ATF Fitness Products, Inc.; Denial of Application, 9967-9969 [E7-3856]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 72, Number 43 (Tuesday, March 6, 2007)]
[Notices]
[Pages 9967-9969]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-3856]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


ATF Fitness Products, Inc.; Denial of Application

    On February 6, 2006, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration, issued an Order to 
Show Cause to ATF Fitness Products, Inc. (Respondent) of Oakmont, Pa. 
The Show Cause Order proposed to deny Respondent's pending application 
for

[[Page 9968]]

registration as a distributor of the list I chemical ephedrine, on the 
ground that its registration would be inconsistent with the public 
interest. Show Cause Order at 1.
    The Show Cause order alleged that ephedrine is a precursor chemical 
that is ``commonly diverted'' for use in the manufacture of 
methamphetamine, a Schedule II controlled substance Id. The Show Cause 
Order specifically alleged that Respondent was proposing to distribute 
combination ephedrine products to gyms, fitness shops, and dietary 
supplement dealers, and that only a very small amount of the legitimate 
commerce in these products occurs in such smaller retail 
establishments. Id. at 2. The Show Cause Order alleged that many 
smaller or non-traditional retailers of combination ephedrine products 
``purchase inordinate amounts of these products and become conduits for 
the diversion of listed chemical[s] into illicit drug manufacturing.'' 
Id.
    Relatedly, the Show Cause Order alleged that ``[t]here is no 
legitimate therapeutic market for this type of product'' at the type of 
stores Respondent ``propose[s] to supply,'' and that Respondent would 
be ``fueling the diversion of precursor chemicals into the illicit 
manufacture of methamphetamine.'' Id. at 3. The Show Cause Order also 
alleged that in conducting verifications of Respondent's proposed 
customers, DEA investigators were unable to determine whether some of 
the proposed customers intended to buy ephedrine products from it. Id. 
at 2.
    Finally, the Show Cause Order alleged that in October 2004, the 
Food and Drug Administration conducted an inspection of Respondent. Id. 
at 2. The Show Cause Order alleged that during the inspection, FDA 
investigators found quantities of ephedra, a banned product.
    The Show Cause Order, which also informed Respondent of its right 
to a hearing, was served by certified mail, return receipt requested. 
On February 13, 2006, Respondent received the Show Cause Order as 
evidenced by the signed return receipt card. 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 found in the investigative 
file and make the following findings.

Findings

    Ephedrine is a list I chemical that, while having a therapeutic 
use, is easily extracted from lawful products and used in the illicit 
manufacture of methamphetamine, a schedule II controlled substances. 
See 21 U.S.C. 802(34); 21 CFR 1308.12(d). As noted in numerous DEA 
orders, methamphetamine is an extremely potent and addictive central 
nervous system stimulant. See T. Young Associates, Inc., 71 FR 60567 
(2006). The illegal manufacture and abuse of methamphetamine pose a 
grave threat to this country. Methamphetamine abuse has destroyed 
numerous lives and families and has ravaged communities. Moreover, 
because of the toxic nature of the chemicals used in producing the 
drug, illicit methamphetamine laboratories cause serious environmental 
harms. Id.
    Respondent is a Pennsylvania corporation which is located at 140 
Pennsylvania Avenue, Oakmont, Pa. Respondent's founder and president is 
Mr. James Vercellotti.
    Respondent previously held a DEA Certificate of Registration to 
distribute list I chemicals. The registration, however, expired on June 
30, 2001. On September 5, 2001, two DEA Diversion Investigators (DIs) 
conducted a regulatory investigation at Respondent's Oakmont facility. 
On that date, Respondent's chief financial officer told the DIs that 
Respondent had submitted a renewal application.
    During the visit, William Charlesworth, Respondent's vice 
president, informed the DIs that Respondent had previously purchased 
bulk ephedrine powder and manufactured a combination ephedrine product, 
Sci-Fit Ephedrine HCL, for Asthma Relief. Respondent's officials 
further maintained that they were under the assumption that their 
distributor's registration authorized them to engage in manufacturing. 
The DIs subsequently advised an official of Respondent that while a 
manufacturer's registration authorizes its holder to distribute, a 
distributor's registration does not authorize its holder to 
manufacture.
    On September 8, 2001, Mr. Charlesworth telephoned one of the DIs 
and informed him that Respondent was withdrawing its renewal 
application in part because list I products comprised less than one 
percent of its sales. Respondent subsequently submitted a letter to DEA 
withdrawing its application.
    On May 5, 2004, Respondent submitted a new application for a 
registration to distribute ephedrine. On September 28, 2004, two DIs 
returned to Respondent's facility to conduct a pre-registration 
investigation and met again with its president. Respondent's president 
told the DIs that it was a wholesale distributor of over-the-counter 
fitness products including food supplements and that it had customers 
nationwide including GNC, a chain of nutritional supplement retailers, 
and Walgreens, a chain of pharmacies. Respondent's president also told 
the DIs that the firm had been in business for fourteen years and that 
it expected that list I products would provide less than two percent of 
its sales.
    Respondent provided the DIs with a list of fifty potential list I 
customers. Subsequently, a DI contacted ten of Respondent's customers. 
Seven of the stores stated that they did not plan to purchase ephedrine 
products; only two of the stores indicated that they would purchase the 
products from Respondent. Respondent's president further stated that it 
would require its List I customers to provide complete identification 
information prior to selling the products to them and that its sales 
manager would verify the existence of each business and its need for 
the products.
    Following the on-site inspection, DEA was notified that the Food 
and Drug Administration (FDA) had conducted an inspection of 
Respondent's facility. During the inspection, FDA found that Respondent 
had in its possession approximately $13,500 worth of products, which 
either contained MaHuang Extract, a source of ephedrine alkaloids, or 
claimed to when they did not. Eight months earlier, FDA had issued a 
final rule banning these products on the ground that they are 
adulterated and present an unreasonable risk of illness or injury under 
section 402(f)(1)(A) of the Federal Food, Drug, and Cosmetic Act (FDA 
Act), 21 U.S.C. 342(f)(1)(A). See 69 FR 6788 (2004). The FDA's ban 
became effective on April 12, 2004.
    According to the FDA, Respondent's officials asserted that they 
intended to export the product. Respondent's officials could not, 
however, provide the documentation required to demonstrate its 
compliance with section 801(e)(1) of the FDA Act, 21 U.S.C. 381(e)(1). 
FDA officials also concluded that some of the products were mislabeled 
in violation of federal law because they claimed to contain ingredients 
that were not actually present. On February 25, 2005, the U.S. 
Attorney's Office for the Western District of Pennsylvania filed a 
complaint for forfeiture of the products and U.S. Marshals seized them.
    Subsequently, the FDA found that Respondent had in its possession

[[Page 9969]]

another product (Lipodrene), which also contained ephedrine alkaloids. 
On January 12, 2006, the U.S. Attorney's Office filed an additional 
complaint which sought the forfeiture of these products. U.S. Marshalls 
seized these products, which were valued at approximately $ 16,000.

Discussion

    Under 21 U.S.C. 823(h), an applicant to distribute List I chemicals 
is entitled to be registered unless 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 a combination of 
factors, and may give each factor the weight I deem appropriate in 
determining whether an application for registration should be denied. 
See, e.g., David M. Starr, 71 FR 39367 (2006); Energy Outlet, 64 FR 
14269 (1999). Moreover, I am ``not required to make findings as to all 
of the factors.'' Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005); 
Morall v. DEA, 412 F.3d 165, 173-74 (D.C. Cir. 2005).
    Here, I conclude that an analysis of each factor is unnecessary and 
that Respondent's application should be denied based on Factor Two, its 
record of non-compliance with applicable laws.
    As recognized in numerous final orders, the illicit manufacture and 
abuse of methamphetamine have had pernicious effects on families and 
communities throughout the nation. Preventing the diversion of list I 
chemicals into the illicit manufacture of methamphetamine is of 
critical importance in protecting the public from the devastation 
wreaked by this drug.
    While the investigative file in this case contains no evidence 
establishing the risk of diversion by establishments such as those 
which Respondent proposed to distribute its products to, the firm's 
record of non-compliance with other federal laws does not inspire 
confidence in its willingness to faithfully obey DEA regulations. Here, 
the investigative file establishes two separate instances in which 
Respondent violated the FDA Act. Moreover, FDA found these violations 
well after the rule banning ephedrine alkaloids went into effect.
    In section 303(h) of the CSA, Congress broadly directed that the 
Attorney General consider ``compliance by the applicant with applicable 
Federal, State, and local law,'' 21 U.S.C. 823(h)(2), in determining 
whether to grant a list I distributor's registration. In contrast to 
the provision applicable to a practitioner's registration, Congress did 
not limit the subject matter of the laws that are properly considered 
in determining whether an applicant's compliance record supports 
granting it a registration. Cf. id. Sec.  823(f)(4) (directing 
consideration of a practitioner's ``[c]ompliance with applicable State, 
Federal, or local laws relating to controlled substances'').
    Moreover, Respondent's apparent willingness to sell products which 
have been banned (as evidenced by the fact that banned products were 
found not once, but twice at its facility) and/or its inability to 
properly document its compliance with the FDA act (with respect to its 
assertion that it intended to export the products found in the first 
incident), are sufficiently probative of the manner in which it would 
likely fulfill its obligations as a registrant under the Controlled 
Substances Act.\1\ I thus conclude that granting it a registration 
would ``be inconsistent with the public interest.'' Id. Sec.  823(h).
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    \1\ The CSA imposes extensive recordkeeping requirements on List 
I chemical distributors. See 21 CFR Pt. 1310.
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Order

    Pursuant to the authority vested in me by 21 U.S.C. 823(h), and 28 
CFR 0.100(b) & 0.104, I order that the application of Respondent ATF 
Fitness Products, Inc., for a DEA Certificate of Registration as a 
distributor of list I chemicals be, and it hereby is, denied. This 
order is effective April 5, 2007.

    Dated: February 23, 2007.
Michele M. Leonhart,
Deputy Administrator.
 [FR Doc. E7-3856 Filed 3-5-07; 8:45 am]
BILLING CODE 4410-09-P