The State Agency That Oversees Cannabis Had the Tools to Regulate La Mota, but Records Show It Rarely Did

What records make clear is that the OLCC is a watchdog with ample authority but few teeth to pierce the hides of industry powerhouses like La Mota.

A La Mota dispensary in Northwest Portland. (Chris Nesseth)

One of the central mysteries surrounding the ongoing saga of Aaron Mitchell and Rosa Cazares, co-founders of the cannabis dispensary chain La Mota, is why a state that prides itself on protecting small businesses allowed an aggressively expanding company to run roughshod over the rest of the industry.

Long before they placed Oregon Secretary of State Shemia Fagan on their payroll, Mitchell and Cazares amassed what the state agency that regulates cannabis termed a “substantial compliance history”—another way of saying regulators suspected they weren’t consistently following the rules. As WW has previously documented, the Oregon Liquor and Cannabis Commission appears to have been unwilling to clamp down on a chain that allegedly stiffed small vendors as it opened more than 30 dispensaries across the state and exhibited a “flagrant disregard” for the law, according to a letter the industry’s guild wrote this month to lawmakers.

“They’ve taken a hands-off approach to La Mota,” says cannabis lawyer Kevin Jacoby, who believes the massive 2018 Black Market Distribution case, in which Mitchell and Cazares settled a number of serious violations with the OLCC after a two-year legal battle, spooked the agency. “I think ever since then, the OLCC has determined that they’re just not going to take La Mota’s licenses, and actually allow them to accrue more licenses.”

Now, an examination by WW of hundreds of emails, documents and spreadsheets provided by the agency in response to nearly a dozen public records requests shows how La Mota sped past regulators like a Mercedes-Benz passing a police cruiser with a flat tire.

What the records make clear is that the OLCC is a watchdog with ample authority but few teeth to pierce the hides of industry powerhouses like La Mota.

It’s an agency whose investigators are given immense discretion, but whose enforcement databases are so disjointed the agency can’t show the outcome of each investigation and where enforcement of the rules appears to vary depending on the size of the company.

And it’s an agency that allowed La Mota to expand unfettered, accruing millions of dollars in tax liens and racking up legal battles over unpaid bills, as the OLCC meanwhile cracked down on smaller businesses.

Here’s how that happened:

1. Investigators are given immense discretionary authority, but no clear written policies.

OLCC investigators, many of them former law enforcement officers, conduct inquiries into cannabis businesses after they receive a complaint or find something troubling during a random inspection.

Records provided by the OLCC show that since the end of 2018, various La Mota licenses have been the subject of 143 investigations, plus another 65 that were triggered by a notification of business changes by La Mota. Of the total, 111 ended in what the agency calls “verbal instructions”—that is, no penalty at all, merely a tutorial on how to fix the issue. Another 81 were closed with no action, which could mean, among other things, that the complaint wasn’t substantiated.

The agency leaves the power of enforcement—or nonenforcement—entirely in the hands of individual investigators.

And WW has learned the agency has no clear written procedure or policy for when a case—particularly a serious one, such as sale to a minor or “dishonest conduct”—may be resolved with a verbal instruction instead of sending it to the enforcement division. “It’s so wishy-washy that it’s not even a standard,” Jacoby says of the language.

Investigations of La Mota licenses over the years have looked into such possible violations as sales to minors, dishonest conduct supplying adulterated cannabis products, and surveillance camera deficiencies.

An investigator may escalate any investigation to the agency’s hearings division, where the case may end in a civil penalty or a temporary suspension or cancellation of a license. But only 16 of La Mota’s cases since 2018 were sent to the hearings division. The OLCC could not verify the outcome in every one of those cases; staff blames this on a patchwork of databases that track violations.

The agency contends that the high number of verbal instructions to La Mota was consistent with aggregate data across all violations. That appears to be true in some cases. But data shows, for example, that 19% of all substantiated dishonest conduct cases went to the hearings division, wheras none of La Mota’s 12 cases of dishonest conduct made it to the hearings division. Similarly, none of La Mota’s six violations for packaging and labeling made it to the hearings division, but 20% of such violations across all licenses made it to the hearings division.

2. The agency appears to have made up a new standard for La Mota.

State law gives the OLCC authority to deny a new license if the agency determines an applicant “does not have a good record of compliance.”

Does La Mota have such a record? If you squint. Records tracking one OLCC decision last summer to grant a new dispensary license to Mitchell and Cazares offer a glimpse into the agency’s process.

To weigh the couple’s new application, records show, agency staff put together documents looking at La Mota’s history of violations across its other licenses. A staffer concluded in a June 2022 memo that although the couple had an “extensive compliance violation history across their multiple licenses,” “in their totality good cause is presumed to overcome denial in the instant application.”

Cannabis lawyers say that’s baloney.

“‘Presumed good cause’ is not a legal standard,” says Vince Sliwoski of the law firm Harris Bricken. “‘Good cause’ is a legal standard. Nobody ever presumes good cause. It sounds to me like gobbledygook to justify a course of action that you may want to take for a reason that’s not a legal or policy reason.”

The OLCC has to date not provided a clear explanation why the agency has never denied a new license to La Mota, despite what the agency’s own staff characterized as the company’s “extensive” compliance history.

“Although the Legislature has given us authority for specific aspects of cannabis regulation, we’re not always in the position to utilize all of that authority,” says OLCC spokesman Mark Pettinger. “Iterative changes to marijuana public policy…has meant the agency has had to shift its resources and focus based on what’s been the most pressing issue affecting the integrity of the whole of Oregon’s regulated cannabis system.”

La Mota has not responded to repeated inquiries from WW.

3. While smaller businesses were shuttered for nonpayment of taxes, La Mota never had to surrender a license.

The OLCC has been unable to explain why it hasn’t penalized La Mota for years of tax liens.

As WW reported last month, state and federal tax authorities have issued more than $7 million in tax liens in recent years to Mitchell, Cazares and the companies they control.

Records provided by the OLCC show that on only two occasions has a La Mota licensee been subject to a tax-related investigation by the agency. Both of those cases, one in 2018 and the other in 2020, ended with verbal instructions.

Meanwhile, a number of smaller dispensaries have been forced to surrender their licenses because of unpaid taxes. The amounts owed, according to lien records, pale in comparison to what La Mota’s entities once owed.

Columbia River Herbals in The Dalles surrendered its license in 2019 for nonpayment of state taxes. While it’s unclear how much the shop owed at the time, a dispensary in April 2021 was issued a $5,280 fine for late tax payments, and records show the state had issued liens against the company totaling $88,000.

A man named Jeremy Wheeler was removed from a dispensary retail license by the OLCC in June 2021 due to his “poor record” of paying state taxes. Liens filed by the Oregon Department of Revenue show Wheeler was issued liens totaling $300,000.

The OLCC did not respond to an inquiry why it’s never penalized La Mota for its much larger tax liens, but Pettinger says the agency “has attempted to apply the same standard to all licensees.”

Records show the OLCC was keenly aware that Mitchell and Cazares faced trouble with tax authorities. Cazares told the agency as much in May 2018, when she wrote that the couple was being investigated by the IRS for “tax crimes.”

OLCC interim director Craig Prins, who spoke on the record about La Mota for the first time earlier this month, would not say whether he believes his agency has adequately regulated La Mota. Prins did say, “We need to do a better job of making sure folks are tax compliant.”

4. The system is skewed to favor big operations with deep pockets.

An enduring criticism of OLCC enforcement is that its penalty system is structurally weighted to favor businesses large enough to pay the fines.

That’s because the agency levies fines of equal size to mom-and-pop operations as well as publicly traded corporations.

In October 2021, for instance, a small company called Luminous Botanicals was fined $100,000—the maximum allowed by the OLCC—for a labeling error on some of its cannabis tonics. Owner Sally Alworth insisted it had been an honest mistake, and one that never would have endangered a consumer.

Meanwhile, just a year prior, Cura Partners, Oregon’s largest cannabis company at the time, was fined the same amount after the OLCC ruled it had knowingly mislabeled 186,000 vape cartridges, failing to disclose additives in its products.

That pattern—of larger companies paying fines with ease that would cripple smaller businesses—persists.

According to documents provided by the agency, civil penalties imposed on La Mota entities for investigations since 2018 that made it to the agency’s hearing division amount to little more than $34,000.

However, the OLCC could not verify that the fines had been collected in all cases, citing its disjointed tracking system.

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