In Missouri, where the state’s social-equity marijuana program was touted as a beacon of hope for disadvantaged individuals seeking a toehold in the booming cannabis industry, disturbing revelations have emerged. Documents obtained by The Independent reveal a pattern of exploitation by cannabis industry insiders who have allegedly used predatory contracts to manipulate vulnerable applicants for social-equity licenses. The focus of these allegations centers on Michael Halow, an investor tied to six revoked microbusiness licenses, and his alleged attempts to gain full control of dispensaries while using Black disabled veterans and other eligible applicants as mere fronts.
The Shattered Dream of Destiny Brown
Destiny Brown, a Black disabled veteran, thought she had been given a unique opportunity when she was recruited by cannabis investor Michael Halow. Having won a coveted Missouri microbusiness dispensary license, Brown was under the impression that she would be the owner and operator of her own cannabis business. Halow had told Brown that her veteran status and her father’s marijuana conviction qualified her for the license and that he would assist with $2 million to help get the business up and running.
But as Brown discovered too late, the contract she signed with Halow was not a step toward independence. Instead, it was a sophisticated ploy that would ultimately strip her of any real ownership and control of the business. The 40-page contract she agreed to, which Brown claims she didn’t fully read, had clauses that would allow Halow to take over the business outright once the license was secured or if she couldn’t repay the promised $2 million plus interest.
Brown’s experience is not an isolated case. The same predatory contracts that were used to secure her participation were also found in five other licenses connected to Halow, each with identical clauses that ultimately ensured Halow would gain full control of the business. According to legal filings, these contracts were designed to place applicants like Brown in the position of legal front-persons while investors such as Halow retained the true ownership and profits.
The microbusiness program was sold to Missouri voters as a way to help victims of the war on drugs get a toehold in this burgeoning industry (Rebecca Rivas/Missouri Independent)
The ‘Flooding’ of Missouri’s Marijuana Lottery
The issue extends beyond Halow and his business dealings. A troubling pattern has emerged in Missouri’s social-equity marijuana program: out-of-state companies and cannabis insiders have been actively recruiting individuals to apply for the state’s microbusiness licenses, with promises of ownership that never materialize. One of the tactics employed by these insiders is “flooding” the lottery, in which large numbers of applications are submitted under the names of disadvantaged individuals who are used solely to win licenses on behalf of the actual investors behind the scenes.
Halow’s consulting firm, Cannabis Business Advisors, was involved in this process, listed as the contact for over 400 dispensary applicants, as the firm orchestrated this process to maximize the likelihood of securing a license under the social-equity program. By submitting hundreds of applications under vulnerable applicants who were either unaware or misinformed, Halow’s team increased their chances of winning the lottery for valuable licenses.
Once the licenses were obtained, these applicants were often left in the dark about the true nature of their agreements, only to realize later that they were being manipulated into giving up all ownership and profit rights in exchange for a role that offered little more than a token association with the business.
(Rebecca Rivas/Missouri Independent)
A Pattern of Predatory Contracts
Halow’s conduct in Missouri is not an isolated incident. A similar case involving a Michigan-based company came to light in 2023, where individuals were recruited through Craigslist ads to apply for Missouri’s social-equity licenses. The contracts provided to them would ultimately force the applicants to relinquish full control over the business, handing over ownership to the out-of-state company.
Legal experts who reviewed these contracts have called them “unfair” and “predatory,” with many noting that they bear striking similarities to the agreements Halow used with Brown and others. According to Joseph von Kaenel, a corporate governance attorney who reviewed the contracts for The Independent, these arrangements are designed to exploit disadvantaged applicants by using them as a front to secure the licenses, while insiders maintain ultimate control over the businesses.
“It’s the same old story we’ve seen of unscrupulous promoters trying to find a disadvantaged person to front the business and then take it over when they can’t pay,” von Kaenel said.
The Missouri Department of Health and Senior Services (DHSS) has been investigating these arrangements, particularly focusing on whether applicants continue to meet the eligibility requirements for ownership and operation of the licenses. However, some of the contracts appear to circumvent these requirements by exploiting loopholes and taking advantage of the vagueness in the state’s regulations regarding disqualifying felonies.
The Role of Armstrong Teasdale and Other Key Players
The law firm Armstrong Teasdale has been embroiled in several of these controversial cases, with Halow’s legal representation and that of other license applicants reportedly linked to the firm. Despite the firm’s name appearing in contracts associated with some of these contested agreements, Armstrong Teasdale has publicly denied preparing or providing these contracts. However, the firm’s involvement in drafting and overseeing these contracts raises questions about the role of legal professionals in perpetuating these exploitative schemes.
Halow himself has denied any wrongdoing in relation to his contracts, claiming that the agreements are conditional and depend on DHSS approval. However, the language in these contracts suggests otherwise, with terms that would ultimately give Halow full control of the business once the license is secured or if the applicant is unable to meet financial obligations.
Furthermore, Halow’s background has also raised concerns. Despite presenting himself as an advocate for social equity and empowerment, Halow has a controversial history, including a criminal conviction for aggravated assault following charges of child sexual assault and child pornography in 2003. While the conviction was expunged and does not automatically disqualify him from working in the cannabis industry, his involvement in these exploitative contracts is seen by some as a stark contradiction to the values of the social-equity program.
The Fallout for Applicants and the Broader Industry
For individuals like Destiny Brown, the fallout from these predatory contracts has been profound. Brown, who initially thought she was getting an opportunity to run a cannabis dispensary, now finds herself in the midst of a legal battle to retain her license. Despite her efforts to distance herself from Halow and his consultants, her application was revoked by the state, citing misleading information and the withholding of important documents. The case is now before the Administrative Hearing Commission, but Brown faces the risk of her case being dismissed because she missed the deadline to file her complaint.
As the investigation into these fraudulent practices continues, it’s clear that Missouri’s social-equity marijuana program has been seriously undermined by a wave of unscrupulous actors who have used deceptive tactics to exploit the very individuals it was supposed to help. The alleged predatory practices in the cannabis industry, particularly in Missouri, have called into question the effectiveness and integrity of social-equity programs designed to provide opportunities for marginalized communities.
Conclusion
The revelations about predatory contracts in Missouri’s social-equity marijuana program are a stark reminder of the risks faced by vulnerable applicants seeking to enter the cannabis industry. With investors like Michael Halow allegedly taking advantage of disadvantaged individuals, the true promise of the program has been obscured by exploitation and deception. As Missouri’s cannabis regulators continue to investigate these practices, the lessons learned from these incidents must be used to reform the system and ensure that those who stand to benefit from marijuana legalization are not further victimized in the process.
The question remains: can Missouri’s social-equity program be salvaged, or has it become yet another avenue for powerful insiders to profit at the expense of the very people it was meant to help?
