IE 11 is not supported. For an optimal experience visit our site on another browser.

DEA cracks down on money-making pot clinics

The Drug Enforcement Administration is embarking on a stepped-up effort targeting medicinal marijuana clinics run by people who appear to flout rules on how much profit they can take home.
/ Source: The Associated Press

Federal agents trailed Sparky Rose as he drove a Porsche Carrera convertible to his medical marijuana clinic.

Under California law, clinics are supposed to dispense marijuana just to seriously ill people and clinic owners are to get only “reasonable compensation.” But to the U.S. Drug Enforcement Administration, the sports car suggested that Rose might be pocketing big money from his purportedly nonprofit clinic, New Remedies Cooperative.

Rose was arrested in October and accused of illegal drug trafficking — charges he denies. According to court papers, an investigation turned up records showing $2.3 million was deposited in a New Remedies bank account over eight months starting in December 2005, and Rose wrote himself weekly checks of $9,600.

California was the first of 12 states to allow the sale of marijuana for medicinal purposes, mainly pain control, and is regarded as having the loosest regulations.

A market with few rules
Oversight is lax and there are few specific guidelines for buyers and sellers of a drug still illegal under federal law.

Who can open a clinic, what constitutes reasonable compensation and who can grow and supply marijuana are all open to broad interpretation — factors that have helped fuel a surge in new clinics, to about 400 statewide. Los Angeles alone has about 100.

Oakland, Santa Rosa and even famously permissive West Hollywood are among cities that have imposed moratoriums on new clinics amid concerns owners and buyers are abusing the law. Los Angeles Police Chief William Bratton has called for a similar moratorium in his city.

The DEA also has taken notice, embarking on a stepped-up effort targeting clinics run by people who appear to flout the reasonable compensation provision.

Federal officials raided 11 Los Angeles-area dispensaries in one day in January, the largest such crackdown. They returned to one of the clinics in West Hollywood this past Wednesday, breaking down a door and seizing additional records.

Targeting the big money
DEA spokeswoman Sarah Pullen said authorities chose clinics that were making big money, had become hot spots for crime or were part of large franchises. The raided clinics on average raked in $20,000 in profits each day, she said.

Many clinics were buying pot wholesale from street dealers and reselling it for twice the roughly $100-an-ounce black-market rate, Pullen said. “It’s become something we can’t ignore,” she said.

That investigation is continuing and has yet to produce any arrests or charges. Some clinics have remained closed while others reopened.

West Hollywood City Councilman Jeff Prang said the federal government should leave it to local governments to monitor and regulate marijuana dispensaries that provide relief for those suffering from cancer, Parkinson’s, AIDS and other debilitating diseases.

“It’s a real sad day for the DEA if these type of facilities are that high on the list of priorities,” he said.

‘Profit is in the eye of the beholder’
Police, clinic owners, activists and legislators — even the author of the law — can’t say for sure how much money clinic owners can legally earn.

“A profit is in the eye of the beholder,” said Joseph David Elford, a lawyer for Americans for Safe Access, a medicinal marijuana advocacy group.

Elford said a hands-off government approach to the clinics should boost competition, keeping marijuana prices affordable for those who need it and forcing owners to limit profits. Pullen said that hasn’t happened.

The author of the 2003 law, then-state Sen. John Vasconcellos, has no problem with clinic owners earning hefty salaries as long as they provide help for ill people. He said the federal government should mellow out.

“We’re helping people who are sick and they have this fascist mentality against good health and pleasure,” Vasconcellos said.

The bill’s co-author, state Assemblyman Mark Leno, sees no need to clarify the law and says there is no serious effort by state politicians to further regulate the industry.

Piles of pot, cash
Rose attracted the DEA’s interest after police raided a West Hollywood clinic he ran in 2005 and seized almost 700 pounds of pot, $242,000 in cash and evidence of nearly $2 million in bank deposits, plus pay sheets “reflecting enormous profits,” according to court papers.

Rose, who is free on bail, did not return a call seeking comment. He defended himself on his Web site, — “My dispensary was a nonprofit and to paint me or my employees as profiteers is simply appalling.”

He also wrote that the silver Porsche was leased and valued at less than $50,000.