Marijuana is a Social Issue
The following story is fictional and doesn’t represent actual people or events.
After due deliberation and inquiry, the supreme justice returned a verdict that fell on deaf ears— “not guilty on charges of racketeering.”
This is the case of “Roots,” a popular dispensary on the east side, well positioned between an excellent pizzeria and the chocolate factory. Both of which have admitted enjoying great profits since the dispensary’s establishment. The state has also done well, as the taxes collected helped fund grants for after-school programs and better roads.
Stoney established “Roots” from the ground up and knows his business. The store offered a variety of products from extracts and edibles to pre-rolls and patches. The bud-tenders were knowledgeable and always smiling. With great rates and strains, the biggest complaint was always about the lines.
Those crowds were refreshing compared to the lines Stoney’s been fed since. Lines strait from the office of the US attorney general regarding federal vs. state laws, and that federal law trumps state law. It was hard for Stoney to see the work of his established “Roots” being buried at a federal level.
When Colorado and Washington approved recreational use of marijuana, much debate took place as to how it would go over. Other states observed the two and after the smoke cleared several more saw the benefits and legalized marijuana.
A few years back the federal government decided to stay neutral and allow states to make their own choices on legalization. Even though the subject remained unsettled before the country, congress looked good, everybody was satisfied, and nobody was seriously hurt. It took a long time to get to this point and was a great process by most accounts.
When states passed their own initiatives on marijuana, one of the greatest concerns of the federal government revolved around banking. Without banks being willing to accept accounts from these recreational businesses the predicament arises where shop owners are carrying large sums of greenbacks on their person or on their property. A cash business is more likely to involve violent crime, as you have owners armed to protect the cash and thieves armed to steal it.
Business owners cannot steer away from an all cash business when Visa and MasterCard refuse to process card transactions for the marijuana industry. However, they can work and live in a safer environment if they’re not carrying around mounds of cash.
The agency in place to detect and prevent money laundering worked together with the Department of Justice during the previous administration to help avoid state legalized marijuana becoming a cash business without any banking involvement, primarily for public safety reasons. They may have also been thinking that the increase in wealth would pour back into the treasury, but like any great government entity only agreed to the idea for welfare of the people. The financial crimes enforcement network told banks to go ahead and open accounts for these businesses.
With the amount of revenue generated by the cannabis companies, banks began warming up to the idea of helping out these new-found wealth clients. Non-compliance fees imposed by the government can be high, but when financial institutions estimated the profits of the money that had not yet been generated, they could afford it. It was like these light-headed bankers managed a contact high off the idea of the unrealized profits.
Stoney’s business account was kept at a local credit union. The way it was explained to him, it’s only fraudulent if he tries to disguise the origination or use of the funds. And this wasn’t a case of financial records being falsified or destroyed. Nor was this a case of missing or deceitful records that led to more questions than answers. This was a case of the sale of a schedule 1 drug, which is illegal by federal law. This was a case of money laundering based on marijuana being illegal at the federal level and the business account being funded with the sale of an illegal substance.
The Department of Justice chief who brought the federal racketeering charges against Stoney, could often be found reminiscing about the 80’s war on drugs and the 90’s ideas on law enforcement. 1980’s marijuana was emphasized as a gateway drug to crack and heroin, allowing it to be viewed as dangerous substance. While law enforcement of the 1990’s was full of racial disparities, the chief rationalized the idea with “you got to fight crime where crime is rampant.” The presidential surrogate insisted on returning our nation to the late decades of the 20th century.
There was a time when marijuana was an investment to consider, but with the newest DOJ chief, the better investment may be prisons. When state laws are ignored to enforce federal laws, more people are jailed for being found in possession. Folks couldn’t claim entrapment when they were pulled over and arrested right around the corner from where they made their purchase. No apologies were made to those arrested who received an unnecessary beat down, since the US attorney general looked the other way due to a relaxation of policing the police.
The elderly attorney vowed to focus all attention on drugs and crime and leave civil rights issues to the states. To his credit though, he wasn’t an attorney who should handle civil rights cases, as he was ok with the KKK until he found out they smoked pot. Some folks thought his focus would be on illegal drugs, but then he reminded us that marijuana is illegal at a federal level. He indicated that states may make their own choices on marijuana, but he will enforce the federal laws on the substance. With the backing of his congressional peers, he interpreted the laws.
The US attorney general indicated he was fine with the memorandum drawn up during the previous administration, as it’s open to be interpreted however the enforcer sees fit. The memorandum suggests that states that have legalized marijuana not be prosecuted as long as they have complied with state laws, but at the same time leave the decision up to the discretion of the DOJ. The memo did make plenty of good points though, as it suggested that banks do their due diligence to report and terminate any account that appears to be involved in money laundering or other criminal activity.
Banks were put into the position to monitor the state legalized marijuana businesses, as they were expected to notify authorities about marijuana businesses receiving more revenue than expected, or considerably more revenue than their competitors, or if the business can’t prove the funds are coming from marijuana sales, or if the deposits and withdrawals are significant compared to their competitors, or if the financial statements provided by the business to the bank are inconsistent with the activity that’s actually taking place on the account, or if the business engages in marijuana related activity outside the state. At the same time these state legalized marijuana establishments were expected to report cash transactions accurately with all the limitations imposed upon them by the government and the financial sector.
The Racketeer Influenced and Corrupt Organization Act (RICO) passed decades ago to eliminate organized crime. A few points to RICO are that there needs to be proof of continuity or repeated conduct. The government has to prove the existence of an enterprise, that it concerned interstate commerce, and there was a pattern of racketeering of at least two acts. The government doesn’t have to prove that the defendant had full knowledge of the conspiracy he committed.
As for the case of the owner of “Roots,” Stoney had no clue he was doing wrong when marijuana became approved for sale and use according to his state’s legislation. He took an appeal to the news that the US attorney general was coming for his license. Stoney was the first to oppose the attorney general’s stance on law enforcement and legalized marijuana. He was also the first to be charge with racketeering. The charges were ridiculous, as he followed every requirement of the state law.
Stoney was dressed to the hilt for his day in court. He raised his right hand and was sworn in for questioning. Was it too much to ask that the federal government focus on more serious issues, and not harass harmless farmers and businesses owners who abide by state laws? His question went unanswered since it wasn’t the government who was being weighed and measured and tried, it was Stoney.
The majority of the prosecutor’s questions revolved around the financial statements of “Roots.” With the amount of cash that changed hands, they wanted to know where the original investment for the business derived from. They wanted to know how much of the cash revenue made it’s way into Stoney’s business account, and how much if any was unaccounted for. They wanted to know if the withdrawals made from the account were used to purchase the crops, and if not how he could account for that money. They wanted proof that all wages were being paid on a legitimate basis and not as cash under the table.
Stoney replied that he’d be happy to answer questions on anything he was familiar with, but these all sounded like questions for his accountant. Stoney made a point of letting the courts know how much easier it would be for them to track the cash flow of the marijuana business, if it weren’t for federal prohibition. He suggested they may never recognize the true economic impact or benefits, when leaving it up to business owners dealing strictly in cash who can’t take advantage of all the traditional financial services that would be available to any other legally run business. He may not be a CPA, but he was by no means stupid.
At the time of Stoney was charged, marijuana legalization was the product of only a small number of states. Greed and excess played a large part in the process. The impacts on the economy were great and well worth the risk. The supreme justice knew she couldn’t hold accountable a small business owner on charges of racketeering, when the US government opened the door and made it possible through the US treasury for financial institutions to work with the marijuana entrepreneur. She knew her decision would impact not just the case of “Roots,” but also be looked at when other courts cast their judgments on similar cases.
Had Stoney transported his marijuana across state lines, there may have been a different outcome. It’s not about the presence of marijuana in states where it’s been legalized, but the absence of intra-state transportation where marijuana was present that got Stoney off the charges. When the criminal activity is said to take place fully within state borders, states typically prosecute criminals with state charges. Federal charges are typically brought against criminals who have committed a crime that involves more than one state.
The RICO statute has been around for over 40 years, but rarely was it ever used in the past for cannabis convictions. To the US attorney general it didn’t matter exactly what the RICO charge was, as long as he could charge them with something under a federal level. The elderly man heard the “not guilty” verdict and refused to be discouraged from pursuing RICO charges in future cases, because he knew what was at stake amounted to more than the outcome of just one case.
As the years continued, he found himself going up against a losing fight. The DOJ chief ordered an attack on marijuana. With all his enthusiasm, he didn’t account for the courts not being on board and he continued to lose case after case. With the momentum growing significantly behind legalized marijuana, a US attorney general pursuing RICO charges against businesses in states where it’s already legal continued to do nothing but backfire. Even those who had no stake in it pushed for legalization, just to bring an end to the fiasco and avoid a new issue of over-populated prisons. It was only a year or two before marijuana became legal at the federal level and the elderly attorney lost the battle altogether.