The former chair of Berkeley’s Medical Cannabis Commission (MCC) is scheduled to appear in federal court today, Sept. 23, to face extortion, fraud and money laundering charges connected to his dealings with cannabis dispensaries in Berkeley, Oakland and Las Vegas.
Daniel Rush, who used to serve as the executive director of the cannabis division of the United Food and Commercial Workers Local 5 until he was fired in August, and who still sits on the MCC, faces more than 70 years in prison and a $1.27 million fine if convicted of the 15 counts with which he is charged.
In one of those counts, Rush, 55, is alleged to have offered special treatment to one of the applicants for Berkeley’s fourth dispensary spot. In exchange, Rush “demanded a well-paid job” from the applicant, according to the indictment filed Sept. 17 in federal court. The applicant is only identified in court papers as “Company A.”
Rush’s indictment has intensified criticism of Berkeley’s dispensary selection process by some applicants who had already been disqualified. But Zach Cowan, Berkeley’s city attorney, said the process was not tainted by Rush because he had nothing to do with the early stages of the selection process.
While Rush sits on the MCC, he has not played an active role in winnowing down the applicants to a smaller list, said Cowan. Rush has also promised to recuse himself in the future from any discussion or decision about the fourth dispensary, he said.
“It’s immaterial because he hasn’t been in control of anything yet and he hasn’t had a vote on anything yet,” said Cowan.
Kriss Worthington, the city councilman who appointed Rush to the commission about four years ago, said he does not plan to fire him or ask him to resign.
“In the United States, unlike many other places, people are considered innocent until proven guilty,” Worthington said in an email.
Rush, who has been one of the state’s most visible proponents of unionizing cannabis workers, is a powerful force on Berkeley’s MCC. As a union organizer who has worked in cities all over the Bay Area, as well as in Nevada, Rush has more experience in the cannabis industry than many of the other commissioners. He has taken a leadership role and was the one who presented models about how to structure a merit-based dispensary selection process, said Charles Pappas, the current chair of the MCC.
Pappas said he and Rush had “rapport,” but that Rush’s big ego is occasionally a detriment during commission discussions. Rush brings a specific agenda to promote unions and workers to the MCC, and is an an advocate for vertical integration, where one cannabis company controls both the grow operation and the dispensary. Other commissioners are in favor of making sure small operators have a crack at the business, said Pappas. That means he isn’t always a great listener, said Pappas.
However, “I didn’t doubt his honesty,” said Pappas.
Rush was not present at the last MCC meeting, on Sept. 10.
The federal government first charged Rush in August and amended the charges Sept. 17. Rush has maintained his innocence and posted a letter from his attorney on his Facebook page Aug. 14 that reminded journalists of that fact. “The accusations in this complaint … are nothing but allegations; they are unproven by any standard, let alone the criminal standard of proof beyond a reasonable doubt, and have never been tested through cross examination in a court of law,” wrote William Osterhoudt, a San Francisco attorney. “The charges are based on ‘informants’ and ‘cooperators’ who for their own reasons implicated Mr. Rush in alleged wrongdoing. Under the law Mr. Rush is presumed innocent until the contrary is proven to a requisite standard, and no competent proof of his guilt has yet been presented.”
Allegations Rush has been taking kickbacks since 2004
The federal charges against Rush are complex, date back 11 years, and involve FBI recruitment of his former associates, who agreed to cooperate in exchange for leniency. In short, the U.S. attorney’s office alleges that from 2010 to 2014 Rush received payments or other things of value from people who were in a position to hire union workers, which violates the Taft-Hartley Act. In addition, Rush allegedly borrowed $600,000 from a cannabis operator, couldn’t repay the loan, and offered to minimize the threat of union organizing in that operator’s businesses in exchange for forgiving the loan, among other promises. Rush used the assistance of an attorney to hide the source of the money and its partial repayment, according to federal documents.
Four of Rush’s former colleagues worked with the FBI to tape telephone conversations with Rush, as well as write down notes of conversations. They also told officials about previous kickbacks Rush provided, according to the indictment. They include Marc L. Terbeek, an Oakland attorney who specializes in workman’s compensation, real-estate and cannabis law; and Martin Kaufman, a dispensary operator looking to win one of the four new permits issued by Oakland. Kaufman is affiliated with Blum Oakland as well as Medifarm, a group seeking to operate in Nevada. There’s also Carl Anderson, a dispensary operator who wanted one of Oakland’s permits; and Derek Peterson, a colleague of Kaufman’s.
Here is a timeline of events, according to the federal complaint filed Aug. 10:
- In March 2010, Rush introduced Kaufman to Anderson, who wanted to open a new dispensary, AMCD, in Oakland. Kaufman gave $50,000 in a paper bag to Andersen as an investment in the dispensary. The next day, Rush showed up at Anderson’s office and allegedly said he would be taking half of all the money raised for AMCD. He took $35,000. A few weeks later, Kaufman delivered another $35,000. Rush came later that day and took $10,000.
- Rush also demanded a secret interest in AMCD. Anderson had stock certificates made up in Rush’s and Kaufman’s name. Rush held $51,000 in stock. But Rush complained because he didn’t want his name on the stock certificates, so Andersen destroyed them.
- In January 2010, Kaufman delivered $500,000 in cash to Rush at Terbeek’s law offices on International Avenue in Oakland. The money came from Kaufman’s involvement in cannabis activities, according to the federal documents. The money was intended for Rush, who wanted to convert his long-time family home at 472 W. MacArthur St. in Oakland into a dispensary. It was supposed to be a five-year loan. A few months later, Kaufman delivered another $100,000 to Rush through Terbeek.
- Terbeek, Kaufman and Rush allegedly tried to hide the nature of the $600,000 loan by depositing it into one of Terbeek’s business accounts. The money was quickly used to pay off the loan against Rush’s house on MacArthur. Rush also used some of the money to buy the house next door. Rush would then make regular interest payments to Kaufman, but would disguise them as payments for consulting services and even issue a 1099 for tax reporting purposes.
- Rush was also the treasurer of Instituto Laboral de la Raza, a nonprofit that advocates for the working poor. Rush encouraged Terbeek to start handling worker’s compensation cases and promised to steer some cases his way from the Insituto. In exchange, Terbeek gave Rush a credit card to use, according to court documents. Over the years, Rush put $110,000 in personal expenses on the card, according to the government charges. Much of this money went to Verizon Wireless to pay the bills for Rush’s motorcycle friends who belonged to the Hell’s Angels Motorcycle Club. On February 20, 2015, Rush texted Terbeek, “Just keep the card going for me.”
- Rush recommended Terbeek’s legal services to groups interested in opening cannabis operations in Berkeley, Oakland, and Nevada. In exchange, Terbeek agreed to share fees with Rush.
- In 2014, Terbeek told both Peterson and Kaufman that Rush was not going to be able to pay back the $600,000 loan by 2015 as previously agreed. This started a series of proposals and actions by Rush and Terbeek to “substitute labor and tax benefits for the debt,” according to court documents.
- Around then, a cannabis operation named Medifarm was formed to go into Nevada to try and establish medical cannabis dispensaries. Petersen was the manager and CFO and Kaufman was on the board of directors and was the director of Quality Assurance. Peterson told Rush he wanted union support for Medifarm’s application for a license since union support would make the application more attractive to lawmakers. Terbeek then told Peterson that Kaufman should forgive the $600,000 debt in exchange for Rush’s union support in Nevada. “The write-off would go a long way towards doors slamming slamming slamming for other people,” he said.
- Rush then suggested that Medifarm sign a “toothless neutrality agreement” that seemed to signal it was open to union representation of its workers, but Rush assured him it wouldn’t be enforced and there were tips how to tell workers not to sign up for the union.
- On May 14, 2014, Terbeek met with Kaufman and told him how the bad debt could be repaid through a tax fraud scheme.
- Terbeeck told federal officials that he had been paying kickbacks to Rush since 2004.
As a result of these alleged interactions, Rush was charged with “honest services fraud,” meaning he was violating the Taft-Hartley Act by depriving union workers of his honest representation by selling his services and allegiances to their potential employers. Rush posted a $100,000 bond after the first charges were filed in August. The charges were refined and refiled on Sept. 17.
The new charges refer to a $550,000 debt, not a $600,000 debt, however. Abraham Simmons, the public relations representative for the U.S. attorney’s office, is trying to find out the reason for the discrepancy but didn’t have an answer by press time.
City Council will review process for selecting fourth dispensary on Sept.29
In the meantime, some of the applicants who were disqualified from being selected as one of Berkeley’s cannabis dispensaries have raised questions about Rush’s role, although none has actually accused Rush or described the process as fatally flawed.
“The revelations flowing from the federal indictment of one of the Commissioners on the Medical Cannabis Commission crystallized our feelings with regard to the overall conduct of the dispensary selection process,” Anh Solis, the public relations manager for Vallejo-based reLeaf, wrote in an email to Berkeley City Council members Sept. 20.
Whitney Leigh, the attorney for Chris Smith, whose application from Forty Acres to become the fourth dispensary was also disqualified, brought up the Rush situation is a recent complaint filed against Berkeley.
“Those involved with the Commission should not have been entirely surprised by Mr. Rush’s indictment,” Leigh wrote. “Since its formation, the Commission has devoted itself to promoting and sanctioning the illegal, for-profit marijuana industry in Berkeley. Under Rush’s leadership, the Commission – and through ratification of Commission acts the Berkeley City Council – have fostered a multi-million dollar scheme, through which a coterie of “authorized dispensaries”, owned and run by a handful of well-connected individuals, have turned the delivery of medical cannabis to Berkeley patients into a illegal, City-protected, profit-making enterprise. Compared to the illegal profits reaped by these illegal dispensaries, Rush’s $600k bribe is a pittance.”
In March, 12 groups applied for the license for the fourth dispensary. A few dropped out, two consolidated their application, and a number were disqualified for incomplete applications. Currently, six applicants remain in the running.
Council is scheduled on Sept. 29 to hear appeals from reLeaf and CP4H, a dispensary proposed by Pappas. Both have expressed concern that they were eliminated in haste and the material required for the application kept changing. They are asking the council to reinstate them. A city staff report on the issues said their disqualification, as well as the disqualification of Forty Acres and another applicant, were done after due process and consideration. Staff decisions are final, according to Berkeley law.
City staff is due to release a list of five finalists soon. The finalists will hold community meetings to discuss their plans. However, council members may amend the current law Sept. 29 to either increase the final list to six; allow those that were disqualified to reenter the competition; or proceed with five finalists, according to a staff report. However, any changes will delay the selection of a fourth dispensary, the staff report warns.
Read the complaint against Rush.
Related:
Twelve apply to operate Berkeley’s fourth dispensary (03.24.15)
Berkeley City Council: Let’s add fourth cannabis dispensary (06.18.14)
Berkeley will again consider a 4th cannabis dispensary (06.03.14)
Berkeley delays decision on fourth dispensary (09.20.13)
Berkeley to consider 4th medical cannabis dispensary (09.17.13)
Berkeley delays fourth medical cannabis dispensary (06.13.13)
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