City Accused of Fraud in Commercial Cannabis Permitting Process

Published : Monday, July 22, 2019 | 5:55 AM

[Updated]  The City has been accused of fraud in managing the commercial cannabis permitting process, Pasadena Planning Director David Reyes said in a memo last week.

“Staff is aware of the highly lucrative nature of this evolving industry,” Reyes noted in the report, which contained descriptions of efforts he said the City has undergone to maintain transparency and speed online posting of documents.

“Unfortunately, not posting material fast enough has created opportunity for applicants to claim fraud and undue influence when there is none,” Reyes wrote.

Knocking top-ranked applicants out of one of the only six spots opens opportunities for a previously unchosen company, he said.

“So there is a strong economic incentive to challenge other applicants and the process,” Reyes observed.

In June, the City announced that Integral Associates Dena, LLC, Tony Fong, The Atrium Group, LLC, Harvest of Pasadena, LLC, SweetFlower Pasadena, LLC and MME Pasadena Retail, LLC scored the highest in the City’s process, which required a $14,000 application fee.

After the names of the winners were released, the City began releasing correspondence between City officials and cannabis company representatives and owners on the City’s website, in an effort, officials said, to be as transparent as possible about the process.

On June 26, Damian Martin unsuccessfully attempted to appeal the city’s decision after WOW Health and Wellness was not chosen among the top six applicants.

Less than a month later, Martin accused Reyes of covertly changing the rules of the process in a “secret, illegal, and total underhanded fashion.”

122 companies applied for the right to sell cannabis in Pasadena after the City opened its process according to Reyes.

“The majority of the applicants have approached the process in good faith and posed questions in the effort to further their understanding and to better their applications,” Reyes wrote. “Some have criticized other applicants and the process, in good faith, which is expected and appropriate. However, a few individuals have, for their own reasons chosen to level personal attacks and accusations against staff.”

The City has reportedly retained additional staffing resources to help with the massive amount of material compiled in connection with the process and the ordinance.

Mayor Terry Tornek said the process was contentious because there’s a lot at stake.

“There are a very limited number of permits available and the potential profitability of each location is very high. So it’s pretty predictable that there would be intense competition and finger-pointing as part of that competitive process,” Tornek said.

Pasadena is seen as a desirable location among cannabis business owners. The City’s ordinance only allows six cannabis dispensaries to do business in Pasadena.

According to a City staff report, the City may not actually be able to accommodate all six of the cannabis companies selected in the process.

So far only three companies — Harvest of Pasadena, Tony Fong and Integral Associates Dena, LLC  — have submitted Conditional Use Permit applications that apparently comply with the City’s ordinance.

The ordinance allows for six dispensary permits, but limits dispensaries to one per City Council district. The regulations also require that dispensaries be located no closer than 1,000 feet from another dispensary, nor closer than 600 feet from a residentially zoned property, religious institution, school or library.

According to a draft map prepared by the City, there are not enough parcels to grant all six companies CPUs based on the requirements of the ordinance.

“The Draft Map identified fewer than six potentially compliant locations,” wrote Director of Planning and Community Development David Reyes. “Since the use of every parcel of land in the City is not maintained in the City’s GIS Database, it is possible that more compliant locations exist, but this is not probable.”

Officials with Atrium Group and Sweetwater Pasadena submitted CPU applications for District 3 on Union Street and East Colorado Boulevard.

Officials with Harvest say they have secured a long term lease in Old Pasadena.

“We are looking forward to making our storefront fit in,” said Alex Howe, Head of Corporate Communications for Harvest. “We’re going to work closely with the planning department and the community to ensure the appropriate design. And that’ll fit in well with the surrounding tenants and retail mix.”