A top Oregon watchdog issued a forceful defense of an audit examining the state’s marijuana regulations Friday amid continued fallout from departing Secretary of State Shemia Fagan’s ties to an embattled cannabis company.
Fagan resigned this week after it came to light that she accepted a lucrative consulting contract in February from an affiliate of marijuana chain La Mota. Records show she sought input from Rosa Cazares, La Mota’s co-owner, on the planned audit months before she began moonlighting for the company.
Audits Director Kip Memmott said Fagan, who oversees the state audit division, helped establish the initial scope of the pot audit and reviewed the report before its public release, but otherwise had no say on what went into it.
“She had no input on the findings, conclusions or recommendations that appear in the final audit report,” he wrote in a publicly shared letter titled “Rebuilding Trust In Audits.” “There was nothing improper by the division with how this audit was conducted.”
“Our independence, even from our boss, is a core principle in our work,” Memmott said.
Earlier this week, Gov. Tina Kotek ordered the Oregon Department of Justice to examine the audit.
Under the deal she quietly took in February, Fagan was paid $10,000 a month to help Cazares and fellow co-owner Aaron Mitchell expand their business into other states. They promised Fagan, who earns $77,000 annually as Secretary of State, $30,000 bonuses if she helped the company obtain licenses beyond Oregon and New Mexico, where it already holds them.
The cannabis couple, who owe millions of dollars in federal income and state cannabis taxes and face numerous workplace complaints and lawsuits, have been among the secretary of state’s top political donors. And they played a role in helping Fagan’s office shape the cannabis audit that called on Oregon marijuana regulators to loosen rules to help the industry.
Records show Fagan, a Democrat, sought input on the audit from Cazares just weeks after entering office in January 2021.
She also recommended that her staff include Cazares’ input in the audit process and her auditors obliged, filling six pages of notes from an interview with Cazares.
Cazares was highly critical of the Oregon Liquor and Cannabis Commission, saying overregulation and high fees were stifling the cannabis industry and the agency needed new leadership.
State regulators were surprised by the pro-industry stance of the final audit, which was released last week. The review minimized illegal market diversion as a threat and instead questioned what it suggested were costly security requirements.
However, Gary Blackmer, who spent decades as an Oregon state auditor, told The Oregonian/OregonLive this week that cannabis review so far appears to be above board.
“It’s a common procedure for auditors to contact stakeholders to get a perspective on an agency’s performance, whether it’s advocates for seniors, or fishermen, or clients,” he said. “When there are multiple perspectives, auditors try to ensure they are hearing all sides.”
“They don’t take these statements as fact, of course, and no quotes get into the audit report,” Blackmer continued. “Auditors do their own research and analysis, and what goes in the audit are only those conclusions supported by objective facts.”
In his letter Friday, Memmott, who was paid $216,004 in fiscal year 2022, conceded that Fagan’s actions had cast a pall over the work of the audit division that would require time to repair.
“I understand why many are concerned – and why the governor recommended an independent third-party investigation into the audit,” he said. “Trust isn’t owed to us. It’s something we must earn.”
Noelle Crombie and Hillary Borrud contributed to this report.
— Shane Dixon Kavanaugh; 503-294-7632
Email at skavanaugh@oregonian.com
Follow on Twitter @shanedkavanaugh
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