At this point, it’s hard to call the program a social justice program because the majority of social equity qualified applicants were bought out or forced out of the licensing that they helped make possible.
By Natasha Yee, Arizona Center for Investigative Reporting
The original publication of this story was by the Arizona Center for Investigative Reporting.
Private investors and major cannabis companies have taken control of the Arizona social equity program from those it was intended to help.
AZCIR discovered that in at least four cases recently, licensees lost legal battles and their chances of making long-term profit in a growing industry.
A social equity licensee signed a contract that could have put his business in debt of up to $3,000,000 before its opening. One woman believed she had signed a contract with the owner of a dispensary, but was actually partnered with someone else.
Two friends were in disagreement over whether or not to sell their licenses, which prompted another large dispensary get involved. After a woman refused to sign a contract with the investor that backed her application and he obtained the license via arbitration, the two friends were unable to agree on whether or not they should sell their license.
These changes in ownership provide the latest glimpse of how powerful entities controlled Arizona’s social justice program, a way some say was deliberate. This enriched those who helped create the voter-approved initiative. While court records may reveal certain aspects of each case to voters, sealed settlements keep them from learning who benefits most from the program they approved.
According to Proposition 207, the voter-approved initiative that legalized marijuana for recreational use, the state’s program of social equity should “promote ownership and operation by individuals from communities disproportionately affected by enforcement of prior marijuana laws”
AZCIR reported that in July, dispensaries with a lot of money sought out applicants from marginalized groups early on. They funded hundreds of applications in exchange for a stake in the business. The health department broadcast the lottery results from over 1,300 applicants. Three major dispensaries were able to secure partnerships with 10 out of 26 winners. The original licensees of those partnerships are no longer involved.
Just four of the 26 original winners of the social equity lottery still hold equity in these lucrative licenses. Corporate dispensaries own the majority of licenses, while private investors hold equity in ten more.
Only one Arizona dispensary has been opened using a social-equity license. This is the only dispensary that was owned by a licensee who did not receive support from corporate dispensaries. The 12 remaining dispensaries operate under well-known names such as Sol Flower, JARS Cannabis Story Cannabis and Mint Cannabis.
The sale of license equity has benefited some original licensees, but sealed settlements make the exact amount difficult to determine.
Tom Dean, a criminal defense lawyer in Arizona who represents clients regularly in the cannabis sector, said: “At this stage, it’s hard to call it a program that promotes social equity, as most of the qualified social equity applicants have either been bought out, or forced out, of the licenses they helped make possible.” “I put a lot of the blame on the [Arizona Department of Health Services] for the way they drafted the regulations. I think that it encouraged this type of behavior by [multistate operators] and investment companies.”
What will happen if social equity licensees fail to open their dispensaries before the deadline of October 8?
ADHS spokesperson Tom Herrmann stated that the agency “has the right to proceed with enforcement action” against these licensees and that, in return, they “have the rights to appeal those enforcement measures.”
He did not comment on the question of whether Arizona’s social justice program was in line with what voters were presented in 2020.
He said, “We followed all the laws there.” “We will leave the evaluation up to others.”
Anavel Vasquez and Michael Halow teamed up to submit two applications under the Social Equity Program. She was among 140 individuals Halow recruited through Helping Handz Wyoming LLC to apply for the social equity program.
When the lottery results were announced, the investor’s efforts led to partnerships with five out of 26 licenses. This included Vasquez Juicy Joint I.
The following day, Vasquez and Rene Mendoza (her long-term partner) met with Helping Handz to sign an agreement. She had agreed to this before the lottery.
Mendoza, in a telephone interview with AZCIR, said that Helping Handz claimed the cost of opening a dispensary would be $21 million. Vasquez, as a 51-percent owner, owed Vasquez $11 million.
He said that Helping Handz had given the couple a duffle-bag containing what they claimed to be $35,000 cash.
Arbitration records describe “threats, raised voices and threats” during the meeting.
They refused to sign and retained an attorney in their place.
Vasquez transferred the license to Menvas22 which she founded with Mohit Ashnani who has two Tucson dispensaries as well as a cannabis products line.
Helping Handz also worked to retain the licence. Vasquez’s contract stipulated that any disputes would be resolved through arbitration. Helping Handz used this clause to settle the dispute outside of court by claiming breach.
In July, an arbitrator ruled that Juicy Joint had the right to license. Vasquez was removed as a member. Mendoza stated that Vasquez has no stake in the license, and she was not compensated by Juicy Joint for her 51 percent.
Menvas22 originally agreed to pay Vasquez for its share of license $2.7 million, and Vasquez received 30%, according to Asnani. However, it is not clear what will happen to those funds, since the license has been transferred to Helping Handz.
Story Cannabis operates the license in Kingman. This corporation runs 16 dispensaries across three states including three in Arizona that have social equity licenses.
Halow and Story Cannabis both declined to comment on this article.
In a separate lawsuit, Helping Handz is accused of selling two social equity licenses that did not belong to Vasquez for $8.25 each. Green Brick Road Consulting claims it hasn’t received the $165,000 fee that it was due for each sale.
Menvas22 sued entities, including the State of Arizona and ADHS. They also sued Juicy Joint I and Helping Handz in late August. The lawsuit is still ongoing, and it asks for the license to be returned back to Menvas22. This company was not involved in the arbitration.
Hermann, the ADHS spokesperson, declined to comment in this matter citing ongoing litigation.
Mendoza stated, “It is very heartbreaking to see the promises that we made being ripped away.” Mendoza said, “And we’re also left in a hole. We are required to pay a variety of taxes and other money. It’s a huge nightmare.”
Keiandrea and her cousin entered an ornate Italian eatery on a Friday night in April 2022 to a roaring applause. They were both there to meet Curtis Devine – the founder of Mohave Cannabis Co. – who Mandley thought was her new partner in business.
Mandley and Devine had agreed, in late 2021 to work together to apply for social equity licenses. In exchange for $1,000, Mandley received an eighth of an inch of marijuana.
“A free eighth good weed?” Mandley recalled this during an interview with AZCIR. “A thousand bucks, $2,000 for referring someone else?” I’ll accept the extra money. “[The offer] was very attractive.”
Mandley had to sign 99 pages of documents, including agreements for operating, management, loan, and security services. She was surprised to learn that the Mohave opportunity she was presented with was not as it appeared after being selected in the April 2022 state lottery.
Devine offered Mandley $1 million to buy the license when they met up for dinner after the drawing. She declined. He offered her a loan of $500,000 to help launch her dispensary. Mandley had told Devine that she intended to raise her own funds.
Mandley said that’s when Mandley told her she could not do it.
Mandley was confused by the response. She expected to be able to make important business decisions in her role as majority owner. She sought out an attorney to make sense of the situation.
The lawyer was blunt when he reviewed the contracts she had signed.
She recalled hearing him say, “They took your rights.” He called the contract “predatory.”
Dean, the cannabis attorney, confirmed this assessment after reviewing the agreement. He cited ADHS regulations that he claimed allowed and encouraged such “predatory activities.” He also noted that the management services contract between Mandley & Mohave, which included an initial term of 20 years that was automatically renewed, transferred profits to the management firm controlled by the investor.
Dean explained that the key components to social equity licenses are ownership and operation. In this agreement for at least 20 years, it’s not really either.
Mandley learned that Devine wasn’t her business partner at all. John Trantham Kemp was the man she never heard of.
Mandley remembered asking Devine, “Why isn’t your name on the license but his?” “He said he couldn’t sign all of those applications.”
Mandley removed Trantham Kemp from the LLC in 2022. She then tried to open a dispensary Globe, which is a small town about 90 minutes away from Phoenix. She would have preferred to open the business nearer to her Phoenix residence, but the city doesn’t allow standalone recreational dispensaries.
Devine Holdings LLC filed a lawsuit against Mandley in February. They claimed breach of contract, unjust enrichment and described the social equity licenses as “likely a multimillion-dollar asset.” Mandley’s lawyers alleged the contract details were altered between the time Mandley reviewed the contract and when she signed it two days later.
The parties reached an agreement on a settlement in late July. According to corporate filings Devine bought Mandley’s license in July. Trantham Kemp left the company in August. Devine is now the sole owner.
Trantham Kemp and Mohave cannabis declined to comment on this article.
Mandley, reflecting in June on her experience with the program, said: “I didn’t know it would be like this.” It has been hell.
Mandley stated that she had signed the settlement and was therefore unable to make any comments. Her attorneys declined to make any comments.
Meagan Dixon, Shonae Johnston and Shonae Johnson joined forces in late 2021 to apply for the social equity license. They had previously worked together in marijuana.
Dixon was accepted into the program and took a 51 percent share in the company, with Johnson holding the remainder. The women, however, had different plans for the license that was given to Dynamic Trio.
Johnson preferred that Dixon sell the license.
I spent three hours in her home trying to convince her not to sell and why she should not. Johnson remembered that I finally said: “OK, if you are not going to make a change in your mind, let’s arrange meetings with other ownership groups to see what we can achieve.”
Johnson claims that the two parties considered offers from $8 million up to $17 millions, but they couldn’t come to an agreement.
Dixon then began talking with Ronnie Kassab. He is the president of JARS Arizona. JARS Cannabis operates 35 dispensaries in Arizona, Colorado and Michigan. Dixon wanted to sell Kassab his portion of the license. Johnson would have had to approve this. But Johnson declined.
Dixon sued Johnson in April and asked the court to allow her to sell her license stake to Kassab. She also requested that Johnson approve the transfer. After months of back-and-forth, the women finally decided to sell their licenses through the courts.
According to court records, each woman ranked the offers but ultimately, the court would choose the buyer.
In mid-July 2018, 10 offers were submitted by dispensaries and investors, including those of Nirvana Center and Oz Cannabis, as well as Trulieve, the country’s largest cannabis company.
ACP Investments is a New York limited liability company that sells insurance. The license was bought by ACP Investments in a June deal.
AZCIR previously described Denzel Mason’s story. Denzel applied for the social equality program through a partnership called Your Bright Horizon with the marijuana industry giant Copperstate Farms. Mason, a Black man from South Phoenix who signed an operating contract with Copperstate Farms before the digital lottery, was previously covered by AZCIR.
Mason was then given a promissory letter and a security agreement by Copperstate, stating that the business they shared would be liable to Copperstate for up to $3,000,000 to open the dispensary. This included the more than $800,000.00 the company claimed to have spent on their outreach program. Mason retained his attorneys.
In May, the court ruled that Copperstate Farms was entitled to compensation. Mason was temporarily removed as manager of the company, Copperstate claiming that Mason had “refused to discharge his duties as manager, now threatening the company’s existence.”
AZCIR reported in mid-August that Copperstate had purchased Mason’s license share in a settlement. Mason and his lawyers declined to comment about the sale. Copperstate declined to comment on this story as well.
Natacha Andrews is an attorney and the executive director of the National Association of Black Cannabis Lawyers. She called this scenario “common” in social justice programs.
People buy melanin constantly in this country. They don’t even want to buy it. “They just want to rent,” she said. The social equity programs are not protecting the people who will need protection in the future. It’s not enough to say, “We’re going set up this program for social equity and distribute these licenses.” There must be substance behind it.
Copperstate opened its Sol Flower dispensaries in Tucson using social equity licenses.
Arizona Marijuana business sues over ‘unlawful’ license transfer as State’s social equity program comes under scrutiny
Photo by Chris Wallis // Side Pocket Images.
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