Feds Press California for Subpoenaed Pot Licensing Docs

By Hilary Corrigan
Jul 21, 2020

The U.S. Justice Department is demanding California cannabis regulators hand over documents the feds say are relevant to an investigation. The state has balked at previous requests for the documents, citing privacy and other state laws.

On Monday, Justice Department attorneys filed a petition (read it here) against California’s Bureau of Cannabis Control in U.S. District Court’s Southern District of California. It seeks a court order to make the bureau—a state agency that regulates retailers, distributors and testing labs—respond to a U.S. Drug Enforcement Administration subpoena from early this year.

The redacted subpoena demands specific documents—licenses, license application and shipping manifests—for six entities from January 2018 to the present. It does not give additional information about the referenced investigation.

In a January 2020 letter, the state regulator declined to produce the documents because the subpoena “does not specify the relevancy,” and seeks information that is confidential, protected, and part of pending licensing investigations.

“The BCC has not complied with the subpoena and informed the United States multiple times that it will not produce the requested documents,” the new filing states. “The United States has made all efforts to obtain compliance short of litigation, but the BCC refuses to comply with the Subpoena.”

The Bureau has not yet been served with the new filing, and a spokesperson had no immediate comment. A spokesperson for the U.S. Attorney’s Office, representing DEA, said the agency was not doing interviews.

“Federal law, not state law, controls.”

In its filing, the DEA argues it has authority to investigate, and that the Controlled Substances Act empowers it to issue administrative subpoenas relevant to investigations. The redacted subpoena seeks documents related to three unspecified corporations and each corporation’s presumed owner.

In the filing, DEA discounts the bureau’s argument that state laws prevent it from handing over the materials. DEA said those laws don’t apply to the federal law enforcement agency. It states, “When state law does contradict federal law that requires production, federal law, not state law, controls.”

The bureau’s redacted January letter argued that the subpoena sought confidential information not subject to disclosure. Application materials contain private information, including social security numbers, dates of birth, loan and revenue disclosures protected by California state law.

Erik Hultstrom, a board member of industry group Southern California Coalition and founder of L.A. cannabis producer Legacy Strains, said any time the federal government gets involved is a cause for concern for the industry. But this could be a legitimate investigation, he said. And it’s been many years since any federal “blanket crack-down.”

“Maybe there’s not much to worry about,” Hultstrom said. “It’s just kind of wait-and-see.”

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