California Weed

Feds move to rein in medical marijuana shops in California

U.S. attorneys in California are threatening to seize the properties of landlords leasing space to marijuana dispensaries, signaling a new tactic in their efforts to rein in the state's burgeoning medical pot trade.

Letters sent in recent days to targeted dispensaries in San Diego, San Francisco, Marin and the federal district that includes Sacramento demand that operators or property owners halt marijuana sales within 45 days.

The letters assert that the dispensaries are neither protected from property forfeiture nor prosecution under federal law, even though they are "providing 'medical marijuana' " under state law.

The threat of federal intervention could have major consequences in California, where medical marijuana transactions are estimated at $1.5 billion or more.

The state rakes in $100 million or more in taxes on dispensary sales. And several cities – including Sacramento – have sought to infuse depleted coffers by taxing medical marijuana outlets.

The letters come as the four U.S. attorneys in California scheduled a news conference in Sacramento today to issue a joint statement on the "sale, distribution and cultivation" of marijuana, which is illegal under federal law – medicinal or otherwise.

In Oct. 4 letters obtained by The Bee, Laura E. Duffy, U.S. attorney for the Southern District of California, warned two San Diego dispensaries that "operations involving sales and distribution of marijuana are illegal and subject to criminal prosecution."

Threatening to seize "real and personal property," she warned San Diego's Ocean Beach Wellness Centers and Oasis Herbal Center marijuana stores that federal law trumps state law and "it is not a defense ... that the dispensary is providing 'medical marijuana.' "

Lauren Horwood, spokeswoman for Sacramento-based U.S. Attorney Benjamin Wagner, said similar letters were sent to dispensary landlords and people leasing land for marijuana cultivation in the 34-county Eastern District of California.

The letters have infuriated some marijuana advocates.

"This is a war on dispensaries," said Dale Gieringer, California director of the National Organization for the Reform of Marijuana Laws. U.S. authorities, Gieringer said, "are afraid that it works, that the state is getting money and people are paying taxes and conducting themselves like licensed businesses and, lo and behold, the sky isn't falling."

"So now they're trying to make the sky fall and make it impossible to operate."

The specter of increased federal intervention follows the disclosure this week that the Internal Revenue Service is seeking a $2.4 million tax penalty against California's largest medical marijuana provider, the Harborside Health Center in Oakland.

In recent weeks, federal authorities in Sacramento also have seized the accounts of two dispensaries in a probe of irregular banking practices. Five people associated with the R & R Wellness Collective in Sacramento were charged with conspiracy and illegal marijuana sales for alleged profiteering, despite California law that mandates nonprofit dispensaries.

Former Sacramento federal prosecutor Donald Heller said the Sacramento cases "send a message" that the federal government won't tolerate medical marijuana as a commercial enterprise. "In the immortal words of Clint Eastwood, Ben Wagner is saying, 'Go ahead. Make my day,' " Heller said.

George Mull, a Sacramento medical marijuana lawyer, said federal authorities may only seize selective properties or prosecute dispensary operators where they believe people "are abusing California medical law ... to line their own pockets with unreasonable amounts of money."

Letters obtained by The Bee indicate federal authorities also are targeting dispensaries whose locations are at odds with state law or local ordinances prohibiting medical marijuana sales near schools, parks and other sensitive sites.

A letter from Melinda Haag, the San Francisco-based U.S. attorney for the Northern District of California, was sent Sept. 28 to the building landlord of the Marin Alliance for Medical Marijuana, California's longest-standing dispensary.

It said the operators of the Fairfax store, opened months before California voters legalized medical marijuana in 1996, could face up to 40 years in prison under federal laws against drug sales near parks. The Marin Alliance is within 1,000 feet of the community's Bolinas Park.

In a letter to a San Francisco landlord, Haag took issue with a dispensary operating close to a school. She warned the property owner of "criminal prosecution, imprisonment, fines and forfeiture of the property on which the dispensary is operating."

In San Diego, City Attorney Jan Goldsmith, who has filed successful civil suits to close about 40 of 180 local marijuana outlets, applauded the threat of seizing buildings of dispensary landlords.

"We have the support of the U.S. attorney and the one thing the feds have that we don't have is asset forfeiture," Goldsmith said. "That is a devastating tool."

Mull suggested that California is vulnerable to federal intervention because neither the Legislature nor voters have enacted statewide regulations for dispensaries "with clear, objective guidelines."

Another state, Colorado, has avoided federal raids despite allowing for-profit marijuana stores and commercial cultivation with strict oversight from state regulators.

A tough federal stance in California may have been boosted Tuesday by a California 2nd District Court of Appeal decision that said the city of Long Beach couldn't license dispensaries due to federal marijuana laws.

"We're going to have to determine whether states have the right to regulate their own medical marijuana," said Mark Reichel, attorney for the three Sacramento pot stores facing federal criminal charges or seizure of their bank accounts. "What interest does the federal government really have in that?"