FBI Investigating Alleged Corruption in Sacramento Cannabis Industry

The Federal Bureau of Investigations is examining possible public corruption tied to the local marijuana industry in Sacramento after federal prosecutors indicted four for reportedly directing overseas money into both campaign coffers and cannabis companies. Did public officials accept bribes in return of favorable licensing to entrepreneurs in a fiercely competitive legal marijuana market?

That’s the question being asked of marijuana industry insiders in the region. High Times reported the FBI has declined to confirm or deny the existence of such an investigation. Yet in an FBI podcast broadcast titled “Corruption Threat Emerges in Marijuana Industry” in mid-August, supervisory special agents indicated unequivocally they had noted an increasing threat of public corruption in the burgeoning marijuana market in Southern California. They explicitly sought tips that might help direct such investigatory efforts.

Another investigation by city officials in Sacramento is examining how one cannabis company owner and those associated with him were able to score eight marijuana dispensary licenses in the city – roughly one-third of the allowable number of sellers within city limits. The man reportedly donated handsome sums to numerous local politicians in the city while they were running for election and re-election.

One of the Ukrainian businessman’s purported associates has already been indicted by U.S. attorneys for alleged involvement in a conspiracy to funnel foreign money to the campaigns of certain politicians as well as lawful cannabis companies in Nevada and several other states. Two others implicated in that alleged scheme are also associated with President Trump’s personal attorney Rudy Guiliani. They were allegedly involved in a reported scheme to discredit Democratic presidential candidate Joe Biden.

Sacramento officials say they want to get to the bottom of how the Ukrainian businessman was able to secure so many marijuana licenses, even though city regulations were specifically designed to ward off this kind of ownership concentration within the industry. The concern is that the system is being exploited.

Regardless, authorities say it’s likely the cannabis business licensing process in Sacramento (and probably elsewhere in California) needs to be re-evaluated and additional safeguards put in place.

Marijuana industry advocates like NORML say the flaw lies in state law, which gives local government agencies an enormous amount of power over lucrative licensing deals, which makes it ripe for public corruption.

Our Los Angeles marijuana business attorneys have seen that local officials tend to be more susceptible to corruption because they are under less journalistic and regulatory scrutiny.

State officials may be working hard to streamline the licensing process, but the local interests at play may be hindering the process, in addition to making it inherently unfair.

As state and federal authorities continue to weed through the growing evidence of corruption between government officials and certain cannabis industry players, we expect incidents like this will continue. The ever-present threat of black market sales to legitimate businesses means local markets can be incredibly cutthroat and competitive. This incentivizes backdoor political deals for those trying to break into the market and gain a firm foothold.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

FBI Investigates Corruption in Sacramento Cannabis Industry, Oct. 21, 2019, By Addison Herron-Wheeler, Culture Magazine