1. chillinwill
    Businesses need banking services, lawmakers say

    Medical marijuana clinics are lawful businesses and the Treasury Department should set rules that encourage banks to provide financial services, according to 15 members of Congress led by US Representative Barney Frank, a Newton Democrat.

    "Legitimate state-legal businesses are being denied access to banking services, which does not serve the public interest," the lawmakers said in a May 20 letter to Treasury Secretary Timothy F. Geithner that was distributed yesterday by Americans for Safe Access, a patient-advocacy group.

    The letter was written by Representative Jared Polis, a Colorado Democrat whose state is one of at least 14 that have legalized marijuana for medical use. He asks the Treasury to issue "formal written guidance" assuring banks they won’t be targeted for doing businesses with companies that distribute medical marijuana.

    Bank of America Corp. and Wells Fargo & Co. are among the US lenders that have stopped opening new accounts for vendors that provide medical marijuana because cannabis consumption and distribution are illegal under federal law.

    Wells Fargo is headquartered in San Francisco, the epicenter of the US pro-marijuana movement. Californians will vote in November on whether to legalize marijuana for recreational use.

    "If states want to make it legal or not, it should be a state matter," Frank said in a telephone interview yesterday. "It's wrong for the banks to be told by Treasury they can't service them the way they would service any other business."

    Andrew Williams, Treasury spokesman, didn't have an immediate comment.

    Frank, chairman of the House Financial Services Committee, signed the letter with 12 Democrats and two Republicans, Representatives Ron Paul of Texas and Dana Rohrabacher of California.

    Frank and Paul are cosponsors of a bill that would repeal the federal law that makes marijuana use a crime and let states decide whether to legalize it. States that do so then would be able to collect sales tax on marijuana, Frank said.

    Denying financial services to medical marijuana dispensaries creates "an increased risk to public safety with potential theft or robbery that any cash-only or cash-reliant business faces," and makes it harder for vendors "to accurately account for tax liability," Polis wrote in the letter.

    The decision by big banks to shun an industry that could generate $100 billion in annual sales has created a void and prompted marijuana entrepreneurs to search for alternative financial services providers, said Allen St. Pierre, executive director of the National Organization for the Reform of Marijuana Laws, based in Washington, D.C.

    "The scramble is definitely afoot right now for procuring not only competent services, but also fairly priced ones," St. Pierre said.

    By Peter Eichenbaum
    May 25, 2010
    Bloomberg News


  1. Terrapinzflyer
    Push to protect banks on legal pot businesses

    Fifteen U.S. representatives, including seven from California, are urging the Treasury Department to say it won't "target or pursue" national banks that do business with medical marijuana distributors operating legally under state laws.

    In a letter to Treasury Secretary Timothy Geithner, the lawmakers said, "dispensary operators are finding it increasingly difficult to maintain accounts with financial institutions."

    That may be true of national banks, but many state-chartered banks are happy to do business with medical marijuana dispensaries, as long as they are operating legally.

    Medical marijuana is legal in 14 states, including California, and many more states - out of compassion or the need for new tax revenues - are considering legalizing it. California voters will decide in November whether to make it legal for recreational use as well.

    But growing and distributing marijuana is still illegal under federal law and for that reason, many national banks won't do business with medical marijuana distributors. Bank of America, Chase and U.S. Bank all confirmed that they won't do business with medical marijuana distributors, even in states where it is legal.

    Wells Fargo said it stopped opening new accounts with medical marijuana dispensaries this month and is reviewing its existing accounts with them. "In general, we follow federal, not state, law," says Wells spokesman Chris Hammond. "The decision was made to have a consistent standard."

    State vs. federal

    National banks have often claimed that they are exempt from state consumer protection and other laws because federal laws pre-empt them. In many cases, the courts have agreed with them. So it could appear inconsistent for a national bank to claim exemption from some state laws yet agree to do business under others.

    Federal pre-emption is a big issue in the financial reform bill being debated in Congress.

    Some Bay Area dispensaries say they've had no problem opening business checking accounts.

    Mark Samuel, manager of Medithrive in San Francisco, says he banks with "one of the big boys," but wouldn't name which one.

    Rose Muniz, manager of Blue Heaven Coastside, says, "Wells Fargo has been a big supporter of the Blue Heaven Collective. They welcomed our business." (The dispensary's future is in doubt after it was denied a business license this week.)

    Erik Miller, manager of the Berkeley Patient's Care Collective, says his operation has a checking account with San Francisco-based Mechanics Bank "and they're great."

    Rauly Butler, a senior vice president with Mechanics Bank, says "several cannabis clubs bank with us" and they are treated like any other business.

    "We have to verify the ownership, who the (check) signers are. We have to make sure they are permitted to do business. We verify any filings with the state of California, the articles of incorporation," he says.

    He says the clubs "are a little more work" than other clients because "they are cash intensive. They come to the bank more often to make deposits."

    His bank will not do credit card processing for cannabis clubs or other businesses that have a higher risk of charge backs, "but there are processors who will," Butler says.

    Mechanics Bank will not make loans to medical marijuana purveyors and doesn't know of any that will.

    Community Bank of the Bay in Oakland also has "a fair number (of dispensaries) banking with us," says its CEO, Brian Garrett.

    "We used to have more," he says, but a few years ago, the Federal Deposit Insurance Corp. "made it very difficult for us to bank them," and he closed some accounts.


    Since then, he hasn't had any extra attention from regulators. "We are in strict compliance. We follow all the rules about suspicious activities and large currency transactions," Garrett says.

    Some medical marijuana shops say they have been dropped by banks but were able to take their business elsewhere.

    Lisa Molyneux, founder of Greenway Compassionate Relief in Santa Cruz, says she originally had an account with BofA. But a few years ago, "they suddenly closed my account, sent me a check and said because of our business, they didn't want to do business anymore. Then I opened one with Wells Fargo, who I am currently with. We are waiting to see what happens next."

    Steve DeAngelo, executive director of the Harborside Health Center in Oakland, says his business had an account with California Bank & Trust. "After two-plus years, the bank's parent company in Utah found out the nature of our business and said we had to remove all funds from their institution within 30 days," he says.

    Harborside was able to move its account to Sterling Bank in San Francisco. Butler says Harborside was also forced to switch credit card processors around the same time last fall.

    "We did $20 million in gross sales last year. We are very, very solvent. But we were never given the kind of access to financial services another business would," he says.

    DeAngelo says he would like to get a business line of credit for emergencies. And as more states legalize medical marijuana, "I would like to establish an ongoing relationship with a national bank. Unfortunately, we haven't been able to do that."

    In their letter to Geithner, the lawmakers said that without access to financial services, some pot dispensaries could be forced to go to an all-cash business, which could pose a threat to public safety and tax collection.

    Last October, U.S. Attorney General Eric Holder put out a statement saying that federal prosecutors should not use their limited resources to pursue individuals who are in "clear and unambiguous compliance" with state laws providing for the use of medical marijuana.

    The lawmakers who signed the letter are hoping Geithner will make a similar statement, saying the Treasury Department will not target banks that have accounts with legal marijuana operations for violating money laundering or other national banking laws.

    Letter signers

    The signers included Democrats Barney Frank of Massachusetts, Jared Polis of Colorado, and Sam Farr, Pete Stark, Lois Capps, Brad Sherman, Lisa Sanchez and Zoe Lofgren of California. Two Republicans, Ron Paul of Texas and Dana Rohrabacher of California, also signed.

    Kathleen Pender
    Tuesday, May 25, 2010

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