Connect with us

Business

Cannabis Investors Involved In Shady Coronavirus Mask Deals, Industry Insider Claims

Published

on

Contracts, emails and spreadsheets that Juanita and Dawn Ramos shared with ProPublica detail how domestic and foreign investors, many with marijuana industry ties, seized upon the nation’s public health disaster.

By J. David McSwane, ProPublica

In late April, as an escalating pandemic shut down most of the country and the federal government shelled out billions of dollars to untested contractors for protective masks, Juanita Ramos got a call from a friend in the marijuana business.

Her friend and some other ganjapreneurs were buzzing over a potentially huge payday. They had in their possession a $34.5 million purchase order from the U.S. Department of Veterans Affairs. A contractor hired by the VA to provide 6 million N95 respirators to the nation’s largest hospital system had searched for weeks but found none of the potentially life-saving masks. So he had reached out far and wide for help, offering to cut in anyone who could help him finance, purchase and deliver masks by his deadline.

His PO, as it’s commonly called, had made its way to players in the cannabis industry, where deals are made quickly and often in cash. The friend asked Ramos: Did she want in on the action?

Ramos had modest connections in the medical supply chain through her work in legal marijuana and thought perhaps she could help terrified health care workers get urgently needed protective gear while also pocketing a little extra cash. Ramos, 66, enlisted her daughter, Dawn, 50, and both hit the phones, calling moneyed folks they knew in the marijuana business.

Marijuana retailers, operating in the no man’s land between state legalization and conflicting federal law, often get financing outside of traditional banks from private-equity firms and wealthy individuals. A famous example from The Before Time: Last fall, two indicted Soviet-born businessmen working for President Donald Trump’s personal attorney, Rudy Giuliani, tried to finance a pot business with cash from a Russian investor.

In the marijuana space, Ramos thought, there are people with deep pockets who can move money around fast, avoiding the hang-ups that might slow such an urgent purchase.

“It’s quick money,” Ramos told ProPublica. “And the broker game in the marijuana and industrial hemp industry — it’s exactly the same.”

For working the phones, Ramos and her daughter said they only made about $200, but their experience and the records they kept tell a cautionary tale for hospitals, agencies and schools that are still scrounging for masks ahead of a potential second wave of coronavirus.

Contracts, emails and spreadsheets that Juanita and Dawn Ramos shared with ProPublica detail how domestic and foreign investors, many with marijuana industry ties, have seized upon the nation’s public health disaster.

They show that some brokers attempted to use forged documents to gain access to masks coming off production lines of 3M, the manufacturer that makes the gold-standard masks capable of filtering 95% of particles that could transmit the novel coronavirus.

In one exchange, the owner of a Swiss nutritional supplement company detailed his plan to buy millions of 3M masks at $3.71 apiece and resell them to the Federal Emergency Management Agency, whose purchase order priced masks at $7 each.

The emails include bogus U.S. Food and Drug Administration certifications; videos and photos of real or imaginary mask stockpiles; bank statements claiming to reflect billions of dollars that could be wired instantly; and, of course, nondisclosure agreements to keep participants quiet.

These coronavirus-era artifacts were collected by a self-described medicine woman who lives with her daughter in Austin, Texas. It took only a few months for her to grow disgusted with what she saw in the rogue personal protective equipment market and decide to tell her story.

The Mystery Woman

I had first heard of Juanita Ramos back in April as I reported the other side of the VA deal.

I had accompanied VA contractor Robert Stewart Jr. on a private plane to Chicago, where he promised I could watch him deliver medical-grade masks to a VA warehouse. But the reporting trip yielded something different: a close-up look at the frenzy the federal government created when it agreed to pay obscene prices for masks to just about anyone claiming they could deliver. The only procurement I witnessed that day was of McDonald’s fast food.

Several times as his deal fell apart, Stewart cryptically referred to Ramos, whom he’d met on a phone call with various mask brokers. He believed Ramos had a connection to Vice President Mike Pence, the head of the federal coronavirus task force, and was greasing the wheels to help Stewart get a contract extension.

He didn’t have a number for this mythical Ramos, and I had turned up nothing about her on deadline. Ramos remained a mystery after the story ran, but a non-journalist friend of mine texted what I thought was a random joke about a nonexistent person: “Juanita Ramos is either a stripper in Atlanta or a Native American medicine woman.”

Ramos had a common name, and I was pre-filtering based on what little I knew, scouring LinkedIn and other databases for someone with Washington connections. But my friend, Crizno (don’t ask), had gone down a random late-night Google hole and found a photo of Ramos holding a dead eagle, bestowed upon her by a Cherokee Nation chief when she completed spiritual medicine training.

Weeks later, I finally contacted the correct Ramos and shared my story of Stewart’s unsuccessful VA deal. I told her he believed she was a conduit to the vice president.

“I’m reading this and I’m like holy hell — what?” she said as she saw the article for the first time. “First off, I don’t even like Mike Pence.”

Ramos insisted she has no White House connections.

“I help write legislation for medical marijuana,” she explained, referring to her work with the Utah Association for Responsible Cannabis Legislation and Sacred Roots Healing, an educational group that helped skeptics accept that non-THC cannabis products don’t make children with autism, like, super high. She’d also worked for a major CBD company in Colorado, the first state to legalize recreational pot.

“I mean, I’m down for the farmer. And believe me, Mike Pence ain’t gonna do shit for the marijuana industry or the farmer.”

“I don’t know how I became the mystery woman,” she quipped, “But this was a great ha-ha.”

It was true, as Stewart said, that she had joined a call with him and Troy King, a former attorney general of Alabama who had apparently become a mask broker. In the final hours before the VA axed Stewart’s contract, King had been helping him track down potential mask sellers and financiers.

“I said, lookit, I will do what I can to contact people that may have access to masks, but I don’t know if it can happen,” she explained, but that was the extent of her role. In retrospect, she’s not sure why she was even on the call. She said she had no connections, no masks, no funding. She complained that after that phone call, she was inundated with offers from mask brokers, which sometimes included client needs lists and “proof of life” videos of secret stockpiles of masks.

“I’m getting emails from these guys saying, lookit, I have 10 million masks or I have, you know, gloves, or we have what was the other thing? Gowns. Let us know if you need any. And I’m like, I don’t want anything to do with these guys.”

I asked her to send me examples of the emails she had collected. She forwarded an April 25 purchase order that suggests King had planned to flip the masks, buying them from a foreign seller and reselling them to Stewart, who would then sell them to the VA. In mask trade parlance it was a “broker chain,” wherein inventory switches ownership multiple times until the end buyer, in this case the VA, pays a price high enough for everyone to get a cut. Once the buyer pays up, money drips down.

That purchase order, included in an email thread with brokers I’ve independently found to be involved in the deal, suggested King, through his limited liability company, intended to buy the VA’s would-be masks from JV Tock Trading Corp., a Canadian distributor.

Chris Kruger, a managing partner at JV Tock, said the company got a call from King and other brokers just hours before the VA deal was about to implode.

The company execs were asked “if we could try and help them save their purchase order that they’re about to lose.”

Kruger said JV Tock got a call the next day saying that “the attorney general’s gonna pull some strings to help them out.”

The company decided not to work with King and was unaware of the purchase order, Kruger said. His company is on the up and up, he said, and hasn’t made much money in its efforts to get more masks to Canadian and U.S. buyers, which have led to countless dead ends.

“The entire industry is one of the most frustrating headaches I have ever dealt with,” he said. “Greed and dishonesty run rampant.”

Through a spokeswoman, King denied any involvement with JV Tock.

“The document you attached to your email is not one of my company’s purchase orders,” his statement said.

Three days later, a different purchase order showed another broker in Arizona offering to buy millions of the same type of 3M masks for $3 apiece from — wait for it — another broker. At the time, 3M’s list price was about $1.27. The VA, however, had agreed to pay about $5.75 apiece, a 350% percent markup, which left plenty of profit for a successful broker chain.

I wanted to see more. So I flew down to Texas at a critical moment in the state’s struggle with COVID-19. Hospitals were near capacity because of an explosion of new infections following Gov. Greg Abbott’s mixed signaling on the importance and enforcement of wearing masks.

“Blood Money”

Ramos lives in Circle C Ranch, a master-planned maze of cedar trees and stone facades southwest of downtown Austin, where residents enjoy a golf course and an Olympic-size pool that is, inexplicably, heated.

She’s definitely not the shrewd, White House-connected capitalist I had been led to expect. She refers to her higher being as “creator” and places colorful stones at the bottom of all sinks so that when you wash your hands, bad energy washes off and returns to the earth.

From her brown leather sectional, Ramos outlined her dream of helping people while making a modest profit, and how it was scuttled by bogus documents, misinformation and greed.

“I told my daughter, ‘Hey, if we were to look at doing this, we would do like maybe a penny or 2 cents,’” she said, referring to the potential profit margin on each mask.

The plan fell apart when friends in the marijuana industry connected her to Drew O’Malley of Boston Capital Consultants, Ramos said. Emails and records show O’Malley, whose background is in Connecticut real estate, was trying to broker multiple high-dollar deals involving foreign investors and private-equity groups, including the VA deal with King and others.

Ramos said her alarming conversations with Boston Capital Consultants eventually led her to sever ties.

“This Drew guy was telling me that they put, like, $1.25 on top of a mask,” Ramos alleged. “And I’m like: ‘What are you talking about? People are dying, and you guys are ripping people off for a buck twenty five?’ It’s like broker-broker-broker-broker for, like, 15 people in the middle, right? And then that dollar mask turns into eight bucks, or seven bucks or whatever.”

“I don’t want to get caught up in the ripping people off,” she added. “That’s blood money to me.”

Emails Ramos shared show O’Malley passed along a few letters of intent, commonly referred to as LOIs, in which prospective buyers outline how much they’ll pay for masks that are either sitting in a warehouse or on a manufacturer’s production line.

On April 29, Ramos received an LOI showing that a Zurich investor named Stephan Schmid, who runs a dietary supplement company, hoped to buy 100 million N95 respirators a week from 3M at $3.71 each. The end buyers for the deal included FEMA and hospitals.

This happened at the same time King and Stewart were trying to sell the same type of masks to FEMA at $7 apiece. Like the VA deal, the FEMA arrangement was ultimately nixed.

Schmid didn’t respond to questions.

O’Malley, who didn’t return calls and emails, is no longer employed by Boston Capital Consultants, according to his former boss, Aaron Marcy Sells.

Sells founded Boston Capital Consultants in 2018 after a career that involved marketing work for New England Patriots owner Robert Kraft, real estate investing through firms branded with his initials, launching bars and liquor brands and, more recently, trading through AMSCAN Inc., a holding company for cannabis ventures.

“They’re all big marijuana guys,” Ramos said.

Sells claims to have played no part in his company’s well-documented negotiations in the PPE trade. “If you asked me under oath what happened, I couldn’t tell you,” Sells told ProPublica.

“I don’t think Drew did anything wrong,” he added. “I think he got pulled in with some bad people. … The minute I smelled it, I pulled everyone away from it, and Drew left the company.”

Sells insisted that he shouldn’t be named in this story. “I am not involved in this Ramos and Troy King nightmare,” he said. And while I asked him multiple times if Boston Capital Consultants was as involved in the PPE game as emails sent out by his employees suggested, he provided only opaque dismissals.

“We do a lot of different business,” he said.

Ramos’ emails show the company was soliciting masks and gowns consistently through June, including in email blasts labeled “Deal of the Day.” For instance on June 5, Boston Capital Consultants sent out an email that’s an alphabet soup of PPE trade terms.

“DEAL OF THE DAY: 5.87 million KN95 Masks (FDA) – .95 cents per mask on the ground in L.A. PO/POF gets POL …”

KN95s are the Chinese version of the N95. The PO is a purchase order from a hospital or government agency. A POF is a proof of funds, such as a bank statement or letter of assurance from a bank. POL is proof of life — video showing the stock.

“THESE WILL MOVE FAST SO PLEASE DO SO AS WELL,” the email ends.

On July 14, Massachusetts business filings show Sells founded his latest venture: Safe and Clean Protection LLC. Its stated business purpose is to “manufacture and sell personal protective equipment (PPE).”

Three Paths to Masks

Resellers pursue three avenues to attain masks, according to interviews with brokers across the country and the dozens of emails Ramos shared.

The first is the all-cash spot buy, done fast to keep the feds from confiscating inventory.

A seller broadcasts that they have a mask lot on the ground, stashed in a warehouse or at a customs inspection hub. A potential buyer bids for the product and provides either a purchase order or bank records to show there’s money backing the deal. In return, the seller provides a proof of life. The money usually goes into an escrow account, similar to a real estate deal — released to the seller upon mask inspection.

Dawn Ramos said she saw brokers reselling inventory over and over in these spot buys just to keep it moving — technically not hoarding — so the federal government wouldn’t snatch it up. One broker “would get it and if he can’t sell it, and if it’s not gone by a certain time, they have to move it somewhere else, because otherwise it would be seized,” she said. Under the Defense Production Act, FEMA has stepped in to compel owners of mask lots to sell to the federal government at market prices if the broker is hoarding or price-gouging.

In late April, as its hospitals were inundated with COVID-19 cases, the VA’s top doctor expressed frustration that FEMA had swooped in and taken shipments the VA had ordered from vendors. FEMA has denied seizing supplies from other government branches.

The second type of deal is a direct buy from a manufacturer such as 3M. To pull this off, a purchase order must come directly from a hospital or government agency. This approach is less attractive to brokers because it requires more paperwork, oversight and the masks sell for near the list price.

The third type of deal is to purchase a production line, as the Swiss investor proposed. As one broker recently told me, “It’s basically futures trading.”

This is where the rampant fabrication comes into play. Getting a connection to a distributor or manufacturer is all but impossible right now, brokers say, and to even be heard you have to prove you have backing. Several companies, including JV Tock, have reported their brands being used in phony letters to help sell an illegitimate deal.

One exchange that dropped into the Ramoses’ emails illustrates the magical thinking pervading the mask trade.

In early May, a potentially existent English investor, using an obscure international charity, was working with a London-based consulting firm to establish that he should be a 3M distributor. His proposal included a letter purportedly from HSBC Bank reflecting more than $2 billion in available funds. The package also came with a letter of support from a California-based energy company that, he claimed, vouched for his bona fides.

Emails show this proposal floating between Boston Capital Consultants, including its owner, and Joseph Ingarra, who identifies himself as the “head rainmaker” at Apex Growth Solutions LLC, based in Palm Beach Gardens, Florida. Ingarra’s company appears to do some sort of marketing and claims to leverage the “world’s leading science of how people make choices.”

“I’m aware of a huge fckn lot 1-2B range in the UK,” Ingarra wrote to O’Malley and Sells in early May, referring to a large mask transaction.

“Get this shipped in one big shot and get paid quickly,” he said in bold letters.

But the proposed deal and documents raise questions. First, it’s coming from Florida. Second, the investor’s Delaware business address connects to a residential home valued at less than $200,000. Third, even in late April and early May, brokers say it was very unlikely such a large stock of masks, which weren’t being made in great abundance beyond pre-pandemic demand, ever existed.

Then there’s the letter vouching for the buyer on letterhead from UDECM, the California firm that designs and builds solar energy rigs primarily overseas. I sent the letter to the firm’s owner, Albert Rau, who called immediately to tell me he believes it was forged like dozens of others that he’s batted away in recent months.

“The letter is 100% fake,” he said. “We don’t know the people listed.”

Why pick his firm? Rau said he didn’t know, but early on in the pandemic, his firm was leveraging its international supply chain connections to help some nonprofits find masks. After UDECM dipped its toes into the sea of brokers, “it went viral,” he said.

“Everybody’s got documents out there being forged now,” he said.

Ingarra said he had no idea the document he shared wasn’t real.

“I have zero idea of who drafted that letter,” he said in an email. “I hope they catch the scumbag.”

“It’s Coming”

So what exactly did we learn here?

Ramos ponders the question as she scratches the ears of Sherlock and Inspector Clouseau, two old fluffy-white toy dogs whose longevity she credits to daily doses of CBD oil.

History is about to repeat itself, she said, and she hopes hospitals, schools and governments don’t waste time with middlemen and profiteers. If they must, she said they should run background checks and do more vetting.

“I want to see your business license,” Ramos said. “I want to know who your attorney is. I want to see that you have the right to represent a hospital, and show me where it’s going.”

While life has slowed for Ramos and her daughter, brokers and importers say the global mask shortage remains. Many brokers told me they’ve moved on from masks — “too much trouble” — to focus on other PPE like gloves, which are becoming harder to source and thus more expensive.

But masks remain the best safeguard for workers and hospitals praying to block a respiratory killer, and the U.S. is still largely reliant on middlemen importers and brokers who are jacking up prices.

Two hours away, in Houston, the country’s fourth-largest city, several hospitals have reached the capacity of their intensive care units to treat the sickest patients. Statewide, the number of daily infections has jumped to about 10 times the April figure.

Nationwide, the COVID-19 death toll has surpassed 150,000 people. With the pandemic nowhere near under control, schools are reopening without plans to equip teachers and staff with life-saving masks. It’s the perfect storm all over again — low supply, intense demand, money to be made.

“It’s coming,” Ramos said. “It’s going to be repeated.”

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Business

Oregon Marijuana Sales Spike Could Continue As Consumers ‘Permanently Adjust Their Behavior’ Following COVID

Published

on

Record-setting Oregon marijuana sales continue to be a bright spot in the state’s coronavirus-slowed economy, state analysts reported this week, but a convergence of unknowns—including the end of federal coronavirus relief and a possible rise in cannabis prices due to devastating wildfires—could still mean a rocky road ahead for consumers.

“Marijuana sales continue to be strong,” Oregon’s Office of Economic Analysis wrote in a quarterly revenue forecast published on Wednesday. “Since the pandemic began, the increase in recreational sales have been more than 30 percent above forecast.”

The increase tracks with other more established cannabis markets, such as those in Colorado, Washington and Nevada, which have also seen “strong gains” since the pandemic, the office said. “There are a number of likely reasons for these higher level of sales and expectations are that some of these increases will be permanent.”

oregon marijuana tax revenue forecast

Oregon Office of Economic Analysis

Analysts also expressed a rosier outlook on the future of the state’s marijuana market than they did in last quarter’s report, which acknowledged a spike in sales since the pandemic began but concluded that business was eventually “expected to mellow” as incomes fell and bars reopened. Officials now forecast Oregon will see “somewhat more” in sales than previously projected.

The state has recently seen a string of record-setting months for cannabis sales. Over the summer, monthly cannabis sales had averaged more than $100 million, according to an Oregon Liquor Control Commission (OLCC) report.

OLCC

The projected uptick in sales will mean an extra $30 million in marijuana tax revenue for the state during its two-year budget period ending in 2021. Total adult-use cannabis taxes for that period are now forecast to end up at more than $276 million.

“Factors leading to increases in sales include higher incomes due to federal support, increased stressors in everyday life, reductions in other forms of entertainment or recreational opportunities, and simply more time on one’s hand be it due to a COVID-related layoff, or increased working from home,” the report said.

“A key question is now that the federal aid is gone and other entertainment options return in the months ahead, will some of this increase in sales in recent months subside?” the Office of Economic Analysis wrote in the new report. “In a recent meeting of our office’s marijuana forecast advisory group, the broad consensus was that yes, some of these sales will come off, but not entirely so. And the longer the pandemic lasts, the more likely customers will permanently adjust their behavior as they become accustomed to their new routines and buying patterns.”

For now, the bulk of the increases appear to be driven by existing consumers. While “indications are that the customer base is broadening some as the market grows due to more users trying an increasingly socially acceptable product and ongoing converts from the black market to the legal market,” the report said, the increase “is more likely to be due to larger or more frequent sales to existing consumers than due to more consumers alone.”

“One item to watch moving forward are prices,” analysts wrote. “In recent years the supply of marijuana has greatly outstripped the demand, leading to lower prices. This is great news for consumers. Given that marijuana is a normal good, lower prices have led to larger quantities sold. But now that demand has increased, while supply has held steady, and with the potential impact of the wildfires right as growers are prepping for harvest, this balance in the market may shift… As such, it may be that prices rise, or at least not decline like they have in recent years.”

oregon marijuana prices and sales

Oregon Office of Economic Analysis

As far as tax revenue goes, any price increase would likely lead to more money for the state, “as the decline in quantity sold is not large enough to outweigh the price impact,” the report said.

How cannabis revenue is spent would also be affected by a drug decriminalization ballot proposition, Measure 110, that voters will decide in November. While the initiative isn’t expected to change the amount of taxes collected, it would redirect marijuana tax funds to expand drug treatment programs. “Whether current programs receiving marijuana tax revenue would ultimately see budgetary impacts,” analysts said, “would remain up to the Legislature should voters approve the measure this fall.”

Measure 110, which broadly seeks to reframe problem drug use in medical rather than criminal terms, is one of two key drug-reform measures on Oregon’s ballot in less than six weeks. The other would legalize the therapeutic use of psilocybin, the main psychoactive ingredient in psychedelic mushrooms. That measure would be the first of its kind in the U.S., although Canada has recently granted some patients immunity from that country’s prohibition on psilocybin.

Oregon Marijuana Businesses Impacted By Wildfires Are Ineligible For Federal Relief, Agency Confirms

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
Continue Reading

Business

Texas Ban On Smokable Hemp Lifted Until 2021, Judge Rules

Published

on

A Texas ban on smokable hemp products hit another roadblock in court last week when a state judge barred officials from enforcing the prohibition until an industry challenge can be heard in court.

A group of four hemp producers sued the state last month over the ban, which began when lawmakers passed a hemp legalization bill last year that explicitly forbade the production of products intended for smoking or vaporization. State health authorities extended its reach earlier this year to prohibit the sale and distribution of such products made outside Texas, a move the hemp companies claim was an unconstitutional overreach of their authorities.

In a ruling issued Thursday, Travis County Judge Lora Livingston wrote that the hemp companies may have a point. Writing that the plaintiffs “have demonstrated a probable right to relief,” Livingston granted a temporary injunction that effectively voids the ban on production, distribution and sale of the products until the conclusion of a trial set to begin in February.

Livingston had previously issued a temporary restraining order in the case last month that had a similar but shorter effect, preventing the state from enforcing the ban for a matter of weeks. The new ruling freezes the ban for at least four months, and potentially longer.

Opponents of the ban said that while the issue is far from over, Livingston’s recent decisions are a sign the challenge could ultimately succeed.

“So far, the rulings relating to this lawsuit are very encouraging,” said Heather Fazio, director of Texans for Responsible Marijuana Policy, which opposes the ban and has organized hundreds of supporters to submit comments to regulators.

“Advocates in Texas have remained vigilant, with both legislative engagement and regulatory oversight,” Fazio said in an email to Marijuana Moment. “Now, Texas businesses are challenging our state’s poorly designed policies in the courts. And they’re winning!”

Plaintiffs are challenging both the legislature’s initial ban on production and processing of smokable hemp as well as the Department of State Health Services (DSHS) added ban on distribution and sale, which they claim violate the state constitution’s protections for economic freedom. They also maintain that DSHS lacked the authority to extend the production ban to retail sales.

The companies also point to logistical problems caused by the ban. Because smokable hemp flower is indistinguishable from hemp grown for other purposes, they argue, the ban will encourage bad actors to mislabel products in order to avoid the prohibition. That could put consumers at risk by exposing them to chemicals and other adulterants not intended for consumption.

Banning smokable hemp would also hurt the state economically, the producers claim, as Texas hemp companies wouldn’t be able to compete with out-of-state producers that can already make and sell anything from hemp joints to CBD vape cartridges.

“The law does not ban the use or consumption of smokable hemp products. As such, Texas consumers will simply buy smokable products made out-of-state,” the lawsuit says. “If Texas had banned the processing and manufacture of cheese in Texas, Texans wouldn’t stop eating cheese.”

Meanwhile, the state’s legalization of hemp for other purposes has caused headaches in the criminal justice community. Because hemp looks and smells similar to marijuana, law enforcement agencies have struggled to know whether individuals have a banned substance until they can chemically analyze a seized product. But state testing labs are overburdened, and in February the state Department of Public Safety said it would “not have the capacity” to perform testing in misdemeanor cases. Prosecutors as a result have dismissed hundreds of low-level cannabis cases.

Marijuana possession arrests fell almost 30 percent in Texas from 2018 to 2019, recently released state data shows, and that trend seems connected to hemp legalization.

Medical Marijuana Should Be Legal For Toothaches, Texas Agriculture Commissioner Says

Image by Lindsay Fox from Pixabay

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
Continue Reading

Business

Federal Workplace Drug Testing Proposal Could Discriminate Against People Of Color

Published

on

A newly proposed federal rule would expand workplace drug testing programs by allowing certain employers to collect and analyze samples of workers’ hair, a move critics say would lead to disproportionate job-related punishments for people of color.

Federal agencies can already test workers’ urine and saliva, which provide evidence of more recent drug use, but “hair testing potentially offers several benefits when compared to urine, including directly observed collections, ease of transport and storage, increased specimen stability, and a longer window of drug detection,” the Substance Abuse and Mental Health Services Administration (SAMHSA) argued in a notice of proposed rulemaking published in the Federal Register on Thursday.

If adopted, the change would affect thousands of government employees as well as private workers in certain federally regulated industries such as those who work in transportation or at nuclear power plants.

Drug reform advocates are skeptical about the move.

“It’s shameful that these harmful federal drug testing guidelines are even being considered again,” Rep. Barbara Lee (D-CA), co-chair of the Congressional Cannabis Caucus, told Marijuana Moment. “Not only is hair follicle testing discriminatory against people of color due to its sensitivity to melanin and darker hair, it gives no indication of someone being impaired on the job. This just goes to show how far behind the federal government is on cannabis policy.”

Paul Armentano, deputy director for the advocacy group NORML, said it is “mind-boggling that, in 2020, SAMHSA is considering expanding federal drug testing guidelines.”

“Hair follicle testing is highly problematic,” Armentano said. “A positive test, even when confirmed, provides neither evidence of behavioral impairment nor recent drug exposure. Moreover, the sensitivity and accuracy of the test is highly variable.”

Because hair exists outside a person’s body, for example, it’s more vulnerable to contamination—including secondhand smoke and other chemicals—than other sample types. That can put workers at risk of false positives unless results are checked through another testing method.

“Arguably most problematic,” Armentano said in an email, “is the reality that these tests discriminate against certain ethnicities because it is influenced by melanin content and is thus more sensitive to those with darker hair—while far less sensitive to those with gray hair.”

Other factors, such as humidity and hormones, could also affect test outcomes, Armentano added.

SAMHSA in its proposal acknowledges that numerous studies “provide scientific evidence that melanin pigments may influence the amount of drug incorporated into hair,” as well as that hair products more commonly used by people of color could lead to false positives. “As noted,” the filing says, “the Department wishes to solicit feedback on scientific studies comparing drug results and hair color and comparing urine to hair.”

The proposal is the latest effort by SAMHSA to expand federal drug screening to include specimens besides urine, including hair, saliva and even sweat. SAMHSA initially floated the idea of hair-based testing in 1997, and the agency put forward a rulemaking proposal along those lines in 2004. Regulators ultimately rejected that proposal amid concerns over accuracy, but SAMHSA has pursued the plan ever since. In recent years, the agency expanded testing to include saliva.

Unlike urine and saliva, hair can take up to a week to show evidence of drug use, rendering it especially useless as a measure of a worker’s immediate impairment. SAMHSA is proposing that hair testing be used only in pre-employment drug screening and random testing—not in cases where workers are suspected of recent use.

In an effort to protect workers from false positives and ensure that hair tests hold up in court, the proposal includes a directive that an alternate specimen, such as urine or saliva, be collected in order to verify a positive hair-test result. “This two-test approach,” SAMHSA’s summary says, “is intended to protect federal workers from issues that have been identified as limitations of hair testing, and related legal deficiencies.”

Marijuana-related cases, however, may not qualify for that additional layer of scrutiny. “The Department is specifically requesting comments, including support from the recent scientific literature, on whether hair tests that are positive for the marijuana analyte, delta-9-tetrahydrocannabinol-9-carboxylic acid (THCA), should be excluded from the requirement to test an alternate authorized specimen,” the proposal says.

Workers, some labor unions and even a Federal Drug Testing Advisory Board (DTAB) member have criticized the SAMHSA proposal as misguided, warning that the proposal is getting away from the science.

As reported in the trade publication Freight Waves, which covers the shipping and logistics industries, independent truck drivers are opposed to the rule, citing bias toward hair color and texture as well as a general lack of evidence that hair testing would improve driver safety. Major trucking companies, however, generally support the change.

DTAB member Michael Schaffer criticized the rulemaking process as “fatally flawed” because the board was left out of discussions.

“This means that these proposed guidelines were developed without the expertise needed to ensure that they are scientifically accurate and defensible,” said Schaffer, a toxicologist at a drug-testing lab, according to a Freight Waves report. “I fear that these proposed guidelines are going to unnecessarily restrict the use of hair drug testing, an incredibly effective tool at detecting drug use, for reasons which have no scientific basis.”

Armentano at NORML said that doubling down on a testing procedure that could exacerbate racial disparities simply doesn’t make sense, especially given today’s political climate.

“Given the heightened awareness surrounding the need for social and racial equity,” he said, “the idea of proposing a testing procedure that will inherently deny more people of color opportunities than it would others who have engaged in exactly the same activities is beyond tone deaf and counterproductive.”

SAMHSA estimates that about one percent of the 275,000 drug tests it expects federal agencies to do every year will be for hair specimens. When it comes to workers in jobs regulated by the Department of Transportation, the agency anticipates that 1.53 million of a total 6.1 million drug tests will be hair-focused. For nuclear workers, 15,000 of 150,000 total tests would be of hair specimens.

“These projected numbers are based on existing annual pre-employment testing that currently occurs in the regulated industries and current hair testing being conducted,” SAMHSA wrote

The agency is accepting public comments on the proposal through November 9.

This story was updated to add comment from Lee.

FDA Teaches Marijuana Growers And Researchers How To Protect Trade Secrets From Competitors

Photo courtesy of Markus Spiske

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
Continue Reading
Advertisement

Marijuana News In Your Inbox

Support Marijuana Moment

Marijuana News In Your Inbox

Do NOT follow this link or you will be banned from the site!