Corruption, backroom deals, local politics mire N.J.’s legal Weed rollout

Corruption, backroom deals, local politics mire N.J.’s legal Weed rollout

Permission to open cannabis businesses is a daunting, opaque and unfair process, they claim.

New Jersey promised a fair and ethical cannabis industry in which mom-and-pop shops would thrive. The law crafted by state legislators allowed towns, with little oversight, to authorize who can sell weed legally.

Cannabis entrepreneurs seeking a piece of the billion-dollar industry are saying they’re being exposed to extortion, intimidation and political savagery. Municipalities have the ability to set their own fees, licensing schemes and preferences independent of state supervision in a way that exceeds virtually every other regulated industry including liquor licenses.

The state created a regulatory agency with limited power to address concerns of wrongdoing, effectively impeding the expansion of the market, observers say.

Where the War on Drugs ended another one began, eating alive some of the very people legislators claimed they wanted to help. Accusations of weaponizing eminent domain, applicants fearing for their family’s lives for speaking out, city councils strong-arming others to not speak to the press, conflicts of interests, lawsuits and more have opened up a new battlefront.

On the frontlines in the City of Elizabeth is Greelensky Charles, a 38-year-old married father of two, who wants to sell cannabis legally.

He had walked away from the lucrative business of selling unregulated and untaxed cannabis. Soon after the adult-use referendum passed in New Jersey in 2020, he sold his other legitimate businesses to get into the state’s nascent market.

Part of the promise of New Jersey’s legalization was to give unlicensed dealers like him a chance to come out of the “legacy” market shadows and counter decades of federal and state drug policy that unfairly targeted members of underserved communities.

But that promise, says Charles and numerous other small business people and legal advocates, has been marred by a byzantine, sometimes torturous process of obtaining municipal approval to operate. They say, too, the current approval structure is already leading to unfairness and manipulation — which will only get worse if left unaddressed.

“I gave up everything I built for this, just to be told I’m taking a business risk by following the rules,” said Charles, who has previous cannabis arrests. “It’s those who are taking advantage of us and robbing us of our opportunities that are contributing heavily to the barriers, causing the industry to roll out so slow.”

For months, Charles has been accusing officials in Elizabeth, one of New Jersey’s most populous cities, of using arbitrary standards to not license him, ranging from parking and traffic, to being too close to a church. Yet at the time Charles applied to open his business, named CannAbyss, there were no such rules in place — a point the city has acknowledged.

Charles further alleges his application was denied, in part, because he refused to donate money to the city.

The conflict has spilled over into a lawsuit Charles filed against the municipality earlier this year. In the lawsuit, he cites multiple interactions with him and the city zoning director, Eduardo Rodriguez, as well as a November 2022 meeting with Elizabeth City Council Chair Frank Mazza. He was asked about making financial contributions to the city, his lawsuit says.

Charles’ municipal faceoff is not an isolated incident.

In small towns and big ones, lawsuits and allegations of wrongdoing and unfairness related to licensing have been emerging across the state in recent months, with concerns coming from applicants, local politicians, lawyers and state officials.

Underlying the complaints is an increasingly widespread concern that, in allowing individual municipalities to regulate weed business licensing with no active oversight, the state has created a landscape ripe for potential corruption.

Moreover, many believe the ones suffering the most are the very people — small business entrepreneurs from disadvantaged communities — that legal weed legislation was supposed to be helping.

“You let the municipalities do whatever they want. What did you think was going to happen? This is Jersey,” said a source who declined to use their name out of fear of getting their license rejected in a municipality. “It’s like they forgot what state they were in.”

In an ongoing, yearlong investigation, NJ Advance Media has identified multiple circumstances where conflicts of interest have gone unchecked, and where political favoritism has been cited among applicants.

Among some of our past and current findings:

  • In Roselle Borough, officials received donations from a cannabis applicant, using the funds to finance a trip to Washington D.C. for the Borough Council president — leading to complaints from another council member, and a member of the town’s planning board.
  • In Oaklyn, a legal dispute erupted after the town used eminent domain and code enforcement to take over a property from a landlord who refused to sell to a cannabis applicant.
  • In Metuchen, a lawsuit claimed the municipality scored cannabis applicants inconsistently and cherry picked the one applicant they wanted.
  • In Morristown an applicant came forward alleging the town scored applicants arbitrarily and put in requirements that would have made it difficult for most small applicants to compete – in favor of larger operators.
  • In Hopewell Borough, the municipality’s mayor has been accused of using his position to help secure a license for an applicant he had ties to as a lawyer.
  • A lobbying firm owned by state Democratic Committee Chair Leroy Jones successfully represented a cannabis applicant in East Orange, where Jones has considerable influence over the city council — leading to charges of political cronyism by another East Orange weed business applicant.

These and other situations paint a portrait of a legal cannabis community in turmoil. It’s also an alarming echo of what happened in California — after the state voted to legalize weed in 2016 — where local municipal control of the market has led to widespread charges of corruption.

Without immediate course correction and greater state oversight, critics say, the health of the industry will be imperiled, and the promises of legalized cannabis legislation will be wholly undermined.

“You could ask anybody in California who supported [legal weed,] if we had a do-over, the biggest, most important number one takeaway would be — if it’s going to have a local-control provision, it’s not even worth passing this law,” said Kenny Morrison, co-founder of the California Cannabis Manufacturers Association in an October 2022 interview.

On the horizon

When New Jersey legalized recreational cannabis more than two years ago, it did so with the promise of creating a fair and equitable industry that would spark a “green rush” to create new businesses and jobs, while benefiting those most harmed by the war on drugs.

Prior to being named state Senate president, Sen. Nicholas Scutari was the chief sponsor of a legalization proposals in New Jersey.(Aristide Economopoulos | NJ Advance Media)NJ Advance Media for

State Senate President Nicholas Scutari, who was the chief sponsor of a legalization proposals more than five years ago, had penned an op-ed promising that the intent of legalization was to heal the harm from the War on Drugs.

“Marijuana legalization in New Jersey has never been about a money grab but about addressing the unfairness and hypocrisy in our state and national drug laws,” said Scutari in a 2020 piece titled “The bill legalizing cannabis has always been about social justice.”

Executing on that promise, however, has been another matter.

A state Cannabis Regulatory Commission was established, with five members appointed by Gov. Phil Murphy and top legislators from each chamber. And that board has also been vocal about its commitment to inclusion, creating pathways for minority-, women- and disabled veteran-owned businesses, as well as those harmed from the decades-long policy of incarcerating people for selling or using the plant.

“I think it’s important for us to continue to underscore how even those who have a prior cannabis conviction, doesn’t matter what it’s for, you have an opportunity to join us here,” said CRC Chair Dianna Houenou in a March interview. “You have an opportunity to still be a part of this process.”

Yet there is nothing in the existing legislation that requires municipalities to hold themselves to such an inclusion mandate, nor is there any meaningful statewide oversight of the municipal licensing process. When Murphy signed into law cannabis legalization in February 2021, the state effectively structured it this way under the guise of “home rule.”

The amount of power that latitude gives, alongside regulators with no authority on how municipalities get to license, is a dynamic that critics are calling a fatal design flaw whose implications are only beginning to be felt.

“The Senate knows what kind of landscape their lack of certain protections in the cannabis legislation created,” Charles said. “Giving the municipalities so much authority breeds corruption.”

In Charles’ case, he claimed in a lawsuit that during a meeting to discuss a license for his proposed business, Elizabeth’s zoning director, Eduardo Rodriguez “inquired about CannAbyss’ proposed financial contributions to the City of Elizabeth.”

Nevertheless, his application was denied, on the grounds that the proposed business would be too close to a church and that there was not enough parking. In an April 12 administrative hearing, Elizabeth lawyers argued that regardless of having no such rules in place, they could decide at their own discretion what was and was not too close to a church, and whether a site had enough parking spots, on a case-by-case basis.

According to Charles’ lawsuit, the hearing officer agreed that CannAbyss had satisfied the requirements laid out in Elizabeth’s own code and ordered the City of Elizabeth to approve CannAbyss’ license application.

Yet at a subsequent meeting the City Council again denied Charles a license.

Elizabeth officials have not responded to multiple requests for comment, including Charles’ allegation he was denied approval because he hadn’t donated money.

City officials argued in legal documents that the administrative hearing Charles won was for his application to move forward to the City Council, but still provided them the option to vote an accepted application down.

Without action from the Legislature or municipal cooperation, the vision of a socially equitable industry may remain elusive for many aspiring cannabis entrepreneurs, operators say.

One of them is East Orange native Precious Osagie-Erese, co-founder of Roll-Up Life, a Black-owned cannabis delivery service that received a conditional license from the CRC for a cannabis store.

She brought up concerns to the press and municipality about the state Democratic Committee Chair Leroy Jones using his lobbying firm for an applicant in East Orange — where he also serves as the county chair and municipal chair of Democratic political committees.

Her concern was that in a municipality with limited licenses this presented a glaring conflict of interest.

“While we understand this is a legislative fix, I implore our CRC to speak out on this,” Osagie-Erese said at a CRC public meeting in April. “Go to these council meetings, speak with these local officials, because we are being gutted on the municipal level. Yes, we are business owners, but this is also our lives.”

Days later after Osagie-Erese’s comments, one of the CRC’s commissioner’s, Charles Barker, gave a speech at a cannabis event inside one of America’s and New Jersey’s largest shopping centers, American Dream mall.

State Cannabis Regulatory Commission board member Charles Barker speaks at American Dream Mall on April 21, the one year anniversary of New Jersey's cannabis market opening.Jelani Gibson for NJ Advance Media

“The market conditions still do not favor small independent businesses getting off the ground — especially small independent Black and brown businesses,” Barker said on April 21. “The future of legalization is municipalities opting in with provisions that mirror or are better than the CRC’s.”

Roll-Up Life is still seeking full licensure.

Aggravating factors

There are close to 70 dispensaries dotting the state. These business owners all have their war stories to tell about how they won approvals.

In order for a business to get full permitting from the state they have to go through a municipal approval process that involves votes from city council, planning, zoning and in some cases going through locally appointed cannabis boards and application processes.

The majority of the state is not open for cannabis business. Roughly 70% of the municipalities in the state have opted out of allowing cannabis licenses to apply. For the towns that have opted in, many of them have caps. That means that there’s a deluge of applicants that have to fight it out in the few municipalities that allow cannabis, making the stakes all the more higher.

Houenou, the CRC chair, has cited shared responsibility among all branches of government and the influential business stakeholders that interact with it.

“We need landlords to stop jacking up rents, we need investors to stop trying to take majority ownership of the business. We need investors to stop trying to prevent people from being able to pay back their loans if their business is successful,” she said in a March interview. “We can only see equity take flight and be brought to life if we all work together and we all row in the same direction.”

Out of the more than 2,000 applications submitted to the CRC, roughly 1,500 have been approved by the agency. A large portion of those applications are conditional licenses that still have to go through a local approval process and many are asking for extensions. Nearly 650 extensions have been granted this year.

At a board meeting earlier this month, the CRC mathematically broke down the top reasons for requesting extensions with municipal approval delays at 64 percent, lack of site control at 59 percent and access to capital at 19 percent.

Site control also involves being properly zoned, a process that can be fraught with political maneuvers as well.

“Zoning boards and stuff like that are usually politically controlled — the mayor and city council are going to have a say on what businesses get approved,” said Paterson-based Assemblyman Benjie Wimberly in an interview last year.

Wimberly also suggested that there should be ethical oversight of municipal licensing schemes and open meetings to accompany those oversight inquiries.

“The big business guys who come in and do projects, they have ways of getting through, usually these guys are donors and things like that,” he said. “They’ll be able to cut some of red tape that the average person’s not.”

Meanwhile, the individual stories coming out of municipalities continue to raise serious questions.

In Roselle, for instance, Borough Councilmember Cynthia Johnson and planning board official Sylvia Turnage have decried the town’s process for awarding cannabis applications.

Both claim Roselle encourages cannabis applicants to donate to its recreational fund, tainting what is supposed to be an unbiased process.

Johnson and Turnage pointed to a cannabis company, Joyleaf, as having donated money to the municipality’s recreation fund.

The company did not respond to a request for comment.

Turnage and Johnson said that money was earmarked for a D.C. trip involving the city council president.

In Roselle Borough, Councilwoman Cynthia Johnson, left, and Planning Board member Sylvia Turnage have raised concerns over its unfair licensing process.Jelani Gibson for NJ Advance Media

“If someone’s going to come out here and do business with Roselle, I don’t have an issue with this,” said Johnson, who represents the borough’s 3rd Ward. “What I do have an issue with — when you see vendors are sending money to our recreation department.”

During this year’s earlier election, Johnson suggested she would be supportive of an ordinance that banned cannabis applicants from donating to the municipality during the application process.

“I am confident that our application process for cannabis applicants is open, fair, and legally sound,” Roselle Mayor Donald Shaw said, when NJ Advance Media inquired about the donations in February.

“There are transparent fundraising efforts to cover the costs of activities for this inspiring borough initiative,” said Wilkerson. “I appreciate the support of all community partners that support goodwill initiatives in Roselle.”

“We definitely need safeguards in place,” Turnage said. “I never want any applicant that comes before the planning board to feel pressured to give a donation to elected officials with the perception that it will make it easier for them to be granted approval.”

Small businesses, big stakes

Complaints have also emerged out of Teaneck, another of the 100 or so municipalities that has opted to allow cannabis businesses to serve its residents.

Joshua Perez said he applied for a cannabis license in Teaneck last year, but he believes some city council members were not supportive of his proposal.

Perez also alleged a councilperson, Mark Schwartz, violated confidentiality agreements and leaked information to anti-cannabis activists, who showed up at public meetings to oppose his application.

Schwartz denied the validity of Perez’s allegations but said the council could still act independent of any one member’s views on cannabis.

“Any conversation with any one council member cannot bind the township,” he said.

Perez also said he spent about $150,000 on legal fees, consultants and other expenses related to his application.

Sebastian Castillo, meanwhile, is one of the first 11 dispensary licensees in the state. The CRC granted him a conditional license in May 2022, but he too had trouble finding a suitable property in Teaneck.

Castillo alleged that the municipality zoned him in one block of one area, a zoning so restrictive to the point where it made it hard for applicants to buy property. He said the municipality had not responded to him for months with next steps to address his concerns.

Castillo said he was still hopeful he could open his dispensary, but said the process was challenging and costly — not only to him but for many applicants, which left Castillo with a stark assessment about his cannabis license.

“It’s almost been like a curse more than an opportunity,” he said.

The municipal legal counsel disagreed with Perez’s and Castillo’s statements.

“We categorically deny that any councilmember breached any such confidentiality requirements,” said township attorney Scott Salmon of Perez’s allegations.

“Moreover, to the extent that any potential applicant has requested information as to the zoning areas in which cannabis dispensaries are permitted, we cannot provide legal advice and encourage applicants to seek competent legal counsel if they are trying to obtain a cannabis license,” he added of Castillo’s criticisms.

“Teaneck is itself in the process of retaining its own cannabis counsel to help revise our cannabis ordinances and set a clear procedure (and requirements) for applications,” Salmon continued.

Castillo had come to a grim conclusion about the promises of the industry and his conditional license.

“Receiving this license as someone who’s not a multimillionaire or doesn’t have deep pockets ... to be that person, it feels like I got screwed by this,” Castillo said.

The municipality’s recently elected mayor, Michael Pagan, who took the position earlier this year, provided comment independent of the municipal legal counsel and said he took the allegations seriously.

“I’m really concerned about these accusations and I hope we can get to the bottom of this,” he said when told of applicant’s concerns.

This month, Perez got the opportunity to see what the town’s redeveloped process looked like where they brought an additional lawyer specializing in cannabis, Ronald Mondello, who is also the cannabis counsel for Jersey City.

“He’s been straight with us,” Perez said of Pagan and the new process the municipality was putting together. Perez still reiterated that local officials had an inordinate amount of power over applicants that had to navigate local politics and financially hold on while doing so.

“We’re at their mercy,” he said.

Land disputes

The process of a municipality approving cannabis isn’t just limited to disenchanted applicants. It has also left frustrated landlords who want to sell or rent properties to those applicants.

In the small town of Oaklyn, after negotiations between landlord company DSHC, and cannabis applicant Uncle Beez fell apart in 2021, DSHC alleged the town used its power on behalf of the applicant by using eminent domain to take the property.

The borough then made Uncle Beez the redeveloper.

The mayor and council authorized the municipality to acquire the property at 1 Whitehorse Pike, according to a condemnation ordinance introduced in April 2023.

“There is no public benefit or policy being advanced — just a land grab to benefit Uncle Beez,” said legal documents filed by the company’s counsel.

Sean Mack, a lawyer representing the landlord, expressed concern over the town’s response.

“Our clients were still negotiating with the applicant when they were unable to come to exact terms. The town essentially put its thumb on the scale on the negotiations,” Mack said.

Mack added they tried to find out what the applicant provided to demonstrate eminent domain was necessary and what plans they proposed.

“The response we got back was that there was nothing in writing given to the town. So it’s very concerning,” he said.

When reached by NJ Advance Media earlier this month, Bryant Greene, the owner of Uncle Beez, said he had walked away from the property and that the real estate company was trying to charge him an inflated price. Greene supported the municipality’s actions.

“When the town decided to commence an action to assure that the property was redeveloped, through eminent domain, we signed on to be the redeveloper. I hoped to build our dream in Oaklyn,” he said.

The lawsuit complicated that acquisition process.

“The delays inherent to the process, and the owners ongoing belief that they should get a massive profit from anyone trying to build in cannabis led us to bow out of that property,” Greene said. “We are still going to build our dream, and maybe someday we can work with Oaklyn again, but I owe it to my community not to get tangled in someone else’s profiteering.”

Requests for comment from the municipality’s legal counsel, clerk and city council went unanswered. In legal documents however, the town has argued it had the discretion to use eminent domain under existing law regardless of the perception on how it was being applied.

“Simply because the ordinance or resolution that is adopted by a governing body is burdensome or distasteful to some individuals does not render the same arbitrary or unreasonable,” stated the municipality’s lawyers in legal documents.

Early and current warnings

What’s so frustrating about all of this, many industry observers say, is it was all extremely predictable — and could have been avoided.

High-profile experts in states such as Massachusetts and California have advised against local control of the cannabis market due to ethical allegations similar to those cropping up in New Jersey.

This year has seen additional allegations sweep the nation. In California, a former Compton City councilman was arrested and indicted in September, alleging he and his consulting client paid $70,000 in bribes to another city council. It also included allegations that a planning commissioner had acted as an intermediary for those bribes.

In Michigan within the same month, a former cannabis regulator and chair was sentenced 55 months in federal prison for soliciting and accepting bribes.

In 2021, a Massachusetts mayor was sentenced to six years in prison for fraud, extortion, and bribes.

“It was really tragic,” said former Massachusetts cannabis regulator Shaleen Title in a February interview. “The municipalities claimed that they could license whoever they want in exchange for whatever they want no matter what the law said.”

“It’s really well-documented, so no state should be doing the same thing now,” Title said of the number of municipalities able to put their own licensing process in place independent of state oversight.

Geoffrey Lawrence, Drug Policy director of the Reason Foundation, a libertarian think tank, explained how social equity programs and promises in cannabis legalization bills across the country end up benefiting the politically connected in an April report.

“The way states have gone about it has not really improved the lives of people who were affected by the drug war,” he said. “Instead, it’s become a vehicle for corruption and patronage because these programs are set up in such a way that they can be easily exploited.”

Without meaningful legislative change, though, it’s likely accusations and cross-accusations will continue to be lobbed, and the possibility of a vibrant, small business community around legal weed will be ever more unlikely.

Consider the circumstance of Sourland Provisions, a proposed small business denied a retail sales licensee in Hopewell. In a lawsuit, Sourland Provisions alleges the municipality’s mayor, Paul Anzano, served as another cannabis company’s legal advisor and that company ultimately got approval.

Anzano has said he prefers to litigate the matter in court as opposed to the press, but that he was supportive of the applicants.

“I was hoping that they would be successful,” Anzano said.

Multiple city council members contacted by NJ Advance Media declined to comment through their legal counsel.

The dynamic of suing municipalities was complex for lawyers because they had to balance it with the needs of clients having to potentially relocate if the town doesn’t work out.

“If they know you’re out there suing their neighbor, they don’t look so favorable upon them ... even if you have a basis for it,” said Sourland Provisions’ legal counsel, Mollie Hartman Lustig.

Those power dynamics can lead to de-facto atmospheres of intimidation, Lustig said.

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