$3 Million On, Welty Pays Upland $100K & Agrees To End Grass Sales

Some five years after the owner of the Tropical Lei strip club began operating a marijuana dispensary on property adjacent to his adult entertainment venue, city officials have succeeded in forging an agreement with him to shut it down as of January 1.
Having captured a profit of somewhere in the neighborhood of $3 million during the run of his medical marijuana clinic which the city all along has deemed illicit, owner Waldon R. Welty has now agreed to pay the city a $100,000 settlement in lieu of a fine and to let the enterprise, which he dubbed Captain Jack’s, go out of business.
Welty, who goes by the first name Randy, has carved out his niche in the world over the last four decades by operating a string of what in another era would have been referred to as vice enterprises, including adult entertainment venues featuring topless or fully nude females, and adult bookstores.
In the 1980s, Welty delivered an insult to local sensibilities when he opened the Tropical Lei at the far western end of Upland along Foothill Boulevard – historic Route 66 – just east of the Claremont/Upland border, the gateway into San Bernardino County from Los Angeles County. City officials considered what Welty had done to be unacceptable on two separate score: not only was a strip club deemed to be beneath the dignity of the city and its residents, its high-profiled location at what was the City of Gracious Living’s face to the world was an unimaginable affront. A generation ago the city used various strategies to remove the Tropical Lei, but was met at every turn by opposition from Welty’s attorney, famed civil liberties lawyer Roger Jon Diamond. Early on, city officials made a crucial mistake of seeking to ban such adult entertainment uses outright, finding out too late that while topless/bottomless joints could be restricted through zoning regulations to locating in certain areas, they could not be prohibited entirely. In learning the lesson that flesh galleries could not be embargoed entirely, the city expending an exorbitant amount of money on its own law team’s failed efforts in the process and then was obliged when it was rebuked in court to pay Diamond’s legal costs as well. The city switched gears, seeking to zone the Tropical Lei out of existence, or at least out of its visually prominent location. That proved unworkable, however, as an adult entertainment venue fell within the rubric of the Route 66 commercial corridor. A further attempt to revamp the city’s zoning code fell short, since undoing the commercial zoning in that area would adversely impact other nearby inoffensive businesses. And once again, the city was met with further legal parrying by Diamond, who established that the Tropical Lei was grandfathered in and could not be forced out even in the aftermath of altered zoning. Again Welty proved to be the prevailing party, and the city’s taxpayers picked up the tab for Diamond’s services.
At some point after the 1996 passage of Proposition 215, which legalized the use of marijuana for medical purposes by those having first obtained a prescription for the drug under what was called the Compassionate Use Act, Welty began to include among his enterprises medical marijuana dispensaries. Eventually he would have an interest in 56 of them up and down the state.
Welty was not, however, the one who led the cannabis charge in Upland. That role fell to Aaron Sandusky. Shortly after the passage of Proposition 215, Upland had moved to prohibit the sale of medical marijuana within its city limits. Beginning in 2007, Sandusky, a 37-year-old real estate agent who was seeing his career tank as the region, state and nation fell under the sway of the economic meltdown precipitated by the subprime mortgage crisis, resolved to take what little capital he could salvage and invest it in an energetic medical marijuana operation which involved both the cultivation/production of the product and the retailing of it. Functioning under the name of G3 Holistics, Sandusky opened dispensaries in Upland, Colton and Moreno Valley, supplying them with marijuana he grew in a nursery located in a warehouse in Ontario. Colton and Moreno Valley deferred to Upland, which took the lead in seeking to shut Sandusky and G3 down. Those tactics included a multitude of police raids of the Upland G3 Holistics dispensary in which the marijuana present and the monetary proceeds from sales were seized. But Sandusky fought back, utilizing Diamond as his lawyer. Diamond, citing the Compassionate Use Act, was able to convince California state judges at the Superior Court and Appellate Court level to consider Sandusky’s arguments that he was acting within the bounds of California law, and he was granted repeated restraining orders against Upland, enjoining the city from interfering in his right to operate G3 Holistics while his case was wending through the judicial process. Along the way, the City of Upland expended $310,000 in legal fees attempting to shutter G3 Holistics, and was unable to lay a glove on Sandusky.
Sandusky was able to buy more time to continue to operate because the one level of law enforcement with the clear-cut legal authority and clout to deal with him – FBI and DEA agents and the U.S. Attorney’s office – were not in the 2009-to-mid-2011 time frame disposed to work against him. At that point, Sandusky was functioning as an FBI informant and then as a witness against none other than then-Upland Mayor John Pomierski. Pomierski had been shaking down a number of business people with projects, permits or other ventures pending before the city, Sandusky among them. Sandusky was providing the FBI with a window on Pomierski’s activities, including audio recordings of his solicitation and acceptance of bribes.
With Upland’s lawyers spinning their wheels in the effort against Sandusky and federal authorities unwilling to hold him to account, at least at that point, Sandusky was living the high life, driving a Maserati, in which he would make deliveries of his $250 an ounce super high grade marijuana.
It was not until more than a half year after Pomierski was indicted in March 2011 and the case against him was progressing satisfactorily that the federal authorities were unfettered to go after Sandusky. Even so, they did so at first with kid gloves, mindful that his testimony might yet be needed to convict Pomierski. Thus, in October 2011, the U.S. Attorney’s office sent Sandusky a letter putting him on notice that his Upland, Colton and Moreno Valley stores and his Ontario warehouse were in violation of federal law, and requesting that he desist. In response, Sandusky closed down the stores in Colton and Moreno Valley, but kept the Upland G3 Holistics shop going. This prompted yet another letter from the U.S. Attorney’s Office. Sandusky did not close the Upland shop. The following month, federal agents raided the Upland location and the Ontario cultivation warehouse. Still, Sandusky, who had yet to be personally arrested, failed to get the message federal authorities were attempting over and over to convey to him. Buoyed by the assurances Diamond was providing him that he was within the law in making medical marijuana available to those with prescriptions to use it, Sandusky kept the Upland clinic open to the public. A second federal raid ensued in November 2011, and from there on, federal authorities began acting against him in earnest. Ineluctably, Sandusky was taken to trial, and despite Diamond’s best efforts, in October 2012 convicted of two conspiracy counts of manufacturing, distributing and selling marijuana. He was sentenced to ten years in prison, where he yet remains.
Cautiously, and without being flamboyant, using only a green light and word of mouth as advertising, with all the fanfare attending Sandusky not to mention the bright lights and glitz next door serving as a cover, Welty had established Captain Jack’s at 2085 West Foothill Boulevard, what was once a small single family residence immediately adjacent to The Tropical Lei, at 2121 West Foothill Boulevard. Welty’s timing was perfect, as Captain Jack’s grew fabulously successful, filling the vacuum created by the demise of H3 Holistics.
Initially, city officials and the Upland Police Department did not seem to recognize that Captain Jack’s was there. When at last they did, and confirmed what it was, they found themselves in an impossible situation. Clearly, the dispensary was operating in violation of the city code. But its owner, Welty, was a man of means, one who was ready to spend a considerable degree of his wealth to continue to be able to generate that wealth as well as to simply make a point and satisfy his own egotistical desire to go to battle and prevail. What was more, he was represented by Diamond, who had repeatedly bloodied the city’s nose in go-rounds in court, after which the city would hemorrhage red ink in terms of having to pay Diamond’s legal fees.
Unwilling to get in the ring and mix it up with Diamond, the city essentially did nothing. When other would-be marijuana millionaires cropped up in Upland, the city would take note, resolve to make an example of them, observe activity in and around their operation, perhaps use undercover police officers to establish probable cause, go in, raid the dispensary, take whatever product and whatever money was on hand, and then come at the entrepreneur and the business from every conceivable angle, including intimidating the landlords to those businesses, fining them, prosecuting them civilly under the rigors of the city’s code enforcement authority, and in virtually every case shutting the dispensary down. Some dispensaries had greater success than others at flying under the radar and not being immediately discovered to be in operation. And there was also a variance in the amount of time that the police department and the city’s code enforcement division, which was eventually made into a division of the police department, might react to a cannabis operation that was discovered, given other demands on the department and its personnel at any given time. Generally, however, the life expectancy of a dispensary in Upland after its discovery by authorities ran from three weeks to just over two months.
The lone exception to that over the last six years has been Captain Jack’s. Unverified but recurrent reports were that Welty, who is rumored to have underworld ties, was either extorting Upland officials or bribing them. Indeed, to all outward appearances, that virtually every other illicit medical marijuana dispensary would be closed down within three months and that Captain Jack’s continued on year after year was seemingly inexplicable.
This week, city officials were able to announce a breakthrough that may go some of the distance in attenuating the public suspicion that has risen to an immense proportion vis-à-vis City Hall and Randy Welty. Rather quietly, as the last item on Monday night’s city council agenda, the council considered a report from interim city manager Marty Thouvenell that was prepared by deputy city manager Jeannette Vagnozzi entitled, “Approval of Settlement Agreement with Waldon R. Welty.”
According to the report, “It is recommended that the city council approve the settlement agreement with Waldon R. Welty and authorize the city manager to sign the agreement.”
Under the subtitle “Background,” the report states, “[The] city council provided direction to the city manager to address Upland Municipal Code violations at 2085 W. Foothill Boulevard. After reviewing all possible alternatives, the city manager negotiated a settlement agreement with the proprietor of the business that will effectively result in the closure of the business.”
Under the subtitle “Issues/Analysis” the report states, “The agreement between the City of Upland and Waldon R. Welty requires that the current business at 2085 W. Foothill Boulevard cease operations as of January 1, 2018 and a settlement of $100,000 be paid to the city.”
Under the subheading “Fiscal Impacts, the report states, “The fiscal benefits of this agreement include the reduction in the cost of code enforcement at this business location, as well as receiving $100,000 as a condition of the settlement.”
The settlement agreement itself, which is dated November 8 and which prior to Monday night’s council meeting bore only Welty’s signature, references two citations issued to Captain Jack’s, although the name Captain Jack’s appears nowhere in the documentation and is referred to by its address, 2085 Foothill Boulevard, its county assessor’s parcel number, 1006-575-09-0000, and its corporate reference, 2085 Foothill, LLC. The two referenced citations are UPL14-320, issued to Welty on December 18, 2014, and UPL1050, issued by the city to Welty’s business, 2085 Foothill, LLC on March 28, 2017.
Under “Recitals” the settlement agreement states, “For some years, the property has been used for the purpose of marijuana related use and activity. Throughout this time, Waldon R. Welty, an individual, has held himself out as an authorized agent of the marijuana collective operating at 2085 Foothill, LLC.”
Somewhat improbably, the next recital states that “Welty and the city would like to see the marijuana related use and activity discontinued and the property to be developed with a use permitted or approved by the city in accordance with applicable law.” Further, the next recital maintains, “The city and Welty have determined that it is in each of their respective best interests to settle their dispute regarding the use of the property for the purpose of marijuana related use and activity on the terms set below.”
The agreement then states “Welty and the collective he represents shall discontinue marijuana related use and activity on the property. Welty shall cause the marijuana related use and activity to be discontinued on or before January 1, 2018. For purposes of this agreement, the marijuana related use and activity shall not be deemed discontinued until the city has verified by inspection that the marijuana related use and activity have ceased and all marijuana has been removed from the property. The city shall be entitled to enter the property for inspection and Welty shall use his best efforts in coordinating a time for inspection. Once the marijuana related use and activity is discontinued on the property as set forth, even if it is discontinued before January 1, 2018, Welty and the collective he represents shall have no right to use or otherwise allow the property for marijuana related use and activity or to assert that marijuana related use and activity is a legal nonconforming use of the property. In the absence of appropriate approvals issued by the city, if at all, in accordance with applicable law or any change in applicable law that would allow such use, marijuana related use and activity shall not be permitted on the property after it has been discontinued. If all marijuana is not removed from the property by January 1, 2018, Welty shall commence and diligently and continuously work to complete the removal of any remaining marijuana on the property. The city shall also be entitled to enter the property and remove any remaining marijuana on the property.”
Furthermore, according to the settlement agreement, “Welty shall not conduct or otherwise permit any marijuana related use and activity at any location within the city, including but not limited to the property.”
The agreement also specifies that “On or before January 1, 2018 Welty shall pay the city One Hundred Thousand Dollars ($100,000) as a consideration for this agreement. Upon verification that the marijuana related use and activity have ceased at the property, the city shall dismiss Citation No. 14-320 and Citation No. 1050.”
In addition, both the city and Welty, according to the agreement, release each other from all claims, liabilities, demands, causes of action damages, obligations and/or losses of every kind or nature growing out of the circumstance and the settlement, known or unknown. Both assented that the agreement is binding.
Mark Gutglueck

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