Drug Enforcement Administration

San Francisco

Christopher Nielsen, Special Agent in Charge

January 18, 2013

Contact: Casey Rettig

Phone Number: (415) 436-7994

Partner In Stockton And Sacramento Marijuana Businesses Pleads Guilty

SACRAMENTO, Calif. - Lynn Farrell Smith, 62, of Stockton, pleaded guilty today to federal marijuana charges that include conspiracy to manufacture and distribute marijuana, two counts of manufacturing marijuana and six counts of distributing marijuana from storefronts in Stockton and Sacramento, Drug Enforcement Administration Acting Special Agent in Charge Bruce C. Balzano and United States Attorney Benjamin B. Wagner announced.

According to court documents, in November of 2009, Smith, along with co-defendant Matthew Davies, opened a marijuana storefront on East Acacia Street in Stockton called Pathways Health Cooperative. According to the plea agreement, Davies obscured his role in the operation and used the assumed name “Chris” when introduced to Pathways employees. The business was closed in early June of 2009 by the City of Stockton. During the seven months it operated, it generated over $1.3 million in sales and profits of $288,000.

According to the plea agreement, in August of 2010, Davies and Smith opened a new marijuana business outside the Stockton City limits on Tomahawk Drive called Central Valley Caregivers (CVCC). Sales grew rapidly, often generating monthly sales of more than $300,000 until it was closed down in October 2011 when a federal search warrant was executed at the facility.

According to Smith’s plea agreement, towards the end of 2009, Davies and Smith also became involved in growing marijuana to sell at their stores. They recruited co-defendant Robert (who pleaded guilty to marijuana cultivation charges on September 21, 2012). They initially grew marijuana in a residence at 3115 Auburn Chase Circle in Stockton and cultivated and harvested marijuana at that location for several growing cycles. Then in July 2010, Davies and Smith substantially increased the marijuana production by leasing a large warehouse at 1838 Vicki Lane in Stockton. Inside the warehouse, smaller internal growing rooms were constructed. When a federal search warrant was executed at the facility on October 4, 2011, eight rooms were in operation containing 1,962 growing marijuana plants and 900 marijuana (starter cuttings set up to establish new plants). Forty pounds of processed marijuana was also found.

The plea agreement also states that Davies and Smith purchased all or part interests in five other existing marijuana dispensaries in Sacramento and Stockton. They purchased “East Bay Health Solution,” a licensed Sacramento marijuana dispensary in February 2011. After renovating and changing its name to MediZen, by May 2011 it had monthly sales of $251,000. In July 2011, after the R&R Wellness Collective in Sacramento was searched by Elk Grove Police Department officers, and the owners were arrested on state charges of marijuana cultivation, possession and sales, Davies and Smith took control of that business and renamed it Sacramento Patients Group. They also purchased interests in, or managed, three other marijuana businesses including: Twelve Hour (Fruitridge Road, Sacramento), River City (Northgate Blvd., Sacramento), and Port City Health and (W. Fremont St., Stockton).

According to U.S. Attorney Benjamin B. Wagner, the investigation uncovered a burgeoning marijuana enterprise that had established industrial scale growing operations and multiple retail outlets with annual sales in the millions of dollars that falsely claimed compliance with California medical marijuana laws.

“This case is not about providing care for ill people,” said Wagner. “It is about the operation of a large business that grew and sold marijuana for profit. The U.S. Department of Justice has consistently stated that large-scale commercial marijuana cultivation and distribution operations will continue to be subject federal prosecution.”

Smith is scheduled for sentencing on April 5, 2013 by U.S. District Judge Garland E. Burrell Jr. in Sacramento. Several of the charges to which Smith pleaded guilty carry a mandatory minimum five-year prison sentence, and the plea agreement contemplates that such sentences be run concurrently. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

This case was investigated by the U.S. Drug Enforcement Administration, the IRS-Criminal Investigation, and the U.S. Marshals Service, with assistance from the Stockton Police Department and other local law enforcement agencies. Assistant U.S. Attorney Richard J. Bender is prosecuting the case.

The charges as to co-defendant Matthew Davies are only allegations and he is presumed innocent until and unless proven guilty beyond a reasonable doubt.

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