Detroit Businessman Pleads Guilty to Bribing Marijuana Regulator

April 24, 2023 · Green Market Report

A Detroit-area businessman who pleaded guilty Friday to bribing a top medical marijuana regulator in exchange for approval of state dispensary licenses said the payments included $4,000 a month for the official’s wife, who was paid as a “consultant” during the process.

John Dalaly, 70, of West Bloomfield Township disclosed the arrangement during questioning from U.S. Magistrate Phillip Green. He said he approached Rick Johnson, who then chaired Michigan’s now-former medical marijuana licensing board, with questions about applying for licenses to open provisioning centers. Johnson, he said, steered him to his wife, Janice.

Both Dalaly and Johnson, a former state House speaker who will plead guilty next week, have agreed to cooperate with federal prosecutors in the probe. Two lobbyists also will plead guilty to conspiring to bribe Johnson on behalf of a business listed in court documents as Company C. Johnson’s deal includes an agreement that his wife will not be charged for her role in his accepting bribes.

The investigation is expected to result in more people being charged.

Also Friday, Dalaly’s defense lawyer, Raymond Cassar, told reporters outside the Grand Rapids courthouse that the business referred to in court records as Company A — which Dalaly helped to establish and which obtained licenses in the scheme — is PharmaCo Inc.

Toronto-based Red White & Bloom Brands bought Southfield-based PharmaCo in 2022 after having provided financing to the company since late 2018 through an RWB subsidiary, Michicann Medical Inc. RWB was transferred 21 medical and adult-use licenses, including for dispensaries and grow operations. A message seeking comment was left with RWB.

PharmaCo obtained prequalification status for three dispensaries in October 2018 and the licenses in April 2019 — the last time the board met before it was disbanded, according to meeting minutes.

Cassar said Dalaly paid Janice Johnson for more than a year. Dalaly helped form PharmaCo and was involved in the business but was not an owner, Cassar said.

“Remember, nobody knew how to do these medical marijuana applications. They were 65 pages and no one understood,” he said. “So the whole idea was John needed to find somebody that can say, ‘OK, here’s how you fill out these forms.’ As you just heard in the plea, he went to Rick Johnson and Johnson said, ‘Talk to my wife.’ And then she was obviously the conduit.”

Dalaly, Cassar said, took responsibility for his actions and has been cooperating with investigators since at least last sumer.

“You can step up to the plate and do the right thing, and that’s what he did today. He owned it. But he’s been owning it since the investigation started. We have been answering all the questions from the government. He wanted to do the right thing. Obviously, he made a bad decision. … But today he cleared the air.”

Dalaly admitted to paying Johnson $68,200 in cash and benefits, including two private jet flights to Canada. Those trips were so Johnson could meet PharmaCo’s Canadian investors, Cassar said. Dalaly also said he gave Johnson a loan and paid for lunches and dinners.

Johnson conveyed to Dalaly that he would provide him with information and assistance to help PharmaCo successfully apply for licenses, help expedite review of the applications and ultimately support them when he and other board members voted, according to Dalaly’s plea agreement.

Dalaly faces up to 10 years in prison and a $250,000 fine. His sentencing likely will not be held for three or four months, the magistrate said.

Dalaly is listed as the resident agent for a number of businesses in state incorporation records. The website of one, Farmington Hills-based D Group International Consulting Services LLC, or DGI, identifies Dalaly as the company’s chairman and calls him a “prolific” businessman who established the business after developing and marketing international health care services for 20 years. DGI managed several major consulting and administrative projects in the U.S. and the Middle East, including hospital management, telecommunications networking, and roads and seaports, according to the website.

In 1996, Crain’s reported that Dalaly won a $24.9 million contract to supply the Saudi Arabian government with an 88-unit mobile field hospital. He emigrated from Iraq with his family in 1963 at age 11 and grew up in Detroit working with his father and uncles in businesses such as supermarkets.

Then-Republican Gov. Rick Snyder appointed Johnson and others to the licensing board in 2017, after he and lawmakers enacted a 2016 law to further regulate medical marijuana almost eight years after its use was authorized by voters. The main bill imposed a new tax and established a state licensing system to grow, process, sell, transport or test products.

“Everybody started jumping on this medical marijuana thing,” Cassar said. “It was the new thing, right? Wow, you could make some money. … I think what really happened here, the truth of the matter is, there were no real guidelines on how to fill out these huge applications. … When they reached out to LARA (the Department of Licensing and Regulatory Affairs), LARA just didn’t know what to do. This is brand new. Nobody really understands. So what happens then? Then you start looking for who could help us figure this thing out.” (Full Story)

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