Pay-to-play and political favoritism allegations persist in San Bernardino’s cannabis license approval process

Before he operated two pharmaceutical research and development labs in Redlands, Majid Seraj worked as a senior pharmacist at Loma Linda University Medical Center, where he managed the hospital pharmacy, enforced its narcotics policies and helped shape new ones.

“Majid is highly intelligent, organized, and diligent. I would consider him an expert in the field of pharmacy, analytical chemistry, and sterile compounding,” wrote Ronald Moore, director of pharmacy services at Loma Linda Children’s Health, in a letter of recommendation on behalf of Seraj last April. “Very few hospital pharmacists have his unique expertise and skill sets.”

That glowing letter was submitted with Seraj’s application to the city of San Bernardino for a commercial cannabis permit to operate a lab on East Drake Drive. He was stunned when the City Council rejected his application on Feb. 21, but granted permits to 16 other applicants, some of which were less qualified and not even in compliance with the city code or General Plan.

Two of the approved applicants, including former San Bernardino Councilwoman Wendy McCammack’s Central Avenue Nursery, lacked health-care, scientific and business qualifications, and are planning to set up shop in close proximity to where Seraj wanted to open his lab.

“It was a fait accompli,” said Seraj, 50, who received his doctor of pharmacy degree from UC San Francisco in 1996 and also is the founder and CEO of Ascend Pharmaceuticals Inc. & Nexderm Inc. His role in the commercial cannabis industry would be to research, develop, test, and manufacture myriad cannabis-based pharmaceutical products.

Like many of the other applicants — 39 in all — Seraj believes the process was suspect. He, along with others — some of whom were quick to sue the city while others are contemplating legal action — allege corrupt practices and an unethical, sloppy, ranking system of prospective commercial cannabis operators during the application process.

“If the application process, and granting of licenses does not rise to the level of favoritism, cronyism, and corruption, it certainly rises to the level of extreme incompetence, and mismanagement,” said Seraj, who ranked 29th out of 39 applicants.

Pay-for-play alleged

Potential commercial cannabis operators smelled something afoul even before licenses were awarded. On Feb. 25, Washington LLC, whose CEO, Stephanie Smith, touts herself as California’s “cannabis landlord,” sued the city, alleging corrupt practices and a “pay-for-play” scheme. Washington LLC ranked at the bottom of the list of applicants.

The lawsuit alleges eight of the 16 businesses approved for licenses were in violation of the city’s Municipal Code or General Plan, and on Feb. 27, a Superior Court judge granted an injunction halting the licensing process for seven of the businesses. (The eighth company named in Washington LLC’s lawsuit did not receive a license.)

Another hearing is scheduled for Friday on the matter.

Washington LLC attorney Ben Eilenberg said more investigation is needed to uncover flaws in the permitting process.

“Either what has happened is run-of-the-mill corruption or every check and balance in the city of San Bernardino has failed,” he said. “Over half the licenses issued are illegal because they’re too close to sensitive uses like homes or conflict with the city’s General Plan.”

Four-phase process

Applicants went through four phases, with pay-as-you-go costs tied to each phase.

According to a 2018 resolution establishing application fees, those who pitched their businesses to the City Council last month would have paid an average of $8,000 to get there.

But certain commercial cannabis applicants said they paid big money to bring their applications before elected officials. Seraj said he paid $100,000, while Upland Realtor Christopher Kim, who owns a building at 4240 N. Hallmark Parkway, said he paid $200,000 to get his nephew’s application before city leaders.

Kim believes one reason Cannaporium’s license was denied is because he rejected a request by Mayor John Valdivia on Jan. 22 to help him clear his $50,000 campaign debt. The request came during Valdivia’s victory celebration at the Mission Inn in Riverside following his November election win in the mayor’s race over incumbent Carey Davis.

“(Valdivia) said, ‘I’m in debt $50,000 because of my campaign. If I could get your help to get that $50,000 paid back, I’d be grateful,’ ” Kim said. “My answer to him was, ‘John, people have promised me a lot of things and never delivered. I don’t want to do anything shady, but I’d be willing to donate $1,000 to you.’”

Valdivia’s campaign consultant, Chris Jones, said in an email Tuesday that under the new city charter, City Manager Andrea Miller and her staff — not the mayor — created the ranking for cannabis license applicants and made recommendations to the City Council on which licenses to approve.

“The mayor had nothing to do with determining these rankings or recommending licenses for approval,” Jones said.

As to Kim’s allegations, Jones said, “Mayor Valdivia had a significant campaign debt after his successful election and has asked many donors for contributions to help eliminate his debt. Mr. Kim is either misguided or corrupt if he believes that contributing money to elected officials somehow entitles him to favorable consideration on business licensing or any other city matter.”

Valdivia also said in a statement Tuesday that the city’s elected officials were not involved in the application and review process.

“The City Council awarded permits based on objective criteria and interviews summarized by city staff and reported to the Council. All applicants were provided an opportunity to be heard at the public hearing,” Valdivia said. “We understand that some applicants were disappointed they were not selected, but it’s unfortunate they have resorted to making baseless accusations.”

Miller declined to comment, other than to say the City Attorney’s Office is investigating claims made by the cannabis applicants. She is up for a performance evaluation by the City Council on Wednesday.

More litigation

On Friday, March 1, EEL Holdings, LLC., doing business as Connected Cannabis, sued the city, challenging its four-phase applicant selection process. The company ranked 26th on the list of 39 applicants. Like Washington LLC, the company argued several other applicants were in violation of city policy from the start, but were approved anyway.

To submit a commercial cannabis license application, businesses had to obtain zoning clearance from the Community Development Department verifying they would be at least 600 feet away from schools, parks, youth centers and other sensitive uses of land. Yet despite not receiving clearance, certain applicants — and eventual licensees — continued through the process, according to the lawsuit. One company even submitted its application two days after the filing deadline, the suit alleges.

“As a result,” the suit says, “applicants immediately began to question the credibility of the City’s selection process amid growing rumors and allegations of corruption, cronyism, political maneuvering, and the use of the process to score political points and to carry out political vendettas in and through the selection process.”

Elliot Lewis, a managing member at EEL Holdings, said the city was aware of the allegations roiling among the cannabis community for at least two weeks prior to the Feb. 21 council meeting, and should have put the brakes on the permit approvals to investigate.

“At minimum, they had a responsibility to investigate and they did not,” Lewis said. “The issue I have is they just ignored it. Everybody knew there were big allegations about score changes and about pay to play.”