[Federal Register: March 28, 2008 (Volume 73, Number 61)]
[Notices]
[Page 16713-16715]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28mr08-116]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 05-38]
Memphis Wholesale Company; Declaratory Order Terminating
Exemption From Registration
On July 12, 2005, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration, issued an Order to
Show Cause to Memphis Wholesale Company (Respondent) of Memphis,
Tennessee. Show Cause Order at 1. The Show Cause Order proposed the
denial of what it referred to as Respondent's ``application'' for a
registration as a distributor of the list I chemicals ephedrine,
pseudoephedrine, and phenylpropanolamine (PPA), and to revoke any
exemption from registration, on the ground that its registration ``is
inconsistent with the public interest.'' Id.
The Show Cause Order specifically alleged that ``[o]n July 29,
1997, Memphis Wholesale Company, by its owner, Neal Abodabba,'' applied
for a DEA Certificate of Registration, that a control number was
assigned to its application ``permitting the firm to temporarily
operate under the regulatory exemption [provided] at 21 CFR 1309.25,
pending agency action on the application.'' Id. at 2. The Show Cause
Order alleged that in ``April 1999, Memphis Wholesale Company was
incorporated in the State of Tennessee by Neal Abodabba and Shawkat
Abodabba, without notification to DEA that the form of ownership, and
thus the registered person, had changed.'' Id.
The Show Cause Order next alleged that on August 10, 2000, DEA
investigators conducted an inspection of Respondent. Id. The Order
alleged that during the inspection, Mr. Neal Abodabba told
investigators ``that 7.8% of his total sales were for `energy'
products, which included Max Brand and Mini-Thins,'' which are listed
chemical products. Id. The Order also alleged that Mr. Abodabba also
told investigators that his customers included approximately 200 to 300
convenience stores and gas stations, which were located in Tennessee,
Arkansas, and northern Mississippi, and that most of these customers
purchased listed chemical products from him. Id.
The Show Cause Order further alleged that ``in July 2000, Memphis
Wholesale had begun consolidating its deliveries in the Nashville area
by shipping to [an] unlicensed distributor, Nashville Wholesale, for
further distribution to retailers * * * in violation of 21 U.S.C.
[[Page 16714]]
841(f) and 843(a)(9).'' Id. Finally, with respect to the August 2000
inspection, the Show Cause Order alleged that DEA investigators
conducted an accountability audit for the period February 1, 2000,
through August 10, 2000, and found overages in various products. Id. at
2-3.
The Show Cause Order next alleged that on May 16, 2002, DEA
investigators conducted another inspection of Respondent. Id. at 3.
According to the Show Cause Order, during the inspection, ``Mr.
Mohammed Issa represented himself as the owner of Memphis Wholesale,''
and subsequently the investigators were informed by Mr. Abodabba ``that
he had `sold his shares' in [the firm] to Mohammed Issa.'' Id.
Relatedly, the Show Cause Order alleged that Respondent ``is now
improperly operating as a chemical distributor under the control of Mr.
Issa,'' and that ``[n]either Mr. Abodabba nor Mr. Issa notified DEA of
any corporate ownership changes.'' \1\ Id.
---------------------------------------------------------------------------
\1\ The Show Cause Order also raised various allegations related
to the diversion of ephedrine and pseudoephedrine from non-
traditional retailers into the illegal manufacture of
methamphetamine, a schedule II controlled substance. Show Cause
Order at 1-2; see also 21 CFR 1308.12(d).Id.
---------------------------------------------------------------------------
Following service of the Show Cause Order, Respondent requested a
hearing on the allegations and the matter was assigned to
Administrative Law Judge (ALJ) Mary Ellen Bittner. Counsel for both
parties agreed, however, that in lieu of a hearing at which witnesses
would be called, they would submit affidavits, proffers of testimony,
and other evidence. ALJ at 4. Neither party objected to any of the
evidence or proffers submitted. After both parties submitted briefs,
the ALJ issued her recommended decision.
In her decision, the ALJ found that Respondent was not entitled to
operate under the temporary exemption from registration authorized
under 21 CFR 1309.25, because neither Respondent, which was
incorporated in 1998, nor Mr. Issa (the corporation's current owner),
``was the same `person' that applied for registration in 1997.'' ALJ at
21. The ALJ thus reasoned that Respondent was ``not entitled to operate
under the exemption granted to the business that Mr. Abodabba owned in
1997.'' Id. The ALJ further found that ``since 1998, Respondent has
been distributing listed chemical products without being registered to
do so, in violation of 21 U.S.C. 822(a)(1).'' Id.
``In light of these findings,'' the ALJ concluded that ``a further
finding would be warranted that there is no viable application
pending.'' Id. She nonetheless concluded that it was appropriate to
make findings under the public interest factors (see 21 U.S.C. 823(h))
because ``the parties have devoted substantial resources to this
case.'' ALJ at 21. Upon analyzing the factors, the ALJ concluded that
Respondent's registration would be inconsistent with the public
interest. ALJ at 24.
Having considered the record as a whole, I hereby issue this
declaratory order. See 5 U.S.C. 554(e). I conclude that the original
exemption from registration obtained by Mr. Abodabba terminated no
later than the date he transferred his ownership interest in Respondent
to Mr. Issa. I further conclude that while the application which Mr.
Abodabba submitted on July 29, 1997, listed ``Memphis Wholesale
Company'' as the applicant, because the entity was not then
incorporated it did not have independent legal capacity to seek a
registration and the application is therefore personal to Mr. Abodabba.
While the evidence establishes that Mr. Abodabba has long since sold
his interest in Respondent and is not in business at the proposed
registered location, to the extent this proceeding seeks to adjudicate
his application, the Government has known since 2002 that Mr. Abodabba
was no longer at that location and has not properly served him.\2\ To
the extent Respondent (under its new owner) seeks to adjudicate its
entitlement to a registration, Respondent has never submitted an
application. Accordingly, there is no pending application to act upon.
I make the following findings.
---------------------------------------------------------------------------
\2\ See Nashville Wholesale Company, Inc., 71 FR 52159, 52160
(2006) (noting that Mr. Abodabba was served at the proposed
registered location of Nashville Wholesale Company).
---------------------------------------------------------------------------
Findings
On July 29, 1997, Neal S. Abodabba, submitted an application for a
registration to distribute the list I chemicals, ephedrine,
pseudoephedrine, and phenylpropanolamine. GX 1. On the application, Mr.
Abodabba indicated that Memphis Wholesale Company was the applicant.
Id. However, the business was not then incorporated and did not file
its charter with the Tennessee Secretary of State until April 14, 1998.
GX 36, at 2.
On May 16, 2002, DEA investigators went to Respondent to conduct an
inspection. On that date, Mr. Mohammed Issa told investigators that he
owned Respondent. Gov't Proffer of Testimony at 6. Moreover, in its
proffer, Respondent stated that ``Mr. Issa would testify that he is the
majority stockholder of Memphis Wholesale Company and that he became
majority stockholder on July 16, 2001.'' Respondent's Summary of
Position at 2. Furthermore, on July 17, 2002, Respondent filed its
annual report with the Tennessee Secretary of State which stated that
Mohammed Issa was the corporation's president, Sameer Issa was its
secretary, and Bill Miller was its treasurer.\3\ GX 36, at 10. The
report further indicated that its board of directors was comprised of
the same three individuals.\4\ Id.
---------------------------------------------------------------------------
\3\ On April 16, 2001, Respondent filed its annual report which
indicated that Neal Abodabba was its president and Shawkat Abodabba
was its Secretary.
\4\ On its annual report which it submitted on May 10, 2004,
Respondent no longer listed Mr. Miller as either a corporate officer
or director. Instead, the report listed ``K. Issa'' as an officer
and director. GX 36, at 12.
---------------------------------------------------------------------------
Respondent submitted into evidence a compilation and serial listing
of its sales of listed chemical products for the period January through
December 2004. According to a table which is attached to this document,
during 2004, Respondent had sales of all products totaling
$4,134,004.28; its list I chemical products constituted 7.09 percent of
its sales. The document (which is 143 pages in length) then lists by
product, numerous instances in which Respondent sold ephedrine and
pseudoephedrine products to gas stations and convenience stores. See
generally Memphis Wholesale Company, Inc., Sales by Item Detail, at 1-
143. According to the list, during 2004, Respondent's sales of these
products totaled $225,167.30. See id. at 143.
Discussion
Under 21 U.S.C. 822(a)(1), ``[e]very person who * * * distributes
any * * * list I chemical, or who proposes to engage in the * * *
distribution of any * * * list I chemical, shall obtain annually a
registration issued by the Attorney General in accordance with the
rules and regulations promulgated by him.'' \5\ Furthermore,
``[p]ersons registered by the Attorney General * * * to distribute * *
* list I chemicals are authorized to possess [and] distribute * * *
such * * * chemicals * * * to the extent authorized by their
registration and in conformity with the other provisions of''
Subchapter I of the Controlled Substances Act. Id. 822(b). DEA
regulations further provide that ``[n]o person required to be
registered shall engage in any activity for which registration is
required until the application for registration is approved
[[Page 16715]]
and a Certificate of Registration is issued by the Administrator to
such person.'' 21 CFR 1309.31(a).
---------------------------------------------------------------------------
\5\ Ephedrine, pseudoephedrine and phenylpropanolamine are list
I chemicals. See 21 U.S.C. 802(34).
---------------------------------------------------------------------------
In 1996, Congress enacted the Comprehensive Methamphetamine Control
Act of 1996, which, for the first time, subjected distributors of
pseudoephedrine, phenylpropanolamine, and combination ephedrine
products to the registration requirements. See 62 FR 52254 (1997)
(final rule). To prevent disruption of the legitimate commerce in these
products, DEA enacted a temporary exemption from registration for
distributors of these products. See 62 FR at 5915 (interim rule).
Accordingly, with respect to distributors of combination ephedrine
products, the exemption applies to ``each person required'' to be
registered, ``provided that the person submit[ted] a proper application
for registration on or before July 12, 1997.'' 21 CFR 1309.25(a). The
regulation further provides that ``[t]he exemption will remain in
effect for each person who has made such application until the
Administration has approved or denied that application.'' Id. DEA
applied the same rule to distributors of pseudoephedrine and
phenylpropanolamine, the only difference being that the application had
to be submitted ``on or before October 3, 1997.'' Id. 1309.25(b).\6\
---------------------------------------------------------------------------
\6\ DEA regulations defined ``[t]he term person [as] includ[ing]
any individual, corporation, government or governmental subdivision
or agency, business trust, partnership, association, or other legal
entity.'' 21 CFR 1300.01(b)(34).
---------------------------------------------------------------------------
As found above, on July 29, 1997, Mr. Neil S. Abodabba applied for
a registration to distribute ephedrine, pseudoephedrine, and
phenylpropanolamine. GX 1. While Mr. Abodabba listed Memphis Wholesale
Company as the applicant, the firm did not file its charter of
incorporation with the Tennessee Secretary of State until April 14,
1998. GX 36, at 4; GX 30. As Memphis Wholesale did not exist as an
independent legal entity until more than eight months later, the
application submitted on July 29, 1997, is personal to Mr. Abodabba.
Moreover, there is no evidence that Memphis Wholesale Company,
Incorporated, has ever submitted an application for a DEA registration
either under its original owner (Mr. Abodabba), or under its new owner
(Mr. Issa). Likewise, there is no evidence that the application was
amended to reflect that Memphis Wholesale Company, Inc., was the
applicant.
While the evidence indicates that Mr. Issa disclosed to agency
investigators during the 2002 inspection that he was Respondent's
owner, the firm did not have authority to distribute under the
temporary exemption because it was not the ``person'' who applied for
registration in July 1997. See, e.g., 21 CFR 1309.25(a). As the
regulation makes plain: [e]ach person required by [21 U.S.C. 822] to
obtain a registration to distribute * * * a combination ephedrine
product is temporarily exempted from the registration requirement,
provided that the person submits a proper application for registration
on or before July 12, 1997.'' Id. (emphasis added).\7\ Moreover, the
authority Mr. Abodabba obtained to distribute (which was limited to
pseudoephedrine and phenylpropanolamine) was not lawfully transferred
to either the corporation or to its new owners) because the written
consent of the Agency was never obtained. See id. 1309.63 (``No
registration or any authority conferred thereby shall be assigned or
otherwise transferred except upon such conditions as the Administrator
may specifically designate and then only pursuant to his written
consent.'').
---------------------------------------------------------------------------
\7\ While Respondent relies on Mr. Abodabba's application, it
ignores that under 21 CFR 1309.25(a), this application was not
timely submitted with respect to combination ephedrine products and
thus, not even Mr. Abodabba was not entitled to the exemption. See
GX 1 (application dated July 29, 1997).
---------------------------------------------------------------------------
Accordingly, I hold that Respondent has been without authority to
distribute list I chemicals since July 16, 2001 (when Mr. Issa became
its owner), and that all distributions it has made since that date
(including all those listed in the compilation of its 2004 sales) have
been in violation of federal law.\8\ See 21 U.S.C. 822(a). I further
hold that Respondent does not have an application pending before the
agency.
---------------------------------------------------------------------------
\8\ Mr. Abodabba is not a party to this proceeding, and I
conclude that it is not necessary to decide whether Respondent's
activities under his ownership were lawful. Moreover, to the extent
this proceeding was brought to deny Mr. Abodabba's application,
which is the only application in the record, see GX 1, service has
not been properly effectuated. See Jones v. Flowers, 547 U.S. 220,
230 (2006) (``[T]he government's knowledge that notice pursuant to
the normal procedure was ineffective triggered an obligation on the
government's part to take additional steps to effect notice.''); see
also id. at 232 (discussing Robinson v. Hanrahan, 409 U.S. 38, 39-40
(1972) (per curiam) (even though state law required vehicle owner to
register his address with the state, ``we found that the State had
not provided constitutionally sufficient notice, despite having
followed its reasonably calculated scheme, because it knew that [the
owner] could not be reached at his address of record'').
---------------------------------------------------------------------------
Order
Pursuant to the authority vested in me under 5 U.S.C. 554(e) and 28
CFR 0.100(b) & 0.104, I hereby declare that since July 16, 2001,
Memphis Wholesale Company, Incorporated, has not had authority under 21
CFR 1309.25 to distribute pseudoephedrine, combination ephedrine, and
phenylpropanolamine. This Order is effective immediately.
Dated: March 17, 2008.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E8-6378 Filed 3-27-08; 8:45 am]
BILLING CODE 4410-09-P