Stoners may not be outlaws anymore, but their illicit weed trade is still hugely profitable – at least for organized crime. It’s estimated that the black market in California alone is worth around $3 billion a year, with a drug bust in November costing the state $2 million. But this lucrative trade is under threat. More weed is being grown illegally every day in California, and the state government is spending millions of dollars to fight it.
The business of selling marijuana is a fast-growing, multi-million dollar market in the United States. But as the number of shops selling the drug increased, so did the number of illegal dispensaries popping up throughout the country. This means that many of these smaller shops are often hurting from the competition, which is no surprise considering the fact that these stores often operate illegally.
One of the biggest problems with trying to buy marijuana on the black market is that there is no such thing as a reliable delivery service. You can’t count on being able to get your hands on any amount of marijuana you want, or, if you do, the product could be laced with dangerous chemicals or contaminated with mold and mildew.. Read more about colorado black market 2020 and let us know what you think.
Some local legal cannabis businesses are taking things into their own hands after years of pushing for tougher enforcement of the illicit cannabis sector. (Photo courtesy of Megan Wood)
On July 6, the dispensary chain March & Ash filed a lawsuit against former San Diego County Sheriff’s Capt. Marco Garmo and a long list of alleged co-conspirators. The lawsuit alleges violations of anti-racketeering, false advertising and unfair competition laws. One of the defendants is a local media outlet that regularly runs advertisements for illegal dispensaries.
Garmo pled guilty in federal court in September 2020 to unlawfully trafficking guns from his office at the sheriff’s Rancho San Diego station, sowing the seeds for the civil lawsuit. In March, Garmo was sentenced to two years in federal prison for “years of illegal weapons transactions and an array of corrupt behavior related to unlicensed marijuana shops operating in his previous area,” according to a news statement from the US Attorney’s office.
Garmo acknowledged that he tipped off an illegal cannabis shop to an impending search by other law enforcement authorities as part of his plea agreement. It was called Campo Greens, and it was partly owned by his cousin. Thanks to the tip, the company avoided any bad consequences from the raid. Garmo also confessed to pushing another illegal dispensary to recruit his buddy and co-defendant in the federal case, Waiel Anton, as a “consultant,” as well as another individual who had promised to pay Garmo a bribe who was employed by the county at the time. That arrangement didn’t work out in the end.
Garmo’s criminal case brought attention to the battle being waged by local law enforcement and politicians to eradicate the same illicit cannabis industry that he was a part of. According to a 2019 industry study, California’s cannabis market — generally believed to be the world’s biggest — is worth $11.9 billion. Approximately $3 billion is lawful, whereas almost $9 billion is not. According to the same study, California’s entire market will be valued $13.6 billion by 2024, with $7.6 billion in legal sales and $6.4 billion in illegal sales.
The reasons for this disparity are many, but one of the most important is that California is the birthplace of cannabis production in the United States. Long before the passing of Proposition 215 in 1996, which legalized medicinal cannabis in California, the state had a mature and highly functioning cannabis industry.
While Prop. 215 brought many previously unlicensed businesses into compliance, it was still simpler and more lucrative for many to stay unlicensed, particularly because California’s marijuana has been feeding illegal markets throughout the nation since the 1960s. It still does, even after Proposition 64, which legalized adult-use cannabis in California and repealed Proposition 215, was passed in 2016. Interstate trade is prohibited in state-legal cannabis marketplaces, which means that legal marijuana must be sold only inside state borders. There are no such regulations in the black market.
In these quasi-legal times, California continues to be the marijuana producer and supplier for the rest of the country.
Prop. 64 created its own problems, owing to the fact that it allowed towns to opt out. In the outlying regions of San Diego County, where much of Garmo’s dispensary-related activities takes place and where the bulk of the county’s illegal dispensaries are located, cannabis sales, distribution, manufacture, and growing are presently prohibited.
Another cannabis industry study released this year by California State University San Marcos found that the Sheriff’s Department had busted 83 unlicensed cannabis dispensaries during 2018, with a total cost of enforcement of approximately $215,000. 64 of the unlicensed dispensaries were in County Supervisor Joel Anderson’s district, which encompasses a significant part of the county’s eastern side.
The board voted 4-1 in January to essentially overturn the prohibition, with Anderson’s backing, and has been working since then to complete the finer details of an ordinance, which is likely to come back for a second vote in the autumn.
The illegal market’s strength has been a major thorn in the side of legitimate operators, who must pay hefty licensing fees and taxes to remain legal.
“For people who don’t live here, it’s hard to grasp how out of control this got in Spring Valley and certain areas of El Cajon and Lakeside,” said Bret Peace, general counsel of March & Ash. “There were stores on seemingly every major street with blinking green lights, open 24 hours, with sign spinners and ads in the [San Diego] Reader,” the alt-weekly newspaper named in the civil case. Jim Holman, owner and publisher of the San Diego Reader, said that he did not have a comment on the matter at this time.
“Even when they had been shut down elsewhere, the continuing growth of illegal dispensaries and accompanying violence remained right out in the open in this very particular region of unincorporated East County,” Peace said. “We all expressed our dissatisfaction, but were informed there was nothing that could be done. Despite this, they continue to sell mislabeled, untested, and contaminated goods while inviting violence, including the murder of an innocent guy connected to one of my colleagues.”
Peace also said that, following the removal of Garmo from his position in 2019, “all hell broke loose,” and illegal dispensaries continued to proliferate. Because of that, he and March & Ash felt the need to pursue more drastic measures because they didn’t see law enforcement stepping up in a meaningful way.
Peace and March & Ash’s attorney, Cory Briggs, puts it more bluntly.
“The purpose of the lawsuit is to put an end to the illegal competition that the legitimate dispensaries are having to face,” Briggs said. “It’s law enforcement’s job to do that, but Marco Garmo had some sort of mob monopoly on the law enforcement and laws weren’t being enforced in his part of the county like they were supposed to be. So, entities like March & Ash are responding to unfair pressures.”
Unlicensed dispensaries, according to Briggs, are not required to pay their employees a livable wage, taxes, or workers’ compensation, to name a few examples. They also offer unauthorized and untested goods, such as those containing unlawful pesticides or growth hormones that have been shown to be hazardous to human ingestion, particularly when combusted, as marijuana is.
Furthermore, unlicensed cannabis businesses, like any other shadow sector, are a popular target for organized crime due to a lack of supervision and legality. Anderson told me he thinks organized crime had a role in the events involving Garmo, but he couldn’t provide any concrete proof and didn’t know the specifics of Garmo’s participation. Instead, he highlighted discussions he had while serving as vice head of the California Senate Public Safety Committee.
“I know it’s a problem all across the state,” he added.
Both Briggs and Peace think their action, which is modeled after federal RICO cases, is the first of its type, at least in the cannabis world and definitely in California’s cannabis business. Briggs said that they are hoping to establish a precedent that other private operators may follow in order to fight the illicit market, particularly in circumstances where they believe government enforcement is not properly serving them.
The Organized Crime Control Act of 1970 created RICO, which stands for Racketeer Influenced and Corrupt Organization, a kind of federal criminal accusation that is used against so-called organized crime organizations. Despite the term, prosecuting a person or people under RICO provisions is more about the behavior and kinds of commercial operations that lead to a network of unlawful economic and criminal activity than it is about whether they are engaged in an established organized crime group. RICO accusations often appear in novels and movies about the mafia in popular culture.
Actors and entities that assist the network’s operations are targeted in civil actions that resemble federal RICO prosecutions. It renders them financially responsible in the event of a legal action. The aim is to demonstrate that by aiding illegal economic activity in any manner, they are liable for any financial losses suffered.
Briggs and the team supporting March & Ash said they did their own detective work by hiring a private investigator, and gathering phone records and video surveillance from a variety of businesses that illustrated a web of interconnected people and money streams. None of it has been made public yet as part of the case.
Briggs said of Garmo and the co-defendants listed in the current complaint, “All of this was out in the open.” “They had become used to working with complete impunity.”
In addition to Garmo and the San Diego Reader, the six other defendants in the case brought by March & Ash include ATM operators, landlords and bootleg edibles companies. By knowingly supporting an illegal dispensary’s activity by doing business with them, even if they are not selling contraband themselves, they are complicit, the suit alleges.
Last week, Anderson and San Diego County District Attorney Summer Stephan announced that they would submit a board letter to the County Board of Supervisors on August 18 that will request more money for the DA’s office to combat illicit marijuana businesses in the county. The proposed legislation would speed up the receivership process for county counsel to take possession of properties in unincorporated areas where law enforcement has detected illicit cannabis sales. It would also provide the district attorney with an extra $1.2 million to assist in the prosecution of the people implicated.
“I’m in a pickle,” Anderson said. “I wholeheartedly support legal cannabis companies, but I also have a responsibility to my voters, who are rightfully and loudly screaming about the damage that these illegal shops are causing them. It has an impact on their quality of life and community safety.”
Another problem, according to Anderson, is that these dispensaries not only exist, but also spread rapidly. Unlicensed dispensaries have been opening considerably quicker than the Sheriff’s Department has been able to shut them down in eastern San Diego County, which Anderson blames to a lack of money and personnel. “With these marijuana businesses, it’s like whack-a-mole,” he added.
The San Diego Sheriff’s Department, for its part, refused to comment on anything particular to Garmo or his cases, but reaffirmed its commitment to shutting down illicit marijuana businesses.
“Community worries over illicit marijuana shops near schools and residential areas prompted the implementation of a cease-and-desist order for unlawful marijuana businesses. In a statement, a spokesman stated, “We want to ensure people we serve that the San Diego County Sheriff’s Department is listening to the community and understands the detrimental effect illicit marijuana shops have on our communities.”
The Sheriff’s Department is especially worried about stopping the sale of illicit edibles that are branded to look like current brands of sweets and snacks, which is prohibited for regulated cannabis goods under Proposition 64. The complaint identified Dabzilla Sour Bears as one of the bootlegging businesses.
Garmo is still in jail, but it’s for gun-related crimes, not for his participation in illicit cannabis trafficking. However, his under-oath confessions exposed a flaw in the Sheriff Department’s anti-illegal cannabis dispensary enforcement approach. It will be interesting to see whether the department is able to get it under control. If it doesn’t, Peace and Briggs think their civil action will provide the public a new avenue to fight illicit cannabis companies in the future.
There are a lot of people in America who have been looking for a way to get their hands on cannabis legally, but the laws prohibit them by putting them in a legal black hole, where they can’t get what they want. Fortunately, there are some dispensaries in Colorado that are able to help them get what they need.. Read more about black market and drug legalization and let us know what you think.
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