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Chicago-based marijuana giant part of federal pay-to-play investigation

Chicago Tribune logo Chicago Tribune 3/30/2021 Jason Meisner and Ray Long, Chicago Tribune
a dining room table: Products for sale inside Rise Niles dispensary in Niles, Illinois, on Dec. 17, 2020. © Jose M. Osorio / Chicago Tribune/Chicago Tribune/TNS Products for sale inside Rise Niles dispensary in Niles, Illinois, on Dec. 17, 2020.

CHICAGO — A Chicago-based marijuana cultivator and dispenser that has rapidly grown into one of the nation’s biggest pot firms is under federal investigation for possible pay-to-play violations during its push for coveted state licenses, sources said.

Investigators have been scrutinizing campaign donations and other steps Green Thumb Industries took as it sought to secure growing and distribution licenses in Illinois and several other states, sources told the Chicago Tribune.

No charges have been filed as part of the investigation.

A company spokeswoman said Green Thumb Industries was not aware of any probe.

“Green Thumb takes compliance very seriously and operates with the highest standards of ethical business conduct,” company spokeswoman Linda Marsicano said in an emailed statement. “We are not aware of any such investigation.”

The investigation is the first Chicago-based federal inquiry to come to light in what’s been called the “green wave” of marijuana decriminalization, which has led to an unprecedented scramble for licenses and financial backing, as well as accusations that the spoils have disproportionately gone to the rich and well-connected.

Founded in 2014, Green Thumb Industries, also known as GTI, was one of a handful of companies to secure the state’s first licenses to grow medicinal marijuana in Illinois after it was legalized eight years ago.

GTI and other companies already licensed to sell medical pot were in turn given the first licenses for recreational sales when that bill passed in 2019, representing a huge head start in the burgeoning industry.

Now, Green Thumb Industries stands as one of the behemoths of the nationwide marijuana market, with more than half a billion dollars in total revenues last year and an estimated market capitalization of $5 billion, according to recent financial reports filed with the U.S. Security and Exchange Commission.

GTI operates a patchwork of cannabis growing sites as well as 56 retail stores in 15 states, including nine in Illinois, according to its online company profile. The company also produces its own line of packaged pot products like pre-rolled joints, marijuana gummies, oils and vaping materials that are sold at stores around the country.

It’s unclear what specific aspects of Green Thumb’s political giving, hiring or other activities are being scrutinized by federal authorities. The exact time frame and origin of the probe were not known.

State records show that during its rise, GTI’s executives and affiliates have spread cash to a number of politicians as well as a political action committee that were instrumental in the marijuana legalization effort.

The company also hired a succession of lobbyists and consultants with deep ties to then-House Speaker Michael Madigan, records show.

Green Thumb’s founder and CEO, Ben Kovler, is a private-equity manager whose ancestors started the Jim Beam whiskey empire a century ago. Other early investors in GTI included Ari Levy, whose father founded Levy Restaurants group in Chicago, and Peter Kadens, an entrepreneur and former head of a large solar power company, records show.

Messages left Monday for Kadens were were not immediately returned. Kovler did not immediately comment and Levy could not be reached for comment.

The business of selling legal marijuana is largely uncharted territory, and companies like GTI had to be savvy and flexible enough to weather getting an operation off the ground while waiting for licenses to be approved and customers to come online.

In interviews, Kovler often has talked about Green Thumb’s success hinging on the ability to take advantage of tightly regulated markets, which allows companies with enough capital to build a “moat” around its interests and wall off competitors.

The effort is beginning to pay off. Earlier this month, Kovler said GTIs revenues more than doubled in 2020, and that this year looks to be an even bigger boon as legal pot sales continue to surge.

“The outlook for U.S. cannabis remains strong and we are pleased to be riding the wave,” Kovler said in an earnings call with investors.

Green Thumb’s rise also has not been without controversy. In 2017, Kovler was sued by a former business associate alleging Kovler stole his ideas for the company — including the name Green Thumb — after they had reached a handshake deal offering him the position of head grower with a 1% cut of future profits.

The suit by Cary Neiman, which is pending in Cook County Circuit Court, alleged Kovler bragged in an early meeting in 2014 that his connections to powerful businesspeople and politicians in Illinois would make them a shoo-in for any licenses they would need.

“My access to capital and the relationships I have forged within the Illinois business and political world from (Chicago) to Springfield, as well as my family’s name, means that without me it is doubtful you will even secure one license,” Kovler allegedly told Neiman, according to the court filing.

Kovler has denied the accusations, court documents show. Reached by phone on Monday, Neiman declined to comment.

When Kovler founded GTI in May 2014, then-Gov. Pat Quinn’s administration was still in the process of drafting exactly how the program would work and months away from accepting applications from potential growers.

To help push his cause in Springfield, Kovler, hired a succession of lobbyists and consultants. Among the early people brought on was Michael McClain, one of Madigan’s oldest confidants, who told the Tribune at the time that he acted only as a consultant for GTI because he feared lobbying government officials would “hurt” the group’s chances.

McClain has said he registered as a lobbyist only to ensure his involvement with the group was transparent.

“We wanted to go beyond the letter of the law. We didn’t want any sense of impropriety,” he said.

McClain has since been charged in U.S. District Court with unrelated bribery conspiracy charges alleging he orchestrated a scheme to steer payments from utility giant Commonwealth Edison to Madigan-connected operatives in exchange for the speaker’s help with legislation. He’s pleaded not guilty.

In 2015, GTI turned to Shaw Decremer, who at the time was a top lieutenant to Madigan, state records show. Decremer was ousted from the political organization by Madigan three years ago as part of a scandal involving alleged abuse of power.

Most recently, GTI contract lobbyists include two firms headed by former Madigan aides: Heather Wier Vaught and Kristen Bauer, records show.

In addition to lobbyists, the company brought some well-known Chicago names into the fold. In 2014, GTI made headlines by hiring former Chicago police Superintendent Terry Hillard and Terry Gainer, a former Chicago cop, Illinois State police director, and head of the U.S. Capitol Police in Washington D.C., to lead its security team.

Meanwhile, GTI and its affiliate companies have donated to the campaigns of a number of Illinois politicians and also gave tens of thousands of dollars to a pro-cannabis organization, which in turn infused cash into local and state legislative contests, state campaign records show.

One of the biggest individual beneficiaries of the generosity in Illinois has been Senate President Don Harmon, D-Oak Park, who a main sponsor of the 2018 bill that expanded the state’s restrictive medical marijuana law and voted for legalizing recreational marijuana in 2019.

GTI’s biggest donations by far went to ICANN, a pro-cannabis political action committee established in 2018 whose executive director is former Republican Sen. Pamela Althoff of McHenry. The political fund has received about $275,000 since late 2018 from cannabis-linked companies in Illinois and other states.

Althoff could not be reached for comment.

Two of the first companies to give to ICANN were Green Thumb subsidiaries GTI-Clinic Holdings and GTI Rock Island LLC, with each contributing $22,000 in November 2018, records show.

A third GTI-affiliated company, Vision Management Services, gave ICANN PAC $16,000 in August 2020, raising the total GTI-related contributions to $60,000.

The next month, Harmon received a $50,000 check from ICANN, and the House Republican Organization and the Republican State Senate Campaign Committee both received $5,000 checks, records show.

A spokesman for Harmon said the Senate president was not aware of any investigation into GTI and had not been contacted by federal authorities.

Vision Management also gave to $1,000 to Bridget Degnen for food for a fund-raiser at Bar Lupo in December 2017 as she campaigned for the Cook County Board, where she later won a position.

Degnen, who served as deputy director of medical cannabis for the Illinois Department of Financial and Professional Regulation from 2013 to 2017, confirmed last year she is involved in a separate cannabis group, AmeriCanna Dream, which has applied for a license. On Monday, Degnen said she had heard nothing about a federal investigation and was surprised by it.

ICANN also gave a $2,000 contribution to new Democratic House Speaker Emanuel “Chris” Welch of Hillside shortly after he took over the gavel in January from Madigan. Welch was a co-sponsor of the recreational marijuana bill; Madigan did not vote on it.

On Monday, a Welch spokesman said the speaker was not aware of the federal probe into Green Thumb and has not been contacted, but as a matter of due diligence will return ICANN’s donation.

The list of lawmakers that ICANN also gave $2,000 contributions to included Rep. Kelly Cassidy, the House sponsor of legalizing recreational marijuana.

Cassidy’s spouse, Candace Gingrich, has served as vice president for Illinois-based cannabis company Revolution Enterprises’ operations in Florida. Cassidy has told the Tribune that the House ethics office said there is no conflict of interest.

On Monday, Cassidy said she had not been contacted by federal authorities. “Nor have I had any contact with GTI in quite some time — nor any of the players,” she said.

And Illinois is certainly not the only state where GTI has been using its capital to try to influence lawmakers.

In 2019, the Tribune reported the company was one of the top financial backers of a failed effort to legalize recreational marijuana in Ohio, donating more than $600,000 to a political action committee pushing the plan.

“We believe in the democratic process including the transparency of political contributions,” GTI spokeswoman Linda Marsicano said in a statement at the time.

State campaign financing records show the company has donated directly to politicians in numerous other states where it holds licenses, including New Jersey, Connecticut and Maryland.

In New York, which is on the verge of passing a law legalizing recreational pot, Green Thumb already has positioned itself as a player in what surely would be one of the country’s biggest markets. In 2019, GTI paid $60 million to buy out a local company and secure one of the state’s medicinal marijuana licenses.

“As one of only 10 license holders in a state with a population of approximately 20 million, this acquisition is firmly in line with our strategic goal of entering highly regulated markets to manufacture and distribute cannabis brands at scale,” Kovler said in a news release at the time.

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