By Mark Gutglueck
California Hispanic Chambers of Commerce Chairman Frank Montes, who has recently emerged as the most pointed critic of the San Bernardino City Council’s policy for granting cannabis sales licensing in the county’s largest city, was accorded brusque treatment by city officials and former city attorney James Penman at the Wednesday, February 21, 2018 city council meeting.
At that meeting, the city held a nearly three-hour long public hearing relating to the city’s yet-to-be-fully adopted ordinance relating to marijuana use and commercial cannabis activity. Shortly after Montes voiced suggestions that have been afoot in the community for weeks that city officials are now themselves acting in concert with a select group of interests willing to kick back to them in exchange for inside information on zoning or permit granting, he was subjected to what his attorney characterized as “threats and intimidation,” including a tense exchange with several police officers present at the meeting.
After decades of the city maintaining a stridently anti-cannabis policy, the current city council is convulsing in its efforts to come to terms with both a societal and local community-based ethos that embraces marijuana use in terms of medical and recreational applications. For years, a solid majority of the city council had held the line against sanctioning the operation of medical marijuana dispensaries in the county seat, exercising its discretion to disallow the drug to be sold despite state voters’ approval of Proposition 215 in 1996, which ratified the so-called Compassionate Use Act, making marijuana legally available to those with a physician-issued prescription to use the substance for a host of physical maladies. Under the act, cities were yet at liberty to ban the sale of the plant within their borders. San Bernardino did just that, passing an ordinance in 2007 that prohibited the sale of the drug or the operation of dispensaries or clinics that trafficked in it. In the face of those bans, beginning as early as 2009, a handful of marijuana availability advocates in conjunction with entrepreneurs willing to dare the legal risk of doing so opened what were officially considered to be illicit dispensaries in defiance of the city’s authority. For a time, and then sporadically thereafter, city officials raced and scrambled to respond with arrests, seizures of the product being sold and sales proceeds, along with civil and criminal citations of the operators. Many of those shut down responded by reopening in different locations. Inspired by the intrepidity of those defying the city’s enforcement efforts, others opened their own dispensaries. The San Bernardino County District Attorney’s Office, faced with the proliferation of similar illicit sales operations in cities all over the county, with only a handful of exceptions essentially ceased prosecution of any marijuana sales ventures that draped themselves in the patina of provisioning medical patients.
In July 2014, a seemingly exasperated San Bernardino City Attorney Gary Saenz, taking stock of the number of pot shops sprouting up in virtually every corner of the nearly 62-square mile city, offered the view that the cost and difficulty of shutting down dispensaries made the city’s ban on the enterprises “futile.” The council formed a legislative review committee composed of three council members to study the issue and promised to reconsider the ban, but was unable to break out of the mold of its attitudinal disaffinity toward marijuana in general and thinly-veiled disdain for those advocating for its availability, such as city resident Karmel Roe, who called for dispensing with the ban, and Redlands-based attorney and former Adelanto city manager James DeAguilera, who threatened legal action against the city over its continuing enforcement of the ban.
The majority of San Bernardino’s political establishment, consisting of John Valdivia, Henry Nickel, Jim Mulvihill, Fred Shorett and Mayor Carey Davis, either unable or unwilling to recognize the change in societal attitude toward and the evolving understanding of marijuana and marijuana use, remained profoundly committed against cannabis liberalization. All five had assumed that “potheads” lacked the discipline and cohesiveness to mount any kind of political effort. In 2016, they were stunned to learn that the cannabis availability advocates within the city had coordinated a successful drive to gather sufficient signatures to put a measure to legalize marijuana sales in the city on that year’s November ballot. Outmaneuvered by the stoners for whom its members had such low regard, the council sought to catch up.
Unfettered by the need to obtain signatures to qualify its own commercial marijuana initiative for the ballot, and again unregardful of the evolving social and political reality, the council used its authority to put its own initiative on the ballot that had far greater restrictions and regulations woven into its language than the original initiative.
Simultaneously, Waldon Randall Welty, a wealthy entrepreneur who at present owns or has a controlling interest in eleven topless or topless/bottomless/fully nude or partially nude theaters or bars, seven adult bookstores and 56 medical marijuana dispensaries throughout California, sponsored a successful signature-gathering effort to put a third competing initiative relating to regulating commercial cannabis activity on the 2016 ballot in San Bernardino. Welty was able to use his financial wherewithal to hire professional signature gatherers to qualify the initiative, which was drafted in such a way as to create zoning for the cannabis-related businesses that would virtually assure he would be able to get a permit to establish a cannabis-selling concern on property he owned or controlled in San Bernardino.
Welty had a considerable history in San Bernardino, having been the prime mover behind the opening of the Flesh Club in San Bernardino’s prime commercial and entertainment district in 1995, though the “totally nude” female dancers review venue was ostensibly owned and operated by his son. The city, under the leadership of three separate mayors – Tom Minor, Judith Valles and Patrick Morris – and then-city attorney James Penman sought, ultimately unsuccessfully, to permanently shutter the Flesh Club. The city obtained what it initially considered to be success in that effort, closing the Flesh Club for four years. But Welty proved every bit as resourceful and even more ruthless than the city, pursuing a $2.6 million suit challenging the city code and the specific ordinance cited in the Flesh Club’s closure. Along the way, he engaged in bare-knuckled tactics of his own, using several of the young women he employed to lure San Bernardino officials into compromising situations which provided him with leverage with which to fight back. In time, Welty obtained a court order calling for the city to allow the club to reopen along with a $1.4 million judgment to recover lost income suffered during the closure.
When the three competing commercial-cannabis-operation-regulating-measures came before the city’s voters in November 2016, the city’s commercial cannabis-activity-permitting-and-regulating proposal, Measure P, which embodied the city council’s socially-out-of-step and culturally tone-deaf ethos geared at keeping marijuana use prohibited and largely in check, made insufficient inroads with the city’s voters and went down to defeat, with 23,106 votes or 48.45 percent in favor and 24,583 votes or 51.55 percent in opposition. Besting Measure P was the original proposal put forth by the city’s indigenous marijuana availability activists, Measure N, which garnered 24,048 votes or 51.1 percent, with 23,015 or 48.9 percent in opposition. Despite that showing, Measure N did not prevail, as Welty bankrolled a promotional campaign for the initiative he sponsored, known as Measure O. Measure O, with 26,037 votes or 55.12 percent and 21,196 or 44.88 percent in opposition, registered as the prevailing measure with regard to the issue of cannabis availability in San Bernardino. It was to go into effect under the terms of California Election Law.
In the aftermath of Measure O’s passage, city officials said they would move expeditiously to actuate it, but then delayed, saying they needed time to redraft elements of the city code to make it compatible with Measure O. That had not been completed when in February 2017 the city was hit with two lawsuits challenging Measure O’s provisions legally and procedurally. One of those lawsuits was filed by former Adelanto City Manager James DeAguilera on behalf of the group that had sponsored the competing Measure N dispensary permitting initiative. City Attorney Gary Saenz, citing that litigation, suspended the full implementation of Measure O.
On March 9, 2017, by which point the city had not yet put any of the elements of the protocol for the marijuana dispensary permitting process provided for in Measure O into place, famed civil rights attorney Roger Jon Diamond, who had successfully battled the city on behalf of Welty with regard to the Flesh Club, again on behalf of Welty filed suit against the city over its foot-dragging in implementing Measure O. Three months passed before the city’s community development department provided applications for dispensary operations to interested parties. On August 24, 2017, the city issued a permit for its first legal marijuana dispensary operation to an entity functioning out of the address at 100 W. Hospitality Lane. 100 W. Hospitality Lane is the address of the Flesh Showgirls, the current reincarnation of the Flesh Club. The de facto owner of Flesh Showgirls is Randy Welty.
As a consequence of all of the litigation pertaining to Measure O, Judge David Cohn three months ago in December, ruled that Measure O imposed on the city so-called “spot zoning,” which unfairly delineates certain properties as eligible for commercially intensive activity and advantages the owners of those properties to the detriment of surrounding or nearby property owners, while simultaneously and not coincidentally creating a virtual marijuana sales monopoly for the sponsor of Measure O, i.e., Welty.
The city utilized Judge Cohn’s ruling disqualifying Welty’s Measure O to revisit the entire concept of how marijuana availability is to be regulated in the city. On February 7 the council gave approval and first reading to a cannabis regulation ordinance. The ordinance set a ratio of one cannabis-oriented business per 12,500 residents, meaning 17 marijuana-related concerns are to be licensed in the city of 215,000.
On February 21, the council reconvened. Based on the council’s action two weeks before, it could have given final approval to the cannabis regulation ordinance by simply giving it a second reading and confirming vote. But in the interim, elements of the ordinance previewed on February 7 were adjusted or changed, such that what was to be considered on February 21 qualified as a new ordinance. Thus, the vote to be taken that night did not qualify as a second reading but a new first reading. Over the previous two weeks, discussion in the community had intensified with regard to the nature of the ordinance, in particular that element relating to prohibitions against certain individuals from obtaining cannabis-related business permits. The city’s indulgence of Welty, who is referred to by many as a vice king and whose ruthless pursuit of his own business interests over the previous two decades had not gone unremarked by many locals, was beginning to raise eyebrows. In particular, there was focus with regard to Section 5.10.100 (a) 2 of the ordinance given first reading on February 7 which states “Any person [who] was either convicted, pled guilty or nolo contendere, or was found by the city’s hearing officer pursuant to Chapters 9.92 or 9.93 of conducting commercial cannabis activity in non-compliance with Title 19 or other City of San Bernardino ordinances, codes and requirements in which they failed to discontinue operating in a timely manner… shall be prohibited from holding a cannabis commercial business permit or being employed by a commercial cannabis business in the City of San Bernardino.” Speculation was rampant that the city would revamp Section 5.10.100 (a) 2 for reconsideration at the February 21 meeting by changing the wording to prohibit anyone previously involved with the operation of an illicit commercial cannabis concern anywhere in California from obtaining a cannabis commercial business permit. As worded, Section 5.10.100 (a) 2 did not apply to Welty because he had not been convicted of nor had he been shown to have run afoul of the City of San Bernardino’s anti-marijuana ordinances. Welty had, however, violated similar regulations in several other cities with the dispensaries he was running there, including in the City of Upland, where in November of 2017 he had agreed to shutter a dispensary he had been operating illicitly at least since 2012, refrain from opening or operating any further such establishments in Upland and pay a settlement of $100,000 to bring to a close the administrative citation processes that had been initiated against him.
No change in the wording of Section 5.10.100 (a) 2 had been made for the city council’s consideration of the revamped ordinance on February 21, and word on the street was that Welty was on a trajectory to extend his vice empire even more deeply into San Bernardino, having continued to apply the tactics he had utilized with regard to the Flesh Club, this time in persuading at least some of the members of the council who were so adamantly opposed to the sale of marijuana in San Bernardino to come to a modus vivendi with him.
Against that backdrop, Frank Montes, the chairman of the California Hispanic Chambers of Commerce, came before the city council on February 21. Montes spoke twice, early during that portion of the meeting traditionally reserved for general input from the public with regard to public issues prior to the council taking up any specific action items on the agenda, and later in the meeting during the public hearing for the proposed commercial cannabis regulation ordinance.
In his first go-round, Montes implicitly referenced community-wide suspicions that Welty was the beneficiary of inside information. He said, “I’m here to speak about the unfair playing field our small businesses have, not only throughout the State of California, but especially here in San Bernardino on the cannabis ordinance. I’m dumbfounded that most of the properties of the zoning were already leased and sold before any of us, anybody in the community, knew where it was going to be. The prices of the properties have gone up, so that means the dispensaries of course are going to have to sell their products for more money, which opens up the door for the black market again. I’ve been in this area for many years and I still don’t understand how this group here,” he said, gesticulating toward the council, “who represents our community, especially our small businesses, doesn’t have a level playing field for our small businesses or our community around the Inland Empire. The ordinances that you guys are putting in place for these dispensaries are geared for big corporations. They’re not here to help the community or the small businesses. And I would like this group to remember who they represent. They represent this community. They represent the small businesses in this community.”
Noting that the California Hispanic Chambers of Commerce represent over 850,000 Latino businesses in the State of California, Montes indicated his belief that San Bernardino was replicating errors in dealing with the newly emerging cannabis market that other cities have made. “We have been working statewide on a lot of these ordinances,” Montes said. “San Bernardino’s not the only one that gives priority to these large corporations.”
Without mentioning Welty by name, Montes then referenced him. “I understand that there is a permit that was already given out,” he said. “I just don’t understand how these people get the permits before anybody in the community even knows. I would like this group to consider when they are giving out these permits to give priority to our small businesses because all these corporations do not live in our community. They don’t understand our community. Give preference to the people that live in this area and represent this area because at the end of the day, those are the people that are going to impact and improve the living of everyone in this city.”
Turning to the crowd, Montes said, “All of you here ask that question: How is it that no small business has a permit? Nobody in this community that’s low income is going to have an opportunity. The ordinances they are putting in place are going to keep the small businesses away. This is nothing but a game for big corporation and I can tell you, I am watching and so is the rest of the state.”
Later that evening, when the public hearing on the ordinance was in full swing, Montes again addressed the council, imploring them to structure the ordinance so it gives opportunities to operate dispensaries and nurseries to “small business, first, the community first, local first.”
He then reiterated his suggestion that someone or several someones within the city were providing inside information with regard to the city’s zoning regulations ahead of time to selected business interests. “I’d be interested to see if the zones you guys chose, if the property was transferred, how soon after it was sold,” said Montes. “If it was soon, that’s the problem a lot of our members are calling me about, that the properties just triple in price. If the lease is too much, they can’t get in there and try to put up a business. They just get frustrated and turn around. All that’s coming in to these cities are the Walmarts of cannabis. They don’t care about the community. They don’t care about these schools. They don’t care about the challenges that the chief [of police] is going to have. They’re in it to make money. That’s fine. It’s a free market. The thing is, as a city council, you need to look after your residents. You need to look after your city first and foremost. I was disturbed when I found out the first permit went to a business that sued the city and won. And he [Welty] gets the first permit. How does that happen? Maybe I should go open up a strip club, sue the city, and then I might get a permit. That’s what everybody’s talking about. They’re talking about the delay this body took. Did it have to do with the elections? Were they [elected officials] stalling so they could get some contributions? That’s what people are saying. I’m not saying it, but people are saying that. It makes you wonder why you dragged your feet this long while other cities are way ahead of you. The other thing is: What is the city doing to prepare the small businesses that are getting these licenses so they don’t fail? In Colorado, a lot of these businesses failed because they weren’t ready. When they come out of the shadows, they need to be prepared. What is the city doing for that? If the city needs some help with that, we can assist. We are a small business organization and we understand the challenges small businesses have. We understand our communities and we understand the need to empower our local communities to assist them on getting into business.”
Montes doubled down on the theme of well-financed outsiders dominating the local cannabis market to the detriment of local entrepreneurs.
“This is a legal business,” he said. “You may not like it, but it’s legal and it’s a business. That’s why we took it up, because it’s a business issue. These big corporations that are coming in here, a lot of them are funded by big tobacco. Wait about ten years. You’re going to see big tobacco owning most of these and that’s going to get away from the community. I haven’t heard much, as I’ve been sitting here, about our small businesses, how you can streamline it for them, how you can make it easier for them, how they can compete when you have millionaires coming in and driving the value up. And this first zoning that you guys had: I never knew about it. A lot of people didn’t know about it. But yet, all the buildings were leased. The properties were bought. How is that fair? How did somebody get inside information before our communities get it? You know, my eyesight is not that great, but I can see BS coming a mile away. The more I sit here and listen to some of these members of the community, the more disturbed I am. I ask myself, what is the city council doing to truly understand their community and work for their community? They were elected to represent the community, not the corporation, not the guys coming with millions of dollars. The city needs to set something aside for local, because if not, most of you won’t be here next election, I can assure you that, because we need people who understand small businesses and support small businesses. We need people that truly know the challenges that our community is having. This should have been dealt with a long time ago. You guys are going to do some other zoning, am I correct? Where? When will that be out? Does somebody already know? Are they already buying the properties? Are they being leased? Is somebody buying it to sell it because they know it’s going to double in price overnight? The reason I’m saying it, is because it happened. It priced everybody out. If I opened up a dispensary, what would I have to go through? If I wanted to open up a grow [operation], what would I have to go through? I would have to compete with the big boys, and we’re tired of that. Small business is the backbone of the economy. You need to continually support it, because they support the community. They come out of the community. They hire in the community. And they invest their money in the community. I’d like to see how many people with the large corporations come and live in the community or even understand our community. Mayor and city council, you guys have got to bring it together. You guys have got to bridge the gap between those big corporations that are winning and us, these people,” Montes said, gesticulating toward the crowd, “the ones you represent.” Montes turned to the crowd then and said, “I don’t know how many of you have ten million dollars in the bank, but I sure don’t. It is not fair that our community is left out of the next big boom.”
Turning again to the council, Montes said, “Your job is to advocate on the behalf of your residents, advocate on behalf of the small businesses that live and work in your community. I hope this body takes that into consideration and understands, understands that there’s a bigger picture out there. This only comes around once. If you don’t get a piece of it now, forget it. It’s up to you, city council and mayor, to cut those pieces. Give some of those pieces to your local community. Make it to where they don’t have to jump through hoops and go against the people with millions of dollars. These ordinances seem like they are geared toward big business. I don’t know about the rest of you,” Montes said, again turning to the crowd, “but I don’t want no big conglomerate owning all the grows or the dispensaries, because that’s what’s coming down.”
Montes then referenced the City of Adelanto, where city officials in 2015 moved rapidly to get in on the ground floor of the marijuana bonanza, entering into a multitude of eyebrow-raising affiliations with businesses interests looking to establish cannabis-based businesses which appeared to have benefited from inside information in tying up property later zoned to allow such uses, followed by the federal indictment of one of the members of the city council on bribery charges and continuing scrutiny of the remaining members of the city council. “It’s like Adelanto,” he said. “All the properties were sold. Somebody knew before that but now the FBI is investigating because of insider information. How did they know before we knew? I’m not saying that happened here but it’s funny that all the properties were sold and leased before our community knew. So, mayor, city council, get a hold of it. Do your job. I’m not asking you guys to do anything else then what you swore to do, the campaign promises that you guys made. Go back and listen to the speeches you gave when you were running for election. ‘Our community… Our community… I care.’ From what I see here, no. You guys dragged your feet. A lot of people just said, ‘Forget it,’ and threw their hands up. So, like I said, do your job, represent the city and if you do that, all these issues will disappear. Work together – Three-to-three votes is ridiculous. You guys have your own little cliques here. That’s not the way to run a city.”
At that point in his presentation, Montes was interrupted by city manager Andrea Travis-Miller, who suggested he was drifting off topic. As Montes attempted to get back on track, former city attorney James Penman began heckling Montes from the audience. In a feigned Mexican accent, Penman hurled the inciting comment: “Where you from, ese?” Penman’s interruptions can be heard on the city’s video of the meeting, starting at around the 5:24:09 mark of the recording.
Mayor Carey Davis then said, “I’d like to ask the audience to please respect the speaker,” and encouraged Montes to complete his comments without being repetitive
As Montes was leaving the podium, Penman again began to engage with him. At that point, city attorney Gary Saenz said, “I would just like to remind the audience…” and then, as the back and forth between Montes and Penman continued, said “You are both out of order. I would admonish the audience, please, not to have conversations among yourselves. When someone has the floor, it is inappropriate and you are out of order and could be removed from the room if you continue to do so.”
Penman, who was city attorney for 26 years and has been issued a concealed weapons permit, shouted out an apology, explaining that Montes “brings out the vato loco in me.”
According to Tim Prince, who is Montes legal representative, “After returning to his seat, Mr. Montes was taken aback when a San Bernardino city police captain approached him and grabbed his shoulder even as Penman continued yelling slurs and threats. A few minutes later, chairman Montes was followed by four SB Police officers into the restroom Penman was using, and was locked in the bathroom and ordered to shake hands with Penman after a stern admonishment, including whether Mr. Montes ‘knows who he (Penman) is.’ People outside the restroom have confirmed that the door was locked by police with Montes, multiple police officers and Penman inside, and a video shows officers letting another officer into the bathroom after he knocked on the door.”
The police captain Prince referenced was identified as Richard Lawhead.
Prince, who was once himself a candidate for city attorney and whose father was San Bernardino’s elected city attorney the 28 years prior to Penman’s term as city attorney, said, “Mr Montes’ civil rights were violated by several city official. He was threatened by recalled city attorney James Penman and the city used its police force to maliciously bully, ratify racist threats by the former city attorney and intimidate a public speaker who had the right to comment.”
San Bernardino Police Lieutenant Mike Madden said it was not true that the police department or its officers had engaged in an effort to abridge Montes’ rights, or aid and abet Penman in an effort to dissuade Montes from exploring any potential irregularities with regard to the city’s cannabis ordinance or from expounding upon any concerns or suspicions he had.
Madden said he was present early in the meeting but was not there when the heated exchanges between Montes and Penman took place. He said it was his understanding that “Things got a little disruptive and the city attorney had to admonish everyone to be mindful of decorum. At one point there was an exchange between Mr. Montes and Mr. Penman. Captain Lawhead spoke briefly with Mr. Montes and Mr. Penman. The two of them [Montes and Penman] exited the council chambers.”
Madden said Montes had not been physically accosted by Lawhead.
“That didn’t happen,” Madden said. Madden said that after Montes and Penman had left the meeting room, “Another city staffer came up and said they might have been trying to go at it in the men’s room and an officer went in there, basically, to see what was going on. One of our jobs is keeping the peace. Two officers did end up in the restroom. There were not four officers in there, where you have relatively close quarters. A third officer, the police chief in fact, did poke his head in the door, and he said, ‘Hey guys, let’s wrap this up.’ There was a brief conversation, and cooler heads prevailed.”
At no time was the door locked or was Montes under arrest or not free to leave, Madden said. “I’m not a hundred percent certain, but there’s not a lock on the door as far as I know,” he said. “I will tell you our second officer had his back to the door. When the chief tried to push the door open, he had to knock and our officer stepped aside. He [Montes] was not locked in the bathroom and he wasn’t being imposed upon.”
Madden said he had “never spoken with Mr. Montes. I do know Mr. Penman.”
The department subsequently learned that Montes felt the officers had joined with Penman in trying to intimidate him, Madden said. “We were made aware of these issues but they were not directly brought to us at any time,” Madden said. “They [Prince and Montes] went to the sheriff’s department and filed a complaint. We tried to reach out to Mr. Montes to facilitate a meeting with the city manager, but so far have not heard back from him.”
In his remarks made during the public hearing while he was at the podium, Penman insisted that the city council was on the up-and-up and that Welty was not corrupting city officials. He dismissed Montes’ remarks and characterizations as inaccurate.
“The implication is you guys gave these folks, who supposedly sued us and supposedly won, a license,” Penman said. “That isn’t what happened. The facts are they didn’t sue us. We sued them and we won. The case went all the way to the California Supreme Court and we won. We never paid the Flesh Club a dime. Also as a part of this ordinance, a handful of people hired some folks to write Measure O so their properties could be the only ones to get licenses. This ordinance fixes that problem. That’s an important thing for you to be doing. The reason the city gave the license to the Flesh Club is because it was the Flesh Club’s hired guns who wrote Measure O and the city had no choice. That was and still is the law in this city. They [the city] had to give that license. They had no choice. The council didn’t act to put Measure O on the ballot. The council has acted responsibly. I want to congratulate the city attorney’s office for the job they did on this [ordinance]. I think they did a very good job.”