[Federal Register Volume 67, Number 48 (Tuesday, March 12, 2002)]
[Notices]
[Pages 11142-11144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5795]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Market Street Market; Denial of Application

    On or about August 27, 2001, the Deputy Assistant Administrator, 
Office of Diversion Control, Drug Enforcement Administration (DEA), 
issued an Order to Show Cause (OTSC) by certified mail to Market Street 
Market (MSM), located in Chehalis, Washington, notifying it of an 
opportunity to show cause as to why the DEA should not deny its 
application, dated November 2, 1998, for a DEA Certificate of 
Registration as a distributor of the List I chemicals ephedrine, 
pseudoephedrine, and phenylpropanolamine, pursuant to 21 U.S.C. 823(h), 
as being inconsistent with the public interest. The order also notified 
MSM that, should no request for hearing be filed within 30 days, the 
right to a hearing would be waived.
    The OTSC was received September 6, 2001, as indicated by the signed 
postal return receipt. 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 MSM 
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

[[Page 11143]]

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 Administrator finds that on or about November 2, 1998, an 
application was received by the DEA Chemical Operations Registration 
section on behalf of MSM for DEA registration as a distributor of the 
three above-mentioned List I chemicals.
    MSM is a convenience store located in Chehalis, Washington. At all 
relevant times, it was owned and operated by Chol Jung Kim and his wife 
Hy Suk Kim (hereinafter collectively referred to as the Kims). In the 
Fall of 1998, MSM attempted to purchase 20 cases of pseudoephedrine 
from a distributor located in Columbus, Ohio. When DEA learned of this 
attempted purchase, personnel from the DEA Seattle Field Division 
contacted the Kims and alerted them to the dangers of List I chemicals, 
including pseudoephedrine, being diverted to the illicit manufacture of 
methamphetamine. The Kims assured DEA personnel that MSM would limit 
its sales to two bottles per customer. Subsequently, on or about 
November 2, 1998, MSM submitted the present application for DEA 
registration as a distributor of List I chemicals.
    The DEA Seattle Field Division received information that documented 
MSM's purchase of 718 bottles of 100 count 60 mg. pseudoephedrine 
tablets from a single distributor between October and December, 1998. 
On March 24, 1999, DEA Headquarters received a letter from a registered 
manufacturer of pseudoephedrine located in New Jersey informing DEA 
that MSM had recently purchased 144 bottles of 100 count 60 mg. 
pseudoephedrine tablets, and that MSM had placed an identical order in 
January, 1999. DEA's investigation reveals that these amounts of 
pseudoephedrine exceed the legitimate retail needs of MSM.
    On March 5, 1999, DEA investigators conducted a pre-registration 
inspection of MSM. During an interview at this time, the Kims were 
again warned about the dangers of the diversion of List I chemicals, 
including pseudoephedrine, to the illicit manufacture of 
methamphetamine. At this time, the Kims were provided with copies of 
official DEA notices and various criminal statutes pertaining to the 
diversion of listed chemicals and the duties and obligations of List I 
chemical registrants. The Kims again assured DEA investigators that 
they would limit their sales to two bottles per customer.
    On March 25, 1999, a confidential source purchased 17 bottles of 60 
count 60 mg. pseudoephedrine tablets from the Kims at MSM. Thereafter, 
a confidential source and an undercover detective from a State of 
Washington law enforcement agency made five purchases of 
pseudoephedrine tablets at MSM between December, 2000, and February, 
2001.
    The first undercover buy took place on December 29, 2000, when the 
confidential source purchased ten bottles of 100 count 60 mg. 
pseudoephedrine tablets from the Kims at MSM. The second undercover buy 
took place on January 4, 2001, when the confidential source purchased 
20 bottles of 100 count 60 mg. pseudoephedrine tablets from the Kims at 
MSM. At this time, one of the Kims stated that MSM would be willing to 
sell pseudoephedrine in half-case quantities (a case contains 144 
bottles). On January 11, 2001, the undercover detective purchased 20 
bottles of 100 count 60 mg. pseudoephedrine tablets from the Kims at 
MSM. On January 18, 2001, the undercover detective made the fourth buy, 
purchasing 25 bottles of 120 count 60 mg. pseudoephedrine tablets from 
the Kims at MSM. The fifth undercover buy took place on February 15, 
2001, when the undercover detective purchased 35 bottles of 100 count 
60 mg. pseudoephedrine from the Kims at MSM.
    On March 23, 2001, a Federal Search Warrant was executed at MSM, 
and the Kims were arrested for violations of the Controlled Substances 
Act relating to their purchases and sales of pseudoephedrine List I 
chemical products. During the search, a total of 50,214 dosage units of 
List I chemical products as well as $44,408 in United States currency 
was seized.
    On April 4, 2001, MSM's State of Washington license to handle over-
the-counter chemicals, including pseudoephedrine, expired. MSM failed 
to renew the license, and as a result, MSM is not currently authorized 
by the State in which it seeks DEA registration to handle the List I 
chemicals listed in its application. The DEA investigation revealed 
that MSM purchased at least 451,800 dosage units of pseudoephedrine 
between August 1, 1999, and August 1, 2000. This amount of 
pseudoephedrine well exceeds the legitimate needs of MSM. DEA had 
delayed acting on MSM's application because of MSM's association with 
other targets of criminal investigations.
    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).
    As a preliminary matter, DEA consistently has held that a retail 
store operates under the control of its owners, stockholders, or other 
employees, and therefore the conduct of these individuals is relevant 
in evaluating the fitness of an applicant for registration. See, e.g., 
Rick's Pharmacy, 62 FR 42,595 (1997); Big T Pharmacy, Inc. 47 FR 51,830 
(1982). The conduct of the Kims is therefore relevant in determining 
the fitness of MSM for DEA registration.
    Regarding factor one, the maintenance of effective controls against 
the diversion of listed chemicals, the DEA investigation revealed that 
MSM and the Kims actively participated in the diversion of List I 
chemicals, in that on

[[Page 11144]]

at least five occasions they distributed the List I chemical 
pseudoephedrine knowing or having reasonable cause to believe that said 
chemical would be diverted to the illicit manufacture of a controlled 
substance.
    Regarding factor two, the applicant's compliance with applicable 
law, the Administrator finds that MSM through its owners/operators the 
Kims significantly violated applicable law by selling the List I 
chemical pseudoephedrine in quantities and under circumstances 
sufficient to engender a reasonable belief that the chemical would be 
diverted to the manufacture of a controlled substance. Despite having 
been extensively briefed twice by DEA personnel in the Fall of 1998 and 
in March of 1999 concerning the risks of diversion of listed chemical 
products, including being served with official DEA written 
notifications and guidelines concerning the obligations and 
responsibilities of listed chemical registrants, the Kims subsequently 
significantly violated applicable law. During a two-week period from 
December 29, 2000, to January 11, 2001, the Kims sold an undercover 
confidential source at least 5,000 dosage units of pseudoephedrine.
    During the next four weeks, from January 18, 2001, to February 15, 
2001, the Kims sold an undercover detective (introduced to the Kims by 
the undercover confidential source) an additional 6,500 dosage units of 
pseudoephedrine. The Administrator finds that, given the Kim's obvious 
knowledge of the dangers of diversion, as directly transmitted to them 
orally and in writing by DEA, the sale of these quantities of 
pseudoephedrine to the same individuals within such a relatively short 
time frame, certainly gave rise to a reasonable belief, if not 
knowledge, that the pseudoephedrine would be diverted to the 
manufacture of a controlled substance, in violation of 21 U.S.C. 
841(d)(2) and 841(g)(1). (Note: subparagraphs (d) and (g) of 841 have 
been redesignated as (c) and (f)).
    Regarding factor three, the investigative file reveals that Hy Suk 
Kim was arrested April 29, 1998 for Washington State violations 
involving possession of drug paraphernalia and a drug violation.
    Regarding factor four, the applicant's past experience in the 
distribution of chemicals, the DEA investigation revealed that MSM and 
the Kims actively participated in distributing the List I chemical 
pseudoephedrine knowing or having reasonable cause to believe it would 
be diverted to the manufacture of a controlled substance, as set forth 
in factor two.
    Regarding factor five, other factors relevant to and consistent 
with the public safety, the Administrator finds that on two separate 
occasions, the Kims stated to DEA personnel that MSM only sold List I 
chemical products in quantities not exceeding two bottles per customer. 
The DEA investigation revealed that, on at least five occasions over a 
six-week period, the Kims sold in quantities of 10, 20, 20, 25, and 35 
bottles to an undercover confidential source and an undercover 
detective. The Kims additionally stated to the undercover detective 
that they were willing to sell in half-case quantities (72 bottles). 
The Administrator finds this lack of candor, taken together with MSM's 
and the Kim's demonstrated cavalier disregard of the law and 
responsibilities concerning the distribution of listed chemicals, makes 
questionable MSM's and the Kim'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).
    Therefore, for the above-stated reasons, the Administrator 
concludes that it would be inconsistent with the public interest to 
grant the application of MSM.
    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 Market Street Market 
be denied. This order is effective April 11, 2002.

    Dated: February 22, 2002.
Asa Hutchinson,
Administrator.
[FR Doc. 02-5795 Filed 3-11-02; 8:45 am]
BILLING CODE 4410-09-M