[Federal Register Volume 69, Number 228 (Monday, November 29, 2004)]
[Notices]
[Pages 69409-69411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-26312]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Volusia Wholesale; 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 Volusia Wholesale (Volusia) proposing to deny 
its December 12, 2003, application for DEA Certificate of Registration 
as a distributor of list I chemicals. The Order to Show Cause alleged 
that granting Volusia'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 Volusia 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 Volusia at its then-proposed registered 
location at 917 Daytona Avenue, Daytona Beach, Florida 32117. It was 
received on August 2, 2004, and DEA has not received a request for a 
hearing or any other reply from Volusia 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 Volusia 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. 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 
11654 (2004); Branex, Inc., 69 FR 8682 (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 September 9, 2003, an application was submitted by the 
owner of Volusia, Mr. Anwar Khrino, seeking registration to distribute 
ephedrine and pseudoephedrine list I chemical products. The application 
initially listed the proposed registered location as Mr. Khrino's then-
residence, 1420 N. Grandview Avenue, Daytona Beach, Florida 32118. He 
subsequently moved to 917 Daytona Avenue, Daytona Beach, Florida 32117, 
which was to be Volusia's registered address.
    In connection with the pending application, an on-site pre-
registration investigation was conducted at the Daytona Avenue proposed 
premises. The location was Mr. Khrino's residence. There were no 
security measures in place and his intent was to store the chemical 
products overnight in a locked delivery van in the driveway.
    Mr. Khrino advised investigators Volusia is a sole proprietorship 
and wholesale distributor of approximately 60 to 80 sundry and novelty 
items to convenience stores and gas stations. He proposed to distribute 
``two packs'' of

[[Page 69410]]

six different cough and cold remedies containing pseudoephedrine.
    Mr. Khrino identified two proposed suppliers of listed chemicals, 
one of which DEA was aware no longer held a DEA registration to handle 
listed chemicals. Mr. Khrino initially failed to provide DEA a complete 
proposed customer list for listed chemical products. Later, he sent DEA 
a handwritten list of 13 purported customers for listed chemicals. DEA 
conducted two verifications of purported customers. At the first 
convenience store, investigators were told the store was not a customer 
of Volusia. Investigators also noted the store was displaying the 
combination ephedrine, Mini-thins product on its counter. Investigators 
were unable to locate the second purported customers, a delicatessen. 
There was no such retailer at the address provided by Mr. Khrino and 
the contact number for this ``customer`` turned out to be Volusia's fax 
machine.
    The State of Florida has a substantial methamphetamine abuse 
problem in Northeast and Central Florida, and DEA is aware of a past 
history of trafficking in precursors in these areas. Distributors or 
retailers serving in 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 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 too 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.
    In the adjacent 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.
    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 
grey 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 ``two-way'' products and 
other 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. 
Furthermore, 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 one, four and five relevant 
to the pending application for registration.
    As 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, which is a personal residence. See, e.g., 
John E. McRae d/b/a J & H Wholesale, 69 FR 51480, 51481 (2004). Mr. 
Khrino has proposed the storage of listed chemical products inside a 
van that is routinely parked in the driveway of his residence. As the 
Deputy Administrator has previously held, ``the prospect of listed 
chemicals being stored in an unattended vehicle [is] fraught with the 
dangers of diversion.'' See, William E. ``Bill'' Smith d/b/a B & B 
Wholesale, 69 FR 22559, 22560 (2004). Accordingly, this factor weighs 
against the granting of Volusia's pending registration application.
    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. Khrino'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); 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 the 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 Volusia 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

[[Page 69411]]

these establishments serve as sources for the diversion of large 
amounts of listed chemical products. See, e.g., ANM Wholesale 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., Mr. Khrino's lack of a criminal record and 
intent to comply with the law and regulations are far outweighed by his 
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 Mr. Khrino's 
failure to provide accurate information to DEA, indicating his 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 Certificate of Registration, previously submitted 
by Volusia Wholesale, be, and it hereby is, denied. This order is 
effective December 29, 2004.

    Dated: November 10, 2004.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 04-26312 Filed 11-26-04; 8:45 am]
BILLING CODE 4410-09-M