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03.31.10

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Phaedra

Photograph by Curtis Cartier
ACCOUNTANTS FOR HIGHER: The city's two medical pot shops may soon have to make their financial records public.

Pot-for-Profit?

Marijuana dispensaries may have to prove they don't make bank

By Curtis Cartier


THE MARIJUANA LAWS in California used to be simple: it was illegal. Now, with the federal government relaxing its stance against medical marijuana, and in light of a statewide push to legalize cannabis altogether, the legal weed world has become the wild, wild West.

Not the least important question at stake in Santa Cruz during this legislative High Noon is what kinds of businesses should be allowed to sell medical pot and how they should be regulated. It's a question the Santa Cruz City Council will address when it meets again on April 13.

"These businesses that sell medical marijuana to patients are supposed to operate as not-for-profits or collectives," says Santa Cruz Councilmember Cynthia Mathews. She's joining Councilmember Don Lane in drafting a set of requirements for the city's two dispensaries that would require financial documentation proving the owners are following state law and not pocketing profits from the sale of pot. "I want them to make me sufficiently convinced that they are not making a profit."

Though the California attorney general's office has published guidelines barring for-profit establishments from selling pot, a spokesman says there is no verification process that forces the establishments to prove they're obeying the law. If Santa Cruz lawmakers succeed in requiring dispensaries to turn over their books, they would represent the sole entity demanding financial accountability from the local medical cannabis trade.

Santa Cruz has two medical marijuana dispensaries: Greenway Compassionate Relief on Dubois Street and the Santa Cruz Patient's Collective on Limekiln Street. Both dispensaries bill themselves as not-for-profit businesses, meaning that whatever profit is made is reinvested into the operation to make a better product and service for its customers.

Lisa Molyneux, a former city council candidate and proprietor of Greenway Compassionate Relief, declined to show Santa Cruz Weekly its year-end financial report—basically the records it would be compelled to show local authorities if the new rules pass—but said, "All this will be finalized soon. We have nothing to hide."

Ken Sampson, owner of Santa Cruz Patient's Collective, similarly declined to open the books. But he said he will eventually turn over whatever information the city requires once he's asked to do so.

"We've operated as a not-for-profit since day one," says Sampson. "We supply a living wage to our employees and pay overhead costs. Every year we've operated our business at less than 1 percent profit. Giving the city our financial reports would be an easy thing."


Weeded Out

Millions of dollars in cash and pot go through a typical dispensary every year. And owners looking to cash in selling some extra product on the side are nothing new to law enforcement agencies. Just last week, Virgil Grant III, owner of six Los Angeles pot shops, was sentenced to six years in federal prison for doing just that. Los Angeles police had investigated him using undercover buys and subpoenas for his records. In Santa Cruz, city leaders hope they'll never see anything like that.

Councilmember Lane says he wants to see independently audited annual financial reports similar to those that are turned in by established nonprofit enterprises—a requirement that also satisfies Santa Cruz City Attorney John Barisone. Lane also wants proof that the two dispensaries are truly "patient collectives" as advertised, meaning that the clients are directly involved in the operation of the dispensary.

"I want us to have clear rules and a sense of verification that there is no profit being made or money being made inappropriately," says Lane, who also says he wants the documents available to the public as well as the council. "To me, a cooperatively or collectively run enterprise is run by its members in a democratic fashion, so I want to see proof that this is happening and there's not just one person running it."

Sampson and Molyneux, meanwhile, have their own legal teams that are helping them retain whatever privacy the forthcoming laws will allow. Both say they look forward to sharing records of exactly how their businesses operate with the city and the public. Until then, however, patients, residents, lawmakers and police will have to take them at their word.


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