By Mark Gutglueck
Federal and local investigators are seeking to define the length, breadth and depth of collusion in the bribery and kickback scheme involving San Bernardino municipal officials and the slew of entrepreneurs given licenses by the city to operate cannabis-related businesses in the county seat on February 21.
At issue is not only how much money and by what means those payoffs were delivered to Mayor John Valdivia and members of the city council, but what knowledge City Manager Andrea Travis-Miler, senior elements within the police department, city consultant HdL and city staff within the community development division have regarding the provision of those inducements and whether they were involved in the distribution of that largesse from the project applicants meant to influence the selection process or are perhaps themselves recipients of some of it.
After years of resisting the legalized distribution of medical marijuana in San Bernardino that was permissible under the auspices of the passage of 1996’s Proposition 215/Compassionate Use of Marijuana Act and the delaying by more than two years compliance with voter mandates approved in 2016 legalizing in California and in San Bernardino the sale of marijuana as an intoxicant, the city council on February 21 voted to provide 16 of 39 applicants with permits to engage in commercial activity of one sort or another involving marijuana.
An evaluation of the applications for those permits and the city’s ordinance, zoning requirements, codes and municipal regulations shows that seven of those operations are out of compliance with the requirements in at least one, and in four of the cases at least two of the applicable standards. Meanwhile, at least four of the applicants which had defined operations and locations which were, or appeared to be, in total compliance were denied licenses to operate.
There is emerging evidence suggesting that city officials were shaking down applicants for either bribes or campaign donations. City officials or those speaking on their behalf have pointed out that reports of graft and bribery in the awarding of the permits are in error or are outright fabrications, which they insist is borne out by the consideration that many of the applicants who were turned down had made donations to the mayor and council. Still, an in-depth analysis indicates that those who were more liberal in their application of money in “taking care of” the city’s decision makers fared better in the commercial cannabis operation permitting sweepstakes than did those who were more parsimonious in the charity they exhibited toward the council and especially the mayor.
On February 20, Empire Connect, Pure Dispensaries, Have a Heart, JIVA, and PTRE Management, all of which are located in San Bernardino’s 3rd Ward at the extreme south end of the city, were given retail licenses. Microbusiness licensees went to Orange Show Cultivators, which is to engage in cultivation, manufacturing and distribution; SOCA Farms, involving retailing, cultivation and distribution; Central Avenue Nursery, a cultivator, retailer and distributor; and Nibble This, which is to entail retailing, manufacturing and distribution. All of those are located in the 3rd District. Nibble This was also provided with a second permit to open a second retailing, manufacturing and distribution operation at a location in the 6th Ward, on the northwestern corner of the city. Accessible Options was given a license to grow marijuana in an indoor nursery in the southeastern 1st Ward; 14 Four and GWC Real Estate Services were given agricultural clearance in the 3rd Ward; and Organtix Orchards was granted a cultivator’s license in the 6th Ward. AM-PM Management, located in the centrally-positioned 2nd Ward, was the recipient of a manufacturing permit and Blunt Brothers, a distributor, is to operate its warehouse and dispatch office in the 3rd Ward.
The day before the special meeting of the council on February 21 at which the 16 licenses were handed out, on February 20, a contingent of San Bernardino police officers traveled 77 miles west across the San Bernardino County/Los Angeles County boundary and descended upon the Pacific Palisades home of Stephanie Smith to serve a search warrant. Smith is the proprietor of Washington LLC, an entity that had applied for a permit. In Smith’s residence, which Smith shares with plastic surgeon Dr. Craig Alan Bittner and four of their five children, officers came across a substantial quantity of outdated oxycodone and hydrocodone, along with $200,000 in cash. The opioids were part of the painkiller supply utilized by Bittner in his now defunct plastic surgery practice. The $200,000 in cash at Smith’s residence was rent money paid by Smith’s tenants engaged in marijuana-related enterprises primarily consisting of cultivation operations who are leasing a substantial portion of the two million square feet of industrial space, primarily in Southern California, she owns. With those tenants, Smith deals primarily in cash because federal laws prohibit banks, which are federally insured, from engaging with businesses trafficking in marijuana, which is yet considered an illegal substance under federal law.
In a clear effort to wing Smith, the police police department took Smith into custody, booking her into the Lynwood Detention Facility in Los Angeles County and presenting the seized materials and the cash to the Los Angeles County District Attorneys Office, along with a report stating that Smith was in possession of controlled substances which were being sold. Those charges are not likely to stick. Smith spent two nights in custody, largely because the San Bernardino Police Department prevailed upon the Los Angeles County District Attorney’s Office to require that the $30,000 in bail she was able to immediately post be established as not being the proceeds of criminal activity. On February 22, she was released after such proof was provided.
Three days later, Smith came roaring back. On Monday February 25, Smith’s attorney, Ben Eilenberg, lodged on Washington LLC’s behalf a lawsuit against the City of San Bernardino.
According to Eilenberg, city officials, and all of them, are on the take. “The effects of the ‘pay for play’ corruption led to the city issuing a large number of licenses that were illegal,” according to the suit. In awarding the permits, according to Eilenberg, the city had failed to adhere to its own declared standards.
The suit states that “Over 50 percent of the issued licenses were illegal, thereby throwing the entire process into doubt.” Identified as out of compliance with the city’s codes, policies, municipal plan, zoning codes and/or general plan were Organtix Orchards, AM-PM Mgmt. Inc., Orange Show Cultivators, both Nibble This LLC operations, A Bud & Beyond, Blunt Brothers, and Accessible Options.
According to the suit, money originating with applicants for the licenses was being passed around to the city’s elected officials, and on occasion city staff in positions as high ranking as the city manager were coordinating how the money, disguised as political donations, was to be vectored and to whom, in return for which the licenses were granted.
Smith was able to marshal proof of her allegations. A private investigator employed by Smith succeeded in retrieving texts and emails that passed between city officials and cannabis operation applicants or their representatives in which preparations for the exchange of approval for money took place. The proof that something is amiss exists in the consideration that several of the cannabis operations that are out of compliance with the city’s standards were given permits while others which were in compliance came away empty-handed at the end of the February 21 special meeting, Eilenberg asserts.
Eilenberg’s accusations passed muster with the San Bernardino Superior Court in the person of Judge Janet M. Frangie, who on February 27 issued temporary restraining orders against seven of the businesses Washington LLC claims gained approval for operational plans that are in violation of the city’s municipal codes, policies, municipal standards, zoning codes and/or general plan. Those companies are Organtix Orchards, AM-PM Mgmt. Inc., Orange Show Cultivators, both Nibble This LLC operations, Blunt Brothers and Accessible Options. A Bud and Beyond, which Smith also alleged to be noncompliant, was not included in those restrained because the city had not granted it a permit.
When it rains, it pours. On March 1, Connected Cannabis Co., also known as EEL Holdings, LLC., represented by attorney Jeff Augustini, filed suit against the city in an action that mirrors the suit Smith brought. Connected Cannabis maintains that not only should the permits on the seven operations already suspended be rescinded but that all 16 that were approved be prohibited from proceeding. Several of those given licenses, and others, were not certified by the San Bernardino Community Development Department as being a requisite 600 feet or more away from schools, parks, churches, youth centers, operations where alcohol is served or sold as well as residences, according to Augustini. Moreover, Augustini suggests that “the credibility of the city’s selection process” has come into question “amid growing rumors and allegations of corruption, cronyism, political maneuvering, and the use of the process to score political points and to carry out political vendettas.”
Connected Cannabis wants the previous permitting process to be scratched in its entirety and the city to start over.
Spicing up an already hot dish is that two former members of the city council, Benito Barrios and Wendy McCammack, had an interest in two of the 39 applications. McCammack’s application, Central Avenue Nursery, succeeded in pulling down one of the licenses. A close examination of the details of McCammack’s application show it failed to meet two of the criteria, several of her competitors who were turned down by the city have said.
Moreover, it has recently come to light that seven separate entities – HC Club LLC, HAH 3 LLC, RZNHead Inc, Pure Dispensaries LLC, SB Pharma Holdings, Inc, Raquel Origel and AM-PM Management Inc. dba Cold Creek Organics – all obtained letters of authorization from the City of San Bernardino in December, issued in advance of the February 21, 2016 council meeting. According to Amna Haslam, a senior environmental scientist and specialist with the California Department of Public Health’s Manufactured Cannabis Safety Branch which serves as the licensing agency for commercial cannabis operations, HC Club, HAH 3, RZNHead, Pure Dispensaries, SB Pharma Holdings, Raquel Origel and AM-PM Management were provided with their temporary licenses from the Bureau of Cannabis Control based on their each having a local permit or letter of authorization from the jurisdiction in which they are to operate.
Councilman Fred Shorett, who on February 21 voted with his colleagues to confer licenses upon the 16 anointed of the 39 applicants and reject the applications of the other 23, defended that action, saying “We had the attorney constantly weighing in on it. As to the innuendo of pay-to-play, I can only tell you that from my perspective on it what was done. The giving of the first fifteen or sixteen permits was done in accordance with the recommendations we had.”
There was no favoritism shown to any one, Shorett said, and the council did the best it could within the limitations of the knowledge it possessed relating to the applicants. “There was some discussion of moving one or two up,” he said, suggesting those discussions were not acted upon ultimately and the staff recommendation was followed in its entirety.
The licenses were evenly and fairly distributed, he said, within the limitation of how many were to be granted. “There was only one that I am aware of where more than one permit was given,” Shorett said. “I personally followed the recommendations. I’m just going to say that this was certainly a new process. I got all of my information on the applicants from our staff.”
Though Shorett acknowledged things went differently at the courthouse, he indicated no official complaints had been launched at City Hall. “Everything I heard from the applicants was our staff did an outstanding job,” Shorett said. “They worked hard and did a diligent job. Andrea [Travis-Miller] maintained more than an arms-length distance from this other than getting answers to questions, but she knew nothing more of the process than she needed to know. She was not involved in the process beyond that. And these claims that [former Mayor] Carey Davis was involved in pay-to-play and Carey Davis was asking for money from some of the people who were applying for marijuana licenses is a bunch of hooey. Carey Davis wouldn’t take money from somebody who was spitting on the sidewalk if there was an ordinance against that. I am absolutely positive that never occurred. He was adamantly opposed to letting marijuana into this city every step of the way until when the attorney explained we had to acquiesce,and even then we had to delay it.”
Shorett said complaints from those who did not succeed in their application for permits is par for the course, and that lawsuits from at least some of those who would not be chosen would be inevitable.
“We were aware there were problems with no matter how we did this and that we were going to get sued by a lot of people,” Shorett said. “We couldn’t do anything about that.”
Shorett also suggested a possible explanation of why the city jumped the gun in giving some applicants licensing late last year without a vote by the city council
“At the same time,” said Shorett, “we were being pushed to speed up the process because people who had applied had gone to the state to get temporary licenses and could not get permanent licenses until they had a license approved by the city, and if they didn’t get the approval right then, they would have to go to the back of the line and that is why we stepped up, to be as business friendly as we could have been. Maybe some of those would have been approved, maybe some would not have been approved by the state. I don’t know. I personally, right or wrong, followed entirely what the staff recommendations were, with the exception, as I said, with what came out of our discussion during the night of the special meeting, where all of the applicants had the opportunity to be heard from.”
Reluctantly, Shorett was critical of HdL, the firm the city hired to guide it through the granting of licenses to marijuana-related commercial operations in the city. While a representative of HdL was at the meeting on February 21, he sat silent throughout the hearing, and many people were not even aware of his presence.
“They could have done a much better job, as well,” said Shorett. “They were never asked to speak up. They did not make their position known to staff or council. They were never asked and they never said anything, one way or the other. I still don’t know what their position was or is. That was perhaps a failure on our part.”
Valdivia sought to distance himself from the the selection process, indicating neither he nor the council had a role in reviewing or rating the applicants. He said charges of graft hovering over the process were “baseless accusations” made by “disappointed and unsuccessful applicants.”
Meanwhile, investigators have obtained warrants to place taps on both the office and home phones of virtually every elected official in San Bernardino, some half dozen city staff members, and the more than three dozen entrepreneurs who are seeking commercial licenses relating to cannabis in the city, and are taking advantage of the latitude in the law which allows them to listen in, without warrants, on communications carried out on cellular or mobile devices.