Legal Issues in the New Realm of Artificial Intelligence


So what are going to do with all of the data that we collect about ourselves? Maybe give the job to machines. Isn’t that one of the goals of artificial intelligence? In a word, yes.

(More Questions than answers)

1) Rules?

Are we in the realm of open source?

Privacy issues? Use and access of data across continents?

How will our US use of AI be impacted by having to comply with European Data Privacy laws?

Where is the machine operating? Effecting? Jurisdictional issues?

Contract law?

Labor laws? There is tremendous concern over displacing workers with machines.

2) Responsibility? 

What if the [recent] Cyberattack on our global infrastructure was committed by a machine?

It is a concern some seem to have had in this article:

Is artificial intelligence just software or even hardware created by a machine?

A machine creating a machine?

Who is responsible for a machine built to “commit” war? A crime?

This was the point of the below article and the open letter written by Musk and others:

I am not talking just moving money, stealing personal data, shutting down infrastructure, bio warfare, hacking.  I am talking about all of the above. 

3) Ownership?

  • What about the IP? Who owns the ip created by a machine?
  • Does it matter?
  • Who is responsible for the mistakes of a machine

I am troubled by the suggestion here that the law simply did not hold a manufacturer responsible when its machine hurt an individual because the manufacturer did after all follow regulations.

Feel free to email me with the legal issues that come into play when we discuss artificial intelligence.


Yeah, I am sure you consider yourself a great negotiator right?

 Nothing to learn right?

Well, one of my mentors fifteen years ago taught about “Getting to No” in the context of sales.

Get a no quickly to qualify a prospect. I think it equally applies in negotiation. For example:

“Will you agree to limit our obligation to repairing the service performed, deliverable or product for a year after closing?”

Or, in real estate deals, we might ask an investing partner:

“In year three, if real estate prices are way up, can you assure us that you will not force a sale until year seven?”

The “no” that follows tells you so much about where to go next if you really pay attention.

No’s” give us boundaries but also clarify how one sees the relationship.

In the first case, I might ask, for starters, how* the customer would want to handle when things change or do not work as planned?


In the real estate situation, since we know our client cannot prove out its return on cash goals if a sale is forced in year 3, we might have to re-think our assumptions.

The real question becomes how often do you practice the art of paying attention?

*how questions are my next topic of focus

How would you rate yourself as a negotiator? 

Do you believe the compliments given by your opponent?

Yesterday, a Mongolia-based consulting services client shared a common negotiation tactic in the US. The nationality of the speaker only highlights an outsider’s perspective.

At a tense point in the negotiation, the American said:

“I would never want to be on opposite sides of this issue with you,” the American said.
“Yeah why is that?” the Mongolian side asked.

“Because you just seem too fierce, I would worry that it wouldn’t end well for me,” the American said.

Americans often use the “false prop up the other side” approach to appeal to ego. Regardless of the words, it is a false compliment to gain leverage and the speaker does not believe it.

I get this often with opposing counsel who says things like “I really like you”, “you’re so smart” or worse, they call my client or me “pal.

These things ever show up in your world?

It is often said in a genuine tone but the fact that it is a negotiation tactic is surprisingly lost on many.

The Mongolian’s below response summed up how the logic of false compliments falls apart.

“You and I are negotiating a transaction to do business together. We are doing the deal because we cannot do it ourselves. If you are telling me that when the chips are down, you will turn from our business partner into our adversary then this discussion is over.”

Would you like to become a better negotiator? Let me know what types of things you negotiate? Shoot me an email –

Corporate Formation

This article is about how to approach the question of forming a new entity.  Many wonder what the steps are to forming a new entity and what questions should be considered. This list should not be seen as the complete list of questions but rather an approach. I would be happy to discuss your particular situation.

  1. Picking an Entity Type
    • Do you already have an entity?  Are there problems? Read about common issues.
    • Have you maintained the “corporate formalities” to be able to argue that the entity protects the individual owners from certain liability?
    • Are you in a regulated industry such as the financial industry, health care or do you store customer data in the EU?
    • Where do you do business? Where are your customers? Your officers and directors?
  2. Common Entity Types: The tax goals, liability issues or issues regarding jurisdiction (i.e, how much risk of being sued in a specific state are you willing to take?) often dictate the entity forms.
    • Delaware entity that is qualified to do business in another state
    • Delaware entity only qualified to do business in Delaware – often as a holding company
    • A California entity only qualified to do business in California
  3. Filing Process and Timing
    • Each state has its own one-time filing and annual fees
    • If you are forming an entity in Delaware, filing can happen almost in one day
    • California takes as long as 7 to 10 business days and a statement of information must be filed within a reasonable period of time (e.g. 90 days) after formation
    • New York requires publication in a News Paper
    • Appointment of a Registered Agent: We recommend that a Registered Agent be appointed – such as Corporation Services Corporation.  They charge an annual fee.
    • If you use a different name than your entity name to conduct business, you will ALSO have to file a fictitious business name in the county (or counties) where you (or the entity) operate(s) your business.  Each filing has a filing fee and most require publication so check with your local county rules, or ask me.
  4. Shareholder and Operating Agreements: 
    • One of the most important parts of forming your entity is the agreement between the owners.
    • Depending on whether you form a C corporation or an LLC, you will have a shareholder (for C corps) or operating agreement (for LLCs)
    • The most common error I see is 50/50 ownership with no mechanism for resolving deadlocks.
  5. Fees: I often do formation work for a flat fee and have various packages depending on the particular issues presented by your entity and arrangement.

For more discussion on corporate formation services, please write or give me a call at 310-570-2399

Representative Cases

Are you in:

biotech, software development, device, game and video console and content, book publishing industry (writer side), property and casualty insurance, life insurance, real estate broker and real estate development, automotive, content development, cloud computing, fashion, manufacturing, food and/or food additives?

Some examples of the past and present clients/matters are:

1) Copyright/ Trademark infringement Litigation

a. Online and Web hosting

• Third World v. XHOT99, Inc. US DC CD. Defend web-host in contributory copyright infringement, RICO, trademark infringement claims. Affirmative defenses include DMCA and CDA.

• Jupitermedia (Fulbright Jaworski) v. Jupiter Hosting – US DC Northern District California. Defended web hosting company from injunctive relief trademark infringement and cybersquatting allegations. Successfully opposed motion for preliminary injunction. Published opinion. (Judge Claudia Wilken). Concurrently advised Jupiter Hosting on all of its commercial transactions and subsequently provided assistance regarding its sale to Navisite in 2007.

• DICK DACK LLC. Advise adult porn producer re DMCA and 2257 custodian of record issues. Review of COPPA and general business advisor.

b. Movie

• Rivera v. Does, US DC SDNY. Obtained TRO, seizure by US Marshall and preliminary injunction on behalf of filmmaker of “ENRIQUILLO” (Story of discovery of Dominican Republic) against cameraman and investor who purloined film. (Judge Kimba Woods)

• Brush Media v. Boujaklian. (2002 WL 1906620 (N.D. Cal.) US DC ND. Adult DVD movie producer. Successfully prevented copyright infringement action through motion to dismiss for lack of subject matter jurisdiction. (Judge Eliza Laporte)

• Eslinger-Galligani adv. Domingo Gutierrez. Advise movie production company on acquisition of life story rights, drafting options and partnership agreement.

c. Video Game

• Sudoku Developer adv. Danger Technologies. Advised on-line sudoku game re licensing agreement with mobile phone developer and mobile phone platform.

• Doe v. Investor. Advised on-line game/personal map developer re licensing agreement risk and litigation strategy re venture investor.

• Eidos acquisition of Crystal Dynamics. Conducted IP audit on behalf of Eidos and negotiation of various commercial agreements related to acquisition of Crystal Dynamics by Eidos including domain names, game titles, content and software.

• Beeck v. Cinemaware, US DC NDCA. Represented video game development team re claims of copyright infringement, breach of licensing agreement and non-payment of royalties.

d. Computer Accessory

• Grixxxx Technology adv. Apple, Inc. Re-negotiation of Made for Ipod agreement and litigation strategy re anti-trust and breach of contract claims

• Disruptive Technology adv. Apple, Inc. Re-negotiation of Made for Ipod agreement and related commercial agreements.

• Acme Studio v. Acme Made. US DC Northern District. Defended computer laptop and accessory manufacture, owner of from allegations of trademark infringement and cyber squatting.

e. Dance

• Creative Station adv. Apple Seeds. US DC SDNY Advise “teach kids to dance” school re copyright litigation and commercial agreements related to licensee

f. Wireless

• General Magic adv. Consolidated Freightways. Advised Apple, Inc. spin-off re commercial licensing of its hand-held device.

• AD USA v. Automan. US DC Pennsylvania. Obtained preliminary and permanent injunction on behalf of handheld computer manufacturer in automotive industry. Resulted in significant financial settlement on behalf of client.

g. Sculptural Works

• Ohtake adv. Sculpturesite Gallery. Defended allegations of breach of contract related to sale of kinetic sculpture.

• Rader v. Sutter. US DC ND. Prosecuted TRO and pursuit of preliminary injunction in copyright infringement claim on behalf of cemetery monument design company. Case proceeded through death threat allegations, expedited discovery and an appeal to the 9th Circuit for relief. (Judge Susan Ilston)

h. Software

• PC Tools v. Contour/Elle Mae, Inc. AAA San Francisco. Successfully brought copyright infringement claim on behalf of mortgage industry software developer. Resulted in six-figure settlement in client’s favor.

• Workshare v. Litera Corp. US DC ND. Successfully defended document management software co against injunctive relief action for copyright infringement.

2) Patent and Trade Secret litigation

• Patentee v. L-3 Corp. US DC Georgia. Defended owner of multiple power utility sites from allegations of patent infringement over payment process method.

• Datapark v. GMG Systems, Inc. San Francisco District Court. Successfully prosecuted misappropriation of trade secrets related to parking garage computer equipment through three defense firms. Resulted in six-figure settlement for client.

II. Fraud litigation

• Sisters v. Brother in Family Partnership. Defended and advised brother/general partner in breach of fiduciary duty suit in LA Superior court alleging misuse of partnership funds, self-dealing.

• Shareholders v. NiftyNet, Inc. US DC ND. Successfully brought derivative action against former President of Delaware corp. on behalf of shareholder/director alleging fraud, corporate waste. Resulted in redemption of shares and a significant financial settlement for client (Judge Charles Breyer)

• Does v. Real Estate co, Inc., and President/director – San Francisco Superior Court. Defense of the President of commercial leasing agency in five separate actions alleging fraud and negligent supervision allegations by investors in multi-unit properties.

• Insurance brokerage v. Former partner– San Francisco Superior Court. Pursued computer fraud and abuse and trade secret misappropriation against former partner of general insurance broker. Resulted in financial settlement.

3) Online Torts

• CPA v. Yelp and anonymous poster. Advised CPA firm re: pursuit of claim against anonymous user on Yelp re: negative services. Consideration of privileges and “opinion” defense. Obtained a retraction by user to be less offensive.

• Jane Doe v. Armando Aguilar, LA Sup. Ct. Prosecute case alleging false light, invasion of privacy, and intentional infliction of emotional distress re: release and publication of sex tape and online harassment.

III. Anti-trust litigation

• Weinberg v. Ingenix. US DC, Connecticut. Participating plaintiffs’ counsel in class action claim of price fixing and unfair trade practices against Cigna, Wellpoint and Aetna.

IV. Outside General Counsel

• Galligani-Eslinger Productions. Outside general counsel to reality television and motion picture production company.

The 4 Best ‘Newly Discovered’ Reasons You Should Sign That Important Contract

I. The 3 essential issues most negotiators miss (most of which you’ve never cared about before…) that other top-preforming businesses owners tend to gloss over until there is a problem.

  • Your Maximum Gain and Maximum Exposure.
    • Do you know the most you can obtain, win, earn, pay from the contract you are about to sign?
    • What is the one-line (or one word) worst case scenario?
    • What is the other side’s answer to this same question?
    • What does the agreement say about the limitation of liability?
  • Are you Crystal Clear About What You Are Obligated To Deliver Under the Agreement and By When? What About the Other Party?
  • If You Or They Do Not Perform, What Is Your Remedy? 
    • Let’s say you’re negotiating a services agreement (cloud management services, architecture services, any services).
      • What happens if you do not perform? Is the first thing that happens a lawsuit? Doubtful. What do you do to (a) confirm that the deliverable is completely satisfactory; (b) to repair any part of the service deliverable that is not satisfactory? (c) Even if it is not in the terms of your agreement, what is your plan/policy/practice to solve this issue?
      • Quick Story on Microsoft: Early in my training I negotiated a multi-million dollar revenue transaction for cloud services with Microsoft.  Microsoft’s total liability was $999 – the cost of one copy of their server software – under the agreement no matter what. Since we knew that from the beginning, we had to understand that our ability to recover if something went wrong was $999.  Problem was: we needed the agreement. Does that info change your negotiation approach?   
  • Bonus: How Much Do You Know About The Otherside’s Ability To Solve Problems that Will Occur? 

II. The #1 best use of your negotiation time (and a strategy that you can implement in 30 minutes or less) to immediately make you less risk exposed.

  • Flush Our the Duck. You need to find leverage.  Leverage comes from information. It is often said that the first to speak loses. That is not true.  If you ask more questions than the other side and learn more, you win. The key is knowing exactly what answers you NEED (not merely want) to know. If you become smarter after you speak to the other side than you were before, then you might gain leverage.

III. The 5 pieces of information you need before you spend any time negotiating with anyone over money.

  • Does the person on the other side have authority to make the changes and negotiate the issues you are discussing?
  • Do you know exactly what you will do if the agreement negotiation is aborted by you or the otherwise? (ie, if you agree not to move forward?)
    • For example, if you are making an offer on a piece of real estate or software, do you have a second, third, fourth choice? If the deal is critical, I recommend having at least two back-up plans.

IV. The #1 best question to ask your lawyer to see if they are a fit for you.

I encourage my clients to ask me hard questions.  One of the hardest questions to answer is “have you worked on the exact same type of deal like mine before?”  Even though it is hard, is can be answered. Here is  – in my opinion today – the number one best question to ask your lawyer to see if there is a fit.  But before I give you the question, you must be willing to hear the answer. And the answer might be essentially back on you, the client.

“For the next ten minutes, please ask me every question you can think of so that you, attorney, can understand exactly how I make money and the risks I take to deliver on my business promise?”

I am amazed how little attorneys often know about their client’s businesses until they are in the midst of a crisis.  I am also amazed by how willing clients are to get help to clearly explain what they do, to get help uncovering potential problems in their delivery of what they offer and in identifying the barriers to growth.

What is your number one burning question?  Email me


Now What: You’ve Messed Up Corporate Formation

I get quite a few calls from clients that MESSED UP their corporate formation.

  • Owners are afraid of being SUED because their entity is not “formally” set up
  • The State Franchise Tax Board has SUSPENDED the entity
  • NO ONE has been ISSUED any equity (stock if a C corp; units if an LLC)
  • NONE of the owners have a  shareholder agreement (e.g. c corp) or
  •  operating agreement (e.g. LLC)
  • Directors are ONE THE HOOK for anything that GOES WRONG
  • Someone has left the entity and there is NO RIGHT TO REPURCHASE

Some of these problems are EASY FIXES.

  1. Let’s Diagnose YOUR Problem

First – let’s compare notes.  Do you have all of the below?


2) Let’s drill down one more level.

a) DO YOU USE UNANIMOUS WRITTEN CONSENTS in lieu of Annual Meetings of Shareholders or Directors?  √ CHECK

–> (Note: LLC’s use Resolutions.)

b) Do your Unanimous Written Consents (or Resolutions) specify ALL material events to your shareholders or directors? √ CHECK

By material – I mean, that any event or decision or information that a reasonable person would need to make an informed decision.  Are we on the same page?

[the SEC defines materiality as: “to which there is a substantial likelihood that a reasonable investor would attach importance in determining whether to buy or sell the securities registered.”

Practice Tip: Consider being as specific about what you put into these Consents and Resolutions.  They can be used to disclose an entity’s important (ie. material) facts and events and can serve as a chronological record of the decisions made by the entity.

3) What is the status of these documents:


Have ALL shareholder’s executed a stock purchase, shareholder or if an LLC – an operating agreement?

Are there differences in the agreements between these individuals?

If so, is that because some have more or less rights than others?

Fiduciary duties:  In the LLC context, did you limit the duties that one member has to the others or between the manager and any member?

Deadlocks: How do you resolve deadlocks? If there are only two owners and they each own 50% of the equity, how will you resolve a deadlock?

Rights to Repurchase or Buyouts: What triggers the rights? what is the method of valuation? Does one equity holder have the right to force another equity holder to buy them out (ie. they have a put) versus the Company or a member have the right to buy away the equity of another member (ie. an call like option?).

4) Tax Matters: Many suspension and reporting problems come about because the tax preparer, advisor and the Client are not communicating about the following items:



IF YOU WOULD LIKE TO GO THRU MY APPROACH TO FORMATION, PLEASE GIVE ME A CALL 310-570-2399.  I offer fixed or flat fee programs for various scenarios. 



Commercial Drone Rules 1.0

On June 21, 2016 the FAA posted FINAL Rules for Commercial Drones – to go into effect August 2016.

A summary of the rules are attached here and a full text of the rules follow here.

Overview: You need a certification to operate commercially. Most requirements are waivable. Most require a reasonableness standard.

You will need a certification to operate commercially.  Here are the min. requirements:

  • must either hold a remote pilot airman certificate with a small UAS rating or be under the direct supervision of a person who does hold a remote pilot certificate (remote pilot in command).
  • To qualify for certificate, a person must either: 
  • Pass an initial aeronautical knowledge test at an FAA-approved knowledge testing center; OR
  • Hold a part 61 pilot certificate other than student pilot, complete a flight review within the previous 24 months, and complete a small UAS online training course provided by the FAA.
  • Be vetted by the Transportation Security Administration.
  • Be at least 16 years old

I will attempt to give you a summary of the summary so that you can get a sense of what this first Final set of rules requires.

  • 55 lbs all in including packages
  • Visual line-of-sight (VLOS) only
  • Remain close enough to see the aircraft with vision unaided by any device
  • May not operate over any persons other than you, not under a covered structure, and not inside a covered stationary vehicle (imagine that one).
  • Day only
  • Must yield to other aircraft.
  • May use visual observer (VO) – will require further reading to understand.
  • First-person view camera cannot satisfy “see-and-avoid” requirement but can be used as long as requirement is satisfied in other ways.
  • Max. speed of 100 mph (87 knots).
  • Max. altitude of 400 feet above ground within 400 feet of a structure.
  • Min. weather visibility of 3 miles
  • Operations in Class B, C, D and E airspace are allowed with the required ATC permission.
  • Operations in Class G airspace are allowed without ATC permission. •
  • No person may act as a remote pilot or for more than one aircraft
  • No ops from a moving aircraft or vehicle unless the operation is over a sparsely populated area.
  • No careless or reckless operations.
  • No carriage of hazardous materials
  • Requires preflight inspection – must read full set of rules
  • A person may not operate if he or she knows or has reason to know of any physical or mental condition that would interfere with the safe operation of a small UAS.
  • Foreign-registered small unmanned aircraft are allowed to operate under part 107 if they satisfy the requirements of part 375.
  • External load operations are allowed if the object being carried by the unmanned aircraft is securely attached and does not adversely affect the flight characteristics or controllability of the aircraft.
  • Transportation of property for compensation or hire allowed provided that attached systems, payload and cargo weigh less than 55 pounds total;
  • The flight is conducted within visual line of sight and not from a moving vehicle or aircraft; and
  •  wholly within the bounds of a State and not between (1) Hawaii and another place in Hawaii through airspace outside Hawaii; (2) the District of Columbia and another place in the District of Columbia; or (3) a territory or possession of the United States and another place in the same territory or possession.
  • Most of the restrictions discussed above are waivable if the applicant demonstrates that his or her operation can safely be conducted under the terms of a certificate of waiver.

Call me to discuss if your commercial drone project falls within the Final regs and what you must know and do about it. 310-570-2399

Got Marijauana Cash? Working with Banks

I get multiple calls each week – how can you help me – a licensed dispensary – obtain a workable banking relationship? 

The answer I give is really a question. A series of questions about the business that is calling me and few ever can answer the simplest question.

The simple questions are:

  • Regardless of what you sell, explain how your business works to me.
  • Are you licensed?
  • Who formed your dispensary?
  • Do you have a lease?
  • How about a simple one paragraph business plan?
  • Have you ever been in any type of business?

If you can’t answer these questions to me, lord knows, a bank won’t want to take your money as a depositor.  That would be almost true regardless of the fact you propose to be in the medical marijuana business but the marijuana part takes it up a notch. You must be even more organized. This is not the 60s and you must begin to talk and act like a real business person. 

Federal Law makes banking as a “marijuana-preneur” really hard.

Here is why: It is plain and simple, Marijuana is still a Class 1 drug and possession and distribution violate Federal law. State law, like in California, differs from Federal law and that only makes things more complex and confusing.  For example, how on earth can you maintain a bank account? Nothing here is intended as advice to circumvent state of federal law.  Caveat Emptor.  But if you prepare a Business Profile based on the concerns of the Federal enforcement agencies, your likelihood of developing a workable relationship with a bank, improves drastically.

  1. Prepare yourself: Create a Business Profile
    1. Business Plan: Using the Cole Memo and SAR Due Diligence Items as your Table of Contents
    2. What assets do you have? Build a simple balance sheet
    3. Business licenses
    4. Organizational Documents
    5. Background on Members of LLC
    6. Credit Reports and Credit background
  2. Know the Cole Memo (Prosecution Guidelines):
    1. Know the Federal Government’s Priorities for Prosecuting Marijuana Activity (things to avoid)
    2. The “Cole Memo priorities” include:
      1. Preventing the distribution of marijuana to minors;
      2. Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;
      3. Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;
      4. Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
      5. Preventing violence and the use of firearms in the cultivation and distribution of marijuana;
      6. Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
      7. Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and
      8. Preventing marijuana possession or use on federal property

[More on the Cole Memo: “The Cole Memo reiterates Congress’s determination that marijuana is a dangerous drug and that the illegal distribution and sale of marijuana is a serious crime that provides a significant source of revenue to large-scale criminal enterprises, gangs, and cartels. The Cole Memo notes that DOJ is committed to enforcement of the CSA consistent with those determinations.” See Fin Cen Directive)]

3. Suspicious Activity Reports: Even if you find a bank that you can work with, they will most likely have to file a SAR. But you should go in prepared to answer these question in advance.

  1. Note: “This FinCEN guidance clarifies how financial institutions can provide services to marijuana related businesses consistent with their BSA obligations. In general, the decision to open, close, or refuse any particular account or relationship should be made by each financial institution based on a number of factors specific to that institution.”
  2.  Due Diligence Items You Must Address:
    1. verifying with the appropriate state authorities whether the business is duly licensed and registered;
    2.  reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business;
    3. requesting from state licensing and enforcement authorities available information about the business and related parties;
    4. developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers);
    5. ongoing monitoring of publicly available sources for adverse information about the business and related parties;
    6. ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and
    7. refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk.
  3. “Marijuana Limited” SAR Filings: This is the reality
    1. To quote the above FinCen Notice: “A financial institution providing financial services to a marijuana-related business that it reasonably believes, based on its customer due diligence, does not implicate one of the Cole Memo priorities or violate state law should file a “Marijuana Limited” SAR.”
    2. Red Flags: If your business exhibits any of these, change your business:
      1. A customer appears to be using a state-licensed marijuana-related business as a front or pretext to launder money derived from other criminal activity (i.e., not related to marijuana) or derived from marijuana-related activity not permitted under state law.
      2. Relevant indicia could include:
        1. The business receives substantially more revenue than may reasonably be expected given the relevant limitations imposed by the state in which it operates.
        2. The business receives substantially more revenue than its local competitors or than might be expected given the population demographics.
        3. The business is depositing more cash than is commensurate with the amount of marijuana-related revenue it is reporting for federal and state tax purposes.
        4. The business is unable to demonstrate that its revenue is derived exclusively from the sale of marijuana in compliance with state law, as opposed to revenue derived from (i) the sale of other illicit drugs, (ii) the sale of marijuana not in compliance with state law, or (iii) other illegal activity.
        5. The business makes cash deposits or withdrawals over a short period of time that are excessive relative to local competitors or the expected activity of the business.
      3. Deposits apparently structured to avoid Currency Transaction Report (“CTR”) requirements.
      4. Rapid movement of funds, such as cash deposits followed by immediate cash withdrawals.
      5. Deposits by third parties with no apparent connection to the account holder.
      6. Excessive commingling of funds with the personal account of the business’s owner(s) or manager(s), or with accounts of seemingly unrelated businesses.
      7. Individuals conducting transactions for the business appear to be acting on behalf of other, undisclosed parties of interest.
      8. Financial statements provided by the business to the financial institution are inconsistent with actual account activity.
      9. A surge in activity by third parties offering goods or services to marijuana-related businesses, such as equipment suppliers or shipping servicers.
      10. The business is unable to produce satisfactory documentation or evidence to demonstrate that it is duly licensed and operating consistently with state law.
      11. The business is unable to demonstrate the legitimate source of significant outside investments.
      12.  A customer seeks to conceal or disguise involvement in marijuana-related business activity. For example, the customer may be using a business with a non-descript name (e.g., a “consulting,” “holding,” or “management” company) that purports to engage in commercial activity unrelated to marijuana, but is depositing cash that smells like marijuana.
      13.  Review of publicly available sources and databases about the business, its owner(s), manager(s), or other related parties, reveal negative information, such as a criminal record, involvement in the illegal purchase or sale of drugs, violence, or other potential connections to illicit activity.
      14. The business, its owner(s), manager(s), or other related parties are, or have been, subject to an enforcement action by the state or local authorities responsible for administering or enforcing marijuana-related laws or regulations.
      15. A marijuana-related business engages in international or interstate activity, including by receiving cash deposits from locations outside the state in which the business operates, making or receiving frequent or large interstate transfers, or otherwise transacting with persons or entities located in different states or countries.
      16.  The owner(s) or manager(s) of a marijuana-related business reside outside the state in which the business is located.
      17. A marijuana-related business is located on federal property or the marijuana sold by the business was grown on federal property.
      18. A marijuana-related business’s proximity to a school is not compliant with state law.
      19. A marijuana-related business purporting to be a “non-profit” is engaged in commercial activity inconsistent with that classification, or is making excessive payments to its manager(s) or employee(s).


To speak further about having us help you develop your Business Plan to help you determine compliance with the Cole Memo, the FinCen and the SAR and Red Flags, please give me a call 310-570-2399

Recommending Retirement Investments?

Is your “financial advisor” subject to the new Department of Labor Conflict of Interest in Retirement Plans and Fiduciary rules?

Have you asked them the following questions:

Do you consider yourself a fiduciary?

  • If not, why not?
  • Are you willing to act as a fiduciary with a duty to act solely on my behalf?
  • Are you willing to disclose to me any conflicts of interest that may interfere with your acting solely on my behalf?
  • Are you willing to put this commitment in writing?

How are you compensated?

  • Do you earn fees or commissions based on the number of products that I buy or the size of my investment?
  • Will you earn a higher fee or other type of compensation if I invest in certain products you recommend or will you receive fees for services related to specific investment products?
  • Will you provide a list of the fees and commissions you receive either directly from me or from other sources in writing?

Are you a licensed or registered investment adviser?

  • Are you registered with the State, U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), or the Certified Financial Planner Board of Standards, Inc. (CFP Board)?
  • For how long? What is your experience?
  • Who supervises you, or, are you a sole practitioner?
  • If a sole practitioner, do you have professional liability insurance?
  • Have you (or your firm) ever been disciplined? For what?


I can help you determine whether YOUR “financial advisor” is your fiduciary?

And if you suspect that your financial advisor is not acting in your best interest, or have been harmed by a recommendation that they have made, let’s discuss what might be done to help you.

Call me at 310-570-2399 or email me at gregory[@]