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Behind the Scenes of an Illegal Kush Operation

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Like a kid flipping through his parents' old photo album, Mike remembers seeing the pictures of a time when nobody knew anything about synthetic marijuana, when it wasn't in any way illegal and his company could sell it with no restrictions. He saw a few old snapshots of a launch party in 2009 when it first came on the shelves and was totally hot. There was a big celebration: a couple of Lamborghinis and some hired models to lean against them, apparently for dramatic effect. Mike (who asked that we not use his real name because he and his former company, Katz Boutique, are being sued) said he remembers seeing the banners displaying this strange new substance's brand name: “Slight Risk.”

The happy times are pretty much over for convenience stores or smoke shops like Katz, many of which are now being aggressively targeted by the Texas Attorney General's Office and the Harris County Attorney's Office with a slew of lawsuits. The substance is illegal statewide and considered highly dangerous within the medical community; in the suit against Katz, prosecutors, who likely consider synthetic marijuana's medical risk to be more than “slight,” point to seizures, impulsive violent outbursts and psychotic episodes as all possible documented side effects. In stores that decide to put this stuff on their shelves, undercover officers have been purchasing it, then returning to bust management, roping the sellers into litigation. Just this week, a business called Jams Smoke Shop was ordered to pay $878,000 in civil penalties after losing one such suit.

It's uncertain for now if Katz will meet the same fate — the shop's attorney says they are trying to settle with the county — but Mike says that, since he started working there, he saw these consequences coming from a mile away.

So what's it like to operate an illegal kush business, as the synthetic pot is often called? Mike gave us the lowdown.

He started working in Katz's corporate office in 2013 and claims that, at the time, he didn't know much of anything about kush. At that point, there were no more “launch parties” to openly celebrate it; in fact, it was rather “hush-hush,” Mike says. But the product didn't really need the publicity anyway. Mike says that it made up roughly 40 percent of the company's revenue (prosecutors say in the lawsuit it was as much as 50 percent). As in many stores, it was marketed not as, well, “synthetic marijuana,” but as “potpourri” or “incense.” The packages might have said “not for human consumption” or “100 percent legal,” and were often brightly colored and contained graphics that looked like they could have come from comic books. Katz sold a lot of different types of fake pot: Bizarro, Galactic Head Trip, Klimax; strawberry, blueberry, pineapple.

“Tony [Nguyen, the owner] was very adamant about calling them 'scents,' not flavors,” Mike says.

Mike claims that, if ever the Drug Enforcement Administration made a certain chemical compound commonly found in kush illegal, the manufacturer would just change the formula so that Nguyen could keep it on the shelves. When the city of Houston banned the substance completely in October 2014, both Mike and Katz's attorney, Michael Lamson (who is representing Katz and Nguyen, but not Mike), say, Nguyen simply moved the product off the shelves within Houston city limits and into other store locations in Harris County. (However, according to the lawsuit, undercover police officers checked out Houston locations in the spring of 2015 and still were able to buy kush repeatedly).

“He just continued business as usual,” Mike said. “He always assured everybody that nothing would go wrong — he'd take care of everything.”

Mike says he knew something was, in fact, going wrong when the director of operations quit. “He said, 'I recommend you look for something else. [Nguyen] is going to end up getting you in trouble,'” Mike remembers. “He was trying to warn us.”

Lamson, however, claims that Nguyen was never intimately involved in selling kush, and just owned the stores. He claims that while Nguyen knew it was illegal in Houston (and also had no idea his employees were still selling it in Houston), he did not know that Texas had made it illegal everywhere in April 2015. Police raided the stores in June. Lamson says that, if officers had just given Nguyen a simple warning, he would've cooperated and removed the fake pot from the shelves. (However, according to the lawsuit, the police officers would identify themselves after successfully making undercover buys and then interview the clerks and management, informing them this was illegal.)

Celena Vinson, with the County Attorney's Office, said that, frequently in these types of cases, the arguments that “I didn't know it was illegal” or that “we really just thought it was potpourri” do not stand up to scrutiny. “At some point, you don't get to just throw your hands up and say, 'Oh, I had no idea.' You have to use your common sense and go, well, if there's a line out the door and people are paying $25 for this tiny packet, then all of that stuff, in my mind, means you knew exactly what you were doing."

According to the suit, Katz has sold more than 90,000 packets of fake pot.

Mike says the future of kush sales at Katz was about to get even bigger just before the shop got sued. He claims that the new director wanted to start purchasing the kush in bulk from the distributor so that Katz could sell more and need to restock less frequently. Everything was all worked out, Mike says — and then one day before it placed the mass order, Katz got raided.

Mike wasn't surprised.

“I told the director, if this is going to get us in trouble, we should pull it out of the stores,” Mike said. “Essentially they said they would ride the waves as long as they could and deal with the consequences when they arose. Well, those are some expensive consequences.”

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