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Joey Enterprises, Inc. d/b/a/ NorthStar Wholesale Denial of
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FR Doc 05-24496 [Federal Register: December 28, 2005 (Volume 70, Number 248)]
[Notices] [Page 76866-76868] From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28de05-143]
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 04-31]
Joey Enterprises, Inc. d/b/a/ NorthStar Wholesale Denial of Application
On March 2, 2004, the Deputy Assistant Administrator, Office of Diversion
Control, Drug Enforcement Administration (DEA), issued an Order to Show Cause to
Joey Enterprises, Inc., d/b/a NorthStar Wholesale (hereinafter referred to as "Respondent'')
of Birmingham, Alabama. The show cause order proposed to deny the Respondent's
February 10, 2003, application for DEA Certificate of Registration as a
distributor of list I chemicals. The Order to Show Cause alleged in substance
that granting the application of the Respondent would be inconsistent with the
public interest as that term is used in 21
U.S.C. 823(h).
According to the DEA investigative file, on or about March 30, 2004, the
Respondent, through its President Feroz Jiwani (Mr. Jiwani), requested a hearing
in response to the show cause order. On April 22, 2004, the presiding
Administrative Law Judge issued an Order for Pre- hearing Statements. As part of
that Order, the Administrative Law Judge directed the Government to file its
Pre-hearing Statement on or before May 14, 2004, and that the Respondent was to
file its Pre-hearing Statement on or before June 4, 2004. Following pre-hearing
motions extending the above scheduled filing dates, the Government filed its
Pre-hearing Statement on July 21, 2004. However, the Respondent did not file its
Pre-hearing Statement by the August 16, 2004 deadline.
On September 2, 2004, the Administrative Law Judge issued an order extending
the filing date of the Respondent's Pre-hearing Statement to September 15, 2004.
The Administrative Law Judge's Order also notified the Respondent that if it
again failed to meet the deadline for filing a Pre-hearing Statement, such
inaction would be deemed a waiver of its hearing entitlement. Nevertheless, the
Respondent again failed to meet the new deadline and did not file its
Pre-hearing Statement. Accordingly, on September 29, 2004, the Administrative
Law Judge issued her Order Terminating the Proceedings.
The Deputy Administrator adopts the ruling of the Administrative Law Judge's
termination order that the Respondent has waived its hearing right. See, Aqui
Enterprises, 67 FR 12576 (2002). After considering relevant material from the
investigative file in this matter, the Deputy Administrator now enters her final
order without a hearing pursuant to 21
CFR 1309.53(b) and (d). The Deputy Administrator finds as follows:
List I chemicals are those that may be used in the manufacture of a
controlled substance in violation of the Controlled Substances Act. 21
U.S.C. 802(34); 21
CFR 1310.02(a). As noted in previous DEA final orders, pseudoephedrine and
ephedrine are list I chemicals commonly used to illegally manufacture
methamphetamine, a Schedule II controlled substance. Methamphetamine is an
extremely potent central nervous system stimulant and its illicit manufacture
and abuse are ongoing public health concerns in the United States. See e.g.,
Direct Wholesale, 69 FR 11654 (2004); Yemen Wholesale Tobacco and Candy Supply,
Inc., 67 FR 9997 (2002); Denver Wholesale, 67 FR 99986 (2002).
The investigative file contains a printed news release article from the DEA
Web site regarding federal drug seizures and the abuse of methamphetamine in the
State of Alabama. http://www.dea.gov/pubs/states/alabama.html. According to the
article, methamphetamine has become the number one abused drug in Alabama. The
article also tracked the "dramatic increase'' in the number of methamphetamine
laboratory seizures in the state from 1997 to 2003. According to data obtained
by DEA's El Paso Intelligence Center (also known as "EPIC''), in 1997,
methamphetamine laboratory seizures in Alabama totaled six; by 2002, the total
number of laboratory seizures climbed to 201.
The above-referenced registration application of the Respondent was initially
submitted under the business name "Joey Enterprises, Inc.,'' and was later
amended to include the caption, "d.b.a. Northstar Wholesale.'' The Respondent
sought DEA registration as a distributor of the list I chemicals ephedrine,
pseudoephedrine and phenylpropanolamine. There is no evidence in the
investigative file that Respondent, or anyone purporting to represent the
Respondent has sought to further modify its pending application.
The Deputy Administrator's review of the investigative file reveals that on
September 3, 2003, DEA Diversion Investigators conducted an on- site
pre-registration inspection at Respondent's proposed registered location in
Birmingham. DEA's investigation revealed that Mr. Jiwani is the owner and
President of the Respondent, his wife, Amynah, is the company's assistant
manager, and the company also employs a part-time employee by the first name of
Christopher. When asked by DEA investigators, neither Mr. nor Mrs. Jiwani knew
the part-time employee's last name.
The Respondent is a cash and carry establishment that distributes typical
convenience store items including tobacco products, candy, drinks and health and
beauty products. The Respondent's customers consist of approximately 150
convenience stores and gas stations located in the Birmingham area, as well as
Northern Alabama, Georgia and Fort Lauderdale, Florida.
DEA investigators asked Mr. Jiwani to provide information on list I chemical
products the firm intended to carry. In response to the request, Mr. Jiwani
provided a list of chemical products the firm would distribute, including: Max
Brand 25/200 mg--60 count bottles; Mini Thins 25/200 mg--60 count bottles;
Ephedrine 25/200 mg--60 count bottles; Bio Tech Ephedrine 25/200 mg--60 count
bottles; Ephedrine 25/ 200 mg Black--12 count packets; Tylenol Cold, Tylenol
Sinus and Tylenol Allergy (no sizes listed); Advil Cold and Sinus and Aleve Cold
and Sinus (no sizes listed); and Vicks Dayquil and Nyquil (no sizes listed). Mr.
Jiwani estimated that these products would make up ten to fifteen percent of
Respondent's total sales.
Max Brand products have previously been identified by DEA as the "precursor
product predominantly encountered and seized at clandestine methamphetamine
laboratories.'' See Express Wholesale, 69 FR 62086, 62087 (2004); see also, RAM,
Inc. d/b/a American Wholesale Distribution Corp., 70 FR 11693 (2005).
Convenience stores are the "primary source'' for the purchase of Max Brand
products, which are the preferred brand for use by illicit methamphetamine
producers. See Elk International, Inc., d/b/a Tri-City Wholesale, 70 FR 24615
(2005).
Mr. Jiwani also informed DEA investigators that he had no experience handling
list I chemical products. He further stated that Respondent had no procedure in
place for identifying suspicious or unusual purchases of list I chemical
products.
[[Page 76867]]
According to the investigative file, on September 3 and 4, 2003, DEA
investigators conducted random verifications of the ten of Respondent's proposed
customers for list I chemical products. At least seven of the customers informed
DEA personnel that they didn't carry listed chemical products or were already
purchasing them from other suppliers. Another customer was already in possession
of listed chemical products which were on display at the establishment. The
customer insisted to DEA investigators that he purchased the products from
Respondent, even when told that Respondent did not carry such products.
Mr. Jiwani further advised DEA investigators he requires new customers to
provide tax exempt ID numbers before selling them anything. DEA investigators
found however, that Mr. Jiwani could not confirm the existence of his customers
because he did not visit the location of these stores prior to their becoming
customers. DEA has previously found that small, illicit laboratories operate
with listed chemical products often procured, legally or illegally, from
non-traditional retailers of over-the-counter drug products, such as gas
stations and small retail markets. Some retailers acquire products from multiple
distributors to mask their acquisition of large quantities of listed chemicals.
See, A-1 Distribution Wholesale, 70 FR 28573 (2005).
DEA has further determined that there exists a "gray market'' in which
certain high strength, high quantity pseudoephedrine and ephedrine products are
distributed only to convenience stores and gas stations, from where they have a
high incidence of diversion. A-1 distribution, supra, at 28573. These gray
market products are not sold in large discount stores, retail pharmacies or
grocery stores, where sale of therapeutic over-the-counter drugs predominate. "Two-way''
ephedrine and single entity pseudoephedrine products are prime products in this
gray market industry and are rarely found in any retail store serving the
traditional therapeutic market.
DEA has also credited industry data, market studies and statistical analysis
which has shown that over 90% of over-the-counter drug remedies are sold in drug
stores, supermarket chains and "big box'' discount retailers. Less than one
percent of cough and cold remedies are sold in gas stations or convenience
stores. Studies have indicated that most convenience stores could not be
expected to sell more than $20.00 or $40.00 worth of products containing
pseudoephedrine per month. Jay Enterprises of Spartansburg, Inc., 70 FR 24620
(2005).
Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an
application for Certificate of Registration if she determines that granting the
registration would be inconsistent with the public interest as determined under
that section. Section 823(h) requires the following factors be considered in
determining the public interest:
(1) Maintenance of effective controls against diversion of listed chemicals
into other than legitimate channels;
(2) Compliance with applicable Federal, State, and local law;
(3) Any prior conviction record under Federal or State laws relating to
controlled substances or to chemicals controlled under Federal or State law;
(4) Any past experience in the manufacture and distribution of chemicals;
and
(5) Such other factors as are relevant to and consistent with the public
health and safety.
As with 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 Deputy Administrator may rely on any one or combination of
factors, and may give each factor the weight she deems appropriate in
determining whether a registration should be revoked or an application for
registration denied. See, e.g., ANM Wholesale, 69 FR 11652 (2004); Energy
Outlet, 64 FR 14269 (1999). See also Henry J. Schwartz, Jr., M.D., 54 FR 16422
(1989).
The Deputy Administrator finds factors four and five relevant to Respondent's
pending registration application.
With regard to factor four, the applicant's past experience in the
distribution of chemicals, the Deputy Administrator finds this factor relevant
to Mr. Jiwani's lack of experience in the handling of list I chemical products.
In prior DEA decisions, the lack of experience in the handling list I chemicals
was a factor in a determination to deny a pending application for DEA
registration. See, e.g., CWK Enterprises, Inc. (CWK), 69 FR 69400 (2004); Prachi
Enterprises, Inc. (Prachi), 69 FR 69407 (2004); Matthew D. Graham, 67 FR 10229
(2002); Xtreme Enterprises, Inc., 67 FR 76195 (2002). Therefore, this factor
similarly weighs against the granting of Respondent's pending application.
With respect to factor five, other factors relevant to and consistent with
the public safety, the Deputy Administrator finds this factor also weighs
heavily against granting the Respondent's application. Methamphetamine abuse is
one of the top public health threats facing the country. While there have been
various state legislative initiatives enacted around the United States that seek
to address the illicit production and use of methamphetamine, the growing menace
of this drug remains a grave public health and safety concern. Ephedrine and
pseudoephedrine are precursor products needed to manufacture methamphetamine and
operators of illicit laboratories regularly acquire the precursor products
needed to manufacture the drug.
Many of these illicit transactions arise from listed chemical products
acquired from convenience stores and gas stations. It is apparent that the
Respondent intends on being a participant in this market with most of its
proposed customers made up of convenience stores and gas stations. While there
are no specific prohibitions under the Controlled Substance Act regarding the
sale of listed chemical products to these entities, DEA has nevertheless found
that gas stations and convenience stores constitute sources for the diversion of
listed chemical products. See, e.g., ANM Wholesale, 69 FR 11652 (2004); K.V.M.
Enterprises, 67 FR 70968 (2002) (denial of application based in part upon
information developed by DEA that the applicant proposed to sell listed
chemicals to gas stations, and the fact that these establishments in turn have
sold listed chemical products to individuals engaged in the illicit manufacture
of methamphetamine); Xtreme Enterprises, Inc., supra. Therefore, to Respondent's
proposed sale of listed chemical products convenience store and gas stations
weighs against granting its pending registration application.
As noted above, there is no evidence in the investigative file that the
Respondent ever sought to modify its pending application with respect to listed
chemical products it intends to distribute. Among the listed chemical products
the firm seeks to distribute is phenylpropanolamine. DEA has previously
determined that an applicant's request to distribute phenylpropanolamine
constitutes a ground under factor five for denial of an application for
registration because of the apparent lack of safety associated with the use of
this product. See e.g., William E. "Bill'' Smith d/b/a B &B Wholesale, 69 FR
2259 (2004); J &S Distributors, 69 FR 62089 (2004); Shani Distributors, 68
FR 62324 (2003). The Deputy Administrator also finds factor
[[Page 76868]]
five relevant to the results of DEA's random customer verifications where
several of Respondent's proposed customers informed investigators that listed
chemicals products likely would not be purchased from Respondent.
Factor five is also relevant to Respondent's lack of procedure for
identifying suspicious or unusual purchases of list I chemical products. Factor
five is further relevant to DEA's investigative findings regarding Respondent's
inability to confirm the existence of its customers. The Deputy Administrator is
also somewhat concerned by the Jiwani's inability to identify a part-time
employee. It is unknown whether any knowledge of the individual's identity would
favorably or unfavorably impact DEA's determination with regard to Respondent's
application for registration. Therefore, the unresolved nature of this event is
also given consideration under factor five. Based on the foregoing, the Deputy
Administrator concludes that granting the pending application of the Respondent
would be inconsistent with the public interest.
Accordingly, the Deputy Administrator of the Drug Enforcement Administration,
pursuant to the authority vested in her by 21
U.S.C. 823 and 28 CFR 0.100(b) and 0.104, hereby orders that the pending
application for DEA Certificate of Registration, previously submitted by Joey
Enterprises, Inc., d/b/a NorthStar Wholesale be, and it hereby is denied. This
order is effective January 27, 2006.
Dated: December 15, 2005.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. 05-24496 Filed 12-27-05; 8:45am]
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