DID LEGAL POT ALSO BOOST MARIJUANA BLACK MARKET?
Law enforcement officials say legalization has made it worse
Law enforcement says the marijuana black market in Colorado has gotten worse since legalization, but others say it is not that simple.
As he awaited sentencing in 2010, Fayin Deng sounded a contemplative, philosophic note. “I have learned now that once you become obsessed with money, no matter how great your original need was,” Deng wrote to the federal judge overseeing his criminal case, “there is no such thing as feeling like you have enough.”
The source of his cash came from a different kind of green — marijuana. It was “easy money,” Deng wrote, referring to his role in a large-scale Colorado drug trafficking organization responsible for growing massive quantities of illicit marijuana for sale across the country.
Facing the prospect of 18 months in federal prison, Deng wished he could take it all back.
“Looking back now, I can see where I had chances to do the right thing. I did not take them,” Deng wrote. “I feel worse about this than anything I have ever done.”
But last month, nearly 12 years to the day after they were arrested the first time, Deng and his wife, Kelly Chuong, were accused by federal investigators of participating in a similar black market marijuana scheme — an operation the now-former U.S. attorney for the District of Colorado in 2019 called the largest marijuana bust in state history.
The couple’s indictment and arrest comes two years after federal and local law enforcement culminated a multiyear investigation that led to 250 homes and businesses being raided across the Front Range and dozens of people arrested. Authorities seized more than 80,000 marijuana plants and nearly $2.2 million along with gold bars, jewelry and sports cars.
Federal prosecutors have divulged little about their case against the couple beyond the just-filed charges, but local drug investigators in 2019 pegged Deng and Chuong as leaders of the drug trafficking organization, according to arrest warrant affidavits for other suspects filed at the time in district courts in Arapahoe and Adams counties.
The black market operation — which also involved another Chinese organiza
tion, investigators say — wasn’t based in seedy warehouses or rural fields. Instead the organization allegedly bought middle-class suburban homes around metro Denver and filled their spacious basements with sophisticated growing equipment designed to cultivate hundreds, if not thousands, of plants, authorities say.
This illicit marijuana operation is part of what local and federal law enforcement officials contend is a worsening problem — a direct rebuttal to Amendment 64 proponents’ argument that legalization would weaken pot’s black market.
“The reality is that it’s bigger now,” said John Kellner, district attorney for the 18th Judicial District, whose jurisdiction in Denver’s suburbs includes many of the homes raided during the 2019 investigation. “And it’s obvious why: It’s easy to hide in plain sight.”
The data, though, paints a more complicated picture of the illicit cannabis market. Some indicators are up in Colorado: Drug Enforcement Administration busts on indoor grows, for example, as well as marijuana seizures by the Postal Inspection Service.
But plenty of other black market marijuana indicators are mixed, at best: arrests on marijuana charges have gone up and down since legalization, as have organized crime numbers, according to data soon to be published in the state’s biennial “Impacts of Marijuana Legalization in Colorado” report.
“By its nature, the black market is hidden,” said Patricia Billinger, spokesperson for the Colorado Department of Public Safety. “So you can’t accurately count what you can’t see.”
Cannabis experts say that as long as marijuana remains illegal at the federal level, and there are states where there’s no regulated market, illicit weed will have room to operate. And for many consumers in certain areas of the country, it’s still cheaper to buy their bud off the books.
But accepting law enforcement’s contention that a boom in black market marijuana is occurring as a result of legalization doesn’t hold water, said John Hudak, a cannabis expert at the nonpartisan Brookings Institution in Washington, D.C.
“Police are not social scientists,” Hudak said. “They’re not in the business of proving broad causal trends. They’re involved in proving individual cases. The connection to legalization as the cause of this is just not the purview or expertise of law enforcement.”
Out of sight, out of mind
The Tollgate Crossing subdivision is a quiet middle-class neighborhood on the southeast reaches of Aurora, replete with three-bedroom brick houses and whitefenced porches.
The neighborhood also served as the headquarters for a network of Chinese drug trafficking organizations — a vast conglomerate whose tentacles reached both coasts, according to a 2019 arrest affidavit.
These middle- and upper-class suburban homes are prime locations for illegal marijuana grow operations because they’re inconspicuous and spacious, Kellner said, featuring large, unfinished basements that can support hundreds, if not a thousand, plants.
“Especially for a district like ours, you’ve got access to very large, wide-open spaces and rural communities where things might be less visible,” said Kellner, whose district includes Arapahoe, Douglas, Lincoln and Elbert counties. “And you’re just a stone’s throw away from the Denver metro area.”
In all, the Chinese network may have operated up to 500 grow homes in the Denver area, investigators said in the 2019 arrest affidavits. Members of the drug organization or their family members purchased the houses, valued as high as $650,000 in some neighborhoods, property records show.
Drug investigators raided the sprawling grow-house network during four major busts from August 2018 to May 2019. The investigation culminated May 22, 2019, when agents hit subdivisions from Brighton to Centennial. Two days later, the U.S. attorney’s office in Colorado announced the arrests and seizures.
While the suburban houses were used to grow the plants, the families used their restaurants to launder the money, law enforcement officials alleged.
The latest investigation began during summer 2016, when the North Metro Task Force, a multijurisdictional drug enforcement group led by the DEA, discovered two outdoor marijuana grows in Adams County, the 2019 arrest affidavit said. They were operated by the Asian Pride drug trafficking organization, another piece of the Chinese network.
As law enforcement unraveled the spool of suspects, familiar names and faces emerged. Investigators named one of the prominent drug rings after Dan Tang, who owns the popular Heaven Dragon restaurants in metro Denver and spent time in prison after the 2008 investigation.
When contacted by The Denver Post, Tang said he’s just “concentrating on running my business.”
“I just pay my taxes, do my business and try to make a living,” he said.
Tang has not been charged in connection with the latest investigation, but investigators suspect it was his family members who spearheaded the day-to-day operations this time, the 2019 arrest affidavits show.
Investigators alleged Tang’s brother, Deng, distributed the marijuana, while Deng’s wife, Chuong, laundered the money through restaurants. The drug money would be run through the restaurants as cash sales, and other members of the drug organization would receive W2s and paychecks as if they worked at the restaurants, the affidavits filed in Adams County District Court said.
Chuong, 43, has several businesses listed under her name, including a restaurant consulting firm and a Boulder tea company, according to the Colorado secretary of state office’s registered business database.
When The Post called the Deng-chuong household, a man who identified himself as their son said he didn’t know anything and hung up. Attorneys for Deng and Chuong declined to comment.
In the wee hours of Aug. 9, 2018, state, local and federal agents descended on homes across the metro area, including several in the Eastlake subdivision in Thornton where Tang family members own homes, property records show. The raids hit 84 houses and restaurants connected with the Tang organization, producing nearly 12,000 marijuana plants, 900 pounds of finished marijuana packaged for sale and close to $1 million, the affidavit said.
More than two years after the raids, a federal grand jury in midmay indicted Deng and Chuong on two counts relating to distribution of 100 kilograms — more than 220 pounds — or more of marijuana, in addition to 100 or more marijuana plants, according to the couple’s indictment.
Both appeared June 9 before a federal judge in Denver for an arraignment, during which they pleaded not guilty to both charges. Deng and Chuong face up to 40 years in federal prison on each count if convicted.
Other members of the drug organizations are at different stages of their criminal proceedings.
An Aurora couple in February 2020 became the first members of the criminal operation to be sentenced in connection with the investigation, with a jury finding them guilty of growing nearly 900 marijuana plants in their basement with plans to distribute.
Is black market marijuana booming in Colorado?
In myriad news conferences and interviews over the past seven years, federal and local law enforcement officials have been adamant that illicit marijuana is growing in Colorado and other states that have passed legalization.
Drug trafficking organizations with “substantial experience, equipment and resources” are able to produce up to 1,800 pounds of marijuana per year for every 100 plants cultivated, which can be worth millions, according to the DEA’S 2020 National Drug Threat Assessment report.
“Every time our task force puts their line in the water, they find something,” Kellner, the district attorney, said about investigating black market marijuana. “It’s a matter of how many resources we can spare and law enforcement can spare to put into it. Because every time we go fishing, we catch something.”
On June 10, Kellner and a host of federal partners stood before a bank of reporters in his Centennial office to detail another large black market marijuana bust. This one, prosecutors alleged, involved 21 individuals growing vast amounts of illicit pot throughout Colorado and laundering their sizable proceeds through China via social media apps.
“Colorado’s experiment with legalizing recreational marijuana has made it easier for groups like this to flourish,” Kellner told reporters.
The numbers, however, present a far fuzzier picture of the state of Colorado’s black market. As Billinger, the state public safety spokesperson, stated, there is simply no good way to accurately measure what you can’t see.
Thus, the state, law enforcement and the cannabis industry can point only to a series of metrics that give some sense as to marijuana’s unregulated market. These include pot-related arrests, organized crime filings and seizures on public land and through mail, as well as the DEA’S cannabis eradication and suppression program.
In 2008, six years before legal recreational pot hit the shelves of Colorado dispensaries, there were 2,542 marijuana-related felony charges filed. In 2019, that number dropped to 1,416, according to the state’s public safety department. Meanwhile, misdemeanor and petty offenses with marijuana ties have also dropped since 2008.
In the state’s extensive 2018 report on marijuana’s impact five years after legalization, authors noted that organized crime filings with pot ties had almost tripled in five years, increasing to 119 in 2017 from 31 in 2012. But data from the upcoming 2021 report shows that number plummeted in 2018 and 2019, dropping back down to near2012 levels.
Members of the cannabis industry acknowledge that an illicit market for marijuana is bound to exist if pot is still illegal federally and in some states, but they say the fact that more and more jurisdictions are taking down barriers to bud proves Colorado’s formula has worked.
“If the overall argument is that legalization increases crime, I think that’s a hard no,” said Truman Bradley, executive director of the Marijuana Industry Group. “Policymakers around the country recognize that, and that’s why you see so many dominoes falling. If the data pointed the other direction, you just wouldn’t see that.”
Taken as a whole, however, state data hardly show a black market gasping for air. Officials in 2019 seized 33,361 plants on public lands in Colorado. That same year, the DEA, through its cannabis eradication/suppression program, snatched 57,711 plants from indoor grows, 19,731 pounds of bulk marijuana and $1.58 million in assets, per the state report.
The decision to form an Illicit Market Marijuana Team in 2018 indicates Colorado is making black market weed grows a priority, Billinger said.
The team, run by the Colorado Bureau of Investigation and comprising 13 investigative agents and one analyst, works with local law enforcement — especially in rural areas — to find and dismantle illegal marijuana grows.
In 2019 the team participated in 36 cases, resulting in the dismantling of 82 illegal grow sites while making 49 arrests, according to the 2021 state report. The team also seized 25,161 plants, 5,487 pounds of processed marijuana and 64 firearms.
So what can be done about marijuana’s black market?
Kellner says the answer is more law enforcement resources. Cannabis advocates say it’s acrossthe-board legalization and lowering the barrier to entry so regulated businesses can compete pricewise with the unregulated players.
“It’s a complex problem,” Hudak, the Brookings Institution expert, said. He noted that cannabis actors are also rational economic actors. If the price is too high in the dispensary, or the closest pot shop is hundreds of miles away like in some Western states, people will get their high via less legal means.
“For individuals who think this is a cannabis-only issue, it’s important to remember there are black markets for alcohol, for cigarettes, for a lot of goods,” Hudak said. “Combating the black market … it’s a nearly impossible task. It’s a battle of diminishing it.”