By Jeffrey Steinborn
Your business lawyer may not have told you everything you need to know about cannabis business risks.
The demand is titanic. It’s an inflation-proof, non-polluting growth industry. It’s better than prisons and a lot timelier. Around the country, and particularly in Washington, California and Colorado, people have started acting as though it’s legal. Media organizations are bursting with stories about folks in the pot business coming out of the closet and acting legit.
And then there’s Washington’s Initiative 502. The Washington State Liquor Control Board issues licenses to participate in the scramble within the bounds of real formal legitimacy. So what does a business person need to know? What government sanctions should a cautious entrepreneur consider along with the usual financial concerns? This divides to two questions: First, what is the nature of cannabis business risks? Second, what are the odds this might happen?
The nature of risk is catastrophic
As your business lawyer probably told you, even though you may be in compliance with state law, and even possibly receive a state license to grow, process or sell cannabis products, federal law absolutely prohibits all cannabis use, possession, manufacture or delivery — including medical. Among the penalties are the following:
Possess, manufacture or deliver marijuana more than 1,000 plants or 1,000 kilograms: Mandatory minimum 10 years to life.
Possess, manufacture or deliver marijuana more than 100 plants or 100 kilograms: Mandatory minimum five to 40 years.
Possess, manufacture or deliver marijuana under 50 kilograms: Up to five years.
Acting as an organizer, supervisor or other position of management in the cannabis business with five or more other persons: Mandatory minimum 20 years to life. If the scope is large, mandatory life in prison.
Acting as management also disqualifies a person from the “safety valve” which would otherwise allow a defendant to escape the mandatory minimums that begin at 100 plants or 100 kilograms.
That’s just a beginning. Spending the money, or even banking it may be money laundering. The penalty for money laundering starts at about two years. When you get to a million dollars, it’s more like eight years. Then there’s “investment of illicit drug profits,” and “maintaining drug-involved premises.” There are others crimes — lots of them.
Then there’s forfeiture. The government can seize virtually anything that has any connection to the cannabis industry, including money intended to be used in the industry. Cash, bank accounts, stock, cars, planes, real estate, jewelry. I’ve even seen them take the socks and underwear from the bedroom dresser. If it’s the fruits of the crime, intended to facilitate the crime, or has been used to facilitate the crime in any way, it’s gone if the feds want it.
Simply put, should the federal government (this administration or the next one) decide to prosecute for cannabis crimes, the consequences will be catastrophic.
Next question: What are the odds the federal government will prosecute “legitimate” entrepreneurs for these crimes? To date the government has issued a series of memos addressing the conflict between state laws and the federal Controlled Substances Act.
Most recently, the Department of Treasury released a memo which purports to establish standards by which banks can accept deposits from the cannabis industry. Were it any less clear, it could be a song from Bob Dylan.
I’ll try to cast more light on it this subject in future postings.