Marijuana Legalization

What medical hashish corporations can be taught from Harvest’s compliance conundrums

Harvest Well being & Recreation is in high-stakes clashes with medical marijuana regulators in Pennsylvania and Ohio, and the disputes might doubtlessly supply different MMJ corporations cautionary classes across the necessity to take care of extraordinarily pristine regulatory compliance in state-legal markets.

At stake for Harvest are greater than a dozen dispensary, processing and cultivation licenses within the younger and rising MMJ markets.

Underneath scrutiny is whether or not the Arizona-based multistate operator doubtlessly skirted guidelines by:

  • Acquiring seven dispensary licenses in Pennsylvania, when the cap is 5.
  • Profitable a cultivation license in Ohio by advantage of being an “economically deprived” applicant.

Harvest is also butting heads with regulators in Pennsylvania over a cultivation license that was revoked due to the shortage of marijuana monitoring information and safety footage stored by a predecessor firm.

For its half, Harvest defends its actions and is combating to retain and regain the varied licenses.

Communication with regulators

Pennsylvania hashish lawyer Judith Cassel stated Harvest’s points converse each to the significance of forging good relationships with regulators, and understanding challenges they face.

“What I’ve discovered is if you’re protecting the company within the loop as you make choices and transfer ahead with transactions, you will get steerage and approvals as a substitute of the wrath of those companies,” Cassell wrote in an electronic mail to Marijuana Enterprise Each day.

“Most extremely regulated industries have their casualties, however medical marijuana is very vulnerable to fines and forfeitures for entities that violate the rules,” she added.

“States are underneath loads of strain to roll these medical marijuana applications out with out changing into targets themselves of the federal authorities.”

The state regulatory disputes come as Harvest is within the technique of finishing a huge $850 million deal to amass Verano Holdings that has been underneath a federal antitrust overview.

Cassel stated she doesn’t consider Harvest’s regulator run-ins are the results of a goal on its again due to its dimension.

“In case you break the principles, you can be caught and you’ll endure the results – no exceptions,” Cassel wrote.

“I’m at present defending each small operators in addition to multistate entities earlier than regulatory companies.”

What follows are the standing of three of Harvest’s main disputes in Ohio and Pennsylvania, which MMJ business watchers are rigorously monitoring:

Dispensary caps in Pennsylvania

Harvest earlier this yr claimed in a information launch and in a name with buyers that it had seven state dispensary licenses permitting it to divulge heart’s contents to 21 retail places. The state’s cap is 5.

In April, John Collins, the state’s director of medical marijuana, wrote a letter to Harvest CEO Steve White warning Pennsylvania may revoke the licenses due to “blatant misrepresentation.”

Collins wrote that Harvest itself didn’t win any permits and that every of the seven should function as impartial entities.

April Hutcheson, communications director for the Pennsylvania Division of Well being, informed MJBizDaily the case is an “ongoing authorized problem” so she couldn’t present particular feedback.

She wouldn’t remark, for instance, when requested why the state had issued greater than 5 permits when six of the seven restricted legal responsibility firms glided by the Harvest title.

Alex Howe, Harvest’s communications director, wrote in an electronic mail to MJBizDaily: “Harvest has been working intently with Pennsylvania’s Division of Well being to resolve all issues involving the licenses we’ve been granted by the state.”

In a June regulatory submitting, Harvest characterised the seven licenses as “managed” by Harvest after which later described the permittees as “Harvest-affiliated.”

Troubled PA cultivation facility

Harvest claims it acquired the Agrimed Industries cultivation facility on Might 17, however the state didn’t switch the allow.

In July, Pennsylvania regulators refused to resume the cultivation license, a month after a shock inspection discovered insufficient information of what occurred to the marijuana grown there.

Harvest claims the state’s resolution to revoke the license unfairly penalizes Harvest for Agrimed’s alleged mismanagement and that it was within the technique of mitigating the issues.

Howe wrote to MJBizDaily that Harvest hopes to resolve the problems with the state and reopen the cultivation facility.

However Harvest additionally has stated it’s ready to take authorized motion if crucial.

Hutcheson would solely say that “Harvest just isn’t the permittee” and solely Agrimed can file an enchantment to the state’s resolution to rescind the license.

‘Economically deprived’ standing

Ohio regulators earlier this yr concluded Harvest’s operation isn’t majority-owned by an African-American lady as claimed on license purposes.

That beforehand enabled Harvest to get further factors as an “economically deprived” applicant and win one in all 12 prized cultivation licenses.

If Harvest didn’t have that standing, different candidates claimed that they had larger scores.

The difficulty has put a cultivation license, three dispensary licenses and an software for a processing facility in limbo.

Howe stated Harvest “objects to the (state’s) unfair characterization of each the character and intent of our enterprise relationship” with the African-American lady, Ariane Kirkpatrick, listed on the applying.

Whereas Harvest didn’t require a capital funding from Kirkpatrick, she contributed “experience and sweat fairness” and is almost all proprietor and “essential contributor” to the cultivation entity, in accordance with Howe.

A proxy assertion filed with securities regulators in June identifies Harvest because the 100% direct and oblique proprietor of varied Harvest restricted legal responsibility firms in Ohio.

Nonetheless, later within the doc, Harvest Growers LLC and Harvest of Ohio LLC are listed because the entities that gained the cultivation and three dispensary licenses and an unidentified third occasion is described as proudly owning 51% of these entities.

Howe stated “whereas we don’t disclose our inside firm construction, Ms. Kirkpatrick has at all times been the bulk proprietor of Harvest of Ohio LLC.”

He added the corporate is working intently with Ohio regulators to “modify our agreements to extra precisely replicate Ms. Kirkpatrick’s possession and management.”

Kelly Whitaker, public data officer for the Ohio Division of Commerce, which regulates MMJ cultivation amenities, wrote in an electronic mail that state regulators are “working with Harvest to verify they fulfill their obligations as set forth of their software to adjust to the (economically deprived) provision.”

“These discussions are ongoing and we’ve not but reached a closing resolution,” Whitaker added.

Jeff Smith will be reached at [email protected]y.com

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