Shell from p 13 to take advantage of applicants.” The contract that Piña’s son signed, with a shell company called “Social Partners, LLC,” directs a third-party management company to siphon out all of the company’s profits, should he win a license. Under the agreement, which one industry attorney criticized as “deeply predatory,” the Piña family would be given a $50,000 payout for a business likely worth millions. Despite his status as owner, Piña’s son would receive none of the business’s annual revenue. Looking back, Piña said she feels like she and her family were taken advantage of. New Times agreed not to name Piña’s son, who signed a non-disclosure agree- ment as part of his application. But New Times did review months of text messages, contracts, and other documents related to his case. “I want the state to know that the Wolf of Wall Street is in Maryvale, targeting low- income families,” Piña said. Opportunity of a Lifetime It was October when Mary Piña was first approached by a social equity investor. Piña remembers that initial conversa- tion was with Susana Espinoza, who said she was working with an investor at Social Partners. “The family suffered at the time [of her son’s charge],” Piña recalled Espinoza telling her. “You were worried about your son.” The license, she said, could fix that. According to text messages and Piña’s account of the process, Espinoza was working as an intermediary for an investor interested in a license, recruiting people in west Phoenix to submit applications. Reached by phone, Espinoza first claimed she had “nothing to do” with the social equity licenses. Pressed on the de- tails and the identity of her employer, how- ever, she said she had to speak with him first, and then ended the call and did not return further inquiries. At first, Piña said she was all-in. The of- fer was hard to pass up. Just for applying, members of her family, if they qualified, would each receive $500 cash — even if the family did not win the license. Also, the in- vestor’s lawyers would petition to have her son’s charge scrubbed from his record through the state’s new expungement pro- cess for low-level pot charges. And anyone who was granted a license 14 would get a $50,000 payout. For Piña, a single mother and renter, who still helps support her adult children, this kind of money would be life-changing, she said. Piña agreed to apply. As the weeks went on, though, Piña began to have doubts. She began receiving constant calls from Espinoza — multiple times a day, sometimes at seven or eight in the morning. Espinoza was asking for one piece of the application or another, warn- ing that if the investor didn’t get docu- ments on time, the family would be dropped from the application pool. Piña said she felt it was borderline “harass- ment.” Over several months, Piña provided her family’s fingerprints, tax information, and social security numbers to the investor’s attorneys. She herself didn’t enter the lot- tery because she was eventually told she didn’t qualify. But her son ultimately signed a 39-page contract, and his name was tossed into the pool. Piña was busy with work and with her family. She had little time to pause to read the documents she was signing — even less to call up a lawyer. Neither she nor her son had time to go through the training that the state had mandated for applicants. It provided education on the program’s details and ways to avoid deals with what the state called “predatory investors.” But no matter; the investor did it for them, Piña said. She now regrets not asking for an out- side legal opinion. “They knew who to target,” she said. “Because they know we have to work.” When she expressed doubts to Espinoza after all the paperwork was submitted with the state, the woman wrote back: “When do you or your family get an opportunity like this dangled in your faces?” The Lottery Pool Over the course of the fall, investors and companies interested in submitting a bid for the license went to great lengths to find families like Piña’s, who were qualified for the program based on their income, ZIP code, and prior pot charges. All of the 1,506 applications to the state lottery are fronted by a qualifying appli- cant, someone in Arizona who meets the state’s requirements of being “dispropor- tionately impacted” by the war on drugs. Each application is attached to a com- pany, which must be at least 51 percent owned by a qualified applicant. The other 49 percent of the company could be owned by anyone — an investor, a management company, or an applicant’s friend. At least 878 applicants are backed by a companies defeats the purpose of a social equity program. The mission, they say, should be to even the playing field in an industry already stacked against under- resourced communities. “The system is operating exactly how it was designed to, to be favorable toward already-existing industry players,” said Julie Gunnigle, an attorney and former political director for Arizona NORML. Still, she said, some of the numbers ana- lyzed by New Times were “shocking.” The cannabis companies involved in the process, however, say that their involve- ment gave applicants a chance they would not have had otherwise. “Most of the applicants [we worked with] were not even aware of the program, so it’s very unlikely any of them would have applied without our assistance,” said Devine, the Mohave Cannabis founder. New Times contacted multiple execu- Tom Carlson Acre 41’s Celeste Rodriguez “predicted everything that took place”with the social equity license program. major cannabis company or an outside in- vestment group, according to New Times’ analysis of corporate filings by companies that have entered the lottery. To analyze the applications, New Times looked at submissions that shared a busi- ness address, an agent, or principal in the company. The remaining 600 applications did not have clear ties to a single investor, based on Arizona Corporation Commis- sion filings. Some of the numbers posted by Arizona’s biggest cannabis companies — which already have recreational dispen- sary licenses — are significant. Mohave Cannabis Co., which now operates in three states, backed 368 applications. Copper- state Farms, which operates Sol Flower brand dispensaries across the state, backed another 110. Mint Cannabis was involved in 90 applications. These big cannabis companies took no measures to conceal the number of appli- cations they submitted to the lottery. In press releases for its program, Copperstate openly touted its efforts, saying that it had created a system that “gives social equity applicants a support system and the infra- structure to submit a strong dispensary application.” But other investors kept their identity from the public. One unknown investor or investment group submitted more than 200 applica- tions to the lottery, or around 14 percent of the pool. Its identity traces back to two shell companies registered at an address in Chey- enne, Wyoming, called “Helping Handz, LLC” and “Investing in the Future, LLC.” Cheyenne has been dubbed “a little Cayman Island on the Great Plains” due to the number of shell companies registered there. The limited state oversight of corpo- rate filings in Wyoming makes it an ideal state to register a business without divulg- ing its true ownership to the public. Critics say that the involvement of these tives with Copperstate Farms and the Mint by phone and email over the course of sev- eral weeks. Neither company returned any inquiries nor offered any comment. Companies found large numbers of willing applicants mostly with extensive advertising campaigns. They put up bill- boards, distributed flyers, and canvassed door-to-door. Copperstate Farms created an entire website — Your Bright Horizon — for its campaign, highlighting that it would assist applicants in expunging prior marijuana charges if they went through its social equity process. “We worked day and night reaching out to potential applicants,” said Devine, the owner of Mohave. “There wasn’t a magic button, just a ton of work. I met with and spoke to every applicant individually to discuss this program and opportunity.” Piña, meanwhile, still does not know the identity of the individual investor that worked with her family. The investor’s identity is well-con- cealed by a series of shell companies that dead-end in New Mexico. The true owner- ship is not reflected in corporate filings obtained by New Times. New Times did find, though, that the same investor had submitted another 76 entities — representing 38 separate appli- cants — into the lottery, securing a decent chance of winning at least one of the licenses. The state’s rules allowed each applicant to submit two bids. The vast majority did. This enabled applicants to double their odds of the big payout, but also meant the state could collect twice as many applica- tion fees. At $4,000 a pop. Rules of the Game When faced with criticism over corporate influence, defenders of the big cannabis companies have an easy scapegoat. Blame the rules. The rulemaking process dates to November 3, 2020. On that day, Proposi- tion 207 — the massive voter initiative that legalized recreational marijuana in Arizona — passed, clearing the way for the lucrative industry to take root in the state. A key provision of Prop. 207 >> p 17 FEB 24TH– MARCH 2ND, 2022 PHOENIX NEW TIMES | MUSIC | CAFE | FILM | CULTURE | NIGHT+DAY | FEATURE | NEWS | OPINION | FEEDBACK | CONTENTS | phoenixnewtimes.com
