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Maryland medical marijuana panel has not paid bill for processing applications

The Maryland Medical Cannabis Commission has paid $150,000 of the $2.6 million tab it rung up while scrambling to review a crush of applications to grow, process and dispense the drug.

A state audit released this week found the commission also circumvented state procurement safeguards designed to make sure it didn't overpay for reviewing the license applications, adding another voice to a chorus criticizing how the commission handled that process.

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The auditors found that as the commission dealt with three times more applications than expected, it agreed to pay Towson University's Regional Economic Studies Institute about 60 percent more per application than originally planned.

The price to review the 512 applications grew by as much as $1,335 each. The commission has yet to pay the bill for either the initial agreement or the expanded one.

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The commission's executive director, Patrick Jameson, said in an email that RESI did not present invoices with line-item specificity.

Because of that lack of detail, the commission has not paid the bill. Last year, Jameson publicly derided the process set up before his tenure as "too cumbersome" and "too expensive."

Daraius Irani, chief economist at RESI, said the $150,000 paid to date was for a separate cannabis commission initiative. RESI has not been compensated for work related to the applications, he said.

Irani said RESI paid all of the roughly two dozen subject experts hired to review the applications and had not been reimbursed. He declined to say how the institute, covered the expense or the impact of the outstanding bill.

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"Based on all of our prior discussions with the commission, we anticipate receiving the balance of the full amount that is owed to us," Irani said in an email.

Unlike most state agencies, the budget for the commission comes primarily from license fees paid by companies authorized to work in the industry, not tax dollars.

At least two lawsuits have been filed contesting the legality of the process the commission used to pick winning companies. The Legislative Black Caucus, meanwhile, has pressed for a special session of the General Assembly this summer to issue more licenses to firms led by African-Americans, who did not win preliminary licenses to grow cannabis in the first round of awards despite state law requiring the commission to consider racial diversity when picking preliminary winners.

Auditors with state's Office of Legislative Audits, as part of a routine review of the finances of several state panels under the state Department of Health and Mental Hygiene, critiqued how the process was set up and executed.

The audit even questioned the initial deal with RESI to oversee the review and ranking of the applications, saying a contract that large should have been competitively bid to guarantee the best prices. Instead, a memorandum of understanding was negotiated between the commission and Towson University.

Auditors said by splitting the deal into four smaller agreements, it allowed the commission to circumvent review by state budget managers. In response to the audit, commission officials denied they tried to circumvent the law.

In a formal response to the audit, the commission wrote that it "respectfully submits that state law permits the use of inter-agency agreements between state agencies."

In an email to The Baltimore Sun, Jameson wrote, "The commission is committed to the competitive procurement process."

Auditors revealed that the cannabis commission considered going through the standard procurement route, and even paid a consultant $29,000 to develop a "request for proposal" for bids on a licensing review system two years ago. It was never released.

Jameson told The Sun the commission is not required to release it because draft documents are exempt from public records laws. He said the commission decided not to use it and did not offer further explanation.

Auditors said the commission's method allowed it to bypass safeguards designed to make sure the state got the best deal. And when it underestimated interest in the nascent industry, the commission allowed RESI to renegotiate deals with the people hired to evaluate applications — an effort to incentivize them to work faster. That caused the per-application cost of review to increase.

Maryland's medical marijuana program is among the slowest in the country to get off the ground, and has been beset by political and legal delays. The commission expects the drug to be available to patients by this fall.

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An earlier version of this article quoted Thomas J. Barnickel III, the state's legislative auditor, saying that auditors could not find an RFP drafted by the Maryland Medical Cannabis Commission. Barnickel has since told The Baltimore Sun he was mistaken -- auditors did find the draft.

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