DEA targets larger marijuana providers

Until federal drug agents arrested him last month, Shon Squier was one of Hayward’s most successful and generous young businessmen.

Customers lined up outside his downtown storefront, particularly on Mondays, when he offered free samples to the first 50 visitors. Business was so good that Squier, a former construction worker, was able to donate more than $100,000 to local charities.

But Squier’s success as a dynamic medical marijuana entrepreneur was also his downfall. Federal drug agents raided his home and business, arresting Squier and his store manager, freezing bank accounts containing $1.5 million and confiscating several expensive cars, motorcycles and $200,000 in cash.

Medical marijuana advocates claim the raid constitutes unfair, selective enforcement by the Drug Enforcement Administration of the estimated 170 medical marijuana dispensaries in the state, including 85 in the San Francisco Bay Area.

Just down the street, another medical marijuana dispensary, not as big or as flashy as Squier’s, was left untouched by the DEA agents in the Dec. 11 raid.

The federal drug agency, which does not recognize California laws legalizing the sale of marijuana to patients with doctor’s prescriptions, contends the amount of money involved proves that the medical marijuana trade is nothing more than high-stakes drug dealing, complete with the same high-rolling lifestyles.

“These people will tell you they are just interested in the terminally ill,” said Gordon Taylor, DEA special agent in charge of the California eastern federal district, “but what they are really interested in is lining their pockets with illegal drug money. When you pull the mask off, you see that they are nothing more than common dope dealers.”

California’s two medical marijuana laws, Proposition 215, approved by voters in 1996, and Senate Bill 420, passed in 2003, are not clear about how much money proprietors can take out of their businesses. One section of SB 420 states that medical marijuana caregivers should be allowed “reasonable compensation” for their services. Another section states that distribution should be done on a nonprofit basis.

“The legislation is about as clear as mud the way that they wrote it,” said Joe Elford, lawyer for Americans for Safe Access, a pro-medical marijuana group. “The dispensaries are legal under state law because they are cooperatives and collectives. It is my best guess in terms of what the Legislature intended is that they shouldn’t be operating to make a profit.”

With the proliferation of medical marijuana dispensaries of all sizes across the state, the DEA and Internal Revenue Service have recently concentrated their investigations on young, high-profile operators like Squier, 34, and Luke Scarmazzo, 26, co-owner of a Modesto dispensary.

Scarmazzo got the attention of the DEA earlier in the year, when he produced a rap video that showed him counting stacks of hundred dollar bills, blowing billows of smoke at the camera and flipping off federal agents.

The Scarmazzo video, featuring the background sound of a pump shotgun racking a round, includes actors posing as members of the Modesto City Council. Online at www.krazmusic.com, it includes the refrain:

I’m in business, man.

I mean business, man.

Let me handle my business, damn.

Federal prosecutors showed it at Scarmazzo’s bond hearing to demonstrate his criminal intent in order to deny him bail.

But Fresno lawyer Anthony P. Capozzi, who represents Scarmazzo, said the effort backfired.

“Let me tell you, the whole courtroom was swaying to the music,” Capozzi said. Scarmazzo was released on a $400,000 bond and his 2007 Mercedes-Benz, confiscated by federal agents, was returned to him.

Taylor, the DEA agent, said that between January and June of this year, Scarmazzo, who has a previous felony conviction, and his associates recorded $3.4 million in sales of marijuana products with brand names that included “911,” “AK47” and “Train Wreck.” Scarmazzo and his California Healthcare Collective co-owner, Ricardo Ruiz Montes, also 26, are charged in federal court with money laundering and “operating a continuing criminal enterprise.” The last charge, one of the most severe under federal drug laws, carries a sentence of 20 years to life in prison.

Here in Hayward, Squier and his business manager, Valerie Lynn Herschel, 23, are charged with the illegal manufacture and distribution of marijuana, a federal “controlled substance.” Federal agents confiscated hundreds of plants, brownies, cookies and other products containing marijuana from Squier’s business, Local Patients Cooperative.

“I only gave the people what they wanted -- easy, safe access to medical marijuana,” said the slightly built Squier, cuddling his pet Chihuahua in his former office, which was stripped bare by federal agents.

He described his business as a responsible enterprise that paid federal and state payroll taxes for 60 employees, contributed to the Hayward High School football team and gave discounts to Hayward residents, veterans and customers in wheelchairs.

Squier said that he served about 75 customers a day and had 70,000 individual patients in his books. The success of his business allowed him to buy a $1.5-million home in the Hayward Hills overlooking San Francisco Bay, a Hummer and a late-model Mercedes.

Half a block down Foothill Boulevard, Tom Lemos, 45, continues to operate his much lower-volume Hayward Patients Resource Center.

Whereas Squier and Scarmazzo flaunted their wealth, Lemos, who claims to have 3,000 to 4,000 regular customers, emphasizes his modest lifestyle.

“I live in a rental apartment and I drive an ’86 Isuzu with 245,000 miles on it,” Lemos said.

Appearing before the Hayward City Council on Dec. 19 to ask for a renewal of his agreement to operate in the city, Lemos opened his remarks by stating: “I don’t live in a large house.”

Compared to his “small, homey” medical cannabis operation, Lemos said, Squier’s high-volume Local Patients Cooperative down the street was a “Wal-Pot.”

After hearing Lemos’ presentation and testimony from several of his patients, the City Council agreed to extend his agreement for 90 days, suggesting that he would be granted a longer-term permit if he moved from the downtown area to a more remote location, away from schools and the general public.

Even before the federal bust, the city had informed Squier that its agreement with him would be terminated.

Similarly, after Scarmazzo began operating in Modesto, the City Council passed an ordinance banning additional cannabis cooperatives, and the city had on several occasions attempted to halt Scarmazzo’s operation.

The raids on both the Hayward and Modesto operations support what medical marijuana advocates contend is an unwritten practice by the DEA of being more likely to crack down on an operation that has lost local government support.

After the U.S. Supreme Court ruled last year that federal laws banning marijuana sales take precedence over those in California and other states permitting the sales, the DEA was empowered to arrest patients and operators at any one of the dispensaries that started up after passage of Proposition 215.

Instead of going after everyone, however, the federal agency appears to concentrate on the larger and higher-profile operations.

Medical marijuana advocates contend it is unfair of the DEA to cite examples like Squier and Scarmazzo to represent the typical dispensary operators.

“Most operators are not wealthy individuals,” said Elford, the Americans for Safe Access lawyer. “As far as we can tell, the majority of dispensary operators are simply people who are interested in providing safe, affordable and reliable medicine to the people who need it and are not in it for the profit.”

The “big fish” strategy enrages Oakland lawyer James Anthony, who represents Scarmazzo in civil matters.

“Why does the DEA suddenly concern themselves with how successful a medical cannabis collective is?” he asked. “Are they saying that if these guys had led monkish lives, then they would have left them alone? Are they judging Donald Trump on his lifestyle?”

*

rone.tempest@latimes.com