Pubdate: Fri, 13 Jul 2012
Source: Los Angeles Times (CA)
Copyright: 2012 Los Angeles Times
Author: Lee Romney


OAKLAND - A day after federal prosecutors moved to shutter the 
country's largest medical marijuana dispensary, city leaders and 
other officials came to the defense of Harborside Health Center, 
warning of dire economic and social consequences if Oakland's 
carefully regulated industry is quashed.

"We cannot afford the money, we cannot afford the waste of law 
enforcement resources, and we cannot afford the loss of jobs that 
this would entail," City Councilwoman Rebecca Kaplan said Thursday at 
a news conference as dozens of Harborside Health Center patients stood by.

Co-founded in 2006 by Executive Director Steve DeAngelo, Harborside 
has in many ways set standards for the medical marijuana industry.

The sleek operation - which has a smaller sister dispensary in San 
Jose - lab tests its cannabis to assess quality and measure key 
chemical components; offers acupuncture, pain management and other 
free wellness services to its thousands of members; and employs more 
than 125 people.

DeAngelo worked closely with Oakland officials as they crafted one of 
the nation's strictest regulatory schemes to monitor and tax the 
industry, and officials say he complies with all local and state laws.

But Melinda Haag, the U.S. attorney for California's Northern 
District, is now seeking to seize the properties where Harborside 
operates, alleging its marijuana sales violate federal law and that 
its size as a "superstore" increases the likelihood that it is in 
violation of state law. A civil forfeiture action was served 
Wednesday against Harborside's two landlords.

If the move drives Harborside out of business, a chunk of its $30 
million in annual sales would return to the streets, benefiting 
dealers who don't lab test their products or work with patients to 
customize medications, DeAngelo and other advocates said Thursday.

Jason David, father of a 5year-old boy with a rare form of epilepsy, 
wept as he recounted his son's positive response to a tincture 
developed with DeAngelo's help. The tincture uses a strain high in 
cannabidol, which is not psychoactive. "Please, Ms. Haag, have some 
compassion," David said.

DeAngelo pledged "never abandon our patients." Harborside attorney 
Henry Wykowski added that he is conferring with the property owners 
and has not decided how to proceed. The landlords are expected to 
reply to the federal action within 20 days and a hearing has been set 
for October.

"There is no reason to kick down our door," Wykowski said, and 
invited federal prosecutors to visit.

Aside from the effect on patients, Harborside's closure - or failure 
to find another property if the current forfeiture action moves 
forward - would deal a direct financial blow to the city.

Last year alone, Harborside paid $3.5 million in taxes - $1.1 million 
of which went to Oakland coffers as a business tax. Additional sales 
tax and payroll taxes were paid as well.

The business tax represents the bulk of the $1.4 million paid last 
year by Oakland's four permitted dispensaries combined, among them 
one associated with medical marijuana pioneer Richard Lee that was 
shuttered in April after a federal raid and is now regrouping without 
Lee's participation.

Lee's company, which operated the industry trade school known as 
Oaksterdam University, dissolved, forcing 45 direct employees off the 
payroll, cutting their health benefits and eliminating 63 other union 
jobs in related businesses, said Dale Sky Jones, who now operates the 
university and is rebuilding its curriculum.

Out-of-towners had flocked to the university's classes, staying at 
downtown hotels and further spurring the city economy, added Oakland 
revenue manager Dave McPherson.

McPherson said the business taxes paid by dispensaries make up about 
2.5% of the $54 million paid citywide. But that is no small 
contribution in a city struggling with a shrinking police force and 
the return to the state of $21 million in redevelopment funds, said 
City Councilman Ignacio De La Fuente.

"This action will have a long-term impact," he said. "Landlords will 
be intimidated into not leasing buildings" to dispensaries.

Oakland moved in 2004 to limit dispensaries, and in 2009 became the 
first city to tax them. The City Council recently raised the number 
of dispensaries from four to eight. Applicants are moving through the 
permitting process but have had difficulty finding landlords, said 
Deputy City Administrator Arturo Sanchez.

Also coming to the defense of Harborside on Thursday were Rep. 
Barbara Lee (D-Oakland); State Board of Equalization member Betty 
Yee, who said her office collects $58 million to $105 million in 
annual state tax from California dispensaries; and Oakland City Atty. 
Barbara J. Parker, a former federal prosecutor.

"I strongly oppose federal actions against members of Oakland's 
business community who are complying with California and Oakland laws 
and regulations and paying their fair share of taxes," Parker wrote 
in a statement.
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MAP posted-by: Jay Bergstrom