What medical cannabis firms might learn from Harvest’s compliance conundrums


2019-08-13 11:10:43 mjbizdaily


Harvest Health & Recreation is in high-stakes clashes with medical marijuana regulators in Pennsylvania and Ohio, and the disputes could potentially offer other MMJ firms cautionary lessons around the necessity to maintain extremely pristine regulatory compliance in state-legal markets. At stake for Harvest are more than a dozen dispensary, processing and cultivation licenses in the young and growing MMJ markets. Under scrutiny is whether the Arizona-based multistate operator potentially skirted rules by: Harvest also is butting heads with regulators in Pennsylvania over a cultivation license that was revoked because of the lack of marijuana tracking records and security footage kept by a predecessor company. For its part, Harvest defends its actions and is fighting to retain and regain the various licenses. Communication with regulators Pennsylvania cannabis attorney Judith Cassel said Harvest’s issues speak both to the importance of forging good relationships with regulators, and understanding challenges they face. “What I have found is if you are keeping the agency in the loop as you make decisions and move forward with transactions, you can get guidance and approvals instead of the wrath of these agencies,” Cassell wrote in an email to Marijuana Business Daily. “Most highly regulated industries have their casualties, but medical marijuana is especially susceptible to fines and forfeitures for entities that violate the regulations,” she added. “States are under a lot of pressure to roll these medical marijuana programs out without becoming targets themselves of the federal government.” The state regulatory disputes come as Harvest is in the process of completing a massive $850 million deal to acquire Verano Holdings that has been under a federal antitrust review. Cassel said she doesn’t believe Harvest’s regulator run-ins are the result of a target on its back because of its size. “If you break the rules, you will be caught and you will suffer the consequences – no exceptions,” Cassel wrote. “I am currently defending both small operators as well as multistate entities before regulatory agencies.” What follows are the status of three of Harvest’s major disputes in Ohio and Pennsylvania, which MMJ industry watchers are carefully tracking: Dispensary caps in Pennsylvania Harvest earlier this year claimed in a news release and in a call with investors that it had seven state dispensary licenses allowing it to open up to 21 retail locations. The state’s cap is five. In April, John Collins, the state’s director of medical marijuana, wrote a letter to Harvest CEO Steve White warning Pennsylvania might revoke the licenses because of “blatant misrepresentation.” Collins wrote that Harvest itself didn’t win any permits and that each of the seven must operate as independent entities. April Hutcheson, communications director for the Pennsylvania Department of Health, told MJBizDaily the case is an “ongoing legal issue” so she couldn’t provide specific comments. She wouldn’t comment, for example, when asked why the state had issued more than five permits when six of the seven limited liability companies went by the Harvest name. Alex Howe, Harvest’s communications director, wrote in an email to MJBizDaily: “Harvest has been working closely with Pennsylvania’s Department of Health to resolve all matters involving the licenses we have been granted by the state.” In a June regulatory filing, Harvest characterized the seven licenses as “managed” by Harvest and then later described the permittees as “Harvest-affiliated.” Troubled PA cultivation facility Harvest claims it acquired the Agrimed Industries cultivation facility on May 17, but the state didn’t transfer the permit. In July, Pennsylvania regulators refused to renew the cultivation license, a month after a surprise inspection found inadequate records of what happened to the marijuana grown there. Harvest claims the state’s decision to revoke the license unfairly penalizes Harvest for Agrimed’s alleged mismanagement and that it was in the process of mitigating the problems. Howe wrote to MJBizDaily that Harvest hopes to resolve the issues with the state and reopen the cultivation facility. But Harvest also has said it is prepared to take legal action if necessary. Hutcheson would only say that “Harvest is not the permittee” and only Agrimed can file an appeal to the state’s decision to rescind the license. ‘Economically disadvantaged’ status Ohio regulators earlier this year concluded Harvest’s operation isn’t majority-owned by an African-American woman as claimed on license applications. That previously enabled Harvest to get extra points as an “economically disadvantaged” applicant and win one of 12 prized cultivation licenses. If Harvest didn’t have that status, other applicants claimed they had higher scores. The issue has put a cultivation license, three dispensary licenses and an application for a processing facility in limbo. Howe said Harvest “objects to the (state’s) unfair characterization of both the nature and intent of our business relationship” with the African-American woman, Ariane Kirkpatrick, listed on the application. While Harvest didn’t require a capital investment from Kirkpatrick, she contributed “expertise and sweat equity” and is the majority owner and “important contributor” to the cultivation entity, according to Howe. A proxy statement filed with securities regulators in June identifies Harvest as the 100% direct and indirect owner of various Harvest limited liability companies in Ohio. However, later in the document, Harvest Growers LLC and Harvest of Ohio LLC are listed as the entities that won the cultivation and three dispensary licenses and an unidentified third party is described as owning 51% of those entities. Howe said “while we don’t disclose our internal company structure, Ms. Kirkpatrick has always been the majority owner of Harvest of Ohio LLC.” He added the company is working closely with Ohio regulators to “modify our agreements to more accurately reflect Ms. Kirkpatrick’s ownership and control.” Kelly Whitaker, public information officer for the Ohio Department of Commerce, which regulates MMJ cultivation facilities, wrote in an email that state regulators are “working with Harvest to make sure they fulfill their obligations as set forth in their application to comply with the (economically disadvantaged) provision.” “These discussions are ongoing and we have not yet reached a final decision,” Whitaker added. Jeff Smith can be reached at [email protected]
Harvest Health & Entertainment 正与宾夕法尼亚州和俄亥俄州的医用大麻监管机构发生高风险冲突,这些纠纷可能会为其他 MMJ 公司提供警示,说明必须在州法律市场保持极其原始的监管合规。 Harvest 面临的风险是,在年轻且不断增长的 MMJ 市场上有十几家药房、加工和种植许可证。 受到审查的是,这家总部位于亚利桑那州的多州运营商是否有可能绕过以下规定: 由于缺乏大麻追踪记录和由一家前任公司保存的安全录像,宾夕法尼亚州的一份种植许可证被吊销,嘉实公司也与监管机构保持着密切联系。 就其而言, Harvest 为自己的行动辩护,并努力保留和恢复各种许可证。 与监管机构的沟通 宾夕法尼亚州大麻律师 JudithCassel 表示, Harvest 的问题既表明与监管机构建立良好关系的重要性,也表明他们理解面临的挑战。 “我发现,如果你在做决定和推进交易时让机构处于循环状态,你可以得到指导和批准,而不是这些机构的愤怒,”卡塞尔在一封发给《马里亚纳商业日报》的电子邮件中写道。 “大多数受到高度监管的行业都有人员伤亡,但医用大麻对违反监管规定的实体尤其容易受到罚款和没收,”她补充说。 “各州面临着巨大的压力,要求在不成为联邦政府目标的情况下推行这些医用大麻计划。” 在州政府监管纠纷发生之际, Harvest 正在完成一项规模8.5亿美元的收购 Verano Holdings 的交易,目前 Verano Holdings 正在接受联邦反垄断审查。 Cassel 表示,她不认为 Harvest 的监管机构挤兑是其背后目标的结果,因为其规模庞大。 “如果你违反规则,你就会被抓住,你将遭受后果——没有例外,”卡塞尔写道。 “我目前在监管机构面前为小型运营商和多州实体进行辩护。” 以下是 Harvest 在俄亥俄州和宾夕法尼亚州发生的三起重大争议的现状, MMJ 行业观察人士正在密切关注这些争议: 宾夕法尼亚州的特许上限 今年早些时候,嘉实在一份新闻稿和与投资者的电话会议中声称,嘉实拥有7个州药房牌照,允许其开设多达21个零售门店。该州的上限是5。 今年4月,该州医用大麻总监约翰•柯林斯( John Collins )写信给 Harvest 首席执行官史蒂夫•怀特( Steve White )警告称,宾夕法尼亚州可能会因为“公然的虚假陈述”而吊销执照。 科林斯写道, Harvest 本身并没有获得任何许可,这七家公司中的每一家都必须作为独立实体运营。 宾夕法尼亚州卫生部通讯主任4月 Hutchison 告诉 MJBizDaily ,此案是一个“持续存在的法律问题”,因此她无法提供具体评论。 例如,当被问及当7家有限责任公司中的6家公司以 Harvest 的名字命名时,政府为何发放了5个以上的许可证时,她不愿发表评论。 Harvest 通讯主管亚历克斯•豪( Alex Howe )在发给 MJBizDaily 的一封电子邮件中写道:“ Harvest 一直在与宾夕法尼亚州卫生部密切合作,以解决所有涉及我们获得的许可证的问题。” 在6月份的一份监管申报文件中, Harvest 将7个许可证描述为由 Harvest “管理”,然后将这些许可证描述为“ Harvest 附属机构”。 不良的 PA 种植设施 Harvest 声称,它于5月17日收购了 Agrimed Industries 的种植设施,但该州没有转让许可证。 7月,宾夕法尼亚州的监管机构拒绝更新种植许可证。一个月前,一次突击检查发现那里种植的大麻记录不足。 Harvest 声称,政府撤销许可证的决定不公平地惩罚了 Harvest ,因为 Agrimed 所称的管理不善,并且正在缓解这些问题。 Howe 给 MJBizDaily 写信说, Harvest 希望解决这个问题,并重新开放种植设施。 但 Harvest 也表示,准备在必要时采取法律行动。 Hutchison 只会说“ Harvest 不是许可证持有者”,只有 Agrimed 才能对政府取消许可证的决定提出上诉。 “经济弱势”地位 今年早些时候,俄亥俄州的监管机构得出结论, Harvest 的运营并非像申请许可证时所宣称的那样,由一名非裔美国女性拥有多数股权。 这使得 Harvest 作为“经济上处于不利地位”的申请者获得了额外的积分,并赢得了12个有价值的种植许可证之一。 如果嘉实没有这种地位,其他申请人声称他们的分数更高。 这个问题已经提出了一个种植许可证,三个药房许可证和一个申请处理设施在四肢。 Howe 说, Harvest “反对(国家)对我们商业关系的性质和意图的不公平描述”,并在申请中列出了非洲裔美国妇女 Ariane Kirkpatrick 。 霍伊表示,尽管嘉实不需要柯克帕特里克的资本投资,但她贡献了“专业技能和汗水资产”,是该种植实体的多数所有者和“重要贡献者”。 6月份提交给证券监管机构的一份委托书指出,嘉实是俄亥俄州各种嘉实有限责任公司的100%直接和间接所有者。 然而,在文件的后面部分, Harvest Growers LLC 和 Harvest of 俄亥俄州 LLC 被列为获得种植和三个药房许可的实体,未被识别的第三方被描述拥有这些实体的51%。 Howe 说,“虽然我们没有披露我们的内部公司结构,但 Kirkpatrick 女士一直是俄亥俄州 LLC 公司的大股东。” 他补充说,该公司正与俄亥俄州监管机构密切合作,“修改我们的协议,以更准确地反映柯克帕特里克的所有权和控制权。” 监管 MMJ 种植设施的俄亥俄州俄商务部( Ohio Department of Commerce )的公共信息官员凯利•惠特克( Kelly Whitaker )在一封电子邮件中写道,州监管机构正“与嘉实合作,确保他们履行申请中规定的义务,遵守(经济上处于不利地位的)条款”。 “这些讨论正在进行中,我们尚未做出最终决定,”惠特克补充说。 JeffSmith 可以在[电子邮件保护]上联系