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Rick's Picks, L.L.C.; Revocation of Registration
FR Doc E7-6759 [Federal Register: April 11, 2007 (Volume 72, Number 69)]
[Notices] [Page 18275-18280] From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11ap07-123]
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 05-8]
Rick's Picks, L.L.C.; Revocation of Registration
On October 7, 2004, the Deputy Assistant Administrator, Office of Diversion
Control, Drug Enforcement Administration, issued an Order to Show Cause to
Rick's Picks, L.L.C. (Respondent), of Moore, Oklahoma. The Show Cause Order
proposed the revocation of Respondent's DEA Certificate of Registration,
003949RPY, as a distributor of list I chemicals, on the ground that its
continued registration was inconsistent with the public interest. Show Cause
Order at 1 (citing 21
U.S.C. 823(h)).
The Show Cause Order incorporated the allegations of a show cause order which
was initiated by the Oklahoma State Bureau of Narcotics and Dangerous Drugs
Control; the latter order proposed the denial of Respondent's application for a
state registration to distribute pseudoephedrine products that are Schedule V
drugs under State law, as well as the revocation of Respondent's state
registration to distribute pseudoephedrine products which are not scheduled
under state law. Id. at 2. Specifically, the state show cause order alleged that
Respondent and its owner, Rick D. Fowler, "have a history of selling very large
amounts of pseudoephedrine under suspicious and questionable circumstances, and
with great negligence and reckless disregard for whether this product would be
used in the clandestine manufacture of methamphetamine,'' and that Respondent,
and its owner, had engaged in this activity notwithstanding "numerous warnings
from . . . DEA officials that Respondent's sales were fueling illicit
methamphetamine laboratories.'' Id.
Relatedly, the State show cause order alleged that from January 2002 through
April 2004, Respondent sold more than $ 2.2 million of Max Brand (for a total of
nearly 10.5 million tablets), a product in which pseudoephedrine is the single
active ingredient and which is the "preferred choice [of] methamphetamine
cooks.'' Id. at 4-5. The state show cause order also alleged that Respondent had
brokered the sale of approximately 400,000 pseudoephedrine tablets for D & E
Pharmaceutical. Id. at 5. The DEA Show Cause Order then repeated ten different
allegations made in the state show cause order which asserted specific instances
in which Respondent had sold extraordinary quantities of pseudoephedrine to
convenience stores, gas stations and other non- traditional retailers of this
product, and that Respondent had failed to report any of these transactions to
DEA. Id. at 6-8.
The State show cause order further alleged that pseudoephedrine distributed
by Respondent had been found at twenty-two methamphetamine dumpsites. Id. at 8.
Finally, the DEA Show Cause Order alleged that in November 2003, DEA had
conducted an inspection of Respondent during which numerous recordkeeping
violations were observed. Id. at 9.
Respondent requested a hearing on the allegations. The matter was assigned
[[Page 18276]]
to Administrative Law Judge (ALJ) Mary Ellen Bittner, who conducted a hearing
in Oklahoma City, Oklahoma, on January 10 and 11, 2006. At the hearing, the
Government introduced both testimonial and documentary evidence; Respondent
introduced only documentary evidence. Both parties submitted post-hearing
briefs.
On August 9, 2006, the ALJ issued her decision. In that decision, the ALJ
concluded that Respondent's continued registration would be inconsistent with
the public interest and recommended that its registration be revoked. Neither
party filed exceptions. Having considered the record as a whole, I hereby issue
this decision and final order. I adopt the ALJ's findings of fact and
conclusions of law in their entirety. For the reasons set forth below, I hold
that Respondent's continued registration would be inconsistent with the public
interest and therefore revoke its registration and deny its pending application
for renewal.
Findings
Respondent, an Oklahoma corporation, is a distributor of assorted merchandise
to convenience stores, gas stations, and other small retailers in that State.
Respondent's sole owner is Mr. Rickey Fowler. ALJ Dec. at 15.
Respondent currently holds DEA Certificate of Registration, 003949RPY, which
authorizes it to distribute list I chemicals. Gov. Ex. 1. While Respondent's
registration certificate states that its registration expired on April 30, 2005,
the record indicates that Respondent filed a timely renewal application. Tr. 24.
Therefore, Respondent's registration remains in effect until the conclusion of
this proceeding. See 5 U.S.C. 558(c).
Methamphetamine and the Market for List I Chemicals
Pseudoephedrine is lawfully marketed under the federal Food, Drug and
Cosmetic Act for over-the-counter use as a decongestant. Pseudoephedrine is,
however, also regulated as a list I chemical under the Controlled Substances Act
because it is easily extracted from non- prescription products and used in the
illicit manufacture of methamphetamine, a Schedule II controlled substance. See 21
U.S.C. 802(34); 21
CFR 1308.12(d).
Methamphetamine "is a powerful and addictive central nervous system
stimulant.'' T. Young Associates, Inc., 71 FR 60567 (2006). The illegal
manufacture and abuse of methamphetamine pose a grave threat to this country.
Methamphetamine abuse has destroyed numerous lives and families and ravaged
communities. Moreover, because of the toxicity of the chemicals used in
producing the drug, its illicit manufacture causes serious environmental harms.
Id.
Methamphetamine abuse has been an especially serious problem in the State of
Oklahoma. In 1999, law enforcement authorities seized 391 illicit
laboratories/dumpsites in the State; in 2003 (the last full year before the
State enacted laws restricting the distribution of pseudoephedrine), authorities
seized 1091 illicit laboratories/ dumpsites. See Gov. Exs. 7 & 11. Moreover,
in 2004, there were still 659 seizures. See Gov. Ex. 12. According to a senior
agent for the Oklahoma Bureau of Narcotics, Max Brand in tablet form, a product
in which pseudoephedrine (60 mg.) is the single active ingredient, is the
preferred product of the State's illicit methamphetamine cooks.\1\ See also Tr.
46 & 180.
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\1\ In response to the methamphetamine problem, effective
April 6, 2004, Oklahoma made pseudoephedrine in tablet form a Schedule V
controlled substance. Pseudoephedrine in liquid, liquid-filled capsules, and
gel caps is, however, exempt from the requirement provided it is not the only
active ingredient in the product. See 63 Okl. St. Ann. section 2-212.
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In the course of adjudicating numerous cases, DEA has acquired substantial
expertise pertaining to the market for list I chemical products containing
pseudoephedrine. Accordingly, pursuant to 5 U.S.C. 556(e), I take official
notice of the following facts related to the market for pseudoephedrine.\2\
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\2\ Under the Administrative Procedure Act, "[a]gencies may
take official notice of facts at any stage in a proceeding-even in the final
decision.'' Attorney General's Manual on the Administrative Procedure Act 80
(1946) ( Wm. W. Gaunt & Sons, Inc., reprint 1979). In accordance with the
Act, Respondent may request a reopening of the proceeding to contest the facts
of which I am taking official notice by filing a request with supporting
affidavits no later than fifteen days after service of this order.
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According to Jonathan Robbin, an expert in statistical analysis of
demographic, economic, geographic and survey data, "over 97% of all sales of
non-prescription drug products occur in drug stores and pharmacies,
supermarkets, large discount merchandisers and electronic shopping and mail
order houses.'' T. Young, 71 FR at 60568. Moreover, "sales of non-prescription
drugs by convenience stores (including both those that sell and do not sell
gasoline), account for only 2.2% of the overall sales of all convenience stores
that handle the line and only 0.7% of the total sales of all convenience
stores.'' Id.
Based on his study of U.S. Government Economic Census Data, information
obtained from the National Association of Convenience Stores, and commercially
available point of sale transaction data, Mr. Robbin has constructed a model of
the traditional market for retail sales of pseudoephedrine. See id. According to
Mr. Robbin, "sales of pseudoephedrine account for only about 2.6% of the sales
of health and beauty care products in convenience stores and only 0.05% of total
in- store (non-gasoline) sales.'' Id.
Moreover, "the normal expected retail sale of pseudoephedrine (Hcl) tablets
in a convenience store may range between $ 0 and $ 40 per month, with an average
of $ 20.60 per month.'' Id. According to Mr. Robbin, a monthly retail sale at a
non-traditional retailer of "$ 60 of pseudoephedrine would occur less than one
in 1,000 times in random sampling.'' Id. Moreover, a monthly retail sale of "$
100 in pseudoephedrine would occur about once in a million times in random
sampling.'' Id.
Findings Pertaining To Respondent
Respondent first became registered to distribute list I chemicals in January
1999. Prior to becoming registered, DEA Diversion Investigators (DIs) conducted
a pre-registration investigation. During this visit, the DIs discussed with Mr.
Fowler the recordkeeping requirements imposed by federal law and regulations.
Tr. 32-33. The DIs also provided Mr. Fowler with DEA notices that discussed
suspicious transactions and advised that certain list I chemical products
including pseudoephedrine were being diverted into the illicit manufacture of
methamphetamine. Id. at 34. One of the notices specifically stated that "[t]he
exemption from certain recordkeeping and reporting requirements for below
threshold transactions . . . does not reduce the risk of criminal liability.''
Gov. Ex. 3. This notice also advised Mr. Fowler to "[r]eport all suspicious
orders to your nearest DEA office immediately.'' Id.
The DIs, however, also gave Mr. Fowler a handout listing required reports.
See Resp. Ex. 18, Tr. 64. More specifically, this document stated that reports
were required for "[a]ny regulated transaction involving an extraordinary
quantity of a Listed Chemical,'' "[a]ny regulated transaction involving an
uncommon method of payment or delivery,'' and "[a]ny regulated transaction
involving any other circumstances that the regulated person (supplier) believes
may indicate that the List (sic) Chemical will be used in the illicit production
of controlled substances.'' Resp. Ex. 18.
In September 2001, DEA DIs returned to Respondent for a scheduled
[[Page 18277]]
inspection. Among other things, the DIs determined that Respondent was
storing list I chemicals in a trailer at a boat storage and not at its
registered location. Id. at 37. The DIs also found that Respondent was in
violation of recordkeeping requirements because its receiving invoices did not
include the date that products were received and its sales invoices did not
indicate package size. Id. at 38. Respondent's owner was issued a letter
admonishing him for the violations. Resp. Ex. 2. Subsequently, Mr. Fowler wrote
to one of the DIs advising of changes Respondent would make in its recordkeeping;
at that time, DEA took no further action. ALJ Dec. at 16.
On November 3, 2003, DEA DIs conducted another inspection of Respondent. The
DIs determined that while Respondent was now properly storing its list I
chemical products, it was still violating the recordkeeping requirements. See
id. at 16-17. DEA issued Respondent an additional letter of admonition. Tr. 41.
During this visit, DEA also obtained Respondent's receiving and sales invoices
for the period from January 1, 2002, through November 1, 2003. Id. at 261; Resp.
Ex. 25.\3\
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\3\ On April 7, 2004, a DEA DI again returned to Respondent
to discuss the then-recently enacted state legislation which scheduled
pseudoephedrine in tablet form. During this visit, the DI conducted a closing
inventory. ALJ Dec. at 17.
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In May 2004, law enforcement authorities obtained a warrant and executed a
search of Respondent. Based on records obtained during the search, as well as
the records obtained during the November 2003 inspection, DEA investigators
compiled a spreadsheet of Respondent's purchases of pseudoephedrine. Gov. Ex.
21; Tr. 187. According to this document, between January 28, 2002, and March 6,
2004, Respondent had purchased 10,062,144 tablets of Max Brand pseudoephedrine
at a wholesale price of $ 941,072.20. Id. Moreover, during the 2003 calendar
year, Respondent purchased nearly six million tablets at a wholesale price of $
564,884.20. Id. Furthermore, between January 5, 2004, and March 6, 2004 (shortly
before the Oklahoma statute scheduling tablet- form pseudoephedrine became
effective), Respondent purchased approximately 1.8 million tablets at a
wholesale price of $ 173,004. Id.
DEA investigators also compiled a spreadsheet of Respondent's pseudoephedrine
sales. See Gov. Ex. 23. This 102 page document lists Respondent's sales to each
store by product size and date. The document shows that Respondent repeatedly
made monthly sales of a $ 1,000 or more of pseudoephedrine products to the great
majority of the stores.\4\ See generally id.
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\4\ One of the DIs testified that her review of Respondent's
records showed that its sales of pseudoephedrine constituted eighty- five
percent of its business. ALJ Dec. at 17. The Government also introduced
evidence that Respondent brokered the sale of substantial amounts of "Bolt''
brand pseudoephedrine directly from its manufacturer to various stores. Tr.
273-276; Gov. Ex. 24, at 5-8.
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For example, from January 2002 through April 6, 2004, Respondent sold $
62,658.00 (and brokered the sale of $ 7,013) of pseudoephedrine to Bernhardt's,
a convenience store in Pharoah, Oklahoma. Gov. Ex. 24, at 5. During the same
period, Respondent sold $ 50,256 (and brokered the sale of $ 7,015) of
pseudoephedrine to Dock's General Store in Council Hill, Oklahoma, and sold $
44,640 (and brokered the sale of $ 7,015) of the chemical to Dock's General
Store in Leonard, Oklahoma. Id. at 6-7. Both of these establishments were bait
and tackle shops. Tr. 269-71. Respondent also sold $ 37,116 (and brokered the
sale of $ 4,676) of the chemical to Kern's Korner Grocery in Henryetta,
Oklahoma. Gov. Ex. 24, at 8. Furthermore, from January 2002 through December
2002, Respondent sold $ 11,880 of pseudoephedrine to the Funky Munky, a head
shop located in McAlester, Oklahoma. Id. at 9; see also Tr. 273.
The record also establishes that between February 2002 and March 2004,
Respondent sold $ 97,026 (and 468,144 tablets) of pseudoephedrine to five stores
in Poteau, a small city in eastern Oklahoma. Of significance among these
customers, Respondent sold $ 30,672 to Babe's Place and $ 37,590 to the
Tote-A-Poke 1. Gov. Ex. 24, at 3. It also sold $14,040 to Burkes Friendly Store;
all of the sales to Burkes occurred between February 2002 and March 2003. Gov.
Ex. 23, at 15-16.
The above per-store figures are based on Respondent's wholesale prices.
Several of Respondent's exhibits indicate that the suggested retail price was
typically twice the wholesale price. See Resp. Exh. 20, at 19; Resp. Ex. 19.
Ultimately, even if Respondent's customers sold the products at far less than
the suggested retail prices, their sales of these products so greatly exceeded
the monthly expected sales range of $ 0 to $ 40, with an average of $ 20.60,
that the probability that the products were being purchased to meet legitimate
consumer demand for use as a decongestant is infinitesimal. Indeed, as DEA's
expert has testified, a monthly retail sale of $ 100 in pseudoephedrine to meet
legitimate demand would occur about once in a million times in random sampling.
Here, where there are numerous stores to which Respondent sold repeatedly $
1,000 or more per month at wholesale prices, the only plausible explanation is
that the products were being diverted into the illicit manufacture of
methamphetamine.\5\ I thus find that substantially all of Respondent's products
were being diverted.
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\5\ During cross-examination, Respondent's counsel elicited
testimony from a Government witness that a few of the stores it sold to were
located on highways--thus suggesting that the sales at these stores were to
meet legitimate consumer demand. Tr. 201-02. This testimony does not persuade
me that Respondent's products were being sold to meet legitimate demand. The
ALJ found that Respondent had more than 200 customers, see ALJ Dec. at 18;
Respondent's line of cross-examination begs the question: What about the other
200 plus stores? Indeed, the ALJ found that "some of Respondent's customers
were convicted of criminal charges involving the diversion of pseudoephedrine.''
Id.
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The ALJ further credited the testimony of a DEA investigator that "some of
Respondent's customers engaged in practices that the DEA considers suspicious.''
ALJ at 18. More specifically, these practices included: (1) Ordering only
single-entity pseudoephedrine rather than a variety of pseudoephedrine and other
over-the-counter drug products, (2) selling single-entity products that are
marketed in large quantities and not in blister packs, (3) selling products that
have only been on the market for a few years and which receive little
advertising, and (4) purchasing large quantities of pseudoephedrine throughout
the year by establishments that traditionally do not sell large quantities of
these products and do little or no marketing of them.\6\ ALJ at 18, Tr. 349-51.
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\6\ Most of these indicia were published by DEA in February
1999. See Suspicious Orders Task Force, Report to the U.S. Attorney General
Appendix A (1999). The indicia were re-published in the June 2002 Chemical
Handler's Manual. See DEA, Chemical Handler's Manual-- A Guide to Chemical
Control Regulations 40-43 (June 2002).
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The ALJ further found that "Respondent never sold more than the [1000 grams]
threshold amount to any one customer in a calendar month.'' ALJ at 20. The ALJ
also found that Respondent's owner twice "reported a suspicious sale to'' DEA.
Id. According to the record, on October 8, 2003, Mr. Fowler reported that while
servicing a store the previous day, "the store clerk made a comment that she
needed products that Methamphetamine is made from.'' Resp. Ex. 6, at p. 2. Mr.
Fowler further wrote that he had "suspended sales of all pseudo ephedrine
products to this store due to this comment,'' and that he would "not service
this store in the future with any cold medications containing pseudo
ephedrine.'' Id. Approximately, a month
[[Page 18278]]
later Mr. Fowler also reported that he had been contacted by a person who
wanted to come to his premises to purchase products but Mr. Fowler advised him
that his firm "did not do business this way.'' Id. at 3. Mr. Fowler further
stated that the address given by this person was non-existent and that he had
determined that the business was not legitimate.\7\ Id.
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\7\ While Respondent introduced several form letters to
customers purporting to impose requirements for the sale of pseudoephedrine,
Resp. Exs. 11-13, as the ALJ noted, "Respondent did not call any witnesses at
the hearing, and there is no evidence as to whether such letters were mailed
to Respondent's customers.'' ALJ Dec. at 19.
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On November 14, 2005, the Cleveland County, Oklahoma, District Attorney filed
a felony information charging Mr. Fowler with criminal racketeering under
Oklahoma law. Gov. Ex. 42. More specifically, the information alleged that "between
January 2002 and April 2004,'' Fowler "was willfully, knowingly and criminally
associated with an enterprise,'' which consisted of himself, "individually, and
as the owner of Rick Picks,'' the affairs of which "were to distribute
pseudoephedrine, a precursor in the manufacturing of methamphetamine, with
reckless disregard for how the product was going to be used in violation of 63
O.S. 2-333(A).'' Id. I further take official notice of the fact that on October
16, 2006, the State filed a second amended felony information charging
Respondent with the "unlawful distribution of pseudoephedrine with reckless
disregard for how it was going to be used.'' Finally, I take official notice of
the fact that on February 9, 2007, a jury found Mr. Fowler guilty of the crime
charged in the second amended information. See Docket Sheet, State v. Fowler,
No. CF-2005- 1651, Cleveland County, Oklahoma, District Court.
Discussion
Section 304(a) of the Controlled Substances Act provides that a registration
to distribute a list I chemical "may be suspended or revoked * * * upon a
finding that the registrant * * * has committed such acts as would render his
registration under section 823 of this title inconsistent with the public
interest as determined under such section.'' 21
U.S.C. 824(a)(4). In making this determination, Congress directed that I
consider the following factors:
(1) Maintenance by the [registrant] 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.
Id. section 823(h).
"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 a registration
should be revoked or an application for renewal of 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). In this case, I hold that factors one, two,
four, and five overwhelmingly establish that Respondent's continued registration
would be "inconsistent with the public interest.'' 21
U.S.C. 823(h). Accordingly, I further hold that Respondent's registration
should be revoked and its pending application for renewal should be denied.
Factor One--Maintenance of Effective Controls Against Diversion
I concur with the ALJ's conclusion that the record does not establish that
Respondent fails to provide adequate physical security for list I chemicals.
However, "'[p]rior agency rulings have applied a more expansive view of factor
one than mere physical security.'' ' D & S Sales, 71 FR 37607, 37610 (2006)
(quoting OTC Distribution Co., 68 FR 70538, 70542 (2003)). Relatedly, I have
previously held that a registrant is "required to exercise a high degree of care
in monitoring its customers' purchases.'' D & S Sales, 71 FR at 37610.
Respondent argues that he maintains effective controls against diversion
because he obtained proof of identity from his customers and only distributed to
"legitimate store[s],'' Resp. Statement of Supporting Reasons 9 [hereinafter
Resp. Br.], he maintained adequate and retrievable records, id., and he "did not
fail to report suspicious sales because he was only required to report
suspicious regulated transactions,'' i.e., transactions that exceeded the 1,000
grams threshold. Id. at 11 (citing 21 U.S.C. 830(b)(1) and 21 CFR
1310.05(a)(1)).
Respondent apparently believes that as long as he sold under threshold
amounts he could distribute pseudoephedrine without taking any further steps to
determine the ultimate disposition of his products. Respondent's understanding
is mistaken. Congress's imposition of recordkeeping and reporting requirements
for regulated transactions does not mean that one can engage in below-threshold
transactions without any further obligation to determine whether the products
are likely to be diverted. Indeed, DEA has found that products which have been
distributed to non-traditional retailers in sub-threshold transactions are
routinely diverted. Contrary to Respondent's view, the threshold provisions
pertaining to regulated transactions do not create a safe harbor which allows a
registrant to sell list I chemicals without any further duty to investigate how
the products are being used.
Respondent further contends that "[t]here was no evidence presented that [it]
had actual knowledge [that] any customer was diverting pseudoephedrine for the
manufacture of methamphetamine.'' Id. at 10. In short, Respondent raises the
ostrich defense.
Congress, however, has rejected the ostrich defense in creating criminal
liability under 21 U.S.C. 841(c)(2), and I have previously rejected this defense
as incompatible with the purpose of proceedings under 21 U.S.C. 823 and 824,
which are brought to protect the public interest. See D & S Sales, 71 FR at
37612; T. Young Associates, 71 FR at 60572. As D & S Sales explained: "Burying
one's head in the sand while his firm's products are being diverted may allow
one to maximize profits. But it is manifestly inconsistent with public health
and safety.'' 71 FR at 37612. More recently, I revoked a registration
holding--albeit in the context of analyzing factors four and five--that a
registrant's lack of "any intent to divert or to sell to customers who were
diverting to the illicit manufacture of methamphetamine is irrelevant.'' T.
Young, 71 FR at 60572. See also Joy's Ideas, 70 FR at 33198 (revoking
registration notwithstanding that distributor was "an unknowing and
unintentional contributor to [the] methamphetamine problem.'').
Respondent's owner also contends that he maintained adequate controls because
he "reported suspicious activities to the DEA in the past.'' Resp. Br. at 9.
According to the record, Mr. Fowler reported an encounter he had during which a
store clerk informed him "that she needed products that Methamphetamine is made
from.'' Resp. Ex. 6. at 2. Mr. Fowler then stated that he would stop servicing
the store. Id.
A review of the compilation of Respondent's sales records indicates,
[[Page 18279]]
however, that this store--the 66 Lake Stop in Arcadia, Oklahoma--was actually
one of the smaller volume purchasers of its pseudoephedrine products. See Gov.
Ex. 23, at 2. For example, on May 24, 2003, the store purchased $ 270 of
products; on July 11, 2003, the store purchased $ 105: and on August 13, 2003,
the store purchased $ 252. Id. The fact that this store "needed more products
that Methamphetamine is made from,'' begs the question of what Mr. Fowler
thought was the likely disposition of the products he sold to the numerous
customers that were repeatedly buying more than $ 1,000 a month of the chemical
from his firm.
Relatedly, Mr. Fowler contends that "the DEA did not warn him that he was
making suspicious sales, [or] that he was making excessive sales'' before
November 3, 2003. Resp. Br. at 10. See also id. at 2 ("Between September, 2001
and November 3, 2003, the DEA never formally warned Mr. Fowler that he was
selling excessive amounts of pseudoephedrine.''). The suggestion that Respondent
would have stopped its excessive sales if it had been warned is absurd. As the
Government's compilation of Respondent's sales invoices establishes, Mr. Fowler
continued to sell extraordinary quantities of pseudoephedrine to numerous stores
for months following the November 3, 2003 warning. Indeed, it appears that the
only reason that the sales eventually stopped was because Respondent's customers
ceased purchasing the products in anticipation of the effective date of the new
Oklahoma law which restricted the sale of tablet-form pseudoephedrine. See
generally Gov. Ex. 23. In short, it is clear that DEA's warning did not register
with Mr. Fowler. I thus conclude that Respondent lacks effective controls
against diversion and that this factor is, by itself, sufficient to conclude
that Respondent's continued registration would be inconsistent with the public
interest.
Factors Two and Three--Respondent's Compliance With Applicable Laws and
Record of Criminal Convictions
As noted by the ALJ, Respondent has previously been admonished for several
violations of DEA regulations pertaining to security and recordkeeping
requirements. Moreover, while Mr. Fowler has not been formally convicted of a
crime (because a final judgment has yet to be entered in the state criminal
case), a jury recently found him guilty of the state law offense of distributing
pseudoephedrine "with reckless disregard as to how the product will be used.''
63 Okl. St. Ann. section 2-333(A). I also hold that Respondent's distributions
of pseudoephedrine violated 21 U.S.C. 841(c)(2) (prohibiting the possession or
distribution of "a listed chemical knowing, or having reasonable cause to
believe, that the listed chemical will be used to manufacture a controlled
substance''). Accordingly, while Mr. Fowler has not been formally convicted of a
crime, I conclude that Respondent's record of compliance with applicable federal
and state laws further demonstrates that Respondent's continued registration
would be inconsistent with the public interest.
Factors Four and Five--Respondent's Experience in the Distribution of
Chemicals and Other Factors Relevant to and Consistent With Public Health and
Safety
As explained above, Respondent's experience in the distribution of listed
chemicals is characterized by the egregious and criminal misconduct of its
owner, Mr. Fowler. But even if there was no such evidence, I would still
conclude--consistent with DEA precedent--that Respondent's excessive sales to
non-traditional retailers would support a finding under factor five that its
continued registration would be inconsistent with the public interest.
While pseudoephedrine has a legitimate medical use as a decongestant, its
diversion into the illicit manufacture of methamphetamine has had pernicious
effects on families and communities throughout the nation. Cutting off the
supply source of methamphetamine traffickers is thus of critical importance in
protecting the public from the devastation wreaked by this drug.
DEA orders have established that convenience stores and gas- stations
constitute the non-traditional retail market for legitimate consumers of
products containing this chemical. See, e.g., Tri-County Bait Distributors, 71
FR 52160, 52161-62; D & S Sales, 71 FR at 37609; Branex, Inc., 69 FR 8682,
8690-92 (2004). DEA has further found that there is a substantial risk of
diversion of pseudoephedrine into the illicit manufacture of methamphetamine
when these products are sold by non-traditional retailers. See, e.g., Joy's
Ideas, 70 FR at 33199 (finding that the risk of diversion was "real'' and "substantial'');
Jay Enterprises, 70 FR 24620, 24621 (2005) (noting "heightened risk of
diversion'' should application be granted). See also TNT Distributors, 70 FR
12729, 12730 (2005) (establishing that "80 to 90 percent of ephedrine and
pseudoephedrine being used [in Tennessee] to manufacture methamphetamine was
being obtained from convenience stores''); Joey Enterprises, 70 FR 76866, 76867
(2005) ("[w]hile there are no specific prohibitions under the Controlled
Substances Act regarding the sale of listed chemical products to [gas stations
and convenience stores], DEA has nevertheless found that [these entities]
constitute sources for the diversion of listed chemical products'').
The record here likewise establishes that there is a substantial nexus
between the sale of non-traditional list I chemical products by non-traditional
retailers and the diversion of these products into the illicit manufacture of
methamphetamine. Here, testimony establishes that Max Brand pseudoephedrine was
the preferred product of Oklahoma meth. cooks and that this product was found in
about eighty percent of the illicit laboratories seized by law enforcement
authorities. Tr. 180-82. The Government also established that Max Brand pseudo
was not found in traditional retailers and that it was distributed to non-
traditional retailers such as convenience stores and gas stations from which
meth cooks obtained the product. See id. Furthermore, the Government also showed
that "the vast majority of pseudoephedrine diversion'' in Oklahoma occurs in the
non-traditional retail market. Id. at 216.
To protect the public from the harms caused by methamphetamine abuse, DEA has
repeatedly revoked the registrations of list I chemical distributors who
supplied the non-traditional market for selling quantities of products that
clearly exceeded legitimate demand and were likely diverted into the illicit
manufacture of methamphetamine. See T. Young Associates, Inc., 71 FR at
60572-73; D & S Sales, 71 FR at 37611- 12; Joy's Ideas, 70 FR at 33198-99;
Branex, Inc., 69 FR at 8693-96. Here, the record clearly establishes that
Respondent distributed pseudoephedrine products in quantities that grossly
exceeded legitimate consumer demand for these products as a decongestant. As
found above, the only plausible explanation for these extraordinary sales is
that Respondent's products were being diverted into the illicit manufacture of
methamphetamine. See T. Young, 71 FR at 60572, D & S Sales, 71 FR at 37611
(finding diversion occurred "[g]iven the near impossibility that * * * sales
were the result of legitimate demand''); Joy's Ideas, 70 FR at 33198 (finding
diversion occurred in the absence of "a plausible explanation in the record for
this deviation from the expected norm'').
[[Page 18280]]
While in this case, there is substantial evidence that Mr. Fowler distributed
pseudoephedrine with a reckless disregard for its eventual use, such proof is
not essential to sustain the revocation of Respondent's registration. A
proceeding under section 304 of the CSA is not a criminal prosecution. Rather,
its purpose is to protect the public interest. See Leo R. Miller, 53 FR 21931,
21932 (1988).
" `In determining the public interest,' Congress granted the Attorney General
broad discretion to consider any other factor that is `relevant to and
consistent with the public health and safety.'' ' T. Young, 71 FR at 60572
(quoting 21 U.S.C. 823(h)(5)).
The statutory text of factor five does not require that the Government prove
that a registrant or its key employees acted with any particular mens rea.\8\ As
I have previously explained, "the diversion of list I chemicals into the illicit
manufacture of methamphetamine poses the same threat to public health and safety
whether a registrant sells the products knowing they will be diverted, sells
them with a reckless disregard for the diversion, see D & S Sales, 71 FR at
37610-12, or sells them being totally unaware that the products were being
diverted.'' T. Young, 71 FR at 60572 (citing Joy's Ideas, 70 FR at 33198)
(revoking registration notwithstanding that distributor was "an unknowing and
unintentional contributor to [the] methamphetamine problem''). Accordingly,
Respondent's excessive sales of pseudoephedrine also provide reason alone to
conclude that its continued registration would be inconsistent with the public
interest.
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\8\ To the extent mens rea is relevant, it is accounted for
in factor three, which directs the consideration of a registrant's prior
conviction record. See 21 U.S.C. 823(h)(3).
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In sum, four of the five factors conclusively demonstrate that Respondent's
continued registration is inconsistent with the public interest. Furthermore, in
accordance with 21
CFR 1316.67, I find that Respondent's owner engaged in egregious misconduct
and is responsible for the diversion of massive amounts of pseudoephedrine into
the illicit manufacture of methamphetamine. There, I conclude that the public
interest requires that Respondent's registration be revoked effective
immediately.
Order
Accordingly, pursuant to the authority vested in me by 21
U.S.C. 823(h) & 824(a),
as well as 28 CFR 0.100(b) & 0.104, I order that DEA Certificate of
Registration, 003949RPY, issued to Rick's Picks, L.L.C., be, and it hereby is,
revoked. I further order that the pending application of Rick's Picks, L.L.C.,
for renewal of its registration be, and it hereby is, denied. This order is
effective immediately.
Dated: March 30, 2007.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E7-6759 Filed 4-10-07; 8:45 am]
BILLING CODE 4410-09-P
NOTICE: This is an
unofficial version. An official version of these publications may be obtained
directly from the Government Printing Office (GPO).
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