[Federal Register Volume 70, Number 248 (Wednesday, December 28, 2005)]
[Notices]
[Pages 76866-76868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-24496]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 04-31]


Joey Enterprises, Inc. d/b/a/ NorthStar Wholesale Denial of 
Application

    On March 2, 2004, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to Joey Enterprises, Inc., d/b/a NorthStar 
Wholesale (hereinafter referred to as ``Respondent'') of Birmingham, 
Alabama. The show cause order proposed to deny the Respondent's 
February 10, 2003, application for DEA Certificate of Registration as a 
distributor of list I chemicals. The Order to Show Cause alleged in 
substance that granting the application of the Respondent would be 
inconsistent with the public interest as that term is used in 21 U.S.C. 
823(h).
    According to the DEA investigative file, on or about March 30, 
2004, the Respondent, through its President Feroz Jiwani (Mr. Jiwani), 
requested a hearing in response to the show cause order. On April 22, 
2004, the presiding Administrative Law Judge issued an Order for Pre-
hearing Statements. As part of that Order, the Administrative Law Judge 
directed the Government to file its Pre-hearing Statement on or before 
May 14, 2004, and that the Respondent was to file its Pre-hearing 
Statement on or before June 4, 2004. Following pre-hearing motions 
extending the above scheduled filing dates, the Government filed its 
Pre-hearing Statement on July 21, 2004. However, the Respondent did not 
file its Pre-hearing Statement by the August 16, 2004 deadline.
    On September 2, 2004, the Administrative Law Judge issued an order 
extending the filing date of the Respondent's Pre-hearing Statement to 
September 15, 2004. The Administrative Law Judge's Order also notified 
the Respondent that if it again failed to meet the deadline for filing 
a Pre-hearing Statement, such inaction would be deemed a waiver of its 
hearing entitlement. Nevertheless, the Respondent again failed to meet 
the new deadline and did not file its Pre-hearing Statement. 
Accordingly, on September 29, 2004, the Administrative Law Judge issued 
her Order Terminating the Proceedings.
    The Deputy Administrator adopts the ruling of the Administrative 
Law Judge's termination order that the Respondent has waived its 
hearing right. See, Aqui Enterprises, 67 FR 12576 (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(b) and (d). 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). As noted in previous DEA final 
orders, pseudoephedrine and ephedrine are list I chemicals commonly 
used to illegally manufacture methamphetamine, a Schedule II controlled 
substance. Methamphetamine is an extremely potent central nervous 
system stimulant and its illicit manufacture and abuse are ongoing 
public health concerns in the United States. See e.g., Direct 
Wholesale, 69 FR 11654 (2004); Yemen Wholesale Tobacco and Candy 
Supply, Inc., 67 FR 9997 (2002); Denver Wholesale, 67 FR 99986 (2002).
    The investigative file contains a printed news release article from 
the DEA Web site regarding federal drug seizures and the abuse of 
methamphetamine in the State of Alabama. http://www.dea.gov/pubs/states/alabama.html. According to the article, methamphetamine has 
become the number one abused drug in Alabama. The article also tracked 
the ``dramatic increase'' in the number of methamphetamine laboratory 
seizures in the state from 1997 to 2003. According to data obtained by 
DEA's El Paso Intelligence Center (also known as ``EPIC''), in 1997, 
methamphetamine laboratory seizures in Alabama totaled six; by 2002, 
the total number of laboratory seizures climbed to 201.
    The above-referenced registration application of the Respondent was 
initially submitted under the business name ``Joey Enterprises, Inc.,'' 
and was later amended to include the caption, ``d.b.a. Northstar 
Wholesale.'' The Respondent sought DEA registration as a distributor of 
the list I chemicals ephedrine, pseudoephedrine and 
phenylpropanolamine. There is no evidence in the investigative file 
that Respondent, or anyone purporting to represent the Respondent has 
sought to further modify its pending application.
    The Deputy Administrator's review of the investigative file reveals 
that on September 3, 2003, DEA Diversion Investigators conducted an on-
site pre-registration inspection at Respondent's proposed registered 
location in Birmingham. DEA's investigation revealed that Mr. Jiwani is 
the owner and President of the Respondent, his wife, Amynah, is the 
company's assistant manager, and the company also employs a part-time 
employee by the first name of Christopher. When asked by DEA 
investigators, neither Mr. nor Mrs. Jiwani knew the part-time 
employee's last name.
    The Respondent is a cash and carry establishment that distributes 
typical convenience store items including tobacco products, candy, 
drinks and health and beauty products. The Respondent's customers 
consist of approximately 150 convenience stores and gas stations 
located in the Birmingham area, as well as Northern Alabama, Georgia 
and Fort Lauderdale, Florida.
    DEA investigators asked Mr. Jiwani to provide information on list I 
chemical products the firm intended to carry. In response to the 
request, Mr. Jiwani provided a list of chemical products the firm would 
distribute, including: Max Brand 25/200 mg--60 count bottles; Mini 
Thins 25/200 mg--60 count bottles; Ephedrine 25/200 mg--60 count 
bottles; Bio Tech Ephedrine 25/200 mg--60 count bottles; Ephedrine 25/
200 mg Black--12 count packets; Tylenol Cold, Tylenol Sinus and Tylenol 
Allergy (no sizes listed); Advil Cold and Sinus and Aleve Cold and 
Sinus (no sizes listed); and Vicks Dayquil and Nyquil (no sizes 
listed). Mr. Jiwani estimated that these products would make up ten to 
fifteen percent of Respondent's total sales.
    Max Brand products have previously been identified by DEA as the 
``precursor product predominantly encountered and seized at clandestine 
methamphetamine laboratories.'' See Express Wholesale, 69 FR 62086, 
62087 (2004); see also, RAM, Inc. d/b/a American Wholesale Distribution 
Corp., 70 FR 11693 (2005). Convenience stores are the ``primary 
source'' for the purchase of Max Brand products, which are the 
preferred brand for use by illicit methamphetamine producers. See Elk 
International, Inc., d/b/a Tri-City Wholesale, 70 FR 24615 (2005).
    Mr. Jiwani also informed DEA investigators that he had no 
experience handling list I chemical products. He further stated that 
Respondent had no procedure in place for identifying suspicious or 
unusual purchases of list I chemical products.

[[Page 76867]]

    According to the investigative file, on September 3 and 4, 2003, 
DEA investigators conducted random verifications of the ten of 
Respondent's proposed customers for list I chemical products. At least 
seven of the customers informed DEA personnel that they didn't carry 
listed chemical products or were already purchasing them from other 
suppliers. Another customer was already in possession of listed 
chemical products which were on display at the establishment. The 
customer insisted to DEA investigators that he purchased the products 
from Respondent, even when told that Respondent did not carry such 
products.
    Mr. Jiwani further advised DEA investigators he requires new 
customers to provide tax exempt ID numbers before selling them 
anything. DEA investigators found however, that Mr. Jiwani could not 
confirm the existence of his customers because he did not visit the 
location of these stores prior to their becoming customers.
    DEA has previously found 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 
products from multiple distributors to mask their acquisition of large 
quantities of listed chemicals. See, A-1 Distribution Wholesale, 70 FR 
28573 (2005).
    DEA has further determined 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. A-1 
distribution, supra, at 28573. These gray market products are not sold 
in large discount stores, retail pharmacies or grocery stores, where 
sale of therapeutic over-the-counter drugs predominate. ``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 has also credited industry data, market studies and statistical 
analysis which has shown 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 or $40.00 worth of products containing pseudoephedrine per 
month. Jay Enterprises of Spartansburg, Inc., 70 FR 24620 (2005).
    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., 
ANM Wholesale, 69 FR 11652 (2004); 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 
Respondent'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 to Mr. Jiwani's lack of experience in the handling of list I 
chemical products. In prior DEA decisions, the lack of experience in 
the handling list I chemicals was a factor in a determination to deny a 
pending application for DEA registration. See, e.g., CWK Enterprises, 
Inc. (CWK), 69 FR 69400 (2004); Prachi Enterprises, Inc. (Prachi), 69 
FR 69407 (2004); Matthew D. Graham, 67 FR 10229 (2002); Xtreme 
Enterprises, Inc., 67 FR 76195 (2002). Therefore, this factor similarly 
weighs against the granting of Respondent's pending application.
    With respect to factor five, other factors relevant to and 
consistent with the public safety, the Deputy Administrator finds this 
factor also weighs heavily against granting the Respondent's 
application. Methamphetamine abuse is one of the top public health 
threats facing the country. While there have been various state 
legislative initiatives enacted around the United States that seek to 
address the illicit production and use of methamphetamine, the growing 
menace of this drug remains a grave public health and safety concern. 
Ephedrine and pseudoephedrine are precursor products needed to 
manufacture methamphetamine and operators of illicit laboratories 
regularly acquire the precursor products needed to manufacture the 
drug.
    Many of these illicit transactions arise from listed chemical 
products acquired from convenience stores and gas stations. It is 
apparent that the Respondent intends on being a participant in this 
market with most of its proposed customers made up of 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 gas 
stations and convenience stores constitute sources for the diversion of 
listed chemical products. See, e.g., ANM Wholesale, 69 FR 11652 (2004); 
K.V.M. Enterprises, 67 FR 70968 (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. Therefore, to Respondent's proposed 
sale of listed chemical products convenience store and gas stations 
weighs against granting its pending registration application.
    As noted above, there is no evidence in the investigative file that 
the Respondent ever sought to modify its pending application with 
respect to listed chemical products it intends to distribute. Among the 
listed chemical products the firm seeks to distribute is 
phenylpropanolamine. 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 because of 
the apparent lack of safety associated with the use of this product. 
See e.g., William E. ``Bill'' Smith d/b/a B &B Wholesale, 69 FR 2259 
(2004); J &S Distributors, 69 FR 62089 (2004); Shani Distributors, 68 
FR 62324 (2003). The Deputy Administrator also finds factor

[[Page 76868]]

five relevant to the results of DEA's random customer verifications 
where several of Respondent's proposed customers informed investigators 
that listed chemicals products likely would not be purchased from 
Respondent.
    Factor five is also relevant to Respondent's lack of procedure for 
identifying suspicious or unusual purchases of list I chemical 
products. Factor five is further relevant to DEA's investigative 
findings regarding Respondent's inability to confirm the existence of 
its customers. The Deputy Administrator is also somewhat concerned by 
the Jiwani's inability to identify a part-time employee. It is unknown 
whether any knowledge of the individual's identity would favorably or 
unfavorably impact DEA's determination with regard to Respondent's 
application for registration. Therefore, the unresolved nature of this 
event is also given consideration under factor five. Based on the 
foregoing, the Deputy Administrator concludes that granting the pending 
application of the Respondent 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 Joey Enterprises, Inc., d/b/a NorthStar Wholesale be, and it hereby 
is denied. This order is effective January 27, 2006.

    Dated: December 15, 2005.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 05-24496 Filed 12-27-05; 8:45am]
BILLING CODE 4410-09-M