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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket Nos. 05-13 and 05-45]

Sunny Wholesale, Inc.; Revocation of Registration and Denial of Application

On August 24, 2005, I, the Deputy Administrator of the Drug Enforcement Administration, issued an Order to Show Cause and Immediate Suspension of Registration to Sunny Wholesale, Inc. (Respondent), of Forest Park, Georgia. ALJ Ex. 6. The Order immediately suspended Respondent's DEA Certificate of Registration, No. 004550SLY, which authorizes it to distribute the list I chemicals ephedrine and pseudoephedrine, on the ground that it was selling "excessive amounts" of these chemicals to convenience stores,id.at 6, which are the "primary source" for the diversion of these chemicals into the illicit manufacture of methamphetamine, a schedule II controlled substance.1 Id.at 4.

More specifically, the Show Cause Order alleged that in July 2005, DEA Diversion Investigators (DIs) learned that records seized from various north Georgia convenience stores which were "suspected of illegally distributing listed chemical precursors," had "indicated that [Respondent] had been distributing 60 count bottles of" Max Brand pseudoephedrine, a product which has been repeatedly found at illicit methamphetamine labs "in full case and double case lots."Id.at 6. The Show Cause Order alleged that "law enforcement officials [in Tennessee and Georgia] have observed that an overwhelming proportion of precursors found at illicit methamphetamine sites has involved non-traditional brands sold through convenience stores,"id.at 4, that DEA had retained an expert in retail marketing and statistics who had concluded that sales of pseudoephedrine products at convenience stores in Tennessee and Georgia "averaged between $15.00 and $60.00 per month" per store and that sales of combination ephedrine products were even lower,Id.at 5, and that "[c]onvenience store purchases of case quantities of high count/high strength pseudoephedrine products [are] consistent with diversion of the products into the illicit manufacture of methamphetamine."Id.at 6. The Show Cause Order further alleged that Respondent had continued selling large amounts of pseudoephedrine "to convenience stores and gas stations," notwithstanding that it had been "put on notice of the potential illegal character of its activities with the issuance of the original Order to Show Cause" which was served in October 2004.Id."[B]ecause of the substantial likelihood that [Respondent would] continue to divert listed chemical products," I thus concluded that Respondent's "continued registration, during the pendency of these proceedings, would constitute an immediate danger to the public health and safety."Id.at 7.2

In addition to the above, the Show Cause Order alleged that during a July 2001 inspection, DEA DIs audited Respondent's handling of listed chemical products and determined that it had "various overages and shortages, including an unexplained shortage of approximately 10,000 bottles of Max Brand, and (another non-traditional brand)Heads Up60 count bottles."Id.at 5. The Show Cause Order alleged that while inventorying Respondent's listed chemical products, it had "no traditional brand * * * products but only 'grey market' brands of pseudoephedrine and combination ephedrine products" which are not sold at drug stores or supermarkets, but "are typically only sold in locations where goods of these types are not expected to be sold, such as liquor stores, head shops, gas stations, and other small retail stores."Id.

The Show Cause Order further alleged that following the inspection, DEA DIs conducted verifications of Respondent's customers; the DIs allegedly found that some of the locations were "non-existent," some were residences, and others included such establishments as "liquor stores, gift shops, a Blimpie restaurant * * * and a magazine store."Id.Relatedly, the Order alleged that in seeking a registration for its Decatur location, Respondent provided a list of its proposed list I chemical customers which included "liquor stores, a lotto store, a clothing store, a newsstand, and another distributor."Id.at 3.

The Show Cause Order also alleged that Respondent would not maintain proper security of listed chemical products at its new proposed location because while its owner, Mr. Shaukat Sayani, had represented that his customers would place their orders "in person" and that Respondent would deliver the products by van, the DIs had previously determined that Respondent did not conduct business in this "manner at [its] Forest Park" location.Id.The Show Cause Order further alleged that Respondent "intended to co-mingle listed chemical products withnon-regulated products on the warehouse floor," that it "had no procedure in place to detect theft or loss at the warehouse," that its "proposed method of sales recordkeeping * * * was inadequate to comply with 21 CFR 1310.06," and that it had no means of "compar[ing] sales between its two * * * locations in order to determine if excessive or suspicious transactions were being encountered."Id.Relatedly, the Show Cause Order alleged that warehouse security at the Forest Park location was inadequate.Id.at 5.

On September 13, 2005, Respondent requested a hearing on the allegations of the Order to Show Cause and Immediate Suspension and moved to consolidate the two proceedings. ALJ Ex. 7. While the hearing on the original Show Cause Order had been scheduled to begin on September 20, 2005, Respondent's counsel sought a continuance to obtain additional time to prepare. Accordingly, the ALJ ordered that the original hearing be cancelled. On December 14, 2005, the ALJ conducted a pre-hearing conference and set the hearing for March 21, 2006. ALJ Decision (ALJ) at 2-3.

Thereafter, on February 27, 2006, Respondent's counsel filed an emergency motion for a continuance. The ALJ granted the motion and subsequently rescheduled the hearing to begin on August 15, 2006.Id.at 3.

A hearing was held on August 15 through 18, 2006, at which both parties called witnesses to testify and submitted documentary evidence. At the hearing, Respondent also submitted a motion for summary judgment.Id.(citing RX 26). Following the hearing, both parties submitted briefs containing their proposed findings of fact, conclusions of law, and argument.

On May 4, 2007, the ALJ ordered the parties to file a joint status report regarding Respondent's Forest Park registration. On June 11, 2007, the parties filed the report; the report stated that "it is the position of the agency and Respondent that [it] currently has a pending application for renewal of its currently suspended registration." Joint Status Report at 2.

On August 17, 2007, the ALJ issued her recommended decision. In her decision, the ALJ concluded that Respondent did not maintain effective controls against diversion because it did not "verify the legitimacy of its customers," sold "suspiciously high quantities of iodine products to some customers" even though its owner "was repeatedly made aware of iodine's role as a methamphetamine precursor," had "inadequate inventory procedures [and] poor recordkeeping," and failed "to report suspicious transactions."Id.at 29-30.

The ALJ also concluded that Respondent was not in compliance with federal law because it "could not account for large quantities of missing bottles of product," and "did not keep adequate records" of its sales which "hindered [its] ability to ascertain whether a customer had purchased an amount above the regulated threshold."Id.at 31. The ALJ further found that "Respondent has distributed large, case quantities of pseudoephedrine and ephedrine products," as well as "large amounts of 2% iodine," and that "even [its] witness concurred that some of [its] sales were in excess of what would be expected."Id.at 32-33. Finally, the ALJ noted that "[m]any of the 'businesses' to which Respondent sold list I chemical products operated within the * * * non-traditional market for such products," that sales to the non-traditional market create an "unacceptable risk of diversion," and that "[s]ome of [Respondent's customers] did not even appear to be tangentially related to the legitimate sale of pseudoephedrine and ephedrine products."Id.at 34.

The ALJ did note that Respondent had improved its security and had "conduct[ed] some investigations into some of its customers' business identities."Id.at 34. The ALJ concluded, however, that Respondent's "cooperation is dwarfed by the significant risk of diversion posed [by its] continued sales of listed chemical products to [non-traditional] customers without adequate sales records or customer verification," and that it "has not provided sufficient evidence * * * that its future conduct would change to the degree necessary to eliminate the threat to the public interest."Id.at 35.

The ALJ further rejected Respondent's arguments that the Government was denying it equal protection of the laws under the Due Process Clause of the Fifth Amendment. More specifically, Respondent argued that it was being held " 'to a different standard than [the Government's] published rules dictate,' "id.(quoting Resp. Br. at 16), that the Agency had not "put Respondent on notice as to what specific action would be a violation [of its] rules and regulations,"id.(quoting Resp. Br. at 17), and that "the agency [was] 'exercising uncontrolled discretion.' "Id.(quoting Resp. Br. at 20).

Finally, the ALJ rejected Respondent's contention that it was entitled to judgment as a matter of law because its sales did not exceed the 1,000 gram monthly threshold (which triggers various reporting and recordkeeping) requirements.Id.at 37. Citing several DEA decisions, the ALJ explained that "Respondent need not exceed the Government's threshold of allowed sales in order to [be deemed to have] act[ed] in a manner inconsistent with the public interest."Id.(citations omitted).3

While the ALJ did not make an express finding that Respondent's continued registration is inconsistent with the public interest, such a finding is implicit in her recommended sanction that Respondent's registration at its Forest Park location should be revoked and its pending application for a registration at its Decatur location should be denied. ALJ at 38. Thereafter, both parties filed exceptions to the ALJ's decision.

The Government's exception noted that while it concurred with the ALJ's recommendation, it was "not apparent whether the ALJ actually made a finding that Respondent's continued registration would not be in the public interest." Gov. Exceptions at 1. The Government thus requested that I "make a finding that Respondent's continued registration and pending application for registration are not in the public interest as that term is used" in the applicable provisions of the Controlled Substances Act.Id.

The Government also took exception to three of the ALJ's factual findings (FOFs 52, 57, 58), pertaining to the testimony of the Government's expert on the expected sale range of listed chemical products at convenience stores and other non-traditional retailers of these products.Id.at 2. More specifically, the Government took exception to the ALJ's findings that Respondent's expert had credibly testified that the Government's expert had made several "flawed assumptions" including "that everybody sells everything in" the product category, and that as a result, "the average convenience store might sell $173.25 of list I chemical products per month," and that "this number [is] more credible than the $82 value" given by the Government's expert.4 ALJ at 23-24; Gov. Exceptions at 2.

Because "Respondent sold in excess of both experts' figures," the Government declined to "opine" as towhose expert's sales figures were "exactly correct" or whether "there is a more precise figure somewhere between their numbers." Gov. Exceptions at 2-3. The Government nonetheless urged that I not adopt the ALJ's finding because Respondent's expert's "analysis of this case was not in detail, but quite limited," and the expert "did not perform his own independent analysis of the data, but only compared end data from two different parts of [the Government expert's] report."Id.at 3.

In its exceptions, Respondent also noted that the ALJ had not made a finding as to whether its continued registration would be in the public interest and argued that "no such ruling would be appropriate in this matter." Resp. Exceptions at 2. More specifically, Respondent contends that it has "complied with every request that was given to it by the DEA, repeatedly requested of DEA what they wanted it to do and was willing to do anything the DEA wanted."Id.at 3. It further contends that the Show Cause Orders were based on Respondent's exceeding sales levels, but that the Government's evidence on the expected sales was "not credible," and that therefore, the Government has not carried its burden of showing that its registration would be inconsistent with the public interest.Id.at 4.

Respondent also takes exception to the ALJ's finding that it has "inadequate inventory procedures."Id.at 4 (citing ALJ at 30). More specifically, Respondent contends that "there is no requirement under any of the DEA rules to have an inventory system, and [that it] is once again being asked to comply with something that is not in the DEA rules."Id.at 5. Respondent thus contends that it is "being held to [a] previously unspecified and unpublished * * * guideline[ ]," and that in doing so, the Agency is violating its constitutional rights to due process and equal protection.Id.at 5. Finally, Respondent contends that the ALJ "ignore[d] the substantial remedial actions that [it] had taken to correct problems of which the DEA had notified it."Id.

Thereafter, the record was forwarded to me for final agency action. Having considered the record as a whole, as well as the exceptions of both parties, I adopt the ALJ findings of fact except as expressly noted herein. I further conclude that the Government has made out aprima faciecase that Respondent's registration would be inconsistent with the public interest and that Respondent has failed to present sufficient evidence to establish that it will maintain effective controls against diversion in the future. I also reject Respondent's constitutional claims and its motion for judgment as a matter of law. I therefore also adopt the ALJ's recommended sanction that Respondent's Forest Park registration be revoked and its applications for renewal of the latter registration and for a registration at its Decatur location be denied. I make the following findings.

Findings

Respondent is a corporation which engages in the wholesale distribution of assorted products to gas stations, convenience stores, dollar stores, beauty stores, and other establishments. Tr. 701. Respondent is owned by Mr. Sunny Sayani,id., and operates two warehouses which are located in Forest Park and Decatur, Georgia.Id.at 702. According to the record, Respondent operates "a cash and carry" business in which its customers come to the warehouse to purchase the products they need. RX 25a, Tr. 731.5

Respondent currently holds DEA Certificate of Registration, # 004550SLY, which authorizes it to distribute the list I chemicals ephedrine and pseudoephedrine out of its Forest Park warehouse. Tr. 245; GX 1. While Respondent's registration expired on February 28, 2005, it filed a renewal application and paid the requisite fee at some point in January 2005. See Joint Status Report at 1-2. Accordingly, Respondent has a registration, albeit one that has been suspended, at its Forest Park location.

Methamphetamine and the Market for List I Chemicals

Both pseudoephedrine and ephedrine have therapeutic uses and are lawfully marketed as non-prescription (OTC) drug products under the Federal Food, Drug and Cosmetic Act. GX 15, at 3. Pseudoephedrine is approved for marketing as a decongestant; ephedrine (in combination with guaifenesin) is approved for marketing as a bronchodilator.6 Id.at 4. Both pseudoephedrine and ephedrine are, however, regulated as list I chemicals under the Controlled Substances Act because they are precursor chemicals that are easily extracted from OTC products and used in the illicit manufacture of methamphetamine, a schedule II controlled substance.See21 U.S.C. 802(34); 21 CFR 1308.12(d); GX 15, at 8 (noting that "the production of methamphetamine from ephedrine or pseudoephedrine can be accomplished via a simple one step reaction and can be accomplished with little or no chemistry expertise").

Methamphetamine is a highly addictive and abused central-nervous system stimulant. GX 15, at 9. Methamphetamine abuse has destroyed numerous lives and families and ravaged communities.Id.;see also Rick's Picks, L.L.C., 72 FR 18275, 18276 (2007). Moreover, because of the toxic nature of the chemicals used to make the drug, its illicit manufacture causes serious environmental harms.Id.; GX 14, at 10.

A DEA Special Agent from the Atlanta Field Division testified regarding the rapid growth of illicit manufacturing of methamphetamine during his tenure in Atlanta. Tr. 29. According to the S/A's testimony, over "a short period of time" the number of meth. lab seizures by DEA and local law enforcement had "multiplied by ten times."Id.Other evidence showed that between 1999 and 2004, the number of seizures in the State of Georgia had increased from 34 to 229.7 SeeGXs 9 & 35.

The Special Agent, who had debriefed over 200 individuals involved in the illicit manufacture of methamphetamine, Tr. 39, also testified that convenience stores, gas stations, and other small retailers were the primary source of the ephedrine and pseudoephedrine which was used by "mom-and-pop" meth. labs.Id.at 56 & 59. The Agent further testified that meth. cooks use individuals known as "runners" who would travel to different stores and purchase small amounts each day to avoid detection.Id.at 62. Moreover, runners generally avoided larger retailers such as chain stores because these establishments have "too much security" and "too much video surveillance,"id.at 56, and have "been very militant on * * * limit[ing] sales" of the drugs.Id.at 102;see also id.at 100.

The S/A also testified that in some instances, meth. cooks recruited multiple persons to go to smaller stores and buy the maximum amount of product the store would sell them.Id.at 63. Moreover, in some instances, either the owner or an employee of a smallerstore would sell a case quantity of a listed chemical product to a person affiliated with a lab.Id.

The Government also established that the overwhelming majority of commerce in non-prescription drug products occurs in drug stores, supermarkets, large discount merchandisers and electronic shopping/mail order houses. GX 25. According to the declaration of Jonathan Robbin,8 who has testified in numerous DEA and federal court proceedings as an expert witness on the market for list I chemical products containing pseudoephedrine and ephedrine, "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."Id.at 4;see alsoGX 24, at 3.9 According to Mr. Robbin, these retailers "constitute the traditional marketplace where [nonprescription drugs for coughs, cold, nasal congestion, and asthma] are purchased by ordinary consumers." GX 25, at 4.

Mr. Robbin has further concluded that sales of non-prescription drugs at convenience stores "account for only 2.2% of the overall sales of all convenience stores that handle the line."Id.Moreover, only 4.87% of convenience store shoppers purchase a non-prescription drug product, GX 24, at 5; and only 4.59% of these shoppers purchase a pseudoephedrine product.10 Id.at 4. Mr. Robbin thus concluded that .21% of convenience store shoppers purchased a pseudoephedrine product.Id.at 5. In another document, Mr. Robbin explained that by extrapolating data from the 1997 U.S. Economic Census data and information obtained from surveys of the National Association of Convenience Stores, he had estimated that during 2005, "[t]he expected average monthly convenience store sales of nonprescription drug products containing pseudoephedrine (hcl) in Georgia were * * * $82." GX 26 at 2.11

Respondent called as an expert witness, Dr. Danny N. Bellenger. Dr. Bellenger holds a PhD in Business Administration and is a Professor and Marketing Research Fellow at the Robinson College of Business at Georgia State University. RX 31, at 2. Dr. Bellenger previously served as chairman of the Department of Marketing at Robinson, and was the Dean of the College of Business at Auburn University.Id.

Dr. Bellenger disputed Mr. Robbin's figures for the expected monthly sales range of pseudoephedrine at convenience stores. Dr. Bellenger testified that he did not agree with the conclusions of Mr. Robbin's reports and that reports did not "agree with each other." Tr. 521. More specifically, Dr. Bellenger noted that one of Mr. Robbin's reports stated that "two in 1,000 * * * convenience store shoppers would be expected to buy Sudafed," but in another report, Mr. Robbin had stated "that there's 120,000 purchasers or customers [who] come into a convenience store."Id.at 523;see alsoGX 25, at 11 (stating that "[t]he average annual number of shoppers in a convenience store (excluding gasoline purchases) is about 120,000").12

Dr. Bellenger explained that if two out of a 1,000 customers purchased pseudoephedrine and a convenience store has 120,000 customers, at least 240 of these persons would buy the product over the course of a year or "twenty per month for an average convenience store." Tr. 523. Dr. Bellenger testified that multiplying this number "times the average retail price of * * * Sudafed" gives an "estimate of about $170 * * * based on the numbers that are in the reports."Id.

Dr. Bellenger subsequently testified that he determined the average price of Sudafed by "looking at the wholesale prices and assuming a markup," and that he "also looked in Kroger to see what it cost, but [the price] would vary a lot * * * by store."Id.at 662-63. However, Dr. Bellenger did not "recall the actual figure" he used for the retail price.Id.at 663. Nor did he explain what source he used for the wholesale price figure, or what price he used.

Dr. Bellenger also testified that he confirmed his estimate by multiplying the percentage of convenience store shoppers who purchase pseudoephedrine (.0027) times the average annual merchandise sales of convenience stores ($770,000). Dividing this figure by twelve results in a monthly sales figure of $173.25, which is "a similar number" to the sales figure obtained in the first method.Id.at 524.13

Dr. Bellenger further testified that Mr. Robbin's methodology was based on several assumptions which he contended "are not consistent with reality."Id.at 527. More specifically, he contended that one of Mr. Robbin's assumptions was that "all retailers [including] convenience stores carry a full line of all" non-prescription medicinal products that are reported in the Economic Census's merchandise line, and that this is "not consistent with the common practice" because "a convenience store * * * carries a much narrower line of most products."Id.at 526;see also id.at 583, 664. According to Dr. Bellenger, "when the conveniences stores sell less than a full line and the supermarkets and drugstores sell the full line, * * * it distorts the numbers," by "caus[ing] the estimate for Sudafed for the convenience store to be lower than it actually should be."Id.at 664.14

While the ALJ credited Dr. Bellenger's testimony that the monthly expected sales figure of pseudoephedrine products at convenience stores was $173.25,seeALJ at 24, I decline to adopt this finding. While Dr. Bellenger's testimony that approximately 240persons would purchase pseudoephedrine at a convenience store over the course of a year calls into question the validity of the Government's figure, he did not establish the source of the wholesale price information (and the price) that he relied upon or the amount of markup he used. As for his testimony regarding pricing at Kroger, he did not testify as to what that price was, what size package it was, and stated that the price would vary a lot by store. Finally, while Dr. Bellenger "confirmed" his estimate by multiplying the percentage of convenience store shoppers who purchase pseudoephedrine by the average store's sales volume, this methodology seems to require a major assumption in its own right--that the average amount spent by a customer in purchasing pseudoephedrine is the same as the average purchase of those convenience store customers who buy other products.

Accordingly, I conclude that neither the Government's nor Respondent's evidence reliably establishes the monthly expected sales range.15 For purposes of this case, I assume without deciding that Dr. Bellenger's figures are accurate.

Dr. Bellenger also testified regarding several other matters. With respect to the size of a retailer's purchases, Dr. Bellenger testified that buying a case quantity may be a legitimate business decision "to invest in more inventory so as to lower [its labor] cost of taking inventory and processing order forms." Tr. 549. According to Dr. Bellenger:

Id.at 549-50.

Amplifying this testimony, Dr. Bellenger added that to purchase a case quantity (144 bottles) is "one of two things. It's a conscious business decision where a store owner has decided it's more efficient to order in large quantities, put it in the stockroom, and make fewer orders, and have less labor involved."Id.at 570. Dr. Bellenger than allowed that "maybe there's some nefarious practice involved here," but that if this was so, "you would see repeat purchases of large quantities."16 Id.at 570-71.

The ALJ also credited Dr. Bellenger's testimony that in reviewing the various exhibits, he noted that while "some of [Respondent's customers] were buying by case lot," he did not find a pattern of the customers "buying [ten] 144s." Tr. 571 (cited at ALJ at 25). Respondent's own evidence shows, however, that there were multiple instances in which Respondent sold case quantities that suggest that the sales were for an illicit purpose.SeeRX 12.

For example, during the year 2004, Respondent sold cases (144 bottles) of Max Brand Pseudo to the Coastal Food Mart of Rockmart, Georgia, on eight occasions: January 21, February 2, March 4, April 19, June 3, July 14, August 2, and September 5.17 Id.at 52, 82, 86, 91, 93, 97, 99. On cross-examination, Dr. Bellenger acknowledged that the store was "probably * * * buying in excess of what would be expected," that "a case over a six-month period is rational," but this store's purchases "would raise [his] suspicions." Tr. 619-20. Moreover, when asked whether this store's retail sales would be "many standard distributions beyond" the $175 figure he calculated for average monthly sales, Dr. Bellenger answered: "Right."Id.at 620. Dr. Bellenger also acknowledged that it would not be logical for a store to "order additional inventory on a regular basis unless they were selling it."Id.at 642.

On re-direct, Dr. Bellenger opined that "it would be highly unlikely in the normal course of business" for an entity like Sunny Wholesale to detect these transactions.Id.at 646. According to Dr. Bellenger, "you've got to be looking real, real, real close" to find these transactions "given the scope of [Respondent's] business," and the fact that the product category was "less than two percent of the total business and these instances would account for a fraction of that."Id.at 647.

The Coastal Food Mart was not, however, the only store to which Respondent repeatedly sold large quantities of pseudoephedrine. During the same year, it sold a case quantity to Chitra Inc.'s Quick Stop of Rome, Georgia, on eight separate dates: January 4, April 8, June 14, July 5, August 2, August 20, September 14, and October 11.SeeRX 12, at 80, 91, 94, 95, 97, 98, 100, & 101. It sold a case to the Phillips 66 Mart of Hapeville on eight occasions: January 5, February 5, March 22, April 1, May 5, June 3, August 17, and September 12.See id.at 80, 84, 88, 89, 92, 93, 98 & 99.

It sold a case to the R & S Grocery of Columbus on nine dates: January 21, February 2, March 2, April 1, May 5, June 21, July 7, August 30, and September 29.See id.at 82, 86, 89, 92, 95, 96, 98, & 100. It sold a case to the Stop In of Bremen on nine occasions: January 5, February 3, March 2, April 1, May 5, June 1, July 27, August 20, and September 14.See id.at 52, 80, 83, 86, 89, 92, 93, 98, 100.

Moreover, the record shows that there were instances in which Respondent sold to two customers who used the same address. For example, Respondent sold case quantities to the P & K Mini Mart, with an address of 461 Columbia Drive, Carrollton, on January 6, February 10, March 4, April 8, and May 5.See id.at 53, 81, 84, 86, 89. Yet it also sold a case to a customer it listed as the "Quick Stop/Tushar/BP" with the same 461 Columbia Drive, Carrollton address, on February 2, March 4, April 8,18 May 5, July 22, and August 1.See id.at 54, 83, 86, 91, 96, 97. Moreover, Respondent sold a case to the DJ Food Mart, with an address of 15582 HWY 27, Trion, on January 6, February 10, March 4, April 8, May 5, and June 15.See id.at 54, 81, 85, 87, 90, 94. It also sold a case to a customer it listed as "BJ's Food Market # 1" with the address of 15582 HWY 27 North, Trion, on February 10, March 4, April 8, May 5, June 4, July 27, July 22, August 18, and September 5.See id.at 54, 84, 87, 90, 93, 96, 98, 99.

Relatedly, Dr. Bellenger testified that "unusual orders become very challenging if there's a relatively small number of * * * those orders * * * given the large numbers of people [a business is] dealing with."Id.at 556. Dr. Bellenger acknowledged, however, that "you could create a computer program which would create an exceptions report."Id.at 648. Dr. Bellenger nonetheless maintained that it would be difficult to track thesepurchases and that finding a high volume purchase "in the normal course of business would be an accident."Id.at 647.

I reject Dr. Bellenger's testimony regarding the difficulty of detecting excessive purchases. As noted below, during an earlier meeting with DEA investigators, Mr. Sayani stated that "a typical sale" of listed] chemicals "was two to three boxes," with each "box contain[ing] twelve bottles of 60-count tablets."Id.at 331. Notably, during this meeting, the DI specifically told Mr. Sayani that an order of "ten boxes [or 120 bottles] would be suspicious," and that if a customer "requested cases quantities" or 144 bottles, "he was to notify DEA."Id.at 336.

Moreover, Respondent's records show that many of these customers were not trying to hide the size of their purchases by purchasing smaller quantities on different dates. Rather, they were openly ordering case quantities,seeRX 12, at 79-101; and as found above, several of these customers did so with disturbing frequency. Finally, even crediting Dr. Bellenger's testimony that in some instances, a convenience store owner could make a legitimate business decision to purchase a case quantity, it does not require that much effort to call up a customer's account history to determine how frequently the customer was purchasing the products.

Respondent's History as a Registrant

In September 1999, Respondent applied for a DEA registration to handle list I chemicals at its Forest Park warehouse. Tr. 703. Prior to being granted the registration, DEA DIs conducted a pre-registration inspection.Id.;see also id.at 323. During the inspection, a DI provided Mr. Sayani with a copy of the DEAChemical Handler's Manualand a document which listed the thresholds for pseudoephedrine and ephedrine (which trigger additional reporting and recordkeeping obligations).Id.at 726-27. Moreover, Mr. Sayani told the DI that "he would deliver [the listed chemical products] to his customers."Id.at 323.19 Shortly after the inspection, Respondent obtained a registration for this location.

On January 31, 2001, Respondent applied for a registration to handle pseudoephedrine, ephedrine, and phenylpropanolamine, at its Decatur warehouse. GX 2. Accordingly, on March 31, 2001, DEA DIs went to Respondent's Decatur facility to conduct a pre-registration inspection. Tr. 246. During the inspection, the DIs met with Mr. Sayani and provided him with another copy of theChemical Handler's Manual, as well as notices stating that drug products containing phenylpropanolamine were being used by drug traffickers to manufacture amphetamine, GX 5, and combination ephedrine and pseudoephedrine were being used to by traffickers to manufacture amphetamine and methamphetamine. GX 6, Tr. 249. The DIs also provided Mr. Sayani with notices pertaining to recordkeeping and reporting of theft and losses of listed chemical products. Tr. 249.

The DI had previously requested that Mr. Sayani provide her with lists of his suppliers, the products he intended to carry, and his proposed customers.Id. 246-47. On the list of suppliers and products, Mr. Sayani indicated that he intended to sell products distributed by Compare Generics of Hauppauge, New York, including Max Brand and Heads Up, two brands of products which "are notoriously popular [with] methamphetamine traffickers."20 GX 34, at 11; GX 27.

During the inspection, the DIs reviewed theChemical Handler's Manualwith Mr. Sayani, placing special emphasis on its provisions pertinent to record keeping, security, the need to know his customers, and requiring proof of identity from his customers. Tr. 321. The DIs also discussed with Mr. Sayani the listed chemical thresholds and the requirement to report suspicious orders.Id. Mr. Sayani again represented that the listed chemical products "would be delivered just like they were at his Forest Park location."Id. at 323. The DI observed, however, that Respondent did not "deliver most of the time" as "[t]he majority of the time the customers were coming" to the warehouse.Id. at 324.21

Based on Mr. Sayani's list of proposed customers, one of the DIs checked to see if DEA's computer system held information regarding the customers.Id. at 255. The DI also visited several of the customers' addresses to verify whether there was a business at the location.Id.

Moreover, the DIs' supervisor decided that before sending the report on the Decatur application to DEA Headquarters, the DIs needed to inspect Respondent's practices at its Forest Park warehouse because the location had "never been audited."Id. at 370. Accordingly, on June 30, 2001, several DIs went to the Forest Park warehouse and conducted an inspection.Id. at 255.

Upon their arrival, the DIs met with Mr. Sayani and asked him to provide them with an inventory and a list of the listed chemical products Respondent distributed.Id. at 256. One of the DIs also asked him for a list of his customers and suppliers and provided him with another copy of theChemical Handler's Manualand several DEA notices.Id. During the inspection, the DIs observed that Respondent's list I products were co-mingled with other products in the warehouse and were not stored in a secure area.22

The DIs then proceeded to conduct an audit of Respondent's handling of list I products for the period January 1, 2001, through the close of business on June 30, 2001. GX 31. The DIs selected eleven non-traditional products to audit; with the assistance of Mr. Sayani, they counted the actual number on hand of each of the selected products. Tr. 264 & 275; GX 30.23 Because Mr. Sayani did not have a previous inventory of the products,24 id. at 260, the DIs assigned an opening value of zero for each of the products.Id. at 377; GX 31. Assigning an opening value of zero for a product should result in an overage if, in fact, there was any of the product on hand on the beginning date of the audit and the distributor is keeping (and provides) complete records of its purchases and distributions.25 Tr. 269 & 377.

To complete the audit, the DIs requested that Mr. Sayani provide them with his purchase invoices and sales invoices.Id. at 266. The sales invoices did not, however, clearly indicate the package size (e.g., whether it was a six count packet or 60 count bottle).Id. at267. The DI therefore contacted Mr. Sayani and requested additional information.Id. at 266-67. While Mr. Sayani then provided his sales tracking reports, even these were sometimes lacking the necessary information.Id. at 267.

The audit found that there were shortages with respect to six of the eleven products.26 SeeGX 31. Most significantly, Respondent was short 7640 sixty-count bottles of Heads Up and 3656 sixty-count bottles of Max Brand.Id. Moreover, Respondent was short 284 sixty-count bottles of Mini 2-Way Action.Id. Respondent was also short 180 six-count packets of Max Brand, 154 six-count packets of Mini 2-Way Action, and 262 packets of Max Brand Pseudo (24-count).Id.

Regarding the audit, Mr. Sayani testified that upon being served with the Show Cause Order, which had alleged that he was short approximately 10,000 bottles of Max Brand and Heads Up, he checked his July 2001 inventory and had 2069 bottles on hand and did not "know where this 10,000 figure came from." Tr. 715. Mr. Sayani further testified that because 10,000 bottles is a large amount, he "would know where [it] is going."Id. at 716.

The ALJ did not make "precise findings" on the amount of the shortages. ALJ Dec. 30 at n.6. I do.

Notably, Mr. Sayani's testimony that he had 2069 bottles on hand according to his July 2001 inventory is consistent with the total amount of product that he and the DIs physically counted.27 Moreover, the DIs found that the largest shortage was in the Heads Up 60-count bottles, yet none of this product was on hand when the physical count was on hand.SeeGX 31. The audit of this product was thus based entirely on Respondent's records of its purchases and distributions; if the amount was incorrect, Respondent could have produced his records to show that.

Moreover, for each of the audited products, the amount of the shortages (11,296 60-count bottles of Max Brand and Heads Up) was determined based on the discrepancy between the amount of these products which Respondent obtained from his suppliers during the audit period and the sum of the amount it had on hand on June 30 and the amount its sales records showed it had distributed during the audit period. Mr. Sayani's assertion aside, he offered no credible evidence that gives me reason to reject the audit's finding. Accordingly, I adopt as findings, the audit results as listed in GX 31.

As found above, during the visit, the DIs also discussed with Mr. Sayani the size of a normal monthly sale to a single store of non-traditional products.Id. at 330. Mr. Sayani told the DIs that "[a] typical sale was two to three boxes," with each "box contain[ing] twelve bottles of 60-count tablets."Id. at 331. As found above, however, Respondent frequently sold listed chemical products in far larger quantities and did so notwithstanding that the DIs had informed him that sales of case quantities were suspicious and should be reported to DEA.SeeRX 12; Tr. 336.

Following the inspection, several DIs were assigned to conduct customer verifications.28 ALJ at 15-17. The verifications serve several purposes including determining whether the customer actually exists, the nature of its business and whether it is legitimate, and whether the customer has a business relationship with the distributor. Tr. 139, 145, 187, 202, 355-56. As the ALJ found, the verifications produced "mixed results." ALJ at 15.

One DI, who was assigned twelve verifications, found that several of the businesses were convenience stores, gas stations, and a liquor store. Tr. 142-45. Moreover, upon visiting the addresses of three of the customers, two of which were listed as businesses (Pamela's Unique Clothing and Reliance Wholesale Supply), and one which was listed as an individual (M.S.), the DI found that they were residences and that there were no signs of businesses. Tr. 142 & 144. The DI further found that the R.S. Corporation was a Blimpie restaurant,id. at 142, and that Artistic Sales was a gift shop which did not sell list I chemicals.Id. at 143.

Another DI testified that when she and her partner went looking for Ashley's Boutique, they could neither find the store nor the address that Mr. Sayani had given for it.Id. at 202-03, 233. The DIs further found that the Atlanta Cleaners Plus "was closed down."Id. at 203. While the DIs found that the Matierra Mexicana #3 was a supermarket, the store did not purchase items from Respondent.Id. at 203-04. Moreover, one of the establishments was a liquor and check cashing store.Id. at 204.

Another customer (BDI Inc.) was a Shell gas station whose manager stated that while he had purchased products from Respondent nine months earlier, he no longer did so.Id. at 205. Moreover, the manager told the DIs that Respondent "did not deliver" and that "he had to drive to [Respondent's] facility to pick up his products."Id. Finally, the DIs determined that another customer (Golden Dealers) "was a house that was located in a cul-de-sac" and there was no store on the premises.Id. at 206.

Following the customer verifications, one of the DIs and her supervisor met with Mr. Sayani and his attorney Henry D. Frantz, Esq., to discuss their concerns that some of Respondent's customers were not legitimate.Id. at 254. More specifically, the DI told Mr. Sayani that the DI had "found numerous suspect customers that normally would not be selling these type of products."Id. at 372. The DI also expressed her concern that some of Respondent's customers were engaged in wholesale distribution out of their homes and were therefore required to be registered under 21 U.S.C. SS 823(h), but were not.Id. at 259.

Upon being informed by the DIs that "some of the customers were suspicious," Mr. Sayani stated that he had "provided * * * a list of the customers he thought * * * would purchase from him, whether it was list I chemicals or other products that he handled."Id. at 254. At the meeting, the DIs also provided Mr. Sayani and his attorney with a list of 147 customers who they deemed suspicious and instructed him to investigate them.Id. at 687.

Several weeks thereafter, Respondent's attorney wrote a letter to the DIs reporting that 119 of the customers owned either a convenience store or grocery. RX 8, at 1. Respondent's attorney further reported that 14 of the customers had "never purchased a list I" product and that three of them "have a DEA license."Id. As for the remaining suspicious customers, the letter stated that Respondent could not contact eight of the customers and that three of them were jobbers who had purchased small amounts.Id.

Respondent's attorney further wrote that it "had tightened up * * * his business with regard to checking out the customer on all sales pertaining to list I chemicals."Id. More specifically, the letter stated Respondent "currently asksfor a tax identification number, business license[,] as well as a DEA permit if the customer does not have a store."Id. at 2.29

At the hearing, Mr. Sayani testified that he did not go to a new customer's store to verify whether it was legitimate "because at the time of opening the account, we get enough proof from them that they're legitimate * * * or that they're who they say" they are. Tr. 768. Mr. Sayani acknowledged, however, that anyone who applied for a state or local tax identification number would be issued one.Id. at 769.

At the hearing, Mr. Sayani further testified that upon being served with the Show Cause Order, which referred to Max Brand and Heads Up as non-traditional products, he stopped selling the products.Id. at 714. As found above, the first Show Cause Order was dated October 20, 2004, and served on Respondent no later than November 19, 2004, when his counsel requested a hearing.

Contrary to Mr. Sayani's testimony, Respondent's "Sales Tracking Report" indicates that it repeatedly sold Max Brand after the first Show Cause Order was served and frequently did so in large quantities. Moreover, there is evidence that it made multiple large sales to several stores.

For example, on November 30, 2004, it sold $504 of Max Brand 2-Way to the Lucky Star of Brookfield, Georgia. RX 12, at 67. This was followed by two December 12, 2004 sales, each totaling $1509.84, to the Dixie Stop of Twion and the Modern Kwik Shop of Summerville,id.at 101, and a December 19, 2004 sale of $504 to Jay Swaminarayan, Inc., of Tifton, Georgia.Id. at 74. On February 13, 2005, it sold an additional $861.12 of the products to both the Dixie Stop and the Modern Kwik Shop.30 Id. at 104.

On both November 29, 2004, and January 3, 2005, it sold $1006.56 of the products to ABJ Ashburn, Inc., of Ashburn.Id. at 106 & 101. Respondent made further sales of the products to this store on January 27, February 17, and February 25, when it sold $430.56 worth on each date, and on both March 20 and April 2, when it sold $861.12 of the products to this store.Id. at 101-2, 105-6.

Moreover, on January 8, 2005, it sold $861.12 of Max Brand pseudoephedrine to Priya Nidhi, Inc., of Calhoun, Georgia.Id. at 53. Notably, it has previously sold this establishment $1006.56 on October 15, 2004.Id. at 52.

On February 5, 2005, it made two separate sales of the products (one totaling $504, the other totaling $430.56) to the West Gray BP of Gray, Georgia,id. at 78 & 112; on February 18, 2005, it sold $504 of the product to the Razk, Inc., Marathon of Douglasville.Id. at 64. And on February 20, 2005, it made two separate sales (one worth $504, and one worth $430.56 of the products) to Krishna Corp. of Huntsville, Alabama.Id. at 72 & 107.

On January 13, February 6, March 1, and April 1, 2005, it sold $430.56 worth of the products to the Texaco 10 Opelika of Phenix City, Alabama; on January 13, it also sold an additional $576 of the products to this store.Id. at 102, 104-06, 113. Moreover, on both February 20 and April 2, it sold $861.12 of the products to USA Trading Inc., of Pheonex (sic) City, Alabama.Id. at 102 & 104. It also sold $861.12 of the products to Thakurs Fuel, Inc., of Pinehurst, Georgia, on each of these dates: February 25, March 20, and April 8, 2005.Id. at 103, 105 & 109.

The evidence further shows numerous other instances in which Respondent sold large quantities of Max Brand as late as April 2005.Id. at 110-12. More specifically, on April 3, 2005, Respondent sold $861.12 of the product to each of the following stores: Amin Enterprises, Inc. of Lithonia, the Coastal Food Mart of Rockmart, and the Hill Top Gas Station of Bremen.Id. at 110-11. Moreover, on April 6, it sold $861.12 worth of the products to Wendel's JKF, Inc., Discount Tobacco #2, and Discount Tobacco; all three stores were located in Americus, Georgia.31 Id. at 111. Finally, between April 10 and 16, 2005, it sold $504 worth of the products to eleven establishments (the DM Cotton Patch of Richland, DM Shopper Stop # 334 of Cusetta, OM Traders #271, DM Shopper Stops #s 442 and 451, all of Cataula; KDC Inv. and RDSP, both of Columbus; Hyaat Groceries of Covington; Jai Bhrahmani, Inc., of Buchanan; Gainesville BP of Gainesville; all in Georgia, and Prem, Inc., of Alexander City, Alabama.Id. at 111-12.

The ALJ specifically found--based on Mr. Sayani's testimony--that "Respondent stopped selling Heads Up and Max Brand products because they were identified as 'non-traditional' items by the DEA in the October 2004 Order to Show Cause." ALJ at 21. To the extent this finding implies that Mr. Sayani stopped selling the products shortly after service of the Order, it is inconsistent with the evidence which shows that for approximately five months after the Order was served, Respondent continued to sell these products. Indeed, Mr. Sayani's testimony begs the question of why, if the products were identified in the Show Cause Order, it took five months to stop selling them.

The Government also produced evidence showing that Respondent had distributed iodine tincture to several of its customers.SeeGX 46, at 1, 2, 3, 15, & 16. Moreover, Respondent's evidence shows that it distributed 2,852 (1 oz.) units of this product to a single store between June 8, 2003, and November 6, 2004. RX 16, at 5.

Regarding the allegation that Respondent sold excessive quantities of iodine to convenience stores, the Government offered anecdotal evidence in the form of a DI's testimony that she had visited more than 100 convenience stores in both the course of her official duties and as a consumer and had never been able to find tincture of iodine. Tr. 396. But in contrast to the extensive evidence the Government introduced regarding the expected sales range of pseudoephedrine and ephedrine at convenience stores, it produced no such evidence with respect to iodine tincture.

The Government also introduced into evidence several documents indicating that iodine was used in manufacturing methamphetamine. The first of these was a blue notice, which was reprinted in theChemical Handler's Manual, a copy of which was provided to Mr. Sayani at both the pre-registration inspection and the schedule regulatory inspection. Tr. 307. The notice stated that "iodine became a federally regulated List II chemical on 10/3/96," and that it was being provided to "[m]ake you aware that iodine is being used to clandestinely produce methamphetamine." GX 36a.

The Government also introduced into evidence an "Information Brief" published by the National Drug Intelligence Center entitled:Iodine in Methamphetamine Production. GX 36B; Tr. 308. The document stated that "[s]mall-scale methamphetamine producers who are unable to obtain iodine crystals occasionally produce them from iodine tincture by mixing iodine tincture with hydrogen peroxide." GX 36B, at 2. This document further explained that "[t]his is a time-consuming process that yields a very small amount of iodine crystals in relation to the amount of tincture and hydrogen peroxide use," and also noted that "[i]odine tincture is not regulatedby law."Id. Putting aside the statement that iodine tincture was not regulated, the Government produced no evidence that this document was ever provided to Mr. Sayani.

To counter the Government, Respondent introduced a copy of a Notice of Proposed Rulemaking (NPRM) in which the Agency proposed "the control of chemical mixtures containing greater than 2.2 percent iodine." DEA,Changes in the Regulation of Iodine Crystals and Chemical Mixtures Containing Over 2.2 Percent Iodine, 71 FR 46144, 46145 (Aug. 11, 2006); RX 28. The NPRM expressly stated that "[i]odine two percent tincture and solution U.S.P. are sold at a wide variety of retail outlets and have household application as antiseptic and antimicrobial products. These products will not become regulated under the proposed regulation." 71 FR at 46146. The NPRM further noted that "[w]hile the regulatory controls placed on iodine apply to iodine crystals,they have not pertained to iodine tinctures (which are considered chemical mixtures)."Id. (emphasis added).

In discussing the rationale for the proposed rule, the NPRM further explained that because "seven percent iodine tincture and solutions are the predominant iodine-containing chemical mixtures diverted by traffickers * * * these chemical mixtures should be subject to CSA chemical regulatory controls."Id. at 46149. The NPRM then noted that "[t]wo percent iodine tincture and solutions are also diverted, but DEA has not documented the frequent diversion of these materials at clandestine laboratories. Therefore, DEA does not intend to regulate the two percent iodine tincture or solution at this time."Id.

Respondent also called as a witness a sales representative for the company which supplied him with iodine tincture. The sales rep. testified that he had sold Respondent iodine tincture with an iodine concentration of only one to two percent, Tr. 437-38, and there is no evidence refuting this.SeeRX 11a & b. The sales rep. further testified that it was his understanding that a DEA registration was not required to sell these products, and that while he had been selling the products for eight to nine years, he had "no idea" that iodine tincture was being diverted into the illicit manufacture of methamphetamine. Tr. 439 & 442.

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 [its] registration under section 823 of this title inconsistent with the public interest as determined under such section." 21 U.S.C. 824(a)(4). Moreover, under section 303(h), "[t]he Attorney General shall register an applicant to distribute a list I chemical unless the Attorney General determines that registration of the applicant is inconsistent with the public interest." 21 U.S.C. 823(h). In making the public interest determination, Congress directed that the following factors be considered:

(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. SS 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 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."Hoxiev.DEA, 419 F.3d 477, 482 (6th Cir. 2005);Morallv.DEA, 412 F.3d 165, 173-74 (D.C. Cir. 2005).

While I reject the Government's allegations based on Respondent's sales of iodine tincture, I nonetheless conclude that the evidence under factors one, four, and five make out asprima faciecase that Respondent's continued registration would be "inconsistent with the public interest." 21 U.S.C. 823(h). Moreover, while I acknowledge that Respondent has improved its physical security, it has otherwise failed to demonstrate that it has adequate procedures in place to protect the public from the diversion of listed chemical products. Finally, I find especially disturbing Respondent's conduct in continuing to sell large quantities of listed chemical products even after the service of the initial Show Cause Order.

Finally, I reject Respondent's argument that revoking his registration would violate its constitutional right to due process because it has not sold listed chemicals "in excess of the quantities authorized in the published rules * * * of the DEA." Resp. Prop. Findings at 16. I also find unavailing his claim--based on the ALJ's finding that his inventory procedures were inadequate--that it "is once again being asked to comply with something that is not in the DEA rules," and that this is another violation of its right to due process. Resp. Exceptions at 6. Accordingly, Respondent's Forest Park registration will be revoked; its pending renewal application for its Forest Park facility and its application for a registration at its Decatur facility will also be denied.

Factor One--Maintenance of Effective Controls Against Diversion

Under DEA precedent and regulations, this factor encompasses a variety of considerations and is not limited to whether the registrant maintains adequate physical security of listed chemical products. ALJ at 29-30. A DEA regulation requires the consideration of the adequacy of a registrant's "systems for monitoring the receipt, distribution, and disposition of List I chemicals in its operations." 21 CFR 1309.71(b)(8). Relatedly, a registrant must exercise a high degree of care in monitoring its customer's purchases.Rick's Picks, 72 FR 18275, 18278 (2007),John J. Fotinopoulos, 72 FR 24602, 24605 (2007),D & S Sales, 71 FR 37607, 37610 (2006);Joy's Ideas, 70 FR 33195, 33197-98 (2005).

It is undisputed that Respondent upgraded its physical security by building storage cages, installing video cameras, and assigning a person to distribute the products from the cage. This, however, is only one part of a registrant's obligation to maintain effective controls against diversion.

Here, the record shows that Respondent's procedures for verifying the legitimacy of its listed chemical customers were wholly inadequate to prevent diversion. Moreover, those procedures remain so. While following the meeting in which agency investigators notified Respondent of their concerns regarding the legitimacy of its customers, Respondent's counsel stated that it had "tightened up" its procedures and was requiring that its customers produce a tax identification number and business license, RX 8, at 1-2 2, these documents can be easily obtained by anyone. While Mr. Sayanitestified that this provided "enough proof" that his customers were "legitimate," he did not have an employee personally visit a new customer to determine whether it was a legitimate business with a need for listed chemical products.

Moreover, Respondent generally operated as a "cash and carry" business and only delivered if a customer ordered at least $ 1,000 worth of the items and requested that it do so. Thus, a customer could be obtaining listed chemical products from multiple sources and Respondent would have no knowledge of this.See Holloway Distributing, 72 FR 42118, 42124 (2007) (noting a registrant's obligation to determine whether a customer is receiving listed chemical products from other suppliers).

As the results of the customer verifications demonstrate, Respondent was indifferent to its obligation to determine whether a potential list I customer had a legitimate need for the products. Moreover, Mr. Sayani's testimony indicates that Respondent did not change its practices. Indeed, Respondent's practices are fundamentally inconsistent with its obligations as a registrant, and are a prescription for wide-spread diversion.Id., see also D & S Sales, 71 FR at 37610. Respondent's unwillingness to reform them provides reason alone to conclude that it does not--and will not--maintain effective controls against diversion and that its registration would be "inconsistent with the public interest." 21 U.S.C. 823(h).

Buttressing this finding is the evidence pertaining to the audit. As found above, the audit, which covered a six-month period, found that Respondent had massive shortages of several listed chemical products including 7640 sixty-count bottles of Head Up, 3656 sixty-count bottles of Max Brand, and 284 sixty-count bottles of Mini 2-Way Action.32 SeeGX 31. In total, Respondent was short 11,580 sixty-count bottles of pseudoephedrine and combination ephedrine products, or nearly 695,000 dosage units. This was so notwithstanding that the DIs used 0 as the opening inventory for each of the products (the consequence of this is that if any product had, in fact, been on hand on the opening date of the audit, the audit would result in an undercount of the shortage), and that the time period was of limited duration.

Based on the ALJ's finding that its "lack of an inventory system, alone, provides persuasive weight against Respondent's continued registration," ALJ at 30 n.6, Respondent argues that "there is no requirement under any of the DEA rules to have an inventory system, and [that it] is * * * being asked to comply with something that is not in the DEA rules." Resp. Exceptions at 6. Respondent contends that it is "being held to * * * unpublished DEA guidelines," and that this is "a violation of due process * * * and equal protection guarantees."Id.

Respondent is correct that there is no regulation which explicitly requires that it maintain an inventory system. However, in enacting section 303(h), Congress made plain that in determining the public interest, the Attorney General was to consider the applicant's (and in a revocation/suspension proceeding, the registrant's) "maintenance * * * of

Dated: September 26, 2008. Michele M. Leonhart, Deputy Administrator.
ACTION: Respondent does not argue that the statute is unconstitutional. Nor could it, as the Supreme Court has repeatedly upheld the use of post-deprivation process in emergency situations.See, e.g., Gilbertv.Homar,520 U.S. 924 (1997). Moreover, in this case, the evidence of Respondent's continued large sales of listed chemical products, even after being served with the first Show Cause Order, supports the finding that Respondent's continued registration during the pendency of the proceeding posed an imminent danger to public health and safety. Respondent could also have sought review of the suspension in a "court of competent jurisdiction." 21 U.S.C. 824(d).

Finally, Respondent asserts that "the effect of the DEA's arbitrary actions [in its] case [is] to discriminate against him because he is a legal alien" in violation of his right to equal protection of the laws. Resp. Prop. Findings at 25. Respondent does not, however, contend that the Agency is intentionally discriminating against its owner,see Hernandezv.New York,500 U.S. 352, 359-60 (1991), a requirement for stating a claim under the Equal Protection Clause, and in any event, it has produced no evidence to support its claim. Respondent is just one of many list I chemical distributors whose registrations have been revoked for committing acts inconsistent with the public interest.