Bruce BarcottJune 23, 2020

US Attorney General William Barr launched false antitrust investigations into 10 cannabis firms, says a Justice Department whistleblower. (AP Photo/Carolyn Kaster)

In a blockbuster statement launched immediately, a excessive official inside the US Department of Justice accused Attorney General William Barr of ordering antitrust investigations into 10 cannabis firms, primarily based solely on Barr’s political opposition to marijuana legalization.

The mergers in query, which included well-known firms resembling MedMen and PharmaCann, didn’t meet the division’s standards for antitrust investigations, mentioned John W. Elias, former chief of workers inside the Justice Department’s Antitrust Division. Elias’ accusations got here in written testimony submitted to the House Committee on the Judiciary. The antitrust investigations, mentioned Elias, had been motivated by Barr’s private opposition to cannabis legalization.

“These mergers involve companies with low market shares in a fragmented industry; they do not meet established criteria for antitrust investigations,” wrote Elias.

Elias is anticipated to testify in individual earlier than the House committee tomorrow, June 24.

False antitrust circumstances had been 29% of DOJ’s annual caseload

Barr’s orders carried such weight, Elias added, that the cannabis circumstances accounted for practically one-third of DOJ’s antitrust workload in fiscal yr 2019.

The fees increase questions on Barr’s potential abuse of authority and waste of departmental assets. “While these were nominally antitrust investigations,” Elias testified, “and used antitrust investigative authorities, they were not bona fide antitrust investigations.”

Charges leveled by nonpartisan official

Elias is not any disgruntled partisan. He joined the Justice Department in 2006, beneath President George W. Bush, and served for 14 years beneath six lawyer generals and three presidents, each Republicans and Democrats. From Jan. 2017 to Oct. 2018, Elias was chief of workers of the DOJ’s antitrust division. He presently works as an antitrust division prosecutor beneath Barr. His casework consists of taking a look at price-fixing conspiracies within the pharmaceutical business.

According to his testimony, Elias was so alarmed by Barr’s course on the cannabis circumstances that he reported his concern to the Justice Department’s inspector common. Each federal cabinet-level division maintains an inspector common to supervise the legality of the work carried out inside the division. IGs and their workers members operate as a type of inside affairs verify on potential abuses inside the division.

Over the previous weeks and months President Trump has purged many inspectors general as a result of, presumably, he views them as a verify on his energy and corruption.

“Based on what I have seen, and what my colleagues saw and described to me, I was concerned enough to report certain antitrust investigations launched under Attorney General Barr to the Department of Justice Inspector General,” testified Elias. “I asked him to investigate whether these matters constituted an abuse of authority, a gross waste of funds, and gross mismanagement.”

DOJ messing with MedMen

In his Congressional testimony, Elias defined that the DOJ’s Antitrust Division investigates only one% to 2% of the hundreds of mergers that occur yearly. DOJ acts on “only the most concerning deals,” Elias mentioned.

In fiscal yr 2018, solely 19 large-scale investigations had been undertaken. In fiscal yr 2019, 31 had been opened. More than 2,000 transactions had been filed with the Department throughout every of these years.

In 2019, DOJ workers reviewed a proposed merger of MedMen and PharmaCann, and suggested that the deal didn’t benefit a full investigation.

Because the state-regulated cannabis business is so fragmented by state strains, DOJ workers concluded the transaction “was unlikely to raise any significant competitive concerns that would justify” an extra expanded investigation.

At a March 5, 2019, assembly, Elias testified, Barr rejected his workers’s recommendation and ordered a full-scale investigation into the merger.

“The rationale for doing so,” Elias wrote, “centered not on an antitrust analysis, but because [Barr] did not like the nature of their underlying business.”

Antitrust circumstances can kill an organization

A federal antitrust investigation is a gigantic endeavor, each for the Justice Department and the businesses concerned. Microsoft famously labored beneath the burden of a DOJ antitrust investigation for a lot of the 1990s. More not too long ago, the DOJ sued to dam AT&T’s deliberate $85 billion merger with Time Warner. Microsoft survived, as did the AT&T-Time Warner deal, however not after draining the businesses of treasured time and assets.

Elias didn’t specify different offers past the MedMen merger with PharmaCann. But that investigation gives perception into the onerous burden introduced by a DOJ investigation. After opening the MedMen / PharmaCann investigation in early 2019, Justice Department officers demanded and acquired 1.three million paperwork from the information of 40 workers concerned within the cannabis deal.

The DOJ investigation closed in Sept. 2019 with none enforcement motion, however the investigation successfully blew up the merger. A number of months later, MedMen itself imploded.

As Politico’s Ben Schreckinger and Mona Zhang documented in nice element final month, the corporate has been hit with fees of labor regulation violations, inventory worth manipulation, financial institution fraud, and unlawful marketing campaign contributions. In 2018, MedMen stood because the cannabis business’s high-flying model chief. Today it’s a shell of its former self, broadly considered as a cautionary story of wild-west cannabis funding and enlargement gone mistaken.

The query for Barr: Why?

If true, Elias’ fees result in a query of motive. Why would Attorney General Barr waste his and the division’s time digging into small-time cannabis mergers?

There are quite a few potentialities.

One easy reply could be as a result of he can. Publicly, Barr has expressed negligible curiosity in marijuana and state legalization. During his Senate affirmation listening to, he solely calmly touched on the problem, expressing concern that the state-federal battle over legalization couldn’t stand indefinitely:

“My approach to this would be not to upset settled expectations and the reliance interests that have arisen as a result of the Cole memoranda,” Barr mentioned. “Investments have been made, so I don’t think it’s appropriate to upset those interests.”

In April 2019, Barr advised members of Congress that he most popular the STATES Act over federal prohibition.

Messing with cannabis, or slow-walking different investigations

But Elias’ testimony fees Barr with harassing cannabis firms merely out of spite.

Given Barr’s far-right conservative background, although, it’s not a stretch to imagine his views on legalization aren’t removed from these of his predecessor, the notoriously anti-cannabis Jeff Sessions. Barr might need ordered the antitrust investigations merely to harass cannabis firms. The lawyer common’s broadly documented bullying tendencies would even be consistent with this reasoning.

The investigations may additionally have been a backhanded approach of hindering antitrust investigations that Barr, Trump, and their backers didn’t need to discourage or quash. By sending practically one-third of the antitrust division’s assets on a wild goose chase, Barr successfully slow-walked antitrust actions in opposition to greater fish—like, say, pharmaceutical firms.

This is larger than simply cannabis

Reaction from throughout the political spectrum signifies that Barr’s doable abuse of authority is breaking out of the cannabis world and spilling over into greater potential bother for the lawyer common.

Norman Ornstein, a longtime Capitol Hill political commentator, had this to say:

Former US Attorney and present LA Times authorized affairs columnist Harry Litman famous that native authorized teams had been already elevating a hue and cry:

This is a breaking story. Leafly can have extra within the coming hours. 

Bruce Barcott's Bio Image

Bruce Barcott

Leafly Senior Editor Bruce Barcott oversees information, investigations, and have initiatives. He is a Guggenheim Fellow and creator of Weed the People: The Future of Legal Marijuana in America.

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