By Joe Nelson | jnelson@scng.com
and Scott Schwebke | sschwebke@scng.com | San Bernardino Sun
Published: February 25, 2019 at 7:00 pm | Updated: February 25, 2019 at 7:46 pm

  • Stephanie Smith alleges ‘pay-for-play’ scheme in lawsuit seeking to halt commercial operator licenses

A Pacific Palisades woman who heads a company that was blocked last week from setting up legitimate commercial cannabis operations in San Bernardino sued the city on Monday, Feb. 25 alleging corrupt practices involving a “pay for play” scheme.

Washington LLC, headed by Calfornia’s self-proclaimed “cannabis landlord” Stephanie Smith, filed a lawsuit in San Bernardino Superior Court seeking to halt the licensing of 16 commercial cannabis businesses approved by the city on Feb. 21. Her company ranked 39th on a list of 44 applicants that applied for commercial cannabis licenses with the city.

A hearing on the requested injunction is scheduled for 8:30 a.m. Wednesday, Feb. 27, in San Bernardino Superior Court before Judge Janet M. Frangie.

“The effects of the ‘pay for play’ corruption led to the City issuing a large number of licenses that were illegal, not just because of the ‘pay for play,’ but also because the licenses violated state and city law,” the lawsuit alleges.

The fact that eight of the 16 businesses whose licenses were approved by the City Council were, according to Washington LLC., in violation of the Municipal Code or General Plan raises suspicion. Those companies are Organtix Orchards, AM-PM Mgmt. Inc., Orange Show Cultivators, Nibble This LLC (two separate locations), A Bud & Beyond, Blunt Brothers, and Accessible Options.

“The court may simply stay implementation of all of the licenses given the fact that over 50% of the issued licenses were illegal, thereby throwing the entire process into doubt,” according to the lawsuit.

Back-channel communications?

Smith alleges a series of back-channel communications involving City Manager Andrea Miller, commercial marijuana entrepreneurs and former Mayor Carey Davis’ re-election campaign, including his former campaign manager, Scott Beard.

Smith’s attorney, Ben Eilenberg, said Monday that Miller and Beard engaged in text messages with their “chosen marijuana operators” about meetings and donations in an effort to support Davis’ campaign.

Miller, according to the lawsuit, arranged a series of meetings between Davis’ former campaign affiliates and commercial marijuana applicants with the intent of receiving campaign donations both “on and off the books.”

Included in the lawsuit were two text chains of Mark Estermyer, owner of AM-PM MGMT. Inc., describing a meeting set up by Miller and Beard to discuss contributions to Davis’ campaign. Estermyer’s AM-PM MGMT., which does business as Cold Creek Organics, has a business model that Washington LLC. alleges is not complaint with city code.

On July 30, 2018, Estermyer sent a text to an operator applying for cannabis permits to discuss a meeting that day with Miller and Beard, Eilenberg said.

‘Strange bedfellows’

“We met with San Bernardino staff today, extremely successful … except for your issue and mine,” the text says. “We were able to get each softened. Mine is enough to for us to remain confident. I don’t know enough about yours to say it is enough also. This industry makes some people strange bedfellows, which is why I want you to know directly from me. Scott Beard was the person who facilitated this meeting. But it was Andrea Miller who requested me.”

In a second text, Estermyer seems to discuss making an “off the books” campaign donation to Davis, Eilenberg said. “AM-PM has given the association a total of $4,500,” says the text. “Plus additional contributions to help us that David doesn’t want counted. … $5,000 towards the mayors campaign.”

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