A report by the Minnesota Office of the Legislative Auditor released Thursday says that the Walz administration missed key background checks in its appointment of the first head of the Office of Cannabis Management.

In a preliminary assessment, Auditor Judy Randall concluded in a Thursday report that Gov. Tim Walz appointed Erin DuPree as the director of the Office of Cannabis Management “without having full and complete information.” However, the report also concluded auditors did not find the situation merits further investigation. Rather, it outlined problems that occurred in the process and made suggestions to the office to ensure similar mistakes aren’t made in the future.

The governor’s office announced it had chosen Erin DuPree to lead the state’s Office of Cannabis Management on Sept. 20. A day later, an investigation by MPR and the Star Tribune revealed DuPree had tax liens and outstanding court judgments. The media reports also found her business was selling cannabis products out of compliance with state law.

DuPree asked that Walz withdraw her appointment shortly after this news came out. Then, on Sept. 24, the Office of the Legislative Auditor was asked to conduct a special review of due diligence and background checks by the governor’s office in its appointment of DuPree.

The Thursday report found the background summary report used by the state in its appointment of DuPree concluded she did not have any noteworthy financial obligations or debts. This was proven untrue when reports uncovered tax liens and unpaid debts from previous businesses.

A missed background check by the state’s Department of Revenue was key to this oversight, according to the audit.

Specifically in the DuPree appointment, procedures deviated as an assumption was made that two separate investigations would coordinate with each other. The standard operating procedure is that the governor’s office would send a signed release form directly to the Department of Revenue. The Department of Revenue would then submit its results directly to the governor’s office, which would review the results and information.

In this case, the governor’s office instead sent the signed release form to the Bureau of Criminal Apprehension, believing this office would coordinate with the Department of Revenue as part of the background check process. This coordination hadn’t happened and the Department of Revenue report was missed.

Staff from the governor’s office did not realize that the Bureau of Criminal Apprehension had not reviewed Department of Revenue information until they reviewed the Bureau of Criminal Apprehension’s Oct. 4 full background report, which was produced after Dupree had stepped down from the position, according to the audit.

General Counsel Mary Fee wrote a letter in response to the report, acknowledging issues outlined in the report and stating the governor’s office was already implementing recommendations made by the Office of the Legislative Auditor. “We’ve also increased Governor’s Office capacity for research about potential appointments,” Fee wrote.

Also on Thursday, the Walz administration announced an expanded recruitment and application process for its next cannabis czar appointment. The office is using a professional recruiter from Minnesota Management and Budget to complete a national search for the next candidate, according to a Thursday release. Applications are open through Monday, Feb. 26.

The office also announced that Charlene Briner, who has headed the office on an interim basis since June, will continue on as the interim director of the Office of Cannabis Management as the search continues.

Media reports following DuPree’s initial appointment also found her hemp shop in Apple Valley was selling products out of compliance with the state’s current cannabis law. However, the missteps outlined in the Thursday Office of the Legislative Auditor report focused on a missing background check by the Department of Revenue. It is unclear what sort of background check would be done to ensure product compliance of a candidate’s business. But, since the failed appointment of DuPree, the Walz administration has said it is looking for someone with regulatory experience for its next head cannabis czar pick.

The Office of Cannabis Management is key to the rollout of the state’s cannabis market. When considering the next appointee to the director role, Jason Tarasek, a Minnesota cannabis attorney with Vicente LLP, told TCB the state will need to recognize the complex nature of the cannabis industry.

“The legislative auditor’s report seems to be focusing on the fact that the tax liens were missed, but I don’t know if the background check would have revealed that Dupree was selling noncompliant products at the time she was interviewing to be the director of a $1.5 billion cannabis industry,” Tarasek said.