[Federal Register: July 12, 2006 (Volume 71, Number 133)]
[Notices]
[Page 39367-39369]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jy06-105]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
David M. Starr Denial of Application
On February 4, 2005, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to David M. Starr (Respondent), d/b/a Northern
Starr Products. The Show Cause Order proposed to deny Respondent's
application for a DEA Certificate of Registration as a distributor of
List I chemicals on the ground that Respondent's registration would be
inconsistent with the public interest. See 21 U.S.C. 823(h).
The Show Cause Order specifically alleged that Respondent was
proposing to sell ephedrine and pseudoephedrine products to gas
stations and convenience stores in the Milwaukee, Wisconsin area, and
that these retail outlets constitute the ``gray market'' for these
products. The Show Cause Order alleged that there is a ``high incidence
of diversion'' of ephedrine and pseudoephedrine products from this
market into the illicit manufacture of methamphetamine and that
methamphetamine availability ``has been on the increase in the Western
district of Wisconsin.'' See Show Cause Order at 2. Finally, the Show
Cause Order alleged that Respondent had no experience in distributing
List I chemicals and that granting Respondent's registration ``would
likely lead to increased diversion of List I chemicals.'' Id. at 4.
The Show Cause Order was served by certified mail, return receipt
requested, and on February 16, 2005, Respondent acknowledged receipt.
Since that time, neither Respondent, nor anyone purporting to represent
him, has responded. Because (1) more than thirty days have passed since
Respondent's receipt of the Show Cause Order, and (2) no request for a
hearing has been received, I conclude that Respondent has waived his
right to a hearing. See 21 CFR 1309.53(c). I therefore enter this final
order without a hearing based on relevant material in the investigative
file and make the following findings.
Findings
Ephedrine and pseudoephedrine are List I chemicals that, while
having therapeutic uses, are easily extracted from lawful products and
used in the illicit manufacture of methamphetamine, a schedule II
controlled substance. See 21 U.S.C. 802(34); 21 CFR 1308.12(d). As
noted in numerous prior DEA orders, ``methamphetamine is an extremely
potent central nervous system stimulant.'' A-1 Distribution Wholesale,
70 FR 28573 (2005). Methamphetamine abuse has destroyed lives and
families, ravaged communities, and created serious environmental harms.
Respondent is the sole owner and operator of Northern Starr
Products. Northern Starr distributes a variety of novelty items to gas
stations and a few conveniences stores in the Milwaukee area. The
business is located at Respondent's residence in West Bend, Wisconsin.
On May 30, 2002, Respondent submitted to DEA an application for a
registration as a distributor of the List I chemicals ephedrine and
pseudoephedrine. On November 7, 2002, two DEA Diversions Investigators
(DIs) met with Respondent to conduct a pre-registration investigation.
Respondent proposed to sell eleven different List I chemical products
including two tablets packs of such over-the-counter products as Advil
Cold and Sinus, Tylenol Allergy/Sinus, Nyquil & Dayquil. Respondent,
however, also proposed to sell several products containing 25 mg of
ephedrine in 60-count bottle sizes.
Respondent informed the DIs that he had no previous experience
handling List I chemical products. Respondent further advised the DIs
that the business was run out of the basement of his home and that he
is the sole employee. The home is located in a residential development,
which is surrounded by farmland and prairie land.
Respondent told the DIs that he would store List I chemical
products in a closed-off area of the basement. According to the
investigative file, the home has door knob locks on the front and back
doors. The investigative file contains no indication that Respondent's
home has an alarm system.
Respondent also discussed with the DIs the record keeping
requirements for List I chemicals; Respondent appeared to understand
them. Respondent also provided the DIs with the name and address of his
supplier, as well as the names and addresses of the customers who he
expected would purchase List I chemical products. Respondent's proposed
supplier has a valid DEA registration. Moreover, the investigative file
contains no adverse information with respect to any of Respondent's
proposed customers. Finally, the investigative file contains no adverse
information with respect to Respondent's compliance with applicable
laws or criminal history.
Discussion
Under 21 U.S.C. 823(h), an applicant to distribute List I chemicals
is entitled to be registered unless I determine that the registration
would be inconsistent with the public interest. In making that
determination, Congress directed that I consider the following factors:
(1) Maintenance by the applicant of effective controls against
diversion of listed chemicals into other than legitimate channels;
(2) Compliance by the applicant with applicable Federal, State, and
local law;
(3) Any prior conviction record of the applicant 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
[[Page 39368]]
(5) Such other factors as are relevant to and consistent with the
public health and safety.
Id.
``[T]hese factors are considered in the disjunctive.'' Joy's Ideas,
70 FR 33195, 33197 (2005). I ``may rely on any one or combination of
factors, and may give each factor the weight [I] deem[] appropriate in
determining whether a registration should be revoked or an application
for a registration be denied.'' Id. See also Energy Outlet, 64 FR
14,269 (1999). In this case, I conclude that factors one, four, and
five establish that Respondent's application should be denied.
Factor One--Maintenance of Effective Controls Against Diversion
The investigative file does not establish that Respondent would
fail to properly comply with DEA's regulations pertaining to
recordkeeping and reports. But ``the adequacy [of an] applicant's
systems for monitoring the receipt, distribution, and disposition of
List 1 chemicals,'' 21 CFR 1309.71(b)(8), is only one part of the
inquiry under factor one.
Determining whether an applicant will provide proper physical
security of listed chemicals is also critical in evaluating the
effectiveness of an applicant's controls against diversion. See 21 CFR
1309.71(b). Here, the investigative file contains information
indicating that Respondent would not provide proper physical security
for List I chemical products. The investigative file indicates that
Respondent proposed to store List I chemicals in the basement of his
home. The home, however, has door knob locks and apparently nothing
more. See id. at 1309.71(b)(3) (requiring consideration of ``[t]he type
of building construction comprising the facility and the general
characteristics of the building or buildings''). Moreover, there is no
evidence that Respondent has an alarm system in place at his residence.
See id. at 1309.71(b)(4) (requiring consideration of ``[t]he
availability of electronic detection and alarm systems''). Finally,
there is nothing in the investigative file indicating that Respondent
was willing to upgrade the security of his proposed location to provide
adequate protection against diversion through theft. Cf. Extreme
Enterprises, 67 FR 76195, 76197 (2002). This factor thus weighs heavily
in favor of denying Respondent's application. See Jay Enterprises, 70
FR 24620, 24621 (2005).
Factors Two and Three--Compliance With Applicable Law and the
Applicant's Prior Record of Relevant Criminal Convictions
The investigative file contains no evidence establishing that
Respondent is not in compliance with applicable Federal, State, or
local laws. Moreover, Respondent has never been convicted of a criminal
offense involving controlled substances or chemicals under Federal or
State law. Both factors thus weigh in favor of granting Respondent's
application.
Factor Four--Past Experience in the Manufacture or Distribution of
Controlled Substances
Respondent acknowledged that he has no prior experience in the
manufacture or distribution of List I chemicals. Because of the
potential for diversion, DEA precedent holds that an applicant's lack
of experience in distributing List I chemicals is a factor which weighs
heavily against granting an application for a registration. See Jay
Enterprises, 70 FR at 24621; ANM Wholesale, 69 FR 11652, 11653 (2004);
Cf. Extreme Enterprises, 67 FR at 76197. Respondent's lack of
experience thus weighs against granting the application.
Factor Five--Other Factors That Are Relevant to and Consistent With
Public Health and Safety
Numerous DEA cases recognize that the sale of certain List I
chemical products by non-traditional retailers is an area of particular
concern in preventing diversion of these products into the illicit
manufacture of methamphetamine. See Joey Enterprises, 70 FR 76866,
76867 (2005). As Joey Enterprises explains, ``[w]hile there are no
specific prohibitions under the Controlled Substances Act regarding the
sale of listed chemical products to [gas stations and convenience
stores], DEA has nevertheless found that [these entities] constitute
sources for the diversion of listed chemical products.'' Id. See also
TNT Distributors, 70 FR 12729, 12730 (2005) (special agent testified
that ``80 to 90 percent of ephedrine and pseudoephedrine being used [in
Tennessee] to manufacture methamphetamine was being obtained from
convenience stores''); OTC Distribution Co., 68 FR 70538, 70541 (2003)
(noting ``over 20 different seizures of [gray market distributor's]
pseudoephedrine product at clandestine sites,'' and that in eight-month
period distributor's product ``was seized at clandestine laboratories
in eight states, with over 2 million dosage units seized in Oklahoma
alone.''); MDI Pharmaceuticals, 68 FR 4233, 4236 (2003) (finding that
``pseudoephedrine products distributed by [gray market distributor]
have been uncovered at numerous clandestine methamphetamine settings
throughout the United States and/or discovered in the possession of
individuals apparently involved in the illicit manufacture of
methamphetamine'').
Moreover, these seizures have frequently found high-strength, high
count List I chemical products, thus indicating that these are the
preferred products for illicit methamphetamine manufacturers. See OTC
Distribution, 68 FR at 70541, MDI Pharmaceuticals, 68 FR at 4236.
Respondent proposed to sell similar high strength, high count products.
Moreover, all of Respondent's proposed customers participate in the
non-traditional market for ephedrine and pseudoephedrine products, and
a significant portion of Respondent's proposed business would violate
recently enacted provisions of Wisconsin law.\1\ See Joy's Ideas, 70 FR
33195, 33199 (2005).
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\1\ The State of Wisconsin recently enacted legislation to
prevent the diversion of List I chemical products from their
legitimate uses into the illicit manufacture of methamphetamine. See
2005 Wis. Act 14. Under Wisconsin law, pseudoephedrine products are
now classified as a Schedule V controlled substance unless they are
sold in liquid form or as a liquid-filled gelcap. See Wis. Stat.
Sec. 961.01; Sec. 961.22. As such, pseudoephedrine products ``may
be sold at retail only by a registered pharmacist or * * * by a
person who is working under the directions of a registered
pharmacist when sold in a retail establishment.'' Id. Sec. 961.23.
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DEA final orders recognize that there is a substantial risk of
diversion of List I chemicals into the illicit manufacture of
methamphetamine when these products are sold by non-traditional
retailers. See, e.g., Joy's Ideas, 70 FR at 33199 (finding that the
risk of diversion was ``real, substantial and compelling''); Jay
Enterprises, 70 FR at 24621 (noting ``heightened risk of diversion''
should application be granted); Cf. Xtreme Enterprises, 67 FR at 76197.
Under DEA precedents, an applicant's proposal to sell into the non-
traditional market weighs heavily against the granting of a
registration under factor five. So too here.
Furthermore, DEA has repeatedly denied an application when an
applicant proposed to sell into the non-traditional market and analysis
of one of the other statutory factors supports the conclusion that
granting the application would create an unacceptable risk of
diversion. Thus, in Cf. Xtreme Enterprises, my predecessor denied an
application observing that respondent's ``lack of criminal record,
compliance
[[Page 39369]]
with the law and willingness to upgrade her security system are far
outweighed by her lack of experience with selling List I chemicals and
the fact that she intends to sell ephedrine almost exclusively in the
gray market.'' 67 FR at 76197. More recently, I denied an application
observing that the respondent's ``lack of a criminal record and any
intent to comply with the law and regulations are far outweighed by his
lack of experience and the company's intent to sell ephedrine and
pseudoephedrine exclusively to the gray market.'' Jay Enterprises, 70
FR at 24621. Accord Prachi Enterprises, 69 FR 69407, 69409 (2004).
Here, there are several factors which support the conclusion that
granting the application would be inconsistent with the public
interest. Respondent's proposed security measures are plainly
inadequate and are thus grounds alone to deny the application.
Moreover, Respondent lacks experience in the distribution of List I
chemicals and proposes to sell into the non-traditional market. I thus
conclude that granting Respondent's application would be ``inconsistent
with the public interest.'' 21 U.S.C. 823(h).
Order
Accordingly, pursuant to the authority vested in me by 21 U.S.C.
823(h), and 28 CFR 0.100(b) & 0.104, I hereby order that the previously
submitted application of David M. Starr, d/b/a Northern Starr products,
for a DEA Certificate of Registration as a distributor of List I
chemicals be, and it hereby is, denied. This order is effective August
11, 2006.
Dated: July 5, 2006.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E6-10925 Filed 7-11-06; 8:45 am]
BILLING CODE 4410-09-P