Fed threat gets results as Calif. pot shops close

[October 21, 2011]  LAKE FOREST, Calif. (AP) -- A letter from federal prosecutors accomplished what nearly $600,000 in legal fees couldn't do in this Orange County suburb: it shut down medical marijuana shops.

Two weeks after California's four U.S. attorneys announced they were cracking down on dozens of operations across the state growing and selling medical pot illegally, all eight collectives that occupied the second floor of a Lake Forest mini-mall have closed.

Across the Central District of California, which stretches from Santa Barbara to San Bernardino counties, many of the 38 clinics have closed because landlords, threatened with criminal charges or seizure of their assets, were given just 14 days to evict their clients, a period that expires Friday. Other districts in California gave pot dispensaries more time to comply.

Some smaller California communities like Lake Forest have struggled in recent years to regulate the clinics, while others have banned pot shops altogether. Cities such as Los Angeles and San Jose have sought to rein in a large number of collectives that have cropped up. The fight has cost local municipalities millions of dollars in legal fees as it has shifted between city halls and courtrooms.

Frustrated and fed-up with pot collectives flouting their laws, cities asked the federal government for help.

The recent action has drawn a backlash from medical marijuana advocates who argue the collectives are protected by California law, which allows the drug to be cultivated and supplied to ill people on a nonprofit basis. Federal officials counter the clinics are lucrative ventures that operate under the guise they are helping the sick. Pot remains illegal under federal law.

To buttress their claim that shops were fronts for illegal drug dealing, federal authorities offered a list of examples, including longtime farmers raising a marijuana crop to a Los Angeles clinic that was shipping up to 700 pounds of pot out of state each month.

Most of those who received letters from prosecutors were smaller dispensaries. The Lake Forest group stood out because eight clinics were lined up in a building across the street from a kindergarten and preschool.

The little strip mall also houses a small market, a massage parlor and at least two dental offices.

Dentist Pankaj Narkhede said he was losing a few new patients every week after they found his office beneath the row of dispensaries upstairs.

The parking lot is usually full, fights have broken out and Narkhede said he's seen teens smoking in front of a head shop that opened after the clinics arrived. Moving isn't an option, Narkhede says, because it's too costly so he has to watch the steady flow of foot traffic, hoping something will change.

"If you are looking to improve this area, having what is upstairs is not going to help," he said. "It's the wrong place for the wrong thing."

In Lake Forest, a town of roughly 75,000 people, dispensaries began to crop up two years ago, about the same time when federal officials indicated they would not take aggressive action against those who complied with laws in 16 states where medical marijuana is legal. Pot clinics are not permitted in Lake Forest per the municipal code, which prohibits businesses that violate state or federal law.

In May, city attorney Scott Smith sent a letter to U.S. Attorney Andre Birotte asking for assistance because many of the dozen or so dispensaries weren't complying with zoning enforcement actions that sought to close them down and had cost the city nearly $600,000 in legal fees.

"In these cases we've just gotten nothing but contempt," from the dispensaries, Smith said. "They've been on notice for a long time. They've been pretty blatant in their disregard for compliance."

A forfeiture complaint filed by federal prosecutors against the owner of the building that has the eight dispensaries as tenants said that two of the collective operators had been arrested on drug-related charges; one was convicted.

Attorney Vincent Howard, who represents two of the Lake Forest pot collectives, said his two clients have closed their doors in the wake of the federal government's action. He said cities like Lake Forest need to have better regulations in order not to have problems with proliferation.

"Their position is they don't want them there," Howard said of Lake Forest officials. "I don't think they can ban a business that the state of California says is legal."

But an about-face by the U.S. Department of Justice put dispensaries on watch with a policy memo issued this summer noting they could face prosecution for violating federal drug and money-laundering laws.

"What we are seeing is a wholesale violation of both federal and state law by some people involved in the industry," said Thom Mrozek, a spokesman with the U.S. attorney's office in Los Angeles. "There are huge amounts of money going into this industry. It's our position that this goes way beyond simply paying rent and cultivating marijuana."

Six people were indicted this month on federal charges accusing them of trafficking as much as 700 pounds of pot every month from a now-defunct collective in North Hollywood that allegedly netted nearly $15 million in profits. A clinic that now occupies the same storefront was raided two weeks ago where federal agents said they found two 16-year-old boys smoking pot inside the shop.

In Dana Point, a coastal hamlet in south Orange County, city attorney Patrick Munoz said dispensaries there were "giant money-making machines," bringing in as much as $12,000 every day.

Through a series of legal actions, Dana Point was able to shutter seven clinics and a judge has awarded $7 million in civil penalties against some of the outlets, citing noncompliance with state law that says dispensaries can't sell marijuana for a profit.

"There was no effort to make sure only ill people were getting access to medical marijuana," Munoz said. "The law was being treated as a big joke by these guys."

In Murrieta, a city in southwestern Riverside County, Police Chief Mike Baray also asked for Birotte's help after a collective opened in July despite a local ordinance prohibiting such businesses. Police said the collective was burglarized the first week it opened and some customers have been robbed. The collective, which received a letter from federal prosecutors, has since closed.

Attorney David Welch, who represents three of the Lake Forest dispensaries that have closed since the letter went out, said every collective in the city received a warning letter that makes it unclear who they are really targeting.

"It doesn't seem there is any narrowing of who is a large operation and who is profiting," Welch said. "I think the main purpose of this tactic is to convince or scare landlords not to rent to medical marijuana collectives."

[Associated Press; By GREG RISLING]

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.