Massachusetts
    Next Score View the next score

    Marijuana licensing went awry early on, records show

    A contractor hired by the state health department to rank companies hoping to open medical marijuana dispensaries acknowledged in internal e-mails that it simply ran out of time to conduct thorough checks of some applications. Still, the health department extended the company’s contract and more than doubled its pay, records show.

    A different contractor was awarded a lucrative no-bid deal to conduct in-depth background checks yet failed to detect that a couple hired by several applicants to run proposed dispensaries had lost their own marijuana business license in Colorado because of violations.

    These latest revelations open a wider window onto the state’s troubled effort to grant licenses for medical marijuana dispensaries, a process so flawed that regulators spent five months untangling the mess.

    Advertisement

    A Globe review shows that the state’s licensing process went off the tracks nearly from the beginning, hobbled by too little time, too many conflicts of interest, and questionable work from highly paid contractors.

    Get Today's Headlines in your inbox:
    The day's top stories delivered every morning.
    Thank you for signing up! Sign up for more newsletters here

    “I have heard of minor complications in other states. But I have not seen anything that raised eyebrows . . . like in Massachusetts,” said Karen O’Keefe, who tracks state policies at the Marijuana Policy Project, a Washington, D.C., group that lobbies to legalize marijuana.

    RELATED: In 2014, Many states experimented with marijuana laws

    More than two years after Massachusetts voters overwhelmingly approved the medical use of marijuana, not a single dispensary has opened, despite the state’s goal of having the first marijuana companies open in summer 2014. The licensing process, which sparked more than two dozen lawsuits against the state health department, remains mired in controversy, even as officials predict the first dispensaries could open this winter.

    “Delays in implementation have been devastating to patients,” said Matt Allen, executive director of the Massachusetts Patient Advocacy Alliance. “Patients are forced into unsafe situations as they continue to go to the black market in search of [marijuana] . . . being robbed, assaulted, or purchasing medicine that is not tested to be free of contaminants.”

    The problems began almost from the earliest days.

    Advertisement

    The state hired two companies in the fall of 2013, one to review thousands of pages of documents from 100 applicants and rank the proposals, and the other to check the backgrounds of more than 600 people associated with the marijuana companies. Much of that work was squeezed between Thanksgiving and New Year’s, according to state records and interviews.

    Yet neither contractor was asked to verify claims made by marijuana companies in their applications. The state’s selection process simply took the companies’ representations at face value — until that approach ran into a wall of problems, which included applicants’ misrepresentations about local support.

    “Massachusetts underestimated the time commitment it would take,” said Todd Brown, vice chairman of the Department of Pharmacy and Health Systems Sciences at Northeastern University “And now it’s taking more time because they have had to backtrack.”

    Brown was part of a committee appointed by the health department to recommend dispensaries for what the state calls provisional licenses, the first step to getting a full operating license. The committee based its recommendations on reviews of applications by ICF International, a Fairfax, Va., consultant hired by the health department.

    Spokesmen for ICF and Mansfield-based Creative Services Inc., which conducted the background checks, declined to be interviewed about their companies’ work.

    Advertisement

    From the selection committee’s list, the department chose 20 applicants in late January for provisional dispensary licenses, and only then were sections of applicants’ proposals made public. It quickly became clear that some of the winners employed former political heavyweights, high-powered lobbyists, and people who once worked for the state health department. Additionally, former US representative William Delahunt, a close friend of the state health commissioner at the time, headed the only company selected for three provisional licenses.

    ‘I have heard of minor complications in other states. But I have not seen anything that raised eyebrows. . . . like in Massachusetts.’

    Karen O’Keefe, Marijuana Policy Project 

    Questions immediately arose about how well ICF and Creative Services scrutinized the applications and backgrounds of the companies.

    ICF had signed a November 2013 contract and was to be paid no more than $247,790. But state records show that ICF — the firm that said in company e-mails it was so pressed it could not sufficiently vet applicants — twice requested more money. By March, the company’s contract nearly doubled, to $478,000, as the department realized it would need help scrutinizing applicants amid a growing public outcry.

    By late June, ICF’s contract was again increased to, among other things, create “talking points” and “practice sessions” for the health department as it prepared to explain selections to the media, according to state records. ICF was also expected to participate in “routine conference calls” with the governor’s office on the selection process, the records show.

    During this stretch, ICF received another contract to help design rules governing dispensaries. State records show that ICF to date has been paid $625,047 for medical marijuana-related work but is in line to receive thousands more under the pending contracts.

    State health regulators said they did not seek competitive bids in a separate deal to conduct background checks on dispensary applicants because there was an existing contract with Creative Services to perform similar pre-employment screenings for a state lab. That contract was awarded to Creative Services just weeks earlier and was a much smaller job. Under that contract, Creative Services has performed only one background screening for the lab, at a cost of $212.50.

    State records show that Creative Services has been paid $691,431 to date for its marijuana background checks.

    But Creative Services failed to uncover court records that indicated violations forced a Colorado husband and wife to shutter their Boulder medical marijuana facility in 2012. The two were executives of companies that won provisional dispensary licenses in three Massachusetts communities. After the Colorado violations were detailed in the Globe, the companies dropped the couple and were allowed to continue in the licensing process.

    Amid near-daily revelations of other problems with chosen applicants, the health department ordered more background investigations.

    By the end of June, the health department dropped nearly half the applicants it had earlier selected, including the three headed by Delahunt, because of questions about his company’s financial structure.

    Yet many questions remain unanswered.

    A Globe public records request seeking all Department of Public Health communications regarding its management of the ICF and Creative Services contracts has been pending since September. The department has declined to respond, aside from stating that it “does not have any records responsive to that request, however, we note that [Medical Marijuana Program] executive director Karen van Unen is responsible for managing the performance of both CSI and ICF.”

    Van Unen declined repeated requests for an interview about the process. The department issued a statement from her that said: “Selecting dispensaries that meet our high standards has taken more time than originally envisioned, as was the case in other states with similar programs, but making sure we are launching this brand new industry the right way for the people of Massachusetts is our top priority.”

    State Representative Jeffrey Sanchez, who headed a legislative inquiry into the selection process, said he still has not received clear answers from the health department.

    “At the end of the day, we need greater transparency on how they made the decisions,” he said.

    One area that remains clouded is the state’s scrutiny regarding conflicts of interest among former staffers.

    Former health department manager Andy Epstein, a nurse who helped craft the state’s marijuana dispensary regulations before retiring last year, is the medical director for New England Treatment Access Inc. The company, which won approval to open dispensaries in Brookline and Northampton, also touted former US representative Barney Frank as its director of community and government relations until he resigned in March.

    The records also show another former high-level health department staffer, Daniel Delaney, was a paid lobbyist for seven companies seeking licenses. Two of those companies won state approval, including Patriot Care, the only applicant to win licenses for three dispensaries.

    Patriot Care was also the only Delaney client to name him on its state application. It also included his resume.

    Delaney told the Globe that he never lobbied his former department, but rather advised clients on the regulatory process. “I can say with certainty that I never called DPH to say, ‘This is my client, can you help me out?’ ” he said.

    Delaney said he left the health department, where he was legislative director of government affairs and director of strategic planning, to form a lobbying firm in June 2012, five months before voters approved marijuana for medical use, and said he followed state ethics laws.

    Patriot Care initially hired former House speaker Thomas Finneran as a lobbyist, then Finneran tapped Delaney for help because of his expertise, Delaney said.

    “Most of the people I worked with didn’t succeed in the marijuana application process, so I don’t think I’ve had a disproportionate success to any other lobbyist engaged in it,” he said.

    Sanchez raised questions about conflicts of interest during his legislative probe, and in response, van Unen sent him a letter that said her department relied on former employees to decide whether they had any conflicts.

    Many of the companies not chosen for a license have complained that the state’s selection process has been arbitrary and unfair — a theme echoed in several of the lawsuits against the health department, including one by Delahunt.

    During a deposition in that suit this fall, van Unen acknowledged that her agency lacked the time to interview leaders of the marijuana companies or verify any of the claims on their applications until after the department narrowed its list to 20 for provisional licenses.

    Delahunt’s suit argued the process was so flawed that part of it should be halted until the court could straighten out the dispute regarding Delahunt’s revoked licenses.

    Suffolk Superior Court Judge Thomas Billings declined, saying patients had already waited too long for dispensaries to open. But on one point, Billings agreed with Delahunt — state regulators had broken their own rules in the selection process.

    “Few things,” Billings wrote, “erode public confidence in government like an agency’s disregard for its own regulations, procedures, and policies.”

    Kay Lazar can be reached at Kay.Lazar@globe.com. Shelley Murphy can be reached at Shelley.Murphy@globe.com.