ML20077J188

Responds to Region III Challenge at 830105 Public Meeting Re Util Proposal for Bechtel to Administer third-party Program at Facility.Bechtel Nomination Should Be Rejected Due to Deficient Audit Plan

ML20077J188
Person / Time
Site:	05000000, Zimmer
Issue date:	01/20/1983
From:	Devine T GOVERNMENT ACCOUNTABILITY PROJECT
To:	James Keppler NRC OFFICE OF INSPECTION & ENFORCEMENT (IE REGION III)
Shared Package
ML20076C445	List: ML20077J188 ML20077J229 ML20077J260 ML20077J268
References
FOIA-83-77 NUDOCS 8308160015
Download: ML20077J188 (11)

Text

_ ___ - - - - - _ - - - - -

. s.  ; .. . .. . . -- . . - . . - - - - - - - - - . . . - - -. =- - - - - . - -

1 .

F

' GOVERNMENT ACCOUNTAmuJY PROJECT Institute forPolicy5ades 1901 Que Screet. N.V.. WesNngton. D.C. 20009 (202)234 9382 l

t January 20, 1983 l

Mr. James Xeppler .

Regional Adminstrator, Region III -

.U.S. Nuclear Regulatory Commission' .

799 Roosevelt Road Glen Ellyn,. Illinois 60137 . .

~

Dear Mr. Xeppler:

At the January 5,1983 public meeting on Cincinnati Gas and Electric's (CGSE) proposal of the Bechtel Corporation to -

adnnister the third party program at the Zimmer nuclear power station, Region III~ counsel Stephen Lewis requested that public critics produce evidence for two serious challenges to the Bechtel nomination. On behalf of the Miami Valley Power Project -

(MVPP), the Governr.ent Accountability Project (GAP) presents this

. response, as well.as supplemental comments.

'More specifically, Mr. Lewis challenged critics.to produce

'e'vidence that Bechtel first arrived on-site at Zimmer to begin work before November 15, 1982 -- the date specified by CGLE and Bechtel for the latter's arrival. Second, Mr. Lewis suggested that we present the full scope of financial conflicts-of-i.nterest due to underwriting purchases of Dayton Power and Light stock by

• Dillon, Read and Co., Inc., an investment company wholly-owned.by '.

Bechtel since June.1981.- .

During the.last two weeks GAP has researched these issues diligently. We have obtained evidence that Bechtel has been on-site continuously at Iimmer since August 1, and after August 15 operated 'out of a double wide trailor that served as headquarters for its site team. ' Further, a review of records at the Securities '

and Exchange Commission reveals that from 1973-82 Dillon Read has purchased at least $49,415,000 in bonds from the three utilities that own Zimer, as well as 571,000 shares of stock. Further.

- Dillon' Read co-managed the sale of $80,000,000 in bonds and 7,100,000 shares of stock for Columbus and Southern Ohio Electric (C50tE) between 1973-7C.

I. BECHTEL'S ACTIVITIES AT ZIMMER SINCE AUGUST' A. Background

• 28 3 In public coments on CGEE's November 26, 1982 nomination of 4' ~ ' ~ Bechtel, critics suggested that the latter's work for CGSE before the Comission's November,12 Order compromised Bechte? 's ability to

' make an independent assessment of the safety hazards at Zimer and

\their' causes . Most co= enters refer:td to Noverber 1982 comunications 8308160015 i330516 -

hNADE83-77 PDR 6) hL - ,[(

q Mr. Keppler Page 2 l

l The MVPP co=ments went a step further:

between CGEE and Bechtel.

" GAP has received reports since August of Bechtel teams on-site

~

at Zi=mer to prepare its workplan. There is no qu'estion that developing a program to finish the plan [t] constitutes direct involvement with the Zimmer project, months before the Co= mission acted." (December 6,1982 letter from GAP to James Xeppler, at,6.) e l

}

As a result cjf the public coc=ents, in a December ,28,1982 letter to CGEE and Bechtel you raised a series of key questions about the nomination. In particular, your first inquiry was at follows: -

please provide all documents and a discussion of any oral understanding related to CGSE's plans to utilize Bechtel as described in.your November 10, )

1982 letter to the NRC Coc=issioners and activities

' conte = plated in response to the November 12, 1982 Cot ission Order. Include with this response a chronology of meetings between CGEE and Bechtel and' site visits by Bechtel employees in connection with this effort.

Cn January 3,1983 CGLE Presid'ent William Dickhoner answered that -- on Novecber 2, 1982 the utility contacted Bechtel and other firms; on November 5 Bechtel cade an initial presentation off-site; and between Nove=ber 15, 1982 and December 22, 1982 visited the site on 16 occasions. Similarly, a Dece=ber 29, 1982 lette'r from Bechtel Power Corporation Vice President and General Manager Howard Wahl fails to mention-any site visits before Nove=ber 15, 1982.

The subject was discussed at the~ January 5,1983 public meeting. In response to an inquiry whether Bechtel's failure to .

disclose the August visits would constitute a caterial false state-cent, Mr. Lewis explained that the early activities would have been within the scope of the December 28 question. (Transcripts, at 60.) Counsel then confirmed.the seriousness of this factual dispute in the following exchange: j l

MR. DEVINE: Well, as you know, since the plant was shut down, a lot of the witnesses have scattered around the country. Some of the best quality assurance personnel at Zi=:er were laid off when work was suspended. If i .

am going to fly around the country and gather these affidavits,-

I want to know if it makes a difference. If Bechtel '

gave material false statements in response to your Dececher 28 letter, are you going to trust the safety of this co== unity '.to their judg=ent' for the rest of the Zin=er project?

MR. KIPPLER: I think the answer to tha't question is, if Bechtel responded falsely, it will be treated as a serious

=atter, yes.

B. CAP Investigation After the J'anuary 5 meeting, GAP contacted a series of for=er

Mr. Keppler Page 3 Zi=mer employees to confirm and clarify their earlier informal reports of Bechtel visits on-site since . August. Six witnesses reported that Bechtel had communicated with CGGE or arrived on-site before November 1982. Five of the witnesses were working at Zimmer when the Co==ission issued its November 12 Order suspending all safety-related ' construction. One witness provided an affida~vit Which -

is enclosed as Exhibit 1. In his-disclosure the witness reported that he had confirmed the accuracy of his state =ent with four other ex-Zit=er employees, who had agreed to speak with the Federal Bureau of Investigation (TBI). Tour'of the five witnesses contacted by GAP who did not provide affidavits stated that they would speak with the federal Bureau of Investigation or the NRC's office of Investigations.

Taken in combination, the Zic=er witnesses provided the. following infor:ation: _

1) On August 1 a team of Bechtel employees arrived on-site at 2ic=er. They ente 6ed through the north gate. The Bechtel team were visitors passes the first day at the plant, although the passes were net seen. subsequently.

2) The witnesses initially identified thf team with Bechtel, because the members wore suits e= blazoned with the Bechtel. logo.

Although the team members wore CGCE hardhats 'the first day, they later switched to Bechtel hardhats. One team'cember stated that the group was from Bechtel. .

~ 3) The Bechtel team was on-site continuously from August 1 at least thttugh the Co==ission's November 12 Order. Initially, there were six Bechtel representatives. The team later increased '

to eight, and eventually to at least 12 members at the ti=e of the shutdown. -

4) Tor the 'first two weeks the team worked out of the " head shed" -- the main building for all construction canagers. On

~approximately August 15 a double wide trailor was installed for the team. The location of the trailor is circled on a copy of an aerial photo enclosed as Exhibit 2. .The team cembers.were seen entering and leaving this trailor, which was not marked with the corporate seal.

5) A ce=ber of the Bechtel team stated that the group was there to do a study of code co:pliance and accountability, to see if the plant could be co=pleted feasibly within normal quality assurance (QA) requirements. They were to submit a report to CGSE Vice President Earl Borgmann. The same representative stated that Bechtel had a team of 200 employees on stand-by to' co=e -in for a larger project. A Bechtel executive in charge of construction at Midland was I

slated to run the Zinner audit. .

6) Bechtel's work at Zit=er was widely known and . discussed among employees on-site,,who believed the firm was bein'g eased in to replace the Kaiser Corporation. Only two of six GAP witnesses personally saw specific Bechtel identification, however.

e

'd

a.

Mr. Keppler Page 4 $

I*

7) One witness reported in an affidavit that in late August or 8 early September NRC Resident Inspector fred Christianson stood beside Bechtel representatives to observe work on a hanger. hg In light of the NRC staff's previous failure to recognize the -

e scope of Zi=:er quality assurance violations until pressed by whistle-blowing disclosures, the last allegation is particularly disturbing.- f Overall, you have stated that if verified these charges are very serious. In our opinion, these findings independently &

candate that you reject the Bechtel proposal, or at least I withhold approval until proper authorities can investigate what g we believe are caterial false statements in response to your e December 28, 1982 letter on the Bechtel nohination. Further, if CGSE h pmvided misleading or inaccurate statenants to support the Bechtel N nomination, it should be disqualified'from making future no=inations. h Surely, an " independent" third . party cannot pmvide an " objective" y e' valuation of the same type issues that it has been working on, secretly h.

for CGEE ~ since August -- over three months before the. NRC-icposed '

shutdown. It is not likely that the public will have confidence in eventual third party conclusions, either, if.the initial ,

selection process is tainted by deception.

• g g

II. FINANCIAL CONFLICTS-OF-INTEREST -

At the January 5 meeting, Phil Amadon, Chairman of the Coalition g for Affordable and Safe Energy -(CASE), reported that Dillon, Read and Co. , a wholly-owned Bechtel subsidiary, acquired $1.5 tillion in g{s bonds in 1982 from Dayton Power and Light (DPEL), one of the Zimmer- 6 owners. Mr. A=adon observed, "[I]f our city council people are ~

1 responsible enough to remove themselves from voting after dealing h with CGEE stocks, we think it night be reasonable to ask Bechtel, j' which wholly owns Dillon and Reed [ sic), to remove themselves from 3 auditing a plant in which they have some financial interest...." E (Transcript, at 51'.) Mr. Lewis requested that any more co=plete research l be submitted for the record. (Id., at 51-2.) 2.

M

' GAP has checked Standard and Poor's listings to confirm that  !

Dillon Read is a Bechtel subsidiary. In a January 19, 1983 tele-  !

phone. conversation, a'Dillon Read representative informed Mr. I A=adon that Bechtel acquired the investment firm in June 1981. h.

s gap has researched a wide sample of utility SEC disclosures back to 1973. Put si= ply, the fir = has an active histor underwriter for all three utilities which own Zimmer - yCGSE, as an  :

DpCL, and CESDE. On balance, Dillon Read participated in purchasing $

$129,415,000 in bonds and 7,671,400 shares of stock between "

1973-82. Included in this total are $80,000,000 in CES0E bonds and "

7,100,000 shares of CESOE stock for which Dillon Read served jointly U with the Ohio Company as managing underwriters. Since June 1981 g

Dillon Read has purchased $15.440,000 in bonds and 130,000 shares of r stock. Statistical sustaries for relevant SEC reports are enclosed .

, as Exhibits 3A-3C, respectively. '

9

' This research establishes a financial conflict-of-interest.

)

+

t .

, Mr. Xeppler Page 5 A subsidiary of the " independent" judge of Zimer traditionally has purchased and traded significant arounts of stock for utilities that own the Zimmer plant. . In light of the potential financial consequences from an aggressive audit and quality verification plan, Bechtel forfeited its objectivity for a job at Zimmer phen it purchased Dillon Read in 1981. '

The.research als'o is significant with respect to the NRC's own financial independence criteria. A literal reading of the Comis-sion's independence criteria reveals that conflicts due to ownership or control of significant amounts of stock only apply to individuals,

'not corporations. As the Bechtel case indicates, the omission creates a gaping loophole that could taint any third party review.

C. SUPPLDfENTAL COMMENTS i

' l A. Competence At the January 5 meeting you were unimpressed that Bechtel had to lay off over 1,000 employees at the Eidland site foJ a quality assurance breakdown -- less than three weeks after the Zimmer~ shutdown. Similarly, you were not impressed that Consusers

~

Power Company previously had sued Bechtel for " gross negligence" in constructing the Palisades plant in Michigan, or that Bechtel

• settled the suit instead of contesting it. Reports of falsified QA recor'ds and intimidation of quality control inspectors during .

Bechtel's construction of the Alaska pipeline. did not faze you..

Instead, you explained that "if you take a critical look at the performance of almost anybody in the . nuclear industry, you can find there are jobs that have been done very well and there are jobs that have not been done so well." (Transcript, at 128.) ,

GAP strongly believes that this evaluation standard is irresponsible. The third party chosen to, evaluate the Zimmer QA breakdown will have an enormous responsibility. Fundamental breakdowns in Bechtel's QA programs cannot be brushed aside ,

merely because. all organizations have problems. That is precisely why a nuclear construction firm should not be selected to evaluate construction at another nuclear plant, and why CGEE should be required to. prove that any alternative choice has an unsurpassed record for quality of its audits and other quality assurance / quality control work. Even if there is a five out of six chance that Zimmer is one of the jobs that Bechtel does "very well," that is no better odds than playing Russian Roulette with public safety.

B. Intol_erance of Bissent After the history of retaliation, intimidation. and vindication of whistleblowers at Zimer, it is essential that any third party.

I G

S

=

_ . .m m m- J

.o -

\

l

, 1

< a E i

~ D -

l Mr. Keppler Page 6 D

has legitimacy.with those who have challenged QA violations.

This would not be possible with Bechtel. As stated at the January $

c 5 meeting, if the gag order in Bechtel's_ standard emolevment contract $ '

had been enforced at Zimer, the problems at the plant would have 1 gone undetected.- - y Second, the gag order reveals Bechtel's institutional intoler- p*i '

ance of dissent. In light of Bechtel's dominance within the . nuclear g industry, any employee who works cooperatively with the third. party p will risk professional suicide within the industry.

MVPP believes that the Bechtel nomination should be rejected y 6

due to a lack of independence, financial and fGnctional conflicts -E of interest,'an insultingly deficient audit plan, an erratic j track record and a history of internal repression. Even if you are not noyed by these deficiencies, we urge you At least to ) t Withhold judgmeht until the allegations of misleading or false 1

!itatements are resolyed. 4 Sincerely, .

. j JJ 5 Thomas Devine

.- Legal Director

. . J 4

3 1

l il f3,Qi]

e I

ed e@ d#

. - . . ., - _ . . . ,.a. - - - - . . - - , ,- , , , , - , , , , , . , _ , .,-n, -. , ,, , . , - . . . r. . . ,,- , , . , , _ ~ . . _ ,

m _

m

• n . .

i .

i

=.

i -

W - . - - - . .

RECIDW III j

1

• N .

OUTUDINC TRANSMSSION SEltVICE REQUEST i

~

j '

[6 i .

! l-10-U .

trumber 'of rases ' -877 (ove+ ) ~

p'(Name): R . F. huh . Arau, h 4 _s o sc. . E m r -

v i ' *

P93*

• Y, MA/,. _

s emif f I ,

[f' A N

! escription MeuMLif TitoVtDED _%I#- - -

j .

I f041(.iE A .

t

. A

' (

i 1

i

• I tr Rights Blds __

TOR WP_4.D/C USE P

~

System 6 (WP) ,

h

/W-Towers

• l -

9  ;

Rapifax' N .~. -

l Street- .

i

, h t

l BE . Ist i L

& w m w w w m ,w - - m w_: L ; L ;;-

--

---- . _ - - T_ --

3 Einssir 2A comxsos a scomia caro sucrarc saxx m scrm PUH3ASES ET DIIEN, MD & CO., IEC.

l

• Data Form Page Bonds .-

Stocks (shares) '

5/12/82 5 12(09) (10.040,000 5/13/81 s-16

• 20(24) 79,200 4 /08/81 8-A 63(74) $10,000,000 s

10/01/80 5-7 63(36) 125,000 10/01/80 5-7 63(34) $10,000,000 6/27/75 :8-A 36 $4,625,000 D,R,. $LcnG WITa ut C150 CneANY szmo As A Mw.GING IDorRWRITER POR THE FOUDfDC snxx e amo mamasts:

10/22/16 S-7 01 , 1,000,000 4/29B6 s-7 01 2,000,000 6/2005 S-7 01 2,000,000 6/189 5 S-7 01 $50,000,000 12/17M4 S-7 01 $30,000,000 2/17M4 S-7 01 1,200,000 4/26/73 . S-7 01 900,000 9

d J _ _______------- _ _ _ _ _ - - _ - - - _ _ - - _ - - - _ _ - - _ _ _ _ _ - - _ _ - - - _ - _ - - - - - - _ - - __ -.

rFU N w:+ A93ratfewau w .wmem rm- ---

e.

• EnseirSA i

COIIDGOs s Sc(7: Eat CEIO II2CTRIC STOCK AMD BWD W3 CEASES BT DILIM, READ & CO., IBC.

Data Foza Page moods ,.

Stocks (share )

l 5/12/82 S 12(09) $10.040,000 5/13/81 5-16

• 20(24) 79,200 4/08/81 6-A 63(74) $10,000,000

. I 10/01/80 5-7 63(36) 125,000

~

10/01/80 S-7 63(34) $10,000,000 6/27/77 :8-A 36 $4,625,000 l

J 1

D,R.. A12G 1CTE TE GIIO CDCPANY SERvm AS A ManCDIC CDCERNRITER FOR THE FOLIDfDC l sm:r no amo exsasts: -

10/22/16 S-7 01 , 1,000,000 l

4/29/76 S '1 01 2,000,000 l

6/20/75 S-7 01 2,000,000 6/18/75 S-7 01 $50,000,000 12/17 /14 S-7 01 $30,000,000 2/17/74 S-7 01 1,200,000 .

7 4/26/73 . S-7 01 900,000 l

l l

e 4

1 h-  : .

r _ _ _ _ _ - _ _ _ _

. ;W2%Mw:++mvsmer;rmww.m. c2 - - u ,_ __ ._ __ _ _ _ l

,. p i .. .

• DAYTW POWT.R & IJGHT STOCK AED DOND mRCBASES BY DILICH, READ & CO., INC..

Date Fom Page armae Stocks (share.s) r 3/09/82 5-16 10 (11) $1,500,000 l'3/04/82 9/22/81 s-16 5-16 01 24 $1,990,000 80,000 -

$/05/81 s-16 07 60,000 s50

. 2/09/81 .8-A 10 $1,449,000 7/14/80 6-A 09 8,000 12/14/79 8-A 10 $1,350,000 10/25/77 8-A 29 $1,000,000 9/27/74 5-7 23 $750,000 .

e g .

e 9

4 9

I

-- ---= = =---x----

3;MrAwmsemy-sers -h arm. A L,--- 5 l .

l- ,,.'..

EM8tf GC, CINCDDLATI OAS E ELBCTRIC S2CCK AMD BotO PUEBSES ST DILIM. READ 5 CO., INC. .

Fom Page Bonds Stocks (shares) lDate $2,000,000

^

s-16 24 6/25/82

. 50,000 3/09/82 s .

- 7(10) s-16 9(10) $2,125,000 5/13/81

~

42,500 1/28/81 S-16 3(10) ,

7,200 1/08/81 5-16 8(09) 25 54,500 .

12/21/79 s-16 ,

10,000 12/21D9 S-16 09.(10) 08(11) 48,003 12/21M9 S-16 '

s-7 24 $1,150,000

~

9/23S6 . .

22 7,000 12/5/75 S-7 s-7 23 -

$900,000 3/27/75 5-7 20 $925,000 10/18/74 i

T W

l e

_ . - _ _ _ _ . _ . . . _ - . . -. _ ._. . _ _ _ _ _ _ _ _ . . _ _ - . _ _ - . _ . _ _ _ _ _ . - _ _ _ _ . - - _ - _ _ - - _ _ _ _ _ . _ .