ML20012B965

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Partially Deleted Investigation Rept 5-84-008, Tdi Suspected Falsification of QA & QC Records
ML20012B965
Person / Time
Issue date: 11/04/1987
From: Marsh R, Power E
NRC OFFICE OF INVESTIGATIONS (OI)
To:
Shared Package
ML20012B886 List:
References
FOIA-89-192 5-84-008, 5-84-8, NUDOCS 9003190230
Download: ML20012B965 (16)
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Title:

TRANSAMERICA DELAVAL, INCORPORATED:

SUSPECTED FALSIFICATION OF QUALITY ASSURANCE F

~AND QUALITY CONTROL RECORDS Vendor:

Case Number:

5-84-008 Transamerica Delaval, Incorporated Report Date:

NOV 41987 Oakland, California Control Office: OI:RV Status:

Cicsed Reported.by:

Reviewed and Approved by:

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' Eugene J pTower, Inycatigator Robert G. Marsh, Director

-Office of Investigations Office of Irvestigatiers Field Office, Regior, V-Field Office, Region V v.

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SYNOPSIS On October 7. 1983, the Regional Administrator, Region IV, U.S. NRC, requested the Office of Investigations (01) to conduct an investigation to determine if therewerefalsificationsofQualityAssurance(QA)andQualityControl(QC) records by Transamerica Delaval. Incorporated (TDI), a vendor, in the manufacture of emergency diesel generators (EDG) for the U.S. commercial i

nuclear industry.

The initial 01 investigative efforts were predicated upon receipt of allegations in January 1983, that: (1) there was an a control in the manufacturing process at TDI, and (2) pparent lack of document there was an inability of QC to trace materials used in the manufacture of EDGs used in the nuclear industry. As a result of that information. 01 Region IV (01:RIV) opened an investigative inquiry into the matter, however, the investigative field work was accomplished by 01:Rll. The field work resulted in the interview of four additional individuals in March 1983, who were or.had been TDI employees.

Three of the additional individuals related that they believed that the 7

material control program at TDI was adequate. One individual expressed.

support for the initial allegations, but he provided no specific basis for his i

suspicions. With these four interviews, additional concerns were developed which indicated (1) lack of control of American Society of Mechanical Engineers

-(ASME) welding practices, (2) inadequate time trials in testing EDGs, (3) possible false certifications by the TDI QA Manager that certain employees had received auditor training, and (4) that an internal TDI audit was falsely documented. The results of the 01:Rll efforts were contain:.d in their Report of Inouiry Q2-83-008, which was provided to the Regional Administrator, RIV, since all vendor matters were centralized with the Vendor Program Branch (VPB)

RIV-at that time.

l Because of the health and safety aspects of the allegations, the.VPB RIV conducted two technical inspections of the TDI facilities at Oakland,

. California. One inspection, Report No. 99900334/83-02, was conducted in September 1983, and a follow-up inspection, Report No. 99900334/83-03 was conducted in October 1983. As a result of the two inspections, 19-n-

L nonconformances were identified. Also, in view of the generic problems L

associated with EDGs, the NRC issued IE Information Notice No. 83-58.

l In August 1983, the Long Island Lighting Company (LILCO), an NRC licensee and I

owner of the Shoreham Nuclear Plant, New York, Docket No. 50-322, experienced-a crankshaft failure of one of its three EDGs which had been purchased from H.

l TDI. Because of the catastrophic failure coupled with numerous other problems l

with EDGs, LILCO reported a loss of several million dollars. As a result, L

LILCO initiated civil legal proceedings against IDI [ Civil Action No. 85 Civ 6892 (GLG), U.S. District Court, Southern District of 'New York).

In their

't legal efforts, LILCO developed testimonies to support their position. LILCO alleged "..TDl's fraud, violation of RICO, failure to warn, negligent provisions of contract services, negligence in design, manufacture, inspection I

and testing, strict liability and numerous breaches of contract." This litigation between the two parties has continued over the years without L

resolution, and the NRC's Office of General Counsel (0GC) has continued to l

monitor these proceedings in the interests of the agency.

I Case No.: 5-84-008 -

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-t Because of the crankshaft failure and other problems identified with TDI EDGs, the U.S. nuclear industry initially met in October 1983 and established the -

TDI EDG Owner's Group (TEOG) of 11 facilities to review the significance of the diesel problems within the industry and to develop recommendations to resolve the issues. The efforts of the TEOG was closely coordinated with and monitored by the NRC to insure the resolution of the safety and health aspects of the technical problems associated with the TDI EDGs.

On December 16, 1983, the' Executive Director for Operations (EDO), NRC directed the transfer of responsibility of all technical issues relating to TDI diesel generators to the Office of Nuclear Reador Regulation (NRR), NRC, and indicted that problems relating to possible violations of the regulations by TDI be reported to NRR and 01 which retained responsibility for any investigative efforts.-

In February 1984, the responsibility for the TDI investigation was transferred

'to 01:RV, and a separate investigation, Case Number 5-84-008, was-opened. The 01:RV case remained-inactive, however, continued coordination was effected between 01, OGC, NRR, and the VPB which had become part of the Office of Inspection and Enforcement (IE), NRC.

The last NRC technical inspection of TDI was conducted in June an NRC inspector and a representative of Brookhaven National Laboratory (BNL There were no violations or nonconformances-identified durin The NRC ultimately concluded in a Safety Evaluation Report (g that inspection.

SER) on the operability and reliability of the TDI EDGs that a technical resolution of the issues was available. The NRC SER to include recommendations of the TEOG is contained in the NRC NUREG 1216 which was published in August 1986.

In view of the potential criminal activities or wrongdoings by individuals and/or the corporation as suggested by the LILCO litigation, all available documentation on the matter available to 01:RV was transmitted to the Federal Bureau of Investigation on September 16, 1987, for their review and any further action deemed appropriate.

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ACCOUNTABILITY-

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Thefollowing.portionsofthisReportofInvestigation(CaseNo.. 5-84-008)'

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TABLE Of CONTENTS Pagt

[

SYNOPSIS.............................

1 r

ACCOUNTABILITY..........................

3 APPLICABLE REGULATIONS......................

7 i

DETAILS OF INVESTIGATION.....................

9 Purpose of Investigation 9

Background

9 01 Review of the NRC Resolution of the Technical issues of the EDGs........................

11 01 Coordination with the FBI 11 Agent's Conclusion 12 Status of Investigation...................

12 LIST OF EXHlBITS.........................

13 REFERENCES............................

15 1

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4 Case No.: 5-84-008

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9 Case No.: 5-84-008 ':

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APPLICABLE REGULATIONS r

10 CFR 50. Appendix B, Criterion XVil: Quality Assurance Records t

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Case No.: 5-84-008

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DETAILS OF INVESTIGATION Purpose of Investigation This investigation was initiated to determine if there were falsifications of Quality Assurance (QA) and Quality Control (QC) records by Transamerica Delaval, Incorporated (TDI),avendor,inthemanufactureofemergencydiesel generators (EDG) for the U.S. coninercial nuclear industry.

Background

The initial investigative efforts by the Office of Investigations (01).

U.S. NRC, into this matter was predicated upon the telephonic receipt of allegations by 01 Field Office, Region V. NRC (01:RV) in January 1983 from a former TDI employee who requested confidentiality. The individual made general allegations regarding TDI that:

(1) there was an apparent lack of document control in the manufacturing process, and (2) there was an inability of QC to trace materials used in the manufacture of EDGs used in the nuclear industry. For example, the alleger advised that he suspected alteration of heat numbers on steel and also suspected the use of Cardinal fasteners which did not meet specifications. The alleger, however did not provide specific details to support his concerns. The initial 01 investigative efforts were contained in Report of Inquiry 05-83-005 which was forwarded to 01 Region IV (01:RIV) for appropriate action since all vendor concerns were centralized at that time.

As a result of the initial allegations. OI:Rlv opened an inquiry Q4-83-002, however, the investigative field work was performed by 01 Region 11 (01:Rll).

Thus 01:Rll reinterviewed the alleger on February 9,1983, and interviewed four additional individuals in March 1983, who had been or were TDI employees.

Three of the additional individuals related that they believed that the na erial control program at TDI was adequate. One individual expressed support for the initial allegations, but he provided no specific basis for his suspicions. With these four interviews, additional concerns were developed which indicated: (1) lack of control of American Society of Mechanical Engineers (ASME) welding practices, (2) inadequate time trials in testing EDGS, (3) possible false certifications by the TDI QA Mana9er that certain employees had received auditor training, and (4) that an internal TDI audit was falsely documented. The results of the Ol:Rll efforts were reported in their Report of Inquiry Q2-83-008. There have been no active 01 investigative efforts expended in this matter since March 1983.

In view of the health and safety aspects of the allegations, the results of L

the01interviewswerereferredtotheVendorProgramBranch(VPB),RegionIV, which subsequently conducted two technical inspections of *the TDI facilities at Oakland, California. The VPB conducted one inspection, Report No. 99900334/83-02, in September 1983 (EXHIBIT 1), and a follow-up inspection, Report No. 99900334/83-03, in October 1983 (EXHIBli 2). As a result of the two inspections, several nonconformances were identified.

In view of the generic problems a'sociated with EDGs, the NRC issued IE Information Notice s

No. 83-58 (EXHlBIT 3),

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On October 7, 1983, the Regional Administrator, RIV, initiated a memorandum to 01:RIV requesting an investigation of possible falsification of QA/QC records byTDI(EXHIBIT 4).

In August 1983, the Long Island Lighting Company (LILCO), an NRC licensee and owner of the Shoreham Nuclear Plant, New York, Docket No. 5D-322, experienced a crankshaft failure of one of its three EDGs which had been purchased from TDI. Because of that catastrophic failure coupled with numerous other problems with EDGs, LILCO experienced a delay in the licensing of Shoreham and a reported loss of several million dollars. As a result, LILCO initiated civil legal proceedings against TDI (Civil Action No. 85 Civ 6892 (GLG), U.S.

DistrictCourt,SouthernDistrictofNewYork).

In their legal efforts LILCO developed testimonies to support their position that the failure of the EDGs at Shoreham "resulted from numerous instances of intentional wrongdoing, other torts and breaches of contract by TDI." Specifically, LILCO alleged that prior to the shipment of the diesels to Shoreham that TDI was aware the ditsels did not meet contract requirements, code, and NRC requirements.

Further, it was cited that TDI was also aware of the possibility of casting defects which could and did cause the blocks on the EDGs to crack, however.

TDI never advised LILC0 of such deficiencies. LILCO further alleged.that TDI concealed information about potential failure of the EDGs and provided deliberate misleading information, in their Preliminary Statement dated February 3, 1986, in response to Motions to Dismiss and Stay Discovery "LILCO has alleged TDl's fraud, violation of RICO, failure to warn, negligent provisions of contract services, negligence in design, manufacture, inspection and testing, strict 1iability and numerous breaches of contract." The litigation between the two parties has continued over the years without resolution, and the NRC's Office of General Counsel (OGC) has continued to monitor these proceedings in the receipt of copies of the depositions of witnesses and other legal documents in the legal proceedings.

TDI was a major supplier of EDGs to the comercial nuclear industry, and by.

1984 had supplied EDGs to 13 different utilities for installation and ultimate operation at 15 different nuclear plants. Because of the crankshaft failure at Shoreham and numerous other problems which were identified with the TDI EDGs, the nuclear industry initially met in October 1983, and subsequently established the TDI EDG Owner's Group (TEOG) of 11 facilities to review the significance of the diesel problems within the industry and to develop recommendations to resolve the issues. The efforts of the TEOG were closely.

coordinated with and monitored by the NRC to insure the resolution of the safety and health aspects of the technical problems associated with the TDI EDGs.

On December 16, 1983, theExecutiveDirectorforOperations(EDO),NRC, directed the transfer of responsibility of all technical issues relating to TDI diesel generators to the Office of Nuclear Reactor Regulations (NRR), NRC, and indicated that problems relating to possible violations of the regulations by TDI be reported to NRR and 01 which retained responsibility for any investigative efforts.

In January 1984, the VPB prepared an inspection history of TDI to assist the NRC staff in evaluating the required licensee actions for the TDI EDGs. The inspectinn summary revealed there were 9 NRC inspections from 1979 through 1983 which cited TDI for 59 nonconformances and 3 violations in the areas of:

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Case No.: 5-84-008.

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! I manufacturing process controlst control of special processes; procurement control; material identity and controll nonconformances and corrective actiont equipment calibrationi internal audits; 10 CFR Part 21 practices; QA records, and miscellaneous.

l In February 1984, the responsibility for the TDI investigation was transferred to 01:RV, and a separate investigation, Case Number 5-84 008, was opened.

This 01:RV case remained inactive, however, continued coordination was effected i

between 01, OGC, NRR, and the VPB, which had become a part of the IE, NRC.

i by The last NRC technical inspection of TDI was conducted on June 37,1985(BNL).

an NRC inspector and a representative of Brookhaven National Laboratory There were no violations or nonconformances identified during that inspection (EXH1 BIT 6).

l The NRC ultimately concluded in a Safety Evaluation Report (SER) on the t

operability and reliability of the TDI EDGs that a technical resolution of the issues was available. The NRC SER to include the recommendations of the TEOG is contained in NUREG 1216 which was ultimately published in August 1986 (EXHIBli 5).

01 Review of the NRC Resolution of the Technical Issues of the EDGs i

in the overall analysis of the technical issues relating to the TDI EDGs, the NRC perforned the following actions to meet the regulatory health and safety responsibilities of the agency:

  • - The NRC conducted three technical inspections of the TDI manufacturing facilities the results of which have been resolved in accordance with NRC regulatory requirements.

The last inspection in June 1985 did not identify any violations or nonconformances.

In view of the generic problems associated with diesel generators in the U.S., the NRC issued IE Information Notice No. 83-S8.

The NRC ultimately concluded in a Safety Evaluation Report (SER) regarding the operability and reliability of the TDI EDGs that a technical i

resolution of the issues was available. The SER to include the recommendations of the TEOG, the owner's group, was contained in the NUREG 1216 which was published in December 1986.

01 Coordination with the FBI In view of the potential criminal activities or wrongdoings by individuals and/or the corporation as suggested in the LILCO litigation, the TDI EDG matter w discussed during a meeting on September 6,1987, with Special Agent g

oftheFederalBureauofInvestigation(FBI). At the request of the FBI, a 1 the documentation available to Ol:RV was subsequently transmitted to the FBI by letter, dated September 16,1987(EXHIBli7),fortheirreview and any further action deemed appropriate.

Case No.: 5-84-008 a

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Agent's Conclusion since the assignment of the TDI investigation to 01:RV in 1984, the workload of the office has been that other investigative matters have been given higher

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priority by the NRC staff. The priority of the TDI investigation has remained low. Thus, the case remained in an inactive status, and no resources were assigned to the investigation. The 01 investigator, therefore, can not offer

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any conclusions to substantiate or refute the allegations of potential wrongdoings.

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Status of Investigation i

With the referral of the case to the FBI for review and potential action, additional 01 efforts are not warranted. The case is CLOSED.

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LIST OF EXHIBITS 1

RIV NRC Inspection Report No. 99900334/83 02, of TDI during September 6 15, 1983 2

RIV NRC Inspection Report No. 99900334/83-03, of TDI during October 17-21, 1983 3

IE Information Notice No. 83-58 4

Memorandum, RIV NRC, dated October 7, 1983,

Subject:

REQUESTED INVESTIGATION OF TRANSAMERICA DELAVAL INCORPORATED (TDI) 5 Letter, Brookhaven National Laboratory, dated June 14, 1985, with a copy of an inspection report dated June 14, 1985 6

NRC NUREG 1216 7

Letter, 01: RV NRC, dated September 16, 1987, to the San Francisco Field Office, FBI (w/o enclosures) i Case No.: 5-84-008 s

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REFERENCES i

1) Letter, HUNTON & WILLIAMS, dated September 3, 1985, with copy of Complaint' filed by LILCO against TDI on August 30, 1985
2) Letter, Law Offices of B0GLE & GATES, dated October 14, 1983, which forwarded copies of documents of Titan Navigation, Inc.
3) letter, KIRKPATRICK, LOCKHART, HILL, CHRISTOPHER & PHILLIPS, dated December 21, 1983, with enclosures
4) letter HUNTON & WILLIAMS, dated February 3, 1986,

Subject:

LONG ISLAND LIGHTING COMPANY V. TRANSAMERICA DELAVAL, INC, with enclosures

5) Memorandum of Karla SMITH, OGC.'U.S. NRC, dated September 25, 1986,

Subject:

DEPOSITIONS OF DANIEL CADY, EDWIN DEANE AND LEOLA ROUNDTREE TAKEN IN LONG ISLAND LIGHTING COMPANY V. TRANSAMERICA DELAVAL INC. TDI),

PENDING IN THE SOUTHERN DISTRICT OF NEW YORK, with EncTosures

6) SECOND AMENDED COMPLAINT, LILCO vs. IMO DELAVAL INC., U.S. DISTRICT COURT, SOUTHERN DISTRICT OF NEW YORK (Undated but believed filed in February 1987)
7) Memorandum Division of Licensing, NRR, U.S. NRC, dated February 2, 1984,

Subject:

REPORT OF MEETING WITH REPRESENTATIVES OF TRANSAMERICA DELAVAL, INC.(TDI)EMERGENCYDIESELGENERATOROWNER'SGROUP,withenclosures 1

8) OI:RV Report of Inquiry 05-83-005
9) Result of Interview with on February 9, 198 (CONFIDENTIALITY GRANTED)
10) Results of Interview with Allen Elvys NANCE on March 21, 1983
11) Results of Interview with James William NORTHRUP on March 22, 1983
12) Results of Interview with Daniel Roy CADY on March 22, 1983
13) Results of Interview with Maurice James HILL on March 23, 1983
14) Memorandum, Rly NRC, dated January 17, 1984,

Subject:

TRANSAMERICA

,J DELAVAL INCORPORATED (TDI) - VENDOR PROGRAM BRANCH INSPECTION HISTORY INVESTIGATOR'S NOTES: A copy of each of the above listed references is retained in the 01 case file.

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