California Cannabis King Caught Up In Trump Ukraine Scandal With Giuliani
In return for supplying pro-Trump groups with foreign cash, America tied to the Ukraine scandal expected a reward of retail cannabis licenses.
A Sacramento cannabis king and his partner are tied up in the Ukraine scandal, thanks to a connection to Rudy Giuliani’s henchmen. Andrey Kukushkin — who was recently indicted by the U.S. government in an attempt to illegally use foreign campaign contributions — is a partner in a major California cannabis operation. He was allegedly plotting to use some of the foreign money to enter the green market in Nevada and elsewhere.
What does this mean for the cannabis industry as we head into the 2020 election?
The Ukraine Scandal
Well, it’s still unfolding and likely to become even more complex. However, what we already know about the scandal contains enough saucy political drama material to fill a PBS miniseries.
From a bird’s-eye view, the scandal goes like this: President Donald Trump’s personal lawyer, Rudy Giuliani, sought help from two Ukrainians in a quest to look into business dealings that former vice president Joe Biden and his family had in the Ukraine. The two Ukrainians agreed to help Giulianni investigate the president’s political rival. The pair did so in the hope that they would receive help in their efforts to broaden their business interests in the United States.
The two men, Lev Parnas and Igor Fruman, were arrested October 9. They are in custody on suspicion of funnelling foreign money toward American politicians and using that money to guide relations between Ukraine and the U.S..
Specifically, the Department of Justice alleges the Ukrainian men tried to hide a $325,000 donation to a pro-Trump political group (America First). The pair allegedly did this by funnelling it through a natural gas company they control. America First insists they won’t spend it until the matter is resolved.
Still, such direct foreign interference is against the law. That’s precisely why there was an attempt to hide it.
How Cannabis Came into the Ukraine Scandal
The twenty-one-page indictment responsible for ensnaring the two Ukrainians also indicted two American businessmen with big interests in the cannabis space. Andrey Kukushkin (who was born in Ukraine) and David Correia schemed a way to get money from a Russian oligarch into the U.S. political system. They did so using a circuitous path that would hide the source of the donations, the DOJ alleges.
In return for their efforts to ply pro-Trump groups with foreign cash, the pair were expecting a reward of retail cannabis licenses for Nevada and beyond.
In one instance, the Americans sought help in changing the rules in Nevada. This help was the acceptance of a recreational cannabis license application they sent in two months late. The charges against the Americans are making false statements to the Federal Elections Committee, conspiracy, and record falsification.
A Shady Deal Puts Two In Charge of One Third of Sacramento Cannabis
Kukushkin already has cannabis interests in California. He and his partner, Garib Karapetyan, have permits for eight dispensaries in Sacramento, according to the Sacramento Bee.
That left these guys in control of almost one-third of all the cannabis dispensaries in the city. This is something that should not legally be happening in Sacramento. The city put a cap on the number of licenses it issues to thirty. And the distribution method of said licenses is designed to prevent ownership consolidation. If a dispensary owner decides to give up, they cannot sell their business. Instead they must turn their license over to the city, which holds a lottery for it.
The Ukraine scandal exposes a weakness in Sacramento’s cannabis licenses, which the mayor has promised to investigate.
And, of course, Kukushkin’s money to get into the business didn’t come from his past profits. He got it from (where else?) a Russian businessman. But, the reason Kukushkin wanted to invest in the green space, and the reason he was able to get foreign backing for such a scheme, is simple. The cannabis business is very lucrative in states that limit the number of dispensaries.
In essence, these areas create a shortage of supply, which increases demand and thus drives up prices. Kukushkin was exploiting a legal loophole suitable for fledgling business easing fairly and carefully into the marketplace. However, instead it has artificially inflated its value. This is leading to the kind of corruption that is now ensnaring the top branches of our government.
Could the Scandal Clean Out Cannabis Corruption?
The downside here is that corrupt practices clearly exist in the cannabis business. This can only be bad for the industry as a whole. The plus side is that the recent corruption may actually end up tidying the mess some states have made of the green business.
The mayor of Sacramento is already turning the scandal into a political issue. There’s a good chance other candidates will run on it, too. The cannabis space has growing support, and the Ukraine scandal is threatening to end political careers. Furthermore, the polling is even hurting Trump in North Carolina, of all places. Any smart politico can see which way the wind is blowing.
That means we’re likely to see a change in the handling of cannabis as a subject in the 2020 election. Instead of the support-decry duality that has consumed past races expect a different stance this time. Most candidates are likely going to talk about what kind of cannabis support they favor.
Will they encourage a free market approach or simply a fine-tuning of current models that have led to corruption in both Canada and the U.S.?
It’s worth watching how the Democratic challengers change their cannabis talking points soon. There’s a good chance they’ll be looking for more nuanced measures that will legalize cannabis the right way.