David M. Starr Denial of Application, 39367-39369 [E6-10925]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 71, Number 133 (Wednesday, July 12, 2006)]
[Notices]
[Pages 39367-39369]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-10925]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


David M. Starr Denial of Application

    On February 4, 2005, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to David M. Starr (Respondent), d/b/a Northern 
Starr Products. The Show Cause Order proposed to deny Respondent's 
application for a DEA Certificate of Registration as a distributor of 
List I chemicals on the ground that Respondent's registration would be 
inconsistent with the public interest. See 21 U.S.C. 823(h).
    The Show Cause Order specifically alleged that Respondent was 
proposing to sell ephedrine and pseudoephedrine products to gas 
stations and convenience stores in the Milwaukee, Wisconsin area, and 
that these retail outlets constitute the ``gray market'' for these 
products. The Show Cause Order alleged that there is a ``high incidence 
of diversion'' of ephedrine and pseudoephedrine products from this 
market into the illicit manufacture of methamphetamine and that 
methamphetamine availability ``has been on the increase in the Western 
district of Wisconsin.'' See Show Cause Order at 2. Finally, the Show 
Cause Order alleged that Respondent had no experience in distributing 
List I chemicals and that granting Respondent's registration ``would 
likely lead to increased diversion of List I chemicals.'' Id. at 4.
    The Show Cause Order was served by certified mail, return receipt 
requested, and on February 16, 2005, Respondent acknowledged receipt. 
Since that time, neither Respondent, nor anyone purporting to represent 
him, has responded. Because (1) more than thirty days have passed since 
Respondent's receipt of the Show Cause Order, and (2) no request for a 
hearing has been received, I conclude that Respondent has waived his 
right to a hearing. See 21 CFR 1309.53(c). I therefore enter this final 
order without a hearing based on relevant material in the investigative 
file and make the following findings.

Findings

    Ephedrine and pseudoephedrine are List I chemicals that, while 
having therapeutic uses, are easily extracted from lawful products and 
used in the illicit manufacture of methamphetamine, a schedule II 
controlled substance. See 21 U.S.C. 802(34); 21 CFR 1308.12(d). As 
noted in numerous prior DEA orders, ``methamphetamine is an extremely 
potent central nervous system stimulant.'' A-1 Distribution Wholesale, 
70 FR 28573 (2005). Methamphetamine abuse has destroyed lives and 
families, ravaged communities, and created serious environmental harms.
    Respondent is the sole owner and operator of Northern Starr 
Products. Northern Starr distributes a variety of novelty items to gas 
stations and a few conveniences stores in the Milwaukee area. The 
business is located at Respondent's residence in West Bend, Wisconsin.
    On May 30, 2002, Respondent submitted to DEA an application for a 
registration as a distributor of the List I chemicals ephedrine and 
pseudoephedrine. On November 7, 2002, two DEA Diversions Investigators 
(DIs) met with Respondent to conduct a pre-registration investigation. 
Respondent proposed to sell eleven different List I chemical products 
including two tablets packs of such over-the-counter products as Advil 
Cold and Sinus, Tylenol Allergy/Sinus, Nyquil & Dayquil. Respondent, 
however, also proposed to sell several products containing 25 mg of 
ephedrine in 60-count bottle sizes.
    Respondent informed the DIs that he had no previous experience 
handling List I chemical products. Respondent further advised the DIs 
that the business was run out of the basement of his home and that he 
is the sole employee. The home is located in a residential development, 
which is surrounded by farmland and prairie land.
    Respondent told the DIs that he would store List I chemical 
products in a closed-off area of the basement. According to the 
investigative file, the home has door knob locks on the front and back 
doors. The investigative file contains no indication that Respondent's 
home has an alarm system.
    Respondent also discussed with the DIs the record keeping 
requirements for List I chemicals; Respondent appeared to understand 
them. Respondent also provided the DIs with the name and address of his 
supplier, as well as the names and addresses of the customers who he 
expected would purchase List I chemical products. Respondent's proposed 
supplier has a valid DEA registration. Moreover, the investigative file 
contains no adverse information with respect to any of Respondent's 
proposed customers. Finally, the investigative file contains no adverse 
information with respect to Respondent's compliance with applicable 
laws or criminal history.

Discussion

    Under 21 U.S.C. 823(h), an applicant to distribute List I chemicals 
is entitled to be registered unless I determine that the registration 
would be inconsistent with the public interest. In making that 
determination, Congress directed that I consider the following factors:
    (1) Maintenance by the applicant of effective controls against 
diversion of listed chemicals into other than legitimate channels;
    (2) Compliance by the applicant with applicable Federal, State, and 
local law;
    (3) Any prior conviction record of the applicant under Federal or 
State laws relating to controlled substances or to chemicals controlled 
under Federal or State law;
    (4) Any past experience of the applicant in the manufacture and 
distribution of chemicals; and

[[Page 39368]]

    (5) Such other factors as are relevant to and consistent with the 
public health and safety.

Id.

    ``[T]hese factors are considered in the disjunctive.'' Joy's Ideas, 
70 FR 33195, 33197 (2005). I ``may rely on any one or combination of 
factors, and may give each factor the weight [I] deem[] appropriate in 
determining whether a registration should be revoked or an application 
for a registration be denied.'' Id. See also Energy Outlet, 64 FR 
14,269 (1999). In this case, I conclude that factors one, four, and 
five establish that Respondent's application should be denied.

Factor One--Maintenance of Effective Controls Against Diversion

    The investigative file does not establish that Respondent would 
fail to properly comply with DEA's regulations pertaining to 
recordkeeping and reports. But ``the adequacy [of an] applicant's 
systems for monitoring the receipt, distribution, and disposition of 
List 1 chemicals,'' 21 CFR 1309.71(b)(8), is only one part of the 
inquiry under factor one.
    Determining whether an applicant will provide proper physical 
security of listed chemicals is also critical in evaluating the 
effectiveness of an applicant's controls against diversion. See 21 CFR 
1309.71(b). Here, the investigative file contains information 
indicating that Respondent would not provide proper physical security 
for List I chemical products. The investigative file indicates that 
Respondent proposed to store List I chemicals in the basement of his 
home. The home, however, has door knob locks and apparently nothing 
more. See id. at 1309.71(b)(3) (requiring consideration of ``[t]he type 
of building construction comprising the facility and the general 
characteristics of the building or buildings''). Moreover, there is no 
evidence that Respondent has an alarm system in place at his residence. 
See id. at 1309.71(b)(4) (requiring consideration of ``[t]he 
availability of electronic detection and alarm systems''). Finally, 
there is nothing in the investigative file indicating that Respondent 
was willing to upgrade the security of his proposed location to provide 
adequate protection against diversion through theft. Cf. Extreme 
Enterprises, 67 FR 76195, 76197 (2002). This factor thus weighs heavily 
in favor of denying Respondent's application. See Jay Enterprises, 70 
FR 24620, 24621 (2005).

Factors Two and Three--Compliance With Applicable Law and the 
Applicant's Prior Record of Relevant Criminal Convictions

    The investigative file contains no evidence establishing that 
Respondent is not in compliance with applicable Federal, State, or 
local laws. Moreover, Respondent has never been convicted of a criminal 
offense involving controlled substances or chemicals under Federal or 
State law. Both factors thus weigh in favor of granting Respondent's 
application.

Factor Four--Past Experience in the Manufacture or Distribution of 
Controlled Substances

    Respondent acknowledged that he has no prior experience in the 
manufacture or distribution of List I chemicals. Because of the 
potential for diversion, DEA precedent holds that an applicant's lack 
of experience in distributing List I chemicals is a factor which weighs 
heavily against granting an application for a registration. See Jay 
Enterprises, 70 FR at 24621; ANM Wholesale, 69 FR 11652, 11653 (2004); 
Cf. Extreme Enterprises, 67 FR at 76197. Respondent's lack of 
experience thus weighs against granting the application.

Factor Five--Other Factors That Are Relevant to and Consistent With 
Public Health and Safety

    Numerous DEA cases recognize that the sale of certain List I 
chemical products by non-traditional retailers is an area of particular 
concern in preventing diversion of these products into the illicit 
manufacture of methamphetamine. See Joey Enterprises, 70 FR 76866, 
76867 (2005). As Joey Enterprises explains, ``[w]hile there are no 
specific prohibitions under the Controlled Substances Act regarding the 
sale of listed chemical products to [gas stations and convenience 
stores], DEA has nevertheless found that [these entities] constitute 
sources for the diversion of listed chemical products.'' Id. See also 
TNT Distributors, 70 FR 12729, 12730 (2005) (special agent testified 
that ``80 to 90 percent of ephedrine and pseudoephedrine being used [in 
Tennessee] to manufacture methamphetamine was being obtained from 
convenience stores''); OTC Distribution Co., 68 FR 70538, 70541 (2003) 
(noting ``over 20 different seizures of [gray market distributor's] 
pseudoephedrine product at clandestine sites,'' and that in eight-month 
period distributor's product ``was seized at clandestine laboratories 
in eight states, with over 2 million dosage units seized in Oklahoma 
alone.''); MDI Pharmaceuticals, 68 FR 4233, 4236 (2003) (finding that 
``pseudoephedrine products distributed by [gray market distributor] 
have been uncovered at numerous clandestine methamphetamine settings 
throughout the United States and/or discovered in the possession of 
individuals apparently involved in the illicit manufacture of 
methamphetamine'').
    Moreover, these seizures have frequently found high-strength, high 
count List I chemical products, thus indicating that these are the 
preferred products for illicit methamphetamine manufacturers. See OTC 
Distribution, 68 FR at 70541, MDI Pharmaceuticals, 68 FR at 4236. 
Respondent proposed to sell similar high strength, high count products. 
Moreover, all of Respondent's proposed customers participate in the 
non-traditional market for ephedrine and pseudoephedrine products, and 
a significant portion of Respondent's proposed business would violate 
recently enacted provisions of Wisconsin law.\1\ See Joy's Ideas, 70 FR 
33195, 33199 (2005).
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    \1\ The State of Wisconsin recently enacted legislation to 
prevent the diversion of List I chemical products from their 
legitimate uses into the illicit manufacture of methamphetamine. See 
2005 Wis. Act 14. Under Wisconsin law, pseudoephedrine products are 
now classified as a Schedule V controlled substance unless they are 
sold in liquid form or as a liquid-filled gelcap. See Wis. Stat. 
Sec.  961.01; Sec.  961.22. As such, pseudoephedrine products ``may 
be sold at retail only by a registered pharmacist or * * * by a 
person who is working under the directions of a registered 
pharmacist when sold in a retail establishment.'' Id. Sec.  961.23.
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    DEA final orders recognize that there is a substantial risk of 
diversion of List I chemicals into the illicit manufacture of 
methamphetamine when these products are sold by non-traditional 
retailers. See, e.g., Joy's Ideas, 70 FR at 33199 (finding that the 
risk of diversion was ``real, substantial and compelling''); Jay 
Enterprises, 70 FR at 24621 (noting ``heightened risk of diversion'' 
should application be granted); Cf. Xtreme Enterprises, 67 FR at 76197. 
Under DEA precedents, an applicant's proposal to sell into the non-
traditional market weighs heavily against the granting of a 
registration under factor five. So too here.
    Furthermore, DEA has repeatedly denied an application when an 
applicant proposed to sell into the non-traditional market and analysis 
of one of the other statutory factors supports the conclusion that 
granting the application would create an unacceptable risk of 
diversion. Thus, in Cf. Xtreme Enterprises, my predecessor denied an 
application observing that respondent's ``lack of criminal record, 
compliance

[[Page 39369]]

with the law and willingness to upgrade her security system are far 
outweighed by her lack of experience with selling List I chemicals and 
the fact that she intends to sell ephedrine almost exclusively in the 
gray market.'' 67 FR at 76197. More recently, I denied an application 
observing that the respondent's ``lack of a criminal record and any 
intent to comply with the law and regulations are far outweighed by his 
lack of experience and the company's intent to sell ephedrine and 
pseudoephedrine exclusively to the gray market.'' Jay Enterprises, 70 
FR at 24621. Accord Prachi Enterprises, 69 FR 69407, 69409 (2004).
    Here, there are several factors which support the conclusion that 
granting the application would be inconsistent with the public 
interest. Respondent's proposed security measures are plainly 
inadequate and are thus grounds alone to deny the application. 
Moreover, Respondent lacks experience in the distribution of List I 
chemicals and proposes to sell into the non-traditional market. I thus 
conclude that granting Respondent's application would be ``inconsistent 
with the public interest.'' 21 U.S.C. 823(h).

Order

    Accordingly, pursuant to the authority vested in me by 21 U.S.C. 
823(h), and 28 CFR 0.100(b) & 0.104, I hereby order that the previously 
submitted application of David M. Starr, d/b/a Northern Starr products, 
for a DEA Certificate of Registration as a distributor of List I 
chemicals be, and it hereby is, denied. This order is effective August 
11, 2006.

    Dated: July 5, 2006.
Michele M. Leonhart,
Deputy Administrator.
 [FR Doc. E6-10925 Filed 7-11-06; 8:45 am]
BILLING CODE 4410-09-P