Tag Archives: Cannabis Industry

Marijuana firms in cloudy haze over banking woes

(Reuters) – Zach Lazarus, chief executive officer of A Green Alternative, a marijuana dispensary in San Diego, California, has lost count every time he re-opened a bank account after it was closed because of his connection to the cannabis industry.

Lazarus has had to play a game of “whack-a-mole” with banks, likening his frustrations to a popular arcade game in which a player repeatedly gets rid of something only to have it re-appear somewhere else.

“We have had Chase Manhattan and Wells Fargo shut us down … my wife’s personal bank accounts and credit cards have been shut down as well, all because I‘m in the cannabis industry,” he says.

Lazarus and other marijuana business owners in the $8 billion industry resort to cash-only transactions for business and to pay employees because they cannot get access to banks.

Despite making legal inroads in the United States, with California the latest state to legalize marijuana for recreational use starting Jan. 1, owners still feel the pinch.

The main problem is the classification of marijuana as a Schedule I controlled substance by the U.S. Food and Drug Administration, alongside heroin, LSD, and ecstasy – making it almost impossible to get banking services.

Banks are governed by federal laws and doing business or extending services to the firms means tougher scrutiny, often at significant costs, as banks have to do their own due diligence to prove transactions are legal.

They are required to prove that the firms are not selling to minors, funding crime groups, and not using the pretext of selling marijuana to push illegal drugs among other things.

A poll conducted by industry publication Marijuana Business Daily in 2015 showed 60 percent of the companies operating in the cannabis industry reported not even having a basic bank account.

UNDERGROUND ECONOMY

The void makes it hard for cannabis companies to conduct basic financial transactions such as deposit money, receive federal insurance or pay taxes.

“Most marijuana companies have a courier service, or a Brinks truck, or a big wheelbarrow full of cash that they send to the Internal Revenue Service to pay their taxes,” says Stuart Titus, CEO of California-based Medical Marijuana Inc (MJNA.PK).

With an estimated 165,000 to 230,000 full and part-time workers, according to Marijuana Business Daily, many marijuana business owners pay their employees in cash. bit.ly/2nQBeYw

“It is basically a kind of underground, cash-based economy,” said Titus.

Sapphire Blackwood, director of public affairs for the Association of Cannabis professionals, says she got paid in cash at her last firm, a San Diego-based cannabis consulting company.

“Because I get paid in cash, and even though I did no illegal activity, I’ve had to deposit so much cash every week and every so often … I felt like I was being stared at by the banks. It’s frightening,” she said.

Blackwood’s current firm also had banking problems. All the deposit accounts were closed because the word “cannabis” was in the name of the company, she said.

SHADY WORKAROUNDS

Workarounds exist but most are borderline unethical.

Medical Marijuana Inc0.17923

MJNA.PKOTC Markets Group – (Current Information)

+0.02(+15.48%)

MJNA.PK

  • MJNA.PK

A widely-used practice is to create a shell or a holding company whose operations are acceptable to banks, and conduct financial transactions through the holding company.

“In many states that have legalized cannabis, pot companies deposit cash under a different description,” says Tim McGraw, CEO of Canna-Hub, a California-based real estate development and property management company for the cannabis industry.

“A lot of operators set up accounts as real estate management companies or call themselves ‘medical marijuana’ companies when they are anything but,” McGraw added.

Others use personal bank accounts to deposit cash earned from the sale of products, wire payments to employees and pay companies.

However, California’s state treasurer John Chiang wants the state to consider creating a public/government-owned bank that could serve cannabis companies.

Chiang’s office formed a group made up of representatives from law enforcement agencies, banks, taxing authorities, local government and the cannabis industry.

It held several meetings with owners to discuss ways to alleviate banking challenges and make information more available to banks for better transparency.

Talks have also begun to form a multi-state group to lobby Congress to ease federal regulations for marijuana companies and remove the Schedule I drug classification.

But it will be an uphill battle. In November, Attorney General Jeff Sessions at a congressional hearing said former President Barack Obama-era guidelines on cannabis will remain, meaning even though a state can legalize marijuana, it will continue to be illegal on the federal level.

To view a graphic on Legalization legislation jpg, click on this link: tmsnrt.rs/2AC91Hk

Reporting By Aparajita Saxena in Bengaluru; Editing by Bernard Orr

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Where does Trump Supreme Court nominee Neil Gorsuch stand on marijuana law?

Dylan Stableford

Senior Editor

Yahoo NewsFebruary 1, 2017

President Trump’s Supreme Court nominee, Neil Gorsuch, is a native of Colorado, the first state to legalize marijuana for recreational use. So where does Gorsuch stand on the pot issue?

It’s not entirely clear.

Gorsuch, a conservative federal judge on the 10th U.S. Circuit Court of Appeals in Denver, has not voiced his views on legal weed — at least not publicly.

But the 49-year-old, who lives with his family in the cannabis-friendly college town of Boulder and teaches at the University of Colorado Law School, has offered a written opinion in several marijuana-related cases.

In 2010 (U.S. v. Daniel and Mary Quaintance), Gorsuch ruled against a couple who tried to argue that federal marijuana distribution offenses should be dismissed on religious grounds because he found the defendants to be insincere:

Daniel and Mary Quaintance responded to their indictment for conspiracy and possession with intent to distribute marijuana with a motion to dismiss. They didn’t deny their involvement with the drug, but countered that they are the founding members of the Church of Cognizance, which teaches that marijuana is a deity and sacrament. As a result, they submitted, any prosecution of them is precluded by the Religious Freedom Restoration Act (“RFRA”), which forbids the federal government from substantially burdening sincere religious exercises absent a countervailing compelling governmental interest.

After taking extensive evidence, the district court denied the motion to dismiss. It held, as a matter of law, that the Quaintances’ professed beliefs are not religious but secular. In addition and in any event, the district court found, as a matter of fact, that the Quaintances don’t sincerely hold the religious beliefs they claim to hold, but instead seek to use the cover of religion to pursue secular drug trafficking activities.

In 2013 (Family of Ryan Wilson v. City of Lafayette and Taser International), Gorsuch held that a Colorado police officer’s fatal Taser use on a man who was fleeing a marijuana arrest was justified:

Illegal processing and manufacturing of marijuana may not be inherently violent crimes but … they were felonies under Colorado law at the time of the incident. And Officer Harris testified, without rebuttal, that he had been trained that people who grow marijuana illegally tend to be armed and ready to use force to protect themselves and their unlawful investments.

And in 2015 (Feinberg et al. v. IRS), Gorsuch ruled against the owners of a Colorado dispensary who had refused to turn over data to the Internal Revenue Service because they feared they would be incriminating themselves, since marijuana remains illegal under federal law:

This case owes its genesis to the mixed messages the federal government is sending these days about the distribution of marijuana. The Feinbergs and Ms. McDonald run Total Health Concepts, or THC, a not-so-subtly-named Colorado marijuana dispensary. They run the business with the blessing of state authorities but in defiance of federal criminal law. Even so, officials at the Department of Justice have now twice instructed field prosecutors that they should generally decline to enforce Congress’s statutory command when states like Colorado license operations like THC. At the same time and just across 10th Street in Washington, D.C., officials at the IRS refuse to recognize business expense deductions claimed by companies like THC on the ground that their conduct violates federal criminal drug laws. So it is that today prosecutors will almost always overlook federal marijuana distribution crimes in Colorado but the tax man never will.

“Yes, the Fifth Amendment normally shields individuals from having to admit to criminal activity,” Gorsuch explained. “But, the IRS argued, because DOJ’s memoranda generally instruct federal prosecutors not to prosecute cases like this one, the petitioners should be forced to divulge the requested information anyway. So it is the government simultaneously urged the court to take seriously its claim that the petitioners are violating federal criminal law and to discount the possibility that it would enforce federal criminal law.”

Outside of those cases, there isn’t much on Gorsuch’s pot stance to go on. However, one of Gorsuch’s former students told a website called the Joint Blog that he once asked the Colorado jurist whether he supports legalization of marijuana.

Gorsuch reportedly responded by saying that he “at the very least” supports states’ rights in regulating marijuana. Cannabis, like heroin and LSD, is currently a Schedule I drug under federal policy, “defined as drugs with no currently accepted medical use and a high potential for abuse.”

The cannabis industry remains cautiously optimistic Gorsuch will allow states to continue their march toward marijuana legalization. (Yahoo News photo illustration; photos: AP)

The cannabis industry remains cautiously optimistic that Neil Gorsuch, if he is confirmed as a Supreme Court justice, will allow states to continue their march toward marijuana legalization. (Yahoo News photo illustration; photos: AP)

If the account is true, that would put Gorsuch more or less in line with the man who nominated him.

At a campaign event in October 2015, Trump said he thinks legalization of pot should be “a state issue, state-by-state.”

In an interview with Fox News that year, Trump said he supports medical marijuana “100 percent.”

Which is why marijuana industry leaders are cautiously optimistic about the prospects of cannabusiness growth in the Trump era.

“For the most part, experts all think we will see a continuation of some form of the status quo,” Chris Walsh, editor of Marijuana Business Daily, told Yahoo Finance last month. “Maybe there will be some efforts to crack down here and there, but the consensus is that a widespread crackdown will be difficult.”

“If Trump’s going to attack the marijuana industry — like the recreational side, or the new states that legalized — it’s going to be very difficult for him to do that,” Walsh added. “He’s going to have a very hard time unwinding all the time and money and effort that states have put into these programs.”

The same goes for Gorsuch.

“We believe that a conservative legal philosophy should be consistent with respect for federalism and state sovereignty,” Taylor West, deputy director of the National Cannabis Industry Association, wrote in an email to Yahoo News. “Voters in 28 states have chosen to establish legal, regulated cannabis programs in their states, and state lawmakers and regulators have implemented those programs. Trampling on those state initiatives would be the kind of federal overreach that conservative judicial leaders typically speak out against.”

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