Special Series

THE TAXMAN'S LOST CASH CROP

Marijuana has emerged as a multi-billion-dollar industry in Canada,
largely because the United States maintains a vigorous opposition to
pot at the same time Canadian authorities turn a blind eye to its
cultivation and possession. In the first of a three-part series,
National Post columnist Diane Francis reports that these paradoxical
positions have created an unparalleled black-market opportunity in
Canada, every bit as lucrative as Prohibition afforded Canadian
bootleggers in the 1920s.

The two-storey frame house on Kerr Avenue in southeast Vancouver is
indistinguishable from any other on this street of tall trees and
beautifully landscaped gardens. It is not the kind of dwelling where
you expect four members of the Vancouver Police Department to ram
through the door, guns drawn, search warrants at the ready. I was with
them, to gain a first-hand understanding of British Columbia's
multi-billion-dollar marijuana industry -- and the thousands of small
"grow-ops" (growing operations) like this one that supply it.

Inside, we found all the accoutrements of middle-class life -- a
computer, a high-end sound system -- as well as a knee-high Buddhist
shrine. On a kitchen counter were five oranges and an opened pack of
Peak Frean cookies. In a cupboard, there were some prescription drugs
with the names of the patients scraped off the label. In the master
bedroom was a big-screen television set and VCR, plus a dozen
Vietnamese movies on cassette. No one was home.

The basement told a different story. There were two "grow rooms," each
with about 250 marijuana plants basking under intensely hot hydroponic
lamps. The windows were covered with glossy white paper or blankets
stapled to the walls so neighbours could not see what was going on
inside.

The third room was dark and empty: Its crop of 250 plants had just
been harvested by hired hands, often Asian men and women who move from
grow-op to grow-op, painstakingly scissoring the leaves and buds from
the plants and bagging them for the next step in their journey to market.

The value of the harvest from this single basement operation of 750
plants, assuming three harvests annually: $2.25-million a year. Tax-free.

It seems remarkable and yet it is true: Growing marijuana has become
the easiest way to get rich quick in Canada and thousands of British
Columbians -- and gradually others in the rest of the country -- are
doing just that.

The Organized Crime Agency of British Columbia estimates there are
20,000 grow-ops in the Lower Mainland alone, and at least that many
more around the province.

That makes growing pot the biggest industry in British Columbia. Some
5,300 growing operations were shut down by police in British Columbia
last year, up from 2,351 in 1998. The annual revenue potential of 500
plants (the average size of a grow-op) is $1.5-million. Thus, the
street value of the marijuana that did not make it to market last year
totalled $7.45-billion.

The remaining 20,000 grow-ops -- the ones that haven't been closed
down -- could generate $29.8-billion. Just for comparison, consider
that B.C.'s forestry industry ships about $29-billion worth of
products a year. The value of all of Canada's agricultural exports to
the United States last year was $10.4-billion. Clearly, the
cultivation of marijuana has become one of the country's most
important industry sectors.

Encouraging this industry is the fact that Canada's legal system has
been gradually and very quietly turning a blind eye to marijuana offences.

For instance, Vancouver City Police -- they call themselves the
Growbusters -- closed down 500 marijuana grow-ops last year with
average potential revenues of $450,000. In 161 cases, individuals were
found in the homes and charged. They were not fingerprinted and they
did not get criminal records, merely fined. And the average fine is a
paltry $2,900 -- a tiny percentage of the income generated by the
average grow-op.

"The highest jail sentence was only one month, which means virtually
nobody actually went to jail," says Vancouver Police Department
spokesman Constable Jay Osborne.

In the raid of the grow-op I attended, police smashed all the
hydroponic lights, cut off the electrical power and natural gas, then
destroyed all the plants. A Baggie of pot, recently harvested, was
confiscated and placed in the back of a squad car. Finally, they
posted a sign at the entrance: "Unfit for Occupancy." It all took less
than an hour.

"We don't care if we find or arrest anyone. We're just here to shut
down the 'grow,' " says Const. Osborne.

This passive approach to policing pot is spreading. Across the
country, the number of pot-related convictions has decreased, with
police catching more offenders but laying fewer charges. According to
statistics from the Canadian Centre for Justice, police laid charges
in 34% of 40,000 cases of possession in 1999; in 1989, they laid
charges in 84% of 29,000 cases.

The Canadian Bar Association, in 1976, and the RCMP more recently have
called for decriminalization. The Canadian Association of Chiefs of
Police and the Canadian Medical Association have also called for a
relaxing of the rules. Polls show that two-thirds of Canadians favour
outright legalization.

And on Monday, the Canadian government said it would grow and
distribute marijuana for limited medical reasons. In January,
marijuana grown in Flin Flon, Man., will be given to patients who win
approval on medical grounds.

Washington, paradoxically, is adamant in its opposition to
decriminalization, regarding marijuana as very much part of its War
Against Drugs. Thousands are imprisoned annually for cultivation,
trafficking and possession, even those using marijuana as a herbal
remedy for pain.

And so we have this interesting situation: The gradual unofficial
decriminalization of marijuana in Canada coupled with the official
zero-tolerance approach in the United States has created an
unparalleled black-market opportunity in Canada, every bit as
lucrative as Prohibition afforded Canadian bootleggers in the 1920s.

"I moved to Canada to grow because it's just a misdemeanour here if
you get caught. But it's real prison time down there," says an
American living in Vancouver illegally who estimates his operation has
made $2-million in two years.

He and his partner run operations in two large warehouses and employ
six workers full-time. He figures they will "make another million
bucks apiece this year too."

Frustrated by the indifference of the courts, Lower Mainland police
forces merely try to thwart the growers, whose whereabouts they
usually discover based on evidence from B.C. Hydro that power usage
has suddenly soared in a house.

"Our job is just to disrupt them and whack as many houses as we can
and shut them down," says Const. Osborne. "Sometimes we just call the
landlords and tell them we know what's going on so they can inspect
and shut them down. The point is we just decided to take the court out
of the picture because there's no point."

But even as the police root out the grow-ops, new ones sprout. All it
takes is an outlay of $20,000 for wiring and hydroponics equipment to
bring 500 plants to maturity within three or four months, plus a
couple of bedrooms or a basement to house them in.

With three harvests a year, an urban cannabis farm yields at least
$300,000 per crop, or $900,000 annually. That's just the wholesale
value. The street value in Canada of a grow-op that size would total
$1.5-million per year.

If it's smuggled over the border, its value increases to $2.3-million.
In New York City, its value could soar to $4-million or more depending
upon quality.

As with any agricultural business, there are layers of middlemen
involved in getting the product from farm to customer.

Bob gave up his small business in Vancouver to become a broker or
grader, connecting grower and seller in return for $100 a pound.

He figures he has made about $700,000 in two years. He weighs and
assesses the quality of the product, keeps it in his inventory for a
few hours, then delivers it to the end customer or another middleman.

"I averaged from $10,000 to $20,000 per week, handling up to 200
pounds," Bob tells me. "I've been smoking it for years. It's easy to
make money in this business if you know what you're doing."

There is a downside. Disputes tend to be settled with violence, and
Bob left the business after he was beaten up. The RCMP estimates there
were 20 homicides last year in British Columbia involving the
marijuana trade.

"I'm lucky to be here. I got hurt," he says. "Somebody was sent to do
something and didn't do what he was supposed to do and there was
retaliation. It's all organized and it's getting uglier as years go
on. There's more violence."

He says marijuana should be legalized to clean up the business. "I'll
bet 60% to 70% of all people in B.C. are involved in some way or
other. They are in the business or know somebody who's in the
business. And most people smoke it," he says.

The history of marijuana growing in British Columbia probably begins
in the isolated mountain valleys in and around Nelson, B.C.

Jim Gouk represents this region as a Member of Parliament for a
constituency that stretches from Kelowna, B.C., to the U.S. border.

"It all goes to the States. There are really big growers here; 5,000
trees that are up to 12 feet tall, not just foot-high plants like the
hydroponic grow-ops. If marijuana growing disappeared it would have a
significant impact on the local economy. It's big," he says.

On a hillside overlooking Nelson is the Holy Smoke Culture Shop. It
sells pipes and other pot paraphernalia. It's also the headquarters of
the B.C. Marijuana Party and local Compassion Club, which hands out
marijuana at cost to ailing people for pain or nausea relief. This is
where marijuana activist Dan Lowendorf and others lobby for changes.

"As an employment opportunity, growing pot is definitely equal in this
area to logging," says Mr. Lowendorf, Marijuana Party candidate in the
last provincial election in Nelson.

"Employment for loggers is seasonal and drops off the edge in the
winter. So growing pot helps them support their families."

Ken Wyllie, a criminal lawyer in Nelson, says marijuana growing began
as a cottage industry in the 1960s with the influx of young Americans
during the Vietnam War. "They came with their seeds and their
attitudes. During the 1960s and 1970s I saw an increasing number of
grow-operations, usually outdoor grows. Then they went indoor because
of the economics and hydroponic technology."

Gary Wright, Mayor of tiny New Denver and himself a long-ago draft
dodger, voices the prevailing attitude toward the region's cash crop.

Most grow-ops, he says, are harmless "ma and pa" businesses. "It
started when the hippies first came to this country. Growers make a
nice buck. It allows them to stay here. They are not driving around
with flashy cars or going to Jamaica once a year," he says. "They just
want a little cabin in the woods with a really good sound system."

Most growers in the area are independents but demand south of the
border, along with the higher prices obtainable there, has introduced
a more organized element.

The Hells Angels, for example, have been trying to get a foothold in
the Kootenays and are financing grow-ops, recruiting workers and
organizing smugglers.

The region is an important export point because there are only five
customs and excise officers from the Alberta border to Kelowna,
patrolling hundreds of kilometres of border.

The U.S. Customs Service recently reported that marijuana seizures
along the B.C.-Washington State land border, which totalled 325 pounds
in 1994, increased sharply by 1999 to nearly 2,900 pounds.

Insiders speculate that Canada's market share of marijuana sold in the
United States is roughly 5%, Mexico supplies 50% and American growers
plus some Caribbean countries make up the rest. But Canada's pot is
regarded as superior, encouraging sales in the United States.

A pound has a street value of roughly $2,300 to $3,000 in Vancouver;
in Washington, the same amount costs $4,500, and in California it
might sell for as much as $9,000. In New York City, it can soar to
$12,000 a pound. In Maine, the price of high-potency Canadian
marijuana brings five times the price of Mexican and domestic
varieties, according to the local Drug Enforcement Agency.

Thus, in Canada, the riskiest and most profitable part of the business
is smuggling -- with high bail and sentences of up to 10 years
imprisonment.

"I'm not afraid. It's easy. Just an hour and a half walk with a
backpack through the woods at night," explains Bill K., an Australian
who stands to make millions growing and smuggling marijuana after
arriving in Canada just a few months ago as a tourist.

"I make about $25,000 delivering 18 pounds. It's fun. It's an
adrenalin rush. I'm not worried about getting caught. There's not a
policeman who wants to catch me as much as I want to get away."

Bill is a microcosm of the pot industry. Not only is he a smuggler, he
also runs seven hydroponic operations for friends, is a partner in
several grow-ops and has brought in childhood buddies -- former
Australian Army soldiers -- to man his 1,200-plant farm on a remote
island off the B.C. coast.

He and his partners will make millions tax-free each year. "I'm here
illegally so I pay cash for everything, then mail home the rest of the
bills to some post office boxes back home," Bill explains. "I never
electronically transfer money or put anything in a bank."

Walking is probably the safest method, but some smugglers use boats
and planes to drop off bundles of marijuana in Puget Sound for pickup
by customers. Only amateurs try to cross at Blaine, Wash., in cars.
(Last August, U.S. officials seized 240 pounds of marijuana from a
Canadian military vehicle that crossed the Blaine border from British
Columbia. The grass was vacuum-packaged and contained in five large
nylon duffle bags. Two Canadians were arrested.)

In the West Kootenay region, pot is put in hockey bags then walked
across the border through woods, or else taken on snowmobiles,
motorcycles, horses or dropped from planes, says RCMP Constable Tom
Clark, drug co-ordinator in Nelson.

Growers sometimes just leave bags full of pot in the woods on the
Canadian side for pickup by trusted U.S. customers.

"This is a policing problem. There's a high tolerance level for this
in the [B.C. Slocan] valley," says Const. Clark.

"It's a huge riding and people look upon it as a victimless crime. You
can get caught with 5,000 trees and get a $1,000 fine so why not try
it? In Alberta, the fines are double."

He points out that the area is a dealer's heaven, with huge plants
that can each generate $3,000 in the United States. And it's strong,
too. In the 1960s, he says, marijuana contained 3% to 5% THC (the
active ingredient). Today, he says "the average is in the mid-teens,
with some stuff in the low 20s."

His jurisdiction is as lax regarding enforcement as everywhere else in
the province. Possession charges are rarely pursued because they would
result only in summary convictions, without fingerprints, photos or
computer records.

"It's a waste of time and energy for the police. It's almost
decriminalized now. Our priorities are break and entry or assaults.
These crimes take precedence over busting a marijuana grow-op."

Some related businesses are also doing well. A hydroponic store
outside tiny Nelson has annual sales of $6.5-million.

"That's a lot of tomatoes," jokes the owner. In fact, hydroponic
stores are everywhere in British Columbia.

So is cash. One heavy-equipment dealer near Nelson recently sold an
excavator to a grower for $250,000 cash.

The Vietnamese population has profited from pot. A Vancouver car
dealer told me 25% of his business was selling luxury cars for cash to
Vietnamese and others who are likely involved in the marijuana trade.

About 95% of the 500 busts in the city last year involved Vietnamese
"farmers," say police.

"Vietnamese families are recruited in Ontario, given a cheap car and
set up in a house. We find Ontario drivers' licences in these busted
houses, Ontario plates on some of the cars we seize. These families
come here, and if they live in the grow they get free rent, money for
food and $1,000 a month per house to look after the plants," says
Const. Osborne.

"The woman is usually on welfare and the man may or may not have a job
for cash. After they've learned how to do it, they return to Ontario
to start up their own franchise. It's coming east in spades.

"There's huge coin in this. High profit, low risk," he observes. "The
Vietnamese are already getting very rich, driving Mercedes and
Porsches. Buying $20,000 karaoke machines and fancy sound systems."

The most successful Vietnamese tend a number of houses and accumulate
capital in order to set up their own grow-ops. They, in turn, train
others to tend and harvest crops. Some have even graduated into
smuggling, where profits -- and risk -- are much higher.

Beyond the cities, pot also thrives. British Columbia is well suited
to illicit farming because of its vast expanse of hidden valleys and
remote islands. Vancouver Island and the other islands off British
Columbia are home to large-scale outdoor "grows" of as many as 4,000
plants.

Operators set up campsites and hire young people to guard, tend and
harvest. These "tenders" often never meet their employers; they are
paid in cash by intermediaries and given a phone number to call when
the plants are harvested. They are guaranteed reimbursement for any
legal fees or fines by their mystery bosses, should they be caught.

The province's forestry industry has also made a contribution.
Marijuana seeds are planted in many clear-cuts, sections of forest
that have been logged and left to regrow. They contain good soil, are
hidden by surrounding uncut forest and are accessible by abandoned and
overgrown logging roads.

It's risky, though. In October, harvest police helicopters equipped
with heat sensors swoop down and destroy crops. The trick is to grow
thousands of plants in a remote location or to plant marijuana single
file among other plants.

One grower was busted after he built a gigantic underground bunker for
5,000 plants (potential annual revenue: $23-million) in remote Fort
St. John in northern British Columbia.

Another indoor grow-op of 4,000 plants was raided on the B.C.-Alberta
border two years ago.

"Some are digging big trenches in rural areas and dropping an old
school bus or cargo container into it," explains a grower near Nelson.

"You cut a hole in the roof to get in and then plug in a generator and
set up your hydroponic operation inside. The lights and water are all
on timers and you can make $1-million per bus a year."

In sum, the marijuana industry permeates British Columbia -- in modest
urban dwellings, in isolated clear-cuts, even underground in buried
buses.

Says Bill K., the Australian grower and smuggler: "You can't find a
piece of land with potential growth possibilities in British Columbia
and not find pot growing. Prohibition creates this false economy. I
find it comical myself. This is a lot of money Revenue Canada's
missing out on."

Indeed it is.

Tuesday: Mark Emery, Canada's Pot-Culture Guru
[go to http://www.mapinc.org/drugnews/v01.n1447.a01.html ]