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Corruption and Bribery Alleged in Lawsuit Filed Over Marijuana Permit Process

 

 

All charges against the defendants, with the exception of one related to an Ordinace, were later dismissed. The attorneys for the defendants called the lawsuit frivolous.

BY BRIAN HEWS
Monday July 9, 2018, 6:00 p.m.

Hews Media Group-Community News has obtained a complaint, filed in 2017 by several medical marijuana dispensaries in United States District Court, alleging bribery, conspiracy, collusion, and civil R.I.C.O.,against the city of Huntington Park, Huntington Park Vice-Mayor Karen Macias, and Council members Graciela Ortiz and Marilyn Sanabria.

The complaint was filed by the Los Angeles based law firm of DR Welch.

Some familiar names in East Los Angeles politics are also alleged to have participated in the corrupt scheme, including  former disgraced Bell Gardens Councilman Mario Beltran.

Sources are telling HMG-CN that Mike Patel, identified in the complaint, is the same Mike Patel who owns a Travel Lodge in Lynwood and is developing hotels in Santa Fe Springs and Downey. Patel is currently a reserve Deputy with the Los Angeles County Sheriff’s Department.

Included as co-defendants in the complaint is a Lake Forest company called C4EverSystems, a large cash payment system company that places payment kiosks in marijuana dispensaries, and MJIC, a full-service marijuana industry provider.

Bribes and Kickbacks

The complaint claimed that, after their own failed sales efforts to secure future marijuana dispensary business from Huntington Park, C4Ever and MJIC “hired” lobbyists  assistance.

The complaint further alleged the lobbyists contacted a willing Macias, Ortiz, and Sanabria and proceeded to set a plan in motion to rig the City’s marijuana permit application process so three companies favored by the defendants would win the lucrative dispensary permits.

DR indicated that the plan also included payoffs from the City application fees, kickbacks from the hefty future cash fees charged by C4Ever inside all three dispensaries, and monetary bribes to Macias, Ortiz, and Sanabria.

Adopt Ordinances

The first step in the scheme involved adopting City Ordinances (Ordinance) that would make it “impossible,” with the exception of the companies favored by the group, to obtain marijuana permits in the City.

The major sections of the Ordinance would: charge a $5,000 Application Fee, mandate a short two-week permit selection process, prohibit outside lobbyist and applicants from contacting any City council members, and dictate that officials must redact all relevant contact information from the applications before delivery to Council members.

A violation of the redaction section would result in immediate denial of the application.

The order also contained a highly questionable section that bypassed City council staff review/recommendations of applicants, with the City councilmembers “conducting all reviews, grants, and awards of the applications.”

The controversial Ordinance passed in April 2016.

Macias, Ortiz, and Sanabria moved quickly, sending out requests for proposals on April 14, due two weeks later on May 4, to be reviewed and approved at their May 17 meeting.

On or around May 5, the permit applications were delivered for redaction and assigned individual reference numbers.

But according to the complaint, certain applications were never redacted.

As mandated by the Ordinance, the application was, “given to City Council to review at their own leisure prior to the award date.”

Five Finalists

The May 17 meeting started out with a bang, with Council woman Graciela Ortiz making a belabored point, without any prompts, that the entire application selection process was “completely transparent.”

Council member Valentin Amezquita, a frequent critic of Macias, Ortiz, and Sanabria, angrily disagreed stating that “the entire process was illegal and I will not take part in the selection.”

During their review, the Council members selected five finalists who were called to the May 17 meeting for final selections.

The selection process commenced and three of the five finalists were awarded the marijuana permits.

Ortiz, Sanabria, and Macias voted for the same three companies out of their five choices.

And all three companies they approved had strong ties to co-defendants C4Ever and MJIC.

A Web of Conflicts Ignored by Council

The C4Ever Strand

C4Ever’s principal owners at the time were Michael Tuccelli-Margolin and Gregg Hodge. The company’s website lists its address as 22600 Lambert Rd., Suite 707-A, Lake Forest.

HMG-CN traveled to the office and found a different company name on the door at the 22600 Lambert Rd. address.

 

C4Ever’s office address at 22600 Lambert Rd Suite 707-A did not exist. 

 

HMG-CN called the number on C4Ever’s website, reached a gentleman named “Bill,” and inquired about the address.

Bill, who could be VP of Sales Bill St. Clair as listed on the website said, “oh is that the address on the website? We moved to 14 Orchard Rd. in Lake Forest.”

The Horowitz and Armstrong Strand

C4Ever is represented by Larry Horowitz of Horowitz and Armstrong (H&A), a law firm who’s address is the same as C4Ever’s “new address” on Orchard Road.

C4Ever’s website lists H&A Principal John Armstrong as the company’s legal counsel. Mr. Armstrong also sits on the Board of C4Ever.

The MJIC Strand

The other company listed as a co-defendant is MJIC who’s CEO is Sturges Karban, a 40-year-old Harvard graduate who has invested $10 million of his own money in “the space” as he calls it.

MJIC’s articles of incorporation were filed by Larry Horowitz who is the agent of service at the same Orchard Rd. address.

Finally, Mr. Horowitz serves as Chairman of the Board of MJIC.

All Strands Connect to the Permit Winners

The first permit was given to Natural Compassionate Center, who’s applicant was Michael Schenone. NCC was represented at the Council meeting by Tuccelli-Margolin, current VP of Operations for C4Ever.

NCC’s articles of incorporation were filed by Josef Bobek on April 22, 2016.

According to the complaint, Josef Bobek III held ownership interest in C4Ever in 2015 along with Horowitz, Hodges and Tuccelli-Margolin.

The address on the articles of incorporation for NCC is 578 Washington, Suite 528, Marina Del Rey, California. An internet search and phone call confirmed that address is a UPS store.

Overriding all other conflicts, NCC’s application should have been denied immediately, the contact information on the application was not redacted as required by the Ordinance.

The next permit was awarded to Goodness for Life (GFL), who’s applicant was Robert Hodge. The lawsuit alleges that Robert is the brother of Greg Hodge who is the current CEO of C4Ever.

According to the California Secretary of State’s website, articles of incorporation for GFL were filed April 8, 2016, just days after the Ordinance was approved.

The articles were filed by an attorney who works for Larry Horowitz (H&A) using the same address on Orchard Rd. as C4Ever and MJIC.

Once again, in blatant violation of the Ordinance, the contact information on the application was not redacted and should have been denied immediately.

The third permit was awarded to United Health and Care Center (UHCC), who’s applicant was Vibha C. Patel.

Patel was represented at the Council meeting by none other than Larry Horowitz (H&A) who was also listed as legal counsel in UHCC’s application.

Similar to GFL, the California Secretary of State’s website showed that the articles of incorporation for UHCC were filed April 8, 2016, by the same H&A employee.

The employee evidently filed the articles for GFL and UHCC at the same window: the corporate number for GFL was C3892716; UHCC’s was next in line at C3892717.

The group blatantly used the same corporate address on Orchard Rd. used by C4Ever, MJIC, and GFL.

Once again, in complete violation of the Ordinance, the contact information on the application was not redacted and should have been denied immediately.

In the end, C4Ever, Macias, Ortiz, and Sanabria stood to make the most money off the permits, and C4Ever represented the three winning applicants.

Tuccelli-Margolin represented NCC; Robert Hodge represented GFL; Horowitz represented UHCC.

Sources are telling HMG-CN that if Ortiz, Sanabria, and Macias had allowed Council Staff review written into the Ordinance, the conflicts of interest would have been discovered.

But the three were “very influential” in the drafting of the Ordinance and the conflicts were subsequently disregarded.

The complaint sought a temporary restraining order, a permanent injunction on the enforcement of the Ordinance, and punitive damages.

Apparently, once the heat was turned up and a trail was nearing, the parties “stipulated.”

In April of this year, MJIC, C4Eversystems, GFL, Robert Hodge, NCC, Vibha Patel, Michael Schenone, Mike Patel, and UHCC agreed to settle their disputes as alleged in the lawsuit.

The group agreed that the dismissal “does not constitute an admission by the defendants regarding the allegations.”

In May of this year, the same parties agreed to dismiss the fraud charges in the same manner. Defendants Ortiz, Macias, Sananbria, and the CIty agreed that the dismissal “does not constitute an admission by the defendants regarding the allegations.”

A recent court ruling gave a victory to DR Welch finding that the Ordinance regulating the application process for the City’s marijuana business permits violated the constitutional rights of all citizens and businesses that applied for a permit in 2016.

Both parties will now submit a joint brief on the ruling and the remaining issues in the case.

On Tuesday HMG-CN spoke to John Armstrong who refuted the story. Armstrong told HMG-CN, “Essentially, after completing extensive discovery, there was no admissible evidence supporting the allegations in the Complaint regarding fraud, bribery, or conspiracy. As a consequence, to avoid sanctions, the Welch law firm dismissed all the fraud, bribery, and conspiracy claims, leaving only its claim for alleged 1st Amendment Violations against only the City of Huntington Park. The City had enacted an ordinance imposing a complete ban on all lobbying activities during the cannabis review and application process. The federal district court ruled that this content ban violated all applicants’ 1st Amendment speech and lobbying rights. That is the only claim remaining in the case.”

In response to this article the City released the following statement, asserting the allegations were “dismissed,” when the parties stipulated, or agreed, to walk away from the lawsuit while not admitting guilt regarding any of the the allegations.

Statement by the Huntington Park City Attorney: 

HUNTINGTON PARK (July 9, 2018)City Attorney Arnold Alvarez-Glasman made the following statement in response to the status of the lawsuit against the City and members of the City Council:

“The City is incredibly pleased with the Court’s ruling dismissing the claims against the City and members of the City Council,”stated Alvarez-Glasman.

The Judge ruled in favor of all members of the City Council in the lawsuit filed against Council dismissing claims filed by Mkay and those parties attempting to overturn the City’s ordinance regulating medicinal cannabis dispensaries. City Attorney indicated that “the Court upheld the City’s ordinance in every respect except for one minor section that prohibited medical cannabis operators from lobbying the City Council in an effort to influence the award of licenses to operate legal businesses within the City.”

This is significant victory for the City and the process of evaluating cannabis operations permitted by law.

The approach adopted by the City of Huntington Park is the smart and fair way to regulate the Medical Cannabis industry in our community, while ensuring the safety of our residents.

In 2016, the city developed and passed its own common-sense framework to transition the unregulated cannabis market to the Medical Cannabis marketplace. The city council voted for a legal structure for medicinal cannabis licenses that are regulated and taxed in order to fund vital public services. During the application process, city staff judiciously reviewed all proposed applicants to ensure that each comply with City and State laws. Our primary priority is to protect our residents and to ensure that the applicants conduct their businesses safely and by the letter of the law.

The regulation of the Medical Cannabis Industry has been a win for our community thereby creating new avenues to address vital public services, including police, homelessness and to remedy illegal dumping which threatens public health.

For more information, please visit the City’s website at www.hpca.gov/

Click here to see complaint.

 

 

 

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La Palma CC tables cannabis farms. Many credit unions are investing in cannibas, many wineries are converting to cannabis hot house.

www.ocregister.com/2018/06/27/la-palma-city-council-drops-idea-of-allowing-some-marijuana-related-businesses/