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Prosecutors Allege Organized Crime Running Chain Of Northern California Medical Marijuana Clinics

OAKLAND (CBS SF) – The alleged owner of a chain of medical marijuana clinics faces criminal charges in one of the first cases of its kind in the state. Prosecutors said it's a criminal enterprise, a prescription mill generating millions of dollars, with most of the money laundered and sent overseas.

KPIX 5 went to one of the clinics 30 minutes to opening time, and things were already jumping: Car after car pulling in, people waiting in line to see a physician for a medical marijuana recommendation. They are not doing anything illegal. But according to law enforcement, the doctor is.

"It's organized crime," said Ralph Hughes. He's an investigator with the Medical Board. Hughes said under California law, Dr. Bennie Brown would have to own and operate the clinic. But in this case, he said there's evidence a group of "non-doctors" running it instead, and that's a felony.

Suspected ringleader Michael Malenkov recently appeared in court on a slew of charges, including money laundering and unlawful practice of medicine. His attorney wouldn't go on camera, but told KPIX 5 her client simply provides marketing services for Dr. Brown, and did nothing illegal.

But prosecutors point to documents they said show Malenkov pays the lease and the salaries of employees, including Dr. Brown, who was hired on Craigslist, and paid handsomely.

"It was about $22,000 a month and it was all cash," said Hughes.

Prosecutors believe Malenkov is operating 4 clinics illegally, in Oakland, Berkeley, San Jose and Sacramento, under the name 420 MD.

"You figure if you are paying a minimum of $49 per patient, it's pretty simple math," said Hughes. "We believe the smaller clinics are in the million dollar a year range, the larger clinics like the Oakland and Sacramento clinics, they are probably closer to $3-4 million," he said.

The costs add up as KPIX 5 saw firsthand when we went in undercover. We were told for $299 we could get a special "exemption" card that would allow us to have 99 plants and 11 pounds of marijuana. Then there's the so-called law enforcement package for an extra $50.

"It's for law enforcement protection," a person at the counter in the Sacramento clinic told us. "Anything happens with you and the law and you have to go to court, we pay Dr. Brown an hourly rate to go to court with you to testify on your behalf. It's just peace of mind," she said.

And it's all cash. "There's an awful lot of money that we think has moved out of the country. When we did the search warrant for Malenkov we found stacks of shipping receipts, where packages were being sent back to the Ukraine. I am certain there are others above Malenkov who are Eastern Bloc who are controlling the money," he said.

KPIX 5 wanted to ask Dr. Brown about his involvement.

"I know in the past you have faced some pretty serious charges in terms of profiteering and conspiracy yet you are here. Why?" we asked him.

"I don't know what you are talking about," Brown said. He told us it's done all over California.

But the medical board doesn't agree. Shortly after our interview, sheriff's deputies arrested Dr. Brown for conspiring to operate a clinic without a license.

"He was warned that it was illegal, that it was a felony for him to be doing that. He didn't care," said Hughes.

And when we asked him why he is going after marijuana doctors, he had a quick reply: "This has nothing to do with marijuana. It has to do with organized crime. It has to do with corruption."

Most doctors won't write you a marijuana recommendation because marijuana is still illegal under federal law. You pretty much have to go to one of these specialized clinics. And since its cash only, it's all too easy for criminals to open up shop.

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