[Federal Register Volume 64, Number 211 (Tuesday, November 2, 1999)]
[Notices]
[Pages 59215-59219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28603]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration
[Docket No. 98-37]


NVE Pharmaceuticals, Inc.; Denial of Applications

    On July 14, 1998, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA) issued an 
Order to Show Cause to NVE Pharmaceuticals, Inc. (Respondent), 
notifying it of an opportunity to show cause as to why DEA should not 
deny its May 7, 1997 applications for registration as an exporter of 
List I chemicals pursuant to 21 U.S.C. 958(c) and as a manufacturer for 
distribution of List I chemicals pursuant to 21 U.S.C. 823(h), for 
reason that such registration would be inconsistent with the public 
interest.
    Respondent timely filed a request for a hearing on the issues 
raised by the Order to Show Cause. The hearing was held in Newark, New 
Jersey on December 3, 1998, before Administrative Law Judge Gail A. 
Randall. At the hearing, the Government called witnesses to testify and 
introduced documentary evidence. Respondent introduced documentary 
evidence, however it did not call any witnesses to testify. After the 
hearing, both parties submitted proposed findings of fact, conclusions 
of law and argument. On June 17, 1999, Judge Randall issued her 
Recommended Rulings, Findings of Fact, Conclusions of Law, and 
Decision, recommending that Respondent's applications for registration 
be denied. Neither party filed exceptions to Judge Randall's 
Recommended Rulings, Findings of Fact, Conclusions of Law and Decision, 
and on July 21, 1999, Judge Randall transmitted the record of these 
proceedings to the Deputy Administrator.
    The Deputy Administrator has considered the record in its entirety, 
and pursuant to 21 CFR 1316.67, hereby issues his final order based 
upon findings of fact and conclusions of law as hereinafter set forth. 
The Deputy Administrator adopts, except as specifically noted, the 
Recommended Rulings, Findings of Fact, Conclusions of Law, and Decision 
of the Administrative Law Judge. His adoption is in no manner 
diminished by any recitation of facts, issues and conclusions herein, 
or of any failure to mention a matter of fact or law.
    The Deputy Administrator finds that Respondent was incorporated in 
1986 with Robert Occhifinto as its president. Respondent is a 
manufacturer and distributor of over-the-counter pharmaceutical 
products and nutritional vitamins, including diet and exercise 
supplements. Some of the products that Respondent manufactures and 
sells contain, in whole or in part, the listed chemicals ephedrine, 
pseudoephedrine, and phenylpropanolamine (PPA). Respondent employs over 
70 individuals, many of whom are extremely handicapped. As early as 
1997, Respondent established a position for a ``Regulatory Affairs'' 
representative who is responsible for ensuring that Respondent complies 
with regulatory requirements.
    Mr. Occhifinto is involved in numerous community and religious 
activities. He donates his time and personal resources to a variety of 
causes, and is also responsible for transforming a toxic waste site 
into a productive business complex.
    The Deputy Administrator finds that ephedrine, pseudoephedrine and 
PPA are all List I chemicals that have legitimate uses, but they can 
also be used in the illicit manufacture of controlled substances. 
Ephedrine and pseudoephedrine can be used to manufacture 
methamphetamine, a Schedule II controlled substance that is a very 
potent central nervous system stimulant. Abuse of methamphetamine is a 
growing problem in the United States. The chemicals needed to 
manufacture methamphetamine are readily accessible at almost any 
pharmacy or retail store that sells pharmaceutical products. Ephedrine 
and pseudoephedrine extracted from over-the-counter products is often 
used in the illicit manufacture of methamphetamine.
    In an effort to curb the use of licit chemicals in the illicit 
manufacture of controlled substances, Congress amended the Controlled 
Substances Act in 1988 with the passage of the Chemical Diversion and 
Trafficking Act (CDTA). Pub. L. 100-690, 102 Stat. 4181 (1988). The 
CDTA required that records and reports be made of certain transactions 
involving various chemicals. However, products containing ephedrine and 
pseudoephedrine were exempt from the recordkeeping and reporting 
requirements because they were approved for marketing under the Federal 
Food, Drug, and Cosmetic Act. The CDTA also made it illegal to 
distribute a listed chemical ``knowing, or having reasonable cause to 
believe, that the listed chemical will be used to manufacture a 
controlled substance * * *.'' See 21 U.S.C. 841(d)(2).
    In November 1990, the DEA office in San Francisco discovered four 
25

[[Page 59216]]

kilogram drums of ephedrine hydrochloride with Respondent's labels on 
them during the course of an investigation of a large scale 
methamphetamine manufacturing organization. As a result, the DEA office 
in Newark began an investigation of Respondent. A review of United 
Parcel Service (UPS) records, revealed that Respondent had been 
shipping ephedrine to an individual who lived in West Virginia, and 
later in California.
    During the course of its investigation, DEA discovered that a New 
York chemical supplier shipped ephedrine hydrochloride to Respondent on 
July 12, 1990. A review of Respondent's shipping invoices indicated 
that Respondent claims to have shipped 4,000 bottles of 25 milligram 
ephedrine tablets to the individual in West Virginia on July 13, 1990. 
A UPS invoice dated July 13, 1990, indicated that four 70 pound 
packages were shipped from Respondent to the individual in West 
Virginia.
    A DEA investigator compared the incoming bulk shipment from the New 
York chemical company to Respondent with the outgoing shipment from 
Respondent to the individual in West Virginia, and concluded that for 
the amount of bulk ephedrine purchased by Respondent, an insufficient 
number of ephedrine tablets was being manufactured. Additionally, the 
recorded weight of the UPS shipment did not correspond with the same 
shipment as indicated by Respondent's shipping invoice. Each 25 
milligram ephedrine tablet actually weighed 85 milligrams due to the 
binders and fillers holding the tablet together. Therefore, if 4,000 
bottles of 25 milligram tablets were shipped to the individual, as 
indicated on Respondent's shipping invoice, then the weight of the 
shipment would have been more than 2.5 times the weight of what was 
actually shipped according to the UPS record.
    Later in 1990, a New Jersey chemical company contacted DEA 
regarding a suspicious order for ephedrine hydrochloride that it had 
received from Respondent. DEA controlled and monitored the shipment 
from the New Jersey chemical company to Respondent, then from 
Respondent to UPS, and finally to California where it was delivered to 
the individual's residence. About a week later, in early January 1991, 
UPS advised DEA of an additional shipment from Respondent to an address 
in California. Once again, DEA controlled and monitored the shipment 
from Respondent to the individual's residence in California.
    Respondent and Mr. Occhifinto ultimately admitted that from March 
22, 1990 through January 2, 1991, 22 shipments totaling 2,700 kilograms 
of bulk ephedrine hydrochloride powder were shipped from Respondent to 
the individual. DEA confirmed that the product shipped to the 
individual was bulk hydrochloride powder, and not ephedrine tablets as 
indicated by Respondent's invoices. At the time of these shipments, 
records would have been required for the shipment of bulk ephedrine 
hydrochloride, however, no records were required for the shipment of 
ephedrine tablets.
    During the course of this investigation, DEA learned that in late 
1900 Mr. Occhifinto had been arrested in Florida. In August 1991, Mr. 
Occhifinto was convicted in the United States District Court for the 
Middle District of Florida of conspiracy to import hashish, conspiracy 
to possess hashish, importation of hashish and possession of hashish 
with intent to distribute. The pre-sentencing report introduced into 
evidence indicates that the hashish that customs officials confiscated 
from Mr. Occhifinto was given to him, without his knowledge, by a 
traveling companion, Roland Bossi. Both Mr. Occhifinto and Mr. Bossi 
confirmed that ``(Mr.) Occhifinto had no knowledge prior to (his 
arrival at customs) about the contraband that he was carrying.'' The 
sentencing judge granted Mr. Occhifinto a downward departure from the 
sentencing guidelines, ``predicated on the (Respondent's) extremely 
limited involvement in the offense.'' Mr. Occhifinto was fined $200.00 
and received probation.
    Following DEA's investigation of Respondent, Mr. Occhifinto 
cooperated extensively with law enforcement personnel. He provided 
truthful information regarding Respondent's transactions with the 
individual in California, and never hid any aspects of his dealings 
with the individual. He also participated in the criminal prosecution 
of the individual
    On December 17, 1991, Mr. Occhifinto entered into a plea agreement 
with the United States Attorney's Office, District of New Jersey. He 
pled guilty to one count of money laundering under 21 U.S.C. 1956, 
stemming from the transactions between Respondent and the individual, 
and accepted full responsibility for his actions. In the stipulations 
attached to the plea agreement, Mr. Occhifinto admitted that he ``knew 
that the funds were the proceeds of unlawful activity involving the 
manufacture and distribution of controlled substances.''
    Mr. Occhifinto continued to cooperate with law enforcement 
personnel and in September 1995, he entered into a voluntary 
diversionary agreement with DEA, where he agreed, among other things, 
to limit his sales of pseudoephedrine and to provide DEA with 
information regarding Respondent's sales of pseudoephedrine.
    On June 4, 1996, as a result of his guilty plea, the United States 
District Court, District of New Jersey, sentenced Mr. Occhifinto to 18 
months incarceration, and ordered him to pay a fine of $50,000.00. Mr. 
Occhifinto was released from prison on December 30, 1997, and he was 
placed on three years of supervised release.
    In 1993, recognizing, among other things that the use of over-the-
counter ephedrine products in the illegal manufacture of 
methamphetamine was increasing, Congress passed the Domestic Chemical 
Diversion Control Act (DCDCA). Pub. L. 103-200, 107 Stat. 2333 (1993). 
The DCDCA removed the exemption from recordkeeping and reporting 
requirements for single entity ephedrine products. In addition, the 
DCDCA established a registration system for certain handlers of List I 
chemicals.
    On May 7, 1997, Respondent submitted applications for DEA 
Certificates of Registration to manufacture and to export ephedrine. By 
Letter to DEA dated September 9, 1997, Respondent requested a 
modification of both its May 7, 1997 applications, to include the 
listed chemicals pseudoephedrine and PPA. Since Mr. Occhifinto was 
incarcerated at the time that the applications were submitted, another 
individual, by power of attorney, signed the applications and the 
September 7, 1997 letter, on behalf of Respondent.
    The individual who submitted the applications answered ``Yes'' to 
the question on the applications which asked:

    Has the applicant ever been convicted of a crime in connection 
with controlled substances/listed chemicals under State or Federal 
law, or ever surrendered or had a Federal registration revoked, 
suspended, restricted or denied, or ever had a State professional 
license or registration revoked, suspended, denied, restricted or 
placed on probation?

In addition, he answered ``Yes'' to the question which asked:

    If the applicant is a corporation * * * has any officer, 
partner, stockholder, or proprietor been convicted of a crime in 
connection with controlled substances/listed chemicals under State 
or Federal law, or ever surrendered or had a Federal controlled 
substance or listed chemical registration revoked, suspended, 
restricted or denied, or ever had a State professional license or

[[Page 59217]]

controlled substance or chemical registration revoked, suspended, 
denied, restricted or placed on probation?

These questions are hereinafter referred to as the liability questions. 
The applications further stated that if a ``Yes'' answer is provided 
for either of the liability questions, the applicant should ``include a 
statement using the space provided on the [reverse side of the 
application.]'' In addition, the applications stated that for a ``Yes'' 
answer, the applicant is ``required to submit a statement explaining 
such response(s).'' However, the applications did not specifically 
inform the applicant to state the nature of the convictions or to state 
what type of conviction it was or when it occurred. The following 
statement was on the reverse of both applications submitted on behalf 
of Respondent:

1990-1991 I sold ephedrine hydrochloride without filing out the 
appropriate paperwork.
    For the past 7 years NVE has manufactured ephedrine-based 
products without incident and has cooperated extensively with the 
DEA on numerous occasions.

The DEA investigator who testified at the hearing does not believe that 
these responses were adequate, since they do not indicate that the 
president of Respondent was convicted of a crime in connection with 
controlled substances or listed chemicals.
    DEA conducted its pre-registration investigation of Respondent in 
August or September of 1997. DEA recommended that Respondent install an 
alarm system in the area in which listed chemicals were going to be 
stored. According to the DEA investigator, Respondent installed ``(a) 
pretty elaborate alarm system.'' Later in the fall of 1997, DEA tested 
the alarm system and concluded that the physical security at Respondent 
was adequate.
    Since Respondent applied for registration prior to a specific date, 
it was authorized to continue to manufacture and export List I 
chemicals until its applications for registration were acted upon by 
DEA. However, it was only authorized to conduct transactions involving 
listed chemicals with other registered entities or entities that had 
timely filed applications for registration. Respondent recognized this 
limitation on its ability to conduct transactions involving ephedrine 
hydrochloride, pseudoephedrine and PPA. In a letter to its customers 
dated September 25, 1997, Respondent's Senior Vice President Ron Bossi 
stated that ``it is mandatory (that Respondent) have a copy of (the 
customer's) registration application * * * (and Respondent) must 
receive a copy of (the customer's) approved application as well.''
    Respondent regularly sent DEA monthly sales reports for ephedrine, 
pseudoephedrine and PPA products. A review of these reports revealed 
that from January 6, 1998 to October 28, 1998, Respondent entered into 
at least 36 separate transactions involving pseudoephedrine with Select 
Health, a business located in Oklahoma. Respondent never tried to hide 
the existence of these sales to Select Health. Since the quantities 
sold by Respondent to Select Health appeared to be excessive, DEA 
conducted further investigation. It was determined that Select Health 
was not registered with DEA to handle listed chemicals, nor did it have 
an application for registration pending. It was further determined that 
because almost all of Select Health's business is conducted by mail 
order, Select Health needed to be registered with DEA.
    Although Respondent did disclose its sales to Select Health to DEA, 
DEA did not inform Respondent that Select Health was not registered. 
When Respondent independently became aware that Select Health was not 
registered, Respondent contacted DEA.
    After being notified that Select Health had received approximately 
3.5 million dosage units of listed chemicals from Respondent, a DEA 
investigator went to Select Health and met with its owner. The owner 
informed the investigator that Select Health did not have a DEA 
registration, nor was she aware that it needed to be registered with 
DEA. The owner further stated that Respondent never informed her that 
Select Health needed to be registered with DEA.
    In September 1998, DEA seized bottles of 480 tablets of one of 
Respondent's pseudephedrine products from clandestine laboratories.
    Pursuant to 21 U.S.C. 823(h) and 958(c), the Deputy Administrator 
may deny an application for a DEA Certificate of Registration, if he 
determines that granting the registration would be inconsistent with 
the public interest. Section 823(h) requires that the following factors 
be considered in determining the public interest.
    (1) Maintenance by the applicant of effective controls against 
diversion of listed chemicals into other than legitimate channels;
    (2) Compliance by the applicant with applicable Federal, State, and 
local law;
    (3) Any prior conviction record of the applicant under Federal or 
State laws relating to controlled substances or to chemicals controlled 
under Federal or State law;
    (4) Any past experience of the applicant in the manufacture and 
distribution of chemicals; and
    (5) Such other factors as are relevant to and consistent with the 
public health and safety.
    These factors are to be considered in the disjunctive; the Deputy 
Administrator may properly rely on any one or a combination of factors, 
and may give each factor the weight he deems appropriate in determining 
whether any application for registration should be denied See, e.g. 
Energy Outlet,! 64 FR 14269 (1999), see also Henry J. Schwarz, Jr., 
M.D., 54 FR 16422 (1989).
    As a preliminary matter, DEA has consistently held that a retail 
store operates under the control of its owners, stockholders, or other 
employees. therefore, the conduct of these individuals is relevant in 
evaluating the fitness of an applicant or registrant for registration. 
See, e.g., Energy Outlet, 64 FR 14 14269 (1999); Rick's Pharmacy, 62 FR 
42595 (1997); Big T Pharmacy, Inc., 47 FR 51830 (1982). Since, Robert 
Occhifinto is the president of Respondent, his conduct is relevant in 
determining whether or not to grant Respondent's applications for 
registration.
    Regarding factor one and Respondent's maintenance of effective 
controls against the diversion of listed chemicals, it is undisputed 
that the alarm system and physical security at Respondent is adequate 
to protect against the diversion of listed chemicals. However as the 
Government argued, not only did Respondent not maintain effective 
controls against diversion in its transactions with the individual from 
West Virginia and then California, it actively engaged in diversion. It 
shipped ephedrine to the individual on 22 separate occasions knowing 
that the ephedrine would be used in the illicit manufacture of 
methamphetamine. Respondent intentionally falsified its invoices to 
conceal the actual contents of the shipments to avoid DEA's 
recordkeeping requirements.
    In addition, Respondent engaged in at least 36 transactions 
involving listed chemicals with Select Health, a company not registered 
with DEA to handle listed chemicals. Pursuant to 21 CFR 1310.07(a), it 
was Respondent's responsibility to properly identify the other party to 
a transaction by verifying the identity or registration status of the 
other party. Here there is no evidence in the record that Respondent 
attempted to ascertain the registration status of Select Health. As a 
result, Respondent shipped approximately 3.5 million dosage units

[[Page 59218]]

of listed chemicals to a company not authorized by DEA to handle the 
chemical. Respondent's failure to ascertain the registration status of 
Select Health is further evidence of Respondent's failure to maintain 
effective controls against the diversion of listed chemicals.
    As to factor two, Respondent's compliance with applicable law, the 
Government contends that Respondent failed to report to DEA 
transactions involving an ``extraordinary quantity'' of a listed 
chemical. Pursuant to 21 CFR 1210.05(a)(1) (1990 & 1991), a regulated 
person was required to report to DEA ``(a)ny regulated transaction 
involving an extraordinary quantity of a listed chemical.'' At the time 
of the 22 shipments to the California individual, Respondent was 
considered a regulated person and the shipments were considered 
regulated transactions. See 21 CFR 1310.01(e) and (f)(1) (1990 & 1991). 
The question then becomes whether these transactions involved an 
``extraordinary quantity'' of a listed chemical requiring that they be 
reported to DEA.
    ``Extraordinary quantity'' is not defined. In a previous case, the 
Deputy Administrator evaluated the amount of listed chemical used for 
various purposes within the manufacturing industry and determined 
whether the amounts in question were ``extraordinary'' given the buyer 
the buyer's stated purpose. See Alfred Khalily, Inc., d/b/a Alfa 
Chemical, 64 FR 31289 (1999). However in this case, no such evaluation 
can be conducted. The Government did not present any evidence as to why 
the amount of ephedrine hydrochloride powder shipped to the individual 
by Respondent should be considered ``extraordinary.'' Therefore, the 
Deputy Administrator agrees with Judge Randall that the Government 
``has failed to prove by a preponderance of the evidence that any of 
the transactions between the Respondent and (the individual) or Select 
Health involved an `extraordinary quantity' of ephedrine or any other 
listed chemical.'' Thus there is no basis for the Deputy Administrator 
to conclude that Respondent violated 21 CFR 1310.05(a)(1).
    The Government also asserts that pursuant to 21 U.S.C. 841(d)(3) it 
is unlawful for any person to knowingly or intentionally, ``with the 
intent of causing the evasion of the recordkeeping or reporting 
requirements of (the CSA) * * * (to) receive() or distribute() a 
reportable amount of any listed chemical in units small enough so that 
the making of records or filing of reports under (the CSA) is not 
required.'' From March 22, 1990 through January 2, 1991, Respondent 
made 22 shipments of ephedrine powder to the California individual and 
altered invoices to reflect sales of ephedrine tablets rather than 
ephedrine powder because no records were required for the shipment of 
ephedrine tablets in 1990 and 1991. Therefore, the Deputy Administrator 
concludes that Respondent failed to properly record and report these 
shipments of ephedrine powder and intentionally misrepresented the 
shipments on its invoices in violation of 21 U.S.C. 841(d)(3).
    The Government further asserts that Respondent violated 21 U.S.C. 
841(d)(2) which makes it unlawful for any person to knowingly or 
intentionally, ``possess() or distribute() a listed chemical knowing, 
or having reasonable cause to believe, that the listed chemical (would) 
be used to manufacture a controlled substance.'' In his plea agreement, 
Mr. Occhifinto stipulated that he knew that he had received funds from 
the individual originating from unlawful activity involving the 
manufacture and distribution of controlled substances. Therefore, the 
Deputy Administrator agrees with Judge Randall that ``Respondent, 
through Mr. Occhifinto, knew or had reason to believe that the 
ephedrine hydrochloride powder shipped to (California individual) would 
be used for diversionary purposes in violation of 21 U.S.C. 
841(d)(2).''
    The evidence also supports a conclusion that Respondent failed to 
ascertain whether Select Health was registered with DEA as required by 
21 CFR 1310.07. Respondent was clearly aware of its responsibilities as 
evidenced by a letter it placed into evidence signed by its Senior Vice 
President to its customers indicating that Respondent needed a copy of 
its customers' registrations. However, there is no indication that 
Select Health received a copy of this letter. It is undisputed that 
Respondent shipped listed chemicals to Select Health from January 6 to 
October 28, 1998, without Select Health being registered with DEA or 
submitting a timely application for such registration.
    The Government also contends that Respondent materially falsified 
its applications for registration in violation of 21 U.S.C. 
843(a)(4)(A), by providing false information in explanation of its 
affirmative responses to the liability questions. Respondent however 
argues that it did not materially falsify its applications because it 
answered ``Yes'' to the liability questions; an explanation was 
offered; DEA was aware of Mr. Occhifinto's convictions at the time of 
the May 1997 applications; and neither Mr. Occhifinto nor Respondent 
had a motive to attempt to conceal Mr. Occhifinto's prior convictions.
    The Deputy Administrator agrees with Judge Randall that the 
Government has failed to establish that Respondent materially falsified 
its applications since it did answer ``Yes'' to the liability 
questions. However, 21 U.S.C. 843(a)(4)(A) also makes it unlawful for 
any person to knowingly or intentionally ``omit any material 
information from any application * * *.'' Here, Respondent clearly 
failed to disclose on its applications Mr. Occhifinto's hashish 
convictions or his money laundering conviction. This omission is 
clearly material since Mr. Occhifinto is Respondent's president and 
from Respondent's explanation provided on the applications, DEA would 
not have been on notice of his convictions. The Deputy Administrator 
agrees with Judge Randall that ``(d)espite the Respondent's argument to 
the contrary, the absence of this information may be considered a 
material omission regardless of whether the DEA previously was aware of 
the convictions. * * * The registration application and the applicable 
law do not provide any exceptions for withholding information that 
already may be within the DEA's purview.'' Therefore, the Deputy 
Administrator concludes that Respondent omitted material information 
from its applications in violation of 21 U.S.C. 843(a)(4)(A).
    The Deputy Administrator notes that there very well may have been a 
further material omission of information on the applications. Evidence 
introduced at the hearing by Respondent indicates that Mr. Occhifinto's 
traveling companion who gave him the bottles containing hashish was 
named Roland Bossi, and that Mr. Bossi was convicted of controlled 
substance related offenses. Further evidence introduced by Respondent 
indicates that the September 1997 letter sent to Respondent's customers 
regarding the need for a copy of customers' DEA registrations was 
signed by a Ron Bossi, Senior Vice President. The Deputy Administrator 
is concerned that this may be the same individual, however the 
Government presented no evidence to support such a conclusion. 
Therefore, the Deputy Administrator has not considered these suspicions 
in rendering his decision in this matter.
    Pursuant to factor three, Mr. Occhifinto's convictions can be 
considered since he is Respondent's president. It is undisputed that in 
1991,

[[Page 59219]]

Mr. Occhifinto was convicted of four counts relating to the smuggling 
of hashish. Mr. Occhifinto was sentenced to probation based upon his 
minimal participation. Further, Mr. Occhifinto, was also convicted in 
1991 following his guilty plea to one count of money laundering as it 
related to his shipments of listed chemicals to the California 
individual. Mr. Occhifinto was ultimately sentenced in 1996 to 18 
months incarceration followed by three years of supervised release.
    As discussed under factor two, evidence in the record seems to 
suggest that Respondent's Senior Vice President, who appeared to have a 
much more significant role in the hashish smuggling endeavor was also 
convicted of controlled substance-related offenses. However, since no 
evidence was presented by the Government to indicate that it is the 
same individual, the Deputy Administrator has not relied on this 
information in rendering his decision.
    Regarding factor four Respondent's experience in manufacturing and 
distributing listed chemicals, Respondent has manufactured and 
distributed pharmaceutical products since 1986. However, the record is 
clear that Respondent distributed listed chemicals from March 22, 1990 
through January 2, 1991 knowing that they were to be used in the 
illicit manufacture of methamphetamine. In addition, as recently as 
1998, Respondent was responsible for the distribution of approximately 
3.5 million dosage units of a listed chemical to an unregistered 
customer.
    As to factor five, Respondent's product was found at clandestine 
laboratories in 1990, which initiated the investigation of Respondent, 
and in 1998. While the evidence in the record does not support a 
finding that Respondent knew or had reason to believe that these 
chemicals were being diverted to the illicit manufacture of controlled 
substances, the Deputy Administrator agrees with Judge Randall that 
``[d]espite what efforts the Respondent may be making to prevent such 
an occurrence, these products have been diverted.''
    The Deputy Administrator agrees with Judge Randall that the 
Government has presented a prima facie case for denial of Respondent's 
applications for registration. However, there is evidence in the record 
regarding Mr. Occhifinto's extensive cooperation with law enforcement, 
his acceptance of responsibility for his actions, and his active 
involvement in religious and community-related charitable activities. 
Further, Mr. Occhifinto did not attempt to hide Respondent's dealings 
with Select Health and in fact reported to DEA that Select Health was 
not registered. But as Judge Randall noted, ``(w)hile the Respondent 
may be recognized for its efforts in reporting this violation to the 
DEA, refraining from any future transactions with Select Health, and in 
hiring a regulatory affairs representative, the fact remains that had 
greater preventative actions been taken, the thirty-six unlawful 
transactions never would have occurred. Remedial efforts are not 
superior to preventative actions.''
    In her opinion, Judge Randall indicated that she is troubled by 
DEA's lack of action in this matter since the shipments to the 
California individual occurred in 1990 and 1991. Judge Randall stated 
that ``(b)y failing to act against the Respondent from 1991 until the 
Order to Show Cause in 1998, the Government has weakened its 
credibility in its argued concern for the public interest in light of 
the Respondent's past business activities. If the DEA believed then, 
what it now purports to argue, it should have acted at the time to 
limit or prohibit the Respondent's, or at least Mr. Occhifinto's, 
handling of listed chemicals.'' The Deputy Administrator disagrees with 
Judge Randall. There was no action that DEA could have taken, short of 
the criminal action that it did, or possibly civil action. Respondent 
did not even apply for registration until May 1997 and all applicants 
who submitted their applications by a specific date were allowed to 
continue in operation until action was taken regarding the applications
    Judge Randall concluded, and the Deputy Administrator agrees, that 
despite Mr. Occhifinto's cooperation with law enforcement, his 
willingness to comply with DEA security requests, and his activities 
within the community, it is inconsistent with the public interest to 
issue Respondent a DEA registration. Respondent has failed to maintain 
effective controls against diversion as evidenced by its shipments to 
the California individual. Mr. Occhifinto has been convicted of two 
offenses related to the handling of controlled substances and listed 
chemicals. As recently as 1998, Respondent made a number of shipments 
of a listed chemical to an unregistered customer. Finally, no 
assurances have been made by Respondent that procedures are in place to 
prevent future transgressions. While Respondent has apparently hired a 
regulatory compliance officer, no evidence was presented concerning 
that individual's duties, responsibilities, and authority within 
Respondent. Also, no evidence was presented as to the extent of Mr. 
Occhifinto's participation in the daily operations of Respondent. As a 
result, the Deputy Administrator agrees with Judge Randall that one 
cannot ``adequately assess the weight to be given Mr. Occhifinto's 
prior egregious misconduct in determining the course of business to be 
followed in the future by the Respondent.'' Therefore, the Deputy 
Administrator concludes that Respondent's registration with DEA would 
be inconsistent with the public interest.
    Accordingly, the Deputy Administrator of the Drug Enforcement 
Administration, pursuant to the authority vested in him by 21 U.S.C. 
823 and 824 and 28 CFR 0.100(b) and 0.104, hereby orders that the 
applications for registration as an exporter of List I chemicals and as 
a manufacturer for distribution of List I chemicals, submitted by NVE 
Pharmaceuticals, Inc., be, and they hereby are, denied. This order is 
effective December 2, 1999.

    Dated: October 25, 1999.
Donnie R. Marshall,
Deputy Administrator.
[FR Doc. 99-28603 Filed 11-1-99; 8:45 am]
BILLING CODE 4410-09-M