Pubdate: Thu, 12 Dec 2013
Source: Denver Post (CO)
Copyright: 2013 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: John Ingold

MORE LICENSES REJECTED

Due-Process Laws Are Forcing Regulators to Approve Fewer Applications to Sell.

Colorado's medical-marijuana regulators have rejected business 
applications at an increasing rate as they near the end of a 
3-year-old backlog, according to figures provided by the state.

Since the state began accepting medical-marijuana business 
applications in 2010, it has approved1,402 and denied 226 - a denial 
rate of about one in seven. Between January and September, the state 
denied only one application, according to a state report. But since 
September, regulators have acted on 217 applications and denied 51 - 
a nearly one-in-four denial clip- according to figures from the 
Colorado Marijuana Enforcement Division.

A spokeswoman for the division says that is not a sign regulators 
have procrastinated in dealing with the most troublesome applicants. 
Instead, the spokeswoman, Julie Postlethwait, said the late surge in 
denials comes down to it taking regulators far longer to deny an 
application than to approve one because of state due-process laws.

"We can't do something to a license without due process," she said.

Meanwhile, regulators on Wednesday unveiled the $1.2 million 
marijuana tracking system they hope will keep Colorado cannabis 
businesses-both medical and recreational - in line. The online system 
is called MITS, for Marijuana Inventory Tracking Solution, and it 
requires marijuana businesses to place radio frequency tags on every 
plant they grow and every bag of pot they move from their grow rooms 
and their sales rooms.

Information from the tags must be entered into MITS to keep tabs on 
the marijuana's location up until its sale. Businesses will also be 
required to track the weight of their harvested marijuana and enter 
that into MITS.

"The MITS system is really a critically important tool for our 
ongoing regulation of the marijuana system in Colorado," said Ron 
Kammerzell, the head of the Colorado Department of Revenue's 
enforcement division.

The system is expected to be up and running by Jan. 1, when 
recreational marijuana stores can sell pot to the adult public for 
the first time. But it has been in development since 2011, when the 
state hired a Florida company to build the system - only for a 
subsequent budget shortfall to put the project on ice for a time.

Postlethwait said that shortfall is also partly to blame for the time 
it has taken state regulators to get through the backlog of 
medical-marijuana business applications and deny the ones that don't 
meet the state's requirements. Most of the applications in the 
backlog were from businesses that applied for licenses in 2010 and 
were allowed to stay open while their applications were pending.

Postlethwait said applications can be denied for a number of reasons 
- - including problems with its location, its operation or its owners. 
Except in the most extreme circumstances, state regulators will 
usually give businesses a chance to fix the problem before issuing a 
notice of denial, she said. While the notice requires the business to 
shut its doors immediately, the business can still go through a 
hearing and appeals process that may ultimately end up in court.

If the business loses its appeal, owners must destroy all of their 
marijuana in the presence of a state investigator, Postlethwait said.

Postlethwait said it is also common for businesses to restructure 
their ownership to address the state's concerns - something that 
causes the state to have to start the application vetting process anew.

The licensing backlog, which regulators have dramatically reduced 
this year, has received new attention after major federal raids on 
medical-marijuana businesses in Colorado, many of which were 
operating with pending applications. Sources have told The Denver 
Post that the raids were part of an investigation into possible links 
to Colombian drug cartels.

That fear of black-market diversion is exactly what state officials 
hope MITS will allay, though they say it is not the only tool they 
will use in regulating marijuana businesses. They will also be 
checking video surveillance systems, scouring sales receipts and 
conducting surprise inspections.

Lewis Koski, the division's chief of investigations, said the 
division is budgeted for 25 criminal investigators and six to eight 
compliance investigators.

"MITS is a material tool," he said. "But we also understand that it 
does not substitute for really good police work."
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MAP posted-by: Jay Bergstrom