Sunny Wholesale, Inc.; Revocation of Registration and Denial of Application, 57655-57668 [E8-23395]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 73, Number 193 (Friday, October 3, 2008)]
[Notices]
[Pages 57655-57668]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23395]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket Nos. 05-13 and 05-45]


Sunny Wholesale, Inc.; Revocation of Registration and Denial of 
Application

    On August 24, 2005, I, the Deputy Administrator of the Drug 
Enforcement Administration, issued an Order to Show Cause and Immediate 
Suspension of Registration to Sunny Wholesale, Inc. (Respondent), of 
Forest Park, Georgia. ALJ Ex. 6. The Order immediately suspended 
Respondent's DEA Certificate of Registration, No. 004550SLY, which 
authorizes it to distribute the list I chemicals ephedrine and 
pseudoephedrine, on the ground that it was selling ``excessive 
amounts'' of these chemicals to convenience stores, id. at 6, which are 
the ``primary source'' for the diversion of these chemicals into the 
illicit manufacture of methamphetamine, a schedule II controlled 
substance.\1\ Id. at 4.
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    \1\ On October 20, 2004, the Deputy Assistant Administrator 
issued the initial Order to Show Cause to Respondent; the Order 
proposed the revocation of its registration at its Forest Park 
location and the denial of its pending application for a 
registration at its Decatur, Georgia location. ALJ Ex. 1. Each of 
the allegations of the initial Show Cause Order was repeated 
verbatim in the subsequent Order to Show Cause and Immediate 
Suspension of Registration. On November 19, 2004, Respondent, 
through its counsel, requested a hearing on the allegations of the 
first Show Cause Order. ALJ Ex. 2.
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    More specifically, the Show Cause Order alleged that in July 2005, 
DEA Diversion Investigators (DIs) learned that records seized from 
various north Georgia convenience stores which were ``suspected of 
illegally distributing listed chemical precursors,'' had ``indicated 
that [Respondent] had been distributing 60 count bottles of'' Max Brand 
pseudoephedrine, a product which has been repeatedly found at illicit 
methamphetamine labs ``in full case and double case lots.'' Id. at 6. 
The Show Cause Order alleged that ``law enforcement officials [in 
Tennessee and Georgia] have observed that an overwhelming proportion of 
precursors found at illicit methamphetamine sites has involved non-
traditional brands sold through convenience stores,'' id. at 4, that 
DEA had retained an expert in retail marketing and statistics who had 
concluded that sales of pseudoephedrine products at convenience stores 
in Tennessee and Georgia ``averaged between $15.00 and $60.00 per 
month'' per store and that sales of combination ephedrine products were 
even lower, Id. at 5, and that ``[c]onvenience store purchases of case 
quantities of high count/high strength pseudoephedrine products [are] 
consistent with diversion of the products into the illicit manufacture 
of methamphetamine.'' Id. at 6. The Show Cause Order further alleged 
that Respondent had continued selling large amounts of pseudoephedrine 
``to convenience stores and gas stations,'' notwithstanding that it had 
been ``put on notice of the potential illegal character of its 
activities with the issuance of the original Order to Show Cause'' 
which was served in October 2004. Id. ``[B]ecause of the substantial 
likelihood that [Respondent would] continue to divert listed chemical 
products,'' I thus concluded that Respondent's ``continued 
registration, during the pendency of these proceedings, would 
constitute an immediate danger to the public health and safety.'' Id. 
at 7.\2\
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    \2\ The Order also alleged that in July 2005, DEA DIs discovered 
that Respondent ``was also selling one-ounce bottles of liquid 
iodine to several convenience stores,'' another chemical used in the 
illicit manufacture of methamphetamine. Show Cause Order at 6. The 
Order further alleged that ``[i]odine * * * has miniscule sales for 
use as an antiseptic, even in pharmacies,'' that ``[t]he likelihood 
of sales of iodine to customers in convenience stores approaches 
zero,'' and that while Respondent ``sold between 48 and as many as 
240 bottles of iodine to individual convenience stores,'' it ``never 
reported these transactions * * * as extraordinary sales or 
suspicious transactions.'' Id.
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    In addition to the above, the Show Cause Order alleged that during 
a July 2001 inspection, DEA DIs audited Respondent's handling of listed 
chemical products and determined that it had ``various overages and 
shortages, including an unexplained shortage of approximately 10,000 
bottles of Max Brand, and (another non-traditional brand) Heads Up 60 
count bottles.'' Id. at 5. The Show Cause Order alleged that while 
inventorying Respondent's listed chemical products, it had ``no 
traditional brand * * * products but only `grey market' brands of 
pseudoephedrine and combination ephedrine products'' which are not sold 
at drug stores or supermarkets, but ``are typically only sold in 
locations where goods of these types are not expected to be sold, such 
as liquor stores, head shops, gas stations, and other small retail 
stores.'' Id.
    The Show Cause Order further alleged that following the inspection, 
DEA DIs conducted verifications of Respondent's customers; the DIs 
allegedly found that some of the locations were ``non-existent,'' some 
were residences, and others included such establishments as ``liquor 
stores, gift shops, a Blimpie restaurant * * * and a magazine store.'' 
Id. Relatedly, the Order alleged that in seeking a registration for its 
Decatur location, Respondent provided a list of its proposed list I 
chemical customers which included ``liquor stores, a lotto store, a 
clothing store, a newsstand, and another distributor.'' Id. at 3.
    The Show Cause Order also alleged that Respondent would not 
maintain proper security of listed chemical products at its new 
proposed location because while its owner, Mr. Shaukat Sayani, had 
represented that his customers would place their orders ``in person'' 
and that Respondent would deliver the products by van, the DIs had 
previously determined that Respondent did not conduct business in this 
``manner at [its] Forest Park'' location. Id. The Show Cause Order 
further alleged that Respondent ``intended to co-mingle listed chemical 
products with

[[Page 57656]]

non-regulated products on the warehouse floor,'' that it ``had no 
procedure in place to detect theft or loss at the warehouse,'' that its 
``proposed method of sales recordkeeping * * * was inadequate to comply 
with 21 CFR 1310.06,'' and that it had no means of ``compar[ing] sales 
between its two * * * locations in order to determine if excessive or 
suspicious transactions were being encountered.'' Id. Relatedly, the 
Show Cause Order alleged that warehouse security at the Forest Park 
location was inadequate. Id. at 5.
    On September 13, 2005, Respondent requested a hearing on the 
allegations of the Order to Show Cause and Immediate Suspension and 
moved to consolidate the two proceedings. ALJ Ex. 7. While the hearing 
on the original Show Cause Order had been scheduled to begin on 
September 20, 2005, Respondent's counsel sought a continuance to obtain 
additional time to prepare. Accordingly, the ALJ ordered that the 
original hearing be cancelled. On December 14, 2005, the ALJ conducted 
a pre-hearing conference and set the hearing for March 21, 2006. ALJ 
Decision (ALJ) at 2-3.
    Thereafter, on February 27, 2006, Respondent's counsel filed an 
emergency motion for a continuance. The ALJ granted the motion and 
subsequently rescheduled the hearing to begin on August 15, 2006. Id. 
at 3.
    A hearing was held on August 15 through 18, 2006, at which both 
parties called witnesses to testify and submitted documentary evidence. 
At the hearing, Respondent also submitted a motion for summary 
judgment. Id. (citing RX 26). Following the hearing, both parties 
submitted briefs containing their proposed findings of fact, 
conclusions of law, and argument.
    On May 4, 2007, the ALJ ordered the parties to file a joint status 
report regarding Respondent's Forest Park registration. On June 11, 
2007, the parties filed the report; the report stated that ``it is the 
position of the agency and Respondent that [it] currently has a pending 
application for renewal of its currently suspended registration.'' 
Joint Status Report at 2.
    On August 17, 2007, the ALJ issued her recommended decision. In her 
decision, the ALJ concluded that Respondent did not maintain effective 
controls against diversion because it did not ``verify the legitimacy 
of its customers,'' sold ``suspiciously high quantities of iodine 
products to some customers'' even though its owner ``was repeatedly 
made aware of iodine's role as a methamphetamine precursor,'' had 
``inadequate inventory procedures [and] poor recordkeeping,'' and 
failed ``to report suspicious transactions.'' Id. at 29-30.
    The ALJ also concluded that Respondent was not in compliance with 
federal law because it ``could not account for large quantities of 
missing bottles of product,'' and ``did not keep adequate records'' of 
its sales which ``hindered [its] ability to ascertain whether a 
customer had purchased an amount above the regulated threshold.'' Id. 
at 31. The ALJ further found that ``Respondent has distributed large, 
case quantities of pseudoephedrine and ephedrine products,'' as well as 
``large amounts of 2% iodine,'' and that ``even [its] witness concurred 
that some of [its] sales were in excess of what would be expected.'' 
Id. at 32-33. Finally, the ALJ noted that ``[m]any of the `businesses' 
to which Respondent sold list I chemical products operated within the * 
* * non-traditional market for such products,'' that sales to the non-
traditional market create an ``unacceptable risk of diversion,'' and 
that ``[s]ome of [Respondent's customers] did not even appear to be 
tangentially related to the legitimate sale of pseudoephedrine and 
ephedrine products.'' Id. at 34.
    The ALJ did note that Respondent had improved its security and had 
``conduct[ed] some investigations into some of its customers' business 
identities.'' Id. at 34. The ALJ concluded, however, that Respondent's 
``cooperation is dwarfed by the significant risk of diversion posed [by 
its] continued sales of listed chemical products to [non-traditional] 
customers without adequate sales records or customer verification,'' 
and that it ``has not provided sufficient evidence * * * that its 
future conduct would change to the degree necessary to eliminate the 
threat to the public interest.'' Id. at 35.
    The ALJ further rejected Respondent's arguments that the Government 
was denying it equal protection of the laws under the Due Process 
Clause of the Fifth Amendment. More specifically, Respondent argued 
that it was being held `` `to a different standard than [the 
Government's] published rules dictate,' '' id. (quoting Resp. Br. at 
16), that the Agency had not ``put Respondent on notice as to what 
specific action would be a violation [of its] rules and regulations,'' 
id. (quoting Resp. Br. at 17), and that ``the agency [was] `exercising 
uncontrolled discretion.' '' Id. (quoting Resp. Br. at 20).
    Finally, the ALJ rejected Respondent's contention that it was 
entitled to judgment as a matter of law because its sales did not 
exceed the 1,000 gram monthly threshold (which triggers various 
reporting and recordkeeping) requirements. Id. at 37. Citing several 
DEA decisions, the ALJ explained that ``Respondent need not exceed the 
Government's threshold of allowed sales in order to [be deemed to have] 
act[ed] in a manner inconsistent with the public interest.'' Id. 
(citations omitted).\3\
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    \3\ The ALJ also noted that there was no evidence that supported 
Respondent's contention that it is being discriminated against 
because its owner ``is a legal alien who is attempting to operate a 
business in this country in accordance with its laws.'' ALJ at 37 
(quoting Res. Br. 24).
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    While the ALJ did not make an express finding that Respondent's 
continued registration is inconsistent with the public interest, such a 
finding is implicit in her recommended sanction that Respondent's 
registration at its Forest Park location should be revoked and its 
pending application for a registration at its Decatur location should 
be denied. ALJ at 38. Thereafter, both parties filed exceptions to the 
ALJ's decision.
    The Government's exception noted that while it concurred with the 
ALJ's recommendation, it was ``not apparent whether the ALJ actually 
made a finding that Respondent's continued registration would not be in 
the public interest.'' Gov. Exceptions at 1. The Government thus 
requested that I ``make a finding that Respondent's continued 
registration and pending application for registration are not in the 
public interest as that term is used'' in the applicable provisions of 
the Controlled Substances Act. Id.
    The Government also took exception to three of the ALJ's factual 
findings (FOFs 52, 57, 58), pertaining to the testimony of the 
Government's expert on the expected sale range of listed chemical 
products at convenience stores and other non-traditional retailers of 
these products. Id. at 2. More specifically, the Government took 
exception to the ALJ's findings that Respondent's expert had credibly 
testified that the Government's expert had made several ``flawed 
assumptions'' including ``that everybody sells everything in'' the 
product category, and that as a result, ``the average convenience store 
might sell $173.25 of list I chemical products per month,'' and that 
``this number [is] more credible than the $82 value'' given by the 
Government's expert.\4\ ALJ at 23-24; Gov. Exceptions at 2.
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    \4\ The ALJ noted, however, that ``even using this larger number 
* * *. Respondent repeatedly sold list I chemical products in excess 
of $173.25 per month.'' ALJ at 24.
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    Because ``Respondent sold in excess of both experts' figures,'' the 
Government declined to ``opine'' as to

[[Page 57657]]

whose expert's sales figures were ``exactly correct'' or whether 
``there is a more precise figure somewhere between their numbers.'' 
Gov. Exceptions at 2-3. The Government nonetheless urged that I not 
adopt the ALJ's finding because Respondent's expert's ``analysis of 
this case was not in detail, but quite limited,'' and the expert ``did 
not perform his own independent analysis of the data, but only compared 
end data from two different parts of [the Government expert's] 
report.'' Id. at 3.
    In its exceptions, Respondent also noted that the ALJ had not made 
a finding as to whether its continued registration would be in the 
public interest and argued that ``no such ruling would be appropriate 
in this matter.'' Resp. Exceptions at 2. More specifically, Respondent 
contends that it has ``complied with every request that was given to it 
by the DEA, repeatedly requested of DEA what they wanted it to do and 
was willing to do anything the DEA wanted.'' Id. at 3. It further 
contends that the Show Cause Orders were based on Respondent's 
exceeding sales levels, but that the Government's evidence on the 
expected sales was ``not credible,'' and that therefore, the Government 
has not carried its burden of showing that its registration would be 
inconsistent with the public interest. Id. at 4.
    Respondent also takes exception to the ALJ's finding that it has 
``inadequate inventory procedures.'' Id. at 4 (citing ALJ at 30). More 
specifically, Respondent contends that ``there is no requirement under 
any of the DEA rules to have an inventory system, and [that it] is once 
again being asked to comply with something that is not in the DEA 
rules.'' Id. at 5. Respondent thus contends that it is ``being held to 
[a] previously unspecified and unpublished * * * guideline[ ],'' and 
that in doing so, the Agency is violating its constitutional rights to 
due process and equal protection. Id. at 5. Finally, Respondent 
contends that the ALJ ``ignore[d] the substantial remedial actions that 
[it] had taken to correct problems of which the DEA had notified it.'' 
Id.
    Thereafter, the record was forwarded to me for final agency action. 
Having considered the record as a whole, as well as the exceptions of 
both parties, I adopt the ALJ findings of fact except as expressly 
noted herein. I further conclude that the Government has made out a 
prima facie case that Respondent's registration would be inconsistent 
with the public interest and that Respondent has failed to present 
sufficient evidence to establish that it will maintain effective 
controls against diversion in the future. I also reject Respondent's 
constitutional claims and its motion for judgment as a matter of law. I 
therefore also adopt the ALJ's recommended sanction that Respondent's 
Forest Park registration be revoked and its applications for renewal of 
the latter registration and for a registration at its Decatur location 
be denied. I make the following findings.

Findings

    Respondent is a corporation which engages in the wholesale 
distribution of assorted products to gas stations, convenience stores, 
dollar stores, beauty stores, and other establishments. Tr. 701. 
Respondent is owned by Mr. Sunny Sayani, id., and operates two 
warehouses which are located in Forest Park and Decatur, Georgia. Id. 
at 702. According to the record, Respondent operates ``a cash and 
carry'' business in which its customers come to the warehouse to 
purchase the products they need. RX 25a, Tr. 731.\5\
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    \5\ Respondent's owner testified that it delivers, but that the 
customer must ``buy more than $1000'' to justify the expenses of 
paying for the driver, gasoline and the truck. Tr. 731.
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    Respondent currently holds DEA Certificate of Registration, 
 004550SLY, which authorizes it to distribute the list I 
chemicals ephedrine and pseudoephedrine out of its Forest Park 
warehouse. Tr. 245; GX 1. While Respondent's registration expired on 
February 28, 2005, it filed a renewal application and paid the 
requisite fee at some point in January 2005. See Joint Status Report at 
1-2. Accordingly, Respondent has a registration, albeit one that has 
been suspended, at its Forest Park location.

Methamphetamine and the Market for List I Chemicals

    Both pseudoephedrine and ephedrine have therapeutic uses and are 
lawfully marketed as non-prescription (OTC) drug products under the 
Federal Food, Drug and Cosmetic Act. GX 15, at 3. Pseudoephedrine is 
approved for marketing as a decongestant; ephedrine (in combination 
with guaifenesin) is approved for marketing as a bronchodilator.\6\ Id. 
at 4. Both pseudoephedrine and ephedrine are, however, regulated as 
list I chemicals under the Controlled Substances Act because they are 
precursor chemicals that are easily extracted from OTC 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); GX 15, 
at 8 (noting that ``the production of methamphetamine from ephedrine or 
pseudoephedrine can be accomplished via a simple one step reaction and 
can be accomplished with little or no chemistry expertise'').
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    \6\ In July 2005, the Food and Drug Administration issued a 
notice of proposed rulemaking which proposes to remove combination 
ephedrine/guaifenesin products from the OTC monograph on the ground 
that these drugs are not safe and effective for OTC use. 70 FR 40232 
(2005).
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    Methamphetamine is a highly addictive and abused central-nervous 
system stimulant. GX 15, at 9. Methamphetamine abuse has destroyed 
numerous lives and families and ravaged communities. Id.; see also 
Rick's Picks, L.L.C., 72 FR 18275, 18276 (2007). Moreover, because of 
the toxic nature of the chemicals used to make the drug, its illicit 
manufacture causes serious environmental harms. Id.; GX 14, at 10.
    A DEA Special Agent from the Atlanta Field Division testified 
regarding the rapid growth of illicit manufacturing of methamphetamine 
during his tenure in Atlanta. Tr. 29. According to the S/A's testimony, 
over ``a short period of time'' the number of meth. lab seizures by DEA 
and local law enforcement had ``multiplied by ten times.'' Id. Other 
evidence showed that between 1999 and 2004, the number of seizures in 
the State of Georgia had increased from 34 to 229.\7\ See GXs 9 & 35.
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    \7\ Between 1999 and 2004, the States adjacent to Georgia also 
experienced large increases in the number of meth. lab seizures. In 
Alabama, the number of seizures increased from 27 to 369; in 
Tennessee, the number increased from 106 to 1251; and in South 
Carolina, the number increased from 5 to 153. See GXs 9 & 35.
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    The Special Agent, who had debriefed over 200 individuals involved 
in the illicit manufacture of methamphetamine, Tr. 39, also testified 
that convenience stores, gas stations, and other small retailers were 
the primary source of the ephedrine and pseudoephedrine which was used 
by ``mom-and-pop'' meth. labs. Id. at 56 & 59. The Agent further 
testified that meth. cooks use individuals known as ``runners'' who 
would travel to different stores and purchase small amounts each day to 
avoid detection. Id. at 62. Moreover, runners generally avoided larger 
retailers such as chain stores because these establishments have ``too 
much security'' and ``too much video surveillance,'' id. at 56, and 
have ``been very militant on * * * limit[ing] sales'' of the drugs. Id. 
at 102; see also id. at 100.
    The S/A also testified that in some instances, meth. cooks 
recruited multiple persons to go to smaller stores and buy the maximum 
amount of product the store would sell them. Id. at 63. Moreover, in 
some instances, either the owner or an employee of a smaller

[[Page 57658]]

store would sell a case quantity of a listed chemical product to a 
person affiliated with a lab. Id.
    The Government also established that the overwhelming majority of 
commerce in non-prescription drug products occurs in drug stores, 
supermarkets, large discount merchandisers and electronic shopping/mail 
order houses. GX 25. According to the declaration of Jonathan 
Robbin,\8\ who has testified in numerous DEA and federal court 
proceedings as an expert witness on the market for list I chemical 
products containing pseudoephedrine and ephedrine, ``over 97% of all 
sales of non-prescription drug products occur in drug stores and 
pharmacies, supermarkets, large discount merchandisers and electronic 
shopping and mail order houses.'' Id. at 4; see also GX 24, at 3.\9\ 
According to Mr. Robbin, these retailers ``constitute the traditional 
marketplace where [nonprescription drugs for coughs, cold, nasal 
congestion, and asthma] are purchased by ordinary consumers.'' GX 25, 
at 4.
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    \8\ Mr. Robbin holds degrees from Harvard College and Columbia 
University and is an expert in multivariate statistical analysis and 
the processing of economic census and population data. See GX 25, at 
1-2. He also founded Claritas, Inc., a company which is now the 
largest producer and seller of census-based consumer marketing 
information products, systems and services. Id. at 1.
    \9\ According to this report, convenience stores selling 
gasoline account for 1.75% of the non-prescription drug market; 
convenience stores that do not sell gasoline account for .95% of the 
market. GX 24, at 3. All other establishments combined account for 
only .21%. Id.
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    Mr. Robbin has further concluded that sales of non-prescription 
drugs at convenience stores ``account for only 2.2% of the overall 
sales of all convenience stores that handle the line.'' Id. Moreover, 
only 4.87% of convenience store shoppers purchase a non-prescription 
drug product, GX 24, at 5; and only 4.59% of these shoppers purchase a 
pseudoephedrine product.\10\ Id. at 4. Mr. Robbin thus concluded that 
.21% of convenience store shoppers purchased a pseudoephedrine product. 
Id. at 5. In another document, Mr. Robbin explained that by 
extrapolating data from the 1997 U.S. Economic Census data and 
information obtained from surveys of the National Association of 
Convenience Stores, he had estimated that during 2005, ``[t]he expected 
average monthly convenience store sales of nonprescription drug 
products containing pseudoephedrine (hcl) in Georgia were * * * $82.'' 
GX 26 at 2.\11\
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    \10\ While the text accompanying table 3 uses the figure of 
5.59% as the percentage of non-prescription drug buyers who purchase 
pseudoephedrine at convenience stores, the previous table makes 
clear that the actual percent is 4.59%. Compare GX 24, at 5, with 
id. at 4.
    \11\ Mr. Robbin noted that data from the 2002 Economic Census 
for Florida (a neighboring State) indicated that the expected sales 
were 21% lower than the data from the 1997 Economic Census 
suggested. GX 26, at 1-2. Mr. Robbin thus stated that ``using the 
same factor as encountered in Florida would produce an updated 
estimate of $65.'' Id. at 2.
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    Respondent called as an expert witness, Dr. Danny N. Bellenger. Dr. 
Bellenger holds a PhD in Business Administration and is a Professor and 
Marketing Research Fellow at the Robinson College of Business at 
Georgia State University. RX 31, at 2. Dr. Bellenger previously served 
as chairman of the Department of Marketing at Robinson, and was the 
Dean of the College of Business at Auburn University. Id.
    Dr. Bellenger disputed Mr. Robbin's figures for the expected 
monthly sales range of pseudoephedrine at convenience stores. Dr. 
Bellenger testified that he did not agree with the conclusions of Mr. 
Robbin's reports and that reports did not ``agree with each other.'' 
Tr. 521. More specifically, Dr. Bellenger noted that one of Mr. 
Robbin's reports stated that ``two in 1,000 * * * convenience store 
shoppers would be expected to buy Sudafed,'' but in another report, Mr. 
Robbin had stated ``that there's 120,000 purchasers or customers [who] 
come into a convenience store.'' Id. at 523; see also GX 25, at 11 
(stating that ``[t]he average annual number of shoppers in a 
convenience store (excluding gasoline purchases) is about 
120,000'').\12\
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    \12\ With respect to the number of convenience store shoppers 
who would purchase Sudafed, Dr. Bellenger testified that ``[t]he 
numbers which I've computed actually says its 2.7 [out of 1,000], 
but * * * that's a relatively minor difference.'' Tr. 523. Dr. 
Bellenger testified that he used ``the data that was in [Mr. 
Robbin's] report, and [did] exactly the computations [Mr. Robbin] 
did * * * and came out with * * * 2.7 customers in 1,000.'' Id. at 
581. In his testimony, Dr. Bellenger did not specifically identify 
which figures he used, and as explained above, it appears that one 
of Mr. Robbins' reports contains a transcription error. See supra n. 
10.
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    Dr. Bellenger explained that if two out of a 1,000 customers 
purchased pseudoephedrine and a convenience store has 120,000 
customers, at least 240 of these persons would buy the product over the 
course of a year or ``twenty per month for an average convenience 
store.'' Tr. 523. Dr. Bellenger testified that multiplying this number 
``times the average retail price of * * * Sudafed'' gives an ``estimate 
of about $170 * * * based on the numbers that are in the reports.'' Id.
    Dr. Bellenger subsequently testified that he determined the average 
price of Sudafed by ``looking at the wholesale prices and assuming a 
markup,'' and that he ``also looked in Kroger to see what it cost, but 
[the price] would vary a lot * * * by store.'' Id. at 662-63. However, 
Dr. Bellenger did not ``recall the actual figure'' he used for the 
retail price. Id. at 663. Nor did he explain what source he used for 
the wholesale price figure, or what price he used.
    Dr. Bellenger also testified that he confirmed his estimate by 
multiplying the percentage of convenience store shoppers who purchase 
pseudoephedrine (.0027) times the average annual merchandise sales of 
convenience stores ($770,000). Dividing this figure by twelve results 
in a monthly sales figure of $173.25, which is ``a similar number'' to 
the sales figure obtained in the first method. Id. at 524.\13\
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    \13\ Notably, Dr. Bellenger used the figure which appears to be 
based on a transcription error in one of Mr. Robbin's reports. If, 
however, the .0021 (or 2.1 shoppers out of 1,000) figure is used, 
see GX 24, at 5; the average monthly sale is $134.75.
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    Dr. Bellenger further testified that Mr. Robbin's methodology was 
based on several assumptions which he contended ``are not consistent 
with reality.'' Id. at 527. More specifically, he contended that one of 
Mr. Robbin's assumptions was that ``all retailers [including] 
convenience stores carry a full line of all'' non-prescription 
medicinal products that are reported in the Economic Census's 
merchandise line, and that this is ``not consistent with the common 
practice'' because ``a convenience store * * * carries a much narrower 
line of most products.'' Id. at 526; see also id. at 583, 664. 
According to Dr. Bellenger, ``when the conveniences stores sell less 
than a full line and the supermarkets and drugstores sell the full 
line, * * * it distorts the numbers,'' by ``caus[ing] the estimate for 
Sudafed for the convenience store to be lower than it actually should 
be.'' Id. at 664.\14\
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    \14\ Dr. Bellenger also testified that one of Mr. Robbin's 
reports assumed that all stores were ``expected to sell the same 
amount,'' and that this requires the assumption that the stores are 
``all the same size'' and ignores the stores' locations. Tr. 529. As 
Dr. Bellenger further testified, ``[i]f you've got a very large 
store attached to a gasoline station selling on the interstate, the 
mix of products is not going to be the same as a small rural 
store.'' Id. at 530. I note, however, that in one of the reports, 
Mr. Robbin estimated a sales range which was based on ``differences 
in sales occurring as a consequence of store size, location, hours, 
advertising expenditures and management practices.'' GX 25, at 7. 
This would appear to address Dr. Bellenger's testimony on this 
point.
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    While the ALJ credited Dr. Bellenger's testimony that the monthly 
expected sales figure of pseudoephedrine products at convenience stores 
was $173.25, see ALJ at 24, I decline to adopt this finding. While Dr. 
Bellenger's testimony that approximately 240

[[Page 57659]]

persons would purchase pseudoephedrine at a convenience store over the 
course of a year calls into question the validity of the Government's 
figure, he did not establish the source of the wholesale price 
information (and the price) that he relied upon or the amount of markup 
he used. As for his testimony regarding pricing at Kroger, he did not 
testify as to what that price was, what size package it was, and stated 
that the price would vary a lot by store. Finally, while Dr. Bellenger 
``confirmed'' his estimate by multiplying the percentage of convenience 
store shoppers who purchase pseudoephedrine by the average store's 
sales volume, this methodology seems to require a major assumption in 
its own right--that the average amount spent by a customer in 
purchasing pseudoephedrine is the same as the average purchase of those 
convenience store customers who buy other products.
    Accordingly, I conclude that neither the Government's nor 
Respondent's evidence reliably establishes the monthly expected sales 
range.\15\ For purposes of this case, I assume without deciding that 
Dr. Bellenger's figures are accurate.
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    \15\ Accordingly, I agree with the Government's exception and 
decline to adopt the ALJ's finding.
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    Dr. Bellenger also testified regarding several other matters. With 
respect to the size of a retailer's purchases, Dr. Bellenger testified 
that buying a case quantity may be a legitimate business decision ``to 
invest in more inventory so as to lower [its labor] cost of taking 
inventory and processing order forms.'' Tr. 549. According to Dr. 
Bellenger:

    The simple fact that someone, in * * * their business model, 
decides to order in large quantities is not necessarily suspicious 
in and of itself. What would be suspicious to me is if someone 
repeatedly ordered in large quantities. So I would think that 
looking for repeated large quantity orders by the same store or a 
combination of products which go into the production and ordering in 
large quantities * * * of a group of products which are involved in 
the manufacture of some illicit substance would be important for 
determining suspicious orders.

Id. at 549-50.
    Amplifying this testimony, Dr. Bellenger added that to purchase a 
case quantity (144 bottles) is ``one of two things. It's a conscious 
business decision where a store owner has decided it's more efficient 
to order in large quantities, put it in the stockroom, and make fewer 
orders, and have less labor involved.'' Id. at 570. Dr. Bellenger than 
allowed that ``maybe there's some nefarious practice involved here,'' 
but that if this was so, ``you would see repeat purchases of large 
quantities.'' \16\ Id. at 570-71.
---------------------------------------------------------------------------

    \16\ Dr. Bellenger added that he was not ``sure how much of this 
is stuff is required to make the illicit drugs in question,'' and 
that he was ``not sure if 144 [bottles] will make enough to matter 
or not.'' Id. at 571. The Government's evidence showed, however, 
that Georgia and the adjacent States had experienced a proliferation 
in smaller methamphetamine labs which typically produced a quarter 
to a half ounce. Id. at 35. The evidence also showed that ``even 
unskilled persons can obtain a 50-70% yield of methamphetamine.'' GX 
15, at 8. Contrary to Dr. Bellenger's understanding, four sixty-
count bottles of 60 mg. pseudoephedrine would provide enough 
material for even an unskilled person to manufacture a quarter ounce 
of the drug; 144 bottles would provide enough material to make nine 
ounces.
---------------------------------------------------------------------------

    The ALJ also credited Dr. Bellenger's testimony that in reviewing 
the various exhibits, he noted that while ``some of [Respondent's 
customers] were buying by case lot,'' he did not find a pattern of the 
customers ``buying [ten] 144s.'' Tr. 571 (cited at ALJ at 25). 
Respondent's own evidence shows, however, that there were multiple 
instances in which Respondent sold case quantities that suggest that 
the sales were for an illicit purpose. See RX 12.
    For example, during the year 2004, Respondent sold cases (144 
bottles) of Max Brand Pseudo to the Coastal Food Mart of Rockmart, 
Georgia, on eight occasions: January 21, February 2, March 4, April 19, 
June 3, July 14, August 2, and September 5.\17\ Id. at 52, 82, 86, 91, 
93, 97, 99. On cross-examination, Dr. Bellenger acknowledged that the 
store was ``probably * * * buying in excess of what would be 
expected,'' that ``a case over a six-month period is rational,'' but 
this store's purchases ``would raise [his] suspicions.'' Tr. 619-20. 
Moreover, when asked whether this store's retail sales would be ``many 
standard distributions beyond'' the $175 figure he calculated for 
average monthly sales, Dr. Bellenger answered: ``Right.'' Id. at 620. 
Dr. Bellenger also acknowledged that it would not be logical for a 
store to ``order additional inventory on a regular basis unless they 
were selling it.'' Id. at 642.
---------------------------------------------------------------------------

    \17\ Each case sold for $1006.56.
---------------------------------------------------------------------------

    On re-direct, Dr. Bellenger opined that ``it would be highly 
unlikely in the normal course of business'' for an entity like Sunny 
Wholesale to detect these transactions. Id. at 646. According to Dr. 
Bellenger, ``you've got to be looking real, real, real close'' to find 
these transactions ``given the scope of [Respondent's] business,'' and 
the fact that the product category was ``less than two percent of the 
total business and these instances would account for a fraction of 
that.'' Id. at 647.
    The Coastal Food Mart was not, however, the only store to which 
Respondent repeatedly sold large quantities of pseudoephedrine. During 
the same year, it sold a case quantity to Chitra Inc.'s Quick Stop of 
Rome, Georgia, on eight separate dates: January 4, April 8, June 14, 
July 5, August 2, August 20, September 14, and October 11. See RX 12, 
at 80, 91, 94, 95, 97, 98, 100, & 101. It sold a case to the Phillips 
66 Mart of Hapeville on eight occasions: January 5, February 5, March 
22, April 1, May 5, June 3, August 17, and September 12. See id. at 80, 
84, 88, 89, 92, 93, 98 & 99.
    It sold a case to the R & S Grocery of Columbus on nine dates: 
January 21, February 2, March 2, April 1, May 5, June 21, July 7, 
August 30, and September 29. See id. at 82, 86, 89, 92, 95, 96, 98, & 
100. It sold a case to the Stop In of Bremen on nine occasions: January 
5, February 3, March 2, April 1, May 5, June 1, July 27, August 20, and 
September 14. See id. at 52, 80, 83, 86, 89, 92, 93, 98, 100.
    Moreover, the record shows that there were instances in which 
Respondent sold to two customers who used the same address. For 
example, Respondent sold case quantities to the P & K Mini Mart, with 
an address of 461 Columbia Drive, Carrollton, on January 6, February 
10, March 4, April 8, and May 5. See id. at 53, 81, 84, 86, 89. Yet it 
also sold a case to a customer it listed as the ``Quick Stop/Tushar/
BP'' with the same 461 Columbia Drive, Carrollton address, on February 
2, March 4, April 8,\18\ May 5, July 22, and August 1. See id. at 54, 
83, 86, 91, 96, 97. Moreover, Respondent sold a case to the DJ Food 
Mart, with an address of 15582 HWY 27, Trion, on January 6, February 
10, March 4, April 8, May 5, and June 15. See id. at 54, 81, 85, 87, 
90, 94. It also sold a case to a customer it listed as ``BJ's Food 
Market  1'' with the address of 15582 HWY 27 North, Trion, on 
February 10, March 4, April 8, May 5, June 4, July 27, July 22, August 
18, and September 5. See id. at 54, 84, 87, 90, 93, 96, 98, 99.
---------------------------------------------------------------------------

    \18\ The record indicates that on this date, Respondent sold 96 
bottles for a total sale of $671.04. RX 12, at 91.
---------------------------------------------------------------------------

    Relatedly, Dr. Bellenger testified that ``unusual orders become 
very challenging if there's a relatively small number of * * * those 
orders * * * given the large numbers of people [a business is] dealing 
with.'' Id. at 556. Dr. Bellenger acknowledged, however, that ``you 
could create a computer program which would create an exceptions 
report.'' Id. at 648. Dr. Bellenger nonetheless maintained that it 
would be difficult to track these

[[Page 57660]]

purchases and that finding a high volume purchase ``in the normal 
course of business would be an accident.'' Id. at 647.
    I reject Dr. Bellenger's testimony regarding the difficulty of 
detecting excessive purchases. As noted below, during an earlier 
meeting with DEA investigators, Mr. Sayani stated that ``a typical 
sale'' of listed] chemicals ``was two to three boxes,'' with each ``box 
contain[ing] twelve bottles of 60-count tablets.'' Id. at 331. Notably, 
during this meeting, the DI specifically told Mr. Sayani that an order 
of ``ten boxes [or 120 bottles] would be suspicious,'' and that if a 
customer ``requested cases quantities'' or 144 bottles, ``he was to 
notify DEA.'' Id. at 336.
    Moreover, Respondent's records show that many of these customers 
were not trying to hide the size of their purchases by purchasing 
smaller quantities on different dates. Rather, they were openly 
ordering case quantities, see RX 12, at 79-101; and as found above, 
several of these customers did so with disturbing frequency. Finally, 
even crediting Dr. Bellenger's testimony that in some instances, a 
convenience store owner could make a legitimate business decision to 
purchase a case quantity, it does not require that much effort to call 
up a customer's account history to determine how frequently the 
customer was purchasing the products.

Respondent's History as a Registrant

    In September 1999, Respondent applied for a DEA registration to 
handle list I chemicals at its Forest Park warehouse. Tr. 703. Prior to 
being granted the registration, DEA DIs conducted a pre-registration 
inspection. Id.; see also id. at 323. During the inspection, a DI 
provided Mr. Sayani with a copy of the DEA Chemical Handler's Manual 
and a document which listed the thresholds for pseudoephedrine and 
ephedrine (which trigger additional reporting and recordkeeping 
obligations). Id. at 726-27. Moreover, Mr. Sayani told the DI that ``he 
would deliver [the listed chemical products] to his customers.'' Id. at 
323.\19\ Shortly after the inspection, Respondent obtained a 
registration for this location.
---------------------------------------------------------------------------

    \19\ Mr. Sayani made the same representation during the pre-
registration investigation of Respondent's application for the 
Decatur location. Tr. 323.
---------------------------------------------------------------------------

    On January 31, 2001, Respondent applied for a registration to 
handle pseudoephedrine, ephedrine, and phenylpropanolamine, at its 
Decatur warehouse. GX 2. Accordingly, on March 31, 2001, DEA DIs went 
to Respondent's Decatur facility to conduct a pre-registration 
inspection. Tr. 246. During the inspection, the DIs met with Mr. Sayani 
and provided him with another copy of the Chemical Handler's Manual, as 
well as notices stating that drug products containing 
phenylpropanolamine were being used by drug traffickers to manufacture 
amphetamine, GX 5, and combination ephedrine and pseudoephedrine were 
being used to by traffickers to manufacture amphetamine and 
methamphetamine. GX 6, Tr. 249. The DIs also provided Mr. Sayani with 
notices pertaining to recordkeeping and reporting of theft and losses 
of listed chemical products. Tr. 249.
    The DI had previously requested that Mr. Sayani provide her with 
lists of his suppliers, the products he intended to carry, and his 
proposed customers. Id. 246-47. On the list of suppliers and products, 
Mr. Sayani indicated that he intended to sell products distributed by 
Compare Generics of Hauppauge, New York, including Max Brand and Heads 
Up, two brands of products which ``are notoriously popular [with] 
methamphetamine traffickers.'' \20\ GX 34, at 11; GX 27.
---------------------------------------------------------------------------

    \20\ On its product list, Respondent also indicated that he 
would be distributing four products from BDI Marketing, Inc., 
another firm whose products have been found at numerous illicit 
methamphetamine labs. GX 4. However, according to the DI, none of 
these products contained a list I chemical. Tr. 250.
    Respondent also listed three other suppliers; the listed 
chemical products he listed under these suppliers were nationally 
recognized brands such as Tylenol, Advil, Nyquil, Contac, and Vicks 
44. See GX 27.
---------------------------------------------------------------------------

    During the inspection, the DIs reviewed the Chemical Handler's 
Manual with Mr. Sayani, placing special emphasis on its provisions 
pertinent to record keeping, security, the need to know his customers, 
and requiring proof of identity from his customers. Tr. 321. The DIs 
also discussed with Mr. Sayani the listed chemical thresholds and the 
requirement to report suspicious orders. Id. Mr. Sayani again 
represented that the listed chemical products ``would be delivered just 
like they were at his Forest Park location.'' Id. at 323. The DI 
observed, however, that Respondent did not ``deliver most of the time'' 
as ``[t]he majority of the time the customers were coming'' to the 
warehouse. Id. at 324.\21\
---------------------------------------------------------------------------

    \21\ The DI also obtained information that Respondent had a 
single employee who was ``his delivery guy.'' Tr. 324. The position 
was vacant for some unspecified period of time. Id. at 324-25.
---------------------------------------------------------------------------

    Based on Mr. Sayani's list of proposed customers, one of the DIs 
checked to see if DEA's computer system held information regarding the 
customers. Id. at 255. The DI also visited several of the customers' 
addresses to verify whether there was a business at the location. Id.
    Moreover, the DIs' supervisor decided that before sending the 
report on the Decatur application to DEA Headquarters, the DIs needed 
to inspect Respondent's practices at its Forest Park warehouse because 
the location had ``never been audited.'' Id. at 370. Accordingly, on 
June 30, 2001, several DIs went to the Forest Park warehouse and 
conducted an inspection. Id. at 255.
    Upon their arrival, the DIs met with Mr. Sayani and asked him to 
provide them with an inventory and a list of the listed chemical 
products Respondent distributed. Id. at 256. One of the DIs also asked 
him for a list of his customers and suppliers and provided him with 
another copy of the Chemical Handler's Manual and several DEA notices. 
Id. During the inspection, the DIs observed that Respondent's list I 
products were co-mingled with other products in the warehouse and were 
not stored in a secure area.\22\
---------------------------------------------------------------------------

    \22\ At some point between 2002 and 2005, Respondent built a 
cage at its Forest Park warehouse in which it stored its list I 
chemical products and installed several security cameras. RX 25a. 
The cage had a separate cash register and window at which the 
products were paid for and delivered to the customer. Id.
---------------------------------------------------------------------------

    The DIs then proceeded to conduct an audit of Respondent's handling 
of list I products for the period January 1, 2001, through the close of 
business on June 30, 2001. GX 31. The DIs selected eleven non-
traditional products to audit; with the assistance of Mr. Sayani, they 
counted the actual number on hand of each of the selected products. Tr. 
264 & 275; GX 30.\23\ Because Mr. Sayani did not have a previous 
inventory of the products,\24\ id. at 260, the DIs assigned an opening 
value of zero for each of the products. Id. at 377; GX 31. Assigning an 
opening value of zero for a product should result in an overage if, in 
fact, there was any of the product on hand on the beginning date of the 
audit and the distributor is keeping (and provides) complete records of 
its purchases and distributions.\25\ Tr. 269 & 377.
---------------------------------------------------------------------------

    \23\ The DIs provided Mr. Sayani with a copy of the count. Tr. 
362.
    \24\ At the hearing, a DI testified that DEA's regulations do 
not require that a list I chemical distributor keep an inventory. 
Id. at 261.
    \25\ Assigning an opening value of zero will also result in an 
undercount of a shortage if any product had actually been on hand on 
the opening date of the audit.
---------------------------------------------------------------------------

    To complete the audit, the DIs requested that Mr. Sayani provide 
them with his purchase invoices and sales invoices. Id. at 266. The 
sales invoices did not, however, clearly indicate the package size 
(e.g., whether it was a six count packet or 60 count bottle). Id. at

[[Page 57661]]

267. The DI therefore contacted Mr. Sayani and requested additional 
information. Id. at 266-67. While Mr. Sayani then provided his sales 
tracking reports, even these were sometimes lacking the necessary 
information. Id. at 267.
    The audit found that there were shortages with respect to six of 
the eleven products.\26\ See GX 31. Most significantly, Respondent was 
short 7640 sixty-count bottles of Heads Up and 3656 sixty-count bottles 
of Max Brand. Id. Moreover, Respondent was short 284 sixty-count 
bottles of Mini 2-Way Action. Id. Respondent was also short 180 six-
count packets of Max Brand, 154 six-count packets of Mini 2-Way Action, 
and 262 packets of Max Brand Pseudo (24-count). Id.
---------------------------------------------------------------------------

    \26\ As the DI explained, the audit was conducted by adding 
Respondent's purchases to the opening inventory figure and comparing 
that figure with the total of the ending inventory plus the amounts 
which Respondent distributed to its customers. Tr. 268, GX 31.
---------------------------------------------------------------------------

    Regarding the audit, Mr. Sayani testified that upon being served 
with the Show Cause Order, which had alleged that he was short 
approximately 10,000 bottles of Max Brand and Heads Up, he checked his 
July 2001 inventory and had 2069 bottles on hand and did not ``know 
where this 10,000 figure came from.'' Tr. 715. Mr. Sayani further 
testified that because 10,000 bottles is a large amount, he ``would 
know where [it] is going.'' Id. at 716.
    The ALJ did not make ``precise findings'' on the amount of the 
shortages. ALJ Dec. 30 at n.6. I do.
    Notably, Mr. Sayani's testimony that he had 2069 bottles on hand 
according to his July 2001 inventory is consistent with the total 
amount of product that he and the DIs physically counted.\27\ Moreover, 
the DIs found that the largest shortage was in the Heads Up 60-count 
bottles, yet none of this product was on hand when the physical count 
was on hand. See GX 31. The audit of this product was thus based 
entirely on Respondent's records of its purchases and distributions; if 
the amount was incorrect, Respondent could have produced his records to 
show that.
---------------------------------------------------------------------------

    \27\ Mr. Sayani did not state which products were included in 
his 2069 figure. According to GX 31, the physical count found 1584 
Max Brand (60 count) bottles, 36 Mini 2-Way (48-count) and 428 (60-
count) bottles, and 18 Mini Twins (60 count bottles). These products 
would total 2066 bottles. I further note the testimony that Mr. 
Sayani agreed with the results of the inventory. Tr. 266.
---------------------------------------------------------------------------

    Moreover, for each of the audited products, the amount of the 
shortages (11,296 60-count bottles of Max Brand and Heads Up) was 
determined based on the discrepancy between the amount of these 
products which Respondent obtained from his suppliers during the audit 
period and the sum of the amount it had on hand on June 30 and the 
amount its sales records showed it had distributed during the audit 
period. Mr. Sayani's assertion aside, he offered no credible evidence 
that gives me reason to reject the audit's finding. Accordingly, I 
adopt as findings, the audit results as listed in GX 31.
    As found above, during the visit, the DIs also discussed with Mr. 
Sayani the size of a normal monthly sale to a single store of non-
traditional products. Id. at 330. Mr. Sayani told the DIs that ``[a] 
typical sale was two to three boxes,'' with each ``box contain[ing] 
twelve bottles of 60-count tablets.'' Id. at 331. As found above, 
however, Respondent frequently sold listed chemical products in far 
larger quantities and did so notwithstanding that the DIs had informed 
him that sales of case quantities were suspicious and should be 
reported to DEA. See RX 12; Tr. 336.
    Following the inspection, several DIs were assigned to conduct 
customer verifications.\28\ ALJ at 15-17. The verifications serve 
several purposes including determining whether the customer actually 
exists, the nature of its business and whether it is legitimate, and 
whether the customer has a business relationship with the distributor. 
Tr. 139, 145, 187, 202, 355-56. As the ALJ found, the verifications 
produced ``mixed results.'' ALJ at 15.
---------------------------------------------------------------------------

    \28\ According to the record, Mr. Sayani provided two separate 
customer lists. One was a list which Mr. Sayani represented as being 
his actual Forest Park warehouse list I customers; the other was a 
list of his potential list I customers for his Decatur warehouse. 
Tr. 373-74.
---------------------------------------------------------------------------

    One DI, who was assigned twelve verifications, found that several 
of the businesses were convenience stores, gas stations, and a liquor 
store. Tr. 142-45. Moreover, upon visiting the addresses of three of 
the customers, two of which were listed as businesses (Pamela's Unique 
Clothing and Reliance Wholesale Supply), and one which was listed as an 
individual (M.S.), the DI found that they were residences and that 
there were no signs of businesses. Tr. 142 & 144. The DI further found 
that the R.S. Corporation was a Blimpie restaurant, id. at 142, and 
that Artistic Sales was a gift shop which did not sell list I 
chemicals. Id. at 143.
    Another DI testified that when she and her partner went looking for 
Ashley's Boutique, they could neither find the store nor the address 
that Mr. Sayani had given for it. Id. at 202-03, 233. The DIs further 
found that the Atlanta Cleaners Plus ``was closed down.'' Id. at 203. 
While the DIs found that the Matierra Mexicana 3 was a 
supermarket, the store did not purchase items from Respondent. Id. at 
203-04. Moreover, one of the establishments was a liquor and check 
cashing store. Id. at 204.
    Another customer (BDI Inc.) was a Shell gas station whose manager 
stated that while he had purchased products from Respondent nine months 
earlier, he no longer did so. Id. at 205. Moreover, the manager told 
the DIs that Respondent ``did not deliver'' and that ``he had to drive 
to [Respondent's] facility to pick up his products.'' Id. Finally, the 
DIs determined that another customer (Golden Dealers) ``was a house 
that was located in a cul-de-sac'' and there was no store on the 
premises. Id. at 206.
    Following the customer verifications, one of the DIs and her 
supervisor met with Mr. Sayani and his attorney Henry D. Frantz, Esq., 
to discuss their concerns that some of Respondent's customers were not 
legitimate. Id. at 254. More specifically, the DI told Mr. Sayani that 
the DI had ``found numerous suspect customers that normally would not 
be selling these type of products.'' Id. at 372. The DI also expressed 
her concern that some of Respondent's customers were engaged in 
wholesale distribution out of their homes and were therefore required 
to be registered under 21 U.S.C. Sec.  823(h), but were not. Id. at 
259.
    Upon being informed by the DIs that ``some of the customers were 
suspicious,'' Mr. Sayani stated that he had ``provided * * * a list of 
the customers he thought * * * would purchase from him, whether it was 
list I chemicals or other products that he handled.'' Id. at 254. At 
the meeting, the DIs also provided Mr. Sayani and his attorney with a 
list of 147 customers who they deemed suspicious and instructed him to 
investigate them. Id. at 687.
    Several weeks thereafter, Respondent's attorney wrote a letter to 
the DIs reporting that 119 of the customers owned either a convenience 
store or grocery. RX 8, at 1. Respondent's attorney further reported 
that 14 of the customers had ``never purchased a list I'' product and 
that three of them ``have a DEA license.'' Id. As for the remaining 
suspicious customers, the letter stated that Respondent could not 
contact eight of the customers and that three of them were jobbers who 
had purchased small amounts. Id.
    Respondent's attorney further wrote that it ``had tightened up * * 
* his business with regard to checking out the customer on all sales 
pertaining to list I chemicals.'' Id. More specifically, the letter 
stated Respondent ``currently asks

[[Page 57662]]

for a tax identification number, business license[,] as well as a DEA 
permit if the customer does not have a store.'' Id. at 2.\29\
---------------------------------------------------------------------------

    \29\ The letter also stated that Respondent would ``cross-check 
* * * all customers purchasing list I items between'' its two 
warehouses, and that it was maintaining ``an updated inventory.'' RX 
8, at 2.
---------------------------------------------------------------------------

    At the hearing, Mr. Sayani testified that he did not go to a new 
customer's store to verify whether it was legitimate ``because at the 
time of opening the account, we get enough proof from them that they're 
legitimate * * * or that they're who they say'' they are. Tr. 768. Mr. 
Sayani acknowledged, however, that anyone who applied for a state or 
local tax identification number would be issued one. Id. at 769.
    At the hearing, Mr. Sayani further testified that upon being served 
with the Show Cause Order, which referred to Max Brand and Heads Up as 
non-traditional products, he stopped selling the products. Id. at 714. 
As found above, the first Show Cause Order was dated October 20, 2004, 
and served on Respondent no later than November 19, 2004, when his 
counsel requested a hearing.
    Contrary to Mr. Sayani's testimony, Respondent's ``Sales Tracking 
Report'' indicates that it repeatedly sold Max Brand after the first 
Show Cause Order was served and frequently did so in large quantities. 
Moreover, there is evidence that it made multiple large sales to 
several stores.
    For example, on November 30, 2004, it sold $504 of Max Brand 2-Way 
to the Lucky Star of Brookfield, Georgia. RX 12, at 67. This was 
followed by two December 12, 2004 sales, each totaling $1509.84, to the 
Dixie Stop of Twion and the Modern Kwik Shop of Summerville, id. at 
101, and a December 19, 2004 sale of $504 to Jay Swaminarayan, Inc., of 
Tifton, Georgia. Id. at 74. On February 13, 2005, it sold an additional 
$861.12 of the products to both the Dixie Stop and the Modern Kwik 
Shop.\30\ Id. at 104.
---------------------------------------------------------------------------

    \30\ Respondent had also sold $1509.84 of the products to the 
Modern Kwik Stop on November 14, 2004. RX 12, at 53.
---------------------------------------------------------------------------

    On both November 29, 2004, and January 3, 2005, it sold $1006.56 of 
the products to ABJ Ashburn, Inc., of Ashburn. Id. at 106 & 101. 
Respondent made further sales of the products to this store on January 
27, February 17, and February 25, when it sold $430.56 worth on each 
date, and on both March 20 and April 2, when it sold $861.12 of the 
products to this store. Id. at 101-2, 105-6.
    Moreover, on January 8, 2005, it sold $861.12 of Max Brand 
pseudoephedrine to Priya Nidhi, Inc., of Calhoun, Georgia. Id. at 53. 
Notably, it has previously sold this establishment $1006.56 on October 
15, 2004. Id. at 52.
    On February 5, 2005, it made two separate sales of the products 
(one totaling $504, the other totaling $430.56) to the West Gray BP of 
Gray, Georgia, id. at 78 & 112; on February 18, 2005, it sold $504 of 
the product to the Razk, Inc., Marathon of Douglasville. Id. at 64. And 
on February 20, 2005, it made two separate sales (one worth $504, and 
one worth $430.56 of the products) to Krishna Corp. of Huntsville, 
Alabama. Id. at 72 & 107.
    On January 13, February 6, March 1, and April 1, 2005, it sold 
$430.56 worth of the products to the Texaco 10 Opelika of Phenix City, 
Alabama; on January 13, it also sold an additional $576 of the products 
to this store. Id. at 102, 104-06, 113. Moreover, on both February 20 
and April 2, it sold $861.12 of the products to USA Trading Inc., of 
Pheonex (sic) City, Alabama. Id. at 102 & 104. It also sold $861.12 of 
the products to Thakurs Fuel, Inc., of Pinehurst, Georgia, on each of 
these dates: February 25, March 20, and April 8, 2005. Id. at 103, 105 
& 109.
    The evidence further shows numerous other instances in which 
Respondent sold large quantities of Max Brand as late as April 2005. 
Id. at 110-12. More specifically, on April 3, 2005, Respondent sold 
$861.12 of the product to each of the following stores: Amin 
Enterprises, Inc. of Lithonia, the Coastal Food Mart of Rockmart, and 
the Hill Top Gas Station of Bremen. Id. at 110-11. Moreover, on April 
6, it sold $861.12 worth of the products to Wendel's JKF, Inc., 
Discount Tobacco 2, and Discount Tobacco; all three stores 
were located in Americus, Georgia.\31\ Id. at 111. Finally, between 
April 10 and 16, 2005, it sold $504 worth of the products to eleven 
establishments (the DM Cotton Patch of Richland, DM Shopper Stop 
 334 of Cusetta, OM Traders 271, DM Shopper Stops 
s 442 and 451, all of Cataula; KDC Inv. and RDSP, both of 
Columbus; Hyaat Groceries of Covington; Jai Bhrahmani, Inc., of 
Buchanan; Gainesville BP of Gainesville; all in Georgia, and Prem, 
Inc., of Alexander City, Alabama. Id. at 111-12.
---------------------------------------------------------------------------

    \31\ The address of Discount Tobacco  2 is listed as 
137 N. Lee St; the address of Discount Tobacco is listed as 107 
South Lee St. RX 12, at 111.
---------------------------------------------------------------------------

    The ALJ specifically found--based on Mr. Sayani's testimony--that 
``Respondent stopped selling Heads Up and Max Brand products because 
they were identified as `non-traditional' items by the DEA in the 
October 2004 Order to Show Cause.'' ALJ at 21. To the extent this 
finding implies that Mr. Sayani stopped selling the products shortly 
after service of the Order, it is inconsistent with the evidence which 
shows that for approximately five months after the Order was served, 
Respondent continued to sell these products. Indeed, Mr. Sayani's 
testimony begs the question of why, if the products were identified in 
the Show Cause Order, it took five months to stop selling them.
    The Government also produced evidence showing that Respondent had 
distributed iodine tincture to several of its customers. See GX 46, at 
1, 2, 3, 15, & 16. Moreover, Respondent's evidence shows that it 
distributed 2,852 (1 oz.) units of this product to a single store 
between June 8, 2003, and November 6, 2004. RX 16, at 5.
    Regarding the allegation that Respondent sold excessive quantities 
of iodine to convenience stores, the Government offered anecdotal 
evidence in the form of a DI's testimony that she had visited more than 
100 convenience stores in both the course of her official duties and as 
a consumer and h