EXCLUSIVE: DOJ plan to arrest state licensers, tax dispensaries could doom medical marijuana industry

A recent letter from the Department of Justice (DOJ), threatening state employees in charge of implmenting medical marijuana laws with prosecution, has forced some governors to re-evaluate and even veto popular legislation -- all seemingly in violation of what the medical marijauana community thought was a cease-fire with the federal government.

Facing the threat of seeing otherwise innocent state employees thrown in jail, lawmakers are responding in an entirely human fashion: what Allen St. Pierre, executive director of the National Organization for the Reform of Marijuana Laws (NORML), called "the old need to CYA -- cover your ass."

Ultimately, the administration's confusing legal position has led to a stagnation of medical marijuana reform efforts, with some states simply deciding it's not worth the risk.

It also represents a significant change in momentum for the prohibition reform movement as a whole, and one that's taken them almost entirely by surprise.

In 2009, Attorney General Eric Holder's Justice Department issued a memo stating that it would not prosecute medical marijuana patients, suppliers or caregivers in states that have passed voter initiatives to legalize the drug's use -- so long as they were all abiding by that state's laws.

Earlier this month, however, the Justice Department sent a letter to the governor of Washington, warning that state employees may be prosecuted if they are in any way involved in the licensing of production or distribution of marijuana.

"The prosecution of individuals and organizations involved in the trade of any illegal drugs and the disruption of drug trafficking organizations is a core priority of the Department," department attorneys wrote. "This core priority includes prosecution of business enterprises that unlawfully market and sell marijuana."

The letter did not state the laws they would be in violation of, but NORML director St. Pierre told Raw Story in an interview Tuesday that he believed feds would try to prosecute state employees under the The Racketeer Influenced and Corrupt Organizations Act.

Reacting to this highly specific language, Gov. Chris Gregoire vetoed the bill, but maintained that she supports moving the drug's classification to Schedule 2, similar to other potent and potentially addictive painkillers used in hospitals.

Similarly, New Jersey Governor Chris Christie (R) is reportedly hesitant to implement portions of his state's medical marijuana provisions, which passed the legislature before he took office. New rules drafted by Christie's administration would make New Jersey's medical marijuana system the most restrictive in the nation, but it requires the involvement of state employees. New Jersey's health department named in March just six private producers it would grant licenses to.

But now that's been delayed too, and the legislature has stalled as it debates whether to rewrite Christie's plans.

Meanwhile, the DOJ's letters are expected in other states too, posing a sobering argument that if governors are wary of waging legal battles with the feds to keep their employees out of jail, they should instead keep them far away from any and all private producers of medical marijuana.

NORML speculated in February that if the Obama administration followed Gov. Gregoire's lead and reclassify marijuana as Schedule 2 -- or potentially expand the definition of Schedule 3 to include pharmacological products -- major corporations are waiting in the wings to take over the market with cannabis-based drugs, like the liquefied marijuana medicine Sativex, from GW Pharmaceuticals plc.

So far, 15 states and the District of Colombia have passed laws permitting marijuana to be used as medicine.

But it's not just state workers who DOJ is currently targeting in its efforts to end the sale of marijuana for medical uses. As previously reported, the DOJ is coming after licensed growers and dispensaries with a very old tool: the tax code.

NORMAL's executive director St. Pierre told Raw Story that this marked a change in tactics for the Justice Department.

Chasing after medical marijuana dispensaries not with SWAT teams, but with tax attorneys, he said, was "like what they did to Al Capone" and represented a significant change in tactics for the DOJ.

To this effect, the Internal Revenue Service (IRS) sees § 280E of the federal tax code as license to come after businesses that sell marijuana if and when they file their taxes, as it prohibits any deductions for companies "trafficking in controlled substances."

"Every transaction you engage in is a separate offense and you are literally writing your own indictment every day on the registry of your cashier's tape," St. Pierre explained.

"The real quandary for these people who thought they had legitimate businesses is whether they can take tax exemptions," St. Pierre went on. "If they can do that, then that industry will continue to grow. If, however, if [a key court decision goes against producers], then for all intents and purposes, that is probably it for retail businesses that sell marijuana for another person."

He concluded: "Absent the federal government changing these laws, the razor blade this administration has now created for itself to crawl across is becoming pretty evident each week. It's hard to maintain both positions."

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