By John Schroyer
Ron Sigman joined the cannabis industry in June after nearly three decades in law enforcement, the last year and a half of which he spent as a criminal investigator with Colorado’s Marijuana Enforcement Division (MED).
Now, he’s the chief operating officer of Adherence Corp., a consulting firm dedicated to helping marijuana companies stay in compliance with state regulations.
As an investigator for Colorado’s cannabis oversight agency, Sigman was part of more than 200 audits, inspections and investigations into various marijuana companies, including dispensaries and recreational shops. He was also responsible for levying the largest fine for rules violations in state history, although he can’t discuss specifics because the case is ongoing.
Marijuana Business Daily sat down with Sigman to get his advice on how cannabis companies can avoid running afoul of government regulators.
What were some of the red flags you looked for while conducting audits, inspections and investigations?
Primarily we had a series of questions that we would review in a screening process. Some of them were tied to METRC, which is our inventory accounting software that all the licensed businesses have to use.
So any METRC issues that we found – anything that had to do with the physical location of the business, for example, if a license was expired, if they didn’t have the right security systems in place, if their plant counting and inventory was off – those kind of issues (raised concern).
And paperwork – if they didn’t have the correct documents and records on premises, all those things were red flags to the MED.
How common are violations by marijuana companies in Colorado, and what are the typical penalties?
I’d say it’s very common to find violations. One of the issues is a lot of these licensees don’t get visited by the MED on a regular basis, and they have a lot of personnel changes and that creates a scenario where violations can occur.
I would say the typical fine that would come from the attorney general’s office in Colorado would probably be between $7,500 to $25,000 for violations, but that’s not just for one violation, but a series of violations that might be found. That doesn’t happen every time.
There are verbal warnings that are also given. There’s a whole hierarchy, actually, of disciplinary actions, leading up to and including suspension of a license.
What are the most common violations?
The most common violations were METRC issues, in other words, the inventory or accounting wasn’t done correctly. Also, security issues – they don’t have the proper camera coverage, things like that.
Some fail to upgrade their licenses. Not accounting for their inventory, as far as having too many plants as opposed to what they’re supposed to have, or too many ounces of marijuana on premises. Those are probably the most common.
Is there anything specific that usually triggers an audit, inspection or investigation from the MED?
Anytime a license is renewed, or a new license is issued, that’s an automatic trigger (for an inspection).
But the MED will investigate any complaint from any source. So employees from a business are a common source of complaints, especially people who are disgruntled or they’ve been terminated. They’ll call the MED.
Another source of complaints are competitive businesses. And a third is customers, if they’re not satisfied with the service or product they received.
What kind of suggestions would you offer to businesses that want to either avoid an audit or inspection, or just want to remain in compliance as best they can?
The key to running a successful marijuana business in Colorado – and in other states as well, I’m sure – is that you have to know the rules and you have to stay in compliance. You have to make a diligent effort to stay compliant 365 days out of the year, because you never know when a regulatory agency is going to come knocking on your door.
So any lapse in that compliance window, you’re just gambling that the regulatory agency isn’t going to walk in.
What are some of the larger policy issues facing the marijuana industry, in Colorado and nationwide, from a regulatory standpoint?
Currently, the Colorado Department of Agriculture, they oversee all the pesticide issues for any agricultural industry, which includes marijuana. They published a list of approved, authorized pesticides to be used on marijuana.
The problem with marijuana is that they don’t have any rules from the federal government. There hasn’t been a lot of testing to determine whether or not a particular fertilizer or pesticide, what’s the impact on the actual marijuana plant. So unfortunately there hasn’t been a lot of research done. That’s probably the biggest issue.
John Schroyer can be reached at [email protected]