[Federal Register: January 25, 2005 (Volume 70, Number 15)]
[Notices]
[Page 3561-3563]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25ja05-62]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 04-32]
Al-Alousi, Inc., Denial of Registration
On March 16, 2004, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to Al-Alousi, Inc. (AAI) proposing to deny its
March 31, 2003, application for DEA Certificate of Registration as a
distributor of list I chemicals. The Order to Show Cause alleged that
granting AAI's application would be inconsistent with the public
interest, as that term is used in 21 U.S.C. 823(h).
According to the DEA investigative file, the Order to Show Cause
was sent by certified mail to AAI at its proposed registered location
at 8760 Greenwell Springs Road, Baton Rouge, Louisiana. On April 14,
2004, AAI's owner, Mr. Humam Al-Alousi, requested a hearing and on
April 26, 2004, Administrative Law Judge Mary Ellen Bittner ordered the
parties to file prehearing statements by June 7, 2004. This date was
later extended until August 24, 2004. As a result of AAI's failure to
file a prehearing statement, Judge Bittner considered its hearing right
to have been waived and issued an Order Terminating Proceedings on
September 3, 2004. The investigative case file was then forwarded to
the Deputy Administrator for a final order pursuant to 21 CFR 1301.46.
The Deputy Administrator finds that AAI has waived its hearing
right and after considering relevant material from the investigative
file, now enters her final order without a hearing pursuant to 21 CFR
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 AAI's president is Mr. Al-Alousi and his wife, Lois Al-Alousi, is
vice-president. On or about March 31, 2003, an application was
submitted by Mrs. Al-Alousi on behalf of AAI, seeking registration to
distribute ephedrine and pseudoephedrine list I chemical products.
Subsequently, AAI advised DEA that its application would only be for a
registration to distribute pseudoephedrine products.
In connection with the pending application, an on-site pre-
registration investigation was conducted at the proposed registered
location in May 2003. Mr. Al-Alousi represented to investigators that
he had purchased AAI in December 2002 and the company had previously
done business at that location under a different name and owner.
The investigators' review showed that a prior DEA investigation of
the former company and its owner had been conducted which adduced
substantial information that the company had distributed list I
chemicals without a DEA registration and knowingly distributed large
quantities of list I chemicals to methamphetamine laboratories during
the mid-to-late 1990's. The former owner, a citizen of Lebanon, had
been arrested by U.S. Immigration and Naturalization Service officers
for willfully and falsely representing himself as a citizen of the
United States.
At the time of the DEA investigators' on-site pre-registration
inspection of AAI's premises, the business sign still bore the former
company's name and that name was also on a facsimile cover sheet and
document which was sent by Mrs. Al-Alousi to DEA investigators during
the pre-registration inquiry.
Mr. Al-Alousi advised investigators that AAI was now a wholesale
distributor of cigarettes, washing powder, oil, candy and novelty items
to approximately 150 convenience stores
[[Page 3562]]
and restaurants in the Baton Rouge area. He stated that all 150 of
AAI's customers would be purchasing list I chemicals. In addition to
its wholesale business, AAI operated a convenience store at the
proposed registered address and many of its customers came to that
location to pick up purchases at a check out counter. Given the
facility's set-up, AAI's wholesale and retail customers and all of its
employees would have physical access to the areas where the listed
products would be stored.
During the investigation, the Al-Alousi's were unable to provide
investigators any records of sales and purchases and stated their
records were transferred weekly to a bookkeeper. According to a list
provided investigators, the great majority of AAI's customers were
convenience stores and gas stations. It was also determined that
neither Mr. nor Mrs. Al-Alousi had any prior experience in the
distribution of list I chemicals.
On July 9, 2003, investigators attempted to conduct verifications
of twelve customers from AAI's list. Two addresses did not exist; one
was a printing shop that was out of business; one was an apartment
complex; one was a bar/pool hall; one was a fast-food stand; two
alleged customers advised they had never done business with either AAI
or its predecessor company; two others stated they only purchased paper
and plastic products from its predecessor company and had never heard
of AAI; and one stated he had purchased list I chemical cold products
from AAI's predecessor but would not do so in the future and had never
heard of AAI. The results of these verification attempts cast doubt on
the veracity of Mr. Al-Alousi's representations regarding the nature of
AAI's business and its prospective customers for list I chemical
products.
DEA is aware that small illicit laboratories operate with listed
chemical products often procured, legally or illegally, from non-
traditional retailers of over-the-counter drug products, such as gas
stations and small retail markets. Some retailers acquire product from
multiple distributors to mask their acquisition of large amounts of
listed chemicals. In addition, some individuals utilize sham
corporations or fraudulent records to establish a commercial identity
in order to acquire listed chemicals.
DEA knows by experience that there exists a ``gray market'' in
which certain high strength, high quantity pseudoephedrine and
ephedrine products are distributed only to convenience stores and gas
stations, from where they have a high incidence of diversion. These
grey market products are not sold in large discount stores, retail
pharmacies or grocery stores, where sales of therapeutic over-the-
counter drugs predominate.
DEA also knows from industry data, market studies and statistical
analysis that over 90 percent of over-the-counter drug remedies are
sold in drug stores, supermarket chains and ``big box'' discount
retailers. Less than one percent of cough and cold remedies are sold in
gas stations or convenience stores. Studies have indicated that most
convenience stores could not be expected to sell more than $20.00 to
$40.00 worth of products containing pseudoephedrine per month. The
expected sales of ephedrine products are known to be even smaller.
Furthermore, convenience stores handling gray market products often
order more product than what is required for the legitimate market and
obtain chemical products from multiple distributors.
Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an
application for a 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 14,259 (1999). See also, Henry J. Schwartz, Jr.,
M.D., 54 FR 16,422 (1999).
The Deputy Administrator finds factors one, four and five relevant
to the pending application for registration.
As to factor one, maintenance of effective controls against
diversion of listed chemicals into other than legitimate channels, the
DEA pre-registration inspection documented that many of AAI's customers
would be coming to the registered location to pick up their products.
Under this procedure, AAI would not be able to adequately verify the
location and legitimacy of its customers. Additionally the listed
chemicals would be stored such that AAI's retail and wholesale
customers, as well as all of its employees, would have access to the
listed chemical products, thus increasing risk of diversion.
Accordingly, this factor weighs against the granting of AAI's pending
application.
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. and Mrs. Al-Alousi's lack of knowledge and
experience regarding the laws and regulations governing handing 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, supra, 69
FR 11,654; 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 the South. Ephedrine and
pseudoephedrine are precursor products needed to manufacture
methamphetamine and operators of illicit methamphetamine laboratories
regularly 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. It is apparent that AAI intends on being a
participant in this market.
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, supra, 69 FR 11,652; 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
[[Page 3563]]
considerations weighed heavily against registering a distributor of
list I chemicals because, ``[v]irtually all of the Respondent's
customers, consisting of gas station 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. and Mrs. Al-Alousi's lack of a
criminal record and stated intent to comply with the law and
regulations are far outweighed by their lack of experience and the
company's intent to sell pseudoephedrine products almost exclusively to
the gray market.
The Deputy Administrator is also troubled by AAI's failure to
provide accurate customer information to DEA investigators, indicating
the company cannot be trusted to handle the responsibilities of a
registrant. Further, its continued or implied use of its predecessor's
name, an entity which prior investigations had linked with the
diversion of listed chemicals to illicit laboratories, raises questions
about AAI's customer base and the risk that its products might be sold
to previous customers of AAI's predecessor and then diverted to illegal
purposes.
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, submitted by Al-
Alousi, Inc., be, and it hereby is, denied. This order is effective
February 24, 2005.
Dated: December 30, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 05-1324 Filed 1-24-05; 8:45 am]
BILLING CODE 4410-09-M