In June 2013, we told you about a 71-count indictment accusing businessman Conley Hoskins and eleven others with defrauding investors who wanted to cash in on the state's booming medical marijuana industry.
That move was taken by the Colorado Attorney General's Office, but now, the feds are getting involved. The U.S. Attorney's Office has filed a forfeiture action to take a marijuana warehouse owned by indictee David Krause, seen here, plus $850,000 in seized funds. Photos, documents and details below.
At the time of last year's indictment, as we've reported, Carolyn Tyler, spokeswoman for Colorado Attorney General John Suthers, said, "Just as we suspected, a medical marijuana business was perpetrating fraud. Through tight oversight by the Department of Revenue, this elaborate scheme was exposed and will be prosecuted."
In addition to Krause, the 2013 indictment, on view below, names Conley Hoskins of Jane Medicals, as well as Dallan Dirkmaat, Brenden Joyce, Yesenia Melendez, Audra Wimer, Kurt Criter, Nathan Newman, Ryan Tripp, Carols Meza, Dialyne Parker and The People's Law Firm.
According to that document, Hoskins, attorney Dirkmaat and Dr. Gerald Searle grew up together in Idaho, and the longstanding friendship of Hoskins and Dirkmaat led them to take part in joint business ventures that included construction and car washes in addition to dispensaries. Specifically, the offices for the dispensaries shared space with Dirkmaat's law firm. Searle, for his part, moved his base of operations to the Jane Medicals building, making it easier to write referrals for the dispensary.
As Hoskins began to concentrate on medical marijuana, the indictment alleges that his "plan to expand his marijuana businesses through investments took a turn down the criminal path. This path included defrauding those same individuals who sought to partner or invest with Mr. Hoskins as he expanded his marijuana businesses."
Criter, identified as an established businessman, is said to have been charged with creating a prospectus that was provided to investors and potential partners -- among them individuals outside the State of Colorado. But prosecutors say the information wasn't entirely genuine: "This prospectus included false sales figures, assets and liabilities and made numerous material omissions."
And what did Hoskins and company supposedly do with the cash they collected? According to the indictment, it wasn't poured into the dispensaries but "diverted for other unrelated purposes, including but not limited to paying off personal debts and business debts on the likes of car washes owned by Mr. Hoskins."
The indictment's narrative also maintains that "several members of the enterprise engaged in money laundering and tax evasion. These actions allowed enterprise members to hide their illicit proceeds from law enforcement and/or taxing authorities and to expand their marijuana production capabilities. Despite taxable earnings and/or taxable sales, others achieved similar goals of hiding their illegal marijuana proceeds or collected sales tax from law enforcement and/or taxing authorities by filing false returns or simply failing to collect or pay over trust taxes.
"Some members even used portions from the proceeds from their illegal sales of marijuana and tax schemes to pay for personal items, including but not limited to vehicles and debt on other businesses."
Assertions like these form the core of the U.S. Attorney's Office forfeiture complaint, which names several banks with which the defendants are said to have worked. But the focus is the warehouse owned by Krause, who was allegedly concerned that illegal activities would splash back on him.
The forfeiture document maintains that Krause purchased the warehouse in 2007 for just over $504,000, with Janet Joyce subsequently obtaining 50 percent ownership through her company, JRD Group Enterprises.
No later than 2010, the complaint alleges that the warehouse was being used to cultivate marijuana, and plenty of it -- at least 508 pounds worth, the document says. But Krause apparently feared that everything wasn't on the up and up. In a February 2012 e-mail to Janet and her son, Brendan Joyce, that's quoted by the feds, he wrote, "We are operating illegally and selling pot illegally and have been for months. This is a felony to the landlord that has the license, not the employee. We are subject to tax evasion and operating an illegal facility."
Perhaps that's why there have been eight guilty pleas thus far in regard to the 2013 indictment, with the other cases pending.
Regarding the forfeiture action, U.S. Attorney John Walsh believes it shows that the federal government continues to monitor the Colorado marijuana scene, even if the Justice Department decided not to stop the launch of retail sales here.
"The U.S. Attorney's Office continues to engage in focused enforcement of violations of federal law as it pertains to marijuana, and to work closely with our local and state law enforcement partners," Walsh writes. "In this case, the warehouse and money that is the subject of this forfeiture action were proceeds of an illegal scheme perpetrated by certain individuals who were not only violating federal law, they were violating Colorado state law, as is demonstrated by the guilty pleas obtained in Jefferson County."
Here are photos of those indicted last year, followed by 2013 documents from the Colorado Attorney General's Office and the U.S. Attorney's Office forfeiture complaint.
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