FR Doc E8-6378[Federal Register: March 28, 2008 (Volume 73,
Number 61)] [Notices] [Page 16713-16715] From the Federal
Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28mr08-116]
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 05-38]
Memphis Wholesale Company; Declaratory Order Terminating
Exemption From Registration
On July 12, 2005, the Deputy Assistant Administrator, Office
of Diversion Control, Drug Enforcement Administration, issued an
Order to Show Cause to Memphis Wholesale Company (Respondent) of
Memphis, Tennessee. Show Cause Order at 1. The Show Cause Order
proposed the denial of what it referred to as Respondent's "application''
for a registration as a distributor of the list I chemicals
ephedrine, pseudoephedrine, and phenylpropanolamine (PPA), and
to revoke any exemption from registration, on the ground that
its registration "is inconsistent with the public interest.''
Id.
The Show Cause Order specifically alleged that "[o]n July 29,
1997, Memphis Wholesale Company, by its owner, Neal Abodabba,''
applied for a DEA Certificate of Registration, that a control
number was assigned to its application "permitting the firm to
temporarily operate under the regulatory exemption [provided] at
21
CFR 1309.25, pending agency action on the application.'' Id.
at 2. The Show Cause Order alleged that in "April 1999, Memphis
Wholesale Company was incorporated in the State of Tennessee by
Neal Abodabba and Shawkat Abodabba, without notification to DEA
that the form of ownership, and thus the registered person, had
changed.'' Id.
The Show Cause Order next alleged that on August 10, 2000,
DEA investigators conducted an inspection of Respondent. Id. The
Order alleged that during the inspection, Mr. Neal Abodabba told
investigators "that 7.8% of his total sales were for `energy'
products, which included Max Brand and Mini-Thins,'' which are
listed chemical products. Id. The Order also alleged that Mr.
Abodabba also told investigators that his customers included
approximately 200 to 300 convenience stores and gas stations,
which were located in Tennessee, Arkansas, and northern
Mississippi, and that most of these customers purchased listed
chemical products from him. Id.
The Show Cause Order further alleged that "in July 2000,
Memphis Wholesale had begun consolidating its deliveries in the
Nashville area by shipping to [an] unlicensed distributor,
Nashville Wholesale, for further distribution to retailers * * *
in violation of 21 U.S.C.
[[Page 16714]]
841(f)
and 843(a)(9).''
Id. Finally, with respect to the August 2000 inspection, the
Show Cause Order alleged that DEA investigators conducted an
accountability audit for the period February 1, 2000, through
August 10, 2000, and found overages in various products. Id. at
2-3.
The Show Cause Order next alleged that on May 16, 2002, DEA
investigators conducted another inspection of Respondent. Id. at
3. According to the Show Cause Order, during the inspection, "Mr.
Mohammed Issa represented himself as the owner of Memphis
Wholesale,'' and subsequently the investigators were informed by
Mr. Abodabba "that he had `sold his shares' in [the firm] to
Mohammed Issa.'' Id. Relatedly, the Show Cause Order alleged
that Respondent "is now improperly operating as a chemical
distributor under the control of Mr. Issa,'' and that "[n]either
Mr. Abodabba nor Mr. Issa notified DEA of any corporate
ownership changes.'' \1\ Id.
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\1\ The Show Cause Order also raised various
allegations related to the diversion of ephedrine and
pseudoephedrine from non- traditional retailers into the
illegal manufacture of methamphetamine, a schedule II
controlled substance. Show Cause Order at 1-2; see also 21
CFR 1308.12(d).Id.
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Following service of the Show Cause Order, Respondent
requested a hearing on the allegations and the matter was
assigned to Administrative Law Judge (ALJ) Mary Ellen Bittner.
Counsel for both parties agreed, however, that in lieu of a
hearing at which witnesses would be called, they would submit
affidavits, proffers of testimony, and other evidence. ALJ at 4.
Neither party objected to any of the evidence or proffers
submitted. After both parties submitted briefs, the ALJ issued
her recommended decision.
In her decision, the ALJ found that Respondent was not
entitled to operate under the temporary exemption from
registration authorized under 21
CFR 1309.25, because neither Respondent, which was
incorporated in 1998, nor Mr. Issa (the corporation's current
owner), "was the same `person' that applied for registration in
1997.'' ALJ at 21. The ALJ thus reasoned that Respondent was "not
entitled to operate under the exemption granted to the business
that Mr. Abodabba owned in 1997.'' Id. The ALJ further found
that "since 1998, Respondent has been distributing listed
chemical products without being registered to do so, in
violation of 21
U.S.C. 822(a)(1).'' Id.
"In light of these findings,'' the ALJ concluded that "a
further finding would be warranted that there is no viable
application pending.'' Id. She nonetheless concluded that it was
appropriate to make findings under the public interest factors
(see 21 U.S.C. 823(h)) because "the parties have devoted
substantial resources to this case.'' ALJ at 21. Upon analyzing
the factors, the ALJ concluded that Respondent's registration
would be inconsistent with the public interest. ALJ at 24.
Having considered the record as a whole, I hereby issue this
declaratory order. See 5 U.S.C. 554(e). I conclude that the
original exemption from registration obtained by Mr. Abodabba
terminated no later than the date he transferred his ownership
interest in Respondent to Mr. Issa. I further conclude that
while the application which Mr. Abodabba submitted on July 29,
1997, listed "Memphis Wholesale Company'' as the applicant,
because the entity was not then incorporated it did not have
independent legal capacity to seek a registration and the
application is therefore personal to Mr. Abodabba. While the
evidence establishes that Mr. Abodabba has long since sold his
interest in Respondent and is not in business at the proposed
registered location, to the extent this proceeding seeks to
adjudicate his application, the Government has known since 2002
that Mr. Abodabba was no longer at that location and has not
properly served him.\2\ To the extent Respondent (under its new
owner) seeks to adjudicate its entitlement to a registration,
Respondent has never submitted an application. Accordingly,
there is no pending application to act upon. I make the
following findings.
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\2\ See Nashville Wholesale Company, Inc.,
71 FR 52159, 52160 (2006) (noting that Mr. Abodabba was served
at the proposed registered location of Nashville Wholesale
Company).
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Findings
On July 29, 1997, Neal S. Abodabba, submitted an application
for a registration to distribute the list I chemicals,
ephedrine, pseudoephedrine, and phenylpropanolamine. GX 1. On
the application, Mr. Abodabba indicated that Memphis Wholesale
Company was the applicant. Id. However, the business was not
then incorporated and did not file its charter with the
Tennessee Secretary of State until April 14, 1998. GX 36, at 2.
On May 16, 2002, DEA investigators went to Respondent to
conduct an inspection. On that date, Mr. Mohammed Issa told
investigators that he owned Respondent. Gov't Proffer of
Testimony at 6. Moreover, in its proffer, Respondent stated that
"Mr. Issa would testify that he is the majority stockholder of
Memphis Wholesale Company and that he became majority
stockholder on July 16, 2001.'' Respondent's Summary of Position
at 2. Furthermore, on July 17, 2002, Respondent filed its annual
report with the Tennessee Secretary of State which stated that
Mohammed Issa was the corporation's president, Sameer Issa was
its secretary, and Bill Miller was its treasurer.\3\ GX 36, at
10. The report further indicated that its board of directors was
comprised of the same three individuals.\4\ Id.
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\3\ On April 16, 2001, Respondent filed its
annual report which indicated that Neal Abodabba was its
president and Shawkat Abodabba was its Secretary.
\4\ On its annual report which it submitted
on May 10, 2004, Respondent no longer listed Mr. Miller as
either a corporate officer or director. Instead, the report
listed "K. Issa'' as an officer and director. GX 36, at 12.
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Respondent submitted into evidence a compilation and serial
listing of its sales of listed chemical products for the period
January through December 2004. According to a table which is
attached to this document, during 2004, Respondent had sales of
all products totaling $4,134,004.28; its list I chemical
products constituted 7.09 percent of its sales. The document
(which is 143 pages in length) then lists by product, numerous
instances in which Respondent sold ephedrine and pseudoephedrine
products to gas stations and convenience stores. See generally
Memphis Wholesale Company, Inc., Sales by Item Detail, at 1-
143. According to the list, during 2004, Respondent's sales of
these products totaled $225,167.30. See id. at 143.
Discussion
Under 21
U.S.C. 822(a)(1), "[e]very person who * * * distributes any
* * * list I chemical, or who proposes to engage in the * * *
distribution of any * * * list I chemical, shall obtain annually
a registration issued by the Attorney General in accordance with
the rules and regulations promulgated by him.'' \5\ Furthermore,
"[p]ersons registered by the Attorney General * * * to
distribute * * * list I chemicals are authorized to possess
[and] distribute * * * such * * * chemicals * * * to the extent
authorized by their registration and in conformity with the
other provisions of'' Subchapter I of the Controlled Substances
Act. Id. 822(b). DEA regulations further provide that "[n]o
person required to be registered shall engage in any activity
for which registration is required until the application for
registration is approved
[[Page 16715]]
and a Certificate of Registration is issued by the
Administrator to such person.'' 21 CFR 1309.31(a).
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\5\ Ephedrine, pseudoephedrine and
phenylpropanolamine are list I chemicals. See 21 U.S.C.
802(34).
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In 1996, Congress enacted the Comprehensive Methamphetamine
Control Act of 1996, which, for the first time, subjected
distributors of pseudoephedrine, phenylpropanolamine, and
combination ephedrine products to the registration requirements.
See 62 FR 52254 (1997) (final rule). To prevent disruption of
the legitimate commerce in these products, DEA enacted a
temporary exemption from registration for distributors of these
products. See 62 FR at 5915 (interim rule).
Accordingly, with respect to distributors of combination
ephedrine products, the exemption applies to "each person
required'' to be registered, "provided that the person
submit[ted] a proper application for registration on or before
July 12, 1997.'' 21
CFR 1309.25(a). The regulation further provides that "[t]he
exemption will remain in effect for each person who has made
such application until the Administration has approved or denied
that application.'' Id. DEA applied the same rule to
distributors of pseudoephedrine and phenylpropanolamine, the
only difference being that the application had to be submitted "on
or before October 3, 1997.'' Id. 1309.25(b).\6\
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\6\ DEA regulations defined "[t]he term
person [as] includ[ing] any individual, corporation,
government or governmental subdivision or agency, business
trust, partnership, association, or other legal entity.'' 21
CFR 1300.01(b)(34).
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As found above, on July 29, 1997, Mr. Neil S. Abodabba
applied for a registration to distribute ephedrine,
pseudoephedrine, and phenylpropanolamine. GX 1. While Mr.
Abodabba listed Memphis Wholesale Company as the applicant, the
firm did not file its charter of incorporation with the
Tennessee Secretary of State until April 14, 1998. GX 36, at 4;
GX 30. As Memphis Wholesale did not exist as an independent
legal entity until more than eight months later, the application
submitted on July 29, 1997, is personal to Mr. Abodabba.
Moreover, there is no evidence that Memphis Wholesale Company,
Incorporated, has ever submitted an application for a DEA
registration either under its original owner (Mr. Abodabba), or
under its new owner (Mr. Issa). Likewise, there is no evidence
that the application was amended to reflect that Memphis
Wholesale Company, Inc., was the applicant.
While the evidence indicates that Mr. Issa disclosed to
agency investigators during the 2002 inspection that he was
Respondent's owner, the firm did not have authority to
distribute under the temporary exemption because it was not the "person''
who applied for registration in July 1997. See, e.g., 21
CFR 1309.25(a). As the regulation makes plain: [e]ach person
required by [21
U.S.C. 822] to obtain a registration to distribute * * * a
combination ephedrine product is temporarily exempted from the
registration requirement, provided that the person submits a
proper application for registration on or before July 12,
1997.'' Id. (emphasis added).\7\ Moreover, the authority Mr.
Abodabba obtained to distribute (which was limited to
pseudoephedrine and phenylpropanolamine) was not lawfully
transferred to either the corporation or to its new owners)
because the written consent of the Agency was never obtained.
See id. 1309.63 ("No registration or any authority conferred
thereby shall be assigned or otherwise transferred except upon
such conditions as the Administrator may specifically designate
and then only pursuant to his written consent.'').
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\7\ While Respondent relies on Mr.
Abodabba's application, it ignores that under 21 CFR
1309.25(a), this application was not timely submitted with
respect to combination ephedrine products and thus, not even
Mr. Abodabba was not entitled to the exemption. See GX 1
(application dated July 29, 1997).
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Accordingly, I hold that Respondent has been without
authority to distribute list I chemicals since July 16, 2001
(when Mr. Issa became its owner), and that all distributions it
has made since that date (including all those listed in the
compilation of its 2004 sales) have been in violation of federal
law.\8\ See
21 U.S.C. 822(a). I further hold that Respondent does not
have an application pending before the agency.
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\8\ Mr. Abodabba is not a party to this
proceeding, and I conclude that it is not necessary to decide
whether Respondent's activities under his ownership were
lawful. Moreover, to the extent this proceeding was brought to
deny Mr. Abodabba's application, which is the only application
in the record, see GX 1, service has not been properly
effectuated. See Jones v. Flowers, 547 U.S. 220, 230 (2006) ("[T]he
government's knowledge that notice pursuant to the normal
procedure was ineffective triggered an obligation on the
government's part to take additional steps to effect
notice.''); see also id. at 232 (discussing Robinson v.
Hanrahan, 409 U.S. 38, 39-40 (1972) (per curiam) (even though
state law required vehicle owner to register his address with
the state, "we found that the State had not provided
constitutionally sufficient notice, despite having followed
its reasonably calculated scheme, because it knew that [the
owner] could not be reached at his address of record'').
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Order
Pursuant to the authority vested in me under 5 U.S.C. 554(e)
and 28 CFR 0.100(b) & 0.104, I hereby declare that since
July 16, 2001, Memphis Wholesale Company, Incorporated, has not
had authority under 21
CFR 1309.25 to distribute pseudoephedrine, combination
ephedrine, and phenylpropanolamine. This Order is effective
immediately.
Dated: March 17, 2008.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E8-6378 Filed 3-27-08; 8:45 am]
BILLING CODE 4410-09-P
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