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The federal fake-pot crackdown continues as real pot gains growing legality

March 28, 2014
By

cp_20131023_coverWhen the counterculture business-to-business trade show, CHAMPS, came to Atlantic City Convention Center in May 2012, the U.S. Drug Enforcement Administration (DEA) was there, checking out the glassware and smoking paraphernalia. The wink-wink aspect of such trade shows is obvious: no one really believes bongs are going to be used to smoke tobacco. But the wink-wink aspect of the pot culture itself is growing sillier all the time: the stuff’s now legal for recreational use in two states, and even in places where that hasn’t yet happened, possessing small amounts of it has been increasingly decriminalized. The trend line is line is clear: pot is getting more and more legal.

So, no, the DEA was not at the Atlantic City CHAMPS show looking for ways to crack down on the pot business. It was there to take down those in the fake-pot business – which, on its cutting edge, produces legal highs with chemicals not yet banned by the DEA.

Fake pot was invented to circumvent the anti-pot laws, and now, increasingly, is more illegal than pot itself.

The DEA has been trying hard to keep abreast of the fast-morphing chemistry of the synthetic-drug industry, which surfs the crest of changing laws prohibiting compounds that are akin to legal drugs by tweaking and selling them before the latest round of chemicals is officially deemed illegal under mechanisms set up by the Controlled Substance Analogue Enforcement Act (CSAEA). The federal law allows the DEA to ban substances, or deem them illegal for human consumption as analogues of already banned substances. But until that happens, newly marketed compounds hit the streets as legal highs, and the industry rakes in insane profits, paying high-dollar, hyper-conscious lawyers to monitor any new developments coming out of the DEA. City Paper gave the issue in-depth treatment last fall, having already covered enforcement in Maryland here, here, here, here, and here in 2012 and 2013.

Given the legal complexities of this business, fake pot – the DEA name for it is “synthetic cannabinoids,” but more commonly it’s called “spice,” “K2,” or “herbal incense” – was not officially part of the CHAMPS scene in Atlantic City that year . But it was definitely part of the informal mix, since all a DEA undercover task-force officer had to do to develop a target was approach someone at an exhibit booth, who allegedly said he could procure large quantities of precursor chemicals for making it.

The “hot” commodities for making fake pot at the time, the DEA’s target allegedly explained, according to court documents, were UR-144 and 5-FUR-144, which at that time were going for $3,000 to $3,500 per kilogram. The target gave the undercover a phone number, and said to call him the following week.

This target’s identity says much about the allure of the fake-pot business. His name is Adam Herman Libby, and he certainly doesn’t fit the profile of a countercultural criminal.

Libby lives in Charlottesville, Va., with his surgeon wife and private-schooled sons, according to court records, and until his current legal problems came crashing down on him in April 2013, he was earning $10,000 a month as business development manager for American International Biotechnology Services, a direct-to-consumer genetic testing company, and driving a Porsche. His PhD in chemistry came from Dartmouth College, the elite Ivy League stalwart in New Hampshire. Yet there Libby was at CHAMPS, offering to procure kilos of “hot” spice-making chemicals – allegedly anyhow, since he still may succeed in fighting the charges that resulted.

The Libby probe, court documents explain, involved an undercover send thousands of dollars to Libby, who sent back to New Jersey and New York kilos of AM-2201, 5-FUR-144, and UR-144, which “are controlled substance analogues” of another banned fake-pot compound, JWH-018. During his interactions with agents, Libby allegedly explained how to spray the compounds onto plant materials using acetone, which would evaporate before users smoke the final product. Some of the chemicals allegedly purchased from Libby were shipped from China, and arrived at the Manhattan address of a phony company the DEA had set up. At one point, Libby allegedly explained that a kilo of 5-FUR-144 is enough for nine to 13 kilos of finished product.

Libby was arrested in Charlottesville in April 2013, having been charged in a sealed New York federal court complaint for participating in a narcotics conspiracy. The DEA had first listed JWH-018 as a banned substance in March 2011, followed by AM-2201 in July 2012, and had deemed 5-FUR-144 and UR-144 as JWH-018 analogues that “are illegal if intended for human consumption,” the court documents explain. At the time of Libby’s arrest, the feds also seized $3,100 from Libby’s bank account as criminal proceeds.

Libby spent $20,000 on a lawyer, posted $500,000 bond secured by $50,000 cash to avoid being detained pending trial, and went home, the court records show. He lost his job after his arrest, and as the months passed, he was occasionally allowed to travel, including an October 2013 trip with his wife and children for a professional meeting in Dartmouth. Then, just before Thanksgiving, still jobless, he was indicted by a federal grand jury.

Libby’s case is before New York U.S. District judge Thomas Griesa, and Libby’s attorney, Jill Shellow, wrote an interesting letter to him on Jan. 30. Libby, the letter explained, “has now exhausted all his financial resources for legal counsel,” and his wife not only is “unwilling to provide any financial resources for his defense,” but won’t “permit her husband to use any assets that they jointly own for this purpose.” Thus, Shellow wants Griesa to dub her Libby’s court-appointed attorney – which the judge promptly did, in what may end up being a coup for Libby.

The evidence against Libby is built largely on recorded conversations he had with the undercover, but the possibilities of what’s long been known as “the chemical defense” among lawyers defending accused narcotics conspirators – a tactic based on questioning the forensic chemistry involved in the government’s cases – have in recent years blown up. And the man who essentially invented and perfected the “chemical defense” is no other than the so-called “dean and demon of defense lawyers,” James Shellow – Jill Shallow’s father and co-counsel, who will likely join his daughter in defending Libby.

As Jill Shellow wrote in her letter to Griesa, “this prosecution raises complex legal issues related to the construction and application” of the CSAEA, and “intricate factual and expert issues related to the substances identified in the indictment.” Since being retained by Libby, Jill Shellow continued, she “has developed extensive information related to the chemistry and legality of prosecutions under this statute.” She did so with her father’s assistance, explaining that James Shallow has “has been practicing criminal defense law for more than 50 years.”

Jill Shellow is no neophyte herself. In January, she won the compassionate release of one her most famous clients, disbarred lawyer Lynne Stewart, who has terminal cancer and had been languishing in prison after 2005 convictions for crimes arising from her distribution of public statements on behalf of a client, Sheikh Omar Abdel Rahman, better known as the “blind sheikh,” an Egyptian Muslim leader who in 1995 was convicted of seditious conspiracy for having hatched a plan to blow up New York City landmarks.

So perhaps, with the Shellows’ help, Libby can succeed where other defendants haven’t in making hay of the government’s application of the CSAEA.

Among those who failed to do so is Michael “Rocky” Lane, who in December was sentenced to 15 years in prison after his Arizona conviction for conspiring to distribute not fake pot, but “bath salts,” which simulate the effects of illegal stimulants like cocaine or methamphetamine. The case was won by prosecutors over defense objections that the CSAEA is so vague as to be unconstitutional, since, as described in a much-quoted 2008 law-review article criticizing the law, its wording is an “unholy union of legalese and chemistry jargon” that is “probably enough to bewilder even the most studious individuals.”

Yet the fact that even the DEA itself is at times confused about the law it’s sworn to enforce has made it into evidence in civil courts, where the testimony of DEA chemist Terrence Boos about spice chemicals has been called into question. In a Florida forfeiture case involving an alleged spice manufacturing business controlled by Timothy Hummel and his family members and associates – who have not been charged criminally – the federal government seized a tremendous volume of valuable assets from them, alleging they were criminally derived proceeds. Hummel’s lawyers have unearthed evidence that, as they wrote in filings, “an entire Section of the DEA disagreed not only with Dr. Boos’ conclusion that UR-144 is an unlawful analogue, but also with his authority to reach such a conclusion on behalf of the agency.”

Still, law enforcers continue to seize assets and bring criminal charges. Here in Maryland, much has happened in the past few months.

Most recently, on March 6, federal prosecutors filed a forfeiture suit to keep $17,268 seized last August by Maryland State and Baltimore County police from a BP gas station in Middle River, according to court documents. The seizure occurred after law enforcers conducted an undercover buy of 500 packets of fake pot from Jabpreet Bhalla, and followed him to the BP station, recovering from him 1,687 packets of fake pot. The station’s owner, Mustanzir Zaheir, and manager, Mohammad Ilyas, were interviewed by law enforcers and denied selling spice at the time, saying they’d stopped doing so months earlier, when the police had seized from the station 26 packets of the stuff – which police later returned to them – and advised them to end the practice. It turned out, though, that the law enforcers who’d followed Bhalla to the BP station found 52 fake-pot packets there, labeled with names such as “Scooby Snax,” “Mr. Happy Potpourri,” “Joker,” and “Hookah Blast.” Also there, near the cash register, were 13 pot grinders, numerous pipes, two digital scales, rolling papers, screens, and other pot paraphernalia. So law enforcers took the $17,268 from the BP’s cash register, and are now moving to keep it.

In December, similarly, the feds in Maryland filed suit to keep $46,558.38 in cash taken from a downtown Hagerstown store called Stix-N-Phrases, a boutique specializing in air-brushed custom clothing that opened in 2007. The store’s spice sales had come to law enforcers’ attention, and in January they arranged for an informant to purchase a packet each of “Scooby Snax, “”WTF Next Generation,” and “Mind Trip,” for $100 total, there in January 2013, and testing determined they contained XLR-11, a compound that was not yet listed as a controlled substance by the DEA – but soon would be. After it was listed on May 16, 2013, two undercover cops went back to Stix-N-Spice on May 23, and purchased six packages, followed by another round of undercover buys on June 5, followed by raid on the place on June 24. The feds now seek to keep the cash seized during the raid, which turned up evidence that it had sold more than 10,000 packets of spice since Sept. 2012.

A third recent spice-money forfeiture case in Maryland, though, shows the potential such seizures can pose in bringing federal criminal charges elsewhere. Filed in December, it’s over $272,574.37 taken last May from a Bay Bank account owned by Hanover Services, Inc., an Exxon station just east of the Baltimore-Washington Parkway off Rte. 175, and its co-owner, Nabeel Malik. Investigators were drawn the Exxon after two suspicious FedEx parcels arrived at BWI, addressed to Malik at his home in Severn, and the resulting probe turned up not only hundreds of pounds of spice, but also evidence that the bank account was used to purchase spice from a company called ZenBio LLC. Hanover Services contested the forfeiture, and recently arrived at a settlement with the government, which is letting the company have back $200,000 of the money seized, but the tentacles of the probe that prompted the case reach to Alabama and California.

In Alabama, federal authorities are prosecuting two women, Crystal Hope Henry and Lydia Ruth Brown, with charges related to an alleged conspiracy to import spice-making chemicals from China and distribute spice from November 2012 through June 2013. They did so, according to the indictment against them, through ZenBio, which allegedly generated nearly $30 million in spice sale in that time-frame. Evidence in the case includes transactions involving Malik and others caught buying wholesale quantities of ZioBen spice in Maryland – transactions that also helped support search warrants in California that, last June, emptied about $3.2 million from bank accounts associated with ZenBio.

The resulting legal battles are likely to generate good money for defense attorneys, who are seeking acquittals for Henry and Brown and the return of ZioBen’s assets to its owners, including Tony Nottoli, who has not been charged criminally.

Thus, the fake-pot/real-pot dichotomy presents deep contrasts. While the health effects of smoking spice remain an open question – adverse reactions, sometimes tragic, are well documented, yet the very nature of its fast-changing chemistry makes solid scientific assessment all but impossible – with real weed, adverse reactions are virtually unheard of, though long-term effects on the cardio-vascular system are to be expected for those who smoke it habitually, as with tobacco. Real weed’s legitimate money-making prospects, meanwhile, are good – where it’s legal: Colorado sales of real pot topped $14 million in the first month after newly legal sales of recreational pot started recently, and in the other state where recreational pot has been legalized, Washington, retail sales are expected to begin this summer, with anticipated profits expected to generate a revenue windfall for state and local governments. For fake weed, though, wholesalers and retailers alike face the prospect of waking up one morning penniless, their bank accounts emptied, or in handcuffs, facing criminal charges. The resulting legal battles may eventually be winnable, as constitutional questions over the law itself, and how it is administered, seem to carry some weight. So far, the consequences of confusion over the law have had only one result: the loss of assets and freedom for those in the fake-pot business. With real pot, there’s no such fog: it’s either legal, or it’s not.

Bottom line: while a barely legal industry faces a cloudy, costly future on the spice front, on the real-weed front, a lawful, taxed industry is suddenly nascent, with more legitimacy on the horizon, and smart gamblers would likely move their chips from the former to the latter. It’s too late, though, for the likes of Libby, the Middle River BP, Stix-N-Phrases, the Hanover Exxon, Henry, Brown, ZenBio, and others who’ve already been ensnared by the ongoing crackdown, which shows no sign of slowing.