Sacramento is Ground Zero

Unregulated market remains major concern with $8.7 billion in black market sales

California’s legal recreational and medicinal cannabis industry is not only “the biggest government-sanctioned market in the nation,” but also the “biggest legal marijuana market in the world,” a new report issued by the Governmental Accountability Institute says.

Individual cannabis permits in the state have sold for as much as $17 million.
There were more than 7,500 active cannabis licenses in California in 2020, including 910 retail dispensaries.

However, the reach of the unregulated market remains a major concern as estimates have revealed about $8.7 billion in black market sales. Thus, taking legal and illegal sales into account, the California market sold a whopping $12.0 billion in cannabis and related products in 2019.

This makes the legal cannabis market in California about $3.3 billion in sales.

The GAI says, “evidence suggests that the current California framework allows for increased corruption in a system where ‘money talks.’”

Where California’s pot industry gets dodgy is how many politicians and dozens of former government officials are involved. GAI found many left government to work for cannabis companies and the lobbying firms representing them. And the tangled web of state and local regulations has only boosted corruption.

“Part of the problem is rooted in California’s dual regulatory structure, which forces cannabis businesses to comply with state and local government requirements,” GAI reports. “With the approval of state cannabis licenses in the hands of city councils, ‘a conflicting patchwork of local laws’ has emerged. Ultimately, with this type of decentralized permitting, ‘corruption can span from the highest to the lowest level of public officials.’ Since then, California has become a focus in the FBI’s investigation. At issue is whether local officials have abused the cannabis regulatory systems that they helped create.”

While the FBI has successfully taken down elected politicians in several California cities for “questionable business practices, which included paying as much as $250,000 cash in a brown paper bag to city officials,” the state’s capital, GAI found that Sacramento, is ground zero for dubious public-private interactions between local and state regulators and the industry. “Sacramento has even attracted national headlines because of its connection to a scheme that violated federal election laws.”

GAI explains:

One of the key individuals linked to Sacramento’s cannabis licensing scandal is Joe Devlin, an experienced political consultant who helped shape the policies and standards of the local and state cannabis markets and eventually became Sacramento’s first “Cannabis Czar.”

Devlin had previously served as a legislative director in the California State Legislature and as a consultant to the Assembly’s Speaker. When candidate Jay Schenirer ran for Sacramento’s City Council in 2010, he hired Devlin’s private consulting firm, Santillan & Devlin LLC, to run point on the campaign. Schenirer won the election and hired Devlin to be his Chief of Staff, but Devlin kept his consulting practice on active status.

Notably, Santillan & Devlin provided consulting services for two important 2016 campaigns while Devlin served as Schenirer’s Chief of Staff. The first of these campaigns was when the former President of the California Senate, Darrell Steinberg, ran for Mayor of Sacramento. The second was to promote Schenirer’s “Measure Y” ballot initiative, which sought a tax increase from 4 to 5 percent on marijuana cultivation and manufacturing businesses to fund city youth services.

As a result of these campaigns, Devlin’s firm was handsomely rewarded with nearly $50,000 in campaign expenditures from mayoral candidate Steinberg, and at least $24,000 from Schenirer’s Measure Y initiative.

These payments to Devlin’s firm (and to Devlin himself) were quite substantial for local elections. They were afforded by campaign budgets significantly enhanced by donations from companies in the local cannabis industry. From 2014 to 2019, these companies donated at least $225,000 for local elections, and about 90 percent of that amount went to campaigns for Steinberg (over $60,000), Schenirer (over $23,000), and Schenirer’s Measure Y cannabis tax (over $116,000).

In 2017, following former State Senator Darrell Steinberg’s election as Sacramento Mayor, Sacramento’s City Council appointed Joe Devlin as Cannabis Czar (officially “Marijuana Policy and Enforcement Manager”) in anticipation of the January 2018 launch of legalized recreational cannabis. “The timing of Devlin’s appointment raises the question about whether or not he did favors for the cannabis companies that indirectly paid him through their campaign donations,” GAI said.

Next: Sacramento’s Cannabis Cronyism

Katy GrimesKaty Grimes, the Editor of the California Globe, is a long-time Investigative Journalist covering the California State Capitol, and the co-author of California’s War Against Donald Trump: Who Wins? Who Loses?