Marijuana licensing woes dog Missouri’s governorJuly 26, 2020
After Missouri voted to legalize medical marijuana in November 2018, the state’s new Republican governor, Mike Parson, moved quickly to certify tens of thousands of patients and begin licensing cannabis businesses.
But what seemed at first to be an easy source of voter satisfaction and a new cache of revenue to the state has boomeranged badly: A flood of complaints led to state and federal corruption probes that now threaten Parson’s 2020 campaign.
The governor’s close personal friend and fundraiser, Steve Tilley, is at the center of the probes. He represented lucrative clients who appeared to receive a boost in the licensing process. The campaign of Parson’s presumptive Democratic opponent, State Auditor Nicole Galloway, put out a taunting memo declaring, “Where there’s smoke, there’s fire.”
The situation reflects how quickly the promise of legalized marijuana can turn from being an asset for political leaders to a liability, as administrations come under intense lobbying and pressure to hand out lucrative licenses, while confronting the risk of outright corruption.
In the wake of the investigations, the race has become increasingly competitive, according to polls and rating services. While Missouri is firmly red when it comes to presidential elections, state offices are another matter: Democrat Jay Nixon served two terms as governor from 2009 to 2017. POLITICO rates the governor’s race as “Lean Republican,” though many observers acknowledge that Galloway is making significant inroads.
Parson’s defenders, including Republican political strategist David Barklage, suggest the blow-up is more a matter of intra-party politics and won’t resonate with voters.
“In terms of campaigning I just don’t see [the impact],” Barklage said.
Dissatisfaction with Parson’s handling of marijuana goes beyond just his close ties to Tilley, which date back to when both men were members of the state legislature. The Parson administration’s decision to cap the number of state licenses has led to a staggering number of administrative appeals — more than 800. A lawsuit aiming to overturn the cap heads to trial this fall.
“What they’re doing with the medical marijuana business looks a lot like what Republican rhetoric accuses Democrats of doing with government,” said Michael Wolff, a Democrat and former chief justice of the Missouri Supreme Court who supported the legalization campaign in 2018. “The libertarian side of the Republican electorate are thinking, ‘Wait a minute, we’re free market people. Why are we setting up a drug cartel?'”
The Parson administration’s choices of marijuana regulators also have been criticized for their political and industry connections. House lawmakers are looking into why Parson tapped former Republican state Rep. Lyndall Fraker — who has no prior medical experience — to head the medical marijuana unit. His administration then brought on Amy Moore as Fraker’s deputy, after she served in various roles at the Missouri Public Service Commission. Moore’s husband is a lawyer who serves cannabis industry clients, which has drawn questions from lawmakers.
A spokesperson for Parson declined to answer specific questions, but said the governor played no role in the licensing of marijuana businesses.
“The Governor’s Office does not review licensure decisions so that the process remains fair and unencumbered from undue influence,” the spokesperson said. “This is in stark contrast to the Auditor’s position that she would kowtow to plaintiff’s attorneys who attempt to use the court system to cajole licenses for applicants who are not otherwise qualified.”
The 64-year-old Parson was a longtime state legislator who was elected lieutenant governor in 2016. He ascended to the state’s top post less than two years later, when Gov. Eric Greitens resigned amid a cloud of scandals, some stemming from an affair with his hair stylist.
The medical marijuana referendum won a decisive victory at the polls just months after Parson took office, and he quickly took steps to implement it. His administration licensed tens of thousands of medical cannabis patients and made business license applications available by the deadlines in the legalization amendment. The state hired a third party to score license applications based on merit.
But the seemingly arbitrary way licenses were awarded drew the attention of the state House’s Special Committee on Government Oversight, said Democratic Rep. Peter Merideth, ranking minority member. Attorneys brought the lawmakers examples of wildly different scores for the same answers to the same questions.
“Even if there wasn’t corruption, the appearance of corruption is so problematic,” Merideth said. “The fact that they’re so set on keeping this cap suggests to me it’s because they’re trying to benefit certain players in the industry.”
Then there is the role of Steve Tilley.
Everyone from state lawmakers to the FBI are investigating the lobbyist and former state legislator’s role in the medical marijuana licensing process. Tilley has been under FBI scrutiny for months for his involvement in the program, The Kansas City Star reported. House committee members investigating the program also requested records involving Tilley and key officials in the governor’s office.
Tilley and Parson served together in the Missouri state House from 2005 to 2011 and Parson, who went on to serve in the state Senate, was one of Tilley’s first clients when he became a political consultant and lobbyist in 2012.
Tilley has raised a substantial amount of money for Parson’s gubernatorial campaign — much of it from his lobbying clients, including those in the marijuana industry. Last May, just as officials were finalizing rules for the program, Tilley hosted a pricey fundraiser for Parson, the St. Louis Post-Dispatch reported.
One of Tilley’s lobbying clients is MoCannTrade, a cannabis industry trade group whose members won dozens of cannabis business licenses. A spokesperson for the organization said that most of its members had more unsuccessful applications than successful ones, if they were successful at all. When asked how many of its members won at least one license, he said that there were 2,300 applications and that “we have no way of knowing exactly how many of those were filed by our members.”
Another client, BeLeaf, was one of two companies that settled early with DHSS in its appeals over licensing decisions. Now, as other companies face a potentially yearslong appeals process, BeLeaf has become one of the first companies in the state to start cultivating cannabis this summer. BeLeaf President Kevin Riggs said that the company did not hire Tilley as a lobbyist until after it was awarded licenses, adding that Tilley was not involved in its administrative appeal. The reason BeLeaf’s appeal was settled so fast was because it was a more straightforward request compared to other, more complicated appeals, he explained.
Tilley’s other clients include Bootheel CannaCare and Kindbio, which each won multiple types of cannabis licenses. Another client, Herbal Health, was denied licenses.
Tilley did not return requests for comment through his lobbying firm.
The public corruption and fraud division of the office of Galloway — the auditor who is running against Parson — reviewed two whistleblower complaints about the application process, referring them to law enforcement. The office declined to comment further, citing whistleblower protection laws.
Galloway’s campaign has been taking aim at Tilley, publishing a memo earlier this year with the subject line: Governor Tilley?
“Where there’s smoke, there’s fire, and the relationship between Tilley and Parson is leaving a lot of smoldering ash around the capitol as the interests of Missouri’s families get snuffed out,” the memo read.
During a town hall event held by the Missouri Patients Alliance — a group largely made up of businesses that lost out on licenses — Galloway hit the Parson administration for benefiting “well-contrived insiders” at the expense of “working families.”
“It looks an awful lot that the well-connected got what they wanted from this program,” she said during the event.
Nonetheless, Barklage, the Republican strategist, thinks that a combination of a presidential race in which Trump is likely to carry Missouri by a comfortable margin and the state’s overall preference for GOP candidates will benefit Parson in November. In the state’s previous gubernatorial election, in 2016, promising Democratic nominee Chris Koster lost with just over 45 percent of the vote.
“[Galloway] doesn’t have many of the strengths Koster has in terms of raising money, in terms of charisma,” Barklage said.
But Galloway has been steadily closing in on Parson in the polls. A Remington Research Group poll in March showed Parson with a 13-point lead over Galloway. More recently, an SLU/YouGov poll found that Parson only has a two-point lead.
The focus of the race so far is the coronavirus crisis. Parson is trying to reassure Missourians as case counts hit new highs, while defending his decision not to wear a mask. The state has confirmed more than 37,000 cases so far, seeing a 3.1 percent jump in the past week.
But if cronyism becomes a key campaign issue — as Galloway clearly hopes it will — the controversies surrounding the medical marijuana program will impact the race, Wolff, the former Supreme Court justice, said.
“[Galloway] has a very good record as the state auditor in ferreting out corruption [and] insider deals,” Wolff said. “When you have insider deals or the appearance of insider deals going on with medical marijuana licensing, that can [contribute to] a bad perception with the governor.”
Some of the Parson administration’s decisions have been ripe for second-guessing.
The state Department of Health and Senior Services opted to limit the number of licenses to the fewest required under the law, even though it wasn’t obliged to set a cap at all. Businesses that applied for multiple licenses noticed that the supposedly merit-based scoring seemed inconsistent.
In one of many examples, a company called GVMS got a meager four points on a 10-point scale for an answer to a question about accounting on its application to open a dispensary. The company gave an almost identical answer on applications for manufacturing and cultivation licenses, and received a full 10 points on those applications, according to its appeal, which outlines 10 instances of similar disparities.
A spokesperson for DHSS said that such criticism “stems from a misunderstanding of this system, and contrary to these claims, public records show the scoring within facility types was remarkably consistent.”
The department has just three commissioners to hear more than 800 appeals, said Joe Bednar, a lawyer representing some applicants in the appeals process and a lawsuit. “[A] judge told me it will take six years to litigate.”
Meanwhile, industry advocates point to the hundreds of jobs that could be created during a historic economic downturn by removing the license cap and allowing entrepreneurs that have already invested heavily in their businesses to move forward.
“We’re broke, in the midst of a pandemic,” Merideth, the state representative, said. “My hope is if nothing else, those reasons alone could push them to do the right thing.”
The 2018 law that legalized medical marijuana also directed revenue from the program into a fund for veterans’ health care. But now, the department is using those funds to hire outside lawyers.
A spokesperson for the DHSS estimates litigation will cost the agency between $2 million to $8 million.
Similar administrative and legal battles have ensued in other states with limited number of licenses, including Nevada and Arkansas. The House committee investigating the program is also looking into the third party hired by the DHSS to score applications — Wise Health Solutions.
When Wise Health received the contract, it touted its credentials of having “a successful history of scoring applications in Nevada and Arkansas.”
The marijuana programs in both of those states, however, have been dogged by allegations of corruption. Earlier this summer, medical marijuana applicant Carpenter Farms in Arkansas was granted a cultivation license after a legal battle went all the way to the Arkansas Supreme Court. The court found that Carpenter Farms, the only Black-owned farm to apply for a license, was treated unfairly in the licensing process.
Merideth noted that department leadership was unable to name a single Black-owned business that secured a Missouri license during committee hearings on the issue.
“There’s a horrifying under-representation of people of color in the licensing process,” said Kansas City Mayor Quinton Lucas, who led a recent successful effort in Kansas City to decriminalize marijuana in the name of racial justice. “I think that Missouri needs to do much better.”
During House committee hearings earlier this year, regulators defended Wise Health and denied any conflicts of interest.
There’s no indication that Parson’s administration will remove the license cap on its own. Cannabis businesses are suing the state in court, arguing that the cap is unconstitutional. One of the lawsuits, brought by Bednar, has a trial date set for October.
The legislature is also considering action to lift the cap. Meredith is confident that the House has the votes to pass such a measure, but he thinks that its chances in the Senate will depend on the outcome of the elections.
But mostly, he is frustrated that the legislature is even having to consider the move when DHSS could just do it themselves. He’s hopeful that the corruption accusations as the election nears might pressure Parson to “see the light and get things fixed.”