San Luis Obispo’s entwined cannabis permitting process unraveling

October 7, 2021

By KAREN VELIE

After years of servility and deference, the City of San Luis Obispo turned on marijuana mogul Helios Dayspring, terminating his application for his Natural Healing Center pot shop.

City staff said, in a press release Wednesday, that Dayspring had lied on his application. Dayspring admitted to tax fraud and bribery in a July plea agreement. The press release did not say why staff had taken so long to act on the news.

Last month, staff decided to let Dayspring continue working toward opening his pot shop because Dayspring transferred “a controlling ownership stake to his girlfriend.” But, even though Dayspring said he was no longer involved in the operation, he continued to direct work at the shop.

Dayspring is known to hold concealed ownership stakes in many cannabis grows. In the past, he has often been the primary owner of a project, even though formal paperwork does not indicate his involvement.

Dayspring has enjoyed a long and warm relationship with local elected officials and city staffs. He was awarded marijuana permits in San Luis Obispo, Grover Beach and Morro Bay. In each selection process, critics pointed to manipulation of applicant criteria, unequal treatment of Dayspring’s competitors in background investigations and, in Morro Bay, the selection of Dayspring’s shop even though it was fifth in the ranking of applicants.

Dayspring admitted to bribing then-San Luis Obispo County supervisor Adam Hill beginning in 2016 and paying him $32,000.

The SLO staff decision to end his application process was the first cancellation Dayspring has suffered in his dealings with local governments.

City staff cited Dayspring’s guilty plea to tax fraud and bribery in its announcement.

“As part of the application process, Dayspring told city officials that he had not ever spent money for illegal purposes, falsified any documents or was involved in tax fraud or evasion of taxes,” city staff said in a press release “However, he now admits to committing several crimes before the application period, including making a false tax return in 2018, under-reporting his individual taxable income, bribing an elected official, and attempting to bribe another elected official.”

Over the past four years, CalCoastNews has exclusively reported on allegations of bribery and fraud regarding Dayspring and several other cannabis business owners who operate on the Central Coast.

In 2017, ignoring allegations of threats and backroom deals, the Grover Beach City Council awarded three marijuana shop permits to applicants including Dayspring who were political contributors to several council members.

On Oct. 28, 2018, Dayspring hosted a fundraiser for eight politicians from San Luis Obispo, Grover Beach and Morro Bay, local cities planning to open cannabis shops in the near future.

The covert fundraiser for then-SLO mayor Heidi Harmon, SLO City Council candidates Carlyn Christanson and Erica Stewart, Morro Bay mayoral candidate John Headding, Morro Bay City Council candidate Dawn Addis, Grover Beach mayoral candidate Jeff Lee, and Grover Beach City Council candidates Barbara Nicolls and Mariam Shah, was not reported by the beneficiaries as a donation until after CalCoastNews reported on the failure to report.

While Harmon, Christianson and Stewart accepted multiple donations from people affiliated with the marijuana industry during Dayspring’s event, those donors were generally listed as retired or under a non-marijuana related occupation on the candidates’ financial disclosure forms.

Cannabis business owners purchased multiple retail properties in San Luis Obispo as they leveraged themselves in the pot shop application process. During that time, Dayspring informed multiple property and cannabis business owners they needed to kiss his ring if they planned on doing business in SLO County, sources said noting they suspect Dayspring has ownership interest in the majority of cannabis shops in the county.

Harmon was allegedly a regular guest at Dayspring’s Grover Beach pot shop, hanging out in the upstairs offices, while the SLO City Council hashed out its cannabis selection process, one of Dayspring’s business partners told CalCoastNews. During one of her visits, Dayspring allegedly ordered staff to give Harmon two bags containing approximately $1,000 worth of complimentary marijuana products.

Council members created a selection criteria to determine the winners of the three lucrative cannabis retail permits on Nov. 27, 2018. The process appeared to promote specific candidates, including Dayspring.

For example, the city provided extra points if a company had enough money to purchase its property and also handing out points for having a minority owner with financial difficulties.

SLO City Attorney Christine Dietrick initially refused to release details of marijuana store application forms amid questions about the fairness of the pot shop application process. Dietrick later acknowledged in nearly three of four record request cases that her initial decisions to censor portions of records were improper under the law — but only after challenged by a CalCoastNews reporter.

In March 2020, SLO staff announced three companies had received the most points: Dayspring’s Natural Healing Center, Megan’s Organic Market and Elemental Wellness. Shortly afterwards, several city staffers, who asked not to be named to protect their jobs, said city officials wanted staff to change the scores to knock Elemental Wellness out. The employees refused.

SLO police detective Suzie Walsh was then charged with interviewing the applicants.

During the April 2020 interviews, Walsh asked odd questions such as, “Have you ever been cruel to animals? Have you ever been involved in a lawsuit? Have you ever had a building code violation?” Even though Walsh does not have a business background, she inspected a number of corporate and business documents.

Walsh also voiced concerns that minority partners with Elemental Wellness had limited or no involvement in the preparation of the city application, a common practice in business. However, she did not require the same level of involvement with minority partners of Natural Healing Center, one of Dayspring’s partners said.

Based on Walsh’s report, then-chief Deanna Cantrell asked city management to disqualify Elemental Wellness, giving SLOCal Roots the third permit.

On March 11, 2020, FBI agents raided Dayspring’s home on the outskirts of SLO.

By that time, Dayspring had secured pot shop permits in Grover Beach, San Luis Obispo and Morro Bay.

Morro Bay was sued over allegations that officials had manipulated results and run afoul of its own laws to reward retail permits to Dayspring’s Natural Healing Center and Perfect Union. In March 2020, SLO County Superior Court Judge Ginger Garrett ruled that city officials had discretion when they passed over the city’s consultant’s top choice in favor of Natural Healing Center and Perfect Union, the fifth and sixth ranked businesses.

In an interesting twist, in the months after Dayspring signed his plea agreement with federal prosecutors, SLO detective Walsh, Judge Garrett and SLO Mayor Harmon left their government positions.

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