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Corrupt marijuana businessman John Dawood Dalaly deserves break in scandal, feds say

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An Oakland County businessman facing up to 10 years in federal prison for bribing Rick Johnson, the former chairman of Michigan's medical marijuana licensing board, deserves a break for implicating the powerful bureaucrat, federal prosecutors said Thursday.

Prosecutors credited West Bloomfield businessman John Dawood Dalaly for providing substantial assistance and implicating others in the largest public corruption scandal in the state's capital in a generation and say he should spend 2 1/2 years in prison. They said Dalaly gave investigators a first-hand account of the $68,200 in bribes paid to Johnson, a Republican former House speaker who was chairman of the licensing board from May 2017 through April 2019.

They suggested that advisory guidelines call for a sentence of no more than 37 months in prison. Grand Rapids U.S. District Judge Jane Beckering is scheduled to sentence Dalaly on Sept. 14 in federal court in Grand Rapids and can ignore the guidelines.

The request provides the first insight into how a group of four people convicted in the scandal stands to benefit for cooperating with federal prosecutors in unraveling a corruption scandal that, so far, has not yielded new criminal charges. The formal request also shows the lengths to which Dalaly has cooperated, meeting with investigators repeatedly since October and as recently as early August.

Starting in 2018, Dalaly bribed Johnson to obtain state licenses for a medical marijuana startup business and for help launching a digital payments business for marijuana transactions. In all, Dalaly paid bribes at least 25 times between January 2018-February 2019.

"When individuals like Dalaly bribe government officials to achieve their goals, they do more than just enrich themselves at public expense," assistant U.S. attorneys Clay Stiffler and Christopher O’Connor wrote in a sentencing memorandum. "Corruption robs citizens of access to services, exacerbates inequality, and distorts the marketplace.

"It is a fundamental threat to the rule of law: it erodes public trust in our government institutions, fuels cynicism toward those institutions, and inhibits effective and accountable governance," they added.

Prosecutors also want Dalaly to pay a fine of at least $62,800.

Dalaly's lawyer, Raymond Cassar, filed a separate, sealed sentencing memorandum Thursday.

In the filing Thursday, prosecutors provided details about Johnson's cozy relationship with people he was supposed to regulate.

Prosecutors say Johnson took two private flights with Dalaly from Michigan to Canada for "field trips" to meet investors who "wined and dined with Johnson," according to the filing.

The cost: $8,200.

In return for the bribes, Johnson provided inside information about marijuana license applicants who would be rejected by the licensing board, prosecutors said. That information could be leveraged to purchase marijuana dispensaries from failed applicants.

"Here, Dalaly’s bribes corrupted the process for the state’s issuance of licenses for businesses to operate in a new and lucrative industry and ensured that Rick Johnson worked not in the interests of the citizens of Michigan, but in the interests of Dalaly and his companies," prosecutors wrote.

Dalaly was the first of four people, including Johnson, to plead guilty following a wide-ranging federal investigation that showed how businessmen, one powerful bureaucrat and lobbyists corrupted the dawn of Michigan's marijuana industry and the awarding of lucrative state licenses to sell and grow medical marijuana.

Dalaly admitted he hired Johnson's wife as a consultant at a rate of $4,000 a month. Dalaly's lawyer, Raymond Cassar, told reporters his client was working on behalf of the company Pharmaco and had hired Jan Johnson to help him fill out application forms. That paperwork would eventually go before the Medical Marihuana Licensing Board that Rick Johnson chaired.

Dalaly pleaded guilty 15 days after authorities announced charges against him, lobbyists Brian Pierce and Vincent Brown and Johnson. All four have struck plea deals with the government and are cooperating with the government. All four are to be sentenced in September.

The probe is ongoing, but so far, the FBI and Grand Rapids U.S. Attorney's Office have said Johnson received at least $110,200 in bribes aimed at influencing his actions as the panel's leader.

Dalaly, 71, previously agreed to plead guilty to paying a bribe to Johnson. The maximum penalty under federal law is 10 years of imprisonment, three years of supervised release and a fine of $250,000.

While seeking licenses from Rick Johnson, Dalaly gave at least $68,200 in cash payments and other benefits to Johnson through his companies, including paying for Johnson to travel on two private chartered flights from Michigan to Canada, where some individuals involved in Pharmaco were located.

Dalaly had the understanding that the expenditures benefiting Johnson "were offered and given to influence or reward Johnson," according to his plea agreement.

Johnson, who state law barred from having unofficial communications with applicants, conveyed to Dalaly that he would provide Dalaly with information to assist his company and would expedite the review of its applications for licenses, according to federal prosecutors.

Dalaly was a "facilitator" for the cannabis company Pharmaco, Cassar said. In October 2018, the licensing board voted to "pre-qualify" Pharmaco for licensing, an initial step in the state's licensing process.

Then, in February and April 2019, the licensing board voted in favor of giving Pharmaco five provisioning center licenses, according to minutes from the meetings. Three of the licenses came at the April 25, 2019, meeting, which was the final session before the board disbanded.

Johnson was one of three members of the five-person board who supported licensing Pharmaco in April 2019, according to the minutes. As part of Rick Johnson's plea agreement, federal authorities have agreed not to charge his wife, Jan Johnson, for her role in the bribery scheme, according to the deal.

In September 2019, after the licensing board's duties were moved to a regulatory agency, Pharmaco registered to lobby Michigan officials and hired the multi-client Lansing lobbying firm Governmental Consultant Services Inc. On its lobbying registration, Pharmaco listed an address in Farmington Hills that has also been used by Dalaly on campaign contributions and by his business, DJK Group.

Orlene Hawks, the director of the Michigan Department of Licensing and Regulatory Affairs, is married to Mike Hawks, CEO and co-owner of Governmental Consultant Services Inc., known in Lansing as GCSI. The licensing department includes the state's Cannabis Regulatory Agency, previously known as the Marijuana Regulatory Agency, which took control of licensing marijuana businesses after Democratic Gov. Gretchen Whitmer disbanded the board Johnson chaired in April 2019.

Bill Nowling, a spokesman for GCSI, said the lobbying firm "played no role in helping Pharmaco obtain" approval from the now-defunct marijuana licensing board.

"In fact, the Cannabis Regulatory Agency subsequently revoked Pharmaco’s license for numerous violations," Nowling said in a statement. "GCSI CEO Mike Hawks did not work on this account and does not represent clients before the Michigan Department of Licensing and Regulatory Affairs."

On July 21, Whitmer's office said Orlene Hawks would be retiring, effective July 30. Hawks, 49, was a 25-year veteran of state government.

Pharmaco ended its lobbying registration with GCSI on Dec. 31, 2021, state records show.

In a consent order from February 2022, the state's marijuana regulatory agency fined Pharmaco $40,000 for a series of legal violations and required four individuals and a business entity involved in the company to sell their interest, state records show.

The interactions between Rick Johnson and Dalaly came as regulators were laying the groundwork for Michigan's marijuana industry.

State lawmakers approved policies for medical marijuana businesses and created the licensing board in 2016. Then-Senate Majority Leader Arlan Meekhof, a Republican from Grand Haven, nominated Johnson for the panel, and then-Gov. Rick Snyder, a Republican, appointed Johnson to lead it on May 26, 2017.

In 2015, Dalaly was CEO of Michigan Green Technologies and touted in a press release his work with legislators in updating the state medical marijuana laws.

“The participants will flourish under proper legal protection that law enforcement can embrace, and the state of Michigan and its citizens will benefit substantially," Dalaly said, according to the 2015 press release.

Dalaly had spent the previous 28 years providing hospital management services to dozens of hospitals worldwide, according to the release.

Dalaly emigrated at age 11 from Iraq in 1963 and got his start in business working with relatives in area supermarkets, according to a 1996 Crain's Detroit Business article.


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