[Federal Register Volume 67, Number 43 (Tuesday, March 5, 2002)]
[Notices]
[Pages 9991-9993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5227]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Paragon Associates; Denial of Application

    On or about May 4, 2001, the Deputy Assistant Administrator, Office 
of Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause (OTSC) by certified mail to Paragon Associates 
(Paragon), located in City of Industry, California, notifying it of an 
opportunity to show cause as to why the DEA should not deny its 
application, dated April 23, 1999, for a DEA Certificate of 
Registration as an exporter of the List I chemical phenylpropanolamine 
(PPA), pursuant to 21 U.S.C. 823(h), as being inconsistent with the 
public interest. The order also notified Paragon that, should no 
request for hearing be filed within 30 days, the right to a hearing 
would be waived.
    The OTSC was received May 16, 2001, as indicated by the signed 
postal receipt. On June 7, 2001, DEA received a letter from Paragon, 
purportedly responding to the issues set forth in the OTSC. This letter 
did not address whether Paragon would request or waive its right to the 
hearing. Since that time, no further response has been received from 
the applicant nor any person purporting to represent the applicant. 
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 that Paragon 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 has considered 
Paragon's letter received June 7, 2001, pursuant to 21 CFR 1309.53(b).
    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). PPA 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.
    The Administrator finds that on April 23, 1999, an application was 
received by the DEA Chemical Operations Registration section on behalf 
of Paragon for DEA registration as an exporter of the List I chemical 
phenylpropanolamine (PPA).
    On June 17, 1999, DEA investigators conducted a pre-registration 
investigation of Paragon's proposed business premises, and interviewed 
the president, Mr. George Fan. Mr. Fan stated that Paragon had been an 
exporter of vitamins and food supplements since 1997, and now intended 
to export the List I chemicl PPA to a firm in Taipei, Taiwan.
    DEA investigators were unable to verify the existence of Paragon's 
intended customer because of misleading information provided by Mr. 
Fan. The DEA investigation revealed Paragon had submitted an 
application for a permit to handle listed chemicals to the State of 
California, Bureau of Narcotic Enforcement (BNE). BNE records revealed 
that Paragon intended to export listed chemicals to China, not Taiwan. 
The DEA investigation further revealed BNE did not issue a permit to 
Paragon to allow listed chemicals to enter California.
    The DEA investigation also revealed that neither Paragon nor its 
intended customer have been authorized by the Government of Taiwan to 
import any listed chemicals. DEA subsequently learned that Paragon had 
submitted an order to a U.S. supplier of PPA in June of 1999 and 
offered a copy of its application for DEA registration as proof of 
registration, despite Paragon's never having been registered to handle 
listed chemicals. Finally, the DEA investigation revealed that in 1997 
and 1998, Paragon acquired domestic supplies of PPA without being 
authorized to do so, and shipped the chemicals without filing the 
required

[[Page 9992]]

export declaration with DEA, in violation of applicable law.
    Pursuant to 21 U.S.C. 823(h), the Administrator may deny an 
application 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 (1999). See also Henry J. Schwartz, Jr., M.D., 54 FR 16,422 
(1989).
    Regarding factor one, the maintenance of effective controls against 
the diversion of listed chemicals, the Administrator finds that the DEA 
investigation revealed significant violations with regard to the 
applicant's security and recordkeeping arrangements. On July 9, 1998, 
Paragon purchased 485,000 PPA 75 mg. capsules from a supplier located 
in New York; and on March 5, 1999, Paragon purchased an additional 
488,000 capsules of the same product from the same supplier. Mr. Fan 
admitted these chemicals were exported to Taiwan. Paragon failed to 
keep records of these regulated transactions, in violation of 21 U.S.C. 
830(a) and 21 CFR 1310.03(a); 1310.04; and 1310.06. Paragon was a 
regulated person as defined by 21 U.S.C. 802(38) as a distributor and 
exporter of listed chemicals, and thus was required to keep records of 
regulated transactions. 21 U.S.C. 802(39)(A).
    Regarding factor two, the applicant's compliance with applicable 
law, the Administrator finds that the evidence shows that Pentagon 
significantly violated applicable law by distributing List I chemicals 
on at least two separate occasions as set forth in the preceding 
factor, when not registered to do so, in violation of 21 U.S.C. 822 and 
843(a)(9) and 21 CFR Sec. 1309.21(a). In addition, Paragon exported 
List I chemicals without a DEA registration in violation of 21 U.S.C. 
957(a)(2), and further failed to declare these exportations on the DEA 
Form 486, as required by 21 CFR 1313.21.
    Regarding factor three, there is no evidence that Paragon nor Mr. 
George Fan has any record of convictions related to controlled 
substances or to chemicals controlled under Federal or State law.
    Regarding factor four, the applicant's past experience in the 
distribution of chemicals, the Administrator finds that the DEA 
investigation revealed that the applicant significantly violated 
applicable law, as set forth in factors one and two. In addition, 
Paragon exported List I chemicals without a DEA registration in 
violation of 21 U.S.C. 957(a)(2), and further failed to declare these 
exportations on the DEA Form 486, as required by 21 CFR 1313.21. The 
DEA investigation further revealed that pursuant to the State of 
California Health and Safety Code, Section 111001.1, businesses are 
required to report to BNE imports and exports of products containing 
PPA 21 days prior to the transaction date. Paragon never notified BNE 
of its PPA imports into California, set forth in factor one.
    Regarding factor five, other factors relevant to and consistent 
with the public safety, the Administrator finds that Paragon 
significantly violated applicable law by distributing and exporting 
List I chemicals without being registered to do so, and by failing to 
keep and maintain required records of regulated List I chemicals 
transactions.
    The DEA investigation further revealed Mr. Fan was not forthcoming 
with information concerning his customers. In response to questions, 
Mr. Fan provided misleading and incomplete information. Mr. Fan's 
proposed distribution network led through a number of parties whose 
relationships were not clear, and concerning whose relationships Mr. 
Fan failed to provide information. When specifically asked, Mr. Fan was 
unable to adequately describe Paragon's proposed distribution network. 
The investigation also revealed that Paragon's proposed Taiwan customer 
did not have the required Import License, and therefore was not 
authorized to import PPA from the U.S. or any other country.
    In addition, review of Paragon's BNE application indicated that 
Paragon intended to export PPA to China, not Taiwan. Mr. Fan further 
alleged he initiated the registration process in 1997; in fact, the DEA 
registration process was not initiated until June of 1999.
    The DEA investigation further revealed that, prior to initiating 
the DEA registration process, on April 23, 1999, Paragon had placed an 
order for 500,000 to 1,000,000 PPA capsules with a U.S.-based 
pharmaceutical manufacturer. When confronted with this order by DEA 
investigators on June 17, 1999, and notified that he was unauthorized 
to handle any listed chemicals until registered with DEA, Mr. Fan 
stated that, while he had completed the order in April of 1999, his 
secretary had only mailed it that week. Then Mr. Fan stated he placed 
the order in advance so that when he received his DEA registration, the 
order would be ready for shipment, because his customer in Taiwan was 
expecting this order.
    Finally, the investigation revealed that Mr. Fan stated to DEA 
investigators that List I chemicals would comprise approximately ten 
percent of his business; however, on his application with BNE, Mr. Fan 
indicated that PPA would be his primary business.
    The Administrator finds this lack of candor, taken together with 
Paragon's and Mr. Fan's demonstrated cavalier disregard of the 
statutory law and regulations concerning the registration, 
distribution, exporting, and recordkeeping requirements of List I 
chemicals, makes questionable Paragon's and Mr. Fan's commitment to the 
DEA regulatory requirements designed to protect the public from the 
diversion of controlled substances and listed chemicals. Aseel 
Incorporated, Wholesale Division, 66 FR 35,459 (2001); Terrence E. 
Murphy, 61 FR 2,841 (1996). The Administrator further finds that 
Paragon's letter received June 7, 2001, in response to the OTSC 
contained only unsupported allegations, and pursuant to 21 U.S.C. 
1309.53(b), the Administrator concludes that this evidence is entitled 
to little, if any, weight. The Administrator notes that the letter does 
not substantively dispute the facts underlying the occurrence of the 
violations of law and regulations set forth above.
    Therefore, for the above-stated reasons, the Administrator 
concludes that it would be inconsistent with the public interest to 
grant the application of Paragon Associates. The evidence indicates 
that the applicant has significantly violated applicable law by 
distributing and exporting List I

[[Page 9993]]

chemicals while not registered with DEA, and by failing to keep and 
maintain required records concerning regulated transactions.
    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 Paragon Associates 
be 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 Wayne Patrick, 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. George Fan, Paragon Associates, 1300 John Reed Court, #13, City 
of Industry, California 91745.

Karen C. Grant.

[FR Doc. 02-5227 Filed 3-4-02; 8:45 am]
BILLING CODE 4410-09-M