[Federal Register Volume 69, Number 204 (Friday, October 22, 2004)]
[Notices]
[Pages 62089-62091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-23706]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


J & S Distributors; Denial of Application

    On August 11, 2003, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to J & S Distributors (J & S) proposing to deny its 
application, executed on August 30, 2000, for DEA Certificate of 
registration as a distributor of List I chemicals. The Order to Show 
Cause alleged in relevant part that granting the application of J & S 
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 & 
S that should not 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 & S Distributors at its proposed 
registered location in Louisville, Kentucky. The return receipt 
indicated the Order to Show Cause was received on August 18, 2003, by 
Jeffrey D. Guernsey, president and owner of J & S. DEA has not received 
a request for hearing or any other reply from J & S or anyone 
purporting to represent the company in this matter.
    Therefore, the Deputy Administrator of DEA, finding that (1) thirty 
days having passed since receipt of the Order to Show Cause, and (2) no 
request for hearing having been received, concludes that J & S has 
waived its hearing right. See Aqui Enterprises, 67 FR 12,576 (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)

[[Page 62090]]

and (d) and 1316.67 (2004). 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. At the time that J 
& S Distributors submitted its application for DEA registration, 
phenylpropanolamine, also a List I chemical, was 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 in the illicit manufacture 
of methamphetamine and amphetamine. 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); Yemen 
Wholesale tobacco and Candy Supply, Inc., 67 FR 9997 (2002); Denver 
Wholesale, 67 FR 99,986 (2002).
    The Deputy Administrator's review of the investigative file reveals 
that on August 30, 2000, J & S submitted an application for DEA 
registration as a distributor of the List I chemicals epheedrine, 
pseudoephedrine and phenylpropanolamine. The application was submitted 
on behalf of J & S by Jeffrey Guernsey. There is no information before 
the Deputy Administrator that J & S had sought to modify its pending 
application with respect to any of the listed chemical products it 
proposes to distribute. Upon receipt of the application, the DEA 
Louisville District Office initiated a pre-registration investigation 
of J & S in September of 2000.
    According to the investigative file, during DEA's initial pre-
registration inspection of J & S, the firm had no office or warehouse 
to conduct its business, and therefore, DEA was unable to immediately 
accomplish an inspection. However, DEA investigators conducted a second 
on-site pre-registration inspection of J & S on April 2, 2001, when the 
firm subsequently secured office and storage space in the vicinity of 
Louisville.
    DEA's investigation revealed that J & S is a sole proprietorship 
operated by Jeffrey Guernsey, along with this father David Guernsey. 
The company is a wholesale distributor of key chains, pens, ceramics, 
lighters and commemorative items. Mr. Guernsey provided DEA with a 
product list of predominantly novelty items. A few ephedra based non-
drug products were on the list. However, no health and beauty aids or 
non-regulated cough and cold products were included in their product 
list.
    According to the DEA investigative file, Jeffrey Guernsey provided 
DEA investigators with a ``customer master list'' indicating he had 270 
customers in about twenty states. Mr. Guernsey indicated he would 
acquire product directly from three manufacturers and further proposed 
to ship listed chemicals to those on his customer list by parcel 
service or truck shipment.
    DEA investigators contacted several purported customers of J & S, 
who indicated they did do business with the company. However, none of 
these customers expressed any intention of purchasing listed chemical 
products from J & S.
    DEA's subsequent review of the company's ``customer master file 
list'' revealed those entities were predominantly distributors or 
wholesalers located in other states. Of the customers listed, several 
did not have DEA registrations to handle List I chemical products, four 
had their DEA registrations revoked or suspended, another four were the 
subject of pending DEA registration actions, and another ten were known 
to DEA to be already receiving similar listed chemical products form 
multiple wholesale distributors. None of these wholesalers had any 
known retail customers other than convenience stores or gas stations.
    In support of J & S' pending application for registration, on March 
30, 2001, Jeffrey Guernsey sent DEA a ``Letter of Compliance'' along 
with a copy of the company's ``return policy on List I Chemicals.'' The 
letter was signed by Jeffrey Guernsey as President and David L 
Guernsey, who listed himself as ``Consultant.'' The letter outlined the 
experience of certain members of the Guernsey family in handling listed 
chemical products. However, Jeffrey Guernsey did not provide 
information as to any experience he personally had with List I 
products.
    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 14,269 (1999); Henry J. Schwartz, Jr., M.D., 54 FR 
16,422 (1989).
    The Deputy Administrator finds factors four and five relevant to J 
& 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 Jeffrey Guernsey's apparent lack of experience in the 
handling of List I chemical products. The DEA investigative files shows 
that J & S is a retailer of general merchandise. While Jeffrey Guernsey 
provided information to DEA about members of his family who had 
experience in the handling of listed chemicals, it is unclear what 
role, if any, these family members would have in J & S' overall 
operation. Jeffrey Guernsey, J & S' sole proprietor and president, 
appears to be company's primary operator and he has not demonstrated 
that he possesses any previous experience handling listed chemical 
products. In prior DEA decisions, lack of experience in handling List I 
chemicals was a factor in determinations to deny applications for DEA 
registration. See, K&Z Enterprises, 69 FR 51,475 (2004); Matthew D. 
Graham, 67 FR 10,229 (2002); Xtreme Enterprises, Inc., 67 FR 76,195 
(2002). Therefore, this factor similarly weights against granting J & 
S' 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 & S' proposal to distribute listed chemical 
products to customers who have engaged in questionable business 
practices. As noted above, several of J & S' proposed customers have 
had DEA registrations revoked or suspended, or are already receiving 
listed chemical

[[Page 62091]]

products from multiple wholesale distributors. In addition, many of 
these purported customers have expressed no desire to purchase listed 
chemical products from J & S and the wholesalers distribute listed 
chemical products primarily to 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 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 10,232 
(2002); K.V.M. Enterprises, 67 FR 70,968 (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.
    As noted above, there is no evidence in the investigative file that 
J & S has sought to modify its pending application with regard to the 
listed chemical products it seeks to distribute. Among the listed 
chemical products the firm intends to distribute is 
phenylpropanolamine. Accordingly, the Deputy Administrator also finds 
factor five relevant to J & S' request to distribute 
phenylpropanolamine and the apparent lack of safety associated with the 
use 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. See William 
E. ``Bill'' Smith d/b/a B&B Wholesale, 69 FR 22,559 (2004); Shani 
Distributors, 68 FR 62,324 (2003). Based on the foregoing, the Deputy 
Administrator concludes that granting the pending application of J & S 
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 J & S Distributors be, and it hereby is, denied. This order is 
effective November 22, 2004.

    Dated: October 5, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-23706 Filed 10-21-04; 8:45 am]
BILLING CODE 4410-09-M