The Sunset Of Medical Marijuana In California

 San Francisco: Medical Cannabis Competition 20108

Media accounts across nation over the last weeks and months paint a portrait of an industry in decline all over California:  Medical Marijuana.  Starting with the Sacramento Bee there remain only eight stores, down from 99 that at one time operated in Sacramento County.  Sacramento City has frozen permit applications for new dispensaries, while Sacramento County is cracking down in the unincorporated areas:

It’s the twilight hour for medical marijuana dispensaries in Sacramento County.

Eight marijuana stores – from as many as 99 dispensaries that opened – are left. Dozens have closed in recent weeks amid fears of federal prosecution and aggressive actions by the county that include litigation and fines for building code violations.

The city of Sacramento has frozen permit applications for existing dispensaries, but has allowed most to stay. Sacramento County’s crackdown in the unincorporated areas, by contrast, is having a dramatic effect on California’s quickly shrinking medical marijuana industry.

The United Food and Commercials Workers Union, which launched a drive to unionize pot workers during the California dispensary boom, estimates 20 percent of marijuana stores statewide have gone out of business in less than a month.

The four United States’ Attorneys have threatened landlords of dispensaries with asset forfeiture and other legal actions, thereby lessening the allure of doing business in this murky drug trade:

Dan Rush, who directs the union’s medical cannabis division, said letters from California’s four U.S. attorneys threatening dispensary landlords with loss of their buildings put a chill on the trade.

“There is a high rate of people closing voluntarily,” Rush said. “They didn’t want to cause trouble for their landlords or they’re closing to get a chance to figure out how to come back in compliance.”

This is one of the reasons the Tri-M partnership has refused to do business with Mr. David Rosenthal, fear of losing their property.  Dispensaries are closing all over the state from Sacramento County to San Diego County, under the burden of the new federal crackdown:

In San Diego, nearly two-thirds of some 220 dispensaries have shut down amid threatened federal property seizures and city lawsuits.

Three well-known San Francisco dispensaries closed after receiving warning letters from U.S. Attorney Melinda Haag. California’s oldest dispensary, the Marin Alliance for Medical Marijuana, is fighting to stay in business and preparing to pull its cannabis products after a federal suit to seize the property. The dispensary offers other services, including magnetic massage therapy, physician evaluations and counseling.

“We need to move the marijuana very shortly. I don’t want to get the landlord in any more trouble,” said operator Lynette Shaw.

In Sacramento County, Chris Dean said he decided it was too risky to continue in the medical marijuana trade.

A former real estate agent and mortgage broker driven out by the market by the housing collapse, Dean opened the Paradise Wellness dispensary in Carmichael with two partners in May.

In October, they abruptly closed, days after the state’s U.S. attorneys held a Sacramento news conference to announce federal actions against California medical marijuana entrepreneurs.

“It didn’t look good. I was concerned about the safety of my employees,” Dean said. “I didn’t want to get anybody in trouble. I’m a lawful person.”

In Sacramento County, many marijuana stores had stayed open even as the county collected $91,000 in fines against businesses operating in violation of zoning codes. Two months ago, the county began threatening $1,000 daily fines against property owners for building code violations for unpermitted work that converted rental space to dispensaries.

Faced with monthly penalties of $30,000, “the property owners all of a sudden got interested in evicting their tenants,” said Steve Pedretti, the county’s director of building and code enforcement.

Dean said Paradise Wellness had stayed open despite orders to close in hopes that a political accord would be reached to allow dispensaries in Sacramento County.

“I was … thinking this was a cat and mouse game with the county in waiting to get a permit,” Dean said. Ultimately, “with the code enforcement people after us every day, I just felt there was too much opposition.”

The county also filed lawsuits against 11 dispensaries for zoning violations, winning court orders to close some and persuading others to voluntarily cease operating. Three suits are pending against open dispensaries, including the Arcade Wellness Collective on El Camino Avenue, the Herbal Connoisseur on Kitty Lane and Magnolia Wellness in Orangevale.

Rush said crackdowns on medical marijuana businesses statewide have cost as many as 5,000 jobs, including positions in dispensaries, construction, security and other support businesses.

Cannabis magazines and alternative weekly newspapers that got a surge in revenue from dispensary ads are feeling the downturn.

Jeff vonKaenel, publisher of the Sacramento News & Review, saw his circulation leap from from 74,000 to 89,000 as the weekly used medical marijuana advertising dollars to buy up hundreds of news racks it remade with original art and filled with papers.

On Aug. 25, the SN&R’s medical marijuana section – “The 420” – featured 36 pages and 65 dispensary ads, plus listings for cannabis physicians, hydroponic supply stores and other services. On Nov. 23, the section totaled eight pages, with 11 ads for marijuana stores.

“We never thought medical marijuana (advertising) would be this strong and I never thought it would last this long, frankly, ” vonKaenel said. “We prepared ourselves for that. But I’m not kidding, it’s a blow for us. We’re going to have to prepare for a new reality.”

The Sacramento Bee, which began running medical cannabis business ads on Aug. 26 as a small advertising niche, peaked with four dispensary listings Sept. 16 and last had a marijuana store ad on Oct. 14.

About 25 of 38 dispensaries remain open in the city of Sacramento. The city, which collects a 4 percent tax on medical marijuana sales, froze applications for dispensary business permits but is allowing operators to stay open until Aug. 13.

Dispensaries in the city “are absolutely in a better place” than those in the county, said Caleb Counts, president of the Sacramento Alliance of Collectives.

But Counts said as many as 16 may have to move or close under city discussions to impose a 1,000-foot distance requirement from schools or parks. The new policy is being considered as federal prosecutors threaten to enforce U.S. laws that carry penalties of up to 40 years in prison for drug sales near such sites.

“I think everyone in Sacramento doesn’t know what to think right now,” said Counts, who runs the Fruitridge Health and Wellness Collective in south Sacramento.

Federal authorities in October filed marijuana distribution charges against operators of the R & R Wellness Collective in south Sacramento and raided another location, the MediZen Collective, on Northgate Boulevard. No charges have been filed in the second case. Several other Sacramento dispensaries received letters threatening federal seizures of the properties.

Medical marijuana advocates who challenged the federal actions in court were dealt a setback last week. U.S. District Judge Saundra Brown Armstrong declared she couldn’t stop federal sanctions against dispensaries because “marijuana remains illegal under federal law, and in Congress’ view, it has no medicinal value.”

This weekend, the Christian Science Monitor ran an excellent editorial on Medical Marijuana entitled:  The smokescreen of reclassifying pot for health.  Its main point is that the push for medical marijuana is nothing more than a well-monied national campaign to legalize all pot use:

Too many elected state leaders still fall for the idea that legalizing “medical” marijuana really isn’t about a well-monied national campaign to legalize all pot use.

And yet, truth be told, it is.

The latest twist in this ongoing political ruse is a request by two governors to have marijuana reclassified under federal drug law – even though such an effort is really a sideshow.

On Nov. 30, Gov. Chris Gregoire (D) of Washingtonand Gov. Lincoln Chafee (I) of Rhode Island asked theDrug Enforcement Administration (DEA) to change how marijuana is rated as a drug under the Controlled Substances Act. Their 106-page petition seeks to have cannabis designated for limited medical use – a category known as “Schedule II” – while still retaining its status as a harmful substance with a high potential for abuse.

The governors claim they simply want safe access to pot for the ill in the 16 states that have so far decriminalized pot for medical reasons. Both of them are frustrated by recent federal crackdowns on the trafficking of “medical” marijuana. To protect state employees and others from being prosecuted, they recently killed proposals passed by their legislatures to allow pot dispensaries.

Rather than simply uphold the federal ban, the governors have caved to powerful pro-pot forces that seek legalization through the backdoor. They know the DEA only last July decided not to remove marijuana from Schedule I – the most restrictive category – based on a lack of consensus in the medical field. The agency found “a material conflict of opinion among experts.”

And this was the third time in recent decades that the DEA has denied such a petition.

The federal crackdown picked up steam two months ago in California, where four US Attorneys decided to end the abuse of marijuana dispensaries by thousands of people who have few health problems. Many California dispensaries were also shipping pot around the country.

The raids in California and other states are not aimed at individuals using pot for medical reasons. Rather they are directed at those who profit from the growing or selling of pot – and who extend those sales way beyond “medical” use.

As DEA Administrator Michele Leonhart says, “The known risks of marijuana use have not been shown to be outweighed by specific benefits in well-controlled clinical trials that scientifically evaluate safety and efficacy.”

But of course, the real issue isn’t whether the medical use of pot makes sense (especially when smoked). Instead, governors should simply uphold federal law – and Obama administration policy – that finds marijuana has too many adverse effects.

States should not be frustrating federal law by playing into the hands of the pro-pot legalization campaign.

I happen to agree with the Monitor.   Again, the purpose of the federal crackdown is not aimed at or meant to keep sick individuals from benefiting from legitimate marijuana needs.  Rather, it is a direct result of the abuse inherent in an industry that thrives on making outrageous sums of money from selling a schedule one drug.  The money quote worth reposting:

The federal crackdown picked up steam two months ago in California, where four US Attorneys decided to end the abuse of marijuana dispensaries by thousands of people who have few health problems. Many California dispensaries were also shipping pot around the country.

The raids in California and other states are not aimed at individuals using pot for medical reasons. Rather they are directed at those who profit from the growing or selling of pot – and who extend those sales way beyond “medical” use.

Within the last two weeks the New York Times ran this story:   Medical Marijuana Industry Is Unnerved by U.S. Crackdown.  Some of the relevant points in the story include:

An intensifying federal crackdown on growers and sellers of state-authorized medical marijuana has badly shaken the billion-dollar industry, which has sprung up in California since voters approved medical use of the drug in 1996, and has highlighted the stark contradiction between federal and state policies.

A billion dollar industry.  That’s a lot of stage four cancer and glaucoma patients–isn’t it?

Federal law classifies the possession and sale of marijuana as a serious crime and does not grant exceptions for medical use, so the programs adopted here, in 15 other states and in the District of Columbia exist in an odd legal limbo.

Legal Limbo: This is exactly the primary problem.  The conflict between very clear federal law, and incredibly vague, ambiguous, and contradictory state law in California.

But in the last several weeks, federal prosecutors have raided or threatened to seize the property of scores of growers and dispensaries in California that, in some cases, are regarded by local officials as law-abiding models. At the same time, the Internal Revenue Service has levied large, disputed tax charges against the state’s largest dispensary, threatening its ability to continue.

Even dispensaries which local law enforcement thinks are appropriate may not be from the United States Justice Department’s view.  Do we really want to voluntarily inject this uncertainty and element into our local community?

“The federal and state laws exist in parallel universes,” said Thomas D. Allman, the Mendocino County sheriff, in his office in Ukiah. He is as tough as anyone on the illegal marijuana trade, he said, but “growing and using medical marijuana is a right of a California citizen.”

Now, he said, the 94 collectives that receive permits and plant tags from his office are frightened.

Parallel universe may be just a bit charitable given the circumstances.  The money these so called “legitimate” (under state law) and “non profit” “collectives” generate is mind numbing:

In Oakland, the state’s largest dispensary, Harborside Health Center, sells marijuana and derived products to more than 600 people a day, charging from $25 to $60 per one-eighth of an ounce, with a limit of two ounces per patient per week. Steve DeAngelo, the executive director, described that as “the maximum amount that a medical patient could legitimately consume in a week.”

Registered with the state as a not-for-profit cooperative, Harborside has 95,000 patient-members and 120 employees, takes in $22 million a year and is one of Oakland’s top 10 taxpayers, Mr. DeAngelo said.

In October, the Internal Revenue Service notified the center that it considered it a criminal drug-trafficking organization and said it could not deduct its rent, salaries, counseling and other operations as business expenses. It billed the center for $2.5 million in back taxes, which would destroy the company, said Mr. DeAngelo, who plans to fight the decision in court.

$22 million a year, placing it in the top 10 taxpayers in Oakland:  a stellar example of big business at its finest.

“We’re clearly breaking federal law every day, but we are faithfully following the laws of California and Oakland,” Mr. DeAngelo said. The Supreme Court has ruled that federal criminal law can prevail, but Mr. DeAngelo and others question the Justice Department’s priorities.

Again, a prime example of a California dispensary operating “legally” under the poorly drafted and even more poorly understood California law–but ripe for federal law enforcement and IRS action.   And, why are is the federal government cracking down?  The actual abuse of the intent of the law:

But federal justice officials say the real change is the proliferation of large, commercial enterprises, not their guidelines.

“A lot of the medical marijuana stores that claim to be nonprofit are making lots of money,” Benjamin B. Wagner, the United States attorney for the Eastern District of California, in Sacramento, said in an interview.

He added that prosecutors were skeptical about the medical needs of many buyers. “We’ve found in California that anybody can get a medical recommendation,” he said.

This is hardly a surprise to anyone–and provides further support for the Christian Science Monitor editorial above.  The final portions of the New York Time’s story again makes the strong case for the discrepency between the myths propogated by the medical marijuana industry and the reality of the every day situation:

Even many marijuana advocates agree that state laws governing medical marijuana are inadequate, largely leaving it to local officials to set rules for growing and selling that vary wildly by county. It is also an open secret that a share of doctor-approved buyers do not have plausible medical needs.

On Ocean Front Walk at Venice Beach, for example, touts compete to lure people into shabby clinics with names like Medical Kush Doctor, promising medical recommendations for $45.

“Why don’t they go after the bad actors?” asked Mr. Cohen, the Mendocino County grower. “I’m a strong advocate of tighter regulations.”

State Senator Mark Leno, a Democrat from San Francisco, is now working with Attorney General Harris to devise a state law that would establish more uniform and stringent rules for medical marijuana. But he condemned what he called the federal authorities’ “heavy-handed interventions.”

Even if the state tightens controls and pares back the industry, the central clash, between the federal war on drugs and California’s desire to offer medical marijuana, will remain.

Ms. Harris said she hoped that if the state improved oversight, federal officials would find other priorities. “I’m a career prosecutor,” she said, “and I know that everyone has a lot of obligations and limited resources.”

There are literally dozens more articles out there, from jurisdictions all over the state, setting forth the same facts, same ideas, and same reasons for the federal crackdown by law enforcement.  Unless and until  the federal government re-classifies marijuana from a schedule one drug to something else, federal and state laws will remain in conflict, with no one, including local state officials, being able to intelligently articulate what is or is not acceptable under federal law.

Marijuana dispensaries are in decline all of the state.  The federal government will continue in its law enforcement actions.  The IRS will continue levying fines and confiscating property.  Why on earth do we want to voluntarily inject this element into our local community?

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