Eastern District of California Blog

EDCA Prosecutors Conducting Criminal Investigation of Wide Swath of California Cannabis Businesses

Per Marijuana Business Daily, 4/27/20, and this 18-page EDCA grand jury subpoena on its website, the feds are apparently conducting a criminal investigation into a wide-range of California cannabis businesses, both licensed and illicit ones.  Here's a few excerpts from the piece:

In all, nearly 100 cannabis businesses and individuals are identified in the Weedmaps subpoena, including company employees, officers, various investors and others in the industry.  

“The bottom line is the feds are showing they’re not done investigating cannabis, not done prosecuting cannabis,” California attorney Matt Kumin said after reading the subpoena.

Among the revelations: The investigation is partially focused on Weedmaps’ relationships with both licensed and apparently illicit California cannabis companies.

Weedmaps, headquartered in Irvine, California, is a popular website among consumers looking to find marijuana retailers across the globe. It also facilitates cannabis deliveries.

*** 

The federal government’s probe, which apparently is ongoing, is being conducted by the U.S. attorney for the Eastern District of California, McGregor Scott. Scott’s office declined to comment to MJBizDaily.

The stakes are high given the federal government’s involvement and the dozens of companies named in the subpoena.

“You only present the case to the grand jury to determine whether or not there’s probable cause to return criminal charges. So this is a criminal investigation,” said San Francisco-based attorney Henry Wykowski, a former federal prosecutor who’s worked with California cannabis companies for more than a decade.

***

Of the four U.S. attorneys offices in California, the conservative-leaning Eastern District is the one Wykowski would most expect to mount a serious attack on the cannabis industry or on a company such as Weedmaps. 

But Scott, the U.S. attorney whose office issued the subpoena, has indicated that his priorities involving the cannabis sector are not state-licensed businesses that are following the law but, rather, illicit actors engaging in “interstate trafficking, organized crime and (marijuana cultivation on) federal public lands.”

***

As originally reported, the subpoena requested information from Weedmaps on dozens of companies it’s dealt with over the years, including Santa Rosa-based CannaCraft and Irvine-based Terra Tech Corp. (The latter has been renamed Onyx Group Holdings after a February merger.)

The subpoena demands “any and all documents related to” at least 40 different business entities and 17 individuals with whom Weedmaps has apparently worked in some capacity.

Of the 40 companies, at least 27 possess a minimum of one valid state marijuana business license, according to government records. The majority of those are licensed retailers, as opposed to brands or other business types.

The other 13 companies apparently are illegal or unlicensed marijuana businesses, further complicating the picture for industry attorneys trying to decipher the subpoena’s intent.

Some of the legal and licensed companies identified include:

• • California Green Cross (delivery license in Sacramento).
  • Connected Cannabis (licenses for six retailers in Long Beach, Sacramento, San Francisco, Santa Ana and Stockton).
  • DEC Medical Group (retail and distribution licenses in Los Angeles).
  • Desert’s Finest (microbusiness license in Desert Hot Springs).
  • East Bay Therapeutics, (three licenses in Emeryville – storefront, delivery service and event).
  • Flav, formerly known as FlavRX, which currently operates as a hemp CBD company and does not hold any California state marijuana permits.
  • Green Valley Collective, Purple Heart Compassionate and the Wellness Earth Energy Dispensary, which together do business as “Project Cannabis” (retail licenses in Los Angeles, North Hollywood and Studio City).
  • Golden State Greens Point Loma (retail and distributor licenses in San Diego).
  • Horizon Collective (retail license in Sacramento).
  • Kushagram (delivery license in Oakland).
  • L.A. Cannabis Co. (three retail licenses in Los Angeles).
  • MMD Long Beach (retail license in Long Beach).
  • Puffy Delivery (retail licenses in Palm Springs, Santa Ana and Vista and a distribution permit in Santa Ana).
  • South Coast Safe Access (retail license in Santa Ana).
  • The L.B. Collective (retail license in Long Beach).
  • The OG Collective (retail license in Cathedral City).
  • Urbn Leaf (four retail licenses in Bay Park, Grover Beach, San Ysidro and Seaside).

U.S. Attorney Subpoenaed Cannabis Business Records from Weedmaps

Lede from yesterday's Marketwatch story:

Federal prosecutors have launched a probe of cannabis companies in California, seeking a batch of records held by a startup that functions as a Yelp for marijuana dispensaries, according to a grand-jury subpoena reviewed by MarketWatch.

Criminal prosecutors in the U.S. attorney’s office for the Eastern District of California ordered the production of records from Ghost Management Group LLC, which owns a subsidiary called Weedmaps that provides an online directory of cannabis retailers. Weedmaps’ online services allow pot consumers to rate and compare stores, find deals and place orders for delivery.

The subpoena covers documents related to cannabis businesses listed on Weedmaps, and records related to its ordering service. The government also sought documents and other records kept by Weedmaps related to its own staff, investors and accounting, according to the subpoena issued late last year.

Feds charge man with conspiracy to grow marijuana in El Dorado County

Federal officials have charged a fourth man in connection with last week’s marijuana field shootout that killed El Dorado County sheriff’s Deputy Brian Ishmael, saying the new defendant was part of a conspiracy run out of Mexico that oversaw two marijuana grows in rural areas of Somerset and Georgetown.

Jorge Lamas, an American citizen who has spent much of his time living in Mexico, has been charged in a criminal complaint filed in federal court in Sacramento with conspiracy to manufacture, manufacturing at least 50 marijuana plants and possession of a firearm in furtherance of a drug trafficking offense.

The weapons charge stems from the discovery of a 9 mm handgun believed to have been the weapon used to kill Ishmael at a grow site in Somerset on Sand Ridge Road.

Sac Bee, 10/29/19

Feds Investigating Whether Sacramento-Area Pot Shops Paid Bribes to Local Public Officials

The FBI has been investigating whether Sacramento-area marijuana businesses have made payoffs to public officials in the region in exchange for favorable treatment and license approvals, The Sacramento Bee has learned.

Three sources with direct knowledge of FBI questioning of area marijuana business figures say the investigation began in the past few months and predates the disclosure that one of Sacramento’s major marijuana dispensary owners had ties to a Ukrainian man indicted last week along with two associates of Rudy Giuliani, President Trump’s personal attorney.

Sac Bee, 10/14/19; see also "California Cannabis King Linked to Ukranian who was Indicted with Guiliani associates," Sac Bee, 10/13/19

Time Served Marijuana Cultivation Sentences

Yesterday, over the government's objection, Judge Mueller sentenced four low-level defendants involved in a large marijuana grow in the Klamath National Forest to 30 months imprisonment, effectively time served.  See United States v. Lobera-Garcia, No. 2:17-CR-0157-KJM. 

Feds Report Illegal Marijuana Growers in National Forests Using Banned Pesticides

California law enforcement has learned that Mexican drug traffickers are using a dangerous pesticide banned in the United States to grow marijuana in remote areas of California’s Sierra Nevada mountains, and are going after their operations.

The pesticide, carbofuran, is toxic to wildlife and humans and can cause permanent reproductive damage. Law enforcement took reporters on a tour of one of the illegal grow sites on Tuesday, where a bottle of carbofuran could be seen.

“These are federal lands, and they are being systematically destroyed through clear-cutting, stream diversion, chemicals and pesticides,” said U.S. Atty. McGregor Scott at a news conference, where he was joined by federal, state and local officials who were part of the investigation. “It’s a vitally important issue.”

LA Times, 8/21/19

Feds Dismiss Marijuana Cultivation Charges

After almost seven years and a 2016 hung jury , the feds dismissed marijuana cultivation charges yesterday against the remaining defendant, Russell Gilmore, in EDCA No. 13-CR-300-GEB.  Congrats to his attorney Matthew Bockmon!

Feds Seek To Forfeit 100 Homes For Pot Growing

In the largest operation of its kind, federal agents swept across the Sacramento region Tuesday and Wednesday targeting about 75 homes serving as suspected marijuana growing sites that authorities say are operated by a Chinese organized crime syndicate.

The raids, which involved more than 500 federal, state and local agents, hit homes from Elk Grove to Sacramento to rural areas and are aimed at forcing the forfeiture of about 100 homes to the federal government, an effort valued at hundreds of millions of dollars in real estate and marijuana.

“This represents one of the largest residential forfeiture efforts in the nation’s history,” the U.S. Justice Department said.

* * *

In an unusual twist, no arrests have yet been made as the investigation continues and focuses on the manner in which the homes were purchased and the identity of suspects federal authorities believe handled the transactions.

McGregor Scott, the U.S. attorney for the Sacramento-based Eastern District of California, emphasized that the raids, which used flash-bang grenades to gain access to some homes, are not aimed at restricting California's new state law allowing recreational marijuana use.

“It absolutely has nothing to do with that,” Scott said. “This is illegal under anybody’s law.”

Sac Bee, 4/4/18

Read more here: http://www.sacbee.com/news/local/crime/article207911324.html#storylink=cpy

 

Ninth Circuit Remands Schweder Marijuana Case for McIntosh Evidentiary Hearing

In EDCA defendant Bryan R. Schweder's appeal, the Ninth Circuit issued this order Tuesday remanding his federal marijuana case to the district court "for the sole purpose of conducting an evidentiary hearing to determine whether, at the times that acts giving rise to his conviction for conspiracy to manufacture marijuana occurred, [Schweder] had 'strictly complied with all relevant conditions imposed by state law on the use, distribution, possession, and cultivation of medical marijuana'" under United States v. McIntosh, 833 F.3d 1163, 1179 (9th Cir. 2016) (available here).  (Remember this case.  It's the one I blogged about extensively where, after a multi-day evidentiary hearing, Judge Mueller ruled that the classification of marijuana as a schedule I controlled substance was not unconstitutional.)   McIntosh is the case where the Ninth Circuit held that a congressional appropriations rider prohibits the Department of Justice from spending funds for the prosecution of persons who engaged in conduct permitted by state medical marijuana laws and who fully complied with such law. 

The remand order was issued one day after oral argument in San Francisco before Ninth Circuit judges Alex Kozinski and Andrew Hurwitz, and visiting N.D. W.Va. judge Irene M. Keeley.  At the Ninth Circuit's website, you can watch or listen to the argument.  My favorite part is when the Assistant U.S. Attorney steps up to the podium (18:40) and announces himself "for the United States."  Judge Kozinski asks, how can you do that?  Did you pay your own way here?  Did you take a leave from the government?  When he says no, the judge inquires,"why aren't you violating the rider?"  Later, Judge Kozinski questions whether the prosecution committed legal "blackmail" (22:40-23:25; see also 25:45-27:47) by requiring Schweder to take its plea bargain without waiting for the then-pending McIntosh appeal to be decided.

In his appeal, Schweder argued, among other things, that because he was complying with California's medical marijuana laws, his guilty plea was not knowingly and voluntarily entered and he should be allowed to withdraw his guilty plea.  Most of the argument is over what the appropriate remedy should be if Schweder's conduct was consistent with California law.   Ultimately, the Ninth Circuit remanded to the district court to determine whether Schweder complied with California law.  The panel retained jurisdiction for further consideration of the appeal after the district court rules on whether Schweder complied with California's medical marijuana laws.

 

Will California's Legal Marijuana Help Reduce Illegal Grows on Public Lands

The 420 issue of the Sacramento News & Review suggests that California's legalization of marijuana may help reduce the harms from illegal cultivation on federal and state parks and forests.