Law enforcement agencies target illicit operations
By Mike W. Ray
| Southwest Ledger
OKLAHOMA CITY — The legal medical marijuana industry in Oklahoma is “bleeding to death” because of illegal activity, said Mark Woodward, spokesman for the Oklahoma Bureau of Narcotics and Dangerous Drugs Control.
For example, the state’s 7% medical marijuana tax generated $54.7 million in calendar year 2022 – its lowest production in three years. MMJ tax receipts totaled $66.1 million in 2021 and $56.2 million in 2020, Oklahoma Tax Commission ledgers reflect.
The Oklahoma Medical Marijuana Authority counted 7,086 growers in its Dec. 7 licensing report, a decline of more than 2,300 from the December 2021 report. A moratorium on new licenses remains in effect.
The OMMA stopped processing applications for new grower, dispensary and processor licenses for up to two years, starting last August, because of House Bill 3208 enacted last year due to explosive growth in the industry.
However, the executive director of the OMMA is authorized to terminate the moratorium at any time prior to August 1, 2024, if all pending licensing reviews, inspections, or investigations “have been completed by the Authority.”
The OBNDD has identified approximately 2,000 medical marijuana licenses as potentially illegal Woodward said. Those licenses are suspected of having been acquired fraudulently or are being used to conceal illegal operators who sell their cannabis on the black market.
Many law enforcement officials contend that most of the marijuana produced in Oklahoma is sold illegally, even if it is grown by state-licensed operators.
Approximately 200 grow operations in Oklahoma have been closed by law enforcement agencies, Woodward said.
Oklahoma City resident Richard Ignacio, 36, is alleged to be a “straw” or “ghost” owner – on paper only – of the 10-acre marijuana farm near Hennessey where four Chinese nationals were shot to death, and a fifth was wounded, in November.
Ignacio was charged Dec. 21 in Kingfisher County District Court with conspiring to fraudulently secure a marijuana grow license from the OMMA and registration from the OBNDD on behalf of Yi Fei Lin, “by falsely claiming 75% ownership in Liu & Chen Inc. in order to meet the residency ownership requirements…” The alleged offense occurred between Nov. 21, 2021, and Nov. 21, 2022, the complaint claims.
The typical dodge of criminals is using Oklahoma residents as fronts to circumvent state ownership requirements for medical marijuana businesses. A 75% owner in an Oklahoma marijuana farm must have lived in this state for two years and must be involved in the day-to-day management of the operation, Woodward said.
“I would be on the license and get paid $2,000 a month for it,” Ignacio admitted in a written statement. Court documents also say he lent his name to six Oklahoma marijuana farms, which netted him more than $100,000 in the last two years.
Ignacio was scheduled to return to Kingfisher County District Court on Jan. 17.
‘Ghost’ ownership common practice to skirt the law
Low production costs and minimal regulation turned Oklahoma into a hub for marijuana activity soon after voters legalized medicinal use in 2018.
In 2021 the Legislature approved House Bill 2272, which requires medical marijuana business licensees and applicants to confirm or deny, under penalty of perjury, the existence of any foreign financial interests in their business operations.
A suspected illegal operation was exposed in June 2021 after a raid on a marijuana farm in Garvin County. It revealed a “ghost” owner and culminated in multicounty grand jury indictments lodged against two Oklahoma lawyers; each was named in 11 felony counts accusing them of facilitating illegal medical marijuana operations.
Logan Michael Jones, 56, of Tulsa, and Eric Brandon Brown, 41, are each charged with one count of conspiracy to cultivate a controlled dangerous substance (marijuana), six counts of filing a false or forged instruments for official recording, three counts of cultivation of a controlled substance (marijuana), and one count of pattern of criminal offenses.
A preliminary hearing for Brown and Jones is scheduled on Feb. 9 in Garvin County District Court.
The Jones Brown Law Firm, with offices in Oklahoma City and Tulsa, was managed jointly by Eric Brown and Logan Jones. Brown’s attorney said the two men are no longer partners.
Besides the raft of charges against the two attorneys, the Garvin County drug raid also resulted in criminal charges against a former employee of Jones Brown Law Firm and a marijuana farmer of Chinese descent.
The investigation into Jones Brown, initiated by the OBNDD, found that the two attorneys directed medical marijuana businesses to sign consulting agreements with Jones Brown Law Firm employees who posed as ghost owners of the companies – Oklahoma residents who own companies on paper only.
The agreements required the client to pay $3,000 per license per year for the law firm to provide a consultant who would serve as an Oklahoma resident so the client could obtain an Oklahoma medical marijuana license.
The investigation revealed that the law firm submitted documents to the OMMA and to OBNDD that listed six of their employees as Oklahoma residents who were 75% owners of medical marijuana grow operations, while the 25% owners were non-Oklahoma residents.
Based on statements and evidence gathered during the investigation, the assertions that Oklahoma residents were 75% owners of marijuana grow operations were fraudulently submitted to the state agencies to obtain licenses, former Attorney General John O’Connor said. “This was facilitated by the Jones Brown Law Firm through Logan Jones and Eric Brown,” O’Connor said at the time.
It was discovered through the investigation that approximately 400 marijuana farms in Oklahoma listed Jones Brown employees as the majority owners.
One former employee, paralegal Kathleen Windler, 69, of Tulsa, was listed on official documents as the majority in-state owner for scores of medical marijuana businesses in the state; she voluntarily surrendered 300 licenses, officials reported.
Foreigners were growing MJ here, shipping out-of-state
OBN Director Donnie Anderson said Brown and Jones represented foreigners who were growing marijuana in Oklahoma and shipping it out-of-state. It is illegal to sell Oklahoma medical marijuana out-of-state, Woodward noted.
In one court document, Windler said she “owned none of the hundreds of businesses whose licenses were sought and obtained” through the “legal handiwork” of Jones and Brown, that she “exercised no control over any businesses, received no profits of the businesses, did not interact with any day-to-day operations of the businesses, and had no access to any bank accounts, assets, or liabilities of the businesses.”
Windler told OBN agents that she received a “resident fee” of $3,000 for each license she signed in which she claimed to be a 75% owner. She said she was “meeting with clients so frequently, this was the only type of work she was doing,” according to an affidavit an OBN agent filed to secure arrest warrants for Jones and Brown.
However, Windler said that starting in January 2021 she was required to rebate one-third of the “resident fee” to the law firm as an “overhead payment.” The kickback was “Eric Brown’s idea,” she told the OBNDD.
In addition, Jones and Brown began charging her rent “for having this business at their law office,” Windler claimed in a lawsuit she filed in Cleveland County against the two lawyers.
After her interview with the OBNDD, Windler provided investigators with documents that corroborated her claims. The records included copies of checks and receipts, and documents titled “Consulting Agreement” or “Third Party Resident Agreement”. She also provided proof about $2,000 monthly “rent” payments she was compelled to pay to the law firm.
Two other employees of Jones Brown confirmed they, too, were charged an “overhead fee” of $1,000 per license and $2,000 per month for rent, “which was paid back to the law firm,” according to the affidavit.
After law enforcement officers raided a marijuana farm east of Pauls Valley in April 2021, Windler and Dao Fang, who had recently moved to Oklahoma from Colorado, were arrested. OMMA records listed Windler as the owner of 75% of the operation and Feng as the 25% minority owner.
Windler and Feng both were charged in Garvin County District Court with three felony crimes: cultivation of marijuana “without lawful authority,” endeavoring to violate the Uniform Controlled Dangerous Substances Act, and possession of a controlled substance without a tax stamp affixed.
However, the charges against Windler were subsequently dismissed at the state’s request, and the charges against Feng were dismissed after a preliminary hearing. “There is not sufficient cause to believe the defendant guilty of the offenses,” a district judge wrote.