GOVERNMENT GOES BEANCOUNTING

Temecula, CA –Since Prop 19, the initiative to pimp Mary Jane Green to Monsanto, George Soros, and local power smurf Jeff Stone, was sent packing, the buzz over bud has been dizzying (pun intended). California has been taken out of the spotlight by Colorado, which is an inside joke to me since a close-in-age relative wields the Code of Hammurabi in Colorado. In this report from John Ingold we look at what is taking shape in that state’s battle with the Feds over State’s Rights and a state approved business.

‘The Internal Revenue Service has opened an audit of a Denver medical-marijuana dispensary, the latest action in what one observer calls a "guerrilla campaign" by Obama to push back against the cannabis industry. The audit is believed to be the first of its kind in Colorado and follows audits of numerous medical-marijuana dispensaries in California and other states.

Investigators are examining whether it was unlawful for the dispensaries - which are illegal enterprises under federal law - to deduct business expenses from their federal taxes, said Jim Marty, a Denver accountant who represents the Colorado dispensary.

Marty declined to name the dispensary or say where it is located. Marty said the dispensary was notified of the audit earlier this month.

"So far," he said, "the IRS has been pretty cooperative. . . . The client had good records."

Marty said he expects the IRS to look broadly at dispensaries in Colorado. If so, that would mirror what the agency has done in California, where tax attorney Henry Wykowski said the IRS has undertaken at least 30 audits of dispensaries.

The audits are also part of a bigger series of events in which the federal government appears to be more actively asserting itself in state-legal marijuana businesses. In recent months, Obama’s federal attorneys in Washington state and California have sent letters to state officials there warning them that efforts to regulate medical-marijuana businesses will not change the federal government's disapproval of those businesses.

In one letter, U.S. attorneys in Washington threatened Gov. Christine Gregoire that state employees who regulate the businesses "would not be immune from liability."

In addition to the IRS audits, the federal government has asserted its authority by raiding medical-marijuana dispensaries. Last month, federal agents served 26 ‘criminal search warrants’ in Montana during a drug-trafficking investigation that focused on dispensaries. The agents ‘allege’ the dispensaries were also engaged in other illegal activities. And you can always believe the authorities’ official statement.

Because federal law enforcement resources are so limited, Robert Mikos, a Vanderbilt University law professor who has studied medical-marijuana laws, said the government has had to be selective in how it targets medical marijuana, conducting more of a "guerrilla campaign" than a frontal assault.

Colorado Attorney General John Suthers believes the recent crackdown should be a warning to Colorado medical-marijuana providers and state lawmakers alike. But so far - the recent IRS audit aside - Colorado has seen relatively little federal enforcement against cannabis businesses, despite having the most well-codified medical-marijuana regulatory system in the nation. Dan Hartman, who oversees medical-marijuana industry regulation in Colorado, said state officials have met repeatedly with federal authorities to keep them apprised of the state's evolving regulations. That has included providing limited, public information about dispensaries if the federal agents request it.

Hartman said federal officials, during the meetings, have remained firm that they see medical-marijuana businesses as illegal. But Hartman thinks the dialogue has helped prevent public blowups. "We started out in the beginning to make sure we have a transparent business."

Still, Allen St. Pierre, the executive director of the National Organization for the Reform of Marijuana Laws, told an audience at his group's annual convention in Denver last week that recent events are a reminder the medical marijuana industry remains a perilous business.

"One cannot whistle by the graveyard* when it comes to medical cannabis," he said.

Some of the people keeping an eye on this latest wave of Federal persecution against Mary Jane Green are Bob Carleton, 66, CEO, Herbal Connections, Denver; Deanna Gabriel, 32, Co-owner, Cannabis Magic, Denver; Lauren Maytin, 39, Attorney, Edson, Maytin & Matz LLP, Aspen; Juan Diaz, 35, General Manager, Cannabis Medical Technologies and Dragon Juice, Denver; Genifer Murray, 40, Co-owner, CannLabs, Denver; and Mark Goldfogel, 44, Founder and co-owner, MJFreeway, Denver.

(* - For the Feds represent death and taxes)