[Federal Register: December 28, 2005 (Volume 70, Number 248)]
[Notices]
[Page 76866-76868]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28de05-143]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 04-31]
Joey Enterprises, Inc. d/b/a/ NorthStar Wholesale Denial of
Application
On March 2, 2004, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to Joey Enterprises, Inc., d/b/a NorthStar
Wholesale (hereinafter referred to as ``Respondent'') of Birmingham,
Alabama. The show cause order proposed to deny the Respondent's
February 10, 2003, application for DEA Certificate of Registration as a
distributor of list I chemicals. The Order to Show Cause alleged in
substance 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).
According to the DEA investigative file, on or about March 30,
2004, the Respondent, through its President Feroz Jiwani (Mr. Jiwani),
requested a hearing in response to the show cause order. On April 22,
2004, the presiding Administrative Law Judge issued an Order for Pre-
hearing Statements. As part of that Order, the Administrative Law Judge
directed the Government to file its Pre-hearing Statement on or before
May 14, 2004, and that the Respondent was to file its Pre-hearing
Statement on or before June 4, 2004. Following pre-hearing motions
extending the above scheduled filing dates, the Government filed its
Pre-hearing Statement on July 21, 2004. However, the Respondent did not
file its Pre-hearing Statement by the August 16, 2004 deadline.
On September 2, 2004, the Administrative Law Judge issued an order
extending the filing date of the Respondent's Pre-hearing Statement to
September 15, 2004. The Administrative Law Judge's Order also notified
the Respondent that if it again failed to meet the deadline for filing
a Pre-hearing Statement, such inaction would be deemed a waiver of its
hearing entitlement. Nevertheless, the Respondent again failed to meet
the new deadline and did not file its Pre-hearing Statement.
Accordingly, on September 29, 2004, the Administrative Law Judge issued
her Order Terminating the Proceedings.
The Deputy Administrator adopts the ruling of the Administrative
Law Judge's termination order that the Respondent has waived its
hearing right. See, 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(b) and (d). 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). As noted in previous DEA final
orders, pseudoephedrine and ephedrine are list I chemicals commonly
used to illegally manufacture methamphetamine, a Schedule II controlled
substance. Methamphetamine is an extremely potent central nervous
system stimulant and its illicit manufacture and abuse are ongoing
public health concerns in the United States. See e.g., Direct
Wholesale, 69 FR 11654 (2004); Yemen Wholesale Tobacco and Candy
Supply, Inc., 67 FR 9997 (2002); Denver Wholesale, 67 FR 99986 (2002).
The investigative file contains a printed news release article from
the DEA Web site regarding federal drug seizures and the abuse of
methamphetamine in the State of Alabama. http://www.dea.gov/pubs/states/alabama.html.
According to the article, methamphetamine has
become the number one abused drug in Alabama. The article also tracked
the ``dramatic increase'' in the number of methamphetamine laboratory
seizures in the state from 1997 to 2003. According to data obtained by
DEA's El Paso Intelligence Center (also known as ``EPIC''), in 1997,
methamphetamine laboratory seizures in Alabama totaled six; by 2002,
the total number of laboratory seizures climbed to 201.
The above-referenced registration application of the Respondent was
initially submitted under the business name ``Joey Enterprises, Inc.,''
and was later amended to include the caption, ``d.b.a. Northstar
Wholesale.'' The Respondent sought DEA registration as a distributor of
the list I chemicals ephedrine, pseudoephedrine and
phenylpropanolamine. There is no evidence in the investigative file
that Respondent, or anyone purporting to represent the Respondent has
sought to further modify its pending application.
The Deputy Administrator's review of the investigative file reveals
that on September 3, 2003, DEA Diversion Investigators conducted an on-
site pre-registration inspection at Respondent's proposed registered
location in Birmingham. DEA's investigation revealed that Mr. Jiwani is
the owner and President of the Respondent, his wife, Amynah, is the
company's assistant manager, and the company also employs a part-time
employee by the first name of Christopher. When asked by DEA
investigators, neither Mr. nor Mrs. Jiwani knew the part-time
employee's last name.
The Respondent is a cash and carry establishment that distributes
typical convenience store items including tobacco products, candy,
drinks and health and beauty products. The Respondent's customers
consist of approximately 150 convenience stores and gas stations
located in the Birmingham area, as well as Northern Alabama, Georgia
and Fort Lauderdale, Florida.
DEA investigators asked Mr. Jiwani to provide information on list I
chemical products the firm intended to carry. In response to the
request, Mr. Jiwani provided a list of chemical products the firm would
distribute, including: Max Brand 25/200 mg--60 count bottles; Mini
Thins 25/200 mg--60 count bottles; Ephedrine 25/200 mg--60 count
bottles; Bio Tech Ephedrine 25/200 mg--60 count bottles; Ephedrine 25/
200 mg Black--12 count packets; Tylenol Cold, Tylenol Sinus and Tylenol
Allergy (no sizes listed); Advil Cold and Sinus and Aleve Cold and
Sinus (no sizes listed); and Vicks Dayquil and Nyquil (no sizes
listed). Mr. Jiwani estimated that these products would make up ten to
fifteen percent of Respondent's total sales.
Max Brand products have previously been identified by DEA as the
``precursor product predominantly encountered and seized at clandestine
methamphetamine laboratories.'' See Express Wholesale, 69 FR 62086,
62087 (2004); see also, RAM, Inc. d/b/a American Wholesale Distribution
Corp., 70 FR 11693 (2005). Convenience stores are the ``primary
source'' for the purchase of Max Brand products, which are the
preferred brand for use by illicit methamphetamine producers. See Elk
International, Inc., d/b/a Tri-City Wholesale, 70 FR 24615 (2005).
Mr. Jiwani also informed DEA investigators that he had no
experience handling list I chemical products. He further stated that
Respondent had no procedure in place for identifying suspicious or
unusual purchases of list I chemical products.
[[Page 76867]]
According to the investigative file, on September 3 and 4, 2003,
DEA investigators conducted random verifications of the ten of
Respondent's proposed customers for list I chemical products. At least
seven of the customers informed DEA personnel that they didn't carry
listed chemical products or were already purchasing them from other
suppliers. Another customer was already in possession of listed
chemical products which were on display at the establishment. The
customer insisted to DEA investigators that he purchased the products
from Respondent, even when told that Respondent did not carry such
products.
Mr. Jiwani further advised DEA investigators he requires new
customers to provide tax exempt ID numbers before selling them
anything. DEA investigators found however, that Mr. Jiwani could not
confirm the existence of his customers because he did not visit the
location of these stores prior to their becoming customers.
DEA has previously found 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
products from multiple distributors to mask their acquisition of large
quantities of listed chemicals. See, A-1 Distribution Wholesale, 70 FR
28573 (2005).
DEA has further determined 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. A-1
distribution, supra, at 28573. These gray market products are not sold
in large discount stores, retail pharmacies or grocery stores, where
sale of therapeutic over-the-counter drugs predominate. ``Two-way''
ephedrine and single entity pseudoephedrine products are prime products
in this gray market industry and are rarely found in any retail store
serving the traditional therapeutic market.
DEA has also credited industry data, market studies and statistical
analysis which has shown that over 90% 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 or $40.00 worth of products containing pseudoephedrine per
month. Jay Enterprises of Spartansburg, Inc., 70 FR 24620 (2005).
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.,
ANM Wholesale, 69 FR 11652 (2004); Energy Outlet, 64 FR 14269 (1999).
See also Henry J. Schwartz, Jr., M.D., 54 FR 16422 (1989).
The Deputy Administrator finds factors four and five relevant to
Respondent's pending registration application.
With regard to factor four, the applicant's past experience in the
distribution of chemicals, the Deputy Administrator finds this factor
relevant to Mr. Jiwani's lack of experience in the handling of list I
chemical products. In prior DEA decisions, the lack of experience in
the handling list I chemicals was a factor in a determination to deny a
pending application for DEA registration. See, e.g., CWK Enterprises,
Inc. (CWK), 69 FR 69400 (2004); Prachi Enterprises, Inc. (Prachi), 69
FR 69407 (2004); Matthew D. Graham, 67 FR 10229 (2002); Xtreme
Enterprises, Inc., 67 FR 76195 (2002). Therefore, this factor similarly
weighs against the granting of 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 also weighs heavily against granting the Respondent's
application. Methamphetamine abuse is one of the top public health
threats facing the country. While there have been various state
legislative initiatives enacted around the United States that seek to
address the illicit production and use of methamphetamine, the growing
menace of this drug remains a grave public health and safety concern.
Ephedrine and pseudoephedrine are precursor products needed to
manufacture methamphetamine and operators of illicit laboratories
regularly acquire the precursor products needed to manufacture the
drug.
Many of these illicit transactions arise from listed chemical
products acquired from convenience stores and gas stations. It is
apparent that the Respondent intends on being a participant in this
market with most of its proposed customers made up of convenience
stores and gas 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 gas
stations and convenience stores constitute sources for the diversion of
listed chemical products. See, e.g., ANM Wholesale, 69 FR 11652 (2004);
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. Therefore, to Respondent's proposed
sale of listed chemical products convenience store and gas stations
weighs against granting its pending registration application.
As noted above, there is no evidence in the investigative file that
the Respondent ever sought to modify its pending application with
respect to listed chemical products it intends to distribute. Among the
listed chemical products the firm seeks to distribute is
phenylpropanolamine. DEA has previously determined that an applicant's
request to distribute phenylpropanolamine constitutes a ground under
factor five for denial of an application for registration because of
the apparent lack of safety associated with the use of this product.
See e.g., William E. ``Bill'' Smith d/b/a B &B Wholesale, 69 FR 2259
(2004); J &S Distributors, 69 FR 62089 (2004); Shani Distributors, 68
FR 62324 (2003). The Deputy Administrator also finds factor
[[Page 76868]]
five relevant to the results of DEA's random customer verifications
where several of Respondent's proposed customers informed investigators
that listed chemicals products likely would not be purchased from
Respondent.
Factor five is also relevant to Respondent's lack of procedure for
identifying suspicious or unusual purchases of list I chemical
products. Factor five is further relevant to DEA's investigative
findings regarding Respondent's inability to confirm the existence of
its customers. The Deputy Administrator is also somewhat concerned by
the Jiwani's inability to identify a part-time employee. It is unknown
whether any knowledge of the individual's identity would favorably or
unfavorably impact DEA's determination with regard to Respondent's
application for registration. Therefore, the unresolved nature of this
event is also given consideration under factor five. Based on the
foregoing, the Deputy Administrator concludes that granting the pending
application of the Respondent 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 28 CFR 0.100(b) and 0.104, hereby orders that the pending
application for DEA Certificate of Registration, previously submitted
by Joey Enterprises, Inc., d/b/a NorthStar Wholesale be, and it hereby
is denied. This order is effective January 27, 2006.
Dated: December 15, 2005.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 05-24496 Filed 12-27-05; 8:45am]
BILLING CODE 4410-09-M