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)
Drug Enforcement Administration
Federal Register Volume 80, Issue 218 (November 12, 2015)
| Page Range | 70083-70114 | |
| FR Document | 2015-28723 |
[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 ----------------------------------------------------------------------- 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]] ----------------------------------------------------------------------- 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''). --------------------------------------------------------------------------- \1\ All citations to the Recommended Decision are to the slip opinion as issued by the CALJ. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- (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\ --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- (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). --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- (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. --------------------------------------------------------------------------- \9\ Both prescriptions were written on a single form. GX 6. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- (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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \12\ Grant Goode testified that he also worked at Respondent on November 24, 2014. Tr. 271. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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
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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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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
mstockstill on DSK4VPTVN1PROD with NOTICES2
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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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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‘‘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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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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‘‘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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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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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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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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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
mstockstill on DSK4VPTVN1PROD with NOTICES2
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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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
mstockstill on DSK4VPTVN1PROD with NOTICES2
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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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
mstockstill on DSK4VPTVN1PROD with NOTICES2
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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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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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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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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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.
mstockstill on DSK4VPTVN1PROD with NOTICES2
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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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,
mstockstill on DSK4VPTVN1PROD with NOTICES2
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
mstockstill on DSK4VPTVN1PROD with NOTICES2
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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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
mstockstill on DSK4VPTVN1PROD with NOTICES2
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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‘‘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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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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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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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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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
mstockstill on DSK4VPTVN1PROD with NOTICES2
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
mstockstill on DSK4VPTVN1PROD with NOTICES2
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Document Created: 2015-12-14 14:54:07
Document Modified: 2015-12-14 14:54:07
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 70083 |
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