State Cracks Down on Bad Behavior in Legal Cannabis Trade

Good morning. It’s Wednesday. Today we’ll look at a new effort by state regulators to stop people who manipulate the cannabis market using tactics such as trafficking illegal products into licensed stores. We’ll also get details on today’s court hearing about dropping the corruption charges against Mayor Eric Adams.

New York State regulators are beginning a new effort to crack down on threats within the legal cannabis pipeline. My colleague Ashley Southall explains:

For the last three years, New York’s efforts to stand up a legal cannabis market have focused on distributing business licenses and shutting down illicit stores that skipped the official line to cash in on consumer demand.

Now regulators are shifting their efforts to threats that have been growing within the legal cannabis pipeline.

State regulators are now targeting people who manipulate the market using tactics like trafficking illegal products into licensed stores that were supposed to provide safe supplies of flower, vapes, edibles and other consumable items. The action is also taking aim at those who illegally hoard licenses.

Last week, the Office of Cannabis Management — which sets the policies that govern the market — announced the creation of a Trade Practices Bureau to tackle violations of state rules that fall into a void between enforcement and compliance. The state’s Cannabis Control Board, which approves licenses and regulations proposed by the cannabis management office, delegated its subpoena powers to strengthen the bureau’s ability to probe allegations.

The changes give the Trade Practices Bureau the power to interview witnesses under oath, but it will not have the authority to bring criminal charges (though it can refer cases to other agencies that could do so). Regulators plan to assign a total of 15 people to the team, though for now, it will rely on other units that typically operate independently.

The shift follows years of complaints about unethical people exploiting gaps in the nation’s patchwork of cannabis laws to bolster their businesses at the expense of those who followed the rules. The Office of Cannabis Management was accused of ignoring complaints in New York, though regulators say they just didn’t have the resources to deal with them.

Felicia A.B. Reid, the acting executive director of the Office of Cannabis Management, said in a statement that setting up the new bureau was a significant step forward. “By identifying and addressing trade practice violations such as predatory lending, fraudulent business practices and illicit market activity,” she said, “we are reinforcing our commitment to creating a level playing field for licensed operators and upholding the economic and social equity priorities of New York’s Cannabis Law.”

Jim Rogers, the director of the new bureau, said that he was leaning on methods he had used to crack down on wage theft when he worked for the State Department of Labor, where he was the director of worker protection from 2013 to 2022. In his first year in that job, he said, the state doubled the amount of wages recovered on behalf of workers to $36 million, from $18 million.

Rogers was also responsible for cases that recovered $500,000 for 158 steelworkers after the upstate manufacturing company they worked for suddenly closed. Another case led to an indictment on charges of grand larceny against two company owners, part of a broader wage theft and insurance fraud case prosecuted by the Manhattan district attorney’s office.

At the Department of Labor, he said, “we needed to get people on the hook, put them under oath, use their testimony in furtherance of proving our case, and then for the most severe violations, bring the most severe consequences unapologetically.” At the Office of Cannabis Management, he said, “it’s just as important to increase the bark, increase the bite.”

His team will include investigative lawyers who will work with compliance inspectors, enforcement investigators and data analysts like forensic accountants. They will also review complaints filed online and through a new hotline, 855-420-TIPS.

Rogers did not say what cases officials planned to tackle first, though there have been reports of surplus weed grown in states like California and funneled into licensed stores in New York. Interstate shipments are illegal under federal and state law. But some people have used secret contracts to obtain additional licenses, prompting suspicion that they might be flouting rules limiting ownership of more than three permits. Rogers suggested that the bureau was hoping to deter wrongdoing by targeting well-known scofflaws.

“Our laws and regulations are designed very specifically to preserve opportunity for everybody,” he said. “So if we don’t get the cheaters, those opportunities go away.”

Weather

Expect an increasingly cloudy sky, a high near 31 and gentle to moderate breeze. Tonight, the sky will be cloudy, and the temperature will drop to 21.

ALTERNATE-SIDE PARKING

Rules are in effect until Feb. 28 (Losar).

The latest Metro news

Today could be the day that Mayor Eric Adams learns whether the federal corruption charges against him will, in fact, be dropped.

The judge handling the case, Dale Ho, has scheduled a hearing for this afternoon to discuss the reasons for the Justice Department’s motion to dismiss the charges.

The hearing comes after a day on which Gov. Kathy Hochul held an extraordinary series of meetings to discuss whether to remove Adams from office, which she has the power to do.

Adams, a Democrat who has insisted that he will not step down, refused to answer questions from reporters, giving a curt explanation: “’Cause you’re all liars.”

Criticism of Adams continued. “This is an unmitigated disaster,” Mark Levine, the Manhattan borough president, said on X after the resignations of four of Adams’s top deputies. “Each one of these leaders is a seasoned, talented professional. Their loss will leave New York City government in a truly precarious position.”

And Jumaane Williams, the public advocate — who would become mayor if Adams left office — issued a statement that said Adams was “engulfed” in crisis. “The job for the rest of us in elected office is to prevent his personal troubles from dragging our city into the crisis along with him,” Williams said.

All that has turned up the pressure as Judge Ho faces demands that he look into the Justice Department’s thinking on dismissing the charges against Adams. The judge has not indicated when he might rule, and a decision today is unlikely. But in the two-page order scheduling the hearing, he noted that under federal rules, the executive branch was “the first and presumptively the best judge” of whether to drop a prosecution.

Adams’s case may prove to be an exception. Three former U.S. attorneys from New York, New Jersey and Connecticut have filed a brief asking Judge Ho to look into whether the Justice Department’s move to drop the case was a pretext for securing the mayor’s cooperation with the administration’s anti-immigration policies. And Common Cause, the good-government advocacy group, asked him to deny the Justice Department’s motion, which it called part of a “corrupt quid pro quo bargain.”

METROPOLITAN diary

Special Ingredient

Dear Diary:

After my daughter was born, everything felt hard. Even my quaint Brooklyn neighborhood began to sour for me. The stuffed raccoon on its hind legs in the coffee shop window, the plant store with only four plants, the fedora shop: It all seemed like a kitschy Hollywood back lot.

One day, I dragged my daughter in her stroller to a local sandwich shop where the sandwiches have clever names. Looking for comfort, I ordered the one simply called Meatloaf.

“Your baby is beautiful,” a man’s voice said.

I looked up to see a young man with a handlebar mustache, a big smile and a tattoo encircling his neck like a shawl.

“Thanks,” I managed to say from within my fog while trying unsuccessfully to soothe my crying daughter.

At first, my sandwich — a slab of meatloaf slathered in a tangy sauce on a roll the size of a Nerf football — seemed like another test I would fail. I took a bite, then another. Then I devoured it.

“What’s the secret?” I asked the young man as I ordered a second sandwich. I felt hungry for the first time in weeks.

“It’s the pickles,” he said with a grin.

When I got outside, I found two cups of them inside my bag.

— Sarah Gundle