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Marijuana licensees to face new scrutiny

The Department of Public Health has notified companies approved for provisional licenses to run the state’s first medical marijuana dispensaries that they will be required to undergo extensive additional background checks, an action that caps weeks of controversy about the selection process.

The department’s letter, obtained by the Globe, states that background checks will now be required on anyone “who will have any involvement” with the proposed dispensaries, including volunteers, consultants, advisory board members, staff members, and all corporate and individual investors.

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Previously, the agency had said it would review only those who contributed 5 percent or more toward the operations, as well as the board of directors and members of the executive management team and corporation.

It is unclear whether this new round of scrutiny will delay the opening of the dispensaries, most of which were expected to be running by August, according to earlier projections by the department.

The expanded background checks come as the state defended its selection process in Suffolk Superior Court Thursday, trying to fend off challenges by three companies that were not among the 20 applications chosen in January for provisional licenses. The three companies are seeking to halt the process.

Since the state announced its choices, several problems have surfaced about misrepresentations and conflicts of interest involving several of the companies selected, and state officials have acknowledged they did not check the veracity of the companies’ statements in their applications.

“All the vetting should have been done before they awarded any of the licenses,” said Stephen Werther, president of Alternative Compassion Services Inc., which unsuccessfully applied for a dispensary license in Bridgewater but is not a party to the suits.

‘We are entitled to a process that follows the regulations. . . . And they didn’t do that.’

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A spokesman for the Department of Public Health declined to comment Thursday.

Letters about the intensive background checks were sent on March 14 to companies selected for the 20 provisional licenses.

“These follow-up background checks are only one part of the ongoing verification process,” these letters said.

On Thursday, the agency sent similar letters to six companies that were not chosen for provisional licenses but were invited by the state to reapply in one of the counties that has not yet been earmarked for a dispensary.

Companies are being charged $550 per individual checked, according to the letters. That’s in addition to the $30,000 charged for the application fee in November.

Amid the brouhaha, one of the companies that has faced a barrage of criticism about its plan to open in the Back Bay has apparently inked a deal with a new landlord to move its facility from Boylston Street to Stuart Street, which runs through the city’s theater district.

Local business groups had raised an uproar, saying the fashionable, upscale shopping district was not an appropriate site for a drug dispensary. Good Chemistry, the applicant, had also misrepresented the local support it had received for the project. The company attributed discrepancies in its application to a paperwork error and said it had not intended to falsify information.

“We have identified a new location and have talked to a significant number of people to make sure it is a location that is acceptable to a majority of people, and we are in that process,” Jim Smith, a lawyer for Good Chemistry, said Thursday.

Lawyers representing three companies whose applications to operate dispensaries were rejected urged a judge Thursday to issue a preliminary injunction that would block the state from awarding any final licenses and require the agency to start the process over. They argued that the process was unconstitutional, discriminatory, and in violation of the Health Department’s regulations.

Suffolk Superior Judge Mary K. Ames took the request under advisement after questioning how applications were scored and whether the losing applicants have standing to challenge the scores of the winners.

“We are entitled to a rational decision-making process,” said Alexei Tymoczko, a lawyer arguing on behalf of Apex Compassion & Wellness Center, which applied for a dispensary in New Bedford, and Striar Center for Compassionate Care, which proposed a dispensary in Brockton. “We are entitled to a process that follows the regulations. . . . And they didn’t do that.”

Tymoczko said the companies do not know how the state selected the 20 applications that won preliminary approval because state public health officials have refused to release detailed scoring sheets. He said the state failed to thoroughly scrutinize the applicants during its two-phase selection process, and now is adding a third phase to complete reviews — such as background checks — that should have been done before.

“The community is unfairly disadvantaged if there is an unsafe dispensary, if a dispensary is fraudulent,” Tymoczko told the judge.

But Assistant Attorney General Joel Beckman, representing the Department of Public Health, said the dispensary applications “were all scored individually on their merits” and the companies that filed suit failed to present any evidence that the state was arbitrary and capricious in denying their requests for licenses.

Beckman said that the Department of Public Health “has maximum discretion to determine whether an applicant is qualified, given the critical public interest in patient care.”

He argued that the losing applicants are not entitled to see the detailed scores of the winners because officials did not compare applications as part of the scoring process. He also insisted that the state did not change its selection process after announcing the 20 preliminary winners.

Attorney Robert Carp, who represents 1 Releaf, which lost its bid for a dispensary in Framingham, said state officials deducted points from the company’s score for “minor deviations” – such as attaching the company’s bylaws, yet failing to sign them.

“It’s hard to understand how anybody else could be prejudiced” by the fact that the bylaws were not signed, Carp told the judge. “We think it was discriminatory.”

When the judge challenged Tymoczko about what constitutional right his clients are being deprived of, he said it is the same right that pharmacists have to obtain state licenses that allow them to dispense drugs.

“In this case,” he said, “what we are really talking about is the right to work.”

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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