EA-96-135 - Innovative Weaponry, Inc.
21st Century Technologies, Inc.
ATTN: Patricia Wilson
2513 East Loop 820 North
Fort Worth, Texas 76118
SUBJECT: ORDER IMPOSING CIVIL MONETARY PENALTY - $2,500
Dear Ms. Wilson:
This is addressed to you as successor licensee to Innovative Weaponry, Inc., and refers to the Answer to Notice of Violation and Reply to Notice of Violation filed October 1, 1996 by your attorney, in response to the Notice of Violation and Proposed Imposition of Civil Penalty (Notice) sent to Innovative Weaponry, Inc. (IWI) by our letter dated May 15, 1996. Our letter and Notice described two violations identified during an NRC investigation conducted between May 9, 1995 and March 22, 1996. This letter is being sent to you as the successor organization to IWI.
To emphasize that management must understand the license and assure that its requirements are met, a civil penalty of $7,500 was proposed.
In your responses you admitted distributing sources from a manufacturer not authorized in the license and distributing "configurations mentioned in the license" [sic], but denied that these were violations of lawful exercise of regulatory authority under the Atomic Energy Act, disagreed with the assessment of the Severity Level, stated that the size of the civil penalty would impose a severe financial hardship on the licensee, argued that NRC standards for imposing penalties are too vague to meet due process standards, and complained that the basic information on which the decision was made has not been made available to the licensee in preparation of its defense.
After consideration of IWI's responses, we have concluded for the reasons given in the Appendix attached to the enclosed Order Imposing Civil Monetary Penalty that the violations occurred as stated and that the civil penalty should be mitigated to $2,500. Accordingly, we hereby serve the enclosed Order on Innovative Weaponry, Inc. imposing a civil monetary penalty in the amount of $2,500.
The NRC's Enforcement Policy provides, ". . . it is not the NRC's intention that the economic impact of a civil penalty be so severe that it puts a licensee out of business (orders, rather than civil penalties, are used when the intent is to suspend or terminate licensed activities) or adversely affects a licensee's ability to safely conduct licensed activities." Therefore, in view of your statement concerning your financial hardship and your suggestion that the NRC should allow payment of the penalty over 18 months, we are prepared to permit you to pay this civil penalty over time. If you make arrangements to pay in installments, interest will be assessed and there may be other administrative charges. If you wish to pay in installments, you are to inform Mr. James Lieberman, Director, Office of Enforcement, within 15 days of the date of this letter, and arrange the terms and conditions of payment.
If you choose to pay the civil penalty in full at this time, Section IV of the enclosed Order provides that payment should be made within 30 days of the date of this Order, by check, draft, money order, or electronic transfer, payable to the Treasurer of the United States and mailed to James Lieberman, Director, Office of Enforcement, U.S. Nuclear Regulatory Commission, One White Flint North, 11555 Rockville Pike, Rockville, MD 20852-2738.
We will review the effectiveness of your corrective actions during a subsequent inspection.
In accordance with 10 CFR 2.790 of the NRC's "Rules of Practice", a copy of this letter and the enclosures will be placed in the NRC's Public Document Room.
Sincerely, James Lieberman, Director Office of Enforcement
Docket No. 030-30266
License No. 30-23697-01E
Enclosure: As Stated
cc: J. Tourtellotte, Esq.
NUCLEAR REGULATORY COMMISSION
In the Matter of ) 21st CENTURY TECHNOLOGIES, INC. ) successor Licensee to ) INNOVATIVE WEAPONRY, INC. ) Docket No. 030-30266 Fort Worth, Texas ) License No. 30-23697-01E ) EA 96-135
Innovative Weaponry, Inc. [of New Mexico] was the former holder of Materials License No. 30-23697-01E issued by the Nuclear Regulatory Commission (NRC or Commission) and which was amended on April 3, 1995 to name Innovative Weaponry of Nevada (Licensee) as the licensee. The license was subsequently amended to change the name to 21st Century Technologies, Inc., and reissued to reflect a move to Fort Worth, Texas. The license authorized the Licensee to distribute luminous gunsights or weapons containing luminous gunsights in accordance with the conditions specified therein.
An investigation of the Licensee's activities was conducted from May 9, 1995 through March 22, 1996. The results of this investigation indicated that the Licensee had not conducted its activities in full compliance with NRC requirements. A written Notice of Violation and Proposed Imposition of Civil Penalty (Notice) was served upon the Licensee by letter dated May 15, 1996. The Notice states the nature of the violations, the provisions of the NRC's requirements that the Licensee had violated, and the amount of the civil penalty proposed for the violations.
The Licensee responded to the Notice in a Reply and an Answer, both dated October 1, 1996. In its responses, the Licensee admitted that the events that constitute the violations occurred, but denied that these were violations of lawful exercise of regulatory authority under the Atomic Energy Act, asserted that the penalty would cause financial hardship, and disagreed with other aspects of the enforcement process.
After consideration of the Licensee's response and the statements of fact, explanation, and argument for mitigation contained therein, the NRC staff has determined, as set forth in the Appendix to this Order, that the violations occurred as stated and that the amount of the proposed penalty for the violations designated in the Notice should be mitigated by $5,000 and a civil penalty of $2,500 imposed.
In view of the foregoing and pursuant to Section 234 of the Atomic Energy Act of 1954, as amended (Act), 42 U.S.C. 2282, and 10 CFR 2.205, IT IS HEREBY ORDERED THAT:
The Licensee pay a civil penalty in the amount of $2,500 within 30 days of the date of this Order, by check, draft, money order, or electronic transfer, payable to the Treasurer of the United States and mailed to James Lieberman, Director, Office of Enforcement, U.S. Nuclear Regulatory Commission, One White Flint North, 11555 Rockville Pike, Rockville, MD 20852-2738.
The Licensee may request a hearing within 30 days of the date of this Order. Where good cause is shown, consideration will be given to extending the time to request a hearing. A request for extension of time must be made in writing to the Director, Office of Enforcement, U.S. Nuclear Regulatory Commission, Washington, D.C. 20555, and include a statement of good cause for the extension. A request for a hearing should be clearly marked as a "Request for an Enforcement Hearing" and shall be addressed to the Director, Office of Enforcement, U.S. Nuclear Regulatory Commission, Washington, D.C. 20555, with a copy to the Commission's Document Control Desk, Washington, D.C. 20555. Copies also shall be sent to the Assistant General Counsel for Hearings and Enforcement at the same address and to the Regional Administrator, NRC Region IV, 611 Ryan Plaza Drive, Suite 400, Arlington, Texas 76011.
If a hearing is requested, the Commission will issue an Order designating the time and place of the hearing. If the Licensee fails to request a hearing within 30 days of the date of this Order (or if written approval of an extension of time in which to request a hearing has not been granted), the provisions of this Order shall be effective without further proceedings. If payment has not been made by that time, the matter may be referred to the Attorney General for collection.
In the event the Licensee requests a hearing as provided above, the issues to be considered at such hearing shall be:
(a) whether the Licensee was in violation of the Commission's requirements as set forth in the Notice referenced in Section II above, and
(b) whether, on the basis of those violations, this Order should be sustained.
FOR THE NUCLEAR REGULATORY COMMISSION James Lieberman, Director Office of Enforcement
Dated at Rockville, Maryland
this 10th day of April 1997
On May 15, 1996, a Notice of Violation and Proposed Imposition of Civil Penalty (Notice) was issued for violations identified during an NRC investigation. Innovative Weaponry, Inc. (Licensee) responded to the Notice on October 1, 1996. The Licensee admitted that the events that were described in the Notice occurred, but denied that these were violations of lawful exercise of regulatory authority under the Atomic Energy Act, asserted that the penalty would cause financial hardship, and disagreed with other aspects of the enforcement process. The NRC's evaluation and conclusion regarding the licensee's requests are as follows:
Restatement of Violations
A. License No. 30-23697-01E authorizes the licensee to distribute SRB Technologies, Inc., Model PRH-800/G/200 sealed light sources.
Contrary to the above, from June to August 1995, the licensee distributed tritium sealed light sources from a manufacturer not authorized in the license. (01013)
B. License Condition 10 of License No. 30-23697-01E authorizes the licensee to distribute sealed light sources in specified gunsights and in specified configurations.
Contrary to the above, from July to September 1995, the licensee distributed tritium sealed light sources in configurations not specified or otherwise authorized in the license. (01023)
These violations represent a Severity Level III problem (Supplement VI).
Civil Penalty - $7,500.
Summary of Licensee's Response to Violations
In its October 1, 1996 "Reply to Notice of Violation," the Licensee admitted that it distributed tritium sealed sources from a manufacturer not mentioned in the license but denied that that was a violation of a lawful exercise of regulatory authority under the Atomic Energy Act of 1954, as amended. The Licensee did not specifically admit or deny the violation of distribution of tritium sealed light sources in configurations not specified or otherwise authorized in the license, but implied admission of that act by use of statements such as "[t]he reason for both actions was inadvertent error" and "[t]he distribution of configurations mentioned [sic] in the license was also made without direct knowledge of corporate management," and further discussed those acts in the context of admitting that the acts occurred. The Licensee denies that either of these activities constitutes a violation of a lawful exercise of regulatory authority under the Atomic Energy Act and relevant case law. The Licensee further argues that the provisions of the license requiring "designation of manufacturers" and "description of the configuration of the gunsights as a condition precedent to distribution" are unlawful because they are beyond the jurisdiction of the NRC to regulate.
In its October 1, 1996 "Answer to Notice of Violation," the Licensee denied the violations to the extent and for the reasons set out in its "Reply to Notice of Violation," and enumerated the following as extenuating circumstances: (1) the NRC lacks jurisdiction, (2) there were no adverse consequences to public health and safety, (3) the alleged acts were not intentional and were not [sic] without prior knowledge of management, (4) the alleged acts were self-identified, (5) management attempted to correct the situation immediately on discovery, (6) the Licensee realized no appreciable profit, (7) no accepted philosophy of enforcement is well served by imposing the civil penalty. In addition, the Licensee contended that the acts are of only minor concern rather than "significant regulatory concern."
NRC Evaluation of Licensee's Response to Violations
The Licensee's Reply specifically admitted that the Licensee had distributed tritium sources from a manufacturer who was not mentioned in the license. As to the second violation, distribution of sources in configurations not authorized, the only logical inference that can be drawn from the language of the October 1, 1996 Reply is that the Licensee also admits the facts of that violation. In addition, at the April 23, 1996 Predecisional Enforcement Conference the Licensee conceded that the events described in the Notice had occurred. The Licensee has not challenged the NRC's findings that the unauthorized distributions occurred and has not provided any facts to support such a challenge. Thus, there is no need to further address the factual determinations.
As to the assertion that the conditions or restrictions contained in the license are unlawful due to their failure to ensure public health and safety, the regulations controlling radioactive materials are promulgated under the Act to protect health and minimize danger to life by assuring that licensees will do what is required. The regulations require that sufficient information concerning the sources and the product be submitted prior to issuance of a license, to demonstrate that the product will meet the safety criteria set forth in the regulations for that type of product. Thus, if a licensee manufactures products in unapproved configurations, the NRC has no way of knowing if the product poses a threat to public health and safety. The provisions concerning the specific source and gunsight models listed in IWI's license were not imposed by the NRC; rather, the list of authorized source models, designation of suppliers of tritium sources, and the specific configurations of gunsights came directly from information submitted by IWI to the NRC during the licensing process.
The thrust of the Licensee's disagreement goes to the agency's jurisdiction and the licensing system promulgated under 10 CFR Part 30. Section 81 of the Atomic Energy Act (AEA or Act) provides in part that a person may not transfer or receive, own, or possess any byproduct material except as authorized pursuant to the AEA.
The NRC's jurisdiction under Section 81 of the Act to regulate use of sealed sources containing byproduct material is long-established. Regulations controlling radioactive materials are promulgated under the Act to protect health and minimize danger to life by endeavering to ensure that licensees will do what is required to prevent adverse impacts on public health and safety. As noted in the General Statement of Policy and Procedure for NRC Enforcement Actions, (NUREG-1600), Section I (Enforcement Policy), licensees are expected to exercise meticulous attention to detail and maintain a high standard of compliance with NRC requirements. This standard applies even in cases such as this, in which no adverse consequences to public health and safety actually occurred in this matter.
Further, regardless of whether violations were committed with or without the knowledge of Licensee management, a licensee committing a violation is subject to enforcement action. In this case, the Licensee did not make a sufficient effort to be aware of the applicable requirements and ensure that they were met. Section VI.B. of the Enforcement Policy states: "Although management involvement, direct or indirect, in a violation may lead to an increase in the civil penalty, the lack of management involvement may not be used to mitigate a civil penalty."
The claim that the Licensee realized no appreciable profit from the transactions is not relevant to the fact that the licensee violated its license. As to whether this civil penalty serves the purposes of the NRC's enforcement program, it clearly does so. In cases such as this, an NRC enforcement action is used, in part, as a deterrent to emphasize the importance of management being aware of license requirements, and where there is a question as to the meaning of a requirement, of the need to seek clarification. If a licensee believes that license conditions are unwarranted, the licensee should seek an amendment, and comply with the license until the amendment is granted.
Summary of Licensee's Request for Mitigation
The Licensee contends that the enforcement action imposes a severe financial hardship on the Licensee, that the NRC standards for imposing civil penalties are too vague to meet standards of due process, and that the penalty should not be imposed because the basic information on which the decision is being made has not been made available to the Licensee in preparation of its defense.
NRC Evaluation of Licensee's Request for Mitigation
The Licensee sought mitigation complaining that the NRC standards for imposing civil penalties are too vague to meet the standards of due process but did not provide further argument or explanation of that claim. The Congress has provided the Commission with the discretion to issue civil penalties of up to $110,000 per day per violation. The NRC has for almost 15 years provided publicly available guidelines for developing enforcement actions, including civil penalties. These guidelines are published in the Enforcement Policy.
As to the Licensee's claim that the basic information on which the action was taken was not made available to the Licensee, although the OI Report had not yet been provided to the Licensee because the Licensee had not paid the required charges, 1. the discussion at the Predecisional Enforcement Conference centered on these violations and how they occurred. Further, during the OI investigation the NRC obtained copies of records from the Licensee, including purchase documents for luminous sources and sales documentation. The nature of the violations cited is such that these documents and the personal knowledge of Licensee employees were clearly the basis for the citations and were available to the Licensee.
The staff has reviewed the assessment of the civil penalty, including the exercise of discretion which escalated the civil penalty to $7,500. In assessing a civil penalty, the NRC weighs both the potential safety significance and the regulatory significance. While the safety concerns in this matter may not be significant, the regulatory concerns are significant because Licensee management failed to apply the meticulous attention to compliance with license conditions that is required of a licensee. While the NRC remains concerned about management involvement in these violations, the civil penalty has been reconsidered in light of the safety significance of the actual violations. The civil penalty is, therefore, being mitigated by $5,000.
As to alleged financial hardship, the NRC's Enforcement Policy provides: "... it is not the NRC's intention that the economic impact of a civil penalty be so severe that it puts a licensee out of business (orders, rather than civil penalties, are used when the intent is to suspend or terminate licensed activities) or adversely affects a licensee's ability to safely conduct licensed activities."
Therefore, to balance these considerations and to be responsive to the potential financial hardship to the Licensee, the NRC will allow the Licensee, if it wishes, to pay the civil penalty in monthly installments.
The NRC has concluded that the violations occurred as stated and that the Licensee provided an adequate basis for mitigation of the civil penalty. However, full mitigation is not warranted because of the importance of emphasizing the role of management in ensuring that it understands regulatory requirements and that these requirements are implemented. Here, the new management did not make sufficient effort to ensure compliance. Consequently, a civil penalty in the amount of $2,500 should be imposed. However, to be responsive to the potential for further financial hardship, the NRC will permit the Licensee to pay the civil penalty in monthly installments.