[Federal Register Volume 67, Number 53 (Tuesday, March 19, 2002)]
[Notices]
[Pages 12576-12579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6572]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Aqui Enterprises; Denial of Application

    On or about November 6, 2000, the Deputy Assistant Administrator, 
Office of Diversion Control, Drug Enforcement Administration (DEA), 
issued an Order to Show Cause (OTSC) by certified mail to Socorro 
Keenan, Aqui Enterprises (Aqui), of Las Vegas, Nevada, notifying her of 
an opportunity to show cause as to why the DEA should not deny her 
application, dated July 22, 1997, for a DEA Certificate of Registration 
as a distributor of the List I chemicals ephedrine and pseudoephedrine, 
and also deny her request for modification of her application, dated 
September 25, 1997, and also revoke her exemption to distribute such 
List I chemicals, pursuant to 21 U.S.C. 823(h), as being inconsistent 
with the public interest. The order also notified Aqui that, should no 
request for hearing be filed within 30 days, the right to a hearing 
would be waived.
    The OTSC was received by Aqui on or about November 21, 2000, and 
DEA received on December 12, 2000, a written response with attachments 
from Ms. Keenan dated November 21, 2000. This response contained 
various objections to the allegations set forth in the OTSC. The 
response neither requested nor waived Aqui's right to a hearing.
    By letter dated December 19, 2000, an Administrative Law Judge 
(ALJ) sent a letter to Aqui requesting that it clarify whether or not 
it was exercising its right to a hearing, and granting until January 
14, 2001, to respond.
    On January 24, 2001, the ALJ issued an ``Order Terminating 
Proceedings'' indicating that Aqui had not responded to the December 
19, 2000, letter and referring the matter to the Administrator for 
final decision without a hearing.
    Therefore, the Administrator of the DEA, finding that no response 
having been received to the ALJ's December 19, 2000, letter, concludes 
that Aqui has waived its right to a hearing. After

[[Page 12577]]

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. Aqui's letter and 
attachments received December 12, 2000, will be considered as ``a 
written statement regarding [Aqui's] position on the matter of fact and 
law . . . and shall be considered in light of the lack of opportunity 
for cross-examination in determining the weight to be attached to 
matters of fact asserted therein.'' 21 CFR 1316.49.
    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 Administrator finds that during a preregistration inspection 
conducted by DEA investigators September 25, 1997, the investigators 
discovered that Aqui's proposed registered address was a mail box. When 
the investigators informed Ms. Socorro Keenan (Ms. Keenan), sole owner 
and operator of Aqui, that the proposed registered address would be 
insufficient to comply with DEA security requirements, Keenan submitted 
a written modification dated the same day requesting to change the 
proposed registered address on Aqui's application. An inspection of the 
modified proposed registered location by DEA investigators revealed 
that this location was a small office with no room for storage of 
listed chemical products and no adequate security as required by 21 CFR 
1309.71. Ms. Keenan stated to investigators that she did not feel she 
needed secure storage, because she planned to distribute the List I 
chemical products immediately upon receipt.
    During the September 25, 1997, preregistration inspection, DEA 
investigators informed Ms. Keenan via both written and oral notice that 
pseudoephedrine is often diverted to the illicit manufacture of 
methamphetamine.
    On or about October 10, 1997, Aqui sold approximately 60 cases of 
pseudoephedrine to an individual who paid cash and who took delivery of 
the chemical in a rented U-Haul truck. In addition, Aqui failed to keep 
required records of this regulated transaction.
    On or about November 5, 1997, Aqui sold approximately 20 cases of 
pseudoephedrine to an individual who paid cash and who took delivery of 
the chemical in a rented U-Haul truck. Aqui failed to keep required 
records of this regulated transaction.
    On or about November 11, 1997, Aqui purchased 20 cases of 
pseudoephedrine, and stored the chemical at an unregistered location 
with inadequate security.
    On or about November 12, 1997, Aqui again purchased 20 cases of 
pseudoephedrine and attempted to store the chemical at an unregistered 
location without adequate security.
    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, two, 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 at the modified proposed 
registered location for the storage of listed chemical products, in 
that Aqui had no facility for storage of List I chemical products, and 
no security system. During the September 25, 1997, pre-registration 
inspection, in response to DEA investigator concerns about security, 
Ms. Keenan stated she had no need for storage, since she would 
distribute the chemicals immediately upon receipt. The Administrator 
finds this dubious proposition unacceptable, for obvious security 
concerns. Regardless of the feasibility of this scheme, Ms. Keenan had 
previously just told DEA investigators that Aqui had no customers.
    On November 12, 1997, DEA investigators seized a total of 40 cases 
of pseudoephedrine from Ms. Keenan at a previously undisclosed storage 
unit in Las Vegas. She had already placed 20 cases of pseudoephedrine 
into the storage unit, and was in the act of unloading an additional 20 
cases when the seizure occurred. The storage unit was not a DEA 
registered location, nor was it listed on Aqui's application. Moreover, 
the storage unit was not a secure location for the storage of List I 
chemicals. The DEA investigators noted that Ms. Keenan used counter-
surveillance driving techniques when delivering the additional 20 cases 
of pseudoephedrine to the storage unit. When asked by DEA investigators 
what she intended to do with the 40 cases of pseudoephedrine, Ms. 
Keenan stated that, while she had no customers at the time, she was 
``building a supply.'' In response to further questioning, however, Ms. 
Keenan admitted the money for the purchase of the pseudoephedrine was 
provided by an individual to whom she had already sold at least 80 
cases of pseudoephedrine, who paid cash and picked up the 
pseudoephedrine in a rented U-Haul truck. Ms. Keenan never properly 
verified the identity of this individual, but the DEA investigation 
revealed that the business address given by this individual was nothing 
but a mail drop. Ms. Keenan admitted she had never visited the 
purported business. DEA's investigation further revealed the address 
was the same as that of another business involved in a separate DEA 
investigation resulting in the seizure of 287 cases pseudoephedrine. 
DEA

[[Page 12578]]

investigators also discovered Aqui had an order pending with a chemical 
distributor for an additional 60 cases of pseudoephedrine.
    Ms. Keenan stated to investigators that she met this individual at 
a trade show in August, 1997, and at that same show, she was approached 
by a friend of this individual, who gave her a cashier's check for 
$7,000 for a future purchase of pseudoephedrine.
    Information in the investigative file reveals that Aqui purchased 
at least 160 cases of pseudoephedrine in an approximately 14 week 
period, while Ms. Keenan state to DEA investigators on several separate 
occasions that Aqui had no customers. The DEA investigation revealed 
Aqui failed to keep required records of these regulated transactions.
    Based on this evidence, the Administrator finds Aqui and Ms. Keenan 
failed to maintain and exercise effective controls against the 
diversion of pseudoephedrine.
    Regarding factor two, compliance by the applicant with applicable 
Federal, State, and local law, the Administrator finds Aqui and Ms. 
Keenan violated applicable Federal law in the following primary 
instances.
    The DEA investigation revealed Aqui and Ms. Keenan failed to keep 
required records of regulated transactions, in violation of 21 U.S.C. 
830(a) and 21 CFR 1310.03(a). The investigation showed that on at least 
eight occasions, Aqui had cumulatively purchased at least 160 cases of 
60 mg. 60 count bottled pseudoephedrine tablets in twenty case 
increments between July 30 and November 12, 1997. One case contains 144 
bottles for a dosage unit total of 8640 per case and 172,800 per 20 
case order. Each purchase was a regulated transaction, for which Aqui 
and Ms. Keenan failed to keep required records.
    Aqui and Ms. Keenan also violated 21 CFR 1310.07 by failing to 
properly identify other parties to regulated transactions. Ms. Keenan 
stated to DEA investigators she had sold 80 cases of pseudoephedrine to 
an individual she met at a trade show. She stated that he approached 
her and asked if she could obtain pseudoephedrine for him. He had no 
apparent interest in any other of the usual convenience store products. 
As previously set forth in the discussion of the first factor, above, 
this individual paid cash for his purchases and picked up the 
pseudoephedrine in a rented U-Haul truck. The local business address 
provided by this individual was only a mail drop, and, as set forth 
above, another purported business using this same address was involved 
in a DEA investigation that culminated in the seizure of 287 cases of 
pseudoephedrine. Ms. Keenan admitted to investigators that she had 
never visited this purported business. In addition, at the same trade 
show a friend of this individual gave Ms. Keenan a $7,000 cashier's 
check for a future purchase of pseudoephedrine.
    The Administrator finds the circumstances surrounding the 
distributions set forth above to be extremely suspicious, and therefore 
concludes that Ms. Keenan and Aqui also violated 21 U.S.C. 830(b)(1)(A) 
and 21 CFR 1310.05(a)(1) by failing to report a suspicious method of 
payment and delivery.
    The Administrator finds also that Aqui and Ms. Keenan violated 21 
U.S.C. 841(d)(2) (since redesignated 841(c)(2)) in that she distributed 
a listed chemical having reasonable cause to believe that the chemical 
would be used to manufacture a controlled substance, to wit, 
methamphetamine. Information in the investigative file reveals that, on 
at least three separate occasions, Ms. Keenan received a written 
official DEA notice warning of the dangers of diversion of 
pseudoephedrine to the illicit manufacture of methamphetamine. The 
first notice was provided at the time of the pre-registration 
inspection, September 25, 1997. At this time, DEA investigators also 
provided oral notice of the dangers of diversion, as well as a 
discussion of all recordkeeping and reporting requirements pertaining 
to listed chemical handlers, and Ms. Keenan stated at that time that 
she understood. A second written notice was provided by certified mail 
October 30, 1997. A third notice was provided at the time of the 
November 12, 1997, seizure of the 40 cases from the unregistered, 
undisclosed storage unit. The Administrator finds the suspicious 
circumstances concerning Aqui's distribution of pseudoephedrine set 
forth above provided Ms. Keenan reasonable cause to believe that the 
chemicals were being diverted to the illicit manufacture of 
methamphetamine.
    The Administrator also finds that Aqui and Ms. Keenan violated 21 
CFR 139.23 by storing pseudoephedrine in an unregistered location (and 
which location was not set forth in her application). On November 12, 
1997, DEA investigators seized 40 cases of pseudoephedrine from a 
previously undisclosed storage unit, as set forth in factor one, above.
    Regarding factor four, the applicant's past experience in the 
distribution of chemicals, the DEA investigation revealed that Aqui and 
Ms. Keenan have violated applicable Federal law and regulations 
relating to the handling and distribution of listed chemicals, as set 
forth in factor two, above.
    Regarding factor five, other factors relevant to and consistent 
with the public safety, the DEA investigators charged with 
investigating Aqui's application reported that Ms. Keenan was not 
cooperative in providing necessary information to properly investigate 
the application. For instance, despite repeated requests by the 
investigators, Ms. Keenan failed to provide customer and supplier 
lists. When she finally provided a customer list (in response to the 
November 12, 1997 seizure, in the opinion of the DEA investigators), a 
telephone call to one or two customers per every page of the 69-page 
list revealed that none of those called were in fact customers of Aqui, 
or had ever heard of Aqui or Ms. Keenan. Ms. Keenan also refused to 
provide the quantities of List I chemical products, she previously has 
purchased, and further refused to provide any information concerning 
the recipients of these chemicals.
    Additionally, the Administrator finds substantial evidence that Ms. 
Keenan was not being candid with investigators concerning her handling 
and distribution of pseudoephedrine. On November 12, 1997, 40 cases of 
pseudoephedrine were seized from Ms. Keenan by DEA from a previously 
undisclosed storage unit. DEA investigators noted that Ms. Keenan used 
counter-surveillance driving techniques when delivering additional 
pseudoephedrine to the storage unit. At the time of this seizure, she 
repeated her earlier statements that she had no customers, and was just 
``building a supply.'' Yet, upon further questioning, Ms. Keenan 
admitted she already had distributed 80 cases of pseudoephedrine to the 
individual she met at the trade show, as set forth above. As previously 
stated, the Administrator finds the circumstances of these 
distributions extremely suspicious. Additionally, also at the time of 
this seizure, DEA investigators noted that the storage unit contained 
only pseudoephedrine and old furniture. Since Ms. Keenan described Aqui 
as a supplier of novelty items to convenience stores, the investigators 
queried Ms. Keenan regarding the whereabouts of her stock of 
convenience store items. Ms. Keenan stated that she had some samples, 
but had given them away. The Administrator finds Ms. Keenan's 
explanation suspicious, and furthermore finds scant evidence in the 
investigative file that Aqui did in fact supply convenience stores with 
novelty items.

[[Page 12579]]

Therefore, the Administrator finds substantial evidence in the 
investigative file that Ms. Keenan exhibited a lack of candor regarding 
her handling and distribution of the List I chemical pseudoephedrine. 
The Administrator finds this lack of candor, taken together with Aqui's 
and Ms. Keenan's demonstrated disregard of the statutory law and 
regulations concerning the distribution, reporting, and recordkeeping 
requirements of List I chemicals, makes questionable Aqui's and Ms. 
Keenan'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).
    The Administrator further finds that Ms. Keenan's letter dated 
November 21, 2000, in response to the OTSC contained only unsupported 
allegations, and pursuant to 21 CFR 1309.53(b), the Administrator 
concludes that this evidence is entitled to little, if any, weight. The 
gist of the letter appeared to concern the November 12, 1997, seizure 
of the 40 cases of pseudoephedrine. Ms. Keenan requested DEA ``to 
return the cash value in today's market for what was taken from the 
secured/locked location on November 12, 1997.'' She then referenced two 
DEA case and seizure numbers. Documentation in the investigative file 
indicates that the seized pseudoephedrine is undergoing forfeiture 
proceedings pursuant to 21 U.S.C. 881. The Administrator finds that the 
forfeiture proceedings will allow Ms. Keenan sufficient due process to 
assert whatever legitimate interest she may have in the seized 
pseudoephedrine, and furthermore, that such a determination is beyond 
the scope of this Final Order.
    Therefore, for the above-stated reasons, the Administrator 
concludes that it would be inconsistent with the public interest to 
grant the application of Aqui.
    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 and also the request for 
modification of the application dated September 25, 1997, submitted by 
Aqui Enterprises, be denied; and furthermore that the exemption of Aqui 
Enterprises to distribute List I chemicals is hereby revoked. This 
order is effective April 18, 2002.

    Dated: March 11, 2002.
Asa Hutchinson,
Administrator.
[FR Doc. 02-6572 Filed 3-18-02; 8:45 am]
BILLING CODE 4410-09-M