POT SHOP OWNERS: WE FOLLOWED LAW

Feds Say That Belief Is Irrelevant As Trial Gets Under Way Monday

Two Modesto men who ran a medical marijuana clinic on McHenry Avenue,
raking in $6 million in less than two years, might have a difficult
time mounting a defense against federal drug charges when they go to
trial Monday.

Luke Scarmazzo and Ricardo Ruiz Montes claim they were abiding by the
terms of Proposition 215 when they ran a cannabis dispensary that
paid state and federal taxes, opened its books to the city and had a
business license.

But they won't be able to talk about the political debate surrounding
California's decision to legalize the medical use of marijuana in
1996, because possession or use of the drug is illegal under federal law.

And a judge said prosecutors from the U.S. attorney's office might
back their claim that the California Healthcare Collective was
nothing more than a continuing criminal enterprise by showing the
jury a rap-style music video Scarmazzo released a few months before his arrest.

In that video, Scarmazzo, who pulled in $13,000 a month as treasurer
and secretary of the collective, flashes wads of cash and shakes his
fist at a mock-up of the City Council, which voted to ban businesses
such as his.

He and his partner now hope they can offer explanations to 12 jurors
who will decide their fate at the close of a three-to four-week trial
in U.S. District Court in Fresno.

"We think there's a good-faith argument here," said attorney Anthony
Capozzi of Fresno, who represents Scarmazzo. "They, in good faith,
thought they could be doing this. They didn't have any intent to
violate the law."

Such cases were off-limits, even though state and federal law
contradicted each other, until a 2005 ruling by the U.S. Supreme
Court said medical marijuana laws in California and 12 other states
do not shield people from federal prosecution.

Since then, 90 dispensaries across the state have been raided, with
criminal charges filed in about half of those cases, according to
Americans for Safe Access, an Oakland-based medical marijuana advocacy group.

Three cases against marijuana growers have gone to trial in
California's federal courts, with prosecutors prevailing each time.
Scarmazzo and Montes are the first dispensary owners to head to
trial. They face mandatory sentences of 20 years to life in prison if
convicted of the charges of engaging in a continuing criminal enterprise.

In legal papers, U.S. Attorney Kathleen Servatius argues that the
defendants' belief that their conduct was lawful is irrelevant. She
could not be reached for comment.

Judge Oliver W. Wanger, who issued a series of pretrial rulings last
week, has yet to decide whether the defendants may argue that they
believed their conduct was legal. A ruling on that crucial point of
law is expected before jury selection begins.

Defense attorneys noted that the collective followed state law and
verified doctors' notes before making any sales. They said the
government will have a hard time explaining how the business amounted
to a continuing criminal enterprise without explaining its operations.

"The facts are the facts. The truth is the truth," said attorney
Robert Forkner of Modesto, who represents Montes. "The truth will
come out at trial."

Montes and Scarmazzo, both 27, and seven others were arrested in
September 2006, after a 15-month investigation by the Modesto police
and the U.S. Drug Enforcement Administration.

Shop Raked in $6 Million

In legal papers, the authorities contend that the collective raked in
$4.5 million from December 2004 to June 2006. Forkner said those
numbers come from business records the collective shared with city
officials, adding that the collective earned $6 million before it was
shuttered.

Investigators found more than 1,100 marijuana plants, 13 guns, 60
pounds of processed marijuana and $140,000 in cash in homes
associated with the defendants, court records said.

The collective sold marijuana with names such as "purple skunk,"
"train wreck" and "God's gift" for prices that ranged from $40 to
$300 for one-eighth of an ounce. An undercover officer purchased
marijuana with a fraudulent doctor's recommendation nine times in
November 2005.

The collective was a hot topic at City Council meetings in 2005 and
2006, with officials passing two zoning ordinances aimed at banning
such dispensaries. The federal raid came five days after city
officials conceded that they could not outlaw the nonprofit collective.

Most likely, Scarmazzo and Montes will be the only defendants when
the high-profile trial begins. The government dropped its case
against one defendant, made deals with two others and likely will
make deals with four more as the trial gets under way.

A prosecutor dropped charges against Stephen J. Demattos, 25, who
worked at the collective, in September.

Two marijuana suppliers who were arrested during the raid took plea
deals in October and January. Bradley J. Wickliffe, 29, and Brad
Heinmiller, 33, were sentenced to 100 hours of community service and
24 months or probation after they pleaded guilty to possession with
the intent to distribute marijuana.

4 Expected to Take Deals

Capozzi said four other defendants are expected to take plea deals
Monday. They are brothers Antonio Malagon, 30, and Jose Malagon, 34,
who were managers at the collective; Lucky Jamal Boissiere, 27, who
had 1,100 marijuana plants in his home; and Monica Valencia, 26, who
made bank deposits for the collective.

Scarmazzo, who is free on $400,000 bail, and Montes, who is free on
$250,000 bail, are expected to testify.

In a recent interview, Montes said he started the collective with
nearly $50,000 he got from a settlement from an injury accident.

He said he had to travel to Livermore to purchase medical marijuana,
which he used temporarily to ease the pain in a hand that had been
crushed. He thought a dispensary would be a good business opportunity
because there were none in the region, and consulted with lawyers who
helped set up the venture.

Montes, who now works in construction, said he would have closed the
shop if he had realized he could face federal drug trafficking
charges. He said his partner's controversial video, with its wads of
cash and thumping refrain, had nothing to do with the collective.

"That money wasn't even real," Montes said.

Scarmazzo said he will tell the jury that his video -- titled
"Business Man" -- was the brainchild of a music producer who thought
the confrontational style would be a hit with 20-somethings.

He was on probation when he joined Montes at the collective, because
he was convicted of assault in May 2004, after spending 18 months in
jail awaiting trial on a murder charge stemming from a fatal stabbing
of a teenager after an egg-throwing incident on McHenry Avenue. Two
others were convicted of manslaughter and sent to prison.

But he did not view his association with the controversial dispensary
as a risky move. "This was something that was legal in our state,"
Scarmazzo said.