MATTHEW S. PAPPAS A T T O R N E Y 22762 ASPAN ST, #202-107

LAKE FOREST, CA 92630 [email protected]

(949) 382-1485 FACSIMILE: (949) 242-2605

August 12, 2013 VIA E-MAIL AND U.S. MAIL Mr. Andrè Birotte, Jr. United States Attorney Mr. Jonathan Galatzan Assistant U.S. Attorney U.S. Courthouse, 14th Floor 312 N. Spring Street Los Angeles, CA 90012 Re: United States of America v. 1651 E. Edinger, Santa Ana (Burcaw) SACV 13-0616 DOC (ANx) Proposed Settlement Agreement Dear Mr. Birotte and Mr. Galatzan: Thank you for rescinding the policy of closing all medical cannabis patient groups in the Central District of California and replacing that policy with one that is consistent with Department of Justice guidance in the area of state medical marijuana laws. Given it appeared that your office had not been following DOJ policy, I was elated when, on July 28, 2013, while appearing on KABC’s Newsmakers program, Mr. Birotte stated: “And we have been consistent in targeting those dispensaries that we think violate not only federal law but state law as well.” Mr. Birotte’s decision to rescind the apparent policy of Mr. Welk to close all marijuana entities regardless of compliance with state law or even consideration of that compliance followed by his decision to replace that policy with the one he announced or perhaps reiterated on July 28 is far more consistent with the December 8, 2011 testimony of Attorney General Eric Holder before the House Judiciary Committee: “but what we said in the [Ogden] memo we still intend, which is that, given the limited resources that we have, and if there are states that are – that have – medical marijuana provisions and if you take into account the Cole memo, if, in fact, people

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are not using the policy decision we had made to use marijuana in a way that’s not consistent with the state statute we will not use our limited resources in that way – and so, I don’t know – I assume that – I just don’t know about that provision.” Moreover, the announced policy replaces the inconsistent stance taken by Mr. Welk and conforms with Mr. Holder’s statements made during a 2010 New Mexico press conference: “As we have indicated, the focus of our efforts is on large traffickers – people who are engaged in ‘drug trafficking’ in the way we normally think of that word – that term. For those people who – or those organizations that are doing so – sanctioned by state law – doing it in a way that is consistent with state law – given the limited resources that we have, that will not be an emphasis for this administration.” PRIOR NONCONFORMING ENFORCEMENT POLICY AND ACTIONS: The policy adopted and followed by Mr. Welk, the Chief of the Asset Forfeiture Section, was demonstrated through and confirmed by an August 28, 2012 email from Assistant U.S. Attorney P. Greg Parham to Jesse Penenuri, an Anaheim code enforcement officer. Contrary to the policy promulgated by the Justice Department in both the Ogden and Cole memorandums as well as that expressed by Attorney General Holder in his sworn testimony before the House Judiciary Committee, Mr. Parham wrote in his email that regardless of a collective’s compliance with state law – even if that compliance is “110%” -- the U.S. Attorney is closing all collectives in the Central District of California. Also illustrative of the now defunct policy established and implemented by Mr. Welk is the sworn declaration of Ms. Tracie Butcher, who attended a July 18, 2013 meeting that included Mr. Welk, Mr. Galatzan and me: "Mr. Pappas asked Mr. We1k if the US. Attorney even checks for state compliance to which Mr. We1k shook his head indicating "no." He then said compliance with state law is irrelevant and that 'we are closing all collectives in the Central District it does not matter if they're state compliant.'" During the same meeting, Mr. Welk incredibly stated that the Justice Department guidance was applicable only to patients – not to collectives or dispensaries (note that for a dispensary to be subject to state criminal law exceptions, it must be a collective or statutory

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agricultural or consumer cooperative). Given Mr. Holder addressed “shops and dispensaries” when questioned by Rep. Jared Polis, D-Colo., during his December, 2011 House Judiciary Committee testimony, it is clear Mr. Welk was mistaken. His error is further demonstrated by Mr. Holder’s reference to “those organizations” that are in compliance with state law when answering questions at the aforementioned New Mexico press conference. No matter how Mr. Welk construes it, a patient or caregiver is not an organization. No matter how he frames it, the Justice Department guidance was not and certainly is not now limited solely to patients. Mr. Welk also erroneously asserted that collectives and dispensaries cannot exchange money for marijuana and remain compliant with state law. In fact, he said that California law does not provide for dispensaries. Again, Mr. Welk, who during the meeting complained the medical marijuana “headache” was eating into his weekend and family time, was mistaken. To wit, the following cases provide that dispensaries are provided for under California law. These cases also hold that money may be exchanged for medical marijuana as well as confirm there are substantial controls on the entire collective process set forth in the state’s MMPA itself and as explained in the 2008 California Attorney General Guidelines for the Safety and Non-Diversion of Marijuana Grown for Medical Use (Guidelines) published by former-Ca. Attorney General Brown: 1.

People v. Hochanadel, 176 Cal.App.4th 997 at 1002 (2009), “We also conclude that storefront dispensaries that qualify as "cooperatives" or "collectives" under the CUA and MMPA, and otherwise comply with those laws, may operate legally.”;

2.

People v. Colvin, 203 Cal.App.4th 1029 at 1032 (2012) “The trial court found that Colvin, although a qualified patient operating a "legitimate dispensary," was not entitled to the defense because the "transportation had nothing to do with the cultivation process" and was "outside what the law permits." We conclude that, based on the trial court's findings, section 11362.775 applied. We reject the Attorney General's argument that the section applies only to those cooperatives involving "some united action or participation among all" members. The judgment is therefore reversed.”; and

3.

People v. Jovan Jackson, 210 Cal.App.4th 525 at 529-30 (2012), “As we interpret the MMPA, the collective or cooperative association

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required by the act need not include active participation by all members in the cultivation process but may be limited to financial support by way of marijuana purchases from the organization.” To further illustrate that Mr. Welk is wholly incorrect in his various assertions, section IV(A)(1) of the Guidelines provides for statutory agricultural cooperative. “Sunkist” is an example of an agricultural cooperative which is a group of individual farms that produce agricultural products and then distribute them. Under the Guidelines, a medical cannabis agricultural cooperative must be limited to a closed-circuit group of patients. Section IV(A)(2) of the Guidelines provides for collectives. Under Hochanadel, Colvin, and Jackson as well as parts of the MMPA revised in 2011, dispensaries that are limited to having members that are medical cannabis patients prescribed marijuana by a state licensed doctor and their authorized caregivers are fully decriminalized (under California law) when operating in conformance with the state’s CUA and MMPA. PROPOSED SETTLEMENT (BURCAW/WU/BOTSCH): Attached with this letter are: 1. 2. 3.

[Proposed] Consent Agreement (Burcaw/Edinger); Independent Compliance Inspection Report Form; and Declaration of Marla James.

The proposed Consent Agreement I have included is modified to provide that the landowner claimants will not lease space to any marijuana entity that is not operating in full compliance with California law. It requires them to include, in all leases, terms that require any medical cannabis cultivating patients, cooperative member, or collective, including dispensaries, to operate in full conformance with state law or immediately cease operation and thereafter vacate the premises. It also requires the landowner claimants to notify the DEA and evict any entity that may become non-compliant (Attachment 1). The consent agreement further requires tenants that engage in medical marijuana activities to agree to monthly inspections by a non-profit independent compliance organization. Attachment 2 is an example of the tri-part independent compliance inspection report form that will be used to verify state law compliance. When the

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inspection has been completed, one of the three copies of the form will be transmitted by the independent inspection organization to the DEA. Although the inspections will be completed at regular intervals, the agreement also requires the landowner claimants to report any major violations by any tenant leasing space that he discovers or believes may be taking place (including, but not limited to, illegal activities involving other controlled substances, transfer of marijuana to non-patients, transfer/attempted transfer of marijuana out of state, or clear repeated failure to comply with state tax laws). Given the rapidly changing area of medical marijuana law in various states and to prevent issues that may arise if state or federal employees are involved in the inspection process, under the proposed settlement agreement all inspections will be conducted by a wholly independent non-profit organization. Former L.A.P.D. deputy chief Stephen Downing has indicated his willingness to lead/manage a fair and impartial independent inspection organization that works cooperatively with state and federal officers/employees to ensure illegal drug-traffickers do not put at risk the ability of seriously ill and disabled patients to access medical cannabis prescribed by their respective state doctors. This solution resolves the Burcaw, Wu, and Botsch cases in a way that is consistent with Mr. Birotte’s July 28 publically announced policy. It also properly gives effect to the public announcements of Mr. Holder and his Deputy Attorneys General. Finally, it comports with Mr. Holder’s December, 2011 testimony before Congress that the Justice Department will not use its resources against patients, collectives, cultivators, dispensaries, or banks that operate in full-conformance with state medical marijuana laws. It is my understanding the Botsch agreement has not yet been finalized. It would be inappropriate and improper to bind Mr. and Mrs. Botsch to the restrictive terms and conditions that were based on the now defunct and former policy that was being enforced by Mr. Welk. Accordingly, I ask the Botsch agreement be modified to reflect the policy expressed and confirmed by Mr. Birotte on July 28. As you know, Mr. Botsch was diagnosed with terminal cancer after going through the stress and utter fear of losing his property simply because he leased property in complete accordance with the law, because of state medical marijuana law and the widely distributed announcements of Mr. Ogden, the Attorney General, and President Obama, to a medical marijuana patient collective. Please review the proposed agreement and attached documents. Thereafter, based on your agreement to meet conveyed to me by Mr. Welk on July 19, please let me know

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when you can meet at your office early next week or the week following. I have invited former Deputy Chief Downing and, although Mr. Welk insisted during the July 18 meeting that there is no discontent by state officials in regard to federal actions in this and other areas, I have asked several elected state officials to attend. Perhaps their presence will, among other things, ensure Mr. Welk’s mistaken notion about the discontent shared by various states in regard to federal usurpation does not go unanswered. As always, I am Very truly yours,

Matthew Pappas MSP:jm encls. cc: Mr. Matthew Cohen,U.S. Dept. of Justice; U.S. Attorney General Eric Holder; Lt. Gov. Gavin Newsom, CA; Rep. Zoe Lofgren, 19th Dist., CA; Rep. Jared Polis, 2nd Dist., CO; Rep. Dana Rohrabacker, 49th Dist., CA.