California

Raids bust dreams of tribal marijuana bonanza

Wendy Del Rosa
Wendy Del Rosa pkitagaki@sacbee.com

Wendy Del Rosa, one of two warring siblings claiming to lead a tiny Indian band just south of the Oregon border, began urgently writing to the U.S. Attorney’s Office in Sacramento in early May.

The Alturas Rancheria – totaling three members or nine, depending on which faction one believes – had not been content with the earnings from its humble wood-plank gambling house, the Desert Rose Casino. It had pursued various ill-fated ventures, including payday lending and manufacturing cigarettes.

Now, Del Rosa warned in a series of letters to authorities, the tribe was converting a cavernous, tented event center on the reservation into a huge facility for growing marijuana.

“The tribe is acting as a beard for private operators who are attempting to use the medical marijuana law of this state and tribal sovereignty for massive personal profit,” Del Rosa wrote Executive Assistant U.S. Attorney Philip Ferrari in a letter dated May 27.

On July 8, federal and state agents and the Modoc County Sheriff’s Department raided vast marijuana cultivation operations at the Alturas Rancheria and on the neighboring land of a larger sister tribe, the Pit River Tribe. The enforcement actions, which so far have not resulted in criminal charges, revealed an audacious effort to capitalize on the California marijuana market.

In a remote northern region where the county seat, Alturas, lacks a single traffic light, the scale of the operation suggested its investors held exuberant expectations about their ability to grow marijuana without legal repercussions and distribute it in the state that boasts America’s most lucrative cannabis economy.

A federal search warrant affidavit said the tribal pot-growing ventures were “designed” by a powerful tribal law firm in Sacramento and financed by the wealthy chief executive officer of a major Canadian cigarette manufacturer.

Authorities seized 12,000 plants and 100 pounds of pot at the two tribal locations. They also discovered 40 newly constructed greenhouses at the Pit River Tribe’s XL Ranch near Highway 395 and the banks of the Pit River.

Even longtime advocates for marijuana legalization described the Alturas and Pit River operations as an overreach – based on an aggressive interpretation of a 2014 Justice Department memo that said sovereign Indian nations could sanction cultivation and use of marijuana on tribal lands. The scope of the operation also went far beyond cultivation restrictions being debated in the Legislature to regulate California’s existing medical marijuana industry, as well as limits contemplated by those pushing for legalization in 2016.

“This is overreach by promoters that are jumping the gun,” said Dale Gieringer, California director for the National Organization for the Reform of Marijuana Laws, a group partnering in efforts to legalize marijuana beyond medical use in 2016. “They don’t understand California law, and they are coming in to try to establish grows that go far beyond anything legally permitted in California.”

According to a July 7 affidavit by Charles Turner, a special agent for drug enforcement with the Bureau of Indian Affairs, the growing had already started in March, when a tribal delegation met with Modoc County Sheriff Mike Poindexter to fill him in on the operation.

The lawyer representing the project was John M. Peebles, a founding partner of Fredericks Peebles & Morgan, a Sacramento law firm specializing in tribal economic development. Peebles met the Modoc County sheriff with a delegation that included Alturas Rancheria chairman Phillip Del Rosa and vice-chair Darren Rose.

Phillip Del Rosa is the brother of Wendy Del Rosa. Both claim to be the rightful chair of the tribe, and they’ve been dueling it out in courtrooms for years.

This is overreach by promoters that are jumping the gun.

Dale Gieringer, California director for the National Organization for the Reform of Marijuana Laws

In a recent interview, Poindexter said he was struck by the confidence Peebles expressed in the legitimacy of the growing operation during the meeting and in follow-up correspondence after sheriff’s investigators began to probe the venture. “He said that we needed to cease our investigation of this because it is legal,” Poindexter said.

The sheriff was further taken aback that the tribe was converting the Alturas Rancheria event center, a popular gathering spot for community functions in the town of 2,800 residents, into a giant grow room for pot.

“Tell me how closing that down and filling that up with marijuana is a good thing,” he said, adding: “There is no way this is good for our bucolic lifestyles.”

Turner said confidential informants told authorities 4,000 marijuana plants were being grown inside the Alturas Rancheria event center by April and that there were plans to build a multimillion-dollar electrical station to provide power for cannabis greenhouses on the XL Ranch of the Pit River Tribe, a 2,000-member band that operates the Pit River Casino in the Shasta County town of Burney.

In May, a sheriff’s sergeant stopped a Penske rental truck leaving the Alturas Rancheria with a posted “plant transfer manifest” for 3,000 marijuana plants in designer strains from Platinum Kush to Star Dawg. Turner wrote that informants told authorities the venture intended to distribute pot as far as 750 miles away.

In addition, Turner wrote, there was a frequent visitor to the cultivation sites: Jerry Montour. He is the CEO and controlling stockholder of an Ontario, Canada-based cigarette company, Grand River Enterprises, which sells more than a billion dollars of cigarettes annually under such brands as Sago, Putters, DK’s and Golden Leaf in Canada and Seneca in the United States.

Montour, who did not return a call for comment after the July 8 raid, has a 1988 conviction in Canada for conspiracy to smuggle marijuana into the country from Mexico, according to authorities.

On June 9, Peebles and Alturas Rancheria went public with their plans in front of the Modoc County Board of Supervisors. Peebles asserted that the tribe had put in place regulations and oversight vastly exceeding California’s nebulous cannabis laws, which merely say that qualified medical marijuana patients can assemble to cultivate and share marijuana.

Peebles said the tribe wouldn’t operate any pot stores on its lands or in Modoc County and maintained “strict inventory controls” in a collective that would provide marijuana to patients through medical cannabis dispensaries elsewhere in California. He invited supervisors to tour the growing operations and view “how we intend to strictly monitor what is going on.”

In the tense board session, Modoc Supervisor David Allan questioned the tribe’s motives. “A tiny handful of people, tough guys, are desperately looking for some minuscule little loophole to make this happen, to profiteer,” Allan said.

According to a leading medical marijuana lawyer who coauthored California’s Proposition 215 Compassionate Use Act, which legalized medicinal use in 1996, the tribal cultivation plan appeared to be a business-to-business program to sell pot to California dispensaries, something not allowed by state law.

Oakland attorney William Panzer said in an interview that the enterprise would have violated state law soon after the marijuana left the tribal lands.

Under a 2003 state law governing medical marijuana distribution, medical users are allowed to share marijuana within closed membership groups of patients. Panzer said the tribal plan appeared to assume the creation of “a giant collective” to distribute pot into multiple patient networks or dispensaries.

“You’re talking about wholesaling cannabis, and you just can’t do it,” he said.

Legislation recently passed in the Assembly, AB 266, would create California’s first formal medical marijuana business licensing and oversight program to govern retail sales, cultivation and transportation of cannabis. The bill proposes commercial cultivation licenses for farms raising up to 500 mature marijuana plants – a fraction of what was being contemplated by tribes in Modoc County.

In recent years, federal authorities aggressively targeted purported wholesale marijuana production in California.

In 2011, a city of Oakland plan to license four cavernous warehouses for pot growing prompted the federal government to conduct sweeping raids on California pot businesses it said were operating in an “unregulated free-for-all.” Threats of U.S. prosecution also shuttered private marijuana greenhouses licensed by the Sacramento Delta town of Isleton. In another production scheme, the government won guilty pleas from two former Sutter County tomato growers and an Oakland medical marijuana entrepreneur.

We thought, ‘Wow, what are these guys up to? Are they smoking their own product?’

Wayne Smith, former deputy assistant secretary of the Bureau of Indian Affairs, representing Wendy Del Rosa

Tribal groups nationally began seeing marijuana as a potential source of new revenue soon after voters in Colorado and Washington legalized it for recreational use in 2012.

Following the legalization votes, the Justice Department issued a 2013 memo declaring it wouldn’t intervene in states allowing marijuana for medical or recreational purposes if they enacted “robust controls” including regulating sales and distribution to keep pot from minors and prevent interstate distribution, environmental degradation and involvement by criminal gangs.

A 2014 follow-up memo said those guidelines also applied to Indian tribes, though it said federal authorities reserved the right to investigate and bring marijuana prosecutions, “including in the event that sovereign Indian Nations seek to legalize the cultivation or use of marijuana.”

Within months, a Kansas City, Kan., investment group, FoxBarry Cos., and a Colorado consulting firm called United Cannabis announced a marijuana growing partnership in January with the Pinoleville Pomo Nation in Mendocino County.

Those investors outlined ambitious plans for numerous greenhouses and over 100,000 square feet of growing space. The Mendocino County Sheriff’s Department responded by threatening to enforce the county growing standards – a limit of 25 plants per parcel.

So far, the tribe has planted just a few dozen plants on adjoining parcels.

Mendocino County Supervisor John McCowen said he was happy to see the federal government crack down in Modoc County. Speculators, he said, are pitching “outrageous” cultivation schemes.

“It smacks of commercial exploitation, almost on parallel with casino developments,” McCowen said. “In many incidents, it’s not the tribes that are benefiting. It’s outsiders who are coming in and saying, ‘Here is how you can do it.’”

In a statement after the July 8 raids, Jerrilyn Spencer, chief executive officer of Pomari-Awte, a management entity for the Pit River Tribe, said the tribe believed it was operating properly under federal guidelines when it adopted “a comprehensive medical marijuana program ordinance that authorized the cultivation … on tribal land.”

She said the tribe believed the 2014 Justice Department memo had provided assurance “that such activity would not trigger federal enforcement action.”

Yet, more than three weeks before attorney Peebles addressed the Modoc supervisors, he got a stern warning from U.S. Attorney Benjamin Wagner and Ferrari, the official in Wagner’s Sacramento office to whom Wendy Del Rosa had written.

Wagner and Ferrari’s May 14 letter to Peebles said “distribution of marijuana by Indian tribes” within California’s 34-county Eastern District was a matter “of real concern” to the Justice Department and local sheriffs. It went on to say: “The prospect of large-scale, for-profit marijuana operations has the potential to introduce quantities of marijuana not contemplated by the Compassionate Use Act” in California.

Peebles and Alturas Rancheria members backing the plan declined to return calls after the raids.

Wendy Del Rosa – who had reported tribal members, including her own brother, to the feds – had a tribal consultant and political ally respond on her behalf.

In an interview, Wayne Smith, a former deputy assistant secretary of the Bureau of Indian Affairs, said Wendy Del Rosa was “screaming from Day One” the marijuana operation was illegitimate. “It was a cultivation and distribution ring beyond anyone’s imagination,” Smith said. He added: “We thought, ‘Wow, what are these guys up to? Are they smoking their own product?’”

Denny Walsh contributed to this report.

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