The Taxman's Lost Cash Crop

Discussion in 'Marijuana News' started by Superjoint, Aug 6, 2001.

  1. By Diane Francis, National Post
    Source: National Post

    Marijuana has emerged as a multi-billion-dollar industry in Canada, largely because the United States maintains a vigorous opposition to pot at the same time Canadian authorities turn a blind eye to its cultivation and possession. In the first of a three-part series, National Post columnist Diane Francis reports that these paradoxical positions have created an unparalleled black-market opportunity in Canada, every bit as lucrative as Prohibition afforded Canadian bootleggers in the 1920s.

    The two-storey frame house on Kerr Avenue in southeast Vancouver is indistinguishable from any other on this street of tall trees and beautifully landscaped gardens. It is not the kind of dwelling where you expect four members of the Vancouver Police Department to ram through the door, guns drawn, search warrants at the ready. I was with them, to gain a first-hand understanding of British Columbia's multi-billion-dollar marijuana industry -- and the thousands of small "grow-ops" (growing operations) like this one that supply it.
    Inside, we found all the accoutrements of middle-class life -- a computer, a high-end sound system -- as well as a knee-high Buddhist shrine. On a kitchen counter were five oranges and an opened pack of Peak Frean cookies. In a cupboard, there were some prescription drugs with the names of the patients scraped off the label. In the master bedroom was a big-screen television set and VCR, plus a dozen Vietnamese movies on cassette. No one was home.

    The basement told a different story. There were two "grow rooms," each with about 250 marijuana plants basking under intensely hot hydroponic lamps. The windows were covered with glossy white paper or blankets stapled to the walls so neighbours could not see what was going on inside.

    The third room was dark and empty: Its crop of 250 plants had just been harvested by hired hands, often Asian men and women who move from grow-op to grow-op, painstakingly scissoring the leaves and buds from the plants and bagging them for the next step in their journey to market.

    The value of the harvest from this single basement operation of 750 plants, assuming three harvests annually: $2.25-million a year. Tax-free.

    It seems remarkable and yet it is true: Growing marijuana has become the easiest way to get rich quick in Canada and thousands of British Columbians -- and gradually others in the rest of the country -- are doing just that.

    The Organized Crime Agency of British Columbia estimates there are 20,000 grow-ops in the Lower Mainland alone, and at least that many more around the province.

    That makes growing pot the biggest industry in British Columbia. Some 5,300 growing operations were shut down by police in British Columbia last year, up from 2,351 in 1998. The annual revenue potential of 500 plants (the average size of a grow-op) is $1.5-million. Thus, the street value of the marijuana that did not make it to market last year totalled $7.45-billion.

    The remaining 20,000 grow-ops -- the ones that haven't been closed down -- could generate $29.8-billion. Just for comparison, consider that B.C.'s forestry industry ships about $29-billion worth of products a year. The value of all of Canada's agricultural exports to the United States last year was $10.4-billion. Clearly, the cultivation of marijuana has become one of the country's most important industry sectors.

    Encouraging this industry is the fact that Canada's legal system has been gradually and very quietly turning a blind eye to marijuana offences.

    For instance, Vancouver City Police -- they call themselves the Growbusters -- closed down 500 marijuana grow-ops last year with average potential revenues of $450,000. In 161 cases, individuals were found in the homes and charged. They were not fingerprinted and they did not get criminal records, merely fined. And the average fine is a paltry $2,900 -- a tiny percentage of the income generated by the average grow-op.

    "The highest jail sentence was only one month, which means virtually nobody actually went to jail," says Vancouver Police Department spokesman Constable Jay Osborne.

    In the raid of the grow-op I attended, police smashed all the hydroponic lights, cut off the electrical power and natural gas, then destroyed all the plants. A Baggie of pot, recently harvested, was confiscated and placed in the back of a squad car. Finally, they posted a sign at the entrance: "Unfit for Occupancy." It all took less than an hour.

    "We don't care if we find or arrest anyone. We're just here to shut down the 'grow,' " says Const. Osborne.

    This passive approach to policing pot is spreading. Across the country, the number of pot-related convictions has decreased, with police catching more offenders but laying fewer charges. According to statistics from the Canadian Centre for Justice, police laid charges in 34% of 40,000 cases of possession in 1999; in 1989, they laid charges in 84% of 29,000 cases.

    The Canadian Bar Association, in 1976, and the RCMP more recently have called for decriminalization. The Canadian Association of Chiefs of Police and the Canadian Medical Association have also called for a relaxing of the rules. Polls show that two-thirds of Canadians favour outright legalization.

    And on Monday, the Canadian government said it would grow and distribute marijuana for limited medical reasons. In January, marijuana grown in Flin Flon, Man., will be given to patients who win approval on medical grounds.

    Washington, paradoxically, is adamant in its opposition to decriminalization, regarding marijuana as very much part of its War Against Drugs. Thousands are imprisoned annually for cultivation, trafficking and possession, even those using marijuana as a herbal remedy for pain.

    And so we have this interesting situation: The gradual unofficial decriminalization of marijuana in Canada coupled with the official zero-tolerance approach in the United States has created an unparalleled black-market opportunity in Canada, every bit as lucrative as Prohibition afforded Canadian bootleggers in the 1920s.

    "I moved to Canada to grow because it's just a misdemeanour here if you get caught. But it's real prison time down there," says an American living in Vancouver illegally who estimates his operation has made $2-million in two years.

    He and his partner run operations in two large warehouses and employ six workers full-time. He figures they will "make another million bucks apiece this year too."

    Frustrated by the indifference of the courts, Lower Mainland police forces merely try to thwart the growers, whose whereabouts they usually discover based on evidence from B.C. Hydro that power usage has suddenly soared in a house.

    "Our job is just to disrupt them and whack as many houses as we can and shut them down," says Const. Osborne. "Sometimes we just call the landlords and tell them we know what's going on so they can inspect and shut them down. The point is we just decided to take the court out of the picture because there's no point."

    But even as the police root out the grow-ops, new ones sprout. All it takes is an outlay of $20,000 for wiring and hydroponics equipment to bring 500 plants to maturity within three or four months, plus a couple of bedrooms or a basement to house them in.

    With three harvests a year, an urban cannabis farm yields at least $300,000 per crop, or $900,000 annually. That's just the wholesale value. The street value in Canada of a grow-op that size would total $1.5-million per year.

    If it's smuggled over the border, its value increases to $2.3-million. In New York City, its value could soar to $4-million or more depending upon quality.

    As with any agricultural business, there are layers of middlemen involved in getting the product from farm to customer.

    Bob gave up his small business in Vancouver to become a broker or grader, connecting grower and seller in return for $100 a pound.

    He figures he has made about $700,000 in two years. He weighs and assesses the quality of the product, keeps it in his inventory for a few hours, then delivers it to the end customer or another middleman.

    "I averaged from $10,000 to $20,000 per week, handling up to 200 pounds," Bob tells me. "I've been smoking it for years. It's easy to make money in this business if you know what you're doing."

    There is a downside. Disputes tend to be settled with violence, and Bob left the business after he was beaten up. The RCMP estimates there were 20 homicides last year in British Columbia involving the marijuana trade.

    "I'm lucky to be here. I got hurt," he says. "Somebody was sent to do something and didn't do what he was supposed to do and there was retaliation. It's all organized and it's getting uglier as years go on. There's more violence."

    He says marijuana should be legalized to clean up the business. "I'll bet 60% to 70% of all people in B.C. are involved in some way or other. They are in the business or know somebody who's in the business. And most people smoke it," he says.

    The history of marijuana growing in British Columbia probably begins in the isolated mountain valleys in and around Nelson, B.C.

    Jim Gouk represents this region as a Member of Parliament for a constituency that stretches from Kelowna, B.C., to the U.S. border.

    "It all goes to the States. There are really big growers here; 5,000 trees that are up to 12 feet tall, not just foot-high plants like the hydroponic grow-ops. If marijuana growing disappeared it would have a significant impact on the local economy. It's big," he says.

    On a hillside overlooking Nelson is the Holy Smoke Culture Shop. It sells pipes and other pot paraphernalia. It's also the headquarters of the B.C. Marijuana Party and local Compassion Club, which hands out marijuana at cost to ailing people for pain or nausea relief. This is where marijuana activist Dan Lowendorf and others lobby for changes.

    "As an employment opportunity, growing pot is definitely equal in this area to logging," says Mr. Lowendorf, Marijuana Party candidate in the last provincial election in Nelson.

    "Employment for loggers is seasonal and drops off the edge in the winter. So growing pot helps them support their families."

    Ken Wyllie, a criminal lawyer in Nelson, says marijuana growing began as a cottage industry in the 1960s with the influx of young Americans during the Vietnam War. "They came with their seeds and their attitudes. During the 1960s and 1970s I saw an increasing number of grow-operations, usually outdoor grows. Then they went indoor because of the economics and hydroponic technology."

    Gary Wright, Mayor of tiny New Denver and himself a long-ago draft dodger, voices the prevailing attitude toward the region's cash crop.

    Most grow-ops, he says, are harmless "ma and pa" businesses. "It started when the hippies first came to this country. Growers make a nice buck. It allows them to stay here. They are not driving around with flashy cars or going to Jamaica once a year," he says. "They just want a little cabin in the woods with a really good sound system."

    Most growers in the area are independents but demand south of the border, along with the higher prices obtainable there, has introduced a more organized element.

    The Hells Angels, for example, have been trying to get a foothold in the Kootenays and are financing grow-ops, recruiting workers and organizing smugglers.

    The region is an important export point because there are only five customs and excise officers from the Alberta border to Kelowna, patrolling hundreds of kilometres of border.

    The U.S. Customs Service recently reported that marijuana seizures along the B.C.-Washington State land border, which totalled 325 pounds in 1994, increased sharply by 1999 to nearly 2,900 pounds.

    Insiders speculate that Canada's market share of marijuana sold in the United States is roughly 5%, Mexico supplies 50% and American growers plus some Caribbean countries make up the rest. But Canada's pot is regarded as superior, encouraging sales in the United States.

    A pound has a street value of roughly $2,300 to $3,000 in Vancouver; in Washington, the same amount costs $4,500, and in California it might sell for as much as $9,000. In New York City, it can soar to $12,000 a pound. In Maine, the price of high-potency Canadian marijuana brings five times the price of Mexican and domestic varieties, according to the local Drug Enforcement Agency.

    Thus, in Canada, the riskiest and most profitable part of the business is smuggling -- with high bail and sentences of up to 10 years imprisonment.

    "I'm not afraid. It's easy. Just an hour and a half walk with a backpack through the woods at night," explains Bill K., an Australian who stands to make millions growing and smuggling marijuana after arriving in Canada just a few months ago as a tourist.

    "I make about $25,000 delivering 18 pounds. It's fun. It's an adrenalin rush. I'm not worried about getting caught. There's not a policeman who wants to catch me as much as I want to get away."

    Bill is a microcosm of the pot industry. Not only is he a smuggler, he also runs seven hydroponic operations for friends, is a partner in several grow-ops and has brought in childhood buddies -- former Australian Army soldiers -- to man his 1,200-plant farm on a remote island off the B.C. coast.

    He and his partners will make millions tax-free each year. "I'm here illegally so I pay cash for everything, then mail home the rest of the bills to some post office boxes back home," Bill explains. "I never electronically transfer money or put anything in a bank."

    Walking is probably the safest method, but some smugglers use boats and planes to drop off bundles of marijuana in Puget Sound for pickup by customers. Only amateurs try to cross at Blaine, Wash., in cars. (Last August, U.S. officials seized 240 pounds of marijuana from a Canadian military vehicle that crossed the Blaine border from British Columbia. The grass was vacuum-packaged and contained in five large nylon duffle bags. Two Canadians were arrested.)

    In the West Kootenay region, pot is put in hockey bags then walked across the border through woods, or else taken on snowmobiles, motorcycles, horses or dropped from planes, says RCMP Constable Tom Clark, drug co-ordinator in Nelson.

    Growers sometimes just leave bags full of pot in the woods on the Canadian side for pickup by trusted U.S. customers.

    "This is a policing problem. There's a high tolerance level for this in the [B.C. Slocan] valley," says Const. Clark.

    "It's a huge riding and people look upon it as a victimless crime. You can get caught with 5,000 trees and get a $1,000 fine so why not try it? In Alberta, the fines are double."

    He points out that the area is a dealer's heaven, with huge plants that can each generate $3,000 in the United States. And it's strong, too. In the 1960s, he says, marijuana contained 3% to 5% THC (the active ingredient). Today, he says "the average is in the mid-teens, with some stuff in the low 20s."

    His jurisdiction is as lax regarding enforcement as everywhere else in the province. Possession charges are rarely pursued because they would result only in summary convictions, without fingerprints, photos or computer records.

    "It's a waste of time and energy for the police. It's almost decriminalized now. Our priorities are break and entry or assaults. These crimes take precedence over busting a marijuana grow-op."

    Some related businesses are also doing well. A hydroponic store outside tiny Nelson has annual sales of $6.5-million.

    "That's a lot of tomatoes," jokes the owner. In fact, hydroponic stores are everywhere in British Columbia.

    So is cash. One heavy-equipment dealer near Nelson recently sold an excavator to a grower for $250,000 cash.

    The Vietnamese population has profited from pot. A Vancouver car dealer told me 25% of his business was selling luxury cars for cash to Vietnamese and others who are likely involved in the marijuana trade.

    About 95% of the 500 busts in the city last year involved Vietnamese "farmers," say police.

    "Vietnamese families are recruited in Ontario, given a cheap car and set up in a house. We find Ontario drivers' licences in these busted houses, Ontario plates on some of the cars we seize. These families come here, and if they live in the grow they get free rent, money for food and $1,000 a month per house to look after the plants," says Const. Osborne.

    "The woman is usually on welfare and the man may or may not have a job for cash. After they've learned how to do it, they return to Ontario to start up their own franchise. It's coming east in spades.

    "There's huge coin in this. High profit, low risk," he observes. "The Vietnamese are already getting very rich, driving Mercedes and Porsches. Buying $20,000 karaoke machines and fancy sound systems."

    The most successful Vietnamese tend a number of houses and accumulate capital in order to set up their own grow-ops. They, in turn, train others to tend and harvest crops. Some have even graduated into smuggling, where profits -- and risk -- are much higher.

    Beyond the cities, pot also thrives. British Columbia is well suited to illicit farming because of its vast expanse of hidden valleys and remote islands. Vancouver Island and the other islands off British Columbia are home to large-scale outdoor "grows" of as many as 4,000 plants.

    Operators set up campsites and hire young people to guard, tend and harvest. These "tenders" often never meet their employers; they are paid in cash by intermediaries and given a phone number to call when the plants are harvested. They are guaranteed reimbursement for any legal fees or fines by their mystery bosses, should they be caught.

    The province's forestry industry has also made a contribution. Marijuana seeds are planted in many clear-cuts, sections of forest that have been logged and left to regrow. They contain good soil, are hidden by surrounding uncut forest and are accessible by abandoned and overgrown logging roads.

    It's risky, though. In October, harvest police helicopters equipped with heat sensors swoop down and destroy crops. The trick is to grow thousands of plants in a remote location or to plant marijuana single file among other plants.

    One grower was busted after he built a gigantic underground bunker for 5,000 plants (potential annual revenue: $23-million) in remote Fort St. John in northern British Columbia.

    Another indoor grow-op of 4,000 plants was raided on the B.C.-Alberta border two years ago.

    "Some are digging big trenches in rural areas and dropping an old school bus or cargo container into it," explains a grower near Nelson.

    "You cut a hole in the roof to get in and then plug in a generator and set up your hydroponic operation inside. The lights and water are all on timers and you can make $1-million per bus a year."

    In sum, the marijuana industry permeates British Columbia -- in modest urban dwellings, in isolated clear-cuts, even underground in buried buses.

    Says Bill K., the Australian grower and smuggler: "You can't find a piece of land with potential growth possibilities in British Columbia and not find pot growing. Prohibition creates this false economy. I find it comical myself. This is a lot of money Revenue Canada's missing out on."

    Indeed it is.

    National Post Special Series

    Tuesday: Mark Emery, Canada's Pot-Culture Guru

    Source: National Post (Canada)
    Author: Diane Francis, National Post
    Published: August 4, 2001
    Copyright: 2001 Southam Inc.

    Canadian Links
  2. HOLY SHIT!!!!! That's a disgusting amount of money to be made!!!!! Imagine knowing someone and having enough free weed to last you forever... You'd run out of zippo fluid before you would weed. And here I am, I've only smoke thrice in my life.

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