More ethics woes for Maryland medical marijuana program

Published: Jul 31, 2017, 7:53 am • Updated: Jul 31, 2017, 7:53 am

By Fenit Nirappil and Aaron Gregg, The Washington Post

Several of the independent experts hired to review applications to open medical marijuana businesses in Maryland had ties to companies whose materials they reviewed, according to records obtained by The Washington Post.

The Maryland Medical Cannabis Commission said it is investigating these potential conflicts of interest.

They include a woman who initially said she had “no known relationships” with individuals applying for cannabis licenses, but later reviewed an application for a company where her husband was a manager and that was affiliated with a Massachusetts marijuana retailer she had co-founded. Two leaders of a District of Columbia dispensary joined Maryland’s panel of experts while their business partners sought to expand into the state; one disclosed the connection, the other did not.

The connections, which The Post discovered after a public records request, raise new questions about how the state tried to avoid conflicts insetting up a legal marijuana industry where hundreds of businesses were competing intensely for a limited number of growing, processing and selling licenses.

The medical cannabis program, which is set to begin selling to patients this fall, has encountered major stumbles since it was legalized four years ago. The state House of Delegates in March reprimanded one of its own for trying to shape medical marijuana laws and regulations without fully disclosing his affiliation to a prospective dispensary.

The state is fending off lawsuits alleging that officials failed to consider racial diversity in licensing, and that they improperly chose lower-ranked cultivators to boost geographic diversity. Gov. Larry Hogan, R, overhauled the beleaguered cannabis commission this month, appointing 10 new members.

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To review the applications, the commission contracted with the Regional Economic Studies Institute at Towson University. The institute was to oversee 20 industry experts as they reviewed hundreds of business applications. The arrangement was the subject of a blistering legislative audit, which found that the commission skirted state contracting rules by hiring the institute without competitive bidding and allowed costs to balloon without proper documentation.

Towson kept the names of evaluators confidential while applications were pending, citing a “double-blind” process where prospective pot entrepreneurs would not know who was reviewing applications, and evaluators would not know whose applications they were assessing, because the names of owners and businesseswereredacted.

Marijuana advocates say the legal sales industry, a fast-growing market worth billions, is relatively small – making it hard to find people who have expertise in marijuana businesses but no connections to companies trying to expand into Maryland.

Daraius Irani, director of the institute, said that his organization took multiple steps to prevent bias from tarnishing the medical marijuana review. Evaluators were given only specific portions of applications where they had expertise, and those materials were stripped of the names of the businesses, its employees and investors.

“RESI took every step to ensure a fair process,” Irani said.

But it was possible to figure out in some cases which companies were behind which applications using other clues. Irani said one processor evaluator, whom The Post identified as Michelle Sexton, had recused herself from an application after she realized that she knew the owners of a business that made a proprietary product listed in materials.

“They had a great proposal and I hated to recuse myself because I thought it was really well done,” Sexton, co-founder of the Center for the Study of Cannabis and Social Policy, said in an interview. “But I didn’t want somebody to come back and say, ‘Hey, you know these guys, and you scored their application really good.’ ”

Records released in June by Towson identifying all experts and their conflict-of-interest affidavits reveal that several other experts also had relationships with people submitting applications.

Julia Germaine, who evaluated processing applications for Maryland, co-founded a cannabis venture now known as Temescal Wellness in Massachusetts. She is a compliance manager there.

In September 2015, she signed an affidavit saying she had “no known relationships” to individuals seeking cannabis licenses in Maryland. Two months later, her co-founder and husband, Nial DeMena, and a director and consultant at her company, Ted Rebholz, submitted applications in Maryland under the Temescal brand.

Temescal of Marylandwas one of just seven companies preliminarily approved last year for all three medical marijuana business licenses in Maryland – growing, processing and dispensing. DeMena was set to be general manager of the Maryland processing facility but told The Post he is not currently involved with the company; instead he is focused on business ventures in other states and may work in Maryland if needed.

Germaine told The Post that Temescal Wellness of Maryland was a distinct entity from the nonprofit Temescal Wellness of Massachusetts and she was not privy to its business activity.

DeMena said he wasn’t aware that his wife was an evaluator in Maryland, and Germaine said she didn’t know her husband was part of the Temescal Wellness of Maryland application.

“Did I know? Of course not,” Germaine said in a telephone interview. She did not respond to follow-up questions about when she learned of her husband’s involvement.

“You can look at my scores and evaluate the individual scores and see no irregularity,” Germaine said. “Temescal must have written a good application across the board.”

The company lists its Massachusetts and Maryland locations on its website.

In June 2016, Germaine asked the institute if she should recuse herself from reviewing Temescal’s application after she recognized the qualifications of a security director as someone she previously worked with, according to emails she provided. But the institute told her to continue scoring.

“It is not a conflict of interest simply to know someone professionally who is working in the industry,” said Irani, the head of the institute. “However, had Julia Germaine revealed to RESI that her husband was the general manager of a company that was applying for a license, or that she was affiliated with a company that was applying for a license, she would not have been an evaluator at all.”

Robert Schulman, an attorney for Temescal Wellness of Maryland, said there was nothing improper about Germaine reviewing the application because she was not involved with the Maryland venture and the process was double-blind. It’s unclear whether she reviewed portions of the application that described her husband’s qualifications.

“What would you gain by knowing a reviewer who doesn’t look at the growing application at all and only looks at a limited number of questions, a minute number of questions, to the whole?” said Schulman. “There’s too much to lose and nothing to gain.”

Nevertheless, the Maryland Medical Cannabis Commission said it was investigating this potential conflict, and Schulman said his company is cooperating with requests for information. The commission is set to award final licenses to growers and processors in August.

“The Commission takes its role concerning the integrity of the Medical Cannabis Program and a fair application process very seriously and has been closely monitoring any and all situations of non-compliance to ensure the public trust,” Patrick Jameson, the commission’s executive director, said in an email. “The Commissioners will evaluate all available background investigation information prior to their deliberative process before issuing any licenses.”

One application reviewer warned the institute about ties to prospective marijuana entrepreneurs in Maryland before the evaluation process.

Grower evaluator Vanessa West, general manager of the Metropolitan Wellness Center dispensary in the District, disclosed that her dispensary shared an investor with District Growers, a Washington, D.C., marijuana grower that planned to seek a cultivation license in Maryland.

But Mike Cuthriell, who is president of Metropolitan Wellness, signed up to evaluate processor applications and did not disclose the connection on his conflict-of-interest affidavit. Cuthriell said he could not figure out which companies were behind which applications based on the materials he reviewed.

District Growers owner Corey Barnette, a part owner of Metropolitan Wellness Center and the shared investor mentioned in West’s disclosure, was turned down for the cultivation and processing licenses he applied for under the name Freestate Growers with other Metropolitan Wellness Center staff. Barnette told The Post that he knew West and Cuthriell were recruited as evaluators and encouraged them to disclose their connections to him if they took the position, but he said he didn’t know they served as evaluators.

Irani said West properly disclosed her conflict but was given Freestate Growers’ application anyway because the connection to District Growers wasn’t clear to the institute. He said her scoring was in line with how she graded other applications, and that it wasn’t necessarily improper for her and Cuthriell to review Freestate applications because of other safeguards to minimize bias.

Kate Bell, a lobbyist for the Marijuana Policy Project, said she was troubled by the connections between evaluators and applicants. But she also said she did not want the discovery of the issue to cause further delays in medical cannabis becoming available to patients. The program’s launch has been one of the slowest in the nation.

“It illustrates the fact that when you have government granting a limited number of licenses, there needs to be full transparency with the public,” said Bell. “Setting up this system, there was no transparency.”

Topics: conflict of interest, ethics, licensing, Maryland, Maryland Medical Cannabis Commission, medical marijuana