Greasing the wheels for local approval of cannabis continues to attract the interest of law enforcement in Massachusetts, following the arrest of a Somerville attorney for bribery and wire fraud.
The FBI announced on Friday, June 24, that it had arrested attorney Sean O’Donovan for allegedly attempting to bribe Medford’s Chief of Police in an attempt to secure local approval of a Host Community Agreement (HCA) in the metro Boston community.
“This case is about attempted corruption of government officials. I commend the Chief of Police in Medford for reporting this illegal behavior to the FBI immediately,” said U.S. Attorney Rachael Rollins in a released statement. “We must ensure that greed and unethical conduct do not undermine the proper functioning of city governments across our Commonwealth. This prosecution does just that.”
Under state regulation, host communities can demand impact fee payments from cannabis operators up to 3% of total retail sales. In theory, these payment demands must be accompanied by detailed information about how the presence of a cannabis company negatively impairs the local government.
The unnamed cannabis company hired O’Donovan in December 2018 to obtain an HCA with Medford. O’Donovan was to be paid a monthly fee of $7,500 until he had secured the HCA and then 1% of annual gross profit after that.
After that, the city adopted tighter rules for adult use cannabis retailers, limiting Medford to just three. With the tighter market, O’Donovan allegedly sought to buy easier access, such as to the local chief of police, for his unnamed client, according to the federal indictment, which was filed on June 23, before it was unsealed on June 24.
HCAs also continue to be a point of contention in state court. The Massachusetts Cannabis Business Association recently reported that municipalities are falling short on reporting HCA fees and how they are calculated and used.
Two cases that are challenging their respective town’s ability to demand impact fees continue to work their way through Essex Superior Court.
Stem, an adult use dispensary in Haverhill, sued its host city in April, 2021 over what it argued were excessive impact fees. Both sides of the case have submitted responses to the original claim, and the next event in the case will be in September when discovery is due for both parties.
Meanwhile, Happy Valley is suing the Town of Gloucester over the impact fees that are being demanded as part of Gloucester’s HCA.
Happy Valley opened their Gloucester dispensary in mid-2020. From that time, up until November 2021, when it filed its lawsuit, the company claims to have paid the town $491,000 in impact fees.
Both sides have until September to complete discovery.
Lawsuits aside, at least one municipality has been in the legal cross hairs for improper handling of impact payments.
Former Fall River Mayor Jasiel Correia is currently serving time in federal prison after he was found guilty in 2021 of extortion after pressuring prospective cannabis operators to bribe their way to municipal approval.Correia’s alleged partner in the grift, David Hebert, was sentenced on June 15 to three years of probation along with about $86,000 in fines and restitution.