[Federal Register Volume 62, Number 78 (Wednesday, April 23, 1997)]
[Notices]
[Pages 19816-19818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-10524]


=======================================================================
-----------------------------------------------------------------------

NUCLEAR REGULATORY COMMISSION

[Docket No. 030-30266; License No. 30-23697-01E EA 96-135]


21st Century Technologies, Inc. successor Licensee to Innovative 
Weaponry, Inc., Fort Worth, Texas, Order Imposing Civil Monetary 
Penalty

I

    Innovative Weaponry, Inc. [of New Mexico] was the former holder of 
Materials License No. 30-23697-01E issued by the Nuclear Regulatory 
Commission (NRC or Commission) and which was amended on April 3, 1995 
to name Innovative Weaponry of Nevada (Licensee) as the licensee. The 
license was subsequently amended to change the name to 21st Century 
Technologies, Inc., and reissued to reflect a move to Fort Worth, 
Texas. The license authorized the Licensee to distribute luminous 
gunsights or weapons containing luminous gunsights in accordance with 
the conditions specified therein.

II

    An investigation of the Licensee's activities was conducted from 
May 9, 1995 through March 22, 1996. The results of this investigation 
indicated that the Licensee had not conducted its activities in full 
compliance with NRC requirements. A written Notice of Violation and 
Proposed Imposition of Civil Penalty (Notice) was served upon the 
Licensee by letter dated May 15, 1996. The Notice states the nature of 
the violations, the provisions of the NRC's requirements that the 
Licensee had violated, and the amount of the civil penalty proposed for 
the violations.
    The Licensee responded to the Notice in a Reply and an Answer, both 
dated October 1, 1996. In its responses, the Licensee admitted that the 
events that constitute the violations occurred, but denied that these 
were violations of lawful exercise of regulatory authority under the 
Atomic Energy Act, asserted that the penalty would cause financial 
hardship, and disagreed with other aspects of the enforcement process.

III

    After consideration of the Licensee's response and the statements 
of fact, explanation, and argument for mitigation contained therein, 
the NRC staff has determined, as set forth in the Appendix to this 
Order, that the violations occurred as stated and that the amount of 
the proposed penalty for the violations designated in the Notice should 
be mitigated by $5,000 and a civil penalty of $2,500 imposed.

IV

    In view of the foregoing and pursuant to Section 234 of the Atomic 
Energy Act of 1954, as amended (Act), 42 U.S.C. 2282, and 10 CFR 2.205, 
It is hereby ordered that:

    The Licensee pay a civil penalty in the amount of $2,500 within 
30 days of the date of this Order, by check, draft, money order, or 
electronic transfer, payable to the Treasurer of the United States 
and mailed to James Lieberman, Director, Office of Enforcement, U.S. 
Nuclear Regulatory Commission, One White Flint North, 11555 
Rockville Pike, Rockville, MD 20852-2738.

V

    The Licensee may request a hearing within 30 days of the date of 
this Order. Where good cause is shown, consideration will be given to 
extending the time to request a hearing. A request

[[Page 19817]]

for extension of time must be made in writing to the Director, Office 
of Enforcement, U.S. Nuclear Regulatory Commission, Washington, D.C. 
20555, and include a statement of good cause for the extension. A 
request for a hearing should be clearly marked as a ``Request for an 
Enforcement Hearing'' and shall be addressed to the Director, Office of 
Enforcement, U.S. Nuclear Regulatory Commission, Washington, D.C. 
20555, with a copy to the Commission's Document Control Desk, 
Washington, D.C. 20555. Copies also shall be sent to the Assistant 
General Counsel for Hearings and Enforcement at the same address and to 
the Regional Administrator, NRC Region IV, 611 Ryan Plaza Drive, Suite 
400, Arlington, Texas 76011.
    If a hearing is requested, the Commission will issue an Order 
designating the time and place of the hearing. If the Licensee fails to 
request a hearing within 30 days of the date of this Order (or if 
written approval of an extension of time in which to request a hearing 
has not been granted), the provisions of this Order shall be effective 
without further proceedings. If payment has not been made by that time, 
the matter may be referred to the Attorney General for collection.
    In the event the Licensee requests a hearing as provided above, the 
issues to be considered at such hearing shall be:

    (a) Whether the Licensee was in violation of the Commission's 
requirements as set forth in the Notice referenced in Section II above, 
and
    (b) Whether, on the basis of those violations, this Order should be 
sustained.

    Dated at Rockville, Maryland this 10th day of April 1997.

    For the Nuclear Regulatory Commission.
James Lieberman,
Director, Office of Enforcement.

Appendix--Evaluation and Conclusion

    On May 15, 1996, a Notice of Violation and Proposed Imposition 
of Civil Penalty (Notice) was issued for violations identified 
during an NRC investigation. Innovative Weaponry, Inc. (Licensee) 
responded to the Notice on October 1, 1996. The Licensee admitted 
that the events that were described in the Notice occurred, but 
denied that these were violations of lawful exercise of regulatory 
authority under the Atomic Energy Act, asserted that the penalty 
would cause financial hardship, and disagreed with other aspects of 
the enforcement process. The NRC's evaluation and conclusion 
regarding the licensee's requests are as follows:

Restatement of Violations

    A. License No. 30-23697-01E authorizes the licensee to 
distribute SRB Technologies, Inc., Model PRH-800/G/200 sealed light 
sources.
    Contrary to the above, from June to August 1995, the licensee 
distributed tritium sealed light sources from a manufacturer not 
authorized in the license. (01013)
    B. License Condition 10 of License No. 30-23697-01E authorizes 
the licensee to distribute sealed light sources in specified 
gunsights and in specified configurations.
    Contrary to the above, from July to September 1995, the licensee 
distributed tritium sealed light sources in configurations not 
specified or otherwise authorized in the license. (01023)
    These violations represent a Severity Level III problem 
(Supplement VI). Civil Penalty--$7,500.

Summary of Licensee's Response to Violations

    In its October 1, 1996 ``Reply to Notice of Violation,'' the 
Licensee admitted that it distributed tritium sealed sources from a 
manufacturer not mentioned in the license but denied that that was a 
violation of a lawful exercise of regulatory authority under the 
Atomic Energy Act of 1954, as amended. The Licensee did not 
specifically admit or deny the violation of distribution of tritium 
sealed light sources in configurations not specified or otherwise 
authorized in the license, but implied admission of that act by use 
of statements such as ``[t]he reason for both actions was 
inadvertent error'' and ``[t]he distribution of configurations 
mentioned [sic] in the license was also made without direct 
knowledge of corporate management,'' and further discussed those 
acts in the context of admitting that the acts occurred. The 
Licensee denies that either of these activities constitutes a 
violation of a lawful exercise of regulatory authority under the 
Atomic Energy Act and relevant case law. The Licensee further argues 
that the provisions of the license requiring ``designation of 
manufacturers'' and ``description of the configuration of the 
gunsights as a condition precedent to distribution'' are unlawful 
because they are beyond the jurisdiction of the NRC to regulate.
    In its October 1, 1996 ``Answer to Notice of Violation,'' the 
Licensee denied the violations to the extent and for the reasons set 
out in its ``Reply to Notice of Violation,'' and enumerated the 
following as extenuating circumstances: (1) The NRC lacks 
jurisdiction, (2) there were no adverse consequences to public 
health and safety, (3) the alleged acts were not intentional and 
were not [sic] without prior knowledge of management, (4) the 
alleged acts were self-identified, (5) management attempted to 
correct the situation immediately on discovery, (6) the Licensee 
realized no appreciable profit, (7) no accepted philosophy of 
enforcement is well served by imposing the civil penalty. In 
addition, the Licensee contended that the acts are of only minor 
concern rather than ``significant regulatory concern.''

NRC Evaluation of Licensee's Response to Violations

    The Licensee's Reply specifically admitted that the Licensee had 
distributed tritium sources from a manufacturer who was not 
mentioned in the license. As to the second violation, distribution 
of sources in configurations not authorized, the only logical 
inference that can be drawn from the language of the October 1, 1996 
Reply is that the Licensee also admits the facts of that violation. 
In addition, at the April 23, 1996 Predecisional Enforcement 
Conference the Licensee conceded that the events described in the 
Notice had occurred. The Licensee has not challenged the NRC's 
findings that the unauthorized distributions occurred and has not 
provided any facts to support such a challenge. Thus, there is no 
need to further address the factual determinations.
    As to the assertion that the conditions or restrictions 
contained in the license are unlawful due to their failure to ensure 
public health and safety, the regulations controlling radioactive 
materials are promulgated under the Act to protect health and 
minimize danger to life by assuring that licensees will do what is 
required. The regulations require that sufficient information 
concerning the sources and the product be submitted prior to 
issuance of a license, to demonstrate that the product will meet the 
safety criteria set forth in the regulations for that type of 
product. Thus, if a licensee manufactures products in unapproved 
configurations, the NRC has no way of knowing if the product poses a 
threat to public health and safety. The provisions concerning the 
specific source and gunsight models listed in IWI's license were not 
imposed by the NRC; rather, the list of authorized source models, 
designation of suppliers of tritium sources, and the specific 
configurations of gunsights came directly from information submitted 
by IWI to the NRC during the licensing process.
    The thrust of the Licensee's disagreement goes to the agency's 
jurisdiction and the licensing system promulgated under 10 CFR Part 
30. Section 81 of the Atomic Energy Act (AEA or Act) provides in 
part that a person may not transfer or receive, own, or possess any 
byproduct material except as authorized pursuant to the AEA.
    The NRC's jurisdiction under Section 81 of the Act to regulate 
use of sealed sources containing byproduct material is long-
established. Regulations controlling radioactive materials are 
promulgated under the Act to protect health and minimize danger to 
life by endeavoring to ensure that licensees will do what is 
required to prevent adverse impacts on public health and safety. As 
noted in the General Statement of Policy and Procedure for NRC 
Enforcement Actions, (NUREG-1600), Section I (Enforcement Policy), 
licensees are expected to exercise meticulous attention to detail 
and maintain a high standard of compliance with NRC requirements. 
This standard applies even in cases such as this, in which no 
adverse consequences to public health and safety actually occurred 
in this matter.
    Further, regardless of whether violations were committed with or 
without the knowledge of Licensee management, a licensee committing 
a violation is subject to enforcement action. In this case, the 
Licensee did not make a sufficient effort to be aware of the 
applicable requirements and ensure that they were met. Section VI.B. 
of the

[[Page 19818]]

Enforcement Policy states: ``Although management involvement, direct 
or indirect, in a violation may lead to an increase in the civil 
penalty, the lack of management involvement may not be used to 
mitigate a civil penalty.''
    The claim that the Licensee realized no appreciable profit from 
the transactions is not relevant to the fact that the licensee 
violated its license. As to whether this civil penalty serves the 
purposes of the NRC's enforcement program, it clearly does so. In 
cases such as this, an NRC enforcement action is used, in part, as a 
deterrent to emphasize the importance of management being aware of 
license requirements, and where there is a question as to the 
meaning of a requirement, of the need to seek clarification. If a 
licensee believes that license conditions are unwarranted, the 
licensee should seek an amendment, and comply with the license until 
the amendment is granted.

Summary of Licensee's Request for Mitigation

    The Licensee contends that the enforcement action imposes a 
severe financial hardship on the Licensee, that the NRC standards 
for imposing civil penalties are too vague to meet standards of due 
process, and that the penalty should not be imposed because the 
basic information on which the decision is being made has not been 
made available to the Licensee in preparation of its defense.

NRC Evaluation of Licensee's Request for Mitigation

    The Licensee sought mitigation complaining that the NRC 
standards for imposing civil penalties are too vague to meet the 
standards of due process but did not provide further argument or 
explanation of that claim. The Congress has provided the Commission 
with the discretion to issue civil penalties of up to $110,000 per 
day per violation. The NRC has for almost 15 years provided publicly 
available guidelines for developing enforcement actions, including 
civil penalties. These guidelines are published in the Enforcement 
Policy.
    As to the Licensee's claim that the basic information on which 
the action was taken was not made available to the Licensee, 
although the OI Report had not yet been provided to the Licensee 
because the Licensee had not paid the required charges,1 
the discussion at the Predecisional Enforcement Conference centered 
on these violations and how they occurred. Further, during the OI 
investigation the NRC obtained copies of records from the Licensee, 
including purchase documents for luminous sources and sales 
documentation. The nature of the violations cited is such that these 
documents and the personal knowledge of Licensee employees were 
clearly the basis for the citations and were available to the 
Licensee.
---------------------------------------------------------------------------

    \1\ The OI Report was provided to the Licensee on October 16, 
1996.
---------------------------------------------------------------------------

    The staff has reviewed the assessment of the civil penalty, 
including the exercise of discretion which escalated the civil 
penalty to $7,500. In assessing a civil penalty, the NRC weighs both 
the potential safety significance and the regulatory significance. 
While the safety concerns in this matter may not be significant, the 
regulatory concerns are significant because Licensee management 
failed to apply the meticulous attention to compliance with license 
conditions that is required of a licensee. While the NRC remains 
concerned about management involvement in these violations, the 
civil penalty has been reconsidered in light of the safety 
significance of the actual violations. The civil penalty is, 
therefore, being mitigated by $5,000.
    As to alleged financial hardship, the NRC's Enforcement Policy 
provides: ``. . . it is not the NRC's intention that the economic 
impact of a civil penalty be so severe that it puts a licensee out 
of business (orders, rather than civil penalties, are used when the 
intent is to suspend or terminate licensed activities) or adversely 
affects a licensee's ability to safely conduct licensed 
activities.''
    Therefore, to balance these considerations and to be responsive 
to the potential financial hardship to the Licensee, the NRC will 
allow the Licensee, if it wishes, to pay the civil penalty in 
monthly installments.

NRC Conclusion

    The NRC has concluded that the violations occurred as stated and 
that the Licensee provided an adequate basis for mitigation of the 
civil penalty. However, full mitigation is not warranted because of 
the importance of emphasizing the role of management in ensuring 
that it understands regulatory requirements and that these 
requirements are implemented. Here, the new management did not make 
sufficient effort to ensure compliance. Consequently, a civil 
penalty in the amount of $2,500 should be imposed. However, to be 
responsive to the potential for further financial hardship, the NRC 
will permit the Licensee to pay the civil penalty in monthly 
installments.

[FR Doc. 97-10524 Filed 4-22-97; 8:45 am]
BILLING CODE 7590-01-P