Pennsylvania’s Medical Marijuana Industry Looks Like a Corrupt Cesspool

From the outset, Pennsylvania’s new medical marijuana industry was shrouded in secrecy.

Companies vying for lucrative state permits to grow or sell cannabis blacked out key information on their permit applications at the state’s encouragement.

The state waged a two-year court battle to protect those redactions and to shield bureaucrats who decided how permits were awarded from scrutiny.

Recent court-ordered releases of public information resulting from years-long legal battle with the state as well as testimony given as part of administrative appeals shine a light on the inner workings⁠ — and lapses of judgment — undergirding what could soon become a multi-billion dollar industry.

Last year, a state-assigned appeals officer concluded that the Department of Health’s scoring process was so marred by “significant errors and irregularities” that one company, Keystone ReLeaf, was entitled to a new review of its application by an entirely new scoring committee.

“All of this sounds like sour grapes but my client was only a few points short,” said Seth Tipton, the attorney representing Keystone ReLeaf.

The Bethlehem-based applicant was one of just two companies to successfully appeal their scores, at least to this point, because Tipton was able to convince the appeals officer of failures in the department’s process.

At least two members of the 12-member scoring committee testified to misinterpreting key components of the applications, creating their own scoring rubric or splitting their responsibilities with coworkers who weren’t authorized to even see the applications.

The Office of Medical Marijuana is contesting virtually all of the appeals officer’s conclusions, arguing that scoring committee members’ actions did not violate state law or that the appeals officer mischaracterized their testimony. It also argues that the appeals officer’s report failed to account for the broad discretion the state Legislature gave the department to roll out the state’s medical marijuana program.

“Other hearing officers have found the process of those two individuals was accurate and the process was correct,” said DOH spokeswoman April Hutcheson. Except for in one other case, appeals officers from the state Department of State found in favor of the health department’s scoring process.

Hutcheson said Health Secretary Rachel Levine, who would usually have final say on such administrative appeals, recused herself. The appeals officer’s order, which was handed down in October, hasn’t been formally acted upon by Levine’s designee.

Apart from the irregularities at issue in the Keystone ReLeaf appeal⁠ — which, it should be noted, likely won’t lead to the wholesale reconsideration of hundreds of applicants — internal documents shine a light on an opaque process of vetting prospective distributors and manufacturers.

As of this spring, Pennsylvania registered more than 100,000 medical marijuana patients.

According to Department of Revenue figures, the state’s 5 percent gross receipts tax on medical marijuana generated $3.4 million year-to-date through May. Based on that figure, these companies reported some $68 million in revenue.

And those revenues are expected to grow, possibly exponentially, as more patients sign up for medical marijuana and the Wolf administration eyes the legalization of pot for recreational use.

Any big business is subject to bad actors and influence peddling.

For years the health department fought to keep their names a secret — even after their work had been completed — to protect them from threats and bribes.

A clause in the state law governing medical marijuana stipulated that the committee members’ names not be disseminated to applicants, but it made no indication that their identities be protected in perpetuity or from the general public.

The subject of how applications are graded and who grades them has been controversial in states like Arkansas and Maryland but the names themselves are often made public.

Last month, the state Commonwealth Court rejected the department’s argument and the department subsequently released their names.

The committee represented a cross-section of middle managers from various departments with insight into agriculture, business, economic development and law enforcement. They included four employees of the Department of Community and Economic Development; three from Labor and Industry; two each from the Department of Agriculture and the Pennsylvania State Police; and one from the Department of General Services.

According to Hutcheson, the Department of Health sent a call out to those agencies with a job description, seeking candidates to serve on the scoring committee. The members were identified by their respective departments as individuals who fulfilled those qualifications.

The 12 members didn’t receive any additional compensation for their participation, she said.

A review of the backgrounds of these individuals showed no obvious conflicts of interest, aside from their status as members of an administration that supported medical marijuana or their expertise in subject areas relevant to managing or regulating a cannabis operation.

In one case, the spouse of a committee member donated to liberal causes, including $150 to Gov. Tom Wolf’s 2016 gubernatorial campaign.

It’s impossible to rule out all possible conflicts of interest, however, due to the fact that some applications were so heavily redacted that they don’t include key employees and financial backers.

Meanwhile, the vast majority of applications from the second phase of permits that rolled out last year remain unavailable. Several sources, including a department spokeswoman, said the same panel also scored those applications.

When asked about the delay in processing the second round of applications, Hutcheson cited the public records lawsuit over the heavily redacted first-round applications.

“It’s a huge amount of work,” she added, “in terms of reviewing the redactions and a huge amount of staff time to do that. Hundreds of thousands of pages have to be reviewed to get to the point we could post those documents online.”

Hutcheson initially confirmed sources that said the same scoring panel reviewed the second-phase applications. Another spokesman, Nate Wardle, later said that Hutcheson’s confirmation was incorrect due to “an ongoing legal process and change to regulations.”

When asked to elaborate, he declined comment.

Most committee members did not respond to requests for comment or could not be reached.

One of the members, who declined to be identified because they weren’t authorized to speak on this contentious issue, said the process seemed fair from their perspective.

“The goal was the patients,” the member said. “[We] try to find the best applicants who could get up and running the fastest.”

That member said there was a sense of urgency to the work and that it involved a lot of reading over a short period of time. But the member rejected the idea that the scoring process was rushed.

In addition to its administrative appeals, Keystone ReLeaf took its complaints about the process to civil court.

Last year, prior to the successful appeal, state Commonwealth Court dismissed the case on procedural grounds, namely that the company had not yet exhausted the appeals process.

Judge Michael H. Wojcik in his decision wrote that the company raised “troubling allegations regarding the permitting process” but that the appropriate course of action would be to continue with the administrative appeals.

“Our position was the cat is out of the bag,” said Keystone’s attorney. “If there’s a problem with the process, you really should stop the process for a moment and resolve it. You can’t put the genie back in the bottle.”

The department incorporated several changes during the second phase of applications and scoring, including rubrics developed for diversity and community impact. Hutcheson said the changes were made to improve the process but they are subject to an ongoing legal process.