Texas Hemp Already Off to a Corrupt Start

The legalization of cannabis is already off to a rough start in the state of Texas. The state legalized medical marijuana, but the program is so restrictive that only a handful of dispensaries exist with roughly 16,00 registered patients. 500 physicians have been approved to prescribe medical marijuana in the state.

Texas is also a big agricultural state and the appetite for hemp farming seems stronger than the desire for medical marijuana. It’s also sparking some bad behavior by Texans in and out of the state. This week, Law360 reported that Todd Smith, a political consultant for Texas Department of Agriculture Commissioner Sid Miller, was indicted on soliciting bribes for hemp licenses. He was charged with soliciting a $25,000 payment in exchange for getting a license awarded by the Department in August 2019. The indictment also alleges that Smith managed to score $65,000 in August and November 2019 from two people.

“We are holding accountable powerful actors who abuse the system and break the law,” Travis County District Attorney José Garza said in a statement Tuesday. “Our community needs to know that no one is above the law and will face justice.”

This apparently isn’t Smith’s first rodeo when it comes to influence peddling. In 2018, the Austin American-Statesman reported that Smith promised a San Antonio businessperson an appointment with the Department of Agriculture in exchange for a $29,000 loan. Miller and Smith’s relationship has been mutually beneficial. In 2016, Miller gave Smith’s wife a newly created assistant commissioner position, one of the highest-paying roles in the department.

“We are disappointed that the Travis County District Attorney has obtained an indictment against Todd Smith, he was not invited to address the grand jury. He is not guilty of these charges and intends to vigorously defend himself against the allegations made by the Travis County District Attorney’s Office,” attorneys Sam Bassett and Perry Minton said in a statement.

Miller who is running for reelection has supposedly cut ties with Miller according to the Dallas News.

Isotex

Separately, Law360 also reported on a case where an Idaho-based machine builder claimed that a Texas company called Isotex Health LLC had planned to build a hemp processing facility in Lincoln, Montana, to extract CBD. Instead, they are accused of running off with $2 million. Idaho resident Jeremiah Skaggs filed the complaint against Isotex.

According to the court filing, in late 2019,  Isotex Health began developing a large facility in coordination with Lincoln County, Montana to process hemp crops into CBD products. As part of the arrangement, Isotex hoped to provide hundreds of jobs to people in Lincoln County, Montana. Skaggs moved to Lincoln County to begin working on the project. Isotex apparently hired a gentleman from Oregon named Clinton Boone to help complete the project.

The complaint alleges that the Texas company Isotex was going to pledge $3.3 million for the project and paid Boone $2.7 million. Skaggs says that when Boone didn’t receive the rest of the payment owed by Isotex – roughly $670,000, he pulled the plug on the project. Skaggs says he had an agreement with Boone on the venture. Skaggs would receive 45% of net proceeds from Isotex Health for creating the machinery and Boone would get the remaining 55%. Skaggs says in his complaint that even without the $670,000, the project could still be completed. Skaggs claims he is owed $156,807 from Boone and alleges he ran off with $2.4 million.

This isn’t the first lawsuit connected with Isotex and the Montana hemp facility. In 2020, The Western News reported that Louisiana-based Kootenai Tec bought the former Stinger building from Fisher Industries and leased it to Isotex in late September. Kootenai alleges Isotex reneged on multiple parts of its contract and should pay $66,067 per month until vacating the property. The Western News reported that Lincoln County, through the Port Authority, invested $3.2 million in the building in an effort to shore up and expand the region’s economy.

The Western News wrote, “The company accused Isotex of failing to make timely interest payments on a $7 million loan facilitated by Kootenai Tec, court documents said. It failed to cooperate in letting Kootenai Tec take payment in kind as outlined in its loan agreement, neglected to provide requested financial documents, and did not maintain insurance, according to the lawsuit. Among the litany of allegations, Isotex also failed to properly document improvements to the site and mishandled the loaned money, court documents said. On Jan. 6, representatives of Kootenai Tec served Isotex with a notice of termination and a notice to quit. Isotex continued to operate in the facility despite the notification, court documents said.”

Byron Gruber, attorney for Isotex Health, LLC, issued a press release on January 23, 2020 stating, in part, that “Isotex will no longer remain silent. Isotex has gathered evidence exposing a conspiracy aimed at taking-over the company. As such, Isotex began filing lawsuits today in Lincoln County, Montana against these conspiring investors, contractors, and their in-state associates.”