[Federal Register Volume 67, Number 53 (Tuesday, March 19, 2002)]
[Notices]
[Pages 12574-12576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6568]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Ace Wholesale & Trading Co.; Revocation of Registration

    On March 16, 2001, the Administrator of the Drug Enforcement 
Administration (DEA), issued an Order to Show Cause (OTSC) to Ace 
Wholesale & Trading Company (Ace), located in Lakewood, Washington, 
notifying it of a preliminary finding that, pursuant to evidence set 
forth therein, it was responsible for inter alia 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 Ace'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 Ace and is owner, Sung Won Hwang (Hwang) of an 
opportunity to request a hearing to show cause as to why the DEA should 
not revoke its DEA Certificate of Registration, 004652ALY, 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 Ace 
that, should no request for hearing be filed within 30 days, its right 
to a hearing would be considered waived.
    On March 23, 2001, a copy of the OTSC was served upon Hwang as he 
was being processed for arrest for Federal offenses relating to the 
unlawful distribution of pseudoephedrine and conspiracy to manufacture 
methamphetamine. Since that time, no request for a hearing or any other 
response was received by DEA from Ace or Hwang nor anyone purporting to 
represent the registrant in this matter. 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 Ace 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 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.
    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 persons, and all transactions mentioned herein to be 
regulated transactions, unless otherwise noted.
    The DEA investigation shows that at the time ACE became registered 
with the DEA on December 20, 1999, as a distributor of the List I 
chemicals pseudoephedrine and phenylpropanolamine, Hwang was personally 
served with the DEA notices informing him that pseudoephedrine and 
other List I chemicals are diverted for use in clandestine 
methamphetamine laboratories, and served as well with 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

[[Page 12575]]

manufacture a controlled substance is a violation of the Controlled 
Substances Act. DEA investigators explained to Hwang the information 
contained in the notices, and Hwang indicated that he understood.
    On or about October 21, 1998, DEA and the Pierce County Sheriff's 
Department, Lakewood, Washington, initiated an investigation of a 
retail outlet (Retail Outlet) located in Lakewood, Washington, selling 
drug-related paraphernalia and List I chemical products containing 
pseudoephedrine. As set forth below, Ace and Hwang on an unknown number 
of occasions distributed large quantities of pseudoephedrine products 
to the Retail Outlet. The DEA investigation revealed that Ace and Hwang 
consistently failed to keep records of these regulated transactions.
    On May 19 and May 30, 2000, undercover DEA investigators purchased 
a total of 429 bottles of 120 count 60 mg. pseudoephedrine tablets 
(51,480 dosage units) from the Retail Outlet. DEA Confidential Source 
information revealed that the owner/operators of the Retail Outlet 
distributed the pseudoephedrine knowing it would be diverted to the 
illicit manufacture of methamphetamine. An August 9, 2000, 
administrative inspection of Ace conducted by DEA revealed this 
pseudoephedrine had originated from Ace. This same administrative 
inspection revealed Ace had no records indicating it had ever supplied 
pseudoephedrine to the Retail Outlet.
    On July 1, 2000, the Evergreen State College Police Department of 
Olympia, Washington, discovered a clandestine methamphetamine 
laboratory dump site. Several empty bottles of 60 mg. pseudoephedrine 
recovered from the Dump site were traced back to Ace.
    On July 21, 2000, DEA investigators made an undercover purchase of 
494 boxes of 48 count 60 mg. pseudoephedrine (23,712 dosage units) from 
the Retail Outlet. DEA Confidential Source information revealed that 
the owner/operators of the Retail Outlet distributed the 
pseudoephedrine knowing it would be diverted to the illicit manufacture 
of methamphetamine. The August 9, 2000, administrative inspection 
revealed this pseudoephedrine also originated from Ace.
    During the August 9, 2000, inspection, Hwang admitted that a 
portion of his List I chemical inventory was stored at his residence, 
because he did not have enough room to store it at his registered 
address. Hwang's residence is not a registered address, according to 
DEA's records.
    Also during the August 9, 2000, inspection, a DEA investigator 
obtained Ace's purchase and sales records for a particular lot number 
of 60 mg. Pseudoephedrine product for the period from July 2000 through 
close of business on the date of the inspection. A closing inventory of 
Ace on August 9, 2000, revealed no pseudoephedrine on hand reflecting 
this lot number. Examination of Ace's records, however, revealed that 
there should have been an inventory under this lot number of ten cases 
and 104 boxes (74,112 dosage units) of pseudoephedrine. Thus, Ace could 
not account for the disposition of this pseudoephedrine. DEA's 
investigation, however, showed that the lot number of the unaccounted-
for pseudoephedrine matched that of the above-referenced July 21, 2000, 
494 box undercover purchase from the Retail Outlet.
    On August 15, 2000, a clandestine methamphetamine laboratory was 
discovered in Eatonville, Washington. Empty pseudoephedrine bottles 
recovered from the site were traced back to Ace.
    On September 29, 2000, undercover DEA investigators purchased 240 
bottles of 120 count 60 mg. pseudoephedrine tablets (28,800 dosage 
units) from the Retail Outlet. DEA Confidential Source information 
revealed that the owner/operators of the Retail Outlet distributed the 
pseudoephedrine knowing it would be diverted to the illicit manufacture 
of methamphetamine. The DEA investigation revealed substantial evidence 
that this pseudoephedrine was provided by Ace.
    The review of Ace's records by DEA investigators during the August 
9, 2000, inspection showed no List I chemical sales by Ace during the 
period from December 20, 1999, to August 9, 2000. The DEA investigation 
revealed, however, at least four separate distributions of 
pseudoephedrine to a firm not registered with DEA to handle List I 
chemicals. On May 22, 2000, on June 22, 2000, on July 14, 2000, and on 
July 28, 2000, Ace distributed 72 bottles of 120 count 60 mg. 
pseudoephedrine tablets (totaling 288 bottles/34,560 dosage units). The 
two July distributions combine to exceed the monthly cumulative 
threshold for pseudoephedrine, and therefore are considered regulated 
transactions. 21 CFR 1310.04. Each of these distributions was made to a 
firm that was not registered with DEA to handle List I chemicals.
    The DEA investigation revealed Ace was distributing quantities of 
pseudoephedrine to retail establishments far in excess of legitimate 
demand. For example, Ace supplied a small retail convenience store with 
144 boxes of 48 count 60 mg.pseudoephedrine tablets (6,912 dosage 
units) per month between July 1, 2000, and September 2, 2000. 
Thereafter, commencing October 1, 2000, Ace doubled the supply to the 
convenience store until a State criminal search warrant was served upon 
the convenience store November 9, 2000. While these do no appear to 
have been regulated transactions, they are indicative of Ace's 
excessive distribution practices. During the execution of this warrant, 
a post-dated sales receipt for pseudoephedrine from Ace was discovered, 
as well as a falsified Ace sales invoice.
    Therefore, pursuant to 21 U.S.C. 824(d), the Administrator of the 
DEA issued an immediate suspension of Ace'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 Ace'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 wound render his registration 
under section 823 inconsistent with the public interest as 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 14269 (1999). See also Henry J. Schwartz, Jr., M.D., 54 FR 
16422(1989)

[[Page 12576]]

    Regarding the first factor, maintenance of effective controls 
against diversion, the Administrator finds substantial evidence in the 
investigative file that Ace and Hwang participated in the illegal 
diversion of pseudoephedrine having reasonable cause to believe it 
would be asked to manufacture methamphetamine. The DEA investigation 
showed Ace was distributing large quantities of pseudoephedrine to the 
Retail Outlet and other establishments that appeared far in excess of 
legitimate demand. In addition, Ace failed to follow recordkeeping 
requirements, as evidenced by its lack of records reflecting numerous 
regulated distributions to the Retail Outlet and its failure to account 
for 74,112 dosage units of pseudoephedrine during the August 9, 2000, 
inspection, in violation of 21 U.S.C. 842(a)(10); 830(a)(1); and 21 CFR 
1310.03 (failure to keep required records); and the July 14 and July 
28, 2000, 72 bottle distributions to the firm not registered with DEA 
to handle List I chemicals, in violation of 21 U.S.C. 842(a)(9); 
830(a)(3); and 21 CFR 1310.07 (failure to obtain proof of identity). 
Therefore, the Administrator finds Ace and Hwang failed to maintain 
effective controls against the diversion of pseudoephedrine.
    Regarding the second factor, compliance with applicable Federal, 
State, and local law, the investigative file in this matter reveals 
that Ace significantly violated applicable Federal law pertaining to 
recordkeeping and identification of parties to regulated transactions, 
as set foth in factor one, above. In addition, Ace failed to make 
required reports of suspicious listed chemical transactions pursuant to 
21 U.S.C. 830(b)(1)(A), in that it was distributing pseudoephedrine to 
convenience stores in quantities that appeared far in excess of 
legitimate demand.
    Ace and Hwang were notified regarding the dangers of List I 
chemical diversion by DEA investigators both orally and via written 
official notices. Therefore, these series of excessive distributions 
also were in violation of 21 U.S.C. 841(d)(2) (since redesignated 
841(c)(2)), since Ace and Hwang had reasonable cause to believe the 
pseudoephedrine would be diverted to the manufacture of 
methamphetamine.
    The Administrator also finds the November 9, 2000, search of the 
convenience store revealed substantial evidence that Ace participated 
in falsifying documents in an attempt to conceal the frequency and 
quantity of pseudoephedrine it was distributing to the convenience 
store referenced above. The post-dated Ace sales receipt and the 
falsified Ace sales invoice seized during the search are evidence of 
violations of 21 U.S.C. 843(a)(4)(A) and 830(a) and 21 CFR 1310.03.
    Finally, the investigative file reflects that Hwang was arrested 
March 23, 2001 in Seattle, Washington, by the Federal Bureau of 
Investigation on charges involving the illegal distribution of 
pseudoephedrine and conspiracy to manufacture methamphetamine.
    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 Ace or Hwang 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 Hwang failed to maintain adequate 
controls in handling and distributing the List I chemical 
pseudoephedrine, and actively participated in the illegal trafficking 
of pseudoephedrine, knowing that it was being diverted to the 
manufacture of methamphetamine, as set forth in the first and second 
factors, above.
    Regarding the fifth factor, such other factors relevant to and 
consistent with the public safety, the Administrator finds the November 
9, 2000, search of the convenience store revealed substantial evidence 
that Ace participated in falsifying documents in an attempt to conceal 
the frequency and quantity of pseudoephedrine it was distributing to 
the convenience store referenced above, in violation of 21 U.S.C. 
843(a)(4)(A) and 830(a) and 21 CFR 1310.03. The Administrator finds 
this willingness to falsify records, taken together with Ace's and 
Hwang's demonstrated disregard of the statutory law and regulations 
concerning the distribution and recordkeeping requirements pertaining 
to List I chemicals, makes questionable Ace's and Hwang's commitment to 
the DEA statutory and regulatory requirements designed to protect the 
public from the diversion of controlled substances and listed 
chemicals. Aseel Incorporated, Wholesale Division, 66 FR 35459 (2001); 
Terrence E. Murphy, 61 FR 2841 (1996).
    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 004652ALY, previously issued to Ace 
Wholesale & Trading company, 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 18, 2002.

    Dated: March 11, 2002.
Asa Hutchinson,
Administrator.
[FR Doc. 02-6568 Filed 3-18-02; 8:45 am]
BILLING CODE 4410-09-M