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L.A. Audit Found No Evidence of Bias or Unfairness During Latest Cannabis Retail Licensing Round

by Roger Tower on May 15, 2020
L.A. Audit Found No Evidence of Bias or Unfairness During Latest Cannabis Retail Licensing Round

After allegations of unfairness and corruption emerged during the latest round of retail cannabis licensing in Los Angeles last fall, the Department of Cannabis Regulations was ordered to suspend all application processing and perform a full audit by a third party company. Everything was put on hold since then. 

The results of the audit were published in late March. The audit, conducted by Sjoberg Evashenk Consulting, Inc., found that errors from the DCR allowed certain applicants early access to the application portal. 

According to the audit, the DCR took the proper steps to address this unfair advantage and determined that the licensing process was conducted in “good faith and that there was no evidence of bias or unfairness.” 

Richard H. Llewellyn, City Administrative Officer, recommended that the DCR complete the processing of Phase 3 Round 1 applications and begin the process required for Round II later this year. 

The auditor issued two recommendations for the DCR:

  1. Develop a new method to restrict user’s access to the application without deactivating accounts or resetting passwords.  
  2. Make the Accela platform available to users well in advance of future application windows to avoid confusion between the application window and the sign-on process.

DCR Recommendations 

The DCR responded with a series of recommendations designed to improve the next round of cannabis retail licensing applications and address some of the issues for Round 1 applicants. Some of the recommendations included: 

  • Establishing new eligibility and criteria for the Social Equity Program 
  • Changing the retail commercial cannabis activity application process to a lottery for eligible applicants for future application rounds. 
  • Giving priority processing to Round I applicants who submitted an application during the 14-day window and were deemed ineligible for further processing. 

The City Council still has to decide whether to adopt these new policy recommendations and there is no word yet as to when this might happen. 

Chaotic Retail Cannabis Licensing Application Round in Los Angeles 

Last September, when the DCR opened up the latest round of cannabis retail licensing applications, chaos ensued. With only 100 licenses available for hundreds of applicants on a first-come, first-served process, the DCR was flooded with applications right away. 

After word got out that some applicants were able to log onto the application software before the 10 a.m. launch time, LA Mayor, Eric Garcetti, ordered an independent audit to help determine whether to move forward and award the winning licenses or redo the application round. 

The DCR “normalized” the early applications by pushing them back to where they would have been if they hadn’t been able to login early. The audit determined that this normalization process was fair and found no evidence of unfair advantages. 

The audit acknowledged that communication from the DCR was unclear to applicants stating that “in some cases, the Department stated that the Application Window would open at 10:00 AM, and in other cases the Department stated that Applicants would be unable to sign on to the Accela portal until 10:00 AM.”

The entire experience has caused frustration among stakeholders, policymakers, as well as cannabis retail applicants in Los Angeles who have had to pause everything until further notice. 


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