Two new lawsuits accuse prominent Arkansas attorneys of committing fraud in order to circumvent a state residency requirement on behalf of an out-of-state client who wanted medical marijuana business licenses.
The two legal complaints assert that Little Rock law firm Steel Wright Gray is at the center of the controversy, Arkansas Business reported. Partners allegedly threw one of their own lawyers under the proverbial bus in favor of Virginia-based former businessman Edward Garcia, who passed away in 2019.
The suits claim that the firm used the plaintiffs as “decoy owners” in the licensing process, and organized a scheme in which Garcia was the true license owner and beneficiary. Straw men were used as figureheads because of a rule that 60% of any medical marijuana business must be owned by an Arkansas resident, Arkansas Business reported.
One of the suits was filed by former state lawmaker Marshall Wright – one of the namesake lawyers in Steel Wright Gray – in which he alleged that the other two partners in the firm, Alex Gray and Nate Steel, never disclosed that they were working on behalf of Garcia. Another plaintiff in that case is ex-CEO Scott Pace of the Arkansas Pharmacists Association.
The second lawsuit was reportedly filed by Ron Smith, a “purported owner” of one of the dispensaries for which Steel Wright Gray won an MMJ permit.
The firm won four of 32 MMJ licenses for clients when regulators awarded them in 2019, according to the lawsuits, including licenses for Garcia’s Virginia-based company, Pure Health Products LLC, and the Chicago-based owner Revolution Cannabis.
The scheme also involved former state Sen. Jeremy Hutchinson – a relative of former Arkansas Gov. Asa Hutchinson and son of former U.S. Sen. Tim Hutchinson, the suits alleged. Hutchinson, a former partner at Steel Wright Gray, is now serving an eight-year federal prison sentence for bribery and tax fraud, unrelated to the cannabis lawsuits.
While Pure Health Products reaped the profits and benefits of the licenses won by Steel Wright Gray, it was the plaintiffs who wound up being hit with state tax liabilities due to how the ownership deals were structured, Arkansas Business reported.
Under the deals, local corporations Big Fish of North Central Arkansas LLC of Heber Springs and River Valley Dispensary LLC of Morrilton, which both used the DBA Enlightened Dispensary, ran the four dispensaries under a management agreement with Pure Health Products.
The decoy owners, including Wright, contend their signatures on ownership documents were forged, and they were stuck with massive tax bills without receiving any profits from the dispensaries.
Wright was hit with a $74,844 tax bill in 2022 based on $287,450 in fictitious income, and another plaintiff in that case alleged being stuck with $133,923 in taxes due to $378,000 in nonexistent income.
In the second lawsuit, five plaintiffs contend they’ve been held liable for nearly $1 million in nonexistent income in 2021 alone, along with taxes assessed on the supposed income for that year and in 2022.
Steel Wright Gray have denied all wrongdoing, called the allegations “blatantly false,” and are fighting the allegations, Arkansas Business reported.