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Former Microsoft exec's Colorado pot plans questioned

Jamen Shively, CEO of Diego Pellicer and a former Microsoft executive

By Eric Gorski
The Denver Post

Jamen Shively is a former Microsoft executive who wants to see the visage of his hemp-growing great-great- grandfather become the Juan Valdez of weed.

But Shively's plans to create the first national marijuana brand — with a strong presence in Colorado soon — is encountering heavy skepticism about running afoul of state laws and inviting federal scrutiny.

Shively said his Washington state company is close to acquiring rights that will allow him to put its Diego Pellicer brand name on a chain of Colorado medical-marijuana dispensaries. If legal, it would prove a creative way around laws barring out-of-state ownership and restricting investment in Colorado pot businesses.

"We want to be the dominant player in the United States market," Shively said. "Whether in the form of acquisitions or a strategic alliance, we are very interested in exploring Colorado."

Colorado is fertile ground as a state that established elaborate regulations for medical marijuana and, along with Washington state, last year became the first to legalize recreational use for adults.

Some outside investors sense opportunity in side businesses that do not grow or sell marijuana, and thus carry less risk — including a private equity firm run by Yale MBAs that is scouting prospects in Colorado.

Of the entrepreneurs trying to get in on the ground floor, Shively has been among the most public.He laid out his vision at a news conference May 30 in Seattle with a high-profile booster at his side: the former president of Mexico, Vicente Fox.

Fox, an acquaintance of Shively's from business dealings in Mexico, supports marijuana legalization and appeared at Shively's invitation. Fox said he is not involved in the business venture.

The 45-year-old Shively, a former Microsoft corporate strategy manager, is seeking investors in a company named for his great-great-grandfather. According to the company, Pellicer was the world's largest hemp grower in the 1890s, supplying rope from his home base in the Philippines to Spanish forces in the Spanish-American War.

Shively already has a deal with a chain of Washington state dispensaries and is negotiating with interests in other states, he said. The company plans to get involved in medical and recreational pot.

"Yes, we are Big Marijuana," Shively announced.

Some news media accounts have said Shively's company has purchased or is about to purchase Colorado dispensaries, but he said that is not true.

Shively said his company is "very close" to finalizing the acquisition of a "specific set of rights" from a Colorado medical-marijuana dispensary company with multiple locations.

He declined to identify the company or go into detail about the rights, citing a confidentiality agreement. But he was confident enough to predict the Diego Pellicer name would appear on Colorado dispensaries in a month or so.

"To operate in this environment, we've had to get pretty creative in terms of our deal structure and exactly what right this will give us," he said.

Shively said he is hopeful restrictions eventually will be loosened and allow for more direct involvement in the Colorado pot industry.

Others are skeptical.

"I don't know how it will work — someone will carry his brand for payment?" said Meg Collins, director of the Cannabis Business Alliance, a trade group for Colorado medical marijuana interests. "All of us were kind of scratching our heads. Every conversation we've had with the Department of Revenue has been pretty clear they want to make sure it's Colorado money being invested in Colorado businesses."

State officials would need to review the arrangement before weighing in, said Julie Postlethwait, spokeswoman for the Colorado Department of Revenue division that oversees medical and recreational marijuana regulations.

Colorado law says licensed marijuana business owners must be residents of the state for at least two years. Out-of-state interests may loan money to Colorado pot businesses but may not share in profits or have any equity stake.

Mark Kleiman, a professor of public policy at the University of California at Los Angeles, who is part of a team hired by Washington state to help craft its recreational pot rules, questioned whether Shively is most interested in promoting his company's stock.

"Maybe he has good legal advice that he can lend a brand name and not be considered by the federal government to be distributing cannabis," he said. "Boy, I wouldn't want to defend that case. ... Nobody has identified anything about this whole thing that makes sense."

Marijuana remains illegal under federal law, and Shively said federal scrutiny is a concern. But he claimed his company's plans do not run against the Obama administration's approach to marijuana.

Generally, the federal government has made enforcement of marijuana laws a low priority. But large operations continue to be targeted, and it's anyone's guess how federal authorities will respond to recreational industries taking shape in Colorado and Washington.

Other businesses are more quietly looking to invest in Colorado.

Partners in Seattle-based Privateer Holdings keep shared office space in Denver and are working on two acquisitions that should be finalized within 90 days, a spokeswoman said, declining to elaborate.

The private equity firm started by partners with Yale MBAs is focused on businesses that do not produce or sell marijuana and already has purchased Leafly, a sort of Yelp for dispensaries and cannabis strains.

Joe Megyesy, a lobbyist on marijuana issues, said out-of-state interest in Colorado can be a double-edged sword — potentially giving the industry legitimacy while putting it at risk of federal attention.

"Maybe," he said, "it could push the federal government into changing their tune and saying, 'Hey, maybe we should stop wasting money trying to make this substance illegal and instead generate tax revenue not just for enforcement but other government services.' "

Eric Gorski: 303-954-1971, egorski@denverpost.com or twitter.com/egorski

The Associated Press contributed to this report.

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