Dream of ‘Cannabis Empire’ Raises Fears, Hackles

Jun 17, 2013

For the activists who led the effort to legal­ize recre­ational mar­i­juana in Wash­ing­ton state last fall, Jamen Shiv­ely was one of their biggest fears: an aspir­ing pot prof­i­teer whose unabashed dreams of build­ing a cannabis empire might attract unwanted atten­tion from the fed­eral gov­ern­ment or a back­lash that could slow the mar­i­juana reform move­ment across the coun­try. With vision­ary zeal, the 45-year-old for­mer Microsoft man­ager described his plans to a con­fer­ence room packed with reporters and sup­port­ers last month, say­ing he was tired of wait­ing for a green light from the Obama admin­is­tra­tion, which still hasn’t said how it will respond to the legal­iza­tion of recre­ational pot in Wash­ing­ton and Col­orado. Shiv­ely vowed to quickly raise $10 mil­lion and even­tu­ally build his com­pany, Diego Pel­licer, into an inter­na­tional pot pow­er­house. Though he promised a “cau­tious and mea­sured” expan­sion, Shively’s approach nev­er­the­less con­trasted with that of state reg­u­la­tors who want to avoid repeat­ing the national expe­ri­ence with Big Tobacco and Big Alco­hol, indus­tries that prof­ited wildly on addic­tion and abuse. Mark Kleiman, who heads the team hired to be Washington’s offi­cial mar­i­juana con­sul­tant, responded on his blog: “It was inevitable that the legal­iza­tion of cannabis would attract a cer­tain num­ber of insen­sate greed­heads to the indus­try.” Shively’s ambi­tions – “We are Big Mar­i­juana,” he pro­claimed – don’t merely raise ques­tions about what mar­i­juana legal­iza­tion might look like in the long run and whether large cor­po­ra­tions will come to dom­i­nate. He also risks get­ting him­self indicted. The Jus­tice Depart­ment has said while it doesn’t intend to pros­e­cute sick peo­ple for using mar­i­juana, it will go after those who try to get rich from com­mer­cial sales. It hasn’t said yet whether it will sue to block Wash­ing­ton and Col­orado from licens­ing pot grow­ers, proces­sors and stores. The legal­iza­tion votes in Wash­ing­ton and Col­orado have cre­ated a fever for cannabis-related invest­ing, to an extent. Con­fer­ences have focused on the para­me­ters for legally invest­ing in “ancil­lary busi­nesses” – those that sup­ply equip­ment needed by pot grows, for exam­ple – with­out financ­ing the actual pro­duc­tion or dis­tri­b­u­tion of mar­i­juana, which remains ille­gal under fed­eral law. Shiv­ely isn’t skirt­ing the edges of the nascent indus­try, but div­ing right in, in a way that few other entre­pre­neurs are. Some com­pa­nies that make high-end marijuana-infused prod­ucts, such as Colorado-based Dixie Elixirs, are plan­ning to make their brands avail­able in other states, but it’s not clear any­one else is tak­ing steps to cre­ate a pot empire. “Devel­op­ing a national brand in an indus­try in which it is ille­gal to move the core prod­uct across state lines presents some seri­ous logis­ti­cal chal­lenges,” said Betty Ald­worth, deputy direc­tor of the National Cannabis Indus­try Asso­ci­a­tion. Diego Pellicer’s busi­ness plan esti­mates $120,000 of pure profit per month, per recre­ational pot store. Shiv­ely said he plans dozens of stores in Wash­ing­ton and Col­orado. At the May 30 news con­fer­ence, Shiv­ely announced Diego’s first cor­po­rate deal – an arrange­ment with a Seat­tle med­ical mar­i­juana com­pany called the North­west Patient Resource Cen­ter. He said Diego would be start­ing in the med­ical mar­i­juana mar­ket in Wash­ing­ton and Col­orado, and then tran­si­tion­ing some dis­pen­saries to recre­ational pot stores once the states begin issu­ing licenses. Shiv­ely said the arrange­ment was “not in vio­la­tion of either fed­eral or state law,” but it was trou­bling enough to one of the dis­pen­sary com­pany own­ers that he’s walk­ing away from the deal – and the com­pany he helped found – because he fears it puts every­one involved at risk of fed­eral pros­e­cu­tion. “I’m not an activist. I’m just a busi­ness­man,” said the part-owner, Thomas Jun, a 42-year-old father of three. “I can’t afford to do any fed­eral time.” Accord­ing to Shiv­ely, Diego Pel­licer has acquired the option to buy North­west Patient Resource Cen­ter, but does not actu­ally own it. That’s what gives Diego Pel­licer some pro­tec­tion and allows it to posi­tion itself for the time when more states legal­ize pot and Con­gress changes fed­eral laws, he said. No mar­i­juana will be moved inter­state. “We don’t touch cannabis. We don’t have own­er­ship of cannabis,” he said. “It’s not a per­fect insu­la­tion or buffer, but it’s the best pos­si­ble mech­a­nism that we can come up with.” Through his lawyer, Dou­glas Hiatt, Jun pro­vided the AP with inter­nal com­pany doc­u­ments, includ­ing a draft of the $1.6 mil­lion agree­ment dated May 30. The deal directs monthly pay­ments of up to $50,000 from Diego be used to “to fur­ther develop and enhance NWPRC’s cus­tomer loca­tions and to oth­er­wise grow its busi­ness as cur­rently con­ducted.” For­mer fed­eral pros­e­cu­tors say that could be seen as a con­spir­acy to vio­late fed­eral law. “It cer­tainly would make me ner­vous to be involved in any­thing like this,” said Lau­rie Lev­en­son, a pro­fes­sor at Loy­ola Law School-Los Ange­les and a for­mer assis­tant U.S. attor­ney. Shiv­ely called the draft pro­vided to AP “an obso­lete doc­u­ment,” but declined to pro­vide fur­ther details. He also declined to dis­cuss a $10,000 check he wrote to the dis­pen­sary com­pany May 27. The deal high­lights the ten­sion between the vary­ing degrees of accep­tance of mar­i­juana by the states and the out­right pro­hi­bi­tion by the fed­eral gov­ern­ment, which makes bank­ing and other busi­ness func­tions prob­lem­atic. For exam­ple, beyond the grow­ing and sale of mar­i­juana con­sti­tut­ing fed­eral crimes, the move­ment of money related to mar­i­juana sales likely con­sti­tutes money laun­der­ing. Dixie Elixirs won’t be directly involved in the grow­ing, pro­cess­ing or sale of pot in mul­ti­ple states, said Tripp Keber, its man­ag­ing direc­tor. Instead, it will license its tech­ni­cal know-how and recipes to peo­ple in Wash­ing­ton or else­where who want to pro­duce prod­ucts under the Dixie Elixirs brand – and try to avoid the atten­tion of fed­eral pros­e­cu­tors by adher­ing to state laws. “Big pub­lic fed­eral indict­ments are going to do the indus­try a dis­ser­vice,” Keber said. If Shively’s model is endorsed by the reg­u­la­tors writ­ing rules for Washington’s pot indus­try, “then we would be increas­ing the risk of inter­ven­tion by the fed­eral gov­ern­ment,” said Ali­son Hol­comb, the Seat­tle lawyer who drafted Washington’s law. Shiv­ely said investors are advised that the com­pany and those involved could face fed­eral pros­e­cu­tion. A copy of Diego’s busi­ness plan includes 11 bul­let points list­ing risks the com­pany faces. None specif­i­cally sug­gests those involved could be pros­e­cuted. Source: Asso­ci­ated Press (Wire) Author: Gene John­son, Asso­ci­ated Press Pub­lished: June 17, 2013 Copy­right: 2013 The Asso­ci­ated Press

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