[Federal Register Volume 69, Number 160 (Thursday, August 19, 2004)]
[Notices]
[Pages 51480-51481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18971]



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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


John E. McCrae d/b/a J & H Wholesale; Denial of Application

    On December 8, 2003, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to John E. McCrae d/b/a J & H (J & H) prosing to 
deny its application executed on April 29, 2003, for DEA Certificate of 
Registration as a distributor of list I chemicals. The Order to Show 
Cause alleged that granting the application of J & H 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 J & H 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 J & H at its address of record in 
Middleburg, Florida and was received on behalf of the firm on December 
16, 2003. Nevertheless, DEA has not received a request for hearing or 
any other reply from J & H, or anyone purporting to represent the 
company in this matter.
    Therefore, the Deputy Administrator of DEA, finding that (1) thirty 
days having passed since the delivery of the Order to Show Cause to the 
applicant's address of record, and (2) not request for hearing having 
been received, concludes that J & H has waived its hearing right. See 
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). The 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). Psedoephedrine 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 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 
that by application dated April 29, 2003, J & H sought DEA registration 
as a distributor of the list I chemicals ephedrine, pseudoephedrine, 
and phenylpropanolamine. The application was submitted on behalf of J & 
H by its owner, John E. McCrae (Mr. McRae). There is no evidence in the 
investigative file that J & H has sought to modify its pending 
application in any respect.
    According to the investigative file, on July 11, 2003, a DEA 
diversion investigator contacted Mr. McRae regarding J & H's pending 
application. It is not clear from the investigative file whether the 
July 11 contact was made in person or over the telephone. The diversion 
investigator advised Mr. McRae that DEA would need to review a list of 
his company's potential customers, products, and suppliers of list I 
chemicals. Mr. McRae was informed that list I chemicals are regulated 
by DEA because they have been used in the illicit manufacture of 
methamphetamine and other controlled substances.
    Mr. McRae at one point inquired with DEA investigators about the 
timing of any approval of his company's pending registration 
application. He stated that he had been approached by customers seeking 
to purchase list I chemical products from him, and further added that 
he could ``double [his] sales tomorrow'' if his application was 
approved. DEA learned that Mr. McRae has no prior experience handling 
over-the-counter medications, including list I chemical products.
    On August 6, 2003, two DEA diversion investigators conducted an on-
site pre-registration inspection at J & H's proposed registered 
location. The location requested by J & H as a proposed DEA registered 
address was Mr. McRae's home residence. DEA's inspection revealed that 
Mr. McRae sells approximately 150 novelty and general merchandise items 
to customers located in various Florida cities, including Jacksonville 
and Gainsville. Mr. McRae estimated that the sale of list I chemical 
products would constitute approximately ten percent or less of his 
company's total sales.
    Mr. McRae then provided to DEA personnel a list of customers to 
whom listed chemical products would be sold. The customer list was 
comprised primarily of convenience and beverage stores, as well as gas 
stations. Mr. McRae stated that he began selling novelty items to 
convenience stores on a full time basis in March 2003. When asked about 
the manner in which he identified his customers, Mr. McRae explained 
that he makes site visits to his customers' stores and knows them from 
prior transactions. He further stated that on most occasions, he deals 
with the owner of a particular establishment and only accepts cash 
payment, which usually comes directly from the customers' cash 
register. Only occasionally has Mr. McRae accepted a business check in 
payment for a sale and he never accepts personal checks.
    As noted above, J & H is located at Mr. McRae's residential home. 
With respect to security of the premises, DEA investigators found that 
the home had a residential alarm system. DEA's inspection further 
revealed that the only security devices were contact switches on the 
home's front and patio doors and there was no motion detector on the 
premises because of the family canine.
    With respect to storage of listed chemical products, DEA personnel 
were informed that these products would be stored in a plastic tote bin 
maintained in the garage of the residence. When DEA investigators 
arrived at the residence, they noted that an exterior garage door was 
open and a young male friend of Mr. McRae's son entered the home 
through the interior garage door. Family members and the visitor were 
later seen using the garage's interior door to depart the home.
    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

[[Page 51481]]

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 Deputy Administrator finds factors one, four and five relevant 
to J & H's pending registration application.
    With regard to factor one, maintenance of effective controls 
against diversion of listed chemicals into other than legitimate 
channels, the DEA pre-registration inspection documented inadequate 
security at the proposed registered location of J & H. Mr. McRae 
proposes to store listed chemical products in the garage of his 
residential location. However, DEA investigators documented a 
residential alarm system in which the only security devices are contact 
switches on the front and patio doors of the residence. Additionally, 
the garage where listed chemicals are to be stored has an exterior 
overhead door which appears to be easily accessed, and the interior 
garage door appears to be a common passage way into and out of the 
residential home for Mr. McRae's family members and their friends.
    With regard to factor two, compliance with applicable Federal, 
State, and local law, there is no evidence before the Deputy 
Administrator that J & H has failed to comply in any respect with such 
laws.
    With respect to factor four, the applicant's past experience in the 
distribution of chemicals, the Deputy Administrator finds this factor 
relevant to Mr. McRae's lack of experience in handling of list I 
chemical products. In prior DEA decisions to deny pending applications 
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 J & H'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 J & H's proposal to distribute listed chemical 
products from a residential location to customers comprised primarily 
of convenience stores and gas 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 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 Enterprise, Inc., supra.
    In the instant matter, the Deputy Administrator finds curious the 
product specific inquiries of J & H's customers with respect to the 
applicant's sale of list I chemical products. The Deputy Administrator 
is also intrigued by Mr. McRae's reliance on the marketing of these 
products to ``double'' his overall sales totals when his own 
projections regarding these products were approximately ten percent or 
less of total sales.
    The high priority placed upon the proposed sale of listed chemical 
products by J & H to convenience stores and gas stations, in 
conjunction with the specific requests by these entities to obtain 
listed chemical products for sale appears to defy current data 
regarding the marketing and sale of these products. DEA has previously 
accepted expert analysis of sales data regarding listed chemical 
products where it was found that establishments such as convenience 
stores and gas stations ``have a very small or no likelihood of selling 
[listed chemical] products over the counter to consumers seeking 
remedies for nasal congestion from allergies, colds or other 
conditions.'' See, Branex, Incorporated, 69 FR 8682, 8690-92 (2004). 
Consistent with the ruling in Branex, the Deputy Administrator 
concludes here that the scale of J & H's proposed sale of list I 
chemical products to its customers appears not in keeping with the 
normal chain of distribution for goods of this kind.
    As noted above, there is no evidence in the investigative file that 
J & H ever sought to modify its pending application with respect to the 
listed chemical products it seeks to distribute. Among the listed 
chemical products the firm seeks to distribute is phenylpropanolamine. 
In keeping with prior DEA rulings, the Deputy Administrator also finds 
factor five relevant to J & H'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, and the 
lack of evidence by the applicant to the contrary, the Deputy 
Administrator concludes that granting the pending application of J & H 
would be inconsistent with the public interest.
    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 John E. McRae d/b/a J & H Wholesale be, and it hereby is, denied. 
This order is effective September 20, 2004.

    Dated: July 27, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-18971 Filed 8-18-04; 8:45 am]
BILLING CODE 4410-09-M