Ethics questions arise as Oregon audit argues for easing regulations on cannabis industry

The Oregon recreational cannabis system may be facing some changes. Learn more about it here.

By Dirk VanderHart (OPB)

Oregon Secretary of State Shemia Fagan consulted with cannabis company owners as her agency audited the industry

Oregon’s recreational cannabis system has overly strict regulations that make running a business expensive and hamper people aspiring to join the industry, state auditors found in an audit released Thursday.

The report is likely to be cheered by current and aspiring participants in Oregon’s legal cannabis market. It suggests the state should consider easing up on security requirements and other safeguards that made sense when Oregon first legalized cannabis, but have become outdated. And it calls on state officials to use financing tools to help cannabis businesses succeed.

But the document comes at an awkward time for Secretary of State Shemia Fagan, a Democrat whose office carried out the study.

On Thursday, Willamette Week reported that Fagan for the last two months has been a contract consultant for an Oregon company, Veriede Holding, LLC, an affiliate of the cannabis chain La Mota. The owners of the company, Aaron Mitchell and Rosa Cazares, have racked up millions in unpaid federal and state taxes and have been sued repeatedly by vendors for not paying their bills, the paper has reported.

At the same time, the couple has ingratiated themselves with members of Oregon’s political class, becoming major funders of Democratic candidates including Gov. Tina Kotek, Senate President Rob Wagner, then-Labor Commissioner Val Hoyle and Fagan.

Fagan’s office said Thursday it could not offer specifics about her side job, but that it had nothing to do with the agency’s forthcoming audit.

Fagan began her consulting work for Veriede Holding on Feb. 20, a spokesman said. That’s five days after she’d told members of her staff she’d decided she should no longer have a role in the audit of the Oregon Liquor and Cannabis Commission’s regulations on the legal weed industry.

“I will soon be consulting for a company involved in the cannabis industry in multiple states,” Fagan wrote in a Feb. 15 email, adding that she was following state ethics guidelines. “I do not believe a real conflict exists because any action required [in response to the audit] would be taken by the legislature or OLCC, and any benefit could flow to all cannabis companies in Oregon, not this specific company.”

Fagan wrote to staff she was recusing herself from “further work” on the audit. She tapped her deputy secretary, Cheryl Myers, to take her place overseeing the matter.

In a press conference about the report’s findings Friday, Audit Director Kip Memmott said Fagan attended two critical meetings regarding the audit prior to recusing herself. The first was a “kickoff meeting” to discuss the purpose and scope of the audit, where auditors solicited feedback from people including Fagan.

Then Fagan participated in a meeting after auditors finished their “survey work,” Memmott said. “We present our plan and approach to the secretary. She does not approve that plan, she does not weigh in on that plan,” he said.


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