Witnesses Testify In Court Case That Could Pause Ohio Medical Marijuana Program

Photo Credit: Ted S. Warren

A state official testified Friday that 12 licenses provisionally granted to large-scale medical marijuana growers could potentially increase if errors in the license award process are uncovered.

After hours of debate in a Franklin County Common Pleas courtroom over whether the number of licenses the state could award is static, Mark Hamlin, a senior policy advisor at the Ohio Department of Commerce, took the stand late in the afternoon and said the agency had the option of giving to any companies that were initially incorrectly scored licenses as a remedy – even if it’s above the state’s initial target for 12 large medical marijuana farms.

Hamlin answered questions at the end of the four-hour hearing in which Ohio Releaf LLC is asking Judge Richard Frye to temporarily put on hold the licenses for the 12 winning companies until it gets an agency administrative appeals hearing. Ohio Releaf did not get a license and believes the department improperly scored its application.

Frye did not make any decisions Friday since testimony is still ongoing. The hearing will continue Monday morning.

Numerous attorneys from the companies with provisional licenses were present, and many spoke and cross-examined witnesses at the hearing. Brian Laliberte, representing Buckeye Releaf, asked the judge for a compromise in the case by forcing the commerce department to give Ohio Releaf its hearing in the next 30 days – which Releaf’s attorney said it doesn’t want, since other appealing companies may need to be rescored, too.

‘Problems with the application process’

Shortly after the Department of Commerce’s November rejection of Ohio Releaf’s application, the company appealed, Ohio Releaf CEO Randall Smith testified.

The state sent him a letter that he described as odd, containing a hearing date.

“In the same paragraph it was both scheduled and cancelled,” he said.

Smith is a Harvard Business School graduate who has worked in the marijuana industry for the past eight years, including owning one of the country’s largest medical marijuana farm and dispensary companies in Arizona. He said he’s invested a half million dollars in the application process to get a cultivation license – including securing licenses to grow marijuana brands in Ohio.

He also consults for other marijuana businesses looking to grow under state marijuana programs, He described Ohio’s program as unusual. Most states disqualify 2.5 to 5 percent of cultivation applicants. In Ohio, the commerce department disqualified two-thirds of the applicants, “indicating to us there was problems with the application process” and not the applicants, he said.

Smith said the commerce department never told him why his hearing was delayed.

The department only held four hearings before deciding to hire Ernst and Young to review how it scored cultivation applications, after discovering an error in one applicant’s score.

Although there are 10 hearing examiners, at the previous hearing an attorney for the state said there will not be 10 hearings a week because many of the same people are needed to testify at all the hearings and cannot be in more than one place at a time. Frye expressed frustration with the state at the time.

Hamlin, the commerce department official, said the agency prioritizes the hearings. It is meeting with Ernst and Young officials Monday morning to review its findings and hopes hearings will be underway soon.

Ohio Releaf’s appeal hearing, however, is 57th on the list and will not occur for a while.

End of the year?

The 12 companies that received provisional licenses are awaiting inspections by the commerce department. At least one is scheduled for next week.

If the cultivators pass, they get certificates of operation and can begin growing.

On average, it takes about 18 weeks to grow marijuana, but strains vary, Smith said. Then the cannabis must dry and cure for a month, be processed and shipped to dispensaries.

“I’ll be very surprised if the state of Ohio has medical marijuana by the end of the year,” he said.

The state’s medical marijuana program is supposed to be fully operational Sept. 8, although the commerce department recently announced that not all marijuana farms and dispensaries would be open then.

‘No to a halt’

Cincinnati patient advocate Nicole Scholten, whose daughter has drug-resistant epilepsy and experiences upwards of 300 seizures a day, doesn’t want Frye to put the 12 licenses on hold.

People’s qualities of life are at stake, Scholten urged.

“A solution that does not put patients as a priority is unacceptable,” she said. “No to a halt — or a pause.”

Ohio Releaf’s attorney Jeff Lipps noted Scholten is on the board of a company that received a license. But she said it didn’t pay her to testify, and the company’s best interests dovetail with patients’.

Unknown target

What wasn’t clear in the Friday hearing was how much marijuana Ohio thinks the state will initially need.

Frye said that Washington state and Colorado, both with smaller populations than Ohio, each have over 1,000 cultivators, although he noted that they both have recreational marijuana.

Heather Stutz, who is representing the department, said the state estimated the need by looking at the number of patients who could qualify for medical marijuana and considered the amount of medical marijuana that was used in other states. She didn’t specify the state’s estimate. She said there will be an uptick in demand once medical marijuana is on the market.

After Sept. 8, the state can award more cultivation licenses and Ohio Releaf can apply then, Stutz said.

However, Lipps said that those initial 12 licensees can get permission from the state to increase their square footage. That could eliminate any need for the state to seek new licensees, which could forever lock Ohio Releaf out of the business.

Several times throughout the hearing, Lipps said that the medical marijuana program is behind schedule anyway. Less than six months from Sept. 8 and dispensary licenses haven’t been awarded, for instance.

But small-scale cultivators will be producing marijuana for patients, Lipps said. If Frye chooses to put the 12 licenses on hold, the program can still move head, he said.

Stutz disagreed, saying the amount of cannabis the small-scale cultivators will produce together will only be equal to the amount 1.5 large-scale farms can produce.

She said Releaf is dead wrong to believe a hold on the large-scale cultivators won’t stop the program.

“The cultivators are the first step in the process,” she said.