‘Stay tuned.’ New Michigan marijuana director hints at plans to go after black market marijuana

One thing is clear: Michigan marijuana regulators intend to increase enforcement to eradicate black-market marijuana making its way to the licensed commercial market.

Gov. Gretchen Whitmer’s placement of Brian Hanna, a former Cannabis Regulatory Agency (CRA) inspector and Michigan state police analyst, as the agency’s “acting” director, hints at a new, stricter approach by the agency.

Hanna confirmed that during a meeting with members of the media at a roundtable in Lansing on Tuesday, Oct. 25, although he was at times vague.

“I can’t talk about open investigations,” Hanna said when asked about the size of the illicit market that’s infiltrating the licensed industry and for examples. “I would say, stay tuned.”

Hanna, who’s worked as a criminal intelligence and computer crimes analyst with state police, said his first 90 days in the position will focus on buttoning down procedures, meeting with stakeholders in the industry and government and attacking illicit marijuana.

“We’re hearing about this illicit product in the market, that’s in the regulated market — we want to find that,” Hanna said from the CRA headquarters. “We want to expose that. We want to make it known.”

The bolder black market

The way things are supposed to work, every single marijuana plant and product is tracked from a seed to final sale in retail stores, using the Marijuana Enforcement Tracking Reporting and Compliance (METRC) system. Theoretically, if you purchase a package of THC gummies, you should be able to track it back to the processor that made the product and the oil that was used, but even further to the grower who supplied the plants that created the oil.

But that’s not always the case, and there are ways to outsmart computers and databases.

When, for instance, a processor receives 100 plants to extract THC oil for vaping cartridges or edibles, there is no clear way to tell if they are incorporating other plants that may not have been grown by a licensed grower. Only the final amount of produced oil is logged into the tracking system.

Other rumored means for tricking the system include adding black-market marijuana to the legitimately harvested flower to increase volume.

Since there is so much variability in the plant, ranging from the genetic strain to growing techniques, there’s no standard amount of flower or THC oil a single plant will yield.

Some unscrupulous businesses are even bolder.

There are “rumors of trucks driving around with (THC) oil, going licensee to licensee, offering illicit oil at a cheaper price,” Hanna said. “That’s the kind of stuff we’re looking for.

“I think this is the first time I’ve heard of a truck driving around from another state with oil … That’s pretty eye opening.”

Hanna said the agency relies on “human intelligence,” reports of illicit behavior, and analysis of data that alerts investigators to anomalies, such as unusual yields.

“As far as presence in the field and when we take action on that, I kind of keep that in the open investigation realm,” Hanna said. “I don’t necessarily want to reveal our tactics.”

He did confirm more “unannounced inspections” are coming.

The agency currently has nearly 170 employees, CRA spokesman David Harns said. Hanna is adding to the enforcement section and expects to top out at 60 inspectors.

Reference lab ‘under serious consideration’

While there are no specific plans in motion, Hanna said he would support the creation of a marijuana “reference lab,” a lab hired to work with the CRA for the purpose of verifying, double-checking and comparing test results issued by private labs in the market.

“It’s under serious consideration,” Hanna said. Some regulatory agencies in other state “are lucky enough to have them in house.”

Any marijuana product that reaches store shelves in Michigan must first be tested by one of nearly 20 state-licenses labs, tasked with checking for contaminants and THC potency.

The validity of results issued by marijuana safety labs in Michigan and across the nation have been called into question. There are allegations of labs intentionally issuing higher THC potency test results — which makes the marijuana more valuable to retailers — and passing product that should have failed for reasons, such as, over-limit amounts of yeast and mold or the presence of potentially dangerous pathogens. like aspergillus.

Marijuana producers are the labs’ customers, so issuing low THC results or failing product may result in the loss of revenue for the lab.

The CRA is currently tied up in litigation with one of the state’s largest lab operators, Viridis Laboratories, which is founded by former state police and operates locations in Bay City and Lansing.

The CRA on Nov. 17, 2021, issued a recall on any product tested by Viridis. A state Court of Claims judge subsequently overturned a large portion of the recall that Viridis CEO Greg Michaud called “baseless, meritless and totally detached from science, facts and data.”

Public complaints issued against Viridis by the CRA called into question the validity of Viridis THC tests results and accused the lab of using testing techniques that have never been approved by the CRA.

When asked how the lab is allowed to use unapproved tests, Hanna said: “It’s a good question. We have pending litigation, so we can’t comment on pending litigation that’s in process right now. We’re aware of the concerns.”

Remediation

Former CRA Director Andrew Brisbo in March asked the public to weigh in on whether marijuana producers should have to disclose remediation on labeling. Most who spoke at the public meeting on the topic supported greater product transparency for consumers.

Remediation is a term applied to any process that kill pests, yeast, mold or removes chemicals and metals in order to help marijuana pass mandated safety tests. This often occurs using expensive X-ray and ozone machines that kill microbes — the most common reason marijuana fails testing — but there are accounts of dipping marijuana or spraying it with certain chemicals, like hydrogen peroxide.

Some marijuana business use remediation techniques in their production process to drastically improve the chance their harvest passes testing. Others use it as a corrective measure in response to failed testing.

Remediation is generally perceived negatively within the industry, may impact quality and is not disclosed to customers.

“We’re hoping to talk about it,” Hanna said. “In fact, we just had a talk about it yesterday.”

He said if there were changes to remediation labeling, it wouldn’t happened until a new administrative rules set is established.

Delayed discipline

The Cannabis Regulatory Agency on Monday, Oct. 10, signed a consent order with the business, House of Mary Jane at 19154 James Couzens Freeway in Detroit, suspending its medical marijuana license for 30 days in addition to issuing a $75,000 fine.

It was one of the harsher punishments the CRA has issued since its inception, but it also came well after the alleged violations.

The violations stem from a May 19, 2021 surprise inspection during which the CRA employee “observed multiple bags, backpacks and duffle bags of suspected marijuana products that did not have the tracking identification numbers assigned by the statewide monitoring system attached,” the CRA said.

Hanna said the agency will tweak the way it prioritizes and investigates violations and admits that the delay in reaching a resolution in the House of Mary Jane investigation “is a valid critique.”

He said he analyzed what led to the delay, but won’t divulge the reasons publicly. “I don’t want to give an edge to those who want to hear how we do things,” Hanna said.

When marijuana isn’t tagged, there is no way to tell if was properly logged into the state system or produced by a licensed business.

The CRA is unable to determine if the marijuana found at the House of Mary Jane was from a black-market source, in part, since the business didn’t retain it, as requested by the inspector.

Furthermore, when investigators asked for video surveillance footage that all marijuana businesses are required to retain, the business said it had been deleted.

Hanna said “a consistent pattern of camera issues” when the footage is requested by investigators. He said that may be because the penalties for not retaining surveillance video are less than if a business is caught introducing illicit marijuana to the market.

“Untagged product, unacceptable,” Hanna said. “Camera issues, unacceptable. And so exposing that stuff and sending a message is part of the priority.”

Not “a lot of appetite” for social equity

The Michigan recreational marijuana laws passed by voters in November 2018 put an emphasis on helping those negatively impacted by the “War on Drugs” get into the newly legal market, something referred to as “social equity.”

The high cost for entry and other issues have made market entry by anyone who’s not well financed difficult. The state does offer extra application cost savings and support to those who qualify, but it’s negligible when taking into the multi-million-dollar investment for real estate, building improvements, equipment, employees and product that new businesses need.

Hanna said he’s “at the forefront of the learning process” regarding the CRA’s involvement in social equity success.

Harns, who also attended the roundtable with media, said 10% of all licensees qualify as social equity applicants.

“We don’t have any resources given to us from the Legislature for that,” he said. Former Director Brisbo “made sure that our budget allowed for a social equity emphasis, so we have a team that is paid for inside the CRA budget to make sure we have help with application assistance and getting people through the licensing process.”

Harns said there have been requests for more funding to help with promoting social equity.

“In the past, the CRA executive director has asked for even $500,000 and it was taken out,” he said. “There’s not a lot of appetite, right now, to invest state dollars into the social equity program, so we’re doing the best we can with what we have.”

What does “acting” mean?

There is a lack of clarity surrounding whether Hanna’s appointment is temporary or long term.

The Governor’s Office in a press release called Hanna the “acting director” and said, “the state will conduct nationwide search to select a permanent executive director.”

Hanna said he’s not been asked to interview for the permanent role and his current contract has no expiration date.

“I’m focused on the first 90 days,” he said. “I serve at the pleasure of the governor.”

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