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Questionable Licensing Issues Now Cropping Up In Ohio – ‘The Process Is Severely Broken’

As the regulatory process plays out across various states in the country – most importantly, in California where regulations and rules are coming right down to the wire (and maybe a little beyond) for the January 1, 2018 start of recreational – more and more issues are cropping up about the licensing process itself and the regulators behind the decision-making. This time it’s Ohio.

Some states, like Nevada, were actually able to accelerate the licensing process and open early. That state had originally expected to begin recreational marijuana sales this January as well. But with the support of Nevada State Senator Tick Segerblom (who told me in November 2016 that he would work to make it happen early: “We know how to do sin here in Nevada.”), they were able to change that recreational start date to July 1, 2017 for the 190 formerly medical-only dispensaries that were already open in the state. It’s been the fastest turnaround between recreational legalization and sales.

One of the first east coast states to demonstrate issues interrupting the process was Maryland, where a last-minute challenge about racial diversity that could have shut down the progress of the medical marijuana industry in the state, resulted in a judge’s decision at the last hour – a troubling moment for Maryland’s medical cannabis hopefuls but apparently smoothed over now as that state’s first ten licensed medical marijuana dispensaries either have begun operations or need to begin operations by December 14.

Another issue in Maryland about grow licenses granted for two growers not in the original 15 applicants – granted for geographic diversity reasons – is still pending.

Another 92 dispensaries in Maryland have been pre-approved for licenses, and are now working through Stage Two of the approval process, which includes undergoing criminal background investigations, completing regulatory requirements, securing local zoning approvals, and compliance inspections by the Maryland Medical Cannabis Commission. Commissioners vote for licensure in a public meeting once the investigations, regulatory requirements and other approvals are complete.

Pennsylvania recently was forced to address how their licensing selection process worked, with complaints about their transparency on the decision-making about both the applications and the decision-makers. In a five-count lawsuit filed September 8 against the Pennsylvania Department of Health, Office of Medical Marijuana (PDHOMM) dispensary license applicant Keystone Releaf, LLC, is seeking to review the department’s “systemically flawed, inequitable and unconstitutional process” for accepting, reviewing and scoring medical marijuana growers and processors, and medical marijuana dispensary permit applications, adding that the “continued administration of the flawed permitting process creates a hardship” for all license applicants in the state.

Now a similar issue has come to light in Ohio, where cultivator licenses have been awarded, with cultivators scrambling to grow a crop by the September 2018 start date for the licensed medical marijuana program.

The Ohio program has been a problem from the beginning. According to a media release from CannAscend Ohio, an investment group planning to build a medical marijuana cultivation facility in Ohio – then denied a license – 204 days after the 2015 statewide vote on legalization, the governor signed a substitute bill. A year went by as the regulatory process was put into place.

Over 100 Level I cultivator license applications were filed before the deadline this summer. An award of licensing was delayed two months, made on the last day of November – five months after the filing deadline.

“It does not in any way meet the spirit of what we – the patients, the activists, and the industry – worked tirelessly to pass in the Ohio House of Representatives Medical Marijuana Task Force,” CEO and chairman Jimmy Gould, of CannAscend Ohio, wrote in a media release about the issue. “This was a system that was driven into the ground by questionable “experts” tasked with grading the applications, managed by an out of touch bureaucracy that has mismanaged this entire process.”

The larger concern, he wrote, is that Ohio’s medical marijuana program is being purposefully compromised in order to cause unnecessary delays in it becoming “fully operational” by September 8, 2018 (and specifically to delay the full roll-out until after the November 2018 election cycle).

Following that statement was a list of the questionable facts in the applications of license award winners that echo some of the Pennsylvania complaints. Included: One applicant getting access to information not provided to other applicants; another applicant failing to provide required information, such as criminal background checks; other applicants providing financial viability without vetting by a qualified certified public accountant, as required; and extreme favoritism to a leading out of state conglomerate (who is both an owner of one license and a consultant on another), that allowed these award winners to claim that the vast majority of their Section 1 administrative pass/fail materials should be protected as a trade secret, a consideration that was never contemplated in the application, because they claim their identity alone is of substantial economic value.

This last instance caused particular burn to CannAscend. “Somehow the state caved to this request, and instead of simply redacting sensitive information as was contemplated in the application, the state chose not to provide any of it for independent review to ensure pass/fail.”

More importantly, the statement continued, it calls into question the role this group is playing as both an owner of one group and lead consultant exercising significant control over another with a potential financial interest or compensation arrangement.

On Wednesday, USA Today reported that state and local officials have called for a freeze on state-issued medical marijuana growers’  licenses after learning one of the consultants hired to grade license applications, Trevor Bozeman, is a convicted drug dealer. Lt. Governor Mary Taylor, who’s running for governor, expressed grave concern over Bozeman’s criminal background and called for halting and reviewing  the selection process.

CannAscend plans to challenge the entire process and seek a complete review of all scores and re-assessment by new graders, with proper oversight, because, they say, the process is severely broken. “It’s not a matter of removing some, and not others properly,” Gould wrote in the media statement. “It’s time to start the review over with new scorers and review all the applications.”

 

 

David Hodes

David Hodes

David Hodes is based in the greater Washington DC metropolitan area. He is the former editor of seven different business magazines, and has contributed feature articles to several business/lifestyle publications and national cannabis magazines. Hodes is also a former field producer for CBS News, NBC, NFL Network, ESPN and other media outlets; worked as a news promotions producer for two network affiliates; and was the morning news editor for a third network affiliate.

He is member of the National Press Club, and deputy booking agent for the National Press Club Headliners Committee.

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