GROUND ZERO IN POT CLUB FIGHT

S.F. Debates Regulations For Scores Of Operators

Kevin Reed has a broad smile as he watches a stream of customers -- as many
as 300 a day -- examine the neatly displayed merchandise at his Green Cross
medicinal-marijuana dispensary.

Several dozen large glass jars, stuffed with green buds and labeled with
names such as "Juicy Fruit" and "Wonder Woman," sit on the counter in the
narrow San Francisco shop that shares the block with a hair salon and Irish
bar. An extensive price list on a large white board starts at $40 for an
eighth of an ounce.

Reed and the city's estimated 40 other pot-club operators are at the center
of a raging debate over who, if anyone, should regulate them -- a subject
that grew more hazy in June when the U.S. Supreme Court ruled that
medicinal-marijuana laws in a dozen states including California do not
protect users or suppliers from federal prosecution.

On one side of the regulation debate are critics who say strict rules are
needed to prevent further proliferation of clubs in a city where they
already outnumber Burger Kings and McDonald's combined. Law enforcement
officials have called the unregulated operations "a great lie" and earlier
this summer raided three clubs, alleging illegal drug-dealing and
money-laundering. On the other side are advocates suspicious of any
oversight, fearing it will aid federal prosecutors.

Other advocates in the Bay Area and beyond are closely watching the
outcome, hoping new regulations will serve as a model for protecting
patients' access and deflecting federal interference with
medicinal-marijuana laws.

Birth of movement

Not surprisingly, the debate is especially vigorous in the city where the
medicinal-marijuana movement got its start over a decade ago.

"This is where it was born, and we have to protect it," said San Francisco
Supervisor Ross Mirkarimi, a longtime proponent of marijuana
decriminalization who has written 60 pages of proposed new rules aimed at
driving unscrupulous operators out of town.

Seeking to legitimize the clubs as businesses, Mirkarimi is proposing that
the clubs hold a business license, do background checks on employees, and
keep accurate accounting to prove to health officials that they are not
generating "excessive profits."

Reed, a 31-year-old former mobile-home salesman from Alabama, would seem an
unlikely supporter of such rules. He uses marijuana to treat back pain from
a car accident and decided last year to open his own dispensary -- after
being convicted of a misdemeanor for growing marijuana in his San Francisco
apartment. His parole papers explicitly say he may work at such a dispensary.

His customers on a midweek afternoon include an ill woman and her son from
Marin County, a Mission district artist with HIV/AIDS and a 25-year-old who
says smoking dope relieves back pain and stress after his day on the job
cleaning carpets. (Reed's security crew won't let anyone in the door unless
they have a San Francisco Health Department card that indicates marijuana
use has been recommended by a doctor, but he admitted to much looser rules
in the past.)

Neighborhood complaints also are a major factor behind the new rule
proposals, including controlling traffic, litter and the wafting of odors.

A surge in business has made for unhappy neighbors of the Green Cross,
which is fighting attempts to shut it down. Reed has hired a security crew
that doubles as parking attendants, installed ventilation systems, banned
use of marijuana on the premises (except by the staff), and got a land-use
permit.

"I want to be treated like any other business," said Reed, who pays sales
tax to the state and provides health insurance for his employees. He says
he runs the Green Cross as a non-profit and pays himself about $65,000 a year.

After an embarrassing incident last spring, San Francisco Mayor Gavin
Newsom is on board for new regulations, too.

In March, a dispensary was about to open in a city-backed residential hotel
for recovering addicts. When the mayor got wind of it, he asked to see the
city's rules for establishing clubs, and found virtually none. The board of
supervisors has called a moratorium on new clubs, pending adoption of new
regulations.

Mayor's approach

Newsom, who supports medicinal marijuana, recently told a gathering of club
operators and advocates that he fears the city's current lawless approach
will hurt the movement: "We can't screw this up."

With about 40 pot clubs, up from about a half-dozen in 1999, San Francisco
has the most of any city in the nation. An advocate Web site lists about
160 clubs statewide. The number of cards issued by the city's health
department to pot patients has quadrupled to about 8,000 in four years.

San Francisco clubs have mushroomed in recent years because other Bay Area
counties and cities have banned them or made rules so onerous few can
operate. Oakland has limited the number of clubs citywide to four, Berkeley
to three.

None are operating in Santa Clara County, and, after the June court ruling,
San Jose and Santa Clara officials say they won't approve any. In 1996,
when California voters approved Proposition 215 legalizing marijuana for
patients with a doctor's recommendation to treat pain and other disorders,
the state was seen as a progressive leader.

A year later, San Jose became the first city in the nation to enact an
ordinance for setting up dispensaries. But only a few tried to operate
under the strict rules, and the ordinance was quietly taken off the books a
few years ago. City Attorney Rick Doyle says he reads the Supreme Court's
decision as an outright ban and would advise turning down any applications
to run one in the city. None are proposed.

Different strategy

Santa Cruz, taking a different tack, this summer approved the city's first
storefront dispensary.

San Francisco critics range from other supervisors, who are calling for
stricter location controls and business hours, to Terence Hallinan, the
former district attorney of San Francisco and well-known supporter of
medicinal marijuana who is defending one of the men charged in the June raids.

"I don't think some regulation is a bad idea," he said, "but it can be
dangerous to keep written records of dates and sales. As a defense
attorney, I tell my clients it's not a good idea. The feds could subpoena
all of it."

Contact Mary Anne Ostrom at mostrom@mercurynews.com or (415) 477-3794.