Richmond Confidential, the only local media that is actually doing investigative reporting, has covered a series of recent events that point to some serious problems involving Richmond’s marijuana dispensaries. I have been told that the Richmond Police Department is conducting an investigation of its own that is not likely to be completed soon due to its complexity and scope. None of this is particularly surprising due to the fact that dispensaries are an extremely lucrative all-cash business. The main thing I am interested in is collecting the potentially large amount of taxes that may be due to the City of Richmond that remain unpaid.
Richmond dispensaries hid possibly millions in sales, profited illegally, DA report finds
Jars of medical marijuana on display at a Richmond dispensary. (photo by Natalie Jones)
By Reis ThebaultPosted December 16, 2016 8:00 am
While performing an internal audit of Richmond’s medical marijuana dispensaries in 2014, accountant Kevin Harper said he saw an industry that, in his words, was operating “in the shadows.”
Banks leery of holding money used to purchase a drug still illegal under federal law forced dispensaries to deal mostly in cash, Harper said, creating the potential for corruption in the industry.
Cash transactions allow dispensaries to potentially misrepresent their profits when reporting them to the city, Harper said in an interview this month. It would be relatively easy for the dispensaries to underreport their sales, he said, and thereby pay less in Richmond business taxes. Richmond hired Harper to determine whether the dispensaries were paying the correct amount of taxes to the city, but Harper said he was unable to do so.
“None of the three collectives provided all information necessary for this audit,” he wrote in the report, dated Oct. 8, 2014.
While Harper’s audit found “no direct evidence” of tax evasion or fraud among the city’s dispensaries, those cash transactions made him suspicious, he said. A year later, another report—this one a forensic analysis conducted by the Contra Costa County District Attorney’s office—appeared to confirm his hunch. A copy of the DA report received by Richmond Confidential last month indicates that the DA’s office estimated that Richmond’s dispensaries may have concealed up to nearly $7 million in unreported sales.
The DA report, dated Sept. 10, 2015, found that Richmond’s three medical marijuana dispensaries—Green Remedy Collective, Holistic Healing Collective and 7 Stars Holistic Healing Collective—and their owners appeared to have manipulated financial data in order to profit from their sales “in direct conflict with state law.”According to state law, medical marijuana dispensaries must operate as nonprofits and the revenue generated must not exceed the amount necessary to cover the dispensary’s overhead and operating costs.
“A portion of these profits appear to have been disguised through manipulation of financial data,” concluded the report. “In addition, it appears that the members of the management team at all these dispensaries are misappropriating these profits for their own personal benefit.”
Harper’s audit and the DA report highlight the turbulent history of medical marijuana in Richmond—a new chapter of which has unfolded in recent months, as the city’s three dispensaries have battled an anti-trust lawsuit filed by another dispensary that has accused the three of monopolizing the local medical marijuana trade.
The District Attorney’s forensic analysis indicates that trouble for Richmond’s three dispensaries and their owners began years before that lawsuit was filed.
The DA’s analysis, performed by Contra Costa District Attorney Forensic Accountant Bassem Banafa with data from 2012 to 2015, identified several instances in which the dispensaries appeared to have neglected to record transactions and hidden sales from regulators.
According to the DA report, Green Remedy Collective, operating out of a location on Hilltop Mall Road, is responsible for the lion’s share of unreported sales—potentially an estimated $6 million in “receipts that have not been reported to the City of Richmond or any regulatory authority.”
The DA accountant also wrote that the data Green Remedy provided “bears strong signs of manual manipulation.” In other words, the report suggests, it is possible that even more sales were concealed.
Similarly, the data that 7 Stars Holistic Healing, located on Pierce Street, provided the DA’s office “do not appear to be an accurate reflection of their sales activity,” according to the report. The report documented nearly 1,500 instances in which the 7 Stars cash register was opened but no sale was recorded.
“The register was opened for the benefit of the security camera and the customer, and the cash was placed in an alternative location or simply pocketed by the cashier,” the report stated.
Using this method, the report indicates, the 7 Stars dispensary may have not reported nearly $900,000 in sales.
According to the report, the third dispensary, Holistic Healing Collective on San Pablo Avenue, had about $113,000 in unexplained cash transactions on their books, along with several discrepancies in receipt numbers, which, the report states, is a sign of manual data manipulation.
Natalia Thurston, Holistic Healing’s attorney, said that neither she nor her client “have ever seen or heard about an alleged report from the Contra Costa District Attorney’s Office,” but that the report’s findings sounded “false” to her.
“Holistic Healing has no accounting discrepancies, there has been no unreported income, there has been no manual data manipulation,” Thurston said.
Zeaad Handoush, one of the owners of 7 Stars, denied the report’s findings and said he hadn’t realized the DA’s office was looking into his dispensary.
“This is all a surprise,” he said in an interview. “As far as I know, to my knowledge, I’m in good standing with the city.”
An attorney for Green Remedy, Barry Himmelstein, also denied the report’s findings.
“There is no unreported income at Green Remedy,” he said, adding that the dispensary uses the software program MJ Freeway to track all sales.
“Absolutely everything goes through that system,” Himmelstein said.
Himmelstein, Handoush and Thurston each said the dispensaries have been fully compliant with past audits or requests for financial records, and that dispensary owners do not profit from their businesses.
The DA report estimates that the three dispensaries combined may have underreported their sales by a total of nearly $7 million between 2012 and 2015. That means the City of Richmond, which imposes a 5 percent tax on dispensary sales, may have been short close to $350,000 in taxes during that time.
Since 2011, when the city established the tax, dispensaries have paid Richmond about $1.7 million, said Antonio Banuelos, the city’s revenue manager. That means dispensaries may have withheld about a fifth of the total amount of money the city was due in accordance with the medical marijuana sales tax.
Yet the city was unaware of this possible loss of revenue—even though the DA report was completed more than a year ago.
“To the best of my knowledge, we haven’t received evidence of any criminal behavior,” said Richmond City Manager Bill Lindsay.
Lindsay said that if the city were presented with such evidence it would seek “back taxes, plus penalties” from the dispensaries.
Lindsay said he did remember Harper’s report and that it “raised concerns” that he thought had since been addressed. But he said he didn’t know about the DA report.
Nor did Banuelos, the city’s revenue manager.
Contra Costa District Attorney Mark Peterson confirmed, via email, that the DA report is genuine. He also said that the report is confidential and was “generated as part of a law enforcement investigation.”
Peterson said that he was concerned that publicizing the report “could cause irreparable harm to the investigation.” He did not respond to questions about how the year-old report could harm the investigation, which he did not specify was ongoing.
Court documents point to ‘pay to play’ scheme between marijuana dispensaries and City Council
Inside Richmond City Hall. File photo by Tawanda Kanhema.
By Reis ThebaultPosted November 16, 2016 11:54 am
A new set of documents filed in an ongoing court case suggest that the heads of Richmond’s three medical marijuana dispensaries may have paid City Councilmembers to back legislation favorable to the dispensaries.
The documents, which were filed with the Contra Costa Superior Court on Nov. 3 and Nov. 9, are part of a lawsuit brought by Richmond Compassionate Care Collective (RCCC) against the dispensaries, their owners, and others that the collective—a dispensary that has tried to open shop in the city for six years without success—alleges conspired to monopolize the local medical marijuana trade.
The documents, which include a series of declarations made under oath and compiled by plaintiff RCCC’s attorney in late October and the attorney for the defense in early November, give conflicting accounts of the ways in which local dispensary heads interacted with Richmond politicians, police officers and prominent community members. Plaintiffs allege backdoor dealings, greased palms and illegal payments, while the defense denies implications of bribery, saying the accusations are false and made by individuals seeking revenge.
In one of the documents, a sworn statement given to an RCCC attorney on Oct. 24, Richmond Police Sergeant Michael Rood recalled an April 2015 conversation with his colleague Detective Erik Oliver and Rebecca Vasquez, the president and executive director of Holistic Healing Collective dispensary. During this conversation, Rood said, Vasquez and an associate repeatedly bragged that they “pay the City Council to get what they want.”
At the time, Rood and Oliver were both officers in RPD’s Regulatory Unit, which oversees the city’s medical marijuana dispensaries. Declarations filed by defense attorneys suggest that Rood, whom the documents say was implicated in the case involving the woman formerly known as Celeste Guap, was later “disciplined, demoted and removed” from the unit. But records from the Richmond City Manager’s office state that as of Nov. 15, Rood is still on the city’s payroll as a sergeant. (In sworn statements submitted to the court, both Rood and Oliver stated they no longer work on the unit but did not provide reasons for their reassignments.)
According to Rood’s declaration, Vasquez said she “paid $8,000 to City Councilmembers to make certain” that an amendment to a city ordinance that would limit the available number of permits given to dispensaries “would pass.”
“I interpreted this to mean an illegal payment or a bribe to City Councilmembers,” Rood said in the statement. He added that Vasquez “did not ever try to claim that the payment was a campaign contribution.”
In an interview last week, Vasquez’s lawyer denied that Vasquez made such statements and dismissed the claims as “hearsay.” The lawyer said that Vasquez was unavailable for comment.
Other sworn statements included among the plaintiff’s documents, from RPD detective Oliver and former Holistic Healing Collective employee Nicole Hilts, specifically named sitting City Councilmembers Jael Myrick and Jovanka Beckles as recipients of questionable payments from dispensary owners.
In interviews last week, both Councilmembers emphatically denied the claims.
“I’m very offended that there is something like this that is on the record and is not true at all,” Beckles said.
Myrick too said the charges are false and that, while Richmond dispensary owners have contributed to his political campaigns, he has never received the off-the-books payouts described in the documents.
“I have never, ever taken cash contributions from any of these dispensaries,” he said.
Campaign finance filings show that in 2016, Myrick, who was reelected to City Council last week, has received about $10,000 from medical marijuana dispensaries or their proprietors—including $2,500 from Vasquez.
Campaign finance reports also show that Beckles received $500 from Vasquez in 2014.
But the court documents suggest a pattern of questionable payments to the City Council—where prominent “community organizers” decide the fate of new businesses. An Oct. 24 declaration from RCCC attorney Brad Hirsch said that one of those organizers, Antwon Cloird, told Hirsch, “you gots to pay to play.”
In the Oct. 24 declaration, Brad Hirsch described a July 2015 meeting with Jerrold Hatchett and Antwon Cloird, two Richmond community members who, he said, have “influence on the Richmond City Council.” According to Hirsch’s statement, Cloird, who is named in the lawsuit, and Hatchett (who is not) told Hirsch that if RCCC did not “pay Hatchett and Defendant Cloird to facilitate Plaintiff RCCC’s entry into the Richmond marketplace,” Cloird would again organize community opposition to the dispensary.
“Defendant Cloird advised that Hatchett would handle the political people, meaning City Councilmembers, and that he would handle the community people,” Hirsch said in the declaration.
Cloird, his attorney and Hatchett did not respond to requests for comment.
One week after the meeting with Cloird and Hatchett, Hirsch said he paid the men $15,000, according to the Oct. 24 declaration.
The documents suggest that this was not the first—or the only—time money flowed from a dispensary to a Richmond City Councilmember.
Holistic Healing Collective employee Hilts said in an Oct. 31 declaration that her boss, Vasquez, “often bragged” about her “connections” in the city. Hilts said in her sworn statement that on several occasions she saw one of Vasquez’s associates, Lisa Hirschhorn, “pick up money from Rebecca Vasquez which Lisa Hirschhorn commented was ‘for the City Council.’”
Hirschhorn, along with Vasquez, is also named in the lawsuit. Hirschhorn’s attorney did not respond to request for comment.
Hilts, who worked in Vasquez’s shop as a “budtender,” said in the declaration that anyone entering the dispensary needed to first show a medical cannabis card, then get buzzed in. But, Hilts said, when Councilmembers Myrick and Beckles came to the shop, she never saw a card.
Instead, Hilts said in her statement, Beckles and Myrick collected envelopes.
“Due to the size of the envelopes and the thickness of the item contained inside the envelope, I believed that the envelopes contained cash,” Hilts said in her declaration. “I do not believe that the envelopes contained cannabis because the cannabis is wrapped differently.”
Beckles said that she has only been to Holistic Healing Collective twice, both times for an event.
“I know for a fact that I didn’t get an envelope with cash,” Beckles said. “I have never, ever been in there to collect any kind of envelope.”
Myrick said that he has stopped by the dispensary and picked up envelopes, but that those envelopes contained checks made out to his campaign, which he later disclosed in a filing. They were legal political contributions, he said, not envelopes containing cash.
The court documents also say Vasquez left cash for Councilmembers elsewhere.
According to the Oct. 26 declaration of her former business partner, Darron Price, Vasquez in conjunction with the proprietors of Richmond’s other two dispensaries, working together under the moniker “the Group,” left money at “the hotdog stand across the street from the Richmond City Hall for unnamed City Councilmembers.”
“On one occasion, Rebecca Vasquez told me that she left $2,500 for an unnamed City Councilmember,” Price said in his declaration.
Natalia Thurston, attorney for Vasquez and Holistic Healing Collective, said each of these declarations was made by a person with “improper” and “ulterior” motives. The documents filed by lawyers for the defense—including Thurston—in response to the declarations filed by RCCC’s attorney further detail those motives.
In her own declaration, made under oath on Nov. 7 and filed by attorneys for the defense, Vasquez denied making any payments to City Councilmembers that were not reported campaign contributions.
“Neither I, nor to my knowledge, any other board member, officer, employee or agent of [Holistic Healing Collective] has given any money to Richmond City Council members except for campaign contributions that have been reported as such,” she said.
Vasquez also said in her statement that Rood sent her “numerous inappropriate and sexually suggestive text messages” while working on the Regulatory Unit and making weekly in-person visits to her dispensary. She responded to him, she said, out of fear that if she did not he would retaliate against her business’s permit.
Vasquez said that Rood was “disciplined, demoted and removed from the Regulatory Unit” in June 2016 “for his improper sexual activity with” the woman formerly known as Celeste Guap. An RPD spokesperson said that Rood and RPD detective Oliver are still city employees but declined to provide further detail or comment
on Rood’s involvement with Guap.
“The officers are still employed with the city and they’re not available for any comment regarding any ongoing civil lawsuits,” the spokesperson, Lieutenant Felix Tan, said.
City Manager Bill Lindsay, whose office oversees city departments including the police force, also declined to comment, citing state laws that prevent him from doing so.
“State law prohibits the city of Richmond from disclosing disciplinary actions or personnel records of police officers,” he said.
In her declaration, Vasquez also challenged the declarations of Price and Hilt, stating that they are two former associates acting in retaliation against her.
“All of these allegations are hearsay without any substantive evidence to back them up and they’re all being made with an improper motive to cause harm to Rebecca [Vasquez],” said Vasquez’s attorney.
In a declaration made under oath on Nov. 9, Hirschhorn also denied paying City Councilmembers. “I have never bribed or attempted to bribe any City Council members or any other federal, state or local government officials,” she said.
Hirschhorn too said that the attacks against her were “motivated by revenge.” In her declaration, she said that she had a relationship with Oliver that ended after about five years.
“At one point, I rebuffed Oliver’s sexual advances,” she said. “Ever since, Oliver has been furious with me, and has attempted to punish me.”
The RPD spokesperson declined to comment on Hirschhorn’s claim.
The next hearing in the case is scheduled for Nov. 17, at which point the court will decide whether it will move forward with the case or side with a motion to strike filed by the defendants.
RPD officer sent ‘sexually suggestive’ messages to head of a dispensary he was regulating, documents show
Richmond Police Department. File photo by Grace Oyenubi.
By Reis ThebaultPosted November 23, 2016 12:56 pm
Court documents submitted in an ongoing case indicate that Richmond Police Department Sergeant Michael Rood sent “numerous inappropriate and sexually suggestive” text messages to the head of a medical marijuana dispensary he was tasked with regulating.
The documents, submitted by both the plaintiff and the defendants in an ongoing lawsuit involving a group of medical marijuana dispensaries, were filed with the Contra Costa Superior Court on Nov. 3 and Nov. 9. Rood is a top-paid officer who has also been implicated in the case involving the woman formerly known as Celeste Guap.
The documents include a Nov. 7 declaration, a statement given under penalty of perjury, by Rebecca Vasquez, president and executive director of dispensary Holistic Healing Collective, in which she said that Rood sent her “inappropriate” text messages from January 2014 until March 2016. Rood stopped, she said, when he found out she was pregnant. (He is not the father of Vasquez’s child, her attorney said.)
At the time, Rood was assigned to the city’s Regulatory Unit, which is responsible for ensuring medical marijuana dispensaries comply with Richmond ordinances. Rood worked on the Regulatory Unit from January 2014 to August 2016.
An RPD spokesperson declined repeated requests for comment and said that Rood was unavailable for comment.
Vasquez was also unavailable for comment, according to her attorney.
In her sworn statement, Vasquez said she responded to Rood’s messages because she was afraid that if she didn’t, he would “take retaliatory action” against her dispensary permit.
Rood frequently texted and called Vasquez, she said, in addition to visiting her shop.
Vasquez provided the court with screenshots of text message exchanges between her and a contact named “Sgt Rood” in 2015. The contact makes reference to Vasquez’s “nice ass” and “sexy feet,” and, in a series of messages, his “love” for Vasquez.
In an Oct. 24 declaration for the same case—in which Vasquez is a defendant—Rood stated under oath that, “During my two and a half years as the Regulatory Unit Sergeant, I came to know most of the named defendants in this case. I had multiple face to face meetings and conversations with many of the defendants.”
Rood also said in the declaration that he had “multiple conversations and meetings” with Vasquez, but he did not mention text messages or phone calls.
In her declaration, Vasquez said that she “decided not to report the inappropriate text messages” after Rood was replaced with a female officer in June and she no longer feared his retaliation.
Rood said in his declaration that he “remained as the Regulatory Unit Sergeant until August 2016 when I was reassigned to patrol.” Vasquez’s declaration, however, says that Rood “was disciplined, demoted and removed from the Regulatory Unit” in June for his “improper sexual activity” with Guap.
In an email this week, Vasquez’s attorney, Natalia Thurston, said that Vasquez learned this from “news reports,” adding that it was “public knowledge” that Rood “was removed from the regulatory unit at the same time that he was implicated in the Celeste Guap case.”
In an interview with the Bay Area News Group—which includes The Mercury News and the East Bay Times—published on June 30, Guap said that Rood was among the officers with whom she had “sex or sexual contact” after she turned 18.
Both the RPD and the Richmond City Manager’s office declined to confirm or deny Rood’s involvement in the Guap case. City Manager Bill Lindsay said that state law prohibits the city from “disclosing disciplinary actions or personnel records of police officers.”
Rood is a 17-year veteran of the RPD and one of department’s best-paid officers, set to make more than $165,000 this year, according to city payroll documents.
A graduate of De Anza High School, he was hired as a full-time officer in August 1999 after attending the police academy and, a few years before that, Contra Costa Community College. In his declaration, Rood said that he has worked several beats on the RPD, including patrol and homicide detective.
This is not the only controversy that Rood has faced during his nearly two-decade tenure on the city’s police force.
In 2012, according to local news reports, Rood was criticized for a violent post on Twitter. Later that same year, Richmond Confidential reported that Rood had admitted to using fake evidence during interrogation of a murder suspect.
The year before both incidents, Rood had been promoted to sergeant.
In a Nov. 17 hearing on the ongoing case involving the dispensaries—which is an anti-trust lawsuit that alleges three Richmond dispensaries are illegally monopolizing the market—Judge Barry P. Goode said the documents would not be considered in the current case as they introduce allegations that were not in the original complaint.