Pubdate: Mon, 13 Jan 2014
Source: Washington Times (DC)
Copyright: 2014 The Washington Times, LLC.
Contact:  http://www.washingtontimes.com/
Details: http://www.mapinc.org/media/492
Author: Valerie Richardson
Page: A1

BANKS TURN AWAY STACKS OF CASH FROM LEGAL POT

Federal Laws Trip Booming Business

DENVER - A week after Colorado's ballyhooed retail marijuana launch,
the line at Evergreen Apothecary is still out the door. That comes as
both good and bad news for co-owner Tim Cullen.

His business may be booming, but his banking situation remains
sketchy. Federal rules prohibit banks from opening accounts for
illegal drug enterprises, and recreational and medical marijuana sales
are still outlawed under federal law.

Mr. Cullen has a business bank account, but only because he belongs to
a business-management service that has allowed him to open an account
under a different name. Even so, because of the merchandise on his
shelves, he can't get a small-business loan to keep up with his
rapidly expanding footprint.

"We don't like it, and the bookkeepers hate us, but that's the way it
is," Mr. Cullen said. Colorado officials and marijuana advocates are
lobbying hard for federal authorities to grant marijuana businesses
access to banking, a gaping pitfall exposed by the otherwise robust
kickoff of Colorado's first-in-the-nation recreational marijuana
market at the start of the year.

The roughly 30 pot shops that opened Jan. 1 are generating a combined
$1 million worth of business every day, much of it the result of cash
transactions. Shops already are struggling to keep up with demand: At
the 3-D Cannabis Center, for example, managers closed their doors for
two days to restock, then announced that the line would be cut off at
5 p.m. or after the first 300 customers.

The result is that many stores are winding up with piles of money at
the end of the day and nowhere safe - or legal - to stash it.

"A lot of business owners are operating on a cash-only basis, and you
can imagine the security issues with that," said Mike Elliott,
executive director of the Medical Marijuana Industry Group, an
industry advocacy organization based in Denver.

"For every business with an account, I've heard 20 stories from people
who have said, 'We had a bank account, and I don't know why, but they
kicked us out,'" said Mr. Elliott. "We're talking about a checking
account here. So you don't have to show up at the Colorado Department
of Revenue and pay your taxes in cash."

The problem is likely to intensify as more stores open and investors
dive into the market in search of the next big thing. Shares of
pot-related stocks are soaring even before major Colorado cities such
as Aurora and Boulder finalize their rules and grant licenses.

Barred from the banks

Bank access has long been a problem for the medical marijuana
industry, which now operates in 20 states. Two states - Colorado and
Washington - allow recreational marijuana use for customers 21 and
older, but more states are expected to join them in the next few years.

In Colorado, state and business officials are urging officials at the
Justice and Treasury departments to issue a guidance giving leeway to
banks in states that have legalized marijuana. The Justice Department
released a memo in August that permits Colorado and Washington to
proceed with their regulated markets.

Even if that happens, a memo might not be enough to persuade most
banks to accept marijuana related clients, said Don Childears,
president and CEO of the Colorado Bankers Association.

"Banks have been told they should not be handling these accounts, so
they're more than nervous," said Mr. Childears. "You really need a
federal statute. But politically, I don't think members of Congress in
either party want to be perceived as being soft on drugs."

The piggy-bank approach to marijuana sales also creates problems for
state and local agencies charged with collecting taxes. "I don't know
how you regulate or tax and industry where you can't follow the
money," said Mr. Childears.

Burden of bounty

The Denver City Council approved a resolution last week urging federal
authorities to help resolve the issue, while Rep. Ed Perlmutter,
Colorado Democrat, has introduced the Marijuana Businesses Access to
Banking Act of 2013.

Mr. Elliott said he worries about safety, with thieves or crime
syndicates targeting Colorado's cash-rich but banking-poor pot shops.

"We've got members, in some cases they're beautiful young women, who
are forced to carry around a whole lot of cash," said Mr. Elliott.
"I'm having nightmares about it."

Many store owners have hired security and installed cameras to enhance
safety. The Denver Police Department increased its presence around the
stores during the first week at the request of business owners.

"That was an incredible thing, because the police community and the
marijuana community have had no common ground for decades," said Mr.
Elliott. "And now I have their cellphone numbers, and when they come
by, they're greeted with a handshake."

The lack of dependable banking aside, Mr. Cullen said, he "couldn't be
happier" about his marijuana business. He has hired five more people
since Jan. 1 and is finishing construction on two warehouses, which
will require another 20 employees.

He said his two Denver retail stores are averaging one sale per 90
seconds. His biggest challenge is "figuring out how to give everyone a
lunch break."

"Everything from the customers to the staff who've stepped up to
handle this is going as smoothly as I could have hoped," said Mr.
Cullen. "It's been fantastic, and aside from the volume, I couldn't
ask for more."
- ---
MAP posted-by: Matt