The new federal charges against Fall River Mayor Jasiel Correia are prompting renewed scrutiny of how marijuana companies are authorized across Massachusetts.
Correia allegedly made use of his position to extort hundreds of thousands of dollars from people today hoping to open marijuana dispensaries in Fall River in exchange for his office’s approval. Federal prosecutors say the 27-year-old mayor received below-the-table money payments, campaign donations, and even a Rolex watch in the spend-to-play scheme.
The case has also highlighted an uncommon alignment of two normally-opposed groups: law enforcement officials and cannabis market advocates.
The two sides share dovetailing issues about the neighborhood approval procedure for marijuana providers in Massachusetts. Even though significantly less overtly illegal, providers in the state are forced to make payments to cities and towns that some argue, in the absence of state oversight, amounts to “extortion and bribery in plain sight.”
“I hope today’s indictment will prompt the Cannabis Handle Commission, the Legislature, and other stakeholders to evaluate what extra safeguards or reforms are required,” Massachusetts Inspector Common Glenn Cunha mentioned in a press conference Friday announcing the charges against Correia.
“I hope that this egregious instance does not eclipse the related economic shakedowns on the cannabis market present in almost every single Host Neighborhood Agreement signed to date in Massachusetts,” Jim Borghesani, a cannabis market consultant and the former spokesman for the state’s 2016 legalization campaign, mentioned in a statement.
Here’s why they have related issues.
How the approval procedure at present operates
Enterprise owners in the Massachusetts marijuana market have to full a quantity of methods prior to they can open, starting with neighborhood permits and ending with a license from the state’s Cannabis Handle Commission. But a single critical hurdle is one thing named the host neighborhood agreement.
Prior to they can apply for a state license, companies are needed to agree to a host neighborhood agreement with the officials in the town or city exactly where they’re situated. The contracts are negotiated by the two sides and spell out the terms below which the new enterprise will operate and had been intended to make sure that communities had a say on any pot shops or cultivation facilities that wanted to open inside their borders.
Host neighborhood agreements also set forth how substantially companies will spend their neighborhood neighborhood in costs and taxes.
Cities and towns are permitted to tax marijuana sales up to three %, as effectively as gather a “community influence fee” from providers. State law says that neighborhood influence costs will have to be “reasonably connected to the fees imposed upon the municipality” by the opening of a new marijuana enterprise and can’t exceed three % of the company’s income. According to the CCC, these costs are supposed to cover items like police overtime or visitors design and style research.
Host neighborhood agreements are not the very same as non-opposition letters, which prosecutors say Correia made use of as leverage in his alleged spend-to-play scheme. Nonetheless, such letters are not legally needed for recreational marijuana providers and haven’t been broadly made use of in quite a few years, at least in adult-use licensing, according to these operating in the market (according to the CCC, they’re nonetheless needed for health-related dispensaries).
Kevin Conroy, a Boston lawyer who operates with cannabis providers in the licensing procedure, says most municipalities call for the neighborhood legislative physique — town selectmen or city council — to sign off on host neighborhood agreements for each adult-use and health-related marijuana providers.
“I haven’t observed a municipality exactly where a mayor or a city official can unilaterally approve a host neighborhood agreement,” Conroy told Boston.com. “I do believe, in most communities, there are checks and balances to make sure that the getting into into a host neighborhood agreement is what’s finest for the neighborhood.”
The issues are twofold
The initial challenge is that, to a degree, these checks and balances finish at the neighborhood level. And advocates say most municipalities are going beyond the spirit of the law when it comes to the costs they charge fledgling marijuana companies.
Issues have been raised considering the fact that even prior to any marijuana dispensaries opened in Massachusetts. As The Boston Globe initial reported back in August of final year, the host neighborhood agreements for the initial nine providers to get a provisional license from the CCC appeared to violate the agency’s personal laws.
All but a single of the contracts incorporated provisions calling for providers to make annual, lump-sum payments to their communities, in disregard of the law capping neighborhood influence costs at three % of income. And according to the Globe, all of the agreements permitted municipalities to use the funds for any objective.
In January, an market study located that 79 % of the state’s 77 host neighborhood agreements at the time needed payments exceeding the three % limit. Practically all of the bargains also reportedly named for “voluntary” donations for third-celebration charities. Even though some legal authorities say the law does not explicitly ban such payments, Shaleen Title, a single of the 5 CCC commissioners, has abstained on almost 80 % of the panel’s final license votes in protest of what she thinks are legally dubious host neighborhood agreements, as Commonwealth magazine reported final month.
Whether or not legal or not, cannabis market members and advocates have argued that the agreements have slowed the statewide rollout of pot shops and exacerbated the lack of diversity in the market.
“It squeezes the small guys out,” Peter Bernard, the president of the Massachusetts Growers Advocacy Council, told Boston.com. “The people today who are going for these smaller sized companies are receiving squeezed out simply because they do not have the revenue to compete with the deeper pockets and cannot afford to spend these sort of ransoms.”
And, at present, state regulators say they cannot do substantially about it.
In a statement, a CCC spokesperson told Boston.com that the commission has “strong suitability requirements for licensure.” But for a lot more than a year, the CCC has maintained that it does not have the legal authority to overview host neighborhood agreements — an opinion that has been affirmed by at least a single state judge.
The agency voted in January to ask state lawmakers to pass a bill providing them clear authority more than the agreements.
“It has been a barrier to entry for some of the communities and the people today that we’ve been attempting to assist,” CCC chairman Steven Hoffman mentioned at the time. “There’s a dilemma right here.”
The second concern is a lot more straight connected to a a lot more classic style of government corruption. In spite of the neighborhood checks and balances, each law enforcement officials and cannabis market advocates say the technique is ripe for the sort of “pay-to-play” abuse alleged in Fall River with no state oversight.
Bernard says that the approval of a host neighborhood agreement can eventually reside with a single official, no matter whether it be a mayor or a council member with a deciding vote. Andrew Lelling, the U.S. lawyer for Massachusetts who brought the charges against Correia, says the dynamic “invites this sort of petty corruption.”
“It creates an massive quantity of temptation,” Lelling mentioned in the press conference Friday.
“With marijuana legalization for recreational use obtaining occurred reasonably lately, there’s now a surge in these applications,” he explained. “Many companies, in a reasonably quick interval, are seeking for permission to set up what they believe will be a profitable enterprise. On best of that, at this point anyway, they are normally a money enterprise simply because marijuana companies cannot use the federal banking technique. So you have a circumstance exactly where neighborhood authorities, neighborhood mayors could be sorely tempted in taking bribes in exchange for a letter. And that single letter can be the ticket to a marijuana dispensary opening a really profitable enterprise.”
Lelling mentioned the topic is a concern “more broadly than in Fall River.”
So what occurs subsequent?
The episode in Fall River appears to have reenergized the debate about host neighborhood agreements just as Massachusetts lawmakers reconvened for the fall legislative session.
Gov. Charlie Baker told reporters Monday that he would help the CCC’s recommendation with regards to modifications to the present law. And in an interview with the Globe, the Massachusetts Republican recommended he was open to some type of state oversight of the neighborhood agreements. Although as the State Residence New Service noted, the governor and legislative leaders appeared commonly unfamiliar with the topic.
The Legislature’s Joint Committee on Cannabis Policy held a hearing in July on two bills connected to host neighborhood agreements. 1 bill, introduced by state Sen. Julian St. Cyr, would give the CCC a lot more explicit authority more than the neighborhood bargains, as the agency requested earlier this year. The other, backed by state Rep. David Rogers, would a lot more clearly prohibit neighborhood influence costs that exceed three % of a company’s income.
“Requesting a lot more than what is statutorily needed is a distortion of the marketplace that we would not tolerate in any line of enterprise,” Rogers mentioned in the course of the hearing. “It’s about what is fair.”
St. Cyr told the Globe Monday that a lot more urgent action on the legislation could at least be a “silver lining from the reprehensible actions of the mayor of Fall River.”
Municipal representatives have opposed tighter oversight and regulation of the host neighborhood agreements. Geoff Beckwith, the executive director of the Massachusetts Municipal Association, which represents neighborhood city and town governments, says the group “strongly opposes” each of the aforementioned bills.
“The MMA believes that these bills are overreaches and would usurp neighborhood authority,” Beckwith wrote in a July letter to legislators, arguing the policymakers need to alternatively concentrate on applications to help tiny players in the market, rather than “undermining” communities’ “ability to represent the public’s interest.”
Conroy cautions against overreacting to “one terrible actor” in Fall River and thinks the vast majority of municipal officials are producing great-faith efforts to represent their communities. Nevertheless, he thinks that lawmakers will need to act to resolve uncertainty about host neighborhood agreements, each concerning the CCC’s authority and the neighborhood influence costs.
“I believe everyone in this market correct is just seeking for clarity,” Conroy mentioned. “I believe municipal officials are seeking for clarity. I believe the Cannabis Handle Commission is seeking for clarity. And the private market is seeking for clarity.”
He added: “We now will need the Legislature to supply clarity.`