[Federal Register Volume 67, Number 53 (Tuesday, March 19, 2002)]
[Notices]
[Pages 12580-12583]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6569]


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

DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Seaside Pharmaceutical Co.; Revocation of Registration

    On July 29, 2000, the Administrator of the Drug Enforcement 
Administration (DEA), issued an Order to Show Cause (OTSC) to Seaside 
Pharmaceutical Company (Seaside), located in Fort Lauderdale, Florida, 
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 Seaside's DEA 
Certificate of Registration, effective immediately, with

[[Page 12581]]

such suspension to remain in effect until a final determination is 
reached in these proceedings. The OTSC informed Seaside and its owner/
president and sole employee Thomas Narog (Narog) of an opportunity to 
request a hearing to show cause as to why the DEA should not revoke its 
DEA Certificate of Registration, 004422SMY, and deny any pending 
applications for renewal or modification of such registration, and 
further deny its application dated March 28, 2000, as an exporter of 
List I chemicals, for reason that such registration is inconsistent 
with the public interest, as determined by 21 U.S.C. 823(h). The OTSC 
also notified Seaside that, should not request for hearing be filed 
within 30 days, its right to a hearing would be considered waived.
    On July 31, 2000, a DEA Special Agent served the OTSC upon Narog's 
attorney as Narog made his initial appearance before a U.S. Magistrate 
Judge in connection with charges related to his handling of List I 
chemicals. Since that time, no request for a hearing or any other 
response was received by DEA from Seaside or Narog 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 Seaside 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 
commonly used in the manufacture of a controlled substance in violation 
of the Controlled Substances Act. 21 U.S.C. 802(34); 21 CFR 1310.22(a). 
Pseudoephedrine, ephedrine, and phyenylpropanolamine are List I 
chemicals that are commonly used to illegally manufacture 
methamphetamine, a Schedule II controlled substance, or amphetamine, a 
Schedule III 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(3). 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 revealed as follows. During an interview with 
DEA investigators April 17, 2000, Narog, in the presence of his then-
counsel, stated that on four occasions since July, 1999, he shipped 60 
mg. pseudoephedrine tablets to Israel. Per Narog, each of the four 
shipments contained at least 100,000 bottles of 60 count 60 mg. 
pseudoephedrine tablets. In response to questions from DEA 
investigators, Narog stated he had no domestic customers, and that all 
of his pseudoephedrine product ``went out to Israel.'' Narog was 
informed that these exportations were illegal, and he was provided with 
official DEA notices concerning the dangers of diversion and statutes 
and regulations pertaining to the handling of List I chemicals. In 
addition, evidence obtained by DEA indicates that at least on one 
subsequent occasion, in or around July, 2002, a number of boxes 
containing pseudoephedrine shipped by Seaside to Israel were seized by 
the Israeli police. DEA records indicate Seaside never has been 
authorized by DEA to export pseudoephedrine.
    On April 17, 2000, Narog stated to DEA investigators that Seaside 
had no domestic customers. Yet, on March 21, 2000, over 5,000 bottles 
of pseudoephedrine product manufactured exclusively for Seaside were 
seized from two individuals in California. Both individuals have been 
charged with criminal offenses related to the unlawful possession of 
pseudoephedrine.
    Narog further stated to DEA investigators that Seaside had no 
domestic customers prior to June, 2000. Yet the DEA investigation 
revealed Narog made numerous shipments of pseudoephedrine to an 
individual located in Los Angeles, California. On several occasions in 
March and April, 2000, DEA investigators conducted surveillance at the 
Shurgard Storage Center (Shurgard) where Seaside maintained its DEA 
registered location. The investigators observed Narog and others load 
boxes of pseudoephedrine into U-Haul trucks. All of the pseudoephedrine 
was subsequently diverted to the illicit market.
    On one occasion, DEA surveillance of Shurgard on March 27, 2000, 
showed Narog and a U-Haul truck arriving separately at warehouse unit 
1352. Narog and two other individuals loaded boxes of pseudoephedrine 
into the back of the U-Haul truck. The U-Haul truck was driven to a 
Home Depot parking lot, where it met another truck, and both trucks 
then proceeded to another storage facility, where the pseudoephedrine 
was unloaded into another storage unit. The next day, March 28, 2000, 
other individuals loaded several large, unmarked boxes from the storage 
unit into a vehicle that was eventually followed by surveillance to the 
Orlando International Airport. The boxes were then shipped to Los 
Angeles, California, listed as ``grocery supplies.'' While at the 
airport, an undercover DEA agent posing as an employee of the shipping 
company met with the individual shipping the pseudoephedrine, who 
invited the agent to join him in the criminal trafficking of 
pseudoephedrine. Following continued surveillance, the pseudoephedrine 
was seized and a number of individuals arrested.
    Also on March 28, 2000, DEA investigators observed Narog receive 
three pallets containing 480 boxes of pseudoephedrine at Shurgard. The 
shipment was packaged at 48 bottles per box, with 60 60mg. tablets per 
bottle, for a total of 1,382,000 dosage units of pseudoephedrine. On 
April 4, 2000, Narog and another individual were observed loading the 
480 boxes of pseudoephedrine into a rented U-Haul truck. The truck was 
driven to another self storage facility and the pseudoephedrine was 
unloaded into a storage unit at that location. The next day, April 5, 
2000, DEA investigators observed an individual load the 480 boxes of 
pseudoephedrine into another U-Haul truck, that was observed to deliver 
the pseudoephedrine to the Orlando International Airport. An undercover 
DEA agent, posing as a shipping company employee, spoke with the 
individual who was shipping this load of pseudoephedrine. This 
individual was the same individual who had shipped the March 28, 2000, 
shipment described above. The individual stated to the undercover DEA 
agent that he was worried that an arrest that had occurred in 
California was related to the individual's distribution of 
pseudoephedrine. The individual further stated that ``the FDA, cops and 
FBI'' had gone to his residence in California and seized $20,000. When 
this shipment reached California, surveillance and investigation of the 
recipients resulted in seven arrests and the seizure of 2,200 pounds of 
pseudoephedrine and $25,000.
    In April, 2000, Narog provided DEA investigators with copies of 
purchase records for Seaside for the period from September 1, 1999, to 
March 22, 2000. The records revealed Seaside had received in excess of 
17 million dosage units of 60 mg. pseudoephedrine. Narog had stated to 
DEA investigators that he had no domestic customers prior to

[[Page 12582]]

June, 2000, and Seaside never has been authorized to export List I 
chemicals.
    During a July 13, 2000, interview with DEA investigators, Narog 
stated that the Shurgard unit 1352 at his DEA registered address was 
the only warehouse unit that he or Seaside leased at the time. The 
investigation revealed, however, that Narog also leased 206/207, which 
is a double unit measuring approximately 22 by 33 feet. DEA 
surveillance revealed thousands of pounds of pseudoephedrine being 
placed into 206/207. Narog further stated to investigators that, as the 
sole owner, president, director, and employee of Seaside, he was the 
only individual with access to unit 1352. DEA surveillance revealed, 
however, several different individuals accessing both 1352 and 206/207 
without Narog, and removing pseudoephedrine that eventually was sent to 
California or seized in Florida.
    The DEA investigation revealed that approximately 36,000 gross 
pounds of pseudoephedrine was delivered to Seaside's DEA registered 
address between September 8, 1999, and June 30, 2000.
    On August 1, 2000, a seven count indictment was filed against Narog 
and others, alleging inter alia possession and distribution of the List 
I chemical pseudoephedrine, knowing and having reasonable cause to 
believe that the listed chemical would be used to manufacture 
methamphetamine, in violation of 21 U.S.C. 841(d)(2) and 846.
    At the August 8, 2000, pre-detention hearing for Narog and another 
individual, both Narog and the other individual were denied bail 
because the judge found they both posed flight risks and were dangers 
to the community because of the large volume of drugs involved.
    Therefore, pursuant to 21 U.S.C. 824(d), the Administrator of the 
DEA issued an immediate suspension of Seaside's DEA Certification 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 Seaside'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 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).
    Regarding the first factor, maintenance of effective controls 
against diversion, the Administrator finds substantial evidence in the 
investigative file that Seaside and Narog actively participated in the 
illegal diversion of pseudoephedrine, knowing and having reasonable 
cause to believe it would be used to manufacture methamphetamine. Narog 
admitted to DEA investigators that he exported hundreds of thousands of 
bottles of pseudoephedrine to Israel, without being registered to do 
so. Moreover, Narog was storing thousands of pounds of pseudoephedrine 
in an unregistered storage unit location that he purposely attempted to 
conceal from DEA investigators. Narog stated to investigators that he 
had sole access to the DEA registered storage unit. The investigation 
revealed, however, that multiple individuals would access both Narog's 
DEA registered storage unit as well as his other, undisclosed storage 
unit. The investigation showed pseudoephedrine stored in both units was 
diverted to the illicit manufacture of methamphetamine.
    Regarding the second factor, compliance with applicable Federal, 
State, and local law, the investigative file in this matter reveals 
that Seaside significantly violated applicable Federal law in the 
following primary instances. Narog and Seaside exported hundreds of 
thousands of bottles of List I chemicals to Israel without being 
registered to do so, in violation of 21 U.S.C. 843(a)(9); 957(a)(2); 
and 960(a)(1) and 21 CFR 1309.22.
    In addition, although Narog stated to DEA investigators during an 
April 17, 2000, interview that he had no domestic customers, over 5,000 
bottles of a List I chemical pseudoephedrine product manufactured 
exclusively for Seaside were seized on March 21, 2000, from two 
individuals in California, who were subsequently charged with criminal 
offenses relating to the unlawful possession of pseudoephedrine. DEA 
surveillance also revealed Narog and others were shipping large 
quantities of pseudoephedrine to individuals located in California, who 
were diverting the chemical to the illicit manufacture of 
methamphetamine. The Administrator finds this substantial evidence that 
Narog and Seaside violated 21 U.S.C. 841(d)(2) (since redesignated 
841(c)(2)).
    The investigation further revealed Narog was concealing thousands 
of pounds of pseudoephedrine product in an unregistered storage unit, 
and this pseudoephedrine was being directly diverted to the manufacture 
of methamphetamine, in violation of 21 CFR 1309.23.
    Finally, Narog was charged in an August 1, 2000, seven count 
indictment, each count charging Narog with violations of 21 U.S.C. 
841(d)(2) (since redesignated as 841(c)(2)) relating to the 
distribution of pseudoephedrine knowing or having reasonable cause to 
believe the chemical would be used to illicitly 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 Seaside or Narog 
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 Narog failed to maintain adequate 
controls in 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 substantial 
evidence in the investigative file that Narog cannot be trusted with 
the responsibilities of a DEA registrant. Narog stated during the July 
13, 2000, interview with DEA investigators that the Shurgard unit

[[Page 12583]]

1352 at his DEA registered address was the only warehouse unit that he 
or Seaside leased at the time. The investigation revealed, however, 
that Narog also leased an additional storage unit 206/207. Narog 
intentionally concealed the existence of this additional storage until 
from DEA investigators. DEA surveillance revealed thousands of pounds 
of pseudoethedrine being placed into 206/207. Narog further stated to 
investigators that, as the sole owner, president, director, and 
employee of Seaside, he was the only individual with access to unit 
1352. DEA surveillance revealed, however, several different individuals 
accessing both 1352 and 206/207 without Narog, and removing 
pseudoephedrine that eventually was diverted to California or seized in 
Florida.
    The Administrator finds this lack of candor, taken together with 
Seaside's and Narog's demonstrated cavalier disregard of the statutory 
law and regulations concerning the distribution, handling, and 
exportation requirements pertaining to List I chemicals, makes 
questionable Seaside's and Narog'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 Fed. Reg. 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 1.014, hereby order that DEA 
Certificate of Registration 004422SMY, previously issued to Seaside 
Pharmaceutical Company, be, and it hereby is, revoked; and any pending 
applications for renewal or modification of said registration, be, and 
hereby are, denied. Furthermore, the application of Seaside 
Pharmaceutical Company dated March 28, 2000, for registration as an 
exporter of List I chemicals is also hereby denied.
    The order is effective April 18, 2002.

    Dated: March 11, 2002.
Asa Hutchinson,
Administrator.
[FR Doc. 02-6569 Filed 3-18-02; 8:45 am]
BILLING CODE 4410-09-M