The Los Angeles Times is reporting an attorney has reviewed partnership agreements between 4thMVMT and one of its social equity partners who likened it to a “predatory” relationship.
Attorney Yvette McDowell is representing a partner of Karim Webb, founder of 4thMVMT, who shared that Webb has partnered with companies selected for social equity licenses administered by the City of Los Angeles.
According to The Times Webb/4thMVMT positioned itself as one of the program’s biggest winners by partnering with at least 13 of the applicants scheduled to receive temporary approval this week to start operating after meeting certain conditions.
“4thMVMT is not … doing anything that’s predatory or that is not in the interest of our partners executing at the highest level,” Webb said. “We are going to address displacement with these folks and build generational wealth.”
An attorney who reviewed one of 4thMVMT’s partnership contracts has raised alarms over what she says are “predatory” business practices baked into the agreements. Meanwhile, competitors of 4thMVMT have seized on the contract language to attack the company.
The contract allows a subsidiary of 4thMVMT to buy out the “social equity” partners if they refuse a “lawful direction/instruction” from the company, according to a copy of the contract reviewed by The Times. The buyout price is set at $200,000, an amount experts on the state’s cannabis trade say is far less than the likely market value of a licensed pot shop in Los Angeles.
Webb refused to turn over other contracts to McDowell’s client, which authorizes an outside company to run the day-to-day operations of the shops. McDowell believes that contract might give Webb’s partners 81% of the shops profits. Webb has 32 agreements in place and according to social equity partners present at the meeting, they were only given two hours to review and sign.
Webb called McDowell ‘unreasonable” saying he had no choice but to rush the agreement signings due to securing storefronts.
“If you’re uncomfortable signing it, don’t sign it, and I’ll call somebody else,” Webb said he told the group. “This is the opportunity, and I apologize that you haven’t had time, but we haven’t had time.”
4thMVMT’s counsel attributes the harsh language to a previous attorney whose intent was to discourage the license holders to skip town with the proceeds.
“That provision in our contract, more so than anything else, is an incentive not to sell,” Webb said. “And to behave properly. You’ve got a million and a half dollars into a property and somebody gets a dividend check and goes to [Cabo San Lucas] and doesn’t come back, you want to at least disincentivize that kind of behavior.”
Webb insists there are no upfront costs to social equity partners for training and assistance for real estate acquisition, however, the rushed contracts the partners signed appears to compensate Webb through the management of their operations.
Webb has basically admitted wrongdoing to The Times.
Los Angeles Councilman Herb Wesson’s son no longer works for 4thMVMT as of February of this year and Webb claims his relationship with City Hall had no bearing on 13 of his partners being awarded social equity licenses.