I love you and support you, I’d tell those plants. If you guys keep living and producing, we will make it.
The plants stared back at me wordlessly, not acknowledging a thing about my dilemma. But they kept growing.
A thought occurred to me: Some months ago, we’d made a sizable payment to Sam’s electrical subcontractor. Sam was going out of business, but the electrician probably wasn’t.
More lights equals more pounds.
More pounds equals more money.
I got on the horn with the electrician. Could he see his way clear to finishing the job?
He pulled the paperwork and did the math. Yeah, he admitted, we still had a credit with the company. But he was wary about walking onto Sam’s unfinished job. He was concerned that we’d blame him for everything. “If you promise not to sue us, we’ll come down and finish the job.”
“I’m not suing you,” I said. “Get down here. I have to get this system upgraded. I need more power and I need to get those lights up and running.”
To make him feel completely comfortable, I signed a document to this effect, and the company came back to finish the job that it had originally signed on to do.
More lights, more buds, more money.
Yes, we needed to do more than just electrical work. But if I could get those lights up in the original building and start generating more income, I could act as general contractor myself and hire my own subcontractors to get the rest of the job done. I was hoping to save a little money, but unfortunately it all had to be done to code, down to the last detail. The city inspectors had insisted on that, and later I would be grateful.
The electricians came and got us on line, finishing the job quickly. Before each room of lights went live, I had Brandon and Kim start a fresh batch of clones. You’d think that with all this turmoil that the plants would be affected, but that wasn’t the case at all. Remember what I said earlier about how we can’t cram Nature? How we can’t force it to do what it isn’t programmed to do? There’s something comforting in that. Something earnest and right and predictable.
We humans were scurrying around, our tempers boiling. Mr. Pink and I were worried that we’d lose our shirts for the second time. Sam was grappling with his failing business. The electricians were worried about being sued.
And the plants just kept growing.
They stuck to their punch clock, day in, day out.
So long as Brandon and Kim were there to water them, feed them, nurture and love them, the plants did the only thing they knew how to do. They were inextricably connected to the rhythm of the universe.
One day our growers called with the harvest figure, and I had to stop what I was doing and ask them to repeat it.
Then I called Mr. Pink at work.
“Are you shitting me?”
“Fifty pounds, man!”
Do the math with me, won’t you? With a wholesale value of about $2,500 a pound, that harvest would earn us $125,000 from the dispensaries that were now clamoring for our goods. And since Brandon and Kim had staggered our resources, we had another harvest coming in less than a month.
That was very promising. We weren’t out of trouble yet. We had debts to repay. And our expenses were high. Besides the cost of growing the weed, we had our rents, our seven new employees (Brandon, Kim, a grow helper, and four staffers who helped us harvest and trim), and the parade of new subcontractors. Additionally, the state had become increasingly creative about hitting the cannabis industry with a fresh menu of fees. On my desk I had a stack of about $56,000 in fees to pay to various taxing and licensing entities in Colorado.
But it didn’t matter. We had had our failures, but we had not failed. The plants were growing. We were bringing in the buds. The axiom More lights, more money had held true.
The cash was rolling in—finally.
We just had nowhere to put it.
5
Don’t Bank on It
When our business was finally up and running at a nice clip, I’d occasionally meet people who wanted to tell me about their personal relationship with this joyous little plant. Mostly people liked to tell me how much they loved weed and how happy they were that it was finally legal, at least medically, in their home state.
At a party one night, I met a man I’ll call Joe. He was in his early thirties. A handsome guy who happened to have been born near Chihuahua, Mexico.
His story was very different from that of the marijuana lovers. His was a story of survival, grit, determination—and money. Money to pay rent, for food, and to care for his family.
When he was still in his teens, Joe helped his family survive by selling marijuana. He’d start by scraping together $10, which he’d use to buy a 2-kilo, plastic-wrapped “brick” of marijuana from the local honchos in his community. He’d stick the brick in his backpack, kiss his mother and sisters good-bye, and set out for southern Colorado in the United States of America.
On foot.
That’s right—he walked across the Mexico–U.S. border, dodging the U.S. Border Patrol, then walked through Arizona and New Mexico, way up into Colorado. His destination was Pueblo, Colorado, where he had some friends and contacts. There, after a number of days walking, he sold his precious cargo for more than $3,000 a pound. When the job was done and he’d rested up, he’d buy a ticket back south on a bus, his backpack stuffed with about $15,000 in cash.
Once home, he and his family used that money to support themselves, until it was time to hit the road again. Joe made this dangerous odyssey several times through his teens. He was never caught.
I was blown away by his story.
Perhaps you are offended by the notion of foreign citizens exploiting gaps in the U.S. legal system to carry out illicit transactions like this. Okay. I get it. But I’d like you to try to muster some compassion for a young man who would make such an arduous trek, on foot, to help his family. When I heard his story, there were no pearl-handled semiautomatic pistols, no drug lord’s overdecorated lair, anywhere in the tale. I heard nothing but a tale of survival. Imagine being asked to hunt an animal whose meat would keep your family alive but that might kill you in the hunting. This was the risk Joe had taken as a kid. When I was riding bikes or playing football in my neighborhood, Joe was walking nearly a thousand miles and risking his life. Think what kind of life he and his family must have had, that he would be forced into such labor to satisfy our very American needs. Is Joe the cause or the result of our illegal marijuana market?
If you can be compassionate about Joe, then I think you would agree that he was in as much danger going to his destination in the United States as he was returning home to Mexico. Numbers are sketchy on this score, but the rate at which Mexicans are losing their lives to the drug trade is obscenely high. By one estimate, fifty thousand Mexicans died violently in just six years, between 2006 and 2012.
In both situations, Joe was carrying something of value. Marijuana on the way north and tons of cash on the way home.
I’ll bet most of you reading this have never carried that much money on your person, even if you had access to it. It just isn’t safe. There was a time, probably as recently as the early twentieth century, when people did keep their money and precious valuables tucked under their mattresses, but those days are gone for the majority of people who live in nations with stable banking systems. I know people like to bitch about customer service and interest rates and hidden fees, but whether they’ve thought of it or not, such banking systems have imbued their lives with a good deal of security and stability. In the United States, once money is deposited in a bank, it’s insured by the federal government, and citizens can get on with their lives—pay bills, transfer funds, withdraw cash for gifts—on a whim, without ever worrying if their nest egg is safe and sound. Yes, FDIC insurance is not unlimited—only $250,000 per depositor is covered—but at lea
st it’s there.
But as I’m writing this, the people who work in the new legal marijuana economy do not enjoy that same privilege. They’re as vulnerable as that nervous teenager on the bus heading south to his family. At any moment, their earnings can be ripped off. At any moment, the hard work they’ve pumped into their business can disappear forever—all because their country won’t give them a simple privilege the rest of us enjoy.
A bank account.
The bank manager’s expression was one you never want to see: part angst, part embarrassment, part distaste. Like it was our fault that he was this uncomfortable in his job.
We’d been banking at this particular institution for eighteen months, ever since the day Mr. Pink had opened an account for our company and wired in our first big infusion of seed money.
From the beginning, we had been completely transparent about our business plans. My attorney had urged me to be “open and notorious.” From day one I had followed a piece of similar advice proffered by my accountant: “If you’re serious about getting into the legal marijuana business, don’t hide a damned thing. Make it completely clear to everyone you meet that this is what you do. You don’t ever want anyone to come back later and say you lied to them.”
Our banker knew what we did for living. That was what made this conversation so awful for him. He’d been fine with our business for more than a year. Now he was not so fine anymore.
“You guys are great clients,” he said. “But we can no longer service your account.”
“Service?”
“We cannot continue to have your account here at this bank.”
“This branch, or the whole bank?”
“The whole bank.”
“Oh,” I said, “You’re kicking us out.”
“No,” he said. “That’s not strictly true. My advice is to use the money that’s in the account right now. But you will not be able to make any more deposits. When the money’s used up, we’ll close the account.” The bank also sent us a nice letter spelling out these terms and stating our undesirability as clients. I saved it as a souvenir.
Why was this happening? Because, according to federal banking law, we were drug dealers, of course.
See, back when Mr. Pink opened the account, the bank managers had assumed that if a depositor was legal and licensed by the state of Colorado, that depositor was welcome as a customer. After all, no one wants to do business with illegal drug dealers, right? Legal drug dealers were on the up-and-up.
But as word trickled from the Colorado bank to its board of directors and risk mitigation committees, the powers that be had carefully considered the corporation’s position and nixed the idea of legal marijuana business checking accounts.
The reason made sense; it just didn’t bode well for anyone we knew in the cannabis industry. Regardless of whether a bank is headquartered in a weed-friendly state or not, it is a federal institution. In order to be part of the Federal Deposit Insurance Corporation program that insures all accounts, U.S. banks must play ball with the federal government. And growing and selling marijuana is still a federal crime. Our bank reasoned that it would lose its charter or be criminally prosecuted if the federal government learned that it was doing business with drug dealers. So our bank had made the decision to show us the door.
We could live with the decision, and we did exactly as the manager suggested. When we spent our last dime, we closed the account and opened another at a local bank. We were completely up front about our business, and the new bank didn’t give us any trouble—then.
That relationship lasted a year before the second bank kicked us out.
The same angst, the same awkwardness, the same uncomfortable banker look, the same damn form letter. I kept that one, too.
Around the same time, another local bank in Denver announced that it was offering commercial marijuana checking accounts. To bank there, all you needed to do was show that you were a state-licensed marijuana dealer.
Great, we thought. It’s about time someone figured out a way to make this work. We rushed over and opened our third account. We were not the only ones. It seemed as if every grower or dispensary owner in the city had gravitated here. We were all so grateful to have finally found a home. But we should have seen it coming. Sooner or later, someone at headquarters connected the dots and realized that the bank was leaving itself open to federal prosecution. When that happened, we were out on the street again. We got another letter, and yes, I kept that one, too. I was thinking that if this kept up, I might be able to wallpaper a restroom in one of our dispensaries someday. It seemed only fitting, I thought, as I slipped the letter in with the others.
We didn’t give up. I mean, we assumed—as any businessperson would—that the law was on our side. Sooner or later, we would prevail. Our businesses were licensed by the state! We paid taxes! How could we be denied access to the banking system? It was absurd.
But that absurdity was boundless. We kept moving on, thinking that eventually we would hit upon a bank that had sorted out this issue internally and would welcome our business. But that was not to be. At one point, we were kicked out of three banks in five weeks.
By then, it was quite clear that every legal cannabis company in the state and the nation was in the same position.
Early in 2014, the White House announced that it supported changing federal bank guidelines to allow licensed cannabis providers access to banks. I and my fellow entrepreneurs were hopeful for about fifteen minutes, until we realized that it would take an act of Congress to get the banks to change. At this writing, we are still locked out.
What does that mean for us?
Well, if you’d like to see what our lives are like sometime, all you have to do is try to pay your monthly bills totally in cash. This was no doubt possible in simpler times, but it’s virtually impossible today. Yes, you can probably drive to an office locally to pay your cable TV, gas, or electric bills in cash. And some people may be able to pay their rent or mortgages in person, but most of us need to transmit those funds online or at least through the postal service. You could buy money orders each time, but that will quickly become tedious. So much of your time will be spent in long lines at the post office that you will start to wonder if you’re wasting your time. (Hint: You are.)
Now imagine having to pay huge bills in cash—amounts in the tens of thousands. Welcome to my world.
It’s not easy running a million-dollar company in an all-cash position, but it can be done. For one thing, our firm stopped sharing our information with banks. They’re not your friends these days, anyway. First thing we did was form a holding company, through which we can flow enough cash to write checks to pay taxes and the other bills that truly require having a bank account.
When it comes time to pay our state taxes, we literally walk cash into the Colorado Department of Revenue office, which is next door to the gold-domed Colorado State Capitol Building, and hand over the Benjamins with our tax forms. Our federal taxes must be remitted electronically—no cash or checks accepted. Paying those requires the same kind of ingenuity we use to pay any large bill from a vendor or contractor.
In the eyes of the federal government, we are laundering money every time we do this. But as yet no law enforcement agency has cracked down on us. In his 2014 announcement, President Obama instructed the Justice Department to leave cannabis entrepreneurs alone if they were “in clear and unambiguous compliance with state marijuana law.” But that instruction was not terribly clear, either, and certainly did not carry the full weight of law behind it.
It’s almost as if we’re trapped in bureaucratic limbo: Until Congress sprouts the balls to deal with the issue, everyone on the federal level is content to look the other way. Meaningful legislation will come inevitably, but that will mean breaking it to the American people that Congress is finally saying okay to marijuana. Our represe
ntatives in DC know that once they open a door, they won’t be able to close it. If it’s okay to deposit legal marijuana money in federal banks, then why is marijuana still illegal on the federal level?
You see? It’s a slippery slope.
So: Where does that leave us? Well, for all other transactions, we use cash. The more the better, because the more cash we can offload, the more we can invest in expansion, say, or use in some other substantive ways, the less we have to hold and hide.
If it sounds ridiculous, insane, and dangerous to do business this way—I agree. When you consider that every person in the legal marijuana business in Colorado must wear a badge clipped to their shirt at all times and that they are not permitted to carry a weapon to protect themselves, it’s even more ludicrous. What could be more dangerous than proclaiming to the world through a badge you must wear that you are unarmed and that you are most likely carrying weed or copious quantities of cash?
Many of the cannabis firms I know have signed with security firms—bodyguards and armored truck providers—to safely convey their cash from their places of business to the various safes hidden throughout the city. We follow strict protocols to pick up cash from our stores. We installed cameras and alarms and pricey security systems. But those services and equipment don’t come cheap, and there are always days when you need to ferry a few thousand dollars to a vendor by yourself.
We don’t like doing it. In fact, we hate it. But we do it anyway, usually looking over our shoulders. Most of the people we deal with—like the architect I mentioned at the beginning of this book—now know that they wouldn’t get our business if they weren’t comfortable accepting at least a little cash.
Please don’t misunderstand: I am grateful for the abundance in my life and business, but cash leaves me feeling vulnerable. Yes, Denver is a relatively safe city. In all the time I’ve worked in the industry, I know of no one who was ripped off while transporting money earned in the legal marijuana industry.
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