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AOAC Approves Two New Microbiological Assays

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On August 11, PathogenDx announced that they received an AOAC Performance Tested Methods Certificate for their QuantX total yeast and mold test. Six days later, on August 17, Medicinal Genomics announced that AOAC approved their PathoSEEK 5-Color Aspergillus Multiplex Assays under the same AOAC Performance Tested Methods program.

Both assays are specifically designed with cannabis and hemp testing in mind and designed to expedite and simplify microbiological testing. PathogenDx’s QuantX quantifies the total amount of yeast and mold in a sample while also measuring against safety standards.

In addition to the total yeast and mold count test, PathogenDx has also introduced a 96-well plate, improved sample preparation and new data reporting with a custom reporting portal for compliance testing.

The Medicinal Genomics platform can detect four species, including A. flavus, A. fumigatus, A. niger, and A. terreus in both flower and infused edibles. The PathoSEEK microbial testing platform uses a PCR-based assay and provides an internal plant DNA control for every reaction.

This technique verifies the performance of the assay when detecting pathogens, allegedly minimizing false negative results commonly due to set up errors and experimental conditions.

AOAC International is a standards organization that works in the cannabis testing space through their CASP program to evaluate and approve standard testing methods for the industry.

Illinois Judge Says Ongoing Lawsuit Could Cause Cannabis Licensing Redo

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On July 21, 2021, NFL superstar wide receiver Julio Jones was named as the lead defendant in a 12-count civil fraud, conversion of assets, breach of contract, and breach of fiduciary duty lawsuit filed in Los Angeles Superior Court relating to a cannabis cultivation operation he co-owns. After being traded from the Atlanta Falcons to the Tennessee Titans this offseason, swapping his black and red jersey for a red, white, and blue one, his focus will be on the color green, as in the color of all the money that he is going to need to pay legal fees.

The case is titled Genetixs, LLC v. Julio Jones, followed by nine other individual and entity-named-defendants including retired Falcon receiver Roddy White. (White is listed individually in the charging document by his formal name, Sharod White.)

Additionally, White’s Mississippi LLC, “SLW Holdings,” is the fifth defendant in the civil case. Jones and White, through White’s LLC, had invested millions of dollars to start and operate a Southern California grow facility, Genetixs. The NFL players, through the holding company, shared a fractionalized ownership interest in the cultivation business with other Genetixs company members. In sum, the cultivation business, Genetixs, operated by the man Jones and White installed as the grow house’s chairman, is now suing the players and others involved in the business.

The 26-page civil complaint (also referred to as the “July 2021 lawsuit”) has been circulating across the Internet and the allegations are incendiary. Genetixs, a California LLC, which operated a grow house in Desert Hot Springs, Calif., has charged that each of civil defendants named in the case participated in a scheme that diverted over $3 million of cannabis a month from March to July 2021 from the Genetixs’ grow facility.

The accusations include claims that associates of Jones, White and others involved in Genetixs’ operations had siphoned off “400 to 2000 pounds of cannabis” through a hole in the wall of Genetixs’ Desert Hot Springs grow facility during an almost six-month period.

It also is alleged that Jones and White, and others, “facilitated” the dissipation of millions of dollars of what should have been Genetixs’ proceeds, and even enabled a former Genetixs employee (who had been hired by the LLC members on day one to build out and manage the grow site and was then fired a year later) to stay on, with family, as squatters at the facility.

Jones and White, over two thousand miles from California, have not been accused of committing the misconduct themselves. The legal language of the July 2021 complaint accuses the NFL players, from afar, with aiding and abetting and “conspiring” with the errant grow house squatters.

Philadelphia’s Drexel University LeBow business school professor Stacy Kline, who teaches Best Business Practices of the Cannabis Industry, in discussing the allegations contained solely in the complaint, was stunned by the description of Genetixs’ gross mismanagement.

“The complaint describes a total lack of oversight for the cannabis business venture and the absence of any internal controls,” Kline stated to Cannabis Business Times. “Where were the security cameras that grow sites are, in many states, required to have? How did so many people who created and were to manage the business abdicate their professional and fiduciary duties to the ongoing concern?”

 Inexperience and Lack of Due Diligence Results in Poor Business Outcomes

There is no way to read the July 2021 complaint (whether any of the allegations are ever proven up at trial) without drawing the conclusion that the wannabe cannabis business investor-partner-member-managers had no cannabis-specific business plan and failed to consult or heed the advice of experienced cannabis business experts before starting a cultivation operation. It’s abundantly clear that the NFL players, like many budding entrepreneurs, got into a business they knew next to nothing about. They both admitted as much in court documents.

 

SLW Holdings v. Freeman by sandydocs

 

A document in a related civil matter (discussed a bit later) and signed under oath by Jones just three weeks before the filing of the Genetixs lawsuit, demonstrates this point. It proves that a bad and ill-conceived cannabis-business-beginning will certainly lead to an ill-fated and often costly ending.

Jones’ account of how he and his friend and former teammate, Roddy White, came to invest “in the cannabis space” is an example of why one  should not invest in cannabis without doing a great deal of research and preparation:

 

“In the summer of 2019, Jones, living in Atlanta, came to Los Angeles for a visit, and while socializing at restaurants and clubs, was approached by someone from Los Angeles named “Al” who had a “proposition” for Jones to invest in cannabis. Based on what was related, Jones believed it would be a “great opportunity to make legal money outside of [his] profession.” 

Jones returned to Georgia and Al from Los Angeles called and texted Jones “about investing in cannabis.” One day, Jones flew back for a cannabis meeting at Al’s office (location not specified). There Jones met future Genetixs’ chairman, Lamarr House, and other men with whom he would ultimately partner at Genetixs.

At some point that day, House urged Jones to not work with Al because Al “did not have his stuff together.” Instead, (as Jones recounts) House urged Jones to do a business deal with him (House). 

Jones talked to House about the business and House drove him around as they looked at a possible grow site. Thereafter, Jones reached out to friend Roddy White and urged him to come aboard for “an opportunity in the cannabis space.” White, who Jones says trusts him greatly, agreed to do the venture.

Weeks later, House informed Jones and White that he had found a cultivator and his name was “Farmer John”. Jones and White flew back to Los Angeles, to meet the farmer. They were driven from Los Angeles by House and others to Farmer John’s Desert Hot Springs cultivation site. “After seeing the grow,” Jones explained, “they knew” Farmer John “was the man for the job.” After that, those present went into the farmer’s office “and started to negotiate the percentages and how much it would cost to build out and for him to grow the product.”

Sometime after Genetixs LLC was formed in California in March 2020 by House, Jones and White (using the Mississippi LLC, which had been formed in February 2020 for the cannabis deal) invested three million dollars in Genetixs.” 

Read more here, here and here

Lack of Planning at the Business Formation Stage

The salacious allegations have spread across sports and cannabis platforms, often with huge chunks of the charging document presented as if the allegations are true. Paul Kuharsky, an all-things-NFL-commentator, was interviewed on a sports program in which, in pertinent part, he reminded the viewers, that the story alleged “if true . . . is not a good look for sure” for the sports figures. Kuharsky also added the caution that, in America, “anyone can sue for anything” and that what is happening “could be a sour grapes scenario.”

Sour grapes is an understatement. A big part of the story in the lead up to the July complaint has been ignored: there were two related lawsuits being litigated in different courtrooms in the same courthouse involving overlapping characters and company entities.

Surely, that earlier lawsuit that Jones and White (as SLW Holdings) filed in May 2021 against Genetixs’ management is what prompted Genetixs to alert the world in a publicly filed civil complaint that there was a dispute between grow house partners.

The NFL players, two months before the July lawsuit in which they ended up as defendants, hired a two-man Los Angeles law firm and went to court. Without notifying their fellow Genetixs business partners, Jones and White asked a judge in Los Angeles Superior Court to intervene in the grow house business operation. The players (who had soured on their investment) tried to wrest control of Genetixs from the LLC principal member, Lamarr House (“the Chairman”). House, who was aligned with partners who were not Jones and White, collectively directed a majority interest of the LLC membership units (akin to shares in a corporation) in Genetixs.

Roddy White, in an under-oath declaration filed as part of the May 2021 lawsuit, informed the court that he had no idea that people involved in the operation of Genetixs had been convicted of fraud crimes and “of federal heroin trafficking.” White emphatically declared that had we [Jones and I] known this “we certainly would not have invested $3,000,000 with them.” 

The players’ lawyers asked for a temporary restraining order (TRO), a preliminary injunction, and sought to expel members from Genetixs’ management and operations. In the May 2021 lawsuit, Jones and White claimed that fellow grow operation members, especially House, who they all had installed as the principal LLC manager, had breached their fiduciary duties to the business. They further asserted that some involved in the business had criminal records, and that unfair business practices were resulting in ruining the cannabis business.

Although the court initially granted the TRO as a way to maintain the status quo until she heard from the other side (to include House and other Genetixs employees), the restraining order was ultimately vacated. A portion of the court’s July 8, 2021 order in the May 2021 case states: “Having considered Plaintiff’s probability of prevailing and the balance of harms, the court denies the preliminary injunction.”

The reasons? The court ruled, in part, that some parties to the lawsuit had not been properly served by Jones and White’s lawyers as well as that the player-plaintiffs had not satisfactorily explained how the operations at the grow house and its alleged personnel issues caused Jones and White quantifiable damages (which the law requires for the kind of equitable court action that they had requested.)

A Corporate or LLC Agreement is Not a Cannabis Business Plan

Arguably the most significant aspect of the White and Jones lawsuit, which influenced the court’s decision to not force any management changes or expel any members, was that the very filing of Jones and White’s lawsuit was barred by the terms of Genetixs’ LLC operating agreement.

Genetixs’ 38-page operating agreement contained pages boilerplate and arcane LLC-related legal language with little specifically related to a cannabis cultivation business. Yet, White, House, and the other Genetixs members did execute it.

The operating agreement contained a curious attachment labeled Exhibit A. There, on a half-page, was the chart alluded to in Jones’ declaration—the part where they negotiated ownership percentages in Farmer John’s office. Exhibit A showed what each of Genetixs’ member-partners had provided to the business in exchange for shares in the grow house business. Only one member put in cash, and specifically noted was the number “$700,000+.” This was the initial capital provided to the Genetixs operation by White and Jones as SLW Holdings. Beside the name of every other member-partner were the words “sweat equity” or some other kind of intangible such as “expertise.”

Who got how many shares in exchange for what seems to have been the primary focus of Genetixs’ owners. Failing to read, understand, and tailor an operating agreement and neglecting to craft a detailed and thorough business plan, can easily lead to being tossed out of court. And this happened here. The Genetixs operating agreement contained a provision that no decisions about business affairs could be made unilaterally by a member. An agreement would be needed by “an affirmative vote” of the members or with the consent of those with a majority interest.

Once the move for injunctive relief was intercepted by the court on July 8, 2021, with the denial of the permanent injunction and the lifting the TRO, some of Genetixs’ operators (who had been sued by Jones and White) decided to file their own lawsuit against the players. Genetixs would go big and name Jones, White, and others individually, as well as SLW Holdings in their counter lawsuit.

On July 21, the NFL stars had become the defendants, and the sports and cannabis news feed world went into overdrive.

Without a PR team in place, the first story to catch the public’s eye about the NFL players involvement in a Desert Hot Springs grow site was the version of the events spelled out in the Genetixs lawsuit. Even though a lawyer could read the complaint and see that the players were not directly or personally involved in misconduct, the drafting of the legal instrument accuses all the civil defendants of the same conduct, and the attendant news coverage made it appear that the players had been involved in nefarious civil (and suggestively criminal) activity.

No Quick End In Sight For The Players

Civil litigation with two coexisting cases (the earlier May 2021 case has new motions for that judge to consider filed by, among other people, the NFL players’ lawyers) and the cringeworthy July 2021 allegations will continue to get much attention because of the combination of celebrity, sports, and cannabis. Also, since it was filed in the vast county of Los Angeles, home to some ten million residents, with state court judges having heavy case dockets and carrying many complex cases, the case will likely persist for years.

But the biggest reason it will take so long for the case to conclude is the amount of money alleged to have been squandered, specifically over $12 million in product or cash, as well as the removal from the site of expensive cultivation and extraction equipment.

Lawsuits can be dismissed “on the papers” if the legal action fails on its face to state a claim. Not here. Genetixs’ lengthy complaint more than amply states a claim (in fact, many claims). These unproven factual assertions could mean big money judgment for the folks bringing the lawsuit if proven in a court of law.

The Los Angeles Superior Court judge assigned to the Genetixs case is former federal prosecutor Barbara Scheper, who handled, among other things at the Los Angeles U.S. Attorney’s Office, complex white-collar crimes. She knows fraud and even when the typical motions to dismiss are filed, will likely let the case proceed to the discovery phase. This means each side will be subpoenaing the other side and other ancillary witnesses for testimony and documents. Then, the forensic accountants on both sides will assess how much money the business generated, how much, if any, was removed, and where the money (mostly cash) went. As forensic accountant Marion Wickersham of Forensic Resolutions, Inc., often opines on cannabis business education panels, “Cash can be tough to trace but we examiners have our ways.”

Takeaways for Cannabis Cultivation Businesses

No doubt that this case is convoluted, but there are clear lessons to be gleaned for cannabis business owners:

  • Choose business partners wisely. Vet them to include background and resume verification checks.
  • Do not invest money with any person or entity that has no seasoned and experienced management team in cannabis.
  • Be wary of investing anywhere which is geographically too far away to drive over and do a spontaneous inspection of the premises.
  • If you are planning to get in and stay in the cannabis business, have experienced civil practice lawyers (often current or former “big law” complex civil practice litigators now doing niche and focused cannabis work who have a roster of lawyers who understand and actually practice in civil cannabis law.)
  • Know this maxim: A corporate or LLC formation document is not a detailed cannabis business plan. Understand that the latter is typically needed for investors, and often must be submitted as an attachment to state and town licensing applications.

Plus, based on the Genetixs’ saga which concerns investing and operating a cannabis cultivation business, the cannabis business participants would be wise to hire, consult with and create a legal team that should include, but is not limited to, lawyers who have direct experience in:

  • Cannabis corporate/LLC/partnership/company formation
  • Cannabis licensure (for both states, U.S. territories and towns for both horizontal and vertically integrated operations)
  • Real estate and rental premises acquisition specific to cannabis businesses
  • Cannabis security systems to include cameras, logs, key card systems, guards, and employee apparel restrictions (for example, bans on clothes with pockets and pre and post work apparel and purse and backpack searches)
  • Cannabis tax, accounting, and books and records system expertise for IRS 280E federal compliance
  • Cannabis product tagging and tracking, seed-to-sale requirements
  • Cannabis and banking (to include those with expertise in how to properly safeguard and report what is still overwhelming a cash-based business due to the ever-present federal illegality of cannabis)
  • Cannabis employment and personnel practices to include expertise in background checks, drug testing, felon, and misdemeanor licensing exclusion provisions in each state of operation, as well as conviction expungement practices, and
  • Cannabis and insurance to include coverage for employee theft, break-ins as well as personal injury and costs of employees being prosecuted for workplace activities.

And as exemplified by this sordid cannabis business tale, the investor/business person’s team must include lawyers who understand and have had significant experience in drafting and specifically tailoring both cannabis operating agreements and cannabis-focused business plans.

Additionally, any successful cannabis business must have experienced forensic accountants on hand—certified public accountants who have worked with cannabis businesses, not just friends or bookkeepers who know how to input cash on an Excel spreadsheet.

And with reputation devastation one lawsuit away for anyone involved in cannabis, cannabis businesses (especially those in which public figures are involved) must have people on the team who have worked in cannabis public relations and crisis management.

Summing Up

Investing in cannabis businesses comes with significant risk, but for the handsomely capitalized (those who can lose money without losing much sleep) there can be great rewards. Had the sports figured treated their investment and participation differently, the outcome and duration of the litigation as well as “their spin” in the public eye would likely have been different.

One hopes Julio Jones, who missed practice with the Tennessee Titans in the first week of August, will soon have better days. With the right combination of expertise by his side or at his disposal, he might just be able to change the odds in the game.

Julie A. Werner-Simon is a former federal prosecutor, now law professor adjunct and cannabis legal analyst at Drexel University’s Kline School of Law and the LeBow School of Business.

Nearly Half of U.S. Adults Report Trying Cannabis; Percentage of Regular Smokers Remains Unchanged

by

On July 21, 2021, NFL superstar wide receiver Julio Jones was named as the lead defendant in a 12-count civil fraud, conversion of assets, breach of contract, and breach of fiduciary duty lawsuit filed in Los Angeles Superior Court relating to a cannabis cultivation operation he co-owns. After being traded from the Atlanta Falcons to the Tennessee Titans this offseason, swapping his black and red jersey for a red, white, and blue one, his focus will be on the color green, as in the color of all the money that he is going to need to pay legal fees.

The case is titled Genetixs, LLC v. Julio Jones, followed by nine other individual and entity-named-defendants including retired Falcon receiver Roddy White. (White is listed individually in the charging document by his formal name, Sharod White.)

Additionally, White’s Mississippi LLC, “SLW Holdings,” is the fifth defendant in the civil case. Jones and White, through White’s LLC, had invested millions of dollars to start and operate a Southern California grow facility, Genetixs. The NFL players, through the holding company, shared a fractionalized ownership interest in the cultivation business with other Genetixs company members. In sum, the cultivation business, Genetixs, operated by the man Jones and White installed as the grow house’s chairman, is now suing the players and others involved in the business.

The 26-page civil complaint (also referred to as the “July 2021 lawsuit”) has been circulating across the Internet and the allegations are incendiary. Genetixs, a California LLC, which operated a grow house in Desert Hot Springs, Calif., has charged that each of civil defendants named in the case participated in a scheme that diverted over $3 million of cannabis a month from March to July 2021 from the Genetixs’ grow facility.

The accusations include claims that associates of Jones, White and others involved in Genetixs’ operations had siphoned off “400 to 2000 pounds of cannabis” through a hole in the wall of Genetixs’ Desert Hot Springs grow facility during an almost six-month period.

It also is alleged that Jones and White, and others, “facilitated” the dissipation of millions of dollars of what should have been Genetixs’ proceeds, and even enabled a former Genetixs employee (who had been hired by the LLC members on day one to build out and manage the grow site and was then fired a year later) to stay on, with family, as squatters at the facility.

Jones and White, over two thousand miles from California, have not been accused of committing the misconduct themselves. The legal language of the July 2021 complaint accuses the NFL players, from afar, with aiding and abetting and “conspiring” with the errant grow house squatters.

Philadelphia’s Drexel University LeBow business school professor Stacy Kline, who teaches Best Business Practices of the Cannabis Industry, in discussing the allegations contained solely in the complaint, was stunned by the description of Genetixs’ gross mismanagement.

“The complaint describes a total lack of oversight for the cannabis business venture and the absence of any internal controls,” Kline stated to Cannabis Business Times. “Where were the security cameras that grow sites are, in many states, required to have? How did so many people who created and were to manage the business abdicate their professional and fiduciary duties to the ongoing concern?”

 Inexperience and Lack of Due Diligence Results in Poor Business Outcomes

There is no way to read the July 2021 complaint (whether any of the allegations are ever proven up at trial) without drawing the conclusion that the wannabe cannabis business investor-partner-member-managers had no cannabis-specific business plan and failed to consult or heed the advice of experienced cannabis business experts before starting a cultivation operation. It’s abundantly clear that the NFL players, like many budding entrepreneurs, got into a business they knew next to nothing about. They both admitted as much in court documents.

 

SLW Holdings v. Freeman by sandydocs

 

A document in a related civil matter (discussed a bit later) and signed under oath by Jones just three weeks before the filing of the Genetixs lawsuit, demonstrates this point. It proves that a bad and ill-conceived cannabis-business-beginning will certainly lead to an ill-fated and often costly ending.

Jones’ account of how he and his friend and former teammate, Roddy White, came to invest “in the cannabis space” is an example of why one  should not invest in cannabis without doing a great deal of research and preparation:

 

“In the summer of 2019, Jones, living in Atlanta, came to Los Angeles for a visit, and while socializing at restaurants and clubs, was approached by someone from Los Angeles named “Al” who had a “proposition” for Jones to invest in cannabis. Based on what was related, Jones believed it would be a “great opportunity to make legal money outside of [his] profession.” 

Jones returned to Georgia and Al from Los Angeles called and texted Jones “about investing in cannabis.” One day, Jones flew back for a cannabis meeting at Al’s office (location not specified). There Jones met future Genetixs’ chairman, Lamarr House, and other men with whom he would ultimately partner at Genetixs.

At some point that day, House urged Jones to not work with Al because Al “did not have his stuff together.” Instead, (as Jones recounts) House urged Jones to do a business deal with him (House). 

Jones talked to House about the business and House drove him around as they looked at a possible grow site. Thereafter, Jones reached out to friend Roddy White and urged him to come aboard for “an opportunity in the cannabis space.” White, who Jones says trusts him greatly, agreed to do the venture.

Weeks later, House informed Jones and White that he had found a cultivator and his name was “Farmer John”. Jones and White flew back to Los Angeles, to meet the farmer. They were driven from Los Angeles by House and others to Farmer John’s Desert Hot Springs cultivation site. “After seeing the grow,” Jones explained, “they knew” Farmer John “was the man for the job.” After that, those present went into the farmer’s office “and started to negotiate the percentages and how much it would cost to build out and for him to grow the product.”

Sometime after Genetixs LLC was formed in California in March 2020 by House, Jones and White (using the Mississippi LLC, which had been formed in February 2020 for the cannabis deal) invested three million dollars in Genetixs.” 

Read more here, here and here

Lack of Planning at the Business Formation Stage

The salacious allegations have spread across sports and cannabis platforms, often with huge chunks of the charging document presented as if the allegations are true. Paul Kuharsky, an all-things-NFL-commentator, was interviewed on a sports program in which, in pertinent part, he reminded the viewers, that the story alleged “if true . . . is not a good look for sure” for the sports figures. Kuharsky also added the caution that, in America, “anyone can sue for anything” and that what is happening “could be a sour grapes scenario.”

Sour grapes is an understatement. A big part of the story in the lead up to the July complaint has been ignored: there were two related lawsuits being litigated in different courtrooms in the same courthouse involving overlapping characters and company entities.

Surely, that earlier lawsuit that Jones and White (as SLW Holdings) filed in May 2021 against Genetixs’ management is what prompted Genetixs to alert the world in a publicly filed civil complaint that there was a dispute between grow house partners.

The NFL players, two months before the July lawsuit in which they ended up as defendants, hired a two-man Los Angeles law firm and went to court. Without notifying their fellow Genetixs business partners, Jones and White asked a judge in Los Angeles Superior Court to intervene in the grow house business operation. The players (who had soured on their investment) tried to wrest control of Genetixs from the LLC principal member, Lamarr House (“the Chairman”). House, who was aligned with partners who were not Jones and White, collectively directed a majority interest of the LLC membership units (akin to shares in a corporation) in Genetixs.

Roddy White, in an under-oath declaration filed as part of the May 2021 lawsuit, informed the court that he had no idea that people involved in the operation of Genetixs had been convicted of fraud crimes and “of federal heroin trafficking.” White emphatically declared that had we [Jones and I] known this “we certainly would not have invested $3,000,000 with them.” 

The players’ lawyers asked for a temporary restraining order (TRO), a preliminary injunction, and sought to expel members from Genetixs’ management and operations. In the May 2021 lawsuit, Jones and White claimed that fellow grow operation members, especially House, who they all had installed as the principal LLC manager, had breached their fiduciary duties to the business. They further asserted that some involved in the business had criminal records, and that unfair business practices were resulting in ruining the cannabis business.

Although the court initially granted the TRO as a way to maintain the status quo until she heard from the other side (to include House and other Genetixs employees), the restraining order was ultimately vacated. A portion of the court’s July 8, 2021 order in the May 2021 case states: “Having considered Plaintiff’s probability of prevailing and the balance of harms, the court denies the preliminary injunction.”

The reasons? The court ruled, in part, that some parties to the lawsuit had not been properly served by Jones and White’s lawyers as well as that the player-plaintiffs had not satisfactorily explained how the operations at the grow house and its alleged personnel issues caused Jones and White quantifiable damages (which the law requires for the kind of equitable court action that they had requested.)

A Corporate or LLC Agreement is Not a Cannabis Business Plan

Arguably the most significant aspect of the White and Jones lawsuit, which influenced the court’s decision to not force any management changes or expel any members, was that the very filing of Jones and White’s lawsuit was barred by the terms of Genetixs’ LLC operating agreement.

Genetixs’ 38-page operating agreement contained pages boilerplate and arcane LLC-related legal language with little specifically related to a cannabis cultivation business. Yet, White, House, and the other Genetixs members did execute it.

The operating agreement contained a curious attachment labeled Exhibit A. There, on a half-page, was the chart alluded to in Jones’ declaration—the part where they negotiated ownership percentages in Farmer John’s office. Exhibit A showed what each of Genetixs’ member-partners had provided to the business in exchange for shares in the grow house business. Only one member put in cash, and specifically noted was the number “$700,000+.” This was the initial capital provided to the Genetixs operation by White and Jones as SLW Holdings. Beside the name of every other member-partner were the words “sweat equity” or some other kind of intangible such as “expertise.”

Who got how many shares in exchange for what seems to have been the primary focus of Genetixs’ owners. Failing to read, understand, and tailor an operating agreement and neglecting to craft a detailed and thorough business plan, can easily lead to being tossed out of court. And this happened here. The Genetixs operating agreement contained a provision that no decisions about business affairs could be made unilaterally by a member. An agreement would be needed by “an affirmative vote” of the members or with the consent of those with a majority interest.

Once the move for injunctive relief was intercepted by the court on July 8, 2021, with the denial of the permanent injunction and the lifting the TRO, some of Genetixs’ operators (who had been sued by Jones and White) decided to file their own lawsuit against the players. Genetixs would go big and name Jones, White, and others individually, as well as SLW Holdings in their counter lawsuit.

On July 21, the NFL stars had become the defendants, and the sports and cannabis news feed world went into overdrive.

Without a PR team in place, the first story to catch the public’s eye about the NFL players involvement in a Desert Hot Springs grow site was the version of the events spelled out in the Genetixs lawsuit. Even though a lawyer could read the complaint and see that the players were not directly or personally involved in misconduct, the drafting of the legal instrument accuses all the civil defendants of the same conduct, and the attendant news coverage made it appear that the players had been involved in nefarious civil (and suggestively criminal) activity.

No Quick End In Sight For The Players

Civil litigation with two coexisting cases (the earlier May 2021 case has new motions for that judge to consider filed by, among other people, the NFL players’ lawyers) and the cringeworthy July 2021 allegations will continue to get much attention because of the combination of celebrity, sports, and cannabis. Also, since it was filed in the vast county of Los Angeles, home to some ten million residents, with state court judges having heavy case dockets and carrying many complex cases, the case will likely persist for years.

But the biggest reason it will take so long for the case to conclude is the amount of money alleged to have been squandered, specifically over $12 million in product or cash, as well as the removal from the site of expensive cultivation and extraction equipment.

Lawsuits can be dismissed “on the papers” if the legal action fails on its face to state a claim. Not here. Genetixs’ lengthy complaint more than amply states a claim (in fact, many claims). These unproven factual assertions could mean big money judgment for the folks bringing the lawsuit if proven in a court of law.

The Los Angeles Superior Court judge assigned to the Genetixs case is former federal prosecutor Barbara Scheper, who handled, among other things at the Los Angeles U.S. Attorney’s Office, complex white-collar crimes. She knows fraud and even when the typical motions to dismiss are filed, will likely let the case proceed to the discovery phase. This means each side will be subpoenaing the other side and other ancillary witnesses for testimony and documents. Then, the forensic accountants on both sides will assess how much money the business generated, how much, if any, was removed, and where the money (mostly cash) went. As forensic accountant Marion Wickersham of Forensic Resolutions, Inc., often opines on cannabis business education panels, “Cash can be tough to trace but we examiners have our ways.”

Takeaways for Cannabis Cultivation Businesses

No doubt that this case is convoluted, but there are clear lessons to be gleaned for cannabis business owners:

  • Choose business partners wisely. Vet them to include background and resume verification checks.
  • Do not invest money with any person or entity that has no seasoned and experienced management team in cannabis.
  • Be wary of investing anywhere which is geographically too far away to drive over and do a spontaneous inspection of the premises.
  • If you are planning to get in and stay in the cannabis business, have experienced civil practice lawyers (often current or former “big law” complex civil practice litigators now doing niche and focused cannabis work who have a roster of lawyers who understand and actually practice in civil cannabis law.)
  • Know this maxim: A corporate or LLC formation document is not a detailed cannabis business plan. Understand that the latter is typically needed for investors, and often must be submitted as an attachment to state and town licensing applications.

Plus, based on the Genetixs’ saga which concerns investing and operating a cannabis cultivation business, the cannabis business participants would be wise to hire, consult with and create a legal team that should include, but is not limited to, lawyers who have direct experience in:

  • Cannabis corporate/LLC/partnership/company formation
  • Cannabis licensure (for both states, U.S. territories and towns for both horizontal and vertically integrated operations)
  • Real estate and rental premises acquisition specific to cannabis businesses
  • Cannabis security systems to include cameras, logs, key card systems, guards, and employee apparel restrictions (for example, bans on clothes with pockets and pre and post work apparel and purse and backpack searches)
  • Cannabis tax, accounting, and books and records system expertise for IRS 280E federal compliance
  • Cannabis product tagging and tracking, seed-to-sale requirements
  • Cannabis and banking (to include those with expertise in how to properly safeguard and report what is still overwhelming a cash-based business due to the ever-present federal illegality of cannabis)
  • Cannabis employment and personnel practices to include expertise in background checks, drug testing, felon, and misdemeanor licensing exclusion provisions in each state of operation, as well as conviction expungement practices, and
  • Cannabis and insurance to include coverage for employee theft, break-ins as well as personal injury and costs of employees being prosecuted for workplace activities.

And as exemplified by this sordid cannabis business tale, the investor/business person’s team must include lawyers who understand and have had significant experience in drafting and specifically tailoring both cannabis operating agreements and cannabis-focused business plans.

Additionally, any successful cannabis business must have experienced forensic accountants on hand—certified public accountants who have worked with cannabis businesses, not just friends or bookkeepers who know how to input cash on an Excel spreadsheet.

And with reputation devastation one lawsuit away for anyone involved in cannabis, cannabis businesses (especially those in which public figures are involved) must have people on the team who have worked in cannabis public relations and crisis management.

Summing Up

Investing in cannabis businesses comes with significant risk, but for the handsomely capitalized (those who can lose money without losing much sleep) there can be great rewards. Had the sports figured treated their investment and participation differently, the outcome and duration of the litigation as well as “their spin” in the public eye would likely have been different.

One hopes Julio Jones, who missed practice with the Tennessee Titans in the first week of August, will soon have better days. With the right combination of expertise by his side or at his disposal, he might just be able to change the odds in the game.

Julie A. Werner-Simon is a former federal prosecutor, now law professor adjunct and cannabis legal analyst at Drexel University’s Kline School of Law and the LeBow School of Business.

Lobbyists for ‘special interests’ accused of un-American activities related to cannabis

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Cannabis licensing issues are set to become the next battlefield in the US as legalization becomes more likely, reports CBD-Intel

With the majority of anti-cannabis users appearing to have accepted the eventual inevitability of some form of legalization, attention now turns to attempts to influence the shape of a possible future regime.

Traditional adversary industries like pharmaceuticals and alcohol have recently changed at least part of their lobbying strategy.

They are now trying to create limited licensing models that would benefit them as better funded companies by either dominating the market itself or limiting its impact on their core business interests.

John Kaweske, CEO of Tweedleaf, a Colorado medical and adult pharmacy chain, told CBD-Intel that outside government officials remain a threat to continued cannabis use.

By lobbying to limit licenses and introduce stricter licensing systems, companies that previously opposed cannabis are trying to create the kind of highly regulated, constrained market conditions for gamblers under which they already thrive. That is, they either beat back the competition by creating the conditions for artificially high prices, or they create a market into which they can enter themselves with considerable financial and experiential advantages.

“The concern of Special Interests is that they try to gain oligopoly-like advantages,” said Kaweske. “States with a restricted licensing model are simply un-American and violate free market principles.

“If the government creates a system of limited licenses and only issues those licenses to a small group of people, how does the American dream come true?”

Aside from concerns about allowing more people – especially those most disadvantaged by the decades-long war on drugs – to enjoy a slice of the lucrative cannabis pie, restricted licensing also hurts consumers directly as it leads to higher prices.

“In limited license states, the cost of cannabis is literally double what our consumers here in Colorado pay for the same product,” added Kaweske. “The consumer pays the price because of this restrictive market.”

But some of the larger cannabis companies can also benefit from limited licensing. This has created a messy situation with sometimes weird bedfellows.

For example, the Michigan Cannabis Manufacturers Association (MCMA), which represents some of the largest cannabis companies in Michigan, is campaigning for stricter regulations on medical cannabis caregivers and possibly more restrictions on home growing.

In essence, the MCMA wants to get as many sales as possible through licensed pharmacies for the benefit of its members.

However, current regulations allow medical cannabis keepers to support up to five patients, which can include growing as well as sourcing supplies from outside the pharmacy system.

This could mean growing up to 12 cannabis plants or purchasing up to 2.5 oz of product for the five patients, which could be combined with personal growing allowances if the caregiver is themselves registered as a medical cannabis patient to grow up to 72 plants.

The Michigan Medical Marijuana Association (MMMA) estimates that there are more than 36,000 registered nurses who could potentially care for a significant portion of the state’s 267,000 medical cannabis patients, according to the MMMA, removing them from the state’s licensed medical cannabis market, which is estimated to be around Estimated $ 1 billion.

The motivation for the companies that make up the MCMA to work to limit potential routes out of the market is obvious. MCMA members say they are concerned about the impact unregulated, unchecked and untaxed medical cannabis could have on consumers and government programs that rely on money.

But there have been calls from cannabis activists to boycott brands associated with membership of the trade group, including Fluresh, Two Joints, Jolly Edibles, North, Short’s Brewing, Petra, Wana, Sherbinski’s, Kiva Confections, DNA Genetics, Clout King , Chief Solventless and Crown Jewels.

Rick Thompson, owner of Michigan Cannabis Business Development Group, called any changes “unnecessary” and referred to the story of MCMA’s executive director Steve Linder.

“You have to acknowledge that Linder has been a real problem for the cannabis industry for years,” Thompson told the local media. “The consistent message from him and the MCMA was to put all cannabis sales under regulation.

“They want more sales to go through their stores. They advocate fundamentally changing the way nurses work to the extent that most of us believe that the program will be fundamentally changed and inoperable. “

The MCMA move puts them on the same side as pharmaceutical organizations that previously urged Michigan lawmakers to restrict nurse activity.

Similar activity can be seen on the recreational cannabis side.

A major problem for companies in states that allow alcohol and cannabis use on the same site is getting cities and other local jurisdictions to rewrite land use policies so that cannabis is visible. There’s also a problem with rewriting the zone restrictions so cannabis businesses can open in more desirable locations, according to House Caviar, a Los Angeles-based event planning company.

This has traditionally been opposed by the alcohol industry, which fears lost sales of cannabis in co-licensed locations, Antoinette Vu, co-founder of House Caviar, told CBD-Intel.

But local jurisdictions often prioritize tackling homelessness and unemployment in changes in land use policies – two social problems often linked to the war on drugs through convictions and other means.

This makes it easy for lobbyists to push other issues with public support and keep cannabis-related changes on the agenda, Vu added.

Ironically, many cannabis companies dealing with social issues such as homelessness and unemployment due to drug convictions could re-lobby on the same side of issues as those seeking to restrict cannabis licensing.

And the same shared loyalties can be seen at the federal level. Members of Congress have proposed several bills related to the legalization of cannabis, including:

  • the highly progressive Cannabis Administration and Opportunity Act, which would remove cannabis from the controlled substances list
  • the Moderately Progressive Marijuana Opportunity Reinvestment and Expungement (MORE) Act, a more progressive edition than the version passed by the House of Representatives last year
  • the Common Sense Cannabis Reform For Veterans, Small Business, and Medical Professionals Act, which would replace the reinvestment and opportunity elements of the MORE Act with legalizing interstate cannabis trade, medical cannabis research, and providing access for military veterans.

Again, issues of social justice and opportunity lead to shared loyalties, with some in the industry advocating any kind of incremental change to slowly bring about a new federal cannabis regime. Others take the position of Democratic Senator Cory Booker of New Jersey and are less opposed to action aimed at promoting broader legislation.

Some companies outside of the cannabis sector, such as Amazon, have publicly supported measures such as the MORE Act. Amazon declined to tell CBD-Intel whether it had backed its public support with money from lobbyists.

Similarly, Big Alcohol and Big Tobacco in particular are silent about their lobbying activities alongside general inclusive propaganda. However, there is a feeling that such companies would be at a disadvantage in terms of either dominance or the safeguarding of their core interests if the focus were on accessing and improving under-represented communities and limited businesses.

As a result, the general activity of traditional cannabis opponents remains worrying – not least because of their much larger war coffers. It has been estimated that cannabis lobbyists spent only $ 4 million on political advocacy last year, compared to the $ 60 million alcohol and tobacco groups contributed to all issues.

A survey of its members conducted by the national cannabis advocacy group NORML found that a majority of consumers do not support alcohol and tobacco companies that influence cannabis policy. A total of 77.6% said it was a problem, just under 47% said it was a big problem and the rest said it was only a problem “when companies advocate policies that address consumer issues There is a conflict ”.

“We have already seen the impact of these corporate interests,” said Erik Altieri, NORML’s Executive Director. “In some cases, many of these people have opposed consumer-friendly legalization regulations, such as the right for adults to grow marijuana in the privacy of their home.

“These business units have also pushed for statewide limits on the number of licensed cannabis producers and dealers to keep prices high and artificially limited – and keep the economic benefits of legalization largely out of the reach of the average American,” especially People of Color. “

What that means: NORML’s concerns are understandable. It is interesting to note that in terms of legalized territory and acceptance, cannabis is growing, it is also becoming more corporate.

Natty Suits and Flash Cars are rapidly replacing RVs and patchouli, potentially bringing the industry into greater conflict with itself – especially as parts of them realize they have more in common with the lobbying positions of former external opponents.

Vigorous prohibitionists are increasingly being sidelined. Even longtime traditional lobbyist opponents like Safe Approaches to Marijuana have changed course from advocating a ban to advocating restrictions while continuing to warn of potential dangers.

With increasing pressure to change at the federal level and in the remaining prohibition states, it will be interesting to see where the money is going and how issues such as licensing and land use develop.

What is clear for now is that there is unlikely to be a clear divide between those within the sector and those outside the sector.

–

CBD-Intel (www.CBD-Intel.com) provides impartial, independent and world-class market and regulatory research, law enforcement and quantitative data for the cannabidiol (CBD) sector.

We offer our clients the tools to navigate this fast-moving sector, adjust their business strategy, optimize resources and make informed decisions. In addition, we offer tailor-made research and advice support.

Judge Allows Out-of-State Businesses to Operate Medical Cannabis Dispensaries in Maine

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On July 21, 2021, NFL superstar wide receiver Julio Jones was named as the lead defendant in a 12-count civil fraud, conversion of assets, breach of contract, and breach of fiduciary duty lawsuit filed in Los Angeles Superior Court relating to a cannabis cultivation operation he co-owns. After being traded from the Atlanta Falcons to the Tennessee Titans this offseason, swapping his black and red jersey for a red, white, and blue one, his focus will be on the color green, as in the color of all the money that he is going to need to pay legal fees.

The case is titled Genetixs, LLC v. Julio Jones, followed by nine other individual and entity-named-defendants including retired Falcon receiver Roddy White. (White is listed individually in the charging document by his formal name, Sharod White.)

Additionally, White’s Mississippi LLC, “SLW Holdings,” is the fifth defendant in the civil case. Jones and White, through White’s LLC, had invested millions of dollars to start and operate a Southern California grow facility, Genetixs. The NFL players, through the holding company, shared a fractionalized ownership interest in the cultivation business with other Genetixs company members. In sum, the cultivation business, Genetixs, operated by the man Jones and White installed as the grow house’s chairman, is now suing the players and others involved in the business.

The 26-page civil complaint (also referred to as the “July 2021 lawsuit”) has been circulating across the Internet and the allegations are incendiary. Genetixs, a California LLC, which operated a grow house in Desert Hot Springs, Calif., has charged that each of civil defendants named in the case participated in a scheme that diverted over $3 million of cannabis a month from March to July 2021 from the Genetixs’ grow facility.

The accusations include claims that associates of Jones, White and others involved in Genetixs’ operations had siphoned off “400 to 2000 pounds of cannabis” through a hole in the wall of Genetixs’ Desert Hot Springs grow facility during an almost six-month period.

It also is alleged that Jones and White, and others, “facilitated” the dissipation of millions of dollars of what should have been Genetixs’ proceeds, and even enabled a former Genetixs employee (who had been hired by the LLC members on day one to build out and manage the grow site and was then fired a year later) to stay on, with family, as squatters at the facility.

Jones and White, over two thousand miles from California, have not been accused of committing the misconduct themselves. The legal language of the July 2021 complaint accuses the NFL players, from afar, with aiding and abetting and “conspiring” with the errant grow house squatters.

Philadelphia’s Drexel University LeBow business school professor Stacy Kline, who teaches Best Business Practices of the Cannabis Industry, in discussing the allegations contained solely in the complaint, was stunned by the description of Genetixs’ gross mismanagement.

“The complaint describes a total lack of oversight for the cannabis business venture and the absence of any internal controls,” Kline stated to Cannabis Business Times. “Where were the security cameras that grow sites are, in many states, required to have? How did so many people who created and were to manage the business abdicate their professional and fiduciary duties to the ongoing concern?”

 Inexperience and Lack of Due Diligence Results in Poor Business Outcomes

There is no way to read the July 2021 complaint (whether any of the allegations are ever proven up at trial) without drawing the conclusion that the wannabe cannabis business investor-partner-member-managers had no cannabis-specific business plan and failed to consult or heed the advice of experienced cannabis business experts before starting a cultivation operation. It’s abundantly clear that the NFL players, like many budding entrepreneurs, got into a business they knew next to nothing about. They both admitted as much in court documents.

 

SLW Holdings v. Freeman by sandydocs

 

A document in a related civil matter (discussed a bit later) and signed under oath by Jones just three weeks before the filing of the Genetixs lawsuit, demonstrates this point. It proves that a bad and ill-conceived cannabis-business-beginning will certainly lead to an ill-fated and often costly ending.

Jones’ account of how he and his friend and former teammate, Roddy White, came to invest “in the cannabis space” is an example of why one  should not invest in cannabis without doing a great deal of research and preparation:

 

“In the summer of 2019, Jones, living in Atlanta, came to Los Angeles for a visit, and while socializing at restaurants and clubs, was approached by someone from Los Angeles named “Al” who had a “proposition” for Jones to invest in cannabis. Based on what was related, Jones believed it would be a “great opportunity to make legal money outside of [his] profession.” 

Jones returned to Georgia and Al from Los Angeles called and texted Jones “about investing in cannabis.” One day, Jones flew back for a cannabis meeting at Al’s office (location not specified). There Jones met future Genetixs’ chairman, Lamarr House, and other men with whom he would ultimately partner at Genetixs.

At some point that day, House urged Jones to not work with Al because Al “did not have his stuff together.” Instead, (as Jones recounts) House urged Jones to do a business deal with him (House). 

Jones talked to House about the business and House drove him around as they looked at a possible grow site. Thereafter, Jones reached out to friend Roddy White and urged him to come aboard for “an opportunity in the cannabis space.” White, who Jones says trusts him greatly, agreed to do the venture.

Weeks later, House informed Jones and White that he had found a cultivator and his name was “Farmer John”. Jones and White flew back to Los Angeles, to meet the farmer. They were driven from Los Angeles by House and others to Farmer John’s Desert Hot Springs cultivation site. “After seeing the grow,” Jones explained, “they knew” Farmer John “was the man for the job.” After that, those present went into the farmer’s office “and started to negotiate the percentages and how much it would cost to build out and for him to grow the product.”

Sometime after Genetixs LLC was formed in California in March 2020 by House, Jones and White (using the Mississippi LLC, which had been formed in February 2020 for the cannabis deal) invested three million dollars in Genetixs.” 

Read more

Lack of Planning at the Business Formation Stage

The salacious allegations have spread across sports and cannabis platforms, often with huge chunks of the charging document presented as if the allegations are true. Paul Kuharsky, an all-things-NFL-commentator, was interviewed on a sports program in which, in pertinent part, he reminded the viewers, that the story alleged “if true . . . is not a good look for sure” for the sports figures. Kuharsky also added the caution that, in America, “anyone can sue for anything” and that what is happening “could be a sour grapes scenario.”

Sour grapes is an understatement. A big part of the story in the lead up to the July complaint has been ignored: there were two related lawsuits being litigated in different courtrooms in the same courthouse involving overlapping characters and company entities.

Surely, that earlier lawsuit that Jones and White (as SLW Holdings) filed in May 2021 against Genetixs’ management is what prompted Genetixs to alert the world in a publicly filed civil complaint that there was a dispute between grow house partners.

The NFL players, two months before the July lawsuit in which they ended up as defendants, hired a two-man Los Angeles law firm and went to court. Without notifying their fellow Genetixs business partners, Jones and White asked a judge in Los Angeles Superior Court to intervene in the grow house business operation. The players (who had soured on their investment) tried to wrest control of Genetixs from the LLC principal member, Lamarr House (“the Chairman”). House, who was aligned with partners who were not Jones and White, collectively directed a majority interest of the LLC membership units (akin to shares in a corporation) in Genetixs.

Roddy White, in an under-oath declaration filed as part of the May 2021 lawsuit, informed the court that he had no idea that people involved in the operation of Genetixs had been convicted of fraud crimes and “of federal heroin trafficking.” White emphatically declared that had we [Jones and I] known this “we certainly would not have invested $3,000,000 with them.” 

The players’ lawyers asked for a temporary restraining order (TRO), a preliminary injunction, and sought to expel members from Genetixs’ management and operations. In the May 2021 lawsuit, Jones and White claimed that fellow grow operation members, especially House, who they all had installed as the principal LLC manager, had breached their fiduciary duties to the business. They further asserted that some involved in the business had criminal records, and that unfair business practices were resulting in ruining the cannabis business.

Although the court initially granted the TRO as a way to maintain the status quo until she heard from the other side (to include House and other Genetixs employees), the restraining order was ultimately vacated. A portion of the court’s July 8, 2021 order in the May 2021 case states: “Having considered Plaintiff’s probability of prevailing and the balance of harms, the court denies the preliminary injunction.”

The reasons? The court ruled, in part, that some parties to the lawsuit had not been properly served by Jones and White’s lawyers as well as that the player-plaintiffs had not satisfactorily explained how the operations at the grow house and its alleged personnel issues caused Jones and White quantifiable damages (which the law requires for the kind of equitable court action that they had requested.)

A Corporate or LLC Agreement is Not a Cannabis Business Plan

Arguably the most significant aspect of the White and Jones lawsuit, which influenced the court’s decision to not force any management changes or expel any members, was that the very filing of Jones and White’s lawsuit was barred by the terms of Genetixs’ LLC operating agreement.

Genetixs’ 38-page operating agreement contained pages boilerplate and arcane LLC-related legal language with little specifically related to a cannabis cultivation business. Yet, White, House, and the other Genetixs members did execute it.

The operating agreement contained a curious attachment labeled Exhibit A. There, on a half-page, was the chart alluded to in Jones’ declaration—the part where they negotiated ownership percentages in Farmer John’s office. Exhibit A showed what each of Genetixs’ member-partners had provided to the business in exchange for shares in the grow house business. Only one member put in cash, and specifically noted was the number “$700,000+.” This was the initial capital provided to the Genetixs operation by White and Jones as SLW Holdings. Beside the name of every other member-partner were the words “sweat equity” or some other kind of intangible such as “expertise.”

Who got how many shares in exchange for what seems to have been the primary focus of Genetixs’ owners. Failing to read, understand, and tailor an operating agreement and neglecting to craft a detailed and thorough business plan, can easily lead to being tossed out of court. And this happened here. The Genetixs operating agreement contained a provision that no decisions about business affairs could be made unilaterally by a member. An agreement would be needed by “an affirmative vote” of the members or with the consent of those with a majority interest.

Once the move for injunctive relief was intercepted by the court on July 8, 2021, with the denial of the permanent injunction and the lifting the TRO, some of Genetixs’ operators (who had been sued by Jones and White) decided to file their own lawsuit against the players. Genetixs would go big and name Jones, White, and others individually, as well as SLW Holdings in their counter lawsuit.

On July 21, the NFL stars had become the defendants, and the sports and cannabis news feed world went into overdrive.

Without a PR team in place, the first story to catch the public’s eye about the NFL players involvement in a Desert Hot Springs grow site was the version of the events spelled out in the Genetixs lawsuit. Even though a lawyer could read the complaint and see that the players were not directly or personally involved in misconduct, the drafting of the legal instrument accuses all the civil defendants of the same conduct, and the attendant news coverage made it appear that the players had been involved in nefarious civil (and suggestively criminal) activity.

No Quick End In Sight For The Players

Civil litigation with two coexisting cases (the earlier May 2021 case has new motions for that judge to consider filed by, among other people, the NFL players’ lawyers) and the cringeworthy July 2021 allegations will continue to get much attention because of the combination of celebrity, sports, and cannabis. Also, since it was filed in the vast county of Los Angeles, home to some ten million residents, with state court judges having heavy case dockets and carrying many complex cases, the case will likely persist for years.

But the biggest reason it will take so long for the case to conclude is the amount of money alleged to have been squandered, specifically over $12 million in product or cash, as well as the removal from the site of expensive cultivation and extraction equipment.

Lawsuits can be dismissed “on the papers” if the legal action fails on its face to state a claim. Not here. Genetixs’ lengthy complaint more than amply states a claim (in fact, many claims). These unproven factual assertions could mean big money judgment for the folks bringing the lawsuit if proven in a court of law.

The Los Angeles Superior Court judge assigned to the Genetixs case is former federal prosecutor Barbara Scheper, who handled, among other things at the Los Angeles U.S. Attorney’s Office, complex white-collar crimes. She knows fraud and even when the typical motions to dismiss are filed, will likely let the case proceed to the discovery phase. This means each side will be subpoenaing the other side and other ancillary witnesses for testimony and documents. Then, the forensic accountants on both sides will assess how much money the business generated, how much, if any, was removed, and where the money (mostly cash) went. As forensic accountant Marion Wickersham of Forensic Resolutions, Inc., often opines on cannabis business education panels, “Cash can be tough to trace but we examiners have our ways.”

Takeaways for Cannabis Cultivation Businesses

No doubt that this case is convoluted, but there are clear lessons to be gleaned for cannabis business owners:

  • Choose business partners wisely. Vet them to include background and resume verification checks.
  • Do not invest money with any person or entity that has no seasoned and experienced management team in cannabis.
  • Be wary of investing anywhere which is geographically too far away to drive over and do a spontaneous inspection of the premises.
  • If you are planning to get in and stay in the cannabis business, have experienced civil practice lawyers (often current or former “big law” complex civil practice litigators now doing niche and focused cannabis work who have a roster of lawyers who understand and actually practice in civil cannabis law.)
  • Know this maxim: A corporate or LLC formation document is not a detailed cannabis business plan. Understand that the latter is typically needed for investors, and often must be submitted as an attachment to state and town licensing applications.

Plus, based on the Genetixs’ saga which concerns investing and operating a cannabis cultivation business, the cannabis business participants would be wise to hire, consult with and create a legal team that should include, but is not limited to, lawyers who have direct experience in:

  • Cannabis corporate/LLC/partnership/company formation
  • Cannabis licensure (for both states, U.S. territories and towns for both horizontal and vertically integrated operations)
  • Real estate and rental premises acquisition specific to cannabis businesses
  • Cannabis security systems to include cameras, logs, key card systems, guards, and employee apparel restrictions (for example, bans on clothes with pockets and pre and post work apparel and purse and backpack searches)
  • Cannabis tax, accounting, and books and records system expertise for IRS 280E federal compliance
  • Cannabis product tagging and tracking, seed-to-sale requirements
  • Cannabis and banking (to include those with expertise in how to properly safeguard and report what is still overwhelming a cash-based business due to the ever-present federal illegality of cannabis)
  • Cannabis employment and personnel practices to include expertise in background checks, drug testing, felon, and misdemeanor licensing exclusion provisions in each state of operation, as well as conviction expungement practices, and
  • Cannabis and insurance to include coverage for employee theft, break-ins as well as personal injury and costs of employees being prosecuted for workplace activities.

And as exemplified by this sordid cannabis business tale, the investor/business person’s team must include lawyers who understand and have had significant experience in drafting and specifically tailoring both cannabis operating agreements and cannabis-focused business plans.

Additionally, any successful cannabis business must have experienced forensic accountants on hand—certified public accountants who have worked with cannabis businesses, not just friends or bookkeepers who know how to input cash on an Excel spreadsheet.

And with reputation devastation one lawsuit away for anyone involved in cannabis, cannabis businesses (especially those in which public figures are involved) must have people on the team who have worked in cannabis public relations and crisis management.

Summing Up

Investing in cannabis businesses comes with significant risk, but for the handsomely capitalized (those who can lose money without losing much sleep) there can be great rewards. Had the sports figured treated their investment and participation differently, the outcome and duration of the litigation as well as “their spin” in the public eye would likely have been different.

One hopes Julio Jones who missed practice with the Atlanta Falcons in the first week of August, will soon have better days. With the right combination of expertise by his side or at his disposal he might just be able to change the odds in the game.

Julie A. Werner-Simon is a former federal prosecutor, now law professor adjunct and cannabis legal analyst at Drexel University’s Kline School of Law and the LeBow School of Business.

The Flowr Corporation Announces Partnership with Cookies to Expand Its Global Brand into the European Union

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It’s not quite worth its weight in gold, but there’s a cannabis rush going on in Oklahoma—for both patients and businesses—and there’s no sign of slowing down.

The number of active patients grew by more than 46,000 during the past year, representing a 14% increase to the current total of nearly 376,000 patients, according to a licensing report released by the Oklahoma Medical Marijuana Authority (OMMA) on Aug. 2. That means roughly 9.4% of the state’s population is actively registered in the medical cannabis program.

Also in the report, Oklahoma has 469 more licensed businesses than this time last year, bringing the active total to 12,598. That list includes 8,625 growers, 2,325 dispensaries and 1,523 processors, in addition to transporters, laboratories and other licensees.

“Oklahoma has one of the largest programs in the country,” the Marijuana Policy Project stated in a policy update released May 3. “Despite the pandemic, the medical cannabis market has been booming, and the Oklahoma Medical Marijuana Authority reports that the state collected over $127 million in state and local taxes from medical cannabis in 2020.”

After voters approved State Question 788 to legalized medical cannabis on June 26, 2018, Oklahoma became the quickest state in the nation to implement an effective medical cannabis law.

Less than two months following S.Q. 788’s passage, Oklahoma opened its application process for businesses and patients—OMMA received 366 patient applications and 205 commercial applications in the first hour of opening its portal. In all, 23 people were approved for medical cannabis licenses on the first day. The first sales began about a month after that.

While the state’s program has continued to grow under unlimited licenses, the Oklahoma Legislature recently passed a bill that would direct the OMMA to conduct on-site compliance inspections with medical cannabis dispensary, processor and grower licensees beginning Sept. 1. The purpose of the compliance directive is to ensure business licensees are actively operating or working toward operational status, according to the bill’s text. Upon expiration of a grace period, the OMMA can terminate any licenses if certain standards are not met.

In addition, the legislation, which Gov. Kevin Stitt approved May 18, also requires medical cannabis businesses to complete an ownership attestation—disclosing the existence of any foreign financial interests and the identity of such ownership, if applicable—with the Oklahoma Bureau of Narcotics and Dangerous Drugs (OBNDD) by Aug. 30. New licensees have 60 days to comply. Failure to do so will result in the loss of OMMA licenses.

To apply for a license in Oklahoma, 75% of the ownership must be held by someone who has lived in the state for a minimum of two years; however, illicit operations have emerged through a loophole—companies are hiring “ghost owners” to obtain licenses. That’s one reason some state lawmakers have drafted new regulations for the industry.

RELATED: Struggles With Illicit Cannabis Operations Affecting Local Growers

The House sponsor for Senate Bill 1033, Republican Rep. Scott Fetgatter backed the legislation because it allows the OBNDD and the OMMA to enter into agreements to hire more agents, he said in a press release. The governor approved the bill on May 28.

“In 2018, we bought the ticket and took the ride when it came to medical marijuana in Oklahoma,” Fetgatter said. “There weren’t many regulations and stakeholders on all sides of the issue have been looking for structure. This industry has blossomed over the past three years, and we have been working to make sure there are structures in place to regulate and help give guidance to those working within it. I’m proud that this session we were able to pass so many important pieces of legislation that do just that.”

Despite illegal operations, Oklahoma collected $90.7 million in medical cannabis taxes during the first seven months of 2021, including $12.6 million in July, according to OMMA. At that pace, Oklahoma will surpass $155 million of medical cannabis taxes collected this year—a 22% increase from 2020.

While Oklahoma was the 30th state to legalize medical cannabis in 2018, it now has one of the largest programs in the country. And it’s still growing.

NFL Players Fumble Investment in Southern California Cannabis Business

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On July 21, 2021, NFL superstar wide receiver Julio Jones was named as the lead defendant in a 12-count civil fraud, conversion of assets, breach of contract, and breach of fiduciary duty lawsuit filed in Los Angeles Superior Court relating to a cannabis cultivation operation he co-owns. After being traded from the Atlanta Falcons to the Tennessee Titans this offseason, swapping his black and red jersey for a red, white, and blue one, his focus will be on the color green, as in the color of all the money that he is going to need to pay legal fees.

The case is titled Genetixs, LLC v. Julio Jones, followed by nine other individual and entity-named-defendants including retired Falcon receiver Roddy White. (White is listed individually in the charging document by his formal name, Sharod White.)

Additionally, White’s Mississippi LLC, “SLW Holdings,” is the fifth defendant in the civil case. Jones and White, through White’s LLC, had invested millions of dollars to start and operate a Southern California grow facility, Genetixs. The NFL players, through the holding company, shared a fractionalized ownership interest in the cultivation business with other Genetixs company members. In sum, the cultivation business, Genetixs, operated by the man Jones and White installed as the grow house’s chairman, is now suing the players and others involved in the business.

The 26-page civil complaint (also referred to as the “July 2021 lawsuit”) has been circulating across the Internet and the allegations are incendiary. Genetixs, a California LLC, which operated a grow house in Desert Hot Springs, Calif., has charged that each of civil defendants named in the case participated in a scheme that diverted over $3 million of cannabis a month from March to July 2021 from the Genetixs’ grow facility.

The accusations include claims that associates of Jones, White and others involved in Genetixs’ operations had siphoned off “400 to 2000 pounds of cannabis” through a hole in the wall of Genetixs’ Desert Hot Springs grow facility during an almost six-month period.

It also is alleged that Jones and White, and others, “facilitated” the dissipation of millions of dollars of what should have been Genetixs’ proceeds, and even enabled a former Genetixs employee (who had been hired by the LLC members on day one to build out and manage the grow site and was then fired a year later) to stay on, with family, as squatters at the facility.

Jones and White, over two thousand miles from California, have not been accused of committing the misconduct themselves. The legal language of the July 2021 complaint accuses the NFL players, from afar, with aiding and abetting and “conspiring” with the errant grow house squatters.

Philadelphia’s Drexel University LeBow business school professor Stacy Kline, who teaches Best Business Practices of the Cannabis Industry, in discussing the allegations contained solely in the complaint, was stunned by the description of Genetixs’ gross mismanagement.

“The complaint describes a total lack of oversight for the cannabis business venture and the absence of any internal controls,” Kline stated to Cannabis Business Times. “Where were the security cameras that grow sites are, in many states, required to have? How did so many people who created and were to manage the business abdicate their professional and fiduciary duties to the ongoing concern?”

 Inexperience and Lack of Due Diligence Results in Poor Business Outcomes

There is no way to read the July 2021 complaint (whether any of the allegations are ever proven up at trial) without drawing the conclusion that the wannabe cannabis business investor-partner-member-managers had no cannabis-specific business plan and failed to consult or heed the advice of experienced cannabis business experts before starting a cultivation operation. It’s abundantly clear that the NFL players, like many budding entrepreneurs, got into a business they knew next to nothing about. They both admitted as much in court documents.

 

SLW Holdings v. Freeman by sandydocs

 

A document in a related civil matter (discussed a bit later) and signed under oath by Jones just three weeks before the filing of the Genetixs lawsuit, demonstrates this point. It proves that a bad and ill-conceived cannabis-business-beginning will certainly lead to an ill-fated and often costly ending.

Jones’ account of how he and his friend and former teammate, Roddy White, came to invest “in the cannabis space” is an example of why one  should not invest in cannabis without doing a great deal of research and preparation:

 

“In the summer of 2019, Jones, living in Atlanta, came to Los Angeles for a visit, and while socializing at restaurants and clubs, was approached by someone from Los Angeles named “Al” who had a “proposition” for Jones to invest in cannabis. Based on what was related, Jones believed it would be a “great opportunity to make legal money outside of [his] profession.” 

Jones returned to Georgia and Al from Los Angeles called and texted Jones “about investing in cannabis.” One day, Jones flew back for a cannabis meeting at Al’s office (location not specified). There Jones met future Genetixs’ chairman, Lamarr House, and other men with whom he would ultimately partner at Genetixs.

At some point that day, House urged Jones to not work with Al because Al “did not have his stuff together.” Instead, (as Jones recounts) House urged Jones to do a business deal with him (House). 

Jones talked to House about the business and House drove him around as they looked at a possible grow site. Thereafter, Jones reached out to friend Roddy White and urged him to come aboard for “an opportunity in the cannabis space.” White, who Jones says trusts him greatly, agreed to do the venture.

Weeks later, House informed Jones and White that he had found a cultivator and his name was “Farmer John”. Jones and White flew back to Los Angeles, to meet the farmer. They were driven from Los Angeles by House and others to Farmer John’s Desert Hot Springs cultivation site. “After seeing the grow,” Jones explained, “they knew” Farmer John “was the man for the job.” After that, those present went into the farmer’s office “and started to negotiate the percentages and how much it would cost to build out and for him to grow the product.”

Sometime after Genetixs LLC was formed in California in March 2020 by House, Jones and White (using the Mississippi LLC, which had been formed in February 2020 for the cannabis deal) invested three million dollars in Genetixs.” 

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Lack of Planning at the Business Formation Stage

The salacious allegations have spread across sports and cannabis platforms, often with huge chunks of the charging document presented as if the allegations are true. Paul Kuharsky, an all-things-NFL-commentator, was interviewed on a sports program in which, in pertinent part, he reminded the viewers, that the story alleged “if true . . . is not a good look for sure” for the sports figures. Kuharsky also added the caution that, in America, “anyone can sue for anything” and that what is happening “could be a sour grapes scenario.”

Sour grapes is an understatement. A big part of the story in the lead up to the July complaint has been ignored: there were two related lawsuits being litigated in different courtrooms in the same courthouse involving overlapping characters and company entities.

Surely, that earlier lawsuit that Jones and White (as SLW Holdings) filed in May 2021 against Genetixs’ management is what prompted Genetixs to alert the world in a publicly filed civil complaint that there was a dispute between grow house partners.

The NFL players, two months before the July lawsuit in which they ended up as defendants, hired a two-man Los Angeles law firm and went to court. Without notifying their fellow Genetixs business partners, Jones and White asked a judge in Los Angeles Superior Court to intervene in the grow house business operation. The players (who had soured on their investment) tried to wrest control of Genetixs from the LLC principal member, Lamarr House (“the Chairman”). House, who was aligned with partners who were not Jones and White, collectively directed a majority interest of the LLC membership units (akin to shares in a corporation) in Genetixs.

Roddy White, in an under-oath declaration filed as part of the May 2021 lawsuit, informed the court that he had no idea that people involved in the operation of Genetixs had been convicted of fraud crimes and “of federal heroin trafficking.” White emphatically declared that had we [Jones and I] known this “we certainly would not have invested $3,000,000 with them.” 

The players’ lawyers asked for a temporary restraining order (TRO), a preliminary injunction, and sought to expel members from Genetixs’ management and operations. In the May 2021 lawsuit, Jones and White claimed that fellow grow operation members, especially House, who they all had installed as the principal LLC manager, had breached their fiduciary duties to the business. They further asserted that some involved in the business had criminal records, and that unfair business practices were resulting in ruining the cannabis business.

Although the court initially granted the TRO as a way to maintain the status quo until she heard from the other side (to include House and other Genetixs employees), the restraining order was ultimately vacated. A portion of the court’s July 8, 2021 order in the May 2021 case states: “Having considered Plaintiff’s probability of prevailing and the balance of harms, the court denies the preliminary injunction.”

The reasons? The court ruled, in part, that some parties to the lawsuit had not been properly served by Jones and White’s lawyers as well as that the player-plaintiffs had not satisfactorily explained how the operations at the grow house and its alleged personnel issues caused Jones and White quantifiable damages (which the law requires for the kind of equitable court action that they had requested.)

A Corporate or LLC Agreement is Not a Cannabis Business Plan

Arguably the most significant aspect of the White and Jones lawsuit, which influenced the court’s decision to not force any management changes or expel any members, was that the very filing of Jones and White’s lawsuit was barred by the terms of Genetixs’ LLC operating agreement.

Genetixs’ 38-page operating agreement contained pages boilerplate and arcane LLC-related legal language with little specifically related to a cannabis cultivation business. Yet, White, House, and the other Genetixs members did execute it.

The operating agreement contained a curious attachment labeled Exhibit A. There, on a half-page, was the chart alluded to in Jones’ declaration—the part where they negotiated ownership percentages in Farmer John’s office. Exhibit A showed what each of Genetixs’ member-partners had provided to the business in exchange for shares in the grow house business. Only one member put in cash, and specifically noted was the number “$700,000+.” This was the initial capital provided to the Genetixs operation by White and Jones as SLW Holdings. Beside the name of every other member-partner were the words “sweat equity” or some other kind of intangible such as “expertise.”

Who got how many shares in exchange for what seems to have been the primary focus of Genetixs’ owners. Failing to read, understand, and tailor an operating agreement and neglecting to craft a detailed and thorough business plan, can easily lead to being tossed out of court. And this happened here. The Genetixs operating agreement contained a provision that no decisions about business affairs could be made unilaterally by a member. An agreement would be needed by “an affirmative vote” of the members or with the consent of those with a majority interest.

Once the move for injunctive relief was intercepted by the court on July 8, 2021, with the denial of the permanent injunction and the lifting the TRO, some of Genetixs’ operators (who had been sued by Jones and White) decided to file their own lawsuit against the players. Genetixs would go big and name Jones, White, and others individually, as well as SLW Holdings in their counter lawsuit.

On July 21, the NFL stars had become the defendants, and the sports and cannabis news feed world went into overdrive.

Without a PR team in place, the first story to catch the public’s eye about the NFL players involvement in a Desert Hot Springs grow site was the version of the events spelled out in the Genetixs lawsuit. Even though a lawyer could read the complaint and see that the players were not directly or personally involved in misconduct, the drafting of the legal instrument accuses all the civil defendants of the same conduct, and the attendant news coverage made it appear that the players had been involved in nefarious civil (and suggestively criminal) activity.

No Quick End In Sight For The Players

Civil litigation with two coexisting cases (the earlier May 2021 case has new motions for that judge to consider filed by, among other people, the NFL players’ lawyers) and the cringeworthy July 2021 allegations will continue to get much attention because of the combination of celebrity, sports, and cannabis. Also, since it was filed in the vast county of Los Angeles, home to some ten million residents, with state court judges having heavy case dockets and carrying many complex cases, the case will likely persist for years.

But the biggest reason it will take so long for the case to conclude is the amount of money alleged to have been squandered, specifically over $12 million in product or cash, as well as the removal from the site of expensive cultivation and extraction equipment.

Lawsuits can be dismissed “on the papers” if the legal action fails on its face to state a claim. Not here. Genetixs’ lengthy complaint more than amply states a claim (in fact, many claims). These unproven factual assertions could mean big money judgment for the folks bringing the lawsuit if proven in a court of law.

The Los Angeles Superior Court judge assigned to the Genetixs case is former federal prosecutor Barbara Scheper, who handled, among other things at the Los Angeles U.S. Attorney’s Office, complex white-collar crimes. She knows fraud and even when the typical motions to dismiss are filed, will likely let the case proceed to the discovery phase. This means each side will be subpoenaing the other side and other ancillary witnesses for testimony and documents. Then, the forensic accountants on both sides will assess how much money the business generated, how much, if any, was removed, and where the money (mostly cash) went. As forensic accountant Marion Wickersham of Forensic Resolutions, Inc., often opines on cannabis business education panels, “Cash can be tough to trace but we examiners have our ways.”

Takeaways for Cannabis Cultivation Businesses

No doubt that this case is convoluted, but there are clear lessons to be gleaned for cannabis business owners:

  • Choose business partners wisely. Vet them to include background and resume verification checks.
  • Do not invest money with any person or entity that has no seasoned and experienced management team in cannabis.
  • Be wary of investing anywhere which is geographically too far away to drive over and do a spontaneous inspection of the premises.
  • If you are planning to get in and stay in the cannabis business, have experienced civil practice lawyers (often current or former “big law” complex civil practice litigators now doing niche and focused cannabis work who have a roster of lawyers who understand and actually practice in civil cannabis law.)
  • Know this maxim: A corporate or LLC formation document is not a detailed cannabis business plan. Understand that the latter is typically needed for investors, and often must be submitted as an attachment to state and town licensing applications.

Plus, based on the Genetixs’ saga which concerns investing and operating a cannabis cultivation business, the cannabis business participants would be wise to hire, consult with and create a legal team that should include, but is not limited to, lawyers who have direct experience in:

  • Cannabis corporate/LLC/partnership/company formation
  • Cannabis licensure (for both states, U.S. territories and towns for both horizontal and vertically integrated operations)
  • Real estate and rental premises acquisition specific to cannabis businesses
  • Cannabis security systems to include cameras, logs, key card systems, guards, and employee apparel restrictions (for example, bans on clothes with pockets and pre and post work apparel and purse and backpack searches)
  • Cannabis tax, accounting, and books and records system expertise for IRS 280E federal compliance
  • Cannabis product tagging and tracking, seed-to-sale requirements
  • Cannabis and banking (to include those with expertise in how to properly safeguard and report what is still overwhelming a cash-based business due to the ever-present federal illegality of cannabis)
  • Cannabis employment and personnel practices to include expertise in background checks, drug testing, felon, and misdemeanor licensing exclusion provisions in each state of operation, as well as conviction expungement practices, and
  • Cannabis and insurance to include coverage for employee theft, break-ins as well as personal injury and costs of employees being prosecuted for workplace activities.

And as exemplified by this sordid cannabis business tale, the investor/business person’s team must include lawyers who understand and have had significant experience in drafting and specifically tailoring both cannabis operating agreements and cannabis-focused business plans.

Additionally, any successful cannabis business must have experienced forensic accountants on hand—certified public accountants who have worked with cannabis businesses, not just friends or bookkeepers who know how to input cash on an Excel spreadsheet.

And with reputation devastation one lawsuit away for anyone involved in cannabis, cannabis businesses (especially those in which public figures are involved) must have people on the team who have worked in cannabis public relations and crisis management.

Summing Up

Investing in cannabis businesses comes with significant risk, but for the handsomely capitalized (those who can lose money without losing much sleep) there can be great rewards. Had the sports figured treated their investment and participation differently, the outcome and duration of the litigation as well as “their spin” in the public eye would likely have been different.

One hopes Julio Jones who missed practice with the Atlanta Falcons in the first week of August, will soon have better days. With the right combination of expertise by his side or at his disposal he might just be able to change the odds in the game.

Julie A. Werner-Simon is a former federal prosecutor, now law professor adjunct and cannabis legal analyst at Drexel University’s Kline School of Law and the LeBow School of Business.

Georgia’s Small Farmers Shut Out During ‘Secretive’ Cannabis Licensing Process, Advocate Says

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After years of regulatory limbo that allowed registered patients in Georgia to possess—but not purchase—low-THC cannabis oil, the state has established a regulated market and has licensed six businesses to produce and sell the oil.

However, some industry stakeholders question the state’s licensing process and the businesses that ultimately won the right to operate in Georgia’s market.

“The process was relatively secretive for these companies to go out and apply for and receive these licenses,” Ryan Ralston, executive director of Peachtree NORML, told Cannabis Business Times and Cannabis Dispensary.

In 2015, Georgia legalized the possession of cannabis oil containing a maximum of 5% THC. In 2019, Gov. Brian Kemp signed a bill that legalized the production and sale of low-THC cannabis oil in the state, and Ralston said Peachtree NORML followed this legislation closely.

“One of the things that really stuck out to us was the fact that if a grower was going to apply for a Class I or a Class II license, right off the bat, they were going to have to be willing to waive their Fourth Amendment rights,” he said. “Basically, if you were going to operate as a dispensary, you had to sign a Fourth Amendment waiver, allowing local, state, and federal officials and law enforcement officials at any given time to enter your property without a warrant and search your property. That was one of the initial red flags on the legislation that we opposed.”

Another requirement, Ralston added, was that applicants must have upwards of $1.5 million in cash on hand to qualify for a license.

“Basically, what the legislation allowed for was bigger conglomerates to come into Georgia and not [allow] the smaller growers and smaller farmers [to produce] the low-THC oil here in Georgia,” he said.

Many smaller farmers have been cultivating hemp in the state since the passage of the 2014 Farm Bill, Ralston said, and while they may have the infrastructure needed to grow cannabis and produce the low-THC oil, many did not have the required cash on hand to apply for a license.

“If you think about it, 80% of Georgia’s economy is based on agriculture,” Ralston said. “You’re basically shutting out the Georgia farmer, and you’re allowing bigger companies to come in and start buying up land and buying up production, when in fact the smaller business operator has been doing it for more than a decade.”

Sixty-nine companies applied for Georgia’s six cannabis licenses, which were ultimately awarded to Trulieve GA Inc., Botanical Sciences LLC, FFD GA Holdings, TheraTrue Georgia LLC, Natures GA LLC and Treevana Remedy Inc.

Trulieve GA Inc., an affiliate of Florida-based Trulieve Cannabis Corp., and Botanical Sciences LLC, a company located in Glennville, won Class I licenses to grow up to 100,000 square feet of medical cannabis, while the other four companies secured Class II licenses to cultivate up to 50,000 square feet.

Each licensee will be allowed to open five dispensaries to sell their low-THC cannabis oil, which can be recommended to patients for a host of qualifying conditions, including cancer, seizure disorders and multiple sclerosis.

The licensing process and the licensees themselves have been under scrutiny in the weeks since the licenses were awarded.

The Atlanta Journal-Constitution points out in a recent report that medical cannabis patients and advocates are questioning how these six companies were chosen following what the news outlet calls a “competitive but secretive selection process by the Georgia Access to Medical Cannabis Commission.”

Also receiving industry backlash is the announcement that former Georgia Congressman and Health and Human Services Secretary Tom Price is serving on Botanical Sciences’ board of directors, despite his history of opposition to cannabis policy reform.

“To have a guy who fought so diligently against everything we’ve worked so hard to accomplish here in Georgia and then receive a license, it was a tough pill to swallow,” Allen Peake, a former state representative who helped win the passage of Georgia’s medical cannabis law, and who was denied a license, told the Atlanta Journal-Constitution. “It’s the height of hypocrisy.”

Fifteen rejected applicants have filed protests against the licensing process, the news outlet reported, and Ralston said he foresees lawsuits on the horizon, which could cause further delays in the rollout of the program.

“It’s kind of been a bureaucratic nightmare down here,” he said.

Once the dust settles and licensing is finalized, licensees will have one year to begin operations, meaning that patients are still at least 12 months out from accessing the low-THC cannabis oil.

“It’s just further frustrating to Georgians, specifically to those who are sick, who are suffering and who are potentially dying, and they don’t have access to the low-THC oil,” he said.

The state could continue to struggle with supply to meet patient demand even after the businesses are up and running, Ralston added, especially since each dispensary is only permitted to serve a maximum of 20,000 patients under state law.

“They’ll be geographically scattered throughout the state, but they’ll only be allowed to take care of upwards of 20,000 patients per dispensary, so once … that particular dispensary reaches its allotted number of patients, Georgians are going to be turned away or they’re going to be forced to travel to a dispensary that may be three to five hours away,” he said. “It’s just going to further complicate the issue.”

Georgia currently has roughly 20,000 registered patients, and Ralston expects this number to grow rapidly as the program rolls out.

“What you’re going to see is the demand for these cards skyrocket over the next probably six to eight months, and I just don’t foresee the dispensaries being able to support that,” he said.

HUB International Announces Evan Stait as Canada Cannabis Specialty Leader

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It’s not quite worth its weight in gold, but there’s a cannabis rush going on in Oklahoma—for both patients and businesses—and there’s no sign of slowing down.

The number of active patients grew by more than 46,000 during the past year, representing a 14% increase to the current total of nearly 376,000 patients, according to a licensing report released by the Oklahoma Medical Marijuana Authority (OMMA) on Aug. 2. That means roughly 9.4% of the state’s population is actively registered in the medical cannabis program.

Also in the report, Oklahoma has 469 more licensed businesses than this time last year, bringing the active total to 12,598. That list includes 8,625 growers, 2,325 dispensaries and 1,523 processors, in addition to transporters, laboratories and other licensees.

“Oklahoma has one of the largest programs in the country,” the Marijuana Policy Project stated in a policy update released May 3. “Despite the pandemic, the medical cannabis market has been booming, and the Oklahoma Medical Marijuana Authority reports that the state collected over $127 million in state and local taxes from medical cannabis in 2020.”

After voters approved State Question 788 to legalized medical cannabis on June 26, 2018, Oklahoma became the quickest state in the nation to implement an effective medical cannabis law.

Less than two months following S.Q. 788’s passage, Oklahoma opened its application process for businesses and patients—OMMA received 366 patient applications and 205 commercial applications in the first hour of opening its portal. In all, 23 people were approved for medical cannabis licenses on the first day. The first sales began about a month after that.

While the state’s program has continued to grow under unlimited licenses, the Oklahoma Legislature recently passed a bill that would direct the OMMA to conduct on-site compliance inspections with medical cannabis dispensary, processor and grower licensees beginning Sept. 1. The purpose of the compliance directive is to ensure business licensees are actively operating or working toward operational status, according to the bill’s text. Upon expiration of a grace period, the OMMA can terminate any licenses if certain standards are not met.

In addition, the legislation, which Gov. Kevin Stitt approved May 18, also requires medical cannabis businesses to complete an ownership attestation—disclosing the existence of any foreign financial interests and the identity of such ownership, if applicable—with the Oklahoma Bureau of Narcotics and Dangerous Drugs (OBNDD) by Aug. 30. New licensees have 60 days to comply. Failure to do so will result in the loss of OMMA licenses.

To apply for a license in Oklahoma, 75% of the ownership must be held by someone who has lived in the state for a minimum of two years; however, illicit operations have emerged through a loophole—companies are hiring “ghost owners” to obtain licenses. That’s one reason some state lawmakers have drafted new regulations for the industry.

RELATED: Struggles With Illicit Cannabis Operations Affecting Local Growers

The House sponsor for Senate Bill 1033, Republican Rep. Scott Fetgatter backed the legislation because it allows the OBNDD and the OMMA to enter into agreements to hire more agents, he said in a press release. The governor approved the bill on May 28.

“In 2018, we bought the ticket and took the ride when it came to medical marijuana in Oklahoma,” Fetgatter said. “There weren’t many regulations and stakeholders on all sides of the issue have been looking for structure. This industry has blossomed over the past three years, and we have been working to make sure there are structures in place to regulate and help give guidance to those working within it. I’m proud that this session we were able to pass so many important pieces of legislation that do just that.”

Despite illegal operations, Oklahoma collected $90.7 million in medical cannabis taxes during the first seven months of 2021, including $12.6 million in July, according to OMMA. At that pace, Oklahoma will surpass $155 million of medical cannabis taxes collected this year—a 22% increase from 2020.

While Oklahoma was the 30th state to legalize medical cannabis in 2018, it now has one of the largest programs in the country. And it’s still growing.

Scottsdale Research Institute’s Sue Sisley Announced as Day 2 Keynote at Cannabis Conference 2021

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LAS VEGAS, NV [August 16, 2021] – Cannabis Conference, produced by parent company GIE Media Inc. and industry-leading Cannabis Business Times, Cannabis Dispensary, and Hemp Grower magazines, announces today President of Scottsdale Research Institute (SRI) Sue Sisley, MD, as the keynote speaker on Day 2 of its annual event, to take place Aug. 24-26, 2021, at Paris Las Vegas Hotel & Casino.

During the keynote session titled “Sue’n the DEA: The Story of a Cannabis Research Breakthrough,” Dr. Sisley—a pioneering medical cannabis researcher and volunteer medical director for more than 40 state cannabis licenses—will share her journey on navigating scientific and legal complexities of medical cannabis research. Dr. Sisley will highlight cutting-edge discoveries from her roles in cannabis studies for pain management and post-traumatic stress disorder (PTSD), as a substitution therapy for opioids, and more.

Dr. Sisley will also explain how she and two lawyers took on the Drug Enforcement Administration (DEA) and Department of Justice (DOJ) through litigation and succeeded—eliminating the 52-year-old government-enforced research monopoly and eventually acquiring a Schedule I research license to cultivate cannabis flower for Food and Drug Administration (FDA)-approved clinical trials.

The Day 2 keynote session will take place on Wednesday, Aug. 25 from 11 a.m. – 12 p.m. PT.

“In a year when the potential for federal legalization has come front and center for this now-deemed essential business, it’s an especially exciting time to be highlighting the part my team and I have played in pushing the boundaries of what is truly possible with medical cannabis,” Sisley said. “I’m looking forward to sharing my story with the plant-touching businesses that work so hard to make medical cannabis a reality for people and exploring the ways in which we can collaborate together in furtherance of our industry goals.”   

“We couldn’t be more thrilled to host Dr. Sisley at Cannabis Conference 2021 as our Day 2 keynote,” said Cannabis Conference Programming Director Cassie Neiden Tomaselli. “Dr. Sisley is the definition of a cannabis trailblazer. Her passion and perseverance for the plant, and the ways in which she and her teams have fought to prove its medical efficacy and legitimacy, are sure to inspire valuable takeaways for both industry veterans and new entrants alike.”

More information about Cannabis Conference, including sessions, speakers, exhibitors and FAQs, can be found at www.CannabisConference.com. Rates will increase August 20, 2021. Click hereto review pricing and to register.

 

About Cannabis Conference

Cannabis Conference 2021, presented by the award-winning Cannabis Business Times, Cannabis Dispensary, and Hemp Grower media brands, is the leading educational provider for plant-touching businesses in the legal cannabis and hemp markets. The three-day event will take place at Paris Las Vegas Hotel & Casino in Las Vegas, Nev., on Aug. 24-26, 2021. The Cannabis Conference exhibition hall will feature 170+ industry-leading technologies, solutions and services for the professional cannabis cultivator and retail businesses. For more information, visit www.CannabisConference.com.

About GIE Media

GIE Media was founded in 1980 and has grown over 41 years into a leading marketing and communications business-to-business media company serving 17 industries—including the horticulture industry through its Horticulture Group (Greenhouse Management, Produce Grower, Nursery Management, Garden Center, Cannabis Business Times, Cannabis Dispensary and Hemp Grower). The company employs nearly 100 editors, publishers, sales representatives, marketers and other professionals. For more information, visit www.GIEMedia.com.