The licensed distributor just wanted to make its mark on California’s new legal market. One illegal seizure later, and Old Kai is a cannabis cause célèbre.
If by the Wild West we mean a state of lawlessness, then Mendocino County could be regarded as a Wild West revival of sorts…except in this case, the lawbreakers appear to be the very institutions tasked with upholding the law. The situation is unsettling not only for the people at the center of the current controversy, but also for local governmental institutions and the nationwide cannabis community. The debacle already has begun to overshadow the cannabis application process in Mendocino County and has the potential to derail the process altogether, crippling the county’s participation in California’s regulated commercial cannabis economy and costing the region its future.
The drama began December 22 on Highway 101 in Ukiah when a California Highway Patrol officer stopped a truck legally operated by employees of Old Kai Distribution. The Old Kai desperados were transporting almost a ton of cannabis trim grown by local farmers to be used in manufacturing cannabis oil for vape pens sold in the Southern California market. Because of the amount of cannabis in the truck, members of the Mendocino Major Crimes Task Force and the Mendocino County Sheriff’s Department were called to the scene. Officers arrested the two employees and seized the vehicle and the cannabis, even though the employees had in their possession a county-issued business license and documentation for their medical marijuana collective.
What followed only served to compound the original error of treating the transportation of cannabis as a crime. The seized cannabis was destroyed, and a subsequent raid was conducted by the Mendocino County sheriff on Old Kai’s distribution facility in Ukiah, using as a pretext the dubious rationale of an alleged probation violation by one of the company principles, Lucas Seymour. These seemingly extrajudicial acts further inflamed the Mendocino grower community and will almost certainly result in litigation that not only challenges the legitimacy of the citations, the arrests, the seizure, the destruction of property, and the subsequent raid, but also calls into question the motives and legitimacy of Mendocino County law enforcement agencies.
“This has turned into a hot potato for them,” Old Kai’s attorney, Joe Rogoway, said January 12, shortly after the sheriff’s destruction of the cannabis had been confirmed. “I think they realize they made a huge mistake, that they never should have issued citations to the drivers or seized the vehicle, and they definitely should not have destroyed the cannabis. There has been a real lack of agencies taking responsibility for this, and everyone seems to be pointing the finger at someone else.”
In the immediate aftermath of the arrests, as the media began questioning why employees of a legal business were busted, law enforcement scrambled for answers. “Let’s say they went through and got all the documentation, and it’s 100-percent legal. [Transporting is] still illegal, because it’s before January 1, 2018,” Officer Jake Slates, a spokesman for the CHP’s Ukiah office, told the Santa Rosa Press Democrat, adding there was no lawful avenue to transport commercial marijuana until 2018.
That explanation didn’t wash with Rogoway. “The only rationale law enforcement could use in this matter is that it took place before the first of the year, but that’s what us lawyers call a specious argument, because it’s not the actual state of the law,” he explained, extremely unamused. “If you look at the Mendocino County ordinance, the very first provision [section 6.36.010] states that getting a facility license permits distribution. It is what allowed that activity there, and there was nothing further needed. We’ve had members of the county administration say this, we’ve now had members of the Mendocino County Board of Supervisors say this, and we’ve also had members of the Bureau of Cannabis Control say there was nothing further needed, that this is what [Old Kai] needed to have to operate, and that it was legally sufficient.
“So, even though law enforcement tries to hang their hat on the fact that this is the first of the year, and that therefore they have some justification for acting the way they did, that is not at all the state of the law,” Rogoway continued. “It’s unequivocal, and that’s where we are now, dealing with the destruction of the cannabis and an egregious violation of the sanctity of the facility itself. We are essentially dealing with law enforcement agencies that, for whatever reasons, are not willing to hold themselves accountable and take responsibility for what they’ve done.”
The series of events sounds like the recipe for a huge lawsuit, or lawsuits. “That is something we are considering right now,” said Rogoway. “The property was still owned by the farmers [at the time of the seizure]. Old Kai did not own it, which means the farmers are the ones bearing the loss, and they will have the most to gain from litigation because they are the ones who would be looking forward to those compensatory damages.”
But litigation may be just the beginning. “I think people in local government who are resistant to the laws of their government either need to wake up and get on board with the law as it exists or no longer be in local government,” said Rogoway. “That is especially true if they are members of law enforcement.”
Old Kai
Named for the Boontling term for coyote, Old Kai Distribution was founded by local growers Lucas Seymour and Matthew Mandelker in 2015 to serve the NorCal region with a sense of purpose the region needed and deserved. “We saw that if these cultivators, especially from the Emerald Triangle, want to survive, there are going to have to be people who step up, get coordinated, and make things happen, or else this community we care so much about really could fade away,” said Seymour. There are, he added, “incredibly special cultivators and manufacturers in Mendocino County that the public doesn’t know about because they’re not really out of the shadows yet. They are a very special type of people doing very special things, and they might go away or disappear altogether if we don’t embrace them.”
With the launch of Old Kai, Seymour and Mandelker moved out of cultivation altogether and spent the next few years meeting people and making themselves better known. “We also did a lot of [research and development] in the beginning to understand what was needed and what it takes to create relationships with retail partners,” said Seymour.
In time, they refined their business model. “One of the things we learned early on was that focusing on whole flower was not a place to be because of the margins, the inconsistency of the product, and because at that time all flower was anonymous, just a bag of cannabis,” Seymour said. “It’s hard to build a company name or reputation on an anonymous product. So, we identified then that what we should be doing is finding retail-ready, branded products that have a name, take those to market, and once we have shown the dispensaries that we can do the logistics and that we are reliable and professional, and once we create that name and reputation, then we can bring in the flower behind it as another product.”
That is why the seized cannabis was not whole flower, but mostly trim. “We are working mostly now with growers for their raw material—the trim and small, reject, and even moldy buds that can be used safely in manufacturing,” said Seymour. “It’s allowed us to create relationships and more trust with more cultivators.”
But any sense of trust that Old Kai and other members of the cannabis community may have had in the state’s system for licensing and regulation was ruptured in the aftermath of the December 22 incident, which could not have come at a worse time. “We had such grand plans for January, and instead we feel like we’re spending all our time protecting ourselves,” said Seymour.
The sense of vulnerability is not unwarranted. Like a horror movie, every day has brought a new challenge for Old Kai, a reality underscored by Rogoway, who said the justification for the raid was just as bogus as the retroactive justification for the citations and seizure.
“[Law enforcement] gave [Seymour’s] status of being on probation as their justification to search the Old Kai facility, which is a bizarre type of justification to have,” noted Rogoway. “If someone is on probation, their home, person, and vehicle are typically what is subject to search. Their person means physically on their person, and then by extension, in the immediate area that is under their custody or control. But the task force used [the search clause] of his probation as the justification for their search not just of the business, but of the individual areas where their employees worked, in their desk drawers and cubicles. They used that probation search clause to justify all of it, which I don’t think is appropriate at all.”
Rogoway said he has been waiting to see if local law enforcement would make a correction, but so far that hasn’t happened. “I’m hopeful they will come to their senses and do the right thing, but then they do another bad thing,” said Rogoway. “Two wrongs don’t make a right. They’ve got to solve their initial mistake of citing the driver and passenger, destroying the property, and then raiding the facility. They’re just digging themselves a bigger hole by following up their illegal citation and destruction of the cannabis with this unconscionable search of a business that they’re using the most frivolous and weak legal arguments to justify.”
Nothing New
Rogoway gets upset about what he has seen in the aftermath of the Old Kai traffic stop because he knows how serious the fallout can be for people who can afford it the least. “This is precisely what people up here use as justification for not participating in the new regulated, legal market,” he said, pointing out the cruel irony of the situation. “This is the outcome people would be looking at if you did none of the work to be compliant. For example, if someone just wanted to stuff 1,800 pounds of weed into a car and drive down the road with it and they didn’t have any license from the county at all, and they hadn’t been working towards compliance and had a legal business set up, but were driving with almost a ton of weed, they would be looking at the exact same outcome: being arrested for misdemeanor possession for sale and transportation, and having everything seized and destroyed, and then having the site where they were storing all the cannabis raided. That is the worst-case scenario, the one everyone is concerned about.
“So, if that is the worst-case scenario for someone who doesn’t comply,” he added, “how can you persuade someone to come out of the shadows to join the newly regulated market if the exact same thing happens to someone who does have a license and a legal business?”
There are larger issues at play, too, according to Rogoway. “This is not a problem that was just created, but a symptom of a larger level of dysfunction that is pervasive in Mendocino County,” he said.
Rogoway began his career in the public defender’s office in Mendocino County, where he handled all the cannabis cases.
“That is where I started, and it made me acutely aware of the challenges of the community and of how people view their interface with the government when it comes to cannabis,” he said. “Historically, when we’re talking about Mendocino, Humboldt, and the Emerald Triangle, we’re talking about people who grew up in fear of their family property being raided and their parents being taken away in handcuffs, or their grandparents. The bottom line is that north of Santa Rosa, people just don’t trust the government. It’s something that is just universally true across political affiliations.”
The origins of the mistrust lie partially in the remoteness of a region forgotten by the rest of the state. “The thing to keep in mind is that on the North Coast in the Emerald Triangle, there is no other opportunity for people,” noted Rogoway. “North of Rohnert Park in Santa Rosa, there is one university, Humboldt State. In other words, you can drive almost twelve hours up to the Oregon border and there is one opportunity for higher education. Now think about that in the context of Southern California, where you can’t throw a rock without hitting a university.”
The result, he said, is “a different type of playing field in terms of academic and professional opportunities. Logging has been dead for forty years; so has fishing. The only source of meaningful opportunity, not just for individuals and families but for the region, is cannabis.”
Legacy
“One of the challenges we have in regulating cannabis is finding a way to have people be able to trust the government,” said Rogoway, whose firm, Santa Rosa-based Rogoway Law Group, offers regulatory compliance services to cannabis businesses seeking to go legit. It isn’t always an easy sell. There is nothing abstract about the paranoia that grips so many people from the NorCal cannabis community. “It’s a tangible and heartbreaking family dynamic; a cultural legacy that is real,” he said.
But fear of law enforcement is not the only reason why many cultivators in the region have their doubts about the legal market. “What we have in the counterbalance to these regulations is a deep fear about what is going to happen to people economically,” Rogoway explained . “Over the past couple of years, everyone has felt like the market is going to change, and now they’re watching prices plummet. What it has meant to them is they feel they need to grow more cannabis. If they’re getting $500 for a pound they used to get $1,000 for, now they grow twice as much. The problem with that is all they’re doing is increasing the supply, making it that much more likely that prices will drop even more. That’s the platform.
“Then, when we have this situation arise with Mendocino County law enforcement establishment not respecting the law, not respecting the will of the voters, not respecting the act of the board of supervisors, and not respecting duly enacted ordinances— When we have that, what we’re doing is undermining the economic fabric of these communities in a very real and visceral way,” he added, clearly angry. “It’s an affront not just to a way of life, but to the hope for the future these people have.”
Personal Animus
Why would law enforcement agencies compound mistakes so recklessly and with so little ostensible support from civilian leadership in the county? Rogoway said the answer is a stone’s throw away. “With Old Kai, there are now elements of personal animus, where [Mendocino County District Attorney David Eyster] is the instigator, the flamethrower in all this, and the one who gave the directive to burn the legal cannabis that came from permitted farms to a licensed facility. He gave the order to burn it. What that means is he now has that liability, because the statutory provision that allows for the destruction of evidence does not permit [destruction] unless it is allowed by the county, and the county does not limit the amount of cannabis a distributor can have. There was no legal justification for the destruction of the cannabis.
“That’s part of it,” continued Rogoway, ticking off the infractions. “Then, when the task force effectuated their raid on the facility, what they told Old Kai is they were there because David Eyster told them to go there. It’s not a situation where we have law enforcement looking at the evidence and following the trail to investigate a crime. What we have is law enforcement basically doing the personal bidding of an elected official who made a terrible mistake and seems to be compounding that mistake with other mistakes.”
The Board
At a January 9 meeting of the Mendocino County Board of Supervisors, the Old Kai seizure was brought up by members of the industry who had traveled to Ukiah to express their concern about the long-term impact it could have on the region. “This is a serious issue that has potential to affect a number of farmers and…the regulated market moving forward,” said Casey O’Neill, vice chairman of development for the California Growers Association.
In response, members of the board steadfastly claimed they have no operational oversight over local law enforcement, but a few of them were clearly concerned about law enforcement’s apparent refusal, witting or otherwise, to recognize the county’s authority to sanction economic activity by local businesses.
Regarding the incident, Supervisor John McCowen pointedly remarked that “although it was dismissively said ‘they merely had a business license,’ the business license was final authorization by Mendocino County to transport the materials.”
Another Supervisor, Dan Gjerde, suggested inviting law enforcement officials from the involved agencies to attend a future meeting, commenting, “I’ve heard rumors that maybe some members of these organizations are not in support of either the state laws and/or the county’s ordinance. If that’s the case, I’d like us to invite them to advise us on what portions of those ordinances they are not in support of, because they have been silent up until now. Yet, if they are going to be implementing those ordinances in a way that’s in contradiction of those ordinances, I think we all ought to know that.” The idea was seconded by supervisors McCowen and Georgeanne Crosky, but was not immediately approved as an actionable item.
“I will take it upon myself as chair to further explore this and see if we can bring something back…where law enforcement does address the board,” said Supervisor Dan Hamburg, who serves as the board’s chairman. “It would seem to be to everyone’s benefit, and certainly the public’s benefit, to know what the expectations are and to know whether there are things in our ordinances…that [law enforcement feels] are unenforceable for whatever reason, or that they would like to see changed. We can look into it.”
Day by Day, Hour by Hour
Back on the ground, the Old Kai story had taken on a life of its own, with new “developments” updating the situation on a daily, almost hourly, basis. The news was not always good for Old Kai, whose strategic planning now had to consider any number of scenarios, including the potential for additional raids and seizures by law enforcement determined to see its interpretation of the law through to the end.
“We are afraid about a raid on our facility,” said Seymour. “We have a responsibility to protect our partners’ products.”
More seizures certainly would imperil the business, an unthinkable situation for Seymour and Mandelker, both of whom passed Live Scan background checks as required prior to being permitted in the first place.
“We were the first distribution license issued by the county,” noted Mandelker. “Taking us off the chess board essentially shuts the industry down locally until someone else gets their license.”
It’s particularly frustrating for Seymour, who is open about his 2015 infraction. “I’m comfortable saying I have a misdemeanor on my record for possession, stemming from the grayness of the market that existed at that time,” he said. “I’m on probation for it. Many in the cannabis industry understand where I am and have experienced the same issue. It’s something I’m very passionate about, ensuring that people who have certain types of infractions on their record are not excluded from this industry.”
That sense of commonality is what bolsters the men during these uncertain times. “‘I went through this before,’ is something we keep hearing from people reaching out to help us,” said Mandelker.
“Our investors are more invested than they have ever been,” added Seymour. “We are very lucky that our investors, our employees, and our relationships are all sticking by us. The outpouring of support from the cannabis industry has been incredible, including from competitors who are reaching out and helping us. We’re all in this together. The biggest silver lining in all of this has been the support from our peers.”
As for why any of this is relevant to people outside the NorCal region, Rogoway, a fierce activist in his own right, has a ready answer. “This is a statewide system; that is the relevance,” he said. “When people in West Hollywood, San Diego, or Santa Ana go into their dispensaries to get vape pens or cartridges, what is inside that pen or cartridge may have come from the same cultivator that just had their products seized and unlawfully destroyed in Mendocino County. And that is something that is going to continue, because the way the market is shaping out is that a lot of the materials going into oils and vaporizer pens is coming from sun-grown, outdoor cannabis, not indoor cannabis, and those outdoor farms are largely in Northern California.
“So, for people who want to be able to buy good, clean, tested, and affordable concentrates at their dispensary, they need to support the Northern California grower,” he added. “Otherwise, all they’re going to have is the highly inflated, warehouse-grown cannabis from places coming online in either the high desert or Los Angeles, and that’s going to be totally inadequate to meet their needs. There is not enough cannabis generated by those facilities to meet the needs of millions of consumers in Southern California.
“As with all things,” he concluded, “consumers rely on farmers for what they consume.”
Postscript
On January 14, Seymour released the following resignation letter: “It is clear that my probation status…is hindering my ability to work within the industry I love. While I work to rectify these personal legal issues, I leave the company in the very capable hands of my partner and co-founder, Matthew Mandelker, and the rest of our exceptional management team.
“Old Kai has an incredible team of employees, as well as incredible cultivation, manufacturing, and retail partners. I have no doubt that each member of our team, along with our partners, will continue to thrive in 2018 and beyond… Old Kai is also committed to working with cultivators who were adversely affected with the seizure of their licensed cannabis material in December… details will follow on the Old Kai website. Thank you for your ongoing support. Lucas Seymour.”
On January 24, the state of California issued Old Kai Distribution, aka Old Kai Logistics, its adult use distributor temporary license. The company’s state-issued medicinal distributor temporary license has been active as of January 1, 2018.
