Black and Latino lawmakers called on Gov. J.B. Pritzker to delay the issuance of new cannabis licenses over concerns about the application process after just 21 firms advance.
By Tom Schuba Updated Sep 5, 2020, 2:36pm CDT
A day after state officials announced that just 21 applicants would be included in an coming lottery to determine the winners of the next round of cannabis dispensary licenses, minority lawmakers urged Gov. J.B. Pritzker to delay all new permits over concerns about an applications process that allowed many clouted and seemingly well capitalized businesses to move onto the next phase.
State officials on Thursday were quick to mention that all the qualifying applicants are so-called social equity candidates, who are given a leg-up in the process to bolster minority participation in the overwhelmingly white marijuana industry.
Yet the small pool of remaining applicants includes former Chicago police Supt. Terry Hillard, well known Chicago restaurateur Phil Stefani, Lucky Lincoln Gaming president Jeff Rehberger and existing players in the pot industry. Their status as applicants was first reported by the Grown In newsletter.
In a written statement Friday, members of the Black and Latino caucuses said they “voted for a law that had a framework for the administration to create more Black and Latino cannabis startups than any other state in the country.
“That’s why we were shocked to see that up to 75 dispensaries will be awarded to 21 entities,” the lawmakers wrote. “Our shock is outweighed by the countless calls we’ve fielded from constituents questioning if this process was equitable and achieve the goals we share to diversify the cannabis industry.”
Members of the Black Caucus also wrote a separate letter calling on Pritzker to provide more information about the remaining hopefuls and the methods for scoring applications.
The group wants additional information about the graders from KPMG, the global accounting firm that was awarded two no-bid contracts valued at nearly $7 million to grade all of the upcoming recreational marijuana licenses. KPMG gave perfect scores to all 21 applicants, who all were given social equity points for having at least one partner who either lives in an area that’s been disproportionately impacted by past drug enforcement, has a prior arrest or conviction for an expungeable weed offense or meets other criteria.
Pritzker spokeswoman Jordan Abudayyeh didn’t directly address the concerns raised by lawmakers. Instead, she issued a statement Saturday touting the measure that lifted Illinois’ pot prohibition as the “most equity centric cannabis law in the nation,” a descriptor that’s been used repeatedly by administration officials.
“Every license in the first round will go to a social equity applicant: in fact, 60% of the eligible entities to receive the 75 licenses in the lottery are majority owned by people of color,” she said. “While this progress is a step in the right direction, we have always said that ensuring equity in the cannabis industry is a marathon, not a sprint.”
Abudayyeh pointed specifically to an upcoming “disparity study” that will be used to “ensure the law as written has its intended effect of making sure those disproportionately impacted by the war on drugs have ownership in the new industry.”
There are 336 spots in the upcoming lottery, which represent each application that received a perfect score. An applicant can win the right to run as many as 10 stores across the state’s 17 regions.
Hillard, the city’s former top cop, is listed as a manager for applicant EHR Holdings LLC, which lists an address on the Near West Side in records kept by the Illinois secretary of state’s office. His firm will have five opportunities in the lottery to win licenses to open dispensaries in three of the state’s regions.
While the legalization law was framed as a way to address some of the harms inflicted by the war on drugs, Hillard played a part in that type of enforcement as a longtime police official. He retired as Chicago’s police superintendent in 2003 after five years, and his private security firm has subsequently been contracted by cannabis dispensaries in Illinois.
Hillard, like other finalists contacted Friday, could not be reached for comment.
Stefani’s restaurant group includes Tavern on Rush and other city hot spots. Now, he’s serving as manager of Hinsdale-based GRI Holdings LLC, which has 25 lottery spots, mostly to open dispensaries in the Chicago area.
Stefani notably spoke out against existing pot firm Pharmacann’s proposal to open a shop near the Gold Coast during a meeting last month of the Zoning Board of Appeals, saying it didn’t fit in a neighborhood famous for its nightlife. The planned dispensary was ultimately shot down by the city.
Rehberger, who runs the West Town-based terminal gambling company Lucky Lincoln Gaming, is listed as the agent and manager of Fortunate Son Partners LLC, an applicant based in Highland Park with 38 applications across all 17 regions, records show.
Omar Fakhouri, the cousin of Lucky Lincoln’s business development manager, is listed in state records as the agent and manager of Lyons-based Mint IL LLC, which has 28 chances to win licenses. Fakhouri currently operates a cannabis business in Michigan with a similar name.
His cousin, Sam Fakhouri, is also the landlord for the Modern Cannabis store in River North.
In a separate statement Friday, state Rep. Sonya Harper, said “many things about this equation and resulting numbers just seem very inequitable.” The chair of the House Economic Opportunity & Equity Committee, she said lawmakers “are considering a change in the amount of licenses one applicant may be able to apply for at one particular time, knowing that a true social equity applicant may not have the means to submit dozens of applications in every district across the state.”
Almost immediately after the state released the list of companies moving onto the next phase, social equity applicants complained about the winners.
Michael Malcolm, a Morgan Park real estate broker whose applications were rejected, said it was “insane” that the state is allowing just 21 applicants to go forward, further limiting the players in an industry already dominated by a few highly capitalized white-owned businesses.
“That doesn’t sound to me like social equity. ... That sounds like big business,” said Malcolm, who is Black.