State cannabis regulations are vague and confusing in a whole variety of ways (see Pennsylvania’s rules for public cannabis companies for just one example). Here’s another issue that we found: In many states, regulations don’t say what an applicant background check covers other than “criminal records.” But when we looked at reporting on three medical marijuana dispensary applicants in Massachusetts, we found that at least in the Commonwealth, background checks go way beyond just criminal records.
With new regulations on the horizon for the launch of adult-use retail sales in Massachusetts in 2018, groups assembling teams to apply for licenses should take a look at issues that have tripped up applicants in the past.
Case 1: In Good Health
In 2014, In Good Health replaced its CEO after its primary application but before its final application to avoid a background check on Douglas Noble. That background check would have revealed that Douglas had been sued multiple times by creditors and that assisted care facilities he owned had also over-billed Medicaid to the tune of about $785,000. In Good Health replaced Douglas with his son, David, and moved Douglas to an advisory role that exempted him from state background checks.
Case 2: Medical Marijuana of Massachusetts
Medical Marijuana of Massachusetts removed an executive between its primary and final applications in 2014. A background check on the executive who would have been responsible for running the company’s cultivation sites and dispensaries would have found that he filed for personal bankruptcy in California in 2011.
Case 3: New England Treatment Access
And in an example of a change that was made after the state background check, New England Treatment Access’s CEO resigned in 2014 after a background check revealed that his resume listed a degree that he had not received.
It's clear that Massachusetts’ background checks include, at the very least, some civil lawsuits and credit issues, as well as verification of an applicant’s education. And since the checks are not limited to Massachusetts state records, your due diligence shouldn't be limited, either.
Applicants who want to avoid the stress of replacing an executive or investor in the middle of the licensing process should consider thoroughly vetting those individuals prior to submitting their applications.