PROSECUTABLE POT
It’s been legal in Canada for 18 months, but more than half of cannabis users in B.C. still buy their pot at illegal shops or via mail order from one of dozens of websites.
The nondescript storefront in the 1100 block of Kingsway has paper covering all of its windows except for a neon “open” sign that is still illuminated just before 11 p.m. on a Sunday night.
The yellow awning overhead suggests the building houses an auto repair shop.
But just inside the front door is another sign — King Canna.
It is one of several illegal cannabis stores still operating in Vancouver more than 18 months after marijuana was legalized in Canada. And even though provincial regulators seized products at King Canna on May 27, it remained open for business this week.
The stores aren’t the only sign that black market cannabis is still a hot commodity in B.C.
Dozens of websites sell a variety of cannabis products offering to deliver in an hour or less — even though door-to-door pot delivery is illegal in Canada. Other websites offer to mail products to customers despite not having the legal authority to do so. And police across the province continue to seize large amounts of cannabis grown by black market producers, though charges are rarely laid.
Legal cannabis sellers who’ve made big investments, obtained licences and opened regulated businesses are upset that the playing field is not level.
On a recent Sunday night, a Sun reporter found more than five illegal pot shops open for business.
One of them was Granville Cannabis, at 2312 Granville St., tucked between a modern furniture store and an art gallery.
On May 20, Vancouver police officers accompanied members of the B.C. Community Safety Unit to the illegal store to seize cannabis. Like King Canna, it remains open for business with both a storefront and an online site that offers mail order service, including no shipping charges on all orders over $149.
Public Safety Minister Mike Farnworth admits the illegal sale and production of cannabis remains a problem. But, he said, as the legal industry evolves, more and more consumers are shifting to licensed stores and producers.
And he said the 44-member safety unit, which investigates illegal vendors, is already shutting down some of the unauthorized operators.
“We know that there’s still the illegal stores up and operating,” Farnworth said recently. “The community safety unit has been out. They initially do site visits … saying ‘Hey, here’s the rules. And if you don’t abide by them, then we will be paying you additional visits. There will be confiscation of product and administrative fines.’”
He said 90 illegal retail outlets have shut down voluntarily, while 36 “are in the process of facing administrative penalties.”
“I know one place has already been fined just over three-quarters of a million dollars,” Farnworth said.
He thinks the illegal stores will disappear as licensed vendors increase in number. As of May, there were 256 licences issued for private stores, and 27 more stores awaiting “a final inspection.” And there are 16 government stores. Cannabis sales have been up every month since December.
“So there is a significant retail presence across the province, though there are still holes, particularly in the Lower Mainland,” Farnworth said. Shutting down the illegal stores, he said, will “take time.”
The pre-legalization pot sellers are “not going to roll over and play dead and give up what has been for them a very lucrative market,” Farnworth said. “But at the same time, we have made it clear the enforcement unit is out there, and they are going to be doing enforcement.”
Mike Babins, who owns Evergreen Cannabis, said he was “shocked” to learn so many illegal stores are still open.
“I was even more shocked that people were shopping at them,” said Babins, whose West Fourth store was the first licensed private store in B.C.
He thinks consumers need to take more responsibility to find out which sources are legal and which are still black market.
“If you go to buy a pack of cigarettes, there’s going to be like a label on it, it’s going to be in a package that’s sealed,” Babins said. “But if someone just gives you a handful of nicotine … that they weigh themselves, you should be a little suspicious.”
He said he’s tried to help the illegal operators who want to “transition over.”
“I mean, we were a grey market shop. We were able to transition. … But there are certain people out there who would rather just keep collecting cash tax-free.”
It’s hard to say precisely how much black market cannabis there is in B.C.
Statistics Canada’s most recent report on cannabis users was released in February. It said that, in 2019, B.C. had the lowest number of residents purchasing from legal sources at just 36.6 per cent. But that was still up from 2018, when just 23 per cent of users here bought from licensed vendors. Still more than half of pot users in B.C. — 51.4 per cent — said they bought illicit weed in 2019.
Abbotsford police Chief Mike Serr, who co-chairs the drug advisory committee of the Canadian Association of Chiefs of Police, says law enforcement is aware of the challenges of black market cannabis.
And Serr said that if he was a legal store owner, “100 per cent I’d be mad. I’m trying to do it the right way. And all these illegal stores are still up and running. And it’s a challenge. And then as well, as you know, some of the big licensed producers — you’re seeing are going out of business because they can’t compete.”
Adam Greenblatt, of Canopy Growth, said he thinks that cuts by cannabis companies have more to do with the industry responding to “real data” 18 months into legalization than the impact of the black market.
“We’re now finally able to run our businesses based on real consumer insights, real sales data,” he said. And he said the legal market has had a significant effect on illicit cannabis, pushing the wholesale price on the black market much lower.
“A pound of weed on the black market usually goes for from $1,500 to $2,000,” he said. “Now you’re hearing 6, 7, 800 dollars for high-quality indoor weed by the pound.”
ILLEGAL ONLINE CANNABIS SITES TOUGH TO CONTROL
While the B.C. government is working to shut down illegal storefronts, it hasn’t been able to control the explosion of illegal online cannabis sites offering both delivery service and mail order pot.
In April, the Surrey RCMP drug unit searched a house in the 16400 block of 24A Avenue. Officers found cocaine and MDMA, but also various packaged cannabis products and evidence that internet sales were taking place.
Weedmaps.com’s Vancouver link for delivery service lists more than two dozen businesses with names like Gogobud, Weedrush and Easybud.
Jaclynn Pehota, executive director of the Association of Canadian Cannabis Retailers, said dealing with online providers is a struggle.
“It is one thing to be able to walk into a storefront and seize product and give somebody a fine. It is quite a different thing to have to determine where they’re located and where they’re sourcing their product, how they’re doing the delivery,” she said. “I think that in B.C. we can continue to really struggle with the project of legalization generally.”
Farnworth said his ministry has “been raising this with the feds and the feds have told us they are aware of it and are working on it.”
One possible remedy would be to allow the legal market to do online deliveries too, “which in essence then would be significant competition against black market operators,” Farnworth said. “That’s something that we are seriously looking at.”
I know one place has already been fined just over three-quarters of a million dollars. mike Farnworth, public safety minister
SOME ONLINE SELLERS MAKING MILLIONS A MONTH
Serr said illegal online sellers “have a very huge footprint” on the black market right now.
“It’s very difficult even for a consumer who would like to buy legal cannabis to know whether they’re at a legal or illegal platform or store.”
Police reports indicate that some online sellers are making millions a month, Serr said.
“There is so much money in this. It’s incredible,” he said. “We’ve always advocated you have to start stamping out organized crime. The issue is we’re not doing that right now. We’ve all kind of said it’s legal and washed our hands of it.”
The chiefs’ association is part of a working group with Health Canada and the federal Public Safety Department that is continually strategizing on how to tackle the black market, Serr said.
“How do we make it more difficult for banking? You know, right now, some are using bitcoin or e-transfers. How do we make it more difficult for companies to ship their illegal products?”
Pehota believes the unlicensed stores and online sales are “really just a symptom of a deeper and more underlying issue,” which is the “large supply of unregulated cannabis being produced in B.C.”
The province has always had a “really heavy concentration — around 6,500 people — who have been cultivating under medical auspices,” Pehota said.
She said the surplus from the medical growers “makes up the majority of the illicit cannabis in Canada in my opinion.”
“I think that’s relatively obvious. That product ends up in other provinces, it’s an export game as well,” Pehota said.
The challenge for government regulators and police is that the medical pot growers are “constitutionally protected,” based on a 2016 Federal Court of Canada ruling that said medical users had a charter right to grow their own cannabis.
“The government is in an awkward position,” said Pehota. “How do you differentiate between people who are doing this under medical auspices and diverting product … and people who are doing this as a large-scale commercial activity strictly for the purposes of trafficking? That is very, very fraught.”
That challenge has led to “a really hands-off approach,” she said.
Farnworth said it’s not a surprise that B.C. still has so much underground production.
“We’ve had an industry that has been entrenched for so long. One of the challenges is how do you want to deal with that component which is linked to organized crime and get that shut down? And the second is how do you bring growers into the legal market, particularly in areas of the province where it’s been very well established for a very long time?” Farnworth said.
He said he’d like some of the illicit growers licensed for “micro production to try and get that transition to take place.”
Farnworth agrees with legal sellers and police that there needs to be “significant reform” to federal medical marijuana legislation. “The licence system needs to undergo a complete reform because it’s pretty clear that criminal activity has a foothold in that area,” he said. CRIMINAL INVESTIGATIONS TAKE ‘A BACK SEAT’
While charges are rarely laid in illicit cannabis production and sale, the B.C. director of civil forfeiture has filed several recent suits to claim assets of those allegedly involved.
On May 19, the director filed one against Surrey resident Derek Chevalier over $424,825 found after he went into medical distress and crashed his 2002 GMC Sierra into several vehicles in an apartment parking lot in February.
Paramedics treating Chevalier found $8,625 in his pockets and gave it to the RCMP, who arranged to tow the Sierra after Chevalier was taken to hospital.
Police were doing an inventory of items in the truck before it was hauled away and saw a backpack in the front passenger foot well. Inside, they “observed a large amount of bundled currency,” the suit says. It was another $416,200, some of it loose, some of it bundled with elastic bands and inside sealed plastic bags.
There were “records of transactions including sale, collection, and debt” score sheets.
Chevalier owns Coast Pet and Plant Supplies, a hydroponics and cannabis growing equipment supplier.
The government alleges the cash is proceeds of crime and that Chevalier has been involved in trafficking controlled substances, “selling, promoting sales and supplying illicit cannabis in a manner that does not comply with the Cannabis Control and Licensing Act,” and “distributing and selling illicit cannabis contrary to the Cannabis Act.”
Chevalier has not filed a statement of defence. Nor has he been charged criminally.
The director filed two lawsuits in May to seize properties in Abbotsford and Powell River where police found illegal cannabis growing operations after separate investigations.
Abbotsford police went to the Horizon Street house of Hong Thi Phan and her husband Dung Quang Nguyen last Dec. 29 after they were robbed at gunpoint.
Officers smelled “vegetative cannabis” and began an investigation into an illicit grow-op, the lawsuit says, eventually executing a search warrant on March 9. They found 366 pot plants, growing equipment and surveillance cameras.
Nguyen “provided the APD with invalid authorization to possess cannabis and produce cannabis for personal use that had previously been granted by Health Canada.” It had expired in 2013.
The director alleges the couple violated the federal Cannabis Act by illicitly possessing pot for the purpose of distribution. The statement of claim also alleges the couple was laundering money at the house Phan bought in 2003. It is now assessed at $809,000. Neither has been charged criminally.
On May 5, the government filed a lawsuit against Powell River resident Marc Joseph Wills Butula, saying his property at 3162 Butler Rd. should be forfeited as a proceed of unlawful activities.
Last fall, Powell River RCMP raided a suspected growing operation and found “10 sea containers with a total of 923 cannabis plants, as well as 589 clones” in a building at the site. They learned Butula ran the operation and began to watch him, the lawsuit says.
In April, they searched two other sites and found 4,490 plants at one, while the other had 198 growing and 973 freshly cut plants.
As in the other cases, Butula is accused of violating both the provincial Cannabis Control and Licensing Act and the federal Cannabis Act.
And, as in the other cases, Butula has not been charged criminally, something he noted in his response denying the government allegations. He also denied that he had any connection to two of the properties and said the search of the third violated his charter rights and the evidence seized should be excluded.
Serr, the Abbotsford police chief, said that police generally are not pursuing investigations targeting illegal marijuana production.
“I’ll be blunt. Most departments are not actively doing criminal investigations. … They take an enormous amount of resources and when we’re dealing with methamphetamine and fentanyl and other things, (cannabis) always will takes a back seat,” Serr said. “But that being said, organized crime is actively involved. They’re getting their drugs from the black market 100 per cent. They’re alive and well and we know we have to deal with it.”