WSLCB - Board Caucus
(January 7, 2020)

Here are some observations from the Tuesday January 7th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• The Board responded to a petition for rulemaking regarding enforcement of a statute requiring retail stores to stock medically compliant products to maintain their medical endorsement from WSLCB.
  • The petition was authored by John Kingsbury, a cannabis patient and concerned citizen whose history engaging the State stretches back several years.
    • In 2018, Kingsbury participated in a WSLCB home delivery study which elicited further engagement by the Board and saw a similar petition denied by WSLCB.
    • In 2019, Kingsbury addressed the board in May, observed a listen and learn session in August, and had a petition for rulemaking to the Department of Health (DOH) accepted.
  • Hoffman reviewed Kingsbury’s petition and accompanying materials which asked to change WAC 314-55-080 “to align the [Washington Administrative Code (WAC)] with the requirements of the [Revised Code of Washington (RCW)]” (audio - 15m).
  • Kingsbury argued:
    • Stores are not routinely stocking DOH Compliant marijuana products as required by RCW 69.50.375 (3)(b). Chronically ill and chemically sensitive patients routinely lack medical access to cannabis that is tested for pesticides and heavy metals because LCB is not requiring stores to stock it.
    • Retail store employees, and especially certified medical cannabis consultants do not even know what DOH compliant product is, even though it is a requirement of the RCW that it be stocked in stores that hold medical endorsements.
    • Lack of enforcement of this RCW requirement for holding medical endorsements eliminates incentives to stock this product,
    • Certified medical cannabis consultants, and buyers, are dis-incentivized from stocking this product so long as the LCB standard for receiving medical endorsements is looser than the RCW standard.
    • The failure of LCB to enforce a rule for cannabis hygiene consistent with the Legislative mandate continues to incentivize qualifying cannabis patients to seek cleaner access outside of the regulated market.
    • Kingstbury concluded the petition saying it centrally benefits “Authorized medical cannabis patients, as defined by [RCW] 69.51A.010. or any other qualifying consumer who choose to stay away from untested, pesticide-ridden recreational cannabis.”
  • Hoffman called the new petition “essentially the same” as Kingsbury’s 2018 petition which the agency denied. She said that while he’d cited WAC 314-55-080 (2)(d) “I think he means (3)(d) ‘cause it doesn’t align with 69.50.375 (3)(b).” She was clear that “our assertion is still the same. We continue to maintain that the current rule language aligns with that statutory language. The governor supported our position [in November 2018].”
  • Beyond the materials he submitted to WSLCB with the petition, Hoffman reported that Kingsbury said “LCB employees can’t tell Mr. Kingsbury what it means or how to identify whether a given product is beneficial for patients.” She noted that there wasn’t any “statute or rule that requires our employees to know what’s beneficial to patients.” The agency had allowed producers to label potential benefits on products under newly adopted labeling rules. Beyond that, Hoffman indicated that quality control rulemaking was “moving forward” leaving her hopeful that more of the state’s cannabis products would move “into that realm of DOH compliant product” with testing for pesticides and heavy metals in “all products over a period of time.”
  • Board Member Russ Hauge noted that he’d gone to “visit Danielle Rosellison’s operation up there in Bellingham, Trail Blazin’ [Productions],” and found it to be “a very tightly run little operation” which had created “innovations, particularly on becoming compliant with DOH requirements without having to dip into five-pound lots.” Hauge suggested that their costs for producing compliant products were now “minimal” while cautioning against any policy changes based on only one example. “The point is that there’s progress to be made there,” he asserted.
  • Hauge mentioned the Cannabis Advisory Council (CAC) meeting the month before where he’d “had a really nice conversation afterwards” with the new cannabis patient representative, Lukas Barfield. Hauge expressed interest in increasing participation in the patient registry database as another avenue to foster demand for compliant products “and we would be a step on the road toward filling this gap we got in Washington’s cannabis industry.” Hoffman agreed, adding that “collaboration” from the industry in increasing patient choice “should happen here.”
    • Hauge submitted that multiple patients with misgivings about the registry pointed to the statutory language around the registry which allowed law enforcement to view patient information “in a bona fide specific investigation of suspected marijuana-related activity that may be illegal.”
    • Hauge said he’d been active as a county prosecutor immediately prior to SB 5052, the 2015 law which combined the recreational and medical markets, and that the “registry was always characterized as being something that would be available to, and support law enforcement. It, I think, helped the pill go down” by being one of “many bones” thrown to law enforcement. Board Member Ollie Garrett asked if that view “still applies.” Hauge responded that her question was key as the market had now existed for several years, meriting reevaluation of the “intrusive requirement for people who are seeking medicine.” He nonetheless believed maintaining access to the registry was a “legitimate concern that the law enforcement community has” around policing cannabis.
    • Hauge speculated that were the legislature to show interest in abolishing the cannabis excise tax for patients, “the law enforcement reaction to that package, and I still wear that hat sometimes, would be ‘You can’t do that because everybody in the world is going to want to get a medical card so that they can have that enormous tax break.’” He noted that most patients he’d spoken to were skeptical that abuse of the system would happen. Garrett also found that argument dubious, feeling that interest in unwarranted medical authorizations had waned in the years since legal retail. Hauge said any policymaking around the registry should reflect “our needs now” instead of “needs we maybe foresaw in 2014.”
  • Hauge acknowledged that the petition represented a “specific, targeted thing” versus some of the “more general” changes he was thinking about. Nonetheless, Hauge wanted it communicated that “this year we might be able to make some progress on this.” Both Board Chair Jane Rushford and Hoffman readily agreed.
  • Garrett asked about “something different we could do” in regards to Kingsbury’s request that might further “inclusion in the registry” and what WSLCB currently did to develop patient participation. “Nothing,” Hauge answered, “we’re not doing anything right now.” Hoffman believed that was more the purview of DOH’s “regulatory space,” while Hauge felt it was a failure of “interagency relations to a certain extent.” Board Members were in agreement that the situation reflected the need for the agency’s Cannabis 2.0 efforts.
  • Rushford resolved that WSLCB and DOH needed a stronger partnership on medical cannabis regardless of whether it was “registry specific.” Hauge commented that the only comments he heard about the registry database was criticism from patients that “the registry is B.S.” Garrett said the registry should be part of any changes but that lawmakers should also consider medical cannabis changes mentioned by stakeholders. Rushford expressed satisfaction with the agency's progress but added there was “so much work to do,” which included medical cannabis.
  • Hoffman restated her opposition to the petition saying other agency endeavors would “move us in the direction that Mr. Kingsbury would like to see us moving.” The Board voted in favor of Hoffman’s recommended denial.
• Board members discussed allegations of discrimination against a cannabis licensing applicant with members of Black Excellence in Cannabis.
  • Racial discrimination within the agency had been called out by Black Excellence in Cannabis (BEC) leader Aaron Barfield in October and December. BEC distributed a “misconduct report” alleging a bias against cannabis license applicant Peter Manning, who also addressed WSLCB about his experience late last year.
  • BEC was represented by Tyler Conway and Maurice Gordon in addition to Barfield and Manning, who commented that he’d “tried to get this meeting years ago” (audio - 30m).
    • Barfield began with the misconduct report, previously provided to the Board, involving Manning and WSLCB Marijuana Licensing Supervisor Frank O’Dell. The report contained documentation showing changes in Manning’s licensing priority status along with allegations of misleading statements from O’Dell to Manning regarding the status of his license application. Barfield asked for the Board’s position on the report and whether WSLCB was “condoning Mr. O’Dell’s behavior and if so, we want to see what’s going to be done about this if the Board decides that activity was not appropriate.”
    • Rushford told the group that when Manning initially brought his complaints to the agency in 2016, WSLCB contracted “an outside consultant” because the Board believed it was important to independently gauge the veracity of the allegations “on our behalf, and for your benefit.” The consultant “did not corroborate some of the allegations that are still apparently standing.”
    • Barfield acknowledged the review by D Diamond Consulting but maintained that “it’s not so much whether discrimination was involved, it’s the actual activity, you know, what [Mr. O’Dell] actually did.” Barfield felt the behavior was “outside of the proper procedure for the LCB” because Manning was “required to jump through extra hoops for his application.” He said that Manning’s application process had been demonstrably different than others with which Barfield had been involved, particularly in regards to scrutiny of Manning’s former medical cannabis collective, Bella Sole. Barfield asked whether the Board would let O’Dell’s “arbitrary decisions” stand.
    • Manning spoke up to say that the consultant’s report “didn’t reflect what Frank O’Dell did” and that it excluded “evidence that showed that he lied about that.” He noted that D Diamond Consulting’s report focused on “the portions of allegations that Mr. Manning would have difficulty proving in court, such as racial bias, while significantly downplaying the portions that showed deceitful activity by Board staff and the corresponding denial of due process in the processing of Mr. Manning’s original application.” Manning asserted that whatever O’Dell’s motivations were, the report lost sight of the effect of O’Dell’s choices on Manning’s livelihood. Barfield maintained that the answers O’Dell gave the consultant about his involvement investigating license applicants differed significantly from “direct communication between Mr. Manning and Mr. O’Dell,” as well as Manning’s attorney, that was shared in their misconduct report.
    • Manning insisted to the Board he’d taken advice from O’Dell on modifying his application so as to maximize odds of a high priority status, only to be rebuffed by O’Dell after Manning included Barfield and another investor, James Buchanan, in his revised application. Barfield claimed that during subsequent investigations, O’Dell made “clearly misleading statements to the investigator” about not being involved with Manning’s applications. Barfield wondered why O’Dell still worked at the agency so long after the discrepancies had been reported. He was further critical because the investigator “never spoke to me, she never spoke to any of the African American people who were alleging the discrimination,” instead prioritizing talking to those accused of the discriminatory actions.
  • Rushford promised the group she’d be talking the matter over with Garrett and Hauge, but stood by the consultant’s conclusions that racial discrimination had not played a role in handling of Manning’s application. Barfield was insistent that whatever the motive for O’Dell’s choices they were incorrect and merited resolution by WSLCB.
    • Rushford reported that she was “not aware” of evidence that O’Dell specifically lied to Manning in the course of his application. 
    • Garrett said she’d excused herself from that case “because I know the parties.” 
    • Hauge said after reviewing the information submitted “I don’t see any evidence that Frank O’Dell willfully misrepresented anything.” Hauge took O’Dell at his word that, in overseeing nearly all the state’s license applicants, he “didn’t recall” communicating specifically with Manning. In reading through emails between O’Dell and Manning, Hauge noted that Manning frequently used a business name instead of his own name, leaving vagueness around whom O’Dell believed he was corresponding with. Manning challenged that claim, saying his name was always included with Bella Sole.
    • Further, in Hauge’s opinion there wasn’t evidence that O’Dell’s actions “caused anything.” Manning took issue with that conclusion, saying his criticisms about O’Dell’s action to WSLCB had been early and consistent. “But maybe it’s because you have total disregard for what he did,” Manning added. Hauge restated his belief that the volume of license applications O’Dell was dealing with on a daily basis at that time lent credence to O’Dell’s claim that “he doesn’t recall anything specifically about this.”
    • Beyond the assertions in Manning’s misconduct report, Hauge didn’t know if Manning or his partners challenged application decisions at the time they’d happened or attempted legal remedies using “channels that we work through every day.” Barfield and Manning insisted that they had, in fact, gone through the agency’s appeal process already. “Ok,” Hauge responded, “the process then produced a result, a result you’re not happy with, and I’m sorry about that.” Rushford said she agreed with Hauge’s interpretation while Garrett repeated her recusal from the case.
  • Barfield moved the discussion on to other criticisms of WSLCB, citing an earlier article that said the agency may have “skirted ethics rules to appease [a] special interest group.” Alleging a series of conflicts of interest and procedural violations had been prevalent at the agency for some time, Manning told the Board “this is all stemming to white people.” He continued, calling the 502 system on the whole “whitewashed, it’s white everything,” later pointedly asking Board Members “who are you guys protecting?”
  • “The next phase is, we just have to sue” Manning said, “in some type of federal court.” He expressed confidence a federal judge would recognize the “nepotism, cronyism” in the state agency. Barfield agreed that the Board was choosing to look at circumstances through a lens which gave too much deference to their own staff and favored license applicants with more money or clout. Manning added that at one point his attorney instructed an agency staffer to change Manning’s priority status, only to see the staffer comply. “A government employee can’t take outside instructions from anybody, other than for his supervisor,” Manning claimed, “but for me to have that type of power, I guarantee you other people had power more than that. And it was probably financial.” The situation would “look real good in court,” Manning stated.
  • Claris Nnanabu, WSLCB’s Director of Human Resources, joined the conversation to share her thoughts, “I was present when Peter Manning was interviewed in Seattle,” she explained, saying she disagreed with an earlier comment that the agency hadn’t spoken with those alleging racially discriminatory actions. “At the time that you were interviewed you were specifically asked if there were witnesses that you want[ed] interviewed. You didn’t provide any names for the investigator to interview.” Barfield responded that he’d never been contacted even though he’d filed the application. Nnanabu said WSLCB’s process for investigating complaints of discrimination focuses on the complainant, in this case Manning. Director Rick Garza chimed in to say it was the agency’s own investigation which had led to the hiring of an independent consultant, but the focus of the investigation remained the person making the complaint, or the witnesses they identify. Manning replied that his impression by the time he was interviewed with Nnanabu was that the investigation was already concluded. Nnanabu included that the interview was for the consultant’s investigation, not the agency’s initial inquiry.
  • Manning reminded the Board that they’d seen the need to propose a social equity program, strong evidence that discrimination did factor into the early development of the industry. “I think what every black person should do is not purchase any marijuana from any of your guys’ stores,” Manning suggested. Instead, he felt Washington’s African Americans should join a class-action lawsuit against the 502 system. “This is going to get bigger than it is,” Manning promised.
• Policy and Rules Coordinator Kathy Hoffman reported on cannabis and vapor rulemaking projects in preparation for the following day’s board meeting.
  • Hoffman last discussed the agency’s rulemaking efforts at a Special Board Meeting on December 18th.
  • Packaging and Labeling (PAL, WSR 19-12-029, audio - 1m). Rule changes recently adopted by the Board included incorrectly marked years on the rescinded Board Interim Policies (BIP). The mistake necessitated adoption of a revised document ending the BIPs. The Board signed off on Hoffman’s correction without questions.
  • Cannabis Penalties (WSR 18-22-099, audio – 1m). Hoffman reported that the proposed rules would have a public hearing during the following day’s board meeting. She noted “no comments have been received to date” and did not anticipate many comments would be presented during the hearing. Hoffman expected to have the CR-103 prepared by January 22nd.
  • Voluntary Compliance Program (WSR 19-15-074, audio – 1m). Hoffman told the Board that the effort, which was required by SB 5318, had only seen one stakeholder meeting and a second internal meeting on December 18th. She noted she was “penciling out” conceptual draft rules for completion by January 15th and anticipated a listen and learn session in February. Hoffman said the program was modeled off of “procedures we already had in place that aligned with what our licensees and their employees were looking for.”
  • True Party of Interest (TPI, WSR 18-22-054, audio – 1m). The TPI rulemaking project had an internal meeting focused on “a few revisions” last week, with another meeting planned for the week ahead. She foresaw putting a new draft in front of stakeholders during the third week of January “so we can move to the CR-102 first part of February.” The end result would be “very different” TPI rules, Hoffman promised the Board.
  • Quality Control (WSR 18-17-041, audio – 2m). Hoffman announced that the Board would not be seeing a proposed rules package the following day despite her earlier optimism. She’d received the proposed rules back from Order Typing Service (OTS) at the Office of the Code Reviser (OCR) the day before. Hoffman explained that a phased-in implementation was “something that we’ve never done before” and required a “staggered effective date” developed for WAC 314-55-102. Hoffman said the “stagger and repeal” approach that had emerged from dialogue with OTS would see changes to different subsections take effect over time until “full implementation, mid-March of 2021 for pesticide and heavy metals testing.” The complicated nature of implementing the rule necessitated a deliberate approach by Hoffman as well as close coordination with the Office of the Attorney General (OAG). “The Small Business Economic Impact Statement (SBEIS) and significant analysis are also substantial for this package.”
    • Hoffman noted that she had heard from stakeholders who believed the agency’s conceptual draft rules distributed in August were WSLCB’s final rules on the subject. To clarify:
      • During the CR-101 stage, “Conceptual Draft Rules” are the agency’s initial description of changes which may incorporate stakeholder comments, work group feedback, and listen and learn forum input.
      • During the CR-102 stage, “Proposed Rules” are filed with the Office of the Code Reviser and commented on in a required public hearing.
      • During the CR-103 stage, “Final Rules” are adopted by the agency, filed with the OCR, and go into effect on a defined date.
  • Incremental Expansion of Tier 1 Canopy (audio - <1m). The new rulemaking project opened last month had drawn two comments so far. Hoffman said she was reaching out to stakeholders to solicit input.
  • Vapor Product Emergency Rules (audio - 1m). Hoffman reminded board members that mid-January was the “90 day point” of the agency’s emergency rules banning certain vapor products. As emergency rules expire after 120 days, Hoffman said members should expect to “renew those in February.”