Docket Roundup: Plea Deal Rejected, Trial Back on for Owners of Phat Stuff

The Drug Enforcement Agency’s (DEA) raid on local Keene smoke shop Phat Stuff in May 2014 resulted in a criminal indictment against Phat Stuff Masked_Man_Uhaulowners Panos and Katie Eliopoulos in February 2015 for Conspiracy to Offer Drug Paraphernalia for Sale (21 USC 846 and 21 USC 863) and Conspiracy to Commit Money Laundering (18 USC 1956).  In a motion filed on October 5, 2015, it was revealed federal prosecutors had offered Panos a deal where he would plead guilty to some lesser charge in exchange for the government dropping the case against his wife Katie.  Although Panos initially accepted the deal, he has since changed his mind and the beleaguered Keene business owners will be going to trial on January 20, 2016 at the federal courthouse in Concord.

Contrary to what was implied in the media, Phat Stuff and its owners were not criminally charged with selling synthetic cannabinoids or any other controlled substance.  In the companion civil asset forfeiture case for Phat Stuff,  USA v. $695.00 US Currency et al, the complaint alleges that on August 9, 2013 an undercover informant for the DEA purchased the synthetic cannabinoid known as PB-22 from the Keene store.  The sale of PB-22 was not made illegal by the DEA until February 10, 2014 when the agency placed the compound on Schedule I by administrative order.  Phat Stuff stopped selling PB-22 prior to September 27, 2013 to comply with a Keene city ordinance forbidding its sale.  Since the constitution specifically forbids ex post facto laws, Phat Stuff and its owners could not be prosecuted for the sale and distribution of a controlled substance.  That left the government with the charges of selling drug paraphernalia, conspiracy, and money laundering.

Under federal law 21 USC 863, “drug paraphernalia” is defined as:

“…  any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful …”

A tobacco “water pipe” and a marijuana “bong” are physically the same item and differ only in their intended use.  Selling a water pipe is legal; selling a bong is not.  To convict under 21 USC 863, the Government must show that the defendants personally sold, offered for sale, or made something that they should have reasonably known would be used in some way with illegal drugs.  There are several allegations the defense will have to explain:

  1. On September 23, 2013, a Phat Stuff employee sold a glass pipe to a DEA informant who claimed he needed a replacement “because the police took his.” (Oops!)
  2. On April 17, 2014, a Phat Stuff employee sold a glass pipe and a drug detox kit to an undercover police officer. (Double oops!)
  3. On April 17, 2014, a Phat Stuff employee sold a chillum, pipe cleaner labeled “420”, and a safe disguised to look like a cigarette lighter to another undercover officer. (Really, super-duper oops!)

Setting aside the usual libertarian objections to the war on drugs, a jury of normal people (i.e. people educated in the government indoctrination camps that are public schools, where children are taught that drugs are wrong; that people who use and sell them should go to jail; and that jurors must obey the judge and find a defendant guilty of breaking the law, even if the juror believes the law is unjust) is going to conclude that Phat Stuff was selling drug paraphernalia.  I would bet money on it — except I will not because of my strong religious belief against going to prison for illegal gambling in New Hampshire.  So as a friendly reminder to all business owners, if somebody comes into your store and buys a can of soda because they are thirsty, that is fine.  If somebody comes into your store and buys a can of soda because they are thirsty, and the customer casually mentions that after drinking the soda they plan to smoke crack cocaine out of the empty can, you should refuse the sale unless you want to risk federal prison time.

The conspiracy law 21 USC 846 will also be used against Panos and Katie.  A conspiracy exists when:

  1. There is an agreement between two or more people to commit a crime and
  2. There is at least one overt act in furtherance of that crime

Under the conspiracy laws, all parties are equally responsible for the whole crime.  So if your friend says to you “Hey, I didn’t report all my income on my tax return that I am about to file.  Can you drive me to the post office so I can mail it in?” you will be in big trouble if you let him put one foot into your car.  According to the federal government, your friend is committing several felonies (tax evasion, false statements on a tax return, and mail fraud for starters) and you knowingly agreed to help him by driving him to the post office, an act in furtherance of the conspiracy.  Congratulations, you will be found guilty of conspiracy to commit tax evasion, conspiracy to make false statements on a tax return, and conspiracy to commit mail fraud and the conspiracy laws make you just as guilty as your friend.

The government will argue the Phat Stuff store employees knew or should have known they were selling drug paraphernalia.  That means the Assistant US Attorney (AUSA) can indict those employees.  You can be reasonably sure that in exchange for their “cooperation” the AUSA will grant them immunity from prosecution.  “Cooperation” in this case translates to “You better tell us what we want to hear, or else!”  With the employees’ freedom as a bargaining chip, the AUSA can get pretty much any witness to say anything desired.  The story the AUSA wants to hear is that Panos and Katie knew their pipes were being purchased by potheads and that the money from the sales were being deposited into the bank, which brings us to the more serious — and lucrative for the government — charge of money laundering.

Money laundering was a crime created by Congress to supposedly deal with Swiss bankers accepting large suitcases of cash from violent drug lords.  Since the bankers were not actually dealing drugs, the Department of Justice argued, a new law was needed to prosecute bankers who accepted drug money to deter them from doing business with kingpins.  Congress’s answer was the Money Laundering Control Act of 1986, part of which is codified in 18 USC 1956.  The law states, among other things:

…  Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity … with the intent to promote the carrying on of specified unlawful activity … shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both.”

The prosecution will argue that the sales from Phat Stuff are the proceeds of unlawful activity (sale of drug paraphernalia) and by depositing that money into their business checking account and paying the store’s bills, Panos and Katie intended to promote the further sale of drug paraphernalia.

Money laundering is the toxic nuclear waste of financial crimes.  Any money tainted by “criminal activity” as defined by the government can be seized.  Anything that tainted money touches becomes tainted and can be seized.  Because Panos and Katie deposited the store’s sales into their TD business checking account, the government seized all the money in the account.  Since some of that money was used to make payments on their Ford F250 truck, the government seized the truck.  Had they used the money to pay the mortgage on a home, the home would be seized.  You get the idea.  In all, the government seized and will get to keep:  $15,209 in cash, a truck, and everything that was not nailed down in the store.  Thus a law that was passed to stop Swiss bankers and violent drug kingpins is now being used against two Keene business owners — all because they sold some glass pipes, a safe, and some cutely labeled cleaning product to the DEA.

The deck is stacked in the prosecution’s favor.  Jurors in federal court are prohibited from knowing about jury nullification or the potential sentence the defendants will get if they render a guilty verdict.  The federal rules of evidence are complicated and spending $50,000 or $100,000 to mount even a basic defense with a private lawyer is not unusual in federal court.  Defendants that fight and go to trial will face a longer prison sentence if they lose, which is almost 90 percent of the time with federal jury trials.  That is why over 90 percent of federal defendants plead guilty rather than fight.  If by some miracle the jury sees through the government’s case and acquits the defendants on all criminal charges, Panos and Katie will still be left with a huge legal bill.  Remember that compared to these two small business owners, the US Attorney’s Office has a practically unlimited budget to wage war thanks to the federal government’s ability to tax citizens through an army of people with guns.  Heads, the government wins and keeps the money; tails, the defendants win and the defense lawyers get to keep the money.  Either way, Panos and Katie lose.

Should the jury return a verdict of guilty, the US Marshals will be allowed to destroy all the glass pipes, bongs, etc. that were seized in the raid or they may be sold at government auction.  “Wait, how is it if Phat Stuff sells me a glass water pipe it constitutes conspiracy to sell drug paraphernalia, but if the government sells me that exact same pipe, the one they seized from Phat Stuff, it does not constitute the sale of drug paraphernalia?”  The answer lies in the legal principle that government lawmakers and lawyers refer to as “Shut up, war on drugs, and do what we say or else!”  Basically this principle says that if Panos and Katie do not plead guilty and let the government keep their property, the Assistant US Attorney (AUSA) can file a superseding indictment with another dozen felony charges, thereby creating a real possibility of Panos and Katie spending decades in prison if convicted.  The United States Code (USC) is over 100,000 printed pages, so there are three felonies a day for each American in there somewhere, including those who sell glass water pipes in Keene.

I am sure that Assistant US Attorney Jennifer Davis, who is handling this case, would love to hear from you about how much you support her use of prosecutorial discretion and our tax dollars to try to put Panos and Katie in prison:

Jennifer C. Davis

Assistant U.S. Attorney

53 Pleasant Street, 4th Floor

Concord, N.H. 03301

(603) 225-1552

Please remember that Jennifer has powerful friends with guns and she can convene a grand jury to have you indicted, especially if you are a ham sandwich, so you might want to keep that in mind when contacting her.  The US Marshals Service, the FBI, and the Office of US Attorneys typically lack a sense of humor or irony when it comes to threats, veiled or otherwise.  Happy writing!

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