Investor: Johnston developer's business tangle included legal cannabis firm

Before the COVID-19 pandemic hit, Johnston developer Daniel Pettit recruited numerous people in Iowa and other states to invest in a legal cannabis cultivation and extraction business in Nevada.

But no product was sold, one of his investors said.

“We never sold an ounce of marijuana but several of us got paid,” said Mike Pauk, a friend and business partner who was among the mix of investors Pettit recruited from Iowa.

Pauk said he was scheduled to talk Monday afternoon to a Johnston police detective regarding his dealings with Pettit.

The head of Encompass Development in Waukee and numerous limited liability corporations in Iowa and other states, Pettit is at the center of a Watchdog probe, published Monday, that found he is alleged to owe $70 million in unpaid loans and court judgments.

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The founder of at least three faith-based charities, he's been accused by investors and former business partners in court documents of accepting millions but defaulting on loans.

A Polk County judge sentenced the 43-year-old last week to six months in jail for repeatedly ignoring court orders and failing to respond to subpoenas in connection with three civil cases. But he failed to show up Friday or Monday to begin his jail sentence for contempt, court documents show.

Pettit also is at the center of a criminal investigation in Johnston that began when he reported an armed robbery in September. Investigators looking into the alleged crime turned up evidence of possible prostitution involving Pettit and evidence he may have helped orchestrate the heist himself, according to search warrant documents.

Some investors contacted Watchdog on Monday trying to figure out what they could do to collect on debts Pettit owes them, while others said they planned to talk to police.

Pettit recruits Iowans to invest in legal Nevada marijuana business

Pauk, who used to own Tally’s Restaurant & Bar in the heart of Des Moines' Beaverdale neighborhood, said he met Pettit, a Cedar Rapids native, years ago, and introduced Pettit to his now ex-wife Rachael through her sister, who worked at Tally's. Pauk said that after he and Pettit invested together in downtown Des Moines loft rentals, Pettit convinced him to invest profits in a business he said would grow vegetables in pods, or containers, in Nevada.

Pauk said Pettit was a partner in several ventures aside from real estate and development, including Online Ammo, an Estherville-based online guns and ammunition business. After sales of cannabis products were legalized in Nevada in 2017, Pettit started recruiting people to invest in marijuana cultivation and extraction.

Pauk said he joined Pettit and other investors from both Iowa and elsewhere in Las Vegas in 2018, before the pandemic hit. Pettit, he said, eventually blamed problems the cannabis business experienced on others involved in Nevada.

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He said Pettit had different investor groups tied to Nature's Kindness and Kindables, businesses owned by Las Vegas resident Stephanie Meehan. Reached Monday, Meehan said she would have her attorney call Watchdog, but the attorney did not respond.

One of the people involved in the business early on was Mike Reysack, a RE/MAX Precision real estate agent based in the Des Moines metro. Reysack was the manager of a limited liability corporation called LV Wash, filings with Iowa’s secretary of state office show.

Reached briefly on Friday, Reysack said, he, too, is owed money by Pettit and said it was an “accurate statement” to say Pettit didn't have a license for the legal cannabis operation he pitched to investors in Nevada.

Reysack then said he had to get off the phone and that he would call Watchdog back, but he didn’t on Friday or Monday.

In February and again in July, Reysack's LV Wash sued Pettit and two limited liability corporations, Lasbox Holdings and Matchbox Investments. LV Wash alleged breach of contract and fraudulent misrepresentation, and accused Pettit of repeatedly supplying misinformation, but did not elaborate.

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Pettit, the lawsuits said, was supposed to make payments to LV Wash, one for $100,000 and another for $250,000. When Pettit missed those payments, his total debt ― which wasn’t disclosed in the lawsuits ― was supposed to come due, the lawsuits said.

LV Wash’s attorney, Jason Springer of Madrid, eventually dismissed his own cases and did not respond to a phone call seeking comment. Springer has since sought to seal the lawsuits, saying keeping them public would "annoy, oppress, and unduly burden both parties." A judge has yet to rule on sealing the documents.

Documents obtained Monday by Watchdog show some Iowa investors reached a confidential settlement agreement when no dispensaries or sales materialized in the Nevada business.

Pauk said he was paid back in full, but that Pettit still owes him money tied to a personal loan of $75,000 made in June. The contract drawn up between Pettit and Pauk for that loan, using Pettit's $2.4 million Johnston mansion as collateral, called for Pettit to pay $500 a day if he defaulted.

Pauk says Pettit did give him some personal possessions after he defaulted, including a hot tub, artwork and weight equipment, but he estimates Pettit still owes him around $200,000, counting the daily penalty.

He said Pettit has told him and other business associates in recent days he will make them whole when a new loan goes through soon, but he can't do that if he goes to jail.

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Pettit has not returned emails and calls seeking comment.

Pauk said he hasn't sued Pettit for defaulting on the $75,000 loan he signed off on this summer because he knows he would get nothing.

“I know everybody’s waiting for this alleged loan to go through. I don’t think Santa Claus is coming,” Pauk said.

Lee Rood's Reader's Watchdog column helps Iowans get answers and accountability from public officials, the justice system, businesses and nonprofits. Reach her at lrood@registermedia.com, at 515-284-8549, on Twitter at @leerood or on Facebook at Facebook.com/readerswatchdog.

This article originally appeared on Des Moines Register: Nevada cannabis business among Johnston developer's tangle of ventures