36746 Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Notices 

1The Show Cause Order also alleged that 

Respondent had ‘‘assisted * * * a former DEA 

registrant, in maintaining his customer base [of 

convenience stores and gas stations] for 

combination ephedrine products, after he 

surrendered his * * * registration for cause.’’ Show 

Cause Order at 2. The Government, however, 

offered no evidence in support of this allegation. 

page reproduction cost) payable to the 

U.S. Treasury. 

Maureen M. Katz, 

Assistant Section Chief, Environmental 

Enforcement Section, Environment and 

Natural Resources Division. 

[FR Doc. E9–17622 Filed 7–23–09; 8:45 am] 

BILLING CODE 4410–15–P 

DEPARTMENT OF JUSTICE 

Notice of Lodging of Consent Decree 

Under the Clean Air Act 

Notice is hereby given that on June 

16, 2009, a proposed Consent Decree 

(Decree) in the case of United States v. 

American Laboratories, Inc., Civil 

Action No. 8:09–CV–00194, was lodged 

with the United States District Court for 

the District of Nebraska. Under this 

Consent Decree, the Settling Defendant 

is required to pay a total of $440,000 in 

civil penalty for alleged violations of the 

Clean Air Act, and recover and reuse at 

93% of total isopropyl alcohol and 

implement best available control 

technology at its pharmaceutical 

manufacturing plant in Omaha, 

Nebraska. 

For thirty (30) days after the date of 

this publication, the Department of 

Justice will receive comments relating to 

the Consent Decree. Comments should 

be addressed to the Assistant Attorney 

General, Environment and Natural 

Resources Division, and either e-mailed 

to pubcomment-ees.enrd@usdoj.gov or 

mailed to P.O. Box 7611, U.S. 

Department of Justice, Washington, DC 

20044–7611. In either case, the 

comments should refer to United States 

v. American Laboratories, Inc., D.J. Ref. 

No. 90–5–2–1–08313. 

The Decree may be examined at the 

Office of the United States Attorney, 

1620 Dodge Street, Suite 1400, Omaha, 

Nebraska 68102. During the comment 

period, the Consent Decree may be 

examined on the following Department 

of Justice Web site: http:// 

www.usdoj.gov/enrd/ 

Consent_Decrees.html. A copy of the 

Consent Decree may also be obtained by 

mail from the Consent Decree Library, 

P.O. Box 7611, U.S. Department of 

Justice, Washington, DC 20044–7611, or 

by faxing or e-mailing a request to Tonia 

Fleetwood (tonia.fleetwood@usdoj.gov), 

fax no. (202) 514–0097, phone 

confirmation number (202) 514–1547. In 

requesting a copy from the Consent 

Decree Library, please enclose a check 

in the amount of $9.25 (with 

attachments) or $8.00 (without 

attachments) (25 cents per page 

reproduction cost) payable to the United 

States Treasury or, if by e-mail or fax, 

forward a check in that amount to the 

Consent Decree Library at the stated 

address. 

Maureen M. Katz, 

Assistant Section Chief, Environmental 

Enforcement Section, Environment and 

Natural Resources Division. 

[FR Doc. E9–17696 Filed 7–23–09; 8:45 am] 

BILLING CODE 4410–15–P 

DEPARTMENT OF JUSTICE 

Drug Enforcement Administration 

[Docket No. 07–14] 

CBS Wholesale Distributors; Grant of 

Renewal Application and Dismissal of 

Proceeding 

On January 5, 2007, the Deputy 

Assistant Administrator, Office of 

Diversion Control, Drug Enforcement 

Administration, issued an Order to 

Show Cause to CBS Wholesale 

Distributors (Respondent), of 

Hephzibah, Georgia. The Show Cause 

Order proposed the revocation of 

Respondent’s DEA Certificate of 

Registration which authorizes it to 

distribute List I chemicals, and the 

denial of any pending applications to 

renew or modify the registration, on the 

ground that his ‘‘registration is 

inconsistent with the public interest.’’ 

Show Cause Order at 1. 

More specifically, the Show Cause 

Order alleged that Respondent is 

‘‘currently registered to distribute the 

List I chemicals pseudoephedrine and 

ephedrine,’’ id. at 2, and that both 

chemicals are ‘‘commonly used to 

illegally manufacture 

methamphetamine, a schedule II 

controlled substance.’’ Id. at 1. The 

Show Cause Order alleged that ‘‘there 

exists a ‘gray market’ in which certain 

pseudoephedrine and ephedrine 

products are distributed only to 

convenience stores and gas stations, 

from where they have a high incidence 

of diversion,’’ and that these 

establishments ‘‘continue to be the 

primary source for precursors to be 

diverted to illicit methamphetamine 

laboratory operations in many states.’’ 

Id. at 1–2. 

Next, the Show Cause Order alleged 

that DEA had retained ‘‘an expert in the 

field of retail marketing and statistics to 

analyze national sales data for over-thecounter non-prescription drugs.’’ Id. at 

2. The Order alleged that the expert had 

determined that ‘‘the average small store 

could expect to sell monthly only about 

$10.00 to $30.00 worth of 

pseudoephedrine products,’’ and ‘‘that 

the potential for sales of combination 

ephedrine products [was] only about 

one-fourth of those sales levels.’’ Id. 

The Show Cause Order further alleged 

that Respondent’s list I customers ‘‘are 

almost exclusively convenience stores 

and gas stations, which are part of the 

gray market for diversion’’ of these 

products, id. at 2, and that Respondent’s 

‘‘sales of combination ephedrine 

products are inconsistent with the 

known legitimate market and known 

end-user demand for products of this 

type.’’ Id. at 3. The Order further alleged 

that Respondent is ‘‘serving an 

illegitimate market and [that its] 

continued registration would likely lead 

to increased diversion of List I 

chemicals.’’ Id.1

Respondent timely requested a 

hearing on the allegations. The matter 

was placed on the docket of the 

Agency’s Administrative Law Judges 

(ALJ), and an ALJ conducted a hearing 

in Savannah, Georgia on December 4–5, 

2007. At the hearing, both the 

Government and Respondent elicited 

the testimony of witnesses and 

submitted documentary evidence. 

Following the hearing, both parties filed 

briefs containing their proposed 

findings of fact, conclusions of law, and 

arguments. 

On June 10, 2008, the ALJ issued her 

recommended decision (ALJ). In her 

decision, the ALJ found persuasive the 

expert testimony of the Agency’s expert 

witness that the average monthly sale of 

ephedrine products to meet legitimate 

demand is $14.39 and that Respondent’s 

customers were purchasing between five 

to eighty times this amount. ALJ at 33. 

The ALJ thus concluded that 

Respondent’s sales of ephedrine 

products ‘‘to gray market entities are so 

grossly excessive that there is a high 

probability that these products are being 

diverted for illicit purposes, and that 

this fact alone outweighs’’ the evidence 

that Respondent provided adequate 

physical security for the products, 

maintained adequate records, and was 

selling only to customers who had 

obtained the required certification 

under the Combat Methamphetamine 

Epidemic Act. Id. at 34. The ALJ thus 

also concluded that ‘‘Respondent’s 

continued registration would be 

inconsistent with the public interest,’’ 

id. at 36, and recommended that its 

registration be revoked and that any 

pending applications to renew or 


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2 It is also undisputed that in 2003, Respondent 

had moved to its current location. Tr. 204. At that 

time, Respondent sought a modification of its 

registration; a DEA Investigator visited Respondent, 

inspected its storage facility, and found it 

satisfactory. Id. 

modify its registration be denied. Id. at 

37. 

Respondent filed Exceptions to the 

ALJ’s decision. Thereafter, the record 

was forwarded to me for final agency 

action. 

Having considered the record as a 

whole (including Respondent’s 

exceptions), I hereby issue this Decision 

and Final Order. I conclude that the 

Government’s allegation that 

Respondent’s sales levels are so 

excessive as to warrant the conclusion 

that its products are being diverted is 

not proved by substantial evidence. I 

further hold that because the 

Government failed to provide notice to 

Respondent in either the Show Cause 

Order or its pre-hearing statement that 

it intended to put in issue Respondent’s 

sales of glass roses, an item which the 

Government alleges is used as drug 

paraphernalia, Respondent has not been 

provided with a full and fair 

opportunity to litigate the issue. 

Consistent with the requirements of the 

Due Process Clause, I conclude that this 

issue cannot be considered by the 

Agency. Accordingly, the Show Cause 

Order will be dismissed. I make the 

following findings. 

Findings 

Respondent is a wholesale distributor 

of sundry items to convenience stores 

and gas stations which is owned and 

operated by Charles Marshall, Sr., and 

Charles Marshall, Jr. (a/k/a Bubba). Tr. 

199. Respondent is located in 

Hephzibah, Georgia. Id. at 199, 201–03; 

GX 1. Among the items Respondent 

distributes are non-prescription drug 

products containing ephedrine, Tr. 202, 

a schedule listed chemical product 

under the Controlled Substances Act. 21 

U.S.C. 802(45); see also id. section 

802(34). 

Respondent has held a DEA 

Certificate of Registration authorizing it 

to distribute listed chemicals since 

1999. GX 2. While the expiration date of 

Respondent’s registration certificate is 

August 23, 2006, Respondent applied 

for a renewal of its registration prior to 

its expiration date and it is undisputed 

that its registration has remained in 

effecting pending the issuance of this 

Order. GX 2; see also 5 U.S.C. 558(c). 

Ephedrine (in combination with 

guaifenesin) is currently approved 

under the Food, Drug and Cosmetic Act 

for marketing as a bronchodilator for use 

in treating asthma. GX 7, at 3–4. 

Ephedrine is, however, regulated as a 

List I chemical under the Controlled 

Substances Act because it is extractable 

from non-prescription drug products 

and frequently diverted into the illicit 

manufacture of methamphetamine, a 

schedule II controlled substance. 21 

CFR 1308.12(d). 

Methamphetamine ‘‘is a powerful and 

addictive central nervous system 

stimulant.’’ T. Young Associates, Inc., 

71 FR 60567 (2006). As noted in 

numerous Agency decisions, the illegal 

manufacture and abuse of 

methamphetamine pose a grave threat to 

this Nation. See, e.g., id. 

Methamphetamine abuse has destroyed 

numerous lives and families, and has 

had a devastating impact on many 

communities. Id. Moreover, because of 

the toxic nature of the chemicals used 

in making the drug, illicit 

methamphetamine laboratories create 

serious environmental harms. Id. 

The Investigation of Respondent 

On March 5, 2005, a DEA Diversion 

Investigator visited Respondent to 

conduct a regulatory investigation. Tr. 

138–39. The DI met with Charles 

Marshall, Sr., and Bubba Marshall. Id. at 

149–50. During the inspection, the DI 

determined that Respondent was selling 

combination ephedrine products, which 

included a brand that is ‘‘notoriously 

popular [with] methamphetamine 

traffickers.’’ Compare GX 4 with GX 6 at 

12; see also Tr. 24. The DI also obtained 

from Respondent a customer list which 

indicated that it was selling the 

products to gas stations, convenience 

stores, and small markets. Tr. 135 & GX 

5. 

During the inspection, the DI 

concluded that Respondent did not 

provide adequate physical security for 

the products. Tr. 149. More specifically, 

the DI found that the products were 

being left overnight on Respondent’s 

truck and were not being returned to its 

storage warehouse. Id. at 152. Moreover, 

the DI also noted that Respondent was 

storing the products in what she 

described as ‘‘a shed,’’ that the shed had 

a window, and that anyone who knew 

‘‘what they were looking for could see 

the product.’’ Id. at 156. The DI 

‘‘recommended’’ to the Marshalls that 

they cover the windows so that a person 

could not see the product. Id. at 156. 

It is undisputed, however, that the 

Marshalls promptly complied with her 

recommendation regarding the storage 

facility.2 Id. at 156–57, 212. It is also 

undisputed that following the 

inspection, Respondent ceased its 

practice of leaving the products on its 

truck and now returns them to its 

storage facility each night. Id. at 211. 

At the hearing, the DI also testified 

that Respondent’s recordkeeping was 

inadequate because the invoices ‘‘were 

not complete’’ and ‘‘[i]t was very hard 

to determine * * * who they sold [the 

products] to, the addresses where the 

people were located, [and] how much 

they sold.’’ Id. at 153. The Government 

did not, however, offer into evidence 

any of the invoices the DI reviewed at 

the time of the inspection. Moreover, in 

support of its allegation that Respondent 

sells excessive quantities of the 

products, the Government introduced 

into evidence numerous invoices for the 

period January through March 2007. See 

GX 11. Yet the Government does not 

point to any of these invoices as 

evidence that Respondent’s 

recordkeeping practices remain 

deficient. See generally Gov. Proposed 

Findings of Fact and Conclusions of 

Law [hereinafter, Gov. Br.] 

In support of the principal allegation 

of its case in chief, the Government 

called Jonathan Robbin to testify as an 

expert witness and introduced several 

exhibits which were prepared by him. 

See GX 8, 9, 14–18. The thrust of Mr. 

Robbin’s presentation was that the 

overwhelming majority of the commerce 

in non-prescription drugs takes place at 

pharmacies, supermarkets, large 

discount stores, and electronic 

shopping/mail order retailers, and that 

convenience stores and gas stations 

account for only ‘‘a very small 

percentage of the sales of ’’ these 

products. See GX 9, at 4. Mr. Robbin 

further testified that using various data 

sources such as the U.S. Economic 

Census, the National Association of 

Convenience Stores’ 2007 State of the 

Industry Survey, the Mediamark 

Research, Inc. (MRI) survey of 

consumers, and scanner data, he 

determined that the ‘‘expected retail 

sale of ephedrine * * * tablets in a 

convenience store ranges between $0 

and $29, with an average of $14.39 and 

a standard deviation of $5.76.’’ Id. at 8. 

Mr. Robbin further opined that ‘‘[a] 

monthly retail sale of $60 of ephedrine/ 

guaifenesin (Hcl) tablets would be 

expected to occur about once in a 

million times in random sampling.’’ Id. 

Both Mr. Robbin’s declaration and his 

testimony failed to adequately explain 

how he arrived at his estimates. While 

Mr. Robbin apparently used NACS 

Survey’s data which indicates that 

convenience stores sold a total of $ 292 

million of cough and cold remedies 

nationwide, and asserted under oath 

that in calculating the average sales per 

store figure he used the number of stores 

which actually sell non-prescription 


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4For example, the survey asks ‘‘[h]ow may times 

in’’ different time periods a person has used one of 

numerous products. 72 FR at 52694. While the 

survey lists a variety of non-prescription cold, 

sinus, and allergy products, none of the products 

contains ephedrine. Id. Indeed, an ephedrine 

product is not listed anywhere in the survey. 

The survey also asks whether a person has had 

asthma in the last twelve months and whether they 

have used a prescription drug, a non-prescription 

drug, an herbal remedy, or have not treated the 

condition at all. Id. The survey does not, however, 

ask any further questions regarding the use of nonprescription drugs to treat asthma. Id. 

It may well be the case that the use of ephedrine 

products to treat asthma has become so minimal 

that the designers of the MRI Survey consider the 

product to be inconsequential. But even if this is 

so, the Government still has the burden of 

adequately explaining how it determined that 

ephedrine sales constitute eight percent of cough 

and cold sales. 

6 In the pleadings, this item was also referred to 

a love rose. Both terms are therefore used in this 

decision. 

drug products, Tr. 107; in another 

proceeding, it was shown that in 

calculating the same average sales per 

store figure, he had used the total 

number of stores selling any item in the 

Health and Beauty Care (HABC) line 

and not the smaller number of stores 

which sold non-prescription drugs. See 

Novelty Distributors, 73 FR 52689, 

52693 (2008). 

Moreover, when questioned in this 

proceeding as to how he determined 

that sales of combination ephedrine 

products constitute eight percent of the 

sales of cough and cold products, Mr. 

Robbin did not submit the 

documentation to support this figure 

and acknowledged that it was ‘‘a 

missing link in this presentation.’’ Tr. 

104. While Mr. Robbin maintained ‘‘that 

this eight percent is an accurate number 

as reflected by’’ the MRI Survey of 

50,000 consumers, id. at 105, as I also 

found in Novelty, the MRI Survey does 

not ask questions which are sufficient to 

establish the extent to which consumers 

purchase and use ephedrine 

products.4See 73 FR 52693–94. 

Accordingly, as in Novelty, I conclude 

that the Government’s estimated sales 

range to meet legitimate demand for 

combination ephedrine products is not 

supported by substantial evidence. I am 

therefore also compelled to reject Mr. 

Robbin’s testimony regarding the 

statistical probability that Respondent’s 

ephedrine sales were to meet legitimate 

demand and that Respondent sold 

‘‘combination ephedrine * * * products 

in extraordinary excess of normal or 

traditional demand.’’ GX 9 at 13; see 

also Tr. at 90–92. 

To be sure, the estimated retail sales 

of some of Respondent’s ephedrine 

customers were several times the 

average sales for cough and cold 

products as reported by the NACS 

Survey. See GX 10, at 62 (indicating that 

in 2005, the average store sold $2,556, 

and in 2006, the average store sold 

$2,040 of the products). It appears, 

however, that the Survey’s average sales 

figure was computed by dividing the 

total volume of cough and cold product 

sales ($292 million nationwide) by the 

total number of convenience stores, 

regardless of whether the stores sell 

non-prescription drug products. See GX 

10, at 4 (indicating that there are a total 

of 145,119 convenience stores 

(including both stores that sell and do 

not sell gasoline) in the US). The 

average sales of stores actually selling 

the products is thus likely several times 

higher than the figure reported by 

NACS; and in any event, the NACS 

Survey not report any of the information 

necessary (such as the median and 

standard deviation) necessary to 

determine the statistical probability of 

various sales levels. The evidence is 

therefore insufficient to support the 

Government’s allegation that 

Respondent’s ‘‘sales of combination 

ephedrine products are inconsistent 

with the known legitimate market and 

known end-user demand for products of 

this type.’’ Show Cause Order at 3. 

The Evidence Related to Respondent’s 

Sales of Glass Roses 

The Government also questioned the 

DI as to whether Respondent sold ‘‘glass 

roses.’’ 6 Tr. 129. The DI answered 

‘‘yes’’; the Government then asked what 

the items were used for. Id. 

Respondent’s counsel promptly objected 

to the question. Id. More specifically, 

Respondent’s counsel objected on two 

grounds: (1) That the Show Cause Order 

contained no allegation regarding 

Respondent’s sale of this product, and 

(2) that the Government did not disclose 

in its Pre-Hearing Statement that it 

would elicit testimony from the DI 

regarding Respondent’s sales of the item 

and its use as drug paraphernalia. Id. at 

129–31. 

The ALJ overruled the objection. Id. at 

133. The Government again asked the DI 

whether Respondent sold glass roses; 

the DI again answered that it did. Id. 

The Government again asked the DI 

what glass roses were used for, and once 

more, Respondent’s counsel objected. 

Id. Before ruling on the objection, the 

ALJ asked ‘‘what are glass roses?’’ Id. 

The DI answered that the product is ‘‘a 

thin glass container with a rose in it and 

typically what it’s used for is somebody 

could come in and give a rose to a 

friend. But these have been known to be 

used for smoking dope. They take the 

rose out and use them to smoke dope.’’ 

Id. at 133–34. 

The ALJ then stated she was ‘‘going to 

provisionally allow this testimony,’’ but 

that Respondent could ‘‘move to strike 

it after * * * it’s complete.’’ Id. at 134. 

When the Government stated that the 

testimony was complete, Respondent 

moved to strike it. Id. The ALJ deferred 

ruling on the motion, stating that she 

was taking the matter ‘‘under 

advisement.’’ Id. The record, however, 

contains no indication that the ALJ ever 

ruled on the motion. 

On cross-examination, Bubba 

Marshall admitted that his business sold 

glass roses. Id. at 215. The Government 

then asked Mr. Marshall when he found 

out that this item is ‘‘being used for drug 

paraphernalia?’’ Id. at 216. Mr. Marshall 

answered: ‘‘I heard that they’d been 

used as drug paraphernalia, I’ve never 

witnessed it.’’ Id . Under further 

questioning, Mr. Marshall stated that he 

had ‘‘probably’’ known this for ‘‘over a 

year’’ and that he had continued to sell 

this product. Id. at 216–17. Continuing, 

the Government asked Mr. Marshall 

whether he had acted responsibly in 

selling the product. Id. at 217. When Mr. 

Marshall reiterated that he had ‘‘only 

heard they were used as drug 

paraphernalia,’’ the Government asked 

him if he had investigated the product’s 

misuse. Mr. Marshall answered ‘‘no,’’ 

and added ‘‘how should I investigate 

it?’’ Id. 

On re-direct examination, 

Respondent’s counsel asked Mr. 

Marshall whether the glass roses had 

uses other than as drug paraphernalia. 

Id. at 223. Mr. Marshall answered: ‘‘[i]t’s 

a novelty.’’ Id. He also maintained that 

he had never been told by any of his 

customers that the item was used as 

drug paraphernalia and that none of his 

customers had told him that the item 

was being purchased in conjunction 

with ephedrine products. Id. at 224. 

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: 


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7At the hearing, the DI also testified that during 

the March 2005 inspection, Respondent’s storage 

facility did not provide adequate physical security 

and that Respondent was storing products on its 

truck overnight and not returning them to its 

storage unit. While this issue was not raised in 

either the Order to Show Cause or the Government’s 

Pre-Hearing Statement, Respondent did not object 

to the testimony. It is undisputed, however, that 

Respondent promptly complied with the DI’s 

recommendation to improve the security of its 

storage facility and ceased its practice of leaving the 

products on its truck. It is thus undisputed that 

Respondent provides adequate physical security for 

its products. 

(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. section 823(h). 

‘‘These factors are considered in the 

disjunctive.’’ Joy’s Ideas, 70 FR 33195, 

33197 (2005). I may rely on any one or 

a combination of factors, and may give 

each factor the weight I deem 

appropriate in determining whether a 

registration should be revoked or an 

application for a 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). 

The Government, however, bears the 

burden of proof. 21 CFR 1301.44(d). 

Having considered the entire record in 

this matter, I conclude that Government 

has failed to establish that Respondent 

does not maintain effective controls 

against diversion. I also conclude that 

the allegation that Respondent was 

selling drug paraphernalia is not 

properly before the Agency. 

Accordingly, the Government has not 

established that Respondent has 

committed acts which render its 

registration ‘‘inconsistent with the 

public interest.’’ 21 U.S.C. 823(h). The 

Order to Show Cause will therefore be 

dismissed. 

Factor One—Maintenance of Effective 

Controls Against Diversion 

As established in several agency 

decisions, this factor encompasses a 

variety of considerations including, 

inter alia, the adequacy of physical 

security, the adequacy of recordkeeping, 

and whether a registrant is selling 

excessive quantities of the products. See 

Holloway Distributing, Inc., 72 FR 

42118, 42123 (2007); Rick’s Picks, 

L.L.C., 72 FR 18275, 18278 (2007); John 

J. Fotinopoulos, 72 FR 24602, 24605 

(2007). In the Order to Show Cause and 

its Pre-Hearing Statement, the 

Government provided notice that it 

would be litigating two issues that are 

relevant to this factor: (1) The adequacy 

of Respondent’s recordkeeping as 

purportedly shown by the results of an 

audit conducted during the March 2005 

inspection, and (2) that Respondent was 

selling volumes of listed chemicals 

products that are inconsistent with 

legitimate demand.7

At the hearing, however, the 

Government did not introduce into 

evidence the audit results. Moreover, 

while a DI asserted in her testimony that 

Respondent’s recordkeeping was 

inadequate because its invoices were 

incomplete, the Government did not 

offer any of the invoices to show why. 

Moreover, while the Government 

obtained numerous other invoices 

which it used to calculate Respondent’s 

sales levels during the period of January 

through March 2007, here again, it does 

not cite any of these invoices as proof 

of its contention that Respondent’s 

recordkeeping is inadequate. The 

allegation is thus rejected. 

As for the allegation that Respondent 

was selling excessive quantities of 

combination ephedrine products, even 

if only a small percentage of the 

commerce in non-prescription drugs 

occurs at non-traditional retailers, 

neither the testimony nor the written 

declaration of the Government’s expert 

adequately explains how he calculated 

the average monthly sales figure or the 

statistical probability that various sales 

levels were consistent with legitimate 

demand. Moreover, in his testimony, the 

expert acknowledged that there was ‘‘a 

missing link in this presentation’’ with 

respect to his determination that 

combination ephedrine products 

comprise eight percent of the sales of 

cough and cold products. 

In sum, the expert did not provide the 

underlying documentation necessary to 

support this critical component of his 

testimony. Not only did this deny 

Respondent a meaningful opportunity to 

challenge the expert’s conclusion, see 

Resp. Proposed Findings of Fact and 

Conclusions of Law at 23; as I have 

previously held, it also precludes a 

finding that the expert’s conclusions are 

supported by substantial and reliable 

evidence. See 5 U.S.C. 556(d); see also 

Novelty, 73 FR at 52693–94. The 

Government’s allegation that 

Respondent was selling excessive 

quantities of combination ephedrine 

products (as well as its contention that 

Respondent does not maintain effective 

controls against diversion) must 

therefore be rejected. 

Factor Two—Respondent’s Compliance 

With Applicable Laws 

At the hearing, the Government was 

allowed to elicit testimony—over 

Respondent’s objection—of the DI who 

performed the 2005 inspection that 

Respondent sold love roses/glass roses, 

an item which the Government 

maintains is drug paraphernalia because 

it is used to smoke illicit drugs. 

Moreover, during its cross-examination 

of Bubba Marshall, the Government 

obtained his admissions that (1) he had 

heard that this item had been used as 

drug paraphernalia, and (2) that 

Respondent had continued to sell the 

product. Mr. Marshall also maintained, 

however, that the item had other 

legitimate uses, such as as a novelty 

item. 

The Government did not, however, 

allege in the Order to Show Cause that 

Respondent had sold these items and 

had violated either Federal or State law 

in selling them. The Government 

likewise did not disclose in its prehearing statement that Respondent’s 

sales of this product would be at issue 

in this proceeding. Finally, the 

Government failed to disclose at any 

time prior to the hearing that it intended 

to put this conduct in issue. As 

explained below, consistent with 

fundamental principles of Due Process 

and the requirements of the 

Administrative Procedure Act, the 

Government’s failure to provide any 

notice that this allegation would be 

litigated precludes the Agency’s 

consideration of the issue. 

One of the fundamental tenets of Due 

Process is that Agency must provide a 

Respondent with notice of those acts 

which the Agency intends to rely on in 

seeking the revocation of its registration 

so as to provide a full and fair 

opportunity to challenge the factual and 

legal basis for the Agency’s action. See 

NLRB v. I.W.G., Inc., 144 F.3d 685, 688– 

89 (10th Cir. 1998); Pergament United 

Sales, Inc., v. NLRB, 920 F.2d 130, 134 

(2d Cir. 1990). See also 5 U.S.C. 554(b) 

(‘‘Persons entitled to notice of an agency 

hearing shall be timely informed of 

* * * the matters of fact and law 

asserted.’’). 

To be sure, ‘‘ ‘[p]leadings in 

administrative proceedings are not 

judged by the standards applied to an 

indictment at common law.’ ’’ Citizens 

State Bank of Marshfield v. FDIC, 751 

F.2d 209, 213 (8th Cir. 1984) (quoting 

Aloha Airlines v. Civil Aeronautics Bd., 

598 F.2d 250, 262 (D.C. Cir. 1979)). 


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36750 Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Notices 

Thus, the failure of the Government to 

disclose an allegation in the Order to 

Show Cause is not dispositive and an 

issue can be litigated if the Government 

otherwise timely notifies a Respondent 

of its intent to litigate the issue. 

The Agency has recognized, however, 

that ‘‘the parameters of the hearing are 

determined by the prehearing 

statements.’’ Darrell Risner, D.M.D., 61 

FR 728, 730 (1996). Accordingly, in 

Risner, the Agency held that where the 

Government has failed to disclose ‘‘in 

its prehearing statements or indicate at 

any time prior to the hearing’’ that an 

issue will be litigated, the issue cannot 

be the basis for a sanction. 61 FR at 730. 

See also Nicholas A. Sychak, d/b/a 

Medicap Pharmacy, 65 FR 75959, 75961 

(2000) (noting that the function of prehearing statements is to provide Due 

Process through ‘‘adequate * * * 

disclosure of the issues and evidence to 

be submitted in * * * proceedings’’); cf. 

John Stafford Noell, 59 FR 47359, 47361 

(1994) (holding that notice was adequate 

where allegations were not included in 

Order to Show Cause but ‘‘were set forth 

in the Government’s Prehearing 

Statement’’). 

As noted above, the Show Cause 

Order contained no allegations 

pertaining to Respondent’s sales of the 

love roses and this item’s use as drug 

paraphernalia. Moreover, in its 

prehearing statement, the Government 

did not disclose that it intended to elicit 

testimony from the DI to this effect. The 

Government thus failed to provide 

adequate notice to Respondent that its 

sales of this product would be at issue 

in the proceeding and it was error for 

the ALJ to allow the testimony in the 

Government’s case. See Risner, 61 FR at 

730. 

Even if it was properly within the 

scope of cross examination (in light of 

Mr. Marshall’s testimony as to what 

products Respondent sold) for the 

Government to question Mr. Marshall 

and obtain his admission that he sold 

love roses, the fundamental error 

remains. As explained above, the 

function of notice is to provide 

Respondent with a ‘‘full and fair 

opportunity’’ to litigate both the factual 

and legal basis of the Government’s 

theory. While the issue of whether an 

allegation ‘‘has been fully and fairly 

litigated is so peculiarly fact-bound as to 

make every case unique,’’ Pergament, 

920 F.2d at 136, ‘‘the simple 

presentation of evidence important to an 

alternative [allegation] does not satisfy 

the requirement’’ that Respondent be 

afforded with a full and fair opportunity 

to litigate the alternative allegation. 

I.W.G., 144 F.3d at 688 (quoting NLRB 

v. Quality C.A.T.V., Inc., 824 F.2d 542, 

547 (7th Cir. 1987) (other citation 

omitted)). Moreover, it is settled that 

where the Government’s case ‘‘focus[es] 

on another issue and [the] evidence of 

[an] uncharged violation [is] ‘at most 

incidental,’ ’’ the Government has not 

satisfied its constitutional obligation to 

provide a full and fair opportunity to 

litigate the issue and it cannot rely on 

the incidental issue as the basis for 

imposing a sanction. Pergament, 920 

F.2d at 136 (quoting NLRB v. Majestic 

Weaving Co., 355 F.2d 854, 861–62 (2d 

Cir. 1966)). 

Significantly, while the Government 

contends in its post-hearing brief that 

‘‘Respondent has continued to sell drug 

paraphernalia even after he was told 

that the ‘love roses’ he was selling were 

used to smoke drugs,’’ Gov. Br. at 12, 

the Government does not cite either the 

Drug Paraphernalia statute, which sets 

forth both criteria for determining 

whether an item constitutes drug 

paraphernalia and lists numerous items 

which constitute per se drug 

paraphernalia, see 21 U.S.C. 863(d) & 

(e), or Supreme Court precedent 

interpreting the statute and setting forth 

the legal standard for determining 

whether an item, which may have 

multiple uses, constitutes drug 

paraphernalia. See Posters ‘N’ Things, 

Ltd., v. United States, 511 U.S. 513, 521 

n.11 (1994). Notably, in Posters ‘N’ 

Things, the Supreme Court explained 

that the Drug Paraphernalia statute 

creates two categories of drug 

paraphernalia: those that are designed 

by the manufacturer for use with illicit 

drugs, id. at 518, and those items which 

are drug paraphernalia based on the 

item’s ‘‘likely use’’ in the community. 

Id. at 521. 

The Government’s brief offers no 

explanation as to whether it maintains 

that the item constitutes drug 

paraphernalia because it is included on 

the list of items constituting per se 

paraphernalia, whether it believes the 

item was designed by its manufacturer 

for use as paraphernalia, or whether it 

believes the item is paraphernalia 

because its ‘‘likely use’’ in the 

community is to ingest drugs. The 

Government’s failure to set forth its 

legal theory indisputably denied 

Respondent a meaningful opportunity to 

present argument to the contrary. 

It is acknowledged that Respondent 

was able to present some evidence on 

the issue when Mr. Marshall testified on 

re-direct that the item had an alternate 

use as a novelty item and that none of 

his customers had ever told him that the 

item was being used for drug 

paraphernalia. Nonetheless, the 

Government’s failure to raise this issue 

until the hearing itself denied 

Respondent the opportunity to present 

other evidence regarding the various 

factors which are relevant in the 

determination of whether an item 

constitutes drug paraphernalia. See 21 

U.S.C. 863(e) (providing a non-exclusive 

list of eight factors to be considered 

including ‘‘the existence and scope of 

legitimate uses of the item in the 

community,’’ and ‘‘expert testimony 

concerning its use’’). 

Of further significance, the focus of 

the Government’s case was 

Respondent’s alleged excessive sales of 

ephedrine products and not its sales of 

the love roses. Indeed, in its brief, the 

Government does not argue that 

Respondent’s sales of the love roses are 

themselves violations of Federal law 

which are properly considered in 

assessing its compliance with applicable 

laws. See generally Gov. Br. at 10–13; 

see also 21 U.S.C. 823(h)(2). Rather, the 

Government appears to argue that the 

evidence establishes that Respondent’s 

owners are irresponsible. Gov. Br. at 12 

(arguing that Respondent’s sales of the 

love roses are ‘‘a clear sign that [its] 

owners are indifferent to the 

methamphetamine problem in this 

country’’). The issue was ‘‘at most 

incidental’’ to the Government’s case. 

Pergament, 920 F.2d at 136 (other 

citations omitted); see also Majestic 

Weaving, 355 F.2d at 861–62. 

Respondent has therefore been denied a 

full and fair opportunity to litigate the 

issue; to consider the evidence as an 

independent ground to revoke 

Respondent’s registration or impose 

even a lesser sanction would violate the 

Due Process Clause and the 

Administrative Procedure Act. 

In sum, the Government has failed to 

prove by substantial evidence its 

contention that Respondent does not 

maintain effective controls against 

diversion and was selling excessive 

quantities of ephedrine products. And 

because the Government failed to 

provide adequate and timely notice that 

Respondent’s sales of love roses would 

also be at issue, there is no lawful basis 

for concluding that Respondent has 

committed acts which render its 

registration ‘‘inconsistent with the 

public interest.’’ 21 U.S.C. 824(a)(4). 

The Order to Show Cause must 

therefore be dismissed. 

Order 

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 the 

application of CBS Wholesale 

Distributors for renewal of its DEA 

Certificate of Registration be, and it 

hereby is, granted. I further order that 

the Order to Show Cause issued to CBS 


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Federal Register / Vol. 74, No. 141 / Friday, July 24, 2009 / Notices 36751 

Wholesale Distributors be, and it hereby 

is, dismissed. This Order is effective 

immediately. 

Dated: July 16, 2009. 

Michele M. Leonhart, 

Deputy Administrator. 

[FR Doc. E9–17688 Filed 7–23–09; 8:45 am] 

BILLING CODE 4410–09–P 

DEPARTMENT OF JUSTICE 

Drug Enforcement Administration 

[Docket No. 06–77] 

Gregory D. Owens, D.D.S.; Suspension 

of Registration; Grant of Restricted 

Registration 

On August 7, 2007, the Deputy 

Assistant Administrator, Office of 

Diversion Control, issued an Order to 

Show Cause to Gregory D. Owens, 

D.D.S. (Respondent), of Abingdon, 

Virginia. The Show Cause Order 

proposed the revocation of 

Respondent’s DEA Certificate of 

Registration as a practitioner on the 

ground that his continued ‘‘registration 

would be inconsistent with the public 

interest, as that term is defined under 21 

U.S.C. 823(f).’’ Show Cause Order at 1. 

More specifically, the Show Cause 

Order alleged that in 1986, when 

Respondent moved his dental practice 

from Tennessee to Virginia, he had 

failed to obtain a new registration as 

required by 21 U.S.C. 822. Id. The Order 

further alleged that in 1992, Respondent 

did not renew his State ‘‘controlled 

dangerous substances license’’ and that 

he only acquired the proper State and 

Federal registrations in 1996 after a 

Virginia Board of Dentistry (‘‘the 

Board’’) inspection. Id. Relatedly, the 

Order alleged that in 1996 and 1997, 

Respondent had ‘‘continued to prescribe 

controlled substances in violation of 

law,’’ using his ‘‘long-expired DEA 

Tennessee registration to facilitate this 

illegal activity.’’ Id. 

Next, the Show Cause Order alleged 

that in both November 1997 and May 

2000, the Board had placed 

Respondent’s dental license on 

probation and subjected him to certain 

conditions. Id. at 1–2. The Order also 

alleged that in August 2005, the State 

Board had ‘‘issued an Order which 

concluded that [Respondent] had 

continuously demonstrated disregard 

for the Board’s orders,’’ reprimanded 

him, and continued him on probation. 

Id. at 2. 

Finally, the Show Cause Order alleged 

that in October 1999, DEA had issued an 

Order to Show Cause to revoke 

Respondent’s registration, and that on 

August 2, 2002, my predecessor had 

issued a Decision and Final Order 

which granted Respondent a registration 

which was ‘‘subject to restrictions and 

conditions’’ including ‘‘recordkeeping 

requirements.’’ Id. at 1. The Show Cause 

Order further alleged that in November 

2005, Respondent applied for a renewal 

of his registration and that a compliance 

review found ‘‘that in 2004 and 2005, 

[Respondent had] failed to submit the 

required controlled substance 

recordkeeping information to DEA in 

violation of the conditions of [the] 

previously granted registration.’’ Id. at 2. 

Respondent, through his counsel, 

timely requested a hearing. The case 

was assigned to a DEA Administrative 

Law Judge (ALJ), who conducted a 

hearing in Abingdon, Virginia, on June 

27, 2007. At the hearing, both parties 

called witnesses to testify and 

introduced documentary evidence. 

Following the hearing, both parties 

submitted briefs containing proposed 

findings of fact, conclusions of law, and 

argument. 

On March 6, 2009, the ALJ issued her 

recommended decision (also ALJ). 

Therein, the ALJ found that Respondent 

had violated the terms of my 

predecessor’s Final Order by failing to 

file quarterly reports of the controlled 

substances he dispensed between the 

effective date of the Order (Sept. 3, 

2002) and December 31, 2002, the date 

stated as the expiration date on a 

registration which was subsequently 

issued to him several months after the 

expiration date and which was the 

result of a clerical error. ALJ at 37–39. 

However, the ALJ further found that 

Respondent’s failure to file the reports 

after that date should be excused 

because the Government did not clearly 

communicate to him that this 

registration was issued in error and that 

a registration issued to him on 

September 8, 2003 (which expired on 

December 31, 2005) was the ‘‘newly 

renewed registration’’ to which the 

reporting requirement imposed by the 

2002 Order applied. Id. at 39. However, 

she also found that because Respondent 

did not present evidence that he had 

submitted the required drug activity 

logs from August 2002 through 

December 2002, Respondent’s ‘‘lack of 

evidence proving good faith compliance 

weigh[ed] against the Respondent’s 

continued registration.’’ Id. at 40. 

The ALJ also found that Respondent 

had not complied with a second 

requirement of the 2002 Order—that he 

notify DEA within thirty days of any 

action taken against his State ‘‘medical 

license.’’ Id. at 40–41. According to the 

ALJ, Respondent violated this provision 

because he failed to report the 2005 

Board action which continued his 

probation upon finding that he had 

committed additional violations. Id. at 

41. In so holding, the ALJ specifically 

rejected Respondent’s contention that 

because the 2002 Order had used the 

term ‘‘medical license’’ rather than 

‘‘dental license’’ in imposing the 

condition, he had no obligation to report 

the proceeding to DEA. Id. 

While the ALJ found that the 

Government had made out a prima facie 

case to revoke Respondent’s registration, 

she concluded that other factors 

counseled against a revocation. Id. at 47. 

More specifically, she noted that 

Respondent treated ‘‘many patients from 

underserved counties, and a substantial 

portion of his patients have limited 

incomes,’’ that there was no evidence of 

diversion or irresponsible prescribing 

practices on Respondent’s part, that 

Respondent had instituted procedures 

to ensure the accuracy of his dental 

records, and that he had begun filing 

drug activity reports with this Agency 

following a 2006 inspection. Id. at 48. 

The ALJ thus recommended the 

revocation of Respondent’s registration 

but that the revocation be stayed for 

twelve months, and that ‘‘[d]uring 

pendency of the stay, the Respondent 

should be allowed to handle controlled 

substances,’’ subject to certain 

restrictions. Id. 

Neither party filed exceptions to the 

ALJ’s decision. Thereafter, the record 

was forwarded to me for final agency 

action. 

Having considered the record as a 

whole, I hereby issue this Decision and 

Final Order. I adopt the ALJ’s findings 

of fact and conclusions of law except as 

noted below. While I accept 

Respondent’s contention that the March 

13, 2003 registration was the ‘‘newly 

renewed registration’’ for purposes of 

the 2002 Order, I note that Respondent 

did not comply with the Order’s 

requirement pertaining to the 

submission of quarterly reports even 

during period in which there is no 

dispute that he was required to do so. 

I also hold that Respondent violated the 

2002 Order because he failed to report 

the 2005 Board action to DEA. While I 

agree that the record does not support 

an outright revocation of his 

registration, I conclude that 

Respondent’s lengthy history of 

regulatory troubles supports the 

suspension of his registration as well as 

the imposition of conditions on his new 

registration. I make the following 

findings. 

Findings 

Respondent graduated from the 

Medical College of Virginia Dental 


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