When the coronavirus pandemic struck in March and hand sanitizer became as scarce as surgical masks and toilet paper, Maine Craft Distilling began producing and bottling small batches of the ethanol-based gel and selling it at cost outside its shuttered Portland tasting room.
Shortly thereafter, however, the company's founder and CEO, Luke Davidson, made what he says was the worst decision of his career: a strategic pivot to mass-produce tens of thousands of gallons of sanitizer a week for a Portland distributor, Noble Partners, which then failed to come up with payment for the vast majority of what he had retooled to produce.
"It became clear we were dealing with a complete and total schemer," Davidson said Monday.
Davidson contacted the Press Herald after reading in the newspaper Saturday that Noble Partners LLC, which has been doing business as Noble Medical Supply since the early days of the pandemic, is being sued in federal court over claims it failed to deliver a million antiseptic wipes and didn't return a $108,000 deposit to a Florida distributor. A San Diego company is also accusing Noble of not refunding a $100,000 deposit for an order of gloves, and its website has been taken down by its provider and replaced with a message saying Noble owes more than $15,000.
Noble is headed by Sean C. Grady, a veteran of Maine's cannabis industry who was facing criminal charges of securities fraud, theft by deception and selling securities without a license when his company started taking orders for N95 masks, COVID-19 tests and other items in critically short supply as ordinary life in the United States ground to a halt in mid-March. Diane Russell, a former Democratic state legislator from Portland, serves as the company's government relations director.
Grady, who would not make himself available for an interview for last week's story, initially agreed to speak Monday morning. But after a reporter summarized Davidson's allegations, Grady said, "I'll have to call you back" and hung up the phone.
Three hours later Grady sent a text message directing questions to his attorney, Jeffrey Bennett of Legal-Ease in South Portland. Bennett said he wished he could discuss the situation but that both parties had signed a non-disclosure agreement that precluded it.
"We are not allowed to speak to the issue, and to the extent that Maine Craft Distilling has unilaterally violated the parties' agreement, we will evaluate that issue and address it if and when appropriate," he said. Davidson acknowledged an NDA existed but said his attorney advised that it did not apply to the information he'd discussed. "We are under no NDA regarding the fact that (Grady) owes us lots of money," Davidson said via email.
Russell did not respond to an interview request.
Davidson said he had been first introduced to Grady as a potential investor in the distillery — which makes small batches of whiskey, gin and other spirits — in early 2019 "with the promise of all the money he had and that he was a wise businessman from his cannabis days." Then, in the midst of the fear and chaos of the early lockdown, he says, Grady and Russell approached him with an audacious business plan that would keep his distillery operating full tilt even as the bars and restaurants that poured his craft spirits were closed down by the virus.
"They came with very grand statements and presented us with a 3-million-gallon purchase order — two truckloads of sanitizer a week," he said. "We didn't have the capacity at the time, so we got ready to expand."
Davidson said he was given pause when the Press Herald reported March 26 that Grady is facing a five-count criminal grand jury indictment in Cumberland County Superior Court on charges of securities fraud, theft by deception and selling securities without a license for incidents predating the pandemic. The charges — the adjudication of which have been delayed by the pandemic — allege Grady defrauded two investment clients, in one case by falsely representing that the funds would be invested in Noble Partners and that the individual would be made the company's chief technology officer.
The story also revealed that Grady had been permanently barred from being granted securities licenses and registration privileges in New Hampshire after he failed to respond to a November 2018 cease-and-desist order connected with one of the alleged frauds, and that he owed that state $238,471 in fines and restitution.
"I pointed to the story and said, 'Guys, what is going on here?' And Diane talked about her experience as a legislator, and Grady had a long story about how it was all a misunderstanding and was almost cleared up and very soon it would all be figured out," Davidson said. He decided to go forward because it was a huge potential deal that would see the company through the crisis.
"I am mad at myself for getting caught up in that gold rush mentality as opposed to our original principles of helping our neighbors," Davidson said.
The distillery put out a news release April 15 announcing a "a strategic shift to hand sanitizer production" and the hiring of five employees to handle the ramped-up production.
He says he spent $100,000 on production equipment and a tanker trailer to store the requisite ethanol, rented 9,000 square feet of warehouse space, and churned out more than $80,000 worth of sanitizer by early May, when the whole deal was clearly coming apart.
By Davidson's account, Noble Partners paid, "albeit late," for a first shipment worth about $25,000, and continued to pressure the distillery to make more product as rapidly as possible and deliver it to a warehouse before it had been paid for. Davidson says he declined, and had piled another $55,000 worth of bottled sanitizer in his rented warehouse when Noble said payment would be delayed. It never came.
"Like others have mentioned in these other cases, the texts saying the check is in the mail or it's coming tomorrow or it's right around the bend, I got all those too," he says, adding that the company is considering legal action.
Losses from the failed effort exceed $150,000, he said. Six thousand gallons of sanitizer sit in a warehouse with a rent of $1,500 a month. The distillery initially didn't try to sell the shipment while it was trying to resolve the situation with Noble, Davidson said, but it is now looking for other buyers.
"Now we're back to our original business," he said. "I don't want anything to do with hand sanitizer."
Distributed by Tribune Content Agency, LLC.