California Police Ramp Up Asset Seizures of Cannabis Companies in Advance of Legalization Vote

At 7:37 a.m. on January 28, 2016, nearly 30 officers from the San Diego joint narcotics task force conducted a raid on Med-West Distributors, a licensed medical cannabis extraction company. The officers, decked out in helmets and tactical gear and clutching assault rifles and handguns, used a sledgehammer to open the door, and then burst into the lobby. Once inside, the task force arrested two employees present, cracked open the company’s safe, and collected its inventory–more than 30,000 cartridges of cannabis oil and a couple of pounds of concentrate.

The narcotics task force seized $1.4 million in cash, product, and money from various bank accounts belonging to owner James Slatic ($325,570 in cash was found in the safe). Med-West had been providing hundreds of licensed dispensaries around California with medical CO2-extracted cannabis oil and products under the state’s medical marijuana laws since 2010. The company was licensed by the city of San Diego and operating openly. Slatic says his company was raided a second time in late June and is now officially closed.

San Diego law enforcement used federal asset forfeiture laws to freeze and seize the company’s cash and the money in Slatic’s personal bank account, the bank account of his wife (who is a federal employee at Veterans Affairs), and his kids’ college savings accounts. The San Diego Sheriff’s Office and San Diego County District Attorney’s Office declined to explain why they seized Med-West’s and the Slatic family’s money, but neither has charged Slatic with a crime.

Med-West is not the only legal medical marijuana concentrate company in California that has been raided recently by the authorities. Law enforcement agencies have raided at least five other cannabis extraction companies since January. Jessica McElfresh, one of Slatic’s attorneys, says state law enforcement started targeting concentrate businesses this year. Typically, McElfresh says, the state had not used asset forfeiture laws against medical marijuana companies in the past, but has doubled down on the strategy with a focus on THC concentrate companies. McElfresh says the state is now using asset forfeiture to target legal marijuana businesses that cannot effectively fight federal asset forfeiture laws because marijuana is illegal federally.

“Over the past year, we have seen more investigations, more raids and systematic asset seizures of medical marijuana companies using CO2 to make concentrates than ever before,” says McElfresh. “According to California state law, medical marijuana is legal. The laws are complicated and ambiguous, but the state has decided this is something they want to allow and regulate.”

Despite the fact that California legalized medical marijuana in 1996 with Proposition 215, it has remained a gray market because the law was vague, it did not cover every sector of the industry, and each city could adopt its own unique rules or ban the industry. Over the years, new laws were passed like Senate Bill 420 to help create more structure, but the complexities left people in the industry open to prosecution at the state, local, and federal level.

Last year, three bills were passed that collectively make up the Medical Marijuana Regulation and Safety Act (MMRSA), legislation that spells out rules, requirements and licensing guidelines for all aspects of the industry. The act went into effect on January 1, 2016, but the specifics are still being written and state licenses will not be issued until 2018. This two-year gap leaves the window open for police to continue to conduct raids and seize assets via federal asset forfeiture laws until MMRSA is implemented at the state level.

The state is also gearing up to vote on legalizing recreational marijuana in November. This has left many with the impression that the authorities are making hay while the sun shines. “They are just trying to get money from us while they still can. That’s why it’s called smash-and-grab,” says Slatic. “The prosecutors do not give us their prosecutorial strategy, but many people think drug task forces have become addicted to the assets. Law enforcement knows we have trouble getting banking, so during my raid they found $325,570 in cash in the safe, and the cops were high-fiving each other.”

Asset forfeiture laws allow police to seize assets they believe are the proceeds of a criminal enterprise without arresting someone and proving his or her guilt. Unlike criminal charges against a person, defendants of federal asset forfeiture laws have little recourse to get their money back. Across the U.S., law enforcement agencies have seized $1 billion through asset forfeiture in marijuana cases from 2002 through 2012, according to data from the Justice Department. (During the same period, authorities have seized a total of $6.5 billion in all drug-related cases.) The seized assets, The Wall Street Journal reports, have helped fund portions of drug task forces around the nation. But as laws reform, that pivotal revenue stream is drying up in states like California, Colorado, Oregon, and Washington.

Continued…

Last-ditch revenue grab.

There’s really nothing in the existing CA med legislation that specifically deals with concentrates as far as I can tell. I do know from experience that most dispensaries keep the stuff like wax and oil out of plain view, so I just always assumed it was illegal.