Arizona Daily Star: “Tucson’s decision to limit the size of marijuana cultivation sites means growers are taking their farms — and jobs — to Phoenix. Dispensaries in Tucson city limits are allowed up to 3,000 square feet to grow marijuana off-site — provided they can find one that’s not too close to a school, church, park, child-care center or substance-abuse rehabilitation facility. Sahuarita, Oro Valley and Pima County limit dispensaries to 2,000 square feet for cultivation.”
A poll of 701 heads of households by Behavior Research Center released on February 18, 2014, starts with:
“By a ratio of 51 to 41 percent, Arizonans favor making the sale of marijuana legal in Arizona. These figures are very similar to a recent national poll completed by CNN/ORC (Opinion Research Corporation) which found that 54 percent favor such sales while 45 percent are opposed.”
Wall St. Journal: “Zoned Properties, Inc. . . . a lessor of land, facilities, and equipment to the medical marijuana market in Arizona announces that it has closed on all of the real estate associated with the approved site for a medical marijuana dispensary located in Gilbert, Arizona for $1.115 million. The Town of Gilbert has already granted a conditional use permit and approved the design of the property, which is properly zoned for a medical marijuana dispensary.”
A search of deeds filed with the Maricopa County Recorder shows a Warranty Deed and affidavit of property value for a parcel of vacant land acquired by Zoned Properties, Inc., on January 30, 2014, for $300,000. The property is located at 988 South 182nd Place, Gilbert, Arizona.
Query: Why does Zoned Properties, Inc., say it purchased the Gilbert property for $1.115 million when the affidavit of property value states the purchase price was $300,000?
Zoned Properties, Inc., a Nevada corporation, lists its headquarters in Scottsdale, Arizona, but it is not a corporation formed in Arizona or licensed to do business in Arizona. Zoned Properties, Inc., is violating Arizona Revised Statutes Section 10-1501.A, which states “A foreign corporation shall not transact business in this state until it is granted authority to transact business in this state.”
The corporation was formerly named “Vanguard Minerals Corp” until 10-2013, “knewtrino, Inc.” until 10-2007 and “Mongolian Explorations Ltd.” until 5-2006. See its financial statement for the nine month period ending September 30, 2013.
Zoned Properties, Inc., appears to be a publicly traded company. Marc J. Brannigan is the President & CEO and Charles Randall is the COO.
CBS Denver: “Colorado is one of 20 states where medical marijuana is legal and one of two states where recreational pot is legal for adults. Texas is not one of those states, but some people who live there claim they are getting high thanks to family and friends shipping the drug to them.”
Phoenix New Times: “According to the results from Scutari and Cieslak (a local firm), 51 percent of their poll respondents opposed legalizing marijuana, with 43 percent in favor of it, and the remainder undecided.”
Modern Times: “Arizona Business Owners Explore The Liability Of Workers Who Are Potentially In Violation Of Federal Narcotics Laws And Under The Influence Of Medicinal Cannabinoids. Several U.S. states have decriminalized medicinal cannabinoids, but Arizona is one of the only states that included a clause for employers in its statute. Under most circumstances, employers cannot discriminate against medical marijuana holders by virtue of their card holder status. . . . The act does not require employers to allow the use of medical marijuana at work or to allow any employee to work while under the influence of cannabis.”
Medbox COO Vincent Mehdizadeh Defends Citron Research’s Charges by Claiming Its Editor is a Bad Dude
Vincent Chase, Inc., alleged to be the largest shareholder of Medbox, Inc. issued a letter to Medbox shareholders in response to Citron Research’s scathing review of Medbox. The letter starts with:
“We are being attacked by a company called Citron Research, whose principal admits to making his living by short selling companies. Now, I have never made any allusions of having a blemish-free past myself and have been painfully honest in company filings in that regard, but I don’t go around casting stones at others. In my opinion, if you are going to take that approach and pick on others, you better have a spotless past yourself. Here is some background on our opponent:”
We note two interesting items about the letter to Medbox shareholders:
1. It fails to mention that the sender of the letter, P. Vincent Mehdizadeh of Vincent Chase, Inc., is the COO and acting CFO of Medbox.
2. It does not dispute any of the allegations contained in Citron Research’s report.
The following is a Medbox press release dated February 18, 2014:
Medbox, Inc. (OTC Markets: MDBX) (www.medboxinc.com), a leader in providing consulting services and patented systems to the medical and retail industries, issued a status update to its shareholders on past, present, and future projects. Company executives also commented on bloggers looking to discredit the company for financial gain and law firms looking to capitalize on misinformation in order to solicit clients.
The following is a summary of key events occurring in recent weeks:
- Medbox filed its Form 10 with the SEC in January and will be an SEC filer, with all the burdens and benefits that result from that status, as of mid-March 2014.
- Medbox issued a special stock dividend to shareholders and that was announced by FINRA on February 3, 2014.
- Medbox continues to accept dispensary licensing clients in Nevada, Illinois, Colorado, Washington, and Oregon.
Company executives clarified their position on the restatement of financials that accompanied the Form 10 registration statement filed with the SEC as a maturation process in becoming an SEC filer.
“The company undertook a project to bring all accounting functions in house and during that lengthy process we discovered some errors in accounting which we have since corrected in the latest financials included in the Form 10. The point is getting it right and being fully transparent with our shareholders at all times,” stated Vincent Mehdizadeh, Board Chairman at Medbox, Inc. “The company has, as part of those corrections, instituted better controls over financial reporting to avoid further corrections. In addition, it is important to note that revenues for the nine months of 2013 had increased over the comparative period of the prior year (as corrected) and we are continuing to add skilled people to accelerate our growth in 2014. Unfortunately, when you are the most visible company in the space, with a large market capitalization, you become a target.”
Company executives caution company shareholders that while the media has been extremely supportive of Medbox as one of the only viable medical marijuana related public companies, with success there will always be opponents that publish deceptive and misleading articles about the company and its executives.
In addition, company executives clarified that the company offers support services to the medical marijuana sector on an arm’s length basis. Often times in a state where applications are being accepted for marijuana dispensary licensing, some landlords would not lease to the newly formed non-profit entities formed for the company’s clients. As a result, in some rare instances and simply as an absolute benefit to their clients, it was agreed that Medbox would lease the properties and assign all rights to the applicant, with the permission of the landlord.
“We go the extra mile for our clients and that is evident through our glowing testimonials displayed on our websites,” stated Dr. Bruce Bedrick, CEO at Medbox, Inc. “Interestingly, with the recent banking policy guidance by the federal government, we can now start to develop an additional revenue stream of acquiring properties and leasing to our dispensary operator clients. This is one of many revenue streams that Medbox is actively developing given the current climate and relaxed federal posture.”
About Medbox, Inc:
Medbox is a leader in the development, sales and service of automated, biometrically controlled dispensing and storage systems for medicine and merchandise. Medbox has offices in New York, Arizona, Florida, and has their corporate headquarters in Los Angeles.
Medbox offers their patented systems, software and consulting services to pharmacies, dispensaries, urgent care centers, drug rehab clinics, hospitals, prison systems, hospice facilities, and medical groups worldwide. In addition, through its wholly owned subsidiary, Vaporfection International, Inc. (www.vaporfection.com), the Company offers an industry award winning medical vaporizer product.
Medbox, Inc. is a publicly traded company, and is quoted on the OTC Markets, ticker symbol MDBX.
Forward-Looking Statements: The statements in this press release constitute forward-looking statements within the meaning of federal securities laws. Such statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, such forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We do not take any obligation to update any forward-looking statement to reflect events or developments after a forward-looking statement was made.
For more information on Medbox, please contact us at (800) 762-1452 or go online to www.medboxinc.com.
Contacts: Investor Relations Stephen Hart Hayden IR +1- 917-658-7878 [email protected]
Sacramento Bee: “Sacramento’s Canna Care dispensary, an evangelical medical marijuana provider renowned for doling out buds with Bibles, is waging a public fight with the Internal Revenue Service over an $873,167 tax penalty sought under a tax code aimed at illegal drug traffickers. On Feb. 24, the U.S. Tax Court in San Francisco is due to hear Canna Care’s challenge over whether the IRS can impose the hefty tax demand under a 1982 law intended to close a loophole that allowed a Minneapolis cocaine and methamphetamine dealer to claim tax deductions for a scale, his apartment rent and telephone expenses. In the case of Canna Care, the IRS has refused to accept $2.6 million in business deductions for employee salaries, rent and other costs after auditing 2006, 2007 and 2008 federal tax returns for the north Sacramento dispensary. However, the IRS did allow the dispensary, which handles about $2 million in medical marijuana transactions a year, to deduct the costs of the marijuana itself.”
Citron Research published a scathing analysis of Medbox, a publicly traded company that is very active in the Arizona medical marijuana dispensary industry. The article starts with the following information about Citron Research:
Citron Research is in our 13th year of publishing investigative research into suspect publicly traded companies. During that span, Citron has exposed more corporate fraud than any other source on Wall Street. Our published work has focused on over 150 companies, some with very notable individual investors and firms publicly “on the other side”. Our writings have warned the public to steer clear of investments rigged to vaporize their cash. All of this writing is available for anyone to evaluate. Much of our work, especially in our early years of publishing, focused on the sparsely regulated Over – the – Counter and Pink Sheets markets When it comes to exposing fraud on the Pink Sheets and the OTCBB, Citron has NEVER been wrong. Yes, we know NEVER is a bold statement but it is what it is.
Here are a few choice allegations made in the report:
“this report will focus on the systemic fraud throughout this company and the stock promotion behind the fraud that has brought this worthless company to a $1 bil + market cap. . . .”
“Medbox’s founder and COO Vincent Mehdizadeh was formerly busted for dispensing legal advice without a law license . . . .”
“It seems like Medbox management cannot help themselves–they cannot control their serial lying in promoting their stock.”
The article closes with my favorite part of the report:
“Dear Vincent and Bruce, Let’s skip the bullshit and cut right to the chase. Your situation is hopeless. Your track record of corporate misdeeds at Medbox and misleading shareholders is beyond salvage. I know when you read this report, you’ll feel a lot of righteous indignation and your first reaction will be to want to sue me. I hope you do! If you would be so kind as to file a suit, my attorneys will use the power of discovery afforded by civil trial procedures right here in California to unravel this entire scam and lay it on the doorstep of Federal regulators. There is truly nothing you can say to defend yourself from the contents of this report except to contact your personal lawyers immediately and ask them what steps you should take so you can avoid going to jail. Nothing more to be said. In the meantime, I sincerely hope you and your team have not sold a single share of restricted stock away from the market–because we will find it in discovery. Please sue me. Editor, Citron Research.”
The report links to another nasty Medbox article called “Tinkerer, Lawyer, Hustler, Lies: One Man’s Path to a Dope Fortune.”
NBC News: “As medical marijuana sales expanded into 20 states, legal weed was detected in the bodies of dead drivers three times more often during 2010 when compared to those who died behind the wheel in 1999, according to a new study from Columbia University published in the American Journal of Epidemiology.”
U.S. Department of Justice
Office of the Deputy Attorney General
The Deputy Attorney General Washington, D.C. 20530
February 14, 2014
MEMORANDUM FOR ALL UNITED STATES ATTORNEYS
FROM: James M. Cole, Deputy Attorney General
SUBJECT : Guidance Regarding Marijuana Related Federal Crimes
On August 29, 2013, the Department issued guidance (August 29 guidance) to federal prosecutors concerning marijuana enforcement under the Controlled Substances Act (CSA). The August 29 guidance reiterated the Department’s commitment to enforcing the CSA consistent with Congress’ determination that marijuana is a dangerous drug that serves as a significant source of revenue to large-scale criminal enterprises, gangs, and cartels. In furtherance of that commitment, the August 29 guidance instructed Department attorneys and law enforcement to focus on the following eight priorities in enforcing the CSA against marijuana-related conduct:
- Preventing the distribution of marijuana to minors;
- Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;
- Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;
- Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
- Preventing violence and the use of firearms in the cultivation and distribution of marijuana;
- Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
- Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and
- Preventing marijuana possession or use on federal property.
Under the August 29 guidance, whether marijuana-related conduct implicates one or more of these enforcement priorities should be the primary question in considering prosecution under the CSA. Although the August 29 guidance was issued in response to recent marijuana legalization initiatives in certain states, it applies to all Department marijuana enforcement nationwide. The guidance, however, did not specifically address what, if any, impact it would have on certain financial crimes for which marijuana-related conduct is a predicate.
The provisions of the money laundering statutes, the unlicensed money remitter statute, and the Bank Secrecy Act (BSA) remain in effect with respect to marijuana-related conduct. Financial transactions involving proceeds generated by marijuana-related conduct can form the basis for prosecution under the money laundering statutes (18 U.S.C. §§ 1956 and 1957), the unlicensed money transmitter statute (18 U.S.C. § 1960), and the BSA. Sections 1956 and 1957 of Title 18 make it a criminal offense to engage in certain financial and monetary transactions with the proceeds of a “specified unlawful activity,” including proceeds from marijuana-related violations of the CSA. Transactions by or through a money transmitting business involving funds “derived from” marijuana-related conduct can also serve as a predicate for prosecution under 18 U.S.C. § 1960. Additionally, financial institutions that conduct transactions with money generated by marijuana-related conduct could face criminal liability under the BSA for, among other things, failing to identify or report financial transactions that involved the proceeds of marijuana-related violations of the CSA. See, e.g., 31 U.S.C. § 5318(g). Notably for these purposes, prosecution under these offenses based on transactions involving marijuana proceeds does not require an underlying marijuana-related conviction under federal or state law.
As noted in the August 29 guidance, the Department is committed to using its limited investigative and prosecutorial resources to address the most significant marijuana-related cases in an effective and consistent way. Investigations and prosecutions of the offenses enumerated above based upon marijuana-related activity should be subject to the same consideration and prioritization. Therefore, in determining whether to charge individuals or institutions with any of these offenses based on marijuana-related violations of the CSA, prosecutors should apply the eight enforcement priorities described in the August 29 guidance and reiterated above. Footnote 1. For example, if a financial institution or individual provides banking services to a marijuana-related business knowing that the business is diverting marijuana from a state where marijuana sales are regulated to ones where such sales are illegal under state law, or is being used by a criminal organization to conduct financial transactions for its criminal goals, such as the concealment of funds derived from other illegal activity or the use of marijuana proceeds to support other illegal activity, prosecution for violations of 18 U.S.C. §§ 1956, 1957, 1960 or the BSA might be appropriate. Similarly, if the financial institution or individual is willfully blind to such activity by, for example, failing to conduct appropriate due diligence of the customers’ activities, such prosecution might be appropriate. Conversely, if a financial institution or individual offers services to a marijuana-related business whose activities do not implicate any of the eight priority factors, prosecution for these offenses may not be appropriate.
The August 29 guidance rested on the expectation that states that have enacted laws authorizing marijuana-related conduct will implement clear, strong and effective regulatory and enforcement systems in order to minimize the threat posed to federal enforcement priorities. Consequently, financial institutions and individuals choosing to service marijuana-related businesses that are not compliant with such state regulatory and enforcement systems, or that operate in states lacking a clear and robust regulatory scheme, are more likely to risk entanglement with conduct that implicates the eight federal enforcement priorities. Footnote 2. In addition, because financial institutions are in a position to facilitate transactions by marijuana-related businesses that could implicate one or more of the priority factors, financial institutions must continue to apply appropriate risk-based anti-money laundering policies, procedures, and controls sufficient to address the risks posed by these customers, including by conducting customer due diligence designed to identify conduct that relates to any of the eight priority factors. Moreover, as the Department’s and FinCEN’s guidance are designed to complement each other, it is essential that financial institutions adhere to FinCEN’s guidance. Footnote 3. Prosecutors should continue to review marijuana-related prosecutions on a case-by-case basis and weigh all available information and evidence in determining whether particular conduct falls within the identified priorities.
As with the Department’s previous statements on this subject, this memorandum is intended solely as a guide to the exercise of investigative and prosecutorial discretion. This memorandum does not alter in any way the Department’s authority to enforce federal law, including federal laws relating to marijuana, regardless of state law. Neither the guidance herein nor any state or local law provides a legal defense to a violation of federal law, including any civil or criminal violation of the CSA, the money laundering and unlicensed money transmitter statutes, or the BSA, including the obligation of financial institutions to conduct customer due diligence. Even in jurisdictions with strong and effective regulatory systems, evidence that particular conduct of a person or entity threatens federal priorities will subject that person or entity to federal enforcement action, based on the circumstances. This memorandum is not intended, does not, and may not be relied upon to create any rights, substantive or procedural, enforceable at law by any party in any matter civil or criminal. It applies prospectively to the exercise of prosecutorial discretion in future cases and does not provide defendants or subjects of enforcement action with a basis for reconsideration of any pending civil action or criminal prosecution. Finally, nothing herein precludes investigation or prosecution, even in the absence of any one of the factors listed above, in particular circumstances where investigation and prosecution otherwise serves an important federal interest.
1. The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) is issuing concurrent guidance to clarify BSA expectations for financial institutions seeking to provide services to marijuana-related businesses. The FinCEN guidance addresses the filing of Suspicious Activity Reports (SAR) with respect to marijuana-related businesses, and in particular the importance of considering the eight federal enforcement priorities mentioned above, as well as state law. As discussed in FinCEN’s guidance, a financial institution providing financial services to a marijuana-related business that it reasonably believes, based on its customer due diligence, does not implicate one of the federal enforcement priorities or violate state law, would file a “Marijuana Limited” SAR, which would include streamlined information. Conversely, a financial institution filing a SAR on a marijuana-related business it reasonably believes, based on its customer due diligence, implicates one of the federal priorities or violates state law, would be label the SAR “Marijuana Priority,” and the content of the SAR would include comprehensive details in accordance with existing regulations and guidance.
2. For example, financial institutions should recognize that a marijuana-related business operating in a state that has not legalized marijuana would likely result in the proceeds going to a criminal organization.
3. Under FinCEN’s guidance, for instance, a marijuana-related business that is not appropriately licensed or is operating in violation of state law presents red flags that would justify the filing of a Marijuana Priority SAR.
FoxNews: “The Obama administration took the unprecedented step Friday of clearing the way for banks to do limited business with marijuana sellers, releasing guidelines for how financial institutions can work with pot shops in states where it’s legal. The move immediately was greeted with relief from the budding marijuana industry. Before the guidance, banks largely had avoided the new pot shops in Colorado for fear of federal prosecution — leaving marijuana sellers running cash-only operations. . . . It’s unclear, though, to what extent banks will engage those businesses. One industry group, the Consumer Bankers Association, voiced legal concerns despite the new guidelines and urged Congress to get involved.”
USA Today: “An ongoing federal investigation is raising questions about the Colorado marijuana industry’s ties to illegal drug operations. Widespread raids on Nov. 21 targeted more than a dozen dispensaries, warehouses, homes and grow operations. Agents are gathering evidence to prove Colombian drug cartels are coming to the state and are using the front of legal marijuana to make money illegally.”
Phoenix New Times: “Arizona veterans and people 65 and older would get a big break from the state on the cost of a medical-marijuana card in 2015 under proposed rule changes.”
Florence Reminder & Blade Tribune: “The 5,000-square-foot building looks even less distinguished than its plain-looking neighbors in a light-industrial area several blocks from downtown. . . . Duke Rodriguez, principal officer of Ultra Health, said the company’s marijuana is grown in a very controlled, sterile environment . . . . Ultra Health is partnering with Rakesh “Rocky” Pahwa, owner of medical imaging clinics in the Valley, for a medical marijuana dispensary where the Riverbottom Grill is now. The company is also working to open dispensaries in Gilbert and Chandler.”
CBS News: “According to a recent study, fatal car crashes involving pot use have tripled in the U.S. “Currently, one of nine drivers involved in fatal crashes would test positive for marijuana,” Dr. Guohua Li, director of the Center for Injury Epidemiology and Prevention at Columbia, and co-author of the study told HealthDay News. . . . Drugged driving accounted for more than 28 percent of traffic deaths in 2010, which is 16 percent more than it was in 1999.”