[Federal Register Volume 72, Number 147 (Wednesday, August 1, 2007)]
[Notices]
[Pages 42114-42118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14815]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Archer's Trading Company; Revocation of Registration

    On February 6, 2006, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration, issued an Order to 
Show Cause to Archer's Trading Company (Respondent), of Mechanicsville, 
Virginia. The Show Cause Order proposed the revocation of Respondent's 
DEA Certificate of Registration, 003001ATY, as a distributor of List I 
chemicals, on the ground that its ``continued registration is 
inconsistent with the public interest.'' Show Cause Order at 1. The 
Show Cause Order also proposed the denial of any pending applications 
for renewal or modification of Respondent's registration. Id.
    The Show Cause Order specifically alleged that Respondent 
distributed List I chemicals to gas stations and convenience stores, 
which DEA has found are non-traditional retailers of

[[Page 42115]]

these products for legitimate therapeutic demand. Id. at 2-3. The Show 
Cause Order alleged that during the period 2001 through 2003, 
Respondent ``sold over-threshold amounts of pseudoephedrine to an 
unregistered individual [who] was subsequently convicted of the federal 
offense of unlawful distribution of listed chemicals.'' Id. at 2. The 
Show Cause Order also alleged that DEA investigators audited 
Respondent's handling of List I chemical products and found that it 
``was unable to account for nearly 3,800 bottles of 60-count 
combination ephedrine'' products and that there were ``numerous 
discrepancies in the firm's sales receipts.'' Id.
    The Show Cause Order further alleged that ``sometime in October-
November 2004, [Respondent] moved its listed chemicals to an unapproved 
location in Ashland, Virginia.'' Id. at 3. Relatedly, the Show Cause 
Order alleged that Respondent violated Federal law by distributing 
products out of the Ashland location. Id. The Show Cause Order also 
alleged that Respondent had failed to report a theft of listed 
chemicals that had occurred at the Ashland location. Id.
    On February 13, 2006, the Show Cause Order was served on 
Respondent's counsel by certified mail, return receipt requested. On 
March 13, 2006, Respondent, through its counsel, requested a hearing. 
The matter was assigned to Administrative Law (ALJ) Judge Mary Ellen 
Bittner. On November 2, 2006, however, Respondent submitted a letter 
withdrawing its request for a hearing and waiving its right to a 
hearing. Accordingly, on November 8, 2006, the ALJ terminated the 
proceeding.
    On or about June 11, 2007, the investigative file was forwarded to 
me for final agency action. Based on Respondent's letter waiving his 
right to a hearing, I therefore enter this Final Order without a 
hearing based on relevant material contained in the investigative file, 
see 21 CFR 1301.43(e), and make the following findings.

Findings

    Respondent is the holder of DEA Certificate of Registration, 
003001ATY, which authorizes it to distribute the List I chemicals 
pseudoephedrine, ephedrine and phenylpropanolamine, at the registered 
location of 10247 Finlandia Lane, Mechanicsville, Virginia. The 
expiration date of Respondent's registration was June 30, 2004. On May 
24, 2004, however, Respondent submitted a renewal application. I 
therefore find that Respondent's registration has remained in effect 
pending the issuance of this Final Order. See 5 U.S.C. 558(c).
    Both pseudoephedrine and ephedrine currently have therapeutic uses. 
See, e.g., Tri-County Bait Distributors, 71 FR 52160, 52161 (2006).\1\ 
Both chemicals are, however, regulated under the Controlled Substances 
Act because they are precursor chemicals which are 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).
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    \1\ The FDA is, however, currently proposing to remove 
combination ephedrine-guaifenesin products from its over-the-counter 
(OTC) drug monograph and to declare them not safe and effective for 
OTC use. See 70 FR 40232 (2005). While Respondent also sought 
authority to handle phenylpropanolamine, there is no evidence in the 
file that it actually handled the product.
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    Methamphetamine ``is a powerful and addictive central nervous 
system stimulant.'' T. Young Associates, Inc., 71 FR 60567 (2006) 
(other citations omitted). As noted in numerous DEA final orders, the 
illegal manufacture and abuse of methamphetamine pose a grave threat to 
this country. See id. Methamphetamine abuse has destroyed numerous 
lives and families. Id. Moreover, because of the toxic nature of the 
chemicals used in making the drug, illicit methamphetamine laboratories 
cause serious environmental harms. Id.
    Respondent is owned and operated by Mr. Archer Carr Satterfield, 
Jr. Respondent distributes dry goods, cakes, pies, and over-the-counter 
medicines (including those containing listed chemicals) to gas 
stations, convenience stores and small grocery stores in central 
Virginia. List I chemicals account for between 15 and 20 percent of 
Respondent's business. As of February 2004, the business was located at 
Mr. Satterfield's private residence in Mechanicsville, Virginia.
    On June 10, 2003, two DEA Diversion Investigators (DIs) went to 
Respondent's registered location to conduct a regulatory inspection. As 
part of the inspection, the DIs conducted an audit of Respondent's 
handling of six combination ephedrine products during the period June 
1, 2002, through June 10, 2003. Notwithstanding that the DIs used zero 
as the initial inventory for each of the audited products, they found 
that Respondent had large shortages in five of the products.
    For example, with respect to the sixty-count bottles of Mini Thins, 
Respondent was short 144,792 dosage units or 2413 bottles. As for the 
six-count packets of Mini Thins, Respondent was short 12,660 dosage 
units or 2,110 packets.
    With respect to the sixty-count bottles of Biotek Ephedrine, 
Respondent was short 80,640 dosage units or 1344 bottles. As for the 
six-count packets of Biotek Ephedrine, Respondent was short 8,856 
dosage units or 1476 packets. Because zero was used as the starting 
inventory for each of the products (and thus any product actually on 
hand on the beginning date would not be counted), the actual shortages 
were likely greater than those calculated by the DIs.
    During the audit, the DIs also found that a substantial number of 
Respondent's sale invoices were incomplete. Some of the invoices lacked 
the purchaser's address information including its street and city. 
Others lacked information regarding the quantity and product size.
    During this inspection, Mr. Satterfield told the DIs that he was 
suspicious of the activities of one of his customer's, Fasil Mitha, the 
owner of Trio's Market/California Imports. Mr. Satterfield further 
related that Mitha had told him that he ``sells to customers off the 
shelf.'' Upon reviewing Respondent's sales invoices, the DIs determined 
that Respondent has sold nearly 47,000 dosage units of combination 
ephedrine products to Mitha between November 20, 2002, and June 4, 
2003. This would amount to approximately 782 sixty-count bottles during 
a six-and-a-half month period.\2\
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    \2\ According to the investigative file, Mitha subsequently pled 
guilty to violating 21 U.S.C. Sec.  841(c)(2), which makes it a 
criminal offense to knowingly ``possess[ ] or distribute[ ] a listed 
chemical knowing, or having reasonable cause to believe, that the 
listed chemical will be used to manufacture a controlled substance 
except as authorized by'' the CSA. Mitha was sentenced to 135 months 
in prison.
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    During the audit period, Respondent also sold large quantities to a 
store identified as Market 14, in Richmond, Virginia. More 
specifically, Respondent sold this entity 50,554 dosage units between 
August 13, 2002, and May 22, 2003. This would amount to approximately 
842 sixty-count bottles.
    Sometime in either October or November 2004, Mr. Satterfield 
notified the DEA Richmond office that he had moved his business from 
his residence in Mechanicsville, Virginia, to a new location at 11262 
Elmont Road, Ashland, Virginia. Mr. Satterfield requested that DEA 
visit his new location and approve his request for modification.
    As part of the process, Mr. Satterfield was asked to provide a 
complete customer list. Mr. Satterfield submitted a customer list, but 
it was missing address and phone number information

[[Page 42116]]

for nine of his customers. He also failed to provide the address, phone 
number, social security number and date of birth for one of his 
employees.
    The DIs instructed Mr. Satterfield that he could not store listed 
chemicals at his new location until his request for the modification 
was approved. Mr. Satterfield stated that he would keep his List I 
products at his Mechanicsville location.
    Subsequently, in March 2005, the DIs obtained an incident report 
from the Hanover County Sheriff's Department pertaining to a theft that 
had occurred at the Ashland property on the night of November 1-2, 
2004. According to the report, at approximately midnight, Mr. 
Satterfield had parked his delivery truck at his Ashland property. When 
Mr. Satterfield returned to the property the following morning, both 
the truck and a trailer that he stored merchandise in had been broken 
into.
    Mr. Satterfield reported that approximately $4,609 in merchandise 
had been stolen. Among the stolen items were various OTC drug products 
including listed chemical products. Mr. Satterfield expressed to the 
responding officer his concern for the consequences were DEA to find 
out about the theft because the products were not locked in a secure 
place. Mr. Satterfield further told the officer that he would never get 
a license if DEA found out about the theft. Mr. Satterfield did not 
report the theft to this Agency.
    On June 22, 2005, two DIs went to Respondent's Ashland facility. 
During the visit, the DIs found that substantial quantities of various 
List I chemical products were stored in the building and were on the 
delivery truck. Mr. Satterfield told the DIs that the products that 
were on the delivery truck were going to be offloaded and stored in the 
building that evening.

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 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. Sec.  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 a renewal or modification 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 
conclude that factors one, two, four, and five establish that 
Respondent's continued registration would be ``inconsistent with the 
public interest.'' 21 U.S.C. 823(h). Accordingly, Respondent's 
registration will be revoked and its pending applications for renewal 
and modification of its registration will be denied.

Factor One--Maintenance of Effective Controls Against Diversion

    Under DEA's regulations, a List I chemical distributor is required 
to ``provide effective controls and procedures to guard against theft 
and diversion of List I chemicals.'' 21 CFR 1309.71(a). The regulations 
further provide that ``[i]n evaluating the effectiveness of security 
controls and procedures, the Administrator shall consider * * * [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.'' Id. 1309.71(b)(8).
    ``[M]aintaining proper records is * * * an essential part of 
providing effective controls against diversion.'' John J. Fotinopoulos, 
72 FR 24602, 24605 (2007). Here, the investigative file establishes 
that many of Respondent's sales invoices were missing necessary 
information for monitoring the distribution and disposition of List I 
products. More specifically, Respondent's invoices were frequently 
missing critical information including the street address and the city 
that its customers were located in. Moreover, the invoices also 
typically lacked information regarding the size of the List I products.
    Beyond that, the accountability audit found substantial shortages 
in five of the List I products which Respondent distributed. As found 
above, Respondent was short 144,792 dosage units or 2413 bottles of 
sixty-count Mini-Thins; it was also short 12,660 dosage units or 2,110 
six-count packets of the product. Moreover, Respondent was short 80,640 
dosage units or 1344 sixty-count bottles of Biotek Ephedrine; it was 
also short 8,856 dosage units or 1476 six-count packets of the product. 
Finally, because the DIs assigned a value of zero for the opening 
inventory for each product, the actual amount of the shortages may well 
have been even larger.
    Accordingly, I conclude that Respondent does not maintain effective 
controls against diversion and that this finding provides reason alone 
to conclude that its continued registration ``is inconsistent with the 
public interest.'' 21 U.S.C. 823(h).

Factors Two and Four--Respondent's Compliance With Applicable Laws and 
Its Experience in the Distribution of Listed Chemicals

    The investigative file also establishes that Respondent failed to 
comply with Federal law in two other respects. First, Respondent 
clearly was distributing listed chemical products out of its Ashland 
facility which did not have a registration. Second, Respondent failed 
to report the November 2, 2004 theft of listed chemical products as 
required by 21 U.S.C. 830(b)(1)(C).
    Under Federal law, a registration is location specific. See 21 
U.S.C. 822(e) (``A separate registration shall be required at each 
principal place of business * * * where the applicant * * * distributes 
* * * list I chemicals.''); see also 21 CFR 1309.23(a). Moreover, 
Federal law clearly provides that a registrant is ``authorized to 
possess [or] distribute'' a listed chemical only ``to the extent 
authorized by their registration and in conformity with the other 
provisions of this subchapter.'' 21 U.S.C. 822(b).
    Under DEA regulations, a request for a modification is treated as a 
new application. See 21 CFR 1309.61 (a ``request for modification shall 
be handled in the same manner as an application for registration,'' 
and, if approved, ``the Administrator shall issue a new certificate of 
registration''). As I recently explained, a request for modification 
does not authorize a registrant to engage in listed chemical activities 
at a new location until the modification is approved and the new 
certificate of registration is issued. See Fotinopoulos, 72 FR at 
24606. Cf.

[[Page 42117]]

Orlando Wholesale, L.L.C., 71 FR 71555, 71557 (2006) (applicant's 
change of address following pre-registration inspection renders 
application moot).
    Here, Mr. Satterfield was specifically told that he could not store 
listed chemicals at the Ashland facility until his request for 
modification was approved. Moreover, Mr. Satterfield told investigators 
that he would store Respondent's listed chemicals products at his 
Mechanicsville location. Mr. Satterfield nonetheless stored listed 
chemicals at the Ashland facility both in the building and in a truck 
which he parked there and distributed listed chemicals from this 
location. 21 U.S.C. 822(b) & (e). This violated Federal law. Moreover, 
based on the date of the theft (which occurred on November 2, 2004), as 
well as the DIs' finding that during the June 22, 2005 visit, 
substantial quantities of List I products were being kept at the 
Ashland location, it appears that Mr. Satterfield repeatedly violated 
Federal law.
    The evidence also establishes that Respondent failed to report to 
DEA the theft of listed chemicals that occurred on November 2, 2004. 
Under 21 U.S.C. 830(b)(1)(C), a registrant must report ``any unusual or 
excessive loss or disappearance of a listed chemical under the control 
of the regulated person.''
    According to the responding officer, Mr. Satterfield failed to 
report the theft because he was concerned that if the Agency found out, 
it would not grant him a registration for his new location. Mr. 
Satterfield thus not only violated Federal law, making matters worse, 
he did so intentionally.
    Finally, the evidence establishes that Respondent sold 
extraordinary quantities of products to at least two stores, and that 
the owner of one of the stores, Mr. Mitha, subsequently plead guilty to 
violating 21 U.S.C. 841(c)(2). As found in T. Young Associates, 71 FR 
at 60572, and numerous other cases, non-traditional retailers (such as 
those supplied by Respondent) sell only small amounts of listed 
chemical products to meet legitimate demand. On average, these stores 
sell only $12.58 per month of combination ephedrine products to meet 
legitimate demand for these products as a bronchodilator. Id.
    The evidence establishes that in a six-and-a-half month period, 
Respondent sold the equivalent of 782 sixty-count bottles of 
combination-ephedrine products to Mr. Mitha. While the record does not 
establish the retail price Mr. Mitha sold the products at, in other 
cases DEA has found that smaller size bottles ( 48 count ) sold for 
approximately $5.99 to 6.99 each. See Wild West Wholesale, 72 FR 4042, 
4043 (2007). Respondent's sales to Mr. Mitha's store so exceeded 
legitimate demand that it is clear that Respondent's products were 
diverted into the illicit manufacture of methamphetamine, a fact 
confirmed by Mr. Mitha's guilty plea.\3\ The same is also true of 
Respondent's sales to Market 14.
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    \3\ Even if Mr. Satterfield lacked either actual or constructive 
knowledge that Mr. Mitha was diverting the products, his state of 
mind is irrelevant. As I have previously noted, the public interest 
standard does not require the Government to ``prove that a 
Registrant has acted with any particular mens rea. Indeed, 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, or 
sells them being totally unaware that the products were being 
diverted.'' T. Young, 71 FR at 60572 (footnote omitted) (citing D & 
S Sales, 71 FR 37607, 37610-12 (2006), and Joy's Ideas, 70 FR 33195, 
33198 (2005)).
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    Respondent's violations of Federal law and its experience in 
distributing listed chemical products thus provide further grounds to 
conclude that its continued registration would be ``inconsistent with 
the public interest.'' 21 U.S.C. 823(h).

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

    The illicit manufacture and abuse of methamphetamine have had 
pernicious effects on families and communities throughout the nation. 
Cutting off the supply source of methamphetamine traffickers is of 
critical importance in protecting the American people from the 
devastation wreaked by this drug.
    While listed chemical products containing pseudoephedrine and 
ephedrine are currently recognized as having legitimate medical uses, 
DEA orders establish that convenience stores and gas-stations 
constitute the non-traditional retail market for legitimate consumers 
of products containing these chemicals. See, e.g., Tri-County Bait 
Distributors, 71 FR at 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 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'' and ``substantial''); Jay 
Enterprises, Inc., 70 FR 24620, 24621 (2005) (noting ``heightened risk 
of diversion'' if application to distribute to non-traditional 
retailers was granted).
    Accordingly, ``[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.'' Joey Enterprises, Inc., 70 FR 76866, 76867 
(2005). 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'').\4\ The 
risk of diversion is especially great where, as here, a registrant 
cannot account for large quantities of the products it handles.
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    \4\ See 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 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'').
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    Moreover, the record establishes that Respondent sold extraordinary 
quantities of combination ephedrine products to several stores 
including one whose owner subsequently pled guilty to distributing a 
listed chemical knowing or having reasonable cause to believe that the 
chemical would be used to illegally manufacture a controlled substance. 
See 21 U.S.C. 841(c)(2). Thus, the record supports a finding that 
Respondent's products were diverted. This factor thus provides 
additional support for the conclusion that Respondent's continued 
registration ``is inconsistent with the public interest.'' Id. Sec.  
823(h).
    In sum, as found above under factor one, the evidence supports a 
finding that Respondent did not maintain adequate records and an audit 
found that it could not account for several hundred thousand dosage 
units of combination ephedrine products. Moreover, while Respondent and 
its owner have no record of relevant criminal convictions, see 21 
U.S.C. 823(h)(3), the evidence nonetheless establishes that Respondent 
violated federal law by: (1) Distributing listed chemicals from a 
facility which was not registered and likely did so for months, and, 
(2) failing to report to DEA the theft of listed chemicals from its 
non-approved location. Finally, the evidence supports a finding that a 
substantial

[[Page 42118]]

portion of Respondent's products were diverted. Accordingly, I 
therefore conclude that Respondent's continued registration ``is 
inconsistent with the public interest.'' Id. Sec.  823(h).

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, 003001ATY, issued to Archer's Trading 
Company be, and it hereby is, revoked. I further order that Archer 
Trading Company's pending applications for modification and renewal of 
its registration be, and they hereby are, denied. This order is 
effective August 31, 2007.

    Dated: July 20, 2007.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E7-14815 Filed 7-31-07; 8:45 am]
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