Caught in the crossfire between state and federal law, dispensary owners in states that have legalized medical cannabis are finding their businesses raided and their products seized

Last month, emergency services were called to an explosion at New MexiCann Natural, a licensed medical marijuana dispensary in Santa Fe, New Mexico. Two employees were injured while making edible cannabis products: Aaron Smith, 28, and Nick Montoya, 29. They were airlifted to University of New Mexico Hospital’s Level 1 Trauma Center with third-degree burns from a presumed butane reaction.

Later that night, long after the emergency vehicles had pulled away, federal Drug Enforcement Agency agents arrived. “They seized all the growing marijuana plants, all the cannabis products in the manufacturing facility – the edibles, the extracts, everything,” says attorney Marc Lowry. Approximately 150 plants were uprooted and confiscated. Lowry conservatively values the loss at $250,000, but a good crop “could have easily yielded two to three times that much”.

While Lowry believes the explosion occurred during the extraction process, the cause is “still under investigation”, according to police spokeswoman Lt Andrea Dobyns. “We’ve never experienced an explosion like this in a dispensary and were unable to secure the lab safely. So the DEA was called. Once they arrived on scene, they found evidence of violations and opened up a separate investigation.”

The dispensary – which has 36 employees and 5,700 registered patients, according to owner Len Goodman – was able to reopen last week.

California marijuana farms at risk as weed smoke could rise from wildfires Read more

Why the DEA opened an investigation, and whether or not the seized cannabis products will ever be returned to Goodman, remains unclear. “That’s a very good question … I don’t I know the definitive answer to that,” says Lowry.

Licensed medical marijuana dispensaries in the 23 states where medicinal cannabis is legal and Washington DC are operating in a tricky gray zone. On one hand, the states recognize cannabis as a legal medical substance. On the other, cannabis is listed under the federal Controlled Substances Act as a drug with “no currently accepted medical use and a high potential for abuse”. As such, small, legal dispensaries can be wiped out by a single visit from law enforcement.

“Under federal law – whether medical or not – it’s contraband,” says Lowry. “We have this unique situation in the history of controlled substances, where the Department of Justice is turning a blind eye to state-run medical programs as long as they are not engaging in the ‘eight areas of concern’.”

This list – issued by the US Justice Department – includes distribution to minors, revenue feeding criminal enterprises and violence, and the use of firearms in the cultivation or distribution of cannabis.

If state law enforcement had seized New MexiCann’s plants and cannabis products, “there would be immunities – once you show you are a legal dispensary, if a product is seized it has to be returned,” says Lowry. “But when it’s a federal agency, which treats cannabis as an illicit contraband, that’s not the case. Federal law trumps state law.”

When local law enforcement gets involved

On a Monday morning in June, El Dorado County Sheriff deputies entered the Tahoe Wellness Cooperative in Lake Tahoe, California, seizing all of its cannabis products, marijuana plants, cash and medical records.

No charges have been filed, and the dispensary, which has approximately 20 full-time employees and sees an estimated 250 patients on a daily basis, was able to reopen the next day.

Attorney Henry Wykowski says law enforcement has yet to provide him with a reason for the search warrant: “The affidavit was filed under seal. I’ve tried to talk to the DA, but they won’t disclose any information.”

“My understanding is that warrants were served and evidenced was seized,” says El Dorado deputy district attorney Worth Dikeman. The County Attorney General’s Office and Attorney General’s office are “reviewing the evidence”. “We haven’t receive any charges, so I’m in no position to comment,” says Dikeman.

The lack of information hasn’t stopped Wykowski from developing his own theory, one that centers on Tahoe Wellness owner Cody Bass’s vocal critique of El Dorado sheriff deputy Mark Zlendick, who was recently arrested on methamphetamine possession and trafficking charges. (Bass had scheduled a call to action to raise awareness of Zlendick’s arrest for the day after officers arrived at Tahoe Wellness.)

“It was punitive,” says Wykowski, adding that Lake Tahoe city officials “had no advanced knowledge” of the raid, and have since voiced their support for the dispensary.

The investigation at Tahoe Wellness Collective is just one in a recent rash in California. While states such as Colorado, Oregon and New Mexico have enacted statewide regulations for medical marijuana dispensaries, California has not. (Apart from New MexiCann, Lowry is unaware “of any other dispensary in the state to have suffered a loss due to law enforcement involvement”.)

As a result, dispensaries in California are more vulnerable to city and county raids because the standards that separate a legal dispensary from an illegal one are ill-defined and contradictory, says Wykowski. Often, California’s city and state laws regarding medical cannabis conflict with one another, which means a dispensary may be in compliance with state but not city law.

The patchwork nature of the golden state’s regulation of medical cannabis has created a cloud of uncertainty and lack of transparency in the industry, says Steve DeAngelo, founder of the Oakland, California-based Harborside Health Center, one of the largest dispensaries in California.

“There is a lot of ambiguity in regards to why one guy gets raided and another one doesn’t,” says Wykowski. “It’s grossly unfair to people who are trying to do it right.”

Caught on camera

About a week before and nearly 400 miles south of the investigation at Tahoe Wellness Collective, Santa Ana police officers entered Sky High Holistic Collective, guns drawn. It was an early evening in late May. Footage from a camera in the dispensary’s lobby shows the officers ordering employees and customers to get on the ground. Once inside, they smash the shop’s surveillance cameras. Save for one.

Shortly after the raid, attorney Matthew Pappas released edited video footage captured by the undamaged camera to the OC Weekly and the Voice of OC; he has since released the raw footage to the Santa Ana Police Department. The clips suggest that the police officers behaved badly: they appear to consume edibles they find on-site and make grossly inappropriate comments. (“Did you punch that one-legged bonita?” one officer asks, referring to a customer, an amputee in a wheelchair, who had been arrested. “I was about to kick her in her fucking nub,” the other responds.)

The video understandably generated national attention and prompted an internal affairs investigation by the Santa Ana Police Department, which is “currently ongoing,” says police spokesman Anthony Bertagna. “The chief has placed three officers on administrative leave.”

In the midst of the uproar, the Santa Ana police officer’s association filed a lawsuit alleging that the video was “illegally recorded”. Furthermore, the lawsuit claims that because the majority of the cameras at Sky High Holistic were destroyed, the police officers had a reasonable expectation that their actions were not being recorded – and thus the tape should be banned from use in implementing any punitive action. A judge is expected to rule on the case early this week.

Licenses via lottery

While Sky High Holistic was operating in compliance with state law, it did not have a permit from Santa Ana, which recently passed the voter-backed, city-approved Measure BB, which caps the number of dispensaries in the county at 20.

In February, Santa Ana held a lottery, overseen by an independent accounting firm, in which the 20 licenses were granted. Because lottery applications were not limited per corporate entity, Pappas says most tickets went to wealthy entrepreneurs who bought them in bulk – he’s also filed a suit alleging that Mayor Miguel Pulido, and other city officials, received money, gifts and were taken to expensive dinners around the time Measure BB was introduced to the city council.

Dispensaries whose owners did not win a lottery ticket, including Sky High Holistic, were operating illegally in the eyes of the city, if not those of the state.

According to Bertagna, the appropriate response from law enforcement when a dispensary is operating “in violation of municipal code” is to first contact the dispensary owners and tell them to cease operations. Next, between 24 to 48 hours later, officers will return and post a sign on the dispensary. If operations continue, undercover officers will make an illegal buy in order to obtain a search warrant. In the case of Sky High Holistic all of these steps were followed, Bertagna says.

Pappas remains incensed at the use of force for a municipal misdemeanor violation: “They are acting like Nazi officers in what they are doing to these folks … these disabled individuals who are being discriminated against.”

He estimates the officers caused more than $200,000 in property damages.

Facebook Twitter Pinterest Differing city, county and state laws get at the heart of California’s untenable piecemeal approach to marijuana regulation. Photograph: Alamy

Lack of regulation failing the industry

Differing city, county and state laws get at the heart of California’s untenable piecemeal approach to marijuana regulation, says Dale Sky Jones, executive chancellor of Oaksterdam University, which offers training for the cannabis industry. “That’s why we need regulation, to weed out bad operators based on performance,” says Jones. “When licenses are handed out in a lottery instead of for quality, we will continue to see raids on businesses that did not make the cut.”

Jones is campaigning for a regulatory structure for California’s medical cannabis program. Two bills – AB 266 and SB 643 – have been introduced, both of which establish regulatory systems similar to those in other states where medical marijuana is legal. While Jones is cautiously optimistic one will pass by year’s end, she’s more encouraged that the issue will be put to the public in a planned November 2016 voter initiative. “You need a voter initiative to make sure [statewide regulations] are not sliced and diced by legislators,” she says.

In April 2012, Oaksterdam University, along with its three sister businesses – a dispensary, a museum and a nursery, all founded by marijuana activist Richard Lee – were raided by IRS officers. They took everything: the plants, course materials, student and patient records. Charges have yet to be filed.

“The Oakland police were livid,” says June, who was a professor at Oaksterdam University at the time. “They were not told.”

The raid resulted in more than 100 union employees losing their jobs and health insurance.

“We were the ice bath on the industry. We were trying to train people how to be the good guys … how to pay taxes, how to legally grow and cook,” says Jones. “To see us get knocked down so badly was frightening for a lot of people in the industry, which was the intended effect.”

Facebook Twitter Pinterest Pandy Arrieta, an intern at Oaksterdam University, the nation’s first marijuana trade school, takes care of marijuana plants in a classroom. Photograph: Tony Avelar/Christian Science Monitor/Getty

Uncertainty beyond the raids

With more than 220,000 registered patients and 135 employees, Oakland, California-based Harborside Health Center is one of the largest dispensaries in the state. While founder DeAngelo describes his relationship with state and city officials as “very good”, the dispensary has been the consistent target of US attorney Melinda Haag, who has filed multiple forfeiture actions against Harborside’s landlord.

“We have spent millions of dollars in legal fees,” says DeAngelo. “My time has shifted from taking care of patients to handling legal work and political work to keep our doors open.”

Lawsuits aren’t DeAngelo’s only headache; he also has to worry about tax code 280E, which attorney Wykowski – who has represented a number of dispensaries in cases brought against them by the IRS – defines as “one of the biggest handicaps on the industry right now”. Passed in the 1980s, 280E stipulates that businesses engaged in the trafficking of controlled substances are not entitled to standard business deductions, resulting in a massive tax burden.

“We’re reaching tipping point: the federal government needs to resolve cannabis programs, so people can plan their businesses accordingly,” says attorney Lowry. “As in any fledgling industry, unpredictably is not a good thing. Unfortunately, it has the unintended consequence of driving up the costs for patients who really need [medical cannabis].

“Everything in this field is unclear,” agrees Wkyowski. “It’s just varying shades of gray.”