Voters legalized recreational marijuana in California in 2016, and medical marijuana has been legal in the state for 20 years. But as one entrepreneur recently learned firsthand, pot companies still operate at their own peril.

On Friday a judge ruled that the San Diego District Attorney's office can keep the more than $100,000 it seized earlier this year from the bank accounts of marijuana business owner James Slatic, his wife Annette, and his stepdaughters Lily and Penny Cohen. Slatic's motion requesting the return of the money was denied despite the absence of criminal charges against him.

San Diego Superior Court judge Jay Bloom said an officer of the Drug Enforcement Administration and the San Diego Police Department, who took part in the January raid on Slatic's business Med-West Distribution, had probable cause to seize the $100,693.85 found in the Slatic family members' bank accounts. The officer had received Judge Bloom's approval to raid the business on the suspicion that it was illegally extracting THC (the active ingredient in cannabis) using volatile chemicals.

Slatic will appeal the ruling, according to Wesley Hottot of the Institute for Justice, a nonprofit law firm representing Slatic.

"The court's decision allows the government to take an entire family's money based on mere suspicion that one family member committed a crime," Hottot says. "That isn't just wrong; it's unconstitutional."

Med-West had been providing legal dispensaries around California with medical CO2-extracted cannabis oil and related products since 2010. On January 28, nearly 30 officers from a San Diego joint narcotics task force raided the company's warehouse, seizing $1.4 million in cash, product, and equipment.

A few days later, Detective Mark Carlson froze and then seized the money in Slatic's family members' bank accounts, alleging that it derived from the business. Slatic says his company was raided a second time in late June and is now officially closed.

In court last week, Slatic and his witnesses argued that money in his personal bank account was from another business unrelated to marijuana, and that Med-West was refining THC concentrate, not extracting it with volatile chemicals. A DEA chemist said that Slatic was extracting, not refining.

Though Judge Bloom rejected Slatic's arguments, the case was not an unqualified win for the DA's office. The judge said he had some concern with the fact that DA has kept the money for 10 months without filing a case.

"Before the year is up from the date of the seizure, the People will have to file a forfeiture case or a criminal case to keep the funds," he wrote.

The judge also noted that a new California law has been passed that requires a conviction before law enforcement can force a person to forfeit assets. But the law doesn't go into effect until January 2017 and Slatic and his lawyers did not provide evidence of the DA's office violating forfeiture laws, he wrote.

Steve Walker, a spokesman for the San Diego District Attorney's office, tells Inc. that the evidence in the case supports the judge's ruling.

"Mr. Slatic's transfer of money to his wife and daughters' accounts is indicative of ... the laundering of funds to avoid detection by those participating in clandestine drug activities," he says. "The district attorney's office is continuing its review of this case for potential criminal charges."

Slatic says the DA's office is using the "poison well theory" to seize his family members' money, which he maintains is totally unrelated to Med-West. His wife receives a salary for her job as a radiology technician, he says, and his stepdaughters both have their own jobs.

"I call asset forfeiture the dirty little secret of the American justice system," Slatic says. "The government has turned into an entity that has grown addicted to seizing proceeds from cannabis."

Published on: Nov 21, 2016