[Federal Register Volume 72, Number 243 (Wednesday, December 19, 2007)]
[Notices]
[Pages 71956-71959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-24610]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
MB Wholesale, Inc.; Denial of Application
On August 7, 2006, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration, issued an Order to
Show Cause to MB Wholesale, Inc. (Respondent), of Detroit, Michigan.
The Show Cause Order proposed the denial of Respondent's pending
application to distribute the list I chemicals ephedrine and
pseudoephedrine, on the ground that ``its registration would be
inconsistent with the public interest.'' Show Cause Order at 1 (citing
21 U.S.C. 823(h)).
The Show Cause Order specifically alleged that ``on or about
February 16, 2006, [Respondent], by Mohamed Mehanna, submitted an
application for registration as a distributor of the list I chemicals
ephedrine and pseudoephedrine,'' and that the fees for incorporating
Respondent ``were paid by a check drawn'' on the account of Mehanna
Brothers Export Import, Inc. (Mehanna Brothers). Id. at 2. The Show
Cause Order alleged that Mehanna Brothers was managed by Abed, Mohammed
and Jack Mehanna, and that it held a DEA registration to distribute
list I chemicals at the registered location of 14442 Michigan Avenue,
Dearborn, Michigan.'' Id.
The Show Cause Order alleged that in January 2005, Mehanna Brothers
had moved its business to 6711 Greenfield Road, Detroit, Michigan, and
distributed list I chemicals from this location without a registration
authorizing it to do so. Id. The Show Cause Order further alleged that
on July 10, 2006, DEA issued an Order to Show Cause proposing the
revocation of Mehanna Brothers' registration based on this activity.
Id.
The Show Cause Order next alleged that on April 16, 2006, DEA
investigators went to Respondent's proposed registered location to
conduct a pre-registration inspection and discovered that the facility
was the same one that was used by Mehanna Brothers. Id. The Show Cause
Order further alleged that on May 18, 2006, Abed Mehanna told DEA
investigators that he was a co-owner of Respondent, that
[[Page 71957]]
Respondent was operated by himself as well as his brothers Mohammed and
Bilal, and that it ``had the same convenience store customers as
Mehanna Brothers.'' Id. at 3.
The Show Cause Order also alleged that a ``review of [the] invoices
provided by Mehanna Brothers indicated that the bulk of the product
sold in dollar terms consisted of various forms of ephedrine
products,'' and that ``[m]any of these records did not properly
identify the strength, packaging, and quantity of the listed
chemical.'' Id. The Show Cause Order thus alleged that ``Mehanna
Brothers and its management did not properly carry out the
recordkeeping responsibilities of a registrant.'' Id.
Finally, the Show Cause Order alleged that the ``bulk of precursor
products destined for illegal methamphetamine laboratories are diverted
through non-traditional markets such as convenience stores, gas
stations, and other small retail outlets.'' Id. The Show Cause Order
thus alleged that ``[t]he ownership and management of MB intend to
parallel Mehanna Brothers'' practice of supplying inordinate amounts of
listed chemical products to outlets which have no expectation of
legitimate sales in the amounts that they are receiving, leading to the
diversion of such products.'' Id.
On August 14, 2006, the Show Cause Order was served on Respondent
by certified mail as evidenced by the signed return-receipt card.
Thereafter, on September 7, 2006, Respondent requested a hearing. The
matter was assigned to Administrative Law Judge (ALJ) Mary Ellen
Bittner, who ordered Respondent to file its pre-hearing statement no
later than November 13, 2006. Order Terminating Proceedings at 1.
Respondent did not, however, comply with the ALJ's order.
Accordingly, on November 27, 2006, the ALJ found that Respondent had
waived its right to a hearing and ordered that the proceeding be
terminated. On June 11, 2007, the case file was forwarded to this
office for final agency action.
Having considered the entire record in this matter, I adopt the
ALJ's finding 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 contained in the investigative file, see id.
1309.53(d), and make the following findings of fact.
Findings
Respondent is a Michigan corporation which was formed in July 2004
with offices located at 6711 Greenfield Road, Detroit, Michigan.
Respondent is co-owned by Abed Mehanna, who serves as its Vice-
President, and his brother, Mohamed Mehanna, who serves as its
President. Respondent has a total of three employees which include
Abed, Mohamed, and a third brother, Bilal Mehanna. Abed and Mohamed
Mehanna are also co-owners with a third brother, Hussein (a.k.a. Jack),
of another corporation, Mehanna Brothers Export/Import, Inc.
(hereinafter, Mehanna Brothers).
According to the investigative file, Mehanna Brothers holds a DEA
registration which authorizes it to distribute list I chemicals.
However, in April 2005, Mehanna Brothers submitted a request to change
the address of its registered location to a new facility at 6711
Greenfield Road in Detroit. Accordingly, in June 2005, DEA
investigators went to the premises to inspect the facility. During the
inspection, the investigators found that Mehanna Brothers was
distributing list I chemicals from the building.
During the visit, a DEA Investigator informed Hussein (Jack)
Mehanna that Mehanna Brothers could not sell list I chemicals out of
the Greenfield Road facility because it was not a registered location.
The DI then sought the surrender of Mehanna Brothers' registration.
However, Hussein Mehanna refused to do so.
Thereafter, on February 16, 2006, Mohamed Mehanna submitted an
application for a registration to distribute ephedrine and
pseudoephedrine on behalf of MB Wholesale, Inc (Respondent). The
application gave as Respondent's proposed registered location the same
Greenfield Road facility that Mehanna Brothers used.
On April 13, 2006, two DEA Investigators went to Respondent's
Greenfield Road facility to conduct a pre-registration investigation.
Upon their arrival, the DIs recognized that the facility was the same
one from which Mehanna Brothers had distributed list I chemicals
without a registration.
During a subsequent telephone conversation, Abed Mehanna told a DI
that Respondent had essentially the same management team as Mehanna
Brothers, but that Hussein (Jack) was no longer involved in the
business. Abed Mehanna also told the DI that Respondent had the same
customers as Mehanna Brothers and had added some additional customers.
The investigative file contains dozens of invoices which were
provided by Abed Mehanna to a DEA Investigator. The invoices, which are
dated from January 5 through May 20, 2005, document the sale of various
list I products (which contained either pseudoephedrine or ephedrine)
including Advil Cold & Sinus, Tylenol Cold, Mini Two-Way, Mini-Thins,
and Ephedrine. Most significantly, each of the invoices bears the
caption ``MB Wholesale,'' and give as its address, ``6711 Greenfield
Rd. Detroit, Mi.'' The invoices also confirm that Respondent was
supplying these products to non-traditional retailers such as gas
stations and convenience stores.
Discussion
Section 303(h) of the Controlled Substances Act (CSA) provides that
``[t]he Attorney General shall register an applicant to distribute a
list I chemical unless the Attorney General determines that
registration of the applicant is inconsistent with the public
interest.'' 21 U.S.C. 823(h). 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 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).
Having considered all of the factors, I conclude that factors two,
four, and five establish that granting Respondent's application would
be ``inconsistent with the public interest.'' 21 U.S.C. 823(h). While
Respondent is nominally a separate legal entity from Mehanna Brothers,
the record establishes that the firms are substantially identical and
thus, the illegal conduct of the latter in distributing listed
chemicals from an unregistered location is properly considered in
evaluating Respondent's application. Moreover, the record contains
substantial evidence which establishes that Respondent also violated
federal law by distributing
[[Page 71958]]
listed chemicals from an unregistered location.
Factors Two and Four--The Applicant's Compliance With Applicable Law
and Its Experience in Distributing Listed Chemicals
On a date which is not established in the record, Mehanna Brothers
moved its business to a facility located at 6711 Greenfield Road,
Detroit, Michigan. In April 2005, Mehanna Brothers submitted an
application for a modification of its registration to change its
registered location to its Greenfield Road facility.
Under DEA regulations, a ``request for modification [is] handled in
the same manner as an application for registration.'' 21 CFR 1309.61.
Accordingly, in June 2005, DEA investigators went to Respondent's new
facility to conduct an inspection to determine whether to approve its
application. During the inspection, the investigators found that
Respondent was already distributing listed chemicals from the
Greenfield Road facility.
Under the CSA, ``[a] separate registration [is] required at each
principal place of business * * * where the applicant * * * distributes
* * * list I chemicals.'' 21 U.S.C. 822(e). Moreover, under DEA
regulations, ``[n]o person required to be registered shall engage in
any activity for which registration is required until the application
for registration is approved and a Certificate of Registration is
issued by the Administrator to such person.'' 21 CFR 1309.31(a).
Mehanna Brothers was thus in violation of federal law by distributing
listed chemicals from an unregistered location. 21 U.S.C. 843(a)(9).
The question remains, however, as to whether Mehanna Brothers'
violations are properly considered in evaluating Respondent's
application. Notwithstanding that Mehanna Brothers and Respondent are
organized as separate corporations, I conclude the firms are only
``nominally separate business entities.'' Cf. Roofers Local 149
Security Trust Fund v. Duane Smelser Roofing Co., 285 F. Supp.2d 936,
940 (E.D. Mich. 2003). Because the firms ``have substantially identical
management, business, purpose, operation, equipment, customers,
supervision and ownership,'' Mehanna Brothers' misconduct is also
chargeable to Respondent. Cf. Wilson v. International Bhd. of
Teamsters, 83 F.3d 747, 759 (6th Cir. 1996).
As the record establishes, Respondent's co-owners, Abed and
Mohammed Mehanna, were also co-owners with their brother Jack, of
Mehanna Brothers. Abed Mehanna, Respondent's co-owner and Vice-
President, serves as a corporate officer of Mehanna Brothers. Indeed,
as Abed Mehanna told a DI, Respondent had the same management team
(except for Hussein) as Mehanna Brothers.
Moreover, Respondent and Mehanna Brothers are engaged in the same
business of wholesale distribution of general merchandise, and
Respondent services the same customers as Mehanna Brothers. Respondent
and Mehanna Brothers also use the same Greenfield Road facility.
Finally, when in October 2005, DEA investigators asked Mehanna Brothers
to provide its sales invoices, the invoices bore Respondent's name and
address.
Accordingly, based on all of the above, I find that Respondent and
Mehanna Brothers are only nominally separate entities. Mehanna
Brothers' violations of federal law in distributing listed chemicals
from an unregistered location are thus properly considered in
determining whether granting Respondent's application would be
``inconsistent with the public interest.'' 21 U.S.C. 823(h).\1\
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\1\ The invoices also support a finding that Respondent itself
distributed list I chemicals without a registration in violation of
federal law. See 21 U.S.C. Sec. Sec. 822(a)(1) & 843(a)(9).
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As noted in other cases, distributing listed chemicals out of an
unregistered location provides ample reason to deny an application. See
Sato Pharmaceutical, Inc., 71 FR 52165, 52166 (2006); Archer's Trading
Co., 72 FR 42114, 421116-17 (2007) (revoking registration in part for
distributing listed chemicals out of unregistered location); John J.
Fotinopolous 72 FR 24602, 24606 (2007) (same). Respondent's misconduct
does not inspire confidence that it will faithfully comply with
applicable laws and diligently protect against the diversion of listed
chemical products. I thus conclude that Respondent's record of non-
compliance with federal law and its experience in dispensing listed
chemicals supports the conclusion that its registration would be
``inconsistent with the public interest.'' 21 U.S.C. 823(h).
Factor Five--Other Factors 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,\2\ 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 52160, 52161-62 (2006); D & S Sales, 71 FR 37607,
37609 (2006); 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 33195,
33199 (2005) (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).
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\2\ 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).
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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'').\3\
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\3\ 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 in that 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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Here, the record establishes that Respondent seeks a registration
to distribute listed chemical products to non-traditional retailers of
these products such as gas stations and convenience stores. Moreover,
Respondent proposes to sell several combination ephedrine products such
as Mini Two-Way, a product rarely found in traditional markets, but one
which is highly ``popular with
[[Page 71959]]
methamphetamine traffickers,'' and which has ``been disproportionately
represented in clandestine lab seizures around the United States.'' T.
Young Associates, Inc., 71 FR 60567, 60568 (2006) (int. quotations and
citation omitted). See also H & R Corp., 71 FR 30168, 30169 (2006);
Joy's Ideas, 70 FR at 33197. Moreover, a substantial number of the
invoices suggest that Respondent's customers purchased quantities of
these products that far exceeded legitimate demand. This factor thus
further supports the conclusion that Respondent's registration would be
``inconsistent with the public interest.'' 21 U.S.C. 823(h).
Order
Accordingly, pursuant to the authority vested in me by 21 U.S.C.
823(h), as well as 28 CFR 0.100(b) and 0.104, I order that the
application of MB Wholesale, Inc., for a DEA Certificate of
Registration to distribute list I chemicals, be, and it hereby is,
denied. This order is effective January 18, 2008.
Dated: December 7, 2007.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E7-24610 Filed 12-18-07; 8:45 am]
BILLING CODE 4410-09-P