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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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