Ohio: Harvest of Ohio LLC (Dispensaries) Settlement With State Authorities

COLUMBUS – Harvest of Ohio LLC will “voluntarily” donate $500,000 to the state’s prescription drug reporting database to settle an ownership dispute with state regulators and open its three Ohio medical marijuana dispensaries. Reports the Cincinnati Enquirer

The report goes on to say

The penalty is among the highest assessed to a state-licensed marijuana business. The agreement means Harvest will be able to open dispensaries in Columbus, Beavercreek and Athens after passing state inspections.

Affiliated business Harvest Grows LLC can also move ahead with its large-scale cultivation and processing facility in Ironton in Lawrence County after reaching an agreement Friday with the Ohio Department of Commerce.

The businesses were accused last year of misrepresenting their ownership to qualify for business licenses set aside for minority-owned companies.

Harvest Health and Recreation, an Arizona-based multi-state operator, laid claim to the Ohio businesses in investor disclosures last year. But on Friday, Harvest’s corporate website did not list any Ohio locations. A corporate spokesman said the company has a “licensing and lending agreement” with Harvest of Ohio and Harvest Grows.

Minority ownership dispute

On its marijuana license applications, Harvest of Ohio LLC claimed Ariane Kirkpatrick, an African-American businesswoman from Northeast Ohio, owned and controlled 51% of the company. The Ohio Board of Pharmacy claimed Harvest “committed fraud, misrepresentation, or deception in furnishing information” on its application.

Harvest successfully blocked release of the board’s findings last year in response to a records request by The Enquirer.

But the Ohio Department of Commerce released a summary of its investigation into the same issue for related business Harvest Grows, which also listed Kirkpatrick as majority owner.

Corporate structure documents reviewed by the agency showed all CEO duties were assigned to Steve White, the CEO and co-founder of Harvest Health and Recreation, who was not listed as a member of a “disadvantaged group.”

By claiming an African-American woman was the majority owner, Harvest of Ohio LLC won licenses over higher the owner of the company to benefit from Ohio law mandating 15% of all medical marijuana licenses go to minority-owned and controlled businesses. The quota has since been struck down in court.

State rules bar ownership changes without approval, and only after a business has been operating. Dispensaries have to wait an additional year to transfer ownership.

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Harvest objected to the Commerce Department’s depiction of its business structure. In the agreements, the Ohio Harvest businesses neither admitted nor denied wrongdoing.

Kirkpatrick said in a statement she has overcome many obstacles as a black female executive and is happy to finally start her businesses and serve patients.

“I am blessed to have industry professionals such as Steve White among my partners in Ohio to help navigate and provide expertise in this rapidly evolving industry,” Kirkpatrick said. “I am equally pleased to have received financial support, marketing and intellectual property support from Harvest Health and Recreation, Inc. Harvest Health & Recreation is an industry leader that is committed to the true meaning of diversity and inclusion.”

Settlements with state agencies

Harvest will not pay any fines or fees as part of settling with the Commerce Department, according to an agency spokeswoman. Kirkpatrick submitted documents in February attesting she is the majority owner. The agreement allows ownership transfer once the cultivation facility is operational.

In the dispensary settlement, Harvest of Ohio agreed to pay $500,000 to the Ohio Automated Rx Reporting System, the database used to track controlled substance prescriptions and medical marijuana purchases in Ohio.

The company also agreed that Kirkpatrick will remain majority member and managing member of the three dispensaries. Harvest cannot change its ownership until after the dispensaries have been open for 18 months and the $500,000 fee has been paid.

For its part, the pharmacy board agreed to perform final inspections on the three dispensary locations and award certificates of operation. Harvest planned to open the dispensaries nearly a year ago, but they’ve been on hold pending the pharmacy board’s investigation and negotiations to settle the dispute.

As of Friday, 50 of the state’s 57 licensed dispensaries had opened. Industry experts cite the slow roll-out of dispensaries last year as one reason for not meeting first-year sales estimates.