Drug enforcement officials are seeing a spike in a lucrative cottage industry: indoor marijuana crops. This year's National Drug Threat Assessment, released by the Justice Department in October, says "vigorous outdoor cannabis eradication efforts have caused many marijuana producers, particularly Caucasian groups, to relocate indoors."
The "grow houses," as they're called, can be found in neighborhoods around the country, but they're becoming especially common in the Pacific Northwest — particularly in the suburbs of Seattle. Local police and federal investigators have raided at least 50 houses in the past two years alone. Authorities say they're just starting to get a handle on how widespread the practice is becoming.
Largely Run by Vietnamese Immigrants
Peter Truong is a community service officer for the sheriff's department in Seattle. He speaks Chinese and Vietnamese — also spoken by most of the people busted in grow houses around Seattle. Truong is constantly being called in by local police departments for help questioning the people arrested in the grow houses.
"A couple of weeks ago, I turn my cell phone off, my home phone off, because I got so tired," Truong says.
Truong immigrated to the United States in 1975 and has worked with the sheriff's department for 20 years. He says the people who live in grow houses tend to come from Vietnamese communities in other places — often Massachusetts and Vancouver, Canada. They're recruited by the grow operation owners to tend the plants, and they're told to keep a low profile in the suburban neighborhoods where the houses are located.
"They live normal life," Troung says, adding, "Really polite. You never know what inside."
Truong says the only tell-tale sign he's noticed is the rash that people get when they tend the plants. He guesses it's caused by the chemicals, or some other side effect of living in close quarters with hundreds of marijuana plants.
Tucked Amid Suburbia
The marijuana is grown in the middle of some very respectable Seattle suburbs, such as Renton. DEA special agent Clark Leininger has spent many long hours on stakeouts in quiet cul de sacs outside split-level homes that might sell for more than $400,000. He says he often has good evidence that a house is stuffed with pot plants, but he holds off making arrests, so he can find the larger network.
"Most of these people who are orchestrating these operations have multiple houses. Some investigators say the minimum is three, some say five. The largest number that I've run into is 12," Leininger says, referring to a case he investigated right there in Renton.
Leininger says the growers prefer to own their houses, because it eliminates the risk of a nosy landlord. And he says growers — or their intermediaries — have little trouble getting the loans to buy the houses they need. He said the man who bought 12 houses was a typical case.
"Many of the loans were zero-down, no-document loans," he says. "He did not have any employment, and if I remember correctly, he was able to purchase about $6 million worth of property — and he didn't have a job."
Backed by Crooked Mortgage Deals
It's a business model imported from British Columbia, where the grow house industry is far more advanced. In one notorious case, a mortgage broker named Danh "Victor" Van Nguyen was convicted of writing hundreds of fraudulent mortgages — many of which were found to have paid for houses containing marijuana grow operations.
Ken Frasier is with Financial Institutions Commission, a British Columbia agency that investigates, among other things, crooked mortgage deals. He says mortgage brokers there just aren't looking closely enough at who's borrowing.
"They'll simply 'pass paper,' so that they will get an application from an individual, they won't check it out, they'll simply forward it on," Frasier says.
Federal prosecutors say they're now finding the same patterns in Seattle. After Sept. 11, 2001, security on the Canadian border was tightened, making it harder to smuggle marijuana grown in the Vancouver suburbs — the well-known "B.C. Bud." So Vancouver-style grow houses started appearing in Seattle, often with Canadian ties.
In fact, Danh Van Nguyen's name — or those of his family — has shown up on deeds for Seattle-area homes that were raided as alleged grow houses. Nguyen and several other people with Vietnamese-Canadian ties have been indicted by the U.S. government. Nguyen himself is still a fugitive, living in Canada.
Federal prosecutor Sarah Vogel says it's clear to her that lenders in the Seattle area have not been asking enough questions of prospective borrowers.
Loose Lending Standards
"It seems like in some cases, applications didn't have true information on them, or perhaps in other cases nobody bothered to call," she says. "Perhaps in other cases, people just pay a higher interest rate in order to not have somebody check up on them."
The extent of background checking is a private matter between lender and customer. But King County records show that several of the houses raided for marijuana production around Seattle were bought with variable interest-rate loans, or with small down payments.
Steve Heaney, the president of the chapter of the Washington Association of Mortgage Brokers, which covers the suburbs where many of these houses are being found, says standards could be tighter — a process he says is already well under way. He says the fallout from the subprime mortgage meltdown has already made it much harder for someone without a clear source of steady, legal income to take out a mortgage.
But he also warns against tightening things up too much.
"I don't think anybody in my industry — other than the bad guys, and I believe they're a very small percentage — really want to facilitate the drug dealers. But if we eliminate completely loans with alternative documentation, there's cretainly a lot of legitimate Americans who aren't going to be able to buy a home," Heaney says.
And, legality aside, it's hard to argue with the marijuana growers' investment instincts. Typically raising three crops a year in bedrooms and basements of their suburban greenhouses, they rarely have trouble meeting their mortgage payments. And the houses, once they're raided, usually sell for more than the growers paid for them — one even went for twice the price.