United States Nuclear Regulatory Commission - Protecting People and the Environment

Information Notice No. 93-73: Criminal Prosecution of Nuclear Suppliers for Wrongdoing

                                 UNITED STATES
                         NUCLEAR REGULATORY COMMISSION
                     OFFICE OF NUCLEAR REACTOR REGULATION
                            WASHINGTON, D.C.  20555

                              September 15, 1993


NRC INFORMATION NOTICE 93-73: CRIMINAL PROSECUTION OF NUCLEAR SUPPLIERS
                              FOR WRONGDOING


Addressees

All NRC licensees.

Purpose

The U.S. Nuclear Regulatory Commission (NRC) is issuing this information
notice to inform addressees of the results of the criminal prosecutions of two
cases of wrongdoing that the NRC staff referred to the U.S. Department of
Justice (DOJ).  Licensees and their suppliers are also reminded of the
penalties that could result from the intentional violation of Federal
regulatory requirements and criminal statutes.  In particular, suppliers,
licensees, and individual employees could be subject to criminal prosecution
by the DOJ if they intentionally violate Federal regulatory requirements.  It
is expected that recipients will review the information notice and consider
actions, as appropriate, to avoid similar problems.  However, suggestions
contained in this information notice are not NRC requirements; therefore, no
specific action or written response is required.

Description of Circumstances

Case 1:  In May of 1993, the president and vice president/manager of Satin
American Corporation were sentenced in United States District Court (District
of Connecticut) on criminal charges; specifically, Section 371 of Title 18 of
the United States Code (18 U.S.C. 371), "Conspiracy to Traffic in Goods
Bearing Counterfeit Marks."  They had pled guilty to participating in a
conspiracy from 1985 to 1987 in which circuit breakers and related equipment
were refurbished at their Shelton, Connecticut, facility.  This equipment was
sold to various NRC licensees and others bearing counterfeit nameplates made
to look like those from the original manufacturers.  The Satin American
president was sentenced to 4 years of imprisonment, which was suspended, and
3 years probation.  The conditions of probation were restitution, a $250,000
fine, 400 hours of community service each year of probation, and barring of
the president, Satin American Corporation, and any related or successor
companies controlled by him from engaging in nuclear safety-related business
for 5 years.  The Satin American vice president/manager was sentenced to 
3 years of imprisonment, also suspended with 3 years probation, 200 hours of
community service each year of probation, a $5,000 fine, and he was barred
from nuclear safety-related business for 3 years.  Information on the
associated equipment problems can be found in IN 89-45 "Low-Voltage Metalclad

9309100054.

                                                            IN 93-73
                                                            September 15, 1993
                                                            Page 2 of 3


Power Circuit Breakers Refurbished with Substandard Parts," and its
Supplements 1 and 2.

Case 2:  On November 6, 1992, the president of J and S Machine and Valve and 
former partner in Coffeyville Valve, Incorporated, was indicted by a grand
jury in Tulsa, Oklahoma, for 11 counts citing violations of 18 U.S.C. 371,
2320, 1341, and 1343.  These counts included conspiracy, copyright
infringement, mail fraud, and wire fraud.  The defendant was alleged to have
refurbished used valves and affixed counterfeit Crane Company labels in an
effort to mislead customers, including NRC licensees, to believe they were
receiving unused valves manufactured by Crane.  On March 16, 1993, the
defendant pled guilty to charges of conspiracy to traffic in counterfeit goods
in violation of 18 U.S.C. 371.  On May 18, 1993, in United States District
Court (Northern District of Oklahoma), the defendant was found guilty. 
Imposition of sentence was suspended, but the defendant was placed on
probation for 3 years and fined $15,000.  Information can be found in 
IN 92-56, "Counterfeit Valves in the Commercial Grade Supply System."

Discussion

All personnel involved in NRC-regulated activities, including licensees,
suppliers, and their employees, have a responsibility to comply with
applicable NRC regulatory requirements and other Federal laws.  The NRC
demands compliance and will seek criminal prosecution of wrongdoing in cases
of willful violations of these requirements.  As evidenced by the cases cited
herein, criminal sanctions may include imprisonment, fines, restitution of
monies, and rendering of community services.

In addition, the "Deliberate Misconduct" provisions, in Title 10 of the
Code of Federal Regulations [10 CFR 30.10, 40.10, 50.5, 61.9(b), 70.10, and
72.12] allow the NRC to take direct enforcement action against suppliers
and/or their responsible officers and/or their employees for deliberately
causing a licensee to be in violation of Commission regulations or for
providing false information to licensees or the Commission concerning licensed
activities.

Furthermore, as indicated in numerous NRC generic communications, in addition
to bearing counterfeit markings, much of the equipment in cases such as the
ones cited above has been found to have been sold in unsatisfactory condition,
or to contain substandard parts, manufacturing processes or workmanship.  Some
of this equipment has failed in service or testing.  Inasmuch as some of this
equipment is sold as basic components as defined in 10 CFR Part 21, "Reporting
of Defects and Noncompliance," and some of it is represented as new and
deviations in the equipment are deliberately not disclosed to the purchasers,
directors or responsible officers of suppliers of such equipment could also be
subject to civil penalties as described in 10 CFR 21.61.  In addition, as
provided in Section 21.62 of the revision of 10 CFR Part 21, published
November 24, 1992, criminal sanctions could be imposed in accordance with
Section 223 of the Atomic Energy Act of 1954, as amended.  Although not.

                                                            IN 93-73
                                                            September 15, 1993
                                                            Page 3 of 3


required by this notice, addressees may wish to distribute copies of this
information notice to their employees and suppliers.

This information notice requires no specific action or written response.  If
you have any questions about the information in this notice, please contact
one of the technical contacts listed below, the appropriate Office of Nuclear
Reactor Regulation project manager, or the appropriate regional office.  

                                    /S/'D BY BKGRIMES


                                    Brian K. Grimes, Director
                                    Division of Operating Reactor Support
                                    Office of Nuclear Reactor Regulation

Technical contacts:  Stephen D. Alexander, NRR
                     (301) 504-2995

                     Ronald K. Frahm, Jr., NRR
                     (301) 504-2986

                     Joseph J. Petrosino, NRR           
                     (301) 504-2979

                     Kevin M. Ramsey, NMSS
                     (301) 504-2534

Attachments:  
1.  List of Recently Issued NMSS Information Notices
2.  List of Recently Issued NRC Information Notices
.
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