"What I tell my clients is this: I got a guy on the jury, 45 years old, busting his butt, moonlighting to pay his mortgage and put his kid through school. My client is a 23-year-old, running a dispensary and making $200,000 a year. How do you think that's going to go?"
LAPD Det. Robert Holcomb instructs smaller agencies with a simple message: "Sales are not authorized anywhere in the medical marijuana laws."
In the last three years, his team of detectives in the Devonshire Division got rid of all 38 dispensaries in their turf, whether they were barely getting by or brimming with cash.
He scoffs at the notion that they were collecting donations. He said he has found signs at dispensaries that read, "Do not haggle over the donation amounts" and "Sales tax will be added to all donations."
On March 26, 2009, police searched the luxury downtown loft of Marlene Miller, director of Caregivers Earth Ordinance in Granada Hills, and found $16,410, mostly under a bed, according to court papers. They raided the store and took her pot.
Miller reopened within days, and they searched again, this time recovering $20,686 from her car and $9,000 from her office, according to police. They also found a spreadsheet on her computer that they contend listed daily sales from the previous September. The average daily sales on the sheet were $9,533.
Miller reached a deal with prosecutors Wednesday that will allow her to plead no contest to a misdemeanor if she stays out of the pot business. Her attorney, Allison Margolin, would not comment except to say there was no evidence of "profit."
Many times, it's not clear who is getting the money. The Orange County Sheriff's Department launched the investigation of Dana Point Safe Harbor Collective when it got an anonymous letter saying John Walker, 56, silently controlled that shop, Belmont Shore Natural Care in Long Beach and others. He was not listed on any of the incorporation papers.
Walker, who lives in a sprawling Tuscan-style home on a hillside in San Clemente, had criminal convictions going back to 1976 for marijuana possession and sales, selling and transporting a controlled substance and carrying a loaded firearm in a public place. Paperwork seized at the Dana Point store suggested he was to get 60% of the profit from the shop.
In November, detectives raided the other storefronts and 16 connected properties. Inside a nearby Long Beach duplex owned by Walker, detectives found 14 flat-screen televisions, according to a report from the search. Inside the garage of another Long Beach house, they found the AK-47, other guns and bags of cash, along with Walker's wedding album.
The affidavit alleges that Walker used a prominent Long Beach attorney, Richard Brizendine, "to give the dispensaries the cover of legitimacy." Brizendine incorporated all seven shops. Records show that six days after the raid of Walker's home, the attorney was briefly granted trust deed to it as security for a loan.
The case is still open and no one has been charged. Brizendine would not discuss the allegations, citing attorney-client privilege. Walker could not be reached.
Tax may be the biggest cudgel the feds have against medical pot. Increasingly, the IRS is applying an obscure provision of the tax code, 280E, which prohibits drug traffickers from claiming routine business deductions, for costs like wages and rent, when federal agents are trying to get back-taxes from them. Already dispensaries were in a quandary: Pay the IRS and literally document your federal crime to the federal government, or don't report it and risk going down for tax evasion. Now they face 280E, and potentially crippling tax bills.
At the same time, city authorities and the U.S. Justice Department are besieging pot shops with civil litigation and threats of asset forfeiture.
This is pushing the big money seekers underground. "They run sort of hit-and-run operations, make as much money as they can for six months and close down before they get caught," said Damian Nassiri of the Cannabis Law Group in Orange.
The founder of Avalon Wellness Center in Long Beach says she has tried to do the opposite. Valerie Crist, 56, was a Realtor when the housing market collapsed. Her husband's income in car sales was not enough, and they worried about their mortgage and their 10-year-old son's future college education. She and her sister decided to open a dispensary to make a modest income and do some good, Crist said. They paid a $15,000 permit fee to the city.
They retrofitted a warehouse to grow on the premises to comply with a city guideline, borrowing and investing half a million dollars. The first crop failed because construction disturbed the atmosphere in the rooms. And when they opened seven months ago, they realized their industrial location was too remote. They had to offer deep discounts.
"We're struggling just to make payroll," she said.
Crist said she pays state and federal taxes, workers' compensation and liability insurance for employees, as well as attorney fees to keep her store open. She just draws a wage when she can, she said, not even the highest in the shop; that's the bookkeeper's, at $20 an hour.
At her counter, a newcomer to the shop, a 23-year-old man nicknamed Junior, inhaled the aroma of various pot strains in jars. Between each, he sniffed a little shaker filled with coffee beans to cleanse his olfactory palate.
"How did you hear about us?" the bud tender asked him.
"Through a buddy at the hospital," he said.
He said he was on chemotherapy for non-Hodgkin's lymphoma, and the marijuana restored his sense of taste, tamped down the nausea and got him off the couch. He showed lesions on his tongue from the chemo. He said he'd come to the pot shop because he'd heard the prices were good. "I go all around, really," he said.
In downtown L.A., the former mortgage broker with the big plans began having doubts about starting a pot business. With the feds threatening to seize property, the few landlords who would lease to him demanded exorbitant rents.
At the end of May, he heard that the City Council was considering a ban. Did he really want to wade into this?
"I think I'll put this on hold," he said.