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Companies That Lost Out On Lottery For Marijuana Dispensary Licenses To Get Second Chance At Passing Grade

CHICAGO (CBS/AP) -- After a barrage of complaints that only 21 companies made the cut for the upcoming lottery for 75 new marijuana dispensary licenses, Gov. JB Pritzker has announced companies that missed out will get a second chance at making the grade.

Earlier this month, the state announced only 21 of 700 applicants for up to 75 new dispensary licenses would move forward to the upcoming lottery process, after they received perfect scores on their applications.

With so few applicants making it into the lottery, the Illinois Legislative Black and Latino caucuses want Pritzker to pause the lottery process until the public can learn more about how and why the 21 finalists were chosen. They have questioned if the process was truly fair.

Although Pritzker has repeatedly said he does not plan to delay the lottery, it has yet to be scheduled, and now the governor's office said applicants who didn't receive the maximum score of 252 points will have the opportunity to amend their applications, or challenge their scores. The lottery could have started as early as Sept. 18.

The governor's office said applicants who did not get perfect scores on their applications will receive a "supplementary deficiency notice," along with a score sheet indicating each part of their application on which they lost points. Those applicants will then get a chance to respond to the notice, and amend their application exhibits, or ask the state to rescore their application if they believe there was a mistake in scoring.

Applicants may not change the listed owners or ownership percentages on their original application in an effort to qualify as a "social equity" applicant, veteran ownership status, or Illinois resident status in order to receive additional points on their score.

To get a perfect score, each applicant had to achieve social equity status and veteran status, meaning at least 51% of the organization must be owned by a veteran or group of veterans.

The governor's office said the Illinois Department of Professional and Financial Regulation will review all timely responses to the supplemental deficiency notices, and issue a final score for each application, before proceeding with the lottery for licenses.

"As we worked with the General Assembly, equity and fairness have always been at the heart of our approach to legalizing cannabis, and when we heard significant concerns from numerous stakeholders about the process to award dispensary licenses, I said we needed to take a pause to fix their concerns, within the bounds of our landmark law," said Governor JB Pritzker. "While this process remains a marathon and not a sprint, we believe that these new steps will inject more equity and fairness in the first round of license awards and provide insight as we improve the process for future rounds."

Pritzker and his senior marijuana adviser, former state Sen. Toi Hutchinson, have defended the application process, pointing out all 21 finalists were "social equity" applicants, who were given a leg up on their applications to boost minority participation in an almost exclusively white marijuana industry in Illinois. The social equity designation was intended to give preference to applicants who live in communities most unfairly impacted by the war on drugs, or those with prior low-level pot convictions.

To qualify as a social equity applicant, a majority of the company's ownership must either have spent 5 of the last 10 years living in an area disproportionately affected by the war on drugs, or have a prior arrest or conviction for a drug-related crime that is eligible for engagement; or have at least 10 full-time employees, most of whom who would meet the social equity requirements.

Pritzker said earlier this month that approximately two-thirds of the finalists are companies owned by people of color.

"When we're done with this process, we will have the largest percentage ownership by people of color anywhere in the nation," he said.

Hutchinson noted applicants were able to seek up to 10 licenses each, so overall there were more than 4,500 applications for the 75 new dispensary licenses, so "there was bound to be a lot of disappointment for this first round."

"We knew that this was going to create a thunderstorm," she said.

The governor has said he would support possible changes in the next rounds of the licensing process, when the state will award approximately 400 licenses for craft growers, infusers, and marijuana transportation firms.

Hutchinson and Pritzker stressed that the reason the state started with 75 new licenses for recreational marijuana dispensaries was to figure out what problems they might face in the first round of the process, and evaluate what changes might need to be made down the line.

The governor also pointed out that the state's licensing process includes an upcoming disparity study to help state officials understand how the industry is working, and make any needed corrections to the program as it moves forward.

Meantime, two companies that were rejected for the lottery have filed a lawsuit to delay the awarding of licenses to the chosen finalists.

Their lawsuit claims the 21 finalists are "politically-connected insider companies." The suit also says that at least one of the 21 companies lists as a manager a person identified on LinkedIn as a risk consultant for KPMG, a firm that scored the applications.

Jim McGann, a KPMG spokesman, said in a statement that the person mentioned in the lawsuit was not involved in the scoring process.

The suit also alleges that the department's decision to not give the "unsuccessful applicants any opportunity to challenge their ineligibility is unconstitutional."

A department spokesperson did not return the Chicago Tribune's request for comment. Lawyers representing the two applicants also did not return the newspaper's requests for comment.

Every applicant in the lottery received a perfect score. The lawsuit alleges that Southshore Restore and Heartland Greens should have, too. Southshore and Heartland are majority owned by social equity applicants and military veterans.

(© Copyright 2020 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)


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