June 6 - 16, 2005
San Francisco Bay Guardian
After 'Raich'
Politicians
and the mass media say all is well, but local cops and the feds are stepping up
their attacks on medical marijuana
By
Ann Harrison
June
14, 2005
The media frenzy surrounding
last week's Supreme Court ruling on medical cannabis emphasized that the
decision does not alter state medical cannabis laws and downplayed the
possibility that law enforcement would launch retaliatory raids against
patients and caregivers.
But local police and federal
authorities continue to target the medical cannabis community – even right here
in San Francisco, where the political leadership uniformly supports legal
access to medical marijuana. The favored tactics of the enforcers of federal
drug laws are asset seizures and tax
investigations, sometimes preceded by police raids.
On the same day justices ruled
in Gonzalez v. Raich that the federal
government has constitutional authority to prosecute cannabis patients under
the Commerce Clause, California's largest operator of medical cannabis
dispensaries had its bank accounts frozen by the Los Angeles Police Department.
Police say the Drug Enforcement Agency (DEA) and the Internal Revenue Service
(IRS) are both involved in the case.
The action was prompted by a May
13 raid carried out by the LAPD against a West Hollywood medical cannabis
dispensary run by Compassionate Caregivers. The company operates dispensaries
in Bakersfield, West Hollywood, Oakland, San Diego, San Leandro, Ukiah, and San
Francisco (Mission Street Caregivers), all of which are now closed.
LAPD spokesperson Lt. Paul
Vernon told the Bay Guardian the raid
was prompted by information suggesting the dispensary was linked to street
sales of marijuana and possible gang activity, not simply its role as a medical
marijuana provider. But he also told us the LAPD's decision to freeze assets
was based on the outcome of the Raich
decision. "The states cannot pass laws that supersede the federal
government," Vernon said.
San Francisco attorney Omar
Figueroa said the opinion only interprets the scope of the Commerce Clause and
the authority it grants to Congress. "It doesn't interpret the Supremacy
Clause. It doesn't say federal law trumps state law," Figueroa said.
"We need to get a clear commitment from the state attorney general to
direct the state cops to follow state law."
Compassionate Caregivers manager
Sparky Rose emphatically rejected the allegation that his dispensaries are
connected to street crime and challenged the LAPD to produce the evidence. Rose
said the business was already planning to temporarily cease all its dispensary
operations after the Supreme Court ruling, when the LAPD seized its assets.
"They knew the money was there, and they knew that if they used federal
seizure, we'd never get it back," Rose said.
Rose acknowledged that the sheer
size of his operation made it a target for law enforcement. A tour of
Compassionate Caregivers' Oakland headquarters last month revealed an efficient
corporate operation with purchasing, human resources, IT, and shipping
departments that delivered medical cannabis to the company's cannabis clubs.
According to Rose, the shutdown put approximately 225 employees out of work and
impacted about 7,000 dispensary members and almost 15,000 other patients and
caregivers across the state who purchased cannabis from the seven clubs.
Rose declined to say how much
money Compassionate Caregivers was generating, but he said the business paid
out almost $1 million in federal taxes and about $100,000 in state taxes last
year plus generous wages and workers' compensation. Rose said the company
bought cannabis wholesale for $3,200 to $3,800 a pound and had profit margins
of only 5 to 10 percent after taxes. Given these margins and an average
corporate tax rate of 30 percent, the business may have grossed $25 million
annually and netted $3 million.
"If they do a deep
investigation and seize all the patient records and records of expenditures, it
could be very ugly because the federal government doesn't look at the costs and
does not consider cannabis an expense," said Rose, who noted that this
logic is being applied to a federal tax audit of another dispensary in San
Francisco.
During a symposium of local
defense attorneys at the San Francisco Cannabis Cooperative dispensary June 11,
attorney Bill Panzer agreed that one of the federal government's emerging
weapons against the dispensaries is attempting to tax them out of existence.
Panzer said he is seeing cases
in which the IRS is disallowing deductions for the price of cannabis by arguing
that purchasing cannabis is against public policy. This means that if a
dispensary grosses $100,000 and its net is $50,000, it would be forced to pay
taxes on the entire $100,000. "The clubs that are trying the hardest to
comply are the ones most at risk, because those are the ones that have the
records, and they are the ones that have filed taxes and declared how much they
have taken in," Panzer said.
Mayor Gavin Newsom has called
for dispensaries to open their books to city regulators, and supervisors are
considering this idea as they develop regulations for them. Many dispensary
operators remain concerned these records could be subpoenaed by federal
authorities and used to prosecute them.
Federal authorities are not
focusing just on big-money operations in their financial probes. Mike and
Valerie Corral, founders of the Wo/Men's Alliance for
Medical Marijuana (WAMM) – which provides free medical cannabis to about 200
chronically sick and dying patients in Santa
Cruz – are being audited by the IRS, which
has referred the case to its criminal division for possible tax evasion
charges.
"It is not like we have
much money in the bank," Mike Corral said. "Coming after Val and I
personally is not just about taxes but persecution."
The Corrals said they are being
audited for the year 2002, when 30 armed DEA agents raided the group's cannabis
garden. In 2003 a federal court granted WAMM an injunction against federal
prosecution. In the aftermath of the Raich
decision, Corral said he expects federal authorities to petition the court to
lift the injunction.
Patients and growers
investigated by San Francisco police worry they too will be targeted by federal
law enforcement. Capt. Tim Hettrich, head of the SFPD's vice department, said
at a community meeting in April that he and his officers are "bound by
federal guidelines to turn over any marijuana grows over 1,000 plants to
federal authorities." Deputy District Attorney Russ Giuntini said he is
not aware of any such guidelines.
"I'm very concerned about
them seizing assets, but I'm mostly concerned about getting turned over to the
feds," said San Francisco artist Mario Martinez, who was arrested last
October by SFPD Sgt. Marty Halloran for growing 98 plants for himself and eight
other patients in a small collective.
Martinez is now facing a year in
county jail if convicted of cultivation and possession for sale, despite a
pledge from District Attorney Kamala Harris not to prosecute medical pot cases
(see Opinion).
Source:
http://www.sfbg.com/39/37/news_medical_marijuana.html
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