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###### Department of Justice

###### Drug Enforcement Administration

On August 11, 2003, the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration (DEA), issued an Order to Show Cause to J & S Distributors (J & S) proposing to deny its application, executed on August 30, 2000, for DEA Certificate of registration as a distributor of List I chemicals. The Order to Show Cause alleged in relevant part that granting the application of J & S would be inconsistent with the public interest as that term is used in 21 U.S.C. 823(h) and 824(a). The Order to Show Cause also notified J & S that should not request for a hearing be filed within 30 days, its hearing right would be deemed waived.

According to the DEA investigative file, the Order to Show Cause was sent by certified mail to J & S Distributors at its proposed registered location in Louisville, Kentucky. The return receipt indicated the Order to Show Cause was received on August 18, 2003, by Jeffrey D. Guernsey, president and owner of J & S. DEA has not received a request for hearing or any other reply from J & S or anyone purporting to represent the company in this matter.

                    Therefore, the Deputy Administrator of DEA, finding that (1) thirty days having passed since receipt of the Order to Show Cause, and (2) no request for hearing having been received, concludes that J & S has waived its hearing right.                     *See*                     Aqui Enterprises, 67 FR 12,576 (2002). After considering relevant material from the investigative file in this matter, the Deputy Administrator now enters her final order without a hearing pursuant to 21 CFR 1309.53(c)      ( print page 62090)                        and (d) and 1316.67 (2004). The Deputy Administrator finds as follows:                

                    List I chemicals are those that may be used in the manufacture of a controlled substance in violation of the Controlled Substances Act. 21 U.S.C. 802(34); 21 CFR 1310.02(a). Pseudoephedrine and ephedrine are List I chemicals commonly used to illegally manufacture methamphetamine, a Schedule II controlled substance. At the time that J & S Distributors submitted its application for DEA registration, phenylpropanolamine, also a List I chemical, was a legitimately manufactured and distributed product used to provide relief of the symptoms resulting from irritation of the sinus, nasal and upper respiratory tract tissues, and is also used in the illicit manufacture of methamphetamine and amphetamine. As noted in previous DEA final orders, Methamphetamine is an extremely potent central nervous system stimulant, and its abuse is a persistent and growing problem in the United States.                     *See e.g.,*                     Direct Wholesale, 69 FR 11,654 (2004); Yemen Wholesale tobacco and Candy Supply, Inc., 67 FR 9997 (2002); Denver Wholesale, 67 FR 99,986 (2002).                

The Deputy Administrator's review of the investigative file reveals that on August 30, 2000, J & S submitted an application for DEA registration as a distributor of the List I chemicals epheedrine, pseudoephedrine and phenylpropanolamine. The application was submitted on behalf of J & S by Jeffrey Guernsey. There is no information before the Deputy Administrator that J & S had sought to modify its pending application with respect to any of the listed chemical products it proposes to distribute. Upon receipt of the application, the DEA Louisville District Office initiated a pre-registration investigation of J & S in September of 2000.

According to the investigative file, during DEA's initial pre-registration inspection of J & S, the firm had no office or warehouse to conduct its business, and therefore, DEA was unable to immediately accomplish an inspection. However, DEA investigators conducted a second on-site pre-registration inspection of J & S on April 2, 2001, when the firm subsequently secured office and storage space in the vicinity of Louisville.

DEA's investigation revealed that J & S is a sole proprietorship operated by Jeffrey Guernsey, along with this father David Guernsey. The company is a wholesale distributor of key chains, pens, ceramics, lighters and commemorative items. Mr. Guernsey provided DEA with a product list of predominantly novelty items. A few ephedra based non-drug products were on the list. However, no health and beauty aids or non-regulated cough and cold products were included in their product list.

According to the DEA investigative file, Jeffrey Guernsey provided DEA investigators with a “customer master list” indicating he had 270 customers in about twenty states. Mr. Guernsey indicated he would acquire product directly from three manufacturers and further proposed to ship listed chemicals to those on his customer list by parcel service or truck shipment.

DEA investigators contacted several purported customers of J & S, who indicated they did do business with the company. However, none of these customers expressed any intention of purchasing listed chemical products from J & S.

DEA's subsequent review of the company's “customer master file list” revealed those entities were predominantly distributors or wholesalers located in other states. Of the customers listed, several did not have DEA registrations to handle List I chemical products, four had their DEA registrations revoked or suspended, another four were the subject of pending DEA registration actions, and another ten were known to DEA to be already receiving similar listed chemical products form multiple wholesale distributors. None of these wholesalers had any known retail customers other than convenience stores or gas stations.

In support of J & S' pending application for registration, on March 30, 2001, Jeffrey Guernsey sent DEA a “Letter of Compliance” along with a copy of the company's “return policy on List I Chemicals.” The letter was signed by Jeffrey Guernsey as President and David L Guernsey, who listed himself as “Consultant.” The letter outlined the experience of certain members of the Guernsey family in handling listed chemical products. However, Jeffrey Guernsey did not provide information as to any experience he personally had with List I products.

Pursuant to 21 U.S.C. 823(h), the Deputy Administrator may deny an application for Certificate of Registration if she determines that granting the registration would be inconsistent with the public interest as determined under that section. Section 823(h) requires the following factors be considered in determining the public interest:

(1) Maintenance of effective controls against diversion of listed chemicals into other than legitimate channels;

(2) Compliance with applicable Federal, State, and local law;

(3) Any prior conviction record under Federal or State laws relating to controlled substances or to chemicals controlled under Federal or State law;

(4) Any past experience in the manufacture and distribution of chemicals; and

(5) Such other factors as are relevant to and consistent with the public health and safety.

                    As with the public interest analysis for practitioners and pharmacies pursuant to subsection (f) of section 823, these factors are to be considered in the disjunctive; the Deputy Administrator may rely on any one or combination of factors, and may give each factor the weight she deems appropriate in determining whether a registration should be revoked or an application for registration denied.                     *See, e.g.,*                     Energy Outlet, 64 FR 14,269 (1999); Henry J. Schwartz, Jr., M.D., 54 FR 16,422 (1989).                

The Deputy Administrator finds factors four and five relevant to J & S' pending registration application.

                    With respect to factor four, the applicant's past experience in the distribution of chemicals, the Deputy Administrator finds this factor relevant to Jeffrey Guernsey's apparent lack of experience in the handling of List I chemical products. The DEA investigative files shows that J & S is a retailer of general merchandise. While Jeffrey Guernsey provided information to DEA about members of his family who had experience in the handling of listed chemicals, it is unclear what role, if any, these family members would have in J & S' overall operation. Jeffrey Guernsey, J & S' sole proprietor and president, appears to be company's primary operator and he has not demonstrated that he possesses any previous experience handling listed chemical products. In prior DEA decisions, lack of experience in handling List I chemicals was a factor in determinations to deny applications for DEA registration.                     *See,*                     K&Z Enterprises, 69 FR 51,475 (2004); Matthew D. Graham, 67 FR 10,229 (2002); Xtreme Enterprises, Inc., 67 FR 76,195 (2002). Therefore, this factor similarly weights against granting J & S' application.                

                    With respect to factor five, other factors relevant to and consistent with the public safety, the Deputy Administrator finds this factor relevant to J & S' proposal to distribute listed chemical products to customers who have engaged in questionable business practices. As noted above, several of J & S' proposed customers have had DEA registrations revoked or suspended, or are already receiving listed chemical                           ( print page 62091)                        products from multiple wholesale distributors. In addition, many of these purported customers have expressed no desire to purchase listed chemical products from J & S and the wholesalers distribute listed chemical products primarily to convenience stores and gas stations. While there are no specific prohibitions under the Controlled Substance Act regarding the sale of listed chemical products to these entities, DEA has nevertheless found that business establishments such as gas stations and convenience stores constitute sources for the diversion of listed chemical products.                     *See, e.g.,*                     Sinbad Distributing, 67 FR 10,232 (2002); K.V.M. Enterprises, 67 FR 70,968 (2002) (denial of application based in part upon information developed by DEA that the applicant proposed to sell listed chemicals to gas stations, and the fact that these establishments in turn have sold listed chemical products to individuals engaged in the illicit manufacture of methamphetamine); Xtreme Enterprises, Inc., supra.                

                    As noted above, there is no evidence in the investigative file that J & S has sought to modify its pending application with regard to the listed chemical products it seeks to distribute. Among the listed chemical products the firm intends to distribute is phenylpropanolamine. Accordingly, the Deputy Administrator also finds factor five relevant to J & S' request to distribute phenylpropanolamine and the apparent lack of safety associated with the use that product. DEA has previously determined that an applicant's request to distribute phenylpropanolamine constitutes a ground under factor five for denial of an application for registration.                     *See*                     William E. “Bill” Smith d/b/a B&B Wholesale, 69 FR 22,559 (2004); Shani Distributors, 68 FR 62,324 (2003). Based on the foregoing, the Deputy Administrator concludes that granting the pending application of J & S would be inconsistent with the public interest.                

Accordingly, the Deputy Administrator of the Drug Enforcement Administration, pursuant to the authority vested in her by 21 U.S.C. 823 and 28 CFR 0.100(b) and 0.104, hereby orders that the pending application for DEA Certificate of Registration, previously submitted by J & S Distributors be, and it hereby is, denied. This order is effective November 22, 2004.

Dated: October 5, 2004.

Michele M. Leonhart,

Deputy Administrator.

[FR Doc. 04-23706  Filed 10-21-04; 8:45 am]

BILLING CODE 4410-09-M