Weed Company Sues California City Under RICO, Will It Backfire?

A California city and its several officials are being sued for allegedly taking part in a bribery and corruption scheme that led to an elderly man dying of cancer and being left with debt after purchasing a cannabis manufacturing permit, reported San Gabriel Valley Tribune.

David Ju and his attorney David Torres-Siegrist filed a federal lawsuit last week naming the city of Baldwin Park and six of its former officials as defendants under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) alleging that they acted together in the scam.

What Happened

Attorney Torres-Siegrist said in the lawsuit that the six city workers conspired to swindle his client. 

"These individuals acted in concert to orchestrate a swindle on an elderly man dying of cancer who poured his life savings into a venture that was destined for failure from the get-go and nothing more than a collusive scheme marred by bribery and corruption," Torres-Siegrist, who first filed a claim seeking damages on Ju's behalf last year, wrote in the lawsuit.

Background: In 2018, Ju agreed to purchase the cannabis development agreement previously awarded by the Baldwin Park City Council to a company known as Tier One Consulting, even though under the city's laws, no transfers of ownership interests by permit holders were allowed at the time, according to the claim filed in November.

However, then-City Attorney Robert Tafoya advanced an amendment to the development agreement in 2019, granting Ju ownership of the business after all, Torres-Siegrist wrote in the document.

Even though then-Mayor Manny Lozano and Tafoya signed it, the amendment was never brought before the council for review.

"Ultimately, Mr. Ju would come to find that he actually purchased nothing but an endless cycle of debt collusively 'negotiated' between a current city attorney and a soon-to-be city attorney, which was set up for failure from the get-go," Torres-Siegrist said earlier.

When DJCBP Corp. Ju's company launched in 2022, it owed over $600,000 in past due annual "mitigation fees" to the city, which had been piling up for years, even though the company wasn't operational.

"They set up a system here that is an endless cycle of debt," Ju's attorney explained earlier. "These owner-operators can never get out of that debt."

In the meantime, attorney Anthony Willoughby II, the listed principal for Tier One, was tapped by Tafoya to serve as an assistant city attorney. Moreover, Galvan earned $50,000 from the business' sale as an intermediary.

What's Next?

The new lawsuit requests the city to pay damages and urges a judge to "issue a permanent injunction prohibiting Defendants from applying, enforcing and/or imposing any commercial cannabis mitigation fees."

Now it remains to be seen how the fact that the lawsuit is filed under RICO will affect the ruling process, considering that a panel of judges at a California court ruled recently that operating a marijuana business is considered a crime.

A three-member panel of the Ninth Circuit Court of Appeals confirmed an earlier ruling that prevented a California licensed cannabis grower from suing her former business partners for participating in a fraudulent scheme that led to her cannabis farm being in a state of disarray.

That ruling was based on the fact that Francine Shulman, a former apple farmer who ventured into the cannabis space, couldn't sue under RICO as it would allow her to take actions that are considered illegal on the federal level.

Aside from the fact that the California cannabis industry continues to be an unequal playing field according to some, with shortcomings such as localities that can set high cannabis taxes and over-regulation that made it impossible for most small growers and retailers to get licensed, in turn giving more space to corporate multi-state operators.

The defendants in the Ju case include former City Attorney Robert Tafoya, former Deputy City Attorney Anthony Willoughby II, former Councilmember Ricardo Pacheco, former Compton Councilmember Isaac Galvan, former Baldwin Park Mayor Manny Lozano and former Chief Deputy Cty Clerk Lourdes Morales.

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