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Medical Marijuana Crackdown By Feds Forces Hundreds Of California Shops To Close

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WASHINGTON -- Medical marijuana dispensaries are shutting their doors in California.

Even in the weed haven of San Francisco, three of the best-known dispensaries were forced to close after receiving warning letters from U.S. Attorney Melinda Haag. And the state's oldest medical dispensary, the Marin Alliance for Medical Marijuana in Marin County, is bracing to pull all cannabis products from its shelves after receiving a threatening letter from Haag invoking a federal law.

"We're basically worried about a D.E.A. raid destroying things," said Charles Pappas, chairman of Divinity Tree in San Francisco's Mission District. "We didn't want to put our staff and patients through that. We're very concerned about our patients."

Before it closed on Veteran's Day, Divinity Tree employed 14 people at its dispensary in San Francisco's Tenderloin neighborhood. Mission-area collective Medithrive and Mr. Nice Guy on Valencia Street, which together employed an estimated 34 workers, closed the same week.

"The guys, half of them with kids, were crying at our last meeting," said Pappas, who paid his workers $20 an hour with full health benefits. "Most of them had been with me for over two years, and all of them for at least two years. They're all laid off now."

The United Food and Commercial Workers Union, which worked to unionize California cannabis workers before the crackdown, has estimated that 20 percent of marijuana stores statewide have shut down.

Hard numbers are difficult to come by. California's National Organization for the Reform of Marijuana Laws keeps an index of dispensaries, but it hasn't been updated as quickly as shops around the state have closed.

"I know in places like Sacramento County, virtually all of those facilities closed down," said Don Duncan, executive director of Americans for Safer Access. "In Los Angeles it's a mixed bag. We've seen some in the Valley close. San Diego has been moving against collectives, but to what degree it's hard to say from city to city. I think to a certain degree that it's up to local authorities how they use the federal pressure."

Only 25 of an estimated 38 dispensaries in the city of Sacramento remain open. City officials, who collect 4 percent in taxes on all medical marijuana sales, will allow the shops to stay open until mid-August of 2012, though permitting for new dispensaries has been suspended.

In the surrounding county, the numbers for pot shop owners are even more grim. Only eight of an estimated 99 shops have not closed, according to The Sacramento Bee.

In San Diego, nearly two-thirds of some 222 dispensaries have been shut down after receiving toughly worded letters from federal officials. Another 9 percent have promised to close in the next week, according to an announcement from the office of U.S. Attorney Laura Duffy.

The closures come less than two months after the state's U.S. attorneys held a Sacramento news conference to announce federal actions against California medical marijuana entrepreneurs. Federal prosecutors also sent letters to hundreds of state law-abiding dispensaries around the state, threatening criminal charges and asset forfeiture if they continued to operate beyond 45 days.

The IRS, meanwhile, has declared California pot clinics can no longer deduct salaries, rent or other operating expenses on their tax returns, rendering business essentially unviable.

"Unless and until ordered otherwise, we will continue to do our duty in enforcing federal narcotics laws," U.S. Attorney Benjamin Wagner said in a statement last month.

Medical marijuana collectives having been thriving in California since 1996, when voters enacted Prop. 215, a law that permits the possession and use of medical marijuana, even though the drug remains illegal under federal law. Since then, 15 other states have followed suit.

David Goldman, a core leadership group member at San Francisco Americans for Safe Access, warned that the crackdown could have unfortunate political ramifications for President Obama, who while on the campaign trail in 2007 promised to leave the business of regulating medical cannabis to the states.

"If that what he wants -- if he wants to erode his base of support in California -- then he's going on the right track right now to do that," said Goldman of Obama. "Our friends in Colorado are not liking this either," he added, "and Colorado's a swing state."

But in Colorado, interestingly, the federal government has taken little action. Their model, which allows for the sale of state-regulated medical marijuana, has some people hopeful that pot shops in California may be able to push back against federal officials.

Lawsuits have been filed in each of California's four federal judicial districts. And Americans for Safe Access, the country's largest medical marijuana advocacy organization, has filed a fifth suit, alleging the Department of Justice overstepped its constitutional authority in policing local medical marijuana laws within the state of California.

But the legal road ahead does not look promising. The most recent blow came just last week when U.S. District Judge Saundra Brown Armstrong wrote in a 27-page ruling that she would not halt federal actions because "marijuana remains illegal under federal law, and in Congress' view, it has no medicinal value."

Now some dispensaries have turned to delivery service, a development ASA's Don Duncan finds somewhat problematic.

"There's definitely a need for delivery services, but I think the best benefit for the patient is to have a place where they can come and there's some peer support," he said. "I would hate to see the market forced into a delivery only format. I don't think that's best for the patients."

Steve DeAngelo, executive director of Oakland's Harborside Health Center, says it's one thing to crack down on the state's bad actors, but U.S. attorneys have been targeting the state's model dispensaries.

"The U.S. prosecutors alleged in their scary press conference that their many targets were people who were using the medical cannabis laws as a shield for criminal activity and for profiteering. In fact they did target a couple of people who were using the medical cannabis laws as shield for criminal activity, and we don't have any problem with that -- in fact we support that," said DeAngelo. "What we had a problem with was, in addition to targeting those people, they also targeted people like Matt Cohen from Northstone Organics, or Charlie Pappas from the Divinity Tree, or Harborside Health Center. We are all amongst the most legitimate, regulated, compliant and transparent distributors of medical cannabis that you'll find in the entire state of California."

It's not the first time dispensaries have seen federal intervention. When the Bush administration targeted marijuana dispensary landlords during his first term in office, Duncan said, some shop owners just "closed the blinds and turned off the lights and laid low for a while," reopening again after the feds backed off.

But Pappas isn't convinced his shop will recover.

"I don't see it going back to the way we were," he said.

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