[Federal Register Volume 71, Number 237 (Monday, December 11, 2006)]
[Notices]
[Pages 71557-71559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-20978]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Taby Enterprises of Osceola, Inc.; Denial of Application

    On November 23, 2005, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration, issued an Order to 
Show Cause to Taby Enterprises of Osceola, Inc., of Plant City, Florida 
(Respondent). The Show Cause Order proposed to deny Respondent's 
pending application for a DEA Certificate of Registration as a 
distributor of the List I chemicals ephedrine and pseudoephedrine on 
the ground that its registration would be inconsistent with the public 
interest. See 21 U.S.C. 823(h) & 824(a).
    The Show Cause Order specifically alleged that Respondent was 
proposing to distribute List I chemical products to convenience stores, 
which are non-traditional retailers of these products. See Show Cause 
Order at 2. The Show Cause Order further alleged that Respondent had no 
experience in the distribution of List I chemical products. See id. The 
Show Cause Order also alleged that Respondent provided a customer list 
which he represented as including his ``established customers.'' Id. 
The Show Cause Order alleged, however, that when DEA investigators 
contacted these establishments, several ``were out of business'' and 
only a small number of them ``expressed any interest in acquiring 
listed chemical products from'' Respondent. Id. The Show Cause Order 
thus alleged that Respondent had ``not provided complete and accurate 
information to DEA,'' and that DEA therefore could not determine 
whether Respondent would comply with federal law and protect against 
the diversion of listed chemical products. Id.
    The Show Cause Order was served by certified mail, return receipt 
requested. On December 3, 2005, Respondent acknowledged receipt of the 
Show Cause Order as evidenced by the signed Return Receipt Card. Since 
that time, neither Respondent, nor anyone purporting to represent it, 
has responded. Because (1) More than thirty days have passed since 
Respondent's receipt of the Show Cause Order, and (2) no request for a 
hearing has been received, I conclude that Respondent has waived its 
right to a hearing. See 21 CFR 1309.53(c). I therefore enter this final 
order without a hearing based on relevant material found in the 
investigative file and make the following findings.

Findings

    Ephedrine and pseudoephedrine are List I chemicals that, while 
having therapeutic uses, are easily extracted from lawful products and 
used in the illicit manufacture of methamphetamine, a schedule II 
controlled substance. See 21 U.S.C. 802(34); 21 CFR 1308.12(d). As 
noted in numerous DEA orders, ``methamphetamine is an extremely potent 
central nervous system stimulant.'' Sujak Distributors, 71 FR 50102, 
50103 (2006); A-1 Distribution Wholesale, 70 FR 28573 (2005). 
Methamphetamine abuse has destroyed lives and families and ravaged 
communities. Moreover, because of the toxic nature of the chemicals 
used to make the drug, its manufacture creates serious environmental 
harms. David M. Starr, 71 FR 39367 (2006).
    Respondent is a Florida corporation which is located at 1912 Jim 
Redman Parkway, Plant City, Fl., 33566. Respondent has been in business 
since December 2002; its President and Owner is Mr. Muhammad Aslam 
Butt.
    On May 2, 2005, Respondent applied for a registration as a 
distributor of the List I chemicals pseudoephedrine and ephedrine. 
Thereafter, on June 17, 2005, two DEA Diversion Investigators (DIs) 
went to Respondent's proposed registered location to conduct a pre-
registration investigation. The DIs inspected Respondent's facility and 
interviewed Respondent's owner.
    The DIs determined that Respondent sells sundry items including 
tobacco products, lighters, various over-the-counter drugs, batteries 
and small toys, etc., to local convenience stores and gas stations. 
Respondent also operates a retail store at the same location.
    During the interview, Respondent informed the DIs that he wanted to 
expand his product line to include cold medicines that contain 
pseudoephedrine such as Advil, Nyquil/Dayquil, Tylenol Sinus, Tylenol 
Cold, Contact and Tylenol Flu. Respondent also told the DIs that he 
intended to sell Mini-Thins Two Way and other ephedrine products. Mr. 
Butt further stated that he would be the only individual who would 
handle List I chemical products and that he would purchase the products 
from F & S Distributing, Inc., and Price Master Corp.
    According to the investigative file, Mr. Butt has no prior 
experience in the wholesale distribution of List I chemicals. Moreover, 
Mr. Butt told the DIs that he does not verify the identity of his 
customers by asking them to present an ID.

[[Page 71558]]

    The DIs also explained to Mr. Butt DEA's recordkeeping 
requirements. The DIs then sought and obtained a list of the firm's 
established customers; the DIs subsequently attempted to visit eleven 
of them. Only two of these establishments expressed any interest in 
buying List I products from Respondent. As for the other nine stores 
visited by the DIs, two of the stores could not be found at the address 
given by Mr. Butt. At another two stores, the owner/manager could not 
recall whether he had ever purchased merchandise from Respondent. At a 
third location, the owner stated that he had never purchased any 
merchandise from Respondent. At three other stores, the owners told the 
DIs that they had only purchased a limited amount of items from 
Respondent and would not consider buying any List I products from it as 
they already had other suppliers. Finally, at another store, the owner 
had never heard of Respondent.

Discussion

    Under 21 U.S.C. 823(h), an applicant to distribute List I chemicals 
is entitled to be registered unless the registration would be 
``inconsistent with the public interest.'' In making this 
determination, Congress directed that I consider the following factors:

    (1) Maintenance by the applicant of effective controls against 
diversion of listed chemicals into other than legitimate channels;
    (2) Compliance by the applicant with applicable Federal, State, 
and local law;
    (3) Any prior conviction record of the applicant 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.

Id.

    ``These factors are considered in the disjunctive.'' Joy's Ideas, 
70 FR 33195, 33197 (2005). I may rely on any one or a combination of 
factors, and may give each factor the weight I deem appropriate in 
determining whether an application for registration should be denied. 
See, e.g., Starr, 71 FR at 39367; Energy Outlet, 64 FR 14269 (1999). 
Moreover, I am ``not required to make findings as to all of the 
factors.'' Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005); Morall v. 
DEA, 412 F.3d 165, 173-74 (D.C. Cir. 2005). In this case, I conclude 
that Factors One, Four, and Five, establish that granting Respondent's 
application would be inconsistent with the public interest and that its 
application should be denied.

Factor One--Maintenance of Effective Controls Against Diversion

    The investigative file establishes that Respondent does not have in 
place effective controls against diversion. According to the file, 
Respondent does not verify the identity of his customers. Verifying the 
identity of purchasers of List I chemicals is essential to ensuring 
that these products are being bought to meet legitimate consumer demand 
and not for use in the illicit manufacture of methamphetamine. See 21 
CFR 1309.71(b)(8) (requiring the assessment of ``[t]he adequacy of the 
registrant's or applicant's systems for monitoring the receipt, 
distribution, and disposition of List I chemicals in its operations''). 
Respondent's practice of failing to identify its customers thus raises 
a substantial risk that if it was granted a registration, its products 
would be diverted. Cf. Alra Laboratories, Inc. v. DEA, 54 F.3d 450, 451 
(7th Cir. 1995) (``[a]n agency rationally may conclude that past 
performance is the best predictor of future performance''). I thus 
conclude that Respondent, if granted a registration, would not maintain 
effective controls against diversion.
    In support of this finding, I further note the discrepancies 
between the customer information Respondent provided and what the DIs 
found during the customer verifications. This is not a case where there 
are slight variances, but rather material differences between the 
information provided by an applicant and that discovered by DEA 
investigators. While Respondent represented that the list included his 
established customers, four of the stores did not appear to have had a 
business relationship with Respondent, and even among those that did 
have a relationship, most of them had no interest in purchasing List I 
chemical products from it. Finally, some of the stores could not be 
found at the address provided by Respondent. This information does not 
inspire confidence that the products Respondent would handle would 
remain within the legitimate chain of distribution. I thus conclude 
that this factor establishes that Respondent's application should be 
denied.

Factors Two and Three--Compliance With Applicable Law and the 
Applicant's Prior Record of Relevant Criminal Convictions

    The file does not contain any evidence that Respondent has failed 
to comply with applicable Federal, State or local laws. The file also 
does not contain any evidence that Respondent, or its owner, has been 
convicted of any drug related criminal offense.

Factor Four--The Applicant's Past Experience in the Manufacture or 
Distribution of Chemicals

    According to the investigative file, neither Respondent, nor its 
owner, has any experience in the wholesale distribution of List I 
chemical products. Numerous DEA final orders have made clear that 
because of the potential for diversion, an applicant's (and its 
controlling person's) lack of experience in distributing List I 
chemicals is a factor which weighs heavily against granting an 
application for a registration. Tri-County Bait Distributors, 71 FR 
52160, 52613 (2006); Jay Enterprises, 70 FR 24620, 24621 (2005); ANM 
Wholesale, 69 FR 11652, 11653 (2004).

Factor Five--Other Factors That Are Relevant To and Consistent With 
Public Health and Safety

    Numerous DEA orders recognize that convenience stores and gas-
stations constitute the non-traditional retail market for legitimate 
consumers of products containing pseudoephedrine and ephedrine. See, 
e.g., Tri-County Bait Distributors, 71 FR at 52161; D & S Sales, 71 FR 
37607, 37609 (2006); Branex, Inc., 69 FR 8682, 8690-92 (2004). DEA 
orders also establish that the sale of certain List I chemical products 
by non-traditional retailers is an area of particular concern in 
preventing diversion of these products into the illicit manufacture of 
methamphetamine. See, e.g., Joey Enterprises, 70 FR 76866, 76867 
(2005). As Joey Enterprises explains, ``[w]hile there are no specific 
prohibitions under the Controlled Substances Act regarding the sale of 
listed chemical products to [gas stations and convenience stores], DEA 
has nevertheless found that [these entities] constitute sources for the 
diversion of listed chemical products.'' Id. See also TNT Distributors, 
70 FR 12729, 12730 (2005) (special agent testified that ``80 to 90 
percent of ephedrine and pseudoephedrine being used [in Tennessee] to 
manufacture methamphetamine was being obtained from convenience 
stores''); OTC Distribution Co., 68 FR 70538, 70541 (2003) (noting 
``over 20 different seizures of [gray market distributor's] 
pseudoephedrine product at clandestine sites,'' and that in eight month 
period distributor's product ``was seized at clandestine laboratories 
in eight states, with over 2 million dosage units seized in Oklahoma 
alone.''); MDI Pharmaceuticals, 68 FR 4233, 4236 (2003) (finding that 
``pseudoephedrine

[[Page 71559]]

products distributed by [gray market distributor] have been uncovered 
at numerous clandestine methamphetamine settings throughout the United 
States and/or discovered in the possession of individuals apparently 
involved in the illicit manufacture of methamphetamine'').
    Moreover, during clandestine lab seizures, DEA has frequently found 
high count List I chemical products, thus indicating that these are the 
preferred products for illicit methamphetamine manufacturers. See OTC 
Distribution, 68 FR at 70541, MDI Pharmaceuticals, 68 FR at 4236. While 
Respondent proposed to sell traditional products, he also sought to 
sell similar high count products.
    Significantly, all of Respondent's proposed customers participate 
in the non-traditional market for ephedrine and pseudoephedrine 
products. DEA orders recognize that there is a substantial risk of 
diversion of List I chemicals into the illicit manufacture of 
methamphetamine when these products are sold by non-traditional 
retailers. See, e.g., Joy's Ideas, 70 FR at 33199 (finding that the 
risk of diversion was ``real, substantial and compelling''); Jay 
Enterprises, 70 FR at 24621 (noting ``heightened risk of diversion'' 
should application be granted). Under DEA precedents, an applicant's 
proposal to sell into the non-traditional market weighs heavily against 
the granting of a registration under factor five. So too here.
    Because of the methamphetamine epidemic's devastating impact on 
communities and families throughout the country, DEA has repeatedly 
denied an application when an applicant proposed to sell into the non-
traditional market and analysis of one of the other statutory factors 
supports the conclusion that granting the application would create an 
unacceptable risk of diversion. Thus, in Xtreme Enterprises, 67 FR 
76195, 76197 (2002), my predecessor denied an application observing 
that the respondent's ``lack of criminal record, compliance with the 
law and willingness to upgrade her security system are far outweighed 
by her lack of experience with selling List I chemicals and the fact 
that she intends to sell ephedrine almost exclusively in the gray 
market.'' More recently, I denied an application observing that the 
respondent's ``lack of a criminal record and any 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.'' Jay Enterprises, 70 FR at 24621. 
Accord Prachi Enterprises, 69 FR 69407, 69409 (2004).
    Here, Respondent clearly lacks effective controls against 
diversion, has no experience in the wholesale distribution of List I 
chemical products, and yet intends to distribute these products to non-
traditional retailers, a market in which the risk of diversion is 
substantial. Given these findings, it is indisputable that granting 
Respondent's application would be ``inconsistent with the public 
interest.'' 21 U.S.C. 823(h).

Order

    Pursuant to the authority vested in me by 21 U.S.C. 823(h), and 28 
CFR 0.100(b) & 0.104, I hereby order that the application of Respondent 
Taby Enterprises of Osceola, Inc., for a DEA Certificate of 
Registration as a distributor of List I chemicals be, and it hereby is, 
denied. This order is effective January 10, 2007.

    Dated: December 1, 2006.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E6-20978 Filed 12-8-06; 8:45 am]
BILLING CODE 4410-09-P