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Government & Politics

Report says agency obstructed examination of Missouri medical marijuana program

 

A memo written by counsel for Missouri House Democrats says the agency responsible for regulating the state’s medical marijuana industry obstructed an oversight committee’s examination of the program.

The memo, which was obtained by The Star on Monday, also alleges conflicts of interest and other issues with a consultant the state hired to score applications for medical marijuana licenses.

It also says that Missouri Gov. Mike Parson’s office was able to influence the state’s new medical marijuana program — namely how applications were scored and a report later used to limit how many licenses would be awarded.

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The report written by Casey Millburg, counsel for the Missouri House Democratic Caucus, was a review of findings from records sought by the Special Committee on Government Oversight from the Missouri Department of Health and Senior Services.

The memo adds to scrutiny of Missouri’s nascent medical marijuana program, which voters approved in 2018 though a constitutional amendment.

The committee received thousands of documents from a request for records made in May as scrutiny of the program was well underway. The request was made on the heels of several lawsuits filed by unsuccessful applicants who claimed irregularities in how licenses were evaluated and handed out.

“The allegations of executive branch interference in the committee’s work and the potential implications that raises are disturbing,” said Millburg’s memo. “Unfortunately, a careful and thorough review of the records provided to the committee raises other serious concerns.”

A spokesperson for DHSS said Monday afternoon that the department had not seen the memo and would not comment on it.

Parson, who met with reporters on Tuesday after an appearance in Kansas City, said the memo was the product of a House aide working with Democrats with an election fewer than two months away.

“There’s absolutely no interference,” Parson said. “I don’t even know why some aide would be able to write a letter and all of a sudden that even becomes newsworthy. If we do that, we’ll be chasing stories from here ‘til Election Day on both sides of it. It’s ridiculous even to be repeated.”

Millburg’s memo cited “a frustrating series of departmental obfuscations and obstructions in response to warranted concerns and questions about the state’s medical marijuana licensure process,” and accused DHSS of not providing other records that the committee sought without providing an adequate explanation.

A conflict of interest?

Records obtained by the committee include an email that appears to show a consultant hired by the state to score license applications may have had a conflict of interest.

The memo points to an Aug. 21, 2019, email from Beth Heidrich to her husband Kurt Heidrich, both co-founders of St. Louis-area medical marijuana company KindBio. The email recounts a conversation she had five days earlier with Chad Westom, who founded marijuana industry consultancy Veracious Compliance Solutions.

Veracious Compliance Solutions joined with Oaksterdam University, an unaccredited institution offering studies in the cannabis industry, to form Wise Health Solutions, the firm hired by Missouri to score medical marijuana licenses.

Beth Heidrich’s email said she received a call from Westom that lasted for 30 minutes and came in response to her seeking help with KindBio’s application.

“During the call he mentioned other clients, specifically one in MO for which they were consulting for a vertical operation,” Beth Heidrich’s email says.

In marijuana industry parlance, a vertical operation is involved in several steps of producing, cultivating and selling medical marijuana. In Missouri, a vertical operation can apply for several types of licenses.

The name of the vertical operator apparently referenced by Westom is not disclosed in the email or the House Democrats memo. But the memo says at the time Westom placed the call to Beth Heidrich, it was long after bidding started for the Missouri contract to score licenses and a week after the state awarded Wise Health Solutions the contract.

“At the point Mr. Westom’s conversation with KindBio occurred, all involved in WHS (Wise Health Solutions) would have been well aware of their obligation to avoid conflicts of interest, such as by simultaneously consulting for a vertically integrated marijuana client in Missouri while scoring marijuana licensure applications.”

Heidrich’s email said Westom asked what state she was applying for — “even though he must have known from my online inquiry,” the email says.

“I said MO and he said there was a conflict of interest as he had just found out he was awarded the contract to score the MO applications,” her email said.

KindBio ultimately won licenses to cultivate marijuana and manufacture marijuana-derived products in St. Louis.

In a phone call with The Star in August, Kurt Heidrich said he and his wife had reached out to Veracious to learn more about one of the firms involved in the scoring process.

Heidrich said Westom told them “after we get our license, he would be happy to work with us, get up and running, compliance and all that other stuff.”

Westom, who has previously denied any conflicts of interest in connection with his work in Missouri, did not answer a phone call or an email seeking his response.

A week after this story was published, Westom called and disputed Heidrich’s account of their conversation. He said it lasted about five minutes and that he ended the call when he learned she was a Missouri applicant.

Westom also denied consulting with any clients in Missouri and said accusations of conflicts of interest were not true.

“There’s just no basis for any of these allegations,” Westom said.

In an email to The Star for an earlier story about allegations of conflicts of interest by unsuccessful applicants, he said: “We were extremely diligent to prevent even the appearance of a conflict, and all personnel provided the State of Missouri with a signed attestation regarding confidentiality and conflict of interest.”

DHSS has also previously denied conflicts of interest.

AN UNDISCLOSED CONTACT

The memo also questions the influence of the Missouri Medical Cannabis Trade Association, which connected Westom with the Missouri Department of Health and Senior Services.

In December 2018, Jack Mitchell, who at the time chaired the association’s government affairs committee, emailed DHSS Director Randall Williams to introduce him to Rebecca Gasca, who had been involved in Nevada’s marijuana licensure process. She alluded to another state regulator in Nevada, presumably Westom, and said she would connect him with DHSS “per Jack’s request.”

Mitchell, whose firm ultimately won several marijuana licenses from the state, is no longer a member of the trade association’s board.

Millburg’s memo says the oversight committee is entitled to question why Williams didn’t disclose this connection earlier and that “it is further justified in inquiring whether Mr. Westom was connected with any other DHSS officials earlier than has previously been shared.”

Several other individuals in the trade association’s leadership were copied on the exchange between Mitchell and Williams, including several who were involved in ventures that received Missouri licenses.

A spokesman for the trade association had not seen the report when reached by phone Monday evening.

THE GOVERNOR’S OFFICE

The memo says records obtained by the committee show Parson’s office twice had opportunities to shape rules that would prove influential on both how medical marijuana licenses were scored and how many were given out.

Records obtained by the committee show DHSS involved the governor’s office, and other state agencies, in reviewing draft medical marijuana rules in 2019. The governor’s office was also involved, the memo suggests, in a study to evaluate the demand for medical marijuana in Missouri. The report later helped shape limits on how many licenses would be approved.

The memo says it’s not unusual for the governor’s office to be involved in rule making.

“What is notable about these instances is they reflect an apparent deviation from MMD’s (Medical Marijuana Division) commendable practice of seeking input from a group of stakeholder departments with relevant experience across the executive branch,” the memo says. “The governor’s office twice had unique opportunities to review advance information and help shape matters that ultimately proved influential to the licensure process and its outcomes.”

A SHAKY ROLL OUT

Missouri’s medical marijuana program has been dogged throughout the last 12 months, even beyond the complaints of scoring irregularities from applicants who didn’t receive licenses.

The Star reported in March that a federal grand jury demanded DHSS turn over all records related to license applications from four individuals. The four names were blacked out. But shortly after the Missouri General Assembly convened for the 2020 session, lawmakers, lobbyists and staff received visits from FBI agents.

Millburg’s memo says that in May 2020, “credible allegations” emerged about executive branch interference in the oversight committee’s investigation, but said it would refrain from disclosing details until the committee can discuss the matter.

The memo concludes with advice that oversight committee members who experience interference or threats in response to its investigation should report it to House counsel or the FBI. The final appendix of the report is contact information for regional FBI field offices in Jefferson City, Kansas City and St. Louis.

This story has been updated to include comments from Chad Westom.

The Star’s Jonathan Shorman contributed reporting to this story.

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