Letter of the law becomes law enforcement by letter

From The Oregonian, October 5, 2004

Letter of the law becomes law enforcement by letter is part of UNNECESSARY EPIDEMIC: A Five-Part Series by The Oregonian – 2004 / 2005
SEE – All five major stories here.

A DEA program to document dealers of meth chemicals has holes large enough to drive truckloads through

The veteran investigators at the U.S. Drug Enforcement Administration found themselves on unfamiliar ground in December 1997, when federal law made them responsible for determining who should be entrusted to distribute pseudoephedrine products.

More than 3,000 companies, many of them self-employed wholesalers who distributed snacks and novelties to mini-marts, lined up seeking DEA licenses. Any company that beat the deadline was allowed to remain in business until the DEA finished reviewing its application, which had to be renewed each year.

Approving the applications was the job of DEA specialists previously assigned to investigating the nation’s 1 million doctors, pharmacies and pharmaceutical factories.

With manufacturers, meanwhile, DEA officials needed to develop benchmark sales figures for the industry that might indicate suspicious volumes. There were dozens of generic pill makers to examine in addition to the big-name brands.

The law said inspectors could deny or revoke any type of license if company officials lacked safeguards against illicit sales, broke “applicable” laws, were convicted of a drug felony or didn’t have proper experience. The agency also could weigh any other factor it considered “relevant and consistent with public health and safety.”

Yet in practice, current and former DEA officials say they were unsure whether such judgment calls would stand up in court if companies challenged them. The preferred alternative was a warning letter.

The following list describes DEA-approved companies whose ephedrine and pseudoephedrine products were discovered in meth labs. Except for Neil Laboratories, none of the companies or their principals were accused of breaking drug laws.

Location: East Windsor, N.J.
Role: Manufacturer

What happened: 3.5 million tablets diverted to the black market; 50 law enforcement actions linked to Neil products in 11 states; four attempts to export millions of tablets to a Tijuana company that submitted bogus import documents.

What the DEA did: In 1998, responding to Neil’s repeated attempts to ship to the Mexican customer, the agency rejected Neil’s export requests. Yet officials allowed Neil to continue making pseudoephedrine pills for the domestic market — more than 100 million tablets a year, the DEA now estimates.

The DEA shut down 13 distributors that carried Neil tablets after millions were used in the meth trade. But the manufacturer itself received only warning letters.

In August 2000, officials audited the company’s books; later they launched a criminal investigation, sending an informant in May 2001 to tape-record a conversation with the company’s part-owner, Mantu Patel.

The outcome: Patel said he had no problem with the informant selling Neil’s products to meth makers, according to a federal affidavit. Patel proposed a phony paper trail that would keep the sales under the table, then made two shipments of pseudoephedrine powder to the informant’s California business, the affidavit said.

Patel was charged with supplying pseudoephedrine to the meth trade. The felony charge was dropped, and he pleaded guilty this year to a misdemeanor charge involving record-keeping.

In February 2003, the DEA announced that Neil had agreed to stop selling over-the-counter pseudoephedrine products. But the company’s Web site advertised ephedrine and pseudoephedrine until September 2003, when The Oregonian asked the DEA’s Newark, N.J., office about the ads. They were pulled a few days later.

Company officials did not respond to written questions from The Oregonian.

Location: Hauppauge, N.Y.
Role: Manufacturer

What happened: Tablets found at 140 meth labs and their dumpsites from 1997 through 2001; four unauthorized shipments of ephedrine from PDK to Canada in 1994 and 1995; thousands of tablets shipped from PDK to mail-order customers, two of them later convicted on meth charges.

What the DEA did: The agency sent the company at least 22 warning letters in four years. In 2000, the DEA halted two 3-ton shipments of ephedrine powder from India on their way to PDK, saying they might be diverted.

The outcome: PDK fought the DEA decision to block the two shipments, arguing that the diversion of its products to meth labs occurred at the retail level, beyond the company’s control. For the DEA to block a foreign shipment because it “may” be diverted further down the distribution chain, the company said, is beyond the agency’s authority.

An administrative law judge sided with the company, finding no evidence that the number of PDK tablets found in meth labs was unusually high. A federal appeals court this year also sided with PDK, ordering the DEA to reconsider its action.

The appeals court noted that PDK had taken steps to safeguard its products: cutting off distributors suspected of selling products in bulk; ending sales to California or Missouri, states where meth production is high; and hiring a former DEA official to review company policies.

The case continues, and the company remains legally approved to sell ephedrine and pseudoephedrine products.

Location: Bohemia, N.Y.
Role: Manufacturer

What happened: About 30 million Gemini pseudoephedrine pills found at 32 labs and dumpsites from 1996 to 1997. Gemini customer Spectrum International convicted of selling more than 350 million pseudoephedrine tablets to the California meth trade from November 1996 through April 1997. Customer Daniel Rosen, who paid Gemini $400,000 for pseudoephedrine from August through December 1997, was convicted of selling millions of pills to the meth trade. Customer Randa Saffo, who bought 40 million Gemini pills, was convicted of supplying the meth trade.

What the DEA did: The agency warned Gemini at least 10 times that its products were used to make meth. The DEA blocked imports of pseudoephedrine destined for Gemini in 1996 because its distributor, Spectrum, was suspected of supplying the black market. Yet officials allowed Gemini to resume imports in 1997 after the company agreed to supply Spectrum’s customers directly and cease its California sales.

The outcome: DEA agents searched Gemini’s offices in January 1998 but filed no charges against the company. Gemini remains a registered pseudoephedrine seller.

Company officials did not respond to written questions from The Oregonian.

Location: Dallas, Texas
Role: Wholesaler

What happened: Products found in 20 meth labs and dumps across eight states as of October 2000. Used unlisted 800 numbers on vehicle cell phones and never advertised. Accepted $70,000 cash from one pseudoephedrine customer whose products, it turned out, had been found in meth labs. Sold pseudoephedrine to a customer whose address was a day-care center.

What the DEA did: OTC founder Larry Petit says — and DEA officials confirm — that he ran a DEA informant operation at his pseudoephedrine distributorship, L&M Vending, from 1994 to 1997. Petit says he recorded about 100 telephone conversations with shady buyers and arranged dozens of major deals with black marketeers in California and Nevada. He says the DEA recovered more than $1 million in diverted pseudoephedrine because of his efforts.

In 1999, facing death threats from people he had incriminated, Petit was ready to get out of the business. But at the urging of his DEA contacts, Petit says, he formed OTC Distribution to do strictly legitimate sales.

DEA officials allowed it after Petit signed an agreement to go above and beyond the law’s record-keeping requirements.

When OTC’s products started appearing in meth labs, the DEA sent 14 warning letters. In March 2000, an audit of the company found thousands of bottles unaccounted for.

The outcome: On July 17, 2000, DEA officials suspended the company’s license. Investigators ultimately documented sales of 92 million pills by OTC in the first eight months of its registration, rivaling the amount of legitimate cold pills sold by Pfizer, maker of Sudafed, Actifed and Benadryl.

Petit says he feels betrayed by the DEA. The audit of his books was faulty, he says, lumping aspirin in with pseudoephedrine. He says he reported all suspicious sales, and all his customers — including the day-care center — were DEA-licensed. Petit says he didn’t need to advertise; he had a national list of pseudoephedrine distributors to contact.

DEA officials penalized him, Petit contends, to hide their own incompetence in screening applicants.

“They knew that pseudoephedrine was a problem,” Petit said. “They went out and dished out 3,000 licenses. They brought this on themselves.”