31 Colorado Marijuana Enforcement Division Actions Summarized by Sean McAllister

Marijuana industry attorney Sean McAllister of McAllister Law Office submitted open records act requests to the Colorado Marijuana Enforcement Division (MED) for all enforcement action settlement agreements in 2015. Readers can benefit from the summary he provided about the errors that businesses are making and the consequences for doing so. McAllister’s summary and the first three cases are provided below, with a link to the full report that includes 28 additional cases at the bottom.

Summary of MED Disciplinary Actions for 2015

5 most common types of violations:

1. Failing underage compliance checks (16 individual citations, 7 business citations).
2. Recordkeeping/METRC compliance issues (22 citations).
3. Inadequate camera coverage or inadequate security for recording devices (18 citations).
4. Failing to disclose all owners or financial interests (5 citations).
5. Failing to ensure employees wore badges (5 citations).

Other categories of violations with about 5 citations each include: Not using RFID tags, making product transfers to marijuana businesses that were not commonly owned, improper waste disposal and recording, and not maintaining transport manifests.

Most severe types of violations:

1. Undisclosed ownership interests (almost always results in revocation of all licenses and restrictions on future ownership or licensing).
2. Operating without a license (small or no fine, usually results in license revocation and restrictions on future ownership or licensing).
3. Butane processing without proper equipment or permits (two incidents, one resulted in license revocation, the other resulted in a $100,000 fine).
4. Diversion of product (wide range in severity of consequences, deliberate diversion results in license revocation and/or fines up to $150,000).
5. Deliberately lying to the MED (There were two instance, both of which involved numerous other violations. Both resulted in a fine and license revocation. One was $50,000, one was $21,000).

Underage sales stings:

There were 16 SAOs involving support licensees selling to underage agents. Every support license holder except two received a 90 day license suspension and no fine. One support license holder received a 180 day suspension for selling medical marijuana to someone who did not have a patient registry identification card. The other support license holder got the charges reduced to a second failure to wear his identification badge. That person had their license revoked but was permitted to reapply for it on the condition he wear his badge in the future.

There were 7 SAOs involving businesses and key licensees selling to underage agents. The standard disciplinary action for this type of violation was a 7 day suspension held in abeyance pending future violations affecting public safety and a $7,500 fine. One licensee received a $8,500 fine with no indication of why their fine was higher than others in this category.

Summary of SAO/FAOs not including underage sales, going from most to least severe violations:

Case #1

Issues and mitigating factors:

• Medical MIP manufactured edibles at their licensed location and then distributed them to the general public at a public event. Related violations included improper inventory tracking, improper surveillance, and diversion of medical marijuana.
• The manager in charge of the business was fired, the business adopted best practices in its SOPs, the business increased the size of it’s regulatory compliance team, and the business ensured each location had it’s own compliance officer.
• Neither owner admits any liability for this issue and it does not reflect on their Key Licenses.

Resolution and settlement:

• 5 of the Division’s alleged violations were admitted to by the business, none were admitted to by the owners.
• The business made extensive adjustments to their operating plan.
• The manager who oversaw this activity was fired and his support license was suspended for 5 years.
• None of the licenses were revoked.
• Fine amount: $150,000

Case #2

Issues and mitigating factors:

• Licensees used a temporary structure outside of their licensed premises to manufacture concentrates through open air butane extraction.

  Resolution and settlement:

• Licensees admitted to 2 of the Division’s alleged violations.
• Licensees received a 30 day suspension held in abeyance for two years pending no further violations of the Medical or Retail Codes.
• None of the licenses were revoked.
• Fine amount: $100,000

Case #3

Issues:

• Licensee did not maintain employee records, transport manifests, or diagrams of their facility.
• Licensee did not maintain a secure surveillance recording area.
• Licensee did not have proper camera coverage in growing, harvesting, or point of sale areas.
• Licensee permitted a visitor to gain access to a Limited Access Area without properly signing in and without being escorted.
• An allegation that didn’t make it to the final order is that the owner’s wife, who was not licensed, was permitted access to limited access areas and the owner deliberately lied about that to the Division.

Resolution and settlement:

• Licensees admitted to 6 of the Division’s 15 alleged violations.
• The owner was prohibited from applying for or holding a license for 8 years.
• The owner was prohibited from having any financial interest or an occupational license for 3 years.
• All licenses were surrendered and all inventory was destroyed.
• The owner was permitted to sell the business.
• Fine amount: $50,000