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How Some Dispensaries Find a Way Around L.A.'s Pot Shop Ban

How Some Dispensaries Find a Way Around L.A.'s Pot Shop Ban
Nanette Gonzalez for LA Weekly

Amid a historic low number of registered marijuana dispensaries in the city of Los Angeles, a new weed shop recently opened up in Chatsworth. At this point in the game, storefronts aren't really supposed to be opening.

See also: More Than Half of L.A.'s Weed Shops Have Closed

In fact all of the weed stores in the Los Angeles Police Department's local Devonshire Division had been shut down with the help of local city Councilman Mitch Englander who, as a reserve police officer, went out on a raid in 2012 that shuttered the last collective in his district.

But police say the Chatsworth dispensary is the second in the area to launch this year - the other is on Reseda Boulevard south of Parthenia Street - and that these businesses could be finding new ways to exploit L.A.'s strict pot-shop rules:

When voters approved Prop. D last year most of the more than 1,000 shops in town were supposed to shut down. Only about 135 remaining since a 2007 city moratorium (interim control ordinance, or ICO) went into effect would be allowed to remain via limited immunity from prosecution.

The result was that the 1,140 shops that had registered to pay a city pot sales tax in 2013 had been reduced to 462 this spring, according to L.A. Department of Finance records. Threats by the L.A. City Attorney to take operators and landlords to court seemed to be working.

See also: L.A. City Attorney Mike Feuer Takes on Marijuana With Compassion

But the allure of the dollar for some of those 135 "pre-ICO" shops might be causing some to multiply. Being pre-ICO is a ticket to millionaire status. It can be more lucrative by far than having a state alcohol license.

A knowledgeable Los Angeles police official who didn't want his name used told LA Weekly that the new shop in Chatsworth, Strain 30 Cap Collective at 21627 Devonshire St., is claiming the same pre-ICO status as a shop in downtown L.A.

And he says it's not at all unusual:

Some shops with pre-ICO status are abandoning their original locations, splitting into two dispensaries at spots outside their original police divisions, and then sometimes even brazenly returning to those first storefronts, he said.

The result is that one pre-ICO store, which is basically what Prop. D allows, turns into prosecutorial immunity for three separate storefronts. At least in theory.

How Some Dispensaries Find a Way Around L.A.'s Pot Shop Ban
Devonshire Street via Google Maps

"They move across divisions," the cop said, "all claiming pre-ICO status. Basically they're trying to franchise and then skirt the law."

He said the shops' attorneys are telling them they can get away with three storefronts before incurring the wrath of the LAPD and the City Attorney.

"It's hard to prove the same people are behind it and the same people are running it," the LAPD official said. "I wouldn't say it's legal. It's proving it's not legal that's the problem."

One of the big enforcement loopholes that these operators have found is that police investigators in one division don't usually go sniffing around in another. A move from the LAPD's Devonshire Division to the North Hollywood Division nearby can turn down the heat.

Those broader cases of multiplying dispensaries, then, need the attention of the LAPD's downtown Gang and Narcotics Division, as well as that of the City Attorney's office, the officer said.

But those centralized authorities don't seem to be tracking the dispensaries "business tax registration certificates" (BRTCs) to ensure there aren't more than one in different parts of the city that lay claim to a single pre-ICO operator, the officer argued.

And so, he said, some operators are getting away with opening multiple storefronts.

Stephanie Saporito, spokeswoman for Councilman Englander, told us that his office was on the case of the Strain 30 Cap Collective.

Protecting the quality of our neighborhoods is a priority for the Councilmember. Our office has been working with the both the LAPD and the City Attorney's office to shut this facility down. 

City Attorney's spokesman Rob Wilcox said it wasn't clear if the shop was in authorities' sights but that, in general, he can't "comment regarding a pending investigation."

No one at the Strain 30 Cap Collective returned our call.

 

If shops like this are multiplying, why isn't the number of shops registered to pay city dispensary taxes going up instead of going down? It's not clear. The police official we spoke to thinks the operators are playing shell games. Many closed Dec. 18 to meet a city deadline to find a more suitable locale away from schools, churches and the like. He thinks some are still resurfacing, sometimes in pairs or more, and have yet to register.

An attorney who represents dispensaries and who did not want to be identified called the strategy to link three storefronts to a single pre-ICO operator "brilliant."

Sarah Armstrong, director of legal and political outreach for the Greater Los Angeles Collective Alliance, which represents the core of those pre-ICO dispensaries that were gung-ho for Prop. D, which killed the competition (at least on paper), says she believes this is about identity theft:

What we have found is that places are engaging in corporate identity theft. The pre-ICO guy moves out because the location is non-compliant [too close to a school, etc.]. We had one egregious case where they adopted the signage of the old shop and told people they were pre-ICO - and then they tried to sell the store!

We have people moving into old non-compliant locations and telling patients, 'We're good to go, we're pre-ICO.' We've addressed all this with the City Attorney.

We wondered aloud if some pre-ICO operators were trying to fill a void left by those shops that had to close forever under Prop. D. Amstrong doubted that the legit shops would put so much on the line, including their livelihoods, for a little (or, rather, much) extra cash.

But Armstrong did acknowledge that Prop. D has created "rogue entities that want to partner up" with legitimate pre-ICO businesses. Can a pre-ICO shop take on new partners, move across town, and change its name?

"It depends on the corporate structure," she said. "If you have stock, people can acquire stock. If you're a nonprofit, someone can come onto your board, provide assets, or try to change the composition of the board."

The result, she says, can be cannabis confusion on L.A.'s boulevards: 

Based on what I see on Weedmaps, there are more people claiming to be Prop. D-compliant than there are Prop. D-compliant operators out there. When Englander went through and closed everybody down in his district, half those people moved to North Hollywood and reopened. Englander's problem became [city Councilman Paul] Krekorian's problem.

There's no reason to assume out of the box these people are operating illegally if they say they're Prop. D-compliant. At the same time, would you claim to be anything else if you wanted to remain open?

Send feedback and tips to the author. Follow Dennis Romero on Twitter at @dennisjromero. Follow LA Weekly News on Twitter at @laweeklynews .


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