Call The Doctor: California Investigates 420 MD Pot-Card Clinic

The Gold Rush-era office building at 36 S. First Street in downtown San Jose is like many other cannabis clinics in cities across the state. Outside, brightly colored temporary signs solicit walk-in business; inside, seated on generic office furniture, a worker in scrubs and a white coat will furnish to anyone with $40 the paperwork required to legally use medical marijuana in California.

For years, physicians and law enforcement officers in the state have bemoaned the way medical marijuana recommendations are written. For every physician treating weed with requirements similar to those of Vicodin, there are countless “prescription mills” - pop-up offices in seedy spots like Venice Beach in Los Angeles, where there's little in the way of a physical examination or inquiry into a patient's past history before “the card” is issued. One “pot doc” allows patients to book a 12-minute appointment window online; at the downtown San Jose office, patrons were observed going in and out in less than three minutes, according to a state investigation.

But it wasn't quick visits or even bad medicine that led the Medical Board of California to investigate 420 MD, which operated out of the San Jose office and three others in the Bay Area and Sacramento. Investigators started looking into 420 MD in April 2013 - tipped off by a competitor clinic, according to court filings. Prosecutors in Santa Clara County now allege that 420 MD engaged in “illegal” business practices, because a layperson and not a doctor owned the clinic.

But there's much more.

The California Medical Board has taken the unprecedented step of declaring that 420 MD is a front for an international criminal organization with roots in Eastern Europe. Not only that, but 420 is only one of several “prescription mill” operations associated with internationals from the “eastern bloc” that's appeared within the last five years in California, according to Medical Board investigator Ralph Hughes.

That's how a slender, baby-faced man in jeans and a designer T-shirt got the ankle bracelet he was wearing when I met him at a marijuana-industry convention recently. Michael Malenkov is 28, but appears younger and does not look like the central conspirator in a scheme to set up shady pot clinics across the state for investors back in Ukraine. But according to state prosecutors, that is exactly what he is. They have charged Malenkov and three others with a slew of felonies for reportedly owning the 420 MD chain of clinics.

The case is one of few instances of serious discipline resulting from alleged improprieties with evaluations in the medical marijuana field, which remains an enormous and largely unregulated cash-only business. The state's investigation of 420 MD could mean the end of so-called recommendation clinics - shady and otherwise - entirely.

After crackdowns several years ago, the state has largely left prescription mills alone. Since 2009, only 16 of the untold hundreds of physicians across the state who offer pot cards have been disciplined by the Medical Board for fudging rules, according to board data.

But 420 MD attracted attention from medical board investigators almost immediately. The investigation began in early 2013, a few months after a former OB-GYN, Bennie Brown, started writing recommendations, according to court filings. Under state law, a physician must own the clinic where recommendations are written. An outside partner or agency may offer business services, but the actual doctor must run the clinic. A state appeals court ruled in 2013 that laypeople who own prescription clinics can be charged with criminal activity.

In violation of that rule, Malenkov had hired Brown and was paying the physician $800 a day to write recommendations, Hughes wrote in court filings. Malenkov then mailed the cash - potentially in the millions per clinic - to Ukraine, back to the “family” that bankrolled the enterprise, according to prosecutors.

Malenkov, Brown, and two other co-defendants have denied all wrongdoing. Their Los Angeles attorney, Allison Margolin - who unsuccessfully attempted to get a judge to impose a gag order on the case after Hughes went on CBS-5 and used language including “organized crime” to describe 420 MD - would not comment to SF Weekly.

Meanwhile, the competing business that supposedly ratted out 420 MD could now be under scrutiny, too.

The complaint that launched the investigation, according to court filings, came from Dr. Parvin D. Syal, the medical director of 420 Evaluations, another chain of physician clinics with locations in southern California as well as San Jose, Oakland, Berkeley, and Sacramento. When contacted by investigators, however, Syal said the tip came not from him but from his “office manager,” who is identified only as “Anna.”

Syal's 420 Evaluations conducts business in the exact same way as 420 MD, according to Hughes' investigation. Indeed, a 2011 civil complaint filed in Los Angeles (later dismissed) accused 420 Evaluations of being a front in a manner similar to 420 MD.

The paper trail appears to lead directly to Malenkov. Business registration records for the clinics, including a business debit card, all have his name on them. But the trail also leads back to 420 Evaluations. It appears as if Malenkov set out to copy 420 Evaluations' processes and procedures to the letter. Before setting up his clinics, Malenkov somehow got a copy of his competitor's business plan, court records show.

The state is showing interesting timing in these latest efforts to more closely scrutinize cannabis doctors. The allegedly shady activities of 420 MD might represent a last hurrah before recreational cannabis is legal in California. With legalization looming, unscrupulous medical clinics are in a final dash for a revenue stream that may disappear after 2016. As for 420 MD, its offices remain open for business in four Bay Area cities. The downtown San Jose office is still in business, too - only now under the name “THC Doctor.” It wasn't immediately clear Tuesday who runs THC Doctor.

As for California's marijuana users? Most could care less if recommendations come from shady characters, as long as the weed is available.