[Federal Register Volume 69, Number 228 (Monday, November 29, 2004)]
[Notices]
[Pages 69400-69402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-26309]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
CWK Enterprises, Inc.; Denial of Registration
On July 23, 2004, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration (DEA), issued an
Order to Show Cause to CWK Enterprises, Inc. (CWK) proposing to deny
its March 1, 2003, application for DEA Certificate of Registration as a
distributor of list I chemicals. The Order to Show Cause alleged that
granting CWK's application would be inconsistent with the public
interest, as that term is used in 21 U.S.C. 823(h). The order also
notified CWK 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 CWK at its proposed registered location
at 3065 McCall Drive, Suite 10, Atlanta, Georgia 30224. It was received
on August 5, 2004, and DEA has not received a request for a hearing or
any other reply from CWK 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 CWK 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
[[Page 69401]]
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 9997 (2002); Denver Wholesale, 67
FR 99986 (2002).
The Deputy Administrator's review of the investigative file reveals
that on or about March 1, 2003, an application was submitted by the
President of CWK, Mr. Charles In Kim, seeking registration to
distribute ephedrine and pseudoephedrine list I chemical products. The
application originally included phenylpropanolamine, but that listed
chemical product was eventually deleted from the request.
In connection with the pending application, an on-site pre-
registration investigation was conducted at the proposed premises.
Investigators were advised that CWK, which was incorporated in 2001,
was a wholesale distributor of general merchandise to convenience
stores and gas stations.
CWK was proposing to sell Mini-Thins and traditional single entity
and combination pseudoephedrine products. Investigators noted that CWK
had no products list, but the company officer referred to a catalogue
produced by a national wholesaler.
At the initial investigation, Mr. Chul Kim, CWK's Vice-President,
also failed to provide DEA investigators an updated customer list for
listed chemical products. Subsequently, a list of fourteen customers
was provided to the investigators. A customer verification revealed
that seven of these purported customers either did not know, or did not
intend to do listed chemical business with CWK.
DEA is aware that small illicit laboratories operate with listed
chemical products often procured, legally or illegally, from non-
traditional retailers of over-the-counter drug products, such as gas
stations and small retail markets. Some retailers acquire product from
multiple distributors to mask their acquisition of large amounts of
listed chemicals. In addition, some individuals utilize sham
corporations or fraudulent records to establish a commercial identity
in order to acquire listed chemicals.
The illegal production of methamphetamine continues unabated within
the DEA Atlanta region. The adjacent State of Tennessee leads the
region in the number of clandestine laboratories seized, accounting for
approximately 50 percent of the clandestine laboratories seized during
the second quarter of 2002. When compared with the third quarter of
2001, the increase in clandestine laboratory seizures is notable.
According to later records for the Atlanta region, 360 clandestine
laboratories were seized during the third quarter of 2002. Of the 360
laboratories seized during that reporting period, 207 were located in
Tennessee, 103 in Georgia, 35 in South Carolina and 15 in North
Carolina.
In the State of Georgia, there has been a consistent increase in
the number of illicit laboratories and enforcement teams continue to
note a trend toward smaller capacity laboratories. This is likely due
to the ease of concealment associated with smaller laboratories, which
continue to dominate seizures and cleanup responses.
The adjacent State of Tennessee has a substantial methamphetamine
abuse problem in the Chattanooga and Eastern Tennessee areas and DEA is
aware of a past history of trafficking in precursors in these
locations. Distributors or retailers serving the illicit
methamphetamine trade observe no borders and trade across State lines.
In fact, where precursor laws are stringent, out-of-state distributors
often make direct shipments to retailers without observing State
requirements.
DEA knows by experience that there exists a ``gray market'' in
which certain high strength, high quantity pseudoephedrine and
ephedrine products are distributed only to convenience stores and gas
stations, from where they have a high incidence of diversion. These
gray market products are not sold in large discount stores, retail
pharmacies or grocery stores, where sales of therapeutic over-the-
counter drugs predominate. Mini-Thins and other ``two-way'' ephedrine
and single entity pseudoephedrine products are prime products in this
gray market industry and are rarely found in any retail store serving
the traditional therapeutic market.
DEA also knows from industry data, market studies and statistical
analysis that over 90% of over-the-counter drug remedies are sold in
drug stores, supermarket chains and ``big box'' discount retailers.
Less than one percent of cough and cold remedies are sold in gas
stations or convenience stores. Studies have indicated that most
convenience stores could not be expected to sell more than $20.00 to
$40.00 worth of products containing pseudoephedrine per month. The
expected sales of ephedrine products are known to be even smaller. Most
convenience stores handling gray market products often order more
product than what is required for the legitimate market and obtain
chemical products from multiple distributors.
Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an
application for a 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 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 CWK's lack of knowledge and experience 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, supra, 69 FR 11654; ANM
Wholesale, 69 FR 11652 (2004);
[[Page 69402]]
Xtreme Enterprises, Inc., 67 FR 76195 (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 Southeast. Ephedrine and
pseudoephedrine are precursor products needed to manufacture
methamphetamine and operators of illicit methamphetamine laboratories
regularly 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. It is apparent that CWK intends on being a
participant in this market.
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 Whilesale, supra, 69 FR 11652; Xtreme Enterprises, Inc.,
supra, 67 FR 76195; Sinbad Distributing, 67 FR 10232 (2002); K.V.M.
Enterprises, 67 FR 70968 (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 station 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 76197. As
in Xtreme Enterprises, Inc., lack of a criminal record and intent to
comply with the law and regulations are far outweighed by CWK's lack of
experience and the company's intent to sell ephedrine and
pseudoephedrine exclusively to the gray market. The Deputy
Administrator is further troubled by CWK's providing DEA investigators
misleading information, indicating the company cannot be trusted to
handle the responsibilities of a 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 Certification of Registration, previously submitted
by CWK Enterprises, Inc., be, and it hereby is, denied. This order is
effective December 29, 2004.
Dated: November 10, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-26309 Filed 11-26-04; 8:45 am]
BILLING CODE 4410-09-M