Photo | Altai Brands website
By Mary Duan
Well, there’s something you don’t see every day.
That was my first thought as I headed toward a table at Eagle Chinese Restaurant in Oldtown Salinas to meet my husband for a fast lunch. I see my husband every day, natch — the thing I don’t see everyday was one table over: Rob Weakley, CEO of cannabis-edibles manufacturer Altai Brands; his attorney, Aaron Johnson, of the firm JRG LLP; and former Salinas Police Chief Kelly McMillin, whose post-retirement exploits thus far (at least based on his Instagram account) have involved a lot of golf and a lot of travel.
The scene, in fact, had all the makings of a set-up for a bad joke: A weed bro, a lawyer and a cop walk into a Chinese restaurant…
I waved at my husband and slid into the Weakley-Johnson-McMillin booth.
“I owe you a phone call,” I said, pointing to Johnson. “And I owe you two beers,” I said, pointing to McMillin (I’ve been on the losing end of an Army/Navy game bet two years in a row now). “You, I don’t think I owe anything to, although who knows anymore?” I said to Weakley. “But this is an interesting little gathering, so what’s the story?”
As I found out, the next day when we met for coffee and a chat at the Cherry Bean, it’s a good one. McMillin, a 33-year veteran of law enforcement who spent at least some time as an undercover narcotics officer, has gone all-in on weed, which became legal for retail sales and adult use on Jan. 1. In September, Altai hired him as its chief compliance officer, responsible for security, government and law enforcement relations, legislative advocacy and ensuring the company complies with all regulatory agencies.
That McMillin would enter the legal cannabis arena may be surprising to many. But a few months ago, at a Salinas City Council Meeting, local businessman Ricky Cabrera — who was then seeking permits to open a cannabis business — announced at the public meeting that McMillin would be doing his security. That came as a surprise to McMillin, who acknowledged having had a conversation about it with Cabrera, but said nothing was yet in writing.
But still, he admitted it was something he would consider.
So here’s how he went from considering it to doing it. (Note: this interview has been edited for length and clarity.)
VOMB: OK, dish. How did this happen?
Kelly McMillin: I was doing my thing, being retired and not getting any better at golf. My buddy Rudy Escalante, the former chief in Capitola, got the job working for Rob (Weakley). Rudy lives in Santa Cruz and was on the board of Janus of Santa Cruz, which is a drug and alcohol rehab center. Apparently Janus needed a new CEO and they offered him the job, and he couldn’t say no.
He called me and said he wanted to recommend me for the job at Altai.
I was intrigued, but obviously I came into it with some trepidation. I was never a cannabis crusader as a cop, not a reefer-madness kind of believer. It was a low priority thing in terms of priorities. I always used alcohol as an example — individuals can be responsible, but as a society we have an issue, so why add another intoxicant to the mix?
V: But clearly things have changed.
Yeah, that ship has sailed. And I think the position of most chiefs and most law enforcement officers is just that. The industry is here and now it needs to be compliant. That’s bringing up some real challenges.
I met with Rob and the principals before I decided to do it. I wasn’t going to stake my professional reputation on some sleazy industry. But these are very serious business people. None of them have a cannabis background, they’re all entrepreneurs and they get supply chain management, and how to track and trace and how to package—all things that translate to the manufacturing side of what we’re doing. And it speaks to how they manage the company that they’ve made a serious investment in a guy that provides no direct return. I’m the buzzkill at the office. If someone comes to me and says, ‘I want to do this,’ I’m the one who says, ‘You have to do it this way and this is what it’s going to cost.’
V: So it’s a good gig and all, but you looked like you were happily retired. How did they convince you?
I had a couple of criteria for going back to work. It had to be worth getting out of bed for in the morning and it had to be interesting. I didn’t want to go back into law enforcement work. I had offers for interim chief jobs and acting chief jbs, and you can make a lot of money in that, but I just couldn’t get fired up over it. I did 33 years and I was just done. Everything else of interest was in the San Jose area and I’d rather eat glass than go to the San Jose area.
V: You’ve entered the industry when its still in its Wild-West phase. What have you noticed?
Right now it’s really an uncontrolled industry, but the city of Salinas has been ahead of the curve largely because of Altai. They came in on a loophole in the code and the city began dealing with the process very early on. One of the biggest challenges going forward is going to be enforcement. For example, in San Diego there are 200 dispensaries, and when their laws kick in, there’s going to something like 30. So what’s going to happen? How do you get rid of the illegal ones?
Taxation is also going to be huge. We have a facility that’s taxed at $15 a square foot, then the state adds another tax, for flowers or trim, per ounce. When it’s packed and delivered to a dispensary, there’s a 5 percent fee to the city and 5 percent to the state. If a facility is unpermitted and we have to compete with someone who’s not being taxed at all, how do we stay in business?
V: I’ll bite. How do you stay in business?
The enforcement piece has to change, not from the drug use aspect but from the fair business aspect. If there is no significant penalty for someone running an illegal grow, and the barriers to lawful entry are so high—and they are, because building out a facility is very expensive and the taxes are burdensome and might be well described as confiscatory (and I’m a guy who lived on taxes) if you go to the police and say, ‘These guys are operating illegally,’ they’d say what I’d say under the same circumstances: it’s a low priority.
I think the key to enforcement is to force people to pay their taxes. If you’re found with an illegal grow, the worst thing that might happen is you’ll lose your stuff. But if you have a 10,000-foot grow, and we come in and take your stuff and lay a $135,000 tax on you and put a lien on your house and take your car because you haven’t paid your taxes…that’s an incentive to comply with the rules.
The tax rates have to come down because people, unless they’re incredibly well-funded, they can’t get into the market. We have to find the point of equilibrium while inviting the most people into the market. What’s the sweet spot? Let’s hire a Nobel-winning economist and pay him up the wazoo to come up with the program.
V: Weed became legal on Jan. 1. What does it mean for Altai?
After the first of the year, we won’t deliver to anyone who is not compliant with state law. The heartening part has been the people with in our supply chain, and the competitors we’re in industry groups with, all appear to be committed to compliance. We’re demonstrating to our vendors that we comply with state law because they won’t deal with us if we don’t. The only thing is that the BCC (state Bureau of Cannabis Control) is only going to do enforcement with licensed people, and they’re leaving unlicensed and illegal operators to local law enforcement and the locals don’t have time to do that kind of work. There are some things in the legislation that scream to be corrected. The way they’ve set up for medicinal and adult use, for example. You have to identify from the seedling stage whether its medicinal or adult use—and it’s the exact same stuff. You have to track it differently and store it differently and it puts a ridiculous burden on the industry.
V: What else is going to change after Jan. 1?
We as an industry have an obligation to do a lot of education. The weed from 35 years ago is not today’s weed. A hash brownie from college is crude by today’s standards, and the rules mean high-dose edibles are going away after July 1. So there’s going to have to be a lot of education, particularly around edibles. You sit down with a beer or a glass of wine, most people know what will happen. You sit down with a 1,000 mg. brownie, you’re going to be in the corner sucking your thumb for eight hours or throwing up violently.
The education piece is going to be really important.
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