Two key figures in Michigan's largest public corruption scandal in three decades, involving the bribery of former Michigan House Speaker Rick Johnson, have been released from federal prison after serving less than half of their sentences. The controversy surrounding their early release has sparked debate over whether justice has truly been served, as Johnson himself may soon be released.
Vince Brown, a lobbyist for the cannabis industry, was released on August 6 from a low-security prison in Pennsylvania after serving less than nine months of his 20-month sentence for conspiring to bribe Johnson. Three weeks prior, Oakland County businessman John Dawood Dalaly was granted compassionate release from a minimum-security prison in West Virginia, also after serving less than nine months of his 28-month sentence for bribing Johnson.
The lenient sentences for these high-profile individuals, both of whom played significant roles in a scandal that rocked Michigan's capital, have raised concerns about the integrity of the justice system. "This does seem like it's not justice," commented Matthew Abel, a Detroit-based criminal defense attorney specializing in cannabis-related cases. Abel emphasized that the legacy of these actions continues to affect Michigan's cannabis industry.
The Federal Bureau of Prisons has not provided an explanation for Brown's release, which continues a pattern of early releases for Metro Detroit businessmen, labor leaders, and politicians convicted of public corruption. The trend highlights ongoing concerns about accountability in high-profile cases.
Rick Johnson, a 71-year-old former Republican lawmaker from LeRoy, has also petitioned for compassionate release, citing various health issues. Johnson was sentenced last year to 55 months in federal prison for accepting $110,200 in bribes while serving as chairman of the Michigan Medical Marijuana Licensing Board. His actions, described by U.S. District Judge Jane Beckering as an "unfettered abuse of power," included accepting bribes ranging from $1,000 to $20,000 and engaging in illicit activities.
Johnson is seeking early release from a minimum-security federal prison camp in Minnesota, where he has served less than nine months of his sentence. The judge had previously rejected his request, noting that Johnson had served only 4% of his sentence and that his medical condition was neither terminal nor severely debilitating.
Johnson's chances of early release appear slim, given that federal judges in Michigan's Western District, where his case was prosecuted, have only granted compassionate release to 3% of the 410 inmates who applied since the COVID-19 pandemic began. This rejection rate is one of the highest in the country, trailing only behind districts in Arkansas, Georgia, Oklahoma, and Texas.
Defense attorney Wade Fink acknowledged the importance of compassionate release as a safety valve for courts, allowing them to consider extraordinary and compelling circumstances. However, he cautioned against interpreting early releases as leniency, noting that underlying factors, such as terminal health conditions or family responsibilities, often play a role.
The bribery scandal resulted in the convictions of four individuals last year, including Brian Pierce, a 46-year-old lobbyist from Lansing who is serving a two-year sentence in a medium-security prison in Pennsylvania. Brown and Dalaly, despite their early release, are required to remain under court supervision for two years.
Brown attributed his early release to credits earned for good behavior under the First Step Act, a federal law that allows inmates to reduce their sentences based on various factors such as age, health, and lack of a prior criminal record. He emphasized that the bribery case represented a small part of his career, which he described as overshadowed by youthful mistakes and poor partnerships.
The scandal continues to reverberate in Michigan's cannabis industry, with some still questioning the extent of favoritism granted to certain businesses during the industry's formative years. As Abel pointed out, "Johnson's never come clean and told what actually happened here. He really single-handedly perverted the industry."
The release of Dalaly, a 72-year-old businessman who bribed Johnson with at least $68,200, has further fueled the debate. Despite objections from federal prosecutors who argued that Dalaly should serve his full sentence, Judge Beckering granted his release, citing Dalaly's worsening health and the need for medical care outside of prison.
Dalaly's release is the first compassionate release granted by a federal judge in Michigan's Western District in two years. Johnson, citing his own deteriorating health, hopes to follow suit. His request includes support from his daughter and the Osceola County Sheriff, who argue that Johnson has shown remorse and taken steps toward rehabilitation.
However, Johnson's previous attempts to shorten his sentence have been unsuccessful, with Judge Beckering rejecting a request in April under federal sentencing guideline changes. The judge emphasized that Johnson had already benefited from shorter guidelines during his sentencing, underscoring the seriousness of his crimes.
As the legal battles continue, questions remain about the true extent of justice served in this high-profile corruption case and the ongoing impact on Michigan's cannabis industry.
As Michigan approaches the fifth anniversary of legal cannabis sales, Ohio has joined the growing list of U.S. states offering recreational cannabis. Ohio's market officially opened on Tuesday, August 6th, with 120 stores licensed to sell cannabis to adults aged 21 and over who present valid identification.
In its first five days, Ohio's cannabis sales reached $11.5 million, averaging nearly $2.3 million per day, according to data from the Ohio Department of Commerce. In comparison, Michigan's cannabis market is generating approximately $9 million in daily sales—more than triple Ohio's average.
Despite Ohio's noteworthy launch, the new competition has had little noticeable impact on Michigan's cannabis market, even for retailers near the border who rely heavily on sales to Ohio residents.
Camden Miller, a manager at Pinnacle Emporium in Morenci, Michigan, located near the Ohio border, expressed minimal concern about Ohio's entry into the market. "At the moment, we're not too worried about it," Miller said. "The supply and demand isn't there yet in Ohio, and just like Michigan ... until you get it oversaturated, you're not going to see prices come down. Within the next few years, I'm sure it will start having more of an impact."
Projections suggest Ohio's cannabis market could reach $1.5 billion in its first year, potentially bringing in nearly $150 million in new excise taxes. However, Ohio currently has only a few stores within a 30-minute drive of the Michigan border, including two in Toledo and one in Bowling Green. The Ohio Department of Cannabis Control has plans to license more stores in the future.
For now, Ohio residents appear willing to travel to Michigan for better deals and more extensive product selections. Miller noted that a significant portion of Pinnacle Emporium's business comes from out-of-state customers, including many from Ohio, who often place large orders. "We've already had customers coming in and saying the prices in Ohio are crazy right now," Miller said.
Price discrepancies between the two states are striking. Ohio stores are reportedly selling 1.6 grams of cannabis flower for nearly $50, while Michigan retailers offer eighths (2 grams) for as low as $8. In Ohio, the average price for an ounce of cannabis during the first week of sales was about $266, whereas in Michigan, the average price dipped to just under $80 per ounce in July, according to the Michigan Cannabis Regulatory Agency (CRA).
Harrison Carter, a manager and co-owner of NAR Cannabis in Monroe, Michigan, about 12 miles north of the Ohio border, emphasized the price advantage Michigan holds. "There is such a large price discrepancy with the abundance of supply that exists in Michigan and the under-supply that currently exists in Ohio that consumers are making decisions that are very much budget-based," Carter said.
Although Ohio's tax structure is slightly higher, with a 10% excise tax and a state sales tax of 5.75% (plus varying local taxes), compared to Michigan's 10% excise tax and 6% state sales tax, the higher product costs in Ohio may deter some consumers from shopping locally.
The Michigan Cannabis Regulatory Agency declined to comment on Ohio's market launch or its potential impact on Michigan. Meanwhile, Ohio officials have expressed satisfaction with the initial rollout of their recreational cannabis market. "The Division of Cannabis Control has been closely monitoring these first days of non-medical sales and has been extremely impressed with the level of seriousness and responsiveness the industry has shown in meeting the requirements," said Jamie Crawford, spokesperson for the Ohio Department of Commerce. "As we move forward, the division's top priority will remain on the safe and legal sale and regulation of both medical and non-medical cannabis for Ohioans who choose to use them."
Michigan's cannabis market, which has been growing since the first licensed businesses began operating in December 2019, benefits from a more flexible licensing program than Ohio's. This has led to significant growth, with Michigan stores having sold nearly $10 billion in cannabis products to date, including approximately $1.3 billion in medical marijuana sales.
The recreational market in Michigan is expected to surpass $3.3 billion in sales over the next year. As of July, Michigan had over 800 licensed stores, with grow and processing operations managing 1.7 million cannabis plants in the pipeline.
In contrast, Ohio's cannabis infrastructure is still developing. The Ohio Department of Commerce recently listed 46 licensed processors, 37 growers, and 120 stores with certificates of operation. Ohio's Division of Cannabis Control, established following a November 2023 ballot initiative passed by 57% of voters, oversees the state's cannabis licenses, similar to a state liquor control commission. Local municipalities in Ohio can impose zoning restrictions or moratoriums on cannabis businesses, further limiting market growth.
Michigan's less restrictive licensing approach has led to clusters of cannabis shops in municipalities that permit recreational sales, particularly along state borders. For example, Monroe, Michigan, near the Ohio border, is home to 18 licensed cannabis shops despite a population of only about 20,300. In Morenci, there is one cannabis shop for every 450 residents.
This liberal licensing has resulted in unique market dynamics in Michigan, including low prices and high competition. Nearly 20% of the retail licenses issued since the market's inception no longer exist, reflecting the market's volatility. Despite these challenges, Michigan retailers view the competitive environment as beneficial for consumers, offering them a wide range of options at low prices.
"We're very much focused on ourselves here in Michigan," said Carter of NAR Cannabis. "We're continuing to offer not only good service but good products at affordable prices ... We're very much in an oversupply moment, and we're able to hit certain price points that a lot of Ohio consumers are frankly used to at this point."
The Michigan Cannabis Regulatory Agency (CRA) has initiated formal legal proceedings against One Love Labs, LLC, an adult-use cannabis processor operating under license number AU-P-000519. Located at 1271 Eden Way, Suite P in Chesaning, Michigan, the business faces serious allegations that could lead to significant penalties, including fines, license suspension, or even revocation.
The CRA's complaint, filed on July 31st, 2024, accuses One Love Labs of multiple violations of the Michigan Regulation and Taxation of Marihuana Act (MRTMA) and associated administrative rules. These allegations are based on findings from a CRA investigation that began in June 2024.
The formal complaint outlines several critical violations:
Improper Transfer and Mislabeling: On June 25th, 2024, One Love Labs accepted a shipment of 50,067 grams of product identified as CBD isolate. However, the CRA determined that the product was actually cannabis. The shipment originated from an Oregon-based industrial hemp processor, not a licensed cannabis business, and was delivered via UPS, bypassing Michigan's requirement for secure transport by a licensed provider.
Mixing of Products Without Proper Testing: The CRA alleges that One Love Labs mixed the received isolate with five grams of THCA oil they had produced. This new mixture was labeled and logged in Michigan's statewide monitoring system (Metrc) under a new tag, but without ensuring all necessary compliance tests had been passed before creating the new product.
Non-Compliance with Testing Protocols: During an inspection on June 29th, 2024, CRA agents found that the company had failed to properly sample and test the combined product. Video surveillance indicated that samples were taken only from one bucket, while the other nine remained sealed. This improper sampling resulted in incomplete and unreliable testing, which is a direct violation of the state's strict testing regulations.
Premature Transfer of Product: Despite pending test results, One Love Labs transferred all 10 buckets of the questionable isolate back to the originating Oregon processor on July 3rd, 2024, in an apparent attempt to avoid further scrutiny.
The CRA's complaint underscores the potential penalties One Love Labs could face, including the suspension, revocation, or restriction of their operating license. The CRA also has the authority to refuse license renewal or impose significant fines. One Love Labs has the right to request a hearing within 21 days of the complaint to contest the allegations or negotiate a compliance agreement.
One Love Labs must decide how to respond to the complaint, whether by requesting a hearing or attending a compliance conference to discuss the allegations and potentially resolve the issues without further legal action. If they fail to respond, the CRA will proceed with a contested case hearing to determine the appropriate sanctions.
These allegations against One Love Labs, if proven, highlight the importance of strict adherence to Michigan's cannabis regulations and the potential consequences for those who fail to comply.
The Cannabis Regulatory Agency (CRA) has formally filed multiple complaints (1, 2, 3, 4) against Hongrui Enterprises, Inc., a medical cannabis cultivation business located at 1100 Industrial Blvd., Albion, Michigan. The complaints highlight a series of alleged violations of the Medical Marihuana Facilities Licensing Act (MMFLA) and related administrative rules, potentially leading to severe sanctions, including fines, suspension, or even revocation of the company's licenses.
Hongrui Enterprises holds four active, stacked Class C medical marijuana grower licenses, which allow the company to cultivate a specific number of plants under Michigan law. According to the CRA, the company has committed numerous violations, as detailed in their formal complaint:
Surveillance System Issues: During an August 2023 site visit, CRA investigators discovered that the Michigan State Police had seized Hongrui's surveillance system, leaving the facility without video monitoring capabilities. Despite this, the business continued to operate without a functioning surveillance system. When CRA investigators returned in November 2023, the surveillance issues persisted, with cameras not recording and no employee on-site who could operate the equipment.
Unsecured Facilities: The complaints describe a facility that failed to meet basic security requirements. In multiple inspections, investigators found grow rooms and other sensitive areas left unlocked, allowing unauthorized access. Garage doors were also left partially open and inadequately secured, presenting additional security risks.
Untracked and Untagged Cannabis: Investigators found a significant number of untagged and untracked cannabis plants. During the initial inspection, 3,171 untagged plants were discovered, far exceeding the number allowed under Hongrui's licenses. By March 2024, the number of plants had ballooned to 10,738—more than double the permitted amount.
Fire Safety Violations: The Bureau of Fire Services (BFS) conducted inspections in March and April 2024, revealing numerous fire code violations. These included unsafe electrical work, obstructed exits, and a disabled fire protection system. The lack of a working fire protection system and unauthorized modifications to the facility raised significant safety concerns.
Improper Storage and Handling of Chemicals: The CRA found chemicals improperly stored in various locations throughout the facility. These were not secured in locked storage areas as required by regulations, further compounding the facility's non-compliance.
Failure to Comply with Regulatory Requirements: Hongrui Enterprises reportedly failed to maintain proper documentation, including employee records and Standard Operating Procedures (SOPs), and did not conduct required criminal background checks on prospective employees. The company also did not report material changes to their operations, such as the installation of new LED lighting, to the CRA as mandated.
Given the scope of the violations, the CRA has indicated its intent to impose substantial penalties, which could include fines, suspension, revocation, or refusal to renew Hongrui's licenses. The agency has provided Hongrui with the opportunity to request a hearing or a compliance conference to discuss the allegations and potentially mitigate the consequences. However, if the company fails to respond within the designated timeframe, a contested case hearing will be scheduled to resolve the matter.
These allegations, if proven true, underscore serious lapses in compliance and operational standards at Hongrui Enterprises, potentially jeopardizing both public safety and the integrity of Michigan's regulated cannabis industry.
The Michigan Court of Appeals is currently reviewing a cannabis-related ballot measure in South Lyon, following efforts by the city to prevent it from being presented to voters.
Previously, a lower court ruled in favor of the city, as confirmed by an attorney representing South Lyon in the case. Anne McClorey McLaughlin, who argued on behalf of the city, emphasized the potential impact of the ballot measure during a recent city council meeting.
"If this measure were allowed on the ballot and subsequently passed, it could significantly limit the city's ability to enforce regulatory measures," McLaughlin explained. "The measure is particularly favorable to the cannabis industry, especially those who already have a vested interest in local properties and have obtained approval from the state's cannabis regulatory agency."
Councilwoman Margaret Kurtzweil also expressed concerns about the measure, highlighting its potential to disrupt local zoning laws.
"This ballot proposal could drastically alter our zoning regulations in South Lyon," Kurtzweil stated. "It would eliminate restrictions on where cannabis dispensaries and retail locations could be established, taking away our authority to keep these businesses away from schools, churches, and other sensitive areas."
A decision from the Michigan Court of Appeals is anticipated in the coming weeks.
Agrify Corp. (NASDAQ: AGFY), a Michigan-based company specializing in cannabis cultivation equipment, reported a net loss of $2.8 million for the second quarter of 2024. Although the loss marks an improvement from the $6.8 million deficit reported in the same quarter last year, it comes despite a significant drop in revenue.
The company's quarterly revenue fell to $2.9 million, nearly halving from $5.1 million in the second quarter of 2023. However, this figure represents a slight increase from the $2.6 million reported in the first quarter of 2024. Over the first half of the year, Agrify's total revenue reached $5.5 million, down from $10.8 million during the same period in 2023.
CEO Raymond Chang, in a recent press release, hinted at the company's precarious financial position, revealing that Agrify had just $53,000 in cash as of June 30th. Chang acknowledged the need for additional capital, particularly after the collapse of a proposed merger with Nature's Miracle in May, which had the potential to provide much-needed financial relief.
"2024 continues to present significant challenges, with the cannabis industry cautious about future investments due to regulatory uncertainties and limited access to capital," Chang stated. "Despite our ongoing efforts to cut costs and manage payables, our limited cash reserves remain a significant barrier to growth. The company will therefore continue to explore all strategic options to maximize shareholder value."
Agrify faced the threat of being delisted from the Nasdaq exchange last fall. In May, the company converted $13.8 million of its debt into equity, enabling it to comply with Nasdaq's requirements and maintain its listing.
As of the end of the second quarter, Agrify reported total assets of $39.6 million, which includes the $53,000 in cash, against total liabilities of $30.8 million. The company also carries an accumulated deficit of $264.3 million, highlighting the significant financial challenges it faces as it seeks to navigate the turbulent cannabis market.
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