The Missouri Cannabis Trade Association describes David Brodsky as “instrumental in the development of Missouri’s microbusiness community” and a mentor to disadvantaged entrepreneurs.
In his cannabis consulting work, Brodsky is part of a group that charges up to $4,000 to help eligible applicants enter the microbusiness lottery. It is a program designed to provide licenses for small-scale marijuana facilities to disabled veterans, lower-income people and those with non-violent marijuana offenses.
That price does not include the state’s $1,500 refundable filing fee.
“We have also served customers who have won licenses in lottery-based application systems in Ohio and Connecticut and have never had an application that did not meet the criteria to enter the lottery,” Brodsky and his partners say at MOmicrolicense.com .
But in Missouri, microbusiness applications linked to Brodsky have repeatedly run into trouble with state regulators.
Of the 96 microbusiness permits the state has issued through a lottery since the program started last year, Brodsky is connected to seven. And all are under investigation or withdrawn because the state questions whether a qualified applicant will actually run the company.
More: Missouri Warns Social Marijuana Permit Applicants About ‘Predatory Practices’
In October, the Division of Cannabis Regulation sent pending revocation letters to four of the seven licensees affiliated with Brodsky, stating that their agreements contained “false or misleading information.”
“The licensee has entered into an agreement that transfers ownership and operational control to another entity,” the letters said.
In July, investigation notices were issued regarding the other three licenses, stating that regulators wanted to ensure that the companies “remain majority owned and operated by eligible persons.”
For over a year, The Independent has been documenting the pattern of well-connected groups and individuals flooding the micro-business lottery by recruiting people to submit job applications and then offering them contracts that limit their profits and control over the company.
State regulators have sounded the alarm about the plan, warning of potentially predatory practices in the microbusiness application process.
Financial agreements for the seven licenses associated with Brodsky are sealed documents. But The Independent managed to obtain part of an agreement linked to Brodsky through a public records request last year.
The agreement gives the qualified candidate only one-third of the voting rights to make corporate decisions.
A nearly identical deal was used to recruit candidates by John Payne, who led the 2022 campaign to legalize marijuana. Payne is listed as part of the mommicrolicense.com team and is the designated point of contact for all seven licenses associated with Brodsky.
Payne has come under scrutiny after The Independent revealed he asked at least one job candidate to sign a 47-page contract that would give him and his partners 90.1% of the profits and majority control of the company.
Despite owning only a fraction of the company, the applicants would be considered the owners under state law and would bear all regulatory controls. If applicants ever want to back out of the deal, they will have to pay a fee of nearly $1 million.
It is unclear whether the financial agreement in that contract also applies to the licenses related to Brodsky or his business partner Scott Wootton. In an email to The Independent, they declined to comment on their role in the seven licenses “due to confidentiality clauses in the agreements, which is standard in business contracts.”
However, they said Payne “has no involvement whatsoever other than being the designated contact to handle communications with the division” for all seven licenses.
Andrew Mullins, executive director of the Missouri Cannabis Trade Association, said he has seen contracts similar to Payne’s 47-page agreement. In some cases, he says, without these types of agreements, licensees would not have the resources to keep a business running.
“Without some of those partners and the way they do it,” he said, “you would basically have people who have a license but don’t have the ability to do anything with it.”
If the 47-page contract were submitted to a federal Disadvantaged Business Enterprise program, it could be considered fraud, said attorney Rod Chapel, president of the Missouri NAACP.
“If I go and get a loan to buy a house that I don’t have the money to actually buy, the bank doesn’t send two tellers and a dog to live in my house – not how that works,” he said. “Ladies and gentlemen, that is why this is a front.”
Flooding the lottery
Brodsky helped found the networking group Missouri Microbusiness Association, where he and Wootton serve as advisors. All of the association’s advisors are also members of MoCann’s advisory board, which represents the cannabis industry as a whole.
During a September call with microbusiness licensees, Brodsky said Missouri is the fourth state to operate a cannabis business, joining California, Colorado and Illinois. He returned to Missouri in 2020 as a pharmacy owner and operator, he said during the community call organized by a licensee.
David Brodsky, cannabis consultant, speaks to Missouri microbusiness licensees on a Zoom call in September.
His association biography states that he sold his stake in Farmer’s Wife cannabis dispensaries in southwest Missouri in 2023 and “dive full steam into Missouri’s new micro-business licensing opportunity.”
Like most licenses for microbusinesses and their investors, the Brodsky-Wootton connection is buried in corporate filings and Missouri Secretary of State documents available only through public records requests.
This spring, more than 80 pharmacy applications entered the lottery with the same St. Peters location address as MO Microbusiness LLC. Brodsky and Wootton are listed as organizers in MO Microbusiness LLC corporate filings.
Two of those applications were successful in the lottery and licenses were issued under the name ‘Individual’. Both threaten withdrawal.
The partners are also connected to 65 wholesale applications that all share the same Elsberry location address. They received two of those licenses to grow up to 250 plants and sell them to micro-business pharmacies.
Both were filed under the name ‘Individual’ and are withdrawn.
More: Missouri awards second round of marijuana microbusiness licenses, 5 in Springfield
The first lottery for microbusiness licenses took place last year, and that same Elsberry address appears on nearly 70 wholesale applications. All were filed by LLCs organized by Cloverleaf Registered Agent, where Wootton is listed as president.
Two of these applicants had obtained permits issued to TEB Industries LLC and JRS Industries LLC. In July, state regulators sent Payne investigation notices for both companies, and the investigation is still ongoing, according to the division.
A similar Elsberry address is also linked to 70 pharmacy applications submitted to the lottery last year. In October 2023, one license was issued to Green Zebra LLC. This has been under investigation by state regulators since July.
Brodsky mentions this license in his association biography.
“We were fortunate,” the report says, “to win a dispensary license in Congressional District 3 with the first round of lottery which we will brand as Heirloom Dispensary, along with several others across the state.”
The eligible applicant who won the license for Green Zebra signed a contract accepting a loan from Black Krim LLC, where Brodsky is the sole member, according to documents obtained by The Independent through a public records request.
The contract established a three-person board that would vote on all company decisions. The lender and the “consultant” may each select a member.
This left the qualified candidate with only one-third of the voting power.
“While you are correct that technically only 2/3 of the votes are needed to make the day-to-day decisions for the company,” Brodsky said in an email to The Independent, “in practice we have done all the day-to-day business decisions unanimously, and we do not expect this to change in the future.”
He also said that the majority of Green Zebra’s three managers are and remain qualifying individuals for the microbusiness program.
The loan information for the Green Zebra contract is a closed record. However, the available operating agreement is virtually identical to the one Payne used to recruit job candidates this spring and which legal experts called “predatory.”
“For clarification, the remainder of the Green Zebra LLC contracts, including the operating agreement, have been reviewed and approved by” regulators, Brodsky said.
New rules
Department of Cannabis Regulation Director Amy Moore told The Independent last month that the state is considering making changes to the application process to curb potentially predatory practices.
However, she said many of the potential changes would require a public hearing before a legislative committee for approval and delay a third round of permitting.
John Payne (right), managing partner at Amendment 2 Consultants, discusses legislation at an industry summit in downtown St. Louis on March 28 with Amy Moore (center), director of the Division of Cannabis Regulation, and Mitch Meyers (left), partner at BeLeaf Medical.
Mullins told The Independent he believes the association would support these changes if they encourage participation.
“In some ways, I’m not sure it’s entirely DCR’s duty to stand between a business owner and the business transactions they’re doing,” Mullins said, “unless it’s something that’s against the law. ”
However, he believes the association would support rules that restrict practices that could be “hurtful” to microbusiness owners.
“We want to see micro-industry succeed the same way we want to see the rest of the industry succeed,” Mullins said, “and we support all of that. So if there is an area where we can make our voice heard and that contributes to the success of the journey of micro-business owners, then I don’t know why we would oppose it.”
This story was first published on missouriindependent.com.
This article originally appeared on Springfield News-Leader: Missouri investigates marijuana licenses linked to microbusiness mentor
