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Ep.319: James M. Cole, Former US Deputy Attorney General

Cannabis Economy Podcast
Ep.319: James M. Cole, Former US Deputy Attorney General

Ep.319: James M. Cole, Former US Deputy Attorney General

Former Deputy Attorney General of the United States and author of the Cole Memo’s James M. Cole returns to discuss the rescission of the Cole Memos and the Ogden Memo before it. We discuss the thought process behind creating each of the three memos, his first in 2011, the second in 2013 and the final memo released in concert with FinCen guidance on Valentine’s Day 2014. Now that the memos have been rescinded the state of legal cannabis is dictated by the Rohrabacher Blumenaur Amendment for medical cannabis. For adult-use cannabis, it’s now up to US attorneys stationed where adult-use cannabis has been passed. Central California which includes Los Angeles and San Diego and Northern California which includes the Bay Area both have new Attorney’s which have been appointed by AG Sessions.

Transcript:

Seth: Here we are.

James M. Cole: Here we are.

Seth: You saw the news. I saw the news and so thank you so much for having me down. I think it makes sense for us to just go through what we did do one more time even though you and I spoke about it in episode 140 in detail. Let's just quickly go through the past and find ourselves in the present and then go from there. Does that make sense?

James M. Cole: Sure.

Seth: When you get to town, not when you get town, but when you get into your chair as the Deputy Attorney General of the United States of America, the Ogden Memo had already been released in 2009.

James M. Cole: Yes, that's correct.

Seth: What didn't it say and what did you need to put into the 2011 Cole Memo 1?

James M. Cole: Well, I think there was a level of confusion among the US attorneys' offices as to what the real meaning of the Ogden Memo was and people were interpreting it as, at the time, saying, "As long as you comply with state law, you will not be prosecuted by the Justice Department." That was not the intent of the memo. More the intent of the memo was to sit there and say, "Look, if you have a medical condition or you are a person who is helping to treat somebody with a serious medical condition, it is not a wise use of Department of Justice resources to go after that person." There were medical marijuana usage that were going on in the States that weren't even close to being for a serious medical condition and those weren't encompassed, but they were being read as being encompassed. There was this confusion.

Seth: It's not a free for all here, folks.

James M. Cole: It's not a free for all. It was a we are carving out people who truly have serious medical conditions as an exercise of prosecutorial discretion and telling prosecutors it's not worth the use of our resources for that.

Seth: Here we are.

James M. Cole: Here we are.

Seth: You saw the news. I saw the news and so thank you so much for having me down. I think it makes sense for us to just go through what we did do one more time even though you and I spoke about it in episode 140 in detail. Let's just quickly go through the past and find ourselves in the present and then go from there. Does that make sense?

James M. Cole: Sure.

Seth: When you get to town, not when you get town, but when you get into your chair as the Deputy Attorney General of the United States of America, the Ogden Memo had already been released in 2009.

James M. Cole: Yes, that's correct.

Seth: What didn't it say and what did you need to put into the 2011 Cole Memo 1?

James M. Cole: Well, I think there was a level of confusion among the US attorneys' offices as to what the real meaning of the Ogden Memo was and people were interpreting it as, at the time, saying, "As long as you comply with state law, you will not be prosecuted by the Justice Department." That was not the intent of the memo. More the intent of the memo was to sit there and say, "Look, if you have a medical condition or you are a person who is helping to treat somebody with a serious medical condition, it is not a wise use of Department of Justice resources to go after that person." There were medical marijuana usage that were going on in the States that weren't even close to being for a serious medical condition and those weren't encompassed, but they were being read as being encompassed. There was this confusion.

Seth: It's not a free for all here, folks.

James M. Cole: It's not a free for all. It was a we are carving out people who truly have serious medical conditions as an exercise of prosecutorial discretion and telling prosecutors it's not worth the use of our resources for that.

Seth: Essentially we're talking about palliative care, cancer patients in 2011.

James M. Cole: Correct.

Seth: We continue down the road until 2013. I believe it was August. I believe it was August 29th. Why the need for a next one?

James M. Cole: Well, you have to go back to November of 2012 when Colorado and Washington state passed referenda to legalize marijuana recreationally.

Seth: These were state laws that were on the books or at least making their way to the books because you headed them off in the past in 2013 before we went legal in 2014.

James M. Cole: Right. Basically it was laws that went completely to the realm of legalized recreational use. You didn't have to have any sort of medical need however large or small in order to be able to use marijuana legally in the state. We looked at that in the Justice Department and tried to determine what are the issues that are now presented. The regulatory schemes and the controls that were in place during the medical marijuana era were not particularly robust. They were not particularly effective. Now, we're looking at something that would increase the usage of marijuana and what are we going to do about it? In looking at what the legal options were, you cannot stop the states from legalizing it. They are allowed to do that under the law. You might be able to preempt the regulatory schemes, but then why would you want to do that? Where we came to was trying to incentivize the states to put in a robust regulatory scheme.

Seth: Here are some things to consider.

James M. Cole: Right. What we tried to layout is here are the federal public safety interests that we can identify. It is are the cartels and gangs going to be involved in this? Are you going to be selling it to children? Are you going to have environmental damage because you're growing it in public parks? Are you going to have people who are drug driving? Are you going to be mixing other kinds of drugs into that commerce allowing it? Are you going to be importing it into states where it hasn't been made legal? We looked at those and said, "These are really the concerns we have."

Seth: Don't do these things.

James M. Cole: Well, not only don't do these things,

Seth: Regulate for these things.

James M. Cole: ... If you do these things, expect us. If people in your state do these things, expect us to come in and prosecute.

Seth: We will be coming after you.

James M. Cole: We will be coming after them. What we expect from you is to have a robust regulatory scheme and our guess is if you have a robust and effective regulatory scheme, these things aren't going to happen and we won't need to come in. But, if you don't have a robust regulatory scheme and we do need to come in, we're also going to question whether or not we need to come in even more forcefully and do something about your regulatory scheme.

Seth: We reserve that right.

James M. Cole: Right.

Seth: Yeah, fine. The voters did what they did. You're going to put in the regulations that you're putting in. But, if things are going nuts, we're not just going to leave it because of the will of the people.

James M. Cole: We're not looking the other way because we still have the federal interest and the federal public safety interest, and a big driver was that if you don't have an environment where you can have a legitimate business that exists that is regulated as to the production, the processing, the distribution of marijuana, if that's not there, then the only place people are going to be buying it from is the cartels and the gangs and we didn't think that was particularly a good thing.

Seth: What's not in the Controlled Substances Act that made you think that you needed to give that further guidance?

James M. Cole: What was not in the Controlled Substances Act, there is a level of prosecutorial discretion that all prosecutors have. It was to try and give some clarity so that people understood what our positions were, what are red lines were, what would be the public safety interest that the federal government had and to say to the states, "Other than those interests, we are leaving this up to you to regulate."

Seth: That was the point of view as of summertime 2013. 2014 is when these things did go into effect and specifically January 1st, Washington came, July 1st kind of, but as of January 1, 2014, adult use sales were happening. On February 14th VAlentine's Day, happy Valentine's Day, you released Cole Memo 3 with FinCEN guidance along with it, in concert.

James M. Cole: Right. Right. The reason for that is shortly after I released the 2013 Cole Memo, I started thinking about the banking aspect of this and certainly one time when I went up to the Senate Judiciary Committee to testify about the 2013 memo, they asked questions about that. I said, "That's the next thing we have deal with." Without that kind of safe harbor from the money laundering statutes, this is a completely cash business. When you have a lot of cash, you have the potential for people wanting to steal it and frequently they use firearms to do it. You then have the incentive of people wanting to protect it and they frequently use firearms to do that. We thought that created a whole nother public safety issue that we wanted to try and stop.

Seth: Right. You mentioned the Bank Secrecy Act. You mentioned money laundering. You mentioned the money transmitter statute.

James M. Cole: Right. There's a number of different statutes that can deal with and can be predicated on transactions from the proceeds of marijuana, as an example, controlled substances under the Controlled Substance Act. We were trying to and working with FinCEN to say, "Look, there is going to be a safe place for banks to bank this money." It was also a way to allow the states that were taxing this activity to have a source of audit trail to be able to find out how much was being made, what is subject to tax so that they could make sure they were getting the appropriate tax revenues that they were due under their laws. These are all things that come out of allowing people to bank it. That was the purpose of the 2014 memo was to try and allow this to get into the banking system.

Seth: We've spoken about the fact that kind of-

James M. Cole: Didn't really happen.

Seth: Well, tiptoed. But that gets me to the question of ... Here we are today. Now that these memos have been rescinded, if I'm an operator in the industry or a bank, how do I now see state legal cannabis without FinCEN guidance, without Cole Memo 3, 2, 1, without the Ogden Memo? How am I to view the world from my own perspective?

James M. Cole: Well, the FinCEN memo may die of its own weight because it is based on compliance with the Cole Memo. There's a question about whether the FinCEN memo, which is not withdrawn, still exists.

Seth: Fair enough. Fair enough.

James M. Cole: As to what you do if you're in the industry at this point, I think you have to wait and see because what is now the order of the day is each individual US attorney, as is normally the case, will have discretion over what cases to bring, and they will use the general guidance that are in the principles of federal prosecution.

James M. Cole: Whether there is a consistent application of it among the different districts is yet to be seen. There is no guidance from the Justice Department to try and create that consistent application. The businesses that exist may exist in more than one district and they may be subject to the discretion of more than one US attorney. They'll have to see where that plays out. Whether or not individual US attorneys issue their own guidance out of their own offices, will yet to be seen. Generally they don't. It's not something that happens very frequently at all.

James M. Cole: I think what we're in is a period of waiting and seeing as to what's going to happen, whether or not there is going to be in essence not much difference from what the prosecutive situation was before this or whether it will be different. That's going to dictate a lot of what happens from here on.

Seth: Simply on US attorney business, if I've got a new US attorney, which Los Angeles, San Diego and Central California does, if I've got a new US attorney, which Northern California does, take us through maybe the first few weeks and months of that person's tenure and how they ramp themselves up and if there's any way to understand how that person sees things in advance of them getting underway.

James M. Cole: That's a difficult question because there are a total of 93 US attorneys and there's 93 individual human beings with their own views of how best to enforce the federal law. You can't sit there and say, "Here's what's going to happen in any given US attorneys' office." Generally, US attorneys will come in and they will be asking their career people who have been there a while what they've been doing. What has the policy of the office been up until then? What are the cases that are prioritized? What are the issues that are really prevalent in their district that need attention? Those are usually the first things you do and try to prioritize what are necessarily limited resources that you're going to have to use and you have to accept the fact you're not going to be able to prosecute everything that comes your way.

Seth: In every memo that we've spoken about, in the Ogden Memo, your memo, in sessions memo from yesterday, it feels like weeks, but it was yesterday, it's always about those limited resources.

James M. Cole: Correct.

Seth: If the Controlled Substances Act is cited as it is in yours, if the Bank Secrecy Act and otherwise is cited as it is in yours, the other thing that's cited here I guess, it's just a question from someone that's not a US attorney, is on that US attorney's manual, what are we talking about there? What's in there that we should know about?

James M. Cole: It's quite voluminous. It's a long piece. It talks about the general considerations that you should take into account, what is going to basically be and serve the needs of your community, what our priorities, whether or not you have a good basis factually and legally to bring the case, whether or not this is something that furthers public interests, furthers public safety. It's not very specific.

Seth: Okay. Okay. While voluminous, not very specific.

James M. Cole: But it gives a lot of the different things that you should be considering. There's a number of publications like this. The American Bar Association has standards for prosecutors, has standards for defense attorneys, has standards for prosecutors who are investigating cases that are general in nature. They're not very specific but they are guidance to go to when you want some help in trying to make a tough decision.

Seth: We've got these things to guide us. We have this memo. What I'm hearing from you is this memo is basically we just have to wait and see how each of not all 93, but the US attorneys that oversee any legal cannabis behave. What else are we waiting to see, I guess? Is that a fair question?

James M. Cole: Well, I think we're waiting to see what the reaction is in the industry because, again, going back to the question of why do you really care about whether there's a marijuana industry and it's because if you're going to make it legal, you want to make sure there's a legal source for it and you want to get the cartels out of it and the gangs out of it. You can only do that by allowing a space for these legal industries to function.

Seth: Somewhat of a safe space, somewhat of a well informed space. These are my words, not yours.

James M. Cole: They're your words, not mine. You want to be able to allow that to exist if you're accepting the fact that state law has in fact done this.

Seth: Right. With that understanding.

James M. Cole: With that understanding and that you cannot stop that. Then you have to make the best of that situation and say, "Okay, faced with that, how do we then go forward to make it as much in the public safety interest as we can?"

Seth: Where I find myself is with a lot of questions. It sounds like I rightfully have a lot of questions. Is that fair?

James M. Cole: I'm not sure if it's fair to say I have a lot of questions as opposed to I don't know how this is going to play out yet. That's really one question. How is this going to play out? What is going to happen here and how is that discretion going to be exercised? What impact is that going to have on this whole space?

Seth: I guess then that must bring us to Congress. That must bring us to if there is the Controlled Substances Act, which is being cited in each of these memos, it's time maybe for Congress to go ahead and do something about it.

James M. Cole: Congress has started. They have the Rohrabacher amendment, which continues to be a part of the Justice Department's Appropriations Bill. There is some ambiguity about how far it goes. But generally it says, "No Department of Justice funds can be used to prevent the implementation of state medical marijuana programs." That's a beginning of something that Congress has done in this space.

Seth: Absolutely. You call it the Rohrabacher amendment because it was once Farr and it is now Blumenauer up until a few weeks from now. That doesn't feel like terra firma to have it be an amendment that goes on to a budget, right?

James M. Cole: Right. Generally easily Congress could make a decision about where they think marijuana should be in the schedule drugs. They could make decisions about what kind of coverage they wanted it to have under the Controlled Substance Act. These are things within Congress's power.

James M. Cole: What I think is necessary is a level of clarity. Whatever it is they decide they want to do, it's up to them. It's up to their constituents to tell them what they want. But, I think this is a field that really needs clarity and that can be supplied by Congress at this point probably in the best way possible under all circumstances. Even when the Cole Memo was there, Congress could have provided even more clarity than that.

Seth: It would have been easier almost if we didn't have to write all these memos, if we would've just said from Congress, "Hey, we told you about the Controlled Substances Act in 1970. Here's an update."

James M. Cole: Right. Right. If there really is a mood to change it, that's the easiest way to do it and the most reliable way to do it.

Seth: I'll start asking those guys. That I guess begrudgingly leads us to the final three questions for returning guests. I'll tell you what they are and then I'll ask you them in order. What would you change about yourself, if anything? What would you change about ... I'm not even kidding. By the way, it might be something you're already working on. What would you change about anything else, if you could? This is bend the space-time continuum and you're omniscient and all that. The last question is always the same on the soundtrack of your life, one track, one song that's got to be on there. What would you change about yourself, if anything? It might be something you're already working on.

James M. Cole: What would I change about myself? I would probably want to listen more and talk less.

Seth: We got two ears and one mouth for a reason is what my mother used to tell me.

James M. Cole: I am working on that and I have been trying to work on that for a long time. I have always found that you are much, much smarter the more you listen before you talk.

Seth: Yeah, usually the smarter people in the room are the ones that are not speaking so much.

James M. Cole: That's right. It's why I usually try to speak last because I get the benefit of all the other smart people in the room,

Seth: There you go.

James M. Cole: ... Who have spoken before me.

Seth: Then you sound really smart.

James M. Cole: That's right.

Seth: That's good. It's a good trick.

James M. Cole: Now, I'm giving away all my secrets.

Seth: Exactly, exactly. What would you change about anything else if you could?

James M. Cole: Oh, that's such a broad question.

Seth: Indeed.

James M. Cole: It really is such a broad question.

Seth: Well, remember the second question from the ... It's usually what's most surprised you in life? We like to do a big question in this pocket.

James M. Cole: That's right. I would like to see, if there's one thing that I could change, it would be to try to really bring down the level of partisan confrontation and to start having people work together to solve problems instead of fighting with each other about solving problems. We really need that.

Seth: I'm right there with you. I think I might have told you this in the past. I read a spectrum of news, everything from the left, everything from the right, so that I can just understand what the other person that I'm speaking to might be thinking and how they might have been informed but there's so much shouting.

James M. Cole: Well, what you're doing is the beginning of it. That then has to move into a dialog, an actual conversation that is not bound by you must do what I want and, instead, is bound by here is our problem. Let's start with that, to find the problem. Now, let's have a discussion about the best way to solve it. That's what I would like to ... If I could change anything, I would like to have that be the process more than we have now.

Seth: I hope that's an attainable goal.

James M. Cole: I think it has been achieved in our country and I think it can be again.

Seth: It brings us back all the way back. The founding fathers never wanted political parties and then right away there were political parties. The stuff is just nasty. When you go back and read what they were saying about each other and what they were printing, it's just horrible. We did recover from that. I guess it is recoverable, right?

James M. Cole: This country has recovered from a lot. This country has had a very long and not always good history. We have had to overcome a lot of things in our history and we have. We're going to continue to have to overcome a lot of things. This is just the cycle that goes on.

Seth: You got to work. You got to wake up in the morning, go to work.

James M. Cole: The secret is the resilience. Can you recognize what the problems are and then do something about them and move on?

Seth: Which leaves only the final question to answer, which is on the soundtrack of your life, one track, one song that's got to be on there.

James M. Cole: Well, the last time I talked with you it was The Times They Are a-Changin'.

Seth: Indeed, and your phone rang also during the interview. Little Wing came up.

James M. Cole: That's correct.

Seth: Just to provide further ...

James M. Cole: That's correct. Probably Steve Miller's Your Saving Grace.

Seth: All right. I think I don't know that one but I will check it out. Your Saving Grace. I can already see where it's going. Is there a particular lyric of question?

James M. Cole: Not that I can think of.

Seth: All right. We will go ahead and read those lyrics because I would imagine that's what it's about. Former US Deputy Attorney General of the United States of America James M. Cole. Jim, thank you so much for your time.

James M. Cole: My pleasure, Seth.

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Cannabis Economy is a real-time history of legal cannabis. We chronicle how personal and industry histories have combined to provide our current reality.