[Federal Register Volume 60, Number 238 (Tuesday, December 12, 1995)]
[Notices]
[Pages 63742-63745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30174]



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NUCLEAR REGULATORY COMMISSION
[IA 95-058]


Five Star Products, Inc. and Construction Products Research, 
Fairfield, CT and H. Nash Babcock, Order

I

    Five Star Products, Inc. (FSP), is a company located in Fairfield, 
Connecticut, and was formerly known as U.S. Grout Corporation. FSP 
manufactures and sells grout and concrete products to the nuclear 
industry and has done so for about 20 years. Through a holding company, 
Mr. Babcock owns FSP and several related businesses, including 
Construction Products Research, Inc. (CPR), which performs laboratory 
tests of FSP products. Mr. Babcock is Vice-President of FSP and 
President of CPR.

II

    FSP submitted its grout and concrete products to CPR for testing. 
Following the tests, CPR issued certifications that it tested FSP 
products in conformance with certain specifications of the American 
Society for Testing and Materials. FSP subsequently utilized those 
certifications as the basis for certifying that its products satisfied 
Appendix B and customer Purchase Order (PO) requirements. At various 
times since 1980, FSP has advertised and represented to NRC licensees 
that its products are manufactured in accordance with the requirements 
of Appendix B. It has supplied products pursuant to purchase orders 
requiring FSP to meet the requirements of Appendix B, and 10 CFR Part 
21. Licensees who have purchased material from FSP under FSP's 
certification of quality have used the grout and concrete in safety-
related applications and as basic components.
    The Nuclear Regulatory Commission (NRC or Commission) issued 10 CFR 
Part 21 (Part 21) to implement Section 206 of the Energy Reorganization 
Act of 1974. Part 21 imposes, inter alia, evaluation and reporting 
requirements on directors and responsible officers of firms which 
supply basic components of any facility or activity which is licensed 
or otherwise regulated pursuant to the Atomic Energy Act of 1954, as 
amended, or the Energy Reorganization Act of 1974. Basic components are 
structures, systems, or parts in which a defect or failure to comply 
with applicable requirements could create a substantial safety hazard. 
10 CFR 21.3(a). Part 21 is implemented in conjunction with Appendix B, 
which contains the quality assurance (QA) criteria applicable to 
design, fabrication, construction, and testing of safety-related 
structures, systems, and components in commercial nuclear power plants. 
Together, these requirements are intended to assure the safety of 
safety-related components, materials, and services for nuclear power 
plants.
    Section 206 of the Energy Reorganization Act of 1974 requires 
directors and responsible officers of firms constructing, owning, 
operating or supplying the basic components of a facility or activity 
licensed or regulated by the Atomic Energy Act of 1954, as amended, who 
obtain information regarding defects in those basic components, or 
failures of basic components, or of the facility to comply with NRC 
requirements, to notify the NRC of those defects and failures to 
comply. Section 206(d) authorizes the Commission to conduct inspections 
and other enforcement activities necessary to insure compliance with 
that section. 10 CFR 21.41 and 21.51 implement Section 206(d).

III

    The NRC conducts inspections of vendors who supply safety-related 
components pursuant to Appendix B and who supply basic components 
pursuant to Part 21. On August 18, 1992, the NRC began an unannounced 
inspection of FSP, and of its laboratory contractor, CPR, to determine 
the extent to which FSP supplied basic components to NRC licensees, the 
adequacy of FSP's QA Program, the adequacy of CPR's testing of FSP 
products, and the adequacy of FSP products.
    Shortly after the inspection began, Mr. Babcock met with the 
inspection team and questioned the NRC's authority to conduct the 
inspection. Mr. Babcock was presented with two identical letters from 
the NRC staff, dated August 13, 1992, each addressed separately to FSP 
and CPR. The letters outlined the NRC's inspection authority under 10 
CFR Part 21, Section 161o of the Atomic Energy Act of 1954, as amended 
(AEA), and Section 206(d) of the Energy Reorganization Act of 1974, as 
amended (ERA). Despite this, Mr. Babcock continued to question the 
NRC's authority and, throughout the inspection, denied the inspectors 
access to inspect CPR's testing laboratory, which was located in the 
basement of FSP's Fairfield, Connecticut, headquarters, and access to 
inspect CPR's laboratory records.
    During the inspection of August 18 and 19, 1992, the inspection 
team reviewed NRC power reactor licensee POs submitted to Five Star in 
order to determine the scope of FSP's nuclear involvement. The team was 
provided with POs for the period 1988 to 1992. Those POs demonstrate 
that at least seven NRC reactor licensees and one licensee contractor 
had issued POs to FSP for safety-related grout and concrete mix 
products, and had specified compliance with Appendix B and Part 21.
    The inspection team reviewed copies of several NRC licensee audit 
reports of FSP and CPR. These reports documented that NRC licensee 
requests to audit CPR's test laboratory and records were consistently 
denied by FSP. Further, several NRC licensee audit reports found that 
FSP's QA program was not acceptable and did not meet certain 
requirements of Appendix B.
    The NRC inspection team requested copies of all audits performed by 
FSP of CPR to determine CPR's compliance with the quality assurance 
criteria of Appendix B and Part 21. Only one FSP audit of CPR was 
performed, by the FSP QA Manager, and it was provided to the NRC 
inspection team by the FSP QA Manager. The July 31, 1992 audit report 
concluded that CPR's June 10, 1992 QA program was satisfactory. The 
format and most of the language of this report were identical to a 
report of an audit conducted by Toledo Edison, an NRC 

[[Page 63743]]
Part 50 reactor licensee, of FSP's QA program in February 1991. The FSP 
QA Manager later admitted that he had not in fact conducted an audit of 
CPR, and that he had used the Toledo Edison audit report to fabricate 
the July 31, 1992 audit report of CPR.
    On August 19, 1992, the second day of the inspection, Mr. Babcock 
told the inspectors to leave at the end of that day and not return 
until after Labor Day. At 4:45 p.m. that day, Mr. Babcock was presented 
with another letter from the NRC staff which was witnessed by members 
of the inspection team and Mr. Henry Allen of FSP. This letter 
reiterated the legal authority of the NRC to conduct the inspection, 
and notified Mr. Babcock that continued refusals to permit inspection 
of FSP or CPR would be treated as a violation of 10 CFR 21.41, could 
result in enforcement action, and could be subject to treatment as a 
criminal violation in accordance with Sections 161o and 223 of the AEA. 
Notwithstanding this second letter, Mr. Babcock continued to deny the 
NRC inspectors access to the CPR laboratory and to records of the CPR 
laboratory. The inspectors left the site at 5:00 pm as Mr. Babcock had 
requested.
    The inspection team also requested copies of QA manuals for both 
FSP and CPR which would provide the basis to support FSP's 
certifications to licensees that its products were manufactured under 
an appendix B Quality Assurance (QA) program. Copies of these documents 
were not furnished by FSP due to Mr. Babcock's suspension of further 
inspection activities.
    As a result of FSP's and Mr. Babcock's curtailing the inspection, 
the inspection team was unable to review the implementation of FSP's QA 
Program against licensee PO's or to inspect CPR's testing of FSP's 
grout and concrete mix products, and thus was unable to determine 
whether those products were produced, tested and provided in compliance 
with appendix B and part 21. Therefore, the NRC staff could not 
determine whether there was reasonable assurance that those FSP grout 
and concrete mix products were acceptable for use in safety-related 
applications in nuclear power plants.
    Shortly thereafter, the NRC obtained a federal criminal search 
warrant, which was executed on September 1, 1992. Certain documents and 
testimonial evidence were taken.
    Additionally, the NRC Office of Investigations conducted an 
investigation of the allegations leading to and the events surrounding 
the inspection. (OI Case No. 1-92-037). During the course of the OI 
investigation, Mr. Babcock instructed his attorney to forward to the 
NRC a letter dated February 18, 1994, which Mr. Babcock had composed 
and signed. The attorney forwarded the letter, in which Mr. Babcock 
stated: ``We did not deny the NRC inspectors access to the laboratory 
in August 1992. Mr. John S. Ma, a civil engineer on the NRC inspection 
team, was escorted to the lab where he conducted an inspection of the 
test laboratory.'' As indicated above, and as known to Mr. Babcock, no 
NRC inspectors were allowed in the laboratory at any time during the 
August 1992 inspection and, therefore, the statement concerning Mr. 
Ma's access to and inspection of the CPR laboratory is deliberately 
false. The letter was material because it provided incorrect 
information to the NRC on a matter that was under investigation.

IV

    Based on the facts discussed above, the NRC concludes that the 
following violations of NRC requirements occurred:
    A. 10 CFR 50.5, ``Deliberate misconduct'' prohibits any contractor 
(including a supplier or consultant), subcontractor, or any employee of 
a contractor or subcontractor who knowingly provides to any licensee, 
contractor, or subcontractor, components, equipment, materials, or 
other goods or services, that relate to a licensee's activities subject 
to this part, from deliberately submitting to the NRC, a licensee, or a 
licensee's contractor or subcontractor, information that the person 
submitting the information knows to be incomplete or inaccurate in some 
respect material to the NRC.
    Contrary to the above, the Quality Assurance Manager of Five Star 
Products, and Five Star Products through its Quality Assurance Manager, 
prepared an audit report for Five Star Products of the Construction 
Products Research QA Program, dated July 31, 1992, without conducting 
an audit of Construction Products Research, and provided that audit 
report to NRC inspectors during an inspection of Five Star Products on 
August 18-19, 1992, knowing that no such audit had been conducted. This 
audit report was material to the NRC because it was capable of 
influencing its determination of whether the Construction Products 
Research QA Program complied with appendix B, and 10 CFR part 21 
requirements.
    B. Contrary to 10 CFR 50.5, Mr. H. Nash Babcock, the Vice President 
of Five Star Products, Inc. and the President of Construction Products 
Research, prepared and caused to be sent to the NRC a letter, in which 
Mr. Babcock stated that one NRC inspector had been allowed to and did 
in fact inspect the laboratory test facility of Construction Products 
Research on August 19, 1992. In fact, as Mr. Babcock knew, no NRC 
inspector was permitted to inspect the laboratory facilities of 
Construction Products Research during the August 18-19, 1992 
inspection. The letter was material to the NRC because it provided 
information directly related to a matter under investigation by the 
NRC, specifically, whether Mr. Babcock had deliberately denied NRC 
inspectors access to the Construction Products Research test facility 
in violation of NRC requirements.
    C. 10 CFR 21.41 requires that each individual, corporation, 
partnership or other entity subject to the regulations in part 21 shall 
permit duly authorized representatives of the Commission to inspect its 
records, premises, activities, and basic components as necessary to 
effectuate the purposes of part 21.
    10 CFR 21.51(b) requires, in part, that each individual, 
corporation, partnership or other entity subject to the regulations in 
part 21 must afford the Commission, at all reasonable times, the 
opportunity to inspect records pertaining to basic components.
    Contrary to the above, on August 18 and 19, 1992, Five Star 
Products, Inc., through H. Nash Babcock, Vice President of Five Star 
Products, and Construction Products Research, Inc., through H. Nash 
Babcock, President of Construction Products Research, denied NRC 
inspectors access necessary to conduct an inspection of Five Star 
Products' contracted laboratory test facility, Construction Products 
Research, for, and of Construction Products Research records of test 
data associated with, safety-related grout and concrete mix products 
sold by Five Star Products to nuclear power plants licensed under 10 
CFR part 50, pursuant to purchase orders specifying compliance with 
appendix B and 10 CFR part 21. Mr. Babcock also refused to allow NRC 
inspectors reasonable access to CPR laboratory personnel. By 
terminating the inspection, Mr. Babcock also prevented NRC inspectors 
from completing their examination of Five Star records.

V

    The NRC and its licensees must be able to rely on licensee 
contractors and officers of licensee contractors, including providers 
of safety-related basic components such as Five Star Products, Inc., 
and suppliers of services associated with basic components, such as 
Construction Products Research, Inc., to comply with NRC requirements, 

[[Page 63744]]
including the requirements to provide accurate and complete information 
in all material respects and the requirements to permit inspection of 
their records, premises, activities and components. Five Star Products' 
and Mr. H. Nash Babcock's violations of 10 CFR 21.41, 21.51(b), and 
50.5 demonstrate that Five Star Products and its Vice President, Mr. 
Babcock, are unable or unwilling to comply with NRC requirements to 
permit inspections and to provide complete and accurate information to 
the NRC in all material respects. In addition, they did not permit NRC 
licensees access to CPR's facilities in order to conduct necessary 
audits. Construction Products Research's and Mr. Babcock's violation of 
10 CFR 21.41, 21.51(b), and 50.5 demonstrate that Construction Products 
Research and its President, Mr. Babcock, are unable or unwilling to 
comply with NRC requirements to permit inspections by the NRC or its 
licensees and to provide complete and accurate information to the NRC 
in all material respects. Consequently, I lack the requisite reasonable 
assurance that the NRC and NRC licensees can rely on the statements or 
certifications of Five Star Products, Inc., Construction Products 
Research, Inc., or Mr. H. Nash Babcock, that basic components of Five 
Star Products, Inc. or associated services of Construction Products 
Research, Inc. meet NRC requirements necessary to protect public health 
and safety. Therefore, I find that the public health, safety, and 
interest require that Five Star Products, Inc., Construction Products 
Research, Inc. and Mr. Babcock (1) be prohibited from providing 
structures, systems, and components subject to a procurement contract 
specifying compliance with Appendix B, or basic components subject to a 
procurement contract specifying compliance with 10 CFR Part 21, and (2) 
must respond to this Order and take certain other actions if they 
desire to provide such products to NRC licensees who specify that they 
must meet the requirements of Appendix B, or 10 CFR Part 21 1.

    \1\ This does not prohibit FSP from supplying commercial grade 
materials to NRC licensees, or CPR from testing and certifying 
commercial grade materials to NRC licensees, provided that no 
representations are made with regard to FSP products being qualified 
for safety-related applications in nuclear power plants based on 
compliance with 10 CFR Part 50, Appendix B, or that 10 CFR Part 21 
requirements have been met.
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VI

    Accordingly, pursuant to Sections 103, 161b, 161i, 161o, 182, and 
186 of the Atomic Energy Act of 1954, as amended, Section 206 of the 
Energy Reorganization Act, as amended, and the Commission's regulations 
at 10 CFR 2.202, 10 CFR Parts 21 and 50, and 10 CFR 50.5, IT IS HEREBY 
ORDERED, THAT:
    1. Until Five Star Products, Inc., Construction Products Research, 
Inc., H. Nash Babcock, and any concern which is owned, controlled, 
operated or managed by H. Nash Babcock, satisfy the provisions of 
paragraph 2., below, they are prohibited from:
    A. providing or supplying structures, systems, or components, 
including grout and concrete, subject to a procurement contract 
specifying compliance with Appendix B; and
    B. providing or supplying basic components, including grout and 
concrete, subject to a procurement contract specifying that the 
contract is subject to the requirements of 10 CFR Part 21;
    2.A. If Five Star Products, Inc., Construction Products Research 
Inc., or any concern owned, controlled, operated or managed by H. Nash 
Babcock, desires to lift the prohibition specified in paragraph 1, 
above, then Five Star Products, Inc., Construction Products Research, 
Inc., H. Nash Babcock or the concern owned, controlled, operated, or 
managed by H. Nash Babcock, shall, at least 90 days prior to the date 
it desires to have the prohibition lifted:
    (1) Advise the NRC of that intent in writing;
    (2) Respond in writing under oath or affirmation specifically as to 
each of the violations listed in Section IV, including: (a) An 
admission or denial of the alleged violation, (b) the reasons for the 
violation if admitted, and if denied, the reasons why, (c) the 
corrective steps that have been taken and the results achieved, (d) the 
corrective steps that will be taken to avoid further violations, and 
(e) the date when full compliance will be achieved;
    (3) Agree in writing, under oath or affirmation, and in fact, to 
permit the NRC, NRC licensees, and contractors performing QA functions 
for such licensees, to inspect the records, premises, basic components 
and activities of Five Star Products, Inc., of Construction Products 
Research, Inc., or of any concern owned, controlled, operated or 
managed by H. Nash Babcock that desires to provide safety related 
products or basic components, or to perform tests to support claims 
that those products or components and those testing services meet the 
standards of Appendix B and 10 CFR Part 21, and to signify in writing a 
willingness to do so in the future;
    (4) Agree in writing under oath or affirmation to demonstrate and 
in fact to demonstrate that those basic components and services 
associated with basic components meet the standards of Appendix B by 
having tests performed by an independent third party and having that 
third party provide copies of the results of those tests directly to 
the NRC; and
    (5) The officers, managers, and supervisors of Five Star Products, 
Inc. and Construction Products Research, Inc. provide statements that 
they understand that the activities and records of the organization are 
subject to NRC inspection, that communications with the NRC must be 
complete and accurate, and that any employee may provide information to 
the NRC at any time without fear of retribution; and
    B. When all conditions of paragraph 2.A. above have been satisfied, 
and the NRC has conducted inspections of the QA program and Part 21 
program of Five Star Products, Inc., Constructions Products Research, 
Inc., and any concern owned, controlled, operated, or managed by H. 
Nash Babcock, and any necessary corrective action has been completed, 
the prohibition of paragraph 1, above, will be lifted in writing.
    The Director, Office of Enforcement, may, in writing, relax or 
rescind any of the above conditions upon demonstration by Five Star 
Products, Inc., Construction Products Research, Inc., and Mr. H. Nash 
Babcock of good cause.

VII

    In accordance with 10 CFR 2.202, Five Star Products, Inc., 
Construction Products Research, Inc., and H. Nash Babcock, or any other 
person adversely affected by the Order, may submit an answer to this 
Order, and may request a hearing on this Order, within 20 days of the 
date of this Order. The answer may consent to this Order. Unless the 
answer consents to this Order, the answer shall, in writing and under 
oath or affirmation, specifically admit or deny each allegation or 
charge made in this Order and shall set forth the matters of fact and 
law on which Five Star Products, Inc., Construction Products Research, 
Inc., and H. Nash Babcock, and any other person adversely affected 
relies and the reasons as to why the Order should not have been issued. 
Any answer or request for a hearing shall be submitted to the 
Secretary, U.S. Nuclear Regulatory Commission, Attn: Chief, Docketing 
and Service Section, Washington, DC 20555. Copies also shall be sent to 
the Director, Office of Enforcement, U.S. Nuclear Regulatory 
Commission, Washington DC 20555, to 

[[Page 63745]]
the Assistant General Counsel for Hearings and Enforcement and the 
Director, Office of Nuclear Reactor Regulation, both at the same 
address. If a person other than Five Star Products, Inc., Construction 
Products Research, Inc., or H. Nash Babcock requests a hearing, that 
person shall set forth with particularity the manner in which his or 
her interest is adversely affected by this Order and shall address the 
criteria set forth in 10 CFR 2.714(d).
    If a hearing is requested by Five Star Products, Inc., Construction 
Products Research, Inc., H. Nash Babcock, or any other person whose 
interest is adversely affected, the Commission will issue an Order 
designating the time and place of any hearing. If a hearing is held, 
the issue to be considered at such hearing shall be whether this Order 
should be sustained. In the absence of any request for hearing, the 
provisions specified in Section VI above shall be effective and final 
20 days from the date of this Order without further order or 
proceedings.

    Dated at Rockville, Maryland this 1st day of December 1995.

    For the Nuclear Regulatory Commission.
James L. Milhoan,
Deputy Executive Director for Nuclear Reactor Regulation, Regional 
Operations and Research.
[FR Doc. 95-30174 Filed 12-11-95; 8:45 am]
BILLING CODE 7590-01-P