As state’s cannabis license questions linger, tax department official takes a grilling
Medical marijuana is an increasingly popular pain reliever, but I’m not sure it will help with the headache state Department of Taxation Deputy Executive Director Jorge Pupo must be experiencing these days.
Pupo testified in June during the marathon hearing in District Judge Elizabeth Gonzalez’s courtroom that last year’s controversial cannabis license selection process wasn’t tilted despite the lunches and dinners he had with dispensary owners and representatives just weeks before announcing a new round of applications. In the end, 462 applications were processed with 61 conditional retail licenses granted, some to companies run by Pupo’s dining companions.
A scandal? Not exactly -- unless there’s more to it.
Lawyers for a group of plaintiffs that includes some of the state’s biggest dispensaries have been arguing in court that the state’s approval process was flawed and unfair. The plaintiffs want Gonzalez to block the state from issuing the new licenses and dream of a do-over. I’d bet they’d also like to question a state employee who displays a clear memory under oath.
Pupo could not remember, for instance, attending a dinner at Hank’s Fine Steaks & Martinis at Green Valley Ranch with industry attorney Amanda Connor and her husband prior to her clients scoring multiple license approvals from the state. But he made it clear he didn’t eat, stayed just 20 minutes, met the attorney’s husband, and never spoke a word about the cannabis licenses.
Wait a minute. He didn’t order a rib eye and a cocktail at Hank’s? In my book, that makes him a tower of strength. But it’s still hard to believe Pupo and Connor didn’t talk about business. When another lunch with Connor was brought to his attention, Pupo remembered that he ate, but not who paid for the meal. He said, “Sometimes I pick it up, sometimes I don’t eat, sometimes they -- whoever I’m meeting with picks it up, varies.”
Under questioning, Pupo admitted that he took a lot of lunches and dinners with industry officials and their representatives. He also admitted that at least one industry representative, Connor, contacted him often on his private cell phone.
Pupo has called the licensing selection process fair and competent despite the fact Manpower temporary employees were hired to vet the voluminous number of applications. No matter how fair they might have been, the arrangement looked thrown-together. “The evaluators were supposed to be independent,” he said in June.
What about Pupo?
Plaintiffs attorneys Ross Miller and Dominic Gentile in the hearing picked apart the contention that his relationship with industry insiders was just part of the job, which according to Transparent Nevada pays $146,000 in salary and benefits for the 15-year state employee. When plaintiffs lawyer Theodore Parker asked Pupo about the appearance of favoritism that might be drawn from such semi-private discussions outside the workplace, he said he’d have to think about.
In the hearing, even Judge Gonzalez had questions for Pupo.
These days I wonder whether all the questions have been asked and answered.
Obscured in the snowstorm of information and evidence associated with the litigation is a an email dated May 2, 2018 from taxation’s Marijuana Enforcement Division supervisor Kara Cronkhite in which she instructs another employee to remove a document noting self-reported incidents of sales “to a minor” for cannabis licensees Integral, Nevada Organic Remedies, and Henderson Organic Remedies.
For companies seeking coveted licenses in a competitive market and new licenses in the offing, the timing couldn’t have been worse. Adding even a self-reported “sales to a minor” incident listed on an application would count as a blemish by most reasonable standards. But the companies didn’t list them -- they didn’t have to.
“Per Jorge,” Cronkhite wrote in the email, “... These investigations should be removed from the log.”
In court, Henderson Organic Remedies owner Andrew Jolley, an outspoken industry leader and one of the winners in the latest licensing competition, downplayed the underage sale incident. He denied it had been brought to the company’s attention when the buyer’s mother called and screamed at a dispensary employee. He said, “Another entity, a sister company, did have an incident that we discussed earlier where we found it in our internal audit, reported it to the state, and addressed it.”
Under examination by plaintiffs attorney Will Kemp, Jolley said, “That’s an isolated incident that occurred. I don’t think it’s fair to say that is our compliance history.”
This past week, plaintiffs attorney Vince Savarese countered that underage sales is, “probably the most egregious form of noncompliance by a licensee that there is in the book.”
It’s possible the public would know more, and be less skeptical of the process, if notice of such incidents were kept in the investigative log. And, for that matter, if the state employee who is central to approval of new license applications weren’t communicating with industry officials on his private cell phone. As an aside, it’s something investigators look at when they’re analyzing the activity of government employees.
That brings us to what I believe is an ongoing issue with the state’s overview of the licensed cannabis industry, now an integral tax revenue generator. I think officials should go over and above the usual regulatory posture for the cannabis business, which practices legally something that’s still illegal under federal law. That’s one reason why the passage of Senate Bill 32, which made formerly confidential applicant information available to the public, was so important. It immediately helped build the public trust.
For his part, Pupo should appreciate the importance of optics. He played an important role in the formation of the state’s marijuana regulatory structure. Back in 2017 when taxation Deputy Director Anna Thornley surprised many with her unexplained resignation while the state was still setting up its recreational marijuana program, department Director Deonne Contine told The Indy that Pupo had “really stepped up” at a critical time.
The hearing has been continued until mid-August. That should give someone in state government time to digest whether Pupo’s comportment harmed the fragile credibility of the licensing process, and whether the state can do better.
It makes sense that Jolley, a popular spokesperson in an industry that’s extremely image-conscious, would want an underage sale resolved quietly. It makes even more sense that attorney Connor would want to make sure a client maintained an immaculate record in a competitive and expanding business.
What makes no sense is the state’s response to the sale of cannabis to an underage customer. And scrubbing a complaint from the record makes it appear someone was playing favorites.
Pupo should chew on that the next time he’s at lunch with cannabis industry insiders.
John L. Smith is an author and longtime columnist. He was born in Henderson and his family’s Nevada roots go back to 1881. His stories have appeared in Time, Readers Digest, The Daily Beast, Reuters, Ruralite and Desert Companion, among others. He also offers weekly commentary on Nevada Public Radio station KNPR. His newest book—a biography of iconic Nevada civil rights and political leader, Joe Neal—”Westside Slugger: Joe Neal’s Lifelong Fight for Social Justice” is published by University of Nevada Press and is available at Amazon.com. Contact him at [email protected] On Twitter: @jlnevadasmith