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Information Notice No. 83-01: Ray Miller, Inc.
SSINS No.: 6835 IN 83-01 UNITED STATES NUCLEAR REGULATORY COMMISSION OFFICE OF INSPECTION AND ENFORCEMENT WASHINGTON, D. C. 20555 January 26, 1983 Information Notice No. 83-01: RAY MILLER, INC. Addressees: All holders of a nuclear power reactor or fuel facility operating license (OL) or construction permit (CP). Purpose: This information notice is provided as an early notification of a potentially significant problem pertaining to fraudulent products that may have been sold to nuclear industry companies by Ray Miller, Inc. This problem may affect both PWR and BWR facilities. The Nuclear Regulatory Commission staff is reviewing the problem and its effects. If the evaluation so indicates, the NRC may request explicit licensee or CP holder action. In the interim, we expect the addressees of this information notice to review the information herein for applicability to their facilities. No specific action or response is required at this time. Description of Circumstances: A. Background During November 1982, the Nuclear Regulatory Commission became aware that Ray Miller, Inc., Charleston, West Virginia had been systematically defrauding its customers, including some nuclear industry companies, by marketing products under false pretense, i.e., the markings on cheaper, lower quality products were altered to make them appear to be of higher quality. Former company officers pleaded guilty in the US District Court in Charleston, West Virginia to 10 felonies: six counts of mail fraud and four counts of wire fraud. Ray Miller, Inc. was a New Jersey corporation with its main office located in West Caldwell, New Jersey and with branch offices in Charleston, West Virginia; Decatur, Georgia; Buffalo, New York; and Skokie, Illinois. The Ray Miller office in Charleston, West Virginia was stated to be the only office with equipment capable of making alterations of markings on materials. The firm had been under investigation by special FBI agents for three years before prosecution by the Office of U.S. Attorney, Charleston, West Virginia. 8212060358 . IN 83-01 January 26, 1983 Page 2 of 4 The precise number of nuclear-related businesses, that may have been defrauded by Ray Miller, Inc. remains an unknown. Records are incomplete and the situation is further complicated by the firm ceasing to operate and filing for reorganization under Chapter 11 of the bankruptcy statutes. An Assistant U.S. Attorney has determined that Ray Miller may have shipped substandard products to at least 125 companies in the 19-year period before the FBI began its probe in July 1979. Under the terms of the plea agreement, Ray Miller, Inc. is to notify, by February 1, 1983, all companies with which it had business dealings, concerning the firm's fraudulent practices. Some of the nuclear industry companies appearing on an FBI-generated list of Ray Miller customers for the year 1979 include Babcock and Wilcox, Combustion Engineering, Goodyear Atomic, Tennessee Valley Authority, Virginia Electric and Power (VEPCO), and Allied Chemical (at Barnwell). VEPCO and Barnwell are aware of the Ray Miller problem. VEPCO has placed suspect fraudulent material, which had not been installed, on hold. B. Discussion Specifically, the scheme to defraud as practiced by Ray Miller, Inc. from approximately 1960 to 1979 was exposed by an extensive investigation, conducted by the Federal Bureau of Investigation. The primary practices which formed that scheme, as detailed by the FBI, are as follows 1. Markings on pipes and nipples indicating the foreign country where the product was manufactured were removed and the pipes and nipples were sold as domestic-made products. 2 Stainless steel (304 and 316) couplings, flanges, and bushings, having standard carbon content were altered by imprinting an "L", making the marking on couplings, flanges and bushings appear as low carbon content materials. 3. Falsely notarized documents were prepared with billings, certifying that the materials shipped were of low carbon content when in fact they were not. 4. Welded and drawn tubing was altered by removing the markings "WD" from this product and it was sold as seamless tubing. The Ray Miller records were made available to the NRC after the company officers who pleaded guilty were sentenced on December 23, 1982. On January 6 and 7; 1983, members of the NRC met with the FBI and the Assistant U.S. Attorney in Charleston, West Virginia to discuss the Ray Miller, Inc. case and to review a sample of the 29 boxes of records currently in the custody of the FBI. These records cover the period from 1975 to 1979. After 1979 Ray Miller, Inc. apparently ceased its fraudulent practices. The NRC is checking on the availability of records that pre-date 1975. . IN 83-01 January 26, 1983 Page 3 of 4 During the sampling of records by the NRC, the following additional documentation of product substitution was identified: machined items were sold as forged ones, and materials with a low capacity to withstand pressure, i.e., 150 psi pipe plugs, were sold as materials capable of withstanding much greater pressures, e.g., 3000 psi pipe plugs. Some of the invoices reviewed by NRC representatives and used as undeniable evidence by the U.S. Attorney's Office, were found to actually have the written notation, "Remark", indicating product fraud. Primarily, the NRC representatives attempted to ascertain the extent that Ray Miller's fraudulent practices may have impacted nuclear-related companies. Based on a sampling of the records, the NRC staff reached the following very general conclusions: 1. It appears that Ray Miller, Inc. supplied products to only a few companies directly involved in the nuclear power industry. However, the full extent to which the firm's products may be used in the nuclear industry is not known, since these products were sold to many jobbers and distributors. 2. Most shipments which were received directly by nuclear-related businesses were relatively small. 3. Generally, only a small portion of Ray Miller products purchased by nuclear industry companies appears to be fraudulent. A search of the License Event Report file has been conducted by the National Science Information Center (Oak Ridge, Tennessee) for the NRC and no instances were identified in which nuclear facilities have reported deficiencies attributed to Ray Miller, Inc. materials. C. Guidance Enclosed for your information and appropriate action is a list from the Charleston office of Ray Miller's customers in 1979. As previously noted, this list resulted from an FBI investigation and may not be all inclusive, since orders made through other Ray Miller branch offices were sometimes filled by the Charleston office. A composite list of customers for other years is not available. Therefore, the NRC staff suggests that, like VEPCO, other nuclear industry companies isolate suspect Ray Miller products which may have been received and prevent the further installation of such materials until more information is obtained. Efforts are continuing to coordinate resources from various sectors of the nuclear industry and DOE to provide a detailed examination of all Ray Miller records known to exist. It is conjectured that these efforts will yield useful information for . IN 83-01 January 4, 1983 Page 4 of 4 placing "bounds" on the types of fraudulent materials shipped and identifying a more comprehensive list of buyers who may have received these materials. Edward L. Jordan Director Division of Emergency Preparedness and Engineering Response Office of Inspection and Enforcement Technical Contact: R. M. Young, IE 301-492-9672 Attachments: 1. List of Ray Miller Customers for 1979 2. List of Recently Issued IE Information Notices
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