*Extremely* tacit approval

No, no one in DC has given Colorado or Washington any sort of nudge-and-wink promise to let their MJ licensees alone.

When I saw Dylan Scott’s story reporting that some Colorado officials were claiming “tacit approval” from the Justice Department for going ahead with the taxed and regulated cannabis market approved by Colorado voters, I was puzzled about exactly what was being claimed.

On the one hand, the Justice Department, in the many months since the Colorado and Washington initiatives passed in November, has not publicly announced that it is going to shut down the Colorado and Washington systems entirely. By its silence, the Department has allowed the state governments to proceed with time-consuming and expensive preparations. If the Department were now to announce that it was asking the courts to find that the Controlled Substances Act pre-empted the entire scheme, or that it was going to ask for injunctions against license applicants, that would certainly be a dirty trick. If that’s what “tacit approval” means, the substance of Scott’s story is correct, bu it doesn’t contain much news.

Nor did the actual sourcing and quotations seem to suggest otherwise. Of the two sources, the State Senator is very unlikely to be privy to whatever’s being said behind closed doors, and the nameless “official” doesn’t really say anything except what I said in the paragraph above: The feds know what’s going on, and haven’t yelled “Stop!” yet, so it’s unlikely they’re going to yell “Stop!” tomorrow.

None of that implies that the people getting licenses to grow and sell pot in Colorado and Washington – licences, that is, to commit felonies under Federal law – would be safe from prosecution.

On the other hand, it was also possible that Scott had learned something I didn’t know about actual negotiations, and that there had been a real nod-and-wink promise that the feds wouldn’t mess with state-licensed activity unless it involved real bad guys or interstate shipments. That would have surprised me, but I couldn’t rule it out.

My membership card in the Blogger’s Guild forbids me, of course, from Picking Up the Damned Phone and doing actual reporting. But I was a drug policy analyst a long time before I became a blogger, and some of the people I talk to in my policy-analyst hat actually know what’s going on.

So I can now say with confidence that no one at DoJ has given the government of Colorado any promises of non-interference with the activities of Colorado’s licensees. There have been discussions involving state and federal officials, but no negotiations of the “If you do X and Y we’ll let your people alone” variety. (I don’t have direct knowledge with respect to Washington State; any contacts with the feds are the province of the Governor’s office and the state AG’s office rather than with the people I know at the Liquor Control Board. But when I spoke of “negotiations” with DoJ, a state official hastily corrected that to “discussions.”)

That seems to me like a big missed opportunity; had the federal government presented the two state governments with list of demands, as conditions of federal acquiescence with the new commercial cannabis-distribution systems, there would have been very strong incentives pushing state officials to meet those demands. Once Washington and Colorado have regulations in place and start issuing licenses, retro-fitting the terms of a bargain into that process gets much, much harder.

The right way, in my view, to implement such a bargain would be through the “contractual agreements” provided for in 21 U.S.C. 873.

The problem with stories such as Scott’s is that they will be eagerly seized on by legalization advocates. When and if the DEA starts busting state-licensed growers and dealers, we will hear the same screams of “bait and switch” we heard when the feds, having announced that they didn’t intend to go after patients and caregivers in the medical marijuana markets but would concentrate on large, for-profit operations, in fact busted some large-scale, for-profit growers in California.

No, that doesn’t mean I think every target of those raids deserved it, merely that the charge of “double-cross” was utterly bogus, and known to be so by those familiar with the situation. The people I chiefly feel sorry for are those who believed that advocates’ claim that the feds had given everyone a green light, and found out the hard way they were wrong.

So: If you’re considering entering the cannabis business in Washington or Colorado, you should do so only if you’re willing to take a risk – an unknown risk, and only partly controllable by keeping your actions discreet – of spending a long spell behind bars.

And: If you’re an activist, or have any influence with the Administration or with Members of Congress, don’t imagine that the job of reconciling federal law with state-level legalization is more or less complete and that you can now relax. All the hard work remains to be done.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

12 thoughts on “*Extremely* tacit approval”

  1. I think it would be a bait and switch. If the federal government really wants to abuse its power and tyrannically overturn the considered and democratic judgment of the voters, it should say so and file suit and take the political hit, rather than ambushing the states after they set it up.

  2. Has the DOJ given any sign that that it has a coherent policy on state legalisation? The Washington and Colorado state governments have the huge advantage in this negotiation that they know what they are trying to do, viz. carry out policies approved by their voters. ¨Ï have to do this¨ beats ¨Ï´ll keep my options open¨ any day.

    Besides, it´s very much the Obama style to lead from behind, and let facts on the ground and popular sentiment create a situation where the Administration has only one way forward, the way he wants to go. See gay discrimination and climate disruption. The White House will now get the solar panels promised in 2010, after they have become bipartisan: the Georgia Tea Party has joined a winning fight against the anti-solar utility. The Keystone pipeline is dying the same unobtrusive way.

  3. Again, the Montana experience may be instructive, or at least muddying. “Real bad guys” is a fairly subjective term. What happened here is that the marketing of medical marijuana got way out in front of what a majority of ordinary folks thought they had voted to allow. The Ogden memo may have implied that people in full compliance with the state law would be safe, but as a matter of fact, none of the larger operators were actually in full compliance. And they mostly had federal tax and weapons violations (which are tied to the drug laws in ways that an MOU on drug enforcement wouldn’t reach). When the feds ended up shutting the big guys down — at the same time the legislature was considering changing the marijuana laws to be more restrictive — those guys found themselves without much in the way of either legal standing or public approval.

    People who go into the legal marijuana business would be well advised to start slow and stay small for quite a while. Not that this is what their investors are going to want them doing.

    1. It’s my understanding that if the Feds crack down the investors might well share all legal liabilities – potentially even more, if they have multiple investments or are treated as drug kingpins. They might not be spurring the producers on as you suggest.

  4. “The feds…in fact busted some large-scale, for-profit growers in California.”

    Wait, how do you know that? What criteria was used by the Feds to determine if a dispensary was operating for profit? You think they used the cash or accrual basis to determine that? The fact that a dispensary was for profit or otherwise operating outside California law doesn’t have to be proven in federal court, so all we have is the DOJ’s word on that. The “for profit” determination was probably made by some low level DOJ/DEA investigator at the start of an investigation who had never been trained in reading financial statements, much less making the determination if a profit was made. That determination is extremely important because if the Feds did in fact bust not-for-profit enterprises, which were legal under CA law, then it is a bait and switch.

    In California, law enforcement does have to worry about the courts looking at the determination of “for profit.” That is a higher burden than the feds, and look how carelessly it’s done. In the PEOPLE v. HOCHANADEL case (http://caselaw.findlaw.com/ca-court-of-appeal/1267300.html):

    ‘Detective Garcia further opined CannaHelp was operating illegally because it was a for-profit enterprise:  “Additionally, given this is a ‘cash only’ business, the presence of an ATM machine, high prices charged for small amounts of marijuana, it is also my opinion that this criminal enterprise is ‘for profit’ …. At the preliminary hearing, Detective Garcia admitted he had no formal training in medical marijuana laws.   He was “[j]ust given a pamphlet or some paperwork, just given the laws just to read over.”He further admitted that based upon his review of CannaHelp’s financial records, it was losing money, with annual revenues of $1.7 million, and expenses of $2.6 million, not including rent, utilities or other expenses. He admitted the business was “upside down.”

    Now is it reasonable that a DEA/DOJ agent, who never has to worry that anyone will review their determination of “for profit” will even go as far as detective Garica? Maybe you have access to better information on the dispensaries that were busted than is available to the public, but from here it looks fishy.

    1. Whether a business is legally organized as a non-profit entity (charitable enterprise or consumer collective) or as a business enterprise or sole proprietorship is a matter of easily determined fact. A “for-profit” business can lose money. A not-for-profit can run a surplus. The question is whether there’s an owner who has access to that surplus.

      As I said, I can’t vouch for the accuracy of the feds’ targeting. But they weren’t out there busting patients or caregivers, which is what the Ogden memo said they wouldn’t do. If someone has an example of their busting actual an actual consumer-owned collective, I’d be interested in seeing that example.

      1. Of course, we can disagree on what the Ogden memo implied as it was oddly worded. You state:

        “Whether a business is legally organized as a non-profit entity (charitable enterprise or consumer collective) or as a business enterprise or sole proprietorship is a matter of easily determined fact.”

        While your statement is true, I do not believe that is the standard used to determine if the business is protected by the Medial Marijuana Program Act. And since the the question is whether Feds are targeting state compliant marijuana providers that is important. The law is (note it does not say it must organize as a non-profit):

        Section of 11362.775 of the Medical Marijuana Program Act provides, “Qualified patients, persons with valid identification cards, and the designated primary caregivers of qualified patients and persons with identification cards, who associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes, shall not solely on the basis of that fact be subject to state criminal sanctions under Section 11357, 11358, 11359, 11360, 11366, 11366.5, or 11570.”

        The courts have tried to figure out what it means to “associate… collectively or cooperatively.” Co-ops have an official definition in the law but collectives do not. It’s not as simple as looking up the organization with the secretary of state and finding out the official designation (though many do organize as mutual benefit corporations I’ve read).

        According to the AG guidelines (which is not law but helpful:

        “Collectives: California law does not define collectives, but the dictionary defines them as “a business, farm, etc., jointly owned and operated by the members of a group.” Applying this definition, a collective should be an organization that merely facilitates the collaborative efforts of patient and caregiver members – including the allocation of costs and revenues. As such, a collective is not a statutory entity, but as a practical matter it might have to organize as some form of business to carry out its activities”

        Therefore when determining if a business falls under the protection of CA law, looking at its income and expenses comes into play and it’s a question for the jury:

        “the jury must determine whether the collective he participates in is a profit-making enterprise and further that in resolving that question, it should consider, in addition to other evidence of profit or loss…” http://www.slashdocs.com/knrtxw/mmj-news-jovan-jackson-california-court-of-appeal-published-opinion-of-october-24-2012.html

        The part about not earning a profit comes from California Health and Safety Code Section 11362.765 “nor shall anything in this section authorize any individual or group to cultivate or distribute marijuana for profit.”

        Interestingly, former state Sen. John Vasconcellos, co-chair of Medical Marijuana Task stated that profit was never prohibited. The language only says profit is not authorized, nothing more, nothing less.

        So if CA courts have trouble figuring which businesses are not in compliance, how are the feds able to do it? The answer is they don’t really care.

        Here is an example of a 2013 warrant excerpt (the affiant is DEA agent Lenin Contreras):

        I am also aware that the sale of marijuana, including sales occurring inside marijuana stores, regardless of their self-identification as “collectives,” is a violation of California’s “medical marijuana” laws.

        That is obviously not true (but doesn’t really matter in a fed warrant since CA doesn’t apply). I quote it to simply point out he didn’t go even close to examining your standard of a legally organized non-profit.

        If you could further define “consumer-owned collective” I might be able to find a list of busts.

        1. Oh I know it’s a dead thread…but one last thing to throw down the memory hole. Eric Holder’s interpretation of the Ogden memo is the same as legalization advocates. His remarks before the House on June 7, 2012:

          Given these facts, why is DOJ focused so extensively on investigating and punishing those who legally grow and sell marijuana
          legally under local law, contrary to the apparent intent of what the
          President said on this subject?
          Attorney General HOLDER. See, this is inconsistent with these little things called the facts. The Justice Department indicated in a
          memo that went out by the Deputy—then-Deputy Attorney General
          that we were not going to use the limited resources that we have
          to go after people who are acting in conformity with State law, people who had serious illnesses, people who were acting, as I said,
          consistent with State law.
          But one has to deal with the reality that there are certain people
          who took advantage of these State laws and a different policy that
          this Administration announced than the previous Administration
          had, and have come up with ways in which they are taking advantage of these State laws and going beyond that which the States
          have authorized. Those are the only cases that we——
          Mr. NADLER. So you are saying that you are not targeting people
          who are growing and distributing marijuana only for medical purposes and following the applicable State law?
          Attorney General HOLDER. Yes. We limit our enforcement efforts
          to those individuals, organizations that are acting out of conformity
          with State laws, or, in the case of instances in Colorado, where distribution centers were placed within close proximity to schools.


    2. As I understand the facts: Detective Garcia suspected that CannaHelp was in fact a for profit enterprise (even though it was registered as non-profit), so he seized CannaHelp’s financial records. These showed that CannaHelp was losing money, leading Garcia to concluded that CannaHelp was not a for profit enterprise after all.

      Perhaps the fact that Garcia bothered to look at CannaHelp’s financial records, rather than just taking CannaHelp’s registration at face value, indicates that he came to the case with some pre-existing bias. But the point is that his response to this bias was to gather more facts, which happened to disprove his initial conjecture. This places him squarely in the “reality based community,” and gives me no reason to doubt the reliability of determinations made by Garcia and other law enforcement officers like him.

      1. Sure, Det. Garcia just might get to keep his reality based community membership card for looking at the facts afterwards. My point was that in establishing probable cause, the standard was so low, that he could be wrong and still meet it. And his determination would be judged by a jury at some point in time. We at least had some standard by which to judge Det. Garcia. But with the Feds we don’t really know how or why they chose their prey. Why can’t we know, so that CA marijuana providers can comply.

  5. I have long wondered if any Americans have gotten busted selling or transporting drugs in the Netherlands or Portugal after hearing that drugs are legal there.

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