In California, It’s U.S. vs. State Over Marijuana

Jan 14, 2013

Matthew R. Davies grad­u­ated from col­lege with a master’s degree in busi­ness and a taste for enter­prise, work­ing in real estate, restau­rants and mobile home parks before seiz­ing on what he saw as uncharted ter­ri­tory with a vast poten­tial for prof­its — med­ical mar­i­juana. He brought graduate-level busi­ness skills to a world decid­edly oper­at­ing in the shad­ows. He hired accoun­tants, com­pli­ance lawyers, man­agers, a staff of 75 and a pay­roll firm. He paid Cal­i­for­nia sales tax and filed for state and local busi­ness per­mits. But in a case that high­lights the grow­ing clash between the fed­eral gov­ern­ment and those states that have legal­ized mar­i­juana for med­ical or recre­ational use, the United States Jus­tice Depart­ment indicted Mr. Davies six months ago on charges of cul­ti­vat­ing mar­i­juana, after raid­ing two dis­pen­saries and a ware­house filled with nearly 2,000 mar­i­juana plants. The United States attor­ney for the East­ern Dis­trict of Cal­i­for­nia, Ben­jamin B. Wag­ner, a 2009 Obama appointee, wants Mr. Davies to agree to a plea that includes a manda­tory min­i­mum of five years in prison, call­ing the case a straight­for­ward pros­e­cu­tion of “one of the most sig­nif­i­cant com­mer­cial mar­i­juana traf­fick­ers to be pros­e­cuted in this dis­trict.” At the cen­ter of this federal-state col­li­sion is a round-faced 34-year-old father of two young girls. Dis­play­ing a sheaf of legal doc­u­ments, Mr. Davies, who has no crim­i­nal record, insisted in an inter­view that he had metic­u­lously fol­lowed Cal­i­for­nia law in set­ting up a busi­ness in 2009 that gen­er­ated $8 mil­lion in annual rev­enues. By all appear­ances, Mr. Davies’ dis­pen­saries oper­ated as openly as the local Krispy Kreme, albeit on decid­edly more tremu­lous legal ground. “To be look­ing at 15 years of our life, you couldn’t pay me enough to give that up,” Mr. Davies said at the din­ing room table in his two-story home along the San Joaquin River Delta, refer­ring to the amount of time he could poten­tially serve in prison. “If I had believed for a minute this would hap­pen, I would never have got­ten into this. “We thought, this is an indus­try in its infancy, it’s a heavy cash busi­ness, it’s basi­cally being used by peo­ple who use it to cloak ille­gal activ­ity. Nobody was doing it the right way. We thought we could make a model of how this should be done.” His lawyers appealed this month to Attor­ney Gen­eral Eric H. Holder Jr. to halt what they sug­gested was a pros­e­cu­tion at odds with Jus­tice Depart­ment poli­cies to avoid pros­e­cu­tions of med­ical mar­i­juana users and with Pres­i­dent Obama’s state­ment that the gov­ern­ment has “big­ger fish to fry” than recre­ational mar­i­juana users. “Does this mean that the fed­eral gov­ern­ment will be pros­e­cut­ing indi­vid­u­als through­out Cal­i­for­nia, Wash­ing­ton, Col­orado and else­where who com­ply with state law per­mit­ting mar­i­juana use, or is the Davies case merely a rogue pros­e­cu­tor out of step with admin­is­tra­tion and depart­ment pol­icy?” asked Elliot R. Peters, one of his lawyers. “This is not a case of an illicit drug ring under the guise of med­ical mar­i­juana,” Mr. Peters wrote. “Here, mar­i­juana was pro­vided to qual­i­fied adult patients with a med­ical rec­om­men­da­tion from a licensed physi­cian. Records were kept, pro­ceeds were tracked, pay­roll and sales taxes were duly paid.” Mr. Holder’s aides declined to com­ment, refer­ring a reporter to a let­ter from Mr. Wag­ner to Mr. Davies’s lawyers in which he dis­puted the depic­tion of the defen­dant as any­thing other than a major-league drug traf­ficker. “Mr. Davies was not a seri­ously ill user of mar­i­juana nor was he a med­ical care­giver — he was the major player in a very sig­nif­i­cant com­mer­cial oper­a­tion that sought to make large prof­its from the cul­ti­va­tion and sale of mar­i­juana,” the let­ter said. Mr. Wag­ner said that pros­e­cut­ing such peo­ple “remains a core pri­or­ity of the depart­ment.” The case illus­trates the strug­gle states and the fed­eral gov­ern­ment are now fac­ing as they seek to deal with the chang­ing con­tours of mar­i­juana laws and pub­lic atti­tudes toward the drug. Col­orado and Wash­ing­ton legal­ized mar­i­juana for recre­ational use last year, and are among the 18 states, and the Dis­trict of Colum­bia, that cur­rently allow its med­ical use. Two of Mr. Davies’s co-defendants are plead­ing guilty, agree­ing to five-year min­i­mum terms, to avoid stiffer sen­tences. Mr. Davies, while say­ing he did not “want to be a mar­tyr,” decided to chal­lenge the indict­ment with a com­bi­na­tion of legal and public-relations mea­sures, set­ting up a Web site devoted to his case and hir­ing Chris Lehane, a hard-hitting polit­i­cal con­sul­tant and for­mer senior aide in Bill Clinton’s White House. Among Mr. Davies’s advo­cates here in Cal­i­for­nia are Paul I. Bonell, who was the pres­i­dent of the Pre­mier Credit Union for 21 years before Mr. Davies hired him in early 2011 to over­see his busi­nesses’ fis­cal con­trols. After the busi­nesses were raided in Octo­ber that year, Mr. Bonell took a posi­tion as the head of the Lodi Boys and Girls Club. “I had some reser­va­tions going in,” he said of Mr. Davies’s enter­prise. “But the indus­try was explod­ing. Matt wanted to have inter­nal con­trols in place. And we thought: This was a legit­i­mate busi­ness. If the State of Cal­i­for­nia deems it legit­i­mate, we want to be the best at it.” Mr. Davies’s accoun­tant, David M. Silva, said he set up spread­sheets to keep track of inven­to­ries, rev­enues and expenses. “I’ve been a C.P.A. for 30 years,” Mr. Silva said. “What I saw was a guy who was try­ing to run an oper­a­tion in an up-and-up way.” The fed­eral author­i­ties said they stum­bled across the oper­a­tion after two men were spot­ted appar­ently break­ing into Mr. Davies’s 30,000-square-foot Stock­ton ware­house. The police said they smelled mar­i­juana plants. Fed­eral agents con­ducted a raid and con­fis­cated 1,962 plants and 200 pounds of mar­i­juana. Mr. Davies, who is free on $100,000 bail, greeted vis­i­tors to his gated home by ask­ing them to speak softly while walk­ing through the entry­way so as not to awaken his sleep­ing infant. He called out to his wife when asked when he was indicted: “Hey, Molly — we were indicted on your birth­day, right? July 18.” Mr. Davies referred to mar­i­juana as “med­i­cine,” and him­self as a turn­around expert. “We were basi­cally phar­ma­cists for med­ical mar­i­juana — every­thing was in full com­pli­ance with state law,” he said. “We paid our employ­ees. We paid over­time. We had peo­ple going for unem­ploy­ment if we fired them.” “Why are they com­ing after me?” he asked. “If they have such a prob­lem with Cal­i­for­nia, why can’t they sue Cal­i­for­nia?” Stephanie Hor­ton, 25, who went to work for Mr. Davies after going to one of his dis­pen­saries to obtain med­ical mar­i­juana to help her deal with ovar­ian and cer­vi­cal can­cer, said she was dev­as­tated by the arrest of employ­ers she described as among the best she had ever had — not to men­tion the loss of her job. “I’d go back and work there in a heart­beat,” Ms. Hor­ton said. “I totally trusted them. We’re not crim­i­nals. I’ve never been arrested my whole life. I need that med­ica­tion, and so do a whole lot of peo­ple.” But fed­eral pros­e­cu­tors offered a much less sym­pa­thetic view of Mr. Davies. The author­i­ties shut down the ware­house and two dis­pen­saries but said that Mr. Davies had ties to a total of seven dis­pen­saries in the region, which they said yielded $500,000 in annual prof­its. Mr. Davies’s lawyers dis­puted those asser­tions. “Mr. Davies is being pros­e­cuted for seri­ous felony offenses,” Mr. Wag­ner wrote to Mr. Davies’s lawyers. “I under­stand he is fac­ing unpleas­ant alter­na­tives. Nei­ther a meet­ing with me nor seek­ing a review in Wash­ing­ton will change that real­ity.” This is as much a legal clash as a cul­tural clash. Recre­ational mar­i­juana use is com­mon across this state, and with­out the legal stigma attached to it in much of the coun­try. The fed­eral gov­ern­ment is viewed as a dis­tant force. “It’s mind-boggling that there were hun­dreds of attor­neys advis­ing their clients that it was O.K. to do this, only to be bush­whacked by a fed­eral sys­tem that most peo­ple in Cal­i­for­nia are not even pay­ing atten­tion to,” said William J. Por­tanova, a for­mer fed­eral drug pros­e­cu­tor and a lawyer for one of Mr. Davies’s co-defendants. “It’s tragic.” A ver­sion of this arti­cle appeared in print on Jan­u­ary 14, 2013, on page A1 of the New York edi­tion with the head­line: In Cal­i­for­nia, It’s U.S. vs. State Over Mar­i­juana. Source: New York Times (NY) Author: Adam Nagour­ney Pub­lished: Jan­u­ary 14, 2013 Copy­right: 2013 The New York Times Com­pany Con­tact: letters@​nytimes.​com Web­site: http://​www​.nytimes​.com/

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In Cal­i­for­nia, It’s U.S. vs. State Over Marijuana

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