Indications Of Graft In SB’s Cannabis Business Permitting Process Mount

Evidence that graft has infused the cannabis-related business operation permitting and licensing process at San Bernardino City Hall involving both elected officials and staff continued to accrue this week.
Suspicions that something was amiss surfaced some time ago, well before the city undertook at its February 21 meeting to grant licensure to 16 entities. With the granting of the licenses, several of which went to applicants that did not conform with the city’s codes and requirements, the case against city officials grew ever stronger in the minds of many members of the public. The popular indictment was cinched when it was subsequently shown that at least six applicants which were in compliance were denied permits. Given the amount of money that had been provided to the city’s elected leadership by several of the successful applicants in the form of disclosed and visible campaign contributions, the widespread impression was that money provided under-the-table to the decision-makers was a factor as well.
Moreover, city officials did nothing to dispel those notions when, in justifying the provision of those permits to the entities that are out of compliance with the regulations the council itself insisted on instituting last year, they stated they had merely relied upon a ranking of the applicants and their qualifications provided by the city’s so-called cannabis consultant, HdL. Conveniently for them, however, HdL was not available to explain the criteria upon which those rankings were based or provide a defense of why companies which had made efforts to meet the conditions were denied and those that ignored the regulations succeeded.
Among those requirements is the maintenance of a buffer zone of 600-feet between homes and cannabis businesses unless there is an intervening barrier, such as a freeway, railroad track or flood control channel. There are similar separation requirements with regard to churches, schools, other cannabis-related businesses and concerns selling or serving alcohol.
For several years, the overwhelming number of members on the city council were adamantly opposed to allowing the operation of medical marijuana dispensaries in the city, which the city had the discretion to permit under the auspices of the Compassionate Use of Marijuana Act put in place by the passage of Proposition 215 in 1996. The city and the city council gamely sought throughout much of the current decade to shut down any such bootleg operations that were set up by those willing to brave the city’s enforcement action, even as an overwhelming number of such enterprises popped up and City Attorney Gary Saenz opined that the effort to clamp down on them was essentially “futile.”
Even after the Passage of Proposition 64 by the state’s voters legalizing the use of marijuana for its intoxicative effect in 2016 together with San Bernardino’s Measure O, which legalized the sale of the product within the city limits, city officials were resistant to the concept. This resulted in litigation against the city to force it to comply with the mandates in Measure O. Ultimately, the city resigned itself to the inevitability of cannabis sales taking place within its confines.
With scores of would-be marijuana entrepreneurs lining up to obtain licenses beginning in 2018, city officials who had been so adamantly opposed to the legalized presence of the substance in San Bernardino flipped. After the realization that the sale of marijuana in the city was going to be subject to a highly competitive permitting and licensing process, the opportunity for those with authority over the process to get a piece of the action dawned on virtually everyone.
Empire Connect, Pure Dispensaries, Have a Heart, JIVA, and PTRE Management were provided with retail permits on February 21. 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 under two separate permits and at two separate locations were all given microbusiness licenses the same night. Accessible Options, 14 Four, GWC Real Estate Services and Organtix Orchards were also granted cultivating permits on February 21. AM-PM Management was the recipient of a manufacturing permit and Blunt Brothers, a distributor, was given on the same night permission to operate. Simultaneously, 23 other applicants had their bids for licensing turned down.
On February 25, Washington LLC filed a lawsuit against the City of San Bernardino which essentially charges the city’s officials with being on the take.
“The effects of the ‘pay for play’ corruption led to the city issuing a large number of licenses that were illegal,” Washington LLC’s attorney Ben Eilenberg wrote in the suit. “Over 50 percent of the issued licenses were illegal, thereby throwing the entire process into doubt.” According to Eilenberg, Organtix Orchards, AM-PM Mgmt. Inc., Orange Show Cultivators, both Nibble This operations, Blunt Brothers, and Accessible Options are out of compliance with the city’s codes, policies, municipal plan, zoning codes and/or general plan.
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.
Proof of the allegations consists, according to Eilenberg, in the form of 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. 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.
On March 1, another applicant, 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 Washington LLC brought. Connected Cannabis maintains that all 16 businesses granted licenses on February 21 should 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.
Dr. Majid Seraj, a Redlands-based biochemist and pharmacist, had applied for a microbusiness permit that would have allowed his company to manufacture cannabis-based medical products for the wholesale market in San Bernardino.
He told the council, “The cannabis licensing process was a stress test for the City of San Bernardino. The results of the stress test show a complete and utter failure by the city at every phase of the licensing process, a perfect case of Murphy’s law which says that if anything can go wrong it will. And it sure did. Disgraced HdL’s phase 2 scores were vacated. The city’s phase 3 scores were statistically debunked, and a phase 4 meeting was a sham in the name of due process as questionable policy decisions were made and licenses were offered for sale on the spot to satisfy licensing quotas. Let’s explore how things should have been done. A competent planning department would have reviewed general plan and land use compliance for each applicant that was not compliant very early in the process. It should have amended the general plan and land use designations where cannabis businesses may be permitted based on a conformance analysis during phase 1, not after awarding licenses. Adding insult to injury, Ms. Miller [City Manager Andrea Travis-Miller] abused her authority throughout the licensing process by accepting a late application, modifying the application guidelines at will and without city council approval to satisfy her own licensing agenda. As a result, her actions have exposed the city and herself to fierce litigation and, just like Measure O, we’re back in court. On a positive note, the council astutely recognized the shortcomings and challenges of the licensing process. Mr. Nickel [Councilman Henry Nickel] said, ‘I will be honest. There are a lot of good applicants here. I’d like to see some of you guys come back because I personally think 17 is kind of an arbitrary number and I don’t think we should be doing this. What we’re doing is picking applicants and to me that is dangerous and I don’t think we should be doing that here tonight. This was a messy process and I apologize to each and every one of you in this room.’ During his closing statement, Mr. Nickel directed the staff to include an item for consideration to increase the number of licenses at the second meeting in April. Mr. Shorett [Councilman Fred Shorett] said he would support this agenda item. Let’s make sure this happens. What’s important is for the council to provide a clear path for the remaining qualified applicants to secure a license without having to go through an entire application process. Therefore, we cannot afford to go through another potentially flawed four-phase system. You have everything you need to evaluate the remaining applicants and consider issuing additional licenses. There is a tremendous amount of work that needs to be done. Please help us get there.”
The heat is clearly on. With significant portions of the community coming to recognize that bribes and kickbacks are being handed around to them or their colleagues, the council, understanding their individual and collective reputations and prospect for prosecution are on the line, have closed ranks and are carrying on nonchalantly, acting as if nothing is out of the ordinary.
In the meantime, what has been going on has not been lost on elements of the police department. No arrests of city officials have been made, however. Police Chief Jarrod Burguan, who underwent knee surgery in January and was cleared to return to work more than three weeks ago, has remained on medical leave, such that Captain Eric McBride’s tenure as acting chief has been extended. Suggestions are that Burguan, who garnered significant positive national attention after the December 2015 mass shooting by Syed Farook and Tashfeen Malik and who is considered a potential candidate for police chief in a host of venues elsewhere, is reluctant to actively involve himself with a situation in which he will need to tolerate criminal involvement on the part of his political masters, and may be willing to leave the department in the hands of McBride and another captain in the department, Richard Lawhead, both considered potential successors to Burguan as chief. In that atmosphere, what appears to have been a major internal departmental power play manifested on Monday, when Lawhead was placed on administrative leave, pending an investigation into an undisclosed matter.
On Wednesday, the city council took up a proposal, ostensibly rolled out by Mayor John Valdivia, to open five police department substations at key locations throughout the city. Curiously, however, in dealing with the proposal, the council drew short of actually committing to the establishment of the substations. Rather, the council made a vague declaration of a “future” reopening of the facilities, which were intended to facilitate community policing and make the department and its personnel more accessible to the public and more sensitive to neighborhood needs.
Despite not having the facilities available for the substations, the council voted, with Councilman Fred Shorett dissenting, to prepare for the reorganization envisioning the substations by making seven promotions and accompanying upgrades in pay to selected officers in the department. The upshot was that seven sworn personnel are now reclassified, consisting of five patrolmen or detectives becoming sergeants and two sergeants becoming lieutenants. Those upgrades will entail a cost of roughly $100,000 over the remaining three-and-a-half months of fiscal 2018-19 and $336,270 annually thereafter, in addition to increased pension benefit costs for the involved officers.
For those watching the council’s action in making the promotions, it heightened suspicions. The optics were that the council, nervous about the police department’s knowledge of the graft its members are engaging in, was attempting to buy the police department off with the do-nothing promotions, given that the council did not budget anything for creating the substations, and took no action to make the actual substations a reality. Supporting that view is that the city has potential access to a number of possible substation sites throughout the city in the form of properties that were assets of the city’s now-defunct redevelopment agency. The city council, which doubles in the role of the successor agency to the redevelopment agency, has the authority to designate those properties for some beneficial public uses, such as housing police substations. During the entirety of the discussion at Wednesday night’s meeting, no mention of using the city’s former redevelopment agency property was made by the council or staff. Nor did McBride suggest making such an adaptation of any of the mostly fallow properties at the city’s disposal.
-Mark Gutglueck

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  1. Pingback: S.B. City Hall Cannabis Licensing: 'Indications' of Graft involving officials, staff and City Manager - Cactusthorns | Cactusthorns

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