GOV URGED TO HALT POT LICENSE LOTTERY, ADDRESS ‘RIGGED’ APPLICATION PROCESS
Plus: Finalist for marijuana dispensary works for KPMG — the firm that graded applicants
A pair of state lawmakers joined a group of losing pot shop applicants Tuesday to call on Gov. J.B. Pritzker to halt an upcoming lottery to determine the winners of the 75 long-delayed licenses and review the application grading process, which they claim was tainted and benefitted clouted firms.
“We are under the weather from this oppressive system, this rigged system, in which the state representatives and the state senators were lied to,” Rickey Hendon, a former Democratic state senator from Chicago, said during a news conference, noting that the “legislative intent” of the legalization law was to increase minority and local participation in the booming weed industry.
State law offers additional points on applications to groups and individuals deemed social equity applicants for living in an area disproportionately impacted by drug enforcement, having a past cannabis offense or meeting other criteria.
More than 700 groups applied for the next round dispensary licenses but only 21 applicants moved onto the lottery last week after receiving perfect scores on their applications, which were graded by the global accounting firm KPMG. All of the applicants in the lottery are considered social equity candidates, who were given a leg-up in the process in an effort to bolster minority participation in the overwhelmingly white pot industry.
Hendon said many eligible applicants are “suspect” over the process, noting that an individual who’s part of one of the applicant groups works for KPMG and has partnered with former Chicago police Supt. Terry Hillard. The small pool of finalists also includes groups involving well-known Chicago restaurateur Phil Stefani, Lucky Lincoln Gaming president Jeff Rehberger and existing players in the pot industry.
State officials have said 17 of the qualifying applicants have at least one minority owner, while 13 are majority owned by people of color. Sixteen have at least one owner who’s a woman.
Prior to attending the news conference, State Reps. La Shawn Ford,
D-8th, and Kathleen Willis, D-77th, penned a joint letter to Pritzker raising a list of concerns.
“The implementation of this law does not seem to meet the true social equity results the General Assembly intended when we passed this bill. We believe the administration should have an opportunity to explain what happened and what is being done to fix the situation,” they wrote.
The letter to Pritzker follows a similar appeal last week from members of the Black and Latino caucuses, who called on the governor to halt the issuance of all upcoming cannabis licenses.
The letter from Ford and Willis includes a series of questions asking among other things why KPMG was awarded a no-bid contract, when information about the scoring process will be released and whether there’s “still time to stop the lottery.” Ford and Willis will also hold a virtual town hall Wednesday afternoon “to hear the concerns from teams that applied and other key individuals worried about social equity.”
Pritzker vows ‘changes and fixes’
Prtizker told reporters Thursday that the law wouldn’t allow officials to hold up the lottery as he defended the diversity of the groups included in the drawing.
Nevertheless, he vowed that “there will be changes and fixes” to the licensing process while pointing to an upcoming disparity study that will determine how many new pot permits are needed after the upcoming dispensary, cultivation, transportation and infusion licenses are issued.
Toi Hutchinson, Pritzker’s chief pot adviser, detailed some proposed changes to the application process for future licenses, including limiting the number of applications each firm can submit. Many of the firms in the lottery have multiple chances to win because they paid thousands of dollars to submit multiple applications.
“We need to put a limit on how many [licenses] you can apply for at one time so that you can’t have really heavy, moneyed interests apply for way more than what your regular folks can apply for . ... I think another thing is to go from just doing top scores to doing a cutoff score so you can also expand the pool,” Hutchinson said, apparently referring to the lottery only including those with perfect application scores.
Two entirely Black-owned firms from Chicago filed a joint lawsuit Friday against the IDFPR and the director of the department’s cannabis control section. The suit, filed in the U.S. District Court for the Northern District of Illinois, alleges that many of the lottery participants are “owned by politically connected insiders” and claims the 75 outstanding dispensary licenses are worth over $1 billion.
The plaintiffs, Southshore Restore and Heartland Greens, claim they should have received perfect scores and want to hold up the lottery until they can find out why they aren’t included.
An employee of the global accounting firm that was awarded a no-bid contract to grade applications for the state’s next round of pot shop licenses is also a partner in one of the 21 groups that secured a spot in the upcoming lottery to determine the winners.
Hamd Kamal works as a risk management consultant for KPMG, which is getting nearly $4.2 million through a no-bid contract with the Illinois Department of Financial and Professional Regulation, the agency that oversees dispensaries.
Kamal is also listed as a manager of EHR Holdings LLC, an upstart pot firm that also counts former Chicago Police Supt. Terry Hillard as a backer, according to records kept by the Illinois secretary of state’s office. EHR’s principal address is a Near West Side head shop that’s also run by Kamal.
Kamal’s LinkedIn account stated last week that he’s a risk consultant at KPMG, though the reference to the firm has since been wiped from the page.
Like the other 20 firms in the lottery, EHR earned perfect scores on the applications that represent its five chances in drawings in three of the 17 possible regions across the state.
The news that a KPMG employee is also part of a firm that’s secured five spots in the dispensary lottery comes as lawmakers and applicants continue to pepper Gov. J.B. Pritzker with concerns about the firm’s contract, methods and how the application process shook out.
KPMG spokesman James McGann said Kamal “is an employee, but he was not part of the engagement team that scored the applications.”
He added: “The scoring process was objective, following the state’s criteria, with a blind scoring methodology. The team scoring the applications would have no knowledge of the names or affiliations of applicants. A separate team scored certain aspects of the application, such as social equity.”
EHR Holdings’ Eric Kowalczyk said the firm was formed last July, seven months before KPMG signed its initial contract with the IDFPR.
“The EHR team learned of KPMG’s selection at the same time as the rest of the state when it was published in the newspaper,” Kowalczyk said, pointing to a news report in July. “In fact, EHR was made aware KPMG only learned of any association two days ago.
“As with every submission, by every applicant who applied for a license, EHR’s application contained no information that could be used to identify the members of EHR or their employers,” added Kowalczyk, who claimed the firm followed state rules “to the letter.”
Despite Kowalczyk saying KPMG just recently learned of Kamal’s ties to EHR, Pritzker spokeswoman Jordan Abudayyeh noted that “KPMG had a plan in place to ensure that any potential conflicts of interest were addressed and did not influence the process. They are a large international firm with experience ensuring there aren’t conflicts of interest.”
KPMG has been one of the big winners as the state moves to dole out new recreational weed licenses. In addition to the IDFPR deal, KPMG was awarded another no-bid contract by the Illinois Department of Agriculture valued at $2.5 million to grade applications for licenses to grow, transport and infuse cannabis products.