Atlantic City Cannabis Dispensary Seeks More Than $5 Million From City Following Federal Bribery Charges

Sweet Leaf's Dispensary alleges municipal misconduct damaged its business as questions grow over cannabis licensing, oversight and a previously authorized refund.

ATLANTIC CITY, N.J. — The owner of an Atlantic City cannabis dispensary is seeking more than $5 million in damages from the city, alleging that misconduct involving municipal officials and the city's cannabis licensing process caused substantial financial losses and contributed to the business's closure.

The notice of tort claim, submitted October 1 by Victor Diaz and Sweet Leaf's Dispensary LLC, comes after federal prosecutors charged Kashawn McKinley, Atlantic City's suspended director of constituent services and former chairman of the city's Cannabis Review Board, with honest-services fraud and bribery offenses.

The claim raises questions about the city's oversight of its cannabis industry and whether municipal officials were aware of problems before the federal investigation became public.

A notice of tort claim is generally a preliminary step toward pursuing legal action against a public entity in New Jersey. It is not itself a lawsuit, and the allegations have not been proven in court.

The claimants are seeking more than $5 million for alleged business losses, lost investment opportunities, reputational damage, emotional distress and other damages.

Federal Charges Form Background of Claim

Federal prosecutors announced charges against McKinley on September 24, alleging he used his municipal position to solicit improper benefits in connection with a cannabis business.

According to the federal criminal complaint, McKinley allegedly solicited more than $20,000 in cash and marijuana in exchange for assistance involving the business and its dealings with Atlantic City.

Prosecutors also allege that McKinley directed a business owner to assault another individual as part of an arrangement involving municipal fees.

The federal complaint describes a dispute involving Atlantic City's cannabis licensing classifications.

Under the fee structure discussed in the complaint, a standard cannabis business faced an annual mercantile license renewal fee of $25,000, while a microbusiness faced a substantially lower $2,500 fee.

Federal authorities allege McKinley intervened in the process to secure favorable treatment.

McKinley faces one count of honest-services fraud and two bribery counts. He is presumed innocent unless proven guilty.

The federal charges are separate from the civil allegations raised by Diaz and Sweet Leaf's Dispensary.

Dispensary Claims Business Was Damaged

The 17-page notice of tort claim identifies Diaz as the individual described as "Individual-1" in the federal criminal complaint.

The claim alleges that improper actions by McKinley and failures of oversight by other municipal officials interfered with the dispensary's operations and business relationships.

According to the filing, the alleged misconduct contributed to the loss of investment opportunities, damaged the company's reputation and ultimately forced the business to close.

The claim identifies a period extending from January 2022 through September 2026.

It also outlines potential legal claims involving civil rights, negligent supervision, interference with business relationships and racketeering.

Those allegations have not been independently established, and the notice does not constitute a judicial finding that the city or any individual official is liable.

The claimants are also demanding preservation of extensive municipal records, including emails, text messages, communications through encrypted messaging applications, licensing documents and financial records.

Such records could become important evidence if the dispute develops into litigation.

City Previously Authorized Refund to Sweet Leaves

A separate review of Atlantic City municipal records identified a potentially significant financial transaction involving a similarly named cannabis business.

The February 18, 2026, City Council agenda included Resolution 130, authorizing a refund of $25,763.93 to Sweet Leaves, LLC.

The amount is noteworthy because the federal criminal complaint describes disputes over cannabis licensing fees and the financial difference between standard business and microbusiness classifications.

However, the available agenda information does not establish the reason for the refund, whether the payment was completed or whether Sweet Leaves, LLC is legally the same entity as Sweet Leaf's Dispensary LLC.

South Jersey NewsBeat has not established a connection between that refund and the conduct described in the federal complaint.

The underlying resolution, supporting financial records and licensing documents would be needed to determine whether the transaction is related.

The refund nevertheless raises an additional question about the history of the city's financial dealings with cannabis businesses during the period now under scrutiny.

Questions About Municipal Oversight

The allegations could create legal and financial challenges for Atlantic City if Diaz and the dispensary ultimately pursue a civil lawsuit.

The notice seeks damages exceeding $5 million, but that amount represents the claimants' demand, not an established loss or judgment against the city.

Among the unanswered questions are whether city officials received earlier complaints about the cannabis licensing process, what oversight procedures were in place and whether any internal warnings were raised before the federal charges.

It also remains unclear what financial responsibility the municipality might face if litigation proceeds.

That could depend on the claims ultimately filed, the evidence developed and the city's applicable insurance or other legal protections.

Mayor Suspended McKinley Following Charges

Following the announcement of the federal charges in September, Mayor Marty Small's administration suspended McKinley without pay.

The administration emphasized the presumption of innocence and pledged to review the matter.

The status and findings of any internal municipal review have not been publicly established.

The city has not been shown to have issued a substantive response specifically addressing the allegations in Diaz's October 1 notice.

The claim is expected to be among the matters before Atlantic City Council on Wednesday, October 28.

Council consideration of the notice does not mean the city has accepted liability or agreed to pay damages.

Broader Questions for Atlantic City's Cannabis Industry

The dispute comes as Atlantic City continues to develop its legal cannabis market, an industry that city officials have promoted as an opportunity for new businesses, employment and economic activity.

The federal investigation and subsequent civil claim have placed greater attention on the procedures used to review cannabis businesses, assess fees and oversee municipal officials involved in licensing decisions.

The outcome could have implications beyond a single dispensary, particularly if records reveal broader weaknesses in the city's regulatory process.

For now, the federal criminal case and the potential civil action remain separate legal matters.

McKinley has not been convicted of the federal charges, and Diaz's allegations against the city have not been proven.

The next developments could include a formal civil lawsuit, additional disclosures concerning the licensing process or a public response from Atlantic City officials.

South Jersey NewsBeat will continue examining the municipal records, the previously authorized refund and the city's response to the allegations.