Smart but Without Honor

When the story is about the government doing something dirty — smart, yes — but dirty, I put Harry Anslinger’s picture up there.  The lies and the fear which surround cannabis started with him.  I want him to get credit when a new dirty game appears.  We have seen the government attack medical cannabis through a “next tier out” strategy — don’t go after the dispensary, frighten the owner of the building who is renting to the dispensary.  Frighten them, by letter, with asset forfeiture.  When the landlord then decides not to renew the lease for the dispensary, well, problem solved.  Without an honorable fight; without having to explain failed cannabis prohibition.  It is time to stop seventy years of failure.  But I digress; on to the news.
Mark Haile and Michele Hammer, are two Arizona businesspeople who in August, 2010, each loaned $250,000 to Today’s Health Care II (THC), a Colorado-based medical marijuana dispensary. The agreements specifically stated that THC was using the loan proceeds for “a retail medical marijuana sales and grow center,” but neither Haile nor Hammer thought that would ever be a problem. Marijuana is legal in Arizona and Colorado (along with 15 other states and the District of Columbia). As far as Haile and Hammer were concerned, it was a smart business move. In California, for example, medical cannabis is an estimated $1.3 billion industry (Colorado is the nation’s second-largest market). Why not get in on a potentially lucrative enterprise?

But in March 12, 2011, THC defaulted on its loan. According to the original terms, THC had five days to re-pay its debt. If it didn’t, Haile and Hammer were entitled to repayment of the principal loan amount at a default interest rate of 21 percent, plus attorney fees. By March 17, THC still hadn’t paid anything, so Hammer and Haile sued, clearly expecting to win. But they didn’t.

Instead, in his April 17 ruling, Judge Michael McVey, of Maricopa County Superior Court, dismissed the suit, stating that he couldn’t enforce the loan agreement because the money was for an illegal purpose under the U.S. Controlled Substances Act, a federal law. While he recognized his ruling was “harsh,” federal law trumps state law, and THC doesn’t have to repay any part of either loan (although it will have to report the $500,000 as taxable income). Wait — I still have to pay tax on money I don’t have to repay? Is this ancient Rome, or what? Maybe the bizzaro world.

So here is a new sneak attack to add to (1) landlords afraid to lease to mmj uses; (2) lenders unsure if they can collect on the money they loaned in good faith. The government will not discuss what makes sense on the issue of legalization. Instead they hamstring us. How much tax revenue are the greedy tools missing out on do you think?

Though the Colorado case can’t set legal precedent, it does raise interesting questions for people involved in the medical marijuana industry, or those interested in getting involved: banks, individual investors, landlords, suppliers, medical directors, independent contractors and yes, even patients. Our original story is from ABC.

[image: Google images Harry Anslinger]

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Author: DavidB

a heathen, but hopefully not an unenlightened one

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