CALIFORNIA POT VENDOR HAS SEEN HIGHS AND LOWS

Medical-Marijuana Dispensary Can't Find Welcome Home

SAN FRANCISCO -- Kevin Reed launched his medical marijuana business
two years ago, armed with big dreams and an Excel spreadsheet.

Happy customers at his Green Cross cannabis club were greeted by
so-called "bud tenders" and glass jars brimming with high-quality
weed at red-tag prices. They hailed the slender, gentle Southerner as
a "ganja" good Samaritan. Although Reed set out to run it like a
Walgreens drugstore, his tiny storefront shop ended up buzzing with
jazzy "joie de vivre." Turnover was Starbucks-style: On a good day,
$30,000 in business would walk through the black, steel-gated front door.

Today, the 32-year-old cannabis capitalist is looking for a job, his
business undone by its own success and unexpected opposition in one
of America's most proudly tolerant places. Critics in nearby
Victorian homes called Reed a neighborhood nuisance. Although four of
five San Francisco voters support medical marijuana, the realities of
dispensing the contentious medicine have proved far more controversial.

It has been 10 years since California approved Proposition 215 -- the
Compassionate Use Act -- becoming the first state to define marijuana
as a medicine. The 389-word act aimed to ensure seriously ill
Californians the right to use marijuana. But it said nothing about
how they might get the drug -- and left ample regulatory ambiguity.

Today, about 200,000 Californians have a doctor's permission to use
cannabis, which they can obtain through more than 250 dispensaries,
delivery services and patient collectives. Medical marijuana,
activists say, has become a $1 billion business.

There has been plenty of blowback. Local governments have been
grappling with how to regulate storefront sales, still prohibited
under federal law despite California's tolerance.

Although two dozen cities and seven counties have approved
regulations allowing dispensaries, more than 90 others have passed
moratoriums on new suppliers or banned them outright.

Few in the medical marijuana business have seen as steep a commercial
rise and fall as Reed, who says he launched Green Cross to make his
medicine affordable.

Flanked by a hair stylist and an Irish bar, his 300-square-foot club
opened in July 2004 in a neighborhood called Fair Oaks. The outside
was marked by a neon-green cross. At the door, security checked each
patient for medicinal bona fides: a doctor's written permission or
the city's formal medical cannabis ID card. The blush-red interior
rocked with music videos on a plasma TV. Reed's prices -- $40 for
one-eighth of an ounce -- were two-thirds what other clubs charged.

He offered 55 varieties of raw weed. An information sheet listed
taste, ailments assuaged, type of high (including "muscle relaxer,"
"great mind drift" and "couch lock"). A pastry chef concocted
marijuana-laced peanut brittle, cannabis cookies with Ghirardelli
chocolate chips, pot peanut butter.

Reed dutifully kept his records on QuickBooks, paid employee health
insurance and nearly $200,000 a year in taxes.

He wasn't getting rich, Reed insists -- just medicated.

"I would rather just go buy it at a regular drugstore," he says. But
for now, he says, "Places like mine have to exist, or you're
literally forcing people to go to crack dealers on the street."

Reed developed a devoted following, from AIDS patients to folks with
chronic aches.

Robert Mars, balding and middle-aged, made the drive from Foster City
nearby to buy cannabis for his persistent back spasms. He liked the
knowledgeable staff, but more than anything felt "safe in going
there," Mars said. "And I can't say that about every dispensary in the city."

Fair Oaks locals, most of them believers in medical marijuana, at
first were laid back about the little pot shop. But feelings hardened
as customers flocked in.

Pot patients arrived from around the Bay Area, many bereft after a
dispensary crackdown in Oakland.

Residents grumbled about customers double-parking, blocking
driveways, flipping off homeowners. Aromatic smoke wafted. When Green
Cross hired security guards to referee parking conflicts, problems
simply moved up the block. One patient was robbed at gunpoint. Crime
worries grew.

The courts and state lawmakers have come to tacitly support the role
of the dispensaries, however. A 2003 legislative measure added a bit
of clarity to the Compassionate Use Act, underscoring that a
patient's primary caregiver could be paid to supply pot. In 2005, a
state appeals court decreed that a dispensary could use the expanded
rules in a criminal defense.

Activists have interpreted the ruling to mean a dispensary can serve
as a de facto primary caregiver. "You simply can't expect a patient
who is undergoing chemotherapy to go find a seed and grow their own
medicine," said Steph Sherer of Americans for Safe Access.

Before Green Cross celebrated its first anniversary, the neighborhood
hubbub began attracting attention at City Hall. San Francisco
regulators suspended the dispensary's permit, ruling it a
neighborhood nuisance, but let Green Cross stay open while Reed
appealed. The board gave Green Cross six months to find a new home.

Under growing pressure, supervisors approved new regulations.
Operators would undergo background checks. Dispensaries would be
prohibited within 1,000 feet of schools and parks. Reed's Green Cross
- -- the first to run the gantlet of new rules -- became "the acid
test," Supervisor Ross Mirkarimi said.

The search for a new home proved daunting. Then, only a day before he
was to shut down in Fair Oaks, Reed got a call from a patient about a
willing landlord a couple of blocks from Fisherman's Wharf.

But neighborhood opposition there was swift and nearly unanimous.

Reed's final stand came one night in late October, before the same
Board of Appeals he had addressed a year earlier.

Green Cross attorney Joe Elford pleaded his case. Reed had slaved to
meet all of the requirements, the attorney declared. The outcome for
Green Cross, he said, would set the tone for the future of
dispensaries in San Francisco.

Once again, residents and business people talked of trampled
community character, threats to schoolkids, proximity to government
housing. Many wore red tags that read "Families First."

After a break, the board expressed its condolences to Reed before
burying his career as a dispensary entrepreneur.

Commissioner Michael Garcia concluded that if progressive San
Francisco couldn't figure out a way to distribute medical marijuana
without opposition, "This might not happen anywhere." Then he voted
against Green Cross.

But it seems City Hall can't keep a medical marijuana entrepreneur
down. A few weeks ago, Reed wrote Mayor Gavin Newsom, asking for the
return of $10,000 in permit fees paid during the course of his long
fight to save Green Cross.

It would, he said, be seed money for his next venture. This time,
Reed is skipping the storefront. He wants to go whole hog into the
medical marijuana delivery business.