ELK International, Inc., d.b.a. Tri-City Wholesale; Denial of Application, 24615-24619 [05-9251]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 70, Number 89 (Tuesday, May 10, 2005)]
[Notices]
[Pages 24615-24619]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-9251]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 03-25]


ELK International, Inc., d.b.a. Tri-City Wholesale; Denial of 
Application

    On April 11, 2003, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to ELK International, Inc., d/b/a Tri-City 
Wholesale (Respondent/Elk) proposing to deny its application for a DEA 
Certification of Registration as a distributor of list I chemicals. The 
Order to Show Cause alleged, in sum that granting the application to 
distribute list I chemicals to what DEA has identified as the ``gray 
market,'' would be inconsistent with the public interest, as that term 
is used in 21 U.S.C. 823(h) and 824(a).
    Respondent, proceeding pro se, requested a hearing on the issues 
raised by the Order to Show Cause and the matter was docketed before 
Administrative Law Judge Gail A. Randall. Respondent subsequently 
retained counsel and following pre-hearing procedures, a hearing was 
held in Memphis, Tennessee, on March 9, 2004. At the hearing, both 
parties called witnesses to testify and introduced documentary 
evidence. Subsequently, both parties filed Proposed Findings of Fact, 
Conclusions of Law, and Argument.
    On October 7, 2004, Judge Randall issued her Recommended Findings 
of Fact, Conclusions of Law, and Decision of the Administrative Law 
Judge (Opinion and Recommended Ruling), recommending that Respondent's 
application to distribute pseudoephedrine and ephedrine chemical 
products be granted, subject to ``close monitoring'' by DEA. She did 
recommend denying ELK registration to distribute phenylpropanolamine. 
The Government filed exceptions to the Opinion and Recommended Ruling 
and on November 16, 2004, Judge Randall transmitted the record of these 
proceedings to the Deputy Administrator.
    The Deputy Administrator has considered the record in its entirety 
and pursuant to 21 CFR 1316.67, hereby issues her final order based 
upon findings of fact and conclusions of law hereinafter set forth. 
Except as otherwise set forth in this final order, the Deputy 
Administrator adopts the findings of fact and conclusions of law of the 
Administrative Law Judge. The Deputy Administrator agrees with 
recommendation that Respondent be denied registration to distribute 
phenylpropanolamine. However, she disagrees with the recommendation 
that Respondent be approved to distribute ephedrine and 
pseudoephedrine, even under monitored conditions.
    On May 9, 2002, Respondent, a Tennessee corporation owned by Mr. 
and Mrs. Nafez Elkhayyat, located in Memphis, submitted its application 
for registration as a distributor of list I chemicals, seeking approval 
to distribute pseudoephedrine, ephedrine and phenylpropanolamine.
    Prior to moving to Memphis, the Elkhayyats had owned Tri-State 
Wholesale, Elk International, Inc. (Tri-State), located in East Ridge, 
Tennessee, a suburb of Chattanooga. In May 2001, Tri-State applied for 
DEA registration to distribute list I chemicals in an application 
signed by Mrs. Elkhayyat. During a pre-registration inspection by a 
Diversion Investigator from DEA's Nashville Office, Mr. Elkhayyat was 
interviewed and stated he intended to carry whatever products his 
customers wanted.
    Despite having operating a retail grocery store for 27 years, Mr. 
Elkhayyat had little or no knowledge of listed chemicals, was unaware 
that they were used in illicit methamphetamine manufacturing and could 
not identify the names of products containing listed chemicals.
    While Tri-State was not registered with DEA, the Diversion 
Investigator found numerous name-brand products at its facility 
containing listed chemicals. These included Dayquil, Nyquil, Advil Cold 
and Sinus, Tylenol Cold and Sinus, Anacin Cough and Cold, Alka Seltzer 
Plus and Robitussin. Mr. Elkhayyat advised he had purchased these items 
from a grocery store in Texas and readily agreed to box them up and 
return them to the supplier, which he did while the Diversion 
Investigator was still on the premises. He was also provided materials 
and a briefing regarding the dangers of diversion and the record 
keeping/reporting requirements for registrants.
    An Order to Show Cause proposing to deny Tri-State's application 
was issued by DEA on May 21, 2002, and sent to the company's address in 
East Ridge. However, by then the Elkhayyats had moved to Memphis and 
sold Tri-State's assets to H & R Corporation, d.b.a. Tri-State 
Wholesale (H & R). At the time, H & R was not seeking to distribute 
listed chemicals and the Elkhayyats had not retained any ownership or 
control over H & R. Accordingly, DEA's Office of Chief Counsel directed 
that Tri-State's application be administratively withdrawn, as the 
entity submitting it no longer existed.\1\
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    \1\ It is noted that H & R Corporation's owners subsequently 
applied for DEA registration to distribute list I chemicals. An 
Order to Show Cause proposing to deny H & R registration was issued 
and the matter is currently pending final agency action.
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    In June 2002, a different Diversion Investigator than the one who 
interviewed Mr. Elkhayyat in East Ridge a year earlier, conducted the 
pre-

[[Page 24616]]

registration investigation on Elk's application. He met Mr. Elkhayyat 
and his brother at the company's Memphis facility and they discussed 
the problem of diversion and record keeping requirements. Despite the 
information having been provided him during the first pre-registration 
investigation, Mr. Elkhayyat did not indicate that he had any 
familiarity with reporting requirements. He also failed to disclose 
that his former company had previously applied for a DEA registration.
    In general, the Diversion Investigator was satisfied with Elk's 
physical security and intended policies for verifying the legitimacy of 
prospective customers. While the Elkhayyats did not yet have a customer 
list, they indicated they intended to sell listed chemicals on a 
wholesale basis, primarily to ``convenience stores, service stations, 
gasoline stations, [and] small grocery stores.''
    After returning to his office, the Diversion Investigator learned 
the Elkhayyats had applied for registration under the Tri-State name 
and he prepared a recommendation that an Order to Show Cause be issued 
to Elk based primarily on its intent to distribute list I chemicals to 
what DEA has termed the ``grey market.''
    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). Pseudoephedrine and ephedrine are 
list I chemicals which are legitimately manufactured and distributed in 
single entity and combination forms as decongestants and 
bronchodilators, respectively. Both are used as precursor chemicals in 
the illicit manufacture of methamphetamine and amphetamine.
    Phenylpropanolamine, also a list I chemical, is a legitimately 
manufactured and distributed product used to provide relief of the 
symptoms resulting from inflammation of the sinus, nasal and upper 
respiratory tract tissues and for weight control. Phenylpropanolamine 
is also used as a precursor in the illicit manufacture of 
methamphetamine and amphetamine. In November 2000, the United States 
Food and Drug Administration issued a public health advisory requestion 
drug companies to discontinue marketing products containing 
phenylpropanolamine, due to risk of hemorrhagic stroke. As a result, 
many pharmaceutical companies have stopped using phenylpropanolamine as 
an active ingredient. See, Gazaly Trading, 69 FR 22561 (2004).
    As testified to by government witnesses and as addressed in 
previous DEA final orders, methamphetamine is an extremely potent 
central nervous system stimulant and its abuse is a persistent and 
growing problem in the United States. See, e.g., Direct Wholesale, 69 
FR 11654 (2004); Branex, Inc., 69 FR 8,682 (2004); Denver Wholesale, 67 
FR 99986 (2002); Yemen Wholesale Tobacco and Candy Supply, Inc., 67 FR 
9997 (2002).
    A Diversion Control Group Supervisor and Special Agent testified at 
the hearing regarding the rapid proliferation of clandestine 
methamphetamine laboratories in Tennessee and its adjoining states and 
described the local methods of production. They recounted the multiple 
health hazards and social costs stemming from the production and abuse 
of methamphetamine and testified to a dramatic increase in local 
clandestine laboratories. As discussed in several recently published 
final orders, Tennessee now leads the DEA Atlanta Region in the number 
of clandestine laboratories seized. See, e.g., Prachi Enterprise, Inc., 
69 FR 69407 (2004); CWK Enterprises, Inc., 69 FR 69400 (2004). Further, 
DEA has found that local ``[d]istributors or retailers serving the 
illicit methamphetamine trade observe no borders and trade across state 
lines.'' Id., 69 FR at 69401.
    The Special Agent credibly testified that local manufacturers 
typically acquired their pseudoephedrine and ephedrine precursors from 
area convenience stores and small ``mom and pop'' stores and would 
patronize multiple stores, in order to deflect attention from their 
buying patterns. In his experience, the precursor most often found in 
area laboratories was Max Brand, followed by other ``off name'' brands, 
such as Mini-Thins, Pseudo-60's and Two-Ways. The preferred 
pseudoephedrine strength of illicit manufacturers is 60 mg. The Special 
Agent further testified that he had never personally encountered 
nationally known brand names at illicit sites, such as Advil Cold and 
Sinus, Tylenol Allergy and Sinus, Tylenol Sinus, Tylenol Cold, Nyquil, 
Dayquil, Theraflu, BC Allergy Sinus Cold or Alka Seltzer.
    By written declaration, a DEA Diversion Investigator contrasted the 
``traditional'' market for list I chemicals with what DEA has termed 
the ``gray market'' for these products. The traditional market, 
characterized by a short distribution chain from manufacturer to 
distributor to retailer, typically includes large chain grocery stores, 
chain pharmacies, large convenience stores and large discount stores. 
The gray market is characterized by additional layers of distribution 
and includes such non-traditional retailers as small convenience 
stores, gas stations and other retail establishments where customers do 
not usually purchase over-the-counter medications. These non-
traditional retailers typically sell higher-strength products in larger 
package sizes, such as 100 or 120 count bottles of 60 mg. 
pseudoephedrine. The Diversion Investigator also identified the off-
name brands found in disproportionate numbers during clandestine 
laboratory seizures. These included Max Brand, Mini Two Way, MiniThin 
and Action-Pseudo products.
    Max Brand Pseudo 60s has previously been identified by DEA as the 
``precursor product predominantly encountered and seized at clandestine 
methamphetamine laboratories'' and convenience stores are the ``primary 
source'' for the purchase of ``Max Brand products, which are the 
preferred brand for use by illicit methamphetamine producers * * *'' 
See, Express Wholesale, 69 FR 62086, 62087 (2004); see also, RAM, Inc. 
d/b/a American Wholesale Distribution Corp., 70 FR 11693 (2005).
    A Group Supervisor from DEA's Nashville office testified that, in 
his view, the area's demand for pseudoephedrine and ephedrine for 
legitimate medical purposes, did not justify the supply.
    Mr. Elkhayyat testified at the hearing that he and his wife were 
Elk's sole shareholders and the company sold candy, tobacco and other 
sundry items on a wholesale basis to area convenience stores, service 
stations and small restaurants. Judge Randall found Mr. Elkhayyat 
credibly testified that, prior to Tri-State's application, he had been 
a retail grocer and was unaware that a license was needed to distribute 
ephedrine and pseudoephedrine products on a wholesale basis.
    After selling Tri-State to H & R in 2001, the Elkhayyats moved to 
Memphis and began their wholesale distribution business under Elk 
International's corporate charter. Mr. Elkhayyat testified that he had 
no interest in selling ``Max Brand or Mini Thins'' and would abide by 
DEA regulations. He testified the company would sell only name brand 
products such as Advil Cold and Sinus, Tylenol Cold and Sinus, Nyquil, 
Dayquil, Theraflu, Alka Seltzer, Benadryl and Vick's Cough Medicine, 
which the Special Agent had testified were rarely, if ever, found at 
clandestine laboratories.
    By declaration, the Government introduced evidence regarding 
ephedrine and pseudoephedrine sales and the convenience store market 
from Mr. Jonathan Robbin, a consultant in marketing information systems 
and

[[Page 24617]]

databases, who is an expert in statistical analysis and quantitative 
marketing research.
    Using the 1997 United States Economic Census of Retail Trade, Mr. 
Robbin tabulated data indicating 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. He characterized these five retail 
industries as the traditional marketplace where such goods are 
purchased by ordinary customers.
    Analyzing national sales data specific to over-the-counter, non-
prescription drugs containing pseudoephedrine, Mr. Robbin's research 
and analysis showed that a very small percentage of the sales of such 
goods occur in convenience stores; only about 2.6% of the Health and 
Beauty Care category of merchandise or 0.05% of total in-store (non-
gasoline) sales. He determined that the normal expected retail sales of 
pseudoephedrine tablets in a convenience store would range between 
$10.00 and $30.00 per month, with an average monthly sales figure of 
about $20.00 and that sales of more than $100.00 in a month would be 
expected to occur in a random sampling about once in one million to the 
tenth power.
    According to Mr. Robbin, ``[h]alf of the Tennessee stores analyzed 
showed implied sales over ten times expectation, with ten of them over 
twenty times expectation.'' These differences were extremely 
significant statistically and in his expert opinion, small Tennessee 
convenience stores were not selling pseudoephedrine and ephedrine 
products ``for their intended purpose as non-prescription drugs'' and 
the assumption that they were supplying the gray market was 
statistically supported ``many times over* * *''
    Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an 
application for a 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 nad 
pharmacies pursuant to subsection (f) of section 823, these factors are 
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., Direct 
Wholesale, 69 FR 11654 (2004); Energy Outlet, 64 FR 14269 (1999); Henry 
J. Schwartz, Jr., M.D., 54 FR 16422 (1989).
    As to factor one, maintenance by the applicant of effective 
controls against diversion, the Deputy Administrator agrees with Judge 
Randall that Elk's proposed physical security is adequate. With regard 
to Elk's proposed monitoring and business practices, Judge Randall 
noted the company's proposed practices ``seemed adequate'' and that, 
while the company had yet to prove the viability of these practices, 
she concluded ``such a lack would support close scrutiny by DEA, but 
not* * * outright denial.'' Judge Randall therefore concluded that 
factor one weighed in favor of registration.
    The Deputy Administrator disagrees with that condition. As noted by 
the Government in its Objections, even if Respondent was able to 
monitor sales to gray market customers for excessive amonts, DEA has 
previously found that grey market retailers supplying chemicals for 
illicit use regularly acquire their product from multiple distributors 
in order to mask their acquisition of large amounts of listed 
chemicals. See, Titan Wholesale, Inc., 70 FR 12,727 92005). Thus, so 
long as Elk was distributing wholesale to this suspect market, even 
sincere efforts by Respondent to self-regulate its customers would not 
thwart gray market retailers from obtaining precursor chemicals from 
other distributors, as well as from Elk, and then reselling them for 
illicit purposes.
    Further, a policy of DEA Headquarters directing field offices to 
provide individual registrants extraordinary scrutiny and monitoring, 
simply to justify an otherwise unwarranted registration, would 
ultimately have an adverse cumulative impact on the execution of DEA's 
mission, given the limited assets and extraordinary demands placed upon 
its personnel in the field.
    In sum, the Deputy Administrator concludes that factor one weighs 
against granting Respondent's application, primarily because of its 
intent to participate in the gray market, See, Titan Wholesale, Inc., 
supra, 70 FR 12727; TNT Distributors, Inc., 70 FR 12729 (2005).
    With regard to factor two, Respondent's compliance with applicable 
Federal, state and local law, Judge Randall concluded this factor 
weights in favor of registration. In doing so, she rejected the 
Government's argument that Respondent's owners, while doing business as 
Tri-State, had distributed brand name listed chemical products without 
a registration, thus violating law and regulations. Because the 
products were only found by the Diversion Investigator stocked on Tri-
State's shelves and no direct evidence was introduced showing they had 
been resold, Judge Randall concluded there was insufficient evidence to 
show the Elkhayyat's had, in fact, distributed the listed chemicals 
products, thus triggering a registration requirement.
    The Government objected to that conclusion, arguing Tri-State was 
actively in business as a wholesale at the time of the pre-registration 
inspection and that all of the products at its unregistered facility, 
including listed chemicals, were there for distribution to retail 
customers, not merely for storage. The Deputy Administrator agrees with 
the Government that, under the facts of this case, it is appropriate to 
infer the Elkhayyats, while operating Tri-State, distributed, attempted 
to distribute or possessed with the intent to distribute, list I 
chemicals without a requisite registration. However, the Deputy 
Administrator considers this apparent non-compliance mitigated by Mr. 
Elkhayyat's then-lack of knowledge as to what products actually 
contained listed chemicals and his cooperation in immediately returning 
the items to his out of state supplier.
    More significant for factor two and factor five as well, the Deputy 
Administrator notes that state legislatures throughout the United 
States are actively considering legislation designed to impede the 
ready availability of precursor chemicals. Many of these proposals are 
similar to legislation enacted by the State of Oklahoma, titled the 
``Oklahoma Methamphetamine Reduction Act of 2004.'' Under that measure, 
as of April 6, 2004, pseudoephedrine tablets were designated as 
Schedule V controlled

[[Page 24618]]

substances and may be sold only from licensed pharmacies within that 
state.
    As a result, it is prohibited in Oklahoma to sell these products 
from gray market establishments, such as independent convenience 
stores, which have contributed so much to the scourage of 
methamphetamine abuse, See, e.g., Express Wholesale, supra, 69 FR at 
62809 [denying DEA registration to an Oklahoma gray market distributor, 
in part, because of new state restrictions].
    A review of data for 2004 reveals the Oklahoma law has resulted in 
an apparent reduction in the number of seizures involving clandestine 
methamphetamine laboratories in the state. These developments are 
encouraging and represent an important step in the ongoing battle to 
curb methamphetamine abuse in the United States. State legislation, 
such as Oklahoma's, reflects a positive trend and growing recognition 
that the diversion of precursor chemicals through the gray market 
insidiously impacts public health and safety. See, e.g., Tysa 
Management, d/b/a Osmani Lucky Wholesale, 70 FR 12732, 12734 (2005) 
[denying registration to intended Oklahoma distributor, in part, on 
basis of enactment of recent state legislation]; Express Wholesale, 
supra, 69 FR at 62089.
    Of particular consequence to Elk and similarly situated Tennessee 
applicants and registrants, after Judge Randall signed her Opinion and 
Recommended Ruling, legislation was enacted by the State of Tennessee 
that is patterned after the Oklahoma initiative. That legislation 
(Senate Bill 2318/House Bill 2334), collectively known as the ``Meth-
Free Tennessee Act of 2005,'' was signed into law by Governor Phil 
Bredeson on March 31, 2005, and makes it unlawful for establishments, 
other than licensed pharmacies, to sell tableted pseudoephedrine 
products in Tennessee after April 1, 2005. This includes both name 
brand and off-name brand products.
    Accordingly, Respondent's entire intended customer base is now 
prohibited by state law from selling the pseudoephedrine products Elk 
seeks DEA registration to distribute. Thus, factor two weighs heavily 
against registration. See, Tysa Management, d/b/a Osmani Lucky 
Wholesale, supra, 70 FR at 12734; Express Wholesale, supra, 69 FR at 
62089.
    As to factor three, any prior conviction record relating to listed 
chemicals or controlled substances, the Deputy Administrator concurs 
with Judge Randall that there is no evidence or any prior convictions 
of Respondent or its owners related to listed chemicals or controlled 
substances. Accordingly, this factor weighs in favor of registration.
    With regard to factor four, the applicant's past experience in 
distributing listed chemicals, Judge Randall found that while Elk's 
owners had no prior experience in manufacturing or distributing these 
products, Mr. Elkhyyat had extensive retail grocery experience and had 
taken steps to improve his knowledge in this area. However, recognizing 
that lack of experience in handling list I chemicals has been a factor 
in prior DEA final orders denying registration, Judge Randall found 
this factor weighted against registration in a ``close call.'' The 
Deputy Administrator agrees. See, e.g., Direct Wholesale, supra, 69 FR 
11654; ANM Wholesale, 69 FR 116522 (2004); Xtreme Enterprises, Inc., 67 
FR 76195 (2002).
    With regard to factor five, other factors relevant to public health 
and safety, Judge Randall acknowledged DEA precedent denying 
registration to grey market distributors under that factor, in 
particular, Xtreme Enterprises, Inc., supra, 67 FR 76195. In that case 
there was no evidence the applicant's owner had failed to comply with 
Federal, State or local law or had any prior convictions relating to 
controlled substance or chemicals. Further, she was willing to provide 
adequate security for the listed chemicals.
    However, the Deputy Administrator found Xtreme's owner had only a 
rudimentary knowledge of what would constitute a suspicious order and 
no experience in the manufacture or distribution of listed chemicals. 
Most significant for this and similar cases, the Deputy Administrator 
also found that ``[v]irtually all of the Respondent's customers, 
consisting of gas station and convenience stores, are considered part 
of the grey market, in which large amounts of listed chemicals are 
diverted to the illicit manufacture of amphetamine and 
methamphetamine.'' Xtreme Enterprises, Inc., supra, 67 FR at 76197.
    However, in her Opinion and Recommended Ruling, Judge Randall 
distinguished the facts of Xtreme Enterprises from this matter. In 
Xtreme, the respondent's supplier had received two warning letters from 
DEA that its product had been found in situations indicating their use 
in illicit methamphetamine manufacturing. Additionally, the applicant 
had received requests for list I chemicals in packaging forms that were 
not normally seen in traditional retail establishments.
    In contrast, Judge Randall found Respondent in this case only 
intended to distribute name brand products and did not intend to 
distribute Max Brand, the precursor product most favored by illicit 
manufacturers. Based on these distinctions, Judge Randall concluded 
Elk's intent to distribute listed chemicals to the gray market did not 
``weigh as heavily'' under factor five as it did against Xtreme 
Enterprises.
    DEA has expansively applied the analysis of Xtreme Enterprises to a 
multitude of applicants seeking to do business in the gray market. See 
e.g., Express Wholesale, supra, 69 FR 624086; Value Wholesale, 69 FR 
58548 (2004); K & Z Enterprises, Inc., 69 FR 5175 (2004); William E. 
``Bill'' Smith d/b/a B & B Wholesale, 69 FR 2259 (2004); Branex 
Incorporated, supra, 69 FR 8682; Shop It for Profit. 69 FR 1311 (2003); 
Shani Distributors, 68 FR 62324 (2003).
    As in those cases, the Elkhayyats' lack of criminal records, 
previous general compliance with the law and regulations and their 
professed willingness to comply with regulations and guard against 
diversion, are far outweighed by their intent to sell ephedrine and 
pseudoephedrine, almost exclusively, in the gray market.
    This reasoning has also been consistently applied by the Deputy 
Administrator in a series of final orders published after Judge Randall 
issued her Opinion and Recommended Ruling in this matter. See, TNT 
Distributors, Inc., supra, 70 FR 12729; Titan Wholesale, Inc., supra, 
70 FR 1227; RAM, Inc. d/b/a American Wholesale Distribution Corp., 
supra, 70 FR 11693; Al-Alousi, Inc., 70 FR 3561 (2005); Volusia 
Wholesale, supra, 69 FR 69409; Prachi Enterprises, Inc., supra, 69 FR 
69407; CWK Enterprises, Inc., 69 FR 69400 (2004); J & S Distributors, 
69 FR 62089 (2004); Express Wholesale, supra, 69 FR 62086; Absolute 
Distributing, Inc., 69 FR 62078 (2004).
    In any event, Judge Randall's reason for not giving Xtreme 
Enterprises more weight in this matter, i.e., Respondent's intent to 
carry only brand name products, has been mooted by Tennessee's new 
requirement that all pill and tablet pseudoephedrine products, 
including those marketed under traditional brand names, be sold only 
through registered pharmacies. As this statute, addressed more fully 
under factor two, effectively bars distribution of these products 
though Tennessee's gray market establishments, it is also relevant 
under factor five and weighs heavily against Respondent's registration.
    The Deputy Administrator also notes with concern Mr. Elkhayyat's 
initially

[[Page 24619]]

professed willingness to sell his customers whatever products they 
wanted and his apparent lack of candidness with investigators, when he 
failed to reveal that his former company had applied for registration 
to distribute listed chemicals.
    Finally, as recommended by Judge Randall, due to the apparent lack 
of safety associated with the use of phenylpropanolamine, factor five 
is also relevant to Elk's proposal to distribute that product. DEA has 
previously determined that such a request constitutes a ground under 
factor five for denial of an application for registration. See J & S 
Distributors, supra, 69 FR 62089; Gazaly Trading, supra, 69 FR 22561; 
William E. ``Bill'' Smith d/b/a B & B Wholesale, supra, 69 FR 22559; 
Shani Distributors, supra, 68 FR 62324.
    Based on the foregoing, the Deputy Administrator concludes that 
granting Respondent's pending application 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 C.F.R. 0.100(b) and 0.104, hereby orders that the pending 
application for a DEA Certificate of Registration, previously submitted 
by Elk International, Inc., d.b.a. Tri-City Wholesale, be, and it 
hereby is, denied. This order is effective June 9, 2005.

    Dated: May 2, 2005.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 05-9251 Filed 5-9-05; 8:45 am]
BILLING CODE 4410-09-M