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Originally published October 6, 2012 at 8:02 PM | Page modified October 9, 2012 at 3:08 PM

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Corrected version

Pot proves big mistake for enterprising schemer

From vodka impresario to real-estate mogul to medical marijuana-dispensary owner, Craig Dieffenbach now faces time in federal prison.

Seattle Times staff reporter

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Greedy cocaine dealing, Hendrix spirit stealing, medicine robbing rat. MORE
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Not too long ago, Craig Dieffenbach was living high on what he was certain was marketing genius: a Jimi Hendrix-themed vodka.

In 2005, he introduced it by hosting lavish parties in Beverly Hills and Las Vegas, sometimes rolling up in a 40-foot purple Hummer.

"We're bottling Jimi's spirit," he gushed to Bloomberg News.

In earlier incarnations, Dieffenbach was a real-estate impresario, dot.com millionaire, art-gallery owner.

Now, at 51, he is facing federal prison. His mistake?

Well, he made a lot of them, landing in hot water in one venture after another.

But it was selling marijuana under the guise of medicine that's done him in. In August, he pleaded guilty to money laundering and drug conspiracy in connection with his medical-marijuana business, Seattle Cannabis Cooperative. It is among a handful of cases filed by federal authorities here in recent years accusing a dispensary of outright drug dealing.

He did not respond to a reporter's messages.

In the 1980s, while running a gallery in California, Dieffenbach founded the San Clemente Art Festival and offered to donate a portion of the proceeds to an anti-drug charity. At the same time, court records show, he was selling pounds of cocaine.

He's "an intelligent person with a great deal of talent and ability to make his way in the world," a federal judge was quoted as saying in 1990, before sentencing him to four years. He avoided a longer sentence by ratting out other dealers.

After his release, he founded SeattleOnline.com, sold it and cashed in. Next he bought several buildings in Seattle's Columbia City neighborhood, including a historic theater.

Hearing the city of Everett was planning a sports arena downtown, he began in late 2000 snapping up properties on Hewitt Avenue, a downtown boulevard that had seen better days. He and a partner bought a dozen buildings, a good chunk of the five-block stretch.

"I feel like I'm part of the rebirth of Everett," he told The Herald, noting he planned to restore the buildings to their earlier glory. The city was thrilled the renovations might attract tenants and turn the area into a bustling retail zone.

But city officials said Dieffenbach nearly killed the arena deal in the process.

He had bought an old theater building for $425,000, betting it was where the city wanted to build its arena. Eight months later, he wrung $825,000 out of the city for it. He promised to build a fountain and statue for the city as part of the deal.

"He never built anything like that," said Lanie McMullin, Everett's director of economic development.

Not long after that came the vodka.

The problem was, neither he nor his partner, Jimi Hendrix' brother Leon, had rights to the trademark. Dieffenbach spent millions fighting a lawsuit by Jimi's stepsister. In the end, he was ordered to stop marketing the vodka. A judgment of $3.2 million was entered against him.

When authorities went to his house to execute the judgment, they found nearly 200 marijuana plants, according to court records.

He had entered the medical-marijuana business, opening two Seattle storefront dispensaries with two partners. Last year, someone in the industry accused them of trafficking in drugs rather than just treating patients, and authorities investigated.

An informant was sent in several times to buy marijuana, eventually walking away with 5 pounds — way too much to qualify as medicine.

Sentencing is Dec. 6.

News researcher Miyoko Wolf contributed to this report.

Maureen O'Hagan: 206-464-2562 or mohagan@seattletimes.com

Information in this article, originally published Oct. 6, 2012, was corrected Oct. 9, 2012. A previous version of this story incorrectly said Leon Hendirx did not have the rights to use Jimi Hendrix's likeness. Instead, he did not have the rights to the trademark.

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