Medical Marijuana Industry Is Unnerved by U.S. Crackdown

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.

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. While federal agencies have long targeted Californians who blatantly reap illegal profits in the name of medicine, or who smuggle marijuana across state lines, the Justice Department said in 2009 that it would not normally pursue groups providing marijuana to sick patients, in accordance with state laws.

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.

In a hint of the simmering federal-state tensions, Kamala D. Harris, the attorney general of California, described in pointed terms the Oct. 7 announcement by four United States attorneys of their tough new campaign against many dispensaries, which they called commercial operations that violate the intent of California law as well as federal statutes.

“It was a unilateral federal action, and it has only increased uncertainty about how Californians can legitimately comply with state law,” Ms. Harris said in an interview. Since federal authorities do not recognize that marijuana can serve medical ends, she said, “they are ill equipped to be the decision makers as to which providers are violating the law.”

But Ms. Harris also described the state’s regulations governing medical marijuana as “vague and chaotic,” and she is working with legislators for more consistency and stronger controls.

The growing federal pressure, industry leaders say, could force the dismantling of some of the cooperatives that provide marijuana to more than 750,000 Californians who have obtained doctor “recommendations” to treat everything from cancer-related nausea to pain and anxiety. Within a few years, hundreds of collectives, large and small, have deeply embedded themselves in the state, paying more than $100 million in sales taxes, joining local chambers of commerce and better business bureaus, even appearing on “adopt-a-highway” signs.

Here in Mendocino County, which gladly cooperates with federal agents against the rampant criminal cultivation of marijuana, officials devised a permit and monthly monitoring system for small-scale growers supplying patient groups. The sheriff said this had eased his burdens and prevented diversion to the black market, and he praised the Northstone Organics Collective, run by Matthew Cohen, for scrupulous adherence to the rules.

But at 6 a.m. on Oct. 13, federal Drug Enforcement Administration agents with assault rifles and chainsaws raided Mr. Cohen’s property in the oak-covered hills north of Ukiah, cutting down the 99 hefty plants, 6 to 12 feet tall, that were meant to provide marijuana for 1,700 members.

“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.

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.

“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.

“Why is the federal government targeting legitimate, regulated enterprises?” he asked. “Is it better for patients to buy from a clean, safe store or from street dealers?”

Medical marijuana advocates accuse the Obama administration of going back on earlier promises not to go after groups abiding by local laws.

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.

Since late September, in their broadest crackdown yet, federal prosecutors have sent letters to more than 100 registered dispensaries or their landlords throughout the state, warning that their property may be confiscated and that they could face prison if they do not shut down.

At the Oct. 7 news conference, André Birotte Jr., the chief federal prosecutor in Los Angeles, said that one strip mall in Orange County had eight stores selling marijuana. “This is not what the California voters intended or authorized,” he said.

Some of the dispensaries threatened by the federal government have shut down or are being evicted by fearful landlords.

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.”

– Article from The New York Times.