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A sticker to support proposition 19, a measure to legalize marijuana in the state of California
A sticker to support proposition 19, a measure to legalize marijuana in California, is seen on a power pole in San Francisco. Photograph: Mike Blake/Reuters
A sticker to support proposition 19, a measure to legalize marijuana in California, is seen on a power pole in San Francisco. Photograph: Mike Blake/Reuters

Cannabis crackdown threatens legal trade in 'medical marijuana'

This article is more than 12 years old
Federal prosecutors target legal marijuana trade despite Obama's liberal stance on medical use of cannabis

Steve DeAngelo doesn't have the luxury of worrying about a threatened US government crackdown on medical marijuana dispensaries like the one he runs in Oakland, California. For him, the crackdown is already in full swing.

As the head of the largest pot dispensary in the country, with more than 80,000 customers and annual revenues of more than $20m, DeAngelo always knew he would have a big target on his back if the federal authorities chose to challenge the state laws that allow him and thousands of other operators across the United States to sell marijuana on the open market.

At the end of September – even before California's top federal prosecutors announced their intention to start filing criminal charges against medical marijuana purveyors, their landlords and the newspapers and television stations where they advertise their services – the feds fired their first shot. The Internal Revenue Service, America's tax collecting agency, sent a letter demanding an initial $2.5 million in back taxes and characterised DeAngelo's dispensary, the Harborside Health Center, as a drug trafficking organisation.

Using a provision of the tax code originally written to help seize the assets of gangsters and organised criminals, the IRS said Harborside was disqualified from claiming its ordinary business expenses – payroll, insurance, rent and so on – as deductions and needed to pay taxes on them instead.

"We are a nonprofit organisation, so we have no profit to draw from to meet this demand," DeAngelo said. "This is not just an attempt to tax us. It's an attempt to tax us out of existence."

Worse may be yet to come: last month, California's four US Attorneys set a 45-day deadline for dispensaries and their landlords to make themselves scarce or face the consequences, and that deadline expired on Saturday. Whether the federal authorities have the nerve to carry out the threat remains to be seen, since their belligerence has provoked an extraordinary backlash in the media, in Congress and in the courts.

The federal authorities like to paint a picture of a free-for-all marijuana market, in which bogus dispensaries effectively hand out drugs to all-comers. But that does not account for the rapidly evolving regulatory framework imposed by states and local municipalities.

DeAngelo's dispensary is widely viewed as above board, as is a recently targeted marijuana farm in the wild coastal landscape of Mendocino County, north of San Francisco, where every last plant is tagged as meeting state inspection requirements. Many of the more obviously rogue operations, meanwhile, have been policed out of existence without federal intervention. An ordinance in Los Angeles last year cleared the Venice Beach boardwalk of dozens of bogus "kush doctors" who had sprouted as a tourist attraction to rival Amsterdam's fabled coffee houses.

Medical marijuana movement

Seeing himself not as a drug pusher but as an advocate and carer for the sick, DeAngelo is fighting with everything he has, and so is the rest of the medical marijuana movement. He has helped establish a nationwide publicity campaign to push back against the IRS and its characterisation of regulated dispensaries as traffickers.

His dispensary is about to be featured in a television reality show called "Weed Wars" in which his battles with the feds will be front and centre. He and other advocacy groups have organised protest marches up and down California.

DeAngelo has helped persuade his local congressman to introduce a bill to amend the tax code. California's entire congressional delegation is sympathetic, not least because marijuana dispensaries bring in tens of millions of dollars in badly needed tax revenues and support tens of thousands of jobs that the ailing economy can ill afford to lose.

One major lawsuit, filed by others, has challenged the federal government's constitutional right to trump state laws – medical marijuana is legal in 16 states, plus the District of Columbia. While the chances of prevailing on this seem slim, the suit has generated considerable publicity including a spotlight on one of the plaintiffs, a young California melanoma sufferer called Briana Billbray whose father is a Republican congressman.

DeAngelo's best weapon is the knowledge that 80 per cent of Americans support the medical use of marijuana and, for the first time according to a recent Gallup poll, more than half of them are now in favour of blanket legalisation. He knows he can win the argument that it is in everyone's best interests – including law enforcement's – to have people buy marijuana from regulated dispensaries instead of forcing them to turn to criminals on the underground market.

But he does not underestimate the power of the federal government and expects the fight to be a long and bruising one. "As goes Harborside, so goes the rest of the industry," he said. "This is a battle for the existence of regulated cannabis in this country."

Much of the movement's anger is directed at Barack Obama, who came into office three years ago promising to leave the legitimate side of the business alone – in start contrast to his predecessor, George Bush, who waged an explicit campaign against medical marijuana in California. Now many advocacy groups fear that Obama may end up even worse than Bush; CBS news recently concurred in a headline referring to "the White House jihad on pot".

White House stance

The true picture appears to be more complicated, however. Washington insiders who have discussed the issue with Obama's staff say the real impetus for the crackdown is coming from career prosecutors, not political appointees, and that the White House is afraid to challenge the prosecutors too openly for fear of falling into another Bush-era trap by interfering with their right to exercise independent judgement.

In other words, the prevailing problem in the White House is absence of leadership, not an excess of it. The Obama people "have painted themselves into a corner," said Aaron Houston of the group Students for a Sensible Drug Policy, "where now people expect... that he can enforce the policy his Justice Department originally set out. But it's not enforceable... He's massively overpromised."

A one-ounce bag of medicinal marijuana
A one-ounce bag of medicinal marijuana is displayed at the Berkeley patients' group in Berkeley, California. Photograph: Justin Sullivan/Getty Images

Houston said there is a pattern of cooperation between federal prosecutors, the IRS and regulators at the Treasury Department who have gone after the bank accounts of dispensary operators, and they have – up to now – successfully pressured the administration into giving them what they want. One policy statement issued by the deputy attorney general in 2009 made clear regulated medical marijuana dispensaries were not a target. A follow-up policy statement in June this year, however, made clear that "persons who are in the business of cultivating, selling or distributing marijuana", for whatever reason, are breaking federal law.

The change of tune, many marijuana advocates say, came about because several states took the first statement as a signal to pass medical marijuana laws and greatly expand the scope of their licensing and regulatory framework. That, in turn, alarmed the law enforcement establishment because they saw it as a gateway to wholesale marijuana legalisation, which they strongly oppose, and they pressed the Justice Department to give them clearance to enforce the drug laws as written.

Steve DeAngelo said it was no coincidence, in his view, that the businesses being targeted most vigorously are the most respectable and visible. "If they had gone after the profiteers, the people using state law as a front for criminal activity, none of us would be rising to their defence," he said. "But they are going after people who never diverted a gram from medicine."

It will be far from a simple battle. Aaron Houston and other pro-marijuana lobbyists in Washington are urging the Obama administration to address the issue more openly in public and acknowledge the groundswell of public opinion in their favour. The federal prosecutors in California, meanwhile, appear to be taken aback by the vehemence of the reaction to their announced crackdown.

One federal prosecutor during the Bush years, Joseph Russoniello of San Francisco, eventually pulled back from his own campaign to fight the medical marijuana movement, saying it was like "shovelling sand against the tide". DeAngelo and his friends are hoping the Obama-era establishment will quickly come to the same conclusion.

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