SB Solons Extend Contract With Firm That Botched Cannabis Licensing

Courting even further controversy, San Bernardino’s elected leadership this week extended its arrangement with a consultant that has already bollixed the effort to license some 15 entities that are to be permitted to traffic in cannabis within the city.
Having retained  Brea-based HdL to advise them on how to go about selecting which applicants for marijuana-related business operating permits would ultimately be provided with those potentially highly-lucrative privileges, city officials ushered the city council toward a decision in that regard at its February 21 meeting.
Working from a secretive protocol based on criteria that have yet to be disclosed, the council rejected 24 of the 39 applicants. At that meeting, the council gave the nod to Empire Connect, Pure Dispensaries, Have a Heart, JIVA, and PTRE Management, all of which were entrusted with retail permits. 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, were all given microbusiness licenses the same night. Nibble This, notably, was provided with two separate microbusiness permits at two separate locations. Accessible Options, 14 Four, GWC Real Estate Services and Organtix Orchards were granted cultivating permits. AM-PM Management was the recipient of a manufacturing permit and Blunt Brothers, a wholesale distributor, was given on the same night permission to operate.
Though a representative from HdL was at the meeting that night, he did not introduce himself or take part in the proceedings. Nor did city officials deign to identify him or engage him in the public process. Even with controversy enveloping the process and the meeting, the HdL representative remained silent. Indeed, after the meeting, the Sentinel erroneously reported that no representative from HdL was present. City officials have yet to identify who the HdL representative was, refusing to disclose his name.
In short order, flaws in the approval process were identified. Specifically, it was learned, six of the companies granted licenses – 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. It was not clear how several of those given licenses and others were not determined  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 before the process of selecting licensees was undertaken. What is known is that at least seven of those operations that were rejected were in compliance with the city’s codes and regulations.
Publicly, members of the San Bernardino community openly suggested that the entire selection process was tainted by graft and that the council was cynically utilizing HdL as a shroud behind which bribe-taking was going on. It did not help matters that several of those provided with the licenses had made hefty donations to the city’s elected leadership.
Jeff Augustini, an attorney representing one of the applicants passed over in the selection process, Connected Cannabis Co., also known as EEL Holdings, LLC, filed suit against the city. According to that suit, “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.” Augustini demanded that all 16 businesses granted licenses on February 21 be prohibited from proceeding.
The city’s management, its council and its community development department defied Augustini’s call, doubling down, insisting that those selected proceed, which will place them in better stead to demonstrate further largesse toward the council.
Another of the spurned applicants, Washington LLC, represented by attorney Ben Eilenberg, also filed a lawsuit against the City of San Bernardino, in not so many words alleging that city officials 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,” Eilenberg articulated in the suit. “Over 50 percent of the issued licenses were illegal, thereby throwing the entire process into doubt.”
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. For proof of the allegations, Eilenberg said, one needed to merely consider 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.
In what struck some as a halfhearted effort to refute those accusations and justify the provision of those permits to the entities that are out of compliance with the regulations which the council’s members had themselves instituted last year, they stated they had merely relied upon a ranking of the applicants and their qualifications provided by HdL.
This week, on Wednesday night, the full council took up a proposal, put forth by city staff to lock the city into a relationship with HdL that would keep the company as San Bernardino’s “cannabis consultant” for five years at a cost of $765,000.
Councilman Theodore Sanchez offered an alternative motion to pare the contract extension back to a minimum of six months, with the option to extend it another six-months beyond that.
The ostensible justification for staying the course with HdL, for at least another half year, is that having the firm’s guidance is crucial to continuing with the ongoing cannabis operation licensing processes in the city. Sanchez proposed, and three of his colleagues went along with, having city staff seek other companies to fill the role HdL is, and then invite them, through a process known as a request for proposals, to bid on providing that service.
HdL is working under a $167,000 per year contract as the city’s consultant, exclusively on the marijuana business licensing application issue.
Councilwoman Sandra Ibarra voted against extending HdL’s contract. Councilman Jim Mulvihill did not participate in the vote. Based upon what HdL was previously carrying out and what was proposed under the five-year contract, HdL is to carry out a battery of determinations as to whether the businesses to be given final occupation and operating permits are in compliance with the city’s codes and regulations, including but not limited to the inspection of the premises from which they will operate. HdL is to also make financial audits of those operations prior to the one-year anniversary of each business starting up, such that all revenue due to the city from taxes applied to the marijuana and cannabis products sold is realized and accounted for.
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. His application was denied, despite his having assiduously prepared his business proposal to be in compliance with the city’s regulations. Seraj told the council the application process was “a stress test” for the city and HdL which turned out to be a “compete and utter failure” for both. HdL had been tasked, he said, with “phase two scoring,” turning in what Seraj said was “a disgraceful performance. The city council lost faith in the phase two scores and the scores were ultimately vacated. The applicants paid $80,000 for phase two scores and received nothing in return. If the $80,000 came from the city’s coffers, I am sure Ms. Ibarra and Mr. Sanchez would be asking HdL tough questions.”
Seraj said the phase three scoring was done by city staff paid for by the applicants. He said HdL was supposed to be excluded from that process but had submitted a $17,500 invoice for work on phase three evaluations, which he said suggests the company was involved in Phase Three scoring. That was, he said, “a violation of the guidelines. If any other phase three fees went to HdL it needs to be disclosed to the city council. He called for an audit “of every penny paid to HdL” before the city enters into any further contracts with the company.
Others indicated they found it suspicious that the city was entering into the contract with HdL on the same night that promotions of five of the city’s police department command staff to community policing sector posts were made, which they suggested was a move to buy the silence of the police department. Furthermore, some citizens were disturbed that Mayor John Valdivia abandoned the council dais prior to the item with regard to the extension of the HdL contract being taken up by the city. Councilwoman Bessine Richard, the city’s mayor pro tem, officiated over the hearing.
-Mark Gutglueck

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