Erich Pearson’s Big Push

Valley cannabis exec recovers from big burn.

Story Jonah Raskin  
Photos Steven Krause

Last October, just days after a raging fire destroyed much of his bumper crop in Sonoma Valley, Erich Pearson told a reporter: “We’re in fight and rebuild mode.” Soon afterward, he explained, “We got water to some of our plants and salvaged part of our garden.” But he wasn’t able to save eight structures on the property that he leases in Glen Ellen, and that’s at the heart of his sustainable marijuana enterprise. By the time he and staff members woke and rolled out of bed, the fire was too far advanced to contain it. But Pearson and his crew managed to wage a successful battle against flames on nearby Trinity Road. “We saved properties and rescued horses and cats that belonged to neighbors,” he says. “Several places had the potential to re-ignite, and we prevented that from happening.”

Would he rather fight a fire or be a bureaucrat behind a desk in Sacramento?

“We’re good at both,” he says with a laugh. “But I’d rather fight a fire. Fire is predictable.”

Putting out fires, helping neighbors and salvaging crops have been a big part of Pearson’s life since 1998, when he arrived in California from Indiana and began to cultivate, harvest, transport and sell marijuana. There isn’t a corner of the industry he doesn’t know from personal experience, and, in a room of financial wizards, he can hold his own on topics such as business models, profit margins and breakeven points. The CEO at SPARC—by almost anyone’s standards a large medicinal cannabis operation—Pearson is the eternal optimist, though he allows that the legalization of adult use is yet another form of Prohibition.

“Overregulation by the government will mean a continuation of the black market, at least for some,” he says. “Unfortunately, regulators don’t understand the industry.” Pearson and entrepreneurs like him created a whole world without their help. Now, to stay in business, they’ve got to live with rules and regulations that became law on January 1. Pearson and his compliance team—all 12 of them—have spent hundreds of hours and well over $100,000 in the past 15 months to get ready for the adult, as opposed to the medical, use of cannabis. When California voters approved Proposition 64 in 2016, that opened the doors for marijuana to become a legal crop, taxed, regulated and tightly controlled by state and local authorities. In fact, no agricultural commodity in California has more red tape around it than cannabis.

If Pearson feels confident about the ability of SPARC to survive and thrive in the new intensely competitive world of legalized cannabis, he’s also troubled about the fate of the larger cannabis community to which he has long belonged and that’s now coming to an end.

“Money is definitely changing the landscape,” Pearson said. “In the future, there won’t be thousands of small growers as there have been ever since the 1980s. They’ll be driven out of business.”

Indeed, from now on, the cannabis industry will be divided between those, like Pearson and SPARC, who follow the rules and pay taxes, and those diehards who continue to operate on the black market and risk losing everything. The line that has divided the legitimate from the illegal will become clearer than ever before, ambiguity will end and wiggle room will disappear.

As criminal-defense and business lawyer Omar Figueroa explains, “No more raids on growers from the Sonoma County Sheriff’s Department. No more trials and no more jail time for the guilty. Those who don’t follow the rules for cultivation will run afoul of the Permit & Resource Management Department (PRMD) and be subject to harsh fines—$10,000 a day per offense—and forfeiture of property.”

It won’t happen all at once, Figueroa said. Local and state authorities want to persuade farmers who have been operating on the black market to play by the rules of the game. They don’t want to frighten farmers right away with fines and forfeitures. As one longtime Sonoma Valley cultivator put it, “The bureaucrats hope that the love of money will be stronger than the fear of coming out of the shadows where growers have concealed their crops and their cash.”

As Pearson knows, there are fortunes to be made, even with taxes and the high cost of meeting the local and state regulations that cover almost every conceivable aspect of the business.

“The best indoor marijuana sells now for about $2,800 a pound,” Pearson explains. “At our dispensaries in Sebastopol, Santa Rosa and San Francisco we break a pound down and sell it for $65 for 1/8 of an ounce. That adds up to $7,800 a pound; a profit margin of 65 percent.”

Pearson’s confidence is based on his cannabis crop, that’s grown biodynamically, without harmful pesticides and herbicides, and no mites and no molds. In accord with state requirements, all the plants and all the flowers will be tracked and traced from seeds to store shelves. And the information will be computerized.

Operators bigger than SPARC say they expect to lose money until competition intensifies and the little growers are driven out of business. Pearson is confident he can thrive even when that happens. The Sonoma wine industry, which accommodates big, medium and small producers, suggests he’s right in his assumption.

“We’ll be well branded in the new market,” he says. “Our cannabis products, including the Marigold Brand, are already carried in dispensaries that we don’t own and operate ourselves.”

Indeed, while Pearson has one eye on healthy soils, he has another on health-conscious cannabis consumers.

His Marigold website proclaims, “All of our flowers are sun-grown avoiding synthetic and chemical products, fostering harmony with the California ecology. This is cultivation with a conscience.”

Sadly, another part of his cultivation agenda went up in smoke when the wildfires scorched test plots he had set up under the guidance of biodynamic wine guru Mike Benziger to measure how soil properties impact chemical properties of the plants, in hopes of determining how terroir affects cannabis quality.

Pearson says he will revisit the terroir project later in the year with Benziger, but for now it is a casualty of the fires.

While Pearson is transparent about almost every aspect of his business, he doesn’t advertise the name or even the location of the financial institutions with which he conducts business. (Federal banking rules forbid the deposit of cannabis dollars. Banks that skirt the rules and take cash from growers, risk legal action from Washington, D.C.)

“We have long, close relationships with our bankers,” Pearson says. “They’re comfortable with us and we’re comfortable with them. They don’t want more business than they already have.”

As 2017 drew to a close, he was running as fast as he could to finalize the necessary permits and licenses so that SPARC would be ready for adult use of cannabis in January 2018. The whole process, plus the fire and its aftermath, kept him, for the most part, away from crowds and speaking engagements. Still, in December he appeared on a panel at the Emerald Cup in Santa Rosa, the world’s largest cannabis confab.

“That was fun,” he says. “We hung out with European friends and talked with breeders. I also followed Sonoma (city) politics. The recent moratorium is what one might expect. But I think the City Council will come around.”

Late last year, the Sonoma City Council voted unanimously to kick the cannabis can down the road again, delaying for a third time a decision on whether or not to consider allowing dispensaries, or recreational sales, in the city. The delay came in part because city staff failed to bring forth a draft ordinance with options for the council to review. From comments made by Council woman Amy Harrington, and others, City Hall watchers believe a council majority is likely to at least allow a medicinal dispensary next year.

And if council members want more facts and figures, or an entertaining story, Pearson has both.

“Recently I was stopped for a minor traffic infraction,” he explains. “When the officer wanted to know what kind of work I did, I told him. ‘Gee,’ the officer said. ‘I’m retiring from the force. Maybe I can apply for a job.’”

In the brave new cannabis industry, ex-cops and ex-outlaws might find themselves on the same side of the fence, harvesting crops together.

Jonah Raskin is the author of Marijuanaland: Dispatches from an American War, which is published in English and in French.
He shares story credit for the feature film
Homegrown.

 

 

 

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