ML20033F726
| ML20033F726 | |
| Person / Time | |
|---|---|
| Issue date: | 03/21/1990 |
| From: | Taylor J NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | |
| References | |
| TASK-PINV, TASK-SE SECY-90-108, NUDOCS 9003270296 | |
| Download: ML20033F726 (8) | |
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/w%g-RELEASED TO THE PDR' t s .rwom 5 I l dafe 7 / ................initifs -l POLICY ISSUE March 21, 1990 (Notatiori Vote) SECY-90-108 For: The Commissioners From: James M.-Taylor Executive Director. for Operations subject: REFUSAL TO PROVIDE' ACCESS TO NRC INSPECTORS BY A' VENDOR OF SAFETY-RELATED MATERIAL
Purpose:
The purpose of this paper is to inform the Comission of NRC's lack of ability to take meaningful enforcement action against-a vendor for failing to allow NRC-inspectors to perform an inspection and to request' Commission guidance on how best to convey to the-Congress the need'for Congressional action ~ on the NRC February 1989 legislative change to Section 206 of .R the Energy Reorganization Act which addresses this-issue.
Background:
On May 4, ',989, the U.S.~ Department of Justice, District of New Jersey, issued information that corporate officers for Meredith Corporation, Pressure Vessel Nuclear (PVN), and Alloy i &CarbonSteelCompany(ALLOY).wereindictedfor_theiralleged D roles in selling commercial-grade steel as military-grade steel, which was used to build and-repair U.S. Navy submarines 1 and surface ships. The 27-count l indictment-rendered on May-4, 1989, by a Newark Federal Grand Jury, charges the defendants, some of whom are presently employees.of-PVN, with l substituting commercial-grade. steel for' military-grade steel and fraudulently documenting the substitutions _ as meeting military specifications..From April 1984 through August 1985, j 3 the defendants allegedly caused nonconforming steel to be ~ shipped to Department of Defense contractors.. The defendants 1 allegedly falsely marked and stenciled steel, created-false documentation bearing the letterhead of various companies, { altered manufacturer-issued certified material test reports (CMTRs), caused fraudulent chemical and physical test-certifi-cates to be prepared for tests that had not been performed, and prepared false certificates of conformance (C of Cs) for 1 steel that did not conform to purchase requirements. j P l NOTE: TO BE MADE PUBLICLY AVAILABLE WHEN THE FINAL SRM IS MADE CONTACT:
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E. W. Brach, NRR '492-0961 1 ffb C 1 0Djp7dc29 XM IfI 9 j
L The Comissioners 1 ? I Discussion: Audits and Inspections of PVN On June 13 and 14, 1989, Virginia Power conducted an audit of PVN. As -telephonically reported by Virginia Power personnel,. the audit examined a sample of purchase orders which consisted-of 16 safety-related purchase orders, encompassing 30 individ-ual line items of various. types-of safety-related materials. i The 16 safety-related purchase' orders were reportedly issued - l between September 1 1988, and May 4,1989. !From the sample 1 of30lineitems,.VIrginiaPowerauditorsreportedthatin 3 cases PVN purchased material from unapproved suppliers'and; in 17 cases PVN supplied commercial-grade. material.~ In all-l- 20 cases, PVN apparently certified that the material = met all j the requirements of Virginia Power's purchase orders, including Appendix B to 10 CFR Part 50. However, the. Virginia Power-auditors reportedly found, that PVN did not 'take any action to-determine that the materials supplied were suitable for safety-related applications before certifying that the material met the requirements of Appendix B. During previous NRC ins >ections of PVN. conducted by tho Vendor Inspection Branch and tie Office of Investigations during the weeks of November -2,1988, and February 1, L 1989, three exam-pies of material supplied as meeting ASME Section IIIl require-ments with no adequate basis were discovered. In the three' cases, PVN purchased stock material and sold it as meeting ~the ' requirements of Section-III without performing the upgrade-testing required by NCA-3867 4(e). -In. addition, it was~also noted that PVN had altered CMTRs received from Americe Tank: and Fabricating Company :(ATF). On material ATF had pu ':hased' from an ASME Quality Systems Certificate (QSC) holder.,sf stock' material and subsequently sold to PVN, PVN had removed ATF's. name from the " Sold To" and:" Shipped To'l blocks of the CMTR' and inserted PVN's name and address. 1 Based on the indication 1 l l that the material was purchased directly.from an ASME-QSC holder, the customer would not be looking for upgrade testing results nor suspect that the material was not in conformance-with ASME Code requirements. At the time of the inspections,- the three examples of nonconforming conditions were. considered errors by staff. After the staff became aware of the indictment and the results of-Virginia Power's audit ~, the'. l staff concluded that these nonconforming conditions may be' indicative of a broader problem'in the vendor's representation of materials and products. PVN's Refusal To Allow NRC Inspection On June 26, 1989, three NRC' inspectors from the Vendor Inspec-tion Branch attempted to make an unannounced inspection of l-PVN's facility and records. Under the advice of PVN's legal
L4-- L The Comissioners - - i counsel, the President of PVN refused'to' allow the inspection-to be; performed. PVN's legal counsel requested that he be provided with the basis of NRC's-authority to conduct the l l inspection.- On June 29; 1989, after providing PVN's legal i counsel with a letter stating the basis ~for NRC's authority l to conduct the inspection, a second attempt to conduct the l inspection was made. A copy of the NRC letter to' PVN's legal t l= counselisenclosed-(Enclosure 1). Access was again denied by; PVN on June 29, 1989. -[ NRC'sOfficeoftheGeneral; Counsel-(OGC)initiatedthe actions necessary to petition-the court to force PVN to allow the inspection. Before filing:the petition, PVN agreed to j allow the inspection, which-took place the week-of. July 17,1989. - Regulatory Authority Over Vendors and Legislative Proposals 10 CFR $ 21.41 requires ~ that companies supplying basic compo-- nents permit duly authorized representatives of:the Comission'- to inspect its records, premises; activities, and basic components as necessary to effectuate the purposes of Part 21. PVN is a large-industry supplier of materials (bar, fasteners, castings, forgings,' plate, fittings) for use' in-safety-related applications. These materials meet the 10'CFR Part 211defini-- I tion of " basic components" which was further clarified in. ( NUREG-0302,,"Remar(s Presented At Public Regional-Meetings To' DiscussRegulations(10CFRPart21)For4 Reporting 10f Defects. t And Noncompliance." PVN's refusal to allow the inspection was-considered by the staff.as a willful violation of 6 21.41.- l However, af ter reviewing '5 21.~61 of-10 CFR Part 21 and' Section 206 of the Energy Reorganization Act of 1974', it was determined by-the' staff-upon. advice of OGC that there is insufficient legal basis to proceed with a civil: penalty for PVN's failure to provide access. It is the view of the OGC i that,.under the provisions of 6 21.61 and Section 206', civil penalties may only be imposed for knowing'and conscious-failures by directors or responsible officers to make.a - i' required notification. Several times _the Comission has submitted proposed legisla-- tion to Congress which would modify.~Section 206 of:the Energy-1 Reorganization Act. This legislation would provide.the Commission ~with explicit authorityf to impose civil; penalties: for violation of the Comission's regulations implementing 4 that section, including. failure to provide access. Although-the 100th Congress'did not enact this legislation, both-the -House and Senate passed nearly identical versions of our proposal. The-Comission resubmitted its proposal to the 101st Congress on February 2, 1989. In addition'to our i l
3 ~i! Li a-The Comissioners - 4:- -Section 206 proposal,-the NRC asked Congress to enact'legisla-tion providing the,NRC with the authority-to obtain adminis-trative search warrants. This would augment. our ability to; j conduct unannounced inspectionsrof non-licensed persons'and: companies supplying components or-providing services for any-facility or activity subject to the Comission's jurisdiction. Two courses;of action are? available to the Comission in-- - this_ matter. The NRC Congressional Affairs staff recomends-that informal comunications by their office to our Oversight-Comittees, as part of their ongoing effort to:get NRC's legislative proposals enacted.will be most effective.. However, the Comission may wish to state-its views more directly to the Congress on the need for-prompt action. A draf t letter is enclosed (Enclosure 2)~ should the Comission - choose this course of action. Staff Actions The staff. issued an Information Notice 89-56 " Questionable Certification of Material' Supplied to the Defense Depart-ment by Nuclear Suppliers," on July 20, 1989 to inform the nuclear industry of the indictment of PVN.and alleged record falsification. On November 22,:1989,- a supplement to the-Information Notice was issued to inform licensees of testing done by Virginia Power and'other nuclear vendors and licensees which identified nonconformances in PVN-supplied materials. The staff is preparing a Bulletin which would request:licenseesL to identify safety-related procurements!of material from PVN' and to take such actions as necessary to provide assurance = that this material is acceptable for its intended use. A copy of the draft Bulletin-has been-provided to NUMARC for their review and coment. A copy has also been placed in the Public Document Room. The observed nonconforming conditions in material furnished by PVN-appear'to' constitute a potential-safety concern..The staff will be working with NUMARC to assure appropriate licensee actions are taken. t i Recomendation: The staff requests that the Comission determine whether informal comunication or a formal letter to our.0versight Comittees is appropriate. 3 4 +
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,The Commissioners-Coordination: The Office of the General" Counsel has reviewed this paper and: has no legal objections, y / \\ [ apis M. Tay Jtecutive Director for Operations-
Enclosures:
1. NRC letter to PWI's Legal Counsel,. dated June 28, 1989 2. Draft ~ letter to C.)ngress Commissioners' comments or consent should be provided directly to the Office of.the Secretary by. COB Thursday, April 5, 1990. Commission Staff Office comments, if-any, should be submitted ~ to the Commissioners NLT Thursday, March 29,-1990, with an infor-mation copy to the Office of the Secretary. If the paper is of ? such a nature that it requires additional-time for' analytical review and comment, the Commissioners and the' Secretariat should. be apprised of when comments may be expected. DISTRIBUTION: Commissioners OGC OIG GPA l REGIONAL OFFICPS ( EDO l SECY 1-i l l.
.q t' oAy k . ENCLOSURE l' l "? +f ,\\ UNITED STATES 8 . <. (g',k NUCLE AR REGULATORY COMMISSION l h*#njsf W A$NINGTON, D. C. 70656 June 28,'19892 L o.,,,, [ Mr. Roger Adelman, Esq. -2 Kirkpatrick and Lockhart HAND DELIVERED 1800 M St.:N.W. L South Lobby 9th floor 3 Washington, D.C., 20036 l
Dear Mr. Adelman:
Re: USNRC Inspection of Meredith Corporation On Monday June 26, 1989, inspectors from the United States Nuclear l ~ .. ' ' Regulatory Comission (USNRC) errived at the New Jersey offices of your-1 client, Meredith Corporation, located at 460 Hillside Avenue, Hillside, New -Jersey 07205, to conduct an inspection pursuant to the USNRC's~ regulations, specifically 10 CFR Section 21.41. This regulation is promulgated under the authority of Section 206 of the Energy Reorganization Act of 1974',.42 U.S.C. i 5846 and Section 1610 of the Atomic Energy Act of.1954, as amended, 42 U.S.C. j o L 2201(c). The regulation authorizes UShRC inspections of facilities supplying ~,
- basic components" or parts thereof for comercial nuclear power-plants:as.
that tem is defined in 10 CFR Part 21. Meredith Corporation. supplies materials to the comercial nuclear industry and these materials are " basic' componer.ts". Thus, inspection of-the records of the New Jersey facility of Meredith Corporation is authorized under 10 CFR Part 21. j Upon your. counsel, the officials of Meredith Corporation. denied access to [ 4 USNRC inspectors to inspect the facility and records. This letter is to infom you that USNRC inspectors will again arrive'at the New Jersey offices 29,1989. of the Meredith Corporation at or after 12 p.m. on Thursday, June
- l The purpose of the inspection is to review records associated with basic
' components supplied to the nuclear industry by Meredith Corporation from 1983 l to the present. Selected records will be photocopied and brought to USNRCc offices for further review. Contact with Meredith Corporation personnel will be limited to information necessary to find and understand the nature of-i the records which are the subject of this inspection. Upon arrival..our inspectors will expect unfettered access to the' facility and records described. i above as authorized by 10 CFR Section 21.41~ .l .) Sincerely, f d 4 E. William rach, Chief 4 Vendor-Inspection Branch Office of Nuclear Reactor Regulation t cc: William Lanza, President Meredith Corporation 460 Hillside Avene i Hillside, New Jersey. 07205
t N 9 i, j i i (DraftLetterToCongress)
Dear Sir:
On February 2,1989, the Comission sent a legislative' proposal to you that-q contained recommended changes to the Atomic Energy Act of 1954 and the Energy- -l Reorganization Act of 1974 Since that proposal was sent, certain events have. 'l =! occurred that I think emphasize the need for these changes. A company that -{ supplies parts for critical safety sy tems has refused NRC access to perform an-inspection on two occasions. NRC planned the inspection after learning that the company had recently been indicted for falsifying material test reports for _ l material supplied to the Department of Defense. We knew that-the: company:was a large supplier to the nuclear industry and we.were concerned that they may.have also falsified test reports provided to the commercial nuclear industry., Af ter numerous discussions between NRC's Office of the General Counsel, Department.of l Justice officials, and legal counsel for the company, NRC was allowed to conduct the inspection. However, the-inspection was delayed-3 weeks. NRC L -) reviewed the possible enforcement action-for the company's refusing to allow, and for delaying, the inspection and determined that no meaningful action could be taken under current statutory legislation. l e i I I i _~
w "\\, Draf.t l'etter to Congress. Two of NRC's February 2,1989 proposed legislative changes directly impact this issue. The proposed changes to Section 206 of the Energy Reorganization-Act of 1974 would provide the WRC with the authority to impose civil penalties for a vendor's failure to comply with the Commission's rules, including failure to provide inspection access. In addition, the proposed changes to Section 161c. of the Atomic Energy Act of 1954 would provide the NRC with the { authority to issue administrative. search warrants. This would augment NRC's ability to conduct unannounced inspections of nonlicensed persons and companies supp' lying components or providing services for any facility or activity-subject to the Commission's jurisdiction. Authority to issue such warrants and to take appropriate enforcement action in such cases as discussed above-is clearly needed now. l 1 strongly encourage your support and action to enact the legislative proposals. Sincerely, Kenneth M. Carr l L i h .}}