Santa Barbara Launches Probe in Wake of Corruption Allegations

On Monday, March 16, Santa Barbara Interim Police Chief Barney Melekian issued a statement responding to a March 12 Los Angeles Magazine article that raised allegations of corruption and undue influence involving Anthony Wagner, the department’s public information officer, who previously helped run the city’s cannabis dispensary licensing process.

Melekian’s announcement stated that he was placing Wagner on administrative leave pending the outcome of his probe. Although Melekian didn’t name names, he later confirmed to the Journal that the department is taking a closer look at Wagner’s prior relationship with two individuals, including Adam Knopf, owner of the San Diego-based Golden State Greens dispensary, and Micah Anderson, a well-known cannabis industry player in the city.

Wagner served as a San Diego planning commissioner when Knopf was an applicant before the commission. In the summer of 2018, Knopf received a license to operate a cannabis dispensary in Santa Barbara, a process that Wagner helped oversee for the city.

“Most of these allegations have been previously investigated, either within the police department or by the city attorney’s office,” Melekian stated. “In addition, the city prevailed in a federal lawsuit by one of the unsuccessful cannabis permit applicants, which was dismissed in December 2019.”

Melekian noted that the recent magazine article “makes new allegations concerning the nature of Mr. Wagner’s role in the process of the awarding cannabis licenses that support further investigation. To that end, the department will be retaining an outside firm to conduct that investigation for the Police Department.”

With several contenders currently challenging incumbent Cathy Murillo to become Santa Barbara’s next mayor, the L.A. Magazine article, written by former Montecito Journal writer Mitchell Kriegman, dropped like a time bomb into the midst of a preheated political season.

Murillo did not respond to a Journal interview request, but even before Melekian announced his probe and placed Wagner on leave, mayoral candidate James Joyce, one of three of Murillo’s rivals in the race, released a statement calling for an outside investigation.

“It absolutely pleases me that they took swift action to do a third-party investigation,” Joyce told the Journal shortly after Melekian’s Monday announcement. “The issue is transparency,” he added. “Who is this third party? Is that an open selection process or one done behind closed doors?”

Joyce previously worked with Melekian when the latter was with the Santa Barbara County Sheriff’s Department, and Joyce was an aide to State Senator Hannah Beth-Jackson. “He always came across as a straight-up guy and doesn’t just stick to talking points,” Joyce said of Melekian. “I’m sure he’s steering this into the right direction.”

The key question that has to be answered, argued Joyce, is why Knopf was able to win a dispensary license despite his past ties to Wagner, and how he was then able to sell a major stake in his cannabis business to a third party without any apparent public scrutiny.

“When we ask our youth to complete a test, the teacher says show your work,” Joyce argued. “What we have here is the result of a test without the work being showed. That’s why I would lean more closely on a third party approach as opposed to an internal investigation. It helps build confidence within the community.”

The Big Story

“In Sleepy Santa Barbara, a City Hall Insider is Raising Eyebrows.” 

That’s the suitably murky, noirish headline for the aforementioned L.A. Magazine story, which stretches several thousands of words and involves a sprawling cast of characters, including Wagner, recently retired Police Chief Lori Luhnow, City Administrator Paul Casey, and Mayor Cathy Murillo.

Full disclosure: Last year, when Kriegman was working on this story for the Journal, I assisted him by conducting interviews and filing public records act requests before, for various reasons, Kriegman decided to shop the story elsewhere. (See Gwyn Lurie’s editorial on page 5 in this issue.) 

Aside from Melekian’s internal investigation of Wagner’s relationship to Knopf and Anderson, Santa Barbara City Attorney Ariel Calonne is also officially reviewing the role played by Wagner in the city’s handling of the dispensary licensing process.

Contacted by the Journal on March 15, Melekian confirmed the scope of his investigation but refused additional comment pending its outcome. However, on March 16, Calonne agreed to be interviewed and stated that almost all the issues raised in the L.A. Magazine story had previously been investigated by his office.

“There have been a couple of inquiries about conflicts of interest involving Mr. Wagner and my office has looked at both of those,” Colonne said, adding that Wagner had disclosed information and had sought conflict of interest advice from the city prior to participating in the dispensary licensing program.

“Our focus then as now was focused on making sure the dispensary licensing process was fair,” he added. “Our interest in that was strong because we were trying to develop a new industry and were allowed to regulate it by the state legislature, so we wanted to do it right.”

According to Calonne, there were five city employees including deputy directors of fire and city finance involved in the licensing process. “Wagner was at the bottom of that list,” Calonne said. “All five staff people involved signed attestations saying they would remain free of conflict and exercise fair judgment. That staff team did the evaluation process and were well aware of conflict of interest rules.”

Calonne reiterated that Wagner both sought and received conflict of interest advice from the city before participating in the application review process, but he declined to go into details. “There is some new factual information that the police chief is looking into,” he said, referring to Melekian. “While we have a very strong interest in avoiding the appearance of corruption, we also have a strong interest in protecting the constitutional rights of employees who are accused of serious misconduct.”

Calonne added, “The police chief, Mr. Melekian, and myself have each made a commitment that when this third round of investigation is done, we intend to disclose everything we know even if we don’t have to disclose it, as long as it’s lawful to do so. It’s critically important to ensure public confidence in what we are doing.”

Questions About Cannabis

One of the critical questions raised by Kriegman’s story is why Knopf was allowed to sell a majority stake in his just-approved Santa Barbara dispensary to another party, Jushi Holdings, Inc. Last year, Noozhawk reporter Joshua Molina reported that shortly after Knopf won the license in 2018, he sold most of the property to the Florida-based cannabis company. Molina’s story stated that while the sale price wasn’t disclosed, it was estimated to be valued at between $7 million and $9 million.

On Monday, City Administrator Paul Casey, Wagner’s boss, spoke to the Journal, but said he had no idea how much money changed hands after Knopf won the license. “The transfer of the license to other party,” he said, “is specifically allowed in the ordinance; we followed it to the letter of the law.”

Land-use permits always allow transference of ownership, Casey stated, as the ability to sell a business to another party is part of the inherent value of the land parcel in question. “The transference issue is a very common thing that comes up in land use,” he said. “It happens all the time. We didn’t see any cause for concern.”

Casey also confirmed that Wagner disclosed his prior relationship to Knopf before participating in the dispensary licensing process back in 2018. “Most of the allegations have been investigated previously by both the city and police department,” he said. “We take these allegations seriously and will be hiring an outside investigator to look at these issues… We’ll have more information later this week and we feel comfortable with what it will show.”

The Accused

Early on the morning of March 16, I met Wagner for coffee and tea at Pierre Lafond Market & Deli. Wearing a button up shirt and blazer and dress slacks, Wagner looked very much like the image I had in mind of a mid-sized metropolitan city police department’s public information officer, which until 24 hours ago, he was, at least actively.

Sitting at a table in front of the popular Montecito café, he occasionally paused to briefly answer his phone, which seemed to constantly be ringing.I had spoken over the phone with Wagner the previous evening, and he seemed eager to refute key allegations made in the L.A. Magazine story before, he added only half-jokingly, his lawyer told him to shut up.

“I have never had a financial relationship with Adam Knopf,” Wagner told me. “I disclosed this in my 2015 background check; everyone in the police department knew about it.” 

Furthermore, said Wagner, “Knopf was never a member of Southern California Growers Association, in which I was a land-use specialist. And I am not aware of any financial relationship between Adam Knopf and Micah Anderson. My relationship with Anderson ended two months before I started my job in Santa Barbara. I have had maybe four phone calls with him in the past four years.”

To back up his statement about disclosure, Wagner showed the Journal a copy of an email he sent at 12:01 pm on February 6, 2018 to several city staffers including Chief Luhnow, and City Attorney Calonne in which he stated that he had previously been represented by a lawyer who, at a different time, had been retained by Knopf.

In the email, Wagner states that he was hired by the Santa Barbara Police Department on March 27, 2017. “Prior to that, I ran an LLC that provided land use and public health and safety guidance to clients wishing to entitle properties for land use development throughout California,” Wagner wrote. “My General Counsel was Gina Austin. From January 2017 to February 2017 I made a final payment to her of $300.00. Ms. Austin has been retained as the attorney of record for a commercial cannabis business applicant currently applying within our jurisdiction. Please provide guidance as to if this precludes me from taking part in review of this applicant’s work product.”

According to Wagner, he left the San Diego cannabis business when Donald Trump was elected president, because then-Attorney General Jeff Sessions was notoriously anti-cannabis. “I didn’t want to lose my house,” Wagner said. “I was an above board advisor to provide consultation on how cannabis businesses could access government.”

Anderson, Wagner said, was a business contact he knew from his cannabis dealings in San Diego. “He was a successful proprietor, a multidimensional, legitimate businessman in what was a very small network of people in San Diego,” Wagner added about Anderson. “When I had business dealings with him, I knew him as a man of amazing integrity and leadership.”

After being hired by the Santa Barbara Police Department to help oversee cannabis licensing, Wagner said, he was responsible for vetting all the main investors in each competing outfit competing for a dispensary license. “The only thing I was responsible for was vetting the principals,” he explained. “I would look at their Live Scans and search all 50 states to see if anything in their background precluded them from owning a stake. I simply reviewed their backgrounds, that’s all.”

Wagner insists that while imperfect, Santa Barbara’s cannabis dispensary licensing ordinance was a well-intentioned effort to implement a recently passed state law, Proposition 64, which legalized adult use recreational marijuana in 2016. “The language in the ordinance was borrowed from various cities, from Moorpark to Lynwood, where we could grab language and make it our own,” he said. “None of this was tested. We did not create an infallible document, just created a document that could be tested and improved as a starting point.”

Before we ended the interview, Wagner reiterated that he had no involvement in the fact that, subsequent to winning the license, Knopf arranged to sell the majority of his ownership interest to an outside party. He also claims he has no idea how much cash Knopf may have received in the transfer deal. “I don’t know,” he said. “I was not part of the process.”

Wagner says he’s eager to cooperate with the city’s ongoing investigation. “I’m ready and willing and able to take part in whatever they want me to do,” he said, emphasizing that he has nothing to hide as far as his role in the city’s dispensary licensing process. “I was not approached by anyone and the scale was not tipped by anyone in any capacity,” he said. “It did not happen.”