The Other IRS Scandal: Outright War Against Marijuana Dispensaries

May 18, 2013 | By Dylan Charles | Reply

Clarence Walker, AlterNet
Waking Times

“Should the IRS campaign be successful, it will … eliminate tens of thousands of well paying jobs, [and] destroy hundreds of millions of dollars of tax revenue.”

Dispensaries providing marijuana to doctor-approved patients operate in a number of states, but they are under assault by the federal government. SWAT-style raids by the DEA and finger-wagging press conferences by grim-faced federal prosecutors may garner greater attention, but the assault on medical marijuana providers extends to other branches of the government as well, and moves by the Internal Revenue Service (IRS) to eliminate dispensaries’ ability to take standard business deductions are another very painful arrow in the federal quiver.

The IRS employs Section 280E, a 1982 addition to the tax code that was a response to a drug dealer’s successful effort to claim his yacht, weapons purchases, and even illicit bribes as business expenses. Under 280E, individuals involved in the illicit sale of controlled substances — including marijuana, even medical marijuana in states where it is legal — cannot claim standard business expenses on their federal taxes.

“The 280E provision which requires certain businesses to pay taxes on their gross income, as opposed to their net income, is aimed at shutting down illicit drug operations, not state-legal medical marijuana dispensaries,” said Kris Hermes, spokesman for the medical marijuana defense group Americans for Safe Access.” Nonetheless, the Obama Administration is using Section 280E to push these local and state licensed facilities out of business.”

The provision can be used to great effect. Oakland’s Harborside Health Center was hit with a $2 million IRS assessment in 2011 after the tax agency employed Section 280E against. Harborside is fighting that assessment, even as it continues to try to fend off federal prosecutors’ attempts to shut it down by seizing the properties it leases. Similarly, when the feds raided Richard Lee’s Oaksterdam University that same year, it wasn’t just DEA, but also IRS agents who stormed the premises. Lee said it was because of a 280E-related audit.

The attacks on Harborside and Oaksterdam were part of an IRS campaign of aggressive audits using 280E to deny legitimate business expenses, such as rent, payroll, and all other necessary business expenses. These denials result in astronomical back tax bills for the affected dispensaries, threatening their viability — and patients’ access to their medicine.

“Should the IRS campaign be successful; it will throw millions of patients back in to the hands of street dealers; eliminate tens of thousands of well paying jobs, destroy hundreds of millions of dollars of tax revenue; enrich the criminal underground; and endanger the safety of communities in the 17 medical cannabis states,” said Harborside’s Steve DeAngelo as he announced the 280E Reform Project to begin to fight back.

It’s going to be an uphill battle. In the last Congress, Rep. Pete Stark (D-CA) introduced House Bill 1985, the Small Business Tax Equity Act, designed to end the 280E problem for medical marijuana businesses, but it went to the Republican-controlled House Ways and Means Committee, where it was never heard from again.

Still, something needs to happen, said Betty Aldworth, deputy director of the National Cannabis Industry Association, which this year is working with members of Congress to try to find a fix for the 280E problem.

“When Section 280E was created in the 1980s, no one imagined state-legal marijuana providers,” Aldworth told the Chronicle. “Whether or not it is part of a larger effort to curtail the development of regulated models for providing marijuana, which is a model that is clearly preferable to leaving this popular and relatively safe medicine (or adult product) in the underground market, these onerous tax rates have severely hampered the development of the regulated market.”

It’s a brake on the overall economy, Aldworth said.

“Not only has it resulted in stymieing job development, but it also curtails other economic activity such as reinvestment in business and the rippling positive effects of that spending,” she argued. “And in many cases, it has created a tax burden that is simply unbearable: many providers have had to close their doors and lay off their staffs because the tax burden was simply too great.”

Because of this unintended application of 280E, medical marijuana providers are paying overall taxes at a rate two to three times those of other small businesses, Aldworth said.

“It’s important to note that just as they want to apply for licenses, follow regulations, and otherwise participate in the legal business community, state-legal marijuana providers also want to pay their fair share of taxes,” she pointed out. “Most small businesses pay an effective tax rate of between 13% and 27% on net income, according to the Small Business Administration. State-legal marijuana providers pay an average effective tax rate of 65-80%. An industry that can provide thousands of jobs is being held back by these crazy tax rates.”

While the lobbyists look to Congress for a fix, one academic tax law expert thinks he has hit upon a novel solution, but not everyone agrees.

Benjamin Leff, a professor at American University’s Washington College of Law, raised eyebrows at a Harvard University seminar this spring when he presented his report,Tax Planning For Marijuana Dealers, where he suggested that dispensaries get around 280E by registering with the IRS as tax-exempt social welfare organizations, known as 501(c)(3)s or 501(c)(4)s.

The IRS has already ruled that medical marijuana providers can be exempt under 501(c)(3) because its “public policy doctrine” does not allow charitable organizations to have purposes contrary to law, but in the paper, Leff argued that “a state-sanctioned marijuana seller could qualify as tax-exempt under 501(c)(4), since the public policy doctrine only applies to charities, and 501(c)(4) organizations are not charities.”

The organization would have to be operated to improve the social and economic conditions of a neighborhood blighted by crime or poverty, by providing job training, employment opportunities, and improved business conditions for commercial development in the neighborhood, just like many existing community economic development corporations that run businesses.

“When taxes get too high, you can drive compliant dispensaries out of business,” Leff told the Chronicle.

Americans for Safe Access’ Hermes would agree with that, but he’s not so sure about Leff’s idea.

“The concept of medical marijuana dispensaries registering with the federal government as a 501(c)(4) in order to sidestep section 280E is novel and may be hypothetically valid,” he said. “However, the IRS will refuse to grant tax-exempt status to a business that the agency believes is violating federal law. Perhaps, it would be possible for a dispensary to obtain 501(c)(4) status under false pretenses, but such status would not very likely withstand an IRS audit.”

There are better ways, he said.

“A much more realistic and sensible approach — pending a change to the federal classification of marijuana for medical use — is to amend the tax code to exclude state-lawful medical marijuana businesses from Section 280E,” Hermes recommended. “This is the kind of legislation that Congress should pass in order to allow states to implement their own medical marijuana laws, without undue interference by the federal government.”

“I agree with everything he said,” Leff replied. “But it’s not just the Obama administration that is using 280E this way. The Supreme Court has held that there is no exception to the Controlled Substances Act for state-level legal marijuana sales, and since 280E makes references to Schedule I controlled substances, it applies to legal marijuana unless Congress changes the law. I totally agree that Congress should amend 280E to exempt marijuana selling that is legal under state law. Congress could also amend the Controlled Substances Act to remove marijuana from it, which would probably also make sense,” he added.

Whether it is by act of Congress, internal policy shifts, or creative thinking by law school professors, some way has to be found to exempt state-permitted medical marijuana providers from the clutches of 280E and its punitive tax burden aimed at dope dealers, or there may not be any medical marijuana providers.

About the Author

Clarence Walker is a veteran Houston-based journalist who writes on criminal justice issues. Walker can be reached at cwalkerinvestigate@gmail.com.

Medical Cannabis in the Empire State: It's Right and It's Respectable

Sunil Kumar Aggarwal

Associate Member of the New York Academy of Medicine

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Medical Cannabis in the Empire State: It's Right and It's Respectable

Posted: 05/14/2013 3:16 pm

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Chronic Pain , Medical Marijuana , Video , Chronic Pain Management , Medical Cannabis Nyc ,Cannabinoids , Empire State , Endocannabinoid , Marijuana , Medical Ethics , New York Medical Marijuana , New York News

physicians, PAs and NPs the authority to certify appropriate patients with debilitating conditions to use marijuana medicinally is the right thing to do.. Here's why I, as a resident physician, think so.

Some 15 percent of all physicians in the United States make their way to New York -- more than any other state -- to complete residency training, the multi-year mostly hospital-based training doctors complete after graduating medical school. Two years ago, I became one of them in the field of Physical Medicine and Rehabilitation, a medical specialty that focuses on restoring or maximizing function and improving quality of life for patients with pain and chronic or temporary disability. While I am not yet able to function as a fully independent practitioner, I came to New York with a significant amount of clinical experience, published research, and scholarship under my belt on the medical uses of cannabis-marijuana, a result of the dual degree MD/Ph.D. route I took in medical school which gave me the opportunity to design and conduct independent research with human subjects. Given that the state legislature is again considering bills to make New York the 19th state in the country to formally allow medicinal use of cannabis, I'd like to share some of my experiences studying and working within a medical marijuana health system and how I have been received as a medical resident in the Empire State.

First, a bit about my qualifications. "The medical geography of cannabinoid botanicals in Washington State: Access, delivery, and distress" was the title of my PhD dissertation that I wrote as a National Science Foundation Graduate Research Fellow as part of the National Institutes of Health (NIH)-supported Medical Scientist Training Program at the University of Washington. It involved a two-armed study of 176 chronically ill patients with qualifying conditions using cannabis under medical authorization. Subjects enrolled in the study under the protections of federally-issued Certificates of Confidentiality, utilized for the first time for this class of subjects. They collectively had 374 years of state-authorized medical marijuana use. Using medical records review, surveys, interviews, observation, and critical literature review, I documented patient health-related quality of life, varieties of chronic pain syndromes being managed, levels of psychosocial and legal distress, and other indicators, and made comparisons to previously studied populations. Nearly all sections of this research have now been published in peer-reviewed medical journals as a series of 6 articles (with the final one 'in press'), which I am pleased to say have received some recognition in the academic and medical community in the form of citation in journal articles and one textbook. Moreover, the American Academy of Physical Medicine and Rehabilitation has invited me to speak on a panel on cannabis and pain at their 75th anniversary annual assembly this year and the American Academy of Hospice and Palliative Medicine gave me a poster award this year for my poster on cannabinergic pain medicine.

In addition to such research and study, I have worked to change outmoded federal laws which restrict medical use and human research with cannabis. As a medical student delegate, I brought the issue of medical cannabis policy reform to my state medical association and to the American Medical Association (AMA) in the form of a resolution, which led to the commissioning of a report. I served as an external reviewer on that 2009 AMA report which 1) acknowledged the gold-standard (that is, randomized, double-blinded, placebo-controlled) clinical trials evidence base and mechanistic rationale supporting the medical efficacy of cannabis for pain, symptom control in multiple sclerosis, and wasting syndromes and 2) concluded by urging the federal government to review of its classification of marijuana as a Schedule I drug. This is an ill-fitting categorization reserved for drugs/substances which have no currently accepted medical use in treatment in the United States and no acceptable level of safety for use under medical supervision. This position was ultimately adopted by the AMA House of Delegates in November 2009, but there has as yet been no change in the federal classification of marijuana. Hence there is a pressing need for state governments to pick up the slack and protect the health and well-being of their populations by allowing cannabis to be legally used medicinally.

 Stigma is the foremost issue to address within medical and other professional circles which impedes clear thinking and advancement of cannabis therapeutics. Stigma fuels lack of knowledge, maintains illegality, and leads to medical neglect. At the large academic medical center in New York City I train at, I see numerous opportunities in which patients presenting with difficult-to-manage pain syndromes, abnormally increased muscle tone, and movement disorders could be counseled about the potential benefits medicinal use of cannabis, a very safe herbal cannabinoid botanical drug, could afford them. The fact of the matter is that medicinal use of cannabis is a 'hot' and 'cutting edge' area in medicine, in part due to the entirely novel molecular signalling system that was discovered as a result of research conducted to understand how cannabis interacts with the human body. This system is a master-regulator for mood, appetite, memory, muscle tone, pain perception, inflammation, and many other functions, and its discovery is truly Nobel-prize worthy and will lead to many medical breakthroughs. But the power of over seven decades of marijuana prohibition enforcement with tens of millions of arrests and draconian sentences meted out can chill and stifle even the wonders of medical discovery and advancement. But thankfully the chill is beginning to thaw as rationality and compassion slowly prevail over ignorance and prejudice.

Physicians' engagement in health justice advocacy is in line with the AMA's long-standingprinciples of medical ethics which call on physicians to work to change laws which are contrary to the best interests of patients. In the hopes of encouraging others, I wish to demonstrate through my own matching and standing in a well-ranked New York residency program that my interest in medical marijuana which I openly wrote about in my application and discussed in admission interviews was not a liability, but rather an asset. This was especially so given that the program I joined is open to complementary and alternative medicine and had even featured on their list of important articles in the field a review on the role of cannabis in the management of neurological disorders. In my personal statement, which was part of my application to join residency, I wrote:

In my research, I studied patients with marked dysfunction and disability secondary to, for example, multiple sclerosis or major traumas, who used cannabinoid botanicals under medical supervision to ease pain and other symptoms. In getting to know these chronically ill patients in their own home and community environments, I began to see improving quality of life and maintaining as much function as possible as valuable medical care goals in and of themselves which mattered most to the hundreds of patients I studied.

Chronic pain is a pandemic that holds back individuals, families, and often whole communities from their full potential. With inadequate pain management, careers fade away and lives fall apart. Some become and remain non-functional for life while others deteriorate due to medication toxicity, accumulated over years. One area that holds great promise for pain relief is cannabinoid medicine, which has advanced at a dizzying pace in recent years. In the peer-reviewed literature, there are now over 16,000 articles on the chemistry and pharmacology of cannabinoids and cannabinoid botanicals, and over 2,000 on the endogenous cannabinoid, or endocannabinoid, signaling system. The endocannabinoid system has become an important therapeutic target as it has been found to modulate pain, mood, appetite, inflammation, muscle relaxation, and memory, amongst other vital functions. Its presence helps to explain why cannabinoid-based approaches have been shown to relieve pain in virtually every experimental model. For example, the mechanism of analgesia of cannabinoid botanicals is centered at their activity at cannabinoid receptors, the most abundant G-protein coupled receptors in the brain, also expressed on peripheral nociceptors, spinal interneurons, immune cells, and other tissues. Having familiarized myself with this literature through independent study, mentorship, conferencing and journal club attendance, I chose to devote a significant portion of my doctoral research towards helping bridge the current translational gap between research findings and clinical applications of cannabinoid medicines. I have brought these and other research findings to the attention of national medical societies and policymakers.

cannabinoid medicine...could bring advances to rehabilitation, not only in pain management, but also neuroprotection, stroke recovery, and disease modification

I have also been invited for a clinical fellowship in Hospice and Palliative Medicine at the National Institutes of Health (NIH) Clinical Center, indicating that even leading clinicians and researchers at America's largest hospital dedicated to clinical research are comfortable with accepting a fellow who studies patients treated with medical cannabis. Surely New York is ready to move beyond stigma and do what's right and respectable.

Disclaimer: The views expressed here are my own and not those of my employer or any organization I am affiliated with.

 

Follow Sunil Kumar Aggarwal on Twitter: www.twitter.com/humansunil

Legalized marijuana increases competition...

Texas News

Legalized marijuana increases competition for Mexican drug cartels

by Angela Kocherga /11 News

khou.com

Posted on May 16, 2013 at 9:40 AM

Updated Thursday, May 16 at 4:07 PM

EL PASO, Texas -- Mexican drug cartels fighting each other for smuggling routes face increasing competition in the U.S. where legalization in some states has increased the amount of marijuana available.

The drug war in Mexico may have helped U.S. growers gain a foothold in some regions.

“The majority of this weed is coming from California. A little bit of it is coming from Colorado,” said a narcotics officer with the El Paso Police Department who works undercover.

According to the DEA, the amount of marijuana from Mexico seized in the El Paso area declined by nearly half starting in 2009, as drug cartels clashed violently just across the border in Ciudad Juarez.

"Once the fighting started in Mexico, we didn’t have the amount that was coming through in the past," said the narcotics officer.

When the violence disrupted smuggling operations, officers began to see more U.S.  grown pot, especially a variety known as Kush. It’s more potent and higher priced than Mexican marijuana.

On a recent afternoon, officers arrested two people on drug charges in a quiet El Paso neighborhood. The woman is a soldier at Fort Bliss. Officers said her boyfriend was a dealer who sold Kush in the home they shared.

“This guy has a little bit more than the usual street dealer: half a pound of Kush. You’re looking at $3,000 to $4,000,” said an undercover officer on the scene.

A one-pound bundle of Kush known on the streets as a “baby” is worth $8,000.

A medical marijuana patient in Las Cruces, who did not want his name used, said there are still plenty of people who can only afford the less expensive Mexican marijuana he referred to as “gas tank pot” because it’s often compressed and smuggled across the borders hidden in vehicles.

Supporters of legalization predict licensed growers will eliminate the need for users to rely on criminal organizations for their supply of pot.

But others doubt drug cartels will give up without a fight. Marijuana is Mexico's top illegal cash crop.

“I think they’ll compete in an economic battle with American marijuana producers because it doesn’t’ serve their interest to get into a violent clash with Americans on U.S. soil,” said Howard Campbell, a professor at the University of Texas El Paso, and author of Drug War Zone.

“I think the Mexican cartels are rational business organizations.” said Campbell. “Even though they’re very violent in Mexico, what they’ll do with the growing legalization in the U.S. is figure out ways to get their product to the American consumer.”

There are already signs that cartels in Mexico are adapting.

“We’ve had one seizure that they’ve told us that it’s Mexican Kush, not very good quality, but it’s coming," said the undercover narcotics officer.

Experts expect the quality to improve as Mexican growers perfect their crop. The quantity smuggled across the border in the El Paso area is starting to increase now that violence has subsided in Juarez.

Few in law enforcement on the border expect Mexican cartels to get out of the marijuana business because of legalization.

Eighteen States and Washington D.C. have medical marijuana programs. Colorado and Washington State also allow recreational use.

"If all the states legalized it the Mexicans would somehow snake their way into it because they can produce a cheaper product. They can produce more of it,” said the undercover narcotics officer.

State releases draft rules for growing, selling legal marijuana

By KOMO Staff Published: May 16, 2013 at 1:37 PM PDT Last Updated: May 16, 2013 at 5:56 PM PDT

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OLYMPIA, Wash. – The state released preliminary draft rules Thursday on the emerging recreational marijuana market, covering an array of topics ranging from how pot should be grown and tested for quality assurance to what types of security should be required at state-licensed pot businesses.

“These initial rules balance our goal of developing a tightly regulated system with reasonable access for small and large business models to participate within the system,” said state Liquor Control Board Chair Sharon Foster.

“They are based upon hundreds of hours of internal research and deliberation, consultation with multiple industry experts and input from the over 3,000 individuals who attended our forums statewide.”

Voters approved legal marijuana for recreational use with the passage of Initiative 502 in November 2012.

The Liquor Control Board is seeking public comment through June 10 on its initial draft rules before officially initiating the formal draft rule-making process in mid-June.

The initial draft rules include elements that address out-of-state diversion of product, traceability of product from start to sale, youth access and other public and consumer safety concerns.

Some key elements proposed in the initial draft rules:

• The application window would open for 30 days for all license types and extended or re-opened at the Board’s discretion. License applicants would be required to submit a form attesting to their criminal history, provide fingerprints, and allow criminal background checks.

• The Liquor Board would employ a disqualifying criminal history point system for license applicants similar to liquor. An exception would be allowed for two misdemeanor convictions of possession within three years.

• Producer operations would be allowed in both secure indoor grows or greenhouses.

• A robust and comprehensive software system will trace product from start to sale.

• In addition to the $1,000 fine for certain violations established by I-502, the initial draft rules also include a strict tiered system of violation penalties over a three year period (similar to the current standard penalty guidelines for liquor).

• The rules direct strict on-site security surveillance systems similar to Colorado’s current system.

• Advertising would be restricted within 1,000 feet of schools, public parks, transit centers, arcades, and other areas where children are present. The draft rules further restrict advertising as they pertain to children.

• Marijuana product must be behind the counter. No open containers allowed.

• Labeling must display the contents and potency of products that consumers purchase.

• Serving sizes should be equal to 10 mg of THC. Products are limited to 100 mg.

• Uniform testing standards should be made by independent accredited labs.

The state Liquor Board is working with its consultant, BOTEC Analysis Corp., to identify marijuana consumption levels in each county. That data will be used to identify the number of retail stores in each county. Should the number of applicants exceed the number of retail outlets identified for each county, the Liquor Board will hold a lottery to choose entities eligible to apply.

After the June 10 deadline for comment, the Liquor Board will incorporate appropriate changes to the rules before officially filing draft rules later in June. 

AS study eyes marijuana decriminalization, findings called historic by drug policy advocates via: Associated Press

AS study eyes marijuana decriminalization, findings called historic by drug policy advocates

BY FRANK BAJAK, THE ASSOCIATED PRESS MAY 17, 2013

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Colombia's President Juan Manuel Santos, left, holds a copy of a regional study the illicit drug trade presented by OAS chief Jose Miguel Insulza, right, during a joint press conference at the Presidential Palace in Bogota, Colombia, Friday, May 17, 2013. The $2.2 million study which emphasizes drug abuse as primarily a public health issue, makes no firm recommendations, instead suggesting several possible ways to stem the illicit drug trade, which has fueled violent crime and corruption and even destabilized governments. (AP Photo/Fernando Vergara)

LIMA, Peru - An Organization of American States study released Friday is calling for a serious discussion on legalizing marijuana.

Drug policy reform advocates called the report historic, though it made no specific proposals and said there was "no significant support" among the OAS' 35 member states for legalizing cocaine, the illicit drug with the greatest impact on Latin America.

"This is the first time any multilateral organization anywhere has done something like this," said Ethan Nadelmann, executive director of the Drug Policy Alliance.

The $2.2 million study was commissioned in response to calls by some Latin American leaders at last year's Summit of the Americas in Cartagena, Colombia, for a rethinking of the war on drugs. Reform advocates call the more than $20 billion that Washington has spent on counterdrug efforts in Latin America over the past decade a damaging waste of taxpayer money.

The report says "greater flexibility" in dealing with the drug problem "could lead to the possibility of amending domestic legislation or promoting changes to international law."

It urges "assessing existing signals and trends that lean toward the decriminalization or legalization of the production, sale and use of marijuana. Sooner or later decisions in this area will need to be taken."

The study, which was presented by outgoing OAS Secretary-General Jose Miguel Insulza in Bogota, examines four different scenarios for confronting the illicit drug trade, which has fueled violent crime and corruption, especially in drug production and transit countries, including destabilizing governments.

The most controversial scenario would involve countries unilaterally abandoning the fight against drug production and trafficking in their territory in order to reduce violence.

President Otto Perez Molina of Guatemala, a hard-hit cocaine transit country along with neighbouring Honduras, made headlines before the Cartagena summit when he said he was tempted to put his country on such a path.

The report's authors conclude, however, "that there is no absolute link between the drug problem and the insecurity experienced by many citizens in the Americas."

Accompanying Insulza on Friday was Colombian President Juan Manuel Santos, whose country remains the No. 1 source of cocaine consumed by U.S. citizens.

Santos said the report presented "simple, realistic options" for future action in order to "reduce the deaths, the violence that drug trafficking wreaks, the consumption of drugs and the profits of criminals."

The 400-page study emphasizes drug abuse as primarily a public health issue and suggests drug abusers should not be criminally prosecuted but rather treated as ill.

"Decriminalization of drug use needs to be considered as a core element in any public health strategy," it says.

That echoes the approach of the U.S. government. But it diverges from Washington's longstanding opposition to legalizing marijuana despite the fact that voters in two states — Colorado and Washington — have done that.

Nadelmann said the U.S. government has in the past suppressed any multilateral attempt to promote discussion of alternatives to the current drug war.

"The notion that the OAS would actually convene 50 people, including a number of my allies and people associated with reform, and then have this open-ended discussion and then produce a report that was not subject to intensive political review and censorship is actually extraordinary," he said from New York.

Rafael Lemaitre, spokesman for the White House's drug czar, said in response to the report that "any suggestion that nations legalize drugs like heroin, cocaine, marijuana, and methamphetamine runs counter to an evidenced-based, public health approach to drug policy and are not viable alternatives."

The report was released two weeks before Guatemala hosts the OAS General Assembly, where the subject of drugs tops the agenda.

Nadelmann said the report reflects to a large degree of interest in Latin America with voter-driven marijuana legalization in the United States.

Uruguay's president, Jose Mujica, is pushing marijuana legalization and wants to put the government in charge of sales.

Other findings of the study:

—Drug abuse is the 15th direct cause of death in the OAS' northern countries , 40th in Andean countries and 52nd in Central America. That supports arguments that the United States and Canada bear more responsibility for illicit drug demand.

— Retail sales of illicit drugs account for 65 per cent of drug profits, while farmers or producers get 1 per cent

___

Associated Press writers Vivian Sequera in Bogota, Colombia, and Luis Alonso in Washington, D.C., contributed to this report.

Britain's marijuana mafia: Two million users £6bn worth of trade (I smell BS!)

Britain's marijuana mafia: Two million users, £6bn worth of trade and 30,000 deaths. A leading author meets the men (and women) feeding the UK's terrifying addiction

• A total of 750,000 cannabis plants were recovered by the police in 2009-10
• Independent Drug Monitoring Unit says UK consumes 1,000 tons each YEAR
• Three joints a day causes similar damage to 20 cigarettes in the same period

By WENSLEY CLARKSON

PUBLISHED: 15:56 EST, 11 May 2013 | UPDATED: 19:54 EST, 15 May 2013

Cyril lives in a five-bedroom detached home hidden along an 800-yard drive in the middle of the Kent countryside. A grandfather and a businessman, he revels in the life of a country squire. But Cyril is one of the single most dangerous criminals I came across in my journey through the secret underworld of cannabis or hash. An outwardly respectable, middle-class businessman, he is clearly more than capable of having someone killed.

Cyril is a hash ‘financier’, called upon to help fund major gangland deals. ‘My role is to cough up £50k on a Monday and by Friday get £120k back, no questions asked,’ he says. ‘That’s a sweet deal.’

Cyril takes me in his gleaming black Bentley Turbo to a nearby lock-up garage, which he opens with an electronic remote control. The door slides up slowly to reveal three chairs, a table and a line of tools. He takes a hacksaw and runs his fingertip slowly along it.

Inside a 'home grown' hash factory in the suburbs of London where cannabis plants are tended

‘See that?’ he says, picking something from between the tiny teeth. ‘That’s blood.’ He laughs. ‘Violence, or the threat of violence, is part of my business. If the other team isn’t scared of me, then I’m going to have a problem on my hands.’

He picks up a claw hammer and smashes it down on a wooden worktop, leaving a dent the size of a 50p piece. ‘That’s what it does to people’s faces. Leaves them with a lasting reminder of who you are.’

Without a trace of irony, Cyril adds: ‘I don’t want you making out I am some sort of psycho who gets people topped if they upset me. This is the trade I work in. I am a businessman and hash is a lucrative way for me to earn a living. End of story.’

The illicit trade in cannabis stretches from some of the poorest countries on Earth to middle-class homes in the UK. It is now believed to be the biggest source of income for organised crime around the world.

 

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Attracted by staggering profits, an underworld network of gangsters, drug barons, crooked police and even terrorists have made cannabis their contraband of choice. And they have no qualms about using sex, intimidation, bribery and murder to achieve their aims.

Cocaine, heroin, LSD and amphetamines all bring devastating consequences but it is no exaggeration to say that cannabis, and in particular hash, its concentrated resin, is the most deadly of them all. It brings a level of violence, illness and addiction that to most people would seem barely credible.

The cannabis industry dwarfs the trade in heroin and cocaine. According to the Serious Organised Crime Agency, around 270 tons of cannabis are consumed every year in Britain, of which 80 per cent is grown here. In comparison, Soca calculates that 23 tons of heroin and 30 tons of cocaine are imported annually, with street values of £2 billion and £3 billion respectively.

Some estimates are higher still. According to the Independent Drug Monitoring Unit, there are up to 2.7 million cannabis users consuming 1,000 tons worth £5.9 billion. This compares with a million users of cocaine and 300,000 of heroin.

The global cannabis trade is reckoned by the United Nations Office on Drugs and Crime to be worth a staggering £200 billion a year.

Going underground: Perry and Dev run a small time hash smuggling operation from Spain to Essex

I have spent a quarter of a century talking to and investigating figures in the underworld here and abroad and my contacts are unrivalled. The more I have come to know about the hash business the more I have come to realise that the risks are just as deadly as for any Class A drugs.

I’ve been told of hitmen paid to kill rival criminals who dared to encroach into another gang’s territory. I’ve travelled from the lawless Rif mountains in Morocco to darkened warehouses in Spain protected by heavily armed gangsters, feeling just as queasy as if I had been in the company of Colombian cocaine dealers or Turkish heroin smugglers.

Cannabis is far from ‘safe’ despite its reputation. Users are six times more likely to suffer from serious mental illness than non-users.

It is also carcinogenic. The British Lung Foundation says smoking three joints a day causes similar damage to smoking 20 cigarettes a day. That would suggest that up to 30,000 people a year contract cannabis-related cancer.

Yet such is the demand for the drug that an entirely new industry has cropped up to meet it. Between 2004 and 2007, police detected around 800 illegal cannabis ‘farms’ each year. This rose to 7,000 by 2009-10. Most produce high-strength herbal ‘skunk’, but now laboratories have sprung up to make premium-grade hashish.

With average prices of £21 per quarter ounce, there is an ever- growing commercial and personal market for cannabis grown here in Britain. That’s where The Consultant comes in. He specialises in organising every aspect of a ‘home-grow operation’ – from the renting of a suitable house to organising the heating, lighting and the right crop to grow. His clients include people wanting to smoke their own to those who see it as a way to make a living. And his services do not come cheap: for setting up a growing room, there is a flat fee of £3,000.

The Consultant takes me to a large semi-detached house in Lewisham, South-East London. In the loft, ultraviolet lights buzz gently. Dozens of seeding cannabis plants, each at least 3ft tall, make the space feel more like a jungle, and the smell is  all-consuming.

The Consultant tells me that he grew up surrounded by ‘duckers and divers’. For some years in the early 1980s, he was a ‘grass’ dealer in Chelsea, selling the leaf, rather than the hash resin form of cannabis. Through his dealing, he claims he got to know pop stars and even members of the Royal Family.

He fell into growing when his supply dried up. ‘I couldn’t see anything wrong with it,’ he says. ‘Surely it’s better to do it this way than line the pockets of cold-blooded gangsters who charge a fortune to smuggle the stuff.’

He’s part of a burgeoning phenomenon. A total of 750,000 cannabis plants were recovered by the  police in 2009-10, with the largest concentrations being found in West Yorkshire, Greater Manchester and the West Midlands.

Energy companies calculate that up to £100 million worth of electricity is being stolen to fuel the sophisticated lighting systems needed to encourage the drug to grow. British Gas – now a major supplier of electricity – has formed a special team to tackle the problem.

At the retail end of the supply trade, Micky cuts up a ‘9 bar’ – the slang term for a nine-ounce block of hash – in an East End lock-up. He smokes a large joint as he works, carefully cutting down the large block into smaller chunks which he weighs on a set of digital scales and then wraps in cellophane.

Micky always sticks to the speed limit as he drives his respectable Audi estate through the London streets. He doesn’t want to get pulled over by police.

The Consultant: Londoner Micky (pictured) whose father was a driver for the Krays and who sells to film stars and builders alike

‘Stay put,’ he says, opening the lid of the armrest between us and removing a tightly wrapped ounce brick of hash. ‘Won’t be long.’

I watch as he climbs the steps to a large, period terrace house. Through the property’s big bay window, I notice a group of people sitting at a table – obviously the host is holding a dinner party. I see a man leading Micky in. He places the  hash on the table before leaving.

‘I hate it when a customer tries to show me off like that,’ he says back in the car. ‘When you drop cocaine off with a punter, they try to keep it hush-hush. Hash users think it’s as normal as having a cup of tea.’

Micky, a 29-year-old East Londoner, comes from a long line of villains – his father was a chauffeur for the Kray twins.

He operates out of a swish apartment close to Canary Wharf, and his customers range from lawyers to film stars to builders. ‘That’s the thing about hash – it crosses the class divide,’ he says.

Indeed, many people I know shrug their shoulders at the mere mention of hash as if it is barely worth anyone’s attention. Their attitude sums up perfectly the way this illicit industry has been allowed to balloon into a multi-billion-dollar network. But even at the civilised end of the market, where well-heeled British clients buy their hash from amiable dealers, you are never more than a step away from vicious gangs. Tom is a former public schoolboy from Berkshire who nurtures a loyal set of customers who only ever buy hash from him. ‘I’m a professional hash dealer,’ he says. ‘I have made a decent living for more than 30 years because I am trusted. I also believe my hash is healthy. There is nothing chemical in the hash I sell.’

Tom claims to have numerous celebrity clients and says he is often flown across continents with hash for tycoons. ‘My business relies solely on word of mouth,’ he says. ‘The rich and sometimes famous people I supply put a good word in to their chums. I’ve got at least ten customers I’ve supplied throughout the 30 years I’ve been in this business. I reckon that’s unique.’

Two weeks before we met, Tom flew to Tibet to inspect a £10,000 shipment of finest Himalayan hash before it was smuggled into Europe, paid for by a client who belongs to one of the world’s most famous banking families.

‘My customers don’t want to know about the other side of this business,’ Tom says. ‘I think they imagine  I only ever deal with nice, smiley- smiley farmers who give me a hug and slab of hash and then we’re on our way.

‘Of course that is utter b******s.  I have to deal with some really  horrible characters, the ones who shift the hash to the UK.

‘The only problem with supplying a range of hash is that I have to deal with a different set of gangsters for each brand: North London Turks who smuggle the best hash from Afghanistan; West London Sikhs bringing it in from Nepal; and a gang of French mafia importing from Morocco.’

Tom predicts an uncertain future for the UK underworld. ‘Soon it’s going to be crawling with so many bloody foreigners that the police are going to lose control and it will be like living back in Victorian times with crooks and pimps on every street corner trying to make a quid. A lot of these people from abroad are much more desperate for cash than the Brits.

‘The cities will soon be overflowing with them and that’s when the real problems will begin.’

It’s not just those users and gangsters who die at gunpoint or whose lives are ruined by cannabis. Besides the barons, dealers and smugglers, there is an army of ‘part-timers’ who often pay the ultimate price for their involvement. These are the mules – characters who often risk their own lives and liberty in a desperate bid to make a few thousand pounds. Every year dozens of people are either arrested or die after swallowing balls of hash tightly packed in plastic. These so-called ‘eggs’ usually hold about five grams of hash apiece. And most mules are expected to swallow around 50 of them at a time.

Many are forced into it by human traffickers and other criminals. Others are students hoping to make some extra money by re-selling the hash once they get home.

The first time Jane worked as a mule was when she was a penniless 18-year-old student in Tangier needing money to get home to Birmingham. She swallowed 30 pellets of hash in exchange for £1,000 and made it back to the UK to deliver it, even though one of the pellets burst in her stomach.

Now a nurse in her mid-30s, Jane has revived her career as a mule to support her family. Since 2010, she has returned three times to her Moroccan lover in Tangier. Each time she swallows hash pellets before the journey home. She says: ‘My husband lost his job and my salary doesn’t cover the costs of bringing up my family. And, if I’m honest, I liked escaping the drudgery of my life and meeting my lover.

‘If a bag bursts inside me it might kill me. If I get arrested I’ll end up in prison. Either way, I will lose my family and destroy them.’

Away from the chaotic, low-reward world of amateur mules such as Jane, there are a number of ‘professionals’. I was introduced to Perry and Dev by one of Essex’s most notorious criminals. Perry and Dev are what are known in the trade as ‘do-it-yourself-merchants’. They buy hash in Spain from one specific supplier, then Perry ‘mules’ it to the UK and they distribute it.

Perry explains that he takes a budget airline flight from southern Spain with the tightly packed bricks of hash taped round his waist. The hash itself is triple-packed in cellophane so that it does not smell and then smothered in hair conditioner to put sniffer dogs off the scent.

Perry lays out 15 bricks of hash on the table in front of him and I casually ask him the street value of what he has just smuggled through. ‘They’re worth two grand a brick so that makes £30,000 once we’ve sold it all to our customers.’ So how much did Perry pay for it in Spain? ‘Hundred and fifty quid a block,’ he says. ‘Not a bad little earner, eh?’

Foreigners – mainly eastern Europeans – are accused of more than a quarter of all crimes committed in the UK. Astonishingly, they also make up nine out of ten drug suspects and are responsible for more than a third of sex offences.

The figures back up fears of an immigrant crime-wave and officials believe that it’s not helped by the ease with which so many eastern Europeans are able to get into Britain with false identities which hide their criminal past.

Nowhere illustrates this problem more than Albania. The collapse of law and order in that country has created a criminal element feared even by the Italian mafia.

I meet Albanian hash baron, Ivan, through a British gangster called Jerry. He warns me in advance that Ivan is ‘a right nutter’ before adding: ‘They are the maddest, baddest people I’ve ever met. Step out of line and they murder you.

‘The Albanians are the ones we all fear. They’ve got a stranglehold on virtually all the hash that comes in from the countries east of Albania. You cross them at your peril.’

At a meeting in a pub near Braintree, Essex, Ivan tells me: ‘I come from a long line of smugglers. My family controlled everything that went in and out of the area. That’s how we make our living. We charge people to bring their drugs through our territory. Why not?

‘I live in the UK half the year, using a different identity because I spent some time in prison in Albania. I like the life in England but I also like  to be back in Albania to make sure my friends do their jobs properly.’ He smiles. ‘I have two wives in the UK and two in Albania. It’s perfect. Most men would like to have my life, I am sure.’

But why hash? ‘Because more people use hash than anything else, my friend. It’s just another commodity to us. Hash, coke, people – we will bring anything in if there is a demand for it. But hash is the biggest business, so we make sure we control it. It’s not easy but I have many friends in high places so I can always get my shipments through without any problems.’

The easy availability of high-quality home-grown cannabis is fuelling the problem in Britain and matters are only going to get worse. Some estimates predict that the number of cannabis smokers in this country will double within 20 years.

Britain is, in the words of one law enforcement official, ‘a very lively marketplace for hash’. But that is an understatement. We are in the grip of an epidemic and it will take more than an increase in domestic production to stem the tide of ruthless gangsters drawn to our shores by this lucrative trade.

Robert, my contact in UK customs, says: ‘Countries such as the UK are being swamped with four times the amount of hash that used to come in as gangs of foreign criminals try to create huge markets out of substandard, dangerously cut drugs, and that includes hash.’

In a chilling postscript, he says the authorities have little or no chance of cracking these operations.

‘The police and other authorities rely on informants, but it’s getting harder and harder to infiltrate these criminal gangs. Informers are few and far between and gangs from eastern Europe are so ruthless, other criminals dare not cross them.’

Names have been changed to protect identities.

• Hash by Wensley Clarkson is published by Quercus, priced £10. To order your copy at the special price of £9 with free p&p, call the Mail Book Shop on 0844 472 4157 or visit mailbookshop.co.uk.