Tysa Management, d/b/a Osmani Lucky Wholesale; Denial of Application, 12732-12734 [05-5068]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 70, Number 49 (Tuesday, March 15, 2005)]
[Notices]
[Pages 12732-12734]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-5068]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Tysa Management, d/b/a Osmani Lucky Wholesale; Denial of 
Application

    On July 23, 2004, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to Mr. Ty Osmani, President, Tysa Management, 
d.b.a. Osmani Lucky Wholesale (hereinafter referred to as ``OLW'') 
proposing to deny its application executed on October 15, 2003, for DEA 
Certificate of Registration as a distributor of list I chemicals. The 
Order to Show Cause alleged that granting the application of OLW would 
be inconsistent with the public interest as that term is used in 21 
U.S.C. 823(h).
    According to the DEA investigative file, the Order to Show Cause 
was sent by certified mail to OLW at its proposed registered location 
in Denison, Texas and was received on August 2, 2004. According to the 
investigative file, DEA received a letter from Tysa Osmani (Mr. Osmani) 
dated August 20, 2004, waiving the applicant's right to a hearing and 
requesting that the firm be issued a registration to distribute 
ephedrine.
    Accordingly, the Deputy Administrator finds that OLW has waived its 
hearing right. See, Aqui Enterprises, 67 Fed. Reg. 12567 (2002). After 
considering relevant material from the investigative file in this 
matter, the Deputy Administrator now enters her final order without a 
hearing pursuant to 21 CFR 1309.53(b) and (d). The Deputy Administrator 
finds as follows:
    List I chemicals are those that may be used in the manufacture of a 
controlled substance in violation of the Controlled Substances Act. 21 
U.S.C. 802(34); 21 CFR 1310.02(a). As noted in previous DEA final 
orders, Pseudoephedrine and ephedrine are list I chemicals commonly 
used to illegally manufacture methamphetamine, a Schedule II controlled 
substance . Methamphetamine is an extremely potent central nervous 
system stimulant and its illicit manufacture and abuse are ongoing 
public health concerns in the United States. See e.g., Direct 
Wholesale, 67 FR 11, 654 (2004); Yemen Wholesale Tobacco and Candy 
Supply, Inc., 67 FR 9,997 (2002); Denver Wholesale, 67 FR 99,986 
(2002).
    On April 6, 2004, the State of Oklahoma enacted House Bill 2176. 
Among its provisions, the newly enacted legislation has designated 
pseudoephedrine tables as a Schedule V controlled substance under 
Oklahoma law. This provision further mandates that pseudoephedrine 
tablets sold only from licensed pharmacies and requires customers 
seeking to purchase this product to present photo identifications and 
sign for their purchases. As a result, it is presently prohibited under 
Oklahoma law for persons to sell pseudoephedrine tables from 
convenience stores or other non-pharmacy locations.
    The Deputy Administrator's review of the investigative file reveals 
that on October 15, 2003, Mr. Osmani submitted an application for DEA 
Registration on behalf of OLW. OLW sought DEA registration as a 
distributor of the list I chemicals ephedrine and pseudoephedrine. OLW 
is a Limited Liability Corporation which became incorporated in Texas 
on October 23, 2003, and Mr. Osmani and his wife are the company's only 
employees.
    On November 13, 2003, DEA diversion investigators conducted an on-
site preregistration inspection at OLW's proposed registered location 
in Denison, Texas. The location requested by OLW as a DEA-registered 
premise was a former gas station establishment. DEA's investigation 
revealed that in addition to its proposed registered location, Mr. 
Osmani owns the following Denison-area convenience stores. Lucky Liquor 
& Discount Tobacco; Lucky Stop 2; and, Lucky Stop 4. 
Mr. Osmani is also the owner of two Lucky Stop convenience stores 
located in Cartwright and Durant, Oklahoma. DEA's investigation 
revealed that as of January 2004, Cartwirght, Oklahoma had an estimated 
population of 13,549. Each of Mr. Osmani's stores sell typical 
convenience store items including tobacco products, candy, automobile 
maintenance products and T-shirts.
    Mr. Owmani informed DEA investigators that he would operate as a 
wholesale distributor to his five convenience stores, which he 
identified as his only customers. He further discussed plans to 
distribute certain listed chemical products, including Mini-Thin 
ephedrine tablets in six-count packets and 60-count bottles, as well as 
Max Brand pseudoephedrine products, also in six-count packets and 60-
count bottles. Mr. Osmani estimated that these products would make up 
five to fifteen percent of OLW's total sales. Mr. Osmani further 
informed DEA investigators that OLW did not own any deliver trucks and 
employees from the two Oklahoma convenience stores would drive to OLW's 
Denison location to pick up list I chemical products for delivery to 
the Oklahoma business establishment.
    According to the investigative file, as of July 1, 2003, 
distributors of pseudoephedrine products conducting business in 
Oklahoma were required to obtain a registration with the Director of 
the Oklahoma Bureau of Narcotics and Dangerous Drugs Control (the 
Bureau). 63 O.S. 2001, Section 2-302. DEA's investigation has revealed 
that as of January 7, 2004, neither Mr. Osmani nor OLW were registered 
with the Bureau to handle pseudoephedrine.
    During the aforementioned onsite inspection by DEA, Mr. Osmani also 
informed investigators that his suppliers for listed chemicals were 
Silver Star and Import Warehouse, Incorporated, both of Dallas, Texas. 
However, when DEA investigators conducted verification checks with 
OLW's proposed suppliers on November 17, 2003, the owner of Import 
Warehouse stated that he would not be supplying listed chemicals 
products to OLW; and, the owner of Silver Star informed DEA personnel 
that he had planned to supply only

[[Page 12733]]

ephedrine to OLW and not pseudoephedrine.
    On November 19, 2003, DEA investigators requested purchase records 
from the two aforementioned establishments. The owner of Import 
Warehouse provided purchase records dating from May 23, 1998 to 
September 27, 2000, for sales of listed chemicals to two of Mr. 
Osmani's Denison-area convenience stores (Lucky Stop 2 and 
Lucky Stop 4). The records revealed that with the exception of 
July and August, 1998, Mr. Osmani ordered forty-eight, 60-count bottles 
of Mini 2 Way 200mg. Guaifenesin nearly every month during the above 
time period. In addition, Mr. Osmani ordered four cases (144 bottles 
per case) of Max Alert Pseudo (pseudoephedrine) 60-count in July 1998. 
One month later, Mr. Osmani ordered an additional 192 bottles of Max 
Alert Pseudo.
    The owner of Silver Star also provided purchase records dating from 
April 24, 2001 to August 28, 2003, for the sale of listed chemical 
products to two of Mr. Osmani's Denison-area convenience stores (Lucky 
Liquor & discount Tobacco and Lucky Stop 4). The records 
revealed that on eleven separate occasions from November 8, 2001 to 
August 28, 2003, Mr. Osmani ordered a case (144 bottles per case) of 
200-count Guaifensin 12.5mg; in April 2001 and again in November 2002, 
Mr. Osmani purchased 288 bottles of this product; on April 19, 2003, 
Mr. Osmani purchased 72 (60-count) bottles of Max Brand 2-Way 
ephedrine.
    Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an 
application for Certificate of Registration if she determines that 
granting the registration would be inconsistent with the public 
interest as determined under that section. Section 823(h) requires the 
following factors be considered in determining the public interest:
    (1) Maintenance of effective controls against diversion of listed 
chemicals into other than legitimate channels;
    (2) Compliance with applicable Federal, State, and local law;
    (3) Any prior conviction record under Federal or State laws 
relating to controlled substances or to chemicals controlled under 
Federal or State law;
    (4) Any past experience in the manufacture and distribution of 
chemicals; and
    (5) Such other factors as are relevant to and consistent with the 
public health and safety.
    As with the public interest analysis for practitioners and 
pharmacies pursuant to subsection (f) of section 823, these factors are 
to be considered in the disjunctive; the Deputy Administrator may rely 
on any one or combination of factors, and may give each factor the 
weight she deems appropriate in determining whether a registration 
should be revoked or an application for registration denied. See, e.g., 
ANM Wholesale, 69 FR 11,652 (2004); Energy Outlet, 64 FR 14269 (1999). 
See also Henry J. Schwartz, Jr., M.D., 54 FR 16,422 (1989).
    The Deputy Administrator finds factors one, two, four and five 
relevant to OLW's pending registration application.
    With regard to factor one, maintenance of effective controls 
against diversion of listed chemicals into other than legitimate 
channels, the Deputy Administrator finds substantial evidence in the 
investigative file that OLW, through its owner Ty Osmani, has 
participated in the unlawful diversion of pseudoephedrine having 
reasonable cause to believe that it would be used to manufacture 
illicit methamphetamine. Mr. Osmani has purchased large quantities of 
pseudoephedrine and ephedrine products and distributed these products 
through his convenience stores located in Texas and Oklahoma. Prior to 
2004, these areas have been known for their numerous seizures involving 
clandestine methamphetamine laboratories. In most instances, the 
primary sources for the diversion of these products are convenience 
stores and other ``non-traditional retailers of over-the-counter drug 
products.'' Al-Alousi, Inc., 70 FR 3561 (2005). See, Sinbad 
Distribution, 67 FR 10232, 10233 (2002). Therefore, factor one weights 
against the granting of OLW's pending application for registration.
    With regard to factor two, compliance with applicable Federal, 
State, and local law, DEA's pre-registrant inspection revealed that as 
of July 1, 2003, distributors of pseudoephedrine products conducting 
business in Oklahoma were required to register with the state Bureau of 
Narcotics and Dangerous Drugs Control (the Bureau) pursuant to 63 O.S. 
2001, Section 2-302. Mr. Osmani and OLW's failure to obtain state 
registration to handle listed chemicals is relevant under factor two, 
and also weighs against the granting of the pending application for 
registration.
    With regard to factor four, past experience in the manufacture and 
distribution of chemicals, and factor five, such other factors relevant 
to and consistent with the public safety, the Deputy Administrator 
finds these factors relevant to Mr. Osmani and OLW's purchase of 
quantities of listed chemical products for distribution to, and sale by 
his convenience stores in Texas and Oklahoma. These listed chemical 
products were for the most part, purchased by OLW on a monthly basis 
and appeared to be far in excess of the expected demand for such 
products. As noted in previous final orders, while there are no 
specific prohibitions under the Controlled Substance Act regarding the 
sale of listed chemical products to these entities, DEA has 
nevertheless found that convenience stores constitute sources for the 
diversion of listed chemical products. Sinbad Distributing, supra at 
10233; K.V.M. Enterprises, 67 FR 70968 (2002) (denial of application 
based in part upon information developed by DEA that the applicant 
proposed to sell listed chemicals to gas stations, and the fact that 
these establishments in turn have sold listed chemical products to 
individuals engaged in the illicit manufacture of methamphetamine).
    DEA has found persuasive, expert testimony in the area of 
statistical analysis of convenience stores and their sale of 
pseudoephedrine. Branex, Inc., 69 FR 8,682 (2004); Express Wholesale, 
69 FR 62086, 62088 (2004). In analyzing the expected sale of listed 
chemical products in the State of Oklahoma, a consultant in marketing 
information and databases offered expert testimony through the use of 
the 1997 United States Economic Census of Retail Trade and tabulated 
data which indicated that ``over 97% of all sales of non-prescription 
drug products,'' including non-prescription cough, cold and nasal 
congestion remedies, occur in drug stores and pharmacies, supermarkets, 
large discount merchandisers, mail-order houses and through electronic 
shopping. The markeing consultant characterized these five retail 
industries as ``the traditional marketplace where such goods are 
purchased by ordinary customers.'' Express Wholesale, supra.
    The market consultant also analyzed national data specific to the 
sale of over-the-counter, non-prescription drugs containing 
pseudoephedrine by convenience stores which he characterized as a 
``nontraditional market'' for the sale of listed chemical products. He 
further determined ``* * * that a very small percentage of the sales of 
such goods occur in convenience stores--only about 2.6% of the HABC 
[Health and Beauty Care] category of merchandise or 0.05% of total in-
store (non-gasoline) sales.'' The marketing consultant concluded that 
``[c]onveniece stores, therefore, definitely constitute a `non-
traditional' market for the sale of over-the-counter, non-prescription 
drug pesudoephedrine products.''

[[Page 12734]]

    The marketing consultant further explained that this information 
support's DEA's conclusion that pseudoephedrine products distributed to 
this nontraditional market greatly exceeded the normal demand for such 
products at such retail outlets. He agreed that such excessive sales 
could be purchases of listed chemical products that were diverted to 
illicit uses. With respect to Oklahoma wholesale pseudoephedrine sales 
of several distributors and over 300 of their retail customers, all of 
which were convenience stores, a July 2002 analysis by the marketing 
consultant led to the conclusion ``that without evidence of the 
existence of immense numbers of legitimate customers, it was likely 
that the massive inventories of pseudoephedrine products purchased by 
these Oklahoma stores were being turned to illegal uses.'' Express 
Wholesale, supra.
    With respect to the instant matter, Mr. Osmani and OLW have 
similarly amassed large quantities of pseudoephedrine and ephedrine 
products. The frequency and quantity of listed chemicals purchased by 
OLW from 1998 to 2003 defined all available and conventional marketing 
data for the expected sale of these products. Given the demonstrated 
lack of legitimate demand for these products when sold from convenience 
stores, the Deputy Administrator is left with the conclusion that Mr. 
Osmani and OLW purchased pseudoephedrine and ephedrine products for 
sale to individuals involved in the illicit manufacture of 
methamphetamine.
    As noted above, effective April 6, 2004, Oklahoma enacted House 
Bill 2176, titled the ``Oklahoma Methamphetamine Reduction Act of 
2004.'' This provision includes the requirement that the sale of 
pseudoephedrine tablets are now restricted to licensed pharmacies. As 
in a prior DEA final order, the Deputy Administrator finds in the 
instant matter that OLW's proposed distribution of listed chemicals 
through its convenience stores is no longer legally viable in Oklahoma. 
See, Express Wholesale, supra at 62089.
    A review of early data for 2004 reveals that the newly enacted laws 
have resulted in an apparent reduction in the number of seizures 
involving clandestine methamphetamine labs in Oklahoma. These 
developments in Oklahoma are encouraging and represent another 
important step in the ongoing battle to curb methamphetamine abuse in 
the United States. In keeping with this positive trend, DEA must also 
act in an appropriate fashion to ensure that listed chemicals are not 
diverted. The Deputy Administrator notes that while Mr. Osmani and OLW 
seek DEA registration in the State of Texas, the company also seeks to 
distribute listed chemicals from convenience stores located in 
Oklahoma. Based solely on the population statistics of Cartwright and 
Durant, Oklahoma, it would appear at first glance that the market for 
over-the-counter drug products in these cities is relatively 
insignificant. However, as the record before the Deputy Administrator 
clearly demonstrates, the relatively small size of the Oklahoma markets 
serviced by OLW is not a significant factor since Mr. Osmani appears 
intent on purchasing extraordinarily large quantities of listed 
chemical products without regard to market size. These purchasing 
practices indicate that OLW would willingly accommodate persons 
involved in the illicit methamphetamine trade. Based on the foregoing, 
the Deputy Administrator concludes that granting the pending 
application of OLW would be inconsistent with the public interest.
    Accordingly, the Deputy Administrator of the Drug Enforcement 
Administration, pursuant to the authority vested in her by 21 U.S.C. 
823 and 28 CFR 0.100(b) and 0.104, hereby orders that the pending 
application for DEA Certificate of Registration, previously submitted 
by Tysa Management, d.b.a. Osmani Lucky Wholesale be, and it hereby is, 
denied. This order is effective April 14, 2005.

    Dated: February 24, 2005.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 05-5068 Filed 3-14-05; 8:45 am]
BILLING CODE 4410-09-M