The Matter of the Illegal Legal Simoleons

Captain Noonan, the “Bearded Holmes” of the Sandersonville Police Department, was working on an understandable definition of ‘conundrum.’  It was an odd word which actually described nothing.  The official definition was “a confusing and difficult problem or question.”  This, of course, was a bogus definition because “problems” and “questions” are “confusing” and/or “difficult;” otherwise they would not be “problems” or “questions.”  There were other words that were far more expressive for the same definition.  A “puzzle,” for instance, described the same condition but came with the added promise of a solution. A “juxtaposition” was the polar opposite of a “puzzle” because there was no solution, simply a stability between two opposites, like the Yin-Yang symbol indicating the world had both good and evil, and you just had to live with it because it had been that way since the cave.   An “oxymoron” was a gift to standup comedians because it was a term populated with contrary terms, like military music, bittersweet and liberal-conservative. But a conundrum was a nebulous concept because it described a condition which was neither a puzzle or a juxtaposition. The most common example used to describe the condition was “trying to find a job with no experience.”

Noonan was intellectually pleased with this logic, and he had been quite willing to toss the word “conundrum” under the proverbial bus. Then he received a loo-loo call from an old friend.  Harold, the old friend, had funded Harold III, his grandson’s Cannabis Heaven business in Alaska. Noonan, an aficionado of fine wine, knew as much about marijuana as he did the rings of Saturn. Once he was educated as to the federal complexity of the business, he – along with Harold, Harold II and Harold III – realized there was a rock-solid reason the word “conundrum” was a useable word. It was the only word that could describe the topsy-turvy, convoluted, secret/public world of finance in the world of marijuana sales.

No matter how it was stated by ‘those in the know,’ the world of marijuana sales had three dimensions. The first was what Federal law was. The second was what State laws were. The third was what was really going on. The problem, and particularly when it came to money, as in cash, and the marijuana industry, was like a Yogi Berra saying, “If the world were perfect, it wouldn’t be.”

In an effort to parse the unreality, Noonan’s research exposed the conundrum. Simply put, legally, marijuana was a Schedule 1 Drug along with heroin, LSD, peyote, and methaqualone.  Supposedly, as listed in the law, none of these drugs had a “currently accepted medical use.”  This was not true, of course, but – again the conundrum – “truth” and “the law” were often at odds.

Then came the problem for Harold III.

In spite of the fact marijuana was legal in Alaska, it was still illegal in the eyes of the Federal government. The conundrum was all banks in Alaska – and America – were federally regulated and could not accept federally-designated drug money. Since credit cards, debit cards, cashier checks, personal checks, and letters of credit are all issued by banks and banks are under the fiscal thumb of the federal government, none of these financial instruments could be used to buy marijuana. Postal money orders were also federally regulated and could not be used to buy marijuana. So if you wanted marijuana or any of its derivatives, you had to pay cash.

Worse for the marijuana industry, dealers who receive the cash for marijuana or CBD in any form could not put that cash in a bank. And if the money takes a circuitous route to a bank, it is called laundered money and thus is doubly illegal.

Because it was still “drug money.”

Even if the money was legally received for selling a legal product, it is, yet another, non sequitur: illegal legal money.

Further, in spite of the fact marijuana was legal in Alaska, it was only legal as far as the State of Alaska is concerned.  Every municipal jurisdiction had the right to allow marijuana businesses within its boundaries, but that still left the problem of what to do with the cash once it was received.  Thus the conundrum, the money was legal in the State of Alaska but was illegal in the eyes of the federal government.  And only in America at this time in history could there be “legal illegal” money.

When Noonan contacted some banking friends, they told him flatly they did not, could not, would not, and did not dare accept marijuana money in any form. The money they would not take included direct deposit and “laundered money.”  “Laundered money,” in the case of the marijuana money, was yet another conundrum. “Laundered” means washed but “money” does not exist. Noonan knew that you had $1,000 in his checking account and he went to the bank and asked to see “his $1,000,” the banker would laugh hysterically.  That specific $1,000 “does not exist” as money.  “It” was in an electronic file; it was not “money’ which you hold in your hand.

Calling around to law enforcement and banking individuals, Noonan discovered that three things were happening when it came to marijuana money.  First, a lot of banks were purblind to what was happening and were accepting marijuana-based money. “It was said,” Noonan was told, a lot of marijuana money was put in FedEx or UPS boxes and sent to the Bahamas.  (Not the USPS because it was federally regulated.) Once in the Bahamas, the cash was deposited in a Bahamian bank. Then, in a nanosecond, it was electronically sent to another bank, possibly in Switzerland.  Now the United States money has been transformed into Bahamian dollars and thereafter to Swiss Francs. Then, if the money is deposited in an American bank, it is no longer “drug money.”


However, as far as the federal government is concerned, if it could link the money from the Swiss bank to the Alaskan marijuana dealer, it would be considered drug money and confiscated. Thus the movement of money using this method was risky.  Bahamian banks ‘come and go’ in the blink of an eye and are unregulated. You might put money in a Bahamian bank, and 24 hours later, the bank is no more. And if the DEA suspected money from a Swiss bank is from marijuana – even if it is not – the DEA could freeze the bank account.

Then things get complicated.

Marijuana businesses were legal in Alaska and had to pay municipal and federal taxes. Since the marijuana businesses could not pay with a check, the payments had to be made in cash. So the marijuana business owners have to go in person to Anchorage City Hall and pay their Municipal property taxes in cash. And they have to go in person to the IRS in Anchorage and pay their income tax.  In cash.  Light, heat, natural gas, water, garbage, internet, cellphone, insurance, and dues all had to be paid in cash as well—every month. Worse, even if the marijuana business owner was making hundreds of thousands of dollars a year, he/she could not buy a home. Real estate agents, title companies, insurance companies, home inspection companies, notaries, and appraisal firms will not take cash. First, because it could have come from a nefarious source, and they would be considered to be in collusion with the criminals if these industries accepted the cash. Second, few people can tell counterfeit dollars from real ones. And third, there was the genuine possibility that the DEA will seize the money and the companies just listed would have their payment taken from them – and be subject to audits by both the DEA and IRS.

There were other elaborate ways to ‘handle’ legal money. In THE CANNABIS STAMPEDE, the marijuana merchants joined with other businesses in a mall to form a single organization.  All of the businesses paid into the organization for rent, utilities, security, and personnel. The marijuana business thus paid the organization cash, and their employees received their pay in check form with the proper deductions. All utilities were billed to the organization and the marijuana business made one cash payment to the organization for its share of the utility bills.

The reason Harold from Alaska had called Noonan was because of his famous MATTER OF THE DEMATERIALIZING ARMORED CAR.  This had been an elaborate but legal scheme to seduce the federal government to seize the legal illegal money and hold it as evidence. But because the federals have seized money, private property, it had to pay for that property because of the Fifth Amendment to the Constitution which states, “nor shall private property be taken for public use, without just compensation.”

Currently – and what frightened Harold in particular – was many of the marijuana businesses were moving along a very narrow ledge over a perilous precipice. The one “avenue” that was open to them is the purchase of bitcoins. There was no way for the Federal government could ‘follow the money’ as it could with banks and financial instruments. But bitcoins were dangerous. They were not linked to any fiscal reality. Their value did not rise and fall on the basis of supply and demand of a tangible product or service.  They were a Ponzi scheme that would burst and leave millions of people with nothing for their investment. Second, bitcoins were not regulated, so investments could not be insured. Bitcoin investment was also very dangerous because one bad episode could wipe out every marijuana business using the bitcoins as a way to maneuver around the law.

Currently and most importantly, marijuana sales in Anchorage, Alaska, alone ran about $9 million a year.  Raw dollars in Anchorage turn over four times, so the local economy was missing out on $36 million in rollover dollars.  Considering that Harold and Harold II made their fortune selling cars, every dollar not spent on a new or “affordable” car was a hard dollar loss to their bottom line. Toss in other businesses that could not take in marijuana dollars, that was a  substantial chunk of change to lose locally because federal law has not kept pace with reality. Nationally, the dollar and turnover impact was significant.

The best way to sum up the fiscal state of marijuana in Anchorage was a slight adjustment to the Harry Nillson 1969, song, “Everybody talking at me/Can’t hear a word they’re saying/Only the echoes of my mind.”  At that moment, no one in the marijuana business, the DEA or the banking industry was talking. They were all waiting for the law change. Until then, any discussion on what was really happening was simply “echoes” in the minds of the marijuana dealers, banks, municipal tax collectors, the IRS and the Harold’s and Harold II’s of America.

So Noonan, the “Bearded Holmes” of the Sandersonville Police Department, a masterful thinker who had weathered the MATTER OF THE DEMATERIALIZING ARMORED CAR, was asked if he had a clever solution Harold, Harold II and Harold II could use to ‘break the ice’ of the conundrum of legal illegal money.

As a matter of fact, Noonan did.

“Harold,” Noonan had told him off the record, “I can’t tell you what to do. All I can do is suggest an approach. Basically, the marijuana industry is fighting the wrong enemy the wrong way. Let me wander philosophically.  Money does not exist.  The ten-dollar bill someone uses to buy a joint was their cash when it was in their pocket. They spent the ten dollars on the joint, and now the money that was theirs is the marijuana store’s ten dollars.  When the marijuana store puts the ten dollars in the bank, that money is no longer marijuana money. It is the bank’s money.  If the DEA wants to prosecute the matter, the money is no longer marijuana money.  It is the bank’s cash. The only ‘thing’ that is identifiable as marijuana-associated money is the ten dollars of asset in the bank account.  That is not illegal money.  It was money legally earned. I suggest Harold III open a bank account and deposit a shade more than the money he owes in taxes in the Municipality of Anchorage, the State of Alaska, the Anchorage utilities and the IRS. Then he should immediately write checks from that bank account to the Municipality of Anchorage, the State of Alaska, the Anchorage utilities and the IRS. Force the DEA to fight the Municipality of Anchorage, the State of Alaska, the Anchorage utilities and the IRS. It will end up in a federal court. That’s basically what everyone is waiting for: a federal court case. The President of the United States does not want to get involved in any discussion of drugs and Congress considers anything relating to drugs as a nonstarter.  So Harold III should use the courts.  Everyone wants this problem solved and only the courts can do it.  So give them the chance.”

Steven C. Levi is a sixty-something freelance historian and commercial writer who lives in Anchorage, Alaska, his home for past 40 years. He has a BA in European History and MA in American history from the University of California Davis and San Jose State. He has more than 80 books in print or on Kindle.