The Daily Agenda: The social equity scam

Who could have possibly seen this coming? ... Mark is popular in Yavapai County ... And Scott is definitely the evil twin.

When Arizonans voted to legalize recreational marijuana in 2020, a big part of the sales pitch from the dispensaries who crafted and funded Prop 207 was that the initiative would help reverse the decades of devastation that communities of color have suffered under the war on drugs. 

That messaging was out of necessity — and like many promises made on the campaign trail, it’s not working out the way voters had hoped. 

Specifically, Prop 207 promised to create a “social equity license” lottery “to promote the ownership and operation of marijuana establishments … by individuals from communities disproportionately impacted by the enforcement of previous marijuana laws.” 

As it turns out, those social equity licenses are primarily promoting the ownership and operation of marijuana establishments by wealthy, white weed kingpins in Arizona who already had a monopoly on the cash crop industry, as the Arizona Center for Investigative Reporting’s Natasha Yee laid bare in a report yesterday that detailed the experience of Denzel Mason, one of the winners of Arizona’s 26 social equity licenses.

After winning the weed lottery in April 2022, Mason spent 4/20, the international weed holiday, inside a courtroom this year as he attempted to defend himself from a lawsuit brought by Copperstate Farms, which is co-owned by Fife Symington IV, the son of the former governor. Spoiler alert: Mason lost that fight. (He’s considering an appeal.) 

Copperstate Farms kicked in about $400,000 to back Prop 207. The company is one of the largest weed distributors in the state, with a giant grow house in Snowflake and five dispensaries in Arizona operating under the banner of Sol Flower. And when Prop 207 passed, the company invested big in getting a piece of the additional 26 social equity licenses the proposition authorized through a program and series of companies it called “Your Bright Horizon.”

But as wealthy white men who have never been adversely impacted by our former draconian weed laws, the owners of Copperstate didn’t qualify for a social equity license themselves. Luckily, the rules around the licenses contained a clever loophole: Applicants can have business partners that own up to 49% of the business. And those business partners can buy them out.

Voters rejected a legalization measure in 2016, after Republican leaders and even pot consumers argued it was just a giveaway to dispensaries that would do nothing to right the wrongs of prohibition.

“This proposition is a massive, special-interest giveaway to a multi-million dollar industry. The marijuana industry wrote this ballot measure to benefit themselves,” Gov. Doug Ducey wrote in the 2016 publicity pamphlet. 

But when the dispensaries returned to voters with Prop 207 in 2020, they hadn’t significantly changed the initiative to address those concerns. 

Progressives threatened to oppose the legalization initiative unless dispensaries expanded provisions allowing expungement of criminal records and empowered communities of color by ensuring that some of the incredibly lucrative licenses would go to disadvantaged communities, instead of solely going to existing dispensaries. 

Dispensaries begrudgingly accepted, rewriting and refiling the initiative with the new expungement and social equity license provisions. 

But it was immediately clear they were still looking out for themselves. 

Dispensaries like Copperstate pumped millions into ensuring they would be the minority business partners of those who won licenses. In Copperstate’s case, they hired HighGround Public Affairs to launch a massive, multi-million dollar ground campaign. HighGround subcontracted the door-knocking to La Machine, a canvassing business owned by Tony Valdovinos¹, which has extensive experience canvassing in low-income neighborhoods, in an attempt to find people who would qualify. 

In fact, we wrote about that canvassing effort back in October 2021 because they kept knocking on our doors, offering to transform our lives by making us dispensary owners.  

But that offer came with a catch. In exchange for fronting the $4,000 fee to enter the social equity license lottery and the cost of opening a dispensary, Copperstate took 49% of the business from its partners that won. And more than that, they required applicants to sign an operating agreement stating they’d be responsible for all costs associated with Copperstate’s outreach to applicants. Besides owning dispensaries, Copperstate is mass-producer of marijuana, and under the agreement, all of its social equity license partners would have to buy their weed from Copperstate Farms.

Out of roughly 200 applications Copperstate submitted on behalf of applicants, three won, including Mason. That’s when Mason found out the operating agreement he signed left his new company on the hook for a previously undisclosed, massive, sum — one third of the cost of expenses for the HighGround/La Machine field campaign, not to mention the $4,000 Copperstate shelled out for each of the more than 200 applications it sponsored. 

Mason’s new business was $800,000 in debt to Copperstate on the day it won a license, not including any additional startup costs it might pay for the actual dispensary. Copperstate showed him a vague estimated profit/loss statement showing he would operate at a huge loss for at least two years. Then, during their very first meeting, Copperstate offered to buy Mason out for $2.4 million. The actual value of the social equity license was probably closer to $8 million, Yee reports. 

Mason, who hadn’t had his own lawyer throughout the process, went and found one. Then, Copperstate sued him, alleging he breached his contract with them by not signing the debt note, as required in the operating agreement he had signed. Copperstate won the case, and the court removed Mason as the manager of his own business in May, handing over control to Copperstate. Mason’s license is one of three shops it’s attempting to open in Tucson before the October deadline. 

We sat in on a few days of Mason’s trial in April and spoke with him about it afterwards at his lawyer’s office.² He struck us as the exact person you’d hope these license would end up with: He’s smart, capable, thoughtful. He’s an assistant manager of another dispensary, and he wants to own a dispensary, not sell the license to another corporate owner.

He’s had a rough life, and he wanted to use this lottery ticket to help lift other people out of their rough lives. He wanted to open a shop in his own neighborhood in south Phoenix, hire other people who have been casualties of the war on drugs (Mason had a minor possession charge on his record, which Copperstate helped him get expunged as part of his application process), and give back to the community with backpack drives and other volunteer and donation-based programs.

Now, Mason won’t be a part of his dispensary, at least not in any real sense. He’s still the majority owner of the company — he has so far refused to sell — but he won’t be involved in any decisions about how it runs. It’s a Copperstate operation. He’s just the name on the application.

Mason’s story highlights the predatory system dispensaries crafted and voters approved with Prop 207. He’s far from the only weed lottery winner to get hustled out of control of his business: Dispensaries have either bought out or forced out many of the applicant they paired with, the Arizona Center for Investigative Reporting found. 

And the problem was 100% foreseeable. First of all, it cost $4,000 to enter the weed lottery. No poor person affected by harsh marijuana laws has $4,000 to spend on the off chance that they could be one of 26 winners in a lottery that drew about 1,500 entries. And by definition, very few people in the target audience would have the resources to actually start a dispensary. That’s especially true considering social equity license holders have only until October, just 18 months from the original lottery drawing, to open their shops. If they don’t, they forfeit their licenses. 

Critics have long warned this is exactly what would happen.

Celestia Rodriguez, a ­principal at cannabis company Acre 41, sued the state over the program, arguing the rules “fail to ensure those 26 licenses will remain in the hands of individuals from disproportionately impacted communities after they’re issued.” The lawsuit was thrown out.

"We predicted everything that took place," she told the New Times in February of last year. 

But it didn’t take a psychic to see what was coming when voters approved Prop 207. The state offered social equity license winners no help — no financial assistance, no serious business training, no legal advice, no way to actually lift someone from poverty to dispensary owner, as the program pledged. 

Instead, that job largely fell to the dispensaries. They had the resources to front the money for applicants fees and startup costs and to help winners navigate the cutthroat world of legal weed dealing. In theory, it makes sense. But in the real world, it leads to the kind of legal bullying and exploitation Mason suffered. 

Arizona’s social equity license program was doomed to fail from the very beginning, and Mason’s case shows how the promise that the initiative’s backers sold of entrepreneurship for those affected by the drug war is slowly unraveling. 

Always keep them guessing: Former Pima County lawmaker Mark Finchem is searching for an office he can get elected to after losing the secretary of state’s race last year by the widest margin of any statewide Republican. Capitol Media Services’ Howie Fisher reports that after pulling papers to potentially run against Stephen Richer for Maricopa County recorder, Finchem has now filed a statement of interest to run for the state Senate in Legislative District 1 against former Secretary of State Ken Bennett, who the election fraud crowd views as a traitor for his rocky ride as the liaison between the state Senate and Cyber Ninjas during the audit. Data cruncher Sam Almy confirmed to us that Bennett’s Legislative District 1, which covers the Prescott area, gave Finchem his second-highest margin of victory in his failed statewide race last year. The only district that liked the idea of Finchem as secretary of state more was LD30, in Mohave County, where there are no RINOs like Bennett to challenge.  

Deny, divide and conquer: Fondomonte, the Saudi Arabian company at the center of the water-pumping controversy in northwestern Arizona, recently hired former APS lobbyist Chad Guzman to represent it. The disclosure piqued the interest of both the Yellow Sheet Report and the Republic because Guzman also owns a separate public affairs firm with Joe Wolf, the former campaign consultant and ongoing advisor to Gov. Katie Hobbs, though Wolf told the Republic that he has no involvement with the Saudi company personally. The Yellow Sheet Report and the Republic got into a war of tweets over who deserves credit for the story. 

Not a priority: Five months after abruptly firing everyone on the Arizona Mexico Commission, Hobbs still hasn’t appointed anyone to replace the ousted board members, Stacey Barchenger reports in the Republic. The Governor’s Office swears it’s interviewing applicants for the job, which is mostly meeting with businesspeople and doing roundtables anyway. 

Erratic means purple: Turning Point USA released its annual congressional rankings, declaring Arizona an “erratic state,” which is better than a “tyrannical state” but not as good as a “free state.” U.S. Sens. Mark Kelly and Krysten Sinema, and Reps. Raul Grijalva and Ruben Gallego are “tyrants” while Rep. Greg Stanton is “becoming tyrannical,” Reps. Juan Ciscomani, David Schweikert and Debbie Lesko are “losing freedom” and Reps. Andy Biggs, Eli Crane and Paul Gosar are “patriots.”

We could do a whole heat newsletter: Seven more people died from the heat in Maricopa County in the last week, bringing the confirmed number of heat deaths to 25 this year, the Washington Post reports. Another 249 potentially heat-related deaths are still under investigation. Separately, the Post pulled out some infrared cameras to analyze Phoenix’s new “cool pavement” coating, which reflects light and makes streets less hot. The county ordered 10 more refrigerated containers to store dead bodies, a tactic it employed during the pandemic, AZFamily’s Dennis Welch reports. And Laura Pyle, the warden of the Perryville Women’s Prison, resigned after 12News started investigating complaints from inmates and families that prison cells were hitting 100 degrees this month, as AC broke down. 

Bipartisanship isn’t dead: A bipartisan duo of state senators penned an op-ed in the Republic calling for more oversight and accountability at Arizona State Hospital, which does inpatient psychiatric care for people who are under court order for treatment, often in place of imprisonment. Republican T.J. Shope and Democrat Catherine Miranda complained that their efforts to create an independent oversight board at the hospital “went up in a puff of smoke again” this year at the Capitol, and they called on their fellow lawmakers to fix the problem next year. 

D.C. reporters <3 Juan: Ciscomani sat for a Q&A with Roll Call, which noted the bipartisan cast of politicians he has worked for, from Democrat Ed Pastor to Republican Doug Ducey. 

A whole new meaning to findmyphone: A crew of volunteer scuba divers that calls themselves the Salty Scuba Squad is finding all sorts of trash and treasure in the Salt River, the Gilbert Sun News’ Cecilia Chan reports. 

“iPhones seem to be really resilient even being under water,” Gilbert resident Curt Bruns told Chan. “We actually found one this season that was under water three years. It got dried off and returned to the owner in Nebraska.”

Hank recommends Hank: KJZZ’s “The Show” hired Hank to do a limited series of interviews with politicos about their glory days and living through big moments in Arizona political history. The first one, with former longtime lawmaker Debbie McCune Davis talking about AzScam, aired on Wednesday. Tune in next Wednesday at 9 a.m. to hear former lawmaker turned Mohave County Supervisor Ron Gould talk about divided government and the time he brought pigs to the Capitol to make a point about pork spending. 

We recently stumbled on this tweet that provides irrefutable evidence that Mark Kelly’s twin brother and fellow astronaut Scott Kelly is the evil twin.

1. If the name Tony Valdovinos sounds familiar, it’s probably because he had a play made about his life as a DACA recipient, called “¡Americano!”

2. Rachel’s maternity leave derailed Hank’s plans to write about Mason’s case. Plus, we knew Yee was on it.