CANNABIS CAPITALISTS SPEAK WITH CONVICTION

The District is writing strict new rules to regulate its nascent
medical marijuana industry, but some of the entrepreneurs best
positioned to lead the way have blemished backgrounds - including
drug convictions at odds with the city's vision.

Among the District's 300 proposed rules is a requirement that
operators would need to be "of good character": No felony convictions
or misdemeanor drug convictions allowed.

"Historically, the people who have dealt with marijuana have,
unsurprisingly, come from a noncompliant background, you might say,"
said Allen St. Pierre, executive director of the Washington-based
National Organization for the Reform of Marijuana Laws. "They have a
compulsion to not follow the law. So these rules might be viewed as
just another bump in the road or a minor impediment for these guys."

Businessmen such as Stephen DeAngelo, a ponytailed Washington native
who runs one of the largest legal pot dispensaries in the world, say
they just want to use their expertise "to help any way we can."
DeAngelo has a drug conviction in Virginia from the 1970s and was
arrested on drug charges in Montgomery County in 2001. He has
launched a consulting service, CannBe, to advise pot capitalists,
such as those hoping to stake their claim to the District's highly
anticipated green rush next year. ad_icon

Officials are wary of DeAngelo's closely guarded plans - he
unexpectedly partnered with a team of Rhode Island investors that is
planning to sell medical cannabis out of a 75,000-square-foot
warehouse in downtown Providence, stoking concerns that he is
expanding his empire nationwide.

"We started this with the intention of selling medical cannabis in a
safe, seemly and responsible way," said DeAngelo, whose Harborside
Health Center along the Oakland, Calif., waterfront employs 80 people
and pulls in more than $20 million in revenue per year. "We didn't
want to set up a chain-store arrangement . . . but we do want to
replicate the model for others."

DeAngelo, 52, said the 2001 arrest was a "case of mistaken identity,"
and his Maryland attorney, Bruce L. Marcus, said charges were never
filed because it "lingered for eight years and prosecutors forgot it
was still out there."

Many of the potential applicants CannBe might advise - from
dispensary owners and "bud-tenders" (those who handle and package
marijuana) to growers, lab technicians, lawyers and "pot docs"
(medical marijuana-friendly doctors who can prescribe) - also fail to
meet the standards envisioned by the D.C. Council or have other ideas
for the city's medical marijuana industry than those outlined in the
pages of draft regulations released by the District two weeks ago.

One thing is certain: The District is uninterested in controversy.

"People are scared D.C. could be Amsterdam on the Potomac and, if
Congress changes leadership, they're going to come barreling down on
us," said Wayne Turner, a longtime AIDS activist in the District who
was instrumental in drafting the 1998 referendum on medicinal
marijuana. "We're going to be under so much scrutiny that any slip-up
is going to be noticed."

A Local Advantage?

City health and regulatory officials tasked with crafting and
overseeing the District's strict new medical marijuana law are
carefully reviewing about 300 proposed rules, listening to
stakeholders and hoping to avoid some of the mistakes made by the 14
other states that have enacted medical marijuana statutes over the past decade.

In Maine, officials realized only after they approved licenses for
eight state dispensaries that half were connected to a very
profitable medical marijuana group in Berkeley, Calif., when local
businesses were preferred. In Colorado, more than 700 dispensaries
have been licensed, overwhelming regulatory and law enforcement agencies.

The administration of D.C. Mayor Adrian M. Fenty (D) is expected to
formally solicit bids in the fall to operate up to five dispensaries
and as many as 10 "cultivation centers," which can be run by
nonprofit and for-profit organizations and be overseen by the city's
Alcoholic Beverage Control Board and its enforcement arm, the
Alcoholic Beverage Regulation Administration.

Competition is expected to be fierce. Winning bidders would ideally
have experience growing medical marijuana, giving a leg up to
established outfits. But D.C. Council member David A. Catania (I-At
Large), chairman of the Health Committee, and other city officials
have expressed a preference for locally owned vendors. "This is for
D.C. residents only," he said.

But some local aspirants have problems, too.

Alan Amsterdam and Adam Eidinger, the owners of Capitol Hemp in Adams
Morgan and Chinatown, have started the D.C. Patients' Cooperative and
are looking at a location in Adams Morgan or Capitol Heights, where
Advisory Neighborhood Commission members have publicly supported the
marijuana legislation.

Amsterdam, 43, opened the first American-owned marijuana coffee shop
in 1998 in the Netherlands. He pleaded guilty to marijuana possession
after being arrested in 1995 but was sentenced to probation before
judgment, allowing him to avoid a standard conviction. It's unclear
whether he would be able to be involved in his shop's day-to-day
operations. "My lawyer is working on it," he said. "He says
everything is kosher."

Amsterdam's original plans for a "showroom-type feel" for his
dispensary had to be scrapped after D.C. proposed what he called "the
most restrictive regulations in the nation."

Another local businessman, Brian Rubin, owner and manager of Maryland
Hydroponics in Laurel, which is expanding with a D.C. location near
Tenleytown, hopes to apply for dispensary and growing licenses.
Rubin, 42, grew marijuana while living in the Netherlands for a
decade and was known up and down the Eastern Seaboard for his
"Potomac Indica" strain of pot.

"We're totally geared up. The cultivation centers are ready to go,"
Rubin said. "We're just waiting for the law to go into effect. It's a
little bit of a gamble, but we wanted to be the first one there."

All of the attention might not be a good thing for Washington's pot
capitalists. "I don't think they're serving themselves well by
weighing in this much so early in the process," Catania said. "I just
think, frankly, that they're creating a lot of nervous energy."

D. Paul Stanford, a Portland, Ore., marijuana activist who runs "pot
doc" clinics in nine states, said he is moving forward with plans for
a nonprofit office here. But officials say Stanford's operation could
run afoul of regulations that require doctors offering marijuana
referrals to have an "ongoing" and "bona fide" relationship with the patient.

Stanford's criminal history might also be an issue. He has been
convicted of four felonies related to drug possession and
distribution, in 1987 and 1991, and of a parole violation, a
misdemeanor, in 2000, according to court documents in Oregon. He has
also been arrested, but not convicted, two other times on
drug-related offenses.

"We run a very professional business here, and we follow all
regulations," Stanford said.

A full-time doctor, nurse and at least five other employees would
staff Stanford's clinic and screen potential patients through medical
records, questionnaires, interviews and physical exams. Stanford's
nonprofit, the Hemp and Cannabis Foundation, pulls in roughly $5
million per year.

"We have a protocol, we require documentation and we're looking to
lend credibility to the process, not take away from it by supplying
medical marijuana to those who aren't qualified," he said.

As part of Stanford's plan, a Denver-based ophthalmologist, Eric
Eisenbud, is working on becoming licensed in the District.

Stanford said he is researching the idea of operating a dispensary in
the District but has no imminent plans to apply for a permit. "It
won't be any huge gold rush," he said.

D.C.'s Strict Rules

The District's rules would include a first-in-the-nation provision
requiring dispensaries to price marijuana on a sliding scale so that
the poorest patients can obtain medicinal pot for free. There would
also be a 95-plant limit on those who grow and sell marijuana, which
is mirrored in New Mexico and designed to preclude federal
intervention. ad_icon

But the limit on plants could severely cut into supply, causing
shortages, reduced profits and black-market deals, according to those
who want the D.C. law expanded. New Mexico's 2,000 medical marijuana
patients routinely exhaust the supply within 24 hours of it hitting the market.

Dispensaries would also have to pay an annual $10,000 registration
fee, and all company officers, managers and employees would have to
pay annual city dues. Security systems would need to be installed and
special packaging labels used; records would need to be kept for at
least three years; and advertising would be minimal - no green leaf
images or neon signs.

Despite the extensive rules, many would-be medical cannabis dealers
say they expect the dispensaries to be profitable.

Jeffrey Kahn, a rabbi who has led congregations for 27 years, is
considering opening a dispensary in the Takoma section of Northwest
Washington with his wife, Stephanie. Kahn, 58, has already held a
town hall forum with neighbors and is committed to renting an old law
office on Blair Road NW if he gets a license. He's set aside "several
hundred thousand dollars" for the venture.

"We want to be very open and very upfront with the community on this
and get their input early in the process," said Kahn, the former
executive director of the D.C.-based nonprofit Interfaith Drug Policy
Initiative.

Catania said officials will be tough on anyone coming to the District
to take part in the city's new legal drug trade. "We have a lot of
time to see how it works," he said. "And we're going to be doing a
lot of thorough background checks all the time."