[Federal Register Volume 69, Number 160 (Thursday, August 19, 2004)]
[Notices]
[Pages 51475-51477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18969]


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

DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 03-15]


K & Z Enterprises, Inc.; Denial of Application

    On December 13, 2002, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to K & Z Enterprises, Incorporated, d/b/a/ Georgia 
Wholesale (Respondent), proposing to deny its application executed on 
June 15, 2001, for DEA Certificate of Registration as a distributor of 
list I chemicals. The Order to Show Cause alleged that granting the 
application of the Respondent 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 was delivered to the Respondent by 
certified mail, and on January 22, 2003, the Respondent, through its 
president Kamar Hamrani (Mr. Hamrani), submitted a written response 
essentially addressing the allegation in the Order to Show Cause. 
However, there was no mention of any request for hearing in the 
Respondent's letter.
    On February 10, 2003, the presiding Administrative Law Judge Gail 
A. Randall (Judge Randall) issued an Order for Prehearing Statements, 
directing the respective parties to file pre-hearing statements. 
However, in lieu of filing a pre-hearing statement, counsel for DEA 
filed Government's Request for Finding and Motion for Summary 
Disposition on February 12, 2003. The Government argued, inter alia, 
that there was no language in any of the Respondent's written 
submissions where a hearing was requested, as required by 21 CFR 
1309.53. The Government therefore requested that Judge Randall make a 
finding that the Respondent had waived its right to a hearing and the 
contents of the Respondent's written submissions

[[Page 51476]]

be submitted to the Deputy Administrator for determination as to 
whether or not a registration should be issued.
    By Order dated February 19, 2003, Judge Randall afforded the 
Respondent an opportunity to respond to the Government's motion. The 
Respondent was directed to file its response by March 12, 2003, 
however, no such response was ever submitted. Judge Randall found that 
a hearing had not been requested in this proceeding and on March 18, 
2003, issued an Order Terminating Proceedings. Following the 
termination of proceedings, Judge Randall transmitted the matter to the 
Deputy Administrator for issuance of a final order.
    In light of the above, the Deputy Administrator similarly finds 
that the Respondent has waived its hearing right. Aqui Enterprises, 67 
FR 12576 (2002). After considering relevant material from the 
investigative file in this matter, the Deputy Administrator now enters 
her final order without a hearing pursuant to 21 CFR 1309.53(c) and (d) 
and 1316.67 (2003).
    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 commonly 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 Deputy Administrator's review of the investigative file reveals 
the DEA received an application dated June 15, 2001, from the 
Respondent. The Respondent's address of record is a location in 
Doraville, Georgia. The application was submitted on behalf of the 
Respondent by Mr. Hamrani. The Respondent initially sought DEA 
registration as a distributor of the list I chemicals ephedrine, 
pseudoephedrine, and phenylpropanolamine. However, Mr. Hamrani 
subsequently informed DEA in writing of his desire to withdraw 
phenylpropanolamine from his company's registration application.
    On October 27, 2001, DEA diversion investigators conducted a pre-
registration inspection of the Respondent's premises, where they met 
with Mr. Hamrani. During the inspection, investigators advised Mr. 
Hamrani of regulatory requirements and problems surrounding the 
diversion of list I chemicals. The investigators also reviewed 
security, recordkeeping, and distribution procedures with Mr. Hamrani 
and provided him with appropriate materials regarding DEA requirements 
for handlers of listed chemicals.
    DEA's inspection revealed that Respondent had become incorporated 
on March 9, 2001. Mr. Hamrani informed DEA investors that his previous 
business experience was as a manager/owner of gasoline stations with 
attached convenience stores. Respondent's primary business consists of 
wholesale distribution of merchandise to retail convenience stores and 
jobbers, with a product line that included soda and juice drinks, 
automotive oil, and various snacks. Mr. Hamrani told DEA investigators 
of his desire to sell to his customers two boxes of 24 bottles and two 
boxes of 24 blister paks of ``Heads-Up,'' ``Max Brand,'' and ``Mini-
Two-Way'' ephedrine products, as well as nationally recognized 
pseudoephedrine brand products. Mr. Hamrani estimated that the sale of 
list I chemical products by his firm would constitute less than one 
percent of total sales. DEA also requested, and Mr. Hamrani provided, a 
list of Respondent's proposed customers.
    From March through June 2002, DEA investigators conducted 
verifications of eighteen establishments from the list of prospective 
customers provided by the Respondent. These customers were located in 
the vicinity of Atlanta and Lawrenceville, Georgia and were comprised 
primarily of convenience stores and gas station's. DEA's investigation 
revealed that four of the purported customers did not exist. Two 
retailers refused to cooperate with DEA's investigation and another 
purported customer did not sell over-the-counter products of any kind. 
Several of the gas station's customers informed DEA personnel that 
while they purchased beverage and other non-drug products from the 
Respondent, they had no agreement to purchase over-the-counter 
medication products from Respondent.
    Pursuant to 21 U.S.C. 823(h), the 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 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 Fed. Reg. 16422 (1989).
    The Deputy Administrator finds factors four and five relevant to 
the Respondent's pending registration application.
    With respect to factor four, the applicant's past experience in the 
distribution of chemicals, the Deputy Administrator finds this factor 
relevant to Mr. Hamrani's apparent lack of experience in the handling 
of list I chemical products. The DEA investigative file shows that the 
Respondent is a retailer of general merchandise and before that, Mr. 
Hamrani operated gasoline stations with attached convenience stores. 
Mr. Hamrani's past history as an entrepreneur suggests that he has not 
had any experience in handling listed chemical products. In prior DEA 
decisions, the lack of experience in the handling of 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 the Respondent's pending application.
    With respect to factor five, other factors relevant to and 
consistent with the public safety, the Deputy Administrator finds this 
factor relevant to the Respondent's proposal to distribute listed 
chemical products primarily to convenience stores and gas

[[Page 51477]]

stations. 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.
    The Deputy Administrator also finds factor five relevant to the 
results of DEA's verification of the Respondent's proposed customers. 
Among the Respondent's potential customers were four establishments no 
longer in existence; two that refused to cooperate with DEA 
investigator; one that did not sell over-the-counter products of any 
kind; and several that had no standing agreement to purchase any over-
the-counter medication products from Respondent. DEA has previously 
found that incomplete customer information, or questionable conduct by 
customers are grounds to deny an application to distribute list I 
chemicals. Island Wholesale, 68 FR 17406 (2003); Shani Distributors, 68 
FR 62324 (2003).
    Accordingly, the 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 K & Z Enterprises, Incorporated be, and it hereby is, denied. This 
order is effective September 20, 2004.

    Dated: July 27, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-18969 Filed 8-18-04; 8:45 am]
BILLING CODE 4410-09-M