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(1) the making of a statement:

The making of a statement appears to be providing the NRC inspector on July 3, 1986 with the DER No. NP-85-0334 which described the operator error and concluded that criticality did not occur.

(2) the falsity of such statement:

There appears to be no dispute that the statement, insofar as it concluded that criticality did not occur, was false.

(3) knowledge of the falsity of such statement:

Your point here is apparently that the reliable known information
was such that they must have known it was critical. The original
entry noted criticality and was changed with insufficient reason
in your view. Vlhile it is not entirely clear that this was the
case, your investigative report contains circumstantial evidence
to support this view. On the other hand there is evidence that
there was a basis for doubt on whether criticality occurred and
the utility moved forward to investigate. It appears to us that
had they corrected their evaluation of whether criticality had
occurred, you would be hard pressed to maintain that a crime had
occurred at the point of delivery of the notification, since NRC
was apparently advised that there was some doubt about the
criticality conclusion. Thus, it really does appear to us that
an omission to provide further facts when they were known or a
failure to correct continues to play a role in evaluating this
referral. Nonetheless, we cannot say that you are wrong in your
investigatory conclusion that Fermi officials knew at the time of
the statement th^t it was false, if we have correctly understood
your conclusion.

(4) relevance of such statement to the function of a
federal department or agency:

Although this information, as you acknowledge, was not reguired by rule to be reported, we believe the relevance of knowledge about a criticality to NRC's regulatory mission is beyond doubt.

The Staff suggestion that the information provided to the NRC inspector was enough to have alerted him to the seriousness of the problem is a two-edged sword. While it supports the view that NRC did not respond sufficiently, it suggests strongly that the licensee must also have had a heightened awareness and that the doubts about criticality may not have been genuine.

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(5) the false statement was material:

Your account presents evidence that the licensing decision would have been made differently had the Region officials known of the criticality. There has been no suggestion that this would have been an improper factor to consider.

In light of the foregoing discussion and recognizing the caveat with respect to omission, we conclude that your report supports this referral.

Violation of 18 U.S.C. 371

Your conspiracy referral is predicated on a conspiracy to commit the 1001 crime. Thus, if the knowledge of falsity element is a problem in consideration of that crime, it will be so here.

The elements of conspiracy are an agreement to commit a crime and one overt act in furtherance of that agreement. Case law has held that the terms of a conspiracy are seldom, if ever, express, and the conspiracy must almost always be gathered by implication from conduct. Moreover, the act itself need not complete the crime.

Since you conclude (1) from testimony and from a continuing and consistent failure to correct that the Fermi officials agreed to provide false information on the criticality which they knew to be false and (2) the report was directed to be changed, and actually was changed, to that end by one of those agreeing, we concur that the elements of conspiracy are met. Thus, we advise that your report supports this referral, even though we recognize that it is possible to draw other inferences from the investigatory facts that you found.

Finally, we have a few editorial comments which we would be happy to share with you orally.

It has been suggested that NRC officials should have been alerted by the information which was provided to them even without notice of the criticality. However, this may not contradict the assertion that knowledge of the criticality was material, indeed would have been dispositive, to the licensing decision. Investigative conclusions appear to support the view that the information was material and that Fermi officials

recognized the materiality of the information.

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The Honorable Sam Gejdenson, Chairman -
Subcommitte on General Oversight

and Investigations
Committee on Interior and Insular Affairs
United States House of Representatives
Washington, O.C. 20515

Dear Chairman Gejdenson:

Subject: Testimony Before the Subcommittee on General Oversight and
Investigations, Committee on Interior and Insular Affairs,
U.S. House of Representatives, on June 11, 1987

The printed statement, issued by the Subcommittee at the hearing as drafted by
the Committee staff with input from me, was the negotiated product of a 2-day,
20-hour interview session conducted by the Subcommittee staff. After reviewing
the final product, I am not satisfied that the principles that I wished to
convey were highlighted. The background for the Committee staff's questioning
was a collection of reports and documents drawn from a variety of outside
agencies and internal units of the NRC. I had two options. The first was to
work through the series of points, that were pressed by the congressional
staff, and attempt to explain the circumstances and educate the staff about the
inspection processes and its limitations. My second option was to be subpoenaed,
and thus be required to respond to random questioning by congressmen during the
hearing. Given the nature of some of the situations and actions that I was
called upon to explain and defend, and compounded by what I believe to be the
absence of logical policy in matters apparently so clear in the minds of the
public, the task was very difficult. I elected to contain the unpredictability
of the line of questioning by reducing the volume of the material at issue and
addressing it during the lengthy interview process. In retrospect, I still
believe that the course that I took was correct and that my professional
behavior was a credit to the region. However, the scenario approach did not
highlight the principles of an effective program.

My statement reflects the facts, as I remembered them, concerning several examples of my inspection findings as contrasted with external materials possessed by the staff. The perspective offered by me is that of one who is on the ground and who admittedly is not privy to all of the relevant decisionmaking processes that follow such findings. However, informed or not, I must attempt to complete the inspection process within that clouded environment. The main theme of the scenarios that I presented was one intended to provide insight into the'difficulties that a security inspector

M l 7 1987

The Honorable Sam Gejdenson -2

must face as it related to issues not covered by regulations. These events are real, emotionally charged, and physically threatening issues. But there are also security principles involved. I am speaking of the matter of screening out individuals whose character or personality manifest traits that are dangerous to the site, its personnel, operations, or the neighboring community. The social problems of the community are reflected in the population of the sites. Because the nuclear sites, which tend to be the major focal point of the rural communities in question, are licensed by the NRC does not make them immune to the ills of the surrounding communities. It takes comprehensive and intelligent proceduralized program efforts to prescreen personnel through background investigation, fingerprint checks, toxicology tests, and polygraph and psychological examinations. The post employment effort requires the use of the same disciplines plus incident investigations, behavioral observation skills and employee assistance resources. Standards for such effective programs are absent in the regulated nuclear industry and the declination of NRC leadership in this area creates a void.

The nature of the rural communities, which host many of the nuclear sites tends not to provide a background for coping with rapidly fluctuating social conditions. The professional expertise at the management level of the sites tends to be in the field of engineering and many of these managers have stated to me that they don't understand the issues and find the pressure to address such human behavior areas to be both distasteful and outside their area of interest. It is my position that such an attitude is at the core of this whole discussion. These conditions are even worse at those sites under construction and at certain licensed sites when they are in outage. In fact, I believe that those categories (construction and outage) are the main concern. Experience reflects that a small, but very disruptive segment of the large temporary forces, contains the primary risk. That risk, I believe, is paralleled with the long time permanent employee who undergoes some emotional trauma. Yet, the industry directs its limited efforts away from those categories.

My explanation to the Committee was not intended to be critical of my management in Region IV. Instead, it was an effort to clarify, rationalize and justify the methods of operation of one NRC security inspector who has had to deal with these real situations in the absence of regulations. I do not mean to imply that I always timidly agree to a managerial decision, nor does my point of view or philosophical position always prevail. However, those views are heard and considered. But when the decision is made, I comply.

Further, my statement was intended to be an expression of empathy for my regional managers. They must, in their decisionmaking, balance regulatory authority, concerning obviously threatening situations, in the absence of guidance.

In summary, my statement was mostly a plea to the Nuclear Regulatory Commission to consider the world through the eyes of a professional, a security inspector, on the ground. The fact that we have such wide grounds for debate is, in my mind, the real issue and not the fact that we debate. These wide grounds exist, I believe, because of the absence of an aggressive,

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