Medical marijuana program gearing up

With the Department of Health poised to select two manufacturers next month from the dozen applicants who ponied up a nonrefundable $20,000 application fee for a chance to get into the ground floor of the booming legal marijuana trade, Minnesota’s nascent medical marijuana program remains on target to be up and running by next summer.

But those lucky “ganja-preneurs” —  and the lawyers, bankers and other professionals who provide vital professional services — need to be aware that they run the risk of the running afoul of federal authorities.

That was the principal takeaway from last week’s meeting of the Task Force on Medical Cannabis Therapeutic Research, the 32-member task force assigned to make recommendations to the Legislature on ways to improve the law.

In a presentation to the task force, Kevin Riach, an attorney with the Minneapolis firm of Fredrikson & Byron, outlined the multiple issues arising from the conflicts between state-level legalization and federal prohibition.

With nearly half the states having legalized marijuana for some purposes, many producers are operating openly and without adverse legal consequence. But Riach cautioned those who do wind up in the crosshairs of federal prosecutors can’t expect to get off the hook simply because they are in compliance with state law.

“You’re not allowed to mention state law in federal court. The judges don’t want juries to have it in their mind,” said Riach.

For lawyers, he noted, involvement in the industry poses particular risks, including exposure to potential ethics charges. While the Minnesota law specifically states that attorneys who comply with its rules “may not be subject to disciplinary action by the Minnesota Supreme Court or professional responsibility board,” those issues are not fully resolved. A petition to clarify the matter is pending before the Supreme Court.

Although there is no precedent, according to Riach, lawyers working in the industry could potentially be subject to a crime-fraud exception to attorney-client privilege.

For those members of the bar who wish to participate as patients in the state’s medical marijuana program, there are implications as well. Riach pointed to an advisory opinion issued by the ethics committee of the North Dakota Bar Association at the behest of an attorney who planned to move to Minnesota to access medical marijuana for a non-terminal condition.

Would the attorney be allowed to continue practicing law in North Dakota? In its response, the ethics committee opined that the lawyer’s actions “would be unlawful and unethical … and would constitute a pattern of repeated offenses that indicate indifference to legal obligations.”

For others in the business, the risks are greater. Amid the flood of recent state-level legalization measures, Riach noted that the U.S. Department of Justice has alternated between a relatively laissez faire posture and more aggressive approaches, with prosecutions of dispensary operators, caregivers and, in some cases, qualified patients.

In a 2011 memorandum, Deputy Attorney General James Cole struck a hard line in his guidance to federal prosecutors, saying the DOJ would prioritize enforcement actions against large scale producers — “and those who knowingly facilitate such activities.

In an explicit warning to the financial sector, Cole said bankers engaging in financial transactions could be charged with money laundering or other violations of federal financial laws, including the Bank Secrecy Act.

However, Riach noted that subsequent memos from Cole have suggested a softening of the position.

In Cole 2, the DOJ signaled that the size of a growing operation would not be a justification — on its own — to make prosecution a priority. That provision is noteworthy for prospective growers in Minnesota, Riach said, because the state’s law allows for only two producers and, hence, the operations will be relatively large.

That memo listed eight factors as triggers for enforcement action, including such considerations as the presence of firearms at cultivation and distribution sites, sales to minors, the associated trafficking of other illegal drugs, and the diversion of product to other states.

In a nod to the federal government’s goal to prevent the burgeoning industry from developing into a strictly cash-only business, a third memo issued this year said prosecutions involving money-laundering charges and other financial crimes should be given priority only in cases involving those eight factors.

In the view of some members of the Task Force on Medical Cannabis Therapeutic Research, the risks outlined by Riach serve as further justification for the many restrictions contained in Minnesota’s law, which is considered among the most conservative in the country.

“It seems to me that there’s got to be an asterisk by Minnesota,” said Dennis Flaherty, the director of the Minnesota Police and Peace Officers Association. Noting that the state’s law allows only for the distribution of marijuana derivatives in the forms of pills and oils, Flaherty ventured that this “very unique” approach would limit exposure to federal prosecution.

That may be true, Riach said, but byproducts of marijuana remain classified as a Schedule 1 drug. “Whether or not that has any impact on the DOJ decisions to pursue people, I can’t say,” he said.

Dakota County Attorney James Backstrom, another task force member, said he believes that Andy Lugar, the U.S. attorney for Minnesota, will abide by the priorities by the Cole memos, so maintaining “strong and effective regulatory systems” should be the task force’s top priority.

Ben Petok, Lugar’s spokesman, said later Lugar intends to follow the guidance in the Cole memos.

No matter how tight its regulatory scheme, the Minnesota law still clearly violates of federal law, so nobody should take much solace in the memorandums from the DOJ, responded Sen. Branden Petersen, R-Andover, one of four legislators on the task force.

In a subsequent interview, Petersen — who has been a vocal critic of Minnesota’s strict limits on qualifying conditions and prohibition against the smoking of whole plant marijuana — pointed out the Cole memos explicitly state that its recommendations are advisory. Additionally, he noted, the U.S. attorneys are appointees whose successors could easily take a different approach, depending on the political winds of the day.

“One of the things I wanted to make everyone understand is that we’ve got to be aware that we are proceeding with a program that is in direct violation of federal law,” he said. “There was a lot of hand wringing and gnashing of teeth about whether we’re complying with the memo. But there really is no gray area. It’s illegal and we knew that going in. Let’s just proceed forward and have the best program we can have.”

While the task force is charged with developing recommendations for potential modifications to the law, Petersen expects little consensus will emerge before it first report is due to the Legislature in February.

While he and three fellow lawmakers on the task force all pushed for more liberal framework during the course of last session’s contentious debate over the medical marijuana, other task force members — including a contingent from the law enforcement coalition — aggressively opposed many of those same  measures.

It will be an uphill battle to convince the Legislature to take up any marijuana-related matters this session, Petersen said.

“It’s a budget year, and lots of folks are of the opinion that we should deal with this sort of thing in a policy year,” he noted. “One of the common refrains around the Legislature is to wait and see what happens with the implementation of any regulatory apparatus — to see how it works — before we talk about expanding it.”

Nonetheless, Petersen said, many legalization activists remain engaged and will continue to push for expansion. He said they ought to focus efforts to encourage the Ed Ehlinger, the commissioner of the Department of Health, to use his statutory authority to expand the number of medical conditions that qualify prospective patients for participation in the program.

Petersen said he would also advocate for changing the state’s classification of marijuana as a Schedule 1 drug, a designation that places it alongside heroin and LSD and signifies “no currently accepted medical use.”

Such scheduling designations were once the purview of the state Board of Pharmacy but, in the wake of a change of law several years ago at the behest of the board, the Legislature assumed the authority.

“It’s really ridiculous. The whole point of the Board of Pharmacy is that they’re supposed to be experts in the field and understand the ramifications of scheduling,” Petersen said.

Kurtis Hanna, a board member of the National Organization for the Reform of Marijuana Laws who has twice previously petitioned the board to reschedule marijuana, urged the task force to recommend rescheduling. “I believe it’s an open and shut case,” he said, arguing that the prevalence of medical marijuana laws demonstrate accepted medical use.

Among the states, only Oregon has reclassified marijuana. The distinction is important, particularly at the federal level, where the classification has been a barrier to researchers.