Proposition 64 was approved by voters in November 2016. This passage legalized recreational marijuana, one incentive had been to dry up the black market for the drug that was linked to other, more serious criminal activity. However, The Los Angeles Times recently reported that “a half-dozen government corruption cases” have arisen, involving “black-market operators” who “try to game the system, through bribery and other means.” Could it be that legalized marijuana is actually breeding crime?
There are several issues that The Times suggests have made the legal marijuana landscape ripe for corruption:
- Federal law — Marijuana is still illegal under federal law. Banks that accept cash from legal marijuana businesses risk federal money laundering charges. It’s also illegal to export pot from California.
- City and county laws — Getting a permit to open a pot farm or dispensary can be difficult, if not impossible. Local officials, therefore, have a great deal of power, which they can easily convert to personal profit.
- Black marketeers — Many illicit producers are seeking to legitimize their businesses, but they tend to be impatient with the law and eager to take shortcuts.
We can add another legal impediment: taxation. Recreational marijuana is a heavily taxed product in California, and black market distributors have found it’s cheaper simply to bribe officials whenever possible.
Here’s a brief run-down of the cases The Times article discusses:
- Siskiyou County — Pot growers Chi Yang and his sister, Gaosheng Laitinen allegedly offered Sheriff Jon Lopey “$1 million if he would keep deputies away from certain illegal cannabis farms.” Lopey alerted the FBI, which set up a sting.
- Adelanto, CA —Jermaine Wright, the town’s pro tem mayor “was charged with agreeing to accept a bribe to fast-track a marijuana business.” Wright’s trial is scheduled for August.
- Humboldt County — Building inspector Patrick Mctigue “was arrested and charged with accepting $100,000 in bribes from marijuana businesses seeking expedited help on county permits.”
- Compton — “Michael Kimbrew, … field representative to then-Rep. Janice Hahn” was convicted in federal court of “bribery and extortion” after “he accepted cash from an undercover FBI agent while pledging his ‘undying support’ to protect a marijuana dispensary … the city … was trying to close.”
- Oakland — Developer Dorian Gray has been charged with “offering bribes to then-Oakland City Council President Larry Reid and Assistant City Administrator Greg Minor” to help him “obtain a cannabis dispensary permit.” Said Reid, “Everybody thinks they can become an instant millionaire by getting a dispensary permit.”
This type of corruption was certainly foreseeable, given the state’s experience after legalizing medical marijuana two decades ago. For example, “the former mayor of the city of Cudahy was sentenced to one year in federal prison in 2013 for taking cash bribes in exchange for supporting the opening of a ‘medical marijuana’ store in the city.”
The bottom line is that legal marijuana is not free market marijuana. Whenever an industry is heavily regulated, businesses will weigh the cost of compliance against the cost of noncompliance. If noncompliance is significantly cheaper, there will be a strong temptation to flout the law. Black market marijuana in California was estimated “to be worth $3.7 billion last year.” That cash can drive a great deal of corruption. When Sheriff Lopey says, “There is no doubt in my mind that the multi-billion-dollar nature of the marijuana industry is corrupting public officials,” who are we to doubt him?