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DeLeo wants marijuana licenses reviewed

HOUSE SPEAKER ROBERT DeLEO

Aram Boghosian for The Boston Globe/File

HOUSE SPEAKER ROBERT DeLEO

House Speaker Robert A. DeLeo on Wednesday stepped up his criticism of the Patrick administration’s handling of medical marijuana licenses, saying state health officials must go back and thoroughly review all 20 provisional licenses they recently awarded to avoid having to restart the entire process.

“I think at the very least we have to look at the places that they have chosen,” DeLeo said during a brief telephone interview Wednesday. “I’m hearing now that a lot of the information on the applications was not verified and that’s, quite frankly, what I have a major problem with.”

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DeLeo said he has received numerous complaints from elected officials and some of the unsuccessful applicants about the state’s failure to verify information that was provided by the companies before awarding provisional licenses last month.

“I don’t know how you can give a provisional license without having people being properly vetted,” he said.

In an interview Tuesday night with NECN’s Jim Braude, DeLeo said he believed the Department of Public Health, which awarded the licenses last month, should probably start the process over.

“This morning, I would have said, ‘No. They should take a look at those where they have found errors.’ Today, I’m probably saying, ‘Yes,’ ” DeLeo told Braude.

On Wednesday, DeLeo said he was waiting for Representative Jeffrey Sanchez, who chairs the Joint Committee on Public Health, to complete his inquiry into the department’s handling of the dispensary applications.

Sanchez was tapped by DeLeo earlier this month to investigate how the health department chose the license winners and has been pressing the agency to turn over information that it has yet to disclose, including how the applications were scored and what efforts were made to verify the documents.

Since the Department of Public Health awarded the provisional licenses in January, a number of questions have surfaced about the applications. As the problems have mounted, the department has issued statements stressing that the licenses were “provisional’’ and none will be officially awarded until the applications are verified. “No one has a license — provisional or otherwise — to operate a dispensary in Massachusetts,’’ the department said Wednesday. “We are in the middle of an intensive verification process with the 20 applicants who have moved into this next phase, and we have been clear that anyone found to have lied or misrepresented information in their application will not get a license.’’

The Globe and other media have reported that some of the companies awarded licenses made misstatements in their applications about local support. The department has also acknowledged it did not check the veracity of companies’ claims in the evaluation process.

On Tuesday, a losing applicant filed a lawsuit against the department challenging the licenses that were awarded and citing a business arrangement involving former congressman William D. Delahunt. Delahunt’s group, Medical Marijuana of Massachusetts, received three of the licenses.

The Globe reported Wednesday that a nonprofit company led by Delahunt intended to give 50 percent of the company’s revenue to a management firm that is controlled by Delahunt and his business partners in the dispensary.

On Wednesday, top officers of the nonprofit defended the unusual business arrangement with the management firm, called Triple M Management.

Jonathan Herlihy, chief operating officer of the nonprofit Medical Marijuana of Massachusetts, said a payment of up to 50 percent of the revenue was justified because Triple M will be shouldering many of the marijuana company’s initial expenses and ongoing costs.

The Globe reported Wednesday that the applications Delahunt’s nonprofit submitted to win licenses for marijuana dispensaries in Plymouth, Mashpee, and Taunton projected they would earn a total revenue of roughly $49 million in the first three years, meaning the management company would get at least $24 million.

Herlihy said the management company would first deduct federal taxes and costs for purchasing equipment, furniture, and other related expenses from that $24 million before investors were compensated.

But Herlihy, who also is a manager and investor in Triple M, declined in an interview with the Globe to clearly spell out how much money investors will be making. “It’s a work in progress,” Herlihy said, adding that the financial plans described in its final applications for three coveted marijuana dispensary licenses last month were far from final.

Also unclear is Delahunt’s exact role in the management company. Two days after it filed its annual report with the secretary of state’s office in January, Delahunt and another former board member, Lianne Ankner, resigned from the management company’s board, and are now minority partners, Ankner said. But the company has failed to file papers with the secretary of state reflecting that change.

The murky relationship between Delahunt’s marijuana nonprofit and the management company that will be receiving much of its revenue raises questions about whether such arrangements violate the spirit of nonprofit laws, say business specialists. Of particular concern is that Herlihy, a top officer in the nonprofit, is still a board member in the management company, raising concerns about conflicts of interest.

“You would want any deal approved by that person to be approved by truly independent directors of the nonprofit,” said Michael Klausner, a Stanford University Law School professor. “If they are making money, they are not independent members of the nonprofit.”

While the state attorney general’s office regulates nonprofit charities, it does not have oversight to investigate other nonprofits, said Brad Puffer, spokesman for Attorney General Martha Coakley.

That would leave oversight to the state health department, Puffer said, the same agency now criticized for its handling of the licensing process.

Delahunt’s marijuana company has also drawn attention because of the credentials of the person it listed in its applications to direct cultivation and operations at its three dispensaries, Avis Bulbulyan.

The Globe earlier this month reported that Bulbulyan was listed in an initial application last fall as an executive of the company, but in the final application he was taken off the leadership team, meaning he was not subject to an extensive background check. Such a check probably would have turned up that Bulbulyan, of Glendale, Calif., filed for personal bankruptcy in 2011.

A resume later provided by Delahunt’s company after repeated requests by the Globe did not list any experience running cultivation or dispensary operations at marijuana firms.

Company officials said Wednesday that Bulbulyan has since left the company. “He had a disagreement with compensation,” said Ankner. “He had an employment arrangement that has been terminated because we could not come to terms with salary.”

Kay Lazar can be reached at Kay.Lazar@globe.com Follow her on Twitter @GlobeKayLazar. Shelley Murphy can be reached at Shelley.Murphy@globe.com Follow her on Twitter @Shelleymurph.
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