CANNABIS CRACKDOWN THREATENS LEGAL TRADE IN 'MEDICAL MARIJUANA'

Federal Prosecutors Target Legal Marijuana Trade Despite Obama's
Liberal Stance on Medical Use of Cannabis

Steve DeAngelo doesn't have the luxury of worrying about a threatened US
government crackdown on medical marijuana dispensaries like the one he
runs in Oakland, California. For him, the crackdown is already in full
swing.

As the head of the largest pot dispensary in the country, with more
than 80,000 customers and annual revenues of more than $20m, DeAngelo
always knew he would have a big target on his back if the federal
authorities chose to challenge the state laws that allow him and
thousands of other operators across the United States to sell
marijuana on the open market.

At the end of September - even before California's top federal
prosecutors announced their intention to start filing criminal charges
against medical marijuana purveyors, their landlords and the
newspapers and television stations where they advertise their services
- - the feds fired their first shot. The Internal Revenue Service,
America's tax collecting agency, sent a letter demanding an initial
$2.5 million in back taxes and characterised DeAngelo's dispensary,
the Harborside Health Center, as a drug trafficking
organisation.

Using a provision of the tax code originally written to help seize the
assets of gangsters and organised criminals, the IRS said Harborside
was disqualified from claiming its ordinary business expenses -
payroll, insurance, rent and so on - as deductions and needed to pay
taxes on them instead.

"We are a nonprofit organisation, so we have no profit to draw from to
meet this demand," DeAngelo said. "This is not just an attempt to tax
us. It's an attempt to tax us out of existence."

Worse may be yet to come: last month, California's four US Attorneys
set a 45-day deadline for dispensaries and their landlords to make
themselves scarce or face the consequences, and that deadline expired
on Saturday. Whether the federal authorities have the nerve to carry
out the threat remains to be seen, since their belligerence has
provoked an extraordinary backlash in the media, in Congress and in
the courts.

The federal authorities like to paint a picture of a free-for-all
marijuana market, in which bogus dispensaries effectively hand out
drugs to all-comers. But that does not account for the rapidly
evolving regulatory framework imposed by states and local
municipalities.

DeAngelo's dispensary is widely viewed as above board, as is a
recently targeted marijuana farm in the wild coastal landscape of
Mendocino County, north of San Francisco, where every last plant is
tagged as meeting state inspection requirements. Many of the more
obviously rogue operations, meanwhile, have been policed out of
existence without federal intervention. An ordinance in Los Angeles
last year cleared the Venice Beach boardwalk of dozens of bogus "kush
doctors" who had sprouted as a tourist attraction to rival Amsterdam's
fabled coffee houses.

Medical marijuana movement

Seeing himself not as a drug pusher but as an advocate and carer for
the sick, DeAngelo is fighting with everything he has, and so is the
rest of the medical marijuana movement. He has helped establish a
nationwide publicity campaign to push back against the IRS and its
characterisation of regulated dispensaries as traffickers.

His dispensary is about to be featured in a television reality show
called "Weed Wars" in which his battles with the feds will be front
and centre. He and other advocacy groups have organised protest
marches up and down California.

DeAngelo has helped persuade his local congressman to introduce a bill
to amend the tax code. California's entire congressional delegation is
sympathetic, not least because marijuana dispensaries bring in tens of
millions of dollars in badly needed tax revenues and support tens of
thousands of jobs that the ailing economy can ill afford to lose.

One major lawsuit, filed by others, has challenged the federal
government's constitutional right to trump state laws - medical
marijuana is legal in 16 states, plus the District of Columbia. While
the chances of prevailing on this seem slim, the suit has generated
considerable publicity including a spotlight on one of the plaintiffs,
a young California melanoma sufferer called Briana Billbray whose
father is a Republican congressman.

DeAngelo's best weapon is the knowledge that 80 per cent of Americans
support the medical use of marijuana and, for the first time according
to a recent Gallup poll, more than half of them are now in favour of
blanket legalisation. He knows he can win the argument that it is in
everyone's best interests - including law enforcement's - to have
people buy marijuana from regulated dispensaries instead of forcing
them to turn to criminals on the underground market.

But he does not underestimate the power of the federal government and
expects the fight to be a long and bruising one. "As goes Harborside,
so goes the rest of the industry," he said. "This is a battle for the
existence of regulated cannabis in this country."

Much of the movement's anger is directed at Barack Obama, who came
into office three years ago promising to leave the legitimate side of
the business alone - in start contrast to his predecessor, George
Bush, who waged an explicit campaign against medical marijuana in
California. Now many advocacy groups fear that Obama may end up even
worse than Bush; CBS news recently concurred in a headline referring
to "the White House jihad on pot".

White House stance

The true picture appears to be more complicated, however. Washington
insiders who have discussed the issue with Obama's staff say the real
impetus for the crackdown is coming from career prosecutors, not
political appointees, and that the White House is afraid to challenge
the prosecutors too openly for fear of falling into another Bush-era
trap by interfering with their right to exercise independent judgement.

In other words, the prevailing problem in the White House is absence
of leadership, not an excess of it. The Obama people "have painted
themselves into a corner," said Aaron Houston of the group Students
for a Sensible Drug Policy, "where now people expect... that he can
enforce the policy his Justice Department originally set out. But it's
not enforceable... He's massively overpromised."

Houston said there is a pattern of cooperation between federal
prosecutors, the IRS and regulators at the Treasury Department who have
gone after the bank accounts of dispensary operators, and they have - up
to now - successfully pressured the administration into giving them what
they want. One policy statement issued by the deputy attorney general in
2009 made clear regulated medical marijuana dispensaries were not a
target. A follow-up policy statement in June this year, however, made
clear that "persons who are in the business of cultivating, selling or
distributing marijuana", for whatever reason, are breaking federal law.

The change of tune, many marijuana advocates say, came about because
several states took the first statement as a signal to pass medical
marijuana laws and greatly expand the scope of their licensing and
regulatory framework. That, in turn, alarmed the law enforcement
establishment because they saw it as a gateway to wholesale marijuana
legalisation, which they strongly oppose, and they pressed the Justice
Department to give them clearance to enforce the drug laws as written.

Steve DeAngelo said it was no coincidence, in his view, that the
businesses being targeted most vigorously are the most respectable and
visible. "If they had gone after the profiteers, the people using
state law as a front for criminal activity, none of us would be rising
to their defence," he said. "But they are going after people who never
diverted a gram from medicine."

It will be far from a simple battle. Aaron Houston and other
pro-marijuana lobbyists in Washington are urging the Obama
administration to address the issue more openly in public and
acknowledge the groundswell of public opinion in their favour. The
federal prosecutors in California, meanwhile, appear to be taken aback
by the vehemence of the reaction to their announced crackdown.

One federal prosecutor during the Bush years, Joseph Russoniello of
San Francisco, eventually pulled back from his own campaign to fight
the medical marijuana movement, saying it was like "shovelling sand
against the tide". DeAngelo and his friends are hoping the Obama-era
establishment will quickly come to the same conclusion.