Businesses that missed out on landing medical marijuana licenses in Missouri say the state should have never outsourced the evaluation of thousands of applications to a private company, according to legal complaints filed with the state.
At issue is the Missouri Department of Health and Senior Services’ decision to hire Wise Health Solutions, a private company comprised of out-of-state concerns, to review license applications and decide which ones deserved permission to grow, manufacture or sell medical marijuana.
Wise Health Solutions is a joint venture between Nevada-based Veracious Investigative & Compliance Solutions and Oaksterdam University, an unaccredited institution in California providing cannabis industry curriculum.
Jilted applicants are making the case to the Missouri Administrative Hearing Commission that it was unconstitutional to hire a private company to make what amounted in some cases to judgment calls on behalf of the state.
St. Louis-based Show Me Alliance LLC filed a complaint after being denied a cultivation license, saying that while the government can contract out some of its functions, “Duties that involve exercise of discretion or subjective judgment cannot be delegated.”
It’s not the only concern over marijuana licensing. Some of the nearly 100 complaints over the matter allege that several licenses were awarded to applicants who had consulted with Veracious. Those allegations carry no specific examples.
Chad Westom, owner of Veracious and former bureau chief for a Nevada government agency that regulated medical marijuana in that state, vehemently denied any conflict of interest.
“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,” Westom said in an email.
Clayton, Missouri, attorney Matthew Vianello has raised the issue in one of his appeals for a cultivation facility that was denied a license.
The appeal points to consulting work done by Veracious and Oaksterdam. It says “one or both entities may have offered consulting services to applicants while simultaneously grading and scoring applications.”
Vianello has filed several appeals and plans more in the coming weeks. He said he will explore the potential conflict of interest in discovery for all those cases.
“There’s not a lot of information about these companies, at least what role they played in Missouri,” he said. “I think it’s odd that they are consulting companies.”
Veracious promotes itself on its website as assisting marijuana companies with compliance and permitting, including reviews of government permit and license submissions.
“It’s certainly a question that’s worth exploring,” Vianello said. “To what extent they were offering consulting services, and if they were what systems they had in place to ensure some type of wall was in place to make sure there was no information leak.”
Westom has said that a blind scoring process, one in which evaluators were unable to see the identity of applicants, prevented conflicts and preferences.
Some complaints also involve a series of seminars held last year in Missouri involving Oaksterdam University called a “cannabis business licensing boot camp.”
The boot camps promoted themselves as a workshop to help license applicants with, among other things, “exclusive access to required industry relationships necessary to build teams and businesses that succeed.”
“Although the state required applicants to redact personal information to ensure anonymity during the scoring process, the fact that Oaksterdam offered application workshops in Missouri purporting to teach prospective license applicants how to complete the application and boost their scores while having a related entity score the applications raises potential conflict-of-interest issues,” said Greg Wu, an attorney with Shook, Hardy & Bacon who is co-chair of the firm’s cannabis practice. Wu is representing several clients appealing their licensure denials from Missouri.
Dale Sky Jones, executive chancellor of Oaksterdam University, said none of the boot camp instructors who went to Missouri had anything to do with the subsequent scoring process that Oaksterdam was involved with through Wise Health Solutions.
“I have intentionally not had any interactions with any of the participants of that training, after that training,” Jones said in an email, noting that the contract with the state came after the boot camps.
Lawmakers leery
Add some lawmakers to those who are leery of how Missouri decided to vet its medical marijuana applicants.
Reports of inconsistent scoring of applications, including identical answers being scored differently on multiple applications, has garnered the most attention and make up the lion’s share of complaints to the Administrative Hearing Commission.
Missouri Sen. Doug Libla, R-Poplar Bluff, called the issues with scoring of applications “glaring and absurd.”
“This is one of the biggest boondoggles I’ve ever seen in my 49 years in business,” Libla said. “I’m not saying someone did something dastardly, but it really doesn’t matter if it’s intentional or not. It’s the same wreck.”
Libla also questioned whether DHSS did their due diligence in choosing Wise Health Solutions.
“The fact of the matter is, I have zero confidence in the scorer,” Libla said. “The department wanted this off their back bad enough that they didn’t do a good job looking into these people.”
DHSS has said it brought on a third party to handle the scoring in order to avoid any accusations of political bias.
The intent of DHSS’s decision was probably good, said Missouri Sen. Lincoln Hough, R-Springfield.
“I believe they were looking for a way to do this in an honest fashion,” he said. “But… these are serious discrepancies, where literally questions that are answered the exact same way are scored differently. I just don’t understand, and a lot of people with financial implications are confused as to how this can happen.”
A march to recreational marijuana
As Missouri works to get its medical marijuana program off the ground, advocates are already pushing for the state to go further and approve recreational marijuana.
John Payne, campaign manager for Missourians for a New Approach, said the group officially began its work to collect petition signatures on Thursday. The group hopes to earn more than 300,000 signatures — well in excess of the 160,000 or so needed — to place the issue on the November general election ballot.
Payne said the group consists of many of the players behind New Approach Missouri, the group that championed the medical marijuana constitutional amendment ballot initiative in 2018.
He said Missouri’s medical program has taken shape faster than many others in the nation, leading the group to believe it’s time to take the next step.
“The public has really moved very quickly on this issue,” he said. “And we believe Missouri is ready.”
Payne said the state’s medical program is already exceeding expectations. A University of Missouri study in 2019 estimated 26,000 patients would participate in the program by 2022. But already, more than 30,000 Missourians have received their cards from the state to legally purchase marijuana.
“I do think people are now fairly confident in the medical marijuana program,” he said.
The recreational program would allow adults 21 or older to purchase marijuana legally without the involvement of a physician, a requirement of the current program.
Payne expects cultivators and dispensaries licensed for the medical program would be the first in line to produce and sell pot for recreational use.
“It’s kind of a way to get the system moving as quickly as possible,” he said. “That’s what Illinois did.”
Steve Vockrodt is an award-winning investigative journalist who has reported in Kansas City since 2005. Areas of reporting interest include business, politics, justice issues and breaking news investigations. Vockrodt grew up in Denver and studied journalism at the University of Kansas.
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