Sujak Distributors; Denial of Application, 50102-50105 [E6-14048]

Download as PDF rmajette on PROD1PC67 with NOTICES1 50102 Federal Register / Vol. 71, No. 164 / Thursday, August 24, 2006 / Notices reconsideration of the ALJ’s decision. See Govt. Resp. at 2. While the Government counsel did not remember the aforementioned telephone conversation, he did not dispute that Respondent’s counsel may have asked him whether he had to file anything. Id. The Government further pointed out that Respondent’s counsel did not contend that he had not received the ALJ’s Order for Status Report, and that the Order, which the Government had not received, presumably clearly stated the deadline for filing the Status Report. See id. at 2–3. The Government contended that whether Respondent should be permitted to file a status report was irrelevant because Respondent’s state license had been suspended in November 2004 and had remained so since then. The Government further argued that ‘‘Respondent still does not know when the state proceedings will end, and there is no assurance that Respondent will regain its state authority.’’ Id. at 3. According to the Government, ‘‘[t]he ALJ based her Decision on the fact that Respondent had no state authority to handle controlled substances at the time of the Decision. That fact was true at the time of the deadline for the status report, at the time of the Decision and is true at the present.’’ Id. Therefore, the Government argued that there was no basis for the ALJ to reconsider her decision. The ALJ denied Respondent’s motion for reconsideration. Again, the ALJ noted that ‘‘under the Controlled Substances Act it is clear that the DEA does not have statutory authority to maintain a registration if the registrant is without state authority to handle controlled substances in the state in which the registrant conducts business.’’ Order Denying Resp. Req. for Recon. at 2. The ALJ then transmitted the record to me.2 Having considered the record as a whole, I hereby issue this decision and final order. I adopt the ALJ’s findings of fact and conclusions of law. I further adopt the ALJ’s recommended decision to revoke Respondent’s registration. I do not, however, adopt the opinion to the extent it suggests that it was ‘‘unfair’’ for this agency to revoke Respondent’s Federal registration based on the State proceeding and that ‘‘such an action is circular and may result in the Respondent being denied an 2 I emphasize that there is no provision in DEA’s regulations for either party to request reconsideration of an ALJ’s recommended decision. See generally 21 CFR Subpart D. The appropriate means of challenging the ALJ’s decision is to file exceptions. See 21 CFR 1316.66. VerDate Aug<31>2005 15:15 Aug 23, 2006 Jkt 208001 opportunity to adjudicate the facts.’’ ALJ Dec. at 6. I acknowledge that the State’s Administrative Complaint relied in part on my Order to Show Cause and Immediate Suspension of Registration. See Admin. Complaint at 3. But the state complaint did not rely solely on my action. The state complaint cited a variety of grounds under Michigan law for imposing sanctions including ‘‘failing to comply with applicable Federal laws,’’ id. at 2 (citing Mich. Comp. Laws § 333.7311(1)(f)); dispensing of ‘‘controlled substances for other than legitimate medical purposes,’’ id. (citing Mich. Comp. Laws § 333.7311(1)(g)); and ‘‘if an officer or stockholder of the pharmacy lacks good moral character.’’ Id. at 2–3 (citing Mich. Comp. Laws § 333.17768(2)(a)). The complaint further alleged that Respondent had violated these provisions of state law. Id. at 3–4. Furthermore, the State’s Order of Summary Suspension was based on the ‘‘careful consideration of the documentation filed’’ in the State’s administrative proceeding including the complaint. Order of Summary Suspension 1. The State’s Order also provided a procedure for Respondent to petition for dissolution of the state suspension. See id. I take the State on its word and conclude that its decision to summarily suspend Respondent’s state license was not based solely on my order but was also based on its own evaluation of the evidence. Furthermore, as Respondent itself pointed out, the State proceeding has been ‘‘an elongated and vigorously contested hearing,’’ which included at least six days of hearings with the State putting on an expert witness. It is hard to imagine why a proceeding would take so long to litigate and require expert testimony if it did not involve an adjudication of the underlying facts. Thus, I do not accept the ALJ’s conclusion that it is ‘‘circular’’ for this agency to revoke Respondent’s registration based on the State’s summary suspension order and that doing so ‘‘may result in * * * Respondent being denied an opportunity to adjudicate the facts.’’ ALJ Dec. at 6. Quite the opposite, it appears that the State entered its suspension order based on its own examination of the evidence; it further appears that Respondent has had a full and fair opportunity to litigate the facts in the State proceeding. DEA’s regulations make clear that the ALJ’s decision is only a recommendation; it is not the final agency action. The revocation of Respondent’s Federal registration PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 becomes final only with this order. Yet in the interval between the ALJ’s decision and the publication of this order, Respondent has submitted no evidence to show that the State has lifted its suspension. As the ALJ correctly recognized, DEA has consistently held that a registrant may not hold a DEA registration if it is without appropriate authority under the laws of the state in which it does business. See, e.g., Rx Network of South Florida, LLC, 69 FR 62,093 (2004); Wingfield Drugs, Inc., 52 FR 27,070 (1987). Respondent does not have authority under Michigan law to handle controlled substances. Therefore, it is not entitled to maintain its DEA registration. See Rx Network of South Florida, 69 FR at 62095. Order Accordingly, pursuant to the authority vested in me by 21 U.S.C. 823(f) and 824(a), as well as 28 CFR 0.100(b) and 0.104, I hereby order that DEA Certificate of Registration, No. AO6837477, issued to Oakland Medical Pharmacy be, and it hereby is, revoked. I further order that any pending applications for renewal or modification of its registration be, and they hereby are, denied. This order is effective September 25, 2006. Dated: August 15, 2006. Michele M. Leonhart, Deputy Administrator. [FR Doc. E6–14045 Filed 8–23–06; 8:45 am] BILLING CODE 4410–09–P DEPARTMENT OF JUSTICE Drug Enforcement Administration Sujak Distributors; Denial of Application On May 18, 2005, the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration (DEA), issued an Order to Show Cause to Sujak Distributors (Respondent). 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 U.S.C. 823(h). The Show Cause Order specifically alleged that Respondent was proposing to sell ephedrine and pseudoephedrine products, which are precursors used in the manufacture of methamphetamine, to convenience stores, gas stations and liquor stores in the Davenport, Iowa area. See Show Cause Order at 2. The E:\FR\FM\24AUN1.SGM 24AUN1 Federal Register / Vol. 71, No. 164 / Thursday, August 24, 2006 / Notices rmajette on PROD1PC67 with NOTICES1 Show Cause Order alleged that only a small percentage of sales of nonprescription ephedrine and pseudoephedrine products occur in these retail outlets and that these establishments are a primary supply source of these products for the illegal manufacture of methamphetamine. See id. at 1–2. The Show Cause Order further alleged that Respondent’s proposed registered location was at a storage unit rental facility and that Respondent’s unit was not ‘‘sufficiently secure from entry from adjacent units.’’ Id. at 2. The Show Cause Order also alleged that Respondent’s co-owner, Mr. Dennis Carney, had told DEA Diversion Investigators that ‘‘25 to 35 percent of his business would consist of listed chemical product sales to convenience stores, liquor stores and gas stations.’’ Id. The Show Cause Order alleged that ‘‘the average small store could expect to sell monthly only about $15.00 to $40.00 worth of pseudoephedrine products.’’ Id. at 3. Finally, the Show Cause Order alleged that methamphetamine is ‘‘one of the most popular and widely abused drugs throughout the Midwest.’’ Id. The Show Cause order also notified Respondent of its right to a hearing. Id. at 4. The Show Cause Order was served on Respondent by certified mail, return receipt requested, and on June 3, 2005, Respondent acknowledged receipt. Since that time, neither Respondent, nor anyone purporting to represent it, 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 its 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.’’ David M. Starr, 71 FR 39367 (2006); A–1 Distribution Wholesale, 70 FR 28573 (2005). Methamphetamine abuse has destroyed lives and families, ravaged communities, and created serious environmental harms. Starr, 71 FR at 39637. VerDate Aug<31>2005 15:15 Aug 23, 2006 Jkt 208001 Respondent is organized as a partnership which is co-owned by Mr. and Mrs. Dennis Carney. The investigate file contains additional information suggesting that Mr. Greg Glowacki, an employee of Respondent, may also have a financial interest in Respondent. Respondent is located at 2501 N. Lincoln Ave, M–3, Davenport, Iowa. The location is a unit in a storage rental facility. On July 16, 2004, Respondent, through its co-owner, submitted an application for a registration to distribute the List I chemicals ephedrine and pseudoephedrine. On November 18, 2004, two DEA Diversion Investigators (DIs) visited Respondent at its proposed registered location to conduct a preregistration investigation. The DIs met with Mr. Carney and discussed the nature of Respondent’s business. Respondent supplies general merchandise and seasonal items to convenience stores, gas stations, and liquor stores in the Davenport, Iowa area. Respondent’s business includes customers in both Iowa and Illinois. Mr. Carney advised the DIs that he was seeking registration in order to sell the following List I chemical products which contain ephedrine: Mini Two Way 12.5/200 mg. in 6 count packets, 12 count blister cards, and 48 count bottles; Twin Tabs 12.5/200 mg. in 48 count bottles; and Rapid Action 12.5/200 mg. in 48 count bottles. Mr. Carney further advised the DIs that neither he or his wife, nor his employee, had any experience in handling List I chemicals. Background checks on Mr. Carney, his wife, and Mr. Glowacki, did not find any adverse information. Respondent’s proposed registered location was a 10 foot by 20 foot unit in a rental storage facility with approximately 100 units. The facility’s office hours were 9 a.m. to 5 p.m., Monday through Friday. All occupants have access to the main corridor where Respondent’s unit is located and can apparently obtain access to the facility at any time through use of a key-pad entry system. Moreover, the main corridor is wide enough so that a motor vehicle can be driven into the facility. The facility has at least two video cameras in place; one covers the main entrance, another covers the corridor adjacent to Respondent’s unit and the loading dock. The entry system records the identification number of any person who has entered or exited the facility. In the event of a break-in, the security company notifies the local police department. Respondent’s unit is protected by a padlock. Mr. Carney also told the DIs that he intended to purchase a steel storage cabinet for the PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 50103 List I chemical products. However, Mr. Carney has not provided documentation that the cabinet was in fact purchased. Upon entering Respondent’s storage unit, the DIs observed that the unit did not have a solid ceiling. Instead, the top of the unit was comprised of wire, which was run both length and width wise at perhaps one foot intervals.1 The DIs found that the wire could easily be tampered with and that a person could gain access to Respondent’s unit from other storage units. The DIs also discussed with Mr. Carney his firm’s business practices. Mr. Carney told the DIs that he did not have any procedures to determine whether new customers are legitimate purchasers other than visiting their businesses and ‘‘checking them out.’’ The DIs found that Mr. Carney understood the recordkeeping requirements. Mr. Carney also appears to have adequate procedures for receiving and delivering List I chemicals. Mr. Carney further told the DIs that he would not engage in any transactions triggering the reporting threshold, see 21 CFR 1310.04 and 1310.05, and that he would contact DEA in the event a customer placed a suspicious order. Subsequent to the pre-registration investigation, the DIs conducted customer verifications. The verifications did not uncover any adverse information. 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 this 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 (5) Such other factors as are relevant to and consistent with the public health and safety. Id. ‘‘These 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 1 The estimates of the interval is based on the photographs. No actual measurement was taken. E:\FR\FM\24AUN1.SGM 24AUN1 50104 Federal Register / Vol. 71, No. 164 / Thursday, August 24, 2006 / Notices rmajette on PROD1PC67 with NOTICES1 give each factor the weight I deem appropriate in determining whether a registration should be revoked or an application for a registration be denied.’’ Starr, 71 FR 39368. See also Energy Outlet, 64 FR 14269 (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 I 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 establishes that Respondent’s proposed location does not provide adequate security for listed chemicals for several reasons. First, Respondent’s storage unit lacks an adequate ceiling. Thus, even individuals who have lawful access to the facility could easily break in to the unit. Second, DEA’s regulations specifically mandate that I consider ‘‘the extent of unsupervised public access to the facility.’’ Id. 1309.71(b)(5). Here, there are 100 rental units in the facility and it is apparent that a large number of people have access to the building. Beyond that, it appears that the facility has employees on-site only from Monday through Friday, and only between the hours of 9 a.m. to 5 p.m. The facility is however, accessible 24 hours a day, every day of the year. Thus, access to the facility is largely unsupervised. Moreover, Respondent does not know whether any of the other tenants have criminal records. Nor does it control who the landlord rents to. While Respondent’s owner claimed to the DIs that no other occupant of the facility would be aware that he was handling List I chemicals, it is certainly possible, if not likely, that other occupants would eventually find out either through word of mouth or by observing Respondent’s employees. Perhaps none of the other tenants (and the acquaintances they may bring to the facility) is a criminal, but this is a risk I decline to assume. I thus conclude that Respondent’s proposed registered location does not provide adequate security for storing listed VerDate Aug<31>2005 15:15 Aug 23, 2006 Jkt 208001 chemicals. This factor thus weighs heavily in support of denying Respondent’s application.2 Factors Two and Three—Compliance With Applicable Law and the Applicant’s Prior Record of Relevant Criminal Convictions While there is evidence that Respondent failed to comply with Federal regulations when it was run by its previous owner, I have already concluded that those violations are not relevant. The more important question is whether there is any evidence that either the co-owners of Respondent or its employee have failed to comply with applicable Federal, state or local laws. The investigative file does not establish that any of these persons has failed to comply with applicable laws. Relatedly, none of these persons has been convicted of a criminal offense relating to controlled substances or chemicals. I thus conclude that both of these factors support granting Respondent’s application. Factor Four—Past Experience in the Manufacture or Distribution of Controlled Substances Neither of Respondent’s co-owners, nor its sole employee, have any prior experience in the manufacture or distribution of List I chemicals. Because of the potential for diversion, DEA has repeatedly held that an applicant’s lack of experience in distributing List I chemicals is a factor which weighs heavily against granting an application for registration. See, e.g., Starr, 71 FR at 39368; Jay Enterprises, 70 FR 24620, 24621 (2005); ANM Wholesale, 69 FR 11652, 11653 (2004). The fact that neither of Respondent’s co-owners, nor its employee, has any experience thus provides a substantial reason to deny 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, e.g., 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 2 Having concluded that Respondent’s proposed location does not provide adequate security, I do not decide whether Respondent has adequate procedures for verifying the legitimacy of customers. PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 [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 an 8-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, during clandestine lab seizures, DEA has frequently found 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 count products. Significantly, all of Respondent’s proposed customers participate in the non-traditional market for ephedrine and pseudoephedrine products. 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); 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 nontraditional 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 Xtreme Enterprises, my predecessor denied an application E:\FR\FM\24AUN1.SGM 24AUN1 Federal Register / Vol. 71, No. 164 / Thursday, August 24, 2006 / Notices rmajette on PROD1PC67 with NOTICES1 observing that the respondent’s ‘‘lack of criminal record, compliance 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). I also note that the State of Iowa recently enacted legislation making all ephedrine products Schedule V controlled substances. See 2005 Iowa Acts Ch.15, S.F. 169 (codified at Iowa Code Ann. 124.212 (West 2006)). Under Iowa law, all ephedrine products must be sold in licensed pharmacies. Therefore, it appears that none of Respondent’s customers can now lawfully sell the products that Respondent proposed to distribute.3 See Iowa Code Ann. 124.302. Relatedly, Respondent can not distribute ephedrine products without obtaining an Iowa controlled substances registration. See id. As I have previously explained, where, as here, state efforts to combat the illicit manufacture of methamphetamine are consistent with Federal policy, it is appropriate to give them due weight in determining whether the granting of a registration would be consistent with public health and safety. See McBride Marketing, 71 FR 35710, 35711 (2006); Joy’s Ideas, 70 FR 33195, 33199 (2005). I thus conclude that granting Respondent’s application would be inconsistent with public health and safety. In summary, 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 3 The Iowa Act also placed limits on the sale of pseudoephedrine products, generally limiting their sale to pharmacies except for packages of liquid, liquid capsule, and liquid-filled gel caps that contain 360 milligrams or less. Respondent also has customers in Illinois. Respondent did not, however, include any customers from Illinois in its list of potential List I chemical customers. I therefore do not consider the effect of Illinois’ recently enacted Methamphetamine Precursor Control Act. VerDate Aug<31>2005 16:30 Aug 23, 2006 Jkt 208001 into the non-traditional market. Furthermore, none of Respondent’s customers can lawfully sell ephedrine products under Iowa law. I therefore 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) and 0.104, I hereby order that the application of Sujak Distributors for a DEA Certificate of Registration as a distributor of List I chemicals be, and it hereby is, denied. This order is effective August 24, 2006. Dated: August 16, 2006. Michele M. Leonhart, Deputy Administrator. [FR Doc. E6–14048 Filed 8–23–06; 8:45 am] BILLING CODE 4410–09–P NUCLEAR REGULATORY COMMISSION [Docket Nos. 50–369 and 50–370] Duke Power Company LLC; Notice of Consideration of Issuance of Amendment to Facility Operating License and Opportunity for a Hearing The U.S. Nuclear Regulatory Commission (the Commission) is considering issuance of an amendment to Facility Operating Licenses NPF–9 and NPF–17, issued to Duke Power Company (the licensee), for operation of the McGuire Nuclear Station, Units 1 and 2, located in Mecklenburg County, North Carolina. The proposed amendment would revise the McGuire Nuclear Station’s licensing basis to adopt the alternative source term radiological analysis methodology in accordance with Title 10 of the Code of Federal Regulations (10 CFR) section 50.67. Before issuance of the proposed license amendment, the Commission will have made findings required by the Atomic Energy Act of 1954, as amended (the Act), and the Commission’s regulations. Within 60 days after the date of publication of this notice, the licensee may file a request for a hearing with respect to issuance of the amendment to the subject facility operating license and any person whose interest may be affected by this proceeding and who wishes to participate as a party in the proceeding must file a written request for a hearing and a petition for leave to intervene. Requests for a hearing and a petition for leave to intervene shall be filed in accordance with the PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 50105 Commission’s ‘‘Rules of Practice for Domestic Licensing Proceedings’’ in 10 CFR part 2. Interested persons should consult a current copy of 10 CFR 2.309, which is available at the Commission’s public document room (PDR), located at One White Flint North, Public File Area O1 F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible from the Agencywide Documents Access and Management System’s (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site, https:// www.nrc.gov/reading-rm/doccollections/cfr/. If a request for a hearing or petition for leave to intervene is filed by the above date, the Commission or a presiding officer designated by the Commission or by the Chief Administrative Judge of the Atomic Safety and Licensing Board Panel, will rule on the request and/or petition; and the Secretary or the Chief Administrative Judge of the Atomic Safety and Licensing Board will issue a notice of a hearing or an appropriate order. As required by 10 CFR 2.309, a petition for leave to intervene shall set forth with particularity the interest of the petitioner/requestor in the proceeding, and how that interest may be affected by the results of the proceeding. The petition should specifically explain the reasons why intervention should be permitted with particular reference to the following general requirements: (1) The name, address and telephone number of the requestor or petitioner; (2) the nature of the requestor’s/petitioner’s right under the Act to be made a party to the proceeding; (3) the nature and extent of the requestor’s/petitioner’s property, financial, or other interest in the proceeding; and (4) the possible effect of any decision or order which may be entered in the proceeding on the requestor’s/petitioner’s interest. The petition must also identify the specific contentions which the petitioner/ requestor seeks to have litigated at the proceeding. Each contention must consist of a specific statement of the issue of law or fact to be raised or controverted. In addition, the petitioner/requestor shall provide a brief explanation of the bases for the contention and a concise statement of the alleged facts or expert opinion which support the contention and on which the petitioner intends to rely in proving the contention at the hearing. The petitioner must also provide references to those specific E:\FR\FM\24AUN1.SGM 24AUN1

Agencies

[Federal Register Volume 71, Number 164 (Thursday, August 24, 2006)]
[Notices]
[Pages 50102-50105]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-14048]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Sujak Distributors; Denial of Application

    On May 18, 2005, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to Sujak Distributors (Respondent). 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 U.S.C. 823(h).
    The Show Cause Order specifically alleged that Respondent was 
proposing to sell ephedrine and pseudoephedrine products, which are 
precursors used in the manufacture of methamphetamine, to convenience 
stores, gas stations and liquor stores in the Davenport, Iowa area. See 
Show Cause Order at 2. The

[[Page 50103]]

Show Cause Order alleged that only a small percentage of sales of non-
prescription ephedrine and pseudoephedrine products occur in these 
retail outlets and that these establishments are a primary supply 
source of these products for the illegal manufacture of 
methamphetamine. See id. at 1-2. The Show Cause Order further alleged 
that Respondent's proposed registered location was at a storage unit 
rental facility and that Respondent's unit was not ``sufficiently 
secure from entry from adjacent units.'' Id. at 2.
    The Show Cause Order also alleged that Respondent's co-owner, Mr. 
Dennis Carney, had told DEA Diversion Investigators that ``25 to 35 
percent of his business would consist of listed chemical product sales 
to convenience stores, liquor stores and gas stations.'' Id. The Show 
Cause Order alleged that ``the average small store could expect to sell 
monthly only about $15.00 to $40.00 worth of pseudoephedrine 
products.'' Id. at 3. Finally, the Show Cause Order alleged that 
methamphetamine is ``one of the most popular and widely abused drugs 
throughout the Midwest.'' Id. The Show Cause order also notified 
Respondent of its right to a hearing. Id. at 4.
    The Show Cause Order was served on Respondent by certified mail, 
return receipt requested, and on June 3, 2005, Respondent acknowledged 
receipt. Since that time, neither Respondent, nor anyone purporting to 
represent it, 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 its 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.'' David M. Starr, 71 FR 39367 
(2006); A-1 Distribution Wholesale, 70 FR 28573 (2005). Methamphetamine 
abuse has destroyed lives and families, ravaged communities, and 
created serious environmental harms. Starr, 71 FR at 39637.
    Respondent is organized as a partnership which is co-owned by Mr. 
and Mrs. Dennis Carney. The investigate file contains additional 
information suggesting that Mr. Greg Glowacki, an employee of 
Respondent, may also have a financial interest in Respondent. 
Respondent is located at 2501 N. Lincoln Ave, M-3, Davenport, Iowa. The 
location is a unit in a storage rental facility.
    On July 16, 2004, Respondent, through its co-owner, submitted an 
application for a registration to distribute the List I chemicals 
ephedrine and pseudoephedrine. On November 18, 2004, two DEA Diversion 
Investigators (DIs) visited Respondent at its proposed registered 
location to conduct a pre-registration investigation. The DIs met with 
Mr. Carney and discussed the nature of Respondent's business. 
Respondent supplies general merchandise and seasonal items to 
convenience stores, gas stations, and liquor stores in the Davenport, 
Iowa area. Respondent's business includes customers in both Iowa and 
Illinois.
    Mr. Carney advised the DIs that he was seeking registration in 
order to sell the following List I chemical products which contain 
ephedrine: Mini Two Way 12.5/200 mg. in 6 count packets, 12 count 
blister cards, and 48 count bottles; Twin Tabs 12.5/200 mg. in 48 count 
bottles; and Rapid Action 12.5/200 mg. in 48 count bottles. Mr. Carney 
further advised the DIs that neither he or his wife, nor his employee, 
had any experience in handling List I chemicals. Background checks on 
Mr. Carney, his wife, and Mr. Glowacki, did not find any adverse 
information.
    Respondent's proposed registered location was a 10 foot by 20 foot 
unit in a rental storage facility with approximately 100 units. The 
facility's office hours were 9 a.m. to 5 p.m., Monday through Friday. 
All occupants have access to the main corridor where Respondent's unit 
is located and can apparently obtain access to the facility at any time 
through use of a key-pad entry system. Moreover, the main corridor is 
wide enough so that a motor vehicle can be driven into the facility. 
The facility has at least two video cameras in place; one covers the 
main entrance, another covers the corridor adjacent to Respondent's 
unit and the loading dock. The entry system records the identification 
number of any person who has entered or exited the facility. In the 
event of a break-in, the security company notifies the local police 
department. Respondent's unit is protected by a padlock. Mr. Carney 
also told the DIs that he intended to purchase a steel storage cabinet 
for the List I chemical products. However, Mr. Carney has not provided 
documentation that the cabinet was in fact purchased.
    Upon entering Respondent's storage unit, the DIs observed that the 
unit did not have a solid ceiling. Instead, the top of the unit was 
comprised of wire, which was run both length and width wise at perhaps 
one foot intervals.\1\ The DIs found that the wire could easily be 
tampered with and that a person could gain access to Respondent's unit 
from other storage units.
---------------------------------------------------------------------------

    \1\ The estimates of the interval is based on the photographs. 
No actual measurement was taken.
---------------------------------------------------------------------------

    The DIs also discussed with Mr. Carney his firm's business 
practices. Mr. Carney told the DIs that he did not have any procedures 
to determine whether new customers are legitimate purchasers other than 
visiting their businesses and ``checking them out.'' The DIs found that 
Mr. Carney understood the record-keeping requirements. Mr. Carney also 
appears to have adequate procedures for receiving and delivering List I 
chemicals. Mr. Carney further told the DIs that he would not engage in 
any transactions triggering the reporting threshold, see 21 CFR 1310.04 
and 1310.05, and that he would contact DEA in the event a customer 
placed a suspicious order.
    Subsequent to the pre-registration investigation, the DIs conducted 
customer verifications. The verifications did not uncover any adverse 
information.

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

[[Page 50104]]

give each factor the weight I deem appropriate in determining whether a 
registration should be revoked or an application for a registration be 
denied.'' Starr, 71 FR 39368. See also Energy Outlet, 64 FR 14269 
(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 I 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 establishes that Respondent's 
proposed location does not provide adequate security for listed 
chemicals for several reasons. First, Respondent's storage unit lacks 
an adequate ceiling. Thus, even individuals who have lawful access to 
the facility could easily break in to the unit.
    Second, DEA's regulations specifically mandate that I consider 
``the extent of unsupervised public access to the facility.'' Id. 
1309.71(b)(5). Here, there are 100 rental units in the facility and it 
is apparent that a large number of people have access to the building. 
Beyond that, it appears that the facility has employees on-site only 
from Monday through Friday, and only between the hours of 9 a.m. to 5 
p.m. The facility is however, accessible 24 hours a day, every day of 
the year. Thus, access to the facility is largely unsupervised.
    Moreover, Respondent does not know whether any of the other tenants 
have criminal records. Nor does it control who the landlord rents to. 
While Respondent's owner claimed to the DIs that no other occupant of 
the facility would be aware that he was handling List I chemicals, it 
is certainly possible, if not likely, that other occupants would 
eventually find out either through word of mouth or by observing 
Respondent's employees. Perhaps none of the other tenants (and the 
acquaintances they may bring to the facility) is a criminal, but this 
is a risk I decline to assume. I thus conclude that Respondent's 
proposed registered location does not provide adequate security for 
storing listed chemicals. This factor thus weighs heavily in support of 
denying Respondent's application.\2\
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    \2\ Having concluded that Respondent's proposed location does 
not provide adequate security, I do not decide whether Respondent 
has adequate procedures for verifying the legitimacy of customers.
---------------------------------------------------------------------------

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

    While there is evidence that Respondent failed to comply with 
Federal regulations when it was run by its previous owner, I have 
already concluded that those violations are not relevant. The more 
important question is whether there is any evidence that either the co-
owners of Respondent or its employee have failed to comply with 
applicable Federal, state or local laws. The investigative file does 
not establish that any of these persons has failed to comply with 
applicable laws. Relatedly, none of these persons has been convicted of 
a criminal offense relating to controlled substances or chemicals. I 
thus conclude that both of these factors support granting Respondent's 
application.

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

    Neither of Respondent's co-owners, nor its sole employee, have any 
prior experience in the manufacture or distribution of List I 
chemicals. Because of the potential for diversion, DEA has repeatedly 
held that an applicant's lack of experience in distributing List I 
chemicals is a factor which weighs heavily against granting an 
application for registration. See, e.g., Starr, 71 FR at 39368; Jay 
Enterprises, 70 FR 24620, 24621 (2005); ANM Wholesale, 69 FR 11652, 
11653 (2004). The fact that neither of Respondent's co-owners, nor its 
employee, has any experience thus provides a substantial reason to deny 
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, e.g., 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 an 8-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, during clandestine lab seizures, DEA has frequently found 
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 count products.
    Significantly, all of Respondent's proposed customers participate 
in the non-traditional market for ephedrine and pseudoephedrine 
products. 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); 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 Xtreme Enterprises, my predecessor denied an 
application

[[Page 50105]]

observing that the respondent's ``lack of criminal record, compliance 
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).
    I also note that the State of Iowa recently enacted legislation 
making all ephedrine products Schedule V controlled substances. See 
2005 Iowa Acts Ch.15, S.F. 169 (codified at Iowa Code Ann. 124.212 
(West 2006)). Under Iowa law, all ephedrine products must be sold in 
licensed pharmacies. Therefore, it appears that none of Respondent's 
customers can now lawfully sell the products that Respondent proposed 
to distribute.\3\ See Iowa Code Ann. 124.302. Relatedly, Respondent can 
not distribute ephedrine products without obtaining an Iowa controlled 
substances registration. See id. As I have previously explained, where, 
as here, state efforts to combat the illicit manufacture of 
methamphetamine are consistent with Federal policy, it is appropriate 
to give them due weight in determining whether the granting of a 
registration would be consistent with public health and safety. See 
McBride Marketing, 71 FR 35710, 35711 (2006); Joy's Ideas, 70 FR 33195, 
33199 (2005). I thus conclude that granting Respondent's application 
would be inconsistent with public health and safety.
---------------------------------------------------------------------------

    \3\ The Iowa Act also placed limits on the sale of 
pseudoephedrine products, generally limiting their sale to 
pharmacies except for packages of liquid, liquid capsule, and 
liquid-filled gel caps that contain 360 milligrams or less.
    Respondent also has customers in Illinois. Respondent did not, 
however, include any customers from Illinois in its list of 
potential List I chemical customers. I therefore do not consider the 
effect of Illinois' recently enacted Methamphetamine Precursor 
Control Act.
---------------------------------------------------------------------------

    In summary, 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. 
Furthermore, none of Respondent's customers can lawfully sell ephedrine 
products under Iowa law. I therefore 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) and 0.104, I hereby order that the 
application of Sujak Distributors for a DEA Certificate of Registration 
as a distributor of List I chemicals be, and it hereby is, denied. This 
order is effective August 24, 2006.

    Dated: August 16, 2006.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E6-14048 Filed 8-23-06; 8:45 am]
BILLING CODE 4410-09-P

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