Tony Cook

tony.cook@indystar.com

Long before Indiana’s controversial vaping law drew the attention of the FBI, a powerful Republican committee chairman had a similar piece of legislation drawn up.

Like the vaping law, it included specific requirements that likely would have allowed a single security company — Lafayette-based Mulhaupt’s Inc. — to secure a lucrative role as the gatekeeper for an entire industry.

This earlier legislation, however, didn’t involve the e-liquid used in electronic smoking devices.

It involved marijuana.

Out sourcing: Early retirements at Carrier could save some jobs

Deep concern: Are voucher students improving?

History makers: Crispus Attucks' state title is 'bigger than basketball'

Drafted in 2013, the measure would have legalized medical marijuana in Indiana and required the state to select a single security contractor to license dispensaries, distributors and manufacturers. The required qualifications for that security contractor were so narrowly written that an expert in the security industry says it is unlikely that any company other than Mulhaupt’s would have qualified.

But that’s not the only link between the marijuana and vaping measures.

The lawmaker who had the medical marijuana legislation drafted, then-Senate Judiciary Chairman Brent Steele, was later hired as the executive director of the newly formed Vapor Association of Indiana, which represents Mulhaupt’s and the few e-liquid makers it has approved.

Steele and Mulhaupt’s owner Doug Mulhaupt did not return multiple messages from IndyStar for this story.

Steele said in December that his new job is unrelated to his votes in favor of the e-liquid law and that he isn't opposed to lawmakers allowing more competition.

Last summer, Mulhaupt said he didn't know until very recently that his security firm was the only one to qualify as a security provider for the vaping industry and that his company never lobbied for the vaping law.

Steele never filed the marijuana legislation and it was never made public, but now it is raising concerns about a possible link between the e-liquid law and what some believe is a secretive behind-the-scenes effort to legalize marijuana and corner that potentially massive new market.

Among the difficult-to-answer but important questions it raises: Was the real purpose of the controversial security provisions in the e-liquid bill to create a ready-made framework for legalizing medical marijuana? Was the true intent of both measures to create a lucrative monopoly for Mulhaupt's? And if so, why?

Legislative leaders concerned

Among those concerned are the Republican-controlled legislature's top two lawmakers: Senate President Pro Tempore David Long and House Speaker Brian Bosma.

Both leaders said they were unaware of Steele's legislation but acknowledged they've been worried about a possible marijuana connection for months amid rampant speculation at the Statehouse. They said the rumors came to the fore after the 2016 vapor law was passed and were an important factor in their decision to prioritize changes to the law this year.

"I heard it enough that it put up the hair on the back of my neck," Long said. "And that’s what really bothered me — that something like that could be going on and I just want to make sure nothing like that happens."

Long, R-Fort Wayne, said Steele's legislation represented additional evidence that the connection was real.

“Having not talked to Sen. Steele, I don’t know where it came from. But it has some uncomfortable similarities. That is obvious,” he said. “I have to say, I have not seen that language anywhere else.”

Bosma, R-Indianapolis, said his concerns were "buttressed" by an encounter with a fellow lawmaker over the summer.

"Some other legislator had toured a marijuana facility in Colorado as part of an exchange of some sort and came back and reported to me that the security was virtually identical to the e-liquid facilities here," Bosma said. "So that obviously raised a significant flag. It’s one of the reasons that both Sen. Long and I have indicated that the revocation of those provisions are a priority for this legislative session."

Both Bosma and Long oppose the legalization of marijuana, even for medical purposes.

Interest in marijuana

Steele, on the other hand, has been one of few the Republicans in the General Assembly to show an interest in easing marijuana restrictions. As a committee chairman in 2011, he allowed debate on a bill that would have created a study of marijuana legalization. The following year, he called for making the possession of small amounts of marijuana an infraction with a $500 penalty rather than a misdemeanor with a penalty of up to $5,000 and a year in jail.

Steele didn't sponsor the vaping legislation, but he consistently voted for it in 2015 and 2016 before retiring last year. The resulting law’s specific security firm requirements effectively made Mulhaupt’s the gatekeeper of the burgeoning industry.

Mulhaupt’s agreed to work with only six e-liquid manufacturers, forcing scores of businesses to close or stop doing business in Indiana. Meanwhile, prices shot up dramatically and the FBI launched an investigation to determine if there was any wrongdoing associated with the law’s creation. The FBI has declined to comment on the status, scope or targets of that investigation.

The security firm requirements in Steele’s earlier medical marijuana legislation are not exactly the same as the ones in the vaping law, but they likely would have had the same effect. In both cases, Mulhaupt's unique blend of work as a locksmith, security firm and overhead door company appears to have made it uniquely qualified.

The vaping law required a pair of obscure trade association accreditations, and the marijuana measure would have required the security firm to be engaged in work that meets seven specific North American Industry Classification System Codes. They include the codes for locksmiths, security system services, building material dealers, wired telecommunications carriers and lumber, plywood, millwork, and wood panel merchant wholesalers.

Bill Nelson, an officer with the Indiana Electronic Security Association, couldn’t think of any security company that would meet the medical marijuana legislation's security specifications — with one exception.

“It almost sounds like that would eliminate everyone, but Mulhaupt’s with their door company could probably qualify,” he said. “Mulhaupt’s would possibly be the only one that would qualify.”

The legislation could have put Mulhaupt's in the center of a huge new industry potentially worth billions of dollars.

Sen. Karen Tallian, D-Portage, who has consistently advocated for decriminalizing marijuana, said she recalled talking to Steele about medical marijuana legislation, though she didn't recall the security firm aspect of the proposed bill. She said the election of Gov. Mike Pence, a stalwart social conservative, may have slammed the door on any plans to formally file the bill.

But many people — including Long and Bosma — wondered if the more recent e-liquid legislation that lawmakers passed under the auspices of protecting consumers could be used as a framework for the legalization of marijuana. Several other states that have legalized medical marijuana in recent years, including Ohio, New York and Minnesota, still prohibit the smoking of marijuana plant material even for medical purposes. But they do allow it to be smoked in vapor form.

After the FBI launched an investigation into the creation of Indiana's law last summer, Long became so concerned about a marijuana connection that he ordered Senate attorneys to conduct what he characterized as a “deep dive” to make sure lawmakers hadn’t inadvertently opened a back door to marijuana.

Long said his legal team doesn't think the e-liquid law would allow such a scenario without additional legislative or administrative action. But he acknowledged that with Indiana’s unusually strict e-liquid regulations and the ability of a single company to determine who gets licenses, it would be easy for a select few business interests to capitalize on medical marijuana with just a small tweak to the existing law.

"That’s never going to happen in our state," he said. "Not under my watch."

Business lost

Those who were shut out of Indiana's vaping market expressed anger when told about Steele's medical marijuana legislation. Although rumors of a marijuana connection to the e-liquid law had been widely circulated, they saw Steele's measure as evidence that their industry had been ravaged for no reason.

“If you wanted to go after the marijuana industry, go for it. But why did we have to get dragged into it?” said Amy Lane, who represents about a dozen vapor manufacturers and shops as president of the Indiana Smoke-Free Alliance. “We are collateral damage of this whole scheme and it’s a shame.”

Evan McMahon, a vaping business owner who runs an association opposed to the e-liquid law, said the potential link to marijuana is ironic because many supporters of the law argued it was a way to discourage electronic smoking devices from being used with illegal drugs.

“We keep hearing the e-liquid law was all about public safety and preventing drug use,” he said. “It would be very hypocritical if the real reason behind the law was a backdoor to marijuana legalization.”

Still, McMahon and other opponents of the vaping law are encouraged that the Senate recently passed a measure that would get rid of the security firm requirements and open up the market again. They were also bolstered by a federal appeals court decision that found parts of the law unconstitutional.

But they may face challenges in the House, where some key Republicans have not been as enthusiastic about changing the law.

Changes coming

Rep. Kevin Mahan, R-Hartford City, who carried the initial vaping legislation in 2015, said he wants to make sure any revisions do not compromise product safety.

“At the end of the day, it’s like any other piece of legislation — there’s winners and there’s losers,” he said. “I think it’s very sad when we’ve reached the point to where if things don’t go your way, we’re just going to go the FBI and make allegations.”

Mahan said he was unaware of Steele's marijuana-related legislation and never spoke to him about it.

As for the security firm language in his own bill, Mahan said he never spoke with anyone from Mulhaupt's about the legislation until last year, long after it had passed. He said he consulted many people about the bill, including an attorney who was later hired by Mulhaupt's, but couldn't pinpoint the source of the security firm language.

"I can’t honestly say for sure," he said. "Who wrote it? I don’t know."

Mahan filed a bill this year that included some changes to the e-liquid law and still would have restricted the number of licenses to 10. But he said he decided not to push the measure once it became clear that Long and other leaders in the Senate would prioritize their own, far more sweeping reform bill.

That measure got its first committee hearing in the House on Wednesday. Although no members of the public opposed the changes, several lawmakers questioned whether it went too far in rolling back regulations.

Long said his chamber remains intent on fixing the law and will work to oppose any "backsliding" in the House.

“For me, to protect the integrity of the legislature is very important. It’s one of the things I take pride in,” he said. “That’s my goal. I think we’re going to accomplish that with Senate Bill 1. It requires vigilance.”

Bosma said Long "is not the only person who is going to be vigilant about it."

"My direction to the group working on the bill in the House is to eliminate the monopoly, focus on consumer protection and to make the security measures, if any are required, extremely reasonable and appropriate for e-liquids — and nothing else."

IndyStar reporters Tim Evans and Mark Alesia contributed to this story.

Call IndyStar reporter Tony Cook at (317) 444-6081. Follow him on Twitter and Facebook.