Los Angeles Times: “A new court ruling (or, actually, a lack of one), is being hailed as a huge victory by the side that says selling is drug dealing: The California Supreme Court declined to review a lower court decision that favored the city of L.A. in its crackdown on a Culver City-adjacent pot shop called Organica. A new court ruling (or, actually, a lack of one), is being hailed as a huge victory by the side that says selling is drug dealing: The California Supreme Court declined to review a lower court decision that favored the city of L.A. in its crackdown on a Culver City-adjacent pot shop called Organica.”
In a June 27, 2012, press conference Maricopa County Attorney Bill Montgomery said the following about Arizona’s medical marijuana law:
“With respect to one other part of the Court’s ruling in SB 1070, it is instructive for state officials and for those who are advocates of Arizona’s ‘medical’ marijuana act to read it well. Particularly at page 8 of the slip opinion, in section 3 of that opinion, where it mentions specifically and I’m going to quote: ‘Second, state laws are preempted where they conflict with federal law. This includes cases where compliance with both federal and state regulations is a physical impossibility.’ The federal Controlled Substances Act prohibits the possession, use, distribution, transportation, or cultivation of marijuana. Arizona’s ‘medical’ marijuana act is unconstitutional on its face. And with this very clear and most recent analysis of those provisions, there is no reason for state officials to not act responsibly and cease any further implementation of that Act. And consistent with my previous opinion that was issued to the Board of Supervisors with respect to the ability for county employees to participate at all in accepting, processing or issuing permits or applications for zoning in pursuit of a state license for a dispensary or cultivation site on county land, that cannot happen.
So, to the extent that any state officials need help in researching the impossibility of complying with the ‘Medical’ Marijuana Act in light of the Supremacy Clause of the federal Constitution, I am more than happy to provide them with a copy of our research so they can issue their opinion forthwith. And I am aware that there are state legislators who have asked for an opinion from the Attorney General. And there’s no reason why that opinion can’t issue.“
Mr. Montgomery issued his opinion over a year ago advising county employees to take no action to help a dispensary open for business (including issuance of zoning permits or business licenses) because they would be facilitating violations of federal drug laws and would have no immunity.* He has called upon Attorney General Tom Horne several times over the past year to take similar action to protect state employees. In issuing his opinion, Mr. Montgomery referred to the oath he took to uphold the U.S. Constitution as well as the laws and constitution of the state of Arizona. Our Governor, Attorney General, and legislators all took the same oath of office.
Arizona state officials received two separate warnings (May 2, 2011 and February 16, 2012) from the Department of Justice, making it clear that (1) Arizona’s scheme for cultivation and sale of marijuana will not be tolerated, and that (2) state employees, landlords, financiers and others who facilitate the activities authorized under the state marijuana law have no immunity from federal prosecution. State legislators have asked for an opinion from Tom Horne as to whether our marijuana law conflicts with federal law and whether state employees could be held personally liable for their actions under the “medical” marijuana law. The legislators (and we) are statutorily entitled to an answer. If Mr. Horne is unwilling or unable to answer the legislators’ request, then he needs to turn over the matter to independent counsel. Now.
The outrage being expressed by many in this country, and especially in Arizona, over the failure of the federal government to enforce federal immigration laws is understandable. The outrage expressed by Arizona state officials over the federal government’s failure to enforce federal immigration laws while blatantly disregarding the federal government’s demands that Arizona comply with federal drug laws is disingenuous.
In responsibly heeding the warnings of the U.S. Attorneys for their states, Washington Governor Gregoire, Delaware Governor Markell and Rhode Island Governor Chafee all expressed concern about the consequences to their state residents if illegal marijuana laws were allowed to be implemented. Attorney General Horne does not have the option of staying neutral and leaving Arizonans vulnerable to arrests, seizures of property and prosecutions.
Our “health” department intends to start issuing dispensary licenses on August 7 in blatant disregard of clear federal law and two separate warnings from the Department of Justice. Pro-pot bloggers are predicting that state officials will call out the National Guard when the federal government comes after dispensaries. As ridiculous as that sounds, you can see why they might believe it. And, you can bet they’ll be screaming at state officials to do it.
*There will be more on this subject soon — A potential dispensary owner has sued Maricopa County for refusing to certify its registration certificate. Read “An applicant for a medical-marijuana dispensary and cultivation site has sued Maricopa County.”
yourwestvalley.com: “For Robert Geier, a medical marijuana dispensary moving into his Sun City neighborhood would be ‘sort of like having a rats nest in the backyard.’ . . . If Maricopa County Attorney Bill Montgomery has his way, neither Geier nor McCoy will have to worry. . . . ‘Arizona’s medical marijuana act is unconstitutional on its face,’ Montgomery said.”
Los Angeles Times: “A Santa Fe Springs councilman agreed to plead guilty to a federal charge that he took $11,500 in bribes from a medical marijuana dispensary operator who wanted the city to allow him to keep his shop open.”
If your dispensary needs a location to operate an Arizona medical marijuana dispensary and grow marijuana that has been approved by the City of Phoenix consider purchasing the central Phoenix commercial building located at 2620 West Encanto. See the realtor’s information flyer and the zoning compliance statement. Here is a summary of the property:
This property is the perfect location for a full service Dispensary, Cultivation and infusion Medical Marijuana facility.
The site is zoned A-1 and meets Phoenix Zoning Ordinances. Zoning ordinance specifies that the exterior building walls of the facility shall not be located within the following:
- 250 feet of residential zoned district
- 1,320 feet of a preschool, kindergarten, elementary school, secondary school or high school, public parks or community center
- 500 feet of a public place of worship
This property has been green lined and granted the zoning approval.
Features: Total Square Footage 9,595
- 832 sq ft of medical/office space with a clear separation from dispensary/retail space (state requirement)
- 660 sq ft of dispensary /retail space
- 432 sq ft of a secured safe/ prep room (state requirement)
- 657 sq ft potential production kitchen
- 994 sq ft of event space
- 682 sq ft secured receiving dock (state requirement)
- 3,346 total sq ft of cultivation space that is separated out to support vegetation/flowering and isolation room
- 1,992 of general office space
There is also a gardening storage area and a wash area that includes a shower and room for a stackable washer and dryer.
Security is one of the most important aspects of the dispensary center. The facility itself is designed with a secondary secured (barb wired can be added for even stronger deterrence) fence that can be manned by a security guard that will ensure that only approved personnel can access the Cultivation area. There is a an office space for an armed security guard (state requirement) And a private secured employee entrance. Inside the building there is a key pad coded locked door that restricts non cultivation employees from accessing area as well. Adequate exterior lighting is set on a timer system to automatically turn on at dusk.
Cameras located both inside and outside of the facility, High Resolution Color Security Cameras 960FPS Realtime @ D1 Resolution ran by a 1 TB hard drive and 150-day DVD recorder installed in each room ( exception of Restrooms) and around the outside of structure with day and night vision capabilities with adjustable 3.5mm to 8mm lens. ( a total of 32 cameras). They are prominently displayed throughout the business to deter theft and to ensure the safety of all who enter the facility and or grounds.
New phone system installed (including phones). New internet server and cabling installed. Furniture items including safe and retail display cases are included in this property. (comp Dispensary, Cultivation and infusion lete list will be included the purchase documents)
Chicago Tribune: “The Chicago City Council overwhelmingly voted today to decriminalize small amounts of marijuana possession. Mayor Rahm Emanuel’s proposal passed 44-3, allowing Chicago police to issue pot-possession tickets starting Aug. 4. The move makes Chicago among a growing wave of states and several of the largest U.S. cities to adopt reduced penalties.”
Arizona Republic: “An applicant for a medical-marijuana dispensary and cultivation site has sued Maricopa County, accusing the county of purposely stalling action on its application to prevent it from seeking a state operating license. The lawsuit by White Mountain Health Center Inc. alleges the county would not certify or reject its registration certificate, one of the Arizona Department of Health Services’ first requirements for obtaining a dispensary license. . . . Based on his analysis, [Arizona County Attorney Bill] Montgomery said, other local jurisdictions that allow medical-marijuana dispensaries should be subject to federal prosecution.”
Will Humble Warns Arizona Medical Marijuana Dispensaries Not to Pretend to be a Not-for-Profit Business
The following is the text of a post made by Will Humble, Director of the Arizona Department of Health Services, on his blog on June 23, 2012:
“We have a couple of new projects in the works to ensure that the dispensary system reflects a medical rather than a recreational system. We’re working with Arizona’s pharmacy/poison control systems to put together a contract to provide technical assistance and educational materials to the future dispensary medical directors. We’re also putting together a contract to hire a vendor to help us ensure that the future dispensaries are truly “non-profit”. The contractor will be reviewing the required dispensary audited financial statements to make sure they’re on the up-and-up in terms of truly being “non-profit”. For example- (among other things) the contractor will be looking for evidence that dispensaries are getting “fair value” for goods, services, salaries, and reimbursements- to make sure that they don’t use a shell game to over-pay for things or services as a way of moving assets out of the dispensary. Stay tuned.”
Medical Marijuana Business Daily: “As if the medical marijuana industry needs another challenge. Last week, we published an exclusive story about a move by the MMJ industry’s primary credit card processor to stop handling Visa and MasterCard transactions made at cannabis centers as of July 1. . . . our sources in the merchant services arena say Visa and MasterCard were behind the decision to sever ties with the MMJ industry . . . . Many cannabis professionals have feared this day was coming since American Express stopped processing dispensary transactions last year. Most dispensaries in the nation will be forced to conduct business solely in cash”
Times Herald: “Solano County prosecutors have dismissed, ‘pending further investigation,’ the case against one of seven Vallejo medical marijuana dispensary operators arrested in recent raids. ‘Nature’s Love’ founder Marc Hewitt, 58, was arrested on suspicion of running an illicit dispensary after the Vallejo police and Solano County Narcotics Enforcement raid May 4 on his club, which he opened in November. While six other local dispensary operators arrested in recent police raids are facing state felony drug charges, none have been filed so far against Hewitt.”
Washington Post: “If someone wanted to do business in the small Southern California city of Cudahy, federal prosecutors say one-time city manager Angel Perales had some advice. “Money makes the monkey dance,” Perales told an FBI informant, according to court documents. Perales, Mayor David Silva and Councilman Osvaldo Conde were arrested Friday and charged with soliciting and accepting cash bribes totaling $17,000 to support the opening of a medical marijuana dispensary.”
See other stories on these arrests:
- Los Angeles Times: “Three Cudahy city officials face federal bribery charges.”
- KTLA.com: “3 Cudahy Officials Arrested in Federal Bribery Probe.”
4KXLF.com: “A Bozeman couple that operated medical marijuana dispensaries in Dillon, Big Sky and Bozeman were sentenced in federal court this week. Mark Sigler and Valerie Sigler were ordered to each forfeit $450,000 by Judge Donald Molloy. Mark must also service six months home arrest and four years of supervised release.”
The following is the text of a post made by Will Humble, Director of the Arizona Department of Health Services, on his blog on June 21, 2012:
“Overall, we ended up receiving 486 medical marijuana dispensary applications among our 126 Community Health Analysis Areas (CHAAs). Twenty-seven of the CHAAs had no applicant at all- leaving 99 Community Health Analysis Areas with at least 1 applicant. Seventy-five of the 99 had more than 1 applicant. Assuming that each of these end up being complete, we’ll need to randomly select successful applicants in 75 of the CHAAs (we’ll be posting an updated summary of how many complete applications there are by CHAA in a few weeks). Here’s how it’ll work for the competitive CHAAs on Selection Tuesday (August 7):
We’ll be using a device that blows balls inside of a clear cage to randomly select the successful applicant in each CHAA. Applicants will be assigned a random code in advance… and the person with the code that matches the ball that blows into the chamber will be allocated a Registration Certificate. We’ll repeat this process for each of the competitive CHAAs. The process will be webcast live on a URL that we identify a few days before August 7. The Act doesn’t allow us to identify the successful applicants by name or even business name publicly- so the live announcement will be made using the code that only the applicants will have. Each applicant will receive their unique identifier electronically so they’ll know whether they won their CHAA drawing via the webcast. The Certificates will be mailed later that day.
Everybody that’s allocated a Dispensary Registration Certificate will have a little less than a year to build out and get an “Approval to Operate”. Keep in mind that an application for Approval to Operate a dispensary is not complete until we get a written notice that the dispensary is ready for an inspection and they meet our criteria. Our team recently put together some tools to help Registration Certificate holders meet our Approval to Operate criteria, including an Approval to Operate Application Checklist, Approval to Operate Application Instructions, and the Dispensary Inspection Checklist.”
Toke of the Town: “New Hampshire Governor John Lynch on Thursday followed through on his threat to veto SB 409, New Hampshire’s medical marijuana bill. The bill will now return to the House and Senate for a final vote that will decide the bill’s fate.Veto override votes are planned for June 27 in both the House and Senate. The veto came as no surprise. Lynch vetoed similar legislation in 2009, after which the House voted by more than two-thirds to override the veto, but support in the Senate fell two votes short of the necessary two-thirds.”
Gazettes.com: “If nothing happens before Aug. 12 this year, then all medical marijuana collectives will be banned from Long Beach. . . . The city has been dealing with about 25 or 30 illegal collectives — mostly through fines and going after property owners.”
Sally Guarino’s June 20, 2012, video interview of the director of the Arizona Department of Health Services Will Humble on the topic of Arizona’s medical marijuana laws.
Reason.com: “Medical marijuana dispensary owner Aaron Sandusky might be going to jail for a long, long time. . . . Thom Mrozek, the press representative for the Department of Justice’s Central California district, responded to questions about G3 Holistic with this emailed statement: ‘Those associated with the G3 marijuana store ignored a series a warnings that the retail store in Upland was operating in violation of the law. Those warnings came from local officials, through letters from the Department of Justice, during the execution of search warrants and through civil lawsuits’.”
Sandusky and the DEA’s previous raids on G3 Holistic are showcased in this Reason.tv video on Obama’s war on medical marijuana.
Los Angeles Times: “Documents show a cash-infused retail world bearing little resemblance to the one pitched to voters for the 1996 Compassionate Use Act for ‘seriously ill Californians.’ . . . Many medical marijuana dispensaries have been making huge sums of money even as they claim to be nonprofit, according to court and law enforcement records, industry insiders, police and federal agents. . . . The federal government, which considers all marijuana use illegal and has signaled it will target any commercial operations, has launched a multi-pronged campaign to put this all back in the bottle. And local authorities throughout California, led by the Los Angeles Police Department and Los Angeles County Dist. Atty. Steve Cooley, are going after them too, based on the notion that nothing in the medical marijuana law permits sales or profits. . . . LAPD Det. Robert Holcomb instructs smaller agencies with a simple message: ‘Sales are not authorized anywhere in the medical marijuana laws.’ In the last three years, his team of detectives in the Devonshire Division got rid of all 38 dispensaries in their turf, whether they were barely getting by or brimming with cash.”
Warning to Arizona Medical Marijuana Dispensaries that Plan to Make their Dispensary Not-for-Profit by Siphoning Funds to Affiliated Entities
Since Arizona voters approved Proposition 203 in November of 2010 I have talked to many people who were interested in obtaining a license to grow marijuana and sell it in an Arizona medical marijuana dispensary. In general these people fall into two categories: (1) people whose primary goal is to provide medicine to patients, and (2) people who want to make a lot of money. When I mention to the people in category 2 that all Arizona medical marijuana dispensaries must be operated on a not-for-profit basis they usually say I know, but I’m going to form one or more companies to provide services to the dispensary to move money from the dispensary to the for profit companies.
In theory this seems like a reasonable plan that could work, but I suspect that in practice most category 2 people will be “over paying” for services rendered by a for profit company to the category 2 person’s not-for-profit dispensary. Let’s consider two scenarios and compare the results.
Scenario 1: AZ Medical Marijuana Dispensary, LLC (“AMMD”), has a license to operate an Arizona medical marijuana dispensary. It is owned equally by Homer Simpson and Ned Flanders. The total cost for salaries, bonuses, employee benefits, payroll taxes and expenses for all of AMMD’s personnel for the first year of its business is $X, which amount can be deducted from AMMD’s gross income for the purposes of determining if AMMD is a not-for-profit dispensary as required by Arizona’s medical marijuana laws. Whether any portion of this amount is deductible from AMMD’s federal income tax return depends on Internal Revenue Code Section 280E.
Scenario 2: Same facts as Scenario 1 except Homer and Ned form Suck Off the Profits, LLC (“SOTP”), an employee leasing company that employs and leases to AMMD all personnel needed by AMMD to operate AMMD’s dispensary business. SOTH bills AMMD $X times 3. In computing its not-for-profit bottom line for Arizona medical marijuana dispensary requirements AMMD now can reduce its gross income by the cost of its leased personnel = $3X instead of $X.
In both scenarios AMMD must submit audited financial statements to the Arizona Department of Health Services. These financial statements will disclose in the case of Scenario 1 that AMMD paid $3X to SOTP. I suspect that ADHS will inquire into the ownership of SOTP and when it finds that Homer and Ned own both companies ADHS may claim that AMMD was not operated on a not-for-profit basis. How will Homer and Ned explain why AMMD paid 3 times the actual cost of the employees to SOTP? Homer and Ned may think ADHS is stupid, but if so, that would be a big mistake that could lead to the loss of AMMD’s license to operate an Arizona medical marijuana dispensary.
However, AMMD’s loss of its license to operate an Arizona medical marijuana dispensary might be the least of its worries. Don’t you think that the federal law enforcement agencies will get copies of the audited financial statements of every Arizona medical marijuana dispensary and do their own investigations as to whether Arizona medical marijuana dispensaries are operated on a not-for-profit basis? Evidence that a dispensary is a money making machine is a good way to entice the feds to bust your medical marijuana dispensary.
Read the post called “Feds Indict 6 California Medical Marijuana Dispensary Owners & Sue to Take Landlord’s Land” about a California dispensary called G3 Holistic that was very good at making money. The story linked to in the preceding sentence said:
“In a civil forfeiture complaint, the government claimed that a forensic investigation by the IRS identified 19 bank accounts linked with G3 Holistic Inc. or individuals connected with it. The accounts had received $3.3 million in deposits during an eight-month period in 2011, with withdrawals nearly equaling that amount. The IRS concluded it was to make G3 appear to be a nonprofit organization.”
The Los Angeles Times has a detailed story about California medical marijuana dispensaries making big bucks called “Some Southern California ‘Nonprofit’ Pot Shops Make Big Money.” This story says:
“Tax may be the biggest cudgel the feds have against medical pot. Increasingly, the IRS is applying an obscure provision of the tax code, 280E, which prohibits drug traffickers from claiming routine business deductions, for costs like wages and rent, when federal agents are trying to get back-taxes from them. Already dispensaries were in a quandary: Pay the IRS and literally document your federal crime to the federal government, or don’t report it and risk going down for tax evasion. Now they face 280E, and potentially crippling tax bills.”
If you are a category 2 person you should read about the G3 Holistic case, note in your mind that your dispensary will be giving ADHS a road map of how your dispensary spends its money (the audited financial statements) and then answer the question San Francisco Detective Harry Callahan asks a crook in the movie “Dirty Harry” after Callahan points his gun at the crook who must decide whether to go for his gun or give up. Dirty Harry says:
I know what you’re thinking. Did he fire six shots or only five? Well, to tell you the truth, in all this excitement, I’ve kinda lost track myself. But being as this is a .44 Magnum, the most powerful handgun in the world, and would blow your head clean off, you’ve got to ask yourself one question: ‘Do I feel lucky?’ Well, do ya punk?”
If you are a category 2 person who is involved with an Arizona medical marijuana dispensary and you plan on siphoning profits from the dispensary, you must ask yourself “Do I feel lucky.”
For those category 2ers who are not familiar with the not-for-profit requirement of Arizona’s medical marijuana law applicable to all Arizona medical marijuana dispensaries I suggest you read the following text taken from my article called “Warning to Everybody Considering Becoming Involved with an Arizona Medical Marijuana Dispensary.”
Arizona Medical Marijuana Dispensaries Must be Operated on a Not-for-Profit Basis
A lot of people believe that owning an Arizona medical marijuana dispensary is a way to get rich despite the fact that all Arizona medical marijuana dispensaries must be operated on a not-for-profit basis. Unfortunately neither Arizona’s medical marijuana laws nor the ADHS rules explain what that term means. The only guidance with respect to the meaning of this term is found in Arizona Department of Health Services rule R9-17-304(D).8 that states that the Bylaws of a dispensary must contain “Provisions for the disposition of revenues and receipts to ensure that the dispensary operates on a not-for-profit basis.” That’s it. Nobody has a clue what the phrase means.
We do know, however, that all Arizona medical marijuana dispensaries must provide annual audited financial statements to ADHS. Most businesses do not get audited financial statements, which are very expensive. The fact every dispensary will be giving ADHS audited financial statements means that ADHS will be able to examine in detail how dispensaries are spending money, i.e., who the dispensaries pay and how much they pay. I believe that all expenditures of money by a dispensary must be commercially reasonable or the dispensary is opening itself up to a claim that the dispensary is being operated on a for profit basis.
For example, if a member of the board of directors attends one two hour meeting of the board every quarter and provides no other services the board member may be paid for the reasonable value of the services rendered. What is the value of 8 hours of time spent at a meeting of the board of directors? Surely payments of $25, $100 or $250 hour may be justified since many professionals, plumbers and Xerox printer technicians charge those hourly rates. However, if that board member is paid $100,000 for eight hours of time I submit that ADHS will have a problem with that and ADHS could refuse to renew the dispensary’s license.
Money dispensaries pay to employees and insiders will be scrutinized closely. The dispensary must be able to justify the reasonableness of all payments to employees, insiders and affiliates. Dispensaries should not agree to pay for any services provided by employees, insiders and affiliates without tangible evidence that the payments are commercially reasonable. One way to do this is to follow the same rules used by bona fide tax exempt charities. To learn more about this important topic a good start is to read “Nonprofit Payments to Insiders and Outsiders: Is the Sky the Limit?“ This article contains footnotes that refer to sources of information that can be used to justify payments to insiders of tax exempt charitable organizations.
Dispensary people must also understand that law enforcement and prosecutors will be able to access dispensaries’ audited financial statements given to ADHS for the purpose of determining if any dispensaries are not operating on a not-for-profit basis. I am sure law enforcement and prosecutors will pay special attention to payments of large amounts of money to “management” companies or service provider companies owned by the owners, officers or board members of a dispensary. It is a mistake to think you can make a dispensary operate on a not-for-profit basis by siphoning money from the dispensary to affiliated entities.
The bottom line with respect to the not-for-profit requirement is that Arizona medical marijuana dispensaries must actually operate a not-for-profit business so why would anybody want to invest the large amounts of money and time into a business that cannot pay profits that justify that risk?
June 23, 2012 Update: Will Humble’s June 23, 2012, blog post confirms what I suspected, i.e., ADHS will investigate large payments by a dispensary to third parties. Read “Will Humble Warns Arizona Medical Marijuana Dispensaries Not to Pretend to be a Not-for-Profit Business.”
The Press-Enterprise: “Federal authorities indicted and arrested six men connected with the operation of G3 Holistic, a chain of Inland medical marijuana dispensaries which federal authorities say were actually for-profit marijuana sales storefronts. G3 tried in 2011 to hide more than $3.3 million it took in ‘to maintain the façade of G3 Holistic as a nonprofit organization,’according to an Internal Revenue Service analysis. . . . In a civil forfeiture complaint, the government claimed that a forensic investigation by the IRS identified 19 bank accounts linked with G3 Holistic Inc. or individuals connected with it. The accounts had received $3.3 million in deposits during an eight-month period in 2011, with withdrawals nearly equaling that amount. The IRS concluded it was to make G3 appear to be a nonprofit organization.”
The six people who were indicted are: Aaron Sandusky, John Leslie Nuckolls II, Keith Alan Sandusky, Paul Neumann Brownbridge, Richard Irwin Kirchnavy and Brandon Anton Gustafson.
Words of Advice to Medical Marijuana Dispensary Owners: Keep a low profile. Do not do media or interviews. Aaron Sandusky has a Youtube video that not only got him on the feds radar, but probably made him a target of enforcement action.
Phoenix New Times: “People caught near the U.S.-Mexico border with backpacks bulging with marijuana are eligible for reduced sentences under a new policy by the Arizona U.S. Attorney’s Office. “Backpackers” with no prior history of drug offenses and no extenuating circumstances, like also packing a firearm, are receiving plea deals that reduce the initial charge to a misdemeanor with a sentence of 180 days behind bars, according to a letter from the office obtained by New Times. The amount of pot in the backpack apparently doesn’t matter.”
Toke of the Town: “Governor Lincoln Chafee of Rhode Island on Wednesday signed legislation that will reduce the penalty for possession of marijuana to a $150 civil fine for most offenses.”
A Collection of Letters from the Feds Telling Government Officials Feds will Prosecute People Involved in State Legal Medical Marijuana
The following is a summary of a collection of letters from U.S. Attorneys for the states of California, Arizona, Hawaii, Washington, Montana, Colorado, Rhode Island, Vermont, New Hampshire and Maine sent to Governors, state legislators and state attorney generals. The letters all have the same theme, i.e., the U.S. will prosecute people involved in the growing and sale of medical marijuana on a large scale, including property owners who allow their land to be used for growing or medical marijuana dispensaries and government workers or officials who facilitate the medical marijuana industry.
- February 1, 2011, letter from Melinda Haag, U.S. Attorney for the Northern District of California, to the Oakland City Attorney. “The Department is concerned about the Oakland Ordinance’s creation of a licensing scheme that permits large-scale industrial marijuana cultivation and manufacturing as it authorizes conduct contrary to federal law and threatens the federal government’s efforts to regulate the possession, manufacturing, and trafficking of controlled substances. Accordingly, the Department is carefully considering civil and criminal legal remedies regarding those who seek to set up industrial marijuana growing warehouses in Oakland pursuant to licenses issued by the City of Oakland. Individuals who elect to operate “industrial cannabis cultivation and manufacturing facilities” will be doing so in violation of federal law. Others who knowingly facilitate the actions of the licensees, including property owners, landlords, and financiers should also know that their conduct violates federal law. Potential actions the Department is considering include injunctive actions to prevent cultivation and distribution of marijuana and other associated violations of the CSA; civil fines; criminal prosecution; and the forfeiture of any property used to facilitate a violation of the CSA. As the Attorney General has repeatedly stated, the Department of Justice remains firmly committed to enforcing the CSA in all states.”
- March 23, 2011, letter from Dennis Burke, U.S. Attorney for Arizona, to Arizona Tribal Leaders. “we will evaluate every case submitted from Indian Country involving marijuana on a case-by-case basis, and where sufficient evidence is developed taking the matter out of “clear and unambiguous compliance” with the state scheme, we will consider prosecution. . . . Our District policy remains one of “zero tolerance” for illegal distribution or other trafficking of any controlled substance–including marijuana–in Indian Country, no matter what the quantity.”
- April 11, 2011, letter from Florence T. Nakakuni, U.S. Attorney for Hawaii to Jodie F. Maesaka-Hirata, Director of the Hawaii Department of Public Safety. The U.S. Attorney responds to a request from the DPS about what the federal government would do if Hawaii state law allowed medical marijuana dispensaries. The following text is from the letter: “As a way of emphasizing the foregoing, the CSA’s penalties for felony marijuana offenses (manufacture, distribution, possession with intent to distribute) should be considered: – 1,000 or more marijuana plants, or 1,000 kilograms: 10 years – life imprisonment; – 100 or more marijuana plants, or 100 kilograms: 5 – 40 years imprisonment; – so marijuana plants or more, or more than so kilograms: up to 20 years imprisonment; and – Less than 50 marijuana plants, or less than 50 kilograms: up to 5 years imprisonment. . . . This includes, but is not limited to, actions to enforce the criminal provisions of the CSA such as: – 21 U.S.C. § 841 (making it illegal to manufacture, distribute, or possess with intent to distribute any controlled substance including marijuana); – 21 U.S.C. § 856 (making it unlawful to knowingly open, lease, rent, maintain, or use property for the manufacturing, storing, or distribution of controlled substances); – 21 U.S.C. § 860 (making it unlawful to distribute or manufacture controlled substances within 1,000 feet of schools, colleges, playgrounds, and public housing facilities, and within 100 feet of any youth centers, public swimming pools, and video arcade facilities); – 21 U.S.C. § 843 (making it unlawful to use any communication facility to commit felony violations of the CSA); and – 21 U.S.C. § 846 (making it illegal to conspire to commit any of the crimes set forth in the CSA) .”
- April 14, 2011, letter from U.S. Attorney for the Western District of Washington, Jenny Durkan, and U.S. Attorney for the Eastern District of Washington, Michael C. Ormsby, to Christine Gregoire, the Governor of Washington. The letter was written in response to the Governor’s inquiry as to what the federal government would do if Washington passed a law legalizing medical marijuana dispensaries. The letter said “The Washington legislative proposals will create a licensing scheme that permits large-scale marijuana cultivation and distribution. This would authorize conduct contrary to federal law and thus, would undermine the federal government’s efforts to regulate the possession, manufacturing, and trafficking of controlled substances. Accordingly, the Department could consider civil and criminal legal remedies regarding those who set up marijuana growing facilities and dispensaries as they will be doing so in violation of federal law. Others who knowingly facilitate the actions of the licensees, including property owners, landlords, and financiers should also know that their conduct violates federal law. ln addition, state employees who conducted activities mandated by the Washington legislative proposals would not be immune from liability under the CSA. Potential actions the Department could consider include injunctive actions to prevent cultivation and distribution of marijuana and other associated violations of the CSA; civil fines; criminal prosecution; and the forfeiture of any property used to facilitate a violation of the CSA. As the Attorney General has repeatedly stated, the Department of Justice remains firmly committed to enforcing the CSA in all states.”
- April 20, 2012, letter from U.S. Attorney for Montana Michael W. Cotter to Montana State Senator Jim Peterson, Senate President, Representative Mike Milburn, Speaker of the House of Representatives.
- April 26, 2011, letter from Colorado Attorney General John W. Suthers to Colorado Governor John Hickenlooper. The letter includes this text “These letters indicate that while the Department of Justice will not focus its limited resources on seriously ill individuals who use marijuana as part of a medically recommended treatment regimen in compliance with state law, it does maintain its full authority to vigorously enforce federal law against individuals and organizations that participate in unlawful manufacturing and distribution activity involving marijuana, even if such activities are permitted under state law. Of great concern is the fact that some of the letters make clear the U.S. Attorneys do not consider state employees who conduct activities under state medical marijuana laws to be immune from liability under federal law.” Emphasis added.
- April 26, 2012, letter from U.S. Attorney for Colorado John F. Walsh to Colorado Attorney General John W. Suthers. This is the now standard state legal medical marijuana laws violate federal criminal laws and the Department of Justice will prosecute violators other than patients.
- April 29, 2011, letter from U.S. Attorney for Rhode Island Peter F. Neronha to Rhode Island Governor Lincoln D. Chafee. This is the now standard state legal medical marijuana laws violate federal criminal laws and the Department of Justice will prosecute violators other than patients.
- May 2, 2011, letter from U.S. Attorney for Arizona Dennis Burke to Will Humble, Director of the Arizona Department of Health Services. This is the now standard state legal medical marijuana laws violate federal criminal laws and the Department of Justice will prosecute violators other than patients.
- May 3, 2011, letter from U.S. Attorney for Vermont Tristram J. Coffin to Commissioner Keith W. Flynn of the Vermont Department of Public Safety. This is the now standard state legal medical marijuana laws violate federal criminal laws and the Department of Justice will prosecute violators other than patients.
- May 10, 2011, letter from New Hampshire Attorney General Michael A. Delaney to New Hampshire State Senator Jeb Bradley. The AG tells the senator that he opposes a pending bill that would legalize medical marijuana in New Hampshire.
- May 10, 2011, letter from U.S. Attorney for New Hampshire John P. Kacavas to New Hampshire Attorney General Michael A. Delaney. This is the now standard state legal medical marijuana laws violate federal criminal laws and the Department of Justice will prosecute violators other than patients.
- May 16, 2011, letter from U.S. Attorney for Maine Thomas E. Delahanty, II, to Maine State Senator Earle M. McCormick and Maine State Representative Meredith N. Strang Burgess. This is the now standard state legal medical marijuana laws violate federal criminal laws and the Department of Justice will prosecute violators other than patients.
In the last and one half year the federal government has made it clear to all but the blind that it intends to prevent the commercial growing and selling of medical marijuana in all fifty states. The following is the text of a January 17, 2012, letter from the DEA to the Board of Clark County Commissioners that states that Clark County employees and the members of the Board of Commissioners could be prosecuted for assisting a medical marijuana program.
JAN 1 7 2012
Board of Clark County Commissioners
1300 Franklin Street
P.O. Box 5000
Vancouver, Washington 98666-5000
SUBJECT: Application of the Controlled Substances Act (CSA) to the Board of Clark County Commissioners and Clark County Employees
Dear Messrs. Mielke, Boldt, and Stuart:
Thank you for your December 2, 2011 letter addressed to Attorney General Eric Holder which was referred to the Drug Enforcement Administration (DEA) for a response.
The Department of Justice has stated that Congress has determined that marijuana is schedule I controlled substance and, as such, growing, distributing, and possessing marijuana in any capacity, other than as part of a federally authorized research program, is a violation of federal law regardless of state laws permitting such activities. This is reflected in the text of the CSA and the decisions of the United States Supreme Court in United Stales v. Oakland Cannabis Buyers’ Cooperative, 532 U.S. 483 (2001), and Gonzales v. Raich, 545 U.S. l (2005). These federal law concepts are premised on the facts that marijuana has never been demonstrated in sound scientific studies to be safe and effective for the treatment of any disease or condition and, therefore, the Food and Drug Administration has never approved marijuana as a drug. As the Supreme Court stated, “for purposes of the Controlled Substances Act, marijuana has ‘no currently accepted medical use’ at all” Oakland Cannabis Buyers’ Cooperative. 532 US. at 491.
In your correspondence to the Attorney General you quote from an April 14, 2011 letter written to the Honorable Christine Gregoire, Washington State Governor by the U.S. Attorneys for both the Eastern and Western Districts of Washington in which they say that “state employees who conducted activities mandated by the Washington [medical marijuana] legislative proposals would not be immune from liability under the CSA.” Although that letter pertained to the Washington state medical marijuana law and Washington state employees, the principles expressed in that letter are useful in addressing any county “medical marijuana” ordinance or provision implementing state law. As that letter indicated. anyone who knowingly carries out the marijuana activities contemplated by Washington state law, as well as anyone who facilitates such activities, or conspires to commit such violations, is subject to criminal prosecution as provided in the CSA. That same conclusion would apply with equal force to the proposed activities of the Board of Clark County Commissioners and Clark County employees.
Such persons may also be subject to money laundering statutes. In addition, the CSA provides for forfeiture of real property and other tangible property used to facilitate the commission of such crimes, as well as the forfeiture of all money derived from, or traceable to such activity.
Thank you for your inquiry regarding this important matter.
Joseph T. Rannazzisi
Deputy Assistant Administrator
Office of Diversion Control
DOJ War Against Marijuana Dispensaries Claims More Victims, but Arizona Governor, Director of Arizona Health Services & Prospective Arizona Medical Marijuana Dispensary Owners & Landlords Put Heads Deeper into the Sand
The text below is a June 6, 2012, press release issued by the U.S. Attorney for the Central District of California. “Federal enforcement actions – the asset forfeiture lawsuits and warning letters – have now targeted more than 220 marijuana stores and grows in the Central District of California.” That is more than two times the number of dispensaries Arizona will have, but each Arizona dispensary will be growing and selling on a large scale by virtue of the fact Arizona’s medical marijuana law limits the number of dispensaries.
If you are involved with an organization that is seeking to obtain a license to operate an Arizona medical marijuana dispensary or a landlord that is considering leasing to a dispensary you must read this press release and note the text in bold in red then ask yourself this question:
Why in the world would you want to risk your future by getting involved with an Arizona medical marijuana dispensary?
Federal Enforcement Actions Against Commercial Marijuana Operations Continue with Warning Letters and Civil Lawsuits Targeting Illegal Storefronts in Los Angeles County
LOS ANGELES – As part of the ongoing federal enforcement actions against the commercial marijuana industry in California, federal authorities this week filed two asset forfeiture lawsuits against properties housing three marijuana stores in Santa Fe Springs and sent warning letters to people associated with another 34 illegal marijuana operations in Los Angeles County.
The warning letters and lawsuits target all known marijuana stores in the communities of Santa Fe Springs, Whittier, South El Monte, La Mirada, Diamond Bar, Artesia, Paramount, South Gate, City of Commerce, Agoura Hills and Malibu.
The two civil asset forfeiture complaints were filed yesterday in United States District Court in Los Angeles against two properties in Santa Fe Springs where marijuana stores are currently operating. According to the lawsuits, “Under federal law, the distribution of marijuana (a Schedule I controlled substance under Title 21) is prohibited except under very limited circumstances not applicable here. The government is informed and believes that at all times relevant to this complaint, the operation of the marijuana stores on the defendant property was not (and is not) permitted under California law.”
The forfeiture lawsuits allege that the owners of the properties knowingly allowed commercial marijuana stores to operate in Santa Fe Springs. The buildings named in the forfeiture lawsuits house:
two marijuana stores located on one property on Rosecrans Avenue which have been the subject of cease and desist letters issued by Santa Fe Springs and which appear to involve a landlord as a silent partner; and
a marijuana store on Telegraph Road that received a cease and desist letter from the city, and which is being operated by a man with a prior conviction in state court for possession of marijuana for sale.
The two marijuana stores at the Rosecrans Avenue location – Tri-City Patient’s Association and the Canna-America Collective (until recently known as the Organic Way Collective) – were the subject of federal search warrants that were executed this morning.
In conjunction with the filing of the asset forfeiture complaints, letters were mailed out yesterday to the property owners and operators of 34 additional marijuana stores that are either currently operating or were recently closed in selected areas in Los Angeles. The warning letters give the operators and landlords 14 days to come into compliance with federal law or risk potential civil or criminal actions.
This week’s enforcement actions in Los Angeles County follow similar actions in recent months across the seven-county Central District of California. Starting in October 2011, prosecutors began filing asset forfeiture lawsuits and sending letters to marijuana operations in selected areas in the Central District of California (see, for example: http://www.justice.gov/usao/cac/Pressroom/2012/056.html).
With the lawsuits filed this week, the United States Attorney’s Office has filed a total of 12 asset forfeiture complaints. Three of those actions have been resolved with the closure of the marijuana stores and court-approved consent decrees in which property owners agreed that they would no longer rent to people associated with illegal marijuana operations or the property would be subject to an immediate forfeiture to the government.
Federal enforcement actions – the asset forfeiture lawsuits and warning letters – have now targeted more than 220 marijuana stores and grows in the Central District of California. The majority of those stores are now closed, are the subject of eviction proceedings by landlords, or have been the subject of additional federal enforcement actions such as search warrants.
In October 2011, the four United States Attorneys in California announced the coordinated enforcement actions targeting illegal marijuana cultivation and trafficking (see: http://www.justice.gov/usao/cac/Pressroom/2011/144a.html).
The United States Attorney’s Office is working in conjunction with the Drug Enforcement Administration and IRS – Criminal Investigation. The Los Angeles County Sheriff’s Department, which provides law enforcement services in most of the communities targeted this week, provided substantial assistance to federal authorities.
Release No. 12-074
SF Gate: “Attorney General Eric Holder on Thursday [June, 11, 2012] defended the Justice Department’s pursuit of medical marijuana growers and dispensers, saying they “took advantage” of state medical marijuana laws.”
A July 2012 study by Nancy J. Kepple, M.S.W. of the Department of Social Welfare, University of California, Los Angeles, Luskin School of Public Affairs, Los Angeles, California, and Bridget Freisthler, PH.D. of the Lewis Center Faculty Fellow, University of California, Los Angeles, Luskin School of Public Affairs, Los Angeles, California states the following conclusions:
“There were no observed cross-sectional associations between the density of medical marijuana dispensaries and either violent or property crime rates in this study. These results suggest that the density of medical marijuana dispensaries may not be associated with crime rates or that other factors, such as measures dispensaries take to reduce crime (i.e., doormen, video cameras), may increase guardianship such that it deters possible motivated offenders.”
Sacramento Bee: “The federal war on medical marijuana came to Sacramento again Monday with the early morning raid of a dispensary hailed by at least one city councilman as an ideal player. Federal Drug Enforcement Agency officials would say little about Monday’s raid other than to confirm they had executed a search warrant on El Camino Wellness Center near El Camino Avenue and Interstate 80. El Camino Wellness was one of four dispensaries that had gone through the city’s stringent vetting process and is a state and locally sanctioned nonprofit, said Max Del Real, a cannabis industry lobbyist working for El Camino Wellness.”
The Gazette: “An El Paso County jury on Monday acquitted a corporate trainer turned-medical marijuana grower on drug cultivation charges . . . . [Elisa] Kappelmann, who left her job at Hewlett Packard in Colorado Springs to open a medical marijuana dispensary, had faced up to 12 years in prison on two felonies in connection with a May 2010 raid on a Colorado Springs warehouse where she leased an 800-square-foot suite as a temporary grow house.”
azdailysun.com: “Guillermo Padres Elias is worried that Mexican drug cartels will seek a share of the medical marijuana trade in Arizona. TUCSON — Arizona voters made a mistake in legalizing marijuana for medical use, the governor of Sonora said Friday, at least from his country’s perspective. ‘I don’t believe in it,’ Guillermo Padres Elias said in response to a question about how the 2010 law might affect the ability of his country to combat the drug cartels.”