March 16, 2018
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If you follow marijuana business and regulatory news, you might wonder who is guarding the guardians of the marijuana industry. In fact, you might even ask if anyone is watching the people making the laws that will shape the marijuana economy for years to come. The answers to those questions might surprise you and leave you wanting a lot more. From Alaska to Florida and nearly every state in between, stories of conflicts of interest have become quite common. It seems as though even regulators find it hard to resist the allure of cashing in on legal marijuana.
As this industry grows and evolves, there are people who see dollar signs and big opportunities – even regulators. However, regulators are not above the law and must adhere to both legal rules and ethical rules to avoid conflicts of interest and bad judgment. In other words, regulators must be scrutinized to ensure they’re doing their jobs effectively without violating the rules that are in place to keep them unbiased in their decision-making.
Unfortunately, it can be very enticing for some people to cash in on the marijuana industry, and in recent years, there have been some very public instances of regulators trying to play both sides – making the laws for the industry and making money from the industry at the same time. Below are a few of those stories to give you an idea of what can happen when no one is watching the regulators.
In November 2016, Californians voted to legalize recreational marijuana. While the recreational program was still being developed, there were already regulators who were trying to cash in on it. In June 2017, a Colorado grand jury determined that former Colorado Marijuana Enforcement Division officer Renee Rayton, joined Harmony & Green as a compliance consultant where she used her regulatory experience to help the company masquerade as a marijuana operator for illegal marijuana growing.
Harmony & Green was a shell company that tricked investors into financing legal marijuana cultivator licenses. However, Harmony & Green never actually operated in the legal marijuana industry. Instead, the company shipped marijuana grown in Colorado to several states illegally to the tune of millions of dollars.
While Renee Rayton did quit her job at the Colorado Marijuana Enforcement Division before joining Harmony & Green weeks later, she didn’t wait long enough to make the transition. She was required to wait six months before working in the marijuana industry after leaving her regulator position. According to the trial, she also was aware that plant monitoring tags where being switched at Harmony & Green, which is illegal. There were additional illegal activities happening at Harmony & Green as well, and the grand jury indictment found that she was aware of them but did nothing in favor of reaping the profits.
Truth be told, this is a problem that stretches beyond an enforcement officer making some very bad decisions and using her knowledge to help a company break multiple laws. Every state has to have a plan in place to prevent companies like Harmony & Green from putting legal marijuana in the illegal market.
Also in June 2017, the Washington Liquor and Cannabis Board fired Grant Bulaski, an employee who leased 25 acres of land that he owned to a prospective marijuana grower. The grower hadn’t planted anything at the time, but the lease was identified as a conflict of interest by Bulaski’s neighbors as well as by the Liquor and Cannabis Board.
Bulaski joined the Liquor and Cannabis Board in 2006 and began working as a marijuana specialist for the Board later. He was terminated in June 2017 because he violated the agency’s ethics rules by having a financial stake in marijuana businesses. Although his stake in the business would have been indirect, the association was close enough to be considered an ethics violation by the Board.
This conflict of interest is one that Bulaski probably should have been aware of, but it appears the allure of the $2,834 monthly lease payment (which he had been getting since October 2016) was enough to entice him to make a very bad decision that cost him his job.
For a long time, Maryland House of Delegates Member Dan K. Morhaim was a medical marijuana advocate. He helped create many of the regulations for the state’s marijuana program. In July 2015, he submitted legislative disclosure forms stating that he might work as a consultant in the medical marijuana field. He also stated that he had received income through a consulting firm. However, he was not required to document who his clients were or could be, nor was he required to provide the sources of his income.
During the same month that Morhaim submitted the disclosure forms, he began working with Doctor’s Orders, a company that was actively seeking marijuana grower and processor licenses in Maryland. Morhaim did not mention Doctor’s Orders on his disclosure forms.
The Joint Committee on Legislative Ethics started an investigation after The Washington Post outed Morhaim’s involvement with Doctor’s Orders in 2016. In March of 2017, the Maryland House of Delegates voted 138 to 0 to formally reprimand Morhaim for violating Maryland’s ethics rules by helping create the state’s marijuana regulations and consulting for a company that was seeking marijuana licenses at the same time.
While the 17-page ethics report obtained by The Baltimore Sun stated there was not sufficient evidence that Morhaim intentionally used his position as a state delegate to obtain benefits from Doctor’s Orders, it did state that he had “poor judgment” which “eroded the confidence and trust of the public … bringing disrepute and dishonor to the General Assembly.” Specifically, Maryland lawmakers are not allowed to use their positions in office and the influence that comes with their positions for personal gain. The ethics report said Morhaim, “Leveraged that influence to advocate for a policy that he should have known could have resulted in gain to himself or his employer.”
The committee’s report concluded, “As a part-time citizen legislature, the members must be ever vigilant that they do not cross the line between their personal interest and the interests of the citizens who they are elected to serve.”
Other stories that have made the news in recent years come from Massachusetts and Ohio. In August 2017, The Boston Herald reported that a state employee who worked at the department regulating medicinal marijuana applied for a marijuana dispensary license – from the very agency she worked for. In other words, the employee tried to work at both a regulatory agency and a business that the agency was regulating.
In December 2017, Cleveland.com reported that Keoki Wing, a consultant who was hired by Ohio regulators to score medical marijuana business applications, had ties to a business that was awarded one of the state’s 12 large-scale marijuana cultivator licenses – Harvest Grows, LLC.
Despite claims from the Ohio Department of Commerce (the agency that oversees Ohio’s medical marijuana program related to growing, processing, and testing) that it screened consultants for conflicts of interest and required them to self-disclose current and future relationships with applicants for marijuana licenses, Keoki Wing’s connections to Harvest Grows, LLC weren’t discovered. However, according to Cleveland.com, it was actually quite easy to discover the connections through Wing’s LinkedIn profile as well as quotes from him in a 2014 article from Tuscon Weekly that stated Wing had worked in the medical marijuana industry for five years.
Any way you look at it, regulators are capable of having bad judgment and some are capable of intentionally or unintentionally making decisions that lead to conflicts of interest. This can happen in any industry – not just marijuana. However, the marijuana industry is already such a contentious one, and stories such as these certainly don’t help it. As with most things in life, a few bad apples can spoil the whole barrel. Bottom-line, someone needs to be guarding the guardians.
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