Sunday, May 22, 2011

The Perils of Medical Marijuana Entrepreneurship

Yesterday's Bay Citizen contains the cautionary tale of a marjuana-growing entrepreneur named Yan Ebyam. To some extent, Ebyam's story is one of simple entrepreneurial error and bad decisions, but it also shines a light on the realities of producing a quasi-legal product like marijuana.

Yan Eybam
Ebyam, the son of pot-growing parents in Mendocino County, has never been the world's most astute businessman. In his early 20s, he started a business buying and selling computer equipment from bankrupt start-up firms in Silicon Valley. This ended in two and a half years in federal prison, after Ebyam pled guilty on charges of money laundering in the sale of over $6 million in stolen Cisco routers and Sun Microsystems servers. He then re-emerged in Oakland three years ago attempting to get into the medical-marijuana business, ultimately partnering with a Los Angeles lawyer named Nathan Hoffman in a plan to grow marijuana on a large scale for eligible patients in LA. They struck a deal with Ken Nurisso, owner of an industrial metal company and several warehouses in East Oakland, to construct a massive installation with more than 450 growing lights in 16 rooms. This effort faced problems almost immediately: the first crop was fatally damaged by bugs, and a dispute arose between Nurisso and Eybam before the second crop was completed. Eybam and Hoffman apparently never produced the $1 million crop they'd promised, and Nurisso bought and liquidated their business.

Eybam's next venture in marijuana cultivation made national news, as he moved into another 40,000 square foot warehouse in Oakland. In true California fashion, its 40 workers were unionized by the Teamsters, who got them a $25 an hour wage, health benefits, and pensions. Oakland city officials were hoping at the time to issue four permits for farms like Eybam's, and conducted tours of the facilities. The local Teamsters were even interviewed by ABC News regarding the farm. But with the publicity, unfortunately, came break-ins and theft; Eybam moved into the warehouse to stand guard at night, yet despite this Hoffman estimates that thieves took $125,000 worth of marijuana. The break-ins and business problems added up, and ultimately the city shut down its plans to issue growing permits after the federal government threatened prosecution. While Eybam still owns part of the farm, he has disappeared, and the operation has dwindled in size.

While the failure of these efforts is due in no small part to Eybam's questionable business acumen, we can't help but think that the deck is stacked against anyone else trying to cultivate marijuana for medical use. Whether the problem is the IRS harassing dispensaries, or cities attempting to zone them out of existence, or the Justice Department attempting to shut down growing farms, or (as in Eybam's case) not being able to depend on police to protect growing operations, the simple fact is that the government's hostility to marijuana cultivation contradicts anything it says about respecting state laws that permit medicinal use. In other words, law enforcement accepts medical marijuana, but only if the supply is magically transmitted to users from another dimension. If it has to be grown anywhere on this planet, they reserve the right to stop it and to punish the growers. Which implies that, for all practical purposes, Prop 215 is pointless.

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