ABA Midyear Meeting

ABA House of Delegates urges legislation protecting marijuana lawyers and banks

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The ABA House of Delegates adopted two resolutions urging federal legislation be passed to shield lawyers and banks from criminal liability for providing services to marijuana businesses in states where the drug is legal.

Both resolutions were sponsored by the Tort Trial and Insurance Practice Section and passed overwhelmingly. The House met on Feb. 17 at the 2020 ABA Midyear Meeting in Austin, Texas.

Under Resolution 103B, the ABA will lobby Congress for changes to federal laws so lawyers do not face the threat of criminal charges when they represent clients in states that have legalized marijuana.

Steven Cash, a member of the TIPS Cannabis Law and Policy Committee who co-authored Resolution 103B, told the House of Delegates that 33 states have legalized cannabis, but attorneys could still be charged with conspiracy and aiding and abetting under federal law.

“That’s an untenable position,” said Cash, counsel at Day Pitney in Washington, D.C.

Despite the fact that prosecutions are unlikely, the current state of the law could deter lawyers from representing marijuana clients and businesses. Under the Controlled Substances Act, marijuana is a Schedule I drug, which is the same category as heroin. Last year, the ABA passed a resolution urging the drug be removed from Schedule I.

“Many lawyers believe, as an ethical matter, that they should not engage in conduct that violates a criminal law, even if the chance of prosecution is slim, perhaps even vanishingly small,” the report accompanying the proposed resolution stated.

Bank on it

Resolution 103D calls on the ABA to urge Congress to clarify and mandate federal laws to ensure banks and other financial institutions can do business with marijuana companies and attorneys in places where they are complying with state and local laws.

The resolution “simply urges Congress to take action in the form of the SAFE Banking Act or similar legislation that would make clear that federal depository institutions can take money from legitimate cannabis industries in states that have chosen to legalize the substance without fear of federal prosecution,” said resolution co-author Adrian Snead, a member of the TIPS Cannabis Law and Policy Committee and an associate at Holland & Knight in Washington, D.C.

Michael Drumke, chair of the TIPS Cannabis Law and Policy Committee and a co-author of both resolutions, said lawyers should be able to represent cannabis clients without fear they will be targeted for their work.

He noted that prosecutions against attorneys are not unheard of.

In 2017, San Diego attorney Jessica McElfresh faced felony charges in connection with representing a marijuana business. The charges were dropped in 2018. “It’s not really a clear system,” Drumke, a shareholder at Swanson, Martin & Bell in Chicago, said in an interview. “You’re not supposed to aid and abet the commission of a federal crime. But under the model rules, clients are entitled to representation.”

Paul Larkin, a senior legal research fellow with the conservative Heritage Foundation, said moves to shield lawyers and banks do not tackle the “fundamental issue” surrounding the legal sale of cannabis. “I think what we need to do is decide as a society if we are going to legalize cannabis and how. If we’re going to legalize it, there’s no need for an exemption for banks and lawyers,” he said in an interview.

Big business

The legal cannabis industry is projected to be worth $30 billion by 2025, according to New Frontier Data, a firm that provides analysis on the industry.

In January 2018, Jeff Sessions, President Donald Trump’s first attorney general, repealed the Cole Memorandum, a President Barack Obama-era policy that directed the Justice Department not to prosecute cases in the states where marijuana is legal. Last year, William Barr, Sessions’ successor, said he supports a softer approach to cannabis enforcement and changes to federal laws.

Still, uncertainty has beset financial institutions. In 2014, the Department of Treasury’s Financial Crimes Enforcement Network issued guidance under the Bank Secrecy Act clarifying how banks should do business in the legal cannabis industry. “Unfortunately, this did not provide sufficient safety for many financial institutions,” the report accompanying Resolution 103D said.

Last year, the U.S. House of Representatives passed the Secure and Fair Enforcement Banking Act of 2019. The bill, still pending in the Senate at press time, would clear the way for banks to open accounts for marijuana businesses without fear of prosecution, the report says, and help prevent the money laundering that can arise from “off-the-books cash transactions.”

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