South Sacramento medical pot provider faces U.S. prosecution

September 24, 2011

Peter Hecht, Sacramento Bee

To federal authorities, Bryan Smith was living a most profitable existence.

The 27-year-old ran R & R Wellness Collective, a south Sacramento dispensary registered as a nonprofit medical marijuana provider.

But U.S. prosecutors say the young dispensary boss was part of a lucrative conspiracy involving multiple growing houses, stolen electricity, pot distribution to Southern California and vast wads of cash.

In a Sept. 12 criminal complaint against Smith and five others, authorities suggested Smith courted a medical marijuana high life and boasted of his success in a video said to be an attempt at an audition tape for the MTV program "True Life."

Smith's attorney, Mark Reichel, said his client is an honest businessman with no criminal record who was trying to operate a city-licensed dispensary "lawfully as a nonprofit" under state law.

R & R Wellness is one of 38 establishments allowed to operate under Sacramento's medical marijuana rules, which include business and licensing fees and a medical marijuana tax, approved last year.

State criminal charges were filed in February against two men at the Horizon Collective on Power Inn Road accused of selling to people without medical marijuana recommendations. Now R & R Wellness faces a more dire prospect of federal prosecution.

Smith is charged along with his father, Kelly Smith, 54, of Elk Grove and three other area men – Daniel Goldsmith, 25, Bruce Goldsmith, 60, and Ryder Phillips, 25 – said to be marijuana growers.

Also charged was a Southern California man, Robert Klaus, 34, accused of buying, selling and growing pot in a conspiracy with the others. The defendants could face up to five years in federal prison.

Michael Wise, the attorney for Kelly Smith, said, "You have a group of individuals who are trying to comply with state law, and we're starting to see conflict with state and federal law."

After Elk Grove police and Sacramento County sheriff's investigators raided R & R Wellness on Quinta Court, medical marijuana advocates decried it as an attack on patients by police in search of a crime.

Kris Hermes, an Oakland-based spokesman for Americans for Safe Access, now blasts authorities' decision to refer the case for federal prosecution. Since marijuana is illegal under U.S. law, Hermes said, a federal trial prevents defendants from arguing they were complying with California medical marijuana law.

"These gentlemen will be denied a defense and will probably never be able to utter the words 'medical marijuana' in the courtroom," Hermes said.

After Elk Grove police pulled over Bryan Smith's truck in June, they found $16,700 in a backpack and $256,000 – most in vacuum-sealed bags of $100 bills – in his house.

On Smith's computer, said Drug Enforcement Administration special agent Miguel Zavala, was a "comical and incriminating 8-minute video," in which Smith appears to audition for an MTV television segment by boasting of raking in $100,000 every 40 to 60 days from marijuana. The "True Life" series has a pot-themed segment called "I'm in the Marijuana Business."

In the video, Smith says, "Every day I'm in fear of being raided by the feds," according to Zavala's affidavit filed in federal court in Sacramento.

Zavala said Smith bragged that he is in the medical marijuana business for profit. The agent said Smith said he was glad Proposition 19 – the 2010 California ballot measure to legalize pot for recreational use – failed "because he was not ready to see prices plummet … . He wants to make as much money as possible."

Reichel said Bryan Smith is neither a marijuana profiteer nor guilty of a crime. He said the cash he had was for dispensary expenses, including sales tax payments to the state Board of Equalization, salaries and "everything you need to run a business."

The lawyer said legitimate marijuana outlets often have no place to put their money because banks fear the scrutiny of federal regulators if they service accounts for dispensaries.

"There is not a bank in town that will let him deposit that money," Reichel said. "It is very difficult to run a business and comply with all the applicable laws when you can't find a bank that is willing to do business with you."

Authorities, however, said they seized $39,000 from bank accounts held by Kelly Smith, Bryan Smith and R & R Wellness. Attorney Wise said the father's only money was a retirement account. "He had absolutely no proceeds from the dispensary," Wise said.

Authorities seized 139 pounds of marijuana at the dispensary and more than 2,200 plants at six locations. They allege two residential growing sites were jury-rigged to steal electricity.

The alleged conduct was shocking to Lanette Davies, a medical marijuana advocate whose family runs Sacramento's Canna Care dispensary.

"I was appalled," said Davies, who said her dispensary handles about 2 to 3 pounds of marijuana a day and has little cash or stockpiles of marijuana in reserve. "What the hell is the matter with these guys? I don't have 139 pounds anywhere. And stealing electricity? Please."

Besides 317 marijuana plants authorities found at the Galt home of Daniel Goldsmith, an alleged contract grower for R & R Wellness, they found a cellphone with photos "of stacks of money, money fanned out, money on countertops," Zavala wrote.

The agent said phone messages indicated Goldsmith was selling marijuana to buyers in Los Angeles and from Phoenix. Authorities also alleged that Klaus, a San Diego commercial real estate broker who met Goldsmith at the R & R Dispensary, was selling marijuana for him for $2,500 a pound.

Zavala said Bryan Smith demanded a share of payments from Klaus, who authorities said also grew more than 700 plants.

Reichel said Smith had only a "tenuous tie" with the Goldsmiths and "that doesn't mean Bryan was in a conspiracy with a guy from San Diego."

Davies said Bryan Smith "always seemed like a very enterprising, honest man."

And Brad Wassen, revenue manager for the city of Sacramento, said R & R Wellness had paid its business taxes through June – plus a $5,000 first installment toward $37,000 in fees required for a permanent operating permit.

R & R Wellness shut down after the raid. Reichel said the federal case has convinced Bryan Smith to keep it closed.

"He made a decision not to ever go back into the business," the lawyer said. "There is too much risk with the federal government's position."

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