Accounting Buds

Nearly 100 More People Allege Problems with DASNY’s Involvement in NY Cannabis

Growing Concerns Surrounding the Role of DASNY in New York's Cannabis Industry

Criticisms and allegations are piling up against the Dormitory Authority of the State of New York and the fund manager it selected to help roll out the state’s legal cannabis marketplace.

DASNY, the state’s public finance and construction authority, was tasked last year to find, secure and facilitate the leasing of real estate to Conditional Adult-Use Retail Dispensary (CAURD) operators – the first legal cannabis dispensaries to operate across New York State.

As part of that effort, Gov. Kathy Hochul charged DASNY with finding a fund manager to raise $150 million from private investors to position these “social equity entrepreneurs to succeed,” according to the governor’s office. The state would kick in an additional $50 million to create a $200 million fund in total.

At the time, DASNY President and Cannabis Control Board member Reuben McDaniel said, “I’m proud of DASNY’s role in a program will help build generational wealth that has been out of reach for far too many of our citizens, and that will succeed in creating social equity when so many other states’ programs have failed.”

DASNY selected Social Equity Impact Ventures as the fund manager last June.

Yet, nearly a year later, that team, composed of NBA Hall of Famer Chris Webber, entrepreneur Lavetta Willis, and executives from the financial services firm Siebert Williams Shank, have yet to raise any of the money for the fund.

Partly as a result, industry stakeholders have become increasingly vocal with their criticism of DASNY, placing much of the blame for the state’s slow rollout of its cannabis marketplace at the authority’s feet.

Last week, a small cohort of CAURD licensees sent a letter to the heads of New York’s cannabis regulatory bodies about DASNY’s “alarming and unacceptable” lack of communication and transparency. They also shared concerns that Social Equity Impact Ventures suffers from “poor structuring, inexperienced management, and a failure to appropriately align incentives for all stakeholders.”

The group cited as grievances DASNY’s obscure and opaque lease agreements, exorbitantly priced build outs for CAURD locations “with no ability by the licensees to negotiate,” delayed or nonexistent site approvals, and much more.

Two days later, New York’s largest cannabis industry group backed the letter, sent it to state senators and assembly members, and raised the stakes by alleging McDaniel – DASNY’s president – may hold a conflict of interest due to his other position as a Cannabis Control Board member.

“We believe it is a conflict of interest for the Executive Director of DASNY to hold a seat on the Cannabis Control Board given the direct business involvement of DASNY with the CAURD program,” said the Cannabis Association of New York.

Then, on Monday, NY Cannabis Insider discovered that more than 45 members of the New York State Society of Certified Public Accounts sent a letter in late April alleging that DASNY is “officially sanctioning a monopoly on accounting” for cannabis dispensaries.

The group said DASNY and Social Equity Impact Ventures are telling CAURD applicants and licensees that they must use Marcum, LLP, a national accounting and advisory firm, exclusively – or risk access to the social equity fund.

“This was shocking news to our membership,” the letter said.

And late Monday night, more than 40 members of the NY CAURD Coalition sent a letter in support of last week’s CAURD cohort – and also raised the stakes by asking the state to seize and account for the remaining money in the cannabis social equity fund.

The accountants
The state’s Society of CPAs has a membership of more than 21,000 accountants, lawyers, bankers, and other professionals. On several occasions, they’ve hosted Cannabis Control Board Chairwoman Tremaine Wright at their office, drafted cannabis position papers and taken an active role in developing the statewide ecosystem.

On April 26, the society’s Cannabis Industry Committee Chair and Vice Chair, Richard LaNeve, Jr., and Renata Serban, sent a letter alleging DASNY and/or Social Equity Impact Ventures was directing CAURD licensees to Marcum exclusively.

“Multiple members reported that CAURD applicants and licensees have been told by DASNY/Fund representatives that the only accounting firm that is acceptable to be used is Marcum, LLP,” they wrote.

The letter was signed by 44 additional committee members.

“We have also heard from multiple members that CAURD applicants and licensees were told that unless they use Marcum LLP, they will not be eligible to receive funding via the Fund,” LaNeve and Serban said.

The NYSSCPA letter was sent to McDaniel, as well as to the authority’s general counsel and ethics officer, whistleblower hotline and professional integrity office. The committee also sent their grievances to top officials at the Office of Cannabis Management.

The accountants are asking DASNY and the fund managers to release guidance that states “clearly, concisely, and without a doubt that as long as a CAURD applicant/licensee is utilizing a vetted accountant or accounting firm from the list, they are not at risk of losing their opportunity to be funded.”

The NYSSCPA committee declined to comment further for this story.

DASNY spokesperson Jeffrey Gordon denied that the agency or its fund managers are requiring licensees to use Marcum for accounting services.

Instead, Gordon told NY Cannabis Insider, Social Equity Impact Ventures is “using Marcum’s services, and has provided CAURD licensees with the option of using their services if they choose.”

NY Cannabis Insider tried unsuccessfully on Monday to speak to Marcum’s leadership about their role in the CAURD program.

However, NY Cannabis Insider did speak to one CAURD licensee who verified that a Marcum employee did tell them they had to use the firm’s services or lose access to the DASNY fund. We are withholding their name because they fear retribution from DASNY for speaking about the issue.

The accounting snafu is yet another source of confusion for the already bewildered CAURD licensees – of which there are now 215, with around 150 who are eligible for DASNY funding and assistance.

The CAURD Coalition
Late Monday night, the NY CAURD Coalition – which has 120 retail applicants with more than 50% already licensed – sent a letter echoing concerns raised by the group of retailers last week.

“The New York CAURD Coalition and its supporting members respectfully submit this letter to express our collective concern, frustration and disappointment with the Social Equity Cannabis Investment Fund, as managed by Social Equity Impact Ventures,” the group wrote.

“Countless CAURD licensees’ questions and requests have gone unanswered, leading to the drafting and publication of this letter.”

The coalition’s concerns echo those from last week, including DASNY’s failure to approve locations, its “no-fly zone” for retail spots, its chosen contractors charging “exorbitant build-out costs,” and its lack of transparency around financing agreements.

Additionally, the group is asking for the remainder of the $50 million dollars that the state allocated to the cannabis social equity fund “be immediately seized, spending be publicly accounted for, and the remainder of the resources be made available to CAURD licensees as grants or low-interest loans.”

Back in February, DASNY told NY Cannabis Insider it had spent $3 million of the fund. However, the agency will not provide an update of how much of the $50 million has been spent since.

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