80 FR 29025 - Keith Ky Ly, D.O.; Decision and Order

DEPARTMENT OF JUSTICE
Drug Enforcement Administration

Federal Register Volume 80, Issue 97 (May 20, 2015)

[Federal Register Volume 80, Number 97 (Wednesday, May 20, 2015)]
[Notices]
[Pages 29025-29037]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-12139]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Keith Ky Ly, D.O.; Decision and Order

    On January 24, 2013, I, the Administrator of the Drug Enforcement 
Administration, issued an Order to Show Cause and Immediate Suspension 
of Registration (hereinafter, OTSC-ISO or Order) to Keith Ky Ly, D.O. 
(Respondent), of Mountlake Terrace, Washington. GX 2, at 1. The Order 
proposed the revocation of Respondent's DEA Certificate of 
Registration, which authorizes him to dispense controlled substances in 
schedules II through V, as a practitioner, as well as the denial of any 
pending applications to renew or modify his registration, on the ground 
that his ``continued registration is inconsistent with the public 
interest, as that term is defined in 21 U.S.C. 823(f).'' Id.
    More specifically, the OTSC-ISO alleged that on February 2, 2012, 
law enforcement officers arrested Respondent's girlfriend, who was then 
driving his vehicle, for driving with a suspended license and that 
during a search of the vehicle, found ``one pound of marijuana, 
approximately $3,900 cash in a vacuum sealed bag located in [her] 
purse, $5,000 cash located in a hidden compartment, and three 
prescription bottles containing controlled substances located in'' her 
backpack. Id. at 2. The Order further alleged that Respondent had 
issued one of the prescriptions found in the backpack to an employee, 
and that during an interview when he attempted to recover the vehicle, 
Respondent stated that he lived with his girlfriend, that she worked at 
his medical practice, and that she and the employee whose medication 
was found in the backpack ``often shared medications.'' Id. The Order 
then alleged that this showed that Respondent had ``knowledge of 
illegal activity occurring between [his] employees and [took] no 
corrective action.'' Id.
    Next, the OTSC-ISO alleged that law enforcement officers discovered 
that several premises owned by Respondent were being used as marijuana-
grow houses. Id. More specifically, the Order alleged that: (1) On May 
30, 2012, the Renton, Washington fire department responded to a fire at 
his Quincy

[[Page 29026]]

Avenue property and seized approximately 700 marijuana plants; (2) on 
July 5, 2012, state and local law enforcement officers obtained a 
search warrant for his property located at 20118 14th Avenue NE., 
Shoreline, Washington, and seized approximately 489 marijuana plants 
and six bags of processed marijuana; (3) on July 6, 2012, state and 
local law enforcement officers executed a search warrant at 
Respondent's personal residence in Bothell, Washington, and ``seized 
$12,000 in cash, two firearms, marijuana grow documents, approximately 
15 grams of processed marijuana, and multiple prescription bottles 
containing pills,'' including an unlabeled bottle containing 
hydrocodone, and a bottle containing clonazepam, which Respondent had 
prescribed for patient R.M.; and (4) on July 7, 2012, state and local 
law enforcement obtained a search warrant for his property located at 
5006 104th Place NE., Marysville, Washington and seized marijuana 
leaves and grow equipment. Id. at 2-3.
    Next, the OTSC-ISO alleged that on July 13, 2012, DEA personnel 
``conducted an inspection and audit at [Respondent's] registered 
address.'' Id. at 3. The Order alleged that Respondent had a 75 percent 
shortage of both testosterone 200mg/ml and phentermine 37.5mg, as well 
as a 14 percent shortage of hydrocodone 10/500mg. Id. Based on the 
audit results, the Order further alleged that Respondent ``failed to 
maintain accurate and complete records and failed to account for these 
controlled substances.'' Id. (citing 21 U.S.C. 827(a)(1) and 842(a)(5); 
21 CFR 1301.71, 1304.03, 1304.04 (a) & (g), and 1304.21). The Order 
then alleged that Respondent had committed additional recordkeeping 
violations, in that he ``failed to take and maintain an initial or 
biennial inventory of all stocks of controlled substances on hand,'' 
``failed to record essential elements on approximately 128 dispensing 
records,'' ``failed to maintain a dispensing/administration log for 
testosterone and Testim samples, located during the on-site 
inspection,'' and ``failed to maintain all Schedule III-V acquisition 
invoices and record the dates of receipt[ ] on the invoices.'' Id. at 
3-4 (citations omitted).
    Finally, the OTSC-ISO alleged that Respondent ``failed to make 
required dispensing reports'' to the Washington State Prescription 
Monitoring Program ``on approximately 45 separate occasions from 
January to July 2012.'' Id. at 4. As the legal basis for this 
allegation, the Government noted that Washington State ``requires a 
dispensing physician to report to the . . . PMP all instances in which 
he or she dispenses more than a 24-hour supply of controlled 
substances.'' Id. (citing Wash. Rev. Code Sec.  70.225.020; Wash. 
Admin. Code Sec.  246-470-030).
    Based on the above, I made a preliminary finding that Respondent 
``illegally manufactured controlled substances in violation of state 
and federal law, illegally possessed and distributed highly addictive 
controlled substances . . . and ha[d] generally failed to maintain 
effective controls to guard against theft and prevent diversion of 
controlled substances.'' Id. I therefore ordered that Respondent's 
registration be suspended effective immediately. Id. (citing 21 U.S.C. 
824(d)).
    According to the Declaration of a DEA Diversion Investigator (DI), 
on January 28, 2013, DEA Special Agents and DIs went to Respondent's 
registered location and personally served him with the OTSC-ISO, along 
with ``a sample request for hearing form.'' DI Declaration, at 9. 
According to the DI, later that same day, he also hand-delivered a copy 
of the OTSC-ISO and the hearing request form to Respondent's ``attorney 
at the time.'' \1\ Id.
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    \1\ The courts are clear that service of an initial pleading on 
an attorney does not constitute adequate service unless a party has 
granted authority to the attorney to accept process on his behalf. 
See, e.g., United States v. Ziegler Bolt & Parts Co., 111 F.3d 878, 
881 (Fed. Cir.1997). There being no such evidence showing that 
Respondent granted such authority to the attorney, I rely only on 
the DI's statement that Respondent was personally served.
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    The OTSC-ISO plainly advised that: (1) ``[w]ithin 30 days after the 
date of receipt of this Order to Show Cause and Immediate Suspension of 
Registration, you may file with the DEA a written request for a hearing 
in the form set forth in 21 CFR 1316.47''; (2) ``[i]f you fail to file 
such a request, the hearing shall be cancelled in accordance with 
paragraph 3''; (3) ``[s]hould you decline to file a request for a 
hearing . . . you shall be deemed to have waived the right to a hearing 
and the DEA may cancel such hearing''; (4) ``[c]orrespondence 
concerning this matter, including requests [for a hearing] should be 
addressed to the Hearing Clerk, Office of Administrative Law Judges 
[OALJ] . . . 8701 Morrissette Drive, Springfield, VA 22152''; and (5) 
``[m]atters are deemed filed upon receipt by the Hearing Clerk.'' GX 2, 
at 4-5 (citations omitted). Notwithstanding this, Respondent did not 
file a request for hearing with the Office of Administrative Law Judges 
until April 4, 2013. GX 4, at 1.
    The matter was then assigned to an Administrative Law Judge (ALJ), 
who ordered that the proceeding be terminated because Respondent had 
``failed to timely request a hearing and failed to assert good cause 
for his 36-day delay.'' Id. at 2. Thereafter, on April 18, 2013, 
Respondent, who was now represented by counsel (a different counsel 
than identified by the DI in his declaration), filed a motion to 
reconsider and re-open. GX 5. Therein, Respondent requested a full 
hearing on the allegations, as well as ``additional time to file his 
Request for Hearing based on this motion showing of good cause.'' Id. 
at 1.
    In the motion, Respondent did ``not contest that he was effectively 
served with a copy of the'' OTSC-ISO. Id. at 2. He also did not dispute 
that his prior attorney ``was in contact with [him] during and after 
the period for filing a timely appeal.'' Id. Rather, Respondent 
maintained that he ``sent a letter requesting appeal of the [OTSC-ISO] 
to [a] local Seattle-based DEA agent . . . by certified mail on 
February 4, 2013,'' who ``did not respond to the appeal letter or 
inform Respondent that an appeal of the [OTSC-ISO] could not be 
perfected by sending it to him.'' Id. at 2-3. Respondent further 
asserts that he ``sought the advice of and had several conversations 
with [his former] attorney,'' and that ``[b]ased on these 
conversations, [he] `filed' an appeal NOT with the DEA . . . Office of 
Administrative Law Judges, but instead with the Office of the Inspector 
General (OIG),'' and that he faxed the appeal ``to the OIG on February 
20, 2013, and again on March 8, 2013.'' Id. at 3. According to 
Respondent, ``[t]he OIG suggested [he] contact the DEA.'' Id.
    Respondent further asserted that he ``discussed the matter with an 
assistant in his office, who believed the correct place to file the 
appeal was with the office of the United States Attorney General.'' Id. 
Respondent stated that ``[a]n `appeal' was sent to that address on 
February 11, 2013.'' Id.
    Next, Respondent contended that on March 14, 2013, he was advised 
by his then-counsel that the latter ``and his partner had decided not 
to represent [him] in this . . . proceeding,'' but that ``[t]his was 
after the request for hearing deadline had expired.'' Id. Respondent 
then contended that on March 28, he spoke with two Seattle-based DEA 
agents, ``who told him he needed to file the request for hearing right 
away.'' Id. According to Respondent, he then ``filed his request for 
hearing on April 4, 2013 with the DEA'' OALJ. Id.
    Respondent asserted that he ``was confused about how and where to 
file his request for a hearing'' and that ``[t]he source of his 
confusion came from his

[[Page 29027]]

contacts with [his former] attorney . . ., with his office assistant, 
and from the lack of response by [a DEA Agent], although a late effort 
to clarify the correct means to request a hearing was provided by the 
DEA agents.'' Id. at 3-4. He further maintained that he attempted ``in 
good faith to ask for a hearing'' and that ``[n]one of the alternatives 
employed by [him] were done for purposes of delay.'' Id. at 4.
    Respondent argued that his case is similar to that of Steven J. 
Watterson, 67 FR 67413 (2002). Therein, the Agency set aside a final 
order where a party had failed to file a request for a hearing based on 
``conflicting guidance'' having been ``given to'' an Applicant by an 
Agency ``official concerning how and when the matter would be 
resolved.'' Id. at 67414. Respondent argued that Watterson stands for 
the proposition that `` `[g]ood cause' . . . to set aside and rescind a 
decision terminating a proceeding . . . require[s] a showing of both 
excusable neglect and a meritorious defense.'' GX 5, at 5. He then 
argued that ``[t]he acceptance and retention by'' the DI of his appeal 
request ``was misleading, particularly when [the DIs] actively 
encouraged [him] to file his appeal correctly AFTER the appeal period 
had lapsed,'' and that ``[t]his was a source of conflicting guidance 
for Respondent.'' Id. at 6.
    Respondent also relied on Pincay v. Andrews, 389 F.3d 853 (9th Cir. 
2004) (en banc). There, a lawyer failed to file a notice of appeal 
within the thirty-day period provided for doing so in the Federal Rules 
of Appellate Procedure, based on his reliance on the erroneous advice 
of a paralegal that the notice of appeal need not be filed until sixty 
days after the issuance of a judgment, rather than the thirty days 
provided in the applicable Federal Rule of Appellate Procedure. Id. at 
855. The Ninth Circuit held that the failure to timely file the notice 
of appeal constituted excusable neglect, notwithstanding its 
conclusions that the lawyer's reliance on the paralegal's reading of 
the rule was ``negligent'' and that the ``lawyer's failure to read an 
applicable rule is one of the least compelling excuses that can be 
offered.'' Id. at 859. The court nonetheless held that the district 
court did not abuse its discretion in concluding that the lawyer's 
untimely filing was the result of excusable neglect. Id. The court 
further noted that ``the decision whether to grant or deny an extension 
of time to file a notice of appeal should be entrusted to the 
discretion of the district court because the district court is in a 
better position than'' the appeals court to evaluate the relevant 
factors, and that the decision was to be determined ``within the 
context of the particular case,'' which, in Pincay, had gone on for 
fifteen years. Id. However, the court also observed that ``[h]ad the 
district court declined to permit the filing of the notice, we would be 
hard pressed to find any rationale requiring us to reverse.'' Id.
    Based on Pincay, Respondent argued that: (1) There is no prejudice 
to the Agency because his registration remains suspended; (2) the 
thirty-six day delay in filing his hearing request had no impact on the 
proceeding; (3) ``the reason for the delay was confusion on his part,'' 
that his conduct is no worse than that found excusable in Pincay and 
was ``based in part on omissions by'' the DI, and was not made in bad 
faith; and (4) that he acted promptly to rectify his untimely filing. 
GX 5, at 8-9. Accordingly, Respondent argued that he has shown good 
cause for setting aside the ALJ's termination order. Id. at 9.
    The ALJ granted Respondent's motion for reconsideration but then 
denied his motion to reopen the proceedings. Order Granting 
Respondent's Motion for Reconsideration and Denying Respondent's Motion 
to Reopen the Case, at 10 (Order on Reconsideration) (GX 7). While 
concluding that she had jurisdiction to consider Respondent's motion 
for reconsideration, the ALJ rejected Respondent's contention that he 
had shown good cause for his untimely filing.
    First, the ALJ rejected Respondent's contention that under 
Watterson, he had demonstrated good cause because he had received 
``conflicting guidance'' from the DI to whom he sent his ``appeal'' 
letter. Id. at 7. The ALJ found that Watterson was not controlling 
because, during the period in which Respondent could have filed his 
hearing request, the DI did not provide conflicting guidance but rather 
no guidance at all. Id. at 8. Indeed, the DI did not provide any advice 
to Respondent regarding his hearing request until he met with the DI on 
March 28, 2013. Id.
    Next, the ALJ rejected Respondent's contention that ``good cause'' 
existed to excuse his untimely filing because his former attorney 
``committed `excusable neglect.' '' Id. More specifically, the ALJ 
noted that the excusable neglect standard of the Federal Rules of 
Appellate Procedure, see Pincay, and the Federal Rules of Bankruptcy 
Procedure (Rule 9006(b)(1)), which was discussed by the Supreme Court 
in Pioneer Inv. Servs. v. Brunswick Assoc., 507 U.S. 380, 396 (1993), 
``do not govern our [DEA] proceedings.'' \2\ Order on Reconsideration, 
GX 7, at 8. The ALJ further noted that even under Pioneer, 
``respondents can `be held accountable for the acts and omissions of 
their chosen counsel.' '' Id. (quoting Pioneer, 507 U.S. at 397).
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    \2\ While it true that DEA has not adopted any of the various 
federal rules of procedure, it has frequently looked to those rules 
for guidance in interpreting its procedural rules. See Bio 
Diagnostic Inc., 78 FR 39327, 39328-29 & n.1 (2013) (applying 
federal court decisions interpreting Fed. R. Civ. P. 56 (governing 
summary judgment), in determining whether summary disposition was 
appropriately granted in Agency proceeding); Glenn D. Kreiger, 76 FR 
20020, 20021 n.3 (2011) (applying federal court decisions and 
holding that a challenge to the sufficiency of service of a Show 
Cause Order is waived if not raised in a respondent's first 
responsive pleading). In this regard, it is noted that the Federal 
Rules of Civil Procedure have expressly adopted the ``excusable 
neglect'' standard for determining whether ``good cause'' exists to 
extend the time for ``[w]hen an act may or must be done'' when a 
``motion [is] made after the time has expired.'' Fed. R. Civ. P. 
6(b)(1). As agency decisions make clear, the good cause standard is 
not limited to those instances where a respondent or his attorney 
are blameless in failing to timely file a pleading. See, e.g., Tony 
T. Bui, 75 FR 49979, 49980 (2010) (finding good cause existed to 
excuse untimely filed hearing request where attorney used an 
incomplete address to mail the request but when the request was 
returned, promptly proceeded to mail it to the correct address).
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    The ALJ found that Respondent was represented by another attorney 
``at the time [he] was served with the Order to Show Cause,'' and that 
this attorney did not inform him that he would not represent him in the 
DEA proceeding until after the deadline had passed for filing his 
hearing request. Id. at 8-9. The ALJ then concluded that while the 
``[a]ttorney was negligent in failing to tell Respondent in a timely 
fashion that he would no longer represent [him], . . . Respondent 
cannot argue that he detrimentally relied on [the attorney] to send out 
the request for hearing.'' Id. at 9. This was so because ``Respondent, 
himself, sent out the letters to [the DI],\3\ OIG, and [the] Attorney 
General.'' Id. The ALJ thus concluded ``that Respondent was ultimately 
responsible for filing a timely request for hearing, despite his former 
attorney's shortcomings.'' Id.
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    \3\ Regarding the letter to the DI, the ALJ noted that 
Respondent wrote: ``I am writing to you as an appeal for the 
immediate and urgent help in the matter of my DEA license 
reinstatement.'' Termination Order, at 9 n.8 (quoting Motion for 
Reconsideration, Ex. 29, at 1). The ALJ further noted that ``[w]hile 
Respondent's intent may have been to request a hearing, Respondent 
did not explicitly express this intent in the letters he sent before 
April 4, 2013.'' Id.
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    Finally, the ALJ rejected Respondent's contention that his 
``confusion . . . support[ed] a finding of `good cause.' '' Id. As the 
ALJ explained, ``[t]he clear language of the Order to Show Cause states 
that `[c]orrespondence concerning

[[Page 29028]]

this matter, including requests referenced in paragraphs 1 [i.e., a 
hearing request] and 2 above, should be addressed to the Hearing Clerk, 
Office of Administrative Law, Drug Enforcement Administration, 8701 
Morrissette Drive, Springfield, VA 22152.' '' Id. (quoting OTSC-ISO, at 
5). Finding ``that this language is an unmistakably clear explanation 
of where to send a request for hearing, especially for an educated 
professional, such as the Respondent,'' the ALJ held that 
``Respondent's confusion does not justify a finding of `good cause.' '' 
Id.
    The ALJ thus rejected Respondent's contention that he had shown 
good cause to excuse his untimely filing. Id. She further concluded 
that ``Respondent's failure to file a timely request [constituted] a 
waiver of his right to a hearing under 21 CFR 1301.43(d).'' Id. at 9-
10. The ALJ thus denied Respondent's motion to reopen the matter.
    Thereafter, the Government forwarded a Request for Final Agency 
Action and the Investigative Record to me. Having reviewed the record, 
I adopt the ALJ's finding that Respondent did not demonstrate good 
cause for his failure to file his hearing request within the thirty-day 
period as required by 21 CFR 1301.43(a).
    As the ALJ explained, the OTSC-ISO provided a clear explanation as 
to the procedure to be followed for filing a hearing request. That 
procedure required that Respondent or his representative file his 
hearing request with the ``Hearing Clerk, Office of Administrative Law 
Judges, Drug Enforcement Administration, 8701 Morrissette Drive, 
Springfield, VA 22152,'' and that ``[m]atters are deemed filed upon 
receipt by the Hearing Clerk.'' GX 2, at 5.
    Moreover, the OTSC-ISO included an attachment entitled: ``REQUEST 
FOR HEARING.'' Id. at 6. The attachment states that ``[a]ny person 
desiring a hearing with regard to an Order to Show Cause must, within 
thirty (30) days from receipt of the Order to Show Cause, file a 
request for a hearing in the following format.'' Id. The attachment 
then provides a sample form, with the following address block: DEA 
Headquarters, Office of the Administrative Law Judges, Hearing Clerk, 
8701 Morrissette Drive, Springfield, Virginia 22152.

Id. Notably, neither the OTSC-ISO, nor the attachment, directed 
Respondent, if he desired a hearing, to file his hearing request with 
DEA field personnel, the Office of Inspector General, or the Attorney 
General himself.
    Also unavailing is Respondent's reliance on Pincay v. Andrews to 
argue ``good cause'' exists to excuse his untimely filing because 
either he or his lawyer committed ```excusable neglect.' '' \4\ Motion 
for Reconsideration, GX 5, at 7. As the Supreme Court explained in 
Pioneer, ``inadvertence, ignorance of the rules, or mistakes construing 
the rules do not usually constitute excusable neglect.'' 507 U.S. at 
392. Moreover, as the Ninth Circuit noted in Pincay, the ``failure to 
read an applicable rule is one of the least compelling excuses that can 
be offered.'' 389 F.3d at 859. Indeed, as the Ninth Circuit noted in 
Pincay, ``had the district court declined to permit'' the appellant to 
file his notice late, it ``would [have] be[en] hard pressed to find any 
rationale requiring us to reverse.'' Id.
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    \4\ While the ALJ interpreted Respondent's excusable neglect 
argument as being based on his former attorney's failure to tell him 
that he would not represent Respondent until after the deadline had 
passed, Respondent's argument appears to rely on his own confusion 
as to where to file the hearing request and not on the aforesaid 
conduct of the attorney.
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    In his affidavit, Respondent asserts that he ``sought the advice of 
and had several conversations with'' his former attorney ``concerning 
the OSC and filing an appeal,'' and that ``[b]ased on these 
conversations, I `filed' an appeal NOT with the DEA . . . Office of the 
Administrative Law Judges, but instead with the Office of the Inspector 
General.'' Respondent's Declaration, at 9. To the extent Respondent 
seeks to rely on the advice he received from his former attorney to 
support a showing of good cause, his vague assertions do not establish 
that he was ever told not to comply with the instructions on the OTSC-
ISO. Nor does Respondent assert that his former attorney ever agreed to 
represent him in this matter, let alone that he agreed to file a 
request for a hearing on Respondent's behalf. To the extent Respondent 
relies on his own confusion as the reason for his untimely filing, see 
Mot. For Recon., at 8; there is no reason to excuse his neglect when 
the OTSC-ISO was personally served on him and set forth, with 
unmistakable clarity, the procedures to be followed for requesting a 
hearing.\5\
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    \5\ As for Respondent's letters to the OIG and the Attorney 
General, Respondent did not submit a copy of any of these letters 
with his motion. See generally Attachments to Respondent's Motion. 
Indeed, the only letter relevant to this issue which Respondent 
submitted for the record (other than his appeal request) was a copy 
of an April 4, 2013 letter he received from the OIG, which 
``acknowledge[d] receipt of [his] correspondence dated July 11, 
2011'' and explained that his ``complaint has been forwarded to'' 
the DEA ``Office of Professional Responsibility.'' Id. at Ex. 31. 
Obviously, this letter could not have been a response to a misfiled 
hearing request given that it referenced his correspondence, which 
was dated approximately eighteen months before he was even served 
with the OTSC-ISO. Nor, even if the OIG's letter was misdated, does 
it seem likely that it was prepared in response to a hearing 
request, given that it referred to his ``complaint'' and referred it 
to the ``Office of Professional Responsibility.'' Id.
    As for Respondent's assertion that he ``discussed the matter . . 
. with an assistant in [his] office, who believed that the correct 
place to send the appeal was to the office of the Attorney 
General,'' Resp. Decl., at 9; this begs the question of why he did 
not discuss where to file his appeal with the attorney (who had also 
received a copy of the OTSC-ISO) he was then consulting with.
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    Respondent further argues that ``[t]he acceptance and retention by 
[the DI] of the appeal request . . . was misleading, particularly when 
he and [another DI] actively encouraged [him] to file his appeal 
correctly AFTER the appeal period had lapsed'' and that [t]his was a 
source of conflicting guidance for'' him. Id. at 6. However, as the ALJ 
noted, this argument goes nowhere because Respondent does not claim 
that he had any discussion with the DI regarding the manner for 
properly filing his hearing request within the thirty-day period, let 
alone that he was given misleading advice as to how to file his 
request.\6\ Indeed, nothing prevented Respondent from filing a separate 
hearing request with the Office of Administrative Law Judges during the 
thirty-day period. I therefore reject Respondent's contention that his 
untimely filing should be excused because he relied on ``conflicting 
guidance'' he received from agency personnel. See Watterson, 67 FR at 
67413.
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    \6\ So too, if there was evidence that the DI had told 
Respondent that he would forward his hearing request to the Office 
of Administrative Law Judges and failed to do, I would order that a 
hearing be granted. Respondent, however, makes no such claim, but 
rather, relies only on the DI's silence during the period for 
requesting a hearing.
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    Accordingly, I hold that Respondent has failed to demonstrate good 
cause to excuse his failure to timely file his hearing request. I 
therefore find that Respondent has waived his right to a hearing on the 
allegations and issue this Decision and Order based on the 
Investigative Record (including Respondent's Declaration) submitted by 
the Government. I make the following findings.

Findings of Fact

    Respondent was the holder of DEA Certificate of Registration 
#BL6283927, pursuant to which he was authorized, prior to the Immediate 
Suspension of his registration, to dispense controlled substances in 
schedules II through V as a practitioner, at the registered address of 
6603 220th Street SW., Mountlake Terrace, Washington 98043. GX 1.

[[Page 29029]]

Respondent's registration was due to expire on March 31, 2014. Id. 
However, according to the registration records of the Agency, on March 
13, 2014, Respondent submitted an application to renew his 
registration. While under the Agency's regulation, his renewal 
application was untimely because he was subject to an Order to Show 
Cause and Immediate Suspension of Registration and did not submit the 
application ``at least 45 days before the date on which [his] 
registration [wa]s due to expire,'' 21 CFR 1301.36(i), and thus his 
registration has expired, his application remains pending before the 
Agency.
    Respondent is also licensed by the State of Washington (as well as 
by the States of Texas and California) as an Osteopathic Physician. 
Resp. Declaration, at 1. According to Respondent, he has never been 
subject to discipline by any state licensing body. Id. However, 
Respondent has been subject to discipline by the Texas Medical Board. 
Moreover, while this matter was pending, the Washington Board of 
Osteopathic Medicine and Surgery issued Respondent an Ex Parte Order of 
Summary Action which suspended his state license to practice as an 
osteopathic physician and surgeon. In re Keith Ky Ly (Wash. Bd. 
Osteopathic Med. & Surg., Sep. 22, 2014) (Ex Parte Order of Summary 
Action, at 1).
    With respect to the Texas Medical Board, on May 20, 2011, 
Respondent entered into an Agreed Order. See In re Application for 
Licensure By Keith Ly, D.O., at 6 (Tx. Med. Bd. 2011). Therein, the 
Texas Board found that Respondent failed to report on his application 
for a Texas Medical License that in February 1990, while undergoing his 
``residency training,'' he had been ``placed on probation'' for being 
late and missing shifts, as well as for failing to report a 2007 
arrest. Id. at 2. While the Board granted Respondent a license, it also 
assessed an administrative penalty of $5,000 and placed him on 
probation for two years.\7\ Id. at 3-4.
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    \7\ Based on the Texas Board's action, the Washington Board 
filed a Statement of Allegations against Respondent. See In re Keith 
K. Ly, No. M2010-1665, Statement of Allegations and Summary of 
Evidence (Wash. Dept. Health, Oct. 12, 2012). However, these 
allegations were settled in a Stipulation To Informal Disposition, 
the terms of which included that it ``is not [a] formal disciplinary 
action.'' See Stipulation To Informal Disposition, In re Ly, at 2. 
However, the proceeding was still subject to reporting to the Health 
Integrity and Protection Databank and the National Practitioner 
Databank. Id.
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    Accordingly, I find that notwithstanding his statement, Respondent 
has been subject to discipline by a state licensing body. While the 
basis of the Texas Board's action does not provide a reason under the 
CSA for DEA to take any action against Respondent's registration, 
Respondent's statement was nonetheless false and clearly offered to 
influence the decision of the Agency to grant him a hearing on the 
allegations. Accordingly, I consider Respondent's lack of candor in 
assessing the credibility of the various assertions contained in his 
declaration.

The Arrest of Respondent's Girlfriend

    According to the DI, on February 2, 2012, Respondent's girlfriend 
(TB),\8\ who was driving his Mercedez Benz SL 65,\9\ was stopped by 
local police, cited for driving under a suspended license, and 
arrested. DI Decl., at 1; Resp. Decl., at 3. Respondent corroborated 
that the car was his, when in his declaration he addressed the 
allegation and stated, inter alia, that on January 24, 2012, he had 
withdrawn $5000 from his bank account to pay for the remodeling of his 
clinic and left the money ``in the small hidden compartment space of 
the car.'' Resp. Decl., at 3. Accordingly, I find that Respondent's 
statements corroborate the DI's assertion that the car was owned by 
Respondent.
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    \8\ According to Respondent, TB has lived with him ``for the 
past 2 years'' and ``is now [his] wife.'' Resp. Decl., at 5. 
Moreover, TB worked in Respondent's clinic. Resp. Decl., at Ex. 4.
    \9\ According to the DI's affidavit, the car was registered to 
Respondent. DI's Decl., at 1. While the DI's affidavit offers no 
explanation as to the basis of knowledge for this assertion, 
Respondent, in his declaration, stated that a friend of TB ``had 
borrowed the car the previous day without my knowledge.'' Resp. 
Decl., at 3. I further note that in a March 3, 2012 letter to a 
local narcotic task force and the King County Prosecuting Attorney's 
Office, Respondent claimed that he owned the car and sought its 
return. Resp. Decl., at Ex.4. Accordingly, I find that Respondent 
owned the car that TB was driving when she was stopped and arrested.
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    Following the arrest of Respondent's girlfriend, the police 
apparently impounded his car, and upon searching it, found one pound of 
marijuana,\10\ the aforesaid $5000, and a backpack which contained pain 
medication. Id.; DI Decl., at 2.\11\ As for the marijuana, Respondent 
asserted that it belonged to a medical marijuana patient (LHE) who was 
a friend of TB, and points to a statement from the purported owner of 
the marijuana. Resp. Decl., at 3; see also Resp. Mot., at Ex.1. 
Therein, LHE stated that she had an engine problem with her car and 
that she borrowed Respondent's car from TB ``for a few hours to pick-up 
. . . one [m]arijuana prescription bag'' from a marijuana collective. 
Resp. Mot., at Ex. 1. According to LHE, she ``was in a hurry to return 
the car to [TB and] forget [sic] to remove the bag behind the driver 
seat.'' Id. However, LHE's statement is unsworn, and given that the 
purported reason for borrowing Respondent's car was to obtain the 
marijuana, I find her story that she left a one pound bag of marijuana 
\12\ in the car because she was in such a hurry to return it to be 
utterly ludicrous.\13\
---------------------------------------------------------------------------

    \10\ In his statement, Respondent does not dispute that the 
arresting authorities found a one pound bag of marijuana. Resp. 
Decl., at 3.
    \11\ According to the DI, the police also found $3900 in cash in 
a vacuum sealed bag in TB's purse. DI Decl., at 2.
    \12\ According to data collected by the Agency, during the 
period in which TB was stopped, one pound of marijuana had a street 
value of $1500 to $1800 in the Seattle area. At .5 grams per joint, 
one pound would be enough to make approximately 900 joints.
    \13\ I further note that in his March 3, 2012 letter to a local 
narcotics task force and the King County Prosecuting Attorney's 
Office, in which he sought the return of his car, while Respondent 
again denied knowledge of the marijuana, he made no mention of the 
story that LHE had borrowed the car from his girlfriend.
---------------------------------------------------------------------------

    As for the cash, Respondent offered two explanations for its 
source. First, he maintained that the day before, a patient paid him 
$5000 cash as a deposit for a liposuction procedure. Resp. Decl., at 3. 
Respondent also produced an unsworn letter from the purported patient 
to this effect and a form entitled: ``SmartLipo & Coolsculpting Price 
Quote.'' Id. at Ex. 2. While the latter purports to show that the 
patient paid a $5000 deposit in cash, the date of the deposit clearly 
appears to have been altered. See id.
    Second, as found above, Respondent maintained that he had withdrawn 
$5,000 from his bank account on January 24, 2012 to pay for clinic 
remodeling, and that he had placed the money ``in the small hidden 
compartment space of the car.'' Resp. Decl., at 3. To support his 
claim, Respondent produced a bank statement showing that he made a cash 
withdrawal of $5,000. Resp. Ex. 3. However, numerous entries in the 
statement, including Respondent's various balances for both his 
checking and savings account, are blacked out. Id.
    Putting aside that Respondent offered two different stories as for 
why so much cash was found in his car, I find neither explanation 
credible. As for the claim that the money was from a patient who had 
paid $5,000 cash the day before for a procedure, the patient's 
statement is unsworn and thus lacks even the most basic indicia of 
reliability. Moreover, on the price quote form, the date of the 
patient's deposit was clearly written over. Also, even acknowledging 
that the patient's procedure was likely not covered by insurance, it 
seems most unlikely that the patient would pay this

[[Page 29030]]

amount in cash rather than by check or credit card.
    As for his second story, it also seems most unlikely that 
Respondent would pay to remodel his clinic with cash (rather than check 
or credit card), let alone be carrying that much cash around in his car 
for nine days. By contrast, carrying large sums of cash is consistent 
with engaging in the distribution of marijuana.
    In his declaration, the DI also asserted that the search of the 
vehicle found ``multiple prescription bottles containing pills,'' and 
that one of the bottles bore a label indicating that the drugs had been 
prescribed to T.V., ``an office employee of'' Respondent. DI's Decl., 
at 2 (citing GX 9). The DI further stated that ``[t]wo of the bottles 
found in the vehicle . . . were unlabeled and contained phentermine and 
phendimetrazine.'' Id. (citing GX 10). Finally, the DI asserted that 
when Respondent ``attempted to recover his vehicle, he told law 
enforcement officers that his employees often shared their 
medication.'' Id.
    Respondent did not dispute that drugs were found in TB's backpack. 
Rather, he asserted that they ``belonged to my office manager,'' that 
he had prescribed the drugs ``for her liposuction procedure pain a few 
months prior,'' and that the drugs were ``left at my house when she 
visited for [a] dinner party.'' Resp. Decl., at 3. Respondent then 
maintained that ``[a]s a medical doctor, I do not encourage nor allow 
any patients to share medication'' and that he ``would absolutely 
terminate my employee if found engaging in sharing medication and would 
report them to the authorities.'' Id. Respondent did not, however, 
explain when the purported dinner party had occurred.
    Consistent with Respondent's admission, the record does include a 
photograph of a prescription vial; its label lists the patient as a 
person whose name corresponds with the initials T.V., the drug as 
hydrocodone/acetaminophen, and Respondent as the prescriber. See GX 9, 
at 1.\14\ Moreover, while the photograph does not show whether there 
were pills remaining in the vial, in his declaration, Respondent does 
not dispute that the vial contained pain medication, which hydrocodone 
is. I thus find that substantial evidence supports a finding that 
Respondent's girlfriend unlawfully possessed hydrocodone, which had 
been prescribed to another person.
---------------------------------------------------------------------------

    \14\ Government Exhibit 9, however, contains seven additional 
photographs, including: (1) A photograph of two unlabeled vials 
(only one of which clearly contains tablets); (2) a photograph of 
two plastic bags, which purportedly contain phentermine and a red 
document, the date of which is unclear; (3) a photograph of a 
plastic bag containing a drug similar in appearance to the drug in 
the previous photograph; (4) a photograph of a vial containing 
yellow capsules and orange tablets, the label of which had been 
removed; (5) a vial bearing a label for a prescription issued by 
Respondent for clonazepam to a patient whose initials are R.M.; (6) 
six bottles bearing manufacturer's labels (several of which are 
labelled as professional samples) for Viagra, Topiramate, Ultram ER, 
and Meridia; and (7) two vials, whose labels list Respondent as the 
prescriber, his girlfriend T.B. as the patient, and the drugs as 
lorazepam and hydrocodone/acetaminophen, with pills being visible 
only in the latter vial. Generally, the DI's declaration offers no 
statements linking these photographs to the various items which were 
purportedly seized during the various searches of Respondent's car 
and properties he owned.
    Moreover, Government Exhibits 8, 9, 10, 11a, 11b, 13, 14, and 15 
each contain the exact same set of eight photographs, although not 
necessarily in the same order. Providing multiple copies of the 
exact same set of photographs does not, however, make the first set 
of photographs any more probative of the facts for which they were 
offered.
---------------------------------------------------------------------------

    In support of the DI's assertion that two unlabeled vials which 
contained phentermine and phendimetrazine were also seized, the DI 
cited Government Exhibit 10, but without regard to the specific page. 
However, in his declaration, the DI offered no statement to the effect 
that he participated in the search of Respondent's car, nor otherwise 
set forth the basis of his knowledge for making this assertion. Nor 
does the record contain any affidavits or police reports prepared by 
those officers who did participate in the arrest and search, nor other 
documents such as an inventory of the search, a chain of custody, and 
lab test results, which would support the DI's assertion.\15\
---------------------------------------------------------------------------

    \15\ Even giving weight to the DI's assertion that Respondent 
``purchased these items [i.e., phentermine and phendimetrazine] on 
August 5, 2011 from Distributor A.F. Hauser,'' DI's Decl., at 5 (] 
34), this is not enough to overcome the insufficiency of the 
evidence with respect to the assertion that these drugs were seized 
during the February 2, 2012 search.
---------------------------------------------------------------------------

    Indeed, while Government Exhibit 10 contains eight photographs, in 
reviewing this matter it is apparent that the exhibit is not limited to 
the evidence that was seized following the search of Respondent's car, 
but also contained photographs of evidence that may well have been 
seized during several of the searches described below. Most 
significantly, the Exhibit contains two photographs of vials (one 
showing two vials, the other showing a single vial) which were missing 
their labels, with no identification of when and from whom the vials 
were seized. Finally, while at least two of the vials appear to contain 
tablets (the third vial being murky), the Government provided no 
evidence (such as lab test results) explaining the basis for the DI's 
assertion that these vials contained phentermine and phendimetrazine.

The Searches of Respondent's Properties

    As noted above, the Show Cause Order also alleged that state and 
local law enforcement officers conducted searches of four different 
premises which Respondent owned, and found marijuana plants at his 
properties which were located in Renton and Shoreline, Washington, as 
well as six bags of processed marijuana at the latter property. GX 2, 
at 2. In addition, the Show Cause Order alleged that marijuana grow 
documents and ``15 grams of processed marijuana'' were found at 
Respondent's personal residence, and that both marijuana grow equipment 
and marijuana leaves were found at a fourth property he owns. Id. at 3.
    In his declaration, the DI made various assertions with respect to 
each of the searches. For example, with respect to the May 30, 2012 
search of the Renton residence, the DI stated that the Renton Fire 
Department had responded to an electrical fire at the premises, which 
``is owned by'' Respondent and ``discovered a large marijuana grow,'' 
and that thereafter, ``[t]he Renton Police Department executed a search 
warrant of the residence and seized approximately 700 marijuana 
plants.'' DI Decl., at 2. The DI further stated that Respondent ``told 
law enforcement that he rented the [premises] to [one] Jack Tran,'' but 
that the police ``were unable to locate and/or identify Mr. Tran.'' Id. 
at 3. While all of this may be true, here again, the DI's declaration 
offers no statement to the effect that he participated in the search, 
nor otherwise sets forth the basis of his knowledge.
    With respect to the July 5, 2012 search of the Shoreline residence, 
the DI stated that it was owned by Respondent, and that during the 
search by state and local law enforcement, ``approximately 489 
marijuana plants and six (6) bags of processed marijuana'' were seized. 
Id. at 3. The DI further stated that TB and three other ``marijuana 
tenders were arrested leaving the Shoreline residence,'' that TB 
``admitted'' to the police ``that she was learning to grow marijuana at 
the Shoreline residence,'' and that two ``of the marijuana tenders 
arrested at the Shoreline residence possessed loose phentermine tablets 
in their pockets.'' Id. (citing GX 11).\16\ Here

[[Page 29031]]

too, all of this may be true, but the DI's affidavit offers nothing 
bordering on substantial evidence to support any of these 
assertions.\17\
---------------------------------------------------------------------------

    \16\ As explained below, while Respondent denies knowledge as to 
how his properties were being used, he does not dispute that 
marijuana was being grown at the various properties. Thus, his 
declaration corroborates the basic thrust of the DI's assertions.
    That being said, the DI's affidavit contains numerous assertions 
for which there is no foundation to conclude that they are based on 
the DI's ``personal knowledge'' as that term is commonly understood. 
Indeed, many of the DI's assertions regarding the searches of 
Respondent's properties appear to be based on hearsay statements, 
the reliability of which cannot be assessed because the DI did not 
identify the source of the information and the Government did not 
include various documents (such as police reports, search 
inventories, and test results) in the record.
    More specifically, the DI asserts that TB and three other 
persons were arrested during the search of the Shoreline residence; 
that during an interview with law enforcement, TB admitted that she 
was learning how to grow marijuana; and that two of the persons had 
loose phentermine tablets in their pockets. Again, the DI offered no 
statement to the effect that he participated in either the search of 
the Shoreline residence or the interview of TB. Nor did he set forth 
any other basis for these assertions.
    As for the two marijuana tenders who purportedly possessed loose 
phentermine, the DI further asserted that ``[s]tate law requires the 
labeling of dispensed medication'' and that ``[t]he lack of labeled 
prescription bottles suggests the controlled substances were 
diverted.'' DI's Decl., at 3. This too may be true, but there is no 
evidence in the record establishing the names of these individuals 
and that they obtained the controlled substances from Respondent. 
Indeed, while the DI cited GX 11 as support for his assertion that 
these individuals possessed phentermine, this exhibit simply 
contains a series of photographs including two of white tablets (one 
of which contains a red form which is illegible), various 
prescription vials (some of which contain pills, others which it is 
unclear if they do) and bottles containing various drug samples. 
Even assuming that the white tablets are phentermine (even though 
there is no evidence they were tested), nothing in the record 
establishes from whom and when these tablets were seized.
    \17\ Here too, even giving weight to the DI's assertion that 
Respondent ``purchased this exact item [i.e., more phentermine] on 
March 16, 2012 from Distributor A.F. Hauser,'' DI Decl., at 5 (] 
35), this evidence does not overcome the insufficiency of the 
evidence with respect to the assertion that these drugs were seized 
from the marijuana tenders during the search of the Shoreline 
residence. And because the evidence is insufficient to establish 
that loose phentermine was seized from the two marijuana tenders who 
were purportedly at the Shoreline residence, the assertions of the 
DI that: (1) One of the tenders ``was never seen by'' Respondent, 
and (2) that while one of the tenders was seen by Respondent, he was 
not prescribed any controlled substance, id. at 5-6 (] 36), is 
insufficient to establish that Respondent unlawfully distributed the 
phentermine to either person.
---------------------------------------------------------------------------

    The DI further asserted that L.E. was one of the marijuana tenders 
arrested during this search, and that using the Washington State 
Prescription Monitoring Program, ``[i]t was discovered . . . that in 
June 2012, [Respondent] prescribed 30 dosage units of 10/500 mg 
hydrocodone to L.E.'' Id. Citing Government Exhibit 12, the DI further 
stated that he ``verified the prescriptions [sic] by obtaining a hard 
copy of the prescription through'' the pharmacy which filled it. Id. at 
3-4. The DI then stated that on July 13, 2012, he subpoenaed ``L.E.'s 
patient chart from'' Respondent, but that ``[t]he office staff could 
not locate a patient chart for L.E., nor could they find his/her name 
in the electronic medical records.'' Id. at 4.
    Government Exhibit 12 is a copy of a prescription issued by 
Respondent on June 28, 2012 for thirty (30) tablets of Lortab 
(hydrocodone/acetaminophen) 10/500. See GX 12. However, the 
prescription was issued to a patient whose initials are H.L., and not 
L.E. See id. Thus, the prescription does not support the DI's 
assertion, and the Government points to no other evidence that 
Respondent prescribed a controlled substance to a patient whose name 
corresponds with the initials of L.E., let alone that he violated the 
CSA's prescription requirement in doing so. See GX 2, at 2, ] 3-b. 
(OTSC-ISO).
    Regarding the July 6, 2012 search of Respondent's and TB's 
residence (which is owned by the former), the DI asserted that state 
and local law enforcement seized ``firearms, marijuana grow documents, 
approximately 15 grams of processed marijuana, and multiple 
prescription bottles containing pills.'' DI Decl., at 4. The DI then 
stated that Investigators found ``an unlabeled'' vial, ``which 
contained hydrocodone''; one labeled vial, ``which contained clonazepam 
that [Respondent] prescribed to patient R.M. in 2010''; and two ``stock 
bottles that contained Meridia and diazepam''; even though Respondent 
``was not, nor has ever been, registered with DEA at his Bothell 
residence.'' Id. (citing GXs 13, 14, and 15).
    As for the unlabeled prescription bottle which purportedly 
contained hydrocodone, here again, the DI's Declaration is devoid of 
any statement that he was present during the search and there is no 
other evidence establishing that the vials were seized from 
Respondent's residence. And while GX 13 contains a photograph of two 
vials, with pills that are barely visible in the vials, there is no 
photograph of the pills outside of the vials, which might have shown 
that the pills bore the NDC Code for hydrocodone. Nor is there any 
evidence establishing that the pills were tested by a laboratory and 
found to be hydrocodone.\18\
---------------------------------------------------------------------------

    \18\ Even giving weight to the DI's assertion that Respondent 
``purchased this item [i.e., hydrocodone] on March 16, 2012 from 
Distributor A.F. Hauser, Inc.,'' DI Decl., at 6 (] 37); this 
statement likewise does not overcome the lack of substantial 
evidence establishing that these drugs were seized during the search 
of Respondent's residence.
---------------------------------------------------------------------------

    As for the DI's assertion that the police also seized a vial 
containing clonazepam, here again, there is no evidence either that the 
DI was present during the search of Respondent's residence or that a 
vial containing this drug was seized during that search. And while the 
record contains a photograph of a vial, which bears a label listing 
Respondent as the prescriber, the drug as clonazepam, and the patient's 
name corresponding with the initials R.M., there is no evidence 
establishing that any pills were in the vial, let alone that the pills 
were clonazepam.\19\
---------------------------------------------------------------------------

    \19\ In his Declaration, Respondent denied that he ``ha[s] or 
store[s] any [h]ydrocodone or [c]lonazepam at home.'' Resp. Decl., 
at 5. He further stated that ``[t]he prescription bottles are 
prescribed for my wife for her liposuction procedures post-
operational pain where she had four liposuction procedures performed 
from 7/9/11 to 11/3/12.'' Id.
---------------------------------------------------------------------------

    Turning to the DI's assertion that Respondent ``also possessed two 
(2) stock bottles that contained Meridia and diazepam,'' here again, 
there is no evidence establishing that the DI participated in the 
search of Respondent's residence, or any other evidence establishing 
that these drugs were seized during that search. To be sure, the 
Government cites to an exhibit, which contains several photographs, 
including one which shows six white bottles (several of which are 
clearly marked as professional samples) which bear the manufacturer's 
label for such drugs as Viagra, Topiramate, Ultram ER, and Meridia. See 
GX 15, at 1. However, of these drugs, only Meridia (sibutramine) is a 
controlled substance under federal law, 21 CFR 1308.14(e), and putting 
aside the absence of any evidence as to where and when this drug was 
seized, here again, there is no evidence that there actually was any of 
the drug in the bottle at the time it was seized. As for the DI's 
assertion that a stock bottle of diazepam was also seized during the 
search of Respondent's residence, here too, there is no evidence 
(indeed, not even a photograph of the bottle) to support the DI's 
contention.
    Finally, the DI stated that on July 7, 2012, state and local law 
enforcement executed a search warrant at a fourth residence which is 
owned by Respondent and located in Marysville, Washington. DI Decl., at 
5. The DI further stated that during the search, the officers ``seized 
some marijuana grow equipment and marijuana leaves.'' Id. Here again, 
the DI's affidavit does not establish the basis of his knowledge.
    Regarding the searches of the properties other than his residence, 
Respondent acknowledged that he owned ``three rental properties.'' 
Resp. Decl., at 3. He also acknowledged that

[[Page 29032]]

``one of the rental houses had an electrical burn that shed light on 
the others that had illegal activities.'' Id. at 4. He then asserted 
that he ``had irresponsible tenants that took advantage of the 
locations by cultivating [m]arijuana for 6 months without [his] 
knowledge'' and that he ``do[es] not personally inspect, supervise, or 
manage the rentals on a regular basis,'' because he works six days a 
week in his medical practice, and that ``[w]hen the rent is timely paid 
with no complaints that need repair, [he has] no need to bother tenants 
at their home.'' Id. at 3-4. Later in his declaration, Respondent 
stated that ``[i]f something is broke they send me a bill for repair 
and I deduct it from the rent.'' Id. at 5.
    On May 22, 2013, Respondent was indicted in United States District 
Court for the Western District of Washington and charged with 
conspiracy to manufacture and distribute marijuana. DI Decl., at 11; 
see also GX 31. Moreover, on October 22, 2013, a superseding indictment 
was filed against Respondent and his girlfriend.
    The superseding indictment alleged that Respondent and others 
conspired to grow marijuana at several residential properties and that 
Respondent ``made at least three of those properties available . . . 
for the purpose of manufacturing marijuana,'' that he ``purport[ed] to 
rent [the houses] to others, knowing that the persons listed as 
`tenants' for these properties did not, in fact, reside there and/or 
did not pay rent,'' that he and his co-conspirators ``set up large-
scale marijuana grows for the purpose of manufacturing marijuana within 
the houses'' and ``caused the electrical power in these houses to be 
diverted around the meters, thus stealing power to run the marijuana 
grows,'' and that he and his co-conspirators ``recruited and directed 
others to help grow and harvest the marijuana plants, and maintain the 
houses and yards at these properties.'' Superseding Indictment, at 2, 
United States v. Thi Nguyen Tram Bui and Keith Ky Ly, No CR13-157JCC 
(W.D. Wash. 2013) (citing, inter alia, 21 U.S.C. 841(a)(1) and 
(b)(1)(A), 846). The Indictment further charged Respondent with three 
counts of manufacturing marijuana at his properties in Renton, 
Shoreline and Marysville, Washington, as well as three counts of 
maintaining drug-involved premises. Id. at 4-7 (citing 21 U.S.C. 
841(a)(1) and (b)(1)(B); 856(a)(1) and 856(b)). The indictment also set 
forth additional allegations regarding the quantities of marijuana 
plants and/or harvested marijuana that were seized during the searches 
of his Renton and Shoreline properties, as well as the quantity of 
marijuana which was seized from his girlfriend. Id. at 3.
    Respondent went to trial; the jury found him guilty on all 
counts.\20\ On December 19, 2014, the United States District Court 
convicted Respondent on each of the above counts and sentenced him to 
60 months of imprisonment, imposed a four-year term of supervised 
release following his release from imprisonment, imposed an assessment 
of $1,000, and ordered that various property be forfeited. Judgment, at 
1-6, United States v. Keith K. Ly (W.D. Wash. Dec. 19, 2014).
---------------------------------------------------------------------------

    \20\ Respondent was also charged and convicted of three counts 
of wire fraud, based on claims he made to an insurance company.
---------------------------------------------------------------------------

The DEA Investigation

    According to the DI's affidavit, on July 13, 2012, DEA 
Investigators visited Respondent's registered location and upon 
obtaining his consent, conducted an inspection. DI's Decl., at 6; see 
also GX 20 (Notice of Inspection manifesting Respondent's consent to 
the inspection and witnessed by the DI). As part of the inspection, the 
Investigators asked Respondent to produce his records, including his 
controlled substance inventories, dispensing and administration logs, 
invoices, returns, distributions, as well as theft and loss reports. 
Id.
    The DIs determined that Respondent ``failed to take and maintain an 
initial or biennial inventory of all stocks of controlled substances on 
hand.'' Id. While Respondent produced a dispensing log, which covered 
the period from December 23, 2010 to July 11, 2012, according to the 
DI, 128 of the entries lacked required information. Id. More 
specifically, the DI asserted that 82 entries did not have the 
patient's address, the name of the controlled substance, the finished 
form, and the dispenser's initials. Id. at 6-7. According to the DI, 
another 46 entries lacked the patient's address, name of the controlled 
substance, the quantity dispensed, and the dispenser's initials. Id. at 
7.
    As part of the record, the Government submitted a copy of 
Respondent's dispensing log. GX 21. A review of the log corroborates 
the DI's assertion that many of the entries which record the dispensing 
of controlled substances lack various items of information required by 
federal law, including the patient's address and the dispenser's 
initials. See id. at 6-9. As for the contention that numerous entries 
did not contain the name of the controlled substance that was 
dispensed, it is true that numerous entries were missing the 
``Medication ID Sticker.'' Id. at 1-5. Yet the Government produced no 
evidence to prove that these dispensings actually involved controlled 
substances as opposed to non-controlled drugs.
    The DI also asserted that Respondent ``failed to maintain or 
provide any dispensing/administration records for Testosterone and 
Testim samples located at the registered location.'' DI Decl., at 7. 
The DI further asserted that Respondent did not ``maintain[ ] at least 
four Schedule III-V acquisition invoices and by not recording the dates 
of receipt on at least five invoices.'' Id.\21\
---------------------------------------------------------------------------

    \21\ The DI also stated that during the inspection, Respondent 
did not provide any ``Report[s] of Theft or Loss of Controlled 
Substances'' (DEA Form 106). DI Decl., at 7. He also reviewed all of 
the hard copy Theft and Loss Reports on file with the Seattle Field 
Office, as well as queried the Drug Theft Loss database, which 
gathers all of the Form 106s which are submitted online, and 
determined that Respondent had not submitted any such reports. Id.
---------------------------------------------------------------------------

    The DIs also conducted an audit of the controlled substances which 
were located at Respondent's registered location. Id. In his 
declaration, the DI stated that ``DEA used an initial inventory date of 
January 1, 2012, beginning of business, and noted that the initial 
inventory was `zero' due to the lack of an initial or biennial 
inventory.'' Id. To determine the amounts of the various drugs 
Respondent purchased, the DIs relied on ``a summary of the invoices 
provided by distributor A.F. Hauser''; they also used his dispensing 
log to determine the amounts that he dispensed. Id. The DI further 
stated that he used ``the closing inventory assembled by DEA 
investigators during the on-site inspection.'' Id.
    The DI then asserted that the ``audit revealed large shortages of 
testosterone, phentermine, phendimetrazine, and a 14% shortage or[sic] 
hydrocodone.'' Id. More specifically, the DI asserted that Respondent 
had a shortage of 300 mg of Testosterone 200 mg/ml, 6,028 tablets of 
phentermine 37.5 mg,\22\ 2,102 tablets of phendimetrazine 35 mg, and 71 
tablets of hydrocodone 10/500 mg. Id. at 8.
---------------------------------------------------------------------------

    \22\ According to the DI's declaration, the shortage was 6.028 
tablets. DI Decl., at 8. Based on the audit chart, which lists the 
shortage as 6,028 tablets, GX 23, I conclude that the former figure 
is a typographical error.
---------------------------------------------------------------------------

    The Government also submitted a document which appears to be the 
aforesaid summary of Respondent's controlled substance purchases from 
A.F. Hauser between January 1, 2010 and July 24, 2012, see GX 16, as 
well as the audit computation chart. GX 23. Significantly, the audit 
chart lists the initial inventory date as ``1-1-2010 COB'' and not 
January 1, 2012 as set

[[Page 29033]]

forth in the DI's declaration. Compare GX 23 with DI Decl., at 7.
    This disparity has a material impact on the accuracy of the audit 
results. For example, according to the DI's declaration (and the 
computation chart), Respondent was short more than 6,000 dosage units 
of phentermine. Yet, according to the summary of Respondent's purchases 
and the invoices, Respondent only purchased 3,000 dosage units of 
phentermine during 2012. Thus, if--as stated by the DI--the beginning 
date of the audit period was January 1, 2012 and zero was assigned as 
the opening inventory, Respondent could not have been short 6,000 
dosage units.
    So too, in his declaration, the DI asserted that Respondent was 
short more than 2,100 phendimetrazine tablets (the same figure listed 
on the computation chart, which also lists 3,000 dosage units as having 
been purchased). However, the Government's other evidence shows that 
Respondent did not purchase any phendimetrazine during 2012. See GX 16. 
Here again, Respondent could not have been short 3,000 dosage units if 
the beginning date of the audit period was January 1, 2012, as stated 
by the DI in his sworn declaration.
    As for the testosterone, while there is evidence that Respondent 
also purchased testosterone in February 2012, the data as presented in 
the computation chart suggests that he purchased 400 10ml bottles and 
that he could not account for 300 bottles. See GX 23 (listing drug as 
``Testosterone 200mg/ml--10 ml bottle'' and listing the ``[t]otal 
purchased'' as 400.) However, the Government's other evidence, i.e., 
the listing of Respondent's purchases, which according to the DI was 
prepared by A.F. Hauser, lists the quantity of Respondent's purchases 
as only ``2.00.'' GX 19. Thus, here again, there is reason to question 
the reliability of the audit results.\23\
---------------------------------------------------------------------------

    \23\ Moreover, even if the entry in the computation chart was 
actually intended to be 400mg (or two bottles) as opposed to 400 
bottles, at most Respondent would not be able to account for 1.5 
bottles.
---------------------------------------------------------------------------

    With respect to the remaining drugs, there is evidence that 
Respondent purchased 500 dosage units of hydrocodone during 2012 (GX 
19) and was short 71 tablets. GX 23. There is also evidence that at the 
time of the July 2012 inspection, Respondent had on hand 21 Testim 1% 
samples. While the DIs concluded that Respondent had an overage of 
these 21 samples, there is no evidence as to who distributed the 
samples to him and there is no evidence the DIs asked Respondent for 
any of the documentation establishing the amount of Testim that was 
distributed to him.\24\ Finally, the Government's evidence shows that 
in March 2012, Respondent purchased 1,000 dosage units of Lorazepam, GX 
16, and the computation chart indicates that the audit balanced with 
respect to this drug. GX 23.
---------------------------------------------------------------------------

    \24\ It is further noted that while the computation chart 
contains a column for the ``Total Purchased,'' which was added to 
the ``Initial Inventory'' to arrive at the ``Amount Accountable 
For,'' samples are not typically purchased and the chart contains no 
column for other means of acquisition. GX 23.
---------------------------------------------------------------------------

    In his declaration, the DI further asserted that Respondent failed 
to report to the State of Washington's Prescription Monitoring Program 
(PMP), ``at least 45 occasions from January through July 2012'' in 
which he ``dispensed more than a 24-hour supply of controlled 
substances.'' DI Decl., at 8. According to the DI, this was a violation 
of Washington law. Id. The Government did not, however, submit the PMP 
reports which establish the basis for its assertion.
    Regarding this allegation, Respondent stated that he ``was not 
aware of this Washington State law requirement . . . [and] thus cannot 
have . . . repeatedly failed'' to comply or to have shown a 
``consistent disregard'' for this requirement. Resp. Decl., at 8. 
Respondent then stated that ``I am now made fully aware and will comply 
with the law. This is not an intentional violation.'' Id.\25\
---------------------------------------------------------------------------

    \25\ Based on the DI's Declaration, the Government proposes that 
I make a factual finding that following the issuance of the 
Immediate Suspension Order, Respondent ``issued at least three (3) 
prescriptions to two (2) separate patients on February 1, March 2, 
and March 30, 2013, in violation of the Order.'' Request for Final 
Agency Action, at 5 (citing DI's Declaration at 9-10). However, in 
its Request for Final Agency Action, the Government does not propose 
that I make any conclusion of law based on this conduct. See id. at 
6-12. Accordingly, I do not consider this conduct.
---------------------------------------------------------------------------

Discussion

    Under the CSA, ``[a] registration pursuant to section 823 of this 
title to manufacture, distribute, or dispense a controlled substance . 
. . may be suspended or revoked by the Attorney General upon a finding 
that the registrant . . . has committed such acts as would render his 
registration under section 823 of this title inconsistent with the 
public interest as determined under such section.'' \26\ 21 U.S.C. 
824(a)(4). The Act further provides that in determining ``the public 
interest'' with respect to a practitioner's application, the following 
factors be considered:
---------------------------------------------------------------------------

    \26\ Pursuant to 28 CFR 0.100(b), this authority has been 
delegated by the Attorney General to the Administrator of the Drug 
Enforcement Administration.

    (1) The recommendation of the appropriate State licensing board 
or professional disciplinary authority.
    (2) The [registrant's] experience in dispensing, or conducting 
research with respect to controlled substances.
    (3) The [registrant's] conviction record under Federal or State 
laws relating to the manufacture, distribution, or dispensing of 
controlled substances.
    (4) Compliance with applicable State, Federal, or local laws 
relating to controlled substances.
    (5) Such other conduct which may threaten the public health and 
safety.

21 U.S.C. 823(f).

    ``[T]hese factors are . . . considered in the disjunctive.'' Robert 
A. Leslie, M.D., 68 FR 15227, 15230 (2003). It is well settled that I 
``may rely on any one or a combination of factors, and may give each 
factor the weight [I] deem appropriate in determining whether a 
registration should be revoked.'' Id.; see also MacKay v. DEA, 664 F.3d 
808, 816 (10th Cir. 2011); Volkman v. DEA, 567 F.3d 215, 222 (6th Cir. 
2009); Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005). Moreover, while 
I am required to consider each of the factors, I ``need not make 
explicit findings as to each one.'' MacKay, 664 F.3d at 816 (quoting 
Volkman, 567 F.3d at 222 (quoting Hoxie, 419 F.3d at 482)).\27\
---------------------------------------------------------------------------

    \27\ ``In short, this is not a contest in which score is kept; 
the Agency is not required to mechanically count up the factors and 
determine how many favor the Government and how many favor the 
registrant. Rather, it is an inquiry which focuses on protecting the 
public interest; what matters is the seriousness of the registrant's 
misconduct.'' Jayam Krishna-Iyer, 74 FR 459, 462 (2009). 
Accordingly, as the Tenth Circuit has recognized, findings under a 
single factor can support the revocation of a registration. See 
MacKay, 664 F.3d at 821.
---------------------------------------------------------------------------

    The Government has the burden of proving, by a preponderance of the 
evidence, that the requirements for revocation or suspension pursuant 
to 21 U.S.C. 824(a) are met. 21 CFR 1301.44(e). This is so even in a 
non-contested case.
    In this matter, I have considered all of the factors. While I find 
that some of the allegations are not supported by substantial evidence, 
I nonetheless find that the Government's evidence with respect to 
factors one, two, three, and four establishes that he has committed 
acts which render his registration ``inconsistent with the public 
interest.'' 21 U.S.C. 823(f). While I have also considered Respondent's 
declaration with respect to the various allegations, I conclude that he 
has not presented sufficient evidence to rebut this conclusion. 
Accordingly, I will affirm the suspension of his registration and

[[Page 29034]]

further order that his pending application be denied.

Factor One--The Recommendation of the State Licensing Board

    As found above, on September 22, 2014, the Washington Board of 
Osteopathic Medicine and Surgery issued Respondent an Ex Parte Order of 
Summary Action, pursuant to which, his authority to practice medicine 
in the State was suspended. Under the CSA, a practitioner's possession 
of authority to dispense controlled substances under the laws of the 
State in which he seeks registration is a prerequisite to obtaining a 
registration. See 21 U.S.C. 823(f) (``The Attorney General shall 
register practitioners . . . to dispense . . . controlled substances . 
. . if the applicant is authorized to dispense . . . controlled 
substances under the laws of the State in which he practices.''); see 
also id. Sec.  802(21) (defining ``[t]he term `practitioner' [to] 
mean[] a physician . . . licensed, registered, or otherwise permitted, 
by the United States or the jurisdiction in which he practices . . . to 
. . . dispense . . . [or] administer . . . a controlled substance in 
the course of professional practice'').
    Because Respondent is no longer authorized by the State of 
Washington to practice medicine and dispense controlled substances, he 
is not authorized to hold a registration in that State. This provides 
reason alone to deny his application. However, because the Government 
also seeks a final order based on the allegations of the Order to Show 
Cause and Immediate Suspension of Registration, I address the evidence 
with respect to the other public interest factors.

Factor Two--Respondent's Experience in Dispensing Controlled Substances

    The Government contends that Respondent unlawfully distributed 
controlled substances to various persons who were arrested during the 
search of his Shoreline property. Req. for Final Agency Action, at 10 
(citing, inter alia, 21 U.S.C. 841(a)(1)). More specifically, the 
Government contends that Respondent ``prescribed hydrocodone . . . to 
an individual arrested at the Shoreline'' property and could ``not 
locate a patient file at [his] registered location for this particular 
individual.'' Id. Based on the Investigators' ``determin[ation] that 
[Respondent] also purchased the loose phentermine tablets located on 
individuals at the Shoreline residence on March 16, 2012, despite the 
fact that he could not produce patient records when requested by law 
enforcement,'' the Government also apparently contends that Respondent 
unlawfully distributed the tablets to these individuals. Id. at 11.
    Neither of these allegations is proved by substantial evidence. As 
for the allegation regarding the hydrocodone prescription, as found 
above, in his Declaration, the DI repeatedly referred to this person as 
L.E. Yet to support the allegation, the Government offered a copy of a 
prescription which was issued to a patient whose initials are H.L. and 
not L.E. Moreover, the Government points to no other evidence that 
Respondent even prescribed hydrocodone (or any controlled substance for 
that matter) to a person whose initials are L.E. Thus, the allegation 
is unsupported by substantial evidence.
    As for the allegation that the phentermine was found on two persons 
who were arrested during the Shoreline search and was distributed to 
them by Respondent, while the Government produced evidence that 
Respondent had ordered phentermine from his distributor several months 
earlier, the evidence offered to establish that phentermine was found 
on these individuals was limited to the DI's assertion that it was. The 
DI did not, however, offer any basis for concluding that he personally 
participated in the search--notwithstanding his assertion that his 
declaration was based on ``personal knowledge''--nor otherwise explain 
the basis for his statement. Finally, the Government offered no other 
evidence to prove this assertion such as a police report, an affidavit 
of the arresting officer, or an inventory of the items found during the 
search conducted incident to the purported arrest of these individuals. 
The allegation therefore fails for lack of substantial evidence.
    The evidence further shows that Respondent purchased controlled 
substances including hydrocodone with acetaminophen, phentermine, 
phendimetrazine, testosterone, and lorazepam, which he dispensed 
directly to his patients. Under federal law, Respondent was required 
upon ``first engag[ing] in the . . . dispensing of controlled 
substances, and every second year thereafter, [to] make a complete and 
accurate record of all stocks thereof on hand.'' 21 U.S.C. 827(a)(1). 
Also, under federal law, because he engaged in the dispensing of the 
controlled substances, Respondent was required to ``maintain, on a 
current basis, a complete and accurate record of each such substance . 
. . received, sold, delivered, or otherwise disposed of by him.'' Id. 
Sec.  827(a)(3). DEA regulations further require that a dispenser 
maintain a record ``of the number of units or volume of such finished 
form dispensed, including the name and address of the person to whom it 
was dispensed, the date of dispensing, the number of units or volume 
dispensed, and the written or typewritten name or initials of the 
individual who dispensed or administered the substance on behalf of the 
dispenser.'' 21 CFR 1304.22(c). Finally, under this regulation, 
Respondent was required to maintain records of the controlled 
substances he acquired, to include ``[t]he name of the substance''; 
``[e]ach finished form . . . and the number of units or volume of 
finished form in each commercial container''; and ``[t]he number of 
units of finished forms and/or commercial containers acquired from 
other persons, including the date of and number of units and/or 
commercial containers in each acquisition to inventory and the name, 
address, and registration number of the person from the units were 
acquired.'' Id. Sec.  1304.22(a)(2)(i), (ii), and (iv).
    Here, I give no weight to the audit results given the numerous 
problems found above, including the conflict in the Government's 
evidence as to what the DIs used as the beginning date for the audit 
period. Nonetheless, I find that the DI's declaration establishes that 
during the July 2012 inspection, Respondent could not produce the 
required inventories for the controlled substances he was handling, and 
was thus in violation of 21 U.S.C. 827(a)(1).\28\ Moreover, the DI's 
declaration establishes that while Respondent was engaged in dispensing 
controlled substances, many of the entries for his phentermine 
dispensings lacked the patient's address and the name or initials of 
the person who did the actual dispensing.\29\ Thus, Respondent violated 
the CSA and DEA regulations for these reasons as well.\30\ See 21 
U.S.C. 827(a)(3); 21 CFR

[[Page 29035]]

1304.22(c). Finally, the DI's declaration establishes that Respondent 
lacked complete records of the controlled substances he acquired from 
his distributor, in violation of 21 U.S.C. 827(a)(3), as well as 21 CFR 
1304.22(c). See also 21 CFR 1304.22(a)(2)(i), (ii), and (iv).
---------------------------------------------------------------------------

    \28\ Regarding the lack of inventories, Respondent stated that 
he ``ha[d] invoices from [his distributor] as my initial 
inventory.'' Resp. Decl., at 7. Contrary to Respondent's contention, 
under the CSA, the requirement to take and maintain complete and 
accurate inventories is separate from the requirement to maintain 
records of the controlled substances a registrant acquires. Compare 
21 U.S.C. 827(a)(1) with id. Sec.  827(a)(3); compare also 21 CFR 
1304.11 with id. Sec.  1304.22. I therefore reject Respondent's 
contention. I further note that during the inspection, the DI found 
that Respondent did not have all of the invoices.
    \29\ While in his declaration Respondent states that this 
information was in the patient charts and that there is only limited 
space in his dispensing log, see Resp. Decl., at 7; DEA regulations 
require that the patient's address be documented in the dispensing 
log. 21 CFR 1304.22(c).
    \30\ As for the various entries in the dispensing log which 
lacked the name of the drug, because the Government provided no 
evidence that the dispensings involved controlled substances, I 
place no weight on this evidence. As for the Government's assertion 
that Respondent failed to maintain a ``dispensing/administration log 
for testosterone and Testim samples,'' Request for Final Agency 
Action, at 8; there is no evidence that he dispensed any Testim 
samples. As for the testosterone, the evidence does suggest that 
Respondent administered approximately 300 mg or 1.5 vials without 
documenting the administrations in his dispensing log. See 21 CFR 
1304.03(d).
---------------------------------------------------------------------------

    As both the Agency and the federal courts have explained, 
recordkeeping is one of the CSA's fundamental features for preventing 
the diversion of controlled substances. See Gonzales v. Raich, 545 U.S. 
1, 14 (2005) (``The CSA and its implementing regulations set forth 
strict requirements regarding . . . recordkeeping.''); United States v. 
Poulin, 926 F. Supp. 246, 250 (D. Mass. 1996) (``The [CSA] focuses on 
recordkeeping, in an attempt to regulate closely the distribution of 
certain substances determined by Congress to pose dangers, if freely 
available, to the public at large.'') (int. quotations and citation 
omitted); Paul H. Volkman, 73 FR 30630, 30644 (2008) (``Recordkeeping 
is one of the CSA's central features; a registrant's accurate and 
diligent adherence to this obligation is absolutely essential to 
protect against the diversion of controlled substances.'').
    Respondent's recordkeeping violations alone are sufficiently 
egregious to support the conclusion that he ``has committed such acts 
[which] render[ed] his registration . . . inconsistent with the public 
interest.'' 21 U.S.C. 824(a)(4); see also Volkman, 73 FR at 30644 
(holding that recordkeeping violations alone can support revocation or 
denial of an application).

Factor Three--Respondent's Conviction Record Under Federal and State 
Laws Related to the Manufacture, Distribution, and Dispensing of 
Controlled Substances

    As found above, following a jury trial, on December 19, 2014, 
Respondent was convicted by the United States District Court on seven 
felony counts related to the manufacture and distribution of marijuana, 
including conspiracy to distribute or manufacture marijuana, three 
counts of manufacturing marijuana, and three counts of maintaining drug 
involved premises.\31\ Each of these convictions provides reason alone 
to deny his application. And under the doctrine of collateral estoppel, 
the convictions also preclude any challenge to the allegations that he 
was engaged in the unlawful manufacture of marijuana. See Robert L. 
Daugherty, 76 FR 16823, 16830 (2011).
---------------------------------------------------------------------------

    \31\ As to the latter offense, the CSA renders it unlawful to 
``knowingly use[] or maintain any place, whether permanently or 
temporarily, for the purpose of manufacturing, distributing, or 
using any controlled substance.'' 21 U.S.C. 856(a)(1). As the 
evidence shows that Respondent used and maintained the three 
properties for the purpose of manufacturing marijuana and not simply 
as places to use the drugs, I conclude that his convictions for 
maintaining drug-involved premises fall within factor three.
---------------------------------------------------------------------------

Factor Four--Compliance With Applicable Laws Related to Controlled 
Substances

    With respect to this factor, the Government raises three main 
allegations. First, based on the various searches, the Government 
argues that Respondent possessed and was engaged in the manufacture of 
marijuana, a schedule I controlled substance. Request for Final Agency 
Action, at 8-9 (citing 21 U.S.C. 841(a)(1), 844(a); 812(c)). Second, 
the Government alleges that during the search of Respondent's 
residence, several vials of controlled substances were found including 
one each of clonazepam and hydrocodone, the latter being in an 
unlabeled vial, as well as stock bottles of Meridia and diazepam, and 
that Respondent's possession of the drugs violated federal law because 
he was not registered at his residence. Id. (citing 21 U.S.C. 844(a); 
21 CFR 1301.75(b)). Third, the Government alleges that Respondent 
violated state law by failing to report to the Washington Prescription 
Monitoring Program some 45 instances in which he dispensed more than a 
twenty-four hour supply of a controlled substance. Id. at 9.
    As for the latter allegation, Respondent did not dispute that he 
had failed to report various dispensings to the State's PMP. Resp. 
Decl., at 8. Rather, he claimed his violations were unintentional 
because he was unaware of the law but would now comply. Id.
    However, this is not a valid defense as the Washington courts 
follow the traditional rule that ignorance of the law is no excuse. See 
State v. Reed, 928 P.2d 469, 471 (Wash. Ct. App. 1997) (other citation 
omitted). Accordingly, I find that Respondent violated Washington law 
by failing to report various dispensings to the State's PMP. See Wash. 
Rev. Code Sec.  70.225.020(2).
    As for the allegations pertaining to the controlled substances that 
the police found during the search of Respondent's residence, I 
conclude that the Government did not provide substantial evidence to 
support the allegations with respect to any of the four drugs (Meridia, 
diazepam, clonazepam (in a vial indicating that Respondent had 
prescribed the drug to R.M.) or hydrocodone (in an unlabeled vial)). 
With respect to the diazepam, the Government produced absolutely no 
evidence that the drug was even seized during the search. With respect 
to the Meridia, the Government's evidence was limited to a photograph 
of a white professional sample bottle and the DI's unsupported 
assertion, with no other evidence to establish that the bottle was 
seized from Respondent's residence, let alone that there were any pills 
in the bottle when it was seized.
    So too, with respect to the hydrocodone and clonazepam, there is no 
evidence other than photographs and the DI's unsupported assertion that 
these drugs were seized during the search of Respondent's residence. To 
be sure, in his declaration, Respondent stated that he prescribed the 
hydrocodone and clonazepam to his wife for several procedures. However, 
Respondent explicitly denied having or storing clonazepam or 
hydrocodone at his home and his statements do not constitute an 
admission of any part of this allegation. Accordingly, these 
allegations fail for lack of substantial evidence.
    I also find that substantial evidence supports the remaining 
marijuana-related allegation--that on February 2, 2012, Respondent 
violated federal law by possessing marijuana, and that he did so with 
the intent to distribute. Most significantly, it is undisputed that 
upon the February 2, 2012 arrest of TB, (Respondent's then live-in 
girlfriend and now wife), who was then driving his car, the police 
impounded his vehicle and during the subsequent search of the vehicle 
found one pound of marijuana and $5,000 in cash; the police also found 
$3,900 in cash in TB's purse.
    As found above, the street value of the marijuana was approximately 
$1,500 to $1,800, and the quantity would provide approximately 900 
joints. Respondent denied having any knowledge of the marijuana, 
asserting that it had been left in his car by LHE, a friend of TB and a 
purported medical marijuana patient who TB allowed to borrow his car, 
and provided an unsworn statement from LHE to this effect. However, as 
I found above, her statement (that she left the marijuana in the car 
because she was in

[[Page 29036]]

such a hurry to return the car to TB and forgot it) is utterly 
ludicrous.\32\ I therefore reject Respondent's explanation for why the 
police found one pound of marijuana in his car.
---------------------------------------------------------------------------

    \32\ As also noted, in a March 3, 2012 letter to the local 
prosecutor in which Respondent sought the return of his car, he 
denied having any knowledge of the marijuana that was found therein. 
See Resp. Decl., at Ex. 4. Yet he made no mention of LHE's story. 
See id.
---------------------------------------------------------------------------

    Moreover, given the closeness of the relationship between 
Respondent and TB in that they were living together and that TB also 
worked for him, I find it implausible that Respondent lacked knowledge 
of the marijuana. Rather, I find that Respondent had the ability to 
exercise dominion or control over the marijuana through TB and thus 
constructively possessed the drug. See United States v. Sanders, 341 
F.3d 809, 816 (8th Cir. 2003) (`` `To prove constructive possession, 
the government had to present evidence that appellants had knowledge 
and ownership, dominion or control over the contraband itself, or 
dominion over the vehicle in which the contraband is concealed.' '') 
(quoting Ortega v. United States, 270 F.3d 540, 545 (8th Cir. 2001)).
    So too, Respondent's attempt to explain the presence of the large 
sum of cash (nearly $9,000) that was found in his car and on his wife's 
person does not persuade. As for the money which was purportedly paid 
by a patient the day before as a deposit on a liposuction procedure, as 
found previously, while the ``Price Quote'' document indicates that the 
patient paid a $5,000 cash deposit, the date was clearly written over. 
And while the purported patient provided a letter to support 
Respondent, it too was unsworn.
    As an additional explanation for why so much money was found in his 
car, Respondent stated that the money had been withdrawn to pay for 
remodeling his clinic. To support this claim, Respondent submitted a 
copy of a bank statement (on which the various balances are blacked 
out), which documents that he made a withdrawal nine days before his 
girlfriend was arrested. However, Respondent offered no further 
evidence to support this contention, and in any event, his explanation 
begs the question of why he would risk the potential theft or loss of a 
large sum of cash, rather than pay for the purported remodeling with a 
check or credit card.
    I therefore find that both the quantity of the marijuana (which 
would provide a single person with three joints a day for approximately 
ten months), and the large amount of cash which was found in 
Respondent's vehicle, support a finding that the marijuana was intended 
for distribution. See United States v. Collins, 412 F.3d 515, 519 (4th 
Cir. 2005) (holding that ``intent to distribute can be inferred from a 
number of factors, including . . . the quantity of drugs'' and ``the 
amount of cash seized with the drugs.''). I further find that 
Respondent ``had the right to exercise dominion and control over'' the 
marijuana ``either directly or through'' TB. United States v. Staten, 
581 F.2d 878, 883 (D.C. Cir. 1978). I therefore find that Respondent 
knowingly possessed marijuana with the intent to distribute it.\33\ See 
21 U.S.C. 841(a)(1).
---------------------------------------------------------------------------

    \33\ In his Declaration, Respondent disputed that he owned the 
marijuana plants, the processed marijuana, and related items that 
were seized in the searches of his three properties. See Resp. 
Decl., at 3 (``I have three rental properties. I had irresponsible 
tenants that took advantage of the locations by cultivating 
Marijuana for 6 months without my knowledge.''). He also claimed 
that because he was a busy physician, who did not bother his tenants 
if they paid their rent and did not request repairs, he ``did not 
know of . . . nor . . . in any way participate in the growing of 
marijuana at these rental houses.'' Id. at 4. Based on Respondent's 
convictions for conspiracy to manufacture marijuana, unlawful 
manufacture of marijuana at each of the three grow houses, and 
maintaining drug-involved premises at each of the three residences, 
I reject his assertions as utterly false.
---------------------------------------------------------------------------

    Based on Respondent's violation of federal law by possessing 
marijuana with the intent to distribute, as well as his admitted 
failure to report multiple dispensings of controlled substances to the 
Washington PMP, I find that factor four also supports a finding that he 
has committed acts which rendered his registration ``inconsistent with 
the public interest.'' \34\ 21 U.S.C. 823(f) & 824(a)(4).
---------------------------------------------------------------------------

    \34\ Having already addressed the various false statements 
regarding the marijuana-related allegations which Respondent has 
made in his declaration, I deem it unnecessary to repeat this 
discussion under factor five.
---------------------------------------------------------------------------

Sanction

    Under Agency precedent, where, as here, ``the Government has proved 
that a registrant has committed acts inconsistent with the public 
interest, the registrant must ` ``present sufficient mitigating 
evidence to assure the Administrator that [he] can be entrusted with 
the responsibility carried by such a registration.'' ' '' Medicine 
Shoppe--Jonesborough, 73 FR 364, 387 (2008) (quoting Samuel S. Jackson, 
72 FR 23848, 23853 (2007) (quoting Leo R. Miller, 53 FR 21931, 21932 
(1988))). ``Moreover, because `past performance is the best predictor 
of future performance,' ALRA Labs, Inc. v. DEA, 54 F.3d 450, 452 (7th 
Cir. 1995), [DEA] has repeatedly held that where a registrant has 
committed acts inconsistent with the public interest, the registrant 
must accept responsibility for [his] actions and demonstrate that [he] 
will not engage in future misconduct.'' Medicine Shoppe, 73 FR at 387; 
see also Jackson, 72 FR at 23853; John H. Kennedy, 71 FR 35705, 35709 
(2006); Prince George Daniels, 60 FR 62884, 62887 (1995). See also 
Hoxie, 419 F.3d at 483 (``admitting fault'' is ``properly 
consider[ed]'' by DEA to be an ``important factor[]'' in the public 
interest determination). So too, in making the public interest 
determination, ``this Agency also places great weight on an 
[applicant's] candor, both during an investigation and in [a] 
subsequent proceeding.'' Robert F. Hunt, 75 FR 49995, 50004 (2010) 
(citing The Lawsons, Inc., t/a The Medicine Shoppe Pharmacy, 72 FR 
74334, 74338 (2007) (quoting Hoxie, 419 F.3d at 483) (``Candor during 
DEA investigations properly is considered by the DEA to be an important 
factor when assessing whether a . . . registration is consistent with 
the public interest.'')).
    Moreover, while a registrant must accept responsibility and 
demonstrate that he will not engage in future misconduct in order to 
establish that granting his application for registration is consistent 
with the public interest, DEA has repeatedly held these are not the 
only factors that are relevant in determining whether to grant or deny 
an application. See, e.g., Joseph Gaudio, 74 FR 10083, 10094 (2009); 
Southwood Pharmaceuticals, Inc., 72 FR 36487, 36504 (2007). Obviously, 
the egregiousness and extent of a registrant's misconduct are 
significant factors in determining the appropriate disposition. Cf. 
Jacobo Dreszer, 76 FR 19386, 19387-88 (2011) (explaining that a 
respondent can ``argue that even though the Government has made out a 
prima facie case, his conduct was not so egregious as to warrant 
revocation''); see also Paul H. Volkman, 73 FR 30630, 30644 (2008); 
Gregory D. Owens, 74 FR 36751, 36757 n.22 (2009).
    Moreover, as I have noted in several cases, `` `[n]either Jackson, 
nor any other agency decision, holds . . . that the Agency cannot 
consider the deterrent value of a sanction in deciding whether a 
registration should be [suspended or] revoked,' '' or whether an 
application should be denied. Gaudio, 74 FR at 10094 (quoting 
Southwood, 72 FR at 36503 (2007)); see also Robert Raymond Reppy, 76 FR 
61154, 61158 (2011); Michael S. Moore, 76 FR 45867, 45868 (2011). This 
is so, both with respect to the respondent in a particular case and the 
community of registrants. See Gaudio, 74 FR at 10095 (quoting

[[Page 29037]]

Southwood, 71 FR at 36504). Cf. McCarthy v. SEC, 406 F.3d 179, 188-89 
(2d Cir. 2005) (upholding SEC's express adoption of ``deterrence, both 
specific and general, as a component in analyzing the remedial efficacy 
of sanctions'').
    As found above, the Government has established that Respondent: 1) 
committed multiple recordkeeping violations in that he did not have 
required inventories, was missing invoices, and his dispensing log 
lacked required information; 2) was engaged in the manufacture and 
distribution of marijuana; and 3) failed to report multiple dispensings 
of controlled substances to the Washington PMP. I find that the proven 
misconduct is sufficiently egregious to affirm the Order of Immediate 
Suspension and to deny his pending application to renew his 
registration. See, e.g., Moore, 76 FR at 45870 (imposing one-year 
suspension on physician who manufactured marijuana, notwithstanding 
ALJ's finding that physician accepted responsibility and demonstrated 
he would not engage in future misconduct).\35\ I further find that the 
Agency's interest in deterring similar acts on the part of both 
Respondent and others supports the denial of his pending application.
---------------------------------------------------------------------------

    \35\ In Moore, I agreed with the ALJ's finding that the 
physician's conduct in manufacturing and distributing marijuana 
supported revocation of his registration. 76 FR at 45868. However, I 
also agreed with the ALJ's finding that the physician had accepted 
responsibility for his misconduct and demonstrated that he would not 
engage in future misconduct. Id. By contrast, here, the record 
establishes that in addition to his marijuana-related misconduct, 
for which he disingenuously denies any responsibility, Respondent 
also committed multiple recordkeeping violations and violated state 
law by failing to report numerous dispensings to the State PMP. 
Also, in contrast to Moore, I find that Respondent has not accepted 
responsibility for his misconduct.
---------------------------------------------------------------------------

    Having carefully reviewed Respondent's declaration, I further find 
that Respondent has not accepted responsibility for his misconduct. 
Regarding his recordkeeping violations, Respondent entirely denied that 
he failed to keep the required inventories and that he was missing 
various invoices. Moreover, he further claimed that the reason his 
dispensing log was missing essential information such as patient 
addresses was because there was no room to make these entries. Yet in 
DEA's experience, thousands of other registrants who engage in 
dispensing have no problem complying with the latter requirements.
    With respect to the marijuana allegations, Respondent offered the 
far-fetched story that the marijuana belonged to an acquaintance of his 
wife, who had borrowed his car to obtain her medical marijuana but who 
was in such a hurry to return the car that she forgot to retrieve it 
even though it was her medicine. So too, Respondent's alternative 
explanations for why thousands of dollars of cash were found in his car 
defy credulity. Similarly, his claim that he was unaware of the 
marijuana growing activities which were being conducted at not one, not 
two, but three of his properties, is clearly disingenuous.\36\ 
Accordingly, based on his various false statements regarding the 
marijuana-related activity, as well as his blatantly false assertion 
that he has never been subject to discipline by a state licensing 
authority (all of which are clearly material to the outcome of this 
proceeding), I further find that Respondent lacks candor.
---------------------------------------------------------------------------

    \36\ With regard to his failure to report dispensings to the 
Washington PMP, Respondent claimed that he was unaware of the law. 
However, the legislation which created the Washington PMP was 
enacted in 2007, more than four years earlier, and as a physician 
who engaged in the highly regulated activity of dispensing 
controlled substances, Respondent was obligated to keep abreast of 
legislation and regulatory developments applicable to his medical 
practice. Moreover, while Respondent asserted that he is now aware 
of the requirement and will comply in the future, his various 
statements regarding the events at issue (including that he had 
never been disciplined by a state board) support a finding that he 
lacks candor. Accordingly, I give no weight to his statement that he 
would comply with the State's PMP reporting requirement in the 
future.
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    Based on his failure to acknowledge his misconduct, his failure to 
offer any credible evidence of remedial efforts, and his lack of 
candor, I conclude that Respondent has failed to present sufficient 
evidence to rebut the Government's prima facie showing that his 
registration would be ``inconsistent with the public interest.'' 21 
U.S.C 823(f); see also id. 824(a)(4). Therefore, I will affirm the 
issuance of the Order of Immediate Suspension and order that any 
pending application to renew Respondent's registration be denied.

ORDER

    Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 
824(a), as well as 28 CFR 0.100(b), I affirm the Order of Immediate 
Suspension of DEA Certificate of Registration BL6283927, issued to 
Keith Ky Ly, D.O. I further order that the application of Keith Ky Ly, 
D.O., to renew his registration, be, and it hereby is, denied. This 
Order is effective June 19, 2015.

    Dated: May 11, 2015.
Michele M. Leonhart,
Administrator.
[FR Doc. 2015-12139 Filed 5-19-15; 8:45 am]
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