Medical Marijuana Dispensary on Railroad Ave. Could be Reality

A local attorney said that the actions of a Beverly investment adviser, accused of bilking investors out of millions for a medical marijuana facility on Railroad Ave. in  Revere, should not hold up plans for the only medical marijuana dispensary in Revere to go forward.

Secretary of the Commonwealth William F. Galvin has charged a Massachusetts investment adviser representative who oversaw the solicitation of millions of dollars from more than 100 investors in order to fund various medical marijuana ventures, though no licenses were ever acquired in Massachusetts and no dispensary was ever opened.

McDonald funded several of his ventures through one high net-worth client, who has lost more than $3 million due to McDonald’s activities. Collectively, investors have lost control of more than $8 million in assets, while seeing no returns on their investments, states the administrative complaint filed by Galvin’s Securities Division.

Frederick V. McDonald, Jr., CEO of the Beverly-based investment adviser U.S. Advisory Group Inc., is accused of failing to disclose key risk factors in the cannabis industry, withholding information about his own conflicting interests in the investments he was recommending, concealing crucial information from the investors, and breaching his fiduciary duty to this client.

“McDonald failed to educate himself regarding the unique and complex licensing process in Massachusetts, which resulted in the distribution of offering documents that failed to adequately disclose to investors the risks or difficulties the investment could face,” the complaint says.

The complaint alleges that McDonald took advantage of this advisory relationship with at least one client in order to pursue side marijuana projects, while hiding important information from investors. McDonald provided only minimal information about the various marijuana ventures, while using his position of trust to access investor funds to support his own projects.

While McDonald and his partners planned to open a medical marijuana dispensary in Revere, a lack of transparency and communication led to funding issues. McDonald and his partners jointly raised money for the venture, but when his partners began to dispute existing agreements, the relationship collapsed, and they subsequently failed to obtain a lease or license, according to the compliant.

It is further alleged that McDonald and his partners deliberately hid the identity of an individual who acted as an agent and fundraiser for the potential dispensary, as the discovery of that individual’s criminal record could have led to denial of a license.

“McDonald’s free-wheeling practices included cutting corners at every opportunity and lying to his own business partners and investors to cover his own mistakes,” the complaint states.

Also charged in the complaint are McDonald’s various companies and corporations, including U.S. Advisory Group, Commonwealth Pain Management Connections, LLC and Kettle Black of MA, LLC.

Galvin’s office is seeking censure of the respondents, an order permanently barring McDonald and USAG from registration in the Commonwealth, disgorgement of profits, requirement that respondents make offers of rescission and provide restitution of compensate investors for the alleged wrongdoing, and an administrative fine.

“As far as I know the medical marijuana dispensary on Railroad Avenue intends to go forward according to conversations that I have had with the landlord. We’ve pulled a building permit and are presently in the process of developing most of what would be a cultivation center,” said Attorney Lawrence Simione Jr., who represented the applicants of the project when it was granted a special permit by the City Council.

According to city records, building permits have been pulled for the 44 Railroad Ave. site for a roof and antennas.

In 2018 the City Council voted the ban all retail marijuana shops from Revere, mainly because the majority of voters voted against the 2016 ballot question for recreational/retail pot shops in the city.

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