[Federal Register Volume 73, Number 61 (Friday, March 28, 2008)]
[Notices]
[Pages 16713-16715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-6378]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 05-38]


Memphis Wholesale Company; Declaratory Order Terminating 
Exemption From Registration

    On July 12, 2005, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration, issued an Order to 
Show Cause to Memphis Wholesale Company (Respondent) of Memphis, 
Tennessee. Show Cause Order at 1. The Show Cause Order proposed the 
denial of what it referred to as Respondent's ``application'' for a 
registration as a distributor of the list I chemicals ephedrine, 
pseudoephedrine, and phenylpropanolamine (PPA), and to revoke any 
exemption from registration, on the ground that its registration ``is 
inconsistent with the public interest.'' Id.
    The Show Cause Order specifically alleged that ``[o]n July 29, 
1997, Memphis Wholesale Company, by its owner, Neal Abodabba,'' applied 
for a DEA Certificate of Registration, that a control number was 
assigned to its application ``permitting the firm to temporarily 
operate under the regulatory exemption [provided] at 21 CFR 1309.25, 
pending agency action on the application.'' Id. at 2. The Show Cause 
Order alleged that in ``April 1999, Memphis Wholesale Company was 
incorporated in the State of Tennessee by Neal Abodabba and Shawkat 
Abodabba, without notification to DEA that the form of ownership, and 
thus the registered person, had changed.'' Id.
    The Show Cause Order next alleged that on August 10, 2000, DEA 
investigators conducted an inspection of Respondent. Id. The Order 
alleged that during the inspection, Mr. Neal Abodabba told 
investigators ``that 7.8% of his total sales were for `energy' 
products, which included Max Brand and Mini-Thins,'' which are listed 
chemical products. Id. The Order also alleged that Mr. Abodabba also 
told investigators that his customers included approximately 200 to 300 
convenience stores and gas stations, which were located in Tennessee, 
Arkansas, and northern Mississippi, and that most of these customers 
purchased listed chemical products from him. Id.
    The Show Cause Order further alleged that ``in July 2000, Memphis 
Wholesale had begun consolidating its deliveries in the Nashville area 
by shipping to [an] unlicensed distributor, Nashville Wholesale, for 
further distribution to retailers * * * in violation of 21 U.S.C.

[[Page 16714]]

841(f) and 843(a)(9).'' Id. Finally, with respect to the August 2000 
inspection, the Show Cause Order alleged that DEA investigators 
conducted an accountability audit for the period February 1, 2000, 
through August 10, 2000, and found overages in various products. Id. at 
2-3.
    The Show Cause Order next alleged that on May 16, 2002, DEA 
investigators conducted another inspection of Respondent. Id. at 3. 
According to the Show Cause Order, during the inspection, ``Mr. 
Mohammed Issa represented himself as the owner of Memphis Wholesale,'' 
and subsequently the investigators were informed by Mr. Abodabba ``that 
he had `sold his shares' in [the firm] to Mohammed Issa.'' Id. 
Relatedly, the Show Cause Order alleged that Respondent ``is now 
improperly operating as a chemical distributor under the control of Mr. 
Issa,'' and that ``[n]either Mr. Abodabba nor Mr. Issa notified DEA of 
any corporate ownership changes.'' \1\ Id.
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    \1\ The Show Cause Order also raised various allegations related 
to the diversion of ephedrine and pseudoephedrine from non-
traditional retailers into the illegal manufacture of 
methamphetamine, a schedule II controlled substance. Show Cause 
Order at 1-2; see also 21 CFR 1308.12(d).Id.
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    Following service of the Show Cause Order, Respondent requested a 
hearing on the allegations and the matter was assigned to 
Administrative Law Judge (ALJ) Mary Ellen Bittner. Counsel for both 
parties agreed, however, that in lieu of a hearing at which witnesses 
would be called, they would submit affidavits, proffers of testimony, 
and other evidence. ALJ at 4. Neither party objected to any of the 
evidence or proffers submitted. After both parties submitted briefs, 
the ALJ issued her recommended decision.
    In her decision, the ALJ found that Respondent was not entitled to 
operate under the temporary exemption from registration authorized 
under 21 CFR 1309.25, because neither Respondent, which was 
incorporated in 1998, nor Mr. Issa (the corporation's current owner), 
``was the same `person' that applied for registration in 1997.'' ALJ at 
21. The ALJ thus reasoned that Respondent was ``not entitled to operate 
under the exemption granted to the business that Mr. Abodabba owned in 
1997.'' Id. The ALJ further found that ``since 1998, Respondent has 
been distributing listed chemical products without being registered to 
do so, in violation of 21 U.S.C. 822(a)(1).'' Id.
    ``In light of these findings,'' the ALJ concluded that ``a further 
finding would be warranted that there is no viable application 
pending.'' Id. She nonetheless concluded that it was appropriate to 
make findings under the public interest factors (see 21 U.S.C. 823(h)) 
because ``the parties have devoted substantial resources to this 
case.'' ALJ at 21. Upon analyzing the factors, the ALJ concluded that 
Respondent's registration would be inconsistent with the public 
interest. ALJ at 24.
    Having considered the record as a whole, I hereby issue this 
declaratory order. See 5 U.S.C. 554(e). I conclude that the original 
exemption from registration obtained by Mr. Abodabba terminated no 
later than the date he transferred his ownership interest in Respondent 
to Mr. Issa. I further conclude that while the application which Mr. 
Abodabba submitted on July 29, 1997, listed ``Memphis Wholesale 
Company'' as the applicant, because the entity was not then 
incorporated it did not have independent legal capacity to seek a 
registration and the application is therefore personal to Mr. Abodabba. 
While the evidence establishes that Mr. Abodabba has long since sold 
his interest in Respondent and is not in business at the proposed 
registered location, to the extent this proceeding seeks to adjudicate 
his application, the Government has known since 2002 that Mr. Abodabba 
was no longer at that location and has not properly served him.\2\ To 
the extent Respondent (under its new owner) seeks to adjudicate its 
entitlement to a registration, Respondent has never submitted an 
application. Accordingly, there is no pending application to act upon. 
I make the following findings.
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    \2\ See Nashville Wholesale Company, Inc., 71 FR 52159, 52160 
(2006) (noting that Mr. Abodabba was served at the proposed 
registered location of Nashville Wholesale Company).
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Findings

    On July 29, 1997, Neal S. Abodabba, submitted an application for a 
registration to distribute the list I chemicals, ephedrine, 
pseudoephedrine, and phenylpropanolamine. GX 1. On the application, Mr. 
Abodabba indicated that Memphis Wholesale Company was the applicant. 
Id. However, the business was not then incorporated and did not file 
its charter with the Tennessee Secretary of State until April 14, 1998. 
GX 36, at 2.
    On May 16, 2002, DEA investigators went to Respondent to conduct an 
inspection. On that date, Mr. Mohammed Issa told investigators that he 
owned Respondent. Gov't Proffer of Testimony at 6. Moreover, in its 
proffer, Respondent stated that ``Mr. Issa would testify that he is the 
majority stockholder of Memphis Wholesale Company and that he became 
majority stockholder on July 16, 2001.'' Respondent's Summary of 
Position at 2. Furthermore, on July 17, 2002, Respondent filed its 
annual report with the Tennessee Secretary of State which stated that 
Mohammed Issa was the corporation's president, Sameer Issa was its 
secretary, and Bill Miller was its treasurer.\3\ GX 36, at 10. The 
report further indicated that its board of directors was comprised of 
the same three individuals.\4\ Id.
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    \3\ On April 16, 2001, Respondent filed its annual report which 
indicated that Neal Abodabba was its president and Shawkat Abodabba 
was its Secretary.
    \4\ On its annual report which it submitted on May 10, 2004, 
Respondent no longer listed Mr. Miller as either a corporate officer 
or director. Instead, the report listed ``K. Issa'' as an officer 
and director. GX 36, at 12.
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    Respondent submitted into evidence a compilation and serial listing 
of its sales of listed chemical products for the period January through 
December 2004. According to a table which is attached to this document, 
during 2004, Respondent had sales of all products totaling 
$4,134,004.28; its list I chemical products constituted 7.09 percent of 
its sales. The document (which is 143 pages in length) then lists by 
product, numerous instances in which Respondent sold ephedrine and 
pseudoephedrine products to gas stations and convenience stores. See 
generally Memphis Wholesale Company, Inc., Sales by Item Detail, at 1-
143. According to the list, during 2004, Respondent's sales of these 
products totaled $225,167.30. See id. at 143.

Discussion

    Under 21 U.S.C. 822(a)(1), ``[e]very person who * * * distributes 
any * * * list I chemical, or who proposes to engage in the * * * 
distribution of any * * * list I chemical, shall obtain annually a 
registration issued by the Attorney General in accordance with the 
rules and regulations promulgated by him.'' \5\ Furthermore, 
``[p]ersons registered by the Attorney General * * * to distribute * * 
* list I chemicals are authorized to possess [and] distribute * * * 
such * * * chemicals * * * to the extent authorized by their 
registration and in conformity with the other provisions of'' 
Subchapter I of the Controlled Substances Act. Id. 822(b). DEA 
regulations further provide that ``[n]o person required to be 
registered shall engage in any activity for which registration is 
required until the application for registration is approved

[[Page 16715]]

and a Certificate of Registration is issued by the Administrator to 
such person.'' 21 CFR 1309.31(a).
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    \5\ Ephedrine, pseudoephedrine and phenylpropanolamine are list 
I chemicals. See 21 U.S.C. 802(34).
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    In 1996, Congress enacted the Comprehensive Methamphetamine Control 
Act of 1996, which, for the first time, subjected distributors of 
pseudoephedrine, phenylpropanolamine, and combination ephedrine 
products to the registration requirements. See 62 FR 52254 (1997) 
(final rule). To prevent disruption of the legitimate commerce in these 
products, DEA enacted a temporary exemption from registration for 
distributors of these products. See 62 FR at 5915 (interim rule).
    Accordingly, with respect to distributors of combination ephedrine 
products, the exemption applies to ``each person required'' to be 
registered, ``provided that the person submit[ted] a proper application 
for registration on or before July 12, 1997.'' 21 CFR 1309.25(a). The 
regulation further provides that ``[t]he exemption will remain in 
effect for each person who has made such application until the 
Administration has approved or denied that application.'' Id. DEA 
applied the same rule to distributors of pseudoephedrine and 
phenylpropanolamine, the only difference being that the application had 
to be submitted ``on or before October 3, 1997.'' Id. 1309.25(b).\6\
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    \6\ DEA regulations defined ``[t]he term person [as] includ[ing] 
any individual, corporation, government or governmental subdivision 
or agency, business trust, partnership, association, or other legal 
entity.'' 21 CFR 1300.01(b)(34).
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    As found above, on July 29, 1997, Mr. Neil S. Abodabba applied for 
a registration to distribute ephedrine, pseudoephedrine, and 
phenylpropanolamine. GX 1. While Mr. Abodabba listed Memphis Wholesale 
Company as the applicant, the firm did not file its charter of 
incorporation with the Tennessee Secretary of State until April 14, 
1998. GX 36, at 4; GX 30. As Memphis Wholesale did not exist as an 
independent legal entity until more than eight months later, the 
application submitted on July 29, 1997, is personal to Mr. Abodabba. 
Moreover, there is no evidence that Memphis Wholesale Company, 
Incorporated, has ever submitted an application for a DEA registration 
either under its original owner (Mr. Abodabba), or under its new owner 
(Mr. Issa). Likewise, there is no evidence that the application was 
amended to reflect that Memphis Wholesale Company, Inc., was the 
applicant.
    While the evidence indicates that Mr. Issa disclosed to agency 
investigators during the 2002 inspection that he was Respondent's 
owner, the firm did not have authority to distribute under the 
temporary exemption because it was not the ``person'' who applied for 
registration in July 1997. See, e.g., 21 CFR 1309.25(a). As the 
regulation makes plain: [e]ach person required by [21 U.S.C. 822] to 
obtain a registration to distribute * * * a combination ephedrine 
product is temporarily exempted from the registration requirement, 
provided that the person submits a proper application for registration 
on or before July 12, 1997.'' Id. (emphasis added).\7\ Moreover, the 
authority Mr. Abodabba obtained to distribute (which was limited to 
pseudoephedrine and phenylpropanolamine) was not lawfully transferred 
to either the corporation or to its new owners) because the written 
consent of the Agency was never obtained. See id. 1309.63 (``No 
registration or any authority conferred thereby shall be assigned or 
otherwise transferred except upon such conditions as the Administrator 
may specifically designate and then only pursuant to his written 
consent.'').
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    \7\ While Respondent relies on Mr. Abodabba's application, it 
ignores that under 21 CFR 1309.25(a), this application was not 
timely submitted with respect to combination ephedrine products and 
thus, not even Mr. Abodabba was not entitled to the exemption. See 
GX 1 (application dated July 29, 1997).
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    Accordingly, I hold that Respondent has been without authority to 
distribute list I chemicals since July 16, 2001 (when Mr. Issa became 
its owner), and that all distributions it has made since that date 
(including all those listed in the compilation of its 2004 sales) have 
been in violation of federal law.\8\ See 21 U.S.C. 822(a). I further 
hold that Respondent does not have an application pending before the 
agency.
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    \8\ Mr. Abodabba is not a party to this proceeding, and I 
conclude that it is not necessary to decide whether Respondent's 
activities under his ownership were lawful. Moreover, to the extent 
this proceeding was brought to deny Mr. Abodabba's application, 
which is the only application in the record, see GX 1, service has 
not been properly effectuated. See Jones v. Flowers, 547 U.S. 220, 
230 (2006) (``[T]he government's knowledge that notice pursuant to 
the normal procedure was ineffective triggered an obligation on the 
government's part to take additional steps to effect notice.''); see 
also id. at 232 (discussing Robinson v. Hanrahan, 409 U.S. 38, 39-40 
(1972) (per curiam) (even though state law required vehicle owner to 
register his address with the state, ``we found that the State had 
not provided constitutionally sufficient notice, despite having 
followed its reasonably calculated scheme, because it knew that [the 
owner] could not be reached at his address of record'').
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Order

    Pursuant to the authority vested in me under 5 U.S.C. 554(e) and 28 
CFR 0.100(b) & 0.104, I hereby declare that since July 16, 2001, 
Memphis Wholesale Company, Incorporated, has not had authority under 21 
CFR 1309.25 to distribute pseudoephedrine, combination ephedrine, and 
phenylpropanolamine. This Order is effective immediately.

    Dated: March 17, 2008.
Michele M. Leonhart,
Deputy Administrator.
 [FR Doc. E8-6378 Filed 3-27-08; 8:45 am]
BILLING CODE 4410-09-P