ROCKY MOUNTAIN HIGH: THE EMERGING INVESTIGATIVE CHALLENGES AND OPPORTUNITIES OF DEALING WITH LEGALIZED MARIJUANA

Whether you or your organization has operations in states that have legalized marijuana or not, it is easy to see that the dopey idea of permitting recreational marijuana use is more than just a grassroots movement. It is part of a broad cultural sea change. With it, will come both challenges and opportunities for the investigative profession. As citizens across America start to toke-up and state legislatures ponder how to turn grass into revenue, professional investigators should start thinking green as well. However, before you dust off your bong and begin your search for a new home-grown profit center for your agency you might want to take a look at the law in Colorado and what it has offered the five million of us who live here.

The journey in my fine state began with Amendment 64. Previously defeated, this new version of the prior ballot initiative set out to amend the state’s constitution legalizing the possession and use of marijuana. By a small margin the measure passed on November 6, 2012, along with a similar measure in Washington State. Now enacted as Article 18, section 16 of the state constitution, the law addresses personal marijuana use for adults 21 and over, as well as commercial cultivation, manufacture, and sale, effectively regulating cannabis in a manner similar to alcohol.[i] The first retailers selling weed opened for business in January of this year. The buzz on the ground is that sales are higher than expected. Others report that the viability of their new enterprises remains in question. Anyway, here are a few of the amendment’s highlights:

  • Personal possession of less than one ounce (28 grams) or less carries no penalty.
  • Transfer of one ounce or less for no consideration carries no penalty.
  • Open and public display of or use of less than 2 ounces is a petty offense, punishable by 15 days in jail and a $100 fine.
  • Possessing 6 to 12 ounces is a misdemeanor, punishable by 18 months in jail, and a $10,000 fine.
  • Possessing more than 12 ounces is a felony, punishable by 12 months to 18 months and a $100,000 fine. However, the delivery of 100 pounds or more is also a felony, punishable by 4-12 years in jail and but with only a $75,000 fine. Go figure.
  • Cultivation of 6 plants or fewer carries no penalty.
  • Cultivation of more than 6 plants is a felony, punishable by 2-6 years in jail and $500,000 fine.

 

And get this, the possession of paraphernalia is a petty offence, punishable by a $100 fine. So the state constitution says Colorado citizens can possess and consume marijuana, but the tools with which to do it are unlawful to own. With a little research this could prove to be a good example of why lawmakers should not toke-up while making law.

The amendment also provides for licensing of cultivation facilities, product manufacturing facilities, testing facilities, and retail stores. Local governments are permitted to regulate or prohibit such facilities and the amendment requires the general assembly to enact an excise tax to be levied upon wholesale sales of cannabis, requiring that the first $40 million in revenue raised annually by such tax be credited to the public school capital construction assistance fund. The anticipation of the implementation of this regulatory nightmare is almost more than one can bear.

As festive as all this may sound to some, the amendment however squarely runs afoul of that nasty little inconvenience called The Controlled Substances Act. The CSA was passed as Title II of the Comprehensive Drug Abuse Prevention and Control Act of 1970 and signed into law by President Richard Nixon. The CSA is our nation’s federal drug policy under which the manufacture, importation, possession, use and distribution of certain substances (including marijuana) are regulated. The legislation created five Schedules (classifications), with varying qualifications for a substance to be included in each. Two federal agencies, the Drug Enforcement Administration and the Food and Drug Administration, determine which substances are added to or removed from the various schedules. More inconvenient to the party revelers is that marijuana is classified as a Schedule 1 drug. Schedule I substances are those that: (1) have a high potential for abuse; (2) has no currently accepted medical use in the United States; and (3) there is the lack of an accepted safety protocol for its use under medical supervision. Violations of the law involving Schedule I substances also carry the stiffest penalties. I’ll forego the obvious legal implications of this little wrinkle and instead explore what might be some of less complicated challenges and opportunities that lay ahead for our esteemed profession. First the challenges.

According to the National Institute on Drug Abuse, marijuana use has many effects on humans. Among the most troubling are those on mood and perception. These effects include euphoria, anxiety, paranoia, a distorted sense of time, short-term memory loss, impaired learning and depression. These psychological effects generally ease a few hours after consumption, but residual effects can last for days. Moreover, most pot smokers smoke regularly, allowing the accumulation of its active ingredient, delta-9-tetrahydrocannabinol (THC) in the fatty tissue of their bodies. These users experience a form or reverse tolerance where the more they smoke the less they need to experience its effects. From a chemical and behavioral standpoint these individuals are always high. As employees they are less productive, prone to more mistakes and accidents and less likely to seek new or additional responsibilities. Thus as employers, we face the expanded challenge of our employees’ off-duty marijuana use and its effect on them while at work. Think too about the potential of those we interview or interact in the course of our work whom might later claim impairment while they were in our company. Not only might our workplaces and highways be less safe and secure, but so might the quality and value of our work.

Another safety challenge for us involves the subjects of our investigations who have violent tendencies. By exposing society to yet another lawful substance capable of impairment, our work which is already dangerous because of alcohol (and other things) will likely become more dangerous. Some will argue that marijuana tends to make its users more passive and less aggressive and I am among them. But we also know marijuana users often abuse other substances as well. Also, no one has yet experienced the behaviors that will be produced when an entire community gets high no less its impact on things like cost of liability or Workers’ Compensation insurance.

The last challenge is a purely speculative and that is—what are the licensing and relicensing implications for those who provide investigative services to those in the marijuana industry? Though our licenses are regulated at the state level, most activities involving marijuana are federal felonies. Thus it is possible an investigator providing services to a business involved with pot in some way could find him or herself on the wrong of side of a drug related conspiracy beef—if for no other reason than to pressure them into providing the government assistance in prosecuting their client. The civil and criminal implication appear many, with none of them good—either for the investigator, their reputation or the client.

Cheerfully, there is some opportunity as well. First among them and most obvious are those services which directly support the production and transactional end of the marijuana trade. They include:

  • Pre-employment background screening for growers, brokers, distributors, transporters and dealers;
  • Investigation of inventory losses, shrinkage and substitutions;
  • Investigation (or re-investigation) of allegations of unlawful conduct of those in the trade or connected to it; and
  • Legal investigations associated the various legal theories of liability associated with the production, distribution and use of marijuana.

Another opportunity tangential but only slightly outside our profession involves security services. Here the opportunity includes everything from the installation and maintenance of cameras, security and access control systems, the protection of cultivation and transportation of product, executive protection and the actual protection of the money involved. To those outside Colorado and Washington this last opportunity is the least obvious and possibly the most complicated. Here’s why.

Because of the CSA banks, credit card companies and everyone else in the money-end of modern commerce fear criminal liability doing business with those in the marijuana trade. Among the most potent concerns emanates from the Bank Secrecy Act. Enforced by the Department of Treasure, the law provides regulatory mechanisms designed to keep the proceeds of illicit activity out of the U.S. financial system. The BSA allows the seizure of both bank and customer assets. Banks that run afoul of the law run the risk of losing their licenses while exposing themselves and officers to criminal prosecution. As such, the entire lawful portion of the marijuana industry as it exists right now is done on a cash basis. That’s right, no checks, credit cards, PayPal, BitCoin, nada, nothing. Here in Colorado overnight, elaborate electronic funds transfer and laundering systems have been erected and cash is slopping around everywhere. And with it are huge, complex problems. Not least among them is how will marijuana retailers pay the taxes they collect if they cannot deposit their receipts, write a check, wire money or even obtain a cashier’s check? Think for a moment the functioning of your own business if you did not have access to our modern banking system? How would pay the federally required monthly or quarterly payroll taxes you owe Washington or pay the subcontractor for the surveillance he just performed for you in another state? Better yet, how will the customer in this new market pay you for the services you just provided him?

Hoping resolve this dilemma, in early February the Treasury Department issued new guidance on the matter. In a public statement Treasury said that it will waive some aspects of the BSA and allow banks to provide financial services to marijuana-related businesses operating legally under state laws as long as they make regular reports of such and watch for suspicious activity. Big banks however aren’t buying it. J.P. Morgan, Chase and Wells Fargo all have well established policies prohibiting their support of marijuana associated businesses and worry that a policy change by Treasury that isn’t enshrined is law could still leave them exposed to prosecution. Speaking for the banks, Frank Keating, president of the American Bankers Association said, “As it stands, possession or distribution of marijuana violates federal law, and banks that provide support to those activities face the risk of prosecution and assorted sanctions.”[ii]

So there we have it. No one really knows the rules or the risk potential for those providing services to the newly legalized marijuana industry. What isn’t hard to understand why marijuana users call their drug of choice, dope. But it is almost impossible to understand why the fine citizens of the great state of Colorado would vote for or support such inanity. But then again maybe not every citizen is actually all that fine. A guest on a local drive-time talk radio show recently might have summed it up best when she related to the host, “I dunna-know. Maybe voting for it [the legalization of marijuana] was kinda stupid when you think about it [giggling]. [Now laughing] But doesn’t everyone love to get high once in a while?” Actually sweetie, no they don’t.

[i] Ingold, John, Colorado marijuana measure’s backers, foes buoyed by out-of-state support, The Denver Post, June 11, 2012
[ii] Grossman, Andrew, Banks OK’d for business with legal pot sellers, Wall Street Journal, February 15, 2014.