Pubdate: Wed, 13 Jul 2016
Source: Stranger, The (Seattle, WA)
Copyright: 2016 The Stranger
Author: Tobias Coughlin-Bogue


A Loophole in the Recreational License Application Process Created a 
Black Market for Dispensary Employee Pay Stubs and Left Longtime 
Dispensary Operators in the Dust

A loophole allowed applicants with no background in medical marijuana 
to be treated as if they were law-abiding, taxpaying veterans of the industry.

On July 1, when the Cannabis Patient Protection Act (SB 5052) took 
effect, all dispensaries without an I-502 license were forced to shut 
down, sending many of the state's medical marijuana patients into a 
panic. Patients worry that the recreational market doesn't have 
enough medicinal cannabis for their needs and that what is available 
is not affordable. Many point to the fact that the Washington State 
Liquor and Cannabis Board (WSLCB) issued only 222 new retail licenses 
to replace more than 1,500 medical marijuana dispensaries.

But there's another aspect that should trouble patients, though few 
may know about it. Thanks to a loophole in the state's licensing 
process, many longtime dispensary operations were shut out of the 
recreational market. New actors were able to game the system by 
buying pay stubs from former medical marijuana dispensary employees 
in order to bolster their applications.

"[The state was] supposed to create new licenses to move over the 
[medical marijuana] system so that the patients could be served," 
said John Davis, owner of the Northwest Patient Resource Center, who 
applied for but did not receive an I-502 license. "That's not what 
they did. They were just giving licenses to people who were scamming 
the system."

As a result of SB 5052, which mandated that the medical marijuana 
market be folded into the recreational one, the WSLCB was instructed 
to open a new round of retail cannabis licensing and "develop a 
competitive, merit-based application process that includes, at a 
minimum, the opportunity for an applicant to demonstrate experience 
and qualifications in the marijuana industry." Applicants were broken 
into three levels of priority based on a list of criteria, including 
whether or not they had operated or were employed by a dispensary 
before January 1, 2013.

The idea was to help the most legit dispensaries transition to the 
legal market. But because a person who had worked just one day at a 
dispensary was given priority to get a license, and because 
applications could include multiple people, a lot of former 
budtenders suddenly found themselves in high demand. In exchange for 
their proof of employment and willingness to sign on to an 
application, they could be paid handsomely. Last November, I searched 
Craigslist for "I-502 Priority I" and found several postings offering 
to buy or sell pay stubs for anywhere from $80,000 to $100,000.

This loophole allowed applicants with no background in medical 
marijuana to be treated as if they were law-abiding, taxpaying 
veterans of the industry.

To make matters worse, the WSLCB blindsided applicants by announcing 
a cap of 222 new medically endorsed stores late in the application 
process. Those 222 stores were allocated by jurisdiction, with more 
populous, higher-selling areas getting larger allocations of 
licenses. Still, that left many places, including Seattle, with far 
fewer licenses than qualified applicants, creating fierce 
competition. Up until shortly after the new cap was announced, the 
WSLCB had assured applicants that there was no hurry.

"They were saying to me, 'Don't worry, it's not a race, there's 
plenty of time, we'll get to you,'" said Davis.

Even more frustrating, Davis said the state investigators who were 
charged with vetting his application were elusive, uncooperative, and 
disorganized. One investigator, he said, went on vacation for four 
weeks without notifying him, and another e-mailed the login 
information for his application to a competing applicant by mistake. 
The error put him weeks behind other applicants, Davis said.

Those who received licenses, Davis said, were people who were able to 
throw down $100,000 to game the system, or those who already owned 
recreational stores. He conducted a study of Seattle's 21 newly 
licensed "medically endorsed" recreational stores and found that a 
significant number of them were newly created. Only nine had operated 
dispensaries prior to the application process, he said, and only 
seven of those existed before 2013. Seven licensees created entities 
after the application process was already under way.

Davis was denied a license, despite operating one of the state's 
oldest-running dispensaries. Now he's suing the WSLCB, contending 
that its rules on priority licensing deviated from the spirit-and, to 
some extent, the letter-of the law.

In an e-mail, WSLCB director of communications Brian Smith 
acknowledged the issue of the pay-stub scam, saying: "From the 
beginning I've seen quotes from applicants [who] say they would try 
to game the system. There will always be people who will try to 
cheat." But, he added, "our investigation process is very thorough. 
We also work with other agencies to review and verify the information 
submitted as correct." However, Smith didn't address if the state was 
able to verify whether applicants would actually be involved on a 
business or operations level with the application they were included on.

Davis isn't the only critic of the WSLCB's licensing process. His 
suit includes about a dozen others, including Olympia's Rainier 
XPress, a dispensary that worked primarily with veterans suffering from PTSD.

"In Oly, there were five available licenses," said Patrick Seifert, 
Rainier Xpress's owner. "Three of the five licenses went to one 
fucking guy. The other two went to people who already had stores. How 
is that fair? How are they spreading it out to all of the good 
players that were supposed to get them?" Good question.
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MAP posted-by: Jay Bergstrom