Debit card payer pulls plug on pot dispensaries

Cash only after statement by federal prosecutor begins to chill legal market

THE HARDLINE STANCE from the top federal prosecutor in the state about pot enforcement has caused a company that processes debit transactions for medical marijuana dispensaries to stop accepting the bank cards and forced the shops to revert to cash-only, adding a layer of hardship to patients.

Westborough-based Merchant Services Consulting Group (MSCG), which processes credit and debit card payments as well as checks, informed several Massachusetts medical marijuana dispensaries that it will no longer accept their transactions.

Adam Fine, an attorney with Vicente Sederberg LLC, a national firm representing marijuana businesses with an office in Quincy, said all of his firm’s clients in the medical marijuana dispensary industry in Massachusetts received calls toward the end of the business day Monday after US Attorney Andrew Lelling issued a statement refusing to immunize even state-sanctioned marijuana purveyors for prosecution under federal drug laws and specifically cited the federal banking laws as a focus.

Fine said his firm represents about a third of the provisionally licensed marijuana businesses in the state and about the same percentage of the 18 operating dispensaries and all were told to cease the transactions. He said nearly all the other medical marijuana companies received the same order, though he was unsure if they dealt with the same processor.

“It’s an issue where there are going to have to be larger cash drops to the banks,” Fine said of the ramifications. “The biggest inconvenience is to the patients who will have to carry large amounts of cash with them or go to the bank or ATM before purchasing. There is the danger that they could potentially be targeted by criminal elements.”

A spokesman for Ermont, Inc., a medical marijuana dispensary in Quincy, confirmed the company received a call from its debit card processor, though he declined to identify the company.

“Ermont, Inc. was instructed [Monday] night by its debit card processor to immediately suspend the use of debit cards at the dispensary,” spokesman Greg Turner said in an email. “We have complied and all transactions are cash-only until further notice. This is an unfortunate situation beyond Ermont’s control, and we sincerely apologize to our patients for the inconvenience.”

Several other dispensaries did not respond to requests for comment. Officials with MSCG also did not return a call for comment.

Lelling’s statement Monday came after pro-pot advocates beseeched him to clarify his prosecutorial priorities in the wake of Attorney General Jeff Sessions rescinding the hand-off approach of the Obama administration that allowed states that legalized marijuana use to skirt federal prosecution. Sessions ordered local US attorneys to use their discretion in deciding what cases to prosecute but emphasized the sale, cultivation, and possession of marijuana remained a crime under federal law.

Lelling last week released a statement that was vague about his approach but his statement Monday shook up much of the nascent industry.

“This is a straightforward rule of law issue,” Lelling said in his statement. “Congress has unambiguously made it a federal crime to cultivate, distribute and/or possess marijuana.  As a law enforcement officer in the Executive Branch, it is my sworn responsibility to enforce that law… Deciding, in advance, to immunize a certain category of actors from federal prosecution would be to effectively amend the laws Congress has already passed, and that I will not do.”

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Jack Sullivan

Senior Investigative Reporter, CommonWealth

About Jack Sullivan

Jack Sullivan is a veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

A Boston native, Jack has lived in Massachusetts all his life. He was a major in English and history with a minor in political science at the University of Massachusetts, Boston. A father and grandfather, he lives in Plymouth with his wife, Susan.

About Jack Sullivan

Jack Sullivan is a veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

A Boston native, Jack has lived in Massachusetts all his life. He was a major in English and history with a minor in political science at the University of Massachusetts, Boston. A father and grandfather, he lives in Plymouth with his wife, Susan.

Medical marijuana advocates had been initially unconcerned because a congressional budget amendment had prohibited the Justice Department from expending resources to prosecute marijuana crimes in states that legalized medical pot. But the move by MSCG indicates that despite that cover, Lelling’s statement is having an impact on the medical marijuana sector.

Scott Moskol, co-chair of the Cannabis Business Advisory group for the law firm of Burns & Levinson, said several bankers he’s spoken with are determined to remain in the industry and accept their cash, though it can’t be transferred by wire now. He said debit transactions account for about 50 percent of the revenue with his dispensary clients, who will now increase their cash deposits. But he acknowledged Lelling’s stance has sent a message.

“I think it’s clear that this will hinder raising investment capital in the short term,” said Moskol. “Look what’s already happened. He’s already started chilling the market. I imagine some will withdraw; those that are on the fence are probably going to stay on the fence. But given there’s no recreational market until July 1, there’s time to fix it.”