FirstEnergy Fined $28 Million for Hiding Davis-Besse Damage from NRC

For its "misleading conduct" and "brazen arrogance" that may have put Davis-Besse Nuclear Power Station on the brink of a meltdown several years ago, FirstEnergy Nuclear Operating Co. (FENOC) has agreed to pay the government a $28 million fine, the largest ever levied against a nuclear plant operator.

The fine is part of a plea agreement with the Department of Justice which has been building a case with other agencies against FENOC since August 2002 that allows FENOC to avoid prosecution, U.S. Attorney Gregory White said at a press conference today in Cleveland.

In a related matter, White announced that the Department of Justice has charged two former FENOC employees and one former contractor for allegedly misleading the Nuclear Regulatory Commission (NRC) about the conditions at the plant in late 2001.

A five-count indictment alleges that David Geisen, Andrew Siemaszko who was the "whistleblower" in the case and Rodney Cook prepared and provided false statements to NRC assuring the agency that past inspections of Davis-Besse were enough to keep the plant operating safely until February or March of 2002.

If convicted, the three men face up to 5 years in a federal prison and a $250,000 fine.

Officials from the Justice Department, NRC and the U.S. Attorney's Office for the Northern District of Ohio told reporters today that the $28 million fine and three indictments should send a clear message to nuclear plant operators about their responsibility to be honest with regulators when reporting plant conditions.

"[I]t does not pay to lie to the NRC," said David Uhlmann, chief of the Environment and Natural Resources Division of the Justice Department's Environmental Crimes Section.

FENOC, which says its has dramatically improved the safety culture at Davis-Besse in the wake of the incident a claim echoed by NRC officials at the press conference "accepts full responsibility for the failure to accurately communicate with the NRC," it said in a statement. FENOC is a subsidiary of Akron-based FirstEnergy Corp.

"FENOC regrets the significant performance deficiencies that led to the reactor head issue and accepts full responsibility for the failure to accurately communicate with the NRC. We have learned much from this experience, and FENOC is a better and stronger company today than in 2001 when this occurred," FENOC President and Chief Nuclear Officer Gary Leidich said. "The agreement closes an important chapter on the Davis-Besse reactor head issue for the company. FENOC will continue to focus on safe, reliable plant operations, and do nothing to retreat from its recovery nor erode the trust it has regained."

Brink of Disaster?

The plea agreement and indictment announced today stem from the alleged actions of FENOC employees in late 2001.

In August 2001, NRC issued a bulletin requiring operators of nuclear plants with pressurized water reactors which heat water to approximately 600 F through the process of nuclear fission to report on their plant's susceptibility to cracking, the steps they had taken to detect it and their plans for addressing the problem in the future.

The bulletin came after some plants' pressurized water reactors in the 1990s started to develop cracks where the nozzles were welded to the reactor vessel head. The cracking, according to a Department of Justice news release, could lead to "a potentially serious accident that would stress the plants' safety systems."

In the months following the bulletin, FENOC submitted five letters to NRC, arguing that its past inspections were adequate to assure that Davis-Besse could safely operate until February or March 2002, at which time the plant had a prescheduled shutdown.

The indictment charges that in order to persuade NRC that Davis-Besse was safe to operate until the prescheduled shutdown, FENOC engineers and contractors including Geisen, Siemaszko and Cook prepared and submitted false and misleading responses to NRC's bulletin and concealed material information, eventually persuading NRC that Davis-Besse was safe to continue operation until Feb. 15, 2002.

Upon the scheduled shutdown in March 2002, workers discovered a pineapple-sized cavity in the head of the reactor vessel at Davis-Besse. Subsequent analysis showed that this hole was the result of corrosive reactor coolant leaking through a nozzle crack.

When reporters today asked Martin Virgilio, NRC's deputy executive for materials, research, state and compliance programs, if the hole in the reactor vessel head posed a threat to the public at the time, Virgilio answered, "yes."

Although Virgilio said he believes Davis-Besse's safety systems if functioning properly would have averted a disaster, he said the hole in the reactor vessel head was "the first step in a series of things that could happen" to cause a major accident at the plant.

FENOC Must Not Pass Cost of Fine to Utility Customers

As part of the terms of the agreement between the Department of Justice and FENOC, the company admits that the government can prove that its employees, acting on behalf of FENOC, knowingly made false representations to NRC in an attempt to persuade NRC that Davis-Besse was safe to operate beyond Dec. 31, 2001.

One of a number of other stipulations in the plea agreement is that the company may not pass the financial hit it takes from the $28 million fine on to its utility customers.

The agreement was structured so the $28 million "comes out of the pocket of FENOC, not the pockets of its customers," Uhlmann said.

The agreement stipulates FENOC will pay more than $23 million in fines and will spend an additional $4.3 million on community service projects.

The projects include a wetlands restoration project, a project aimed at developing energy-efficient technologies at the University of Toledo College of Engineering and a project for the Northern Ohio Chapter of Habitat for Humanity for the construction of EPA Energy Star-certified homes.

Prasoon Goyal, a former design engineer for FENOC, also accepted and entered into a deferred prosecution agreement with the government.

For more on previous enforcement actions taken against FENOC Nuclear Operating Co., read "Former FirstEnergy Employees Banished from Nuclear Industry." For more on safety challenges at Davis-Besse, read "Davis-Besse: A Plan for Change or a Worst-Case Scenario?"

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