IN CALIFORNIA, A DIFFERENT DRUG WAR IS BREWING Issue Is Whether To Curb, Legitimize Shops That Sell Medical Marijuana SAN FRANCISCO - Kevin Reed has a broad smile as he watches a stream of customers - as many as 300 a day - examine the neatly displayed merchandise at his Green Cross medical-marijuana dispensary. Several dozen large glass jars, stuffed with green buds and labeled with names such as "Juicy Fruit" and "Wonder Woman," sit on the counter in the narrow San Francisco shop that shares the block with a hair salon and Irish bar. An extensive price list on a large white board starts at $40 for an eighth of an ounce. Mr. Reed and the city's 40 other pot-club operators are at the center of a raging debate over who, if anyone, should regulate them - a subject that grew hazier in June when the U.S. Supreme Court ruled that medicinal-marijuana laws in a dozen states including California do not protect users or suppliers from federal prosecution. On one side of the regulation debate are critics who say strict rules are needed to prevent further proliferation of clubs in a city where they already outnumber Burger Kings and McDonald's combined. Law enforcement officials have called the unregulated operations "a great lie" and earlier this summer raided three clubs, alleging illegal drug-dealing and money-laundering. On the other side are advocates suspicious of any oversight, fearing it will aid federal prosecutors. Other advocates in the Bay Area and beyond are closely watching the outcome, hoping new regulations will serve as a model for protecting patients' access and deflecting federal interference with medicinal-marijuana laws. Not surprisingly, the debate is especially vigorous in the city where the medicinal-marijuana movement got its start more than a decade ago. "This is where it was born, and we have to protect it," said San Francisco Supervisor Ross Mirkarimi, a longtime proponent of marijuana decriminalization who has written 60 pages of proposed new rules aimed at driving unscrupulous operators out of town. Seeking to legitimize the clubs as businesses, Mr. Mirkarimi is proposing that the clubs hold a business license, do background checks on employees, and keep accurate accounting to prove to health officials that they are not generating "excessive profits." Mr. Reed, a 31-year-old former mobile-home salesman from Alabama, would seem an unlikely supporter of such rules. He uses marijuana to treat back pain from a car accident and decided last year to open his own dispensary - after being convicted of a misdemeanor for growing marijuana in his San Francisco apartment. His parole papers explicitly say he may work at such a dispensary. His customers on a midweek afternoon include an ill woman and her son from Marin County, Calif., a San Francisco Mission District artist with HIV/AIDS and a 25-year-old who says smoking dope relieves back pain and stress after his day on the job cleaning carpets. (Mr. Reed's security crew won't let anyone in the door unless they have a San Francisco health department card that indicates marijuana use has been recommended by a doctor, but he admitted to much looser rules in the past.) And, as might be expected in San Francisco, neighborhood complaints also are a major factor behind the new rule proposals, including controlling traffic, litter and the wafting of odors. A surge in business has made for unhappy neighbors of the Green Cross, which is fighting attempts to shut it down. Mr. Reed has hired a security crew that doubles as parking attendants, installed ventilation systems, banned use of marijuana on the premises (except by the staff), and got a land-use permit. "I want to be treated like any other business," said Mr. Reed, who pays sales tax to the state and provides health insurance for his employees. He says he runs the Green Cross as a non-profit and pays himself about $65,000 a year. After an embarrassing incident last spring, San Francisco Mayor Gavin Newsom is on board for new regulations, too. In March, a dispensary was about to open in a city-backed residential hotel for recovering addicts. When the mayor got wind of it, he asked to see the city's rules for establishing clubs, and found virtually none. The board of supervisors has called a moratorium on new clubs, pending adoption of new regulations, which could come this fall. Mr. Newsom, who supports medicinal marijuana, recently told a gathering of club operators and advocates that he fears the city's current lawless approach will hurt the movement: "We can't screw this up." With about 40 pot clubs, up from about a half-dozen in 1999, San Francisco has the most of any city in the nation. An advocate Web site lists about 160 clubs statewide. The number of cards issued by the city's health department to pot patients has quadrupled to about 8,000 in four years. San Francisco clubs have mushroomed in recent years because other Bay Area counties and cities have banned them or made rules so onerous few can operate. Oakland has limited the number of clubs citywide to four, Berkeley to three. Most eyes, however, are on San Francisco. Devising rules for selling pot, even in a liberal-minded city, is complicated. Critics range from other supervisors, who are calling for stricter location controls and business hours, to Terence Hallinan, the former district attorney of San Francisco and well-known supporter of medicinal marijuana who is defending one of the men charged in the June raids. "I don't think some regulation is a bad idea," he said, "but it can be dangerous to keep written records of dates and sales. As a defense attorney, I tell my clients it's not a good idea. The feds could subpoena all of it." Distributed by Knight Ridder/Tribune Information Services.