On November 8, 2016, Florida voters approved a constitutional amendment that legalized using marijuana for medicinal purposes, which patients may obtain from licensed marijuana dispensaries. Contrary to what some believe, voters did not completely legalize marijuana for general consumption. Law makers are currently working to implement laws and regulations to accomplish what Florida voters demanded, and this article does not seek to provide an analysis of their efforts or to rehash the possession and sale of marijuana outside of legitimate medical means. This article describes criminal legal issues that marijuana dispensary owners, operators, managers, and employees need to be cognizant of while lawfully operating their businesses.
Despite the state constitutional amendment, distributing or dispensing marijuana is illegal under federal law, specifically the Controlled Substance Act. In 2005, the U.S. Supreme Court, in Gonzalez v. Raich, found that federal marijuana laws trumped state marijuana laws. In that case, Drug Enforcement Administration agents seized and destroyed six marijuana plants a California resident lawfully maintained under California’s Compassionate Use Act, which permitted marijuana use with a prescription. The California residents sued to prohibit enforcement of federal marijuana laws that violated California law, but the Supreme Court concluded federal law prevails in the event of a conflict with state law.
While the trend toward legalizing marijuana is readily apparent, the current U.S. Justice Department leadership has given medical marijuana dispensaries and advocates cause for concern. Before Attorney General Jeff Sessions took the helm of the Justice Department, he served as a U.S. Senator for Alabama for twenty years. While in Congress, then-Senator Sessions made clear that he believes marijuana is a “dangerous” substance. There are no signs that Attorney General Sessions has softened his position, even though President Trump supported medical marijuana use while on the campaign trail. In April 2017, Sessions voided the order announced during the Obama administration that restrained federal prosecutors from going after licensed medical marijuana dispensaries, and ordered his staff to evaluate the Justice Department’s policy on enforcement of federal drug laws and make recommendations to him. Given the Attorney General’s pronouncements and past position on the issue, several state governors and medical marijuana advocates are concerned. As of the writing of this article, eight states have legalized marijuana and twenty-eight states have laws permitting marijuana use for medicinal purposes. No matter the position the Justice Department ultimately takes, federal prosecution remains a real and distinct concern for legitimate marijuana dispensaries.
First, as with any pharmacy, the diversion of marijuana by unscrupulous employees should be a concern. As law enforcement works with the seven nurseries authorized to grow marijuana in Florida, law enforcement is gaining the tools necessary to trace the DNA of the marijuana back to those nurseries. While law enforcement would ideally be concerned with prosecuting the employee, asset forfeiture laws incentivize targeting the business and its bank accounts. Nurseries that grow marijuana and dispensaries that sell the medical marijuana products must maintain stringent access and inventory safeguards. Remember, in May 2015, CVS was investigated in relation to prescriptions being filled by CVS stores in Central Florida. While no criminal charges were filed, CVS was fined millions of dollars. It is also common for federal and state healthcare investigations to target owners and medical directors. This should be of paramount concern to anyone who owns, manages, controls, or works at medical marijuana nurseries or dispensaries.
Second, the life blood of any business is “cash flow,” which law enforcement often targets so the business’s financial holdings can be seized. In this context, federal law still prohibits manufacturing, possessing with the intent to distribute, distributing, and dispensing marijuana and its by-products. Federal law refers to those as “specified unlawful activities,” or “SUA.” Once money is generated from a SUA, conducting further financial transactions with that money to promote or carry on the SUA – meaning to operate the business in this case – can be charged as money laundering. If two or more people are involved, conspiracy to launder money can also be charged. While FinCEN (Financial Crimes Enforcement Network), under the Obama administration, opined that financial institutions could service legal medical marijuana dispensaries, many financial instructions have been hesitant to do so. Those in the medical marijuana industry may be confronted with federal authorities seizing business’ bank accounts.
Finally, medical marijuana dispensaries can run afoul of the law by failing to follow any one of the multiple Bank Secrecy Act requirements. While the ordinary dispensary may not consider itself a “bank,” federal law may define it as a “financial institution,” depending upon how the dispensary operates. Whether classified as a financial institution or not, in some instances, federal law will require businesses to file reports with the U.S. Treasury Department. For example, a nursery, processing facility, or dispensary that deals in cash transactions with a customer or supplier, that exceed $10,000, or in multiple transactions designed not to exceed $10,000, must file a report. Failing to do so subjects the business and individuals to criminal penalties.
While starting up a business may be the American dream, medical marijuana dispensaries will not be treated like other start-ups. Those in the medical marijuana industry may become the target of law enforcement investigators. If you have questions or concerns, you can contact us.