Pubdate: Thu, 23 Jun 2005
Source: San Francisco Chronicle (CA)
Copyright: 2005 Hearst Communications Inc.
Contact:  http://www.sfgate.com/chronicle/
Details: http://www.mapinc.org/media/388
Authors: Jaxon Van Derbeken, Charlie Goodyear, Rachel Gordon, Chronicle 
Staff Writers
Note: Chronicle staff writer Ilene Lelchuk contributed to this report.
Cited: Americans for Safe Access http://www.safeaccessnow.org/
Bookmark: http://www.mapinc.org/mmj.htm (Marijuana - Medicinal)
Bookmark: http://www.mapinc.org/find?115 (Marijuana - California)

3 S.F. POT CLUBS RAIDED IN PROBE OF ORGANIZED CRIME

Medical Marijuana Dispensaries Used As Front for Money Laundering, 
Authorities Say

Federal authorities raided three San Francisco medical marijuana 
dispensaries Wednesday, and investigators arrested at least 13 people as 
part of an alleged organized crime operation using the clubs as a front to 
launder money.

Agents seized marijuana and other items from two cannabis clubs on Ocean 
Avenue in the Ingleside district and a third on Judah Street in the Inner 
Sunset district. The raids were the first in the Bay Area since the U.S. 
Supreme Court dealt a blow to the medical marijuana movement two weeks ago 
by ruling that the federal government had the authority to prosecute people 
whose activities are legal under state law.

The actions prompted concern from medical marijuana advocates that the 
raids could be the first step in a federal crackdown on dispensaries. 
Authorities, however, said they were not specifically targeting such 
outfits but were aiming at an enterprise that was dealing large amounts of 
marijuana and laundering money through cannabis clubs.

Twenty people were charged in an indictment that federal authorities 
planned to unseal today. Authorities would not comment on the specific 
allegations against them. San Francisco sheriff's officials said Wednesday 
night that 11 men and two women were in the county jail in connection with 
the case and would appear in federal court today.

Authorities said the raids were the culmination of a lengthy investigation 
of an operation whose members were mostly of Asian descent and living in 
San Francisco and Oakland. They said that the operation controlled at least 
10 warehouses where marijuana was grown in large quantities and that those 
involved were bringing in millions of dollars.

One warehouse in Oakland that federal agents raided earlier this month was 
capable of growing $3 million worth of marijuana annually, investigators said.

The marijuana ostensibly was for cannabis clubs, but the amount being grown 
was far more than needed to supply the dispensaries, authorities said.

"It's not the pot clubs per se" that were targets, said one law enforcement 
official, who asked not to be named because the indictments were still 
under seal. "It's not an attack on medical marijuana. This is an organized 
crime group that is using the whole pot club thing as a front."

Mayor Gavin Newsom declined to comment on the federal raids but nodded 
affirmatively when asked whether he believed they reached beyond the issue 
of medical marijuana.

San Francisco police have raided a dozen large indoor marijuana-growing 
operations, mostly in flats in the Sunset District, in the last two years. 
Investigators say at least some of these illegal home operations were 
connected to the new case.

Police Chief Heather Fong said her narcotics officers had taken part in 
Wednesday's roundup of suspects but had not raided the dispensaries.

City policy recognizes cannabis clubs under Proposition 215, the 1996 state 
initiative legalizing medical marijuana. As a result, "we don't enter pot 
clubs" to make marijuana arrests, Fong said.

Hilary McQuie, spokeswoman for Americans for Safe Access in Oakland, a 
medical marijuana user advocacy group, was not satisfied that the raids 
were targeting organized crime and not the cannabis clubs.

"Saying organized crime brings up visions of violent activity, but if all 
they are supporting is the sale of marijuana, police can call that 
organized crime," McQuie said. "They will need to show there's distribution 
outside the dispensaries. ... I want to wait and see."

Drug enforcement agents disclosed few details of the raids.

"It's a large-scale operation," said Javier Pena, special agent in charge 
of the San Francisco office of the Drug Enforcement Administration. He said 
U.S. Attorney Kevin Ryan had been present during raids at the clubs at 1545 
and 1939 Ocean Ave. and at 445 Judah St.

Drug enforcement agents and investigators from the Internal Revenue Service 
arrived at the Herbal Relief Center at 1545 Ocean early Wednesday and cut 
the lock off the front door. By the afternoon, they had loaded a truck with 
dozens of marijuana plants, heat lamps and generators.

A man outside identified himself as Van Nguyen and said he had owned the 
business for more than five years. He was not under arrest.

"We run a service," said Nguyen, 27, who said he was a business student at 
City College. "I am definitely worried, but I want to make sure the message 
is out and the patients are taken care of."

Nguyen said the club served about 2,000 medical marijuana patients. "I have 
a couple of people in that group who are dying, and they won't be getting 
their marijuana on Monday," he said.

Asked about any involvement in organized crime, Nguyen said, "I have 
nothing to do with that at all. I make sure the patients in this 
neighborhood are well taken care of."

Nguyen said federal agents might have seized patient information at the 
club. One drug agent could be seen looking at what appeared to be 
photocopies of driver's licenses.

Chip Camp lives behind the club and said he never noticed any problems with 
it. "They opened late and closed early," he said. "There was never much 
foot traffic. It was very low-key."

A few blocks away at the other Ocean Avenue club, which appeared to have no 
name, Kris Hermes of Americans for Safe Access said he was "appalled that 
San Francisco has to call in the DEA for something that should be dealt 
with by the city. More investigation could have happened before the DEA was 
used in this manner."

The third raid of the day was at the Sunset Medicinal Resource Center on 
Judah Street near Ninth Avenue, where federal agents left after about nine 
hours with two dozen bags and boxes and horticultural grow lights.

At Bikram Yoga next door, owner Elizabeth Palmer said the club and its 
patrons were "quiet, calm neighbors."

At one point this spring, San Francisco was home to 44 medical marijuana 
dispensaries, more than any other city in the nation. Matt Dorsey of the 
city attorney's office said San Francisco now had 35 storefront 
dispensaries. Those don't include clubs that operate by appointment only or 
delivery-only service.

Residents and officials have grown increasingly frustrated that a 
2-month-old city moratorium on the clubs was having little effect. Dorsey 
said the club at 1939 Ocean Ave. appeared to be among those that had opened 
since the moratorium took effect April 1.

Dorsey added that his office had not been in touch with federal drug agents 
about the club.

Supervisor Sean Elsbernd has called on the city to crack down on illegal 
clubs and said Wednesday's raids showed the wisdom of that idea.

Elsbernd wants the number of clubs allowed in San Francisco to be capped at 
eight. He also wants operators to go through the same strict application 
process as those who request liquor licenses.

Supervisor Ross Mirkarimi, who has spent months working on new rules, said 
the city had to find a way to separate legitimate operations from 
illegitimate ones.

"The absence of laws only puts out a welcome mat for potential problems, " 
he said. "That's how we got to the place where we are today."

Supervisor Gerardo Sandoval, whose district includes the two Ocean Avenue 
clubs, has also called for improved city monitoring but said he hoped 
Wednesday's raids were "not a pretext to meddle in San Francisco's 
well-established medical marijuana policies."

"It's pretty clear the Bush administration is not very happy about San 
Francisco's efforts," Sandoval said. "If there's money laundering or 
organized crime involved, then by all means we welcome federal law 
enforcement. But I have to ask myself, 'Why now?' "

[sidebar]

REACTION TO THE RAIDS

What Investigators Say About the Raids

"It's not an attack on medical marijuana," said a law enforcement source. 
"This is an organized crime group that is using the whole pot club thing as 
a front."

What Medical Marijuana Advocates Say

"Saying organized crime brings up visions of violent activity, but if all 
they are supporting is the sale of marijuana, police can call that 
organized crime. They will need to show there's distribution outside the 
dispensaries. .. . I want to wait and see," said Hilary McQuie of Americans 
for Safe Access.

Why S.F. Police Didn't Enter Medical Pot Clubs

City policy recognizes cannabis clubs under Proposition 215, the 1996 state 
initiative legalizing medical marijuana. As a result, "we don't enter pot 
clubs" to make marijuana arrests, said police Chief Heather Fong.
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MAP posted-by: Richard Lake