Cannabiz Law Blog

“He can run, but he can’t hide.”

Joe Louis

Recent developments in decisions and regulatory requirements for licensing for medical cannabis businesses in Michigan drive home the point that candor and full disclosure is your best option. Failure to be transparent, even about items that you may think have long since passed human and bureaucratic memory, may result in the denial or delay of a medical cannabis license.

Michigan has adopted a two-step process for qualifying for a cannabis license under the Michigan Medical Marihuana Facilities Licensing Act (MMFLA): (1) prequalification for an applicant and supplemental applicants (i.e., individuals with direct or indirect ownership interests) and (2) license qualification for the actual physical location of the operation, which also requires confirmation of the local government’s approval for the operation.

On March 22, Michigan’s Medical Marihuana Licensing Board (board) conducted its regularly scheduled meeting. On the agenda for that meeting, the board anticipated considering two prequalification applications. The board failed to approve either application.

Reports of the March 22 board meeting included the disclosure that as of March 21, the Michigan Bureau of Medical Marihuana Regulation (BMMR), which is responsible for overseeing medical cannabis regulation in Michigan, received 411 prequalification applications. Yet, despite the large number of prequalification applications, the board was only considering two prequalification applications. As of this date, the board has approved no prequalification application.

According to news reports, the applicants, one seeking a transporter license and the other a provisioning center, failed to obtain the board’s approval because both had prior criminal matters that they had failed to disclose, but were uncovered during the criminal background check. One was a misdemeanor cannabis possession charge that had been expunged and the other was a 20-year-old misdemeanor charge.

Michigan issued emergency rules for complying with the MMFLA. Rule 4 provides that the applicant must answer all the questions in the application and that an applicant’s failure to comply with this requirement is grounds for denial. If additional information is required, the board may delay a decision on the application while the applicant provides the requested information.

Rule 5 requires that the applicant provide “full” criminal history background information. By “full,” as explained in an advisory bulletin, an applicant must include all criminal background information, “regardless of whether the offense has been reversed on appeal, reduced, expunged, set aside, pardoned or otherwise.”

Often people think that crimes for which they may been charged are undiscoverable. That is likely an incorrect assumption. That includes items that have been expunged. While having a record expunged may mean that the public has no access to one’s criminal record, it may appear in a detailed criminal history check.

So, what kind of criminal history is the board looking for? Well, it is not looking for parking, jaywalking or speeding tickets. Instead, if the offense related to felony criminal offense or a misdemeanor that involved any controlled substance or is related to dishonesty, theft, or fraud, the applicant must disclose.

In March, the Michigan Department of Licensing and Regulatory Affairs (LARA) changed the criminal disclosure forms (Disclosure 7 and Disclosure 7SA) in the application package. The old forms provided that if you answered “no” to the top part of the form, you need not continue to the lower part of the form. The new form now requires completion of the entire disclosure form, including disclosure if the applicant was arrested, but not charged. An applicant should confirm that it is completing the new form, rather than the old one, and that if it has a pending application, that it supplements it with a completed new form.

In addition to complete disclosure, LARA also requests the following: evidence regarding all charges and the results of those charges (i.e., dismissal, conviction, expungement, etc.) and copies of any parole or probation information.

One should disclose everything, even if they think that the information will not come up in a criminal background check – they should assume that it will. Engaging in philosophical debates about whether a particular offense fits the definition is also irrelevant, as one is risking the approval of an application and the costs of completing and submitting the application. It is very likely that the nature of the offense will not be fatal to an application, but a failure to disclose most certainly will be.

If there remains any doubt, the instructions to the criminal disclosure section of the prequalification application state: “It is in the applicant’s best interest to disclose information about which the applicant is uncertain should be disclosed.” The board’s recent application decisions give great weight to that statement.