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
.

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                                                          January 26, 1983 
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     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.
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                                                           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
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                                                            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