[Federal Register Volume 67, Number 44 (Wednesday, March 6, 2002)]
[Notices]
[Pages 10229-10230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5239]


-----------------------------------------------------------------------

DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Matthew D. Graham; Denial of Application

    On or about December 21, 2000, the Deputy Assistant Administrator, 
Office of Diversion Control, Drug Enforcement Administration (DEA), 
issued an Order to Show Cause (OTSC) by certified mail to Matthew D. 
Graham (Graham), residing in Rosehill, Kansas, notifying him of an 
opportunity to show cause as to why the DEA should not deny his 
application, dated November 30, 1999, for a DEA Certificate of 
Registration as a distributor of the List I chemicals ephedrine and 
pseudoephedrine, pursuant to 21 U.S.C. 823(h), as being inconsistent 
with the public interest. The order also notified Graham that, should 
no request for hearing be filed within 30 days, the right to a hearing 
would be waived.
    The OTSC was received, as indicated by the signed postal return 
receipt that was returned to DEA on or about February 5, 2001. 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 Graham is deemed to have 
waived his 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 Substance Act. 21 U.S.C. 802(34); 21 CFR 
1310.02(a). Pseudoephedrine and ephedrine are List I chemicals that are 
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 November 17, 1997, a DEA 
Certificate of Registration was issued to John's Fashions of Augusta, 
Kansas. The owner of this establishment was John Snodell, Jr. 
(Snodell). Among the listed chemicals handled by John's Fashions were 
ephedrine and pseudoephedrine. These listed chemicals are precursors 
used in the illicit manufacture of methamphetamine.
    A routine traffic stop on November 24, 1998, by the Pratt County 
(Kansas) Police Department resulted in the seizure of 16 cases of 
pseudoephedrine tablets from the trunk of a rental car bound for 
California. The pseudoephedrine had been obtained from a local business 
called Discount Smoke Mart, whose owner stated to Kansas State law 
enforcement personnel that he routinely purchased 16 cases of 
pseudoephedrine tablets at a time for cash from Snodell at John's 
Fashions. This individual further stated to Kansas State law 
enforcement personnel that Snodell was well aware of the arrangement 
whereby these 16 case shipments were routinely being sent to California 
in rental cars.
    On December 16, 1998, DEA and Kansas Bureau of Investigation (KBI) 
agents observed a delivery of 64 cases of 60 mg. pseudoephedrine 
tablets to Snodell's residence. Several male individuals were observed 
to assist in unloading the pseudoephedrine, including Snodell and an 
individual later identified as Matthew D. Graham.
    On December 22, 1998, Snodell was observed by DEA and KBI agents to 
deliver 16 cases of pseudoephedrine 60 mg. tablets to Discount Smoke 
Mart. Pursuant to a Federal Search and Seizure Warrant, the 16 cases 
were seized by DEA and KBI. Subsequently, DEA and KBI agent seized 
534,150 pseudoephedrine and 206,730 ephedrine tablets from Snodell's 
residence.
    During a subsequent interview with DEA and KBI agents, Snodell 
admitted he sold cases of pseudoephedrine to individuals he considered 
``suspicious'' but continued to do so because the profit he made on 
such cash sales was ``* * * too great an incentive to pass up.'' At the 
conclusion of this interview, Snodell surrendered his DEA Certificate 
of Registration.
    On November 30, 1999, less than a year later, Matthew D. Graham 
submitted the subject application for registration as a distributor of 
the List I chemicals ephedrine and pseudoephedrine. In January of 2000, 
Graham informed a DEA investigator of his intention to sell from his 
residence certain sundry items, including List I chemical products. 
Graham further stated to the investigator that he ``need[ed] the pills 
to sell * * * the other items.'' He also stated he learned about the 
business of distributing listed chemical products from friends who 
service convenient stores, and it was his intent also to supply 
convenience stores and smoke shops.
    On May 22, 2000, Graham informed DEA that he intended to enter into 
a wholesale business arrangement with has friend Snodell. The DEA 
investigation revealed Graham is co-owner with Snodell of a wholesale 
business outlet called Retailers Wholesale, Inc. (RWI), located in 
Wichita, Kansas. Although Graham assured DEA investigators Snodell 
would not handle listed chemical products in the business, Graham did 
state Snodell would have contact with RWI customers and would be 
responsible for referring List I chemical orders to Graham. Graham 
further stated he planned to obtain List I chemical products from the 
same supplier previously used by Snodell and John's Fashions.
    During the June 7, 2000, pre-registration inspection, Graham 
informed DEA investigators that RWI has established customer accounts 
with local convenience stores and smoke shops by selling lighters, 
gloves,

[[Page 10230]]

batteries, incense, and rolling papers. Graham reiterated that, in 
order to maintain business relations with these firms, he needed to 
supply List I chemical products in both single dose packets and 60 
count bottles. He further stated that his customers were already 
requesting certain name-brand List I chemical products. DEA information 
reveals that the specifically-requested products mentioned by Graham 
are often diverted to the illicit manufacture of methamphetamine.
    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 14269 (1999). See also Henry J. Schwartz, Jr., M.D., 54 FR 16422 
(1989).
    The Administrator finds factors one, four, and five relevant to 
this application.
    Regarding factor one, the maintenance of effective controls against 
the diversion of listed chemicals, the DEA pre-registration inspection 
documented inadequate security arrangements for the proposed storage of 
listed chemical products, in that Graham was unable to satisfy DEA 
investigator's security concerns with his various suggested 
arrangements. Graham made no apparent provision for an alarm system, 
and no sufficient provision for a separate, locked storage enclosure 
for the List I chemical products. In addition, the Administrator is 
concerned with Graham's business partnership with Snodell, and notes 
that Graham failed to explicate any arrangement at the business whereby 
Snodell's access to listed chemical products would be controlled.
    Regarding factor four, the applicant's past experience in the 
distribution of chemicals, the DEA investigation revealed that Graham 
has no previous experience related to handling or distributing listed 
chemicals. As set forth previously, however, his business partner 
Snodell surrendered a DEA registration because a DEA and KBI 
investigation revealed he was distributing large quantities of List I 
chemical products having reasonable cause to believe the chemical would 
be used to manufacture a controlled substance. Graham admitted to DEA 
investigators that Snodell was his source of information concerning the 
business of distributing listed chemicals.
    Regarding factor five, other factors relevant to and consistent 
with the public safety, the Administrator finds that in response to DEA 
investigator requests, Graham provided proposed supplier and customer 
lists. The DEA investigation shows that of the two suppliers proposed, 
one is currently under investigation for diversion of listed chemicals, 
and the other had its application for DEA registration as a distributor 
of listed chemicals denied by DEA. Of the four proposed customers 
provided by Graham, one was closed, another would not respond to DEA 
inquirers, and only one of the remaining two was interested in List I 
chemical products. The Administrator finds this lack of a legitimate 
customer base, combined with insufficient security arrangements, lack 
of experience in handling listed chemicals, and a business partnership 
with an individual who in the recent past was the subject of a DEA 
investigation and who was forced to surrender his DEA registration as a 
result, creates an unacceptable risk of diversion and is contrary to 
the public interest.
    Therefore, for the above-stated reasons, the Administrator 
concludes that it would be inconsistent with the public interest to 
grant the application of Graham.
    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 Matthew D. Graham be 
denied. This order is effective April 5, 2002.

    Dated: February 22, 2002.
Asa Hutchinson,
Administrator.
[FR Doc. 02-5239 Filed 3-5-02; 8:45 am]
BILLING CODE 4410-09-M