The pot farm next door: Black market weed operations inundate California suburb, cops say

Once California legalized marijuana, the sky was the limited for ILLEGAL marijuana growth.  Can you, by smoking the weed tell the difference between legal and illegally grown pot?  Can the cops tell the difference?  Of course not.  The real goal of legalization was to make illegal pot safer to sell and use.

“Among California’s marijuana cops at Cannabis Control, Antioch has developed a reputation as a hub for high-yield, covert indoor grow operations. They have raided at least 60 alleged grow houses in the city over the past two years and suspect well over 100 more remain in operation.

But that’s not all. Investigators say the illegal pot production in Antioch provides a glimpse of a hidden world – one that mirrors a trend playing out not only in California, but in states such as Oklahoma, Oregon, New Mexico and Maine: groups of people with apparent ties to foreign countries – most notably China – producing weed in colossal volumes.

A CNN investigation has found that, in this unassuming city of 115,000, the minimal consequences and hefty rewards for producing illicit marijuana in huge volumes has led to a whack-a-mole pattern of enforcement and a brazenness on the part of participants – all while neighbors look on in dismay.”

In a town of a little over 100,000 population, after the raids, there are still at least 100 more illegal grows in the City.  And, this is just one city.  For the user, why pay for legal marijuana, with the added permit, security, taxes and brick and mortar costs—along with insurance.  The illegal folks can sell you the same quality weed, for half the price of a government permitted facility.  Even potheads won’t over pay for the product.

The pot farm next door: Black market weed operations inundate California suburb, cops say

 

By Rob Kuznia, Scott Glover, Yahya Abou-Ghazala, Kyung Lah and Yong Xiong, CNN, 8/31/24  https://www.cnn.com/2024/08/31/us/california-black-market-marijuana-grow-houses-invs/index.html

Antioch, CaliforniaCNN — 

Just after dawn on a recent spring morning, police dressed in tactical gear and armed with a search warrant pounded on the front door of an upscale home in a quiet suburban neighborhood an hour outside San Francisco.

When no one answered, the officers with California’s Department of Cannabis Control, which polices the legal sale of marijuana in the state, took a battering ram to the steel-reinforced door. When the door didn’t budge, they used a power saw to cut their way through a fortified back entrance and into the spacious five-bedroom property.

Inside, investigators found precisely what they were looking for: evidence of yet another black-market marijuana operation hidden in plain sight amid the cookie-cutter homes of suburbia.

They removed 80 pounds of weed from the pricey two-story home in Antioch, California. With curious neighbors looking on, they repeated the spectacle twice more on the same block that morning in late April. The raids filled a dump truck with about $1 million worth of illicit weed cultivated by unlicensed growers. Although cars were parked in the driveways, no people were found in any of the homes and no arrests were made.

Among California’s marijuana cops at Cannabis Control, Antioch has developed a reputation as a hub for high-yield, covert indoor grow operations. They have raided at least 60 alleged grow houses in the city over the past two years and suspect well over 100 more remain in operation.

But that’s not all. Investigators say the illegal pot production in Antioch provides a glimpse of a hidden world – one that mirrors a trend playing out not only in California, but in states such as Oklahoma, Oregon, New Mexico and Maine: groups of people with apparent ties to foreign countries – most notably China – producing weed in colossal volumes.

A CNN investigation has found that, in this unassuming city of 115,000, the minimal consequences and hefty rewards for producing illicit marijuana in huge volumes has led to a whack-a-mole pattern of enforcement and a brazenness on the part of participants – all while neighbors look on in dismay.

The unlicensed operations, which can cause house fires and mold, often leave homes in a severely damaged state. Properties deemed uninhabitable by the city after raids are sometimes quickly rehabbed and sold for much more than the prior sale. Throughout, operatives in the schemes are seldom held accountable.

Law enforcement breaking through a reinforced back door to raid a marijuana grow house. CNN

The dynamic in Antioch is a microcosm of greater California, where lax laws on black-market weed are doing little to change the state’s status as a gargantuan producer of it.

The Golden State, whose cannabis enjoys a global reputation similar to that of Napa Valley wines, produces about 40% of the nation’s weed – the vast majority of it by unlicensed growers, according to Beau Whitney, an economist who specializes in the cannabis industry. The runner-up state – Oregon – produces less than a fifth of California’s output, he said.

This means California is fueling a massive underground economy, as three-quarters of the US marijuana market is illegal, Whitney said.

Law enforcement officials – including former DEA leaders and FBI director Christopher Wray – attribute much of the activity nationwide to Chinese organized crime.

In Antioch, the operations bear the hallmarks of “the Chinese criminal syndicate,” said Bill Jones, chief of law enforcement at the California Department of Cannabis Control. He added that criminal networks made up of Chinese nationals have become the dominant presence in the state’s illegal cannabis trade over the past five years, eclipsing Mexican cartels.

Law enforcement officials said they’ve seen evidence that the activity in Antioch amounts to organized crime, citing the sophistication of the operations and apparent coordination of some of the people involved. But they declined to elaborate, citing ongoing investigations.

A review of search warrant affidavits, online property records and interviews with neighbors of some of the raided homes showed that the vast majority were owned or occupied by people with Chinese names, in a city where Asians make up about 15% of the population.

The home that Cannabis Control agents had to power-saw their way into belongs to Samson Liu, a police officer in nearby Oakland, California, CNN found. Cannabis Control declined to say whether Liu lived in the home or had tenants, citing an ongoing investigation.

Liu’s home not only contained what police said was 80 pounds of illegal marijuana trimmings stashed away in piles of garbage bags, officials said it was also extensively modified for the sole purpose of cultivation: The doors were fortified; the windows were boarded up. A heavy-duty generator sat in the laundry room to maximize power. Silver industrial air ducts snaked in and out of rooms for ventilation.

Law enforcement officials recover marijuana from inside a grow house. CNN

Almost every US state – even the most liberal – and the federal government considers the cultivation and/or sale of unlicensed marijuana a serious crime that carries felony-level fines and prison time, according to a CNN analysis of data from the National Organization for the Reform of Marijuana Laws.

But in California, the feds in recent years have largely taken a hands-off approach to marijuana, officials say. And under state law, any amount of illegal weed – save a few exceptions, such as the culprit being a registered sex offender or selling it to a child – is a misdemeanor offense.

As for the house owned by Liu, Cannabis Control agents have referred the matter to the internal affairs division of the Oakland Police Department, but have made no arrests in connection with the contraband.

CNN’s efforts to reach Liu by phone, email and a visit to his home were unsuccessful. The Oakland Police Department told CNN it is cooperating with outside law-enforcement agencies and investigating the case as a personnel matter; Liu was placed on administrative leave the day of the raid in late April.

Despite the large loads of marijuana and cash taken during roughly 60 raids in Antioch since 2022, only two people associated with the busts in that city have been arrested and charged; both were given misdemeanors, according to records provided by Cannabis Control.

Although the state routinely seizes cash from the raided homes, it does not seize the homes themselves. Of the 60 raided homes in Antioch, about half were fixed up and sold by the original owner – often for a significantly higher amount than the prior sale – after the busts, CNN found.

CNN identified one real estate agent who has had a hand in selling four residential homes raided by authorities in Antioch. A review of online property records shows that she herself owns one of those homes, from which $937,000 worth of illicit cannabis was seized during a raid in December.

This summer, the agent listed another Antioch home for sale, less than three months after it was raided and deemed uninhabitable by the city due to issues related to its past use as an illegal grow house.

In a brief interview with CNN, the agent brushed aside questions about her involvement with properties associated with marijuana cultivation.

From online listing

“We pay the fine,” the real estate agent said, without elaborating. “There is no problem.”

The real estate agent’s attorney, Darius Chan, said his client is not involved in any “illegal operation” involving marijuana.

Chan acknowledged that his client owns a home that was used for illegal marijuana cultivation, but said she leased the house to a tenant who used it as a grow house. As for her role in real estate transactions involving suspected illicit marijuana operations, Chan said his client learned only afterwards that the properties had been converted to grow houses. He added that such conversions were a “persistent issue” in the area.

“It is not fair to tie a few houses to her or to tie her to the illegal cannabis operation,” the lawyer said. “She’s a victim of circumstance.”

‘People are smoking pesticides’

California, despite its legalization of recreational marijuana in 2016, remains a haven for unlicensed black-market entrepreneurs, officials say.

Illegal operators ignore the rules and fees of California’s highly regulated system under which marijuana can be legally produced and sold. They also skirt taxes and can thus undercut the prices of the legal market, which in California is struggling – in part because of the surplus flowing from the black market.

All the while, the rogue entrepreneurs enjoy the protection of doing business in a state where a voter-approved legalization law has a clause that effectively eliminates felony prosecutions when it comes to marijuana. In almost every other state – including Washington and Colorado, the first two to legalize recreational marijuana – high-volume producers and/or distributors of illegal weed face felony charges, according to CNN’s review of state laws.

In California, “You can have seven plants or 70,000 plants and it still is that same misdemeanor violation,” said Siskiyou County Sheriff Jeremiah LaRue, whose sprawling northern California district is notorious for outdoor illegal marijuana cultivation. “It’s actually just a joke.”

Shannon Dicus, the sheriff of San Bernardino County in Southern California, said the state’s weak law creates an environment in which black-market growers have lots to gain and little to lose.

“It’s risk versus reward,” Dicus said. “Very small risk, very high reward.”

Unlicensed operators ship their in-demand California product to locations across the United States, including the East Coast, where it’s harder to grow outdoors in colder seasons.

Meanwhile, the illicit farming of marijuana is associated with a wide array of problems. It can be a magnet for violent crime, such as armed robbery.

The grow houses are typically left in degraded condition due to the excessive amounts of power and water needed to produce the crop, which often requires makeshift electrical wiring and leaves walls covered in mold. Workers who tend to the plants are sometimes exploited or even trafficked, Cannabis Control officials said.

One little-recognized problem, police say, is that untested weed from illegal growers sometimes finds its way into legal dispensaries where customers don’t realize what they’re buying.

“People are smoking pesticides,” said Kevin McInerney, a commander with the Department of Cannabis Control.

Two recent cases filed in federal court in California offer a rare glimpse into how the more organized rings of grow houses can operate.

In one, federal authorities in 2018 alleged that about 100 homes in Greater Sacramento had been purchased by Chinese nationals and converted to weed-cultivation centers.

The investigation led to money-laundering and marijuana-manufacturing charges against four co-conspirators, including a real estate broker whose office was located in a strip mall.

The down payments for the homes were financed by wire transfers from China.

In the other federal case, a real estate agent used millions of dollars from Chinese investors to purchase nine homes in San Bernardino County that were converted into illegal marijuana cultivation sites.

The agent faced life in prison, but after pleading guilty in 2020 to conspiracy to possess, manufacture and distribute at least 1,000 marijuana plants, he ultimately was sentenced to six months.

In a letter to the judge, the real estate agent said he was lured into the scheme based on a promise to share in the profits and an assurance that marijuana cultivation was “only a misdemeanor.”

Some politicians and law enforcement officials in the US have gone so far as to theorize that the Chinese government may have a hand in the illicit cannabis grow house operations – or at a minimum are monitoring them. For instance, two members of Maine’s Congressional delegation – an Independent and a moderate Democrat – issued a joint press release in February expressing concern about “the Chinese Communist Party (CCP) affiliated marijuana cultivation operations” in their state and across the nation.

But Wray, the FBI director, said at a public hearing earlier this year that while his agency is starting to see “more ties between a lot of these growing operations and Chinese organized crime,” it hasn’t yet found any direct links between the marijuana farms and the Chinese government.

‘You have to steal electricity’

CNN interviewed four Mandarin-speaking Chinese nationals who said they worked in the illegal marijuana trade.

One of the men, who asked that he not be named due to his immigration status and fear for his safety, said he crossed the Mexican border about a year ago and found work in the underground cannabis market through a Los Angeles-area employment agency geared toward recent Chinese immigrants.

The man, who spoke with a Mandarin-speaking CNN producer in a series of telephone interviews, said he first spent seven months working for a friend who runs several unlicensed outdoor greenhouses near Fresno, California.

The man said he then moved to the San Diego area, where he helped to produce between 40 and 50 pounds of marijuana a month from inside a home.

“You have to steal electricity,” he told CNN. “If you don’t steal electricity, the monthly electricity bill will be over $10,000.”

He said the drug sells for $1,000 a pound and is picked up by Chinese buyers who show up at the door. He doesn’t know where it goes from there.

Details of the man’s account could not be independently verified, but he did provide photos of large bags of marijuana he said were produced as part of the operation.

The other three men who spoke with CNN shared similar accounts.

Vanda Felbab-Brown, an expert on transnational crime and nontraditional security threats at the Brookings Institute, said the trafficking of Chinese migrants – many of whom end up cultivating illegal marijuana – appears to be organized by “a combination of … Chinese criminal networks and Mexican criminal groups.”

It’s something she believes the US government needs to be paying closer attention to.

“We have been prioritizing China military decision-making, but Chinese organized crime and organized crime more broadly has not been a high priority in intelligence collection,” she said. “That needs to change.”

Marijuana houses sold at elevated prices

In Antioch and other nearby cities in recent years, investigators with Cannabis Control began receiving a steady flow of anonymous tips and complaints from neighbors.

As they began to investigate, one tell-tale sign of cultivation was off-the-charts usage of power.

“There was one neighbor, she got her PG&E (utility) bill and it was for $40,000,” said Jones of Cannabis Control. “And she’s like, ‘Whoa.’”

The bill, it turned out, had landed in the wrong mailbox: It belonged to a grow house across the street.

In one raid this spring, authorities found about $1 million worth of illegal weed in a spacious five-bedroom home on Shell Ridge Way.

City records obtained by CNN show that an inspector deemed the house uninhabitable on the day of the raid in March, citing a fire hazard and “a lot of chemicals” that he believed were ending up in the house’s drainage system. The inspector came back less than a month later and removed the designation.

By June it was back on the market, described as a “dream home” listed for $889,000 – nearly $200,000 more than it sold for in 2020.

McInerney of Cannabis Control said untangling what he suspects are the complex networks behind illegal grow houses will require not only more resources, but also a fundamental culture change at his own agency – one he is pushing to achieve.

The idea, he said, is to supplement the current narcotics-investigation approach of surveilling suspicious characters and banging down doors – the “fun stuff,” as he said – with another dimension: the duller white-collar work of delving into paperwork.

“That’s where we can get the people that are making the money,” McInerney said. “But we’re swimming upstream.”

Regardless of whether organized crime is at play, the phenomenon strikes some Antioch residents as not only strange, but frustrating.

Bill Tillson, who lives on the same block where three homes were raided this spring – including that of the Oakland police officer – told CNN that he’d since seen people associated with the homes cleaning the properties, removing marijuana-growing equipment and putting one of the houses up for sale, price tag: $900,000. The whole dynamic struck him as unfair.

“It’s like, yeah, we’ll buy these houses, we’ll use them as a grow house … it’s a misdemeanor. No big deal,” Tillson said.

“Where are the higher-up people, the politicians?” he asked. “I mean, they’re letting them get away with this?”