SLO rejects cannabis company’s appeal, citing ‘confirmed acts of criminal misconduct’
About 50 employees of a San Luis Obispo County cannabis company lobbied Tuesday for the San Luis Obispo City Council to reverse city staff’s decision to revoke its retail shop operator permit.
The public appeal from Natural Healing Center included a rally outside City Hall and advocacy during public comment at the following council meeting. But the effort came to no avail.
Natural Healing Center (NHC) — which has retail shops in Morro Bay, Grover Beach and Lemoore — asked the City Council to allow for its nearly completed San Luis Obispo store to open at 2640 Broad St.
“I hope that they’ll understand where we’re coming from, what we represent and bring to the community, and hopefully change their decision,” NHC employee Josh Bulmer said at Tuesday’s rally. “You’ve literally got citizens and people that live here in SLO, and they’re depending on that store to open for their careers.”
“The amount of opportunity that would be missed out on, not only for the community but for the staff, would be immense,” Bulmer added.
In response to NHC workers’ comments, city manager Derek Johnson said at Tuesday’s meeting that the decision to revoke the company’s cannabis operator permit was a difficult one. However, he said, the facts supported disqualification.
Johnson said the company’s application for permitting needed to “adhere to both truthfulness and a background check and unfortunately we are in the situation that the facts led staff to its decision.”
SLO revokes cannabis company’s permit
The city revoked NHC’s permit on Oct. 6, citing falsified documents submitted by company founder and former majority owner Helios Dayspring during the business’ permitting process.
The city approved the company’s retail operator permit in March 2019.
In July, Dayspring pleaded guilty to one count each of bribery and filing a false tax return, admitting to those illegal activities during a period leading up to the falsified city operator permit application, San Luis Obispo officials said.
“(Dayspring) told city officials that he had not ever spent money for illegal purposes, falsified any documents or was involved in tax fraud or evasion of taxes,” the city said in a news release. “However, he now admits to committing several crimes before the application period, including making a false tax return in 2018, underreporting his individual taxable income, bribing an elected official and attempting to bribe another elected official.”
The city has three cannabis retail permit slots, with Megan’s Organic Market and SLOCal Roots holding the other two.
NHC employees lobbied Tuesday to allow the business to open under its new majority ownership. Dayspring’s girlfriend, Valnette Garcia, now controls the company.
According to Joe Armendariz, NHC government affairs manager, the company’s “flagship dispensary” was originally slated to open Friday. A tour of the facility on Tuesday revealed a new interior with a customer-serving kiosk, furniture, flooring and lighting in place.
Armendariz said that Garcia has broken no laws, and contends it’s unfair to associate her involvement with Dayspring’s criminal case.
Garcia was one of several NHC employees who spoke during public comment Tuesday. She said the ability to open the San Luis Obispo shop will help save her business.
“I helped start, build and manage a business that employs nearly 100 talented locals that pays millions of annual taxes, generates over 40 million in annual sales, and makes the lives of tens of thousands of people better, including many with chronic pain and many veterans suffering PTSD,” Garcia said.
A speaker at Tuesday’s rally who identified herself as Christian said the business offered her a livelihood.
“Without NHC, I don’t know where I would be right now,” she said. “I’ve been on my own since 17, and I’m about to be 30, and I’m finally at a place to where I can support not only myself but my family.”
Protesters wore white t-shirts that read “Support NHC SLO” on the front and “Save My Career” on the back.
City denies Natural Healing Center efforts
After the rally kicked off in front of City Hall at 5 p.m., San Luis Obispo officials sent a news release re-affirming NHC’s disqualification at 5:20 p.m.
“San Luis Obispo city manager Derek Johnson notified Natural Healing Center today that the automatic disqualification of Natural Healing Center’s commercial cannabis operator permit application remains unchanged,” the release said. “The company cannot activate, obtain or hold an operator permit to conduct commercial cannabis activity at 2640 Broad St. in San Luis Obispo, which is not yet open to the public.”
“This decision comes after city officials met with Natural Healing Center’s representatives last week and considered their response to the automatic disqualification on Oct. 6, 2021,” the city added. “Natural Healing Center may seek judicial review within 90 days.”
If NHC chooses to pursue a judicial review, that would mean a civil court process.
City Council member Andy Pease said she enjoyed hearing the stories of NHC employees, which included testimonies of hard work, economic opportunity and dedication to the cannabis industry.
But Pease deferred to the staff’s automatic disqualification under city law, honoring the integrity of that process.
“I think we totally sympathize with the folks and what you’re going through and I really just appreciate people being part of the community,” Pease said. “This is a super unfortunate situation overall.”
In the city’s Oct. 6 notice of disqualification to NHC, San Luis Obispo officials said Dayspring underreported his tax income by $9 million between 2014 and 2018, resulting in a tax loss of about $3.4 million.
The letter also states Dayspring bribed late San Luis Obispo County Supervisor Adam Hill between 2016 and 2019 with $29,000 in unreported cash, and attempted to bribe then-Grover Beach Mayor John Shoals in 2017.
Dayspring’s application stated that he’d never spent money for illegal purposes, falsified documents or evaded taxes, city officials said.
NHC also can apply for permitting in the future under its new ownership structure, Johnson said.
“It wasn’t the criminal plea itself that was the trigger,” city attorney Christine Dietrick said. “It was the information included in the criminal plea that made it very clear throughout that there were misrepresentations and omissions made throughout the application and permitting process with the city that were defined from the get-go in our processes as automatic disqualifying events.”
Did city know about business founder’s illegal activities?
As part of its argument that NHC’s application was filed as a company document, NHC lawyers say that Dayspring was a member who’s now no longer involved or associated with the current business, and thus the permit should stand.
The business’s lawyers wrote a letter to the city on Oct. 14 stating that San Luis Obispo officials were aware of some of Dayspring’s past illegal activities before he filed his application materials.
“The city was aware that Mr. Dayspring admitted that he spent money for illegal purposes, used or possessed illegal drugs, had been placed on court probation, that police had been called to his home, that he had in the past committed a battery, and that he was then involved in litigation involving fraud,” the letter from the Santa Barbara firm Reetz, Fox & Bartlett noted.
In response, Dietrick told The Tribune that Dayspring did admit that he bought marijuana before it was legal, thus spending money for illegal purposes.
But the basis of the city’s disqualification were the admissions to bribery and tax evasion, the city attorney said.
“If you look closely at our original notice, it is clear that our contention is that he did not disclose that he was bribing or attempting to bribe public officials or had an ongoing pattern of tax evasion,” Dietrick said.
“There were no prior admitted or confirmed acts of criminal misconduct directly related to cannabis business operations and occurring in a time frame relevant to the cannabis operator permit application and permitting process,” Dietrick said.
“Attempts to conflate prior rumors, unconfirmed allegations, or disclosures of past low level misconduct to the admitted federal felony misconduct at issue here are misleading and misplaced,” she added.
The city posted public documents and recordings at slocity.org/government/department-directory/community-development/cannabis.
This story was originally published October 20, 2021 at 12:57 PM with the headline "SLO rejects cannabis company’s appeal, citing ‘confirmed acts of criminal misconduct’."
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