Legal Pot in California in 2010? "Oaksterdam" Provides the Model

There is a buzz moving through the culture, as the public attitudes around cannabis use are rapidly shifting, that the legalization of marijuana in some states, particularly California, is a growing possibility.

Recent polling by Zogby in May demonstrated that a majority of Americans, say it "makes sense to tax and regulate" marijuana. The Zogby poll, commissioned by the conservative-oriented O'Leary Report, found 52 percent in favor of legalization, only 37 percent opposed. As Ryan Grim reports on the Huffington Post , a previous ABC News/Washington Post poll found 46 percent in support. In California, a Field Poll found 56 percent backing legalization and as a result California Gov. Arnold Schwarzenegger called for an open debate on legalization, all which suggest that American society may be reaching a tipping point when it comes to legal pot.

An array of new circumstances -- Democrats in power, economic recession leaving states starving for revenue that could come from taxing cannabis sales, less funds for law enforcement and Mexican drug operatives moving into the US to grow huge amounts of untaxed pot, contributing to the horrible drug violence South of the Border -- support the growing public support for legalization of pot.

Anther element perhaps pushing changes to our pot laws is the gaggle of strange bed fellows who are outspoken on the issue. Former Secretary of State George Shultz and the late conservative economist Milton Friedman have been for legalization for years. But recently Fox News' latest conservative wild man Glenn Beck and CNN's much more reasonable Jack Cafferty have publicly questioned the billions spent each year fighting the endless war against drugs. They are joining the growing chorus that suggest it now makes more financial and social sense to tax and regulate marijuana.

At the epicenter of legal pot talk and strategic political action is Richard Lee, a highly successful pot entrepreneur, who over the past decade has turned the "uptown" entertainment area of downtown Oakland, California into what many call Oaksterdam, a play on Amsterdam, their sister city in Holland. A centerpiece of the Oakland transformation is Oaksterdam University which Lee founded to prepare people for jobs in the cannabis industry. As he told MSNBC, "my basic idea is to professionalize the industry, and have it taken seriously just like beer and distilling hard liquor." The University, along with half a dozen other "cannabis businesses," controlled by Lee bring thousands of visitors to Oakland daily.

California Pot Legalization Initiative

And it was Richard Lee who raised eyebrows among many last week, including some in the "drug reform establishment," when he announced an effort to qualify for the California statewide ballot in November of 2010, The Control, Regulate and Tax Cannabis Act of 2010, the first major statewide initiative designed to legalize marijuana for personal use.

Lee and TaxCannabis2010.org, the newly minted organization he started to push the initiative, calls for the legalization of small amounts of marijuana for personal possession by adults 21 and older, and allows cities and counties the option of regulating sales and cultivation. The legal amount would be 1 ounce for personal possession, with cultivation allowed in a space no larger than 5 feet by 5 feet.

Lee feels very strongly that the tide has turned among the public as the polls indicate. "This will be a landmark opportunity that will generate interest and funds nationwide," he said. If successful, the initiative will be viewed as a watershed "a first step in changing federal law."

Lee's group plans to send the initiative to California Attorney General Jerry Brown in July for the summary and title oversight required by law. Signature gathering will begin in August, with 650,000 signatures required by January to make the November 2010 ballot. An efficient political operation, with paid signature gatherers, as well as thousands of volunteers is expected.

Recently I spent a morning in Oakland with Lee touring the array of facilities that make up his Oaksterdam network, including his ownership of seven buildings in a few block radius. The fact that Lee is at the center of the legalization action is not a surprise, given his drive, passion and obvious business skills. In fact, it is tempting to say after spending time with the whip smart political advocate and businessman, that I have seen the pot future and it is Richard Lee and Oaksterdam.

Lee is not exactly a household word in political and drug reform circles. But based on his current media attention -- including Geraldo, MSNBC, and tons of print articles, he very soon will be the person most associated with pot legalization in America. Lee is no "Johnny come-lately," either. Over the past decade, he has taken major strides in building a cannabis business empire in the entertainment section of Oakland which includes new bars, restaurants, a rash of new highly designed condos, the popular Paramount Theatre, and the spectacular renovation of the famous Fox Theater, which lay dormant for many years. Lee joked that he heard that when the Allman Bothers Band played in Oakland recently, that the Fox enjoyed the pungent smell of pot smoke, a welcome sign for the area to be pot friendly. Much of the downtown growth effort comes from initiatives begun when Jerry Brown, now Attorney General and candidate for governor, was Mayor.

Lee also has a number of political successes under his belt. In fact in the next few weeks, Oakland voters will be voting on a July special election mail-in ballot that includes Measure F, which would make their city the first in the nation to establish a new tax rate for "cannabis businesses." If the measure is approved, Oakland medical marijuana businesses, which generate an estimated $20 million annually in sales - and are now charged at the general tax rate of $1.20 per $1,000 gross receipts - would see that rate raised to $18 per $1,000, a 15-fold increase.

According the Carla Marinucci, reporting for the San Francisco Chronicle, the measure was supported enthusiastically by Lee and overseers of other city medical marijuana dispensaries as one that could contribute more than $400,000 a year to city coffers while also giving the medical marijuana businesses an increasingly mainstream profile in a major city.

Another ballot success has been Measure Z, which passed by Oakland voters 64- 36 in 2004. Measure Z gave Lee and many local pot advocates some serious maneuvering room, attempting to effectively legalize marijuana use in the city. More than 30,000 Oakland residents signed petitions to put Z on the ballot which asked Oakland Police to put all other criminal activity before the prosecution of pot users and requested city officials to advocate legalization of adult marijuana use statewide.

Since then Lee has been very busy. Prior to sitting for an interview Lee took me on a tour of his terrain. I almost had to break into a trot to keep up with Lee's speeding wheelchair covering a lot of ground quickly. As we tooled down 15th street, he pointed out the three buildings he already owns on the street and his fantasy of turning the block into a traffic-less mall, with coffee shops ( cafes where pot buying and smoking is legal) a la Amsterdam. "This is our Project Street. It is a couple of blocks long with not much traffic so the idea is to close it down during the day. In Amsterdam, streets are narrow with wider sidewalks, the opposite of things here."

Besides Oaksterdam U, which appears to be thriving, Leestarted the Bulldog Cafe (named after a famous collection of Amsterdam coffeehouses), and owns a pot growing and equipment store where there are a range of high tech machines for making hash, and powerful microscopes for a super enhanced view of the beauty of the pot plant -- in this case "white widow" which the crystals in the pot plant give off a jewel like glow. Near by is a cannabis novelty store with hundreds of cool and corny pot tschockes, T-shirts and the like, soon to be a cannabis museum (like the one in Amsterdam, of course), Lee also has a glass blowing studio and an advertising agency-- all the better to promote his varied operations (e.g. Lee advertises for Oaksterdam U. at concerts at the Shoreline Amphitheatre.) And finally, la piece de resistance, a pot growing warehouse, with many dozens of beautiful and pungent green plants thriving under the warm glow of grow lights. Lee proudly points out his specialties including "white rhino" and "casey jones" -- which are sold at the Blue Sky Cafe, his medical pot dispensary, a block away.

While visiting the Blue Sky, I hear testimony from a woman who owns a shop next store, who is eager to share how her business has grown with the new found traffic to the dispensary. All of this is designed to show that cannabis business can be a popular and responsible business model that can help transform downtown Oakland, which while improving, can certainly use more of a boost. I sat down with Lee to discuss both the big picture of pot and drug politics, as well as his experience in Oakland, creating a visionary model for creative cannabis thinking:

Don Hazen: Gil Kerlikowske, Obama’s new drug czar, said the concept of the war against drugs -- that we are at war with our own people -- must end. Were you surprised by that?

Richard Lee: No, but I think it’s easy to say it; it’s another thing to actually do it. So hopefully it’s a first step, a change of attitude from more of a ‘police law enforcement to help’ approach, which would be a good thing.

It’s like what Ethan Nadleman ( head of the Drug Policy Alliance) says; significant drug reform is like turning around a super tanker ... .but the point is that it is starting to turn. You don’t expect it to turn around on a dime; there’s lots to it. From my perspective it’s a war between drugs, and it is drugism -- which is, people thinking that their drug is better than other peoples. It is like racism -- people thinking their race is better than other people’s race. Here people discriminate based on their substance of choice. The alcoholic drinkers think they’re better than cannabis consumers.

Just like racism didn’t end with the 1964 Civil Rights Act, drugism won’t end with cannabis legalization. We’ve built up a whole generation of hate and prejudice. You have cops who still say “we don’t believe in medical marijuana, we don’t care how many people vote for it, how you change the laws; we’re going to do what we believe in,” and changing that is going to take quite a long time.

DH: So what is pushing the change? Is it that the states need revenue, there are going to be fewer cops, less people in prison, people want to put a crimp in their Mexican Cartels which benefit from pot being illegal in the States?

RL: Mexico just decriminalized pot -- did you hear about that?

DH: No, really.

RL: Yep. The new President signed it, and Vicente Fox (Quesada), the ex president, just went on the media saying it’s time to look at and debate legalizing. He’s the one that put the original bill to legalize small amounts two years ago; and you remember the fire storm that happened with Bush. They all jumped down their throats and he said, "OH! THAT’S CRAZINESS! WHO WOULD EVER CALL FOR THIS?!?!" This time, the new bill just went right through; no muss, no fuss -- nobody said a word and nobody’s debating it.

DH: How do the Mexican Cartels work in the United States? Do they grow pot here?

RL: I think cartel is a media word to make it sound scarier -- Cartel is supposed to be a monopolistic organization that controls the total market of something; like OPEC, to control the price of oil by cutting production, getting all its’ members to reduce the flow of oil. There’s nothing like that with this business. There are too many producers, too many different companies, so there is no cartel, first of all. Now --  there may be business people or cannabis producers (whatever you call them) who are Mexican decent here growing -- that’s what we’ve seen in the past couple years, is the big plantation growers instead of hippies with a couple hundred plants; you’ve got guys with thousands … tens of thousands.

DH: But is that mostly on their own land?

RL: No ... no -- that’s part of the point. Possibly one of the reasons they’re doing it here is that after 9/11, security borders have gotten a little bit tougher, and so if they grow it here, they don’t have to worry about smuggling it across. It’s already here.

DH: One question I don’t see discussed very much, is the difference between legalization and decriminalization.

RL: “Decrim” doesn’t really do anything. We’ve had decrim in what, a dozen states? ... including California since the 1970’s, which makes like a hundred dollar fine for under an ounce and it’s not an arrestable offense, like a parking ticket or a speeding ticket -- that’s what decrim is. It does something for the people that aren’t getting arrested. It’s a good thing for them. But it doesn’t do anything to deal with the black-market crime because it doesn’t address sales, cultivation ... anything. As a matter of fact, alcohol prohibition was “decrim”. Did you know that? Alcohol was only illegal to be made or transported or sold -- you could possess all you wanted on a personal level ... so your can see all of the crime and violence -- Tommy Gun-Al Capone, that came with that “decrim”. That’s why anyone who is serious about drug reform really hates decrim, because you can see how it could be used against reformers -- when they say, “Well, we decrimmed and then there was still all of this violence -- see? “ It doesn’t do any good.

DH: Do you have worries that with legalization that the corporations are going to come in and dominate the market with massive amounts of marketing dollars?

RL: It’ll be just like the wine industry. You may have some Ernst & Julio Gallo that’s out there in supermarkets for the lower ... you know -- like Mad Dog 20/20 and Boon’s Farm ... the low quality stuff. And then I think a lot of it would be like the wine industry with little boutique wineries and people liking very specific tastes and flavors. My big thing is to get the people out of the prisons and to stop the injustice. All of the rest of the shit is just whiny stuff.

DH: What about the urban legend of cigarette companies patenting the names of legendary pot strains. Is that true?

RL: I don’t know. I don’t care, If they all get on our side to legalize pot that would be more power to em’. That’d be great to have them on our side instead of fighting against us. Lobbies that are against us are the alcohol and pharmaceuticals because we’re in competition. Like I said; I see it as a war between drugs: it’s the alcohol axis powers vs. the cannabis-hemp allied forces.

DH: What about jobs? Everybody talks about green jobs. Isn’t this a way to have green jobs?

RL: Definitely ... and there are a lot of jobs that are already there, but they are not above ground. There are no income taxes being paid, no workman’s comp insurance, no unemployment insurance. The big deal is to get these businesses that are currently cash, underground businesses, above ground. People don’t have the social safety net that they would if they were in a regular job. That’s what we (Oaksterdam Univ. etc. ) do, by the way. We have health insurance; we have 43 employees now who have health and dental. We pay about $300,000 in sales tax every year and about a half a million on all our payroll income taxes combined.

DH: Is anybody making the green jobs argument?

RL: Nah ... It’s been a big breakthrough just to get people to talk about pot and Oaksterdam. The media has changed just lately to take the issue seriously, and the economic benefits seriously -- that’s been the first thing. I’m just trying to get the direct sales tax numbers out there. But the other thing is the other indirect taxes and businesses that will be legitimized and spring up from the cannabis business. When I go to Amsterdam, I spend more on hotels, airfare, food and taxis than I do on cannabis and seeds. When people go to the Blue Sky Coffee Shop and they get smoothies, or whatever -- that’s the kind of business that can be created for tourism. California can be first before the rest of the country, much like Las Vegas and Atlantic City preceded the Lotteries and River Boat Gambling. I see that as a big thing. It’s going to be a big tourism draw and you got all those ancillary or indirect taxes in business that will be created from it -- and the suppliers. For example: Say you go to grow some -- you’re getting paid in cash for your cannabis; then you’re going to pay your suppliers in cash; but if you’re getting paid with a check -- then you’re going to pay them a check and they are all going to pay their taxes. We’re all legit. It’s all business. We estimate it’s like a ten to one ratio of revenue for other spending. If you look at other economic models that show how much gambling promotes other Las Vegas business; it’s like a ten to one ratio.

DH: And you see tourists coming to Oakland now because of Oaksterdam?

RL: Well, we’ve been doing this for a long time here. Oaksterdam’s staff has been going strong for about 13 years since Jeff Jones first opened. We’ve been drawing in over a thousand people a day for years. So it’s really nothing new. In fact, Oaksterdam was even bigger back in the early 2000’s. From about 2001 to 2004 there was about ten cannabis outlets in the area and then when the city issued permits in 2004, they only issued permits to four and they put in an anti-cluster clause, which caused everybody but us to move out of the area. So it used to be even bigger than it was. We used to be bringing in three or four thousand for a couple of years. We’ve already done it; tested it out -- it all works. Now we just have to redo it under adult legalization instead of medical so it’s more above ground and honest.

DH: Was that move by the City of Oakland, in the end, a good thing?

RL: It was a political compromise. You’ve got to remember that back in 2003, when they first started working on ordinance Z the federal government was a lot bigger of a dark cloud hanging over everything, people were being busted by the FEDS. So to have the City Council, the Police Chief and the Mayor all sign our permits, and become our co-conspirators, it was a big boost forward, as far as the long term goes. There was a compromise. There were negative things to it, like they didn’t allow on-site consumption, which would be a very good thing for isolated patients who don’t have a lot of friends or places to get out, they don’t get a lot of chances to talk to other people with similar conditions as theirs; and that’s a really good thing for medical patients to be able to socialize. And the other thing that was a compromise was the strict zoning, the anti-cluster clause -- there were a lot of things we didn’t like; but there was one big thing that we did like, which was that they gave us the first permits in the Country for cannabis outlets. They set up a whole system -- treated us like a business. We’re not non-profit. It allows a reasonable profit is what the Oakland permit ordinance says, so Oakland is ahead of the state as well as the Country.

DH: Is Oakland the most progressive city in the country, as far as marijuana?

RL: Yep. I think so. I think because of people like Jeff Jones and myself, who have been here for 13 years working hard on this, and people like Nate Miley, Council Member, who is now the County Supervisor, but back then he was City Council. He really took the lead on those early days in the mid 90’s, passing resolutions in favor of medical marijuana for arthritis, things like that.

DH: There seems to be a lot of momentum toward legalization going on ... But what about the larger consciousness and attitudes? Because back in the 70s, we all thought drug repression was over and then, well we know what happened.

RL: No -- actually, if you look back at the poll numbers back then, they weren’t that high for legalization; the consumption rate was the highest in 1979, than it ever has been. That was the peak of the popularity of cannabis, I would say. But if you look at the voting public, it was never that high. Now is the first time we’ve ever had a majority -- just saw a 56% number that was in the polls for California, and one with 52% by Zogby for nation–wide which really needs to be confirmed by other polls, but that’s the first time we’ve ever seen that on a National poll.

DH: Let’s talk a little bit about your vision for Oaksterdam.

RL: It dovetails with the entertainment district. We’ve got beautiful Lake Merritt nearby with the paddleboats and sailboats. The old rowing house is being converted into a new restaurant ... so yeah -- it’s entertainment. Its jobs, and taxes, and tourism. And it is important to bring in other things like the glass blowing, art, artists; things like that. Just as Vegas now has Cirque du Soleil or the other entertainment that people go to; they don’t just go there for gambling anymore. That’s how Oakland needs to use the cannabis as part of the overall tourism mix and need to bring in other activities because eventually it is going to be legal everywhere and then it isn’t going to be as big of a tourism draw as it will be for the next five or ten years.

DH: The University -- how does it fit in? What are you teaching people?

RL: The motto is quality trading for the cannabis industry, and we’re teaching people how to do it right. What we see is a lot of people who want to help get it legal, or want to get a job, or start a cannabis dispensary, but they don’t know how to do it. And when they do it wrong, they make the industry look bad. We are trying to encourage more good actors and less bad by training them on the politics, legal issues ... that’s a big part of our curriculum. We really encourage people to be involved in the politics. And there are general classes we teach on the actual nut-bolts of the business or the horticulture: growing cannabis, cooking, hash making, bud tending, management, starting a business, incorporating.….you can go to our website too in order to look up all the classes.

DH: I always ask this kind of question at the end of an interview: You’ve gotten some really good media; phenomenal media. Is there something that no one ever asks you? Something that you’d want to get out? A message? A piece of information?

RL: Yeah. How about the conflict of interest that the media has advertising booze. Think about it -- If Coca Cola was legal and advertised on TV, and Pepsi was illegal, do you think the media might talk bad about Pepsi and talk good about Coke? If they were buttering that side of the bread.. I’m pressing here (ha ha) …I can come up with a better analogy.

But yeah, because I’m a pr/advertising major; that’s my history and my background, so that’s the thing I’ve always seen.

It’s like you watch TV and you see a beer commercial, then you see a Partnership for Drug Free anti-cannabis commercial, and you’re like, “What gives with this? And that’s the thing: it’s tough for the media to cover the media, right? Unless you’re John Stewart making fun of the cable news.

DH: One last question about the Obama policy and the Attorney General. There still seems to be evidence of the FEDS coming in and busting some targeted clubs. Is that still happening?

RL: Well, they raided one in San Francisco and stole all of their plants, but they didn’t arrest anybody, and they haven’t really been arresting anybody in a while. Generally they seem to be resigned to just going in and stealing a bunch of stuff and harassing people by being as mean as they can without actually prosecuting. But it’s really sad for the people who are still being prosecuted that were busted back during the Bush days. You know about the Lynch case --  where he is getting a year in jail for following the law. The other heavy case is Scarmazzo & Montes, who got 20 years under the RICO -- continuing criminal enterprise. I think legalization is the only way to get those guys out. The US Attorney said we’re not going to revisit. Obama is only going to do it if we federally legalize.

DH: Those guys made a fortune and spent it on fancy cars and stuff -- that was part of the problem in making millions of bucks.

RL: Yeah, exactly. They spent it on toys instead of putting it back into politics.

And they put a video on the Internet which had them singing, “Fuck the DEA”, and showing them with a bunch of cash. They did everything wrong. Don’t get me wrong -- but I would still say they only deserve a year or two in jail; not 20 years. Maybe a couple of months to teach them a lesson. Take away their money; fine them, you know? Whatever. But 20 years? C’mon people … CCI is the worst you can get -- a mandatory sentence. it’s like the mafia statute; and they’re (Scarmazzo & Montes) the only ones to have gotten hit with that.