John J. Fotinopoulos; Revocation of Registration, 24602-24607 [E7-8453]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 72, Number 85 (Thursday, May 3, 2007)]
[Notices]
[Pages 24602-24607]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-8453]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 05-3]


John J. Fotinopoulos; Revocation of Registration

    On October 7, 2004, the Deputy Assistant Administrator, Office of 
Diversion Control, Enforcement Administration, issued an Order to Show 
Cause to John J. Fotinopoulos (Respondent) of Gainesville, Florida. The 
Show Cause Order proposed the revocation of Respondent's DEA 
Certificate of Registration, 002964JTY, as a distributor of listed 
chemicals, on the ground that his continued registration would be 
inconsistent with the public interest. See 21 U.S.C. 824(a)(4) & 
823(h). The Show Cause Order also proposed the denial of Respondent's 
pending applications for modification and renewal of his registration.
    The Show Cause Order alleged that Respondent distributed listed 
chemicals to the non-traditional market. More specifically, the Show 
Cause Order alleged that in July 2003, Respondent moved his business 
from SW 47th St., Gainesville, Florida, to a trailer park located at SW 
Archer Road, Gainesville, Florida, but failed to request a modification 
of his registered location as required by DEA regulations until January 
15, 2004. Show Cause Order at 2-3. The Show Cause Order further alleged 
that from July 2003 through January 2004, Respondent violated federal 
law by distributing listed chemicals from his new location which was 
not registered. Id. at 3.
    The Show Cause Order also alleged that in 2001, a DEA investigator 
had inspected Respondent and found his recordkeeping and customer 
identification practices to be inadequate. Id. The Show Cause Order 
further alleged that during a May 2004 inspection, DEA investigators 
had again determined that Respondent's recordkeeping was inadequate, 
that he was unable to identify whether certain products were regulated 
because they contained listed chemicals, and that he was unfamiliar 
with the regulations pertaining to thresholds and regulated 
transactions. Id. Relatedly, the Show Cause Order alleged that 
Respondent told investigators that he kept information pertaining to 
his customers in his head. Id. Finally, the Show Cause Order alleged 
that Respondent's security arrangements were inadequate. See id.
    Respondent, through his counsel, timely requested a hearing. The 
matter was assigned to Administrative Law Judge (ALJ) Gail Randall, who 
conducted a hearing in Gainesville, Florida, on April 19 and 20, 2005. 
At the hearing, both parties introduced documentary evidence and called 
witnesses to testify; both parties also submitted post-hearing briefs.
    On October 11, 2006, the ALJ issued her decision.\1\ In her 
decision, the ALJ found that four of the five statutory factors, see 21 
U.S.C. 823(h), supported the revocation of Respondent's registration 
and the denial of his pending applications for renewal and modification 
of the registration. ALJ at 41. Neither party filed exceptions.
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    \1\ The ALJ's Decision will be cited as ``ALJ.''
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    Having reviewed 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 except as expressly noted herein. I further adopt the ALJ's 
recommendation that Respondent's registration should be revoked and his 
pending applications for renewal and modification should be denied and 
make the following findings.

Findings of Fact

    Respondent distributes assorted products including maps, cigarette 
lighters, rolling papers, prophylactics, batteries, and over-the-
counter drug products to convenience stores, gas stations and liquor 
stores in northern Florida and southern Georgia. Gov. Ex. 27. 
Respondent is the holder of DEA Certificate Registration, No. 
002964JTY, which authorizes him to distribute list I chemical products. 
ALJ at 3. Since 1998, Respondent has held a registration at his former 
residence which was located at 4000 SW 47th Street, Gainesville, 
Florida. Id. In early July 2003, Respondent moved from this address to 
a mobile home park located at 7117 SW Archer Road, Gainesville, 
Florida. Tr. 286.
    On November 10, 2003, Respondent filed an application to renew his 
registration and paid the fee. Gov. Ex. 3; Tr. 289. On the application, 
Respondent sought to distribute pseudoephedrine and ephedrine from his 
new address. Gov. Ex. 3, at 2.
    As explained in numerous DEA final orders, both pseudoephedrine and 
ephedrine currently have therapeutic uses. See, e.g., Tri-County Bait 
Distributors, 71 FR 52160, 52161 (2006).\2\ Both chemicals are, 
however, regulated under the Controlled Substances Act because they are 
precursor chemicals which are easily extracted from non-prescription 
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).
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    \2\ The FDA is, however, currently proposing to remove 
combination ephedrine-guaifenesin products from its over-the-counter 
(OTC) drug monograph and to delare them not safe and effective for 
OTC use. See 70 FR 40232 (2005).
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    Methamphetamine is a powerful and highly addictive central nervous 
system

[[Page 24603]]

stimulant. See, e.g., Tri-County Bait Distributors, 71 FR at 52161. The 
illegal manufacture and abuse of methamphetamine pose a grave threat to 
this country. Methamphetamine abuse has destroyed numerous lives and 
families and ravaged communities. Moreover, because of the toxic nature 
of the chemicals which are used to make the drug, the illegal 
manufacture of methamphetamine causes serious environmental harms.\3\ 
Id.
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    \3\ The illicit manufacture of methamphetamine is an increasing 
problem in the State of Florida. See Planet Trading, Inc., 72 FR 
11055, 11056 (2007). As I noted in Planet Trading, during the period 
October 1, 2004, through September 30, 2005, law enforcement 
authorities seized 340 clandestine laboratories statewide. Id. By 
contrast, in 1999, only 20 clandestine laboratories were seized. See 
gov. Ex. 9.
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    Because Respondent had changed his address, DEA did not renew his 
registration, which had an expiration date of December 31, 2003. ALJ at 
10 (FOF 31). Respondent was told to contact the DEA Orlando office; on 
January 15, 2004, Respondent faxed a letter to that office informing it 
of his new address. Id.; Gov. Ex. 2.\4\
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    \4\ Respondent testified that at the time of his move, he phoned 
DEA headquarters to notify the Agency that he had changed his 
address. Tr. 286-87. Respondent further testified that he was told 
to contact the DEA Miami office, who told him to call the Orlando 
office. Id. According to Respondent's testimony, a person in the 
Orlando office told him to fax his new address to that office. Id. 
at 287. Respondent testified that he then faxed a written notice of 
his new address to DEA Orlando from the office of the trailer park 
where he now lives. Id. The ALJ did not specifically credit any of 
this testimony. See ALJ at 9 (FOFs 26 & 27). Nor do I. As the ALJ 
noted, Respondent acknowledged that he ``could not find a copy of 
that fax,'' id. at 9 (FOF 27; citing Tr. 287), and Respondent did 
not produce any phone records to support his assertions.
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    In January 2001, a DEA Diversion Investigator (DI) had conducted a 
cyclic investigation at Respondent's prior location. During this 
inspection, the DI instructed Respondent regarding the obligations of a 
registrant including the recordkeeping requirements and the duty to 
report suspicious orders. Tr. 207. The DI also provided Respondent with 
DEA Warning Notices; one of these documents specifically informed 
Respondent that pseudoephedrine and ephedrine drug products were being 
diverted into the illicit manufacture of methamphetamine. Id. at 207, 
211-12; Gov. Ex. 6. Respondent acknowledged that during the inspection, 
the DI had discussed with him the subject of suspicious orders; in his 
testimony, he further asserted that the DI did not provide him with 
specific written guidelines pertaining to threshold amounts. Tr. 281-
82.
    During this inspection, the DI found Respondent's records to be 
``in disarray.'' Id. at 208. The DI was ``unable to determine * * * who 
[Respondent's] customers were because they were not fully identified.'' 
Id. While Respondent provided a customer list to the DI, the list 
frequently stated just a store name and street. Id. at 210. 
Furthermore, because Respondent's records did not allow for the 
identification of specific customers, the DI was unable to determine 
whether Respondent had engaged in any regulated transactions. Id. at 
208-09.
    Respondent told the DI that he would maintain a ledger sheet for 
each of his listed chemical customers which would include the name of 
the person he dealt with. Id. at 209. The DI also suggested to 
Respondent that he keep the invoices for listed chemical products apart 
from his other invoices. Id. at 302. At the hearing, Respondent 
testified that he had ``attempted'' to do so, but had not ``succeeded'' 
in keeping the invoices ``separate.'' Id.
    On direct examination, Respondent testified that he kept track of 
his sales of listed chemical products ``mostly * * * in my mind.'' Id. 
at 303. Respondent further stated that he ``visit[ed] the store[s] 
regular[ly],'' and that he knew ``something's wrong'' ``if [the store] 
ordered two weeks ago and * * * re-order[ed] after two weeks.'' Id. 
Respondent asserted, however, that he had ``never had any'' suspicious 
transactions. Id. at 304.
    Under DEA's rules, a request to modify a registration is ``handled 
in the same manner as an application for registration,'' 21 CFR 
1309.61, and in the case of a chemical distributor, requires an on-site 
inspection. Upon receipt of Respondent's January 2004 request to modify 
his registration, the same DI who had conducted the 2001 inspection 
told Respondent that he could not distribute listed chemicals from his 
new address because he was not registered there. Tr. 225.
    In May 2004, the DI visited Respondent at his new address to 
conduct an on-site inspection. During this visit, the DI found that 
Respondent was in possession of both pseudoephedrine and ephedrine 
products. Id. at 226. More specifically, Respondent had ``several 
hundred boxes'' of listed chemical products. Id. at 219. Respondent was 
not aware that the products contained listed chemicals.\5\ Id.
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    \5\ Relatedly, at the hearing, Respondent was asked if he knew 
``what the Code of Federal Regulations are [sic]?'' Tr. 319. 
Respondent answered: ``No.'' Id.
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    Moreover, during the visit, the DI asked Respondent to mark which 
of the products on his product list contained listed chemicals. Id. 
218. While Respondent correctly indicated that products such as Mini 
Two-Way contained listed chemicals, he failed to mark any of the 
traditional products on his list such as Tylenol Cold and Tylenol 
Sinus, which contain pseudoephedrine. Id.
    The DIs subsequently contacted Respondent's suppliers. One of the 
suppliers stated that it had sold ``almost 700,000'' dosage units of 
combination ephedrine products to Respondent after January 1, 2004, 
based on his representation to it ``[t]hat DEA had told him that he 
[could] keep purchasing that product.'' Id. at 227. The DI subsequently 
asked everyone in the Orlando diversion group whether they had given 
Respondent permission to continue handling listed chemical products; no 
one had. Id.
    During the inspection, the DI asked Respondent about his 
recordkeeping, specifically, whether he was keeping a separate ledger 
as he had promised the investigator during the 2001 inspection. Id. at 
215, 268. Respondent was not and told the DI that ``he didn't remember 
that conversation.'' Id. at 268.
    The DI asked to see Respondent's purchase records from his 
suppliers. Id. at 228. Respondent could not provide them because they 
were not ``filed or organized in any manner.'' Id.
    Respondent did provide the DI with seven ledger books containing 
copies of his sales invoices, which covered the period from September 
through December 2003. Id. at 239; see also Resp. Ex. 1 at 59-192. With 
respect to Respondent's listed chemical products, the invoices did not 
contain information regarding the product strength or number of tablets 
in a bottle/package. Tr. 240. While some of the invoices gave an 
address, others only listed the name of the store, the street it was 
on, and the city it was located in. Id. at 242-43; see also Gov. Ex. 
29. For example, one of the invoices stated that products had been sold 
to a Chevron on ``Beach Boulevard, Jacksonville.'' Tr. 242-43. After 
conducting research using the internet and yellow pages, as well as 
driving the length of the street, the DI determined that there were 
three Chevron stations on the street. Id. at 243.
    The ALJ also found that ``[m]ost of * * * Respondent's invoices 
failed to list the individual contact person for the customer.'' ALJ 13 
(FOF 43, citing Tr. 243, Gov. Ex. 29, Resp. Ex. 1). Furthermore, one of 
the invoices indicated that Respondent had sold a case (144 bottles) of 
Max Brand, a product which typically contains sixty tablets of 60 mg. 
pseudoephedrine, see Gov. Ex. 25, at 4; Gov. Ex. 26, at 12, to

[[Page 24604]]

``Steve.'' Gov. Ex. 29, at 2. The invoice lacked essential identifying 
information such as the person's last name, a store name, and address. 
See id.\6\
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    \6\ While Respondent testified that ``Steve'' was ``Steve Lee, 
the owner of the Week 3, which is located on 576 South Edgewood, 
Jacksonville,'' Tr. 307, Respondent's customer list indicated that 
the name of the store located at this address was the ``Quick Trip 
Food Store.'' Gov. Ex. 28, at 3.
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    At least one of the other invoices, which listed the sale of Max 
Brand products, contained no identifying information at all. Tr. 157 & 
243, Resp. Ex. 1, at 402. When asked who had purchased the products 
listed on invoice number 361516, Respondent answered: ``I'm not sure. 
It's been quite some time. But I would say * * * it was to Steve again 
and probably a--or whatever.'' Tr. 308. Respondent further explained 
that he had not written the name down because he was either ``busy or 
tired.'' Id.
    The DI testified that because of the condition of Respondent's 
records, he was unable to determine whether Respondent had engaged in 
any regulated transactions. Id. at 241. Moreover, when the DI asked 
Respondent what the threshold was for a regulated transaction, 
Respondent did not know. Id. at 242. When the DI discussed with 
Respondent the inadequacy of his recordkeeping, Respondent replied that 
``he was just too busy'' to ``write all this information down.'' Id. at 
243-44. Respondent further stated that the records ``were good enough 
for him.'' Id. at 244.
    Respondent acknowledged that he could not tell if he had engaged in 
any regulated transactions ``without going back and going through every 
* * * invoice.'' Id. Regarding the identification of his customers, 
Respondent told the DI ``[t]hat he knew who they were and that all the 
information was kept in his head.'' Id. Furthermore, when asked by his 
counsel whether he had records that allowed him ``to identify more 
particularly where these various customers are?'' Respondent answered: 
``Yes and no * * *. I [can] go home and find the exact address because 
some of the stores are listed in the phone book. Same thing the 
Gainesville phone book.'' Id. at 298.
    During the on-site inspection, the DI also examined Respondent's 
security arrangements. Respondent was storing his listed chemical 
products in an aluminum storage shed that was mounted on a foundation 
of cement blocks. Id. at 250, 292. The storage shed was secured with a 
combination lock. Id. at 292. The shed apparently did not have an 
alarm. Id. Respondent further testified that he stored the products in 
the shed because his mobile home was too small, and ``nobody can see 
what is in the shed.'' Id. at 293. Respondent further stated that his 
customers did not come to his home and while people (neighbors) ``may 
see cases from different things * * * they wouldn't know what is the 
contents [of] the case.'' Id. at 294. According to the DI, Respondent's 
listed chemical products were commingled with other products in the 
shed. Id. at 252-53. Furthermore, Respondent would ``spend[] up to a 
week at a time on the road'' leaving his property unsupervised. Id. at 
267.
    The Government also called Jonathan Robbin, who testified as an 
expert witness. Mr. Robbin testified extensively regarding his findings 
regarding the market for listed chemical products, his review of the 
records of another distributor, and the expected monthly sales range to 
meet legitimate demand for listed chemical products at non-traditional 
retailers of these products such as gas stations, convenience stores, 
and liquor stores.
    Unlike in numerous other cases, the Government did not produce a 
compilation of Respondent's sales of listed chemical products which 
showed the average sale amount per store, per month, over a sustained 
period of time. Instead, the Government asked Mr. Robbin to testify 
regarding several isolated invoices. While Mr. Robbin testified that 
some of Respondent's invoices were ``rather curious'' and were 
suggestive of excessive sales, id. at 154, he also stated that 
``definitive conclusions'' could not be drawn from individual invoices. 
Id. at 156. Mr. Robbin further stated that ``[w]e should really analyze 
all their records to come up with definitive conclusions.'' Id.
    I agree. A single invoice does not prove that a store engaged in 
excessive sales (and that its products were diverted) because it does 
not establish the length of time it took the store to sell the 
products. Without other invoices showing the dates and amounts of 
additional purchases, the possibility remains that the products 
remained in inventory for a substantial period and that the sales were 
to meet legitimate demand. In sum, the isolated invoices do no more 
than create a suspicion that Respondent engaged in excessive sales. 
Accordingly, I find that the Government's proof on the issue of 
excessive sales does not satisfy the substantial evidence test. See 
NLRB v. Columbia Enameling & Stamping Co., 306 U.S. 292, 300 (1939) 
(``Substantial evidence is more than a scintilla, and must do more than 
create a suspicion of the existence of the fact to be 
established.'').\7\
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    \7\ This is not to say that the Government must review every 
single invoice and compile sales amounts for every single store. 
Rather, to establish excessive sales and support a finding of 
diversion, the Government need only analyze the sales made to 
selected stores. The Government cannot, however, rely solely on a 
single sale absent other evidence that the products were diverted.
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    Another issue in this case involved the employment status of Mr. 
Justin J. Paden, who serviced Respondent's customers in the Tallahassee 
area. Specifically, the Government attempted to prove that Mr. Paden 
was not an employee of Respondent because he did not withhold federal 
income tax from Mr. Paden's compensation, he did not pay the employer's 
share of Mr. Paden's Social Security taxes, and he did not pay worker's 
compensation or unemployment taxes. Tr. 310-11. The Government viewed 
Mr. Paden as an independent contractor, id. at 223 & 311, and 
considered Respondent's use of Mr. Paden to distribute listed chemical 
products to be a violation of the Controlled Substances Act. Id. at 224 
(testimony of DI) (``any time that [Mr. Paden] sold product, it would 
actually be an illegal distribution'').
    The ALJ found, however, that ``Mr. Paden worked under the direct 
supervision of the Respondent, and serviced only the Respondent's 
customers,'' that ``his pay was calculated'' based on his sales to 
Respondent's customers, and that he drove a van provided by, and 
insured by, Respondent. ALJ at 35. The ALJ thus concluded ``that the 
relationship between Mr. Paden and the Respondent was one of employer 
and employee, based on their conduct.'' Id. Ultimately, I conclude that 
it is immaterial whether Mr. Paden was an employee or an independent 
contractor because the evidence clearly establishes that Mr. Paden was 
subject to Respondent's control and therefore acted as his agent.

Discussion

    Section 304(a) of the Controlled Substances Act provides that a 
registration to distribute a list I chemical ``may be suspended or 
revoked * * * upon a finding that the registrant * * * has committed 
such acts as would render his registration under section 823 of this 
title inconsistent with the public interest as determined under such 
section.'' 21 U.S.C. 824(a)(4). 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;

[[Page 24605]]

    (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. section 823(h).

    ``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 a registration should be revoked or an application 
for a modification of a registration should be denied. See, e.g., David 
M. Starr, 71 FR 39367, 39368 (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). In this case, I conclude 
that factors one, two, four, and five establish that Respondent's 
continued registration would be ``inconsistent with the public 
interest,'' 21 U.S.C. 823(h). Accordingly, Respondent's registration 
will be revoked and his pending applications for renewal and 
modification of the registration will be denied.

Factors One and Two--Maintenance of Effective Controls Against 
Diversion and Compliance With Applicable Laws and Regulations

    The ALJ found that Respondent does not maintain effective controls 
against diversion. While the ALJ reasoned that the Government had not 
proved that Respondent's physical security arrangement were 
inadequate--because the storage shed appeared to be ``as secure as the 
DEA-approved past location in his mobile home,'' ALJ at 34--she further 
concluded that ``Respondent's failure to properly maintain records * * 
* is especially egregious.'' Id. at 35. While I agree with the ALJ's 
finding that Respondent's recordkeeping is inadequate, and her ultimate 
conclusion that this factor ``favors revocation,'' id. at 36, I further 
conclude that Respondent's proposed storage would provide inadequate 
security.
    The applicable DEA regulation directs that eight factors be 
considered in assessing the adequacy of security. See 21 CFR 
1309.71(b). Among the factors are ``[t]he type, form, and quantity of 
List I chemicals handled,'' ``[t]he location of the premises and the 
relationship such location bears on the security needs,'' ``[t]he type 
of building construction * * * and the general characteristics of the 
building,'' ``[t]he availability of electronic detection and alarm 
systems,'' and ``[t]he extent of unsupervised public access to the 
facility.'' Id. Here, the record establishes that Respondent proposed 
to store listed chemicals, which are easily converted into 
methamphetamine, in an aluminum storage shed (located apparently in his 
back yard), which was secured with a combination lock. Moreover, 
notwithstanding that Respondent was frequently away from his home for 
lengthy periods, the shed did not have an alarm.
    It is obvious that such arrangements are inadequate to protect 
these products from theft. A thief using readily available bolt cutters 
would make short work of the lock, and without an alarm, a thief would 
be far more likely to succeed in stealing the chemicals.
    The fact that similar arrangements were approved in the past does 
not estop the Agency from requiring greater security measures. 
Respondent did not rely on any representations of DEA personnel that 
the security arrangements at his new location met the Agency's 
requirements. Indeed, while DEA regulations provide that an ``applicant 
desiring to determine whether a proposed system of security controls * 
* * is adequate may submit materials and plans regarding the proposed 
security controls'' for review by either the Special Agent in Charge or 
the Office of Diversion Control, 21 CFR 1309.71(c), Respondent made no 
such submission. As found above, the illegal manufacture of 
methamphetamine has become an increasingly serious problem. 
Accordingly, whatever arrangements were previously deemed satisfactory 
are not necessarily still adequate to protect against theft. I 
therefore conclude that Respondent's proposed security arrangements 
would not provide effective controls against diversion.
    The ALJ, however, also correctly observed that ``the inquiry into 
the effectiveness of the Respondent's controls `does not end when 
products leave [their] physical location.' '' ALJ at 35 (quoting D & S 
Sales, 71 FR 37607, 37610 (2006)). As the ALJ recognized, maintaining 
proper records is also an essential part of providing effective 
controls against diversion. See id. Indeed, as the ALJ explained, 
Respondent's ``recordkeeping was so inadequate that neither he nor the 
DEA would be able to detect excessive purchases or other suspicious 
transaction behavior by his customers.'' Id. at 35-36.
    As found above, many of Respondent's sale invoices lacked essential 
information. The invoices almost always failed to include information 
pertaining to product strength and count. The invoices also frequently 
lacked complete street addresses and the name of the contact person at 
a particular establishment; indeed, the testimony showed that on some 
streets there were multiple stores which used the same name. Moreover, 
in one instance, an invoice documented a large sale of a listed 
chemical product to a person identified only as ``Steve''; in another 
instance, purchaser information was completely missing.
    While Respondent services approximately 150 stores, he testified 
that he kept track of his listed chemical sales to individual customers 
``mostly * * * in my mind.'' Tr. 303. Moreover, Respondent further told 
the DI ``that all the information [regarding the identity of his 
customers] was kept in his head.'' Id. at 244. Respondent further 
contended that he could ascertain the exact address of his various 
customers ``because some of the stores are listed in the phone book.'' 
Id. at 298.
    These statements are absurd. While it is true that the Government 
did not establish whether Respondent ever exceeded the 1,000 grams 
threshold and thus engaged in a regulated transaction, see 21 CFR 
1300.02(b)(28)(i), as the ALJ found, ``this may well be attributed to * 
* * Respondent's deficient recordkeeping.'' ALJ at 36. Moreover, as the 
ALJ further explained, ``there was no means to determine if the 
Respondent's customers received in excess of the threshold amounts 
during any given month.'' Id. Relatedly, Respondent's purchase records 
were not ``filed or organized in any manner.'' Tr. 228.
    While registrants who engage in regulated transactions are subject 
to additional recordkeeping and reporting requirements, see 21 CFR 
1310.03, under DEA regulations, every registrant must maintain adequate 
records to monitor the receipt and distribution of listed chemical 
products. See id. 1309.71(b)(8) (directing the consideration of ``[t]he 
adequacy of [a] registrant's * * * systems for monitoring the receipt, 
distribution, and disposition of List I chemicals''). Absent 
maintaining proper records, legitimate registrants might fail to 
discover that their sales to an entity have exceeded the cumulative 
threshold and report the transaction. Furthermore, disreputable 
registrants could engage in regulated transactions and hide behind 
their poor recordkeeping to escape liability.

[[Page 24606]]

    Finally, the record establishes that Respondent violated federal 
law by distributing listed chemical products from his new location 
without a valid registration. Under federal law, a registration is 
location specific. See 21 U.S.C. 822(f) (``A separate registration 
shall be required at each principal place of business * * * where the 
applicant * * * distributes * * * list I chemicals.''); see also 21 CFR 
1309.23(a). Moreover, federal law clearly provides that a registrant is 
``authorized to possess [or] distribute'' a listed chemical only ``to 
the extent authorized by their registration and in conformity with the 
other provisions of this subchapter.'' 21 U.S.C. 822(b). Furthermore, 
in contrast to a renewal application, which, if timely filed, keeps a 
registration in effect past its expiration date and until the Agency 
makes a final determination on the application, see 5 U.S.C. 558(c), a 
request for a modification is treated as a new application. See 21 CFR 
1309.61 (a ``request for modification shall be handled in the same 
manner as an application for registration,'' and, if approved, ``the 
Administrator shall issue a new certificate of registration''). 
Accordingly, a request for modification does not authorize a registrant 
to engage in listed chemical activities until the modification is 
approved and the new certificate of registration is issued. Cf. Orlando 
Wholesale, L.L.C., 71 FR 71555, 71557 (2006) (applicant's change of 
address following pre-registration inspection renders application 
moot).
    The record contains numerous invoices showing that Respondent 
distributed listed chemicals out of his new and unregistered location. 
See Gov. Ex. 29; Resp. Ex. 1. Furthermore, the record contain 
substantial evidence establishing that even after Respondent was told 
by a DEA Investigator to stop distributing listed chemicals, he 
proceeded to obtain ``almost 700,000'' dosage units of combination 
ephedrine products from a distributor by representing to it that DEA 
had authorized him to continue to purchase them. Id. at 227. While the 
record does not contain invoices documenting the sale of these 
products, the quantity involved makes it obvious that Respondent was 
not purchasing the products for his personal use but rather to 
distribute them.\8\ Respondent's distribution of list I chemicals after 
being told that he could no longer do so is egregious misconduct and 
manifests a flagrant disregard for the requirements of federal law. \9\
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    \8\ Respondent's purchases of products in this period also far 
exceeded the inventory found in his storage shed during the May 2004 
inspection.
    \9\ The ALJ properly rejected the Government's contention that 
because Mr. Paden was not registered, Respondent violated federal 
law by distributing listed chemical products to him. Even if Mr. 
Paden was not an employee, but rather an independent contractor, the 
evidence shows that he was clearly Respondent's agent. See 21 U.S.C. 
802(3) (defining ``agent'' as ``an authorized person who acts on 
behalf of or at the direction of a manufacturer, distributor, or 
dispenser'').
    Under the plain language of the Act, an agent of a registered 
distributor is not ``required to register and may lawfully possess 
any * * * list I chemical * * * if such agent. * * * is acting in 
the usual course of his business.'' 21 U.S.C. Sec.  822(c). See also 
21 CFR 1309.24(a) (``The requirement of registration is waived for 
any agent * * * of a person who is registered * * * if such agent * 
* * is acting in the usual course of his * * * business[.]''); 
Daniel Koller, D.V.M., 71 FR 66975, 66983 n.14 (2006).
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    I thus concur with the ALJ's conclusion that this factor ``weighs 
heavily in favor of revocation.'' ALJ at 38. Indeed, were there no 
other evidence of Respondent's non-compliance with federal law and 
regulations, this conduct would provide reason alone to revoke his 
registration.\10\
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    \10\ Relatedly, I acknowledge that there is no evidence that 
Respondent has been convicted of a crime, under either Federal or 
State laws, relating to controlled substances or listed chemicals.
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Factor Four--Respondent's Experience in Distributing Listed Chemicals

    According to the record, Respondent has been registered since 1998. 
Yet notwithstanding his several years of experience, Respondent has not 
learned very much about the products that are regulated and DEA's 
rules. Moreover, as explained above, Respondent's experience is 
characterized by his disregard for Federal laws and regulations and 
unsatisfactory business practices.
    For example, when asked if he knew ``what the Code of Federal 
Regulations are [sic]?,'' Respondent answered: ``No.'' Tr. 319. 
Moreover, during the May 2004 pre-registration inspection, Respondent 
had ``several hundred boxes'' of pseudoephedrine products in his 
possession. Id. at 219, 226. Respondent was not aware, however, that 
the products contained this listed chemical. Id. at 219. Respondent was 
also unaware that products he carried such as Tylenol Cold and Tylenol 
Sinus contained pseudoephedrine. Id. at 218.
    Beyond that, I note that Respondent's experience is characterized 
by (as charitably described by the ALJ) his ``lackadaisical attitude.'' 
ALJ at 39. As noted by the ALJ, Respondent justified his failure to 
adequately document his sales on the grounds that ``he was just too 
busy or too tired.'' Id. Respondent's attitude is simply incompatible 
with his continued participation in the distribution of list I 
chemicals. Accordingly, I adopt the ALJ's conclusion ``that this factor 
strongly favors revocation.''

Factor Five--Other Factors Relevant to Public Health and Safety

    As found above, the illicit manufacture and abuse of 
methamphetamine have had pernicious effects on families and communities 
throughout the nation.\11\ Cutting off the supply source of 
methamphetamine traffickers is of critical importance in protecting the 
public from the devastation wreaked by this drug.
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    \11\ As found above, methamphetamine trafficking has increased 
substantially in Florida.
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    While listed chemical products containing both ephedrine and 
pseudoephedrine have legitimate medical uses, DEA orders have 
established that convenience stores and gas-stations constitute the 
non-traditional retail market for legitimate consumers of products 
containing these chemicals. See, e.g., Tri-County Bait Distributors, 71 
FR at 52161-62; D & S Sales, 71 FR at 37609; Branex, Inc., 69 FR 8682, 
8690-92 (2004). DEA has further found 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'' and ``substantial''); Jay Enterprises, 
Inc., 70 FR 24620, 24621 (2005) (noting ``heightened risk of 
diversion'' if application to distribute to non-traditional retailers 
was granted).
    Accordingly, ``[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.'' Joey Enterprises, Inc., 70 FR 76866, 76867 
(2005). 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'').\12\ 
Here, it

[[Page 24607]]

appears that all of Respondent's customers are convenience stores and 
gas stations, which are non-traditional retailers of list I chemical 
products and entities which DEA has repeatedly found are conduits for 
the diversion of these products into the illicit manufacture of 
methamphetamine.
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    \12\ See 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'').
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    Here, unlike in other cases where the Government's evidence 
established that a distributor had made excessive sales and that these 
sales supported a finding of diversion, the Government's proof does not 
support such a finding. Nonetheless, Respondent's wholly inadequate 
recordkeeping substantially hinders the efforts of this Agency and its 
local partners to investigate the suppliers of methamphetamine 
traffickers and the traffickers themselves. Moreover, even if 
Respondent's recordkeeping is attributable to neglect, it still impedes 
the protection of public safety. I therefore conclude that this factor 
also supports a finding that Respondent's continued registration would 
be inconsistent with the public interest.
    In sum, Respondent violated Federal law by distributing products 
from an unregistered location. Indeed, this misconduct is especially 
egregious because he did so even after being told by a DEA official to 
stop. Respondent also does not maintain effective controls against 
diversion as evidenced by his wholly inadequate recordkeeping and the 
inadequate security he provided for list I products. Moreover, 
notwithstanding his years of experience distributing list I chemicals, 
Respondent clearly lacked knowledge of which products contained listed 
chemicals and he did not even know what the Code of Federal Regulations 
is. Finally, Respondent's attitude reflects indifference to his 
obligations under federal law and regulations. Given all of the above, 
it is indisputable that Respondent's continued registration would be 
inconsistent with the public interest.

Order

    Accordingly, pursuant to the authority vested in me by 21 U.S.C. 
823(h) & 824(a), as well as 28 CFR 0.100(b) & 0.104, I order that DEA 
Certificate of Registration, 002964JTY, issued to John J. Fotinopoulos 
be, and it hereby is, revoked. I further order that the pending 
applications for modification and renewal of the registration issued to 
John J. Fotinopoulos be, and they hereby are, denied. This order is 
effective June 4, 2007.

    Dated: April 25, 2007.
Michele M. Leonhart,
Deputy Administrator.
 [FR Doc. E7-8453 Filed 5-2-07; 8:45 am]
BILLING CODE 4410-09-P