California is awash in cannabis cash. Some is being used to bribe public officials

Reporting from Sacramento —  Sheriff Jon Lopey was startled when the mysterious stranger offered him $1 million if he would keep deputies away from certain illegal cannabis farms in Siskiyou County.

Lopey called in the FBI, and, later, deliveries of envelopes stuffed with thousands of dollars in cash were recorded by cameras and microphones hidden on the sheriff’s cluttered, wooden desk. Two people were later indicted by a federal grand jury for attempting to bribe the elected sheriff.

“I was surprised and offended that a citizen would believe a law enforcement administrator would compromise his ethics and morals by accepting money,” said Lopey, whose rural county abuts the Oregon border and strictly outlaws outdoor pot farms.

In the more than two years since California voters approved the licensed growing and sale of recreational marijuana, the state has seen a half-dozen government corruption cases as black-market operators try to game the system, through bribery and other means. The cases are tarnishing an already troubled roll-out of the state permitting of pot businesses as provided for when voters approved Proposition 64 in November 2016.

Opponents of the initiative say the cases confirm their campaign arguments that legalization wouldn’t end the black market and the criminal behavior it has unleashed.

“We knew this was going to be an issue.The money is so great that the temptation is always there,” said William Lowe, a leader of the group Americans Against Legalizing Marijuana.

California is awash in cannabis cash from inside and out of the state, partly because pot remains an illegal drug under federal law, so banks won’t accept cash from the businesses. The state’s black market for cannabis was estimated to be worth $3.7 billion last year — more than four times the size of the legal market, according to the firm New Frontier Data.

Proposition 64, approved in 2016, allowed the state to license businesses to grow and sell pot but required the firms to also get approval from the cities and counties, most of which have outlawed pot operations. Experts say that local resistance explains why many of the corruption allegations center on illegal attempts to buy help from city and county officials.

“There is no doubt in my mind that the multi-billion-dollar nature of the marijuana industry is corrupting public officials,” said Lopey, a 41-year veteran of law enforcement who began his full-time career as a California Highway Patrol officer stationed in East Los Angeles.

Proposition 64 also outlawed the transportation of cannabis out of the state, which was an issue in the Siskiyou County indictments against Chi Yang and his sister, Gaosheng Laitinen.

Yang allegedly approached the sheriff in his county office in Yreka in the summer of 2017, and initially suggested the $1 million could go to a foundation headed by Lopey.

At one of the subsequent meetings where Lopey was handed the envelopes of cash, Laitinen allegedly sought assurances about what their payments would buy: “Are we talking about protection from being raided?” she asked the sheriff, according to a DEA agent’s affidavit attached to the criminal charging document.

The pair allegedly paid Lopey $10,500, including four $500 cash bonuses, before they were arrested, according to court records.

That case is just one of several that have involved cannabis sellers and growers allegedly bribing or trying to bribe government officials, or public officials acting illegally to get rich from marijuana.

Last year, Jermaine Wright, then the mayor pro tem of Adelanto, was charged with agreeing to accept a bribe to fast-track a marijuana business. Wright’s trial is scheduled for August. In May, FBI agents served search warrants at the home of Rich Kerr, who was mayor of Adelanto at the time, as well as at City Hall and a marijuana retailer.

Also in May, Humboldt County building inspector Patrick Mctigue was arrested and charged with accepting $100,000 in bribes from marijuana businesses seeking expedited help on county permits, according to the Humboldt County Sheriff’s Office.

Last March, a federal jury reached guilty verdicts to bribery and extortion charges against Michael Kimbrew, who was a field representative to then-Rep. Janice Hahn when he accepted cash from an undercover FBI agent while pledging his “undying support” to protect a marijuana dispensary that the city of Compton was trying to close.

On Tuesday, developer Dorian Gray was held to answer by a judge in a preliminary hearing on charges of offering bribes to then-Oakland City Council President Larry Reid and Assistant City Administrator Greg Minor, according to court records. Gray allegedly offered the councilman cash to help obtain a cannabis dispensary permit, and Reid reported the offer to authorities. Gray is charged with offering Minor, who oversees marijuana permitting for Oakland, a free trip to Spain.

Reid said he was offended by the offer made by Gray in his City Hall office, and reported it to the city administrator’s office.

“He (Gray) said he had an envelope with $10,000 and my name on it in his pocket, and I told him I don’t work that way,” Reid said. “Everybody thinks they can become an instant millionaire by getting a dispensary permit.”

Autumn Paine, an attorney for Gray, said the two city officials offered “wildly different” stories about what occurred.

As for the allegation of bribery against Gray, “He absolutely denies that,” she said.

An attorney for Laitinen declined comment beyond noting that she pleaded “not guilty.” Yang has also denied the charge in court, but his attorney did not return calls for comment.

An attorney for Wright declined comment.

Not all of the recent cases involve elected officials. Los Angeles County Sheriff’s Deputy Marc Antrim pleaded guilty two weeks ago to federal charges stemming from his arrest for robbing a warehouse of a half-ton of marijuana in October.

While some cases filed in the last year are still pending trial, there have been convictions in other corruption cases in recent years.

California was the first state to legalize the sale of marijuana for medical use two decades ago. The former mayor of the city of Cudahy was sentenced to one year in federal prison in 2013 for taking cash bribes in exchange for supporting the opening of a “medical marijuana” store in the city.

The head of the city’s code enforcement division and a city councilman were also convicted of taking part in the corruption scheme.

Law enforcement agencies are currently investigating possible corruption in other Southern California cities, according to Ed Muramoto, a private attorney for medical pot dispensaries that have complained about cities locking them out of competition for permits.

“We have been contacted regarding a good handful of cities and jurisdictions with respect to investigations that law enforcement is engaging in,” Muramoto said.

He declined to identify the cities involved, saying he has been asked by investigators not to talk about pending probes.

Gov. Gavin Newsom, a key supporter of Proposition 64, declined to comment on the numerous bribery cases involving marijuana growers and sellers.

State law gives too much authority to local officials to dictate terms of city licenses, according to Dale Gieringer, director of California NORML, a pro-legalization group that supported Proposition 64.

“Corruption is always worse at the local level because there are so many more local officials and they aren’t under as much scrutiny as those in Sacramento,” he said. State agencies, he said, “have been doing their best to expedite licensing, but too many local players have been getting their hands in the pie.”

The Siskiyou County case provides further evidence that California remains the largest exporter of pot in the nation. Yang allegedly told the sheriff he wanted to ship California-grown cannabis to Missouri.

Sam Clauder can speak from personal experience about being caught up in illegal, interstate activity after succumbing to financial temptation. The former congressional aide and San Bernardino County Democratic Party official pleaded guilty in 2017 to charges in Texas of possessing 130 pounds of cannabis that he was transporting back east from California.

Clauder started out driving pot from Humboldt County to legal medical cannabis dispensaries in Southern California. He turned to illegal transportation out of state after he was fired from a job as an aide to then-Rep. Joe Baca (D-Rialto) over an unrelated criminal case for which he was later found innocent.

Clauder said cannabis growers paid him about $30,000 for every 100 pounds of marijuana he transported back east, and he made the cross-country trip about 45 times before he was arrested in Texas.

“I think it’s a temptation, if you can’t make it legally, to cross a line,” Clauder said. “I went from working for a U.S. Congressman to being homeless and destitute overnight. What was I supposed to do? I just fell into it.”

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