Businesses bring in lobbyists in push for legalization – and big profits
DENVER — Two decades ago, Dean Petkanas was the chief financial officer of Stratton Oakmont, the Long Island stock firm whose collapse was made famous in the 2013 film “The Wolf of Wall Street.” Now the Huntington-based entrepreneur is looking to become a big winner in a new risky venture — the business of marijuana. The opportunities for moneymaking range from “edibles,” such as candy infused with marijuana, to a high-tech computer firm looking to link up patients with doctors. “This is an industry that is in its infancy,” explained Petkanas, here to confer with potential partners in Colorado where marijuana is legal, earning millions for investors with both medical and recreational uses. “You’re probably going to have a major gold rush in each state.” Hoping for the same success in New York, Petkanas, head of KannaLife Sciences Inc., and other firms seeking to capitalize on the legalization of marijuana hired top lobbyists — including Park Strategies LLC, the firm owned by former Sen. Alfonse D’Amato, and the Mercury public strategy firm — to persuade state lawmakers in June to end the century-old prohibition on marijuana and make it legal for medicinal purposes. For 17 years in Albany, pro-pot advocacy groups such as NORML (National Organization for the Reform of Marijuana Laws) had pushed a bill to legalize medical marijuana without any luck. But the arrival of lobbyists and big-money investors in the past two years propelled the idea forward.
The new medical marijuana law, signed by Gov. Andrew M. Cuomo in July, bans smokable marijuana but allows doctors to prescribe marijuana through oils, vapor and other edible forms in treating patients with cancer, epilepsy and other specific illnesses. The new law won’t take effect for about 18 months, and not until a program is created to select state-approved growers and dispensers of the drug. “This is not a Cheech-and-Chong bill,” said Patrick McCarthy, a former top aide to Gov. George Pataki and now managing director of Mercury, about the state legislation that eventually led to the state’s regulated use of medical marijuana. McCarthy says his firm has advised Petkanas and Gaia Plant-Based Medicine, a large successful Colorado marijuana grower and dispensary firm, looking to start up operations in New York if allowed. “‘Medical marijuana’ was once code for legalization,” but that’s no longer the case, McCarthy contends.
“This is not a Cheech-and-Chong bill.” — Patrick McCarthy, former top aide to Gov. George PatakiWhile some lobbyists represent growers or packagers, D’Amato’s firm represents “Ideal 420 Technologies,” a firm with offices in New York and New Hampshire that sells a sort of Miracle-Gro for pot. “We have developed the world’s first true marijuana soil,” boasts the company, with a reference in its name to “420,” a common phrase that means “marijuana friendly” among users. “Our soil — a carefully selected blend of vital nutrients and one that only requires watering — grows the highest quality marijuana in the marketplace.” D’Amato, who as a U.S. senator once posed famously for a photo as an undercover cop in the 1980s war on drugs, recently acknowledged he’s had a change of heart. “I know it’s a tough pill to swallow, and if you asked me five years ago if I would ever consider supporting legalizing medical marijuana, I would’ve say, ‘Not a chance,’” wrote D’Amato in a February column in the LI Herald, a local publication. “But times are changing, and marijuana has become a viable form of alternative medicine for those suffering from many debilitating diseases such as ALS, multiple sclerosis, cancer and others. When traditional medicines fail to offer relief, why not give patients alternatives?” Overall, Ideal 420 is prepared to pay D’Amato’s firm as much as $200,000 this year for its lobbying work, said co-founder Richard Yost, who hopes to become a key supplier for medical marijuana in New York. “You have to understand New York politics,” explained Yost about his lobbying effort for the medical marijuana bill. “It’s a Republican issue in the Senate, and Park Strategies has a strong relationship on that side.” The debate about a new marijuana industry for New York — worth potentially as much as $250 million in tax revenue, according to proponents — created a strange set of bedfellows who say they’re happy to be working together. Already in the first six months this year, Park Strategies was paid $90,000 to lobby for Ideal 420, state records show. A spokeswoman for Park Strategies declined to comment. “Business interests are definitely looking at this and hiring lobbyists to work in Albany, primarily around the issue of medical marijuana, because we are a lot closer on that,” said Doug Greene, legislative director for Empire State NORML, which also advocates that recreational use of marijuana (or “nonmedical,” as he prefers) be legalized. “Historically, we are at the point where we are finally having a conversation about the regulation and taxation of marijuana.” Erik A. Williams, a spokesman for Gaia Plant-Based Medicine, said a coalition of business interests, lobbyists and advocacy groups worked to help make marijuana legal in New York for the first time. “The more voices across the board that are involved, then that’s fantastic,” Williams said. “The bottom line on this issue is that it’s nonpartisan. It’s one of the most nonpartisan issues in this country.” In the near future, Williams said he foresees warehouses in Hauppauge or outdoor farms on the East End could be growing marijuana legally. “There’s an absolutely amazing economic boom that can come from this,” he said, walking through a cavernous warehouse facility in suburban Denver where various marijuana plants, at different stages of growth, are cultivated for sale. “Right here in this facility, we employ 60 persons already. What we’ve seen here in Colorado is millions of square feet in retail and warehouse space have been rented. The jobs are incredible. The taxes are incredible.” On Long Island, some are already in the marijuana business in a sense. In a bottom-floor suite in a Plainview office building, the staff of MarijuanaDoctors.com is busy handling telephone calls to doctors and patients in the more than 20 states where medical marijuana is legal, acting as a middleman referral agency and database for those who spot their colorful Internet ads and toll-free number online. Since it began in 2010, the company says some 300 physicians, 500 clinics and 93,000 patients have used its services. Through its website, the firm connects patients with licensed professionals in their area who legally prescribe medical marijuana. “A doctor basically comes to us, tells us what he’s looking for, what type of patients he wants to add to his practice, and we prequalify and screen those patients for him,” explained the firm’s CEO, Jason Draizin, who collects a fee from each participating physician. Many of them deal with patients who suffer from cancer, HIV and other chronic illnesses and believe marijuana can ease their pain and suffering. Despite the company’s name, Draizin insisted, “I run a computer company,” which a few years ago began buying up the rights to several domain names related to marijuana — “the future brand names of the industry,” he said — so his firm could capitalize as medical marijuana became legal in some 20 states throughout the nation. “We think we’ve successfully created the first brand in the industry,” said Draizin, who also oversees another website, PotLocator.com, which provides a wide variety of marijuana information, from where to find smoke shops in states where it is legal to more generalized blogs and social media devoted to the topic. Inside the Plainview office, next to staffers on headsets and computers dealing with incoming calls, Draizin keeps a supply shelf full of promotion giveaways, from vaporizers for inhaling marijuana fumes to complimentary caps, socks and even underwear with a marijuana-related logo. Though his firm doesn’t lobby, Draizin said MarijuanaDoctors.com is riding the wave of popular sentiment favoring legalization of marijuana, which he says is “similar to the original Prohibition” a century ago when banned alcohol sales were eventually legalized. Like other entrepreneurs in the marijuana business, Draizin predicts that legalization soon will bring even bigger players into the industry, willing to spend millions for television, radio and other forms of advertisement similar to those now enjoyed by beer, liquor, tobacco and even pharmaceutical companies. “It grows exponentially,” he said of the burgeoning pot industry around the nation. “In the belief of our company, medical marijuana should be a natural form of Bayer aspirin — so what’s that worth?” Petkanas runs his firm from a home address in Huntington and advertises KannaLife Sciences on a website. Currently, its biggest marijuana effort is a research project at a biotech center in Bucks County, Pa., studying the effect of certain cannabinoids (the chemical compounds in marijuana) on hepatic encephalopathy (brain damage caused by a diseased liver). Under an exclusive license granted by the National Institutes of Health, KannaLife is seeking to develop drugs from the nonpsychoactive compounds in the cannabinoids (in other words, the stuff in the plant that doesn’t make the user high) to help treat patients “without the adverse side effects associated with smoked marijuana,” said Renate Myles, chief of NIH’s news section. “It should be noted that the [government approval] is for the use of cannabinoid compounds similar to and including those that naturally occur in marijuana, but not for the whole marijuana plant.” While that biotech research is taking place, Petkanas has his eye on making money from other legal uses of marijuana. Right now, he estimates that sales of marijuana — both legal in some states and illegally through the underground market — is between $20 billion and $30 billion annually. In the past two years, his firm has announced various partnerships with other marijuana or hemp-related firms, including one in Colorado looking to develop “health and wellness” products. The marijuana biz is a new venture for Petkanas after a career spent with financial and investment firms. His current website touts his business background but doesn’t mention his previous “Wolf of Wall Street” connection or other past difficulties with Wall Street regulators. Financial Industry Regulatory Authority records show he agreed to a $4,000 fine in 2004 for a violation while working with another investment firm, without any admission of guilt. Belfort and other Stratton Oakmont officials got into trouble with federal authorities and went to prison. When asked about his “Wolf of Wall Street” background, Petkanas said he enjoyed the movie starring Leonardo DiCaprio. “As far as Jordan’s involvement [in the marijuana business], I don’t think he’s going to be involved,” he said with a smile, recalling their previous relationship. Joined by Newsday and News 12 Long Island on a recent trip to Denver, Petkanas visited a large grow warehouse and marijuana dispensary operated by Gaia, the same weekend that many in the marijuana business were displaying their wares at the second-annual U.S. Cannabis Cup. Held on the April weekend of 4/20, it was a huge trade show devoted to medical and recreational use attended by thousands at Denver Merchandise Mart. At the U.S. Cannabis Cup, both Gaia and Ideal 420 Technologies — the marijuana soil company represented by D’Amato’s lobbying firm — had display booths. Other vendors promoted virtually every imaginable use for marijuana, from edibles dipped in chocolate for those who like to eat their marijuana to glass bongs and electric powered vaporizers for those who like to inhale. Many firms such as Ideal 420 Technologies hawked hydroponic watering systems, hot lamps, silver-colored reflecting tents, enriched soils and other equipment needed to grow marijuana, both on a large scale and at home. David Holland, counsel to High Times magazine, which was a host of the event, acknowledged that some of this equipment may wind up eventually being used in places such as New York, where there is a wide underground market for the drug. “Now technology has advanced with hydroponics and other systems, so you can grow quality plants in a small space like a closet,” Holland explained. “So people are growing it partly to eliminate the need to go out there for a streetcorner transaction to procure what they need. And there has certainly been an underground market in it that is not going to go away.” At Gaia’s storefront dispensary in East Denver, customers older than age 21 lined up at glass counters, clearly marked for either medical or recreational use of marijuana, served by “bud-tenders” offering various strains of marijuana for sale. With the help of lobbyists and other Albany power brokers, Williams said, Gaia would like to bring similar dispensaries providing marijuana to New York soon. “A lot of New Yorkers don’t understand that there’s a wide variety of marijuana flowers and products that are available to help a wide variety of disease conditions,” he said. But for future investors, any rush to turn marijuana into gold on Long Island will take some sizable investment, experts say. Most expect the new New York legislation to keep the number of state-approved growers to about five and require an indoor growing operation that would be monitored by video security cameras — all costing a lot of money upfront before any profits are realized. Some say tobacco or alcohol firms may also enter the marijuana market, especially if most U.S. states have legalized it. “The resources that are used to grow it in a greenhouse environment, especially indoors, are very costly,” conceded Petkanas. “So it’s a dicey proposition for people who think, ‘I’m going to invest in swaths of land and groves, and that the next Philip Morris is going to emerge.’” Not everyone is willing to wait for the marijuana business to become legal. Many Long Islanders say they use marijuana recreationally or for various ailments — regardless of the criminal risks — and point to great public acceptance of the familiar drug. On a recent afternoon, inside the Nassau County basement apartment of a friend, Kevin Eastwood, 24, turned on an electric vaporizer, which hummed along as marijuana smoke filled a large clear bag attached to it. Then Eastwood took a big breath, inhaling the light gray vaporized fumes into his lungs with a big smile of satisfaction. Vaporizers are one of many accessories sold in the pot trade. “Even if people want to call me a criminal, I’m just trying to survive like everyone else,” explained the Amityville resident. He says smoking weed helps ease his pain from head and other bodily injuries suffered during a 2012 car accident in Seattle that nearly killed him. After months of hospitalization, he now has a polyfiber plate in his skull and 45 titanium screws. Marijuana curbs the “brainstorming” — the sometimes painful mental aftereffects of his injury — that is part of his daily life, he said. “It’ll start coming on and I can feel it,” Eastwood says of his brain pain. “I get one or two or three of what feels like lightning bolts. And with the medical marijuana, it allows me to help focus on just three or four of those ideas, so I can get through my day and be a contributing human being to society.” Others are concerned about the 18-month wait for medical marijuana to become regulated under the new law. For months, Missy Miller of Long Island pushed state lawmakers to approve medical marijuana that she says would help her 14-year-old son Oliver deal more effectively with his frequent epileptic seizures. She’s seeking an emergency waiver from the state to allow her son and others with severe conditions to get marijuana as soon as possible. She’s worried her son’s fragile health may result in him dying before the 18-month wait is over. “Come to my house. Sit with me, sit with Oliver and watch what he goes through,” she explains. “And then you tell me that it shouldn’t be available to the sick people who need it.” Some Long Island-based doctors, like Richard Carleton and Grace Forde, say they’ve wanted for a long time to prescribe medical marijuana to certain patients but were afraid of losing their medical license unless it becomes legal. “I would definitely prescribe it,” says Forde, who works in Nassau County, a few weeks before the law’s passage. “I had experience with medical marijuana when I trained in California and I found it to be very effective in a lot of chronic pain conditions, as well as neurological conditions. So I would definitely prescribe medical marijuana if it were legal in the State of New York.”