Corruption in California’s Cannabis Industry: State Officials Launch Audit to Curtail Misdeeds

Corruption in California’s cannabis industry has become a widespread and brazen problem. Pay-to-play schemes, threats of violence against local officials, and city council members accepting money from cannabis businesses while regulating them are just a few examples of the corruption that has afflicted local governments in rural Northern California enclaves and towns like Calexico near the Mexican border. These problems and more were uncovered by a sweeping Times investigation last year, which led to state officials launching an audit aimed at curtailing bribery, conflicts of interest, and other misdeeds.

The inquiry, requested by Assemblyman Reggie Jones-Sawyer and authorized by the state Joint Legislative Audit Committee, comes more than six years after California voters approved Proposition 64, the ballot measure that legalized recreational cannabis. Since then, corruption has plagued local governments.

The state’s dual state and local licensing system is widely blamed for creating a fertile ground for corruption. Proposition 64 left ultimate business licensing in the hands of cities and counties, with part-time, often low-paid local elected officials becoming gatekeepers over decisions worth potentially millions of dollars to business owners in the hyper-competitive cannabis market. The Times investigation uncovered a possible six-figure bribe demand by a former councilman in Baldwin Park — later corroborated by a federal plea agreement — and other potential conflicts of interest around the state.

The audit aims to identify six jurisdictions with licensed cannabis businesses and review criteria used to approve the permits, reviewing local governments that have been rocked by corruption allegations and others that appear to have fewer such problems. State auditors plan to look for patterns in the licensing rules that indicate whether certain practices are “more susceptible to fraud and abuse.” They’ll also be reviewing a “fairly good sample” of cannabis permits to check whether local authorities followed rules they had set. The findings could form the basis for legislation and new regulations governing licensing.

The audit has been welcomed by lawmakers and industry representatives alike. Assemblyman Jones-Sawyer hailed the action as a step toward reform, stating that “if we don’t clean house, nobody else will. I think this will prove to the public that we take corruption very seriously.” The California Cannabis Industry Assn. also supported the audit, blaming local regulations for the corruption problem and arguing that it could lead to more “liberal” local regulations that reduce opportunities for payoffs and allow more cannabis businesses to open.

Assemblyman Jim Patterson agreed that there was an “undercurrent of misconduct” in cannabis licensing, suggesting that his own community be among those examined to determine which practices are least likely to lead to corruption. However, no one at the hearing opposed the plan, indicating that there is widespread support for the audit.

Corruption in California’s cannabis industry has become a significant problem that has plagued local governments for years. The audit launched by state officials aims to identify corrupt practices and could form the basis for legislation and new regulations governing licensing. The audit has been welcomed by lawmakers and industry representatives alike, who hope that it will lead to a more transparent and fair licensing system. Ultimately, this audit represents an important step toward cleaning up the cannabis industry in California and restoring public trust in local governments.

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