[Federal Register: October 11, 2006 (Volume 71, Number 196)]
[Notices]
[Page 59830-59832]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11oc06-143]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Gregg Brothers Wholesale Co., Inc.; Denial of Application
On April 26, 2005, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order To Show Cause to Gregg Brothers Wholesale Co., Inc., (Respondent)
of Powell, Tennessee. The Show Cause Order proposed to deny
Respondent's application for registration as a distributor of the List
I chemicals ephedrine, pseudoephedrine, and phenylpropanolamine on the
ground that its registration would be inconsistent with the public
interest as that term is defined in 21 U.S.C. 823(h). See Show Cause
Order at 1.
The Show Cause Order specially alleged that methamphetamine
production ``continues unabated within the Tennessee region,'' that the
State ``has a large number of independent methamphetamine producers,''
and that the State leads DEA's southeast region in the number of
clandestine laboratory seizures. Id. at 2. The Show Cause Order also
alleged that ``several distributors in Tennessee were selling
pseudoephedrine and ephedrine products to many of the same retail
customers.'' Id. at 3.
The Show Cause Order alleged that Respondent's owner, Mr. Thomas
Gregg, told DEA Diversion Investigators (DIs) that he intended to
distribute both traditional pseudoephedrine products and non-
traditional or ``gray market'' products, including products that have
been found during seizures of clandestine laboratories. Id. at 4. The
Show Cause Order further alleged that ``during the pre-registration
inspection, the DIs found that Respondent had several pseudoephedrine
products in its possession and that Mr. Gregg ``did not realize that
these products contained pseudoephedrine.'' Id. The Show Cause Order
also alleged that between 2002 and 2005, Respondent had made ``about 17
purchases of various pseudoephedrine products,'' and that ``[b]etween
2002 and 2004, [Respondent] sold about 200 orders of pseudoephedrine
products to various convenience stores and similar retail
establishments.'' Id. at 5.
The Show Cause Order next alleged that Respondent expected to sell
List I chemical products ``to about 190 various convenience stores and
similar retail establishments.'' Id. at 5. Finally, the Show Cause
Order alleged that Respondent's owner had indicated that ``ephedrine 2-
way products would be the largest volume'' List 1 chemical product. Id.
at 5-6. The Show Cause Order also notified Respondent of its right to a
hearing.
The Show Cause Order was served by certified mail, return receipt
requested, and on May 4, 2005, Respondent acknowledged receipt.
Thereafter, Respondent, in a letter dated June 1, 2005, but which was
not received until June 9, 2005, requested a hearing; the matter was
initially assigned to Administrative Law Judge (ALJ) Mary Ellen
Bittner.
On June 16, 2005, the Government moved to deny Respondent a hearing
on the ground that Respondent had not timely filed its request. See 21
CFR 1301.43(a). On June 28, 2005, the ALJ issued a memorandum offering
Respondent the opportunity to respond to the Government's motion by 4
p.m. on July 21, 2005. When, by August 26, 2005, no response had been
received, the ALJ granted the government's motion. See Order
Terminating Proceedings at 1. The ALJ also found that Respondent had
not timely requested a hearing and thus concluded that it had waived
its right to a hearing. See id. The ALJ then ordered that the
proceeding be terminated. See id. at 2.
Thereafter, the investigative file was forwarded to me for final
agency action. I adopt the ALJ's finding that Respondent has waived its
hearing right and hereby enter this final order based on relevant
material in the investigative file.
Findings
Respondent is a Tennessee Corporation which is located in Powell,
Tennessee. Mr. Thomas Gregg is Respondent's President and owns all of
its shares. Respondent distributes bait, groceries, candy, snack food,
health and beauty items and novelty items to convenience stores and gas
stations in East Tennessee, Virginia, Kentucky, and North Carolina. On
August 15, 2002, Respondent applied for a registration to distribute
the List I chemicals pseudoephedrine, ephedrine, and
phenylpropanolamine (PPA).
While ephedrine and pseudoephedrine have therapeutic uses, they are
easily extracted from lawful over-the-counter 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). PPA can also be
used to manufacture methamphetamine. In November 2000, the FDA issued a
public health advisory regarding PPA based on a study that found that
the use of PPA increases the risk of hemorrhagic stroke.\1\
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\1\ More recently, on December 22, 2005, the FDA issued a notice
of proposed rulemaking, which proposed to reclassify over-the-
counter PPA products as ``not generally recognized as safe and
effective.'' U.S. FDA, Center for Drug Evaluation and Research,
Phenylpropanolamine (PPA) Information Page http.//http://www.fda.gov/cder/drug/infopage/ppa/
(visited June 15, 2006).
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Methamphetamine is a powerful and addictive central nervous system
stimulant, see A-1 Distribution Wholesale, 70 FR 28573 (2005), and is a
schedule II controlled substance. 21 CFR 1308.12(d). The illegal
manufacture and abuse of methamphetamine pose a grave threat to this
country. Methamphetamine abuse had destroyed numerous lives and
families and has ravaged communities. The manufacture of
methamphetamine also causes serious environmental harms because of the
toxic nature of the chemicals used to make the drug.
The problem of methamphetamine abuse is especially serious in
Tennessee. In 2004, law enforcement agencies seized 939 clandestine
methamphetamine labs in the State. These seizures were the second
largest per-state total in the nation.
On September 1, 2004, two DEA Diversion Investigators (DIs) visited
Respondent at its proposed registered location to conduct a pre-
registration investigation. The DIs met with Mr. Gregg, who told them
that he intended to sell both traditional and non-traditional List I
chemical products and that his suppliers included Sessions Specialty
Company of Lewisville, North
[[Page 59831]]
Carolina, and Proactive Labs of Lithin Springs, Georgia. Among the non-
traditional products which Respondent intended to sell were 2-way
ephedrine products including bottles containing 48 tablets manufactured
by Body Dynamics, Inc. (BDI). Of note, DEA has issued numerous warning
letters to both BDI and ProActive Labs advising them that their
products have been found at illegal methamphetamine labs. See D & S
Sales, 71 FR 37607, 37608 (2006).
During the course of the investigation, the DIs found that
Respondent had obtained several pseudoephedrine products (3 boxes of
Tylenol Sinus Tablets and 1 box of Advil Cold and Sinus Tablets) from
the Sessions Specialty Company. Mr. Gregg further told the DIs that he
had sold some pseudoephedrine products to his customers. Respondent did
not, however, have a DEA registration to distribute the products.
When told by the DIs that Respondent could not lawfully sell these
products, Mr. Gregg told the DIs that he did not know that the products
contained List I chemicals. According to the DIs, Mr. Gregg returned
the List I products to the distributor. There is, however, an invoice
dated October 11, 2004, documenting the sale of Tylenol Sinus Geltabs
to a food market; this was a product which Respondent was required to
return to its distributor because it contained pseudoephedrine.
A review of Respondent's purchase records shows that Respondent
purchased pseudoephedrine products sixteen times between January 2002
and June 2004. Respondent's sales records further show that Respondent
sold List I chemical products containing pseudoephedrine on
approximately 160 occasions during the 2002 through 2004 time
period.\2\
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\2\ Approximately thirty-six of the invoices documented the sale
of Alka-Seltzer Plus Cold. The invoices did not, however, specify
whether these were in tablet or gelcap form. According to the
manufacturer's web site, while Alka-Seltzer Plus Cold Liqui-Gels
contain pseudoephedrine, the tablets do not. Because the
investigative file does not establish the specific product sold, I
do not count these sales as instances in which Respondent violated
the CSA.
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The DIs evaluated Respondent's security measures; the physical
security of its premises appeared to be adequate. Mr. Gregg further
told the DIs that he did not allow merchandise to be stored on trucks
overnight. When the DIs discussed with Mr. Gregg the problem of List I
chemical diversion into the illicit manufacture of methamphetamine, Mr.
Gregg told the DIs that he was not responsible because he did not make
methamphetamine himself and could not control what other people did.
Mr. Gregg provided the DIs with a customer list. The DIs determined
that Respondent's customer list included seventeen establishments that
were also customers of another firm (Rite, Inc.), which was then under
investigation and ultimately surrendered its registration.
The DIs determined that Respondent did not have a current business
license. Finally, the DIs conducted background checks on Mr. Gregg and
his employees. The backgrounds checks found no adverse information on
any of these individuals.
Discussion
Under 21 U.S.C. 823(h), an applicant to distribute List I chemicals
is entitled to be registered unless the registration would be
``inconsistent with the public interest.'' In making this
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
(5) Such other factors as are relevant to and consistent with
the public health and safety.
Id.
``These factors are considered in the disjunctive.'' Joy's Ideas,
70 FR 33195, 33197 (2005). I may rely on any one or a combination of
factors, and may give each factor the weight I deem appropriate in
determining whether an application for registration should be denied.
See, e.g., David M. Starr, 71 FR 39367 (2006); Energy Outlet, 64 FR
14269 (1999). Moreover, I am ``not required to make findings as to all
of the factors.'' Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005);
Morall v. DEA, 412 F.3d 165, 173-74 (D.C. Cir. 2005). In this case, I
conclude that factors one, two, and four are dispositive. Moreover,
because the record establishes that Respondent has a substantial
history of non-compliance with the registration provisions and that
this provides ample reason for denying its application, I do not make
any findings on factor five.
Factor One--Maintenance of Effective Controls Against Diversion
The investigative file does not establish that Respondent would
fail to provide effective physical security to protect List I chemicals
from theft. Moreover, Respondent appears capable of maintaining the
required records. I have serious reservations, however, as to whether
Respondent would report suspicious transactions.
During his discussions with the DIs regarding the diversion of List
I chemicals, Mr. Gregg made statements to the effect that he was not
responsible because he did not make methamphetamine himself and could
not control what other people did. In light of the well documented
problem of methamphetamine abuse in Tennessee, I find this statement
extremely disturbing.
Recently, I ordered the revocation of a List I chemical
distributor's registration in part because the registrant's attitude
was that he was not responsible for diversion of his products into the
illicit manufacture of methamphetamine after he delivered them to his
customers. See D & S Sales, 71 FR 37607, 37610 (2006). In D & S Sales,
the registrant had failed to report any suspicious sales
notwithstanding that he clearly had reason to know that many of his
customers were purchasing products in amounts that far exceeded
legitimate demand. As I noted in D & S Sales, a registrant's attitude
that it is not responsible for what happens to its product after
delivery ``is fundamentally inconsistent with the obligations of a
registrant.'' Id. Moreover, ``[t]his attitude is highly relevant in
assessing the adequacy of [an applicant's] systems for monitoring the
disposition of List I chemicals.'' Id.
As DEA has learned in cases such as D & S Sales, the effectiveness
of our regulation which requires the reporting of suspicious
transactions is dependent on registrants taking seriously their
obligation to report. In short, Mr. Gregg's comments do not inspire
confidence in his willingness to report sales of excessive quantities.
I therefore conclude that Respondent would not maintain effective
controls against diversion and that this factor supports a finding that
Respondent's registration would be inconsistent with the public
interest.
Factor Two--Compliance With Applicable Laws
The investigative file establishes that between 2002 and 2004,
Respondent repeatedly violated the Controlled Substances Act when it
engaged in approximately 160 distributions of List I chemical products
without being registered to do so.\3\ See 21 U.S.C.
[[Page 59832]]
823(h); id. section 843(a)(9). Furthermore, according to Respondent's
records, it sold List I chemical products even after the DIs conducted
the on-site inspection and told Mr. Gregg that Respondent could not
distribute these products without a registration. I thus conclude that
Respondent's numerous and repeated violations of the CSA demonstrate
that its registration would be inconsistent with the public interest
and are reason alone to deny its application. I further note that
Respondent did not produce a valid business license during the on-site
inspection.
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\3\ Respondent's sales records indicate that it frequently sold
several pseudoephedrine products on a single invoice. The 160 figure
counts each invoice as a single distribution even if the invoice
documented the sale of several pseudoephedrine products.
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Factor Three--The Applicant's Prior Record of Relevant Criminal
Convictions
There is no evidence that Respondent's owner, or any of its
employees, has been convicted of a crime relating to controlled
substances or chemicals under either Federal or State law. This factor
ordinarily supports a finding that Respondent's registration would not
be inconsistent with the public interest. But in this case, I decline
to give the factor any weight because of the evidence establishing
Respondent's non-compliance with the CSA.
Factor Four--The Applicant's Past Experience in the Distribution of
Listed Chemicals
According to a letter from Mr. Gregg, Respondent previously
distributed ephedrine and pseudoephedrine during some unspecified
period prior to these products becoming regulated. I do not, however,
consider this to be relevant experience as it occurred before the
adoption of the current regulatory scheme and thus does not address
whether Respondent would comply with federal regulations. Furthermore,
for the reasons discussed under Factor Two, Respondent's past
experience in distributing List I chemicals involved approximately 160
distributions over a nearly three year period without being registered
and Respondent sold pseudoephedrine even after the DIs expressly told
Mr. Gregg that Respondent could not distribute pseudoephedrine products
without a registration.
As I noted in Sato Pharmaceutical, Inc., 71 FR 52165, 52166 (2006),
there is simply no excuse for Respondent to have engaged in the
repeated distribution of List I chemical products without a
registration, or for Respondent's owner or employees to be unaware that
several of the products it was distributing contained List I chemicals.
Because Respondent's past experience in distributing List I chemicals
manifests a lengthy failure of non-compliance with the CSA's
registration requirements, I therefore conclude that granting
Respondent's application would be inconsistent with the public
interest. Finally, because of the seriousness and duration of these
violations, I deem them dispositive of the ultimate issue and need not
make findings on the remaining factor. See Hoxie v. DEA, 419 F.3d 477,
482 (2005); Morall v. DEA, 412 F.3d 165, 173 (2005).
Order
Accordingly, pursuant to the authority vested in me by 21 U.S.C.
823(h), and 28 CFR 0.100(b) and 0.104, I hereby order that the
previously submitted application of Gregg Brothers Wholesale, Co.,
Inc., for a DEA Certificate of Registration as a distributor of List I
chemicals be, and it hereby is, denied. This order is effective
November 13, 2006.
Dated: September 29, 2006.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E6-16758 Filed 10-10-06; 8:45 am]
BILLING CODE 4410-09-P