The federal government is moving to shut down the nation's largest and highest-profile medical marijuana dispensary operation, filing papers to seize properties in Oakland and San Jose where Harborside Health Center does business.
California medical marijuana operation targeted by feds
July 10, 2012
Joe Mozingo, Los Angeles Times
Copies of the federal Complaint for Forfeiture were taped to the front doors of the two dispensaries Tuesday, alleging that they were "operating in violation of federal law."
Medical marijuana advocates, as well as some state and local officials, decried the action, saying it hurts patients in legitimate need of the drug and breaks repeated promises by President Obama's Justice Department that it was targeting only operations near schools and parks or otherwise in violation of the state's laws.
The U.S. attorney for Northern California, Melinda Haag, said she now found "the need to consider actions regarding marijuana superstores such as Harborside" because they presented unique opportunities for abuse.
Harborside was co-founded by outspoken marijuana activist Steve DeAngelo in 2006 and was the subject of a reality show, "Weed Wars," on the Discovery Channel last year. While other dispensary operators have sought a low profile since California's four U.S. attorneys began cracking down on the industry in October, DeAngelo has consistently railed against the federal intervention, advocated for better state regulations and become a leader in the movement.
"People are not going to stop using cannabis, they're just going to buy it in the illegal marketplace … on the streets," he said Wednesday in an interview. "Why are federal prosecutors using their discretion to do something so profoundly destructive?"
DeAngelo said that he would fight the Justice Department "openly and in public" and that he would resist any effort by his landlords to evict the dispensaries in response to the federal complaint — which targeted the property owners, not the tenants.
While all marijuana use and sales are illegal under federal law, Atty. Gen. Eric H. Holder told the House Judiciary Committee last month that federal agents were targeting only those large-scale growers and dispensaries that have "come up with ways in which they are taking advantage of these state laws, and going beyond that which the states have authorized."
In a statement released late Wednesday, Haag suggested "superstores such as Harborside" fit that bill.
"The larger the operation, the greater the likelihood that there will be abuse of the state's medical marijuana laws, and marijuana in the hands of individuals who do not have a demonstrated medical need."
She noted that Harborside claims to have "over 108,000 customers."
California's medical marijuana laws are nebulous in regard to how the drug is to be distributed and courts have yet to settle the matter. Still, marijuana activists often hail Harborside as a model of professionalism and compliance. Its main facility in Oakland is one of four independent enterprises permitted and strictly regulated by the city.
"If Harborside is not in compliance with state law, no one is," said DeAngelo, 54.
The Oakland dispensary was awarded its permit in 2006 after the city put out a request for proposals. DeAngelo says it does about $22 million in annual sales, and the San Jose shop does about $8 million. Together they pay about $3 million in city and state sales taxes, and employ more than 100 people.
The state Board of Equalization estimates it collects $58 million to $105 million in annual sales tax from dispensaries.
"If we continue to drive everything underground, we're going to create an unsafe environment for patients who need this product … and lose revenue," board member Betty Yee said.
This week's move against Harborside further highlights the continuing conflict between local and federal officials over the drug.
"The city of Oakland has developed a system to assure such distribution occurs according to state law in a fair and orderly process," Nancy Nadel, member of the Oakland City Council and vice mayor of the city, said in a statement. "It is most unjust to our citizen patients and distributors who have followed local guidelines to be harassed and treated as criminals by federal officials."
Medical marijuana advocates said the Obama administration has repeatedly reneged on its promises that it would not meddle with the state laws.
"This is the most obvious and significant step by the federal government in attacking completely law-abiding dispensaries," said Kris Hermes, spokesman for the advocacy group Americans for Safe Access. "It becomes more untenable for them to say they are just going after certain facilities and not just undermining the state's marijuana laws."
Hermes said the Justice Department has sent more than 200 letters to dispensaries and their landlords, threatening to seize their property if the shops do not close. It has been an effective strategy. With the letters, raids by the Drug Enforcement Administration and IRS audits, the government has forced more than 400 to close in the state, Hermes said, including the nearby Berkeley Patients Group, which was also seen as a model in the industry and closely regulated by local officials.
He knew only of half a dozen cases in which federal prosecutors actually filed an asset forfeiture complaint, as they did with Harborside.
Already, Harborside was embroiled in a battle with the IRS, which was seeking $2.5 million in back taxes, using an obscure provision of the tax code to say dispensaries cannot deduct routine expenses such as rent and wages.
Under Haag's supervision, agents and prosecutors have targeted a number of leaders in the medical pot movement. In October, DEA agents raided the Mendocino County marijuana farm of Matthew Cohen, who helped push for permitting and regulating cannabis cultivation in that county. And in April, they targeted a pot trade school and dispensary run by Richard Lee, who put the legalization measure Proposition 19 on the ballot in 2010.
In her statement, Haag said: "The filing of the civil forfeiture complaints against the two Harborside properties is part of our measured effort to address the proliferation of illegal marijuana businesses in the Northern District of California."