As the City prepares to begin accepting Request For Proposal’s (RFP’s) for recreational cannabis dispensaries to open within city limits, larger cannabis corporations are reportedly attempting to use local names as a front for their RFP’s.
Although several local business owners have reportedly been approached by these companies, only one local businessman, David Horowitz of Horowitz Jewelers, was willing to speak with The Porterville Recorder on record about the offer that was made to him.
“When you put in an (RFP), there are points awarded based on certain issues,” said Horowitz. “A major issue for major points is that (the applicant) be a local person, who has a business license and who owns property in town. So, they are basically trying to make it (look like) it is the local guys (applying), but the problem is people have found a way to get around those rules. They approached me and offered me ten percent ownership if I would let them use my name on the contracts, but on paper I would be 100 percent liable.”
After being approached with this offer, Horowitz dug a little deeper into the legal side of it by calling his brother who’s an attorney in Fresno. His brother referred him to an attorney who specializes in setting up cannabis contracts, and she told Horowitz this situation is a problem throughout the state.
“The problem is, according to the attorney that I spoke with, the side contracts are not enforceable,” said Horowitz, referring to the contracts between the local party and the larger corporation, outside of the RFP’s. “So, I could steal the whole thing away from them if I wanted to technically, but she said the reason that you are seeing a lot of this is because a lot of the people who are in the industry and know what they are doing have records from before (marijuana) became legal, so they are not able to pass the background checks.
“(Instead), they approach somebody like me and make them an offer to give them a percentage of the company. This company said they have $1.5 million in start-up money. They are investors from LA, and they want to come in and make a bunch of money just after starting up. Then, once they’ve made they’re money, they want to try and sell (the business).They told me that they would be listed as my management firm (on the RFP), and they would manage everything that way they would have all of the control.
“The other problem I was told by the attorney was that you can’t just sell a marijuana business like any other business. It doesn’t work that way because then the new buyers would have to go through the background checks and clear everything first. So they couldn’t just sell it because they don’t know if the new buyer will pass a background check. The attorney said its very difficult to sell (cannabis businesses).”
When the City Council approved the establishment of recreational cannabis dispensaries in Porterville, it did it with the intent to keep money spent at those dispensaries local to Porterville. However, if larger businesses are attempting to use local names as a front on their RFP’s, this thwarts the Council’s intentions of keeping local money circulating locally, as the larger businesses could take the money spent in Porterville out of the area.
“If we are going to do this, let’s let somebody who has got money invested in the community make that money because they are going to turn around and reinvest it in to the community, whereas this investment group that approached me, all they want to do is draw money out of the area,” said Horowitz. “It is a big money making situation. These clients make a lot of money for whoever the owner is, but they’ve got some risk involved. But a local guy who puts money back into the community, those are the guys we want doing that. They’re going to do it right because they are a part of the community and they live here.”
Horowitz was unsure of how many other local business owners had been approached with the offer, but he was certain he wasn’t the only one.
“I don’t know how many other people they approached, but I know I’m not the only one,” said Horowitz. “I also know they probably aren’t the only company to approach people.”
When asked if he was going to accept the offer or if he thought it would be a good idea to move forward with the offer, he simply replied no and the risk involved was much greater than the potential end reward.
“When I spoke with the attorney, she told me it wasn’t the right thing to do,” said Horowitz. “I said I don’t want to be involved. If it’s illegal, that’s not good. I opted out of it. I didn’t want to do anything that would put me at risk.”