On August 16, 2007, the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration, issued an Order to Show Cause to Hi-Tech Pharmaceuticals, Inc. (Respondent), of Norcross, Georgia. The Show Cause Order proposed the denial of Respondent's pending applications for DEA Certificates of Registration to import and manufacture ephedrine, a list I chemical, on the ground that its “registrations would be inconsistent with the public interest.” Show Cause Order at 1 (citing 21 U.S.C. 824(a)(4) & 958(c)).
The Show Cause Order specifically alleged that both Respondent's owner, Mr. Jared Wheat, and its Vice-President, Mr. Stephen D. Smith, had previously been convicted of controlled-substance felony offenses. Id. The Show Cause Order next alleged that on February 23, 2006, agents of the U.S. Customs Service and the Food Drug Administration (FDA) executed a search warrant at Respondent and seized various products containing ephedrine alkaloids that the company was manufacturing and distributing, as well as the raw materials used to manufacture these products. Id. at 2.
The Show Cause Order further alleged that Respondent operated several websites which represented that they offered controlled substances for sale from Canada and that the “drugs were made using good manufacturing practices in Canada,” when, in fact, “Hi-Tech manufactured many of these drugs, including various Schedule III and IV controlled substances, in the country of Belize and unlawfully imported them into the United States without a DEA registration” in violation of 21 U.S.C. 957(a) and 21 CFR 1301.11. Id. at 2. Relatedly, the Show Cause Order alleged that on September 7, 2006, a federal grand jury indicted Start Printed Page 16716Respondent, Mr. Wheat, Mr. Smith, and ten other individuals associated with the company, charging them with, inter alia, “the unlawful distribution of controlled substances and conspiracy to import controlled substances into the United States.” Id.
On August 20, 2007, the Show Cause Order was served on Respondent by certified mail, return receipt requested. Thereafter, Respondent's counsel submitted a letter in which it waived its right to a hearing, but in which it also responded to several of the Show Cause Order's allegations. Ltr. of Joseph P. Schilleci, Jr., to Hearing Clerk, 1 (Sept. 14, 2007). The factual assertions and arguments presented in this letter will be considered pursuant to 21 CFR 1301.43(c).
I therefore conclude that Respondent has waived its right to a hearing. I therefore enter this Final Order without a hearing based on relevant material contained in the investigative file as well as Respondent's letter and make the following findings. See 21 CFR 1301.43(e).
On July 25, 2005, Respondent, a Georgia corporation, applied for two DEA registrations: one to import ephedrine and one to manufacture it. Ephedrine is a list I chemical, which is frequently diverted into the illicit manufacture of methamphetamine, a schedule II controlled substance. See 21 U.S.C. 802(34); see also 21 CFR 1308.12(d). Respondent's applications were submitted by Mr. Jared R. Wheat. On both applications, Respondent stated that “Jared R. Wheat, [its] President and sole shareholder * * * was convicted on October 2, 1991[,] in the United States District Court, Northern District of Alabama * * * for conspiracy to distribute MDMA. He was sentenced to the custody of the Bureau of Prisons for thirty-six months (36) months [and] three years supervised release.” 
During the course of DEA's pre-registration investigation, agency investigators received information that several other federal agencies including the FDA and Federal Trade Commission were also investigating Respondent. Moreover, during an on-site inspection, Mr. Wheat told DEA investigators that he was currently importing ephedra or Ma Huang Extract. He also provided DEA investigators with a “Certificate of Analysis” which indicated that Respondent had imported from Sinochem Jiangsu Import & Export Corporation of Nanjaing, China, one thousand kilograms of Ma Huang Extract containing 8.2% total ephedrine alkaloids. The Certificate stated that “[t]his product is concentrated from natural sources and does not contain either synthetic or fermentation source. All alkaloids are results from extraction and concentration of crude plant material.” The Certificate also noted that “water” was used as the “extract solvent.”
On February 23, 2006, investigators from FDA and U.S. Customs executed a search warrant at Respondent's building. The FDA investigators seized various products. Simultaneously, the United States Attorney filed a complaint for forfeiture against various products which the FDA had seized on the ground that they were adulterated. These products were labeled as “Lipodrene,” “Stimerex-ES,” and “Betradene,” and each of the products indicated that they contained 25 mg. of ephedrine alkaloids in each tablet. Subsequently, the U.S. District Court for Northern District of Georgia rejected Respondent's contentions and granted the Government's motion for summary judgment on its complaint for forfeiture. Hi-Tech Pharmaceuticals, Inc. v. Crawford, 505 F.Supp.2d 1341 (N.D. Ga. 2007).
On September 7, 2006, a federal grand jury returned a forty-five count indictment against Respondent, Jared Wheat, Stephen D. Smith, and nine other individuals. The indictment alleged, inter alia, that the defendants had conspired to manufacture in Belize and intentionally import, or attempt to import, into the United States, schedule III controlled substances (the steroids oxandrolone, oxymetholone, stanazolol) and schedule IV controlled substances (alprazolam, diazepam, lorazepam, phentermine, and zolpidem), in violation of 21 U.S.C. 952(a)(2), 960(a)(1), 960(b)(4), and 963. United States v. Wheat, et al., No. 1:06CR382 (N.D. Ga.) (Indictment at 14-16, 23-24). The indictment also alleged that Respondent, Mr. Wheat, Mr. Smith, and others, knowingly and intentionally imported phentermine, Xanax (alprazolam), and Ambien (zolpidem) on various dates between February and May 2004. Indictment at 30-31.
Regarding the indictment, Respondent's counsel stated that it “is confident that the facts will show that it has been and is appropriately conducting its business within the bounds of the law.” Letter of Respondent's Counsel, at 1. Respondent's counsel further contended that the indictment's allegations “are incorrect and do not portray an accurate description of [it], either in the past or present,” and “that there is no basis for the Government's indictment of Hi-Tech.” Id.
The investigative file establishes, however, that several of the defendants named in the indictment have entered guilty pleas to various counts. As part of his plea agreement, B.W. admitted that he conspired with Wheat, Smith, and Respondent, “to knowingly and intentionally import and attempt to import into the United States from Belize [the] Schedule IV controlled substances * * * [a]lprazolam, [d]iazepam, [l]orazapam, [p]hentermine, and [z]olpidem * * * all in violation of federal law.” B.W. Guilty Plea and Plea Agreement at 1-2. B.W. further admitted that he “had knowledge of attempts to import Schedule IV controlled substances and [that he] assisted in the manufacture of [these substances] on two (2) occasions.” Id. at 2.
Defendant D.W. admitted that he conspired with Wheat and Smith “to knowingly and intentionally import and attempt to import into the United States from Belize anabolic steroids, Schedule III controlled substances, and to knowingly and intentionally import and attempt to import into the United States from Belize [the] Schedule IV controlled substances * * * [a]lprazolam, [d]iazepam, [l]orazepam, [p]hentermine and [z]olpidem * * * all in violation of federal law.” D.W. Guilty Plea and Plea Agreement at 1. Finally, Defendant D.J. admitted in his plea agreement that he had knowledge that Wheat, Smith, Respondent, and others, “did knowingly and intentionally * * * conspire * * * with each other and others to knowingly and intentionally import and attempt to import into the United States from Belize [the] Schedule IV controlled substances * * * [a]lprazolam, [d]iazepam, [l]orazepam, [p]hentermine and [z]olpidem * * * in violation of” federal law. D.J. Guilty Plea and Plea Agreement at 1-2. Start Printed Page 16717
Section 303(h) of the Controlled Substances Act (CSA) provides that “[t]he Attorney General shall register an applicant to distribute a list I chemical unless the Attorney General determines that registration of the applicant is inconsistent with the public interest.” 21 U.S.C. 823(h). In making this determination, Congress directed that I consider the following factors:
(1) Maintenance by the applicant of effective controls against diversion of listed chemicals into other than legitimate channels;
(2) Compliance by the applicant with applicable Federal, State, and local law;
(3) Any prior conviction record of the applicant under Federal or State laws relating to controlled substances or to chemicals controlled under Federal or State law;
(4) Any past experience of the applicant in the manufacture and distribution of chemicals; and
(5) Such other factors as are relevant to and consistent with the public health and safety.
“These factors are considered in the disjunctive.” Joy's Ideas, 70 FR 33195, 33197 (2005). I may rely on any one or a combination of factors, and may give each factor the weight I deem appropriate in determining whether an application for a registration should be denied. See, e.g., David M. Starr, 71 FR 39367, 39368 (2006); Energy Outlet, 64 FR 14269 (1999). Moreover, I am “not required to make findings as to all of the factors.” Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005); Morall v. DEA, 412 F.3d 165, 173-74 (D.C. Cir. 2005).
Having considered all of the factors, I conclude that factors two and four establish that Respondent's registration would be “inconsistent with the public interest.” 21 U.S.C. 823(h). Respondent's application will therefore be denied.
Here, the record establishes that between September 2005 and February 2006, Respondent illegally imported into the United States, 1,000 kilograms of Ma Huang extract, which contained ephedrine alkaloids in a concentration of approximately eight percent. While at the time of the importation, “harvested plant material * * * contain[ing] ephedrine * * * that preserve[d] the natural constituents in the ratios that are found in the plant's natural state” was exempt from the CSA's requirements, DEA's regulation further provided that “[p]lant material subjected to chemical or physical extraction, concentration, chemical reaction, or other treatment that alters the plant's natural constituents [was] not exempt.” 21 CFR 1310.12(d)(1). Respondent did not have a registration to import the product, which contains a list I chemical and was produced through an extraction process, and thus was not exempt from the application of the Act. See 21 U.S.C. 957(a); 21 CFR 1310.12(d)(1). Respondent's importation of Ma Huang extract therefore violated federal law.
Moreover, substantial evidence establishes that Respondent, its owner (Mr. Wheat), and vice-president (Mr. Smith), violated the CSA by importing schedule III and IV controlled substances (including anabolic steroids, multiple benzodiazepines, as well as phentermine and zolpidem) into the United States from Belize in violation of 21 U.S.C. 952 and 957(a)(b). While the indictment sets forth only allegations, the plea agreements of several co-conspirators implicated Respondent, Mr. Wheat, and Mr. Smith, in the conspiracy to knowingly import controlled substances into the United States in violation of federal law. The agreements thus provide substantial evidence to support a finding that Respondent, Mr. Wheat, and Mr. Smith violated federal law. See Richardson v. Perales, 402 U.S. 389 (1971) (upholding use of hearsay evidence in administrative proceedings). Accordingly, I conclude that granting Respondent's application would be “inconsistent with the public interest.” 21 U.S.C. § 823(h).
Pursuant to the authority vested in me by 21 U.S.C. 823(h), as well as 28 CFR 0.100(b) & 0.104, I order that the application of Hi-Tech Pharmaceuticals, Inc., for a DEA Certificate of Registration to import ephedrine, a list I chemical, be, and it hereby is, denied. I further order that the application of Hi-Pharmaceuticals, Inc., for a DEA Certificate of Registration to manufacture ephedrine, a list I chemical, be, and it hereby is, denied. This order is effective April 28, 2008.Start Signature
Dated: March 17, 2008.
Michele M. Leonhart,
1. The investigative file also indicates that in September 1992, Mr. Smith was convicted in the Georgia Superior Court of purchasing or possession of a controlled substance. As the letter from Respondent's counsel indicated, Mr. Smith “is a Vice-President of [Respondent but] does not own any shares in” the company.Back to Citation
2. During the inspection, Mr. Wheat provided the DIs with a product list and invoice which showed that it was manufacturing and distributing several products which contained ephedrine alkaloids. Each of the products had an ephedrine alkaloid content of less than five percent.Back to Citation
3. Regarding the seizure of ephedrine alkaloid products from Respondent, its counsel admitted that “on August 15, 2007, the United States District Court for the Northern District of Georgia entered judgment in favor of the FDA.” Ltr. of Joseph P. Schilleci, Jr., to Hearing Clerk, at 1 (Sept. 14, 2007). Respondent's counsel further stated that it was appealing the district court's decision. Id.Back to Citation
4. On July 25, 2007, DEA published an interim rule which removed the exemption “for unaltered ephedra plant material.” 72 FR 40738, 40741 (2007). This rule became effective on August 24, 2007. Id. at 40742.Back to Citation
5. In light of the evidence establishing that Mr. Wheat and Mr. Smith have committed offenses in violation of the CSA, I need not decide whether their prior convictions are too dated to be considered.
I further note that Respondent imported listed chemicals which it then used to manufacture and distribute products which a federal court has held were adulterated within the meaning of the Food, Drug, and Cosmetic Act. See Hi-Tech Pharmaceuticals, Inc., v. Crawford, 505 F.Supp.2d at 1357. See also 21 U.S.C. 823(h)(5) (directing consideration of “such other factors as are relevant to and consistent with the public health and safety”). This conduct also supports the conclusion that granting Respondent a registration would be “inconsistent with the public interest.” 21 U.S.C. 823(h).Back to Citation
[FR Doc. E8-6377 Filed 3-27-08; 8:45 am]
BILLING CODE 4410-09-P