[Federal Register Volume 69, Number 204 (Friday, October 22, 2004)]
[Notices]
[Pages 62078-62080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-23705]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Absolute Distributing, Inc.; Denial of Registration

    On May 6, 2004, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to Absolute Distributing, Inc. (Absolute) proposing 
to deny its May 12, 2003, application for DEA Certificate of 
Registration as a distributor of list I chemicals. The Order to Show 
Cause alleged that granting Absolute'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 Absolute 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 Absolute at its proposed registered 
location at 2005 S. 300 W., Suite C, Salt Lake City, Utah, 84115. It 
was received on May 10, 2004, and DEA has not received a request for a 
hearing or any other reply from Absolute 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

[[Page 62079]]

hearing having been received, concludes that Absolute has waived its 
hearing right. See Aqui Enterprises, 67 FR 12,576 (2002). After 
considering relevant material from the investigative file, the Deputy 
Administrator now enters her final order without a hearing pursuant to 
21 C.F.R. 1309.53(c) and (d) and 1316.67. 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. As noted in 
previous DEA final orders, methamphetamine is an extremely potent 
central nervous system stimulant, and its abuse is a persistent and 
growing problem in the United States. See e.g., Direct Wholesale, 69 FR 
11,654 (2004); Branex, Inc., 69 FR 8,682 (2004); Yemen Wholesale 
Tobacco and Candy Supply, Inc., 67 FR 9,997 (2002); Denver Wholesale, 
67 FR 99,986 (2002).
    The Deputy Administrator's review of the investigative file reveals 
that an application dated May 12, 2003, was submitted by Mr. David T. 
Milton, seeking registration to distribute ephedrine, a list I chemical 
product. Subsequently, Mr. Milton, the President of Absolute, asked 
that the application be changed to reflect the company's name as 
registrant.
    In connection with the pending application, an on-site pre-
registration investigation was conducted on August 18, 2003. Mr. Milton 
advised investigators that he had been solicited by Premium Oil Company 
(Premium) to obtain a DEA registration so that Absolute could provide 
ephedrine to Premium's convenience stores and gas stations, which are 
located throughout the State of Utah. Premium had also provided 
Absolute with office and storage space for ephedrine products so that 
Premium could have easy access to its distributor.
    Premium had previously been obtaining its list I chemical products 
from Spencer Distributing. However, on May 22, 2003, that company 
surrendered its DEA registration. Mr. Milton was aware that Premium 
considered ephedrine products to be good sources of income, ``better 
than fuel,'' and the company needed Absolute to replace Spencer 
Distributing as its supplier.
    Mr. Milton provided investigators only a generalized list of 
potential customers, which included almost every gas station and their 
associated convenience stores in the State of Utah. He could not 
provide a confirmed list of customers who would purchase the listed 
chemical products from the company. While he also intended to 
distribute sundry items if he obtained a DEA registration, Mr. Milton 
estimated that 30% of Absolute's sales would be ephedrine products.
    He intended to primarily distribute 50 and 60 count bottles of list 
I chemical products. This form of packaging and quantities are 
preferred by individuals illicitly manufacturing methamphetamine. 
Further, one of Absolute's intended suppliers had already received two 
warning letters from DEA that its list I chemical products had been 
discovered in various illicit settings consistent with clandestine 
methamphetamine manufacturing.
    Neither Mr. Milton nor his brother, the company's Vice-President, 
had any experience in handling or distributing listed chemical 
products. On May 1, 2003, diversion investigators had met with Mr. 
Milton. Among other items, they provided a copy of the DEA Chemical 
Handler's Manual and a notice regarding combination ephedrine and 
pseudoephrine products. The investigators explained how ephedrine and 
pseudoephedrine are used as immediate precursors for making 
methamphetamine and discussed the history and problems of 
methamphetamine in Utah.
    On August 18, 2003, long after this meeting, investigators were 
arranging for the pre-registration inspection. At that time they asked 
Mr. Milton what he knew about the list I chemical products he was 
seeking to distribute. He replied that he knew nothing about list I 
chemicals and, while he had been told by investigators the product was 
used to manufacture methamphetamine, he had no personal proof of that 
fact.
    On April 18, 2001, state investigators made an undercover purchase 
of Two-Way Max Brand Ephedrine 25 mg. tablets (60 tablets per bottle 
for a total of 480 dosage units) from a Premium owned gas station/
convenience store in West Jordan, Utah. The total amount of ephedrine 
was 12 grams, which at the time was the threshold amount an individual 
could legally possess in Utah. The conversion included the topic of 
using ephedrine to manufacture methamphetamine and the employee 
suggested the undercover agents return daily to buy eight bottles of 
ephedrine so they could obtain what they needed. As discussed above 
Absolute intended to supply its list I chemical products to convenience 
stores and service stations owned by Premium.
    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 14,269 (1999). See also, Henry J. Schwartz, Jr., 
M.D., 54 FR 16,422 (1989).
    The Deputy Administrator finds factors four and five relevant to 
the pending application for registration.
    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. Milton's lack of knowledge regarding the laws and 
regulations governing handling of list I chemical products. In prior 
DEA decisions, this lack of experience in handling list I chemical 
products has been a factor in denying pending applications for 
registration. See, e.g., Direct Wholesale, 69 FR 11,654 (2004); ANM 
Wholesale, 69 FR 11,652 (2004); Xtreme Enterprises, Inc., 67 FR 76,195 
(2002).
    With regard to factor five, other factors relevant to and 
consistent with the public safety, the Deputy Administrator finds this 
factor weighs heavily against granting the application. Unlawful 
methamphetamine use is a growing public health and safety concern 
throughout the United States and in the State of Utah and ephedrine and 
pseudoephedrine are precursor products needed to manufacture 
methamphetamine. Operators of illicit methamphetamine laboratories 
regularly

[[Page 62080]]

acquire the precursor products needed to manufacture the drug from 
convenience stores and gas stations which, in prior DEA decisions, have 
been identified as constituting the ``grey market'' for list I chemical 
products. Absolute's intended customer base consists entirely of such 
businesses.
    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 these establishments serve as 
sources for the diversion of large amounts of listed chemical products. 
See, e.g., ANM Wholesale, 69 FR 11,652 (2004); Xtreme Enterprises, 
Inc., supra, 67 FR 76,195; Sinbad Distributing, 67 FR 10,232 (2002); 
K.V.M. Enterprises, 67 FR 70,968 (2002).
    The Deputy Administrator has previously found that many 
considerations weighed heavily against registering a distributor of 
list I chemicals because, ``[v]irtually all of the Respondent's 
customers, consisting of gas stations and convenience stores, are 
considered part of the grey market, in which large amounts of listed 
chemicals are diverted to the illicit manufacture of amphetamine and 
methamphetamine.'' Xtreme Enterprises, Inc., supra, 67 FR at 76,197. As 
in Xtreme Enterprises, Inc., Mr. Milton's lack of a criminal record and 
stated intent to comply with the law and regulations are far outweighed 
by his lack of experience and the company's intent to sell ephedrine 
exclusively to the gray market.
    Additionally, the Deputy Administrator is troubled by Mr. Milton's 
comments suggesting he still questioned whether list I chemical 
products are being diverted for illicit manufacturing, even after being 
specifically educated by DEA investigators to the contrary. His 
professed personal ignorance of the methamphetamine manufacturing 
problem in Utah suggests he is motivated by financial gain and would be 
unable or unwilling to comply with the responsibilities of a DEA 
registrant.
    Based on the foregoing, the Deputy Administrator concludes that 
granting the pending application 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 824 and 28 CFR 0.100(b) and 0.104, hereby orders the pending 
application for DEA Certificate of Registration, previously submitted 
by Absolute Distributing, Inc., be, and it hereby is, denied. This 
order is effective November 22, 2004.

    Dated: October 5, 2004.
Michelle M. Leonhart,
Deputy Administrator.
[FR Doc. 04-23705 Filed 10-21-04; 8:45 am]
BILLING CODE 4410-09-M