Lincoln ‘K2’ Kingpin & Mom Face Decades Behind Bars

LINCOLN, NEBRASKA – Allen E. Peithman, Jr., his mother Sharon A. Elder, and their corporate entities, Cornerstone Plaza, Inc., and AEP Properties, L.L.C., are facing significant prison time after a jury delivered guilty verdicts on multiple federal charges Tuesday, March 28, 2017. The pair operated two Lincoln “head shops” – Dirt Cheap and Island Smokes – peddling dangerous synthetic cannabinoids, commonly known as “potpourri” or “K2,” and a mountain of drug paraphernalia.

The case exploded into public consciousness in April of 2015, coinciding with a spike in drug overdoses across Lincoln directly linked to the “potpourri” sold at Island Smokes. A subsequent raid uncovered over 500 packets of the substance, alongside hundreds of pieces of paraphernalia. Another search in August 2015 at Dirt Cheap yielded further evidence of illicit trade. This wasn’t just a simple drug bust; it was a calculated scheme to profit from poison, masked as legal incense.

Peithman, 41, was convicted on a staggering six counts: conspiracy to distribute drug paraphernalia; investment of drug proceeds; conspiracy to distribute misbranded substances; conspiracy to commit mail fraud; conspiracy to structure financial transactions; and committing a felony while on supervised release. AEP Properties, L.L.C., his corporation, was also found guilty of conspiracy to structure. Elder, 62, and her corporation, Cornerstone Plaza, Inc., faced five counts: conspiracy to distribute drug paraphernalia; investment of drug proceeds; conspiracy to distribute misbranded substances; conspiracy to commit mail fraud; and conspiracy to structure.

Following the initial verdict, the jury heard further evidence relating to forfeiture – the government seeking to seize assets gained through the criminal enterprise. On March 29, 2017, they ruled in favor of the government, forfeiting Cornerstone Plaza, Inc.’s business checking account, as well as all the seized drugs and paraphernalia. A money judgment against the defendants is scheduled to be considered on April 24, 2017. This isn’t just about locking them up; it’s about stripping them of the fruits of their illegal labor.

The potential penalties are severe. The conspiracy to commit mail fraud carries a possible 20-year prison sentence. Investment of drug proceeds and conspiracy to structure each carry up to 10 years. The drug-related conspiracies each carry up to three years. Peithman also faces an additional 10 years, consecutive to any other sentence, for violating his supervised release. The corporations could be fined up to $1,000,000 for the structuring conviction. Sentencing is scheduled for June 20, 2017.

The investigation was a collaborative effort between the Lincoln/Lancaster County Drug Task Force, the Food and Drug Administration (FDA), Homeland Security Investigations, and the Nebraska State Patrol. William Conway, Special Agent in Charge of the FDA Office of Criminal Investigations, Chicago Field Office, stated, “Drugs that are produced and distributed outside the FDA’s oversight put consumers at risk of being harmed. We will continue to work with our law enforcement partners to prevent such drugs from reaching the market and to bring to justice those who endanger American consumers by circumventing FDA’s regulatory process.” This case serves as a stark reminder that peddling poison, even under the guise of legal products, will not be tolerated.