AFTER 'RAICH'

Politicians and the mass media say all is well, but local cops and
the feds are stepping up their attacks on medical marijuana

The media frenzy surrounding last week's Supreme Court ruling on
medical cannabis emphasized that the decision does not alter state
medical cannabis laws and downplayed the possibility that law
enforcement would launch retaliatory raids against patients and caregivers.

But local police and federal authorities continue to target the
medical cannabis community -- even right here in San Francisco, where
the political leadership uniformly supports legal access to medical
marijuana. The favored tactics of the enforcers of federal drug laws
are asset seizures and tax investigations, sometimes preceded by police raids.

On the same day justices ruled in Gonzalez v. Raich that the federal
government has constitutional authority to prosecute cannabis
patients under the Commerce Clause, California's largest operator of
medical cannabis dispensaries had its bank accounts frozen by the Los
Angeles Police Department. Police say the Drug Enforcement Agency
(DEA) and the Internal Revenue Service (IRS) are both involved in the case.

The action was prompted by a May 13 raid carried out by the LAPD
against a West Hollywood medical cannabis dispensary run by
Compassionate Caregivers. The company operates dispensaries in
Bakersfield, West Hollywood, Oakland, San Diego, San Leandro, Ukiah,
and San Francisco (Mission Street Caregivers), all of which are now closed.

LAPD spokesperson Lt. Paul Vernon told the Bay Guardian the raid was
prompted by information suggesting the dispensary was linked to
street sales of marijuana and possible gang activity, not simply its
role as a medical marijuana provider. But he also told us the LAPD's
decision to freeze assets was based on the outcome of the Raich
decision. "The states cannot pass laws that supersede the federal
government," Vernon said.

San Francisco attorney Omar Figueroa said the opinion only interprets
the scope of the Commerce Clause and the authority it grants to
Congress. "It doesn't interpret the Supremacy Clause. It doesn't say
federal law trumps state law," Figueroa said. "We need to get a clear
commitment from the state attorney general to direct the state cops
to follow state law."

Compassionate Caregivers manager Sparky Rose emphatically rejected
the allegation that his dispensaries are connected to street crime
and challenged the LAPD to produce the evidence. Rose said the
business was already planning to temporarily cease all its dispensary
operations after the Supreme Court ruling, when the LAPD seized its
assets. "They knew the money was there, and they knew that if they
used federal seizure, we'd never get it back," Rose said.

Rose acknowledged that the sheer size of his operation made it a
target for law enforcement. A tour of Compassionate Caregivers'
Oakland headquarters last month revealed an efficient corporate
operation with purchasing, human resources, IT, and shipping
departments that delivered medical cannabis to the company's cannabis
clubs. According to Rose, the shutdown put approximately 225
employees out of work and impacted about 7,000 dispensary members and
almost 15,000 other patients and caregivers across the state who
purchased cannabis from the seven clubs.

Rose declined to say how much money Compassionate Caregivers was
generating, but he said the business paid out almost $1 million in
federal taxes and about $100,000 in state taxes last year plus
generous wages and workers' compensation. Rose said the company
bought cannabis wholesale for $3,200 to $3,800 a pound and had profit
margins of only 5 to 10 percent after taxes. Given these margins and
an average corporate tax rate of 30 percent, the business may have
grossed $25 million annually and netted $3 million.

"If they do a deep investigation and seize all the patient records
and records of expenditures, it could be very ugly because the
federal government doesn't look at the costs and does not consider
cannabis an expense," said Rose, who noted that this logic is being
applied to a federal tax audit of another dispensary in San Francisco.

During a symposium of local defense attorneys at the San Francisco
Cannabis Cooperative dispensary June 11, attorney Bill Panzer agreed
that one of the federal government's emerging weapons against the
dispensaries is attempting to tax them out of existence.

Panzer said he is seeing cases in which the IRS is disallowing
deductions for the price of cannabis by arguing that purchasing
cannabis is against public policy. This means that if a dispensary
grosses $100,000 and its net is $50,000, it would be forced to pay
taxes on the entire $100,000. "The clubs that are trying the hardest
to comply are the ones most at risk, because those are the ones that
have the records, and they are the ones that have filed taxes and
declared how much they have taken in," Panzer said.

Mayor Gavin Newsom has called for dispensaries to open their books to
city regulators, and supervisors are considering this idea as they
develop regulations for them. Many dispensary operators remain
concerned these records could be subpoenaed by federal authorities
and used to prosecute them.

Federal authorities are not focusing just on big-money operations in
their financial probes. Mike and Valerie Corral, founders of the
Wo/Men's Alliance for Medical Marijuana (WAMM) -- which provides free
medical cannabis to about 200 chronically sick and dying patients in
Santa Cruz -- are being audited by the IRS, which has referred the
case to its criminal division for possible tax evasion charges.

"It is not like we have much money in the bank," Mike Corral said.
"Coming after Val and I personally is not just about taxes but persecution."

The Corrals said they are being audited for the year 2002, when 30
armed DEA agents raided the group's cannabis garden. In 2003 a
federal court granted WAMM an injunction against federal prosecution.
In the aftermath of the Raich decision, Corral said he expects
federal authorities to petition the court to lift the injunction.

Patients and growers investigated by San Francisco police worry they
too will be targeted by federal law enforcement. Capt. Tim Hettrich,
head of the SFPD's vice department, said at a community meeting in
April that he and his officers are "bound by federal guidelines to
turn over any marijuana grows over 1,000 plants to federal
authorities." Deputy District Attorney Russ Giuntini said he is not
aware of any such guidelines.

"I'm very concerned about them seizing assets, but I'm mostly
concerned about getting turned over to the feds," said San Francisco
artist Mario Martinez, who was arrested last October by SFPD Sgt.
Marty Halloran for growing 98 plants for himself and eight other
patients in a small collective.

Martinez is now facing a year in county jail if convicted of
cultivation and possession for sale, despite a pledge from District
Attorney Kamala Harris not to prosecute medical pot cases (see Opinion).