cannabis management software

FROM BLACK MARKET TO GREY

By: Brian Hutchinson
Source: National Post

Meet the boss of Canada’s illegal marijuana trade, Don Briere. To police and the criminal courts, he’s a familiar face, a maverick dealer and convicted grower who has served multiple prison sentences for refusing to obey the country’s long-standing prohibitions on pot.Briere has fought the law and lost, most of the time. Yet, even at the age when most Canadians are entering retirement, this 65-year-old British Columbian is more involved in the underground cannabis business than ever. And he’s very open about it.

Briere is the founder of Weeds Glass and Gifts, a chain of retail outlets that sells an array of cannabis products from glass display cases: marijuana, potent concentrates, baked goods, even drinks. What started as a single shop — a so-called dispensary — in Vancouver three years ago has grown into a national franchise, with 23 stores in B.C., Manitoba, Ontario and Quebec. Briere owns six of the stores outright and is a joint-venture partner in the others.

His chain’s annual sales have reached $20 million, Briere says, adding that more Weeds outlets are the way.

Authorities have managed to slow him down but it seems they can’t stop him. Seven of Briere’s Toronto dispensaries were raided by police in May, but three were back in operation by mid-summer. A Weeds store in Quebec City was raided recently, but Briere vows that sales will resume.

In Vancouver, police don’t even bother trying to shut down his stores. They say their priorities no longer include enforcement of Canada’s existing marijuana laws. The landscape has dramatically changed since Briere got into the game decades ago.

In an effort to reduce and cap the number of cannabis dispensaries in Vancouver — they numbered more than 100 last year — the city introduced unique bylaws requiring shops to apply for business licences. If they were denied, they would have to close.

That was how the system was meant to work, at least.

None of Briere’s Vancouver stores passed muster with city authorities; none received the required permits. They’ve remained open, regardless, racking up thousands of dollars in municipal fines, which Briere refuses to pay.

He’s not waiting for the federal government to introduce legislation that will legalize and regulate the sale of recreational marijuana to adults in Canada, either. Briere doubts the new rules — expected to come into force in the next year or two — will make room for his stores.

He has, after all, a number of criminal convictions related to the cultivation and sale of marijuana in B.C., going back to 2001. He was also convicted for possession of a prohibited firearm. While on parole in 2004, he was arrested for running an illegal cannabis shop on Vancouver’s Commercial Drive, and sent back to prison.

Briere says he’ll keep selling marijuana, his way. “We’re not going anywhere,” he declares, adding that any attempts to close him down, now or in the future, will be met with court challenges based on constitutional grounds. He already has scored some minor victories, including a B.C. Supreme Court decision in August that has allowed him to continue operating — temporarily — an illegal dispensary in Abbotsford, about an hour’s drive east of Vancouver.

Briere may be an old hand, but he represents the type of person who has taken over the sale of underground weed in Canada. The illicit pot market is no longer dominated by street gangs, outlaw motorcycle clubs and organized crime. While those forces still exist, their involvement in the production and sale of cannabis has diminished as marijuana use becomes more widespread and accepted across the country.

Small- and large-scale cultivation has increased, street-front dispensaries are becoming commonplace, law enforcement has relaxed and marijuana prices are lower than ever before. All of these factors have pushed organized crime to the fringes. The black market has turned grey.

According to several sources, even the regulated medical marijuana market in Canada has been compromised.

Under existing federal law, Canadians authorized to use cannabis for medical purposes by their health-care practitioner have several legal product sources: they may grow their own marijuana, designate someone to produce it for them, or purchase it from a large-scale producer under licence by the federal government.

There are hundreds of “designated persons” and 34 corporate-style licensed producers in Canada, all growing marijuana in indoor facilities and greenhouses across the country. They are not authorized to provide marijuana to anyone except individuals holding federal permits, buying for their own medical needs.

But Briere says that all of the marijuana he purchases wholesale — $10-million worth this year — and sells through his stores comes from designated producers and “more than one” licensed producer.

“Some of the licensed producers are losing money,” he says. “They have a surplus of product. What are they supposed to do, let it rot?”

Meanwhile, a Colorado executive involved in that state’s legal recreational marijuana trade says Canadian licensed producers have told him that 80 per cent of their cannabis products “are going to the dispensaries. They are serving the dispensaries,” the executive told Postmedia News.

Such claims are impossible to verify — no licensed producer will admit to illegally supplying dispensary owners such as Briere. But authorities have previously acknowledged that Canada’s medical marijuana rules were being exploited.

In 2010, the RCMP found that 40 marijuana production licence holders were illegally selling their product. And a 2012 RCMP intelligence report noted that “gaining access to or control of a medical marijuana grow operation is highly desirable for criminal networks due to the array of opportunities it would present for the illicit production and diversion of high-grade medical marijuana.”

Yet Health Canada, the government department that handles medical marijuana licensing, says it “has no information” to suggest licensed producers and individual licence holders are supplying illegal dispensaries.

“Should Health Canada have reason to suspect that a licensed producer is diverting product to the illegal market, an investigation would be launched immediately,” the department says, in response to questions from Postmedia. “In the event that the investigation found that a licensed producer was diverting product to the illegal market, their licence would be revoked, and the owner and employees would be referred to law enforcement.”

Whatever the case, the Trudeau government insists making marijuana legal and available to every adult in Canada will do more than any other measure to cut big-time criminals from the trade.

A government discussion paper prepared this year for the federally appointed Task Force on Marijuana Legalization and Regulation says “the illegal trade of marijuana reaps an estimated $7 billion in income annually for organized crime … In 2015, the Criminal Intelligence Service Canada reported 657 organized crime groups operating in Canada, of which over half are known or suspected to be involved in the illicit marijuana market.”

But in an August submission to the same task force (headed by former justice minister Anne McLellan, it will recommend how the government should proceed with legalization), three Vancouver-area drug policy experts including Simon Fraser University criminologist Neil Boyd warned that in Canada, organized crime’s involvement with marijuana is overstated.

“Evidence suggests a very low level of involvement of organized crime in the cannabis industry in Canada,” the trio writes. “The majority of those in the industry tend to be non-violent and have minimal involvement with other criminal activities … Erroneously painting current industry participants as organized criminals, with predatory actions and intentions, could lead to unfounded restrictions on participation in this emerging legal market.”

In its own task force submission, a group of small producers called the Craft Cannabis Association of B.C. wrote that “Craft producers and retailers wish to be part of the legal industry … We do not want the federal government to exclude them based on the unfounded notion that these people are members of ‘organized crime.’”

Whomever the federal government decides to allow into the recreational marketplace — large corporate players, smaller mom-and-pop operators or both — regulations and efforts to inoculate the industry from criminal elements are inevitable, and necessary.

The danger is that rules meant to prevent bad guys from participating in the recreational market could reach too far, producing unintended consequences.

Legal recreational marijuana was introduced to Colorado in 2014, and while most industry participants say the state’s regulatory environment has allowed them to succeed, there are some arcane requirements and potential changes that tend to tilt the playing field — in the wrong direction.

“Legalization was sold to voters as something to be regulated like alcohol,” says Tim Cullen, CEO and co-owner of the Colorado Harvest Company, which produces, process and sells recreational weed. “But the rules aren’t the same. They aren’t even close. We have residency rules, purchase limits, advertising packaging and labelling restrictions that the alcohol industry doesn’t have. All of our ingredients must be declared, including what has been sprayed on our plants.”

There’s now a proposal before voters to limit the potency of all marijuana sold in Colorado. Forcing licensed marijuana producers to cut the strength of their product is “a ridiculous idea,” Cullen says, “because it would benefit black market producers. They are already our strongest competition. Right now, we beat them with the quality and selection we offer in our stores.”

But the biggest difference between black market weed and legal marijuana — what keeps the underground market in the game — has less to do with quality and variety than price. The government-regulated market is taxed; the black market is not.

When legal recreational marijuana was made available to adults in Washington state two years ago, the state government imposed three levels of taxation: licensed producers, processors and retailers were all forced to pay a 25 per cent excise tax on marijuana products. These duties were passed along to the customer, and the average price for a gram of dried marijuana sold in regulated shops was US$30, about four times the street price.

Hardly surprising, consumers avoided the legal market in droves, says Rick Garza, director of the Washington State Liquor and Cannabis Board, the public body that enforces pot laws. The state responded a year later, overhauling its tax regime so that a single 37 per cent excise tax would be applied to marijuana products at the point of sale.

As a result, the average price for a gram of marijuana sold through legal channels is now about US$9. After a slow start and a glut in supply the first year, total sales of marijuana under the regulated system have exceeded expectations, reaching the US$1-billion mark in June this year. “That’s double what we expected,” Garza says. Meanwhile, the state has collected more than US$270 million in marijuana excise taxes since legalization came into effect.

Washingtonians may love their legal pot, but the black market hasn’t died. Garza estimates the state’s illicit marijuana trade still represents about 28 per cent of the total market. That should not come as a big surprise, he says. Some consumers live in areas of the state where legal pot is not close at hand as a result of county-wide bans. Some have chosen to eschew the legal market, preferring to deal directly with underground growers and dealers.

“It’s like booze after prohibition,” Garza says. Some people continued to purchase liquor from bootleggers. But with time, the black market shrank to the point of insignificance. The same may happen with marijuana; a lot depends on the rules that various governments decide to impose on the legal market, and on levels of taxation they apply.

Garza has received visits from Canadian lawmakers and law enforcement officials, looking to learn from the Washington state experience. His advice? “Start conservatively,” he says. Create limits, but don’t burden a nascent, legal marijuana industry with more rules and restrictions that are necessary to protect children, and society at large. Don’t overtax the system, or the whole exercise may fail.

And don’t expect to eliminate the black market overnight. On that point, at least, Don Briere can agree. Canada’s king of retail pot stores says he’s thinking of expanding, getting into the cultivation trade. He’s speaking to investors and looking at potential sites for low-cost outdoor grow-operations and greenhouses.

“We’re looking at going into production ourselves,” Briere says. “We’re not going anywhere.”

Source: National Post
Author: Brian Hutchinson
Published: October, 19 2016
URL: National Post

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