A pudgy man in a white lab coat, protective goggles, and a white hardhat ambles down several long rows of potted marijuana plants. An industrial A/C unit cranks frigid air into the capacious grow room, located inside a 300,000-square-foot warehouse just outside Tallahassee, while an array of high-pressure sodium lights bathes the indoor crop in a sunny, golden hue.
Wearing latex black gloves, the tender gently inspects the flowery orange, green, and purple buds bursting from a cannabis plant that is so leafy it looks like a small tree.
All of this legal pot, pictured in a promotional video, belongs to Surterra Therapeutics, which teamed up with Homestead-based farm Alpha Foliage in 2015 to win a state medical marijuana license. Surterra is also building a 100,000-square-foot greenhouse in Hillsborough County. Together, the two facilities are about half the size of Marlins Park.
Jake Bergmann, Surterra Holdings CEO, is a soft-spoken entrepreneur with stylishly gelled brown hair and a neatly trimmed beard. A private equity manager who also owns a firm called Valkyrie Capital, he's one of a handful of people set to make a windfall in the burgeoning medical marijuana market. His firm's facility near the state capital is built to crank out 3,000 plants per grow cycle. Surterra has already opened two dispensaries, one in Tampa and another in Tallahassee. Plans call for six more by year's end.
The company's fast rollout recently prompted a private equity firm to predict Surterra could generate $138 million in sales by 2021. Though Bergmann won't confirm that total, he's optimistic. "We are honored outside investors believe we have such a great chance of success," Bergmann says. "In all honesty, there is no way I could estimate the number of patients we will have or future revenues."
Surterra is one of seven firms the state has chosen so far to manage the new medical marijuana business following last year's 71 percent vote in favor of a constitutional amendment that legalized it. At first, pot advocates hoped state lawmakers would establish a free marketplace where as many as a half-million patients could choose from dozens of providers.
Instead, Florida's nascent medical marijuana industry, which could be worth $1 billion by 2020, remains in the hands of seven firms — located from Tallahassee to the farmlands of South Miami-Dade. They were chosen to provide a nonpsychoactive form of weed to epilepsy patients after the state Legislature passed the Compassionate Medical Cannabis Act of 2014. Each is licensed to grow, process, and dispense cannabis. All of them, like Surterra, had to partner with Florida-based nurseries that have been in business for at least 30 years.
To get a leg up on possible new competitors, Bergmann and leaders of the other six companies have spent a combined $1.5 million on lobbyists and $667,000 in campaign contributions to Florida legislators in the last election cycle and in the 2018 matchups so far, according to a New Times review of state data. Critics — such as state Sen. Jeff Brandes — have dubbed these companies and their executives Florida's medical marijuana "cartel." During the legislative session this past spring, the St. Petersburg Republican proposed scrapping the state's current program and replacing it with one similar to Colorado's, which allows more than 500 operators to grow and sell cannabis for medicinal purposes. That bill never got out of committee.
During a special session in June, Florida lawmakers caved a little by increasing the number of marijuana-growing licenses. In August, the health department gave two new cannabis ventures the green light to launch their operations. By early October, another eight pot companies could have licenses to grow and sell medicinal weed in Florida.
But Brandes and other detractors claim the system has been set up to favor the seven companies that first secured licenses. "The laws... limit competition, inhibit access, and result in higher prices for patients," the senator says. "Florida should focus on what is best for patients."
Jodi James, executive director of the Florida Cannabis Network, agrees. Current rules prevent mom-and-pop operators from ever setting up shop. "I was hopeful we would see more of a cottage cannabis industry," James says. "The organizations that have licenses spent an awful lot of money lobbying lawmakers, and what we saw come out of the legislative and special sessions had their fingerprints all over it."
Responds Surterra's Bergmann: "Honestly, I laugh about it... In reality, we are highly regulated and compete intensely with the six other competitors."
So far, the state has authorized ingestion of pot only through vaporizers and tinctures. Smokeable buds are not allowed. And providers are limited to a maximum of 25 dispensaries.
Over the past several months, New Times dug into the backgrounds of the seven companies' current and former owners, executives, and partners. These marijuana moguls include some of the state's best-connected and savviest businesspeople. Many also have backgrounds that haven't been explored in-depth. Among them are a real-estate developer once tied to political corruption, a hedge fund manager who recruited two gambling tycoons as investors, an attorney embroiled in a burgeoning Tallahassee FBI probe, a Gainesville entrepreneur who bought a franchise from one of the largest cannabis companies in Colorado, an ex-IBM executive, a Miami mortgage broker, and some of the largest nursery operators in Florida.
A Republican rainmaker and real-estate developer from Destin, Florida, Jay Odom entered the medical marijuana game early. He is one of the founders of CHT Medical, a two-year-old company that partnered with Chestnut Hill Tree Farm of Alachua, Florida, for a license. In the past, he has had several unrelated brushes with the law. Odom, who still runs his real-estate ventures, declined to comment for this story.
In 2009, he was indicted on charges of grand theft and conspiracy to commit grand theft by Leon County State Attorney Willie Meggs in a public corruption case also involving former Florida House Speaker Ray Samson, who was indicted on the same charges.
Prosecutors accused the two of steering $6 million in state funds to the development of an airport hangar at Northwest Florida State College that Odom planned to use. The money was made to appear as if it were benefiting the school, according to news reports. However, the case unraveled two years later while both men were on trial. After Leon County Circuit Judge Terry Lewis ruled out testimony by a key witness who said he was present when Odom and Samson discussed the deal, prosecutors dropped charges against the pair.
Then, in January 2013, prosecutors hit Odom with a felony count of making more than $20,000 in illegal campaign contributions to the 2008 presidential campaign of hyperconservative candidate Arkansas Gov. Mike Huckabee.
A few weeks later, Odom worked out a deal that allowed him to plead guilty to a misdemeanor count of inducing another person to make a false statement to the Federal Election Commission. Prosecutors alleged Odom solicited dozens of his employees and their families to each make the maximum contribution of $2,300 to Huckabee's campaign. He subsequently reimbursed them with his personal funds. Odom later admitted to illegally bundling contributions not only to Huckabee but also to dozens of local, state, and federal candidates going back to the 1990s. "[Odom] claims illegally reimbursing campaign contributions was 'common' and 'everyone did it,'" a pre-sentencing report states. "[Odom] avoided public knowledge and scrutiny of the substantial financial campaign support he provided through his conduits and straw donors."
On April 23, 2013, U.S. District Judge Lacey Collier slapped Odom with a six-month sentence. Then, barely a year after emerging from his prison stint, Odom found a new business: medical marijuana. Because state law prohibits only felons from securing pot licenses in Florida, state health department officials accepted CHT Medical's application for one of the five medical marijuana licenses in 2015. (Two others would be added after lawsuits were filed.)
Now Odom stands to make a fortune. Though his name does not appear on CHT Medical's license application, he controls two companies, CBD Equity and the JBMM Group, that own a significant stake in the medical marijuana venture, according to a recently dismissed lawsuit filed in April by Odom against former CHT Medical investor Robert Beasley.
Though CHT Medical did not begin official operation until this past January because of legal challenges with the Department of Health's system for awarding licenses, the company was sold in April for $60 million, according to the Miami Herald.
Odom might have learned his lesson when it comes to political contributions. CHT Medical has donated $12,000 to 2016 and 2018 legislative election cycles.
Maria Costa-Smith, Jose Smith, and Jose Costa III
For Maria Costa-Smith, her husband Jose Smith, and her brother Jose Costa III, tilling soil has been a way of life since childhood. In 1961, family patriarch Jose Costa Sr. purchased 30 acres in South Miami-Dade to grow tomatoes in the winter and citrus in the summer. After Hurricane Andrew leveled their Redland nursery in 1992, the trio rebuilt Costa Farms into a global green conglomerate that rakes in $450 million in revenues annually. The Costas count Walmart, Home Depot, and IKEA among their biggest clients. Smith is Costa Farms' CEO, while his wife and brother-in-law are executive vice presidents.
The Costa clan owns Modern Health Concepts, one of the seven licensed companies. Today cannabis is among more than 1,500 varieties of plants the family-run nursery grows and sells across the United States.
Modern Health Concepts CEO Gregg Roberts, a former executive for the Nestlé Purina PetCare Company, calls the term marijuana cartel "unfortunate." The clean-cut entrepreneur with square-rimmed eyeglasses and a neatly trimmed salt-and-pepper goatee says the Costas decided to compete for one of the licenses in 2014: "The Costa family saw it as a new market opportunity... That is why they continued with the competitive process [for one of the licenses]."
Modern Health Concepts was awarded a license in 2015, but the Costas didn't begin growing cannabis until March 2016. The company dispensed its first medical marijuana products seven months later. Roberts says Modern Health Concepts has opened a dispensary in the Redland and is building one in downtown Bradenton. The company also plans a Lake Worth location.
To help grow their medical marijuana venture, the Costas partnered this past January with PalliaTech Inc., a Massachusetts private equity firm specializing in cannabis product development. That firm's medical marijuana expertise in other states was attractive. "They offered us best practices and proven methods," Roberts explains.
PalliaTech was founded in 2010 by Boris Jordan, an American venture capitalist of Russian descent. Jordan, who paid a cool $20 million to buy a pair of Ocean Drive penthouse condos in 2015, didn't respond to requests for an interview. An employee who answered PalliaTech's corporate number said Jordan would not be available for comment. And Jordan himself did not respond to three messages sent to his email address at his firm the Sputnik Group.
In a press statement earlier this year, PalliaTech CEO Joseph Lusardi said Modern Health Concepts had become a medical marijuana leader since beginning full operation in October 2016, almost a year after obtaining its license. "We admire what Modern Health Concepts has done to date to successfully evolve this industry and are excited about this partnership," Lusardi said. "We are proud to partner with them and invest in growing their ability to provide medicine to many Floridians for years to come."
In Tallahassee, the Costas play hardball. They rely heavily on lobbyist Paul Bradshaw, who was instrumental in Jeb Bush's 1998 gubernatorial win. They have also contributed a combined $347,000 to 2016 and 2018 legislative campaigns. "We wanted to make sure our business interests and the interests of our patients were well represented," Roberts says. "We think the state legislative session was fair and allowed for a controlled expansion of the market. We agree with this approach."
Kim Rivers, an aspiring medical marijuana head honcho with straight blond hair and a dimpled smile, is CEO of one of the big seven, Trulieve, which is based in Tallahassee. Though it was recently reported that several of the former corporate lawyer's real-estate deals are under FBI scrutiny, she has big plans for the company.
Rivers, age 34, moved to Tallahassee from Atlanta shortly before the 2008 housing crash. She soon started companies to buy and renovate properties. She also founded consulting companies to help others seek local and state tax incentives.
In 2014, Rivers teamed up with Jason Pernell, a medical marijuana dispensary owner who has stores in California and Oregon, to form Trulieve. They quickly partnered with Hackney Nursery Co. and May Nursery, two North Florida growers located about 30 minutes from Tallahassee, to obtain a medical marijuana license. Thad Beshears, Hackney's chief financial officer and the proprietor of another nursery that owns a stake in Hackney, is the brother of state Rep. Halsey Beshears, who in 2014 voted for the legislation that set up the guidelines making the seven license-holders eligible to grow low-THC pot.
"We all had known each other in some form or fashion for years prior to medical marijuana laws being passed in Florida," Rivers says. "Many members of our group have a deep personal connection to medical cannabis, with loved ones who have benefited from cannabis treatment."
At a large indoor cultivation facility in Quincy, a small city 27 miles northwest of Tallahassee, Trulieve grows 20 strains of marijuana with exotic names such as Chemdawg, Remedy, Sour Diesel, Spacebomb, and Vitajay. The company has also opened seven dispensaries in Clearwater, Edgewater, Miami, Pensacola, Tallahassee, Tampa, and the Villages.
To defend its turf in the state capital, Trulieve hired lobbyist Brian Ballard, who is one of Florida's biggest backers of Donald Trump and who raised substantial money for the president's 2016 election campaign. The company also retained Sean Pittman, chairman-elect of Miami's Orange Bowl Committee. The company gave $70,300 to legislative campaigns in 2016 and 2018.
"We are a highly regulated business," Rivers says. "We wanted to ensure that we, and the patients we serve, were adequately represented." She adds that Brandes' label of "cartel" for the marijuana companies is easy for critics to use but doesn't apply to Trulieve: "It is clearly offensive and was intended to be a derogatory term."
But Rivers might have bigger problems than name-calling — though they are unrelated to marijuana. This past June 13, an FBI special agent delivered a grand jury subpoena to the Tallahassee Community Redevelopment Agency requesting documents, records, bids, applications, and proposals submitted by Rivers, her domestic partner John Thomas Burnette, and at least four holding companies the couple owns or manages, including one that paid $21 million in 2014 for a DoubleTree hotel. In response to an email from New Times August 21, Trulieve spokesperson Steve Vancore said that the FBI investigation has nothing to do with Trulieve and that none of the companies targeted by the feds is tied to the marijuana venture. He added that Rivers has been interviewed by special agents but that she is not a target of the probe.
Despite the swirling federal investigation, Rivers remains focused on creative medical marijuana products. But even that has been complicated. This past May, Trulieve launched a product line called Entourage that consists of whole flower buds crushed into a fine substance packed into small wire mesh bags sold in cups. The packaging suggested Entourage was to be used in a Volcano vaporizer, an electric heating apparatus that fills a plastic bag with vapor that patients inhale for maximum effect.
Under rules approved by the state this past spring, vaping, eating, and topically applying cannabis is legal, but smoking is not. On May 15, Christian Bax, director of Florida's Office of Compassionate Use, ordered Trulieve to stop selling Entourage in the state. "Whole flower products are not permitted," he wrote.
But that hasn't stopped Rivers from trying to figure out a way to reintroduce Entourage to her clientele. "We are reengineering the packaging," she tells New Times. "Once we do that, we will work with the Department of Health and receive approval."
José Javier Hidalgo
Past the glass doors of Knox Medical near the University of Florida in Gainesville is what looks like an Apple Store for cannabis products. The waiting room has a minimalist design with stark-white walls accented by wood-paneled counters. Shelves hold an array of tinctures, vape pens, oils, and swag bearing Knox's green logo.
But there are no jars brimming with pungent buds of marijuana or rows of pot edibles in whimsical packaging, as one might find in Colorado or Washington dispensaries, where recreational pot is legal. According to Knox Medical CEO José Javier Hidalgo, a hazel-eyed 45-year-old who wears crisp suits and bold ties, the company doesn't want to promote the traditional dispensary image. "We want to establish Knox Medical as the gold standard in medical cannabis in the United States," he said this past February during an interview with an Orlando TV station.
Knox Medical cultivates and manufactures its brand of medical marijuana in one of several dozen indoor greenhouses that take up 700,000 square feet at Knox's massive operation in Winter Garden. The farm was founded by nursery president Bruce Knox's parents in 1962 and produces 30,000 types of plants.
Today the company has established dispensaries in Orlando, Gainesville, and Tallahassee. Its corporate headquarters are located in a converted warehouse at 82 NE 26th St. in Miami's Wynwood Arts District. (During a recent visit to the Wynwood office, an assistant said Hidalgo was in Jacksonville for the grand opening of the company's fourth dispensary.)
Hidalgo was a mortgage broker before entering the medical cannabis business three years ago. Based in Miami, he partnered with local real-estate developer and lawyer Henry Batievsky and Knox to win one of the first medical marijuana licenses in Florida. Hidalgo did not respond to three phone messages and an email requesting an interview. Bruce Knox also failed to return six phone calls and two emails.
After beginning marijuana production last year, Knox Medical served its first customer this past January. Jacel Delgadillo, a Nicaraguan-born mother with dark-brown eyes and straight black hair, says she buys a bottle of a low-THC liquid every month. She uses it to treat her 5-year-old son, Bruno, who has a rare type of epilepsy. Four drops on the boy's tongue help control his seizures. "It's a blessing that I can have his medicine delivered," Delgadillo says. "The people of Knox Medical are so helpful. They really have Bruno's best interests at heart."
To unlock legislators' doors in Tallahassee, Knox hired three lobbyists and contributed $21,700 to 2016 and 2018 legislative campaigns.
Marc Meisel, Alan Shapiro, and Don Clifford
The Green Solution and GrowHealthy are two companies that had to fight for a slice of Florida's medical marijuana pie. In 2015, they sued the state Department of Health over how it awarded the first five licenses to CHT Medical, Surterra, Modern Health Concepts, Knox Medical, and Trulieve.
The Green Solution is helmed by Marc Meisel, a 47-year-old Gainesville entrepreneur who has dabbled in music promotion and fast-food restaurants for more than 20 years. Meisel decided to leap into medical marijuana in 2014 when the Compassionate Medical Cannabis Act was working its way through the Legislature. He subsequently teamed up with Alan Shapiro, owner of Gainesville's San Felasco Nurseries, and together they bought a franchise from the Green Solution, one of the largest cannabis conglomerates in Colorado.
Meisel and Shapiro, whose firm has spent $109,000 in political contributions in the 2016 and 2018 election cycles, sued after the Department of Health disqualified the Green Solution's initial application last November. The bureaucrats alleged one of the firm's employees was a felon in Kansas. However, a judge voided that finding in February 2016 after determining the employee's conviction was actually for a misdemeanor.
Meisel and Shapiro referred requests for interviews about their medical marijuana venture to Trent Woloveck, president of TGS National Holdings, which owns the Green Solution as well as other pot-related companies. Woloveck says the Green Solution does not disclose financial figures. It operates a dozen dispensaries in Colorado. "The Green Solution is one of the largest vertically integrated companies that cultivates, manufactures, and dispenses legal cannabis in Colorado," he explains. "We partnered with San Felasco to bring the knowledge we have and put it to use in Florida."
The Green Solution harvested its first crop in Florida last November, Woloveck says. The company has not opened any dispensaries yet but will deliver to patients across the state. He adds that the Green Solution is awaiting more Department of Health rules before ramping up production and sales. "Many people think that the seven licensees won a golden ticket," he says. "That's just not the case down here in Florida or anywhere else across the U.S. There is a tremendous amount of work and capital that needs to be deployed prior to getting products to patients."
Like the Green Solution, GrowHealthy obtained a license only after suing the Florida Department of Health. The firm alleged the selection process was unfair, and the state settled in early December 2016 by awarding the seventh license to GrowHealthy and its partner, McCrory's Sunny Hill Nursery. State health department officials acknowledged that McCrory's, which is based in Eustis, Florida, should have received the license that was awarded to Knox.
GrowHealthy is led by Don Clifford, an ex-IBM executive who left the computer giant in 1975 to start his own company, MarketSource, which he ran for three decades before retiring, according to a biography on bloomberg.com. Clifford did not return two phone messages and two emails seeking comment.
This past April, he told the Tampa Bay Times that he formed GrowHealthy three years ago when he and an unnamed business partner purchased a 200,000-square-foot production facility in Lake Wales. In addition to paying $2.4 million for the property, GrowHealthy spent $2 million renovating the warehouse. In total, GrowHealthy will invest $20 million in rolling out its operations, according to the Tampa Bay Times story. The firm has not yet opened a dispensary.
None of these entrepreneurs — except perhaps the owners of CHT Medical, who sold the company for millions — has made much money yet. Florida's medical marijuana industry is just beginning to get off the ground. But they have all done a lot of spadework. Jake Bergmann's Surterra, for instance, has raised around $33 million in equity from investors and secured close to $15 million in debt financing to cover start-up costs. Surterra, like CHT Medical, Modern Health Concepts, and Trulieve, really began selling cannabis products only within the past six months.
The companies' profit will depend on the quantity of state-approved medical marijuana patients. "The patient registry is expanding," Bergmann says. "But right now, we are serving about 1,200 patients."
That number is small, at least in part because, as of August 21, the state had approved only 31,051 sick people for medical marijuana cards. And only about 12,226 had possession of their ID cards. There is a 30-day waiting period between when the medical card is approved and when it is issued.
If you like this story, consider signing up for our email newsletters.
SHOW ME HOW
You have successfully signed up for your selected newsletter(s) - please keep an eye on your mailbox, we're movin' in!
Another challenge for would-be cannabis moguls is that by October 1, the number of medical marijuana providers will more than double. In early August, after another court loss, the state Department of Health granted licenses to the Florida-based nurseries Tornello Landscape and Plants of Ruskin. In addition, the health department is scheduled to issue licenses to eight other companies, three of which lost out to the first seven.
So, very soon Florida will have 17 companies licensed to dispense medicinal weed. By comparison, New York has allowed only five firms to cultivate and distribute medical marijuana under a system even more highly regulated than the Sunshine State's. Meanwhile, the pot-pioneering state of Colorado has hundreds of companies licensed in various submarkets of the marijuana industry. They include manufacturing and distribution firms such as the Green Solution and cannabis-infused-food makers like Dixie Elixirs & Edibles.
Florida Cannabis Coalition's chief operating officer, Peter Sessa, would like to see the market opened further in the Sunshine State. "Sure, it's being expanded to 17, but that is still a very limited market that only allows well-capitalized or well-connected firms to apply," Sessa says. "If Florida had a truly free, open market, it would lead to better medicine and better access to the sick people who need medical marijuana."