Six unsuccessful applicants to grow medical marijuana in Ohio claim in a new lawsuit that state regulators failed to follow their own rules while scoring cultivator applications, made several scoring errors and hired scoring consultants who had blatant conflicts of interest.
Several groups led by Jimmy Gould of CannAscend Ohio LLC filed a lawsuit Tuesday in Franklin County Common Pleas court challenging the Ohio Department of Commerce’s process for awarding the highly sought after licenses. They are seeking a permanent injunction from awarding operating licenses to the 12 companies awarded provisional licenses for large-scale growing facilities.
Joining CannAscend in the lawsuit are Appalachian Pharm Products LLC, CannaMed Therapeutics LLC, Palliatech Ohio LLC, Trillium Holdings Inc. and Schottenstein Aphria LLC.
The lawsuit names as defendants Ohio Department of Commerce Director Jacqueline Williams, three scoring consultants and the 12 companies awarded large-scale grow licenses.
The complaint alleges the department made several mistakes including the following:
- Five licenses were awarded to companies that should have been disqualified for failing to meet pass-fail criteria or misrepresenting compliance with those requirements.
- The two minority-owned companies that received licenses aren’t actually owned and operated by individuals meeting the law’s definition for the set-aside.
- Scores for 14 of 17 applications reviewed by attorneys were calculated incorrectly.
- Scoring consultants, including two who had knowledge of the scoring rubric in advance of the application deadline, had blatant conflicts of interest with companies awarded licenses.
These mistakes lead “to a fundamentally arbitrary, capricious, unfair, and flawed scoring process at the expense of the Plaintiffs, who in the aggregate expended millions of dollars complying with rules the Department did not properly enforce or follow,” attorneys for the plaintiffs wrote.
Each applicant submitted a nonrefundable $20,000 application fee and spent hundreds of thousands of dollars more to prepare their applications.
The department declined to comment Tuesday and does not comment on pending litigation. Department officials have fiercely defended the scoring process and pledged to continue establishing the program to meet the law’s Sept. 8 deadline to be up and running.
Gould threatened a lawsuit back in November, when the department awarded provisional licenses for 12 grows up to 3,000 square feet and 12 grows up to 25,000 square feet.
Since then, questions have been raised about consultants hired to help score applications and security around the department’s online portal where applications and scores were stored for reviewers. Last week, cleveland.com reported four applicants’ proposed grow sites did not meet the requirement they be 500 feet from the nearest school, church, playground, child care center or other prohibited facility at the time of application.
The department was sued in December over state law requiring that 15 percent of all marijuana business licenses go to minority-owned businesses.
Of the 185 applications, 131 were disqualified, mostly for not meeting a minimum score in one or several parts of the application. Sixty-nine applicants have filed appeals with the department.
Scoring errors
The complaint details several examples of “scoring defects” that benefited winning companies’ scores and hurt losing companies’ scores.
Among those:
- Some applicants were marked down for failing to show they would properly package material under a rule that was not finalized until three months after applications were submitted, according to the complaint.
- Applicants were scored on criteria that did not appear in state law, rules or application instructions.
- Applicants were docked points for excluding data that was actually in the application.
- The department did not add up the scores correctly for 14 of 17 applications reviewed by plaintiffs’ attorneys.
Pass/fail criteria
The complaint alleges the department did not verify several pass/fail criteria in the application such as locating a grow site 500 feet from a school, church or other prohibited facility and having the required liquid capital. And additionally, the complaint alleges, the department did not verify that two businesses were owned and controlled by a minority as claimed by the applicant.
Last week, cleveland.com reported four applicants’ proposed grow sites did not meet the requirement they be 500 feet from the nearest school, church, playground, child care center or other prohibited facility at the time of application. The department said the provisional licensees have nine months to comply with all rules and regulations, but the complaint says that was not the intent of the law and was not communicated to applicants.
Three of those companies are cited in the lawsuit: Cresco Labs Ohio LLC, Grow Ohio Pharmaceuticals LLC and Terradiol Ohio LLC.
The lawsuit also challenges whether the reported principals for Harvest Grows LLC and Parma Wellness LLC actually own and control at least 51 percent of the company. The complaint alleges both companies are actually owned and controlled by out-of-state investors.
It also claims Harvest Grows’ application did not mention the Arizona-based company’s president, who would have been subject to a background check showing involvement in a federal drug investigation.
Department did not control for conflicts of interest
The complaint alleges that the department did not properly vet three consultants hire to help score applications and did little to control for potential conflicts of interest.
The lawsuit claims the department should have easily learned of conflicts of interest between Jason Meade and Keoki Wing of Meade & Wing LLC and applicant Harvest Grows, which were reported in a December cleveland.com story. Meade & Wing was also seeking work for would-be applicants months before being hired by the department, according to the complaint.
Consultant B&B Grows helped draft the scoring rubric and reported a conflict of interest after applications were submitted, according to the complaint. The department said B&B did not assist in scoring. One of B&B’s two partners, Bret Bender, left the company in October and became the Illinois political director for national lobbying group Marijuana Policy Project.
Most of the 25 scorers were state employees, which the complaint claims had little or no experience with medical marijuana.
“The department failed to score the applications with competent graders with the requisite subject matter expertise capable of producing results that were not arbitrary and capricious,” states the complaint.
Had the scoring process been properly administered, the complaint claims, the six companies would have received provisional licenses.
credit:420intel.com
