Category Archives: Corporate Cannabis

How prohibition limits cannabis & technology

Published on February 7, 2017

Travis Lachner

Travis Lachner
CEO & Creative Director at Cannvas

 

Federal prohibition segregates cannabis and technology.

Complex banking regulation suffocates cash flow.

Research discoveries are suppressed and hidden.

Social media shutdowns are routine procedure.

Simply stated; making progress in the cannabis industry is really difficult right now.

This professional canna-bigotry is due to marijuana’s (mis)classification as a Schedule I substance. Domestic and international companies

Most of the country supports cannabis legalization. Yet, it still remains illegal.

Prohibition causes unnecessary and inefficient problems for the industry – and the nation.

We need to end prohibition and build the industry right to realize the potential of cannabis.

Companies, consumers, patients, and citizens will all benefit from proper legalization.

1) Banking and FinTech access sucks. Cash-only operations are unsafe.

Cannabis companies cannot access basic banking and financial technologies normally.

Federal prohibition restricts most banks from serving companies related to cannabis in any way. Even ancillary companies (that don’t touch the plant) are still neglected.

And legislative progress for cannabis banking created at the state level is stomped out by federal government.

In Colorado, state banking officials approved a charter for the first “Cannabis Bank” ever – A credit union named The Fourth Corner (TFCCU).

However, final admin approval at the federal level is continuously denied… The cannabis bank cannot operate without it.

Financial restrictions force cannabis companies two directions:

  • Option A – Companies operate cash only. Sometimes moving hundreds of thousands of dollars at a time.
  • Option B – Companies pursue private banking opportunities at the state level and operate within financial loopholes.

Neither of these options are ideal.

According to Bloomberg Business, less than 3% of banks in America accept cannabis cash. Which means employees and individuals must move billions of dollars in cash regularly. These are extremely unsafe conditions and procedures.

A new “cannabis security” industry is emerging because of this problem. Ventures like Canna Security America provide comprehensive security services to keep staff, customers, and citizens safe.

But cannabis companies shouldn’t have to hire armed security services for safety… If customers were allowed to just swipe a damn debit card at any dispensary, the context of cannabis will be safer.

Modern banking technology is essential to all modern companies. Why are cannabis companies forced into awkward and unsafe restrictions?

It is unrealistic to make companies to operate under such irrational conditions. Especially while being taxed so heavily.

2) Awkward and vague regulations change often.

Cannabis companies pour capital into compliance. The “cover your ass” attitude is necessary in the ever-shifting regulations and requirements.

Brands balance between state legality and federal prohibition. New laws can make, break, or change business models overnight.

In addition to operational regulation, cannabis companies must abide to marketing and advertising restrictions. They cannot reach audiences like most other businesses.

Traditional companies in America spend millions on marketing and advertising – with minimal restrictions. TV, Facebook, Google, Instagram – pretty much whatever they want. But cannabis related companies can’t participate. (Yet.)

Instead, cannabis companies navigate complex layers of ambiguous regulation. Many areas of requirements are unclear, unrealistic, or nonexistent.

Large companies like Google and Facebook restrict ads for anything and everything cannabis-related.

And to be fair, they are just protecting their companies. Most of these policies are indirectly due to federal prohibition.

National brands fear the possible repercussions of the federal government. So they cover their ass by following suit with whatever the government says at the time.

This creates a contradicting scenario for companies and states… Selling cannabis is legal – but advertising cannabis is tricky.

Beyond regulation, cannabis companies are often pushed around by the “big boys” of media and technology.

I see new stories like those every week. It’s seriously like industrial level bigotry or bullying.

3) Research and development efforts are limited and discouraged.

Cannabis companies cannot complete high-level research and development.

Innovation research and medical studies require strict government approval or federal funding – which is often denied.

But here’s the weird part. The federal government already knows cannabis research will benefit society… The federal government owns the patent to use cannabinoids as antioxidants and neuroprotectants. Yet, they still suppress innovative discoveries.

Back in the 70’s, the US government discovered THC can shrink cancerous tumors. But political forces swept this research under the rug.

Why? Because it did not support the agenda for “The War on Drugs.”

Modern research reinforced the discovery again in 2000.

Spanish scientists successfully destroyed “uncurable” brain tumors with THC (an active component of cannabis).

But you probably didn’t see this story in America. That’s because the revolutionary research was censored and ignored by major media outlets.

The neglected study from Madrid was named the “Top Censored Story” of 2000 by Project Censored

Today, American government is still putting up roadblocks for research.

In 2015, Congress shut down federal research on medical marijuana yet again.

This is an absurd problem. Is our own government suppressing the potential power of cannabis intentionally?

The medical benefits of cannabis and technology deserve to be discovered and delivered to the people.

Let’s take a closer look at the potential of marrying cannabis and technology.

Throughout history, technology innovations pave the path for industries to leverage and build upon.

But unfortunately, cannabis companies are restricted from leveraging existing technologies.

While most American companies sit on the shoulders of giants, cannabis companies barely get to stand on on the big toe of that giant.

Even worse – companies that “touch the plant” are restricted by regulations and fear of prosecution. Which means new innovations in the industry are often discouraged or dismissed.

This type of environment creates irrational risk for entrepreneurs, researchers, and innovators. It discourages progress and big ideas..

Instead, we must cultivate an environment for encouraging positive growth and development.

Imagine what we will gain when the cannabis industry can leverage the entire spectrum of modern technologies with less restriction.

1) Companies will focus on improving products and services.

Cannabis companies will devote more time and energy to optimize the customer experience. Products and services will be fixed, upgraded, and optimized over time.

Currently, cannabis companies spend TONS of time, money, and energy navigating a shit-show of regulations and compliance.

Intense, time-consuming administrative projects ensure the entire business isn’t stripped away.

This energy could be (and should be) spent better.

Internal resources should be used to enhance product development, improve services, and innovate the customer experience.

Cannabis companies deserve the right to allocate their bandwidth more efficiently.

2) Companies will mature their marketing (and targeting).

Marketing and advertising will experience noticeable maturity. Companies will focus on more specific target audiences with hyper-detailed precision.

Cannabis companies will target consumers and patients better.

From stereotypical “stoners” to critically concerned medical patients… Proper access to modern marketing and targeting technology will enhance the customer experience.

Customer archetypes, strain-matching, and advanced targeting tools will be standard in the industry. Apps like PotBot will offer custom product recommendations based on user preferences.

Technology allows brands to target the exact type of users best-fit for their product. In the end, that is better for both the consumers and the companies.

But most technologies will be inaccessible or restricted until prohibition is lifted.

Federal prohibition sets the tone for large companies and advertising platforms to follow suit regarding cannabis. And the current advertising restrictions make it extremely difficult for companies to capture targeted audiences.

Cannabis pioneers experience difficulty building and marketing effective, creative and compliant campaigns.

If this problem sounds familiar… Cannvas provides custom cannabis brand-building solutions for 100% compliant marketing, advertising, and PR.

3) Research will unlock the power of the endocannabinoid system.

This is the big kahuna.

The endocannabinoid system is the untapped holy grail of cannabis and medicine.

It could be one the missing key needed to treat, manage, or cure many conditions in the medical community.

The endocannabinoid system is revolutionary. But we are only in the early stages of discovery. Many experts predict mastering the ECS will mark a new era of healthcare.

From cancer, to epilepsy, to simple chronic pain or nausea… The endocannabinoid system is directly related to the biological balance of humans.

Currently, we are just scratching the surface of possibilities. But the convergence of cannabis and medical technology is well under way.

With proper funding, and federal approval, hundreds of medical benefits will be discovered. The full potential of can be literally life-saving.

Cannabis will soon develop its identity as a wellness product.

And canna-pharmaceuticals may be the future of healthcare.

The solution is simple.

Federal prohibition is ineffective. We need to marry cannabis and modern technologies.

Nationwide legalization will enable better access to existing technologies – while encouraging innovation and safety.

Companies, consumers, and citizens will all benefit from legalizing cannabis.

And we can build the industry right.

Let’s do this.

Santa Rosa marijuana processing plant back in business

JULIE JOHNSON

THE PRESS DEMOCRAT | December 14, 2016, 8:29PM

| Updated 38 minutes ago.

 

In a white-walled room deep inside a southwest Santa Rosa building once used to manufacture heart stents, 11 specialized machines to extract concentrated cannabis rumbled, hummed and popped in production for California’s largest legal marijuana manufacturing operation.

Five months ago, law enforcement officers hauled away extraction machines and other equipment worth about $3 million from the Circadian Way facility, halting production and forcing the company, CannaCraft, to address a series of code violations. One of its founders, Dennis Hunter, was briefly jailed.

Since then, California and the city of Santa Rosa have begun embracing cannabis manufacturing with new regulations that allow producers of medical marijuana-infused products to operate openly. And state voters legalized recreational use of marijuana, adding to the system of regulations advocates hope will bring marijuana businesses into the mainstream.

CannaCraft this week received a final level of approval from the city of Santa Rosa to run its multimillion-dollar enterprise, making it the first in the city — and among only a handful of companies statewide — to receive local authorization to manufacture marijuana-infused products for medicinal use. The Santa Rosa plant is the largest cannabis extraction and manufacturing facility in the state, said Nate Bradley, executive director of the California Cannabis Industry Association, a Sacramento trade group.

“It’s a sign of how the times have changed when we have local governments in support of manufacturing,” Bradley said. “Santa Rosa is leading the way in the state.”

Operating under the name CannaCraft, the 150-employee organization is a group of companies founded by Hunter, Edward Fussell and others. One company, CBD Guild, handles manufacturing and packaging. Sonoma Lab Works provides testing services, such as tests that detect the presence of pesticides or fungus in cannabis. Critical Solutions builds extraction equipment. CannaCraft is the management, finance and regulatory compliance arm of the organizations.

The Supercritical CO2 Fluid Extraction machines each day produce about 30 to 35 pounds of raw concentrated cannabis, a yellow wax-like substance with a floral odor that when further refined is used to make oils and sprays marketed for a range of medicinal purposes.

On Wednesday, the company brought a group that included several Santa Rosa City Council members, Sonoma County Supervisor Efren Carrillo, and a representative from Assemblyman Jim Woods’ office among others to tour the facility.

“We want to be the company that helps tear down stigmas for cannabis,” Hunter said to the group during a catered lunch in which they announced plans to hire developmentally disabled adults in a special off-site facility that makes packaging for the company but doesn’t handle cannabis products.

The specter of prosecution still hangs over Hunter, a Rohnert Park resident who was arrested July 15 on suspicion of manufacturing a controlled substance, a felony. He was arrested on the morning the company’s facility was raided by a group of officers from Santa Rosa and the U.S. Drug Enforcement Administration.

Law enforcement seized about $5 million worth of property, including the extraction machines, about $500,000 in cash for payroll and another $1.5 million in products, according to company spokesman Nick Caston.

Hunter was released within about 24 hours, and no charges have been filed.

CONTINUE READING AND TO VIDEO!

"Any sense as to what will happen with marijuana’s legal status if Donald Trump or Hillary Clinton is elected, given that they’re the presidential frontrunners? I would expect Hillary to continue the policy we’ve seen from the Obama administration. With Donald Trump, I have not the slightest idea."

 

March 23, 2016

CBD, Marijuana Banking and General Cannabis Reform: Q&A With NCIA’s Taylor West

 

By John Schroyer

Before landing her current job as deputy director of the National Cannabis Industry Association, Taylor West spent more than a decade working in national politics, including four years in Washington DC.

During that time, West gained insight she can use today to assess the likelihood of federal change on the cannabis front.

Marijuana Business Daily sat down with West recently to get her thoughts on how the 2016 election could impact the cannabis industry and the chances of meaningful MJ reform for businesses.

What kind of cannabis-related reforms do you think Congress or President Barack Obama could move on in the near future?

I’m not optimistic that we’ll see much out of the president at this point. The president pretty clearly stated on multiple occasions now that he thinks this is an issue that needs to be dealt with by Congress.

As much as I’d like to think he’ll have a change of heart, he’s said it enough times now that I think he’s sticking to it.

From a congressional standpoint, there seems to be some movement in Congress around some kind of CBD legislation that protects businesses and patients that are involved with those products.

The second piece where we’re most likely to see some movement is on banking. There is a possibility that we’ll see an amendment that says the Department of the Treasury cannot spend any of the funds being appropriated to them to go after financial institutions that serve legitimate cannabis businesses.

We’ve seen bipartisan action on that in the past two years, and it’s probably our best bet for getting any kind of banking activity between now and at least the election.

How would this type of banking reform affect the cannabis industry?

It’s a little bit unclear whether an appropriations amendment on banking would have as dramatic an impact, as we need to create an industry-wide solution, in part because appropriations have to be renewed every year. So it wouldn’t be a guaranteed multi-year protection for banks, and some of them may continue to be risk-averse on it.

But it would send a very clear message.

When we look to the election this November, are there any potential changes at the federal level that could have a major impact on marijuana companies and pro-cannabis bills in Congress?

There is the possibility that this year the Senate could change hands, from the GOP to the Democrats. That would be a huge deal, because that means all of the committee chairs change hands.

One of the hardest things for our issues is simply getting a hearing on some of these standalone bills.

We have good legislation that has been introduced in the House and the Senate, on banking, on tax reform, we have the CARERS Act.

But because the committees in which they’re sitting are chaired by Republican senators who are very opposed to (marijuana), they have a very difficult time getting a hearing, much less a vote.

Any sense as to what will happen with marijuana’s legal status if Donald Trump or Hillary Clinton is elected, given that they’re the presidential frontrunners?

I would expect Hillary to continue the policy we’ve seen from the Obama administration.

With Donald Trump, I have not the slightest idea. As with most things, he’s been a bit all over the map. He hasn’t been as clearly against legalization as some other Republicans, but he also isn’t exactly laying out a clear philosophy of how he would handle it.

CONTINUE READING ARTICLE….

The stock markets will soon welcome a dispensary to the ranks of the publicly traded

January 13, 2016

Oakland Dispensary Shares To Be Publicly Traded

Following a brutal 2015 for marijuana stocks, the cannabis investment sector has something to smile about to start the new year. The stock markets will soon welcome a dispensary to the ranks of the publicly traded: Black Oak Gallery, better known as Blüm Oakland.

Blüm joins dispensary Kaya Shack in Portland, Oregon, a subsidiary division of a publicly-traded company, Kaya Holdings (KAYS). Kaya Shack opened in 2014.

But Blüm Oakland didn’t take the traditional route of selling shares to raise capital. Rather, the Oakland dispensary has announced it will merge with an already public company, Terra Tech Corp. (TRTC), an agricultural and cannabis cultivation company in Newport Beach, California, with a market cap of nearly $30 million.

“It’s very significant,” said Matt Karnes, president of GreenWave Advisors, a New York City-based cannabis consulting firm. “The fact that you have a dispensary that has to file financial disclosures and be transparent, that definitely helps the legitimacy of the industry.”

Karnes does not expect the SEC to oppose the deal, because Terra Tech has already stated in its filings that it plans to grow and sell marijuana. “They didn’t come back and ding it,” Karnes said. “I don’t expect them to block it.”

The emergence of publicly traded marijuana-touching businesses should also help reduce the leeriness that many institutional investors feel for the cannabis sector by providing them with companies that they can scrutinize.

“When a company has to file financial statements, it eliminates uncertainty,” said Karnes. “It could provide investors with a benchmark. They’ll have a company that they can compare to other marijuana companies that may go public.”

While Blüm’s soon-to-be publicly traded status is a major advance for the cannabis industry, the merger would also be a major milestone for Blüm’s owner Salwa Ibrahim, who hopes it will help the dispensary fulfill ambitions of expanding into other markets.

Ibrahim said Blüm and Terra Tech have already worked together to secure permits in Nevada for a venture known as MediFarm, which has several cultivation, processing, and dispensary sites in the state.

“It is our hope that we can continue to secure permits and to develop sustainable but successful operations in new markets opening up,” Ibrahim said in a statement. “We’re looking forward to bringing together the core teams of both companies and finding other capable operators in this growing industry to join with as we continue to further our business strategy.”

Under the agreement, Terra Tech will acquire 100% of Blüm’s outstanding shares plus its integrated supply chain, which consists of an onsite cultivation facility, proprietary strains, and retail storefront, the companies said in a statement. The deal is expected to close by March 31.

Blüm opened in November 2012 and had close to $15 million in revenue in 2015. The company sees almost 1,000 patients daily, and has about 42,000 registered patients in all.

Terra Tech bought Blüm for about 1.5-times forward-looking revenue – estimated to be about $14 million – for the 12 months after the merger closes, or about $21 million. To protect stockholders, 80% of the equity will be held in escrow subject to performance adjustments at the end of the 12-month term.

Terra Tech’s shares were up to 11 cents from nine cents on the news. The company had a 52-week high of 28 cents and a low of 8 cents.

Terra Tech CEO Derek Peterson said the merger gives his company more cash-flow and positions it to take advantage of the regulatory changes that will come with the implementation of California’s Marijuana Regulation and Safety Act in 2016 this March.

The states new regulations will for the first time allow for-profit marijuana businesses. Some of Terra Tech’s competitors are not likely to successfully navigate the licensing process, while they will increase the number of potential legal-market customers in the state. Also under the new regulations, vertically-integrated cannabis businesses which growing, extract, process and sell product will not be allowed – that is, unless that company was formed before July 1, 2015.

Terra Tech Corp also owns IVXX LLC, which produces medical cannabis-extracted products for regulated medical cannabis dispensaries throughout California, and Edible Garden, whose produce is sold in major grocery stores such as Shoprite, Walmart, and Krogers.

“As we continue to develop our long-term strategy in Nevada, it has always been our goal to also focus on near-term acquisitions that have immediate value to our stockholders,” explained Mike Nahass, Director of Terra Tech.

CONTINUE READING…

Kevin Sabet Is The Marijuana Movement’s Biggest Threat, But Can He Really Stop ‘Big Pot’?

By Joel Warner @joelmwarner j.warner@ibtimes.com on December 09 2015 8:02 AM EST

Judiciary Committee Holds Hearing, Drew Angerer, Getty

BETHESDA, Maryland — Kevin Sabet, the man Salon called the quarterback of the new anti-drug movement, the guy Rolling Stone labeled the No. 1 enemy of marijuana legalization, the 36-year-old political wunderkind whom High Times has declared the devil himself, takes the stage in a sprawling conference hall at the annual conference of the Association for Addiction Professionals (NAADAC) and gazes with confidence over his audience. But what comes out of the mouth of the founder of the three-year-old nonprofit, Smart Approaches to Marijuana, or Project SAM, isn’t typical anti-marijuana rhetoric.

“We cannot be Reefer Madness 2.0,” he tells his audience. “We went overboard.” Sabet doesn’t suggest marijuana is a gateway drug, doesn’t resort to scare tactics like the “This Is Your Brain on Drugs" public service announcement from the 1980s. In fact, Sabet agrees with his pro-marijuana opponents on many matters. He’s opposed to harsh drug laws that have long criminalized people – mostly minorities – for smoking or possessing small amounts of marijuana. He concedes that components of marijuana might hold medical promise and wants the federal government to make it easier to study the plant. And, most strikingly, he concedes the war on drugs was a failure.

But he’s not willing to give up the fight. He’s launched a new war against marijuana legalization, one focused on a new bogeyman. “These are the guys who keep me up at night,” he says with dramatic flair during his presentation, clicking to a slide depicting not ominous drug dealers or disheveled hippies, but three slick-looking guys in suits and ties. They’re the co-founders of Privateer Holdings, a powerful marijuana private equity firm. (With his boyish, clean-cut looks and thickset frame swaddled in a jacket and tie, Sabet would fit in among the trio.)

“In my mind, legalization equals commercialization,” says Sabet, explaining that legal cannabis will lead to the rise of corporations whose bottom lines will be tied to promoting the use of an inebriating and habit-forming substance. Like the alcohol industry, these marijuana businesses will target excessive users. “This is the addiction business,” he says. “The industry has an incentive to encourage heavy use.” And like the tobacco industry, marijuana businesses will try to hook potential customers when they’re young – hence the growing ubiquity of marijuana-infused gummy bears and other candies.

It’s a compelling argument: Our country has already allowed the mass commercialization of two intoxicating substances, alcohol and tobacco, which together cause more than 500,000 U.S. deaths and $500 billion in social costs each year. Do we want to follow the same path for marijuana?

Now, more than ever before, the country may be ready to embrace Sabet’s line of reasoning. A legalization initiative in Ohio that would have granted an oligopoly to its deep-pocketed funders failed at the polls in November, but not before shifting the national dialogue around cannabis. Media outlets are reporting on the rise of “Big Pot" and marijuana advocates are bemoaning the fact that the country is entering a new era of cannabis reform in which “industry is taking over the legalization movement.” Sabet says the Ohio initiative has energized him and led to several new Project SAM donors.

"There’s a real tipping point here,” says Sam Kamin, marijuana law professor at the University of Denver. “It’s whether the industry runs this going forward or the policy wonks do. There’s real room for Sabet and others to say, ‘Let’s keep this from being tobacco and alcohol.’”

All it might take for the marijuana movement to lose ground is someone like Sabet, who has launched Project SAM chapters in three dozen states, to capture the hearts and minds of the people he calls “the marijuana middle,” the vast majority of Americans who don’t smoke pot but also don’t want to put people in jail for it. This could be why cannabis advocates are so antagonized by Sabet; maybe, deep down, they know he has a shot at stopping them.

But can Sabet even capture the hearts and minds of addiction specialists? At the end of his NAADAC conference presentation, he draws a hearty round of applause – from the 60 or so people in attendance. It’s a small fraction of the crowd the conference hall can hold.

The moderate turnout hints at the challenges that lie ahead for Sabet. While his kinder, gentler opposition to cannabis could be just what the anti-marijuana movement needs, with more than half of Americans now supporting legalization, are such efforts too little, too late? And if Sabet really has a realistic plan for marijuana that avoids both of hysterical excesses of the war on drugs and the corporate hazards of all-out legalization that the majority of Americans could get behind, why so often does it feel like he’s fighting this war all alone?

Driven to Compete

“Marijuana is more potent, it’s being marketed to kids, heavy use is at record highs … ”

It’s several hours before Sabet’s NAADAC presentation, and he’s hunched over a laptop in the 14th floor executive lounge of JW Marriot in downtown Washington, D.C. Through the lounge’s sweeping windows, the Washington Monument pierces the early morning sky. He’s prepping for several packed days of meetings and presentations, going over key talking points he has to hit not just at the addiction professionals convention, but in sit-downs with staff at the White House’s Office of National Drug Control Policy, a drug court judge and other power players.

This is what Sabet does: He roves all over the country and beyond on the dime of the various policy groups that have invited him, hammering home key facts and figures. But right now he’s being extra diligent with his preparations. He only has three days here in D.C., where the future of national drug policy will be decided, before he’s off to his next excursion, to Ireland. It’s imperative he’s at the top of his game.

Usually the Kevin Sabet show is a solo operation, but this morning he’s joined by two Project SAM staffers, both recently hired. One is Jeff Zinsmeister, a former State Department narcotics affairs officer in Mexico who left a consulting job at Bain & Company to work for Project SAM. The other is Will Jones, who at 24 launched “Two Is Enough,” an organization that tried – and failed – to stop D.C.’s marijuana legalization initiative in 2012.

Zinsmeister and Jones look tired as they help Sabet finalize a PowerPoint presentation. At one point Jones makes a run for coffee. Sabet passes on the caffeine. He’s wide awake and ready to go, even though he got in late last night after a flight from Melbourne.

Sabet has always been like this: driven to compete, driven to win. “ The guy is always on,” says Zinsmeister. Buoyant and approachable, albeit well-versed enough in politics to stick to the script, Sabet likes telling stories of how he actively chats up hardened opponents, dismantling their assumptions of “the devil Kevin Sabet.” His wife Shahrzad, a postdoctoral fellow in international affairs at Harvard University, says she fell for him when they were both studying at the University of Oxford in 2004 because of his sincerity – “He totally wears his heart on his sleeve,” she says – compared to the slick alpha males she was used to at the institution.

But Sabet also has an aggressive side, one that arises and flourishes on the debate stage. His mentors vividly recall the moment when, at an Orange County, California, event, 17-year-old Sabet faced off against local Superior Court Judge James Gray and wiped the floor with the libertarian drug war critic. And his supporters speak in reverential tones of his ability to verbally spar with the marijuana movement’s most eloquent advocates. “He is probably one of the best debaters I have ever seen,” says Christine Miller, director of Project SAM’s Maryland chapter.

Sabet’s competitive streak was honed on the tennis courts of the upper-middle class southern California suburb in which he grew up. He was known for besting more powerful players who underestimated him, for thriving when all hope seemed lost. He did it all as a singles player.

“I hated doubles,” he says. “I didn’t want to let my partner down, and I wanted to rely on myself. I was going to go down alone or triumph in victory.”

His interest eventually shifted to another competition: Fighting marijuana. His crusade was inspired by a tragedy in high school. “A friend of his in school was killed in a drug-related car accident,” says his older sister, Mina Sabet. “He felt very passionate about it and wanted to find out the reason for it.” It’s the sort of anecdote that Sabet could use for political leverage, but he won’t go into details. “I don’t want to talk about my friend out of respect to the family,” he says.

The son of Iranian immigrants, avoiding alcohol and drugs was part of Sabet’s Baha’i faith growing up. But the stories his parents told of social injustices in their home country made him reluctant to fully embrace the strict criminal penalties of the war on drugs. “Our own family experienced persecution in Iran,” says Homa Tavangar, his older sister. “We grew up with a very strong sense of social justice, and taking a very big stand around issues like human rights.”

Becoming an anti-pot advocate at a young age was at times a lonely endeavor for Sabet, but it also got him noticed. “He always stood out,” says Robert DuPont, first director of the National Institute on Drug Abuse and one-time drug czar, who was one of Sabet’s mentors. “He was never like other people. You meet him and he is so clear on the issues, so outspoken, so against the stereotype.”

Launching Citizens for a Drug-Free Berkeley while an undergrad at the famed freewheeling school helped land Sabet a research job with President Bill Clinton’s Office of National Drug Control Policy, then another drug policy position under President George W. Bush. Finally he became a senior adviser to President Barak Obama’s first drug czar. He had high expectations for Obama’s marijuana policies. “I saw legalization coming down the pike, and I hoped this president didn’t get distracted by these really seductive arguments,” he says.

But instead there were setbacks, including the 2009 “Ogden Memo,” the Department of Justice notice that U.S. attorneys shouldn’t prosecute those in compliance with state medical marijuana laws, a memorandum that fueled dispensary industries around the country. According to Sabet, the memo blindsided the Office of National Drug Control Policy, triggering what he remembers as “pit in my stomach.”

The Ogden Memo was the turning point for Sabet. Marijuana advocates suddenly seemed more politically savvy, replacing buzzwords like “legalization” with more palatable options like “taxation and regulation.” In the fall of 2011, he left his job with the Obama administration to adopt his own approach to anti-marijuana advocacy. He recruited two contrasting heavyweights to his cause: Patrick J. Kennedy, the former Democratic U.S. representative from Rhode Island whose struggles with drugs and alcohol inspired him to become a steadfast anti-legalization proponent, and David Frum, a neoconservative speechwriter for George W. Bush. With their help, he launched what he titled “the third way” on marijuana policy, instead of outright criminalization or legalization.

“We had lost the middle,’” he says. “We had to rebrand.”

The Third Way

In January 2013, two months after Colorado legalized recreational marijuana, Sabet and Kennedy launched Project SAM in Denver. “We’re opening the doors to allowing a new, powerful industry to downplay the effects of a substance they will be profiting off of and to downplay the effects of addiction,” Sabet told the media at the time.

While the United States generally accepts big companies running major industries, Sabet argues a line should be drawn for potentially addictive products like marijuana. “Big Tobacco was a disaster for our country in terms of the marketing machine that was activated, while the government looked the other way for a century,” he says. “Do we want to repeat that with yet another substance? And one that in fact, unlike tobacco, produces intoxication and therefore leads to car crashes, workplace accidents, school dropouts and mental illness?”

Project SAM launch, REUTERS, Rick Wilking Former Rep. Patrick Kennedy, D-R.I., (left) and Kevin Sabet at the 2013 launch of Project SAM.  Rick Wilking/Reuters

It’s why Project SAM opposes any form of legalization. But then what does the organization want in its place? Sabet has repeatedly promised to develop model laws, but so far, policy proposals encapsulating Project SAM’s preferred legal reforms, such as reduced marijuana arrests and increased public health campaigns and treatment options, haven’t materialized.

“What do they want as a policy?” says Tom Angell, chairman of the pro-legalization group Marijuana Majority. “They make these assertions, how it’s something in the middle, but it’s very vague.”

Sabet says his organization has been working with drug-law experts and political consultants on the matter, and Project SAM-backed policy initiatives are coming soon. “We have to go on the offense,” he says. “I am sick of saying, ‘Vote no, vote no.’ We want to be ‘yes.’”

Sabet insists these proposals will be a major shift from the punitive “War on Drugs” approaches of old, including policies he worked on as a White House adviser. But some of his opponents wonder if his evolution is simply political expediency. “For many, many years he was a major driving force behind jailing and demonizing marijuana users,” says Brian Vicente , a Denver marijuana attorney who co-authored Colorado’s 2012 legalization initiative. “Now that public opinion has shifted away from the drug war, he has attempted to rebrand himself as the ‘Smart,’ middle approach, without acknowledging his past.”

Then there’s the fallout Sabet predicted from the country’s first experiments with legalized marijuana, how he promised in 2014 that in Colorado, people should expect “criminal organizations to adapt to legal prices,” “our teens to be bombarded with promotional messages from a new marijuana industry seeking lifelong customers” and “the social costs ensuing from increased marijuana use to greatly outweigh any tax revenue.” Two years in, has the doom and gloom he foretold come to pass?

Marijuana Support Over Time | InsideGov

Sabet and others point to reports concluding that problems such as marijuana use among youth, cannabis-related hospitalizations and marijuana traffic deaths have all increased since Colorado legalized marijuana. But others argue these reports feature selectively parsed data to suit the authors’ purposes, and note that other studies indicate marijuana might lead to reduced driving fatalities and underage use.

The sky hasn’t fallen in Colorado or Washington State since marijuana became legal, concludes Jonathan Caulkins, a Carnegie Mellon University professor who studies marijuana policy. But that’s because, he says, it’s too soon to determine the social impacts of the policy change. He thinks that anyone who tries to spin the short-term data to either promote or condemn legalization is missing the bigger question: What happens years from now to the first generation to grow up not just with legalized but potentially mass-marketed cannabis?

“Only an idiot would predict that the problems would come in two years,” says Caulkins. “I think we are going to legalize this nationally, we are going to let Big Tobacco play, and 25 years from now we will say, ‘What were we thinking?’”

A Thousand Kevins

As his three-day Washington, D.C., junket progresses, Sabet and his two-person Project SAM entourage ping-pong from one appointment to the next. As an Uber driver transports the trio to the NAADAC conference, Sabet conducts a news interview with a British journalist over his cell phone while Zinsmeister and Jones tweak their boss’ conference slideshow. At the convention center in Bethesda, Maryland, the three grab granola bars and potato chips from a Starbucks to make do for lunch, then power-walk through the facility, looking for the right conference hall.

Throughout their exploits, there’s talk of money. Before the insurance association meeting, the three brainstorm as to how best ask for financial support. After Sabet’s NAADAC talk, Jones suggests they acquire a smartphone credit-card reader, so they can take donations from inspired audience members after future speeches. As they are driven through posh D.C. suburbs, they admire the sprawling residences, making cracks that “multimillion-dollar drug warriors” like themselves should get mansions like these.

Project SAM’s opponents have long wondered who is paying the nonprofit’s bills. Critics have scrutinized the fact that when Project SAM first launched, it received support from Community Alliances for Drug Free Youth, a California nonprofit that’s received funding from the Federal Drug-Free Communities Act, which means the organization could have a financial interest in preserving the country’s current drug policies and related grants. And they’ve pointed out that Project SAM appears to enjoy a cozy relationship with several local DEA task forces, which have long operated as an advance guard in the country’s war on drugs.

Sabet’s detractors also make note of the fact that Stuart Gitlow, an outspoken member of Project SAM’s board of directors, is the medical director for a pharmaceutical company marketing Zubsolv, a drug designed to treat opioid addiction, and that Robert DuPont, Sabet’s mentor, helps run a consulting firm specializing in drug testing management. Sabet himself was an advisory board member of the Drug Free America Foundation, an organization founded by Mel and Betty Sembler after they shut down STRAIGHT, Inc., a highly controversial drug treatment company. Drug manufacturers and drug testing companies are also major sponsors of anti-marijuana organizations like NAADAC. Could they be bankrolling Project SAM, too?

Sabet insists that his organization receives zero funding from pharmaceutical companies, drug-testing interests or the government, although some of his trips and talks have been financed by organizations that do. And while Project SAM hasn’t yet filed taxes for 2014 – the first year the 501c3 nonprofit was in operation – Sabet says that when it does, the records will show an annual operating budget of around $100,000, funded entirely by small donations and a few larger contributions from organizations like the Bodman Foundation and Patrick Kennedy’s Kennedy Forum. While recently new funding sources have allowed Project SAM to make two additional hires in Washington, D.C., the organization is still far from flush with cash. “On one hand, it’s a badge of honor how much we have done with so little,” says Sabet. “On the other, it’s kind of embarrassing.”

Project SAM’s financial situation isn’t just embarrassing; it also highlights just how much has changed since the days of bush-league cannabis activists going up against the war on drugs machine. In 2013, the Marijuana Policy Project posted $1.6 million in revenue, while the Drug Policy Alliance boasted over $9 million, and these organizations have used their coffers to outspend their opponents on major legalization initiatives by a factor of 10 or more. And while reporters now have a plethora of pro-marijuana spokespeople they can mine for comments on the importance of legalization, on the anti-legalization side, they mostly just have Sabet. While the head of Project SAM may be a capable spokesman, is his voice powerful enough?

“When we had the ‘Just Say No’’ press on drugs, we had the first lady leading the charge, and that’s powerful,” says Tom Gorman, director of the Rocky Mountain High Intensity Drug Trafficking Area and longtime drug-war soldier. “The anti-legalization side doesn’t have that crusader that people are going to look to follow right now, and that’s a real deficit. Kevin’s not a radical; he is very reasonable; he is looking at the science, but he’s just Kevin Sabet trying to do the right thing.”

Late on his first day in Washington, D.C., Sabet returns to the JW Marriot’s executive lounge to unwind over a club soda. He doesn’t drink, but it’s clear the long day is getting to him. His polished talking points slip away, and anger seeps into his voice. But he’s not mad at pro-marijuana advocates, the ones he’s endlessly battling. He’s mad at anti-marijuana activists, or rather the lack thereof.

“I want there to be a thousand Kevins,” he exclaims. “There can’t be just one Kevin. Kevin is not going to be able to do this alone. Kevin can’t just do this year after year, he is going to have a heart attack.”

Running Out Of Time

After his D.C. lobbying trip, Sabet flies to Dublin followed by London for meetings and presentations, then he’s off to upstate New York for a fundraising event. After that, there are strategy meetings in San Diego, followed by a trip south to speak at a conference in Mexico before returning to New York City, where he lives with his wife Shahrzad. Sabet says his international work is partially about correcting misconceptions about U.S. policy, but also “advocates abroad [who] ask me to come to give a shot in the arm to their efforts.”

Through it all he’s prepping for 2016. At last count, there are more than a dozen legalization and medical marijuana initiatives being readied for state ballots next year. “Obviously, I think 2016 is important,” says Sabet. “If we can figure out the angles that are important and be smart about it and not shoot ourselves in the foot, as we often do, we have a shot.”

But even some of Project SAM’s staunchest supporters are starting to sound like they’re losing hope. “We are not as far as I would have expected us to be,” says Patrick Kennedy, the organization’s co-founder. “I am proud to be affiliated with Project SAM and doing what I can to help, but I am facing the same ambivalence and intransigence he is facing. It’s very disheartening.”

But Sabet, for one, won’t be giving up the fight. He’s a “happy warrior,” says Kennedy.

It’s like he’s back on the tennis court, begging his opponents to underestimate him, hoping to thrive when all hope seems lost. He’ll keep fighting to the end – even if he’s all alone. “This is deep in my veins,” says Sabet. “I feel like it is my calling.”

At one during Sabet’s D.C. junket, his packed schedule risks getting the best of him. He’s slated to appear on what he believes is a taped BBC News segment, but the car service that’s taking him, Zinsmeister and Jones to the television studio gets snarled in beltway gridlock. While they’re still several blocks away, Sabet gets a call from the studio: The segment is live, not taped, and cameras are rolling in just a few minutes.

The three scramble out of the car and take off. Zinsmeister and Jones look stressed, but not Sabet. Running down the sidewalk, he’s grinning, like he’s having the time of his life.

“We’re running out of time,” he says. “It’s a good analogy.”

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California’s New Medical Marijuana Legislation: Cue the Bad Lawsuits

By Alison Malsbury on November 1, 2015 Posted in Advocacy, California, Legal Issues, Litigation, Medical Cannabis

We’ve written extensively of late about both California’s Medical Marijuana Regulation and Safety Act (MMRSA) and about the nationwide uptick in cannabis-related litigation (see here, here and here), so it comes as no surprise that there is already a lawsuit challenging the state constitutionality of California’s new marijuana legislation.

As I explain more fully below, this is not a good case for the cannabis industry. Not at all.

Please don't ask courts to declare all state legalization illegal.

Please don’t ask courts to declare all state legalization illegal.

Passage of the MMRSA signals California’s shift away from a loosely regulated, ambiguous grey marijuana market to a robust, state law regulated medical marijuana regime. For us as lawyers, that’s a great thing. And it’s a great thing for marijuana business owners too, since a solid state law regulatory scheme that meets the Federal Department of Justice’s requirement of “robust regulation” goes a long way towards keeping the Feds away.

But not everyone is celebrating California’s adoption of the MMRSA. Tight regulation inevitably means bad actors will be weeded out. It also means, in this case, that patient access will not be as loose and free as it has been under the current system. This is a tradeoff. The big benefit of a regulated system for California patients means things like product testing, safety and quality control requirements will be implemented and enforced.

Armstrong, plaintiff in the lawsuit against the State of California and operator of a medical cannabis collective in Santa Clara County, alleges that “the MMRSA violates the California Constitution because it amends a voter initiative without voter approval.” The complaint goes on to allege that the MMRSA “restricts the manner in which ill Californians are able to possess and grow marijuana for medical purposes and allows for criminal penalties and professional discipline for physicians who recommend marijuana under certain circumstances.”

Though we agree that the MMRSA does contemplate additional restrictions on cultivating and distributing marijuana in California, we do not believe that the intent of the voter initiative was to provide for unfettered and unregulated access to medical cannabis. The initiative and resulting regulations just did a poor job of creating a sufficient, logical regulatory framework. The MMRSA and the resulting implementation of a robust regulatory scheme is attempting to address the very real threat, caused by this insufficient framework, of federal intervention.

Putting aside, however, the main issue of the case involving violation of the California state constitution, the plaintiff in this case also raises the issue of federal preemption. Never have we seen a pro-pot plaintiff raise this issue in a lawsuit, though we have seen the issue raised in cases advocating for cities’ rights to ban state-legal commercial marijuana activity. In those cases, courts have punted the issue, deciding the case on the narrowest grounds possible. Though this case will likely be resolved on state law grounds, it is incomprehensible to us why the plaintiff in this case opted to raise the federal preemption issue. By doing so, they are essentially arguing that NO state can legalize in ANY manner because the federal government treats cannabis as illegal and federal law controls (preempts) state law.

We’ve said it before: Bringing a bad lawsuit in no way helps the cause.

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Rule or Law? The Difference Matters For Your Marijuana Business

By Daniel Shortt on October 28, 2015 Posted in Legal Issues, States

This is for federal bills, but it nicely illustrates how complicated the process can be.

Laws are different than rules and understanding the difference between the two can be important to your marijuana business’s bottom-line. I will use Washington State as the example.

In Washington, laws are generally enacted through initiative or through the legislative process. Initiatives allow voters to pass laws directly by popular vote. Washington legalized recreational marijuana by popular vote — Initiative 502 in 2012. The legislative process requires a bill pass through both Washington’s Senate and House of Representatives and then garner the Governor’s signature before becoming law. Recently, SB 5052 and HB 2136 were passed through the legislative process and established new Washington State laws regarding medical cannabis.

As is the case with other states with “robust regulation,” Washington cannabis businesses are also subject to rules created by state agencies without the political protections provided by initiatives and the legislative process. State agencies, like the Washington State Liquor and Cannabis Board (LCB), are government entities given the power to regulate and govern a specific area or industry. These agencies are typically run by unelected officials. Agencies arguably create more efficient government because they a focus on one discreet area or industry, with expertise not usually available to legislatures and lawmakers.

A rule is an agency order, directive, or regulation that applies to the public generally. Rules are similar to laws because those who violate them may be subject to penalties and sanctions. Rules can and do change constantly, whereas laws tend to remain more static. The LCB’s rule-making process may begin with an individual’s petition to the LCB, but often the agency itself initiates the process against a cannabis business if it sees a need to do so.

To enact a rule, the LCB must publish notice of the rule-making in the Washington State Register. The LCB then holds a public hearing at which citizens are given an opportunity to comment on the proposed rule. Citizens can also submit written comments to the LCB about the proposed rule. The LCB must consider the public comments and then issue an order of adoption, which explains the new rule and the basis for its adoption.  Agencies can also institute emergency rules, which are not subject to the above requirements and become effective immediately. These emergency rules only last for up to 120 days and they must be in response to some immediate issue or danger. The Washington Department of Health recently issued emergency rules for medical marijuana, for instance.

Despite similarities to laws, LCB rules are not subject to the same type of political recourse as laws. This is significant because LCB regulations have huge impacts on the cannabis marketplace. For example, in Initiative 502, voters enacted residency requirements that restrict issuance of cannabis licenses only to those who can demonstrate having spent a certain amount of time in the state (see here and here). The Initiative never mentions “True Party of Interest.” In its rule making though, the LCB created the term, True Party of Interest, and defined it, and now applies the residency requirements to any party deemed to be a True Party of Interest. The definition for a “True Party of Interest” includes all investors and the spouses of any shareholders or principal. Though never contemplated by the voters, the “True Party of Interest” rule significantly restricts the marijuana marketplace by making it difficult for out-of-state investors to put their funds into Washington State cannabis businesses. Moreover, Washington voters who disagree with the “True Party of Interest” rule have little recourse beyond lobbying to get this rule changed.

One of the best ways for citizens to get involved with LCB rule making is to comment during the agency’s rule-making process. Currently the LCB and the Washington State Department of Health are holding hearings regarding medical marijuana regulations. If you care about the future of the marijuana industry in Washington State you should make your voice heard at one or more of these hearings.

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Foreign Investors in the U.S. Cannabis Industry Face Their Own Special Risks

By Dylan Moore on October 30, 2015 Posted in Federal law and policy, Legal Issues, Medical Cannabis, Recreational Marijuana

Foreign investment in the cannabis industry. It's complicated.

The cannabis industry has always been international. Our first cannabis client was actually a Dutch company that hired us years before either Colorado or Washington had legalized. This client hired us to figure out what it would need to do as a foreign company investing in a U.S. cannabis business in a cannabis industry which this company was certain would eventually be legal. That client was unique for years, but nowadays, many more of our cannabis clients come from outside the United States. So far, they are mostly coming from Canada, the Netherlands, Australia, Germany, and Israel, with a smattering of clients from elsewhere in Europe, Latin America and Asia.

The foreign companies that contact us generally split fairly evenly between those seeking to get involved with ancillary companies and those seeking to get involved in the growing, processing or selling of cannabis. Invariably, they most want to know whether foreigners can invest in the U.S. cannabis industry and, if so, at what risk?

The short answer is a qualified yes for ancillary businesses and a qualified maybe for businesses directly involved with the plant. The immigration issues faced by foreign investors is just one of the many issues they face when investing into the US cannabis industry. But because we have been dealing with this issue frequently of late, we use it to illustrate how foreign involvement in US cannabis can be tricky.

U.S. Citizenship and Immigration Services maintains broad authority to limit entry of foreigners into the United States. This includes the authority to bar entry (or deport) a foreign citizen who has committed a crime, including a mere misdemeanor. Since any business activity involving marijuana remains illegal under federal law, a foreigner doing business with a cannabis company – even one operating completely legally in a state with the robust regulations required by the Cole Memo – is technically committing a crime and therefore may be deported. The Cole Memo dictates federal enforcement policy by prioritizing prosecutorial discretion; it does not create a legal defense for marijuana related crimes, even in states with legal cannabis, and it therefore offers no help to a foreign citizen in a deportation proceeding. Marijuana related activity (including involvement with state-legal marijuana) can also constitute “moral turpitude” in the eyes of immigration authorities and this designation can bar entry into the U.S. and prevent any chance of gaining U.S. citizenship.

Immigration authorities have the power to deport foreigners without having to comply with many of the legal safeguards to which U.S. citizens are entitled. For example, when immigration authorities are determining whether to deport someone for alleged criminal activity, the mere admission of the crime can often be enough to warrant summary deportation, even absent a formal conviction. This means a foreigner can be deported without ever being able to tell his or her side of the story, to explain the extenuating circumstances, or to make any other argument before a judge as to why deportation is unwarranted.

Though we are not aware of any foreign investor being deported for investing in a business that provides ancillary services or products to the cannabis industry, it is always possible that a zealous prosecutor or the USCIS will seek deportation by asserting that even ancillary businesses violate U.S. law by acting as an accessory to businesses that violate the Federal Controlled Substances Act. The deportation risks are greater for foreign investors who put their money into businesses that grow, process or sell cannabis.

Foreign investors must also always be mindful of the laws in their own country as well. And again, though we are not aware of any such prosecution, it is possible that some countries will prosecute their own citizens for having gotten involved in the cannabis industry of another country.

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6 Stories That Prove You Can Still Be Arrested For Growing Marijuana In Colorado

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By TNM News on October 9, 2015 Latest Headlines, Legal, News Feed

Although it may be “Legal” in some way, some operations for making your own marijuana are being targeted by both the Federal and State governments. Much like the law that you cannot make and distribute your own alcohol without the proper licensing and adhering to certain guidelines, the Marijuana industry follows suit.

Fox31 Denver Reports:

DENVER — 20,000 marijuana plants, 700 pounds of dried weed and more than 30 guns, all found right out in the open.

“You see a group of people who are actually actively engaged, farming the marijuana. So that means there are tents, cookhouses. There are irrigation systems in place. There’s a lot of pesticides,” said United States Attorney for the District of Colorado John Walsh.

The busts started Aug. 19 and spanned the state of Colorado as listed below. Six of them took place through Thursday.

Pike National Forest, Aug. 19 in the Green Mountain Area in Jefferson County. Investigation is ongoing.

Law Enforcement Officers from the U.S. Forest Service, Department of Homeland Security Investigations (HSI), Jefferson County Sheriff’s Office and the Colorado National Guard Joint Counter Drug Task Force joined together to complete an eradication of an illegal marijuana grow site in the Pike National Forest. The eradication team collected more than 3,900 plants and over 3,000 pounds of irrigation pipe, pesticides, flammable liquids, camping gear and trash.

Routt National Forest, Aug. 28, Buffalo Pass Area in Routt County, two arrested.

Law Enforcement Officers from the U.S. Forest Service, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) and the Routt County Sheriff’s Office joined together to eradicate an illegal marijuana grow site located in the Buffalo Pass area, northeast of Steamboat Springs. The eradication team collected approximately 1,000 plants and removed camping gear from the site. Further, a handgun was found. Additional site clean-up of trash and other items will be ongoing by the U.S. Forest Service. Two Mexican Nationals in the country illegally were arrested.

Private Land, Sept. 1, Cotopaxi and Westcliffe in Freemont and Custer County. 20 people arrested.

A DEA-led task force executed eight search warrants in Cotopaxi and Westcliffe as part of a major drug trafficking organization investigation. Agents and officers found well over 1,000 marijuana plants, 50 pounds of dried marijuana, 28 firearms, and $25,000 in cash. The investigation and seizures resulted ultimately in the arrest of 20 individuals, many from Cuba, acting in an organized manner according to investigators. Those arrested were growing the marijuana in Cotopaxi and Westcliffe, and then either driving or using UPS to get it to Florida.

San Isabel National Forest, Sept. 7, Cordova Pass Area northwest of Trinidad in Huerfano County, two arrested.

Hunters discovered an illegal marijuana grow site located in the Cordova Pass area approximately 40 miles northwest of Trinidad. The eradication team collected more than 11,700 plants as well as irrigation pipe, pesticides, flammable liquids, camping gear and trash. The U.S. Forest Service and Huerfano County Sheriff’s Office are working together to identify the individuals. The cultivation site spread across 10 acres with some of the growing areas above 10,000 feet in elevation. The overall grow area included a kitchen structure, three sleeping areas and a rifle. Two men were arrested at one of the campsites within the cultivation area.

Bureau of Land Management land, Sept. 15, along the Dolores River corridor between Gateway and Naturita in Montrose County, four arrested.

BLM Rangers discovered more than 1,200 fully mature marijuana plants, many exceeding six feet tall, along with 211 kilograms of dried marijuana and a rifle. Because of the size of the operation, officers spent two-and-a-half days eradicating and removing the plants. The rangers arrested four Mexican nationals who were on-scene and believed to be working the grow site.

Bureau of Land Management land, September 30, also along the Dolores River corridor between Gateway and Naturita in Montrose County, six arrested.

Law enforcement officers identified a marijuana grow site, also along the Dolores River. Evidence of at least 1,000 marijuana plants appeared recently harvested with approximately 69.6 kilograms of processed marijuana still on site. The rangers arrested one Honduran and five Mexican nationals at or near the site.

“We think this is being grown in Colorado to be shipped all around the United States to states where it’s not legal,” said Walsh.

Some grows discovered by hikers and hunters, others uncovered by law enforcement. Walsh calls operations like these a multifaceted problem.

“A major concern is this marijuana is worth a lot of money and there may be violence in connection with protecting it. It’s causing Colorado to be a source state for marijuana for other states that don`t want our marijuana. Its creating environmental damage in our mountains. Its creating safety problems in our mountains,” Walsh said.

32 people are now in custody in connection with these illegal operations

Some face up to life in prison.

Walsh has one message for anyone who thinks because weed is now legal in the state, they can just come in and grow it.

“You are not going to stay long in Colorado because you are going to be in a Federal prison somewhere,” he said.

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“Can a debtor in the marijuana business obtain relief in the federal bankruptcy court? No.”

August 27, 2015

No Relief: Ruling Highlights Lack of Options for Marijuana Companies Seeking Bankruptcy Protection

 

By John Schroyer

“Can a debtor in the marijuana business obtain relief in the federal bankruptcy court? No.”

That’s a line in the first paragraph of a recent court ruling against Frank Arenas, a Colorado marijuana grower and wholesaler who tried to win federal bankruptcy protection. A U.S. Bankruptcy Court judge initially ruled that Arenas can’t claim such protections because marijuana is still illegal, and an appellate panel affirmed that decision last Friday.

It’s the latest in a string of court decisions on cannabis-related bankruptcy cases dating back to at least 2012, when a judge involved in the Arenas decision issued a similar ruling involving another marijuana company. There have been at least four other such decisions as well in Colorado and California – all with the same outcome as Arenas’ case.

So what can distressed marijuana companies do if they’re on the verge of bankruptcy? The answer may depend on which state a company is in, and how it’s structured.

Arenas, for example, made a big mistake in not keeping his personal assets separate from his business, said Arizona attorney Gary Michael Smith. That’s evident, Smith said, because Arenas tried initially to file for Chapter 7 bankruptcy protection and then convert it into Chapter 13, which is only doable if it’s a personal – not a business – bankruptcy.

“The mistakes he made makes it pretty clear that he conducted business in his personal name, and/or he was personally guaranteeing the debt that his business was assuming, which is horrible,” Smith said. “One should not do that, particularly with those amounts of money.”

Sean McAllister, a Denver attorney who also works closely with the cannabis industry, said one of the best and most obvious ways to avoid such pitfalls is to be careful when setting up a marijuana business at the outset.

“The most important thing for any cannabis company is to be really thinking about this as you make agreements, as you borrow money, as you enter into partnerships, because there are things you can do to limit your liability,” McAllister said. “The lack of bankruptcy protection is a problem, but it’s more of a problem if people have exposed their personal assets.”

As Marijuana Business Daily wrote about last year, there are a number of ways that cannabis companies can prepare for financial hardships and possibly avoid even having to consider bankruptcy.

There may be some additional steps companies can take, depending on the state where a given business is located, Smith said.

For example, a possibly unique precedent was set in Arizona several years ago when a court sided with a cannabis company that owed creditors $500,000, Smith said. The judge tossed a lawsuit brought by two creditors, saying the loans were illegal in the first place because they were given to a business handling cannabis, which is illegal under federal law.

“If that guy walked into my office and had this problem, what I’d probably suggest is he go into a federal lawsuit to have the debt related to the marijuana operation deemed void for illegality,” said Smith, referring to the owner of the Arizona business seeking relief from creditors. That would mean “nobody could enforce those debts against” the company, he added.

That probably wouldn’t work everywhere, said Colorado attorney Rachel Gillette. She said the state put in place protections for such deals, so under Colorado statute such an argument wouldn’t apply.

Still, there are other potential state laws that businesses might be able to take advantage of, said New York attorney Hanan Kolko. Some states have their own versions of bankruptcy protections, he said, that wouldn’t have the same conflicts as federal bankruptcy laws.

“To an extent that a state has that, a cannabis business could use that,” Kolko said.

But that underscores the need for business owners to do their homework and talk to legal counsel, both before companies are founded and if they ever run into financial hardship. And it highlights a need for further reforms.

“It’s just another example which illustrates why we need substantive reform at the federal level,” Gillette said. “It doesn’t work to operate in this sort of quasi-legal arena. The federal law needs to change.”

John Schroyer can be reached at johns@mjbizmedia.com

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