Roadblocks in D.C. marijuana law don't quell entrepreneurs' excitement

By Derek Kravitz
Washington Post Staff Writer
Thursday, August 26, 2010; 2:26 PM

The District is writing strict new rules to regulate its nascent medical marijuana industry, but some of the entrepreneurs best positioned to lead the way have blemished backgrounds -- including drug convictions -- at odds with the city's vision.

Among the District's 300 proposed rules is a requirement that operators would need to be "of good character" -- no felony convictions or misdemeanor drug convictions allowed.

"Historically, the people who have dealt with marijuana have, unsurprisingly, come from a non-compliant background, you might say," said Allen St. Pierre, executive director of the Washington-based National Organization for the Reform of Marijuana Laws. "They have a compulsion to not follow the law. So these rules might be viewed as just another bump in the road or a minor impediment for these guys."

Businessmen like Stephen DeAngelo, a ponytailed Washington native who runs one of the largest legal pot dispensaries in the world, say they just want to use their expertise "to help any way we can." DeAngelo has several out-of-state drug convictions and was arrested on drug charges in Montgomery County in 2001. He has launched a consulting service, CannBe, to advise pot capitalists, such as those hoping to stake their claim to the District's highly anticipated green rush next year.

Officials are also wary of DeAngelo's closely guarded plans -- he unexpectedly partnered with a team of Rhode Island investors that is planning to sell medical cannabis out of a 75,000-square-foot warehouse in downtown Providence, stoking concerns that he is expanding his empire nationwide.

"We started this with the intention of selling medical cannabis in a safe, seemly and responsible way," said DeAngelo, whose Harborside Health Center along the Oakland, Calif., waterfront employs 80 people and pulls in more than $20 million in revenue per year. "We didn't want to set up a chain-store arrangement . . . but we do want to replicate the model for others."

DeAngelo, 52, said the 2001 arrest was a "case of mistaken identity," and his Maryland attorney, Bruce L. Marcus, said charges were never filed because it "lingered for eight years and prosecutors forgot it was still out there."

Many of the potential applicants CannBe might advise -- from dispensary owners and "bud-tenders" (those who handle and package marijuana) to growers, lab technicians, lawyers and "pot docs" (medical marijuana-friendly doctors who can prescribe) -- also fail to meet the standards envisioned by the D.C. Council or have other ideas for the city's medical marijuana industry than those outlined in the pages of draft regulations released by the District two weeks ago.

One thing is certain: The District is uninterested in controversy.

"People are scared D.C. could be Amsterdam on the Potomac and, if Congress changes leadership, they're going to come barreling down on us," said Wayne Turner, a longtime AIDS activist in the District who was instrumental in drafting the 1998 referendum on medicinal marijuana. "We're going to be under so much scrutiny that any slip-up is going to be noticed."

A local advantage?

City health and regulatory officials tasked with crafting and overseeing the District's strict new medical marijuana law are carefully reviewing about 300 proposed rules, listening to stakeholders and hoping to avoid some of the mistakes made by the 14 other states that have enacted medical marijuana statutes over the past decade.

In Maine, officials realized only after they approved licenses for eight state dispensaries that half of them were connected to a very profitable medical marijuana group in Berkeley, Calif., when local businesses were preferred. In Colorado, more than 700 dispensaries have been licensed, overwhelming regulatory and law enforcement agencies.

D.C. Mayor Adrian M. Fenty's (D) administration is expected to formally solicit bids in the fall to operate up to five dispensaries and as many as 10 "cultivation centers," which can be run by nonprofit and for-profit organizations and will be overseen by the city's Alcoholic Beverage Control Board and its enforcement arm, the Alcoholic Beverage Regulation Administration.

Competition is expected to be fierce. Winning bidders would ideally have experience growing medical marijuana, giving a leg up to established outfits. But D.C. Council member David A. Catania (I-At Large), chairman of the council's Health Committee, and other city officials have expressed a preference for locally owned vendors. "This is for D.C. residents only," he said.

But some local aspirants have problems, too.

Alan Amsterdam and Adam Eidinger, the owners of Capitol Hemp in Adams Morgan and Chinatown, have started the D.C. Patients' Cooperative and are eyeing a location somewhere in Adams Morgan or Capitol Heights, where advisory neighborhood commissioners have publicly supported the marijuana legislation.

Amsterdam, 43, opened the first American-owned marijuana coffee shop in 1998 in the Netherlands. He pleaded guilty to marijuana possession after being arrested in Rockville in 1995 but received a suspended sentence. It's still unclear whether he would be able to be involved in his shop's day-to-day operations. "My lawyer is working on it," he said. "He says everything is kosher."

Amsterdam's original plans for a "showroom-type feel" for his dispensary had to be scrapped after D.C. proposed, he said, "the most restrictive regulations in the nation."

Another local businessman, Brian Rubin, owner and manager of Maryland Hydroponics in Laurel, which is expanding with a D.C. location near Tenleytown, brings a certain amount of notoriety with his aspirations for applying for dispensary and growing licenses. Rubin, 42, grew marijuana while living in the Netherlands for a decade and was known up and down the Eastern Seaboard for his "Potomac Indica" strain of pot.

"We're totally geared up. The cultivation centers are ready to go," said Rubin. "We're just waiting for the law to go into effect. It's a little bit of a gamble, but we wanted to be the first one there."

All of the attention might not be a good thing for Washington's pot capitalists. "I don't think they're serving themselves well by weighing in this much so early in the process," Catania said. "I just think, frankly, that they're creating a lot of nervous energy."

D. Paul Stanford, a Portland, Ore., marijuana activist who runs "pot doc" clinics operating in nine states, said he is moving forward with plans to locate a nonprofit office here. But officials say Stanford's operation could run afoul of regulations that require physicians offering marijuana referrals to have an "ongoing" and "bona fide" relationship with the patient, and Stanford's lengthy criminal history might be an issue; he was convicted in 1987 in Oregon of distributing a controlled substance, a felony.

A full-time doctor, nurse and at least five other employees would staff Stanford's clinic and screen potential patients through medical records, questionnaires, interviews and physical exams. Stanford's nonprofit, the Hemp and Cannabis Foundation, pulls in roughly $5 million per year.

"We have a protocol, we require documentation and we're looking to lend credibility to the process, not take away from it by supplying medical marijuana to those who aren't qualified," he said.

As part of Stanford's plan, a Denver-based ophthalmologist, Dr. Eric Eisenbud, is working on becoming licensed in the District, and Stanford is searching for office space.

Stanford said he is researching the idea of operating a dispensary in the District but has no imminent plans to apply for a permit. "It won't be any huge gold rush," he said.

D.C.'s strict rules

The District's rules would include a first-in-the-nation provision requiring dispensaries to price marijuana on a sliding scale so the city's poorest patients can obtain medicinal pot for free and a 95-plant limit on those who grow and sell marijuana, which is mirrored in New Mexico and designed to avoid federal intervention.

But the limit on plants could severely cut into supply, causing shortages, reduced profits and black-market deals, according to those who want the D.C. law expanded. New Mexico's 2,000 medical marijuana patients routinely exhaust its supply within 24 hours of it hitting the market.

Dispensaries would also have to pay an annual $10,000 registration fee, and all company officers, managers and employees would have to pay annual city dues. Security systems would need to be installed and special packaging labels used, records would need to be kept for at least three years and advertising would be minimal -- no green leaf images or neon signage.

Despite the extensive rules, many would-be medical cannabis dealers say they expect the dispensaries to be profitable.

Jeffrey Kahn, a practicing rabbi for 27 years, is considering opening a dispensary in the Takoma section of Northwest Washington with his wife, Stephanie. Kahn, 58, has already held a town hall forum with neighbors and is committed to renting an old law office on Blair Road NW, if he gets a license. He's set aside "several hundred thousand dollars" for the venture.

"We want to be very open and very up-front with the community on this and get their input early in the process," said Kahn, the former executive director of the D.C.-based nonprofit Interfaith Drug Policy Initiative.

Catania said officials will be tough on anyone coming to D.C. to take part in the city's new legal drug trade. "We have a lot of time to see how it works," he said. "And we're going to be doing a lot of thorough background checks all the time."

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