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Mass. defends scrutiny of marijuana bids

Amid problems, insists process is rigorous, reveals that $50,000 fees will be refunded

The Patrick administration has offered state lawmakers a forceful defense of its heavily criticized process for selecting medical marijuana companies, but did not provide an explanation of its failure to verify applicants’ information until after approving 20 dispensaries for provisional licenses.

In an 18-page letter to a state lawmaker investigating the licensing process, the head of the state’s medical marijuana program insisted that the health department “rigorously verifies’’ information in the applications and “investigates any allegations that information provided is not accurate.”

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But Karen van Unen, executive director of the state medical marijuana program, in a March 7 letter made public Monday, also appeared to back away from one of the requirements in the state’s licensing procedures: that applicants pay a nonrefundable $50,000 fee if they were selected for preliminary approval to run a marijuana dispensary in Massachusetts.

Van Unen disclosed that the state would refund those fees, even if the would-be medical marijuana companies provided inaccurate information before winning preliminary approval by the state.

Over the last several weeks, problems have turned up among some of these applicants. The Globe and other news organizations have reported on questions about the qualifications of key staff of several dispensaries and documented misstatements that firms made in applications about support from local officials.

House Speaker Robert DeLeo asked Representative Jeffrey Sanchez last month to examine how the state selected the companies, and he sent a long list of questions to van Unen.

“Why did [the Department of Public Health] not review the veracity prior to the award of provisional licenses?” Sanchez asked the department in questions he submitted last month. “Were there mechanisms in place to investigate potential application fraud or conflicts of interest?”

In her response, van Unen didn’t answer those questions, and instead noted that “all applicants signed a sworn statement, under the pains and penalties of perjury, indicating that the information provided in their application was complete and accurate.”

Sanchez said in a phone interview Monday that he was still reviewing the state’s responses “with a fine-tooth comb” and had “no doubt in my mind” that he would be demanding more answers from the health department.

In her responses to Sanchez regarding the state’s selection process, van Unen wrote that her department interviewed staff at the state gambling commission, which oversees the awarding of casino licenses, to shape the health department’s medical marijuana dispensary selection process.

However, the process the health department eventually chose to narrow its field of 100 applicants to 20 is significantly different from the one used by the gambling commission, which took roughly a year to scrutinize the state’s casino applicants.

The commission’s investigations were performed by Massachusetts state troopers with help from consulting firms staffed with former law enforcement agents from the FBI and the IRS, as well as forensic accountants.

That vetting process — paid for by the casino license applicants — cost about $12 million, according to the commission.

By contrast, the health department hired two consulting companies for a total of roughly $666,000, and gave them less than two months to review the applications and check applicants’ backgrounds.

ICF International was paid $335,449 to review the applications, score them, and write a summary report on each to a selection committee. ICF was to start receiving applications on Nov. 22, according to the contract, and was expected to deliver its reports 11 days later, by Dec. 6.

The second contractor, Creative Services Inc. received $331,000 to provide background searches that included a seven-year check of federal and state court records (criminal and civil); credit history; corporations search; a professional license verification; motor vehicle, sex offender, and terrorist databases; and media reports, according to state records.

The company agreed, as part of the civil court records search, to research civil suits at the county level in the applicant’s jurisdiction.

But problems with the applications have become public.

The 2012 revocation of John J. Czarkowski’s license to operate a marijuana facility in Boulder, Colo., apparently didn’t surface during the state’s search. The case was detailed in a civil suit filed in Boulder District Court.

The Globe reported last week that Czarkowski and his wife, Diane, were forced to shut down their Colorado medical marijuana facility for numerous violations, but the couple then resurfaced in Massachusetts, as the managers of three companies that won preliminary state approval in January to run medical marijuana dispensaries.

Two of those companies cut ties with the couple after the revelation, a third said it had severed relations earlier, but had failed to notify state officials.

Lesley Rich, a real estate attorney and president of a group that unsuccessfully applied for a dispensary license in New Bedford, said it’s clear that state public health officials failed to investigate and verify applicants before scoring them.

“They have gone through the motions,” he said. “They hired companies to provide score cards, almost like scoring a multiple choice exam in college. . . . They didn’t interview anybody or do any site visits. The process is very poor.”

Rich, whose company is Apex Compassion & Wellness Center, is one of two lawyers who have filed lawsuits in Suffolk Superior Court in recent weeks challenging the selection process and asking the court to halt it.

Lawyers for the state asked the court on Monday for two more weeks to prepare its case. A judge, who was slated to hear arguments Tuesday, granted the delay.

Rich said the state’s defense of its application process didn’t address the issues he raised in his lawsuit . He said health officials had vowed to disqualify applicants who failed to follow certain rules, but failed to do so.

“The [health department] will make excuses and justifications where they want to make justifications,” Rich said. “I don’t have confidence in their discretion based on what’s happened so far.

As part of the process, the application says that the marijuana companies are “prepared to pay a nonrefundable registration fee of $50,000’’ within two weeks after being notified they received approval for a provisional license.

When the department announced Jan. 31 that it had selected companies for the first 20 provisional licenses, it stated in a press release that the successful applicants would be required to demonstrate compliance with municipal rules, regulations, and bylaws before opening. It also said the dispensaries would be required to pass a state inspection, which would include review of companies’ security systems, architectural plans, and marijuana growing process.

There was no mention of any additional verifications.

But since problems started surfacing, the department has since said it intended all along to engage in an additional review process that scrutinizes assertions made by applicants who won preliminary approval.

Mark Arsenault contributed to this report. 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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