[Federal Register: August 19, 2004 (Volume 69, Number 160)]
[Notices]
[Page 51475-51477]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19au04-72]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 03-15]
K & Z Enterprises, Inc.; Denial of Application
On December 13, 2002, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to K & Z Enterprises, Incorporated, d/b/a/ Georgia
Wholesale (Respondent), proposing to deny its application executed on
June 15, 2001, for DEA Certificate of Registration as a distributor of
list I chemicals. The Order to Show Cause alleged that granting the
application of the Respondent would be inconsistent with the public
interest as that term is used in 21 U.S.C. 823(h) and 824(a).
The Order to Show Cause was delivered to the Respondent by
certified mail, and on January 22, 2003, the Respondent, through its
president Kamar Hamrani (Mr. Hamrani), submitted a written response
essentially addressing the allegation in the Order to Show Cause.
However, there was no mention of any request for hearing in the
Respondent's letter.
On February 10, 2003, the presiding Administrative Law Judge Gail
A. Randall (Judge Randall) issued an Order for Prehearing Statements,
directing the respective parties to file pre-hearing statements.
However, in lieu of filing a pre-hearing statement, counsel for DEA
filed Government's Request for Finding and Motion for Summary
Disposition on February 12, 2003. The Government argued, inter alia,
that there was no language in any of the Respondent's written
submissions where a hearing was requested, as required by 21 CFR
1309.53. The Government therefore requested that Judge Randall make a
finding that the Respondent had waived its right to a hearing and the
contents of the Respondent's written submissions
[[Page 51476]]
be submitted to the Deputy Administrator for determination as to
whether or not a registration should be issued.
By Order dated February 19, 2003, Judge Randall afforded the
Respondent an opportunity to respond to the Government's motion. The
Respondent was directed to file its response by March 12, 2003,
however, no such response was ever submitted. Judge Randall found that
a hearing had not been requested in this proceeding and on March 18,
2003, issued an Order Terminating Proceedings. Following the
termination of proceedings, Judge Randall transmitted the matter to the
Deputy Administrator for issuance of a final order.
In light of the above, the Deputy Administrator similarly finds
that the Respondent has waived its hearing right. Aqui Enterprises, 67
FR 12576 (2002). After considering relevant material from the
investigative file in this matter, the Deputy Administrator now enters
her final order without a hearing pursuant to 21 CFR 1309.53(c) and (d)
and 1316.67 (2003).
List I chemicals are those that may be used in the manufacture of a
controlled substance in violation of the Controlled Substances Act. 21
U.S.C. 802(34); 21 CFR 1310.02(a). Pseudoephedrine and ephedrine are
list I chemicals commonly used to illegally manufacture
methamphetamine, a Schedule II controlled substance.
Phenylpropanolamine, also a list I chemical, is presently a
legitimately manufactured and distributed product used to provide
relief of the symptoms resulting from irritation of the sinus, nasal,
and upper respiratory tract tissues, and is also used for weight
control. Phenylpropanolamine is also a precursor chemical used in the
illicit manufacture of methamphetamine and amphetamine. Methamphetamine
is an extremely potent central nervous system stimulant, and its abuse
is an ongoing public health concern in the United States.
The Deputy Administrator's review of the investigative file reveals
the DEA received an application dated June 15, 2001, from the
Respondent. The Respondent's address of record is a location in
Doraville, Georgia. The application was submitted on behalf of the
Respondent by Mr. Hamrani. The Respondent initially sought DEA
registration as a distributor of the list I chemicals ephedrine,
pseudoephedrine, and phenylpropanolamine. However, Mr. Hamrani
subsequently informed DEA in writing of his desire to withdraw
phenylpropanolamine from his company's registration application.
On October 27, 2001, DEA diversion investigators conducted a pre-
registration inspection of the Respondent's premises, where they met
with Mr. Hamrani. During the inspection, investigators advised Mr.
Hamrani of regulatory requirements and problems surrounding the
diversion of list I chemicals. The investigators also reviewed
security, recordkeeping, and distribution procedures with Mr. Hamrani
and provided him with appropriate materials regarding DEA requirements
for handlers of listed chemicals.
DEA's inspection revealed that Respondent had become incorporated
on March 9, 2001. Mr. Hamrani informed DEA investors that his previous
business experience was as a manager/owner of gasoline stations with
attached convenience stores. Respondent's primary business consists of
wholesale distribution of merchandise to retail convenience stores and
jobbers, with a product line that included soda and juice drinks,
automotive oil, and various snacks. Mr. Hamrani told DEA investigators
of his desire to sell to his customers two boxes of 24 bottles and two
boxes of 24 blister paks of ``Heads-Up,'' ``Max Brand,'' and ``Mini-
Two-Way'' ephedrine products, as well as nationally recognized
pseudoephedrine brand products. Mr. Hamrani estimated that the sale of
list I chemical products by his firm would constitute less than one
percent of total sales. DEA also requested, and Mr. Hamrani provided, a
list of Respondent's proposed customers.
From March through June 2002, DEA investigators conducted
verifications of eighteen establishments from the list of prospective
customers provided by the Respondent. These customers were located in
the vicinity of Atlanta and Lawrenceville, Georgia and were comprised
primarily of convenience stores and gas station's. DEA's investigation
revealed that four of the purported customers did not exist. Two
retailers refused to cooperate with DEA's investigation and another
purported customer did not sell over-the-counter products of any kind.
Several of the gas station's customers informed DEA personnel that
while they purchased beverage and other non-drug products from the
Respondent, they had no agreement to purchase over-the-counter
medication products from Respondent.
Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an
application for Certificate of Registration if she determines that
granting the registration would be inconsistent with the public
interest as determined under that section. Section 823(h) requires the
following factors be considered in determining the public interest:
(1) Maintenance of effective controls against diversion of listed
chemicals into other than legitimate channels;
(2) Compliance with applicable Federal, State, and local law;
(3) Any prior conviction record under Federal or State laws
relating to controlled substances or to chemicals controlled under
Federal or State law;
(4) Any past experience in the manufacture and distribution of
chemicals; and
(5) Such other factors as are relevant to and consistent with the
public health and safety.
As with the public interest analysis for practitioners and
pharmacies pursuant to subsection (f) of section 823, these factors are
to be considered in the disjunctive; the Deputy Administrator may rely
on any one or combination of factors, and may give each factor the
weight she deems appropriate in determining whether a registration
should be revoked or an application for registration denied. See, e.g.,
Energy Outlet, 64 FR 14269 (1999). See also Henry J. Schwartz, Jr.,
M.D., 54 Fed. Reg. 16422 (1989).
The Deputy Administrator finds factors four and five relevant to
the Respondent's pending registration application.
With respect to factor four, the applicant's past experience in the
distribution of chemicals, the Deputy Administrator finds this factor
relevant to Mr. Hamrani's apparent lack of experience in the handling
of list I chemical products. The DEA investigative file shows that the
Respondent is a retailer of general merchandise and before that, Mr.
Hamrani operated gasoline stations with attached convenience stores.
Mr. Hamrani's past history as an entrepreneur suggests that he has not
had any experience in handling listed chemical products. In prior DEA
decisions, the lack of experience in the handling of list I chemicals
was a factor in a determination to deny a pending application for DEA
registration. See, Matthew D. Graham, 67 FR 10229 (2002); Xtreme
Enterprises, Inc. 67 FR 76195 (2002). Therefore, this factor similarly
weighs against the granting of the Respondent's pending application.
With respect to factor five, other factors relevant to and
consistent with the public safety, the Deputy Administrator finds this
factor relevant to the Respondent's proposal to distribute listed
chemical products primarily to convenience stores and gas
[[Page 51477]]
stations. While there are no specific prohibitions under the Controlled
Substance Act regarding the sale of listed chemical products to these
entities, DEA has nevertheless found that business establishments such
as gas stations and convenience stores constitute sources for the
diversion of listed chemical products. See e.g., Sinbad Distributing,
67 FR 10232, 10233 (2002); K.V.M. Enterprises, 67 FR 70968 (2002)
(denial of application based in part upon information developed by DEA
that the applicant proposed to sell listed chemicals to gas stations,
and the fact that these establishments in turn have sold listed
chemical products to individuals engaged in the illicit manufacture of
methamphetamine); Xtreme Enterprises, Inc., supra.
The Deputy Administrator also finds factor five relevant to the
results of DEA's verification of the Respondent's proposed customers.
Among the Respondent's potential customers were four establishments no
longer in existence; two that refused to cooperate with DEA
investigator; one that did not sell over-the-counter products of any
kind; and several that had no standing agreement to purchase any over-
the-counter medication products from Respondent. DEA has previously
found that incomplete customer information, or questionable conduct by
customers are grounds to deny an application to distribute list I
chemicals. Island Wholesale, 68 FR 17406 (2003); Shani Distributors, 68
FR 62324 (2003).
Accordingly, the Deputy Administrator of the Drug Enforcement
Administration, pursuant to the authority vested in her by 21 U.S.C.
823 and 28 CFR 0.100(b) and 0.104, hereby orders that the pending
application for DEA Certificate of Registration, previously submitted
by K & Z Enterprises, Incorporated be, and it hereby is, denied. This
order is effective September 20, 2004.
Dated: July 27, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-18969 Filed 8-18-04; 8:45 am]
BILLING CODE 4410-09-M