The legalization of marijuana in Colorado brought huge regulatory restrictions. As one of the nation’s first trailblazers, Colorado drafted some of the restrictions rather vaguely, perhaps to allow judges to apply discretion, or because of concern about conflicts with federal restrictions, or simply due to inexperience in the industry. However, when laws that could result in jail time are not specifically detailed, there is huge potential for serious breaches.
The Marijuana Enforcement Division of the Department of Revenue publishes a 274-page list of regulations, which was updated this month due to evolving issues with interpretation.
An example of conflict comes from the recent conviction of the three owners of the Sweet Leaf dispensaries on the Front Range. While some feel that this case was simply pure greed and deliberate illegal activity, the defense brought up issues worth considering. It is a continual reminder that ignorance of the law is no excuse (when in doubt, consult an attorney), but could there have been some vulnerability in the wording of the regulations? That would explain why the reported 2.5 tons of felony marijuana distribution charges for 11 dispensaries resulted in only a 1-year prison term, which fell under the Colorado Organized Crime Act and federal tax laws.
While I am not an attorney, as sheriff, I must enforce the law, and I don’t want our business owners and neighbors to get into trouble due to lack of information. This particular case highlights how easily transactions can turn into very serious criminal matters, particularly when as law enforcement, we must balance state and federal demands. In this situation, something as simple as selling or purchasing more than 1 ounce at a time can cost you everything. It’s a practice known as “looping,” where someone buys an ounce, several times a day, sometimes for an innocent reason like picking up something for themselves and a family member at home.
According to an article in Westword, in an email exchange with former MED compliance officer Renee Rayton, former Sweet Leaf vice president Nichole West asked for clarification on the limit of marijuana transactions, specifically how much time must separate them. Here is Rayton’s response:
“We are aware the statute says per transaction, which I (speaking for myself) take as a single sales transaction. According to ‘higher-ups’ at MED, if you do more than one transaction with an individual, you are sending them away with more than ONE OUNCE, which violates State Law of having more than one ounce on your person (even if that person has taken a transaction to their home or car). So, that is all the information I have regarding this rule.”
Recommended Stories For You
Although she pleaded guilty, West feels Sweet Leaf was unfairly targeted over a rule the state failed to fix.
As a result, the plea deal involved a one-year prison term, a year of parole, and one year of probation, to run concurrently. In addition, the Sweet Leaf owners had to relinquish all assets, including their dispensaries, cultivation, and infused-product manufacturing, with fines of up to $125,000 each; plus, the plea deal included banishment from the industry for 15 years, with the possibility of additional fines totaling millions of dollars.
Sweet Leaf’s 18 budtenders were also arrested but charges were dropped. The company’s vice president and operations manager each received 30 days in jail.
Lead prosecutor Kenneth Boyd said in an interview with the Denver Post: “I think this was obviously a first case in Colorado. I think it was the first in the nation where a state prosecution office went after a licensed marijuana company.”
Banking regulations present another challenge. With banks being insured by the FDIC, they fall under federal jurisdiction, which prohibits the handling of any marijuana transaction. Yet, this is a big-money, evolving industry, which is legal in Colorado.
Without bank accounts, money is often “stuffed into bulging envelopes, slid into back pockets, and ferried around town in fully loaded SUVs” according to a January 2017 New York Times article. When business owners tried to disguise their deposits from traditional banks to avoid account closures, “bankers noticed the currency reeked of marijuana, so owners began spraying it with Febreze” but eventually, they’d be caught.
To address this problem, a credit union in Arvada named “Partner Colorado” (originally chartered in 1931 to serve postal workers, with about $350 million in assets), provides checking accounts expressly for the marijuana industry, in potential violation of federal law. According to the New York Times, “in three years, it has established itself, entirely through word of mouth, as the marijuana industry’s biggest banker.”
As a sheriff, my interest is in the safety of all within the community. The New York Times article states that “most deposits [to the credit union] are cash, taken off the streets and thereby reducing the latent, associated threat of robbery; a threat not just to those working in the industry but also to the ordinary people around them. As one banker put it, ‘I don’t want to stand in line next to a backpack filled with $30,000 cash’ while someone fills out money orders.” These credit unions, however, don’t lend money, because the federal authorities could seize whatever collateral backs the loan.
Sundie Seefried, Chief Executive of Partner Colorado, has managed to build a large portfolio of accounts that so far has withstood federal scrutiny. Seefried has concluded that for the moment at least, her chances of facing prosecution are small. Part of the reason may be the paper trail necessary for states to collect tax revenue is difficult in an all-cash business.
The marijuana industry is fraught with potential legal pitfalls. As business owners and customers, along with those in related fields, I ask that you please proceed with caution. The rules and regulations of this industry are in transition and beyond my control. Let’s all become knowledgeable and stay safe.
James van Beek is the Eagle County sheriff. You can reach him at james.vanbeek@eaglecounty.us.
