Holiday Inn targets Summit County dispensary in first marijuana RICO case
February 20, 2015
Nearly three months after two heartland states sued Colorado in federal court, a Frisco dispensary is now at the epicenter of the first-ever racketeering lawsuit filed against a marijuana business since the advent of legal weed.
On Thursday, the Washington, D.C.-based advocacy group Safe Streets Alliance named Medical Marijuana of the Rockies as one of 12 defendants in a federal Racketeer Influenced and Corrupt Organizations Act case. RICO, as it's known, is designed to go after organized crime.
Safe Streets sponsored the lawsuit in partnership with co-plaintiff New Vision Hotels, the Colorado Springs company that owns the Frisco Holiday Inn.
"This is really the only course of action left for the hotel," said Brian Barnes, the plaintiffs' spokesman and one of several attorneys working the case. "They weren't sure of other options available to them, and the reality is that when people talk about marijuana being legal in Colorado, it is still illegal in the United States and selling marijuana is against the law. They have a legal right to not be injured by that activity."
“They’re (plaintiffs) accusing the state of doing something that would clearly be illegal if a crime family were doing it.”John HudakBrookings Institution
In late January, members of the New Vision management team asked the Frisco Town Council to deny the license for a new dispensary on Dillon Dam Road, located in a nearly vacant building 75 yards from the hotel entrance. Hotel representatives argued that a prospective marijuana dispensary has already harmed business, citing cancellations from several youth ski teams after the town council debates made national news.
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Frisco is currently home to two marijuana dispensaries, both located less than a mile from the Holiday Inn.
Following nearly two weeks of impassioned pleas, the council sided with Medical Marijuana of the Rockies and owner Jerry Olson, who planned to open a combination retail/medical dispensary and cultivation site under the name Summit Marijuana in a 5,750-square-foot space, according to documents included with the dispensary application.
The Frisco case was the second RICO lawsuit filed on Thursday by Safe Streets, a nonprofit that opposes marijuana legalization. The other case involves the owners of a Pueblo County horse farm, who say the construction of a nearby recreational marijuana cultivation site will interfere with their plans for a new home and mar the natural landscape, according to an article from The Cannabist. Colorado Gov. John Hickenlooper, director of the Colorado Marijuana Enforcement Division Lewis Koski and 15 others were named in the lawsuit, which claims state officials should be charged with racketeering for collecting marijuana taxes.
"From our property you can see the Green Horn Valley, Pikes Peak to the north and the Spanish Peaks to the south," farm co-owner Hope Reilly wrote in a statement released Thursday. "We bought our land in part for those spectacular views, but now they are marred by the sight of an illegal drug conspiracy at our doorstep."
THE DEBATE CONTINUES
The RICO lawsuits, both filed with the U.S. District Court in Denver, mark the first time anti-marijuana activists have brought racketeering into the legalization debate. The lawsuits also mark the first time residents in a state with legal retail or medical marijuana have petitioned the federal government to strike down pot laws, according The Associated Press.
In December, Nebraska and Oklahoma brought a lawsuit to the U.S. Supreme Court, saying Colorado's marijuana industry is creating a rift between state and federal policies.
Following the RICO announcements, pro-marijuana advocates took to the steps of the Colorado state Capitol to oppose the lawsuits, waving signs that read "Regulation Works!"
Yet in Frisco, at the heart of the Summit County case, Olson wasn't aware of the lawsuit until attorneys and the media began calling him on Thursday.
"I can't answer many questions because I don't even know what's happening yet," said Olson, who added that his attorneys are currently reviewing the lawsuit. "I have attorneys calling me and asking if I need an attorney, asking if they can work for free. I just don't have any answers right now."
During the initial town council debates, New Vision's attorney at the time, Dave Helmer, warned the council and Olson of potential litigation. The dispensary owner believes he has been transparent since opening his first Frisco location in 2009. In the lawsuit, he is named with nearly a dozen other defendants, including Bank of the West.
"They made threats, but I had no idea what to look for," said Olson, who claims he has not been officially served lawsuit documents. "I don't think I'm doing anything wrong. I'm the sole owner of Medical Marijuana of the Rockies. I'm not trying to hide anything, I'm not trying to build walls, but there is now a lawsuit against my company."
Olson also questioned why New Vision and Safe Streets are targeting his dispensary, particularly when hotel officials were opposed to national media attention.
"Everybody in the world will know where Frisco, Colorado, is now," Olson said. "I don't think this is negative, personally, but this is my only question: Why is somebody who has a windfall presented to them, a literal windfall, going to complain to this point? That to me is suspicious. Who's really behind this?"
'A CREATIVE ARGUMENT'
Olson and the remaining RICO defendants, including state officials, have 21 days to respond to the lawsuit. Sean McAllister, a Denver-based attorney who has represented medical and retail dispensaries since 2007, believes the plaintiffs are out of step with the current direction of U.S. drug policy.
"Clearly these groups are another visage of the Prohibition Era," said McAllister, who founded the marijuana education group Sensible Colorado in 2004 and is not representing either of the RICO defendants. "They're trying to turn back time to when marijuana wasn't regulated, when tax revenues didn't flow to the state, when people weren't showing a legal ID to buy legal marijuana. They want to turn back time to when marijuana was in the hands of drug cartels."
For the plaintiffs, racketeering charges cut to the core of the drug cartel argument. Colorado and its politicians benefited from the $44 million in tax revenue generated in 2014 by legal marijuana, much as organized crime families benefit from illegal drug and weapons sales.
"It is a creative argument," says John Hudak, a Brookings Institution Fellow on governance and author of a recent paper outlining the challenges the marijuana industry will tackle in 2015.
"On the face, this isn't something you necessarily laugh at. They're accusing the state of doing something that would clearly be illegal if a crime family were doing it, setting up a system and taking a percentage of money from operations."
But the road to a decision won't be short or easy. Hudak believes the RICO suit is politically and legally strategic thanks to the involvement of Safe Streets. He says a federal judge will have to weigh the perception of harm against proof of actual harm, the crux of a successful RICO case, and even if a ruling is made against Colorado, it may not dismantle the marijuana industry as a whole.
Hudak also warns that the ensuing litigation will likely last for years, with countersuits and appeals on both sides of the issue.
"They (the plaintiffs) probably don't appreciate the messiness of this lawsuit and the reasoning that may go into a decision," Hudak says.
"This becomes a light-switch argument: Either we'll have the switch on and the system will exist in Colorado, or we'll turn it off and everything will go away. But I don't think that's how it will work in the end, and the complexity of the decision making will further complicate that. This will absolutely take years."