Feds announce Calif. pot dispensary crackdown

October 7, 2011 - 7:55 PM
Medical Marijuana

FILE - In this Tuesday Jan. 26, 2010 file photo, a pedestrian walks past a marijuana leaf neon sign advertising a medical marijuana provider along a street in the Sherman Oaks section of Los Angeles, Calif. Federal prosecutors have launched a crackdown on pot dispensaries in California, warning the stores that they must shut down in 45 days or face criminal charges and confiscation of their property even if they are operating legally under the state’s 15-year-old medical marijuana law. (AP Photo/Richard Vogel)

SACRAMENTO, Calif. (AP) — Federal prosecutors announced an aggressive crackdown on California pot dispensaries Friday, vowing to shut down dozens of growing and sales operations and saying that the worst offenders are using the cover of medical marijuana to act as storefront drug dealers.

Officials described it as the first coordinated statewide offensive against marijuana dealers and suppliers who use California's 15-year-old medical marijuana law as legal cover for running sophisticated drug trafficking ventures in plain sight.

"California's marijuana industry supplies the nation," said U.S. Attorney Benjamin Wagner, citing a 2009 federal study that 72 percent of marijuana plants eradicated nationwide were grown in California. "Huge amounts of marijuana grown here in this state is flowing east to other states, and huge amounts of money are flowing back in the opposite direction."

The actions were geared toward stopping a proliferation that has led to thousands of pot shops opening their doors across the state. The spread was fueled partly by the Obama administration's assurance two years ago that it did not plan to devote federal resources to countering marijuana outlets operating in compliance with state laws.

One example cited by the prosecutors Friday: In one Orange County strip mall, eight of the 11 second-floor suites are occupied by dispensaries and doctors' offices for doctors where healthy individuals obtain "sham" recommendations to use medical marijuana.

It is "a Costco, Walmart-type model that we see across California," said Andre Birotte Jr., U.S. attorney in the Los Angeles-area. Some people making money from medical marijuana openly revel in what some have called "the new California gold rush," he said.

Landlords leasing property to dozens of warehouses and agricultural parcels where marijuana is being grown and retail spaces where pot is sold over the counter are receiving written warnings to evict their tenants or face criminal charges or seizure of their assets, the state's four U.S. attorneys said.

"The intention regarding medical marijuana under California state law was to allow marijuana to be supplied to seriously ill people on a nonprofit basis," said U.S. Attorney Melinda Haag, the top federal law enforcement officer for the San Francisco Bay area. "What we are finding, however, is that California's laws have been hijacked by people who are in this to get rich and don't care at all about sick people."

The crackdown comes a little more than two months after the Obama administration toughened its stand on medical marijuana. For two years before that, federal officials had indicated they would not move aggressively against dispensaries in compliance with laws in the 16 states where pot is legal for people with doctors' recommendations.

The Department of Justice issued a policy memo to federal prosecutors in late June stating that marijuana dispensaries and licensed growers in states with medical marijuana laws could face prosecution for violating federal drug and money-laundering laws. The effort to shutter California dispensaries appeared to be the most far-reaching effort so far to put that guidance into action.

Increased federal intervention will likely unify marijuana growers and sellers in a drive to change federal policy, National Cannabis Industry Association spokeswoman Melissa Milam said.

"We're not going anywhere. We're mothers, we're patients, we're family members of patients," she said. "We want to pay taxes, we want to be able to make deposits at our bank, we want to be a business."

Not all of the thousands of storefront pot dispensaries thought to be operating in the state are being targeted in the crackdown, which also involves new indictments and arrests of marijuana growers and vendors throughout the state over the past two weeks, said Wagner, who represents the state's Central Valley.

The strategies federal authorities are using vary somewhat, with warning letters issued by the U.S. attorney in San Diego giving recipients 45 days to comply and property owners in Los Angeles, Orange County and the Central Coast given just two weeks to evict pot dispensaries or growers.

Haag said she is initially going after pot shops located close to schools, parks, sports fields and other places where there are a lot of children.

Wagner, who represents the state's Central Valley, also is targeting what he termed "significant commercial operations," including farmland where marijuana is being grown. Birotte is prioritizing dispensaries in communities where local officials have been trying unsuccessfully to shut down marijuana businesses.

Moreover, the four said their warnings were aimed at cities and counties that have started licensing and taxing marijuana shops.

"The ordinances are illegal under federal law," Haag said, citing an appellate court ruling this week against Long Beach's ordinance that charged shops fees to operate.

The California Board of Equalization has estimated medical marijuana generates between $53 million and $104 million in annual sales taxes on sales of between $700 million and $1.3 billion.

"If it creates revenue and jobs and increases safety, with all that's going on in the world and the nation, why is the federal government mounting this assault — just because they can?" asked attorney Mark Reichel, who represents three licensed Sacramento dispensaries that face federal charges or civil forfeitures.

"Absolutely it will have a chilling effect. More than that, it will have a freezing effect — it will freeze them out of the business," Reichel said. "A chilling effect is minor compared to what this is. This is a freezing winter storm."

Three of the four prosecutors declined to reveal how many dispensaries are subject to closure orders, saying only there were dozens in each of their four districts. Birotte said 38 property owners in his district were sent warnings.

Birotte said his office already had initiated property forfeiture proceedings involving three properties whose owners had received prior warnings.

The effort was criticized by two Democrat state legislators who represent San Francisco.

Assemblyman Tom Ammiano said the crackdown "means that Obama's medical marijuana policies are worse than Bush and Clinton. It's a tragic return to failed policies that will cost the state millions in tax revenue and harm countless lives."

"I don't understand the politics of it, and certainly if we haven't learned anything over the past century, it's that Prohibition does not work," added State Sen. Mark Leno, who has worked to safeguard and regulate medical marijuana in California.

Haag said the move is not designed to clamp down on patients who grow their own marijuana for medical use. But dispensaries that were not part of the initial wave of warning letters "shouldn't take any comfort," she said. "They are illegal under federal law."

"I understand there are people in California who believe marijuana stores should be allowed to exist, but I think we can all agree we don't need marijuana stores across the street from schools and Little League fields," she said.

Wagner said individual U.S. attorneys general in other states including Nevada, Oregon and Washington state have also coordinated actions with the U.S. Department of Justice.

But Justin Williams, the manager and marijuana grower at Mayflower Wellness in downtown Denver, said he believes Colorado's regulations on growing marijuana makes the state less of a target than California.

"I think their main concern is the lack of regulation in California with the explosion that's happened," he said.

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Associated Press writers Lisa Leff in San Francisco and Catherine Tsai in Denver contributed to this report.