state of iowa before the department of ... at food mart...expert (kevin g. shanks) as a witness. mr....

STATE OF IOWA

BEFORE THE DEPARTMENT OF COMMERCE

ALCOHOLIC BEVERAGES DIVISION

IN RE: DOCKET NO. S-2014-00017

DOCKET NO. S-2014-00018

Jasjit Singh Nat1 DIA NO. 14ABD009

d/b/a Nat Food Mart

1443 2nd Avenue

Des Moines, Iowa 50314 PROPOSED DECISION

Beer Permit Number BC-27098

Liquor License No. LE-2079

PROCEDURAL HISTORY

On March 4, 2014, the City of Des Moines, Iowa (hereinafter “local authority” or “city”)

filed an administrative Hearing Complaint and Request for Emergency Suspension

against Jasjit Singh Nat, d/b/a Nat Food Mart (hereinafter “licensee” or “Nat Food

Mart”). The Hearing Complaint and Request for Summary Suspension was filed with

the Alcoholic Beverages Division (Division) and alleged that:

the licensee, its owner, or employees of the licensee violated Iowa Code sections

123.49(2)(j) and 124A.4(1) by delivering or possessing with intent to deliver an

1 According to the licensing records at the Alcoholic Beverages Division, this liquor license was applied

for in the name of “Jasjit Singh Nat” as a sole proprietor, and this is how the licensee’s name appears in

the caption of the Local Authority’s Hearing Complaint, in the Division’s Summary Suspension Order,

and in Local Authority Exhibit 1 (See, eg., p. 15). In the licensee’s submissions and in the transcript

caption, however, the licensee’s name appears as “Nat Jasjit Singh.” It is clear that both names refer to

the same individual. This same individual also holds a second liquor license (LE-1737) for Nat Food Mart

#1 located at 3804 Hubbell Avenue, which is also the subject of a summary suspension appeal. For the

Hubbell Avenue store, the liquor license and beer permit were applied for in the name of “Nat Jasmit

Singh” as sole proprietor, which is how the Hearing Complaint and Summary Suspension were

captioned in the Hubbell Avenue case. (See Hearing Transcript, p. 228, Hearing Transcript Captions;

Pleadings and Briefs)

DIA No. 14ABD009

imitation controlled substance on the licensed premises on twenty different dates

from October 16, 2013-February 24, 2014 2; and

the ongoing possession, delivery, and possession with intent to deliver illegal

controlled substances and imitation controlled substances presented an

immediate danger to the public health, safety, and welfare warranting an

emergency suspension of the liquor license.

On March 4, 2014, the Division issued a Summary Suspension Order, pursuant to Iowa

Code sections 17A.18A, 123.20, and 123.39. The Division’s Summary Suspension Order

immediately suspended Beer Permit Number BC-27098 and Liquor License LE-2079,

pending further proceedings before the Division. The Summary Suspension Order was

based upon the Division’s finding that the licensee had engaged in criminal activity

within the licensed premises, in violation of Iowa Code section 123.49(2)(j), and that

drug trafficking on the licensed premises poses a significant risk to the public health,

safety, and welfare.

On March 5, 2014, the licensee filed an appeal from the Summary Suspension Order.

The hearing was initially scheduled for March 21, 2014, but was indefinitely continued

at the licensee’s request. On September 26, 2014, the licensee filed an Application to Set

Hearing, and the hearing was rescheduled for October 27, 2014 at 1:00 p.m. by

agreement of the parties. The local authority was represented at hearing by Assistant

City Attorney Doug Philiph. The licensee was represented by attorneys Alfredo Parrish

and Gina Messamer. The hearing was recorded by a certified court reporter.

THE RECORD

The record includes the Hearing Complaint and Request for Emergency Suspension, the

Summary Suspension Order, the Notice of Hearing, Request for Continuance and

Continuance Order, Application to Set Hearing and Continuance Order, and an

Application for Expert to Testify by Telephone.3

In opening statement, the licensee’s attorney asserted that the licensee’s owners were

targeted for investigation based on their nationality and alleged a violation of the

2 At the time of hearing, the local authority made an oral motion to amend its Complaint to strike and

dismiss paragraphs 6(d), (e), (i), (l), (m), (q), and (s), thereby reducing the number of alleged illegal sales

transactions from twenty to thirteen. The licensee did not object to the motion to strike and dismiss those

portions of the complaint, and the motion was granted. 3 This motion was granted over the local authority’s objection, but the licensee later elected not to call the

expert (Kevin G. Shanks) as a witness. Mr. Shanks’ resume and two of his published articles were

submitted as exhibits. (Licensee Exhibits D, E1 and E2)

DIA No. 14ABD009

owners’ right to equal protection under the state and federal constitutions. The

licensee’s attorney acknowledged, however, that the agency lacks the authority to rule

on constitutional issues and only asked to preserve this issue for further review.4

The record also includes the testimony of Des Moines Police Officer Brady Carney; Iowa

Division of Criminal Investigation Criminalist Amanda Kilgore; Des Moines Police

Officer Rahn Bjornson; Private Investigator Delbert King, and Geetinder Nat. The

record also includes Local Authority Exhibits 1-11 and Licensee Exhibits A, and C-H.

The record also includes the licensee’s Hearing Brief, the licensee’s Post Hearing Brief,

and the City of Des Moines Response Brief.

IMPORTANT NOTE CONCERNING THE HEARING RECORD: The local authority

filed similar Hearing Complaints and Requests for Summary Suspension Orders against

three other licensees who operate convenience stores within the Des Moines city limits.5

All four licensees appealed, and all are represented by attorney Alfredo Parrish.

Separate hearings were requested, and the hearings were scheduled to be held

throughout the day on October 27, 2014. At the time of the hearings, however, the

parties stipulated that the testimony of Amanda Kilgore, Rahn Bjornson, and Delbert

King would be submitted once and then considered as evidence in all four cases. In

addition, the parties stipulated that Officer Brady Carney would provide testimony

unique to each case concerning the controlled buys made at each individual store, but

the rest of his testimony would be submitted once and considered as evidence for all

four cases. This included Officer Carney’s testimony about his background, training,

and experience; his knowledge of synthetic cannabinoids; his submission of products

purchased during controlled buys for laboratory testing, and his receipt of the

laboratory reports containing the testing results. The parties agreed that Mr. Parrish

would give one opening statement for all four cases. The parties also agreed that the

court reporter would prepare a single chronological transcript of the day’s testimony

with four separate captions.

4 Soo Line R.R. v. Iowa Dep’t of Transportation, 521 N.W.2d 685, 688 (Iowa 1994); Shell Oil Co. v. Bair, 417

N.W.2d 425, 430 (Iowa 1987);Salsbury Laboratories v. Iowa Dep’t of Envtl. Quality, 276 N.W.2d 830, 836 (Iowa

1979). 5 See Docket Nos. S-2014-00015 (Shop N Save #1 on MLKing Jr. Parkway) S-2014-00014 (Shop N. Save on

6th Avenue), and S-2014-00016 (Nat Food Mart on Hubbell Avenue).

DIA No. 14ABD009

FINDINGS OF FACT

Jasjit Singh Nat, d/b/a Nat Food Mart has been issued Beer Permit No. BC-270986 and

Liquor License LE-20797 for the premises located at 1443 2nd Avenue in Des Moines,

Iowa. Jasjit Singh Nat is the license holder and permit holder and has reported that he

is the 100% owner of Nat Food Mart. Geetinder Nat is the manager of Nat Food Mart,

and her husband, Bunny Nat, is listed as the contact person for the business. Nat Food

Mart is both a gas station and convenience store. Nat Food Mart currently sells gasoline

tobacco, groceries, non-alcoholic beverages, and lottery tickets. Prior to the summary

suspension, the store also sold liquor, wine, and beer. (Summary Suspension Order;

Local Authority Exhibit 1, p. 15; Testimony of Brady Carney; Geetinder Nat)

Background Information

Des Moines Police Officer Brady Carney has been a police officer since 2007 and has

been assigned to the Des Moines Police Department’s Narcotics Control Section (NCS)

since July 2012. While assigned to NCS, Officer Carney has been responsible for

completing narcotics-related investigations including undercover investigations,

managing confidential informants, and executing search warrants. Officer Carney has

attended a number of trainings and conferences related to drug investigations and drug

trends. Based on his experience and training, Officer Carney is familiar with the

manner in which individuals market, sell, and deliver controlled substances, simulated

controlled substances, and imitation controlled substances. Individuals involved in

criminal activity may attempt to sanitize proceeds or assets gained from illegal activity

by filtering those proceeds and assets through businesses or gambling activities thereby

creating a credible and seemingly legitimate source for these proceeds and assets.

(Testimony of Brady Carney; Local Authority Exhibit 1, pp. 11-12)

Officer Carney has had many first-hand encounters with individuals who are involved

in purchasing, using, and selling “synthetic cannabinoids,” which are commonly

referred to as “K-2,” “Kush,” or “Spice.” Synthetic cannabinoids are commonly

marketed under a number of different product names including “Cloud 9,” “Kush,”

6 A Class C Beer Permit authorizes the holder to sell beer to consumers at retail for consumption off the

premises. Iowa Code section 123.132. 7 A Class E Liquor License authorizes the holder to purchase alcoholic liquor from the Division only and

high alcoholic content beer from a class “AA” beer permittee only and to sell the alcoholic liquor and

high alcoholic content beer to patrons for consumption off the licensed premises and to other liquor

control licensees. The holder of a class “E” liquor license may also hold a class “B” wine or class “C” beer

permit or both for the premises licensed under a class “E” liquor license. Iowa Code section

123.30(3)(e)(2013).

DIA No. 14ABD009

“Caution,” “Mister Nice Guy,” “Diablo,” and “7H Hydro.” According to Officer

Carney, the term “Hydro” is commonly used to refer to hydroponic marijuana, and the

term “Kush” is used to refer to high grade or high quality marijuana. Both are common

street or slang terms for marijuana. Synthetic cannabinoids may be falsely marketed as

incense. They are typically packaged in small sealable packages or pouches labeled

“not for human consumption,” and are often designated with a skull and/or crossbones.

Synthetic cannabinoids are commonly sold in packages weighing approximately 3

grams. (Testimony of Brady Carney; Local Authority Exhibit 1, p. 12)

Through his training and experience as a police officer, Officer Carney has learned that

synthetic cannabinoids are typically smoked in the same manner as marijuana.

Although many of these products are labelled as incense or potpourri, their price

(typically $20-$30) is much higher than the typical price for incense (3 or 4 sticks for a

dollar) or potpourri. Officer Brady was unfamiliar with anyone who burned these

products for their smell, which apparently is very unpleasant. Synthetic cannabinoid

users will often also purchase cigarillos, which are legal products, which they use to

smoke the synthetic cannabinoids. The user will cut the cigarillo’s wrapper lengthwise,

remove the tobacco, and then fill the wrapper with synthetic cannabinoids. The

common term for a cigarillo wrapper filled with either marijuana or synthetic

cannabinoids is a “blunt.” (Testimony of Brady Carney; Local Authority Exhibit 1, pp.

12-13)

The active ingredient in marijuana is THC, which is present in the marijuana plant

itself. Synthetic cannabinoids, however, are created when chemicals that have been

synthesized in a laboratory and dissolved into a liquid have been sprayed on a plant

material, such as potpourri or spice. The active ingredients in synthetic cannabinoids

work on the same brain receptors (CB1 and CB2) as marijuana and have similar effects

on the user’s body.8 The federal government enacted the Controlled Substances

Analogue Enforcement Act of 1986 (21 U.S.C. §813), which treats analogue substances

(substances that have a chemical structure substantially similar to a controlled

substance and that have similar effects on the central nervous system) the same as a

controlled substance under federal law, although there have been few prosecutions

under the under the federal analogue law. 9 The state of Iowa does not have a

controlled substance analogue law. 10 (Testimony of Amanda Kilgore)

8 The effects of the synthetic cannabinoids have been reported to include agitation, delusions,

hypertension, psychosis, sedation, and tachycardia. (Licensee Exhibit E1, p. 1). 9 21 U.S.C. §§ 813, 802(32)(A). 10 Iowa does have a statute prohibiting the manufacture, delivery, or possession with intent to deliver of

an imitation controlled substance. See Iowa Code section 124A.4.

DIA No. 14ABD009

Both the federal government and the state of Iowa have taken legislative actions to

designate the specific active ingredients identified in some synthetic cannabinoids as

Schedule I controlled substances. The individuals that manufacture the synthetic

cannabinoids have responded by altering the chemical composition of their products so

that they do not include designated controlled substances. There is little quality

control in the manufacture, packaging, and labeling of synthetic cannabinoids,

however. It is not unusual for the testing laboratories to find that identically packaged

and identically labelled products actually have different chemical compositions or

active ingredients. For example, one product may test positive for a Schedule I

controlled substance while an identically packaged product may only test positive for

non-controlled synthetic cannabinoids. (Testimony of Amanda Kilgore; Licensee

Exhibits D, E1, E2)

Officer Carney has responded to several medical emergencies where individuals have

had severe and life-threatening side effects from ingesting synthetic cannabinoids.

These side effects have included severely elevated heartbeat, slurred speech, and

inability to form speech, foaming at the mouth, tremors or seizures, belligerence,

hallucinations, comatose-like states, and cardiac arrest.11 Officer Carney further reports

that he has responded to medical emergencies where the ingestion of synthetic

cannabinoids has led to the death of the user. (Testimony of Brady Carney; Local

Authority Exhibit 1, p. 13)

In August 2013, Officer Carney learned of a large scale Drug Enforcement Agency

(DEA) investigation involving the alleged sale of synthetic cannabinoids in Northeast

Iowa. One of the primary targets of that investigation was Muhammad Anwar. DEA

Task Force Officer Bryan Furman informed Officer Carney that Muhammad Anwar was

currently living in the Des Moines area and was believed to be involved in the sale of

synthetic cannabinoids from stores. The DEA Task Force Officer reported, in part, that

Muhammad Anwar had called Bunny Nat, who was the named contact person for Nat

Food Mart, 324 times between August 29, 2012 and March 19, 2013. (Local Authority

Exhibit 1, pp. 13-15)

In 2013 and early 2014, the Des Moines Police Department received several complaints

regarding the sale and distribution of synthetic cannabinoids from stores in the Des

11 Officer Carney’s testimony concerning the effects of synthetic cannabinoids on the user is consistent

with the research paper submitted into evidence by the licensee, which notes that agitation, delusions,

disorientation, hypertension, psychosis, sedation, and tachycardia have been reported from the use of

synthetic cannabinoids. (Licensee Exhibit E-1, p. 1)

DIA No. 14ABD009

Moines area. Based on the information received from the investigation in Northeast

Iowa and based on other complaints, the Des Moines Police Department started an

investigation of several Des Moines convenience stores, including Nat Food Mart, to

determine if the stores were selling synthetic cannabinoids to the public. (Testimony of

Brady Carney; Local Authority Exhibit 1, pp. 13-15)

On October 16, 2013, Officer Carney observed a white female enter the Nat Food Store

on 2nd Avenue and then exit approximately two minutes later carrying something small

in her hand. A short time later, the female’s car was stopped for a broken windshield.

During this stop and a subsequent interview, the female admitted that she had two

vials of “Snake” synthetic cannabinoids in her vehicle. The female reported that she

purchased the synthetic cannabinoids at Nat Food Mart for $10.00 a vial and was

heading home. She told Officer Carney that the vials came from under the counter, that

she paid cash for them, and that she did not receive a receipt. The vials were later

tested at the DCI Criminalistics Laboratory and found to contain 1.93 grams of AB-

FUBINACA, which was described as a non-controlled synthetic cannabinoid.

(Testimony of Brady Carney; Local Authority Exhibit 1, pp. 21-22; Local Authority

Exhibit 2)

Thirteen Controlled Buys at Nat Food Mart(October 23, 2013-February 24, 2014)

During his investigation, Officer Carney worked with a confidential informant

(hereinafter CI#2 or CI) in connection with the investigation of Nat Food Mart. CI#2

told Carney that he/she had purchased synthetic cannabinoids from the Nat’s stores on

several occasions. CI#2 reported that the Nat’s stores have different types and amounts

of synthetic cannabinoids, including:

“Snake” and “Bullet” which come in plastic vials and cost $10.00;

“Mr. Big Shot” pouches which cost $15.00;

“7H” pouches which cost $20.00 or $30.00 depending on the size; and

“Diablo” pouches which cost $25.00.

CI#2 also told Officer Carney that an Arab male named “Benny,” who was in his 30’s or

early 40’s, owned the Nat’s Stores and that the store on 2nd Avenue had two full time

employees: an Hispanic male named “Franky” who is approximately 30 years old and

an Hispanic female named “Claudia” who is approximately 21 years old. The CI told

Officer Carney that the Nat’s clerks will not sell to anyone who asks for “K2” or

“synthetic marijuana.” The CI further stated that the synthetic cannabinoids are kept

behind the counter in cardboard boxes or paper or plastic bags. Officer Carney enlisted

DIA No. 14ABD009

CI#2 to make “controlled” purchases (i.e. purchases under the direction and

surveillance of police officers) of synthetic cannabinoids at Nat Food Mart on 2nd

Avenue. (Local Authority Exhibit 1, p. 22)

Prior to each purchase, Officer Carney and another officer searched the CI and his/her

vehicle for contraband or currency. Finding none, Officer Carney gave the CI currency

and instructed the CI to try to make a purchase of synthetic cannabinoids at Nat Food

Mart. The officers followed the CI to Nat Food Mart, making sure that no stops were

made along the way. The officers observed the CI enter and exit Nat Food Mart and

then followed the CI to a predetermined location where they were given any purchase

made by the CI. The CI was equipped with an audio and video recorder that recorded

all of the transactions. The officers reviewed the recordings following each purchase to

ensure that they were consistent with the CI’s reports of what happened. CI#2 was

able to purchase products containing synthetic cannabinoids at Nat Food Mart on the

following dates: October 23, 2013; October 30, 2013; November 19, 2013; and December

9, 2013. In addition, Officer Carney went “undercover” and was able to purchase

products containing synthetic cannabinoids from employees of Nat’s Food Mart on the

following dates: December 23, 2013; January 2, 2014, January 21, 2014; February 3, 2014;

February 4, 2014; February 14, 2014 and February 24, 2014. (Testimony of Brady

Carney; Local Authority Exhibit 1, pp. 24-57)

October 23, 2013

On October 23, 2013, the officers followed CI#2 and watched him enter Nat’s Food

Mart. A short time later, the CI exited the store and left in his/her vehicle. The officers

followed the CI back to the predetermined location; no stops were made. At the

predetermined location, the CI handed Officer Brady several cigarillos and a vial of

“Snake.” The CI and his vehicle were searched, and no other currency or contraband

was found. (Local Authority Exhibit 1, p. 23; Testimony of Brady Carney)

The CI reported that he/she purchased the “Snake” from the clerk named “Franky” for

$10.00. “Franky” retrieved the “Snake” from a bag under the counter and did not

provide a receipt. The officers reviewed the recordings of the transaction and heard the

CI state “Snake gets you more messed up than that other…” before he was handed the

“Snake” by the male clerk. Officer Brady also heard the CI ask for cigarillos so he could

smoke the “Snake.” (Local Authority Exhibit 1, p. 23; Testimony of Brady Carney)

Officer Carney submitted the package of “Snake” to the Iowa Division of Criminal

Investigation (DCI) laboratory for testing. On November 21, 2013, DCI Criminalist

DIA No. 14ABD009

Amanda Kilgore issued a written report concerning the results of the testing. Amanda

Kilgore has a B.S. degree in Chemistry and Forensic Science, and she has been

employed by the DCI Crime Laboratory for 8 years. She was previously employed by

the federal Drug Enforcement Agency (DEA) Laboratory in Virginia. Ms. Kilgore has

had substantial experience testing and identifying synthetic cannabinoids. Ms. Kilgore

reported that the “Snake” purchased on October 23, 2013 weighed 2.02 grams and was

instrumentally consistent with AB-FUBINACA, which was described by Ms. Kilgore as

non-controlled synthetic cannabinoids. (Testimony of Brady Carney, Amanda Kilgore;

Local Authority Exhibit 3, Lab #5)

October 30, 2013

On October 30, 2013, the CI returned to Nat Food Mart and purchased several cigarillos

and a plastic vial of “Snake,” under the same supervision and controls as the prior

purchase. The CI reported that he/she spoke to Hispanic female clerk named “Claudia”

and asked for some “Snake,” which she retrieved from under the counter and sold to

the CI for $10.00. The CI was not offered or given a receipt for the purchase. On the

audio/video footage of the transaction, Officer Carney first heard another male

customer ask for two packages of “Diablo.” He then heard the CI ask for “Snake” or

“Bullet” and for two kinds of wraps. Officer Carney heard a Hispanic female voice say

that “Diablo is better” and “It’s legit.” (Local Authority Exhibit 1, p. 25; Testimony of

Brady Carney)

Officer Carney submitted the vial of “Snake” to the DCI laboratory for testing. On

November 21, 2013, DCI Criminalist Amanda Kilgore issued a written report

concerning the results of the testing. The “Snake” purchased on October 30, 2013

weighed 2.06 grams and was instrumentally consistent with AB-FUBINACA, a non-

controlled synthetic cannabinoid. (Testimony of Brady Carney; Local Authority Exhibit

3, Lab #7)

November 19, 2013

On November 19, 2013, CI#2 returned to Nat Food Mart and purchased multiple

cigarillos and a pouch of “Mister Nice Guy,” under the same supervision and controls

as the prior purchase. The CI reported that he/she spoke to Hispanic female clerk

named “Claudia” and she recommended that he buy “Mister Nice Guy” because most

people bought that brand. The CI was not offered or given a receipt for the purchase.

On the audio/video footage of the transaction, Officer Carney heard the CI ask about

“7H” and the female clerk reply, “Mister Nice Guy.” The CI asked “what’s that they

DIA No. 14ABD009

say?” and the clerk answered “Well, people buy that one more.” She told the CI that

“Mister Nice Guy” was $20.00. The CI asked for “Mister Nice Guy” and cigarillos to

smoke it. (Local Authority Exhibit 1, p. 29; Testimony of Brady Carney)

Officer Carney submitted the package of “Mister Nice Guy” to the DCI laboratory for

testing. On December 7, 2013, DCI Criminalist Amanda Kilgore issued a written report

concerning the results of the testing. The “Mister Nice Guy” purchased on November

19, 2013 weighed 2.88 grams and was instrumentally consistent with AB-PINACA and

AB-FUBINACA, which were described by Ms. Kilgore as non-controlled synthetic

cannabinoids. (Testimony of Brady Carney; Local Authority Exhibit 4, #21)

December 9, 2013

On December 9, 2013, CI#2 returned to Nat Food Mart and purchased multiple

cigarillos and a pouch of “Diablo” under the same supervision and controls as the prior

purchase. The CI reported that “Claudia” retrieved the pouch of “Diablo” from under

the counter and sold it to him/her along with some cigarillos. The CI was not offered or

given a receipt for the purchase. On the audio/video footage of the transaction, Officer

Carney saw the female clerk reach under the counter and sift through what appeared to

be synthetic cannabinoid pouches while helping another customer. He then heard the

CI ask “what did he get? The fifteen dollar one?”” and the female clerk stated that they

have “Diablo.” The CI then asked “Is that what people say? Is that what people say gets

you fucked up?” The clerk replied “We have Nice Guy. Have you tried that?” After

some additional conversation, the clerk could be seen retrieving a key from the counter,

unlocking a slide-out drawer from under the counter, removing a pouch and throwing

it on the counter, and then locking the drawer. The video/audio footage showed the

clerk selling the pouch and cigarillos to the CI. (Local Authority Exhibit 1, pp. 31-32;

Testimony of Brady Carney)

Officer Carney submitted the package of “Diablo” to the DCI laboratory for testing. On

December 31, 2013, DCI Criminalist Amanda Kilgore issued a written report concerning

the results of the testing. The “Diablo” purchased on December 9, 2013 weighed 3.11

grams and was instrumentally consistent with AB-PINACA and AB-FUBINACA, which

were described by Ms. Kilgore as non-controlled synthetic cannabinoids. (Testimony of

Brady Carney; Local Authority Exhibit 5, #22)

DIA No. 14ABD009

December 23, 2013

On December 23, 2013, Officer Carney went to Nat Food Mart in an undercover

capacity and purchased a package of cigarillos and a pouch of “Mister Nice Guy” from

a male that he was able to identify as Bunny Nat. Officer Carney believed that Bunny

Nat was the manager of the store. He observed Bunny Nat use a key to unlock a

drawer just under the countertop and to the right of the cash register. He observed

Bunny Nat remove the “Mister Nice Guy” from the drawer and also observed several

similar pouches of synthetic cannabinoids in the drawer. Officer Carney paid Bunny

Nat for the “Mister Nice Guy” and the cigarillos and was not offered or given a receipt

for his purchases. (Local Authority Exhibit 1, pp. 33-34; Testimony of Brady Carney)


testing. On January 29, 2014, DCI Criminalist Amanda Kilgore issued a written report

concerning the results of the testing. The “Mister Nice Guy” purchased on December

23, 2013 weighed 3.05 grams and was instrumentally consistent with AB-PINACA and

AB-FUBINACA, which were described by Ms. Kilgore as non-controlled synthetic


January 2, 2014

On January 2, 2014, Officer Carney went to Nat Food Mart in an undercover capacity

and purchased a pouch of “Mister Nice Guy” and some cigarillos from a female clerk.

Officer Carney initially asked the clerk “Did the stuff come in?” and mentioned “7H.”

The clerk responded “Yeah, what kind do you want?” When Officer Carney told the

clerk that he wanted to spend $20.00 or $25.00, she told him that would be either

“Mister Nice Guy” or “7H.” He asked for “Mister Nice Guy,” and the clerk asked if he

wanted sour apple or blueberry. He requested Officer Carney observed the clerk pull

out a sliding drawer below the counter, but then close the door and reach down lower

to take the “Mister Nice Guy” from a brown paper bag. Officer Carney asked if the

sour apple is better, and the clerk responded “I have no idea. People buy this one a

lot.” Officer Carney paid in cash for the Mister Nice Guy and the cigarillos, and he was

not offered or given a receipt for his purchases. (Local Authority Exhibit 1, pp. 35-36;

Testimony of Brady Carney)


testing. On January 29, 2014, DCI Criminalist Amanda Kilgore issued a written report

concerning the results of the testing. The “Mister Nice Guy” purchased on January 2,

2014 weighed 3.02 grams and was instrumentally consistent with AB-PINACA and AB-

DIA No. 14ABD009

FUBINACA, which were described by Ms. Kilgore as non-controlled synthetic


January 21, 2014

On January 21, 2014, Officer Carney went to Nat Food Mart in an undercover capacity

and purchased a pouch of “777 XTREME” and some cigarillos from a female clerk.

Officer Carney initially asked the clerk “What do you got?” The clerk responded that

they had the same stuff. She used a key to open the slide-out drawer beneath the

countertop. Officer Carney observed that the drawer was completely full of different

brands of synthetic cannabinoids. The clerk told him that “for fifteen, I have 7-7.”

When Officer Carney asked if it was new and if people liked it, the clerk responded that

it was new and that a lot of people did not know about it yet. Officer Carney told her

he would try it, and the clerk placed a package of “777 XTREME on the counter. Officer

Carney also asked for cigarillos. Officer Carney paid in cash for the 777 XTREME and

the cigarillos, and he was not offered or given a receipt for his purchases. (Local

Authority Exhibit 1, p. 36; Testimony of Brady Carney)

Officer Carney submitted the package of “777 XTREME” to the DCI laboratory for

testing. On February 6, 2014, DCI Criminalist Amanda Kilgore issued a written report

concerning the results of the testing. The “777 XTREME” purchased on January 21,

2014 weighed 3.23 grams and was instrumentally consistent with AB-FUBINACA, a

non-controlled synthetic cannabinoid. (Testimony of Brady Carney; Local Authority

Exhibit 7, #34)

January 29, 2014

On January 29, 2014, Officer Carney returned to Nat Food Mart in an undercover

capacity and purchased a pouch of “Mister Nice Guy” and some cigarillos from a

female clerk. Officer Carney initially asked if they still had the “same stuff” and then

told the clerk that the previous stuff (777 Xtreme) was bad and he wanted some “Mister

Nice Guy.” The clerk retrieved the pouch of “Mister Nice Guy” from the drawer.

Officer Carney also asked for some cigarillos. Officer Carney paid in cash for the Mister

Nice Guy and the cigarillos, and he was not offered or given a receipt for his purchases.

(Local Authority Exhibit 1, p. 37; Testimony of Brady Carney)

After making his purchase, Officer Carney went over to the incense stand along the

west side of the building and selected a stick of incense to purchase. While waiting in

line to purchase the incense, Officer Carney observed a female customer enter the store

and ask for “7H” or “Diablo.” The female handed the clerk a $20 bill, and the clerk

DIA No. 14ABD009

opened the slide-out drawer and sifted through several packets looking for the right

kind. The female customer ended up purchasing a pouch of “777 Xtreme.” Officer

Carney then paid $.25 for the incense stick and left the store. (Local Authority Exhibit 1,

p. 37; Testimony of Brady Carney)


testing. On February 15, 2014, DCI Criminalist Amanda Kilgore issued a written report

concerning the results of the testing. The “Mister Nice Guy” purchased on January 29,

2014 weighed 3.08 grams and was instrumentally consistent with AB-PINACA and AB-

FUBINACA, which were described by Ms. Kilgore as non-controlled synthetic

cannabinoids.. (Testimony of Brady Carney; Local Authority Exhibit 8, #38)

February 3, 2014

On February 3, 2014, Officer Carney went to Nat Food Mart in an undercover capacity

and purchased a pouch of “Mister Nice Guy,” some cigarillos, and some incense sticks

from the same female clerk. Officer Carney initially asked the clerk if she had anything

new and she said no. Officer Carney asked if they had any pipes for sale, and the clerk

told him that they just have wraps. Officer Carney asked for a pouch of “Mister Nice

Guy” and then selected two incense sticks that were clearly marked and openly

displayed inside the front door. Office Carney also requested two packs of cigarillos.

Officer Carney told the clerk that some of the other stores sell pipes and that some

people have said that smoking the synthetics through a pipe does not mess you up as

bad. The clerk retrieved the “Mister Nice Guy” from the slide-out drawer below the

counter. Officer Carney was not offered or given a receipt for his purchases. (Local

Authority Exhibit 1, p. 38-39; Testimony of Brady Carney)


testing. On February 20, 2014, DCI Criminalist Peter Wagner issued a written report

concerning the results of the testing. The “Mister Nice Guy” purchased on February 3,

2014 weighed 2.98 grams and was instrumentally consistent with AB-FUBINACA, a

non-controlled synthetic cannabinoid. (Testimony of Brady Carney; Local Authority

Exhibit 9, #45)

February 4, 2014


and purchased a pouch of “Mister Nice Guy” and some cigarillos. As he was entering

he store, Officer Carney observed an unidentified white male leaving the store with

multiple packages of cigarillos and a pouch of “Diablo.” Bunny Nat was at the counter

DIA No. 14ABD009

going through paperwork and Geetinder Nat was stocking shelves. Officer Carney told

a female clerk that it was too cold out so he was “headed home to cuddle up and smoke

up.” He asked for a small bag of “Mister Nice Guy.” The pouch of “Mister Nice Guy”

was removed from the slide-out drawer under the counter. Officer Carney paid for his

purchases and was not offered or given a receipt. (Local Authority Exhibit 1, p. 40)

Officer Carney’s affidavit indicates that the “Mister Nice Guy” was submitted for

testing at the DCI laboratory and was consistent with a non-controlled synthetic

cannabinoid. (Local Authority Exhibit 1, p. 40) The record does not appear to include

the laboratory report for this purchase.

February 14, 2014


and purchased a pouch of “Mister Nice Guy,” a pouch of “7-7-7 XTREME” and some

cigarillos from a female clerk. Officer Carney initially selected an incense stick to

purchase and asked the clerk for “Mister Nice Guy, “which was rung up as $25.00. He

then asked the clerk if she had anything new. The clerk asked “How much?” and

Officer Carney that he wanted something between $15.00 and $20.00. The clerk

retrieved pouches of “Mister Nice Guy” and “7-7-7 XTREME” from the slide-out

drawer. Officer Carney also requested cigarillos. Officer Carney paid for his purchases

and was not offered or given a receipt. (Local Authority Exhibit 1, p. 41; Testimony of

Brady Carney)

Officer Carney submitted the packages of “Mister Nice Guy” and “7-7-7 XTREME” to

the DCI laboratory for testing. On February 20, 2014, DCI Criminalist Peter Wagner

issued a written report concerning the results of the testing. The “Mister Nice Guy”

purchased on February 14, 2014 weighed 2.85 grams and was instrumentally consistent

with AB-FUBINACA, a non-controlled synthetic cannabinoid. The “7-7-7 XTREME

purchased on February 14, 2014 weighed 3.06 grams and was instrumentally consistent

with AB-FUBINACA and AB-PINACA, non-controlled synthetic cannabinoids.

(Testimony of Brady Carney; Local Authority Exhibit 9, #48.1, 48.2)

February 24, 2014


and purchased a pouch of “7H Hydro,” a pouch of “Diablo” and some cigarillos from a

male clerk. When he entered the store, Officer Carney observed a male clerk take a

bright blue pouch of “7H” from the slide-out drawer under the counter and sell it to a

DIA No. 14ABD009

male customer. He then observed the same clerk sell a vial of “Snake” and a cigarillo to

another customer for $11.05. Officer Carney approached the same clerk and asked for

“7H.” The clerk asked Officer Carney if he wanted the $15.00 one and indicated that he

had a $30.00 packet as well. Officer Carney asked for the $15.00 pouch and observed

the clerk remove it from the slide-out drawer under the counter. As the clerk was

totaling the transaction, Officer Carney also asked for “Diablo.” The clerk said he had a

$25.00 pouch of “Diablo” and he removed it from the same drawer. The clerk charged

Officer Carney a total of $40.00. He did not add sales tax and did not provide a receipt.

(Local Authority Exhibit 1, p. 45; Testimony of Brady Carney)

Officer Carney submitted the packages of “7H Hydro” and “Diablo” to the DCI

laboratory for testing. On February 27, 2014, DCI Criminalist Amanda Kilgore issued a

written report concerning the results of the testing. The “7H Hydro” purchased on

February 24, 2014 weighed 3.19 grams. The “Diablo” purchased on February 24, 2014

weighed 3.33 grams. Both products were instrumentally consistent with AB-

FUBINACA and AB-PINACA, non-controlled synthetic cannabinoids. (Testimony of

Brady Carney; Local Authority Exhibit 10, #57.1, 57.2)

At hearing, Officer Carney agreed that some of the packages of synthetic cannabinoids

had labels indicating the absence of all banned substances. (Testimony of Brady

Carney).

Events Following the Controlled Buys

On March 4, 2014, a search warrant was executed at Nat Food Mart at 1443 2nd Avenue

in Des Moines. The search warrant was issued based on the submission of two

affidavits from Officer Carney. The affidavits described Officer Carney’s training and

background as well as detailed information about the controlled buys conducted at Nat

Food Mart, police surveillance of the owners of Nat Food Mart, and information about

the licensee’s bank accounts. The affidavit also included information about the

investigation and controlled buys at Nat Food Mart #1 located on Hubbell Avenue in

Des Moines.12 (Local Authority Exhibit 1; Testimony of Brady Carney)

In his affidavit, Officer Carney outlined the evidence that led him to believe that the

manner in which Nat Food Mart was selling synthetic cannabinoids was consistent with

the sale and distribution of controlled substances, simulated controlled substances,

imitation controlled substances, and synthetic substances as prohibited by Iowa law.

12 Jasjit Singh Nat is the license holder and reported 100% owner of both of the Nat Food Stores. (Local

Authority Exhibit 1, p. 15)

DIA No. 14ABD009

This evidence included: 1) keeping the synthetic cannabinoids below the counter while

traditional incense and potpourri was displayed on open shelves; 2) the price disparity

between synthetic cannabinoids and the traditional incense and potpourri sold by the

store; 3) the clerk’s refusal to sell synthetic cannabinoids without age verification; 4)

the sale proceeds from the synthetic cannabinoids were rung up separately and the cash

from these sales were sometimes kept in a separate location. No receipts were given or

offered. Sales tax was charged on traditional products but not for the synthetic

cannabinoids; 5) the clerks’ selective sale of synthetic cannabinoids to some people and

not others; 6) the purchase of the synthetic cannabinoids with cigarillos, which are used

to ingest the synthetic cannabinoids; and 7) the language used by the clerks and the

purchasers when referring to synthetic cannabinoids. (Local Authority Exhibit 1, pp. 46-

47; Testimony of Brady Carney)

A number of items were seized at the Nat Food Mart during the execution of the search

warrant on March 4, 2014. The seized items included:

147 packages of various synthetic cannabinoids;

Cash in the following amounts: $551 and $729;

5 boxes of “glass rose” pipes which are commonly used to ingest illegal

narcotics;

Plastic tubs with blue and white glass pipes; and

Plastic bins with smoking screens and zip lock baggies.

(Local Authority Exhibit 11; Testimony of Brady Carney)

The Division issued its Summary Suspension Order on March 4, 2014. The licensee has

been in compliance with the Summary Suspension Order and has not sold alcoholic

beverages in violation of the Order. (Summary Suspension Order; Testimony of Rahn

Bjornson, Brady Carney)

On May 30, 2014, the owner of both of the Nat Food Marts (Jasjit S. Nat), as well as three

other named individuals (including Bunny Nat and Geetinder Nat) and two banks

entered into a Settlement Agreement with the Polk County Attorney’s Office concerning

the forfeiture of cash, bank accounts, and other property that had been seized from

them. The parties named in the forfeiture agreed to forfeit a total of $146,485 in cash

and/or bank accounts. (Licensee Exhibit A)

The licensee submitted a letter dated August 14, 2014 from “The Bookkeepers, Inc.”

The letter states that for the period from March 1, 2013 through July 31, 2013, Nat’s

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reported gross sales of $177,603.09 for the 2nd Avenue store. For the period from March

1, 2014 through July 31, 2014, Nat’s reported $25,604.24 in gross sales for the 2nd

Avenue store. The reported total reduction in gross sales for the 2nd Avenue Store was

$151,998.85. (Licensee Exhibit H; Testimony of Geetinder Nat)

CONCLUSIONS OF LAW

I. Emergency Suspension of Liquor License

The Iowa Alcoholic Beverages Control Act (Iowa Code chapter 123) is an exercise of the

police power of the state for the protection of the welfare, health, peace, morals, and

safety of the people of the state, and all its provisions shall be liberally construed for the

accomplishment of that purpose. It is declared to be public policy that the traffic in

alcoholic liquors is so affected with a public interest that it should be regulated to the

extent of prohibiting all traffic in them, except as provided in chapter 123. 13

Administrative agencies are authorized by statute to use emergency adjudicative

proceedings in a situation involving an immediate danger to the public health, safety or

welfare requiring immediate agency action.14 The agency may only take such action as

is necessary to prevent or avoid the immediate danger to the public health, safety, or

welfare that justifies the use of the emergency adjudication.15 After issuing an order

pursuant to its emergency adjudicative authority, the agency shall proceed as quickly as

feasible to complete any proceedings that would be required if the matter did not

involve immediate danger. 16Summary suspension of a license may be ordered pending

proceedings for revocation or other action, which shall be promptly instituted and

determined.17

The Division has adopted administrative rules governing emergency adjudicative

proceedings at 185 IAC 10.31. The rules provide, in relevant part, that the Division may

suspend a license, in whole or in part.18 Before issuing an emergency adjudicative order

the agency shall consider factors including, but not limited to, the following:

13 Iowa Code section 123.1 (2013). 14 Iowa Code section 17A.18A(1)(2013). 15 Iowa Code section 17A.18A(2)(2013). 16 Iowa Code section 17A.18A(5)(2013). 17 Iowa Code section 17A.18A(2013). 18 Iowa Code section 185 IAC 10.31(1).

DIA No. 14ABD009

a. Whether there has been a sufficient factual investigation to ensure that the

agency is proceeding on the basis of reliable information;

b. Whether the specific circumstances which pose immediate danger to the

public health, safety or welfare have been identified and determined to be

continuing;

c. Whether the person required to comply with the emergency adjudicative

order may continue to engage in other activities without posing immediate

danger to the public health, safety or welfare;

d. Whether imposition of monitoring requirements or other interim safeguards

would be sufficient to protect the public health, safety or welfare; and

e. Whether the specific action contemplated by the division is necessary to avoid

the immediate danger.

185 IAC 10.31(2).

Based on the investigation conducted by the Des Moines Police Department, the

Alcoholic Beverages Division was justified in issuing the emergency suspension of the

licensee’s liquor license and beer permit. The Division was provided sufficiently

detailed and sufficiently reliable information upon which to conclude that imitation

controlled substances had been purchased from the licensee’s employees on the

licensed premises on at least thirteen occasions over a period of four months. There is a

strong public interest in stopping and preventing the use of licensed liquor

establishments as locations for the sale of illegal drugs, including synthetic

cannabinoids.19 The illegal sale of drugs, including synthetic cannabinoids, poses a

substantial risk to the public health, welfare and safety, and a licensee’s use of the

licensed premises for this purpose justifies a summary suspension of the liquor license.

A prompt hearing was scheduled on the emergency suspension, and the delay in

proceeding to hearing was due solely to the licensee’s continuance requests. When the

licensee asked for the hearing to be reset, one was promptly scheduled, in accordance

with Iowa Code section 17A.18A and 185 IAC 10.31.

19 See 185 IAC 4.7(4) (“No licensee, permittee, their agent or employee, shall knowingly permit the

licensed premises to be frequented by, or become the meeting place, hangout or rendezvous for …those

wo are known to engage in the use, sale or distribution of narcotics, or in any other illegal occupation or

business.”)

DIA No. 14ABD009

II. Division’s Authority to Suspend or Revoke the Liquor License for Knowingly

Permitting or Engaging in Illegal Activity on the Licensed Premises

The Division’s Administrator or the local authority may suspend a liquor license or beer

permit for a period not to exceed one year, may revoke the license or permit, and/or

may impose a civil penalty not to exceed one thousand dollars for any violation of the

provisions of Iowa Code chapter 123.20 A criminal conviction is not a prerequisite to

suspension, revocation, or imposition of a civil penalty.21

Iowa Code section 123.49(2)(j) (2013) provides:

2. A person or club holding a liquor control license or retail wine or

beer permit under this chapter, and the person's or club's agents or

employees, shall not do any of the following:

...

j. Knowingly permit or engage in any criminal activity on the

premises covered by the license or permit.

(Emphasis added). Similarly, the Division’s administrative rules specifically provide

that a violation of Iowa Code chapter 123 by any employee, agent, or servant of a

licensee shall be deemed to be the act of the licensee and shall subject the licensee to

suspension and revocation.22

In order to show a violation of Iowa Code section 123.49(2)(j) for knowingly permitting

or engaging in illegal activity on the licensed premises, it is only necessary to show that

the licensee or its employees were aware that the activity was occurring on the legal

premises.23 It is unnecessary to demonstrate or show that the licensee or its employees

knew that they were violating the law by permitting or engaging in the specific

activity.24

20 Iowa Code section 123.39(1)(b)(2)(2013). 21 Iowa Code section 123.39(1)(c)(2013). 22 185 IAC 4.8. 23 See Sullivan v. Iowa Departmental Hearing Board of Iowa Beer and Liquor, 325 N.W.2d 923,926 (Iowa Ct.

App.1982). (The Court construed Iowa Code section 123.49(2)(a) and held that the word "knowingly" in

the subsection prohibiting licensees or the licensees’ employees from knowingly permitting gambling on

the licensed premises, modifies the word "permit" rather than "violate." The court noted that a person's

knowledge of the law is generally presumed, particularly when the activity challenged is regularly

conducted by the person in the course of business.) 24 Id.

DIA No. 14ABD009

Sale/Delivery of Imitation Controlled Substances

In paragraph 6 of the Hearing Complaint, the local authority alleges that the licensee, its

owner, or its employees knowingly permitted or engaged in criminal activity on the

licensed premises, in violation of Iowa Code section 123.49(2)(j), by delivering or

possessing with intent to deliver an imitation controlled substance, in violation of Iowa

Code section 124A.4(1). The local authority alleged that the licensee or the licensee’s

employees delivered or possessed with intent to deliver imitation controlled substances

on the following dates: October 16, 2013; October 23, 2013; October 30, 2013; November

19, 2013; December 9, 2013; December 23, 2013; January 2, 2014; January 21, 2014;

January 29, 2014; February 3, 2014; February 4, 2014; and February 24, 2014.

Iowa Code Chapter 124A is the “Imitation Controlled Substances Act.”25 “Imitation

Controlled Substance” means a substance which is not a controlled substance but which

by color, shape, size, markings, and other aspects of dosage unit appearance, and

packaging or other factors, appears to be or resembles a controlled substance. The

board of pharmacy may designate a substance as an imitation controlled substance

pursuant to the board’s rulemaking authority and in accordance with chapter 17A.26

When a substance has not been designated as an imitation controlled substance by the

board of pharmacy and when dosage unit appearance alone does not establish that a

substance is an imitation controlled substance, the following factors may be considered

in determining whether the substance is an imitation controlled substance:

1. The person in control of the substance expressly or impliedly

represents that the substance has the effect of a controlled substance.

2. The person in control of the substance expressly or impliedly

represents that the substance because of its nature or appearance can be

sold or delivered as a controlled substance or as a substitute for a

controlled substance.

3. The person in control of the substance either demands or receives

money or other property having a value substantially greater than the

actual value of the substance as consideration for the delivery of the

substance.27

25 Iowa Code section 124A.1(2013). 26 Iowa Code section 124A.2(4)(2013). 27 Iowa Code section 124A.3(2013).

DIA No. 14ABD009

It is unlawful for a person to manufacture, deliver, or possess with intent to deliver, an

imitation controlled substance. A person who does so is generally guilty of an

aggravated misdemeanor.28

By administrative rule, the Pharmacy Board has designated certain synthetic

cannabinoids, including products by whatever trade name that are treated, sprayed, or

saturated with these synthetic cannabinoids, as “imitation controlled substances”

subject to the provisions of Iowa Code chapter 124A.29 None of the substances at issue

in this contested case, however, have been specifically designated in the Board’s rules as

“imitation controlled substances.” Therefore, the factors outlined in Iowa Code section

124A.3 must be considered in determining whether or not the substances sold by the

licensee’s employees on the licensed premises constituted illegal “imitation controlled

substances.”

The preponderance of the evidence in this record established that the licensee’s

employees repeatedly sold imitation controlled substances on the licensed premises, in

violation of Iowa Code sections 123.49(2)(j) and 124A.4(1). The DCI Laboratory Reports

and the testimony of Officer Carney established that each of the packages purchased by

the Des Moines’ Police Department’s confidential informant (CI) or by Officer Carney at

the licensed premises contained AB-FUBINACA and/or AB-PINACA, both of which are

synthetic cannabinoids. According to DCI Criminalist Amanda Kilgore, synthetic

cannabinoids have active ingredients that work on the same brain receptors (CB1 and

CB2) as marijuana, and they have similar effects on the body as marijuana. Moreover,

the totality of the circumstances surrounding these sales supports the conclusion that

the licensee’s employees fully understood that customers were purchasing and smoking

these products as a substitute for a controlled substance and to obtain the same effect as

a controlled substance.

The licensee and the licensee’s employees were clearly the “persons in control” of these

substances, which unlike legal products were kept beneath the store’s front counter and

out of sight of the store’s customers. Contrary to the typical procedures for the sale of

legal products such as incense or potpourri, no receipts were provided for the sale of

the synthetic cannabinoids. No sales tax was added to the purchase price. In order to

28 Iowa Code section 124A.4(1)(2013). If a person 18 years of age or older violates subsection 124A.4(1) by

delivering an imitation controlled substance to a person under 18 years of age who is at least three years

younger than the violator, then the offense is classified as a class “D” felony. Iowa Code section 124.4(3). 29 657 IAC 10.41(1). The Pharmacy Board’s rule also identifies some currently marketed products

containing the imitation controlled substances identified in subrule 10.41(1) as including K2, Red Dragon

Smoke, Spice, K2 Spice, Mojo, Smoke, Skunk, K2 Summit, and Pandora Potpourri. 657 IAC 10.41(2).

DIA No. 14ABD009

purchase the substances, customers had to specifically request them from the licensee’s

employee and had to pay approximately $20-$25 for a 3 gram package, which is

substantially higher than the typical price for potpourri or incense.

With each purchase, either the CI or Officer Carney also purchased cigarillos, which are

commonly used for smoking marijuana or synthetic cannabinoids. The licensee’s

employees who made the sale clearly understood that the CI and Officer Carney

intended to smoke the substances that they were purchasing. On October 23, 2013, the

CI commented to the licensee’s employee that “Snake gets you more messed up than

the other” and asked for cigarillos so he could smoke the “Snake.” On multiple

occasions the licensee’s employees responded to questions from the CI or Officer

Carney by either explicitly or impliedly recommending one of the synthetic

cannabinoids over another. On October 30, 2013, the licensee’s employee commented

that “Diablo is better.” On November 19, 2013, the licensee’s employee recommended

“Mr. Nice Guy” to the CI because most people bought that brand. On February 3, 2014,

Officer Carney made the comment to the licensee’s employee that some people have

said that smoking synthetics through a pipe does not mess you up as bad. The

circumstances of these sales were wholly inconsistent with the purchase of legal

products, such as incense or potpourri, which are not intended for human consumption

or ingestion.30

The preponderance of the evidence supports the conclusion that the licensee’s

employees knowingly engaged in or permitted illegal activity on the licensed premises

when they repeatedly sold synthetic cannabinoid products from under the counter. The

licensee is liable for the acts of its employees.31 The circumstances of the sales support

the conclusions that these products constituted imitation controlled substances, which

were sold in violation of Iowa Code section 124A.4(1). The licensee argues in its brief

that the licensee had a good faith belief that the products were legal. The licensee

offered no testimony from the store’s owners or from its employees, however, to

support that contention other than the concession by Officer Carney that some of the

synthetic cannabinoids had labels indicating the absence of all banned substances.

Moreover, the local authority was not required to prove that the licensee’s employees

knew that the particular substances being sold were in fact illegal, knowledge of the law

30 Commentators have concluded that “a conspicuous ‘not for human consumption’ label has in many

ways become code for ‘this product is a drug.’ “ State v. Heinrichs, 845 N.W.2d 450, 457, ftnte 4 (quoting

from Timothy P. Stackhouse, 54 Ariz. L. Rev. 1105, 1131 (2012). 31 Iowa Code section 123.49(2)(j); 185 IAC 4.8.

DIA No. 14ABD009

is presumed when the activity challenged is regularly conducted by the person in the

course of business.32

III. Sanction

The local authority is requesting revocation of the liquor license and beer permit as the

appropriate sanction for illegal drug trafficking on the licensed premises. The Division

has previously revoked a liquor license after finding that the licensee’s employee was

selling cocaine on the licensed premises.33 A license revocation has severe repercussions

not only for the licensee, but also for the licensee’s spouse and business associates, and

for the owner of the property where the business is located. Following a revocation, the

licensee, the licensee’s spouse, and certain business associates of the licensee may not be

issued a liquor control license, wine permit or beer permit for a period of two years

from the date of revocation.34 In addition, the premises which had been covered by the

license may not be relicensed to anyone for a period of one year.35

The licensee asserts that the length of the emergency suspension of its license (now

more than 9 months) has been more than sufficient punishment given the nature of its

conduct. The licensee notes that the ceiling for license suspensions is one year, which

the licensee argues should be reserved for only the most egregious conduct. The

licensee contends that its conduct does not merit the most severe sanction because the

licensee:

believed that it was legal to sell these products;

was never told to stop selling synthetic cannabinoids or offered the opportunity

to enter into an agreement not to sell these products,36

32 Sullivan, 325 N.W. 2d 923, 926. See also United States v. Sheppard, 219 F.3d 766, 769 (8th Cir, 2000) (“The

government is not required to prove that the defendant knew the exact nature of the substance with

which he was dealing”) and United States v. Ramos, NDIA NO. 13-CRF-2034-LRR, 2014 WL 4437554

(9/9/2014 Order) (finding that the amount Ms. Ramos charged for her products, where she stored the

products in her store, and the fact she offered investigating officers ‘rolling papers’ along with the sale of

a synthetic cannabinoid was sufficient evidence to support a conviction for knowingly distributing an

illegal controlled substance.). 33 See Administrator’s Final Order, Hacienda Bar Limited Liability Company, d/b/a La Hacienda, Docket No. S-

2002-00012, issued February 17, 2003. 34 Iowa Code section 123.40(2013). 35 Id. 36 The licensee submitted an Agreement (Exhibit C), which was signed by Abdul Islam as the owner of

Kartar, LLC d/b/a University Grocery, 2121 University Avenue, on October 2, 2013 and argued that this

licensee should have been given the same opportunity to enter into an agreement with the local authority

rather than have its license suspended. Exhibit C states, in part, that Abdul Islam agreed not to sell

DIA No. 14ABD009

fully cooperated with law enforcement subsequent to the suspension of its

license on March 4, 2014;

and its owners have not been criminally charged;

is willing to agree not to sell any synthetic cannabinoid products in the future.

The licensee asserts that it has suffered significant financial losses as a result of the

suspension and that any further suspension of its liquor license would irreparably harm

the licensee’s business.

The licensee’s owner and none of the employees involved in sales of synthetic

cannabinoids testified. The licensee’s brief makes a number of factual assertions that

were not considered in making the decision in this case because those factual assertions

were not supported by testimony or other evidence at hearing. The unsupported

factual assertions included assertions that: (1) the licensee had a good faith belief that

the particular products it was selling were legal to sell; (2) the licensee paid sales tax

and income tax on the money generated from the sales of these products; (3) the

licensee was aware that certain synthetic cannabinoids were illegal while others were

not and that there was a fine line between the two; (4) the sales representative who sold

these products to the licensee represented them to be legal; (5) the products were

marketed as bath salts, incense, potpourri, plant food, and fertilizer with a label stating

that they were legal in the United States; and (6) the products were kept behind the

counter to prevent theft and not to conceal them from law enforcement.

The licensee’s brief also asserts, in part, that: (1) specific dollar amounts purporting to

be the licensee’s actual loss of revenue due to the license suspension, (2) that the store is

not self-sustaining without the revenue from the sale of liquor, (3) that the licensee’s

losses have greatly exceeded any profits made from the sales and the licensee has no

other source of income; (4) that the settlement and keeping the store open without

liquor revenue has exhausted the licensee’s savings and any additional suspension will

place the business at risk of going out of business; and (5) that the timing of these

hardships is particularly difficult because the licensee’s wife passed away two months

ago.

prohibited Schedule I substances under Iowa Code 124.204 and “imitation controlled substances” as

defined in Iowa Code section 124A.2(4) , as well as other products. Although the licensee was allowed to

submit this exhibit, it was ultimately given no weight in making this decision. No other signature

appears on the Agreement, and it is unknown what circumstances led to the agreement or if the

agreement was accepted by the local authority.

DIA No. 14ABD009

The licensee did not testify at hearing. The only evidence in the record to support the

factual assertions listed above was the letter from the licensee’s bookkeeper (Licensee

Exhibit H) which provides a summary statement of the decrease in the licensee’s loss of

revenue, as reported by the licensee. No receipts or business records were provided to

support the statements made in the letter.

The licensee also points to its Settlement Agreement (Exhibit A) with Polk County, in

which Jasjit S. Nat, along with Bunny Nat, Geetinder Nat, Narinder Nat and several

banks agreed to forfeit $146,485 in United States currency from several different bank

accounts, in return for the release of additional bank accounts and two vehicles. The

Settlement Agreement was admitted as an exhibit at hearing. The licensee suggests that

this forfeiture should be considered in mitigation of the administrative penalty while

the local authority asserts that the forfeiture is irrelevant to this administrative

proceeding.

This Settlement Agreement was given some weight in considering the sanction to be

imposed. Administrative sanctions should be adequate to punish the violator given

the number and nature of the violations, to ensure that the violator does not benefit

financially from the violation, and to deter others from engaging in the same prohibited

behaviors. The fact that the licensee has agreed to forfeit a significant amount of cash

proceeds makes it more likely that the licensee has not benefitted financially from the

violations established at hearing. The amount of the forfeiture may also serve as a

deterrent to others who might otherwise consider selling similar products containing

synthetic cannabinoids.

Finally, the licensee argues that the length of the suspension as of the date of the

hearing was already significantly longer than the Division’s typical suspensions and is

more than double the suspension imposed on a store found to have sold to a minor for

the third time in three years. The licensee also cites to links for news articles out of

other states concerning the length of license suspensions in those states. Once again,

these news articles were not offered into the record at the time of the hearing and are

matters outside the record that were not considered in making this decision.

The licensee’s illegal sales of imitation controlled substances are very serious violations

of the Iowa Alcoholic Beverages Act that threatened the public health, safety and

welfare. An emergency suspension was warranted in order to bring a halt to the use of

the licensed premises for this illegal activity, and a lengthy license suspension is clearly

warranted given the number and nature of the violations. Based on all of the

circumstances presented, the violations warrant the maximum license suspension of

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one (1) year but do not warrant revocation. The primary reason for choosing the

sanction of a one year suspension over the revocation that was requested by the local

authority is that the illegal sale of synthetic cannabinoids is an issue of first impression

for the Alcoholic Beverages Division.

ORDER

IT IS THEREFORE ORDERED, pursuant to Iowa Code section 123.39, that for

knowingly engaging in illegal activity on the licensed premises, Liquor License No. LE-

2079 and Beer Permit No. BC-27098, issued to Jasjit Singh Nat d/b/a Nat Food Mart,

shall be SUSPENDED for a total period of one (1) year. The licensee shall receive full

credit for the period of the emergency suspension. Therefore the period of license

suspension, which began on Tuesday, March 4, 2014, shall continue and shall end on

Tuesday, March 3, 2015 at 6:00 a.m. IT IS FURTHER ORDERED that no alcoholic

liquor, wine, or beer may be sold, dispensed or consumed on the premises during the

period of suspension.

Pursuant to the administrative rules of the division, any adversely affected party may

appeal a proposed decision to the Administrator of the Alcoholic Beverages Division

within thirty (30) days after issuance of the proposed decision. In addition, the

Administrator may initiate review of a proposed decision on the Administrator's own

motion at any time within thirty (30) days following the issuance of a proposed

decision. 185 IAC 10.27(1) and (2).

Requests for review shall be sent to the Administrator of the Alcoholic Beverages

Division, 1918 S.E. Hulsizer, Ankeny, IA 50021. Unless otherwise ordered, each

appealing party may file exceptions and briefs within thirty (30) days of the notice of

appeal or order for review. Within thirty (30) days thereafter, any party may file a

responsive brief. The Administrator may shorten or extend the briefing period as

appropriate. The Administrator may resolve the appeal on the briefs or provide an

opportunity for oral argument. 185 IAC 10.27(6). The administrator may affirm,

reverse or modify the proposed decision.

A party who is adversely affected by the proposed decision shall not be deemed to have

exhausted administrative remedies unless the adversely affected party files a request

for review of the proposed decision within the time provided and the Administrator

has reviewed the proposed decision and has affirmed, reversed, or modified the

proposed decision.

DIA No. 14ABD009

Dated this 17th day of December , 2014.

Margaret LaMarche

Administrative Law Judge

Department of Inspections and Appeals

Administrative Hearings Division

Wallace State Office Building-Third Floor

Des Moines, IA 50319

CC: See Attached Mailing List

DIA No. 14ABD009

Copies to:

Margaret LaMarche

Administrative Law Judge

Depart. of Inspections & Appeals

Wallace State Office Building

Des Moines, Iowa 50319

John Lundquist

Assistant Attorney General

Department of Justice

Hoover State Office Building


Lt. Ritzman

ISP, District #1

260 N.W. 48th Place

Des Moines, Iowa 50313-2299

Diane Rauh

City Clerk - City Hall

400 Robert D Ray Drive


Interim Police Chief Douglas Harvey

Des Moines Police Dept.

25 E. 1st Street


Officer Rahn Bjornson

Des Moines Police Department

25 E. 1st Street


Douglas P. Philiph

Assistant City Attorney

Des Moines Police Dept.

25 E. 1st Street


Steve Bogle

Iowa Lottery

2323 Grand Avenue


Steven Mandernach

Social Gaming Unit

Lucas State Office Bldg.


Karen Freund

Licensing/Regulatory Bureau Chief

Iowa Alcoholic Beverages Division

1918 SE Hulsizer

Ankeny, Iowa 50021

Alfredo Parrish

Attorney at Law

2910 Grand Ave


state of iowa before the department of ... at food mart...expert (kevin g. shanks) as a witness. mr....

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