united-states corporate-law
Legality of Big Tobacco moving into Big Marijuana?
<p>I've been doing some research for a presentation I'm going to do. The proposition would be that a Big Tobacco company (Altria - Phillip Morris) transition into growing and distributing marijuana.</p>

<p>My research has led to a lot of skepticism mainly around legality, but also that big tobacco companies are selling a completely different product and prefer to not get more scrutiny and regulations over marijuana.</p>

<p>However, my plan only needs to be viable. I am curious about the legality of Altria from getting into this.</p>

<p>Would Altria be able to incorporate a completely new company/open a subsidiary that would operate marijuana growing operations in states that have legalized some form of marijuana? I know that controlling interest in a firm rolls up to the balance sheet of Altria so just wanted to know this wouldn't be an issue.</p>

<p>We are looking to target one state that could produce and allow us to legally distribute to all other legalized states (NW Region for Washington, Oregon, California, etc).</p>

<p>The industry right now is running into commerce issues because banks are federally regulated, credit/debit/bank cards can't by used, so they only operate in cash.</p>

<p>For Washington, the answer is in part that <em>nobody</em> new can produce marijuana – the period for applying for a license was a month at the end of 2013. But if you set that aside, the regulations governing producer licenses are <a href="http://app.leg.wa.gov/wac/default.aspx?cite=314-55" rel="nofollow noreferrer">here</a>, especially <a href="http://app.leg.wa.gov/wac/default.aspx?cite=314-55-075" rel="nofollow noreferrer">here</a> for producer requirements. <a href="http://app.leg.wa.gov/wac/default.aspx?cite=314-55-035" rel="nofollow noreferrer">This section</a> spells out license qualifications, wherein lies the rub. Suppose a publicly held corporation wanted to produce, then by WAC 314-55-035, you first determine the "true parties of interest", which would be "All corporate officers (or persons with equivalent title) and their spouses. All stockholders and their spouses". These parties are subject to vetting, and,</p>

<blockquote>
  <p>After licensure, a true party of interest, including financiers, must
  continue to disclose the source of funds for all moneys invested in
  the licensed business. The WSLCB must approve these funds prior to
  investing them into the business.</p>
</blockquote>

<p>They operate a <a href="http://app.leg.wa.gov/wac/default.aspx?cite=314-55-040" rel="nofollow noreferrer">point system for criminal records</a>, and do not normally issue a license if you have more than 8 points. You get 12 points for a felony conviction, 5 for a gross mindemanor, 4 for a misdemeanor, and 8 for being under supervision for a felony conviction. There are also "<a href="http://app.leg.wa.gov/wac/default.aspx?cite=314-55-045" rel="nofollow noreferrer">other violations</a>" such as 4+ regulatory violations, which are a permanent disbarment from a marijuana license.</p>

<p>Apart from age requirements (everyone at a production facility must be over 21) and the violation filter, there is no specific regulation pertaining to what kind of work you do. However, if the stated rules for publicly held corporations is enforced and they check the criminal histories of all of the true parties of interest, then there is effectively no possibility for a tobacco corporation – or a software corporation – to produce marijuana in Washington. There is in fact a contrast between the definitions of "true party of interest", with respect to <a href="http://app.leg.wa.gov/wac/default.aspx?cite=314-07-035" rel="nofollow noreferrer">liquor</a> vs. marijuana licenses. There is a similar criminal vetting of applicants for liquor license which includes board members. For a liquor license, it does <em>not</em> include stockholders in the case of a publicly held corporation, and only includes stockholders with more that 10% interest for a privately held corporation, whereas for a marijuana license it includes all stockholders. </p>
