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Lawsuits Allege Fraud in Arkansas Cannabis LicensingLock Icon

9 min read

Update: Defendants Nate Steel and Alex Gray have filed a response to the accusations, calling them “a sham.” Click here for the full story.

Prominent Arkansans have accused their attorney friends of setting them up as figurehead owners of medical marijuana dispensaries, sticking them with massive tax bills and casting new doubts on the integrity of the state’s cannabis licensing system.

Two lawsuits, filed in St. Francis and Pope counties, feature big names in Arkansas’ legal and business worlds. One attorney in the Little Rock firm Steel Wright Gray is suing his own firm and partners.

The suits prompted some cannabis businesses to call for a state investigation and led the author of the 2016 amendment that legalized medical cannabis to demand audits of all state marijuana companies.

The plaintiffs say SWG used them as decoy owners for dispensaries in Heber Springs and Morrilton to gain favor in the licensing process and meet a constitutional requirement that 60% of owners be Arkansans. The suits allege SWG was actually working on behalf of a Virginia client, Edward S. “Eddie” Garcia, who hoped to snap up as many dispensary licenses as he could. Garcia died in 2019.


One plaintiff is Marshall Wright, an ex-state legislator and a law partner of the two individual defendants: Alex Gray and Nate Steel of SWG. Another plaintiff is pharmacist and lawyer Scott Pace, a former CEO of the Arkansas Pharmacists Association and now a partner at the lobbying firm Impact Management Group of Little Rock.

Ron Smith, a plaintiff in the Pope County lawsuit and a purported owner of the Morrilton dispensary, is president and CEO of Curtis H. Stout Inc. of Little Rock, a lighting and electrical manufacturers’ representative with offices in seven states.

Steel, Gray, Hutchinson

The defendants are no less eminent.

Gray has had a hand in many medical marijuana companies since voters legalized the drug through an amendment to the state constitution in 2016. U.S. Securities & Exchange Commission filings show that Gray is involved with at least eight cannabis-related companies that, combined, have raised more than $135 million from investors.

Steel is also a former state legislator and outside general counsel to the pharmacists association.

The suits also say former state Sen. Jeremy Hutchinson played a part in recruiting straw dispensary owners, although he’s not a named party in the litigation.

Hutchinson, son of former U.S. Sen. Tim Hutchinson and a nephew of former governor and current presidential candidate Asa Hutchinson, is serving an eight-year federal sentence for bribery and tax fraud in an unrelated case. Jeremy Hutchinson was once a partner of Steel, Gray and Wright.

Both lawsuits, filed by attorney Scott Poynter of Little Rock, accuse SWG  and its sister company, the Capitol Law Group, of legal malpractice and fraud in helping win four of the state’s first 32 dispensary licenses in 2019.

The complaints say Steel and Gray never disclosed to the plaintiffs, who were their clients, that the firm was also working for Eddie Garcia and his Virginia Beach companies, including medical cannabis management company Pure Health Products LLC.

Steel and Gray helped Pure Health obtain management contracts with four Arkansas dispensaries, including Big Fish of North Central Arkansas LLC of Heber Springs and River Valley Dispensary LLC of Morrilton, which both operate under the brand Enlightened Dispensary. The other Enlightened dispensaries, in Arkadelphia and Clarksville, are not parties to the lawsuits, which were first reported by the nonprofit Arkansas Advocate.


Gray and Steel crafted management deals for the Morrilton and Heber Springs dispensaries that stuck their purported owners with hundreds of thousands of dollars in tax liabilities while offering little or none of the dispensaries’ profits, the lawsuits say.

They also allege that Steel and Gray gave the plaintiffs fictitious ownership shares, stakes the plaintiffs learned about only after the press reported on licensees’ ownership percentages in 2019.

Plaintiffs said they invested no money toward ownership, and that Steel and Gray recruited them for their reputational value in the licensing process.

Revenue from the dispensaries, in which the plaintiffs said they had no management role, went via management contracts to Pure Health Products and then to Revolution Cannabis of Chicago, which bought Pure Health in 2019 and demanded even more onerous conditions, the suits say.

Revolution Cannabis did not respond to repeated requests for comment.

Steel and Gray have asked for the complaints to be dismissed and deny wrongdoing. They also moved in filings this month to have Poynter removed as the plaintiffs’ attorney because he worked at Steel Wright Gray from 2015 to 2019 in an “of counsel” arrangement.

Steel said in an affidavit signed Oct. 2 that the firm started working with PGA Boulevard Investments LLC, which has the same address as Garcia’s companies in Virginia Beach, to gain Arkansas dispensary licenses.

“The Defendants helped locate potential applicants in Arkansas to apply to receive dispensary licenses,” Steel wrote. “Licensees would operate any awarded dispensaries under management agreements with Pure Health Products, LLC, an entity formed by PGA.”

Steel said that Poynter participated “in numerous conversations” regarding the representation of Garcia.

“Indeed, Poynter reviewed and approved the language in operating agreements that he now brings as the primary basis” of his complaints, Steel wrote.


Poynter told Arkansas Business last week that Steel’s statements in his affidavit were “just wrong” and untrue. “The plaintiffs want to have their day in court and we’ll prove their lawsuit and their allegations in the courtroom rather than in the media,” Poynter said.

Doubts Go Back Years

“I think this [phantom ownership] is just a sham,” said Little Rock lawyer David Couch, who wrote Amendment 98 of 2016. “The amendment meant for Arkansans to own these companies, not outsiders. It’s about accountability.”

Couch said the complaints reinforced years of suspicions about chicanery in the licensing process. His amendment established the Arkansas Medical Marijuana Commission as the industry’s licensing body and made the state Alcoholic Beverage Control Division its code enforcement agency.

A charter member of the marijuana commission, Dr. J. Carlos Roman, told Arkansas Business last year that he’d been offered a bribe by a license seeker and had reported it to the FBI. “There was an attempted bribery,” Roman said in an interview, discussing allegations widely reported to have involved Natural State Agronomics, which didn’t receive a license. “I did contact the FBI, and they investigated them. Unfortunately, there was not an indictment against them.”

A Fayetteville physician, Dr. Thomas Benjamin de Miranda, alleged in a 2022 deposition that an eventual cultivation company part-owner, Dr. Alonzo Williams, discussed ways of gaining influence with medical marijuana commissioners in 2017. De Miranda’s deposition said the conversation came during a meeting of potential cultivation applicants at a Little Rock restaurant.

Couch said if he had the amendment to write all over again, he would use a lottery to award licenses to qualified dispensary and cultivator applicants. Nearly 200 entities applied for 32 initial dispensary licenses. Clients of the Steel Wright Gray firm got four of them.


The attorneys of Steel Wright & Collier in 2016: (top row, from left) Winston Collier, who is not involved in the current litigation; Marshall Wright, Nate Steel, Scott Poynter, (seated, from left) Alex Gray and Jeremy Hutchinson.
The attorneys of Steel Wright & Collier in 2016: (top row, from left) Winston Collier, who is not involved in the current litigation; Marshall Wright, Nate Steel, Scott Poynter, (seated, from left) Alex Gray and Jeremy Hutchinson. (Provided)


“Based on what these two complaints say, this certainly violates the amendment’s requirement that 60% of ownership has to be in Arkansas,” Couch said in an interview. “I’m sure that’s why these management agreements were designed this way, because they [out-of-state residents] can’t legally own it.

“What I have always suspected, and what is now pretty clear as a result of these two complaints, is that these management companies have come in here, and in my mind, they actually own the dispensaries,” Couch said. “This is all at the feet of the ABC, and they should take action,” fining the dispensaries and forcing their management to divest, he said.

State spokesman Scott Hardin told Arkansas Business that the ABC has issued no violations regarding the sham ownership allegations.


“ABC is aware of both lawsuits,” Hardin said in an email. “As a policy, we don’t speak to details of investigations, which would include confirming whether an investigation is underway. Anytime allegations or complaints are filed, ABC must determine if it meets the investigation threshold,” determining if ABC or Medical Marijuana Commission rules were allegedly violated. “ABC’s Enforcement Division, a full law enforcement agency, oversees all investigations,” Hardin said.

Forgery Alleged

In the St. Francis County case, Wright and Josh Landers, another minority owner and a physical therapist for D1 Training Little Rock, say Steel, Gray and Hutchinson had a clear conflict of interest as lawyers for them and for Garcia. The complaint also says that Steel and Gray crafted a management agreement that gave operational and monetary control to Pure Health and eventually Revolution Cannabis.

Management agreements are common for dispensaries, but in the case of Big Fish and River Valley, the lawsuits say, out-of-state firms got the profits and Arkansans got the tax bills.

Landers’ purported stake in Big Fish was 25%, Wright’s 19%. The majority owner, Dr. Regina Thurman, is not a party to the litigation. Thurman is medical director of Optimal Pain & Wellness of Fayetteville and was the inaugural chair of the Arkansas Medical Marijuana Association.

Attempts to get comment from Thurman for this article drew no response.

The litigation says plaintiffs’ signatures on management contracts were forged.

“Defendants set up Big Fish as a multi-member pass-through entity for purposes of tax treatment, and took no steps whatsoever to protect the Plaintiffs from the effect thereof, which would mean Wright and Landers would pay federal and state income taxes on all … totally fictional income from Big Fish and in accordance with the ownership percentages assigned to them by the Defendants without their knowledge or consent,” the complaint says.

Last year, Landers paid $133,923 in federal and state income taxes on Big Fish. Wright’s 2022 tax bill was $74,844.

“In 2023, based upon the substantial revenues of Big Fish in 2022, Landers and Wright expect to pay, once again, hundreds of thousands of dollars” in taxes, the suit says. “Landers has received a K-1 [tax form] from Revolution exceeding $378,000 in income he did not receive, and Wright has received a K-1 from Revolution exceeding $287,450 in income he did not receive,” the lawsuit says.

Steel’s Prom Date

The Pope County lawsuit alleges similarly harsh tax consequences for Scott Pace, Ron Smith and three other plaintiffs.


Paige Fisher of Russellville, listed as 51% owner of River Valley Dispensary, is a district sales manager for Nevro, a medical device company headquartered in Redwood City, California. “Steel chose to solicit Paige as a dispensary owner because she was a longtime friend of his and his family, his high school prom date, and because she was employed in the medical industry and was specifically involved in pain management,” the suit says.

Other plaintiffs are entrepreneur Rick Don Angel and Bryan Fisher, Paige’s husband and associate vice president for development at Arkansas Tech University in Russellville.

The complaint says that Paige Fisher “checked many of the blocks necessary to place her in a good position to be awarded a license. Her husband Bryan, another friend of Steel, was also to be included as a hopeful dispensary owner and SWG chose to include him in an applicant slate. Together, the attorneys at SWG told Paige and Bryan that on paper they would be shown as owning 52% of the dispensary, but the attorneys represented that they would ensure the Fishers’ ‘true’ ownership obligation would only be about 4% in total.”

The suit says the Fishers, Pace, Angel and Smith were “ascribed fictional (but taxable) income of $975,174” in 2021 alone.

The suit says that the group would be liable for additional nonexistent taxable income of more than $1 million for 2022, creating a tax liability exceeding $376,000. But the “owners” sold their interests in the dispensary for roughly the same amount as their tax burdens, according to the complaint. The Arkansas Medical Marijuana Commission approved the sale in the fall of 2022.

Court filings this month by Steel and Gray’s attorney, Clifford Plunkett of the Rogers office of Friday Eldredge & Clark, ask plaintiffs to provide a “more definite statement concerning the tax liability” they allege. “It’s not clear what documents allegedly created the alleged tax liability,” Plunkett wrote. “Nor have Plaintiffs clearly alleged that any of the subsequent management agreements dated in 2019 or 2020 altered or changed any such tax issues/responsibilities of Plaintiffs.”

Plunkett said in a statement that the allegations in the lawsuits “contain numerous factual inaccuracies and errors” and “many are blatantly false.”

Jesse Trammel, manager of New Day Laboratories of Hot Springs, a medical marijuana processor, said licensees who stuck to the letter of Amendment 98 are dismayed by the phantom ownership allegations and would welcome an ABC investigation.

“I wish they would [investigate],” Trammel said. If the complaints prove true, he said, “it’s like we’re not on a level playing field.”

Hot Springs businesswoman Carla McCord owns New Day Laboratories and is majority owner of Leafology, the Hot Springs medicinal cannabis cultivator. She also owns Fisherman’s Wharf restaurant, Kahuna Bay boat rentals and Salty Dog Boating Center.


“We have played by all the rules with local ownership ever since the beginning; we’re a family-owned and operated business,” Trammel said, adding that “the same rules should apply to everyone.”

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