86-CR-17-499 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN BEFORE JOHN J. LEIDIG, NATALIE M. LAPRADE MEDICAL 3F CANNABIS COMMISSION, * AN ADMINISTRATIVE LAW JUDGE MARYLAND DEPARTMENT * OF THE MARYLAND OFFICE OF HEALTH * 0F ADMINISTRATIVE HEARINGS * OAH No.: * MIVICC Case v. MARYMED, LLC, MDH—MMCC-l70-l7-36882 No.: 2017-001 ‘ ~ * RESPONDENT ac * * 9; * * * 4r 4: s: a: 9: =2 PROPOSED FINDINGS OF FACT STATEMENT OF THE CASE SUMMARY OF THE EVIDENCE PROPOSED FINDINGS OF FACT DISCUSSION STATEMENT 0F THE CASE On September 8, 2017, the Natalie M. LaPrade Medical Cannabis Commission (Commission), Maryland Department of Health (Department), issued aNotice of Intgnt Medical Cannabis Grower, Processor, and Dispensary Licenses against MaryMed, (MaryMed to Deny LLC or Respondent), alleging violations of Maryland law concerning the licensing of medical cannabis growers, processors and dispensaries. Code of Maryland Regulations (COMAR) 10.62. On September On November 2, 14, 2017, the Respondent requested a hearing. 2017, the Commission transmitted the hearing request to the Office of Administrative Hearings (OAH), delegating to the OAH the authority to conduct a contested case hearing and “prepare proposed findings of fact related to the charges issued by the Commission with a particular finding of fact on whether there is a reasonable likelihood that medical cannabis 86-CR-17-499 was Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN diverted from Minnesota Medical Solutions, a subsidiary of Vireo Health, to Vireo Health of New York.” Commission Transmittal On January 18, 2018, in at 1; Memorandums to from the I cOnducted a OAH in Hunt Valley, Maryland. On March parties, I 1, 2018, issued a Ruling on Motions and Pre-Hearing address matters raised at the Conference.2 On March 7 and Maryland. Robert State Gov’t § 10-205 (2014).l accordance with the Commission’s delegation, pre-hearing conference (Conference) at the after considering submissions Md. Code Ann., J. 8, 2018, Gilbert, I held an evidentiary hearing at the OAH in Hunt Valley, Deputy Counsel, Health Occupations Prosecution and Litigation Division (HOPL), and Michael Kao, Assistant Attorney General, the State of Maryland (State). Steven K. White, Esquire, and HOPL, Matthew appeared on behalf of C. Smilowitz, Esquire} Stinson Leonard Street LLP, appeared on behalf of MaryMed. The contested case provisions of the Administrative Procedure Act and the Rules of Procedure of the OAH govem procedure in this case. 10-201 through 10-226 (2014 Md. Code Ann., State Gov’t §§ 94607.2, & Supp. 2017); COMAR 28.02.01. ' The delegation statement from the Commission presupposes that the question of whether there is a reasonable was diverted fiom Minnesota Medical Solutions, a subsidiary of Vireo Health, to Vireo Health ofNew York is a question of fact. I believe that it is a mixed question of law and fact that involves the likelihood medical cannabis application ofspecific facts to COMAR 10.62.34.01B. This regulation states in pertinent part as follows: “In the afier written notice and a hearing in Commission finds there is a reasonable likelihood ofdiversion accordance with the State Government Article, §§10-20 1—10-226, Annotated Code of Maryland, the Commission B. Deny the license or registration.” (emphasis added). COMAR 10.62.34.01B. may: 2 The parties submitted the following: State’s Pest Pre-Hearing Conference Memorandum of Law, February 1, 2018; MaryMed LLC’s Motion to Compel, Motion in Limine, and Pre-Hearing Initial Brief, February 1, 2018; State’s Response to MaryMed, LLC's‘Motion to Ccmpel, Motion in Limine and Pre-Hearing Initial Brief, February 8, 2018; MaryMed LLC’s Response to State‘s Post Pre-Hearing COnference Memorandum of Law, February 8, 2018; and MaryMed, LLC’s Reply to State’ s Response to MaryMed, LLC’s Motion to Compel, Motion in Limine and event the . . . . . . Pre—Hearing Initial Brief, February 12, 2018. Mr. Smilowitz ls specially admitted to participate in these proceedings pursuant to an Order entered by the Circuit Court for Baltimore County on January 8, 201 8 (In the Matter ofMaryMed, LLC, Case No 03-C- 18- 108). 2 86-CR-17-499 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN SUMMARY 0F THE EVIDENCE Exhibits I admitted the following exhibits at the hearing. Joint exhibits are designated as JT; State exhibits as ST; JTl MaryMed exhibits as MM; and the OAH exhibit as OAH. Memorandum from Mark Rodeheaver (Rodeheaver), the Commission’s Senior Bureau ofEnforcement and Compliance (BBC), (K1003), BEC Director, July 7, 2017 Investigator, to David K1005 JTZ Complaint and supporting materials for State ofMirmesota v. Laura Lynn Bultman (Bultman Case), State of Minnesota, County of Wright, District Court, 10‘“ Judicial District (Minnesota Court), February 3, 2017 JT3 Letter JT4 Letter from JTS Email from Paul from Eddie L. Pounds, Esquire (Pounds) to Patrick Jameson (Jameson), the Commission’s Executive Director, January 31, 2017 Pounds J. to Jameson, February 7, 2017 Quill (Quill), Commission’s Senior Investigator, to Pounds, February 15, 2017; letter from Pounds to Quill, February 17, 2017 JT6 Emails between Pounds and Quill, February 17, 2017 to March 1, 2017; from Pounds to Quill, with spreadsheet attachment, March 3, 2017 JT7 Letter from Quill JT8 Letter from Pounds JT9 Letter from JT 10 Emails between Pounds and Jameson, with attachments, t0 Pounds Pounds, March t0 Quill, 13, letter 2017 March 29, 2017 to Quill, April 4, 2017 May 19, 2017 to May 22, 2017 JT11 Email from Rodeheaver to Pounds, May 23, 2017; letter from Rodeheaver Pounds, with attachments, March 23, 2017; email from Pounds to to Rodeheaver, with attachments, March 23, 2017 JT 12 Company Statement of Vireo Health and Minnesota Medical Solutions re: Investigation Stemming from Accusations of Former Disgruntled Employee, June 1, JT 13 20 16 MaryMed’s applications . 13-1 Grower Application 13-2 Processor Application 13-3 Dispensary Application 3 86-CR-17-499 JT 14 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN Electronic Calendar entry for Ari Hoffnung, for appointment on September 30, 20 1 6 JT 15 “Dear Pre-approved Grower, Processor, Dispensary Applicant” Letter from the Department, with attachment, March 24, 2017 ' JT l6 “Dear Pre-approved Dispensary Applicant” Letter from the Department, with attachment, March 28, 2017 JT 17 Emails between Pounds and Quill, March 29, 2017 to March 30, 2017 JT 18 Emails between Pounds and Quill, April JT 19 Commercial Lease Agreement between MaIyMed and 100 Enterprise Drive, LLC, April 21, 2017 JT 20 Report from the Department (redacted), JT 21 Letter JT 22 Commission’s Meeting Minutes, JT 23 Email from Quill to Jake May (May), Special Agent of the Minnesota Bureau of Criminal Apprehension (BCA), with attachments, May 18, 201 7 JT 24 Emails between Rodeheaver and May, JT 25 Email from Pounds JT 26 Emails between Rodeheaver and Minnesota Department of Health, June to from Pounds to Kloos, May 16, May to Rodeheaver, 6, 2017 May to April 13, 11, 2017 2017 20 17 17, 2017 May 22, 2017 May 26, to May 31, 2017 2017 5, 20 1 7 June 14, 2017 MaIyMed and 2017 JT 27 Email from Kloos JT 28 Letter from Stinson Leonard Street LLP (Stinson) (AAG) Heather Nelson (Nelson), June 14, 2017 to Assistant JT 29 Emails between Rodeheaver and Pounds, June 2017 JT 3O Email from Rodeheaver 20, 20 1 7 JT31 Letter to others, June '1 7, 6, Attorney General to policechief@cheverly-md.gov, with attachment, from Pennsylvania Department of Health to Dr. June Kyle Kingsley, June 20, 2017 JT 32 Emails among Steven White, Esquire (White), Stinson, Rodeheaver and Nelson, June 20, 2017 to June 21, 2017 4 AAG 86-CR-17-499 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN June 23, 2017 JT 33 Email from White JT 34 Commission’s Meeting Minutes, June 26, 2017 JT 35 MaryMed’s Supplemental Grower License JT 36 MaryMed’s Supplemental Processor License JT 37 Letter to Nelson, from White to Administration, July Mary 1 1, Application, June 25, 2017 Application, June 25, 2017 Jo Mather (Mather), Commission’s Director of 2017 2017 JT 38 “Dear Applicants” email from Kloos, with attachment, July 5T 39 Renewal 20 1 7 JT 40 Renewal statement from Minnesota Department of Health, August JT41 Order Denying Motion JT 42 Letter from letter from 19, New York Department of Health t0 Vireo Health, July 3 1, to Dismiss in the Bultman Case, August Amber Shimpa, MaryMed’s Chief Financial 2, 2, 2017 2017 Officer, to K1005, with attachments, August 14, 2017 from White August 25, 2017 JT 43 Letter JT 44 Notice of Agency Action: letter from Commission to MaryMed, with attachmcnt, September 8, 2017; Notice of Intent to Deny Medical Cannabis Grower, . to Nelson, Processor, and Dispensary Licenses, September from Mather 8, 2017 White, October 2S, 2017 JT 45 Letter JT 46 Motion to Dismiss JT 47 Press Release from Pennsylvania Department of Health, ST 48 Commission’s investigative notes, undated ST 49 Order entered in the Bultman Case, February ST 50 Order entered in State of Minnesota to in the Bultman Case, November v. 16, Letter MM 52 Memo MM 53 Memo from Rodeheaver to Kloos, from Quill from Quill to Pounds, March to Kloos, May 11, 5 2017 December 19, 2017 2018 Ronald Dale Owens in the Minnesota Court, February 16, 2018 MM 51 3, l3, 2017 2017 June 20, 2017 86-CR-17-499 OAH 54 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN OAH and the Commission, Contested Case Hearing Agreement between the December 2017 MM 55 11, OAH, November 2, 2017; Transmittal from the Commission to the ' ' Receipt and Certificate of Burn/Destruction from Pope/Douglas Solid Waste Management, April 26, 2016 Testimony The State presented testimony from the following witness: Mark Rodeheaver (Rodeheaver), the Commission’s Senior Investigator, Bureau of Enforcement and Compliance (BBC). MaryMed presented testimony from the following witnesses: Paul Quill (Quill), the Commission’s former Senior Investigator, BEC; and Dr. Kyle Kingsley (Kingsley), MaryMed’s Chief Executive Officer. PROPOSED FINDINGS OF FACT Ipropose that the Commission make the following findings of fact. Except as otherwise noted, all of these proposed findings are by.a preponderance of the evidence. On or about November 4, 2015, MaryMed 1. Commission applications 2. and for Stage 1 cannabis grower, processor and dispensary licenses. True copies ofthe were admitted At that time, into evidence as Joint Exhibits 13-1 90% entities, As of December MaryMed, As of December 13-2, and 13-3. (Schneyer), MaryMed’s LLC (Vireo Health) Clinical Director. 2015, Vireo Health was also the majority owner of two other Minnesota Medical Solutions 4. , of MaryMed was owned by Vireo Health, 10% was owned by Dr. Mark Schneyer 3. submitted applications to the (MMS) a’nd Vireo Health ofNew York (Vireo NY). 2015, Dr. Kyle Kingsley was the Chief Executive Officer 0f MMS and Vireo NY. 86-CR-17-499 Each of MaryMed’s 5. . three applications states that “the Applicant continuing duty to promptly notify the Commission provided to the Commission.” JT 13 In 6. its applications, Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN if there is a change is under a in the information at 15. MaryMed identified officers, its which included the following individuals: o Laura Bultman, MD. (Bultman), as Chief Medical Officer; 0 Robert Shimpa (Shimpa) as Chief Operations Officer; and o Ronald Owens (Owens) The Commission 7. as Security Director. hired the Regional Economic Studies Institute (RESI) of University to score and rank the grower, processor, a’nd dispensary applicants. Towson RESI, 8. in turn, hired a panel experts from across the country to evaluate of third-party evaluators composed of subject matter all applicants that met the Commission’s minimum mandatory qualifications. 9. RESI provided applications to the evaluators in a Word document that was redacted as follows: The Word document must be devoid of any identifying information after Form 5, including the Applicant’s name, the company name of the Applicant (if applicable), and the names of any investors and/or employees. The related documents must be devoid of any identifying information including the Applicant’s name, the company name of the Applicant (if applicable), and the names of any investors and/or employees. Only the redacted Word document and related documents will be sent mandatory qualification JT to evaluators if the Application mects the criteria. 13 at 10. 10. RESI in the applications 1 1. assigned scores and rankings to the applications based on the criteria stated and reported those scores and rankings Each application states that the to the “Commission issuing any [grower/processor/dispensary] licenses.” JT Commission. will 13 at 11. make the final decision on 86-CR-17-499 12. As of December 2015, Vireo supply shortage of any cannabis products or 13. vehicle, a reasons, On or about December 6, NY’s Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN New York facility was not experiencing a strains. 2015, Bultman and 2011 Yukon Denali, to Vireo NY’s facility in Owens drove MMS’s armored Queens, New York. For business MMS had previously decided to use the armored vehicle in New York rather than Minnesota. 14. In April 2016, approximately one year as 15. MMS fired Dan Abate Pella (Pella), who had served for MMS’s Chief Scientific Officer. wbuld “bring In response to his firing, Pella stated that he Transcript of May 8, 201 8 hearing (Tr. II) at 49. He 16. damage company down.” also intentionally altered or manipulated a High Performance Liquid Chromatography (HPLC) machine concentrations, in order Io this that is used by MMS to test product MMS. Later in April 2016, Fella provided Minnesota law enforcement authorities with a screen shot of a Vireo or grams of cannabis oil MMS computer purporting to show that on December 10, 2015, 372 was transported from the Otsego, Minnesota facility to one of Vireo’s patient centers in Minnesota. Pella told authorities that the screen shot was evidence of improper x diversion because the patient center only sold cannabis oil products in vaporizers or cartridges and it could not convert bulk shipments of cannabis that are oil into the types of vaporizers or cartridges used by the center’s patients. 17. Pella also provided Minnesota authorities with copies of text messages purportedly between himself and Bultman from told authorities that these text December messages substantiated that 3, 201 S'to December 5, 2015. Pella MMS was diverting cannabis oil in order to meet a supply shortfall for certain strains of cannabis products at the Vireo NY facility. 86-CR-17-499 Aftcr reviewing the screen shot and the text messages, and based on information 18. told to them by cannabis oil Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN Minnesota authorities PelIa, an investigation into possible diversion of MMS. by Senior Special Agent Robert 19. initiated Nance (Nance) and Special Agent Jake of the Minnesota Bureau of Criminal Apprehension (BCA) were assigned to the May (May) Minnesota investigation. 20. In the course of their investigation, Nance and May obtained and reviewed the following: The screen shot provided by Fella purporting to cannabis The text oil to show a transfer of 372 grams of an MMS-affiliated patient center on December 10, 2015 messages purportedly between Pella and Bultman between December 2015 and December 5, 2015 concerning an alleged plan to divert cannabis oil 3, from MMS to Vireo NY to resolve a cannabis oil supply shortage at the New York facility A seven-page An Biotrack inventory report from Bultman for December 2015 eight-page Biotrack inventory report from Brian Harvey (identified as lead pharmacist) for MMS’s December 2015 Data “extracted from” the hard drives of the computers of Kingsley, Shimpa, and Bultman, including emails A report from The Wadsworth Center (identified as a company that does “marijuana testing in An New York”) inventory spreadsheet generated by December 8, Mia Vang (a technician at MMS) 0n 20 I 5 r Labeled jars of Vireo product; allegedly from the Otsego, Minnesota and ' facilities Smartphone records for Bultman, Owens, and Shimpa Emails between Mia Vang and JT 2. Bill Com'gan (other MMS employees) New York 86-CR-17-499 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN . In addition, 21. Nance and May interviewed manufacturing technician employed by Solid Waste facility; MMS; Owens; John Pmdes two unidentified employees Duane Archie Lindenfelser of Legend Technical Services; and PelIa; (Lifidenfelser), an Doug Maniak, at the (Purdes), a Pope/Douglas MMS employee; Tom Barrett identified as the former Manufacturing Manager of MMS. 22. Bultman resigned from 23. On August grower and processor 24. Commission 26. Capital, LLC 27. 2016, the COmmission voted to award MaryMed Stage 1 cannabis licenses. During August 2016, the Commission became aware of the Minnesota investigation of 25. 5, MMS in July 2016. MMS and Vireo NY. On August 25, 2016, Kingsley for successful Stage On September 9, 1 attended a mandatory meeting called by the grower and processor applicants. 2016, a Certificate of Formation was filed to fprm Dorchester (Dorchester), a Delaware limited liability On September company. 30, 2016, Kingsley participated in a conference call with the Commission’s Executive Director Patrick Jameson and its Director of Bureau of Enforcement and Compliance (BEC) David Kloos. MaIyMed’s Chief Strategy Officer Ari Hoffnung (Hoffnung) and MaryMed’slcounsel Eddie Pounds, Esquire, (Pounds) also participated in the call. 28. that the During the September 30, 2016 conference Minnesota BCA was investigating call, MaryMed representatives stated criminal charges of diversion of cannabis oil from MMS to Vireo NY, and that Bultman and Shimpa were no longer employed by MMS. 29. all During November 2016, Vireo Health and Schneyer contributed and transferred of their equity in MaryMed t0 Dorchester in exchange 10 for Class A Units of Dorchester. , 86-CR-17-499 30. On November 28, 2016, Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN Commission voted the to award MaryMed a Stage 1 cannabis dispensary license. 3 1. On January 26, 2017, MaryMed hired Compliance Director. Jennifer Duey was hired Jennifer to replace Duey to become a Security and Ronald Owens, who was terminated effective January 3 1, 201 7. 32. Onianuary 3 1, 2017, MaryMed’s counsel explaining that as a result of the Minhesota isolate its operations longer 33. . . . Health.” at 1. The letter also states that “MaryMed is no Id. MaryMed’s January 3 1, several individuals outlined 2017 letter also states as follows: on the original applications are employed by Vireo Health or affiliated with MaryMed prospective employees. Commission BAC investigation, “MaryMed has taken steps to from Vireo Health.” JT 3 owned by Vireo sent a letter to the To this end, the no longer as shareholders or following replacements have been made with individuals of similar or superior qualifications: Medical Director Stephen Dahmer, M.D., replaced Laura Bultman, M.D. Duey replaced Ronald Owens Greenbaum replaced Dan Abate Pella Operations Director Nik Goran replaced Robert Shimpa Security and Compliance Director Jennifer Scientific Director Eric In addition, Chief Strategy Officer Ari Hoffnung and Assistant Head Cultivator Chuck Schmitt have been added to MaryMed’s leadership team. 1d. 34. On February 3, 2017, the State of Minnesota, Wright County, filed two felony counts each against Bultman and District Owens in the Wright County District Court for the 10'“ Judicial (Minnesota Court). CountI alleges an intentional transfer of medical cannabis person other than allowed by law, and Count II alleges aiding of medical cannabis to a person other than allowed by law. 11 to a and abetting an intentional transfer 86-CR-17-499 35. On February 7, 2017, MaryMed Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN sent a letter to the Commission notifying that a it criminal complaint had been filed in the Minnesota Court. 36. On February 15, 2017, the Commission’s investigator Quill sent én email to S” on ‘Dorchester and asking whether Bultman Pounds (MaryMed’s counsel) requesting “details and Owens were “terminated or allowed to resign.” 37. Pounds responded to Quill with a JT letter 5. He dated February 17, 2017'. enclosed the I documen “incorporation Although Wé ” for Dorchester. JT 5. Pounds further wrote as follows: can confirm that Laura Bultman, M.D., and Ron Owens are no longer employed by [MMS], a subsidiary 0f Vireo Health, LLC, based 9n confidentiality and other obligations that we are subject to, we are limited in our ability to describe the nature JT of their separations. 5. .38. On March 1, 2017, Quill sent an email to Pounds asking him to “identify the investors, corporate officers” Amber Shimpa 39. “controlled by (listed as On March its company, which Kingsley.” JT 6. of Dorchester, and asking whether there MaryMed’s CFO) and Robert Shimpa‘ JT 3, 2017, Pounds sent a is any association between 6. letter to Quill stating that Dorchester manager, Dorchester Management, LLC, a Minnesota limited is owned by Kyle Kingsley and Amber Shimpa, and managed by Kyle The letter identifies Dorchester’s officers as Kingsley (CEO), Amber Shimpa is Robert Shimpa’s 40. raised Amber Shimpa In his March 3, 2017, letter to Quill, more than $3.2 million from Maryland-based and the purchase price. 1d. also states it spouse. Pounds also reported investors and a spreadsheet showing ten investors, and listing their addresses, Units, is liability (CFO), Dahmer (Chief Medical Officer), and Hoffnung (Chief Strategy Officer); that new that “Dorchester has entities.” Id. Pounds attached number of assigned Class The spreadsheet does not show the percentage by each investor or the dates on which each purchased Class 12 A Units. interest ‘ A owned 86-CR-17-499 On March 41. objects to all all 13, 2017, Quill sent a Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN letter to Pounds stating that the proposed changes to MaryMed’s organization unlesé and information requested by the Commission in order to complete application.” JT 7. its until “Commission MaryMed provides evaluation of the Quill also asked for additional details concerning the “separations" of Bultman, Owens and Shimpa from MaryMed, as well as “a copy of all reports, documents, data, records, and notes contained in the On March 42. resigned in July 2016, 29, 2017, company’s Pounds responded Shimpa resigned in between MaryMed’s “team” and On April Vireo Health, to Quill with a letter stating that September 2016, and Owens was terminated Bultman in I January 2017. In the days preceding this 43. internal investigation.” Id. Quill. Pounds had attempted letter, JT LLC up a meeting 8. 2017, Pounds sent a 4, to set letter to Quill stating as follows: (“Vireo Health”) hired outside legal counsel to conduct an internal investigation. Neither MaIyMed nor Vireo Health have in their possession any reports, documents, data, records, or notes from this investigation. JT 9. On April 44. MM 52 at investigation.” On April 45. 2017, Quill sent an email to Pounds requesting a copy of the “internal 6, 4. 13, Heather Nelson. The email that “in its 2017, Pounds sent an email states that Quill and Assistant Attorney General an investigation was conducted by outside counsel and due diligence, outside counsel generated notes from interviews of witnesses and reviewed various other documents and records that to. . .” . . JT 18 at 2. Pounds’ email further asserts any notes are protected by the attomey-client privilege. On May 46. MaryMe'd for . . . 17, 2017, the Commission met and “voted to suspend the application of failing to provide the internal investigation as requested.” MM 53 at 13. A During April and May, 2017, leading up to the date of the Commission’s vote, MaryMed’s 13 86-CR-17-499 counsel told Quill that he would team available at 176-177, JT to the Commission other members of MaryMed’s for interviews, but Quill did not pursue leadership any interviews. Tr. I 18. At 47. make Kingsley and Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN all relevant times, neither MaryMed nor Vireo Health had any repons from the internal investigation. On May 48. - 19, 2017, W. Anders outside counsel) sent a letter to the Folk, Esquire (of the Stinson firm, Commission MaryMed’s stating as follows: My firm was hired by Vireo in July 2016. As part of our work for Vireo, we performed an investigation into issues raised by a criminal investigatio'n conducted by Minnesota authorities. My firm’s work 0n behalf of Vireo did not include drafting a written report of investigation and I am not aware of any such report having been prepared for Vireo. JT 11. I Quill resigned effective 49. Commission May 23, to take over his role as Senior Investigator. 50. On May 23, document requests 2017, Rodeheaver wrote to Pounds setting forth nine queries and 5 1. 1, information t0 determine, in facility Rodeheaver the next day. MM 53 11. at 13. in response to a request 2017. Rodeheaver sent an email and followed up with a phone conducting an investigation in York to Rodeheaver received no response from the Commission documents sent on June 52. conducted by Stinson Leonard Street.” JT relating to the “investigation Pounds provided “the requested infomation” for 2017, and Rodeheaver was hired by the call to the investigator New York. He received n0 response. He was among and whether Vireo other things, whether there seeking was a product shortage at the New‘ NY was facing penalties for failing to meet production deadlines New York. 14 86-CR-17-499 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN 53. Rodeheaver did not investigate the circumstances of Pella’s termination from 54. During June 2017, Rodeheaver, Assistant Attorney General Heather Nelson, and MMS. Executive Director Jameson rejected MaryMed’s offer to interview. Tr. I at~94, 104-105, On 55. JT make Kingsley available for an 33. July 19, 2017, the Commission sent MaryMed a revised Pre-Inspection Checklist that included an item called “Criminal History Checks completed.” On August 56. 1, 2017, MaryMed sent a request to the CJIS-Central Repository in Baltimore requesting criminal background checks be performed on named in its of the new individuals Stage 2 applications. On August 57. 2, 2017, the Minnesota Court ruled the facts set forth in the Statement of Probable Cause, behalf of all MMS assuming the truth of _a11 of Bultman and Owens were not acting on or Vireo Health. On August 58. that, 2, 2017,‘the Minnesota Depaflment of Health renewed MMS’s cannabis growing, processing and distributing licenses. On August 59. showing its that it 2017, MaryMed provided documentation to the Commission had requested criminal background checks on all of the new individuals named in Stage 2 applications. 60. MaryMed responded information concemin ‘ 14, reasonably promptly to the Commission’s requests for Mar Med’s grower,P rocessor and dis p ensar Y aPP 1ications.4 Whether MaryMed complied with specific regulatory deadlines contained in COMAR 10.62 is a question of law involve analysis of waiver, forfeiture, and equitable considerations. There may also be interpretive questions to resolve concerning the phrases “amend an application,” “within 3 business days,” “new investor,” that may “investor of 5 percent or more,” and “material detail,” that are part of the regulations cited by the Commission. See COMAR 10.62.08.02, .05, .06; Commission‘s delegation is COMAR 10.62.19.02, .04, .05; COMAR 10.62.25.02, limited to the issuance of proposed findings of fact, authority to undertake these analyses. 15 I .05, .06. Becausethe have not been delegated the 86-CR-17-499 6 1. - There is Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN not a reasonable likelihood that medical cannabis was diverted from MMS to Vireo NY. DISCUSSION H The Commission delegatedauthority t0 the OAH to conduct a contested case hearing and “prepare proposed findings 0f fact related to the charges issued finding of fact on whether there particular is by the Commission with a a reasonable likelihood that medical cannabis was diverted from Minnesota Medical'Solutions, a subsidiary of Vireo Health, to Vireo Health of New York.” For the reasons explained in the Rulings on Pre-Hearing Memorandums issued on March 1, 2018, MaryMed bears the burden of proving processor, and dispensary licenses. 10.62.19.04A (processor licenses); COMAR 10.62.34.01B In the event the . . . qualifications as an applicant for grower, COMAR 10.62.08.05A (grower licenses); COMAR COMAR 10.62.25.05A (dispensary Iicense's). states in pertinent part as follows: Commission finds after written notice Article, its there and a hearing in is a reasonable likelihood of diversion accordance with the State Government §§10—201—1 0-226, Annotated Code of Maryland, the Commission may: B. COMAR Denv the license or registration. 10.62.34.01B (emphasis added). The term “reasonable likelihood” is not defined in COMAR 10.62. “Reasonable,” means-“mair, proper, or moderate under the circumstances[.]” Black's Law Dictionary (10th ed. 2014). Similarly, Merriam—Webster defines “reasonable” as “not 16 86-CR-17-499 extreme or excessive” and “moderate, 2003). “Likelihood” means fair.” Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN Merriam—Webster Collegiate Dictionary “probability.” Id. 5 Thus, the term “reasonable likelihood” probability.” See Rowhouses, Inc. synonymous with “reasonable (l 1th ed. (2016) (“we conclude that a “reasonable probability” is a v. Smith, 446 fair likelihood that is Md. 61 1, 657 something is true.”).6 In the Rowhouses case, the Court of Appeals wrote that “a reasonable probability is less than more likely than not, but more than a possibilfiy.” Regarding the term “possibility,” the Court further wrote as follows: something that is possible probable; a possibility is is less probable than something that is reasonably a mere chance that something might be true, as opposed something is true. Establishing a possibility requires a lower quantum of proof or evidence (the showing of a chance, not necessarily a to a fair likelihood that fair likelihood) than establishing a reasonable probability. In that regard, a “reasonable probability” A “possibility” The is a higher standard than a “possibility.” is: of being conceivable in theory or in practice; the character of perhaps being, of perhaps existing, or In 0f comporting with physical laws or the laws of reason[.] this sense, the word ofien (but not always) conveys a sense of 1. quality, state, or condition . uncertainty or improbability. 2. true, or that something . . . The chance that something . . is . . . will happen[.] (10th ed.2014). Similarly, Merriam—Webster “a chance that something might exist, happen, or be defines “possibility” as Possibility, Black's Law Dictionary true[.]” Possibility, Merriam—Webster (2015) . . . . Id. 5 The fourteenth edition of Black‘s Law Dictionary does not contain an entry for “likelihood.” I find the Rowhouses case to be instructive on the definition ofreasonable likelihood. Even so, I recognize that the Court of Appeals was reviewing a lower court’s grant of summary judgment. The lower court in Rowhouses, accordingly, evaluated the evidence in the light most favorable to the non-moving party; it could also permissibly draw inferences from the evidence favorable to the non-moving party. Those principles do not apply here because I conducted an evidentiary hearing for the purpose of making proposed factual findings. 6 17 86-CR-17-499 The term “diversion” regulations set forth in is Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN not defined in the statute creating the COMAR 10.62. The concept is Commission or the mentioned in section 13-33 l3(b)(1) of the Health General Article as follows: (b) A person may not distribute, possess, manufacture, (1) or use cannabis that has been diverted from a qualifying patient. a caregiver, a licensed grower. or a licensed (2) is dispensm. A person who violates this subsection is guilty of a felony and on conviction subj ect to 2;)b0'3111Ie imprisonment notgxceeding 5 years or a fine not exceeding $10,000 penalty under this subsectiOn is in addition to may be subject to for manufacture, possession, the Criminal Law Article. Md. Code Ann., Health—Gen. “to context ofthe person act or who is course or use to another.” COMAR regulation, I Id. The Minnesota According 2003). It defines “divert” to to activity, mean transfer‘ th'e of cannabis to a it.7 was initiated based Minnesbta authorities by Dan Abate Fella in April 2016. Specifically, Special Agents Nance and was opened because to Based on these sources, and considering investigation of MMS’s alleged cannabis oil diversion on statements and documents provided that the investigation (I 1th ed. conclude that diversion means the not authorized by law to possess person an instance of divening from a course, Merriam—Webster Collegiate Dictionary tum from one that a § 13-33 13(b) (emphasis added) (Supp. 2017). Merriam-chster, “diversion” means “the or use.” any penalties or distribution of marijuana under May indicate in the Statement of Probable Pplla provided authorities with a screen shot Cause from the MMS Biotrack inventory system purportedly showing that 372 grams of cannabis oil were transported to a patient center affiliated with MMS in December 2015. Previously, Pella had held a high position with MMS (Chief Scientific Officer), and had access to cannabis product, computers, calibration equipment, and sensitive information about the company. In April 2016, however, 7 MMS fired Pella. At the hearing, Kingsley testified Section 13-33 13 of the Health General Article does not state what level of criminal intent felony of diversion. Therefore, for purposes of this analysis, Ihave assumed that there 18 is is no required to prove the intent requirement. 86-CR-17-499 was threatening and credibly that Pella destructive Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN when he learned of his termination. Tr. HPLC machine that 48-49. According to Kingsley, Pella intentionally manipulated an expensive MMS used to test product concentrations down.” Id.; JT 12 (press release). The and specifically threatened II at to “bring this company State did not offer any credible evidence to rebut Kingsley’s account of Pella’s termination. Moreover, although the Commission made several attempts to interview and obtain information from Pella, Pella never discussed any details of the alleged diversion with them. Based on these by MMS. This is 0f THC and CBDS to oil supply; (4) oil; (5) was unusual it Bultman to is no MMS had to “rescue make Biotrack entries for MMS was facing New York State regulatory deadlines to result of the product shortfall. JT 2 credible, corroborating evidence in the record for reasonable to think that (3) if the State ofNew York were ofNew York was at 2-4; MM 53 at about t0 7. any of these allegations, about to impose penalties on NY for a supply shortfall, there would be some documentary or other evidence of that action. It is technician also telling that, although who claimed he was at the May interviewed Purdes, an Vireo corroborated Pella’s claim of a shortage in Tetrahydrocannabinol (THC) and cannabidiol MMS manufacturing NY facility “the week before Christmas order to assist in producing the final products,” there a for supply of acceptable cannabis products; and (6) the State There Vireo an allegation of cannabis diversion meet New York carmabis product standards; impose fines and/or penalties as a it is to fabricate of cannabis being grown in New York were not producing acceptable outbound transfers of cannabis and had a motive NY had a shortage of acceptable cannabis product at its New York New York” with cannabis its at 10. significant because Pella’s statements are the sole evidentiary support for the facility; (2) several strains replenish 1 facts, Pella allegations that (1) Vireo levels JT New (CBD) is no evidence showing that in 201 5 Purdes York. JT 2 (Statement ofProbable Cause are the 19 in two most prominent cannabinoids found at 3). in cannabis. 86-CR-17-499 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN In addition, the Commission’s investigator testified that he contacted Michael Lanuto, the investigator conducting an investigation in production deadlines in making those and requested “information regarding the New York that Vireo was facing deadlines.” Tr. no response and attempted I at 90:10-21. The and possible penalties involved for not investigator further testified that he “received to contact [Lanuto] via telephone not obtain “any information this New York, testimony credible, and 'that it with no return call” and that he did would be any sanctions indicated there buttresses Kingsley’s testimony that there [in New York].” was - shortage in I found Kingsley questions its New York as on of December 201 5. Tr. to II at cross-examination;' was candid about his found production 51-52. He gave be a credible witness; n9» I straightforward answers to the State’s own shortcomings and those of MMS and employees; and admitted that there was a possibility that cannabis oil had bjcen diverted. JT 12 (cempany statement admitting that the inventory system in place as of December 2015 was inadequate for tracking cannabis oils); Tr. II at 93-94, 121. Kingsley testified that Pella threatened to “bring manipulated the company’s had been fired from HPLC machine to this harm With respect to Pella’s termination, company down” and intentionally the company. Despite knowing that Pella MMS and was also the informant to Minnesota authorities about MMS, the Commission’s investigator admitted that he did not “make any investigation into the circumstances of [Pella’s] termination” or investigate Pella’s “reaction to his termination of employment.” Tr. I 9227-16. For these reasons, I do not find any of the statements that Pella ' made to the Minnesota investigators to be reliable hearsay. The documents, data, criminal investigation are not and statements relied upon by Nance and May for the Minnesota pan of the record before me. None of the following were offered or admitted into evidence: the screenshots and text messages provided by Pella that prompted the investigation; the seven-page Biotrack inventory report 20 from Bultman f0r December 2015, 86-CR-17-499 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN from Brian Harvey the eight—page Biotrack inventory report for December 2015; the data extracted from the hard drives ofthe computers of Kingsley, Shimpa, and Bultman; copies (as opposed to redacted transcriptions) generated by of emails of Mia Vang on December 8, MMS employees; the inventory spreadsheet 2015; and photos or samples of the labeled jars of MMS products. Also, the record does not include transcripts or audio or video recordings of any of the interviews conducted bits by Nance and May. As a result, there is little to no context for the sketchy of evidence cited in the Statement of Probable Cause. The Statement of Probable Cause and supporting affidavits make it apparent to during their interviews, and there Nance and May is me that Nance no way olf and May knowing what asked many leading questions potential evidence collected by not contained in the Statement of Probable Cause. is For example, the Statement of Probable Cause cites Biotrack records of one purported outbound transfer by Bultman on December 10, 2015, and five purported outbound transfers by Bultman on December oils to Vireo transactions NY. JT 2 cites is too 2015, as the transfers that constituted an at 1-4 Id. every Biotrack entry that listed. The is in would, in itself, all to examine, outbound entries for which no destination was be improper. In following the incident, the company noted that for tracking cannabis oils. JT 12 transfers with certain material to the question of whether a diversion occurred, and State presented no evidence to establish Having them on determining whether the Statement of Probable Cause May accurately found and listed in a Biotrack entry listed” for Without having the complete Biotrack logs from December much guesswork involved even whether of cannabis illegal diversion (May’s Supporting Affidavit). Based on May’s Affidavit, these were singled out because there was “no destination Biotrack reports. there 16, at 2. the absence of a vendor or destination fact, in the statement issued by in'ventory system at the time The statement MMS was inadequate also contained the following content: System and only indicates not yet in the system. For example, when we send no destination that a precise disposition is its why is comrhon 21 in this 86-CR-17-499 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN materials to a third party testing lab or for disposal as waste, no destination listed is because of a system limitation. For that reason, there are actually dozens of have no destination listed, not just the small number of entries cherry picked by the disgruntled former employee. entries that 1d. There is no indication in the record thaé NanCe, May, Quill, Rodeheaver, or the Commission ever considered this informa‘tion as an explanation for the “no destination” entries on the Biotrack logs, despite this being the most likely explanation. Moreover, the states of Minnesota, New York, and Pennsylvania granted or rlenewed MMS’s cannabis growing, processing and/or MMS Biotrack entries that purportedly do not dispensing licenses afier the disclosure of the list a vendor or destination. JT 39, 40, 47. The Statement of Probable Cause messages ofDecember 3, 20,15 and 2015, pmportedly between Pella and Bultman. Bultman’s statement in these texts December 5, that she is “Making raise a also cites text plans. None of which can b6 discussed vague suspicion of‘improper activity. electronically” might reasonably Howeiler, lacking context and cofroboration, these texts are too vague; they'might also reflect a harmless concern for privacy or confidentiality. The texts are not particularly probative on the issue ofwhether there is a reasonable likelihood of diversion, especially without authenticated copies of the texts or a full, or at least a more complete, record of the conversation before and after the cited texts. Similarly, the text very little messages between Bultman and Shimpa on December other than that these 8, 2015, prove MMS employees arranged for the transport of some cannabis oils that they referred to as “Christmas reds.” See MM53 at 8-9. It would require far too much speculation to conclude that these messages involve a conspiracy to divert cannabis oils from MMS to Vireo NY. Moreover, May confirmation of receipt by Vireo kilograms of cannabis (May oil that admitted in his affidavit ‘that there was never any NY on or around the first week of December 2015 of 5.6 matched the products being tracked by the Minnesota BAC. JT 2 affidavit at 1-4). 22 86-CR-17-499 I found Kingsley’s explanation reasonable that beneficial to the company MMS’s armored vehicle would be more New York rather than Minnesota. Queens, in Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN Tr. II 53-54. State did not refute Kingsley’s testimony that the armored vehicle has remained in since it that the was driven there in December 201 5. armored vehicle was driven to MaryMed These Id. And the New York facts effectively rebut the State’s position New York as a means of illegally diverting presented a receipt from Pope/Douglas Solid Waste caImabis oil. Management (Pope/Douglas) purponing to show that certain “plant based drugs” were incinerated on April 26, 2016. This document references certain allegations in the Statement of Probable Cause that Owens told investigators he destroyed the 5.6 kilograms of cannabis oil that Minnesota investigation by having that Owens’ statement was not who Owens incinerated at Pope/Douglas. it true. identified as the person is the subject ofthe Nance and May concluded In reaching this conclusion, they interviewed Lindenfelser, who accompanied him to Popc/Douglas. Lindenfelser did not testify at the hearing, and the brief, elliptical snippets of his answers that are included in the Statement of Probable Cause (the questions asked by the investigator are omitted) do not persuade five me to either accept or reject or six boxes to be incinerated stored in five consistent with MaryMed’é that there were position that the oil at issue was or six containers; however, Lindenfelser also told investigators that the total weight of the packages was substantially Nance wrote is Owens’ account. Lindenfelser’s statement less than 5.6 kilograms. In the Statement of Probable Cause, that he: learned from multiple sources, including Tom Barrett of Legend Technical would be no reason Those oils could be reprocessed Services, an accredited cannabis testing laboratory, that there of concentrated oils. Doug Maniak, the former Manufacturing Manger of and reformulated. would be no reason to destroy 372 grams of a finished there that [reported] product as that would be a waste 0f a lot of money. t0 destroy the 5.6 kilograms . JT 2 at 4. I gave little . . MMS weight to these hearsay opinions; they were not supported by sufficient or credible foundation, evidence of expert credentials, or scientific validation. 23 Still, the record did 86-CR-17-499 not contain any persuasive evidence explaining why Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN MMS would have waited more than three months, apparently until afier a criminal investigation had been cannabis oil that was the subject of the Minnesota initiated, to BAC investigation. dispose of the Moreoyer, Kingsley was unable to adequately corroborate the Pope-Douglas receipt. Considering the record in MaryMed did not prove by a preponderance of the evidence that kilograms of carmabis oil that is incinerated at Pope/Douglas Nevertheless, the subject of the Minnesota on April 26, destroyed the 5.6 BAC investigation by having it 2016.9. MaryMed’s burden of proof in this case is to reasonable likelihood that medical cannabis was diverted from reasons set forth above, Owens its totality, MaryMed met this burden by show that there is MMS to Vireo NY. not a For the credibly and sufficiently refuting each allegation and item of evidence offered in support of diversion. Regarding the Commission’s knowledge ofthe Minnesota investigation, Quill’s May 11, 2017 memorandum to I find Paul be credible evidence that the Commission became aware of the investigation during August 2016. MM 52 at 2. Ialso found credible Kingsley’s testimony that the investigation was discussed during the September 30, 2016 conference which Executive Director Jameson and investigation was a reasonable thing BEC Director Kloos participated. for Kingsley to d0 given that the call in Disclosing the company was about to incur significant liabilitieg during Stage 2 of the licensing process. See, e.g.,’ JT l9 (Commercial Lease). Regarding employee termination dates, the evidence showed that Bultman resigned in July 2016, and 9 MaryMed did not produce sufficient evidence to rebut that date. Tr. II at 90-91 To prove something by a “preponderance ofthe evidence" means “to prove that something is more likely so than when all ofthe evidence is considered. Coleman v. Anne Arundel Cty. Police Dep 'I, 369 Md. 108, 125 not so[,]” n.16 (2002). 24 86-CR-17-499 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN (testimony of Kingsley). Kingsley also admitted that Shimpa resigned in September or October 2016. Tr. II at 93. There was no dispute that Owens was terminated in January 2017. Based on the August 2, 2017, Minnesota Court Order that propose that the Committee find the Minnesota Court ruled Statement of Probable Cause, Bultman and NY. Because the pommission delegated Owens were that, is part of the record even assuming the truth of the not acting on behalf of limited authority t0 the (MM 41), I MMS or Vireo OAH to make proposed findings 0f fact but not conclusions of law, the questions of whether the Minnesota Court’s ruling is correct and whether the ruling this analysis. is entitled The answers, however, may be to preclusive effect are beyond the scope of dispositive in determining whether there is a reasonable likelihood that medical cannabis was diverted from MS to Vireo NY. fl/ Z May 4, 2018 Date Mailed and Emailed J. Lcidig/ Jdministrativ/ aw Ju/dgc JJL/dlm #173638 RIGHT TO FILE EXCEPTIONS by these Proposed Findings of Fact has the right to file written exceptions with the Chair of the Maryland Medical Cannabis Commission (Commission) within twenty-one (21) days of receipt ofthis decision. Md. Code Ann, State Gov’t §§ 10-216, 10-220 (2014); cf COMAR 10.01 .03.18A. The Commission or the Commission’s designee will review timely exceptions before rendering the final Commission decision. Md. Code Ann., State Gov’t §§ 10-216, 10-220, 10-221 (2014). The Office ofAdministrative Hearings is not a party Any party adversely to affected any review process. 25 86-CR-17-499 Filed in Tenth Judicial District Court 5/15/2018 4:59 PM Wright County, MN Copies Mailed and Emailed To: MaryMed, LLC 207 South 9‘“ Minneapolis, Street MN 55410 Steven K. White, Esquire, Stinson Leouard Street LLP 1775 Pennsylvania Avenue, N.W., Suite 800 Washington, DC 20006 steven.white@stinson.com Matthew C. Smilowitz, Esquire Stinson Leonard Street LLP 1775 Pennsylvania Avenue, N.W., Suite 800 Washington, DC 20006 matthew.smilowitz@stinson.com J. Gilbert, Deputy Counsel Office of the»Attorney General Robert . Health Occupations Prosecution and Litigation Division 300 Wést Preston Street, Suite 201 21201 Baltimore, MD Robert.gilbert@maryland.gov Michael Kao, Assistant Attorney General Office of the Attorney General Health Occupations Prosecution and Litigation Division 300 West Preston Street, Suite 201 21201 Baltimore, MD Michael.kao@maryland.gov 26