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Archer's Trading Company; Revocation of Registration
FR Doc E7-14815 [Federal Register: August 1, 2007 (Volume 72, Number
147)] [Notices] [Page 42114-42118] From the Federal Register Online via
GPO Access [wais.access.gpo.gov] [DOCID:fr01au07-100]
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
Archer's Trading Company; Revocation of Registration
On February 6, 2006, the Deputy Assistant Administrator, Office of
Diversion Control, Drug Enforcement Administration, issued an Order to
Show Cause to Archer's Trading Company (Respondent), of Mechanicsville,
Virginia. The Show Cause Order proposed the revocation of Respondent's
DEA Certificate of Registration, 003001ATY, as a distributor of List I
chemicals, on the ground that its "continued registration is
inconsistent with the public interest.'' Show Cause Order at 1. The Show
Cause Order also proposed the denial of any pending applications for
renewal or modification of Respondent's registration. Id. The Show Cause
Order specifically alleged that Respondent distributed List I chemicals
to gas stations and convenience stores, which DEA has found are
non-traditional retailers of
[[Page 42115]]
these products for legitimate therapeutic demand. Id. at 2-3. The
Show Cause Order alleged that during the period 2001 through 2003,
Respondent "sold over-threshold amounts of pseudoephedrine to an
unregistered individual [who] was subsequently convicted of the federal
offense of unlawful distribution of listed chemicals.'' Id. at 2. The
Show Cause Order also alleged that DEA investigators audited
Respondent's handling of List I chemical products and found that it "was
unable to account for nearly 3,800 bottles of 60-count combination
ephedrine'' products and that there were "numerous discrepancies in the
firm's sales receipts.'' Id.
The Show Cause Order further alleged that "sometime in October-
November 2004, [Respondent] moved its listed chemicals to an unapproved
location in Ashland, Virginia.'' Id. at 3. Relatedly, the Show Cause
Order alleged that Respondent violated Federal law by distributing
products out of the Ashland location. Id. The Show Cause Order also
alleged that Respondent had failed to report a theft of listed chemicals
that had occurred at the Ashland location. Id.
On February 13, 2006, the Show Cause Order was served on Respondent's
counsel by certified mail, return receipt requested. On March 13, 2006,
Respondent, through its counsel, requested a hearing. The matter was
assigned to Administrative Law (ALJ) Judge Mary Ellen Bittner. On
November 2, 2006, however, Respondent submitted a letter withdrawing its
request for a hearing and waiving its right to a hearing. Accordingly,
on November 8, 2006, the ALJ terminated the proceeding.
On or about June 11, 2007, the investigative file was forwarded to me
for final agency action. Based on Respondent's letter waiving his right
to a hearing, I therefore enter this Final Order without a hearing based
on relevant material contained in the investigative file, see 21
CFR 1301.43(e), and make the following findings.
Findings
Respondent is the holder of DEA Certificate of Registration,
003001ATY, which authorizes it to distribute the List I chemicals
pseudoephedrine, ephedrine and phenylpropanolamine, at the registered
location of 10247 Finlandia Lane, Mechanicsville, Virginia. The
expiration date of Respondent's registration was June 30, 2004. On May
24, 2004, however, Respondent submitted a renewal application. I
therefore find that Respondent's registration has remained in effect
pending the issuance of this Final Order. See 5 U.S.C. 558(c).
Both pseudoephedrine and ephedrine currently have therapeutic uses.
See, e.g., Tri-County Bait Distributors, 71 FR 52160, 52161 (2006).\1\
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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\1\ The FDA is, however, currently proposing to
remove combination ephedrine-guaifenesin products from its
over-the-counter (OTC) drug monograph and to declare them not safe and
effective for OTC use. See 70 FR 40232 (2005). While Respondent also
sought authority to handle phenylpropanolamine, there is no evidence
in the file that it actually handled the product.
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Methamphetamine "is a powerful and addictive central nervous system
stimulant.'' T. Young Associates, Inc., 71 FR 60567 (2006) (other
citations omitted). As noted in numerous DEA final orders, the illegal
manufacture and abuse of methamphetamine pose a grave threat to this
country. See id. Methamphetamine abuse has destroyed numerous lives and
families. Id. Moreover, because of the toxic nature of the chemicals
used in making the drug, illicit methamphetamine laboratories cause
serious environmental harms. Id.
Respondent is owned and operated by Mr. Archer Carr Satterfield, Jr.
Respondent distributes dry goods, cakes, pies, and over-the-counter
medicines (including those containing listed chemicals) to gas stations,
convenience stores and small grocery stores in central Virginia. List I
chemicals account for between 15 and 20 percent of Respondent's
business. As of February 2004, the business was located at Mr.
Satterfield's private residence in Mechanicsville, Virginia.
On June 10, 2003, two DEA Diversion Investigators (DIs) went to
Respondent's registered location to conduct a regulatory inspection. As
part of the inspection, the DIs conducted an audit of Respondent's
handling of six combination ephedrine products during the period June 1,
2002, through June 10, 2003. Notwithstanding that the DIs used zero as
the initial inventory for each of the audited products, they found that
Respondent had large shortages in five of the products.
For example, with respect to the sixty-count bottles of Mini Thins,
Respondent was short 144,792 dosage units or 2413 bottles. As for the
six-count packets of Mini Thins, Respondent was short 12,660 dosage
units or 2,110 packets.
With respect to the sixty-count bottles of Biotek Ephedrine,
Respondent was short 80,640 dosage units or 1344 bottles. As for the
six-count packets of Biotek Ephedrine, Respondent was short 8,856 dosage
units or 1476 packets. Because zero was used as the starting inventory
for each of the products (and thus any product actually on hand on the
beginning date would not be counted), the actual shortages were likely
greater than those calculated by the DIs.
During the audit, the DIs also found that a substantial number of
Respondent's sale invoices were incomplete. Some of the invoices lacked
the purchaser's address information including its street and city.
Others lacked information regarding the quantity and product size.
During this inspection, Mr. Satterfield told the DIs that he was
suspicious of the activities of one of his customer's, Fasil Mitha, the
owner of Trio's Market/California Imports. Mr. Satterfield further
related that Mitha had told him that he "sells to customers off the
shelf.'' Upon reviewing Respondent's sales invoices, the DIs determined
that Respondent has sold nearly 47,000 dosage units of combination
ephedrine products to Mitha between November 20, 2002, and June 4, 2003.
This would amount to approximately 782 sixty-count bottles during a
six-and-a-half month period.\2\
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\2\ According to the investigative file, Mitha
subsequently pled guilty to violating 21
U.S.C. Sec. 841(c)(2), which makes it a criminal offense to
knowingly "possess[ ] or distribute[ ] a listed chemical knowing, or
having reasonable cause to believe, that the listed chemical will be
used to manufacture a controlled substance except as authorized by''
the CSA. Mitha was sentenced to 135 months in prison.
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During the audit period, Respondent also sold large quantities to a
store identified as Market 14, in Richmond, Virginia. More specifically,
Respondent sold this entity 50,554 dosage units between August 13, 2002,
and May 22, 2003. This would amount to approximately 842 sixty-count
bottles.
Sometime in either October or November 2004, Mr. Satterfield notified
the DEA Richmond office that he had moved his business from his
residence in Mechanicsville, Virginia, to a new location at 11262 Elmont
Road, Ashland, Virginia. Mr. Satterfield requested that DEA visit his
new location and approve his request for modification.
As part of the process, Mr. Satterfield was asked to provide a
complete customer list. Mr. Satterfield submitted a customer list, but
it was missing address and phone number information
[[Page 42116]]
for nine of his customers. He also failed to provide the address,
phone number, social security number and date of birth for one of his
employees.
The DIs instructed Mr. Satterfield that he could not store listed
chemicals at his new location until his request for the modification was
approved. Mr. Satterfield stated that he would keep his List I products
at his Mechanicsville location.
Subsequently, in March 2005, the DIs obtained an incident report from
the Hanover County Sheriff's Department pertaining to a theft that had
occurred at the Ashland property on the night of November 1-2, 2004.
According to the report, at approximately midnight, Mr. Satterfield had
parked his delivery truck at his Ashland property. When Mr. Satterfield
returned to the property the following morning, both the truck and a
trailer that he stored merchandise in had been broken into.
Mr. Satterfield reported that approximately $4,609 in merchandise had
been stolen. Among the stolen items were various OTC drug products
including listed chemical products. Mr. Satterfield expressed to the
responding officer his concern for the consequences were DEA to find out
about the theft because the products were not locked in a secure place.
Mr. Satterfield further told the officer that he would never get a
license if DEA found out about the theft. Mr. Satterfield did not report
the theft to this Agency.
On June 22, 2005, two DIs went to Respondent's Ashland facility.
During the visit, the DIs found that substantial quantities of various
List I chemical products were stored in the building and were on the
delivery truck. Mr. Satterfield told the DIs that the products that were
on the delivery truck were going to be offloaded and stored in the
building that evening.
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;
(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. Sec. 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 renewal or 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 its pending applications for renewal and modification of its
registration will be denied.
Factor One--Maintenance of Effective Controls Against Diversion
Under DEA's regulations, a List I chemical distributor is required to
"provide effective controls and procedures to guard against theft and
diversion of List I chemicals.'' 21
CFR 1309.71(a). The regulations further provide that "[i]n
evaluating the effectiveness of security controls and procedures, the
Administrator shall consider * * * [t]he adequacy of the registrant's or
applicant's systems for monitoring the receipt, distribution, and
disposition of List I chemicals in its operations.'' Id. 1309.71(b)(8).
"[M]aintaining proper records is * * * an essential part of providing
effective controls against diversion.'' John J. Fotinopoulos, 72 FR
24602, 24605 (2007). Here, the investigative file establishes that many
of Respondent's sales invoices were missing necessary information for
monitoring the distribution and disposition of List I products. More
specifically, Respondent's invoices were frequently missing critical
information including the street address and the city that its customers
were located in. Moreover, the invoices also typically lacked
information regarding the size of the List I products.
Beyond that, the accountability audit found substantial shortages in
five of the List I products which Respondent distributed. As found
above, Respondent was short 144,792 dosage units or 2413 bottles of
sixty-count Mini-Thins; it was also short 12,660 dosage units or 2,110
six-count packets of the product. Moreover, Respondent was short 80,640
dosage units or 1344 sixty-count bottles of Biotek Ephedrine; it was
also short 8,856 dosage units or 1476 six-count packets of the product.
Finally, because the DIs assigned a value of zero for the opening
inventory for each product, the actual amount of the shortages may well
have been even larger.
Accordingly, I conclude that Respondent does not maintain effective
controls against diversion and that this finding provides reason alone
to conclude that its continued registration "is inconsistent with the
public interest.'' 21
U.S.C. 823(h).
Factors Two and Four--Respondent's Compliance With Applicable Laws
and Its Experience in the Distribution of Listed Chemicals
The investigative file also establishes that Respondent failed to
comply with Federal law in two other respects. First, Respondent clearly
was distributing listed chemical products out of its Ashland facility
which did not have a registration. Second, Respondent failed to report
the November 2, 2004 theft of listed chemical products as required by 21
U.S.C. 830(b)(1)(C).
Under Federal law, a registration is location specific. See 21
U.S.C. 822(e) ("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).
Under DEA regulations, 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''). As I
recently explained, a request for modification does not authorize a
registrant to engage in listed chemical activities at a new location
until the modification is approved and the new certificate of
registration is issued. See Fotinopoulos, 72 FR at 24606. Cf.
[[Page 42117]]
Orlando Wholesale, L.L.C., 71 FR 71555, 71557 (2006) (applicant's
change of address following pre-registration inspection renders
application moot).
Here, Mr. Satterfield was specifically told that he could not store
listed chemicals at the Ashland facility until his request for
modification was approved. Moreover, Mr. Satterfield told investigators
that he would store Respondent's listed chemicals products at his
Mechanicsville location. Mr. Satterfield nonetheless stored listed
chemicals at the Ashland facility both in the building and in a truck
which he parked there and distributed listed chemicals from this
location. 21
U.S.C. 822(b) & (e). This violated Federal law. Moreover, based
on the date of the theft (which occurred on November 2, 2004), as well
as the DIs' finding that during the June 22, 2005 visit, substantial
quantities of List I products were being kept at the Ashland location,
it appears that Mr. Satterfield repeatedly violated Federal law.
The evidence also establishes that Respondent failed to report to DEA
the theft of listed chemicals that occurred on November 2, 2004. Under 21
U.S.C. 830(b)(1)(C), a registrant must report "any unusual or
excessive loss or disappearance of a listed chemical under the control
of the regulated person.''
According to the responding officer, Mr. Satterfield failed to report
the theft because he was concerned that if the Agency found out, it
would not grant him a registration for his new location. Mr. Satterfield
thus not only violated Federal law, making matters worse, he did so
intentionally.
Finally, the evidence establishes that Respondent sold extraordinary
quantities of products to at least two stores, and that the owner of one
of the stores, Mr. Mitha, subsequently plead guilty to violating 21
U.S.C. 841(c)(2). As found in T. Young Associates, 71 FR at 60572,
and numerous other cases, non-traditional retailers (such as those
supplied by Respondent) sell only small amounts of listed chemical
products to meet legitimate demand. On average, these stores sell only
$12.58 per month of combination ephedrine products to meet legitimate
demand for these products as a bronchodilator. Id.
The evidence establishes that in a six-and-a-half month period,
Respondent sold the equivalent of 782 sixty-count bottles of
combination-ephedrine products to Mr. Mitha. While the record does not
establish the retail price Mr. Mitha sold the products at, in other
cases DEA has found that smaller size bottles ( 48 count ) sold for
approximately $5.99 to 6.99 each. See Wild West Wholesale, 72 FR 4042,
4043 (2007). Respondent's sales to Mr. Mitha's store so exceeded
legitimate demand that it is clear that Respondent's products were
diverted into the illicit manufacture of methamphetamine, a fact
confirmed by Mr. Mitha's guilty plea.\3\ The same is also true of
Respondent's sales to Market 14.
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\3\ Even if Mr. Satterfield lacked either actual or
constructive knowledge that Mr. Mitha was diverting the products, his
state of mind is irrelevant. As I have previously noted, the public
interest standard does not require the Government to "prove that a
Registrant has acted with any particular mens rea. Indeed, 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, or sells them
being totally unaware that the products were being diverted.'' T.
Young, 71 FR at 60572 (footnote omitted) (citing D & S Sales, 71
FR 37607, 37610-12 (2006), and Joy's Ideas, 70 FR 33195, 33198
(2005)).
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Respondent's violations of Federal law and its experience in
distributing listed chemical products thus provide further grounds to
conclude that its continued registration would be "inconsistent with the
public interest.'' 21
U.S.C. 823(h).
Factor Five--Such Other Factors as Are Relevant To and Consistent
With Public Health and Safety
The illicit manufacture and abuse of methamphetamine have had
pernicious effects on families and communities throughout the nation.
Cutting off the supply source of methamphetamine traffickers is of
critical importance in protecting the American people from the
devastation wreaked by this drug.
While listed chemical products containing pseudoephedrine and
ephedrine are currently recognized as having legitimate medical uses,
DEA orders establish 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'').\4\ The risk of diversion is especially great
where, as here, a registrant cannot account for large quantities of the
products it handles.
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\4\ 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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Moreover, the record establishes that Respondent sold extraordinary
quantities of combination ephedrine products to several stores including
one whose owner subsequently pled guilty to distributing a listed
chemical knowing or having reasonable cause to believe that the chemical
would be used to illegally manufacture a controlled substance. See 21
U.S.C. 841(c)(2). Thus, the record supports a finding that
Respondent's products were diverted. This factor thus provides
additional support for the conclusion that Respondent's continued
registration "is inconsistent with the public interest.'' Id. Sec.
823(h).
In sum, as found above under factor one, the evidence supports a
finding that Respondent did not maintain adequate records and an audit
found that it could not account for several hundred thousand dosage
units of combination ephedrine products. Moreover, while Respondent and
its owner have no record of relevant criminal convictions, see 21
U.S.C. 823(h)(3), the evidence nonetheless establishes that
Respondent violated federal law by: (1) Distributing listed chemicals
from a facility which was not registered and likely did so for months,
and, (2) failing to report to DEA the theft of listed chemicals from its
non-approved location. Finally, the evidence supports a finding that a
substantial
[[Page 42118]]
portion of Respondent's products were diverted. Accordingly, I
therefore conclude that Respondent's continued registration "is
inconsistent with the public interest.'' Id. Sec. 823(h).
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, 003001ATY, issued to Archer's Trading Company be, and it
hereby is, revoked. I further order that Archer Trading Company's
pending applications for modification and renewal of its registration
be, and they hereby are, denied. This order is effective August 31,
2007.
Dated: July 20, 2007.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E7-14815 Filed 7-31-07; 8:45 am]
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