On or about August 27, 2001, the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration (DEA), issued an Order to Show Cause (OTSC) by certified mail to Market Street Market (MSM), located in Chehalis, Washington, notifying it of an opportunity to show cause as to why the DEA should not deny its application, dated November 2, 1998, for a DEA Certificate of Registration as a distributor of the List I chemicals ephedrine, pseudoephedrine, and phenylpropanolamine, pursuant to 21 U.S.C. 823(h), as being inconsistent with the public interest. The order also notified MSM that, should no request for hearing be filed within 30 days, the right to a hearing would be waived.
The OTSC was received September 6, 2001, as indicated by the signed postal return receipt. Since that time, no further response has been received from the applicant nor any person purporting to represent the applicant. Therefore, the Administrator of the DEA, finding that (1) thirty days having passed since receipt of the Order to Show Cause, and (2) no request for a hearing having been received, concludes that MSM is deemed to have waived its right to a hearing. After considering relevant material from the investigative file in this matter, the Administrator now enters his final order without a hearing pursuant to 21 CFR 1301.43(d) and (e) and 1301.46.
The Administrator finds as follows. List I chemicals are chemicals that may be used in the manufacture of a controlled substance in violation of the Start Printed Page 11143Controlled Substances Act. 21 U.S.C. 802(34); 21 CFR 1310.02(a). Pseudoephedrine is a List I chemical that is commonly used to illegally manufacture methamphetamine, a Schedule II controlled substance. Methamphetamine is an extremely potent central nervous system stimulant, and its abuse is a growing problem in the United States.
A “regulated person” is a person who manufactures, distributes, imports, or exports inter alia a listed chemical. 21 U.S.C. 802(38). A “regulated transaction” is inter alia a distribution, receipt, sale, importation, or exportation of a threshold amount of a listed chemical. 21 U.S.C. 802(39). The Administrator finds all parties mentioned herein to be regulated, and all transactions mentioned herein to be regulated transactions, unless otherwise noted.
The Administrator finds that on or about November 2, 1998, an application was received by the DEA Chemical Operations Registration section on behalf of MSM for DEA registration as a distributor of the three above-mentioned List I chemicals.
MSM is a convenience store located in Chehalis, Washington. At all relevant times, it was owned and operated by Chol Jung Kim and his wife Hy Suk Kim (hereinafter collectively referred to as the Kims). In the Fall of 1998, MSM attempted to purchase 20 cases of pseudoephedrine from a distributor located in Columbus, Ohio. When DEA learned of this attempted purchase, personnel from the DEA Seattle Field Division contacted the Kims and alerted them to the dangers of List I chemicals, including pseudoephedrine, being diverted to the illicit manufacture of methamphetamine. The Kims assured DEA personnel that MSM would limit its sales to two bottles per customer. Subsequently, on or about November 2, 1998, MSM submitted the present application for DEA registration as a distributor of List I chemicals.
The DEA Seattle Field Division received information that documented MSM's purchase of 718 bottles of 100 count 60 mg. pseudoephedrine tablets from a single distributor between October and December, 1998. On March 24, 1999, DEA Headquarters received a letter from a registered manufacturer of pseudoephedrine located in New Jersey informing DEA that MSM had recently purchased 144 bottles of 100 count 60 mg. pseudoephedrine tablets, and that MSM had placed an identical order in January, 1999. DEA's investigation reveals that these amounts of pseudoephedrine exceed the legitimate retail needs of MSM.
On March 5, 1999, DEA investigators conducted a pre-registration inspection of MSM. During an interview at this time, the Kims were again warned about the dangers of the diversion of List I chemicals, including pseudoephedrine, to the illicit manufacture of methamphetamine. At this time, the Kims were provided with copies of official DEA notices and various criminal statutes pertaining to the diversion of listed chemicals and the duties and obligations of List I chemical registrants. The Kims again assured DEA investigators that they would limit their sales to two bottles per customer.
On March 25, 1999, a confidential source purchased 17 bottles of 60 count 60 mg. pseudoephedrine tablets from the Kims at MSM. Thereafter, a confidential source and an undercover detective from a State of Washington law enforcement agency made five purchases of pseudoephedrine tablets at MSM between December, 2000, and February, 2001.
The first undercover buy took place on December 29, 2000, when the confidential source purchased ten bottles of 100 count 60 mg. pseudoephedrine tablets from the Kims at MSM. The second undercover buy took place on January 4, 2001, when the confidential source purchased 20 bottles of 100 count 60 mg. pseudoephedrine tablets from the Kims at MSM. At this time, one of the Kims stated that MSM would be willing to sell pseudoephedrine in half-case quantities (a case contains 144 bottles). On January 11, 2001, the undercover detective purchased 20 bottles of 100 count 60 mg. pseudoephedrine tablets from the Kims at MSM. On January 18, 2001, the undercover detective made the fourth buy, purchasing 25 bottles of 120 count 60 mg. pseudoephedrine tablets from the Kims at MSM. The fifth undercover buy took place on February 15, 2001, when the undercover detective purchased 35 bottles of 100 count 60 mg. pseudoephedrine from the Kims at MSM.
On March 23, 2001, a Federal Search Warrant was executed at MSM, and the Kims were arrested for violations of the Controlled Substances Act relating to their purchases and sales of pseudoephedrine List I chemical products. During the search, a total of 50,214 dosage units of List I chemical products as well as $44,408 in United States currency was seized.
On April 4, 2001, MSM's State of Washington license to handle over-the-counter chemicals, including pseudoephedrine, expired. MSM failed to renew the license, and as a result, MSM is not currently authorized by the State in which it seeks DEA registration to handle the List I chemicals listed in its application. The DEA investigation revealed that MSM purchased at least 451,800 dosage units of pseudoephedrine between August 1, 1999, and August 1, 2000. This amount of pseudoephedrine well exceeds the legitimate needs of MSM. DEA had delayed acting on MSM's application because of MSM's association with other targets of criminal investigations.
Pursuant to 21 U.S.C. 823(h), the Administrator may deny an application for a DEA Certificate of Registration if he determines that granting the registration would be inconsistent with the public interest. Section 823(h) requires the following factors be considered:
(1) Maintenance by the applicant of effective controls against diversion of listed chemicals into other than legitimate channels;
(2) Compliance by the applicant with applicable Federal, State, and local law;
(3) Any prior conviction record of the applicant under Federal or State laws relating to controlled substances or to chemicals controlled under Federal or State law;
(4) Any past experience of the applicant in the manufacture and distribution of chemicals; and
(5) Such other factors as are relevant to and consistent with the public health and safety.
Like the public interest analysis for practitioners and pharmacies pursuant to subsection (f) of section 823, these factors are to be considered in the disjunctive; the Administrator may rely on any one or combination of factors and may give each factor the weight he deems appropriate in determining whether a registration should be revoked or an application for registration be denied. See, e.g. Energy Outlet, 64 FR 14,269 (1999). See also Henry J. Schwartz, Jr., M.D., 54 FR 16,422 (1989).
As a preliminary matter, DEA consistently has held that a retail store operates under the control of its owners, stockholders, or other employees, and therefore the conduct of these individuals is relevant in evaluating the fitness of an applicant for registration. See, e.g., Rick's Pharmacy, 62 FR 42,595 (1997); Big T Pharmacy, Inc. 47 FR 51,830 (1982). The conduct of the Kims is therefore relevant in determining the fitness of MSM for DEA registration.
Regarding factor one, the maintenance of effective controls against the diversion of listed chemicals, the DEA investigation revealed that MSM and the Kims actively participated in the diversion of List I chemicals, in that on Start Printed Page 11144at least five occasions they distributed the List I chemical pseudoephedrine knowing or having reasonable cause to believe that said chemical would be diverted to the illicit manufacture of a controlled substance.
Regarding factor two, the applicant's compliance with applicable law, the Administrator finds that MSM through its owners/operators the Kims significantly violated applicable law by selling the List I chemical pseudoephedrine in quantities and under circumstances sufficient to engender a reasonable belief that the chemical would be diverted to the manufacture of a controlled substance. Despite having been extensively briefed twice by DEA personnel in the Fall of 1998 and in March of 1999 concerning the risks of diversion of listed chemical products, including being served with official DEA written notifications and guidelines concerning the obligations and responsibilities of listed chemical registrants, the Kims subsequently significantly violated applicable law. During a two-week period from December 29, 2000, to January 11, 2001, the Kims sold an undercover confidential source at least 5,000 dosage units of pseudoephedrine.
During the next four weeks, from January 18, 2001, to February 15, 2001, the Kims sold an undercover detective (introduced to the Kims by the undercover confidential source) an additional 6,500 dosage units of pseudoephedrine. The Administrator finds that, given the Kim's obvious knowledge of the dangers of diversion, as directly transmitted to them orally and in writing by DEA, the sale of these quantities of pseudoephedrine to the same individuals within such a relatively short time frame, certainly gave rise to a reasonable belief, if not knowledge, that the pseudoephedrine would be diverted to the manufacture of a controlled substance, in violation of 21 U.S.C. 841(d)(2) and 841(g)(1). (Note: subparagraphs (d) and (g) of 841 have been redesignated as (c) and (f)).
Regarding factor three, the investigative file reveals that Hy Suk Kim was arrested April 29, 1998 for Washington State violations involving possession of drug paraphernalia and a drug violation.
Regarding factor four, the applicant's past experience in the distribution of chemicals, the DEA investigation revealed that MSM and the Kims actively participated in distributing the List I chemical pseudoephedrine knowing or having reasonable cause to believe it would be diverted to the manufacture of a controlled substance, as set forth in factor two.
Regarding factor five, other factors relevant to and consistent with the public safety, the Administrator finds that on two separate occasions, the Kims stated to DEA personnel that MSM only sold List I chemical products in quantities not exceeding two bottles per customer. The DEA investigation revealed that, on at least five occasions over a six-week period, the Kims sold in quantities of 10, 20, 20, 25, and 35 bottles to an undercover confidential source and an undercover detective. The Kims additionally stated to the undercover detective that they were willing to sell in half-case quantities (72 bottles). The Administrator finds this lack of candor, taken together with MSM's and the Kim's demonstrated cavalier disregard of the law and responsibilities concerning the distribution of listed chemicals, makes questionable MSM's and the Kim's commitment to the DEA regulatory requirements designed to protect the public from the diversion of controlled substances and listed chemicals. Aseel Incorporated, Wholesale Division, 66 FR 35,459 (2001); Terrence E. Murphy, 61 FR 2,841 (1996).
Therefore, for the above-stated reasons, the Administrator concludes that it would be inconsistent with the public interest to grant the application of MSM.
Accordingly, the Administrator of the Drug Enforcement Administration, pursuant to the authority vested in him by 21 U.S.C. 823 and 28 CFR 0.100(b) and 0.104, hereby orders that the application for a DEA Certificate of Registration submitted by Market Street Market be denied. This order is effective April 11, 2002.Start Signature
Dated: February 22, 2002.
[FR Doc. 02-5795 Filed 3-11-02; 8:45 am]
BILLING CODE 4410-09-M