DOJ Defends Cannabis Industry Investigations Pushed By AG Barr

A Department of Justice office tasked with investigating claims of misconduct in the agency has determined that antitrust prosecutors did not violate rules when they looked into cannabis industry mergers at the request of Attorney General William Barr. Last week, two whistleblowers at the DOJ’s antitrust division (ATR) testified before Congress that Barr directed the inquiries because of his “personal dislike of the industry.”

In his testimony, John Elias, who served as the ATR’s chief of staff from 2017 through 2018, said that the division had been instructed to look into 10 cannabis industry mergers. After an initial review determined that the proposed transactions did not include competitive concerns of interest to the office, prosecutors were instructed to continue the investigations and make so-called second requests for more information.

A second request for documents can be an onerous and time-consuming undertaking for a company, requiring the submission of thousands if not millions of documents. According to a memo obtained by Politico from the Office of Professional Responsibility (OPR), which investigated the allegations by the then anonymous whistleblowers, the agency “placed these demands on merging cannabis companies in order to slow the growth of the cannabis industry due to DOJ leadership’s animosity towards the industry.”

“Personal dislike of the industry is not a proper basis upon which to ground an antitrust investigation,” Elias told lawmakers in his written testimony.

No Rules Broken In Cannabis Industry Probes

Jeffrey R. Ragsdale, the OPR director and chief counsel, reported in the memo that the office had investigated the whistleblower complaints after they were made last year and reviewed documents and information provided by the ATR. In his findings, he wrote that the “rapidly expanding and consolidating” nature of the cannabis industry was justification for further investigation of the mergers.

“The cannabis industry provided a unique challenge to federal and state regulators alike, and it was reasonable for ATR to seek additional information from the industry through its Second Request process,” Ragsdale wrote in the memo. 

Ragsdale also noted that the antitrust division has wide latitude in decisions to continue an investigation and such action “would not have violated any relevant laws, regulations, rules, policies, or guidelines.”

“Because OPR concludes that ATR acted consistent with all applicable laws, regulations, and DOJ guidelines in its review of the proposed cannabis mergers, OPR is closing its investigation.”

But Elias, who saw the memo the night before providing his testimony to Congress, took issue with the OPR’s findings, telling lawmakers that the document “says even if the allegations are true, even if these investigations were motivated by animus and not by bona fide law enforcement reasons, then that’s not a problem, there is still no violation of rules or regulations.”

“That is very concerning to me because it seems so self-evident that if your sole motivation is animosity, that is impermissible,” he continued. “If there is no rule or regulation, there is one missing because that’s obviously wrong.”

Although the OPR has determined that the antitrust division acted reasonably in its handling of cannabis industry mergers, another investigation of the matter is still pending. In his testimony to Congress, Elias said that the Department of Justice’s inspector general is also looking into the allegations.