Archive for the ‘economics’ category

Legal Pot’s Cash Conundrum

March 6th, 2014

pot_shopOn Sunday February 16th, I bought legal weed for the first time from a recreational cannabis store in Denver, Co.  I spent a few minutes speaking with some of the employees, as I was eager to hear how things were going under this newly sanctioned marijuana market.  Unsurprisingly, business was great.  Some items were selling quicker than others, but everyone was in agreement that the rollout of Colorado’s legal cannabis retail system had been a great success, except for one crucial component that was as unsettling as it was expected – we were standing in one of a few dozen high profile stores, well-known for having excessive amounts of cash on hand (in the first week of sales, businesses generated $5 million in cash-only transactions) and no where to put it, because the banks won’t take it.

Clearly, denying these pot stores the ability to safely deposit their earnings poses an imminent threat to public safety.  These shops are easy targets for robbery and assault (as well as other forms of criminal activity), which puts customers and employees at serious risk.  Some of these shop owners are considering banning backpacks or other large bags – others are arming their workers.  Neither of these options are a viable solution.

This problem isn’t new however, nor is it going unnoticed.  On February 14th, the Department of Treasury released a nonbinding memorandum, in conjunction with the Justice Department stating that banks may consider working with pot retailers without fear of prosecution – so long as they remain in compliance with state laws, and followed other instructions outlined in the memo.  Though a truly historic and progressive action by the federal government’s leading financial regulatory body, these guidelines are largely symbolic, providing no actual legal protection to banks working with cannabis shops.   As such, most financial companies remain skeptical about getting involved with a market existing under so many contradictory laws.

According to federal law, these banks could technically be found guilty of money laundering (among other offenses) for handling the proceeds of what the US government still considers an illegal drug.  The Colorado Bankers Association rightly notes that the guidance issued by the Department of Justice and the U.S. Treasury “only reinforces and reiterates that banks can be prosecuted for providing accounts to marijuana related businesses.”  The Association further criticizes these new guidelines, stating that “Bankers had expected the guidance to relieve them of the threat of prosecution should they open accounts for marijuana businesses, but the guidance does not do that.  Instead, it reiterates reasons for prosecution and is simply a modified reporting system for banks to use. It imposes a heavy burden on them to know and control their customers’ activities, and those of their customers.”

Is it any surprise then that these guidelines – which include a multi-tiered labeling structure and a requirement for banks to maintain ‘suspicious activity reports’ – have left many financial institutions with cold feet?  Two of Colorado’s largest banks, Wells Fargo and FirstBank have already announced they won’t work with weed-related enterprises.  In fact, most financial trade associations have widely rejected these latest overtures because there are no tangible, legal policies in place.

Despite the skepticism held by many federal administration officials and other politicians, the government can and should be doing much more to enable the success of this new, legal market. Unfortunately, many are sitting on their hands, and holding their breath – hoping to quietly ride out this growing wave of support for legalization, which shows no sign of subsiding.  Over 50% of the US population supports a regulated marijuana retail system for adults.

Its time for these officials to concede to the will of the electorate, and address the legitimate needs of this new industry. Lawmakers now have an opportunity to show true leadership in this changing political landscape by supporting legislation that would give states and businesses the resources necessary to enable a responsible and successful implementation of this new “great experiment.” Specifically, they should get behind the “Marijuana Businesses Access to Banking Act,” introduced by Colorado representative Ed Perlmutter.  This bill (HR 2652), already endorsed by the Colorado Bankers Association, would alter various banking laws to protect banks providing services to marijuana-related businesses from the threat of federal prosecution and other penalties.

Financial institutions don’t operate off good-faith statements (including non-binding memorandums) – even those from the Department of Treasury, or any other enforcement agency.  They operate under explicit legal authorization.  Only when the laws change will the banks truly be free to provide the services these businesses so desperately need, and their communities rightly deserve.

 

takeactionban

 Contact your representative today and tell them to support HR 2652

The Prohibition Industrial Complex

January 28th, 2014

sheet-of-money-hemp

Our nation’s marijuana laws are being held hostage by a prohibition industrial complex.  

The latest Wall St. Journal/NBC poll shows, yet again, that the majority of Americans support legalizing the recreational use of marijuana for adults age 21 and over.  But despite this surge in support (several other national polls have seen similar results), there are a few well financed, politically powerful groups that remain staunchly against reform – and will likely serve as the biggest hinderance to widespread change.  These folks have made a lot of money off of marijuana’s current legal status, and those individuals (as well as their businesses/shareholders) are deeply invested in making sure things stay the way they are.  The wide range of direct and auxiliary enforcement mechanisms, as well as the increase in drug testing laws are driven by companies and businesses who provide the services necessary to support this disastrous and wasteful policy.

One such industry that has a financial interest in maintaining the status quo is law enforcement, especially drug officers and private prisons.  Drug officers benefit from forfeiture and federal grants.  Private prisons keep their jails full and multi-million dollar state contracts in place.  The Office of National Drug Control Policy requested $9.4 billion in funding for 2013, the majority of which went to enforcement and incarceration.   More specifically, California police – one of the most vocal opponents to legalization in the state made $181.4 million by seizing and selling the homes and cars of Californians involved in marijuana cases from 2002 to 2012.  Police in Washington are already taking budget hits as a result of the passage of I-502, the state’s marijuana legalization initiative that passed in 2012. It was reported that some police drug task forces lost 15 percent of funding due to decreased revenue from marijuana forfeiture cases.  On a national level, marijuana cases netted $1 billion in assets forfeited between 2002 and 2012.  Assets can be seized under federal or state law, depending on the situation.  The Wall St. Journal recently reported that marijuana law reform would cut into a significant percentage of drug task forces’ revenue.   Most cash generated from drug-related property forfeitures goes to the law enforcement agency that made the bust.  The Journal reports that “Nationally, assets forfeited in marijuana cases from 2002 through 2012 accounted for $1 billion of the $6.5 billion from all drug busts.”  Task forces also rely heavily on federal grants.

One example of a federal grant relied heavily upon by drug task forces is Edward Byrne Memorial Justice Assistance Grant Program.  The amount of money distributed is based on the number of drug arrests made for that year, among other components.  The more drug arrests made, the more grant money provided, and 50% of all drug arrests are marijuana related.   No drug will be able to fill the void of marijuana arrests.  Marijuana is easier to spot and smell, and is consumed by more people than any other illegal drug, making marijuana arrest rates a significant percentage of overall revenue.  Then you have state contracts with private prisons, which mandate that facilities be filled at 90% capacity at all times.  If 50% inmates are there as a result of drug-related crimes, and half of that is for marijuana – legalization would be a serious threat to new contracts and increased profits.

Another industry tied into the prohibition industrial complex is the drug testing market. It’s a multi-billion dollar a year industry with its own, built in legislative advocacy machine.   Take DATIA , the Drug & Alcohol Testing Industry Association for example.  This industry organization represents more than 1,200 companies and employs a DC-based lobbying firm, Washington Policy Associates.   Their mission statement includes, among other things, creating “new opportunities for the drug testing industry.”

In 2002, a representative from the influential drug-testing management firm Besinger, DuPont & Associates (Robert DuPont, Nixon’s first drug czar is a high profile opponent to legalization) heralded schools as “potentially a much bigger market than the workplace.”  Workplace drug testing is a declining market due to the fact that employees see minimal return on investment.  In fact, a DATIA newsletter dubbed school children “the next frontier.”  Unsurprisingly, this industry advocates testing in all grades and for all extracurricular activities.  It should be noted that several reports have concluded that drug testing minors is not only ineffective but can be emotionally and psychologically damaging.  Lucky, many schools have been reluctant to embrace testing.

Year after year, the drug testing industry gears up for another legislative push, ghostwriting bills for local and national lawmakers demanding testing for people who receive public assistance.  Many of these elected officials are either financially investment in these companies, or received significant financial contributions from industry organizations.  For example, in February 2012, Congress amended federal rules to allow states to drug-test select unemployment applicants.  Among the lawmakers advocating for the change was Congressman Dave Camp, who owns at least $81,000 in assets in companies that are major players in the drug-testing industry, such as LabCorp and Abbott Laboratories. He has also received $5,000 in federal campaign contributions from LabCorp over the past three years.  Abbott Laboratories spent $133,500 on campaign donations to Ohio and Texas state politician promoting drug testing to welfare recipients, in the lead-up to the 2010 and 2012 elections, in addition to more than $500,000 spent by the company on state lobbying contracts since 2010.

The industry is once again flexing its political arm pushing for policies that mandate drug testing for welfare recipients.  Legislation has already been introduced in Virginia, New York, Arizona, Ohio, Iowa, Illinois and Mississippi, for the 2014 legislative session.

Two of the most outspoken opponents of marijuana legalization are David Evans and Robert DuPont.  DuPont, Founder of Besinger, DuPont & Associates served as the nation’s first drug policy director under Presidents Richard Nixon and Gerald Ford.  During that time he had advocated decriminalizing marijuana and its use a “minor problem.”  Once he left public office however, he became a “drug-testing management” consultant.  David Evans worked for Hoffmann-La Roche, a multi-billion dollar drug testing group encouraging workplace drug testing policies.  He now runs his own lobby firm and has ghostwritten several state laws to expand drug testing.   Drug testing overall detects marijuana more than any other drug, which stays in the body for up to a month — as opposed to other harder drugs like cocaine and heroin, which are metabolized within one to three days. That is why they have such significant stake in keeping the plant illegal.

The total income for all of these industries combined adds up to hundreds of billions of dollars annually, a significant amount derived from taxpayer dollars.  An industrial complex is when there is a policy and monetary relationship between legislators, the public sector and an industrial base that supports them.  Just like the military industrial complex, the prohibition industrial complex, and its cycle of laws, enforcement and contracts will pose a major challenge to reform efforts.  This will be especially true in states that don’t have ballot initiatives, which is why it is so important for everyone to get active on a local level, and hold lawmakers accountable.  Though difficult, this will not be an impossible challenge to overcome, as long as we remain diligent and active in the political process.

Please take a minute of your time today to utilize NORML’s Take Action Center to contact your representatives and urge them to support or sponsor marijuana law reform legislation.  Click here to see if there is a bill pending in your state, and here to find contact information for your elected officials. 

 

Feds To Issue Banking Guidelines For Businesses Engaged In Cannabis Commerce

January 24th, 2014

Federal officials are poised to unveil new regulations allowing for financial institutions to legally interact with licensed businesses that are engaged in cannabis commerce.

United States Attorney General Eric Holder announced the forthcoming guidelines yesterday in a speech at the University of Virginia’s Miller Center.

“You don’t want just huge amounts of cash in these place. They (retail facilities that dispense cannabis) want to be able to use the banking system,” Holder said. “And so we (the Obama administration) will be issuing some regulations I think very soon to deal with that issue.”

Presently, federal law discourages financial institutions from accepting deposits or providing banking services for facilities that engage in cannabis-related commerce because the plant remains illegal under the US Controlled Substances Act. While the Obama administration is unlikely to amend cannabis’ illegal status under federal law, the forthcoming rules are anticipated to provide clear guidelines for banks that wish to provide support for state-licensed cannabis facilities.

In Colorado, where retail stores began legally selling cannabis on January 1 to anyone age 21 and older, businesses were estimated to have engaged in over $5 million in marijuana sales in their first week of business.

President Obama: Marijuana Less Dangerous Than Alcohol; Legalization in WA and CO “Important”

January 19th, 2014

White HouseIn a profile published online over the weekend in New Yorker magazine, President Barack Obama continued his softening towards marijuana legalization. In the interview, the president alluded to his own youthful marijuana consumption and clarified that, while he doesn’t believe it to be a healthy pastime and has discouraged his daughters from its use, it is a less dangerous substance than alcohol. President Obama also stated that current moves towards legalization are important experiments that can help end discriminatory arrest practices.

“As has been well documented, I smoked pot as a kid, and I view it as a bad habit and a vice, not very different from the cigarettes that I smoked as a young person up through a big chunk of my adult life. I don’t think it is more dangerous than alcohol.” President Obama stated when asked about the growing public support for ending marijuana prohibition.

When asked to clarify if he thought it was “less dangerous,” Obama replied that he thought it was less dangerous “in terms of its impact on the individual consumer.” He continued that “it’s not something I encourage, and I’ve told my daughters I think it’s a bad idea, a waste of time, not very healthy.”

“Middle-class kids don’t get locked up for smoking pot, and poor kids do and African-American kids and Latino kids are more likely to be poor and less likely to have the resources and the support to avoid unduly harsh penalties.” he stated, “we should not be locking up kids or individual users for long stretches of jail time when some of the folks who are writing those laws have probably done the same thing.”

“It’s important for it [marijuana legalization in Colorado and Washington] to go forward because it’s important for society not to have a situation in which a large portion of people have at one time or another broken the law and only a select few get punished.”

You can read the full article on the New Yorker’s website here.

Perhaps President Obama will continue to evolve and find himself on the right side of history when it comes to marijuana legalization. It would take just one simple Executive Order to deschedule marijuana from the Controlled Substances Act and help institute some real lasting change in our nation’s failed war on cannabis. At a minimum, these statements show just how far we have come from the “Just Say No” era of American politics.

Banks Willing to Work With Marijuana Business, But Waiting for Federal Clarification

October 29th, 2013

Reported this week in the Daily Herald:

Community banks and credit unions are ready and willing to provide financial services to entrepreneurs in the state’s new legal pot industry. But they aren’t able to, at least not yet.

Marijuana businesses, even ones that will soon be legally licensed in this state, are considered criminal enterprises under federal law, which makes handling their money a crime in the eyes of the Department of Justice.

Until the agency changes its outlook or Congress changes the law — and efforts are under way to do both — those getting into the pot business can’t open a bank account, secure a line of credit or obtain a loan from a federally insured financial institution in their neighborhood.

Full Article

Fortunately, there is already a bill Congress could act upon to resolve this issue. Earlier this year, Representatives Ed Perlmutter (CO-07) and Denny Heck (WA – 10), along with a bipartisan group of 16 other Republicans and Democrats, introduced legislation that would reform federal banking laws relating to marijuana businesses. HR 2652: The Marijuana Business Access to Banking Act of 2013 updates federal banking rules to resolve conflicts between federal and state laws and would allow marijuana businesses acting in compliance with state law to access banking services.

Under current federal banking laws, many legal, regulated legitimate marijuana businesses that follow state law are prevented from opening bank accounts and operating as any other businesses would, which could ultimately lead to crime such as robbery and tax evasion in addition to the already onerous burden of setting up a legitimate small business.

Please take a minute of your time today to utilize NORML’s Take Action Center to contact your elected officials and urge them to support this important legislation. You can do so by clicking here.

Banks Willing to Work With Marijuana Business, But Waiting for Federal Clarification

October 29th, 2013

Reported this week in the Daily Herald:

Community banks and credit unions are ready and willing to provide financial services to entrepreneurs in the state’s new legal pot industry. But they aren’t able to, at least not yet.

Marijuana businesses, even ones that will soon be legally licensed in this state, are considered criminal enterprises under federal law, which makes handling their money a crime in the eyes of the Department of Justice.

Until the agency changes its outlook or Congress changes the law — and efforts are under way to do both — those getting into the pot business can’t open a bank account, secure a line of credit or obtain a loan from a federally insured financial institution in their neighborhood.

Full Article

Fortunately, there is already a bill Congress could act upon to resolve this issue. Earlier this year, Representatives Ed Perlmutter (CO-07) and Denny Heck (WA – 10), along with a bipartisan group of 16 other Republicans and Democrats, introduced legislation that would reform federal banking laws relating to marijuana businesses. HR 2652: The Marijuana Business Access to Banking Act of 2013 updates federal banking rules to resolve conflicts between federal and state laws and would allow marijuana businesses acting in compliance with state law to access banking services.

Under current federal banking laws, many legal, regulated legitimate marijuana businesses that follow state law are prevented from opening bank accounts and operating as any other businesses would, which could ultimately lead to crime such as robbery and tax evasion in addition to the already onerous burden of setting up a legitimate small business.

Please take a minute of your time today to utilize NORML’s Take Action Center to contact your elected officials and urge them to support this important legislation. You can do so by clicking here.

New York City Comptroller’s Office: Legalizing Marijuana in NYC Would Yield $431 Million Annually in Savings and Revenue

August 15th, 2013

Marijuana Adventure: Swashbuckling For Sativa Strains

August 3rd, 2013

Over the last year or so I’ve read about and on occasion met with the newly minted ‘cannabis CEOs’ in America (men and women who’re at the vanguard of creating a sustainable cannabis industry in America post prohibition). Most of them talk in couched terms regarding what they ‘hope’ to see happen with a legal cannabis market in the US or issue over-the-top and breathless press releases that seek to attract investor attention.

However, Vice Magazine has produced a very fascinating and revealing short documentary featuring a real life cannabis industry CEO who walks the walk when it comes to not only taking substantive legal chances to further his businesses, but one who lives his life as-a-always-interested-stakeholder in the future of humans being able to access high quality cannabis products.

Having met Amsterdam’s Arjan Roskom of the famed Green House coffeeshops and seed company on a number of occasions previously, I was hardly surprised when Vice contacted me to review their documentary that Arjan was featured and had provided them an insider’s view of what it is like to be a genuine cannabis industry maverick.

The Vice documentary focuses on Arjan and his lead cultivator traveling to the deep jungles of Colombia to re-locate three famed sativa strains of cannabis historically cultivated in this region of South America.

Cannabis kudos to Vice and Arjan!

Another Ugly Moment For US’ War Against Marijuana Consumers

July 31st, 2013

arrestedIn what can only be described as a horrible tragedy for college student Daniel Chong–as well as for the American taxpayer–the Department of Justice’s Drug Enforcement Administration has agreed to pay $4.1 million dollars to Mr. Chong for falsely imprisoning him after an April 20, 2012 party, and worse, literally forgetting about him in a holding cell for five days where Mr. Chong drank his own urine to survive, and cut himself to leave a dying message to his mother.

To date no DEA field agents or local managers have been held responsible for this gross error (ironically, only the taxpayer is left being the responsible party in this legal nightmare).

This kind of abuseful and money-wasting government nitwittery is another prime example of why cannabis prohibition must end in America post haste.

San Diego Union Tribune article about the settlement, and previous news coverage, is below:

DEA settles left-in-cell case for $4M

By Jeff McDonald1:08 a.m.July 30, 2013

Daniel Chong, the self-confessed pot smoker who was caught up in a drug sweep last year and nearly died after federal agents inadvertently abandoned him in a holding cell for five days without food or water, is now a millionaire.

Attorney Eugene Iredale announced Tuesday he reached a $4.1 million settlement with the U.S. Department of Justice, without even filing a lawsuit.

The harrowing experience for Chong, 25, an engineering student, began on a Friday night in 2012, when he admittedly went to some friends’ house in University City to celebrate April 20, a special date for marijuana users.

Chong didn’t know it at the time, but the home had been under surveillance by a federal narcotics task force.

Drug agents executed a search warrant early in the morning of April 21, Among other things, they found 18,000 ecstasy pills, marijuana and several weapons in the residence, according to court papers.

The agents also found Chong sleeping on a couch in the front room and transported him and six others to the San Diego field office of the U.S. Drug Enforcement Administration for follow-up interviews.

Chong said he answered all of the agents’ questions and they agreed to send him home without criminal charges.

But instead he was returned to a temporary holding cell, where he spent the next four days without food or water. He has said he became delirious, drank his own urine, ate the broken shards of his glasses and used the glass to cut the message “sorry mom” in his own forearm.

He said he kicked the door and screamed for help but agents never came to his assistance. DEA agents admitted later they “accidentally” left Chong in the cell and took the unusual step of apologizing publicly to the UCSD student.

DEA officials declined to comment about the case Monday.

Findings of an investigation by the Office of the Inspector General’s Office of the U.S. Department of Justice have not been released.

NORML Meets With Former Mexican President

July 9th, 2013

At a meeting with drug reform advocates in San Francisco, former Mexican President Fox expressed support for California’s efforts to legally regulate cannabis, medical and otherwise. He said that California has a strong cultural influence on Mexico, and that progress here would help efforts there.NWA Canada Prohibition Car

Speakers included Dale Sky Jones for CCPR, Nate Bradley for LEAP and myself for California NORML, who noted that marijuana prohibition is an international problem founded on international treaties, which need to be fixed through international cooperation by the U.S., Mexico, and other countries. Many thanks to President Fox, Jamen Shively, and Steve DeAngelo for arranging this meeting.  - Dale Gieringer, CA NORML

 

Former Mexican president Fox urges marijuana legalization

Source: Reuters – Tue, 9 Jul 2013 12:40 AM

By Ronnie Cohen

SAN FRANCISCO, July 8 (Reuters) – Former Mexican President Vicente Fox took his crusade to legalize marijuana to San Francisco on Monday, joining pot advocates to urge the United States and his own country to decriminalize the sale and recreational use of cannabis.

Fox met for three hours with the advocates, including Steve DeAngelo, the Oakland-based executive director of California’s largest marijuana dispensary, and former Microsoft executive Jamen Shively, who hopes to create a Seattle-based pot brand now that Washington state has legalized recreational use.

Legalization, Fox told reporters after the meeting, is the only way to end the violence of Mexican drug cartels, which he blamed on America’s war on drugs.

“The cost of the war is becoming unbearable – too high for Mexico, for Latin America and for the rest of the world,” Fox said in English.

Every day, he said, 40 young people are killed in drug-related violence.

Fox’s position on legalizing drugs has evolved over time since the days when he cooperated with U.S. efforts to tamp down production in Mexico during his 2000-2006 presidential term. He has been increasingly vocal in his opposition to current policies, backing two prior efforts to legalize marijuana in Mexico.

Mexico’s current president, Enrique Pena Nieto, has opposed legalization. But he recently said that he would consider world opinion on the matter, particularly in light of recent voter-approved initiatives to legalize marijuana in Washington state and Colorado for recreational use.

In San Francisco on Monday, Fox said he had signed on to attend and help develop an international summit later this month in Mexico to strategize a path to end marijuana prohibition.

Participants scheduled to attend the three-day meeting starting July 18 in San Cristobal include an American surgeon, the dean of Harvard’s School of Public Health and a Mexican congressman who plans to introduce a bill to legalize marijuana in Mexico this summer, Fox said.

The bill, which he expects to be introduced by Mexican lawmaker Fernando Belaunzaran, would legalize adult recreational use of marijuana, Fox said.

Support for legalizing marijuana in the United States has been growing. Nineteen states and the District of Columbia have passed medical marijuana laws, according to the pro-legalization National Organization for the Reform of Marijuana Laws. But the drug remains illegal under federal law.

Lifting the prohibition on cannabis in Mexico, however, appears to face more of an uphill battle. Mexican lawmakers have rejected previous legalization efforts and polls have shown little popular support for the idea.

But Fox promised to wage what he said was a necessary battle.

“We cannot afford more blood and the loss of more young people,” Fox said. “We must get out of the trap we are in.” (Editing by Sharon Bernstein and Eric Walsh)