According to a story released by The Boston Globe last night, US Attorney Andrew Lelling has launched a grand jury inquiry related to “Host Community Agreements” for cannabis operations in Massachusetts.
Host Community Agreements are contracts between a Massachusetts municipality and a cannabis operation desiring to operate in that city or town. Under state law, executing a Host Community Agreement is a prerequisite for state licensure and an applicant must include evidence that a Host Community Agreement has been reached as part of its state application. As part of a Host Community Agreement, municipalities are permitted by state law to charge a “community impact fee” of up to 3% of the operation’s gross sales, provided that the amount assessed is “reasonably related” to the costs incurred by the municipality as a result of that entity’s operation.
Even prior to this grand jury investigation, Host Community Agreements have been subject to a great deal of scrutiny and media attention in Massachusetts. In January, the state’s Cannabis Control Commission voted to ask for the state Legislature to provide the Commission with clear oversight authority over Host Community Agreements. The Globe and others have previously reported on how a number of executed Host Community Agreements may violate statutory requirements by charging annual “donations” in addition to the 3% community impact fee. Additionally, there are concerns that some municipal officials may have used these Host Community Agreements as an opportunity to obtain kickbacks from applicants. For instance, in September, the former Mayor of Fall River, Massachusetts was charged with pressuring four marijuana businesses to pay $575,000 in exchange for municipal approval.
While Lelling’s office has declined to comment on how many subpoenas have been issued, The Globe reports that at least six communities have received subpoenas requesting a variety of records related to the Host Community Agreement process in that city or town. Additionally, The Globe states that “it appears likely that the investigation extends well beyond those six communities,” with other local officials and several industry lawyers indicating that they have also received subpoena requests.
We will continue to follow this story so be sure to check out Locke Lord’s blog for additional posts and developments.