[Federal Register Volume 69, Number 48 (Thursday, March 11, 2004)]
[Notices]
[Pages 11654-11655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5478]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Direct Wholesale Denial of Application

    On February 25, 2003, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to Direct Wholesale proposing to deny its 
application executed on July 27, 2001, for DEA Certificate of 
Registration as a distributor of list I chemicals. The Order to Show 
Cause alleged that granting the application of Direct Wholesale would 
be inconsistent with the public interest as that term is used in 21 
U.S.C. 823(h) and 824(a). The Order to Show Cause also notified Direct 
Wholesale that should no request for a hearing be filed within 30 days, 
its hearing right would be deemed waived.
    According to the DEA investigative file, the Order to Show Cause 
was sent by certified mail to Direct Wholesale at its proposed 
registered location in Jacksonville, Florida and was received on March 
7, 2003. DEA has not received a request for hearing or any other reply 
from Direct Wholesale or anyone purporting to represent the company in 
this matter.
    Therefore, the Acting Deputy Administrator of DEA, finding that (1) 
thirty days having passed since the delivery of the Order to Show Cause 
to the applicant's last known address, and (2) no request for hearing 
having been received, concludes that Direct Wholesale has waived its 
hearing right. See Aqui Enterprises, 67 FR 12576 (2002). After 
considering relevant material from the investigative file in this 
matter, the Acting Deputy Administrator now enters her final order 
without a hearing pursuant to 21 CFR 1309.53(c) and (d) and 1316.67 
(2003). The Acting Deputy Administrator finds as follows:
    List I chemicals are those 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 used to illegally manufacture methamphetamine, a 
Schedule II controlled substance. Phenylpropanolamine, also a list I 
chemical, is presently a legitimately manufactured and distributed 
product used to provide relief of the symptoms resulting from 
irritation of the sinus, nasal and upper respiratory tract tissues, and 
is also used for weight control. Phenylpropanolamine is also a 
precursor chemical used in the illicit manufacture of methamphetamine 
and amphetamine. Methamphetamine is an extremely potent central nervous 
system stimulant, and its abuse is an ongoing public health concern in 
the United States.
    The Acting Deputy Administrator's review of the investigative file 
reveals that DEA received an application dated July 27, 2001, from 
Direct Wholesale located in Jacksonville, Florida. The application was 
submitted on behalf of Direct Wholesale by its owner, Ronald Dean Petts 
(Mr. Petts). Direct Wholesale sought DEA registration as a distributor 
of the list I chemicals ephedrine, pseudoephedrine, and 
phenylpropanolamine. There is no evidence in the investigative file 
that Direct Wholesale has sought to modify its pending application in 
any respect.
    Following receipt of the above application, on December 5, 2001, 
DEA diversion investigators conducted an on-site pre-registration 
inspection at Direct Wholesale's proposed registered location. Upon 
arrival, DEA investigators furnished and reviewed with Mr. Petts 
procedures for warning notices as they relate to various listed 
chemicals and procedures employed in the illicit manufacture of 
methamphetamine. DEA investigators also reviewed suspicious orders and 
recordkeeping procedures with Mr. Petts. In addition, Mr. Petts was 
furnished with a copy of the DEA Chemical Handler's Manual as well as 
relevant portions of the Methamphetamine Control Act.
    DEA's investigation revealed that Direct Wholesale is a sole 
proprietorship, owned and operated by Mr. Petts. The firm is currently 
operated out of Mr. Petts' residence and has been in operation since 
March or April of 2001. Mr. Petts informed investigators that he sells 
cigars, lighters, and general merchandise. When asked by investigators 
why he was applying for registration to handle listed chemical 
products, Mr. Petts stated that many of his customers were expressing 
interest in buying these products from him.
    DEA's investigation further revealed that aside from Mr. Petts, 
there are no

[[Page 11655]]

other employees of Direct Wholesale. Prior to opening his business, Mr. 
Petts sold food and clothing items, and he also operated a courier 
service. Mr. Petts informed DEA investigators that he has no prior 
experience with over-the-counter drug products, however, he estimated 
that the sale of list I chemical products would account for 
approximately five percent of his total sales. Mr. Petts further 
disclosed that he plans to sell cold and sinus products to convenience 
stores.
    Mr. Petts was also asked by investigators to submit preliminary 
information regarding customers and suppliers of goods to Direct 
Wholesale. Mr. Petts supplied investigators the names of four listed 
chemical suppliers, as well as a list of thirty-four retail businesses. 
The customer list was comprised primarily of convenience stores. The 
customer list submitted by Mr. Petts was later compared to a customer 
list submitted by NTS, a separate firm that sought DEA registration to 
distribute listed chemical. The comparison showed that at least 
thirteen of NTS' customers were also listed as customers for Direct 
Wholesale. A DEA inspection of a customer list for a second retailer 
revealed at least nine entities that were also listed as customers of 
Direct Wholesale.
    DEA's investigation further revealed that Direct Wholesale 
possesses a Florida occupational license for Mr. Petts' residence, and 
the firm is also registered with the Florida Department of Revenue to 
collect sales tax. However, according to Mr. Petts, his home is not 
zoned for business.
    Pursuant to 21 U.S.C. 823(h), the Acting Deputy Administrator may 
deny an application for Certificate of Registration if she determines 
that granting the registration would be inconsistent with the public 
interest as determined under that section. Section 823(h) requires the 
following factors be 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.
    As with 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 Acting Deputy Administrator 
may rely on any one or combination of factors, and may give each factor 
the weight she deems appropriate in determining whether a registration 
should be revoked or an application for registration denied. See, e.g. 
Energy Outlet, 64 FR 14269 (1999). See also Henry J. Schwartz, Jr., 
M.D., 54 FR 16422 (1989).
    The Acting Deputy Administrator finds factors two, four and five 
relevant to Direct Wholesale's pending registration application.
    With regard to factor two, compliance with applicable Federal, 
State, and local law, the Acting Deputy Administrator notes that 
Florida state and county law requires zoning approval for the operation 
of a particular business. Mr. Petts informed DEA investigators that 
Direct Wholesale was not zoned for business. The failure to obtain a 
proper zoning permit for business purposes has been cited under factor 
two as a basis for the denial of an application for DEA registration to 
distribute list I chemicals. See Daniel E. Epps, Jr., 67 FR 9987 
(2002).
    With respect to factor four, the applicant's past experience in the 
distribution of chemicals, the Acting Deputy Administrator finds this 
factor relevant to Mr. Petts' lack of experience in the handling of 
list I chemical products. In prior DEA decisions, the lack of 
experience in the handling list I chemicals was a factor in a 
determination to deny a pending application for DEA registration. See, 
Matthew D. Graham, 67 FR 10229 (2002); Xtreme Enterprises, Inc., 67 FR 
76195 (2002). Therefore, this factor similarly weighs against the 
granting of Direct Wholesale's pending application.
    With respect to factor five, other factors relevant to and 
consistent with the public safety, the Acting Deputy Administrator 
finds this factor relevant to Direct Wholesale's proposal to distribute 
listed chemical products primarily to convenience stores. While there 
are no specific prohibitions under the Controlled Substance Act 
regarding the sale of listed chemical products to these entities, DEA 
has nevertheless found that business establishments such as gas 
stations and convenience stores constitute sources for the diversion of 
listed chemical products. See, e.g., Sinbad Distributing, 67 FR 10232, 
10233 (2002); K.V.M. Enterprises, 67 FR 70968 (2002) (denial of 
application based in part upon information developed by DEA that the 
applicant proposed to sell listed chemicals to gas stations, and the 
fact that these establishments in turn have sold listed chemical 
products to individuals engaged in the illicit manufacture of 
methamphetamine); Xtreme Enterprises, Inc., supra.
    Factor five is also relevant to Direct Wholesale's proposal to 
distribute to potential customers that are apparently purchasing list I 
chemical products from other suppliers. The Acting Deputy Administrator 
also finds curious the specific requests for listed chemical products 
by Direct Wholesale's customers. DEA has previously found similar 
conduct by potential customers relevant under factor five. See Shop It 
For Profit, 69 FR 1311, 1313 (2004).
    As noted above, there is no evidence in the investigative file that 
Direct Wholesale ever sought to modify its pending application with 
regard to listed chemical products it seeks to distribute. Among the 
listed chemical products that the firm seeks to distribute is 
phenylpropanolamine. In light of this development, the Acting Deputy 
Administrator also finds factor five relevant to Direct Wholesale's 
request to distribute phenylpropanolamine, and the apparent lack of 
safety associated with the use of that product. DEA has previously 
determined that an applicant's request to distribute 
phenylpropanolamine constitutes a ground under factor five for denial 
of an application for registration. Shani Distributors, 68 FR 62324 
(2003). Based on the foregoing, the Acting Deputy Administrator 
concludes that granting the pending application of Direct Wholesale 
would be inconsistent with the public interest.
    Accordingly, the Acting Deputy Administrator of the Drug 
Enforcement Administration, pursuant to the authority vested in her by 
21 U.S.C. 823 and 28 CFR 0.100(b) and 0.104, hereby orders that the 
pending application for DEA Certificate of Registration, previously 
submitted by Direct Wholesale be, and it hereby is, denied. This order 
is effective April 12, 2004.

    Dated: February 20, 2004.
Michele M. Leonhart,
Acting Deputy Administrator.
[FR Doc. 04-5478 Filed 3-10-04; 8:45 am]
BILLING CODE 4410-09-M