Great Barrington — A federal grand jury in Boston has issued subpoenas to several Massachusetts towns seeking information about so-called host community agreements between cannabis businesses and the towns in which they are located. At least two of them are in southern Berkshire County.
A Nov. 4 report in the Boston Globe cast the grand jury investigation as “a major escalation of an effort by federal prosecutors to crack down on local corruption related to the burgeoning cannabis industry.” The paper cited a mid-November grand jury hearing led by Assistant US Attorney Mark Grady, a member of the public corruption unit of the U.S. Attorney’s Office in Boston.
Andrew E. Lelling became U.S. Attorney for the District of Massachusetts on Dec. 21, 2017. Courtesy U.S Attorney’s Office.
The Globe said at least six communities — Great Barrington, Eastham, Leicester, Newton, Northampton, and Uxbridge — have received subpoenas from the office of U.S. Attorney Andrew Lelling seeking information about so-called host community agreements. The city of Boston was recently added to that list.
Great Barrington Selectboard chairman Steve Bannon confirmed that the town has received a subpoena but declined to comment further. Town Manager Mark Pruhenski also told the Edge, “Our legal counsel has recommended that all media inquiries be directed to the U.S. Attorney’s Office for the District of Massachusetts at this time. I cannot comment any further.” Lelling’s office has declined to comment.
The Globe obtained a copy of one the subpoenas: it seeks a variety of documents, including final and draft host community agreements, all communications between marijuana companies, residents and local officials; records regarding “current and former municipal employees or officials attempting to win local marijuana permits or working for marijuana firms”; and records of public meetings, including votes on applications by cannabis firms for local approval.
A host community agreement is a requirement for applicants applying for a license to sell or manufacture marijuana from the state Cannabis Control Commission. In addition to a local-option 3 percent sales tax added to the state sales tax, municipalities may negotiate a community impact fee of up to 3 percent of annual gross sales.
In addition, the law allows municipalities to charge additional fees to allow for the cost of the potentially negative impacts marijuana retailers might have on their communities. This is apparently where potential for corruption comes into play.
Adam Lippes and Alexander Farnsworth of Highminded LLC explain their proposal for a high-end recreational marijuana shop during a community outreach forum July 9 at the Fairfield Inn & Suites in Great Barrington. Their enterprise would be located in Paul Joffe’s so-called ‘Flying Church’ on Main Street. Photo: Terry Cowgill
In the case of Great Barrington, that additional fee is typically a $10,000 annual donation to the nonprofit of the applicant’s choice. For example, Highminded, which plans to open a cannabis store at the former Dempsey physical therapy building on Main Street, is donating its $10,000 annual fee to the Railroad Street Youth Project, which will use the money to fund a campaign against adolescent substance use and develop educational materials for parents and caregivers. Canna Provisions in Lee will pay an annual community impact fee of $5,000 to be used, most likely, for education or some other community benefit. But as the Harvard Crimson has reported, the community impact fees have been a source of frustration for those trying to open cannabis businesses in Massachusetts.
“[The municipalities] have all the leverage,” James E. Smith, a lawyer who has represented cannabis businesses, told the Crimson. “Either we sign that agreement, or we don’t open. We have no business. It’s a very one-sided negotiation.”
Fall River Mayor Jasiel F. Correia, was arrested in September by federal officials and was charged by Lelling’s office in connection with a bribery and extortion scheme that included “extorting marijuana vendors for hundreds of thousands of dollars in bribes,” according to an extensive news release by the U.S. attorney.
In its recent report on the grand jury subpoenas, the Globe added that, “it appears likely the investigation extends well beyond those six communities” it named in the story.
One of those towns not named by the Globe is Lee, where members of the Board of Selectmen discussed the matter at a Nov. 5 meeting in town hall. Click here to watch the video of the meeting courtesy of Community Television of the Southern Berkshires. Fast forward to 3:00 to see the discussion of the subpoena.
Jeff Shapiro of Columbia Growth Inc., which proposes to open a cannabis manufacturing facility at the downtown Eagle Mill complex, told the Lee selectmen that “towns have taken the liberty to interpret [the law] in their own way.” Courtesy CTBS
Jeff Shapiro of Columbia Growth Inc. went before the board to discuss the process by which his company will obtain the necessary approvals to open a cannabis manufacturing facility at the downtown Eagle Mill complex, which is the site of a substantial redevelopment project. The company needs a special permit from the selectboard and site plan approval from the Planning Board. A host community agreement is yet to be worked out.
Tom Wickham, who chairs the Board of Selectmen, asked Shapiro if he had heard that “there are things going on with the host community agreements?” As a professional working in the cannabis industry, Shapiro keeps abreast of all developments.
“We’ve received a subpoena for the town of Lee — not only us but other towns around here,” Wickham said. “They seem to be on the retail part of it on the host community agreements so far, not on the manufacturing part.”
Shapiro said cannabis entrepreneurs need clarity from the state on host community agreements, adding that “there’s the letter of the law at the state level … but there’s not a lot clarifying around it. The interpretation of the law at the state level has been from town to town.”
“Not that cannabis companies have been taken advantage of, but I think that towns have taken the liberty to interpret [the law] in their own way.”
Wickham agreed. He said the board has recently spoken with town counsel and “It’s very difficult to understand what they’re trying to look for in the subpoena.”
Some observers have suggested Lelling is on a “fishing expedition,” which is typically shorthand for a prosecutor casting a wide net in a search for information without knowledge of whether such information actually exists.
Local cannabis operators are mostly mum on the subject. Thomas Winstanley, marketing director for Great Barrington’s Theory Wellness, the first medical and recreational cannabis store to open in Berkshire County, said, “We’re declining comment as the investigation is on-going.”
The interior of Canna Provisions in Lee. Photo: Terry Cowgill
Andy Katkin, a spokesman for Canna Provisions in Lee, said his company has not been contacted by the U.S. Attorney’s office.
“It is, however, my understanding that the town of Lee has been contacted,” Katkin told The Edge. “We are confident that our HCA is in full and complete compliance with the law, does not go further than state law allows and we received no undue pressure of any kind for further contributions or donations.”
Margaret L. Boyle, a spokesperson for U.S. Rep. Richard Neal, declined to comment in an email to The Edge: “As these are local issues between the individual municipalities and the grand jury, Congressman Neal has no comment.”
A separate Globe report in August 2018 quoted Cannabis Control Commissioner Shaleen Title saying that there is “clear evidence” that “problematic host community agreements that disregard sections of the law are pervasive.”
Title has been a voice for requiring the inclusion of local contracts in the state’s licensing process. Title would like to see the commission reject applications from companies that agree to make excessive payments. As it stands, the commission only checks to see that a host community agreement has been signed, but the panel does not examine the contents of the HCAs.
“If we don’t institute a fair and consistent standard now, before issuing any final licenses, we may as well roll out a red carpet for companies with flashy gifts and big checks to ignore the legal cap on payments,” Title added.
Theory Wellness opened its doors to recreational cannabis sales in January after opening the county’s first medical marijuana dispensary in 2017. In its first quarter of operation this year, Theory brought in revenues of almost $1 million to the town of Great Barrington. Those funds came to the town from the local-option sales tax and the community impact fee of 3 percent of gross sales.
At its Nov. 5 meeting, the Lee Board of Selectmen discusses the subpoena the town received from the US Attorney’s Office in Boston. From left, chief administrative officer Chris Ketchen, along with board members David Consolati, Tom Wickham and Patricia Carlino. Courtesy CTSB.
Canna Provisions, which opened in Lee at 220 Housatonic St. on July 5, made its inaugural payment to the town after closing out its first quarter of business at the end of September. The company paid a community impact fee of $109,942 to the town of Lee as part of its previously negotiated HCA.
Lelling, a nominee of President Donald Trump, is perhaps best known as the U.S. attorney who secured indictments and several guilty pleas from wealthy parents, actresses and coaches in the recent college admissions scandal that rocked the higher education community — locally and nationally.
Grady, the aforementioned assistant US attorney who led the cannabis grand jury, most recently prosecuted the corruption case that became known as the Massachusetts State Police overtime scandal.
The cultivation, sale and use of recreational cannabis-related products was legalized in Massachusetts through a 2016 ballot initiative. The measure passed by almost 7.5 percentage points statewide, by almost 30 points in Great Barrington and by almost 24 points in Sheffield. Implementation of the new law was left to the hastily created state Cannabis Control Commission. Preceding that law, medical marijuana was legalized in Massachusetts in 2012 through the same process.