Keegan Skeate was on the night shift at the time he heard about the scam. He was 26 years old when he discovered the scam at Praxis Laboratory in Washington. Praxis Laboratory is a Washington state laboratory that conducts consumer safety testing and THC potency analyses for legal cannabis products. Skeate was working a quiet shift in 2018 when a colleague lab technician approached her and said that she believed someone was manipulating the results of her tests. She claimed that her spreadsheets were not correct and that the THC potency values she had recorded was higher than what she remembers measuring.Skeate shared his experiences at Praxis in multiple interviews with FiveThirtyEight. Skeate noticed a similar pattern when he reviewed his test results.Skeate said that I believed Skeate and did believe the numbers had been changed. It was a moral dilemma that I didn't know how to solve. What should you do? Do you quit or continue working? I worked hard, but I don't think it was the right thing.This was in the spring 2018. Skeate would be fired by his employer at the end of 2020. The police would also recommend that Skeate be charged with obstruction of a company database. Skeate, a young software developer, would then become the latest whistleblower in a complex legal cannabis industry problem: stopping corrupt pot labs profiting from manipulated test results.America's legal marijuana industry generated over $17 billion in pot sales last year. The industry's obsession with THC (pots most well-known intoxicant) has resulted in financial rewards for any slight increase in THC potency. THC percentages are used by marijuana shoppers to purchase products based on THC content. However, the lab system that is responsible for measuring the compound is susceptible to corruption. There have been several cases in which laboratories across the country were fined or suspended for manipulating potency results or failing to detect contaminants such as mold.THC inflation is dangerous, it's easy to achieve, and there are strong financial incentives for it. Don Land, a professor of Chemistry and Forensics at the University of California Davis and adviser to Steep Hill, a multistate cannabis laboratory company, stated that the practice of THC inflation was pernicious. It is unlikely that it will happen in all markets, and labs could be caught.Customers are being cheated by corrupt labs. The industry's potential problems with laboratory fraud will not go away as more states legalize marijuana and regulations become increasingly dependent on THC measurement. New York will tax cannabis based on its THC content, when it begins commercial sales in the next few year. There is a national movement to limit THC in legal cannabis products. How can you enforce taxes or collect taxes based on the product's THC potency?The THC percentage is part the way pot is displayed in dispensaries. This is partly because some consumers base their decisions on potency values. JOSH EDELSON / AFP VIA GETTY IMAGESOBSESSED WITH THCLong-time pot advocates argue that legalizing marijuana would improve public health by placing consumer safety regulations on America's most popular illicit drug. Underground markets are known for being dangerous and unable to protect consumers. This is true whether it's tainted moonshine that killed people in 1920s or illegal THC vape carts that kill people in 2019. Therefore, safety standards should be established in order to make society safer.The state governments of America have given their regulatory powers to the private, for-profit cannabis laboratories. Before any pot product can be sold to customers, pot farmers and processors will need to pay private labs that are state-certified. To ensure that the samples are free from mold or E.coli, they must be passed a quality control check. They also need to be tested for cannabinoid potential. This is usually done by testing for pots two most popular active compounds, tetrahydrocannabinol and cannabidiol.This testing system is supposed to be more robust than those used for other consumer products like produce and alcohol. These products are only tested when there's a safety concern. In practice, however, fraud has been committed by some labs in the country. Some labs were caught exaggerating the THC potency, making moldy cannabis safe and even fabricating results. The 2019 Oregon state testing system audit revealed that it cannot guarantee that products and test results are accurate and safe. It also found that the state regulatory program was inefficient, understaffed and had limited authority.Experts believe that lab corruption is common because of the high incentives for cheating and ineffective enforcement. Land stated that the people who pay for the tests will be more happy to have inaccurate tests that claim [their products] are stronger than they actually are.THC has been a useful way for marijuana growers and sellers to differentiate their product from the rest. However, this leaves the possibility for labs to make a profit by increasing THC potency. ETHAN MILLER / GETTY IMAGESThese lab tests can have severe financial consequences for America's multi-billion dollar legal cannabis market. A farmer may have to destroy entire crops of cannabis if a sample fails the quality assurance test. THC potencies are used as a benchmark to determine retail and wholesale cannabis prices for cured cannabis products. This is the most common form of cannabis that can be smoked. According to a 2018 study, 31 million cannabis transactions were made in Washington between 2014 and 2016. A 1 percentage point increase of THC potency was associated with an increase in price pergram. The study revealed that pot with a tested potency of over 15% was the dominant market in Washington state. Only 7.5 percent of pot sold during the study fell below this threshold. According to Flowhub, a software company that helps cannabis users, California's market exhibits a similar dynamic. More than 95 percent of all cured products sold in 2020 tested above 14 percent THC. California's retail prices also correlate with THC potency. Low-potency pot (between 7 to 14 percent THC) sold on average for $5.31 per Gram, while pot with more than 21 percent THC sold on average for $11 per Gram.California has a higher price for potent marijuana. Market share and price by THC level, 2020 THC Level Share of transactions. Medium 14-21 39.8 7.37. High 21-28 44.7 11.06 High >=28 11.1 12.89. Source: FlowhubJulia Jacobson, CEO of Northern California's Aster Farms, believes that THC is the key to California's pot commerce.The pressure is real. It's over. Jacobson stated that we have some retailers who love our products and will only sell our product to them if it has a THC level of over 20%. The buyers always complain that there is more to cannabis and its effects than THC, but they are still THC hunters.Jacobson stated that her company does not sell batches below 15 percent THC. Instead, she uses the batches to promote or makes oil for edibles and vape cartridges.Markets' obsession with slightly higher THC potencies appears to not be supported by any scientific evidence or expert advice. The University of Colorado Boulder published a study last year that found no correlation between stronger subjective high effects and higher THC products. THC potency has been a poor indicator of cannabis quality. Cannabis enthusiasts have claimed for years that it is not a good way to shop for marijuana.There is a sungrown brand, and they had a batch with 12 percent THC, but that weed did it for me," Andrew DeAngelo said. He is a well-respected cannabis advocate and cofounder of Oaklands Harborside Dispensary. Because I don't want people to believe it is a low-potency brand I won't name it.Laboratories test marijuana samples to determine THC content. They also check for safety violations like mold. CHRIS CARLSON / AP PHOTOA VULNERABLE SYTEMSince 2014, the legal cannabis market has been plagued by allegations of lab fraud. This is especially true in Washington, where recreational marijuana has been sold legally since 2014. Because lab data in Washington is publicly available, data scientists can analyze individual lab results. This has allowed observers to spot the problem.Jim MacRae is a private consultant to pot businesses based in the Seattle suburbs. MacRae is a verbose, profane, and accented with a Canadian accent. He has been an irritant in Washington's lab industry since 2015 when it began releasing its traceability database. This allows the state to track products as they grow, test, and are sold. MacRae holds a PhD in experimental psychology. He also worked for Merck as a data scientist for over a decade. He uses state pot data to identify problems in lab operators. This is similar to the way the Department of Justice uses prescription data from health care to find doctors and pharmacists overprescribed opioids. MacRae's analysis is published in a series of blog posts, punctuated with a damning analysis on how the testing industry's perverse incentives impact the market.MacRae released data in late 2015 showing that four of Washington's 14 labs were certified and had tested thousands of samples over a three-month span. Other labs failed to test as many as half of the samples. The state suspended one of the four labs for six more months after finding that the lab had been testing the highest levels of THC in Washington. This exposed the public to pot products that were not properly or accurately tested for microbial contaminants.State regulators have struggled to keep up with labs that exaggerate THC levels in an effort to attract more customers. CHRIS CARLSON / AP PHOTOMacRaes analysis also showed that the pot market rewards friendly laboratories (the ones that give high THC potency results but fail to produce as many samples) with millions in laboratory tests. He published data in March 2017 showing that one lab had seen its cannabis flower testing market share increase from zero percent to about 20 percent in just twelve months. It was also giving out the highest average THC potencies. Washington suspended the lab temporarily five months later after finding irregular lab results and poor lab practices. Although the auditor of the state did not find any evidence of widespread THC inflation at its lab, he did discover a Blue Dream cannabis sample that had been tested at 37.2 percent THC. This was despite there being no documentation to prove the lab's incredible results. (Marijuana's maximum potency is typically around 35 percent THC. The lab was criticized by the auditors for not conducting further investigations.Similar problems are faced by other states. MacRae conducted an analysis of the Nevada cannabis market in 2019, which has been publicly struggling to regulate its industry. The state has suspended nearly half of the labs it certified in a five-month span. MacRae's analysis revealed that the state's average THC potency had increased steadily from 19% to nearly 22 percent between 2018-2019. Multiple labs were releasing fraudulently inflated THC levels and failing to meet safety standards. After MacRae presented his findings to Nevada, the government alerted the industry that they were actively investigating THC inflation. Within weeks, a lab was fined by the state for its unsound testing methods.Pot is an essentially vegetable so it is difficult to ensure accurate testing. There is natural variation among different pot samples. Michigan, which has sold more than $500 million worth of legal pot in a single year, tried to minimize the possibility of sampling errors by mandating that testing laboratories collect samples using a standard sampling process. This is in place of allowing farms to submit their own samples. Lev SpivakBirndorf is co-owner and state-certified PSI Labs Michigan. He said that even though there was a mandatory sampling process, he still saw evidence of THC inflation on Michigan's market.Spivak-Birndorf stated that it is difficult for labs working in this industry due to the lack of regulatory oversight. Labels with 106 percent THCA have been posted to my knowledge. You don't need to be a scientist if you know that this label has some degree of inflation.VERSION CONTROLKeegan Skeate could not forget his coworkers' allegations of fraud at Praxis Laboratory. He found it nauseating to think about how his lab was defrauding legal pot customers by convincing them to buy pot with less THC than the label indicated. He needed the job. After he had relocated from out of state, he was now responsible for $50,000 in student loans. He also had just dropped out of the University of California at Irvine's Ph.D. program. The lab was doing well, despite his suspicions. He was promoted quickly from laboratory analyst to software developer and built the company's website and an information management system.His software contained a version control system that tracked every change to company data workbooks. It would confirm what he and his colleague had suspected. Dustin Newman was the lab's scientific director and owner. He was falsifying THC potency testing on a large scale.Skeate stated that I was able to see that Dustin had signed off on a set of results while the first person signed off for a set. It was hundreds of samples, I added them all up.Keegan Skeates' decision to report Praxis Laboratories inflated THC values to Washington State led to his dismissal. LESTER BLACKSketes version control revealed that Newman altered test results for more than 1,200 samples to increase the THC potencies over a three month period in the summer 2020. Skeates whistleblower complaint was reviewed by the Washington State Liquor and Cannabis Board (WSLCB). The officer wrote in his investigation file that there was solid proof of tampering. The weights varied between two, three and four decimal places, and even though the lab scales were only four decimal places, the results showed inconsistent decimal point values.Two days after Skeate had sent his evidence of widespread fraud to Skeate, the WSLCB investigators arrived at Praxis Laboratory, Centralia. This small town is about 80 miles south-east of Seattle. After verifying that the lab's internal documents match what Skeate had secretly emailed to the agency, they confronted Newman regarding the altered numbers. According to the state investigation file Newman claimed that he had not inflated THC potencies, but did not have any explanation. FiveThirtyEight interviewer Newman said that Skeates software was responsible for the irregularities and that the WSLCB did not conduct an investigation.Newman emailed state five days after WSLCBs visited his lab and stated that he would no more be involved in the operation or management of the company. Skeate continued to work, apparently unaware that the lab management had discovered he was whistleblower.Skeate stated that I should have quit right at that point but I felt it was my responsibility not to stop working. Dustin realized that he did not quit on the first day, but he slowly connected the dots to realize I was the whistleblower. Then I was basically fired, and it became this very dramatic thing.Skeate called Newman two weeks later, demanding that Skeate return his company computer. He also requested login credentials to his cloud storage account. This was where Skeates versions control files were stored. According to a police report, Skeate refused and the situation became heated.Skeate stated that he wished he had just given everything to Newman in hindsight, but at the time he did not know if Newman had enough evidence.Skeate stated that I should have quit and walked away. I was unsure if [WSLCB] would do any so I did not think it was okay for [Praxis] access the database to delete the possible fraud.Newman and two of his colleagues reported Skeate's theft to the Centralia Police Department. Skeate was accused of keeping the work computer at work and not giving Newman access to the cloud storage. According to a police report, the police recommended Skeate was arrested and charged for first-degree theft. He refused to give access to the database to Praxis.Skeate was even more sad when I informed him seven months later that Centralia Police Department had referred a case of first-degree theft against them to the county prosecutor's office.Skeate said slowly, his voice trailing off, "That's information for me." I haven't been to Centralia. Although I haven't done anything wrong, I don't think I should be forced to make any changes in my life. However, I won't take that threat as a given. That's a very serious threat.Low-THC marijuana is sometimes not as popular as high-THC products, so growers don't often bother to bring it to market. CRAIG F.WALKER / THE BOSTON GLOBE VIAGETTY IMAGESOPEN DATA SOLUTIONJim MacRae is a Washington state data scientist and says there's an easy way to keep pot laboratories honest. Just look at the data. MacRae stated that state regulators should examine lab data in order to identify fraudsters and also release it publicly for private firms to report suspicious activity.MacRae stated that looking at the data and only looking for issues is a good thing. Three months after [Washington state] made the data public in 2015, I informed the regulators of the problem. These data should be made available to journalists and data scientists, as well as social sciences around the globe, who would be captivated by this shit.Although Washington's pot lab data is still available to the public, data companies across the state claim it is no longer accessible due to a new vendor who has made the system more complicated since 2018. This has made it impossible for MacRae to examine labs over the past three years.Rosalie Pacula, professor of law, health policy, and economics at the University of Southern California, said that federal prohibition of marijuana also means that cannabis testing laboratories cannot have any federal business. This makes them even more dependent on the cannabis industry.Pacula stated in an email that this is not a good way to set incentives to ensure labs give priority to consumer protection over industry protection. Effective regulation requires random compliance checks and secondary tests to make sure that testing labs are actually doing what they are supposed to (and protecting consumers safety not profits).Several states have suspended or fined pot labs for inflating THC levels. CHRIS CARLSON / AP PHOTOOklahoma has the most stringent lab regulations in the nation. This is due to the booming pot industry that is worth $800 million per year. The state requires pot labs to pass regular proficiency tests. They also require labs to collect two sample for each test. A reserve sample is kept by the state to help investigate complaints. The state will randomly retest reserve samples to determine if the second sample is being used as a calibration tool. Any deviations in the second and first tests must be addressed by the lab.Lee Rhoades (Laboratory Oversight Manager for Oklahoma Medical Marijuana Authority) said that if they are found to be outside the [testing accuracy] window, then the laboratory director must conduct an evaluation to determine how it happened. Our rules allow us to take further action if the situation becomes chronic and people are unable to achieve the target value.Terri Watkins, spokesperson for OMMA, stated that the state knew it had to create a rigorous laboratory testing program.It was more a question of "Why take the chance?" Watkins stated that two sets of eyes are better than one.SHUTTEREDSeven months after Skeate contacted the WSLCB, and more than two decades after he heard about the scheme in general, the state issued a 180 day suspension to Praxis Laboratories. It also filed a complaint seeking a revocation of its license for falsifying laboratory records and reporting false THC potency analyses between April 2018 and September 2020. According to the agency, the continued operation of the labs was a direct threat to public safety.Newman denied all allegations made by the WSLCBs and appealed initially against the state's decision. He said in an interview with FiveThirtyEight that the state had failed to investigate Praxis properly. However, he did not return any follow-up calls when he retracted his appeal in May.In April, Newman stated to FiveThirtyEight that Skeate was acting only because he was about losing his job. Skeate also manipulated files he sent to the WSLCB. Skeate software was also responsible for the discrepancies between decimal points.Newman stated that whatever he handed over to the LCB didn't match any of our backups. We had hardcopy backups and a separate server that backed up everything.FiveThirtyEight could not independently assess Newman's claims. However, state investigators verified Skeates whistleblower data using data from the laboratory.These were not the first accusations of Newman's impropriety. Newman was the laboratory director at another Washington lab in 2016, and was fired after questions were raised regarding the accuracy of the lab results. After a state audit revealed poor laboratory practices, the lab's license was temporarily suspended. The audit also revealed a handwritten note from a pot farmer to Newman asking him not to post flower results below 20 percent, and to instead request that the farm send a fresh sample for a retest. According to the Seattle Times, Newman was accused by the lab owner of reporting THC potency levels that were pulled from thin air.FiveThirtyEight was told by Newman that he has never tested potency samples at farms' request. He also said that the 2016 note was saved for anyone to see and that it was the last time they worked with that farm. FiveThirtyEight was also sent an email thread in which Newman, who was the lab director in 2016, showed that he refused to test samples again after a client requested new tests. The client wrote that he thought they had discussed any flower lots below 25% or so would require another sample to test. Newman also blamed the 2016 dispute with the lab owners on the lab owners' rejection of Newman's request for more equity.Skeate was charged with first-degree theft. However, the Lewis County Prosecuting Attorneys said that they are not currently pressing charges against Skeate. Karin Phomma, Deputy Prosecuting Attorney, stated, "If more evidence is presented in the future our office would certainly examine it."Skeate is currently working on his startup, selling software to marijuana companies and labs. Skeate said that he didn't regret reporting Praxis the state. However, he regretted not doing so sooner due to the need for stricter lab regulations. Skeate stated that it still appears like laboratories are self-regulated.This was at least the case for Praxis. The only reason that the labs license was revoked was because of the willingness of young software developers to put their lives at risk and face criminal prosecution for doing the right thing. Who's to say that there won't be another Praxis? These labs serve as clearinghouses for a pot industry that is growing by billions every year. The federal government is absent and the state legislatures are beleaguered. This gives them a billion-dollar incentive for THC. The most potent tests results, no matter how dubious, are the ones that win.Emily Scherer, art direction Charts by Jasmine Mithani and Elena Meja. Maya Sweedler did copy editing. Story editing by Chadwick Mattlin.
