Oklahoma authorities have indicted yet another individual alleged to have served as a straw buyer for out-of-state applicants in order to circumvent the state’s two-year residency requirement for cannabis operators.
Kody Sumter, whose name appears on licenses for 63 businesses in the CRB Monitor licensing database, allegedly offered to pose as owner of at least one of those businesses, while brokering a straw owner deal with another individual who served as owner on behalf of an out-of-state funder.
Oklahoma’s medical market has grown a reputation for being a breeding ground for illicit grows that traffic outside of the state based on the relatively inexpensive entry point to licensing. That reputation has not been helped by the series of alleged straw owners who have been charged with fraud-related crimes for allegedly allowing non-residents to get in on a market with a residency requirement.
Authorities also indicted Michael Dudek, whom Sumter allegedly paired up with a prospective applicant, and Dengfeng Huang, who allegedly paid for Sumter’s services in a separate instance.
Dudek appears on two separate licenses. One is inactive and the other, I&W Farm and Grow Inc. in the Town of Seminole was named in the indictment. Huang was connected to Everlasting Fortune Inc. in Ada. Both businesses were licensed to cultivate and process cannabis.
Sumter, 34, is a general manager at Kadam Technologies, which is a consulting firm in Tulsa that assists in developing small businesses, according to his LinkedIn profile. He is also listed as a real estate agent in the Tulsa area.
Sumter has been associated with 119 medical cannabis licenses in Oklahoma, according to the CRB Monitor database, of which 46 are currently active. All but one of them were for cultivation and manufacturing/processing.
The 16-page indictment, which was unsealed in late August and publicly released on Aug. 2, states that Huang had been running his business, paying property taxes and setting up the site’s electricity service, when he was still supposedly a minority owner with a 25% stake. The fact that he sought total control once he had lived in the state for at least two years, was further scrutinized by the state.
“These cases illustrate how unscrupulous individuals have exploited Oklahoma’s medical marijuana industry for nefarious and illegal criminal activity,” said Attorney General Gentner Drummond in a statement. “While many individuals are lawfully abiding by the regulations governing medical marijuana, law enforcement is tirelessly cracking down on the bad actors who are feeding the nation’s illegal marijuana market. These ‘straw ownership’ schemes made a mockery of our laws, and they will not be tolerated.”
Sumter, Dudek and Huang were all arrested on charges of conspiracy to defraud the state and aggravated manufacturing of a controlled dangerous substance. Huang is also charged with trafficking a controlled dangerous substance in excess 25 pounds.
Blowing down straw businesses
This latest legal action is part of a larger effort from the State of Oklahoma to reign in its cannabis market after it exploded.
The investigation into Sumter stemmed from collaboration between the Attorney General’s Organized Crime Task Force, the Oklahoma Medical Marijuana Authority, and the Oklahoma Bureau of Narcotics and Dangerous Drugs.
“This is another example of our commitment to aggressively combat these criminal organizations seeking to get a foothold in Oklahoma,” said OBN Director Donnie Anderson. “Working alongside our partners at the Attorney General’s Office and the Oklahoma Medical Marijuana Authority, we continue to dramatically reduce the number of illegal marijuana businesses that have been operating with fraudulent ‘straw ownership’ schemes and moving product to the illicit market out of state.”
Oklahoma had 3,797 cultivation licenses as of Sept. 5, according to the CRB Monitor licensing database, marking a significant drop over the last few years. The state went from about 9,400 cultivators in 2021 to 6,400 in 2022, before dropping to its current level.
Oklahoma has been cracking down on alleged straw owners since late 2022 when authorities arrested attorneys Eric Brown and Logan Jones for allegedly using their employees as straw owners.
In late 2023, authorities arrested Kevin Pham for allegedly operating a similar scheme. His name appears on at least 160 cannabis licenses in the CRB Monitor database, 72 of which are still active.
A few months ago, the state unsealed an eight-count indictment against Matt Stacy for allegedly acting as a straw owner for multiple operators. His name is associated with 161 licenses, including 50 active licenses.
