[Federal Register Volume 67, Number 43 (Tuesday, March 5, 2002)]
[Notices]
[Pages 9986-9987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5221]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Denver Wholesale; Revocation of Registration

    On July 29, 2000, the Administrator of the Drug Enforcement 
Administration (DEA), issued an Order to Show Cause (OTSC) to Denver 
Wholesale, located in Denver, Colorado, notifying it of a preliminary 
finding that, pursuant to evidence set forth therein, it was 
responsible for the diversion of large quantities of List I chemicals 
into other than legitimate channels. Based on these preliminary 
findings, and pursuant to 21 U.S.C. 824(d) and 28 CFR 0.100 and 0.104, 
the OTSC suspended Denver Wholesale's DEA Certificate of Registration, 
effective immediately, with such suspension to remain in effect until a 
final determination is reached in these proceedings. The OTSC informed 
Denver Wholesale and its owner, Hassan, Zaghmot (Zaghmot) of an 
opportunity to request a hearing to show cause as to why the DEA should 
not revoke its DEA Certificate of Registration, 003378DHY, and deny any 
pending applications for renewal or modification of such registration, 
for reason that such registration is inconsistent with the public 
interest, as determined by 21 U.S.C. 823(h). The OTSC also notified 
Denver Wholesale that, should no request for hearing be filed within 30 
days, its right to a hearing would be considered waived.
    On August 9, 2000, a copy of the OTSC was served upon Zaghmot's 
attorney. No request for a hearing or any other response was received 
by DEA from Denver Wholesale or Zaghmot; nor anyone purporting to 
represent it in this matter. Therefore, the Administrator of the DEA, 
finding that (1) thirty days having passed since receipt of the Order 
to Show Cause, and (2) no request for a hearing having been received, 
concludes Denver Wholesale 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.
    The Administrator finds as follows. List I chemicals are chemicals 
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). Pseudoephedrine is a List I chemical that is commonly used 
to illegally manufacture methamphetamine, a Schedule II controlled 
substance. Methamphetamine is an extremely potent central nervous 
system stimulant, and its abuse is a growing problem in the United 
States.
    A ``regulated person'' is a person who manufactures, distributes, 
imports, or exports inter alia a listed chemical. 21 U.S.C. 802(38). A 
``regulated transaction'' is inter alia a distribution, receipt, sale, 
importation, or exportation of a threshold amount of a listed chemical. 
21 U.S.C. 802(39). The Administrator finds all parties mentioned herein 
to be regulated, and all transactions mentioned herein to be regulated 
transactions, unless otherwise noted.
    The DEA investigation shows that at the time Denver Wholesale 
became registered with the DEA in July of 1998 as a distributor of List 
I chemicals, Zaghmot was personally served with the DEA notices 
informing him that ephedrine and pseudoephedrine are diverted for use 
in clandestine methamphetamine laboratories, as well as the notice 
informing him that possession or distribution of a listed chemical 
knowing or having reasonable cause to believe that the listed chemical 
will be used to manufacture a controlled substance is a violation of 
the Controlled Substances Act.
    The DEA investigation shows Denver Wholesale has received millions 
of dosage units of pseudoephedrine from distributors nationwide since 
being registered with DEA. In calendar year 1999, Denver Wholesale 
received 18 million dosage units of 60 mg. pseudoephedrine from one of 
its six List I chemical suppliers alone.
    During September, 1999, and on June 20, 2000, Denver Wholesale 
provided DEA with customer lists. The lists showed no customers in 
California, yet Federal Express records document numerous large 
shipments of pseudoephedrine from Denver Wholesale to California, 
several of which were tracked directly to methamphetamine laboratories. 
Zaghmot used fictitious and non-existent business names and addresses 
in shopping pseudoephedrine to California.
    In March of 2000, in Denver, Colorado, Zaghmot and other 
individuals loaded approximately 55 boxes containing over 15,000 
bottles of pseudoephedrine 60 mg. tablets from a storage locker into a 
rented van, that was then packed with furniture obtained from thrift 
shops throughout the Denver area. The boxes were transported to a self-
storage facility in California, from whence it was transported to 
several different locations at which laboratory equipment and chemicals 
consistent with the clandestine manufacture of methamphetamine were 
located. The individuals having access to the storage lockers were 
arrested and charged with conspiracy to manufacture methamphetamine. 
The rented van was stopped in Nevada, and a search revealed $233,960 in 
United States currency. The passenger, who had been observed by 
investigators assisting Zaghmot loading pseudoephedrine into the van, 
stated that he had driven the van from Denver to Sacramento, 
California, with a load of pseudoephedrine, and was returning to Denver 
for another load of the chemical.
    On July 20, 2000, an undercover DEA agent purchased 120 bottles of 
Denver Wholesale-labeled pseudoephedrine product for $1000 in cash from 
a convenience store in Denver, Colorado. On July 25, 2000, the 
undercover agent returned for another purchase. In response to 
questioning from the convenience store owner, the undercover agent 
stated that he had used the previous purchase to manufacture 
methamphetamine. The convenience store owner sold the agent another 144 
bottles of the same product, and informed the agent that he could 
provide as much as 100 cases (14,400 bottles) of pseudoephedrine. 
Larger quantities, however, would cost $1,500 a case. The undercover 
agent left, and the convenience store owner was observed to drive to 
Denver Wholesale, where he met with Zaghmot. The next day, the 
undercover agent contacted the convenience store owner, who stated that 
since the supplier did not know the agent, the supplier would only 
provide two cases at a time until a relationship was built.
    Therefore, pursuant to 21 U.S.C. 824(d), the Administrator of the 
DEA issued an immediate suspension of Denver Wholesale's DEA 
Certificate of Registration. While the above-cited evidence provides 
ample grounds for an immediate suspension pursuant to section 824(d), 
these grounds also provide the basis for the revocation of Denver 
Wholesale's DEA Certificate of Registration.
    Pursuant to 21 U.S.C. 824(a), the Administrator may revoke a 
registration to distribute List I chemicals upon a finding that the 
registrant has committed such acts as would render his registration 
under section 823 inconsistent with the public interest as

[[Page 9987]]

determined under that section. Pursuant to 21 U.S.C. 823(h), the 
following factors are 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.
    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 (1999). See also Henry J. Schwartz, Jr., M.D., 54 FR 16,422 
(1989).
    Regarding the first factor, maintenance of effective controls 
against diversion, the Administrator finds substantial evidence in the 
investigative file that Denver Wholesale and Zaghmot actively 
participated in the illegal diversion of pseudoephedrine knowing it 
would be used to manufacture methamphetamine.
    Regarding the second factor, compliance with applicable Federal, 
State, and local law, the investigative file in this matter reveals 
that on July 27, 2000, a Federal Grand Jury in the District indicated 
Zaghmot and other individuals with violations of 21 U.S.C. 841(d)(2) 
(possession or distribution of a listed chemical knowing, or having 
reasonable cause to believe, that the listed chemical will be used to 
manufacture a controlled substance) and 846 (attempt or conspiracy to 
violate the Controlled Substances Act); as well as various money-
laundering offenses. Zaghmot was arrested the next day. Search warrants 
were executed upon Denver Wholesale, a storage facility used by 
Zaghmot, and Zaghmot's residence. Totals of approximately 2,500 pounds 
of pseudoephedrine and $668,000 in United States currency were seized 
from Denver Wholesale, Zaghmot, and his co-conspirators.
    Regarding the third factor, any prior conviction record under 
Federal or State laws relating to controlled substances or chemicals, 
there is no evidence in the investigative file that Denver Wholesale or 
Zaghmot has any record of convictions under Federal or State laws 
relating to controlled substances or chemicals.
    Regarding the fourth factor, past experience in the manufacture and 
distribution of chemicals, the Administrator finds substantial evidence 
in the investigative file that Zaghmot actively participated in the 
illegal trafficking of pseudoephedrine, knowing that it was being 
diverted to the manufacture of methamphetamine. Denver Wholesale's 
customer list did not contain any customers from California. Yet DEA 
investigators observed Zaghmot and others loading pseudoephedrine into 
a rental van in Denver, Colorado, concealing the chemicals with thrift 
store furniture, and driving the van to a California self-storage 
facility. A search of the rental van as it was headed back to Colorado 
revealed $233,960 in United States currency.
    In addition, the investigative file contains information obtained 
from Federal Express showing Denver Wholesale shipping large quantities 
of pseudoephedrine to California. Zaghmot used fictitious business 
names and addresses in making these shipments. A number of these 
shipments were traced directly to clandestine methamphetamine 
laboratories.
    Thus the Administrator finds Denver Wholesale and Zaghmot violated 
21 U.S.C. 841(g)(1) (knowing distribution of a listed chemical in 
violation of the Controlled Substances Act); 841(g)(2) (possession of a 
listed chemical with knowledge that recordkeeping or reporting 
requirements not adhered to); and 830(b)(1)(a) (failure to report any 
regulated transaction involving an extraordinary quantity of a listed 
chemical, an uncommon method of payment or delivery, or any other 
circumstance the regulated person believes may indicate that the listed 
chemical will be used in violation of this subchapter). (Note: 
subparagraphs (d) and (g) of 841 have been redesignated as (c) and 
(f)). Therefore, the Administrator finds Denver Wholesale and Zaghmot 
significantly violated applicable federal law.
    Regarding the fifth factor, such other factors relevant to and 
consistent with the public safety, the Administrator finds substantial 
evidence that Denver Wholesale significantly violated applicable law by 
illegally trafficking thousands of pounds of pseudoephedrine knowing it 
was being diverted to the manufacture of methamphetamine and further by 
failing to keep and maintain required records and failure to report 
suspicious listed chemical transactions. Zaghmot was indicated and 
arrested for various violations pertaining to controlled substances and 
listed chemicals.
    Accordingly, the Administrator of the Drug Enforcement 
Administration, pursuant to the authority vested in him by 21 U.S.C. 
823 and 824 and 28 CFR 0.100(b) and 0.104, hereby orders that DEA 
Certificate of Registration 003378DHY, previously issued to Denver 
Wholesale, be, and it hereby is, revoked; and any pending applications 
for renewal or modification of said registration be, and hereby are, 
denied. This order is effective April 4, 2002.

    Dated: February 22, 2002.
Asa Hutchinson,
Administrator.

Certificate of Service

    This is to certify that the undersigned, on February 25, 2002, 
placed a copy of the Final Order referenced in the enclosed letter in 
the interoffice mail addressed to Charles Trant, Esq., Office of Chief 
Counsel, Drug Enforcement Administration, Washington, DC 20537; and 
caused a copy to be mailed, postage prepaid, registered return receipt 
to Mr. Hassan Zaghmot, Denver Wholesale, 8200 East Pacific Place, Suite 
103, Denver, Colorado 80231.

Karen C. Grant.

[FR Doc. 02-5221 Filed 3-4-02; 8:45 am]
BILLING CODE 4410-09-M