'Nonprofit' key to medical marijuana sales
Authorities may have seized jars and bags filled with medical marijuana from two Lake Forest dispensaries, but it was the businesses' financial records they were really seeking, records and interviews show.
Investigators searched for and seized receipts, buyer sheets, member lists, check stubs and other financial documents from 215 Agenda and The Health Collective looking for evidence that the two locations were profit-making businesses and not nonprofit collectives as required under California guidelines.
The raids -- which were launched on the two neighboring dispensaries on Nov. 13 -- provide a glimpse into how investigators and prosecutors in Orange County are tackling the growing number of dispensaries, many of which authorities say are operating illegally.
When it comes to medical marijuana, local authorities say their efforts are focused on the financial status of several dispensaries, and inspecting which are not operating as collectives or cooperatives, where earnings and savings are distributed among its members.
Instead, in search warrant affidavits filed in court, investigators point to the criminal history of some dispensary owners, and examples of where they were found to be in possession of tens of thousands of dollars in cash.
In one instance, a dispensary owner was pulled and found to be carrying more than $140,000 in cash -- the result of eight days worth of sales in one shop, according to an affidavit. In another case, an owner was carrying $76,000 and 23 pounds of marijuana.
Authorities say such examples are contradictory to California law which does not authorize collectives, cooperatives or individuals to profit from medical marijuana sales.
Must be nonprofit
"It has to be a nonprofit," said Assistant District Attorney Joe D'Agostino, who oversees the narcotics division. "We're looking at what the letter of the law is, and it says it must be nonprofit."
But proponents of medical marijuana argue that state guidelines are vague, and that even though owners or employees of dispensaries may receive a paycheck, the collective can still act as a nonprofit. That, said an attorney representing the owners of 215 Agenda and The Health Collective, was the case of the two dispensaries raided last month.
"If you compare it to any other type of nonprofit employees regularly take a salary for their time," said Christopher Glew, who represents the two owners. "It's a point of contention. What is a reasonable salary?"
Since the passage of Proposition 215 in 1996, several California cities have looked for ways to regulate or bar medical marijuana dispensaries, either through ordinances or zoning restrictions. But despite these efforts, dispensaries have settled in several cities. In Lake Forest, more than 20 dispensaries opened, prompting the city to file a lawsuit to shut them down.
But in the state, the most prevalent example is Los Angeles, where hundreds have popped up despite a moratorium.
While city officials there debated an ordinance to regulate dispensaries, Los Angeles County District Attorney Steve Cooley last month that cash sales were illegal.
In Orange County, officials were hesitant about making such a distinction, and said cash sales at dispensaries were one of several factors prosecutors and investigators would be looking into to see if dispensaries were following state guidelines.
"We're looking at what the letter of the law is, and it says it must be nonprofit," D'Agostino said.
In search warrant affidavits filed in court, investigators allege that 215 Agenda and the Health Collective were not operating as nonprofits. Instead, investigators with the Orange County Sheriff's Department paint a picture of two store-front businesses which were operating with a large amount of cash.
According to an affidavit, Mark Moen, owner of 215 Agenda, has been stopped on several occasions by police while carrying a large amount of cash. In September, Moen was allegedly stopped by Huntington Beach Police carrying $145,530 in cash. According to the affidavit, Moen told the officer he was the owner of 215 Agenda and said the money was the proceeds of eight days worth of sales.
In June, Moen was arrested on suspicion of being in possession of more than $25,000 derived from sale of a controlled substance in Ukiah County.
In the affidavit, investigators state they believe 215 Agenda is selling marijuana for a profit, instead of operating as a cooperative.
"I believe the business is a marijuana distribution company that distributes marijuana for cash to any individual with a marijuana recommendation without having any other relationship to the customer," the affidavit reads.
Cash and marijuana
A second affidavit alleges The Health Collective also makes a profit. The affidavit cites two previous searches of a Laguna Niguel home, where investigators found $76,000 and 23 pounds of marijuana in Nov. 2008.
According to the affidavit, John Wick, the owner of The Health Collective, told investigators at the time he was the primary caregiver for more than 500 people.
Moen and Wick were both arrested during the November searches. The District Attorney's office has not filed charges against the two.
But Glew contends the two businesses operated as a collective, and that overall profits were distributed among its members. And despite the fact that both owners had been carrying large amounts of cash with them, operational costs for the dispensaries are still unknown, he said.
Glew said he did not know specifics, but the cash may have been to cover operation costs, such as paying farmers.
Glew also said that investigators appeared to have targeted two of the busiest dispensaries in the city.
In an earlier interview, Glew also questioned the timing of the sheriff's raid, since the city of Lake Forest is c trying to shut down 22 dispensaries through a civil lawsuit. He described the search warrants as an effort by city officials to strong-arm the businesses into closing – a contention city officials deny.
But after the November searches, The Health Collective closed its doors where it operated on Raymond Way. 215 Agenda reopened days later, with several of its members volunteering time and donating office supplies, Moen said.
Employees at the collectives addressed the City Council after the raids and criticized tactics used by sheriff officials. Lt. Adam Powell, who oversees narcotic investigations for the Orange County Sheriff's Department said his deputies acted properly during the searches.
Glew, who has watched video from one of the dispensaries during the search agreed, though he questioned investigators decision to tape over surveillance cameras during the search.
Meanwhile, Powell said sheriff officials would continue to investigate collectives that were not following state guidelines: "If they're operating illegally, we're going to investigate."
By SALVADOR HERNANDEZ
THE ORANGE COUNTY REGISTER
December 04, 2009 8:46 AM