U.S. Attorney's Office Investigating Salem Marijuana Contracts

SALEM, MA — The U.S. Attorney's office asked Salem and other Massachusetts communities to turn over documents related to the host community agreements they signed with marijuana retailers as part of a federal grand jury inquiry. The investigation is an effort by federal prosecutors to crack down on potential corruption at the local level in the state's newly-legalized recreational marijuana industry.

"We are fully cooperating with this request and have been in communication with the U.S Attorney’s team to coordinate the compilation of the requested records," Dominick Pangallo, chief of staff for Mayor Kim Driscoll, said in a statement. "We strongly believe that we have engaged in a fair, open and professional process with respect to medical and recreational cannabis facilities in the City of Salem and are working to provide this information and respond to this request."

The host community agreements need to be signed by the retailers and the city they want to locate in as a step in the process towards getting a state license to sell recreational cannabis. The agreements have been controversial, as they typically require the retailer to make payments to the host community.

State law is murky on what is and is not acceptable. The state says municipalities can only collect up to three percent of revenue for five years, and that those receipts need to be related to the direct costs associated with hosting the stores. But communities have argued the law does not prevent them from collecting separate fees or requiring the retailers to make donations.

In Salem, for example, recreational cannabis stores pay a three percent local tax on all local sales but have also combined to pledge to donate more than $250,000 to local nonprofits. Critics say those upfront payments combined with the high legal and consulting fees needed to secure licensing are stacking the deck in favor of big, corporate players in the state's cannabis industry.

Ward 5 City Councilor Josh Turiel, who was city council's appointee to the committee that reviewed the host agreements, said in a Facebook post late Monday that he would not discuss particulars of the agreements or the federal investigation because they contained private business information.

"I will say that if the federal inquiries into agreements include Salem's work I'm looking forward to it all," Turiel wrote. "I read all the proposals, gave my thoughts on what I believed were the strongest ones as input along with a number of other people, and that input was part of what the mayor used to make a judgment on what four companies would get host agreements."

Turiel's post said that an executive of one of the companies Salem passed over had made comments on his Facebook page accusing him of corruption. The "head of the marijuana company that is suing the city after being refused a host agreement has been coming on this page periodically to accuse me of corruption," Turiel wrote. "Tonight I banned him from the page. This will keep everyone involved out of trouble, and probably make both the city solicitor and his private attorney happy."

In Salem, Mederi filed a lawsuit in December claiming the state Cannabis Control Commission — not municipalities — have the authority on which businesses get licenses. While Mederi received zoning approval, the city notified the company in early December it would not be invited to negotiate a host community grant with the city.

A spokesperson for the U.S. Attorney's office declined comment Tuesday. But the Boston Globe reported that the office is seeking a wide range of documents related to the agreements, including unsigned drafts of the agreements, emails and other communications between officials and the applicant, as well as among officials, documents about municipal employees trying to secure marijuana retailers or who have gone on to work in the industry and minutes from meetings where host agreements were discussed.

The probe is far-reaching. The newspaper said Great Barrington, Eastham, Leicester, Newton, Northampton, and Uxbridge have all received the subpoenas, and that there are likely other communities being asked to turn over the documents.

In September, the U.S. Attorney's office charged Fall River Mayor Jasiel Correia with extorting marijuana vendors for more than $600,000 to secure a host city agreement. Federal prosecutors said at one point he accepted $75,000 in the backseat of a car for the letter of non-opposition one retailer needed for their state license.

Dave Copeland writes for Patch and can be reached at dave.copeland@patch.com or by calling 617-433-7851. Follow him on Twitter (@CopeWrites) and Facebook (/copewrites).