Phoenix New Times: “A Navajo County judge’s recent ruling about medical-marijuana extracts could lead to popular dispensary products like vape cartridges and edibles being taken off the shelves. Don’t freak out: That’s a worst-case scenario. But it’s possible, if a higher court ultimately agrees with the judge and rules that “cannabis” is not covered by the Arizona Medical Marijuana Act.”
Phoenix New Times: “The Arizona Supreme Court saved the state’s medical-marijuana law on Tuesday, slapping down the Maricopa County Attorney’s crusade to overturn it. Without comment, the high court denied a petition by County Attorney Bill Montgomery’s office to review a December state Court of Appeals ruling in White Mountain Health v. Maricopa County/Montgomery. That ends the state-level battle against the law.”
The Recorder: “A regional IRS executive told a gathering of cannabis lawyers on Friday that the agency is not out to target them, despite their work with clients whose marijuana businesses remain illegal under federal law. Matthew Houtsma, associate area counsel for the IRS Office of Chief Counsel, said the tax agency’s Office of Professional Responsibility has held that “to the extent [a lawyer] is representing someone in the industry, that is not sanctionable.”
10th Circuit Rules Neighbors May File Federal RICO Lawsuit Against State-licensed Marijuana Growing Operation
Washington Post: “Marijuana has been decriminalized and regulated by various states, but it remains forbidden by federal law. This means that state-legal marijuana growers might still face federal charges, though federal prosecutors could choose not to enforce the federal ban in such situations. But it also means that private citizens . . . could sue neighboring marijuana growers under the federal RICO statute, on the theory that the growers are interfering with the neighbors’ use of their land — as the U.S. Court of Appeals for the 10th Circuit just held Wednesday in Safe Streets Alliance v. Alternative Holistic Healing, LLC. And this would not be affected by a Justice Department policy of not enforcing the criminal ban on marijuana production and distribution in those states that allow marijuana.”
This lawsuit concerns marijuana growing in Colorado.
Tucson Local Media: “Arizona voters legalized medical marijuana a few years ago, but employers are still adjusting to how these new laws affect how they handle their employees. In some ways, medical marijuana use is no different than any other prescription drug. But it is still an intoxicant and even with a medical marijuana card, there are restrictions on use by workers. It is a tricky time for many employers: There are state and federal patient rights to uphold, but marijuana, even for medical use, is still illegal under federal law.
Phoenix New Times: “A Chandler medical-marijuana lawyer’s license could go up in smoke in a State Bar of Arizona discipline case that involves accusations of shady deals, backstabbing her own clients, and making a dishonest grab for tainted cash. The allegations of ethical misconduct, conflict of interest, and lying appear in an explosive 25-page complaint filed by the State Bar in late September against Kathryne Ward, . . . The bulk of the document . . . concerns a complex, fouled relationship between would-be cannabis-business partners and a tricky real estate deal conducted as part of an attempt to open a state-licensed dispensary in Winslow.”
Here are some of the names mentioned in the New Times article:
- MERC medical-marijuana facility, 1811 East Southern Avenue, Tempe, Arizona, Steven Smigay and Michael Colburn.
- Compassionate Care Dispensary, Inc., Michael Colburn, Joe Kendall and John Gally. This nonprofit corporation’s articles of incorporation states that it was organized exclusively for charitable, religious, educational, and scientific purposes under Section 501(c)(3) of the Internal Revenue Code. Owning and operating a medical marijuana dispensary is not a 501(c)(3) activity and therefor would be a violation of the corporation’s Articles of Incorporation.
- Arizona Grass Roots Dispensary in Mayer is where Colburn now works.
- Natural Earth Providers, Timothy Thiess, NEP Holding, LLC and Ingrid-Joy Warrick.
- NEP Holding, LLC, whose initial members included Bruce Bedrick of Medbox. This LLC is owned by Jennifer Sanchez, John Romero, and Hector Martinez.
- The Bar complaint alleges that Warrick introduced Ward to Jennifer Sanchez, John Romero, and Hector Martinez. All four would eventually file grievances with the Arizona Bar Association that would lead to the official complaint against Ward.
- QPAC LLC, owned by Rimm Education Center, Inc. who only shareholder listed in its 2015 annual report filed with the Arizona Corporation Commission is D Taylor.
Phoenix New Times: “t the beginning of this month, Oregon became the third state where adults 21 and older can buy marijuana at retail stores — and Arizona may not be far behind. But the pro-legalization movement and even Arizona’s medical-marijuana program could still be derailed in the next few years by court rulings or by a new president, Maricopa County Attorney Bill Montgomery maintains. New Times asked the Republican politician and pot prohibitionist about the start of retail sales in Oregon, where he thinks the law still could be reversed, and about how such a thing could occur when all signs suggest that the United States is growing more, not less, cannabis-friendly.”
USA Today: “Emotions appeared to be sky high at the newly formed First Church of Cannabis after the Internal Revenue Service granted it nonprofit status. The designation means donors can deduct gifts to the church on their federal tax returns if they itemize and the church is eligible for a property-tax exemption in Indiana. The organization has raised $10,905 in a gofundme.com solicitation but has not found a home yet. “What a GLORIOUS DAY it is folks,” the founder and grand poohbah, Bill Levin, wrote May 26 in a Facebook post announcing the church’s IRS approval as 501 (c) (3) charitable organization.
ABC15.com: “Go on Craigslist and search for marijuana, and you’ll likely come across quite a few posts advertising for ‘patient-to-patient’ exchanges or delivery of the drug. The ads will ask for other medical marijuana patients only and, often, they’ll ask for a ‘donation’ fee. . . . calling the money exchanged a donation, doesn’t help either. ‘That donation, 100 percent of the time that I’ve had interaction with that
Fox10Phoenix.com: “An Arizona State University student has a valid Arizona Medical Marijuana Card, but now he’s facing a criminal conviction for using his legal, medical marijuana on campus. He’s fighting the conviction and says he shouldn’t have been treated differently than any other medical marijuana patient, just because he lives on campus. Andre Maestas has been using marijuana to relieve his back pain for several years.”
myfoxny.com: “The Los Angeles city attorney filed a lawsuit Tuesday to shut down a mobile phone application that arranges medical marijuana home deliveries.”
Chron.com: “One of the many problems created by the conflict between federal and state marijuana law is uncertainty in the enforceability of certain contracts. Judges can, and in cannabis cases often do, void contracts for violating federal policy.”
Associated Press: “A graduate student has sued a textile company for refusing to hire her for a two-month internship because she uses medical marijuana to treat frequent and debilitating migraine headaches, a decision her lawyer calls discrimination.”
The Daily Signal: “So who supports decriminalizing cocaine, heroin, LSD, methamphetamine, ecstasy and all dangerous drugs, including marijuana? No, it’s not your teenage nephew. It’s President Obama’s new acting head of the Justice Department’s Civil Rights Division, Vanita Gupta. In 2012, Gupta wrote that “states should decriminalize simple possession of all drugs, particularly marijuana, and for small amounts of other drugs.”
East Valley Tribune: “Medical marijuana users have no right to grow their own plants once a dispensary moves within 25 miles as the crow flies, a state hearing officers concluded Tuesday. But some rural residents may get to start cultivating again next year. Tammy Eigenheer rejected arguments by Arlin Troutt that the 25-mile rule, part of the original 2010 voter-approved Arizona Medical Marijuana Act, violates his constitutional rights because it allows others living outside the zone to continue to cultivate the drug.”
The following is the text of an August 5, 2014, Securities & Exchange Commission press release:
“The Securities and Exchange Commission today charged four promoters with ties to the Pacific Northwest for manipulating the securities of several microcap companies, including marijuana-related stocks that the agency has warned investors about in recent weeks.
The SEC alleges that the four promoters bought inexpensive shares of thinly traded penny stock companies on the open market and conducted pre-arranged, manipulative matched orders and wash trades to create the illusion of an active market in these stocks. They then sold their shares in coordination with aggressive promotional campaigns that urged investors to buy the stocks because the prices were on the verge of rising substantially. However, these companies had little to no business operations at the time. The promoters reaped more than $2.5 million in illegal profits through their schemes.
Two of the companies manipulated in this case – GrowLife Inc. and Hemp Inc. – claim to be related to the medical marijuana industry. The SEC has issued an investor alert warning about possible scams involving marijuana-related investments, noting that fraudsters often exploit the latest growth industries to lure investors into stock manipulation schemes. Other schemes by these four promoters involved an oil-and-gas company – Riverdale Oil and Gas Corporation – and three other microcap stocks, ISM International, Allied Products Corp, and Aden Solutions.
The SEC was able to unearth the schemes through the work of its recently created Microcap Fraud Task Force.
“Our Microcap Fraud Task Force is taking direct aim at abusive practices and serial violators within the microcap markets like these four promoters seeking to exploit retail investors for personal gain,” said Michael Paley, co-chair of the SEC’s Microcap Fraud Task Force. “In this case, we meticulously reviewed trading records and developed the evidence necessary to connect these four promoters and their coordinated trading efforts.”
The SEC’s complaint filed in federal court in Tacoma, Wash., charges the following individuals:
- Mikhail Galas, a stock promoter who lives in Vancouver, Wash.
- Alexander Hawatmeh, a member of Worthmore Investments LLC, which owns a stock promotion website called stockhaven.com. He formerly lived in Vancouver and currently resides in Lincoln City, Oregon.
- Christopher Mrowca, a stock promoter who operates Money Runners Group LLC, which has an affiliated stock promotion website called MoneyRunnersGroup.com. He lives in Bradenton, Fla.
- Tovy Pustovit, who owns a stock promotion website called Explosive Alerts. He also lives in Vancouver.
In a parallel action, the U.S. Attorney’s Office for the Western District of Washington announced criminal charges against Galas, Hawatmeh, and Mrowca.
According to the SEC’s complaint, GrowLife Inc. was part of a broader online promotion of several marijuana-related stocks in early 2014. Mrowca specifically promoted GrowLife through his Money Runners Group website and predicted that the stock price would nearly double. Mrowca, Galas, and Hawatmeh meanwhile engaged in manipulative trading designed to increase the price and volume of GrowLife stock, and they later sold their shares for illicit profits.
Similarly, the SEC alleges that Hawatmeh, Galas, and Mrowca bought and sold approximately 41.7 million shares of Hemp Inc. in January and February 2014 while the stock was actively promoted on the Internet. For example, one Internet tout on February 6 claimed that Hemp could reach “a REAL Possible Gain of OVER 2900%.” During the promotion, Hawatmeh, Mrowca, and Galas engaged in manipulative wash trades and matched orders to manipulate Hemp’s common stock before selling their shares for illegal gains.
“This was a carefully planned operation by Galas, Hawatmeh, Mrowca, and Pustovit to distort the performance of specific penny stocks as they were simultaneously promoted through social media and the Internet. As the companies’ stock prices increased, these four promoters opportunistically dumped their shares for illicit gains,” said Amelia A. Cottrell, associate director in the SEC’s New York Regional Office.
The SEC’s complaint charges Galas, Hawatmeh, Mrowca and Pustovit with violating antifraud provisions of the federal securities laws. The SEC seeks temporary, preliminary, and permanent injunctions along with an emergency asset freeze, disgorgement, prejudgment interest, financial penalties, and orders barring the promoters from participating in a penny stock offering.
The SEC’s complaint names Nadia Hawatmeh as a relief defendant for the purposes of recovering ill-gotten gains in her brokerage account, which was used by the promoters to conduct some of their manipulative trades.
The SEC’s investigation has been conducted by Michael Paley, Eric M. Schmidt, Mona Akhtar, Joseph Darragh, and Tejal Shah. The case was supervised by Ms. Cottrell, and the litigation will be led by David Stoelting. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Western District of Washington, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.
If your company employs people in Arizona the people running the company need to read this article by Arizona attorneys Michael D. Moberly & Charitie L. Hartsig of the Ryley Carlock & Applewhite law firm.
If you own or operate or are involved in management of an Arizona medical marijuana dispensary you need to take extra care to prevent people from hacking into your computer systems, camera systems and dispensary agent records of the Arizona Department of Health Services. Many types of computer hacks are felonies under Arizona criminal law. Today I contacted an Assistant Arizona Attorney General and discussed the following statute:
Arizona Revised Statutes Section 13-2316.A states:
A person who acts without authority or who exceeds authorization of use commits computer tampering by:
1. Accessing, altering, damaging or destroying any computer, computer system or network, or any part of a computer, computer system or network, with the intent to devise or execute any scheme or artifice to defraud or deceive, or to control property or services by means of false or fraudulent pretenses, representations or promises.
2. Knowingly altering, damaging, deleting or destroying computer programs or data.
3. Knowingly introducing a computer contaminant into any computer, computer system or network.
4. Recklessly disrupting or causing the disruption of computer, computer system or network services or denying or causing the denial of computer or network services to any authorized user of a computer, computer system or network.
5. Recklessly using a computer, computer system or network to engage in a scheme or course of conduct that is directed at another person and that seriously alarms, torments, threatens or terrorizes the person. For the purposes of this paragraph, the conduct must both:
(a) Cause a reasonable person to suffer substantial emotional distress.
(b) Serve no legitimate purpose.
6. Preventing a computer user from exiting a site, computer system or network-connected location in order to compel the user’s computer to continue communicating with, connecting to or displaying the content of the service, site or system.
Arizona Revised Statutes Section 13-2316.E states:
Computer tampering pursuant to subsection A, paragraph 1 of this section is a class 3 felony. Computer tampering pursuant to subsection A, paragraph 2, 3 or 4 of this section is a class 4 felony, unless the computer, computer system or network tampered with is a critical infrastructure resource, in which case it is a class 2 felony. Computer tampering pursuant to subsection A, paragraph 5 of this section is a class 5 felony.
CBS5AZ.com: “A CBS 5 investigation found medical marijuana delivery services operating outside the boundaries of state law, violating guidelines, procedures and potentially opening their sales to buyers who do not carry valid state-issued medical marijuana cards. . . . County Attorney Bill Montgomery issued the following statement after CBS 5 Investigates informed his office about the delivery attempt:
‘This is just one more example of how, despite the best efforts to have a ‘medicinal program,’ the ease with which people can circumvent the rules and regulations established by Arizona’s Medical Marijuana Act proves that this is ripe for recreational abuse’.”
Yuma Sun: “Medical marijuana users have no constitutional right to grow their own drug, a trial judge has ruled. Judge Katherine Cooper threw out a challenge by two men to a provision in the 2010 voter-approved Arizona Medical Marijuana Act which says only those living farther than 25 miles from a state-regulated dispenary can cultivate the plants. She said there is no basis for their claim that the provision limits their health care rights.”
Phoenix New Times: “Medical-marijuana users were warned. And now Maricopa County Attorney Bill Montgomery is carrying out his plan to harass qualified medical users for resin-infused edibles. Montgomery repeatedly has refused to say whether he is prosecuting patients for possession of marijuana concentrates who otherwise are acting within the boundaries of the 2010 Arizona Medical Marijuana Act. New Times has learned that his office is moving forward with at least one such case, a felony prosecution of a medical-marijuana patient for possession of a single piece of infused candy.”
Phoenix New Times: “Phoenix police say they might bust you for holding the wrong kind of cookie. In researching this week’s cover story about marijuana food products and concentrates, ‘Half Baked,’ New Times asked police to clarify their position on the preparations of marijuana not protected by the Arizona Medical Marijuana Act. Patients and dispensary operators won’t like the answer, though it might not surprise them.”
Here is the content of the email message Phoenix Police Sergeant Martos sent to the New Times:
“Hash oil purity:
“In order to identify marijuana we need to be able to look at plant material under the microscope and observe structures on the leaf surfaces. If someone has removed the resin from the plant material by mechanical or chemical means what we get is hashish, hash oil or cannabutter for example.
I can tell you that hashish runs the gamut in color from green to dark brown. Under the microscope it appears resinous and not like plant material and occasionally there may be some particles of plant material adhering to it. The resinous material does not look like plant material, nor does it contain the features in place for us to look at so we do not call it marijuana. Testing the hashish in the lab will allow us to identify THC and other cannabinoids which is how we arrive at classifying the material as cannabis (narcotic drug) vs. marijuana.
The lab does not grade hashish or marijuana for that matter for purity, quality etc. If we receive a food product as evidence, which contain no plant material, but we can identify THC etc. the material will be reported out as cannabis (narcotic drug). Our examination of items submitted as evidence is using definitions contained in ARS 13-3401. We do not use the AMMA as a means of testing evidence submitted to the laboratory.
“cannabutter”: This substance is considered a narcotic drug if created from extracts from marijuana. We deal with this in accordance with title 13.
We do not have a department policy for every single Title 13 criminal violation. It is our job as law enforcement personnel to enforce the laws of Arizona, which is what is being done when it comes to the aforementioned violations related to use/possession of cannabis. Department policies are not specific to each A.R.S. code.”
Phoenix New Times: “Uncle Herb’s medical-marijuana dispensary, tucked away near pine trees in an industrial area of south Payson, has the homey feel of a country store. . . . The super-potent paste gets added to Uncle Herb’s growing takeout menu of medicinal food and drink products sold to qualified patients . . . . Essentially, legal officials claim that the medical-pot law provides no protection for extracts, concentrates, or the food and drinks that may contain them. Under their theory, qualified patients and dispensary officials could be charged with a felony for possessing or making marijuana extracts.”
Phoenix New Times: “The national Marijuana Policy Project, bolstered by federal approval of state pot-freedom laws, plans to put a Colorado-style legalization initiative on Arizona’s ballot for 2016. It’s part of a master plan to pass similar legalization laws in 10 states by 2017.
Huff Post: “Medical marijuana businesses worried that federal agents will close them down now have a roadmap to avoid prosecution, courtesy of the Justice Department’s decision to allow legal pot in Colorado and Washington state. The agency said last week that even though the drug remains illegal under federal law, it won’t intervene to block state pot laws or prosecute as long as states create strict and effective controls that follow eight conditions.”
Can Arizona Employers Fire an Employee for Marijuana Use if the Employee Holds a Medical Marijuana Card?
azcentral.com: “I am a computer programmer and licensed medical marijuana patient. I only use it at night to help deaden the pain so I can sleep. My new job required me to take a drug test. Two weeks later, they told me I was being fired because I tested positive for marijuana. I showed my employer my prescription card, and later that day, they fired me for being incompetent. I had not received any complaints about my work, so I think they fired me because I use medical marijuana. What are my rights?“
Huff Post: “Drug abuse prevention groups asked the U.S. Justice Department on Wednesday how it will know whether its acceptance of recreational marijuana laws in Washington and Colorado affects public health. In a letter to Attorney General Eric Holder, the groups said the DOJ’s position is a mistake and they want to know how it will measure the states’ success in meeting enforcement priorities required as part of the federal acceptance.”
Huffington Post: “In spite of what you may think, legal pot doesn’t just sell itself, marijuana’s marketers are finding. . . . The marketers said they’re finding much of the media industry remains hostile to pot businesses. Online search giant Google wants nothing to do with them, as do many newspaper publishers. Billboard operators are reluctant to offer them space. Even some pro-marijuana activists said they worry that an out-and-proud embrace of marijuana advertising could spark a reactionary backlash.
Arizona Medical Marijuana Law Does Not Allow Possession of Resin Extracted from Cannibis in Food Products
On August 30, 2013, Will Humble, Director of the Arizona Department of Health Services, wrote a detailed article that concludes with the following statement:
“registered identification card holders and dispensaries may be exposed to criminal prosecution under the Criminal Code for possessing a narcotic drug if the card holder or dispensary possesses resin extracted from any part of a plant of the genus Cannabis or an edible containing resin extracted from any part of a plant of the genus Cannabis.’
Read also “Marijuana regulations might not cover all food products.” The full text of the article is below.
“Are Marijuana and Cannabis the same thing when it comes to Arizona Law? The short answer is no- and the distinction may be an important one for Qualified Patients.
The Arizona Medical Marijuana Act provides registry identification card holders and dispensaries a number of legal protections for their medical use of Marijuana pursuant to the Act. Interestingly, the Arizona Medical Marijuana Act definition of “Marijuana” in A.R.S. § 36-2801(8) differs from the Arizona Criminal Code’s (“Criminal Code”) definition of “Marijuana” in A.R.S. § 13-3401(19). In addition, the Arizona Medical Marijuana Act makes a distinction between “Marijuana” and “Usable Marijuana.” A.R.S. § 36-2801(8) and (15).
The definition of “Marijuana” in the Arizona Medical Marijuana Act is “… all parts of any plant of the genus cannabis whether growing or not, and the seeds of such plant.” The definition of “Usable Marijuana” is “… the dried flowers of the marijuana plant, and any mixture or preparation thereof, but does not include the seeds, stalks and roots of the plant and does not include the weight of any non-marijuana ingredients combined with marijuana and prepared for consumption as food or drink.” The “allowable amount of marijuana” for a qualifying patient and a designated caregiver includes “two-and-one half ounces of usable marijuana.” A.R.S. § 36-2801(1).
The definition of “Marijuana” in the Criminal Code is “… all parts of any plant of the genus cannabis, from which the resin has not been extracted, whether growing or not, and the seeds of such plant.” “Cannabis” (a narcotic drug under the Criminal Code) is defined as: “… the following substances under whatever names they may be designated: (a) The resin extracted from any part of a plant of the genus cannabis, and every compound, manufacture, salt, derivative, mixture or preparation of such plant, its seeds or its resin. Cannabis does not include oil or cake made from the seeds of such plant, any fiber, compound, manufacture, salt, derivative, mixture or preparation of the mature stalks of such plant except the resin extracted from the stalks or any fiber, oil or cake or the sterilized seed of such plant which is incapable of germination; and (b) Every compound, manufacture, salt, derivative, mixture or preparation of such resin or tetrahydrocannabinol.” A.R.S. § 13-3401(4) and (20)(w).
An issue the Department has been wrestling with for some time is how the definition of “Marijuana” and “Usable Marijuana” in the Arizona Medical Marijuana Act and the definition of “Cannabis” and “Marijuana” in the Criminal Code fit together. This confusion, which appears to be shared by dispensaries and registered identification card holders alike, is not easy to clear up and has resulted in the Department receiving numerous questions regarding the interplay between the protections in A.R.S. § 36-2811 and the Criminal Code. While we can’t provide legal advice as to whether a certain conduct is punishable under the Criminal Code (only an individual’s or entity’s legal counsel can do this), “Cannabis” is defined as the “resin extracted from any part of a plant of the genus cannabis” and “Cannabis” is listed as a narcotic drug according to the Criminal Code in A.R.S. § 13-3401(4) and (20)(w).
In other words, registered identification card holders and dispensaries may be exposed to criminal prosecution under the Criminal Code for possessing a narcotic drug if the card holder or dispensary possesses resin extracted from any part of a plant of the genus Cannabis or an edible containing resin extracted from any part of a plant of the genus Cannabis. If you’re concerned that your conduct may expose you to criminal prosecution, you may wish to consult an attorney. We’ll be providing some specific guidance for dispensaries licensed by the ADHS next week.
Big Practical Problem: How would a card carrying patient or a dispensary employee know if a food or beverage product contained resin extracted from a cannabis plant?
Phoenix New Times: “For the millions of people who now use marijuana legally under their states’ laws, driving in Arizona is technically a crime. Motorists with pot metabolites in their bloodstreams who want to avoid a marijuana DUI — which comes with nasty fines and a one-year suspension of driving privileges, instead of the regular 90 days for booze DUIs — may want to consult our quick primer below.”