Bank Fraud and Credit Card Scam Results in Medical Pot Raids

By Jeralyn, Section Colorado News
Posted on Fri Aug 14, 2009 at 05:33:43 PM EST
Tags: medical marijuana (all tags)

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The FBI was busy in Denver today, raiding medical marijuana businesses, but, the U.S. Attorneys' office says they weren't after the pot -- even though they seized it.

FBI has busted an operation run by Russians who they say came up with an elaborate scheme to steal from credit card companies that somehow involves a local medical marijuana business and a local car dealership, according to sources and the U.S. Attorney's office.

Law enforcement officers arrested four people Friday morning across the metro area who were allegedly part of the bank fraud operation. FBI agents also served search warrants at more than a dozen locations, including personal residences, auto dealerships and the medical marijuana business called Alternative Medicine of Southeast Denver (AMSD), a company that is the same building as CannaMed, on Leetsdale Drive in Denver. CannaMed is where people can apply to get medical marijuana.

Four persons of Russian nationality were arrested and charged with bank fraud and making false statements on loan applications. [More...]

A used car dealership was also raided:

[Owner Walid]Maaliki says the dealership was a victim of the fraud and suspects that several customers purchased as many as six cars from the dealership using the stolen or forged credit cards.

"We didn't do anything wrong. It's just that we have records and copies of all of the credit cards that were used, the people's identities and their pictures," Maaliki said.

So why did they take the pot?

The FBI also raided AMSD on Friday morning after finding a little less than 100 marijuana plants. The FBI's primary focus was CannaMed, but entered AMSD after seeing the marijuana.

Because marijuana is not legal under federal law, the agents confiscated all the plants..... Colorado law allows for the use and sale of medical marijuana, but federal law does not. In this situation the federal agents were obligated to confiscate the marijuana.

The two owners of AMSD tell 9NEWS the plants were worth tens of thousands of dollars and were used to treat more than 100 clients. The seizure effectively shuts the business down.

The U.S. Attorney's Office says more arrests are expected. I hope they also explain why they went after the pot dispensaries. According to Attorney General Eric Holder, the feds were going to lay off medical pot raids unless they weren't in compliance with state law. Is the excuse now going to be they're investigating other crimes and just happened across the pot so of course they had to seize it? Stay tuned.

Update: I'm hearing that the dispensary AMSD was subject to the search because it was on the first floor of the building housing the businesses subject to the search warrant. The warrant was for offenses involving tax evasion, real estate fraud, insurance fraud, credit card theft, and id theft -- not drugs. And the DEA wasn't involved.

Update: I just read the 30 page complaint and affidavit. The affidavit says it is in support of 14 Criminal Complaints and 16 arrest warrants.

This is all related to a scam under investigation since October, 2007 by people from the Former Soviet Union who came here on visas. The complaint alleges a criminal enterprise is behind their actions. It alleges they formed phony businesses, got credit cards and loans and didn't pay them back. It was a "bust out scheme."

A "bust out" scheme is a fraud in which the identity and credit line of a business are used to obtain loans and goods with no intention of paying for the money or merchandise. During this investigation, it was determined the J-l students, referred to as "straw buyers," are recruited by the criminal enterprise and provided an instant credit history through a process called "credit piggybacking.

Total loss: $80 million through use of 700 straw buyers.

This had nothing to do with medical marijuana. There's no mention of drugs or medical marijuana in the Complaint or affidavit. The dispensary just happened to be in the same building at which they were executing search warrants.

AG Holder should direct the FBI to return the pot to the dispensary -- and the patient records they seized. If the dispensary was not in violation of state medical marijuana law and it was just "in plain view" by FBI agents investigating misconduct related to other persons and not the dispensary, under Holder's criteria, it should be returned.

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Bank Fraud and Credit Card Scam Results in Medical Pot Raids | 6 comments (6 topical)

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Is there a restriction (none / 0) (#1)
by oculus on Fri Aug 14, 2009 at 07:43:51 PM EST

On growing v.dispensing? Marijuana remains a restricted substance under federal law.

that's the case in all states (none / 0) (#2)
by Jeralyn on Fri Aug 14, 2009 at 08:03:53 PM EST

that have legalized medical marijuana. It's not legal under federal law to possess or grow it. But Obama and Holder said they would stop the raids on dispensaries in states that have legalized medical marijuana so long as they were complying with state law. Dispensaries are legal here.

This one was in compliance. But nonetheless, because all pot is illegal under federal law, possession as well as cultivation, the FBI seized it --as well as a lot of patient records.

Note this was FBI acting in a fraud case that had nothing to do with pot. The DEA was not involved. Still they should return the pot and patient records.

Colorado had its first acquittal of a medical marijuana patient two weeks ago. He was growing more than allowed. After the acquittal, he was given his plants back. That's how it's should be.


It is my understanding CA (none / 0) (#3)
by oculus on Fri Aug 14, 2009 at 08:11:19 PM EST

CA MD may write permission slip but not grow or dispense. What does CO law provide?


: the md is not the caregiver (none / 0) (#4)
by Jeralyn on Fri Aug 14, 2009 at 08:25:12 PM EST

the MD can't provide the post but the dispensary, as a patient's caregiver, can.
See this about a new dispensary opening in Aspen:

Several strains of the plant, which is Colorado-grown, will be offered, and will be available in edible and vaporized form for those qualified to buy cannabis. Starter plants with lighting equipment will be sold, as will kief and hashish.
Under Colorado's medical marijuana law, approved by voters as Amendment 20 in 2000, patients with certain conditions, including HIV, muscle spasms and chronic pain, can use medical marijuana as long as they get a doctor's approval and register with the state.
The law permits patients or their designated caregivers to grow up to six marijuana plants or possess two ounces of usable marijuana.
Although they don't need much space for the dispensary, Charlie said he and the owners are looking for a location that offers privacy for those who want to consume on-site.
"We're hoping that at each of our locations, we'll have a lounge area, a private place for our patients," he said of Aspen and possible future locations in Eagle and southern Colorado.
The Aspen pot shop will become the Roaring Fork Valley's third dispensary.
Colorado places no limit on the number of patients for whom a caregiver can grow or otherwise provide marijuana. We now have 10,000 registered users and 40 dispensaries and the numbers are growing. We have 500 doctors who have made recommendations.
The state tried last month to set limits, but it failed. Imagine walking into a pharmacy to pick up your prescription but getting turned away because the pharamcy had already filled x number of scripts that day.
One dispensary in Denver has 300 patients. It can provide six plants or two ounces per patient.
More here.

Leigh's waiting room could be found in a dentist's office, save for coffee-table reading material that includes a copy of High Times and a Timothy Leary book. Spice jars feature samples of marijuana available for sale. All sales are by appointment only, and Leigh's business collects about $10,000 in sales tax a month.
Leigh's patients are mainly middle-aged women with multiple sclerosis and men coping with hepatitis C. One employee said he takes tincture drops to help prevent seizures. A customer, a jiujitsu coach, said he uses it to treat pain from four surgeries and regular fights.
Leigh said she and her husband, who uses marijuana to cope with degenerative disc disease, started selling marijuana he was growing to avoid running up against the law.
Patients can only possess up to 2 ounces of usable marijuana under Colorado law. But a patient or his designated caregiver can grow six marijuana plants _ but only three can flower at any time.

: I should also mention (none / 0) (#5)
by Jeralyn on Fri Aug 14, 2009 at 08:28:43 PM EST

that Colorado's medical marijuana law is a state constitutional amendment passed by voters, not a legislatively passed law.

So this is the scam Obama's using... (none / 0) (#6)
by mcl on Sat Aug 15, 2009 at 05:20:23 AM EST

...To continue the failed and futile War on Drugs despite his repeated promises to end it.

You have to give him points for cleverness. Gin up some unrelated fraud charge, then seize the weed and never give it back. Clever.

NY police officers are doing something similar to get around the new laws decriminalizing possession of small amounts of weed. The police officer demands to see the weed in order to be sure that it's under the legal limit which prohibits a misdemeanor arrest, then, once the weed is "in public view," the officer arrests John Q. Public for committing a misdemeanor.

Clever. Reminiscent of the 60s where atni-war protesters were ordered off public grounds by police, then immediately arrested for trespassing.