A cannabis business that fell short in the application process to operate a retail store in the city is contesting the results, arguing the selection process was unfair and the top three finalists should be disqualified.
In its appeal filed with the city, MedMen Enterprises Inc. makes two different arguments that the company says should disqualify the three finalists from obtaining development agreements needed to establish a retail cannabis business in the city.
Argument one states that two of the top scoring applicants were unqualified to apply because of their participation in a cannabis subcommittee that helped craft the city’s regulations.
Argument two alleges that all three of the finalists made false statements in their applications, which should disqualify them.
All three of the applicants declined to comment on the appeal when contacted by the Tribune. Under the city’s appeal process, they have five business days to file formal responses with the city.
Last week the city of South Lake Tahoe released the scoring results for all of the cannabis applications. Of the 21 applications submitted to the city, 18 were for retail stores.
The city can award three development agreements for a retail store under regulations adopted earlier this year.
MedMen — a Canadian cannabis corporation with operations in five different U.S. states — finished fifth with a score of 86.3 out of 100. The company did not respond to a request for comment from the Tribune Thursday night.
The top three scoring applicants were Embarc Tahoe (97.7), Cannablue (91.8) and Tahoe Green (90.7).
MedMen contends that California’s Political Reform Act should have prohibited Embarc Tahoe’s Christy Wilson and Tahoe Green’s David Turner from participating in the application process due to their service on a cannabis subcommittee created by the city to help craft local cannabis guidelines.
The subcommittee barred participation by members of the cannabis industry because, as then South Lake Tahoe City Councilor Tom Davis told the Tribune, they didn’t want the cannabis industry dictating the subcommittee’s work.
“We excluded [those in the cannabis industry] because we don’t want them driving the conversation. This is a cross-section of the community. They are going to decide how many dispensaries we want, where we want them, how we educate the community and how we prevent youth under 21 from getting recreational marijuana,” said Davis.
City Council ultimately used the recommendations to draft an ordinance that was adopted in 2018. The ordinance was subjected to a successful referendum, which forced the city to make substantive changes to the ordinance.
Changes, which the city deemed substantive, were made and a revised ordinance was adopted earlier this year. That ordinance allows unsuccessful applicants to appeal the results of the scoring process on four different grounds.
MedMen alleges that Wilson and Turner had an unfair advantage in the application process due to their participation on the subcommittee.
“While most applicants had roughly 2-3 months to compile their applications, Ms. Wilson and Mr. Turner had roughly 20 months to put together their applications,” the appeal states.
MedMen also alleges Wilson and Turner owned or managed cannabis dispensaries in the past, which means they violated the city’s intent when it formed the subcommittee. That, the company continues, should disqualify them from applying for a development agreement.
MedMen also alleges that all three of the finalists gave false statements in their applications.
The company says while all three received nine out of nine points for having 100% local ownership, it is aware of two different business relationships that call into question local ownership.
In one situation, MedMen says it spoke with one of the applicants about a potential business partnership that would allow MedMen to receive some of the local ownership points while the applicant would gain MedMen’s experience.
MedMen says the applicant ultimately declined the arrangement because they had received over $1 million to enter into a similar agreement with a different multi-state cannabis business — one of MedMen’s competitors.
MedMen suggests the applicant, who the company did not identify because of a non-disclosure agreement, withheld information about its business relationship.
MedMen also says it believes another applicant has a financial partnership with an executive at Gap Inc. Unless that executive resides or owns a business in the city’s “sphere of influence,” the applicant, which MedMen did not identify, falsified its application.
In its appeal, MedMen does not explain how it believes those two possible situations would disqualify all three of the finalists.
MedMen is not without controversy.
As reported by Pasadena Now Friday morning, the company’s efforts to obtain a license there were facing added scrutiny after the city learned of a lawsuit by a former employee alleging racial and sexual discrimination by the company’s CEO.
In a statement to the online news outlet, MedMen called the allegations “meritless.”
Under South Lake Tahoe’s appeal process, all three applicants have five business days to respond to MedMen’s appeal.
City Manager Frank Rush will designate a hearing officer to review the appeal and the applicants’ responses and promptly initiative an investigation to determine if the city followed the selection process, and if the applicants were honest in their applications.
If a mistake was made, the hearing officer can make several recommendations to correct the issue: ending the process with the selected applicants and moving on to the next highest scoring applicants; starting the whole process over; or other remedies that would be in the city’s best interest.
The hearing officer is not meant to second-guess staff or the scoring committee with regards to the strengths or weaknesses of the applications.
The window for other cannabis applicants to appeal the scoring process closes today. As of Friday morning it was unknown if additional appeals had been filed.