Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1918)

Complainant,
v.

SAB Convenience and Gas, Inc. /
Kumar John Beries
d/b/a SAB Convenience and Gas / Citgo,

Respondent.
Docket No. C-15-387
Decision No. CR3591

Date: January 20, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, SAB Convenience and Gas, Inc. / Kumar John Beries, d/b/a
SAB Convenience and Gas / Citgo at 6400 Highway 41, Jasper, Tennessee 37347, and by
filing a copy of the complaint with the Food and Drug Administration’s (FDA) Division
of Dockets Management. The complaint alleges that SAB Convenience and Gas / Citgo
unlawfully sold tobacco products to minors and failed to verify that a purchaser of
tobacco products was 18 years of age or older, thereby violating the Federal Food, Drug,
and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations,
Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140. CTP seeks to impose a $250
civil money penalty against Respondent SAB Convenience and Gas / Citgo.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 19, 2014, CTP served the
complaint on Respondent SAB Convenience and Gas / Citgo by United Parcel Service.
In the complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time in
which to file an answer. CTP warned Respondent that, if it failed to take one of these
actions within 30 days, the Administrative Law Judge could, pursuant to 21 C.F.R.

§ 17.11, issue an initial decision ordering it to pay the full amount of the proposed
penalty.

Respondent SAB Convenience and Gas / Citgo has neither filed an answer within the
time prescribed, nor requested an extension of time within which to file an answer.
Pursuant to 21 C.F.R. § 17.11, I assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

e At approximately 10:15 a.m. on December 30, 2013, at Respondent’s business
establishment, 6400 Highway 41, Jasper, Tennessee 37347, an
FDA-commissioned inspector observed that a person younger than 18 years of age
was able to purchase a package of Grizzly Long Cut Premium Wintergreen
smokeless tobacco. The inspector also documented that staff failed to verify, by
means of photographic identification containing a date of birth, that the purchaser
was 18 years of age or older;

e Ina warning letter dated March 27, 2014, CTP informed Respondent of the
inspector’s December 30, 2013 observations, and that such actions violate federal
law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that
Respondent’s failure to correct its violations could result in a civil money penalty
or other regulatory action;

e At approximately 5:09 p.m. on May 19, 2014, at Respondent’s business
establishment, 6400 Highway 41, Jasper, Tennessee 37347, FDA-commissioned
inspectors observed that a person younger than 18 years of age was able to
purchase a package of L and M Blue Pack cigarettes.

These facts establish Respondent SAB Convenience and Gas / Citgo’s liability under the
Act. The Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A
tobacco product is misbranded if sold or distributed in violation of regulations issued
under section 906(d) of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B);

21 C.F.R. § 1140.1(b). The Secretary of the U.S. Department of Health and Human
Services issued the regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act.

21 U.S.C. § 387a-1; see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19,
2010). The regulations prohibit the sale of tobacco products to any person younger than
18 years of age. 21 C.F.R. § 1140.14(a).
The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no tobacco purchasers are younger than 18
years of age. 21 C.F.R. § 1140.14(b)(1).

A $250 civil money penalty is permissible under 21 C.F.R. § 17.2.

Order

For these reasons, I enter default judgment in the amount of $250 against Respondent
SAB Convenience and Gas, Inc. / Kumar John Beries d/b/a SAB Convenience and Gas /
Citgo. Pursuant to 21 C.F.R. § 17.11(b), this order becomes final and binding upon both
parties after 30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Asia Supermarket, LLC
d/b/a Wallingford Food Land,

Respondent.

Docket No. C-15-514
FDA Docket No. FDA-2014-H-2034

Decision No. CR3590

Date: January 22, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Asia Supermarket, LLC d/b/a Wallingford Food Land, that alleges
facts and legal authority sufficient to justify the imposition of a civil money penalty of
$5,000. Respondent did not answer the Complaint, nor did Respondent request an
extension of time within which to file an answer. Therefore, I enter a default judgment
against Respondent and assess a civil money penalty of $5,000.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent impermissibly sold cigarettes to
minors and failed to verify that cigarette purchasers were 18 years of age or older,
thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et
seq., and its implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt.
1140 (2013). CTP seeks a civil money penalty of $5,000.
On December 3, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1am required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Wallingford Food Land, an establishment that sells tobacco
products and is located at 250 South Colony Road, Wallingford, Connecticut
06492.. Complaint { 3.

e CTP previously initiated a civil money penalty action, CRD Docket Number C-13-
1188, FDA Docket Number FDA-2013-H-0974, against Respondent for three
violations of 21 C.F.R. pt. 1140 within a 24-month period. Specifically,
Respondent violated 21 C.F.R. § 1140.14(a) on August 22, 2012 and February 25,
2013 by selling tobacco products to a minor. Respondent also violated 21 C.F.R.

§ 1140.14(b) on February 25, 2013 by failing to verify the minor’s identification
before the sale. Complaint § 10; August 28, 2013 Complaint ¥ 10.

e The previous civil money penalty action concluded when on October 31, 2013 an
administrative law judge issued an Initial Decision and Default Judgment against
Respondent. This decision, which became final and binding on December 2,
2013, found Respondent liable for the three violations. Complaint § 11;

e During a subsequent inspection of Respondent’s establishment on June 3, 2014, at
approximately 3:16 PM, FDA-commissioned inspectors documented that “a
person younger than 18 years of age was able to purchase a package of Skoal
Long Cut Classic Wintergreen smokeless tobacco . . . [.]” The inspectors also
documented that “the minor’s identification was not verified before the sale... .
Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under

section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of tobacco to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a). The
regulations also require retailers to verify, by means of photo identification containing a
purchaser’s date of birth, that no tobacco purchasers are younger than 18 years of age.

21 C.F.R. § 1140.14(b)(1).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
tobacco to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on August 22,
2012, February 25, 2013 and June 3, 2014. On February 25, 2013 and June 3, 2014,
Respondent also violated the requirement that retailers verify, by means of photo
identification containing a purchaser’s date of birth, that no tobacco purchasers are
younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s
actions constitute violations of law that merit a civil money penalty.

CTP has requested a fine of $5,000, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $5,000 is warranted and
so order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Omar Reyes
d/b/a 58 Delancey Food Market,

Respondent.

Docket No. C-15-428
FDA Docket No. FDA-2014-H-1959

Decision No. CR3589

Date: January 22, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Omar Reyes d/b/a 58 Delancey Food Market, alleging facts and legal
authority sufficient to justify imposing a civil money penalty of $5,000. Respondent did
not timely answer the Complaint, nor did Respondent request an extension of time within
which to file an Answer. Therefore, I enter a default judgment against Respondent and
order that Respondent pay a civil money penalty in the amount of $5,000.

CTP began this case by serving a Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent’s staff unlawfully sold cigarettes
to minors and failed to verify that cigarette purchasers were of sufficient age, thereby
violating the Federal Food, Drug, and Cosmetic Act (Act) and its implementing
regulations, found at 21 C.F.R. pt. 1140. CTP seeks a civil money penalty of $5,000.
On November 25, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days Respondent should pay the penalty, file
an answer, or request an extension of time within which to file an answer. CTP warned
Respondent that if it failed to take one of these actions within 30 days an Administrative
Law Judge could issue an initial decision by default ordering Respondent to pay the full
amount of the proposed penalty. 21 C.F.R. § 17.11.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Therefore, pursuant to 21 C.F.R. § 17.11(a), am required to
issue an initial decision by default if the Complaint is sufficient to justify a penalty.
Accordingly, I must determine whether the allegations in the Complaint establish
violations of the Act.

For purposes of this decision, I assume the facts alleged in the Complaint are true.
21 C.F.R. § 17.11(a). Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns 58 Delancey Food Market, an establishment that sells tobacco
products and is located at 5800 Delancey Street, Philadelphia, Pennsylvania
19143. Complaint § 3.

e CTP previously initiated a civil money penalty action, CRD Docket Number C-14-
836, FDA Docket Number FDA-2014-H-0362, against Respondent for three
violations of 21 C.F.R. pt. 1140 within a 24-month period. Specifically, those
violations included violations on May 30, 2013 and October 20, 2013, when
Respondent sold tobacco products to a minor and failed to verify, by means of
photographic identification, that the tobacco purchaser was 18 years of age or
older. Complaint § 10.

e The previous civil money penalty action concluded when Omar Reyes,
Respondent’s authorized representative, settled the action with CTP on
Respondent’s behalf. On May 6, 2014, Mr. Reyes signed an Acknowledgment
Form in which he “‘admitt[ed] that the violations . . . occurred, waiv[ed]
Respondent’s ability to contest the violations in the future, and stat[ed] that he
understood that the violations may be counted in determining the total number of
violations for purposes of future enforcement actions against Respondent.” The
Administrative Law Judge closed the case on May 22, 2014. Complaint 4 11.

e During a subsequent inspection of Respondent’s establishment conducted on June
8, 2014, at approximately 11:17 AM, FDA-commissioned inspectors documented
that “‘a person younger than 18 years of age was able to purchase a package of
Newport Box cigarettes . . . at approximately 11:17 AM[.] The inspectors also
noted that “the minor’s identification was not verified before the sale... .
Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 U.S.C. § 387c(a)(7)(B); 21 C.F.R § 1140.1(b). The regulations prohibit the sale of
cigarettes or smokeless tobacco to any person younger than 18 years of age. 21 C.F.R.

§ 1140.14(a). The regulations also require retailers to verify, by means of photographic
identification containing the purchaser’s date of birth, that no purchaser of cigarettes or
smokeless tobacco is younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1).

Here, Respondent had five violations of regulations found at 21 C.F.R. pt. 1140 within a
36-month period. Respondent acknowledged that three violations occurred when its
representative settled the previous civil money penalty action. Most recently, on June 8,
2014, Respondent sold cigarettes to a person younger than 18 years of age, in violation of
21 C.F.R. § 1140.14(a). During that same transaction, Respondent failed to verify, by
means of photographic identification containing the bearer’s date of birth, that the
cigarette purchaser was 18 years of age or older, in violation of 21 C.F.R.

§ 1140.14(b)(1). Therefore, Respondent’s actions constitute violations of law that merit a
civil money penalty.

CTP has requested a fine of $5,000, which is a permissible fine for five violations of the
regulations found at 21 C.F.R. pt. 1140. 21 C.F.R. § 17.2. Therefore, I find that a civil
money penalty of $5,000 is warranted and so order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

UISCE BEATHA, Inc.
d/b/a Cavanaugh’s Restaurant,

Respondent.

Docket No. C-15-566
FDA Docket No. FDA-2014-H-2086

Decision No. CR3587

Date: January 23, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, UISCE BEATHA, Inc. d/b/a Cavanaugh’s Restaurant, that alleges
facts and legal authority sufficient to justify the imposition of a $2,000 civil money
penalty. Respondent did not answer the Complaint, nor did Respondent request an
extension of time within which to file an answer. Therefore, I enter a default judgment
against Respondent and assess a $2,000 civil money penalty.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent sold cigarettes to minors, failed to
verify that cigarette purchasers were 18 years of age or older, and used a vending
machine to sell regulated tobacco products in a non-exempt facility, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140 (2013).
CTP seeks a civil money penalty of $2,000.
On December 4, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), I am required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Cavanaugh’s Restaurant, an establishment that sells tobacco
products and is located at 119 South 39th Street, Philadelphia, Pennsylvania
19104. Complaint § 3.

e During an inspection of Respondent’s establishment on June 3, 2013, at
approximately 5:39 PM, an FDA-commissioned inspector observed that “a person
younger than 18 years of age was able to purchase a package of Newport Box
100s cigarettes from a vending machine . . . [.]” The inspector also observed that
“the minor’s identification was not verified before the sale... .” Complaint § 10.

¢ On July 3, 2013, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from June 3, 2013. The letter explained that the
observations constituted violations of regulations found at 21 C.F.R. § 1140.14(a),
(b)(1), and (c), and that the named violations were not necessarily intended to be
an exhaustive list of all violations at the establishment. The Warning Letter went
on to state that if Respondent failed to correct the violations, regulatory action by
the FDA or a civil money penalty action could occur and that Respondent is
responsible for complying with the law. Complaint § 10.

e Although UPS records indicate that an individual named “Pritchett” received the
Warning Letter, CTP did not receive a response to the Warning Letter. Complaint

ql.

e During a subsequent inspection of Respondent’s establishment on February 1,
2014, at approximately 1:11 PM, FDA-commissioned inspectors documented that
“a person younger than 18 years of age was able to purchase a package of

Parliament cigarettes from a vending machine . . . [.]” The inspectors also
documented that “the minor’s identification was not verified before the sale... .
Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).
The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than

18 years of age. 21 C.F.R. § 1140.14(b)(1). Moreover, under 21 C.F.R. § 1140.14(c), a
retailer may sell cigarettes only in a direct, face-to-face exchange without the assistance
of any electronic or mechanical device, such as a vending machine. However, vending
machines containing cigarettes are permitted in facilities where the retailer ensures that
no person younger than 18 years of age is present, or permitted to enter, at any time.

21 C.F.R. § 1140.16(c)(2)(ii).

Taking the above alleged facts as true, on June 3, 2013, and February 1, 2014,
Respondent violated both 21 C.F.R. § 1140.14(a) and 21 C.F.R. § 1140.14(c) by using a
vending machine to sell cigarettes to a minor. On those same dates, Respondent also
violated the requirement that retailers verify, by means of photo identification containing
a purchaser’s date of birth, that no cigarette purchasers are younger than 18 years of age.
21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions constitute violations of law
that merit a civil money penalty.

CTP has requested a fine of $2,000, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. I thus find that a civil money penalty of $2,000 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1869)

Complainant,
v.

Paramount Shops LLC / Anil Gupta
d/b/a Hope Quick Mart / Red-E-Mart,

Respondent.
Docket No. C-15-339
Decision No. CR3586

Date: January 20, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Paramount Shops LLC / Anil Gupta, d/b/a Hope Quick Mart /
Red-E-Mart, at 1409 East 3rd Street, Hope, Arizona 71801, and by filing a copy of the
complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The complaint alleges that Hope Quick Mart / Red-E-Mart unlawfully sold
cigarettes to minors and failed to verify that a cigarette purchasers was 18 years of age or
older, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301
et seq., and its implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R.
pt. 1140. CTP seeks to impose a $500 civil money penalty against Respondent Hope
Quick Mart / Red-E-Mart.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 18, 2014, CTP served the
complaint on Respondent Hope Quick Mart / Red-E-Mart by United Parcel Service. In
the complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time in

which to file an answer. CTP warned Respondent that, if it failed to take one of these
actions within 30 days, the Administrative Law Judge could, pursuant to 21 C.F.R.

§ 17.11, issue an initial decision ordering it to pay the full amount of the proposed
penalty.

Respondent Hope Quick Mart / Red-E-Mart has neither filed an answer within the time
prescribed, nor requested an extension of time within which to file an answer. Pursuant
to 21 C.F.R. § 17.11, l assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

e At approximately 1:06 p.m. on July 31, 2013, at Respondent’s business
establishment, 1409 East 3rd Street, Hope, Arizona 71801, an FDA-commissioned
inspector observed that a person younger than 18 years of age was able to
purchase a package of Newport Box cigarettes;

e Ina warning letter dated September 12, 2013, CTP informed Respondent of the
inspector’s July 31, 2013 observations, and that such actions violate federal law,
21 C.F.R. § 1140.14(a) . The letter further warned that Respondent’s failure to
correct its violations could result in a civil money penalty or other regulatory
action;

e At approximately 11:44 a.m. on May 12, 2014, at Respondent’s business
establishment, 1409 East 3rd Street, Hope, Arizona 71801, FDA-commissioned
inspectors observed that a person younger than 18 years of age was able to
purchase a package of Marlboro Gold Pack 100s cigarettes. The inspectors also
documented that staff failed to verify, by means of photographic identification
containing a date of birth, that the purchaser was 18 years of age or older.

These facts establish Respondent Hope Quick Mart / Red-E-Mart’s liability under the
Act. The Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A
tobacco product is misbranded if sold or distributed in violation of regulations issued
under section 906(d) of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B);

21 C.F.R. § 1140.1(b). The Secretary of the U.S. Department of Health and Human
Services issued the regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act.

21 U.S.C. § 387a-1; see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19,
2010). The regulations prohibit the sale of cigarettes to any person younger than 18 years
of age. 21 C.F.R. § 1140.14(a). The regulations also require retailers to verify, by means
of photo identification containing a purchaser’s date of birth, that no cigarette purchasers
are younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1).

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, | enter default judgment in the amount of $500 against Respondent
Paramount Shops LLC / Anil Gupta, d/b/a Hope Quick Mart / Red-E-Mart. Pursuant to
21 C.F.R. § 17.11(b), this order becomes final and binding upon both parties after 30
days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant,
v.

Check Masters, Inc.
d/b/a Discount Tobacco Masters,

Respondent.

Docket No. C-15-353
FDA Docket No. FDA-2014-H-1886

Decision No. CR3582

Date: January 20, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Check Masters, Inc. d/b/a Discount Tobacco Masters that alleges
facts and legal authority sufficient to justify the imposition of a civil money penalty of
$500. Respondent did not answer the Complaint, nor did Respondent request an
extension of time within which to file an answer. Therefore, I enter a default judgment
against Respondent and assess a civil money penalty of $500.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent unlawfully utilized a self-service
display of cigarette and smokeless tobacco in a non-exempt facility, impermissibly sold
cigarettes to a minor, and failed to verify, by means of photo identification containing a
date of birth, that a tobacco purchaser was 18 years of age or older, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140 (2013).
CTP seeks a civil money penalty of $500.

On November 18, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), Iam required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Discount Tobacco Masters, an establishment that sells tobacco
products and is located at 12 East Broadway Street, Shelbyville, Indiana 46176.
Complaint 3.

e During an inspection of Respondent’s establishment on August 22, 2012, at an
unspecified time, an FDA-commissioned inspector observed “customer-accessible
shelves containing numerous brands of cigarettes, cigarette tobacco and smokeless
tobacco on the main sales floor.” The inspector also observed that the
establishment allows minors to enter during regular business hours.

Complaint § 10.

¢ On November 29, 2012, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from August 22, 2012. The letter explained that the
observations constituted a violation of regulations found at 21 C.F.R. § 1140.16(c)
and that the named violation was not necessarily intended to be an exhaustive list
of all violations at the establishment. The Warning Letter went on to state that if
Respondent failed to correct the violation, regulatory action by the FDA or a civil
money penalty action could occur and that Respondent is responsible for
complying with the law. Complaint 10.

e Talmage Thompson responded to the Warning Letter via a December 10, 2012
letter. Mr. Thompson stated that “Respondent posted age restricted signage,
moved all smokeless tobacco and ‘partial cigarettes product’ behind the counter,
and reviewed FDA's tobacco website with all employees.” Complaint § 11.

e During a subsequent inspection of Respondent’s establishment on May 21, 2014,
at approximately 4:40 PM, FDA-commissioned inspectors documented that “‘a
person younger than 18 years of age was able to purchase a package of Marlboro
cigarettes ... [.]” The inspector also observed that “the minor’s identification
was not verified before the sale... .” Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).
The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than

18 years of age. 21 C.F.R. § 1140.14(b)(1). The regulations also require a retailer to sell
cigarettes and smokeless tobacco only in a direct, face-to-face exchange. 21 C.F.R.

§ 1140.16(c).

Taking the above alleged facts as true, on August 22, 2012 Respondent utilized a
self-service display in violation of 21 C.F.R. § 1140.16(c). On May 21, 2014, the
Respondent also violated the prohibition against selling tobacco products to persons
younger than 18 years of age, 21 C.F.R. § 1140.14(a), and the requirement that retailers
verify, by means of photo identification containing a purchaser’s date of birth, that no
cigarette purchasers are younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1).
Therefore, Respondent’s actions constitute violations of law that merit a civil money
penalty.

CTP has requested a fine of $500, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $500 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Palmetto Grocery and Grill, LLC /
Scott Haselden
d/b/a Palmetto Grocery and Grill,

Respondent.

Docket No. C-15-542
FDA Docket No. FDA-2014-H-2061

Decision No. CR3580

Date: January 23, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Palmetto Grocery and Grill, LLC / Scott Haselden d/b/a Palmetto
Grocery and Grill, that alleges facts and legal authority sufficient to justify the imposition
of a $250 civil money penalty. Respondent did not answer the Complaint, nor did
Respondent request an extension of time within which to file an answer. Therefore, I
enter a default judgment against Respondent and assess a $250 civil money penalty.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent impermissibly used a self-service
display in a non-exempt location, thereby violating the Federal Food, Drug, and Cosmetic
Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, Cigarettes and
Smokeless Tobacco, 21 C.F.R. pt. 1140 (2013). CTP seeks a $250 civil money penalty.
On December 5, 2014, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1 am required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Palmetto Grocery and Grill, an establishment that sells tobacco
products and is located at 2192 Ebenezer Road, Florence, South Carolina 29501.
Complaint § 2.

e During an inspection of Respondent’s establishment on March 21, 2014, an
FDA-commissioned inspector “observed cans of Seneca smokeless tobacco for
sale from a customer accessible display located next to the sales counter.” The
inspector further observed that “[t]he establishment was open to the general public
during business hours.” Complaint § 9.

e On May 8, 2014, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from March 21, 2014. The letter explained that the
observations constituted a violation of regulations found at 21 C.F.R.

§ 1140.16(c), and that the named violation was not necessarily intended to be an
exhaustive list of all violations at the establishment. The Warning Letter went on
to state that if Respondent failed to correct the violation, regulatory action by the
FDA or a civil money penalty action could occur and that Respondent is
responsible for complying with the law. Complaint § 9.

e¢ On May 13, 2014, Scott Haselden, the owner of Palmetto Grocery and Grill,
responded to the Warning Letter by telephone. “Mr. Haselden stated that he
removed the smokeless tobacco to an area of the establishment where customers
could not access the product. Mr. Haselden also stated that all other regulated
tobacco products were behind the sales counter.” Complaint § 10.

e During a subsequent inspection of Respondent’s establishment on June 10, 2014,
an FDA-commissioned inspector “observed Seneca smokeless tobacco for sale
from a customer accessible display located on a wall above the sales counter.

During the inspection.

to enter the establishment.” Complaint § 1.

, the cashier informed the inspector that minors are allowed

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded

if distributed or offered for s
section 906(d) of the Act. 2

ale in any state in violation of regulations issued under
U.S.C. § 387¢(a)(7)(B); 21 C.F.R. § 1140.1(b). The

Secretary of the U.S. Department of Health and Human Services issued the regulations at

21 C.F.R. pt. 1140 under sec

tion 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). A self-service display is a

method of sale expressly pro!
located in a facility in which

ibited by the regulations unless the self-service display is
the retailer ensures that no person younger than 18 years of

age is present, or permitted to enter, at any time. 21 C.F.R. § 1140.16(c)(2)(ii).

Taking the above alleged facts as true, on March 21, 2014, and again on June 10, 2014,

Respondent violated 21 C.F.

R. § 1140.16(c) by using a self-service display to sell

tobacco products in a facility that was open to minors. Therefore, Respondent’s actions

constitute violations of law t

at merit a civil money penalty.

CTP has requested a fine of $250, which is a permissible fine under the regulations.

21 CFR. § 17.2. I thus fin
one imposed.

that a civil money penalty of $250 is warranted and so order

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Metropolitan Urologic Specialists, PA, d/b/a Metro Urology
(PTAN: 025299001),

Petitioner,
v.
Centers for Medicare & Medicaid Services
Docket No. C-14-1557
Decision No. CR3579

Date: January 20, 2015

DECISION

Palmetto GBA National Supplier Clearinghouse (NSC), an administrative contractor
acting on behalf of the Centers for Medicare & Medicaid Services (CMS), determined
that Petitioner, Metropolitan Urologic Specialists, PA, d/b/a Metro Urology, failed to
allow NSC or its agent access to perform on-site inspections in order to ascertain
Petitioner’s compliance with the durable medical equipment, prosthetics, orthotics, and
supplies (DMEPOS) supplier standards. Based on this conclusion, NSC revoked
Petitioner’s Medicare billing privileges. Petitioner requested a hearing to dispute NSC’s
determination. For the reasons stated below, I uphold CMS’s determination to revoke
Petitioner’s Medicare billing privileges because Petitioner did not comply with

42 CFR. § 424.57(c)(8). However, I establish a new effective date of May 9, 2014, for
the revocation, which is 30 days after NSC’s initial determination.

I. Background and Procedural History
Petitioner was enrolled in the Medicare program as a DMEPOS supplier. See CMS

Exhibit (Ex.) 1 at 1; CMS Ex. 3 at 1,5. On October 3, 2013, Petitioner submitted a
revalidation application for its enrollment as a DMEPOS supplier. CMS Ex. 3 at 1. In
conjunction with the revalidation process, NSC directed Overland Solutions, Inc. (OSI),
an NSC subcontractor, to conduct a visual inspection of Petitioner. CMS Ex. 3 at 1,8, 9;
see also CMS Ex. | at 1. On December 5, 2013, and December 12, 2013, the OSI
inspector attempted to conduct site inspections at the address CMS had on file for
Petitioner’s place of business. CMS Exs. 1,3,5. The inspector was not granted access to
Petitioner’s facility on either date and, on April 9, 2014, NSC issued an initial
determination revoking Petitioner’s Medicare supplier number and related billing
privileges pursuant to 42 C.F.R. §§ 405.800, 424.57(e), 424.535(a)(1), (a)(5)(ii), and

424 .535(g) because Petitioner was not in compliance with two supplier standards: 42
C.F.R. § 424.57(c)(7) -Supplier Standard 7, and 42 C.F.R. § 424.57(c)(8) — Supplier
Standard 8. CMS Ex. 2. The notice also indicated Petitioner was not operational under
42 CFR. § 424.535(a)(5)(ii). CMS Ex. 2 at 2. In its notice to Petitioner, NSC stated that
the revocation was retroactive to December 12, 2013, the date CMS determined that
Petitioner’s practice location was not operational. CMS Ex. 2, at 1. NSC barred
Petitioner from re-enrolling in the Medicare program for two years from the effective
date of the revocation. CMS Ex. 2, at 1.

Petitioner filed a timely request for reconsideration with NSC. CMS Ex. 4. On May 12,
2014, an NSC hearing officer issued an unfavorable reconsidered determination
upholding the revocation of Petitioner’s Medicare billing privileges. CMS Ex. 4. The
reconsidered determination upheld revocation based on Petitioner’s failure to be
accessible and staffed during posted hours of operation (42 C.F.R. § 424.57(c)(7)), and
failure to allow CMS or its agents to conduct on-site inspections to determine compliance
with the supplier standards (42 C.F.R. § 424.57(c)(8)). CMS Ex. 4, at 2-5. The NSC
hearing officer did not indicate that Petitioner was not operational (42 C.F.R.

§ 424.535(a)(5)(ii)) or state the effective date of the revocation.

On July 23, 2014, Petitioner timely filed a request for hearing (RFH). On August 1,
2014, I issued an Acknowledgement and Prehearing Order (Order). In response to the
Order, CMS filed a motion for summary judgment with five exhibits (CMS Exs. 1-5).
Petitioner filed a brief in response (P. Br.), which included a motion for summary
judgment, and two exhibits (P. Exs. 1-2).

II. Evidentiary Ruling and Decision on the Record
Tadmit CMS Exs. 1-5 and P. Ex. 1, without objection from the parties.

Texclude P. Ex. 2 from the record. CMS objects to this exhibit because Petitioner should
have submitted this exhibit with its reconsideration request and there is no good cause for
the late submission. Petitioner argues that there is good cause because Petitioner did not
know, at the reconsideration stage, that the inspector did not take pictures of the waiting
area of Petitioner’s offices (he only took pictures of the exterior as seen in CMS Ex. | at
1), and only learned this with the submission of CMS’s exhibits in this case.
If a supplier does not show good cause for submitting new evidence at the hearing stage
of a provider enrollment case, then that new evidence must be excluded from the record.
42 CFR. § 498.56(e)(2)(ii). I do not find good cause exists for submitting this evidence
for the first time because the initial determination expressly placed Petitioner on notice
that revocation was based, in part, on a lack of accessibility to its facility and a finding
that Petitioner was not operational. CMS Ex. 2. Any evidence Petitioner wanted to
present regarding its accessibility, or to show it was operational, should have been
submitted with its reconsideration request. In any event, as explained below, the question
as to whether Petitioner was non-operational is not before me and I find it is unnecessary
to decide whether Petitioner was in compliance with section 424.57(c)(7). Therefore, the
exclusion of P Ex. 2 does not affect this decision.

I decide this case on the written record. Both parties submitted written direct testimony
(CMS Ex. 5 and P. Ex. 1); however, neither party requested to cross-examine the other
party’s witness as required by my Order. Order § 8-10. Therefore, there is no reason for
a hearing. Order § 11; Marcus Singel, D.P.M., DAB No. 2609, at 5-6 (2014).

III. Issues

1. Whether CMS had a legitimate basis for revoking Petitioner’s Medicare billing
privileges for failing to allow the agents of CMS or NSC to conduct on-site
inspections to ascertain compliance with the requirements of the supplier
standards, in violation of Supplier Standard 8 (42 C.F.R. § 424.57(c)(8)).!

2. IfCMS had a legitimate basis for revoking Petitioner’s Medicare billing
privileges under 42 C.F.R. § 424.57(c)(8), but CMS cannot rely on its previous
finding of a violation under 42 C.F.R. § 424.535(a)(5)(il) as a basis for
revocation,” does the effective date of Petitioner’s revocation need to be adjusted.

' As explained below, I conclude that Petitioner violated 42 C.F.R. § 424.57(c)(8).
Because a violation of one of the supplier standard is sufficient to uphold revocation (See
1866ICPayday.com, L.L.C., DAB No. 2289, at 13 (2009)), I will not decide whether
Petitioner violated 42 C.F.R. § 424.57(c)(7). The record shows that the site inspector
encountered personnel from Petitioner’s office on both visits and was able to enter the
reception area, evidencing at least some level of staffing and accessibility. However, the
inspector was actually unable to conduct the site visit because he was denied access to the
premises. CMS Ex. 5 §§ 4,7; P. Br. at 2, 4.

> Although the reconsidered determination defined the term “operational,” the NSC
hearing officer did not expressly uphold the initial determination’s finding that Petitioner
was not operational under 42 C.F.R. § 424.535(a)(5)(ii). My review is limited to the
issues in the reconsidered determination (Neb Group of Arizona, LLC, DAB No. 2573, at
7 (2014)), therefore, the question whether Petitioner was operational is not before me.
IV. Jurisdiction

Ihave jurisdiction to decide the issues in this case. 42 C.F.R. §§ 405.803, 498.3(b)(15),
498 .3(b)(17), 498.5(1)(2); see also 42 U.S.C. § 1395cc(j)(8).

V. Findings of Fact, Conclusions of Law, and Analysis*

In order for a DMEPOS supplier to qualify for continued enrollment in the Medicare
program, a supplier must satisfy the criteria set forth in the Social Security Act and
Department of Health and Human Services’ (HHS) regulations. 42 U.S.C. § 1395m(j);
42 C.F R. part 424. HHS promulgated regulations establishing the supplier standards that
a DMEPOS supplier must meet to enroll and to maintain enrollment. 42 C.F.R.

§ 424.57(c). Supplier Standard 8 mandates that a supplier allow “CMS, NSC, or agents
of CMS or NSC to conduct on-site inspections to ascertain supplier compliance with the
requirements of this section.” 42 C.F.R. § 424.57(c)(8).

1. On December 5 and December 12, 2013, Petitioner ’s employees denied an
inspector, acting on behalf of NSC, entry to Petitioner’s offices to perform an
on-site inspection in order to ascertain whether Petitioner was in compliance
with supplier standards.

On November 5, 2013, NSC placed a work order with OSI to complete a visual
inspection of Petitioner’s offices. CMS Ex. 3 at 8-9. OSI sent Donald Andren, an
inspector employed with OSI, a work order to conduct the site survey. CMS Ex. 5 J 1-3
On December 5, 2013, Inspector Andren attempted to inspect Petitioner’s offices. CMS
Exs. 1; 5. At 1:50 p.m., Inspector Andren entered Petitioner’s reception area and
informed Petitioner’s receptionist that he was there to inspect Petitioner for NSC. CMS
Ex.5 94. The receptionist connected Inspector Andren by phone to Stacey Sandberg, the
contact person identified in the work order he received from OSI. CMS Ex. 3 at 8.

Ms. Sandberg informed Inspector Andren that he could not enter the premises without
making an appointment with management. CMS Ex.5 § 4. Before leaving, Inspector
Andren gave the receptionist his business card and a letter of introduction that explained
that OSI is authorized to perform Medicare inspections by NSC and that failure to
cooperate can result in revocation. That letter also provided a toll free number at NSC
that a supplier could call to confirm authorization. The receptionist told him that
someone from management would call him to make an appointment. RFH at 21; CMS
Ex. 3 at 5, 8-9; CMS Ex. 59 4.

Inspector Andren did not receive a return phone call and emailed Ms. Sandberg on
December 9, 2013, attaching his work order as additional proof of his authenticity. CMS
Ex. 3 at 7-9; CMS Ex. 5 § 5; P. Ex. 1 § 2. Ms. Sandberg responded, asking what

5 My numbered findings of fact and conclusions of law appear in bold and italics.
specifically he wanted to “come in and review.” RFH at 23; CMS Ex. 3 at 6; P. Ex. 1

§ 3. Inspector Andren replied that he needed only to view the supplies sold to Medicare
beneficiaries to verify that Petitioner in fact has inventory. RFH at 22; CMS Ex. 3 at 6;
P. Ex. 1 § 4. Ms. Sandberg again said she would have to have additional information
about the inspection before Inspector Andren would be allowed to conduct the site visit.
RFH at 20; CMS Ex. 3 at 3; P. Ex.195.

Following the email message exchange, Inspector Andren telephoned and spoke with Ms.
Sandberg. CMS Ex. 5 § 6. He again gave her the NSC toll free number ((866) 238-
9652), which appears on the letter of introduction, and suggested she call to confirm that
he was authorized to inspect Petitioner on behalf of NSC. CMS Ex. 3 at 5; CMS Ex. 5

§ 6; P. Ex. 197. She refused. CMS Ex. 5 9 6; see also P. Ex. 1 (Ms. Sandberg did not
testify she called NSC to verify the inspection).

On December 12, 2013, Inspector Andren returned to Petitioner’s offices to attempt to
conduct the inspection. CMS Ex. | at 1; CMS Ex.5 9 7. He entered the reception area
and asked to see Ms. Sandberg, but was informed she was not there. CMS Ex. 5 § 7; see
also P. Ex. 1 § 9. Inspector asked for access to the inventory in order to conduct the
inspection. CMS Ex. 5 § 7. He again was informed he could not enter without an
appointment with management. CMS Ex.597. Asa result, Inspector Andren reported
that although he attempted on two occasions to conduct a site visit of Petitioner’s offices,
he was unsuccessful because he was denied access to the premises beyond the reception
area. CMS Ex | at 1; CMS Ex. 5 §§ 7-8. He could not complete an inspection and,
therefore, could not verify whether Petitioner was compliant with the supplier standards.

2. Petitioner violated Supplier Standard 8 (42 C.F.R. § 424.57(c)(8)) because
Petitioner refused to allowed an inspector, acting on behalf of NSC, to enter
Petitioner’s offices to perform an on-site inspection in order to ascertain
whether Petitioner was in compliance with supplier standards.

Petitioner admits it denied access to its offices to Inspector Andren, but asserts that it was
obligated to do so. Petitioner argues that the site inspector did not show a photographic
identification or a letter proving his authority to conduct the site inspection. P. Br. at 6-
8. The record supports Petitioner’s position.’ Petitioner quotes from NSC’s website
frequently asked questions (FAQ) that indicates inspectors will have a photographic
identification and a signed letter on CMS letterhead, and that suppliers ought not to give
information to an inspector who is not properly credentialed. P. Br. at 6.

* The site inspector’s written direct testimony states that he gave the receptionist his
business card and letter of introduction, a generic letter from NSC on behalf of CMS,
which explained that OSI is authorized to perform Medicare inspections by NSC and that
failure to cooperate can result in revocation. CMS Ex.5 § 4.
Petitioner’s concerns over the inspector’s lack of credentials justify its initial refusal to
permit Mr. Andren to enter its offices. However, as indicated in the NSC FAQs,
Petitioner was obligated to notify NSC of the situation at the following phone number:
(866) 238-9652. P. Br. at 6. Petitioner did not do this. After turning Inspector Andren
away, Petitioner’s receptionist said that he would receive a phone call concerning the
inspection; however, Petitioner did not contact Inspector Andren.

After the inspector initially attempted to conduct a site inspection on December 5, 2013,
the inspector made contact with Ms. Sandberg, one of Petitioner’s managers by email,
and on December 9 forwarded the work order under which the inspector was operating
(the first line of the first page indicates that the work order was for a “NSC — Visual
Inspection” and further down, for “Metropolitan Urological Specialists PA” at
Petitioner’s address). CMS Ex. 3, at 7-8. When Ms. Sandberg questioned the document,
the inspector left a voicemail for the manager and then, on December 11, forwarded again
by email the generic letter about the authorization to conduct the inspection. CMS Ex. 3
at 3-6. Significantly, the phone number given in the generic letter for a supplier to call to
verify that the inspection was legitimate was the same number as that on the NSC’s
website FAQs. Compare CMS Ex. 3 at 5 with P. Br. at 6.

Although both parties portray Petitioner’s manager with different degrees of motivation
to call the NSC phone number and confirm that the inspection was authorized, compare
CMS Ex. 5 § 6 (testimony that manager refused to call the number) with RFH at 3
(indicating that Petitioner verified the inspection was authentic, but only after the Dec.
12, 2013 attempted inspection), I will accept the inspector’s testimony because
Petitioner’s witness’ testimony does not refute the inspector’s testimony. P. Ex. 1.

Petitioner should have made every effort to confirm the validity of the inspection because
Petitioner is under an obligation to permit inspections. Applicable regulations permit
CMS to perform site inspection to verify enrollment requirements are met when applying
for enrollment (42 C.F.R. § 424.510(d)(8)), seeking revalidation of enrollment (42 C.F.R.
§ 424.515(c)), or at any other time (42 C.F.R. § 424.517). The regulations also provide
that CMS may deny enrollment or revoke enrollment if, based upon on-site review, it
determines that the supplier fails to satisfy Medicare enrollment requirements. 42 C.F.R.
§§ 424.530(a)(5) and 424.535(a)(5). Petitioner was a DMEPOS supplier that had
recently filed a revalidation application. Petitioner should have expected the possibility
of an inspection. When an inspector appeared, Petitioner was obligated to take action to
confirm whether the inspection was legitimate.

For his part, the inspector tried to convince Petitioner he was acting under NSC’s
authority. NSC conducts unannounced inspections and the time the inspector spent
attempting to persuade Petitioner that he was authorized to conduct the inspection had the
potential for undermining the purpose behind conducting an unannounced inspection.

75 Fed. Reg. 52,629, 52,637-52,638 (“We have found unannounced on-site visits to be a
very effective tool in combating fraud and abuse and to protect the Medicare Trust Fund
from unscrupulous suppliers. Moreover, CMS and our designated contractor, the NSC,
have conducted unannounced on-site visits since 2000 to ensure compliance with those
standards which only can be verified by visual inspection.”), 52,644 (“maintain[ing] a
minimum number of hours open to the public . . . will ensure that the DMEPOS supplier
is operational and allows CMS, the NSC or agents of CMS or the NSC to conduct
unannounced site visits to ensure compliance with the standards set forth at § 424.57.”)
(Aug. 27, 2010).

Although it is unclear why Inspector Andren does not appear to have the credentials
listed on the NSC FAQs, Inspector Andren provided Petitioner with the necessary
information for Petitioner to confirm that NSC authorized the inspection. I conclude that
Petitioner’s refusal to allow the inspector to conduct the site visit in conjunction with
Petitioner’s refusal to contact NSC to confirm whether the inspection was valid is a
violation of 42 CFR 424.57(c)(8).

3. Because revocation is premised only on a violation of Supplier Standard 8
and not a finding that Petitioner was not operational, the retroactive effective
date of the revocation imposed by CMS in the initial determination is no
longer appropriate, and the effective date must be changed from December
12, 2013, to May 9, 2014, which is 30 days after the date CMS mailed its
initial determination to revoke Petitioner’s billing privileges in this case.

NSC’s April 9, 2014 initial determination imposed an effective date of revocation that
was retroactive to December 12, 2013, the date that Petitioner was found not to be
operational. CMS Ex. 2, at 1. This is appropriate under 42 C.F.R. § 424.535(g) when
CMS has made a finding that a supplier is not operational pursuant to 42 C.F.R.

§ 424.535(a)(5)(ii). However, because the reconsidered determination in this case failed
to make a finding that Petitioner was not operational, there is no longer a valid reason to
impose a retroactive effective date of revocation.

As a recent DAB decision on this issue:

Because the sole basis for revocation properly decided by the
ALJ and affirmed by the Board in this appeal is [Petitioner’s]
noncompliance with Supplier Standard 7, the effective date of
revocation should be determined in accordance with section

424.57(e)’s effective-date provision .. . . Applying that rule
here, we conclude that the proper effective date of the
revocation is . . . 30 days from the date of NSC’s letter

notifying [Petitioner] of the revocation.

Orthopaedic Surgery Associates, DAB No. 2594, at 8 (2014).
Having found that Petitioner was not in compliance with Supplier Standard 8 (42 C.F.R.
§ 424.57(c)(8)), I uphold CMS’s revocation of Petitioner’s Medicare billing privileges,
but set a new revocation effective date of May 9, 2014. This is 30 days from the date of
the April 9, 2014 initial determination in this case.

VI. Conclusion

For the reasons stated above, I affirm CMS’s revocation of Petitioner’s Medicare billing
privileges, but modify the effective date of the revocation to May 9, 2014.

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Michael Aaron Ganz, M.D.,
(OI File No. H-13-42590-9),

Petitioner,
v.
The Inspector General.
Docket No. C-14-1626
Decision No. CR3576

Date: January 14, 2015

DECISION

Petitioner, Michael Aaron Ganz, M.D., appeals the determination of the Inspector
General for the U.S. Department of Health and Human Services (I.G.) to exclude him
from participating in Medicare, Medicaid, and other federally funded health care
programs pursuant to section 1128(a)(4) of the Social Security Act (Act) (42 U.S.C.

§ 1320a-7(a)(4)) for a period of five years. For the reasons discussed below, I find that
the I.G. is authorized to exclude Petitioner for the five-year minimum mandatory
exclusionary period.

Background

In a letter dated May 30, 2014, the I.G. notified Petitioner, a physician licensed to
practice in Wisconsin, that he was being excluded from participation in Medicare,
Medicaid, and other federal health care programs for the minimum statutory period of
five years pursuant to section 1128(a)(4) of the Act. The I.G. advised Petitioner that the
exclusion was based on his felony conviction in the United States District Court, Eastern
District of Wisconsin, of a criminal offense related to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled substance as defined under federal
or state law. Petitioner timely requested a hearing on July 31,2014. The case was
assigned to me for a possible hearing and written decision.

On August 25, 2014, I convened a prehearing conference by telephone, the substance of
which is summarized in my Order and Schedule for Filing Briefs and Documentary
Evidence, dated August 26, 2014. Pursuant to that scheduling order, I asked the parties
to answer the questions on the short-form briefs sent to them, together with any
additional arguments and supporting documents they wished to present. The I.G. filed a
brief (I.G. Br.) on September 24, 2014, together with the I.G.’s exhibits (I.G. Exs.) 1
through 6. Petitioner filed a response (P. Br.) on November 3, 2014, without any
exhibits. The IG. filed a reply brief on November 21, 2014.

Petitioner objects to I.G. Ex. 3, a Superseding Indictment, on relevancy grounds because
it was dismissed pursuant to Petitioner’s plea agreement. P. Br. at 1; 1.G. Ex. 5. I find
1G. Ex. 3 relevant, however, because the charges contained in the Superseding
Indictment formed the basis of Petitioner’s plea agreement. The Superseding Indictment
is referenced multiple times in the plea agreement, provides context to the plea
agreement, and it provides facts and circumstances surrounding the underlying
conviction. I therefore admit I.G. Exs. 1-6 into the record.

I directed the parties to indicate in their briefs whether an in-person hearing would be
necessary, and if so, to list the names of the witnesses they would call. Both parties did
not request witness testimony and indicated they did not believe an in-person hearing was
necessary to decide this case. Therefore, I now decide the case based on the written
record.

Discussion
A. Issue

The only issue before me is whether the I.G. has a legitimate basis to exclude Petitioner
from participating in Medicare, Medicaid, and other federal health care programs
pursuant to section 1128(a)(4) of the Act. If I find that the I.G. is authorized to exclude
Petitioner, then I must uphold the I.G.’s exclusion because it is for the minimum
mandatory period of five years. See 42 C.F.R. § 1001.2007(a)(2).

B. Findings of Fact, Conclusions of Law, and Analysis
1. Petitioner’s exclusion is mandated by section 1128(a)(4) of the Act

because Petitioner was convicted of a felony offense related to the
unlawful distribution of a controlled substance.
The I.G. is required to exclude from participation in Medicare, Medicaid, and other
federal health care programs any individual: (1) convicted of a felony criminal offense
under federal or state law; (2) where the offense occurred after August 21, 1996; and

(3) the criminal offense is related to the unlawful manufacture, distribution, prescription,
or dispensing of a controlled substance.' Act § 1128(a)(4); see also 42 C.F.R.

§ 1001.101(d).

a. Petitioner was convicted of a felony offense on April 6, 2012.

For exclusion purposes, an individual is convicted of a criminal offense: (1) when a
judgment of conviction has been entered against an individual in a federal, state, or local
court, regardless of whether an appeal is pending or whether the judgment of conviction
or other record relating to the criminal conduct has been expunged; (2) when there has
been a finding of guilt by a federal, state, or local court; (3) when a plea of guilty or nolo
contendere has been accepted by a federal, state, or local court; or (4) when an individual
has entered into participation in a first offender, deferred adjudication, or other
arrangement or program where judgment of conviction has been withheld. Act §1128(i)
(42 USC. § 1320a-7(i)).

Court records conclusively establish that Petitioner was “convicted,” as set out by
subsections 1128(i)(1) and (3), of a felony offense that justifies his exclusion. On
January 4, 2012, Petitioner pled guilty to a violation of section 843(b), Title 21, United
States Code. See I.G. Exs. 4 and 5. Petitioner’s crime was a felony offense. See I.G. Ex.
5, at 3. On April 6, 2012, the District Court entered a judgment of conviction against
Petitioner. I.G. Ex. 6. Petitioner was sentenced to a one-year term of probation, ordered
to perform 20 hours of community service, ordered to participate in a drug treatment
program, fined $5,000, and assessed a penalty of $1,000. I.G. Ex. 6. The District Court’s
acceptance of Petitioner’s guilty plea and its subsequent entry of a judgment of
conviction satisfies the conviction definition under the Act.

b. Petitioner’s criminal offense was related to the unlawful
distribution of a controlled substance.

On February 15, 2011, Petitioner was charged with one count of conspiracy to distribute
cocaine and one count of possession with the intent to distribute cocaine. I.G. Ex. 3, at 1-
2,10. On January 4, 2012, Petitioner pled guilty to one count of “knowingly and
intentionally us[ing] a communication facility, to wit: a telephone, in committing, or in
causing and facilitating the commission of an act or acts constituting the attempted

' The Secretary of Health and Human Services has delegated to the I.G. the authority to
determine and impose exclusions under section 1128(a)(4). See 53 Fed. Reg. 12993
(Apr. 20, 1988).
possession with the intent to distribute a controlled substance, a felony” in violation
of 21 U.S.C. § 843(b). LG. Exs. 4, 5 (emphasis added).

In his plea agreement, Petitioner stipulated to the following:

On March 13, 2009, Michael A. Ganz called [D.E.] by telephone and arranged to
buy 1/2 ounce of cocaine from [D.E.] for $400 for his use and the use of others.
Later that same day, [D.E.] received a 1/2 ounce of cocaine from [S.G.] that he
paid $400.00 for and in turn drove this 1/2 ounce of cocaine to Michael A. Ganz at
Ganz’ residence ....

1G. Ex. 5, at 2 (Emphasis added).
Petitioner’s plea agreement clearly articulated the elements of his offense and shows that
the intent to distribute a controlled substance is a necessary element of the crime to which
Petitioner pled guilty:
Elements
The parties understand and agree that in order to sustain the charge of unlawful

use of a communication device as set forth in Count One of the Information, the
government must prove each of the following propositions beyond a reasonable

doubt:
First the defendant used a telephone;
Second that use of the telephone was accomplished as part of the
committing of, or to cause or facilitate the committing of the
attempted possession with the intent to distribute a
controlled substance; and
Third that such use of a telephone was knowing or intentional.

1G. Ex. 5, at 3 (emphasis added). Petitioner acknowledged, agreed, and understood that
he was in fact guilty of a felony involving the attempted possession of a controlled
substance with the intent to distribute it. I.G. Ex. 5, at 29 6.

There is no dispute that Petitioner was convicted of a felony that occurred after August
21, 1996. There is no dispute that cocaine is a controlled substance. Petitioner contends
that the facts in the plea agreement do not establish a common sense nexus to a finding
that Petitioner distributed a controlled substance. Petitioner emphasizes that the
gravamen of Petitioner’s offense is that he used a communication device, a telephone.
Petitioner states that the “crime was committed, completed, when the telephone call was
made” and that “Petitioner was not convicted of purchasing or using or sharing. He was
convicted of making a telephone call.” P. Br. at 2-3. Petitioner also asserts that the facts
in the plea agreement do not describe any use by any other person or any “distribution
activities.” P. Br. at 3-4.

Petitioner’s assertion that the facts in the plea agreement do not describe any distribution
activities could be construed as a collateral attack of his predicate conviction. The factual
findings that support Petitioner’s conviction, however, are not reviewable in the instant
proceeding. “When the exclusion is based on the existence of a criminal conviction . . .
where the facts were adjudicated and a final decision was made, the basis for the
underlying conviction . . . is not reviewable and the individual or entity may not
collaterally attack it either on substantive or procedural grounds in this appeal.”

42 CFR. § 1001.2007(d). Excluding individuals based on criminal convictions provides
protection for federally funded programs and their beneficiaries and recipients, without
expending program resources to duplicate existing criminal processes. See, e.g., Lyle
Kai, R-Ph., DAB No. 1979, at 8 (2005).

Here, Petitioner attempted to possess cocaine with the intent for others to use the drug.
Petitioner’s admission satisfies the “related to” distribution requirement of section
1128(a)(4) of the Act. Frank R. Pennington, M.D., DAB No. 1786, at 5 (2001)
(affirming that a conviction was related to the distribution of a controlled substance
where a physician intended to share cocaine with others). Accordingly, I conclude that
there is a basis to exclude Petitioner pursuant to section 1128(a)(4) of the Act.

2. Petitioner’s five-year exclusion is not unreasonable
as a matter of law.

Five years is the minimum authorized period for a mandatory exclusion pursuant to
section 1128(a). Act § 1128(c)(3)(B) (42 U.S.C. § 1320a-7(c)(3)(B)). Ihave found there
is a basis for Petitioner’s exclusion pursuant to section 1128(a)(4) of the Act.
Accordingly, the minimum period of exclusion is five years, and as a matter of law that
period is not unreasonable.
Conclusion

I sustain the I.G.’s determination to exclude Petitioner from participating in Medicare,
Medicaid, and other federal health care programs pursuant to section 1128(a)(4) of the
Act, which mandates the exclusion due to Petitioner’s felony conviction related to
distributing a controlled substance. The five-year exclusion that the I.G. imposed is
mandatory as a matter of law and is effective 20 days from the I.G.’s exclusion notice
dated May 30, 2014.

/s/
Joseph Grow
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1843)

Complainant,
v.

Local Fuel, Inc. / Jayprakash Sata
d/b/a Citgo,

Respondent.
Docket No. C-15-314
Decision No. CR3574

Date: January 13, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Local Fuel, Inc. / Jayprakash Sata, d/b/a Citgo, 5605 Livernois
Avenue, Detroit, Michigan 48210, and by filing a copy of the complaint with the Food
and Drug Administration’s (FDA) Division of Dockets Management. The complaint
alleges that Citgo unlawfully sold cigarettes to minors and failed to verify that the
cigarette purchasers were 18 years of age or older, thereby violating the Federal Food,
Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations,
Cigarettes and Smokeless Tobacco, 21 C.F.R. pt. 1140. CTP seeks to impose a $500
civil money penalty against Respondent Citgo.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 13, 2014, CTP served the
complaint on Respondent Citgo by United Parcel Service. In the complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent should pay
the penalty, file an answer, or request an extension of time in which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent Citgo has neither filed an answer within the time prescribed, nor requested an
extension of time within which to file an answer. Pursuant to 21 C.F.R. § 17.11, 1
assume that the facts alleged in the complaint (but not its conclusory statements) are true.
Specifically:

e At approximately 7:28 p.m. on April 27, 2013, at Respondent’s business
establishment, 5605 Livernois Avenue, Detroit, Michigan 48210, an FDA-
commissioned inspector observed that a person younger than 18 years of age was
able to purchase a package of Newport Box 100s cigarettes. The inspector also
documented that staff failed to verify, by means of photographic identification
containing a date of birth, that the purchaser was 18 years of age or older;

e Ina warning letter dated May 9, 2013, CTP informed Respondent of the
inspector’s April 27, 2013 observations, and that such actions violate federal law,
21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that Respondent’s
failure to correct its violations could result in a civil money penalty or other
regulatory action;

e At approximately 4:00 p.m. on May 10, 2014, at Respondent’s business
establishment, 5605 Livernois Avenue, Detroit, Michigan 48210,
FDA-commissioned inspectors observed that a person younger than 18 years of
age was able to purchase a package of Newport Box 100s cigarettes. The
inspectors also documented that staff failed to verify, by means of photographic
identification containing a date of birth, that the purchaser was 18 years of age or
older.

These facts establish Respondent Citgo’s liability under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C § 387a-1; see 21 U.S.C.

§ 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).
The regulations also require retailers to verify, by means of photo identification
containing a purchaser’s date of birth, that no cigarette purchasers are younger than 18
years of age. 21 C.F.R. § 1140.14(b)(1).

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $500 against Respondent
Local Fuel, Inc. / Jayprakash Sata, d/b/a Citgo. Pursuant to 21 C.F.R. § 17.11(b), this
order becomes final and binding upon both parties after 30 days of the date of its
issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1478)

Complainant
v.

Alena LLC / Mike Iskhakov
d/b/a Camelback Smoke Shop,

Respondent.
Docket No. C-14-2009
Decision No. CR3573

Date: January 13, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Alena LLC / Mike Iskhakov, d/b/a Camelback Smoke Shop, at
650 East Camelback Road, Phoenix, Arizona 85012, and by filing a copy of the
complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The complaint alleges that Camelback Smoke Shop impermissibly sold
cigarettes to minors, and failed to verify, by means of photo identification containing a
date of birth, that a tobacco purchaser was 18 years of age or older, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140. The complaint likewise alleges that
Respondent Camelback Smoke Shop was previously held liable for two violations of
regulations found at 21 C.F.R. pt. 1140 and, therefore, CTP seeks to impose a $2,000
civil money penalty against Respondent Camelback Smoke Shop.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 12, 2014, CTP served the
complaint on Respondent Camelback Smoke Shop. In the complaint and accompanying
cover letter, CTP explained that, within 30 days, Respondent should pay the penalty, file
an answer, or request an extension of time in which to file an answer. CTP warned
Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent Camelback Smoke Shop has neither filed an answer within the time
prescribed, nor requested an extension of time within which to file an answer. Pursuant
to 21 C.F.R. § 17.11, l assume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

CTP previously issued a warning letter to Respondent Camelback Smoke Shop on
January 3, 2013, citing violations of 21 C.F.R. pt. 1140 on December 4, 2012, at
Respondent’s business establishment, 650 East Camelback Road, Phoenix,
Arizona 85012;

On September 9, 2013, CTP initiated a previous civil money penalty action, CRD
Docket Number C-13-1263, FDA Docket Number FDA-2013-H-1069, against
Respondent for two violations of 21 C.F.R. pt. 1140 within a 12-month period.
CTP alleged those violations to have occurred on December 4, 2012, and March
14, 2013;

The previous action concluded when, on November 8, 2013, an Administrative
Law Judge issued an Initial Decision and Default Judgment finding Respondent
liable for the violations. That Initial Decision became final and binding on the

parties on December 9, 2013. Complaint § 13;

At approximately 1:53 PM on March 21, 2014, at Respondent’s business
establishment, 650 East Camelback Road, Phoenix, Arizona 85012,
FDA-commissioned inspectors documented Respondent’s staff selling a package
of Marlboro Gold Pack 100’s cigarettes to a person younger than 18 years of age.
The inspectors also documented that Respondent’s staff failed to verify, by means
of photo identification containing the bearer’s date of birth, that the purchaser of a
tobacco product was 18 years of age or older.

These facts establish Respondent Camelback Smoke Shop’s liability under the Act. The
Act prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product
is misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21
C.F.R. § 1140.14(a), no retailer may sell cigarettes to any person younger than 18 years

of age. Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of photo
identification containing the bearer’s date of birth, that no cigarette or smokeless tobacco
purchaser is younger than 18 years of age.

Under 21 C.F.R. § 17.2, a $2,000 civil money penalty is permissible for four violations of
the regulations found at 21 C.F.R. pt. 1140.

Order

For these reasons, | enter default judgment in the amount of $2,000 against Respondent
Alena LLC / Mike Iskhakov, d/b/a Camelback Smoke Shop. Pursuant to 21 C.F.R.

§ 17.11(b), this order becomes final and binding upon both parties after 30 days of the
date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
Cotton Orthotic and Prosthetic Associates, LLC,
(PTAN: 6684110001),

Petitioner,

v.

Centers for Medicare & Medicaid Services
Docket No. C-15-146
Decision No. CR3571

Date: January 13, 2015

DECISION

I sustain the determination of the Centers for Medicare & Medicaid Services (CMS) to
revoke the enrollment of Petitioner, Cotton Orthotic and Prosthetic Associates, LLC, as a
supplier of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) to
the Medicare program. I establish the effective date of CMS’s revocation determination
to be June 27, 2014, 15 days after June 12, 2014, the date when CMS sent notice of
revocation to Petitioner.

I. Background

Petitioner requested reconsideration of CMS’s determination to revoke its participation
and reconsideration was denied. Petitioner requested a hearing before me in order to
challenge CMS’s determination. CMS moved for summary judgment and Petitioner
opposed CMS’s motion. CMS filed two proposed exhibits, identified as CMS Ex. | —
CMS Ex. 2, in support of its motion. Petitioner filed seven proposed exhibits, identified
as P. Ex. 1 — P. Ex. 7, in opposition to CMS’s motion.
Neither side has filed objections to my receiving these exhibits. I receive them for
purposes of deciding CMS’s motion.!

II. Issues, Findings of Fact and Conclusions of Law
A. Issues

The issues are: whether a basis exists to revoke Petitioner’s participation in Medicare;
and, the effective date of the revocation determination.

B. Findings of Fact and Conclusions of Law

As a DMEPOS supplier Petitioner is bound by regulations at 42 C.F.R. Part 424 and in
particular the special payment rules established by 42 C.F.R. § 424.57. Among the
requirements of that regulation is the requirement that a DMEPOS supplier must maintain
a physical facility on an appropriate site. 42 C.F.R. § 424.57(c)(7). In order to assure
compliance, CMS must have access toa DMEPOS supplier’s site and must be able to
inspect that site. 42 C.F.R. § 424.57(c)(8).

The undisputed material facts of this case are that on two occasions an inspector on
behalf of CMS attempted to visit Petitioner’s business location in order to verify, among
other things, that Petitioner was compliant with the requirements of 42 C.F.R. §
424.57(c)(7). On both occasions the inspector found the facility to be closed, locked, and
unstaffed. CMS Ex. | at 262-70. That made it impossible for the inspector to verify
compliance. In particular, it made it impossible for the inspector to verify whether
Petitioner maintained a physical facility that complied with all of the requirements of 42
C.F.R. § 424.57, more specifically, the requirements of 42 C.F.R. § 424.57(c)(7).
Moreover, the facility was not accessible for inspection in violation of the requirements
of 42 C.F.R. § 424.57(c)(8). That noncompliance was ample basis for CMS to revoke
Petitioner’s Medicare enrollment.

Petitioner offers several arguments in its defense, but I find them to be unpersuasive.
Petitioner argues that, at the first visit to Petitioner’s facility, on May 9, 2014, the first
attempted inspection date, its owner was away, providing a service to a patient.
Normally, another individual would staff the facility, but on that occasion, she was forced
to return home to retrieve a laptop computer that she had inadvertently left there.

' In fact, nearly all of the evidence contained in these exhibits is irrelevant. As I shall
discuss, the undisputed material facts of this case are extremely simple: on two occasions
an inspector, working on behalf of CMS, attempted to visit Petitioner’s facility during
normal business hours and found it to be closed and unattended. All of the other facts
presented by the parties are collateral and, as I explain below, it is unnecessary that I
consider them.
Consequently, and unavoidably, the facility was briefly closed during what would
otherwise be normal business hours. CMS Ex. | at 8; 18-30. Petitioner contends that, on
May 12, 2014, the date of the second attempted inspection, its owner also was away
providing service to a patient and the facility was closed only because its employee was
on vacation on that date. Id.

I accept all of these asserted facts as true but they do not provide Petitioner with a
defense. Applicable regulations require that a DMEPOS supplier be open during
business hours and they require also that the facility be accessible for inspection. These
regulations allow for no exception to the requirement. Petitioner was not in compliance
and consequently, that justifies CMS’s determination.

Petitioner asserts also that, on May 9, its employee placed a sign at the entrance of the
acility indicating that it would be closed temporarily. Petitioner asserts that there is a
‘act dispute concerning this sign because the inspector did not report having seen it. But,
I find no dispute as to a material fact. Whether or not the employee placed a sign, the
acility was closed during normal business hours on May 9. That was a violation of
regulatory requirements. Moreover, even if Petitioner was excused for being closed on
May 9 it nonetheless was closed on May 12 due to its employee’s decision to be on
vacation.

Petitioner argues also that it is CMS’s policy to give a DMEPOS supplier two
opportunities to comply with the requirement that it be accessible for inspection. It
reasons that, if it was in compliance on May 9, then its noncompliance on May 12 was its
first regulatory violation and it should have been given another chance to comply.
However, there is no regulation that embodies this asserted “two bites at the apple
policy.” If such policy exists, it is a matter of discretion for CMS. The regulations
require, simply, that a facility be open and accessible. Petitioner’s failure to be open and
accessible on May 12 is sufficient basis to justify CMS’s determination to revoke
Petitioner’s Medicare participation.

Finally, Petitioner asserts that it was “operational” on the dates in question because it was
actively providing services and goods to Medicare beneficiaries. But, assuming that to be
true, it is not a defense for Petitioner’s failure to have an open and accessible facility on
the dates in question.

Petitioner’s noncompliance justified revocation of its Medicare participation. The
effective date of that revocation is governed by 42 C.F.R. § 424.57(d). That is 15 days
after the date that CMS sends notice of its initial determination to revoke. In

this case that would be June 27, 2014, 15 days after CMS’s June 12, 2014 notice to
Petitioner.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1834)

Complainant
v.

S and B Fuel, Inc.
d/b/a Phillips 66,

Respondent.
Docket No. C-15-307
Decision No CR3567

Date: January 8, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an
administrative complaint on Respondent, S and B Fuel, Inc. d/b/a Phillips 66, at
4347 South Broadway, St. Louis, Missouri 63111, and by filing a copy of the
complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The complaint alleges that Phillips 66 unlawfully sold an individual
cigarette to a minor, and failed to verify that a cigarette purchasers was 18 years of
age or older, thereby violating the Federal Food, Drug, and Cosmetic Act (Act),
21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140. An
Administrative Law Judge (ALJ) has previously found Respondent to have
committed four violations of regulations found at 21 C.F.R. pt. 1140. S & B Fuel
Inc. d/b/a Phillips 66, DAB CR3110, at 2-3 (2014); Complaint 41 11. Therefore,
CTP seeks to impose a $10,000 civil money penalty against Respondent Phillips
66.
As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 13, 2014, CTP
served the complaint on Respondent Phillips 66 by United Parcel Service. In the
complaint and accompanying cover letter, CTP explained that, within 30 days,
Respondent should pay the penalty, file an answer, or request an extension of time
in which to file an answer. CTP warned Respondent that, if it failed to take one of
these actions within 30 days, the ALJ could, pursuant to 21 C.F.R. § 17.11, issue
an initial decision ordering it to pay the full amount of the proposed penalty.

Respondent Phillips 66 has neither filed an answer within the time prescribed, nor
requested an extension of time within which to file an answer. Pursuant to

21 C.F.R. § 17.11, Lassume that the facts alleged in the complaint (but not its
conclusory statements) are true. Specifically:

e CTP previously issued a warning letter to Respondent Phillips 66 on
January 24, 2013, citing a violation’ of 21 C.F.R. pt. 1140 on December 28,
2012, at Respondent’s business establishment, 4347 South Broadway, Saint
Louis, Missouri 63111;

e¢ On December 9, 2013, CTP initiated a previous civil money penalty action,
CRD Docket Number C-14-292, FDA Docket Number FDA-2013-H-1492,
against Respondent for four violations of 21 C.F.R. pt. 1140 within a 24-
month period. CTP alleged those violations to have occurred on December
28, 2012, and May 20, 2013;

e The previous action concluded when the ALJ issued an Initial Decision and
Default Judgment in which he found that Respondent Phillips 66 committed
four violations of 21 C.F.R. pt. 1140. S and B Fuel Inc. d/b/a Phillips 66,
DAB CR3110, at 2-3 (2014); Complaint § 11;

e At approximately 8:25 AM on June 10, 2014, at Respondent’s business
establishment, 4347 South Broadway, St. Louis, Missouri 63111, FDA-
commissioned inspectors documented Respondent’s staff selling a single
Newport cigarette to a person younger than 18 years of age.

' In the complaint, CTP describes the action or actions that took place at
Respondent Phillips 66’s business establishment on December 28, 2012, as both
“a violation” and as “violations.” Complaint § 10. In a previous administrative
complaint issued on December 9, 2013, attached to the present complaint, CTP
described one discrete violation of 21 C.F.R. § 1140.14(d) at Respondent Phillips
66’s business establishment on December 28, 2012. Therefore, I will infer that
CTP’s description in the present complaint of “violations” occurring on December
28, 2012, was a typographical error.
The inspectors also documented that Respondent’s staff failed to verify, by
means of photo identification containing the bearer’s date of birth, that the
cigarette purchaser was 18 years of age or older.

These facts establish Respondent’s liability under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section
906(d) of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R.
§ 1140.1(b). The Secretary of the U.S. Department of Health and Human Services
issued the regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act.

21 U.S.C. § 387a-1; see 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229
(Mar. 19, 2010). Under 21 C.F.R. § 1140.14(a), no retailer may sell cigarettes to
any person younger than 18 years of age. 21 C.F.R. § 1140.14(a). The regulations
also require retailers to verify, by means of photo identification containing a
purchaser’s date of birth, that no cigarette purchasers are younger than 18 years of
age. 21 C.F.R. § 1140.14(b)(1). Additionally, the regulations prohibit the sale of
individual cigarettes. 21 C.F.R. § 1140.14(d).

Order

Under 21 C.F.R. § 17.2, a $10,000 civil money penalty is permissible for a total of
six violations of the regulations found at 21 C.F.R. pt. 1140 within a period of 48
months. For these reasons, I enter default judgment in the amount of $10,000
against S and B Fuel, Inc. d/b/a Phillips 66. Pursuant to 21 C.F.R. § 17.11(b), this

order becomes final and binding upon both parties after 30 days of the date of its
issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
(FDA No. FDA-2014-H-1812)

Complainant,
v.

Mamoud M. Sarameh
d/b/a Park N Pak,

Respondent.
Docket No. C-15-288
Decision No. CR3565
Date: January 8, 2015
INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative
complaint on Respondent, Mamoud M. Sarameh d/b/a Park N Pak, at 905 East Lincoln
Avenue, Sunnyside, Washington 98944 and by filing a copy of the complaint with the
Food and Drug Administration’s (FDA) Division of Dockets Management. The
complaint alleges that Park N Pak unlawfully sold cigarettes to minors and failed to
verify, by means of photo identification containing a date of birth, that a tobacco
purchaser was 18 years of age or older, thereby violating the Federal Food, Drug, and
Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R.
pt. 1140. CTP seeks to impose a $250 civil money penalty against Respondent Park N
Pak.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on November 11, 2014, CTP served the
complaint on Respondent Park N Pak by United Parcel Service. In the complaint and
accompanying cover letter, CTP explained that, within 30 days, Respondent should pay
the penalty, file an answer, or request an extension of time in which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent Park N Pak has neither filed an answer within the time prescribed, nor
requested an extension of time within which to file an answer. Pursuant to 21 C.F.R.
§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

At Respondent’s business establishment, 905 East Lincoln Avenue, Sunnyside,
Washington 98944, on December 10, 2013, at approximately 4:25 PM, an FDA-
commissioned inspector observed Respondent’s staff sell a package of Newport
Box cigarettes to a person younger than 18 years of age. The inspector also
observed that Respondent’s staff failed to verify, by means of photo identification
containing the bearer’s date of birth, that the tobacco purchaser was 18 years of
age or older;

In a warning letter issued on February 27, 2014, CTP informed Respondent of the
inspector’s observations from December 10, 2013, and that such actions violate
federal law, 21 C.F.R. § 1140.14(a) and (b)(1). The letter further warned that if
Respondent failed to correct its violations, the FDA could impose a civil money
penalty or take other regulatory action;

At Respondent’s business establishment, 905 East Lincoln Avenue, Sunnyside,
Washington 98944, on May 8, 2014, at approximately 12:03 PM, FDA-
commissioned inspectors documented Respondent’s staff selling a package of
Marlboro Gold Pack cigarettes to a person younger than 18 years of age.

These facts establish Respondent’s liability under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if sold or distributed in violation of regulations issued under section 906(d) of the Act.

21 US.C. § 387f(d); see 21 U.S.C. § 387¢(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21 C.F.R.

§ 1140.14(a), no retailer may sell cigarettes or smokeless tobacco to any person younger
than 18 years of age. Under 21 C.F.R. § 1140.14(b)(1), retailers must verify, by means of
photo identification containing the bearer’s date of birth, that no cigarette or smokeless
tobacco purchaser is younger than 18 years of age.

A $250 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $250 against Respondent
Mamoud M. Sarameh d/b/a Park N Pak. Pursuant to 21 C.F.R. § 17.11(b), this order
becomes final and binding upon both parties after 30 days of the date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge