[Federal Register Volume 81, Number 183 (Wednesday, September 21, 2016)]
[Notices]
[Pages 64940-64949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22680]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Richard J. Settles, D.O.; Decision and Order

    On September 9, 2015, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration, issued an Order to 
Show Cause to Richard J. Settles, D.O. (hereinafter, Respondent), of 
Grand Junction, Colorado. The Show Cause Order proposed the revocation 
of Respondent's DEA Certificate of Registration FS3717975, pursuant to 
which he is authorized to dispense controlled substances in schedules 
II through V, as a practitioner, at the registered address of 715 
Horizon Drive, Suite 200, Grand Junction, Colorado. GX 2, at 1 (citing 
21 U.S.C. 824(a)(1) and (4)). The Show Cause Order also proposed the 
denial of any pending application to renew or modify Respondent's 
registration, on the ground that his ``continued registration is 
inconsistent with the public interest.'' Id.
    As grounds for the proposed actions, the Government alleged that 
Respondent had materially falsified his March 4, 2013 application for 
registration. Id. at 2 (21 U.S.C. 824(a)(1)). The Order also alleged 
that he had issued prescriptions for controlled substances without 
authority to do so under both Arizona and Federal law. Id. at 3 (citing 
21 U.S.C. 824(a)(4)).
    With respect to the material falsification allegation, the 
Government alleged that on March 4, 2013, Respondent applied for a DEA 
registration at a location in Chattanooga, Tennessee. Id. at 1. The 
Government alleged that Respondent provided a ``yes'' answer to the 
application question: ``Has the applicant ever surrendered (for cause) 
or had a state professional license or controlled substances 
registration revoked, suspended, restricted, or placed on probation, or 
is any such action pending?'' and that ``[i]n furtherance of [his] 
answer,'' Respondent explained that on July 17, 2012, ``the Arizona 
Board of Osteopathic Examiners placed my license on a 5 year 
probation,'' and that as a result, ``I voluntarily surrendered my 
Arizona license and DEA registration as I knew I was moving to 
Tennessee in the next few months.'' Id. at 1-2.
    The Government then alleged that Respondent's answer was materially 
false because he was ``aware of at least two . . . other state 
professional license actions'' when he submitted the application and 
failed to disclose them. Id. at 2. The Government alleged that these 
actions included a November 17, 2012 Interim Consent Order issued by 
the Arizona Board, which restricted Respondent's license to practice 
osteopathic medicine pending the Board's investigation into whether he 
violated its July 17, 2012 Order by prescribing controlled substances 
as his authority to do so had been restricted by that Order. Id. As for 
the second Board action, the Government alleged that on February 6, 
2013, Respondent entered into a Stipulation and Order with the Utah 
Division of Occupational and Professional Licensing, in which he 
admitted that he had falsified a May 4, 2012 application for licensure 
in that State, because he failed to disclose that he was then under 
investigation by the Arizona Board, and that he had surrendered his 
Utah license to practice as an osteopath. Id. at 2-3 (citing 21 U.S.C. 
824(a)(1), 823(f), 843(a)(4)(A)).
    As for the prescribing allegations, the Government alleged that 
pursuant to the July 17, 2012 Arizona Board Order, Respondent was 
restricted from prescribing schedule I through IV controlled 
substances. Id. at 3. The Order alleged that the Board subsequently 
found that after the effective date of the Order, Respondent became the 
medical director of a hospice program and prescribed controlled 
substances to 10 of the program's patients. Id. The Order then alleged 
that ``[p]rescribing controlled substances without appropriate 
authority is contrary to Federal law.'' Id. at 3 (citations omitted).
    Next, the Order alleged that on May 7, 2014, one day before the 
Tennessee State Board of Osteopathic Examination issued a Consent Order 
which indefinitely suspended his Tennessee license, Respondent applied 
to modify his registered address from Tennessee to an address in 
Dolores, Colorado. Id. at 4. The Order alleged that Respondent made 
several additional requests to modify his registered address, 
concluding with his February 18, 2015 request to change his address to 
a location in Grand Junction, Colorado and that the Agency approved 
this request on March 17, 2015. Id.
    The Order then alleged that prior to the Agency's approval of his 
modification request, Respondent issued controlled substance 
prescriptions in Colorado, ``in violation of 21 U.S.C. 810(10),\1\ 
822(e), and 841(a)(1).'' Id. at 4 (citing, inter alia, 21 CFR 
1301.12(a), 1301.13(a)). Specifically, the Order alleged that ``from 
July 2014 through February 2015, [Respondent] issued over 250 
prescriptions when [he] lacked the requisite federal authority to issue 
prescriptions in Colorado.'' Id. The Order then set forth multiple 
instances of such prescriptions. Id. at 5-6. The Order further alleged 
that Respondent ``issued multiple prescriptions to patients within a 
thirty-day window, amounting to prescriptions for large dosages of 
highly abused controlled substances'' and set forth a dozen patients to 
whom he issued the prescriptions. Id. at 6-7.
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    \1\ There is no such provision in the CSA.
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    On September 14, 2015, the Show Cause Order, which also notified 
Respondent of his right to request a hearing on the allegations or to 
submit a written statement in lieu of a hearing, the procedure for 
electing either option, and the consequence for failing to elect either 
option, was served on Respondent by certified mail, return receipt 
requested. GX 4, at 1. Thereafter, on October 14, 2015, Respondent, 
through his attorney, filed a document entitled ``Waiver of Hearing, 
Statement of Position on the Facts and Law'' (hereinafter ``Position 
Statement'') with the Office of Administrative Law Judges. See 21 CFR 
1301.43(c); GX 5. Therein, Respondent acknowledged service of the Order 
to Show Cause on September 14, 2015, see GX 5 at 5, and explained he 
was waiving his right to a hearing and filing his ``Statement of 
Position on the Facts and Law regarding the matters alleged in the 
Order to Show Cause.'' GX 5, at 2.
    On February 29, 2016, the Government forwarded its Request for 
Final Agency action, the Investigative Record, and Respondent's 
Position Statement. Subsequently, on March 21, 2016, the Government 
filed an Addendum to its Request for Final Agency Action (hereinafter, 
First

[[Page 64941]]

Addendum). Therein, the Government notified my Office that Respondent 
did not file his renewal application until February 2, 2106,\2\ which 
was less than 45 days before the expiration date of his registration 
(Feb. 29, 2016). Noting that under an agency regulation, ```a 
registrant, who has been served with an Order to Show Cause, [must] 
file his renewal application at least 45 days before the expiration of 
his registration, in order for it to continue in effect past its 
expiration date and pending the issuance of a final order,''' and that 
Respondent had filed his renewal application less than 45 days prior to 
the expiration of his registration, the Government argued that 
Respondent's registration had expired and thus, ``the issue to be 
considered . . . is whether DEA should grant [his] application . . . 
not whether DEA should revoke Respondent's registration.'' Id. at 1 
(quoting Paul Weir Battershell, 76 FR 44359, 44361 (2011) (quoting 21 
CFR 1301.36(i))).
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    \2\ On the date the Show Cause Order was issued, Respondent was 
registered as a practitioner to handle controlled substances in 
schedules II-V under DEA Registration FS3717975 at the registered 
address of La Junta Clinic, 715 Horizon Drive, Suite 200, Grand 
Junction, Colorado; this registration, which was issued on March 5, 
2013, was due to expire by its terms on February 29, 2016. GX 1.
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    On April 28, 2016 the Government filed a second Addendum to its 
Request for Final Agency Action (hereinafter, Second Addendum). 
Therein, the Government advised that ``the Medical Board of Colorado 
issued an Order of Suspension which suspended Applicant's Colorado 
medical license, effective Friday, April 22, 2016''; the Government 
provided a copy of the Board's Order.\3\ Id. at 1; see also Attachment 
(GX 27), at 1-2. The Board's Order has been made a part of the 
Investigative Record in this proceeding.
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    \3\ The Government certified that a copy of both Addendums was 
served on Respondent's counsel. First Addendum, at 3; Second 
Addendum at 2.
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Respondent's Position Statement

    Respondent's Position Statement raises various contentions which 
warrant discussion prior to my determination of the material facts in 
this matter. As a preliminary matter, Respondent asserts that ``in 
waiving his right to participate in the hearing[,] [he] did not and 
does not waive any rights other than his right to a hearing'' and that 
``there is no authority in the regulations of the Agency to waive any 
other rights pertaining to the adjudication of this matter.'' GX 5, at 
1.
    Among other things, Respondent contends that the Administrative Law 
Judge is required, ``upon receipt of a waiver of hearing and statement 
on the matters of fact and law to determine if the statement is 
admissible, and if so make the statement part of the record.'' Id. at 3 
(citing 21 CFR 1316.49). Respondent then argues that he ``is entitled 
to have the ALJ certify the record in this proceeding to the 
Administrator,'' that ``the ALJ's jurisdiction . . . does not terminate 
until after he certifies the record,'' that ``a termination of the 
proceedings that permits the Government's counsel to determine what 
constitutes the record is a clear violation of this regulation,'' and 
that ``[t]he ALJ's role and authority is not altered by the waiver of a 
hearing.'' Id. at 4 (citing 21 CFR 1316.52).
    Respondent is mistaken. Under the Agency's rules, absent the filing 
of a request for a hearing on an Order to Show Cause, the Office of 
Administrative Law Judges does not acquire jurisdiction over the 
matter. Here, Respondent did not file a request for a hearing, and 
indeed, explicitly waived his right to a hearing. Accordingly, no 
Administrative Law Judge was designated as a presiding officer and 
because no hearing was held, there was no record to be certified by a 
member of the Office of Administrative Law Judges.
    Thus, the Government, while it was required to submit Respondent's 
Position Statement with its filing, was otherwise entitled to determine 
what evidence it would submit to my Office in support of its Request 
for Final Agency action. Moreover, the Government has represented to me 
that it provided to Respondent a copy of its Request for Final Agency 
Action, the Exhibits, the Addendums, and the Attachment to the Second 
Addendum. Accordingly, as the Government has provided Respondent with 
all of its filings, Respondent cannot claim that it has been stripped 
``of its status as a party to the proceeding.'' \4\ Id. For the same 
reason, I reject Respondent's assertion that a ``quagmire . . . would 
ensue if the proceedings were cancelled in their entirety \5\ and 
Government Counsel were permitted to seek a final order by presenting 
DEA's case directly to the Administrator in ex parte communications.'' 
Id. at 5.
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    \4\ As support for this contention, Respondent quotes 20 CFR 
404.929, a regulation applicable to certain hearings conducted by 
ALJs on behalf of the Social Security Administration. See GX 5, at 
4. This provision has no relevance to this proceeding.
    \5\ Respondent offers no explanation as to what further rights 
he believes he is entitled to, given that he has waived his right to 
a hearing and has filed his Position Statement. Nor does he explain 
what he believes remains of the proceeding other than the 
Government's submission of its Request for Final Agency Action and 
its evidence and my issuance of this Decision and Order.
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    Respondent further argues that under 21 CFR 1301.43(c), I ``may not 
terminate the proceeding and issue [my] final order unless `all persons 
entitled to a hearing or to participate in a hearing waive . . . their 
opportunity for the hearing or to participate in the hearing.'' Id. 
(quoting 21 CFR 1301.43(e)) \6\ (emphasis in Respondent's Position 
Statement). Respondent then argues that ``DEA is entitled to 
participate in the hearing and . . . has counsel of record representing 
it,'' but ``has not waived its opportunity to participate in the 
hearing.'' Id. at 4. Respondent thus contends that ``canceling the 
hearing and allowing the Administrator to issue [his] final order is 
not authorized.'' Id.
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    \6\ The correct regulation is 21 CFR 1301.43(e).
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    Once again, Respondent is mistaken. Notwithstanding that an agency 
regulation applicable to hearings (21 CFR 1316.42(e)) defines the 
``[t]he term person [to] include[] an individual, corporation, 
government or governmental subdivision or agency,'' when the Government 
initiates an Order to Show Cause proceeding, it is not a ``person 
entitled to a hearing'' within the meaning of 21 CFR 1301.43.\7\ 
Indeed, this language is fairly read as encompassing only the recipient 
of the Show Cause Order.
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    \7\ Words take their meaning from the context in which they are 
used, and in this regard the language of 21 CFR 1301.43(a) is 
probative. It states: ``Any person entitled to a hearing pursuant to 
Sec.  1301.32 or Sec. Sec.  1301.34-1301.36 and desiring a hearing 
shall, within 30 days after the date of receipt of the order to show 
cause . . . file with the Administrator a written request for a 
hearing in the form prescribed in Sec.  1316.47 of this chapter.'' 
The reference provisions apply to applicants for registration whose 
applications the Agency is proposing to deny, and the holders of 
registrations whose registrations the Agency is proposing to revoke. 
As the provision applicable to Respondent states: ``[b]efore 
revoking or suspending any registration, the Administrator shall 
issue an order to show cause pursuant to Sec.  1301.37 and, if 
requested by the registrant, shall hold a hearing pursuant to Sec.  
1301.41.'' 21 CFR 1301.36(d) (emphasis added). Here, however, 
Respondent did not request a hearing but rather chose to submit a 
position statement in lieu thereof.
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    For the same reason, i.e., because it initiated the proceeding, 
when the Government initiates an Order to Show Cause proceeding, it is 
not a ``person entitled to participate in a hearing pursuant to Sec.  
1301.34 or Sec.  1301.35(b).'' 21 CFR 1301.43(b). With respect to Sec.  
1301.34, this provision applies to only a narrow category of cases 
which are not initiated by the Government--specifically, where an 
applicant seeks registration to import schedule I or II controlled 
substances. Under this provision, the Agency is required to give notice 
to registered manufacturers as

[[Page 64942]]

well as other applicants for registration to manufacturer the same 
basic substance, and upon request of such manufacturer or applicant, 
the Agency ``shall hold a hearing on the application.'' 21 CFR 
1301.34(a). While Government does not initiate the proceeding, it may 
intervene in the proceeding as a ``person entitled to participate in a 
hearing.'' 21 CFR 1301.43(b). See also e.g., Chattem Chemicals, Inc., 
71 FR 9834, 9834 (2006), pet. for rev. denied sub nom. Penick Corp, 
Inc., v. DEA, 491 F.3d 483, 493 (D.C. Cir. 2007); Penick Corp., Inc., 
68 FR 6947, 6947 (2003), pet. for rev. denied sub nom. Noramco, Inc., 
v. DEA, 375 F.3d 1148, 1159 (D.C. Cir. 2004). Indeed, this is the only 
circumstance in which the Government can be fairly described as a 
``person entitled to participate in a hearing.'' \8\
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    \8\ 21 CFR 1301.43(b) also refers to the provisions of 
1301.35(b), which allow for registered bulk manufacturers of a basic 
substance in schedule I or II (as well as applicants for 
registration to manufacture the basis substance) to ``participate in 
a hearing'' when the Government has issued a Show Cause Order 
proposing the denial of an application for registration ``to 
manufacture in bulk'' the same basic class and the applicant has 
requested a hearing. Here too, the Government is not a ``person 
entitled to participate in a hearing.'' Rather, it is initiator of 
the proceeding.
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    Thus, with respect to this proceeding, the Government is neither a 
``person[] entitled to a hearing or to participate in a hearing,'' 21 
CFR 1301.43(e), and the only person whose waiver matters for the 
purpose of cancelling the hearing is Respondent. Because Respondent has 
waived his right to a hearing, I am authorized to issue this ``final 
order . . . without a hearing.'' \9\ Id.
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    \9\ The Agency's longstanding and consistent practice is that 
where a party waives its right to a hearing, the Government is 
entitled to present its evidence directly to the Administrator, who 
is the ultimate factfinder. See, e.g., Cf. Reckitt & Colman, Ltd. v. 
Administrator, 788 F.2d 22, 26 (quoting 5 U.S.C. 557(b) (``On appeal 
from or review of the initial decision, the agency has all the 
powers which it would have in making the initial decision . . . 
.'')). This practice has been followed in hundreds of cases over the 
years.
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    Having reviewed the entire record, including Respondent's Statement 
of Position, I make the following factual findings.

FINDINGS OF FACT

Jurisdictional Facts

    Respondent, a doctor of osteopathic medicine, previously held DEA 
Certificate of Registration FS3717975, pursuant to which he was 
authorized to dispense controlled substances in schedules II-V, at the 
address of La Junta Clinic, 1012 Belmont Ave., La Junta, Colorado. GX 
1. This registration was issued on March 5, 2013, after Respondent 
submitted the application which is the subject of the material 
falsification allegations. On February 2, 2016, Respondent submitted an 
application to renew this registration. First Addendum, at 1. However, 
because Respondent had previously been served with the Show Cause 
Order, in order for his registration to remain valid pending this 
proceeding, he was required to submit his application at least 45 days 
before the date on which the registration was due to expire. 21 CFR 
1301.36(i). Accordingly, I find that Respondent's registration expired 
on February 29, 2016. I further find, however, that Respondent's 
application remains pending in this proceeding.\10\
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    \10\ Respondent previously held DEA Certificate of Registration 
BS3176105. GX 7, at 3. Pursuant to this registration, Respondent was 
authorized to dispense controlled substances in schedules II through 
V, at the registered location of 10752 North 89th Place, Suite 218, 
Scottsdale, Arizona 85620. GX 9, at 1. However, on July 30, 2012, 
Respondent surrendered this registration ``[i]n view of [his] 
alleged failure to comply with the Federal requirements pertaining 
to controlled substances, and as an indication of my good faith in 
desiring to remedy any incorrect or unlawful practice on [his] 
part.'' Id. This registration was retired the following day. GX 7, 
at 3.
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The Arizona and Utah Investigations of Respondent

    On April 29, 2010, the mother of Respondent's patient K.K. made a 
complaint to the Arizona Board of Osteopathic Examiners alleging that 
K.K. was a heroin addict and that Respondent was prescribing drugs and 
quantities that ``were inappropriate [given] K.K.'s history with 
substance abuse.'' GX 8, at 2. The same day, the Board notified 
Respondent that it was initiating an investigation. Id. at 1.
    Thereafter, Respondent was invited to attend an investigative 
hearing which was conducted on September 24, 2011; the hearing was 
continued to allow the Board to obtain additional information and 
conduct ``a chart review of thirty (30) patients.'' Id. The Board also 
ordered Respondent to undergo a psychological evaluation and requested 
that he provide additional documentation to it. Id.
    On April 10, 2012, the Board notified Respondent ``that the 
Investigative Hearing would continue on May 19, 2012.'' Id. On that 
date, the Board conducted the hearing with Respondent present and 
represented by counsel. Id. Thereafter, the Board issued a decision and 
order which made factual findings and legal conclusions regarding 
Respondent's prescribing to K.K. as well as its chart review.
    With respect to K.K., the Board found that she was Respondent's 
patient ``from March 2005 through March 2010, with a lapse in care from 
February 2006 to early 2009.'' Id. at 2. The Board found that at K.K.'s 
second visit, Respondent prescribed Percocet to her in quantities 
ranging from 120 to 180 dosage units each month as well as 90 Xanax and 
30 Ambien each month. Id. The Board further found that ``Respondent 
failed to obtain prior medical records or to perform a workup on K.K. 
and no consultations were ordered.'' Id. It also found that ``[t]he 
majority of K.K.'s medications were obtained through Respondent's 
office'' and that he ``did not enter into a medication contract with 
[her] until May 5, 2010 for Suboxone.'' Id.
    Continuing, the Board found that K.K. ``returned to Respondent . . 
. in 2009 and . . . was started on'' 90 Percocet and 90 Soma, and that 
``[i]n October 2009, K.K. overdosed and was taken to the hospital.'' 
Id. The Board found that ``Respondent continued'' to provided K.K. with 
prescriptions each month for 120 dosage units of Percocet, 90 Xanax, 
and 30 Ambien until March 2010, when he increased her Percocet 
prescription to 180 du per month. Id. According to the Board, K.K. 
overdosed again on March 17, 2010 as well as on April 11, 2010. Id. at 
2-3.
    With respect to the chart review, the Board found that ``Respondent 
prescribed controlled substances to chronic pain patients'' and that 
``[p]harmacy inquiries and drug screens were ignored in patients that 
were clearly diverting.'' Id. at 3. The Board further found that 
``Respondent deviated from the standard of care by failing to'':

    (1) ``stop prescribing controlled substances for patients that 
had overdosed'';
    (2) ``recognize drug seeking behavior in patients'';
    (3) ``request prior medical records'';
    (4) ``obtain appropriate laboratory testing'';
    (5) ``conduct a physical exam in at least one patient'';
    (6) ``obtain consultations''; and
    (7) ``follow the directions of specialist [sic] or 
recommendations when consultations were obtained.''

Id.
    The Board thus found that ``Respondent practice[d] medicine in a 
manner that harmed or had potential to harm patients and fell below the 
community standard . . . and . . . this conduct endangered a patient or 
the public's health.'' Id. And the Board concluded that Respondent 
engaged in unprofessional conduct by `` `[e]ngaging in the practice of 
medicine in a manner that harms or may harm a patient or that the board 
determines falls below the community,' '' as well as that he engaged in 
`` `[a]ny conduct or practice

[[Page 64943]]

that endangers the public's health or may reasonably be expected to do 
so.''' Id. at 4 (quoting Ariz. Rev. Stat. Sec. Sec.  32-1854(6) & 
(38)).
    Based on the above, the Board censured Respondent and 
``restricted'' him ``from prescribing or recommending Schedule I, II, 
III or IV controlled substances for a period of two years . . . from'' 
the Order's effective date. The Board also restricted him from 
practicing pain management, imposed a civil penalty of $1,000 and 
placed him on probation for a period of five years, the terms of which 
included that he ``obey all federal, state and local laws, and rules 
governing the practice of medicine in the State of Arizona.'' Id. The 
Order became effective on July 17, 2012. GX 10, at 3.
    As found above, on July 30, 2012, Respondent voluntarily 
surrendered his then DEA registration (BS3176105). Thereafter, on 
October 12, 2012, the Board received information form anonymous sources 
that Respondent ``may be prescribing controlled substances.'' GX 16, at 
1. In response, the Board queried the Board of Pharmacy's Controlled 
Substances Prescription Monitoring Program ``for all controlled 
substances written or ordered by [Respondent] from June 11, 2012 
through October 15, 2012.'' Id. The query showed that between July 17, 
2012 and October 15, 2012, Respondent had issued 99 prescriptions for 
schedule II drugs, 23 prescriptions for schedule III drugs, and 70 
prescriptions for schedule IV drugs. Id. at 1-2. The Board identified 
one patient Respondent saw at his office who received a prescription 
for temazepam on August 21, 2012, and 11 patients at hospices in Tuscon 
and Mesa to whom he either prescribed or ordered the dispensing of 
controlled substances, which included morphine, hydromorphone, 
oxycodone, lorazepam and temazepam. Id. at 2-6. Moreover, Respondent 
issued 17 controlled substance prescriptions or orders for the 
dispensing of controlled substances for 12 patients after he 
surrendered his DEA registration. Id.
    On November 9, 2012, Respondent was interviewed by the Board and 
admitted ``that he had signed prescriptions for Schedule I, II, III or 
IV controlled substances after the Effective Date'' of the Order. GX 
10, at 4. Respondent denied having ``written prescriptions for patients 
in his private practice'' and ``stated that he had only written or 
authorized prescriptions in his capacity as the . . . medical director 
for various hospice locations.'' \11\ Id.
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    \11\ Under the probationary terms of the July 17, 2012 Order, 
Respondent was required to hire a practice monitor. GX 10, at 4. 
During the November 9 interview, ``Respondent stated that he did not 
hire a practice monitor because he was not actively practicing in 
Arizona.'' Id.
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    On November 16, 2012, Respondent entered into an Interim Consent 
Agreement which the Board approved the following day. Id. at 2, 5. 
Respondent admitted to the findings of fact contained therein, 
including that he had prescribed or ordered controlled substances after 
the July 17, 2012 Order became effective, as well as the legal 
conclusion that he had engaged in unprofessional conduct by 
``[v]iolating a formal order, probation or a stipulation issued by the 
board.'' Id. at 1, 4. The Board then ordered that Respondent be 
``restricted from practicing medicine until the investigation'' was 
completed and ``he appear[ed] before the Board . . . for resolution'' 
of the matter. Id. at 4.
    On May 12, 2014, Respondent entered into a Consent Agreement and 
Order for Voluntary Surrender of Licensee. GX 12, at 1, 5. Therein, 
Respondent waived his right to a hearing before the Board. Id. at 2. 
The Board found, inter alia, that on August 1, 2012, Respondent had 
``entered into an Independent Contractor Agreement with Hospice Family 
Care, Inc.[,] to continue to serve as its Executive Medical Director of 
Hospice'' and that he had ``signed prescriptions for controlled 
substances for ten patients ``after the effective date of the [July 17, 
2012] Board Order.'' Id. at 3.
    While the Arizona Board's investigation was ongoing, Respondent was 
also the subject of disciplinary proceedings brought by the Utah 
Division of Occupational and Professional Licensing against his 
licenses to practice osteopathy and prescribe controlled substances in 
that State. GX 11, at 1. On February 4, 2013, Respondent entered into a 
Stipulation and Order with the State in which he admitted that on May 
4, 2012, he had submitted an application for licensure as an osteopath 
and represented on the application ``that he was not currently under 
investigation by any licensing agency, even though [he] knew he was 
currently under investigation in Arizona.'' Id. at 3. Respondent 
admitted that his conduct constituted both ``unprofessional conduct as 
defined in Utah Code Ann. Sec.  58-1-501(2)(a) and unlawful conduct as 
defined in Utah Code Ann. Sec.  58-1-501(e).'' Id. Respondent agreed to 
surrender his licenses to practice as an osteopath and to administer 
and prescribe controlled substances and to not reapply for such 
licenses for a period of five years. Id. On February 6, 2013, the 
Division approved the Order. Id. at 6.

Respondent's March 2013 DEA Application, the Tennessee Board Action, 
and His Subsequent Address Changes

    On March 4, 2013, Respondent applied for a new DEA registration at 
an address in Chattanooga, Tennessee. GX 6, at 2. On the application, 
Respondent was required to answer four liability questions. With 
respect to Question Two, which asked, inter alia, whether Respondent 
had ever surrendered (for cause) his DEA registration, Respondent 
answered ``yes.'' GX 7, at 2. After listing the incident date as ``7/
17/2012'' and the incident location as ``Scottsdale, AZ,'' Respondent 
explained the nature of the incident as follows: ``AN ADDICTION PATIENT 
OF MINE ESCALATED THE USE OF HER MEDICATIONS AND ENDED UP IN THE ER. 
SHE WAS DISCHARGED FROM THE ER UNHARMED BUT HER MOTHER COMPLAINED TO 
THE ARIZONA OSTEOPATHIC BOARD OF EXAMINERS. THEY PLACED MY LICENSE ON 
SUSPENSION.'' Id. As for the ``incident result,'' Respondent explained: 
``I VOLUNTARILY SURRENDERED MY ARIZONA MEDICAL LICENSE AND DEA 
REGISTRATION AS I NEW [sic] THAT I WAS MOVING TO TENNESSEE IN THE NEAR 
FUTURE.'' Id.
    As for Question Three, it asked: ``Has the applicant ever 
surrendered (for cause) or had a state professional license or 
controlled substance registration revoked, suspended, denied, 
restricted, or placed on probation, or is any such action pending?'' 
Id. Respondent again answered ``Yes'' and listed the same incident date 
and location as he did in his previous answer. Id. As for the nature of 
the incident, Respondent explained: ``THE ARIZONA BOARD . . . PLACED MY 
LICENSE ON A 5 YEAR PROBATION.'' Id. He then explained the incident 
result as: ``I VOLUNTARILY SURRENDERED MY ARIZONA LICENSE AND DEA 
REGISTRATION AS I KNEW I WAS MOVING TO TENNESSE IN THE NEXT FEW 
MONTHS.'' Id. at 3.
    Respondent did not disclose on the application the November 16, 
2012 Interim Consent Agreement with the Arizona Board. See id. He also 
did not disclose the February 6, 2013 Stipulation and Order with the 
State of Utah. Id.
    As found above, the next day, Respondent was issued a new 
registration which authorized him to dispense controlled substances in 
schedules II through V, at a location in

[[Page 64944]]

Chattanooga, Tennessee; this registration did not expire until February 
29, 2016. Shortly thereafter, Respondent sought to change his 
registered address to a location in Hixson, Tennessee, which the Agency 
approved on April 3, 2013. GX 6, at 5.
    However, on March 17, 2014, Respondent entered into a Consent Order 
with the Tennessee Board of Osteopathic Examination. GX 13, at 7. The 
Order was based on the July 17, 2012 and November 17, 2012 Arizona 
Orders, as well as the Utah Stipulation and Order. GX 13, at 3-4. 
Respondent agreed that the ``disciplinary actions in Utah and Arizona . 
. . constitute [sic] unprofessional conduct'' in that they involved 
``[u]nprofessional, dishonorable or unethical conduct'' which, while it 
occurred in other States, was also grounds for discipline in Tennessee. 
Id. (citing Tenn. Code Ann. Sec. Sec.  63-9-111(b)(1) & (b)(21)). 
Respondent further agreed to the indefinite suspension of his Tennessee 
license. Id. at 4. On May 7, 2014, the Board approved the Order. Id. at 
6.
    According to Respondent, in July 2014, he moved to Grand Junction, 
Colorado, where he was also licensed, and began working for Dr. Rebecca 
Tolby, and worked for her for 11 months. GX 5, at 11 (Resp. Position 
Statement). On some date which is not clear on the record,\12\ 
Respondent sought to modify his registered location to an address in 
Colorado; however, the modification was not approved until April 6, 
2015. GX 6, at 6 (Diversion Investigator's (DI) Declaration); see also 
GX 7, at 1 (Certification of Registration History).
---------------------------------------------------------------------------

    \12\ In an affidavit attached to his Position Statement, 
Respondent asserted that ``[w]hen I moved to Colorado in 2014, I 
applied to modify my DEA registration to my Colorado address.'' GX 
5, at 13. Respondent did not, however, specify the date on which he 
applied for the modification. Id.
---------------------------------------------------------------------------

    In her Declaration, the DI stated that on December 1, 2014, she 
phoned ``Respondent regarding his lack of authority to write 
prescriptions in the State of Colorado'' and offered him ``the 
opportunity to surrender [his] DEA registration.'' GX 6, at 6. 
According to the DI, ``[t]hat same evening . . . Respondent attempted 
to modify his registered address again from Tennessee to New Mexico.'' 
\13\ Id. However, Respondent subsequently changed his modification 
request ``back to Colorado.'' \14\ Id.
---------------------------------------------------------------------------

    \13\ Respondent also obtained an osteopathic medicine license in 
New Mexico in May 2012; he provided the Agency with a contact 
address in Albuquerque from December 2014 through February 2015, but 
there is no indication in the record that he practiced in New 
Mexico. Respondent admits that the New Mexico Board of Osteopathic 
Medical Examiners (NMBOME) had opened an investigation into his 
license but that his license had been renewed on August 19, 2015. GX 
5 at 12. However, the NMBOME Web site states that Respondent's 
Pharmacy license expired on March 1, 2016, and that his osteopathic 
license expired on July 1, 2016. See http://verification.rld.state.nm.us/Details.aspx?agency_id=l&license_id=625477.
    \14\ On September 14, 2015 (the same date the Show Cause Order 
was served), Respondent's registered address was changed to the La 
Junta Clinic, 1012 Belmont Avenue, in La Junta, Colorado. GX 7, at 
1.
---------------------------------------------------------------------------

The DI's Investigation of Respondent's Controlled Substance Prescribing 
in Colorado

    On April 30, 2015, the DI served a Notice of Inspection on five 
pharmacies located in Grand Junction, Colorado seeking to obtain copies 
of the prescriptions written by Respondent and dispensing reports 
showing the prescriptions he had written ``from approximately July 2014 
through February 2015.'' GX 6, at 7-8. Upon reviewing the records, the 
DI prepared a list by month of 89 controlled substance prescriptions 
(some of which provided for refills) Respondent issued from July 29, 
2014 through December 1, 2014 while practicing in Grand Junction, 
Colorado, id. at 7-10; copies of the prescriptions were submitted for 
the record.\15\ See GXs 14, 15, 20, 21, 22, 23, 24, 25. Moreover, the 
dispensing reports obtained from two of the pharmacies showed that 
Respondent issued additional controlled substance prescriptions even 
after December 1, 2014, the date on which he was told by the DI that he 
was not authorized to issue such prescriptions in Colorado. See GX 22, 
at 7 (report obtained from Palisade Pharmacy of Palisade, Colorado 
showing prescriptions for Tramadol issued to M.B. on Dec. 18, 2014 
(filled on Dec. 29, 2014) and on January 26, 2015 (filled that day)); 
GX 25, at 7 (report obtained from Walgreens of Clifton, Colorado 
showing prescription for clonazepam issued to A.O. on Mar. 2, 2015 and 
dispensed by pharmacy on Mar. 3, 2015).
---------------------------------------------------------------------------

    \15\ As discussed above, the Government also alleged that 
Respondent ``issued multiple prescriptions to patients within a 
thirty-day window, amounting to prescriptions for large dosages of 
highly-abused controlled substances.'' GX 2, at 6. As support for 
the allegation, the DI listed 11 patients who received additional 
prescriptions within 30 days of having received prescriptions from 
Respondent. GX 6, at 10-11. While Respondent violated federal law 
when he issued the prescriptions because he was not registered in 
Colorado, the Government did not allege that any of these 
prescriptions lacked a legitimate medical purpose and thus violated 
21 CFR 1306.04(a) or a similar provision under Colorado law. Beyond 
that, in some instances the prescriptions were issued 28 days after 
the previous prescriptions, which hardly suggests that patients were 
seeking refills that were too early. While in other instances, the 
time between the prescriptions was only two or three weeks, the 
Government did not address why, given the dosing instruction, the 
refill was too early. I thus reject the allegation.
---------------------------------------------------------------------------

The Colorado Board Proceeding

    On April 22, 2016, the Colorado Medical Board suspended 
Respondent's license to practice medicine pending proceedings for 
suspension or revocation. The suspension was based on the Board's 
finding that there is ``reasonable grounds to believe that Respondent 
was guilty of a deliberate and willful violation of the Medical 
Practice Act'' in that he ``authorized prescriptions for controlled 
substances for at least four patients . . . using another physician's 
DEA registration'' when he did not have an active DEA registration 
number. April 2016 Addendum to Government's RFAA, GX 27. As of the date 
of this Decision and Order, Respondent's Colorado license remains 
suspended. See https://www.colorado.gov/dora/licensing/Lookup/Licensedlookup.aspx (visited September 13, 2016).

Respondent's Position Statement

    In support of his Position Statement, Respondent provided an 
affidavit. Therein, Respondent states that he ``take[s] full 
responsibility for my actions that resulted in the probation and 
ultimate surrender of my Arizona license'' and that he since ``learned 
a great deal on the proper prescribing of controlled substances.'' GX 
5, at 11. He further asserts that ``I did not fully understand the 
scope of my initial restriction, which caused me to inadvertently 
violate that restriction.'' Id.
    Respondent further asserts that ``[s]ince 2012, [he] ha[s] taken a 
number of steps to ensure that my prescribing practices are compliant 
with federal and state law'' and that in ``the past year,'' he has 
``been a member of the Colorado Consortium for Prescription Drug Abuse 
Prevention'' and that ``[t]he program is helpful to keep abreast of the 
latest trends on opioid abuse and strategies for prevention.'' Id. at 
11-12. He further states that in 2014, he attended lectures during a 
medical convention on the ``Tennessee Substance Abuse Epidemic'' and 
``Office Based Opioid Withdrawal.'' Id. at 12.
    In his affidavit, Respondent states that ``I have had some 
challenges with my state medical licenses, all of which arise from the 
suspension of my Arizona license.'' Id. He then maintains that ``I have 
tried to be as transparent as possible in communicating these issues to 
the various state medical boards and the local DEA offices that have 
conducted pre-registration investigations.'' Id. at 13.

[[Page 64945]]

    As for his conduct in issuing controlled substance prescriptions in 
Colorado when he was not registered in the State, Respondent states 
that he ``was unaware when I moved to Colorado that I was not able to 
prescribe controlled substances until the DEA actually approved the 
modification of my . . . registration to my new address.'' Id. 
Respondent states that he thought that he could prescribe controlled 
substances in Colorado ``so long as I had submitted my request for a 
modification.'' Id. Respondent then states that he ``take[s] full 
responsibility'' for this misconduct which was based on his 
``misunderstanding of the law and not on any intentional effort to 
circumvent the'' CSA. Id. at 14.
    According to Respondent, ``[a]s soon as I understood my mistake, I 
immediately stopped prescribing controlled substances.'' Id. However, 
as found above, the reports of Respondent's dispensings that were 
provided by the Palisade Pharmacy and Walgreens show that Respondent 
issued additional prescriptions after the DI told him on December 1, 
2014 that he lacked authority to write prescriptions in Colorado.\16\ I 
thus find that Respondent's statement is false.
---------------------------------------------------------------------------

    \16\ While Respondent offered an extensive explanation of his 
practice, at least as it existed prior to the Colorado Board's 
suspension of his medical license, which involved working in rural 
Colorado, the Agency has made clear that it does not consider so-
called community impact evidence relevant in making the public 
interest determination in the case of prescribing practitioners. See 
Linda Sue Cheek, 76 FR 66972, 66972-73 (2011); Gregory Owen, 74 FR 
36751, 36756-57 (2009).
---------------------------------------------------------------------------

    Respondent further states that he ``understand[s] that the 
allegations in the . . . Order to Show Cause are very serious and that 
compliance with the DEA's regulations on prescribing controlled 
substances is crucial to prevent . . . diversion and abuse of 
controlled substances.'' Id. at 17. Notably, Respondent did not address 
the allegation that he materially falsified his March 4, 2013 
application for a DEA registration. See generally id. at 10-17.

DISCUSSION

    Pursuant to section 303(f) of the Controlled Substances Act, 
``[t]he Attorney General shall register practitioners . . . to dispense 
. . . controlled substances . . . if the applicant is authorized to 
dispense controlled substances under the laws of the State in which he 
practices.'' 21 U.S.C. 823(f). Section 303(f) further provides that an 
application for a practitioner's registration may be denied upon a 
determination ``that the issuance of such registration . . . would be 
inconsistent with the public interest.'' Id. In making the public 
interest determination, the CSA requires the consideration of the 
following factors:

    (1) The recommendation of the appropriate State licensing board 
or professional disciplinary authority.
    (2) The Applicant's experience in dispensing . . . controlled 
substances.
    (3) The Applicant's conviction record under Federal or State 
laws relating to the manufacture, distribution, or dispensing of 
controlled substances.
    (4) Compliance with applicable State, Federal, or local laws 
relating to controlled substances.
    (5) Such other conduct which may threaten the public health and 
safety.

Id.
    ``These factors are . . . considered in the disjunctive.'' Robert 
A. Leslie, M.D., 68 FR 15227, 15230 (2003). I ``may rely on any one or 
a combination of factors, and may give each factor the weight [I] 
deem[] appropriate in determining whether . . . an application for 
registration [should be] denied.'' Id. Moreover, while I am required to 
consider each of the factors, I ``need not make explicit findings as to 
each one.'' MacKay v. DEA, 664 F.3d 808, 816 (10th Cir. 2011) (quoting 
Volkman, 567 F.3d 215, 222 (6th Cir. 2009) (quoting Hoxie, 419 F.3d 
477, 482 (6th Cir. 2005))).\17\
---------------------------------------------------------------------------

    \17\ ``In short, this is not a contest in which score is kept; 
the Agency is not required to mechanically count up the factors and 
determine how many favor the Government and how many favor the 
registrant. Rather, it is an inquiry which focuses on protecting the 
public interest; what matters is the seriousness of the registrant's 
misconduct.'' Jayam Krishna-Iyer, 74 FR 459, 462 (2009).
---------------------------------------------------------------------------

    Pursuant to section 304(a)(1), the Attorney General is also 
authorized to suspend or revoke a registration ``upon a finding that 
the registrant . . . has materially falsified any application filed 
pursuant to or required by this subchapter.'' 21 U.S.C. Sec.  
824(a)(1). It is well established that the various grounds for 
revocation or suspension of an existing registration that Congress 
enumerated in section 304(a), 21 U.S.C. Sec.  824(a), are also properly 
considered in deciding whether to grant or deny an application under 
section 303. See The Lawsons, Inc., 72 FR 74334, 74337 (2007); Anthony 
D. Funches, 64 FR 14267, 14268 (1999); Alan R. Schankman, 63 FR 45260 
(1998); Kuen H. Chen, 58 FR 65401, 65402 (1993).
    Thus, the allegation that Respondent materially falsified his 
application is properly considered in this proceeding. See Samuel S. 
Jackson, 72 FR 23848, 23852 (2007). Moreover, just as materially 
falsifying an application provides a basis for revoking an existing 
registration without proof of any other misconduct, see 21 U.S.C. 
824(a)(1), it also provides an independent and adequate ground for 
denying an application. The Lawsons, 72 FR at 74338; cf. Bobby Watts, 
M.D., 58 FR 46995 (1993); Shannon L. Gallentine, 76 FR 45864, 45866 
(2011).
    In this matter, I conclude that there are three independent grounds 
for denying Respondent's pending application. First, he materially 
falsified his March 4, 2013 application. Second, by prescribing 
controlled substances in both Arizona and Colorado when he was not 
legally authorized to issue such prescriptions in the respective State, 
he violated the CSA and DEA regulations and thus has committed acts 
which render his registration ``inconsistent with the public 
interest.'' 21 U.S.C. Sec.  823(f). Third, as a result of the Colorado 
Board's suspension of his osteopathic license, he lacks authority under 
state law to dispense controlled substances in the State in which he 
now seeks registration. See id; see also id. Sec.  802(21).

The Material Falsification Allegation

    As found above, the evidence shows that when Respondent submitted 
his application for a registration on or about March 5, 2013, he 
answered ``Yes'' to two liability questions.\18\ GX 7, at 2. Question 
Three asked: ``Has the applicant ever surrendered for cause or had a 
state professional license or controlled substance registration 
revoked, suspended, denied, restricted, or placed on probation, or is 
any such action pending?'' Respondent checked the ``yes'' box and 
provided the following information:
---------------------------------------------------------------------------

    \18\ The second question asked Respondent, inter alia, whether 
he had ever surrendered his DEA registration for cause. The 
Government does not allege that Respondent materially falsified his 
application in answering this question.

    Incident Date: 07/17/2012. Incident Location: Scottsdale, AZ. 
Incident Nature: The Arizona Board of Osteopathic Examiners placed 
my license on a 5 year probation. Incident Result: I voluntarily 
surrendered my Arizona license and DEA registration as I knew I was 
---------------------------------------------------------------------------
moving to Tennessee in the next few months.

Id.
    The Government alleges that Respondent's answer was materially 
false because Respondent failed to disclose the November 2012 Interim 
Consent Agreement he entered into with the Arizona Board and the 
February 2013 Stipulation and Order he entered into with the Utah 
Division of Occupational and Professional Licensing. Request for Final 
Agency Action, at 11-13. I agree with the Government that Respondent 
materially

[[Page 64946]]

falsified his application, but only with respect to his failure to 
disclose the November 2012 Interim Consent Agreement with Arizona.
    The Supreme Court has held that ``the most common formulation'' of 
the concept of materiality is that ``a concealment or misrepresentation 
is material if it `has a natural tendency to influence, or was capable 
of influencing, the decision of' the decisionmaking body to which it 
was addressed.'' Kungys v. United States, 485 U.S. 759, 770 (1988) 
(quoting Weinstock v. United States, 231 F.2d 699, 701 (D.C. Cir. 1956) 
(other citation omitted)) (quoted in Samuel S. Jackson, 72 FR 23848, 
23852 (2007)); see also United States v. Wells, 519 U.S. 482, 489 
(1997) (quoting Kungys, 485 U.S. at 770); Arthur H. Bell, 80 FR 50035, 
50038 (2015). The Court has further explained that ``[i]t has never 
been the test of materiality that the misrepresentation or concealment 
would more likely than not have produced an erroneous decision, or even 
that it would more likely than not have triggered an investigation.'' 
Kungys, 485 U.S. at 771 (emphasis added). Rather, the test is ``whether 
the misrepresentation or concealment was predictably capable of 
affecting, i.e., had a natural tendency to affect, the official 
decision.'' Id. `` `[T]he ultimate finding of materiality turns on an 
interpretation of substantive law,' '' id. at 772 (int. quotations and 
other citation omitted), and must be shown ``by evidence that is clear, 
unequivocal, and convincing.'' Id.
    Respondent's failure to disclose the Arizona Interim Consent 
Agreement clearly meets the standard of materiality. As found above, 
the Consent Agreement was based on the Board's findings that even after 
the Board had restricted him from prescribing controlled substances, 
Respondent continued to dispense controlled substances in that State 
and did so for nearly three months after the effective date of the 
Board's Order by either issuing prescriptions or ordering the 
dispensing of controlled substances. As the evidence shows, Respondent 
dispensed 99 prescriptions/orders for schedule II drugs, 23 
prescriptions for schedule III drugs, and 70 prescriptions for schedule 
IV drugs after the effective date of the Board's Order and when he no 
longer held authority under state law and DEA regulations. See 21 CFR 
1306.03(a) (requiring for a legal prescription that an individual 
practitioner be ``[a]uthorized to prescribe controlled substances by 
the jurisdiction in which he is licensed to practice his profession and 
. . . [e]ither registered or exempted from registration'').
    Moreover, Respondent issued multiple prescriptions or ordered the 
dispensing of controlled substances even after he surrendered his DEA 
registration on July 30, 2012.\19\ See 21 U.S.C. 843(a)(3) (``It shall 
be unlawful for any person knowingly or intentionally . . . to use in 
the course of the . . . dispensing of a controlled substance, a 
registration number which is fictitious, revoked, suspended, expired, 
or issued to another person[.]''); id. Sec.  822(a)(2) (``Every person 
who dispenses . . . any controlled substance, shall obtain from the 
Attorney General a registration . . . .''); see also 21 CFR 1306.03(a).
---------------------------------------------------------------------------

    \19\ While Respondent's loss of his state authority rendered his 
subsequent issuance of the prescriptions and orders unlawful under 
the CSA even without his having formally surrendered his DEA 
registration, Respondent's continued dispensing of controlled 
substances after he surrendered his registration begs the question 
of what consequences he believed were attendant to the surrender of 
his DEA registration. However, in his Position Statement, Respondent 
does not address the question.
---------------------------------------------------------------------------

    In determining whether the granting of an application is consistent 
with the public interest, the Agency is required to consider both 
``[t]he Applicant's experience in dispensing . . . controlled 
substances'' and ``compliance with applicable State [and] Federal . . . 
laws relating to controlled substances.'' 21 U.S.C. 823(f)(2) & (4). 
Thus, while Respondent disclosed the July 2012 Arizona Board Order on 
his application, his failure to disclose the November 2012 Order was 
clearly ``capable of affecting'' the Agency decision to grant his 
application because the Order was based on the additional misconduct he 
committed with respect to the dispensing of controlled substances when 
he no longer held authority under the CSA and Arizona law. Kungys, 485 
U.S. at 771.\20\
---------------------------------------------------------------------------

    \20\ Given this finding, I need not decide whether Respondent's 
failure to disclose the Utah Stipulation and Order was material to 
the Agency's determination as to whether to grant his application 
for registration in Tennessee.
---------------------------------------------------------------------------

    As noted above, in his affidavit, Respondent did not address his 
material falsification of the 2013 application. However, in his 
Position Statement, he admits (through his counsel) that he ``did not 
provide a complete answer to the liability question,'' but then 
contends that ``there was never intent . . . to withhold information 
from DEA, to be untruthful, and/or to omit relevant information to 
influence DEA's decision.'' GX 5, at 4-5.
    However, the statement made by Respondent's counsel is not 
evidence, see INS v. Phinpathya, 464 U.S. 183, 186 n.6 (1984), and I 
conclude that Respondent submitted his 2013 DEA application with 
fraudulent intent. As explained above, the November 2012 Order, which 
was issued only three plus months before he submitted his application, 
establishes that Respondent had engaged in additional misconduct and 
disobeyed the Board's earlier Order as well as issued prescriptions 
after he surrendered his DEA registration. So too, Respondent's failure 
to disclose the Arizona investigation on his Utah application is 
probative evidence of his intent or lack of mistake in failing to 
disclose the November 2012 Arizona order on his DEA application. See 
Arthur H. Bell, 80 FR 50035, 50038 (2015); cf. Fed. R. Evid. R. 
404(b)(2). Accordingly, I conclude that Respondent materially falsified 
his March 4, 2013 application for a DEA registration in Tennessee. This 
conclusion provides reason alone to deny his pending application.

The Public Interest Factors

    In its Request for Final Agency Action as initially submitted, the 
Government argues that Factors Two, Four and Five support the denial of 
Respondent's application.\21\ Govt. Request at 14-17. I

[[Page 64947]]

agree that the evidence with respect to Factor Two and Four establishes 
a prima facie case to deny Respondent's application. And having 
reviewed Respondent's Position Statement, I hold that he has failed to 
present sufficient evidence to rebut the conclusion that his 
``registration would be inconsistent with the public interest.'' 21 
U.S.C. Sec.  823(f).
---------------------------------------------------------------------------

    \21\ In the Request for Final Agency Action, the Government 
argued that Factor One--The Recommendation of the Appropriate State 
Licensing Board--``neither weighs in favor nor weighs against the 
[denial] of Respondent's'' application for registration.'' Req. for 
Final Agency Action, at 14.
     While Respondent held a Colorado license on the date the 
Government submitted its Request for Final Agency Action, the Board 
subsequently suspended his license to practice medicine on the 
ground that he authorized controlled substance prescriptions ``using 
another physician's DEA registration'' after his DEA registration 
expired. GX 27, at 1. While Respondent apparently has not had a 
hearing on these allegations, the fact remains that he does not 
currently possess authority to dispense controlled substances in 
Colorado, the State in which he is seeking registration.
     DEA has long held that the possession of state authority to 
dispense controlled substances in the State in which a practitioner 
engages in professional practice is a prerequisite for obtaining a 
DEA registration in that State. See Frederick Marsh Blanton, 43 FR 
27616, 27617 (1978) (``State authorization to dispense or otherwise 
handle controlled substances is a prerequisite to the issuance and 
maintenance of a Federal controlled substances registration.''); see 
also 21 U.S.C. Sec.  802(21) (defining ``[t]he term `practitioner' 
[to] mean[] a physician . . . or other person licensed, registered, 
or otherwise permitted, by the United States or the jurisdiction in 
which he practices to . . . dispense . . . a controlled substance in 
the course of professional practice.''); id. Sec.  823(f) (``The 
Attorney General shall register practitioners . . . to dispense . . 
. controlled substances . . . if the applicant is authorized to 
dispense . . . controlled substances under the laws of the State in 
which he practices.''); United States v. Moore, 423 U.S. 122, 140-41 
(1975) (``In the case of a physician, this scheme contemplates that 
he is authorized by the State to practice medicine and to dispense 
drugs in connection with his professional practice.''). The Agency 
has further held that this rule applies even where a practitioner's 
state authority has been summarily suspended and the State has yet 
to provide him/her with a hearing to challenge the State's action. 
See Bourne Pharmacy, 72 FR 18273, 18274 (2007).
    Because Respondent's Colorado medical license has been 
suspended, he is no longer currently authorized to dispense 
controlled substances in Colorado, the State in which he seeks 
registration. Thus, he no longer meets the CSA's requirement that he 
be authorized to dispense controlled substances in the State where 
he is registered. This conclusion provides a further reason to deny 
his application.
---------------------------------------------------------------------------

Factors Two and Four--the Applicant's Experience in Dispensing 
Controlled Substances and Compliance With State and Federal Laws 
Related to Controlled Substances

    The Government contends that the various Arizona Board Orders 
establish that Respondent's experience in dispensing controlled 
substances and his compliance with state and federal laws related to 
controlled substances support the denial of his application and that 
the Board's factual findings and legal conclusions are entitled to 
preclusive effect in this proceeding. Req. for Final Agency Action, at 
14-15. I agree in part.
    Based on its findings that Respondent deviated from the standard of 
care in his treatment of K.K. as well as at least 30 patients, to 
include prescribing excessive controlled substances to chronic pain 
patients, and that he ignored pharmacy inquiries and drug screenings in 
patients who were clearly diverting, the Board restricted him from 
prescribing or recommending controlled substances for two years.\22\ 
Id. at 4. Nonetheless, after the effective date of the Order, 
Respondent continued to issue controlled substance prescriptions as 
well order the administration of controlled substances to hospice 
patients. These prescriptions and orders violated the CSA and DEA 
regulations because he lacked the requisite state authority to dispense 
controlled substances. 21 CFR 1306.03(a). See also Ariz. Rev. Stat. 
Sec.  32-1854 (25). Moreover, Respondent issued at least 17 of these 
prescriptions and orders for administration even after he surrendered 
his registration. 21 U.S.C. 841(a)(1), 843(a)(3), 822(a)(2). Thus, by 
itself, Respondent's unauthorized dispensing of controlled substances 
while practicing in Arizona establishes that his registration would be 
``inconsistent with the public interest.'' 21 U.S.C. 823(f).
---------------------------------------------------------------------------

    \22\ While the Government argues that the Board's findings 
establish that Respondent ``failed to comply with state law by 
deviating from the standard of care in issuing prescriptions for 
controlled substances,'' the Arizona Board did not find that he 
engaged in ``[p]rescribing, dispensing, or administering controlled 
substances . . . for other than therapeutic purposes.'' See Ariz. 
Rev. Stat. Sec.  32-1854. In short, neither of the provisions the 
Board found Respondent to have violated make specific reference to 
controlled substances but are provisions generally applicable to all 
osteopathic physicians. As such, while Respondent's conduct involved 
controlled substances, the provisions he violated are not laws 
related to controlled substances.
     Notwithstanding that the Board did not find that he prescribed 
``for other than therapeutic purposes,'' the Board's findings and 
conclusions might well have supported an adverse finding under 
Factor Two because ``DEA's authority to [deny an application] is not 
limited to those instances in which a practitioner intentionally 
diverts,'' and ``[a] practitioner who ignores the warning signs that 
[his] patients are either personally abusing or diverting controlled 
substances commits `acts inconsistent with the public interest,' 21 
U.S.C. 824(a)(4), even if [he] is merely gullible or na[iuml]ve.'' 
Jayam Krishna-Iyer, 74 FR 459, 461 n.3 (2009) (citing Paul J. 
Caragine, Jr., 63 FR 51592 (1998)). As Caragine explained, even 
``[c]areless or negligent handling of controlled substances creates 
the opportunity for diversion and [can] justify revocation or 
denial'' of an application. 63 FR at 51601. The Government did not, 
however, raise this theory in the Show Cause Order.
---------------------------------------------------------------------------

    Moreover, there is additional evidence of prescribing violations 
that supports this conclusion. As found above, upon moving to Colorado, 
Respondent proceeded to issue numerous controlled substance 
prescriptions without being registered in that State.
    Under DEA's regulation, where a registrant seeks to change his 
registered location, the registrant must apply to modify his 
registration, 21 CFR Sec.  1301.51(a), and this regulation clearly 
states that a ``request for modification shall be handled in the same 
manner as an application for registration.'' Id. Sec.  1301.51(c). 
Moreover, under 21 CFR 1301.13(a), ``[n]o person required to be 
registered shall engage in any activity for which registration is 
required until the application for registration is granted and a 
Certificate of Registration is issued by the Administrator to such 
person.'' Id.; see also Anthony E. Wicks, 78 FR 62676, 62678 (2013). 
Thus, a registrant may ``not engage in any activity for which 
registration is required until the application . . . is granted and a . 
. . [r]egistration is issued.'' 21 CFR 1301.13(a). See also Mark Koch 
79 FR 18714 (2014).
    Here, the evidence shows that between July 29, 2014 and December 1, 
2014, Respondent issued 89 prescriptions for controlled substances 
while practicing in Grand Junction, Colorado, when he did not hold a 
DEA registration in the State and was therefore not authorized to 
dispense controlled substances in the State. 21 U.S.C. 822(e) (``A 
separate registration shall be required at each principal place of 
business or professional practice where the applicant . . . dispenses 
controlled substances. . . .''); 21 CFR 1301.12. Moreover, while 
Respondent claims that he was unaware that he could not issue 
controlled substance prescriptions until the Agency approved his 
modification request and that he stopped after he was told by the DI 
that he could not write prescriptions until his request was approved, 
the evidence shows that he issued further controlled substance 
prescriptions after he was told by the DI that he lacked authority to 
do so in Colorado.
    Accordingly, I conclude that Respondent violated the CSA and DEA 
regulations when he prescribed controlled substances in Colorado before 
April 6, 2015. These findings, particularly when considered in light of 
the extent of the Applicant's prescribing violations in Arizona, 
support the conclusion that granting Applicant's application ``would be 
inconsistent with the public interest.'' 21 U.S.C. 823(f).\23\
---------------------------------------------------------------------------

    \23\ As for Factor Three, there is no evidence that Applicant 
has been convicted of an offense ``relating to the manufacture, 
distribution or dispensing of controlled substances.'' 21 U.S.C. 
823(f)(3). There are, however, a number of reasons why a person who 
has engaged in misconduct may never have been convicted of an 
offense under this factor, let alone prosecuted for one. Dewey C. 
MacKay, 75 FR 49956, 49973 (2010), pet. for rev. denied MacKay v. 
DEA, 664 F.3d 808 (10th Cir. 2011). The Agency has therefore held 
that ``the absence of such a conviction is of considerably less 
consequence in the public interest inquiry'' and is therefore not 
dispositive. Id.
     As for the Government's arguments with respect to Factor Five, 
I consider its contentions in my discussion of the appropriate 
sanction.
---------------------------------------------------------------------------

SANCTION

    Where, as here, the Government has established grounds to deny an 
application, Respondent must then ``present[ ] sufficient mitigating 
evidence'' to show why he can be entrusted with a new registration. 
Samuel S. Jackson, 72 FR 23848, 23853 (2007) (quoting Leo R. Miller, 53 
FR 21931, 21932 (1988)). `` `Moreover, because `past performance is the 
best predictor of future performance,' ALRA Labs, Inc. v. DEA, 54 F.3d 
450, 452 (7th Cir. 1995), [DEA] has repeatedly held that where [an 
applicant] has committed acts inconsistent with the public interest, 
the [applicant] must accept responsibility for [his] actions and 
demonstrate that [he] will not engage in

[[Page 64948]]

future misconduct.'' Jayam Krishna-Iyer, 74 FR 459, 463 (2009) (citing 
Medicine Shoppe, 73 FR 364, 387(2008)); see also Jackson, 72 FR at 
23853; John H. Kennedy, 71 FR 35705, 35709 (2006); Cuong Tron Tran, 63 
FR 64280, 64283 (1998); Prince George Daniels, 60 FR 62884, 62887 
(1995).\24\
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    \24\ This rule also applies to other grounds that support the 
denial of an application, such as where the Government has proven 
that an applicant materially falsified his application. See Jackson, 
72 FR, at 23853.
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    So too, an Applicant's candor during the course of an investigation 
and subsequent proceeding is an important factor to be considered in 
determining whether he has accepted responsibility for the proven 
misconduct as well as the appropriate disposition of the matter. See 
Robert F. Hunt, 75 FR 49995, 50004 (2010); Jeri Hassman, 75 FR 8194, 
8236 (2010); see also Hoxie v. DEA, 419 F.3d 477, 483 (6th Cir. 2005) 
(``Candor during DEA investigations, regardless of the severity of the 
violations alleged, is considered by the DEA to be an important factor 
when assessing whether a physician's registration is consistent with 
the public interest.'').
    While an applicant must accept responsibility for his misconduct 
and demonstrate that he will not engage in future misconduct in order 
to establish that its registration is consistent with the public 
interest, DEA has repeatedly held that these are not the only factors 
that are relevant in determining the appropriate disposition of the 
matter. See, e.g., Joseph Gaudio, 74 FR 10083, 10094 (2009); Southwood 
Pharmaceuticals, Inc., 72 FR 36487, 36504 (2007). Obviously, the 
egregiousness and extent of an applicant's misconduct are significant 
factors in determining the appropriate sanction. See Jacobo Dreszer, 76 
FR 19386, 19387-88 (2011) (explaining that a respondent can ``argue 
that even though the Government has made out a prima facie case, his 
conduct was not so egregious as to warrant revocation''); Paul H. 
Volkman, 73 FR 30630, 30644 (2008); see also Paul Weir Battershell, 76 
FR 44359, 44369 (2011) (imposing six-month suspension, noting that the 
evidence was not limited to security and recordkeeping violations found 
at first inspection and ``manifested a disturbing pattern of 
indifference on the part of [r]espondent to his obligations as a 
registrant''); Gregory D. Owens, 74 FR 36751, 36757 n.22 (2009).
    So too, the Agency can consider the need to deter similar acts, 
both with respect to the respondent in a particular case and the 
community of registrants. See Gaudio, 74 FR at 10095 (quoting 
Southwood, 71 FR at 36503). Cf. McCarthy v. SEC, 406 F.3d 179, 188-89 
(2d Cir. 2005) (upholding SEC's express adoption of ``deterrence, both 
specific and general, as a component in analyzing the remedial efficacy 
of sanctions'').
    Having reviewed Respondent's Position Statement, I conclude that he 
has failed to produce sufficient evidence to show why he should be 
entrusted with a new registration. With respect to his acceptance of 
responsibility, Respondent states only that he ``accepts full 
responsibility for his actions that lead [sic] to the sanctions imposed 
by Arizona'' and ``regrets and acknowledges that he prescribed 
controlled substances in Colorado while his modification request was 
pending.'' GX 5, at 7-8. Putting aside that the credibility of 
Respondent's statement cannot be tested through cross-examination 
because Respondent waived his right to a hearing, it is notable that 
Respondent does not acknowledge that he materially falsified his March 
2013 application for registration in Tennessee. Respondent's failure to 
acknowledge his misconduct in this regard is fatal to his application.
    Moreover, even with respect to his misconduct in prescribing 
controlled substances in Colorado, I conclude that Respondent has not 
adequately acknowledged his misconduct. Even putting aside that 
ignorance of the law is no excuse, Respondent's statement regarding his 
actions is less than forthcoming. As found above, Respondent asserted 
that ``[a]s soon as I understood my mistake, I immediately stopped 
prescribing controlled substances.'' Yet the evidence shows that on 
December 1, 2014, the DI phoned him and told him that he lacked 
authority to issue controlled substance prescriptions in Colorado. 
While this should have been the point at which he ``understood [his] 
mistake'' and ``immediately stopped prescribing,'' the evidence shows 
that Respondent issued additional controlled substance prescriptions 
thereafter. In short, Respondent's assertion is clearly false and I 
therefore also find that he has not accepted responsibility for his 
prescribing in Colorado when he lacked a DEA registration.
    Likewise, while Respondent contends that he prescribed controlled 
substances in violation of the first Arizona order because he ``did not 
fully understand the scope of my initial restriction, which caused 
[him] to inadvertently violate that restriction,'' having reviewed that 
Order, I conclude that it was more than clear. See GX 8, at 4 (``IT IS 
HEREBY FURTHER ORDERED that [Respondent], holder of osteopathic medical 
License number 2686 is restricted from prescribing or recommending 
Schedule I, II, III, or IV controlled substances for a period of two 
(2) years from the effective date of this Order.''). Indeed, if 
Respondent did not fully understand the scope of the restriction, he 
had five weeks to contact the Board and clarify his understanding 
before the Order went into effect. Nor is Respondent's explanation 
credible given that he continued prescribing and issuing dispensing 
orders even after he surrendered his DEA registration. I thus conclude 
that Respondent has not credibly acknowledged his misconduct.
    I also conclude that the record as a whole establishes that 
Respondent's misconduct was egregious given his material falsification 
of his March 2013 DEA application, his prescribing of controlled 
substances after the Arizona Board's Order became effective, and his 
continued prescribing in Arizona after he surrendered his DEA 
registration. As for his prescribing in Colorado, even were I to accept 
his excuse that he mistakenly believed that he could prescribe once he 
submitted his request for modification, his issuance of prescriptions 
after he was told by the DI that he lacked authority to write 
prescriptions in the State renders this misconduct egregious as well.
    Accordingly, I find that Respondent's misconduct warrants denial of 
his application for this reason as well. So too, I find that the 
Agency's interest in deterring similar misconduct by other applicants 
who may contemplate materially falsifying their applications, as well 
as by other registrants who may choose to ignore agency regulations and 
prescribe when they lack authority to do so, supports the denial of his 
application.
    Of further note, as explained in my discussion of Factor One, 
subsequent to the issuance of the Show Cause Order and Respondent's 
submission of his Position Statement, the Colorado Medical Board 
suspended his medical license and his license remains suspended as of 
the date of this Order. As a consequence, Respondent no longer holds 
authority under state law to dispense controlled substances in the 
State where he is currently registered and thus no longer meets the 
statutory prerequisite for obtaining and maintaining his registration. 
See Frederick Marsh Blanton, 43 FR 27616, 27617 (1978) (``State 
authorization to dispense or otherwise handle controlled substances is 
a prerequisite to the issuance and maintenance of a Federal controlled 
substances registration.''); see also 21 U.S.C. 823(f) (``The Attorney 
General shall register practitioners . . .

[[Page 64949]]

if the applicant is authorized to dispense . . . controlled substances 
under the laws of the State in which he practices.''); 21 U.S.C. 
802(21) (``[t]he term `practitioner' means a physician . . . licensed, 
registered, or otherwise permitted, by . . . the jurisdiction in which 
he practices . . . to distribute, dispense, [or] administer . . . a 
controlled substance in the course of professional practice'').\25\
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    \25\ See also Rezik A. Saqer, 81 FR 22122, 22125-27 (2016); 
Sheran Arden Yeates, 71 FR 39130, 39131 (2006); Dominick A. Ricci, 
58 FR 51104, 51105 (1993); Bobby Watts, 53 FR 11919, 11920 (1988).
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    While the Show Cause Order did not assert this as a ground for 
denial of his application (because it occurred subsequent to the 
issuance of the Order), the Government did serve a copy of its Addendum 
which presented this development to me, on Respondent. In response to 
this filing, Respondent has raised no objection.\26\ In any event, 
there are two other independent and legally sufficient bases to deny 
his application. Accordingly, I will deny his application.
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    \26\ DEA has previously held that ``[t]he rules governing DEA 
hearings do not require the formality of amending a show cause order 
to comply with the evidence. The Government's failure to file an 
amended Show Cause Order alleging that Respondent's state CDS 
license has expired does not render the proceeding fundamentally 
unfair.'' Roy E. Berkowitz, 74 FR 36758, 36759-60 (2009); see also 
Hatem M. Ataya, 81 FR 8221, 8245 (2016) (collecting cases).
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ORDER

    Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 28 
CFR 0.100(b), I order that the application of Richard J. Settles, for a 
DEA Certificate of Registration as a practitioner be, and it hereby is, 
denied. This Order is effective immediately.

    Dated: September 13, 2016.
Chuck Rosenberg,
Acting Administrator.
[FR Doc. 2016-22680 Filed 9-20-16; 8:45 am]
 BILLING CODE 4410-09-P