Anaheim Officials Welcome the Kush Expo--While Suing Small Pot Shops and Their Landlords
Jeff Drew/OC Weekly
Every summer for the past five years, the Anaheim Convention Center, a swirly tower of concrete and blue-tinted glass, transforms itself into a mecca of marijuana. This magical event, the world's largest of its kind, lasts exactly two days and happens just across the street from the Disneyland Resort. It's called the Kush Expo.
On display inside the four-hall, football field-sized facility are dozens of vendors hawking products ranging from the latest vaporizers to bongs, soil nutrients and hydroponic growing equipment. There's the annual Kush Cup Awards, offering recognition for best indica, sativa and hybrid strains; oil; wax; hash; edible chocolate; vape pen; and tube bong--to name but a few categories. Then there's the Hot Kush Girl Contest, in which bikini-clad lasses with green numbers spray-painted on their thighs compete for up to $500 and a gift bag.
If all the bare flesh and bong raffles aren't enough to keep you entertained, you can step inside an open-air white tent out back, where folks with a doctor's recommendation for medical marijuana can smoke pot while guarded by Anaheim police officers. Doctors are on-site and available to help out the poor souls who forgot their cards. For a small fee, they can figure out what ails you, and presto change-o, you're a certified medicinal-marijuana patient.
It's a toker's paradise, one that makes Colorado seem as libertine as a Mormon party, and is fully approved by the city, which owns the Convention Center. But during the other 363 days of the year, Anaheim is as anti-pot as you can get. The city first banned medical-marijuana dispensaries in 2007, and it has extended and strengthened that ban every year since, adding delivery services to the prohibition in 2013. Last October, council members ordered staff to begin cutting electricity and water services to anyone violating the ban.
As with many other cities in California, however, Anaheim knows that bans that exist on paper can only do so much to fight the rapid growth of dispensaries that occurred following the Obama administration's so-called Ogden Memorandum (or Ogden Memo) of 2009, which (falsely, as it turned out) indicated the Justice Department wouldn't interfere with states that had legalized medical marijuana. So city officials eagerly turned to the U.S. Attorney's office, inviting it to threaten landlords in their city with asset-forfeiture lawsuits and DEA raids.
On Aug. 21, 2011, the feds obliged, filing lawsuits against six dispensaries in Anaheim and sending letters to more than 60 property owners and dispensaries in the city, as well as neighboring La Habra, threatening seizures and raids to anyone still open within 30 days.
One of those lawsuits targeted a collective called Releaf Health & Wellness, located in a nondescript, two-story, multi-unit building at 2016 W. Ball Rd. The city also sued the landlord, Tony Jalali.
This particular pair of lawsuits was pointless: Releaf had closed days before the city sent the notice, and Jalali had sent a certified letter to the city informing it that his property was now officially pot-free. Yet Anaheim refused to back off, perhaps hoping to make an example out of Jalali and his tenant.
Backed by Best, Best & Krieger (BBK), the largest anti-marijuana law firm in California--the lawyers there literally wrote the book on how municipalities could ban pot clubs--Anaheim worked with the feds to seize his $1.5 million building, citing exactly one $37 pot sale to an undercover police officer that was perfectly legal under state law. Yet in the face of an unprecedented legal and publicity campaign (spurred in part by the Weekly's coverage), the feds ultimately backed out of the battle, promising to never threaten to seize the building again.
Now, three years later, Anaheim continues its quest to punish Jalali and the hapless former operators of the long-defunct Releaf collective. Meanwhile, despite the city's continued ban on pot clubs, large-scale marijuana dispensaries continue to operate within the city, too deep-pocketed to worry much about fines or lawsuits. In other words, weed continues to flow freely in the land of the Kush Expo while Anaheim officials have wasted a small fortune in taxpayer money going after a sympathetic property owner and his long-evicted tenant, neither of whom has been convicted, much less charged with a crime, and who, by all accounts, had no intention of violating state law.
As it turned out, Anaheim had picked the wrong landlord to mess with.
Hits from the bong
Ronnie Cote/OC Weekly
In early 2010, Steve (who asked to remain anonymous) was driving on the 91 freeway when he saw a billboard advertising Anaheim's inaugural Kush Expo, scheduled to arrive in the city that July.
"I thought, 'Wow, what is all this about?'" he recalls.
Curious, Steve purchased a ticket to the event. "There was a medicating area out back, and there were Anaheim police officers monitoring the people going in, and everyone was out there smoking," he says. "As an outsider coming in, it was really cool. They set it up for someone like me to feel comfortable."
At the time, Steve's elderly father was suffering from degenerative arthritis and couldn't stomach the pain medication his doctors had prescribed. Steve's wife had also recently been diagnosed with scoliosis of the spine. Steve knew that there were already about 60 collectives operating in the city, but he didn't feel as though many of them were truly working on behalf of patients. They advertised strains with names such as Green Crack and charged up to $70 per eighth of an ounce. Steve wanted to open a small collective that would help his family and other legitimately sick patients in Anaheim.
"We had a detailed conversation with one of the lawyers [at the Kush Expo]," recalls Bobby Holley, who attended the event with Steve that day and later became his partner at the Releaf collective. "We wanted a clear answer as to whether Anaheim was cool with [dispensaries], and he told us Anaheim was in the clear because there were so many operating at the time."
The lawyer offered to help Steve draw up legal paperwork that would ensure his collective was obeying state law and told Steve that Anaheim wouldn't interfere with his efforts. "By the time I left that place, I was sure it was okay," he says. So Steve paid the lawyer to draw up articles of incorporation for a mutual-benefit, nonprofit corporation. "We paid him a few grand, which I thought was high, but I wanted it to be as legal as possible," Steve explains.
Then Steve obtained a state seller's permit from the California Board of Equalization (BOE). The woman who helped Steve over the telephone at the BOE warned him that Anaheim might deny his application for a city business license, but she advised him to apply anyway, so he could at least document a paper trail showing he had notified the city about his collective.
That turned out to be unnecessary: Anaheim quickly mailed Steve the license, although it stated that selling medical marijuana at his location was prohibited under federal law. For a month, Steve and Holley scouted possible locations. After noticing a "For Rent" sign at a building near the intersection of Ball Road and Magnolia Avenue, Steve called the number and spoke to Jalali, who agreed to rent one of his vacant units to them. "He was a good guy," Steve says of Jalali. "He believed in patients' rights and already had two other dispensaries there. We provided him with all the proper documentation, and he accepted us."
Jalali is a highly intelligent, fast-talking, somewhat-intense man. An Iranian-born software engineer who holds a government security clearance--which is partly why he refused to be photographed for this story--he carries himself with the self-confidence and borderline impatience of a successful businessman. The longtime resident of Irvine had purchased the Anaheim building that eventually housed Releaf in 2003 as a retirement nest egg. His wife, Morgan, a dentist, had a practice located there, and when the building went on the market and the first buyer's loan fell through, the Jalalis were able to negotiate a good deal, buying the property for about $900,000.
In 2009, after seven years of working out of the Ball Road building, Morgan wanted to work closer to home, so she opened a new practice in Lake Forest. When the Jalalis sold the Anaheim practice, they were able to put $400,000 toward the $600,000 loan on the building. He then refinanced his home loan to pay off the remaining $200,000 on his mortgage.
Jalali says that as soon as he paid off the loan, he began to have problems with Anaheim officials who seemed eager to make being a landlord in the city as difficult as possible. At the time, Jalali had several tenants on his first floor: a dental office, an insurance company and an immigration-services business. Upstairs, he rented to a business that sold cars. But the city stepped in and told him that even though several of his units were empty, he didn't have enough parking spaces. "So they stopped accepting applications from my tenants," Jalali says. When he complained to the city, officials told him that if he paid a $2,000 waiver fee, he could get around the parking restriction. "It was ransom money," Jalali says. He refused to pay and instead rented the unit to an ultrasound medical company, but the city once again refused to allow him to take on any more tenants unless he paid the fee.
"For probably two years, my building was empty upstairs," Jalali recalls, fuming. "So I go to the city and asked who I could rent to, and the guy tells me a shoeshine business. I have 12 units upstairs. It was an insult to me for him to say that."
By 2011, Jalali had written several letters to various city officials complaining about his treatment, without any response. So when a medical-marijuana collective asked about renting a unit upstairs, he gladly accepted. As far as Jalali was concerned, dispensaries were legal under state law and Anaheim had allowed the Kush Expo to operate for two years running. What could possibly go wrong?
Don't forget your doctor's note!
Ronnie Cote/OC Weekly
A lot, as it turned out. After a few months, Jalali's other tenants complained that the owner of the collective was smoking pot in one of the building's bathrooms. Jalali confronted the man, who promised to never do it again. When the dispensary was late with the rent a month later, Jalali says, he refused to extend the club's lease. Jalali also rented to another dispensary but soured on that tenant's style of operation. "I got a call from the dental office about people in the parking lot and found out they were operating a happy hour," Jalali says. "To me, this was illegal activity. I kicked him out. He had to leave within 30 days."
So when Steve called Jalali looking for a rental space for Releaf Health & Wellness, Jalali was in the process of phasing out the other two collectives. He insisted that Steve not only stay well within state law, but also do nothing to bother other tenants, much less create a public nuisance that would draw police attention. Steve signed his lease with Jalali on June 11, 2011.
"To be honest with you, Tony was a pain in my ass," Steve says. Once, Jalali scolded Steve for allowing teenagers into the collective, so Steve had to show him proof that the patients were at least 21 years old. When Jalali complained about the smell, Steve installed an expensive filtration system to fix the problem.
In fact, Steve and his wife had invested their life's savings into fixing up the unit and opening the Releaf collective. It was a stressful time, he says, complicated by his wife's cancer diagnosis. In late 2011, the same week his wife went into the hospital for surgery and chemotherapy, he suffered a heart attack. But, Steve says, the experience only strengthened his resolve to make Releaf a model dispensary.
"We went above and beyond the guidelines to regulate ourselves," he insists. "Our whole goal was to provide safe access to patients. We were not pot dealers out to make money." According to both Steve and Holley, the city never sent them a single letter telling them they were operating illegally. And the only time uniformed police officers visited Releaf was when a burglar broke a window at the shop and triggered an alarm. "The cops showed up and called [Steve] and said we needed to go down there," Holley says. "We didn't know what to expect, but sure enough, a guy had broken in and stolen a few little things."
According to Holley, the obvious fact that he and Steve were operating a marijuana dispensary never came up in conversation with the officers. "The cops were actually really cool about it," he says. "It wasn't a secret what we were."
Ronnie Cote/OC Weekly
Unbeknownst to Steve or Holley, Anaheim police were already investigating Jalali's tenants, including Releaf. According to files obtained by the Weekly, the investigation began with a tenant whom Jalali was in the process of evicting. Detectives had used Weedmaps to view a Jan. 1, 2011, message by a reviewer named Filiblunt 420.
"Happy New Year my fellow potheads!!!" the post reads. "Man, [the collective] gots it goin on [sic]. . . . I picked up some Platinum Kush, some Blackberry and they hooked me up with some Plain Wreck!! I just toked on a gram of each and every hit was an adventure!! I am SO LIFTED right now . . . even as I am typing this review."
Because Jalali evicted that dispensary, officers turned their attention to Steve's collective. Late in 2011, an undercover police officer showed up at the Releaf Health & Wellness asking for marijuana. Because the cop didn't have a doctor's note, he wasn't even allowed inside the dispensary, in accordance with California law. So on Dec. 2, the officer posing as a patient returned with a legitimate doctor's recommendation for cannabis--and according to police notes, he was able to purchase "4.2 net grams of marijuana for $37."
At other collectives, that amount would sell for an average price of $65, according to Steve. "We gave it to him for wholesale," Steve says. "That's nonprofit in my book. But that's how we did business. It was for the patients."
Despite the cheap price, the $37 marijuana transaction, which was not only perfectly legal under state law, but also a heck of a bargain, became the linchpin for Anaheim's civil lawsuits against Jalali and Releaf, as well as the federal government's attempt to seize Jalali's building. The Weekly broke the story in a Feb. 7, 2013, article that noted that Jalali had evicted Steve as soon as he received his first letter from the city warning him that his tenant was violating federal law.
But neither Anaheim nor the feds would drop the case.
For Anaheim, part of the explanation for this may lie with the law firm it has paid to prosecute medical-marijuana cases for the past several years. BBK is based in Riverside, but it has offices throughout California and even a lobbying wing in Washington, D.C. Originally formed in 1915, it represents private business interests, particularly those seeking to privatize public services (especially water agencies) at the same time it represents public sector agencies, especially cities.
BBK works on behalf of dozens of cities in California--including Anaheim, Westminster and Lake Forest in Orange County alone--as well as numerous public agencies including county governments and school districts. The amount of billable hours is mind-boggling; a Weekly public records request for all invoices submitted to the city by BBK during the past four years turned up no less than 1,317 pages asking for payments for legal work.
Among BBK's more controversial clients in recent years is the city of Bell, whose top officials illegally granted themselves six-figure salaries and bloated pensions, leading to a nationwide scandal and the arrest of several city officials. BBK lawyer Edward Lee (who also worked for the cities of Downey and Maywood) escaped criminal charges but was fired by BBK, which ended up being sued by Bell for providing bad legal advice.
"They were the attorneys for Bell when it became a charter city in 2005, which Bell officials thought gave them a way to avoid salary limits," says Jeff Gottlieb, the Los Angeles Times reporter whose reporting on Bell with Ruben Vives won the 2011 Pulitzer Prize for public service. "In fact, their new charter screwed up and didn't allow that, which is one of the reasons the city council members could be charged."
In the war on marijuana, BBK not only has helped specific cities such as Anaheim to draft ordinances to ban collectives, but one of its lawyers, Jeffrey Dunn, has successfully argued on behalf of the League of California Cities for the right to ban dispensaries before the California Supreme Court in the so-called Riverside decision. (Dunn did not respond to interview requests.) That 2013 case stemmed from a challenge to Riverside's ban on marijuana dispensaries, an ordinance drafted by--you guessed it--BBK lawyers hired by Riverside city officials.
It might seem like a conflict of interest for a law firm to help businesses profit from the same government entities it represents in court, but not according to BBK. Denise Nix, BBK's marketing communications manager, sent the Weekly an email saying the firm wouldn't comment for this story. Sonia Carvalho, a BBK partner who is also Santa Ana's city attorney and who co-wrote a 2010 paper with Dunn titled "The Legal Basis for Banning Medical Marijuana Dispensaries," didn't respond to a Weekly interview request. But in a 2009 article for the now-defunct Inland Empire Weekly, she provided a written statement to that paper insisting that BBK plays no role in crafting public policy.
"We advise cities on what the law says," Carvalho wrote. "We are always ever sensitive to understanding our role and not becoming involved in the public policy debates."
On the trail of BBK: Matthew Pappas (L) and Sergio Sandoval
John Gilhooley/OC Weekly
After Anaheim, with help from BBK, sued Jalali, crusading medical-marijuana attorney Matthew Pappas offered to represent the property owner pro bono. Both Pappas and his researcher, Sergio Sandoval, had done similar legal work on behalf of marijuana collectives throughout Orange and Riverside counties, and BBK had always been there in the courtroom.
"I first became aware of BBK because of Dunn's constant presence at various court hearings involving the establishment of medical marijuana in California," Sandoval says. "His attendance was often to monitor key hearings, while other times, he was arguing on the side of prohibitionist cities. . . . For the past four years, every person involved in our law firm has wondered why it is that BBK is so obstinately opposed to the implementation of the state laws regarding medical marijuana."
"It's a money thing with them," Pappas says. "There's a ton of money to be made, and that's what they do."
In October 2013, two years after Anaheim sued Jalali and invited the federal government to try to seize his building, that effort failed with an exclamation point. Alerted to the case by the Weekly's coverage of the story, the libertarian law firm Institute for Justice took on the case, also pro bono. Before agreeing to drop the case, the U.S. Attorney's office had tried to pressure Jalali to agree to surprise inspections and to never rent to another dispensary. When he refused, the feds caved in and withdrew its case with prejudice, essentially promising it would never attempt to take the building again.
Anaheim is still suing Jalali and his former tenants, Steve and Holley, for violating Anaheim's ban on marijuana dispensaries. The suit was filed by Dunn on behalf of the city on Aug. 22, 2012; the trial started Jan. 13.
Meanwhile, the weed world anxiously awaits the release of tickets for Anaheim's next Kush Expo, which rankles Steve and Jalali.
"I never would have opened the collective if I hadn't visited the Kush Expo," says Steve, who declined to be photographed out of fear of retaliation by the city. "Now, my wife has cancer, we lost our life's savings, we are on the verge of losing our house, and Anaheim wants another $25,000 from me. There is no way I can pay that."
With his collective gone, Steve has to go to other dispensaries that continue to operate in the city to find medicine to help his wife. "We get her medication from different places, but some are sketchy, a bunch of thugs or hoods running them," he says. "I don't want them shut down because I want access, but I want safe access, not just punks slinging pot to anyone who walks through the door."
Jalali, apparently emboldened by his victory over the feds, is now renting space to a brand-new marijuana collective. He says he won't evict the tenant until Anaheim closes down the Kush Expo. "During all this time, we kept pushing the federal government, saying that if this dispensary is illegal, go after the source, the city of Anaheim promoting the Kush Expo with show girls," he says. "I am willing to stop it in my building if the city is willing to stop the Kush Expo."
"I would like to have a trial," says Pappas. "I believe the city's purpose in attacking [Jalali] was to obtain the forfeiture money and not to abate nuisances. We asked for all complaints from citizens, and [the city] sent us two items, one of which was centered on the Kush Expo. . . . They are like a big dog that has bitten down and can't let go."
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