For the second time in six months, the Washington State Liquor and Cannabis Board (WSLCB) took swift and severe action on a cannabis business licensee operating in the black market. The regulatory agency issued an emergency license suspension for Port Angeles’ North Coast Concentrates, which are effective for 180 days, during which time regulators plan on revoking the license altogether.
According to a release emailed last week, the violation was uncovered during a routine traffic stop. “On September 20, 2018 an employee of North Coast Concentrates was pulled over by Lower Elwha Police, during the course of the traffic stop officers found 112 grams of traceable marijuana concentrates, three large jars and a large tote bin of untraced dried marijuana flower,” reads the release. “The products were not manifested in the state traceability system. Subsequent investigation by WSLCB officers revealed that the untraced product had been removed from the licensees grow operation and that the traced concentrates were returned from a marijuana retailer in Tacoma several weeks earlier.”
The release goes on to add that when regulators investigated the matter, they found text messages indicating the license holder’s complicity in the act. When the WSLCB suspended the license, officers seized “556 pounds of marijuana flower product, 24 pounds of marijuana oil and 204 plants from both locations.” Regulators say, “the severity of these violations and the risk of diversion” is the reason for the emergency suspension and product seizures.
According to the end of the release, The WSLCB issued one emergency suspension in 2017, and six in 2018. One of those was roughly six months ago in July when regulators issued an emergency suspension for a Tacoma-based cannabis business for the same reason as the most recent one- diversion.
The enforcement branch of the WSLCB acted on a complaint and inspected Refined Cannabinoids where they found “numerous and substantial violations including full rooms of untagged plants, clones and finished product,” reads a release emailed back in July. “During the course of the inspection officers discovered and seized 2,569 marijuana plants, 1,216 marijuana plant clones, 375.8 lbs. of frozen marijuana flower stored in 11 freezer chests, 3,423 0.5 gram marijuana cigarettes, and 97.5 lbs. of bulk marijuana flower without the requisite traceability identifiers.”
That July release also states that enforcement officers found evidence of diversion to the black market, in addition to the company not tracking their product. “Traceability is a core component of Washington’s system and essential for licensee compliance,” says Justin Nordhorn, WSLCB chief of enforcement. “If our licensees fail to track their product they put their license in jeopardy.”
Pennsylvania Medical Solutions, LLC (PAMS), won a license to grow medical cannabis in Pennsylvania, but some think the Pennsylvania Department of Health (PA DOH) should reconsider awarding that license. PAMS is a subsidiary of Vireo Health, which has medical cannabis licenses in New York and Minnesota, as well as quite the blemish on their business record. In December 2015, two former employees were accused of breaking state and federal laws by transporting cannabis oil from Minnesota to New York. Because of that history, some are questioning why exactly they were awarded the PA medical cannabis license.
In that school of thought is Chris Goldstein, a Philadelphia-based cannabis advocate and author of an article on Philly.com, which calls PAMS’ license into question. According to Goldstein, Vireo Health could lose their licenses in New York and Minnesota, and those former employees involved might even face federal prosecution. “On the surface it would seem that Vireo broke every rule in the book,” says Goldstein. “Not only could the company lose its permits in both of those states, but employees could face federal prosecution for interstate transport and distribution.” But does that previous wrongdoing by two former employees have any bearing on their application in PA? In Maryland, it did. According to The Baltimore Sun, concerns surrounding MaryMed’s parent company, Vireo Health, is the main reason why their permit to grow medical cannabis was revoked.
In response to some of those concerns about their PA license, Andrew Mangini, spokesman for Vireo Health, issued the following statement, which appeared in Goldstein’s article: “While we’re aware of allegations against two former employees of an affiliate, those individuals have never had a role in our application or in the management of PAMS,” says Mangini. “It’s also important to note that our Minnesota affiliate and our parent company Vireo Health have not been accused of any wrongdoing in connection with those allegations.”
Below is a timeline of events leading up to the PA DOH defending their decision to give PAMS a license:
December 2015: Two former employees of Minnesota Medical Solutions, a subsidiary of Vireo Health, transported a half-million dollars worth of cannabis oil from Minnesota to New York, violating state and federal laws.
February 9th, 2017: The two former employees were formally charged with crimes in Minnesota for illegally transporting cannabis across state lines.
February 20th-March 20th, 2017: PAMS submitted a license application to the PA DOH between these dates, listing their business state as Minnesota on the application.
May 2017: Maryland DOH suspended the licenses of MaryMed LLC, a subsidiary of Vireo Health, over concerns that the company did not provide information related to the Minnesota and New York licenses on their application, according to the Washington Post.
June 20th, 2017: PA DOH releases a list of license winners; PAMS was listed among winners for a cultivation license in Scranton.
June 26th, 2017: PA DOH officials defend their decision to award PAMS a license, according to a Philly.com article. That same day, The Baltimore Sun reported the Maryland Medical Cannabis Commission revoked MaryMed, LLC their license, citing concerns about Vireo Health.
April Hutcheson, spokeswoman for the PA DOH, told Philly.com in June, “Remember, the permits are given to business entities, not people.” The point she is making refers to the charges being filed against former employees, not any of the businesses who hold medical cannabis licenses.
Steve Schain, Esq., an attorney with Hoban Law Group in Pennsylvania, has seen no objective evidence of anything wrongful in either PAMS’ application or the DOH’s processing of it. “Marijuana related businesses often have distinct, affiliated components and the Department of Health faces two critical issues,” says Schain.
“First, whether grow applicant PA Medical Solutions, LLC (PAMS) had a duty to disclose alleged wrongdoing on its application, failed to fulfill this duty and, if so, whether PAMS’ application should be amended, re-scored or disqualified. Second, as part of its ongoing license reporting requirements, whether grow licensee PAMS has any duty to disclose the alleged wrongdoing. The answer to much of this hinges on whether criminal or administrative charges were leveled against just Vireo Health’s former employees or also included the entity and whether these individuals or enterprise fell within Pennsylvania Medical Marijuana Organization Permit Application definition of an “Applicant” (“individual or business applying for the permit”) or applicant’s “Principals, Financial Backers, Operators or Employees” of PAMS. Either way, it does not presently appear that the [PA] DOH missed anything.”
This does raise the question of whether or not Vireo Health is under investigation, which is yet to be determined. According to Goldstein in his Philly.com article, the Minnesota DOH declined to comment on Vireo Health and the New York DOH says the department’s investigation is ongoing. “The selection of a Vireo Health affiliate to grow and process medical cannabis in Pennsylvania has cast a serious shadow over the integrity of the program even before it has started,” says Goldstein.
In Maryland, the DOH revoked their license as a direct result of those former employees in Minnesota committing crimes, according to The Baltimore Sun. Commissioner Eric Sterling said there is “a reasonable likelihood of diversion of medical cannabis by the applicant.” So should Pennsylvania do the same? Do those crimes by former employees have any bearing on their application? This story raises a number of questions regarding applications for state licenses that are largely left unanswered. One thing we know for certain: each state handles applications very differently.
In a memo sent throughout the Department of Justice on April 5th, attorney general Jeff Sessions outlines the establishment of the Department’s Task Force on Crime Reduction and Public Safety. That task force, largely focused on violent crime, is supposed to find ways that federal prosecutors can more effectively reduce illegal immigration, violent crimes and gun violence.
The task force is made up of subcommittees, according to the memo, and one of them is focused on reviewing federal cannabis policy. “Task Force subcommittees will also undertake a review of existing policies in the areas of charging, sentencing, and marijuana to ensure consistency with the Department’s overall strategy on reducing violent crime and with Administration goals and priorities,” the memo reads. “Another subcommittee will explore our use of asset forfeiture and make recommendations on any improvements needed to legal authorities, policies, and training to most effectively attack the financial infrastructure of criminal organizations.” Those existing policies that Sessions refers to in the memo could very well be the 2013 Cole Memorandum, an Obama administration decree that essentially set up a framework for states with legal cannabis laws to avoid federal enforcement of the Controlled Substances Act.
In the past, Sessions has said he thinks the Cole Memo is valid, but remains skeptical of medical cannabis. In the last several months, comments made by Sessions and White House press secretary Sean Spicer have sparked outrage and growing fears among stakeholders in the cannabis industry, including major business players and state lawmakers. As a general feeling of uncertainty surrounding federal cannabis policy grows, many are looking for a safe haven, which could mean looking to markets outside of the U.S., like Canada, for example.
Washington State’s former Attorney General Rob McKenna, Washington State’s former Chief Deputy Attorney General Brian Moran, and Maryland’s former Chief Deputy Attorney General Kay Winfree recently went on the record identifying the BioTrack THC traceability system as fully compliant with the Cole Memo. “The key to meeting the requirements of the Cole Memorandum is ‘both the existence of a strong and effective state regulatory system, and an operation’s compliance with that system’,” says the former attorney general and chief deputy attorneys general in a press release. “As described above, Washington State has a robust, comprehensive regulatory scheme that controls the entire marijuana supply chain.
The flagship component of this regulatory scheme is the WSLCB’s seed to sale inventory system, the BioTrackTHC Traceability System.” Those commendations from a former attorney general could provide some solace to business operating with the seed-to-sale traceability software.
Still though, worries in the industry are fueled by speculation and a general lack of clarity from the Trump Administration and the Department of Justice. In an email obtained by an open records request and first reported by the International Business Times, a DEA supervisor asked a Colorado prosecutor in the state attorney general’s office about a number of cannabis-related prosecutions. The DEA supervisor asked for the state docket numbers of a handful of cases, including one involving cannabis being shipped out of state, according to The Denver Post. “Some of our intel people are trying to track down info regarding some of DEA’s better marijuana investigations for the new administration,” reads the email. “Hopefully it will lead to some positive changes.” So far, only speculations have emerged pertaining to its significance or lack thereof and what this could possibly mean for the future of federal cannabis policy.
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