NEW FEDERAL MEMO ON MEDICAL MARIJUANA STIRS ANGST

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" 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
unlike California 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."