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Updated Aug. 13: On Wednesday, Ohio's elections chief confirmed that ResponsibleOhio's marijuana legalization measure will be on the November ballot, according to The Center for Public Integrity. But state lawmakers have offered a competing ballot measure that would make it tougher to amend the state Constitution with a ballot initiative that would economically benefit a select group or create a monopoly.
COLUMBUS, Ohio – In this perennial swing state, a fascinating political experiment is unfolding this year.
A group of wealthy investors is betting tens of millions of dollars on a ballot initiative that could net them billions if Buckeye State voters decide this November to legalize marijuana – in a very particular way.
Along with The Center for Public Integrity, America Tonight tracked the story of Ohio's unique marijuana ballot initiative from its Capitol to its cornfields to see if voters are aware of the fine print and if they care.
Across the state, blue-shirted workers for the ResponsibleOhio political action committee have been collecting voters' signatures – gathering more than 550,000 so far – in hopes of qualifying their medical and recreational legalization effort for the November ballot.
If they succeed and voters pass the measure, Ohio could become the fifth state to legalize recreational use of the drug and the investors in the 10 limited liability companies backing ResponsibleOhio's $20 million budget – massive for a single ballot initiative in any state (see CPI story at left and interactive graphics below) – stand to have first crack at legally growing marijuana in a state with 11.6 million residents.
But ResponsibleOhio's proposal, which would essentially bake the LLCs' business model into the state Constitution, has raised hackles from some people who favor other efforts to legalize pot.
In a column for High Times, Jon Gettman, a former national director for NORML, said Mooney's group is trying to use Ohio's government to advance private interests and use criminal law to support a constitutionally mandated monopoly.
"ResponsibleOhio argues that they are not establishing a monopoly because their 10 grow facilities will have to 'compete with each other on price and quality, which is the exact opposite of a monopoly. There is no coordination between them, they will be trying to make money by selling the best goods at the best prices to stores, dispensaries and manufacturers,'" Gettman wrote. "The proper description, then, is oligopoly – the control of a closed market by a few firms, commonly referred to as a cartel."
A March poll by Quinnipiac University found that more than 8 in 10 Ohio voters support medicinal marijuana while a small majority favors allowing people to possess a small amount of the drug for personal use.
To get a better understanding of the potential market for legalized pot in Ohio, America Tonight spoke with Alan Mooney, a Columbus-based financial adviser, who is a major stakeholder in one LLC supporting ResponsibleOhio with the hopes of developing a booming wholesale marijuana business. He said he thinks the marijuana industry could surpass the automotive industry in Ohio and create at least 15,000 new jobs. Answers have been edited for brevity and clarity.
Lisa Fletcher: How did you get involved in the effort to legalize marijuana in Ohio?
Alan Mooney: I was involved with Children's Hospital 20 years ago with children who had epilepsy. The families approached me a little bit over a year ago and said, "We think it's going to get legalized at a certain point in the future, could you represent our interests?" And I went, "Oh, no, this is a subject I don't want anything to do with. It's controversial, it's not positive. I don't even approve." After several weeks of meeting families and listening to the stories and doctors, I went, "OK, I'll help you."
I am a capitalist. I am a Wall Streeter – a Republican. All those things say I am not for marijuana.
I looked at the groups in Ohio that were trying to legalize for the last 17 years. They're all great people and they maybe paved the way, but [had] none of the skills or financial understanding to do something of this magnitude in this state. This is the most conservative place in the world. This is the heart of America.
I wanted to approach it on a straight business side. Through some contacts, I ran into Ian James. And Ian's a [political] strategist – an extraordinary professional, brilliant man, one of the most professional people. But he's totally on the opposite side of the world from me. He's a Democrat, oh my gosh! He's for things that I'm against. We had a hard time just in the first few minutes until we got to the real subject and then we both were on the same path.
I realized that I had gone from being 100 percent against this to now being over halfway for it, but still had all kinds of prejudices and bigotry in my mind that I'm trying to understand. I'd heard all the propaganda the government had put out for years.
Under this umbrella of ResponsibleOhio, there are 10 groups that have decided that they are essentially going to pool a portion of their money to put this before voters to produce a robust and compelling advertising campaign that's going to get people to pass this. So there's collaboration between those groups?
If you talk to any of the other investors, they are going to be adamantly and totally against everything I think I'm going to do in my growth. They're going to want to brand their lines, they're going to want to have their retail outlets, they're going to be doing their capitalization and we're in competition.
Is it fair to say you're not in competition yet?
Yet. The only thing we have in common, really, is going to be ResponsibleOhio, which is a political PAC group that each put money into to take it through the legal process.
Most entrepreneurs are bootstrap ... no research, no analysis, no mathematical understanding of what they're doing. I've come from the totally different side of the world. I look at 2,000 investments a year ... and maybe we do two a year.
So let me play devil's advocate here. You're a brilliant businessman, obviously, and you're one of the most widely respected financial guys in the state, if not the most respected, and you said that no financial dummies are involved at this point. So you got all these really smart financial people together who say, "We're going to be in competition eventually, but right now, we are going to amass our brilliant minds and figure out how to get this passed, so we can be in a position to then compete with each other"?
It's like bringing fighters together to put together a fight in a ring. And the putting together and promoting it, yes, we're in some level of collusion to do that. But when we get in the ring? Oh, no. This is going to be tough business all the way.
You said you got to the point where you were about 50 percent there. What was the trigger that got you all in?
I started going to California and Colorado, states that were legalizing it, and I had a hard time finding real businesspeople; I found a lot of great entrepreneurs, but most entrepreneurs are bootstrap, "I'll start a business because I think it's a good idea," no research, no analysis, no mathematical understanding of what they're doing.
I've come from the totally different side of the world. I look at 2,000 investments a year, narrow it down to 200, bring it down to 36 and each month, bring in a team that looks over three and maybe we do two a year.
Trying to do that [with marijuana], it's insanity. If you ask most people involved right now, nobody has found – maybe other than me – the Rosetta Stone, the algorithm of the mathematics of this, so every person's got a different opinion right now. Every one of the partners [is thinking],"Oh, my gosh, how much of my capital should I put into what I'm doing up front?" I've never seen a business [come] together with less factual information at that level. I've drilled oil wells out in the middle of the Gulf – a mile underground – something nobody else had ever done before, but I knew what my costs were, I knew what my probabilities were, I knew what I was getting into. And this, you don't.
So you're looking at professionalizing an industry that's never been professionalized?
That's what we're doing in Ohio. ResponsibleOhio really is "responsible Ohio"; these people are some of the highest integrity, the most savvy and, by the way, you're swimming with sharks. They are some of the most financially intelligent businesspeople I've ever met.
Do people know what the return on investment is going to be here?
They have no idea. They can't triangulate the number, they don't have any point of reference. Can you tell me what a pound of cannabis is going to sell for in Ohio?
Not a clue.
The price in Colorado by competition has already dropped 70 percent. Most mathematicians and financial minds said, "Gosh, whatever Colorado is, we can look at the demographics of Ohio and make a mathematical correlation." That doesn't get you anywhere in this business, because without the other factors, you can't triangulate the numbers you need to make a business plan.
How far off do you think the investment estimates were?
[The 10 LLCs each] had to have an indication of an ability to finance $12 million ... [but] $46 million is my guesstimation. That's fully operational: plants, employees, lights, electricity, building, security. You're going to have $200 million or $300 million potentially in every one of these warehouses. There isn't a bank in the state, probably a bank in the United States, that has that kind of cash in it.
What kind of revenue or profit are you projecting in the first year or so?
I've talked to the top six growers in [Colorado] and even that's arguable. Who are they? Everybody's in competition. But I did find the Rosetta Stone while I was up there, a key factor that I could use to start running the real mathematical equations on this.
One of the biggest factors that nobody seems to even understand is the taxation of all this. Right now, it's a Level One federal drug. That means at beginning rate, a 50 percent flat tax with no write-offs off the top. And then, in our proposal, you have on the growers, a 15 percent [flat] state tax, no write offs. That's like having a 70 percent tax on your overhead without any write off. Nobody would go in business doing that.
Unless there's a profit incentive that is so astronomical that it doesn't matter.
But you don't know what that number is again. You're all guessing at it.
But a lot of really, really smart financial guys are doing the guessing.
Well, I can handle that. I have the financial capital. I watched all the groups in Ohio and went and interviewed most of them and looked at it as an analyst. I was asked, "What's the probability of any of them getting this done?" For 17 years, lots of people, tens of thousands of people in Ohio tried to change the law.
I sit down and estimate that early on, it would probably take me at least $3 million to $4 million to get it on the ballot. That number was so understated, that was so unrealistic of me. We want to go in and fully capitalize, because we can't run back to a bank and say, "Oh, we need some more capital." This subject's taboo right now in the banking world.
What happens when you bring on the world's largest grower, Ohio? This isn't some farmer with a [moonshine] still in his back 40 in the early '20s. This is talking about Maker's Mark or Chivas or major corporations that now manufacture commercially. This industry is going to go through a time warp like that at a speed that we've never seen any industry in the world happen.
Wall Street still hasn't woke up and begun to realize the magnitude of what we're talking about ... We're moving a $100 billion business that's been underground, not taxed in America, above ground and taxed at a level that no other business can survive being taxed.
Do you see this as important or as large as the auto industry or oil?
The wildest estimates I've heard so far was Ohio might be a billion-dollar industry. I don't think that's even close. I think it's going to be over $10 billion in Ohio, so I think it's going to be bigger than GM and the automotive industry is in this state. I think in the United States, I've got a proposal in front of me right now that their estimation's over $100 billion industry.
Billion with a "B"?
B. Wall Street still hasn't woke up and begun to realize the magnitude of what we're talking about. This is beyond anything I've ever seen in my life. We're moving a $100 billion business that's been underground, not taxed in America, above ground and taxed at a level that no other business can survive being taxed and people are still willing to put their money into it? Oh my gosh, that's because they sensed what you're talking about.
Have you had anybody offer you money to get in with your LLC or buy out your position?
Sure. I've had people offer me 10 times what I've already invested to buy out my interest. So whatever I thought that interest was worth last November, today it's worth 10 times that. By Nov. 1, I think each one of these partnerships will be worth – without growing one plant – the day this passes the ballot, each partnership's worth over $1 billion.
If I came to you today and I said, "I'll give you $100 million for your position," you walk away?
Yeah, already have.
If this passes, are you going to feel as though you're part of a monopoly?
Oh, no. I wish I could have a monopoly. This isn't any place close to a monopoly. The truth is a monopoly is one. [We] start off with 10 corporations that are going into competition day one. [President] Obama tomorrow morning could say, "This is a Level Three drug now and by the way, it can cross interstate lines." Then, all of a sudden, I'm competing with 5,000 people before I ever get my first store open, right? I wouldn't call that a monopoly. I'd just say, "We were the first guy on the street."
What's the greater good here?
If we want to ignore the 1 million medical needs in Ohio alone, I can tell you that there's probably close to 1,000 businesses that have never existed before in Ohio that are getting ready [for[ some entrepreneur to jump in. Retail stores, there's going to be approximately 1,100 of them open up, plus maybe 300 medical dispensaries.
Is it a false framing of the issue to say this shouldn't pass because a very few number of people are going to get very wealthy because of it?
No, no. Capitalism is part of what made America great. From day one, this country was about capitalism, that's what the freedom of America's been about, is the ability to raise the capital, to go change the political environment and be able to adopt it. Our system was built for this. I am a capitalist and I really believe in what we do as capitalists …
The guys doing this are some of the best people with the highest ideals and the highest responsibilities I've ever met in my life. And the fact that they came together, I think, is a reflection of Ian and Jimmy Gould. Why would they come up with a silly name like ResponsibleOhio?
They knew they were going to be held accountable by the media, by everybody, didn't they? They started off day one saying, "We want to use best practices, we want to do it to the higher standards," that's idealism at a level in capitalism that I want to be part of always. But normally, when you talk to people like that, they're so idealistic. Their heads are in the clouds, they don't know what reality is.
These guys were a little bit – in my opinion – in that category. They had the capital to take the risk.
Is there anything we haven't covered?
The fear factor. I think fear from politicians, fear from Wall Street … If we all knew what the outcome was going to be, that would be an easy decision. This isn't easy at all.
Jimmy and Ian and the people who have put this together, you can look at what they've done and said, "Oh, I could have done that." You're right. You could have, but you didn't, and most people really didn't even have the ability, the knowledge or the research to be able to raise the money to do it.
I've never seen anything in this country, in the world come together like this with this kind of money. Ohio is doing something that the whole world right now is paying attention to …
The politicians don't see it coming right now and don't even realize this may be the biggest political debate item by the time we get to a presidential convention. Even my governor is asleep at the wheel on that. If John Kasich really wants to be president, the best thing, John, you can do is walk across the the state line to Kentucky and say to Rand Paul, "I want you to be my running mate," because Rand gets the subject.
And I'm going to appeal to the 87 percent of the voters. That's how you get to the White House. But politicians right now are scared to do that.
We've got a governor in New Jersey that just did something politically on the subject that blew my mind away. He came out and said, "If I'm elected president, I'll roll back every state and I'll stop this marijuana legalization process." He threw down on all of his Republican buddies, didn't he?
He's asking every one of them, "Come out and make a public statement. Where are you, John Kasich? Where are you? Don't hide in the wings and not address the question, answer the question." And he told every reporter in the country, "Go ask my competition."
Now he's not concerned right now about the Democrats at all. First thing is, "I got to be the Republican nominee if I want to have a chance to be president." He just put all his competitors in a box, didn't he? This is going to happen at a presidential level. This is going to be the biggest debated situation in America as we run for the next president.