[Federal Register Volume 69, Number 189 (Thursday, September 30, 2004)]
[Notices]
[Pages 58548-58550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21948]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Value Wholesale Denial of Registration

    On September 8, 2003, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to Value Wholesale (Value) proposing to deny its 
November 6, 2001, application for DEA Certificate of Registration as a 
distributor of list I chemicals. The Order to Show Cause alleged that 
granting Value's application would be inconsistent with the public 
interest, as that term is used in 21 U.S.C. 823(h) and 824(a). The 
order also notified Value 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 Value at its proposed registered location 
at 15188 Eight Mile Road, Oak Park, Michigan 48237. It was received on 
September 16, 2003, and DEA has not received a request for a hearing or 
any other reply from Value or anyone purporting to represent the 
company in this matter.
    Therefore, the Deputy Administrator of DEA, finding that (1) thirty 
days have passed since delivery of the Order to Show Cause, and (2) no 
request for a hearing having been received, concludes that Value has 
waived its hearing right. See Aqui Enterprises, 67 FR 12576 (2002). 
After considering relevant material from the investigative file, 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). Pseudoephedrine and ephedrine are 
list I chemicals commonly used to illegally manufacture 
methamphetamine, a Schedule II controlled substance. 
Phenhylpropanolamine, 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 
that an application dated November 6, 2001, was submitted on behalf of 
Value and signed by its President and only officer, Mr. John Loussia 
(Mr. Loussia). Value sought registration as a distributor of multiple 
list I chemicals, including pseudoephedrine (8112) and 
phenylpropanolamine (1225). There is no evidence in the investigative 
file that Value has sought to modify its pending application with 
regard to those two chemicals.
    In January 1999, Value originally applied for DEA registration as a 
distributor of list I chemicals and during a pre-registration 
investigation, it was determined the company had been buying and 
selling list I chemical products for a number of years prior to filing 
this application for registration. However, on February 5, 1999, that 
application was approved and Value issued DEA Certificate of 
Registration 004000VHY.
    On October 31, 2001, during the course of a regularly scheduled 
cyclic investigation, it was discovered Value's registration had 
expired, effective May 31, 2000, without any application for renewal 
having been filed. Nevertheless, investigators found that the firm had 
continued to order and sell list I chemical products after its 
registration had expired. Investigators also discovered Value had not 
been maintaining adequate or complete records of customer addresses as 
required by 21 CFR 1310.06. A DEA letter of admonition was issued the 
company and in reply, Mr. Loussia advised he would be submitting the 
instant application for registration and not be carrying list I 
chemical products until its approval.
    In connection with the pending application, an on-site pre-
registration investigation was conducted in March 2002. Mr. Loussia 
advised investigators that Value was a full-line wholesaler/distributor 
of groceries to local food

[[Page 58549]]

stores in the Detroit metropolitan area and its intention was to sell 
name brand cough and cold products containing list I chemicals. 
However, Value's application included over 21 chemical codes, many of 
which are solely used for commercial or industrial purposes. After 
being briefed by investigators, Mr. Loussia requested that numerous 
chemical codes be deleted from Value's application.
    The company proposed to primarily sell over-the counter products on 
a cash and carry basis to walk-in customers, including businesses 
ranging from gas stations, small grocery stores, dollar stores, party 
stores and meat markets. They would pay in cash or by check and pick up 
products directly from Value's facility. Mr. Loussia provided a list of 
proposed customers, estimating that chemical products would be sold to 
about 50 to 60 customers in the Detroit area and represented less than 
1% of Value's total business. When investigators attempted to verify 
several of these proposed customers, it was determined they no longer 
existed.
    The Deputy Administrator finds that during the year 2000, DEA 
suspended the registrations of three Detroit area listed chemical 
distributors who were engaged in diversion of listed chemical products 
by purporting to distribute them to phony distributors and non-existent 
retail customers. Additionally, DEA suspended the registration of a 
Florida distributor who was purporting to sell listed chemical products 
to Detroit area retailers, after DEA was unable to determine that 
retailers were actually receiving the product.
    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. Section 823(h) requires that 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 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.
    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 a 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 Deputy Administrator finds factors one, two, four and five 
relevant to the pending application for registration.
    With respect to factor one, maintenance of effective controls 
against diversion, while physical security of list I chemical products 
is a focus of 21 CFR 1309.71, among the factors considered under the 
general security requirements of 21 CFR 1309.71, is ``[t]he adequacy of 
the registrant's or applicant's system for monitoring the receipt, 
distribution and disposition of list I chemicals in its operations.'' 
21 CFR 1309.71(b)(8). Prior agency rulings have applied a more 
expansive view of factor one then mere physical security. See, e.g., 
OTC Distribution Company, 68 FR 70538 (2003) (failure to maintain 
adequate administrative records and controls to permit a precise audit 
of list I chemical products and company's inability or unwillingness to 
fully comply with record keeping and report obligations under an MOA 
considered adverse under factor one). See also, Alfred Khalily, Inc., 
64 FR 31289 (1999) and NVE Pharmaceuticals, Inc., 64 FR 59215 (1999) 
(failure to identify a party to a transaction or engaging in 
transactions with non-registered entities fell under factor one); State 
Petroleum, Inc., 67 FR 9994 (2002); Hadid International, Inc., 67 FR 
10230 (2002) and Aqui Enterprises, 67 FR 12576 (2002) (recordkeeping 
inadequate to track sales and customers within factor one). The Deputy 
Administrator finds that factor one is adversely implicated to the 
extent that Value has previously failed to maintain records, as 
required by 21 CFR 1310.06.
    With regard to factor two, compliance with applicable Federal, 
State and local law, the Deputy Administrator finds that prior to its 
initial application for DEA registration and then subsequent to that 
registration's expiration, Value illegally acquired listed chemical 
products while not registered to do so. It then distributed those 
products in violation of the criminal provisions of 21 U.S.C. 841, 842 
and 843. Value also failed to comply with applicable laws and 
regulations requiring adequate and complete records of listed chemical 
transactions.
    With regard to factor four, the applicant's past experience in the 
distribution of chemicals, the Deputy Administrator finds this factor 
relevant based on Mr. Loussia's lack of knowledge or inability to 
comply with the laws and regulations governing handling of list I 
chemical products. Before applying for initial registration in 1999, 
for several years Value had been acquiring list I chemical products 
from certain distributors and reselling those products. Mr. Loussia 
claimed he was unaware of the registration requirement until Value was 
turned down as a customer by a major distributor, based on Value's lack 
of a DEA registration. Only then did Value submit the 1999 application 
for registration which was ultimately granted. The company then allowed 
that registration to expire but continued to acquire and distribute 
list I chemical products. It was either unaware of the need to renew 
its registration or purposely failed to do so. In addition, the Deputy 
Administrator finds factor four relevant to Mr. Loussia's apparent 
unfamiliarity with listed chemical products, as evidenced by his 
inclusion in Value's application of multiple products having only 
industrial and commercial uses.
    With respect to factor five, other factors relevant to and 
consistent with the public safety, the Deputy Administrator finds this 
factor relevant to Value's proposal to distribute listed chemical 
products to gas stations, small retail markets and convenience stores. 
While there are no specific prohibitions under the Controlled 
Substances 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., ANM Wholesale, 69 FR 11652 (2004); Xtreme Enterprises, Inc., 
67 FR 76195 (2002); Sinbad Distributing, 67 FR 10232 (2002); K.V.M. 
Enterprises, 67 FR 70968 (2002).
    Finally, as noted above, there is no evidence in the investigative 
file that Value ever sought to modify its pending application with 
respect to the listed chemical product phenylpropanolamine. In light of 
this development, the Deputy Administrator also finds factor five 
relevant to Value'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

[[Page 58550]]

registration. See Direct Wholesale, 69 FR 11654 (2004); ANM Wholesale, 
supra, 69 FR 11652; Shani Distributors, 68 FR 62324 (2003).
    Based on the foregoing, the Deputy Administrator concludes that 
granting the pending application of Value would be inconsistent with 
the public interest. In sum, by its past conduct, Value has displayed a 
continuing history of illegal activity and an inability to discharge 
the responsibilities of a registrant.
    Accordingly, the Deputy Administrator of the drug Enforcement 
Administration, pursuant to the authority vested in her by 21 U.S.C. 
823 and 824 and 28 CFR 0.100(b) and 0.104, hereby orders the pending 
application for DEA Certificate of Registration, previously submitted 
by Value Wholesale be, and it hereby is, denied. This order is 
effective November 1, 2004.

    Dated: September 13, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-21948 Filed 9-29-04; 8:45 am]
BILLING CODE 4410-09-M