Pubdate: Fri, 15 Jun 2012
Source: Sacramento Bee (CA)
Copyright: 2012 The Sacramento Bee
Author: Peter Hecht


The Internal Revenue Service has seized bank accounts it says took in 
more than $870,000 in cumulative deposits in recent months, part of a 
federal probe into alleged money laundering involving a Sacramento 
marijuana dispensary.

Agents of the federal Drug Enforcement Administration and the IRS 
presented search warrants earlier this week on the El Camino Wellness 
Center, considered the largest medical marijuana provider in Sacramento.

The seizure of bank accounts, detailed in a sealed affidavit obtained 
by The Bee, underscores an effort by federal authorities to crack 
down on California medical marijuana dispensaries by employing laws 
traditionally used to target money transfers by narcotics traffickers.

A June 8 IRS seizure warrant cited federal money-laundering statutes 
and laws against improper reporting of income to seize bank accounts 
of the El Camino Wellness Center and its officers, Nicholas Street 
and Suneet Agarwal. No charges have been filed in the case.

IRS Special Agent SoEun Park said in the affidavit that Street and 
Agarwal, who goes by the name Sunny Kumar, distributed "illegal 
drugs" from "their illegal marijuana store" and conspired with 
"co-schemers" to hide profits from a purportedly nonprofit dispensary.

Park alleges that the men registered their dispensary with the state 
as a nonprofit corporation  the Sacramento Nonprofit Collective  then 
"concealed the proceeds from their marijuana store."

"The concealment and deposit of drug proceeds was primarily 
facilitated by false statements to financial institutions to disguise 
the true nature of their marijuana business," Park wrote.

He alleged that the dispensary operators were "commingling drug 
proceeds with legitimate funds, utilizing different entity names and 
bank accounts and frequently transferring funds between accounts to 
obfuscate the paper trail."

Former Sacramento federal prosecutor Donald Heller said authorities 
are sending a message that they will use federal drug 
money-laundering laws to target dispensaries that handle hundreds of 
thousands of dollars in medical marijuana transactions.

"I don't think it matters if they're nonprofit or not" under 
California law, Heller said "What the government sees is big 
commercial enterprises and they're going after them."

James Anthony, an Oakland attorney specializing in medical marijuana 
regulation, blasted the account seizures as an assault on a legal 
California business.

"Did that (IRS) affidavit say a darn thing about these being medical 
marijuana collectives in compliance with state law? No," Anthony 
said. "There is a total disconnect."

El Camino Wellness Center opened in 2008 and last year became the 
first Sacramento dispensary issued a permit under a city regulatory 
program for medical marijuana outlets. The city is still collecting 
voter-approved taxes on local dispensaries, amounting to $1.1 million 
between July 2011 and March of this year.

Mark Reichel, the attorney representing Street and Agarwal, said El 
Camino Wellness Center was "a flagship for compliance" as a 
city-regulated medical marijuana provider.

Reichel said federal authorities raided the dispensary and the homes 
of both men, taking computers, cellphones and business records. In 
addition to the money-laundering probe, a DEA search warrant 
affidavit said Street and Agarwal are being investigated for 
conspiracy to distribute marijuana and maintaining a place for distribution.

"We're going to try to talk to the government and see if we can work 
things out and explain that these guys were in compliance with state 
law," Reichel said.

U.S. Magistrate Dale A. Drozd approved the request to seize up to 
$827,435 from a Wells Fargo business account for the dispensary. The 
figure was based on IRS accounting of cumulative deposits made 
between January 2006 and August 2011.

Max Del Real, a spokesman for the dispensary, said the actual account 
balance was "a minute fraction" of the deposits it had received over 
time. Park wrote that any deposits from "sale of controlled 
substances" are subject to seizure.

The IRS also said it would seize up to $44,271 from a Wells Fargo 
account for Agarwal and deposits from two Golden One Credit Union 
accounts in Street's name.

The affidavit includes allegations that El Camino Wellness 
misleadingly listed its services as "health"  but not marijuana  when 
it set up merchant services accounts for credit and debit card 
transactions. It said one credit card company, JPMorgan Chase, 
stopped doing business with El Camino Wellness upon learning it was a 
medical marijuana provider.

Joe Elford, legal counsel for Americans for Safe Access, an advocacy 
group for medical marijuana patients, said the investigation stirs 
questions over banking rights for dispensaries. He said just because 
a dispensary has money in the bank doesn't signal a crime.

"When you deposit money into a bank, you don't have to explain to the 
bank where that money came from, typically," Elford said. "And every 
nonprofit I know of has a bank account."

Last year, a U.S. Treasury Department criminal task force seized more 
than $80,000 from accounts of another Sacramento dispensary, One Love 
Wellness Center. The establishment closed on New Year's Eve with no 
charges filed.

The latest raid worries Lanette Davies, co-operator of Sacramento's 
Canna Care, one of 20 dispensaries still operating in city limits, 
down from the original 38.

Davies said that in recent years three different financial 
institutions, all aware Canna Care was a dispensary, initially agreed 
to service accounts for Canna Care but closed the accounts after 
deciding not to service medical marijuana businesses. The dispensary 
has another banking partner, but Davies worries she could be targeted 
by the government.

"It's almost like the federal government sets you up to fail," she 
said. "We are not Mexican drug cartels."

U.S. prosecutors have said they are targeting marijuana businesses 
"hijacked by profiteers" that they contend are operating in violation 
of both federal and state laws  though warrants in the El Camino 
Wellness case make no mention of California's medical marijuana law.

So far, federal courts have rejected legal challenges by medical 
marijuana advocates to the crackdown on California dispensaries.

Last year, El Camino Wellness sued U.S. Attorney General Eric Holder 
and Sacramento U.S. Attorney Benjamin Wagner, charging that federal 
property forfeiture notices  including one sent to the dispensary's 
landlord  violated rights of medical marijuana users and threatened 
to shut down the "supply chain of medical cannabis."

A federal judge threw out the complaint.
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