Slow burn: Companies fume as licensing process drags on

Reviews underway on bias, fairness toward applicants

When Maryland launched its medical cannabis industry, the first companies to nab coveted licenses for growing, processing and selling the drug were overwhelmingly white-owned.

So, state lawmakers ordered more licenses to be issued, with the goal of getting more black people and women into the industry.

But a year and a half later, those new licenses are on hold amid five lawsuits and accusations from applicants that the process was botched or biased. The Maryland Medical Cannabis Commission has hired contractors to identify problems in the licensing process. And state lawmakers are weighing whether to step in with another legislative fix.

Meanwhile, federal prosecutors have charged the chief legislative champion for the industry, Cheryl Glenn, with wire fraud and bribery, and she has resigned her seat in the House of Delegates. Prosecutors allege the Baltimore Democrat took bribes from two companies to support legislation, including a 2018 bill that created the additional round of licenses. That’s thrown further doubt on what happens next for the fledgling industry.

William Tilburg, who recently was named executive director of the cannabis commission after serving as acting director for three months, said the commission will carefully review information that comes out in the Glenn case. He said he wasn’t aware of the federal investigation until it became public Monday.

Number of applicants this year for four new growing licenses and 10 new processing licenses.

Meanwhile, the commission is investigating claims of bias in the licensing process, while hopeful applicants wait to see what happens.

“The commission is taking seriously the concerns raised by legislators and applicants about the impartiality of the process,” Tilburg said.

But the commission’s decision on how to handle the concerns — by ordering up two outside reviews — will take at least until February. That’s created further uncertainty for the hundreds of companies that applied for licenses.

State lawmakers first approved medical cannabis in 2013 to allow people to treat a variety of conditions, ranging from seizures and post-traumatic stress disorder to severe nausea and chronic pain. But they required that the drug be grown only by academic centers. That didn’t work out: Universities feared losing federal funding because cultivating and using marijuana remains illegal under federal law.

The next year, the Maryland legislature reworked the law, creating a set number of licenses that private companies could seek for growing, processing and dispensing medical cannabis.

The first businesses got off the ground in late 2017. But before they even opened, an issue was discovered: Minority-owned businesses were shut out of the 15 licenses for growing the drug, even though the law required the state to “actively seek to achieve” racial diversity among license holders.

The issue of equity is important, advocates say, because black people have disproportionately been arrested and jailed for marijuana offenses for decades. Ensuring that minorities can profit from the drug, now that it is legal in the state, is a priority to groups such as the Legislative Black Caucus of Maryland.

Republican Gov. Larry Hogan ordered a study of the first licenses that determined minorities are at a disadvantage in the industry.

State lawmakers responded in 2018 by ordering a second round of licenses, and directing the cannabis commission to award bonus points in the application process to businesses owned by minorities or those from financially disadvantaged backgrounds.

Competition for those additional licenses this year was strong: More than 200 applicants for four new growing licenses and 10 new processing licenses.

But there were technical problems. Many applicants had difficulty with the online application system as the May 24 deadline approached. So, the cannabis commission extended the deadline by a month and required applicants to handdeliver USB drives containing their application.

Teams at historically black Morgan State University in Baltimore ranked the applications this summer, and the cannabis commission was poised to issue initial license approvals in September. But an applicant that missed the deadline by minutes, Remileaf, sued. A judge issued temporary restraining order that blocked the commission from awarding the approvals.

At the same time, officials from companies and lawmakers alleged improprieties in the process. Some claimed out-of-state companies partnered with local minority representatives to be the faces of their companies, earning them more points in the scoring process.

The cannabis commission decided in October to hire outside consultants to conduct two reviews.

One study will look at whether the licensing evaluation process was fair, while the other will check the veracity of information included in the high-ranking applications.

While the cannabis commission has not publicly named the top-ranking applicants who would be in line for licenses, each company was told where it fell in the rankings.

Each review will take 45 days, meaning the cannabis commission will learn the findings in February, according to Tilburg, the executive director.

From there, commission members will decide what actions, if any, are needed to remedy the process.

Tilburg acknowledged that the cannabis commission has struggled with achieving diversity in the new industry. It’s something that many states didn’t properly address, he said.

“It was never a consideration five and 10 years ago,” he said. “Then, when licenses were granted, there was a realization that there was a problem. So, states like Maryland have been looking to address it.”

Black lawmakers were among the leaders of the push to create the second round of licenses. Del. Darryl Barnes, chairman of the black caucus, said the delays have been frustrating.

“It’s troubling that we put out a second round of license opportunities, and we’re still having the same problems of a process that was flawed,” said Barnes, a Prince George’s County Democrat.

Barnes said lawmakers will consider whether they need to pass another law in 2020 to correct issues in the industry.

At least five companies have taken their complaints to the court system.

Remileaf is trying to get a judge to order the commission to review its application. Founder Jume Akinaggbe tearfully told an Anne Arundel County judge this month that while her company just missed the extended deadline, resubmitting its application mere minutes late, it had met the original deadline.

“I felt that I let everybody down,” she said.

A Baltimore-based company, MAS Alliance, also sued, saying its application for a processing license was improperly disqualified and should be evaluated. MAS Alliance also is asking the court to disqualify another applicant, because one of its owners has an affiliation with Morgan State, which was contracted to score and rank the applications.

The MAS Alliance lawsuit made the allegation that some of the top-scoring companies “utilized sham ownership” to score points reserved for minority and disadvantaged applicants.

Dennis Whitley, a lawyer in Prince George’s County, filed lawsuits on behalf of three companies: A Healing Leaf, Roundtable Wellness and Nature’s Healing Concepts. Whitley said his clients are concerned that not every applicant got a fair review, which he said is critical.

“We’re talking about opportunities at generational wealth, and they don’t believe the opportunities are being distributed in a fair manner,” he said. “They’ve taken hundreds of thousands of dollars just to go through the application process.”

For the 12 months ending in November, the state tracked more than $250 million worth of retail sales.

The state cannabis commission says demand for the drug outstrips supply, as the number of certified patients grows. More than 84,000 people have been approved to buy the drug.

As the lawsuits wind through the courts, the independent reviews are conducted and lawmakers mull potential legislation, dozens of companies are unsure what will happen next.

“It’s so hard,” said Annie Palmisano, whose company, Matriarch, applied for licenses to grow and process cannabis in Harford County.

“You worry about losing momentum. We were so excited to get started. We’ve got the town of Havre de Grace waiting on us; the people are waiting to see if they’re going to have new job opportunities. That just doesn’t feel good,” she said.

Donnie Waters is part of an ownership group of the company Greener Goods, which bought a 23-acre property in the lower Eastern Shore community of Eden in hopes of growing and processing cannabis there.

Waters believes the solution is for the state to award more licenses, perhaps unlimited licenses.

“They’ve introduced an artificial barrier to entry,” he said. “Why can’t anyone with the money and the business wherewithal to go into the business, open the business, as long as you abide by the regulations?”

Greener Goods had contractors lined up to build the facility and people interested in applying for jobs. Now, that’s on hold while the company waits to find out whether it will get another chance at a license.

“I hold out hope,” Waters said. “I’m optimistic, but I’m cautiously optimistic.”