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The Nevada Independent

Learning more about marijuana licensing process

John L. Smith
John L. Smith
Marijuana displayed inside Inyo Fine Cannabis Dispensary

It’s unclear just how much Richard Elloyan knows about the marijuana business, but he sure plays a fine acoustic guitar. Sings a dandy country song, too.

If you’re looking for an experienced fire safety inspector who is also a certified welder, Duane Lemons sounds like the right man for the job. Whether those skills also qualify him to grade the applications of marijuana businesses seeking licenses worth tens of millions of dollars is probably debatable.

Their relative expertise figures to be discussed at length in the coming weeks as attorneys work to unwind the state Department of Taxation’s reasoning behind hiring Elloyan, Lemons and four other Manpower temporary workers to grade hundreds of applications from companies seeking coveted licenses to operate recreational marijuana dispensaries in Nevada. For now, the licenses are considered conditional.

The award of 32 licenses to just four entities has sent Nevada licensees to the legal mattresses with multiple motions before District Judge Elizabeth Gonzalez calling for a preliminary injunction to halt to the process that’s accused of being arbitrary and capricious, unconstitutional and “ripe for corruption.” In a withering 29-page motion for preliminary injunction quietly filed last week, attorneys for MM Development Company and LivFree Wellness pull apart the taxation department’s 2018 retail marijuana application that gives new meaning to the word farce even in a state with an extremely mixed record of licensing businesses.

The licensing fiasco in Nevada’s booming new industry has been so mortifying it compelled Gov. Steve Sisolak and new Taxation Director Melanie Young to forward new regulations meant to increase transparency through the ongoing state Legislature. Sisolak signed into law SB32 on Friday.

That could stanch the bleeding of the credibility of the fledgling process, but there will still be a price to pay in court.

Filed by attorneys Will Kemp and Nathan Rulis, the MM Development/LiveFree motion calls out DOT for failing its legal mandate and the provisions of the license application process. The department inherited responsibility for licensing from the state Division of Health and Human Services last year.

By law, the DOT was required to grade applicants, each of whom paid nonrefundable $5,000 fees, on a list of criteria ranging from operating experience and diversity to showing of an established financial plan, evidence of sufficient resources, the amount of taxes paid, a staffing plan, ability to care for the product “from seed to sale,” community impact, and a detailed building plans.

DOT is accused of failing to consider diversity in its grading and scoring process. The motion makes clear a DOT spokesman admits this wasn’t done. That violates the law.

Using six temporary employees from Manpower to grade the applications with millions hanging in the balance violates common sense. That’s not a criticism of the contract workers; someone at DOT owes them an apology for putting them in the middle. Plaintiff attorneys call the workers’ qualifications “sketchy,” but perhaps they’re not country music fans or have never needed a good welder.

More seriously, “These licenses are likely worth tens of millions of dollars each,” the motion states. “They will generate tens of millions of dollars in tax revenue over the next few years. Yet the DOT improperly delegated its duty to grade the applications to a temporary agency.”

Then the questions get stickier. Why was Elloyan, a former food health inspector, called a “marijuana specialist?” What was the thought process behind assigning a former Office Max salesperson to grade financial plans for applicants whose companies, if successful, would be worth a fortune?

And while we’re asking questions, didn’t anyone find it just a little strange that four companies could receive a total of 32 licenses when a slate of other applicants had previously successfully navigated the process?

Although Kemp admits he’s heard some “ridiculous rumors” about the licensing process in recent weeks, he says he believes the breakdown was more a matter of ineptitude than something shadier.

“I’ll stick with incompetence at this point,” Kemp says. He also expresses hope that corrective measures are on the way from the legal, legislative, and regulatory arenas. The DOT’s Marijuana Enforcement Division and state Cannabis Compliance Board have their work cut out for them amid rising stakes.

“Five years from now, it will be like gaming here,” Kemp predicts, “but it’s not like gaming now.”

And that’s the name of that tune.

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 Contact him at [email protected] On Twitter: @jlnevadasmith


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