[Federal Register Volume 72, Number 69 (Wednesday, April 11, 2007)]
[Notices]
[Pages 18275-18280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-6759]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 05-8]


Rick's Picks, L.L.C.; Revocation of Registration

    On October 7, 2004, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration, issued an Order to 
Show Cause to Rick's Picks, L.L.C. (Respondent), of Moore, Oklahoma. 
The Show Cause Order proposed the revocation of Respondent's DEA 
Certificate of Registration, 003949RPY, as a distributor of list I 
chemicals, on the ground that its continued registration was 
inconsistent with the public interest. Show Cause Order at 1 (citing 21 
U.S.C. 823(h)).
    The Show Cause Order incorporated the allegations of a show cause 
order which was initiated by the Oklahoma State Bureau of Narcotics and 
Dangerous Drugs Control; the latter order proposed the denial of 
Respondent's application for a state registration to distribute 
pseudoephedrine products that are Schedule V drugs under State law, as 
well as the revocation of Respondent's state registration to distribute 
pseudoephedrine products which are not scheduled under state law. Id. 
at 2. Specifically, the state show cause order alleged that Respondent 
and its owner, Rick D. Fowler, ``have a history of selling very large 
amounts of pseudoephedrine under suspicious and questionable 
circumstances, and with great negligence and reckless disregard for 
whether this product would be used in the clandestine manufacture of 
methamphetamine,'' and that Respondent, and its owner, had engaged in 
this activity notwithstanding ``numerous warnings from . . . DEA 
officials that Respondent's sales were fueling illicit methamphetamine 
laboratories.'' Id.
    Relatedly, the State show cause order alleged that from January 
2002 through April 2004, Respondent sold more than $ 2.2 million of Max 
Brand (for a total of nearly 10.5 million tablets), a product in which 
pseudoephedrine is the single active ingredient and which is the 
``preferred choice [of] methamphetamine cooks.'' Id. at 4-5. The state 
show cause order also alleged that Respondent had brokered the sale of 
approximately 400,000 pseudoephedrine tablets for D & E Pharmaceutical. 
Id. at 5. The DEA Show Cause Order then repeated ten different 
allegations made in the state show cause order which asserted specific 
instances in which Respondent had sold extraordinary quantities of 
pseudoephedrine to convenience stores, gas stations and other non-
traditional retailers of this product, and that Respondent had failed 
to report any of these transactions to DEA. Id. at 6-8.
    The State show cause order further alleged that pseudoephedrine 
distributed by Respondent had been found at twenty-two methamphetamine 
dumpsites. Id. at 8. Finally, the DEA Show Cause Order alleged that in 
November 2003, DEA had conducted an inspection of Respondent during 
which numerous recordkeeping violations were observed. Id. at 9.
    Respondent requested a hearing on the allegations. The matter was 
assigned

[[Page 18276]]

to Administrative Law Judge (ALJ) Mary Ellen Bittner, who conducted a 
hearing in Oklahoma City, Oklahoma, on January 10 and 11, 2006. At the 
hearing, the Government introduced both testimonial and documentary 
evidence; Respondent introduced only documentary evidence. Both parties 
submitted post-hearing briefs.
    On August 9, 2006, the ALJ issued her decision. In that decision, 
the ALJ concluded that Respondent's continued registration would be 
inconsistent with the public interest and recommended that its 
registration be revoked. Neither party filed exceptions.
    Having considered the record as a whole, I hereby issue this 
decision and final order. I adopt the ALJ's findings of fact and 
conclusions of law in their entirety. For the reasons set forth below, 
I hold that Respondent's continued registration would be inconsistent 
with the public interest and therefore revoke its registration and deny 
its pending application for renewal.

Findings

    Respondent, an Oklahoma corporation, is a distributor of assorted 
merchandise to convenience stores, gas stations, and other small 
retailers in that State. Respondent's sole owner is Mr. Rickey Fowler. 
ALJ Dec. at 15.
    Respondent currently holds DEA Certificate of Registration, 
003949RPY, which authorizes it to distribute list I chemicals. Gov. Ex. 
1. While Respondent's registration certificate states that its 
registration expired on April 30, 2005, the record indicates that 
Respondent filed a timely renewal application. Tr. 24. Therefore, 
Respondent's registration remains in effect until the conclusion of 
this proceeding. See 5 U.S.C. 558(c).

Methamphetamine and the Market for List I Chemicals

    Pseudoephedrine is lawfully marketed under the federal Food, Drug 
and Cosmetic Act for over-the-counter use as a decongestant. 
Pseudoephedrine is, however, also regulated as a list I chemical under 
the Controlled Substances Act because it is easily extracted from non-
prescription 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).
    Methamphetamine ``is a powerful and addictive central nervous 
system stimulant.'' T. Young Associates, Inc., 71 FR 60567 (2006). The 
illegal manufacture and abuse of methamphetamine pose a grave threat to 
this country. Methamphetamine abuse has destroyed numerous lives and 
families and ravaged communities. Moreover, because of the toxicity of 
the chemicals used in producing the drug, its illicit manufacture 
causes serious environmental harms. Id.
    Methamphetamine abuse has been an especially serious problem in the 
State of Oklahoma. In 1999, law enforcement authorities seized 391 
illicit laboratories/dumpsites in the State; in 2003 (the last full 
year before the State enacted laws restricting the distribution of 
pseudoephedrine), authorities seized 1091 illicit laboratories/
dumpsites. See Gov. Exs. 7 & 11. Moreover, in 2004, there were still 
659 seizures. See Gov. Ex. 12. According to a senior agent for the 
Oklahoma Bureau of Narcotics, Max Brand in tablet form, a product in 
which pseudoephedrine (60 mg.) is the single active ingredient, is the 
preferred product of the State's illicit methamphetamine cooks.\1\ See 
also Tr. 46 & 180.
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    \1\ In response to the methamphetamine problem, effective April 
6, 2004, Oklahoma made pseudoephedrine in tablet form a Schedule V 
controlled substance. Pseudoephedrine in liquid, liquid-filled 
capsules, and gel caps is, however, exempt from the requirement 
provided it is not the only active ingredient in the product. See 63 
Okl. St. Ann. section 2-212.
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    In the course of adjudicating numerous cases, DEA has acquired 
substantial expertise pertaining to the market for list I chemical 
products containing pseudoephedrine. Accordingly, pursuant to 5 U.S.C. 
556(e), I take official notice of the following facts related to the 
market for pseudoephedrine.\2\
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    \2\ Under the Administrative Procedure Act, ``[a]gencies may 
take official notice of facts at any stage in a proceeding-even in 
the final decision.'' Attorney General's Manual on the 
Administrative Procedure Act 80 (1946) ( Wm. W. Gaunt & Sons, Inc., 
reprint 1979). In accordance with the Act, Respondent may request a 
reopening of the proceeding to contest the facts of which I am 
taking official notice by filing a request with supporting 
affidavits no later than fifteen days after service of this order.
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    According to Jonathan Robbin, an expert in statistical analysis of 
demographic, economic, geographic and survey data, ``over 97% of all 
sales of non-prescription drug products occur in drug stores and 
pharmacies, supermarkets, large discount merchandisers and electronic 
shopping and mail order houses.'' T. Young, 71 FR at 60568. Moreover, 
``sales of non-prescription drugs by convenience stores (including both 
those that sell and do not sell gasoline), account for only 2.2% of the 
overall sales of all convenience stores that handle the line and only 
0.7% of the total sales of all convenience stores.'' Id.
    Based on his study of U.S. Government Economic Census Data, 
information obtained from the National Association of Convenience 
Stores, and commercially available point of sale transaction data, Mr. 
Robbin has constructed a model of the traditional market for retail 
sales of pseudoephedrine. See id. According to Mr. Robbin, ``sales of 
pseudoephedrine account for only about 2.6% of the sales of health and 
beauty care products in convenience stores and only 0.05% of total in-
store (non-gasoline) sales.'' Id.
    Moreover, ``the normal expected retail sale of pseudoephedrine 
(Hcl) tablets in a convenience store may range between $ 0 and $ 40 per 
month, with an average of $ 20.60 per month.'' Id. According to Mr. 
Robbin, a monthly retail sale at a non-traditional retailer of ``$ 60 
of pseudoephedrine would occur less than one in 1,000 times in random 
sampling.'' Id. Moreover, a monthly retail sale of ``$ 100 in 
pseudoephedrine would occur about once in a million times in random 
sampling.'' Id.

Findings Pertaining To Respondent

    Respondent first became registered to distribute list I chemicals 
in January 1999. Prior to becoming registered, DEA Diversion 
Investigators (DIs) conducted a pre-registration investigation. During 
this visit, the DIs discussed with Mr. Fowler the recordkeeping 
requirements imposed by federal law and regulations. Tr. 32-33. The DIs 
also provided Mr. Fowler with DEA notices that discussed suspicious 
transactions and advised that certain list I chemical products 
including pseudoephedrine were being diverted into the illicit 
manufacture of methamphetamine. Id. at 34. One of the notices 
specifically stated that ``[t]he exemption from certain recordkeeping 
and reporting requirements for below threshold transactions . . . does 
not reduce the risk of criminal liability.'' Gov. Ex. 3. This notice 
also advised Mr. Fowler to ``[r]eport all suspicious orders to your 
nearest DEA office immediately.'' Id.
    The DIs, however, also gave Mr. Fowler a handout listing required 
reports. See Resp. Ex. 18, Tr. 64. More specifically, this document 
stated that reports were required for ``[a]ny regulated transaction 
involving an extraordinary quantity of a Listed Chemical,'' ``[a]ny 
regulated transaction involving an uncommon method of payment or 
delivery,'' and ``[a]ny regulated transaction involving any other 
circumstances that the regulated person (supplier) believes may 
indicate that the List (sic) Chemical will be used in the illicit 
production of controlled substances.'' Resp. Ex. 18.
    In September 2001, DEA DIs returned to Respondent for a scheduled

[[Page 18277]]

inspection. Among other things, the DIs determined that Respondent was 
storing list I chemicals in a trailer at a boat storage and not at its 
registered location. Id. at 37. The DIs also found that Respondent was 
in violation of recordkeeping requirements because its receiving 
invoices did not include the date that products were received and its 
sales invoices did not indicate package size. Id. at 38. Respondent's 
owner was issued a letter admonishing him for the violations. Resp. Ex. 
2. Subsequently, Mr. Fowler wrote to one of the DIs advising of changes 
Respondent would make in its recordkeeping; at that time, DEA took no 
further action. ALJ Dec. at 16.
    On November 3, 2003, DEA DIs conducted another inspection of 
Respondent. The DIs determined that while Respondent was now properly 
storing its list I chemical products, it was still violating the 
recordkeeping requirements. See id. at 16-17. DEA issued Respondent an 
additional letter of admonition. Tr. 41. During this visit, DEA also 
obtained Respondent's receiving and sales invoices for the period from 
January 1, 2002, through November 1, 2003. Id. at 261; Resp. Ex. 25.\3\
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    \3\ On April 7, 2004, a DEA DI again returned to Respondent to 
discuss the then-recently enacted state legislation which scheduled 
pseudoephedrine in tablet form. During this visit, the DI conducted 
a closing inventory. ALJ Dec. at 17.
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    In May 2004, law enforcement authorities obtained a warrant and 
executed a search of Respondent. Based on records obtained during the 
search, as well as the records obtained during the November 2003 
inspection, DEA investigators compiled a spreadsheet of Respondent's 
purchases of pseudoephedrine. Gov. Ex. 21; Tr. 187. According to this 
document, between January 28, 2002, and March 6, 2004, Respondent had 
purchased 10,062,144 tablets of Max Brand pseudoephedrine at a 
wholesale price of $ 941,072.20. Id. Moreover, during the 2003 calendar 
year, Respondent purchased nearly six million tablets at a wholesale 
price of $ 564,884.20. Id. Furthermore, between January 5, 2004, and 
March 6, 2004 (shortly before the Oklahoma statute scheduling tablet-
form pseudoephedrine became effective), Respondent purchased 
approximately 1.8 million tablets at a wholesale price of $ 173,004. 
Id.
    DEA investigators also compiled a spreadsheet of Respondent's 
pseudoephedrine sales. See Gov. Ex. 23. This 102 page document lists 
Respondent's sales to each store by product size and date. The document 
shows that Respondent repeatedly made monthly sales of a $ 1,000 or 
more of pseudoephedrine products to the great majority of the 
stores.\4\ See generally id.
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    \4\ One of the DIs testified that her review of Respondent's 
records showed that its sales of pseudoephedrine constituted eighty-
five percent of its business. ALJ Dec. at 17. The Government also 
introduced evidence that Respondent brokered the sale of substantial 
amounts of ``Bolt'' brand pseudoephedrine directly from its 
manufacturer to various stores. Tr. 273-276; Gov. Ex. 24, at 5-8.
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    For example, from January 2002 through April 6, 2004, Respondent 
sold $ 62,658.00 (and brokered the sale of $ 7,013) of pseudoephedrine 
to Bernhardt's, a convenience store in Pharoah, Oklahoma. Gov. Ex. 24, 
at 5. During the same period, Respondent sold $ 50,256 (and brokered 
the sale of $ 7,015) of pseudoephedrine to Dock's General Store in 
Council Hill, Oklahoma, and sold $ 44,640 (and brokered the sale of $ 
7,015) of the chemical to Dock's General Store in Leonard, Oklahoma. 
Id. at 6-7. Both of these establishments were bait and tackle shops. 
Tr. 269-71. Respondent also sold $ 37,116 (and brokered the sale of $ 
4,676) of the chemical to Kern's Korner Grocery in Henryetta, Oklahoma. 
Gov. Ex. 24, at 8. Furthermore, from January 2002 through December 
2002, Respondent sold $ 11,880 of pseudoephedrine to the Funky Munky, a 
head shop located in McAlester, Oklahoma. Id. at 9; see also Tr. 273.
    The record also establishes that between February 2002 and March 
2004, Respondent sold $ 97,026 (and 468,144 tablets) of pseudoephedrine 
to five stores in Poteau, a small city in eastern Oklahoma. Of 
significance among these customers, Respondent sold $ 30,672 to Babe's 
Place and $ 37,590 to the Tote-A-Poke  1. Gov. Ex. 24, at 3. 
It also sold $14,040 to Burkes Friendly Store; all of the sales to 
Burkes occurred between February 2002 and March 2003. Gov. Ex. 23, at 
15-16.
    The above per-store figures are based on Respondent's wholesale 
prices. Several of Respondent's exhibits indicate that the suggested 
retail price was typically twice the wholesale price. See Resp. Exh. 
20, at 19; Resp. Ex. 19. Ultimately, even if Respondent's customers 
sold the products at far less than the suggested retail prices, their 
sales of these products so greatly exceeded the monthly expected sales 
range of $ 0 to $ 40, with an average of $ 20.60, that the probability 
that the products were being purchased to meet legitimate consumer 
demand for use as a decongestant is infinitesimal. Indeed, as DEA's 
expert has testified, a monthly retail sale of $ 100 in pseudoephedrine 
to meet legitimate demand would occur about once in a million times in 
random sampling. Here, where there are numerous stores to which 
Respondent sold repeatedly $ 1,000 or more per month at wholesale 
prices, the only plausible explanation is that the products were being 
diverted into the illicit manufacture of methamphetamine.\5\ I thus 
find that substantially all of Respondent's products were being 
diverted.
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    \5\ During cross-examination, Respondent's counsel elicited 
testimony from a Government witness that a few of the stores it sold 
to were located on highways--thus suggesting that the sales at these 
stores were to meet legitimate consumer demand. Tr. 201-02. This 
testimony does not persuade me that Respondent's products were being 
sold to meet legitimate demand. The ALJ found that Respondent had 
more than 200 customers, see ALJ Dec. at 18; Respondent's line of 
cross-examination begs the question: What about the other 200 plus 
stores? Indeed, the ALJ found that ``some of Respondent's customers 
were convicted of criminal charges involving the diversion of 
pseudoephedrine.'' Id.
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    The ALJ further credited the testimony of a DEA investigator that 
``some of Respondent's customers engaged in practices that the DEA 
considers suspicious.'' ALJ at 18. More specifically, these practices 
included: (1) Ordering only single-entity pseudoephedrine rather than a 
variety of pseudoephedrine and other over-the-counter drug products, 
(2) selling single-entity products that are marketed in large 
quantities and not in blister packs, (3) selling products that have 
only been on the market for a few years and which receive little 
advertising, and (4) purchasing large quantities of pseudoephedrine 
throughout the year by establishments that traditionally do not sell 
large quantities of these products and do little or no marketing of 
them.\6\ ALJ at 18, Tr. 349-51.
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    \6\ Most of these indicia were published by DEA in February 
1999. See Suspicious Orders Task Force, Report to the U.S. Attorney 
General Appendix A (1999). The indicia were re-published in the June 
2002 Chemical Handler's Manual. See DEA, Chemical Handler's Manual--
A Guide to Chemical Control Regulations 40-43 (June 2002).
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    The ALJ further found that ``Respondent never sold more than the 
[1000 grams] threshold amount to any one customer in a calendar 
month.'' ALJ at 20. The ALJ also found that Respondent's owner twice 
``reported a suspicious sale to'' DEA. Id. According to the record, on 
October 8, 2003, Mr. Fowler reported that while servicing a store the 
previous day, ``the store clerk made a comment that she needed products 
that Methamphetamine is made from.'' Resp. Ex. 6, at p. 2. Mr. Fowler 
further wrote that he had ``suspended sales of all pseudo ephedrine 
products to this store due to this comment,'' and that he would ``not 
service this store in the future with any cold medications containing 
pseudo ephedrine.'' Id. Approximately, a month

[[Page 18278]]

later Mr. Fowler also reported that he had been contacted by a person 
who wanted to come to his premises to purchase products but Mr. Fowler 
advised him that his firm ``did not do business this way.'' Id. at 3. 
Mr. Fowler further stated that the address given by this person was 
non-existent and that he had determined that the business was not 
legitimate.\7\ Id.
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    \7\ While Respondent introduced several form letters to 
customers purporting to impose requirements for the sale of 
pseudoephedrine, Resp. Exs. 11-13, as the ALJ noted, ``Respondent 
did not call any witnesses at the hearing, and there is no evidence 
as to whether such letters were mailed to Respondent's customers.'' 
ALJ Dec. at 19.
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    On November 14, 2005, the Cleveland County, Oklahoma, District 
Attorney filed a felony information charging Mr. Fowler with criminal 
racketeering under Oklahoma law. Gov. Ex. 42. More specifically, the 
information alleged that ``between January 2002 and April 2004,'' 
Fowler ``was willfully, knowingly and criminally associated with an 
enterprise,'' which consisted of himself, ``individually, and as the 
owner of Rick Picks,'' the affairs of which ``were to distribute 
pseudoephedrine, a precursor in the manufacturing of methamphetamine, 
with reckless disregard for how the product was going to be used in 
violation of 63 O.S. 2-333(A).'' Id. I further take official notice of 
the fact that on October 16, 2006, the State filed a second amended 
felony information charging Respondent with the ``unlawful distribution 
of pseudoephedrine with reckless disregard for how it was going to be 
used.'' Finally, I take official notice of the fact that on February 9, 
2007, a jury found Mr. Fowler guilty of the crime charged in the second 
amended information. See Docket Sheet, State v. Fowler, No. CF-2005-
1651, Cleveland County, Oklahoma, District Court.

Discussion

    Section 304(a) of the Controlled Substances Act provides that a 
registration to distribute a list I chemical ``may be suspended or 
revoked * * * upon a finding that the registrant * * * has committed 
such acts as would render his registration under section 823 of this 
title inconsistent with the public interest as determined under such 
section.'' 21 U.S.C. 824(a)(4). In making this determination, Congress 
directed that I consider the following factors:

    (1) Maintenance by the [registrant] 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. section 823(h).
    ``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 a registration should be revoked or an application 
for renewal of a registration should be denied. See, e.g., David M. 
Starr, 71 FR 39367, 39368 (2006); 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 hold that 
factors one, two, four, and five overwhelmingly establish that 
Respondent's continued registration would be ``inconsistent with the 
public interest.'' 21 U.S.C. 823(h). Accordingly, I further hold that 
Respondent's registration should be revoked and its pending application 
for renewal should be denied.

Factor One--Maintenance of Effective Controls Against Diversion

    I concur with the ALJ's conclusion that the record does not 
establish that Respondent fails to provide adequate physical security 
for list I chemicals. However, ``'[p]rior agency rulings have applied a 
more expansive view of factor one than mere physical security.'' ' D & 
S Sales, 71 FR 37607, 37610 (2006) (quoting OTC Distribution Co., 68 FR 
70538, 70542 (2003)). Relatedly, I have previously held that a 
registrant is ``required to exercise a high degree of care in 
monitoring its customers' purchases.'' D & S Sales, 71 FR at 37610.
    Respondent argues that he maintains effective controls against 
diversion because he obtained proof of identity from his customers and 
only distributed to ``legitimate store[s],'' Resp. Statement of 
Supporting Reasons 9 [hereinafter Resp. Br.], he maintained adequate 
and retrievable records, id., and he ``did not fail to report 
suspicious sales because he was only required to report suspicious 
regulated transactions,'' i.e., transactions that exceeded the 1,000 
grams threshold. Id. at 11 (citing 21 U.S.C. 830(b)(1) and 21 CFR 
1310.05(a)(1)).
    Respondent apparently believes that as long as he sold under 
threshold amounts he could distribute pseudoephedrine without taking 
any further steps to determine the ultimate disposition of his 
products. Respondent's understanding is mistaken. Congress's imposition 
of recordkeeping and reporting requirements for regulated transactions 
does not mean that one can engage in below-threshold transactions 
without any further obligation to determine whether the products are 
likely to be diverted. Indeed, DEA has found that products which have 
been distributed to non-traditional retailers in sub-threshold 
transactions are routinely diverted. Contrary to Respondent's view, the 
threshold provisions pertaining to regulated transactions do not create 
a safe harbor which allows a registrant to sell list I chemicals 
without any further duty to investigate how the products are being 
used.
    Respondent further contends that ``[t]here was no evidence 
presented that [it] had actual knowledge [that] any customer was 
diverting pseudoephedrine for the manufacture of methamphetamine.'' Id. 
at 10. In short, Respondent raises the ostrich defense.
    Congress, however, has rejected the ostrich defense in creating 
criminal liability under 21 U.S.C. 841(c)(2), and I have previously 
rejected this defense as incompatible with the purpose of proceedings 
under 21 U.S.C. 823 and 824, which are brought to protect the public 
interest. See D & S Sales, 71 FR at 37612; T. Young Associates, 71 FR 
at 60572. As D & S Sales explained: ``Burying one's head in the sand 
while his firm's products are being diverted may allow one to maximize 
profits. But it is manifestly inconsistent with public health and 
safety.'' 71 FR at 37612. More recently, I revoked a registration 
holding--albeit in the context of analyzing factors four and five--that 
a registrant's lack of ``any intent to divert or to sell to customers 
who were diverting to the illicit manufacture of methamphetamine is 
irrelevant.'' T. Young, 71 FR at 60572. See also Joy's Ideas, 70 FR at 
33198 (revoking registration notwithstanding that distributor was ``an 
unknowing and unintentional contributor to [the] methamphetamine 
problem.'').
    Respondent's owner also contends that he maintained adequate 
controls because he ``reported suspicious activities to the DEA in the 
past.'' Resp. Br. at 9. According to the record, Mr. Fowler reported an 
encounter he had during which a store clerk informed him ``that she 
needed products that Methamphetamine is made from.'' Resp. Ex. 6. at 2. 
Mr. Fowler then stated that he would stop servicing the store. Id.
    A review of the compilation of Respondent's sales records 
indicates,

[[Page 18279]]

however, that this store--the 66 Lake Stop in Arcadia, Oklahoma--was 
actually one of the smaller volume purchasers of its pseudoephedrine 
products. See Gov. Ex. 23, at 2. For example, on May 24, 2003, the 
store purchased $ 270 of products; on July 11, 2003, the store 
purchased $ 105: and on August 13, 2003, the store purchased $ 252. Id. 
The fact that this store ``needed more products that Methamphetamine is 
made from,'' begs the question of what Mr. Fowler thought was the 
likely disposition of the products he sold to the numerous customers 
that were repeatedly buying more than $ 1,000 a month of the chemical 
from his firm.
    Relatedly, Mr. Fowler contends that ``the DEA did not warn him that 
he was making suspicious sales, [or] that he was making excessive 
sales'' before November 3, 2003. Resp. Br. at 10. See also id. at 2 
(``Between September, 2001 and November 3, 2003, the DEA never formally 
warned Mr. Fowler that he was selling excessive amounts of 
pseudoephedrine.''). The suggestion that Respondent would have stopped 
its excessive sales if it had been warned is absurd. As the 
Government's compilation of Respondent's sales invoices establishes, 
Mr. Fowler continued to sell extraordinary quantities of 
pseudoephedrine to numerous stores for months following the November 3, 
2003 warning. Indeed, it appears that the only reason that the sales 
eventually stopped was because Respondent's customers ceased purchasing 
the products in anticipation of the effective date of the new Oklahoma 
law which restricted the sale of tablet-form pseudoephedrine. See 
generally Gov. Ex. 23. In short, it is clear that DEA's warning did not 
register with Mr. Fowler. I thus conclude that Respondent lacks 
effective controls against diversion and that this factor is, by 
itself, sufficient to conclude that Respondent's continued registration 
would be inconsistent with the public interest.

Factors Two and Three--Respondent's Compliance With Applicable Laws and 
Record of Criminal Convictions

    As noted by the ALJ, Respondent has previously been admonished for 
several violations of DEA regulations pertaining to security and 
recordkeeping requirements. Moreover, while Mr. Fowler has not been 
formally convicted of a crime (because a final judgment has yet to be 
entered in the state criminal case), a jury recently found him guilty 
of the state law offense of distributing pseudoephedrine ``with 
reckless disregard as to how the product will be used.'' 63 Okl. St. 
Ann. section 2-333(A). I also hold that Respondent's distributions of 
pseudoephedrine violated 21 U.S.C. 841(c)(2) (prohibiting the 
possession or distribution of ``a listed chemical knowing, or having 
reasonable cause to believe, that the listed chemical will be used to 
manufacture a controlled substance''). Accordingly, while Mr. Fowler 
has not been formally convicted of a crime, I conclude that 
Respondent's record of compliance with applicable federal and state 
laws further demonstrates that Respondent's continued registration 
would be inconsistent with the public interest.

Factors Four and Five--Respondent's Experience in the Distribution of 
Chemicals and Other Factors Relevant to and Consistent With Public 
Health and Safety

    As explained above, Respondent's experience in the distribution of 
listed chemicals is characterized by the egregious and criminal 
misconduct of its owner, Mr. Fowler. But even if there was no such 
evidence, I would still conclude--consistent with DEA precedent--that 
Respondent's excessive sales to non-traditional retailers would support 
a finding under factor five that its continued registration would be 
inconsistent with the public interest.
    While pseudoephedrine has a legitimate medical use as a 
decongestant, its diversion into the illicit manufacture of 
methamphetamine has had pernicious effects on families and communities 
throughout the nation. Cutting off the supply source of methamphetamine 
traffickers is thus of critical importance in protecting the public 
from the devastation wreaked by this drug.
    DEA orders have established that convenience stores and gas-
stations constitute the non-traditional retail market for legitimate 
consumers of products containing this chemical. See, e.g., Tri-County 
Bait Distributors, 71 FR 52160, 52161-62; D & S Sales, 71 FR at 37609; 
Branex, Inc., 69 FR 8682, 8690-92 (2004). DEA has further found that 
there is a substantial risk of diversion of pseudoephedrine 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'' and ``substantial''); 
Jay Enterprises, 70 FR 24620, 24621 (2005) (noting ``heightened risk of 
diversion'' should application be granted). See also TNT Distributors, 
70 FR 12729, 12730 (2005) (establishing that ``80 to 90 percent of 
ephedrine and pseudoephedrine being used [in Tennessee] to manufacture 
methamphetamine was being obtained from convenience stores''); Joey 
Enterprises, 70 FR 76866, 76867 (2005) (``[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'').
    The record here likewise establishes that there is a substantial 
nexus between the sale of non-traditional list I chemical products by 
non-traditional retailers and the diversion of these products into the 
illicit manufacture of methamphetamine. Here, testimony establishes 
that Max Brand pseudoephedrine was the preferred product of Oklahoma 
meth. cooks and that this product was found in about eighty percent of 
the illicit laboratories seized by law enforcement authorities. Tr. 
180-82. The Government also established that Max Brand pseudo was not 
found in traditional retailers and that it was distributed to non-
traditional retailers such as convenience stores and gas stations from 
which meth cooks obtained the product. See id. Furthermore, the 
Government also showed that ``the vast majority of pseudoephedrine 
diversion'' in Oklahoma occurs in the non-traditional retail market. 
Id. at 216.
    To protect the public from the harms caused by methamphetamine 
abuse, DEA has repeatedly revoked the registrations of list I chemical 
distributors who supplied the non-traditional market for selling 
quantities of products that clearly exceeded legitimate demand and were 
likely diverted into the illicit manufacture of methamphetamine. See T. 
Young Associates, Inc., 71 FR at 60572-73; D & S Sales, 71 FR at 37611-
12; Joy's Ideas, 70 FR at 33198-99; Branex, Inc., 69 FR at 8693-96. 
Here, the record clearly establishes that Respondent distributed 
pseudoephedrine products in quantities that grossly exceeded legitimate 
consumer demand for these products as a decongestant. As found above, 
the only plausible explanation for these extraordinary sales is that 
Respondent's products were being diverted into the illicit manufacture 
of methamphetamine. See T. Young, 71 FR at 60572, D & S Sales, 71 FR at 
37611 (finding diversion occurred ``[g]iven the near impossibility that 
* * * sales were the result of legitimate demand''); Joy's Ideas, 70 FR 
at 33198 (finding diversion occurred in the absence of ``a plausible 
explanation in the record for this deviation from the expected norm'').

[[Page 18280]]

    While in this case, there is substantial evidence that Mr. Fowler 
distributed pseudoephedrine with a reckless disregard for its eventual 
use, such proof is not essential to sustain the revocation of 
Respondent's registration. A proceeding under section 304 of the CSA is 
not a criminal prosecution. Rather, its purpose is to protect the 
public interest. See Leo R. Miller, 53 FR 21931, 21932 (1988).
    `` `In determining the public interest,' Congress granted the 
Attorney General broad discretion to consider any other factor that is 
`relevant to and consistent with the public health and safety.'' ' T. 
Young, 71 FR at 60572 (quoting 21 U.S.C. 823(h)(5)). The statutory text 
of factor five does not require that the Government prove that a 
registrant or its key employees acted with any particular mens rea.\8\ 
As I have previously explained, ``the diversion of list I chemicals 
into the illicit manufacture of methamphetamine poses the same threat 
to public health and safety whether a registrant sells the products 
knowing they will be diverted, sells them with a reckless disregard for 
the diversion, see D & S Sales, 71 FR at 37610-12, or sells them being 
totally unaware that the products were being diverted.'' T. Young, 71 
FR at 60572 (citing Joy's Ideas, 70 FR at 33198) (revoking registration 
notwithstanding that distributor was ``an unknowing and unintentional 
contributor to [the] methamphetamine problem''). Accordingly, 
Respondent's excessive sales of pseudoephedrine also provide reason 
alone to conclude that its continued registration would be inconsistent 
with the public interest.
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    \8\ To the extent mens rea is relevant, it is accounted for in 
factor three, which directs the consideration of a registrant's 
prior conviction record. See 21 U.S.C. 823(h)(3).
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    In sum, four of the five factors conclusively demonstrate that 
Respondent's continued registration is inconsistent with the public 
interest. Furthermore, in accordance with 21 CFR 1316.67, I find that 
Respondent's owner engaged in egregious misconduct and is responsible 
for the diversion of massive amounts of pseudoephedrine into the 
illicit manufacture of methamphetamine. There, I conclude that the 
public interest requires that Respondent's registration be revoked 
effective immediately.

Order

    Accordingly, pursuant to the authority vested in me by 21 U.S.C. 
823(h) & 824(a), as well as 28 CFR 0.100(b) & 0.104, I order that DEA 
Certificate of Registration, 003949RPY, issued to Rick's Picks, L.L.C., 
be, and it hereby is, revoked. I further order that the pending 
application of Rick's Picks, L.L.C., for renewal of its registration 
be, and it hereby is, denied. This order is effective immediately.

    Dated: March 30, 2007.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E7-6759 Filed 4-10-07; 8:45 am]
BILLING CODE 4410-09-P