Video: Pot for medicine and profit

By Anchor
CNBC
updated 12/8/2010 5:54:02 PM ET 2010-12-08T22:54:02

The story of marijuana’s growing acceptance in America begins in the Colorado Rockies, where cannabis is meeting capitalism head-on.

Once a month, at his downtown Denver restaurant, chef Scott Durrah teaches a cooking class. It’s well attended, mostly by retired and affluent boomers. It’s exactly the market Durrah and his wife and business partner Wanda James want to reach.

“What we're seeing, which is really interesting, are older people,” said James. “I would say over the age of 30, and definitely women. These women are your mom, your grandmother, women that you see at the post office, at the day care center."

It’s their new twist on classic cuisine that draws this crowd. The ingredients are common, except for one — a Colorado-grown herb. The secret ingredient is marijuana.

Pot has arrived in mainstream America. And entrepreneurs like Durrah and James are leading the way as one of Denver’s power couples, prominent in the local political and business scenes. He’s is a former marine. She’s an ex-naval intelligence officer, a successful public relations executive and a top political fundraiser.

In most places in America, they would be considered dope dealers. In Colorado, they are savvy entrepreneurs in a fast-growing, state-sanctioned industry, branding and marketing medical marijuana under their label, “simply pure.”

It’s a new kind of company in an old industry, one that generates tens of billions of dollars a year in this country. Most of it illegally.

Durrah and James are taking the high road, using their business knowhow to take America’s most popular drug from the back alley to the corporate suite.

“When you look around this industry and the people who have come into the industry, there are people who were laid off from corporate America," James said. "This is America's new hot industry.”

James took CNBC to the heart of the operation: a lush marijuana farm inside a temperature-controlled warehouse. With 1000-watt lights, a sped-up growth cycle produces a new crop every two to three weeks - about twice as fast as Mother Nature. According to James, a typical plant yields 2.5 ounces of marijuana, with high-end varieties selling for $300 to $450 an ounce.

CNBC Special Report:
Marijuana USA

Even at those prices, medical marijuana is flying off the shelves. The choices are exotic, like choosing a bottle of wine. If you need help, just ask the pros, known here as “bud-tenders.”

As long as you have a state medical marijuana license, you can sample all you want. It’s all regulated, taxed and legal as far as the state is concerned.

Federal law, on the other hand, said pot is illegal. But in 2009, President Barack Obama directed the U.S. Department of Justice to defer to state laws regarding medical marijuana. With a single memo, the White House turned 70 years of prohibition on its head by advising U.S. attorneys in medical marijuana states to not go after individuals who are “in compliance with state laws.”

The threat of raids by the Drug Enforcement Administration seemed a thing of the past, and Colorado’s cannabis gold rush took off. People applied for medical marijuana licenses in droves, flooding the health department with more than 500 applications a day. The number of dispensaries jumped from about a dozen to more than a thousand across the state — outnumbering Starbucks almost two to one.

Today, you can buy pot next to a pizzeria, an auto repair shop or inside a medical office building. From downtown to the suburbs, pot dispensaries become neighborhood fixtures.

That’s too close to home for some parents, like Eric and Stacey Howell.

“You don’t want it invading your household, let alone your neighborhood, let alone your state,” said Stacey Howell, an elementary school teacher and mother of three. “As a parent, drugs are always in the back of your mind. From the minute your child is born, that's something you have to teach your child because it's out there.”

James said the marijuana industry is taking a more responsible approach to marketing than some others.

“What kind of signal does it send to your children when you have a fully stocked refrigerator with Coors Light or with Budweiser in it?” James asked. “And then the campaigns that are behind those alcohol products of the half-naked women? What kind of signal is that?”

But with medical marijuana laws already on the books in Washington D.C. and fifteen states, there’s an army of new marijuana entrepreneurs contributing to the supply. Samantha Sandt, 21, is one of them. She jumped at the chance to get in on the ground floor of the pot boom, selling seeds.

“We’re a new enterprise’” she said. “There’s endless opportunities. It’s like the Internet boom.”

With a degree in marketing and business, Sandt’s first job out of college is with Centennial Seed. Their seeds aren’t cheap: they retail for $70-$100 a dozen.

“We have close to 100 retailers in under six months,” she said. “We keep receiving calls day in and day out of more people interested in seed.”

But just as Colorado’s pot business took on an air of legitimacy and began thriving, the federal government fired a warning shot aimed at Chris Bartkowicz, who had been cultivating for years, long before medical marijuana was legal. Bartkowicz said he wanted nothing more than to come aboveground and become licensed and legitimate.

"You don’t see back alley deals with cigarettes," he said. "You don't see back alley deals with alcohol. But you do see it with marijuana. If it was legalized, taxed and government-regulated, we wouldn’t have problems like this. I wouldn’t be facing life in prison."

Bartkowicz was just another pot grower when a local television station asked for an interview. He agreed and proudly showed off the goods in his basement. It was a sensational story with a dramatic ending: the DEA raided Bartkowicz’s home and arrested him.

"If you go on the news and you show this marijuana grow and you tell me what house it's in, what am I left to do?” said DEA Special Agent Jeff Sweetin, who was in charge of the case. "(It’s a) violation of federal law, clear and simple.”

But it was not so clear and simple to Bartkowicz, who’d put his faith in that Justice Department memo, which advised the Feds not to crack down on people complying with state laws on marijuana. He was charged with possession of more than 100 marijuana plants with “intent to manufacture and distribute.”

“I was state compliant,” he said. “I had no fear. I was not worried about the Feds coming. No state charges have been levied against me and no state investigation was conducted. Why would I even have a hint of fear of the federal government?"

With a prior drug conviction, Bartkowicz was looking at a sentence of 40 years to life. He pled guilty and is hoping to get that reduced to five years.

BLTWY: Politicians' love-hate relationship with pot

With so many medical marijuana businesses here breaking federal law, Bartkowicz’s story sounded an alarm. But growers like Durrah and James are taking their chances.

“The federal government has been very, very clear in its guidelines that if you are operating under the guise of your state regulations, that it's supposed to be a hands-off scenario,” said James. “Which is why we feel confident to be able to do this industry and not fear, every morning when we wake up, of being arrested for this.”

James may not fear going to jail, but that’s not the case for growers in states without medical marijuana laws, where the crackdown continues.

© 2012 CNBC, Inc. All Rights Reserved

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