Lobbyist advanced client's plan as appointee on Michigan pot panel

Mar. 5—LANSING — A state task force aimed at combating injustices in Michigan's burgeoning marijuana industry is creating controversy because it featured a registered lobbyist and proposed a policy that would financially benefit one of his clients.

The Marijuana Regulatory Agency created the Racial Equity Advisory Work Group to develop policy recommendations and make Michigan a "leader on diversity, equity and inclusion" in the marijuana industry. Andrew Brisbo, the agency's director and an appointee of Gov. Gretchen Whitmer, selected individuals who served on the panel.

When the workgroup's ideas were unveiled in January, the top recommendation aimed to shake up the market by creating a new license type, allowing for so-called "class A marijuana microbusinesses." Currently, marijuana microbusinesses face smaller licensing fees than larger operators, and under the new proposal, "class A" microbusinesses would be allowed to grow twice as many plants, 300, as the current 150 limit.

An Ann Arbor-based business called Tranquility Fields, which describes itself as a "microbusiness franchise brand," had unsuccessfully pushed a similar idea in the Legislature months earlier.

The company wants to franchise small marijuana operations across the state, similar to the strategy of McDonald's. Among the group's lobbyists is Berton Brown of the firm Kelley Cawthorne, one of the 21 workgroup members.

"The business model is solid except for one challenge," Dan Russell of Tranquility Fields told lawmakers in September. "There's not enough plant material to create the number of products necessary to compete in the marketplace, and there's not enough plant material to generate sufficient revenue to offset the costs."

Critics argue having a lobbyist on an official state workgroup advancing recommendations that could boost his employer is a conflict of interest that raises concerns about who's calling the shots within the Marijuana Regulatory Agency. Others counter that lobbyists are present on many state panels, and a worthwhile idea is a worthwhile idea regardless of who's proposing it.

"Come on. ... You've got lobbyists sitting on all kinds of boards," said Scott Dianda, a former state lawmaker and senior vice president of business development for Tranquility Fields.

"Does that negate whether it's a good idea or not?" asked Cimone Casson, who chaired the Racial Equity Advisory Work Group's business development committee. "Where it came from? Hell, I don't know."

But Rep. Steve Johnson, R-Wayland, who chairs the state House Oversight Committee, said the situation didn't seem proper.

"It certainly appears to be a conflict of interest," Johnson said.

Asked where the work group's idea first came from, Casson told The Detroit News it came from Brown. Casson said she wasn't aware of the plans of Brown's client.

"He is the one who actually came up with that idea," Casson said of Brown.

In an emailed statement, Brown said the proposal is the "right thing to do."

"Ensuring there is equitable access to the marijuana industry is one of my personal priorities because we cannot let historically disadvantaged communities be exploited by big cannabis, where black and brown people are being excluded from the opportunity to build wealth, something we've been excluded from throughout history," Brown said.

But Johnson said this maneuver might prompt legislative changes.

"Speaker Wentworth and myself are prioritizing ethics legislation this term," he said, "and I believe that this should be a consideration in any legislation that we do to fix our state's broken ethics laws."

A Senate proposal stalls

On Feb. 17, Sen. Jon Bumstead, R-Newaygo, didn't want to talk about marijuana.

Bumstead, who sponsored a Tranquility Fields-backed proposal in the state Senate, hadn't responded to multiple interview requests. Asked if he had a minute to answer questions after a committee meeting, Bumstead told The News "no" and immediately walked out of the building.

His proposal, introduced on Sept. 10, would have allowed marijuana microbusinesses to grow 150 "flowering" marijuana plants instead of 150 marijuana plants. It effectively would double the limit because of the plants' growth cycles, according to supporters of the bill.Bumstead told lawmakers that microbusinesses would be allowed to have 150 flowering plants and 150 plants in a vegetative state under his legislation.

The 300-plant total was also the recommendation of the workgroup.

Under the state's licensing system, microbusinesses are similar to microbreweries. They have the ability — under a single license — to grow, sell and process their own products. Larger operations have to obtain multiple licenses for each element of the business or work with outside entities.

The initial license fee for a microbusiness is $8,000 with the annual renewal price ranging from $6,000 to $10,000. The initial license fee for a larger retail marijuana business in $25,000 with the annual renewal ranging from $20,000 to $30,000, and those operations have to get separate licenses that can also bring large price tags if they want to grow and process their own products.

The Senate Regulatory Reform Committee considered Bumstead's proposal on Sept. 22 — although the full Senate never voted on the bill, and it died at the end of December.

Russell of Tranquility Fields told lawmakers that the business wants to support diversity and provide opportunities for small family cannabis businesses to be successful. Tranquility Fields provides members with a "turnkey program," helping them obtain licenses, supporting them with money and providing training for cultivation, retail and processing, he said.

But under Michigan's current guidelines, a marijuana microbusiness would have to close for two weeks each month because of the limitations on plants, Russell said.

Likewise, Nic Easley, CEO of 3C Cannabis Consulting, said doubling the plant limit would take the microbusinesses from losing $2 million a year to making $1 million to $2 million a year.

'A slap in the face'?

After being appointed by Brisbo, the Racial Equity Advisory Work Group members held their first meetings in July and met through December. The group's recommendations debuted publicly in January — about four months after the Senate Regulatory Reform Committee meeting.

The group made 16 policy proposals, including creating a crowdfunding platform to promote entrepreneurship in distressed communities. The overall goal was to provide more pathways for more people to get into the marijuana industry, said Casson, the work group's chair who owns an insurance company that works with marijuana businesses.

About 4% of those with ownership interests in adult-use marijuana businesses in Michigan are Black, according to data tracked by the state, while African Americans make up 14% of the state's population. Expanding the microbusiness license was a no-brainer to provide more opportunities, Casson said.

Of the state's current limits for microbusinesses, Casson said, "You're pretty much a hot dog stand right next to a major McDonald's and asking them to hold the same responsibilities while you can only sell to 10 people while the other can sell 10,000."

But the Michigan Cannabis Manufacturers Association has opposed increasing the number of plants that microbusinesses can grow, saying it undermines the investment others have made in the state since voters approved recreational marijuana in 2018.

"This is a slap in the face to the manufacturers and entrepreneurs who have played by the rules and acquired A, B and C licenses, each of which costs hundreds of thousands — if not millions — of dollars," the association wrote in a message to lawmakers last year.

Lobbying concerns

The situation resurfaces concerns about the influence of lobbyists over marijuana industry regulations in Michigan, whichhad about $510 million in recreational marijuana sales in 2020, according to monthly reports.

Orlene Hawks, the director of the Licensing and Regulatory Affairs Agency, is married to the leader of a multi-client lobbying firm, Michael Hawks, CEO of Governmental Consultant Services Inc. And multiple former state officials have begun lobbying on behalf of marijuana businesses, including former Rep. Scott Dianda, who is senior vice president of business development for Tranquility Fields and registered to lobby on the company's behalf.

Dianda, a Democrat, represented a portion of the Upper Peninsula in the state Legislature from 2013 through 2018.

Tranquility Fields is supporting small businesses starting up across the state to promote social equity in the industry, Dianda said. "Big cannabis" is pretty much dominating the state's market, the former lawmaker said.

Dianda denied the business had advocated for the work group to add its proposal to its recommendations. In addition to Brown, two of the other 20 members of the group were members of the Legislature. One of the lawmakers, Rep. Sarah Anthony, D-Lansing, received $2,000 from Ed Santangelo, CEO of Tranquility Fields, while the work group was holding its meetings, according to campaign finance disclosures.

The Michigan Secretary of State's Office has flagged the contributions because the limit an individual donor can give a House candidate is $1,050 per election cycle. Anthony didn't respond to multiple requests for comment.

"We're not trying to play any politics or have anybody say anything on our behalf," Dianda said. "When folks are sitting on that board, they're speaking for the people of Michigan."

Brisbo, the leader of the Marijuana Regulatory Agency, said the members of the work group were selected to represent a "diversity of perspectives."

"Many of the participants have an interest in the industry (directly or indirectly) and were asked to consider the broader goals established for the group ahead of self-interests," Brisbo said. "All recommendations included in the report were brought forward from the committees and presented to the entire group for adoption."

Brisbo didn't respond directly to a question of whether Brown's position represented a conflict of interest.

The report from the Racial Equity Advisory Work Group said the new microbusiness license type could be created outside of the Legislature through Brisbo's agency promulgating rules.