COLUMBUS – Two companies are coming under fire for allegedly lying on their applications to sell medical marijuana in Ohio and violating rules for the state's highly regulated program.

The Ohio Board of Pharmacy, which oversees medical marijuana dispensaries, has concluded two companies violated state rules: Greenleaf Apothecaries LLC, which does business as The Botanist, and Harvest of Ohio LLC.

The board claims Greenleaf Apothecaries transferred ownership without state approval and/or misrepresented facts submitted with its dispensary application last year, according to portions of a board notice sent to the company obtained by The Enquirer through a public records request.

The company, which was awarded five dispensary licenses, announced in December 2018 it had a management agreement with big cannabis company Acreage Holdings, headquartered in New York. State rules prohibit ownership transfers until after one year of operation.

The board says Harvest of Ohio LLC does not meet the state's definition of an "economically disadvantaged group," as claimed on its application. The company was awarded three dispensary licenses and is an offshoot of Harvest Health and Recreation Inc., which operates in eight states.

The pharmacy board sent notices to both companies in early June, giving each the opportunity to make their case before the board at a future meeting.

Neither company will receive permission to open new dispensaries until the matter is resolved. Discipline from the board ranges from fines to revoking licenses.

Meanwhile, the pharmacy board reiterated the ownership rules to the dozens of other dispensary licensees that are still establishing their businesses. Only 19 of the state's 56 licensed dispensaries have opened since January.

Pharmacy board attorney Erin Reed said the agency has allowed dispensaries to make small changes in ownership for certain situations, such as adding a new employee with a financial interest in the company.

"Folks are coming to us with their challenges we're doing everything we can to help them work through it," Reed said. “We are certainly balancing the need to discipline against patient access."

Ownership change?

In December 2017, businesses submitted 376 applications for 60 available dispensary licenses across the state. They had to list on the application anyone with at least 1 percent ownership or equity in the company.

The pharmacy board is holding the businesses to their word – all have to comply with what they promised in that application, including financial interests. Pharmacy board rules prohibit big dispensary ownership changes, such as acquisitions, until the dispensary has been open for one year.

The first four dispensaries opened in mid-January, so any changes now, the board says, are premature.

The pharmacy board alleges Greenleaf Apothecaries violated state rules for ownership changes and/or gave false information on its applications. The pharmacy board detailed two violations in a letter sent to the company in June and obtained by The Enquirer through a public records request.

Acreage Holdings announced in a December 2018 press release it had a management agreement with Greenleaf Apothecaries, which had been awarded five dispensary provisional licenses.

The press release didn’t say how much “support” Acreage was providing. But a November 2018 filing with the U.S. Securities and Exchange Commission noted the company entered the agreement with Greenleaf Apothecaries and its related cultivation and processing companies on July 2, 2018.

Acreage agreed to loan the Greenleaf family of companies up to $8 million to build the cultivation facility, up to $5.5 million for processing and $10.5 million for five dispensaries. Acreage claimed it "owns or operates cannabis businesses in 14 states" including Ohio.

In exchange, Greenleaf agreed to sell all interests to Acreage, when allowed by the state.

In its annual report filed in April 2019, Acreage said it was providing "expertise, branding and design aesthetics, vendor relationships, and technical know-how" while Greenleaf maintains "operational control."

"The Company does not currently hold an equity or ownership interest in the licensed operators and will not do so ‎without first receiving necessary approvals from Ohio state regulators, including the Ohio Department of Commerce ‎and Ohio Board of Pharmacy," Acreage officials wrote in the report.

Greenleaf was issued certificates of operation for two of its Botanist stores in January and February. Three others are planned for Akron, Cleveland and Columbus.

Greenleaf disputes the board’s findings and says it can open the doors in Columbus, Akron and Cleveland within 48 hours of receiving state approval.

Tom Haren, an attorney for Greenleaf, said Greenleaf continues to own and operate its dispensaries and the company’s relationship with Acreage did not develop until after dispensary applications were submitted.

“Greenleaf is obviously frustrated by the board’s decision to issue these meritless notices, which have unnecessarily delayed the opening of three of the highest scoring dispensaries – in three of the state’s highest population centers – at a time when too many Ohio patients lack access to the medicine they need,” Haren said in a statement.

Acreage made state and national headlines last year when former U.S. House speaker and Ohio congressman John Boehner of West Chester joined its board of directors. It made headlines again when Canadian cannabis company Canopy Growth Corp. announced the right to buy Acreage for $3.4 billion once the U.S. legalizes marijuana.

Minority ownership claim

Arizona-based Harvest of Ohio LLC claimed in its applications that 51 percent of the company was owned by Ariane Kirkpatrick, an African-American businesswoman in Northeast Ohio. The addresses listed for Kirkpatrick and the other nine owners are for a business suite in Tempe, Arizona.

The company won licenses for dispensaries in Columbus, Athens and Beavercreek.

State law required 15 percent of all licenses to go to businesses majority-owned and operated by someone from one of several “economically disadvantaged” groups: African-Americans, American Indians, Hispanics or Latinos, or Asians. Harvest's minority-majority ownership meant the company was given preference over higher scoring applicants.

The law was struck down by a Franklin County court late last year.

Details of what the board's investigation found were not immediately made available to The Enquirer because investigations are confidential and conclusions presented in the notice sent last month are subject to trade secret.

Harvest filed a motion in court Wednesday to block the board from releasing the entire notice to The Enquirer. In a court briefing, Harvest claimed the notice contains confidential information about the company's "unique way of organizing an LLC" to qualify for the minority owned and controlled designation "with ownership that is only minimally from an economically disadvantaged group."

Portions of the letter released to The Enquirer show the board believes Harvest "committed fraud, misrepresentation, or deception in furnishing information" on its application.

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Kirkpatrick, reached by phone on Tuesday, was not aware of the pharmacy board’s notice that was sent in early June.

“That’s not accurate,” Kirkpatrick told The Enquirer. “This is probably the 10th ridiculous call I’ve received today.”

A Harvest corporate spokesman reached on Wednesday said the company is aware of the investigation and is working with state regulators to remedy any outstanding issues.

Kirkpatrick was also listed as the majority owner on Harvest application for cultivation, which are regulated by a different state agency, the Ohio Department of Commerce. Harvest was awarded one of 12 competitive large-scale cultivator licenses in November 2017 because of its minority ownership designation.

Commerce officials are still reviewing Harvest’s ownership, an agency spokeswoman told The Enquirer. Harvest announced in January it had also won a processing license to make marijuana-infused food, oil, lotions and other products.

But commerce has yet to award the provisional license because of the pending investigation.

More:Where are Ohio's medical marijuana dispensaries? Here's a map.

More:Where to find an Ohio doctor who can recommend medical marijuana

Jackie Borchardt is the Columbus Bureau Chief for The Cincinnati Enquirer. You can follow her on Twitter @JMBorchardt.