Paul Montoya - Cannabis Trial

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RELEASED DATE: 09/08/2016

US vs. Montoya

Enforcement Actions Directed At Commercial Marijuana Operations Across Southland Include Criminal Drug Trafficking Case, Property Forfeiture Lawsuits and Warning Letters to Landlords

LOS ANGELES – As part of a coordinated effort by California’s four United States Attorneys, federal prosecutors in Los Angeles have taken a series of actions against illegal commercial marijuana operations, including a building in South Orange County that houses eight marijuana stores and a trafficking ring that sold marijuana at its San Fernando Valley storefront, and sent marijuana to customers as far away as New York state.

The coordinated enforcement actions that were announced today address a marijuana industry in California that has swelled to include numerous drug-trafficking enterprises that operate commercial grow operations, intricate distribution systems and hundreds of marijuana stores across the state – even though the federal Controlled Substances Act prohibits the sale and distribution of marijuana.

“It is important to note that for-profit, commercial marijuana operations are illegal not only under federal law, but also under California law,” said United States Attorney André Birotte Jr. “While California law permits collective cultivation of marijuana in limited circumstances, it does not allow commercial distribution through the store-front model we see across California.”

The actions being announced today in the Central District of California include:

a criminal indictment that charges six people with marijuana trafficking that allegedly generated nearly $15 million in profits in only eight months;

the filing of civil forfeiture lawsuits against three properties and a related seizure of more than $135,000 from the bank account of one property owner; and

warning letters sent to the operators and landlords of 38 marijuana stores.

The criminal case unsealed this week names six defendants linked to a now-defunct North Hollywood marijuana store called NoHo Caregivers. The drug trafficking organization – which sold marijuana at NoHo Caregivers, sold marijuana to other stores, and sent marijuana to affiliates in New York and Pennsylvania – distributed approximately 600 to 700 pounds of marijuana per month, according to the indictment.

The defendants used encrypted BlackBerry devices, but investigators were able to intercept email communications that detailed the distribution of marijuana, as well as the payments for the drugs. That indictment details one email exchange between the two lead defendants in which they “discussed the amounts of marijuana they intended to distribute monthly over the coming year and estimated that they would each receive over $194,000 in profits per month.”

The defendants named in the NoHo Caregivers indictment are:

Paul A. Montoya, 37, of Arleta, a co-owner of NoHo, who was arrested on Wednesday;

Noah Joel Kleinman, 36, of Santa Clarita, a co-owner of NoHo, who has agreed to surrender to federal authorities on Tuesday;

Kathy Thabet, 25, of Los Angeles, a courier and bookkeeper for the organization, who was arrested on Wedneday;

James Stanley, 33, of Grass Valley, California, an alleged marijuana grower, who is currently a fugitive;

Bryant Watson, 43, of Douglassville, Pennsylvania, a NoHo customer on the East Coast, who was arrested in Pennsylvania on Wednesday and has agreed to appear in United States District Court in Los Angeles on Tuesday; and

Casey Wheat, 40, of Huntington Beach, who allegedly arranged to transport marijuana for NoHo, who is currently a fugitive.

The indictment alleges drug trafficking violations, as well as money laundering charges. The indictment also seeks the forfeiture of $14.7 million – which is a conservative estimate of the value of the marijuana allegedly trafficked by the organization from the summer of 2008 through the beginning of 2009.

In relation to the NoHo case, federal agents on Wednesday executed a search warrant at NoHo’s former location, which is now occupied by a marijuana store called the Green Camel Collective. During the search, agents seized about 23½ pounds of marijuana and nearly a pound of hashish – and observed two 16-year-old boys who were smoking marijuana inside the store.

“NoHo Caregivers was illegally operating an enormously profitable marijuana store,” said Special Agent in Charge Leslie P. DeMarco of IRS-Criminal Investigation’s Los Angeles Field Office. “IRS-CI specializes in following the money in illegal drug operations, enabling increased criminal prosecutions and the forfeiture of assets. IRS-CI will continue to work with our law enforcement partners to restore the respect for federal laws that has not been exhibited in the medical marijuana industry during the past several years.”

Prosecutors on Thursday filed three forfeiture actions against properties where the owners knowingly allowed marijuana stores to operate. The buildings named in the forfeiture lawsuits house:

the Wildomar Patients Compassionate Group in Wildomar, a city that expressly prohibits marijuana stores and has spent more than $50,000 on legal fees in its efforts to close the store;

Montclair Caregivers in an unincorporated part of Montclair, which has repeatedly received citations – ignoring most of them – from San Bernardino County Code Enforcement personnel; and

eight stores located in a two-story strip mall at 26402 Raymond Way in Lake Forest.

The forfeiture complaint relating to the Lake Forest building alleges that eight of 11 suites on the second floor of the building are occupied by marijuana stores, and that a prior owner of the property had previously received a warning letter from the DEA. According to the complaint, the operator of one of the stores at the property has previously been convicted on narcotics-related charges. Records show that the Orange County District Attorney (OCDA) charged three people related to another store on the property in March 2010, and that the OCDA convicted the owner and the manager of another store in the building, both of whom were sentenced to state prison in April 2010. The property is across the street from a school serving pre-school and kindergarten students. As part of forfeiture efforts, authorities on Wednesday seized $136,686 from a bank account controlled by the owner of the building. The forfeiture lawsuit states that the City of Lake Forest has spent approximately $585,000 in legal fees as part of its efforts to shut down the marijuana stores operating in the building.

In addition to the criminal case and the forfeiture actions, the United States Attorney’s Office sent dozens of letters yesterday to people affiliated with 38 marijuana stores in selected cities across the Southland. Those receiving letters – the owners of the buildings where the stores are allowed to operate, as well as some owners of the illegal stores – are warned that the stores are operating in violation of federal law and that they have two weeks to “take the necessary steps to discontinue the sale and/or distribution of marijuana” at the stores.

All known marijuana stores in the following areas are being sent letters warning that their operations are in violation of federal law:

Orange County - the cities of Lake Forest, Dana Point, Laguna Hills, Laguna Niguel, and Rancho Santa Margarita;

Riverside County – the cities of Murrieta, Wildomar, and Temecula; and

Inland Empire – the cities of Pomona, Claremont, Upland, Montclair, and Chino.

The letters note that the operation of a marijuana store “may result in criminal prosecution, imprisonment, fines, and forfeiture of assets, including the real property on which the dispensary is operating and any money you receive (or have received) from the dispensary operator.”

The areas in which the initial warnings have been sent are all areas where local officials have taken steps to eliminate marijuana stores and have asked the federal government for assistance. The United States Attorney’s Office will continue to work with local municipalities and local law enforcement throughout the District to assist in ongoing efforts to combat illegal commercial marijuana operations.

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