City Takes on Cannabis Kings and Red Tag Bandits

On the face of things, it just looked like a crew of corner-cutting, scofflaw real estate types from an outfit called West Bluff Capital got dragged before the City Council by a couple of upright, uptight solid citizen types for totally renovating an Upper East house without getting necessary permits. West Bluff had, in fact, gotten a permit to replace the roof. But along the way, they totally remodeled the interior of a home built in 1953 by the guy who created Loreto Plaza. They added a front deck that the neighbors complain invades their privacy. And they replaced the wooden garage door with a frosted-glass model that sprays nighttime light on innocent passersby. There were lots of other little things, too, that, combined, violated the integrity of what experts call “mid-century design.”

In July, city inspectors were alerted. West Bluff was ordered to stop. They didn’t. Then the inspectors affixed a red tag stop-work order to the front door. The red tag was removed so real estate agents could show the property. Work resumed. That seriously pissed off the inspectors, who then red-tagged the house again. They also called the City Attorney, who commenced legal action.

Ultimately, West Bluff managed to secure permits ​— ​after the fact ​— ​for the work it had already done. It had to pay a fine of $250. Two neighbors flipped their corks. One is a structural engineer who created four companies ​— ​all of which, it turns out, use caustic acids. He himself spent eight months getting a permit to redo his own roof. The other is a former El Presidente of Fiesta. They were so mad they appealed West Bluff’s after-the-fact permits. Do rules mean nothing? they demanded. Are there no consequences for violating rules and regulations? they asked the council.

Normally this would be just another story in the Naked City. But two of West Bluff’s principals ​— ​Julian Michalowski and Malante Hayworth ​— ​also happen to be the driving force behind the new recreational retail cannabis dispensary slated to go in at 1019 Chapala Street. For that, Julian and Malante teamed up with some serious heavy hitters in Colorado’s cannabis world. They plan to create a sprawling Central Coast cannabis empire with about eight outlets running from Lompoc to West Hollywood. Their partnership, Coastal Dispensary, was also the top scorer in the City of Santa Barbara’s intensely competitive ​— ​and now intensely contested ​— ​beauty pageant among wannabe recreational operators. They also have been green-lighted by City Hall to open a cannabis manufacturing plant on the Eastside, from which they will run a distribution center.

Julian is short and stocky, a former rugby player. He’s endowed with a charismatic smile and a menacing glower. Malante is long and lean, a former volleyball stud and onetime rock-star bartender. Neither took to the council podium to explain themselves. Instead, their partner Neil Botts showed up to play the role of designated fall guy. And I mean that literally. Botts first acknowledged work had been done without permits. He acknowledged it was wrong. He apologized for it. Then he collapsed at the dais, slowly crumbling to the ground. Mayor Cathy Murillo called a recess. Botts returned to explain he’d recently undergone treatment for cancer; he’d been absent from the business the last 18 months, and he probably would not be returning.

Where was Julian? Where was Malante?

Nowhere to be seen.

Not a good look.

It got worse. Upon council questioning, it came out that West Bluff appeared to be a serial offender, getting red-tagged as many as five time for doing work far in excess of what permits allowed on the houses they’d been flipping. It was also alleged West Bluff “lied” to city officials, telling them the offending glass garage door previously existed, when in fact, it had not.

Does it matter?

It turns out Julian and Malante also provided false information on their application to City Hall for the Chapala Street cannabis retail storefront. They claimed they owned the building outright at the time they submitted their application. In actual fact, the sale had not yet cleared escrow. Ultimately, it would, and they did come to own the property. But that was only after City Hall had extended the application deadline by one month.

Again, the question is, who cares?

For starters, a very large Arizona-based cannabis operator who lost out to Julian and Malante by just three points ​— ​out of a maximum of 1,000 ​— ​really does. Before the deadline was extended, this operator, who proposed opening a shop on the 900 block of State Street, had a higher score than Julian and Malante. He has since sued City Hall, claiming, among other things, that Coastal lied on its application and that City Hall effectively rewarded them for doing so.

It’s tempting to dismiss this as the sour grapes of a sore loser. Millions, after all, are at stake. Still, there’s a thematic consistency here that should be raising red flags ​— ​if not red tags ​— ​at City Hall. It’s hard to read City Hall’s response. On one hand, city officials insist Julian and Malante have done everything they’ve been asked and without complaint. But in legal papers, attorneys hired by City Hall charged Julian and Malante failed to live up to the written contract they signed in which they promised to “indemnify” City Hall against such legal challenges. Sounds like the squeak of a back door opening.

There are a million stories in the Naked City. To find out how this ends, we’ll need a million and one.