Lawsuit: Pot-growing company allegedly met with ex-Gov. Quinn before license recommendations

A company that lost out on a coveted medical marijuana farming license alleges its successful competitor met with former Gov. Pat Quinn before his administration made recommendations on who should get the licenses, according to a lawsuit filed in Cook County.

The lawsuit, filed Tuesday evening by PM Rx LLC, seeks a temporary restraining order against the Illinois Department of Agriculture, prohibiting the agency from issuing the cultivation license in the marijuana-growing district that encompasses Kankakee, court records show. Cresco Labs LLC has been awarded that growing license. It also has two others in different parts of the state.

PM Rx claims its application had “been scored higher than Cresco’s prior to Cresco’s meeting with Governor Quinn,” the lawsuit said.

It’s an allegation Quinn, who claims not to have known the names or scores of any license applicants, denied through a spokesman.

“Governor Pat Quinn did not have any meetings with any medical marijuana applicants to discuss their licensing applications,” Bill Morgan, a spokesman for Quinn, said in a statement after reviewing records Wednesday. “Furthermore, Governor Quinn had no involvement in the scoring and evaluation of applicants in the Medical Cannabis Pilot Program.”

Gov. Bruce Rauner’s administration has said it was expecting legal challenges regarding the marijuana business licenses, which were not issued under Quinn despite recommendations made by his administration. The Rauner administration reviewed the recommendations after taking office and awarded the licenses earlier this month.

“We understood and acknowledged that the process the Quinn administration applied would likely expose the state to significant and costly litigation. We believe the steps we took to fix the errors in the Quinn selection process reduce, but cannot entirely eliminate, the risk of litigation,” Catherine Kelly, the spokeswoman, said in a statement. “We will fully participate in any judicial review of the selection process and comply with any orders issued by a court as it relates to this particular applicant or any other applicant that seeks a judicial review.”

Along with the allegations that officials met with the former governor, PM Rx claims the state altered its scoring process for the licensing area encompassing Kankakee, “violating its own required scoring system.”

It says the state allowed its competitor to proceed with the application process even though necessary background checks were not performed.

Earlier this month, the state announced the FBI will allow the state to perform background checks for those involved in the business of medical marijuana in Illinois.

In addition, PM Rx questions a deal Cresco made with the city of Kankakee. The lawsuit claims Cresco had agreed to pay a portion of its revenue from the sale of marijuana to the city in exchange for a necessary zoning permit. PM Rx claims that’s against state law, and it will “artificially increase the price of the medical cannabis it cultivates, thereby needlessly increasing the cost to agents in need of medication,” according to the lawsuit.

Finally, PM Rx claims Cresco doesn’t have the necessary funding required by the state. Applicants needed a $2 million surety bond or an escrow account of that amount. They also needed $500,000 in liquid assets.

But since Feb. 2, the day Rauner’s administration announced the winners of the licenses, Cresco “has been seeking funding through private placement” and did not have the necessary funding when it applied, the lawsuit claims.

“Our group and the 157 others who submitted applications to build 21 cultivation facilities in Illinois expected a fair and open process based on the applications submitted that day,” Andy James, CEO of PM Rx, said in a statement. “That hasn’t happened. All we are asking is for proof that the scoring was done properly and that the applications were evaluated in accordance with the laws and regulations.”

Cresco, which is not named as a defendant in the lawsuit, issued a sharp response to the allegations made in the lawsuit.

“We are not going to comment on the efforts of a company that is attempting to achieve in court what it failed to do with the state,” Joe Caltabiano, president of Cresco, said in a statement. “Cresco Labs submitted comprehensive and thorough applications exceeding all of the state’s very stringent requirements, and we stand behind our applications.”

PM Rx is asking a judge to determine the awarded license to Cresco in the Kankakee area is not valid. It’s also asking the state to re-score the Kanakee-area applicants.

The lawsuit is believed to be the second filed regarding the award of medical marijuana business licenses in Illinois.

The first, filed earlier this month, claims a company that won a growing license was improperly given it because it is a nonprofit organization that receives tax benefits from the Internal Revenue Service, a federal agency. The feds, of course, outlaw the sale and growth of marijuana.

More lawsuits are expected.