As Marijuana Goes Mainstream, California Pioneers Rot in Federal Prison

Behind the headlines about President Obama’s historic visit to federal prisons and highly publicized releases of non-violent drug offenders, the numbers tell a different story. Despite encouraging and receiving more clemency petitions than any president in U.S. history—more than the last two administrations combined, nearly 20,000—very few federal prisoners are actually being granted clemency.

Nowhere is this irony more glaring than in the world of legal cannabis. Cannabis is now considered the fastest-growing industry in the nation, yet remains federally illegal. The sea change from the Department of Justice since 2009 has allowed state-legal cannabis industries to thrive. Federal solutions seem to be around the corner and for the first time cannabis businesses are being publicly traded and receiving legal Wall Street investment.

Ricardo Montes and Luke Scarmazzo are two of the 20,000 federal prisoners appealing to President Obama for clemency. They have exhausted their appeals and are serving 20-year mandatory minimum sentences for openly running a dispensary in the early days of California’s pioneering medical cannabis law. The irony isn’t lost on them that their crimes are now legal and profitable, but their appeals for clemency aren’t based on justice anymore—they just want to be home with their kids. Their daughters, Jasmine Scarmazzo, 13, and Nina Montes, 10, are appealing directly to President Obama to release their fathers via a Change.org petition.  

Nina and Jasmine

Nina Montes is in fifth grade. She is a straight A student who loves math and wants to be a doctor when she grows up. She was just four years old when her dad went to prison. “All I remember is the cops coming and taking him away from me on my birthday,” Nina says. She has always dreamed that her father would be released on her birthday, May 15.  

“It is really sad and it makes me cry [when I visit my dad in prison],” Nina says. “I cry when the time is over and we have to go because we only get three hours, maybe two.”

Nina gets to visit her father once every two months at FCI Lompoc, a five-hour drive from her home in Modesto, Calif.

“All I know is he made a mistake and I don’t think he should be owing that [much time],” Nina says.

Federal prisoners must purchase minutes in order to use phones. They are allowed up to 300 a month and calls are limited to 15 minutes each. Ricardo Montes says he tries to call every other day, sometimes every day, but he has to share his limited phone time between his three children.

“I try to speak to all of them, Nina is the oldest so I have more of a conversation with her. She is at the age now where I can actually explain why I am here,” Montes says. “She didn’t know for a long time. She really doesn’t understand when I explain to her what I did. She’s like, there are still other dispensaries open, why aren’t they going to jail? I told her I have no answer for that.”

Jasmine Scarmazzo is in the eighth grade and loves to debate. Inspired by her father’s case, she says she wants to be a criminal attorney when she grows up. She is increasingly confused as to why her dad is still in prison.

“There were so many tears,” Jasmine says, remembering the day Scarmazzo and Montes were sentenced. “My mom said, your dad got 20 years in prison; I didn’t really comprehend how long that was, I just knew I wasn’t going to see him for a long time. I knew why [he was going to prison]—because of the dispensary—but I was so confused, why is he going to prison if he is helping people?”

Jasmine remained confused until about the age of 8, when she started learning more about federal and state government in school and how it applied to her father’s case.

Over the years legal dispensaries have popped up, not just in Modesto, but across the country. Today marijuana companies are publicly traded and driving legal and profitable Wall Street investment in a handful of states.

“It makes me feel confused, once again, as to why our system is only holding certain people who are doing the same thing in 2016 and are free, and my dad’s in prison,” Jasmine says.  

“Being in prison makes us miss the small normal things that a father and daughter share,” Luke Scarmazzo says. “I don’t get to be there to encourage her successes or console her when she fails or has a bad day. I don’t experience the little things like what she doesn’t like for breakfast or who her friends are. These are attributes that a dad should know and often take for granted, but because of our limited communication, I have to rush to talk to her about the larger mile-markers in life.”

Crime and Punishment

Scarmazzo and Montes opened the California Healthcare Collective in 2004, when they were both 23 years old. Although California became the first medical cannabis state by voter initiative in 1996, dispensaries didn’t begin to appear until the early 2000s, primarily in the San Francisco Bay Area. The state legislature passed S.B. 420 in 2003 to provide basic guidelines for state-legal medical cannabis cultivation and distribution. After the law went into effect on Jan. 1, 2004, more dispensaries began to open, but mainly in San Francisco and Los Angeles. CHC was the first in the Central Valley and served a patient base accustomed to driving an hour or more west to San Francisco and Oakland to obtain safe access under the law.

Montes says there was a clear need for a dispensary in the Central Valley. One local doctor writing cannabis recommendations had said up to 70 percent of his patients, many with cancer, were making regular trips to the Bay Area to access cannabis.

“We were the only ones open and we helped a lot of patients who were sick and couldn’t travel,” Montes says. “It was actually a good thing for the Central Valley… but [local law enforcement and then-mayor Jim Ridenour] didn’t see us as helping people out, they saw us as young kids making money and selling a narcotic drug. We tried to help people. We paid a lot of sales tax [over $1 million], but in that town it doesn’t matter.”

Modesto is largely an agricultural city located about an hour south of Sacramento, the state capital, and about an hour east of the San Francisco Bay. At 9.6 percent in 2015, the city has nearly twice the national average unemployment. Modesto, and the rest of the Central Valley, has consistently ranked high among the highest unemployment averages in the nation.

At the height of its operation, the collective employed up to 14 people.

“The people of the Central Valley are a hard-working, mostly blue-collar community and they don't earn very high incomes compared to the rest of California,” Luke Scarmazzo says. “Many didn't have the extra money to regularly make the 100-plus mile commute [to a legal storefront]. The patients that couldn't afford to travel to the Bay Area before CHC opened were forced to break the law and purchase their recommended medication from the illicit market. It was a terrible hardship on so many levels.”

The dispensary was legal under state law, but as is it still is today, federally illegal. Although many have interpreted the 10th Amendment of the U.S. Constitution to leave the regulation of medicine to the states, the federal government affirmed its dominance over state medical cannabis programs in the controversial 2005 Supreme Court decision Gonzalez v. Raich. The federal government argued that because cannabis grown for personal consumption could wind up on the interstate market, the federal government had the authority to enforce federal commerce laws to control state-legal medical marijuana despite voter-approved or supported state legislation.

On Sept. 27, 2006—Jasmine’s fourth birthday—CHC was raided and Scarmazzo and Montes were taken into custody. In 2006, U.S. Attorney McGregor Scott referred to the pair as the “poster children” for the problems with medical marijuana.

“These were drug dealers selling marijuana. This case is that simple,” Scott told the press. He cited $9.2 million in gross sales over two years of operation as evidence the collective was operating for-profit, in opposition to S.B. 420, which required medical cannabis collectives operate not-for-profit.

Gross sales paint an inaccurate picture of actual income and are irrelevant to defining a not-for-profit enterprise. Further, they aren’t completely accurate under state law. Gross sales reflect the total revenues generated before expenses such as labor, security, overhead, legal fees, and perhaps most relevant, cost of goods sold. Under California law, collectives can be reimbursed for their expenses and donations are made to continue the service of cultivating and distributing cannabis to patients. Technically, the numbers reflect gross donations made to the collective before expenses.

Despite what federal prosecutors decried as over-the-top executive compensation, it is not illegal or unheard of that a director at a non-profit could make over $100,000 annually in personal compensation while the business remains a non-profit. Top directors at United Way make just as much and are unquestionably considered not-for-profit.

Scarmazzo and Montes were found guilty of conspiracy, distribution and cultivation of marijuana. 

As Luke Scarmazzo wrote for Kindland.com, “we were also charged with conducting a continuing criminal enterprise (CCE), a Nixon-era drug kingpin offense that carries a 20-year mandatory minimum sentence. No medical marijuana dispensary operator has ever been convicted under this fearsome statute. It has historically been reserved for cartel leaders and international drug kingpins. In fact, the charge is so rarely used that only 0.02 percent of inmates in the U.S., that’s 427 of them, are serving sentences for CCE.”

The FBI defines CCE in terms of membership and leadership, organizations with six or more people, one of which is a primary organizer, involved in organized crime or significant racketeering activity. Scarmazzo and Montes are the only state-legal dispensary owners to be convicted of CCE.

On May 15, 2008—Nina’s third birthday—Scarmazzo and Montes were sentenced and taken into custody. Scarmazzo was sentenced to 21 years and 10 months, Montes to the 20-year mandatory minimum.

Six months later Barack Obama was elected president. Shortly after he took office, in 2009, then-Attorney General Eric Holder released what is now known as the Ogden Memo, outlining the administration’s position in regards to state-legal medical cannabis; the feds said they were backing off compliant cannabis businesses and non-profits in legal states. The new position seemed to be a complete shift from the George W. Bush administration’s strong position against state legal medical cannabis. Cannabis businesses began to pop up all over California and Colorado.

Since Obama took office, four states and Washington D.C. have legalized adult use cannabis and 24 states have legal whole plant medical cannabis programs. In 2013, shortly after Colorado and Washington voters approved legalization initiatives, the Department of Justice issued the Cole Memo, which stated that, for the most part, the DOJ would not use its resources to enforce federal laws in states that had voted to legalize medical or adult use marijuana. Large-scale grow operations are now legal and profitable in many states. These states have not just legalized and regulated, they have taken in hundreds of millions of dollars in tax revenues.

Today, Harborside Health Center in Oakland boasts over $25 million in gross annual sales. Blum, also in Oakland, recently became the first publicly traded dispensary with an initial valuation of $21 million based on $14 million in gross annual sales when it was acquired by Terratech Corporation. Privateer Holdings, owners of a portfolio of brands including Leafly.com, received the largest infusion of Wall Street capital of any marijuana business to date, $75 million. According to Weedmaps.com, there are four dispensary storefronts operating in the city of Modesto today and over 30 more mobile delivery services in the area.

Scarmazzo and Montes have watched all the legislative change around them from behind bars.

“I have mixed emotions when I read the headlines regarding legal marijuana,” Scarmazzo says. “On one hand, I'm happy to see the progress that is being made, research being conducted and the injustices being addressed. Marijuana in the context of criminal justice reform is something we desperately need in this country. On the other hand it's extremely frustrating. With almost a decade served in prison, we've seen our freedom taken, our properties forfeited and our families lost, for business activities that are essentially legal now and taking place everyday throughout the country. Yet, we continue to struggle through this lengthy mandatory sentence. It’s hard to wrap my mind around sometimes.”

“It's upsetting because when I got arrested I was young, I was only 26 years old, I thought I was doing something right by following state law,” Montes says. “So by exercising my rights and going to trial to fight for my innocence, they punished us severely. I have no action, so to me when I see that it’s a kick in the face. What did I do wrong?"

Selective Prosecution

Search the name “Luke Scarmazzo” online and the first thing that pops up is a Youtube video called “Kraz-Business Man.” The video depicts scenes of Scarmazzo in a courtroom arguing that his medical cannabis business is legitimate and in alternate scenes smoking blunts and counting cash. Midway through the video he turns his middle finger to the camera and raps, “Fuck the Feds.” The video was an undeniably dumb move for a man running a state-legal medical cannabis dispensary in unchartered territory in the earliest days of Prop. 215, though hardly a crime. The video was introduced as evidence against Scarmazzo and Montes in court.

Twelve years later, Montes and Scarmazzo are in their mid-30s and their daughters are growing up without them. 

“My daughter, Jasmine, was four years old when I was arrested. Ricardo's daughter, Nina, was two. Today they are entering high school and junior high school, respectively,” Luke Scarmazzo wrote for Kindland.com. “They have spent much of their young lives growing up without their fathers. The impact is visible and saddening. According to a 2014 Rutgers University study, one in 28 children in the USA currently have an incarcerated parent. These children have a greater chance of living in poverty and an increased risk of experiencing serious mental-health issues.”

With all appeals exhausted, their only hope of early release is for President Obama to grant them clemency. Their applications are one of over 20,000 the administration has received. Jasmine and Nina hope that by appealing to supporters around the country via the petition they can ultimately reach President Obama.

“My dad is a good man. He made a mistake, but he is very sorry for it,” Nina says. “President Obama has two daughters. I don’t think they would like it if he went to prison for 20 years. His daughters would be miserable and want him home—he would want to come home too. That’s the exact same way I feel.”

“As we do time we realize our mistakes. Ignorance of the law is no excuse; at the time I didn’t understand federal law and how it trumps state law,” Montes says. “Now I understand it’s illegal federally. When I was young I didn’t understand that. We all make mistakes. Hopefully he could forgive our mistakes.”

“I've made some big mistakes in the past, ones that have greatly affected those closest to me, and I'm fully responsible for those poor decisions. But I ask for a second opportunity to prove I can make a positive impact, and most importantly, return to being a responsible father to a little girl that means the world to me,” Luke Scarmazzo says.

Sign the Change.org petition, “President Obama, Free Our Dads."