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Colorado's black market thrives under a legal marijuana canopy, law enforcement tries to keep up

By: Kaitlin Durbin
May 2, 2017 Updated: May 2, 2017 at 7:44 am

No one was attempting to hide the plywood greenhouse in rural Yoder where Cuban nationals were growing 7-foot marijuana plants under the name of a man who died five months prior to a doctor extending his 99-plant grow permit.

Considering the pot operation was a 40-minute drive from Colorado Springs — out where the term “close neighbor” doesn’t apply on a county road you’d need GPS to find — hiding didn’t seem necessary.

But those involved in the illegal grow didn’t need the remote location to cloak their activity — they already felt secure under Colorado’s legal marijuana laws, according to law enforcement officers.

As constituted, those laws allow criminals to hide in plain sight, masquerading as medical marijuana patients or recreational co-ops to grow large quantities of pot they sell illegally out of state, a problem Colorado officials have acknowledged.

The makeshift grow busted on Fossinger Road in April was the perfect example, El Paso County sheriff’s Deputy Jeff Schulz said.

Drug enforcement officers had to walk away from the same grow last year because residents had legal paperwork. This year, the discovery of the fictitious licenses, which authorized well below the 475 plants found, allowed officers to search further, uncovering 22 half-pound bags of buds in vacuum-sealed packages commonly associated with drug trafficking.

“Distribution,” Schulz said, matter-of-factly.

Although about $500,000 worth of processed marijuana won’t reach its suspected illegal destination, officers hardly considered the bust a big win. The grow houses built without permit and with sketchy electric service remain intact. The four men living on the property haven’t been arrested, and even if they were, growers are always replaced, law enforcement says.

In their view, Colorado’s headlong pursuit of legal recreational and medical marijuana has created a colossal weed conundrum.

The state’s Amendment 20 allowed for extended plant counts, and Amendment 64 gave residents the right to grow it at home. If growers possess the necessary paperwork, law enforcement is forced to ignore potential criminal activity, creating an ambiguous corner of pot commerce known as “the gray market.”

In the end, law enforcement insists, it all finds its way to the black, illegal market.

“It doesn’t matter if they’re in compliance (with paperwork) or not. It’s still a scam,” Schulz said, boiling the Fossinger Road bust down to simple math. “They’re paying $1,500 in rent just for that single-wide trailer. Their January electric bill was $7,000. Then you gotta think about food, gas, cars, all that other stuff, and none of them have jobs.

“It doesn’t add up.”

Little U.N. of drug busts

The fact that people are moving to Colorado to take advantage of legalization and to make vast sums of money selling pot on the black market is a narrative repeated in police reports, federal raids and prosecutions.

In March, the federal Drug Enforcement Administration announced 23 indictments associated with marijuana raids across the Pikes Peak region, with some growers charged with funneling 300 pounds of marijuana out of the state each month.

Those rounded up in drug raids included Laotians, Vietnamese, Chinese, Russians, Cubans and even “white people from Minnesota,” Colorado Springs DEA Resident Agent in Charge Tim Scott said.

Colorado weed has been tracked to nearly every state. Neighboring states Oklahoma and Nebraska sued, claiming that Colorado cannabis was creating a huge burden for their law enforcement. The U.S. Supreme Court tossed the case.

Officials also have tracked Colorado pot through the mail. In 2014, the latest data available, the U.S. Postal Service confiscated 7,990 parcels containing about 39,301 pounds of marijuana destined for ZIP codes across the nation. To stop that steady stream of illegal green, the state has studied how so much ostensibly legal marijuana is leaking to the black market. Their answer was not complicated: home grows.

State figures compiled by the Marijuana Policy Group estimate that of the 130.3 tons of marijuana demanded by Colorado residents and tourists in 2014, 40.9 percent was supplied by channels outside the regulated market, including the black market. That percentage decreased slightly in 2015, with 27.6 percent of 148.7 metric tons coming from the unregulated and black markets. How much state-grown weed is supplying the out-of-state black market “is not a measurable number,” MPG founding partner Adam Orens said.

But state officials say they are tracking what they describe as an exploding black market through actual drug seizures.

Mark Bolton, a spokesman with Gov. John Hickenlooper’s office, said DEA data show that 4,406 plants and 2,545 pounds of processed marijuana were seized in 2015, compared with 20,031 plants and 7,260 pounds of processed marijuana in 2016.

El Paso County law enforcement officials said grows are getting so big and so prolific that they’re running out of room to store all of the evidence they seize. In April, Vargason and Gerhart stood outside a 60-foot Connex shipping container with 275 plants drying inside. All came from a single bust.

And it’s not slowing, they said.

“2015 wasn’t a really big year for marijuana grows because people didn’t understand what they were seeing. Now that people are educated, our 100 to 150 (2015) reports is now over 400,” Vargason said, explaining that most busts are initiated by citizen complaints. “2016 is going to be huge for us.”

Total numbers from last year haven’t yet been compiled.

Legislative trial and error

The Colorado General Assembly has attempted to roll back the open marijuana market that Amendments 20 and 64 inadvertently created, but it has been a game of trial and error.

A rash of home explosions in which users were attempting to use butane to extract hash oil from marijuana plants prompted legislators to define what rights are entailed in processing the plant. The butane method was banned.

Legislators also put restrictions on packaging to prevent overconsumption and marketing to children. They limited caregivers, those who grow on behalf of patients, to 99 plants and placed them under the same oversight as commercial grows.

Cities and counties, like Colorado Springs and El Paso County, tried to control the industry further by banning recreational shops and passing ordinances limiting home grows to 12 plants per residence.

But improvements to the rules are only as good as enforcement, and changes came so fast it has been hard for law enforcement to keep up, according to Greenwood Village Police Chief John Jackson, who speaks on the topic for the Colorado Association of Chiefs of Police. The association called for a moratorium on marijuana legislation last year, but it was ignored, Jackson said.

We’re building this plane while we fly at about 24,000 feet,” he said.

State and law enforcement officials are hopeful, though, that legislation might help.

House Bill 17-1220 would cap the number of plants a person can have or grow on a residential property at 16, unless the person registered with the state for up to 24 plants. It also would increase criminal penalties for offenders. House Bill 17-1221 would eliminate growing co-ops and create a grant program to help fund enforcement efforts.

If the bills pass, Taylor said, his Pueblo County Sheriff’s Office team could revisit some “pretty extensive grows” they were forced to walk away from last year. And that could be huge, he said, because if they clamp down on those exploiting the legal market, they also will make it harder to disguise the illegal.

“The black market isn’t going to dry up, but this is going to take a big bite out of the loophole,” Taylor said.

A co-sponsor of HB17-1220, Majority Leader KC Becker, D-Boulder, has additional motives.

If they can reduce the volume of illegal grows and make it riskier to operate illegally in Colorado, the state will diminish the opening for federal authorities to conduct raids and “begin interfering with our billion-dollar marijuana industry,” Becker said.

“The ‘nuclear option’ for Attorney General Jeff Sessions would be to try to shut down Colorado’s industry,” Becker said, referring to Sessions’ call for a crackdown. “That would defy the will of the voters of Colorado, deal a heavy blow to our economy and throw thousands of Coloradans out of work. … The best way to avoid the ‘nuclear option’ will be to have a clean, well-regulated industry that doesn’t tolerate criminal activity, including smuggling of marijuana to other states where it’s illegal.”

Even marijuana proponents aren’t protesting the change.

Kristi Kelly, executive director of the Marijuana Industry Group, argues the legal industry is based on strict regulations, leaving little to no room for criminal activity.

“People that follow the rules and do a good job aren’t the ones making the news,” Kelly said.

Hickenlooper is expected to sign the bills, bringing Colorado’s laws in line with other states with forms of legalized weed. Twelve states ban home grows, and the others allow residences no more than 16 plants.

“We’re trying to give law enforcement bright lines so there’s not these murky, gray rules,” Hickenlooper spokesman Bolton said.

Attracting crime?

The black market isn’t the only criminal activity legalization may have inadvertently invited into the state, some worry.

Anti-pot advocates have used controversial statistics from federally funded agencies like the Rocky Mountain High Intensity Drug Trafficking Area to charge that crime is up in the state and more Colorado kids are getting high.

Even language written into HB 17-1220 speaks to a pot-induced culture of violence: “Large-scale, multi-national crime organizations have exploited Colorado laws, rented multiple residential properties for large-scale cultivation sites, and caused an influx of human trafficking and large amounts of weapons as well as the potential for violent crimes in residential neighborhoods.”

But the latest data, including the FBI index, doesn’t support the narrative of rampant violence, and, in a twist, some say even that data is suspect.

“Proponents of marijuana will tell you that crime is down, and they’re right; and the opponents of marijuana will tell you crime is up, and they are right,” Taylor said.

It all depends on how data are captured. For most law enforcement agencies, a statistical weakness started in 2012 with the shift to the National Incident Base Reporting System, which feeds data to the FBI on eight index crimes: homicide, aggravated assault, robbery, forcible rape, burglary, larceny/theft, motor vehicle theft and arson.

That first year, agencies were inconsistent in how they logged crimes, leading stats to “go haywire,” Taylor said. Some agencies filed a single case under multiple crime headings, which made it look like crime was on the rise. Misreporting in his office caused crime to tank, Taylor said.

To better answer whether marijuana legalization is affecting crime, police have come up with formulas for tracking cases with drug connections.

In March, Colorado Springs police released information claiming “a marijuana nexus” in at least 11 of the 59 homicides reported over the past three years: 2 of 29 homicides in 2015, 8 of 22 homicides in 2016 and at least one so far in 2017. Pending prosecution kept them from identifying which homicides those were, but spokesman Lt. Howard Black said they counted only those cases where marijuana was identified as part of the motive.

Court documents brought to light at least two marijuana-motivated killings in 2016, including the first homicide of the year: Kyle Sullivan.

Sullivan was house-sitting for friends with a marijuana grow in the basement when convicted culprits Michael Durante and Daniel Newell came to steal the plants from what they thought was a vacant house. They encountered a sleeping Sullivan and slashed his throat.

Near the end of the year, Richard Allon Spanks and Haywood Eugene Miller were accused in a double shooting over a botched marijuana deal in a home on Carmel Drive. The homeowner, Eric Stone, was reportedly arguing with the suspects over price when the men shot him in the right eye and killed bystander Marcus Williams, 21, as he played video games on the couch.

Spanks and Miller went on to kill two other women, authorities say, but whether those were related to marijuana dealings has not been made public.

The Pueblo County Sheriff’s Office created a tagging system to track “marijuana-related crime.” The data show that while overall crime is trending down, the percentage of crime involving marijuana is going up — controlled substance complaints, persons crimes, property crimes, nuisance calls.

But even that data is flawed, Taylor admitted, because there are too many uncontrolled variables. There is no benchmark to compare the data, officers haven’t been consistent in reporting, populations are up, law enforcement staffing is down. Most misleading, deputies are applying the term “marijuana related,” to any situation where the drug is visible, without determining if it played a role in the crime.

So the result proves marijuana’s “existence” at crimes, “not causation,” Taylor said. It’s not being used to draw conclusions about crime trends, he said.

Jackson, Greenwood Village’s police chief, sees a clear connection between legalization and rising crime, “and anyone who tells you there’s not, they’re either naïve or not being honest with you.

“Just because we don’t have data doesn’t mean it’s not happening or a problem,” Jackson said.

Uncertain outlook

A March 2016 report on the early impacts of marijuana legalization by the Colorado Department of Public Safety hedged: “It is too early to draw any conclusions about the potential effects of marijuana legalization or commercialization on public safety, public health, or youth outcomes, and this may always be difficult due to the lack of historical data.”

In an interview with The Cannabist in March, Hickenlooper was quoted as saying legalization is “certainly not as bad as what most people thought.”

People who were using before legalization still are and people who weren’t still aren’t, he said.

Regulations also are evolving to deter unintended consequences.

“The negative factors we’re seeing less of each year and I would argue to the (U.S.) attorney general (Jeff Sessions) that the country has potential benefit to be able to see this experiment through to a natural conclusion. Let’s go a couple more years and see and get more data and really see, ‘Are we worse off or better off than we were before,’ ” Hickenlooper said in The Cannabist interview.

If an official state position could be defined, it might be: Keep tracking crime, keep busting illegal marijuana grows and keep regulating recreational use and see what really happens.

Jackson thinks that, eventually, law enforcement will be able to say: We told you so.

“I don’t know if you can get to the end punchline with this just yet,” he said. “I think 10 years from now we’ll all look back and say, ‘Ah yeah, that makes sense.’ ”

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