GCM Roundup | Let's talk about Cannabless instead of OK’s new weed czar
Oklahoma cannabis is full of hot stories right now. Most of them have been covered in depth already by state-and-local news outlets and national cannabis sites.
So let’s explore a lesser-noticed Oklahoma cannabis story: The prosecution of Cannabless honcho Victor Ngo.
On August 17, the U.S. Attorney’s Office for the Western District of Oklahoma issued a press release announcing that 33-year-old Ngo had agreed to a major plea deal.
His crime? Ngo for a period of several months in 2019 maintained an account with the mainstream bank JPMorgan Chase to run his cannabis business in newly state-legal Oklahoma. Ngo, according to prosecutors, wasn’t entirely forthcoming with JPMorgan about the fact that the business sold cannabis.
He instead told JPMorgan that the business was “a wellness and fitness company,” which could just as easily be how Gwyneth Paltrow described her latest line of cannabis-lifestyle products. Federal drug enforcers and prosecutors were not amused, however.
On August 2, just 15 days prior to the plea announcement and two years after the targeted conduct, federal prosecutors in Oklahoma City filed a single charge against Ngo for making a false statement to a bank.
Two more charges for money laundering were filed against the business entity Ngo used to make the false statement, Friendly Management Group. (I’d be obligated to write “allegedly used” if Ngo hadn’t agreed to a plea deal so fast.)
As part of the plea agreement, Ngo would forfeit $622,000 in cannabis earnings and be sentenced at a later date to as many as 30 years in prison. Ngo and Friendly Management Group would additionally face $1.7 million in fines.
The Justice Department presser consciously adds a vague statement almost as a gesture to further justify the severity of the penalties in Ngo’s case: “At the time, Cannabless was not in full compliance with Oklahoma’s medical marijuana laws.”
No evidence of noncompliance is presented in the press release or the court record of Ngo’s case. Either way, the federal government formally interprets cannabis as a prohibited substance, which is the very reason banks are reluctant to do business with state-legal cannabis operators in the first place.
Is the federal government saying that Ngo would not have been prosecuted for lying to a bank if he’d been fully, demonstrably compliant with Oklahoma’s state cannabis laws?
It’s almost as if the Justice Department knows that the penalties in this case look more like what federal prosecutors would seek for violent kingpins and narcos at the height of the nation’s war on drugs.
These charges don’t look like what state-legal cannabis operators deserve, even if they aren’t entirely state-compliant at a given moment. It’s pretty easy to slip into cannabis noncompliance in any state, even with a small army of expensive lawyers and consultants.
Interestingly, none of these developments have affected Cannabless today, which continues to operate numerous locations in and around Oklahoma City.
The email address email@example.com remains on several fully active dispensary and cultivation licenses from the Oklahoma Medical Marijuana Authority. The name Victor Ngo remains on several active licenses with the Oklahoma Bureau of Narcotics. His name is not, it should be noted, on any state business-registration records for Cannabless or Friendly Management Group that I could find.
Prosecutors say Ngo made almost daily deposits and was careful to keep each below $10,000 to evade detection, which probably didn’t help his case. The aggressive prosecution of Victor Ngo nonetheless stands out for several reasons. A leading reason is that attempts to open accounts with mainstream banks are commonplace in the cannabis industry.
What typically happens is that behemoth banks eventually discover a business is involved in cannabis and shutter the account. What’s far less common is federal prosecutors announcing $2.4 million in fines and forfeiture and the possibility of three decades behind bars.
As one cannabis banking expert pointed out in response to the Ngo plea deal, this is only a single instance of bank fraud and money laundering where it’s likely systemic given that there are more than 50,000 cannabis businesses between the United States and Canada.
There are a few more additional facets of the Cannabless case that I think make it more than just a one-day story and press release and worth a deeper look:
The U.S. Justice Department for three presidential administrations now has observed a general rule of standing down on rigid cannabis enforcement in legal states. Since Oklahoma voters authorized medical marijuana in 2018, press releases from federal prosecutors in the state announcing major cannabis-related prosecutions have become rare for all the right reasons, which made Ngo’s case all the more noticeable.
The August 17 presser from the Justice Department goes on to say that the investigation of Cannabless and Victor Ngo was joined by the Drug Enforcement Administration, the U.S. Marshal’s Service, and the Oklahoma Highway Patrol. It’s odd for any these four agencies to be involved in what seems like a crusade in a legal state to send an unclear message at the expense of one actor in a universe full of them.
Federal prosecutors in Oklahoma did not charge Ngo until August 2 of this year, well into the presidency of Joe Biden and well into 2021, a year in which there’s arguably been more enthusiasm and momentum than ever before in the United States for comprehensive federal cannabis reform. Attorneys general are independent of presidential administrations, and that independence is crucial, as we’ve learned now from too many presidents. But AGs are appointed by presidential administrations and confirmed by elected members of Congress. The attorney general of the United States sets the tone for what federal prosecutors choose to make a priority in any state, and Ngo’s prosecution sets an ugly tone.
The eight-month period of transactions targeted by investigators and prosecutors in Ngo’s case falls squarely within the term of former Trump Attorney General William Barr, who according to one brave federal whistleblower, had a “personal dislike of the marijuana industry” and ordered “politically motivated” investigations of cannabis-industry mergers. This occurred despite promises Barr made during Senate confirmation hearings that he wouldn’t use the Justice Department to unfairly hunt state-legal cannabis businesses.
Victor Ngo felt compelled to lie to JPMorgan for the same reason that so many other cannabis operators feel compelled to not be entirely truthful with their banks. Plenty of cannabis operators in Oklahoma don’t even know better and just open small-business accounts oblivious to what could happen. Fortunately for them, all that happens is their accounts get suddenly closed, and they don’t face decades in prison.
Select lawmakers in Congress from legal states have tried and failed since 2013 to remedy this by granting banks greater permission to do business with cannabis. Congress could today pass the SAFE Banking Act without taking any other action on cannabis reform and prevent future Ngo prosecutions. There are technical reasons for why even the SAFE Banking Act may not have saved Ngo. But the point is that if Congress was where most Americans are on cannabis right now, the prosecution of Victor Ngo likely never would have happened.
The dissonance between where federal law enforcers have placed their priorities in Ngo’s case and shifting public attitudes toward cannabis in Oklahoma and now three-dozen other states is perplexing to say the least.
Federal prosecutors would likely argue that Ngo’s prosecution is about the fact that he lied to a bank and not the fact that he operated state-legal cannabis businesses.
Yet it’s the U.S. Attorney’s Office for the Western District of Oklahoma that loudly broadcast the case’s ties to cannabis in its press release and listed the Drug Enforcement Administration as a lead agency in the investigation.
The United States government believes that Victor Ngo committed a felony act so egregious to the public interest that it justifies as many as 30 years in prison and $2.3 million in forfeited earnings and fines.
But I can still drive to any Cannabless location in Oklahoma today, legally purchase cannabis, and even get 20% off as a first-time patient, because I’ve never been to a Cannabless location before. I prefer the gritty, working-class dispensaries with one location that would fit naturally into a Tom Waits song.
Select coverage of Oklahoma’s new ‘cannabis czar’
Go on vacation, Dr. Williams. God forbid, smoke a quality pre-roll of cannabis made in the great state of Oklahoma and attempt to be less intense. I, too, am often haunted by not achieving what I set out to achieve in my career. I have lots of plastic journalism trophies, and none of them will ever be enough.
Then I recall one of my favorite comedians of all time, Bill Hicks.
Further coverage of Kelly’s (sorry, “Dr. Williams’s”) abrupt departure:
“Stitt appoints leading SQ 788 critic to head Oklahoma Medical Marijuana Authority” The Lost Ogle
“Medical marijuana authority gets its fourth director in three years” Tulsa World
“Stitt announces new medical marijuana director, Oklahoma's fourth in three years” The Oklahoman
“New Oklahoma medical marijuana administrator says op-ed opposing measure that legalized it was about question language, not pot stance” Yahoo News
“Concerns about Oklahoma Medical Marijuana Authority oversight renewed with new director's appointment” Tulsa World
“‘It’s never been anti-medical marijuana. Ever.’ New OMMA executive director says she’s not anti-marijuana after 2018 opinion piece resurfaces” KFOR
“Oklahoma names former oil lobbyist to medical cannabis regulatory agency” Ganjapreneur
“Oklahoma taps new director to oversee thriving medical cannabis market” Marijuana Business Daily (The better, bolder alt-weekly headline: “OK recruits another weed hater to run its weed circus”)
“New director appointed to lead Oklahoma Medical Marijuana Authority” Cannabis Business Times
“Governor Stitt takes action to address challenges caused by growing marijuana industry” Press release from Kevin Stitt's office
More from Oklahoma and beyond
In a new editorial, the Tulsa World says that it’s time for Oklahoma state lawmakers to accept the fact that legal cannabis is here to stay: “We had our own qualms before the vote, but the measure passed by a substantial margin, and it’s now state government’s duty to live with the results. To do anything else would be breaking faith with the voters of Oklahoma.”
The former legal secretary of a prominent Oklahoma cannabis law firm, Jones Brown, is now suing her past employer alleging that she was used to stand in as a lawful state resident on behalf of outside applicants for cannabis-business licenses. Competing Tulsa weed lawyer Ron Durbin wasted no time reporting the lawsuit to Instagram. Oklahoma cannabis operators are struggling to stay afloat. but Oklahoma’s weed lawyers — billing by the hour — seem to be doing just fine. A friend called me tonight and asked that I go easy on this particular subject. Love you, homie, but fuck that. No one would trust me if I did that. Perception is everything. The legal secretary, Kathleen Windler, alleges that the aforementioned conduct from Jones Brown led to her facing felony criminal charges in a separate case. According to her civil suit against Jones Brown: “[Windler] owned none of the hundreds of businesses whose licenses were sought and obtained by the defendants legal handiwork. Plaintiff exercised no control over any businesses; plaintiff received no profits of the businesses; plaintiff did not interact with any day-to-day operations of the businesses; and plaintiff had no access to any bank accounts, assets, or liabilities of the businesses.”
There’s more news from around Oklahoma’s melodramatic cannabis legal community. Noisy Tulsa weed lawyer Ron Durbin mysteriously missed a court hearing in his ongoing legal challenge to Oklahoma’s plan for tracking every cannabis plant seed to sale. The state’s contractor for the program, Metrc, asked that the case be moved from Okmulgee to Oklahoma City. A judge agreed to the request with Durbin nowhere to be seen.
In related news, Metrc’s contracts for cannabis tracking in three other states have been renewed: Alaska, Michigan, and Nevada.
Meanwhile, the Oklahoma Bureau of Narcotics is hiring a criminal intelligence analyst for its marijuana enforcement division. Someone from Oklahoma cannabis should pursue the job and teach the agency how to use its databases to avoid issuing search warrants against perfectly legal cannabis grows.
The small, downtown Tulsa location of the Eufloria Dispensary inside the long-standing Gypsy Coffee House (I’ve been going there to write for many years) suffered a “brutal” robbery back in January. Eight months later, police now believe they have solved it and connected one suspect to four other dispensary robberies.
Oklahoma is inching closer to generating more taxes from cannabis than cigarettes.
There’s been a burst of new stories from national news outlets and Web sites in recent weeks that variously called Oklahoma cannabis the “wild west” or compared it to a gold rush:
“While Oklahoma was the 30th state to legalize medical cannabis in 2018, it now has one of the largest programs in the country. And it’s still growing.” Cannabis Business Times
Oklahoma is the new ‘Wild West of weed’ -- and Colorado marijuana entrepreneurs are helping fuel the green rush Denver Post
“Given the volume of licenses already issued to cannabis entrepreneurs, you would think that a moratorium would happen. On the contrary, Oklahoma believes that more is more.” MarijuanaDoctors.com (This particular piece is loaded with inaccuracies.)
High Times writes that an important strategy for cannabis businesses to avoid having their social media accounts suspended or shuttered is to treat themselves more like “a lifestyle brand, using their channels to start the conversation with followers rather than generate sales.” I wrote a freelance piece earlier in August about this and other techniques for communicating a cannabis brand online while lessening your reliance on social media. (Sponsor a race team or kickball league! Be authentic! Be clever!)
Politico has extensively covered cannabis and cannabis policy in recent years, including a major profile of Oklahoma published late last year. In a new story, two Politico reporters say the nation’s patchwork of cannabis laws is making the cultivation of cannabis “one of the most energy-intensive crops in the nation.” The issue, they say, “is going essentially unnoticed by climate hawks on Capitol Hill.”
Two legal scholars argue in a provocative new paper that Congress should at least temporarily continue to prohibit the sale of cannabis between states after federal legalization. The reason is it could enable smaller cannabis businesses and those owned by people of color more time to prepare for rigorous new competition from a national market. Sudden national competition “could spawn a race to the bottom among states as they compete.” On the other hand, as The Fresh Toast points out in response to the paper, interstate cannabis commerce could be a boon for states like Oklahoma: “Areas that have lower costs of labor and electricity will see an uptick in job creation and business volume, whereas areas with higher labor costs and fixed costs will see growing and harvesting jobs to cheaper states.”
A reality show about cannabis in Oklahoma called “Cowboys of Cannabis” could be coming to cable and streaming services soon. A production crew has already shot over 100 hours of raw footage. Said one media executive who was involved: “So much of what we have captured seems larger-than-life, but it's all real and it's happening right now throughout Oklahoma.”
A first-of-its-kind look specifically at the pre-roll industry involved the surveying of more 130 pre-roll companies. Based on their answers, researchers estimated $1.1 billion in U.S. pre-roll sales during 2020 alone, a jump of more than $400 million over the previous year. Demand for infused pre-rolls has surged since 2018 and now makes up almost 32 percent of the pre-roll market.
The cannabis market in neighboring Missouri is beginning to experience what’s already been underway here in Oklahoma for some time. Prices for cannabis there are beginning to drop as new businesses enter the Missouri market. The Show Me State still has only a fraction of the number of cannabis operators as Oklahoma.
The cannabis industry already had an unfortunate general visual aesthetic. Cannabis brands often look like they were conceived hastily by a roadie for Insane Clown Posse. While that’s changing with time, cannabis is still being dragged kicking and screaming into the future. Fast Company reports that where some mainstream cannabis retailers at first adopted the sleekness of Apple stores, they’re now devolving into something that better resembles Jimmy Buffett’s Margaritaville.
Unlike Oklahoma, New Jersey is an “opt-in” state where local governments can decide to ban cannabis businesses entirely. More than 70 percent of the municipalities in New Jersey have opted out of allowing cannabis businesses there.
The fastest-growing segment of cannabis consumers is women from Generation Z.
The lottery system in Illinois for new cannabis-business licenses is a mess of lawsuits and frustration.
Legal cannabis businesses are suing to stop illegal cannabis businesses in San Diego. Attorneys for the legal operators believe their suit is a first of its kind and that they are setting “a precedent other private operators can use to combat the black market.”
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