Detroit Businessman Pleads Guilty in Cannabis Licensing Bribery Case

DETROIT — John Dawood Dalaly, a prominent businessman from the Detroit area, has pleaded guilty to bribing a leading state cannabis regulator, seeking approval for dispensary licenses. Federal prosecutors have recommended that Dalaly face a prison sentence ranging from 30 to 37 months.

The recommendation was forwarded to Judge Jane Beckering of the U.S. Attorney’s Office for the Western District of Michigan. She is set to pronounce the sentence on Sept. 14. The government, in its official filings, acknowledged Dalaly’s cooperation in the ongoing investigation, suggesting a two-level reduction from the suggested sentencing guidelines due to his compliance.

Dalaly, aged 71 and a resident of West Bloomfield Township, confessed in April to bribing Rick Johnson, the former chair of the state’s medical cannabis licensing board. The bribe amounted to approximately $68,000 in cash and other benefits, which included private jet flights to Canada. These bribes were aimed at securing regulatory approval for PharmaCo Inc. As a result of Dalaly’s collaboration with the authorities, three others — including Johnson and two lobbyists — have also pleaded guilty.

The filing reveals that Dalaly, a co-founder of PharmaCo and another cannabis payment venture, was instrumental in shedding light on the extent of the bribery scheme. His disclosures offered detailed insights, many of which were hitherto unknown to the investigators.

Prosecutors underscored the significance of bank records, which indicated payments made to JBJ Ranch, LLC, an entity associated with Johnson, ostensibly for ‘accounting work’ done by Johnson’s spouse. Dalaly’s admittance, clarifying these payments as bribes, provided pivotal evidence highlighting Johnson’s illicit intentions.

Intriguingly, the revelations did not end there. Dalaly further disclosed that Johnson, once a state House speaker, was in the habit of offering inside information about cannabis license applicants that were unlikely to secure the board’s approval. Such information, if wielded strategically, would allow companies to acquire dispensaries from unsuccessful applicants.

On the corporate front, 2022 saw Toronto’s Red White & Bloom Brands finalize the purchase of PharmaCo, based in Southfield. The financing for PharmaCo was orchestrated by an RWB subsidiary, Michicann Medical Inc., starting from late 2018. Following the acquisition, RWB inherited 21 licenses for both medical and recreational use, which encompassed dispensaries as well as cultivation operations.