3 S.F. POT CLUBS RAIDED IN PROBE OF ORGANIZED CRIME

Medical Marijuana Dispensaries Used As Front for Money Laundering,
Authorities Say

Federal authorities raided three San Francisco medical marijuana
dispensaries Wednesday, and investigators arrested at least 13 people as
part of an alleged organized crime operation using the clubs as a front to
launder money.

Agents seized marijuana and other items from two cannabis clubs on Ocean
Avenue in the Ingleside district and a third on Judah Street in the Inner
Sunset district. The raids were the first in the Bay Area since the U.S.
Supreme Court dealt a blow to the medical marijuana movement two weeks ago
by ruling that the federal government had the authority to prosecute people
whose activities are legal under state law.

The actions prompted concern from medical marijuana advocates that the
raids could be the first step in a federal crackdown on dispensaries.
Authorities, however, said they were not specifically targeting such
outfits but were aiming at an enterprise that was dealing large amounts of
marijuana and laundering money through cannabis clubs.

Twenty people were charged in an indictment that federal authorities
planned to unseal today. Authorities would not comment on the specific
allegations against them. San Francisco sheriff's officials said Wednesday
night that 11 men and two women were in the county jail in connection with
the case and would appear in federal court today.

Authorities said the raids were the culmination of a lengthy investigation
of an operation whose members were mostly of Asian descent and living in
San Francisco and Oakland. They said that the operation controlled at least
10 warehouses where marijuana was grown in large quantities and that those
involved were bringing in millions of dollars.

One warehouse in Oakland that federal agents raided earlier this month was
capable of growing $3 million worth of marijuana annually, investigators said.

The marijuana ostensibly was for cannabis clubs, but the amount being grown
was far more than needed to supply the dispensaries, authorities said.

"It's not the pot clubs per se" that were targets, said one law enforcement
official, who asked not to be named because the indictments were still
under seal. "It's not an attack on medical marijuana. This is an organized
crime group that is using the whole pot club thing as a front."

Mayor Gavin Newsom declined to comment on the federal raids but nodded
affirmatively when asked whether he believed they reached beyond the issue
of medical marijuana.

San Francisco police have raided a dozen large indoor marijuana-growing
operations, mostly in flats in the Sunset District, in the last two years.
Investigators say at least some of these illegal home operations were
connected to the new case.

Police Chief Heather Fong said her narcotics officers had taken part in
Wednesday's roundup of suspects but had not raided the dispensaries.

City policy recognizes cannabis clubs under Proposition 215, the 1996 state
initiative legalizing medical marijuana. As a result, "we don't enter pot
clubs" to make marijuana arrests, Fong said.

Hilary McQuie, spokeswoman for Americans for Safe Access in Oakland, a
medical marijuana user advocacy group, was not satisfied that the raids
were targeting organized crime and not the cannabis clubs.

"Saying organized crime brings up visions of violent activity, but if all
they are supporting is the sale of marijuana, police can call that
organized crime," McQuie said. "They will need to show there's distribution
outside the dispensaries. ... I want to wait and see."

Drug enforcement agents disclosed few details of the raids.

"It's a large-scale operation," said Javier Pena, special agent in charge
of the San Francisco office of the Drug Enforcement Administration. He said
U.S. Attorney Kevin Ryan had been present during raids at the clubs at 1545
and 1939 Ocean Ave. and at 445 Judah St.

Drug enforcement agents and investigators from the Internal Revenue Service
arrived at the Herbal Relief Center at 1545 Ocean early Wednesday and cut
the lock off the front door. By the afternoon, they had loaded a truck with
dozens of marijuana plants, heat lamps and generators.

A man outside identified himself as Van Nguyen and said he had owned the
business for more than five years. He was not under arrest.

"We run a service," said Nguyen, 27, who said he was a business student at
City College. "I am definitely worried, but I want to make sure the message
is out and the patients are taken care of."

Nguyen said the club served about 2,000 medical marijuana patients. "I have
a couple of people in that group who are dying, and they won't be getting
their marijuana on Monday," he said.

Asked about any involvement in organized crime, Nguyen said, "I have
nothing to do with that at all. I make sure the patients in this
neighborhood are well taken care of."

Nguyen said federal agents might have seized patient information at the
club. One drug agent could be seen looking at what appeared to be
photocopies of driver's licenses.

Chip Camp lives behind the club and said he never noticed any problems with
it. "They opened late and closed early," he said. "There was never much
foot traffic. It was very low-key."

A few blocks away at the other Ocean Avenue club, which appeared to have no
name, Kris Hermes of Americans for Safe Access said he was "appalled that
San Francisco has to call in the DEA for something that should be dealt
with by the city. More investigation could have happened before the DEA was
used in this manner."

The third raid of the day was at the Sunset Medicinal Resource Center on
Judah Street near Ninth Avenue, where federal agents left after about nine
hours with two dozen bags and boxes and horticultural grow lights.

At Bikram Yoga next door, owner Elizabeth Palmer said the club and its
patrons were "quiet, calm neighbors."

At one point this spring, San Francisco was home to 44 medical marijuana
dispensaries, more than any other city in the nation. Matt Dorsey of the
city attorney's office said San Francisco now had 35 storefront
dispensaries. Those don't include clubs that operate by appointment only or
delivery-only service.

Residents and officials have grown increasingly frustrated that a
2-month-old city moratorium on the clubs was having little effect. Dorsey
said the club at 1939 Ocean Ave. appeared to be among those that had opened
since the moratorium took effect April 1.

Dorsey added that his office had not been in touch with federal drug agents
about the club.

Supervisor Sean Elsbernd has called on the city to crack down on illegal
clubs and said Wednesday's raids showed the wisdom of that idea.

Elsbernd wants the number of clubs allowed in San Francisco to be capped at
eight. He also wants operators to go through the same strict application
process as those who request liquor licenses.

Supervisor Ross Mirkarimi, who has spent months working on new rules, said
the city had to find a way to separate legitimate operations from
illegitimate ones.

"The absence of laws only puts out a welcome mat for potential problems, "
he said. "That's how we got to the place where we are today."

Supervisor Gerardo Sandoval, whose district includes the two Ocean Avenue
clubs, has also called for improved city monitoring but said he hoped
Wednesday's raids were "not a pretext to meddle in San Francisco's
well-established medical marijuana policies."

"It's pretty clear the Bush administration is not very happy about San
Francisco's efforts," Sandoval said. "If there's money laundering or
organized crime involved, then by all means we welcome federal law
enforcement. But I have to ask myself, 'Why now?' "

[sidebar]

REACTION TO THE RAIDS

What Investigators Say About the Raids

"It's not an attack on medical marijuana," said a law enforcement source.
"This is an organized crime group that is using the whole pot club thing as
a front."

What Medical Marijuana Advocates Say

"Saying organized crime brings up visions of violent activity, but if all
they are supporting is the sale of marijuana, police can call that
organized crime. They will need to show there's distribution outside the
dispensaries. .. . I want to wait and see," said Hilary McQuie of Americans
for Safe Access.

Why S.F. Police Didn't Enter Medical Pot Clubs

City policy recognizes cannabis clubs under Proposition 215, the 1996 state
initiative legalizing medical marijuana. As a result, "we don't enter pot
clubs" to make marijuana arrests, said police Chief Heather Fong.