Two Ohio medical marijuana businesses face state scrutiny
COLUMBUS – Two companies come under fire for allegedly lying about their claims to sell medical marijuana in Ohio and breaking the state’s highly regulated program rules.
The Ohio Board of Pharmacy, which oversees medical marijuana dispensaries, found two companies violated state rules: Greenleaf Apothecaries LLC, which operates as The Botanist, and Harvest of Ohio LLC.
The board says Greenleaf Apothecaries transferred ownership without state approval and / or distorted facts submitted with its dispensary application last year, according to parts of a board notice sent to the company obtained by The Enquirer via a public registration application.
The company, which has secured five dispensary licenses, announced in December 2018 that it had a management agreement with the large cannabis company Acreage Holdings, headquartered in New York City. State rules prohibit transfers of ownership before one year of operation.
The board says Harvest of Ohio LLC does not meet the state’s definition of an “economically disadvantaged group,” as its claim claims. The company has obtained three dispensary licenses and is an offshoot of Harvest Health and Recreation Inc., which operates in eight states.
The pharmacy board sent notices to both companies in early June, giving each an opportunity to present their point of view to the board at a future meeting.
Neither company will be given permission to open new dispensaries until the issue is resolved. Disciplinary measures imposed by the council range from fines to revocation of licenses.
Meanwhile, the pharmacy board reiterated the ownership rules to the dozens of other dispensary licensees who are still in the process of establishing their businesses. Only 19 of the state’s 56 licensed dispensaries have opened since January.
Pharmacy board attorney Erin Reed said the agency allowed dispensaries to make small changes in ownership in certain situations, such as adding a new employee with a financial interest in the business.
“People come to us with their challenges, we do everything we can to help them overcome them,” Reed said. “We certainly balance the need for discipline with patient access. “
Change of ownership ?
In December 2017, companies submitted 376 applications for 60 dispensary licenses available statewide. They had to indicate on the request any person holding at least 1% of the shares or equity of the company.
The pharmacy board keeps the companies at their word – all must live up to what they promised in this request, including financial interests. Pharmacy board rules prohibit major changes in dispensary ownership, such as acquisitions, until the dispensary has been open for a year.
The first four dispensaries opened in mid-January, so any changes now, the board says, are premature.
The pharmacy board alleges that Greenleaf Apothecaries violated state rules for changes in ownership and / or gave false information about its apps. The pharmacy’s board detailed two violations in a letter sent to the company in June and obtained by The Enquirer via a public registration request.
Acreage Holdings announced in a December 2018 press release that it had a management agreement with Greenleaf Apothecaries, which had obtained five provisional dispensary licenses.
The press release did not say how much “support” Acreage was providing. But a November 2018 filing with the U.S. Securities and Exchange Commission indicated that the company reached the deal with Greenleaf Apothecaries and its related grow and process companies on July 2, 2018.
Acreage has agreed to loan the Greenleaf family of companies up to $ 8 million to build the grow facility, up to $ 5.5 million for processing and $ 10.5 million for five dispensaries. Acreage has claimed that it “owns or operates cannabis businesses in 14 states,” including Ohio.
In return, Greenleaf agreed to sell all the interest to Acreage, when the state allows it.
In its annual report filed in April 2019, Acreage said it provides “design expertise, branding and aesthetics, supplier relationships and technical know-how” while Greenleaf maintains “operational control “.
“The Company does not currently own any ownership or ownership interest in Licensed Operators and will not do so without first receiving the necessary approvals from Ohio State regulators, including the Ohio Department of Commerce and the Ohio Pharmacy Board, “Acreage officials wrote in the report.
Greenleaf obtained operating certificates for two of its Botanist stores in January and February. Three more are planned in Akron, Cleveland and Columbus.
Greenleaf disputes the board’s findings and says it can open doors in Columbus, Akron and Cleveland within 48 hours of receiving state approval.
Tom Haren, an attorney for Greenleaf, said Greenleaf continues to own and operate its dispensaries, and the company’s relationship with Acreage only developed after the exemption requests were submitted.
“Greenleaf is obviously frustrated with the board’s decision to issue these baseless opinions, which have unnecessarily delayed the opening of three of the top-rated clinics – in three of the state’s highest population centers – at a time when too many Ohio patients do not have access to the medicine they need, ”Haren said in a statement.
Acreage made headlines across the state and nation last year when Former Speaker of the United States House of Representatives and Congressman from Ohio John Boehner of West Chester has joined his board of directors. It hit the headlines again when Canadian cannabis company Canopy Growth Corp. announced the right to buy Acreage for $ 3.4 billion after the United States legalizes marijuana.
Minority property claim
Arizona-based Harvest of Ohio LLC claimed in its claims that 51% of the company is owned by Ariane Kirkpatrick, an African-American businesswoman from northeast Ohio. The addresses listed for Kirkpatrick and the other nine owners are for a business suite in Tempe, Arizona.
The company has obtained licenses for dispensaries in Columbus, Athens and Beavercreek.
State law required that 15% of all licenses be issued to businesses majority owned and operated by someone from one of the “economically disadvantaged” groups: African Americans, American Indians, Hispanics or Latinos, or Asians. The minority-majority ownership of Harvest meant the company had preference over the top-rated applicants.
Details of what the council’s investigation found were not immediately made available to The Enquirer as the investigations are confidential and the findings set out in the notice sent last month are subject to trade secrecy.
Harvest filed a motion in court on Wednesday to prevent the board from disclosing the full notice to The Enquirer. During a briefing in court, Harvest claimed that the notice contained confidential information about the “unique way to organize an LLC” to qualify for the designation minority owned and controlled “with property that does not originate from only minimally from an economically disadvantaged group “.
Portions of the letter shared with The Enquirer show that the board believes Harvest “committed fraud, misrepresentation or deception in providing information” on its request.
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Kirkpatrick, reached by phone Tuesday, was not aware of the pharmacy board notice that was sent in early June.
“This is not correct,” Kirkpatrick told The Enquirer. “This is probably the ridiculous 10th call I got today.”
A Harvest spokesperson joined on Wednesday said the company is aware of the investigation and is working with state regulators to address any outstanding issues.
Kirkpatrick has also been listed as majority owner on the crop application for the crop, which is regulated by another state agency, the Ohio Department of Commerce. Harvest received one of 12 competing large-scale cultivator licenses in November 2017 due to its minority ownership designation.
Trade officials are still scrutinizing Harvest ownership, a spokesperson for the agency told The Enquirer. Harvest announced in January that it has also obtained a processing license to make food, oils, lotions and other marijuana products.
But the trade has not yet granted the provisional license due to the ongoing investigation.
Jackie Borchardt is the Columbus bureau chief for The Cincinnati Enquirer. You can follow her on Twitter @JMBorchardt.