[Federal Register Volume 66, Number 54 (Tuesday, March 20, 2001)]
[Notices]
[Pages 15760-15762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6908]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Payne Sales, Inc.; Denial of Application

    On February 7, 2000, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause (OTSC) by certified mail to Payne Sales, 
Incorporated (Payne Sales), located in Grand Haven, Michigan, notifying 
it on an opportunity to show cause as to why the DEA should not deny 
its application, dated August 24, 1999, for a DEA Certificate of 
Registration as a distributor of List I chemicals, pursuant to 21 
U.S.C. 823(h), as being inconsistent with the public interest. The 
order also notified Payne Sales that, should no request for hearing be 
filed within 30 days, the right to a hearing would be waived.
    The DEA mailed the show cause order to Payne Sales by certified 
mail, and a return receipt, signed. ``Fred Thornell'' and dated 
February 18, 2000, was received by the DEA. No request for a hearing or 
any other response was received by DEA from Payne Sales or anyone 
purporting to represent it in this matter, however. Therefore, the 
Administrator of the DEA, finding that (1) thirty days have passed 
since receipt of the Order to Show Cause, and (2) no request for a 
hearing having been received, concludes Payne Sales is deemed to have 
waived its right to a hearing. After considering relevant material from 
the investigative file in this matter, the Administrator now enters his 
final order without a hearing pursuant to 21 CFR 1301.43(d) and (e) and 
1301.46 (1999).
    The Administrator finds that on August 24, 1999, an application was 
submitted to DEA on behalf of Payne Sales for DEA registration as a 
distributor of the List I chemicals pseudoephedrine, 
phenylpropanolamine, and ephedrine. The application was submitted by 
Peggy Joe Payne, President of Payne Sales, who was previously employed 
as an accountant for TNT Marketing, Incorporated (TNT) of Grand Haven, 
Michigan. Ms. Payne was also previously married to Frederick Thornell, 
President and CEO for TNT. The application lists Payne Sales address as 
8 North Ferry, Grand Haven, Michigan, which is the same address as TNT.
    The Administrator finds that on April 7, 1998, the Deputy Assistant 
Administrator, Office of Diversion Control of DEA issued an Order to 
Show Cause to TNT for the revocation of its DEA Certificate of 
Registration, 001291TEY as a distributor of List I chemicals pursuant 
to 21 U.S.C. 824(a)(4) and to deny any pending applications for 
modification or renewal of such registration pursuant to Sec. 823(h). 
That order to Show Cause alleged in sum that TNT had, during the period 
of January through July, 1997, and encompassing several transactions, 
and in spite of DEA requests to discontinue, sold at least 5040 cases 
of a List I chemical to recipients for which TNT knew or had reasonable 
cause to believe would divert the listed chemical to the unlawful 
manufacture of methamphetamine, a Schedule II controlled substance, in 
violation of 21 U.S.C. 841(d)(2). In addition, the DEA investigation 
revealed that TNT failed to make required reports of these regulated 
transactions, in violation of 21 CFR 1310.05(a), and further failed to 
create proper invoice records for at least seven shipments totaling 
2,760 cases of a listed chemical, in violation of 21 CFR 1310.06.
    Peggy Joe Payne was employed by TNT during the time the firm 
engaged in the unlawful sales alleged in the April 7, 1998, Order to 
Show Cause. On September 2, 1998, TNT surrendered its DEA Certificate 
of Registration for cause.
    In August 1998, in the United States District Court for the Western 
District of Michigan, Southern Division, TNT Marketing, Inc., and three 
of its representatives, including Frederick Thornell, were each 
indicted on one felony count of distribution of a listed chemical 
(pseudoephedrine) and conspiracy pursuant to 21 U.S.C.

[[Page 15761]]

841(d)(2) and 846. On December 7, 1998, TNT entered into a plea 
agreement with the United States in which it agreed to enter a guilty 
plea to the conspiracy count of the August 1998 indictment. Pursuant to 
the same plea agreement, Frederick Thornell and another TNT 
representative entered into an agreement with the United States in 
which they agreed to plead guilty to one felony count related to their 
failure to report regulated transactions involving extraordinary 
amounts of pseudoephedrine, pursuant to 21 U.S.C. 830(b)(1)(A) and 
842(a)(10). The other indicted TNT representative pleaded guilty to one 
felony count of unlawful distribution of a listed chemical in violation 
of 21 U.S.C. 843(a)(7).
    TNT, Frederick Thornell, and the two other convicted TNT 
representatives further agreed that they would not apply for 
registration as a distributor of controlled substances or listed 
chemicals, nor engage in such distribution, for a period of ten years 
from the date of the agreement. On April 23, 1999, Frederick Thornell 
and the two other convicted representatives on behalf of TNT were 
ordered to pay a fine of $100,000, and Frederick Thornell was sentenced 
to two years probation and ordered to pay a fine of $1,000.
    On October 5, 1999, DEA investigators conducted a pre-registrant 
investigation of Payne Sales. The Administrator finds the investigation 
revealed that Payne Sales and TNT are virtually indistinguishable 
businesses. Specifically, DEA investigators discovered products 
belonging to Payne Sales were co-mingled with products belonging to 
TNT, including products containing listed chemicals, in violation of 
the above-referenced plea agreements. On several occasions during the 
investigation of Payne Sales, Ms. Payne directed queries by DEA 
investigators regarding products on hand to her former husband, 
Frederick Thornell. The DEA investigators also noticed Ms. Payne's 
frequent interaction with Frederick Thornell's two convicted co-
defendants from TNT, all of whom continue to work for TNT on the 
premises. The DEA investigation further revealed TNT is the registered 
property owner of the premises at 8 N. Ferry, Grand Haven, Michigan. At 
that location, there is a sign identifying the business as TNT 
Marketing, Inc. The Ottawa County Registrar's Office indicates no 
business certification has been filed for Payne Sales as required by 
local law; there is a business certification on file for TNT, however. 
The Administrator also notes that the Order to Show Cause, addressed to 
Payne Sales and sent certified mail, was signed for by Frederick 
Thornell.
    Pursuant to 21 U.S.C. 823(h), the Administrator may deny an 
appliation for a DEA Certificate of Registration if he determines that 
granting the registration would be inconsistent with the public 
interest. Section 823(h) requires the following factors be considered:
    (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.
    Like 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 Administrator may rely on any one or 
combination of factors and may give each factor the weight he deems 
appropriate in determining whether a registration should be revoked or 
an application for registration be denied. See, e.g. Energy Outlet, 64 
FR 14,269 (DEA 1999). See also Henry J. Schwartz, Jr., M.D., 54 FR 
14,269 (DEA 1989).
    Regarding factor one, the maintenance of effective controls against 
the diversion of listed chemicals, the Administrator finds the DEA pre-
registrant investigation shows that Payne Sales and TNT are co-located 
in an open warehouse and storage area, with no evidence of physical 
separation between the two businesses, and furthermore, that the 
products of the two entities were also co-mingled. Peggy Joe Payne 
stated to investigators that she conducted most of her business out of 
her home, and spent little time at the warehouse, where the products 
would be stored. As previously noted TNT pleaded guilty to the 
conspiracy count of the August 1998 indictment, to distribute a listed 
chemical knowing, or having reasonable cause to believe, that the 
listed chemical will be used to manufacture a controlled substance. 
Additionally, the continued presence and interaction noted by DEA 
investigators of Payne's ex-husband Frederick Thornell and the two 
other convicted TNT employee co-defendants who pursuant to the August 
1998 indictment pleaded guilty to felony counts regarding the violation 
of reporting and distribution requirements involving List I chemicals 
creates a grave risk of diversion of listed chemicals. Peggy Joe Payne 
also admitted to DEA investigators that Payne Sales has no policy for 
background checks for its customers. The Administrator finds that Ms. 
Payne provided little or no evidence that Payne Sales has or plans any 
controls whatsoever to protect against diversion of listed chemicals.
    Regarding factor two, the applicant's compliance with applicable 
law, it does not appear that Peggy Joe Payne was named in the August 
1998 indictment involving TNT. The Administrator notes, however, that 
she was employed as an accountant by TNT during the time the firm and 
its represenatives engaged in the illicit conduct forming the basis for 
the August 1998 indictment. She was also married to Fred Thornell, 
president and chief executive officer for TNT.
    Regarding factor three, there is no evidence that Peggy Joe Payne 
has a record of convictions related to controlled substances or to 
chemicals controlled under Federal or State law. As previously 
discussed, however, her firm is co-located with TNT and its 
representatives, which entity and representatives pleaded guilty to 
various felony counts listed in the August 1998 indictment involving 
the illicit distribution of listed chemicals.
    Regarding factor four, the applicant's past experience in the 
distribution of chemicals, the Administrator finds, as previously 
noted, Ms. Payne was employed as an accountant by TNT during the time 
the firm engaged in the illicit conduct forming the basis for the 
August 1998 indictment, and was married to TNT's President and Chief 
Executive Officer, Fred Thornell. TNT pleaded guilty to felony 
violations of 21 U.S.C. 841(d)(2) and 846, while Fred Thornell and 
another of TNT's representatives pleaded guilty to felony violations of 
21 U.S.C. 830(b)(1)(A) and 842(a)(10), and another representative 
pleaded guilty to a felony violation of 21 U.S.C. 843(a)(7). As stated 
previously, the basis for the August 1998 indictment was the conduct by 
TNT and certain representatives in distributing over 5040 cases of a 
Listed I chemical, knowing or having reasonable cause to know that the 
listed chemical would be used to unlawfully manufacture a controlled 
substance, and further, failing to make required reports of such 
regulated transactions and failing to create proper involce records of 
such regulated transactions.

[[Page 15762]]

    Regarding factor five, other factors relevant to and consistent 
with the public safety, the Administrator concludes, for the purposes 
of this application, that Payne Sales and TNT are effectively identical 
entities. The Administrator finds the DEA investigation reveals that 
the businesses share the same space, address, and telephone number; 
that there appears no evidence that the businesses are physically 
separated in any way; that TNT employees have equal and complete access 
to all of Payne Sales space and products; that the same TNT 
representatives who pleaded guilty to felony violations set forth in 
the August 1998 indictment are present within the shared Payne Sales/
TNT space; Peggy Joe Payne maintains personal relationships with her 
convicted ex-husband Fred Thornell and the two other convicted 
representatives of TNT; she also relies on her ex-husband Fred Thornell 
regarding the business operation of Payne Sales; the only sign on the 
exterior of the building indicates ``TNT Marketing Wholesale 
Novelities;'' their products are co-mingled; their customer lists 
overlap; when the telephone number is dialed; the telephone is answered 
``TNT Marketing Payne Sales;'' and there is no county business 
certification on file in the county records for Payne Sales as required 
by local law as there is for TNT. Therefore, the Administrator 
considers the past conduct of TNT to be relevant to Payne Sales' 
present application. As previously noted, listed chemicals were sold by 
TNT, despite DEA warnings, under circumstances that TNT knew or had 
reasonable cause to believe that the listed chemicals would be used to 
unlawfully manufacture a controlled substance. Evidence from the case 
file shows TNT attempted to conceal seven shipments totaling 2,760 
cases of listed chemicals from DEA scrutiny by labeling the product 
shipped as ``OTC (over the counter) vitamins.'' In addition, TNT failed 
to create proper invoice records for these shipments, in violation of 
21 CFR 1310.06, and further failed to make any report to DEA of these 
regulated transactions, in violation of 21 CFR 1310.05(a). TNT pleaded 
guilty to a felony violation of 21 U.S.C. 841(d)(2) and 846, while Fred 
Thornell and another representative pleaded guilty to felony violations 
of 21 U.S.C. 830(b)(1)(A) and 842(a)(10) and another representative 
pleaded guilty to a felony violation of 21 U.S.C. 843(a)(7). TNT was 
required to pay $100,000 in fines, and the three convicted TNT 
representatives were placed on two years' probation. TNT and its 
convicted representatives were forbidden to apply for DEA registration, 
or to engage in the distribution of controlled substances or listed 
chemicals, for a period of ten years. Furthermore, Peggy Joe Payne 
stated to a DEA investigator that she conducted most of her business 
from her home; therefore, she would not be on the premises, leaving 
TNT's convicted representatives free reign over the shared business 
premises. As previously noted, there is no evidence in the DEA 
investigative file of effective controls against diversion.
    Therefore, for the above-stated reasons, the Administrator 
concludes that it would be inconsistent with the public interest to 
grant the application of Payne Sales. The applicant has failed to 
demonstrate that it has effective controls against the diversion of 
listed chemicals. Additionally, the evidence indicates that for the 
purposes of this application that Payne Sales and TNT are virtually 
indistinguishable, that Peggy Joe Payne continues to rely on her 
convicted ex-husband Fred Thornell to operate Payne Sales, and that the 
demonstrated record of felony violations of TNT and its representatives 
regarding the distribution of listed chemicals present a grave risk of 
future diversion.
    Accordingly, the Administrator of the Drug Enforcement 
Administration, pursuant to the authority vested in him by 21 U.S.C. 
823 and 28 CFR 0.100(b) and 0.104, hereby orders that the application 
for a DEA Certificate of Registration submitted by Payne Sales be 
denied. This order is effective April 19, 2001.

    Dated: March 8, 2001.
Donnie R. Marshall,
Administrator.
[FR Doc. 01-6908 Filed 3-19-01; 8:45 am]
BILLING CODE 4410-09-M