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John J. Fotinopoulos; Revocation of Registration
FR Doc E7-8453 [Federal Register: May 3, 2007 (Volume 72, Number 85)]
[Notices] [Page 24602-24607] From the Federal Register Online via GPO
Access [wais.access.gpo.gov] [DOCID:fr03my07-81]
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 05-3]
John J. Fotinopoulos; Revocation of Registration
On October 7, 2004, the Deputy Assistant Administrator, Office of
Diversion Control, Enforcement Administration, issued an Order to Show
Cause to John J. Fotinopoulos (Respondent) of Gainesville, Florida. The
Show Cause Order proposed the revocation of Respondent's DEA Certificate
of Registration, 002964JTY, as a distributor of listed chemicals, on the
ground that his continued registration would be inconsistent with the
public interest. See 21
U.S.C. 824(a)(4) & 823(h).
The Show Cause Order also proposed the denial of Respondent's pending
applications for modification and renewal of his registration.
The Show Cause Order alleged that Respondent distributed listed
chemicals to the non-traditional market. More specifically, the Show
Cause Order alleged that in July 2003, Respondent moved his business
from SW 47th St., Gainesville, Florida, to a trailer park located at SW
Archer Road, Gainesville, Florida, but failed to request a modification
of his registered location as required by DEA regulations until January
15, 2004. Show Cause Order at 2-3. The Show Cause Order further alleged
that from July 2003 through January 2004, Respondent violated federal
law by distributing listed chemicals from his new location which was not
registered. Id. at 3.
The Show Cause Order also alleged that in 2001, a DEA investigator
had inspected Respondent and found his recordkeeping and customer
identification practices to be inadequate. Id. The Show Cause Order
further alleged that during a May 2004 inspection, DEA investigators had
again determined that Respondent's recordkeeping was inadequate, that he
was unable to identify whether certain products were regulated because
they contained listed chemicals, and that he was unfamiliar with the
regulations pertaining to thresholds and regulated transactions. Id.
Relatedly, the Show Cause Order alleged that Respondent told
investigators that he kept information pertaining to his customers in
his head. Id. Finally, the Show Cause Order alleged that Respondent's
security arrangements were inadequate. See id.
Respondent, through his counsel, timely requested a hearing. The
matter was assigned to Administrative Law Judge (ALJ) Gail Randall, who
conducted a hearing in Gainesville, Florida, on April 19 and 20, 2005.
At the hearing, both parties introduced documentary evidence and called
witnesses to testify; both parties also submitted post-hearing briefs.
On October 11, 2006, the ALJ issued her decision.\1\ In her decision,
the ALJ found that four of the five statutory factors, see 21 U.S.C.
823(h), supported the revocation of Respondent's registration and the
denial of his pending applications for renewal and modification of the
registration. ALJ at 41. Neither party filed exceptions.
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\1\ The ALJ's Decision will be cited as "ALJ.''
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Having reviewed 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 except as expressly noted herein. I further adopt the ALJ's
recommendation that Respondent's registration should be revoked and his
pending applications for renewal and modification should be denied and
make the following findings.
Findings of Fact
Respondent distributes assorted products including maps, cigarette
lighters, rolling papers, prophylactics, batteries, and over-the-
counter drug products to convenience stores, gas stations and liquor
stores in northern Florida and southern Georgia. Gov. Ex. 27. Respondent
is the holder of DEA Certificate Registration, No. 002964JTY, which
authorizes him to distribute list I chemical products. ALJ at 3. Since
1998, Respondent has held a registration at his former residence which
was located at 4000 SW 47th Street, Gainesville, Florida. Id. In early
July 2003, Respondent moved from this address to a mobile home park
located at 7117 SW Archer Road, Gainesville, Florida. Tr. 286.
On November 10, 2003, Respondent filed an application to renew his
registration and paid the fee. Gov. Ex. 3; Tr. 289. On the application,
Respondent sought to distribute pseudoephedrine and ephedrine from his
new address. Gov. Ex. 3, at 2.
As explained in numerous DEA final orders, both pseudoephedrine and
ephedrine currently have therapeutic uses. See, e.g., Tri-County Bait
Distributors, 71 FR 52160, 52161 (2006).\2\ Both chemicals are, however,
regulated under the Controlled Substances Act because they are precursor
chemicals which are 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).
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\2\ The FDA is, however, currently proposing to
remove combination ephedrine-guaifenesin products from its
over-the-counter (OTC) drug monograph and to delare them not safe and
effective for OTC use. See 70 FR 40232 (2005).
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Methamphetamine is a powerful and highly addictive central nervous
system
[[Page 24603]]
stimulant. See, e.g., Tri-County Bait Distributors, 71 FR at 52161.
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 toxic nature
of the chemicals which are used to make the drug, the illegal
manufacture of methamphetamine causes serious environmental harms.\3\
Id.
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\3\ The illicit manufacture of methamphetamine is an
increasing problem in the State of Florida. See Planet Trading, Inc.,
72 FR 11055, 11056 (2007). As I noted in Planet Trading, during the
period October 1, 2004, through September 30, 2005, law enforcement
authorities seized 340 clandestine laboratories statewide. Id. By
contrast, in 1999, only 20 clandestine laboratories were seized. See
gov. Ex. 9.
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Because Respondent had changed his address, DEA did not renew his
registration, which had an expiration date of December 31, 2003. ALJ at
10 (FOF 31). Respondent was told to contact the DEA Orlando office; on
January 15, 2004, Respondent faxed a letter to that office informing it
of his new address. Id.; Gov. Ex. 2.\4\
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\4\ Respondent testified that at the time of his
move, he phoned DEA headquarters to notify the Agency that he had
changed his address. Tr. 286-87. Respondent further testified that he
was told to contact the DEA Miami office, who told him to call the
Orlando office. Id. According to Respondent's testimony, a person in
the Orlando office told him to fax his new address to that office. Id.
at 287. Respondent testified that he then faxed a written notice of
his new address to DEA Orlando from the office of the trailer park
where he now lives. Id. The ALJ did not specifically credit any of
this testimony. See ALJ at 9 (FOFs 26 & 27). Nor do I. As the ALJ
noted, Respondent acknowledged that he "could not find a copy of that
fax,'' id. at 9 (FOF 27; citing Tr. 287), and Respondent did not
produce any phone records to support his assertions.
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In January 2001, a DEA Diversion Investigator (DI) had conducted a
cyclic investigation at Respondent's prior location. During this
inspection, the DI instructed Respondent regarding the obligations of a
registrant including the recordkeeping requirements and the duty to
report suspicious orders. Tr. 207. The DI also provided Respondent with
DEA Warning Notices; one of these documents specifically informed
Respondent that pseudoephedrine and ephedrine drug products were being
diverted into the illicit manufacture of methamphetamine. Id. at 207,
211-12; Gov. Ex. 6. Respondent acknowledged that during the inspection,
the DI had discussed with him the subject of suspicious orders; in his
testimony, he further asserted that the DI did not provide him with
specific written guidelines pertaining to threshold amounts. Tr. 281-
82.
During this inspection, the DI found Respondent's records to be "in
disarray.'' Id. at 208. The DI was "unable to determine * * * who
[Respondent's] customers were because they were not fully identified.''
Id. While Respondent provided a customer list to the DI, the list
frequently stated just a store name and street. Id. at 210. Furthermore,
because Respondent's records did not allow for the identification of
specific customers, the DI was unable to determine whether Respondent
had engaged in any regulated transactions. Id. at 208-09.
Respondent told the DI that he would maintain a ledger sheet for each
of his listed chemical customers which would include the name of the
person he dealt with. Id. at 209. The DI also suggested to Respondent
that he keep the invoices for listed chemical products apart from his
other invoices. Id. at 302. At the hearing, Respondent testified that he
had "attempted'' to do so, but had not "succeeded'' in keeping the
invoices "separate.'' Id.
On direct examination, Respondent testified that he kept track of his
sales of listed chemical products "mostly * * * in my mind.'' Id. at
303. Respondent further stated that he "visit[ed] the store[s]
regular[ly],'' and that he knew "something's wrong'' "if [the store]
ordered two weeks ago and * * * re-order[ed] after two weeks.'' Id.
Respondent asserted, however, that he had "never had any'' suspicious
transactions. Id. at 304.
Under DEA's rules, a request to modify a registration is "handled in
the same manner as an application for registration,'' 21
CFR 1309.61, and in the case of a chemical distributor, requires an
on-site inspection. Upon receipt of Respondent's January 2004 request to
modify his registration, the same DI who had conducted the 2001
inspection told Respondent that he could not distribute listed chemicals
from his new address because he was not registered there. Tr. 225.
In May 2004, the DI visited Respondent at his new address to conduct
an on-site inspection. During this visit, the DI found that Respondent
was in possession of both pseudoephedrine and ephedrine products. Id. at
226. More specifically, Respondent had "several hundred boxes'' of
listed chemical products. Id. at 219. Respondent was not aware that the
products contained listed chemicals.\5\ Id.
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\5\ Relatedly, at the hearing, Respondent was asked
if he knew "what the Code of Federal Regulations are [sic]?'' Tr. 319.
Respondent answered: "No.'' Id.
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Moreover, during the visit, the DI asked Respondent to mark which of
the products on his product list contained listed chemicals. Id. 218.
While Respondent correctly indicated that products such as Mini Two-Way
contained listed chemicals, he failed to mark any of the traditional
products on his list such as Tylenol Cold and Tylenol Sinus, which
contain pseudoephedrine. Id.
The DIs subsequently contacted Respondent's suppliers. One of the
suppliers stated that it had sold "almost 700,000'' dosage units of
combination ephedrine products to Respondent after January 1, 2004,
based on his representation to it "[t]hat DEA had told him that he
[could] keep purchasing that product.'' Id. at 227. The DI subsequently
asked everyone in the Orlando diversion group whether they had given
Respondent permission to continue handling listed chemical products; no
one had. Id.
During the inspection, the DI asked Respondent about his
recordkeeping, specifically, whether he was keeping a separate ledger as
he had promised the investigator during the 2001 inspection. Id. at 215,
268. Respondent was not and told the DI that "he didn't remember that
conversation.'' Id. at 268.
The DI asked to see Respondent's purchase records from his suppliers.
Id. at 228. Respondent could not provide them because they were not "filed
or organized in any manner.'' Id.
Respondent did provide the DI with seven ledger books containing
copies of his sales invoices, which covered the period from September
through December 2003. Id. at 239; see also Resp. Ex. 1 at 59-192. With
respect to Respondent's listed chemical products, the invoices did not
contain information regarding the product strength or number of tablets
in a bottle/package. Tr. 240. While some of the invoices gave an
address, others only listed the name of the store, the street it was on,
and the city it was located in. Id. at 242-43; see also Gov. Ex. 29. For
example, one of the invoices stated that products had been sold to a
Chevron on "Beach Boulevard, Jacksonville.'' Tr. 242-43. After
conducting research using the internet and yellow pages, as well as
driving the length of the street, the DI determined that there were
three Chevron stations on the street. Id. at 243.
The ALJ also found that "[m]ost of * * * Respondent's invoices failed
to list the individual contact person for the customer.'' ALJ 13 (FOF
43, citing Tr. 243, Gov. Ex. 29, Resp. Ex. 1). Furthermore, one of the
invoices indicated that Respondent had sold a case (144 bottles) of Max
Brand, a product which typically contains sixty tablets of 60 mg.
pseudoephedrine, see Gov. Ex. 25, at 4; Gov. Ex. 26, at 12, to
[[Page 24604]]
"Steve.'' Gov. Ex. 29, at 2. The invoice lacked essential identifying
information such as the person's last name, a store name, and address.
See id.\6\
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\6\ While Respondent testified that "Steve'' was "Steve
Lee, the owner of the Week 3, which is located on 576 South Edgewood,
Jacksonville,'' Tr. 307, Respondent's customer list indicated that the
name of the store located at this address was the "Quick Trip Food
Store.'' Gov. Ex. 28, at 3.
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At least one of the other invoices, which listed the sale of Max
Brand products, contained no identifying information at all. Tr. 157
& 243, Resp. Ex. 1, at 402. When asked who had purchased the
products listed on invoice number 361516, Respondent answered: "I'm not
sure. It's been quite some time. But I would say * * * it was to Steve
again and probably a--or whatever.'' Tr. 308. Respondent further
explained that he had not written the name down because he was either "busy
or tired.'' Id.
The DI testified that because of the condition of Respondent's
records, he was unable to determine whether Respondent had engaged in
any regulated transactions. Id. at 241. Moreover, when the DI asked
Respondent what the threshold was for a regulated transaction,
Respondent did not know. Id. at 242. When the DI discussed with
Respondent the inadequacy of his recordkeeping, Respondent replied that "he
was just too busy'' to "write all this information down.'' Id. at
243-44. Respondent further stated that the records "were good enough for
him.'' Id. at 244.
Respondent acknowledged that he could not tell if he had engaged in
any regulated transactions "without going back and going through every *
* * invoice.'' Id. Regarding the identification of his customers,
Respondent told the DI "[t]hat he knew who they were and that all the
information was kept in his head.'' Id. Furthermore, when asked by his
counsel whether he had records that allowed him "to identify more
particularly where these various customers are?'' Respondent answered: "Yes
and no * * *. I [can] go home and find the exact address because some of
the stores are listed in the phone book. Same thing the Gainesville
phone book.'' Id. at 298.
During the on-site inspection, the DI also examined Respondent's
security arrangements. Respondent was storing his listed chemical
products in an aluminum storage shed that was mounted on a foundation of
cement blocks. Id. at 250, 292. The storage shed was secured with a
combination lock. Id. at 292. The shed apparently did not have an alarm.
Id. Respondent further testified that he stored the products in the shed
because his mobile home was too small, and "nobody can see what is in
the shed.'' Id. at 293. Respondent further stated that his customers did
not come to his home and while people (neighbors) "may see cases from
different things * * * they wouldn't know what is the contents [of] the
case.'' Id. at 294. According to the DI, Respondent's listed chemical
products were commingled with other products in the shed. Id. at 252-53.
Furthermore, Respondent would "spend[] up to a week at a time on the
road'' leaving his property unsupervised. Id. at 267.
The Government also called Jonathan Robbin, who testified as an
expert witness. Mr. Robbin testified extensively regarding his findings
regarding the market for listed chemical products, his review of the
records of another distributor, and the expected monthly sales range to
meet legitimate demand for listed chemical products at non-traditional
retailers of these products such as gas stations, convenience stores,
and liquor stores.
Unlike in numerous other cases, the Government did not produce a
compilation of Respondent's sales of listed chemical products which
showed the average sale amount per store, per month, over a sustained
period of time. Instead, the Government asked Mr. Robbin to testify
regarding several isolated invoices. While Mr. Robbin testified that
some of Respondent's invoices were "rather curious'' and were suggestive
of excessive sales, id. at 154, he also stated that "definitive
conclusions'' could not be drawn from individual invoices. Id. at 156.
Mr. Robbin further stated that "[w]e should really analyze all their
records to come up with definitive conclusions.'' Id.
I agree. A single invoice does not prove that a store engaged in
excessive sales (and that its products were diverted) because it does
not establish the length of time it took the store to sell the products.
Without other invoices showing the dates and amounts of additional
purchases, the possibility remains that the products remained in
inventory for a substantial period and that the sales were to meet
legitimate demand. In sum, the isolated invoices do no more than create
a suspicion that Respondent engaged in excessive sales. Accordingly, I
find that the Government's proof on the issue of excessive sales does
not satisfy the substantial evidence test. See NLRB v. Columbia
Enameling & Stamping Co., 306 U.S. 292, 300 (1939) ("Substantial
evidence is more than a scintilla, and must do more than create a
suspicion of the existence of the fact to be established.'').\7\
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\7\ This is not to say that the Government must
review every single invoice and compile sales amounts for every single
store. Rather, to establish excessive sales and support a finding of
diversion, the Government need only analyze the sales made to selected
stores. The Government cannot, however, rely solely on a single sale
absent other evidence that the products were diverted.
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Another issue in this case involved the employment status of Mr.
Justin J. Paden, who serviced Respondent's customers in the Tallahassee
area. Specifically, the Government attempted to prove that Mr. Paden was
not an employee of Respondent because he did not withhold federal income
tax from Mr. Paden's compensation, he did not pay the employer's share
of Mr. Paden's Social Security taxes, and he did not pay worker's
compensation or unemployment taxes. Tr. 310-11. The Government viewed
Mr. Paden as an independent contractor, id. at 223 & 311, and
considered Respondent's use of Mr. Paden to distribute listed chemical
products to be a violation of the Controlled Substances Act. Id. at 224
(testimony of DI) ("any time that [Mr. Paden] sold product, it would
actually be an illegal distribution'').
The ALJ found, however, that "Mr. Paden worked under the direct
supervision of the Respondent, and serviced only the Respondent's
customers,'' that "his pay was calculated'' based on his sales to
Respondent's customers, and that he drove a van provided by, and insured
by, Respondent. ALJ at 35. The ALJ thus concluded "that the relationship
between Mr. Paden and the Respondent was one of employer and employee,
based on their conduct.'' Id. Ultimately, I conclude that it is
immaterial whether Mr. Paden was an employee or an independent
contractor because the evidence clearly establishes that Mr. Paden was
subject to Respondent's control and therefore acted as his agent.
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 applicant of effective controls against
diversion of listed chemicals into other than legitimate channels;
[[Page 24605]]
(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 a modification 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 conclude
that factors one, two, four, and five establish that Respondent's
continued registration would be "inconsistent with the public
interest,'' 21 U.S.C. 823(h). Accordingly, Respondent's registration
will be revoked and his pending applications for renewal and
modification of the registration will be denied.
Factors One and Two--Maintenance of Effective Controls Against
Diversion and Compliance With Applicable Laws and Regulations
The ALJ found that Respondent does not maintain effective controls
against diversion. While the ALJ reasoned that the Government had not
proved that Respondent's physical security arrangement were
inadequate--because the storage shed appeared to be "as secure as the
DEA-approved past location in his mobile home,'' ALJ at 34--she further
concluded that "Respondent's failure to properly maintain records * * *
is especially egregious.'' Id. at 35. While I agree with the ALJ's
finding that Respondent's recordkeeping is inadequate, and her ultimate
conclusion that this factor "favors revocation,'' id. at 36, I further
conclude that Respondent's proposed storage would provide inadequate
security.
The applicable DEA regulation directs that eight factors be
considered in assessing the adequacy of security. See 21
CFR 1309.71(b). Among the factors are "[t]he type, form, and
quantity of List I chemicals handled,'' "[t]he location of the premises
and the relationship such location bears on the security needs,'' "[t]he
type of building construction * * * and the general characteristics of
the building,'' "[t]he availability of electronic detection and alarm
systems,'' and "[t]he extent of unsupervised public access to the
facility.'' Id. Here, the record establishes that Respondent proposed to
store listed chemicals, which are easily converted into methamphetamine,
in an aluminum storage shed (located apparently in his back yard), which
was secured with a combination lock. Moreover, notwithstanding that
Respondent was frequently away from his home for lengthy periods, the
shed did not have an alarm.
It is obvious that such arrangements are inadequate to protect these
products from theft. A thief using readily available bolt cutters would
make short work of the lock, and without an alarm, a thief would be far
more likely to succeed in stealing the chemicals.
The fact that similar arrangements were approved in the past does not
estop the Agency from requiring greater security measures. Respondent
did not rely on any representations of DEA personnel that the security
arrangements at his new location met the Agency's requirements. Indeed,
while DEA regulations provide that an "applicant desiring to determine
whether a proposed system of security controls * * * is adequate may
submit materials and plans regarding the proposed security controls''
for review by either the Special Agent in Charge or the Office of
Diversion Control, 21 CFR 1309.71(c), Respondent made no such
submission. As found above, the illegal manufacture of methamphetamine
has become an increasingly serious problem. Accordingly, whatever
arrangements were previously deemed satisfactory are not necessarily
still adequate to protect against theft. I therefore conclude that
Respondent's proposed security arrangements would not provide effective
controls against diversion.
The ALJ, however, also correctly observed that "the inquiry into the
effectiveness of the Respondent's controls `does not end when products
leave [their] physical location.' '' ALJ at 35 (quoting D & S Sales,
71 FR 37607, 37610 (2006)). As the ALJ recognized, maintaining proper
records is also an essential part of providing effective controls
against diversion. See id. Indeed, as the ALJ explained, Respondent's "recordkeeping
was so inadequate that neither he nor the DEA would be able to detect
excessive purchases or other suspicious transaction behavior by his
customers.'' Id. at 35-36.
As found above, many of Respondent's sale invoices lacked essential
information. The invoices almost always failed to include information
pertaining to product strength and count. The invoices also frequently
lacked complete street addresses and the name of the contact person at a
particular establishment; indeed, the testimony showed that on some
streets there were multiple stores which used the same name. Moreover,
in one instance, an invoice documented a large sale of a listed chemical
product to a person identified only as "Steve''; in another instance,
purchaser information was completely missing.
While Respondent services approximately 150 stores, he testified that
he kept track of his listed chemical sales to individual customers "mostly
* * * in my mind.'' Tr. 303. Moreover, Respondent further told the DI "that
all the information [regarding the identity of his customers] was kept
in his head.'' Id. at 244. Respondent further contended that he could
ascertain the exact address of his various customers "because some of
the stores are listed in the phone book.'' Id. at 298.
These statements are absurd. While it is true that the Government did
not establish whether Respondent ever exceeded the 1,000 grams threshold
and thus engaged in a regulated transaction, see 21
CFR 1300.02(b)(28)(i), as the ALJ found, "this may well be
attributed to * * * Respondent's deficient recordkeeping.'' ALJ at 36.
Moreover, as the ALJ further explained, "there was no means to determine
if the Respondent's customers received in excess of the threshold
amounts during any given month.'' Id. Relatedly, Respondent's purchase
records were not "filed or organized in any manner.'' Tr. 228.
While registrants who engage in regulated transactions are subject to
additional recordkeeping and reporting requirements, see 21
CFR 1310.03, under DEA regulations, every registrant must maintain
adequate records to monitor the receipt and distribution of listed
chemical products. See id. 1309.71(b)(8)
(directing the consideration of "[t]he adequacy of [a] registrant's * *
* systems for monitoring the receipt, distribution, and disposition of
List I chemicals''). Absent maintaining proper records, legitimate
registrants might fail to discover that their sales to an entity have
exceeded the cumulative threshold and report the transaction.
Furthermore, disreputable registrants could engage in regulated
transactions and hide behind their poor recordkeeping to escape
liability.
[[Page 24606]]
Finally, the record establishes that Respondent violated federal law
by distributing listed chemical products from his new location without a
valid registration. Under federal law, a registration is location
specific. See 21
U.S.C. 822(f) ("A separate registration shall be required at each
principal place of business * * * where the applicant * * * distributes
* * * list I chemicals.''); see also 21
CFR 1309.23(a). Moreover, federal law clearly provides that a
registrant is "authorized to possess [or] distribute'' a listed chemical
only "to the extent authorized by their registration and in conformity
with the other provisions of this subchapter.'' 21 U.S.C. 822(b).
Furthermore, in contrast to a renewal application, which, if timely
filed, keeps a registration in effect past its expiration date and until
the Agency makes a final determination on the application, see 5 U.S.C.
558(c), a request for a modification is treated as a new application.
See 21
CFR 1309.61 (a "request for modification shall be handled in the
same manner as an application for registration,'' and, if approved, "the
Administrator shall issue a new certificate of registration'').
Accordingly, a request for modification does not authorize a registrant
to engage in listed chemical activities until the modification is
approved and the new certificate of registration is issued. Cf. Orlando
Wholesale, L.L.C., 71 FR 71555, 71557 (2006) (applicant's change of
address following pre-registration inspection renders application moot).
The record contains numerous invoices showing that Respondent
distributed listed chemicals out of his new and unregistered location.
See Gov. Ex. 29; Resp. Ex. 1. Furthermore, the record contain
substantial evidence establishing that even after Respondent was told by
a DEA Investigator to stop distributing listed chemicals, he proceeded
to obtain "almost 700,000'' dosage units of combination ephedrine
products from a distributor by representing to it that DEA had
authorized him to continue to purchase them. Id. at 227. While the
record does not contain invoices documenting the sale of these products,
the quantity involved makes it obvious that Respondent was not
purchasing the products for his personal use but rather to distribute
them.\8\ Respondent's distribution of list I chemicals after being told
that he could no longer do so is egregious misconduct and manifests a
flagrant disregard for the requirements of federal law. \9\
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\8\ Respondent's purchases of products in this
period also far exceeded the inventory found in his storage shed
during the May 2004 inspection.
\9\ The ALJ properly rejected the Government's
contention that because Mr. Paden was not registered, Respondent
violated federal law by distributing listed chemical products to him.
Even if Mr. Paden was not an employee, but rather an independent
contractor, the evidence shows that he was clearly Respondent's agent.
See 21 U.S.C. 802(3) (defining "agent'' as "an authorized person who
acts on behalf of or at the direction of a manufacturer, distributor,
or dispenser'').
Under the plain language of the Act, an agent of a
registered distributor is not "required to register and may lawfully
possess any * * * list I chemical * * * if such agent. * * * is acting
in the usual course of his business.'' 21 U.S.C. Sec. 822(c). See also
21 CFR 1309.24(a) ("The requirement of registration is waived for any
agent * * * of a person who is registered * * * if such agent * * * is
acting in the usual course of his * * * business[.]''); Daniel Koller,
D.V.M., 71 FR 66975, 66983 n.14 (2006).
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I thus concur with the ALJ's conclusion that this factor "weighs
heavily in favor of revocation.'' ALJ at 38. Indeed, were there no other
evidence of Respondent's non-compliance with federal law and
regulations, this conduct would provide reason alone to revoke his
registration.\10\
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\10\ Relatedly, I acknowledge that there is no
evidence that Respondent has been convicted of a crime, under either
Federal or State laws, relating to controlled substances or listed
chemicals.
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Factor Four--Respondent's Experience in Distributing Listed
Chemicals
According to the record, Respondent has been registered since 1998.
Yet notwithstanding his several years of experience, Respondent has not
learned very much about the products that are regulated and DEA's rules.
Moreover, as explained above, Respondent's experience is characterized
by his disregard for Federal laws and regulations and unsatisfactory
business practices.
For example, when asked if he knew "what the Code of Federal
Regulations are [sic]?,'' Respondent answered: "No.'' Tr. 319. Moreover,
during the May 2004 pre-registration inspection, Respondent had "several
hundred boxes'' of pseudoephedrine products in his possession. Id. at
219, 226. Respondent was not aware, however, that the products contained
this listed chemical. Id. at 219. Respondent was also unaware that
products he carried such as Tylenol Cold and Tylenol Sinus contained
pseudoephedrine. Id. at 218.
Beyond that, I note that Respondent's experience is characterized by
(as charitably described by the ALJ) his "lackadaisical attitude.'' ALJ
at 39. As noted by the ALJ, Respondent justified his failure to
adequately document his sales on the grounds that "he was just too busy
or too tired.'' Id. Respondent's attitude is simply incompatible with
his continued participation in the distribution of list I chemicals.
Accordingly, I adopt the ALJ's conclusion "that this factor strongly
favors revocation.''
Factor Five--Other Factors Relevant to Public Health and Safety
As found above, the illicit manufacture and abuse of methamphetamine
have had pernicious effects on families and communities throughout the
nation.\11\ Cutting off the supply source of methamphetamine traffickers
is of critical importance in protecting the public from the devastation
wreaked by this drug.
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\11\ As found above, methamphetamine trafficking has
increased substantially in Florida.
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While listed chemical products containing both ephedrine and
pseudoephedrine have legitimate medical uses, DEA orders have
established that convenience stores and gas-stations constitute the
non-traditional retail market for legitimate consumers of products
containing these chemicals. See, e.g., Tri-County Bait Distributors, 71
FR at 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 list I chemicals 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, Inc., 70
FR 24620, 24621 (2005) (noting "heightened risk of diversion'' if
application to distribute to non-traditional retailers was granted).
Accordingly, "[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.'' Joey Enterprises, Inc., 70 FR 76866, 76867 (2005).
See also TNT Distributors, 70 FR 12729, 12730 (2005) (special agent
testified that "80 to 90 percent of ephedrine and pseudoephedrine being
used [in Tennessee] to manufacture methamphetamine was being obtained
from convenience stores'').\12\ Here, it
[[Page 24607]]
appears that all of Respondent's customers are convenience stores and
gas stations, which are non-traditional retailers of list I chemical
products and entities which DEA has repeatedly found are conduits for
the diversion of these products into the illicit manufacture of
methamphetamine.
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\12\ See OTC Distribution Co., 68 FR 70538, 70541
(2003) (noting "over 20 different seizures of [gray market
distributor's] pseudoephedrine product at clandestine sites,'' and
that in eight- month period distributor's product "was seized at
clandestine laboratories in eight states, with over 2 million dosage
units seized in Oklahoma alone.''); MDI Pharmaceuticals, 68 FR 4233,
4236 (2003) (finding that "pseudoephedrine products distributed by
[gray market distributor] have been uncovered at numerous clandestine
methamphetamine settings throughout the United States and/or
discovered in the possession of individuals apparently involved in the
illicit manufacture of methamphetamine'').
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Here, unlike in other cases where the Government's evidence
established that a distributor had made excessive sales and that these
sales supported a finding of diversion, the Government's proof does not
support such a finding. Nonetheless, Respondent's wholly inadequate
recordkeeping substantially hinders the efforts of this Agency and its
local partners to investigate the suppliers of methamphetamine
traffickers and the traffickers themselves. Moreover, even if
Respondent's recordkeeping is attributable to neglect, it still impedes
the protection of public safety. I therefore conclude that this factor
also supports a finding that Respondent's continued registration would
be inconsistent with the public interest.
In sum, Respondent violated Federal law by distributing products from
an unregistered location. Indeed, this misconduct is especially
egregious because he did so even after being told by a DEA official to
stop. Respondent also does not maintain effective controls against
diversion as evidenced by his wholly inadequate recordkeeping and the
inadequate security he provided for list I products. Moreover,
notwithstanding his years of experience distributing list I chemicals,
Respondent clearly lacked knowledge of which products contained listed
chemicals and he did not even know what the Code of Federal Regulations
is. Finally, Respondent's attitude reflects indifference to his
obligations under federal law and regulations. Given all of the above,
it is indisputable that Respondent's continued registration would be
inconsistent with the public interest.
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, 002964JTY, issued to John
J. Fotinopoulos be, and it hereby is, revoked. I further order that the
pending applications for modification and renewal of the registration
issued to John J. Fotinopoulos be, and they hereby are, denied. This
order is effective June 4, 2007.
Dated: April 25, 2007.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E7-8453 Filed 5-2-07; 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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