D.C. legalized weed. A marijuana delivery service was indicted anyway.

Connor Pennington always knew he would start his own business, though he wasn’t sure what type. His family recalls how he mused as a teenager about running clothing brands or breaking into the music industry, drawing inspiration from his father, a cafe owner in rural Currituck County, N.C.

When nearly 65 percent of D.C. voters approved Initiative 71 in 2014, legalizing the recreational use of marijuana, the 29-year-old found “what I truly believe is my calling,” he said: distributing pot. He named the company Joint Delivery.

Although he knew marijuana sales were illegal under federal law, Pennington created a website where customers could place orders, and he had delivery workers fan out daily in bikes or cars. Hoping to create a professional atmosphere, he hired middle managers and a full-time accountant. The company generated at least $4 million in sales from 2017 to 2022, according to court records.

“I tried out all these services, figuring out what they were lacking in,” Pennington said. “I remember I went in for a service, and the guy just hands me it out of the bag with the window cracked this, you know, three inches. And I was like … this is not going to create a good, healthy environment.”

Pennington, who had been a restaurant manager in D.C., saw himself as a pioneer in what he predicted would become a booming market for recreational marijuana in the nation’s capital.

The Drug Enforcement Administration (DEA) and U.S. prosecutors saw him as the leader of a runaway criminal enterprise.

In July 2022, Pennington, two younger brothers he had hired and five Joint Delivery managers were indicted — the first and so far only D.C. marijuana dispensary to face federal prosecution since Initiative 71 passed. In a related case, Pennington’s accountant was charged with money laundering.

The case highlights how the federal prohibition on marijuana distribution creates legal risks for those in D.C. and states that have legalized its use — even in an administration that is more pot-friendly than its predecessor. President Biden has pardoned thousands of low-level marijuana offenders and announced policy moves to end what he called the “failed approach” on federal marijuana enforcement. The District’s law, which allows adults to exchange up to one ounce of marijuana as long as “no money, goods, or services” are traded, has spawned a network of shops and delivery services that sell goods such as T-shirts and give customers a marijuana “gift” with their purchase.

“This is a strange kind of case, because the substance that’s involved is legal in many, many states now. It’s not in the federal system,” U.S. District Judge Leonie M. Brinkema said at a hearing May 2. “This disparity has got to get worked out soon because it creates a crazy situation in the law enforcement area.”

The difference between buying weed in D.C., Maryland and Virginia

The DEA twice raided Joint Delivery’s offices in D.C. last year, finding cash, marijuana and cannabis products, according to the indictment. All nine defendants pleaded guilty to money laundering or conspiring to distribute a dangerous substance and were ordered to forfeit the money they earned.

But they never set foot in a D.C. courthouse, and none went to prison.

The top federal prosecutor in the District, U.S. Attorney Matthew M. Graves, declined to prosecute Joint Delivery and generally does not seek charges against any of the dozens of marijuana “gifting” shops and delivery services in the city, despite occasional police raids, according to U.S. officials and defense attorneys involved in the Joint Delivery case.

Instead, all the charges against Pennington and his employees were filed by the U.S. attorney’s office for the Eastern District of Virginia (EDVA), led by Jessica D. Aber. Prosecutors said they had jurisdiction mainly because much of the money laundering occurred in Northern Virginia. But legal experts and the judge who handled most of the case said they were puzzled by the move, because the drug distribution that prosecutors described happened in D.C.

“I don’t think this case truly belonged here,” Brinkema said at a hearing in Alexandria federal court on Jan. 6, after chiding a prosecutor in Aber’s office for seeking a “completely inappropriate” sentence of four years and nine months in prison for one of Pennington’s shift managers, Robert Spear, who was 27 years old at the time.

The judge sentenced all of those indicted to terms of supervised release of two or three years. “It was always amazing to me that the District of Columbia, where this business essentially was, was not interested in the prosecution of this case,” Brinkema said at one of the final sentencings.

A warning to other D.C. dispensaries

Most states and D.C. have medical marijuana programs and nearly half have legalized it for adult recreational use. Virginia has legalized possession but not nonmedical sales. Maryland will allow recreational use starting July 1.

Aber said in a statement that her office “has no interest in prosecuting individuals who are legitimately following the marijuana regulation laws of the state where they live or operate,” but that “when appropriate, we may prosecute illicit, large-scale, interstate marijuana distributors, like JointVentures, who violate federal law.” (JointVentures was Joint Delivery’s legal name.) She noted that Pennington pleaded guilty to laundering roughly $3.5 million through his enterprise.

“In short, EDVA will not prosecute those who abide by state marijuana laws but will prosecute individuals on occasion whose massive enterprises violate federal and state law,” Aber said.

Unlike in other jurisdictions that have legalized recreational marijuana for adults, D.C. has not been able to implement a regulatory framework for cannabis sales because Congress has blocked it from doing so in annual spending riders attached to appropriations bills since 2015. The gifting businesses operate without sales licenses. Pennington said he at first used the gifting model for Joint Delivery but then decided to drop the facade in 2020 “to stay relevant.”

Defense attorneys in the case said Aber’s statement suggested that dozens of marijuana dispensaries in the District could now face prosecution in Virginia. The District has seven licensed medical marijuana dispensaries, which are the only businesses that can make sales while fully complying with federal law. Adults over 21 years old may self-certify their applications for a medical marijuana card.

Pennington admitted he sourced his marijuana from California and Colorado, arranging shipments through the mail or on commercial flights. The operation’s accountant, John Robert Fischel, laundered sales revenue mostly through banks in Northern Virginia, directing employees to make deposits under $10,000 to avoid unwanted scrutiny, a practice known as structuring. One of Pennington’s shift managers, Nicole Mayorga, admitted she accepted a U.S. Postal Service delivery of a marijuana parcel at her Virginia home in 2021; it was a sting arranged by law enforcement. Prosecutors did not allege that Pennington’s delivery workers ventured outside the District to deliver marijuana as part of their jobs.

The DEA did not respond to questions. A spokeswoman for Graves said prosecutors in D.C., Maryland or Virginia sometimes take cases that involve the other two jurisdictions and did not respond to further questions.

Federal prosecutors in Virginia at first sought prison sentences of more than four years for two of Pennington’s shift managers. They requested six months to one year for four other managers. At one of the final sentencing hearings, Assistant U.S. Attorneys Katherine E. Rumbaugh and David A. Peters sought 18 months in prison for Pennington, arguing in a court filing that he “took advantage of the murkiness of D.C.’s cannabis laws to corrupt the integrity of the banking system, all to enrich himself.”

Brinkema was unmoved, sentencing all of them to time served after they spent one or two days in jail. Pennington was required to forfeit $227,274, “representing the sum involved in the defendant’s offense of conviction,” according to a court order.

“Her reactions suggest federal law really needs to catch up,” said Alex Kreit, assistant professor and director of the Center on Addiction Law and Policy at Northern Kentucky University’s Salmon P. Chase College of Law.

Robert Mikos, a professor at Vanderbilt Law School, said it was “undisputed that the defendants were violating both state and federal law; as far as I’m aware, that really makes them fair game for federal prosecution.” But he added that prosecutors have discretion to choose what cases to pursue and might face criticism for the ones they prioritize.

“There are thousands of federal criminal statutes out there, and only a small number of U.S. attorneys spread throughout the country,” Mikos said. “They can’t prosecute every violation of federal law.”

An attempt at a ‘legitimate business’

Pennington’s operation resembled a traditional business, according to court records and the people involved in the case.

Fischel, who was 57 years old at his sentencing in March, said a 2011 bankruptcy and expenses including pets’ medical costs had put his family in a financial bind when a neighbor of his who worked for Pennington made introductions. Fischel became Joint Delivery’s chief financial officer in 2018.

Fischel, who lost his accounting license after pleading guilty to money laundering last year, ran the payroll for Joint Delivery and had employees sign up for health benefits. He prepared tax returns and sales-and-use tax payments for D.C. and arranged a 401(k) retirement plan for the company.

Shift manager Joseph Mayorga Burtt “attended the office Christmas party, participated in the office Fantasy Football league, filled out a time-sheet, received a W2 at the end of the year, and paid his taxes,” his attorney, Jay P. Mykytiuk, wrote in a court filing. Pennington said he implemented containment measures during the coronavirus pandemic in the two apartments across the hall from each other on 12th Street NW, where the company was based, and in a warehouse in Hyattsville, Md.

Prosecutors recommended no prison time for Fischel, despite federal sentencing guidelines that called for 135 months to 168 months, the same as for Pennington. A statement of facts accompanying Fischel’s guilty plea says the “money laundering scheme, adopted by Connor Pennington and executed by the JointVentures conspirators, was Mr. Fischel’s brainchild.” U.S. District Judge Rossie D. Alston Jr. sentenced Fischel to a probationary term of three years. Alston told him that he was getting “absolute grace” and that prosecutors “cut you a big break.” Fischel did not spend time in jail.

“He had a crazy notion that he could somehow make this business legitimate,” an attorney for Fischel, Danny C. Onorato, told the judge.

“We were overextended,” Fischel said at his sentencing. “I made a poor choice — a poor decision — to help support the family.”

A marijuana case like no other

Since recreational marijuana was legalized in Colorado in 2014, federal prosecutors in that state have obtained eight indictments for marijuana distribution conspiracies that did not involve firearms — all but one of those cases involved large-scale cultivation, and the remaining case involved the one-time distribution of 114.9 kilograms of marijuana, according to Spear’s defense attorney in the Virginia case, Joseph T. Flood. The Joint Delivery defendants admitted they sold 400 to 700 kilograms of marijuana from 2018 to 2022.

But there is no case on record in Colorado, Maryland, Washington state or the District of Columbia against dispensary workers such as Spear, Flood wrote.

“I did an exhaustive search, as I indicated, of states that have had laws on the books for a long time,” Flood told the judge at Spear’s sentencing on Jan. 6. “I can’t find another prosecution that looks remotely like this. … It’s unimaginable that it would happen again.”

Spear, who is now a coastal engineering major at a North Carolina college, told the judge he started off as a Joint Delivery customer who found the business “through a Google search.” Then he became a delivery biker and eventually was promoted to shift manager before Pennington fired him after Spear voiced “outrage … that many of his practices seemed illegal.”

The D.C. Council, Flood noted, has approved legislation clearing a pathway for marijuana “gifting” shops to be fully licensed. Flood said he found “no prosecutions of people selling cannabis through unlicensed dispensaries” in Virginia since possession was legalized in the state in 2021.

As of this year, 37 states and D.C. have medical marijuana programs and 22 states have legalized the drug for recreational use, along with D.C. and Guam.

But under the federal Controlled Substances Act, marijuana since 1970 has been in the top category for addictive and dangerous substances, Schedule I. Biden in October asked federal agencies to consider downgrading marijuana to a less serious category.

A Justice Department policy from 2013, known as the Cole memorandum, outlined eight priorities for prosecuting marijuana offenses under federal law in states that had moved toward legalization, such as preventing sales to minors or abetting organized or violent crime. “None of those [eight] considerations are present in this matter,” Fischel’s attorneys wrote in a court filing.

Although the policy was rescinded during the Trump administration, Attorney General Merrick Garland said in March congressional testimony that the Justice Department was drafting new guidelines that would be “very close to what was done in the Cole memoranda.” Defense attorneys involved in the Joint Delivery case said that likely would have prevented prosecutors from targeting their clients.

Pennington said he was relieved to not have to spend time in any of the white-collar prison facilities he had been researching while he awaited his sentencing on May 2. But he said he feels deflated by the conviction on his record and the fact that he is being cut out of the market he spent so much time researching and learning. Pennington said he developed his own brand of cannabis called “Rosslyn,” and never failed to pay taxes to D.C., even during the pandemic doldrums. He said he took care of his brothers and employees and their needs.

“We may be the last group of convicted cannabis-related individuals, to be honest,” said Pennington, who has since returned to the restaurant business.

But he said he was heartened by Brinkema’s comments at his sentencing hearing.

“How do you have private equity companies that are profiting on stock exchanges for marijuana, while you have individuals who are suffering 20 years in prison?” Pennington said. “That’s wrong, and as a society, we need to make a stand and say this has got to be resolved. And so it’s a relief to hear that federal judges are thinking that way. It’s a relief to hear that she’s thinking that way.”

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