Michigan: Former House Speaker among four charged in public corruption scheme

Michigan: Former House Speaker among four charged in public corruption scheme

06 Apr 2023 ( The Detroit News )

Former House Speaker Rick Johnson received more than $100,000 in cash bribes and free flights while wielding the power to pick which businesses could enter Michigan’s marijuana industry, according to prosecutors who unveiled Thursday the largest public corruption scandal in the state’s capital in 30 years.

Johnson, 70, a Republican from LeRoy who served as chairman of the Medical Marihuana Licensing Board, pocketed the bribes in exchange for licenses to launch marijuana facilities at the dawn of Michigan’s cannabis market, federal officials said. The bribes included free private jet flights from an Oakland County businessman, Grand Rapids U.S. Attorney Mark Totten said.

At a press conference Thursday in downtown Lansing with the Capitol building in the background, Totten unveiled charges against Johnson and three other marijuana industry figures while vowing the bribery investigation was ongoing. Totten emphasized public corruption was a “poison” to democracy and noted the marijuana industry has been compared to a “modern-day gold rush.”

Appointed by then-Gov. Rick Snyder, Johnson was the chairman of the state’s medical marijuana licensing board from May 2017 through April 2019. The investigation into his actions began in December 2017, Totten said.

“Certainly, what I have described today should give anybody reason to question the process and what effect all of these payments of money had on the chair of the board who was essentially serving as one of the key gatekeepers at the beginning of this fledgling industry,” Totten said.

Johnson was charged with accepting bribes, including at least $68,200, from businessman John Dawood Dalaly. Dalaly, 70, of West Bloomfield, was charged with paying bribes to Johnson.

Also charged Thursday are two lobbyists who were charged with conspiracy to commit bribery: Brian Pierce, 45, of Midland and Vincent Brown, 32, of Royal Oak.

All four have reached plea agreements with the government and are cooperating with the FBI and U.S. Attorney’s Office, Totten said.

“Johnson accepted these bribes corruptly … with the understanding that these bribes were offered to influence him or reward him for actions he might take,” Totten told reporters.

Johnson provided ‘non-public info’

Brown and Pierce, who previously worked as staffers in the state Legislature, were part of two lobbying businesses, Philip Alan Brown Consulting and Michigan Growers Consultants, which were based out of the same downtown Lansing office building that Johnson’s old firm, Dodak Johnson, operated out of.

Brown and Pierce made payments to Johnson “to influence and reward him for providing assistance” with their clients’ applications for medical marijuana licenses, according to a court filing by the U.S. Attorney’s Office on Thursday.

From June 8, 2017, to Feb. 15, 2018, Brown and Pierce transferred a total of $19,000 from their lobbying firms to business entities connected to Johnson, according to the court filing. And Johnson provided those who gave him bribes with “valuable non-public information” about anticipated rules and the licensing board’s operations, according to court documents.

While Dalaly’s company was seeking a license from Johnson’s board, Dalaly paid for Johnson’s travel on two private chartered flights from Michigan to Canada on a Learjet 35 and King Air 200 aircraft, according to Dalaly’s plea agreement.

Meanwhile, state law banned members of the licensing board from having outside communications with applicants or their representatives. On required lobbying disclosures with the state, the firms of Pierce and Brown reported having only two clients: a nonprofit trade association called Michigan Responsibility Council and New York-based Sunshine Health Freedom Foundation.

Pierce’s lawyer, Ben Gonek, declined comment. Brown’s lawyer, David Griem, could not be reached Thursday for an immediate comment.

Brian Hanna, executive director of the Michigan Cannabis Regulatory Agency, said state regulators are reviewing the information that has been made available and “will begin investigations as warranted.”

“Marijuana industry stakeholders in Michigan can be assured that if we find that any businesses broke the law or rules, disciplinary action will be pursued,” Hanna said.

Ongoing investigation

At Thursday’s press conference, Totten was joined by James Tarasca, special agent in charge of the FBI in Michigan, who helped in the investigation.

Totten declined to say whether others would be charged in the ongoing investigation, but there are multiple targets who have not been charged with wrongdoing, The Detroit News previously reported.

“There’s really not much I can say at this point except that the people I have named today as defendants are cooperating,” Totten said.

Johnson has agreed to plead guilty to accepting a bribe, according to his agreement with the U.S. Attorney’s Office. The maximum potential penalty for the crime is 10 years in prison and a $250,000 fine, according to the document.

The former House speaker has also agreed to forfeit $110,200, which represents the proceeds he received from the conduct that brought the charge, according to the plea deal.

“This is finally going to send a message that this is unacceptable conduct,” said Matthew Schneider, the former U.S. Attorney in Detroit who was briefed on the investigation before leaving office in 2021 and joining the Honigman law firm.

“This is just the start,” Schneider added. “It is the first bullet out of the gun, and the U.S. Attorney’s Office has a very large magazine in its pistol.”

Key figures targeted

The criminal cases are expected to become the largest federal corruption case in Michigan’s capital in a generation. The News’ reporting about the investigation has raised new questions about financial pressures on Lansing, the state’s ethics policies while the GOP controlled the Legislature and whether politicians, businessmen and lobbyists rigged Michigan’s burgeoning marijuana industry.

The News exclusively revealed the investigation in February, reporting that FBI agents were scrutinizing Johnson’s nearly two-year tenure as chairman of the state board that determined which businesses could sell and grow medical marijuana.

The News later reported that Pierce, 45, of Midland, was under investigation and that FBI agents had searched his home in August 2020 as part of a broader series of raids targeting people central to the probe.

Dalaly’s website portrays him as a prolific Michigan businessman who developed and marketed international health care services.

Prosecutors said he had two marijuana-related businesses, including one that sought state licenses to operate provisioning centers and one firm that explored creating a digital currency platform for marijuana transactions.

In a separate instance, Johnson voted in support of a marijuana business during his tenure leading the board and then accepted a $75,000 loan from an investor with a stake in the deal, a Detroit News investigation revealed.

Court records from a civil lawsuit pointed to a tangled, troubled deal between the Republican farmer from LeRoy who led the Medical Marihuana Licensing Board for two years and Bloomfield Hills-based real estate investment company MSY Capital Partners.

The loan violated the spirit of a state law aimed at preventing corruption, according to the legislator who sponsored the policy, and raised new concerns about secret financial arrangements at the dawn of Michigan’s marijuana industry, which generated more than $2 billion in sales in 2022.

On April 25, 2019 — the date of the final meeting of the medical marijuana board before it was disbanded — Johnson and two other panel members voted to pre-qualify JAR Capital LLC for a pot license. One of the investors in JAR Capital was Metro Detroit lawyer Gregory Yatooma.

Then, on June 24, 2019, MSY Capital Partners, a firm run by members of the Yatooma family, loaned Johnson $75,000, according to court records and internal documents provided by MSY. Those documents show Johnson personally emailed Gregory Yatooma on June 18, 2019, seeking a $75,000 loan to “pay off” another short-term loan from a “business associate” and to gain “funds for finishing up spring 2019 planting.”

A 2016 law creating the marijuana licensing board prohibited board members from entering into a contract with an applicant, including those with a 10% ownership interest in an applicant or those who manage the applicant, for four years after their service on the board. While Gregory Yatooma’s name was listed in the JAR Capital application, Gregory Yatooma spokesman Mort Meisner said he was a minority investor of less than 10% ownership in the marijuana company.

Meisner, speaking on behalf of brothers Christopher and Gregory Yatooma, two members of MSY Capital Partners, said in a statement the $75,000 loan had nothing to do with Johnson’s role on the licensing board. MSY also provided emails that showed attempts to collect on the loan throughout most of 2020 before Johnson eventually repaid them. The loan had a 60-day term with varying interest rates depending on the status of repayment.”MSY regrets providing the loan, as they did not know the issues surrounding Mr. Johnson, and unequivocally the loan was not made for any actions during Mr. Johnson’s time on the board,” Meisner said, referencing what he called “Johnson’s consistent record of bad behavior.”