June 21, 2017

AG Sessions orders harsher punishment for those who don’t comply with state cannabis laws.

Be careful – the federal stakes just got higher for everyone in the cannabis industry thanks to our country’s renewed so-called “war on drugs.”

Under a new policy announced last month by Attorney General Jeff Sessions, cannabis business owners facing federal drug charges can now expect to receive long prison sentences if they don’t 100% comply with state law.

Most recently, Sessions ordered federal prosecutors to charge drug offenders with “the most serious, readily provable” crimes carrying the most severe penalties, according to a staff memo sent in May. This controversial move reverses years of “smart on crime” reforms enacted during the Obama administration, including a 2013 policy change that allowed federal prosecutors to avoid harsh mandatory-minimum sentences for low-level, nonviolent drug offenders.

This places California’s medical cannabis industry in a somewhat precarious position. State licensing is less than six months away, but with all the recent White House threats about a potential federal crackdown on weed, industry stakeholders are left scratching their heads trying to figure out what Sessions plans to do with California’s cannabis industry.

Whatever the case, it’s more important now than ever that you obey state law if you are prepping for state licensing in 2018.

Even though Sessions blatantly dislikes the plant, technically he can’t do anything about it due to a congressional spending rider called the Rohrabacher-Farr Amendment. For more on the Rohrabacher-Farr Amendment read Rohrabacher Farr Budget Returns 2017.

In the meantime, businesses will be safe from federal prosecution if they “strictly comply” with state law. Here’s why:

Earlier this year, our firm was retained as state-compliance experts in the landmark case of United States v. McIntosh. In this case, federal prosecutors tried to challenge the rider when it was first passed in 2014 so that they could continue prosecuting a group of defendants who were operating medical cannabis dispensaries and grows located in Los Angeles and San Francisco. The feds ended up losing their argument at the Ninth Circuit, where the federal appeals court basically said that the feds can only go after cannabis defendants if they are breaking state law.

The McIntosh ruling was surely a huge win for the legal weed industry in California, but its protections are extremely limited.   For example, the ruling emphasizes that the rider applies to medical cannabis only – not recreational. Moreover, the ruling states that the rider only guards medical cannabis businesses that are in “strict compliance” with every single relevant condition imposed by state law. If a lower court holds an evidentiary hearing and determines that a medical cannabis operation doesn’t strictly comply with state law, then the rider doesn’t apply and the DOJ is free to aggressively prosecute cannabis defendants for federal anti-drug laws.

So what does the term “strict compliance” actually mean in practice? Its an all or nothing deal. The easiest way to describe it is if you’re driving 56 mph and the speed limit is 55 mph, that’s enough to get you a ticket. It doesn’t matter if you were really, really close to complying with the law (or even if you had every good intention of doing so), one small technical violation is enough for a judge to find you guilty. For cannabis defendants under the Sessions regime, paying that “ticket” is going to likely involve doing some serious time in federal prison.

And that’s exactly what happened to several California business owners after the McIntosh ruling came down in late 2016.   In one case, a dispensary owner in Bakersfield was sentenced to 5 years in federal prison after a district court judge found that the dispensary was operating for profit and didn’t comply with certain provisions of the California Corporations Code. In another case, a grower in Tulare County was sentenced to one year in federal prison after a district court judge found that there was insufficient evidence to prove that the defendant was legally growing on behalf of a Los Angeles dispensary. Fortunately, both of these cases were decided before Sessions announced his new sentencing reform policy in May, otherwise the defendants would have likely faced much harsher sentences.

The punishment may or may not fit the crime. Complying with local and state law can be a difficult task for any small business owner in this space, but it is necessary … if you want to avoid prison.

Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.