Posted by Jeff Gard on February 2, 2012
Dear Friends,
As you know, Mr. Dan Hartman was removed from his position as Director of the Medical Marijuana Enforcement Division due primarily to the efforts of our Attorney General, John Suthers. On the last day as Director, I met with Mr. Hartman to answer many of the questions posed by our clients and colleagues:
1. Q: If a MMB that was locally banned (i.e., Fort Collins, Longmont, etc.) withdraws its application and then moves to a favorable jurisdiction, when can they begin operation?
A: The local authority must approve the business, then MMED will move forward with state approval. The MMB will receive preference in the processing of the application.
2. Q: Can a MMC sell to a primary caregiver?
A: Only if the primary caregiver’s patient is homebound and the appropriate home delivery request has been approved by MMED.
3. Q: Can a MMC sell to a patient who has valid paperwork on file with the MMC?
A: No. A valid MMJ registry card must be presented every time, including patients that have assigned the MMC as their primary center.
4. Q: Can MMCs trade an equal amount of MMJ with another MMC without implicating the 70/30 rule?
A: No. There are no “trades” permitted. Payment from one MMC to the other MMC is required and there must be paperwork evidencing the transaction.
5. Q: Can a MMC sell kief hash and/or bubble hash wholesale to other MMCs without implicating 70/30?
A: The answer was not clear. Mr. Hartman acknowledged that hash does not count against allowable inventory and is treated like other infused products. However, he stated that it counts against 70/30. At this point, Mr. Hartman advised that hash is a problematic issue and will be addressed in future rule making. Stay tuned.
6. Q: Does a homebound patient have to assign the MMC as their primary center in order to receive a home delivery?
A: No. See #2 above. The sale is to the patients primary caregiver, who will deliver the medicine pursuant to authorization by MMED. This means that any homebound patient must assign a primary caregiver.
7. Q: Does hash count against allowable inventory?
A: No. See #5 above.
8. Q: Does the sale of trim count against 70/30?
A: This is complicated. If the trim is provided to a MIP and the MIP uses the trim to create an infused product, which product is then provided back the MMC only and not sold to any other MMCs, then it does not count against 70/30. However, if the trim is used by the MIP and the MIP sells the infused products to any MMC other than the MMC that provided to trim, it counts against the selling MMC’s 70/30.
9. Q: Can employees of a MMJ Vendor (i.e., has a MMED Vendor license) be under 21?
A: Not if the employee will be in a restricted access area for any reason.
10. Q: Will the 7/1/12 moratorium be extended?
A: Not in Mr. Hartman’s opinion. Mr. Hartman stated that MMED will not request it and the legislature “is in no mood to hear anything else about MMJ” at this point.
Posted by Jeff Gard on January 18, 2012
The Boulder City Attorney, Mr. Thomas Carr, recently requested and was granted a moratorium regarding medical marijuana businesses in the City of Boulder. The moratorium is expected to be extended for 6 months. I suspect this is a prelude to a request from Mr. Carr that the City Council enact a “cap” on the number of medical marijuana businesses in the City.
This is highly problematic. The moratorium affects existing businesses, not just new businesses. Under the current ordinance, the City requires a new license in the event the business wants to, or needs to, change locations. A new license is also required in order to transfer the business to a new owner. By contrast, the State of Colorado amends the existing license for both scenerios and does not require a new license.
In view of the recent Federal threat of criminal prosecution and civil forfeiture for landlords and medical marijuana businesses located within 1000 feet of a school, this is quite terrifying. For instance, if a medical marijuana business is within 1000 feet of a school (CU?, a day care?), the Feds require the business to move within 45 days. The City of Boulder moratorium makes this impossible.
Finally, the City’s actions demonstrate veiled hostility and fear toward the medical marijuana industry. The moratorium is likely only a first step. It is incumbent on all City of Boulder medical marijuana businesses to band together and oppose any further interference with medical marijuana businesses, which are the most regulated businesses in the history of the State of Colorado. City officials need to be reminded that they are representatives of the citizens of Boulder and personal political agendas have no place in representative government. If they are unwilling to support the industry, they need to be replaced with people who support local and state law regarding medical marijuana. Please attend the 2/7/12, 7:00 p.m., public hearing and let the Council know that further regulation, including the proposed moratorium, will not be tolerated.
Filed under marijuana · Tagged with City of Boulder, colorado, DEA, dispensary, federal, holder, landlord, medical marijuana, moratorium, obama, Polis, suthers
Posted by Jeff Gard on October 5, 2011
As you all know, the federal government continues to struggle with state legalization of medical marijuana. In June, the U.S. Attorney’s Office issued a 2nd memorandum regarding medical marijuana and the potential prosecution of medical marijuana businesses. However, on the other side of the federal government, the I.R.S. is permitting medical marijuana businesses to file tax returns and receive various deductions in connection with the cultivation and sale of medical marijuana. We are not tax attorneys, so please discuss such issues directly with a qualified and knowledgeable accountant.
The ATF:
On 9/21/11, the Bureau of Alcohol, Tobacco and Firearms (ATF) got into the act. The ATF sent an open letter to all federal firearms dealers informing them that they could not sell a firearm to a person known to use medical marijuana. Federal law, 18 U.S.C. Sec. 922(g)(3) prohibits an unlawful user of or addicted to any controlled substance, including marijuana. The ATF states that this includes medical marijuana patients. According to the ATF, this law prohibits a firearms dealer from selling a firearm to any person whom the dealer has “reasonable cause to believe that such person is an unlawful user of or addicted to a controlled substance, i.e., medical marijuana.
Currently, the firearms dealer does not have access to the Colorado medical marijuana patient database, nor does the ATF. There are only two ways that a firearms dealer can learn of a person’s mmj patient status: (1) the patient tells the dealer for whatever reason about his mmj status; or (2) the person checks “yes” to Question 11(e) on ATF Form 4473, which is form used when purchasing a firearm. Question 11(e) asks if the purchaser is an unlawful user or is addicted to a controlled substance. Again, marijuana, medical or otherwise, is federally classified as a controlled substance.
A copy of the 9/21/11 Open Letter to All Federal Firearms Licensees can be viewed at: http://www.atf.gov/press/releases/2011/09/092611-atf-open-letter-to-all-ffls-marijuana-for-medicinal-purposes.pdf
California and federal prosecution:
As many of you know, the federal government continues to threaten MMJ businesses through the US Attorney’s Office. It appears that, for now, the focus is California. You can read more about this at: http://latimesblogs.latimes.com/lanow/2011/10/feds-cracking-down-on-california-medical-marijuana-dispensaries.html.
This also has been the case historically. One of the reasons that California is targeted is the lack of substantive regulation by the state. Also, many people in law enforcement believe that California dispensaries are selling marijuana obtained illegally from growers in Humboldt, Mendocino, Mexico, etc.
With regard to Colorado, I recently met with Medical Marijuana Enforcement Division director, Mr. Dan Hartman, who advises that he is routinely in contact with the DEA here in Colorado. Accordingly, to Mr. Hartman there has been no movement toward targeting MMBs here. Of course, that could change at any time.
In any event, it is never good news that federal law enforcement is targeting MMBs in California or anywhere else. If you are concerned about the potential for federal prosecution, this is not a business you should continue to be associated with. Currently, there is no protection from federal criminal prosecution under current law. While Colorado is tightly regulated, that does not currently provide any defense to federal criminal prosecution. It could be argued that the fact that the Colorado MMBs are owned by residents, grow all their own medicine under state supervision and sell only to Colorado patients may afford an exception to Gonzales v. Raich, 545 U.S. 1 (2005), 352 F.3d 1222, which is the California case decided by the U.S. Supreme Court which confirmed the power of the federal government to prosecute medical marijuana actors based upon the Commerce Clause. See,http://www.law.cornell.edu/supct/html/03-1454.ZS.html. However, this potential exception to Gonzales v. Raich has never been attempted and would have to be litigated in the context of the criminal prosecution of a Colorado medical marijuana patient, caregiver or business. A frightening thought indeed. While I am prepared to assert such arguments and am admitted in the federal court, I hope it never comes to that.
Finally, as those of you who have met with or spoken with me, I have always maintained and advised that federal prosecution is a real and substantial risk for anyone involved in the medical marijuana business. Simply put, no one should take any risk for which they are not prepared to accept the ultimate, potential risk, in this case – federal criminal prosecution. If such federal criminal prosecution is successful, it could mean a lengthy prison sentence, civil forfeiture of property or both.
Posted by Jeff Gard on June 21, 2011
Yesterday I met with the Director of the Medical Marijuana Enforcement Division to answer the numerous questions I receive from the businesses we represent. The issues and the answers are set forth below:
1. Transfer of “banned” businesses to new jurisdictions:
Will there be continued operation of the transferred business based on prior 7/1/10 compliance? Yes, as long as there is local approval. Mr. Hartman recommends that the “banned business” request withdrawal of the application, along with an explanation of the banned/transfer reason. If the application is not withdrawn, it must be denied. Then, once the transfer and local approval are complete, you can request that the withdrawal of the application be rescinded. Once the rescinded application is reinstated, you may resume operation.
Also, if the banned/tranferred business is sold before the transfer is complete, the business will not be able to operate. Mr. Hartman’s reasoning is that this provision is designed to help people who suffered local ban, not speculators who seek to profit from this unfortunate situation.
Further, both the MMC/MIP and OPC must be transferred, not the OPC only.
2. Security system and other ongoing compliance issues:
Are there approved providers? No, and there will not be any. Mr. Hartman states that the specifications are published and must be followed. As long as the specifications are followed, the provider of the service is not relevant. He did state that ADT appears to be ready to supply MMC/MIP/OPC security needs.
What if the system is not in place yet? This will be ok, as long was you have something in place and are under contract by 7/1/11to meet the specifications.
What if the system is not adequate, will there be a chance to correct it? Yes.
Does the security system have to have its own room? No, as long as the DVR(s) is locked in a secure box, bolted into the wall, floor, etc.
3. Point of Sale system:
Are there approved providers? No, but various companies are prepared for compliance, (MJ Freeway is one example). Mr. Hartman advised that “a big chief tablet” is ok, as long as you are tracking the necessary information. What the state requires will be published shortly and I will send out an email link to this information.
4. Employees deemed unacceptable by MMED:
Will there be an opportunity to terminate the employee if deemed unacceptable? Yes.
5. Ongoing construction, permits, etc.:
Does all construction work need to be completed by 7/1/11? No. You must be making a concerted effort to complete the work and permits should be requested by 7/1/11. However, if the local licensing authorities require the work to be completed and deny you for this reason, the state will not interfere and will enforce the denial.
6. License fees:
What are the licensing fees? These are not set, but MMCs will be less than the application fee, OPCs and MIPs will be more (perhaps even double). The license will be good for one year and will begin when the state notifies you that the fee is due and payable.
7. Key employees:
What is a key employee versus support? The answer is “case by case” and the answer will turn on how the employee is used, whether there is any contract with employee in place (key), and the businesses decision to classify someone as an “independent contractor” will have little or no bearing.
Also, payment of growers “by the pound” will be under serious scrutiny. If that is the arrangement, Mr. Hartman advises that this arrangement makes the grower an owner and the business will be required to revise its ownership structure, corporate documents, etc., accordingly. Mr. Hartman advises that you should pay the grower a salary and that bonuses are ok.
8. Business under denial/appeal, i.e., City of Boulder:
What is the state going to do about businesses locally denied (not banned), where an appeal is pending and the local licensing authority permits continued operation? This is a tricky one. The state will honor the continued operation order until such time as the business prevails or appeals to the district court. An order from the district court permitting continued operation will be required. The license will be issued by the state as a “provisional license” and the state will await final outcome of the case.
Further, Mr. Hartman advised that he will be speaking with the City of Boulder to discuss this matter (and others). Stay tuned, as I expect this policy to change (for better or worse) once the situation between the City and the State is further clarified.
9. Transactions of businesses:
Do all of the various sales, mergers and tranfers of MMBs have to be completed by 7/1/11? No. However, be reminded that any transfer requires (1) local approval; (2) state approval, including a meeting with the parties with MMED before the sale/merger/transfer occurs. Simply put, you need MMED’s blessing before the transaction can occur.
10, Sales below cost/free:
Does the “sales below cost or for free” provisions of HB1043 preclude the incentive programs, i.e. “buy one get one, free pre-rolled,” etc.? No, and there will be new rules developed in connection with the industry to help clarify this situation.
However, Mr. Hartman advised that MMED will take a very dim view of businesses “flooding” the market with cheap meds to drive out other businesses. Beware.
11. Independent contractors, i.e., trimmers, growers, etc.
What do independent contractors, vendors, etc., need to file with MMED? Everyone needs some sort of license to handle meds. If you are an employee, the employee application needs to be completed. If you are a vendor, the vendor application:
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251721405112&ssbinary=true
If you are an independent contractor, i.e,, trimmer, etc., you need to complete an occupational license application. It is unclear what this means. If you fall into this category, we can schedule a meeting with MMED to discuss your situation.
Again, the relationship between the individual and the MMB will be viewed by its substance, not what you call it. Be careful.
12. Contracts between MMC and MIP:
Is there an approved contract, recommended language or necessary inclusions for the contracts between MMCs and MIPs? No. The contract should deal with the amount paid for the trim, the weights to be delivered, the parties, etc. Also, be advised that the parties cannot pay “in product.”
13. Inventory and MIP sales:
Does the trim, etc., sold to MIPs count against allowable inventory, 70/30? Yes and no. If the MMC sells trim to the MIP, i.e., 10 lbs, and the MIP makes the infused product and provides all of the infused product to the MMC, then no. However, if the 10 lbs. sold to the MIP is then used to make infused products sold to other MMCs, even if 1/2 of the infused product goes back to the selling MMC, then all 10 lbs. counts against the selling MMCs 70/30 inventory numbers. Be aware that this is somewhat different from prior information provided by MMED.
14. MIP issues, misc.:
Does the use of alcohol in infused products require a liquor license required? Not as far as MMED is concerned. However, Mr. Hartman advised that the Liquor board may have a very different view and a big problem with this. I suggest a candid discussion with the liquor board be had before proceeding further with alcohol infused product manufacturing.
Does the liquid weight versus MMJ weight count against an MMC’s allowable inventory? This was not a clear answer. In general, no. However, if the MIP product is clearly labled “2 ounces, 1 gram, etc. MMJ in each product,” Mr. Hartman advises that he would have no choice but to count it against allowable inventory.
What about MIPs in jurisdictions with no MIP approval process, i.e., Fort Collins? If there is no local approval, there will be no state approval. Sorry to all the Fort Collins’ MIPs.
15. Expanded plant and ounce recommendations:
Is a MMC ok to honor the recommendation and incorporate patient center assignments of this variety into its allowable inventory? Yes.
Does the MMC have any duty to investigate the propriety of the recommendation? No. However, Mr. Hartman advises that the expanded plant recommendations will be under great scrutiny by the Department of Health and that doctor recommendations patterns are likely to be tracked. In these cases, the doctors will be required to medically justify the recommendations. Be advised that this is going to be a big deal
If patient designates “self and MMC” can both the patient and MMC grow 6 plants? This answer was not clear. In general, yes, but it appears that this issue has not been considered by MMED and is likely to see revision in the near future.
16. Sales Taxes:
What is the form of monthly reporting to MMED? This will be handled by the sales tax folks, not the MMCs/MIPs. However, monthly, not quarterly payments are required.
17. Other:
Does a scale need to be attached and incorporated into the point of sale system? No.
Can someone own a % of both a MMC and a doctor referral business even if no $ is exchanged between MMC and the doctor referral business? No. Mr. Hartman believes this is not appropriate. I am not sure if his opinion will be legally supported, since the only prohibition is payments from MMCs to doctors/doctor referral businesses.
Can investors receive a % of the profit? Yes, but there are then deemed owners, not investors and must follow all of the MMC/MIP ownership rules (residency, felony rules, and local/state approval of their ownership).
Can existing MMC’s apply for new retail locations in 2011? No. New OPC locations in 2011? No.
How is the MMC going to verify patient center assignment? MMED and the Department of Health are working on this. For now, keep track yourself, including accurate records
What will MMED do about MMCs/MIPs currently in litigation between partners for pending licensees? Mr. Hartman will issue the license provided both parties are license eligible. So, if the litigation is between owners with felonies and owners without felonies, the license will be denied. The same is true for residents and non-residents. Mr. Hartman wants notice of the lawsuit and periodic status reports. He does not want copies of pleadings.
Filed under marijuana · Tagged with caregiver, cultivation, dan hartman, department of revenue, dispensary, grow, infused products, licensing, Matt Cook, medical marijuana, medical marijuana center, mmed, patient
