Less than a week before the New Mexico Department of Health transferred authority over the state’s medical marijuana program to the newly created Cannabis Control Division, officials opened a narrow window for producers to apply for a license for the first time in six years.
But the department didn’t let anyone know.
Only one company applied, and it was issued a lucrative “legacy” producer license for a $10,000 fee just a day before the Medical Cannabis Program was transferred between the two agencies. The move has sparked allegations of favoritism and calls for an investigation by others in the cannabis industry.
“In my opinion, this was a dirty affair,” said Willie Ford, managing director of Reynold Greenleaf & Associates, a consulting firm for cannabis businesses. “This was obviously somebody making it happen for somebody else.”
The new Cannabis Control Division of the state Regulation and Licensing Department was set to assume regulatory authority June 29 over the medical marijuana program and a developing industry for legal production and sales of recreational marijuana.
Under a “publications” tab on its website, the Department of Health posted a notice several days earlier titled “Medical Cannabis Licensed Non-Profit Producer Application Instructions.”
The June 23 posting, however, did not explicitly state the department was accepting new applications, and the agency didn’t advertise the application window or otherwise make the public aware of the opportunity. An online application form gave a June 28 deadline.
According to documents obtained under a public records request, Albuquerque-based GH LLC, founded by Vance Dugger, submitted a 713-page application for a nonprofit medical cannabis producer license June 25. On June 27, a Sunday, Dominick Zurlo, director of the state’s Medical Cannabis Program, and Billy Jimenez, general counsel and deputy secretary of the Department of Health, personally inspected the company’s facilities. The department issued a license the following day.
Department of Health spokeswoman Baylee Rawson wrote in an email Friday the agency “often posts announcements through the website.” The site is visited regularly by patients in the Medical Cannabis Program and license holders, she added. “It is also one of the primary methods used to present information and updates about the program including meeting announcements, patient statistics, educational materials, and other reports and documents.”
But Ford and others in the industry said the application opening appears to have been kept secret deliberately.
“This new licensee process has certainly ignited a fair amount of distrust, raised eyebrows and questions,” said Duke Rodriguez, president and CEO of New Mexico Top Organics-Ultra Health, the state’s largest medical cannabis operation.
“There are a number of good folks who have invested time, effort and resources while not knowing there might have been an express lane,” he said.
Larry Love, a medical marijuana advocate and host and producer of Santa Fe-based Medical Marijuana Radio, said he knows “plenty of people” who would have applied for a license if they had known the department was accepting new applications for medical producers ahead of the application process for a license under the recreational cannabis program.
He said, “It just doesn’t seem fair to the public, knowing that someone was able to get a license ahead of everybody else.”
Rawson wrote in her email the Department of Health had been working for several months “on opening licenses for additional licensees to help ensure patients had additional options for obtaining their medication.” She did not answer follow-up questions on whether the department had disclosed it was working on such an effort.
Asked about the last-minute weekend inspection of GH’s facilities, Rawson wrote, “It is not unusual for MCP staff to work on weekends due to the high workload and demand for services.”
In response to questions about whether it was common for Zurlo and Jimenez to conduct inspections of prospective producers, Rawson wrote Zurlo has “performed many inspections,” but she did not did not address whether Jimenez normally took part.
Dugger, who is also the CEO or founder of three road service and towing companies, said in a brief interview Friday, “We submitted an application like everyone else.”
The Cannabis Control Division now processes all cannabis licensing applications.
“We are actively reviewing hundreds of producer license applications — and amendments from existing medical cannabis businesses,” spokeswoman Heather Brewer wrote in an email. “We look forward to working with each applicant to help them complete their application or amendment request in the order in which they were received.”
Any licensing decisions made prior to June 29 “were made solely by the experienced team at the Department of Health,” Brewer wrote.
Emails obtained under the public records request show decisions concerning GH LLC’s application after the Medical Cannabis Program transfer were made by top officials in the Cannabis Control Division. On Aug. 2, Nicole Bazzano, acting deputy director of business operations for the division, asked Joshua Wilson, a health and safety specialist, for a status update on the inspection of GH and its manufacturing facility.
“It’s my impression that they are just waiting on the inspection from you in order to start producing/manufacturing, is that correct?” she wrote. “What can we do to get them taken care of and up and running properly and legally?”
The next day, Wilson wrote he “had to go back and do a bit of research on this one” and that he “largely” had no information on the license approval.
“The processing, inspection and approval were done at a level above MCP License and Compliance staff,” he wrote. “After looking at the approval letter, it does appear that they were issued some form of conditional approval allowing for the completion of infrastructure and requiring re-inspection before being allowed to cultivate, manufacture, or distribute.”
Wilson also noted that GH LCC, which he referenced as GH Labs, originally applied for a manufacturing license.
“However, GH Labs then applied and was approved for the [nonprofit producer license] that was opened for a few days prior to the transition” to the Cannabis Control Division, he wrote.
“Before GH Labs submitted the [nonprofit producer license] application, I had drafted a denial letter regarding several missing items and the fact that the application included portions for cultivation rather than manufacturing. Thus, the submitted manufacturing application was partly for the wrong license type. … I believe this was ultimately disregarded at a higher level” because of the medical cannabis license, “which allowed for manufacturing.”
Neither Wilson nor Bazzano responded to a request for comment.
Rodriguez, of Ultra Health, said the cannabis industry is “up in arms” over the license issued to GH LLC.
“If there really was a desire to open [the application process] up, how many people would have applied prior to June 28?” he asked, adding companies entering the recreational marijuana business with a so-called legacy license have huge advantages.
“You get the mack daddy of licenses,” he said. “You’re the vertically integrated license that allows you to do everything — produce, manufacturing — you can do all those things. The new approach under the [Cannabis Regulation Act] makes you subject to having this silo effect. You have to get a license for manufacturing. You have to get a license for retail. You have to get a license for production.”
“This is a lottery ticket,” Rodriguez said, adding people in the industry are referring to the license approval as “weedgate.”
Love, the radio host and producer, agreed.
“It’s a license to print money,” he said.
Ford, of Reynold Greenleaf & Associates, said the matter needs to be investigated by authorities and the GH license should be suspended until the investigation is complete.
“There was a whole process they went through last time with a window of application period,” he said, referring to an application opening in early 2015. “I didn’t see any of that happening here. …
“It goes against a fair, level playing field for people who want to be in this industry,” added Ford, who also serves as board chairman of R. Greenleaf Organics, a cannabis cultivation and dispensary operation in New Mexico. “It just stinks of favoritism.”