Las Vegas Sun

October 22, 2019

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In testimony, ex-tax department boss defends cannabis-licensing practices

The former director of the Nevada Department of Taxation on Thursday defended the division’s process for selecting recipients of retail cannabis licenses in 2018.

Deonne Contine said during the 13th day of a hearing over a marijuana licensing injunction that she and her employees took the appropriate steps to lay the groundwork to find the most deserving license applicants. 

Among other practices, she defended the use of a provision that called for background checks only on owners of cannabis dispensaries who controlled 5% or more of a company.

“The whole idea behind the process was to balance public health and safety with the interests of the industry,” Contine said. “The goal was to keep a regulated, robust market and to not have potential for a black market.”

Her testimony is part of an ongoing hearing over the grievances of dozens of companies that were rejected for permits to open retail marijuana stores.

Several lawsuits contend the licensing process wasn't transparent and the state picked favored winners. Some maintain the process was unconstitutional, others seek financial damages. Some seek a do-over.

Contine — who left the tax department in January 2018 and now heads the state’s Department of Administration — testified that it wouldn’t have been “practical” for the department to background check all owners. 

She offered an example of a possible part-owner of a dispensary “in Ohio who might own 0.5 percent” of a company.

Plaintiff attorney Will Kemp was particularly interested in Contine’s example during his questioning. He wondered why the 5% figure was chosen and where it came from.

“Under 5% is a relatively low amount of ownership,” Contine said. “They’re not making decisions. They don’t have enough influence over what’s happening. That was the analysis.”

In 2016, Nevada voters affirmed Question 2, which effectively legalized use of recreational marijuana in the state. Kemp suggested that the ballot question called for all owners of a company to be backgrounded, not a specific percentage.  

Throughout her testimony Thursday, Contine stood by her former department’s role in creating the regulations for retail licensing, though she did say she wasn’t involved in the creation of the actual applications. 

She also emphasized the role of a task force appointed to help with the process and pointed out that a legislative body was charged with approving an administrative code the tax department put forth to apply state marijuana laws. 

“Everything was discussed extensively,” Contine said. “There was a strong consensus for a workable, reasonable, legal set of rules. There were plenty of public avenues to voice concerns and have your voice heard.”

Lawyers for the group of plaintiffs filed an injunction last month with hopes of bringing the state’s recreational cannabis licensing process to a halt. Last year, the state approved about five-dozen conditional retail cannabis licenses out of a pool of 461.

The sides are battling over a lot of money as, from July through March, recreational and medical marijuana sales in Nevada totaled $464 million. For March alone, $59.7 million in marijuana sales were recorded, according to the state.

The hearing is scheduled to resume Friday. Clark County District Judge Elizabeth Gonzalez said it’s possible the hearing could conclude late next week. Gonzalez will decide the fate of the injunction.

Sun publisher Brian Greenspun was part owner of Essence, one of the defendants in this case.