Several members of a key congressional committee on Wednesday expressed concerns over a Justice Department whistleblower’s allegations that the attorney general directed multiple improper antitrust investigations into marijuana business mergers because of his personal opposition to the industry.
Reps. Steve Cohen (D-TN), Pramila Jayapal (D-WA) and Mary Gay Scanlon (D-PA) each directly questioned the witness, John Elias, about the allegations at a hearing that also covered other unrelated reports of inappropriate actions by Attorney General William Barr.
The lawmakers touched on the costs of the cannabis investigations to taxpayers, the waste of department resources to conduct the inquiries and the attorney general’s apparent animus toward businesses operating in accordance with state legalization laws.
“Did that cost the cannabis folks a lot of money?” Cohen asked.
“Absolutely, these subpoenas that get issued that require production of millions of documents is very burdensome,” Elias, who has been with the Justice Department for 14 years, said.
“So it was harassment by Bill Barr of an industry he didn’t like, is that right?” the congressman followed up.
The witness replied that “I think that’s a fair way to characterize it, yes.”
“Barr doesn’t like marijuana. Marijuana is seven times more likely to be enforced against young African Americans, breeding discontent with police and breeding interactions with police, and Barr doesn’t care about that type of stuff because he doesn’t like marijuana,” Cohen said. “That’s one of the breeding grounds of distrust of African Americans and police and police and African American contact and problems. Very unfortunate.”
Later in the hearing, Elias disclosed in response to a question from Scanlon that a second, unnamed Justice Department whistleblower had similarly raised concerns about the Antitrust Division’s marijuana investigations that were reportedly made at the attorney general’s behest. He further said that the response to his complaint was troubling because the Office of Professional Responsibility (OPR) determined that even if the investigations were directed out of personal animus, that would not represent a violation of any rule.
“That’s very concerning to me because it seems so self-evident that if your sole motivation is animosity that that’s impermissible,” he said.
Rep. Lou Correa (D-CA) wasn’t able to attend the House Judiciary Committee hearing, but his office shared a copy of his prepared statement on the subject with Marijuana Moment. He said it was unacceptable that the allegedly improper cannabis-related investigations accounted for nearly one-third of the Antitrust Division’s caseload in 2019.
“After nearly four years, I did not think the actions of this administration could continue to shock me,” he said. “John Elias’s testimony showed me just how wrong that was. The very idea that the lead law enforcement professional in the land would use the immense power of the United States government to investigate American businesses out of his own personal animosity should put fear into every American.”
“Due process and equal protection under the law are the cornerstones of our democracy,” he added. “When they crumble, the fabric of our democracy and legal system follows close behind.”
Correa noted the growing number of states that have legalized cannabis in some form and “yet the federal government repeatedly treats this legal industry as criminals and second-class businesses.”
“The attorney general’s blatant abuse of his authority to improperly investigate cannabis businesses shows just how important it is to end the federal prohibition of cannabis,” he said. “Regardless of Mr. Barr’s own personal feelings, Americans wildly support descheduling cannabis, and it is time ur federal laws represented the people’s will.”
“Attorney General Barr has once again shown he cannot be trusted to meet the high standards of his position. His use of the Department of Justice Antitrust Division to satisfy his own personal grudges are beyond reproach. If these allegations stand true, there must be serious consequences for the Attorney General. Every American must know with full confidence that the leader of American law enforcement will protect each of our constitutional right to due process and equal protection under the law. When investigations by the Department of Justice can be directed by the personal whims of individual men, the very core of our legal system shattered.”
Jayapal stressed that the allegations indicate the Justice Department’s resources and taxpayer dollars were wasted at the whim of the nation’s top prosecutors. She first asked how much of the division’s staff was involved in the investigations.
“Congresswoman, there were dozens of staff—attorneys, paralegals, economists and others who worked on these various cases,” Elias replied.
Jayapal also pressed the witness on the extent to which the millions of documents that were obtained over the course of the investigations were reviewed.
“I think a very small number of the documents were reviewed,” he said, adding that many were “uploaded after the closing process had been initiated as if they were irrelevant to the investigation.”
Ultimately, across 6 of the 10 investigations for which data are available, 5,965,000 documents were produced by the marijuana companies under inquiry.
“So they requested enormous resources, taxpayer dollars were used, these documents were never really looked at, they weren’t relevant to the investigations—and so to be clear, at Attorney General Barr’s direction, the department expends countless taxpayer resources to force companies to ultimately produce millions of pages of evidence and then doesn’t even look at or upload some of that evidence before admitting there’s a violation,” Jayapal said.
“Have you ever seen anything this extreme?” she asked.
“In my experience, which includes 14 years at the Justice Department at many different levels of the antitrust division, no, I have never seen anything like that,” the witness said.
Asked why the situation is concerning to him, Elias said it’s “concerning because the investigations and the work of the Antitrust Division need to be done in good faith—they need to be done evenhandedly—both for the sake of everybody involved and for the sake of the public’s perception of the rule of law in that the Justice Department is being aboveboard with everything.”
“For it to disregard the usual standards in the law on what counts for an antitrust investigation is improper and an abuse,” he said.
Early in the hearing, Rep. Doug Collins (R-GA) mentioned that the Justice Department’s OPR had determined that the investigations into cannabis mergers didn’t violate rules or regulations and questioned his political motivations. He also brought up marijuana’s legal status under federal law and asked the witness whether he knew what schedule the plant is classified as under the Controlled Substances Act.
Elias said he knew it was a controlled substance but wasn’t sure of the schedule.
“You were part of an antitrust in marijuana and didn’t know how it was scheduled?” Collins said. “The credibility of this is going downhill quickly here.”
Other committee members, including Rep. Greg Stanton (D-AZ), spoke more broadly about the Justice Department’s antitrust investigations without explicitly discussing the marijuana merger inquiries. He said the department’s “resources are not being used to protect the American people” when it is “pursuing meritless investigations.”
All of these questions come one day after Elias’s written testimony was first released, detailing how the attorney general directed questionable investigations into 10 mergers of state-legal marijuana companies, including one for MedMen and PharmaCann that seemed to have resulted in the end of the agreement.
“The head of the Antitrust Division, Assistant Attorney General Delrahim, responded to internal concerns about these investigations at an all-staff meeting on September 17, 2019,” the witness said. “There, he acknowledged that the investigations were motivated by the fact that the cannabis industry is unpopular ‘on the fifth floor,’ a reference to Attorney General Barr’s offices in the DOJ headquarters building.”
“Personal dislike of the industry is not a proper basis upon which to ground an antitrust investigation,” he said.
Barr’s personal opposition to the cannabis industry doesn’t seem to comport with statements he’s made in various congressional hearings, where he’s expressed interest in resolving the state-federal conflict over marijuana policy. Last year, he said that while he personally opposes legalization, he would prefer for Congress to pass a bill respecting the rights of states to implement their own cannabis policies rather than maintain blanket federal prohibition.
Marijuana Businesses Could Get Federal Disaster Relief Funds Under New Congressional Bill
Marijuana businesses impacted by recent natural disasters or that have experienced financial distress due to the coronavirus pandemic would be eligible for federal relief programs under new legislation introduced in the House of Representatives and Senate on Thursday.
Because cannabis remains federally prohibited, the Small Business Administration (SBA) has explicitly denied the industry—and businesses that work indirectly with it—access to its relief programs like other markets. That means, for example, marijuana farmers in states like California and Oregon that have seen their crops destroyed by wildfires are fully dependent on state and local assistance.
The new Small Business Disaster Relief Equity Act would resolve that problem, stipulating that disaster- or COVID-related services, grants, loans and tax benefits that are made available through federal agencies or congressional legislation cannot be denied to cannabis businesses solely because of the nature of their work, as long as it is in compliance with state law.
What’s more, the bill states that the the heads of federal agencies that administer disaster relief such as SBA “shall, to the greatest extent practicable, allow State-legal cannabis businesses to retroactively apply for such disaster assistance.”
Sens. Ron Wyden (D-OR) and Jeff Merkley (D-OR) and Reps. Earl Blumenauer (D-OR) and Peter DeFazio (D-OR) filed the companion bills.
“Cannabis businesses in Oregon hurt by the blazing wildfires or any other disaster shouldn’t be shut out from federal relief simply because the federal government is stuck in yesteryear,” Wyden said in a press release. “These legal small businesses employ thousands of workers and support our struggling economy. If they need federal support, they should get it. Full stop.”
SBA recently confirmed to Marijuana Moment that while it opened a disaster relief loan program for Oregon businesses damaged or destroyed by the wildfires, the cannabis industry isn’t eligible. People working in the state-legal market whose primary residences were impacted could still apply, however, but not if they conduct their business from home.
Blumenauer, cochair of the Congressional Cannabis Caucus, said that many marijuana companies in his state “have faced catastrophic disruptions because of wildfires.”
“There’s no reason why these legitimate businesses shouldn’t have access to the federal support meant to help businesses survive unprecedented disasters,” he said. “Our legislation will help ensure these businesses and their workers are not left behind.”
According to the Oregon Liquor Control Commission, 20 percent of marijuana businesses in the state were encouraged to evacuate due to the fires. Regulators are also asking cannabis business owners to fill out a survey so they can get a better sense of how extensive the damage is.
As of this week, seven cannabis business have been destroyed by the fires and at least a dozen have been damaged, Oregon Live reported.
“Whether you’re for or against state-legal cannabis, we can all agree that families in all of our communities are struggling to keep the lights on and stay afloat during this turbulent time—and that they need and deserve support,” Merkley said. “That includes thousands of small business owners, workers and their families who rely on state-legal cannabis businesses for their livelihoods.”
“We have to make sure those families won’t be shut out from critical assistance that can make a real difference,” he said.
The timing of the natural disasters in Oregon isn’t ideal, either, as consumer demand for marijuana products has been up amid the pandemic. In July, the state broke its record for cannabis sales, with about $106 million in medical and recreational cannabis purchases. Oregon’s Office of Economic Analysis said in a report on Wednesday that “since the pandemic began, the increase in recreational sales have been more than 30 percent above forecast.”
Blumenauer in April led a letter with 34 bipartisan members of Congress calling on House leadership to include language in COVID-19 stimulus legislation to allow marijuana businesses to access federal disaster relief. He followed up by filing standalone legislation—the Emergency Cannabis Small Business Health and Safety Act—that would address the problem specifically when it comes to coronavirus relief.
Wyden similarly led a letter with nine other senators in April, asking the chamber’s leadership to extend federal assistance to the cannabis market. Civil rights groups and industry stakeholders have also made these calls to action in recent months.
“It’s ridiculous that legal businesses here in Oregon are being denied critical wildfire aid because of outdated policies handed down from Washington, D.C.” DeFazio said. “Cannabis businesses employ thousands across Oregon and are a vital economic engine for our state. This important legislation will ensure that these businesses are eligible for the same aid as every other business impacted by the 2020 wildfires.”
Read text of the marijuana disaster relief bill below:
Photo courtesy of Philip Steffan.
Congressional Research Service Analyzes Marijuana Expungements And Cannabis Immigration Issues
The Congressional Research Service (CRS) released new two reports on marijuana policy—one dealing with the immigration implications of federal prohibition and the other looking at expungements provisions in pending legislation to deschedule cannabis.
For the immigration-focused report published last week, CRS outlined how being convicted of a marijuana crime, admitting to using cannabis (even in a legal state) or working in the marijuana industry can carry four “key consequences” for non-citizens. They can be deemed inadmissible to the U.S., deported, lose immigration relief benefits and be denied naturalization.
The threat of inadmissibility for state-legal cannabis activity even extends to people who simply invest in the market, CRS said. The report makes a point of reiterating several times that just because something is legal under state law doesn’t mean there are carve outs in federal immigration statutes.
There are also immigration relief benefits that individuals could lose out on because of marijuana-related activities. They include the “waiver of certain criminal inadmissibility grounds, cancelation of removal, voluntary departure, withholding of removal, protection under the Convention Against Torture, asylum, Temporary Protected Status (TPS), and Deferred Action for Childhood Arrivals (DACA),” the report states.
With respect to naturalization restrictions, CRS points out that the Trump administration in 2019 issued a memo clarifying that having a cannabis conviction or admitting to working in the marijuana industry “can bar an individual from establishing [good moral character], even if the marijuana-related activity did not violate applicable state or foreign laws.”
CRS also recognized in the new report that legislation to federally deschedule marijuana—the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act—would help resolve the immigration dilemma, as the bill “would prohibit the denial of any immigration benefit or protection to aliens who have participated in any marijuana-related activity.”
The MORE Act was initially expected to be scheduled for a House of Representatives floor vote this week, but following pushback from certain Democratic lawmakers who felt it would look bad to advance the bill before approving additional COVID-19 relief, it was postponed. Now it’s expected to receive a vote later in fall, likely after the election.
In a separate report also released last week, CRS looked specifically at the MORE Act’s expungement provisions.
The bill would mandate that federal district courts expunge the records of individuals with federal marijuana convictions within one year of the bill’s enactment. It would also allow individuals with cannabis-related convictions to petition courts to have their records cleared prior to the one-year review period.
The Capitol Hill research office noted that federal marijuana convictions represent just a small fraction of the country’s total cannabis convictions, with most being carried out at the state, county and local levels. Relatively few federal cases are for possession alone; most are for trafficking-related charges. According to the U.S. Sentencing Commission, cannabis trafficking convictions are on the decline, with fewer than 2,000 cases occurring last year.
“The expungement provision in the MORE Act could raise several issues for policymakers,” CRS said. “The legislation would only address expungement of criminal records related to federal marijuana offenses; it would not provide relief from convictions for marijuana offenses in state courts.”
But CRS also floated potential solutions such as providing “an incentive for states to adopt uniform laws regarding the expungement of convictions for state level marijuana offenses.”
“For example, Congress may place conditions on federal criminal justice funding, such as the Edward Byrne Memorial Justice Assistance Grant (JAG) program, or provide funds to states to help them implement expungement programs. Congress may consider providing guidelines to states on how to structure their expungement programs,” the report states.
CRS also noted that while the courts could be compelled to expunge records, the bill doesn’t address the fact that certain private companies harvest data on arrests and convictions when they’re publicly available.
“Policymakers might consider whether federal courts should be required to send lists of criminal records that would be expunged under the MORE Act to private background check companies in their respective districts to notify them of the expungement,” the report said.
CRS has dedicated significant time to exploring cannabis policy issues lately. Earlier this month, for example, it released a separate report that identified multiple problems caused by conflicting federal and state marijuana laws.
Photo courtesy of Brian Shamblen.
Oregon Marijuana Sales Spike Could Continue As Consumers ‘Permanently Adjust Their Behavior’ Following COVID
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.”
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.
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.”
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.