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The Missouri Independent writes

The state has worked to purge the social-equity program of alleged ‘predatory’ practices. Contracts at the heart of 22 revoked licenses were written by an attorney who represents the state’s cannabis trade group and had a hand in the drafting of the marijuana legalization amendment that created the program.

Missouri’s social-equity cannabis program has struggled to get off the ground since it began in 2023, with state regulators routinely revoking business licenses for relying on contracts they’ve publicly characterized as “predatory.”

As it turns out, the attorney who crafted most of those contracts also represents the marijuana industry trade group, whose leaders helped create the microbusiness license program to diversify the market and ensure its benefits went to communities most impacted by the war on drugs.

Eric Walter is a St. Louis-based attorney who represents the Missouri Cannabis Trade Association and a significant percentage of the state’s cannabis licensees. He wrote 22 agreements the state believes would take the microbusiness licenses out of the hands of eligible applicants and put them into the hands of well-connected or out-of-state cannabis investors, according to the administrative appeal case documents obtained by The Independent.

Each of those agreements largely led to the state revoking a microbusiness license issued last year for not meeting the constitutional mandate that the licenses be “majority owned and operated” by eligible applicants.  All but one of the license revocations is being appealed to the Missouri Administrative Hearing Commission.

To be eligible for a microbusiness license, applicants must meet certain criteria, including income below certain thresholds, having past marijuana offenses or being a disabled veteran.

Walter’s law firm and the consulting companies who hired the firm to draw up the agreements have vehemently denied the contracts are predatory, arguing the applicants voluntarily signed them.

“Those documents are all transparent, fair, and compliant with Missouri law, including the Department of Health and Senior Services’ rules,” Jamie Moss, spokeswoman for Walter’s law firm, Armstrong Teasdale, said in an email to The Independent.

Walter’s bio boasts being an “influential advisor to the industry” and a member of the committee responsible for drafting the marijuana legalization amendment that created the microbusiness program.

Andrew Mullins, executive director of the Missouri Cannabis Trade Association, or MoCann, praised Walter’s legal acumen on behalf of the industry, though he didn’t respond to questions about the revoked licenses.

“Eric Walter is unquestionably one of the top cannabis lawyers in the Midwest,” Mullins said in an email to The Independent, “and MoCannTrade benefits greatly from his expert legal counsel.”

But legal experts who reviewed the contracts for The Independent say the agreements are an attempt to establish front companies and manipulate the system.

Nimrod Chapel — an attorney, president of the Missouri NAACP and former chairman of the Administrative Hearing Commission — called the agreements “a trick” that results in eligible applicants “receiving little to nothing.”

“This system — because that’s what it is — it’s a system to divest people who are truly or could be truly deserving underneath the constitutional amendment,” Chapel said.

The contracts written by Walter gave applicants two years to pay back loans that can total up to $2 million. If they couldn’t, they’d have to pay a “break-up fee” of up to $2.5 million or give up ownership of the license transfers to the loan holder, according to the state’s response in several of the appeals.

“Therefore, the business would likely be unable to generate revenue to pay back the loan,” the state argues in one of the legal filing responding to a revocation appeal. “This leaves them no option but to convert the debt into ownership.”

In most cases, the same people involved in the consulting company that hired Armstrong Teasdale to draw up the contract are also involved in lending the money.

For the last two years, The Independent has documented a pattern of well-connected groups and individuals flooding the microbusiness lottery by recruiting people to submit applications and then offering them contracts that limit their profit and control of the business.

A majority of the revoked licenses followed this pattern.

Walter’s agreements are nearly identical to a contract The Independent obtained last year circulated by John Payne, who led the campaign to legalize recreational cannabis in 2022. Armstrong Teasdale denied having anything to do with Payne’s agreement.

The consultants who hired the firm

For 16 of the 22 revoked licenses connected to Walter, the contracts were between the applicants and a consulting firm called Goldengrain Ventures LLC. The contracts were signed by Arizona-based cannabis investor Michael Halow, according to exhibits submitted in the licensees’ appeals.

Four of the revoked licenses involved the consulting companies MO Microbusiness LLC and W2 Industries, with either David Brodsky or Scott Wootton signing as managers. Brodsky and Wootton are MoCann board members and “micro reps,” in addition to being investors in the industry.

Two involved the consulting firm Great Granny Gertie LLC, where Springfield-based investor Thane Kifer signed as the company’s manager.

A person can only be the owner of one microbusiness license.

Read the full report