New York's Cannabis Program Is A 'Disaster' And Regulators Should 'Prepare For War,' Lawyer Says

Government tax agents recently swarmed two Manhattan stores belonging to Empire Cannabis without presenting a warrant, which is illegal.

Empire is now striking back and seeking legal counsel from Steve Zissou — the same attorney who represented Soviet arms dealer Viktor Bout and helped orchestrate last year's Russian prison swap that freed WNBA star Brittney Griner.

Zissou spoke with Benzinga about what he calls a Gestapo-like problem in New York. Empire's situation, it turns out, is not unique. Gov. Kathy Hochul's Office of Cannabis Management (OCM) and the state's "tax police" are acting out of step with the law by using an iron-fist approach to the marijuana business community, Zissou argues.

Zissou shared his thoughts with Benzinga on what is shaping up to be a bitter back-and-forth between regulators and a growing "coalition" of cannabis companies.

BZ: You're advising Empire Cannabis against New York on what appears to have been two unjust raids. Just how messy are New York's cannabis regulations?

Zissou: "Messy" is way too kind of a way to describe the new regulations. Disaster is far more accurate. The key to any regulation that affects commerce is that it must be drafted in a way to make it easy for folks to understand. Equally important is that the regulations must be constitutional. The new regs are not just unclear, but they also violate both the United States and the New York State constitutions. Empire is a private club. You can't just demand entrance to a private club and threaten to arrest everyone inside the club unless you have a warrant or some kind of court order. And this combination of factors is what should give folks a genuine concern about the new regs. 

Hochul's Tax Cops

Governor Hochul has not just created a new police force — believe it or not, the agents actually called themselves the 'tax police' — she has created regulations that allow them to break down the doors of private clubs without any kind of court order. This is how entire generations of people were lost during the Rockefeller drug war. Keep in mind that when I say 'commerce,' we are talking about real people. Empire's 100 or so employees and approximately 100,000 club members. Many of whom Hochul's tax Gestapo threatened to arrest when employees told them they would not be permitted to enter a private club without a warrant.

Do you think the Dept. of Taxation and Finance will opt to settle, considering they didn't have a warrant and Empire's owners (the Elfand family) say they can prove they've paid taxes?

I can’t say what the tax department will do. But it is pretty obvious that the agents were not prepared. For example, agents claimed that they were doing an inspection because Empire did not pay taxes. This is simple ignorance.  Empire Club members paid almost $3 million in sales taxes alone in 2022. And that number will probably double in 2023. All of this money was passed along to New York State. It was placed in the general fund and was used to pay for teachers, firefighters, police and other necessary services, including the budget of the Office of Cannabis Management. Do you think we should ask for the money to be returned? The fact is that the tax police had no idea that Empire paid millions in taxes. Yes, it's pathetic, I know.

Empire is not the only cannabis shop NY regulators are going after. John Brown, owner of a shop in Rochester plans to sue the OCM following a recent raid of his place. Might there potentially be a group of plaintiffs?

Absolutely. Several months ago, we established the Coalition to Protect The Safe Harbor. Since the tax police started acting like the Gestapo, the number of people and businesses that have volunteered to join has increased geometrically. So, as the ancient Romans were fond of saying: Si vis pacem, para bellum ("If you want peace, prepare for war") — which is what Empire and the coalition are preparing for.

The Elfand and Brown stories seem very Kafkaesque. Should businesses in other sectors be worried or concerned?

I can’t say how far the Governor will go with her new tax police agency. But it seems to me that the issue is more about the failure to invite the legacy folks into the new cannabis market. Empire is paying its fair share of taxes, but most of the unlicensed cannabis dispensaries operating in New York City are not. The loss in actual tax revenue is probably in the hundreds of millions. It would be great if the other unlicensed operator were paying their fair share of taxes, as Empire has. But we don't control them.

Have you spoken to Viktor Bout since his release? And what was your reaction to his running for office in Russia?

Yes, I speak with Viktor several times per month. He is doing very well and is happy to be home and able to take care of his family. And yes, I am thrilled that he will soon be a member of the legislature of the Russian Federation. You can quote me on this: Viktor Bout will be the president of Russia within the next five years. He has that kind of gravitas. And a very strong following. It will also help build a better relationship between the U.S. and Russia.

Editor's Note: Gov. Hochul's office did not respond to requests for comment.

Now Read: Congress Gets Warning Letter - Be Aware The DEA Is Breaking The Law, Cannabis Company Says

Image courtesy of Steve Zissou (Zissou, center; from left: Sally Butler, Andrew Harkuscha, and Jon Cruz).