Corruption in the Cannabis Industry
It is just a matter of time before cannabis becomes fully legalized for medicinal and recreational use across the U.S. This trend and the growth predictions for sales has driven many new and existing entrepreneurs to try and stake their claim before the industry becomes too crowded. Sadly, this drive has resulted in acts of corruption that have involved public officials and marijuana businesses.
In several states, there have been reports of bribery and extortion that threaten to compromise the likely success of legit players in the industry. Some industry experts fear that unless properly regulated, these acts may end up crippling the sector and slow down progress being made in legalization.
Having fully legalized marijuana in 2016, California has yet to reap the tax revenues predicted. This failure has been attributed to several challenges including a highly lucrative black market. With high taxes and stringent licensing regulations, many consumers are opting for more affordable but illegal sources. Licensing issues have proven controversial with several cases already in the courts challenging how approvals are arrived. An L.A. Times article further indicates that there are at least 6 corruption cases currently in courts involving black market operators and bribed government officials.
In San Francisco, a dispensary dubbed Apothecarium challenged the licensing of a competitor, Barbary Coast, after its application was rejected. Both had submitted similar proposals, yet only Barbary Coast was granted a license for its Sunset dispensary. Though the dispensary has now been allowed to open, ongoing legal proceedings make mention of around $75,000 in campaign donations given by Barbary Coast to members of the Board of Supervisors that voted on this permit.
The FBI has also been investigating cases of corruption with an Adelanto mayor having been arrested in 2018. Serving search warrants at the mayor’s office and home, a report by the local Sun indicates that the case relates to dealings with marijuana businesses. An Adelanto dispensary named Jet Room was also searched, alongside the law offices of the company’s attorney.
Another state that has fully legalized. Unlike California, Nevada has seen better luck when it comes to growth in tax revenues. Most recent figures indicate a peak collection in October 2019 of $9.8 million. This is a $1 million increase on September’s figures and comes to a cumulative of almost $200 million since recreational sales began. This strong performance may, however, be marred by cases of bias in the licensing process.
Several lawsuits are currently filed against state officials, including Deputy Executive Director Jorge Pupo. It is alleged that the officials may have favored certain candidates over others when applying for licenses. Pupo has been noted for giving an account of job offers from some certain approved licensees. He has also been accused of giving preferential treatment to those that socialize with him.
Unlike California and Nevada, Maryland has only legalized medical marijuana and decriminalized cases of low amounts of recreational marijuana. Despite the restrictions, the state has still had to face its own cases of corruption. Former democrat delegate, Cheryl Glenn has been accused of wire fraud and having received bribes amounting to $33,750. These bribes are said to have been to facilitate support for medical marijuana licenses, amongst other charges. Charged with denying citizens of her honest services, she faces a possible 20-year sentence if convicted.
William Tilburg, the Executive director of the state’s Cannabis Commission is also investigating claims of bias reported in the licensing process. With a desire to see more minority-owned businesses penetrate the market, the commission is facing challenges in working out how to do so fairly. Meanwhile, the courts are faced with cases alleging connections between some of the applicant licensees and scoring companies that rank applications. One such case is MAS Alliance that says a rival applicant should be disqualified for having one of its owners affiliated to Morgan State, a top-scoring firm.
Corruption creates an uneven playing field for those looking to get in on the business. Those that are moneyed, stand a better chance at getting licenses, locking out minorities and other smaller players. It also brings up the issue of quality. If an ill-equipped dispensary is licensed, are its products safe? Shortcuts often give way to compromised standards and safety concerns.
Thankfully authorities are getting keener about how these bribes are making their way to public officials. Whether it is through job offers or donations to campaign kitties, evidence of illegality will eventually be exposed. With each case filed we can expect more scrutiny of how states approve licenses and hopefully amendments to regulations that will see fairer competitiveness and the driving of the industry in the right direction.