Los Angeles charges 515 people with running illegal marijuana businesses as part of black market crackdown

Prosecutors in Los Angeles have charged 515 people for helping to run 105 illegal marijuana operations, the City Attorney’s office said Friday.

The sweep is part of an effort to level the financial playing field for licensed cannabis businesses, which have suffered by competing with black market operators who remain active despite new licensing requirements and regulations that kicked in Jan. 1.

“Our message is clear: If you are operating an illegal cannabis business you will be held accountable,” Los Angeles City Attorney Mike Feuer said.

After months of only issuing warning notices, state officials announced in August that they were starting to pursue criminal charges against unlicensed cannabis retailers, distributors and growers.

It’s widely believed that Los Angeles has the world’s biggest marijuana market, and businesses have thrived for years under the state’s loose medical marijuana laws. But since the start of the year, new California laws have required all cannabis businesses to have both a state and city license to operate — licenses that can add costs to operations in the form of fees, testing requirements and hefty taxes.

The new laws also let cities regulate the marijuana industry, and many cities so far have opted against allowing such operations. Los Angeles, however, began licensing retail outlets in late January and most other types of marijuana businesses on Aug. 1. As of Friday, the city said 163 businesses have been given temporary licenses to operate.

But that represents just a fraction of the overall marijuana market, and for the past eight months, the City Attorney’s office coordinated with the Los Angeles Police Department to identify and investigate businesses that were operating without licenses. Most are retail shops, the City Attorney’s office said, but action also was also taken against marijuana growers, extraction labs and delivery services.

Since the investigation started, Feuer said 23 of the 105 unlicensed businesses identified by his office have shut down.

Most of the 515 people charged in the crackdown were business operators, according to Feuer. But he said there are also some landlords and employees facing charges in 120 separate criminal cases.

All of the defendants face misdemeanor charges, punishable by up to six months in jail and $1,000 in fines. That’s based in part on Proposition 64, which reduced the punishments for nearly every marijuana crime in addition to legalizing recreational marijuana use.

The action was well-received by City Councilwoman Nury Martinez. Buoyed by a concern that black market cannabis businesses can congregate in poorer neighborhoods and minority areas, Martinez has advocated for policy that cracks down on illegal dispensaries and regulates legal ones in her district, which includes Van Nuys, Panorama City and Sun Valley.

“Since the city began its work on laws regarding cannabis, I have been consistent in my argument that we must enforce these new regulations,” she said in a statement. “Today, we are letting our residents and those who want to flout our laws know that the city is not going to stand idly by, while the safety of our communities are at risk.”

Both Feuer and LA Police Chief Michael Moore acknowledged that they still have a lot of work to do to eliminate the black market.

“There are still hundreds of these locations out there,” Moore said.

Authorities are reviewing another 40 marijuana businesses now, Feuer said, to see if they are operating properly. He encouraged residents to report businesses that they believe may not be operating illegally through a new online portal at cannabis.lacity.org.

Greg Meguerian, who operates the licensed dispensary Reefinery in Van Nuys, said the crackdown announced by Feuer on Friday “is not enough.”

Meguerian says that he has had to raise money to operate his cannabis shop legally. Meanwhile, unlicensed businesses can still claim some legal protection under the state’s medical marijuana laws, since so-called “collectives” don’t have to dissolve until the end of the year.

Until then, Meguerian said, “We’re just trying to survive.”

The crackdown in Los Angeles isn’t happening in a vacuum. Last month, after giving businesses more than seven months to comply with new licensing requirements, state authorities said they have started to team up with local police to target unlicensed marijuana businesses. The state agency that regulates marijuana, the Bureau of Cannabis Control, last month said it helped to shutter an unlicensed marijuana shop in Costa Mesa and launch an enforcement action against an unlicensed delivery service in Sacramento.

Both businesses were included in the more than 1,000 complaints the state has received since Jan. 1. In that time, the bureau also has sent more than 2,500 cease and desist letters to marijuana businesses that appear to be operating without licenses, according to spokesman Alex Traverso, who added that more than 500 complaints remain under investigation.

Cities and counties throughout the state are also stepping up enforcement efforts.

San Diego authorities announced in August that they’ve shut down 11 unlicensed marijuana delivery services and arrested 34 people as part of a year-long operation.

The Riverside County District Attorney’s Office also recently formed a new marijuana task force that served its first search warrant Aug. 23 on an unlicensed dispensary operating out of a large trailer in Jurupa Valley.

Staff writer Elizabeth Chou and editor Ryan Carter contributed to this report.