“The people who were the victims of cannabis laws are once again the losers in what appears to be an utterly inappropriate power grab.”
By Rebecca Rivas, Missouri Independent
James Harnden is a long-time advocate for legalizing cannabis, ever since he was charged with a low level felony for possessing an ounce.
The Rockford resident, 56, says he has lost 30 years of job opportunities because of the charge.
He saw an ad in the Craigslist section “gigs” posted by a Michigan marijuana real estate group named Canna Zoned MLS earlier this year. It was seeking “partners” who qualified as social equity applicants to take part in Illinois’s lottery for cannabis business licenses. The lottery is intended to help people affected by marijuana criminalization.
Harnden explained, “I’ve spent the majority of my adult life trying to get a job and never getting one.” “I thought, ‘Okay. Maybe one of these licences will swing me my way.’
Craigslist’s ad stated: “If you meet the criteria and submit the necessary documentation, we will pay you $2,000 for submitting the lottery application. We will also give you $20,000 if we win the lottery.
Harnden claims that what he did not realize is that when he signed the contract, he agreed to own 100 percent of the business. However, he would not receive any revenue or profit from the company. The contract stipulated that after the business had received all state and local approvals, Harnden was required to either sell his share for $1 or be considered in breach of contract.
The contract authorized the group also to enter Harnden’s information in lotteries of social equity cannabis licenses other states. Harden claims he received $500 for being part of the Missouri’s microbusiness licence program.
Harnden’s marijuana conviction was one of seven eligibility criteria that included living in census tracts where unemployment and poverty rates were high. Jeffrey Yatooma, of Canna Zoned, is listed on the contract Harnden gave to The Independent as “authorized agent”. There’s a place for his signature below.
According to The Independent, which obtained the information through a request for public records, Yatooma was awarded two of 16 social equity cannabis licences in Columbia and Arnold earlier this month. These records reveal that Yatooma was listed as “designated contact”, for 104 of the 1 048 applications for dispensary licences in Missouri lottery.
Yatooma’s group wasn’t the only one to use the strategy of flooding Missouri’s lottery with dispensary applications in order to get a license. A consulting firm in Arizona is linked to over 400 applicants for dispensaries, including six winners. Another Missouri-based firm is also connected to 80 applicants and two other winners. Both firms said that their clients had not advertised or promised payment to submit applications.
At least three states are holding social equity cannabis licence lotteries this year, including Illinois, Maryland and Missouri. Yatooma’s organization has offered to compensate eligible people with up to $2,000 for applying on their behalf. They will also pay them an additional $20,000 if they win.
The ads are currently up in Maryland, where the state’s a href=”https://www.marijuanamoment.net/marylands-first-adultuse-marijuana license applications will open for social equity businesses in November – regulators announce/” rel=”noopener” target=”_blank”>social equity cannabis application opens on November 13th. Maryland is currently running ads for the social justice cannabis application that opens November 13th.
Yatooma, when presented with a copy Harnden’s contract, said that his company “never entered into any agreement similar to the one you mentioned.”
He claimed that the agreement was a part of “early discussions” Yatooma’s group had made a similar claim earlier this year, when they were criticised for their efforts to obtain licenses in Illinois.
Yatooma told The Independent in an email that “the parties never proceeded with the referenced documents, and the State subsequently provided advice on how to structure partnership.” In our experience, when there are new laws it’s important to start business discussions. Then be ready to pivot and finalize the partnership once new state guidance has been announced.
Yatooma said that he is aware of the fact that microbusiness dispensary licences “must be owned in majority by a person who meets one or more of the eligibility requirements” as outlined in the Constitution.
The microbusiness program was approved by voters in November last year as part of the constitutional amendment which legalized marijuana for recreational use.
Nimrod Chapel reviewed the agreement that Harnden signed and gave to The Independent. He thinks it “frauds” the state because it denies the applicants any voting rights or financial interests, which is in violation of state constitution.
Chapel stated that “the very people who were victims of cannabis laws in first place are once again on the wrong end of what appears a distinctly unsuitable power grab.”
Yatooma rejected “any allegations of defrauding the state”. Any final agreements reached with partners in Missouri “will comply with all state regulations and laws.”
Lisa Cox spokeswoman of the Missouri Division of Cannabis Regulation did not confirm that the division has seen the agreements signed between Yatooma, the applicants, and the Missouri Division.
She said that such an agreement would be reviewed in the course of the verification process after the license is granted. The division will then “determine if any microbusiness applications are false or misleading, and ensure all microbusiness licences are owned by eligible applicants.”
She said that the process would be complete by the end the year.
Chapel stated that if the state does not take action to revoke Yatooma’s two licenses the Missouri NAACP will consider litigation in order to obtain a stop and desist on the entire Microbusiness Program.
Chapel stated that if the division did not take action to stop the licenses, and instead looked at the agreements which showed the applications were false, they would be complicit.
Cox responded to the NAACP by saying that the division would revoke a license if “it determines that the applicant provided false or inaccurate information in the application.”
A pattern of practice
Simone Booker (52), a Chicago resident and tax preparer, recalls meeting Amanda Kilroe at Starbucks this spring to discuss a “great opportunity” for her business.
Kilroe is listed as the contact number on Craigslist in Maryland. She was the one who answered when The Independent called.
Booker, however, never saw an ad on Craigslist. Kilroe was referred by a friend, but she never received the $2,000 as a result of applying.
Booker described Kilroe as a “wonderful person”. “I’ve met a few [from Canna Zoned]. They are wonderful people. “That’s the impression I had of them.”
Booker recalls Kilroe asking him multiple questions regarding her commission and the percentage of profits that she would receive. Kilroe told her she would be a “social partner” with a share in the profits for every quarter.
Kilroe said that after a year Booker would sell her shares in the company at a price “we would decide later”. Booker was told that she could make up to $200,000 if she sold her company shares. She could also decide to purchase back in the business if she so desired.
Booker now admits that she did not read the fine print of the contract closely, because Kilroe appeared so professional and trustworthy.
Booker claimed Kilroe did not mention that the contract required her to sell shares at $1. Booker also said that Kilroe described the partnership “completely differently” than what was signed, stating she had agreed to “no other disbursements,” except for the $2,000 she paid to apply and the $20,00,000.
She would receive $10,000 after the municipality in which the dispensary was located approved its location and an additional $9,999 once the state approved the license and transferred her ownership of the company.
Booker was surprised to discover these clauses in her contract after being asked by The Independent about them.
Booker stated, “I am completely blessed that God did not approve this business.” “I wouldn’t have signed the contract…not for $20,000, because $20,000 doesn’t even compare to the millions they will make from my name.”
Kilroe has not responded to The Independent’s request for comment.
Booker is worried about the other people that signed without realizing what they were doing. She has a background in tax and knows how to complete the paperwork so that the group cannot use her name as an EIN (federal tax identification number) in the future.
Chapel explained that the contract allowed her to use her Social Security Number as an EIN. This means she is responsible for all tax liabilities of the company, even though it says otherwise. She said that other people do not know how to use an EIN.
She said, “Their names will be used forever for business but they won’t profit.”
Chapel said that he has never seen anything like this contract.
He said, “This agreement has no time limit and is broad-based.” It’s unclear when you would be released. I guess, at your death.
He said that it’s basically agreeing to allow the company to use their “likeness” or name indefinitely.
He asked, “How can this not be buying a little piece of someone?”
Public warning
Kilroe said to the Sun Times after they contacted her regarding a similar deal the group had made with a victim of gun violence, that Canna Zoned did not “end up moving forward” in any way with the respondent to the ad.
Kilroe, a newspaper reporter, said: “We did not enter the game in Illinois.”
According to Illinois business records, Yatooma’s company was responsible for at least 20 dispensary license applications under the variations “Chicago Retail LLC”, including Booker’s & Harnden’s. Chicago Retail LLC was not on the list released by Illinois on July 13. However, it is unclear if Yatooma received a license.
Chris Slaby said that the Illinois Department of Financial and Professional Regulation overseeing the social equity program does not allow him to disclose if Yatooma has a cannabis license.
Slaby told The Independent in an email that the department had been aware of such posts and warned potential applicants in February about the dangers associated with these agreements.
Illinois held its lottery on 13 July, and the department is assessing the eligibility of the winners. Slaby stated that it “may refuse a license if it determines false information was provided to apply.”
Booker’s contract resembled the one Harnden had signed in Missouri.
Both said that Yatooma’s group could use the applicants’ information in any other state lotteries to obtain social equity cannabis licenses. The group recently contacted Booker about entering the next Illinois lottery.
Harnden received a notification at the end of the month that his name would be entered in the Missouri Lottery, which took place on August 28.
The Missouri contract was signed with a Michigan Limited Liability Company called “Report Head LLC”, but Yatooma, the agent authorized on the contract, is listed.
Adolphus Pruitt of the St. Louis City NAACP Chapter also reviewed the contract and stated that it established a “modern day indentured slavery.”
Pruitt concurs with Chapel, that the Michigan group defrauds the state and puts the applicants into this position whether or not they are aware of it. He said that the St. Louis City NAACP would support the state NAACP in its efforts to obtain a cease-and-desist order.
Pruitt stated that “it appears the intention was never for the social equity partner to own, run, or benefit from the micro-license as intended by the voters.”
Only five of the 16 license winners appeared to have made a single application. This means they did not make an agreement with other people who were eligible to submit their applications on their behalf.
The state awarded 48 microbusiness permits on October 2. Six winners were chosen in each of Missouri’s eight congressional districts.
Each district has two microbusiness dispensaries and four microbusiness wholesale facilities, where the owner can grow up 250 plants.
The Independent obtained records that showed the wholesale sector, where there were 577 applicants in total, did not seem to have the same flooding strategy as dispensaries with 1,048 applicants.
Yatooma was not the most successful in finding multiple applicants who could apply for one person. He only applied to half of the eight districts in his state, namely, the 2nd, 4th 5th, and 6th.
Cannabis Business Advisors is a Phoenix-based cannabis consulting company that appears on 42 percent (or 142 applications) of dispensary licenses. They are also the designated contact on six of the sixteen winning licenses.
Maxime Kot is listed as the contact on 40-60% of applications submitted in each congressional district, including the 1st and 2nd districts, the 4th and 5th districts, the 6th district, and the 7th district, where clients have won dispensary licensing.
In the 1st district, which includes the City of St. Louis, Kot was listed on 76 applications for dispensaries, or 62 percent of all the submitted. In the 2nd and 4th districts, the percentage was 63 and 53 percent, respectively.
Sara Gullickson said that the company’s secret sauce is its intellectual property, and the way it submits applications, whether they are merit-based or lottery-based.
After hearing about Yatooma’s strategy, which involved posting Craigslist advertisements and paying applicants, she stated that this was “not our model”.
Gullickson stated, “We have probably worked in thirty states and five different countries.” “I have been doing this since I was 26. I am now 40. “I’ve only been around a little while.”
Gullickson owns a stake of several cannabis licenses that are owned by women or minorities across the nation. She said that in Missouri she was only acting as a consultant and not vying for the license.
She refused to divulge the number of applicants who are from outside the state.
John Payne, founding member of Amendment 2 Consultants, served as campaign manager in both the constitutional amendments that legalized medical and recreational marijuana. He is listed as the contact on 16 percent of all dispensary applications in the state, including two winners – both from the 3rd District.
Records show that one of Payne’s clients won with only one application. Payne confirmed this. Payne confirmed that the other person had 68 applications, and Payne explained that they were pooled together with friends and colleagues to obtain a license.
Payne, like Gullickson said he did not advertise or offer payments as Yatooma.
Payne stated that “it was almost exclusively internal networks.” “We knew many people, and they knew a great deal of people.” That’s how our clientele grew.
Payne said that any questionable agreements entered into as part of the application process for microbusiness licenses should be revealed in the next two months during the state’s verification process.
Payne stated that the department is very thorough in its vetting of these types of items. They do ask you for the operating agreements and contracts signed by you, so this could be something they check into.
The Missouri Independent published this story first.
Marijuana companies and investors grab Arizona’s Social Equity licenses ahead of retail launch deadline
Photo by Mike Latimer.
The first time Marijuana Moment published the post Missouri NAACP Threatens Legal Action To Stop Marijuana Equity Social Arrangements that ‘Defrauds’ The State.
