Sweet Leaf Dispensaries May Lose Licenses
The Sweet Leaf dispensary chain, shut down in December after a police sting, was a criminal enterprise that pocketed millions from an illicit “looping” scheme that allowed customers to purchase the maximum amount of marijuana multiple times in a day, a municipal hearing officer ruled.
As a result, Sweet Leaf Marijuana Centers should be stripped of its 26 retail, cultivation and manufacturing licenses, according to recommendations released Monday by Denver hearing officer Suzanne Fasing.
“Sweet Leaf’s scheme at the very least permitted the unlawful possession by its customers and its scheme was not the action of a ‘reasonable licensee,'” she wrote. “Not only did Sweet Leaf fail to take action to stop the illegal purchases, but it actively aided and abetted the illegal purchases through its looping scheme.”
Ashley Kilroy, the city’s director of marijuana policy will have the final say on Sweet Leaf’s fate, following a 10-day period for objections and a five-day period for a response. Kilroy’s determination could come in the next few weeks.
Sweet Leaf’s licenses were suspended on Dec. 14, when police raided eight Sweet Leaf facilities in Denver and Aurora following a year-long undercover investigation into illegal marijuana sales. More than a dozen arrests of budtenders and customers have been made in connection with the case.
The investigation zeroed in on alleged incidences of “looping,” in which Sweet Leaf budtenders would make repeated sales of up to 1 ounce of recreational marijuana — the maximum allowed for individual possession under Colorado law — to the same customer multiple times in a day.
Looping accounted for at least $6.7 million of medical marijuana sales in the 18-month period that ended when the stores were shut down, and at least $1.5 million in recreational marijuana sales, according to the hearing officer’s report.
At least half of the loopers had out-of-state IDs, Fasing wrote. She found that people from Arkansas, Nebraska, New Mexico and Texas purchased large amounts of marijuana to resell illegally in their home states. Some of those customers were convicted of criminal charges after being arrested with multiple pounds of Sweet Leaf marijuana in their possession.
Fasing heard testimony in Sweet Leaf’s case over several days in March and April. A central issue raised then was what constituted a “transaction.”
Colorado’s marijuana rules were amended on Jan. 1 to define a single transaction as including “multiple transfers to the same consumer during the same business day where the retail marijuana store employee knows or reasonably should know that such transfer would result in that consumer possessing more than 1 ounce of marijuana.”
Sweet Leaf’s attorneys argued that Colorado marijuana rules in place prior to Jan. 1 did not explicitly prohibit the sale of more than 1 ounce of recreational marijuana per day but rather it barred any single sale of more than 1 ounce of recreational pot. Multiple transactions to the same person would not have been in violation of state law, they said.
Fasing disagreed, citing a Marijuana Enforcement Division public notice that outlined how “sales that are structured as multiple, stand-alone transactions may be viewed … as an attempt to evade quantity limitations on the sale” of recreational marijuana.
Sweet Leaf’s owners Matthew Aiken, Christian Johnson and Anthony Sauro encouraged and directed the practice of looping, including training new employees to allow looping for retail customers if the customer left the premise after each purchase, she wrote.
Evidence cited by Fasing included messages from management on Sweet Leaf’s Slack channel promoting multiple sales to the same customer: “Looping is going to be going on until the new year most likely,” they wrote. “Please talk it up with (extended plant-count) patients. We need med sales up!”
“The evidence is clear in this case that respondents implemented a looping scheme that was intended to evade quantity limitations on the sale of retail marijuana,” she said.