U.S. TARGETS POT SUPPLIERS WHO PROFIT IN STATE

California's federal prosecutors announced a campaign Friday to shut
down scores of marijuana dispensaries, which they described as
profit-making criminal enterprises masquerading as suppliers of medicine.

The announcement at a Sacramento news conference angered medical
marijuana advocates, who said President Obama had reneged on his
promise to let states set their own policies on therapeutic use of
the drug. But prosecutors insisted they weren't going after patients
and their caregivers.

"People are using the cover of medical marijuana to make
extraordinary amounts of money," said San Francisco's U.S. attorney,
Melinda Haag, speaking alongside her counterparts from Sacramento,
Los Angeles and San Diego.

The prosecutors said dispensaries are violating California law -
which allows medical marijuana distribution only by nonprofit
organizations - as well as federal law that bans all use of the drug.

Targeted stores

Haag, whose district runs from Monterey County to the North Coast,
said she is initially targeting a limited number of marijuana stores
located near schools, playgrounds or Little League fields. A Sept. 28
letter, released by medical marijuana advocacy groups, advises the
owner of an unidentified Mission District dispensary to shut down
within 45 days or face possible criminal charges and loss of the property.

Haag declined to say how many outlets received the letters, but
added, "We will almost certainly be taking action against others.
None are immune from action by the federal government."

The other three prosecutors said they had each sent letters to dozens
of marijuana retailers in their districts notifying them that they
were violating federal law and subject to property forfeiture and
possible prosecution.

"This is not an idle threat," said San Diego's U.S. attorney, Laura
Duffy. "This is our commitment to the concerned citizens and parents
of our community. ... So-called medical marijuana has become a law
enforcement nightmare."

Advocates for medical marijuana - first legalized by California
voters in 1996, and later by 15 other states and Washington, D.C. -
cited Obama's campaign promise that he would let states chart their
own course on the issue. His Justice Department issued guidelines in
October 2009 discouraging federal prosecutors from going after people
who were complying with state laws.

"Barack Obama is betraying promises made when he ran for president
and turning his back on the sensible policies announced during his
first year in office," said Ethan Nadelmann, executive director of
the Drug Policy Alliance.

Policy change?

With Friday's announcement, said Assemblyman Tom Ammiano, D-San
Francisco, "Obama's medical marijuana policies are worse than Bush
and Clinton."

But the Justice Department denied it was changing course.

"The department has maintained that we will not focus our
investigative and prosecutorial resources on individual patients with
serious illnesses like cancer or their immediate caregivers," Deputy
Attorney General James Cole said in a statement. "However, U.S.
attorneys continue to have the authority to prosecute significant
violations" of federal narcotics laws.

In one criminal case unsealed this week, said U.S. Attorney Andre
Birotte of Los Angeles, a purported medical marijuana supplier in the
San Fernando Valley is alleged to have distributed 600 to 700 pounds
of marijuana per month and made nearly $15 million in profits in eight months.

"We have yet to find a single instance in which a marijuana store was
able to prove that it was a not-for-profit organization," Birotte said.

Other federal agencies have also joined the crackdown.

Last month the Bureau of Alcohol, Tobacco, Firearms and Explosives
notified all federally licensed gun dealers that the ban on selling
guns and ammunition to users of illegal drugs applied to anyone who
consumed marijuana, even with a doctor's approval.

Meanwhile, the Internal Revenue Service, in an apparent turnabout,
has told some medical marijuana providers it will not allow them to
deduct employee payroll and operating costs from their taxable income.

Threatened closure

Harborside Health Center in Oakland, one of the largest marijuana
dispensaries in the world, said it got a $2.5 million tax bill from
the IRS this week and may have to close if its appeal is unsuccessful.

The Fairfax-based Marin Alliance for Medical Marijuana, which
describes itself as the nation's oldest licensed marijuana
dispensary, has received two potentially lethal messages from federal
authorities - a $1 million IRS bill in March, and a letter to its
landlord from Haag on Sept. 29 demanding a shutdown because the
office is within 1,000 feet of Bolinas Park.

Federal laws against illegal drugs contain additional punishment for
transactions within 1,000 feet of places where children regularly gather.

"This is ridiculous - after 14 years of paying taxes and doing
everything else we were supposed to do," said the dispensary's
founder and owner, Lynette Shaw. "I think that Obama has turned his
back on the medical marijuana movement, the people who worked hard to
put him into office."

Shaw said her nonprofit dispensary has always worked closely with the
IRS and gotten approval for all of its business deductions until this
year. Any suggestion of danger to children at the nearby park is
unfounded, she said, because they've learned from their parents that
marijuana is medicine and "they don't steal pot from someone who's sick."