Corruption & Crime Seems to Follow Restrictive Dispensary Permitting

In the grand panoply of grand exits, Debbie Peterson’s is memorable.

Until last February, Peterson, the former mayor of Grover Beach, a small city on the Central California coast in San Luis Obispo County, was serving on the city council, a post she had held for more than 10 years.

Like many California cities not in the Bay Area or in Los Angeles, Grover Beach was in need of viable commercial businesses — and stood poised to capture needed tax revenue and a commercial base after voters legalized cannabis — but also imposed strict limits on legal weed operations. The city would issue no more than three retail licenses, with the winners to be chosen by a council vote after their merits will duly weighed.

The problem is that limited business opportunities creates an atmosphere in which competition for those opportunities exceeds the bounds of propriety. That is, they encourage corruption, bribery and other excesses, a fact recognized by the FBI and alleged by lawmakers and members of the public as well as law enforcement in other states and cities, among them Illinois, Ohio and Florida. Licenses mysteriously awarded to political donors rather than the best-suited applicants, or other examples of patronage and nepotism abounded.

And that’s what happened in Grover Beach, according to Peterson, who quit the city council while throwing grenades at her colleagues — whom she alleged were participants in a corrupt “pay-to-play-insider” scheme.

“Many members of the community and the cannabis industry report that some dispensary applicants paid council members and their consultant to get their licenses approved,” she wrote in her resignation letter, according to a copy posted by the San Luis Obispo Tribune. “In the end, applicants with clean backgrounds were pushed out of town while those with felony convictions were granted licenses.”

At the time, it wasn’t clear exactly whom or which acts Peterson was referring, but the list of suspects was small. A recent lawsuit filed by an erstwhile Grover Beach cannabis entrepreneur, Wendy Cronin, and reported in the CalCoast Times reveals at least one specific allegation of “corrupt king-making.”

According to Cronin, who operated medical-cannabis collective The Herb Pantry prior to the passage of Prop. 64, business partners in possession of capital she took on to create a dispensary called 805 Beach Breaks effectively wrote her out of the business — and did so with participation from city officials who issued her partners a business license, keeping her name off of the rolls, and thus shut out of the business she created.

Last summer, 805 Beach Breaks was sold off to an out-of-state company, Harvest Heath and Recreation. The business was an attractive sales target because of the artificial limits on cannabis sales in Grover Beach). Why, exactly, Cronin was left off of state and local licenses and thus cut off from the sale will have to be untangled in court, but the development is consistent enough with patterns seen in other cities to be suspicious.

In the meantime, those patterns continue.

In Fall River, Massachusetts — another state that grants localities broad authority to limit the number of dispensaries in each city, creating the same cutthroat atmosphere that invites corruption — Mayor Jasiel Correia stands accused of accepting cash bribes, campaign donations, and “even a Rolex watch” from weed businesspeople so desperate for a lucrative license they were willing to engage in criminal behavior.

In each of these instances, there’s a factor in common: limited licenses, an atmosphere in which elected officials rather than the market are left to pick who is able to enter business. In Massachusetts, where licenses are so limited that customers must make reservations in advance just to go shopping, limited licensing means each permitted business has a license to print money. And printing money, it turns out, brings out some of the worst elements of human nature — just like Peterson said it would.

TELL US, do you think there is corruption when it comes to acquiring a limited number of cannabis licenses?