Mellow Oregon Farmers Take Over
In Jackson County, Oregon, cannabis farms now blend in with gently sloping hills and pastures. Here, licensed farms with flowering marijuana plants rest along paved country highways, as open as their neighbors growing wine grapes or corn. Yet despite the mellow setting, legal cannabis producers here and elsewhere in the state grapple with challenges from the illicit market.
In Portland, further north, veteran medical marijuana advocate Don Morse spent years berating cops over raids on medicinal gardens and dispensaries serving patients with serious illnesses. In 2012, his dispensary — The Human Collective, then in neighboring Washington County — was raided by local authorities who charged Morse with multiple felonies. In June 2014, he pleaded guilty to a single misdemeanor for possession, paying a $100 fine. That November, Oregonians approved Measure 91. It legalized cannabis use and sales for adults 21 and over and allowed possession of eight ounces — eight times what California voters would adopt in 2016.
Yet Morse finds himself grappling with contradictions as he appeals to cops to target illicit marijuana producers, so Oregon’s legal cannabis operators can succeed and thrive. “For 20 years, we’ve been saying, ‘Leave us alone. It’s harmless, it’s medicine. Police have better things to do,’” he tells me. “I think we won on that. But the problem we’re having now is in saying to the police, ‘Okay, there are legal actors and illegal, bad actors, and now we want you to go after the bad actors.’
“For 20 years, we’ve been saying, ‘Leave us alone. It’s harmless, it’s medicine. Police have better things to do’ … I think we won on that. But the problem we’re having now is in saying to the police, ‘Okay, there are legal actors and illegal, bad actors, and now we want you to go after the bad actors.’ After all these years, they look at us like we are crazy.” – Don Morse, MMJ advocate and businessowner
“After all these years, they look at us like we are crazy.”
As with Humboldt, many permitted Oregon growers come from the illicit market. Peter Gendron, president of the Oregon SunGrowers Guild representing licensed outdoor cultivators, calls himself a former “open market” grower, scorning the “illicit market” term. He argues cannabis regulation will ultimately diminish illegal activities without people having to hail the cops. But he adds: “Let me put it this way, if you want to tell people not to do or sell something, how has that been working out for the past century?”
Rob Pendell, 52, a farmer in the Jackson County community of Applegate who greets me in blue denim overalls, tells me of the glory years when you could sell cannabis for “$4,000 a [pound] bag and you would go over to your neighbor and say, ‘Okay, your tote is ready.’” The neighbor presumably would know of a supplier or shipper to get it to.
In Oregon, all taxes are taken on dispensary sales, and cultivators don’t have to pay a state fee on dried flowers sent to market (as in California). Currently a medical cultivator, Pendell is applying to provide the adult-use market. His outdoor plants, blooming to the scale of citrus trees, sit next to a vegetable garden of squash, tomatoes and peppers, his rose bushes and — a short walk away — his worm farm, where conveyor belts with worm-embedded sediment churn out premium mulch.
Soon enough, Pendell believes, cannabis in Oregon will be a regular feature of locally accepted agriculture. Illicit cultivation, he says, “isn’t just going to go away after two years of legalization — but it is going away because of legalization. It’s better for the consumer. It’s better for the entire industry.”
The Chinese Connection
Federal prosecutor McGregor W. Scott begins his closing argument with a flourish on why marijuana legalization isn’t working to stop the illicit market. He starts out speaking about Chinese workers.
Sacramento has had a long history of illegal indoor cultivation by southeast Asian gangs or Chinese networks, often connected to crime bosses in neighboring San Francisco. But the results of a recent two-year investigation were shocking to Scott, the veteran U.S. attorney who served from 2003 to 2009 after being appointed by President George W. Bush and was re-appointed by Donald Trump last December.
In April, hundreds of federal and local law enforcement officers descended on suburban homes around the capital city, raiding illicit indoor gardens and filing more than 100 property forfeiture actions in what was billed as one of the largest anti-trafficking seizure efforts in history.
Authorities, who seized 61,050 plants and more than 440 pounds of cannabis flower in the 100-plus house raids on April 3 and 4, tracked more than 125 wire transfers — totaling $6.3 million — from China. The money inevitably came in amounts just under $50,000 — the Chinese legal limit for cash exports, Scott said — from financial institutions such as the Agricultural Bank of China or the China Construction Bank. Wired funds covered down payments on real estate purchases — all for illegally growing cannabis to ship across America, regulated markets in California and other states be damned.
Chinese-funded illegal cannabis operations have also been taking hold in Washington and Colorado, both with robust state-regulated cannabis economies. In May, federal authorities raided residential grow rooms — paid for with similar money transfers — in Seattle and surrounding Washington communities including Burien, Kent, Tacoma and Renton. They charged three Seattle residents with conspiracy to distribute marijuana from the Pacific Northwest to New York. In Colorado, Drug Enforcement Administration agents in September 2016 arrested 14 Chinese citizens, half in the county without authorization, in an outdoor marijuana growing operation. Authorities said a tip led them to a U-Haul packed with 3,900 pounds of marijuana.
According to the criminal complaints filed in Sacramento federal court, authorities tracked residential houses, rigged with high-voltage growing lights, where electrical use was spiking by 3,000 to 4,000 percent. A federal civil forfeiture notice alleged that seven houses were purchased by a single individual, Leonard Yang of Ohio, who was charged with narcotics and money-laundering charges for arranging “hard money financing and tens of thousands of dollars wired to the United States from China” to facilitate the real estate transactions. Many purchases were set up under the names of straw buyers. One was a 25-year-old woman who got a mortgage loan for a $416,000 house in the Sacramento suburb of Elk Grove based on earnings of $5,000-a-month managing a liquor store in Brooklyn, N.Y. Authorities determined the liquor store didn’t exist.
“I would use the word ‘audacious’ to describe it,” McGregor tells me. “To think that you could just come into [the] region and convert more than 100 houses into marijuana grow houses. We found there was vast equity in these houses. There was money wired from China, then people got lenders [in California] and got more financing — or they bought the properties outright.
“To be putting so much cash into these homes, there has to be an expectation of a massive payout on the backside.”
Into the Light: Poignant Lessons
The massive payout from illegal production, of course, is rooted in federal marijuana prohibition and market demand for products in numerous cannabis-restrictive states.
David Winkle, 62, understood that when his career as a Humboldt County lumber and building products broker cratered in the economic collapse of 2008. He knew where to seek his comeback. He partnered with growers and created a fake fishing gear company. It was soon shipping cannabis to upstate New York through unsuspecting trucking companies carrying pallets of thermal boxes with the logo of the faux Blue Lake Fishing Products. New York dealers in 2009 paid him $3,500 to $4,000 a pound, selling it on the streets for $6,000 and sending back cash in FedEx packages with thank you notes written to “Papa Winks.”
The scheme was busted in late 2011, and Winkle served 44 months of a 60-month federal prison sentence before his release in 2016. “I do miss the money,” the gray-haired Winkle tells me as we sit down in the town of Blue Lake. “I was walking around with a big wad of cash. But your quality of life is based on the quality of people around you. And that money doesn’t bring you happiness.”
Winkle is back in the timber business, working as a general manager of a sawmill. Ironically, in a long-depressed logging region, lumber prices are going up (spiking last summer at $1,500 per 1,000 board feet from as low as $700 two years earlier) as weed tumbles down. Authorities in Connecticut recently reported that marijuana there still fetches an average of $3,500-a-pound. But that’s much lower than historic East Coast norms. And word in Humboldt is that things are getting bleaker for illicit producers, given overproduced masses of cannabis from forests, shadowy farms and even vast suburban housing tracts.
Winkle says his pals still in the illicit market tell him they are lucky to get $400 per pound for outdoor cannabis. “I don’t feel sorry for them,” he says. “Everyone was spoiled. I tell them, ‘Keep it in perspective: this is an agricultural product.’”
That’s the way Kevin Jodrey, 52, sees it as well. The owner of the licensed Wonderland Nursery, providing clones and starter plants to locally permitted farmers, was once a sought-out illicit-market consultant, demanding $500-an-hour fees or more to help criminal growers maximize lighting and plant yields in cavernous grow rooms burrowed into forested slopes and powered by diesel-spewing generators. Jodrey hopes that era is gone for good, particularly as federal prohibition eventually dies.
“Over time, little by little, the illicit market will disappear, except in a small form,” he tells me. “Have you bought any moonshine lately?”
“Over time, little by little, the market will disappear, except in a small form … Have you bought any moonshine lately?” – Kevin Jodrey, licensed cannabis cultivator
He understands that perspective doesn’t pay the bills for Humboldt cultivators trying to go legal. “It’s going to cost you every dollar you have, and you’re probably going to go deep into debt before you break even,” Jodrey says.
There’s no need to tell that to Chad Steelman, who still finds little time to worship that spectacular view from his mountain cultivation. He is on the phone, scheduling business meetings, trying to get his Humboldt Marijuana Co. off the ground and soaring in the bright, regulated market. This is it for him now. He isn’t going back into the shadows. “I’m a little closer to [living under] the bridge,” he tells me in an update. “But at least now I’m getting some fliers for the jet.”