[Federal Register: September 30, 2004 (Volume 69, Number 189)]
[Notices]
[Page 58548-58550]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30se04-140]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Value Wholesale Denial of Registration
On September 8, 2003, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to Value Wholesale (Value) proposing to deny its
November 6, 2001, application for DEA Certificate of Registration as a
distributor of list I chemicals. The Order to Show Cause alleged that
granting Value's application would be inconsistent with the public
interest, as that term is used in 21 U.S.C. 823(h) and 824(a). The
order also notified Value that should no request for a hearing be filed
within 30 days, its hearing right would be deemed waived.
According to the DEA investigative file, the Order to Show Cause
was sent by certified mail to Value at its proposed registered location
at 15188 Eight Mile Road, Oak Park, Michigan 48237. It was received on
September 16, 2003, and DEA has not received a request for a hearing or
any other reply from Value or anyone purporting to represent the
company in this matter.
Therefore, the Deputy Administrator of DEA, finding that (1) thirty
days have passed since delivery of the Order to Show Cause, and (2) no
request for a hearing having been received, concludes that Value has
waived its hearing right. See Aqui Enterprises, 67 FR 12576 (2002).
After considering relevant material from the investigative file, the
Deputy Administrator now enters her final order without a hearing
pursuant to 21 CFR 1309.53(c) and (d) and 1316.67 (2003). The Deputy
Administrator finds as follows:
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.
Phenhylpropanolamine, 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
that an application dated November 6, 2001, was submitted on behalf of
Value and signed by its President and only officer, Mr. John Loussia
(Mr. Loussia). Value sought registration as a distributor of multiple
list I chemicals, including pseudoephedrine (8112) and
phenylpropanolamine (1225). There is no evidence in the investigative
file that Value has sought to modify its pending application with
regard to those two chemicals.
In January 1999, Value originally applied for DEA registration as a
distributor of list I chemicals and during a pre-registration
investigation, it was determined the company had been buying and
selling list I chemical products for a number of years prior to filing
this application for registration. However, on February 5, 1999, that
application was approved and Value issued DEA Certificate of
Registration 004000VHY.
On October 31, 2001, during the course of a regularly scheduled
cyclic investigation, it was discovered Value's registration had
expired, effective May 31, 2000, without any application for renewal
having been filed. Nevertheless, investigators found that the firm had
continued to order and sell list I chemical products after its
registration had expired. Investigators also discovered Value had not
been maintaining adequate or complete records of customer addresses as
required by 21 CFR 1310.06. A DEA letter of admonition was issued the
company and in reply, Mr. Loussia advised he would be submitting the
instant application for registration and not be carrying list I
chemical products until its approval.
In connection with the pending application, an on-site pre-
registration investigation was conducted in March 2002. Mr. Loussia
advised investigators that Value was a full-line wholesaler/distributor
of groceries to local food
[[Page 58549]]
stores in the Detroit metropolitan area and its intention was to sell
name brand cough and cold products containing list I chemicals.
However, Value's application included over 21 chemical codes, many of
which are solely used for commercial or industrial purposes. After
being briefed by investigators, Mr. Loussia requested that numerous
chemical codes be deleted from Value's application.
The company proposed to primarily sell over-the counter products on
a cash and carry basis to walk-in customers, including businesses
ranging from gas stations, small grocery stores, dollar stores, party
stores and meat markets. They would pay in cash or by check and pick up
products directly from Value's facility. Mr. Loussia provided a list of
proposed customers, estimating that chemical products would be sold to
about 50 to 60 customers in the Detroit area and represented less than
1% of Value's total business. When investigators attempted to verify
several of these proposed customers, it was determined they no longer
existed.
The Deputy Administrator finds that during the year 2000, DEA
suspended the registrations of three Detroit area listed chemical
distributors who were engaged in diversion of listed chemical products
by purporting to distribute them to phony distributors and non-existent
retail customers. Additionally, DEA suspended the registration of a
Florida distributor who was purporting to sell listed chemical products
to Detroit area retailers, after DEA was unable to determine that
retailers were actually receiving the product.
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. Section 823(h) requires that 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 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.
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 a 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 FR 16422 (1989).
The Deputy Administrator finds factors one, two, four and five
relevant to the pending application for registration.
With respect to factor one, maintenance of effective controls
against diversion, while physical security of list I chemical products
is a focus of 21 CFR 1309.71, among the factors considered under the
general security requirements of 21 CFR 1309.71, is ``[t]he adequacy of
the registrant's or applicant's system for monitoring the receipt,
distribution and disposition of list I chemicals in its operations.''
21 CFR 1309.71(b)(8). Prior agency rulings have applied a more
expansive view of factor one then mere physical security. See, e.g.,
OTC Distribution Company, 68 FR 70538 (2003) (failure to maintain
adequate administrative records and controls to permit a precise audit
of list I chemical products and company's inability or unwillingness to
fully comply with record keeping and report obligations under an MOA
considered adverse under factor one). See also, Alfred Khalily, Inc.,
64 FR 31289 (1999) and NVE Pharmaceuticals, Inc., 64 FR 59215 (1999)
(failure to identify a party to a transaction or engaging in
transactions with non-registered entities fell under factor one); State
Petroleum, Inc., 67 FR 9994 (2002); Hadid International, Inc., 67 FR
10230 (2002) and Aqui Enterprises, 67 FR 12576 (2002) (recordkeeping
inadequate to track sales and customers within factor one). The Deputy
Administrator finds that factor one is adversely implicated to the
extent that Value has previously failed to maintain records, as
required by 21 CFR 1310.06.
With regard to factor two, compliance with applicable Federal,
State and local law, the Deputy Administrator finds that prior to its
initial application for DEA registration and then subsequent to that
registration's expiration, Value illegally acquired listed chemical
products while not registered to do so. It then distributed those
products in violation of the criminal provisions of 21 U.S.C. 841, 842
and 843. Value also failed to comply with applicable laws and
regulations requiring adequate and complete records of listed chemical
transactions.
With regard to factor four, the applicant's past experience in the
distribution of chemicals, the Deputy Administrator finds this factor
relevant based on Mr. Loussia's lack of knowledge or inability to
comply with the laws and regulations governing handling of list I
chemical products. Before applying for initial registration in 1999,
for several years Value had been acquiring list I chemical products
from certain distributors and reselling those products. Mr. Loussia
claimed he was unaware of the registration requirement until Value was
turned down as a customer by a major distributor, based on Value's lack
of a DEA registration. Only then did Value submit the 1999 application
for registration which was ultimately granted. The company then allowed
that registration to expire but continued to acquire and distribute
list I chemical products. It was either unaware of the need to renew
its registration or purposely failed to do so. In addition, the Deputy
Administrator finds factor four relevant to Mr. Loussia's apparent
unfamiliarity with listed chemical products, as evidenced by his
inclusion in Value's application of multiple products having only
industrial and commercial uses.
With respect to factor five, other factors relevant to and
consistent with the public safety, the Deputy Administrator finds this
factor relevant to Value's proposal to distribute listed chemical
products to gas stations, small retail markets and convenience stores.
While there are no specific prohibitions under the Controlled
Substances Act regarding the sale of listed chemical products to these
entities. DEA has nevertheless found that gas stations and convenience
stores constitute sources for the diversion of listed chemical products
See, e.g., ANM Wholesale, 69 FR 11652 (2004); Xtreme Enterprises, Inc.,
67 FR 76195 (2002); Sinbad Distributing, 67 FR 10232 (2002); K.V.M.
Enterprises, 67 FR 70968 (2002).
Finally, as noted above, there is no evidence in the investigative
file that Value ever sought to modify its pending application with
respect to the listed chemical product phenylpropanolamine. In light of
this development, the Deputy Administrator also finds factor five
relevant to Value's request to distribute phenylpropanolamine, and the
apparent lack of safety associated with the use of that product. DEA
has previously determined that an applicant's request to distribute
phenylpropanolamine constitutes a ground under factor five for denial
of an application for
[[Page 58550]]
registration. See Direct Wholesale, 69 FR 11654 (2004); ANM Wholesale,
supra, 69 FR 11652; Shani Distributors, 68 FR 62324 (2003).
Based on the foregoing, the Deputy Administrator concludes that
granting the pending application of Value would be inconsistent with
the public interest. In sum, by its past conduct, Value has displayed a
continuing history of illegal activity and an inability to discharge
the responsibilities of a registrant.
Accordingly, the Deputy Administrator of the drug Enforcement
Administration, pursuant to the authority vested in her by 21 U.S.C.
823 and 824 and 28 CFR 0.100(b) and 0.104, hereby orders the pending
application for DEA Certificate of Registration, previously submitted
by Value Wholesale be, and it hereby is, denied. This order is
effective November 1, 2004.
Dated: September 13, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-21948 Filed 9-29-04; 8:45 am]
BILLING CODE 4410-09-M