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Embezzlement in the California Marijuana Industry

Posted by Lynn Gorelick | Jan 31, 2017 | 0 Comments

Marijuana is a multi-billion dollar industry in California. Now that it has been legalized for recreational use, the industry will continue to expand. With so much money involved and the promise of more, the pot industry is also subject to abuse and fraud. A couple of recent arrests have tied the marijuana industry to claims of embezzlement.

Embezzlement is a type of fraud. Under California Penal Code 503, “embezzlement is the fraudulent appropriation of property by a person to whom it has been entrusted.” Penalties may depend on the value of property embezzled but could result in a felony with the possibility of a long jail sentence.

Jonathan Todd Schwartz was a business manager for a number of entertainment and sports figures, including the singer Alanis Morissette. In that position, he was entrusted with financial assets in the tens of millions of dollars. Schwartz now stands accused of embezzling more than $6.5 million from his former clients.

Between May 2010 and January 2014, Schwartz acknowledged withdrawing nearly $4.8 million from Morissette, unbeknownst to the singer. Many of the cash withdrawals were marked as “sundry/personal expenses” on accounting records. When Morissette realized the missing funds, she confronted Schwartz, who falsely claimed the money was being used to invest in an illegal marijuana business.

As part of a plea agreement, Schwartz admitted to embezzling from at least two other clients and filing a false tax return. He owes more than $1.7 million in federal income taxes, and faces a maximum penalty of 23 years in prison.

Even legal marijuana businesses have claimed to be victims of embezzlement. Humboldt Redwood Healing was a nonprofit medical marijuana company that sought workers' compensation insurance for their employees. They contacted a Eureka insurance broker, known to sell insurance policies to those in the medical marijuana industry. Broker John Ford accepted more than $50,000 in payments from Humboldt Redwood Healing to cover workers' comp premiums. However, the company later discovered they were not covered by any policy.

Ford claimed that he made a mistake in failing to obtain coverage, however, the Humboldt County District Attorney is investigating alleged embezzlement. According to an investigator with the DA's office, “the industry of marijuana production is particularly vulnerable to this type of embezzlement because business owners are less likely to report their own victimization, as doing so may generate further scrutiny to their business.”

An investigator found the policy had been cancelled for failure to make payments, despite the medical marijuana company making payments to Ford. The investigation also found that Ford's business status with the Secretary of State had been cancelled, and he was not an approved insurance broker for the reported insurance companies.

At the Gorelick Law Offices, attorney Lynn Gorelick has dedicated her legal career to defending people facing embezzlement, fraud, and other criminal charges. For over 30 years she has successfully defended her clients in the East Bay. If you have been arrested, there is still time to keep the conviction off your record. You do not have to plead guilty just because you were arrested. Contact a local East Bay criminal defense attorney who understands the law and will make sure you get the justice you deserve.

About the Author

Lynn Gorelick

Lynn Gorelick has been an attorney for over 38 years. She is the Attorney Lynn Gorelick is the Immediate Past President of the California DUI Lawyers Association and a Faculty and Sustaining member of the National College of DUI Defense. Lynn is a Specialist Member of the California DUI Lawyers Association and lectures frequently to other attorneys regarding DUI and DMV issues.


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