Smuggler's Blues
6:41 am
Wed May 28, 2014

Pot Grower Says Black Market Can Survive Legalization

Originally published on Wed May 14, 2014 8:29 am

Scott Johnson is one of those natural born salesmen. He used to own a restaurant on the 15th floor of the Bellingham Towers -- Bellingham’s tallest building.

“At first it was called ‘Top of the Towers’ and then after about five years I changed it to ‘City View Grill,’” he says.

Now Johnson comes to Bellingham Towers to see his lawyer -- whose office is also here. Johnson has been sentenced to five years behind bars for his role in a long-running marijuana production and distribution ring.

Johnson says before the feds swept in, it was a lucrative line of business. “I was part of the 1 percent,” he says.

There was a Lamborghini, a boat named “Liquid Assets,” jet skis and trips to Hawaii. Johnson ran a couple of grow operations. His business partners had a couple more. He would ship the marijuana -- 70 to 80 pounds at a time -- across the country.

“It was packaged very well," Johnson explains. "Placed into a motor home, driven close to New York City and then it was transferred and delivered other ways.”

Johnson would fly to New York to meet the shipment and supervise the transaction.

“Put on a smiling face, put the suit and tie on and go to work,” he says. “Literally the suit and tie.”

Marijuana legalization in Washington was sold to voters as a way to take money away from criminals and generate tax revenue for the state.

One of the TV ads for Initiative 502 back in 2012 said, “….we could tax it to fund schools and healthcare, free up police to go after violent crime instead.”

But will the end of pot prohibition really mean the end of the black market? Johnson says it wouldn’t have put him out of business.

Illicit markets vs. legal pot

Johnson says in a good year he could make upwards of a $1 million. His profit margin was 65 percent. Since he couldn’t pay taxes, he gave to charity. He kept his wife and twin daughters in the dark.

And then the feds came calling.

“I never believed that I’d see the feds sniffing around,” Johnson says.

The feds put Johnson out of business. But what if they hadn’t caught wind of his operation? Would pot legalization in Washington have got him instead?

“Legalization wouldn’t have put me out of business," Johnson says. "It’s not going to put anyone that’s been doing this for a while out of business.”

For the record, Johnson says he planned to become a licensed pot grower under Initiative 502.

“I don’t like lying to my family," he says. "I don’t like cheating the government.”

But Johnson says if he couldn’t get a license for some reason, “I definitely wouldn’t have folded. I mean I would have attempted to get the license, if that didn’t work I would have just continued on the mission.”

He also says that he would still have had a customer base and a business model that worked.

Johnson says he already weathered one storm in the pot business -- medical marijuana. It drove down the price so much that’s when he started moving product to New York. He says to survive legalization he might have had to expand his distribution to other states.

“He can certainly grow pot in Bellingham and send it to Oregon or Chicago or New York," says UCLA’s Mark Kleiman. He was Washington’s marijuana consultant and literally co-authored the book on marijuana legalization.

But Kleiman does not believe illegal growers in Washington will continue to have a homegrown customer base.

“How many moonshiners are there in Washington?" Kleiman asks rhetorically. "How many illicit tobacco growers are there in Washington? [It’s] very hard to for an illicit market to compete with a licit market. It’s just much cheaper to pay your taxes and do stuff above board.”

But Johnson isn’t convinced the new pot stores will immediately replace longstanding customer-dealer relationships.

“I think that the majority of people are going to be getting it from their buddy that they’ve been getting it from for decades,” he says.

“I think I might stick with my dealer”

To test that theory, I went to Sylvester Park in downtown Olympia to conduct an informal survey. There I found 20-year old Chris Baldwin and his friend Madison, who wouldn’t give her last name. They were sitting in the sun eating Triscuits, pepperoni sticks and fruit leather. Both admitted to regularly smoking pot.

I asked if they had used that day.

“Ya," says Madison. "Probably explain the food eating. I’m currently a little baked.”

I ask Chris and Madison if they plan to start buying their pot at the licensed stores when they open in Washington.

“I think I might stick with my dealer,” answers Baldwin.

Both are skeptical they’ll get the quality and variety of marijuana they’re accustomed to. And Madison doesn’t want to be videotaped going into a marijuana retail store.

“There’s really no telling how they’re going to be classifying people who buy it,” she says.

So how much do they pay now for pot?

“Street prices on a gram would be like $10 normally,” says Madison.

But if the price in the stores gets down to $3 per gram -- the price Mark Kleiman predicts within three years -- that sparks a debate.

“Then all illegal grow ops will go out of business," says Baldwin. "I guarantee that. Those kinds of prices are unmatched."

“Only if it’s the same quality,” counters Madison. “Because I’m not going to spend $50 on weed that’s only going to get me and my friend high for a couple of days. Fifty bucks?”

As for Scott Johnson, he’s scheduled to check-in to federal prison in June. The date was delayed so he could watch his twin daughters graduate from high school. So when he gets out of prison does he have any plans to get back into the pot trade?

“As far as the black market, absolutely not,” he says.

Johnson says he would consider participating in the legal trade, but as a convicted felon he’s unlikely to get a license from the state.

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