According to a recent press release from the U.S. Department of Justice, Californians can sleep a little easier thanks to the brave work of federal and local cops who dismantled a criminal organization in San Diego County. Ryan L. Korner, the special agent in charge of the IRS-Criminal Investigation office in Los Angeles, says the gangsters who pleaded guilty to federal felonies last week didn't care "how their actions negatively impact innocent people, the community, or our society." Chula Vista Police Chief Roxana Kennedy says such criminals "pose a significant health and safety hazard to the public, especially our youth."
But not to worry. Kelly A. Martinez, undersheriff of the San Diego County Sheriff's Department, declares that "East San Diego County is safer today because of this hard work." Stacey Moy, the special agent in charge at the FBI's San Diego field office, wants you to know that "the FBI is committed to keeping our communities safe from the vast array of violent crimes and criminal activity which accompanies these illegal establishments."
What did "these illegal establishments" do? They sold marijuana, a business that California supposedly legalized six years ago.
The cannabis industry, of course, remains completely illegitimate in the eyes of the federal government. That means anyone who grows or distributes marijuana in California, even with the state's approval, is committing federal felonies every day. But even though President Joe Biden wants to keep it that way, he has promised not to interfere with states that reject marijuana prohibition. So why are the feds not only busting marijuana merchants in California but doing so in collaboration with local law enforcement agencies?
The explanation, as you may have surmised, is that these particular marijuana merchants were breaking state law as well as federal law. Their businesses were not just "illegal" but also "unlicensed." Yet the fact that unlicensed pot dealers continue to thrive in California is testimony to the ways in which the state has botched legalization. Most local governments do not allow recreational sales, and even those that do frequently impose caps that artificially limit the supply. Bureaucratic barriers, costly regulations, and high taxes are daunting deterrents for weed dealers who otherwise might be inclined to go legit.
Those burdens, combined with local bans, explain why unlicensed sales still account for about two-thirds of the marijuana purchased in California. As a recent report from Reason Foundation (which publishes Reason) notes, California has one licensed recreational outlet per 29,282 residents, compared to one per 13,838 in Colorado and one per 6,145 in Oregon. Worse, the report adds, California's stores are distributed unevenly across the state, leading to "massive cannabis deserts" where "consumers have no access to a legal retailer within a reasonable distance of their home."
Instead of addressing those problems, California officials are cracking down on marijuana suppliers who fail to get the government's permission to sell pot, even when such permission is difficult or impossible to obtain. And they are waging that war on weed with the help of federal agencies that view every marijuana business, licensed or not, as a criminal enterprise.
Last Thursday, the Justice Department reports, Shahram Sheikhan and Sabriana Williams pleaded guilty to participating in a marijuana distribution conspiracy. Sheikhan faces "forty years in prison with a mandatory minimum sentence of five years and a $5 million fine." Williams faces "twenty years in prison and a $1 million fine." Their convictions were part of "an ongoing investigation by federal and state authorities targeting unlicensed, illegal marijuana dispensaries throughout Southern California."
From 2019 to 2022, the Justice Department says, "Sheikhan and Williams, along with others, operated an unlicensed, illegal marijuana business known as 'Cannaland,' which functioned primarily as a wholesale supplier of marijuana and marijuana products to unlicensed and illegal marijuana dispensaries in Southern California. Additionally, Cannaland operated as an unlicensed, illegal marijuana dispensary in its own right, serving individual customers."
In addition to Sheikhan and Williams, two other groups of California marijuana distributors recently pleaded guilty to federal drug trafficking, money laundering, and firearm charges. They face maximum prison sentences ranging from 20 years to life and maximum fines ranging from $1 million to $5 million.
Lance Kachi "admitted to operating multiple unlicensed, illegal marijuana dispensaries in Spring Valley and El Cajon." Kachi, Michael Yono, Avrin Yakou, and Fabian Yakou "oversaw multiple unlicensed dispensaries that would each generate up to $25,000 daily, and were open 24 hours a day, seven days a week." Four brothers—Sean, Alvin, Vincent, and Andrew Shamoun—pleaded guilty to operating Babylon's Garden, which "manufactured a variety of marijuana products at a warehouse in San Diego" and distributed them to "unlicensed, illegal marijuana dispensaries from Los Angeles to San Diego."
But for the lack of licenses and Kachi's unusually convenient hours, neither of which makes any difference under federal law, all that is par for the course in California's cannabis industry. If the Biden administration decided to enforce the Controlled Substances Act more aggressively, licensed marijuana merchants across the state could likewise find themselves looking at decades in federal prison.
San Diego Police Chief David Nisleit is "proud of the work that has been done to close these illegal distribution centers and stop the violent crime associated with them." But despite that claim and Moy's reference to a "the vast array of violent crimes" that "accompanies these illegal establishments," none of these defendants was charged with predatory crimes of any sort.
The reason some of them had guns seems clear from a detail that the Justice Department presents as damning. After police seized "five firearms" while executing a search warrant at Cannaland's shop in Spring Valley last year, "Sheikhan and Williams personally coordinated and facilitated the procurement of replacement firearms for the business' armed security guards."
Like many licensed marijuana dealers, in other words, Sheikhan and Williams worried that their business was a tempting target for robbers. Continued federal prohibition magnifies that risk by making it difficult for marijuana businesses, licensed or not, to obtain banking services, which forces them to rely heavily on cash. If anything, it seems, these defendants were potential victims of "violent crimes" rather than perpetrators of them.
Even the defensive possession of firearms, ordinarily protected by the Second Amendment, becomes a crime if your business involves a psychoactive substance that Congress has arbitrarily banned. Kachi, for example, was charged with "possession of a firearm in furtherance of a drug trafficking crime," a federal felony that is punishable by a mandatory minimum sentence of five years. When someone has previously been convicted of that offense, the mandatory minimum is 25 years.
Again, Kachi's lack of a business license is irrelevant under federal law. A licensed marijuana merchant who dares to arm himself against the risk of robbery is guilty of the same offense.
Just as armed self-defense is a crime for anyone in the marijuana industry, ordinary business transactions are federal felonies. Kachi was charged with money laundering, which by itself is punishable by up to 20 years in prison, plus "a fine of $500,000 or twice the value of the monetary instrument or funds involved."
To show us how nefarious Kachi's activities were, the Justice Department emphasizes that he took in lots of cash. "Kachi and his coconspirators grossed millions of dollars in revenue," it says. "Several times a week, Kachi and others would meet at various hotels where they would spend hours counting hundreds of thousands of dollars in dispensary proceeds using automated money counters. Before leaving the room with bags of money, the defendants would pack up their money counters as well as the various notes they took to account for their profits and expenses, such as the cost of armed security." Moy observes that "the primary motivation of drug traffickers is greed."
A profit motive is by no means unique to unlicensed marijuana businesses, and neither are bags of money. Due to the dearth of banking services, duly licensed pot dealers in California and other states commonly operate this way. Like Kachi, all of them are guilty of money laundering.
Kennedy claims these operations posed a threat to "our youth." While unauthorized pot shops may be less punctilious about checking customers' IDs than licensed retailers are, the Justice Department's announcement does not include any allegations of distribution to minors. The closest it comes is Kennedy's complaint that "many" unlicensed pot stores have "open[ed] up near our schools," which may mean they were closer than the 1,000 feet mandated by the city.
Kennedy also says "illegal marijuana dispensaries have been responsible for numerous complaints by our community members," although she does not specify the nature of those complaints. In 2020, when Chula Vista cracked down on unlicensed dispensaries, Kennedy said some "sold cannabis to children" or were selling "unregulated products that contained banned chemicals," according to The San Diego Union-Tribune.
These are legitimate concerns. But the best way to address them is by making it easier to sell marijuana legally. The greater the black market's share of marijuana sales, the greater the potential for underage purchases or tainted products.
Chula Vista did not start accepting applications from would-be recreational retailers until 2018. The first such business, Grasshopper Delivery, opened in 2020. It has since been joined by several others. But the city caps the number of dispensaries at 12, or about one per 23,000 residents. That's a bit better than the statewide average but clearly less than the adult market can bear. The situation in San Diego is even worse: The city allows no more than 36 recreational dispensaries, or about one per 39,000 residents. And even without such restrictions, high taxes and burdensome regulations make it very difficult for licensed shops to compete with the black market.
Even as the Justice Department implies that unlicensed marijuana dealers pose a special threat to public safety, it complains that the federal government is not getting its cut of their profits. "All the various defendants," it says, "admitted that they had an obligation to report their income" to the IRS "as well as pay taxes on any income derived from these illegal businesses, which they failed to do." As compensation for that failure, the defendants "agreed to forfeit seized cash, which currently exceeds $5 million." Uncle Sam is perfectly happy to make money from this obviously iniquitous business, as long as the cash is laundered by self-righteous rhetoric.