FEDERAL MEDICAL MARIJUANA MEMO STIRS ANGST IN INDUSTRY

In October 2009, medical marijuana advocates
celebrated a U.S. Department of Justice memo
declaring that federal authorities wouldn't
target the legal use of medicinal pot in states where it is permitted.

The memo from Deputy U.S. Attorney General David
Ogden was credited with accelerating a California
medical marijuana boom, including a proliferation
of dispensaries that now handle more than $1 billion in pot transactions.

But last month brought a new memo from another
deputy attorney general, James Cole. And this
time, it is stirring industry fears of federal
raids on pot dispensaries and sweeping crackdowns
on large-scale medical pot cultivation.

Cole asserted in the June 29 memo that state laws
"are not a defense" from federal prosecution,
saying, "Congress has determined that marijuana
is a dangerous drug" =AD and that distributing it "is a serious crime."

Justice Department officials said the memo
offered "guidance" for states permitting medical
marijuana and didn't mark a harsher shift in
federal policy. But it was a clear signal of the
government's concern about a move toward
industrial-scale operations that would generate
millions of dollars in revenue.

The memo came off as a threat to Steve DeAngelo,
director of the Harborside Health Center,
California's largest medical marijuana provider.
He charged that President Barack Obama and
Attorney General Eric Holder are turning their
backs on medical users and imperiling the
distribution of marijuana as medicine.

"I can't imagine why the Obama administration
wants patients to obtain their medicine from a
criminal market rather from a licensed and
regulated system of distribution," said DeAngelo,
whose Oakland dispensary has 50,000 clients and
handles more than $22 million in annual
transactions. "I just can't imagine them following through on their
position."

Advocates and legal observers are split on
whether the concern expressed in the Cole memo
over the "scope of commercial cultivation and use
of marijuana for purported medical purposes"
signals raids on pot stores. But many say it is a
backlash against cities and entrepreneurs trying
to cash in on the medicinal pot trade.

The city of Oakland is still exploring a plan to
regulate and tax expansive marijuana cultivation,
despite warnings by federal authorities that they
wouldn't tolerate earlier city efforts to
sanction cavernous indoor marijuana farms.

Recently, federal authorities indicted two Sutter
County tomato farmers who were growing marijuana
for an Oakland businessman who claimed he was
providing medical pot to dispensaries.

And the threat of federal prosecution killed the
ambitions of the Sacramento Delta town of Isleton
to reap a tax windfall from an entrepreneur's
plan to grow medical pot in multiple greenhouses.

"I think the federal government never anticipated
what really has happened," said Michael Vitiello,
a McGeorge School of Law professor who has
studied efforts to legalize pot. "And the
government is saying, 'Wait a second.' "

In February, U.S. Attorney Melinda Haag in San
Francisco declared that the Justice Department
was "considering civil and criminal remedies"
against anyone trying to set up "industrial
marijuana-growing warehouses in Oakland." The
Alameda County district attorney warned that
meant public officials weren't immune from prosecution.

Oakland City Councilwoman Patricia Kernighan said
the city hasn't given up on taxing and licensing
medical marijuana cultivation. But she said the
council, due to vote Tuesday on doubling the
number of local dispensaries from four to eight,
will wait until fall before deciding on a
scaled-down proposal to let each dispensary
operate marijuana growing rooms only for its own registered patients.

In the wake of federal prosecution threats,
Kernighan said, "We are in an abundance of caution these days."

So is the city of South Lake Tahoe, which had
allowed three dispensaries on Lake Tahoe
Boulevard to grow marijuana on site. The city was
considering a plan to entice them to move their
grow rooms by allowing expanded cultivation in an
industrial area away from the lake.

Now, "the memo from the U.S. attorney's office is
giving us some pause," said city attorney Patrick Enright.

Yet mega-scale pot cultivation is flourishing in
Colorado, which allows dispensaries to operate
for profit in contrast with California's nonprofit model.

"We have whopper grows," said Colorado lawyer
Warren Edson, whose clients include medical
marijuana stores that lease growing space in a
120,000-square-foot indoor farm in downtown Denver.

Edson said he suspects that Colorado hasn't been
targeted because =AD unlike California =AD it has
statewide regulation of medical marijuana,
including licensing of pot industry workers.
"We're doing what we're doing and keeping our fingers crossed," he said.

Less than two years ago, Ogden's memo vowed
"prosecution of significant traffickers of
illegal drugs, including marijuana." But he said
the government wouldn't target pot patients or
their caregivers "whose actions are in clear and
unambiguous compliance with existing state laws."

In his memo, Cole said that policy remains unchanged.

But medical marijuana attorney Joe Elford said a
series of federal raids this spring on
dispensaries in Montana and Washington has
unnerved advocates for medicinal use.

Two states that allow medical marijuana, Rhode
Island and New Jersey, have refused to permit
dispensaries, citing fear of federal action.

"We're concerned for our patients," said Elford,
legal counsel for Americans for Safe Access. "The
majority of patients obtain their marijuana
through dispensaries. Most sick people don't know
how to cultivate quality marijuana.

"There is a specter of widescale criminal
prosecution. And needless to say, that is very scary for us."