Will Humble & Other Arizona Medical Marijuana Law Pundits Bury Heads in Sand

After five U.S. Attorneys in recently issued letters stating the position of the Department of Justice is to prosecute people involved in growing and selling marijuana, local Arizona medical marijuana law pundits have dug deeper holes into which they have inserted their heads.  Yesterday, Peter F. Neronha, the U.S. Attorney for Rhode Island hand delivered a letter to the Governor of Rhode Island that said he intends to prosecute the people involved in Rhode Island’s three medical marijuana dispensaries that are scheduled to open in June and July.

The U.S. Attorney also delivered his letter to the owners of the three yet-to-be opened Rhode Island medical marijuana dispensaries.  In response to the letter, the Governor of Rhode Island, Lincoln D. Chafee, suspended the licensing of the state’s three prospective medical marijuana dispensaries.  The text of the Governor’s press release follows:

“May 2, 2011

“Statement from Governor Lincoln D. Chafee Regarding Compassion Centers

“The United States Attorney for the District of Rhode Island delivered a letter to me on Friday afternoon which was copied to the Director of the Department of Health and the three Compassion Center applicants. That letter, as well as similar letters sent to officials in other states, clarified the Department of Justice’s position on medical marijuana. The Department of Justice previously indicated that it would not focus its limited resources on doctors and their sick patients who prescribe and use marijuana if such use was permitted by state law. This position was interpreted by some states as giving them latitude to authorize medical marijuana cultivation and distribution programs. Friday’s letter makes it clear that DOJ will now pursue certain commercial cultivation and distribution of medical marijuana, even if such cultivation and distribution is permitted by state law. Compassion centers, their owners, landlords, financiers and other operations “facilitators” are identified as potential targets of federal law enforcement activities.

“None of Rhode Island’s compassion center applicants have received a certificate of registration to date. In light of the United States Attorney’s articulated position on closing compassion centers, seizing proceeds and prosecuting business enterprises that market and sell medical marijuana, I have placed a hold on the State’s medical marijuana certificate of registration program. During this hiatus, I will be consulting with the governors of other states with similar medical marijuana programs, with federal officials and with the compassion center applicants themselves.”

Here in Arizona our medical marijuana law pundits said the following after Dennis Burke’s letter of May 2, 2011, in which he said it is a core priority of the Department of Justice to prosecute those who grow and sell marijuana unless they are patients or caregivers who strictly comply with Arizona’s medical marijuana laws.

“But attorney Jordan Rose, who has been advising those going into the business, said no one should be worried. She said nothing in Burke’s letter is markedly different than what has been said U.S. attorneys in other states with medical marijuana laws” – from “Arizona’s federal prosecutor issues warning over medical marijuana.”

Commenting on recent raids of dispensaries in California and Montana, Joe Yuhas said the “raids appear to be isolated. And Joe Yuhas, spokesman for the Arizona Medical Marijuana Association, said he doesn’t expect similar problems here” – from “Arizona’s federal prosecutor issues warning over medical marijuana.”

[Director of the Arizona Department of Health Services Will] “Humble said, he does not expect most dispensaries to wind up under federal scrutiny. ‘Really, it’s not about whether you’re in compliance with your state law but rather are you a large-scale actor who’s manufacturing, distributing, possessing, marketing in clear violation of the (federal) Controlled Substances Act,” he said.  Humble said that’s borne out by reading a bit between the lines of what Burke did — and did not — write.” – from “Arizona’s federal prosecutor issues warning over medical marijuana.”

  • “US attorney issues warning over Ariz medical pot”

Will Humble said “I think it’s a pretty clear shot across the bow for applicants who intend to have large-scale cultivation facilities or a big dispensary . . . . ‘I believe the federal government ought to enforce their laws,” Gov. Jan Brewer said. ‘I have been calling on them to do that with regards to illegal immigration, and they have refused, so I guess that they pick and choose which ones they want to enforce’. . . . ‘I think the biggest impact the letter could have would be to cut down on the number of dispensary applications that we get, especially for people who have a lot to lose and people that were planning to have a business model that included large-scale cultivation or a large dispensary,’ he [Will Humble] said. “Because it makes it clear that even if they were in total compliance with our rules … they could go to the pokey.”

  • “Arizona’s federal prosecutor issues warning over medical marijuana”

“Potentially more significant, Burke had special words of caution to those who are in the business of growing marijuana even if they have a cultivation license from the state. And he said even those on the periphery, including property owners, landlords and organizations which finance dispensaries, risk not just federal criminal prosecution but also having the assets seized.”

“U.S. Attorney Peter F. Neronha Friday threatened to prosecute civilly and/or criminally those involved in Rhode Island’s three planned medical marijuana dispensaries — from the organizations that would run them to the landlords who rent them floor space.  The threat was contained in a letter hand-delivered to Governor Chafee’s office in the morning and also sent Friday to the would-be proprietors of the dispensaries.”

  • “Chafee puts hold on RI medical-pot centers”

“on Sunday, in an interview with The Providence Journal, the U.S. Attorney said he hoped the dispensaries don’t open because he considers them to be large-scale for-profit cannabis production centers that are against federal law.”

“Gov. Lincoln D. Chafee said Monday he has put a hold on the state’s medical marijuana certificate of registration program after receiving notice that it could violate federal law.”

“U.S. Attorney Peter F. Neronha said Sunday that he hopes that Rhode Island’s three state-approved medical-marijuana dispensaries don’t open and that if they do, “I might have to take some action” against them in court to prevent cultivation and distribution of the cannabis.  ‘I don’t think it would be a wise move’ for them to start cultivating large amounts of marijuana, or selling it, Neronha said in a telephone interview. . . . Neronha says he considers the planned dispensaries, which some call “compassion centers,” large-scale, for-profit cannabis production businesses that are against federal law. . . . Neronha said it has never been his intention to prosecute the ‘small-time caregivers’ who are growing small amounts of marijuana for ill people. . . . But medical-marijuana dispensaries are a different story, he said.”

“‘The Department of Justice maintains the authority to enforce [federal law] vigorously against individuals and organizations that participate in unlawful manufacturing and distribution activity involving marijuana, even if such activities are permitted under state law,’ Neronha wrote. ‘The [state law], the registration scheme it purports to authorize and the anticipated operation of the three centers appear to permit large-scale marijuana cultivation and distribution. The Department of Justice could consider civil and criminal legal remedies against those individuals and entities who set up marijuana-growing facilities and dispensaries’ . . . .”

By |2017-10-07T09:54:50-07:00May 3rd, 2011|Federal Dispensary Attacks, Marijuana Crimes, Stories & Articles, Will Humble Speaks|Comments Off on Will Humble & Other Arizona Medical Marijuana Law Pundits Bury Heads in Sand

U.S. Attorney Dennis Burke’s Buzz-Kill on Medical Marijuana: Feds to Act Against “Large” Grow Operations — But Won’t Define “Large”

Phoenix New Times:  “Burke compounds the schizophrenic stance by stating that federal law “may be vigorously enforced against those individuals and entities who operate large marijuana production facilities. Individuals and organizations — including property owners, landlords and financiers” face legal problems including seizure of their property and other assets.  Problem is, Burke gives no definition of ‘large.’ . . . Rather than simply make a decision, Obama’s Justice Department chooses to play games with people’s lives — and money. Go ahead, the feds say, invest your hundreds of thousands of dollars in a medical weed-related business. Maybe you’ll be a millionaire, or maybe you’ll end up serving a few years behind bars. But whether you’ll get the prize or prison will be based on a whim. Your operation may be too ‘large,’ while someone else’s may be just right. . . . drug cartel kingpins probably can’t wait for the feds to target state-approved pot suppliers.”

Arizona’s U.S. Attorney Notifies Will Humble & Arizona Department of Health Services that Compliance with Arizona’s Medical Marijuana Law Does not Offer Protection from Federal Criminal Laws

Today, May 2, 2011, the United States Attorney for Arizona, Dennis Burke, sent a letter to Arizona Department of Health Services Director Will Humble that notified him and the would-be Arizona medical marijuana industry that compliance with Arizona’s recently enacted medical marijuana laws and the DHS rules implementing the laws is not a defense to prosecution for violating U.S. criminal laws involving marijuana.  Here are the main points contained in the letter:

May 2, 2011

Will Humble
Director
Arizona Department of Health Services
150 N. 18th Avenue
Phoenix, Arizona 85007

Re: Arizona Medical Marijuana Program

Dear Mr. Humble:

I understand that on April 13, 2011, the Arizona Department of Health Services filed rules implementing the Arizona Medical Marijuana Act (AMMA), passed by Arizona voters on November 2, 2010. The Department of Health Services rules create a regulatory scheme for the distribution of marijuana for medical use, including a system for approving, renewing, and revoking registration for qualifying patients, care givers, nonprofit dispensaries, and dispensary agents. I am writing this letter in response to numerous inquiries and to ensure there is no confusion regarding the Department of Justice’s view of such a regulatory scheme.

The Department has advised consistently that Congress has determined that marijuana is a controlled substance, placing it in Schedule I of the Controlled Substances Act (CSA). That means 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 that purport to pennit such activities. As has been the case for decades, the prosecution of individuals and organizations involved in the trade of illegal drugs and the disruption of illegal drug manufacturing and trafficking networks, is a core priority of the Department of Justice. The United States Attomey’s Office for the District of Arizona (“the USAO”) will continue to vigorously prosecute individuals and organizations that participate in unlawful manufacturing, distribution and marketing activity involving marijuana, even if such activities are permitted under state law.

An October, 2009, memorandum from then-Deputy Attomey General Ogden provided guidance that, in districts where a state had enacted medical marijuana programs, USAOs ought not focus their limited resources on those seriously ill individuals who use marijuana as part of a medically recommended treatment regimen and are in clear and unambiguous compliance with such state laws. And, as has been our policy, this USAO will continue to follow that guidance. The public should understand, however, that even clear and unambiguous compliance with AMMA does not render possession or distribution of marijuana lawful under federal statute.

Moreover, the CSA may be vigorously enforced against those individuals and entities who operate large marijuana production facilities. Individuals and organizations- including property owners, landlords, and financiers -that knowingly facilitate the actions of traffickers also should know that compliance with AMMA will not protect them from federal criminal prosecution, asset forfeiture and other civil penalties. This compliance with Arizona laws and regulations does not provide a safe harbor, nor immunity fromfederal prosecution.

The USAO also has received inquiries about our approach to AMMA in Indian Country, which comprises nearly one third of the land and five percent of the population of Arizona, and in which state law -including AMMA- is largely inapplicable. The USAO currently has exclusive felony jurisdiction over drug trafficking offenses in Indian Country. Individuals or organizations that grow, distribute or possess marijuana on federal or tribal lands will do so in violation of federal law, and may be subject to federal prosecution, no matter what the quantity of marijuana. The USAO will continue to evaluate marijuana prosecutions in Indian Country and on federal lands on a case-by-case basis. Individuals possessing or trafficking marijuana in Indian Country also may be subject to tribal penalties. I hope that this letter assists the Department of Health Services and potential registrants in making informed choices regarding the possession, cultivation, manufacturing, and distribution of medical marijuana.

Sincerely,

DENNIS K. BURKE
United States Attorney
District of Arizona

Will Humble’s first public response to Mr. Burke’s warning shot across the bow of prospective Arizona medical marijuana dispensaries was to recite portions of Dennis Burke’s letter and to warn:

“The bottom line take-home message in today’s letter is that federal enforcement priorities in Arizona will continue to focus on folks that manufacture, distribute, possess and market marijuana despite the passage of the AZ Medical Marijuana Act-  and that folks that operate large cultivation facilities or dispensaries (including property owners, landlords, and financiers) will be at risk for federal prosecution and asset forfeiture even if they’re in compliance with Arizona law and the rules that we published a couple of weeks ago.”

I expected Dennis Burke’s letter to say what it said.  He merely reiterated the position of the United States Attorney General as set forth in recent letters from the U.S. Attorneys for the Northern District of California, the Eastern District of Washington and the Western District of Washington.  See

By |2015-04-06T18:51:47-07:00May 2nd, 2011|Federal Dispensary Attacks, Legal Issues, Marijuana Crimes, Stories & Articles, Will Humble Speaks|Comments Off on Arizona’s U.S. Attorney Notifies Will Humble & Arizona Department of Health Services that Compliance with Arizona’s Medical Marijuana Law Does not Offer Protection from Federal Criminal Laws

Arizona Medical Pot Law no Shield for Users, Growers, Prosecutor Says

Arizona Republic:  “Arizona’s top federal prosecutor launched a pre-emptive strike against the state’s medical-marijuana industry Monday, warning prospective pot growers and sellers that they could be prosecuted under federal drug-trafficking laws. U.S. Attorney Dennis Burke, joining a growing chorus of federal law officers across the country, said his office will abide by a 2009 Justice Department memo that discourages prosecution of medical-marijuana users. But he said anyone who possesses or distributes marijuana is still violating federal law. And he singled out large operations.”

The story said that Arizona Governor Jan Brewer does not intend to stop the implementation of Arizona’s medical marijuana laws.  Maricopa County Attorney William Montgomery said this about Dennis Burke’s letter:

“I think this is the end of the medical-marijuana movement. You can’t do a wink and a nod toward unlawful conduct and not have a consequence.”

Read the story.  It contains more stupid statements made by Arizona medical marijuana law pundits about the significance of Dennis Burke’s letter.  The story also says:

“Rep. John Kavanagh, R-Fountain Hills, said Burke’s letter is reason enough for Humble to stop issuing marijuana cards and halt plans for granting dispensary permits. ‘I hope he doesn’t think the Legislature is going to bail him out if he facilitates the distribution of marijuana,’ Kavanagh said. ‘The federal government has told him that this is an illegal operation. I don’t think they have to do the math for him’.”

By |2012-05-12T15:23:25-07:00May 2nd, 2011|Federal Dispensary Attacks, Legal Issues, Marijuana Crimes, Stories & Articles|Comments Off on Arizona Medical Pot Law no Shield for Users, Growers, Prosecutor Says

Federal Agents Raid Spokane Medical Marijuana Dispensaries

MSNBC.com:  “Federal agents are raiding several medical marijuana dispensaries in Spokane, following a warning from the top federal prosecutor there that such operations are illegal.”  See “U.S. Attorney Will Prosecute Dispensary Owners, Landlords who Rent to Dispensaries & State Employees Involved in State Medical Marijuana Laws” and “WA US Attorney Says Marijuana Dispensaries / Stores Violate Federal Law.”

By |2015-04-06T18:51:47-07:00April 30th, 2011|Federal Dispensary Attacks, Marijuana Crimes, Stories & Articles|Comments Off on Federal Agents Raid Spokane Medical Marijuana Dispensaries

Agents Raid Washington Medical Marijuana Dispensaries

Seattle Times:  “Medical marijuana activists across Washington state decried federal raids on at least two dispensaries in Spokane on Thursday, saying they underscored the need for a dispensary licensing system that the governor has threatened to veto.  The raids came Thursday afternoon, three weeks after the top federal prosecutor in Eastern Washington, Spokane U.S. Attorney Michael Ormsby, warned the 40 dispensaries in the area that they should close up shop or face federal enforcement actions.”

By |2015-04-06T18:51:47-07:00April 29th, 2011|Federal Dispensary Attacks, Marijuana Crimes, Stories & Articles|Comments Off on Agents Raid Washington Medical Marijuana Dispensaries

Washington Legislature Passes New Medical-marijuana Law, Governor Threatens Veto

Seattle Times:  “The Legislature passed a major overhaul of the state’s medical-marijuana law on Thursday despite a veto threat by the governor, a measure that would for the first time protect some patients from being arrested and create a system for licensing storefront dispensaries and grow operations. . . . But Gov. Chris Gregoire reiterated her opposition to the licensing scheme, saying she won’t sign it because state workers could be held liable for violating federal law”

The Washington Governor wrote a letter dated April 13, 2011, to Eric Holder, the Attorney General of the United States.  The following day, the U.S. Attorneys for the Eastern and Western Districts of Washington responded to the Governor’s letter.  Interesting to note that the Department of Justice responded to the Washington Governor’s request the before the U.S. mail could have delivered the letter to Eric Holder, but it has not yet responded to a similar request from the New Jersey Attorney General.  See “N.J. Attorney General asks Obama Administration if N.J. Medical Marijuana Program Violates U.S. Law.”  The text of Governor Christine Gregoir’s April 13, 2011, letter follows.

April 13, 20 11

The Honorable Eric Holder
Attorney General of the United States
U.S. Department of Justice
950 Pennsylvania A venue, NW
Washington, DC 20530-0001

Dear Attorney General Holder:

This letter requests written guidance on the Department of Justice’s position on enforcement of the Controlled Substances Act if state law were to establish a regulatory system wherein state officials license persons to dispense, produce, and process marijuana for medical use by qualifying patients. By way of background, in 1998 the voters of the state of Washington determined that patients with terminal or debilitating illnesses, under their physician’s care, who may benefit from the use of medical marijuana, would not be guilty of a crime under state law for their possession and limited use of marijuana. It is our understanding that the Department of Justice does not focus its resources on individuals who use marijuana as part of a recommended treatment regimen in compliance with state law, as outlined in an October 2009 Memorandum from Deputy Attorney General Ogden.

The Washington Legislature, concerned with a lack of sufficient and safe supply of medical marijuana, has under consideration Engrossed Second Substitute Senate Bill 5073. This legislation would provide for the Departments of Health and Agriculture to license persons to dispense, produce, and process cannabis for medical use. Licensed dispensers would select, measure, package, and label cannabis for delivery or retail sale to a qualifying patient or designated provider. Licensed processors would manufacture, process, handle, and label cannabis products for wholesale distribution to licensed dispensers. Licensed producers would produce cannabis for medical use for wholesale distribution to licensed dispensers and licensed processors of cannabis products.

In recent days I have been in contact with the United States Attorneys for the Western and Eastern Districts of Washington regarding this legislation. They referenced a February 1, 2011, letter that the United States Attorney for the Northern District of California wrote to the Oakland City Attorney in response to a request for guidance on the City of Oakland Medical Cannabis Cultivation Ordinance. The letter indicated that the Department of Justice would enforce the Controlled Substances Act against individuals and organizations that market and sell marijuana, even if such activities are permitted under state law, consistent with the guidance set forth in the 2009 Memorandum from Deputy Attorney General Ogden.

Within the next week lawmakers will be considering the differing versions of this legislation and determining what provisions of state law they will enact and forward to me, as Governor, for approval or disapproval. It would be very helpful to receive clear guidance on the Department of Justice enforcement position and whether the 2009 Memorandum from Deputy Attorney General Ogden should be read to encompass the activities that would be licensed under this state legislation. Also, it would be helpful if the guidance addressed whether state employees involved in inspecting the premises, auditing the records or collecting fees from the licensed dispensers, producers or processors would be immune from arrest or liability when engaged in the enforcement of this licensing law.

Thank you for your assistance as we make these important decisions.

Sincerely,

Christine 0. Gregoire
Governor

To read the U.S. Attorney’s response to this letter see “U.S. Attorney Will Prosecute Dispensary Owners, Landlords who Rent to Dispensaries & State Employees Involved in State Medical Marijuana Laws.”

By |2017-02-12T07:38:38-07:00April 28th, 2011|Federal Dispensary Attacks, Marijuana Crimes, Stories & Articles|Comments Off on Washington Legislature Passes New Medical-marijuana Law, Governor Threatens Veto

U.S. Attorney Will Prosecute Dispensary Owners, Landlords who Rent to Dispensaries & State Employees Involved in State Medical Marijuana Laws

On April 13, 2011, Washington Governor Christine Gregoire sent a letter to Attorney General Eric Holder asking him if Washington state employees would be prosecuted for implementing Washington’s new medical marijuana law.  The next day, April 14, 2011, the U.S. Attorneys for the Eastern and Western Districts of Washington sent a letter to the Governor of Washington that contains a clear statement that the U.S. Attorney will prosecute people involved in the medical marijuana industry, including state workers who implement or oversee state medical marijuana laws.  The U.S. Attorney for the Northern District of California, Melinda Haag, sent a letter dated February 1, 2011, to the City of Oakland that also said that she would prosecute people involved in the “industrial growing of marijuana.”

These three U.S. Attorneys each said that they consulted with U.S. Attorney General Eric Holder about the state legal medical marijuana issue and that their letters state the U.S. Attorney General’s position   From these two recent letters it is apparent that the Department of Justice is giving a clear warning to everybody in the state legal medical marijuana business other than patients and caregivers that they risk prosecution for violating federal criminal laws involving marijuana.  DHS are you listening?  The text of the letter follows.

April 14, 2011

Honorable Christine Gregoire
Washington State Governor
P.O. Box 40002
Olympia, Washington 98504-0002

Re: Medical Marijuana Legislative Proposals

Dear Honorable Governor Gregoire:

We write in response to your letter dated April 13, 20 11, seeking guidance from the Attorney General and our two offices concerning the practical effect of the legislation currently being considered by the Washington State Legislature concerning medical marijuana. We understand that the proposals being considered by the Legislature would establish a licensing scheme for marijuana growers and dispensaries, and for processors of marijuana-infused foods among other provisions. We have consulted with the Attorney General and the Deputy Attorney General about the proposed legislation. This letter is written to ensure there is no confusion regarding the Department of Justice’s view of such a licensing scheme.

As the Department has stated on many occasions, Congress has determined that marijuana is a controlled substance. Congress placed marijuana in Schedule I of the Controlled Substances Act (CSA) 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.

The prosecution of individuals and organizations involved in the trade of any illegal drugs and the disruption of drug trafficking organizations is a core priority of the Department. This core priority includes prosecution of business enterprises that unlawfully market and sell marijuana. Accordingly, while the Department does 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 as stated in the October 2009 Ogden Memorandum, we maintain the authority to enforce the CSA vigorously against individuals and organizations that participate in unlawful manufacturing and distribution activity involving marijuana, even if such activities are permitted under state law. The Department’s investigative and prosecutorial resources will continue to be directed toward these objectives.

Consistent with federal law, the Department maintains the authority to pursue criminal or civil actions for any CSA violations whenever the Department determines that such legal action is warranted. 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).

In addition, Federal money laundering and related statutes which prohibit a variety of different types of financial activity involving the movement of drug proceeds may likewise be utilized. The Government may also pursue civil injunctions, and the forfeiture of drug proceeds, property traceable to such proceeds, and property used to facilitate drug violations.

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. In 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.

We hope this letter assists the State of Washington and potential licensees in making informed decisions regarding the cultivation, manufacture, and distribution of marijuana.

Very truly yours,

Jenny A. Durkan
United States Attorney
Western District of Washington

Michael C. Ormsby
United States Attorney
Eastern District of Washington

By |2012-05-12T15:24:06-07:00April 27th, 2011|Federal Dispensary Attacks, Marijuana Crimes, Stories & Articles|Comments Off on U.S. Attorney Will Prosecute Dispensary Owners, Landlords who Rent to Dispensaries & State Employees Involved in State Medical Marijuana Laws

WA US Attorney Says Marijuana Dispensaries / Stores Violate Federal Law

Here is the text of a press release issued on April 6, 2011, by U.S. Attorney Michael Ormsby (Eastern District of Washington):

Spokane – Today, Michael C. Ormsby, United States Attorney for the Eastern District of Washington, announced that he has notified landlords that marijuana stores are illegal and warned them of the penalties they may face. Marijuana continues to be prohibited by federal law and specifically marijuana stores are subject to enforcement action and stringent federal penalties. Under federal law, the possession or distribution of marijuana remains illegal, despite state law.

In 2001, the Food and Drug Administration (FDA) and the Drug Enforcement Administration thoroughly analyzed the relevant medical, scientific, and abuse data and concluded that marijuana continues to meet the criteria for placement in schedule I of the Controlled Substances Act. The Food and Drug Administration reiterated this determination in April 2006, stating in a news release:

Marijuana is listed in schedule I of the Controlled Substances Act (CSA), the most restrictive schedule. The Drug Enforcement Administration (DEA), which administers the CSA, continues to support that placement and FDA concurred because marijuana met the three criteria for placement in Schedule I under 21 U.S.C. 812(b)(1) (e.g., marijuana has a high potential for abuse, has no currently accepted medical use in treatment in the United States, and has a lack of accepted safety for use under medical supervision). Furthermore, there is currently sound evidence that smoked marijuana is harmful. A past evaluation by several Department of Health and Human Services (HHS) agencies, including the Food and Drug Administration (FDA), Substance Abuse and Mental Health Services Administration (SAMHSA) and National Institute for Drug Abuse (NIDA), concluded that no sound scientific studies supported medical use of marijuana for treatment in the United States, and no animal or human data supported the safety or efficacy of marijuana for general medical use. There are alternative FDA-approved medications in existence for treatment of many of the proposed uses of smoked marijuana.

* * *

FDA has not approved smoked marijuana for any condition or disease indication.

* * *

Accordingly, FDA, as the federal agency responsible for reviewing the safety and efficacy of drugs, DEA as the federal agency charged with enforcing the CSA, and the Office of National Drug Control Policy, as the federal coordinator of drug control policy, do not support the use of smoked marijuana for medical purposes.

The Office of National Drug Control Policy supports multi-faceted prevention and treatment programs and firmly opposes the legalization of marijuana and all illegal drug use.

The voters approved a ballot initiative in 1998, which removed the state-level criminal penalties for physician prescribed marijuana. In November 2008, the state adopted a rule that authorized a 60 day supply of no more than 24 ounces and no more than 15 plants of marijuana. “The proliferation of marijuana stores, which are not authorized under state law, suggests that drug traffickers are attempting to avoid application of state law through the use of these stores,” U.S. Attorney Mike Ormsby stated. “Drug traffickers cannot hide behind the law by simply claiming they are medical marijuana stores,” said Mr. Ormsby. According to information gathered by drug enforcement authorities, there are currently over 40 stores in Spokane County alone, more than any other county in the State. Many of these stores are located close to schools, parks, and playgrounds where children are often present. “Additionally, many of these stores are conducting a high volume, high dollar business, far from the allegations of the operators that they are furnishing marijuana to “patients” with debilitating medical conditions,” added Mr. Ormsby.

Our goal is to first seek voluntary compliance with the law by notifying property owners of the non-conforming use of their property, with the expectation that they take appropriate action. If they do not, the U.S. Attorney’s Office will determine the appropriate law enforcement response, which could include the forfeiture of the property used to facilitate the crimes,” said Mr. Ormsby.

There are two targets to our enforcement action; the operators of the stores and the owners of the real property where the stores operate. The property owners have been notified of the penalties associated with renting property to those operating the stores, as they may be unaware of the ramifications of such action. Mr. Ormsby said he hopes that notice to the landlords will lead to voluntary compliance and eviction of those illegally distributing marijuana.

On the other hand, “we are preparing for quick and direct action against the operators of the stores,” Mr. Ormsby said. “We intend to use the full extent of our legal remedies to enforce the law.”

Here’s a link to the actual press release.

See “U.S. Attorney Will Prosecute Dispensary Owners, Landlords who Rent to Dispensaries & State Employees Involved in State Medical Marijuana Laws.”

By |2015-04-06T18:51:47-07:00April 27th, 2011|Federal Dispensary Attacks, Marijuana Crimes, Stories & Articles|Comments Off on WA US Attorney Says Marijuana Dispensaries / Stores Violate Federal Law

WA US Attorney Threatens Crackdown if Medical-pot Makeover Becomes Law in WA

Seattle Times:  “Washington’s top federal prosecutors have threatened to crack down if the state goes forward with a proposal to legalize medical-marijuana dispensaries and growers, putting in jeopardy a bill that has already passed both chambers of the Legislature.  In a letter to Gov. Chris Gregoire on Thursday, U.S. Attorneys Jenny Durkan of Seattle and Michael Ormsby of Spokane wrote that the bill would undermine drug enforcement and could result in an array of prosecutions or civil penalties against dispensary owners and growers, as well as against state regulators enforcing the proposed law.”

See “WA US Attorneys Say Marijuana Dispensaries / Stores Violate Federal Law.

When, if ever, will the U.S. Attorney for Arizona tell the potential medical marijuana patients, caregivers, dispensaries and others in Arizona’s newest industry that they are safe from federal criminal prosecution if the strictly comply with Arizona’s medical marijuana laws and rules or that they will be prosecuted despite the fact they comply with Arizona’s laws and rules?

By |2012-05-12T15:24:31-07:00April 27th, 2011|Federal Dispensary Attacks, Marijuana Crimes, Stories & Articles|Comments Off on WA US Attorney Threatens Crackdown if Medical-pot Makeover Becomes Law in WA

Feds Raid 5 locations in Oakland County, Detroit in Marijuana Crackdown

Detroit Free Press: “Federal agents raided at least five properties in Oakland County and Detroit this morning.  U.S. Drug Enforcement Administration agents were at two marijuana facilities in Walled Lake and Novi, a home in Commerce Township and the Bayside Sports Grill in Walled Lake. They also raided Coliseum Bar and Grill strip club on Eight Mile in Detroit.”

By |2017-02-12T07:38:37-07:00April 15th, 2011|Federal Dispensary Attacks, Marijuana Crimes, Stories & Articles|Comments Off on Feds Raid 5 locations in Oakland County, Detroit in Marijuana Crackdown

California Medical Marijuana Activist Convicted of Selling Pot in His Dispensary Speaks of Legal Battle

North County Times:  “Two years ago, James Stacy operated a martial arts studio in Vista.  Then he opened a medical marijuana dispensary in the same building.  Within 10 weeks, he landed in federal jail.  Stacy fought federal criminal charges, lost, and now, with a felony drug conviction, is without a full-time job or significant income.  But along the way, he said, he found a new calling: activism.”

By |2015-04-06T18:51:46-07:00April 5th, 2011|California News, Federal Dispensary Attacks, Marijuana Crimes|Comments Off on California Medical Marijuana Activist Convicted of Selling Pot in His Dispensary Speaks of Legal Battle

Medical Marijuana Users Fight for Gun Rights

Associated Press: “Willis is not only packing a concealed handgun permit in her wallet, she also has a medical marijuana card. That combination has led the local sheriff to try to take her gun permit away.  She is part of what is considered the first major court case in the country to consider whether guns and marijuana can legally mix.”

By |2017-02-12T07:38:37-07:00April 5th, 2011|Federal Dispensary Attacks, Stories & Articles|Comments Off on Medical Marijuana Users Fight for Gun Rights

Medical Pot Banking Dilemma

Recordnet.com:  “Dispensaries run into difficulties dealing with financial institutions. Stockton and other local government agencies in California require medical marijuana dispensaries to promptly deposit cash into bank accounts. The federal government, meanwhile, is putting pressure on financial institutions to make that more difficult.  Medical marijuana dispensaries throughout the state have been getting letters in recent months from their banks telling them their accounts are frozen or closed.”

By |2012-05-12T15:25:15-07:00April 4th, 2011|Banking Issues, California News, Federal Dispensary Attacks|Comments Off on Medical Pot Banking Dilemma

Federal Agents Raid Montana Medical Marijuana Businesses

Great Falls Tribune:  “Federal and local law enforcement officials raided medical marijuana operations in at least six Montana cities Monday. . . . at least 10 businesses were raided across the state,”

By |2017-02-12T07:38:37-07:00March 26th, 2011|Federal Dispensary Attacks, Marijuana Crimes|Comments Off on Federal Agents Raid Montana Medical Marijuana Businesses

Lawyer in the CHAMPS Marijuana Dispensary Tax Comments on IRS Dispensary Audits

Taxes.com:  “Henry Wykowski . . . represented Californians Helping to Alleviate Medical Problems . . .  in that dispensary’s landmark 2007 case against the IRS.  Now, many of the growing number of California dispensaries facing what could amount to debilitating audits have sought out Wkyowski’s services. . . . ‘The most successful dispensaries do more than strictly offer cannabis.’  Says Wykowski, ‘I personally believe that a large part of the government decided that because they had not been successful through the DEA to shut [the dispensaries] down, maybe they could tax them out of business’.”

By |2015-04-06T18:57:50-07:00March 26th, 2011|Federal Dispensary Attacks, Tax Issues|Comments Off on Lawyer in the CHAMPS Marijuana Dispensary Tax Comments on IRS Dispensary Audits

IRS is in the Early Stages of a War to Kill Medical Marijuana Dispensaries

Question:  Does a medical marijuana dispensary that is legal under state law have anything to fear from the Internal Revenue Service?

Answer:  Yes.  In 2007 the United States Tax Court issued its opinion in the case of Californians Helping to Alleviate Medical Problems, Inc. v. Commissioner of Internal Revenue.  The issue in this case was what business expenses could a California medical marijuana dispensary deduct on its federal income tax return in light of Internal Revenue Code Section 280E, which states:

No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

In the CHAMPS case, the IRS conceded that the taxpayer could deduct its cost of goods sold, which included $575,317 for marijuana.  Based on news reports about recent IRS audits of big California medical marijuana collectives, it appears that the IRS wants to revisit Section 280E and how it applies to medical marijuana dispensaries.

Warning to All Would-Be and Existing Medical Marijuana Dispensaries about Federal Income Taxes

The IRS is auditing a number of high dollar revenue medical marijuana dispensaries in California.  See for example “IRS tells California Medical Marijuana Dispensary it Owes Millions in Unpaid Taxes” and “Millions at Stake in IRS Audit of Oakland Medical Marijuana Dispensary.”  I believe that the ultimate goal of the IRS is to change the result in the CHAMPS case, which will have the practical affect of putting almost all state legal medical marijuana dispensaries out of business.  If a dispensary spends $1,000,000 to grow its marijuana in 2011 and none of that expense is deductible because of Section 280E, then the dispensary will pay federal income taxes of $340,000 that it would not pay if the expense were deductible.  This means it actually will cost the dispensary $1,340,000 to grow $1,000,000 of marijuana.

I do not know why the IRS conceded in CHAMPS that the taxpayer could deduct the cost of goods sold.  COGS was the taxpayer’s biggest expense.  I believe the IRS regrets conceding in CHAMPS that the COGS was deductible.  I predict the IRS  will disallow the  COGS of the medical marijuana dispensaries it audits.  I believe the IRS wants to litigate this issue in federal district court rather than in Tax Court with the ultimate goal of having the 9th Circuit Court of Appeals rule that COGS is not deductible by a state legal medical marijuana dispensary.  If the IRS can get one or more appellate courts to agree that the COGS is not deductible, the practical result may be to kill the medical marijuana industry in every state that has legalized it.

Tax Court vs. Federal District Court & Circuit Courts of Appeal

The CHAMPS case was a U.S. Tax Court case that had a good result for the medical marijuana dispensaries in states that have legalized the growing and sale of medical marijuana.  Neither federal district courts nor Circuit Courts of Appeal are required to follow the decisions of the Tax Court.  That is why the IRS wants to relitigate Section 280E in the federal district courts and then the appropriate Circuit Court of Appeals.   The IRS wants to reverse the CHAMPS case by winning at the Circuit Court of Appeals level.

When the IRS conducts an audit and demands more taxes from a taxpayer, the taxpayer who wants to dispute the results of the audit has two choices:

  1. Pay the entire amount of taxes in dispute and ask the U.S. Tax Court to determine how much additional taxes, if any, the taxpayer owes, or
  2. Pay none or less than all of the amount of taxes demanded by the IRS and ask the U.S. district court to determine how much additional taxes, if any, the taxpayer owes.

Tax court decisions cannot be appealed.  Federal district court decisions can be appealed by the losing party to the appropriate Circuit Court of Appeals, which is the 9th Circuit for California and Arizona. district courts.   Any legal medical  marijuana dispensary that is assessed additional taxes by the IRS will want to pay the additional taxes and have the Tax Court rule on the dispute.  The practical problem with this tactic, however, is that most dispensary taxpayers will not have the cash to pay the amount of taxes in dispute and will be forced to litigate in the federal district court.

The choice of venue to litigate the dispute is significant.  Dispensaries will want to pay the tax and go to the Tax Court where they expect the Court to apply the holdings of the CHAMPS case.  Clearly the IRS does not want these medical marijuana dispensary Section 280E cases to go to the Tax Court where the CHAMPS case is bad precedent for the IRS.  What the IRS is doing is going after dispensaries that have high income and expenses so that when it demands more taxes, the dispensaries most likely will not have the money to pay the amount in dispute and must then go to the U.S. district court.  Because the amount of tax dollars in dispute will be so big, the loser in the district court will appeal to the 9th Circuit Court of Appeals where the IRS hopes it will get a favorable Section 280E ruling that will effectively allow it to tax legal medical marijuana dispensaries out of existence.

The Marin Alliance for Medical Marijuana is being audited by the IRS.  When asked how much the IRS is demanding in back federal income taxes, Lynnette Shaw, the owner of this dispensary, would not disclose the amount, but she said, “It’s a staggering sum, millions and millions.”  I’m guessing this dispensary does not have a few spare millions of dollars lying around to pay the IRS so it can litigate the dispute in tax court.

Related Stories:

Disclaimer

Although I have a masters degree in income tax law from New York University Law School, I am  no longer a practicing tax lawyer.  I recommend that every dispensary hire a good  experienced tax CPA or tax lawyer to advise the dispensary on the federal and state income tax issues arising from the operation of a medical marijuana dispensary.

Circular 230 Notice:  Pursuant to recently-enacted U.S. Treasury Department regulations, I am required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including websites linked to, is not intended or written to be used, and  may not be used, for the purpose of  (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

IRS tells California Medical Marijuana Dispensary it Owes Millions in Unpaid Taxes

Marin Independent Journal:  “The Internal Revenue Service has notified the Marin Alliance for Medical Marijuana in Fairfax that it owes millions of dollars in unpaid back taxes, according to the alliance’s founder and director, Lynnette Shaw.  Shaw said the IRS audited the alliance’s tax returns for 2008 and 2009 and disallowed all of its business deductions. She said that although dispensaries throughout the state are being audited by the IRS, the alliance is the first to be told it can’t deduct business expenses.  ‘Every dispensary in the nation, past, present and future is dead if this is upheld,’ Shaw said. . . . Shaw said the IRS disallowed her deductions — for buying marijuana, hiring employees, securing office space and more — based on section 280E of the federal tax code, which states that no deduction shall be allowed for any business trafficking in controlled substances.”

This story is a wake-up call and warning to all prospective Arizona medical marijuana dispensaries.  Despite the CHAMPS case, which was decided in the U.S. Tax Court, the IRS apparently is disallowing ALL deductions of medical marijuana dispensaries.  Prospective Arizona medical marijuana dispensaries should consider this fact when doing budgets and financial projections for their dispensary businesses.  See “Californians Helping to Alleviate Medical Problems, Inc. v. Commissioner of Internal Revenue.”

By |2019-06-14T08:24:54-07:00March 18th, 2011|California News, Federal Dispensary Attacks, Tax Issues|Comments Off on IRS tells California Medical Marijuana Dispensary it Owes Millions in Unpaid Taxes

26 Warrants Issued in Montana Medical Marijuana Raids

Bozeman Daily Chronicle:  “Gallatin Valley medical marijuana businesses were open Tuesday, but many questions remained about what prompted federal raids of dispensaries across the state Monday. . . . The U.S. attorney’s office Tuesday said federal agents executed 26 search warrants in 13 cities and towns across the state in the first major crackdown on medical marijuana businesses since the industry took off last year. . . . the U.S. attorney’s office said the raids followed an 18-month investigation. However, federal officials did not make clear what distinguished the businesses raided Monday from other medical marijuana operations across the state, . . . . The businesses that were raided were some of the largest medical marijuana providers in the state

See also:

  • Medical marijuana growers accused of trafficking.”  Montana’s U.S. attorney said the U.S. conducted the raids because “there is probable cause that the premises were involved in illegal and large-scale trafficking of marijuana.”
  • U.S. Attorney’s Office: Montana medical marijuana businesses involved in trafficking, tax evasion” which said, “the U.S. Attorney’s Office said the medical marijuana businesses raided were involved in large-scale marijuana trafficking and tax evasion.  While there have been no arrests yet, agents seized at least $3.6 million from various bank accounts,”  The story also says that one of the raided dispensaries purchased pounds of marijuana from another dispensary that was also raided.

By |2012-05-12T15:26:16-07:00March 17th, 2011|Federal Dispensary Attacks, Marijuana Crimes|Comments Off on 26 Warrants Issued in Montana Medical Marijuana Raids

2 West Hollywood Medical Marijuana Dispensaries Raided by Federal Agents

Los Angeles Times:  “Federal drug enforcement agents Tuesday raided two West Hollywood medical marijuana stores in the first such action in the city since the Obama administration decided two years ago to take a hands-off approach to dispensaries that abide by state laws. The dispensaries — Alternative Herbal Health Services and Zen Healing on Santa Monica Boulevard — are among four that the city has authorized to operate. . . . The DEA raided five of six dispensaries in West Hollywood in 2007, but has left the city’s stores alone since then.”

By |2012-05-12T15:26:27-07:00March 17th, 2011|California News, Federal Dispensary Attacks, Marijuana Crimes, Video|Comments Off on 2 West Hollywood Medical Marijuana Dispensaries Raided by Federal Agents

IRS Goes After Medical Marijuana Dispensary in California

The American Independent:  “Federal agencies have stepped up efforts to crack down on medical marijuana, and while high-profile ATF raids may be more immediately shocking, there is a less direct tactic being used that could spell the death of medical marijuana across the country, according to its opponents.  In the last several months, the IRS has begun targeting medical marijuana dispensaries in California, declaring that some owe millions in back taxes as a result of a section of U.S. tax code that the IRS is now applying to medical marijuana dispensaries.”

By |2015-04-06T18:50:20-07:00March 17th, 2011|Federal Dispensary Attacks, Tax Issues|Comments Off on IRS Goes After Medical Marijuana Dispensary in California

Feds Warnings to Oakland & Its Plan to Allow Large Scale Growing of Pot May Affect All Prospective Arizona Medical Marijuana Dispensary Owners

The New York Times had a story on March 2, 2011, entitled “Oakland’s Plan to Cash in on Marijuana Farms Hits Federal Roadblock,” which everybody who is contemplating becoming an owner in an Arizona medical marijuana dispensary should read.  The story said:

“an exchange of letters between the city attorney and federal law enforcement officials has made it exceedingly clear that Washington will not tolerate plans for the large-scale marijuana farms the City Council approved last July. . . . just weeks before the city was set to issue the permits, the Council voted to stall the plan after the city’s attorney, John Russo, and a county district attorney warned the Council that the marijuana cultivation ordinance thwarted state law and that city officials could be held criminally liable.

On Jan. 14, Mr. Russo wrote a letter to the United States Department of Justice seeking guidance on the city’s legal standing. In a response, Melinda Haag, United States attorney for the Northern District of California, warned that ‘individuals who elect to operate ‘industrial cannabis cultivation and manufacturing facilities’ will be doing so in violation of federal law.’ The letter went on to say that the Justice Department was ‘carefully considering civil and criminal legal remedies regarding those who seek to set up industrial marijuana growing warehouses‘.”

If you are considering becoming an owner of a medical marijuana dispensary in Arizona, you must read and consider U.S. Attorney for the Northern District of California Melinda Haag’s letter of February 1, 2011, to John A. Russo, the then Oakland, California, City Attorney.  Here are some pertinent quotes that every dispensary and grower of any quantity, but especially large quantities of marijuana should read and consider carefully:

I have consulted with the Attorney General and the Deputy Attorney General about the Oakland Ordinance.”

“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.”

“The prosecution of individuals and organizations involved in the trade of any illegal drugs and the disruption of drug trafficking organizations is a core priority of the Department. This core priority includes prosecution of business enterprises that unlawfully market and sell marijuana.”

“we will enforce the CSA vigorously against individuals and organizations that participate in unlawful manufacturing and distribution activity involving marijuana, even if such activities are permitted under state law.”

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.”

Clearly the Department of Justice intends to take legal action against those it believes are involved in the “industrial growing of marijuana.”  The problem for all Arizona dispensaries that intend to grow marijuana is what  is the difference between nonindustrial growing of marijuana and industrial growing of marijuana?  This problem and the risk of criminal prosecution is especially great for Arizona medical marijuana dispensaries that intend to grow excess amounts of marijuana to sell to other dispensaries.

If Arizona medical marijuana dispensary owners think they can take cover under the Department of Justice memo of October 19, 2009, think again.  This memo said only that the U.S. has a better use of its resources than to prosecute individuals (such as patients and caregivers) who are using medical marijuana in compliance with state law.  The memo does not say that the Department of Justice will not prosecute  medical marijuana dispensaries and their owners who are complying with state law.  It says just the opposite.

prosecution of commercial enterprises that unlawfully market and sell marijuana for profit continues to be an enforcement priority of the Department. To be sure, claims of compliance with state or local law may mask operations inconsistent with the terms, conditions, or purposes of those laws, and federal law enforcement should not be deterred by such assertions when otherwise pursuing the Department’s core enforcement priorities.”

For a related story, see “Medical Marijuana Cultivation Plan Antagonizes Feds in Oakland — and Arizona’s Plan is Similar.”

By |2012-08-18T09:14:08-07:00March 5th, 2011|Federal Dispensary Attacks, Legal Issues, Marijuana Crimes, Stories & Articles|Comments Off on Feds Warnings to Oakland & Its Plan to Allow Large Scale Growing of Pot May Affect All Prospective Arizona Medical Marijuana Dispensary Owners
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