80_FR_70301 80 FR 70083 - Perry County Food & Drug Decision and Order

80 FR 70083 - Perry County Food & Drug Decision and Order

DEPARTMENT OF JUSTICE
Drug Enforcement Administration

Federal Register Volume 80, Issue 218 (November 12, 2015)

Page Range70083-70114
FR Document2015-28723

Federal Register, Volume 80 Issue 218 (Thursday, November 12, 2015)
[Federal Register Volume 80, Number 218 (Thursday, November 12, 2015)]
[Notices]
[Pages 70083-70114]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-28723]



[[Page 70083]]

Vol. 80

Thursday,

No. 218

November 12, 2015

Part II





Department of Justice





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Drug and Enforcement Administration





Perry County Food & Drug Decision and Order; Notice

Federal Register / Vol. 80 , No. 218 / Thursday, November 12, 2015 / 
Notices

[[Page 70084]]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 15-10]


Perry County Food & Drug Decision and Order

    On May 13, 2015, Chief Administrative Law Judge (CALJ) John J. 
Mulrooney, Jr., issued the attached Recommended Decision (hereinafter, 
cited as R.D.\1\). Thereafter, on June 15, 2015, the CALJ forwarded the 
record to this Office for Final Agency Action noting that neither party 
had filed exceptions to the Recommended Decision. See 21 CFR 1316.66 
(providing a party with the right to file exceptions to an ALJ's 
decision ``[w]ithin twenty days after the date upon which [it] is 
served [with] a copy'').
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    \1\ All citations to the Recommended Decision are to the slip 
opinion as issued by the CALJ.
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    Subsequently, on July 8, 2015, Respondent filed with this Office a 
pleading entitled as its ``Closing Brief.'' In a letter accompanying 
the filing, Respondent's counsel explained that the Recommended 
Decision had been mailed to his former address and that he had recently 
changed his address and had ``only recently received'' the CALJ's 
Recommended Decision. Letter of Respondent's Counsel to Acting Deputy 
Administrator, DEA (July 8, 2015).
    Upon reviewing the letter, I noted that while Respondent's Counsel 
had explained that he had only recently received the Recommended 
Decision because it had been mailed to his former address, his filing 
was nonetheless untimely. Order of the Acting Administrator, at 1 (July 
13, 2015). I therefore directed Respondent's Counsel to explain why 
``this constitute[d] good cause''; I also directed Respondent's Counsel 
to address why he did not notify the Office of Administrative Law 
Judges (OALJ) of his new address, as well set forth the date on which 
he received the decision. Id.
    In response, Respondent's Counsel explained that he was ``not now 
attempting to add exceptions to the record,'' that he had previously 
received the decision on May 13, 2015, and that he ``had not filed any 
exceptions to it due to [his] understanding that exceptions are not 
necessary under the regulations.'' Letter of Respondent's Counsel to 
Acting Administrator, at 1 (July 14, 2015). Respondent's Counsel 
further explained that he had sent his previous letter to the Acting 
Deputy Administrator because he had received a copy of the CALJ's 
letter transmitting the record, and that he sent his letter ``in an 
abundance of caution due to [his] misunderstanding of the purpose of '' 
the CALJ's letter, as he ``did not want the fact that [he] had not 
filed any exceptions . . . to preclude'' this Office from 
``perform[ing] an independent review of the record and Decision.'' Id. 
at 1-2.
    Taking Respondent's Counsel at his word, I do not consider the 
filing submitted on July 8, 2015. However, in reviewing the record, I 
have considered the ``Closing Brief '' Respondent's Counsel submitted 
on April 27, 2015, following the conclusion of the evidentiary phase of 
the proceeding.
    Having considered the entire record in this matter, I have decided 
to adopt the factual findings of the Recommended Decision except as 
discussed below.\2\ I also adopt but modify the CALJ's legal 
conclusions as discussed below.\3\ Because I agree with the CALJ's 
conclusion that Respondent's evidence as to its acceptance of 
responsibility and remedial measures is not persuasive, I further adopt 
the CALJ's Recommendation to the extent that it recommends that I deny 
any pending application to renew its registration.\4\
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    \2\ The United States Supreme Court has explained my obligations 
under the Administrative Procedure Act, as well as the role of the 
ALJ's recommended decision, in reviewing the record and making 
factual findings. See Universal Camera Corp. v. NLRB, 340 U.S. 474, 
496 (1951) (``The `substantial evidence' standard is not modified in 
any way when the Board and its examiner disagree. . . . The findings 
of the examiner are to be considered along with the consistency and 
inherent probability of testimony. The significance of his report, 
of course, depends largely on the importance of credibility in the 
particular case.'') (emphasis added). The standard of review of an 
agency decision is also well settled. Accordingly, I decline to 
publish the ALJ's discussion of the substantial evidence test and 
the standard of review.
    \3\ I do not adopt the ALJ's statement (at R.D. 49) that 
``Regarding Factor 2, in requiring an examination of a registrant's 
experience in dispensing controlled substances, Congress manifested 
an acknowledgement that . . . the quantitative volume in which an 
applicant has engaged in the dispensing of controlled substances may 
be [a] significant factor[ ] to be evaluated'' in the public 
interest determination. See JM Pharmacy Group, Inc., d/b/a Farmacia 
Nueva and Best Pharma Corp., 80 FR 28667, 28667-68 n.2 (2015); see 
also Syed Jawed Akhtar-Zaidi, M.D., 80 FR 42962, 42967-68 (2015).
    \4\ Because I find that Respondent's registration has expired, 
see infra note 16, I do not adopt the ALJ's recommendation that I 
revoke its registration.
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    In this matter Respondent stipulated (and other evidence shows) 
that its Pharmacist-in-Charge, Chris Watson, who is also the son of its 
owner Tom Watson, committed multiple acts resulting in the diversion of 
controlled substances. These include:
    (1) Dispensing controlled substances including hydrocodone (a 
schedule II drug) to A.R. without a prescription. Stipulation 13. 
Additional record evidence shows that on nine occasions between June 
18, 2014 and December 29, 2014, Respondent dispensed controlled 
substances including hydrocodone and oxycodone (also a schedule II 
drug) to A.R. listing a dentist (Dr. Hambuchen) as the prescriber. GX 
4. However, Dr. Hambuchen denied knowing A.R. (GX 3) and testified to 
this in the proceeding. Tr. 23. The parties further stipulated that Dr. 
Hambuchen never issued a prescription for A.R. ALJ Ex. 15, at 4. Each 
of these acts constitutes an outright drug deal in violation of 21 
U.S.C. 841(a)(1), which provides that ``[e]xcept as authorized by this 
subchapter, it shall be unlawful for any person knowingly or 
intentionally . . . to distribute[ ] or dispense . . . a controlled 
substance[.]''). See also id. Sec.  842(a)(1) (``It shall be unlawful 
for any person . . . who is subject to the requirements of part C to 
distribute or dispense a controlled substance in violation of section 
829 of this title[.]''); id. Sec.  829(a).\5\
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    \5\ 21 U.S.C. 829(a) sets forth the prescription requirement 
applicable to the dispensing of a schedule II drug. It provides, in 
relevant part, that: ``[e]xcept when dispensed directly by a 
practitioner, other than a pharmacist, to an ultimate user, no 
controlled substance in schedule II, which is a prescription drug . 
. . may be dispensed without the written prescription of a 
practitioner, except [for] in emergency situations, as prescribed . 
. . by regulation,'' allowing for an oral prescription. See also 21 
CFR 1306.11(a).
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    (2) A. Dispensing hydrocodone and alprazolam to Ms. Samantha 
Pemberton, who the evidence shows was Chris Watson's girlfriend, on 
November 19, 2014, without a prescription for either drug. Stipulation 
19. For the same reasons as described above, these dispensings also 
constitute violations of 21 U.S.C. 841(a)(1). See also 21 U.S.C. 
842(a)(1); id. Sec.  829(b).\6\
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    \6\ 21 U.S.C. 829 (b) sets forth the prescription requirement 
applicable to the dispensing of a schedule III or IV drug. It 
provides that ``[e]xcept for when dispensed directly by a 
practitioner, other than a pharmacist, to an ultimate user, no 
controlled substances in schedule III or IV, which is a prescription 
drug . . . may be dispensed without a written or oral 
prescription.'' See also 21 CFR 1306.21(a).
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    B. The evidence also shows that on November 19, 2014, Ms. Pemberton 
was stopped for driving a vehicle without a license plate. ALJ Ex. 20, 
at 9. During a consensual search of Ms. Pemberton's purse, a police 
officer found both Xanax (in an unmarked vial) and hydrocodone, and 
took Ms. Pemberton into custody. Id. at 10. During several interviews, 
Ms. Pemberton claimed that she had a prescription for both drugs. Id. 
She also stated that she had just filled prescriptions for the drugs at

[[Page 70085]]

Respondent and had received them in unmarked bottles; however, she 
could not name the prescriber. Id.
    C. The evidence further shows that during the course of the police 
investigation of how Ms. Pemberton had obtained the controlled 
substances, Chris Watson admitted to a Detective that Pemberton had 
been in Respondent that morning and that he provided the drugs without 
prescriptions. Id. at 11. Watson then stated that he had `` `loaned' 
her some pills . . . `because she was out,' '' but then asserted that 
``we are just waiting on [the doctor's office] to call back because 
that office is notoriously slow.' '' Id. However, according to the 
credited testimony of the Detective who interviewed Watson, Watson gave 
him ``conflicting information about the identity of Ms. Pemberton's 
prescribing physician,'' initially stating that it was a Dr. Humbard. 
Id. at 12. While Watson agreed to provide the Detective with a copy of 
the prescriptions, the next day, he faxed over copies of the dispensing 
labels (but not the actual prescriptions), which indicated that the 
prescriptions had been filled on October 9, 2014 (and not November 19, 
2014), and the labels indicated that the prescriber was a different 
doctor (Dr. Arnold) than reported by Watson. Id. Moreover, the labels 
for both drugs showed that no refills were authorized. Id.
    D. The next day, the Detective again called Respondent and spoke 
with Chris Watson seeking the prescriptions. Id. After Watson stated 
that he had faxed over the labels, the Detective told Watson that he 
needed the prescriptions. Id. Watson stated that he would have one of 
the pharmacy technicians look up the prescriptions and send it to the 
Detective; later that day, the Detective received a fax which appeared 
to list called-in prescriptions. Id. at 13. While the document listed a 
prescription for Ms. Pemberton, the date appeared to be either October 
4 or October 9, 2014 and not November 19, 2014. Id.
    E. Subsequently, Ms. Pemberton provided the Detective with copies 
of two prescriptions; the prescriptions listed the date of issuance as 
October 9, 2014 and Dr. Arnold as the prescriber. Id. However, 
according to the stipulated testimony of a DEA Task Force Officer who 
interviewed Dr. Arnold, Arnold ``stated that he had never prescribed 
any controlled substances for Ms. Pemberton.'' ALJ Ex. 20, at 19. Thus, 
even the October prescriptions were fraudulent.\7\
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    \7\ I decline, however, to adopt the CALJ's further finding that 
Chris Watson's actions in ``generating false documents and supplying 
them to law enforcement to cover his tracks in supplying Samantha 
Pemberton with drugs . . . stand[s] out as worthy of separate 
consideration under Factor 5.'' R.D. at 58. At no point did the 
Government argue that Watson's actions with respect to the creation 
and provision of these documents to the local police constitute 
actionable misconduct under factor five, and while Respondent 
stipulated to the testimony, I conclude that the issue was 
``incidental'' to the principal issues in the case. See, e.g., 
Yellow Freight System, Inc. v. Martin, 954 F.2d 353, 358 (6th Cir. 
1992) (An ``agency may not base its decision upon an issue the 
parties tried inadvertently. Implied consent is not established 
merely because one party introduced evidence relevant to an 
unpleaded issue and the opposing party failed to object to its 
introduction. It must appear that the parties understood the 
evidence to be aimed at the unpleaded issue. Also, evidence 
introduced at a hearing that is relevant to a pleaded issue as well 
as an unpleaded issue cannot serve to give the opposing party fair 
notice that the new, unpleaded issue is entering the case.'') 
(citations omitted); see also NLRB v. Majestic Weaving Co., 355 F.2d 
854, 861-62 (2d Cir. 1966) (where Government's case focuses on other 
issues and evidence of uncharged violations is ``at most 
incidental,'' the incidental issue cannot support a sanction); 5 
U.S.C. 554(b) (``Persons entitled to notice of an agency hearing 
shall be timely informed of . . . the matters of fact and law 
asserted.'') (emphasis added).
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    (3)A. Distributing controlled substances, including one 1,000-count 
bottle of hydrocodone 10/325 mg and two bottles of 100-count methadone 
10 mg methadone, to one Eric Horton, on or about January 20, 2015, who 
was arrested following a traffic stop. Respondent stipulated that each 
of the bottles had Respondent's pharmacy stock stickers on it. 
Stipulation 21.
    B. The evidence also includes snapshots from Respondent's 
surveillance video camera which show that on January 20, 2015, both 
Chris Watson and Eric Horton were inside the pharmacy, in the area 
where it stored its drugs. GX 36. The evidence shows Watson taking a 
stock bottle, which appears to be of 1,000-count size from the shelves 
and handing it to Horton, who then went to a counter and proceeded to 
fill an amber prescription bottle with some of the contents of the 
1,000-count bottle. Id. The evidence further shows Horton then placing 
items in a blue tote, after which he proceeded to the pharmacy's 
shelves, took a stock bottle off a shelf, and showed it to Chris Watson 
before placing it in a pharmacy bag. Id. Thereafter, the evidence shows 
Horton going into a back room with the pharmacy bag, before returning 
and then placing the pharmacy bag in the tote. Id.
    C. Horton then went back to another shelf, and returned with 
another stock bottle which he showed to Chris Watson. Id. Horton then 
took out an amber prescription bottle before disappearing from the 
camera frame; however, upon reappearing, Horton did not have the stock 
bottle but appeared to place something in his jacket pocket. Id. Horton 
then took the tote and left the pharmacy. Id.
    D. About ten minutes later, Horton returned to the pharmacy without 
the blue tote. Id. A short while later, Chris Watson pulled a stock 
bottle from a shelf and placed it on the counter, after which Horton 
walked to the counter, counted pills, removed several amber pill 
bottles from under the counter and proceeded to fill them. Id. After 
handing a bottle to Watson, Horton placed one of the bottles in his 
pocket. Id. Horton then obtained a pharmacy bag and placed multiple 
amber bottles into the bag before leaving the pharmacy. Id. The video 
then shows Horton carrying a blue tote and leaving the store, followed 
by his placing the tote in the bed of his pick-up truck, before driving 
away.
    E. Later that evening, Horton was arrested by an Arkansas State 
Trooper on an outstanding warrant following a traffic stop. During an 
inventory search of Horton's vehicle, the officer found the blue tote 
along with one 1,000-count bottle of hydrocodone 10/325 mg, two 100-
count bottles of methadone 10 mg, and one 100-count bottle of oxycodone 
30. Tr. 83; Stipulation 21; GX 36, at 12. Notably, the oxycodone 30 
bottle also had Respondent's stock sticker on it. GX 36, at 12.
    F. In addition to the above, Respondent stipulated to Ms. 
Pemberton's testimony that on two occasions she ``witnessed [Chris 
Watson] providing stock bottles of controlled substances to Eric 
Horton'' while attending parties at Watson's home. ALJ Ex. 20, at 9.
    I therefore conclude that the evidence shows that on multiple 
occasions, Chris Watson (and Respondent) unlawfully distributed 
controlled substances to include hydrocodone, methadone, and oxycodone 
to Eric Horton.\8\ See 21 U.S.C. 841(a)(1).
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    \8\ The State Trooper further testified that he found pills in 
bottles that were mislabeled, as well as pills that were mixed in 
bottles. Tr. 83. He also found a coke bottle with a lid that could 
be unscrewed to access a container; inside the container was ``a 
bunch of mixed pills.'' Id. He also found other coke cans with lids 
that could be unscrewed and used to hide drugs. Id. at 84.
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    (4) The evidence also shows that on or about September 14, 2014, 
the Arkansas State Police arrested one Joseph Jackson who had been 
involved in a motor vehicle accident. Tr. 68-70. According to the 
unrefuted testimony, local police officers observed a bottle of 
prescription liquid codeine (with the label scratched off) in the front 
seat of Jackson's vehicle and the State Trooper testified that Jackson 
smelled of marijuana. Tr. 70-71. During a search of

[[Page 70086]]

the vehicle, the Officer found a black bag which contained ``a baggie 
of marijuana, prescription bottles of drugs, and two handguns,'' as 
well as a 500-count bottle of alprazolam 2 mg which bore Respondent's 
stock sticker. Tr. 71; Stipulation 22; ALJ Ex. 15, at 16. Because the 
evidence further shows that Respondent had not filed a controlled 
substance theft or loss report with DEA ``since at least 2012,'' I 
conclude that Respondent unlawfully distributed the 500-count bottle of 
alprazolam 2 mg. Stipulation 23; see 21 U.S.C. 841(a)(1).
    (5) Other evidence establishes that Chris Watson removed stock 
bottles of controlled substances from Respondent. Specifically, one of 
Respondent's employees provided stipulated testimony that she had seen 
Chris Watson remove stock bottles of hydrocodone and Xanax (alprazolam) 
from Respondent. ALJ Ex. 20, at 20-21. Still another employee testified 
that on two occasions he witnessed Chris Watson take 1,000 count 
bottles of hydrocodone off the shelf and place them in his backpack. 
Tr. 278-79.
    (6) The evidence further shows that on four occasions beginning on 
November 7, 2014 and ending on December 4, 2014, a DEA Special Agent 
(S/A) made undercover visits to Respondent during which he presented 
fictitious controlled substance prescriptions to Chris Watson. ALJ Ex. 
15, at 5.
    A. On the first occasion, the S/A presented prescriptions for 120 
Norco (hydrocodone/acetaminophen) 10/325 mg and 60 Xanax (alprazolam) 2 
mg.\9\Id. at 5-6. According to the S/A, he asked Chris Watson if he 
``create[d] the script right?''; Watson then told the S/A to add a 
certain letter to the DEA number he had created and to change the last 
number of the prescription ``to create a more realistic-looking 
prescription.'' Id. at 6. Notwithstanding that Watson knew the two 
prescriptions were fraudulent, he filled them. Id.; see also GXs 6, 7, 
8.
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    \9\ Both prescriptions were written on a single form. GX 6.
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    B. On November 13, 2014, the S/A returned to Respondent and 
presented prescriptions for both hydrocodone and alprazolam to Chris 
Watson. ALJ Ex. 15, at 6. However, Watson told the S/A that he was out 
of both drugs but would have more the next week. Id. The S/A then asked 
Watson if the letters he had used on the prescriptions for the 
prescriber's DEA registration number (RF) ``were correct?'' Id. Watson 
told him to use ``RA'' instead and wrote the letters down on a piece of 
paper. Id. After the S/A looked at the paper, Watson ``scratched out 
the letters with a pen.'' Id.
    C. On November 19, 2014, the S/A returned to Respondent with 
prescriptions for 240 Norco 10/325 mg (hydrocodone/apap) and 60 Xanax 2 
mg which he presented to Watson. Id.; see also GX 15, at 1. However, 
Watson stated that he could not fill the Norco prescription because he 
had run out ``two days earlier'' and ``would not get any more tablets 
until the first of the month.'' Id. The S/A then asked Watson if the 
DEA number on the prescription ``was correct.'' Id. at 7. Watson told 
him to change the last digit on the number and then ``described how to 
formulate a DEA number.'' Id. Watson then told the S/A that ``the 
prescription . . . looked better than most he sees at the pharmacy.'' 
Id.
    The S/A then asked Watson how much it would cost to buy a 1,000-
count bottle of hydrocodone; Watson stated: ``I don't usually do 
that.'' Id. After the S/A told Watson that he was trying to make some 
extra money, Watson replied that what the S/A did with the pills after 
the prescriptions had been filled [was] ``none of his business.'' Id. 
Watson then told the S/A to return to Respondent on the first of the 
month when the pharmacy would be resupplied with hydrocodone. Id. 
However, there is no evidence that Watson filled the Xanax prescription 
on this date.
    D. On December 4, 2014, the S/A presented fictitious prescriptions 
for 240 tablets of hydrocodone 10/325 mg and 60 tablets of alprazolam 2 
mg to Chris Watson. ALJ EX. 15, at 7. Watson dispensed the 
prescriptions to the S/A. Id.; see also GX 29-30.
    E. The evidence thus shows that Watson knowingly distributed both 
hydrocodone/acetaminophen (a schedule II narcotic) and alprazolam (a 
schedule IV benzodiazepine) on two occasions, based on fraudulent 
prescriptions, for a total of four separate acts of unlawful 
distribution. See 21 U.S.C. 841(a)(1); see also id. Sec.  843(a)(2) 
(``It shall be unlawful for any person knowingly or intentionally . . . 
to use in the course of the . . . distribution[ ] or dispensing of a 
controlled substance . . . a registration number which is 
fictitious[.])''; Cf. 21 CFR 1306.04(a) (``An order purporting to be a 
prescription issued not in the usual course of professional treatment . 
. . is not a prescription within the meaning and intent of section 309 
(21 U.S.C. 829) and the person knowingly filling such a purported 
prescription, as well as the person issuing it, shall be subject to the 
penalties provided for violations of the provisions of law relating to 
controlled substances.'').
    Moreover, I agree with the Government and CALJ that Watson's 
actions in instructing the S/A, who, in his undercover capacity 
presented as a drug-seeking patient, as to how to create fraudulent 
prescriptions which were ``more realistic,'' constitutes conduct 
``inconsistent with the public interest,'' regardless of whether it is 
considered under factor two (experience in dispensing controlled 
substances) or factor five (``[s]uch other conduct which may threaten 
the public health and safety''). 21 U.S.C. 823(f).\10\
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    \10\ As found above, Chris Watson clearly knew that the S/A was 
presenting fraudulent prescriptions when he filled them. In other 
circumstances, a pharmacist's counseling of a person who he knows to 
be presenting a fraudulent prescription as to how to create ``more 
realistic'' prescriptions (i.e., one which would avoid detection by 
another pharmacist to whom it was presented) could constitute 
criminal conduct actionable under factor four even without a 
conviction. See 21 U.S.C. 843(a)(3) (``It shall be unlawful for any 
person knowingly or intentionally . . . to acquire or obtain 
possession of a controlled substance by misrepresentation, fraud, 
forgery, deception, or subterfuge[.]''); 18 U.S.C. 2(a) (``Whoever 
commits an offense against the United States or aids, abets, 
counsels, commands, induces or procures its commission, is 
punishable as a principal.''). So too, in other circumstances (i.e., 
where the person creating the prescriptions is not an agent for the 
Government), Watson's conduct in filling a prescription, which he 
knew bore a fictitious registration number, could support a charge 
of conspiracy to use a fictitious registration number in the course 
of the distribution or dispensing of a controlled substance. See 21 
U.S.C. 846; id. Sec.  843(a)(2).
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    (7)A. Other evidence shows that during a search of Chris Watson's 
home, paper controlled substance prescriptions for both schedule II 
drugs OxyContin (oxycodone) and combination hydrocodone (with 
acetaminophen), and schedule IV drugs, including alprazolam, 
clonazepam, and Soma (carisoprodol), were found in violation of DEA 
regulations. ALJ EX. 15, at 2. More specifically, DEA regulations 
require that paper prescriptions be maintained at the registered 
location. See 21 CFR 1304.04(h)(2) (``Paper prescriptions for Schedule 
II controlled substances shall be maintained at the registered location 
in a separate prescription file.''); id. Sec.  1304.04(h)(4) (``Paper 
prescriptions for Schedules III, IV, and V controlled substances shall 
be maintained at the registered location either in a separate 
prescription file for Schedules III, IV, and V controlled substances 
only or in such form that they are readily retrievable from the other 
prescription records of the pharmacy.'').
    B. Still other evidence shows that during the execution of a search 
warrant at Respondent, the pharmacy only had

[[Page 70087]]

``partial invoices'' for the controlled substances it purchased in 
December 2014 and January 2015 because Eric Horton ``had removed all of 
the other invoices at PIC Watson's request in early December 2014.'' 
ALJ Ex. 20, at 22. However, under 21 U.S.C. 827(a)(3), ``every 
registrant . . . distributing[ ] or dispensing a controlled substance 
or substances shall maintain, on a current basis, a complete and 
accurate record of each such substance received . . . by him.'' 
Moreover, under DEA regulations, these records ``must be kept by the 
registrant and be available, for at least 2 years from the date of such 
inventory or records, for inspection and copying by authorized 
employees of'' DEA and must be kept at the registered location unless 
``the registrant has notified the Administration of his intention to 
keep'' the records ``at a central location, rather than at the 
registered location.'' 21 CFR 1304.04(a). Likewise, Respondent could 
not produce its most recent inventory, which apparently had been 
removed by its PIC notwithstanding that a DEA regulation requires that 
the inventory be maintained at the registered location. ALJ Ex. 20, at 
23; see also 21 CFR 1304.04(b)(1) (requiring that inventories ``be 
maintained at each registered location'').
    (8) Finally, the evidence shows that Respondent would receive 
shipments of controlled substances such as oxycodone and that the drugs 
would ``frequently disappear overnight.'' ALJ Ex. 20, at 20-21. The 
evidence also shows that ``in either August or October 2013, two 1,000-
count bottles of carisoprodol were stolen'' from Respondent. Id. at 22. 
Yet the evidence also shows that as of January 22, 2015, Respondent had 
not filed any theft or loss reports (DEA Form 106) with DEA since 
January 1, 2012.\11\ ALJ Ex. 20, at 17; Tr. 175-76; GX 63.
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    \11\ While Respondent reported a theft incident in August 2013 
which involved oxycodone, hydrocodone, alprazolam, clonazepam, and 
phenergan with codeine to the Arkansas Board of Pharmacy on a DEA 
Form 106, the report was never filed with DEA as required by 21 CFR 
1301.74(c). Tr. 120.
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    While Respondent stipulated to most of these acts, this is not the 
only evidence of misconduct on the part of Respondent's principals. 
More specifically, the evidence shows that on various occasions, Tom 
Watson, Respondent's owner and the father of Chris Watson, was provided 
information by employees and a business partner that Chris Watson was 
likely diverting controlled substances and failed to take appropriate 
action.
    Mr. Tracy Swaim testified that he had worked at Respondent for 26 
years and had served as its PIC from June 1997 until January 2012, when 
he resigned. Tr. 233, 251. Mr. Swaim further testified that after Chris 
Watson began working at Respondent as a staff pharmacist (in July 
2011), he noticed that Chris Watson ``was not being completely legal on 
some refills'' and that he saw this over the course of a month. Id. at 
251, 253, 263. Mr. Swaim decided that he was not going to remain as the 
PIC and told Tom Watson that he was not going to remain as the PIC 
because Chris was ``bending the rules'' and he (Mr. Swaim) did not 
``want to go to jail.'' Id. at 253. Thereafter, Swaim then completed 
the drug inventory and Chris Watson became Respondent's PIC. Id. at 
254.
    Mr. Swaim, who stayed on as a staff pharmacist with the same hours, 
further testified that in September 2014, a pharmacy technician (who 
had worked at Respondent for 31 years, see ALJ Ex. 20, at 21), ``was 
having a conversation with Tom [Watson]'' during which she told Watson 
that Chris Watson was ``giving stuff away.'' Tr. 256-57. Mr. Swaim 
joined the conversation and told Tom Watson, ``Tom, he's handing pills 
out the window,'' and that he was going to give his notice if Watson 
did not stop Chris's misconduct. Id. at 257. Tom Watson replied that he 
would ``put a stop to it'' and to ``trust me.'' Id. However, when Mr. 
Swaim returned to Respondent after several days off, he ``asked the 
girls [the pharmacy techs] if Chris had changed'' his behavior and was 
told ``no.'' Id. Mr. Swaim then gave notice and retired. Id.
    Grant Goode, who was Tom Watson's nephew, worked as a staff 
pharmacist at Respondent from December 12, 2014 through February 18, 
2015.\12\ Tr. 271; 273. Mr. Goode testified that he worked 
approximately 25 hours a week during December 2014, and that in 
January, he gradually increased his hours until after the middle of 
January, he was working most of the hours that the pharmacy was open. 
Id. at 271. Mr. Goode testified that when he was not working at 
Respondent, Chris Watson was the pharmacist. Id. at 273.
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    \12\ Grant Goode testified that he also worked at Respondent on 
November 24, 2014. Tr. 271.
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    Mr. Goode testified that while working at Respondent, he received 
phone calls from a couple of doctors inquiring about whether their 
patients had picked up prescriptions written by them, and that after he 
would inform the doctors that the patients had picked up the 
prescriptions, the doctors would ask if their patients had filled any 
other prescriptions. Tr. 275. Goode testified that when he would tell 
the doctors about the other prescriptions listed in the patients' 
profiles, the doctors stated that they had not written ``any 
prescriptions for those days.'' Id. Goode further testified that there 
were ``dozens'' of instances in which he looked for the hard copies of 
controlled substance prescriptions which were listed on the patient 
profiles but was unable to find them. Id. at 274-75.
    Mr. Goode testified that he told Tom Watson that he had ``talked to 
a couple of doctors, and that [he] couldn't find any hard copies for 
those prescriptions.'' Id. at 276. According to Goode, Watson's 
reaction was that the prescriptions may have been placed in the wrong 
file by the pharmacy technicians. Id. at 276-78. Mr. Goode further 
testified that he discovered that Respondent was missing prescriptions 
and reported this to Tom Watson during the first week of his employment 
(following December 12, 2014). Id. Goode testified that after the 
conversation he asked the pharmacy technicians about the prescriptions 
and was told that they ``should be in the file.'' Id.at 278.
    Mr. Goode testified to another incident, during which Tom Watson 
was present at Respondent and ``sitting at the desk'' when Chris Watson 
took a 1,000-count bottle of hydrocodone off the pharmacy's shelves and 
placed it in his backpack. Id. at 278-80. Mr. Goode testified that 
``[i]t appeared to'' him that Tom Watson saw what Chris was doing. Id. 
at 280.
    Mr. Goode testified to a further incident, which occurred on 
January 2, 2015. Id. at 282. According to Mr. Goode, one of 
Respondent's pharmacy technicians brought to his attention ``several'' 
prescriptions for schedule II drugs that were ``just made up'' and 
which listed Goode as the dispensing pharmacist on the label. Id. at 
282-83. Mr. Goode testified that Tom Watson was at Respondent that 
morning and so Mr. Goode laid out six or eight prescriptions and told 
Watson that while his initials were on the prescriptions he had not 
filled any of them. Id. Tom Watson responded that one of the pharmacy 
technicians (one who had worked for him for 31 years) ``must be doing 
that.'' Id. at 283. Goode then told Tom Watson that Chris ``was logging 
in and printing prescriptions from his laptop.'' Id. Goode further 
testified that Tom Watson did not take any action in response to the 
allegation.\13\ Id. at 284.
---------------------------------------------------------------------------

    \13\ In its closing brief, Respondent argues that in a 
proceeding brought to revoke Chis Watson's bond, based on the 
unsuitability of his third-party custodian, a federal magistrate 
judge found that ``Mr. [Grant] Goode lacks credibility when 
testifying in court under oath.'' Resp. Post-Hrng. Br. 8.; see also 
RX 14 (denying motion, reasoning that ``[t]he evidence revealed a 
number of conflicting family dynamics casting considerable doubt 
upon the reliability of the witness describing the alleged behavior 
that the Government presented to disqualify the current third-party 
custodian''). Apparently, this was in response to Mr. Goode's 
testimony in the criminal proceeding against Chris Watson that Tom 
Watson said ``he would like to kill a couple of DEA agents,'' a 
statement which he reported to DEA and which prompted the U.S. 
Attorney to file the motion. Tr. 302; see also RX 14.
     The CALJ nonetheless found Grant Goode's testimony to be 
``sufficiently detailed, plausible, and internally consistent to be 
fully credited in this decision.'' R.D. 25. The CALJ further 
explained that ``[b]ecause the Government did not offer the 
purported threat in its case-in-chief, a disposition of this case 
does not require that a credibility issue on this statement be 
rendered, and it forms no basis of this recommended decision.'' Id. 
at n.69.
     Respondent, however, offered the magistrate judge's findings to 
attack Grant Goode's credibility with respect to his testimony that 
he had brought his concerns about Chris Watson to Tom Watson's 
attention and sought to have the CALJ give Goode's testimony ``no 
weight.'' Resp. Post-Hrng. Br. 8 (``It is not known if the attention 
the DEA gave to Mr. Goode made him have delusions of grandeur that 
motivated his testimony, but he did take a keen interest in this 
case when he, unlike other lay witnesses, was at the hearing every 
day, even after his testimony had been given. On the other hand, 
unlike his reaction to Mr. Swaim's testimony, Tom Watson flatly 
denied that Mr. Goode ever brought any concerns about Chris to his 
attention.'' (citations omitted)).
     However, while Respondent offered the magistrate judge's 
finding to impeach Mr. Goode's testimony, I nonetheless adopt the 
CALJ's credibility finding because in assessing the credibility of 
Mr. Goode's testimony, I am entitled to consider ``the consistency 
and inherent probability of [his] testimony.'' Universal Camera 
Corp. v. NLRB, 340 U.S. 474, 496 (1951). Here, consistent with Mr. 
Goode's testimony, other witnesses testified that they brought their 
concerns with Chris Watson to Tom Watson's attention but that the 
latter ignored them. Accordingly, I find Goode's testimony credible 
notwithstanding the magistrate judge's finding.

---------------------------------------------------------------------------

[[Page 70088]]

    The Government also elicited testimony from Steve Goode, who, 
between 2001 and 2012, was a business partner of Tom Watson in four 
supermarkets (including Respondent), three of which had pharmacies. Id. 
at 485-86. While Steve Goode testified that his responsibilities 
involved managing the grocery side of the stores and that Tom and Chris 
Watson oversaw the pharmacies, he would see the daily and weekly sales 
reports for the stores. Id. at 487. Steve Goode further testified that 
its grocery wholesaler (AWG) allowed McKesson (the drug distributor 
used by the stores' pharmacies) to invoice through it, and thus, even 
though Steve Goode's responsibilities were limited to the grocery side 
of the stores, he could see the pharmacies' purchases on the ``weekly 
AWG statement.'' Id. at 487-88. According to Steve Goode, the daily 
sales report showed the sales of both the grocery side and the 
pharmacies. Id.
    Steve Goode further testified that in the summer of 2010, he 
noticed that one of the stores (Mayflower Food and Drug) ``didn't have 
any money in [its] accounts.'' Id. at 490. Goode looked into the 
situation and determined that while the pharmacy's purchases of 
medications ``were up,'' it ``sales were flat.'' Id.; see also id. at 
491. Of note, Chris Watson was the Pharmacist in Charge at the 
Mayflower store. Id. at 490.
    Steve Goode told Tom Watson about the issue; Watson's response was 
that ``we would get together and . . . have a talk with Chris.'' Id. at 
491. However, when the conversation did occur, Goode was told that he 
``needed just to take care of the grocery department [and] that Chris 
would take care of the pharmacy department.'' Id. at 492-93.
    At some point, Chris Watson started working at Respondent. Id. at 
495. According to Steve Goode, in the ``late spring of 2012'' he was on 
vacation when he received a phone call from another employee who told 
him that Chris Watson had allowed a former employee from the Mayflower 
pharmacy to go into Respondent on a Sunday afternoon when the pharmacy 
was closed and fill prescriptions ``for her family members and 
friends.'' Id. at 496, 498. When Goode returned from vacation, he spoke 
with Tom Watson about the incident and told him that he needed to ``get 
a handle on Chris.'' Id. at 496. While Tom Watson said that he would 
``take care of it,'' Goode testified that ``[n]othing happened.'' Id. 
However, Goode did not know whether the prescriptions were for 
controlled substances. Id. at 500.
    Regarding Mr. Swaim's testimony as to the reason he resigned as 
Respondent's PIC, Tom Watson testified that ``I remember some of what 
he talked about but I don't remember all of what he talked about.'' Tr. 
326. Watson then added that he had talked to his son ``about some 
things, too, so I was hoping . . . everything was in good shape.'' Id. 
Mr. Watson also denied having had a conversation with his long-standing 
pharmacy technician (as Mr. Swaim testified) that Chris was diverting 
drugs. Id. at 347.
    However, Tom Watson later acknowledged that Mr. Swaim is ``a good 
guy,'' who had been with him for ``a long time,'' before attributing 
the disparity between Mr. Swaim's testimony and his recollection as 
being the result of ``some health problems.'' Id. at 333. Watson then 
maintained that ``some of the stuff he said I just didn't remember like 
the conversations that he said we had. That don't mean we didn't have 
them. It just means that I just don't remember them.'' Id. at 333-34. 
As between the testimony of Mr. Swaim and Mr. Watson, the CALJ found 
Mr. Swaim's testimony more credible than Mr. Watson's. See R.D. 23, 41. 
I agree with the CALJ.
    As for Grant Goode's testimony that he told Tom Watson about the 
issues he found (the missing hard copy prescriptions, the doctors 
denying having written various prescriptions, the dispensings which 
were attributed to him which he did not fill), Watson asserted that ``I 
haven't talked to Grant about any concerns,'' that Grant ``didn't 
mention a word about anything he talks about here,'' and ``didn't 
mention misconduct . . . about anybody.'' Id. at 348-49.
    Watson also faulted Grant Goode for having called the State Board 
and the DEA, testifying that: ``Well, he seems like he's talked to 
everybody else. He's called the state board. He's called the DEA, and 
all this stuff, but he hasn't talked to me about it.'' Id. at 348.\14\ 
Still later, Watson reiterated that Grant Goode had ``never come 
directly to'' him about the issues he encountered. Id. at 351. While 
Watson maintained that Grant Goode also had the same medical issue 
which affected Watson's memory, Tr. 349, the CALJ found that ``Watson's 
assertion that . . . Grant Goode never brought concerns about his son's 
actions to his attention is simply not credible.'' R.D. at 41. I agree 
with the CALJ.\15\
---------------------------------------------------------------------------

    \14\ Later, Watson testified that:
    [F]amily is family. You know, if you've got a problem go see 
them about it, and talk about the problem. You don't know you got a 
problem until you at least talk about it. And you know, don't start 
with the state board, don't start with the DEA and all that. Start 
by calling your uncle or whatever or tell your mom and have her talk 
to your uncle if that--you know.
    Tr. 350.
    \15\ As for the incidents related by Steve Goode, Tom Watson 
also denied that Steve Goode had ever complained about the 
performance of the Mayflower pharmacy when Chris Watson was working 
there. Tr. 374-75. Notwithstanding that there is an ongoing dispute 
over the proceeds from dissolution of their partnership, id. at 505, 
the CALJ found that Steve Goode's testimony was fully credible as do 
I. R.D. 44.
---------------------------------------------------------------------------

    Mr. Watson further testified that he trusted his son, and that this 
``really'' shocked him. Tr. 326. When then asked whether he had any 
idea that his son ``had a substance abuse issue or was diverting,'' 
Watson maintained that he ``had no idea [Chris] had any kind of drug 
problem.'' Id.
    When further asked what he would have done if he ``had known that 
[his] son had a substance abuse problem or was diverting controlled 
substances,'' Watson asserted that he would have ``[g]ot it stopped,'' 
that he would have gone ``to the state board,'' and that he

[[Page 70089]]

``would have halted that immediately.'' Id. at 328. However, shortly 
thereafter, Watson admitted that he did not ``know exactly how [he] 
would have handled it,'' but that ``at some point'' the state board 
would have had to ``become involved'' because he had scheduled an 
inventory for early February and ``would have found out'' that drugs 
were missing.\16\ Id. at 330. The CALJ did not find Mr. Watson's 
testimony on these issues credible. R.D. at 41. Nor do I.
---------------------------------------------------------------------------

    \16\ While Mr. Watson testified that an inventory would have 
determined that Respondent was missing drugs, short of doing an 
audit in which Respondent's receipts of controlled drugs were added 
to the results of a previous inventory and its dispensings (as well 
as disposals, thefts or losses) were subtracted, it is not likely 
that this would have uncovered the problem. In any event, given the 
evidence that Mr. Swaim and Ms. Gilbert, his longstanding pharmacy 
technician, (not to mention his former business partner), had told 
Mr. Watson about his son's activities, I am left to wonder why the 
inventory was not scheduled months earlier.
---------------------------------------------------------------------------

    Thus, even putting aside the 2010 incident in which his business 
partner complained about the cash shortage at the Mayflower store, the 
evidence shows that on multiple occasions, Tom Watson, Respondent's 
owner, was provided with information that Chris Watson was likely 
engaged in the diversion of controlled substances. Notably, in his 
testimony, Tom Watson claimed only that he talked to his son (although 
it is unclear which incident prompted this) and offered no testimony 
that he took any other measures (other than to schedule an inventory 
long after he had received credible reports of a problem) to 
investigate the allegations. This is especially remarkable in light of 
the complaints raised by Mr. Swaim and the pharmacy technician, both of 
whom had worked for Mr. Watson for decades. I therefore hold that Mr. 
Watson's failure to investigate the allegations that his son and PIC 
was diverting controlled substances constitutes ``other conduct which 
may threaten public health and safety.'' 21 U.S.C. 823(f)(5); see also 
Rose Mary Jacinta Lewis, 72 FR 4035, 4042 (2007) (holding physician 
liable under factor five for failing to investigate the misuse of her 
registration; ``every registrant has a duty to conduct a reasonable 
investigation upon receiving credible information to suspect a theft or 
diversion has occurred'' as an investigation ``is essential to 
preventing the continuation of criminal activity'').
    The record in this matter thus establishes that Chris Watson, 
Respondent's PIC, committed egregious and extensive misconduct which 
ranged from regulatory violations to criminal acts. In short, Chris 
Watson used Respondent's DEA registration as a license to engage in 
drug dealing. Notably, in its post-hearing brief, Respondent does not 
dispute the evidence of its PIC's misconduct. Resp. Post-Hrng. Br. 2.
    Thus, Respondent acknowledges that ``the Government has met its 
burden of proving its Section 824(a) claim, placing the burden on 
[Respondent] to show that despite Chris Watson's conduct, granting [it] 
a [Registration] would not be contrary to the public interest.'' Id. at 
3. I agree and hold that the evidence conclusively establishes that 
Respondent, through both its PIC and owner, has committed numerous acts 
``inconsistent with the public interest,'' which support both the prior 
Administrator's issuance of the Immediate Suspension Order, as well as 
the denial of Respondent's pending application.\17\ See U.S.C. 823(f); 
824(a)(4); 824(d).
---------------------------------------------------------------------------

    \17\ The CALJ found that ``[t]he most recent renewal of the 
Respondent's registration occurred on February 7, 2012, with a 
scheduled expiration date of March 31, 2015.'' R.D. at 2 n.2. The 
CALJ then explained that ``[d]uring a March 19, 2015 status 
conference, the Respondent, through counsel, represented that a 
renewal application had been timely filed, and the Government 
represented that it will not contest the timeliness of the renewal 
application. Thus, the Respondent's [Registration] remains in full 
force and effect.'' Id. (citing 21 CFR 1301.36(i)).
     Here, however, the prior Administrator ordered that 
Respondent's registration be immediately suspended, thus prohibiting 
Respondent from exercising the authority granted by its 
registration. Thus, Respondent's registration did not ``remain[ ] in 
full force and effect.''
     Moreover, according to the Agency's registration records, of 
which I take official notice, Respondent did not file its renewal 
application until March 3, 2015. See 5 U.S.C. 556(e); 21 CFR 
1316.59(e). Significantly, at the time Respondent filed its renewal 
application, it had previously been served with the Order to Show 
Cause and Immediate Suspension of Registration. By regulation, DEA 
has set forth the conditions for the continuation of a registration 
past its expiration date where a registrant has been served with an 
Order Show Cause. See 21 CFR 1301.36(i); see also 5 U.S.C. 558(c) 
(``When [a] licensee has made timely and sufficient application for 
a renewal or a new license in accordance with agency rules, a 
license with reference to an activity of a continuing nature does 
not expire until the application has been finally determined by the 
agency.''). This regulation provides that:
    [i]n the event that an applicant for reregistration (who is 
doing business under a registration previously granted and not 
revoked or suspended) has applied for reregistration at least 45 
days before the date on which the existing registration is due to 
expire, and the Administrator has issued no order on the application 
on the date on which the existing registration is due to expire, the 
existing registration of the applicant shall automatically be 
extended and continue in effect until the date on which the 
Administrator so issues his/her order. The Administrator may extend 
any other existing registration under the circumstances contemplated 
in this section even though the Applicant failed to apply for 
reregistration at least 45 days before expiration of the existing 
registration, with or without request by the Applicant, if the 
Administrator finds that such extension is not inconsistent with the 
public health and safety.
    Id.
     Thus, where a Registrant, which has been served with an Order 
to Show Cause, fails to file its renewal application at least 45 
days before the expiration of its registration, the registration 
expires absent a showing that the extension of its registration is 
not inconsistent with the public health and safety. See Ralph J. 
Chambers, 79 FR 4962, 4962 (2014). The Agency has also applied the 
45 day rule in cases where a registrant has been issued an Immediate 
Suspension Order, recognizing that while a timely renewal 
application may result in the extension of a registration, the 
Immediate Suspension Order precludes the registration from remaining 
in effect. See Paul H. Volkman, 73 FR 30630, 30641 (2008). However, 
the Agency has further held that where an untimely renewal 
application has been filed and the Registrant's Registration has 
expired, the application remains pending before the Agency. Id.
     In this matter, I am not bound by the Government's agreement 
not to contest the timeliness of Respondent's renewal application. 
Accordingly, I find that Respondent did not file its renewal 
application until 28 days before its registration expired and was 
thus untimely. Moreover, I further find that because Respondent's 
registration was immediately suspended based on the prior 
Administrator's finding, which is amply supported by the record, 
that its ``continued registration during the pendency of these 
proceedings would constitute an imminent danger to the public health 
or safety,'' ALJ Ex. 1, at 5; and there is no evidence that the 
prior Administrator found that the extension of its registration 
would not be ``inconsistent with the public health and safety,'' 21 
CFR 1301.36(i), its registration has expired. However, I also find 
that Respondent's application is before the Agency. See Volkman, 73 
FR at 30641.
---------------------------------------------------------------------------

    Notwithstanding its egregious and extensive misconduct, Respondent 
nonetheless argues that the denial of its renewal application ``on this 
ground is a matter of discretion.'' Resp. Post-Hearing Br. 2 (citing 
Dinorah Drug Store, Inc., 61 FR 15972, 15973 (1996)). As a statement of 
the law, that is true. However, as set forth in numerous decisions, 
where, as here, ``the Government has proved that a registrant [or 
applicant] has committed acts inconsistent with the public interest, a 
registrant [or applicant] must `present sufficient mitigating evidence 
to assure the Administrator that it 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 its actions and demonstrate that it 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);

[[Page 70090]]

Prince George Daniels, 60 FR 62884, 62887 (1995). See also Hoxie v. 
DEA, 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, an applicant's candor during the proceeding is 
an important consideration in the public interest determination. See 
Hoxie, 419 F.3d at 483.
    While a registrant must accept responsibility and demonstrate that 
it will not engage in future misconduct in order to establish that its 
registration is consistent with the public interest, DEA has repeatedly 
held that these are not the only factors that are relevant in 
determining the appropriate sanction. 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 
sanction. See 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''); Volkman, 73 FR at 30644; see also Paul Weir Battershell, 
76 FR 44359, 44369 (2010) (imposing six-month suspension, noting that 
the evidence was not limited to security and recordkeeping violations 
found at first inspection and ``manifested a disturbing pattern of 
indifference on the part of [r]espondent to his obligations as a 
registrant''); Gregory D. Owens, 74 FR 36751, 36757 n.22 (2009). So 
too, the Agency can consider the need to deter similar acts, both with 
respect to the respondent in a particular case and the community of 
registrants. See Gaudio, 74 FR at 10095 (quoting Southwood, 72 FR at 
36504). Cf. McCarthy v. SEC, 406 F.3d 179, 188-89 (2d Cir. 2005) 
(upholding SEC's express adoptions of ``deterrence, both specific and 
general, as a component in analyzing the remedial efficacy of 
sanctions'').
    Having considered the relevant factors, I conclude that Respondent 
has not produced sufficient evidence to show why it can be entrusted 
with a new registration. As for whether Respondent accepted 
responsibility for its misconduct, based on the record as a whole, I 
agree with the CALJ's finding that it ``has not accepted 
responsibility.'' R.D. at 60.
    I acknowledge that Respondent stipulated to many of the 
allegations. However, on the whole, Tom Watson's testimony on the issue 
was equivocal and unpersuasive as he repeatedly denied that he and 
Respondent were responsible for his son's misconduct.
    For example, Tom Watson initially testified that ``I didn't do 
enough. That was the problem.'' Tr. 335. However, Watson then amended 
his testimony, stating: ``Well, not that I didn't do enough, I didn't 
do it fast enough. I would have found out in a week what was--you know, 
where we stood on everything, so within a week I would have had to have 
made a decision on where I went from there because I would have known . 
. . exactly what we were missing.'' Id. However, even crediting 
Watson's testimony that he had scheduled an inventory to be conducted 
in early February (one week after the ISO was served), the evidence 
shows that Watson was told of his son's misconduct on multiple 
occasions by three different persons (Mr. Swaim, Ms. Gilbert, his 
longstanding pharmacy tech, and his former business partner), well 
before his nephew Grant Goode also complained. Watson offered no 
explanation for why he failed to do anything more that talk to his son 
in response to the earlier reports he received.\18\
---------------------------------------------------------------------------

    \18\ Even then, short of conducting an audit (of which an 
inventory is only a part), it is unlikely that Tom Watson would have 
discovered the full scope of Respondent's diversion.
---------------------------------------------------------------------------

    The record contains other examples of Tom Watson providing 
equivocal testimony or outright denying responsibility for Respondent's 
various violations of federal law. For example, when asked whether he 
accepted responsibility for the violations Respondent committed when 
Chris Watson removed the controlled substance prescriptions from the 
pharmacy to his house, Tom Watson testified that Chris ``failed to 
provided [sic] with the law,'' before adding that while ``[t]he owner 
have [sic] to take some responsibility . . . this is not--that's not my 
fault, I don't think. I think the pharmacist-in-charge should be 
responsible for that.'' Tr. 354.
    When then asked whether he was admitting that Respondent failed to 
comply with federal law when Chris Watson distributed controlled 
substance without a prescription, Tom Watson replied: ``I don't think 
[Respondent] did. I think my son did.'' Id. at 355. Upon further 
questioning as to whether he was accepting responsibility for these 
violations, Watson explained: ``I accept some responsibility because I 
probably should have replaced Chris with somebody else, but . . . it's 
past tense so now so I can't, so I'll have to take responsibility for 
that, yes.'' Id.
    Turning to the multiple instances in which the undercover Agent 
presented clearly fraudulent prescriptions which Chris Watson filled, 
Tom Watson testified that he did not accept responsibility. Id. at 356. 
Watson then explained that ``[w]hoever filled is responsible for those 
prescriptions. I didn't fill them.'' Id.
    Tom Watson acknowledged that his son violated federal law when he 
distributed the stock bottles of controlled substances that were found 
on Eric Horton and Joseph Jackson when they were arrested. Tr. 357. 
However, when asked whether he bore any responsibility for these acts, 
Watson testified: ``I don't think so.'' Id. at 358. Continuing, Watson 
added: ``Whoever filled the prescriptions and whoever give [sic] the 
medication away, that's who is responsible, I think. They will have to 
take responsibility for that they do, I mean it's part of life.'' Id.
    Also, as found above, Mr. Watson's nephew testified that Tom Watson 
was present on one occasion during which Chris Watson placed a 1,000-
count bottle of hydrocodone in his back pack and that Tom Watson 
observed this. Tom Watson did not address this incident either to deny 
that it had occurred or to acknowledge that it had occurred and accept 
responsibility for his misconducting in failing to intervene to prevent 
his son from diverting the drugs.
    Still later, when asked whether under Respondent's new Policies and 
Procedures, Tom Watson could even be affiliated with Respondent, Watson 
testified that ``[i]t would right now, yes. The only problem is I have 
done nothing wrong.'' Tr. 368. Continuing, Watson explained that 
``[w]hen they come and took my DEA license, yes, that's a possibility, 
but I have--I mean, I have done nothing wrong. I mean, I can't help 
what other people have done, but me personally I have done nothing 
wrong . . . I might be a little slow to act on some things that's all 
I'm guilty of.'' Tr. 368.
    Accordingly, I agree with the CALJ's findings that Respondent has 
failed to accept responsibility for its misconduct. This alone is 
sufficient to conclude that Respondent has not rebutted the 
Government's prima facie showing that granting Respondent's application 
``would be inconsistent with the public interest.'' 21 U.S.C. 823(f); 
see also Liddy's Pharmacy, L.L.C., 76 FR 48887, 48897 (2011). Given the 
egregiousness and extent of its misconduct, I need not consider whether 
Respondent has put forward sufficient evidence of remedial

[[Page 70091]]

measures to support its burden of production on this issue.\19\
---------------------------------------------------------------------------

    \19\ On the issue of its remedial measures, Respondent argued 
that Tom Watson testified that if its application is granted, ``he 
will be more actively involved in its operations'' to ``ensure its 
proper operations, accountability, and viability.'' Resp. Post-Hrng. 
Br. 16. However, given the multiple instances in which Mr. Watson 
was made aware of his son's misconduct and did nothing more than 
talk to his son, his promise to do better in the future rings 
hollow.
     On this issue, Respondent also presented the testimony of Glenn 
Wood, its prospective new Pharmacist in Charge. R.D. at 60. Finding 
Wood's testimony unpersuasive, the CALJ explained that:
    Wood's testimony concerning all the extra security measure [sic] 
he intends to take suffers from the same fundamental defect that 
[Tom] Watson's representations regarding his anticipated increased 
pharmacy involvement and implementation of his Proposed Policy do: 
both men were present and did nothing when the Respondent's PIC 
Chris [Watson], ran wild. These men are a major part of the problem, 
not the champions of a solution that can be afforded any genuine 
credence.
    Id.
     I do not find adequate support in the record for the CALJ's 
assertion that Glenn Wood was ``present and did nothing when'' Chris 
Watson ``ran wild.'' While Glenn Wood testified that he had done a 
one-month internship under Chris Watson while he was in pharmacy 
school, Tr. 477, 479; and that during the period 2006 through 2007, 
when he was working at both the Mayflower and Perryville stores, he 
worked alongside of Chris Watson one day a week, id. 454, 479; there 
is no evidence that Chris Watson was diverting controlled substances 
during this time period, let alone evidence that Glenn Wood observed 
this.
     Thereafter, Wood went to Utah for a brief period before 
returning to Arkansas and becoming the PIC at Morrilton Food and 
Drug for approximately three years up until the sale of the pharmacy 
in 2013. Tr. 395-96. Here again, there is no evidence that Chris 
Watson was diverting drugs in this period, let alone evidence that 
Glenn Wood observed this.
     After the sale of Morrilton Food and Drug, Wood worked for a 
pharmacy that is not affiliated with the Watsons, before agreeing in 
December 2014 with Chris Watson to work several days a week at 
Respondent. Id. at 396. Wood, however, did not start work at 
Respondent until January 28, 2015, the day after the search warrant 
and Immediate Suspension Order were served. Id. at 398.
     To be sure, Wood acknowledged that he had met Eric Horton at a 
birthday party for Chris Watson's daughter and there were occasions 
on which Chris Watson and Horton would show up at the pharmacy. Id. 
at 464-68. This, however, is too thin a reed to support the 
conclusion that Wood was ``present and did nothing when [Chris 
Watson] ran wild,'' R.D. at 60, especially given that there is no 
evidence that Watson was diverting drugs during this period. 
Ultimately, because Wood testified primarily on the issue of whether 
Respondent has instituted adequate remedial measures, an issue which 
I need not resolve given Respondent's failure to accept 
responsibility, I deem it unnecessary to consider the issues 
surrounding the February 25, 2015 phone call (nearly one month after 
the ISO was served and the search warrant executed) between Wood and 
Grant Goode regarding the latter's employment status, or Wood's 
involvement in the Redneck Remedy business venture, and decline to 
adopt that portion of the Recommended Decision which discusses these 
issues. R.D. 29-36.
---------------------------------------------------------------------------

    Respondent nonetheless argues that it should be granted a new 
registration because ``[t]he community impact'' of not granting its 
application ``is significant.'' Resp. Post-Hrng. Br. 12. As support for 
its contention, it relies on Pettigrew Rexall Drugs, 64 FR 8855, 8860 
(1999), a case in which the Agency found that revocation of a 
pharmacy's registration was justified by the proven misconduct (i.e., 
dispensing controlled substances without a physician's authorization 
but for which the patients appeared to have medical needs), but then 
``recognize[d] that [it was] one of two pharmacies in a relatively 
poor, medically underserved community, and . . . would most likely 
close if its DEA registration [was] revoked.'' However, the Agency also 
noted that in addition to having changed its procedures, there was ``no 
evidence of any wrongdoing since the events at issue'' which had 
occurred five or more years before the proceeding was even initiated 
(and eight years before the issuance of the decision). Id.
    Based on Pettigrew Rexall Drugs, Respondent argues that the 
community impact would be substantial because Respondent ``is located 
in ``a rural and underserved area,'' and that ``[a] large percentage of 
[its] patients are indigent.'' Resp. Post-Hrng. Br. 13-14. Respondent 
further argues that without a registration, Respondent would not be 
viable concern because patients will not go to two different pharmacies 
to fill their prescriptions and that the only ``other pharmacy in the 
area'' ``would have a monopoly.'' Id. at 14-15.
    While the Agency has now in multiple cases rejected the contention 
that community impact is a relevant consideration in assessing whether 
a prescribing practitioner's registration ``would be consistent with 
the public interest,'' and the reasoning of these decisions calls into 
question the continuing vitality of Pettigrew Rexall Drugs even as 
applied to a pharmacy, contrary to the discussion in the Recommended 
Decision, R.D. at 60, the Agency has not formally overruled the 
case.\20\ However, the Agency's reasons for rejecting consideration of 
community impact evidence in cases involving prescribing practitioners 
apply with equal force to pharmacies.
---------------------------------------------------------------------------

    \20\ Each of the cases cited by the ALJ involved prescribers. 
The closest the Agency has come to overruling Pettigrew Rexall Drugs 
is Physicians Pharmacy, L.L.C., 77 FR 47096 (2012). Therein, the 
Agency agreed ``with the ALJ's rejection of the Government's 
contention that `in assessing the public interest, the nature and 
amount of diversion of controlled substances in a geographical area 
is a legitimate area of inquiry and concern when determining whether 
an applicant should be granted a DEA registration.' '' Id. at 47096 
n.2. As the Agency explained, ``[n]othing in the texts of any of the 
five [public interest] factors set forth in section 823(f) remotely 
suggests that Congress granted the Agency authority to deny an 
application based on its assessment of `the nature and amount of 
diversion of controlled substances in a geographical area.' '' Id. 
(quoting Gov. Br. 4).
     In dicta, the Agency also noted that the Government's argument 
is ``simply the other side of the community impact coin'' and ``that 
a rule which takes into account the impact on the community caused 
by not registering (or de-registering through a revocation 
proceeding) a particular practitioner is completely unworkable.'' 
Id. (citations omitted). Moreover, the Agency cited only cases 
involving prescribing practitioners and did not discuss Pettigrew 
Rexall Drugs. Accordingly, Physicians Pharmacy cannot be read as 
overruling Pettigrew Rexall Drugs. See, e.g., Drug Plastics & Glass 
Co., Inc., v. NLRB, 44 F.3d 1017, 1022 (D.C. Cir. 1995) (``In order 
to diverge from agency precedent, the Board must `suppl[y] a 
reasoned analysis indicating that prior policies and standards are 
being deliberately changed, not casually ignored.' '') (citations 
omitted); Shaw's Supermarkets, Inc., v. NLRB, 884 F.2d 34, 37 (1st 
Cir. 1989) (quoting Atchison, Topeka & Santa Fe Ry. Co. v. Wichita 
Bd. of Trade, 412 U.S. 800, 808-09 (1973) (plurality op.) (``It is, 
of course, true that the Board is free to adopt new rules of 
decision and that the new rules of law can be given retroactive 
application. Nevertheless the Board may not depart sub silentio, 
from its usual rules of decision to reach a different, unexplained 
result in a single case.'')).
---------------------------------------------------------------------------

    In Gregory Owens, 74 FR 36751, 36757 (2009), the Agency explained 
that ``whether a practitioner treats patients who come from a medically 
underserved community or who have limited incomes has no bearing on 
whether he has accepted responsibility and undertaken adequate 
corrective measures.'' The Agency further explained that ``[t]he 
diversion of prescription drugs has become an increasingly serious 
societal problem, which is particularly significant in poorer 
communities whether they are located in rural or urban areas,'' and 
that ``[t]he residents of this Nation's poorer areas are as deserving 
of protection from diverters as are the citizens of its wealthier 
communities.'' Id.
    The Agency also noted that there are no workable standards for 
determining when a practitioner should be entitled to a reduced 
sanction based on community impact evidence. Id. Thus, in Owens, the 
Agency rejected the ALJ's recommendation that the Agency should decline 
to impose either a suspension or revocation of the practitioner's 
registration because 10 percent of his patients came from underserved 
counties and a majority of his patients had limited finances.
    As the Agency explained:

    The ALJ's reasoning begs the question of how many patients from 
underserved areas would a practitioner have to treat to claim the 
benefit of the rule. As for her reliance on the fact that a majority 
of Respondent's patients have limited incomes, determining what 
constitutes a patient with a limited income or finances (or what 
percentage of patients) a practitioner must have [who meet the 
criteria] to claim entitlement to this rule,

[[Page 70092]]

would inject a new level of complexity into already complex 
proceedings and take the Agency far afield of the purpose of the 
CSA's registration provisions, which is to prevent diversion.

Id.
    Notwithstanding that Respondent provided notice that it intended to 
argue that the Agency should consider the community impact of denying 
its application, the Government does not address whether Pettigrew 
Rexall Drugs remains viable as precedent. See generally Gov. Post-Hrng. 
Br. Accordingly, I address whether Respondent has produced sufficient 
evidence to support such a claim.
    Respondent's evidence on the issue was limited to the testimony of 
Mr. Wood that Perry County is ``an extremely rural area'' and that 
``[a] large percent of our customers are what I would describe as being 
indigent probably somewhat.'' Tr. 404. Mr. Wood further testified that 
without Respondent, there would only be one pharmacy in the county 
which would have a monopoly. Id. at 405. Finally, Mr. Wood testified 
that in Arkansas, a pharmacist can provide disease state management and 
give immunizations. Id. at 404-05.
    Mr. Wood's testimony is too insubstantial to support the conclusion 
that a sanction less than denial of its application is warranted 
because of the adverse community impact resulting from its inability to 
dispense controlled substances. Notably, Mr. Wood did not specify the 
percentage of Respondent's customers that is indigent, nor the income 
level he used to support his conclusion.
    As for the contention that without a DEA registration, Respondent 
will lose many of its customers because they will not want to go to two 
pharmacies to fill their prescriptions, controlled substances 
constitute only 11 percent of all prescriptions issued nationally. See 
Electronic Prescriptions for Controlled Substances, 75 FR 16236, 16237 
(2010) (Interim Final Rule). This suggests that the majority of 
pharmacy patients do not even fill controlled substance prescriptions.
    Moreover, even if the lack of a registration will eventually render 
Respondent financially unviable, I do not find persuasive its 
contention that this will have an adverse community impact. While 
Respondent maintains that this will result in the creation of a 
monopoly because there is only one other pharmacy in Perryville, Mr. 
Watson and his partner formerly owned a pharmacy in Morrilton, 
Arkansas, which is only fourteen miles from Perryville, and the results 
of a Mapquest search for pharmacies in the Perryville area (of which I 
take official notice) show that there are six pharmacies located in 
Morrilton.\21\ Tr. 395. Moreover, since Pettigrew Rexall Drugs, there 
has been an increase in the availability of legitimate mail order 
pharmacies. Thus, I reject Respondent's suggestion that denying its 
application will allow the remaining pharmacy to engage in monopolistic 
pricing.
---------------------------------------------------------------------------

    \21\ Pursuant to 5 U.S.C. 556(e), Respondent may show to the 
contrary, by filing a properly supported motion, no later than 15 
days from the date of service of this order, which shall commence on 
the date of mailing.
---------------------------------------------------------------------------

    Of further note with respect to Mr. Wood's testimony that a large 
percentage of Respondent's customers are indigent (and presumably less 
able to travel to Morrilton), Respondent produced no evidence as to the 
number of patients it deems to be indigent who are not enrolled in the 
Arkansas Medicaid program. However, the Arkansas Medicaid program 
covers the cost of most prescription drugs. See Arkansas Dept. of Human 
Services, Arkansas Medicaid, ARKids First & You--Arkansas Medical 
Beneficiary Handbook 56 (Rev. 2010). And Respondent produced no 
evidence that the other Perryville pharmacy does not accept Medicaid 
patients.\22\ Finally, as for Respondent's contention that pharmacists 
in Arkansas can provide disease state management and immunizations, it 
has offered no evidence that there is a shortage of medical 
professionals in the Perryville area who can provide these 
services.\23\
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    \22\ Because Respondent seeks to rebut the Government's prima 
facie showing, it has the burden of production on this issue.
    \23\ While I decline to overrule Pettigrew Rexall Drugs, I find 
its reasoning to be problematic as it appears to have given more 
weight to community impact than was warranted by the minimal 
evidence discussed in the decision and set forth no principle for 
when such evidence could overcome other relevant factors.
     For example, the decision noted the Agency's agreement with the 
ALJ's finding that the pharmacy owner ``did not appear candid or 
forthright and his testimony appeared to be tailored to Respondent's 
defense in this proceeding.'' 64 FR at 8858. The decision also noted 
the ``[r]espondent's failure to acknowledge or accept responsibility 
for any wrongdoing.'' Id. at 8860.
     Notably, since Pettigrew Rexall Drugs, the Agency has made 
clear that where the Government has proved that a registrant/
applicant has engaged in intentional or knowing diversion, the 
registrant/applicant must acknowledge its misconduct to rebut the 
conclusion that its registration is inconsistent with the public 
interest. See Holiday CVS, L.L.C., d/b/a CVS/Pharmacy Nos. 219 and 
5195, 77 FR 62315, 62323 (2012) (revoking pharmacy registration 
notwithstanding that company had replaced each pharmacy PIC because 
company failed to acknowledge its misconduct); Jayam Krishna-Iyer, 
74 FR 459, 463 (2009) (holding on remand that had physician not 
``acknowledged wrongdoing with respect to both her prescribing to 
the undercover operatives, as well as'' other misconduct, the Agency 
``would [have] again revoke[d] her registration''); see also MacKay 
v. DEA, 664 F.3d 808, 820 (10th Cir. 2011) (``The DEA may properly 
consider whether a physician admits fault in determining if the 
physician's registration should be revoked.'') (citation omitted); 
Chein v. DEA, 533 F.3d 828, 837 (D.C. Cir. 2008) (upholding 
revocation order, noting in part that physician had not ``accepted 
responsibility for his misconduct''); Hoxie v. DEA, 419 F.3d 477, 
483 (6th Cir. 2005) (DEA properly considers a registrant's admission 
of fault in determining whether registration should be revoked).
     Since Pettigrew Rexall Drugs, the Agency has also made clear 
that it ``places great weight on a registrant's/applicant's candor, 
both during an investigation and in any subsequent proceeding.'' 
Robert F. Hunt, 75 FR 49995, 50004 (2010); see also 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.''); Rose Mary Jacinta Lewis, 72 FR at 4042 (holding that 
lying under oath in proceeding to downplay responsibility supports 
conclusion that physician ``cannot be entrusted with a 
registration'').
     Thus, were a case to come before me with similar facts to those 
of Pettigrew Rexall Drugs, I would deny its application and/or 
revoke its registration.
---------------------------------------------------------------------------

    Thus, I conclude that Respondent's evidentiary showing on community 
impact is insufficient to rebut the Government's prima facie showing 
that granting its application ``would be inconsistent with the public 
interest.'' 21 U.S.C. 823(f). Nor do I consider its evidence sufficient 
to support a lesser sanction than what is warranted on the facts of 
this case.
    In short, I agree with the CALJ that the misconduct engaged in by 
both Chris Watson (Respondent's PIC) and Tom Watson (its owner) was 
egregious. See R.D. at 61. And I further agree with the CALJ's 
conclusion that ``a sanction that falls short of [denial] would 
undermine the Agency's legitimate interests in both specific and 
general deterrence.'' Id. Accordingly, I will affirm the Order of 
Immediate Suspension, as well as order the denial of Respondent's 
pending application to renew its registration.

Order

    Pursuant to the authority vested in me by 21 U.S.C. 823(f) as well 
as 28 CFR 0.100(b), I order that the application of Perry County Food & 
Drug for a DEA Certificate of Registration as a retail pharmacy be, and 
it hereby is, denied. Pursuant to the authority vested in me by 21 
U.S.C. 824(a)(4) & (d), as well as 28 CFR 0.100(b), I affirm the Order 
of Immediate Suspension of DEA Certificate of Registration AP2331851 
issued to Perry County Food & Drug. Pursuant to the authority vested in 
me by 21 U.S.C. 824(f), I further order that all right, title, and 
interest in any controlled substances seized by the Government during 
the execution of the

[[Page 70093]]

Order of Immediate Suspension issued to Perry County Food & Drug be, 
and it hereby is, vested in the United States. This Order is effective 
immediately.\24\
---------------------------------------------------------------------------

    \24\ For the same reasons that led the former Administrator to 
conclude that an Immediate Suspension was warranted, I conclude that 
the public interest necessitates that this Order be effective 
immediately. See 21 CFR 1316.67.

    Dated: October 29, 2015.
Chuck Rosenberg,
 Acting Administrator.
    Paul A. Dean, Esq., for the Government.
    M. Darren O'Quinn, Esq., for the Respondent.

RECOMMENDED RULINGS, FINDINGS OF FACT, CONCLUSIONS OF LAW, AND DECISION 
OF THE ADMINISTRATIVE LAW JUDGE

    John J. Mulrooney, II, Chief Administrative Law Judge. On January 
26, 2015, the Administrator of the Drug Enforcement Administration 
(DEA) issued an Order to Show Cause and Immediate Suspension of 
Registration (OSC/ISO) \25\ suspending the DEA Certificate of 
Registration (COR), number AP2331851,\26\ of Perry County Food & Drug 
(Respondent), pursuant to 21 U.S.C. 824(d), on the grounds that the 
Respondent's continued registration constitutes an immediate danger to 
the public health and safety. The OSC/ISO also proposes to revoke the 
Respondent's COR pursuant to 21 U.S.C. 824(a)(4), deny any pending 
applications for renewal or modification of such registration, or deny 
any applications for additional DEA registration, on the grounds that 
the Respondent's continued registration is inconsistent with the public 
interest as that term is defined in 21 U.S.C. 823(f). On February 6, 
2015, the Respondent, through counsel, filed a timely request for a 
hearing.\27\ A hearing was conducted in this matter on March 31-April 
1, 2015, in Little Rock, Arkansas.
---------------------------------------------------------------------------

    \25\ ALJ Ex. 1.
    \26\ Gov't Ex. 1. The Respondent was issued DEA COR AP2331851 
prior to April 2, 1986. Id. at 1. The most recent renewal of the 
Respondent's registration occurred on February 7, 2012, with a 
scheduled expiration date of March 31, 2015. Id. During a March 19, 
2015 status conference, the Respondent, through counsel, represented 
that a renewal application had been timely filed, and the Government 
represented that it will not contest the timeliness of the renewal 
application. Thus, the Respondent's COR remains in full force and 
effect. 21 CFR 1301.36(i) (2015).
    \27\ ALJ Ex. 3.
---------------------------------------------------------------------------

    The issue ultimately to be adjudicated by the Administrator, with 
the assistance of this recommended decision, is whether the record as a 
whole establishes by substantial evidence that the Respondent's 
registration with the DEA should be revoked pursuant to 21 U.S.C. 
824(a).
    After carefully considering the testimony elicited at the hearing, 
the admitted exhibits, the arguments of counsel, and the record as a 
whole, I have set forth my recommended findings of fact and conclusions 
of law below.

The Allegations

    In the OSC/ISO, the Government contends that several bases exist 
upon which the Agency should revoke the Respondent's COR. The 
Government alleges that revocation of the Respondent's COR is 
appropriate because the Respondent unlawfully distributed controlled 
substances in violation of 21 U.S.C. 841(a) and 21 U.S.C. 842(a). 
Specifically, the Government contends that from August 2014 through 
January 2015, the Respondent (1) ``on several occasions . . . 
distributed and dispensed controlled substances to individuals either 
without a prescription, as required by 21 U.S.C. 829(a), (b) and 21 CFR 
1306.11(a) and 1306.21(a), or pursuant to prescriptions that [the 
Respondent's] pharmacist knew or should have known had not been issued 
for a legitimate medical purpose in the usual course of the 
practitioner's professional practice'' and (2) failed to ``provide 
effective controls against theft and diversion of controlled 
substances.'' \28\
---------------------------------------------------------------------------

    \28\ ALJ Ex. 1 at 1-3.
---------------------------------------------------------------------------

    In support of its allegations, the Government asserts that on 
several occasions, the Respondent's pharmacist-in-charge (PIC) Chris 
Watson (Chris W) (1) dispensed controlled substances (hydrocodone and 
alprazolam) without a prescription and (2) dispensed controlled 
substances (hydrocodone and alprazolam) pursuant to prescriptions that 
Chris W knew were fictitious or fraudulent.\29\ Additionally, the 
Government alleges that Chris W advised an undercover DEA agent on how 
to modify a scrip by hand to ``create a more realistic looking 
prescription'' and deliberately ignored the agent's reference to 
intentional diversion of controlled substances filled at the 
Respondent.\30\ The Government also asserts that state law enforcement 
discovered the Respondent's stock bottles of controlled substances in 
vehicles of non-pharmacy personnel, and that the Respondent failed to 
inform DEA of the loss or theft of controlled substances as required by 
21 CFR 1301.74(c).\31\
---------------------------------------------------------------------------

    \29\ Id. at 1-2.
    \30\ Id. at 2-3.
    \31\ Id. at 4.
---------------------------------------------------------------------------

The Stipulations of Fact

    The Government and the Respondent, through counsel, have entered 
into stipulations \32\ regarding the following matters:
---------------------------------------------------------------------------

    \32\ The parties have also entered into stipulations of credible 
testimony regarding twenty-three witnesses. All stipulations of fact 
and testimony are set forth in ALJ Ex. 20.
---------------------------------------------------------------------------

    (1) The Respondent pharmacy is registered with the DEA as a retail 
pharmacy in Schedules II-V under DEA COR AP2331851 at 112 Houston 
Avenue, P.O. Box 327, Perryville, Arkansas 72126.
    (2) The scheduled expiration date of DEA COR AP2331851, which has 
been issued to the Respondent, and is the subject of these proceedings, 
is March 31, 2015.
    (3) During the time period of August 15, 2014 through January 28, 
2015, Chris W was the Vice-President and Controller of the Respondent 
pharmacy.
    (4) During the time period of August 15, 2014 through January 28, 
2015, Chris W was the pharmacist-in-charge (PIC) of the Respondent 
pharmacy.
    (5) The only registered address for the Respondent pharmacy under 
DEA COR AP2331851 is: 112 Houston Avenue, P.O. Box 327, Perryville, 
Arkansas 72126.
    (6) Patient D.J.\33\ had a prescription for Xanax, a controlled 
substance,\34\ filled at the Respondent pharmacy on September 17, 2013. 
The hard copy of this prescription was discovered at Chris W's 
residence during the execution of a federal search warrant on January 
27, 2015.
---------------------------------------------------------------------------

    \33\ Consistent with the terms of the Protective Order issued in 
this matter (ALJ Ex. 15), initials have been substituted for patient 
name identifiers. Copies of each of the prescriptions found at Chris 
W's house were received into evidence. Gov't Exs. 41, 54-63; Tr. 
204.
    \34\ Xanax (alprazolam) is a Schedule IV controlled substance. 
21 CFR 1308.14 (2015); Office of Diversion Control, Benzodiazepines, 
Drug Enforcement Admin. (Jan. 2013), available at http://www.deadiversion.usdoj.gov/drug_chem_info/benzo.pdf.
---------------------------------------------------------------------------

    (7) Patient J.I. had a prescription for Clonazepam, a controlled 
substance,\35\ filled at the Respondent pharmacy on September 17, 2013. 
The hard copy of this prescription was discovered at Chris W's 
residence during the execution of a federal search warrant on January 
27, 2015.
---------------------------------------------------------------------------

    \35\ Clonazepam is a Schedule IV controlled substance. 21 CFR 
1308.14.
---------------------------------------------------------------------------

    (8) Patient A.Q. had a prescription for Hydrocodone, a controlled 
substance,\36\

[[Page 70094]]

filled at the Respondent pharmacy on September 17, 2013. The hard copy 
of this prescription was discovered at Chris W's residence during the 
execution of a federal search warrant on January 27, 2015.
---------------------------------------------------------------------------

    \36\ Hydrocodone is a Schedule II controlled substance. 21 CFR 
1308.12 (2015).
---------------------------------------------------------------------------

    (9) Patient N.R. had a prescription for Hydrocodone, a controlled 
substance, filled at the Respondent pharmacy on May 25, 2011. The hard 
copy of this prescription was discovered at Chris W's residence during 
the execution of a federal search warrant on January 27, 2015.
    (10) Patient M.B. had a prescription for Oxycontin, a controlled 
substance,\37\ filled at the Respondent pharmacy on September 17, 2013. 
The hard copy of this prescription was discovered at Chris W's 
residence during the execution of a federal search warrant on January 
27, 2015.
---------------------------------------------------------------------------

    \37\ Oxycontin (oxycodone) is a Schedule II controlled 
substance. Id.; Office of Diversion Control, Oxycodone, Drug 
Enforcement Admin. (Mar. 2014), available at http://www.deadiversion.usdoj.gov/drug_chem_info/oxycodone/oxycodone.pdf.
---------------------------------------------------------------------------

    (11) Patient DC had a prescription for Soma, a controlled 
substance,\38\ filled at the Respondent pharmacy on September 16, 2013. 
The hard copy of this prescription was discovered at Chris W's 
residence during the execution of a federal search warrant on January 
27, 2015.
---------------------------------------------------------------------------

    \38\ Soma (carisoprodol) is a Schedule IV controlled substance. 
21 CFR 1308.14; Office of Diversion Control, Carisoprodol, Drug 
Enforcement Admin. (March 2014), available at http://www.deadiversion.usdoj.gov/drug_chem_info/carisoprodol/carisoprodol.pdf.
---------------------------------------------------------------------------

    (12) Patient D.C. had a prescription for Hydrocodone, a controlled 
substance, filled at the Respondent pharmacy on September 16, 2013. The 
hard copy of this prescription was discovered at Chris W's residence 
during the execution of a federal search warrant on January 27, 2015.
    (13) On or about August 15, 2014, Chris W dispensed 42 tablets of 
hydrocodone 10/325 mg to one A.R. without a prescription.
    (14) On November 7, 2014, Chris W dispensed 120 tablets of 
hydrocodone 10/325 mg and 60 tablets of alprazolam 2 mg to an 
undercover DEA Special Agent pursuant to a prescription that Chris W 
knew or should have known was fraudulent.
    (15) On November 7, 2014, Chris W instructed an undercover DEA 
Special Agent to add the letter ``R'' to the DEA registration number on 
a prescription, and to change the last digit of the number to seven to 
create a more realistic-looking prescription.
    (16) On November 13, 2014, Chris W instructed an undercover DEA 
Special Agent to use the letters ``RA'' instead of ``RF'' on the DEA 
registration number of a prescription that was presented to Chris W.
    (17) On November 19, 2014, Chris W instructed an undercover DEA 
Special Agent to change the last digit of a DEA registration number to 
six on a prescription that was presented to Chris W.
    (18) On November 19, 2014, Chris W instructed an undercover DEA 
Special Agent on how to create a fictitious DEA registration number.
    (19) On or about November 19, 2014, Chris W distributed 30 tablets 
of hydrocodone and 30 tablets of Xanax to Samantha Pemberton without a 
prescription.
    (20) On December 4, 2014, Chris W distributed 240 tablets of 
hydrocodone 10/325 mg and 60 tablets of alprazolam 2 mg to an 
undercover DEA Special Agent pursuant to a prescription that Chris W 
knew or should have known was fraudulent.
    (21) The stock bottle of 1,000-count hydrocodone 10/325 mg and two 
stock bottles of 100-count methadone \39\ 10 mg that were in Eric 
Horton's possession at the time of Horton's arrest on or about January 
20, 2015 all had the Respondent pharmacy's stock stickers on them.
---------------------------------------------------------------------------

    \39\ Methadone is a Schedule II controlled substance. 21 CFR 
1308.12.
---------------------------------------------------------------------------

    (22) The stock bottle of 500-count alprazolam 2 mg that was in Joe 
Jackson's possession at the time of Joe Jackson's arrest on or about 
September 14, 2014 had the Respondent pharmacy's stock sticker on it.
    (23) The Respondent pharmacy has not filed a theft or loss report 
with DEA since at least 2012.

The Evidence

    In addition to its reliance on the factual stipulations reached by 
the parties, supra, the Government presented its case through the live 
and/or stipulated testimony \40\ of twenty-six witnesses.\41\
---------------------------------------------------------------------------

    \40\ The parties stipulated to the credibility of the stipulated 
testimony. ALJ Ex. 20. Where applicable, individual credibility 
determinations regarding live testimony are set forth in the body of 
this recommended decision.
    \41\ Two of the Government's witnesses were presented in 
rebuttal.
---------------------------------------------------------------------------

    Arkansas State Trooper Corporal (Cpl.) Richard Whitley testified 
that he was on patrol on September 14, 2014 when he was dispatched to a 
one-vehicle accident where an individual named Joseph Jackson was being 
detained for leaving the scene. Stipulation of Testimony (SOT) 13(b); 
Tr. 67-68. Upon his arrival, Cpl. Whitley was advised that another 
police officer had noticed a bottle of liquid codeine \42\ in the front 
seat of the vehicle. SOT 13(b); Tr. 69-71. Cpl. Whitley started a 
conversation with Jackson and although Jackson denied any drug use, 
Cpl. Whitley noticed that his speech was slurred and detected the odor 
of marijuana. SOT 13(b); Tr. 71. Cpl. Whitley then secured Jackson in 
handcuffs in a police vehicle, and he and the other officers searched 
Jackson's car.\43\ SOT 13(b). The troopers smelled marijuana in 
Jackson's car and observed a bottle of codeine on the seat. SOT 13(c). 
Also discovered during the car search was a black bag containing a 
baggie of marijuana,\44\ prescription bottles of drugs, and two 
handguns. Id. Jackson denied any knowledge of the drugs and told Cpl. 
Whitley that the weapons were not his. SOT 13(c); Tr. 74. Cpl. Whitley 
searched Jackson for additional weapons, and discovered three large 
bundles of cash in his pockets totaling $2,820. SOT 13(c), (d). Among 
other things, the seized evidence included 74 carisoprodol tablets, 12 
alprazolam bars, one bag of suspected marijuana, one bottle of codeine, 
and two 500-count stock bottles of alprazolam, one of which bore a 
sticker from the Respondent.\45\ SOT 13(d). Interestingly, the 
materials seized from Jackson's vehicle also contained a handwritten 
note bearing the following phrases: ``no standing out''; ``your people 
go in as a group and if you leave plz [sic] leave your number''; 
``please have A-C in your car''; ``what to say''; ``you have lower back 
pain and you take hydrocodone 10.325 four time [sic] a day''; ``xanx 
[sic] 2 mg twice a day''; ``and your last visit to a doctor 2 to 3 
months ago.'' Gov't Ex. 39 at 3. The seized note bore the obvious 
hallmarks of crib notes that were apparently contrived to coach others 
successfully to lie persuasively to obtain controlled substances 
illegally from DEA practitioner registrants.
---------------------------------------------------------------------------

    \42\ Codeine is a Schedule II controlled substance. 21 CFR 
1308.12.
    \43\ A copy of a photograph of Jackson was received into 
evidence. Gov't Ex. 38; Tr. 70-71.
    \44\ Marijuana is a Schedule I controlled substance. 21 CFR 
1308.11.
    \45\ Photographs of the controlled substances, weapons, and note 
found in Jackson's car at the time of his arrest were received into 
evidence. Gov't Ex. 39; Tr. 75-76.
---------------------------------------------------------------------------

    The Government also presented the testimony of Dr. Raymond E. 
Hambuchen, D.D.S., a dentist practicing in Conway, Arkansas, and an 
acquaintance of the Respondent's (then) PIC, Chris W. Dr. Hambuchen 
testified that he has known Chris W for years and that they 
occasionally exchanged text

[[Page 70095]]

messages. SOT 1(a).\46\ On September 29, 2014, Dr. Hambuchen exchanged 
a series of text messages with Chris W wherein Chris W stated that he 
had dispensed controlled substances to one A.R. using Dr. Hambuchen's 
name as the prescriber and without a prescription. SOT 1(b); Gov't Ex. 
2; Tr. 20-21. Dr. Hambuchen testified that he did not know A.R.,\47\ 
has never issued a prescription for her, and that he wrote a letter to 
the DEA (Hambuchen Letter), at the request of DEA personnel, on 
November 12, 2014 memorializing that fact. SOT 1(c); Gov't Ex. 3; Tr. 
22-24. The Government acquired and introduced a patient profile on file 
at the Respondent regarding A.R. that lists Dr. Hambuchen as having 
authorized eleven prescriptions in her name. Gov't Ex. 4; SOT 20(d), 
(e); Tr. 185-86. These eleven prescriptions were dispensed at the 
Respondent between June and December 2014 \48\ and included the 
controlled substances Hydroco/APAP and oxycodone. Gov't Ex. 4.
---------------------------------------------------------------------------

    \46\ Dr. Hambuchen testified that although he and Chris W had 
``in the past'' texted each other a lot because they were friends, 
it was unusual in the last few years for him to receive a text 
message from Chris W. Tr. 24-25.
    \47\ The record reflects some confusion regarding A.R.'s first 
name; however, it is undisputed that Dr. Hambuchen does not know 
A.R. and did not prescribe any controlled substances to her. Tr. 23; 
SOT 1(b), (c); 10(d).
    \48\ The patient profile report for A.R. submitted by the 
Government spans the time period of January 2012 through January 
2015. Gov't Ex. 4.
---------------------------------------------------------------------------

    DEA Task Force Officer (TFO) Chad Wilson testified that he is 
currently stationed at the DEA Little Rock District Office (Little Rock 
DO) and that he received and reviewed the Hambuchen Letter. SOT 15(b). 
After reading the letter, TFO Wilson interviewed Dr. Hambuchen, who 
confirmed its contents,\49\ forwarded him a copy, and reiterated that 
he did not know an A.R. Id. TFO Wilson generated a report from the 
Arkansas prescription monitoring program (PMP) on A.R. Id.
---------------------------------------------------------------------------

    \49\ DEA SA Thomas Fisher, another agent stationed at the Little 
Rock DO, testified that he was also present with TFO Wilson during 
his interview of Dr. Hambuchen, and corroborated TFO Wilson's 
account of the interview. SOT 10(c), (d).
---------------------------------------------------------------------------

    DEA Special Agent (SA) Mark Mitchell testified that he is also an 
agent assigned to the Little Rock DO. SOT 3(a). He testified that on 
four occasions (specifically, November 7, 2014; November 13, 2014; 
November 19, 2014; and December 4, 2014), he made undercover visits to 
the Respondent. SOT 3(b). On each occasion, he presented fictitious 
controlled substance prescriptions to the pharmacist on duty, Chris 
W.\50\ Id. On November 7, 2014 (Undercover Visit 1), SA Mitchell met 
with Chris W and presented him with a fraudulent prescription for 
hydrocodone and alprazolam. SOT 3(c). According to SA Mitchell, during 
this visit, Chris W instructed him to add the letter ``R'' to the DEA 
registration number on the scrip and to change the last number to a 
``7'' to make the false document appear more realistic. Id. In SA 
Mitchell's estimation, Chris W's tutelage on the subject of making 
better fraudulent scrips demonstrated that Chris W well knew the 
presented scrip was fictitious. Id. The Government introduced a copy of 
the fraudulent scrip that SA Mitchell presented to Chris W at the 
Respondent. Gov't Ex. 6; Tr. 106. The scrip, dated November 7, 2014, is 
made out for ``Brian Jackson'' (the name SA Mitchell used in his 
undercover visits) and specifies 120 tablets of Norco and 60 tablets of 
Xanax. Gov't Ex. 6. During Undercover Visit 1, SA Mitchell was wearing 
audio and video recording equipment, but due to an equipment 
failure,\51\ nothing was recorded. SOT 3(c). Chris W filled the 
fraudulent prescription and dispensed the controlled substances to SA 
Mitchell.\52\ Id.
---------------------------------------------------------------------------

    \50\ SA Mitchell testified that the patient name he used on all 
of his undercover visits was ``Brian Jackson.'' Tr. 154.
    \51\ DEA SA Michael Willett testified that he is assigned to the 
Little Rock DO. SOT 4(a). SA Willett's area of responsibilities 
includes technical surveillance issues, and he is familiar with the 
video equipment that was used in SA Mitchell's undercover visits to 
the Respondent. SOT 4(b). SA Willett explained that the video 
equipment utilized during the four undercover visits has an internal 
battery that needs to be recharged in order for the video recording 
device to work properly. Id. Although none of the audio/video 
recordings or transcripts made regarding the four undercover visits 
were the subject of objection by the Respondent, it is worth noting 
that some of the tapes contained time/date stamp anomalies. The 
anomalies were persuasively explained by the combined testimony of 
SA Willett and TFO Wilson. SOTs 4, 15. Regarding date/time 
discrepancies encountered in the recording of other undercover 
visits in this case, SA Willett testified that when an internal 
battery has been allowed to go completely dead, the device loses 
track of the actual time. SOT 4(b). If the device's battery was not 
checked prior to use, the recording will reflect whatever time value 
is stored in the unit. Id. In SA Willett's opinion, this is what 
happened with some of the video recording devices operated by SA 
Mitchell on some of the undercover visits to the Respondent. Id. 
Additionally, TFO Wilson provided credible corroborating testimony. 
SOT 15(e)-(g).
    \52\ Photographs of the controlled substances and corresponding 
receipts received by SA Mitchell during Undercover Visit 1 were 
received into evidence. Gov't Exs. 7-8; Tr. 129, 131.
---------------------------------------------------------------------------

    On November 13, 2014 (Undercover Visit 2), SA Mitchell attempted to 
fill another fictitious prescription for hydrocodone and alprazolam at 
the Respondent.\53\ SOT 3(d). SA Mitchell stated that he presented the 
prescription to Chris W, who informed him that the pharmacy was out of 
hydrocodone and benzodiazepines, but that he would have more during the 
first of the following week. Id. SA Mitchell recalled that Chris W was 
mumbling, but that when SA Mitchell asked Chris W if he ``did the 
prescription right,'' Chris W recommended that he use the letters 
``RA'' instead of ``RF,'' which once again, in SA Mitchell's view, 
demonstrated that Chris W was well aware that the scrip was a fake. 
Id.; Tr. 145-50. When SA Mitchell asked Chris W again which letters to 
use, Chris W wrote the letters ``RA'' down on a piece of paper. SOT 
3(d). SA Mitchell testified that after he looked at what Chris W wrote, 
Chris W scratched out the letters with a pen. Id.
---------------------------------------------------------------------------

    \53\ Audio and video recordings contemporaneously made by SA 
Mitchell and a corresponding transcript of Undercover Visit 2 were 
received into evidence. Gov't Exs. 11-14; Tr. 139-40, 145.
---------------------------------------------------------------------------

    On November 19, 2014 (Undercover Visit 3), SA Mitchell returned to 
the Respondent and attempted to fill another fictitious prescription 
for hydrocodone and alprazolam.\54\ SOT 3(e). Once again, SA Mitchell 
encountered Chris W and handed him another fictitious scrip. Id. Chris 
W told Mitchell that he ran out of hydrocodone tablets two days 
earlier, and that more were not expected until the first of the month, 
because his supplier had placed limits on how much he could order. Id.; 
Gov't Ex. 18 at 1-2. When SA Mitchell asked Chris W if the fictitious 
DEA number on the prescription SA Mitchell presented was correct, Chris 
W instructed him to change the last digit of the DEA number of the 
prescription to a ``6.'' SOT 3(e). Chris W started counting, described 
the methodology in creating a DEA COR number to the undercover agent, 
and volunteered that the prescription that SA Mitchell just handed him 
looked better than most he sees as the pharmacy.\55\ Id.; Gov't Ex. 18 
at 4. Chris W also volunteered that he believed that multiple law 
enforcement agencies were scrutinizing his pharmacy, but the record 
contains no objective indication that he felt particularly inhibited by 
this revelation. Gov't Ex. 18 at 2. This crash course in the finer 
points of creating phony scrips reinforced SA Mitchell's view that 
Chris W was well aware that the scrip he

[[Page 70096]]

presented was fraudulent. SOT 3(e). When SA Mitchell asked Chris W for 
his cell phone number so that he could ``call you directly [so that] me 
and you [could] do business,'' Chris W took the undercover agent's cell 
phone number instead. Gov't Ex. 18 at 3.
---------------------------------------------------------------------------

    \54\ Audio and video recordings contemporaneously made by SA 
Mitchell and a corresponding transcript of Undercover Visit 3 were 
received into evidence. Gov't Exs. 16-18, Tr. 141.
    \55\ Chris W told SA Mitchell that his fraudulent scrip ``looks 
a lot better than any of the other damn things [he's] seen.'' Gov't 
Ex. 18 at 3.
---------------------------------------------------------------------------

    A copy of the fraudulent scrip that SA Mitchell presented to Chris 
W during Undercover Visit 3 was received into evidence.\56\ Gov't Ex. 
6, 15; Tr. 110. This scrip, dated November 19, 2014, specified a 
prescription for 240 tablets of Norco and 60 tablets of Xanax. Gov't 
Ex. 6. During the course of Undercover Visit 3, SA Mitchell asked Chris 
W how much it would cost to buy a 1,000-count bottle of hydrocodone. 
SOT 3(e). Chris W replied, ``I don't usually do that.'' Id. When the 
undercover agent told Chris W that he was trying to make some extra 
money, Chris W responded that what the agent does with the pills after 
the prescription is filled is none of his business. Id.
---------------------------------------------------------------------------

    \56\ DI Shelli Chupik, the creator of the fictitious scrip, 
explained that she deliberately included an authorization for an 
amount of medication that was inconsistent with the dosage 
instructions. Tr. 111-13. The discrepancy is highlighted by a text 
note added by DI Chupik on the copy of the exhibit received (without 
objection) into evidence. Id.; Gov't Ex. 16.
---------------------------------------------------------------------------

    On December 4, 2014 (Undercover Visit 4), SA Mitchell returned to 
the Respondent, presented another phony scrip to Chris W, and was 
dispensed 240 tablets of hydrocodone 10/325 mg and 60 tablets of 
alprazolam 2 mg.\57\ SOT 3(f). During Chris W's interaction with SA 
Mitchell during this visit the two men discussed a possible handgun 
sale. Over the course of discussion, the undercover agent volunteered 
to Chris W that he was a ``convicted felon.'' Gov't Ex. 33 at 8. Chris 
W told the agent, ``I can't sell [a gun] to you because I know you're a 
convicted felon.'' Id. Chris W's reservations concerning the undercover 
agent's felony conviction revelation did not apparently awaken in him 
any sense of heightened scrutiny regarding the wisdom of dispensing 
powerful controlled substances to him.
---------------------------------------------------------------------------

    \57\ Audio and video recordings contemporaneously made by SA 
Mitchell and a corresponding transcript of Undercover Visit 4 were 
received into evidence. Gov't Exs. 31-33; Tr. 142-43, 158-59.
---------------------------------------------------------------------------

    Diversion Investigator (DI) Shelli Chupik testified that she is 
stationed at the Little Rock DO. SOT 2(a); Tr. 107. According to DI 
Chupik, it was she who created the four fake controlled substances 
scrips that SA Mitchell used during his undercover visits to the 
Respondent. Chupik explained that each fake prescription contained the 
following fictitious information: a doctor's name, the name and phone 
number of a clinic, and a DEA COR number. SOT 2(b).
    On January 12, 2015, the Arkansas Board of Pharmacy (Arkansas 
Pharmacy Board or APB) supplied DI Chupik with a compact disc (APB CD) 
that contained reports that APB personnel prepared in connection with 
the pharmacy. SOT 2(e); Tr. 117-19. Included in the materials provided 
in the APB CD was a completed DEA Report of Theft or Loss of Controlled 
Substances (DEA-106), signed by Chris W, as the ``Owner/Pharmacist-in-
Charge.'' \58\ SOT 2(e); Gov't Ex. 53. The DEA-106 that was filed with 
the Arkansas Pharmacy Board on January 9, 2014 reflects (and purports 
to report to DEA) that on August 5, 2013, the Respondent was 
burglarized and that there was a theft of controlled substances. Gov't 
Ex. 53. DI Chupik testified that a DEA-106 is a form that, once 
prepared, must be filed with DEA.\59\ Tr. 120. On January 22, 2015, 
based on the information contained in the DEA-106, DI Chupik queried 
the DEA electronic DEA-106 Theft or Loss database and discovered that 
no DEA-106 forms had been submitted to the DEA by the Respondent in 
either 2013 or 2014. SOT 2(f); Tr. 120-22. Thus, although the DEA-106 
filed by the Respondent with the Arkansas Pharmacy Board ordinarily 
would/should/does indicate that the document had been filed with DEA to 
supply DEA with notice of the loss,\60\ this was not the case with this 
purported burglary.
---------------------------------------------------------------------------

    \58\ A copy of this DEA-106 was received into evidence. Gov't 
Ex. 53; Tr. 119.
    \59\ Former Respondent PIC Terry Swaim testified that the 
Respondent had a burglary in August of 2013 that resulted in the 
theft of approximately two thousand Soma (carisoprodol) pills and 
some Xanax (alprazolam), and that both Tom Watson and Chris W were 
aware of the incident. Tr. 259-60.
    \60\ DI Chupik clarified that the duty to file a DEA-106 occurs 
``pretty much immediately'' after discovery of a theft or loss of 
controlled substances and is not related to the dates when a 
pharmacy registrant is required to conduct a biennial inventory. Tr. 
122-24. Although DI Chupik testified that she believed that the DEA-
106 must be filed within seven days (Tr. 124), the DEA regulations 
actually provide that a ``registrant shall notify [the local DEA 
Field Division Office], in writing, of [a] theft or significant loss 
of any controlled substances within one business day of discovery of 
such loss or theft [and] shall also complete, and submit to the 
Field Division Office in his area, [a DEA-106] regarding the loss or 
theft.'' 21 CFR 1301.76(b) (2015).
---------------------------------------------------------------------------

    Conway Police Officer Matthew Edgmon testified that on November 19, 
2014, he initiated a traffic stop with a white Tahoe that had no 
license plate. SOT 8(b); Tr. 29. After some conversation with the 
driver, Samantha Pemberton, he ascertained that she had a suspended 
driver's license and that the (plateless) vehicle she was driving was 
owned by Chris W, whom she described to Officer Edgmon as the 
pharmacist/owner of the Respondent as well as her boyfriend.\61\ SOT 
8(b). Pemberton consented to a search of Chris W's car. A search of her 
purse yielded numerous pill bottles, many of which were unlabeled.\62\ 
SOT 8(c), (d); Tr. 29-32; Govt. Ex. 19. One of these unlabeled bottles 
had pills that Officer Edgmon recognized as likely being alprazolam. 
SOT 8(d). Pemberton's purse also contained bottles with labels bearing 
her name, as well as other labeled bottles containing non-controlled 
pills. Id. Officer Edgmon subsequently took Pemberton into custody for 
possession of a controlled substance, advised her of her Miranda rights 
(which Pemberton acknowledged she understood) and then questioned her 
about the pills he found in her purse. SOT 8(e). Pemberton told Officer 
Edgmon that she had Xanax and ``hydros'' (hydrocodone) and claimed that 
she had prescriptions for these. Id. Pemberton was transported to the 
Conway Police Department (CPD) for processing, and Officer Edgmon 
secured the contraband. Id.
---------------------------------------------------------------------------

    \61\ The Government introduced a copy of an insurance claim 
letter issued to ``Jennifer Watson and Christopher Watson'' on 
November 4, 2014, stating that on October 28, 2014, Pemberton was 
involved in a loss with a vehicle (a ``2013 Infinity'') on their 
policy. Gov't Ex. 27; Tr. 214-18. Additionally, Pemberton told 
Investigator Kennedy in the course of the interview at CPD that 
Chris W was her boyfriend and her pharmacist. Tr. 38.
    \62\ Photographs of the controlled substances found in 
Pemberton's car at the time of her November 19, 2014 arrest were 
received into evidence. Gov't Ex. 19; Tr. 31-32.
---------------------------------------------------------------------------

    In addition to corroborating many of the details of her arrest, 
Samantha Pemberton testified that she was Chris W's girlfriend, and 
that it is her understanding that he is an owner of the Respondent 
pharmacy. SOT 7(a). According to Pemberton, prior to the traffic stop, 
Chris W had given her controlled substances (specifically, 30 
hydrocodone 10/325 mg and 30 Xanax 2 mg) in unmarked bottles and 
without a prescription, and at the time of her arrest, those 
medications were still in her possession. SOT 7(b).
    CPD narcotics investigator Thomas Kennedy testified that he 
interviewed Pemberton at CPD after her arrest on November 19 and that 
this interview was recorded.\63\ SOT 9(b); Tr. 33. During the 
interview, Pemberton stated that: (1) she received at least some of the 
controlled substances that were in her purse from Chris W; (2) she had 
prescriptions for the controlled

[[Page 70097]]

substances in unmarked bottles, and that she had received those 
controlled substances from the Respondent where her boyfriend, Chris W, 
was the pharmacist; (3) she had just filled prescriptions for 
hydrocodone and Xanax at the Respondent, and that she received the 
controlled substances from Chris W in unmarked bottles; and (4) she was 
prescribed 30 hydrocodone 10/325 mg and 30 Xanax 2 mg, but was not able 
to name the doctor who prescribed the pills. SOT 9(c); Gov't Ex. 26 at 
6-7.
---------------------------------------------------------------------------

    \63\ A recording and corresponding transcript of the interview 
of Pemberton conducted by Investigator Kennedy on November 19, 2014 
were received into evidence. Gov't Exs. 25-26; Tr. 36, 38.
---------------------------------------------------------------------------

    Investigator Kennedy telephoned Chris W during the afternoon of the 
day Pemberton was apprehended and recorded that conversation.\64\ SOT 
9(d). When Investigator Kennedy informed Chris W that Pemberton had 
been arrested, Chris W replied that he only vaguely knew her. 
Specifically, Chris W said ``I think I know who she is,'' and 
amorphously described her as ``blonde'' and ``kinda cute.'' SOT 9(e). 
Chris W told Investigator Kennedy that he thought he recalled that 
Pemberton may have come into the Respondent that morning, and he 
admitted that on or about November 19 he allowed her to ``borrow'' some 
hydrocodone and Xanax without a prescription, and that the pharmacy had 
``loaned'' her some pills. Id. During the call, Chris W allowed that 
``we let her borrow a few because she was out,'' and ``I know we loaned 
her some hydrocodone and seemed like Xanax, maybe 2 mg.'' Id. When 
Investigator Kennedy asked Chris W how much he had dispensed to 
Pemberton, he responded, ``I want to say like 30 of each'' ``just 
because she gets like 90 at a time.'' Id. Chris W assured Investigator 
Kennedy that the pharmacy was ``just waiting on [the doctor's office] 
to call back because that office is notoriously slow.'' Id.
---------------------------------------------------------------------------

    \64\ A recording and corresponding transcript of Investigator 
Kennedy's November 19, 2014 phone call with Chris W were received 
into evidence. Gov't Exs. 20-21; Tr. 41, 43.
---------------------------------------------------------------------------

    Investigator Kennedy made repeated requests to Chris W and 
Pemberton to provide scrips for the 30 hydrocodone pills and 30 Xanax 
pills that Chris W admitted he had dispensed to Pemberton on or about 
November 19, but neither supplied any documentation. SOT 9(f). Chris W 
also provided Investigator Kennedy with conflicting information about 
the identity of Pemberton's prescribing physician. SOT 9(g). Initially, 
Chris W told him that the prescribing physician was a Dr. Humbard and 
agreed to fax a copy of the prescription. Id.
    On November 20, the day following the arrest and phone call, 
Investigator Kennedy did receive a fax (Fax 1) from the Respondent, but 
contrary to Chris W's representations on the phone, Fax 1 contained no 
scrips, but only a copy of two prescription labels (i.e., pharmacy fill 
stickers) from the Respondent.\65\ Id.; Tr. 52-53. Further, not only 
did Fax 1 contain labels instead of scrips, but in Investigator 
Kennedy's review of those prescription labels, he determined that the 
labels did not even correspond to the information Chris W had provided 
him during their phone conversation about the controlled substances he 
said he had dispensed to Pemberton the previous day. SOT 9(g). Instead, 
the labels with Fax 1 reflected prescriptions that had been filled on 
October 9, 2014 (not November 19, 2014), and had been issued for 75 
alprazolam 2 mg tablets and 75 Hydroco/APAP tablets 10/325 mg (not 30 
tablets of each drug as Chris W had stated during the previous day's 
phone call). Id. Moreover, the labels stated that the prescriptions had 
been issued by a ``Dr. Arnold'', not a ``Dr. Humbard.'' Id. 
Furthermore, an examination of the labels that were provided indicated 
that both directed that no refills remained on the prescriptions. Id. 
Thus, even on their face, the prescriptions supplied by Chris W in Fax 
1 that were purportedly used for the October 9, 2014 dispensing to 
Pemberton were no longer valid for refilling anything on November 19, 
2014 and could not have been properly used for that purpose. Id.
---------------------------------------------------------------------------

    \65\ A copy of Fax 1 was received into evidence. Gov't Ex. 48; 
Tr. 54.
---------------------------------------------------------------------------

    On November 21, three days following Pemberton's arrest, 
Investigator Kennedy contacted Pemberton and notified her that he had 
not received scrips for the drugs she received on November 19 from the 
Respondent.\66\ SOT 9(h). In response, Pemberton told Kennedy that she 
believed that Chris W had sent them. Id. When Investigator Kennedy 
explained that he had not received the scrips, Pemberton assured him 
that she would take care of it. Id. Pemberton called Investigator 
Kennedy back later in the day and told him that Chris W would fax the 
scrips. Id. Sometime later in the day, following his phone call with 
Pemberton, Investigator Kennedy telephoned Chris W at the Respondent 
and recorded the call.\67\ SOT 9(i). Chris W insisted that he had faxed 
over the labels the other day, but Investigator Kennedy again explained 
that he still needed to see the scrip. Id.; Tr. 55-56. Chris W then 
clarified that he did not give the scrip to Pemberton because she did 
not want her to try to take it somewhere else, but that he would have 
one of his technicians look up the scrip and send it over. SOT 9(i).
---------------------------------------------------------------------------

    \66\ A recording and corresponding transcript of Investigator 
Kennedy's phone call with Pemberton were received into evidence. 
Gov't Exs. 66-67; Tr. 47-50.
    \67\ A recording and corresponding transcript of Investigator 
Kennedy's phone call with Chris W were received into evidence. Gov't 
Exs. 22-23; Tr. 44-46.
---------------------------------------------------------------------------

    Later in the day, Investigator Kennedy did receive another fax (Fax 
2) from the Respondent but once again, the fax had was not a scrip, but 
merely a page of lined paper covered in scribbles, which, based on the 
investigator's experience, appeared to him to be a page from a notepad 
customarily used for call-in type prescriptions.\68\ SOT 9(j); Tr. 55, 
58-59. The Fax 2 notepad page did not contain any reference to a 
prescription issued to dispense medication to Pemberton on November 19. 
SOT 9(j). Instead, the only reference to Pemberton on the notepad page 
appeared in the upper right-hand corner of the fax, which included a 
handwritten date that appeared to be either ``10-4-14'' or ``10-9-14''; 
beneath that date appeared to be the name ``Samantha Pemberton,'' the 
text ``Xanax 2mg, TID, #75'', ``Narco 10/325'', some additional writing 
that Investigator Kennedy was unable to decipher, and then ``#75''. Id. 
The name ``James Arnold'' is written at the bottom of the notation. 
Gov't Ex. 49. Investigator Kennedy was quite clear that he had plainly 
articulated that he needed to see the scrips. Tr. 57-58.
---------------------------------------------------------------------------

    \68\ A copy of Fax 2 was received into evidence. Gov't Ex. 49; 
Tr. 59-60.
---------------------------------------------------------------------------

    Investigator Kennedy testified that on January 2, 2015, he called 
Pemberton again to remind her that he had still not received a scrip. 
SOT 9(k). In response, she stated that she would try to get the 
prescription and deliver it to him. Id. Four days later, on January 6, 
2015, Pemberton brought Investigator Kennedy two scrips, both of which 
bore the date October 9, 2014, and a signature from a Dr. James 
Arnold.\69\Id.; Tr. 61-63. The Government also introduced a copy of 
Pemberton's patient profile from the Respondent, which indicates that 
two prescriptions (alprazolam and hydroco/APAP) were dispensed to 
Pemberton on October 9, 2014. Gov't Ex. 24. According to the patient 
profile, James Arnold, M.D. is listed as the prescriber for both 
prescriptions. Id.
---------------------------------------------------------------------------

    \69\ Copies of these scrips were received into evidence. Gov't 
Exs. 51, 52; Tr. 64-66.
---------------------------------------------------------------------------

    In her testimony, Pemberton indicates that on January 6, 2015, 
approximately two months after her arrest, she did give Investigator 
Kennedy scrips that corresponded to the controlled

[[Page 70098]]

substances in her possession on the day she was arrested. SOT 7(d). The 
scrips Pemberton gave Investigator Kennedy were dated October 9, 2014 
and were issued for 75 tablets of hydrocodone 10/325 mg and 75 tablets 
of alprazolam 2 mg, and bore the purported signature of Dr. James 
Arnold of the Baptist Emergency Medicine Clinic. Id.
    Dr. James Arnold, M.D., testified that he is a doctor practicing at 
the Baptist Springhill Clinic in North Little Rock, Arkansas. SOT 
22(a). He stated that by virtue of the fact that he practices in an 
emergency room, he does not prescribe more than twenty hydrocodone 
tablets at one time. SOT 22(b). Dr. Arnold also indicated that he has 
checked his records and determined that he has not treated and does not 
know a person named Samantha Pemberton.\70\ SOT 22(c). On January 7, 
2015, Investigator Kennedy turned over to TFO Wilson the two scrips 
bearing Dr. Arnold's name that Samantha Pemberton had given him. SOT 
15(c). Both prescriptions had stickers on them indicating that they 
were filled on October 9, 2014, and both were marked ``no refills.'' 
Id.
---------------------------------------------------------------------------

    \70\ TFO Wilson ascertained from Dr. Arnold that he is not 
Pemberton's doctor and did not issue the scrips. SOT 15(d).
---------------------------------------------------------------------------

    DEA Task Force Officer (TFO) Robert Puckett testified that he is a 
member of the Beebe, Arkansas Police Department, is cross-designated as 
a DEA TFO, and is currently stationed at the Little Rock DO. SOT 5(a); 
Tr. 91. TFO Puckett reviewed surveillance videos of the interior and 
exterior of the Respondent that were recorded on January 20, 2015, and 
testified that he isolated screen captures from the video. SOT 5(c); 
Gov't Ex. 36. Chris W and his friend, Eric Horton, are depicted in the 
video footage. The Government introduced the screen captures of the 
surveillance videos created by TFO Puckett, as well as TFO Puckett's 
written narrative describing the actions of Horton and Chris W. Tr. 98; 
Gov't Ex. 36.\71\
---------------------------------------------------------------------------

    \71\ A clearer version of this exhibit was subsequently 
substituted in the record with the assent of the Respondent. Tr. 
387-88.
---------------------------------------------------------------------------

    According to TFO Puckett's (unchallenged) account, the surveillance 
tapes show Chris W handing Horton a bottle of medication, some of the 
contents of which Horton pours into an amber prescription bottle. Gov't 
Ex. 36 at 1-2. Horton can then be seen placing items into a blue tote 
bag on the floor. Horton then pulls a stock bottle of medication from 
the shelf, shows the bottle to Chris W, puts it into a pharmacy bag, 
and drops the pharmacy bag with some other items into a blue tote bag. 
Id. at 2. Horton takes another stock medication bottle from a pharmacy 
shelf, the bottle disappears from view, and Horton can be seen shoving 
something into his jacket pocket and walking out of the pharmacy. Id. 
at 2-6. A camera outside the pharmacy picks up Horton throwing 
something into a dumpster and placing the aforementioned blue tote \72\ 
into a white pickup truck. Id. at 10.
---------------------------------------------------------------------------

    \72\ A blue tote filled with controlled medications was seized 
from the white pickup truck Horton was driving at the time of his 
arrest later that evening. Tr. 83.
---------------------------------------------------------------------------

    Upon Horton's return to the pharmacy, Chris W can be seen placing a 
stock medication bottle on the counter for Horton to count out into 
multiple amber prescription bottles, one of which he hands to Chris W, 
and one of which he places in his own pocket. Id. at 7-13. Horton then 
fills a pharmacy bag with the amber prescription bottles and again 
leaves the pharmacy. Id. at 13. A camera outside the pharmacy captures 
Horton pulling away from the pharmacy in the white pickup truck. Id. at 
11. Other photographs depict controlled substances that were in the 
blue tote upon its subsequent seizure and inventory. Id. at 11-13.
    Shortly after Horton departed the Respondent, he was pulled over by 
Arkansas State Trooper First Class (Trooper) Kevin Growns. Trooper 
Growns testified that when he observed Horton's white truck change 
lanes twice without the benefit of a turn signal,\73\ he initiated a 
traffic stop. SOT 11(b); Tr. 77-78. At the time of the stop, Horton 
handed the trooper Chris W's driver's license, eventually explaining 
that he had the license so he could use Chris W's credit card. SOT 
11(b); Tr. 78-79. Horton ultimately did present his own driver's 
license,\74\ a run of which through the Arkansas Crime Information 
Center (ACIC) database \75\ revealed two outstanding warrants, one of 
which was active. SOT 11(c). In response to a question from Trooper 
Growns, Horton indicated that he was not armed, but that there were two 
pistols in the truck he was driving. Id.; Tr. 81. Horton was searched 
for weapons, handcuffed, and placed into the trooper's vehicle.\76\ SOT 
11(c). Trooper Growns found two handguns sitting on the rear floorboard 
(one of which had a chambered round). Tr. 83. When asked if there was 
anything else illegal in his vehicle, Horton gave no response, but an 
inventory search of the truck revealed a blue tote bag that contained a 
stock bottle of hydrocodone \77\ and two 100-count methadone 10 mg 
stock bottles.\78\ SOT 11(d); Tr. 83-84. Horton also had $1,529 in cash 
on his person, and the methadone stock bottles seized had the 
Respondent's pharmacy stickers on them. SOT 11(d), (e). Additionally, 
Trooper Growns testified:

    \73\ Trooper Growns testified that a traffic citation was issued 
regarding the failure to signal violation as well as driving without 
insurance. Tr. 85.
    \74\ Tr. 79-80.
    \75\ In his live testimony, Trooper Growns stated that the 
license check was initiated through the Federal Bureau of 
Investigation's National Crime Information Center (NCIC) database. 
Tr. 79. The variance is not material.
    \76\ A copy of Horton's arrest photograph was received into 
evidence. Gov't Ex. 34; Tr. 86-87.
    \77\ In Trooper Growns's estimation, it was a ``like [a] 
thousand count bottle of hydrocodone[ ] . . .'' Tr. 83.
    \78\ Photographs of the controlled substances found in Horton's 
vehicle were received into evidence. Gov't Ex. 35; Tr. 87-89.

    We found a pair of tennis shoes that also had another bottle of 
pills that were mixed in. We also found a meth pipe and a baggie of 
stuff that appeared to be meth as well, and there was a couple of 
other [C]oke cans as well that you could unscrew the lid and had 
---------------------------------------------------------------------------
false compartments in them.

    Tr. 84.
    DI Inez Davis testified that she is currently assigned to the 
Little Rock DO. SOT 12(a); Tr. 213. The certified copy of the 
Respondent's incorporation from the State of Arkansas that DI Davis 
procured reflects that Chris W is listed among the Respondent 
pharmacy's officers, and specifically is listed as vice-president, 
controller, and board member of the Respondent. Gov't Ex. 50; SOT 
12(b); Tr. 218-19.
    On January 27, 2015, a federal search warrant was executed on the 
Respondent simultaneously with the service of the OSC/ISO that 
initiated these proceedings (pharmacy search warrant execution). Little 
Rock DO Group Supervisor (GS) Lisa Barnhill testified that during the 
pharmacy search warrant execution, it was she who coordinated and 
supervised the search of the pharmacy's records. SOT 14(c). DEA and 
other law enforcement personnel associated with the search were able to 
locate patient profiles for Eric Horton, Brian Jackson (the undercover 
identity used by SA Mitchell), Samantha Pemberton, and A.R. However, 
although the vehicle he was driving on the night of his arrest 
contained stock bottles of controlled substances adorned with labels 
from the Respondent pharmacy, there was no patient profile for Joseph 
Jackson at the pharmacy.\79\ Id. GS Barnhill also related that she 
conducted an audit of Respondent pharmacy records obtained during the 
pharmacy search warrant

[[Page 70099]]

execution, focusing on varying strengths of ``oxycodone, hydrocodone, 
alprazolam and generic Dilaudid.'' \80\ Tr. 181. According to GS 
Barnhill, her audit of just those medications yielded a ``shortage of 
close to a quarter million pills.'' Id. Barnhill also testified that 
the search she conducted of all of relevant paper and electronic 
records at the Little Rock DO reflects no report of theft or loss of 
controlled substances filed with DEA by the Respondent between January 
1, 2012 and January 22, 2014. SOT 14(a), (b); Gov't Ex. 63; Tr. 161, 
175-76.
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    \79\ This testimony is consistent with the recollection of DI 
Pamela Lee and DI Davis, who were also present. SOTs 20, 12(c), (d). 
The patient profiles seized that day were received into evidence. 
Gov't Exs. 4, 24, 37; Tr. 187, 188-89, 191-92; see also SOT 18.
    \80\ Dilaudid (hydromorphone) is a Schedule II controlled 
substance. 21 CFR 1308.12; Office of Diversion Control, 
Hydromorphone, Drug Enforcement Admin. (July 2013), available at 
http://www.deadiversion.usdoj.gov/drug_chem_info/hydromorphone.pdf.
---------------------------------------------------------------------------

    DI Carolina Vazquez-Lopez testified that she is assigned to the 
Little Rock DO, that she was present at the pharmacy search warrant 
execution, and that, as she was directed to do, she gathered all 
pertinent required DEA records from the Respondent, including DEA Order 
Form 222s, Controlled Substance Ordering System (CSOS) records, 
purchase invoices, DEA Form 41/Registrants Inventory of Drugs 
Surrendered, DEA Form 106/Theft or Loss of Controlled Substances, Power 
of Attorney, and Inventory Records. SOT 19(a)-(c). DI Vazquez-Lopez 
testified that during the pharmacy search warrant execution she was 
assisted in gathering records by Bettie Wood, a pharmacy technician 
(Pharm. Tech.) employed at the Respondent. SOT 19(d). DI Vazquez-Lopez 
testified that Pharm. Tech. Wood told her that the Respondent only had 
partial invoices for December 2014 and January 2015 because Chris W's 
friend, Eric Horton (a non-employee), had removed all of the other 
invoices at Chris W's request in early December 2014. SOT 19(e).
    DI Vazquez-Lopez asked Pharm. Tech. Wood whether the Respondent had 
any reported thefts or losses in the last two years. SOT 19(f). Pharm. 
Tech. Wood stated that there had been an incident in either August or 
October 2013 when two 1,000-count bottles of carisoprodol were stolen. 
Id. When DI Vazquez-Lopez asked Pharm. Tech. Wood for a copy of the DEA 
Form 106/Theft or Loss Form, she stated that Chris W would have it. Id. 
When DI Vazquez-Lopez asked Pharm. Tech. Wood where the controlled 
substance prescriptions were stored, she explained that the 
prescriptions were stored in the back office, but only as far back as 
April 2014 because prescriptions prior to 2012 were lost in a fire, and 
the balance had been taken away by another friend of Chris W's, Eric 
Horton, who was also not employed at the pharmacy. SOT 19(f). When DI 
Vazquez-Lopez asked Pharm. Tech. Wood for the Respondent's most recent 
physical inventory records, Pharm. Tech. Wood stated that Chris W had 
taken the Respondent's last inventory records after a state inspection 
the previous year, and that there were no other copies in the 
Respondent pharmacy. SOT 19(i).
    Pharm. Tech. June Gilbert testified that she has been a pharmacy 
technician at the Respondent for approximately thirty-one years, and 
that it has been her experience that controlled substances frequently 
disappear from the Respondent overnight. SOT 17(a), (c). Pharm. Tech. 
Gilbert also related that she has seen Chris W repeatedly give out 
pills without a prescription, and that Eric Horton and Joseph Jackson 
are not employees of the Respondent. SOT 17(b), (c).
    Pharm. Tech. Alyssa Burns testified that she has been a pharmacy 
technician at the Respondent for approximately one year. SOT 16(a). 
Similar to Pharm. Tech. Gilbert's experience, Pharm. Tech. Burns 
testified to her observation that items delivered in medication 
shipments to the Respondent--mostly oxycodone--regularly turn up 
missing the morning after delivery. SOT 16(b). It is Pharm. Tech. 
Burns's opinion that orders for controlled substances placed by the 
Respondent are excessive in light of the number of prescriptions that 
are actually filled there. Id. According to Pharm. Tech. Burns, the 
Respondent usually reaches its controlled substance limit with 
McKesson--one of its pharmaceutical suppliers--on the ninth day of each 
month.\81\ Id.
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    \81\ The Government introduced into evidence copies of lists 
generated by the Respondent's distributors indicating the products 
sold to the Respondent between 2013 and 2015. Gov't Exs. 42-43, 68 
(McKesson); 44-45 (Harvard); 46-47 (Top Rx); Tr. 167, 169, 172-73.
---------------------------------------------------------------------------

    Pharm. Tech. Burns also stated that Chris W has ordered her to fill 
prescriptions for hydrocodone, Xanax, Soma, and promethazine cough 
syrup without a hard copy of a prescription, and that he once directed 
her to fill four identical prescriptions for Xanax, hydrocodone, and 
Soma for a customer (B.E.) in a single week.\82\ SOT 16(e). Pharm. 
Tech. Burns has seen Chris W leave the pharmacy with drugs in his 
backpack, and has actually seen a stock bottle of hydrocodone with 
tablets in Chris W's open backpack. SOT 16(f). Like Pharm. Tech. 
Gilbert, Pharm. Tech. Burns affirmed that neither Eric Horton nor 
Joseph Jackson is an employee of the Respondent.\83\ SOT 16(c). She 
believes that Horton is a friend \84\ of Chris W's, and she has seen 
Horton take bottles of controlled substances off of shelves at the 
Respondent and place them in his pockets. Id. Pharm. Tech. Burns 
further testified that several weeks before the pharmacy search warrant 
execution, Chris W and Horton removed a large number of invoices and 
hard copies of prescriptions that were previously filled from the 
pharmacy, but she does not know what became of the documents they took. 
SOT 16(g).
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    \82\ A copy of B.E.'s patient profile at the Respondent, as well 
as copies of prescriptions issued to B.E., were introduced into 
evidence. Gov't Ex. 65; Tr. 194. B.E.'s patient profile does 
indicate that this was the case from January 2-8, 2014. Gov't Ex. 65 
at 9.
    \83\ Long-time Respondent PIC Tracy Swaim also testified that 
Jackson was never an employee at the Respondent. Tr. 235; Gov't Ex. 
38.
    \84\ Samantha Pemberton testified that has seen Chris W supply 
Horton with controlled substances at parties at Chris W's residence. 
SOT 7(c).
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    TFO Eli Fowlkes testified that he is a detective with the Benton, 
Arkansas Police Department and is cross-designated as a DEA Task Force 
Officer stationed at the Little Rock DO. SOT 21(a); Tr. 197-98. TFO 
Fowlkes testified that on January 27, 2015, he participated in the 
execution of a search warrant at Chris W's residence (Chris W residence 
search warrant execution). SOT 21(b); Tr. 199-200. During the search of 
Chris W's house, TFO Fowlkes discovered numerous controlled substance 
scrips, which he photographed and inventoried into DEA custody. SOT 
21(c), (d); Gov't Exs. 41, 54-62; Tr. 200-07.
    The Government also presented the testimony of pharmacist Tracy 
Swaim. Swaim testified that he is currently employed as a part-time 
\85\ pharmacist at the Respondent, but up until October 10, 2014, he 
had worked there as a full-time pharmacist for twenty-six years, and 
was the Respondent's pharmacist-in-charge (PIC) until January of 2012. 
Tr. 232-33.
---------------------------------------------------------------------------

    \85\ Tr. 266.
---------------------------------------------------------------------------

    Swaim explained that controlled drug purchases at the Respondent 
are conducted through the DEA Controlled Substance Ordering System 
(CSOS) program, and that a single password, issued in Swaim's name, is 
and has been used by all Respondent employees who order controlled 
medications. Tr. 245-48; see also Tr. 365-66. According to Swaim, the 
Respondent purchased controlled substances from the McKesson Drug 
Company (McKesson), Top Rx, and The Harvard Drug Group. Tr. 248; see 
also Gov't Exs. 42-47, 68. Swaim explained that prior to the 
commencement of Chris W's involvement with the Respondent, McKesson was 
able to provide an adequate supply to keep up with

[[Page 70100]]

demand, but that resort was had to the other two suppliers when the 
amount of controlled drugs ordered by the Respondent increased by one-
third \86\ and rose to a level exceeding McKesson's quantity limits. 
Tr. 248-51.
---------------------------------------------------------------------------

    \86\ Tr. 262-63.
---------------------------------------------------------------------------

    In the course of the hearing, Swaim was shown photographs of Joseph 
Jackson and Eric Horton and affirmed that neither man had ever been an 
employee of the Respondent. Tr. 235-36; Gov't Ex. 38, 34. Swaim 
testified that although he did not know Jackson at all, he did 
recognize Horton as a man that periodically came to the store to pick 
up cream that the pharmacy regularly ordered to manufacture Redneck 
Remedy, a cream produced by a company called Matlon, Incorporated 
(Matlon).\87\ Tr. 236-40; see also Gov't Ex. 69. According to Swaim, 
although Horton was not an employee and not a pharmacist, he was 
routinely permitted into the restricted pharmacy area, and he regularly 
made deliveries of prescriptions (including controlled substances) to 
customers in the Mayflower area for the Respondent. Tr. 237-39. Swaim 
testified that to his knowledge, Horton worked with Chris W in 
connection with Chris W's Matlon business. Tr. 236.
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    \87\ As discussed in greater detail infra, Matlon is a company 
that is jointly owned and managed by Chris W and Glenn Wood, a 
pharmacist who now works at the Respondent and previously worked at 
a another pharmacy owned by Tom Watson in Mayflower, Arkansas. Gov't 
Exs. 69, 70.
---------------------------------------------------------------------------

    Swaim also related that the Respondent was burglarized in August of 
2013, resulting in the theft of approximately two thousand carisoprodol 
pills and some Xanax. Tr. 259-60. The police were notified, and both 
Chris W and the Respondent's owner, Tom Watson, were aware of the 
incident. Tr. 260.
    Swaim explained that since his retirement approximately ten to 
twelve years ago, the Respondent's owner, Tom Watson, would visit the 
business (which included the Big Star grocery store in which the 
pharmacy was located) approximately once a week. Tr. 240-41. According 
to Swaim, prior to his retirement, Watson worked two days per week 
part-time as a relief pharmacist while Swaim served as the full-time 
PIC. Tr. 241-44.
    Swaim testified that in January of 2012, he informed Watson that 
his observation of improper controlled substance refills approved by 
Watson's son, Chris W, sufficiently troubled him that he was resigning 
as the PIC. Tr. 251-56. Swaim recounted the conversation in this 
manner:

    I just told him I was not going to be pharmacist-in-charge. . . 
. I said that I can't sleep at night, and I'm not--I don't want to 
go to jail over something. And Tom [Watson] said don't worry, 
nobody's going to jail. If anybody does, I will.

Tr. 253. Swaim testified that he completed the paperwork and inventory 
required to hand over PIC control and accountability of the pharmacy to 
Chris W, and that notwithstanding this diminution in his 
responsibilities, neither his compensation nor his hours were reduced. 
Tr. 254-55, 266-67.
    Swaim also recounted a conversation he overheard between long-term 
Respondent Pharm. Tech. June Gilbert \88\ and Watson that occurred in 
September of 2014,\89\ approximately two years and nine months after 
surrendering his PIC responsibilities. Swaim testified that he heard 
Pharm. Tech. Gilbert tell Watson that his son, Chris W, was ``giving 
away'' medication. Tr. 256-57. In response to what he heard, Swaim told 
Watson that he (Swaim) ``just can't take this anymore [and that he was] 
going to give notice . . . if you don't stop [Chris W].'' Tr. 257. In 
reply, Tom Watson asked Swaim not to leave and assured him that he 
would ``put a stop to it.'' Id. According to Swaim, ``he looked me in 
the eye and said `trust me,' and I said `okay, I will.' '' Id.; see 
also Tr. 265. Swaim testified that four days later, upon ascertaining 
from the pharmacy staff that, notwithstanding Watson's assurances to 
the contrary, nothing had changed about the improper manner in which 
(now PIC) Chris W was executing his responsibilities as a pharmacist, 
he called Watson and gave two weeks' notice.\90\ Tr. 257.
---------------------------------------------------------------------------

    \88\ See SOT 17.
    \89\ Tr. 265. Although Swaim initially indicated that the date 
was in September of 2015 (a date in the future), he subsequently 
corrected the date to 2014.
    \90\ The record does not reflect any other area of contention 
between Swaim and Watson and in fact, Watson hired Swaim back to 
work part-time at the Respondent after the pharmacy search warrant 
execution. Tr. 266.
---------------------------------------------------------------------------

    Swaim's testimony (which was not the subject of a stipulation 
regarding content or credibility) was detailed, internally consistent, 
plausible, and presented no objective factual basis upon which to 
challenge it for bias. Simply put, Swaim has nothing to gain or lose 
based on the outcome of this case. The fact that he served the 
Respondent for twenty-six years as its PIC and was even hired back 
after the pharmacy search warrant execution, is powerful evidence that 
even Watson knows that Swaim is a man who can be trusted. The witness's 
testimony presented as thoughtful, coherent, and unbiased, and is fully 
credited in this recommended decision.
    The Government also presented the testimony of Grant Goode, Tom 
Watson's nephew \91\ and a former staff pharmacist at the Respondent. 
Tr. 270-71. Goode testified that he started at the Respondent working 
one day in November 2014 and then for approximately two months, 
starting in mid-December 2014, working on a schedule that increased 
from about twenty-five hours per week to ninety-six hours per two 
weeks. Tr. 271. Goode recalled that during this time, his cousin Chris 
W would enter the pharmacy for varying amounts of time, generally less 
than twenty-five hours per week, and do non-pharmacist work. Tr. 273-
74.
---------------------------------------------------------------------------

    \91\ Tr. 274.
---------------------------------------------------------------------------

    Goode testified that while working at the Respondent, he fielded 
several telephonic inquiries from prescribing physicians that led him 
to discover that pharmacy patient profiles described numerous Schedule 
II controlled substance dispensing events where no hard copy of the 
scrip was present in the file and where the purported prescribing 
doctor had no recollection of authorizing the medication. Tr. 274-75. 
According to Goode, when he examined the pharmacy files, he discovered 
other occasions where controlled substances had been dispensed but no 
scrip hard copy was retained. Tr. 275-76. Based on what he discovered, 
Goode began contacting prescribing doctors on his own and discovered 
``dozens'' of cases were controlled substances were dispensed and no 
hard copy scrip was present. Tr. 276. Goode testified that when he 
brought this issue to the attention of Watson, his response was that 
the scrips ``must have been put in the wrong place in the files. Maybe 
the girls, maybe the technicians misplaced the prescriptions.'' Tr. 
277. Goode kept checking pharmacy files and made inquiry of the 
technicians. Tr. 278.
    Goode also related that on two occasions he observed Chris W take 
thousand-count stock bottles \92\ of hydrocodone and place them into 
his backpack. Tr. 278. Further, Goode stated that on one occasion, Tom 
Watson was present and observed Chris W pack the stock bottle into his 
backpack. Tr. 280.
---------------------------------------------------------------------------

    \92\ Goode testified that this size bottle of medication was 
used to contain stock and fill prescriptions, but would never be a 
quantity that would be dispensed to an individual patient. Tr. 279-
80.
---------------------------------------------------------------------------

    Goode testified that he called the Pharmacy Board on December 17, 
2014 and related his suspicions regarding diversion as well as some 
concerns he had about whether Chris W had an

[[Page 70101]]

addiction problem. Tr. 281. According to Goode, personnel at the 
Pharmacy Board advised him that they would be dispatching someone to 
investigate the pharmacy, and that in the meantime, he should ``just 
stay put.'' Tr. 282. Goode explained that on January 2, 2015, in the 
midst of ``staying put,'' one of the Respondent's pharmacy technicians 
brought to his attention forged Schedule II scrips that had been 
dispensed with Goode's initials on the label. Tr. 282-83. When Goode 
showed the forged scrips to Watson, the latter suggested that (long-
time pharmacy technician) ``June [Gilbert] must be doing that.'' Tr. 
283. Goode pressed him on the issue and reminded him that his son, 
Chris W, had access to a laptop that allowed him to log in and print 
out pharmacy paperwork. Tr. 283. That day, Goode faxed copies of the 
fraudulent scrips to the Pharmacy Board, and followed up with a phone 
call to both the Pharmacy Board and DEA. Tr. 284-85.
    On February 5, 2015, several days after the (January 27) pharmacy 
search warrant execution, Goode confronted his cousin, Chris W, with 
his suspicions. Tr. 286. By Chris W's demeanor, Goode got the sense 
that his cousin had identified him as DEA's source, and shortly 
thereafter, Chris W informed him that he would be substituting Goode 
with a pharmacist named Glenn Wood. Tr. 287. Goode also recalled being 
approached by Tom Watson near the end of January 2015 and told that 
customers had registered complaints about his unwillingness to dispense 
scrips they had presented, and that one customer was even concerned 
that Goode would ``turn [him] into DEA.'' Tr. 288. Goode got the sense 
that Watson was disappointed in him for declining to fill the scrips as 
presented. Tr. 289.
    Pharmacist Glenn Wood and Goode communicated by text and phone a 
few days later. Tr. 291-92. When Goode asked Wood about his hours for 
the week, Wood related his understanding that Watson had planned to let 
Goode know that his services would no longer be required at the 
pharmacy. Id. The conversation turned somewhat heated, and Goode 
essentially accused Wood of looking the other way in the face of 
misconduct being committed by Chris W at the Respondent as well as the 
Mayflower pharmacy, where Wood and Chris W previously worked 
together.\93\ Tr. 291-92. Watson did eventually let Goode know that 
Glenn Wood would be taking his hours. Tr. 290. Watson subsequently 
telephoned Goode and told him he was ``upset'' about statements Goode 
had made to DEA, and that he felt Goode ``had hung him out to dry.'' 
Tr. 291.
---------------------------------------------------------------------------

    \93\ Goode also testified that Tom Watson told him that ``he 
would like to kill a couple of DEA agents.'' Tr. 302. Even assuming 
that Watson could have been speaking during a time of some 
agitation, such a statement demonstrates a deplorable and dangerous 
lack of judgment on his part. The Government did not offer this not-
too-veiled threat against law enforcement officers on its case-in-
chief, and in an exercise of commendable candor, notified the 
tribunal at the outset of the case that in proceedings unrelated to 
this case, a United States Magistrate Judge had declined to credit 
this testimony from Goode. Tr. 11; ALJ Ex. 21. The parties 
acquiesced in official notice (see 5 U.S.C. 556(e) (2012)) that this 
testimony had previously been found unsupported by a United States 
Magistrate Judge in an unrelated proceeding (Tr. 304), and the order 
issued by the Magistrate Judge, which denied the Government's motion 
to revoke Chris W's bond based on these comments purportedly uttered 
by his sponsor (and father) Watson, was received into evidence. 
Resp't Ex. 14; Tr. 306. Because the Government did not offer the 
purported threat in its case-in-chief, a disposition of this case 
does not require that a credibility issue on this statement be 
rendered, and it forms no basis of this recommended decision.
---------------------------------------------------------------------------

    Goode's testimony was not the subject of a stipulation regarding 
content or credibility, but the testimony was sufficiently detailed, 
plausible, and internally consistent to be fully credited in this 
decision. Although there were vague references to some unrelated, 
historical family acrimony that did not specifically involve the 
Watsons, there was no evidence that would support any level of bias 
that impacts on this witness's credibility, and his testimony is fully 
credited in this recommended decision.
    The Respondent called three witnesses in its case-in-chief: Tom 
Watson, the pharmacist-majority-owner \94\ of the Respondent; Glenn 
Wood, the pharmacist Watson selected to succeed his son as the PIC; and 
Brenda McCrady,\95\ an official from the Pharmacy Board, who attested 
to the fact that neither of these professional pharmacists has been 
subject to discipline before that body.
---------------------------------------------------------------------------

    \94\ Tom Watson testified that he owned fifty-eight and one half 
percent of the Respondent. Tr. 314.
    \95\ SOT 23; Gov't Ex. 12; Tr. 320.
---------------------------------------------------------------------------

    Glenn Wood is the pharmacist who supplanted the hours worked by 
Grant Goode at the Respondent after Grant Goode registered concerns 
about diversion there to the Pharmacy Board,\96\ and the individual who 
has been selected by the Respondent to assume the duties of its PIC 
permanently. Tr. 313. Wood testified that he has his Pharm. D. degree, 
has been a licensed pharmacist in Arkansas for approximately nine 
years, and is a member of the Arkansas Pharmacists Association. Tr. 
391, 393. Wood stated that he has never been aware of a diversion issue 
in any pharmacy where he has been employed, and that he has never been 
subject to disciplinary action. Tr. 393, 424-25, 430, 443; see also SOF 
23(b); Gov't Ex. 12.
---------------------------------------------------------------------------

    \96\ Tr. 281, 291-92.
---------------------------------------------------------------------------

    Wood testified to a relatively lengthy history of working on and 
off for the Watsons over the course of his nine years \97\ as a 
pharmacist. When he was in school at the University of Arkansas for 
Medical Sciences, he completed a one-month pharmacy internship working 
for Chris W. Tr. 391, 478. After graduating in 2006, Wood worked as a 
pharmacist in several Watson-owned pharmacies, rotating between his 
Mayflower, Morrilton, and Perryville (the Respondent) pharmacies. Tr. 
392-94, 453, 475.
---------------------------------------------------------------------------

    \97\ Tr. 392.
---------------------------------------------------------------------------

    Wood testified that in 2008 or 2009 he briefly moved to Utah to 
accept a pharmacist position there, but the adventure was short-lived, 
and he returned to Arkansas. Tr. 395. Upon his return, he resumed 
employment for Tom Watson as the PIC of his Morrilton Food and Drug 
pharmacy (Morrilton) for three years. Tr. 394-95. When Watson sold the 
Morrilton pharmacy to a rival chain, Wood spent three years with a 
pharmacy unaffiliated with the Watsons. Tr. 396. Wood explained that in 
December 2014 he made arrangements with Chris W to return to the 
Respondent on a part-time basis,\98\ but that he did not report for 
work until the day after the pharmacy search warrant execution. Tr. 
396, 398. Wood testified that although the final paperwork is still 
pending at the Pharmacy Board,\99\ he is currently acting as the PIC at 
the Respondent. Tr. 398. According to Wood, the appropriate application 
was filed at the Pharmacy Board days prior to the hearing. Tr. 399, 
443.
---------------------------------------------------------------------------

    \98\ Wood testified that he only desired part-time employment at 
the Respondent because he wanted additional time to pursue a career 
in professional bass fishing. Tr. 397-98.
    \99\ Wood had previously been approved by the Arkansas Board as 
a PIC at Morrilton. Tr. 399. He testified that he had taken an 
examination when he was initially designated as a PIC. Tr. 475.
---------------------------------------------------------------------------

    Wood opined that where a pharmacy is operating without an involved 
and active owner, diversion control responsibility ``starts with the 
PIC.'' Tr. 415. Wood testified that he believes that it would be 
difficult to discover a PIC engaging in unethical or illegal behavior 
unless the PIC ``was doing it obviously in front of everyone that 
worked there.'' Id. He stated that because the PIC is in charge of 
diversion control at a pharmacy, he doesn't know a way to ``safeguard'' 
against such behavior except by having another employee (for

[[Page 70102]]

example, a pharmacy technician) also signing off on checking drugs in 
and conducting an inventory (a measure which he stated he would 
implement should the Respondent again dispense controlled substances). 
Tr. 416-18, 448. Wood testified has reviewed a written (unsigned) 
proposed controlled substance policy document (Proposed Policy) 
provided to him by Watson, and represented he would implement its 
provisions if the pharmacy gets its COR back. Tr. 417; Resp't Ex. 1. 
Wood described the Proposed Policy as an outline of policies and 
procedure, a ``working document,'' and stated that he would recommend 
that all future PICs be required to review the policy with Watson and 
sign off that they had done so.\100\ Tr. at 418. Wood proposed the 
implementation of diversion controls beyond the requirement of the 
already mandatory biennial inventory,\101\ such as a requirement that 
the PIC personally insure that all controlled substance inventory is 
checked in properly in the inventory database, and the maintenance of a 
``perpetual inventory'' of controlled substances,\102\ and several 
other measures aimed at increased security and accountability. Tr. 415-
19, 444.
---------------------------------------------------------------------------

    \100\ However, in describing the framework created by the 
Proposed Policy, he also stated, ``Common sense tells you what you 
need to be doing in this regard and what you don't need to be 
doing.'' Tr. 419.
    \101\ Tr. 416-17.
    \102\ Wood explained that the institution of a perpetual 
inventory would require pharmacy personnel to count the contents of 
stock controlled substance bottles whenever the bottle was nearing 
depletion and reconcile the bottle count inventory reflected in the 
system. Tr. 419.
---------------------------------------------------------------------------

    Wood testified that electronic keypad door locks,\103\ lockable 
roll-down windows, and a host of pharmacy security cameras \104\ 
trained on the windows, doors, and cashiers supply additional layers of 
diversion control. Tr. 401, 419.\105\ However, he stated that he does 
not believe anyone watches the tape in real time or reviews the tape 
regularly. Tr. 423-24. He did not know how long the loop of the tape 
was or how long the tape preserved the images before recording over 
itself. Tr. 423. In fact, Wood stated that he never had a circumstance 
in which to review any video monitor tape himself in any pharmacy where 
he has ever worked, and as far as he knows, no one ever reviews the 
footage at the Respondent. Tr. 424.
---------------------------------------------------------------------------

    \103\ Wood conceded that the keypad lock combination remains the 
same and that he did not know whether it was changed after Chris W's 
arrest. Tr. 445.
    \104\ Presumably, this is the same closed-circuit system that 
Watson did not know how to access. Tr. 365-67.
    \105\ Photographs depicting the Respondent were admitted into 
evidence. Tr. 403; Resp't Exs. 2-11.
---------------------------------------------------------------------------

    Wood also explained the role of Arkansas's prescription monitoring 
program (PMP), in which pharmacies are required to submit a weekly 
report to the state to disclose what and how many controlled substances 
have been dispensed at the pharmacy that week.\106\ Tr. 419-20. The 
database into which that information is incorporated then permits 
doctors and pharmacists to search for a particular patient and see that 
patient's prescription history to investigate whether a patient has 
been using multiple pharmacies or doctor-shopping. Tr. 420. Wood 
testified that he does not have a ``magical number'' of how often he 
checks the PMP when filling a prescription but that such a decision 
relies upon whether ``something doesn't feel right'' or if a patient 
shows up multiple times in a short period of time with scrips from 
different practitioners. Tr. 422-23.
---------------------------------------------------------------------------

    \106\ Wood testified that software developed by McKesson and 
used by the Respondent automatically submits these dispensing 
reports to the state. Tr. at 420-21.
---------------------------------------------------------------------------

    Wood stated that he believes that as PIC, he could administer the 
Proposed Policy should the Respondent retain its COR. Tr. 430. He has 
been working at the Respondent since January 2015 and intends to remain 
and assume the duties as the PIC, but indicated that he deferred the 
submission of his Pharmacy Board paperwork until April due to lingering 
uncertainty as to the pharmacy's future. Tr. 470. Wood allowed that 
even at the time he accepted the offer to become the next PIC, he 
harbored concerns about what the future holds for the pharmacy. Tr. 
471.
    Wood testified that his efforts to allay his concerns extended to 
sending emails to the Pharmacy Board.\107\ Tr. 472. However, an 
examination of the email exchange \108\ between Wood and the Pharmacy 
Board reflects a level of urgency that exceeded the impression conveyed 
by Wood on the witness stand. In his initial email to the Board he 
explained:
---------------------------------------------------------------------------

    \107\ As part of the Government's rebuttal case, it presented 
the testimony of John Kirtley, the Executive Director of the 
Pharmacy Board. Tr. at 509. Kirtley testified that he recalled the 
email exchange with Wood, and although he was not surprised that a 
prospective PIC would inquire about becoming a PIC in a recently-
raided pharmacy, he did recall being surprised that Wood, who had 
already served as a PIC, was unfamiliar with the procedural aspects 
of becoming a PIC. Tr. 517-19.
    \108\ Gov't Ex. 71.

    We have not applied for a PIC status because of the fact that 
we're not sure what direction the store is going in. There's rumors 
that it's up for sale and the fact that the owner, Tom Watson, will 
probably not get his DEA registration back . . . I really don't feel 
comfortable, right now, putting my name down as PIC of this place . 
---------------------------------------------------------------------------
. . I'm not even sure I'll be here in another month.

Gov't Ex. 71 at 3. A subsequent email sent by Wood reads:

    [D]o I need to put my name down as PIC to make [the Respondent] 
compliant? I really don't want to associate my name with it right 
now, but I seem to be the only pharmacist they can get to work here 
for now. I seriously doubt I will be here much longer, however.

Id. at 2.
    Wood also explained that the Respondent is located in an 
``extremely rural'' area, and that the pharmacy serves a largely 
indigent population. Tr. 404. Wood described the Respondent's customer 
base as ``extremely loyal'', and he explained that customers rely upon 
pharmacists much as they would rely upon doctors. Id. Wood also stated 
that because of the small-town nature of the community, doctors and 
pharmacists have a unique relationship such that doctors ``trust'' and 
``utilize'' pharmacists differently than in other, more cosmopolitan 
communities, and that the Respondent participates in state-authorized 
``disease state management,'' counsels patients, and administers 
immunizations.\109\ Tr. 430. According to Wood, although there is 
another pharmacy in the county, the grocery store owned by Tom Watson 
in which the Respondent is located is the only grocery store located in 
the county. Tr. 404. Wood opined that without the Respondent present, 
the other pharmacy in the county would have a ``monopoly'' on business. 
Tr. 405.
---------------------------------------------------------------------------

    \109\ Wood admitted that these services do not involve the 
dispensing of controlled substances and thus are not dependent on 
the status of the Respondent's COR. Tr. 442.
---------------------------------------------------------------------------

    Wood also testified about his recollections about his interactions 
with pharmacist Grant Goode, which diverge significantly from Goode's 
account. According to Wood, he met Grant Goode for the first time upon 
returning to work at the Respondent, and while the relationship between 
the two men was cordial enough at the outset, it culminated in a rather 
testy telephone exchange regarding Goode's continued employment at the 
pharmacy. Tr. 425. By Wood's account, he and Watson had come to the 
conclusion that there was insufficient business \110\ at the pharmacy 
to merit Goode's continued employment

[[Page 70103]]

there.\111\ Tr. 426. Wood stated that he communicated the substance of 
this discussion to Goode and suggested that the two of them share the 
weekly schedule, with Wood working full-time (three to four days per 
week) and Goode working part-time (two to three days per week).\112\ 
Tr. 427. It was Wood's recollection that upon hearing this disagreeable 
news, Goode became irate, complained that the Watsons had been lying 
for years, and even marveled that Wood himself had not yet been 
indicted based on his experiences with Chris W at the Watsons' 
Mayflower pharmacy.\113\ Tr. 427-29. It is apparent from Wood's 
testimony that he was offended on behalf of the Watsons. Tr. 427, 429. 
In his words, it ``struck me as kind of odd [that t]he guy was asking 
me to work for the Watsons, at the same time bashing them.'' Tr. 427. 
Interestingly, offended as Wood may have been at the implications of 
his own culpability and that of his employer, the conversation 
apparently did not result in any heightened level of suspicion on his 
part that diversion issues could be afoot at the pharmacy where he was 
working. Tr. 431-34.
---------------------------------------------------------------------------

    \110\ Although Tracy Swaim testified that pharmacy business had 
grown by one-third (Tr. 262-63), Wood was apparently was not aware 
of that growth. Tr. 435. He attributed the diminishment in business 
to the impact of the immediate suspension order. Tr. 438.
    \111\ Tr. 262-63.
    \112\ According to Wood, Goode wanted to work six days per week 
at the Respondent. Tr. 436.
    \113\ Goode's statements as reported by Wood were received for 
the limited purpose of demonstrating Goode's state of mind during 
the conversation, not for the truth of the matters asserted. Tr. 
428.
---------------------------------------------------------------------------

    Glenn Wood's testimony was problematic from a credibility 
standpoint. In fact, the Respondent's position regarding the security 
and integrity to future operations that will follow based on the 
appointment of Wood as the PIC were actually undermined by Wood's 
testimony. Although Wood testified that Goode raised issues regarding 
the pharmacy and even implied that Wood could have been indicted based 
on his time working with Chris W, no sense of professional 
responsibility as a pharmacist awakened in him even the slightest 
curiosity as to what Goode (a fellow pharmacist that he said he barely 
knew) was talking about. Tr. 427-29. When pressed on the issue, Wood 
countered that Goode had merely accused the Watsons of lying, not 
diversion,\114\ but in view of the fact that this conversation was 
occurring two-to-three weeks after the pharmacy search warrant 
execution, and revelations of misconduct, which, by Wood's own account, 
made him ``sick,'' ``mad,'' and ``upset,'' this explanation strains 
credulity. Evaluating this conversation in the context of recent 
events, the Respondent had just been searched and served with a DEA 
immediate suspension order and a former pharmacist who worked there 
just told him that the owners were liars and he was fortunate not to be 
laboring under an indictment himself. It is in this backdrop that, Wood 
(an experienced pharmacist) now claims that he never connected Goode's 
statements to any possible pharmacy misconduct. To put it mildly, this 
is implausible and damages this witness's credibility. The fact that he 
did not pursue the matter further with Goode speaks volumes about his 
level of professional vigilance, and the fact that he testified that he 
never realized that Goode was referring to pharmacy misconduct is 
equally telling on the subject of this witness's credibility.
---------------------------------------------------------------------------

    \114\ Tr. 434.
---------------------------------------------------------------------------

    The divergence between Wood's recollection of this phone 
conversation and the recollection of Grant Goode is striking. Goode was 
clear that Wood told him that all of his hours at the pharmacy were 
being taken by Wood, and that it was Wood's understanding that Watson 
would have told him so already. Tr. 291. Wood's version of the 
conversation is internally inconsistent and illogical. In Wood's 
account, when Goode reached out to him to pin down the hours he would 
be working, this is what occurred:

    So, when I returned [Goode's] call that evening, I told him, I 
said, Grant, I hate to be the one to tell you this, you know, I hate 
it because I don't want to put anybody out of work, I was like 
there's not room for both of us, bud, and I need full-time, but what 
I'd like to happen, I don't want to work six days a week. I only 
want to work three to four days a week. And I suggested to Grant 
that evening, I said what I'd like to happen is if you could work at 
[the Respondent] two or three days and then find another pharmacy 
that will let you work a couple days there. You know, that would be 
great.

Tr. 426-47; see also Tr. 435-37. Wood's testimony about this phone 
conversation strengthens Goode's account and weakens his own. If Goode 
was calling to find out which days he was working, it is reasonable to 
assume he knew already that he was not working all days. If Wood was 
really only telling Goode which days he would be working, it is 
illogical that he would ``hate to be the one to tell [him] . . . 
because [he does not] want to put anyone out of work.'' Tr. 426-27. It 
makes even less sense that Wood, even by his own recollection, would 
remember telling Goode that ``there's just not room for both of us, 
bud, and I need full-time . . . .'' Tr. 427. Goode's testimony that he 
was essentially informed of his own termination during this phone call 
is rendered light-years more credible by Wood's self-admitted 
reluctance to tell him about Watson's decision, and his explanation to 
Goode that his need for full-time pharmacist work obviated the need to 
have Goode employed there at all. In short, Wood's account is less 
credible than Goode's, and Wood's version of this interaction 
significantly diminishes his credibility.
    Wood testified that in the approximately ten years that he has 
worked ``on and off'' for pharmacies owned by Tom Watson, including the 
one-month internship under Chris W and the two years he worked with 
Chris W at the Mayflower pharmacy, he never saw Chris W engage in any 
strange, suspicious, or illegal behavior. Tr. 406, 478. He stated that 
when he heard about Chris W's arrest, he assumed that the authorities 
``got [Chris W] for putting refills on blood pressure meds and diabetes 
meds,'' which he describes as ``about the only thing that [he] ever saw 
[Chris W] do'' and which he had seen other pharmacists do as well. Tr. 
406. Wood added that when working as a relief pharmacist at the 
Respondent, none of the pharmacy technicians ever complained to him 
about missing controlled substances or issues with Chris W, nor did he 
ever notice missing inventory himself. Tr. 447. Wood testified that 
upon learning of the allegations against Chris W, he was shocked, 
sickened, in disbelief, sad, and angry with Chris W. Tr. 406. He stated 
that this was not the Chris W that he knew from working with him. Tr. 
407.
    On the issue of Wood and Chris W working together, Wood's testimony 
was also confusing. At one point in his testimony, Wood said he ``can't 
recall a time when [he and Chris W] ever worked side by side'' as 
pharmacists during the same shift. Tr. 451. After some significant 
equivocation, Wood answered the direct question of whether they worked 
together this way:

    Just on occasion. You know, vacation issues or sickness issues 
if me or . . . my other part-time pharmacist, again I can't recall 
an instance, but I'm almost certain that there probably was over the 
course of three years in which Chris had come over to relieve us.

Tr. 452. Wood then described how, because Mondays or the first day of 
each month could be high traffic times, that pharmacists ``would often 
double up,'' but that he could not recall doubling up with Chris W at 
Morrilton. Tr. 453. Since Morrilton was not predicated in the question, 
it was only upon follow-up that Wood finally admitted that he and Chris 
W worked together at the Watson's Mayflower pharmacy once a week for 
two years. Tr. 453-54; see also Tr. 479. This equivocation made even 
less sense in light of the fact that Wood

[[Page 70104]]

had testified earlier to working together regularly with Chris W. Tr. 
392. The relevance of Wood's testimony on the point is less about how 
often the two pharmacists were dispensing in the same room that it is 
about how reluctant Wood was to confirm it. Wood's equivocation 
detracted from the credibility of his testimony.
    In a similar vein, at one point in his testimony, Wood indicated 
that he did not know Eric Horton ``personally.'' Tr. 465. Eventually 
Wood allowed that he ``know[s] who Eric Horton is'' because he would 
encounter him at times with Chris W. Tr. 466. Then Wood indicated that 
he attended ``some birthday parties'' for Chris W's daughter where 
Horton was present, and that he sometimes saw Horton ``riding around in 
the truck.'' Tr. 466-67. When pressed about what ``riding around in the 
truck'' means, Wood clarified that he would see him in the Watsons' 
grocery store (which is not really in any truck), and that it was not 
really that he did not know Horton, but that he did not know him well. 
Tr. 466-69. Equivocation on this point did not enhance Wood's 
credibility.
    Wood also testified about a separate business relationship he has 
maintained with Chris W in a corporation they started together and 
named Matlon, Incorporated (Matlon).\115\ Matlon produced and 
distributed a product known as ``Redneck Remedy.'' Tr. 407. Wood stated 
that shortly after graduating from pharmacy school, he developed a 
formula for sunburn cream and began compounding it for sale. Id. 
According to Wood, Redneck Remedy was initially sold only to frequent 
pharmacy customers, friends, and family, but that the success of the 
product grew so steadily that after two years ``it got so big it went 
from my third bedroom in my home to my garage. . . .'' Tr. 408. Wood 
recounted how he felt that demand for the product had swelled 
sufficiently that he needed a partner, and enlisted Chris W to supply 
the business acumen for the enterprise. Id.
---------------------------------------------------------------------------

    \115\ Wood testified that the name is a combination of the 
letters starting the first names of their respective daughters. Tr. 
409.
---------------------------------------------------------------------------

    Redneck Remedy was bottled, labeled,\116\ and shelved for retail 
sale at the Respondent and another (non-Watson) pharmacy. Tr. 440-41. 
Wood maintained that he had scant contact with Chris W throughout the 
course of their Matlon partnership, and the two mostly communicated by 
text message and phone calls, especially in recent years. Tr. 450. Wood 
testified that the corporation never hired employees, ``had no one on 
the payroll,'' but occasionally utilized the services of independent 
contractors (generally Wood's friends) \117\ to help mix the product 
and market it at trade shows. Tr. 411-12, 464-65. Chris W procured 
supplies for the product from Watson family pharmacies. Tr. 463-64.
---------------------------------------------------------------------------

    \116\ Tr. 414.
    \117\ Wood testified that he was unaware that Chris W's friend, 
Eric Horton, had been enlisted to pick up supplies for the 
enterprise. Tr. 464, 469.
---------------------------------------------------------------------------

    Wood stated that ``the product worked'' and that the business was 
``somewhat successful'' for a few years, but instead of investing time 
and money, he just let the business go. Tr. 408-09. In his words, 
``[i]t was one of those deals that it grew too fast almost and then for 
whatever reason from there it just--I lost interest in it, got burned 
out, and--.'' Tr. 408. Wood testified that in the past two years, the 
business has been ``pretty much defunct,'' for essentially no other 
reason than Wood's interest in professional bass fishing. Tr. 408-10, 
454-55. According to his testimony, he has not actively supplied 
bottles of Redneck Remedy for the past year-and-a-half to two 
years.\118\ Tr. 412. In fact, he testified that he removed the 
remaining bottles off the shelf at the Respondent when he began working 
there again in January 2015. Tr. 440-41, 461-63. Thus, the three 
remaining jars of the product were removed to shelves in the restricted 
pharmacy area where potential customers or anyone else outside 
Respondent's pharmacy staff could not see it. This was done shortly 
after Wood returned to the pharmacy (the day after the pharmacy search 
warrant execution), and just after the diversion allegations 
surrounding Chris W came to light. Tr. 441-42, 461-63. Wood said the 
remaining cream is ``off of the counter at the point of sale in the 
pharmacy, and it's basically just put back out of sight, out of mind.'' 
Tr. 441. Wood insisted that Matlon is currently worth nothing and still 
continues to exist as a hollow legal entity merely because he and Chris 
W never got around to dissolving it. Tr. 454-55.
---------------------------------------------------------------------------

    \118\ Wood likewise testified that he anticipated that the 
company made $600 in sales in 2014, and most of that was from 
friends and family in the early part of the year. Tr. 413. Assuming, 
as Wood testified, that each bottle of Redneck Remedy has a value of 
$8 (Tr. 480), Matlon sold approximately 75 bottles of the cream 
during this period of alleged decline.
---------------------------------------------------------------------------

    Much of Wood's testimony regarding Matlon makes no sense. The 
Redneck Remedy Web site remains active, and charges to maintain it 
continue to accrue. Tr. 455-57; Gov't Ex. 70. Upon learning that Matlon 
was in arrears in its payments for the Web site account, Wood informed 
the hosting company that he should take the matter up with Chris W, 
inasmuch as he is the majority shareholder and the partner charged with 
responsibility for handling bills. Tr. 457. If the business was truly 
bereft of any potential benefit and awaited only its paperwork coup de 
grace, it is difficult to imagine why the two partners would suffer the 
continued expense of a Web site. At one point in his testimony, Wood 
said that the enterprise failed only because he became distracted with 
bass fishing and other interests,\119\ and at another point, when 
pressed about the timing of the venture's demise, Wood declared that 
``the business began dropping off way before last year.'' Tr. 413. 
Similarly, Wood testified that he only wanted to return to pharmacy 
work part-time because of his bass fishing and family responsibilities, 
but testified that he told Grant Goode that there was no room for him 
at the Respondent because ``there's just not room for both of us, bud, 
and I need full time. . . .'' Tr. 427.
---------------------------------------------------------------------------

    \119\ Tr. 408-09, 454-55.
---------------------------------------------------------------------------

    To the extent that Matlon served no purpose beyond a (successful) 
profit venture, it is difficult to reconcile the partners' decision to 
kill it so unceremoniously. Wood was unable to supply an answer that 
made any sense. Tr. 409-10. Wood stated that he was not in a position 
to be able to quit his full-time position as a pharmacist to devote to 
the business and that his priorities shifted from marketing the 
business to starting his professional fishing career and raising his 
family. Tr. 409-11. Despite describing himself as the corporation's 
hands-on, ``go-to guy'' (compared to Chris W, whom he described as the 
``silent partner''), Wood was unable to explain how or why the 
corporation went from successful to floundering. Tr. 408. In addressing 
the question of what how Matlon's outstanding financial issues would be 
handled, Wood was only able to unconvincingly offer that he had 
``stepped away'' from the responsibility of managing the corporation 
last year and had informed Chris W of that fact. Tr. 458-59. 
Inconsistently, Wood conceded that he was the last person to file 
corporate income taxes on the entity in 2013 and anticipates doing so 
for 2014. Tr. 459, 465. Confounding matters further in this regard, 
Wood's email auto signature still imbues him with the moniker 
``President and CEO of Matlon, Inc.'' Tr. 460-61. Wood offered a 
variety of verbal shrug, citing ``[i]gnorance on [his] part.'' Tr. 461. 
Wood indicated that he did not know why he continued to sign all his 
emails as the president and CEO of Matlon, and once again stressed

[[Page 70105]]

his self-described status as a poor businessman (a characterization 
which is belied by the fact that Redneck Remedy made money for Matlon 
until company operations were abruptly abandoned). Tr. 461-63. Matlon's 
Web site still lists Wood at its president and CEO. SOT 12(g); Gov't 
Ex. 70.
    Although it would be na[iuml]ve to conclude that Matlon is the 
simply the failed business enterprise described by Wood, teasing out 
its intricacies is likewise a task unrequired to resolve the principal 
issues in this case. Matlon was a business venture that sold a product 
whose overhead and production costs were amorphous, to say the least. 
The materials were purchased and or otherwise obtained by Chris W and 
compounded by Wood. Likewise, its manpower largely came from non-
employee friends and associates whose compensation was almost certainly 
variable and unclear. The business was not driven out of business by 
lack of success so much as it was suppressed by its owners at about the 
time that law enforcement scrutiny focused on Chris W and the 
Respondent. Inexplicably, by Wood's account, the last three bottles of 
Redneck Remedy were removed from retail shelves where they could be 
sold, and secreted on a shelf within the enclosed pharmacy spaces away 
from potential customers. Tr. 462. While Matlon was almost certainly 
structured (and abandoned) in a manner that belies the simplistic 
explanations tendered by Wood, it is not necessary here to draw any 
conclusions in this regard. The principal relevance of Matlon in these 
proceedings is that Wood's implausible testimony regarding its 
operations detracts considerably from the credibility of his testimony.
    Suffice it to say that Wood's presentation was sufficiently 
punctuated with inconsistencies, equivocations, and implausibility that 
is cannot be fully credited in this recommended decision. Thus, his 
assertions that he had never had any reason to believe that Chris W 
demonstrated addiction signs or suspicious activity,\120\ that no staff 
member ever brought diversion concerns to his attention,\121\ or that 
he had never noticed controlled stock missing,\122\ are of limited 
value here.
---------------------------------------------------------------------------

    \120\ Tr. 414.
    \121\ Tr. 447-48
    \122\ Tr. 447.
---------------------------------------------------------------------------

    Respondent's majority shareholder, Tom Watson, testified that he is 
and has been a licensed pharmacist for about forty years,\123\ that he 
received his pharmacy degree from the University of Oklahoma in 1974, 
and after working as a staff pharmacist in a few establishments, opened 
a grocery store/pharmacy with his brother-in-law, Duane Goode,\124\ in 
West Conway, Arkansas. Tr. 315-16. Watson and his father-in-law 
subsequently built the Respondent in Perryville, operating as part of a 
grocery store (Big Star Perryville), and he later created two 
additional stores in the nearby rural communities of Morrilton and 
Mayflower. Tr. 318. He stated that he has divested himself of all 
pharmacies with the exception of the Respondent in the Big Star 
Perryville grocery store. Tr. 321.
---------------------------------------------------------------------------

    \123\ Tr. 352.
    \124\ Duane Goode is Grant Goode's father. Tr. 316.
---------------------------------------------------------------------------

    Watson testified that he retired four years ago, at age sixty-two, 
and has encountered Lyme disease and some back issues. Tr. 320-21. 
According to Watson, Big Star Perryville was destroyed by a fire about 
three years prior to the hearing and the pharmacy was victimized by a 
burglary while the store was located in a temporary location. Tr. 323.
    Watson explained that after working as a pharmacist at a rival 
pharmacy chain, and then his (now closed) Mayflower store, his son 
Chris W came to work at the Respondent, and ``inherited'' the job of 
pharmacy PIC ``when Tracy [Swaim] quit.'' Tr. 324-25, 375-76. Watson 
also testified that his son Chris W also served as the vice president, 
controller, and part owner \125\ of the business. Tr. 318, 377-78. When 
asked about Tracy Swaim's account of why he stepped down as the PIC, 
the elder Watson had this to say:
---------------------------------------------------------------------------

    \125\ Although this testimony is consonant with a stipulation of 
fact regarding Chris W's ownership that was reached by the parties 
(SOF 24; Tr. 389), a post-hearing motion by the Respondent sought to 
``correct the record'' by the addition of an affidavit by Tom 
Watson's wife (Teresa Watson) that challenges that assertion. ALJ 
Ex. 21. The Government validly opposed the Respondent's post-hearing 
motion to include Mrs. Watson's affidavit. ALJ Ex. 22. Although the 
Respondent's motion to include the affidavit was styled as a 
``Motion to Correct the Record,'' it could do no such thing, and was 
granted only to the extent that Mrs. Watson's affidavit is now 
included in the record, and considered in accordance with 21 CFR 
1316.58(b) (``Affidavits admitted into evidence shall be considered 
in light of the lack of opportunity for cross-examination in 
determining the weight to be attached to statements made 
therein.''). ALJ Ex. 23. Inasmuch as the affidavit is inconsistent 
with the prior stipulation of the parties, and must be considered in 
light of the absence of cross-examination, it has been afforded 
little weight in this recommended decision. Additionally, as 
explained infra, under current Agency precedent, Chris W's status as 
a part owner of the Respondent is of negligible significance to a 
resolution of the present case.

    Yeah. I--I don't--I remember some of what [Swaim] talked about 
but I don't remember all of what he talked about, you know. And I 
talked to Chris [W] about some things, too, so I was hoping 
---------------------------------------------------------------------------
everything was, I was hoping everything was in good shape.

Tr. 326. Watson emphasized that he held Swaim in high regard, stating 
that the two have been together for a long time and still are. Tr. 333.
    Watson was clear that he was ``shocked'' to learn that his son had 
an addiction problem, and opined that the younger Watson's chronically 
bloodshot eyes were the result of a longstanding medical condition. Tr. 
236. He offered that during the 2013-2014 timeframe, notwithstanding 
the fact that he and his son lived ``a little over a quarter of a 
mile'' from each other, they only saw each other once every two weeks 
or so, because their ``paths didn't cross.'' Tr. 327-28.
    Watson's position at the hearing regarding the steps he took based 
on what he was believed and what he was told was less than clear. On 
the one hand, he indicated that had he learned that his son, a 
pharmacist (and later the PIC) at his store, had indications of an 
addiction problem or was engaged in suspicious behavior, he would have 
referred his son for treatment and advised the Pharmacy Board. Tr. 328-
29, 331. But Watson also testified that he would be unwilling to ``fire 
somebody `cause they tell me so and so is doing this or that. . . .'' 
Tr. 332. In Watson's words:

    It's hard. I mean, you know, `cause I've talked to [Chris W], 
well, several times, and he'd usually blame it on something else or, 
you know, this or that, and I didn't know how much was gone.

Tr. 332. Thus, Watson testified that he would involve the Pharmacy 
Board and put his son into treatment if he learned that addiction and/
or diversion were occurring,\126\ but then conceded that he actually 
had been so informed and was dissuaded from any action by conversations 
with his son, who, even by his own account, did no more than ``usually 
blame it on something else,'' or ``this or that.'' Id. Watson even 
acknowledged that he ``didn't do enough [and] didn't do it fast 
enough,'' but asserted that all would have been corrected with a 
scheduled audit that was scheduled to occur a week after the pharmacy 
search warrant execution,\127\ and that an inventory was essentially 
the only real option he had based on what Swaim told him. Tr. 335-36. 
However, in view of the fact that he (even still) holds Tracy Swaim in 
high esteem, and did so at the time Swaim raised the alarm, it is 
difficult to

[[Page 70106]]

understand how the addition of an inventory to confirm the warning 
tendered by a trusted employee would have altered his reluctance to 
act. Stated differently, he trusted Swaim and Swaim warned him; he had 
every reason, based on his decades of experience with Swaim to rely on 
what he related to him; an inventory would have added nothing to the 
equation. To suggest that an inventory that never occurred would have 
been the final, deciding factor in motivating him to act is simply not 
persuasive and undermines his credibility.
---------------------------------------------------------------------------

    \126\ Tr. 328.
    \127\ Tr. 345-46.
---------------------------------------------------------------------------

    To add to the confusion, at another point in his testimony, Watson 
testified that he has actually encountered employees using and 
diverting controlled substances, but has never reported any misconduct 
to the Pharmacy Board in his life. Tr. 344-45. It is difficult to place 
credence in his testimony that he would refer all diversion issues to 
the Pharmacy Board when he also says that he has actually seen 
diversion issues in his career and has never referred anything to the 
Pharmacy Board. The two points seem irreconcilable.
    Watson's testimony regarding security measures that have been in 
place at the pharmacy was also somewhat disquieting. He admitted that 
the entire staff had access to the controlled substance ordering 
password, and acknowledged that although his pharmacy had security 
cameras, he did not know how to access any of the footage to review it. 
Tr. 365-67.
    Watson also offered a document that purportedly sets forth a new 
written set of policies and procedures that he intends to implement at 
the Respondent to address some of the security shortcomings and reduce 
the risk of future diversion (Proposed Policy).\128\ Tr. 336-39, 341; 
Resp't Ex. 1. Regrettably, the document was unsigned,\129\ and although 
he testified that the Proposed Policy had been circulated to two 
pharmacy employees and his prospective PIC,\130\ it was clear from 
Watson's testimony that he did not know who drafted the document and 
was not too familiar with its substantive contents. Tr. 337-38, 368-71. 
All in all, the Proposed Policy did not add much to the discussion of 
the Respondent's future.
---------------------------------------------------------------------------

    \128\ Gov't Ex. 1.
    \129\ Watson offered to sign the document on the witness stand. 
Tr. 341.
    \130\ Tr. 338-39.
---------------------------------------------------------------------------

    In discussing his nephew, Grant Goode, Watson initially was 
unequivocal in his denial that Goode had raised any concerns about the 
pharmacy or Chris W, but subsequently retreated somewhat from that 
position, indicating that he had been ill from Lyme Disease, slipped in 
the bathtub, had to take his granddaughter to the doctor, and 
eventually allowed that if there was such a warning from Goode, that he 
simply did not remember it. Tr. 348-50. In an astonishingly telling 
statement, Watson related the distaste with which he viewed Goode's 
decision to alert the authorities without sufficiently vetting his 
concerns through Watson family first. In Watson's own words:

    You know--family is family. You know, if you've got a problem go 
see them about it, and talk about the problem. You don't know you 
got a problem until you at least talk about it. And you know, don't 
start with the state board, don't start with the DEA and all that. 
Start by calling your uncle or whatever or tell your mom and have 
her talk to your uncle if that--you know. But get it there where you 
can get it in front of you instead of, you know. . . . Be sure you 
know what you're talking about before you start that stuff, I mean.

Tr. 350-51.
    Watson testified that Pharm. Tech. June Gilbert has been his friend 
and employee for over thirty-three years,\131\ and has been with him 
since the first day he opened the Respondent. Tr. 347. Even in the face 
of the (credible) testimony of his trusted employee, Tracy Swaim, that 
Pharm. Tech. Gilbert's direct warning to Watson (in Swaim's presence) 
that Chris W was ``giving away'' medication,\132\ was the tipping point 
that precipitated his resignation, Watson adamantly maintained that 
Pharm. Tech. Gilbert never alerted him to problems at the 
pharmacy,\133\ and that he was not aware of any complaints from those 
who worked with Chris W at his (former) pharmacy in Mayflower. Tr. 373-
74.
---------------------------------------------------------------------------

    \131\ However strong he felt the bonds of his friendship were 
with his long-time employee Pharm. Tech. Gilbert, they apparently 
did not inhibit him from blaming her to Grant Goode for the 
diversion being perpetrated by his son, Chris W. Tr. 283.
    \132\ Tr. 256-57.
    \133\ Tr. 347.
---------------------------------------------------------------------------

    Watson's consistent point of view throughout the proceedings was 
that the PIC is the focal point of diversion control in any pharmacy, 
and that diversion occurring by the hand of the PIC is a difficult 
phenomenon to address. Tr. 332, 336. When pressed on his perception of 
his own responsibility, the elder Watson steadfastly maintained that he 
is not accountable for the actions of his PIC/son, Chris W. Tr. 354-56. 
Watson insisted that the blame was not on the Respondent or its owner, 
but rather exclusively on his son. Tr. 355. The only possible 
responsibility Watson was willing to acknowledge (albeit grudgingly) 
was not replacing his son as the PIC earlier. Id. Specifically, on the 
issue of Chris W's wrongful dispensing, Watson declared that 
``[w]hoever filled is responsible for those prescriptions. I didn't 
fill them.'' \134\ and regarding the failure to file a DEA-106 
regarding medications that were taken from the pharmacy, Watson said 
``[t]hat should have been taken care of by the [PIC] when they [sic] 
found out they were missing.'' Tr. 357.
---------------------------------------------------------------------------

    \134\ Tr. 356.
---------------------------------------------------------------------------

    It was clear from the tenor and text of his testimony that Watson 
is strongly possessed of the view that his authority to delegate 
extends not only to authority, but also to responsibility. Watson 
explained it in this unequivocal manner:

    That's the reason you delegate jobs to people; have somebody 
that [sic] is responsible. If I had been the pharmacist-in-control 
[sic] I would have taken care of that myself. I wish now I had of 
been [sic]. I'll admit that mistake.

Tr. 358. When asked about the scope of his theft reporting 
responsibilities as the pharmacy owner, Watson tellingly put it this 
way:

    Well, in the long run, yeah, that's my responsibility, but it's 
really the responsibility of the store manager, [PIC], and all that. 
I try to delegate authority as much as I can because I can't be 
there every day.

Tr. 362.
    Tom Watson's testimony was certainly not without its believable 
aspects. That said, even apart from the obvious reality that Watson has 
the most at stake at the hearing, there were internal inconsistencies, 
inconsistencies with other credible evidence, and implausible aspects 
that preclude his version of events from being fully credited in this 
recommended decision. The biographical information Watson supplied 
during his testimony as well as his subjective estimation (contrary as 
it is to Agency precedent) that delegation of authority can yield 
immunity from responsibility, are credible. However, his dual 
assertions that he was never warned of pharmacy problems by his nephew, 
Grant Goode, is compromised by his alternate position that he just may 
not remember all of Goode's warnings because he fell in a bathtub and 
has a history of once contracting Lyme disease. Tr. 348-50. The 
veracity of Watson's account is even further diminished by his 
assertion that he could only act upon the concerns expressed by his 
trusted, long-time PIC

[[Page 70107]]

Tracy Swaim once an inventory (that never occurred) had corroborated 
it. Tr. 335-36. Similarly, Watson's assertion that his long-time 
pharmacy technician and friend June Gilbert never raised pharmacy 
concerns with him is belied by credible testimony of Swaim that he quit 
when he overheard Pharm. Tech. Gilbert telling Watson that his son was 
giving away pills. Tr. 256-57.
    Likewise, Watson's position that if he had received information 
regarding addiction and diversion he would have brought in the Pharmacy 
Board and sought treatment for Chris W is belied by his subsequent 
assertions that although he has encountered diversion over the course 
of his career, he has never made such a report to the Pharmacy Board. 
Tr. 328, 344-45.
    Even beyond the bathtub and Lyme disease issues, Watson's assertion 
that his pharmacist/nephew Grant Goode never brought concerns about his 
son's actions to his attention is simply not credible. Tr. 348-50. 
Although Watson expressed exasperation over his nephew's decision to 
alert the authorities before sufficiently exhausting attempts to 
resolve issues through the intercession of family members, he raised no 
issue that impacted on Grant Goode's credibility or that would supply a 
motive to fabricate misconduct.
    After Watson testified, the Government presented (in its rebuttal 
case) the testimony of Steve Goode (Goode.1),\135\ a former employee 
and business partner of Tom Watson. Tr. 485. Goode.1 testified that he 
began working for Tom Watson in 1993 in the capacity of overall store 
manager for Big Star Perryville. Tr. 486. He worked in that position 
for approximately six years, and then also assumed management 
responsibilities over Watson's new Mayflower pharmacy/grocery store for 
the next year and a half. Id. Goode.1 testified that he left Watson's 
employ for a year and a half, but in 2001 rejoined him as a business 
partner. Id. Goode.1 explained that over the course of their ten-year 
partnership, in addition to Big Star Perryville and Mayflower, the two 
men bought several grocery stores, all but one of which included a 
pharmacy. Tr. 486-87.
---------------------------------------------------------------------------

    \135\ Steve Goode has no relation to Grant Goode, and pronounces 
his (identically-spelled) name differently. Tr. 484.
---------------------------------------------------------------------------

    Goode.1 stated that his role in the partnership was to oversee the 
grocery side of the business, and that he was responsible for 
inventory, invoicing, sales, and purchases, and had access to the bank 
accounts in all of the stores. Tr. 487. According to Goode.1, although 
his responsibilities did not include the management of the pharmacy 
aspects of the businesses, a unified ordering, sales, and inventory 
reporting system \136\ linked to all store cash registers gave him 
access to all sales, billing, ordering, and inventory figures, 
including transactions in the pharmacies. Tr. 487-89. In 2009, Goode.1 
had noticed that the Mayflower pharmacy was paying three full-time 
pharmacists, one of whom was Chris W, who had eased his actual hours 
into part-time work (at a full-time salary). Tr. 494. When Goode.1 
raised the issue that this salary output was not sustainable, Chris W 
told him that he would ``make it work'' and that Goode.1 should ``take 
care of grocery.'' Tr. 494.
---------------------------------------------------------------------------

    \136\ Goode.1 testified that the system was provided by the 
grocery wholesaler, Associated Wholesale Grocers (AWG). Tr. 487-88. 
The AWG system accommodated and tracked the ordering of 
pharmaceuticals through McKesson, who at the time was the 
Respondent's pharmacy supplier. Tr. 488. Goode.1 explained that a 
unified system allowed an overview of all Big Star Perryville 
transactions such that he could conduct an examination to determine 
which aspects of the business were doing well or poorly. Tr. 489.
---------------------------------------------------------------------------

    Goode.1 recounted that overall the business partnership enterprise 
had been ``pretty successful'' in the 2000s, but during the summer of 
2010 he became aware that a new store the two men had opened in 
Russellville was struggling financially. During this period, Goode.1 
and Watson would generally see each other about twice a week, but 
Goode.1 was sufficiently concerned about the Russellville operation and 
some other issues that he made arrangements to see Watson at his house. 
Tr. 489-90. Among other things discussed at the meeting, Goode.1 
testified that he told the elder Watson that ``all of a sudden'' there 
was no money in the Mayflower store bank accounts, and that when he 
examined the records, pharmacy purchases were up, but pharmacy sales 
were ``flat.'' Tr. 490. Watson, whose son Chris W was the Mayflower 
PIC, told Goode.1 that he would look at the issue and ``take care of 
it.'' Tr. 490-91. Goode.1 testified that until the summer of 2010, he 
had not really paid a lot of attention to pharmacy numbers at the 
Mayflower store because his primary focus was always the grocery end of 
the business, but that he turned his attention in that direction as 
part of his efforts to ascertain why two stores, Mayflower and 
Russellville, were underperforming. Tr. 494-95. It was his conclusion 
that they had merely underestimated demand at Russellville, but the 
issue at Mayflower was different; pharmacy sales were level, but the 
pharmacy was buying more drugs.\137\
---------------------------------------------------------------------------

    \137\ Goode.1 testified that he had heard rumors of controlled 
substance discrepancies at the Mayflower pharmacy, but as he was not 
a pharmacist, he could not verify them. Tr. at 502-03.
---------------------------------------------------------------------------

    The upshot of Goode.1's meeting with Watson was that the men agreed 
to meet with Chris W, and did so two weeks later. Tr. 491-92. However, 
according to Goode.1, his takeaway from the meeting was that ``it was 
evident that nothing was going to change.'' Id. Goode.1 was told to 
mind the grocery side of the business and that Chris W would take care 
of the pharmacy department. Tr. 493-93. Goode.1 stated that the 
conversation devolved into a discussion focused on the personal 
relationship between Goode.1 and the Watsons, and he was told that 
since because Goode.1 was permitted to use Watson land for hunting and 
a Watson truck for hauling, that he should mind the grocery side of the 
house and let Chris W manage the pharmacy end. Tr. 493. Goode.1 
testified that Chris W (who was doing most of the talking) did not 
supply any business-related reason for the drug-sales versus drug-
ordering anomaly at the Mayflower pharmacy. Tr. 493-95.
    Goode.1 stated that after the Mayflower store was sold to a large 
pharmacy chain,\138\ Chris W began to work at some hours at the 
Respondent at Big Star Perryville. Tr. 495. Goode.1 testified that in 
late 2012, while he and his wife were on vacation, he received a call 
from a mid-level multi-store department manager \139\ (T.G.), who told 
him that Chris W had given a former Mayflower pharmacy technician 
(C.J.D.) access to the Respondent pharmacy at a time when the 
Respondent was closed. Tr. 496-99. T.G. told Goode.1 that while the 
pharmacy was closed, C.J.D., using the keypad access code to enter the 
restricted pharmacy area, prepared and dispensed medications to her 
friends and family. Although Goode.1 believes that entries were made in 
the store computer to reflect the distribution of the drugs, none of 
the transactions were rung up on any store cash registers.\140\ Tr. 
498. Goode.1 testified that he met with Watson about the situation and 
warned him that if he didn't ``get a handle'' on Chris W, the business 
would encounter the same problem as the Mayflower pharmacy did. Tr. 
496. According to Goode.1, Watson said

[[Page 70108]]

``he'd take care of it'' but nothing happened. Id.
---------------------------------------------------------------------------

    \138\ Goode.1 testified that his share of the sale price (from 
his 20 percent ownership interest) totaled approximately $90,000. 
Tr. at 502.
    \139\ Goode.1 testified that the manager, T.G., supervised 
bakery and deli operation. Tr. 500.
    \140\ Goode.1 did not know whether the prescriptions prepared by 
the former employee were controlled substances. Id.
---------------------------------------------------------------------------

    Goode.1 reckoned that Tom Watson ``was the only one that had any 
influence over [Chris W],'' and that by bringing the issues to Watson's 
attention, he expected him to ``get involved in the business'' and 
acknowledge that there was a problem. Tr. 504. His partner's 
aspirations notwithstanding, Watson made no discernible effort to 
intervene. Id. Goode.1 and Watson sold the Mayflower and Morrilton 
stores and dissolved their partnership in 2012 shortly after the C.J.D. 
incident came to light. Tr. 486.
    Goode.1 presented testimony that was sufficiently even, detailed, 
plausible, and internally consistent to be afforded full credibility in 
these proceedings. Goode.1 readily acknowledged that dissolution of 
their partnership was ``not totally amicable'' because the two men 
still harbor some dispute about the financial aspects of the 
dissolution. Tr. 505. Still, there is nothing about the outcome of 
these proceedings that would enhance or detract from Goode.1's status 
in their unrelated monetary dispute, and there was no indication of 
malice or bias in the tenor or his words or demeanor. Watson's former 
business partner provided credible testimony.
    Any additional facts required for a resolution of this case are set 
forth in the Analysis portion of this recommended decision.

The Analysis

    Under 21 U.S.C. 824(a)(4), the Agency may revoke the COR of a 
registrant if the registrant ``has committed such acts as would render 
[its] registration . . . inconsistent with the public interest.'' 21 
U.S.C. 824(a)(4) (2012). The following factors have been provided by 
Congress in determining ``the public interest'':

    (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) (2012).
    ``[T]hese factors are considered in the disjunctive.'' Robert A. 
Leslie, M.D., 68 FR 15227, 15230 (2003). Any one or a combination of 
factors may be relied upon, and when exercising authority as an 
impartial adjudicator, the Agency may properly give each factor 
whatever weight it deems appropriate in determining whether a 
registrant's registration should be revoked. Id.; David H. Gillis, 
M.D., 58 FR 37507, 37508 (1993); see Morall v. DEA, 412 F.3d 165, 173-
74 (D.C. Cir. 2005); Joy's Ideas, 70 FR 33195, 33197 (2005); Henry J. 
Schwarz, Jr., M.D., 54 FR 16422, 16424 (1989). Moreover, the Agency is 
``not required to make findings as to all of the factors,'' Hoxie v. 
DEA, 419 F.3d 477, 482 (6th Cir. 2005); Morall, 412 F.3d at 173, and is 
not required to discuss consideration of each factor in equal detail, 
or even every factor in any given level of detail. Trawick v. DEA, 861 
F.2d 72, 76 (4th Cir. 1988) (holding that the Administrator's 
obligation to explain the decision rationale may be satisfied even if 
only minimal consideration is given to the relevant factors and that 
remand is required only when it is unclear whether the relevant factors 
were considered at all). The balancing of the public interest factors 
``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. . . .'' Jayam Krishna-
Iyer, 74 FR 459, 462 (2009).
    In the adjudication of a revocation of a DEA COR, the DEA has the 
burden of proving that the requirements for continued registration are 
not satisfied. 21 CFR 1301.44(d) (2015). Where the Government has met 
this burden by making a prima facie case for revocation of a 
registrant's DEA COR, the burden of production then shifts to the 
registrant to show that, given the totality of the facts and 
circumstances in the record, revoking the registrant's registration 
would not be appropriate. Med. Shoppe-Jonesborough, 73 FR 364, 387 
(2008); Samuel S. Jackson, D.D.S., 72 FR 23848, 23853 (2007). Further, 
``to rebut the Government's prima facie case, [the Respondent] is 
required not only to accept responsibility for [the established] 
misconduct, but also to demonstrate what corrective measures [have 
been] undertaken to prevent the reoccurrence of similar acts.'' Jeri 
Hassman, M.D., 75 FR 8194, 8236 (2010); accord Krishna-Iyer, 74 FR at 
464 & n.8. In determining whether and to what extent a sanction is 
appropriate, consideration must be given to both the egregiousness of 
the offense established by the Government's evidence and the Agency's 
interest in both specific and general deterrence. David A. Ruben, M.D., 
78 FR 38363, 38364, 38385 (2013).
    Normal hardships to the registrant, and even the surrounding 
community, which are attendant upon the revocation of a registration, 
are not a relevant consideration. Linda Sue Cheek, M.D., 76 FR 66972, 
66972-73 (2011); Gregory D. Owens, D.D.S., 74 FR 36751, 36757 (2009). 
The Agency's conclusion that past performance is the best predictor of 
future performance has been sustained on review in the courts, Alra 
Labs., Inc. v. DEA, 54 F.3d 450, 452 (7th Cir. 1995), as has the 
Agency's consistent policy of strongly weighing whether a registrant 
who has committed acts inconsistent with the public interest has 
accepted responsibility and demonstrated that he or she will not engage 
in future misconduct, Hoxie, 419 F.3d at 483; see also Ronald Lynch, 
M.D., 75 FR 78745, 78754 (2010) (holding that the Respondent's attempts 
to minimize misconduct undermined acceptance of responsibility); George 
Mathew, M.D., 75 FR 66138, 66140, 66145, 66148 (2010); George C. 
Aycock, M.D., 74 FR 17529, 17543 (2009); Steven M. Abbadessa, D.O., 74 
FR 10077, 10078 (2009); Krishna-Iyer, 74 FR at 463; Med. Shoppe-
Jonesborough, 73 FR at 387.

[Omitted Material]

Factors 1 and 3: The Recommendation of the Appropriate State Licensing 
Board or Professional Disciplinary Authority Conviction Record Under 
Federal or State Laws Relating to the Manufacture, Distribution, or 
Dispensing of Controlled Substances

    Consideration of the evidence of record under Factors 1 and 3 does 
not support or undermine the sanction sought by the Government in this 
case. Under Factor 1, the recommendation of state medical licensing 
authorities is an important but not dispositive factor in determining 
whether maintaining a DEA COR is consistent with the public interest. 
Patrick W. Stodola, M.D., 74 FR 20727, 20730 (2009); Krishna-Iyer, 74 
FR at 461. It is beyond argument that beyond the absence of any 
evidence that Arkansas state officials have taken any action (or have 
even considered the matter), the present record contains no 
recommendation of any kind from any licensing or disciplinary 
authorities in Arkansas.
    Regarding the third factor (convictions relating to the 
manufacture, distribution, or dispensing of controlled substances), the 
record in this case does not contain evidence that the Respondent, its 
owner(s), or any pharmacist or key employee of the

[[Page 70109]]

pharmacy has been convicted \141\ of a crime related to any of the 
controlled substance activities designated in the CSA. The standard of 
proof in a criminal case is more stringent than the standard required 
at an administrative proceeding, and the elements of both federal and 
state crimes relating to controlled substances are not always 
coextensive with conduct that is relevant to a determination of whether 
maintaining registration is within the public interest. Still, where 
present, evidence that a registrant has been convicted of crimes 
related to controlled substances is a factor to be evaluated in 
reaching a determination as to whether the registrant should continue 
to be entrusted with a DEA certificate. The probative value of an 
absence of any evidence of criminal prosecution is somewhat diminished 
by the myriad of considerations that are factored into a decision to 
initiate, pursue, and dispose of criminal proceedings by federal, 
state, and local prosecution authorities. See Robert L. Dougherty, 
M.D., 76 FR 16823, 16833 n.13 (2011); Dewey C. MacKay, M.D., 75 FR 
49956, 49973 (2010) (``[W]hile a history of criminal convictions for 
offenses involving the distribution or dispensing of controlled 
substances is a highly relevant consideration, there are any number of 
reasons why a registrant may not have been convicted of such an 
offense, and thus, the absence of such a conviction is of considerably 
less consequence in the public interest inquiry.''), aff'd, MacKay v. 
DEA, 664 F.3d 808 (10th Cir. 2011); Ladapo O. Shyngle, M.D., 74 FR 
6056, 6057 n.2 (2009).
---------------------------------------------------------------------------

    \141\ It is undisputed that Chris W has been arrested in 
connection with facts related to this case (Tr. 433, 437-38, 445) 
and equally undisputed that the record contains no evidence that 
anyone associated with the Respondent (including Chris W) has been 
convicted in connection with the misconduct alleged by the 
Government.
---------------------------------------------------------------------------

    Therefore, on the present record, the absence of criminal 
convictions of the Respondent's owner, pharmacists, or key employees 
(Factor 3), like the absence of any state recommendation regarding the 
Respondent's COR (Factor 1), militates neither for nor against the COR 
revocation sought by the Government.

Factors 2 and 4: The Respondent's Experience in Dispensing Controlled 
Substances, and Compliance with Applicable State, Federal, or Local 
Laws Relating to Controlled Substances

    Much of the Government's public-interest-factors case seeking a COR 
revocation for the Respondent is based on conduct most aptly considered 
under Factors 2 and 4. The Government alleges and relies on intentional 
diversion activity conducted primarily by Chris W, the Respondent's 
PIC, and the failure on the part of the Respondent to act or have 
safeguards in place to protect the controlled substances in its care 
against Chris W's malfeasance. Specifically, the Government argues that 
based on what the Respondent (through its owner, Tom Watson) knew or 
should have known, insufficient care was exercised in preventing 
controlled substance diversion. The Government argues that the 
information in the Respondent's possession compelled it to act, and it 
failed to do so. Agency precedent has consistently held that the 
registration of a pharmacy may be revoked as the result of the unlawful 
activity of the pharmacy's owners, majority shareholders, officers, 
managing pharmacist, or other key employee. EZRX, LLC, 69 FR 63178, 
63181 (1988); Plaza Pharmacy, 53 FR 36910 (1988).
    Regarding Factor 2, in requiring an examination of a registrant's 
experience in dispensing controlled substances, Congress manifested an 
acknowledgement that the qualitative manner and the quantitative volume 
in which an applicant has engaged in the dispensing of controlled 
substances may be significant factors to be evaluated in reaching a 
determination as to whether an applicant should be (or continue to be) 
entrusted with a DEA COR. In some (but not all) cases, viewing an 
registrant's actions against a backdrop of how its regulated activities 
have been performed within the scope of its registration can provide a 
contextual lens to assist in a fair adjudication of whether continued 
registration is in the public interest. Agency precedent has placed 
some limitations on the weight to be accorded to evidence considered 
under this factor. For example, the Agency has taken the position that 
this factor can be readily outweighed by acts held to be inconsistent 
with the public interest, and evidence analyzed under this factor will 
be afforded scant weight by the Agency in the face of proven 
allegations of intentional diversion. Krishna-Iyer, 74 FR at 463; see 
also Hassman, 75 FR at 8235 (acknowledging Agency precedential 
rejection of the concept that conduct inconsistent with the public 
interest is rendered less so by comparing it with a respondent's 
legitimate activities that occurred in substantially higher numbers); 
Paul J. Cargine, Jr., 63 FR 51592, 51560 (1998) (``[E]ven though the 
patients at issue are only a small portion of Respondent's patient 
population, his prescribing of controlled substances to these 
individuals raises serious concerns regarding [his] ability to 
responsibly handle controlled substances in the future.''). Similarly, 
in Cynthia M. Cadet, M.D., the Agency determined that existing List I 
precedent \142\ clarifying that experience related to conduct within 
the scope of the COR sheds light on a practitioner's knowledge of 
applicable rules and regulations would not be applied to cases where 
intentional diversion allegations were sustained. 76 FR 19450, 19450 
n.3 (2011). The Agency's approach in this regard has been sustained on 
review. MacKay, 664 F.3d at 819.
---------------------------------------------------------------------------

    \142\ See, e.g., Volusia Wholesale, 69 FR 69409, 69410 (2004).
---------------------------------------------------------------------------

    There is no question that the Respondent has been conducting 
regulated activity under a DEA-issued COR since 1986 without any 
indication on the present record of reported misconduct that predates 
the facts that gave rise to these proceedings. Gov't Ex. 1. That said, 
as discussed in greater detail infra, there is no question that the 
actions of the Respondent's PIC, for which the Respondent is 
accountable, see EZRX, LLC, 69 FR at 63181; Plaza Pharmacy, 53 FR at 
36910, were plainly calculated to facilitate intentional diversion. 
Thus, even if it were assumed, arguendo, that the regulated activity 
conducted by the Respondent over the past three decades was exclusively 
benign, under Agency precedent, the intentional nature of the diversion 
established by the evidence of record would deprive that assumption of 
its ability to mitigate a sanction.
    In addition to Factor 2 (experience in dispensing), Factor 4 
(compliance with laws related to controlled substances) is also germane 
to a correct resolution of the instant case. Regarding Factor 4, to 
effectuate the dual goals of conquering drug abuse and controlling both 
legitimate and illegitimate traffic in controlled substances, 
``Congress devised a closed regulatory system making it unlawful to 
manufacture, distribute, dispense, or possess any controlled substance 
except in a manner authorized by the CSA.'' Gonzales v. Raich, 545 U.S. 
1, 13 (2005). Under the regulations, ``[t]he responsibility for the 
proper prescribing and dispensing of controlled substances is upon the 
prescribing practitioner, but a corresponding responsibility rests with 
the pharmacist who fills the prescription.'' 21 CFR 1306.04(a) (2015). 
Under this language, a pharmacist has a duty ``to fill only those 
prescriptions that conform in all respects with the requirements of the 
[CSA] and DEA regulations. . . .'' Electronic

[[Page 70110]]

Prescriptions for Controlled Substances, 75 FR 16236, 16266 (2010).
    In short, a pharmacist has a ``corresponding responsibility under 
Federal law'' to dispense only lawful prescriptions. Liddy's Pharmacy, 
L.L.C., 76 FR 48887, 48895 (2011). ``The corresponding responsibility 
to ensure the dispensing of valid prescriptions extends to the pharmacy 
itself.'' Holiday CVS, L.L.C., d/b/a CVS/Pharmacy Nos. 219 & 5195, 77 
FR 62315, 62341 (2012) (citing Med. Shoppe-Jonesborough, 73 FR at 384; 
United Prescription Servs., Inc., 72 FR 50397, 50407-08 (2007); EZRX, 
LLC, 69 FR at 63181; Role of Authorized Agents in Communicating 
Controlled Substance Prescriptions to Pharmacies, 75 FR 61613, 61617 
(Oct. 16, 2010); Issuance of Multiple Prescriptions for Schedule II 
Controlled Substances, 72 FR 64921, 69424 (Nov. 19, 2007)). Settled 
Agency precedent has interpreted this corresponding responsibility as 
prohibiting the filling of a prescription where the pharmacy, through 
its pharmacist, ``knows or has reason to know'' that the prescription 
is invalid. E. Main St. Pharmacy, 75 FR 66149, 66163 (2010); Bob's 
Pharmacy & Diabetic Supplies, 74 FR 19599, 19601 (2009) (citing Med. 
Shoppe-Jonesborough, 73 FR at 381).
    The Agency has interpreted this ``legitimate medical purpose'' 
feature of the corresponding responsibility duty ``as prohibiting a 
pharmacist from filling a prescription for a controlled substance when 
he either knows or has reason to know that the prescription was not 
written for a legitimate medical purpose,'' and has been equally 
consistent in its admonishment that ``[w]hen prescriptions are clearly 
not issued for legitimate medical purposes, a pharmacist may not 
intentionally close his eyes and thereby avoid [actual] knowledge of 
the real purpose of the prescription.'' Sun & Lake Pharmacy, Inc., 76 
FR 24523, 24530 (2011); Liddy's Pharmacy, 76 FR at 48895; E. Main St. 
Pharmacy, 75 FR at 66163; Lincoln Pharmacy, 75 FR 65667, 65668 (2010); 
Bob's Pharmacy, 74 FR at 19601.
    When considering whether a pharmacy has violated its corresponding 
responsibility, the Agency considers whether the entity, not the 
pharmacist, can be charged with the requisite knowledge. See United 
Prescription Servs., 72 FR at 50407 (finding that the Respondent 
pharmacy violated its corresponding responsibility because ``an entity 
which voluntarily engages in commerce [to] other States is properly 
charged with knowledge of the laws regarding the practice of medicine 
in those States'' (emphasis added)); see also Pharmboy Ventures 
Unlimited, Inc., 77 FR 33770, 33771 n.2 (2012) (``DEA has long held 
that it can look behind a pharmacy's ownership structure `to determine 
who makes decisions concerning the controlled substance business of a 
pharmacy.' '' (quoting Carriage Apothecary, 52 FR 27599, 27599 (1987)); 
S & S Pharmacy, Inc., 46 FR 13051, 13052 (1981) (holding that the 
corporate pharmacy acts through the agency of its PIC). Knowledge 
obtained by the pharmacists and other employees acting within the scope 
of their employment may be imputed to the pharmacy itself. See United 
States v. 7326 Highway 45 N., 965 F.2d 311, 316 (7th Cir. 1992) (``Only 
knowledge obtained by corporate employees acting within the scope of 
their employment is imputed to the corporation.''). Agency precedent 
has consistently held that the registration of a pharmacy may be 
revoked as the result of the unlawful activity of the pharmacy's 
owners, majority shareholders, officers, managing pharmacists, or other 
key employees. Holiday CVS, 77 FR at 62340; EZRX, 69 FR at 63181; Plaza 
Pharmacy, 53 FR at 36911.
    The evidence of record preponderantly establishes that while acting 
as the Respondent's PIC, Chris W twice \143\ dispensed controlled 
substances to a DEA undercover agent on scrips that he knew were bogus. 
SOFs 14-18, 20; SOT 3. It was clear that he knew the scrips were fakes 
because he had been actively engaged in schooling the undercover agent 
on how to improve his forging skills for future scrips. SOFs 14-18, 20; 
SOT 3; Tr. 146-50. In a palpable display of arrogance and disregard for 
his responsibilities, Chris W told the undercover agent that the 
agent's fake scrip ``looks a lot better than any of the other damn 
things [he's] seen.'' Gov't Ex. 18 at 3. He also assured the undercover 
agent that what he did with the drugs after the drugs left his pharmacy 
was none of his business. SOT 3(e).
---------------------------------------------------------------------------

    \143\ Controlled substances were dispensed to the undercover 
agent by Chris W on November 7, 2014 (Undercover Visit 1) and 
December 4, 2014 (Undercover Visit 4). SOFs 14, 20.
---------------------------------------------------------------------------

    The evidence of record establishes that Chris W engaged in a wild 
pattern of abusing his authority as a pharmacist while serving as a 
pharmacist and PIC at the Respondent. Staff members at the pharmacy 
have been directed by Chris W to dispense controlled substances in the 
absence of the requisite scrips and in the face of blatant red flags of 
diversion, and were aware that large quantities of controlled substance 
shipments delivered to the pharmacy routinely disappear by the 
following morning. SOTs 16(b), (e), 17(c). Staff members have also seen 
Chris W load his backpack with controlled medications and walk out the 
pharmacy door. SOT 16(f). With the assistance of his friend Eric 
Horton, he has also taken large amounts of pharmacy documentation out 
of the pharmacy and secreted it in his home. SOFs 6-12; SOTs 16(g), 
19(e), (g), 21. This was done with the knowledge of the Respondent's 
staff and in violation of the regulations, which require that the 
records be maintained by the pharmacy. 21 CFR 1306.15(a)(3) (2015).
    Chris W also supplied his girlfriend, Samantha Pemberton, with 
controlled substances in unmarked bottles without a prescription and 
created a paper trail at the pharmacy that fraudulently reflected 
prescriptions from Dr. James Arnold, M.D., an emergency room physician 
who never treated Pemberton. SOTs 7, 22. When, following a traffic 
stop, local police officers attempted to ascertain the facts about how 
Pemberton came into possession of drugs found with her, Chris W misled 
them on numerous phone calls and provided fabricated documentation that 
falsely created the impression that Dr. Arnold was her prescriber and 
that she was legitimately dispensed the drugs. SOT 9; Gov't Exs. 19, 
48, 49; Tr. 52-53.
    The record also establishes that Chris W dispensed controlled 
substances to an individual named A.R. with no prescription whatsoever. 
SOF 13. Not only did Chris W supply A.R. with controlled substances, 
but to cover his tracks, he reached out by text message to a dentist 
acquaintance, Dr. Raymond Hambuchen, who did not know A.R., and asked 
Dr. Hambuchen to vouch for his criminality. SOTs 1, 15(b)-(d), 10(d); 
Tr. 20-21; Gov't Exs. 2, 3. Fortunately, Dr. Hambuchen was not 
complicit. Records seized at the Respondent demonstrate that Chris W 
fraudulently dispensed controlled substances to A.R. eleven times under 
Dr. Hambuchen's name. SOF 13; SOT 20(d), (e); Gov't Ex. 4Tr. 185-86.
    Chris W spent an evening in the restricted area of the Respondent 
identifying and assisting his friend, Eric Horton, in liberating 
copious amounts of controlled substances from the pharmacy. A search 
incident to an arrest based on a traffic stop of Horton's truck shortly 
thereafter yielded a virtual cornucopia of controlled substances from 
the Respondent that Chris W helped him identify, gather, and pack up at 
the pharmacy, none of which had a label with Horton's name on it. SOTs 
5(c), 11(e), 12(c); Gov't Ex. 36; Tr. 98. Chris W also gave controlled 
substances

[[Page 70111]]

to Horton at his (Chris W's) home. SOT 7(c).
    Joe Jackson, another of Chris W's friends, was arrested while in 
possession of a large quantity of controlled substances in Respondent-
labeled stock bottles. SOT 13; Gov't Ex. 39. A search of the 
Respondent's pharmacy records revealed that no patient profile was 
maintained on Jackson at the pharmacy; thus, the controlled medications 
he was transporting at the time of his traffic stop were not legally 
dispensed to him. SOTs 14(c), 20(e).
    A search warrant executed at Chris W's home yielded, inter alia, 
hard copies of scrips for five patients who were dispensed controlled 
substances at the Respondent. SOFs 6-12. Under the regulations, these 
documents were required to be maintained at the pharmacy. 21 CFR 
1306.15(a)(3) (2015).
    There is thus no question that Chris W was a bad actor, and less 
question under Agency precedent that because he was a pharmacist, the 
PIC, the vice president, and the controller of the Respondent, the 
Respondent is accountable for every bit of Chris W's misconduct.\144\ 
Holiday CVS, 77 FR at 62340; EZRX, 69 FR at 63181; Plaza Pharmacy, 53 
FR at 36911. The seminal question here is not whether a sanction is 
authorized (it clearly is), but whether the Respondent should be 
sanctioned. For the reasons that follow, that question must be answered 
in the affirmative.
---------------------------------------------------------------------------

    \144\ Although the Respondent has stipulated that Chris W is and 
was a part-owner of the Respondent (SOF 20), it subsequently sought 
to challenge the basis of that stipulation with an affidavit from 
Chris W's mother offered after the hearing was completed. ALJ Ex. 
21. The motion was granted over the Government's objection. ALJ Exs. 
22, 23. However, inasmuch as Agency precedent does not distinguish 
between the responsibility imputed to a Respondent from an owner and 
the responsibility imputed from a managing pharmacist, officer, or 
other key employee, Holiday CVS, 77 FR at 62340; EZRX, 69 FR at 
63181; Plaza Pharmacy, 53 FR at 36911, the admission of the 
affidavit (Resp't Ex. 15), especially when considered with the 
diminished weight accorded by the regulations, 21 CFR 1316.58(b) 
(2015), adds virtually nothing to the equation.
---------------------------------------------------------------------------

    Notwithstanding the stunning level of controlled substance 
shortages \145\ revealed by the DEA audit,\146\ the awareness by 
pharmacy staff that controlled medications shipped to the pharmacy 
routinely disappear by the next morning,\147\ the burglary with 
controlled substance losses reported to the local police,\148\ and the 
large quantities of controlled substances found in the possession of 
Horton and Jackson (neither of whom were Respondent employees, and 
Jackson was not even a pharmacy customer), the Respondent has not filed 
a report of theft or loss (DEA-106) as required by the 
regulations.\149\ SOT 14(b). That the staff has noticed that the 
pharmacy regularly runs out of controlled medications by the ninth day 
of each month is clearly evidence that the Respondent was well aware 
that controlled medications were routinely going missing. SOT 16(b). 
The repeated failure to report the thefts/losses to DEA constitutes a 
violation of DEA regulations. 21 CFR 1301.76(b).
---------------------------------------------------------------------------

    \145\ Inasmuch as the shortages based on a DEA audit were not 
noticed in the OSC or the prehearing statements, the audit results, 
standing alone, cannot form an independent basis for sanction. CBS 
Wholesale Distribs., 74 FR 36746, 36750 (2009) (citing Darrel 
Risner, D.M.D., 61 FR 728, 730 (1996)); see also Roy E. Berkowitz, 
M.D., 74 FR 36758, 36759-60 (2009). However, the Government did 
sufficiently notice the Respondent's failure to file a report of 
theft or loss of controlled substances. ALJ Ex. 1 at 4.
    \146\ Tr. 181.
    \147\ SOTs 16(b), 17(c).
    \148\ SOTs 2(e), 19(f); Tr. 259-60, 323.
    \149\ 21 CFR 1301.76(b) (2015).
---------------------------------------------------------------------------

    It is likewise beyond argument that the owner of the Respondent, 
Tom Watson, had unequivocal notice from multiple sources over the 
course of several years that his son, Chris W, approached the disregard 
of his obligations as a pharmacist as if it were an art form. Tracy 
Swaim worked for Tom Watson at the Respondent, most of that time as its 
PIC, for over a quarter of a century. Tr. 232-33. In January of 2012, 
Swaim told Watson that he was sufficiently troubled by Chris W's 
illegal hijinks that he intended to resign as the PIC. Tr. 251-56. 
Unconsoled by Watson's assurances, Swaim conducted a close-out 
inventory, completed the necessary paperwork to step down, and did so. 
The fact that Swaim's salary remained unaffected and his hours were not 
reduced is strong evidence that the demotion was in no way punitive, 
and that the long-term PIC was making a powerful statement to his 
employer. Tr. 254-55, 266-67. Tom Watson's reaction was to effect no 
discernible change in the organization--other than having Chris W 
replace Swaim as the Respondent's PIC.
    Two years and nine months later, when Swaim overheard Pharmacy 
Technician June Gilbert (a twenty-five-year veteran of the Respondent) 
tell Watson that Chris W was ``giving away'' medication, it was more 
than Swaim could endure, and he warned Watson that he was considering 
leaving the pharmacy altogether. Tr. 257. Four days later, when Swaim 
learned from the staff that Chris W's misconduct had not abated, 
notwithstanding the fact that Swaim had no job prospects and lived in a 
rural area, he gave his two weeks' notice and quit. Tr. 257. It would 
be difficult to conceive of more sincerely-rendered, credible warnings 
from more trusted employees than those tendered by Tracy Swaim and June 
Gilbert. Still, Watson was unmoved and left Chris W as the Respondent's 
PIC.
    Tom Watson was also warned of Chris W's blatant misconduct by his 
nephew, Grant Goode, who briefly worked at the Respondent as a staff 
pharmacist. When Goode alerted Watson that dozens of dispensing events 
lacked hard-copy scrips, the owner dismissed it as benign filing errors 
made by pharmacy staff members. Tr. 277. In view of the fact that Goode 
was present when Chris W loaded medications in his backpack in plain 
view of his father,\150\ the elder Watson's unwillingness to act likely 
came as no surprise to Goode. When Watson became suspicious that Grant 
Goode had brought his concerns to the Pharmacy Board, he had another 
pharmacist (and business partner of Chris W) dismiss him from the job. 
Tr. 291. The reaction of this pharmacist, Glenn Wood (also a key 
employee and supervisory pharmacist), to Goode's concerns was not to 
elevate the issue or to investigate the allegations; his response was 
merely to take offense on behalf of the Watsons and defend them. Tr. 
427, 429.
---------------------------------------------------------------------------

    \150\ Tr. 280.
---------------------------------------------------------------------------

    Tom Watson also disregarded concerns expressed by his former long-
time store manager and partner, Steve Goode (Goode.1). While co-owning 
the Mayflower store with Watson, Goode.1 had determined that while 
Chris W was the PIC, pharmacy ordering was going through the roof while 
sales were static. Tr. 490-92. When he brought this concern to Watson's 
attention, the two men met with Chris W, and Goode.1 was essentially 
told to keep his nose out of the pharmacy side of the house. Tr. 493.
    Goode.1 also informed Watson that Chris W had granted access to the 
pharmacy to a former employee while the pharmacy was closed and enabled 
her to dispense medications to her friends and relatives free of 
charge. Tr. 496-99. Consistent with his custom in such matters, Watson 
assured Goode.1 that he would take care of the issue and proceeded to 
do nothing. Tr. 496-97. The partnership between the two men was 
subsequently dissolved. Id.
    The Respondent also ran afoul of state controlled substance laws. 
The Arkansas Uniform Controlled Substances Act specifies that no 
controlled substance is to be dispensed without a prescription issued 
in compliance with federal laws and

[[Page 70112]]

regulations. Ark. Code Ann. Sec.  5-64-308 (2013). Thus, Chris W's 
practice of dispensing controlled substances without scrips to his 
girlfriend, friends, and associates, and his facilitation of a former 
employee's weekend drug dispensing event to her friends and family, 
clearly violated state laws related to controlled substances, and was 
passively endured by the Respondent. As discussed supra, the Respondent 
was credibly informed by numerous sources, was well aware of Chris W's 
misconduct, and chose to do nothing.
    When Chris W dispensed controlled substances twice to an undercover 
DEA agent where he knew that the presented scrips were fraudulent, he 
also violated his state ``corresponding responsibility'' to ensure that 
the prescribing and dispensing of a controlled substance is proper. 
Ark. Admin. Code Sec.  007.07.2-II-VIII(B)(1) (2014); see also Ark. 
Admin. Code Sec.  070.00.4-04-00-0009 (2014) (``Any pharmacist . . . 
participating in the preparation of orders or dispensing of 
prescriptions . . . is responsible for the validity and legality of the 
order or prescription.''). Prescriptions can only be issued for 
``legitimate medical purposes'' by ``an individual practitioner who is 
legally authorized to prescribe . . . controlled substances in the 
State of Arkansas and who holds a current [DEA COR].'' Ark. Admin. Code 
Sec.  007.07.2-II-VIII. Chris W knew the scrips were frauds, and even 
sought to improve the caliber of the undercover agent's future 
forgeries. Chris W's actions as pharmacist and later PIC violated 
Arkansas laws and under the circumstances, the Respondent is fully 
responsible with knowledge of his malfeasance.
    Arkansas regulations delineate a number of responsibilities for 
supervisory pharmacists; those persons responsible for supervising 
pharmacy personnel are ``responsible for the validity and legality'' of 
the prescriptions dispensed and also ``responsible for any shortage of 
drugs classified as controlled substances . . . which occurs under 
their supervision.'' Ark. Admin. Code Sec.  070.00.4-04-00-0009 (2014). 
Likewise, state regulations outline the responsibilities unique to 
those individuals designated as pharmacists-in-charge: ``The [PIC] is 
responsible for the security and accountability of all drugs stored in 
a pharmacy and is responsible for the validity and legality of all 
prescriptions and/or orders upon which drugs are dispensed in a 
pharmacy. The [PIC] is responsible for ensuring that pharmacy staff has 
been appropriately trained to follow the pharmacy's policies and 
procedures.'' Ark. Admin. Code Sec.  070.00.4-04-00-0010 (2014).
    Under Arkansas law, ``[t]he permit holder and the [PIC] are jointly 
responsible for the security and accountability of all controlled drugs 
stored in and/or ordered by a pharmacy.'' Ark. Admin. Code Sec.  
070.00.4-04-00-0015 (2014). As such, the permit holder is required to 
``provide diversion prevention and detection tools appropriate for the 
particular pharmacy setting and the pharmacist in charge shall 
implement and monitor the diversion control and detection tools 
provided by the permit holder.'' Id. Such policies and procedures 
developed by the permit holder and the PIC to prevent and detect 
diversion may include ``limiting access to by non-pharmacists to 
controlled drug shipments'', ``confirming pill count before opening a 
new bottle of high risk drugs'', and ``tracking pill count on stock 
bottles.'' Id. As discussed supra, Respondent's lack of any meaningful 
measures of checks and balances to guard against diversion by a 
pharmacist, the sharing of the CSOS password, and its owner's obdurate 
refusal to act on credible warning after warning placed the Respondent 
in violation of the Arkansas security and accountability provisions.
    Chris W served as a staff pharmacist and PIC at the Respondent. He 
is the son of the majority owner of the business, and diverted 
controlled substances with equal measures of wild abandon and complete 
impunity. The Respondent knew its pharmacist was violating federal and 
state laws and diverting copious amounts of controlled substances and 
elected to take no action. Consideration of the record evidence under 
Factors 2 and 4 militate powerfully and conclusively in favor of the 
COR revocation sought by the Government.

Factor 5: Such Other Conduct Which May Threaten the Public Health and 
Safety

    The fifth statutory public interest factor directs consideration of 
``[s]uch other conduct which may threaten the public health and 
safety.'' 21 U.S.C. 823(f)(5) (2012) (emphasis added). To qualify for 
consideration under this factor, the evidence must constitute: (1) 
Conduct \151\ (2) not covered by application of the other four public 
interest factors (3) which has the potential to threaten the public 
health and safety.\152\ Agency precedent has generally embraced the 
principle that any conduct that is properly the subject of Factor 5 
must have a nexus to controlled substances and the underlying purposes 
of the CSA. Terese, Inc., 76 FR 46843, 46848 (2011); Tony T. Bui, M.D., 
75 FR 49979, 49989 (2010) (stating that prescribing practices related 
to a non-controlled substance such as human growth hormone may not 
provide an independent basis for concluding that a registrant has 
engaged in conduct which may threaten public health and safety); cf. 
Paul Weir Battershell, N.P., 76 FR 44359, 44368 n.27 (2011) (noting 
that although a registrant's non-compliance with the Food, Drug, and 
Cosmetic Act is not relevant under Factor 5, consideration of such 
conduct may properly be considered on the narrow issue of assessing a 
respondent's future compliance with the CSA). Only conduct that has ``a 
nexus to controlled substances and the underlying purposes of the CSA'' 
may be considered under this factor. Joe W. Morgan, D.O., 78 FR 61961, 
61977 (2013); accord Holiday CVS, 77 FR at 62345.
---------------------------------------------------------------------------

    \151\ See Holloway Distrib., 72 FR 42118, 42126 n.16 (2007).
    \152\ Jacobo Dreszer, 76 FR 19386, 19386 n.3, 19434 (2011); 
Michael J. Aruta, M.D., 76 FR 19420, 19420 n.3 (2011); Beau Boshers, 
M.D., 76 FR 19401, 19402 n.4 (2011).
---------------------------------------------------------------------------

    Even the Respondent seems to agree that the depth and breadth of 
Chris W's arrogance and imagination in his extended efforts to flout 
the CSA is remarkable by any standard. During his enthusiastic campaign 
of diversion for profit, there were certainly acts he committed that 
were both inside and outside the other public interest factors 
considered here. However, there were two ``other conduct'' undertakings 
\153\ that stood out from the rest as deserving of separate 
consideration: Providing advice to the DEA undercover agent on how to 
improve his scrip forgery efforts \154\ and generating false documents 
and supplying them to law enforcement to cover his tracks in supplying 
Samantha Pemberton with drugs. Both stand out as worthy of separate 
consideration under Factor 5.\155\
---------------------------------------------------------------------------

    \153\ This is certainly not offered as an exhaustive list of all 
Chris W's Factor 5-eligible actions.
    \154\ SOFs 15-18, 20; SOT 3; Tr. 146-50.
    \155\ SOT 9(e)-(g); Gov't Exs. 48, 49.
---------------------------------------------------------------------------

    There is little doubt that on the present record, where the 
Respondent's owner stubbornly ignored every warning sign that Chris W, 
his PIC and his son, was essentially on a campaign to abuse his 
authority and divert drugs on an unprecedented level, that the 
Respondent should be and is wholly accountable Chris W's Factor 5 
conduct.

[[Page 70113]]

Holiday CVS, 77 FR at 62340; EZRX, 69 FR at 63181; Plaza Pharmacy, 53 
FR at 36911. There is equally little question that consideration of the 
record evidence under Factor 5 militates powerfully in favor of the 
revocation of the Respondent's COR.

Recommendation

    Inasmuch as the Government has preponderantly established that the 
Respondent's PIC engaged in behavior that is violative of Federal and 
state law regarding controlled substances dispensing practices and a 
pharmacist's corresponding responsibility, that the Respondent treated 
the misconduct with deliberate indifference, and that the Respondent 
systemically failed to maintain adequate controls to protect against 
theft or loss of controlled substances, the Government has supplied 
sufficient evidence to make out a prima facie case that maintaining the 
Respondent's COR would be contrary to the requirements of 21 U.S.C. 823 
and 824. As the Government has sustained its burden to show that the 
Respondent committed acts inconsistent with the public interest, the 
burden shifts to the Respondent to show that it can be entrusted with a 
DEA registration. ``[T]o rebut the Government's prima facie case, [the 
Respondent is] required not only to accept responsibility for [the 
established] misconduct, but also to demonstrate what corrective 
measures [have been] undertaken to prevent the reoccurrence of similar 
acts.'' Hassman, 75 FR at 8236; Hoxie, 419 F.3d at 483; Lynch, 75 FR at 
78749 (Respondent's attempts to minimize misconduct held to undermine 
acceptance of responsibility); Mathew, 75 FR at 66140, 66145, 66148; 
Aycock, 74 FR at 17543; Abbadessa, 74 FR at 10078; Krishna-Iyer, 74 FR 
at 463; Med. Shoppe-Jonesborough, 73 FR at 387. Both prongs are 
required, and one is irrelevant without the other.
    The Government's prima facie burden having been met,\156\ an 
unequivocal acceptance of responsibility stands as a condition 
precedent for the Respondent to prevail. Mathew, 75 FR at 66148. This 
feature of the Agency's interpretation of its statutory mandate on the 
exercise of its discretionary function under the CSA has been sustained 
on review. MacKay, 664 F.3d at 822. While it is true that the 
Respondent, through counsel, commendably entered into an extensive and 
reasonable array of evidentiary and testimonial stipulations in this 
case, no amount of prudent legal advice could save the Respondent from 
itself. During his testimony, Tom Watson, the majority owner of the 
Respondent, doggedly maintained that the responsibility for every bit 
of horrendous misconduct committed by his son/PIC was his son's 
responsibility to bear. Tr. 354-56, 358, 362. Watson obdurately clung 
to the (false) notion that delegation of his authority equates with 
absolution from his responsibility. Tr. 358. He is mistaken, and his 
position in this regard is made even more unreasonable by the fact that 
he has spent years turning a blind eye to warning after warning. Under 
longstanding Agency precedent, Watson's failure to accept any level of 
responsibility has virtually precluded the Respondent's ability to 
avoid a sanction in this case.
---------------------------------------------------------------------------

    \156\ The Respondent concedes that the Government has met its 
prima facie burden. Resp't Brf. at 2-3.
---------------------------------------------------------------------------

    Inasmuch as the Respondent has not accepted responsibility, 
evidence of remedial steps is irrelevant. Hassman, 75 FR at 8236. 
However, even if the remedial steps offered by the Respondent were 
considered, they would not alter the result. Prospective PIC Glenn 
Wood's testimony concerning all the extra security measure he intends 
to take \157\ suffers from the same fundamental defect that Watson's 
representations regarding his anticipated increased pharmacy 
involvement \158\ and implementation of his Proposed Policy \159\ do: 
both men were present and did nothing when the Respondent's PIC, Chris 
W, ran wild. These men are a major part of the problem, not the 
champions of a solution that can be afforded any genuine credence.
---------------------------------------------------------------------------

    \157\ Tr. 416-19, 444.
    \158\ Resp't Brf. at 16; Tr. 320, 346-47.
    \159\ Gov't Ex. 1.
---------------------------------------------------------------------------

    Although there was no cognizable acceptance of responsibility, the 
Respondent took the position that consideration should be given to the 
fact that its pharmacy serves an underserved, primarily indigent, rural 
community. Resp't Brf. at 114; Tr. 404, 429-30. Even apart from the 
potential irony in concluding that a rural, indigent community would 
garner significant benefit from a COR holder who has consistently 
refused to take even the smallest step to mitigate his son's wholesale 
diversion of dangerous drugs, Agency precedent is clear that normal 
hardships to the practitioner, and even the surrounding community, 
which are attendant upon the denial of a registration, are not a 
relevant consideration. Cheek, 76 FR at 66972-73; Abbadessa, 74 FR at 
10078; Owens, 74 FR at 36757. Suffice it to say that the Respondent's 
community impact argument, even if it were not rendered irrelevant by 
Agency precedent (which it is), is not persuasive on the present 
record.
    That a sanction is authorized does not end the inquiry. In 
determining whether and to what extent imposing a sanction is 
appropriate, consideration must be given to both the egregiousness of 
the offenses established by the Government's evidence and the Agency's 
interest in both specific and general deterrence. Ruben, 78 FR at 
38364, 38385. As discussed supra, the conduct of the Respondent, 
through its PIC, and as ignored by its owner, was stunning. Not only 
were dangerous controlled drugs being doled out to friends, love 
interests, and customers, but the apparatus of the Respondent was 
actively employed by Chris W to accomplish his misconduct. Chris W used 
the Respondent's privileges to order and store controlled substances as 
if he were running a big-box retailer specializing in drug dealing. No 
amount of security measures, cameras, documents, or safety protocols 
could defend the public against his father's deliberate indifference. 
Chris W even once loaned out the store so that a former employee could 
mete out drugs to her friends and family. There is no question that a 
thoughtful consideration of the egregiousness of the established 
misconduct compels the revocation sought by the Government.
    Regarding the issue of deterrence, there is no question that a 
sanction that falls short of revocation would undermine the Agency's 
legitimate interests in both specific and general deterrence. On the 
issue of specific deterrence, there is nothing in the record that lends 
any support to the proposition that Tom Watson's future behavior will 
be any different from his past behavior. Although the Respondent 
represents that (the retired) Watson intends to become more active in 
the business in the future,\160\ his level of activity was never the 
issue. He had his closest associates, managers, business partners, 
employees, pharmacists, and relatives engaged in a consistent chorus 
implicating Chris W as a persistent and criminal diverter, yet Watson 
was unmoved. It strains credulity to think that the exercise of 
successfully defending an ISO at administrative proceedings before the 
DEA will be the catalyst of change. There is no reason to believe that 
Tom Watson intends to manage his pharmacy differently than he has for 
decades, and every reason to believe that escaping consequences here

[[Page 70114]]

will be as destructive as the impunity with which he ignored every 
warning sign that his pharmacy was a mess, and rendered so at the hands 
of his son.
---------------------------------------------------------------------------

    \160\ Resp't Brf. at 16; Tr. 320, 346-47.
---------------------------------------------------------------------------

    Regarding general deterrence, as the regulator in this field, the 
Agency bears the responsibility to deter similar misconduct on the part 
of others for the protection of the public at large. Ruben, 78 FR at 
38385. The ubiquitous nature of the drug diversion taking place within 
plain sight of the COR holder, the Respondent's employees, law 
enforcement, and the public at large would render anything less than a 
revocation as an invitation to others in the regulated community to 
ignore trouble in their own operations. The inescapable lesson to other 
COR holders would be that delegation of authority does equate to 
delegation of responsibility. The Agency's interests in general 
deterrence are served best by revoking the Respondent's COR.
    A balancing of the statutory public interest factors, coupled with 
consideration of the Respondent's failure to accept responsibility and 
the Agency's interests in deterrence, supports the conclusion that the 
Respondent should not continue to be entrusted with a registration.
    Accordingly, the Respondent's DEA COR should be REVOKED, and any 
pending applications for renewal should be DENIED.

Dated: May 13, 2015.

John J. Mulrooney, II,

Chief Administrative Law Judge.

[FR Doc. 2015-28723 Filed 11-10-15; 8:45 am]
 BILLING CODE 4410-09-P



                                                                                                        Vol. 80                           Thursday,
                                                                                                        No. 218                           November 12, 2015




                                                                                                        Part II


                                                                                                        Department of Justice
                                                                                                        Drug and Enforcement Administration
                                                                                                        Perry County Food & Drug Decision and Order; Notice
mstockstill on DSK4VPTVN1PROD with NOTICES2




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                                                   70084                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   DEPARTMENT OF JUSTICE                                   the record, and that he sent his letter ‘‘in            drug) to A.R. without a prescription.
                                                                                                           an abundance of caution due to [his]                    Stipulation 13. Additional record
                                                   Drug Enforcement Administration                         misunderstanding of the purpose of ’’                   evidence shows that on nine occasions
                                                   [Docket No. 15–10]                                      the CALJ’s letter, as he ‘‘did not want                 between June 18, 2014 and December
                                                                                                           the fact that [he] had not filed any                    29, 2014, Respondent dispensed
                                                   Perry County Food & Drug Decision                       exceptions . . . to preclude’’ this Office              controlled substances including
                                                   and Order                                               from ‘‘perform[ing] an independent                      hydrocodone and oxycodone (also a
                                                                                                           review of the record and Decision.’’ Id.                schedule II drug) to A.R. listing a dentist
                                                      On May 13, 2015, Chief                               at 1–2.                                                 (Dr. Hambuchen) as the prescriber. GX
                                                   Administrative Law Judge (CALJ) John J.                    Taking Respondent’s Counsel at his                   4. However, Dr. Hambuchen denied
                                                   Mulrooney, Jr., issued the attached                     word, I do not consider the filing                      knowing A.R. (GX 3) and testified to this
                                                   Recommended Decision (hereinafter,                      submitted on July 8, 2015. However, in                  in the proceeding. Tr. 23. The parties
                                                   cited as R.D.1). Thereafter, on June 15,                reviewing the record, I have considered                 further stipulated that Dr. Hambuchen
                                                   2015, the CALJ forwarded the record to                  the ‘‘Closing Brief ’’ Respondent’s                     never issued a prescription for A.R. ALJ
                                                   this Office for Final Agency Action                     Counsel submitted on April 27, 2015,                    Ex. 15, at 4. Each of these acts
                                                   noting that neither party had filed                     following the conclusion of the                         constitutes an outright drug deal in
                                                   exceptions to the Recommended                           evidentiary phase of the proceeding.                    violation of 21 U.S.C. 841(a)(1), which
                                                   Decision. See 21 CFR 1316.66                               Having considered the entire record                  provides that ‘‘[e]xcept as authorized by
                                                   (providing a party with the right to file               in this matter, I have decided to adopt                 this subchapter, it shall be unlawful for
                                                   exceptions to an ALJ’s decision                         the factual findings of the                             any person knowingly or intentionally
                                                   ‘‘[w]ithin twenty days after the date                   Recommended Decision except as                          . . . to distribute[ ] or dispense . . . a
                                                   upon which [it] is served [with] a                      discussed below.2 I also adopt but                      controlled substance[.]’’). See also id.
                                                   copy’’).                                                modify the CALJ’s legal conclusions as                  § 842(a)(1) (‘‘It shall be unlawful for any
                                                      Subsequently, on July 8, 2015,                       discussed below.3 Because I agree with                  person . . . who is subject to the
                                                   Respondent filed with this Office a                     the CALJ’s conclusion that Respondent’s                 requirements of part C to distribute or
                                                   pleading entitled as its ‘‘Closing Brief.’’             evidence as to its acceptance of                        dispense a controlled substance in
                                                   In a letter accompanying the filing,                    responsibility and remedial measures is                 violation of section 829 of this title[.]’’);
                                                   Respondent’s counsel explained that the                 not persuasive, I further adopt the                     id. § 829(a).5
                                                   Recommended Decision had been                           CALJ’s Recommendation to the extent                        (2) A. Dispensing hydrocodone and
                                                   mailed to his former address and that he                that it recommends that I deny any                      alprazolam to Ms. Samantha Pemberton,
                                                   had recently changed his address and                    pending application to renew its                        who the evidence shows was Chris
                                                   had ‘‘only recently received’’ the CALJ’s               registration.4                                          Watson’s girlfriend, on November 19,
                                                   Recommended Decision. Letter of                            In this matter Respondent stipulated
                                                                                                                                                                   2014, without a prescription for either
                                                   Respondent’s Counsel to Acting Deputy                   (and other evidence shows) that its
                                                                                                                                                                   drug. Stipulation 19. For the same
                                                   Administrator, DEA (July 8, 2015).                      Pharmacist-in-Charge, Chris Watson,
                                                                                                                                                                   reasons as described above, these
                                                      Upon reviewing the letter, I noted that              who is also the son of its owner Tom
                                                                                                                                                                   dispensings also constitute violations of
                                                   while Respondent’s Counsel had                          Watson, committed multiple acts
                                                                                                                                                                   21 U.S.C. 841(a)(1). See also 21 U.S.C.
                                                   explained that he had only recently                     resulting in the diversion of controlled
                                                                                                                                                                   842(a)(1); id. § 829(b).6
                                                   received the Recommended Decision                       substances. These include:
                                                                                                              (1) Dispensing controlled substances                    B. The evidence also shows that on
                                                   because it had been mailed to his former
                                                                                                           including hydrocodone (a schedule II                    November 19, 2014, Ms. Pemberton was
                                                   address, his filing was nonetheless
                                                                                                                                                                   stopped for driving a vehicle without a
                                                   untimely. Order of the Acting
                                                                                                                                                                   license plate. ALJ Ex. 20, at 9. During a
                                                   Administrator, at 1 (July 13, 2015). I                    2 The United States Supreme Court has explained

                                                                                                           my obligations under the Administrative Procedure       consensual search of Ms. Pemberton’s
                                                   therefore directed Respondent’s Counsel
                                                                                                           Act, as well as the role of the ALJ’s recommended       purse, a police officer found both Xanax
                                                   to explain why ‘‘this constitute[d] good                decision, in reviewing the record and making            (in an unmarked vial) and hydrocodone,
                                                   cause’’; I also directed Respondent’s                   factual findings. See Universal Camera Corp. v.
                                                                                                                                                                   and took Ms. Pemberton into custody.
                                                   Counsel to address why he did not                       NLRB, 340 U.S. 474, 496 (1951) (‘‘The ‘substantial
                                                                                                           evidence’ standard is not modified in any way           Id. at 10. During several interviews, Ms.
                                                   notify the Office of Administrative Law
                                                                                                           when the Board and its examiner disagree. . . .         Pemberton claimed that she had a
                                                   Judges (OALJ) of his new address, as                    The findings of the examiner are to be considered       prescription for both drugs. Id. She also
                                                   well set forth the date on which he                     along with the consistency and inherent probability
                                                                                                                                                                   stated that she had just filled
                                                   received the decision. Id.                              of testimony. The significance of his report, of
                                                      In response, Respondent’s Counsel                    course, depends largely on the importance of            prescriptions for the drugs at
                                                                                                           credibility in the particular case.’’) (emphasis
                                                   explained that he was ‘‘not now                         added). The standard of review of an agency                5 21 U.S.C. 829(a) sets forth the prescription
                                                   attempting to add exceptions to the                     decision is also well settled. Accordingly, I decline   requirement applicable to the dispensing of a
                                                   record,’’ that he had previously received               to publish the ALJ’s discussion of the substantial      schedule II drug. It provides, in relevant part, that:
                                                   the decision on May 13, 2015, and that                  evidence test and the standard of review.               ‘‘[e]xcept when dispensed directly by a practitioner,
                                                                                                             3 I do not adopt the ALJ’s statement (at R.D. 49)     other than a pharmacist, to an ultimate user, no
                                                   he ‘‘had not filed any exceptions to it                 that ‘‘Regarding Factor 2, in requiring an              controlled substance in schedule II, which is a
                                                   due to [his] understanding that                         examination of a registrant’s experience in             prescription drug . . . may be dispensed without
                                                   exceptions are not necessary under the                  dispensing controlled substances, Congress              the written prescription of a practitioner, except
                                                   regulations.’’ Letter of Respondent’s                   manifested an acknowledgement that . . . the            [for] in emergency situations, as prescribed . . . by
                                                                                                           quantitative volume in which an applicant has           regulation,’’ allowing for an oral prescription. See
                                                   Counsel to Acting Administrator, at 1
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                                                                                                           engaged in the dispensing of controlled substances      also 21 CFR 1306.11(a).
                                                   (July 14, 2015). Respondent’s Counsel                   may be [a] significant factor[ ] to be evaluated’’ in      6 21 U.S.C. 829 (b) sets forth the prescription
                                                   further explained that he had sent his                  the public interest determination. See JM Pharmacy      requirement applicable to the dispensing of a
                                                   previous letter to the Acting Deputy                    Group, Inc., d/b/a Farmacia Nueva and Best              schedule III or IV drug. It provides that ‘‘[e]xcept
                                                                                                           Pharma Corp., 80 FR 28667, 28667–68 n.2 (2015);         for when dispensed directly by a practitioner, other
                                                   Administrator because he had received                   see also Syed Jawed Akhtar-Zaidi, M.D., 80 FR           than a pharmacist, to an ultimate user, no
                                                   a copy of the CALJ’s letter transmitting                42962, 42967–68 (2015).                                 controlled substances in schedule III or IV, which
                                                                                                             4 Because I find that Respondent’s registration has   is a prescription drug . . . may be dispensed
                                                     1 All citations to the Recommended Decision are       expired, see infra note 16, I do not adopt the ALJ’s    without a written or oral prescription.’’ See also 21
                                                   to the slip opinion as issued by the CALJ.              recommendation that I revoke its registration.          CFR 1306.21(a).



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                                                                              Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                          70085

                                                   Respondent and had received them in                       (3)A. Distributing controlled                            to place something in his jacket pocket.
                                                   unmarked bottles; however, she could                    substances, including one 1,000-count                      Id. Horton then took the tote and left the
                                                   not name the prescriber. Id.                            bottle of hydrocodone 10/325 mg and                        pharmacy. Id.
                                                       C. The evidence further shows that                  two bottles of 100-count methadone 10                         D. About ten minutes later, Horton
                                                   during the course of the police                         mg methadone, to one Eric Horton, on                       returned to the pharmacy without the
                                                   investigation of how Ms. Pemberton had                  or about January 20, 2015, who was                         blue tote. Id. A short while later, Chris
                                                   obtained the controlled substances,                     arrested following a traffic stop.                         Watson pulled a stock bottle from a
                                                   Chris Watson admitted to a Detective                    Respondent stipulated that each of the                     shelf and placed it on the counter, after
                                                   that Pemberton had been in Respondent                   bottles had Respondent’s pharmacy                          which Horton walked to the counter,
                                                   that morning and that he provided the                   stock stickers on it. Stipulation 21.                      counted pills, removed several amber
                                                   drugs without prescriptions. Id. at 11.                   B. The evidence also includes                            pill bottles from under the counter and
                                                   Watson then stated that he had                          snapshots from Respondent’s                                proceeded to fill them. Id. After handing
                                                   ‘‘ ‘loaned’ her some pills . . . ‘because               surveillance video camera which show                       a bottle to Watson, Horton placed one of
                                                   she was out,’ ’’ but then asserted that                 that on January 20, 2015, both Chris                       the bottles in his pocket. Id. Horton then
                                                   ‘‘we are just waiting on [the doctor’s                  Watson and Eric Horton were inside the                     obtained a pharmacy bag and placed
                                                   office] to call back because that office is             pharmacy, in the area where it stored its                  multiple amber bottles into the bag
                                                   notoriously slow.’ ’’ Id. However,                      drugs. GX 36. The evidence shows                           before leaving the pharmacy. Id. The
                                                   according to the credited testimony of                  Watson taking a stock bottle, which                        video then shows Horton carrying a blue
                                                   the Detective who interviewed Watson,                   appears to be of 1,000-count size from                     tote and leaving the store, followed by
                                                   Watson gave him ‘‘conflicting                           the shelves and handing it to Horton,                      his placing the tote in the bed of his
                                                   information about the identity of Ms.                   who then went to a counter and                             pick-up truck, before driving away.
                                                   Pemberton’s prescribing physician,’’                    proceeded to fill an amber prescription                       E. Later that evening, Horton was
                                                   initially stating that it was a Dr.                     bottle with some of the contents of the                    arrested by an Arkansas State Trooper
                                                   Humbard. Id. at 12. While Watson                        1,000-count bottle. Id. The evidence                       on an outstanding warrant following a
                                                   agreed to provide the Detective with a                  further shows Horton then placing items                    traffic stop. During an inventory search
                                                   copy of the prescriptions, the next day,                in a blue tote, after which he proceeded                   of Horton’s vehicle, the officer found the
                                                   he faxed over copies of the dispensing                  to the pharmacy’s shelves, took a stock                    blue tote along with one 1,000-count
                                                   labels (but not the actual prescriptions),              bottle off a shelf, and showed it to Chris                 bottle of hydrocodone 10/325 mg, two
                                                   which indicated that the prescriptions                  Watson before placing it in a pharmacy                     100-count bottles of methadone 10 mg,
                                                   had been filled on October 9, 2014 (and                 bag. Id. Thereafter, the evidence shows                    and one 100-count bottle of oxycodone
                                                   not November 19, 2014), and the labels                  Horton going into a back room with the                     30. Tr. 83; Stipulation 21; GX 36, at 12.
                                                   indicated that the prescriber was a                     pharmacy bag, before returning and then                    Notably, the oxycodone 30 bottle also
                                                   different doctor (Dr. Arnold) than                      placing the pharmacy bag in the tote. Id.                  had Respondent’s stock sticker on it. GX
                                                   reported by Watson. Id. Moreover, the                     C. Horton then went back to another                      36, at 12.
                                                   labels for both drugs showed that no                    shelf, and returned with another stock                        F. In addition to the above,
                                                   refills were authorized. Id.                            bottle which he showed to Chris                            Respondent stipulated to Ms.
                                                       D. The next day, the Detective again                Watson. Id. Horton then took out an                        Pemberton’s testimony that on two
                                                   called Respondent and spoke with Chris                  amber prescription bottle before                           occasions she ‘‘witnessed [Chris
                                                   Watson seeking the prescriptions. Id.                   disappearing from the camera frame;                        Watson] providing stock bottles of
                                                   After Watson stated that he had faxed                   however, upon reappearing, Horton did                      controlled substances to Eric Horton’’
                                                   over the labels, the Detective told                     not have the stock bottle but appeared                     while attending parties at Watson’s
                                                   Watson that he needed the                                                                                          home. ALJ Ex. 20, at 9.
                                                   prescriptions. Id. Watson stated that he                false documents and supplying them to law                     I therefore conclude that the evidence
                                                   would have one of the pharmacy                          enforcement to cover his tracks in supplying               shows that on multiple occasions, Chris
                                                                                                           Samantha Pemberton with drugs . . . stand[s] out
                                                   technicians look up the prescriptions                   as worthy of separate consideration under Factor           Watson (and Respondent) unlawfully
                                                   and send it to the Detective; later that                5.’’ R.D. at 58. At no point did the Government            distributed controlled substances to
                                                   day, the Detective received a fax which                 argue that Watson’s actions with respect to the            include hydrocodone, methadone, and
                                                   appeared to list called-in prescriptions.               creation and provision of these documents to the           oxycodone to Eric Horton.8 See 21 U.S.C.
                                                                                                           local police constitute actionable misconduct under
                                                   Id. at 13. While the document listed a                  factor five, and while Respondent stipulated to the        841(a)(1).
                                                   prescription for Ms. Pemberton, the date                testimony, I conclude that the issue was                      (4) The evidence also shows that on
                                                   appeared to be either October 4 or                      ‘‘incidental’’ to the principal issues in the case. See,   or about September 14, 2014, the
                                                   October 9, 2014 and not November 19,                    e.g., Yellow Freight System, Inc. v. Martin, 954 F.2d      Arkansas State Police arrested one
                                                                                                           353, 358 (6th Cir. 1992) (An ‘‘agency may not base
                                                   2014. Id.                                               its decision upon an issue the parties tried               Joseph Jackson who had been involved
                                                       E. Subsequently, Ms. Pemberton                      inadvertently. Implied consent is not established          in a motor vehicle accident. Tr. 68–70.
                                                   provided the Detective with copies of                   merely because one party introduced evidence               According to the unrefuted testimony,
                                                   two prescriptions; the prescriptions                    relevant to an unpleaded issue and the opposing            local police officers observed a bottle of
                                                   listed the date of issuance as October 9,               party failed to object to its introduction. It must
                                                                                                           appear that the parties understood the evidence to         prescription liquid codeine (with the
                                                   2014 and Dr. Arnold as the prescriber.                  be aimed at the unpleaded issue. Also, evidence            label scratched off) in the front seat of
                                                   Id. However, according to the stipulated                introduced at a hearing that is relevant to a pleaded      Jackson’s vehicle and the State Trooper
                                                   testimony of a DEA Task Force Officer                   issue as well as an unpleaded issue cannot serve to        testified that Jackson smelled of
                                                   who interviewed Dr. Arnold, Arnold                      give the opposing party fair notice that the new,
                                                                                                                                                                      marijuana. Tr. 70–71. During a search of
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                                                                                                           unpleaded issue is entering the case.’’) (citations
                                                   ‘‘stated that he had never prescribed any               omitted); see also NLRB v. Majestic Weaving Co.,
                                                   controlled substances for Ms.                           355 F.2d 854, 861–62 (2d Cir. 1966) (where                   8 The State Trooper further testified that he found

                                                   Pemberton.’’ ALJ Ex. 20, at 19. Thus,                   Government’s case focuses on other issues and              pills in bottles that were mislabeled, as well as pills
                                                   even the October prescriptions were                     evidence of uncharged violations is ‘‘at most              that were mixed in bottles. Tr. 83. He also found
                                                                                                           incidental,’’ the incidental issue cannot support a        a coke bottle with a lid that could be unscrewed to
                                                   fraudulent.7                                            sanction); 5 U.S.C. 554(b) (‘‘Persons entitled to          access a container; inside the container was ‘‘a
                                                                                                           notice of an agency hearing shall be timely                bunch of mixed pills.’’ Id. He also found other coke
                                                      7 I decline, however, to adopt the CALJ’s further    informed of . . . the matters of fact and law              cans with lids that could be unscrewed and used
                                                   finding that Chris Watson’s actions in ‘‘generating     asserted.’’) (emphasis added).                             to hide drugs. Id. at 84.



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                                                   70086                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   the vehicle, the Officer found a black                  Watson ‘‘scratched out the letters with               provisions of law relating to controlled
                                                   bag which contained ‘‘a baggie of                       a pen.’’ Id.                                          substances.’’).
                                                   marijuana, prescription bottles of drugs,                  C. On November 19, 2014, the S/A                      Moreover, I agree with the
                                                   and two handguns,’’ as well as a 500-                   returned to Respondent with                           Government and CALJ that Watson’s
                                                   count bottle of alprazolam 2 mg which                   prescriptions for 240 Norco 10/325 mg                 actions in instructing the S/A, who, in
                                                   bore Respondent’s stock sticker. Tr. 71;                (hydrocodone/apap) and 60 Xanax 2 mg                  his undercover capacity presented as a
                                                   Stipulation 22; ALJ Ex. 15, at 16.                      which he presented to Watson. Id.; see                drug-seeking patient, as to how to create
                                                   Because the evidence further shows that                 also GX 15, at 1. However, Watson                     fraudulent prescriptions which were
                                                   Respondent had not filed a controlled                   stated that he could not fill the Norco               ‘‘more realistic,’’ constitutes conduct
                                                   substance theft or loss report with DEA                 prescription because he had run out                   ‘‘inconsistent with the public interest,’’
                                                   ‘‘since at least 2012,’’ I conclude that                ‘‘two days earlier’’ and ‘‘would not get              regardless of whether it is considered
                                                   Respondent unlawfully distributed the                   any more tablets until the first of the               under factor two (experience in
                                                   500-count bottle of alprazolam 2 mg.                    month.’’ Id. The S/A then asked Watson                dispensing controlled substances) or
                                                   Stipulation 23; see 21 U.S.C. 841(a)(1).                if the DEA number on the prescription                 factor five (‘‘[s]uch other conduct which
                                                      (5) Other evidence establishes that                  ‘‘was correct.’’ Id. at 7. Watson told him            may threaten the public health and
                                                   Chris Watson removed stock bottles of                   to change the last digit on the number                safety’’). 21 U.S.C. 823(f).10
                                                   controlled substances from Respondent.                  and then ‘‘described how to formulate a                  (7)A. Other evidence shows that
                                                   Specifically, one of Respondent’s                       DEA number.’’ Id. Watson then told the                during a search of Chris Watson’s home,
                                                   employees provided stipulated                           S/A that ‘‘the prescription . . . looked              paper controlled substance
                                                   testimony that she had seen Chris                       better than most he sees at the                       prescriptions for both schedule II drugs
                                                   Watson remove stock bottles of                          pharmacy.’’ Id.                                       OxyContin (oxycodone) and
                                                   hydrocodone and Xanax (alprazolam)                         The S/A then asked Watson how                      combination hydrocodone (with
                                                   from Respondent. ALJ Ex. 20, at 20–21.                                                                        acetaminophen), and schedule IV drugs,
                                                                                                           much it would cost to buy a 1,000-count
                                                   Still another employee testified that on                                                                      including alprazolam, clonazepam, and
                                                                                                           bottle of hydrocodone; Watson stated: ‘‘I
                                                                                                                                                                 Soma (carisoprodol), were found in
                                                   two occasions he witnessed Chris                        don’t usually do that.’’ Id. After the S/
                                                                                                                                                                 violation of DEA regulations. ALJ EX.
                                                   Watson take 1,000 count bottles of                      A told Watson that he was trying to
                                                                                                                                                                 15, at 2. More specifically, DEA
                                                   hydrocodone off the shelf and place                     make some extra money, Watson replied
                                                                                                                                                                 regulations require that paper
                                                   them in his backpack. Tr. 278–79.                       that what the S/A did with the pills
                                                                                                                                                                 prescriptions be maintained at the
                                                      (6) The evidence further shows that                  after the prescriptions had been filled
                                                                                                                                                                 registered location. See 21 CFR
                                                   on four occasions beginning on                          [was] ‘‘none of his business.’’ Id. Watson
                                                                                                                                                                 1304.04(h)(2) (‘‘Paper prescriptions for
                                                   November 7, 2014 and ending on                          then told the S/A to return to
                                                                                                                                                                 Schedule II controlled substances shall
                                                   December 4, 2014, a DEA Special Agent                   Respondent on the first of the month                  be maintained at the registered location
                                                   (S/A) made undercover visits to                         when the pharmacy would be                            in a separate prescription file.’’); id.
                                                   Respondent during which he presented                    resupplied with hydrocodone. Id.                      § 1304.04(h)(4) (‘‘Paper prescriptions for
                                                   fictitious controlled substance                         However, there is no evidence that                    Schedules III, IV, and V controlled
                                                   prescriptions to Chris Watson. ALJ Ex.                  Watson filled the Xanax prescription on               substances shall be maintained at the
                                                   15, at 5.                                               this date.                                            registered location either in a separate
                                                      A. On the first occasion, the S/A                       D. On December 4, 2014, the S/A                    prescription file for Schedules III, IV,
                                                   presented prescriptions for 120 Norco                   presented fictitious prescriptions for                and V controlled substances only or in
                                                   (hydrocodone/acetaminophen) 10/325                      240 tablets of hydrocodone 10/325 mg                  such form that they are readily
                                                   mg and 60 Xanax (alprazolam) 2 mg.9                     and 60 tablets of alprazolam 2 mg to                  retrievable from the other prescription
                                                   at 5–6. According to the S/A, he asked                  Chris Watson. ALJ EX. 15, at 7. Watson                records of the pharmacy.’’).
                                                   Chris Watson if he ‘‘create[d] the script               dispensed the prescriptions to the S/A.                  B. Still other evidence shows that
                                                   right?’’; Watson then told the S/A to add               Id.; see also GX 29–30.                               during the execution of a search warrant
                                                   a certain letter to the DEA number he                      E. The evidence thus shows that                    at Respondent, the pharmacy only had
                                                   had created and to change the last                      Watson knowingly distributed both
                                                   number of the prescription ‘‘to create a                hydrocodone/acetaminophen (a                             10 As found above, Chris Watson clearly knew

                                                   more realistic-looking prescription.’’ Id.              schedule II narcotic) and alprazolam (a               that the S/A was presenting fraudulent
                                                   at 6. Notwithstanding that Watson knew                  schedule IV benzodiazepine) on two                    prescriptions when he filled them. In other
                                                                                                                                                                 circumstances, a pharmacist’s counseling of a
                                                   the two prescriptions were fraudulent,                  occasions, based on fraudulent                        person who he knows to be presenting a fraudulent
                                                   he filled them. Id.; see also GXs 6, 7, 8.              prescriptions, for a total of four separate           prescription as to how to create ‘‘more realistic’’
                                                      B. On November 13, 2014, the S/A                     acts of unlawful distribution. See 21                 prescriptions (i.e., one which would avoid detection
                                                   returned to Respondent and presented                    U.S.C. 841(a)(1); see also id. § 843(a)(2)            by another pharmacist to whom it was presented)
                                                                                                                                                                 could constitute criminal conduct actionable under
                                                   prescriptions for both hydrocodone and                  (‘‘It shall be unlawful for any person                factor four even without a conviction. See 21 U.S.C.
                                                   alprazolam to Chris Watson. ALJ Ex. 15,                 knowingly or intentionally . . . to use               843(a)(3) (‘‘It shall be unlawful for any person
                                                   at 6. However, Watson told the S/A that                 in the course of the . . . distribution[ ]            knowingly or intentionally . . . to acquire or obtain
                                                   he was out of both drugs but would                      or dispensing of a controlled substance               possession of a controlled substance by
                                                                                                                                                                 misrepresentation, fraud, forgery, deception, or
                                                   have more the next week. Id. The S/A                    . . . a registration number which is                  subterfuge[.]’’); 18 U.S.C. 2(a) (‘‘Whoever commits
                                                   then asked Watson if the letters he had                 fictitious[.])’’; Cf. 21 CFR 1306.04(a)               an offense against the United States or aids, abets,
                                                   used on the prescriptions for the                       (‘‘An order purporting to be a                        counsels, commands, induces or procures its
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                                                   prescriber’s DEA registration number                    prescription issued not in the usual                  commission, is punishable as a principal.’’). So too,
                                                                                                                                                                 in other circumstances (i.e., where the person
                                                   (RF) ‘‘were correct?’’ Id. Watson told                  course of professional treatment . . . is             creating the prescriptions is not an agent for the
                                                   him to use ‘‘RA’’ instead and wrote the                 not a prescription within the meaning                 Government), Watson’s conduct in filling a
                                                   letters down on a piece of paper. Id.                   and intent of section 309 (21 U.S.C. 829)             prescription, which he knew bore a fictitious
                                                   After the S/A looked at the paper,                      and the person knowingly filling such a               registration number, could support a charge of
                                                                                                                                                                 conspiracy to use a fictitious registration number in
                                                                                                           purported prescription, as well as the                the course of the distribution or dispensing of a
                                                     9 Both prescriptions were written on a single         person issuing it, shall be subject to the            controlled substance. See 21 U.S.C. 846; id.
                                                   form. GX 6.                                             penalties provided for violations of the              § 843(a)(2).



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                                                                             Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                    70087

                                                   ‘‘partial invoices’’ for the controlled                 had served as its PIC from June 1997                  the patients’ profiles, the doctors stated
                                                   substances it purchased in December                     until January 2012, when he resigned.                 that they had not written ‘‘any
                                                   2014 and January 2015 because Eric                      Tr. 233, 251. Mr. Swaim further testified             prescriptions for those days.’’ Id. Goode
                                                   Horton ‘‘had removed all of the other                   that after Chris Watson began working at              further testified that there were
                                                   invoices at PIC Watson’s request in early               Respondent as a staff pharmacist (in                  ‘‘dozens’’ of instances in which he
                                                   December 2014.’’ ALJ Ex. 20, at 22.                     July 2011), he noticed that Chris Watson              looked for the hard copies of controlled
                                                   However, under 21 U.S.C. 827(a)(3),                     ‘‘was not being completely legal on                   substance prescriptions which were
                                                   ‘‘every registrant . . . distributing[ ] or             some refills’’ and that he saw this over              listed on the patient profiles but was
                                                   dispensing a controlled substance or                    the course of a month. Id. at 251, 253,               unable to find them. Id. at 274–75.
                                                   substances shall maintain, on a current                 263. Mr. Swaim decided that he was not                   Mr. Goode testified that he told Tom
                                                   basis, a complete and accurate record of                going to remain as the PIC and told Tom               Watson that he had ‘‘talked to a couple
                                                   each such substance received . . . by                   Watson that he was not going to remain                of doctors, and that [he] couldn’t find
                                                   him.’’ Moreover, under DEA regulations,                 as the PIC because Chris was ‘‘bending                any hard copies for those
                                                   these records ‘‘must be kept by the                     the rules’’ and he (Mr. Swaim) did not                prescriptions.’’ Id. at 276. According to
                                                   registrant and be available, for at least               ‘‘want to go to jail.’’ Id. at 253.                   Goode, Watson’s reaction was that the
                                                   2 years from the date of such inventory                 Thereafter, Swaim then completed the                  prescriptions may have been placed in
                                                   or records, for inspection and copying                  drug inventory and Chris Watson                       the wrong file by the pharmacy
                                                   by authorized employees of’’ DEA and                    became Respondent’s PIC. Id. at 254.                  technicians. Id. at 276–78. Mr. Goode
                                                   must be kept at the registered location                    Mr. Swaim, who stayed on as a staff                further testified that he discovered that
                                                   unless ‘‘the registrant has notified the                pharmacist with the same hours, further               Respondent was missing prescriptions
                                                   Administration of his intention to keep’’               testified that in September 2014, a                   and reported this to Tom Watson during
                                                   the records ‘‘at a central location, rather             pharmacy technician (who had worked                   the first week of his employment
                                                   than at the registered location.’’ 21 CFR               at Respondent for 31 years, see ALJ Ex.               (following December 12, 2014). Id.
                                                   1304.04(a). Likewise, Respondent could                  20, at 21), ‘‘was having a conversation               Goode testified that after the
                                                   not produce its most recent inventory,                  with Tom [Watson]’’ during which she                  conversation he asked the pharmacy
                                                   which apparently had been removed by                    told Watson that Chris Watson was                     technicians about the prescriptions and
                                                   its PIC notwithstanding that a DEA                      ‘‘giving stuff away.’’ Tr. 256–57. Mr.                was told that they ‘‘should be in the
                                                   regulation requires that the inventory be               Swaim joined the conversation and told                file.’’ Id.at 278.
                                                   maintained at the registered location.                  Tom Watson, ‘‘Tom, he’s handing pills                    Mr. Goode testified to another
                                                   ALJ Ex. 20, at 23; see also 21 CFR                      out the window,’’ and that he was going               incident, during which Tom Watson
                                                   1304.04(b)(1) (requiring that inventories               to give his notice if Watson did not stop             was present at Respondent and ‘‘sitting
                                                   ‘‘be maintained at each registered                      Chris’s misconduct. Id. at 257. Tom                   at the desk’’ when Chris Watson took a
                                                   location’’).                                            Watson replied that he would ‘‘put a                  1,000-count bottle of hydrocodone off
                                                      (8) Finally, the evidence shows that                 stop to it’’ and to ‘‘trust me.’’ Id.                 the pharmacy’s shelves and placed it in
                                                   Respondent would receive shipments of                   However, when Mr. Swaim returned to                   his backpack. Id. at 278–80. Mr. Goode
                                                   controlled substances such as                           Respondent after several days off, he                 testified that ‘‘[i]t appeared to’’ him that
                                                   oxycodone and that the drugs would                      ‘‘asked the girls [the pharmacy techs] if             Tom Watson saw what Chris was doing.
                                                   ‘‘frequently disappear overnight.’’ ALJ                 Chris had changed’’ his behavior and                  Id. at 280.
                                                   Ex. 20, at 20–21. The evidence also                     was told ‘‘no.’’ Id. Mr. Swaim then gave                 Mr. Goode testified to a further
                                                   shows that ‘‘in either August or October                notice and retired. Id.                               incident, which occurred on January 2,
                                                   2013, two 1,000-count bottles of                           Grant Goode, who was Tom Watson’s                  2015. Id. at 282. According to Mr.
                                                   carisoprodol were stolen’’ from                         nephew, worked as a staff pharmacist at               Goode, one of Respondent’s pharmacy
                                                   Respondent. Id. at 22. Yet the evidence                 Respondent from December 12, 2014                     technicians brought to his attention
                                                   also shows that as of January 22, 2015,                 through February 18, 2015.12 Tr. 271;                 ‘‘several’’ prescriptions for schedule II
                                                   Respondent had not filed any theft or                   273. Mr. Goode testified that he worked               drugs that were ‘‘just made up’’ and
                                                   loss reports (DEA Form 106) with DEA                    approximately 25 hours a week during                  which listed Goode as the dispensing
                                                   since January 1, 2012.11 ALJ Ex. 20, at                 December 2014, and that in January, he                pharmacist on the label. Id. at 282–83.
                                                   17; Tr. 175–76; GX 63.                                  gradually increased his hours until after             Mr. Goode testified that Tom Watson
                                                      While Respondent stipulated to most                  the middle of January, he was working                 was at Respondent that morning and so
                                                   of these acts, this is not the only                     most of the hours that the pharmacy was               Mr. Goode laid out six or eight
                                                   evidence of misconduct on the part of                   open. Id. at 271. Mr. Goode testified that            prescriptions and told Watson that
                                                   Respondent’s principals. More                           when he was not working at                            while his initials were on the
                                                   specifically, the evidence shows that on                Respondent, Chris Watson was the                      prescriptions he had not filled any of
                                                   various occasions, Tom Watson,                          pharmacist. Id. at 273.                               them. Id. Tom Watson responded that
                                                   Respondent’s owner and the father of                       Mr. Goode testified that while                     one of the pharmacy technicians (one
                                                   Chris Watson, was provided information                  working at Respondent, he received                    who had worked for him for 31 years)
                                                   by employees and a business partner                     phone calls from a couple of doctors                  ‘‘must be doing that.’’ Id. at 283. Goode
                                                   that Chris Watson was likely diverting                  inquiring about whether their patients                then told Tom Watson that Chris ‘‘was
                                                   controlled substances and failed to take                had picked up prescriptions written by                logging in and printing prescriptions
                                                   appropriate action.                                     them, and that after he would inform                  from his laptop.’’ Id. Goode further
                                                      Mr. Tracy Swaim testified that he had                the doctors that the patients had picked              testified that Tom Watson did not take
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                                                   worked at Respondent for 26 years and                   up the prescriptions, the doctors would               any action in response to the
                                                                                                           ask if their patients had filled any other            allegation.13 Id. at 284.
                                                      11 While Respondent reported a theft incident in
                                                                                                           prescriptions. Tr. 275. Goode testified
                                                   August 2013 which involved oxycodone,                   that when he would tell the doctors                     13 In its closing brief, Respondent argues that in

                                                   hydrocodone, alprazolam, clonazepam, and                                                                      a proceeding brought to revoke Chis Watson’s bond,
                                                   phenergan with codeine to the Arkansas Board of         about the other prescriptions listed in               based on the unsuitability of his third-party
                                                   Pharmacy on a DEA Form 106, the report was never                                                              custodian, a federal magistrate judge found that
                                                   filed with DEA as required by 21 CFR 1301.74(c).          12 Grant Goode testified that he also worked at     ‘‘Mr. [Grant] Goode lacks credibility when testifying
                                                   Tr. 120.                                                Respondent on November 24, 2014. Tr. 271.                                                        Continued




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                                                   70088                      Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                      The Government also elicited                             Steve Goode further testified that in             remember them.’’ Id. at 333–34. As
                                                   testimony from Steve Goode, who,                         the summer of 2010, he noticed that one              between the testimony of Mr. Swaim
                                                   between 2001 and 2012, was a business                    of the stores (Mayflower Food and Drug)              and Mr. Watson, the CALJ found Mr.
                                                   partner of Tom Watson in four                            ‘‘didn’t have any money in [its]                     Swaim’s testimony more credible than
                                                   supermarkets (including Respondent),                     accounts.’’ Id. at 490. Goode looked into            Mr. Watson’s. See R.D. 23, 41. I agree
                                                   three of which had pharmacies. Id. at                    the situation and determined that while              with the CALJ.
                                                   485–86. While Steve Goode testified                      the pharmacy’s purchases of                             As for Grant Goode’s testimony that
                                                   that his responsibilities involved                       medications ‘‘were up,’’ it ‘‘sales were             he told Tom Watson about the issues he
                                                   managing the grocery side of the stores                  flat.’’ Id.; see also id. at 491. Of note,           found (the missing hard copy
                                                   and that Tom and Chris Watson oversaw                    Chris Watson was the Pharmacist in                   prescriptions, the doctors denying
                                                   the pharmacies, he would see the daily                   Charge at the Mayflower store. Id. at                having written various prescriptions,
                                                   and weekly sales reports for the stores.                 490.                                                 the dispensings which were attributed
                                                   Id. at 487. Steve Goode further testified                   Steve Goode told Tom Watson about                 to him which he did not fill), Watson
                                                   that its grocery wholesaler (AWG)                        the issue; Watson’s response was that                asserted that ‘‘I haven’t talked to Grant
                                                   allowed McKesson (the drug distributor                   ‘‘we would get together and . . . have               about any concerns,’’ that Grant ‘‘didn’t
                                                   used by the stores’ pharmacies) to                       a talk with Chris.’’ Id. at 491. However,            mention a word about anything he talks
                                                   invoice through it, and thus, even                       when the conversation did occur, Goode               about here,’’ and ‘‘didn’t mention
                                                   though Steve Goode’s responsibilities                    was told that he ‘‘needed just to take               misconduct . . . about anybody.’’ Id. at
                                                   were limited to the grocery side of the                  care of the grocery department [and]                 348–49.
                                                   stores, he could see the pharmacies’                     that Chris would take care of the                       Watson also faulted Grant Goode for
                                                   purchases on the ‘‘weekly AWG                            pharmacy department.’’ Id. at 492–93.                having called the State Board and the
                                                   statement.’’ Id. at 487–88. According to                    At some point, Chris Watson started               DEA, testifying that: ‘‘Well, he seems
                                                   Steve Goode, the daily sales report                      working at Respondent. Id. at 495.                   like he’s talked to everybody else. He’s
                                                   showed the sales of both the grocery                     According to Steve Goode, in the ‘‘late              called the state board. He’s called the
                                                   side and the pharmacies. Id.                             spring of 2012’’ he was on vacation                  DEA, and all this stuff, but he hasn’t
                                                                                                            when he received a phone call from                   talked to me about it.’’ Id. at 348.14 Still
                                                                                                            another employee who told him that                   later, Watson reiterated that Grant
                                                   in court under oath.’’ Resp. Post-Hrng. Br. 8.; see
                                                   also RX 14 (denying motion, reasoning that ‘‘[t]he       Chris Watson had allowed a former                    Goode had ‘‘never come directly to’’
                                                   evidence revealed a number of conflicting family         employee from the Mayflower pharmacy                 him about the issues he encountered. Id.
                                                   dynamics casting considerable doubt upon the             to go into Respondent on a Sunday                    at 351. While Watson maintained that
                                                   reliability of the witness describing the alleged        afternoon when the pharmacy was
                                                   behavior that the Government presented to
                                                                                                                                                                 Grant Goode also had the same medical
                                                   disqualify the current third-party custodian’’).         closed and fill prescriptions ‘‘for her              issue which affected Watson’s memory,
                                                   Apparently, this was in response to Mr. Goode’s          family members and friends.’’ Id. at 496,            Tr. 349, the CALJ found that ‘‘Watson’s
                                                   testimony in the criminal proceeding against Chris       498. When Goode returned from                        assertion that . . . Grant Goode never
                                                   Watson that Tom Watson said ‘‘he would like to kill      vacation, he spoke with Tom Watson
                                                   a couple of DEA agents,’’ a statement which he
                                                                                                                                                                 brought concerns about his son’s actions
                                                   reported to DEA and which prompted the U.S.
                                                                                                            about the incident and told him that he              to his attention is simply not credible.’’
                                                   Attorney to file the motion. Tr. 302; see also RX 14.    needed to ‘‘get a handle on Chris.’’ Id.             R.D. at 41. I agree with the CALJ.15
                                                      The CALJ nonetheless found Grant Goode’s              at 496. While Tom Watson said that he                   Mr. Watson further testified that he
                                                   testimony to be ‘‘sufficiently detailed, plausible,      would ‘‘take care of it,’’ Goode testified           trusted his son, and that this ‘‘really’’
                                                   and internally consistent to be fully credited in this   that ‘‘[n]othing happened.’’ Id. However,
                                                   decision.’’ R.D. 25. The CALJ further explained that
                                                                                                                                                                 shocked him. Tr. 326. When then asked
                                                   ‘‘[b]ecause the Government did not offer the             Goode did not know whether the                       whether he had any idea that his son
                                                   purported threat in its case-in-chief, a disposition     prescriptions were for controlled                    ‘‘had a substance abuse issue or was
                                                   of this case does not require that a credibility issue   substances. Id. at 500.                              diverting,’’ Watson maintained that he
                                                   on this statement be rendered, and it forms no basis        Regarding Mr. Swaim’s testimony as
                                                   of this recommended decision.’’ Id. at n.69.
                                                                                                                                                                 ‘‘had no idea [Chris] had any kind of
                                                                                                            to the reason he resigned as                         drug problem.’’ Id.
                                                      Respondent, however, offered the magistrate
                                                   judge’s findings to attack Grant Goode’s credibility
                                                                                                            Respondent’s PIC, Tom Watson testified                  When further asked what he would
                                                   with respect to his testimony that he had brought        that ‘‘I remember some of what he                    have done if he ‘‘had known that [his]
                                                   his concerns about Chris Watson to Tom Watson’s          talked about but I don’t remember all of             son had a substance abuse problem or
                                                   attention and sought to have the CALJ give Goode’s       what he talked about.’’ Tr. 326. Watson
                                                   testimony ‘‘no weight.’’ Resp. Post-Hrng. Br. 8 (‘‘It                                                         was diverting controlled substances,’’
                                                   is not known if the attention the DEA gave to Mr.
                                                                                                            then added that he had talked to his son             Watson asserted that he would have
                                                   Goode made him have delusions of grandeur that           ‘‘about some things, too, so I was hoping            ‘‘[g]ot it stopped,’’ that he would have
                                                   motivated his testimony, but he did take a keen          . . . everything was in good shape.’’ Id.            gone ‘‘to the state board,’’ and that he
                                                   interest in this case when he, unlike other lay          Mr. Watson also denied having had a
                                                   witnesses, was at the hearing every day, even after
                                                   his testimony had been given. On the other hand,
                                                                                                            conversation with his long-standing                     14 Later, Watson testified that:

                                                   unlike his reaction to Mr. Swaim’s testimony, Tom        pharmacy technician (as Mr. Swaim                       [F]amily is family. You know, if you’ve got a
                                                   Watson flatly denied that Mr. Goode ever brought         testified) that Chris was diverting drugs.           problem go see them about it, and talk about the
                                                   any concerns about Chris to his attention.’’             Id. at 347.                                          problem. You don’t know you got a problem until
                                                   (citations omitted)).                                                                                         you at least talk about it. And you know, don’t start
                                                                                                               However, Tom Watson later                         with the state board, don’t start with the DEA and
                                                      However, while Respondent offered the
                                                   magistrate judge’s finding to impeach Mr. Goode’s
                                                                                                            acknowledged that Mr. Swaim is ‘‘a                   all that. Start by calling your uncle or whatever or
                                                   testimony, I nonetheless adopt the CALJ’s                good guy,’’ who had been with him for                tell your mom and have her talk to your uncle if
                                                   credibility finding because in assessing the             ‘‘a long time,’’ before attributing the              that—you know.
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                                                   credibility of Mr. Goode’s testimony, I am entitled      disparity between Mr. Swaim’s                           Tr. 350.
                                                   to consider ‘‘the consistency and inherent                                                                       15 As for the incidents related by Steve Goode,

                                                   probability of [his] testimony.’’ Universal Camera
                                                                                                            testimony and his recollection as being              Tom Watson also denied that Steve Goode had ever
                                                   Corp. v. NLRB, 340 U.S. 474, 496 (1951). Here,           the result of ‘‘some health problems.’’              complained about the performance of the
                                                   consistent with Mr. Goode’s testimony, other             Id. at 333. Watson then maintained that              Mayflower pharmacy when Chris Watson was
                                                   witnesses testified that they brought their concerns     ‘‘some of the stuff he said I just didn’t            working there. Tr. 374–75. Notwithstanding that
                                                   with Chris Watson to Tom Watson’s attention but                                                               there is an ongoing dispute over the proceeds from
                                                   that the latter ignored them. Accordingly, I find
                                                                                                            remember like the conversations that he              dissolution of their partnership, id. at 505, the CALJ
                                                   Goode’s testimony credible notwithstanding the           said we had. That don’t mean we didn’t               found that Steve Goode’s testimony was fully
                                                   magistrate judge’s finding.                              have them. It just means that I just don’t           credible as do I. R.D. 44.



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                                                                              Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                         70089

                                                   ‘‘would have halted that immediately.’’                  license to engage in drug dealing.                          Notwithstanding its egregious and
                                                   Id. at 328. However, shortly thereafter,                 Notably, in its post-hearing brief,                      extensive misconduct, Respondent
                                                   Watson admitted that he did not ‘‘know                   Respondent does not dispute the                          nonetheless argues that the denial of its
                                                   exactly how [he] would have handled                      evidence of its PIC’s misconduct. Resp.                  renewal application ‘‘on this ground is
                                                   it,’’ but that ‘‘at some point’’ the state               Post-Hrng. Br. 2.                                        a matter of discretion.’’ Resp. Post-
                                                   board would have had to ‘‘become                            Thus, Respondent acknowledges that                    Hearing Br. 2 (citing Dinorah Drug
                                                   involved’’ because he had scheduled an                   ‘‘the Government has met its burden of                   Store, Inc., 61 FR 15972, 15973 (1996)).
                                                   inventory for early February and                         proving its Section 824(a) claim, placing                As a statement of the law, that is true.
                                                   ‘‘would have found out’’ that drugs were                 the burden on [Respondent] to show                       However, as set forth in numerous
                                                   missing.16 Id. at 330. The CALJ did not                  that despite Chris Watson’s conduct,                     decisions, where, as here, ‘‘the
                                                   find Mr. Watson’s testimony on these                     granting [it] a [Registration] would not                 Government has proved that a registrant
                                                   issues credible. R.D. at 41. Nor do I.                   be contrary to the public interest.’’ Id. at             [or applicant] has committed acts
                                                      Thus, even putting aside the 2010                     3. I agree and hold that the evidence                    inconsistent with the public interest, a
                                                   incident in which his business partner                   conclusively establishes that                            registrant [or applicant] must ‘present
                                                   complained about the cash shortage at                    Respondent, through both its PIC and                     sufficient mitigating evidence to assure
                                                   the Mayflower store, the evidence                        owner, has committed numerous acts                       the Administrator that it can be
                                                   shows that on multiple occasions, Tom                    ‘‘inconsistent with the public interest,’’               entrusted with the responsibility carried
                                                   Watson, Respondent’s owner, was                          which support both the prior                             by such a registration.’ ’’ Medicine
                                                   provided with information that Chris                     Administrator’s issuance of the                          Shoppe-Jonesborough, 73 FR 364, 387
                                                   Watson was likely engaged in the                         Immediate Suspension Order, as well as                   (2008) (quoting Samuel S. Jackson, 72
                                                   diversion of controlled substances.                      the denial of Respondent’s pending                       FR 23848, 23853 (2007) (quoting Leo R.
                                                   Notably, in his testimony, Tom Watson                    application.17 See U.S.C. 823(f);                        Miller, 53 FR 21931, 21932 (1988))).
                                                   claimed only that he talked to his son                   824(a)(4); 824(d).                                       ‘‘Moreover, because ‘past performance is
                                                   (although it is unclear which incident                                                                            the best predictor of future
                                                   prompted this) and offered no testimony                     17 The CALJ found that ‘‘[t]he most recent renewal
                                                                                                                                                                     performance,’ ALRA Labs, Inc. v. DEA,
                                                   that he took any other measures (other                   of the Respondent’s registration occurred on
                                                                                                            February 7, 2012, with a scheduled expiration date
                                                                                                                                                                     54 F.3d 450, 452 (7th Cir. 1995), [DEA]
                                                   than to schedule an inventory long after                 of March 31, 2015.’’ R.D. at 2 n.2. The CALJ then        has repeatedly held that where a
                                                   he had received credible reports of a                    explained that ‘‘[d]uring a March 19, 2015 status        registrant has committed acts
                                                   problem) to investigate the allegations.                 conference, the Respondent, through counsel,             inconsistent with the public interest, the
                                                                                                            represented that a renewal application had been
                                                   This is especially remarkable in light of                timely filed, and the Government represented that        registrant must accept responsibility for
                                                   the complaints raised by Mr. Swaim and                   it will not contest the timeliness of the renewal        its actions and demonstrate that it will
                                                   the pharmacy technician, both of whom                    application. Thus, the Respondent’s [Registration]       not engage in future misconduct.’’
                                                   had worked for Mr. Watson for decades.                   remains in full force and effect.’’ Id. (citing 21 CFR
                                                                                                            1301.36(i)).
                                                                                                                                                                     Medicine Shoppe, 73 FR at 387; see also
                                                   I therefore hold that Mr. Watson’s                          Here, however, the prior Administrator ordered        Jackson, 72 FR at 23853; John H.
                                                   failure to investigate the allegations that              that Respondent’s registration be immediately            Kennedy, 71 FR 35705, 35709 (2006);
                                                   his son and PIC was diverting controlled                 suspended, thus prohibiting Respondent from
                                                   substances constitutes ‘‘other conduct                   exercising the authority granted by its registration.       Id.
                                                                                                            Thus, Respondent’s registration did not ‘‘remain[ ]
                                                   which may threaten public health and                     in full force and effect.’’                                 Thus, where a Registrant, which has been served
                                                   safety.’’ 21 U.S.C. 823(f)(5); see also                                                                           with an Order to Show Cause, fails to file its
                                                                                                               Moreover, according to the Agency’s registration
                                                                                                                                                                     renewal application at least 45 days before the
                                                   Rose Mary Jacinta Lewis, 72 FR 4035,                     records, of which I take official notice, Respondent
                                                                                                                                                                     expiration of its registration, the registration expires
                                                   4042 (2007) (holding physician liable                    did not file its renewal application until March 3,
                                                                                                            2015. See 5 U.S.C. 556(e); 21 CFR 1316.59(e).            absent a showing that the extension of its
                                                   under factor five for failing to                         Significantly, at the time Respondent filed its          registration is not inconsistent with the public
                                                   investigate the misuse of her                            renewal application, it had previously been served       health and safety. See Ralph J. Chambers, 79 FR
                                                                                                                                                                     4962, 4962 (2014). The Agency has also applied the
                                                   registration; ‘‘every registrant has a duty              with the Order to Show Cause and Immediate
                                                                                                                                                                     45 day rule in cases where a registrant has been
                                                   to conduct a reasonable investigation                    Suspension of Registration. By regulation, DEA has
                                                                                                            set forth the conditions for the continuation of a       issued an Immediate Suspension Order, recognizing
                                                   upon receiving credible information to                   registration past its expiration date where a            that while a timely renewal application may result
                                                   suspect a theft or diversion has                         registrant has been served with an Order Show            in the extension of a registration, the Immediate
                                                                                                            Cause. See 21 CFR 1301.36(i); see also 5 U.S.C.          Suspension Order precludes the registration from
                                                   occurred’’ as an investigation ‘‘is                                                                               remaining in effect. See Paul H. Volkman, 73 FR
                                                                                                            558(c) (‘‘When [a] licensee has made timely and
                                                   essential to preventing the continuation                 sufficient application for a renewal or a new license    30630, 30641 (2008). However, the Agency has
                                                   of criminal activity’’).                                 in accordance with agency rules, a license with          further held that where an untimely renewal
                                                      The record in this matter thus                        reference to an activity of a continuing nature does     application has been filed and the Registrant’s
                                                                                                                                                                     Registration has expired, the application remains
                                                   establishes that Chris Watson,                           not expire until the application has been finally
                                                                                                                                                                     pending before the Agency. Id.
                                                                                                            determined by the agency.’’). This regulation
                                                   Respondent’s PIC, committed egregious                    provides that:                                              In this matter, I am not bound by the
                                                   and extensive misconduct which ranged                       [i]n the event that an applicant for reregistration   Government’s agreement not to contest the
                                                   from regulatory violations to criminal                   (who is doing business under a registration              timeliness of Respondent’s renewal application.
                                                   acts. In short, Chris Watson used                        previously granted and not revoked or suspended)         Accordingly, I find that Respondent did not file its
                                                                                                            has applied for reregistration at least 45 days before   renewal application until 28 days before its
                                                   Respondent’s DEA registration as a                                                                                registration expired and was thus untimely.
                                                                                                            the date on which the existing registration is due
                                                                                                            to expire, and the Administrator has issued no           Moreover, I further find that because Respondent’s
                                                     16 While Mr. Watson testified that an inventory                                                                 registration was immediately suspended based on
                                                                                                            order on the application on the date on which the
                                                   would have determined that Respondent was                existing registration is due to expire, the existing     the prior Administrator’s finding, which is amply
                                                   missing drugs, short of doing an audit in which          registration of the applicant shall automatically be     supported by the record, that its ‘‘continued
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                                                   Respondent’s receipts of controlled drugs were           extended and continue in effect until the date on        registration during the pendency of these
                                                   added to the results of a previous inventory and its     which the Administrator so issues his/her order.         proceedings would constitute an imminent danger
                                                   dispensings (as well as disposals, thefts or losses)     The Administrator may extend any other existing          to the public health or safety,’’ ALJ Ex. 1, at 5; and
                                                   were subtracted, it is not likely that this would have   registration under the circumstances contemplated        there is no evidence that the prior Administrator
                                                   uncovered the problem. In any event, given the           in this section even though the Applicant failed to      found that the extension of its registration would
                                                   evidence that Mr. Swaim and Ms. Gilbert, his             apply for reregistration at least 45 days before         not be ‘‘inconsistent with the public health and
                                                   longstanding pharmacy technician, (not to mention        expiration of the existing registration, with or         safety,’’ 21 CFR 1301.36(i), its registration has
                                                   his former business partner), had told Mr. Watson        without request by the Applicant, if the                 expired. However, I also find that Respondent’s
                                                   about his son’s activities, I am left to wonder why      Administrator finds that such extension is not           application is before the Agency. See Volkman, 73
                                                   the inventory was not scheduled months earlier.          inconsistent with the public health and safety.          FR at 30641.



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                                                   70090                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   Prince George Daniels, 60 FR 62884,                     denied that he and Respondent were                           Turning to the multiple instances in
                                                   62887 (1995). See also Hoxie v. DEA,                    responsible for his son’s misconduct.                     which the undercover Agent presented
                                                   419 F.3d at 483 (‘‘admitting fault’’ is                    For example, Tom Watson initially                      clearly fraudulent prescriptions which
                                                   ‘‘properly consider[ed]’’ by DEA to be                  testified that ‘‘I didn’t do enough. That                 Chris Watson filled, Tom Watson
                                                   an ‘‘important factor[ ]’’ in the public                was the problem.’’ Tr. 335. However,                      testified that he did not accept
                                                   interest determination). So too, an                     Watson then amended his testimony,                        responsibility. Id. at 356. Watson then
                                                   applicant’s candor during the                           stating: ‘‘Well, not that I didn’t do                     explained that ‘‘[w]hoever filled is
                                                   proceeding is an important                              enough, I didn’t do it fast enough. I                     responsible for those prescriptions. I
                                                   consideration in the public interest                    would have found out in a week what                       didn’t fill them.’’ Id.
                                                   determination. See Hoxie, 419 F.3d at                   was—you know, where we stood on                              Tom Watson acknowledged that his
                                                   483.                                                    everything, so within a week I would                      son violated federal law when he
                                                      While a registrant must accept                       have had to have made a decision on                       distributed the stock bottles of
                                                   responsibility and demonstrate that it                  where I went from there because I                         controlled substances that were found
                                                   will not engage in future misconduct in                 would have known . . . exactly what                       on Eric Horton and Joseph Jackson
                                                   order to establish that its registration is             we were missing.’’ Id. However, even                      when they were arrested. Tr. 357.
                                                   consistent with the public interest, DEA
                                                                                                           crediting Watson’s testimony that he                      However, when asked whether he bore
                                                   has repeatedly held that these are not
                                                                                                           had scheduled an inventory to be                          any responsibility for these acts, Watson
                                                   the only factors that are relevant in
                                                                                                           conducted in early February (one week                     testified: ‘‘I don’t think so.’’ Id. at 358.
                                                   determining the appropriate sanction.
                                                                                                           after the ISO was served), the evidence                   Continuing, Watson added: ‘‘Whoever
                                                   See, e.g., Joseph Gaudio, 74 FR 10083,
                                                                                                           shows that Watson was told of his son’s                   filled the prescriptions and whoever
                                                   10094 (2009); Southwood
                                                                                                           misconduct on multiple occasions by                       give [sic] the medication away, that’s
                                                   Pharmaceuticals, Inc., 72 FR 36487,
                                                                                                           three different persons (Mr. Swaim, Ms.                   who is responsible, I think. They will
                                                   36504 (2007). Obviously, the
                                                                                                           Gilbert, his longstanding pharmacy tech,                  have to take responsibility for that they
                                                   egregiousness and extent of a
                                                                                                           and his former business partner), well                    do, I mean it’s part of life.’’ Id.
                                                   registrant’s misconduct are significant
                                                   factors in determining the appropriate                  before his nephew Grant Goode also                           Also, as found above, Mr. Watson’s
                                                   sanction. See Jacobo Dreszer, 76 FR                     complained. Watson offered no                             nephew testified that Tom Watson was
                                                   19386, 19387–88 (2011) (explaining that                 explanation for why he failed to do                       present on one occasion during which
                                                   a respondent can ‘‘argue that even                      anything more that talk to his son in                     Chris Watson placed a 1,000-count
                                                   though the Government has made out a                    response to the earlier reports he                        bottle of hydrocodone in his back pack
                                                   prima facie case, his conduct was not so                received.18                                               and that Tom Watson observed this.
                                                   egregious as to warrant revocation’’);                     The record contains other examples of                  Tom Watson did not address this
                                                   Volkman, 73 FR at 30644; see also Paul                  Tom Watson providing equivocal                            incident either to deny that it had
                                                   Weir Battershell, 76 FR 44359, 44369                    testimony or outright denying                             occurred or to acknowledge that it had
                                                   (2010) (imposing six-month suspension,                  responsibility for Respondent’s various                   occurred and accept responsibility for
                                                   noting that the evidence was not limited                violations of federal law. For example,                   his misconducting in failing to
                                                   to security and recordkeeping violations                when asked whether he accepted                            intervene to prevent his son from
                                                   found at first inspection and                           responsibility for the violations                         diverting the drugs.
                                                   ‘‘manifested a disturbing pattern of                    Respondent committed when Chris                              Still later, when asked whether under
                                                   indifference on the part of [r]espondent                Watson removed the controlled                             Respondent’s new Policies and
                                                   to his obligations as a registrant’’);                  substance prescriptions from the                          Procedures, Tom Watson could even be
                                                   Gregory D. Owens, 74 FR 36751, 36757                    pharmacy to his house, Tom Watson                         affiliated with Respondent, Watson
                                                   n.22 (2009). So too, the Agency can                     testified that Chris ‘‘failed to provided                 testified that ‘‘[i]t would right now, yes.
                                                   consider the need to deter similar acts,                [sic] with the law,’’ before adding that                  The only problem is I have done
                                                   both with respect to the respondent in                  while ‘‘[t]he owner have [sic] to take                    nothing wrong.’’ Tr. 368. Continuing,
                                                   a particular case and the community of                  some responsibility . . . this is not—                    Watson explained that ‘‘[w]hen they
                                                   registrants. See Gaudio, 74 FR at 10095                 that’s not my fault, I don’t think. I think               come and took my DEA license, yes,
                                                   (quoting Southwood, 72 FR at 36504).                    the pharmacist-in-charge should be                        that’s a possibility, but I have—I mean,
                                                   Cf. McCarthy v. SEC, 406 F.3d 179, 188–                 responsible for that.’’ Tr. 354.                          I have done nothing wrong. I mean, I
                                                   89 (2d Cir. 2005) (upholding SEC’s                         When then asked whether he was                         can’t help what other people have done,
                                                   express adoptions of ‘‘deterrence, both                 admitting that Respondent failed to                       but me personally I have done nothing
                                                   specific and general, as a component in                 comply with federal law when Chris                        wrong . . . I might be a little slow to act
                                                   analyzing the remedial efficacy of                      Watson distributed controlled substance                   on some things that’s all I’m guilty of.’’
                                                   sanctions’’).                                           without a prescription, Tom Watson                        Tr. 368.
                                                      Having considered the relevant                       replied: ‘‘I don’t think [Respondent] did.
                                                   factors, I conclude that Respondent has                                                                              Accordingly, I agree with the CALJ’s
                                                                                                           I think my son did.’’ Id. at 355. Upon                    findings that Respondent has failed to
                                                   not produced sufficient evidence to                     further questioning as to whether he
                                                   show why it can be entrusted with a                                                                               accept responsibility for its misconduct.
                                                                                                           was accepting responsibility for these                    This alone is sufficient to conclude that
                                                   new registration. As for whether                        violations, Watson explained: ‘‘I accept
                                                   Respondent accepted responsibility for                                                                            Respondent has not rebutted the
                                                                                                           some responsibility because I probably                    Government’s prima facie showing that
                                                   its misconduct, based on the record as                  should have replaced Chris with
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                                                   a whole, I agree with the CALJ’s finding                                                                          granting Respondent’s application
                                                                                                           somebody else, but . . . it’s past tense                  ‘‘would be inconsistent with the public
                                                   that it ‘‘has not accepted responsibility.’’            so now so I can’t, so I’ll have to take
                                                   R.D. at 60.                                                                                                       interest.’’ 21 U.S.C. 823(f); see also
                                                                                                           responsibility for that, yes.’’ Id.                       Liddy's Pharmacy, L.L.C., 76 FR 48887,
                                                      I acknowledge that Respondent
                                                   stipulated to many of the allegations.                                                                            48897 (2011). Given the egregiousness
                                                                                                             18 Even then, short of conducting an audit (of
                                                   However, on the whole, Tom Watson’s                                                                               and extent of its misconduct, I need not
                                                                                                           which an inventory is only a part), it is unlikely that
                                                   testimony on the issue was equivocal                    Tom Watson would have discovered the full scope
                                                                                                                                                                     consider whether Respondent has put
                                                   and unpersuasive as he repeatedly                       of Respondent’s diversion.                                forward sufficient evidence of remedial


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                                                                             Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                         70091

                                                   measures to support its burden of                       significant.’’ Resp. Post-Hrng. Br. 12. As              for rejecting consideration of
                                                   production on this issue.19                             support for its contention, it relies on                community impact evidence in cases
                                                     Respondent nonetheless argues that it                 Pettigrew Rexall Drugs, 64 FR 8855,                     involving prescribing practitioners
                                                   should be granted a new registration                    8860 (1999), a case in which the Agency                 apply with equal force to pharmacies.
                                                   because ‘‘[t]he community impact’’ of                   found that revocation of a pharmacy’s                      In Gregory Owens, 74 FR 36751,
                                                   not granting its application ‘‘is                       registration was justified by the proven                36757 (2009), the Agency explained that
                                                                                                           misconduct (i.e., dispensing controlled                 ‘‘whether a practitioner treats patients
                                                      19 On the issue of its remedial measures,
                                                                                                           substances without a physician’s                        who come from a medically
                                                   Respondent argued that Tom Watson testified that                                                                underserved community or who have
                                                   if its application is granted, ‘‘he will be more
                                                                                                           authorization but for which the patients
                                                   actively involved in its operations’’ to ‘‘ensure its   appeared to have medical needs), but                    limited incomes has no bearing on
                                                   proper operations, accountability, and viability.’’     then ‘‘recognize[d] that [it was] one of                whether he has accepted responsibility
                                                   Resp. Post-Hrng. Br. 16. However, given the             two pharmacies in a relatively poor,                    and undertaken adequate corrective
                                                   multiple instances in which Mr. Watson was made
                                                   aware of his son’s misconduct and did nothing
                                                                                                           medically underserved community, and                    measures.’’ The Agency further
                                                   more than talk to his son, his promise to do better     . . . would most likely close if its DEA                explained that ‘‘[t]he diversion of
                                                   in the future rings hollow.                             registration [was] revoked.’’ However,                  prescription drugs has become an
                                                      On this issue, Respondent also presented the         the Agency also noted that in addition                  increasingly serious societal problem,
                                                   testimony of Glenn Wood, its prospective new                                                                    which is particularly significant in
                                                   Pharmacist in Charge. R.D. at 60. Finding Wood’s
                                                                                                           to having changed its procedures, there
                                                   testimony unpersuasive, the CALJ explained that:        was ‘‘no evidence of any wrongdoing                     poorer communities whether they are
                                                      Wood’s testimony concerning all the extra            since the events at issue’’ which had                   located in rural or urban areas,’’ and
                                                   security measure [sic] he intends to take suffers       occurred five or more years before the                  that ‘‘[t]he residents of this Nation’s
                                                   from the same fundamental defect that [Tom]             proceeding was even initiated (and eight                poorer areas are as deserving of
                                                   Watson’s representations regarding his anticipated
                                                   increased pharmacy involvement and                      years before the issuance of the                        protection from diverters as are the
                                                   implementation of his Proposed Policy do: both          decision). Id.                                          citizens of its wealthier communities.’’
                                                   men were present and did nothing when the                  Based on Pettigrew Rexall Drugs,                     Id.
                                                   Respondent’s PIC Chris [Watson], ran wild. These                                                                   The Agency also noted that there are
                                                   men are a major part of the problem, not the
                                                                                                           Respondent argues that the community
                                                   champions of a solution that can be afforded any        impact would be substantial because                     no workable standards for determining
                                                   genuine credence.                                       Respondent ‘‘is located in ‘‘a rural and                when a practitioner should be entitled
                                                      Id.                                                  underserved area,’’ and that ‘‘[a] large                to a reduced sanction based on
                                                      I do not find adequate support in the record for     percentage of [its] patients are                        community impact evidence. Id. Thus,
                                                   the CALJ’s assertion that Glenn Wood was ‘‘present                                                              in Owens, the Agency rejected the ALJ’s
                                                   and did nothing when’’ Chris Watson ‘‘ran wild.’’       indigent.’’ Resp. Post-Hrng. Br. 13–14.
                                                   While Glenn Wood testified that he had done a one-      Respondent further argues that without                  recommendation that the Agency
                                                   month internship under Chris Watson while he was        a registration, Respondent would not be                 should decline to impose either a
                                                   in pharmacy school, Tr. 477, 479; and that during       viable concern because patients will not                suspension or revocation of the
                                                   the period 2006 through 2007, when he was                                                                       practitioner’s registration because 10
                                                   working at both the Mayflower and Perryville            go to two different pharmacies to fill
                                                   stores, he worked alongside of Chris Watson one         their prescriptions and that the only                   percent of his patients came from
                                                   day a week, id. 454, 479; there is no evidence that     ‘‘other pharmacy in the area’’ ‘‘would                  underserved counties and a majority of
                                                   Chris Watson was diverting controlled substances        have a monopoly.’’ Id. at 14–15.                        his patients had limited finances.
                                                   during this time period, let alone evidence that                                                                   As the Agency explained:
                                                   Glenn Wood observed this.                                  While the Agency has now in
                                                      Thereafter, Wood went to Utah for a brief period     multiple cases rejected the contention                    The ALJ’s reasoning begs the question of
                                                   before returning to Arkansas and becoming the PIC       that community impact is a relevant                     how many patients from underserved areas
                                                   at Morrilton Food and Drug for approximately three      consideration in assessing whether a                    would a practitioner have to treat to claim
                                                   years up until the sale of the pharmacy in 2013. Tr.                                                            the benefit of the rule. As for her reliance on
                                                   395–96. Here again, there is no evidence that Chris
                                                                                                           prescribing practitioner’s registration
                                                                                                           ‘‘would be consistent with the public                   the fact that a majority of Respondent’s
                                                   Watson was diverting drugs in this period, let alone                                                            patients have limited incomes, determining
                                                   evidence that Glenn Wood observed this.                 interest,’’ and the reasoning of these                  what constitutes a patient with a limited
                                                      After the sale of Morrilton Food and Drug, Wood      decisions calls into question the                       income or finances (or what percentage of
                                                   worked for a pharmacy that is not affiliated with the   continuing vitality of Pettigrew Rexall
                                                   Watsons, before agreeing in December 2014 with                                                                  patients) a practitioner must have [who meet
                                                   Chris Watson to work several days a week at             Drugs even as applied to a pharmacy,                    the criteria] to claim entitlement to this rule,
                                                   Respondent. Id. at 396. Wood, however, did not          contrary to the discussion in the
                                                   start work at Respondent until January 28, 2015, the    Recommended Decision, R.D. at 60, the                   the community impact coin’’ and ‘‘that a rule which
                                                   day after the search warrant and Immediate              Agency has not formally overruled the                   takes into account the impact on the community
                                                   Suspension Order were served. Id. at 398.                                                                       caused by not registering (or de-registering through
                                                      To be sure, Wood acknowledged that he had met
                                                                                                           case.20 However, the Agency’s reasons                   a revocation proceeding) a particular practitioner is
                                                   Eric Horton at a birthday party for Chris Watson’s                                                              completely unworkable.’’ Id. (citations omitted).
                                                                                                             20 Each of the cases cited by the ALJ involved
                                                   daughter and there were occasions on which Chris                                                                Moreover, the Agency cited only cases involving
                                                   Watson and Horton would show up at the                  prescribers. The closest the Agency has come to         prescribing practitioners and did not discuss
                                                   pharmacy. Id. at 464–68. This, however, is too thin     overruling Pettigrew Rexall Drugs is Physicians         Pettigrew Rexall Drugs. Accordingly, Physicians
                                                   a reed to support the conclusion that Wood was          Pharmacy, L.L.C., 77 FR 47096 (2012). Therein, the      Pharmacy cannot be read as overruling Pettigrew
                                                   ‘‘present and did nothing when [Chris Watson] ran       Agency agreed ‘‘with the ALJ’s rejection of the         Rexall Drugs. See, e.g., Drug Plastics & Glass Co.,
                                                   wild,’’ R.D. at 60, especially given that there is no   Government’s contention that ‘in assessing the          Inc., v. NLRB, 44 F.3d 1017, 1022 (D.C. Cir. 1995)
                                                   evidence that Watson was diverting drugs during         public interest, the nature and amount of diversion     (‘‘In order to diverge from agency precedent, the
                                                   this period. Ultimately, because Wood testified         of controlled substances in a geographical area is a    Board must ‘suppl[y] a reasoned analysis indicating
                                                   primarily on the issue of whether Respondent has        legitimate area of inquiry and concern when             that prior policies and standards are being
                                                   instituted adequate remedial measures, an issue         determining whether an applicant should be              deliberately changed, not casually ignored.’ ’’)
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                                                   which I need not resolve given Respondent’s failure     granted a DEA registration.’ ’’ Id. at 47096 n.2. As    (citations omitted); Shaw's Supermarkets, Inc., v.
                                                   to accept responsibility, I deem it unnecessary to      the Agency explained, ‘‘[n]othing in the texts of any   NLRB, 884 F.2d 34, 37 (1st Cir. 1989) (quoting
                                                   consider the issues surrounding the February 25,        of the five [public interest] factors set forth in      Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Bd.
                                                   2015 phone call (nearly one month after the ISO         section 823(f) remotely suggests that Congress          of Trade, 412 U.S. 800, 808–09 (1973) (plurality op.)
                                                   was served and the search warrant executed)             granted the Agency authority to deny an application     (‘‘It is, of course, true that the Board is free to adopt
                                                   between Wood and Grant Goode regarding the              based on its assessment of ‘the nature and amount       new rules of decision and that the new rules of law
                                                   latter’s employment status, or Wood’s involvement       of diversion of controlled substances in a              can be given retroactive application. Nevertheless
                                                   in the Redneck Remedy business venture, and             geographical area.’ ’’ Id. (quoting Gov. Br. 4).        the Board may not depart sub silentio, from its
                                                   decline to adopt that portion of the Recommended          In dicta, the Agency also noted that the              usual rules of decision to reach a different,
                                                   Decision which discusses these issues. R.D. 29–36.      Government’s argument is ‘‘simply the other side of     unexplained result in a single case.’’)).



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                                                   70092                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   would inject a new level of complexity into             search for pharmacies in the Perryville                   Thus, I conclude that Respondent’s
                                                   already complex proceedings and take the                area (of which I take official notice)                 evidentiary showing on community
                                                   Agency far afield of the purpose of the CSA’s           show that there are six pharmacies                     impact is insufficient to rebut the
                                                   registration provisions, which is to prevent
                                                                                                           located in Morrilton.21 Tr. 395.                       Government’s prima facie showing that
                                                   diversion.
                                                                                                           Moreover, since Pettigrew Rexall Drugs,                granting its application ‘‘would be
                                                   Id.                                                     there has been an increase in the                      inconsistent with the public interest.’’
                                                      Notwithstanding that Respondent                      availability of legitimate mail order                  21 U.S.C. 823(f). Nor do I consider its
                                                   provided notice that it intended to argue               pharmacies. Thus, I reject Respondent’s                evidence sufficient to support a lesser
                                                   that the Agency should consider the                     suggestion that denying its application                sanction than what is warranted on the
                                                   community impact of denying its                         will allow the remaining pharmacy to                   facts of this case.
                                                   application, the Government does not                    engage in monopolistic pricing.                           In short, I agree with the CALJ that the
                                                   address whether Pettigrew Rexall Drugs                    Of further note with respect to Mr.                  misconduct engaged in by both Chris
                                                   remains viable as precedent. See                        Wood’s testimony that a large                          Watson (Respondent’s PIC) and Tom
                                                   generally Gov. Post-Hrng. Br.                           percentage of Respondent’s customers                   Watson (its owner) was egregious. See
                                                   Accordingly, I address whether                          are indigent (and presumably less able                 R.D. at 61. And I further agree with the
                                                   Respondent has produced sufficient                      to travel to Morrilton), Respondent                    CALJ’s conclusion that ‘‘a sanction that
                                                   evidence to support such a claim.                       produced no evidence as to the number                  falls short of [denial] would undermine
                                                      Respondent’s evidence on the issue                   of patients it deems to be indigent who                the Agency’s legitimate interests in both
                                                   was limited to the testimony of Mr.                     are not enrolled in the Arkansas                       specific and general deterrence.’’ Id.
                                                   Wood that Perry County is ‘‘an                          Medicaid program. However, the                         Accordingly, I will affirm the Order of
                                                   extremely rural area’’ and that ‘‘[a] large             Arkansas Medicaid program covers the                   Immediate Suspension, as well as order
                                                   percent of our customers are what I                     cost of most prescription drugs. See                   the denial of Respondent’s pending
                                                   would describe as being indigent                        Arkansas Dept. of Human Services,                      application to renew its registration.
                                                   probably somewhat.’’ Tr. 404. Mr. Wood                  Arkansas Medicaid, ARKids First &
                                                   further testified that without                                                                                 Order
                                                                                                           You—Arkansas Medical Beneficiary
                                                   Respondent, there would only be one                     Handbook 56 (Rev. 2010). And                              Pursuant to the authority vested in me
                                                   pharmacy in the county which would                      Respondent produced no evidence that                   by 21 U.S.C. 823(f) as well as 28 CFR
                                                   have a monopoly. Id. at 405. Finally,                   the other Perryville pharmacy does not                 0.100(b), I order that the application of
                                                   Mr. Wood testified that in Arkansas, a                  accept Medicaid patients.22 Finally, as                Perry County Food & Drug for a DEA
                                                   pharmacist can provide disease state                    for Respondent’s contention that                       Certificate of Registration as a retail
                                                   management and give immunizations.                      pharmacists in Arkansas can provide                    pharmacy be, and it hereby is, denied.
                                                   Id. at 404–05.                                          disease state management and                           Pursuant to the authority vested in me
                                                      Mr. Wood’s testimony is too                          immunizations, it has offered no                       by 21 U.S.C. 824(a)(4) & (d), as well as
                                                   insubstantial to support the conclusion                 evidence that there is a shortage of                   28 CFR 0.100(b), I affirm the Order of
                                                   that a sanction less than denial of its                 medical professionals in the Perryville                Immediate Suspension of DEA
                                                   application is warranted because of the                 area who can provide these services.23                 Certificate of Registration AP2331851
                                                   adverse community impact resulting                                                                             issued to Perry County Food & Drug.
                                                   from its inability to dispense controlled                 21 Pursuant to 5 U.S.C. 556(e), Respondent may       Pursuant to the authority vested in me
                                                   substances. Notably, Mr. Wood did not                   show to the contrary, by filing a properly supported   by 21 U.S.C. 824(f), I further order that
                                                   specify the percentage of Respondent’s                  motion, no later than 15 days from the date of         all right, title, and interest in any
                                                                                                           service of this order, which shall commence on the
                                                   customers that is indigent, nor the                     date of mailing.                                       controlled substances seized by the
                                                   income level he used to support his                       22 Because Respondent seeks to rebut the             Government during the execution of the
                                                   conclusion.                                             Government’s prima facie showing, it has the
                                                      As for the contention that without a                 burden of production on this issue.                    misconduct, the Agency ‘‘would [have] again
                                                                                                             23 While I decline to overrule Pettigrew Rexall      revoke[d] her registration’’); see also MacKay v.
                                                   DEA registration, Respondent will lose
                                                                                                           Drugs, I find its reasoning to be problematic as it    DEA, 664 F.3d 808, 820 (10th Cir. 2011) (‘‘The DEA
                                                   many of its customers because they will                 appears to have given more weight to community         may properly consider whether a physician admits
                                                   not want to go to two pharmacies to fill                impact than was warranted by the minimal               fault in determining if the physician’s registration
                                                   their prescriptions, controlled                         evidence discussed in the decision and set forth no    should be revoked.’’) (citation omitted); Chein v.
                                                   substances constitute only 11 percent of                principle for when such evidence could overcome        DEA, 533 F.3d 828, 837 (D.C. Cir. 2008) (upholding
                                                                                                           other relevant factors.                                revocation order, noting in part that physician had
                                                   all prescriptions issued nationally. See                  For example, the decision noted the Agency’s         not ‘‘accepted responsibility for his misconduct’’);
                                                   Electronic Prescriptions for Controlled                 agreement with the ALJ’s finding that the pharmacy     Hoxie v. DEA, 419 F.3d 477, 483 (6th Cir. 2005)
                                                   Substances, 75 FR 16236, 16237 (2010)                   owner ‘‘did not appear candid or forthright and his    (DEA properly considers a registrant’s admission of
                                                   (Interim Final Rule). This suggests that                testimony appeared to be tailored to Respondent’s      fault in determining whether registration should be
                                                                                                           defense in this proceeding.’’ 64 FR at 8858. The       revoked).
                                                   the majority of pharmacy patients do                    decision also noted the ‘‘[r]espondent’s failure to       Since Pettigrew Rexall Drugs, the Agency has also
                                                   not even fill controlled substance                      acknowledge or accept responsibility for any           made clear that it ‘‘places great weight on a
                                                   prescriptions.                                          wrongdoing.’’ Id. at 8860.                             registrant’s/applicant’s candor, both during an
                                                      Moreover, even if the lack of a                        Notably, since Pettigrew Rexall Drugs, the Agency    investigation and in any subsequent proceeding.’’
                                                   registration will eventually render                     has made clear that where the Government has           Robert F. Hunt, 75 FR 49995, 50004 (2010); see also
                                                                                                           proved that a registrant/applicant has engaged in      The Lawsons, Inc., t/a The Medicine Shoppe
                                                   Respondent financially unviable, I do                   intentional or knowing diversion, the registrant/      Pharmacy, 72 FR 74334, 74338 (2007) (quoting
                                                   not find persuasive its contention that                 applicant must acknowledge its misconduct to           Hoxie, 419 F.3d at 483) (‘‘Candor during DEA
                                                   this will have an adverse community                     rebut the conclusion that its registration is          investigations properly is considered by the DEA to
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                                                   impact. While Respondent maintains                      inconsistent with the public interest. See Holiday     be an important factor when assessing whether a
                                                                                                           CVS, L.L.C., d/b/a CVS/Pharmacy Nos. 219 and           . . . registration is consistent with the public
                                                   that this will result in the creation of a              5195, 77 FR 62315, 62323 (2012) (revoking              interest.’’); Rose Mary Jacinta Lewis, 72 FR at 4042
                                                   monopoly because there is only one                      pharmacy registration notwithstanding that             (holding that lying under oath in proceeding to
                                                   other pharmacy in Perryville, Mr.                       company had replaced each pharmacy PIC because         downplay responsibility supports conclusion that
                                                   Watson and his partner formerly owned                   company failed to acknowledge its misconduct);         physician ‘‘cannot be entrusted with a
                                                                                                           Jayam Krishna-Iyer, 74 FR 459, 463 (2009) (holding     registration’’).
                                                   a pharmacy in Morrilton, Arkansas,                      on remand that had physician not ‘‘acknowledged           Thus, were a case to come before me with similar
                                                   which is only fourteen miles from                       wrongdoing with respect to both her prescribing to     facts to those of Pettigrew Rexall Drugs, I would
                                                   Perryville, and the results of a Mapquest               the undercover operatives, as well as’’ other          deny its application and/or revoke its registration.



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                                                                             Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                    70093

                                                   Order of Immediate Suspension issued                    registration with the DEA should be                   substances as required by 21 CFR
                                                   to Perry County Food & Drug be, and it                  revoked pursuant to 21 U.S.C. 824(a).                 1301.74(c).31
                                                   hereby is, vested in the United States.                    After carefully considering the                    The Stipulations of Fact
                                                   This Order is effective immediately.24                  testimony elicited at the hearing, the
                                                                                                                                                                    The Government and the Respondent,
                                                     Dated: October 29, 2015.                              admitted exhibits, the arguments of
                                                                                                                                                                 through counsel, have entered into
                                                   Chuck Rosenberg,                                        counsel, and the record as a whole, I
                                                                                                                                                                 stipulations 32 regarding the following
                                                   Acting Administrator.                                   have set forth my recommended
                                                                                                                                                                 matters:
                                                     Paul A. Dean, Esq., for the                           findings of fact and conclusions of law
                                                                                                                                                                    (1) The Respondent pharmacy is
                                                   Government.                                             below.
                                                                                                                                                                 registered with the DEA as a retail
                                                     M. Darren O'Quinn, Esq., for the                      The Allegations                                       pharmacy in Schedules II–V under DEA
                                                   Respondent.                                                                                                   COR AP2331851 at 112 Houston
                                                   RECOMMENDED RULINGS, FINDINGS                              In the OSC/ISO, the Government                     Avenue, P.O. Box 327, Perryville,
                                                   OF FACT, CONCLUSIONS OF LAW,                            contends that several bases exist upon                Arkansas 72126.
                                                   AND DECISION OF THE                                     which the Agency should revoke the                       (2) The scheduled expiration date of
                                                   ADMINISTRATIVE LAW JUDGE                                Respondent’s COR. The Government                      DEA COR AP2331851, which has been
                                                                                                           alleges that revocation of the                        issued to the Respondent, and is the
                                                      John J. Mulrooney, II, Chief                         Respondent’s COR is appropriate                       subject of these proceedings, is March
                                                   Administrative Law Judge. On January                    because the Respondent unlawfully                     31, 2015.
                                                   26, 2015, the Administrator of the Drug                 distributed controlled substances in                     (3) During the time period of August
                                                   Enforcement Administration (DEA)                        violation of 21 U.S.C. 841(a) and 21                  15, 2014 through January 28, 2015,
                                                   issued an Order to Show Cause and                       U.S.C. 842(a). Specifically, the                      Chris W was the Vice-President and
                                                   Immediate Suspension of Registration                    Government contends that from August                  Controller of the Respondent pharmacy.
                                                   (OSC/ISO) 25 suspending the DEA                         2014 through January 2015, the                           (4) During the time period of August
                                                   Certificate of Registration (COR),                      Respondent (1) ‘‘on several occasions                 15, 2014 through January 28, 2015,
                                                   number AP2331851,26 of Perry County                     . . . distributed and dispensed                       Chris W was the pharmacist-in-charge
                                                   Food & Drug (Respondent), pursuant to                   controlled substances to individuals                  (PIC) of the Respondent pharmacy.
                                                   21 U.S.C. 824(d), on the grounds that                   either without a prescription, as                        (5) The only registered address for the
                                                   the Respondent’s continued registration                 required by 21 U.S.C. 829(a), (b) and 21              Respondent pharmacy under DEA COR
                                                   constitutes an immediate danger to the                  CFR 1306.11(a) and 1306.21(a), or                     AP2331851 is: 112 Houston Avenue,
                                                   public health and safety. The OSC/ISO                   pursuant to prescriptions that [the                   P.O. Box 327, Perryville, Arkansas
                                                   also proposes to revoke the                             Respondent’s] pharmacist knew or                      72126.
                                                   Respondent’s COR pursuant to 21 U.S.C.                  should have known had not been issued                    (6) Patient D.J.33 had a prescription for
                                                   824(a)(4), deny any pending                             for a legitimate medical purpose in the               Xanax, a controlled substance,34 filled at
                                                   applications for renewal or modification                usual course of the practitioner’s                    the Respondent pharmacy on September
                                                   of such registration, or deny any                       professional practice’’ and (2) failed to             17, 2013. The hard copy of this
                                                   applications for additional DEA                         ‘‘provide effective controls against theft            prescription was discovered at Chris
                                                   registration, on the grounds that the                   and diversion of controlled                           W’s residence during the execution of a
                                                   Respondent’s continued registration is                  substances.’’ 28                                      federal search warrant on January 27,
                                                   inconsistent with the public interest as                                                                      2015.
                                                   that term is defined in 21 U.S.C. 823(f).                  In support of its allegations, the
                                                                                                                                                                    (7) Patient J.I. had a prescription for
                                                   On February 6, 2015, the Respondent,                    Government asserts that on several
                                                                                                                                                                 Clonazepam, a controlled substance,35
                                                   through counsel, filed a timely request                 occasions, the Respondent’s pharmacist-
                                                                                                                                                                 filled at the Respondent pharmacy on
                                                   for a hearing.27 A hearing was                          in-charge (PIC) Chris Watson (Chris W)
                                                                                                                                                                 September 17, 2013. The hard copy of
                                                   conducted in this matter on March 31–                   (1) dispensed controlled substances
                                                                                                                                                                 this prescription was discovered at
                                                   April 1, 2015, in Little Rock, Arkansas.                (hydrocodone and alprazolam) without
                                                                                                                                                                 Chris W’s residence during the
                                                      The issue ultimately to be adjudicated               a prescription and (2) dispensed
                                                                                                                                                                 execution of a federal search warrant on
                                                   by the Administrator, with the                          controlled substances (hydrocodone and
                                                                                                                                                                 January 27, 2015.
                                                   assistance of this recommended                          alprazolam) pursuant to prescriptions
                                                                                                                                                                    (8) Patient A.Q. had a prescription for
                                                   decision, is whether the record as a                    that Chris W knew were fictitious or
                                                                                                                                                                 Hydrocodone, a controlled substance,36
                                                   whole establishes by substantial                        fraudulent.29 Additionally, the
                                                   evidence that the Respondent’s                          Government alleges that Chris W                         31 Id. at 4.
                                                                                                           advised an undercover DEA agent on                      32 The  parties have also entered into stipulations
                                                      24 For the same reasons that led the former          how to modify a scrip by hand to                      of credible testimony regarding twenty-three
                                                   Administrator to conclude that an Immediate             ‘‘create a more realistic looking                     witnesses. All stipulations of fact and testimony are
                                                   Suspension was warranted, I conclude that the           prescription’’ and deliberately ignored               set forth in ALJ Ex. 20.
                                                   public interest necessitates that this Order be                                                                 33 Consistent with the terms of the Protective

                                                   effective immediately. See 21 CFR 1316.67.
                                                                                                           the agent’s reference to intentional                  Order issued in this matter (ALJ Ex. 15), initials
                                                      25 ALJ Ex. 1.                                        diversion of controlled substances filled             have been substituted for patient name identifiers.
                                                      26 Gov’t Ex. 1. The Respondent was issued DEA        at the Respondent.30 The Government                   Copies of each of the prescriptions found at Chris
                                                   COR AP2331851 prior to April 2, 1986. Id. at 1. The     also asserts that state law enforcement               W’s house were received into evidence. Gov’t Exs.
                                                   most recent renewal of the Respondent’s                                                                       41, 54–63; Tr. 204.
                                                                                                           discovered the Respondent’s stock
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                                                                                                                                                                   34 Xanax (alprazolam) is a Schedule IV controlled
                                                   registration occurred on February 7, 2012, with a
                                                   scheduled expiration date of March 31, 2015. Id.
                                                                                                           bottles of controlled substances in                   substance. 21 CFR 1308.14 (2015); Office of
                                                   During a March 19, 2015 status conference, the          vehicles of non-pharmacy personnel,                   Diversion Control, Benzodiazepines, Drug
                                                   Respondent, through counsel, represented that a         and that the Respondent failed to inform              Enforcement Admin. (Jan. 2013),
                                                   renewal application had been timely filed, and the      DEA of the loss or theft of controlled                available at http://www.deadiversion.usdoj.gov/
                                                   Government represented that it will not contest the                                                           drug_chem_info/benzo.pdf.
                                                   timeliness of the renewal application. Thus, the                                                                35 Clonazepam is a Schedule IV controlled
                                                                                                             28 ALJ  Ex. 1 at 1–3.
                                                   Respondent’s COR remains in full force and effect.                                                            substance. 21 CFR 1308.14.
                                                   21 CFR 1301.36(i) (2015).                                 29 Id. at 1–2.                                        36 Hydrocodone is a Schedule II controlled
                                                      27 ALJ Ex. 3.                                          30 Id. at 2–3.                                      substance. 21 CFR 1308.12 (2015).



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                                                   70094                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   filled at the Respondent pharmacy on                    Agent to use the letters ‘‘RA’’ instead of               officer had noticed a bottle of liquid
                                                   September 17, 2013. The hard copy of                    ‘‘RF’’ on the DEA registration number of                 codeine 42 in the front seat of the
                                                   this prescription was discovered at                     a prescription that was presented to                     vehicle. SOT 13(b); Tr. 69–71. Cpl.
                                                   Chris W’s residence during the                          Chris W.                                                 Whitley started a conversation with
                                                   execution of a federal search warrant on                   (17) On November 19, 2014, Chris W                    Jackson and although Jackson denied
                                                   January 27, 2015.                                       instructed an undercover DEA Special                     any drug use, Cpl. Whitley noticed that
                                                      (9) Patient N.R. had a prescription for              Agent to change the last digit of a DEA                  his speech was slurred and detected the
                                                   Hydrocodone, a controlled substance,                    registration number to six on a                          odor of marijuana. SOT 13(b); Tr. 71.
                                                   filled at the Respondent pharmacy on                    prescription that was presented to Chris                 Cpl. Whitley then secured Jackson in
                                                   May 25, 2011. The hard copy of this                     W.                                                       handcuffs in a police vehicle, and he
                                                   prescription was discovered at Chris                       (18) On November 19, 2014, Chris W                    and the other officers searched Jackson’s
                                                   W’s residence during the execution of a                 instructed an undercover DEA Special                     car.43 SOT 13(b). The troopers smelled
                                                   federal search warrant on January 27,                   Agent on how to create a fictitious DEA                  marijuana in Jackson’s car and observed
                                                   2015.                                                   registration number.                                     a bottle of codeine on the seat. SOT
                                                      (10) Patient M.B. had a prescription                    (19) On or about November 19, 2014,                   13(c). Also discovered during the car
                                                   for Oxycontin, a controlled substance,37                Chris W distributed 30 tablets of                        search was a black bag containing a
                                                   filled at the Respondent pharmacy on                    hydrocodone and 30 tablets of Xanax to                   baggie of marijuana,44 prescription
                                                   September 17, 2013. The hard copy of                    Samantha Pemberton without a                             bottles of drugs, and two handguns. Id.
                                                   this prescription was discovered at                     prescription.                                            Jackson denied any knowledge of the
                                                   Chris W’s residence during the                             (20) On December 4, 2014, Chris W                     drugs and told Cpl. Whitley that the
                                                   execution of a federal search warrant on                distributed 240 tablets of hydrocodone                   weapons were not his. SOT 13(c); Tr.
                                                   January 27, 2015.                                       10/325 mg and 60 tablets of alprazolam                   74. Cpl. Whitley searched Jackson for
                                                      (11) Patient DC had a prescription for               2 mg to an undercover DEA Special                        additional weapons, and discovered
                                                   Soma, a controlled substance,38 filled at               Agent pursuant to a prescription that                    three large bundles of cash in his
                                                   the Respondent pharmacy on September                    Chris W knew or should have known                        pockets totaling $2,820. SOT 13(c), (d).
                                                   16, 2013. The hard copy of this                         was fraudulent.                                          Among other things, the seized evidence
                                                   prescription was discovered at Chris                       (21) The stock bottle of 1,000-count                  included 74 carisoprodol tablets, 12
                                                   W’s residence during the execution of a                 hydrocodone 10/325 mg and two stock                      alprazolam bars, one bag of suspected
                                                   federal search warrant on January 27,                   bottles of 100-count methadone 39 10 mg                  marijuana, one bottle of codeine, and
                                                   2015.                                                   that were in Eric Horton’s possession at
                                                      (12) Patient D.C. had a prescription                                                                          two 500-count stock bottles of
                                                                                                           the time of Horton’s arrest on or about                  alprazolam, one of which bore a sticker
                                                   for Hydrocodone, a controlled                           January 20, 2015 all had the Respondent
                                                   substance, filled at the Respondent                                                                              from the Respondent.45 SOT 13(d).
                                                                                                           pharmacy’s stock stickers on them.                       Interestingly, the materials seized from
                                                   pharmacy on September 16, 2013. The                        (22) The stock bottle of 500-count
                                                   hard copy of this prescription was                                                                               Jackson’s vehicle also contained a
                                                                                                           alprazolam 2 mg that was in Joe
                                                   discovered at Chris W’s residence                                                                                handwritten note bearing the following
                                                                                                           Jackson’s possession at the time of Joe
                                                   during the execution of a federal search                                                                         phrases: ‘‘no standing out’’; ‘‘your
                                                                                                           Jackson’s arrest on or about September
                                                   warrant on January 27, 2015.                                                                                     people go in as a group and if you leave
                                                                                                           14, 2014 had the Respondent
                                                      (13) On or about August 15, 2014,                                                                             plz [sic] leave your number’’; ‘‘please
                                                                                                           pharmacy’s stock sticker on it.
                                                   Chris W dispensed 42 tablets of                                                                                  have A–C in your car’’; ‘‘what to say’’;
                                                                                                              (23) The Respondent pharmacy has
                                                   hydrocodone 10/325 mg to one A.R.                                                                                ‘‘you have lower back pain and you take
                                                                                                           not filed a theft or loss report with DEA
                                                   without a prescription.                                                                                          hydrocodone 10.325 four time [sic] a
                                                                                                           since at least 2012.
                                                      (14) On November 7, 2014, Chris W                                                                             day’’; ‘‘xanx [sic] 2 mg twice a day’’;
                                                   dispensed 120 tablets of hydrocodone                    The Evidence                                             ‘‘and your last visit to a doctor 2 to 3
                                                   10/325 mg and 60 tablets of alprazolam                    In addition to its reliance on the                     months ago.’’ Gov’t Ex. 39 at 3. The
                                                   2 mg to an undercover DEA Special                       factual stipulations reached by the                      seized note bore the obvious hallmarks
                                                   Agent pursuant to a prescription that                   parties, supra, the Government                           of crib notes that were apparently
                                                   Chris W knew or should have known                       presented its case through the live and/                 contrived to coach others successfully to
                                                   was fraudulent.                                         or stipulated testimony 40 of twenty-six                 lie persuasively to obtain controlled
                                                      (15) On November 7, 2014, Chris W                    witnesses.41                                             substances illegally from DEA
                                                   instructed an undercover DEA Special                      Arkansas State Trooper Corporal                        practitioner registrants.
                                                   Agent to add the letter ‘‘R’’ to the DEA                (Cpl.) Richard Whitley testified that he                    The Government also presented the
                                                   registration number on a prescription,                  was on patrol on September 14, 2014                      testimony of Dr. Raymond E.
                                                   and to change the last digit of the                     when he was dispatched to a one-                         Hambuchen, D.D.S., a dentist practicing
                                                   number to seven to create a more                        vehicle accident where an individual                     in Conway, Arkansas, and an
                                                   realistic-looking prescription.                         named Joseph Jackson was being                           acquaintance of the Respondent’s (then)
                                                      (16) On November 13, 2014, Chris W                   detained for leaving the scene.                          PIC, Chris W. Dr. Hambuchen testified
                                                   instructed an undercover DEA Special                    Stipulation of Testimony (SOT) 13(b);                    that he has known Chris W for years and
                                                                                                           Tr. 67–68. Upon his arrival, Cpl.                        that they occasionally exchanged text
                                                     37 Oxycontin (oxycodone) is a Schedule II

                                                   controlled substance. Id.; Office of Diversion
                                                                                                           Whitley was advised that another police
                                                                                                                                                                      42 Codeine is a Schedule II controlled substance.
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                                                   Control, Oxycodone, Drug Enforcement Admin.
                                                   (Mar. 2014), available at http://                         39 Methadone    is a Schedule II controlled            21 CFR 1308.12.
                                                   www.deadiversion.usdoj.gov/drug_chem_info/              substance. 21 CFR 1308.12.                                 43 A copy of a photograph of Jackson was received

                                                   oxycodone/oxycodone.pdf.                                   40 The parties stipulated to the credibility of the   into evidence. Gov’t Ex. 38; Tr. 70–71.
                                                     38 Soma (carisoprodol) is a Schedule IV controlled    stipulated testimony. ALJ Ex. 20. Where applicable,        44 Marijuana is a Schedule I controlled substance.

                                                   substance. 21 CFR 1308.14; Office of Diversion          individual credibility determinations regarding live     21 CFR 1308.11.
                                                   Control, Carisoprodol, Drug Enforcement Admin.          testimony are set forth in the body of this                45 Photographs of the controlled substances,

                                                   (March 2014), available at http://                      recommended decision.                                    weapons, and note found in Jackson’s car at the
                                                   www.deadiversion.usdoj.gov/drug_chem_info/                 41 Two of the Government’s witnesses were             time of his arrest were received into evidence. Gov’t
                                                   carisoprodol/carisoprodol.pdf.                          presented in rebuttal.                                   Ex. 39; Tr. 75–76.



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                                                                              Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                       70095

                                                   messages. SOT 1(a).46 On September 29,                   Chris W.50 Id. On November 7, 2014                       Respondent.53 SOT 3(d). SA Mitchell
                                                   2014, Dr. Hambuchen exchanged a                          (Undercover Visit 1), SA Mitchell met                    stated that he presented the prescription
                                                   series of text messages with Chris W                     with Chris W and presented him with                      to Chris W, who informed him that the
                                                   wherein Chris W stated that he had                       a fraudulent prescription for                            pharmacy was out of hydrocodone and
                                                   dispensed controlled substances to one                   hydrocodone and alprazolam. SOT 3(c).                    benzodiazepines, but that he would
                                                   A.R. using Dr. Hambuchen’s name as                       According to SA Mitchell, during this                    have more during the first of the
                                                   the prescriber and without a                             visit, Chris W instructed him to add the                 following week. Id. SA Mitchell recalled
                                                   prescription. SOT 1(b); Gov’t Ex. 2; Tr.                 letter ‘‘R’’ to the DEA registration                     that Chris W was mumbling, but that
                                                   20–21. Dr. Hambuchen testified that he                   number on the scrip and to change the                    when SA Mitchell asked Chris W if he
                                                                                                            last number to a ‘‘7’’ to make the false                 ‘‘did the prescription right,’’ Chris W
                                                   did not know A.R.,47 has never issued
                                                                                                            document appear more realistic. Id. In                   recommended that he use the letters
                                                   a prescription for her, and that he wrote
                                                                                                            SA Mitchell’s estimation, Chris W’s                      ‘‘RA’’ instead of ‘‘RF,’’ which once
                                                   a letter to the DEA (Hambuchen Letter),                                                                           again, in SA Mitchell’s view,
                                                   at the request of DEA personnel, on                      tutelage on the subject of making better
                                                                                                                                                                     demonstrated that Chris W was well
                                                   November 12, 2014 memorializing that                     fraudulent scrips demonstrated that
                                                                                                                                                                     aware that the scrip was a fake. Id.; Tr.
                                                   fact. SOT 1(c); Gov’t Ex. 3; Tr. 22–24.                  Chris W well knew the presented scrip
                                                                                                                                                                     145–50. When SA Mitchell asked Chris
                                                   The Government acquired and                              was fictitious. Id. The Government                       W again which letters to use, Chris W
                                                   introduced a patient profile on file at                  introduced a copy of the fraudulent                      wrote the letters ‘‘RA’’ down on a piece
                                                   the Respondent regarding A.R. that lists                 scrip that SA Mitchell presented to                      of paper. SOT 3(d). SA Mitchell testified
                                                   Dr. Hambuchen as having authorized                       Chris W at the Respondent. Gov’t Ex. 6;                  that after he looked at what Chris W
                                                   eleven prescriptions in her name. Gov’t                  Tr. 106. The scrip, dated November 7,                    wrote, Chris W scratched out the letters
                                                   Ex. 4; SOT 20(d), (e); Tr. 185–86. These                 2014, is made out for ‘‘Brian Jackson’’                  with a pen. Id.
                                                   eleven prescriptions were dispensed at                   (the name SA Mitchell used in his                           On November 19, 2014 (Undercover
                                                   the Respondent between June and                          undercover visits) and specifies 120                     Visit 3), SA Mitchell returned to the
                                                   December 2014 48 and included the                        tablets of Norco and 60 tablets of Xanax.                Respondent and attempted to fill
                                                   controlled substances Hydroco/APAP                       Gov’t Ex. 6. During Undercover Visit 1,                  another fictitious prescription for
                                                   and oxycodone. Gov’t Ex. 4.                              SA Mitchell was wearing audio and                        hydrocodone and alprazolam.54 SOT
                                                                                                            video recording equipment, but due to                    3(e). Once again, SA Mitchell
                                                      DEA Task Force Officer (TFO) Chad                     an equipment failure,51 nothing was                      encountered Chris W and handed him
                                                   Wilson testified that he is currently                    recorded. SOT 3(c). Chris W filled the                   another fictitious scrip. Id. Chris W told
                                                   stationed at the DEA Little Rock District                fraudulent prescription and dispensed                    Mitchell that he ran out of hydrocodone
                                                   Office (Little Rock DO) and that he                      the controlled substances to SA                          tablets two days earlier, and that more
                                                   received and reviewed the Hambuchen                      Mitchell.52 Id.                                          were not expected until the first of the
                                                   Letter. SOT 15(b). After reading the                                                                              month, because his supplier had placed
                                                   letter, TFO Wilson interviewed Dr.                          On November 13, 2014 (Undercover
                                                                                                                                                                     limits on how much he could order. Id.;
                                                   Hambuchen, who confirmed its                             Visit 2), SA Mitchell attempted to fill
                                                                                                                                                                     Gov’t Ex. 18 at 1–2. When SA Mitchell
                                                   contents,49 forwarded him a copy, and                    another fictitious prescription for
                                                                                                                                                                     asked Chris W if the fictitious DEA
                                                   reiterated that he did not know an A.R.                  hydrocodone and alprazolam at the
                                                                                                                                                                     number on the prescription SA Mitchell
                                                   Id. TFO Wilson generated a report from                                                                            presented was correct, Chris W
                                                                                                               50 SA Mitchell testified that the patient name he
                                                   the Arkansas prescription monitoring                                                                              instructed him to change the last digit
                                                                                                            used on all of his undercover visits was ‘‘Brian
                                                   program (PMP) on A.R. Id.                                Jackson.’’ Tr. 154.                                      of the DEA number of the prescription
                                                      DEA Special Agent (SA) Mark                              51 DEA SA Michael Willett testified that he is        to a ‘‘6.’’ SOT 3(e). Chris W started
                                                   Mitchell testified that he is also an agent              assigned to the Little Rock DO. SOT 4(a). SA             counting, described the methodology in
                                                                                                            Willett’s area of responsibilities includes technical    creating a DEA COR number to the
                                                   assigned to the Little Rock DO. SOT                      surveillance issues, and he is familiar with the
                                                                                                                                                                     undercover agent, and volunteered that
                                                   3(a). He testified that on four occasions                video equipment that was used in SA Mitchell’s
                                                                                                            undercover visits to the Respondent. SOT 4(b). SA        the prescription that SA Mitchell just
                                                   (specifically, November 7, 2014;
                                                                                                            Willett explained that the video equipment utilized      handed him looked better than most he
                                                   November 13, 2014; November 19, 2014;                    during the four undercover visits has an internal        sees as the pharmacy.55 Id.; Gov’t Ex. 18
                                                   and December 4, 2014), he made                           battery that needs to be recharged in order for the
                                                                                                                                                                     at 4. Chris W also volunteered that he
                                                   undercover visits to the Respondent.                     video recording device to work properly. Id.
                                                                                                            Although none of the audio/video recordings or           believed that multiple law enforcement
                                                   SOT 3(b). On each occasion, he                           transcripts made regarding the four undercover           agencies were scrutinizing his
                                                   presented fictitious controlled substance                visits were the subject of objection by the              pharmacy, but the record contains no
                                                   prescriptions to the pharmacist on duty,                 Respondent, it is worth noting that some of the          objective indication that he felt
                                                                                                            tapes contained time/date stamp anomalies. The
                                                                                                            anomalies were persuasively explained by the             particularly inhibited by this revelation.
                                                     46 Dr. Hambuchen testified that although he and
                                                                                                            combined testimony of SA Willett and TFO Wilson.         Gov’t Ex. 18 at 2. This crash course in
                                                   Chris W had ‘‘in the past’’ texted each other a lot      SOTs 4, 15. Regarding date/time discrepancies            the finer points of creating phony scrips
                                                   because they were friends, it was unusual in the last    encountered in the recording of other undercover
                                                   few years for him to receive a text message from                                                                  reinforced SA Mitchell’s view that Chris
                                                                                                            visits in this case, SA Willett testified that when an
                                                   Chris W. Tr. 24–25.                                      internal battery has been allowed to go completely       W was well aware that the scrip he
                                                     47 The record reflects some confusion regarding
                                                                                                            dead, the device loses track of the actual time. SOT
                                                   A.R.’s first name; however, it is undisputed that Dr.    4(b). If the device’s battery was not checked prior        53 Audio and video recordings
                                                   Hambuchen does not know A.R. and did not                 to use, the recording will reflect whatever time         contemporaneously made by SA Mitchell and a
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                                                   prescribe any controlled substances to her. Tr. 23;      value is stored in the unit. Id. In SA Willett’s         corresponding transcript of Undercover Visit 2 were
                                                   SOT 1(b), (c); 10(d).                                    opinion, this is what happened with some of the          received into evidence. Gov’t Exs. 11–14; Tr. 139–
                                                     48 The patient profile report for A.R. submitted by    video recording devices operated by SA Mitchell on       40, 145.
                                                   the Government spans the time period of January          some of the undercover visits to the Respondent. Id.       54 Audio and video recordings

                                                   2012 through January 2015. Gov’t Ex. 4.                  Additionally, TFO Wilson provided credible               contemporaneously made by SA Mitchell and a
                                                     49 DEA SA Thomas Fisher, another agent                 corroborating testimony. SOT 15(e)–(g).                  corresponding transcript of Undercover Visit 3 were
                                                   stationed at the Little Rock DO, testified that he was      52 Photographs of the controlled substances and       received into evidence. Gov’t Exs. 16–18, Tr. 141.
                                                   also present with TFO Wilson during his interview        corresponding receipts received by SA Mitchell             55 Chris W told SA Mitchell that his fraudulent

                                                   of Dr. Hambuchen, and corroborated TFO Wilson’s          during Undercover Visit 1 were received into             scrip ‘‘looks a lot better than any of the other damn
                                                   account of the interview. SOT 10(c), (d).                evidence. Gov’t Exs. 7–8; Tr. 129, 131.                  things [he’s] seen.’’ Gov’t Ex. 18 at 3.



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                                                   70096                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   presented was fraudulent. SOT 3(e).                     number of a clinic, and a DEA COR                        was owned by Chris W, whom she
                                                   When SA Mitchell asked Chris W for his                  number. SOT 2(b).                                        described to Officer Edgmon as the
                                                   cell phone number so that he could                         On January 12, 2015, the Arkansas                     pharmacist/owner of the Respondent as
                                                   ‘‘call you directly [so that] me and you                Board of Pharmacy (Arkansas Pharmacy                     well as her boyfriend.61 SOT 8(b).
                                                   [could] do business,’’ Chris W took the                 Board or APB) supplied DI Chupik with                    Pemberton consented to a search of
                                                   undercover agent’s cell phone number                    a compact disc (APB CD) that contained                   Chris W’s car. A search of her purse
                                                   instead. Gov’t Ex. 18 at 3.                             reports that APB personnel prepared in                   yielded numerous pill bottles, many of
                                                      A copy of the fraudulent scrip that SA               connection with the pharmacy. SOT                        which were unlabeled.62 SOT 8(c), (d);
                                                   Mitchell presented to Chris W during                    2(e); Tr. 117–19. Included in the                        Tr. 29–32; Govt. Ex. 19. One of these
                                                   Undercover Visit 3 was received into                    materials provided in the APB CD was                     unlabeled bottles had pills that Officer
                                                   evidence.56 Gov’t Ex. 6, 15; Tr. 110. This              a completed DEA Report of Theft or                       Edgmon recognized as likely being
                                                   scrip, dated November 19, 2014,                         Loss of Controlled Substances (DEA–                      alprazolam. SOT 8(d). Pemberton’s
                                                   specified a prescription for 240 tablets                106), signed by Chris W, as the ‘‘Owner/                 purse also contained bottles with labels
                                                   of Norco and 60 tablets of Xanax. Gov’t                 Pharmacist-in-Charge.’’ 58 SOT 2(e);                     bearing her name, as well as other
                                                   Ex. 6. During the course of Undercover                  Gov’t Ex. 53. The DEA–106 that was                       labeled bottles containing non-
                                                   Visit 3, SA Mitchell asked Chris W how                  filed with the Arkansas Pharmacy Board                   controlled pills. Id. Officer Edgmon
                                                   much it would cost to buy a 1,000-count                 on January 9, 2014 reflects (and                         subsequently took Pemberton into
                                                   bottle of hydrocodone. SOT 3(e). Chris                  purports to report to DEA) that on                       custody for possession of a controlled
                                                   W replied, ‘‘I don’t usually do that.’’ Id.             August 5, 2013, the Respondent was                       substance, advised her of her Miranda
                                                   When the undercover agent told Chris                    burglarized and that there was a theft of                rights (which Pemberton acknowledged
                                                   W that he was trying to make some extra                 controlled substances. Gov’t Ex. 53. DI                  she understood) and then questioned
                                                   money, Chris W responded that what                      Chupik testified that a DEA–106 is a                     her about the pills he found in her
                                                   the agent does with the pills after the                 form that, once prepared, must be filed                  purse. SOT 8(e). Pemberton told Officer
                                                   prescription is filled is none of his                   with DEA.59 Tr. 120. On January 22,                      Edgmon that she had Xanax and
                                                   business. Id.                                           2015, based on the information                           ‘‘hydros’’ (hydrocodone) and claimed
                                                      On December 4, 2014 (Undercover                      contained in the DEA–106, DI Chupik                      that she had prescriptions for these. Id.
                                                   Visit 4), SA Mitchell returned to the                   queried the DEA electronic DEA–106                       Pemberton was transported to the
                                                   Respondent, presented another phony                     Theft or Loss database and discovered                    Conway Police Department (CPD) for
                                                   scrip to Chris W, and was dispensed 240                 that no DEA–106 forms had been                           processing, and Officer Edgmon secured
                                                   tablets of hydrocodone 10/325 mg and                    submitted to the DEA by the                              the contraband. Id.
                                                   60 tablets of alprazolam 2 mg.57 SOT                    Respondent in either 2013 or 2014. SOT                      In addition to corroborating many of
                                                   3(f). During Chris W’s interaction with                 2(f); Tr. 120–22. Thus, although the                     the details of her arrest, Samantha
                                                   SA Mitchell during this visit the two                   DEA–106 filed by the Respondent with                     Pemberton testified that she was Chris
                                                   men discussed a possible handgun sale.                  the Arkansas Pharmacy Board ordinarily                   W’s girlfriend, and that it is her
                                                   Over the course of discussion, the                      would/should/does indicate that the                      understanding that he is an owner of the
                                                   undercover agent volunteered to Chris                   document had been filed with DEA to                      Respondent pharmacy. SOT 7(a).
                                                   W that he was a ‘‘convicted felon.’’                    supply DEA with notice of the loss,60                    According to Pemberton, prior to the
                                                   Gov’t Ex. 33 at 8. Chris W told the agent,              this was not the case with this                          traffic stop, Chris W had given her
                                                   ‘‘I can’t sell [a gun] to you because I                 purported burglary.                                      controlled substances (specifically, 30
                                                   know you’re a convicted felon.’’ Id.                       Conway Police Officer Matthew                         hydrocodone 10/325 mg and 30 Xanax
                                                   Chris W’s reservations concerning the                   Edgmon testified that on November 19,                    2 mg) in unmarked bottles and without
                                                   undercover agent’s felony conviction                    2014, he initiated a traffic stop with a                 a prescription, and at the time of her
                                                   revelation did not apparently awaken in                 white Tahoe that had no license plate.                   arrest, those medications were still in
                                                   him any sense of heightened scrutiny                    SOT 8(b); Tr. 29. After some                             her possession. SOT 7(b).
                                                   regarding the wisdom of dispensing                      conversation with the driver, Samantha                      CPD narcotics investigator Thomas
                                                   powerful controlled substances to him.                  Pemberton, he ascertained that she had                   Kennedy testified that he interviewed
                                                      Diversion Investigator (DI) Shelli                   a suspended driver’s license and that                    Pemberton at CPD after her arrest on
                                                   Chupik testified that she is stationed at               the (plateless) vehicle she was driving                  November 19 and that this interview
                                                   the Little Rock DO. SOT 2(a); Tr. 107.                                                                           was recorded.63 SOT 9(b); Tr. 33. During
                                                   According to DI Chupik, it was she who                     58 A copy of this DEA–106 was received into           the interview, Pemberton stated that: (1)
                                                   created the four fake controlled                        evidence. Gov’t Ex. 53; Tr. 119.                         she received at least some of the
                                                   substances scrips that SA Mitchell used                    59 Former Respondent PIC Terry Swaim testified
                                                                                                                                                                    controlled substances that were in her
                                                                                                           that the Respondent had a burglary in August of          purse from Chris W; (2) she had
                                                   during his undercover visits to the                     2013 that resulted in the theft of approximately two
                                                   Respondent. Chupik explained that each                  thousand Soma (carisoprodol) pills and some Xanax
                                                                                                                                                                    prescriptions for the controlled
                                                   fake prescription contained the                         (alprazolam), and that both Tom Watson and Chris
                                                                                                           W were aware of the incident. Tr. 259–60.                  61 The Government introduced a copy of an
                                                   following fictitious information: a
                                                                                                              60 DI Chupik clarified that the duty to file a DEA–   insurance claim letter issued to ‘‘Jennifer Watson
                                                   doctor’s name, the name and phone                       106 occurs ‘‘pretty much immediately’’ after             and Christopher Watson’’ on November 4, 2014,
                                                                                                           discovery of a theft or loss of controlled substances    stating that on October 28, 2014, Pemberton was
                                                     56 DI Shelli Chupik, the creator of the fictitious
                                                                                                           and is not related to the dates when a pharmacy          involved in a loss with a vehicle (a ‘‘2013 Infinity’’)
                                                   scrip, explained that she deliberately included an      registrant is required to conduct a biennial             on their policy. Gov’t Ex. 27; Tr. 214–18.
                                                   authorization for an amount of medication that was      inventory. Tr. 122–24. Although DI Chupik testified      Additionally, Pemberton told Investigator Kennedy
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                                                   inconsistent with the dosage instructions. Tr. 111–     that she believed that the DEA–106 must be filed         in the course of the interview at CPD that Chris W
                                                   13. The discrepancy is highlighted by a text note       within seven days (Tr. 124), the DEA regulations         was her boyfriend and her pharmacist. Tr. 38.
                                                   added by DI Chupik on the copy of the exhibit           actually provide that a ‘‘registrant shall notify [the     62 Photographs of the controlled substances found

                                                   received (without objection) into evidence. Id.;        local DEA Field Division Office], in writing, of [a]     in Pemberton’s car at the time of her November 19,
                                                   Gov’t Ex. 16.                                           theft or significant loss of any controlled substances   2014 arrest were received into evidence. Gov’t Ex.
                                                     57 Audio and video recordings                         within one business day of discovery of such loss        19; Tr. 31–32.
                                                   contemporaneously made by SA Mitchell and a             or theft [and] shall also complete, and submit to the      63 A recording and corresponding transcript of the

                                                   corresponding transcript of Undercover Visit 4 were     Field Division Office in his area, [a DEA–106]           interview of Pemberton conducted by Investigator
                                                   received into evidence. Gov’t Exs. 31–33; Tr. 142–      regarding the loss or theft.’’ 21 CFR 1301.76(b)         Kennedy on November 19, 2014 were received into
                                                   43, 158–59.                                             (2015).                                                  evidence. Gov’t Exs. 25–26; Tr. 36, 38.



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                                                                             Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                   70097

                                                   substances in unmarked bottles, and                     Kennedy did receive a fax (Fax 1) from                labels the other day, but Investigator
                                                   that she had received those controlled                  the Respondent, but contrary to Chris                 Kennedy again explained that he still
                                                   substances from the Respondent where                    W’s representations on the phone, Fax                 needed to see the scrip. Id.; Tr. 55–56.
                                                   her boyfriend, Chris W, was the                         1 contained no scrips, but only a copy                Chris W then clarified that he did not
                                                   pharmacist; (3) she had just filled                     of two prescription labels (i.e.,                     give the scrip to Pemberton because she
                                                   prescriptions for hydrocodone and                       pharmacy fill stickers) from the                      did not want her to try to take it
                                                   Xanax at the Respondent, and that she                   Respondent.65 Id.; Tr. 52–53. Further,                somewhere else, but that he would have
                                                   received the controlled substances from                 not only did Fax 1 contain labels                     one of his technicians look up the scrip
                                                   Chris W in unmarked bottles; and (4)                    instead of scrips, but in Investigator                and send it over. SOT 9(i).
                                                   she was prescribed 30 hydrocodone 10/                   Kennedy’s review of those prescription                   Later in the day, Investigator Kennedy
                                                   325 mg and 30 Xanax 2 mg, but was not                   labels, he determined that the labels did             did receive another fax (Fax 2) from the
                                                   able to name the doctor who prescribed                  not even correspond to the information                Respondent but once again, the fax had
                                                   the pills. SOT 9(c); Gov’t Ex. 26 at 6–                 Chris W had provided him during their                 was not a scrip, but merely a page of
                                                   7.                                                      phone conversation about the controlled               lined paper covered in scribbles, which,
                                                      Investigator Kennedy telephoned                      substances he said he had dispensed to                based on the investigator’s experience,
                                                   Chris W during the afternoon of the day                 Pemberton the previous day. SOT 9(g).                 appeared to him to be a page from a
                                                   Pemberton was apprehended and                           Instead, the labels with Fax 1 reflected              notepad customarily used for call-in
                                                   recorded that conversation.64 SOT 9(d).                 prescriptions that had been filled on                 type prescriptions.68 SOT 9(j); Tr. 55,
                                                   When Investigator Kennedy informed                      October 9, 2014 (not November 19,                     58–59. The Fax 2 notepad page did not
                                                   Chris W that Pemberton had been                         2014), and had been issued for 75                     contain any reference to a prescription
                                                   arrested, Chris W replied that he only                  alprazolam 2 mg tablets and 75                        issued to dispense medication to
                                                   vaguely knew her. Specifically, Chris W                 Hydroco/APAP tablets 10/325 mg (not                   Pemberton on November 19. SOT 9(j).
                                                   said ‘‘I think I know who she is,’’ and                 30 tablets of each drug as Chris W had                Instead, the only reference to Pemberton
                                                   amorphously described her as ‘‘blonde’’                 stated during the previous day’s phone                on the notepad page appeared in the
                                                   and ‘‘kinda cute.’’ SOT 9(e). Chris W                   call). Id. Moreover, the labels stated that           upper right-hand corner of the fax,
                                                   told Investigator Kennedy that he                       the prescriptions had been issued by a                which included a handwritten date that
                                                   thought he recalled that Pemberton may                  ‘‘Dr. Arnold’’, not a ‘‘Dr. Humbard.’’ Id.            appeared to be either ‘‘10–4–14’’ or ‘‘10–
                                                   have come into the Respondent that                      Furthermore, an examination of the                    9–14’’; beneath that date appeared to be
                                                   morning, and he admitted that on or                     labels that were provided indicated that              the name ‘‘Samantha Pemberton,’’ the
                                                   about November 19 he allowed her to                     both directed that no refills remained on             text ‘‘Xanax 2mg, TID, #75’’, ‘‘Narco 10/
                                                   ‘‘borrow’’ some hydrocodone and Xanax                   the prescriptions. Id. Thus, even on                  325’’, some additional writing that
                                                   without a prescription, and that the                    their face, the prescriptions supplied by             Investigator Kennedy was unable to
                                                   pharmacy had ‘‘loaned’’ her some pills.                 Chris W in Fax 1 that were purportedly                decipher, and then ‘‘#75’’. Id. The name
                                                   Id. During the call, Chris W allowed that               used for the October 9, 2014 dispensing               ‘‘James Arnold’’ is written at the bottom
                                                   ‘‘we let her borrow a few because she                   to Pemberton were no longer valid for                 of the notation. Gov’t Ex. 49.
                                                   was out,’’ and ‘‘I know we loaned her                   refilling anything on November 19, 2014               Investigator Kennedy was quite clear
                                                   some hydrocodone and seemed like                        and could not have been properly used                 that he had plainly articulated that he
                                                   Xanax, maybe 2 mg.’’ Id. When                           for that purpose. Id.                                 needed to see the scrips. Tr. 57–58.
                                                   Investigator Kennedy asked Chris W                         On November 21, three days                            Investigator Kennedy testified that on
                                                   how much he had dispensed to                            following Pemberton’s arrest,                         January 2, 2015, he called Pemberton
                                                   Pemberton, he responded, ‘‘I want to say                Investigator Kennedy contacted                        again to remind her that he had still not
                                                   like 30 of each’’ ‘‘just because she gets               Pemberton and notified her that he had                received a scrip. SOT 9(k). In response,
                                                   like 90 at a time.’’ Id. Chris W assured                not received scrips for the drugs she                 she stated that she would try to get the
                                                   Investigator Kennedy that the pharmacy                  received on November 19 from the                      prescription and deliver it to him. Id.
                                                   was ‘‘just waiting on [the doctor’s office]             Respondent.66 SOT 9(h). In response,                  Four days later, on January 6, 2015,
                                                   to call back because that office is                     Pemberton told Kennedy that she                       Pemberton brought Investigator
                                                   notoriously slow.’’ Id.                                 believed that Chris W had sent them. Id.              Kennedy two scrips, both of which bore
                                                      Investigator Kennedy made repeated                   When Investigator Kennedy explained                   the date October 9, 2014, and a
                                                   requests to Chris W and Pemberton to                    that he had not received the scrips,                  signature from a Dr. James Arnold.69
                                                   provide scrips for the 30 hydrocodone                   Pemberton assured him that she would                  Tr. 61–63. The Government also
                                                   pills and 30 Xanax pills that Chris W                   take care of it. Id. Pemberton called                 introduced a copy of Pemberton’s
                                                   admitted he had dispensed to                            Investigator Kennedy back later in the                patient profile from the Respondent,
                                                   Pemberton on or about November 19,                      day and told him that Chris W would                   which indicates that two prescriptions
                                                   but neither supplied any                                fax the scrips. Id. Sometime later in the             (alprazolam and hydroco/APAP) were
                                                   documentation. SOT 9(f). Chris W also                   day, following his phone call with                    dispensed to Pemberton on October 9,
                                                   provided Investigator Kennedy with                      Pemberton, Investigator Kennedy                       2014. Gov’t Ex. 24. According to the
                                                   conflicting information about the                       telephoned Chris W at the Respondent                  patient profile, James Arnold, M.D. is
                                                   identity of Pemberton’s prescribing                     and recorded the call.67 SOT 9(i). Chris              listed as the prescriber for both
                                                   physician. SOT 9(g). Initially, Chris W                 W insisted that he had faxed over the                 prescriptions. Id.
                                                   told him that the prescribing physician                                                                          In her testimony, Pemberton indicates
                                                                                                                                                                 that on January 6, 2015, approximately
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                                                   was a Dr. Humbard and agreed to fax a                     65 A copy of Fax 1 was received into evidence.

                                                   copy of the prescription. Id.                           Gov’t Ex. 48; Tr. 54.                                 two months after her arrest, she did give
                                                                                                             66 A recording and corresponding transcript of
                                                      On November 20, the day following                                                                          Investigator Kennedy scrips that
                                                                                                           Investigator Kennedy’s phone call with Pemberton
                                                   the arrest and phone call, Investigator                 were received into evidence. Gov’t Exs. 66–67; Tr.    corresponded to the controlled
                                                                                                           47–50.
                                                     64 A recording and corresponding transcript of          67 A recording and corresponding transcript of        68 A copy of Fax 2 was received into evidence.

                                                   Investigator Kennedy’s November 19, 2014 phone          Investigator Kennedy’s phone call with Chris W        Gov’t Ex. 49; Tr. 59–60.
                                                   call with Chris W were received into evidence.          were received into evidence. Gov’t Exs. 22–23; Tr.      69 Copies of these scrips were received into

                                                   Gov’t Exs. 20–21; Tr. 41, 43.                           44–46.                                                evidence. Gov’t Exs. 51, 52; Tr. 64–66.



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                                                   70098                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   substances in her possession on the day                 pharmacy shelf, the bottle disappears                     anything else illegal in his vehicle,
                                                   she was arrested. SOT 7(d). The scrips                  from view, and Horton can be seen                         Horton gave no response, but an
                                                   Pemberton gave Investigator Kennedy                     shoving something into his jacket                         inventory search of the truck revealed a
                                                   were dated October 9, 2014 and were                     pocket and walking out of the                             blue tote bag that contained a stock
                                                   issued for 75 tablets of hydrocodone 10/                pharmacy. Id. at 2–6. A camera outside                    bottle of hydrocodone 77 and two 100-
                                                   325 mg and 75 tablets of alprazolam 2                   the pharmacy picks up Horton throwing                     count methadone 10 mg stock bottles.78
                                                   mg, and bore the purported signature of                 something into a dumpster and placing                     SOT 11(d); Tr. 83–84. Horton also had
                                                   Dr. James Arnold of the Baptist                         the aforementioned blue tote 72 into a                    $1,529 in cash on his person, and the
                                                   Emergency Medicine Clinic. Id.                          white pickup truck. Id. at 10.                            methadone stock bottles seized had the
                                                      Dr. James Arnold, M.D., testified that                  Upon Horton’s return to the                            Respondent’s pharmacy stickers on
                                                   he is a doctor practicing at the Baptist                pharmacy, Chris W can be seen placing                     them. SOT 11(d), (e). Additionally,
                                                   Springhill Clinic in North Little Rock,                 a stock medication bottle on the counter                  Trooper Growns testified:
                                                   Arkansas. SOT 22(a). He stated that by                  for Horton to count out into multiple                        We found a pair of tennis shoes that also
                                                   virtue of the fact that he practices in an              amber prescription bottles, one of which                  had another bottle of pills that were mixed
                                                   emergency room, he does not prescribe                   he hands to Chris W, and one of which                     in. We also found a meth pipe and a baggie
                                                   more than twenty hydrocodone tablets                    he places in his own pocket. Id. at 7–                    of stuff that appeared to be meth as well, and
                                                   at one time. SOT 22(b). Dr. Arnold also                 13. Horton then fills a pharmacy bag                      there was a couple of other [C]oke cans as
                                                   indicated that he has checked his                       with the amber prescription bottles and                   well that you could unscrew the lid and had
                                                   records and determined that he has not                  again leaves the pharmacy. Id. at 13. A                   false compartments in them.
                                                   treated and does not know a person                      camera outside the pharmacy captures                        Tr. 84.
                                                   named Samantha Pemberton.70 SOT                         Horton pulling away from the pharmacy                       DI Inez Davis testified that she is
                                                   22(c). On January 7, 2015, Investigator                 in the white pickup truck. Id. at 11.                     currently assigned to the Little Rock DO.
                                                   Kennedy turned over to TFO Wilson the                   Other photographs depict controlled                       SOT 12(a); Tr. 213. The certified copy
                                                   two scrips bearing Dr. Arnold’s name                    substances that were in the blue tote                     of the Respondent’s incorporation from
                                                   that Samantha Pemberton had given                       upon its subsequent seizure and                           the State of Arkansas that DI Davis
                                                   him. SOT 15(c). Both prescriptions had                  inventory. Id. at 11–13.                                  procured reflects that Chris W is listed
                                                   stickers on them indicating that they                      Shortly after Horton departed the                      among the Respondent pharmacy’s
                                                   were filled on October 9, 2014, and both                Respondent, he was pulled over by                         officers, and specifically is listed as
                                                   were marked ‘‘no refills.’’ Id.                         Arkansas State Trooper First Class                        vice-president, controller, and board
                                                      DEA Task Force Officer (TFO) Robert                  (Trooper) Kevin Growns. Trooper                           member of the Respondent. Gov’t Ex.
                                                   Puckett testified that he is a member of                Growns testified that when he observed                    50; SOT 12(b); Tr. 218–19.
                                                   the Beebe, Arkansas Police Department,                  Horton’s white truck change lanes twice                     On January 27, 2015, a federal search
                                                   is cross-designated as a DEA TFO, and                   without the benefit of a turn signal,73 he                warrant was executed on the
                                                   is currently stationed at the Little Rock               initiated a traffic stop. SOT 11(b); Tr.                  Respondent simultaneously with the
                                                   DO. SOT 5(a); Tr. 91. TFO Puckett                       77–78. At the time of the stop, Horton                    service of the OSC/ISO that initiated
                                                   reviewed surveillance videos of the                     handed the trooper Chris W’s driver’s                     these proceedings (pharmacy search
                                                   interior and exterior of the Respondent                 license, eventually explaining that he                    warrant execution). Little Rock DO
                                                   that were recorded on January 20, 2015,                 had the license so he could use Chris                     Group Supervisor (GS) Lisa Barnhill
                                                   and testified that he isolated screen                   W’s credit card. SOT 11(b); Tr. 78–79.                    testified that during the pharmacy
                                                   captures from the video. SOT 5(c); Gov’t                Horton ultimately did present his own                     search warrant execution, it was she
                                                   Ex. 36. Chris W and his friend, Eric                    driver’s license,74 a run of which                        who coordinated and supervised the
                                                   Horton, are depicted in the video                       through the Arkansas Crime Information                    search of the pharmacy’s records. SOT
                                                   footage. The Government introduced the                  Center (ACIC) database 75 revealed two                    14(c). DEA and other law enforcement
                                                   screen captures of the surveillance                     outstanding warrants, one of which was                    personnel associated with the search
                                                   videos created by TFO Puckett, as well                  active. SOT 11(c). In response to a                       were able to locate patient profiles for
                                                   as TFO Puckett’s written narrative                      question from Trooper Growns, Horton                      Eric Horton, Brian Jackson (the
                                                   describing the actions of Horton and                    indicated that he was not armed, but                      undercover identity used by SA
                                                   Chris W. Tr. 98; Gov’t Ex. 36.71                        that there were two pistols in the truck                  Mitchell), Samantha Pemberton, and
                                                      According to TFO Puckett’s                           he was driving. Id.; Tr. 81. Horton was                   A.R. However, although the vehicle he
                                                   (unchallenged) account, the surveillance                searched for weapons, handcuffed, and                     was driving on the night of his arrest
                                                   tapes show Chris W handing Horton a                     placed into the trooper’s vehicle.76 SOT                  contained stock bottles of controlled
                                                   bottle of medication, some of the                       11(c). Trooper Growns found two                           substances adorned with labels from the
                                                   contents of which Horton pours into an                  handguns sitting on the rear floorboard                   Respondent pharmacy, there was no
                                                   amber prescription bottle. Gov’t Ex. 36                 (one of which had a chambered round).                     patient profile for Joseph Jackson at the
                                                   at 1–2. Horton can then be seen placing                 Tr. 83. When asked if there was                           pharmacy.79 Id. GS Barnhill also related
                                                   items into a blue tote bag on the floor.                                                                          that she conducted an audit of
                                                   Horton then pulls a stock bottle of                       72 A blue tote filled with controlled medications       Respondent pharmacy records obtained
                                                   medication from the shelf, shows the                    was seized from the white pickup truck Horton was         during the pharmacy search warrant
                                                                                                           driving at the time of his arrest later that evening.
                                                   bottle to Chris W, puts it into a                       Tr. 83.
                                                   pharmacy bag, and drops the pharmacy                                                                                 77 In Trooper Growns’s estimation, it was a ‘‘like
                                                                                                             73 Trooper   Growns testified that a traffic citation
                                                   bag with some other items into a blue                                                                             [a] thousand count bottle of hydrocodone[ ] . . .’’
                                                                                                           was issued regarding the failure to signal violation
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                                                                                                                                                                     Tr. 83.
                                                   tote bag. Id. at 2. Horton takes another                as well as driving without insurance. Tr. 85.                78 Photographs of the controlled substances found
                                                   stock medication bottle from a                            74 Tr. 79–80.
                                                                                                                                                                     in Horton’s vehicle were received into evidence.
                                                                                                             75 In his live testimony, Trooper Growns stated         Gov’t Ex. 35; Tr. 87–89.
                                                     70 TFO Wilson ascertained from Dr. Arnold that        that the license check was initiated through the             79 This testimony is consistent with the
                                                   he is not Pemberton’s doctor and did not issue the      Federal Bureau of Investigation’s National Crime          recollection of DI Pamela Lee and DI Davis, who
                                                   scrips. SOT 15(d).                                      Information Center (NCIC) database. Tr. 79. The           were also present. SOTs 20, 12(c), (d). The patient
                                                     71 A clearer version of this exhibit was              variance is not material.                                 profiles seized that day were received into
                                                   subsequently substituted in the record with the           76 A copy of Horton’s arrest photograph was             evidence. Gov’t Exs. 4, 24, 37; Tr. 187, 188–89, 191–
                                                   assent of the Respondent. Tr. 387–88.                   received into evidence. Gov’t Ex. 34; Tr. 86–87.          92; see also SOT 18.



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                                                                             Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                     70099

                                                   execution, focusing on varying strengths                W’s, Eric Horton, who was also not                      Like Pharm. Tech. Gilbert, Pharm. Tech.
                                                   of ‘‘oxycodone, hydrocodone,                            employed at the pharmacy. SOT 19(f).                    Burns affirmed that neither Eric Horton
                                                   alprazolam and generic Dilaudid.’’ 80 Tr.               When DI Vazquez-Lopez asked Pharm.                      nor Joseph Jackson is an employee of
                                                   181. According to GS Barnhill, her audit                Tech. Wood for the Respondent’s most                    the Respondent.83 SOT 16(c). She
                                                   of just those medications yielded a                     recent physical inventory records,                      believes that Horton is a friend 84 of
                                                   ‘‘shortage of close to a quarter million                Pharm. Tech. Wood stated that Chris W                   Chris W’s, and she has seen Horton take
                                                   pills.’’ Id. Barnhill also testified that the           had taken the Respondent’s last                         bottles of controlled substances off of
                                                   search she conducted of all of relevant                 inventory records after a state                         shelves at the Respondent and place
                                                   paper and electronic records at the Little              inspection the previous year, and that                  them in his pockets. Id. Pharm. Tech.
                                                   Rock DO reflects no report of theft or                  there were no other copies in the                       Burns further testified that several
                                                   loss of controlled substances filed with                Respondent pharmacy. SOT 19(i).                         weeks before the pharmacy search
                                                   DEA by the Respondent between                              Pharm. Tech. June Gilbert testified                  warrant execution, Chris W and Horton
                                                   January 1, 2012 and January 22, 2014.                   that she has been a pharmacy technician                 removed a large number of invoices and
                                                   SOT 14(a), (b); Gov’t Ex. 63; Tr. 161,                  at the Respondent for approximately                     hard copies of prescriptions that were
                                                   175–76.                                                 thirty-one years, and that it has been her              previously filled from the pharmacy, but
                                                      DI Carolina Vazquez-Lopez testified                  experience that controlled substances                   she does not know what became of the
                                                   that she is assigned to the Little Rock                 frequently disappear from the                           documents they took. SOT 16(g).
                                                   DO, that she was present at the                         Respondent overnight. SOT 17(a), (c).                      TFO Eli Fowlkes testified that he is a
                                                   pharmacy search warrant execution, and                  Pharm. Tech. Gilbert also related that                  detective with the Benton, Arkansas
                                                   that, as she was directed to do, she                    she has seen Chris W repeatedly give                    Police Department and is cross-
                                                   gathered all pertinent required DEA                     out pills without a prescription, and                   designated as a DEA Task Force Officer
                                                   records from the Respondent, including                  that Eric Horton and Joseph Jackson are                 stationed at the Little Rock DO. SOT
                                                   DEA Order Form 222s, Controlled                         not employees of the Respondent. SOT                    21(a); Tr. 197–98. TFO Fowlkes testified
                                                   Substance Ordering System (CSOS)                        17(b), (c).                                             that on January 27, 2015, he participated
                                                   records, purchase invoices, DEA Form                       Pharm. Tech. Alyssa Burns testified                  in the execution of a search warrant at
                                                   41/Registrants Inventory of Drugs                       that she has been a pharmacy technician                 Chris W’s residence (Chris W residence
                                                   Surrendered, DEA Form 106/Theft or                      at the Respondent for approximately                     search warrant execution). SOT 21(b);
                                                   Loss of Controlled Substances, Power of                 one year. SOT 16(a). Similar to Pharm.                  Tr. 199–200. During the search of Chris
                                                   Attorney, and Inventory Records. SOT                    Tech. Gilbert’s experience, Pharm. Tech.                W’s house, TFO Fowlkes discovered
                                                   19(a)–(c). DI Vazquez-Lopez testified                   Burns testified to her observation that                 numerous controlled substance scrips,
                                                   that during the pharmacy search                         items delivered in medication                           which he photographed and inventoried
                                                   warrant execution she was assisted in                   shipments to the Respondent—mostly                      into DEA custody. SOT 21(c), (d); Gov’t
                                                   gathering records by Bettie Wood, a                     oxycodone—regularly turn up missing                     Exs. 41, 54–62; Tr. 200–07.
                                                   pharmacy technician (Pharm. Tech.)                      the morning after delivery. SOT 16(b). It                  The Government also presented the
                                                   employed at the Respondent. SOT 19(d).                  is Pharm. Tech. Burns’s opinion that                    testimony of pharmacist Tracy Swaim.
                                                   DI Vazquez-Lopez testified that Pharm.                  orders for controlled substances placed                 Swaim testified that he is currently
                                                   Tech. Wood told her that the                            by the Respondent are excessive in light                employed as a part-time 85 pharmacist at
                                                   Respondent only had partial invoices                    of the number of prescriptions that are                 the Respondent, but up until October
                                                   for December 2014 and January 2015                      actually filled there. Id. According to                 10, 2014, he had worked there as a full-
                                                   because Chris W’s friend, Eric Horton (a                Pharm. Tech. Burns, the Respondent                      time pharmacist for twenty-six years,
                                                   non-employee), had removed all of the                   usually reaches its controlled substance                and was the Respondent’s pharmacist-
                                                   other invoices at Chris W’s request in                  limit with McKesson—one of its                          in-charge (PIC) until January of 2012. Tr.
                                                   early December 2014. SOT 19(e).                         pharmaceutical suppliers—on the ninth                   232–33.
                                                      DI Vazquez-Lopez asked Pharm. Tech.                  day of each month.81 Id.                                   Swaim explained that controlled drug
                                                   Wood whether the Respondent had any                        Pharm. Tech. Burns also stated that                  purchases at the Respondent are
                                                   reported thefts or losses in the last two               Chris W has ordered her to fill                         conducted through the DEA Controlled
                                                   years. SOT 19(f). Pharm. Tech. Wood                     prescriptions for hydrocodone, Xanax,                   Substance Ordering System (CSOS)
                                                   stated that there had been an incident in               Soma, and promethazine cough syrup                      program, and that a single password,
                                                   either August or October 2013 when two                  without a hard copy of a prescription,                  issued in Swaim’s name, is and has
                                                   1,000-count bottles of carisoprodol were                and that he once directed her to fill four              been used by all Respondent employees
                                                   stolen. Id. When DI Vazquez-Lopez                       identical prescriptions for Xanax,                      who order controlled medications. Tr.
                                                   asked Pharm. Tech. Wood for a copy of                   hydrocodone, and Soma for a customer                    245–48; see also Tr. 365–66. According
                                                   the DEA Form 106/Theft or Loss Form,                    (B.E.) in a single week.82 SOT 16(e).                   to Swaim, the Respondent purchased
                                                   she stated that Chris W would have it.                  Pharm. Tech. Burns has seen Chris W                     controlled substances from the
                                                   Id. When DI Vazquez-Lopez asked                         leave the pharmacy with drugs in his                    McKesson Drug Company (McKesson),
                                                   Pharm. Tech. Wood where the                             backpack, and has actually seen a stock                 Top Rx, and The Harvard Drug Group.
                                                   controlled substance prescriptions were                 bottle of hydrocodone with tablets in                   Tr. 248; see also Gov’t Exs. 42–47, 68.
                                                   stored, she explained that the                          Chris W’s open backpack. SOT 16(f).                     Swaim explained that prior to the
                                                   prescriptions were stored in the back                                                                           commencement of Chris W’s
                                                   office, but only as far back as April 2014                 81 The Government introduced into evidence           involvement with the Respondent,
                                                   because prescriptions prior to 2012 were                copies of lists generated by the Respondent’s           McKesson was able to provide an
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                                                                                                           distributors indicating the products sold to the
                                                   lost in a fire, and the balance had been                Respondent between 2013 and 2015. Gov’t Exs. 42–
                                                                                                                                                                   adequate supply to keep up with
                                                   taken away by another friend of Chris                   43, 68 (McKesson); 44–45 (Harvard); 46–47 (Top
                                                                                                                                                                      83 Long-time Respondent PIC Tracy Swaim also
                                                                                                           Rx); Tr. 167, 169, 172–73.
                                                     80 Dilaudid (hydromorphone) is a Schedule II             82 A copy of B.E.’s patient profile at the           testified that Jackson was never an employee at the
                                                   controlled substance. 21 CFR 1308.12; Office of         Respondent, as well as copies of prescriptions          Respondent. Tr. 235; Gov’t Ex. 38.
                                                                                                                                                                      84 Samantha Pemberton testified that has seen
                                                   Diversion Control, Hydromorphone, Drug                  issued to B.E., were introduced into evidence. Gov’t
                                                   Enforcement Admin. (July 2013), available at            Ex. 65; Tr. 194. B.E.’s patient profile does indicate   Chris W supply Horton with controlled substances
                                                   http://www.deadiversion.usdoj.gov/drug_chem_            that this was the case from January 2–8, 2014. Gov’t    at parties at Chris W’s residence. SOT 7(c).
                                                   info/hydromorphone.pdf.                                 Ex. 65 at 9.                                               85 Tr. 266.




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                                                   70100                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   demand, but that resort was had to the                    I just told him I was not going to be               unbiased, and is fully credited in this
                                                   other two suppliers when the amount of                  pharmacist-in-charge. . . . I said that I can’t       recommended decision.
                                                   controlled drugs ordered by the                         sleep at night, and I’m not—I don’t want to              The Government also presented the
                                                   Respondent increased by one-third 86                    go to jail over something. And Tom [Watson]           testimony of Grant Goode, Tom
                                                                                                           said don’t worry, nobody’s going to jail. If          Watson’s nephew 91 and a former staff
                                                   and rose to a level exceeding                           anybody does, I will.
                                                   McKesson’s quantity limits. Tr. 248–51.                                                                       pharmacist at the Respondent. Tr. 270–
                                                      In the course of the hearing, Swaim                  Tr. 253. Swaim testified that he                      71. Goode testified that he started at the
                                                   was shown photographs of Joseph                         completed the paperwork and inventory                 Respondent working one day in
                                                   Jackson and Eric Horton and affirmed                    required to hand over PIC control and                 November 2014 and then for
                                                   that neither man had ever been an                       accountability of the pharmacy to Chris               approximately two months, starting in
                                                   employee of the Respondent. Tr. 235–                    W, and that notwithstanding this                      mid-December 2014, working on a
                                                   36; Gov’t Ex. 38, 34. Swaim testified that              diminution in his responsibilities,                   schedule that increased from about
                                                   although he did not know Jackson at all,                neither his compensation nor his hours                twenty-five hours per week to ninety-six
                                                   he did recognize Horton as a man that                   were reduced. Tr. 254–55, 266–67.                     hours per two weeks. Tr. 271. Goode
                                                   periodically came to the store to pick up                 Swaim also recounted a conversation                 recalled that during this time, his cousin
                                                   cream that the pharmacy regularly                       he overheard between long-term                        Chris W would enter the pharmacy for
                                                   ordered to manufacture Redneck                          Respondent Pharm. Tech. June Gilbert 88               varying amounts of time, generally less
                                                   Remedy, a cream produced by a                           and Watson that occurred in September                 than twenty-five hours per week, and do
                                                   company called Matlon, Incorporated                     of 2014,89 approximately two years and                non-pharmacist work. Tr. 273–74.
                                                   (Matlon).87 Tr. 236–40; see also Gov’t                  nine months after surrendering his PIC                   Goode testified that while working at
                                                   Ex. 69. According to Swaim, although                    responsibilities. Swaim testified that he             the Respondent, he fielded several
                                                   Horton was not an employee and not a                    heard Pharm. Tech. Gilbert tell Watson                telephonic inquiries from prescribing
                                                   pharmacist, he was routinely permitted                  that his son, Chris W, was ‘‘giving                   physicians that led him to discover that
                                                   into the restricted pharmacy area, and                  away’’ medication. Tr. 256–57. In                     pharmacy patient profiles described
                                                   he regularly made deliveries of                         response to what he heard, Swaim told                 numerous Schedule II controlled
                                                   prescriptions (including controlled                     Watson that he (Swaim) ‘‘just can’t take              substance dispensing events where no
                                                   substances) to customers in the                         this anymore [and that he was] going to               hard copy of the scrip was present in
                                                                                                           give notice . . . if you don’t stop [Chris            the file and where the purported
                                                   Mayflower area for the Respondent. Tr.
                                                                                                           W].’’ Tr. 257. In reply, Tom Watson                   prescribing doctor had no recollection
                                                   237–39. Swaim testified that to his
                                                                                                           asked Swaim not to leave and assured                  of authorizing the medication. Tr. 274–
                                                   knowledge, Horton worked with Chris
                                                                                                           him that he would ‘‘put a stop to it.’’ Id.           75. According to Goode, when he
                                                   W in connection with Chris W’s Matlon
                                                                                                           According to Swaim, ‘‘he looked me in                 examined the pharmacy files, he
                                                   business. Tr. 236.
                                                                                                           the eye and said ‘trust me,’ and I said               discovered other occasions where
                                                      Swaim also related that the                                                                                controlled substances had been
                                                   Respondent was burglarized in August                    ‘okay, I will.’ ’’ Id.; see also Tr. 265.
                                                                                                           Swaim testified that four days later,                 dispensed but no scrip hard copy was
                                                   of 2013, resulting in the theft of                                                                            retained. Tr. 275–76. Based on what he
                                                   approximately two thousand                              upon ascertaining from the pharmacy
                                                                                                           staff that, notwithstanding Watson’s                  discovered, Goode began contacting
                                                   carisoprodol pills and some Xanax. Tr.                                                                        prescribing doctors on his own and
                                                   259–60. The police were notified, and                   assurances to the contrary, nothing had
                                                                                                           changed about the improper manner in                  discovered ‘‘dozens’’ of cases were
                                                   both Chris W and the Respondent’s                                                                             controlled substances were dispensed
                                                   owner, Tom Watson, were aware of the                    which (now PIC) Chris W was executing
                                                                                                           his responsibilities as a pharmacist, he              and no hard copy scrip was present. Tr.
                                                   incident. Tr. 260.                                                                                            276. Goode testified that when he
                                                      Swaim explained that since his                       called Watson and gave two weeks’
                                                                                                           notice.90 Tr. 257.                                    brought this issue to the attention of
                                                   retirement approximately ten to twelve                                                                        Watson, his response was that the scrips
                                                   years ago, the Respondent’s owner, Tom                    Swaim’s testimony (which was not
                                                                                                           the subject of a stipulation regarding                ‘‘must have been put in the wrong place
                                                   Watson, would visit the business (which                                                                       in the files. Maybe the girls, maybe the
                                                   included the Big Star grocery store in                  content or credibility) was detailed,
                                                                                                           internally consistent, plausible, and                 technicians misplaced the
                                                   which the pharmacy was located)                                                                               prescriptions.’’ Tr. 277. Goode kept
                                                   approximately once a week. Tr. 240–41.                  presented no objective factual basis
                                                                                                           upon which to challenge it for bias.                  checking pharmacy files and made
                                                   According to Swaim, prior to his                                                                              inquiry of the technicians. Tr. 278.
                                                   retirement, Watson worked two days per                  Simply put, Swaim has nothing to gain
                                                                                                                                                                    Goode also related that on two
                                                   week part-time as a relief pharmacist                   or lose based on the outcome of this
                                                                                                                                                                 occasions he observed Chris W take
                                                   while Swaim served as the full-time                     case. The fact that he served the
                                                                                                                                                                 thousand-count stock bottles 92 of
                                                   PIC. Tr. 241–44.                                        Respondent for twenty-six years as its
                                                                                                                                                                 hydrocodone and place them into his
                                                      Swaim testified that in January of                   PIC and was even hired back after the
                                                                                                                                                                 backpack. Tr. 278. Further, Goode stated
                                                   2012, he informed Watson that his                       pharmacy search warrant execution, is                 that on one occasion, Tom Watson was
                                                   observation of improper controlled                      powerful evidence that even Watson                    present and observed Chris W pack the
                                                   substance refills approved by Watson’s                  knows that Swaim is a man who can be                  stock bottle into his backpack. Tr. 280.
                                                   son, Chris W, sufficiently troubled him                 trusted. The witness’s testimony                         Goode testified that he called the
                                                   that he was resigning as the PIC. Tr.                   presented as thoughtful, coherent, and                Pharmacy Board on December 17, 2014
                                                   251–56. Swaim recounted the                                                                                   and related his suspicions regarding
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                                                                                                             88 See SOT 17.
                                                   conversation in this manner:                              89 Tr.
                                                                                                                                                                 diversion as well as some concerns he
                                                                                                                    265. Although Swaim initially indicated
                                                                                                           that the date was in September of 2015 (a date in     had about whether Chris W had an
                                                     86 Tr.262–63.                                         the future), he subsequently corrected the date to
                                                     87 Asdiscussed in greater detail infra, Matlon is     2014.                                                   91 Tr.274.
                                                   a company that is jointly owned and managed by            90 The record does not reflect any other area of      92 Goode testified that this size bottle of
                                                   Chris W and Glenn Wood, a pharmacist who now            contention between Swaim and Watson and in fact,      medication was used to contain stock and fill
                                                   works at the Respondent and previously worked at        Watson hired Swaim back to work part-time at the      prescriptions, but would never be a quantity that
                                                   a another pharmacy owned by Tom Watson in               Respondent after the pharmacy search warrant          would be dispensed to an individual patient. Tr.
                                                   Mayflower, Arkansas. Gov’t Exs. 69, 70.                 execution. Tr. 266.                                   279–80.



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                                                                              Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                       70101

                                                   addiction problem. Tr. 281. According                    Tr. 291–92. Watson did eventually let                    diversion issue in any pharmacy where
                                                   to Goode, personnel at the Pharmacy                      Goode know that Glenn Wood would be                      he has been employed, and that he has
                                                   Board advised him that they would be                     taking his hours. Tr. 290. Watson                        never been subject to disciplinary
                                                   dispatching someone to investigate the                   subsequently telephoned Goode and                        action. Tr. 393, 424–25, 430, 443; see
                                                   pharmacy, and that in the meantime, he                   told him he was ‘‘upset’’ about                          also SOF 23(b); Gov’t Ex. 12.
                                                   should ‘‘just stay put.’’ Tr. 282. Goode                 statements Goode had made to DEA,                           Wood testified to a relatively lengthy
                                                   explained that on January 2, 2015, in the                and that he felt Goode ‘‘had hung him                    history of working on and off for the
                                                   midst of ‘‘staying put,’’ one of the                     out to dry.’’ Tr. 291.                                   Watsons over the course of his nine
                                                   Respondent’s pharmacy technicians                           Goode’s testimony was not the subject                 years 97 as a pharmacist. When he was
                                                   brought to his attention forged Schedule                 of a stipulation regarding content or                    in school at the University of Arkansas
                                                   II scrips that had been dispensed with                   credibility, but the testimony was                       for Medical Sciences, he completed a
                                                   Goode’s initials on the label. Tr. 282–83.               sufficiently detailed, plausible, and                    one-month pharmacy internship
                                                   When Goode showed the forged scrips                      internally consistent to be fully credited               working for Chris W. Tr. 391, 478. After
                                                   to Watson, the latter suggested that                     in this decision. Although there were                    graduating in 2006, Wood worked as a
                                                   (long-time pharmacy technician) ‘‘June                   vague references to some unrelated,                      pharmacist in several Watson-owned
                                                   [Gilbert] must be doing that.’’ Tr. 283.                 historical family acrimony that did not                  pharmacies, rotating between his
                                                   Goode pressed him on the issue and                       specifically involve the Watsons, there                  Mayflower, Morrilton, and Perryville
                                                   reminded him that his son, Chris W,                      was no evidence that would support any                   (the Respondent) pharmacies. Tr. 392–
                                                   had access to a laptop that allowed him                  level of bias that impacts on this                       94, 453, 475.
                                                   to log in and print out pharmacy                         witness’s credibility, and his testimony                    Wood testified that in 2008 or 2009 he
                                                   paperwork. Tr. 283. That day, Goode                      is fully credited in this recommended                    briefly moved to Utah to accept a
                                                   faxed copies of the fraudulent scrips to                 decision.                                                pharmacist position there, but the
                                                   the Pharmacy Board, and followed up                         The Respondent called three                           adventure was short-lived, and he
                                                   with a phone call to both the Pharmacy                   witnesses in its case-in-chief: Tom                      returned to Arkansas. Tr. 395. Upon his
                                                   Board and DEA. Tr. 284–85.                               Watson, the pharmacist-majority-                         return, he resumed employment for
                                                      On February 5, 2015, several days                     owner 94 of the Respondent; Glenn                        Tom Watson as the PIC of his Morrilton
                                                   after the (January 27) pharmacy search                   Wood, the pharmacist Watson selected                     Food and Drug pharmacy (Morrilton) for
                                                   warrant execution, Goode confronted                      to succeed his son as the PIC; and                       three years. Tr. 394–95. When Watson
                                                   his cousin, Chris W, with his                            Brenda McCrady,95 an official from the                   sold the Morrilton pharmacy to a rival
                                                   suspicions. Tr. 286. By Chris W’s                        Pharmacy Board, who attested to the                      chain, Wood spent three years with a
                                                   demeanor, Goode got the sense that his                   fact that neither of these professional                  pharmacy unaffiliated with the
                                                   cousin had identified him as DEA’s                       pharmacists has been subject to                          Watsons. Tr. 396. Wood explained that
                                                   source, and shortly thereafter, Chris W                  discipline before that body.                             in December 2014 he made
                                                   informed him that he would be                               Glenn Wood is the pharmacist who                      arrangements with Chris W to return to
                                                   substituting Goode with a pharmacist                     supplanted the hours worked by Grant                     the Respondent on a part-time basis,98
                                                   named Glenn Wood. Tr. 287. Goode also                    Goode at the Respondent after Grant                      but that he did not report for work until
                                                   recalled being approached by Tom                         Goode registered concerns about                          the day after the pharmacy search
                                                   Watson near the end of January 2015                      diversion there to the Pharmacy                          warrant execution. Tr. 396, 398. Wood
                                                   and told that customers had registered                   Board,96 and the individual who has                      testified that although the final
                                                   complaints about his unwillingness to                    been selected by the Respondent to                       paperwork is still pending at the
                                                   dispense scrips they had presented, and                  assume the duties of its PIC                             Pharmacy Board,99 he is currently acting
                                                   that one customer was even concerned                     permanently. Tr. 313. Wood testified                     as the PIC at the Respondent. Tr. 398.
                                                   that Goode would ‘‘turn [him] into                       that he has his Pharm. D. degree, has                    According to Wood, the appropriate
                                                   DEA.’’ Tr. 288. Goode got the sense that                 been a licensed pharmacist in Arkansas                   application was filed at the Pharmacy
                                                   Watson was disappointed in him for                       for approximately nine years, and is a                   Board days prior to the hearing. Tr. 399,
                                                   declining to fill the scrips as presented.               member of the Arkansas Pharmacists                       443.
                                                   Tr. 289.                                                 Association. Tr. 391, 393. Wood stated                      Wood opined that where a pharmacy
                                                      Pharmacist Glenn Wood and Goode                       that he has never been aware of a                        is operating without an involved and
                                                   communicated by text and phone a few                                                                              active owner, diversion control
                                                   days later. Tr. 291–92. When Goode                       against law enforcement officers on its case-in-         responsibility ‘‘starts with the PIC.’’ Tr.
                                                   asked Wood about his hours for the                       chief, and in an exercise of commendable candor,
                                                                                                            notified the tribunal at the outset of the case that
                                                                                                                                                                     415. Wood testified that he believes that
                                                   week, Wood related his understanding                     in proceedings unrelated to this case, a United          it would be difficult to discover a PIC
                                                   that Watson had planned to let Goode                     States Magistrate Judge had declined to credit this      engaging in unethical or illegal behavior
                                                   know that his services would no longer                   testimony from Goode. Tr. 11; ALJ Ex. 21. The            unless the PIC ‘‘was doing it obviously
                                                   be required at the pharmacy. Id. The                     parties acquiesced in official notice (see 5 U.S.C.
                                                                                                            556(e) (2012)) that this testimony had previously
                                                                                                                                                                     in front of everyone that worked there.’’
                                                   conversation turned somewhat heated,                     been found unsupported by a United States                Id. He stated that because the PIC is in
                                                   and Goode essentially accused Wood of                    Magistrate Judge in an unrelated proceeding (Tr.         charge of diversion control at a
                                                   looking the other way in the face of                     304), and the order issued by the Magistrate Judge,      pharmacy, he doesn’t know a way to
                                                   misconduct being committed by Chris                      which denied the Government’s motion to revoke
                                                                                                            Chris W’s bond based on these comments
                                                                                                                                                                     ‘‘safeguard’’ against such behavior
                                                   W at the Respondent as well as the                       purportedly uttered by his sponsor (and father)          except by having another employee (for
                                                   Mayflower pharmacy, where Wood and                       Watson, was received into evidence. Resp’t Ex. 14;
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                                                   Chris W previously worked together.93                    Tr. 306. Because the Government did not offer the          97 Tr. 392.
                                                                                                            purported threat in its case-in-chief, a disposition       98 Wood   testified that he only desired part-time
                                                      93 Goode also testified that Tom Watson told him      of this case does not require that a credibility issue   employment at the Respondent because he wanted
                                                   that ‘‘he would like to kill a couple of DEA agents.’’   on this statement be rendered, and it forms no basis     additional time to pursue a career in professional
                                                   Tr. 302. Even assuming that Watson could have            of this recommended decision.                            bass fishing. Tr. 397–98.
                                                                                                              94 Tom Watson testified that he owned fifty-eight
                                                   been speaking during a time of some agitation, such                                                                 99 Wood had previously been approved by the

                                                   a statement demonstrates a deplorable and                and one half percent of the Respondent. Tr. 314.         Arkansas Board as a PIC at Morrilton. Tr. 399. He
                                                                                                              95 SOT 23; Gov’t Ex. 12; Tr. 320.
                                                   dangerous lack of judgment on his part. The                                                                       testified that he had taken an examination when he
                                                   Government did not offer this not-too-veiled threat        96 Tr. 281, 291–92.                                    was initially designated as a PIC. Tr. 475.



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                                                   example, a pharmacy technician) also                    reviews the footage at the Respondent.                that it’s up for sale and the fact that the
                                                   signing off on checking drugs in and                    Tr. 424.                                              owner, Tom Watson, will probably not get
                                                   conducting an inventory (a measure                         Wood also explained the role of                    his DEA registration back . . . I really don’t
                                                   which he stated he would implement                      Arkansas’s prescription monitoring                    feel comfortable, right now, putting my name
                                                                                                                                                                 down as PIC of this place . . . I’m not even
                                                   should the Respondent again dispense                    program (PMP), in which pharmacies                    sure I’ll be here in another month.
                                                   controlled substances). Tr. 416–18, 448.                are required to submit a weekly report
                                                   Wood testified has reviewed a written                   to the state to disclose what and how                 Gov’t Ex. 71 at 3. A subsequent email
                                                   (unsigned) proposed controlled                          many controlled substances have been                  sent by Wood reads:
                                                   substance policy document (Proposed                     dispensed at the pharmacy that week.106                 [D]o I need to put my name down as PIC
                                                   Policy) provided to him by Watson, and                  Tr. 419–20. The database into which                   to make [the Respondent] compliant? I really
                                                   represented he would implement its                      that information is incorporated then                 don’t want to associate my name with it right
                                                   provisions if the pharmacy gets its COR                 permits doctors and pharmacists to                    now, but I seem to be the only pharmacist
                                                   back. Tr. 417; Resp’t Ex. 1. Wood                       search for a particular patient and see               they can get to work here for now. I seriously
                                                   described the Proposed Policy as an                     that patient’s prescription history to                doubt I will be here much longer, however.
                                                   outline of policies and procedure, a                    investigate whether a patient has been                Id. at 2.
                                                   ‘‘working document,’’ and stated that he                using multiple pharmacies or doctor-                     Wood also explained that the
                                                   would recommend that all future PICs                    shopping. Tr. 420. Wood testified that                Respondent is located in an ‘‘extremely
                                                   be required to review the policy with                   he does not have a ‘‘magical number’’ of              rural’’ area, and that the pharmacy
                                                   Watson and sign off that they had done                  how often he checks the PMP when                      serves a largely indigent population. Tr.
                                                   so.100 Tr. at 418. Wood proposed the                    filling a prescription but that such a                404. Wood described the Respondent’s
                                                   implementation of diversion controls                    decision relies upon whether                          customer base as ‘‘extremely loyal’’, and
                                                   beyond the requirement of the already                   ‘‘something doesn’t feel right’’ or if a              he explained that customers rely upon
                                                   mandatory biennial inventory,101 such                   patient shows up multiple times in a                  pharmacists much as they would rely
                                                   as a requirement that the PIC personally                short period of time with scrips from                 upon doctors. Id. Wood also stated that
                                                   insure that all controlled substance                    different practitioners. Tr. 422–23.                  because of the small-town nature of the
                                                   inventory is checked in properly in the                    Wood stated that he believes that as               community, doctors and pharmacists
                                                   inventory database, and the                             PIC, he could administer the Proposed                 have a unique relationship such that
                                                   maintenance of a ‘‘perpetual inventory’’                Policy should the Respondent retain its               doctors ‘‘trust’’ and ‘‘utilize’’
                                                   of controlled substances,102 and several                COR. Tr. 430. He has been working at                  pharmacists differently than in other,
                                                   other measures aimed at increased                       the Respondent since January 2015 and                 more cosmopolitan communities, and
                                                   security and accountability. Tr. 415–19,                intends to remain and assume the duties               that the Respondent participates in
                                                   444.                                                    as the PIC, but indicated that he                     state-authorized ‘‘disease state
                                                      Wood testified that electronic keypad                deferred the submission of his                        management,’’ counsels patients, and
                                                   door locks,103 lockable roll-down                       Pharmacy Board paperwork until April                  administers immunizations.109 Tr. 430.
                                                   windows, and a host of pharmacy                         due to lingering uncertainty as to the                According to Wood, although there is
                                                   security cameras 104 trained on the                     pharmacy’s future. Tr. 470. Wood                      another pharmacy in the county, the
                                                   windows, doors, and cashiers supply                     allowed that even at the time he                      grocery store owned by Tom Watson in
                                                   additional layers of diversion control.                 accepted the offer to become the next                 which the Respondent is located is the
                                                   Tr. 401, 419.105 However, he stated that                PIC, he harbored concerns about what                  only grocery store located in the county.
                                                   he does not believe anyone watches the                  the future holds for the pharmacy. Tr.                Tr. 404. Wood opined that without the
                                                   tape in real time or reviews the tape                   471.                                                  Respondent present, the other pharmacy
                                                   regularly. Tr. 423–24. He did not know                     Wood testified that his efforts to allay           in the county would have a ‘‘monopoly’’
                                                   how long the loop of the tape was or                    his concerns extended to sending emails               on business. Tr. 405.
                                                   how long the tape preserved the images                  to the Pharmacy Board.107 Tr. 472.                       Wood also testified about his
                                                   before recording over itself. Tr. 423. In               However, an examination of the email                  recollections about his interactions with
                                                   fact, Wood stated that he never had a                   exchange 108 between Wood and the                     pharmacist Grant Goode, which diverge
                                                   circumstance in which to review any                     Pharmacy Board reflects a level of                    significantly from Goode’s account.
                                                   video monitor tape himself in any                       urgency that exceeded the impression                  According to Wood, he met Grant Goode
                                                   pharmacy where he has ever worked,                      conveyed by Wood on the witness                       for the first time upon returning to work
                                                   and as far as he knows, no one ever                     stand. In his initial email to the Board              at the Respondent, and while the
                                                                                                           he explained:                                         relationship between the two men was
                                                     100 However, in describing the framework created
                                                                                                             We have not applied for a PIC status                cordial enough at the outset, it
                                                   by the Proposed Policy, he also stated, ‘‘Common
                                                   sense tells you what you need to be doing in this       because of the fact that we’re not sure what          culminated in a rather testy telephone
                                                   regard and what you don’t need to be doing.’’ Tr.       direction the store is going in. There’s rumors       exchange regarding Goode’s continued
                                                   419.                                                                                                          employment at the pharmacy. Tr. 425.
                                                     101 Tr. 416–17.                                         106 Wood testified that software developed by       By Wood’s account, he and Watson had
                                                     102 Wood explained that the institution of a
                                                                                                           McKesson and used by the Respondent                   come to the conclusion that there was
                                                   perpetual inventory would require pharmacy              automatically submits these dispensing reports to
                                                   personnel to count the contents of stock controlled     the state. Tr. at 420–21.
                                                                                                                                                                 insufficient business 110 at the pharmacy
                                                   substance bottles whenever the bottle was nearing         107 As part of the Government’s rebuttal case, it   to merit Goode’s continued employment
                                                   depletion and reconcile the bottle count inventory      presented the testimony of John Kirtley, the
                                                   reflected in the system. Tr. 419.
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                                                                                                           Executive Director of the Pharmacy Board. Tr. at        109 Wood admitted that these services do not
                                                     103 Wood conceded that the keypad lock
                                                                                                           509. Kirtley testified that he recalled the email     involve the dispensing of controlled substances and
                                                   combination remains the same and that he did not        exchange with Wood, and although he was not           thus are not dependent on the status of the
                                                   know whether it was changed after Chris W’s arrest.     surprised that a prospective PIC would inquire        Respondent’s COR. Tr. 442.
                                                   Tr. 445.                                                about becoming a PIC in a recently-raided               110 Although Tracy Swaim testified that pharmacy
                                                     104 Presumably, this is the same closed-circuit       pharmacy, he did recall being surprised that Wood,    business had grown by one-third (Tr. 262–63),
                                                   system that Watson did not know how to access.          who had already served as a PIC, was unfamiliar       Wood was apparently was not aware of that growth.
                                                   Tr. 365–67.                                             with the procedural aspects of becoming a PIC. Tr.    Tr. 435. He attributed the diminishment in business
                                                     105 Photographs depicting the Respondent were         517–19.                                               to the impact of the immediate suspension order.
                                                   admitted into evidence. Tr. 403; Resp’t Exs. 2–11.        108 Gov’t Ex. 71.                                   Tr. 438.



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                                                                              Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                               70103

                                                   there.111 Tr. 426. Wood stated that he                   suspension order and a former                         reluctance to tell him about Watson’s
                                                   communicated the substance of this                       pharmacist who worked there just told                 decision, and his explanation to Goode
                                                   discussion to Goode and suggested that                   him that the owners were liars and he                 that his need for full-time pharmacist
                                                   the two of them share the weekly                         was fortunate not to be laboring under                work obviated the need to have Goode
                                                   schedule, with Wood working full-time                    an indictment himself. It is in this                  employed there at all. In short, Wood’s
                                                   (three to four days per week) and Goode                  backdrop that, Wood (an experienced                   account is less credible than Goode’s,
                                                   working part-time (two to three days per                 pharmacist) now claims that he never                  and Wood’s version of this interaction
                                                   week).112 Tr. 427. It was Wood’s                         connected Goode’s statements to any                   significantly diminishes his credibility.
                                                   recollection that upon hearing this                      possible pharmacy misconduct. To put                     Wood testified that in the
                                                   disagreeable news, Goode became irate,                   it mildly, this is implausible and                    approximately ten years that he has
                                                   complained that the Watsons had been                     damages this witness’s credibility. The               worked ‘‘on and off’’ for pharmacies
                                                   lying for years, and even marveled that                  fact that he did not pursue the matter                owned by Tom Watson, including the
                                                   Wood himself had not yet been indicted                   further with Goode speaks volumes                     one-month internship under Chris W
                                                   based on his experiences with Chris W                    about his level of professional vigilance,            and the two years he worked with Chris
                                                   at the Watsons’ Mayflower pharmacy.113                   and the fact that he testified that he                W at the Mayflower pharmacy, he never
                                                   Tr. 427–29. It is apparent from Wood’s                   never realized that Goode was referring               saw Chris W engage in any strange,
                                                   testimony that he was offended on                        to pharmacy misconduct is equally                     suspicious, or illegal behavior. Tr. 406,
                                                   behalf of the Watsons. Tr. 427, 429. In                  telling on the subject of this witness’s              478. He stated that when he heard about
                                                   his words, it ‘‘struck me as kind of odd                 credibility.                                          Chris W’s arrest, he assumed that the
                                                   [that t]he guy was asking me to work for                    The divergence between Wood’s                      authorities ‘‘got [Chris W] for putting
                                                   the Watsons, at the same time bashing                    recollection of this phone conversation               refills on blood pressure meds and
                                                   them.’’ Tr. 427. Interestingly, offended                 and the recollection of Grant Goode is                diabetes meds,’’ which he describes as
                                                   as Wood may have been at the                             striking. Goode was clear that Wood                   ‘‘about the only thing that [he] ever saw
                                                   implications of his own culpability and                  told him that all of his hours at the                 [Chris W] do’’ and which he had seen
                                                   that of his employer, the conversation                   pharmacy were being taken by Wood,                    other pharmacists do as well. Tr. 406.
                                                   apparently did not result in any                         and that it was Wood’s understanding                  Wood added that when working as a
                                                   heightened level of suspicion on his                     that Watson would have told him so                    relief pharmacist at the Respondent,
                                                   part that diversion issues could be afoot                already. Tr. 291. Wood’s version of the               none of the pharmacy technicians ever
                                                   at the pharmacy where he was working.                    conversation is internally inconsistent               complained to him about missing
                                                   Tr. 431–34.                                              and illogical. In Wood’s account, when                controlled substances or issues with
                                                      Glenn Wood’s testimony was                            Goode reached out to him to pin down                  Chris W, nor did he ever notice missing
                                                   problematic from a credibility                           the hours he would be working, this is                inventory himself. Tr. 447. Wood
                                                   standpoint. In fact, the Respondent’s                    what occurred:                                        testified that upon learning of the
                                                   position regarding the security and                                                                            allegations against Chris W, he was
                                                   integrity to future operations that will                    So, when I returned [Goode’s] call that            shocked, sickened, in disbelief, sad, and
                                                                                                            evening, I told him, I said, Grant, I hate to
                                                   follow based on the appointment of                       be the one to tell you this, you know, I hate
                                                                                                                                                                  angry with Chris W. Tr. 406. He stated
                                                   Wood as the PIC were actually                            it because I don’t want to put anybody out            that this was not the Chris W that he
                                                   undermined by Wood’s testimony.                          of work, I was like there’s not room for both         knew from working with him. Tr. 407.
                                                   Although Wood testified that Goode                       of us, bud, and I need full-time, but what I’d           On the issue of Wood and Chris W
                                                   raised issues regarding the pharmacy                     like to happen, I don’t want to work six days         working together, Wood’s testimony was
                                                   and even implied that Wood could have                    a week. I only want to work three to four             also confusing. At one point in his
                                                   been indicted based on his time working                  days a week. And I suggested to Grant that            testimony, Wood said he ‘‘can’t recall a
                                                   with Chris W, no sense of professional                   evening, I said what I’d like to happen is if         time when [he and Chris W] ever
                                                   responsibility as a pharmacist awakened                  you could work at [the Respondent] two or             worked side by side’’ as pharmacists
                                                                                                            three days and then find another pharmacy             during the same shift. Tr. 451. After
                                                   in him even the slightest curiosity as to
                                                                                                            that will let you work a couple days there.
                                                   what Goode (a fellow pharmacist that he                                                                        some significant equivocation, Wood
                                                                                                            You know, that would be great.
                                                   said he barely knew) was talking about.                                                                        answered the direct question of whether
                                                   Tr. 427–29. When pressed on the issue,                   Tr. 426–47; see also Tr. 435–37. Wood’s               they worked together this way:
                                                   Wood countered that Goode had merely                     testimony about this phone
                                                                                                                                                                     Just on occasion. You know, vacation
                                                   accused the Watsons of lying, not                        conversation strengthens Goode’s                      issues or sickness issues if me or . . . my
                                                   diversion,114 but in view of the fact that               account and weakens his own. If Goode                 other part-time pharmacist, again I can’t
                                                   this conversation was occurring two-to-                  was calling to find out which days he                 recall an instance, but I’m almost certain that
                                                   three weeks after the pharmacy search                    was working, it is reasonable to assume               there probably was over the course of three
                                                   warrant execution, and revelations of                    he knew already that he was not                       years in which Chris had come over to
                                                                                                            working all days. If Wood was really                  relieve us.
                                                   misconduct, which, by Wood’s own
                                                   account, made him ‘‘sick,’’ ‘‘mad,’’ and                 only telling Goode which days he would                Tr. 452. Wood then described how,
                                                   ‘‘upset,’’ this explanation strains                      be working, it is illogical that he would             because Mondays or the first day of each
                                                   credulity. Evaluating this conversation                  ‘‘hate to be the one to tell [him] . . .              month could be high traffic times, that
                                                   in the context of recent events, the                     because [he does not] want to put                     pharmacists ‘‘would often double up,’’
                                                   Respondent had just been searched and                    anyone out of work.’’ Tr. 426–27. It                  but that he could not recall doubling up
                                                   served with a DEA immediate                              makes even less sense that Wood, even                 with Chris W at Morrilton. Tr. 453.
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                                                                                                            by his own recollection, would                        Since Morrilton was not predicated in
                                                     111 Tr. 262–63.                                        remember telling Goode that ‘‘there’s                 the question, it was only upon follow-
                                                     112 According   to Wood, Goode wanted to work six      just not room for both of us, bud, and                up that Wood finally admitted that he
                                                   days per week at the Respondent. Tr. 436.                I need full-time . . . .’’ Tr. 427. Goode’s           and Chris W worked together at the
                                                     113 Goode’s statements as reported by Wood were
                                                                                                            testimony that he was essentially                     Watson’s Mayflower pharmacy once a
                                                   received for the limited purpose of demonstrating
                                                   Goode’s state of mind during the conversation, not       informed of his own termination during                week for two years. Tr. 453–54; see also
                                                   for the truth of the matters asserted. Tr. 428.          this phone call is rendered light-years               Tr. 479. This equivocation made even
                                                     114 Tr. 434.                                           more credible by Wood’s self-admitted                 less sense in light of the fact that Wood


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                                                   70104                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   had testified earlier to working together               corporation never hired employees,                      that he should take the matter up with
                                                   regularly with Chris W. Tr. 392. The                    ‘‘had no one on the payroll,’’ but                      Chris W, inasmuch as he is the majority
                                                   relevance of Wood’s testimony on the                    occasionally utilized the services of                   shareholder and the partner charged
                                                   point is less about how often the two                   independent contractors (generally                      with responsibility for handling bills.
                                                   pharmacists were dispensing in the                      Wood’s friends) 117 to help mix the                     Tr. 457. If the business was truly bereft
                                                   same room that it is about how reluctant                product and market it at trade shows.                   of any potential benefit and awaited
                                                   Wood was to confirm it. Wood’s                          Tr. 411–12, 464–65. Chris W procured                    only its paperwork coup de grace, it is
                                                   equivocation detracted from the                         supplies for the product from Watson                    difficult to imagine why the two
                                                   credibility of his testimony.                           family pharmacies. Tr. 463–64.                          partners would suffer the continued
                                                      In a similar vein, at one point in his                  Wood stated that ‘‘the product                       expense of a Web site. At one point in
                                                   testimony, Wood indicated that he did                   worked’’ and that the business was                      his testimony, Wood said that the
                                                   not know Eric Horton ‘‘personally.’’ Tr.                ‘‘somewhat successful’’ for a few years,                enterprise failed only because he
                                                   465. Eventually Wood allowed that he                    but instead of investing time and                       became distracted with bass fishing and
                                                   ‘‘know[s] who Eric Horton is’’ because                  money, he just let the business go. Tr.                 other interests,119 and at another point,
                                                   he would encounter him at times with                    408–09. In his words, ‘‘[i]t was one of                 when pressed about the timing of the
                                                   Chris W. Tr. 466. Then Wood indicated                   those deals that it grew too fast almost                venture’s demise, Wood declared that
                                                   that he attended ‘‘some birthday                        and then for whatever reason from there                 ‘‘the business began dropping off way
                                                   parties’’ for Chris W’s daughter where                  it just—I lost interest in it, got burned               before last year.’’ Tr. 413. Similarly,
                                                   Horton was present, and that he                         out, and—.’’ Tr. 408. Wood testified that               Wood testified that he only wanted to
                                                   sometimes saw Horton ‘‘riding around                    in the past two years, the business has                 return to pharmacy work part-time
                                                   in the truck.’’ Tr. 466–67. When pressed                been ‘‘pretty much defunct,’’ for                       because of his bass fishing and family
                                                   about what ‘‘riding around in the truck’’               essentially no other reason than Wood’s                 responsibilities, but testified that he told
                                                   means, Wood clarified that he would                     interest in professional bass fishing. Tr.              Grant Goode that there was no room for
                                                   see him in the Watsons’ grocery store                   408–10, 454–55. According to his                        him at the Respondent because ‘‘there’s
                                                   (which is not really in any truck), and                 testimony, he has not actively supplied                 just not room for both of us, bud, and
                                                   that it was not really that he did not                  bottles of Redneck Remedy for the past                  I need full time. . . .’’ Tr. 427.
                                                   know Horton, but that he did not know                   year-and-a-half to two years.118 Tr. 412.                  To the extent that Matlon served no
                                                   him well. Tr. 466–69. Equivocation on                   In fact, he testified that he removed the               purpose beyond a (successful) profit
                                                   this point did not enhance Wood’s                       remaining bottles off the shelf at the                  venture, it is difficult to reconcile the
                                                   credibility.                                            Respondent when he began working                        partners’ decision to kill it so
                                                      Wood also testified about a separate                 there again in January 2015. Tr. 440–41,                unceremoniously. Wood was unable to
                                                   business relationship he has maintained                 461–63. Thus, the three remaining jars                  supply an answer that made any sense.
                                                   with Chris W in a corporation they                      of the product were removed to shelves                  Tr. 409–10. Wood stated that he was not
                                                   started together and named Matlon,                      in the restricted pharmacy area where                   in a position to be able to quit his full-
                                                   Incorporated (Matlon).115 Matlon                        potential customers or anyone else                      time position as a pharmacist to devote
                                                   produced and distributed a product                      outside Respondent’s pharmacy staff                     to the business and that his priorities
                                                   known as ‘‘Redneck Remedy.’’ Tr. 407.                   could not see it. This was done shortly                 shifted from marketing the business to
                                                   Wood stated that shortly after                          after Wood returned to the pharmacy                     starting his professional fishing career
                                                   graduating from pharmacy school, he                     (the day after the pharmacy search                      and raising his family. Tr. 409–11.
                                                   developed a formula for sunburn cream                   warrant execution), and just after the                  Despite describing himself as the
                                                   and began compounding it for sale. Id.                  diversion allegations surrounding Chris                 corporation’s hands-on, ‘‘go-to guy’’
                                                   According to Wood, Redneck Remedy                       W came to light. Tr. 441–42, 461–63.                    (compared to Chris W, whom he
                                                   was initially sold only to frequent                     Wood said the remaining cream is ‘‘off                  described as the ‘‘silent partner’’), Wood
                                                   pharmacy customers, friends, and                        of the counter at the point of sale in the              was unable to explain how or why the
                                                   family, but that the success of the                     pharmacy, and it’s basically just put                   corporation went from successful to
                                                   product grew so steadily that after two                 back out of sight, out of mind.’’ Tr. 441.              floundering. Tr. 408. In addressing the
                                                   years ‘‘it got so big it went from my                   Wood insisted that Matlon is currently                  question of what how Matlon’s
                                                   third bedroom in my home to my                          worth nothing and still continues to                    outstanding financial issues would be
                                                   garage. . . .’’ Tr. 408. Wood recounted                 exist as a hollow legal entity merely                   handled, Wood was only able to
                                                   how he felt that demand for the product                 because he and Chris W never got                        unconvincingly offer that he had
                                                   had swelled sufficiently that he needed                 around to dissolving it. Tr. 454–55.                    ‘‘stepped away’’ from the responsibility
                                                                                                              Much of Wood’s testimony regarding                   of managing the corporation last year
                                                   a partner, and enlisted Chris W to
                                                                                                           Matlon makes no sense. The Redneck                      and had informed Chris W of that fact.
                                                   supply the business acumen for the
                                                                                                           Remedy Web site remains active, and                     Tr. 458–59. Inconsistently, Wood
                                                   enterprise. Id.
                                                      Redneck Remedy was bottled,                          charges to maintain it continue to                      conceded that he was the last person to
                                                   labeled,116 and shelved for retail sale at              accrue. Tr. 455–57; Gov’t Ex. 70. Upon                  file corporate income taxes on the entity
                                                                                                           learning that Matlon was in arrears in its              in 2013 and anticipates doing so for
                                                   the Respondent and another (non-
                                                                                                           payments for the Web site account,                      2014. Tr. 459, 465. Confounding matters
                                                   Watson) pharmacy. Tr. 440–41. Wood
                                                                                                           Wood informed the hosting company                       further in this regard, Wood’s email auto
                                                   maintained that he had scant contact
                                                   with Chris W throughout the course of                                                                           signature still imbues him with the
                                                   their Matlon partnership, and the two
                                                                                                             117 Wood testified that he was unaware that Chris
                                                                                                                                                                   moniker ‘‘President and CEO of Matlon,
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                                                                                                           W’s friend, Eric Horton, had been enlisted to pick      Inc.’’ Tr. 460–61. Wood offered a variety
                                                   mostly communicated by text message                     up supplies for the enterprise. Tr. 464, 469.
                                                   and phone calls, especially in recent                     118 Wood likewise testified that he anticipated       of verbal shrug, citing ‘‘[i]gnorance on
                                                   years. Tr. 450. Wood testified that the                 that the company made $600 in sales in 2014, and        [his] part.’’ Tr. 461. Wood indicated that
                                                                                                           most of that was from friends and family in the         he did not know why he continued to
                                                                                                           early part of the year. Tr. 413. Assuming, as Wood      sign all his emails as the president and
                                                     115 Wood testified that the name is a combination
                                                                                                           testified, that each bottle of Redneck Remedy has
                                                   of the letters starting the first names of their        a value of $8 (Tr. 480), Matlon sold approximately      CEO of Matlon, and once again stressed
                                                   respective daughters. Tr. 409.                          75 bottles of the cream during this period of alleged
                                                     116 Tr. 414.                                          decline.                                                 119 Tr.   408–09, 454–55.



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                                                                               Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                  70105

                                                   his self-described status as a poor                       Oklahoma in 1974, and after working as                   I talked to Chris [W] about some things, too,
                                                   businessman (a characterization which                     a staff pharmacist in a few                              so I was hoping everything was, I was hoping
                                                   is belied by the fact that Redneck                        establishments, opened a grocery store/                  everything was in good shape.
                                                   Remedy made money for Matlon until                        pharmacy with his brother-in-law,                        Tr. 326. Watson emphasized that he
                                                   company operations were abruptly                          Duane Goode,124 in West Conway,                          held Swaim in high regard, stating that
                                                   abandoned). Tr. 461–63. Matlon’s Web                      Arkansas. Tr. 315–16. Watson and his                     the two have been together for a long
                                                   site still lists Wood at its president and                father-in-law subsequently built the                     time and still are. Tr. 333.
                                                   CEO. SOT 12(g); Gov’t Ex. 70.                             Respondent in Perryville, operating as                      Watson was clear that he was
                                                      Although it would be naı̈ve to                         part of a grocery store (Big Star                        ‘‘shocked’’ to learn that his son had an
                                                   conclude that Matlon is the simply the                    Perryville), and he later created two                    addiction problem, and opined that the
                                                   failed business enterprise described by                   additional stores in the nearby rural                    younger Watson’s chronically bloodshot
                                                   Wood, teasing out its intricacies is                      communities of Morrilton and                             eyes were the result of a longstanding
                                                   likewise a task unrequired to resolve the                 Mayflower. Tr. 318. He stated that he                    medical condition. Tr. 236. He offered
                                                   principal issues in this case. Matlon was                 has divested himself of all pharmacies                   that during the 2013–2014 timeframe,
                                                   a business venture that sold a product                    with the exception of the Respondent in                  notwithstanding the fact that he and his
                                                   whose overhead and production costs                       the Big Star Perryville grocery store. Tr.               son lived ‘‘a little over a quarter of a
                                                   were amorphous, to say the least. The                     321.                                                     mile’’ from each other, they only saw
                                                   materials were purchased and or                              Watson testified that he retired four                 each other once every two weeks or so,
                                                   otherwise obtained by Chris W and                         years ago, at age sixty-two, and has                     because their ‘‘paths didn’t cross.’’ Tr.
                                                   compounded by Wood. Likewise, its                         encountered Lyme disease and some                        327–28.
                                                   manpower largely came from non-                           back issues. Tr. 320–21. According to                       Watson’s position at the hearing
                                                   employee friends and associates whose                     Watson, Big Star Perryville was                          regarding the steps he took based on
                                                   compensation was almost certainly                         destroyed by a fire about three years                    what he was believed and what he was
                                                   variable and unclear. The business was                    prior to the hearing and the pharmacy                    told was less than clear. On the one
                                                   not driven out of business by lack of                     was victimized by a burglary while the                   hand, he indicated that had he learned
                                                   success so much as it was suppressed by                   store was located in a temporary                         that his son, a pharmacist (and later the
                                                   its owners at about the time that law                     location. Tr. 323.                                       PIC) at his store, had indications of an
                                                   enforcement scrutiny focused on Chris                        Watson explained that after working                   addiction problem or was engaged in
                                                   W and the Respondent. Inexplicably, by                    as a pharmacist at a rival pharmacy                      suspicious behavior, he would have
                                                   Wood’s account, the last three bottles of                 chain, and then his (now closed)                         referred his son for treatment and
                                                   Redneck Remedy were removed from                          Mayflower store, his son Chris W came                    advised the Pharmacy Board. Tr. 328–
                                                   retail shelves where they could be sold,                  to work at the Respondent, and                           29, 331. But Watson also testified that
                                                   and secreted on a shelf within the                        ‘‘inherited’’ the job of pharmacy PIC                    he would be unwilling to ‘‘fire
                                                   enclosed pharmacy spaces away from                        ‘‘when Tracy [Swaim] quit.’’ Tr. 324–25,                 somebody ‘cause they tell me so and so
                                                   potential customers. Tr. 462. While                       375–76. Watson also testified that his                   is doing this or that. . . .’’ Tr. 332. In
                                                   Matlon was almost certainly structured                    son Chris W also served as the vice                      Watson’s words:
                                                   (and abandoned) in a manner that belies                   president, controller, and part owner 125
                                                   the simplistic explanations tendered by                   of the business. Tr. 318, 377–78. When                      It’s hard. I mean, you know, ‘cause I’ve
                                                                                                                                                                      talked to [Chris W], well, several times, and
                                                   Wood, it is not necessary here to draw                    asked about Tracy Swaim’s account of
                                                                                                                                                                      he’d usually blame it on something else or,
                                                   any conclusions in this regard. The                       why he stepped down as the PIC, the                      you know, this or that, and I didn’t know
                                                   principal relevance of Matlon in these                    elder Watson had this to say:                            how much was gone.
                                                   proceedings is that Wood’s implausible                       Yeah. I—I don’t—I remember some of what
                                                   testimony regarding its operations                                                                                 Tr. 332. Thus, Watson testified that he
                                                                                                             [Swaim] talked about but I don’t remember
                                                   detracts considerably from the                            all of what he talked about, you know. And               would involve the Pharmacy Board and
                                                   credibility of his testimony.                                                                                      put his son into treatment if he learned
                                                      Suffice it to say that Wood’s                            124 Duane   Goode is Grant Goode’s father. Tr. 316.    that addiction and/or diversion were
                                                   presentation was sufficiently                               125 Although   this testimony is consonant with a      occurring,126 but then conceded that he
                                                   punctuated with inconsistencies,                          stipulation of fact regarding Chris W’s ownership        actually had been so informed and was
                                                                                                             that was reached by the parties (SOF 24; Tr. 389),       dissuaded from any action by
                                                   equivocations, and implausibility that is                 a post-hearing motion by the Respondent sought to
                                                   cannot be fully credited in this                          ‘‘correct the record’’ by the addition of an affidavit
                                                                                                                                                                      conversations with his son, who, even
                                                   recommended decision. Thus, his                           by Tom Watson’s wife (Teresa Watson) that                by his own account, did no more than
                                                   assertions that he had never had any                      challenges that assertion. ALJ Ex. 21. The               ‘‘usually blame it on something else,’’ or
                                                                                                             Government validly opposed the Respondent’s              ‘‘this or that.’’ Id. Watson even
                                                   reason to believe that Chris W                            post-hearing motion to include Mrs. Watson’s
                                                   demonstrated addiction signs or                           affidavit. ALJ Ex. 22. Although the Respondent’s
                                                                                                                                                                      acknowledged that he ‘‘didn’t do
                                                   suspicious activity,120 that no staff                     motion to include the affidavit was styled as a          enough [and] didn’t do it fast enough,’’
                                                   member ever brought diversion                             ‘‘Motion to Correct the Record,’’ it could do no such    but asserted that all would have been
                                                                                                             thing, and was granted only to the extent that Mrs.      corrected with a scheduled audit that
                                                   concerns to his attention,121 or that he                  Watson’s affidavit is now included in the record,
                                                   had never noticed controlled stock                        and considered in accordance with 21 CFR
                                                                                                                                                                      was scheduled to occur a week after the
                                                   missing,122 are of limited value here.                    1316.58(b) (‘‘Affidavits admitted into evidence shall    pharmacy search warrant execution,127
                                                      Respondent’s majority shareholder,                     be considered in light of the lack of opportunity for    and that an inventory was essentially
                                                                                                             cross-examination in determining the weight to be        the only real option he had based on
                                                   Tom Watson, testified that he is and has
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                                                                                                             attached to statements made therein.’’). ALJ Ex. 23.
                                                   been a licensed pharmacist for about                      Inasmuch as the affidavit is inconsistent with the
                                                                                                                                                                      what Swaim told him. Tr. 335–36.
                                                   forty years,123 that he received his                      prior stipulation of the parties, and must be            However, in view of the fact that he
                                                   pharmacy degree from the University of                    considered in light of the absence of cross-             (even still) holds Tracy Swaim in high
                                                                                                             examination, it has been afforded little weight in       esteem, and did so at the time Swaim
                                                                                                             this recommended decision. Additionally, as
                                                     120 Tr. 414.                                            explained infra, under current Agency precedent,
                                                                                                                                                                      raised the alarm, it is difficult to
                                                     121 Tr. 447–48                                          Chris W’s status as a part owner of the Respondent
                                                     122 Tr. 447.                                                                                                      126 Tr.   328.
                                                                                                             is of negligible significance to a resolution of the
                                                     123 Tr. 352.                                            present case.                                             127 Tr.   345–46.



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                                                   70106                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   understand how the addition of an                        pharmacy or Chris W, but subsequently                  rather exclusively on his son. Tr. 355.
                                                   inventory to confirm the warning                         retreated somewhat from that position,                 The only possible responsibility Watson
                                                   tendered by a trusted employee would                     indicating that he had been ill from                   was willing to acknowledge (albeit
                                                   have altered his reluctance to act. Stated               Lyme Disease, slipped in the bathtub,                  grudgingly) was not replacing his son as
                                                   differently, he trusted Swaim and                        had to take his granddaughter to the                   the PIC earlier. Id. Specifically, on the
                                                   Swaim warned him; he had every                           doctor, and eventually allowed that if                 issue of Chris W’s wrongful dispensing,
                                                   reason, based on his decades of                          there was such a warning from Goode,                   Watson declared that ‘‘[w]hoever filled
                                                   experience with Swaim to rely on what                    that he simply did not remember it. Tr.                is responsible for those prescriptions. I
                                                   he related to him; an inventory would                    348–50. In an astonishingly telling                    didn’t fill them.’’ 134 and regarding the
                                                   have added nothing to the equation. To                   statement, Watson related the distaste                 failure to file a DEA–106 regarding
                                                   suggest that an inventory that never                     with which he viewed Goode’s decision                  medications that were taken from the
                                                   occurred would have been the final,                      to alert the authorities without                       pharmacy, Watson said ‘‘[t]hat should
                                                   deciding factor in motivating him to act                 sufficiently vetting his concerns through              have been taken care of by the [PIC]
                                                   is simply not persuasive and                             Watson family first. In Watson’s own                   when they [sic] found out they were
                                                   undermines his credibility.                              words:                                                 missing.’’ Tr. 357.
                                                      To add to the confusion, at another                     You know—family is family. You know, if                 It was clear from the tenor and text of
                                                   point in his testimony, Watson testified                 you’ve got a problem go see them about it,             his testimony that Watson is strongly
                                                   that he has actually encountered                         and talk about the problem. You don’t know             possessed of the view that his authority
                                                   employees using and diverting                            you got a problem until you at least talk              to delegate extends not only to
                                                   controlled substances, but has never                     about it. And you know, don’t start with the           authority, but also to responsibility.
                                                   reported any misconduct to the                           state board, don’t start with the DEA and all          Watson explained it in this unequivocal
                                                   Pharmacy Board in his life. Tr. 344–45.                  that. Start by calling your uncle or whatever          manner:
                                                   It is difficult to place credence in his                 or tell your mom and have her talk to your
                                                                                                            uncle if that—you know. But get it there                 That’s the reason you delegate jobs to
                                                   testimony that he would refer all                                                                               people; have somebody that [sic] is
                                                                                                            where you can get it in front of you instead
                                                   diversion issues to the Pharmacy Board                   of, you know. . . . Be sure you know what              responsible. If I had been the pharmacist-in-
                                                   when he also says that he has actually                   you’re talking about before you start that             control [sic] I would have taken care of that
                                                   seen diversion issues in his career and                  stuff, I mean.                                         myself. I wish now I had of been [sic]. I’ll
                                                   has never referred anything to the                                                                              admit that mistake.
                                                   Pharmacy Board. The two points seem                      Tr. 350–51.
                                                                                                               Watson testified that Pharm. Tech.                  Tr. 358. When asked about the scope of
                                                   irreconcilable.                                                                                                 his theft reporting responsibilities as the
                                                      Watson’s testimony regarding security                 June Gilbert has been his friend and
                                                                                                            employee for over thirty-three years,131               pharmacy owner, Watson tellingly put it
                                                   measures that have been in place at the                                                                         this way:
                                                   pharmacy was also somewhat                               and has been with him since the first
                                                                                                            day he opened the Respondent. Tr. 347.                    Well, in the long run, yeah, that’s my
                                                   disquieting. He admitted that the entire
                                                                                                            Even in the face of the (credible)                     responsibility, but it’s really the
                                                   staff had access to the controlled                                                                              responsibility of the store manager, [PIC], and
                                                   substance ordering password, and                         testimony of his trusted employee,
                                                                                                                                                                   all that. I try to delegate authority as much
                                                   acknowledged that although his                           Tracy Swaim, that Pharm. Tech.
                                                                                                                                                                   as I can because I can’t be there every day.
                                                   pharmacy had security cameras, he did                    Gilbert’s direct warning to Watson (in
                                                                                                            Swaim’s presence) that Chris W was                     Tr. 362.
                                                   not know how to access any of the                                                                                  Tom Watson’s testimony was
                                                   footage to review it. Tr. 365–67.                        ‘‘giving away’’ medication,132 was the
                                                                                                            tipping point that precipitated his                    certainly not without its believable
                                                      Watson also offered a document that
                                                                                                            resignation, Watson adamantly                          aspects. That said, even apart from the
                                                   purportedly sets forth a new written set
                                                                                                            maintained that Pharm. Tech. Gilbert                   obvious reality that Watson has the most
                                                   of policies and procedures that he
                                                                                                            never alerted him to problems at the                   at stake at the hearing, there were
                                                   intends to implement at the Respondent
                                                                                                            pharmacy,133 and that he was not aware                 internal inconsistencies, inconsistencies
                                                   to address some of the security
                                                                                                            of any complaints from those who                       with other credible evidence, and
                                                   shortcomings and reduce the risk of
                                                                                                            worked with Chris W at his (former)                    implausible aspects that preclude his
                                                   future diversion (Proposed Policy).128
                                                                                                            pharmacy in Mayflower. Tr. 373–74.                     version of events from being fully
                                                   Tr. 336–39, 341; Resp’t Ex. 1.
                                                                                                               Watson’s consistent point of view                   credited in this recommended decision.
                                                   Regrettably, the document was
                                                                                                            throughout the proceedings was that the                The biographical information Watson
                                                   unsigned,129 and although he testified
                                                                                                            PIC is the focal point of diversion                    supplied during his testimony as well as
                                                   that the Proposed Policy had been
                                                                                                            control in any pharmacy, and that                      his subjective estimation (contrary as it
                                                   circulated to two pharmacy employees
                                                                                                            diversion occurring by the hand of the                 is to Agency precedent) that delegation
                                                   and his prospective PIC,130 it was clear
                                                                                                            PIC is a difficult phenomenon to                       of authority can yield immunity from
                                                   from Watson’s testimony that he did not
                                                                                                            address. Tr. 332, 336. When pressed on                 responsibility, are credible. However,
                                                   know who drafted the document and
                                                                                                            his perception of his own responsibility,              his dual assertions that he was never
                                                   was not too familiar with its substantive
                                                                                                            the elder Watson steadfastly maintained                warned of pharmacy problems by his
                                                   contents. Tr. 337–38, 368–71. All in all,
                                                                                                            that he is not accountable for the actions             nephew, Grant Goode, is compromised
                                                   the Proposed Policy did not add much
                                                                                                            of his PIC/son, Chris W. Tr. 354–56.                   by his alternate position that he just
                                                   to the discussion of the Respondent’s
                                                                                                            Watson insisted that the blame was not                 may not remember all of Goode’s
                                                   future.
                                                      In discussing his nephew, Grant                       on the Respondent or its owner, but                    warnings because he fell in a bathtub
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                                                   Goode, Watson initially was                                                                                     and has a history of once contracting
                                                   unequivocal in his denial that Goode                        131 However strong he felt the bonds of his         Lyme disease. Tr. 348–50. The veracity
                                                   had raised any concerns about the
                                                                                                            friendship were with his long-time employee            of Watson’s account is even further
                                                                                                            Pharm. Tech. Gilbert, they apparently did not          diminished by his assertion that he
                                                                                                            inhibit him from blaming her to Grant Goode for the
                                                     128 Gov’t Ex. 1.                                       diversion being perpetrated by his son, Chris W. Tr.   could only act upon the concerns
                                                     129 Watson  offered to sign the document on the        283.                                                   expressed by his trusted, long-time PIC
                                                   witness stand. Tr. 341.                                     132 Tr. 256–57.
                                                     130 Tr. 338–39.                                           133 Tr. 347.                                         134 Tr.   356.



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                                                                             Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                      70107

                                                   Tracy Swaim once an inventory (that                     responsibilities did not include the                    sales were level, but the pharmacy was
                                                   never occurred) had corroborated it. Tr.                management of the pharmacy aspects of                   buying more drugs.137
                                                   335–36. Similarly, Watson’s assertion                   the businesses, a unified ordering, sales,                 The upshot of Goode.1’s meeting with
                                                   that his long-time pharmacy technician                  and inventory reporting system 136                      Watson was that the men agreed to meet
                                                   and friend June Gilbert never raised                    linked to all store cash registers gave                 with Chris W, and did so two weeks
                                                   pharmacy concerns with him is belied                    him access to all sales, billing, ordering,             later. Tr. 491–92. However, according to
                                                   by credible testimony of Swaim that he                  and inventory figures, including                        Goode.1, his takeaway from the meeting
                                                   quit when he overheard Pharm. Tech.                     transactions in the pharmacies. Tr. 487–                was that ‘‘it was evident that nothing
                                                   Gilbert telling Watson that his son was                 89. In 2009, Goode.1 had noticed that                   was going to change.’’ Id. Goode.1 was
                                                   giving away pills. Tr. 256–57.                          the Mayflower pharmacy was paying                       told to mind the grocery side of the
                                                      Likewise, Watson’s position that if he               three full-time pharmacists, one of                     business and that Chris W would take
                                                   had received information regarding                      whom was Chris W, who had eased his                     care of the pharmacy department. Tr.
                                                   addiction and diversion he would have                   actual hours into part-time work (at a                  493–93. Goode.1 stated that the
                                                   brought in the Pharmacy Board and                                                                               conversation devolved into a discussion
                                                                                                           full-time salary). Tr. 494. When Goode.1
                                                   sought treatment for Chris W is belied                                                                          focused on the personal relationship
                                                                                                           raised the issue that this salary output
                                                   by his subsequent assertions that                                                                               between Goode.1 and the Watsons, and
                                                                                                           was not sustainable, Chris W told him
                                                   although he has encountered diversion                                                                           he was told that since because Goode.1
                                                                                                           that he would ‘‘make it work’’ and that                 was permitted to use Watson land for
                                                   over the course of his career, he has                   Goode.1 should ‘‘take care of grocery.’’
                                                   never made such a report to the                                                                                 hunting and a Watson truck for hauling,
                                                                                                           Tr. 494.                                                that he should mind the grocery side of
                                                   Pharmacy Board. Tr. 328, 344–45.
                                                      Even beyond the bathtub and Lyme                        Goode.1 recounted that overall the                   the house and let Chris W manage the
                                                   disease issues, Watson’s assertion that                 business partnership enterprise had                     pharmacy end. Tr. 493. Goode.1
                                                   his pharmacist/nephew Grant Goode                       been ‘‘pretty successful’’ in the 2000s,                testified that Chris W (who was doing
                                                   never brought concerns about his son’s                  but during the summer of 2010 he                        most of the talking) did not supply any
                                                   actions to his attention is simply not                  became aware that a new store the two                   business-related reason for the drug-
                                                   credible. Tr. 348–50. Although Watson                   men had opened in Russellville was                      sales versus drug-ordering anomaly at
                                                   expressed exasperation over his                         struggling financially. During this                     the Mayflower pharmacy. Tr. 493–95.
                                                   nephew’s decision to alert the                          period, Goode.1 and Watson would                           Goode.1 stated that after the
                                                   authorities before sufficiently                         generally see each other about twice a                  Mayflower store was sold to a large
                                                   exhausting attempts to resolve issues                   week, but Goode.1 was sufficiently                      pharmacy chain,138 Chris W began to
                                                   through the intercession of family                      concerned about the Russellville                        work at some hours at the Respondent
                                                   members, he raised no issue that                        operation and some other issues that he                 at Big Star Perryville. Tr. 495. Goode.1
                                                   impacted on Grant Goode’s credibility                   made arrangements to see Watson at his                  testified that in late 2012, while he and
                                                   or that would supply a motive to                        house. Tr. 489–90. Among other things                   his wife were on vacation, he received
                                                   fabricate misconduct.                                   discussed at the meeting, Goode.1                       a call from a mid-level multi-store
                                                      After Watson testified, the                          testified that he told the elder Watson                 department manager 139 (T.G.), who told
                                                   Government presented (in its rebuttal                   that ‘‘all of a sudden’’ there was no                   him that Chris W had given a former
                                                   case) the testimony of Steve Goode                      money in the Mayflower store bank                       Mayflower pharmacy technician (C.J.D.)
                                                   (Goode.1),135 a former employee and                     accounts, and that when he examined                     access to the Respondent pharmacy at a
                                                   business partner of Tom Watson. Tr.                     the records, pharmacy purchases were                    time when the Respondent was closed.
                                                   485. Goode.1 testified that he began                                                                            Tr. 496–99. T.G. told Goode.1 that while
                                                                                                           up, but pharmacy sales were ‘‘flat.’’ Tr.
                                                   working for Tom Watson in 1993 in the                                                                           the pharmacy was closed, C.J.D., using
                                                                                                           490. Watson, whose son Chris W was
                                                   capacity of overall store manager for Big                                                                       the keypad access code to enter the
                                                                                                           the Mayflower PIC, told Goode.1 that he
                                                   Star Perryville. Tr. 486. He worked in                                                                          restricted pharmacy area, prepared and
                                                                                                           would look at the issue and ‘‘take care
                                                   that position for approximately six                                                                             dispensed medications to her friends
                                                                                                           of it.’’ Tr. 490–91. Goode.1 testified that             and family. Although Goode.1 believes
                                                   years, and then also assumed                            until the summer of 2010, he had not
                                                   management responsibilities over                                                                                that entries were made in the store
                                                                                                           really paid a lot of attention to                       computer to reflect the distribution of
                                                   Watson’s new Mayflower pharmacy/                        pharmacy numbers at the Mayflower
                                                   grocery store for the next year and a                                                                           the drugs, none of the transactions were
                                                                                                           store because his primary focus was                     rung up on any store cash registers.140
                                                   half. Id. Goode.1 testified that he left                always the grocery end of the business,
                                                   Watson’s employ for a year and a half,                                                                          Tr. 498. Goode.1 testified that he met
                                                                                                           but that he turned his attention in that                with Watson about the situation and
                                                   but in 2001 rejoined him as a business                  direction as part of his efforts to
                                                   partner. Id. Goode.1 explained that over                                                                        warned him that if he didn’t ‘‘get a
                                                                                                           ascertain why two stores, Mayflower                     handle’’ on Chris W, the business would
                                                   the course of their ten-year partnership,               and Russellville, were underperforming.
                                                   in addition to Big Star Perryville and                                                                          encounter the same problem as the
                                                                                                           Tr. 494–95. It was his conclusion that                  Mayflower pharmacy did. Tr. 496.
                                                   Mayflower, the two men bought several                   they had merely underestimated
                                                   grocery stores, all but one of which                                                                            According to Goode.1, Watson said
                                                                                                           demand at Russellville, but the issue at
                                                   included a pharmacy. Tr. 486–87.                        Mayflower was different; pharmacy                         137 Goode.1 testified that he had heard rumors of
                                                      Goode.1 stated that his role in the                                                                          controlled substance discrepancies at the
                                                   partnership was to oversee the grocery                     136 Goode.1 testified that the system was provided   Mayflower pharmacy, but as he was not a
                                                   side of the business, and that he was                                                                           pharmacist, he could not verify them. Tr. at 502–
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                                                                                                           by the grocery wholesaler, Associated Wholesale
                                                   responsible for inventory, invoicing,                   Grocers (AWG). Tr. 487–88. The AWG system               03.
                                                                                                                                                                     138 Goode.1 testified that his share of the sale
                                                   sales, and purchases, and had access to                 accommodated and tracked the ordering of
                                                                                                           pharmaceuticals through McKesson, who at the            price (from his 20 percent ownership interest)
                                                   the bank accounts in all of the stores. Tr.                                                                     totaled approximately $90,000. Tr. at 502.
                                                                                                           time was the Respondent’s pharmacy supplier. Tr.
                                                   487. According to Goode.1, although his                 488. Goode.1 explained that a unified system              139 Goode.1 testified that the manager, T.G.,

                                                                                                           allowed an overview of all Big Star Perryville          supervised bakery and deli operation. Tr. 500.
                                                     135 Steve Goode has no relation to Grant Goode,       transactions such that he could conduct an                140 Goode.1 did not know whether the

                                                   and pronounces his (identically-spelled) name           examination to determine which aspects of the           prescriptions prepared by the former employee
                                                   differently. Tr. 484.                                   business were doing well or poorly. Tr. 489.            were controlled substances. Id.



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                                                   70108                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   ‘‘he’d take care of it’’ but nothing                    upon, and when exercising authority as                general deterrence. David A. Ruben,
                                                   happened. Id.                                           an impartial adjudicator, the Agency                  M.D., 78 FR 38363, 38364, 38385 (2013).
                                                      Goode.1 reckoned that Tom Watson                     may properly give each factor whatever                   Normal hardships to the registrant,
                                                   ‘‘was the only one that had any                         weight it deems appropriate in                        and even the surrounding community,
                                                   influence over [Chris W],’’ and that by                 determining whether a registrant’s                    which are attendant upon the revocation
                                                   bringing the issues to Watson’s                         registration should be revoked. Id.;                  of a registration, are not a relevant
                                                   attention, he expected him to ‘‘get                     David H. Gillis, M.D., 58 FR 37507,                   consideration. Linda Sue Cheek, M.D.,
                                                   involved in the business’’ and                          37508 (1993); see Morall v. DEA, 412                  76 FR 66972, 66972–73 (2011); Gregory
                                                   acknowledge that there was a problem.                   F.3d 165, 173–74 (D.C. Cir. 2005); Joy's              D. Owens, D.D.S., 74 FR 36751, 36757
                                                   Tr. 504. His partner’s aspirations                      Ideas, 70 FR 33195, 33197 (2005); Henry               (2009). The Agency’s conclusion that
                                                   notwithstanding, Watson made no                         J. Schwarz, Jr., M.D., 54 FR 16422,                   past performance is the best predictor of
                                                   discernible effort to intervene. Id.                    16424 (1989). Moreover, the Agency is                 future performance has been sustained
                                                   Goode.1 and Watson sold the Mayflower                   ‘‘not required to make findings as to all             on review in the courts, Alra Labs., Inc.
                                                   and Morrilton stores and dissolved their                of the factors,’’ Hoxie v. DEA, 419 F.3d              v. DEA, 54 F.3d 450, 452 (7th Cir. 1995),
                                                   partnership in 2012 shortly after the                   477, 482 (6th Cir. 2005); Morall, 412                 as has the Agency’s consistent policy of
                                                   C.J.D. incident came to light. Tr. 486.                 F.3d at 173, and is not required to                   strongly weighing whether a registrant
                                                      Goode.1 presented testimony that was                 discuss consideration of each factor in               who has committed acts inconsistent
                                                   sufficiently even, detailed, plausible,                 equal detail, or even every factor in any             with the public interest has accepted
                                                   and internally consistent to be afforded                given level of detail. Trawick v. DEA,                responsibility and demonstrated that he
                                                   full credibility in these proceedings.                  861 F.2d 72, 76 (4th Cir. 1988) (holding              or she will not engage in future
                                                   Goode.1 readily acknowledged that                       that the Administrator’s obligation to                misconduct, Hoxie, 419 F.3d at 483; see
                                                   dissolution of their partnership was                    explain the decision rationale may be                 also Ronald Lynch, M.D., 75 FR 78745,
                                                   ‘‘not totally amicable’’ because the two                satisfied even if only minimal                        78754 (2010) (holding that the
                                                   men still harbor some dispute about the                 consideration is given to the relevant                Respondent’s attempts to minimize
                                                   financial aspects of the dissolution. Tr.               factors and that remand is required only              misconduct undermined acceptance of
                                                   505. Still, there is nothing about the                  when it is unclear whether the relevant               responsibility); George Mathew, M.D.,
                                                   outcome of these proceedings that                       factors were considered at all). The                  75 FR 66138, 66140, 66145, 66148
                                                   would enhance or detract from                           balancing of the public interest factors              (2010); George C. Aycock, M.D., 74 FR
                                                   Goode.1’s status in their unrelated                     ‘‘is not a contest in which score is kept;            17529, 17543 (2009); Steven M.
                                                   monetary dispute, and there was no                      the Agency is not required to                         Abbadessa, D.O., 74 FR 10077, 10078
                                                   indication of malice or bias in the tenor               mechanically count up the factors and                 (2009); Krishna-Iyer, 74 FR at 463; Med.
                                                   or his words or demeanor. Watson’s                      determine how many favor the                          Shoppe-Jonesborough, 73 FR at 387.
                                                   former business partner provided                        Government and how many favor the
                                                   credible testimony.                                     registrant. Rather, it is an inquiry which            [Omitted Material]
                                                      Any additional facts required for a                  focuses on protecting the public                      Factors 1 and 3: The Recommendation
                                                   resolution of this case are set forth in                interest. . . .’’ Jayam Krishna-Iyer, 74              of the Appropriate State Licensing
                                                   the Analysis portion of this                            FR 459, 462 (2009).                                   Board or Professional Disciplinary
                                                   recommended decision.                                      In the adjudication of a revocation of             Authority Conviction Record Under
                                                   The Analysis                                            a DEA COR, the DEA has the burden of                  Federal or State Laws Relating to the
                                                                                                           proving that the requirements for                     Manufacture, Distribution, or
                                                     Under 21 U.S.C. 824(a)(4), the Agency                 continued registration are not satisfied.             Dispensing of Controlled Substances
                                                   may revoke the COR of a registrant if the               21 CFR 1301.44(d) (2015). Where the
                                                   registrant ‘‘has committed such acts as                 Government has met this burden by                        Consideration of the evidence of
                                                   would render [its] registration . . .                   making a prima facie case for revocation              record under Factors 1 and 3 does not
                                                   inconsistent with the public interest.’’                of a registrant’s DEA COR, the burden of              support or undermine the sanction
                                                   21 U.S.C. 824(a)(4) (2012). The                         production then shifts to the registrant              sought by the Government in this case.
                                                   following factors have been provided by                 to show that, given the totality of the               Under Factor 1, the recommendation of
                                                   Congress in determining ‘‘the public                    facts and circumstances in the record,                state medical licensing authorities is an
                                                   interest’’:                                             revoking the registrant’s registration                important but not dispositive factor in
                                                     (1) The recommendation of the appropriate             would not be appropriate. Med. Shoppe-                determining whether maintaining a DEA
                                                   State licensing board or professional                   Jonesborough, 73 FR 364, 387 (2008);                  COR is consistent with the public
                                                   disciplinary authority.                                 Samuel S. Jackson, D.D.S., 72 FR 23848,               interest. Patrick W. Stodola, M.D., 74 FR
                                                     (2) The [registrant’s] experience in                  23853 (2007). Further, ‘‘to rebut the                 20727, 20730 (2009); Krishna-Iyer, 74
                                                   dispensing, or conducting research with                 Government’s prima facie case, [the                   FR at 461. It is beyond argument that
                                                   respect to controlled substances.
                                                                                                           Respondent] is required not only to                   beyond the absence of any evidence that
                                                     (3) The [registrant’s] conviction record                                                                    Arkansas state officials have taken any
                                                   under Federal or State laws relating to the             accept responsibility for [the
                                                                                                           established] misconduct, but also to                  action (or have even considered the
                                                   manufacture, distribution, or dispensing of                                                                   matter), the present record contains no
                                                   controlled substances.                                  demonstrate what corrective measures
                                                     (4) Compliance with applicable State,                 [have been] undertaken to prevent the                 recommendation of any kind from any
                                                   Federal, or local laws relating to controlled           reoccurrence of similar acts.’’ Jeri                  licensing or disciplinary authorities in
                                                                                                                                                                 Arkansas.
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                                                   substances.                                             Hassman, M.D., 75 FR 8194, 8236
                                                     (5) Such other conduct which may threaten             (2010); accord Krishna-Iyer, 74 FR at                    Regarding the third factor
                                                   the public health and safety.                           464 & n.8. In determining whether and                 (convictions relating to the manufacture,
                                                   21 U.S.C. 823(f) (2012).                                to what extent a sanction is appropriate,             distribution, or dispensing of controlled
                                                     ‘‘[T]hese factors are considered in the               consideration must be given to both the               substances), the record in this case does
                                                   disjunctive.’’ Robert A. Leslie, M.D., 68               egregiousness of the offense established              not contain evidence that the
                                                   FR 15227, 15230 (2003). Any one or a                    by the Government’s evidence and the                  Respondent, its owner(s), or any
                                                   combination of factors may be relied                    Agency’s interest in both specific and                pharmacist or key employee of the


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                                                                              Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                   70109

                                                   pharmacy has been convicted 141 of a                     and relies on intentional diversion                  regarding [his] ability to responsibly
                                                   crime related to any of the controlled                   activity conducted primarily by Chris                handle controlled substances in the
                                                   substance activities designated in the                   W, the Respondent’s PIC, and the failure             future.’’). Similarly, in Cynthia M.
                                                   CSA. The standard of proof in a                          on the part of the Respondent to act or              Cadet, M.D., the Agency determined
                                                   criminal case is more stringent than the                 have safeguards in place to protect the              that existing List I precedent 142
                                                   standard required at an administrative                   controlled substances in its care against            clarifying that experience related to
                                                   proceeding, and the elements of both                     Chris W’s malfeasance. Specifically, the             conduct within the scope of the COR
                                                   federal and state crimes relating to                     Government argues that based on what                 sheds light on a practitioner’s
                                                   controlled substances are not always                     the Respondent (through its owner, Tom               knowledge of applicable rules and
                                                   coextensive with conduct that is                         Watson) knew or should have known,                   regulations would not be applied to
                                                   relevant to a determination of whether                   insufficient care was exercised in                   cases where intentional diversion
                                                   maintaining registration is within the                   preventing controlled substance                      allegations were sustained. 76 FR 19450,
                                                   public interest. Still, where present,                   diversion. The Government argues that                19450 n.3 (2011). The Agency’s
                                                   evidence that a registrant has been                      the information in the Respondent’s                  approach in this regard has been
                                                   convicted of crimes related to controlled                possession compelled it to act, and it               sustained on review. MacKay, 664 F.3d
                                                   substances is a factor to be evaluated in                failed to do so. Agency precedent has                at 819.
                                                   reaching a determination as to whether                   consistently held that the registration of              There is no question that the
                                                   the registrant should continue to be                     a pharmacy may be revoked as the result              Respondent has been conducting
                                                   entrusted with a DEA certificate. The                    of the unlawful activity of the                      regulated activity under a DEA-issued
                                                   probative value of an absence of any                     pharmacy’s owners, majority                          COR since 1986 without any indication
                                                   evidence of criminal prosecution is                      shareholders, officers, managing                     on the present record of reported
                                                   somewhat diminished by the myriad of                     pharmacist, or other key employee.                   misconduct that predates the facts that
                                                   considerations that are factored into a                  EZRX, LLC, 69 FR 63178, 63181 (1988);                gave rise to these proceedings. Gov’t Ex.
                                                   decision to initiate, pursue, and dispose                Plaza Pharmacy, 53 FR 36910 (1988).                  1. That said, as discussed in greater
                                                   of criminal proceedings by federal, state,                                                                    detail infra, there is no question that the
                                                                                                               Regarding Factor 2, in requiring an
                                                   and local prosecution authorities. See                                                                        actions of the Respondent’s PIC, for
                                                                                                            examination of a registrant’s experience
                                                   Robert L. Dougherty, M.D., 76 FR 16823,                                                                       which the Respondent is accountable,
                                                                                                            in dispensing controlled substances,
                                                   16833 n.13 (2011); Dewey C. MacKay,                                                                           see EZRX, LLC, 69 FR at 63181; Plaza
                                                                                                            Congress manifested an
                                                   M.D., 75 FR 49956, 49973 (2010)                                                                               Pharmacy, 53 FR at 36910, were plainly
                                                                                                            acknowledgement that the qualitative                 calculated to facilitate intentional
                                                   (‘‘[W]hile a history of criminal
                                                                                                            manner and the quantitative volume in                diversion. Thus, even if it were
                                                   convictions for offenses involving the
                                                                                                            which an applicant has engaged in the                assumed, arguendo, that the regulated
                                                   distribution or dispensing of controlled
                                                                                                            dispensing of controlled substances may              activity conducted by the Respondent
                                                   substances is a highly relevant
                                                                                                            be significant factors to be evaluated in            over the past three decades was
                                                   consideration, there are any number of
                                                                                                            reaching a determination as to whether               exclusively benign, under Agency
                                                   reasons why a registrant may not have
                                                                                                            an applicant should be (or continue to               precedent, the intentional nature of the
                                                   been convicted of such an offense, and
                                                                                                            be) entrusted with a DEA COR. In some                diversion established by the evidence of
                                                   thus, the absence of such a conviction
                                                                                                            (but not all) cases, viewing an                      record would deprive that assumption
                                                   is of considerably less consequence in
                                                                                                            registrant’s actions against a backdrop of           of its ability to mitigate a sanction.
                                                   the public interest inquiry.’’), aff'd,
                                                                                                            how its regulated activities have been                  In addition to Factor 2 (experience in
                                                   MacKay v. DEA, 664 F.3d 808 (10th Cir.
                                                                                                            performed within the scope of its                    dispensing), Factor 4 (compliance with
                                                   2011); Ladapo O. Shyngle, M.D., 74 FR
                                                                                                            registration can provide a contextual                laws related to controlled substances) is
                                                   6056, 6057 n.2 (2009).
                                                                                                            lens to assist in a fair adjudication of             also germane to a correct resolution of
                                                      Therefore, on the present record, the
                                                                                                            whether continued registration is in the             the instant case. Regarding Factor 4, to
                                                   absence of criminal convictions of the
                                                                                                            public interest. Agency precedent has                effectuate the dual goals of conquering
                                                   Respondent’s owner, pharmacists, or
                                                                                                            placed some limitations on the weight                drug abuse and controlling both
                                                   key employees (Factor 3), like the
                                                                                                            to be accorded to evidence considered                legitimate and illegitimate traffic in
                                                   absence of any state recommendation
                                                                                                            under this factor. For example, the                  controlled substances, ‘‘Congress
                                                   regarding the Respondent’s COR (Factor
                                                                                                            Agency has taken the position that this              devised a closed regulatory system
                                                   1), militates neither for nor against the
                                                                                                            factor can be readily outweighed by acts             making it unlawful to manufacture,
                                                   COR revocation sought by the
                                                                                                            held to be inconsistent with the public              distribute, dispense, or possess any
                                                   Government.
                                                                                                            interest, and evidence analyzed under                controlled substance except in a manner
                                                   Factors 2 and 4: The Respondent’s                        this factor will be afforded scant weight            authorized by the CSA.’’ Gonzales v.
                                                   Experience in Dispensing Controlled                      by the Agency in the face of proven                  Raich, 545 U.S. 1, 13 (2005). Under the
                                                   Substances, and Compliance with                          allegations of intentional diversion.                regulations, ‘‘[t]he responsibility for the
                                                   Applicable State, Federal, or Local                      Krishna-Iyer, 74 FR at 463; see also                 proper prescribing and dispensing of
                                                   Laws Relating to Controlled Substances                   Hassman, 75 FR at 8235 (acknowledging                controlled substances is upon the
                                                     Much of the Government’s public-                       Agency precedential rejection of the                 prescribing practitioner, but a
                                                   interest-factors case seeking a COR                      concept that conduct inconsistent with               corresponding responsibility rests with
                                                   revocation for the Respondent is based                   the public interest is rendered less so by           the pharmacist who fills the
                                                   on conduct most aptly considered under                   comparing it with a respondent’s                     prescription.’’ 21 CFR 1306.04(a) (2015).
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                                                   Factors 2 and 4. The Government alleges                  legitimate activities that occurred in               Under this language, a pharmacist has a
                                                                                                            substantially higher numbers); Paul J.               duty ‘‘to fill only those prescriptions
                                                      141 It is undisputed that Chris W has been arrested   Cargine, Jr., 63 FR 51592, 51560 (1998)              that conform in all respects with the
                                                   in connection with facts related to this case (Tr.       (‘‘[E]ven though the patients at issue are           requirements of the [CSA] and DEA
                                                   433, 437–38, 445) and equally undisputed that the        only a small portion of Respondent’s
                                                   record contains no evidence that anyone associated                                                            regulations. . . .’’ Electronic
                                                   with the Respondent (including Chris W) has been
                                                                                                            patient population, his prescribing of
                                                   convicted in connection with the misconduct              controlled substances to these                         142 See, e.g., Volusia Wholesale, 69 FR 69409,

                                                   alleged by the Government.                               individuals raises serious concerns                  69410 (2004).



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                                                   70110                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   Prescriptions for Controlled Substances,                Inc., 77 FR 33770, 33771 n.2 (2012)                   routinely disappear by the following
                                                   75 FR 16236, 16266 (2010).                              (‘‘DEA has long held that it can look                 morning. SOTs 16(b), (e), 17(c). Staff
                                                      In short, a pharmacist has a                         behind a pharmacy’s ownership                         members have also seen Chris W load
                                                   ‘‘corresponding responsibility under                    structure ‘to determine who makes                     his backpack with controlled
                                                   Federal law’’ to dispense only lawful                   decisions concerning the controlled                   medications and walk out the pharmacy
                                                   prescriptions. Liddy's Pharmacy, L.L.C.,                substance business of a pharmacy.’ ’’                 door. SOT 16(f). With the assistance of
                                                   76 FR 48887, 48895 (2011). ‘‘The                        (quoting Carriage Apothecary, 52 FR                   his friend Eric Horton, he has also taken
                                                   corresponding responsibility to ensure                  27599, 27599 (1987)); S & S Pharmacy,                 large amounts of pharmacy
                                                   the dispensing of valid prescriptions                   Inc., 46 FR 13051, 13052 (1981) (holding              documentation out of the pharmacy and
                                                   extends to the pharmacy itself.’’ Holiday               that the corporate pharmacy acts                      secreted it in his home. SOFs 6–12;
                                                   CVS, L.L.C., d/b/a CVS/Pharmacy Nos.                    through the agency of its PIC).                       SOTs 16(g), 19(e), (g), 21. This was done
                                                   219 & 5195, 77 FR 62315, 62341 (2012)                   Knowledge obtained by the pharmacists                 with the knowledge of the Respondent’s
                                                   (citing Med. Shoppe-Jonesborough, 73                    and other employees acting within the                 staff and in violation of the regulations,
                                                   FR at 384; United Prescription Servs.,                  scope of their employment may be                      which require that the records be
                                                   Inc., 72 FR 50397, 50407–08 (2007);                     imputed to the pharmacy itself. See                   maintained by the pharmacy. 21 CFR
                                                   EZRX, LLC, 69 FR at 63181; Role of                      United States v. 7326 Highway 45 N.,                  1306.15(a)(3) (2015).
                                                   Authorized Agents in Communicating                      965 F.2d 311, 316 (7th Cir. 1992) (‘‘Only                Chris W also supplied his girlfriend,
                                                   Controlled Substance Prescriptions to                   knowledge obtained by corporate                       Samantha Pemberton, with controlled
                                                   Pharmacies, 75 FR 61613, 61617 (Oct.                    employees acting within the scope of                  substances in unmarked bottles without
                                                   16, 2010); Issuance of Multiple                         their employment is imputed to the                    a prescription and created a paper trail
                                                   Prescriptions for Schedule II Controlled                corporation.’’). Agency precedent has                 at the pharmacy that fraudulently
                                                   Substances, 72 FR 64921, 69424 (Nov.                    consistently held that the registration of            reflected prescriptions from Dr. James
                                                   19, 2007)). Settled Agency precedent                    a pharmacy may be revoked as the result               Arnold, M.D., an emergency room
                                                   has interpreted this corresponding                      of the unlawful activity of the                       physician who never treated Pemberton.
                                                   responsibility as prohibiting the filling               pharmacy’s owners, majority                           SOTs 7, 22. When, following a traffic
                                                   of a prescription where the pharmacy,                   shareholders, officers, managing                      stop, local police officers attempted to
                                                   through its pharmacist, ‘‘knows or has                  pharmacists, or other key employees.                  ascertain the facts about how Pemberton
                                                   reason to know’’ that the prescription is               Holiday CVS, 77 FR at 62340; EZRX, 69                 came into possession of drugs found
                                                   invalid. E. Main St. Pharmacy, 75 FR                    FR at 63181; Plaza Pharmacy, 53 FR at                 with her, Chris W misled them on
                                                   66149, 66163 (2010); Bob's Pharmacy &                   36911.                                                numerous phone calls and provided
                                                   Diabetic Supplies, 74 FR 19599, 19601                      The evidence of record                             fabricated documentation that falsely
                                                   (2009) (citing Med. Shoppe±                             preponderantly establishes that while                 created the impression that Dr. Arnold
                                                   Jonesborough, 73 FR at 381).                            acting as the Respondent’s PIC, Chris W               was her prescriber and that she was
                                                      The Agency has interpreted this                      twice 143 dispensed controlled                        legitimately dispensed the drugs. SOT 9;
                                                   ‘‘legitimate medical purpose’’ feature of               substances to a DEA undercover agent                  Gov’t Exs. 19, 48, 49; Tr. 52–53.
                                                   the corresponding responsibility duty                   on scrips that he knew were bogus.                       The record also establishes that Chris
                                                   ‘‘as prohibiting a pharmacist from filling              SOFs 14–18, 20; SOT 3. It was clear that              W dispensed controlled substances to
                                                   a prescription for a controlled substance               he knew the scrips were fakes because                 an individual named A.R. with no
                                                   when he either knows or has reason to                   he had been actively engaged in                       prescription whatsoever. SOF 13. Not
                                                   know that the prescription was not                                                                            only did Chris W supply A.R. with
                                                                                                           schooling the undercover agent on how
                                                   written for a legitimate medical                                                                              controlled substances, but to cover his
                                                                                                           to improve his forging skills for future
                                                   purpose,’’ and has been equally                                                                               tracks, he reached out by text message
                                                                                                           scrips. SOFs 14–18, 20; SOT 3; Tr. 146–
                                                   consistent in its admonishment that                                                                           to a dentist acquaintance, Dr. Raymond
                                                                                                           50. In a palpable display of arrogance
                                                   ‘‘[w]hen prescriptions are clearly not                                                                        Hambuchen, who did not know A.R.,
                                                                                                           and disregard for his responsibilities,
                                                   issued for legitimate medical purposes,                                                                       and asked Dr. Hambuchen to vouch for
                                                                                                           Chris W told the undercover agent that
                                                   a pharmacist may not intentionally                                                                            his criminality. SOTs 1, 15(b)–(d), 10(d);
                                                                                                           the agent’s fake scrip ‘‘looks a lot better
                                                   close his eyes and thereby avoid [actual]                                                                     Tr. 20–21; Gov’t Exs. 2, 3. Fortunately,
                                                                                                           than any of the other damn things [he’s]
                                                   knowledge of the real purpose of the                                                                          Dr. Hambuchen was not complicit.
                                                                                                           seen.’’ Gov’t Ex. 18 at 3. He also assured
                                                   prescription.’’ Sun & Lake Pharmacy,                                                                          Records seized at the Respondent
                                                                                                           the undercover agent that what he did                 demonstrate that Chris W fraudulently
                                                   Inc., 76 FR 24523, 24530 (2011); Liddy's
                                                   Pharmacy, 76 FR at 48895; E. Main St.                   with the drugs after the drugs left his               dispensed controlled substances to A.R.
                                                   Pharmacy, 75 FR at 66163; Lincoln                       pharmacy was none of his business.                    eleven times under Dr. Hambuchen’s
                                                   Pharmacy, 75 FR 65667, 65668 (2010);                    SOT 3(e).                                             name. SOF 13; SOT 20(d), (e); Gov’t Ex.
                                                                                                              The evidence of record establishes
                                                   Bob's Pharmacy, 74 FR at 19601.                                                                               4Tr. 185–86.
                                                      When considering whether a                           that Chris W engaged in a wild pattern                   Chris W spent an evening in the
                                                   pharmacy has violated its corresponding                 of abusing his authority as a pharmacist              restricted area of the Respondent
                                                   responsibility, the Agency considers                    while serving as a pharmacist and PIC                 identifying and assisting his friend, Eric
                                                   whether the entity, not the pharmacist,                 at the Respondent. Staff members at the               Horton, in liberating copious amounts of
                                                   can be charged with the requisite                       pharmacy have been directed by Chris                  controlled substances from the
                                                   knowledge. See United Prescription                      W to dispense controlled substances in                pharmacy. A search incident to an arrest
                                                   Servs., 72 FR at 50407 (finding that the                the absence of the requisite scrips and               based on a traffic stop of Horton’s truck
                                                                                                           in the face of blatant red flags of
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                                                   Respondent pharmacy violated its                                                                              shortly thereafter yielded a virtual
                                                   corresponding responsibility because                    diversion, and were aware that large                  cornucopia of controlled substances
                                                   ‘‘an entity which voluntarily engages in                quantities of controlled substance                    from the Respondent that Chris W
                                                   commerce [to] other States is properly                  shipments delivered to the pharmacy                   helped him identify, gather, and pack
                                                   charged with knowledge of the laws                        143 Controlled substances were dispensed to the
                                                                                                                                                                 up at the pharmacy, none of which had
                                                   regarding the practice of medicine in                   undercover agent by Chris W on November 7, 2014
                                                                                                                                                                 a label with Horton’s name on it. SOTs
                                                   those States’’ (emphasis added)); see                   (Undercover Visit 1) and December 4, 2014             5(c), 11(e), 12(c); Gov’t Ex. 36; Tr. 98.
                                                   also Pharmboy Ventures Unlimited,                       (Undercover Visit 4). SOFs 14, 20.                    Chris W also gave controlled substances


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                                                                               Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                            70111

                                                   to Horton at his (Chris W’s) home. SOT                     pharmacy routinely disappear by the                    notice and quit. Tr. 257. It would be
                                                   7(c).                                                      next morning,147 the burglary with                     difficult to conceive of more sincerely-
                                                      Joe Jackson, another of Chris W’s                       controlled substance losses reported to                rendered, credible warnings from more
                                                   friends, was arrested while in                             the local police,148 and the large                     trusted employees than those tendered
                                                   possession of a large quantity of                          quantities of controlled substances                    by Tracy Swaim and June Gilbert. Still,
                                                   controlled substances in Respondent-                       found in the possession of Horton and                  Watson was unmoved and left Chris W
                                                   labeled stock bottles. SOT 13; Gov’t Ex.                   Jackson (neither of whom were                          as the Respondent’s PIC.
                                                   39. A search of the Respondent’s                           Respondent employees, and Jackson                         Tom Watson was also warned of Chris
                                                   pharmacy records revealed that no                          was not even a pharmacy customer), the                 W’s blatant misconduct by his nephew,
                                                   patient profile was maintained on                          Respondent has not filed a report of                   Grant Goode, who briefly worked at the
                                                   Jackson at the pharmacy; thus, the                         theft or loss (DEA–106) as required by                 Respondent as a staff pharmacist. When
                                                   controlled medications he was                              the regulations.149 SOT 14(b). That the                Goode alerted Watson that dozens of
                                                   transporting at the time of his traffic                    staff has noticed that the pharmacy                    dispensing events lacked hard-copy
                                                   stop were not legally dispensed to him.                    regularly runs out of controlled                       scrips, the owner dismissed it as benign
                                                   SOTs 14(c), 20(e).                                         medications by the ninth day of each                   filing errors made by pharmacy staff
                                                      A search warrant executed at Chris                      month is clearly evidence that the                     members. Tr. 277. In view of the fact
                                                   W’s home yielded, inter alia, hard                         Respondent was well aware that                         that Goode was present when Chris W
                                                   copies of scrips for five patients who                     controlled medications were routinely                  loaded medications in his backpack in
                                                   were dispensed controlled substances at                    going missing. SOT 16(b). The repeated                 plain view of his father,150 the elder
                                                   the Respondent. SOFs 6–12. Under the                       failure to report the thefts/losses to DEA             Watson’s unwillingness to act likely
                                                   regulations, these documents were                          constitutes a violation of DEA                         came as no surprise to Goode. When
                                                   required to be maintained at the                           regulations. 21 CFR 1301.76(b).                        Watson became suspicious that Grant
                                                   pharmacy. 21 CFR 1306.15(a)(3) (2015).                        It is likewise beyond argument that                 Goode had brought his concerns to the
                                                      There is thus no question that Chris                    the owner of the Respondent, Tom                       Pharmacy Board, he had another
                                                   W was a bad actor, and less question                       Watson, had unequivocal notice from                    pharmacist (and business partner of
                                                   under Agency precedent that because he                     multiple sources over the course of                    Chris W) dismiss him from the job. Tr.
                                                   was a pharmacist, the PIC, the vice                        several years that his son, Chris W,                   291. The reaction of this pharmacist,
                                                   president, and the controller of the                       approached the disregard of his                        Glenn Wood (also a key employee and
                                                   Respondent, the Respondent is                              obligations as a pharmacist as if it were              supervisory pharmacist), to Goode’s
                                                   accountable for every bit of Chris W’s                     an art form. Tracy Swaim worked for                    concerns was not to elevate the issue or
                                                   misconduct.144 Holiday CVS, 77 FR at                       Tom Watson at the Respondent, most of                  to investigate the allegations; his
                                                   62340; EZRX, 69 FR at 63181; Plaza                         that time as its PIC, for over a quarter               response was merely to take offense on
                                                   Pharmacy, 53 FR at 36911. The seminal                      of a century. Tr. 232–33. In January of                behalf of the Watsons and defend them.
                                                   question here is not whether a sanction                    2012, Swaim told Watson that he was                    Tr. 427, 429.
                                                   is authorized (it clearly is), but whether                 sufficiently troubled by Chris W’s illegal                Tom Watson also disregarded
                                                   the Respondent should be sanctioned.                       hijinks that he intended to resign as the              concerns expressed by his former long-
                                                   For the reasons that follow, that                          PIC. Tr. 251–56. Unconsoled by                         time store manager and partner, Steve
                                                   question must be answered in the                           Watson’s assurances, Swaim conducted                   Goode (Goode.1). While co-owning the
                                                   affirmative.                                               a close-out inventory, completed the                   Mayflower store with Watson, Goode.1
                                                      Notwithstanding the stunning level of                   necessary paperwork to step down, and                  had determined that while Chris W was
                                                   controlled substance shortages 145                         did so. The fact that Swaim’s salary                   the PIC, pharmacy ordering was going
                                                   revealed by the DEA audit,146 the                          remained unaffected and his hours were                 through the roof while sales were static.
                                                   awareness by pharmacy staff that                           not reduced is strong evidence that the                Tr. 490–92. When he brought this
                                                   controlled medications shipped to the                      demotion was in no way punitive, and                   concern to Watson’s attention, the two
                                                                                                              that the long-term PIC was making a                    men met with Chris W, and Goode.1
                                                      144 Although the Respondent has stipulated that         powerful statement to his employer. Tr.                was essentially told to keep his nose out
                                                   Chris W is and was a part-owner of the Respondent          254–55, 266–67. Tom Watson’s reaction                  of the pharmacy side of the house. Tr.
                                                   (SOF 20), it subsequently sought to challenge the          was to effect no discernible change in                 493.
                                                   basis of that stipulation with an affidavit from Chris                                                               Goode.1 also informed Watson that
                                                   W’s mother offered after the hearing was completed.        the organization—other than having
                                                   ALJ Ex. 21. The motion was granted over the                Chris W replace Swaim as the                           Chris W had granted access to the
                                                   Government’s objection. ALJ Exs. 22, 23. However,          Respondent’s PIC.                                      pharmacy to a former employee while
                                                   inasmuch as Agency precedent does not distinguish             Two years and nine months later,                    the pharmacy was closed and enabled
                                                   between the responsibility imputed to a Respondent                                                                her to dispense medications to her
                                                   from an owner and the responsibility imputed from          when Swaim overheard Pharmacy
                                                   a managing pharmacist, officer, or other key               Technician June Gilbert (a twenty-five-                friends and relatives free of charge. Tr.
                                                   employee, Holiday CVS, 77 FR at 62340; EZRX, 69            year veteran of the Respondent) tell                   496–99. Consistent with his custom in
                                                   FR at 63181; Plaza Pharmacy, 53 FR at 36911, the           Watson that Chris W was ‘‘giving away’’                such matters, Watson assured Goode.1
                                                   admission of the affidavit (Resp’t Ex. 15), especially                                                            that he would take care of the issue and
                                                   when considered with the diminished weight                 medication, it was more than Swaim
                                                   accorded by the regulations, 21 CFR 1316.58(b)             could endure, and he warned Watson                     proceeded to do nothing. Tr. 496–97.
                                                   (2015), adds virtually nothing to the equation.            that he was considering leaving the                    The partnership between the two men
                                                      145 Inasmuch as the shortages based on a DEA
                                                                                                              pharmacy altogether. Tr. 257. Four days                was subsequently dissolved. Id.
                                                   audit were not noticed in the OSC or the prehearing                                                                  The Respondent also ran afoul of state
                                                                                                              later, when Swaim learned from the
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                                                   statements, the audit results, standing alone, cannot
                                                   form an independent basis for sanction. CBS                staff that Chris W’s misconduct had not                controlled substance laws. The
                                                   Wholesale Distribs., 74 FR 36746, 36750 (2009)             abated, notwithstanding the fact that                  Arkansas Uniform Controlled
                                                   (citing Darrel Risner, D.M.D., 61 FR 728, 730              Swaim had no job prospects and lived                   Substances Act specifies that no
                                                   (1996)); see also Roy E. Berkowitz, M.D., 74 FR                                                                   controlled substance is to be dispensed
                                                   36758, 36759–60 (2009). However, the Government
                                                                                                              in a rural area, he gave his two weeks’
                                                   did sufficiently notice the Respondent’s failure to
                                                                                                                                                                     without a prescription issued in
                                                   file a report of theft or loss of controlled substances.    147 SOTs 16(b), 17(c).                                compliance with federal laws and
                                                   ALJ Ex. 1 at 4.                                             148 SOTs 2(e), 19(f); Tr. 259–60, 323.
                                                      146 Tr. 181.                                             149 21 CFR 1301.76(b) (2015).                           150 Tr.   280.



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                                                   70112                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   regulations. Ark. Code Ann. § 5–64–308                  procedures.’’ Ark. Admin. Code                        and safety.152 Agency precedent has
                                                   (2013). Thus, Chris W’s practice of                     § 070.00.4–04–00–0010 (2014).                         generally embraced the principle that
                                                   dispensing controlled substances                           Under Arkansas law, ‘‘[t]he permit                 any conduct that is properly the subject
                                                   without scrips to his girlfriend, friends,              holder and the [PIC] are jointly                      of Factor 5 must have a nexus to
                                                   and associates, and his facilitation of a               responsible for the security and                      controlled substances and the
                                                   former employee’s weekend drug                          accountability of all controlled drugs                underlying purposes of the CSA. Terese,
                                                   dispensing event to her friends and                     stored in and/or ordered by a                         Inc., 76 FR 46843, 46848 (2011); Tony
                                                   family, clearly violated state laws                     pharmacy.’’ Ark. Admin. Code                          T. Bui, M.D., 75 FR 49979, 49989 (2010)
                                                   related to controlled substances, and                                                                         (stating that prescribing practices
                                                                                                           § 070.00.4–04–00–0015 (2014). As such,
                                                   was passively endured by the                                                                                  related to a non-controlled substance
                                                                                                           the permit holder is required to
                                                   Respondent. As discussed supra, the                                                                           such as human growth hormone may
                                                                                                           ‘‘provide diversion prevention and
                                                   Respondent was credibly informed by                                                                           not provide an independent basis for
                                                                                                           detection tools appropriate for the
                                                   numerous sources, was well aware of                                                                           concluding that a registrant has engaged
                                                   Chris W’s misconduct, and chose to do                   particular pharmacy setting and the                   in conduct which may threaten public
                                                   nothing.                                                pharmacist in charge shall implement                  health and safety); cf. Paul Weir
                                                      When Chris W dispensed controlled                    and monitor the diversion control and                 Battershell, N.P., 76 FR 44359, 44368
                                                   substances twice to an undercover DEA                   detection tools provided by the permit                n.27 (2011) (noting that although a
                                                   agent where he knew that the presented                  holder.’’ Id. Such policies and                       registrant’s non-compliance with the
                                                   scrips were fraudulent, he also violated                procedures developed by the permit                    Food, Drug, and Cosmetic Act is not
                                                   his state ‘‘corresponding responsibility’’              holder and the PIC to prevent and detect              relevant under Factor 5, consideration
                                                   to ensure that the prescribing and                      diversion may include ‘‘limiting access               of such conduct may properly be
                                                   dispensing of a controlled substance is                 to by non-pharmacists to controlled                   considered on the narrow issue of
                                                   proper. Ark. Admin. Code § 007.07.2–II–                 drug shipments’’, ‘‘confirming pill count             assessing a respondent’s future
                                                   VIII(B)(1) (2014); see also Ark. Admin.                 before opening a new bottle of high risk              compliance with the CSA). Only
                                                   Code § 070.00.4–04–00–0009 (2014)                       drugs’’, and ‘‘tracking pill count on                 conduct that has ‘‘a nexus to controlled
                                                   (‘‘Any pharmacist . . . participating in                stock bottles.’’ Id. As discussed supra,              substances and the underlying purposes
                                                   the preparation of orders or dispensing                 Respondent’s lack of any meaningful                   of the CSA’’ may be considered under
                                                   of prescriptions . . . is responsible for               measures of checks and balances to                    this factor. Joe W. Morgan, D.O., 78 FR
                                                   the validity and legality of the order or               guard against diversion by a pharmacist,              61961, 61977 (2013); accord Holiday
                                                   prescription.’’). Prescriptions can only                the sharing of the CSOS password, and                 CVS, 77 FR at 62345.
                                                   be issued for ‘‘legitimate medical                      its owner’s obdurate refusal to act on                   Even the Respondent seems to agree
                                                   purposes’’ by ‘‘an individual                           credible warning after warning placed                 that the depth and breadth of Chris W’s
                                                   practitioner who is legally authorized to               the Respondent in violation of the                    arrogance and imagination in his
                                                   prescribe . . . controlled substances in                Arkansas security and accountability                  extended efforts to flout the CSA is
                                                   the State of Arkansas and who holds a                   provisions.                                           remarkable by any standard. During his
                                                   current [DEA COR].’’ Ark. Admin. Code                      Chris W served as a staff pharmacist               enthusiastic campaign of diversion for
                                                   § 007.07.2–II–VIII. Chris W knew the                    and PIC at the Respondent. He is the son              profit, there were certainly acts he
                                                   scrips were frauds, and even sought to                  of the majority owner of the business,                committed that were both inside and
                                                   improve the caliber of the undercover                   and diverted controlled substances with               outside the other public interest factors
                                                   agent’s future forgeries. Chris W’s                                                                           considered here. However, there were
                                                                                                           equal measures of wild abandon and
                                                   actions as pharmacist and later PIC                                                                           two ‘‘other conduct’’ undertakings 153
                                                                                                           complete impunity. The Respondent
                                                   violated Arkansas laws and under the                                                                          that stood out from the rest as deserving
                                                                                                           knew its pharmacist was violating
                                                   circumstances, the Respondent is fully                                                                        of separate consideration: Providing
                                                                                                           federal and state laws and diverting
                                                   responsible with knowledge of his                                                                             advice to the DEA undercover agent on
                                                                                                           copious amounts of controlled
                                                   malfeasance.                                                                                                  how to improve his scrip forgery
                                                      Arkansas regulations delineate a                     substances and elected to take no action.
                                                                                                                                                                 efforts 154 and generating false
                                                   number of responsibilities for                          Consideration of the record evidence
                                                                                                                                                                 documents and supplying them to law
                                                   supervisory pharmacists; those persons                  under Factors 2 and 4 militate
                                                                                                                                                                 enforcement to cover his tracks in
                                                   responsible for supervising pharmacy                    powerfully and conclusively in favor of
                                                                                                                                                                 supplying Samantha Pemberton with
                                                   personnel are ‘‘responsible for the                     the COR revocation sought by the                      drugs. Both stand out as worthy of
                                                   validity and legality’’ of the                          Government.                                           separate consideration under Factor
                                                   prescriptions dispensed and also                        Factor 5: Such Other Conduct Which                    5.155
                                                   ‘‘responsible for any shortage of drugs                 May Threaten the Public Health and                       There is little doubt that on the
                                                   classified as controlled substances . . .               Safety                                                present record, where the Respondent’s
                                                   which occurs under their supervision.’’                                                                       owner stubbornly ignored every
                                                   Ark. Admin. Code § 070.00.4–04–00–                        The fifth statutory public interest                 warning sign that Chris W, his PIC and
                                                   0009 (2014). Likewise, state regulations                factor directs consideration of ‘‘[s]uch              his son, was essentially on a campaign
                                                   outline the responsibilities unique to                  other conduct which may threaten the                  to abuse his authority and divert drugs
                                                   those individuals designated as                         public health and safety.’’ 21 U.S.C.                 on an unprecedented level, that the
                                                   pharmacists-in-charge: ‘‘The [PIC] is                   823(f)(5) (2012) (emphasis added). To                 Respondent should be and is wholly
                                                   responsible for the security and                        qualify for consideration under this                  accountable Chris W’s Factor 5 conduct.
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                                                   accountability of all drugs stored in a                 factor, the evidence must constitute: (1)
                                                   pharmacy and is responsible for the                     Conduct 151 (2) not covered by                           152 Jacobo Dreszer, 76 FR 19386, 19386 n.3, 19434

                                                   validity and legality of all prescriptions              application of the other four public                  (2011); Michael J. Aruta, M.D., 76 FR 19420, 19420
                                                   and/or orders upon which drugs are                                                                            n.3 (2011); Beau Boshers, M.D., 76 FR 19401, 19402
                                                                                                           interest factors (3) which has the                    n.4 (2011).
                                                   dispensed in a pharmacy. The [PIC] is                   potential to threaten the public health                  153 This is certainly not offered as an exhaustive
                                                   responsible for ensuring that pharmacy                                                                        list of all Chris W’s Factor 5-eligible actions.
                                                   staff has been appropriately trained to                   151 See Holloway Distrib., 72 FR 42118, 42126          154 SOFs 15–18, 20; SOT 3; Tr. 146–50.

                                                   follow the pharmacy’s policies and                      n.16 (2007).                                             155 SOT 9(e)–(g); Gov’t Exs. 48, 49.




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                                                                             Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices                                                          70113

                                                   Holiday CVS, 77 FR at 62340; EZRX, 69                   amount of prudent legal advice could                     Respondent’s community impact
                                                   FR at 63181; Plaza Pharmacy, 53 FR at                   save the Respondent from itself. During                  argument, even if it were not rendered
                                                   36911. There is equally little question                 his testimony, Tom Watson, the                           irrelevant by Agency precedent (which
                                                   that consideration of the record                        majority owner of the Respondent,                        it is), is not persuasive on the present
                                                   evidence under Factor 5 militates                       doggedly maintained that the                             record.
                                                   powerfully in favor of the revocation of                responsibility for every bit of                             That a sanction is authorized does not
                                                   the Respondent’s COR.                                   horrendous misconduct committed by                       end the inquiry. In determining whether
                                                                                                           his son/PIC was his son’s responsibility                 and to what extent imposing a sanction
                                                   Recommendation                                                                                                   is appropriate, consideration must be
                                                                                                           to bear. Tr. 354–56, 358, 362. Watson
                                                      Inasmuch as the Government has                       obdurately clung to the (false) notion                   given to both the egregiousness of the
                                                   preponderantly established that the                     that delegation of his authority equates                 offenses established by the
                                                   Respondent’s PIC engaged in behavior                    with absolution from his responsibility.                 Government’s evidence and the
                                                   that is violative of Federal and state law              Tr. 358. He is mistaken, and his position                Agency’s interest in both specific and
                                                   regarding controlled substances                         in this regard is made even more                         general deterrence. Ruben, 78 FR at
                                                   dispensing practices and a pharmacist’s                 unreasonable by the fact that he has                     38364, 38385. As discussed supra, the
                                                   corresponding responsibility, that the                  spent years turning a blind eye to                       conduct of the Respondent, through its
                                                   Respondent treated the misconduct with                  warning after warning. Under                             PIC, and as ignored by its owner, was
                                                   deliberate indifference, and that the                   longstanding Agency precedent,                           stunning. Not only were dangerous
                                                   Respondent systemically failed to                       Watson’s failure to accept any level of                  controlled drugs being doled out to
                                                   maintain adequate controls to protect                   responsibility has virtually precluded                   friends, love interests, and customers,
                                                   against theft or loss of controlled                     the Respondent’s ability to avoid a                      but the apparatus of the Respondent was
                                                   substances, the Government has                          sanction in this case.                                   actively employed by Chris W to
                                                   supplied sufficient evidence to make                       Inasmuch as the Respondent has not                    accomplish his misconduct. Chris W
                                                   out a prima facie case that maintaining                 accepted responsibility, evidence of                     used the Respondent’s privileges to
                                                   the Respondent’s COR would be                           remedial steps is irrelevant. Hassman,                   order and store controlled substances as
                                                   contrary to the requirements of 21                      75 FR at 8236. However, even if the                      if he were running a big-box retailer
                                                   U.S.C. 823 and 824. As the Government                   remedial steps offered by the                            specializing in drug dealing. No amount
                                                   has sustained its burden to show that                   Respondent were considered, they                         of security measures, cameras,
                                                   the Respondent committed acts                           would not alter the result. Prospective                  documents, or safety protocols could
                                                   inconsistent with the public interest, the              PIC Glenn Wood’s testimony concerning                    defend the public against his father’s
                                                   burden shifts to the Respondent to show                 all the extra security measure he intends                deliberate indifference. Chris W even
                                                   that it can be entrusted with a DEA                     to take 157 suffers from the same                        once loaned out the store so that a
                                                   registration. ‘‘[T]o rebut the                          fundamental defect that Watson’s                         former employee could mete out drugs
                                                   Government’s prima facie case, [the                     representations regarding his                            to her friends and family. There is no
                                                   Respondent is] required not only to                     anticipated increased pharmacy                           question that a thoughtful consideration
                                                   accept responsibility for [the                          involvement 158 and implementation of                    of the egregiousness of the established
                                                   established] misconduct, but also to                    his Proposed Policy 159 do: both men                     misconduct compels the revocation
                                                   demonstrate what corrective measures                    were present and did nothing when the                    sought by the Government.
                                                   [have been] undertaken to prevent the                   Respondent’s PIC, Chris W, ran wild.                        Regarding the issue of deterrence,
                                                   reoccurrence of similar acts.’’ Hassman,                These men are a major part of the                        there is no question that a sanction that
                                                   75 FR at 8236; Hoxie, 419 F.3d at 483;                  problem, not the champions of a                          falls short of revocation would
                                                   Lynch, 75 FR at 78749 (Respondent’s                     solution that can be afforded any                        undermine the Agency’s legitimate
                                                   attempts to minimize misconduct held                    genuine credence.                                        interests in both specific and general
                                                   to undermine acceptance of                                 Although there was no cognizable                      deterrence. On the issue of specific
                                                   responsibility); Mathew, 75 FR at 66140,                acceptance of responsibility, the                        deterrence, there is nothing in the
                                                   66145, 66148; Aycock, 74 FR at 17543;                   Respondent took the position that                        record that lends any support to the
                                                   Abbadessa, 74 FR at 10078; Krishna-                     consideration should be given to the fact                proposition that Tom Watson’s future
                                                   Iyer, 74 FR at 463; Med. Shoppe-                        that its pharmacy serves an                              behavior will be any different from his
                                                   Jonesborough, 73 FR at 387. Both prongs                 underserved, primarily indigent, rural                   past behavior. Although the Respondent
                                                   are required, and one is irrelevant                     community. Resp’t Brf. at 114; Tr. 404,                  represents that (the retired) Watson
                                                   without the other.                                      429–30. Even apart from the potential                    intends to become more active in the
                                                      The Government’s prima facie burden                  irony in concluding that a rural,                        business in the future,160 his level of
                                                   having been met,156 an unequivocal                      indigent community would garner                          activity was never the issue. He had his
                                                   acceptance of responsibility stands as a                significant benefit from a COR holder                    closest associates, managers, business
                                                   condition precedent for the Respondent                  who has consistently refused to take                     partners, employees, pharmacists, and
                                                   to prevail. Mathew, 75 FR at 66148. This                even the smallest step to mitigate his                   relatives engaged in a consistent chorus
                                                   feature of the Agency’s interpretation of               son’s wholesale diversion of dangerous                   implicating Chris W as a persistent and
                                                   its statutory mandate on the exercise of                drugs, Agency precedent is clear that                    criminal diverter, yet Watson was
                                                   its discretionary function under the CSA                normal hardships to the practitioner,                    unmoved. It strains credulity to think
                                                   has been sustained on review. MacKay,                   and even the surrounding community,                      that the exercise of successfully
                                                   664 F.3d at 822. While it is true that the              which are attendant upon the denial of                   defending an ISO at administrative
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                                                   Respondent, through counsel,                            a registration, are not a relevant                       proceedings before the DEA will be the
                                                   commendably entered into an extensive                   consideration. Cheek, 76 FR at 66972–                    catalyst of change. There is no reason to
                                                   and reasonable array of evidentiary and                 73; Abbadessa, 74 FR at 10078; Owens,                    believe that Tom Watson intends to
                                                   testimonial stipulations in this case, no               74 FR at 36757. Suffice it to say that the               manage his pharmacy differently than
                                                                                                                                                                    he has for decades, and every reason to
                                                     156 The Respondent concedes that the                    157 Tr.416–19, 444.                                    believe that escaping consequences here
                                                                                                             158 Resp’t Brf. at 16; Tr. 320, 346–47.
                                                   Government has met its prima facie burden. Resp’t
                                                   Brf. at 2–3.                                              159 Gov’t Ex. 1.                                         160 Resp’t   Brf. at 16; Tr. 320, 346–47.



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                                                   70114                     Federal Register / Vol. 80, No. 218 / Thursday, November 12, 2015 / Notices

                                                   will be as destructive as the impunity                  would render anything less than a                     Agency’s interests in deterrence,
                                                   with which he ignored every warning                     revocation as an invitation to others in              supports the conclusion that the
                                                   sign that his pharmacy was a mess, and                  the regulated community to ignore                     Respondent should not continue to be
                                                   rendered so at the hands of his son.                    trouble in their own operations. The                  entrusted with a registration.
                                                     Regarding general deterrence, as the                  inescapable lesson to other COR holders                 Accordingly, the Respondent’s DEA
                                                   regulator in this field, the Agency bears               would be that delegation of authority                 COR should be REVOKED, and any
                                                   the responsibility to deter similar                     does equate to delegation of                          pending applications for renewal should
                                                   misconduct on the part of others for the                responsibility. The Agency’s interests in             be DENIED.
                                                   protection of the public at large. Ruben,               general deterrence are served best by
                                                                                                                                                                 Dated: May 13, 2015.
                                                   78 FR at 38385. The ubiquitous nature                   revoking the Respondent’s COR.
                                                   of the drug diversion taking place                         A balancing of the statutory public                John J. Mulrooney, II,
                                                   within plain sight of the COR holder,                   interest factors, coupled with                        Chief Administrative Law Judge.
                                                   the Respondent’s employees, law                         consideration of the Respondent’s                     [FR Doc. 2015–28723 Filed 11–10–15; 8:45 am]
                                                   enforcement, and the public at large                    failure to accept responsibility and the              BILLING CODE 4410–09–P
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Document Created: 2015-12-14 14:54:07
Document Modified: 2015-12-14 14:54:07
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation80 FR 70083 

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