POLICE DISPUTE POT CLUB COSTS

S.J. cops say director inflated sale prices; question spending

In a court document equating the executive director of the Santa Clara
County Medical Cannabis Center with a street-level drug pusher, San Jose
police accuse Peter Baez of charging clients four times what the center
paid for pot, selling the drug to nearly 70 people without a required
doctor's recommendation and using center money to pay for such questionable
expenses as his satellite TV bill.

Baez, who currently faces six felony charges of illegally selling
marijuana, denied any wrongdoing Thursday. But his legal troubles could
worsen considerably if the allegations contained in a Santa Clara County
Superior Court affidavit are proved true.

Sgt. Scott Savage, the San Jose police department's liaison with the center
Baez co-founded about a year ago, said in the affidavit the center's check
register contained numerous questionable payments. He also wrote that about
a quarter of the center's 270 clients had no apparent recommendation from a
doctor. He added in those papers that the non-profit center charged $400
per ounce of marijuana, while paying only $100 per ounce.

``Based on my training and experience, I know that this type of profit
equals street-level trafficking,'' Savage wrote in the affidavit. The
eight-page document, made public this month, was filed in support of a
search warrant used three days after a March 23 police raid of the San
Jose-based center that led to the arrest of Baez, now free on $5,000 bail.

But Baez and his lawyer said Thursday that many of Savage's contentions
were exaggerated. ``Cops lie, and that's all I can say, for their own
agenda,'' said Baez, a 34-year-old Gilroy resident.

``If (Baez and center co-founder Jesse Garcia) wanted to live the lavish
lifestyle and have everything paid for, there was enough cash that they
could have done it without anybody knowing,'' said Baez's attorney,
Riccardo Ippolito.

``But they took meticulous notes and documented everything,'' he said.
``I'm certain . . . he will be vindicated of any financial wrongdoing.''

Ippolito also said that Baez, who has colon cancer, lives on Social
Security and disability payments -- a far cry from the impression left by
the affidavit.

Garcia, who was not named in Savage's affidavit, agreed with Ippolito.
``We've done everything to the best of our ability,'' he said.

Although the investigation into the center continues, a Santa Clara County
prosecutor confirmed the affidavit is the first step in efforts to
confiscate any illegal assets belonging to Baez or the center. If the case
proceeds, it may establish whether the state's asset-forfeiture law can
supercede Proposition 215, the 1996 initiative that broadly sanctioned the
medicinal use of marijuana.

San Jose gained national attention when it established in 1997 its own
ordinance governing medicinal marijuana dispensaries, but has not moved to
shut down Baez's group despite its violations of that law.

The center has not completed the application process for a required
special-use permit, nor met a city requirement that the marijuana be grown
on-site.

``We didn't feel there was a need to oversee his operation because (we
felt) it served a greater benefit to the community,'' said Officer John
Carrillo, a police department spokesman. ``Not only has he betrayed the
police department, he's conned and betrayed the entire community.''

An accusation

Until recent weeks, the center had avoided the sort of legal troubles that
befell many of its counterparts in other cities.

That good fortune came to a halt after a suspect in a marijuana-possession
case claimed he was entitled to have the drug because of back pain.
Although Baez said a doctor authorized that patient's use of marijuana,
police said they found none of the patient's three doctors had recommended
it.

On March 23, police served a search warrant on the center, at 265 Meridian
Ave., to see if any other clients did not have the proper sanction to use
the drug. They arrested Baez, froze about $30,000 in assets and seized
patient files, a sampling of marijuana and club records. The charges
against Baez could result in a maximum nine years in prison.

Until last month, the center had enjoyed a seemingly close relationship
with local authorities, who said they had no wish to close the center even
after Baez was charged. But that relationship appears fractured.

Now, Deputy District Attorney Julie Sousa said her office would seek to
seize permanently at least part of the center's bank account, worth about
$29,000. Investigators are conducting an audit to see whether any of those
funds are illegal, and to determine what other assets the center might have
obtained unlawfully.

Sousa estimated she might file a forfeiture claim by mid-May. The case
would then proceed much like a civil lawsuit, she said.

Evidence in the March 23 search prompted Savage to seek -- and receive --
another search warrant, served on March 26.

Savage referred questions about the subject to Capt. Ralph Torres, who is
slated to act as deputy chief over the department's Bureau of
Investigations. But Torres said he has not been fully informed about the
issue, since he does not have authority over narcotics in his current post.

Payments questioned

In the March 23 search, Savage wrote, he obtained a check register with
payments for such ``apparently personal'' expenses as South Valley Refuse,
the city of Gilroy, car repairs and a refrigerator. Between November and
the day of the raid, court records show, about $400 was paid to the
satellite-television provider Primestar.

Asked about those payments, Baez said, ``I don't know anything about
that,'' and added he was limited in what he could say because of the
pending litigation.

Ippolito, however, said that all but one of the expenses Savage and
prosecutors questioned were clearly legitimate. The car was used in the
business, and Baez used the satellite service to keep informed about any
developments in Proposition 215.

Ippolito conceded there might be questions about payments to the refuse
service, which does not service San Jose: ``At best, you might have $18 a
month.''

Ippolito also said that the center paid $300 per ounce for most of its
marijuana, rather than the $100 that Savage contended it did.

Baez, Ippolito and Garcia all said they didn't know why the accusations
were focused on Baez. Sousa said that may have been because Baez had told
Savage he handled most of the sales.

With most of the center's assets frozen, it continues to operate on a
day-to-day basis, Garcia said. He added that he wished he and Baez could
sit down with city officials to discuss how to address the center's
problems.

``I think the city should just open up their own pot club,'' Baez said.
``It's so frustrating, dealing with bureaucracy on both ends.''