Pubdate: Tue, 25 May 2010
Source: San Francisco Chronicle (CA)
Section: Net Worth
Copyright: 2010 Hearst Communications Inc.
Author: Kathleen Pender


Fifteen U.S. representatives, including seven from  California, are
urging the Treasury Department to say  it won't "target or pursue"
national banks that do  business with medical marijuana distributors
operating  legally under state laws.

In a letter to Treasury Secretary Timothy Geithner, the  lawmakers
said, "dispensary operators are finding it  increasingly difficult to
maintain accounts with  financial institutions."

That may be true of national banks, but many  state-chartered banks
are happy to do business with  medical marijuana dispensaries, as long
as they are  operating legally.

Medical marijuana is legal in 14 states, including  California, and
many more states - out of compassion or  the need for new tax revenues
- - are considering  legalizing it. California voters will decide in
November whether to make it legal for recreational use  as well.

But growing and distributing marijuana is still illegal  under federal
law and for that reason, many national  banks won't do business with
medical marijuana  distributors. Bank of America, Chase and U.S. Bank
all  confirmed that they won't do business with medical  marijuana
distributors, even in states where it is  legal.

Wells Fargo said it stopped opening new accounts with  medical
marijuana dispensaries this month and is  reviewing its existing
accounts with them. "In general,  we follow federal, not state, law,"
says Wells  spokesman Chris Hammond. "The decision was made to have  a
consistent standard."

State vs. federal

National banks have often claimed that they are exempt  from state
consumer protection and other laws because  federal laws pre-empt
them. In many cases, the courts  have agreed with them. So it could
appear inconsistent  for a national bank to claim exemption from some
state  laws yet agree to do business under others.

Federal pre-emption is a big issue in the financial  reform bill being
debated in Congress.

Some Bay Area dispensaries say they've had no problem  opening
business checking accounts.

Mark Samuel, manager of Medithrive in San Francisco,  says he banks
with "one of the big boys," but wouldn't  name which one.

Rose Muniz, manager of Blue Heaven Coastside, says,  "Wells Fargo has
been a big supporter of the Blue  Heaven Collective. They welcomed our
business." (The  dispensary's future is in doubt after it was denied a
  business license this week.)

Erik Miller, manager of the Berkeley Patient's Care  Collective, says
his operation has a checking account  with San Francisco-based
Mechanics Bank "and they're  great."

Rauly Butler, a senior vice president with Mechanics  Bank, says
"several cannabis clubs bank with us" and  they are treated like any
other business.

"We have to verify the ownership, who the (check)  signers are. We
have to make sure they are permitted to  do business. We verify any
filings with the state of  California, the articles of incorporation,"
he says.

He says the clubs "are a little more work" than other  clients because
"they are cash intensive. They come to  the bank more often to make

His bank will not do credit card processing for  cannabis clubs or
other businesses that have a higher  risk of charge backs, "but there
are processors who  will," Butler says.

Mechanics Bank will not make loans to medical marijuana  purveyors and
doesn't know of any that will.

Community Bank of the Bay in Oakland also has "a fair  number (of
dispensaries) banking with us," says its  CEO, Brian Garrett.

"We used to have more," he says, but a few years ago,  the Federal
Deposit Insurance Corp. "made it very  difficult for us to bank them,"
and he closed some  accounts.


Since then, he hasn't had any extra attention from  regulators. "We
are in strict compliance. We follow all  the rules about suspicious
activities and large  currency transactions," Garrett says.

Some medical marijuana shops say they have been dropped  by banks but
were able to take their business  elsewhere.

Lisa Molyneux, founder of Greenway Compassionate Relief  in Santa
Cruz, says she originally had an account with  BofA. But a few years
ago, "they suddenly closed my  account, sent me a check and said
because of our  business, they didn't want to do business anymore.
Then  I opened one with Wells Fargo, who I am currently with.  We are
waiting to see what happens next."

Steve DeAngelo, executive director of the Harborside  Health Center in
Oakland, says his business had an  account with California Bank &
Trust. "After two-plus  years, the bank's parent company in Utah found
out the  nature of our business and said we had to remove all  funds
from their institution within 30 days," he says.

Harborside was able to move its account to Sterling  Bank in San
Francisco. Butler says Harborside was also  forced to switch credit
card processors around the same  time last fall.

"We did $20 million in gross sales last year. We are  very, very
solvent. But we were never given the kind of  access to financial
services another business would,"  he says.

DeAngelo says he would like to get a business line of  credit for
emergencies. And as more states legalize  medical marijuana, "I would
like to establish an  ongoing relationship with a national bank.
Unfortunately, we haven't been able to do that."

In their letter to Geithner, the lawmakers said that  without access
to financial services, some pot  dispensaries could be forced to go to
an all-cash  business, which could pose a threat to public safety  and
tax collection.

Last October, U.S. Attorney General Eric Holder put out  a statement
saying that federal prosecutors should not  use their limited
resources to pursue individuals who  are in "clear and unambiguous
compliance" with state  laws providing for the use of medical marijuana.

The lawmakers who signed the letter are hoping Geithner  will make a
similar statement, saying the Treasury  Department will not target
banks that have accounts  with legal marijuana operations for
violating money  laundering or other national banking laws.

Letter signers

The signers included Democrats Barney Frank of  Massachusetts, Jared
Polis of Colorado, and Sam Farr,  Pete Stark, Lois Capps, Brad
Sherman, Lisa Sanchez and  Zoe Lofgren of California. Two Republicans,
Ron Paul of  Texas and Dana Rohrabacher of California, also signed.

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