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600+ Marijuana Licensing Lawsuits Expected

By Emily Wolf / Missouri News Network

JEFFERSON CITY — A simple question set the tone for a hearing on medical marijuana licensing Wednesday: “How many lawsuits will it take for you to realize your department has made mistakes?”

Rep. Maria Chappelle-Nadal, D-University City, pressed for an estimate on the number of lawsuits the Department of Health and Senior Services anticipated. Richard Moore, general counsel for DHSS, said he expects over 600 lawsuits.

As of Wednesday, 425 appeals had been filed with the Administrative Hearing Commission, the first step in the process. Applicants have five more days to file appeals.

When Chappelle-Nadal asked how much the department was willing to pay for its mistakes, Lyndall Fraker, director of DHSS Section for Medical Marijuana, said he didn’t have an answer. After House Minority Leader Crystal Quade, D-Springfield, asked how much they anticipated spending on the legal processes, Moore said it was “certainly going to be millions of dollars, but I can’t tell you if it’ll be 2 million or 6 million.” The litigation would be paid for through licensing application fees, which are designated by law to go into a veterans fund.

The lawsuits allege various issues with the licensing process. Some applicants allege they submitted identical answers on facility applications but received different scores. Moore said it was possible for scoring differences to occur between different facility types, because different people scored the respective facility applications.

Chappelle-Nadal asked if racial and gender diversity was taken into account when awarding a contract to the company overseeing the licensing process. Initially, Fraker said he didn’t believe so, but then he changed his answer and said he thought it was. He also confirmed that there are no people of color in his office.

It was the second time Fraker addressed the committee in as many weeks. Another issue brought up in both hearings concerned Wise Health Solutions, which won the contract to score applications.

Critics questioned whether some applicants gained an advantage through boot camps that one of the company’s owners hosted for potential applicants through Oaksterdam University. Fraker said the department was not aware of the boot camps before selecting Wise Health Solutions.

Rep. Jered Taylor, R-Republic, asked if there was a prohibition on companies already involved in the medical marijuana industry, like Oaksterdam, from applying for the scoring contract. Fraker said something like that would have been mentioned on the conflict of interest portion of the application, but the boot camps were not an issue if they were done before the company was awarded the contract. Once the company received the contract, Wise Health Solutions was prohibited from conducting boot camps.

Taylor asked if Fraker would’ve been fine with Oaksterdam hosting boot camps in neighboring states, such as Kansas, Illinois and Oklahoma, if he knew about the practice. Fraker said he’d have to think about it. Moore said the company told the department it was not providing answers and advice to questions on the Missouri license applications.

Multiple lawmakers asked why the department decided to go with a third party to score applications instead of doing the scoring in-house. Fraker said the department didn’t have enough staff or resources to handle the job.

Rep. J. Eggleston, R-Maysville, said it perplexed him that the department cited a lack of resources as a reason for outsourcing when it had generated $18 million in licensing fees. Fraker said the money was designated for veterans, not for the department to use however it wanted, but avoiding the appearance of political bias was another reason to outsource the work.

“A bigger factor is that we didn’t want there to be any remote chance that people thought we were giving licenses to people we knew, political connections, whatever,” Fraker said.