Cole Memorandum Provides Less Security for Tribes than Initially Anticipated

By: Gabriela Rios | Law Clerk | gabriela.rios@procopio.com
Theodore J. Griswold | Partner | ted.griswold@procopio.com

Tribes who have attempted to pursue cannabis cultivation and have taken steps necessary to avoid the eight enforcement priorities of the Cole Memorandum are finding out that those eight priorities are not deterring federal enforcement to the extent anticipated. In April 2015 article 40 Questions Tribal Governments Should Consider When Discussing Whether to Undertake a Cannabis Business, the blog included this question: “Does Department of Justice (DOJ) Policy Statement mark a permanent shift in policy that you can rely on?” Recent raids in Indian Country may answer that question in the negative.

It is well understood that the Cole Memorandum did nothing to legalize marijuana cultivation on Indian reservations. However, its intent seemed to put tribes on an equal footing with the states in terms of the DOJ’s hands-off approach for certain operations, while diverting federal resources to those operations that pose more significant threats to public health and safety, such as those that involve or fund criminal organizations.

Rather than limit discretionary enforcement, the Cole Memorandum is being used as a basis for enforcement.  Several tribes have attempted to cultivate marijuana for recreational use or even industrial hemp for research purposes, only to be confronted with significant opposition by federal and state authorities. Most recently, the federal government raided the Menominee Reservation in Wisconsin for allegedly growing marijuana, despite the tribe’s insistence it was growing industrial hemp in accordance with the Farm Bill of 2014. Whether it was marijuana or hemp, the raid offers insight into the Drug Enforcement Administration’s (DEA) concerns regarding marijuana cultivation on reservations and the effect, if any, of the Cole Memorandum.

Despite tribes’ best efforts to comply with the Cole Memorandum, DEA officials seem willing to stretch those enforcement priorities to encompass any conceivable scenario, giving them the broadest possible interpretation, and raising doubts about the purpose and effectiveness of the memorandum. DEA officials pointed to two priorities under the Cole Memorandum within the affidavit in support of the warrant to search the Menominee operation. The first was a reference to health and safety concerns stating: “All points of ventilation were closed except the front door which Brian Goldstein advised that it needs to stay shut. Workers hanging up the green leafy substance up in the drying facility had no protective equipment on nor had breathing apparatus. This is a health and safety concern for the community and individuals associated with the operation, which is in violation of one of the enumerated priorities listed in Cole Memorandum regarding adverse public health concerns of marijuana cultivation.” The application of the Cole Memorandum Priorities to worker health and safety is surprising considering the priority actually reads: “preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use.”

The second priority identified was “preventing the diversion of marijuana from states where marijuana is legal in some form to other states.” Relying on this priority, the DEA officials repeatedly pointed out that the consultant for the operation was a white, non-tribal member from Colorado. According to the DEA, his non-native status and his Colorado citizenship triggered the Cole Memorandum priority “regarding the diversion of marijuana from states where marijuana is legal in some form to other states, [in] this case Wisconsin where marijuana cultivation is illegal in all forms.”

The rationale for the search and seizure creates additional questions for tribes considering cannabis cultivation: Must they only hire Native Consultants and/or must those consultants be from a state where marijuana is legal in some form to avoid enforcement action by the DEA? What standards of health and safety for workers should be followed? The uncertainty of enforcement action has led one tribe, the Flandreau Sioux Tribe, to suspend its operation—burning its crop rather than risk a raid by federal law enforcement.

The DOJ Policy Statement is part of a larger discussion on the legalization of cannabis and hemp. It application, however, should be seen for what it is­—a prioritization of enforcement. As such, it is important for tribes to be aware of the evolving standards and applications of the Cole Memorandum Priorities by federal law enforcement to better assess the potential risk to the tribe and to protect future cannabis ventures.

Gabriela is a citizen of the Cahuilla Band of Indians and currently clerking for Procopio. She graduated from the James E. Rogers College of Law at the University of Arizona in 2015 and is awaiting July California bar results.

Ted is head of the Native American Law practice group and primary editor for the Blogging Circle. Connect with Ted at ted.griswold@procopio.com and 619.515.3277

Beware of Illicit Marijuana Grown on Tribal Lands

By: Hazel Ocampo | Associate | hazel.ocampo@procopio.com
Theodore J. Griswold | Partner | ted.griswold@procopio.com

 

Tribal lands are in danger of becoming the target for illicit marijuana grows, which may expose Tribes to hefty fines. Last year, the state of California experienced a massive growth of marijuana cultivation by illicit operations on public forest and park land.

In response, Governor Jerry Brown signed into law Senate Bill 165, authorizing severe civil fines against unauthorized marijuana grows causing damage to land managed by the United States Bureau of Land Management, and other state and federal agencies. The law recognizes that illicit marijuana grows lead to water theft and resource degradation. Last year, illicit marijuana growers diverted 5 million gallons of water from rivers and streams, introduced toxic pesticides, and caused the unauthorized discharge of waste into state waterways.

The new law attempts to curtail the harmful environmental consequences resulting from illicit marijuana grow sites. The law permits fines of up to $40,000 for the illegal dumping of hazardous materials into rivers or streams, and up to $10,000 for the unlawful diversion or obstruction of streams or rivers in connection to illicit marijuana grows. These fines will be assessed by courts and by the State Department of Fish and Wildlife.

So what does this have to do with Native American lands? Potential unintended consequences with steep fines looming for illicit cultivation on state public lands, growers will be looking for a new “safe haven” to grow their product. In many instances, they may be looking at tribal lands as that “safe haven,” which can be a significant detriment to an unknowing tribal community. The best defense for tribal governments is awareness, diligence and the creation of their own protective measures so that illicit growers can be efficiently expelled.

Hazel is an Associate on the environmental team at Procopio as well as an active member of Procopio’s Native American Practice Group. Her practice focuses on environmental law, including climate change, clean technology and sustainability. Hazel regularly assists state and federal government agencies on project permitting involving the California Environmental Quality Act (CEQA) and the National Environmental Policy Act (NEPA). She also represents businesses and individuals on permitting, compliance and enforcement matters under the Clean Air Act, the Clean Water Act, Superfund and the Endangered Species Act.

Ted is head of the Native American Law Practice Group and primary editor for the Blogging Circle. Connect with Ted at ted.griswold@procopio.com and 619.515.3277.

Navigating the Marijuana Minefield in Indian Country

By: Theodore J. Griswold | Partner | ted.griswold@procopio.com
Stephanie A. Conduff | Attorney | stephanie.conduff@procopio.com

Yes, marijuana in Indian Country is illegal. You can get raided. Ask the Alturas Indian Rancheria and the Pit River Tribe in California. They were both raided by the Bureau of Indian Affairs (BIA) and the Drug Enforcement Administration (DEA) earlier this week. The agencies seized more than 12,000 marijuana plants and 100 pounds of processed marijuana.

In the raid they didn’t take tribal property, and there aren’t any federal charges pending. That seems like a pretty good day in Indian Country. I guess if you are the foreign national who put up all the cash to grow the plants, then you are likely pretty angry that the BIA and DEA have all of your profit in evidence bags across town. But, for the tribal government I would think that you may start thinking about bringing back your event center and closing up the cultivation shop.

The US Attorney’s Office consulted with members and representatives of both tribal governments on multiple occasions, and reminded the tribal governments that the cultivation of marijuana is still illegal under federal law and that anyone engaging in such activity did so at the risk of enforcement action. Usually raids are less consultative and more kick-in-the-door-this-is-going-down.

One of the major misconceptions in Indian Country right now is about prosecutorial discretion. It is just that…discretion.  And it can change like the winds.  Or like political parties change.  So just how much do tribal governments want to invest in social, political and financial capital?

According to the US Attorney’s office, the search warrants and seizures are part of an ongoing investigation relating to the financing and management of the commercial marijuana-cultivation projects. The concerns that led to the investigation were not disclosed. So is this about growing marijuana? Or about business dealings?

Here, according to search warrant affidavits, the investigation indicates that operations may have been financed by a third-party foreign national. And that leads us to another important question. Who are we choosing to do business with in Indian Country? Where are the profits going? And is this going to bring additional scrutiny in the form of prosecutorial discretion raiding tribal businesses and lands?

Or is this about the size of the operation? The US Attorney’s Office emphasized that large-scale commercial marijuana grows on tribal lands have the potential to introduce quantities of marijuana in a manner that violates federal law, is not consistent with California’s Compassionate Use Act, and undermines locally enacted marijuana regulations. Would this raid have occurred if the operation was more moderate?

So, what lessons did we learn?

Marijuana is still illegal in Indian Country. And, if tribal governments are going to pursue this as an economic development diversification strategy, then they should be mindful of the consultative conversations with the DEA and BIA which are required under the prosecutorial discretion and know who is involved in financing their start-up capital. It matters.

Ted is head of the Native American Law practice group and primary editor for the Blogging Circle. Connect with Ted at ted.griswold@procopio.com and 619.515.3277.

Stephanie is a member of the firm’s Real Estate and Environmental Team and a member of the Native American Law practice group. She provides advice and strategic policy analysis on national regulatory issues and advises clients of the legal and policy issues.

40 Questions Tribal Governments Should Consider When Discussing Whether to Undertake a Cannabis Business

By: Theodore J. Griswold | Partner | ted.griswold@procopio.com
Stephanie Conduff | Law Clerk | stephanie.conduff@procopio.com

The prospects of cannabis cultivation and sales in Indian Country are hot topics, with uncertainty the part of every conversation. The immediate discussions regarding the business of Tribal cannabis development often creates more questions than it does solutions for Indian Country. But is your Tribal Government asking all of the right questions?

With the Department of Justice’s (DOJ) October 2014 Policy Statement, Tribal Governments find themselves in a changing legal landscape, and it is likely to change even more in the coming months and years. Just last week, the Senate introduced legislation that hinted to the intent of Congress regarding increasing cannabis availability throughout the Veteran’s Administration (here).

With the uncertain atmosphere surrounding the Tribal cannabis industry, we thought that it would be good to issue-spot some of the formative questions that a Tribal Government should be discussing as they consider new opportunities within the cannabis industry. These are not comprehensive, but hopefully they will start the conversation as you identify the primary concerns within your community.

40 Questions Tribal Governments Should Consider

Reliability Questions

1. The DOJ Policy does not legalize cannabis use or sale—it uses prosecutorial discretion to create a policy of tolerance. Does the DOJ Policy Statement mark a permanent shift in policy that you can rely on?
2. Is there a risk of that Policy changing with a Presidential or Congressional change?

Legal Questions 

3. Is your state a Public Law 280 state? How does Public Law 280 affect the legality of the business?

4. If the Tribal Government sells the cannabis in an edible form or in other packaged forms, are there other federal laws that apply?

5. If your business is enforced against, are your assets safe? How can you protect your assets from forfeiture proceedings?

6. If this DOJ industry tolerance is deemed illegal, are the contracts with vendors, consultants, and others in the cannabis business matters enforceable?

7. Is the Tribal Government willing to agree to limited waivers of sovereign immunity in your contracts?

Tribal Policy Questions

8. Many Tribal Governments take steps to protect the youth from drug paraphernalia or references in the community. Will the cannabis business confuse your message?

9. Will you allow a cannabis business advertising like shirts, pens and other things that youth can wear or take to school? Or what will your public service campaign look like for tribal youth?

10. How will you conduct Tribal drug testing of employees if you have a Tribal Code that regulates cannabis use in the Tribal Government’s jurisdiction?

11. What other employee policies will have to change in response to these Tribal laws?

12. Will employees working in the cannabis business or using the business be eligible to drive federal General Services Administration (GSA) fleet vehicles?

13. Do you have a Tribal Controlled Substances Code, and what is required to ensure your Tribal Government is being mindful of the Department of Justice (DOJ) memorandum?

14. How will this affect Tribal elders, Tribal youth, and other citizens?

15. What internal controls will you have in your businesses to control the handling of cannabis products and cash?
16. What specific steps do you need to take to regulate and then operate/allow cannabis business on the Tribal land?

17. Are you interested in marketing cannabis? Growing cannabis? Or both? These actions are very different endeavors and are treated differently by the DOJ policy.

Health and Safety Questions

18. The Tribal Government has a responsibility for public safety. How will you ensure safe grows and the safety of your firefighters, or Fire Dancers?

19. What is your security plan for the business, its facilities and operations and the employees?

20. Will you create a “cannabis card” or registration process to be able to track product flow and destination?

21. If this is a cash business, how will cash be handled? Will you allow armed guards on Tribal land?

Relationship Questions

22. Neighbors and others who have opposed gaming or economic ventures may oppose cannabis development. Who are your local adversaries and how will they complicate your business? Will they pursue the federal, county or state government to regulate you?

23. Will this affect your relationship on Capitol Hill and with Congress on any future appropriations?

24. Will this affect other federal grants or programs that you are operating which have drug testing or other behavioral requirements?

25. How will you screen those who want to do business with the Tribal government?

26. What processes are you going to use to ensure the contracting is done consistent with Tribal law and with Tribal transparency (i.e. following Request for Proposals, Native Preference, etc.)?

27. Does a cannabis business require Secretarial Approval through the Department of Interior for land use or business agreements?

28. Are any of the financing or cannabis business agreements considered management contracts under the NIGA?

29. Is there a reason to compact with the state to share in the tax revenues to ensure a “safe harbor”?

30. Will you sell products at a lower price because of lower taxation within the Tribal Governments’ jurisdiction like in tobacco sales?

31. Will you use the tax revenue for a specific health community need to offset social impacts?

32. Is this a political issue for tribal leadership that could divide the Tribal citizens or lead to political instability?

Practical Questions

33. There may be large amounts of cash that the Tribal Government cannot deposit into a bank because of current banking regulations. Where will you keep the money? Will you use armored cars? How will you handle cash and product transportation?

34. Can the cash received from the remittance of taxes be handled differently from the business profits relative to banking deposits?

35. The Tribal Government may need to create physical barriers, like bulletproof glass, at the point of sale or place where taxes are remitted in cash. What type of security will be necessary at the site to protect Tribal employees?

36. Given the cash dependency, the Tribal Government may be under increased scrutiny by the IRS and other investigative entities in the federal government. Do you want to invite this increased security? How will you prepare for such potential auditing?

37. Banking institutions have federal restrictions on deposits from “illegal” businesses. Who will you bank with now and will they accept your deposits?

38. The Tribal Government may have issues with their 401(k) provider, insurance carrier, and other benefits providers. Will these affect your insurance carrier and coverage rates?

39. This is a new industry–are the other consultants, dispensaries, and others interesting in doing business with the tribal government ethical, trustworthy and established?

40. History has shown us that new business such as gaming can be profitable for many Tribal governments, but the risk must be weighed. This industry must be approached in a similar way – with open dialogue, solid guidance, and wisdom. Who will work with you through this process?

Procopio is in a position to assist tribal governments work through these questions.

Please subscribe to our blog and you will be notified of an upcoming blog post on the: Social, Political and Cultural Ramifications of Marijuana Legalization in Indian Country.

Ted is head of the Native American Law practice group and primary editor for the Blogging Circle. Connect with Ted at ted.griswold@procopio.com and 619.515.3277.

Stephanie Conduff, a Tribal citizen, works with tribal governments and citizens on Capitol Hill on issues of regulation, self-governance, and self-determination.