Last year, Destiny Brown was told that she had been recruited to operate and own a small marijuana dispensary in Missouri. Michael Halow, a marijuana investor, informed Brown that the cannabis crime on the criminal record of her father and her status as a disabled veteran made her qualified for a microbusiness license.
These qualifications had been designed for licenses like these to be awarded to disadvantaged owners of businesses, such as individuals with nonviolent cannabis offenses and lower incomes, as well as those who are disabled veterans.
Brown, a Black woman, was also under the impression that she would get paid $200,000 to run the business. To her disadvantage, she failed to read the contract she signed with Halow closely. What he hadn’t mentioned was the fact that he would have complete ownership/control of this business and she would simply be the legally known front. Halow, who has a felony conviction on his record, cannot legally hold a license.
A transcript obtained from her interview with investigators at the Division of Cannabis Regulation also reveals that Halow repeatedly told her he would give her $2 million to start and operate the business. Once Brown was awarded her license, she tried to extricate herself from the situation, but her hands seemed tied. According to the agreements she’d signed, she wouldn’t be permitted to sell even one cannabis product in the state until she repaid the $2 million in full (plus interest), or ownership changed to Halow.
A promissory note as well as memo of understanding also afforded Halow a right to convert the loan he’d give Brown to 100% of membership interest.
Brown is one of the 16 individuals who won the lottery for microbusiness licenses in October 2023. Six of these licenses were linked to Halow and have since been revoked. A deep dive found that Cannabis Business Advisors, Halow’s consulting company, was the liaison on more than 400 of the dispensary applicants.
Halow isn’t the only individual applying this strategy either.
Recently obtained contracts reveal that marijuana industry insiders or out-of-state companies have tried to leverage qualified individuals to acquire licenses while excluding them from the profits. This comes after another expose found that a firm based in Michigan was recruiting individuals on Craigslist to enter the license lottery, then using contracts to force the individuals to give up all control and profits.
The equity program, as pitched to voters in Missouri, was an avenue to help those disproportionately affected by the war on drugs to gain a foothold in this growing industry. While it was a good idea in theory, it seems nobody anticipated the emergence of exploitation and these predatory and unfair contracts.
These stories of predatory contracts in Missouri must be distressing to established cannabis companies in other U.S. markets, such as SNDL Inc. (NASDAQ: SNDL), given the effort, time and resources expended in fighting against prohibition. To see that unscrupulous individuals are trying to the abuse the social-equity programs is disturbing for everyone who wishes the industry well.
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