Cannabis Venture Enrichment Fever Afflicting The Most Unlikely Of Victims

So instantaneously and spectacularly lucrative is California’s nascent marijuana industry that staid and imperious members of the state’s business and social aristocracy, establishment figures whose familial and corporate reputations going back generations are steeped in conservative and decorous respectability, are casting aside all caution and venturing into trafficking in literally tons of a substance, the possession of a pound of which just a few years ago would have put one into a prison cell for ten years.
A case in point is the Lewis Family, the scions of Ralph and Goldie Lewis.
In 1955, Ralph Lewis, a tax attorney and accountant by profession, undertook construction on his first residential subdivision in Claremont. The synergy of Ralph Lewis’ business acumen and Goldie Lewis’ understanding of the need to build into each house living space and amenities to enhance the home’s domestic ambience set the Lewis Homes’ product apart from many of the cookie cutter structures built by competitors in the same market and in the same era. Indeed, in the weeks and days before a Lewis subdivision would go before the governmental land use authorities for approval in whatever jurisdiction where that particular project was to be developed, Goldie Lewis could be seen late in the evening perched in a chair at the kitchen table, upon which would be spread the blueprints and site plans for the homes and neighborhoods that the company was proposing to build, as she obsessed over the internal layouts of the houses and made sure there was adequate closet space in the bedrooms and along the hallways, and that the kitchen configuration made sense in terms of the relative position of cupboards and counters and the placement of the built-in stoves and the open spaces provided for refrigerators that would make most sense for a modern homemaker. After she satisfied herself that the individual floor plans were worthy of bearing the Lewis Home name and were livable internally, she would turn her attention to the external aspects of the product her husband was delivering, laying out in detail the pattern of variance in how the models of the homes were to be arranged in order up and down the streets to achieve the most appealing aesthetic effect for that future neighborhood.
It was this pride in quality and attention to detail, while other homebuilders were simply slapping their houses together as quickly as possible and without regard to the long term ambience of the communities being created, that set Lewis Homes apart from its contemporary competitors. Lewis Homes gained uncommon traction in the 1960s, expanded beyond all reasonably predictable expectations in the 1970s and had grown to become by the 1980s among the most fabulously successful of San Bernardino County’s corporate institutions.
At that point, the reins of the company were being entrusted to the next generation, Ralph and Goldie’s sons, Richard, Randall, Robert and Roger. Under their guidance, particularly that of Richard and Randall, what was already a premier locally-based company evolved into one of the largest homebuilders in California, and expanded from there. In the 1980s, the Lewis family had progressed from building single family homes exclusively to a full line of residential units, including large and small homes, condominiums, townhomes, apartment complexes and commercial subdivisions.
At this point, Lewis Homes and its corporate successors have developed in excess of 25,000 acres and more than 100,000 residential units within the context of subdivisions or planned communities in California, Nevada, Arizona, and Utah.
In 1999, the company sold a part of its operation to Kaufman and Broad. Since that time, the company is involved far less in actual building, concentrating instead on acquiring land and completing the entitlement process for large projects which are then completed by other homebuilders.
Lewis Homes long ago established its corporate headquarters in Upland and now, more than a generation later, the company has expanded to become the Lewis Group of Companies, which remains headquartered in the City of Gracious Living, from which Richard, the president of the Lewis Group’s California Division; Randall, the executive vice president of marketing; Robert, the president of the Nevada division; and Roger, the executive vice president; along with John Goodman, the chief executive officer and executive vice president; Jennifer Lewis, the vice president; David Linden, the senior vice president for asset management; Leon C. Swails, the senior vice president for apartment development; and Bryan Goodman, the senior vice president and regional manager for Southern California planned communities oversee an operation that has only a handful of native-grown peers in San Bernardino County, such as Stater Bros. in San Bernardino, Esri [Environmental Systems Research Institute] in Redlands, CO-OP Financial Services in Rancho Cucamonga, and Prime Healthcare Services in Ontario.
Even in the face of the Lewis Group of Companies’ continuing level of success in the development field, when an opportunity to make a substantial profit through involvement in the cannabis production industry presented itself, the Lewis Group of Companies jumped at the chance.
In Adelanto, the November 2014 election resulted in Rich Kerr, John Woodard and Charlie Glasper displacing, in a clean sweep, respectively, then-incumbent Mayor Cari Thomas and council members Charles Valvo and Steve Baisden. Immediately upon the three new office holders being sworn in, the newly composed city council spelled out to then-City Manager Jim Hart that the city’s political leadership was willing to depart with the conservative policies of past city councils and embrace the commercialization of marijuana as an economic engine to get the city, which was teetering on the abyss of bankruptcy and had declared itself to be in a state of fiscal emergency in June 2013, back on track financially. The approach engendered a degree of resistance among city staff, and the city burned through employees at an alarming rate, starting with Hart in February 2015 and a succession of four city managers thereafter, as well as three city attorneys, the city engineer/public works director, a senior planner, a public works superintendent, the city’s conservation administrator and a senior management analyst, all as a consequence of their misgivings over the city’s aggressive embracing of cannabis-related businesses as a financial panacea. Nevertheless, Kerr and Woodard, with the enthusiastic backing of another member of the city council, Jermaine Wright, and the lukewarm support of Glasper, were resolved to use the opportunity that had long existed in California, as a consequence of the passage of 1996’s Proposition 215 Compassionate Use of Marijuana Act, to make Adelanto a medical marijuana Mecca. Recognizing that the vast majority of California’s cities had enacted ordinances and maintained policies banning both the sale and cultivation of marijuana, prohibiting indoor and outdoor farms and nurseries, as well as keeping clinics or dispensaries from operating in their cities, the council majority believed Adelanto could fill a potentially lucrative void by going in a different direction. Only Councilman Ed Camargo would remain as a steadfast opponent of the marijuanification of Adelanto. Initially, to obtain the support of Glasper, who had concerns about making marijuana available to city residents, Kerr, Woodard and Wright agreed to limit marijuana-related activity in the city to agricultural operations, continuing to outlaw clinics and dispensaries. Kerr, as the mayor and point man on promoting Adelanto as the marijuana capital of California, made clear that the city was ready to welcome and facilitate any and all serious applications to grow marijuana out of enclosed warehouse-based greenhouses, as long as they were located in the city’s industrial park.
When the city ratified an ordinance that opened the way for marijuana-grow operations in November 2015, there ensued an intensive frenzy as aspiring cannabis millionaires were literally walking over each other to secure permits for such enterprises, either by purchasing, leasing or otherwise tying up land within the city’s industrial park for such businesses and applying for the permits and licenses to begin operating. Would-be marijuana industry entrepreneurs seeking permits began to regularly show up at City Hall in such numbers that they formed a line that wended its way through the building and out the front door. In an alarming sign, many carried with them into City Hall briefcases full of cash which appeared to be intended as inducements to city officials to give their applications favorable treatment and speeded processing.
It soon became apparent that the area zoned for cannabis cultivation within the city’s industrial park was insufficient size-wise to accommodate the influx of those with the intention of becoming farmers. Kerr, Wright and Woodard along with the somewhat reluctant Glasper gave indication they would enlarge the city’s marijuana growing zone.
Land speculators poured into the city, alongside applicants for marijuana-involved businesses. In many cases, those purchasing property in the city appeared to be functioning on inside information about what properties would later be zoned to allow cannabis-related businesses. This was particularly acute, given that land values in the High Desert in general and Adelanto in particular had historically lagged behind – far behind – those in many other parts of Southern California. Typical undeveloped property in Adelanto throughout the 1990s, early 2000s and up until two years ago sold for a fraction of comparably zoned properties in places like Rancho Cucamonga, Upland, Ontario and Chino Hills. Yet throughout that time, there had been no rush to purchase property in Adelanto, as the community was lacking in much of the key infrastructure – good roads, sewers, electrical and water utilities – needed to render it into being development-ready. Virtually overnight, property that no one was interested in had become the hottest real estate commodity going, with prices escalating by factors of at first two or three, then five, six and seven and then eight, nine and ten. By late 2016, federal officials in the form of Securities and Exchange Commission investigators along with Drug Enforcement Agency and FBI agents were interesting themselves in the city’s goings-on, as one seemingly well-heeled developer after another came into town, obtained land and in record time was moving toward completion of a project that would get occupancy and operating permits with seemingly no serious scrutiny by city inspectors, even as reports were rampant that those inspectors were being ordered to stand down so that the development rush could proceed.
With California voters’ passage, in November 2016, of Proposition 64 the Adult Use of Marijuana Act, the free-for-all in Adelanto intensified, as the three-member council ruling coalition of Kerr, Wright and Woodard, which technically did not need Glasper’s support to prevail, made clear that the city would expand from being a marijuana cultivation, production and wholesale center and open itself to the end use retailing of the drug at clinics and dispensaries where the substance would be sold for medical applications, as well as at pot shops, a la liquor stores, where those wishing to purchase it for use as an intoxicant could obtain it.
In February 2017, the city brought in Mike Milhiser, who had more than a quarter of a century experience as the city manager in Montclair, Ontario and Upland, to serve as acting city manager. After a six-month stint in that assignment, Milhiser left as top staffer as the city council in August 2017 chose to elevate Gabriel Elliott, the city’s development services director, to the position of city manager. While Kerr, Wright and Woodard fully expected Elliott would wholeheartedly advance their agenda to get as many cannabis-related operations on track as possible, Elliott soon demonstrated himself to be more cautious, deliberative and methodical in the way he ran the city than his political masters had hoped, as he insisted that staff be given time to evaluate and inspect thoroughly the project and permit applications coming into City Hall.
As Summer 2017 advanced, Councilman Wright, through an acquaintance he did not recognize to be an FBI informant, was put in contact with two undercover FBI agents, one of whom held himself out to be an arsonist and the other who made a convincing show of being an applicant for a license for a marijuana distribution business in Adelanto. Unsuspecting that those he was dealing with were actually law enforcement officers, Wright sought the assistance of one in helping him burn down his restaurant to collect on an insurance policy he had on it and agreed to take a bribe from the other in exchange for assisting him in getting his cannabis distribution enterprise on track. In October 2017, the FBI agents closed the trap they had laid for Wright, and obtained what turned out to be his short-lived agreement to cooperate with them in gathering information about graft on the part of other Adelanto officials. When Wright again approached the FBI informant, whom the councilman yet did not understand was cooperating with federal authorities, in an effort to help him arrange for a gangland hit on the FBI agent who had been masquerading as an arsonist, the FBI and the U.S. Attorney’s Office obtained an arrest warrant for Wright and took him into custody on November 7, 2017.
In December 2017, Kerr and Woodard, apparently unchastened by what had happened with their council colleague, remained resolved to continue with the accelerated effort to move Adelanto toward a cannabis-based economy. Perceiving Elliott to be an obstructionist to this agenda, they used complaints of sexual harassment lodged against Elliott by two city employees and an intern working at City Hall, which had apparently been orchestrated by Kerr, as a pretext to suspend Elliott as city manager, placing him on paid administrative leave, a status he remains in to the present. They then turned once more to Milhiser to serve as interim city manager.
In the meantime, by early 2017 corporate officers with the Lewis Group of Companies had seen the escalation of property values in Adelanto and saw in the circumstance an opportunity to turn a tremendous profit. The company makes a practice of acquiring property in places where doing so offers a prospect of future development potential. It just so happened that the company had acquired 178.75 acres in the northwestern quadrant of Adelanto, property that was zoned at that time for low density residential development. Observing the circumstances in Adelanto, company officials resolved to press the advantage that had accrued to them as a consequence of the land the company controlled in the city. In addition to being in a position of opportunity as a consequence of owning property in Adelanto, the company had especial access to City Hall, given that Mike Milhiser was then Adelanto’s acting city manager. As city manager in Montclair, Ontario and Upland in the 1970s, 1980s, 1990s and early 2000s, Milhiser was familiar, and on very good terms, with what was at one time Lewis Homes and later the Lewis Group of Companies, which was one of the major residential developers in each of those communities during his tenures with each.
In March 2017, Lewis Group of Companies Chief Executive Officer and Executive Vice President John Goodman, acting as an agent on behalf of the corporation, filed with the California Secretary of State’s office notice of a limited liability company that existed under the Lewis Group of Companies’ corporate umbrella, this one called Adelanto Ventures, LLC, a Delaware Corporation, giving Adelanto Ventures, LLC powers and privilege to conduct business in California. Adelanto Ventures thereafter undertook seeking to have the City of Adelanto amend its general plan and zoning map, rezoning the 178.75 acres it owned from so-called “Desert Living” upon which up to 2.5 dwelling units per acre could be built, to a “Light Manufacturing Cannabis Only” zoning designation.
To facilitate the processing of that application, Goodman, again acting as an agent on behalf of the corporation, filed with the California Secretary of State’s office to register Adelanto Ventures, LLC directly as a limited liability company with the state and obtain a California file number. The aim was to utilize that entity to intensify the effort to have the zoning of the 178.75 acres of residentially zoned property the Lewis Group of Companies owned in northwest Adelanto changed to allow cannabis cultivation.
The effort bogged down after Milhiser’s departure in August 2017, as Elliott’s methodical management of operations at City Hall was creating a substantial backlog of applications for marijuana cultivation and retail sales permits, and the city’s march toward considering and effectuating zone changes slowed.
The Adelanto Ventures undertaking was boosted early this year after Milhiser was once again installed as Adelanto’s acting city manager.
On March 7, 2018, the planning commission approved a resolution recommending that the city council adopt two ordinances, ratifying a general plan amendment and zoning map change transitioning the acceptable land use of the Lewis-owned acreage from residential to a light industrial cannabis only designation. Milhiser, who is retired and drawing a pension, is prohibited from working for a public agency for more than 960 hours in any 12 month period. Accordingly, he was due to leave as acting Adelanto city manager the first week of May. A public hearing on the proposed general plan amendment and zoning map change for the Lewis property was scheduled for the April 25 meeting, the last one that would occur during Milhiser’s tenure. Contained in the agenda packet for that hearing was a report from Milhiser to the city council which was put together by Charles Rangel, Adelanto’s development services director, and Louis Morales, the project planner, at Milhiser’s behest. It recommended that the amendments be granted and the city council adopt what is referred to as a mitigated negative declaration, meaning that the council has determined that by granting the changes no undesirable environmental impacts that could not be mitigated by conditions of approval would ensue. At the April 25 meeting, the city council, which was down to four-fifths strength because Wright had been removed from office more than three months previously, voted 3-to-1, with Kerr, Woodard and Glasper in favor and Camargo dissenting, to make the amendments and grant Adelanto Ventures and the Lewis Group of Companies the zone and general plan changes sought for the property. That action increased by a factor of at least seven the value of the Lewis-owned property.
Contacted by the Sentinel on June 6, Randall Lewis, Lewis Group of Companies’ executive vice president of marketing, said, “We own about 1,000 acres in Adelanto. We worked with the city to get an overlay on about 180 acres.”
His company has no intention of developing the property as a marijuana cultivation facility or operating it as such, Lewis said, but is looking to flip it to someone who will, now that the zone change has been granted. “We were involved because someone might buy it,” Lewis said. “We have no intention to go into the marijuana business in any way, either as a grower or a seller or a distributor. We went into this based on whether or not we could get the zoning. We wanted to see if someone wanted to buy some of the property.”
Land speculation is not the focus of his company’s efforts, but can be a consequence of what it does, Lewis said. “We are in the business of being a master developer,” he said. “We would serve as the developer, if our land was to be used for houses or apartments or a shopping center. In that case, we would do the developing. If the highest use turns out to be something other than that – other uses such as a gas station or a hotel – then part of our business is to get zoning for the property and sell it to someone who specializes in that kind of project. We will attempt to have that land developed to its highest use, even if we are not involved in the final development.”
A high ranking Adelanto official who has functioned within both the managerial and land use echelons at City Hall told the Sentinel that the Lewis property is in the north part of the city, well outside the city’s industrial park, outside the area previously zoned for marijuana cultivation, and well away from where such zoning would be most logically and sensibly applied.
“The other bigger picture is there in no infrastructure there,” he said. “Not only is the zoning inconsistent but it is going to be extremely expensive to locate the type of support infrastructure those types of facilities will need, such as roads, water, sewers, etcetera. The other big problem is displacing the residential zoning there. Our priorities there were for high desert living or zoning for something similar. I am not sure exactly how many hundreds of acres they were going to change. What occurred at the April 25 meeting is obviously not looking really good.”
Milhiser’s prior connection to the Lewis Group of Companies played a role in the decision, the official said. “He [Milhiser] knows the Lewis people,” he said. “I am not really sure why he would do this. This isn’t a good thing. There are some significant issues. Environmental maps had to be written, and that was a major obstacle.”
The official noted that Elliott had not been willing to make the zone changes that the Lewis Group of Companies had requested. As soon as Elliot “wasn’t in the picture, miraculous things began to happen,” the official said.
Given the Lewis Group of Companies’ reputation and prestige, the official said it was difficult to understand why the company would have lowered itself to participate in the manipulation of the city’s zoning codes, even considering the money to be made. “If I were them, this is not something I would have wanted to get into,” he said. “It required an illogical zone change and altering the city’s zoning map. What is up there doesn’t conform to that land use. They knew that from day one, and what amount of environmental study would be required to make that work. They said, ‘We don’t want to do an environmental impact report.’ It was for that reason it was originally turned down. It looks really bad. For a company of Lewis’ stature, it’s hard to figure why they did that. For someone smaller, you can understand it. But Lewis doesn’t need the money and you’d think the company’s image is more valuable than getting involved in something like this.”
Mark Gutglueck

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