When Washington voters passed a ballot initiative in 2012 legalizing recreational cannabis, they did so with the understanding it would be tightly regulated. But Ty Camp, who runs a Sifton-based cannabis farm, wonders if the scrutiny he’s facing from regulators is what the voters had in mind.
Camp, an Army veteran and business owner, said that he acquired a small share of Sunshine Farms with the intent of fully owning the business and its license, building it and selling it for a profit.
He said it took about a year to fully acquire Sunshine Farm’s license from someone who had moved out of state. But without the license, he said he couldn’t get a business bank account and retailers didn’t want to deal in cash. He said he used unvetted accounts to keep the farm running, which Camp said is what he had to do “in a really screwed-up market and a really screwed-up situation.”
Camp said he didn’t try to conceal anything from the Washington State Liquor and Cannabis Board and resolved his banking issues after getting the license. But in 2017, an officer from the liquor and cannabis board wrote a report concerning Sunshine Farm suggesting Camp had connections to drug cartels, engaged in money laundering and made false deposits. Camp denied the allegations and said the liquor and cannabis board never gave him a chance to tell his side.
“There’s no due process here,” said Camp. “You are guilty until you pay yourself innocent.”
He agreed to pay a $125,000 settlement to resolve violations of misrepresentation of fact, failure to provide records and not having his landlord on the license. But the LCB rejected the settlement and is taking it to trial, which Camp said will cost more than $150,000 and could result in the loss of his grower’s license. Brian Smith, spokesman for the liquor and cannabis board, declined to comment on the case.
How the agency regulates the roughly 2,000 businesses that hold licenses to produce, process, sell and transport cannabis has caught the attention of state lawmakers who are worried the agency is taking an overly punitive approach to an increasingly mainstream industry. During the current legislative session, Sen. Ann Rivers, R-La Center, has sponsored Senate Bill 5318, which seeks to shift the liquor and cannabis board’s approach to education and collaboration and away from penalties.
“What we have with the LCB is a situation where there is very subjective enforcement,” said Rivers. “So you could have one enforcement officer come into your facility and give you a clean bill of health and then just a couple days later a different officer could come in and write you up for several things.”
Rep. Brandon Vick, a Vancouver Republican who co-sponsored a companion bill, said that cannabis businesses are losing their licenses over “slap-on-the-wrist things” because of the “heavy-handed” approach taken by regulators.
The legislation has broad support among the industry, including the Washington CannaBusiness Association. Jim Mullen, the group’s board president and co-owner of the Vancouver-based cannabis retailer The Herbery, said that the industry has proven it has good players since retail sales began in 2014 and that it’s time for the liquor and cannabis board to relax its practices.
The bill is advancing through the Legislature with strong support, passing the Senate on a 41-5 vote this month. Representatives from the LCB have pushed back, saying that its tough enforcement policy has generated high compliance that’s been critical to protecting the state’s cannabis industry, which remains illegal under federal law.
“Because of Washington’s solid regulatory system, if the federal government is going to go after a state, it’s not going to be Washington,” said Smith.
Smith said that the agency is revising its guidelines and has hired a consultant to look at its enforcement practices. He also said that some allegations made against the board aren’t reflective of its broader practices.
The legislation has revealed disagreements between the agency and lawmakers, some of whom have sharply criticized the LCB’s leadership. Rivers as well as Vick are among a group of legislators who have openly accused the agency of having a “toxic culture” and are pushing for an even bigger change.
Compliance and cooperation
Since Washington and Colorado became the first states to legalize recreational cannabis in 2012, eight other states have followed. All have operated against a legally precarious backdrop as the drug remains illegal under federal law.
In 2013, the Obama administration issued the Cole Memo, which indicated that the federal government would not enforce its prohibition on cannabis if states that legalized it had strong regulatory environments that prevented the drug from being sold across state lines or ending up in the hands of gangs or minors. Since then, the Trump administration has rescinded the memo and delegated enforcement decisions to local U.S. attorneys.
Hoping to avoid a federal crackdown, Washington adopted a stringent “seed-to-sale” traceability system for pot businesses. According to data from the liquor and cannabis board, the agency has issued nearly 3,000 violation notices across the state (nearly 80 of which went to businesses in Clark County) over issues such as selling to minors, inadequate security systems, failing to maintain traceability and others. Data shows that since 2016, 36 businesses had their licenses canceled because of violations. In 2019, 32 license cancellations are pending.
Meanwhile, the industry generated $319 million in revenue for fiscal year 2017 and even Gov. Jay Inslee has boasted of the quality of Washington’s weed. But many in Washington’s cannabis industry say they’re still being treated like criminals.
“The licensed (cannabis) businesses in this state didn’t choose to become licensed because they wanted to break the law,” said Vicki Christophersen, the executive director of the Washington CannaBusiness Association, who has testified in favor of Senate Bill 5318 along with pot business owners.
The legislation would create a process for the state to issue notices of correction instead of civil penalties in some circumstances. It would expand the LCB’s compliance education program and would give license holders the opportunity to have representatives of the agency visit their businesses to provide guidance on complying with regulations without penalties. It would also limit civil penalties in some circumstances, including which violations result in license cancellation. A workgroup on enforcement would be created by the bill, among other provisions.
Christophersen said that cannabis businesses will run afoul of the regulators for relatively small administrative mistakes, such as employees not having their middle name on their name badge, not submitting the right paperwork after making a deposit, or moving furniture without filing a change to their operation plan.
She also said that because enforcement is anonymous and complaint-based, it’s used as a weapon by a company’s disgruntled ex-employees or by competitors. As a result, she said some businesses have never been visited by the liquor and cannabis board while others have been scrutinized dozens of times.
“It’s high stakes, and many of these people have invested their life savings, so we want to be as fair to them as we can,” said Rivers during a hearing of her bill before the House Commerce and Gaming Committee.
During the hearing, the committee heard from John Jung, an LCB agent, who said he had seen first-hand the agency’s “unfair and inconsistent” enforcement. Saying the liquor and cannabis board has a “toxic culture,” he faulted the agency’s training and record keeping and said he was retaliated against for raising concerns.
The agency declined to comment on Jung’s testimony. Chris Thompson, the LCB’s director of legislative affairs who had earlier expressed concern about the bill, told the committee that he was feeling “positively” about compromises that had been struck between the agency and legislators.
‘Culture of gotcha’
Both Rivers and Vick were among a group of legislators that are calling for a broader shift. In February, they were among 10 legislators that signed a letter sent to Inslee opposing the reappointment of Russ Hauge to the Liquor and Cannabis Board of Directors.
The letter stated that the LCB has “consistently modeled the opposite” of its stated values of respect, courtesy, professionalism, open communication, accountability, integrity, customer focus and others. The letter accused the liquor and cannabis board of using shows of “authority and intimidation” against cannabis businesses and faulted the agency for “unevenly, inconsistently and unfairly” applying rules.
“Rejection of the toxic culture at LCB should start with not reappointing Mr. Hauge,” read the letter.
Inslee responded with a letter stating that Hauge provided a valuable perspective and that a “thriving cannabis economy” required enforcement to be balanced with compliance and education.
In their letter, lawmakers questioned if Hauge’s background as a Kitsap County prosecutor made him a good pick for the three-member board. It also called out Hauge for either being “ignorant of facts” or not telling the truth to members of the House Commerce and Gaming Committee during a hearing earlier in the session.
Vick, who sits on the committee, told The Columbian that Hauge’s testimony was “irreverent” and had a tone of “we-know-better.”
During the hearing, multiple pot business owners complained of being penalized for what they described as minor infractions. Hauge pushed back saying that some of their testimony left out facts. He mentioned that the closure of The Clone Zone, an Arlington grower, happened after numerous “fair hearings.”
He denied that licenses are canceled solely for clerical errors. He also said that pot businesses are obligated to account for their product, and not leave it “lying around,” to keep it from the black market. He also said that the LCB’s conservative approach has allowed the industry to access banking services, unlike other states, and raised concerns that the bill would undermine the agency.
At times, the hearing grew tense, with Rep. Steve Kirby, D-Tacoma, telling Hauge that he was not speaking to opposing defense counsel and he should change his tone.
“I’m sorry, there is a culture of gotcha from the liquor control board and that’s why this bill is here,” said Rep. Drew MacEwen R-Union, who noted that he was trying to maintain his composure.