DEC 13 (SACRAMENTO, Calif.) — Matthew Davies, 35, of Stockton, was sentenced today by United States District Judge Garland E. Burrell Jr. to five years in prison and a $100,000 fine for offenses involving the cultivation and sale of marijuana via dispensaries in Sacramento and Stockton, United States Attorney Benjamin B. Wagner and DEA Special Agent in Charge Jay Fitzpatrick announced. Davies was ordered to surrender on March 3, 2014, to begin serving his sentence.
Davies pleaded guilty to one count of conspiring to manufacture and distribute marijuana, two counts of manufacturing marijuana in connection with two separate indoor marijuana grow operations, and seven counts of distribution of marijuana in connection with seven separate dispensaries. Two other men have pleaded guilty in this case and await sentencing. Lynn Smith, 63, of Stockton, pleaded guilty on January 18, 2013, and Robert Duncan, 30, of Fremont, pleaded guilty to marijuana cultivation charges on September 21, 2012. Over $160,000 was previously forfeited in the case.
According to court documents, Davies and Smith owned and operated various marijuana businesses in Northern California. One of the two marijuana growing operations was a sophisticated indoor growing facility involving thousands of plants in a warehouse on Vickie Lane in Stockton. Stockton Police Officers responded to a burglary-in-progress call on October 4, 2011, and found over a dozen workers inside trimming the finished product.
The follow-up investigation showed that in addition to the marijuana growing operation, Matthew Davies and Lynn Smith owned and/or operated seven separate marijuana storefront businesses in Stockton and Sacramento between 2009 and 2011. The businesses generated substantial revenues. Profit and loss statements obtained during the course of the investigation showed that the Pathways Family Health Cooperative in Stockton, which was closed in 2010 due to action by the City of Stockton, generated more than $2.2 million in marijuana sales in less than a year. Similarly, records obtained in the investigation show that the Central Valley Caregivers Cooperative (CVCC) dispensary that Davies and Smith owned and operated just outside the city boundary of Stockton, generated over $4.5 million in gross sales in 2011 before federal search warrants were executed in mid-October 2011. The MediZen business in Sacramento generated $2 million in gross sales of marijuana during that same time period. During 2011, Davies and Smith also managed and operated River City Wellness and R & R Wellness (renamed Sacramento Patient's Group), and purchased and operated Twelve Hour Care dispensary. All three of these dispensaries were located in Sacramento. During 2011, Davies and family members also personally purchased a 50 percent interest in Port City Wellness in Stockton (which was briefly open between September and October of 2011) for approximately $200,000, using funds from the CVCC and MediZen dispensary. Davies and Smith also briefly operated an eighth marijuana business in Manteca before it was closed due to action by the City of Manteca.
"Matthew Davies, a Stockton businessman with a MBA degree, set out to build a lucrative marijuana empire in the Central Valley, even though he knew that his conduct was illegal under federal law," said U.S. Attorney Wagner. "He persisted in expanding his businesses even after local jurisdictions took action against them, and even purchased one storefront business in Sacramento shortly after its prior owners had been arrested by local police. This case was about money, not about treating the seriously ill. Despite claims made in a well-funded PR campaign, documents obtained from the dispensaries in the course of the investigation established that those businesses generated substantial income for Davies, his spouse, and his other businesses, and that some of them significantly underreported income and underpaid state taxes. A five-year sentence is well below the sentence that would be called for under federal sentencing guidelines, and it is commensurate with other sentences recently imposed on similarly situated defendants in this district."
This case was the product of an investigation by the U.S. Drug Enforcement Administration with the assistance of the U.S. Marshals Service, the Internal Revenue Service – Criminal Investigation, the San Joaquin County METRO narcotics task force, and the Stockton Police Department. It was funded by the U.S. Department of Justice's Organized Crime and Drug Enforcement Task Force (OCDETF), which targets and investigates significant drug trafficking organizations. Assistant U.S. Attorney Richard J. Bender prosecuted the case. The forfeiture action was handled by Assistant U.S. Attorney Kevin Khasigian.