An Address by Gene R. Haislip, B.A., LL.B., LL.M. Before the Interpol Conference of Heads of National Drug Services In Antwerp on April 29, 1998

INDUSTRY COOPERATION, PROBLEMS AND PERSPECTIVES IN CHEMICAL CONTROL

An Address by Gene R. Haislip, B.A., LL.B., LL.M. Before the Interpol Conference of Heads of National Drug Services In Antwerp on April 29, 1998

My name is Gene R. Haislip and I am very pleased to have this opportunity to address you on a topic with which I have been greatly concerned for many years. I am pleased also to see a number of colleagues present with whom I have worked and know well; and it is always pleasant to meet and make new acquaintances.
Just one year ago I retired from the US Drug Enforcement Administration where I last served as a Deputy Assistant Administrator and, among other duties, was in charge of the US chemical control program and at various times, the enforcement effort against illicit laboratories. It is my belief that the best promise for success against the clandestine manufacture of drugs is a program which combines and integrates three different elements; (1) a dedicated enforcement operation aimed at clandestine laboratory organizations, (2) international and inter-jurisdictional coordination, and (3) legal control of the commerce in certain critical chemicals. It is this latter component which I will be discussing.
Following my retirement, I established my own private consulting practice and am pleased to say that I do in fact have a number of good clients who consult with me from time to time regarding their problems and activities. Today, I am appearing at my own expense to represent my own views of what I have learned in an important area in the hope that it will also be of some small use to each of you. As you will discover, if you do not already know it, service in this cause is a habit that, once acquired, never dies.
The law-abiding public is the policeman's greatest ally. It is true in virtually every field of law enforcement and it is true in that narrow but strategically important area of drug enforcement that we have come to call "chemical control". But in this case, the most important segment of the public are those men and women in those companies which supply the very chemicals so ardently sought after by the drug traffickers. We all know this and we have all said it at every conference that concerns itself with chemical control. But because we are still in the initial stages of developing chemical control as a global strategy, it has seldom been the focus of our discussions.
As we complete the framework of law and international cooperation, I think the time will come when it will be both useful and appropriate to address the topic in greater detail. I know that in both Europe and America, drug enforcement officers have given considerable attention to this area and have much to say and much to share. It is also an area with which I was much concerned as a drug enforcement officer and now that I am retired from the DEA, I have had the opportunity as a private consultant, to focus on some of the issues from the perspective of the effected industries. It is my hope that this may add something to the dialogue.
So, we are talking about the regulation of the great, natural energy of our system, and we should be seeking what Aristotle always referred to as 'The Golden Mean', or what Goldilocks called "just right" in that famous case of stolen porridge. If one were to speak of regulating the flow of automobile traffic, it might be understood as maintaining the maximum ease of transportation at the lowest cost, consistent with reducing injury to the minimum. As applied to the control of potentially harmful drugs, we might think of it as facilitating the maximum benefit to public health, at a conveniently low price, while safeguarding against drug abuse, crime and injury.

Importance of Industry Cooperation
Before proceeding further, it is worthwhile to briefly mention some of the specifics that illustrate the importance of the chemical industry as an ally of the drug law enforcement officer. First, we should note that many of the most important enforcement actions against clandestine laboratory operators have come about, or been significantly assisted by information provided by chemical supply companies. In many cases, these were unsolicited contacts that came to us because of the civic concern of company officers. Just one of these in our own hemisphere, known as the "Raid on Tranquilandia" provided a great stimulus to the creation of the US chemical control program. In this case, a well-known chemical supplier contacted the DEA because a Colombian engineer was seeking to purchase a large quantity of ether for shipment to Colombia. The result was the first major seizure of a jungle laboratory together with fourteen tons of cocaine. Such cases are legend on both sides of the Atlantic.

But industry cooperation is also critical in other areas. Such cooperation is often the key to quickly halting or delaying international shipments that the authorities of other countries have determined to be suspicious. There are times when voluntary action by a company is needed prior to the time that all of the necessary evidence is available to justify legal action. And finally, it is only through voluntary contacts with the industry that law enforcement authorities can acquire the knowledge of commercial norms, patterns and usage necessary for them to understand how to judge and deal with suspicious chemical movements.

Basic Assumptions of Chemical Control

The US has now been pursuing a program of formal national and international chemical control since 1987. The first national legislation was enacted in November of 1988 and we now have over seven years of experience in enforcing it. As a result of the Vienna Convention, many other countries also have a number of years of similar experience. I believe that our original assumptions have proven to be correct and more recent experience has confirmed this for me.
Legitimate business is about business; it is not about drug enforcement. Businessmen are rightly concerned with efficiency, service to their customers and profit. They do not know or understand police work or the operations of the illicit traffic and they are usually not willing to incur additional costs, delays or inefficiencies for something they don't understand or which is not mandated by law. There are some, particularly large, well-known companies that are willing and even interested in volunteering action because of their wealth, prestige and commitment to the community. Many, however, are reluctant to take legal risks or incur the loss of profits because of vaguely understood requests by law enforcement authorities that they perceive as having no understanding of business. And finally, there are a few who are willing to look the other way in the case of suspicious customers, and a smaller number who will actually structure their business to hide behind the law while servicing the drug traffic.
National legislation has three major effects on this situation. First, it represents a clear statement by the national government that a decision has been taken and business is expected to cooperate. Secondly, it provides a degree of specificity to the obligation to cooperate that is lacking in a purely voluntary system. And finally, it provides regulatory penalties for the negligent and indifferent, and criminal penalties for those few who are engaged in criminal profiteering. But undoubtedly, the most important effect of a national law is to bring law enforcement and industry into a relationship that has the potential to greatly extend and enhance cooperation.

Commercial Diversity and Legal Simplicity

Once the legal relationship has commenced, one of the great headaches for everyone involved is the very great diversity of commerce and commercial enterprises compared to the relatively simple structure of the law and expectations of law enforcement. There are large companies of tens of thousands of employees which deal in hundreds of mega-volume transactions, or alternatively, in tens of thousands of small volume transactions. There are companies of just several, or a dozen employees that distribute many tons of List I chemicals in the course of a single month, whereas many giant firms may distribute only a few kilos. There are great companies that sell controlled chemicals, but only in the form of pharmaceuticals that, even in a large batch of drugs, may represent only a small quantity of chemicals. There are companies which manufacture and distribute, companies which only broker supplies of chemicals by purchasing them where they are cheap and selling them were they are expensive, companies which only sell for export, companies which only sell domestically, and so many, many other different situations, business practices and patterns. But there is only one law and it has been made by people who have limited expertise in any of these areas of commerce.

The position and practices of a company greatly affect it disposition and ability to cooperate with law enforcement. A few generalizations are appropriate to illustrate these differences:

 
Large, well-known companies
Very large, well-known companies are usually concerned with their public image. They are professionally staffed, bureaucratic entities planning a long-term existence, and coexistence with the relevant government or governments. They generally view their reputation as more important to their long-term success than any single product, customer, or line of business. Moreover, they have a staff and continuity capable of tracking and understanding the legislation that affects them. My experience is that once the law is settled, these companies are willing to comply with the law and, if requested by the authorities, will actually do more than is required of them.

Small companies with minimum staff
Small companies are generally more conscious of the money involved in a single item of business and are in a tougher competitive situation. Public recognition and reputation is not usually a major asset. They are also inclined to the view that their competitors are anxious to steal their business. They have a minimum of staff devoted to non-operational activities, and are less likely to know or understand complex legal requirements or public policy issues. A relationship with the police authorities can bring headaches and very few benefits. Once the issue is explained and understood however, the great majority of these firms can be of invaluable assistance to the police. Nevertheless, it is important to note that some few small businesses of this sort have been identified which knowingly function as a primary source of chemicals for the drug traffic.
Foreign owned and managed companies
It is not uncommon to find that a chemical distributor may be a subsidiary of a larger, parent firm controlled and managed within a distant country. In some cases, even the local or national manager will be a foreign national posted for a relatively short period of service within the country serviced. In such cases, where professional staff is minimal, management will sometimes have very little knowledge or interest in the problems of a 'foreign society' or its non-commercial laws, policies and priorities. The overseas owners to whom the manager is responsible, may have even less knowledge or interest but will exert continuous pressure to achieve maximum sales revenues. In such circumstances, legal requirements are apt to be narrowly construed until unpleasant collisions occur.

 

These are just a few limited examples to indicate the diverse environment within which chemical control authorities must work. What is important to grasp is the great diversity of circumstances in which companies operate and the different factors which affect the problems of liaison and cooperation. With this in mind, let us look at some of the critical issues involved in industry compliance and cooperation.
Major Problems for Industry and Government

There are a number of major problems which one repeatedly encounters and which are common to both government and industry. In my experience, the most important of these are (1) a lack of knowledge and understanding of each other, (2) a divergence between the various lists of controlled chemicals from country to country and even within jurisdictions of the same country, (3) a proliferation of substances which need to be controlled or responded to, (4) the handling and identification of suspicious orders, and (5) attitudes and policies regarding the observance and enforcement of regulatory controls. Some brief comment is appropriate to each,

 

Lack of Knowledge

Perhaps the greatest single impediment to effective government and industry cooperation is mutual ignorance. Companies are expected to recognize and respond to suspicious orders but generally lack any knowledge or understanding of the operations of the illicit drug traffickers as it might affect them. Thus, they are really only prepared to respond in certain very obvious circumstances although they rightly suspect that they may be penalized for any subsequently discovered failure on their part.

Another problem is that government legal interpretations, policies, and expectations may be unknown to them. Some companies have actually filled suspicious orders and then notified the police of them, assuming that their obligation had been fulfilled. In some cases there may be policy reasons, which inhibit the police from fully communicating their expectations.

On the other hand, law enforcement agencies seldom have personnel who have any in depth familiarity with the various aspects of the chemical business. They are therefore lacking in the way of judging the conditions under which the business is conducted, both as regards limitations and possibilities, and do not know what is routine and what is unusual. It is sufficient to say that the ignorance of the one side is well reciprocated by the ignorance of the other. A specific program with dedicated staff resources should be established to insure constant formal and informal communication with all segments of the chemical industry.

Lack of Uniformity of Controls

Another problem, which both industry and the police share in equal measure, is the divergence between the various lists of controlled chemicals in different countries and jurisdictions. This is the result of the concern of each separate political jurisdiction with the drug trafficking problems that most affect it. Although logical in a certain sense, this narrow, local approach to chemical control seldom works because the traffickers merely seek out a source of chemical supply available elsewhere, where the problem may not be recognized.

This inconsistency of lists is a frustration to companies seeking to comply with the requirements and to law enforcement officers seeking to deal with local problems that are fueled by foreign supplies. In the US, the problem is not only one of international differences, but even differences within the various states, each of which may enact its own legislation. The practical difficulties of achieving a rational, organized, uniform and mutually supportive system of controls in a divided world, continues to be the single greatest impediment for both effective law enforcement and industrial compliance.

Proliferation of Listed Chemicals

A final difficulty faced by the chemical control system and all of those affected by it, is the proliferation of chemical substances used by the traffickers. Thus, there is a fear, both on the part of the control authorities and the industry that the system will become ever more Baroque and unwieldy. At the same time we are faced with the need to adapt to the changes in the illicit traffic and to keep the controls as simple and intelligible as possible.

This is essentially a challenge to legal genius, communications and coordination. One hope for dealing with the first problem is through the development of the concept of a 'Special Surveillance List' that we are now approaching. This may give us the tool to respond to chemical problems which have not yet become, and may never become, of major global magnitude, but which require a response. As planned, the list will contain those uncontrolled chemicals to which some traffickers have at least temporarily shifted in the search for substitutes. The key is to be found in (1) the judicious selection of the substances placed on the list and (2) a careful articulation of what is expected in the cooperation of both governments and of industry.

Identification and Response to Suspicious Orders

Perhaps the single most important responsibility of the chemical supplier is to inform the enforcement authority of suspicious orders. This would appear to be a simple requirement, but in fact there are a number of important issues that need to be addressed. What kinds of measures must a company take to identify suspicious orders? What measures should it take to resolve the suspicion and under what circumstances? When should it report the suspicion to the authorities? And what are its obligations once the report has been made?

The first issue is whether or not chemical suppliers are required to establish a mechanism to identify suspicious orders. In most businesses, orders are received by telephone or fax by clerks who are not regarded as having the ability or responsibility to exercise discretion. Normally, the only concern is to determine the method of payment or establish credit, and then make arrangements for pick-up or delivery. If there is no conscious system for screening orders with an eye to possible diversion, then such a concern will arise only in the most unusual and egregious circumstances.

In the US, companies are now correctly assuming that they have such a responsibility because it is the logical outcome of the operation of other provisions of the law. As a consequence, there appear to be two basic approaches being used to identifying suspicious shipments; and the results can be quite different. The least costly method is to establish a computerized program that will electronically identify predetermined variances in orders received. These may be subsequently screened by management or turned over en mass to law enforcement. The problem is that the computer makes only a mechanical judgment and not a determination of suspicion. The consequences can create problems in both directions and provide law enforcement with a large mass of information that is too costly and time consuming to investigate.

The other approach is to establish a dedicated staff resource to receive and examine all in-coming orders for controlled chemicals, with the power to make inquiries and decisions. This provides the human judgment that the control laws have assumed, but it may be considerably more labor intensive and costly. In many cases, the best approach may be to combine elements of each with the emphasis of the mix determined by the particular chemicals, quantities and patterns of commerce in which the business is involved.

Another problem is that discussions usually proceed on the assumption that an order is either regular or suspicious when in fact, it is seldom so clear-cut as that. We need therefore to differentiate the more usual circumstance in which something about the order has created an unresolved concern. For this, a suitable term would be 'orders', or 'shipments of concern'. Common sense would suggest that the company take at least preliminary measures to see if the 'concern' can be resolved. Failing in that, or in certain special cases, the company should then contact the authorities. The point is that none of this is obvious to anyone and the industry needs guidance in order to do what is expected of it.

A final issue is what to do when the 'concern' cannot be satisfactorily resolved. Experience shows that this also needs to be clarified. There are certainly some suppliers who would like to consummate the sale, take the money, supply the chemicals to the traffic, and be content with having discharged their duty by merely reporting the transaction to the authorities. Obviously, the correct view is that the sale should be halted, unless it is needed to consummate a law enforcement action.

Attitudes and Policies in Enforcement and Compliance

The last problem is the most important of all, for it concerns the spirit of the relationship between these two disparate entities, functions, and professions which have so little similarity in their daily pursuit; government and industry, law enforcement and business. The one never made a nickel's worth of profit and the other never kicked in a foreboding door.

What is the essence of this relationship; the regulator and the regulated, the inquisitor and the suspect, the bull in the china closet? I submit that it ought to be one of close partnership based upon mutual respect and the clear obligation of law to protect the public health and safety. The chemical control authority ought to enter into the relationship with chemical suppliers on the assumption of good will and partnership, and the highest test of compliance ought to be evidence of sincere commitment.

There needs to be a recognition that there are certain natural proclivities of each that must be resisted. It is not in the nature of business to wish to forego a profitable sale, but it sometimes must be done. It is not within the nature of law enforcement to forego the taking of a penalty for an infraction, but in non-criminal, technical regulatory matters, it ought sometimes to be done. The nature of commerce is such that even the most committed and sincere will sometimes miss a signal and sometimes loose a load. This is particularly true for those companies that engage in numerous transactions within the course of a single day. We ought to remember that chemical control was conceived of as a strategic tool and not as a new bureaucracy designed to track every ounce, quart or gallon of controlled merchandise. When sincere vigilance fails, it ought to be regarded much as a failed police surveillance. But as for those who are insincere, incompetent or avaricious; they are the proper targets of a just penal action, whether civil or criminal, as appropriate. With them there can be no partnership until their management is reformed or replaced and their debt to society paid.

 

In closing, I wish to thank you all for your attention and to thank the officers of the ICPO Interpol for this opportunity to contribute to our common cause.