Why Did San Diego Declare War on Med-West?Chase ScheinbaumJune 7, 2017
The district attorney’s office then began a systematic confiscation of Med-West’s assets. The haul included 30,000 cannabis oil cartridges, 800 infused chocolate bars, computers, business and financial records, and $324,000 in cash taken from a safe. Authorities also seized $100,000 from personal bank accounts belonging to Slatic, his wife, and his two stepdaughters.
“There is no indication … that criminal charges are going to be filed in this case in the near future.”Judge Tamila E. Ipema, San Diego County Superior Court
Slatic himself was at a breakfast meeting when the raid took place. “I went home and waited for them to arrest me,” he recalled in a recent interview with Leafly.
Remarkably, that didn’t happen. Sixteen months passed, and not a single charge had been filed.
Meanwhile, Slatic and his lawyers worked to recover at least some of the seized property. On May 8, a San Diego judge ordered the DA’s office to return the $100,000 from the family’s personal bank accounts. “Investigations have been ongoing since January 2016 and there is no indication … that criminal charges are going to be filed in this case in the near future,” the judge wrote.
Then, barely two weeks after the ruling, charges came. Heavy charges. San Diego County District Attorney Bonnie Dumanis filed multiple felony counts against Slatic and his associates. According to a DA press release, the defendants now face more than 15 years behind bars.
The criminal complaint accuses Slatic, four employees, and his attorney, Jessica McElfresh, of 12 felony counts, including manufacturing a controlled substance, conspiracy, and money laundering. The DA’s office alleges that Slatic and his team amassed illegal profits to the tune of $3.2 million in 2015 and that McElfresh helped Slatic hide from authorities the use of “flammable, volatile and toxic chemicals” to extract cannabis oil in violation of California law.
“Clearly, after 16 months, to charge us three days after we got our family money returned is vindictive prosecution,” Slatic told Leafly after the charges were filed.
Through her attorney, Eugene Iredale, McElfresh vowed to fight the charges. “It was no accident that the charges came right after the court ordered the return of funds that had been seized,” Iredale said.
The Med-West raid, asset forfeiture, and delayed felony charges have left many in California’s multibillion-dollar cannabis industry scratching their heads. The day before the raid, Slatic, now 57, headed up a flourishing cannabis empire. The 35-employee company he founded was the largest distributor of cannabis-infused products in California. When it was shut down, Med-West supplied 1,100 dispensaries and had just enjoyed the best month in its seven-year existence, Slatic said. “Then it all came to a crashing halt.”
A respected member of the legal cannabis community, Slatic was among the founding members of the National Cannabis Industry Association. He was a member of the group’s California and Nevada chapters, a board member of the Marijuana Policy Project, and a co-author of state cannabis legislation with California Assemblyman Rob Bonta.
In an interview, Slatic remained staunch that he followed all laws and operated an exemplary business. “We did everything 100% legit,” he told Leafly last month. “We had the best lawyers, the best CPAs. We were a model for the good actors in the business.”
Med-West paid its taxes and used a reputable payroll service, Slatic said. Its employees enjoyed good wages, 401(k) retirement accounts, and health insurance. City inspectors cleared the company to operate from a building adjacent to a Mercedes-Benz dealership.
According to Slatic, search warrants claimed that a confidential informant tipped off authorities to illegal cannabis extraction happening on the property. But both Slatic and McElfresh have maintained that no extraction took place on site. Slatic believes the raid was spurred on by other factors.
“It was a combination of my visibility and the fact they knew we were a good-sized company. They saw the number of cars in the parking lot. They knew the size of our operation,” he said. “The mayor’s office talked to us after the raid and said, ‘This didn’t come from us.’”
“There’s no question they were unfairly targeted.”Wesley Hottot, attorney for Med-West founder James Slatic
A persistent sticking point in this case was the legality of chemical extraction in the pre-Proposition 64 days when Slatic was busted. In California, extraction falls under a 1985 statute meant to apply to illegal methamphetamine production. The statute, passed more than a decade before California’s legalization of medical cannabis in 1996, uses vague language to prohibit the manufacture of concentrated controlled substances—including meth and crack cocaine—without specifying which compounds are off-limits.
“A wide variety of extraction methods are legal in California, including CO2,” McElfresh told Leafly before the charges were filed. “The only method of extraction courts said was illegal was butane, but now that’s hypothetically legal under California law if someone has local permitting.”
San Diego cannabis attorney Michael Cindrich doesn’t fully agree. “It’s questionable whether a CO2 lab is legal under California law,” Cindrich said. “The law that currently exists for extraction only says extraction by chemical synthesis is not allowed. We can argue that CO2 is nonvolatile, but it doesn’t change the fact that it’s chemical extraction.”
In California, “even if you’re following all appropriate laws and rules and you’re properly permitted, there’s still a risk this can happen to you,” added Nicholas Moore, a San Diego cannabis attorney.
Cindrich, who has an asset forfeiture practice, said no effort to comply could have prevented this. “There’s nothing you can show law enforcement that says, ‘I’m legal and have jumped through all the hoops to get authorization to do this.’”
Those who side with Slatic point to the raid as overreach by Dumanis and her office. Broadly, the action might be seen as emblematic of the nationwide misuse of asset forfeiture by law enforcement, maligned by critics as policing for profit. Dumanis, who has held the post since 2003 and mounted an unsuccessful mayoral bid in 2012, is resigning next month. She’s openly considering a run for a seat on the San Diego County Board of Supervisors.
“Some people would say this office has shown an unusually high appetite for medical marijuana prosecutions that have not yielded much fruit,” said McElfresh.
Critics of the charges feel the business was unfairly targeted due to its high visibility in the legal cannabis space, noting the significant discretion granted to prosecutors.
“There’s no question they were unfairly targeted,” said Wesley Hottot, one of Slatic’s attorneys, who points to a common refrain in the cannabis world: “Your business is legal if the local district attorney deems it legal.”
Others have faced similar prosecution. In June 2016, another cannabis operation was raided, this one in Sonoma County. Local authorities cited the manufacturing process, but declined to pursue criminal charges.
Some see the actions as opportune on the part of law enforcement, with prosecutors filing charges before more comprehensive regulations took effect.
“I don’t think we’ll see these in the future,” Hottot said. “We were seeing them in 2016 because police and prosecutors saw the writing on the wall that there was only so much time to target these legitimate businesses before their legitimacy was beyond question.”
Regarding the recovered money, a spokesperson for the DA said: “The funds ordered returned by a civil judge were previously found by a criminal judge to be tainted by criminal conduct, however the District Attorney’s Office is complying with the civil judge’s recent order.”
It didn’t help the DA’s case that the one-year statute of limitations was expiring on the personal money. But a longer statute of limitations, three years, exists for seized business assets. Slatic is unlikely to see them without a vigorous legal fight, at least until 2019.
Legal challenges to cannabis prosecutions and asset seizures are becoming more common in California, Cindrich added. Though, “historically people plead guilty because they don’t want to face going to trial and losing. That empowers the DA’s office to continue filing charges and moving forward against these individuals.”
In a strange sidebar that has not been reported elsewhere, investigators, in Slatic’s view, made the probe disturbingly personal. One year before the raid, Slatic’s son, who had been in drug rehabilitation, escaped, relapsed and fatally overdosed. Slatic says investigators piled sympathy cards he’d kept in his desk on the office floor, and placed the funeral invitation “front and center” on his desk. “That was their way of saying we know about this, and fuck you. They made it deeply personal when they attacked my family and my dead son.”
In an email, the district attorney’s office said it could not address that claim or other facts about the case because the investigation is ongoing.
A press release accompanying the recent charges seemed to address the timing of the criminal complaint, saying that the “year-long, complicated investigation faced delays both in court and out.” It quoted Dumanis as saying, “We wanted to be thorough and make sure we got it right.”
With its assets seized, Med-West was forced to shut down and to sell a portion of the building it owned. A separate case continues for the $324,000 in cash. If not for the pro-bono representation, Slatic would have given up pursuing the seized money by dint of spending more on legal fees than was at stake, he said.
Even with the money returned, the ordeal has taken its toll on the three-dozen employees who lost their jobs, not to mention Slatic himself. “My cholesterol is through the roof. I can’t sleep through the night. It’s emotionally devastating when when 17-year-old daughter cries to you about how they took your money,” Slatic said.
With the criminal charges he’s facing, the returned $100,000 could be a blip compared to the punishment—or at least the high-stakes legal proceedings—Slatic now faces.
Bruised but not deterred, Slatic launched a new company before the charges were filed. It’s still in cannabis, but this time it’s a business that only deals with intellectual property—he won’t touch the plant or derivative products. The company expected to launch a line of cannabis-infused brain supplements this summer, but the charges may complicate that. “I do intend to stay in the industry, even though my consulting business has lost two clients already because of me being charged,” he said.
Slatic promised that he wouldn’t let the threat of jail time dissuade him. “I won’t leave the industry or my activism,” he said. Nor will he drop the legal fight that began with the raid. “They made it my personal mission to fight this until the day I die.”