"Eat your green beans or there'll be 6 weeks of solitary!"
Seems Attorney General Jeff Sessions is still debating how to prosecute federal marijuana laws in states with legal weed, if his March 9th interview with Hugh Hewitt is any indication. We’re guessing AG Sessions doesn’t read the D9S blog, so he didn’t catch the recent post we wrote about a Heritage Foundation briefing published in the Daily Signal in which the author, senior legal fellow Cully Stimson, obsequiously laid out an 11-point roadmap for the the Trump administration to start prosecuting cannabis businesses.
As if they needed any help.
Amongst other items in the plan there was one item, right in the middle, that nearly escaped our attention here: step 6 in what we’re calling the “Cully Memo” calls for the selective prosecution of some ”large, well-funded marijuana businesses [which] are in violation of both state and federal marijuana [production/distribution] laws and prosecute both their management/operators and financiers.“
That’s right – the financiers. It’s from the French, for “a delicious cake”. Or, depending on the dialect, “a surprisingly large group of people”.
The thing with marijuana investing is that it isn’t happening the way Cully may be envisioning it; investors in cannabis businesses do not place their capital by using bag men with suitcases full of unmarked, non-sequentially numbered bills (although the general lack of available banking services does necessitate that cannabusinesses overall have a larger share of cash dealings than most any other consumer or medical product category, both pre- and post-sale).
The investments aren’t structured like Tony Soprano’s $50k “mezzanine loan” to his childhood friend Artie Bucco – there’s no weekly “vig” and no danger of busted kneecaps for anyone involved. The companies are public in many cases, and the investors – the financiers - are just as likely to be a Californian as they are CalPERS, as likely to be John Q. Public as a publicly traded mutual fund managed by Blackrock or Ameriprise or Fidelity, all of whom have investments in public cannabis stocks.
And all of whom could, in theory, be exposing their own investors to the very criminal prosecution Cully suggests, because an investor in a mutual fund that bought a cannabis stock may not be insulated, criminally speaking, from federal prosecution. At the Cannabis World Congress & Business Expo in New York in 2015, Rose Law Group partner Ryan Hurley was circumspect, saying he could not guarantee 100% protection from federal prosecution for any client investing in cannabis.
"This is still federally illegal," he told CNBC in a follow up interview "I get a lot of people who come in and talk to me because I'm a lawyer. Can I set up some corporate structure to protect them? They can still go to jail for doing this. It's the number one thing to keep in mind."
If no corporate structure exists to protect investors, it seems Cully would have the federal government prosecute everyone who ever held either a direct or pooled investment in a public cannabis issue. It could mean your colleagues with 401k investments, your neighbors with the annuities they own, it could mean your dear Granny with her retirement nest egg…heck, it might even mean you and I.
And in what we think is the ultimate irony, it could very well mean Cully Stimson himself.
How well do you know your own retirement plan holdings, Cully?
Dan Ogden is a 20+ year veteran of the executive search industry, having covered operations, regulatory and consulting verticals within capital markets as well as data science, data analytics and, more recently, the cannabis industry within search firm and internal corporate HR leadership roles. Dan is Principal of the practice at Delta 9, the Western Hemisphere's' only dedicated cannabis industry executive search firm. To find out how Delta 9's proprietary, trademarked end-to-end recruiting methodology can help you find the key executives to make your company thrive and grow in the cannabis industry, shoot us an email, or give us a ring at 212.390.8190.