U.S. ATTORNEY IN R.I. THREATENS TO PROSECUTE POT DISPENSARIES

PROVIDENCE - U.S. Attorney Peter F. Neronha Friday threatened to
prosecute civilly and/or criminally those involved in Rhode Island's
three planned medical marijuana dispensaries - from the organizations
that would run them to the landlords who rent them floor space.

The threat was contained in a letter hand-delivered to Governor
Chafee's office in the morning and also sent Friday to the would-be
proprietors of the dispensaries.

Jim Martin, Neronha's spokesman, said the letter is "a reminder" of
what he said state officials and the proprietors already know, that
it is the policy of the U.S. Department of Justice to prosecute
significant growers and distributors of marijuana.

Neronha is only now formally advising the governor's office of his
intentions because it was only about six weeks ago that the state
Department of Health tentatively approved licenses for three
dispensaries, Martin said.

"We needed time to review the applications as to the scale and scope
of the approved grows" and discuss the proposed licensed operations
with Justice officials in Washington, D.C., Martin said.

The applications were made public by the Department of Health in November.

"We wanted to make everyone aware of the concerns before the state's
issuance of the certificates of registration" that would allow the
operations, Martin said. "The most appropriate way is to bring it to
the attention of the interested parties" such as the would-be
regulators and proprietors, he added.

The operators of the three prospective dispensaries have said they
plan to open in June and July.

Rhode Island is on the cusp of empowering dispensaries that will
cultivate thousands of plants and widely sell the plants'
derivatives, Martin pointed out, as opposed to the state's existing
and comparatively modest arrangement of patients and caregivers who
may individually grow a maximum of 12 mature plants or 24 mature
plants, respectively.

Neronha's letter came as federal prosecutors in California, Colorado
and Montana have warned government officials not to pass bills that
appear to authorize the medical marijuana industry, according to the
Associated Press.

JoAnne Lepannen, executive director of the Rhode Island Patient
Advocacy Coalition, decried the flexing of federal muscle by Neronha.

"It's one of our worst nightmares," she said. "It's a complete
misunderstanding of what medical marijuana centers are."

She said she feels betrayed by the Obama administration, which
announced in October 2009 that federal authorities would not
interfere with state decisions to permit the distribution and use of
medical marijuana.

The state Health Department currently licenses just over 3,400 people
to use marijuana to treat a range of medical conditions - and nearly
2,200 people as caregivers who may grow marijuana for patients, but
not use it. Patients are allowed to grow marijuana for their own use.

Under the state's medical marijuana law, enacted in 2006 and modified
in 2009 to permit dispensaries, the stores could sell only to
patients who register the dispensary as a caregiver. Each patient can
have up to two caregivers. The informal caregiver program would continue.

The governor had no immediate substantive response to Neronha's
threat, which appears likely to severely damage, if not destroy, the
state's attempt to enhance and broaden its medical marijuana program.

Chafee issued a statement saying that he had received the letter and
it is "under review."

The licensed dispensaries are Summit Medical Compassion Center in
Warwick, the Thomas C. Slater Compassion Center in Providence, and
Greenleaf Compassionate Care Center in Portsmouth. They are required
to grow their marijuana indoors.

Seth Bock, chief executive officer of Greenleaf, said he is
"shocked." "As this is state law, we believe that this is a matter
for the state attorney general and governor to take up with the
Department of Justice," he said.

"We believe it is a state's right to enact legislation for the
benefit and health of its populace. We also believe that the
[federal] Controlled Substance Act as it pertains to medical
marijuana is antiquated, and a multitude of research trials in
numerous countries have proven that medical marijuana should not be a
Schedule I drug." There was no comment from representatives of the
other two dispensary organizations.

Medical marijuana advocates have said that dispensaries will make it
more comfortable and practical for medical marijuana users to get cannabis.

Neronha wrote, "The Department of Justice could consider civil and
criminal legal remedies against those individuals and entities who
set up marijuana growing facilities and dispensaries, as those
actions are in violation of federal law."

Those individuals and entities, he warned in his letter, as well as
the owners of their real estate, their landlords and their
financiers, could be subject to civil suits that seek injunctions and
fines, criminal prosecution, seizure of the marijuana and seizure and
forfeiture of any real property used to facilitate the production and
distribution, and seizure and forfeiture of any property such as
money that is derived.

The Controlled Substances Act, he pointed out, states that "growing,
possessing and distributing marijuana in any capacity other than as
part of a federally authorized research program is a violation of
federal law regardless of state laws permitting such activities."

It is Justice policy, however, that federal resources not be spent on
growers or patients with serious illnesses such as cancer whose
activities clearly comply with a law in any state that allows medical
marijuana on a small-scale individual basis.

However, "prosecution of commercial enterprises that unlawfully
market and sell marijuana for profit continues to be an enforcement
priority," the policy says, according to Neronha's letter.

U.S. Attorneys in Washington state warned officials there that state
employees could be civilly or criminally liable for enforcing a law
that would legalize medical marijuana dispensaries. The threat came
as Gov. Chris Gregoire was considering the legalization bill and has
prompted concern about federal meddling in state policymaking,
according to the Associated Press.

Thursday, federal agents raided several medical marijuana
dispensaries in Spokane, asserting they were illegal.

Although 15 states and the District of Columbia have medical
marijuana programs, only three states - Colorado, New Mexico and, as
of this month, Maine, have state-regulated dispensaries in operation.
Rhode Island has been on course to become the fourth.

The Greenleaf operation would be the smallest of the dispensary
operations, projecting about $1.2 million in sales by 2013. Slater
projected in its application having $3.9 million in revenue by then.
Summit's projections are for $25 million in revenue by 2013 with
8,000 patients.

Dispensary prices are forecast at $300 to $350 per ounce. The
operations are required by the state's medical marijuana statute to
be nonprofit.

But the Chafee administration is expecting to profit from them. The
state tax administrator in March projected $802,000 in sales tax
income from the dispensaries for the fiscal year beginning July 1,
climbing to $1.3 million the following budget year. There would also
be a four percent surcharge on monthly dispensary sales, forecast to
bring in an additional $1.4 million over the next two budget years.