[Federal Register: October 22, 2004 (Volume 69, Number 204)]
[Notices]
[Page 62078-62080]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22oc04-102]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Absolute Distributing, Inc.; Denial of Registration
On May 6, 2004, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to Absolute Distributing, Inc. (Absolute) proposing
to deny its May 12, 2003, application for DEA Certificate of
Registration as a distributor of list I chemicals. The Order to Show
Cause alleged that granting Absolute'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 Absolute 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 Absolute at its proposed registered
location at 2005 S. 300 W., Suite C, Salt Lake City, Utah, 84115. It
was received on May 10, 2004, and DEA has not received a request for a
hearing or any other reply from Absolute 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
[[Page 62079]]
hearing having been received, concludes that Absolute has waived its
hearing right. See Aqui Enterprises, 67 FR 12,576 (2002). After
considering relevant material from the investigative file, the Deputy
Administrator now enters her final order without a hearing pursuant to
21 C.F.R. 1309.53(c) and (d) and 1316.67. 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. As noted in
previous DEA final orders, methamphetamine is an extremely potent
central nervous system stimulant, and its abuse is a persistent and
growing problem in the United States. See e.g., Direct Wholesale, 69 FR
11,654 (2004); Branex, Inc., 69 FR 8,682 (2004); Yemen Wholesale
Tobacco and Candy Supply, Inc., 67 FR 9,997 (2002); Denver Wholesale,
67 FR 99,986 (2002).
The Deputy Administrator's review of the investigative file reveals
that an application dated May 12, 2003, was submitted by Mr. David T.
Milton, seeking registration to distribute ephedrine, a list I chemical
product. Subsequently, Mr. Milton, the President of Absolute, asked
that the application be changed to reflect the company's name as
registrant.
In connection with the pending application, an on-site pre-
registration investigation was conducted on August 18, 2003. Mr. Milton
advised investigators that he had been solicited by Premium Oil Company
(Premium) to obtain a DEA registration so that Absolute could provide
ephedrine to Premium's convenience stores and gas stations, which are
located throughout the State of Utah. Premium had also provided
Absolute with office and storage space for ephedrine products so that
Premium could have easy access to its distributor.
Premium had previously been obtaining its list I chemical products
from Spencer Distributing. However, on May 22, 2003, that company
surrendered its DEA registration. Mr. Milton was aware that Premium
considered ephedrine products to be good sources of income, ``better
than fuel,'' and the company needed Absolute to replace Spencer
Distributing as its supplier.
Mr. Milton provided investigators only a generalized list of
potential customers, which included almost every gas station and their
associated convenience stores in the State of Utah. He could not
provide a confirmed list of customers who would purchase the listed
chemical products from the company. While he also intended to
distribute sundry items if he obtained a DEA registration, Mr. Milton
estimated that 30% of Absolute's sales would be ephedrine products.
He intended to primarily distribute 50 and 60 count bottles of list
I chemical products. This form of packaging and quantities are
preferred by individuals illicitly manufacturing methamphetamine.
Further, one of Absolute's intended suppliers had already received two
warning letters from DEA that its list I chemical products had been
discovered in various illicit settings consistent with clandestine
methamphetamine manufacturing.
Neither Mr. Milton nor his brother, the company's Vice-President,
had any experience in handling or distributing listed chemical
products. On May 1, 2003, diversion investigators had met with Mr.
Milton. Among other items, they provided a copy of the DEA Chemical
Handler's Manual and a notice regarding combination ephedrine and
pseudoephrine products. The investigators explained how ephedrine and
pseudoephedrine are used as immediate precursors for making
methamphetamine and discussed the history and problems of
methamphetamine in Utah.
On August 18, 2003, long after this meeting, investigators were
arranging for the pre-registration inspection. At that time they asked
Mr. Milton what he knew about the list I chemical products he was
seeking to distribute. He replied that he knew nothing about list I
chemicals and, while he had been told by investigators the product was
used to manufacture methamphetamine, he had no personal proof of that
fact.
On April 18, 2001, state investigators made an undercover purchase
of Two-Way Max Brand Ephedrine 25 mg. tablets (60 tablets per bottle
for a total of 480 dosage units) from a Premium owned gas station/
convenience store in West Jordan, Utah. The total amount of ephedrine
was 12 grams, which at the time was the threshold amount an individual
could legally possess in Utah. The conversion included the topic of
using ephedrine to manufacture methamphetamine and the employee
suggested the undercover agents return daily to buy eight bottles of
ephedrine so they could obtain what they needed. As discussed above
Absolute intended to supply its list I chemical products to convenience
stores and service stations owned by Premium.
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 14,269 (1999). See also, Henry J. Schwartz, Jr.,
M.D., 54 FR 16,422 (1989).
The Deputy Administrator finds factors four and five relevant to
the pending application for registration.
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. Milton's lack of knowledge regarding the laws and
regulations governing handling of list I chemical products. In prior
DEA decisions, this lack of experience in handling list I chemical
products has been a factor in denying pending applications for
registration. See, e.g., Direct Wholesale, 69 FR 11,654 (2004); ANM
Wholesale, 69 FR 11,652 (2004); Xtreme Enterprises, Inc., 67 FR 76,195
(2002).
With regard to factor five, other factors relevant to and
consistent with the public safety, the Deputy Administrator finds this
factor weighs heavily against granting the application. Unlawful
methamphetamine use is a growing public health and safety concern
throughout the United States and in the State of Utah and ephedrine and
pseudoephedrine are precursor products needed to manufacture
methamphetamine. Operators of illicit methamphetamine laboratories
regularly
[[Page 62080]]
acquire the precursor products needed to manufacture the drug from
convenience stores and gas stations which, in prior DEA decisions, have
been identified as constituting the ``grey market'' for list I chemical
products. Absolute's intended customer base consists entirely of such
businesses.
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 these establishments serve as
sources for the diversion of large amounts of listed chemical products.
See, e.g., ANM Wholesale, 69 FR 11,652 (2004); Xtreme Enterprises,
Inc., supra, 67 FR 76,195; Sinbad Distributing, 67 FR 10,232 (2002);
K.V.M. Enterprises, 67 FR 70,968 (2002).
The Deputy Administrator has previously found that many
considerations weighed heavily against registering a distributor of
list I chemicals because, ``[v]irtually all of the Respondent's
customers, consisting of gas stations and convenience stores, are
considered part of the grey market, in which large amounts of listed
chemicals are diverted to the illicit manufacture of amphetamine and
methamphetamine.'' Xtreme Enterprises, Inc., supra, 67 FR at 76,197. As
in Xtreme Enterprises, Inc., Mr. Milton's lack of a criminal record and
stated intent to comply with the law and regulations are far outweighed
by his lack of experience and the company's intent to sell ephedrine
exclusively to the gray market.
Additionally, the Deputy Administrator is troubled by Mr. Milton's
comments suggesting he still questioned whether list I chemical
products are being diverted for illicit manufacturing, even after being
specifically educated by DEA investigators to the contrary. His
professed personal ignorance of the methamphetamine manufacturing
problem in Utah suggests he is motivated by financial gain and would be
unable or unwilling to comply with the responsibilities of a DEA
registrant.
Based on the foregoing, the Deputy Administrator concludes that
granting the pending application would be inconsistent with the public
interest.
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 Absolute Distributing, Inc., be, and it hereby is, denied. This
order is effective November 22, 2004.
Dated: October 5, 2004.
Michelle M. Leonhart,
Deputy Administrator.
[FR Doc. 04-23705 Filed 10-21-04; 8:45 am]
BILLING CODE 4410-09-M