Front Burner - Why do illegal weed dispensaries still exist?

Episode Date: July 24, 2019

It's been nine months since marijuana was legalized in Canada, and illegal dispensaries are not only prevalent across the country — but in many cases, thriving. Today on Front Burner, CBC investigative reporter Zach Dubinsky and Sol Israel from The Leaf News on illegal pot shops that brazenly defy the law and why they exist in the age of legal weed.

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I'm Alicia Bridges. And I'm Victoria Dinh. The Pit, a story about the murder of Sherry Furtuck. Subscribe at cbc.ca slash the pit or wherever you get your podcasts. I'm Matthew Braga in for Jamie Poisson. So there's this thing I've been curious about for a while now, mostly since the arrival of legal weed. And I guess it's kind of a simple question.

mostly since the arrival of legal weed. And I guess it's kind of a simple question. It's how and why do illegal dispensaries still exist? Like, you can buy weed legally now. The government will actually mail it to your house. So why bother taking the risk to shop at an illicit store, or run one in the first place, let alone a chain. You know the ones, some are fly by night, blinds pulled down, frosted glass windows, buzz to get in, but others are real slick operations. So today we visit the wild west of illegal weed, starting with a CBC investigation into two men and a chain of upscale pot shops. This is Frontburner. Whale Pot Shops. This is Frontburner. Zach, hello.

Hi, Matt. Thanks for joining us. Pleasure. Maybe you can tell people, who are you? What do you do here at the CBC? I'm an investigative journalist. I work for the CBC's National Investigative Unit. I mostly write for the CBC's website. Excellent. You and your colleague, Lisa Mayer, just published this great story, and it starts with two guys named Wes Weber and John Galvano. Who are these guys? They're two buddies who go back to Windsor, Ontario. They're both in their mid-40s now,

but they've known each other since their teenage years, from what we can tell. Old friends? Yeah, old friends from Windsor. What we know of them today is that they both appear to be involved in this world of very conspicuous consumption and lavish lifestyles. This is my room with the reddish and blue. King bed, desk, flat screen. John posts prolifically on his Instagram account. What sort of stuff? Well, it's everything from his Gucci shoe purchases to driving a Lamborghini

and a Lamborghini Huracan. He flies first class and business class around the world, often with Wes. They were in Cambodia, or at least he was in Cambodia. He was firing assault weapons in an RPG. He kind of fancies himself, and he even says this on his Instagram feed, like this guy Dan Bilzerian, who's a bit of an Instagram star known for a lavish life. Spicuous consumption, that kind of stuff. Yeah, like fancy boats and lots of women and all that. Sure. And so we've got Rolexes, we've got jets, we've got cars, we've got helicopters, a couple of racehorses. Do you know what their names are? Yeah. So he named them after the two main strains of cannabis plant, sativa and indica. Interesting. And that is a good segue because these guys and their lavish lifestyles seem to be connected to a chain of upscale cannabis dispensaries called Cafe, which opened up in Toronto in 2016.

Now, we don't know this for sure, but what evidence is there to support a connection? Yeah. So we know that Galvano was one of the founders. He posts about it on Facebook. And Wes Weber, we know he loaned his friend John Galvano $10,000. He says that under oath in a separate lawsuit. He claims that he was never a partner and never made any money off of it. But we've spoken to quite a few people who have said things like, oh, I've seen Wes Weber around Cafe all the time, including as recently as a couple weeks ago. Wes Weber used to work at his company and he used to boast about being involved in CAFE and making money off of CAFE.

And Wes Weber's common law spouse is also linked up in all of this. She's on the property records and guarantees one of their mortgages and all that. Some of what we know about Weber in particular comes from court documents that you've looked at. What was he doing before Galvano started CAFE? What was his life like?

In high school, he's kind of the self-admitted computer nerd. And shortly after graduating, the story is that he gets into things like buying a scanner and an inkjet printer and figures out that it's not too hard to scan Canadian currency, Photoshop it a bit, print it out on your color printer, and you can actually start passing some of it off. So, you know, he starts with $20 bills. Didn't work out so well. He got caught. He was convicted. But then he upped his game and he and a number of associates got into serious, serious counterfeiting of $100 bills. Oh, I was a shooter. I was a movie star. Ferraris, Tahoes, big screen TVs, jewelries, trips, snowmobiles, boats, you name it,

I had it. I just wanted bags of money. And it got so bad that in the early 2000s, a lot of people might remember a lot of businesses in the kind of Windsor to Toronto corridor would post signs saying, we don't accept $100 bills. Because of him? A lot of people say he was one of the

influences on that. He was one of the big counterfeiters of the hundred dollar bill at the time. And the levels got to such a high proportion that the Bank of Canada started to freak out and they had to bring in new kinds of currency. My goodness. So what happened to him as a result of that? The RCMP were on the case. They investigated. They charged him. He was convicted and he was sentenced to five years in prison. Wesley Weber pleaded guilty to his role in a counterfeit ring. It produced more than 35,000 fake $100 bills. Defense lawyer Bob DiPietro says the sentence was fair considering Weber was a one-man crime wave.

Zach reached out to Wes Weber and John Galvano to find out their exact roles in Cafe, if any, beyond Galvano's role in founding the company, but he didn't get an answer. Zach did speak with someone he couldn't identify on the phone who told him that Galvano sold his shares in the company two years ago. But again, we have no way of verifying this either. John Galvano, I mean, maybe you can tell me a little bit more about him. Is there more to his story, to his past that's relevant here? He was convicted of running a fairly small, like a modest grow up in his basement in Windsor. The police had a couple of confidential informants, according to our records, that told them, hey, John Galvano's got to grow up. So they busted him for that. And then he was running a pizza

parlor in Windsor and he moved to Toronto in 2016 and he kind of proudly announced then on his social media that he was going to found this Amsterdam style coffee shop and then it all took off from there. Zach, I want to give people a sense of what these shops are like. Paint me a picture. What is it like to visit a cafe store on like a scale from coffee time to Apple store? Yeah, well, they're pretty sleek. They're much closer to the Apple Store. First, you see from the street,

they've got really beautiful facades. They have nice signage. They have what has to be a professionally designed logo in lettering. And then you walk in. I mean, I've been inside just to check them out on a couple occasions. Unfortunately, one time I went in,

they didn't have a doorknob because they'd just been raided by the police the night before. So they were using a coat hanger to pull the door open. But aside from that, on the inside, some of them are kind of industrial chic decor, very airy, very bright. The main room is always just like any other pie and coffee shop. You've got some pastries, you've got your espresso. They pride themselves on having top notch espresso machines as well. Uh, so that's all on the main floor. And then sort of off to the side, you'll have someone sitting at a computer. Uh, now they even have that person with a bunch of pagers, like you might have in a busy restaurant and you would go over to

them and they would check your ID. And if it was really busy, they'd give you a pager and say, okay, we'll page you when we're ready to see you. And otherwise you'd be let in and you'd go either upstairs to an upstairs room or to a back room. And there you have, depending on the location, because there's four of them, you'll have a room where you'd have a number of cash registers, probably four or five staff inside, maybe more if it's busier. And they've got displays with all the products. We promote responsible use because our bartenders are extremely well-informed. So they ensure that any customers that come in are well-informed about what they're purchasing, how it will affect them, and whether that is what they're actually looking for. So in terms of revenue, how are these stores doing? How much money are they making from

these operations? The only official source we have on this is the City of Toronto's Director of Investigation Services. He's the guy who's heading up the team that has been rating these shops over the last few months. And their estimates, I guess, are based on essentially what they see in cash when they go in. And they've sort of said they think it's from $30,000 to $50,000 a day per store. But these stores also take debit and credit card. And I don't know if that number includes the payments by debit and credit. So it could be much more per store. If the only enforcement we could do, which in the past was laying a fine, that is no deterrent. When these illegal stores are making $30,000 to $50,000 a day in some locations, a fine is not going to be a deterrent.

They'll just see that as a cost of doing business. So how have police and the city dealt with shops like Cafe? So there's been kind of a range of approaches. Even before legalization, there were very often police raids on the illicit dispensaries. Police smashed locks with a hammer and then pried open the front door. This is the fifth time in three months police have raided California Cannabis, but police say so far it's been nothing more than a minor inconvenience for the owners. We've actually watched them go out and get new monitors the next day.

And then after legalization, the city kind of took an educational approach at first. They sort of went around and said, OK, we know that there's this many illegal dispensaries still around. Let's send them all letters and let's send letters to their landlords and just let them know, hey, guys, by the way, what you're doing is illegal. send letters to their landlords and just let them know, hey guys, by the way, what you're doing is illegal. We could come in and use all these measures to try and shut you down and here's the consequences you might face. If people weren't responding to those educational letters and the mail and all that, then they would start to come in and actually, you know, raid the places in the sense of like seizing their product, posting closure notices and all that. Cafe is actually offering a shuttle service to take people from the shutdown location

at City Place to this one here on Harvard. There are still plenty of people picking up today. And how did we get then from there to 4,000 pound concrete blocks being placed outside of the entrances of these cafe stores? Yeah, so that's an interesting story how that all developed. The city was getting, most of these places were shutting down when they would get raided. The city would post the closure notice and they would say, okay, we're blocking the premise, that's it. But cafe has been very clever about how it's been operating. They saw that in the provincial law, there was this exception.

And the exception said, if a premise is a residence for anyone, then you can't just shut it down because someone lives there. So they made sure that they had someone living in, I think, all their locations, if not certainly most of them. And in fact, I was even told by the landlord of one of these locations that the lease was actually a residential lease. So they could hold it up and say, look, no, this is actually someone's home. You can't shut it down. Where it's a person's residence exists, we can't bar or physically prevent somebody from being able to access their residence. They pulled it off for a while. And

then the province actually amended the law. There were enough complaints that the provincial government came in and said, OK, we're getting rid of that exception in the law. You can now shut down a premise, even if it's a residence for somebody. So that was in June. So since then, the city said, OK, well, now we're going to do things like we're going to put up a steel door and weld it shut over your business to make sure you don't go back in. The cafe location here on Bloor Street has been closed.

The notice wasn't enough. The padlock wasn't enough. They, too, have a steel door. And Toronto Hydro is here to cut the power. So they might do that in the morning. They might do that at night. They'd leave, and lo and behold, a few hours later, someone had come and unwelded the steel door

or broken in through the window and bashed out the door from the inside or cut off the door frame. All kinds of techniques. And so finally the city said, okay, well, if none of that's going to work, our next step is we bring in crane trucks and we park them in the street and we offload these 4,000 pound cement blocks and we pile them up in front of your store and just try and physically block you from getting in and out. Scoring in Toronto has really come full circle.

Cafe has taken to selling on the sidewalks. Some of the customers lined up outside said the legal stores are just not for them. When I go to the government store, I can't see anything. Hats off to all the people at Cafe. The few open locations in Toronto that I visited, the staff there are extremely uneducated about the product. And so since cannabis was legalized last October,

correct me if I'm wrong, but Cafe has been raided and shut down at least a dozen times at this point? Yeah, depending on how we're defining a raid, but like at least a dozen times, officers from a combination of the Toronto Police and also the city's bylaw and enforcement team have actually gone into the stores,

seized products, seized cash, taken it out of the stores, tried to sort of barricade them. And then on top of that, there's all these other times that they've just come on the outside and just put in blocks to block the stores. So I understand you emailed Cafe for comment. Did you get a response? Yeah, so from Cafe, we got a response back where they said that it's important for them, they feel, to stay open, they have people who rely on them, that there's a range of products that people need for themselves that aren't available in the licensed and legal cannabis stores. We also got a response from

John Galvano. He wrote to us. He acknowledged the phone calls we had placed to him and the other messages we sent to him. And he complained that, he said in his words, that we were essentially threatening him by mentioning his criminal record in our messages to CAFE. Zach, thank you for joining us. This was a really, really great investigation that you and Lisa Mayer put together. For those of you who are listening at home, if you haven't read it, you can find it on cbcnews.ca.

And Zach, we look forward to having you on the podcast again soon. Thanks so much for having me, Matt. So I want to broaden this out a little bit so that we don't get stuck inside this Toronto bubble. This is obviously something that's happening all across the country. Illegal dispensaries do exist outside of Toronto. And I want to talk to Saul Israel. He's a cannabis reporter for the Leaf News at the Winnipeg Free Press. He's been on the show a couple of times when we need to do episodes about weed. So let's give Saul a call. Saul, it's Matthew Braga. I'm filling in for Jamie this week on FrontBurner. How are you?

Oh, that's funny. OK, I'm good, man. How are you doing? I thought I recognized you. So there are illegal dispensaries across the country, surprising no one. But what I'm wondering is, are many of them as slick as some of the ones we're seeing in major city centers like Vancouver and Toronto? Like, give me the lay of the land here. I mean, they really do run the gamut. I've definitely been to illegal dispensaries in places like Toronto and Vancouver that were like cafe. You know, they were kind of luxury stores or coffee shops and they looked really fancy from the outside. I have also I mean, I recall once visiting an illegal dispensary in Ottawa that was literally a hole in the wall. And there was a guy behind the hole who was doling out weed with his bare hands.

And that was a pretty unpleasant shopping experience. Was it an existing hole or was this a hole that was punched into the side? Like describe this. I mean, it was like you'd walk in and there was just like a little kind of vestibule. And then there was just a guy behind this sliding window. So I imagine one of the things

that separates these illegal dispensaries from the officially licensed stores is product selection. And so maybe you can tell me a little bit about the kinds of products that you can get in these illegal stores that you can't find in some of the provincially licensed outlets right now. Yeah. So if you go to a provincially licensed cannabis store right now, anywhere in Canada, you'll be able to buy cannabis bud, cannabis flower, which is what most of us would just call cannabis. Or you can buy ingestible cannabis oils that are meant for oral administration. What you can't buy, though, at this point in legal stores is edibles, commercially produced cannabis edibles. You can't buy concentrated forms of cannabis like dabs or shatter.

You can't buy concentrated forms of cannabis like dabs or shatter. You can't currently buy tinctures, which is cannabis dissolved in alcohol, essentially. And you can't buy topicals, which are creams that you would apply to your skin. We are expecting those products to come online at the end of this year for legal sale. Edibles will gradually hit store shelves in mid-December at the earliest. The new government regulations require all products to have extensive warning labels, and THC will be limited to 10 milligrams per serving. But until then, if you want to buy some of those things, you'd have to buy them illegally. And is that perhaps then one of the answers to this question

of why these shops still exist? Like, will that give these shops one less reason to exist when most of the products perhaps that they sell that you can't get in the official stores are then available in the official stores as well? Yeah, I mean, that's part of it. But I think a lot of it also just comes down to convenience and what people are used to. I mean, you know, cannabis is a very popular substance in this country and people, especially young people have, have really become accustomed to, to breaking the law when they buy it. And it's, I think it's kind of become no big deal for some people, you know what I mean? And so if, if I live in downtown Toronto and I have a cannabis dispensary, even though it's illegal that I've been going to for a year and that works for me. I mean, you know, what incentive do I have to change, especially,

especially if there's no legal counterpart. And I think that's, that's another key part of this, this puzzle, right? Especially in Ontario where the provincial government has really, really bungled the rollout of provincial cannabis stores. I mean, you know, we're going on a year after legalization, and there are not even 25 bricks and mortar cannabis stores in Ontario at this point. Compare that to Alberta, where the provincial government has issued, at this point, I think the count today is 216 licenses for cannabis stores in Alberta, right, which is a province that has a much smaller population than Ontario. So, yeah, I mean, when we're talking about why illegal cannabis dispensaries continue to proliferate where you are in Toronto, I think that's a big part of the reason.

And I'm sure the specifics differ from province to province. But why don't police just shut all these shops down? all these shops down? In some places they do. You know, I know that there was there was a crackdown, for example, in Saskatchewan earlier this year. Maybe it was late last year on dispensaries there. In other places, there doesn't always seem to be the political will for it. Or, you know, in Toronto, like they'll do it, they'll shut down the stores, but then they just open up the next day. And, you know, I mean, I wouldn't be surprised if enforcement stepped up as the years go on. So let's say that I'm one of those people that has been going to the illegal dispensary in my neighborhood for the past couple of months, maybe years. What incentives are there for me to switch, to start going to one of these legal dispensaries that now exists?

Yeah, I mean, from my perspective, this is something I think a lot of Canadians actually don't know about. But the new federal law that legalized cannabis last October made it illegal to knowingly possess illicit cannabis. So if I go to an illegal dispensary and I know it's illegal and I buy cannabis from them and I possess that cannabis, that is a crime now. The penalties for that could range from a $200 fine for possessing less than 50 grams of illicit cannabis or much bigger fines or even theoretically prison time. Now, I haven't really seen much indication that police are enforcing this law against holistic cannabis against individuals who are possessing it just for their own use,

but it is there. And I think that kind of runs counter to what a lot of people expected from legalization. Saul, thanks for joining us. Hey, my pleasure, Matt. So earlier this month, Statistics Canada released its most recent quarterly report on the price of pot in Canada. And the big takeaway is that the gulf between legal and illegal product is getting wider. So Illegal Bud sold on average for $5.93 a gram from April to the end of June, while the legal variety was $10.65 during the same period. In other words, the legal stuff was on average almost half the price.

As you might imagine, collecting data on the illegal cannabis market isn't the easiest job in the world. So Statistics Canada uses a mix of voluntary survey data, there were 572 voluntary responses last quarter, and pricing from a legal retailer selling online to calculate that average cost. As for the legal market, retailers recorded nearly $500 million in sales between legalization last October and the end of May, while the government has earned $186 million in taxes from cannabis sales by mid-March. And remember, edibles are still to comebc.ca slash podcasts. It's 2011 and the Arab Spring is raging.

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