Weed Wars

Dispatches from the California Marijuana Front

August 18, 2010
After years on the lam, he helps marijuana clubs pay their taxes

kenhayes.JPGKen Hayes Jr., a former owner of a San Francisco medical pot dispensary raided by the federal agents in 2002, is back from more than six years on the lam. He is free from jail after a 2009 guilty plea to illegal marijuana distribution and filing a false federal tax return.

Now the long-time California marijuana activist, a man once praised by a former district attorney for "helping a lot of sick people alleviate their suffering," is selling tax software and consulting services to ensure that cannabis businesses follow the law.

Last year, following his extradition from Romania, a federal judge sentenced Hayes to 41 days in jail and ordered him to pay $20,755 for failing to report income from the Harm Reduction Center. The San Francisco center dispensed pot to AIDS patients and other medical users and also offered counseling for heroin and crack addicts.

But apparently, it didn't properly maintain its books - and that sent Hayes on the run from the feds.

Now his Haze Consulting business sells a point-of-service software to help marijuana businesses calculate and pay their taxes.

The business is currently aimed at medical pot dispensaries, but is prepared to serve retail marijuana outlets if Californians pass the Proposition 19 initiative to legalize marijuana for recreational use.

"If Proposition 19 passes, this software will be needed only that much more. Even in the medical cannabis industry, there are a lot of people who are fly by night and don't keep the books," Hayes says. "That causes a lot of grief..."

Though the software is primarily aimed at helping pot business calculate and pay state sales taxes, Hayes refers to his federal tax case, saying: "This is the reason you need to have your accounts in order. Learn from what I learned. Give the feds their money."

His story requires some filling in.

Before he founded the Harm Reduction Center, Hayes grew marijuana in Sonoma County for a medical collective in San Francisco's Castro District. It was called CHAMP - for Cannabis Helping Alleviate Medical Problems.

But that brought problems for Hayes. Along with co-defendant Michael Foley, he was tried in Sonoma County on state cultivation charges for growing 899 marijuana and operating six green houses. They were acquitted after testimony from a star witness - then-San Francisco District Attorney Terrance Hallinan.

"I'm just here testifying on behalf of a guy who, in my opinion, is performing a public service in San Francisco in terms of helping a lot of sick people alleviate their suffering by supplying them with marijuana," Hallinan told the San Francisco Chronicle in 2001.

A year later, the feds raided the Harm Reduction Center, and Hayes took flight.

His journey took him to Canada, where he unsuccessfully sought political asylum as a medical pot refugee. He then fled to Cambodia, where he worked in a medical clinic and taught English. Later, he wound up in Romania, where he enrolled in medical school until he was detained and returned to the United States.

Medical marijuana activists championed Hayes cause. But he got a lecture from U.S. District Court Judge Charles Breyer before the judge ordered him to pay back taxes, sentenced him to time served in jail, plus six months home confinement, and placed him on probation for three years.

"I think he's made a series of poor choices but I think he's paid for it," Breyer said at the time.

Hayes says he deals with "post-traumatic stress disorder" from his marijuana trials and years on the run. But he says he is back in business - and the movement - where he belongs.

His website says his point of sales system for marijuana businesses offers "the transparency the government is looking for."

It adds: "There are many people that were trying to do things the right way that are now facing prison sentences or are in jail that we know we could have saved. The IRS is coming and we want to make sure that you are ready."

"I need to be careful. I'm on probation," Hayes says. "At the same time, I'm trying to offer a solution to people who are moving this movement forward."

Pictured: Hayes pitches his point of sale software at HempCon medical marijuana expo in San Jose. Peter Hecht/phecht@sacbee.com

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