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Steven Wishnia: What’s Up With Obama’s Cynical Approach to Medical Marijuana?

May 9, 2011

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The previous ten presidents were staunch prohibitionists. Meanwhile, Obama has taken the federal hand off the scale quite a bit.

By **Steven Wishnia**

By arrangement with AlterNet.Org.

In October 2009, the Justice Department declared that prosecuting medical-marijuana users and caregivers who clearly comply with state laws was not a wise use of its resources. That declaration has dominated public perception of President Barack Obama’s policy on the issue—minimal progress, but is a welcome improvement on his predecessors.

In reality, however, the Obama administration has attacked medical-marijuana providers on several fronts. Since January 2010, it has staged more than 90 raids on dispensaries and growers, according to figures collected by the patient-advocacy group Americans for Safe Access. That represents a pace double the Bush administration’s, says ASA spokesperson Kris Hermes. The administration has also threatened state officials with prosecution if they participate in licensing or regulating medical marijuana. The Internal Revenue Service has expanded auditing dispensaries for tax evasion, on the grounds that drug-trafficking enterprises cannot legally claim business-expense deductions.

In April, ASA gave Obama an F for his policy on medical marijuana. He’s “no better than Bush,” says Hermes.

Allen St. Pierre of the National Organization for the Reform of Marijuana Laws calls that stance “hyperbolic.” “The previous ten presidents did nothing,” he says. Obama has “taken the federal hand off the scale a wee bit.”

Most notably, the Veterans Administration and the Department of Housing and Urban Development have revised regulations to acknowledge the use of medical marijuana.

For example, although federal zero-tolerance laws prohibit illegal-drug users from living in public housing or receiving rent subsidies such as Section 8, HUD has given local housing authorities in states that allow medical marijuana the discretion to not evict users.

Still, St. Pierre worries that the combination of raids and IRS harassment is seriously endangering medical marijuana. An unfavorable court decision regarding the IRS audits “could end medical cannabis,” he warns. “They’re going the Al Capone route.”

The VA is the bright spot, says Michael Krawitz of Veterans for Medical Cannabis Access. Although it still forbids its doctors from recommending marijuana, and possession is illegal on VA property, last year it changed its regulations so that medical-marijuana use is no longer an automatic violation of “pain contracts”-agreements patients sign in which they state that they’re not going to abuse their prescription painkillers.

In practice, Krawitz says, some VA doctors still refuse to accept medical-cannabis use, but “the feedback I’ve gotten from veterans, especially Vietnam-era veterans, is that it’s the first time the VA did something because it’s the right thing to do. Vets really appreciate that.”

Overall, he says, “I’m just completely baffled by what the administration is doing. They’re using the DEA and the IRS, but they’re trying to look like they’re not going after medical marijuana.”

Raids Keep Coming

Meanwhile, federal raids on dispensaries continue. On March 14, on the eve of the Montana Senate’s vote to repeal the state’s medical-marijuana law, federal agencies raided 26 growers and dispensaries there. Hermes calls that “intimidation, with specific intent to undermine a state law.” On April 28, DEA agents raided more than five dispensaries in Spokane, Washington.

The Spokane raids came three weeks after Michael C. Ormsby, federal prosecutor for eastern Washington, had sent letters to the landlords of more than 40 dispensaries in the area, warning them that their property could be forfeited if they continued to rent to drug traffickers.

“Nearly half have reported that they have evicted their tenants to comply with federal law,” says Ormsby spokesperson Tom Rice.

The touchstone here is a memorandum that Deputy Attorney General David W. Ogden sent to federal prosecutors in October 2009. In it, he told them that they “should not focus federal resources in your states on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.” Prosecuting cancer patients and their caregivers, he added, “is unlikely to be an efficient use of limited federal resources.”

However, a February 2011 letter from U.S. Attorney Melinda Haag, federal prosecutor for the Bay Area and Northern California, to Oakland City Attorney John Russo significantly narrowed that policy. While the “Ogden Memorandum” says the federal government will not prosecute individual patients, she wrote, “we will enforce the [law] vigorously against individuals and organizations that participate in unlawful manufacturing and distribution activity regarding marijuana, even if such activity is permitted under state law.”

California law is so murky…that 98 percent of the state’s thousand-odd dispensaries might be illegal. The only form that would be definitely legal…would be “a true socialist collective” in which all cultivated herb was divided equally among the members.

The Ogden memo does not grant dispensaries anything remotely resembling immunity, Rice emphasizes. He points to clauses that state that “prosecution of commercial enterprises that unlawfully market and sell marijuana for profit continues to be an enforcement priority of the department” and “claims of compliance with state or local law may mask operations inconsistent with the terms, purposes, and conditions of those laws.”

Did the department consider whether Spokane dispensaries were in compliance with state law before authorizing the raids? “No,” Rice replies. One dispensary, he says, “was across the street from a grade school.”

St. Pierre is not shocked by the raids. Many growers push the limits, he explains. “The regrettable thing about the medical-cannabis industry is that it’s often acting in violation of state law,” he says. “50,000 plants is crossing that Rubicon.”

One thing that provoked the backlash in Montana, he adds, is that some dispensary owners were “charismatic.” “Charismatic” in this context sounds like a euphemism for the kind of evangelistic stoner who believes that because they’re doing Jah’s work, providing the herb for the healing of the nations, they don’t have to worry about following the finicky feinschmeckery of bureaucratic details—and that making money is doing well by doing good.

Bill Panzer, a veteran Oakland defense lawyer, voices similar sentiments. Twenty-five years ago, he says, his clients were mostly pot smugglers “who knew they were taking a risk. Now, I’m representing people who think everything they’re doing is completely legal. They’re in for a rude awakening.”

California law is so murky, he says, that 98 percent of the state’s thousand-odd dispensaries might be illegal. The only form that would be definitely legal, he adds, would be “a true socialist collective” in which all cultivated herb was divided equally among the members. Instead, he says, lots of people are setting up co-ops and “acting like sellers.” The Obama administration has also continued Bush-era prosecutions of medical-marijuana providers. On May 2, Californians Dr. Mollie Fry and Dale Schafer turned themselves in to begin serving five-year federal mandatory-minimum sentences. Fry, a breast-cancer survivor, and Schafer, a hemophiliac, were raided in 2001. In 2007, they were convicted of manufacturing and conspiracy charges for growing more than 100 plants over several years. “The Obama administration vigorously fought an appeal of their sentence,” says ASA.

In any case, the federal Controlled Substances Act maintains that marijuana has no valid medical use, and thus any distribution of it in the guise of “medicine” constitutes criminal sale of a controlled substance. In the last few months, federal prosecutors have sent letters reiterating that to governors and other officials in several states, including California, Colorado, Hawaii, Montana, Rhode Island, and Washington. The letters threatened that any official involvement in licensing or regulating medical marijuana would expose state employees to prosecution.

“We maintain the authority to enforce the CSA against individuals and organizations that participate in unlawful manufacturing and distribution activity involving marijuana, even if such activity is permitted under state law,” the Colorado letter, dated April 26, stated. “It is well settled that a State cannot authorize violations of federal law.”

On April 14, the two federal prosecutors in Washington state warned Gov. Christine Gregoire that if the state licensed medical-marijuana cultivation and distribution, government employees who worked with such a system could be prosecuted, and state property forfeited.

On April 29, Gregoire vetoed most of a bill to regulate medical-cannabis sales and production. The provisions she rejected included state licensing of dispensaries and a state register of patients. She said she feared state workers would be subject to arrest, and she urged the federal government to move marijuana to Schedule II under the Controlled Substances Act.

IRS

The IRS first went after dispensaries during the Bush administration, but it has greatly expanded such efforts under Obama.

More than two dozen dispensaries are now being audited, according to Henry Wykowski, a former Justice Department tax prosecutor now in private practice in San Francisco. Most are in California, he says, including the massive Harborside facility in Oakland and a smaller one in Marin County; at least one is in Colorado. Allen St. Pierre says he expects the probes to expand to Rhode Island, Maine, Montana, and New Mexico.

The law involved is Section 280E of the federal tax code, which prohibits drug-trafficking enterprises from claiming business expenses as deductions. “The government has brought 280E cases for years,” says Panzer, but “as far as saying, ‘hey, we can use this to go after dispensaries,’ it started with Obama.”

“I think the IRS didn’t know what to do, because of the conflict between federal law and state law,” says Wykowski. “When it became clear that there weren’t going to be wholesale prosecutions, they decided it was okay to audit.”

However, the one case to reach the courts so far yielded highly favorable results for medical marijuana. In 2007, the IRS assessed a defunct San Francisco dispensary called CHAMP—Californians Helping Alleviate Medical Problems—for $426,000 in back taxes and penalties on $2 million in sales. A three-lawyer team that included Panzer and Wykowski got the bill reduced to less than $5,000. The IRS refused to negotiate—which is highly unusual in tax cases, says Wykowski—and lost in court.

The IRS argued that because CHAMP sold marijuana illegally, those sales should count as “an expanding drop of ink in a glass of water” to disqualify deductions, Panzer explains. But because the dispensary also provided social services, including counseling, nursing, housing assistance, and massage; hosted support groups for AIDS patients and others; and put on social events, the judge agreed that 90 percent of its rent was deductible.

Paradoxically, the judge also let CHAMP deduct the wholesale cost of the medical pot it sold. This is a principle called “cost of goods” that dates back to Prohibition, Wykowski explains. The issue is complex, but basically, he says, there is legal authority that people cannot be forced to incriminate themselves in order to pay taxes. The ‘70s Harlem heroin dealer Nicky Barnes used to file tax returns anonymously, and “the right to selectively assert Fifth Amendment privilege has been recognized by the courts.”

It would be self-incriminatory for a taxpayer to report their occupation as “marijuana grower,” Wykowski adds. Disallowing the cost-of-goods deduction “would have made it impossible for any dispensary to remain in business.” Still, with the IRS continuing to audit dispensaries under Section 280E, that makes lawyers in the field fear a bad precedent. Other dispensaries may not have as strong a case, keep good records, or have the financial and legal resources to defend themselves.

“We are concerned that someone who doesn’t know what they’re doing will take a bad case to court and lose, and jeopardize everyone else in the industry,” Wykowski says. The conflicts between federal and state law and between tax and criminal law also create a massive record-keeping dilemma for dispensaries. If they keep accurate and complete records, they can prove that they’re acting like a legitimate business, a legitimate medical-services provider—but they’re potentially handing the federal government a cut-and-paste indictment.

“If the federal government would stop fighting the rescheduling process, we could have a resolution,” says [Allen] St. Pierre. “They’re not choosing to lead.”

“The same records that can help you in state court can screw you over in federal court,” says Panzer. If the amount of cannabis a dispensary grows, buys, or distributes is tallied cumulatively over several years, it can be large enough to trigger a five- or ten-year mandatory-minimum sentence.

Rescheduling

The overriding fact is that the Controlled Substances Act, enacted in 1970, puts marijuana in Schedule I, saying it has “a high potential for abuse, has no currently accepted medical use in treatment in the United States, and has a lack of accepted safety for use under medical supervision.” Thus, the law does not recognize “medical use” as a valid defense to charges of possession, sale, or cultivation. As far as federal law is concerned, medical-marijuana users are the equivalent of junkies, no matter how sick they are, and the dispensaries and growers that supply them are little different from crack dealers and meth-lab operators.

This rule is tied into a host of other laws intended to prohibit money-laundering and the like. Medical-marijuana users in public housing and landlords who rent to dispensaries run afoul of laws intended to close crackhouses.

The obvious solution, at least to those in the medical-marijuana movement, would be for the federal government to move marijuana out of Schedule I and into the realm of legitimate prescription drugs. Even moving it to Schedule II would gain it that status, although under controls as strict as those for OxyContin or medical cocaine. Marinol, the synthetic THC that is the prime legal cannabinoid drug, is in Schedule III, along with codeine.

That is not likely to happen soon. The Drug Enforcement Administration has jurisdiction over scheduling. In 2002, a coalition including NORML, ASA, and Virginia cannabis-policy expert Jon Gettman filed a petition to reschedule marijuana for medical use. It “has been languishing without a response from the DEA for nearly nine years,” says an angry Dale Gieringer of California NORML. “They’re sitting on our petition.”

The DEA, he says, has also “blocked efforts to establish a legal medical marijuana research garden,” which would provide the scientific background needed to obtain Food and Drug Administration approval.

“If the federal government would stop fighting the rescheduling process, we could have a resolution,” says St. Pierre. “They’re not choosing to lead.”

The DEA, headed by Bush holdover Michele Leonhart, remains resistant. Its official stance, the lead item in “DEA Position on Marijuana,” a 54-page booklet issued in July 2010, is that medical marijuana is a “fallacy,” that “smoked marijuana is not medicine,” and there is “no sound scientific evidence that smoked marijuana can be used safely and effectively as medicine.”

It blames “organizers of the ‘medical’ marijuana movement” for failing to ensure that “the product meets the standards of modern medicine. [There is] no safety regulation, no way to measure its effectiveness (beyond anecdotal stories), and no insurance coverage.” It calls the entire idea that marijuana has medical use “false-trickery [sic] used by those promoting wholesale legalization.”

“I don’t think that’s happening any time soon,” a DEA spokesperson who refused to give his name said of rescheduling. “I don’t see any movement on that. The science hasn’t borne it out.”

Copyright 2011 Steven Wishnia ________________________________________________________________________

This essay originally appeared at AlterNet.Org.

Steven Wishnia is a New York-based journalist and musician. The author of Exit 25 Utopia and The Cannabis Companion, he has won two New York City Independent Press Association awards for his coverage of housing issues.

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