Cannabis Industry Daily News

Husband of marijuana MSO Trulieve CEO faces trial on bribery charges

The husband of marijuana multistate operator Trulieve CEO Kim Rivers is on trial in Florida this week on federal bribery and corruption charges stemming from a four-year investigation of his real estate development activities.

John Thomas “J.T.” Burnette and Rivers were partners in an investment venture before their marriage and Trulieve’s founding, according to the Tallahassee Democrat, and Burnette is a minority owner of a company that provides construction and related services to Trulieve.

Trulieve said in a regulatory filing in 2019 that it concluded that Rivers herself wasn’t a target of the federal corruption investigation, and the potential liability from the case wasn’t great enough to prevent her from continuing as CEO.

Rivers emphasized to MJBizDaily in early 2020 that Trulieve had been “fully transparent and had full disclosure” on the matter.

An equity analyst for Stifel GMP in Canada wrote at the time that while he believed Trulieve had followed proper disclosure requirements, the transactions involving Burnette “are admittedly not our favorite company attribute.”

In its audited annual financial report in March, Trulieve disclosed that it made property and equipment purchases totaling $96.7 million in 2020 from a company that includes Burnette as minority owner. That compared to purchases of $46.4 million in 2019 and $12.1 million in 2018.

The unidentified company was described in the filing as being responsible for the construction of Trulieve’s cultivation and processing facilities, including providing labor, materials and equipment.

“The use of the supplier was reviewed and approved by the independent members of the company’s board of directors,” according to the regulatory filing, “and all invoices of the supplier are reviewed by the office of the company’s (Trulieve’s) general counsel.”

The regulatory filing didn’t mention Burnette’s legal problems.

Trulieve didn’t immediately respond to MJBizDaily‘s request for comment Monday.

– Jeff Smith

Missouri governor denies tax relief for medical cannabis companies

Missouri Gov. Mike Parson shot down legislation that would have eased the taxed burden for medical marijuana companies.

State lawmakers recently passed a bill that would have allowed MMJ companies to deduct “ordinary and necessary” business expenses on their state tax returns that Section 280E of the federal tax code currently prohibits.

According to the Missouri Independent, Parson explained in a letter vetoing the measure that he rejected the bill over a section that would have provided tax breaks for businesses affected by citywide or countywide public health restrictions.

The governor said those provisions could have had unintended, harmful consequences for those localities.

Cannabis companies seeking to reverse 280E have suffered other legal setbacks this year, including in a U.S. appeals court in April and the U.S. Supreme Court in May.

NY lawyers may work with adult-use marijuana industry, bar association says

Lawyers are free to take part in New York’s adult-use marijuana industry despite federal prohibition, according to a new ethics opinion from the state’s bar association.

The opinion posted online by the New York State Bar Association (NYSBA) says that, in light of the legalization law signed by Gov. Andrew Cuomo in March, lawyers may now do the following without violating the NYSBA’s professional conduct rules:

  • Work with clients “in conduct designed to comply with New York’s Recreational Marijuana Law and its implementing regulations.”
  • “Accept an equity ownership interest in a cannabis business in exchange for legal services.”
  • Use recreational marijuana, and, when the law permits, cultivate marijuana plants at home.

The NYSBA previously allowed its members to advise clients in New York’s legal medical marijuana industry despite federal prohibition.

The bar association’s opinion said New York’s recreational marijuana licensing process “will function more expeditiously and with more consistency if lawyers can assist with preparing and submitting license applications and can counsel the regulators reviewing those applications.”

“More generally,” according to the opinion, “in a complex regulatory system where cultivation, distribution, possession, sale and use of a product are tightly regulated, legal advice and guidance has immense value.”

As for using recreational marijuana, the NYSBA warned that excessive marijuana use, “like excessive consumption of alcohol, may adversely impact a lawyer’s ability to competently and diligently represent a client.”

“Nothing we say here connotes approval of such excessive use or establishes a protective shield for a lawyer who is facing disciplinary charges, malpractice claims, or other adverse consequences arising out of marijuana use.”

Bar associations in other legal markets have been mixed in their views on marijuana and their members.

Bar associations in New Mexico, Ohio, Oklahoma and South Dakota, for example, have cautioned their members about getting involved in the marijuana industry, while the Los Angeles County Bar Association actually established a new law practice focused on legal marijuana.

Goodness Growth Holdings to acquire Maryland medical cannabis dispensary

Multistate marijuana company Goodness Growth Holdings announced an $8 million deal to acquire Charm City Medicus, a medical cannabis dispensary in Baltimore.

The $8 million acquisition agreement includes $4 million cash, $2 million in Goodness Growth shares subject to a one-year lock-up agreement, and a $2 million promissory note.

Upon closing, the dispensary will be rebranded to Goodness’ “Green Goods” dispensary brand, the company said in a news release.

Goodness Growth Holdings is the new name for the parent company of Minneapolis-based multistate cannabis operator Vireo Health International, a change that was announced in June.

“With our recent initiatives to expand cultivation and processing capacity in Maryland, we’re in an excellent position to continue growing our wholesale and retail sales in the state as our manufacturing capabilities enable us to offer the full spectrum of cannabis products to patients,” Goodness Growth chair and CEO Kyle Kingsley said in a statement.

The acquisition, subject to a license transfer approval by Maryland cannabis regulators, is expected to close “later this year.”

In late April, regulated medical marijuana sales in Maryland hit the $1 billion mark since launching in December of 2017.

An adult-use cannabis legalization effort in Maryland failed in March, but lawmakers are expected to try again in 2022.

Goodness Growth shares trade as GDNS on the Canadian Securities Exchange and GDNSF on the over-the-counter markets.

Coalition pushes for federal marijuana legalization as chagrin with Biden grows

A bipartisan coalition of business and advocacy groups, including the powerful billionaire Koch family, issued a white paper this week with recommendations for federally legalizing marijuana like alcohol or tobacco.

The 14-page white paper by the recently formed Cannabis Freedom Alliance came at the same time legalization advocates expressed increasing frustration with President Joe Biden’s stance on marijuana as exemplified by his response to sprinter Sha’Carri Richardson’s exclusion from the U.S. Olympic team for using the drug.

“The rules are the rules, and everybody knows what the rules were going in. Whether they should remain the rules is a different issue, but the rules are the rules,” Biden said last weekend about the U.S. Anti-Doping Agency’s decision to suspend Richardson 30 days and nullify her 100-meter dash victory at the U.S. Olympic trials in Oregon in June.

Kassandra Frederique, executive director at the Drug Policy Alliance, noted the “inconsistencies” at the federal and state levels.

“Sha’Carri reportedly used marijuana in Oregon – a state where adult use is legal. These inconsistencies force people to be stuck in the middle, navigating unclear rules and being faced with lifelong consequences,” Frederique said in a statement.

“We must end the drug war once and for all so that no one is subjected to contradictory and punitive rules about what they can and cannot put in their own bodies.”

The disparate worlds of thought regarding marijuana also come as legalization advocates wait still longer for U.S. Senate Majority Leader Chuck Schumer to unveil his comprehensive marijuana reform bill.

The Cannabis Freedom Alliance was launched in April.

The organization includes:

  • Global Alliance for Cannabis Commerce.
  • The Koch-backed Americans for Prosperity.
  • Libertarian think-tank Reason Foundation.
  • Law Enforcement Action Partnership.
  • A criminal justice-reform initiative called Mission Green.

The coalition recommends removing marijuana from the federal Controlled Substances Act to resolve the current conflict between federal and state laws.

In the white paper, the coalition espouses several goals:

  • Establish a regulatory framework that spurs innovation and research as well as ensure public safety.
  • Ensure that individuals previously involved in the illicit market have opportunities in the legal market.
  • Create low barriers to entry so that large companies and new entrepreneurs can compete on a level playing field.
  • Ensure that the total tax burden doesn’t encourage a continuing gray or illicit market and instead contributes to a vibrant and competitive global industry.

MJBizDaily launches survey on women and minorities in cannabis

As the cannabis industry evolves and expands in the U.S., more focus has been placed on social equity and diversity.

But to understand where the industry is going, it’s important to understand where it already is.

With that goal in mind, MJBizDaily has launched a survey to assess the state of women and minority leadership in cannabis.

The information will form the underpinning of the third edition of the Women and Minorities in Cannabis report, available this fall.

In addition to providing metrics around participation, the team at MJBizDaily will examine where the barriers to participation still exist and provide resources for overcoming the challenges.

Owners, founders and executives with dispensaries/retail stores, commercial cultivation operations, infused product manufacturers and vertically integrated businesses as well as investors who fund cannabis companies are invited to participate in the survey, which is available here.

The survey will be open for responses through Wednesday, July 28.

Prominent marijuana firm Hoban Law Group merges with national practice

Hoban Law Group, a prominent marijuana law practice based in Denver, merged with Clark Hill, a Michigan-based firm with more than 650 lawyers spanning the United States, Ireland and Mexico.

Bob Hoban becomes co-leader of Clark Hill’s Cannabis Industry Group and heads the firm’s Denver office.

Also leading Clark Hill’s cannabis group is Sander Zagzebski in Los Angeles.

Terms of the deal were not disclosed.

“They are both pioneers in the cannabis legal space who recognize what is on the horizon for the industry in the U.S. and abroad,” the firm said in a news release.

Michigan recalls 10,000 cannabis edibles that weren’t properly inspected

Marijuana regulators in Michigan issued a recall for 10,000 cannabis-infused chocolates because the products didn’t undergo proper inspection.

The Covert Cups were processed in Bay City, Michigan, by a company doing business as 3843 Euclid, which also operates a retail store by the name Dispo, MLive.com reported.

The edibles, which were distributed to more than 40 stores across the state, include:

  • Peanut butter cups.
  • S’mores cups.
  • Banana cream cups.

The full list of recalled products and the stores that carry them is available here.

Retailers are required to notify customers about the recall and display the recall notice in the store for 30 days.

The recall came about after the edibles were tested for compliance on March 23 and approved with all of the products in yellow packaging.

When the state inspected the edibles on April 2, 3843 Euclid had packaged the 10,000 Covert Cups in a variety of colors beyond yellow.

The state then determined the sample wasn’t representative of the whole batch.

The matter is still under investigation.

3843 Euclid’s license was suspended for 14 days last summer after the state found employees were licking pre-rolls to seal them.

Plaintiffs drop text-message suit against California marijuana courier Eaze

A consumer lawsuit filed against California marijuana delivery giant Eaze was formally dropped after the two sides reached a settlement agreement.

According to Law360, the two plaintiffs who agreed to withdraw the suit they filed in 2018 are now “hashing out the details” of a settlement.

The case had been on hold because both Eaze and the plaintiffs asked a judge in 2020 not to rule until the U.S. Supreme Court decided on a related case involving Facebook and automatic telephone dialing systems.

The Supreme Court ruled unanimously in April that autodialing machines “use a random or sequential number generator.”

That ruling is expected to have a major impact on the number of spam-related lawsuits involving text messages brought against marijuana businesses such as Eaze under the federal Telephone Consumer Protection Act (TCPA), Law360 reported.

Eaze contended during the suit that at least one of the plaintiffs had signed up for messages from the company and therefore was bound by its terms of service. Those terms include mandatory arbitration in the event of a legal dispute such as this. Eaze also argued the other plaintiff had received messages stemming from a “third party error.”

This is at least the second such lawsuit filed against Eaze.

The first was also filed in 2018, and was sent to arbitration.

US senator seeks $4 million to combat illegal cannabis activities in Oklahoma

A U.S. Senator from Oklahoma requested $4 million in federal funds to help the state fight illegal cannabis operations.

Sen. Jim Inhofe, a Republican, made the request to the U.S. Justice Department, the Associated Press reported, citing comments made by Inhofe’s chief of staff during an Oklahoma Sheriffs Association meeting.

The funding request, if approved, would be used by the Oklahoma Bureau of Narcotics and Dangerous Drugs (OBN) to create a special unit that would work with sheriffs to crack down on illegal operations such as organized crime, according to Inhofe’s chief of staff, Luke Holland.

Oklahoma has one of the most wide-open medical marijuana markets in the country.

As of July 1, Oklahoma was home to 12,105 licensed medical marijuana businesses, including 8,247 growers, according to state figures.

Oklahoma law enforcement officials have been conducting a wide-range investigation into illegal operations, including legal growers that might be involved in cross-border illicit sales.

State regulators have acknowledged that low barriers to entry have made such illegal operations enticing.

A track-and-trace system, which was supposed to launch earlier this year, could help curb some of the activity but is tangled in litigation.

Oklahoma is not the only state where law enforcement officials are seeking to aggressively crack down on illicit activities.

Los Angeles County authorities announced this week the largest seizure of illegal marijuana in California history, worth an estimated $1 billion, as part of a federal, state and local investigation.

California authorities seize $1 billion of illegal marijuana

Los Angeles County authorities announced the seizure of the largest illegal crop of marijuana in state history, worth an estimated $1 billion.

According to The Associated Press, L.A. sheriff’s deputies seized 373,000 marijuana plants and 33,480 pounds of cannabis flower, which have a combined value of about $1.2 billion on the illicit market.

The seizure is the result of a 10-day law enforcement investigation that culminated in search warrants being served June 8 on 200 facilities in the Antelope Valley area, north of Los Angeles.

The raids were a joint operation between the L.A. sheriff’s department, the U.S. Drug Enforcement Administration, the California Department of Fish and Wildlife and multiple other local law enforcement agencies, the Valley Post News reported.

There were 131 arrests made in connection with the raids, and 33 firearms and $20,000 in cash was also seized.

The 200 facilities were all run by “cartel members,” the Valley Post News reported, and L.A. Sheriff Alex Villanueva said criminals were stealing ground water and threatening local residents.

“What we want to do is send a clear and loud message to the cartels and anyone doing illegal operations in the High Desert, your days are over and we’re coming for you,” Villanueva said.

Nevada reappoints three members to cannabis regulatory board

Nevada reappointed three members to the compliance board that oversees the state’s cannabis industry.

According to a news release, Nevada Gov. Steve Sisolak announced the reappointment of the initial three members of the Nevada Cannabis Compliance Board:

  • Jerrie Merritt, a senior vice president with the Bank of Nevada.
  • Dennis Neilander, a former chair of the state’s Gaming Control Board.
  • Justice Michael Douglas, a former chief justice of the Nevada Supreme Court. Douglas also will continue in his role as chair of the five-person cannabis board.

Last year, Sisolak appointed former Nevada Dispensary Association Executive Director Riana Durrett and Reno-based physician Dr. Bryan Young as the final two members of the CCB to serve four-year terms.

Douglas, Merritt and Neilander will each serve a four-year term.