Pubdate: Mon, 14 Jan 2013
Source: New York Times (NY)
Copyright: 2013 The New York Times Company
Contact: http://www.nytimes.com/ref/membercenter/help/lettertoeditor.html
Website: http://www.nytimes.com/
Details: http://www.mapinc.org/media/298
Author: Adam Nagourney

IN CALIFORNIA, IT'S U.S. VS. STATE OVER MARIJUANA

STOCKTON, Calif. - Matthew R. Davies graduated from college with a 
master's degree in business and a taste for enterprise, working in 
real estate, restaurants and mobile home parks before seizing on what 
he saw as uncharted territory with a vast potential for profits - 
medical marijuana.

He brought graduate-level business skills to a world decidedly 
operating in the shadows. He hired accountants, compliance lawyers, 
managers, a staff of 75 and a payroll firm. He paid California sales 
tax and filed for state and local business permits.

But in a case that highlights the growing clash between the federal 
government and those states that have legalized marijuana for medical 
or recreational use, the United States Justice Department indicted 
Mr. Davies six months ago on charges of cultivating marijuana, after 
raiding two dispensaries and a warehouse filled with nearly 2,000 
marijuana plants.

The United States attorney for the Eastern District of California, 
Benjamin B. Wagner, a 2009 Obama appointee, wants Mr. Davies to agree 
to a plea that includes a mandatory minimum of five years in prison, 
calling the case a straightforward prosecution of "one of the most 
significant commercial marijuana traffickers to be prosecuted in this 
district."

At the center of this federal-state collision is a round-faced 
34-year-old father of two young girls. Displaying a sheaf of legal 
documents, Mr. Davies, who has no criminal record, insisted in an 
interview that he had meticulously followed California law in setting 
up a business in 2009 that generated $8 million in annual revenues. 
By all appearances, Mr. Davies' dispensaries operated as openly as 
the local Krispy Kreme, albeit on decidedly more tremulous legal ground.

"To be looking at 15 years of our life, you couldn't pay me enough to 
give that up," Mr. Davies said at the dining room table in his 
two-story home along the San Joaquin River Delta, referring to the 
amount of time he could potentially serve in prison. "If I had 
believed for a minute this would happen, I would never have gotten into this.

"We thought, this is an industry in its infancy, it's a heavy cash 
business, it's basically being used by people who use it to cloak 
illegal activity. Nobody was doing it the right way. We thought we 
could make a model of how this should be done."

His lawyers appealed this month to Attorney General Eric H. Holder 
Jr. to halt what they suggested was a prosecution at odds with 
Justice Department policies to avoid prosecutions of medical 
marijuana users and with President Obama's statement that the 
government has "bigger fish to fry" than recreational marijuana users.

"Does this mean that the federal government will be prosecuting 
individuals throughout California, Washington, Colorado and elsewhere 
who comply with state law permitting marijuana use, or is the Davies 
case merely a rogue prosecutor out of step with administration and 
department policy?" asked Elliot R. Peters, one of his lawyers.

"This is not a case of an illicit drug ring under the guise of 
medical marijuana," Mr. Peters wrote. "Here, marijuana was provided 
to qualified adult patients with a medical recommendation from a 
licensed physician. Records were kept, proceeds were tracked, payroll 
and sales taxes were duly paid."

Mr. Holder's aides declined to comment, referring a reporter to a 
letter from Mr. Wagner to Mr. Davies's lawyers in which he disputed 
the depiction of the defendant as anything other than a major-league 
drug trafficker.

"Mr. Davies was not a seriously ill user of marijuana nor was he a 
medical caregiver - he was the major player in a very significant 
commercial operation that sought to make large profits from the 
cultivation and sale of marijuana," the letter said. Mr. Wagner said 
that prosecuting such people "remains a core priority of the department."

The case illustrates the struggle states and the federal government 
are now facing as they seek to deal with the changing contours of 
marijuana laws and public attitudes toward the drug. Colorado and 
Washington legalized marijuana for recreational use last year, and 
are among the 18 states, and the District of Columbia, that currently 
allow its medical use.

Two of Mr. Davies's co-defendants are pleading guilty, agreeing to 
five-year minimum terms, to avoid stiffer sentences. Mr. Davies, 
while saying he did not "want to be a martyr," decided to challenge 
the indictment with a combination of legal and public-relations 
measures, setting up a Web site devoted to his case and hiring Chris 
Lehane, a hard-hitting political consultant and former senior aide in 
Bill Clinton's White House.

Among Mr. Davies's advocates here in California are Paul I. Bonell, 
who was the president of the Premier Credit Union for 21 years before 
Mr. Davies hired him in early 2011 to oversee his businesses' fiscal 
controls. After the businesses were raided in October that year, Mr. 
Bonell took a position as the head of the Lodi Boys and Girls Club.

"I had some reservations going in," he said of Mr. Davies's 
enterprise. "But the industry was exploding. Matt wanted to have 
internal controls in place. And we thought: This was a legitimate 
business. If the State of California deems it legitimate, we want to 
be the best at it."

Mr. Davies's accountant, David M. Silva, said he set up spreadsheets 
to keep track of inventories, revenues and expenses. "I've been a 
C.P.A. for 30 years," Mr. Silva said. "What I saw was a guy who was 
trying to run an operation in an up-and-up way."

The federal authorities said they stumbled across the operation after 
two men were spotted apparently breaking into Mr. Davies's 
30,000-square-foot Stockton warehouse. The police said they smelled 
marijuana plants. Federal agents conducted a raid and confiscated 
1,962 plants and 200 pounds of marijuana.

Mr. Davies, who is free on $100,000 bail, greeted visitors to his 
gated home by asking them to speak softly while walking through the 
entryway so as not to awaken his sleeping infant. He called out to 
his wife when asked when he was indicted: "Hey, Molly - we were 
indicted on your birthday, right? July 18."

Mr. Davies referred to marijuana as "medicine," and himself as a 
turnaround expert.

"We were basically pharmacists for medical marijuana - everything was 
in full compliance with state law," he said. "We paid our employees. 
We paid overtime. We had people going for unemployment if we fired them."

"Why are they coming after me?" he asked. "If they have such a 
problem with California, why can't they sue California?"

Stephanie Horton, 25, who went to work for Mr. Davies after going to 
one of his dispensaries to obtain medical marijuana to help her deal 
with ovarian and cervical cancer, said she was devastated by the 
arrest of employers she described as among the best she had ever had 
- - not to mention the loss of her job.

"I'd go back and work there in a heartbeat," Ms. Horton said. "I 
totally trusted them. We're not criminals. I've never been arrested 
my whole life. I need that medication, and so do a whole lot of people."

But federal prosecutors offered a much less sympathetic view of Mr. 
Davies. The authorities shut down the warehouse and two dispensaries 
but said that Mr. Davies had ties to a total of seven dispensaries in 
the region, which they said yielded $500,000 in annual profits. Mr. 
Davies's lawyers disputed those assertions.

"Mr. Davies is being prosecuted for serious felony offenses," Mr. 
Wagner wrote to Mr. Davies's lawyers. "I understand he is facing 
unpleasant alternatives. Neither a meeting with me nor seeking a 
review in Washington will change that reality."

This is as much a legal clash as a cultural clash. Recreational 
marijuana use is common across this state, and without the legal 
stigma attached to it in much of the country. The federal government 
is viewed as a distant force.

"It's mind-boggling that there were hundreds of attorneys advising 
their clients that it was O.K. to do this, only to be bushwhacked by 
a federal system that most people in California are not even paying 
attention to," said William J. Portanova, a former federal drug 
prosecutor and a lawyer for one of Mr. Davies's co-defendants. "It's tragic."
- ---
MAP posted-by: Jay Bergstrom