Editor’s notice: This story was co-reported and produced in collaboration with KOSU.
For republishers: This collaborative report was initially printed by KOSU, a public radio service in Oklahoma, and The Frontier, a nonprofit newsroom in Oklahoma.
Row by row, Oklahoma Bureau of Narcotics and Harmful Medication brokers and Garvin County deputies lower down 2,500 marijuana crops and loaded them in a dump truck for destruction throughout an April 2021 raid close to Pauls Valley.
The develop operation had a Oklahoma Medical Marijuana Authority license, however had not obtained a further allow from the OBNDD, based on authorities. Each are required to legally develop marijuana within the state.
The develop’s two homeowners, a person who lately moved from Colorado named Dao Feng, and Tulsa resident Kathleen Windler, had been later arrested.
The April 30 raid and arrests triggered a series of occasions that led to tens of millions of {dollars} in seized funds and a whole lot of different medical marijuana farms and dispensaries dropping their licenses. After the bust, Windler, a 68-year outdated paralegal who was listed as the bulk in-state proprietor for a whole lot of medical marijuana companies within the state, voluntarily surrendered 300 licenses.
The Windler case marked a purple flag for authorities and regulators, prompting state regulators to take a better have a look at marijuana companies with solely tenuous hyperlinks to the in-state residents they listed as majority homeowners.
Oklahoma has attracted 8,306 licensed industrial marijuana operators since 2019, outnumbering extra populous states like California and Colorado. Observers have referred to Oklahoma as “the one free-market marijuana business within the nation,” with 10 p.c of the inhabitants carrying medical marijuana playing cards.
Regulators estimate that medical marijuana is already a billion-dollar business within the state, second solely to grease and pure fuel.
The scale and development of the business have outpaced regulators’ means to maintain up with enforcement. OMMA is required to bodily examine all licensed marijuana companies within the state, however has visited lower than half because the inception of this system, based on the company.
A minimum of 75 p.c of an Oklahoma marijuana enterprise should be owned by somebody who has lived within the state for no less than two years, however companies are discovering inventive methods to get across the requirement.
The state legal guidelines governing medical marijuana develop operations have led to a whole lot of circumstances of ghost homeowners — in-state residents who’re homeowners of firms on paper solely. The apply has opened the door to out-of-state and foreign-backed firms and people to regulate giant parts of the state’s marijuana market.
“It simply took time for phrase to get out that Oklahoma is a state with fairly mild laws, has been from the beginning, fairly low tax burden, comparatively fairly low price of residing, very low boundaries to entry and low licensing charges and all that,” stated Barrett Brown, deputy director and coverage liaison for OMMA.
The scenario has harm reputable marijuana develop operations, introduced in doable parts of organized crime and raised questions of moral labor practices at some operations. The inflow of latest medical marijuana companies has additionally strained the infrastructure of some rural communities.
State laws require the OMMA to make a willpower to simply accept or reject a license utility inside 90 days, however the authority doesn’t have the employees or capability to bodily examine the enterprise inside that 90-day window.
“At present, you simply come to OMMA and submit the required documentation for the statute,” Brown stated. “And so long as every thing checks out, you’re good to go together with nobody having inspected the enterprise.”
Since Oklahoma voters legalized medical marijuana in 2018, state companies have collected greater than $332 million in gross sales and excise tax. In 2021 alone, medical marijuana generated almost $150 million in new gross sales and excise tax income. Most of these funds don’t go towards enforcement. State regulation requires that 75% of any taxes collected above OMMA’s budgeted quantity go towards training.
The state has 50 inspectors however would wish about 100 extra to get by the backlog of inspections, Brown stated. The aim, he stated, is to have all companies inspected by the top of 2022.
Brown additionally stated he’s speaking with the Legislature to strengthen the required documentation for industrial licenses to assist OMMA root out fraudulent functions.
“Pre-licensure inspections, I feel that may additionally assist tremendously,” Brown stated. “If nothing greater than to present us extra time to conduct any kind of investigations.”
Regardless of being short-handed, state regulators and regulation enforcement say they’ve made some headway previously yr in opposition to fraudulent and unlawful develop operations. However there may be nonetheless a protracted technique to go. And lawmakers count on to see dozens of payments filed for the upcoming legislative session to tighten medical marijuana laws.
Ghost homeowners
The quickly shuttered develop facility owned by Dao Feng, simply east of Pauls Valley, the place Garvin County deputies and Oklahoma Bureau of Narcotics brokers carried out a raid on April 30, 2021. CLIFTON ADCOCK/The Frontier
Earlier than her arrest, Windler labored as a paralegal for the Tulsa-based Jones Brown regulation agency, which state information present has helped a whole lot of shoppers set up medical marijuana companies in Oklahoma.
A lot of these companies had been truly owned by individuals from out of state or from outdoors the nation.
Starting in 2019, the Jones Brown agency directed medical marijuana companies to signal a consulting settlement with Windler, who would step in as an in-state proprietor of the businesses, Windler claims in a lawsuit she later filed in opposition to the Jones Brown regulation agency. In response to the swimsuit, authorities started investigating Windler and the Jones Brown regulation agency in late 2020.
The agreements between Windler and the out-of-state homeowners had been easy — Windler can be listed as the bulk proprietor on paperwork submitted to state regulators, however she was not entitled to a share of the earnings, couldn’t make enterprise choices or declare possession of any firm property. In trade, every firm would pay Windler $3,000 a yr, at some point of the contract.
Windler was ultimately listed as the bulk proprietor for 300 medical marijuana companies in Oklahoma.
State officers instructed The Frontier and KOSU that the apply of signing on ghost homeowners to satisfy the in-state residency requirement is frequent.
“They’re positively not the primary regulation agency that has finished one thing like this. I do know that there have been investigations of different regulation corporations for providing that kind of recommendation,” stated Oklahoma Metropolis legal professional Andrew Casey, who’s representing Windler in her civil swimsuit in opposition to Jones Brown.
Casey stated that Windler trusted her former bosses on the Jones Brown regulation agency once they instructed her it was authorized to signal the ghost proprietor agreements. However that recommendation would in the end get her arrested, he stated.
In late August, Windler employed Casey as her legal professional and sued the Jones Brown agency, together with its founders Logan Jones and Eric Brown, and different related teams. The lawsuit claims Jones and Brown duped Windler into signing the ghost proprietor agreements.
David Cheek, an legal professional for Jones Brown, argued at a courtroom listening to in December that Windler was an energetic participant within the ghost proprietor scheme. Jones and Brown each declined interview requests by The Frontier and KOSU.
“She knew what was happening. She knew precisely what was happening,” Cheek instructed the courtroom. “She was an energetic participant each step of the best way, and paid properly for it.”
Cheek argued state statutes are obscure on what constitutes possession of a medical marijuana enterprise, and that Jones and Brown acted inside the bounds of the regulation.
“You may criticize us sometimes for being too inventive, however with all due respect. We’re entitled to learn within the phrases the Legislature handed and be inventive,” Cheek stated.
Windler’s abrupt give up of a whole lot of enterprise licenses the place she was listed as an proprietor final yr set off a shockwave within the state’s medical marijuana business. Dozens of medical marijuana companies filed lawsuits in opposition to the OMMA in search of to have their licenses reinstated. The circumstances are nonetheless pending, however judges have issued non permanent injunctions permitting the companies to proceed working.
After the Pauls Valley raid, Windler and Feng had been charged with cultivation of marijuana, possession of a managed harmful substance with out a tax stamp and violation of the U.S. Uniform Managed Harmful Substances Act — all felonies.
In November, prosecutors dropped the costs in opposition to Windler, however prison circumstances in opposition to Feng and three Chinese language nationals arrested throughout the Pauls Valley raid are nonetheless shifting ahead.
Shortly after the raid, OBNDD seized almost $3.2 million from Feng’s checking account, alleging the cash was for use to violate federal regulation that bans marijuana cultivation. A choose has but to enter a call in these circumstances, and Feng is mounting a protection to reclaim the cash, based on courtroom information.
Feng’s legal professional, Marco Palumbo, stated his shopper had the right license on the time of the raid, although he didn’t present a replica of that license to KOSU and The Frontier. Mark Woodward, a spokesman for OBNDD, stated the license was by no means issued to the enterprise.
Authorized disputes
A develop home at Lue Her’s Okfuskee County develop operation sits empty, after his marijuana develop license was surrendered final yr by Kathleen Windler, who was listed as majority proprietor of Her’s firm. COURTESY/Lue Her
Lue and Julie Her moved from California final yr to start out their very own medical marijuana develop operation in Okfuskee County. Drawn by the comparatively low-cost worth of land, the low-cost boundaries to entry into the Oklahoma market, and assurances from the Jones Brown regulation agency that the in-state resident majority proprietor requirement wouldn’t be an issue, Lue stated he and his spouse determined to attempt to stake their declare within the state’s booming marijuana business.
They spent greater than $50,000 to arrange three greenhouses and a plant nursery, and to pay for labor and authorized charges..
As a result of the Hers had lived in Oklahoma for lower than two years, they didn’t but meet the state’s residency necessities to get a license to develop medical marijuana. The Hers stated they trusted the Jones Brown regulation agency’s assurances that state residency necessities wouldn’t be a problem to start out rising inside weeks.
They labored with Windler to get their license final Could and paid the regulation agency round $15,000. Quickly after getting their OMMA license, however earlier than getting their OBNDD license, the Hers stated Windler forfeited their license.
“My license is about to run out, and we’re going to start out the entire course of (once more), and that’s an entire bunch of cash wasted,” Lue Her stated.
In order that they went to their second plan: They discovered one other Oklahoma resident and submitted their utility once more. They’ve since been calling day-after-day for the previous few months, however say the license remains to be beneath evaluation.
“We spent some huge cash on this property right here and we will’t do something,” Lue Her stated. “We’re simply sitting right here.”
The Hers are actually a part of a lawsuit in opposition to the OMMA together with almost two dozen different marijuana companies that declare Windler had no proper to give up their licenses.
Speedy business development has led to issues Riki Roberts, the top grower of Uncooked Botanicals in Cushing, appears at rising hashish inside an indoor facility on Jan. 11. Roberts moved from Hawaii, the place he additionally labored within the hashish business. SETH BODINE/KOSU
Speedy development of the state’s medical marijuana business has led to points starting from pressure on utilities to alleged involvement in organized crime.
A rural couple residing in Sapulpa has filed a lawsuit in opposition to 21 marijuana companies, claiming unlawful growers constructed lower than 50 toes from their property line. Residents Keith and Stephanie Grant say they will’t take pleasure in their house as a consequence of what they describe as a “pungent scent” or the sound of helicopters the growers function that circle their house.
Some rural electrical and water utilities managers are combating the inflow of rising operations. One rural water district in Garvin County instructed KOSU and The Frontier {that a} single giant marijuana develop within the district used more water in one month than the rest of its customers combined.
Farmers are apprehensive about lawsuits if pesticides they spray find yourself inside a close-by marijuana develop. OMMA director Adria Berry stated the company is creating working groups to resolve the problems between industries.
Oklahoma Bureau of Narcotics spokesman Mark Woodward stated the company is conscious of a number of brokers, brokers and regulation corporations tied to fraudulent licenses specializing in qualifying out-of-state homeowners to develop marijuana in Oklahoma.
Low cost land and low licensing prices have lured marijuana growers to Oklahoma, he stated.
“That’s why a whole lot of these teams are hiring ghost homeowners,” Woodward stated. “And principally, their solely data of the farm is that they go to the mailbox as soon as a month and get a test to say on the paper that they’re the proprietor.”
Woodward says lax laws have lured out-of-state and worldwide funding that could possibly be fronts for organized crime.
Migrant staff introduced in to reap and domesticate the crops have few authorized protections since marijuana stays unlawful on the federal degree. There are federal and state packages to assist agricultural employers discover staff and shield migrant staff’ rights. The packages don’t shield migrant staff at medical marijuana operations as a result of they’re federally funded, stated Shelley Zumwalt, government director of the Oklahoma Employment Safety Fee.
Complaints in rural areas, laws on the best way
Lawmakers are taking discover of the issue. Oklahoma enacted legal guidelines in 2021 to present $5 million in OMMA licensing fees to OBNDD to analyze fraudulent marijuana operations and supply funding to the Oklahoma Attorney General’s office to analyze and gather knowledge on overseas land possession within the state. Sen. Jim Inhofe’s workplace has additionally requested $4 million from Congress to fund OBNDD’s marijuana enforcement crew.
Oklahoma legislators plan to introduce a brand new wave of payments to additional regulate the business within the coming legislative session. Tightening possession necessities is on the prime of the listing.
Rep. Scott Fettgatter, R-Okmulgee, stated the state’s residency rule spelled hassle from the start.
“What that basically did was … arrange an surroundings for straw man enterprise buildings, and people have been deemed unlawful,” Fettgatter stated.
One other proposed invoice would let native governments cap the variety of licenses of their areas.
- Sean Sherwood, enterprise developer and co-owner of the marijuana enterprise Lucid Moon, stands behind rising hashish crops in an indoor facility Jan. 11 in Guthrie, OK. Sherwood moved in early 2019 from Arizona to get into the marijuana enterprise. SETH BODINE/KOSU
- Lee Womack, the proprietor of Uncooked Botanicals, stands inside a develop facility on Jan. 11 in Cushing, Oklahoma. Womack stated he was hit by a semi-truck and have become a medical marijuana consumer whereas being handled in a hospital in Colorado. He stated he moved to Oklahoma to get into the marijuana enterprise. SETH BODINE/KOSU
Growers like Sean Sherwood, a co-owner of Lucid Moon in Guthrie moved to Oklahoma in 2019 from Arizona to get into the enterprise. In contrast to Arizona, which caps the number of licenses it points, it wasn’t laborious to get began within the marijuana enterprise in Oklahoma.
“It was a lot simpler to face out as a good, stable enterprise individual, you understand, doing all the proper issues, simply because it’s simple to chop by the noise of those who had been possibly novices or simply entering into the business,” Sherwood stated. “And total, it was only a more healthy marketplace for the enterprise finish. It was not as cutthroat and never as aggressive because it has gotten lately.”
Now, Sherwood describes the market as unhealthy. Oversaturation of the market has triggered costs to tank, and so they purchased their location in a giant industrial advanced from somebody who went out of enterprise, he stated.
“The way in which I’ve described it’s treacherous,” Sherwood stated. “It’s very, very aggressive. In case you don’t know what you’re doing, you’ll get chewed up and spit proper again out.”
There’s hope that issues might get higher, Sherwood stated. He stated a moratorium on licenses, tightening up laws and permitting leisure use might assist the market.
As marijuana growers put together for survival, OMMA officers like Brown stated Oklahoma is by itself path for fixing the business’s challenges.
“I actually suppose we’re on our personal path,” Brown stated. “I don’t know the place we’re going to be in 5 years. However I can inform you that our aim is for the medical marijuana business to be handled like some other business.”
