09.27.12

Inside Obama’s ‘War on Weed’

Seventeen states say it’s OK to distribute medicinal marijuana, but increasingly, the feds don’t seem to care. Chaddwick McKeen found out the hard way, when his pot shop was raided, his Corvette seized and his business closed down for good. Winston Ross reports.

When the telltale banging came to the door of Chaddwick McKeen’s upscale condo in the Orange County town of Newport Beach, Calif., he was sure it wasn’t meant for him.

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'Why backing legalized pot could help Obama.'

“I think our neighbors are getting raided right now,” he told his wife, Alysha, lying in bed next to him.

Sure, McKeen was selling pot out of a shop he says did a quarter of a million dollars worth of business in its first 10 weeks. And sure, the federal government doesn’t seem to give two tokes about the California law that allows holders of medical marijuana cards to legally possess cannabis, and has been cracking down hard on alleged dispensaries over the past year or so.

But McKeen, 42, says he was operating according to the law. His OtherSide Farms—where “the grass is always greener”—was a nonprofit collective, he says, which has been a legal way to distribute marijuana in California since 2003. Also, he only had 200 plants, and he didn’t plan to sell more than 200 kilograms of pot annually. As far as he knew, the feds were only targeting large-scale outfits or ones that fit certain criteria, like being close to schools or playgrounds (he wasn’t anywhere near a playground).

The story of how McKeen—along with his wife and stepdaughter—found himself handcuffed, his belongings seized, and his business shuttered, shows the extent to which even bit players in the booming marijuana business are finding themselves in the crosshairs of a simmering battle between states and the federal government over who has the right to make and enforce drug laws. It’s also a rare look inside what grumpy stoners across America are calling Obama’s “War on Weed.”

Over the past two decades, as more states have allowed some form of medicinal pot use, a growing number of entrepreneurs have rushed to meet the unflagging demand for cannabis. In Venice Beach, entire downtown blocks are lined with dispensaries, with touts on the sidewalk pushing their products. In Denver, there are more weed dispensaries than there are Starbucks.

For a while, the feds tended to look the other way—until last year, when the Obama administration began stepping up enforcement of a law that supersedes the writs of the 17 states that have legalized marijuana. The Controlled Substances Act, which classifies pot as a “schedule one” drug on par with heroin, makes it illegal to sell or possess it.

Now, the federal crackdown appears to be expanding. On Tuesday, officials raided several pot shops in Los Angeles and sent letters to dozens more warning them to close or face criminal charges. Last week, the DEA raided one of Oregon’s largest medical marijuana operations. In Washington, U.S. Attorney Jenny Durkan sent a threatening letter last month (PDF) to 23 pot dispensaries identified as being within 1,000 feet of a school, prompting many of them to close. And in Colorado, 57 dispensaries have quit so far this year after the U.S. attorney there announced it would prosecute shops that were deemed too close to schools.

“Large commercial operations cloak their money-making activities in the guise of helping sick people when in fact they are helping themselves,” said Benjamin B. Wagner, the U.S. Attorney for the Eastern District of California, at a press conference last year announcing a statewide effort to tackle the “commercial marijuana industry.” “Our interest is in enforcing federal criminal law, not prosecuting seriously sick people and those who are caring for them.”

The feds aren’t bluffing, and Chadd McKeen knows that better than most. When he opened the door on Jan. 16, McKeen was greeted by one DEA agent and eight city cops, who marched in and seized the books for OtherSide Farms and McKeen’s cell phone, according to DEA documents. They also took his 2009 Corvette ZR1.

McKeen says he assumed the car would be towed. Instead, he says, one of the cops hopped in, opened the garage door and sped off, while his family sat detained in the living room.

The only pot found in the apartment was a couple small piles of “shake” (basically marijuana crumbs) that McKeen and his wife are allowed by state law to possess, because they have medical marijuana cards for injuries Chadd suffered when he was younger and to treat the symptoms of Alysha’s skin cancer.

Officials with the U.S. Attorney’s office in California, the Drug Enforcement Administration and the Costa Mesa Police Department all declined to speak directly to the circumstances of the raid at OtherSide Farms. “I’m not going to respond to something about a car that was seized,” wrote U.S. Attorney spokesman Thom Mrozek in an email to The Daily Beast. Mrozek did say that there’s been a general shift toward more enforcement, but didn’t elaborate.

The real bounty would later be found at OtherSide Farms itself, which McKeen calls the “Taj Mahal” of pot shops. He believed he’d set himself apart from other providers in Costa Mesa by offering a superior product in a posh setting at a reasonable cost. The 6,500-square-foot space, next door to Dippity Donuts on Broadway, had a window that looked into the 300-square-foot grow facility, right in the middle of the showroom. All 15 employees, from the $15-an-hour “bud tender” to the $25-hour-gardener, had full health insurance, says McKeen.

“I built a facility that was like the Ronald McDonald House for kids, but for medical marijuana patients,” McKeen said.

The reviews were positive. “Very fresh, great tasting, and dang does it get you high,” wrote one user on Weedmaps.com, which is kind of like the Yelp of places to buy pot.

“I just have to mention that the guys who deliver are so knowledgeable and very, uhm, CUTE. :)” wrote one reviewer, lauding the shop’s “discreet, professional and fast” service.

Reviews from law enforcement were less effusive. In Costa Mesa, as it is everywhere in California, it’s illegal to sell marijuana for a profit. State law only permits “collectives,” whereby multiple marijuana permit holders can grow the product together and distribute it to each other. McKeen says he was operating a nonprofit as part of a collective. He paid himself $750 a week and everything else went back into the business.

Yet not long after OtherSide first opened, McKeen got his first fine, a few hundred bucks for allegedly violating the conditions of his building permit. Two weeks later, came another, bigger penalty, for the same infraction, and then a third.

Rather than fight those fines in court, McKeen says he chose to pay those fines, chalking them up to the cost of doing business, like a tax. But that didn’t pacify Johnny Law.

Once the DEA-deputized team finished scouring McKeen’s condo—he claims they took his wife’s jewelry, and the $15 in his wallet, though none of the records reviewed by The Daily Beast mention these items— they headed to OtherSide Farms, where audio-equipped surveillance cameras (that the feds didn’t seize) captured footage of the raid.

In the footage, the officers’ mood appears jovial. Some of them seem impressed by McKeen’s digs. “I would definitely come buy my weed here,” says one person on the tape, which The Daily Beast reviewed.

Says another: “This place is a-fucking-mazing.”

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Video footage from OtherSide Farms captures the mood of the officers during the raid.

None of that adulation altered the outcome, though. McKeen’s plants were destroyed, his ATM machine seized, along with various marijuana-laced confections, according to DEA records. McKeen says the officers also took the money from a tip jar at the front desk, clearly labeled, “Help the homeless,” though it isn’t listed in the DEA’s records.

In the search warrant affidavit provided by the U.S. Attorney’s office for OtherSide and McKeen’s condo, the reason for the raid is laid out: a city code enforcement officer had visited OtherSide back in 2011, and McKeen allegedly said in that visit that he intended “to make so much money at the location and that he was going to give the city ‘a donation’ each and every year to offset the city’s current budgetary issues and help city employees keep their jobs.” The first donation would be $250,000 by the end of 2011, and $500,000 every year after that, said McKeen, according to the warrant. The code enforcement officer replied that “was a lot of money.” McKeen said it wouldn’t be a problem, as he was going to “drive the other dispensaries out of business.”

McKeen told The Daily Beast he was actually talking about the amount of revenue a plan to tax all dispensaries in Costa Mesa could raise. (He also says OtherSide wasn’t a dispensary, because dispensaries are technically for-profit, and illegal.)

As a candidate, Obama promised in multiple interviews to avoid using his resources if elected president to go after medicinal marijuana users. Targeting patients who use the stuff as medicine “makes no sense,” he said at a 2007 town hall meeting in Manchester, N.H.

In a February 2011 letter from U.S. Attorney Melinda Haag to Oakland City Attorney John Russo, Haag called prosecuting businesses that market and sell marijuana a “core priority.” While the government wouldn’t “focus its resources on seriously ill individuals who use marijuana as part of a medically recommended treatment regimen in compliance with state law,” any who manufacture and distribute the substance would be targeted, “even if such activities are permitted under state law.”

In a Rolling Stone interview earlier this year, Obama clarified his campaign promise. “What I specifically said was that we were not going to prioritize prosecutions of persons who are using medical marijuana,” Obama said. “I never made a commitment that somehow we were going to give carte blanche to large-scale producers and operators of marijuana—and the reason is, because it’s against federal law.”

The reviews were positive. “Very fresh, great tasting, and dang does it get you high,” wrote one user on Weedmaps.com.

McKeen believes “the worst president we’ve ever had for medical marijuana is Barack Obama.” 

The reason for the recent enforcement actions has to do with the skyrocketing growth of dispensaries, said a former U.S. Justice Department official who spoke to The Daily Beast on the condition of anonymity. “We are responding to a very aggressive effort to expand the distribution of marijuana. By making it medicine, kids think it’s safe. Same as prescription drugs,” the official said. “For the most part, all they’re doing is traffickers. They never prosecute anybody who isn’t a trafficker.”

Neither McKeen nor any of his employees or family members were prosecuted in the wake of the raid, which is partly why he thinks it was really about money. “In my mind, it was a home invasion robbery, under the auspices of the federal government,” said McKeen, who hasn’t been able to reopen OtherSide and instead is working in marketing. “Not only that, they carjacked me.”

The former DOJ official who spoke to the Beast said that money does play a role: “Seize a couple buildings, then it’s a profit center. You sell the buildings and make money.”

The cops didn’t get much from OtherSide farms, McKeen is happy to report, and no charges were filed, he said. He even got his Corvette back, albeit several months after the raid and, he says, with the tires worn down.