Pubdate: Sun, 16 Mar 2014
Source: Sacramento Bee (CA)
Copyright: 2014 The Sacramento Bee
Contact: http://mapinc.org/url/0n4cG7L1
Website: http://www.sacbee.com/
Details: http://www.mapinc.org/media/376
Author: Peter Hecht
Note: Note: This article was adapted from Peter Hecht's book "Weed
Land" from University of California Press (April 2014).

BOOM AND BUST IN CALIFORNIA'S MEDICAL MARIJUANA INDUSTRY

Days after California voters rejected an initiative to legalize
marijuana for recreational use in 2010, Oakland City Attorney John
Russo got an unexpected visit from an old friend, a high-ranking
official from the U.S. Department of Justice.

As they chatted warmly about their children, Russo sensed what was
coming. Despite the failed pot measure, Proposition 19, Oakland was
spiritedly moving forward on an audacious marijuana cultivation plan.
This city, long hard-bitten by crime and economic malaise and mostly
left behind as other San Francisco Bay Area communities reaped the
benefits of California's technology boom, was determined to become the
Silicon Valley of weed.

A wealthy construction contractor, Jeff Wilcox, had proposed
converting his warehouse complex to produce 21,000 pounds of "medical
grade cannabis" a year to supply the California dispensary market.
Wilcox promised $3.5 million a year in marijuana tax revenue for a
city that had just laid off 80 cops.

Oakland saw a fiscal elixir from pot, with Wilcox just one of the
suitors for four coveted city permits for industrial cannabis production.

But Russo's friend from the Justice Department let him know the
stakes: If Oakland moved forward, a fragile truce forestalling federal
actions against California cannabis businesses would be over.

The encounter revealed the government's exasperation with the Golden
State's untamed marijuana market, which operated without state rules
or oversight. The meeting in Russo's office foreshadowed California's
four U.S. attorneys declaring, a year later, a sweeping crackdown on
America's largest marijuana economy.

Federal raids and forfeiture actions would target icons of California
cannabis politics and renowned medical marijuana providers. Agents
would raid Oakland's cannabis trade school, Oaksterdam University, and
its president, Richard Lee, the chief funder of Proposition 19. In a
continuing case, the government would to seek to seize the Harborside
Health Center, an Oakland facility billed as the world's largest
medical marijuana dispensary.

The feds would also aim prosecutions at cash-reaping cultivators and
retail-style dispensaries, at pot business speculators, and, in
egregious cases, at rogue drug traffickers exploiting the cover of
medical marijuana.

The actions unfolded after the Proposition 19 campaign exposed a
billion-dollar industry making marijuana widely available in
California. Soon after the initiative's defeat by 53.5 percent to 46.5
percent, Benjamin W. Wagner, the U.S. attorney for the Eastern
District of California, convened the state's four U.S. attorneys and
other Justice Department officials at the Drug Enforcement
Administration headquarters in Sacramento. They began plotting to rein
in the California excess.

To the government, a famous October 2009 pledge not to target medical
marijuana patients and caregivers acting in compliance with state law
had been wildly misconstrued by opportunistic cannabis entrepreneurs.
The memo by Deputy Attorney General David W. Ogden was seen as a green
light for accelerating a lucrative marijuana industry in the name of
compassionate care for the sick.

Oakland's industrial pot production plans, and other big cultivation
ventures by private speculators, signaled a level of cannabis
commercialization the feds weren't going to tolerate.

Indoor pot farm planned

As Oakland solicited permit applications for industrial pot farms
under eco-friendly city mandates of "zero waste," "efficient energy"
and "carbon neutrality," a mysterious player was already operating a
cavernous indoor marijuana farm in the city.

Yan Ebyam, whose first name stood for "yes and no" and last name was
"maybe" spelled backward, was the CEO of a company called Marjyn
Investments. It shared a business address with a Los Angeles
immigration lawyer, Nathan Hoffman, who had taken up working with
Southern California medical marijuana dispensaries.

Ebyam and Hoffman contracted with an East Oakland industrial plumbing
and metal fabrication company to lease warehouse space for a
marijuana-growing operation that soon blazed with 450 indoor lights.
They sold the operation to investors, who soon complained they had
been wrongly promised a marijuana yield "well in excess of $1
million." Ebyam moved on to grow marijuana in a barn-shaped warehouse
on Oakland's San Leandro Street - and earn a national splash of fame
by signing a labor contract with the Teamsters.

The city of Oakland hadn't licensed either facility. But Ebyam let Lou
Marchetti, business manager for Teamsters Local 70, know that he
wanted in on one of Oakland's licensed commercial cannabis farms.
Marchetti began lobbying city officials.

Oakland officials warned

After the meeting with his friend from the Justice Department, Russo
told Oakland City Council members they should get out of the marijuana
cultivation business before it was too late. He argued that
Proposition 19 had lost and there was nothing in state law to support
the city's cultivation dreams.

In a tense closed session, Russo heard incredulous council members
telling him they didn't believe him and directing him to ask the
Justice Department what its concerns were. He walked out convinced he
had been instructed to write U.S. Attorney General Eric Holder about
Oakland's pot farms idea. The mayor and other council members charged
that Russo acted on his own volition.

"The council told me to contact the feds," Russo would insist. "I am
going to assert this until I die."

On Feb. 1, 2011, Melinda Haag, the U.S. attorney in San Francisco,
responded on Holder's behalf. She declared that federal authorities
were "concerned" about Oakland's "licensing scheme"  and threatened
"civil and criminal legal remedies" against those setting up or
participating in the marijuana cultivation.

Before resigning to take a job as city manager in Alameda, Russo sent
a follow-up memo. He declared he wouldn't work with Oakland on its
continuing marijuana aspiration because he couldn't represent a client
that "seeks to pursue an illegal course of conduct."

Big dreams in Isleton

Despite Haag's scathing warning to Oakland, the town of Isleton, a
beleaguered municipality beyond the pear orchards and levees of the
Sacramento-San Joaquin Delta, sought its salvation through pot.

In 2010, a young businessman, the nephew of legendary jazz pianist
Dave Brubeck, strode into town and made an offer to restore Isleton's
economic confidence. He promised that his Delta Allied Growers,
supplying dispensaries in Southern California, would employ 50 people
and pay Isleton 3 percent of its gross revenue. Isleton leaped at the
opportunity.

To Wagner, the U.S. attorney in Sacramento, Isleton was "exhibit A"
for local governments looking at taxable marijuana commerce as a
fiscal rescue from economic recession. Wagner was one of 15 members of
Holder's advisory committee at the Justice Department. He participated
in roundtable discussions in Washington, D.C., with the attorney
general and his chief deputy. Over time, Wagner would let his
superiors know that "federal law is totally being flouted here in
California and we have to respond." His first action was a declarative
statement on the little town grabbing at a moneymaking
opportunity.

Wagner sent a letter to Isleton and Delta Allied Growers, warning of
federal civil and criminal actions. Isleton's pot dreams went bust. A
Sacramento County grand jury report later said Delta Allied Growers
abruptly "buried more than 1,000 marijuana plants" before scurrying
out of town. There were no federal or state charges. But in a county
grand jury report, foreman Donald Prange Sr. offered a sage warning
for Isleton. "They forgot the old saying," he wrote. "If it sounds too
good to be true, it probably is."

 From tomatoes to pot

The proverb would also come to apply to Sutter County tomato growers
Thomas and David Jopson after the fourth-generation farmers met Ebyam.
The Jopsons, nationally renowned for heirloom tomatoes, were getting
out of the business due to falling produce prices. They were sold on
leasing their greenhouses for pot.

In June 2011, local and state narcotics officers raided the Jopson
ranch, seizing 2,168 plants from their greenhouse and another 3,305
plants from a Sacramento County greenhouse tied to Ebyam.

The raids went down as Wagner and other U.S. attorneys were
circulating drafts of a new Justice Department memo seeking to head
off industrialization of cannabis in California and elsewhere. In the
June 29, 2011, directive, Deputy Attorney General James M. Cole
assailed pot speculators for overreaching on the Ogden memo. "The term
'caregiver' as used in the (earlier) memorandum meant just that:
individuals providing care to individuals with cancer or other serious
illness," Cole wrote, "not commercial operations cultivating, selling
or distributing marijuana."

The next day, Ebyam, Thomas and David Jopson and six others were
indicted by a federal grand jury in Sacramento on conspiracy and
marijuana charges. Hoffman, the L.A. lawyer, and a Southern California
dispensary operator were indicted in the scheme a year later. The
Jopsons recently pleaded guilty to reduced charges. Ebyam and Hoffman
await trial.

Many medical marijuana dispensaries and medicinal cultivators had
maintained an aura of compliant, compassionate, nonprofit providers
under California medical marijuana law. The feds saw unscrupulous
operators on the fringes stuffing their pockets with cash in an
industry without rules.

In Madera County, federal authorities filed charges against purported
medical marijuana farmers trafficking marijuana in FedEx and United
Parcel Service packages to Connecticut, Texas and Massachusetts. A
Fresno County farm with 4,000 plants posted with physicians'
recommendations for medical use was raided for shipping pot to drug
dealers in Boston.

Orange County authorities seized $2.9 million in cash at a dispensary
and home of John "Pops" Walker, a San Clemente operator who reaped $25
million from nine marijuana stores opened as healing collectives for
patients. Federal agents tracked email messages from operators of a
North Hollywood dispensary, NoHo Caregivers. While claiming to serve
sick people coming in the front door, they were shipping hundreds of
pounds of marijuana a month out the back door - and across America.

In 2012, voters in Colorado and Washington would go on to legalize pot
for purely recreational use. And in 2013, in a historic concession,
the Justice Department would declare that it wouldn't target lawful
marijuana businesses in states that enacted and enforced "robust"
state regulations.

There were no such regulations in California. So, in late 2011, Wagner
briefed superiors on the state's four U.S. attorneys' planned Oct. 7
declaration of far reaching actions against pot businesses operating
an "unregulated free-for-all." The feds' medical marijuana truce in
California was over.
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MAP posted-by: Matt