Will Ohio's medical pot program go up in smoke?

CINCINNATI -- Legal threats and concerns of corruption are stacking up against Ohio’s fledgling medical marijuana program as the state races against a September deadline to get it fully up and running.

In the last month: A lawsuit has been filed, an audit launched and legislation proposed that all call into question the validity of the state’s process for awarding provisional licenses to growers.

“There’s a cloud of impropriety around the whole program right now,” said Sen. Bill Coley, a Republican from West Chester. “Whether it’s deserved or not is still to be determined. Mistakes have been uncovered, and we continue to find more.”

Coley’s Senate Bill 264 would prohibit Ohio from awarding final business licenses to any medical marijuana grower, processor or testing facility until the state completes an audit of the Department of Commerce's process for grading and scoring applicants vying for those licenses.

The proposal lands after months of criticism and questions from marijuana-business investors and Ohio Auditor David Yost who last month said his office discovered a “critical flaw” in Commerce Department's protocols.

“This is about making sure that we can look at each other and say ‘this was a fair process that was done correctly,'” Coley said.

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The mounting problems have some industry advocates concerned that the program could be seriously delayed or derailed.

Any setback on the program's planned September start date could be a major blow to businesses that have invested hundreds of thousands of dollars to launch their new start-ups and patients waiting for a new therapy, said Thomas Rosenberger, executive director of the National Cannabis Industry Association of Ohio.

“If these cultivators don’t have certificates of operation, then they can't grow,” Rosenberger said. “That’s a big deal.”

Where the troubles began

Late last year the Department of Commerce awarded 24 provisional licenses to small and large medicalmarijuana growers. More than 100 firms applied, including Cincinnati-based CannAscend - which was denied a license.

CannAscend hired an attorney to review the state’s processes and discovered that one of the consultants paid to screen applicants had been convicted of felony drug crimes.

Last week, CannAscend filed a lawsuit along with 19 other cultivation applications asking the courts to stop the program and redo the scoring for growers. Among other claims, the lawsuit alleges that at least five firms that landed a provisional license failed to adhere to Ohio's program requirements, including having adequate set-backs from schools, day cares and other sanctioned properties.

“We know that not every applicant was treated the same by the scorers -- that's the best case scenario for the mistakes that were made," said James Gould CEO of CannAscend. "Worse case: Someone had their thumbs on the scale here. I think it will all come out in this lawsuit."

CannAscend’s questions and findings prompted Ohio’s auditor to begin looking into the issues.

Last month, Auditor Yost sent a letter Commerce Director Jaqueline Williams detailing a host of problems his office discovered.

According to Yost, at least two Commerce employees had unlimited access to online accounts of application reviewers and the application documents. Those same employees created user names and passwords for the application reviewers and had the ability to access accounts at any time. Yost said that "weakness" prevented auditors from being able to tell if revisions to records were made by the reviewer or someone else with access to the account.

"Because of this critical flaw in the procedure's design, neither this office, nor the public, can rely upon the cultivator application score results," Yost wrote.

The Commerce Department told WCPO that changes have been made to better secure user names and passwords and the department continues to work with Yost to address his offices concerns.

Meanwhile, Coley is working to get his bill passed by the end of this month. The measure would give Yost 30 days to complete a full audit of the process, and give the Commerce Department another 30 days to implement recommendations.

If more serious mistakes are uncovered, Coley said he believes all applications for growers should be scored again.

“This is a question of character,” Coley said. “Now that you know there have been mistakes, the question is what are you going to do about it. If there are serious flaws discovered, you score again and finish up."

Lawsuits could 'slow everything up’

Both Coley and Yost have said that the audit process shouldn’t keep Ohio from meeting its September deadline.

“The people who have provisional licenses, we’re not saying they shouldn't continue building their business,” Coley said.

Pending lawsuits like the one CannAsend filed are a separate issue, Coley said.

“The bottom line is, if we (legislators) don’t act, then the courts are going to act and that is going to slow everything up,” he said.

Legal troubles and delays have been common in other states that have legal marijuana programs.

A recent lawsuit in Maryland “could be indicative of what will happen in Ohio,” said Brian Higgins, a lawyer with Downtown-based Frost Brown Todd

There, the state’s Medical Cannabis Commission was sued for not abiding by state laws that require an applicants’ racial diversity to be considered when awarding preliminary licenses. The plaintiffs, a group of applicants that were denied licenses, wanted the entire application process done over.

Initially, a circuit court ruled that it could stop the program and grant the redo. The Maryland Court of Appeals intervened and gave the state’s Medical Cannabis Commission permission to issue licenses while the lawsuit worked it’s way through the courts, Higgins said.

Last month, the lawsuit was settled out of court.

For now, it’s “difficult to tell what will happen at this point with the program and whether patients will have access to medical marijuana in Ohio (by) September,” Higgins said.

If Ohio courts take the same approach as Maryland, Higgins said, “cultivators who have been awarded provisional licenses will continue to ramp up operations while the legal system figures out how to deal with the lawsuits affecting the program."