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How Colorado’s marijuana legalization strengthened the drug’s black market

Some states that have legalized marijuana for recreational use have experienced a surge in the drug’s black market activity. In particular, Colorado has become a haven for underground marijuana cultivation, sale and export, prompting questions about how legalization led to some unforeseen consequences. John Ferrugia of Rocky Mountain PBS has the story.

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  • Judy Woodruff:

    As more states consider the legalization of cannabis for both medicinal and recreational use, opponents are warning that such moves actually open the door to criminal groups in a burgeoning black market.

    As correspondent John Ferrugia from Rocky Mountain PBS reports, many are looking to what happened in Colorado after legalization of marijuana.

    It's the latest in our series on The Green Rush.

  • John Ferrugia:

    It is becoming almost routine across much of the country, law enforcement intercepting Colorado marijuana products being exported to other states.

    In this case, a traffic stop in Tennessee netted 100 pounds of processed pot worth tens of thousands of dollars. In Indiana, it was a lettuce truck headed from Colorado to Florida with a load of marijuana. In South Carolina, it came through the mail.

    And across Colorado, raids on illegal marijuana grow operations have increased in both rural and metropolitan areas, as law enforcement tries to keep up with the burgeoning black market.

    When Colorado voters approved legalization of marijuana, no one imagined such an opportunity to cash in on illegally grown pot.

  • Chris Woods:

    Every plant here has an RFID tag. And this is logged seed to sale.

  • John Ferrugia:

    Chris Woods is President Of Terrapin Station, a company that cultivates and dispenses marijuana and THC products for both medical and recreational use. And this is what a legal pot business looks like, complete with special grow lighting.

  • Chris Woods:

    There is a perpetual cultivation cycle that is happening throughout this facility.

  • John Ferrugia:

    His meticulous legal grow operations are scrutinized, tracked, and regulated by the Colorado Department of Revenue and the state Marijuana Enforcement Division.

  • Chris Woods:

    Yes, I think one of the mistakes that was made in Colorado and some other states is allowing for home cultivation. And what we're seeing right now is a lot of cleanup from the mistakes that have been made.

  • Kevin Merrill:

    I had never been in an indoor marijuana grow. I have heard about them.

  • John Ferrugia:

    Kevin Merrill, the former agent in charge of Colorado's office of the Federal Drug Enforcement Administration agrees.

    When he first arrived in Denver as a federal drug enforcement agent in 2001, large illegal marijuana grows weren't on the radar.

  • Kevin Merrill:

    Most of those that I even heard about really involved, you know, a couple of individuals trying to make some product for themselves and then sell whatever extra they had to fund their operation. It was a very small mom-and-pop operation.

  • John Ferrugia:

    But when it became legal for individuals to grow both medical and recreational marijuana in Colorado, federal law enforcement officials say criminal organizations saw an opportunity to illegally grow marijuana in plain sight in residential neighborhoods

  • Bob Troyer:

    The thing that nobody predicted is that normalization, commercialization would be a magnet for international black market activity.

  • John Ferrugia:

    Bob Troyer stepped down last year as Colorado's U.S. attorney.

  • Bob Troyer:

    They have plumbers. They have electricians. They have front people who rent and buy houses. They have money people. They have an underground banking..

  • John Ferrugia:

    A money laundering corporation?

  • Bob Troyer:

    Exactly, just like a corporation.

  • Woman:

    What is this? Oh, my God.

  • John Ferrugia:

    Perched at the front window of her mom's Firestone, Colorado, home last year…

  • Woman:

    Look at all the police cars.

  • John Ferrugia:

    … Angie Wright and her mother witnessed a raid in this suburban subdivision north of Denver.

  • Woman:

    It was just, holy cow, something major is going on.

  • John Ferrugia:

    Law enforcement officers rolled in and started banging on doors.

  • Woman:

    Oh, my God. They're everywhere.

    I thought maybe it was just the house next door.

    Oh, they're going in the backyard of that house in the corner.

    To find out it was as many homes, I — neither one of us had any idea.

  • John Ferrugia:

    Our investigation revealed the raids in Firestone, Colorado, in March of 2018 are part of a federal case that started a year earlier, and is linked to a web of other suburban properties across the Denver metropolitan area and beyond.

    Our investigation documented that the DEA has seized more than 78,000 plants so far, as well as more than 2,300 pounds of processed marijuana, serving almost 200 search warrants, making dozens of arrests.

    This is Colorado's most complex federal black market case since the state legalized recreational cannabis in 2014. Rocky Mountain PBS obtained records showing every federal black market marijuana search warrant between 2014 and November of 2018 in which the DEA seized marijuana. And there are hundreds.

    We plotted each address on a map, and found an increasing number of search warrants every year through 2018. And it wasn't only federal and state law enforcement and prosecutors who were taken by surprise by the booming illegal market.

  • John Hickenlooper:

    We thought that the black market would disappear.

  • John Ferrugia:

    Former Colorado Governor John Hickenlooper says the state was indeed caught off-guard. He is now running for president.

  • John Hickenlooper:

    Evidently, it contracted, and then began to expand again. And that's counterintuitive, right? It's not what you would expect.

  • John Ferrugia:

    But some in the marijuana industry argue that, if cannabis is legalized nationally, it would take care of the black market for good.

  • Chris Woods:

    If there's no demand for marijuana from other states then, you know, that there will not be the supply to meet it. It's just a function of business.

  • John Ferrugia:

    But former DEA Agent in Charge Kevin Merrill disagrees.

    Would national legalization of marijuana stop the black market?

  • Kevin Merrill:

    No. You would always be able to go out there and probably find it cheaper than what you can through a state-regulated business.

  • John Ferrugia:

    Local sheriffs say rural areas of Colorado have also become a destination for out-of-state marijuana growers. Law enforcement has more ground to cover with fewer officers to find the illegal grows.

    And they are uncovering connections to other states, particularly Florida.

  • Justin Miller:

    This is a trend that we have been seeing since about early 2014.

  • John Ferrugia:

    Justin Miller is the intelligence chief for the DEA Field office in Miami.

  • Justin Miller:

    Cuban drug trafficking organizations relocating to places such as Colorado, setting up operations, leaving their proxies back here in the state of Florida, and producing large-scale marijuana for distribution, diversion out of Colorado.

  • John Ferrugia:

    Colorado state data shows police have seized Colorado marijuana in at least 34 states and, in Florida, at least 70 times between 2013 and 2017, more than every other state on the East Coast combined.

    In Douglas County, Colorado, investigators caught this woman, who said she had flown in from Florida to drive a load of marijuana east.

  • Man:

    And you were going to drop this all off in Florida?

  • Woman:

    Yes, I thought so.

  • John Ferrugia:

    Miller says Florida once ranked near the top of the nation in indoor seizures at grow houses, but now it is more often imported.

  • Justin Miller:

    It's just the widespread perception that growing marijuana up there is much less scrutinized.

  • John Ferrugia:

    So authorities keep knocking on doors, destroying plants and, says former U.S. attorney Bob Troyer, putting pressure on the criminal groups.

  • Bob Troyer:

    There are costs of doing this business that they accept and they calculate. If you are constantly increasing those costs and increasing those risks, you do change their behavior.

  • John Ferrugia:

    Former Governor John Hickenlooper agrees.

  • John Hickenlooper:

    Certainly, if we don't push back on it aggressively, it'll get worse.

  • Bob Troyer:

    What we never know at any moment in real time is if we have passed a tipping point, we have made a dent, and now we have deterred the behavior.

  • John Ferrugia:

    But Troyer and DEA officials say, while law enforcement may slow down the illegal business, Colorado will continue to be a major exporter of high-quality cannabis for the foreseeable future.

    For the "PBS NewsHour," I'm John Ferrugia in Denver.

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