GENERAL LEE

Can Oaksterdam Weed Magnate Richard Lee Push Legalization Over The
Top?

(July 29, 2010) One day last month, Richard Lee was able to snatch a
few minutes of freedom from the chaos of his daily life at his
Oaksterdam University, the centerpiece of Oakland's marijuana
district. In the previous 15 minutes he had checked the enrollment
figures for a growing workshop he was scheduled to teach that weekend,
made a snap decision about some future students who said they were
promised reduced tuition and had his photo taken for High Times
magazine, constantly consulting with his assistant while rolling
around the aisles on two floors of his flagship business.

Finally he came to rest in an upstairs conference room with windows
looking out over Broadway, and there he sparked up a joint. A lanky,
clean-cut Texan with nerdy wireframe glasses, technically 47 years of
age, Lee has gotten around on a wheelchair since he suffered a spinal
cord injury 20 years ago. It seems to have slowed him down not at all.
Between puffs, he spoke in the drawl of his native state about his
most ambitious political brainchild -- the "Regulate, Control and Tax
Cannabis Act of 2010," also known as Proposition 19, which, if voters
approve it in November, would end marijuana prohibition in the state
of California.

Lee mused about the vocal opposition his initiative has received to
date, which has come in two forms. Naturally the religious right, and
associated hardcore law & order types, stand opposed to legalization.
More surprisingly, though, some big-name figures in the medical
marijuana movement, such as San Francisco's Dennis Peron, stand
against the measure on the grounds that government would have a role
in regulating the marijuana trade. Lee couldn't help but marvel at
these erstwhile allies.

"If the narcs don't kill me, the growers will," he said. "Or these
hippie peace and love kind of guys from the '60s and '70s: ‘We
don't want to be regulated and pay taxes. It should just be free for
everybody to grow! Peace and love!'" Lee is not a hippie.

What are Prop. 19's chances? Most public polls released recently show
the initiative trailing somewhat. The most recent Field Poll showed
the initiative barely trailing at 48-44 percent against. (The poll
carried a 3.2 percent margin of error.) The leadership of the
California Democratic Party decided two weeks ago to take no position
on the initiative. The party's major statewide candidates for office
- -- Sen. Barbara Boxer and gubernatorial aspirant Jerry Brown -- have
actively come out against it.

On the other hand, it would be a mistake to underestimate Lee. In just
a few short years he has built a massive empire around medical
marijuana. He owns a coffee shop-style medical marijuana dispensary, a
supply store, a nursery selling starts and, of course, the flagship
Oaksterdam University, offering non-accredited classes in cultivation,
politics, law, business and even marijuana cookery. (The university
also has its own off-site gift shop, as well as three affiliate
schools around the country -- in Sebastapol, Los Angeles and Flint,
Mich.)

More importantly, though, Lee is an uncommonly canny political player,
at least on his own home turf in Oakland. His enterprises are now
woven into the very fabric of city government. Local ballot measures
he has championed have put millions in the the city treasury at a time
of cutbacks and layoffs. The few blocks of downtown he has colonized
are now lively, clean areas of the city that draw visitors from around
the world. One of Lee's companies prints an Oaksterdam tourism map.
The medical marijuana movement has a visibility and legitimacy in
Oakland unequaled anywhere else in the state, and much of that can be
traced back to Lee's savvy.

For folks who pray for legalization, and for those who fear it, the
question is whether or not Lee can replicate his success at the
municipal level with a statewide initiative. How for-real is he?
Locally, a lot depends on the answer to that question. Black-market
marijuana is a huge part of the Humboldt County economy -- if the
voters pass Prop. 19, we will quickly be thrown into turmoil. A recent
analysis from the RAND Corporation predicted that legalization would
drop the price of marijuana by nearly 80 percent -- more than enough
to put most small Humboldt County growers out of business.

There's every reason to be concerned. The team Lee has put together
for the Prop. 19 campaign is very real indeed.

"I've been around a lot of very professional political operations. I'd
like to think that I've run some professional political operations on
my own," said Aaron Houston, executive director of Students for a
Sensible Drug Policy, during a visit to Oaksterdam last month. "I mean
- -- it's very, very good. They are good. They have got it down. It'll be
the most professional marijuana campaign you've ever seen."

Lee's rise to prominence in Oakland started out slowly enough. He
moved to the city in 1997, one year after Proposition 215 legalized
marijuana for medical use in California. He started growing pot for a
buyer's collective, and after two years he founded his own
coffeeshop-style marijuana dispensary. He named it "Bulldog
Coffeeshop," after a famous marijuana cafe in Amsterdam.

It was a welcoming climate for people looking to get their start in the
industry. Unlike most jurisdictions, the city of Oakland had become
accustomed to working with the medical cannabis industry early on, says
John Geluardi, author the book Cannabiz: The Explosive Rise of the Medical
Marijuana Industry, which will be published in October. The city was
working with legendary marijuana horticultural guru Ed Rosenthal, even
granting him an official city title to permit him to grow pot for patients
within the city's borders. According to Geluardi, Lee's early genius was to
cement this relationship with official legislation that would work to the
benefit of both parties.

"I think [Lee] took what was a good, casual relationship between city
officials and dispensary owners and made it official," Geluardi said.

At first, Lee worked through the auspices of the Oakland Civil Liberty
Alliance, a political action committee that he founded. In 2004, the
OCLA sponsored a citywide initiative -- Measure Z -- that would direct
the Oakland Police Department to make enforcement of marijuana laws
its lowest priority. In a city infamous for its high rates of violent
crime, the measure passed by a 2-1 vote.

A couple of years later, Lee championed a different initiative, one
that would increase the amount of business taxes paid by marijuana
industries in the city fifteenfold. This initiative, Measure F, passed
by an even greater margin in July 2009. Fully 80 percent of the
Oakland electorate voted in favor. The city would only collect an
infinitesimal increase in tax revenue -- around $300,000 per year, at
least at first -- but it sent a message that the marijuana industry was
a friend of the city.

All of which set the table for the city of Oakland's most startling
embrace of the industry to date: the decision, earlier this month, to
license four mega-sized industrial warehouse growing operations, a
measure passed by the Oakland City Council earlier this month. The
city is already receiving hundreds of applications for the licenses,
and some bidders estimate that each warehouse might be able to pump
out something like 50 pounds of product per day.

It's unclear how much Lee participated in the drafting of this latest
City Council effort, though Councilmember Rebecca Kaplan, a strong Lee
ally, was one of the two sponsors of the ordinance. In any case, Lee's
political attention had by then moved away from Oakland and onto a
larger stage. In 2009, he convened a group of people -- lawyers,
activists, businessmen and government types -- to start discussing and
drafting what would become the Tax Cannabis ballot initiative.

The measure they came up with has several parts. Firstly, it
establishes absolute baselines for people who want to grow for
personal consumption. Anyone, anywhere in the state, would be able to
devote 25 square feet of their own property to growing their own weed.
At the same time, it would introduce penalties for anyone providing
marijuana to minors, or to consuming marijuana in the presence of a
minor. ("Minors," in this case, defined as anyone under 21 years of
age).

In the case of marijuana as a commerical activity, the initiative is
much trickier. It follows on the heels of existing California medical
marijuana law, such at it is, by charging local jurisdictions -- cities
and counties -- with developing their own guidelines for commercial
operations. One county might decide to ratchet down on the marijuana
trade as much as possible, while others might throw open the flood
gates and try to attract as much of the industry as possible. Local
jurisdictions can also set their own tax and licensing rates for
commercial marijuana farms, and they may also increase the amount of
space that someone can use to legally grow their own. One invariable
criticism is that the initiative, if passed, would make for a messy
patchwork of commercial marijuana law in the state, and would punt
enforcement off to strapped local governments.

Lee said that this patchwork approach, with each city council and
board of supervisors deciding for itself how much marijuana it wants
to permit, is the most politically viable route to
legalization.

"This is following the history of alcohol prohibition," he said last
month. "Same thing happened there. Not every state legalized right
away when federal prohibition ended. Even to this day, states handle
it totally differently. Different cities and towns have different
laws, about how many alcohol permits they allow, and different zoning
regulations."

Besides spearheading the drafting of the initiative, Lee spent around
$1.5 million to fund a signature-gathering effort, according to
campaign finance disclosure statements filed with the California
Secretary of State's office in April. (At the time, Lee's
contributions, through Oaksterdam U. and a related entity, S.K.
Seymour LLC, amounted to nearly all of the money the campaign had
raised to that date. Another round of financial disclosure, covering
fundraising and expenditures through June 30, is due next week.)

But last month the Tax Cannabis campaign was starting to seriously
gear up for the fight, and Lee said that his own role in it was
growing "less and less every day." The campaign's political
headquarters had set up shop just a couple of doors down from
Oaksterdam University, and had staffed itself with veteran political
operatives and fresh-faced volunteers from around the country.
Staffers were abuzz with their newest recruit, a New Jersey student
who had apparently taken the bus across the country and shown up at
the headquarters unannounced, asking to be put to work. There was a
tableful of campaign literature spread out at the entrance, behind a
wall of posters telling the stories of people who have been
incarcerated for growing marijuana. Whiteboards tracked press coverage
of the campaign and charted the increase in the campaign's number of
Facebook fans.

It is a slightly low-rent office in a slightly low-rent neighborhood,
and it had the vibe of a grassroots, up-from-the-people political
effort, which in some ways it is. Organizers are depending on the
plausible idea that this is the one thing on the November ballot in
California that is going to motivate young people, idealists and
infrequent voters to get out to the polls. Voting for it would make a
concrete change in California society, the broad outlines of which are
easily grokked. A "yes" vote for Prop. 19 is the most defiant protest
vote available in November -- a protest against Drug War policies going
back to the Reagan era and beyond.

In fact, though, the top levels of the Tax Cannabis campaign are
stuffed with top-level political veterans from the Obama and Clinton
years. Chris Lehane, a Clinton spin doctor during the Monica Lewinsky
years who now works as a public relations manager in Sacramento, is
donating his services to the campaign. Blue State Digital, the
consultancy that ran Barack Obama's groundbreaking Internet strategy,
is now performing the same services for Tax Cannabis. The campaign is
being coordinated by Doug Linney, president of The Next Generation, a
political firm that has managed many successful ballot initiatives and
candidacies for the California State Legislature. That's on top of
volunteers from allied organizations, including Aaron Houston's
Students for a Sensible Drug Policy, that will be throwing all their
resources into Tax Cannabis well before November.

But if it seems that the campaign hasn't yet really turned on the gas,
that's because it hasn't. The election is a little more than three
months away, and the buzz around it hasn't quite built to a level that
is driving people crazy to get to the polls. Is the campaign saving
its ammunition for the home stretch, or is it failing to generate
enough excitement?

Last year, shortly after Tax Cannabis qualified for the ballot, Lee
estimated that the pro-legalization campaign would need to raise
between $10 and $20 million to compete in November. On Tuesday, when
the next set of finance documents are due to be released, we'll know
if the campaign has been able to hit that mark, or at least come close
to it. If not, it will have to try to step up its grassroots,
volunteer get-out-the-vote effort. In the meanwhile, the April round
of campaign finance documentation showed that the opposition was in
even worse shape, at the time -- it had yet to gather any contributions
at all.

Humboldt County's name is still synonymous with high-quality weed
nearly everywhere you go. But the world is edging away from
prohibition -- not only California and the nation, but the entire
developed world -- and in the meanwhile we have lost some of our market
advantage. In preparing for legalization, there is little doubt that
we are a few years behind cities like Vancouver, Denver and especially
Lee's Oakland. The local marijuana economy is comprised of thousands
of small-to mid-sized growers, operating clandestinely and thoroughly
dependent on the price controls offered by government-enforced
prohibition. If marijuana went for, say, $300 per pound wholesale --
and under Prop. 19, there's no reason why it wouldn't go that low or
lower -- then the entire Humboldt County marijuana industry would all
but go belly-up overnight.

Lee is unsympathetic. "The long and short of it is, it is black-market
prices right now, and there's nothing we can do to keep little
mom-and-pop places going that were making the money they were making
before," he said. "It's gotta come down."

This is a legitimate consumer-protection argument, and the businessman
in Lee can't be blamed if he has foreseen and prepared for the sudden
price drop that will occur with legalization (or for the more gradual,
continuous drop in price if Prop. 19). If anyone is well positioned to
make the leap from quasi-furtive success in the marijuana gray market
to out-and-out industry moguldom in a world where weed is legal, he is
that person. He has capital, resources, a solid political base and a
huge stake in the high-profile "Oaksterdam" brand. Oakland growers
will soon possess a warehouse operation pumping out product on an
unprecedented industrial scale.

Unsurprisingly, the survival of the Humboldt County economy in the
face of legalization isn't among Lee's top concerns at the moment.
That's something that we're going to have to figure out for ourselves
- -- the more quickly, the better. Even if Prop. 19 fails at the polls,
the industry will continue its slow march out of the closet, driving
prices down toward what they would be if the marijuana trade operated
in anything like a free market. Nevertheless, when prompted Lee was
happy to spare a few brain cycles woodshedding ideas for us.

"Well, the tourism factor," he said. "You got beautiful redwoods, you
got beautiful country up there. You have stuff to offer that we don't
have."

But what about our marijuana? Good old Humboldt County/Emerald
Triangle sinsemilla, organic and grown in the sun -- the variety that
made our name? Indoor, energy-intensive pot, with its exotic varietal
names and chemically engineered effects, has already taken most of the
medical dispensary market, and looks to take even more with
legalization.

"The outdoor, I was thinking they'll have to start making a lot of
hash out of that," he said. "Bring a hash resurgence to the country.
We haven't seen hash in the United States to any degree since the
'70s, since it was coming into the country from Lebanon. Midnight
Express. That holds a lot of history, right there."

To people who take pride in Humboldt County's reputation in the world
of weed, such an idea is a slap in the face. There are local efforts
to adapt to the coming reality; a group called the Humboldt Medical
Marijuana Advisory Panel has been holding forums around the county to
seek ideas, and another Southern Humboldt group, treading in Lee's
footsteps, has formed something called the "707 Cannabis College."
People are starting to talk more openly about forming growers'
cooperatives, organic or "salmon-safe" certifications, promotion of
"Humboldt County" as a marijuana appellation a la Burgundy or
Bordeaux. But almost no government action has been taken to date, and
while the local industry has plenty of ingenious business people, none
of them have pushed beyond the gray market to seriously imagine the
day when the internal contradictions of the war on marijuana
inevitably fall apart.

Oaksterdam is drinking our milkshake.