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Arkansas panel rejects making medical marijuana licensee be person, not business

by Brian Fanney | February 9, 2017 at 4:30 a.m.

A legislative committee rejected a bill Wednesday that would require medical-marijuana license holders to be people instead of corporations, and the panel then tabled a separate bill that would limit ownership of cultivation facilities and dispensaries by out-of-state groups.

The bills were both sponsored by Rep. Doug House, R-North Little Rock. He was given the job by House Speaker Jeremy Gillam, R-Judsonia, of organizing legislation to implement the voter-approved constitutional amendment permitting use of the drug for health reasons. The House Rules Committee -- whose members are appointed by Gillam -- considered the bills Wednesday.

Asked by lawmakers why he wanted a "natural person" instead of a corporate entity to be the license holder, House said, "You can't put a corporation in jail."

The other bill -- which limits the involvement of non-Arkansans -- is aimed at closing a loophole, he said.

The Rules Committee chairman, Rep. Andy Davis, R-North Little Rock, and House said they expect the committee to consider the bills again this week. The next meeting is at 1 p.m. today.

[MARIJUANA BILL TRACKER: Updates on all legislation dealing with medical marijuana]

The committee's rejection of House Bill 1298 came after Sylvester Smith, a lobbyist who represents medical-marijuana grower and seller Columbia Care, told lawmakers that the bill would allow business owners -- or their proxies -- to be sued as individuals.

"If you think about sophisticated business people ... none of them is going to put their names on this license," he said. "They're going to go find straw people" to sign the license in their place.

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He argued that the bill would limit transparency because the bill creates "this whole shell game where the people who are actually running this process will run and hide, and you will not necessarily be able to find them and hold them accountable."

Smith told lawmakers that he was speaking on behalf of small-business interests and did not mention his affiliation with Columbia Care until he was pressed by reporters.

Regardless of whether a person or business receives a license to grow or sell medical marijuana in Arkansas, the Arkansas Medical Marijuana Commission's draft rules for dispensaries and cultivation facilities require "owners, board members, and officers" to submit to background checks.

House said his proposed license structure is not new. Pilots who fly for commercial airlines also hold individual licenses and can be held personally responsible for their actions, he said.

"We want a natural person so that they can be not only administratively and bureaucratically accountable, but criminally responsible if something goes on," he told a reporter.

After the committee rejected HB1298, it tabled House Bill 1371 until the next meeting. That bill contains a "natural person" provision, and it would require that Arkansans hold 60 percent ownership interest in dispensaries and cultivation facilities.

The voter-approved Arkansas Medical Marijuana Amendment requires 60 percent of the owners to be Arkansans, but there's a potential loophole in the provision, House said.

If there were 10 owners of a dispensary, seven could be Arkansans to satisfy the amendment, but the remaining three out-of-state owners could hold a disproportionately larger share in the organization.

Smith, the lobbyist, told reporters that Arkansans should have an ownership interest but that groups outside the state could help local businesses start cultivation facilities and dispensaries.

"If you open this up and you don't put these tight in-state ownership restrictions, now I can reach out to someone -- a company in New York or Wall Street or whatever -- and ask them to invest and maybe get some more generous terms," he said.

Restricting out-of-state owners would violate the commerce clause of the U.S. Constitution, he argued.

Courts have interpreted the commerce clause -- which gives the federal government the power to regulate interstate commerce -- as preventing states from unduly burdening interstate commerce.










David Couch, the Little Rock lawyer who sponsored the amendment, said in an interview he supported House's bills.

"I always anticipated that a license would be held by a resident, a natural person of this state, and the corporation that actually operated by the facility would be owned 60 percent by Arkansans," he said. "You want a person to be held accountable, otherwise there's lot's of shenanigans that can go on."

Likewise, Melissa Fults, executive director of Drug Policy Education Group, said she backed the bills.

"It's easier if a natural person actually holds the license because then you have actually a face to put with that license, and so it helps prevent the underground, the mob, the drug lords from coming in and building a dummy company," she said.

Fults backed a competing medical-marijuana ballot measure that the Arkansas Supreme Court disqualified during early voting.

With little discussion, the House Rules Committee did approve five of House's medical-marijuana bills Wednesday.

House Bill 1049 better defines excluded felony offenses that bar people from operating dispensaries and cultivation facilities.

House Bill 1051 adds a licensing process for medical-marijuana transporters, distributors and processors.

House Bill 1057 specifies how criminal-background checks should be completed.

House Bill 1369 ensures that the state is reimbursed for enforcement and regulation before other entities receive money from the medical-marijuana program. It removes references to vocational-technical funds and skills development.

House Bill 1370 allows Alcoholic Beverage Control to regulate packaging, advertising, flavor, shape and labeling so medical marijuana does not appeal to children.

In response to questions from Rep. Lane Jean, R-Magnolia, about medical-marijuana advertising, House said he would support a bill to prohibit the practice.

The committee did not consider bills Wednesday by Rep. Robin Lundstrum, R-Elm Springs, to allow city councils and quorum courts to ban marijuana facilities, ban manufactured edible and drinkable marijuana products, and prohibit marijuana smoking.

A Section on 02/09/2017

Print Headline: Panel rejects making Rx-pot licensee be person, not business

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