Pubdate: Wed, 05 Mar 2008
Source: Modesto Bee, The (CA)
Copyright: 2008 The Modesto Bee
Contact:  http://www.modbee.com/
Details: http://www.mapinc.org/media/271
Author: Susan Herendeen
Bookmark: http://www.mapinc.org/find?115 (Cannabis - California)
Bookmark: http://www.mapinc.org/mmj.htm (Cannabis - Medicinal)

POT DISPENSER SUING MODESTO

Lawsuit Claims City Conspired With Feds To Drive Out Business

A Modesto man who managed a medical marijuana  dispensary on McHenry 
Avenue is suing the city, saying  local authorities conspired with 
the federal government  to shut down a lucrative business that raked 
in $6 million in less than two years.

Luke Scarmazzo, formerly the treasurer and secretary of  California 
Healthcare Collective, filed the lawsuit  Thursday in Stanislaus 
County Superior Court, seeking  compensation for emotional distress, 
mental anguish and  the loss of a job that paid him $13,000 a month.

Scarmazzo said he cooperated with local officials even  as the City 
Council sought to ban pot clubs, turning  over business records to 
show that everything was on  the up and up. In return, he said, the 
city shared  information with federal authorities, who shuttered the 
dispensary after a September 2006 raid.

In his lawsuit, Scarmazzo claims that the city worked  in concert 
with the federal Drug Enforcement Agency so  it could close the 
business without compensating its  owners. He wants the city to pay 
the fair market value  of the dispensary at the time it was closed -- 
$3.8 million.

"This was something that was legal in our state,"  Scarmazzo said 
during a recent interview with former  business partner Ricardo 
Montes and defense attorney  Robert Forkner.

The lawsuit is an offshoot of a criminal case against  Scar-mazzo, 
Montes and four others who face federal  drug trafficking charges and 
are scheduled for trial  April 15 in U.S. District Court in Fresno. 
Scarmazzo,  27, is free on $400,000 bail. Montes, 27, is free on $250,000 bail.

The dispensary operators said city officials negotiated  in bad 
faith, because they said they wanted to shut the  business down after 
a six-month amortization period,  but were collecting information 
that fueled a federal  investigation.

The extent of cooperation between city and federal  officials is 
unclear, but in a letter to Scarmazzo's  attorney last spring, Senior 
Deputy City Attorney David  Cervantes acknowledged communications 
between local and  federal officials.

Calls to the city attorney's office were not returned Tuesday.

The dispensary was a hot topic at City Council meetings  in 2005 and 
2006, with officials passing two zoning  ordinances aimed at banning 
such businesses.

The federal drug raid came only five days after city  officials 
conceded that they could not outlaw the  nonprofit California 
Healthcare Collective, which had a  three-year lease that ran until 
Jan. 20, 2008.

Scarmazzo and Montes said they sought legal advice,  obtained a 
business license, paid state and federal  taxes, and made sure every 
patient had a note from a  doctor before they could purchase any marijuana.

But a 2005 ruling by the U.S. Supreme Court said a 1996  initiative 
that legalized marijuana for medical uses in  California does not 
shield people from federal  prosecution.

Since then, 90 dispensaries across the state have been  raided, with 
criminal charges filed in about half of  those cases, according to 
Americans for Safe Access, an  Oakland-based medical marijuana advocacy group.

Most dispensary owners are hit with conspiracy and  money laundering 
charges, but Scarmazzo and Montes are  accused of something far more 
serious. The U.S.  attorney's office has charged the two men with 
engaging  in a continuing criminal enterprise, which carries a 
sentence of 20 years to life.

Only two charged in country

Scarmazzo said he thinks he and his partner have been  singled out 
because he released a rap-style music video  called "Business Man" 
only one month before his arrest.  In that video, Scarmazzo flashes 
wads of cash and  shakes his fist at a mock-up of the City Council.

Forkner agrees. "These two defendants are the only two  defendants in 
the country who are facing a continuing  criminal enterprise charge," he said.

A criminal complaint alleges that the dispensary took  in $4.5 
million from December 2004 to June 2006.  Forkner said the dispensary 
generated $6 million in  sales before it closed.

Scarmazzo and Montes referred to themselves as  caregivers and said 
the marijuana was medicine.  Investigators also found more than 1,100 
marijuana  plants, 13 guns, 60 pounds of processed marijuana and 
$140,000 in cash in houses associated with the  defendants.

As they await trial, Scarmazzo is playing music gigs  around the 
region and has released a second album,  while Montes works a 
construction job. Both said they  would have done things differently 
if they had  understood that their business could be viewed as a 
continuing criminal enterprise.

"If a cease-and-desist order had come to us, we would  have 
definitely complied," Scarmazzo said. "They came  in with guns drawn 
and arrested everybody."
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MAP posted-by: Jay Bergstrom