FEDS MOVE TO REIN IN MEDICAL MARIJUANA SHOPS IN CALIFORNIA

U.S. attorneys in California are threatening to seize the properties
of landlords leasing space to marijuana dispensaries, signaling a new
tactic in their efforts to rein in the state's burgeoning medical pot
trade.

Letters sent in recent days to targeted dispensaries in San Diego, San
Francisco, Marin and the federal district that includes Sacramento
demand that operators or property owners halt marijuana sales within
45 days.

The letters assert that the dispensaries are neither protected from
property forfeiture nor prosecution under federal law, even though
they are "providing 'medical marijuana' " under state law.

The threat of federal intervention could have major consequences in
California, where medical marijuana transactions are estimated at $1.5
billion or more.

The state rakes in $100 million or more in taxes on dispensary sales.
And several cities including Sacramento have sought to infuse
depleted coffers by taxing medical marijuana outlets.

The letters come as the four U.S. attorneys in California scheduled a
news conference in Sacramento today to issue a joint statement on the
"sale, distribution and cultivation" of marijuana, which is illegal
under federal law medicinal or otherwise.

In Oct. 4 letters obtained by The Bee, Laura E. Duffy, U.S. attorney
for the Southern District of California, warned two San Diego
dispensaries that "operations involving sales and distribution of
marijuana are illegal and subject to criminal prosecution."

Threatening to seize "real and personal property," she warned San
Diego's Ocean Beach Wellness Centers and Oasis Herbal Center marijuana
stores that federal law trumps state law and "it is not a defense ...
that the dispensary is providing 'medical marijuana.' "

Lauren Horwood, spokeswoman for Sacramento-based U.S. Attorney
Benjamin Wagner, said similar letters were sent to dispensary
landlords and people leasing land for marijuana cultivation in the
34-county Eastern District of California.

The letters have infuriated some marijuana advocates.

"This is a war on dispensaries," said Dale Gieringer, California
director of the National Organization for the Reform of Marijuana
Laws. U.S. authorities, Gieringer said, "are afraid that it works,
that the state is getting money and people are paying taxes and
conducting themselves like licensed businesses and, lo and behold, the
sky isn't falling."

"So now they're trying to make the sky fall and make it impossible to
operate."

The specter of increased federal intervention follows the disclosure
this week that the Internal Revenue Service is seeking a $2.4 million
tax penalty against California's largest medical marijuana provider,
the Harborside Health Center in Oakland.

In recent weeks, federal authorities in Sacramento also have seized
the accounts of two dispensaries in a probe of irregular banking
practices. Five people associated with the R & R Wellness Collective
in Sacramento were charged with conspiracy and illegal marijuana sales
for alleged profiteering, despite California law that mandates
nonprofit dispensaries.

Former Sacramento federal prosecutor Donald Heller said the Sacramento
cases "send a message" that the federal government won't tolerate
medical marijuana as a commercial enterprise. "In the immortal words
of Clint Eastwood, Ben Wagner is saying, 'Go ahead. Make my day,' "
Heller said.

George Mull, a Sacramento medical marijuana lawyer, said federal
authorities may only seize selective properties or prosecute
dispensary operators where they believe people "are abusing California
medical law ... to line their own pockets with unreasonable amounts of
money."

Letters obtained by The Bee indicate federal authorities also are
targeting dispensaries whose locations are at odds with state law or
local ordinances prohibiting medical marijuana sales near schools,
parks and other sensitive sites.

A letter from Melinda Haag, the San Francisco-based U.S. attorney for
the Northern District of California, was sent Sept. 28 to the building
landlord of the Marin Alliance for Medical Marijuana, California's
longest-standing dispensary.

It said the operators of the Fairfax store, opened months before
California voters legalized medical marijuana in 1996, could face up
to 40 years in prison under federal laws against drug sales near
parks. The Marin Alliance is within 1,000 feet of the community's
Bolinas Park.

In a letter to a San Francisco landlord, Haag took issue with a
dispensary operating close to a school. She warned the property owner
of "criminal prosecution, imprisonment, fines and forfeiture of ...
the property on which the dispensary is operating."

In San Diego, City Attorney Jan Goldsmith, who has filed successful
civil suits to close about 40 of 180 local marijuana outlets,
applauded the threat of seizing buildings of dispensary landlords.

"We have the support of the U.S. attorney and the one thing the feds
have that we don't have is asset forfeiture," Goldsmith said. "That is
a devastating tool."

Mull suggested that California is vulnerable to federal intervention
because neither the Legislature nor voters have enacted statewide
regulations for dispensaries "with clear, objective
guidelines."

Another state, Colorado, has avoided federal raids despite allowing
for-profit marijuana stores and commercial cultivation with strict
oversight from state regulators.

A tough federal stance in California may have been boosted Tuesday by
a California 2nd District Court of Appeal decision that said the city
of Long Beach couldn't license dispensaries due to federal marijuana
laws.

"We're going to have to determine whether states have the right to
regulate their own medical marijuana," said Mark Reichel, attorney for
the three Sacramento pot stores facing federal criminal chargesor
seizure of their bank accounts. "What interest does the federal
government really have in that?"