Oregon Secretary Of State’s Marijuana Consulting Gig Raises Questions About New Audit On Preparing For Federal Legalization

April 30, 2023 ·

The Oregon secretary of state’s office released an audit of the state’s regulation of the cannabis industry on Friday on the heels of revelations that the agency’s head, Shemia Fagan, accepted a side job as consultant to a cannabis company in February.

Fagan’s consulting work with Veriede Holding LLC, an affiliate of La Mota cannabis dispensary chain, was first reported by Willamette Week on Thursday. The next day, secretary of state officials released the audit and took steps to distance Fagan from the analysis as much as possible.

Fagan recused herself on February 15 from the audit process after calling the Oregon Government Ethics Commission about the consulting work, public records show. They show Fagan contacted ethics officials in February, when the audit was only a little more than two months away from release—and much work was already underway. Her work with the company began shortly after her recusal.

No one is accusing Fagan of breaking any laws. And her secretary of state staffers say Fagan’s recusal exceeded what’s legally required because any action stemming from her office’s audit of the Oregon Liquor and Cannabis Commission, which regulates cannabis, would come from the Legislature or the commission, not her office.

“Secretary Fagan recused herself because in her private life, she has a limited consulting contract with a company that’s regulated by OLCC,” Deputy Secretary of State Cheryl Myers said in a press conference about the audit’s release. “While a conflict of interest technically doesn’t exist, the secretary voluntarily imposed the most restrictive limitation on herself because she respects ethics rules as a floor, not a ceiling.”

Nevertheless, the Republican leaders in the Legislature said Fagan should resign.

Meanwhile, Gov. Tina Kotek (D) called for an ethics investigation into the issue.

“It’s critical that Oregonians trust their government,” Kotek said in a statement to the Capital Chronicle. “That is why I am urging the Oregon Government Ethics Commission to immediately investigate this situation. Additionally, I am requesting that the Oregon Department of Justice examine the Secretary of State’s recently released audit of the Oregon Liquor and Cannabis Commission  and its cannabis program.”

Fagan was not at the press conference, and she was not available for an interview.

State audits director stresses independence

Kip Memmott, the office’s audits director, stressed the role of professional auditing staff in the analysis.

“All audit work, all conclusions or methodologies or recommendations are all generated and done by the professional audit team,” he said. “The final call on all of our audit reports is me… I make all decisions on what is in our final audit reports and they are approved under my issuance.”

Before Fagan’s February 15 recusal, Fagan asked in a December 2021 meeting with audit staff if the team had interviewed Rosa Cazares, the chief executive officer of La Mota, the Willamette Week reported. The next year, audit staff interviewed her, among others.

Asked about the report, Ben Morris, a secretary of state spokesman, told the Capital Chronicle: “Cazares was one of two dozen interviews conducted by auditors during the scoping process, which is the standard process for conducting an audit. The ultimate decision about the scope of the report was made by the auditors. No decision is ever based on one single source.”

Memmott said the secretary of state can tell him what to audit, and auditing staff map out the plan and present it to Fagan.

“She does not approve that plan,” Memmott said. “She does not weigh in on that plan. That is again our internal management approval, but she is informed.”

Fagan was involved in two meetings about the audit before she recused herself, Memmott said.

“The secretary was not involved in the reporting process, reviewing the report, providing feedback on the report—on any of the conclusions at all,” Memmott said.

Fagan, who’s paid $77,0000 annually, appears to be an outlier in state government. By early afternoon, communications staff for the Oregon Health Authority, Department of Human Services, Treasury, Business Oregon, Department of Environmental Quality, Oregon Parks and Recreation, Attorney General, Department of Consumer and Business Affairs, Department of Revenue, Department of Transportation, Department of Administrative Services, Department of Forestry, Department of Forestry, Water Resources Department, Department of Corrections and the Oregon Lottery said their directors or interim directors did not have any paid side jobs.

Colt Gill, outgoing director of the Department of Education, taught some classes at the University of Oregon on his own time in 2018, 2019 and 2020, according to Marc Siegel, a spokesman. He currently doesn’t have any side jobs.

Other agency communications staff did not respond to a request for information by early afternoon.

Morris, Fagan’s spokesperson, said she has no other clients besides this one and is paid as an independent contractor. She also teaches a class at Willamette University, Morris said.

“Secretary Fagan prioritizes her public service and completes any work for her private contracts during her free time,” Morris said.

He declined to answer a question about how much she is being paid as a consultant, saying it was outside the scope of his job. Fagan did not respond to a question about her pay, either.

The news prompted Republican legislative leaders on Friday to release a statement, calling on Fagan to step down.

“She must resign,” Senate Republican Leader Tim Knopp and House Republican Leader Vikki Breese-Iverson said in a joint statement. “This appears to be an ethics violation and if it isn’t then Oregon’s ethics laws are broken. An elected official cannot take funds for personal use from someone they regulate.”

Audit results

The audit found the Oregon Liquor and Cannabis Commission, which oversees the cannabis industry, should consider changes to better serve the state and prepare for federal approval of marijuana, which is currently ranked as a Schedule I substance. That means federal authorities consider it has no medical value and has a serious potential for abuse.

But it only remains completely illegal in three U.S. states.

Its federal status poses various challenges, however, the audit found. There is a moratorium on new licenses and federal restrictions on interstate commerce, and companies are barred from many banks.

That impacts Oregon. For example, Business Oregon, the state’s economic development agency, won’t work with cannabis businesses because of concerns about losing its federal funding, auditors found.

Auditors also are concerned that the commission’s licensing system cannot track demographic data, making it difficult to track efforts to help communities of color disproportionately impacted by the war on drugs

Auditor recommendations include:

  • Reconsider regulations that require steel doors and 24-hour video surveillance at cannabis businesses.
  • Start to obtain demographic data and reports when the commission replaces its licensing system. Auditors found more data is needed to ensure diverse communities are included in the state’s efforts and have access.
  • Complete an assessment of how the moratorium on new licensees has impacted the state.

Some of Oregon’s congressional delegation have long been concerned about barriers to the industry, especially Democratic Rep. Earl Blumenauer, a member of the Congressional Cannabis Caucus. Last year, the U.S. House passed a bill removing marijuana from the controlled substances list. The bill died in the U.S. Senate.

U.S. lawmakers in the House have proposed more reforms in the current Congress. One of Oregon’s recently elected U.S. representatives, Republican Lori Chavez-DeRemer, who represents the Fifth District, broke ranks with some in her party to co-sponsor federal cannabis reform, the Oregon Capital Insider reported. (Full Story)

In category:Legalization
Tags:
Next Post

Delaware Becomes 22nd State to Legalize Recreational Cannabis, Is Minnesota about to Become Lucky Number 23?

Delaware Becomes 22nd State, Is Minnesota Lucky Number 23? With Minnesota likely the next state to join the ever-expanding list of states that have legalized recreational marijuana, the Midwest has assumed centre stage in the ongoing debate in the United…
Read
Previous Post

Delaware just became the latest state to legalize recreational marijuana. See a list of every state where cannabis is legal.

Marijuana is legal for adults in 22 states and Washington, DC. Medical marijuana is legal in 38 states and DC. Delaware is the latest state to legalize recreational cannabis. Visit the Business section of Insider for more stories. Marijuana legalization is…
Read
Random Post

Romancing the stoned! Michael Douglas, 78, shops at cannabis dispensary in his old stomping grounds of Santa Barbara

He once attributed his issues with short-term memory to his prodigious marijuana smoking. But that doesn't seem to have stopped Michael Douglas from giving up weed, as he was spotted making a short visit to a marijuana dispensary in his former home town…
Read
Random Post

Jones Soda Struggles to Find Profitability as Revenue Slides Further

Seattle-based Jones Soda Co. (CSE: JSDA) (OTCQB: JSDA) continued fighting to get out of the red in the third quarter of 2023. Revenue dipped across the board, including with its cannabis-infused “Mary Jones” product line, the company reported in its latest…
Read
Random Post

Michigan Bill Would Allow Students to Use Medical Cannabis at School

A bill introduced in Michigan seeks to allow students to use medical cannabis at school, CBS News reports. It is the second time the measure, known as Jayden’s Law, has been introduced in the state and supporters say it would allow students…
Read
Random Post

Federal Marijuana Records Would Be Automatically Sealed Under New Bipartisan Congressional Bill

Bipartisan congressional lawmakers have filed a bill to mandate the automatic sealing of criminal records for certain non-violent federal marijuana convictions. Reps. Lisa Blunt Rochester (D-DE) and Nancy Mace (R-SC) reintroduced the Clean Slate Act last week. The measure would…
Read