OIG “Special Inquiry” finds fraudulent, counterfeit parts in US reactors


Nuclear industry whistleblowers have been reporting bogus parts and components installed in US nuclear power station that can jeopardize both reactor operations and public safety but nobody in charge seems to be listening or taking action. Finally, on February 9, 2022, the Office of Inspector General (OIG) of the US Nuclear Regulatory Commission (NRC) released a “Special Inquiry into Counterfeit, Fraudulent and Suspect Items In Operating Nuclear Power Stations.”  The inquiry reveals that “Counterfeit parts are safety and security concerns that could have serious consequences in critical power plant equipment required to perform a safety function.” In fact, even critical non-safety-related component failure can cascade into the failure safety-related equipment with serious consequences in nuclear power stations and beyond.

Based in part on whistleblower allegations of nationwide violations, the OIG conducted inspections and interviews at four unidentified nuclear power stations from the NRC’s four regions across the county.

While the federal inquiry did not substantiate that the vulnerability to US reactor safety and security created by this corrupt activity was a direct result of the NRC lowering regulatory standards and oversight of industry purchasing practices, the OIG “found several examples that appear as such, including lack of inspection violations issued, a downward trend” in the industry following through on federal reporting requirements established to prevent the entry of fraudulent and substandard parts into the nuclear supply chain. In fact, some counterfeit parts were discovered only after failure during reactor operations as in the example of an emergency water pump shaft that snapped after a very short service life. An examination of the part confirmed it was counterfeit but was not reported because the licensee said reporting was only necessary only if the discovery was made prior to installation.

The OIG inquiry warns that while the NRC asserts that the appearance of counterfeit, fraudulent and suspect items (CFSI) is small across the industry, the agency “may be underestimating the number of CFSI in plants and their impact because it does not require licensees to report CFSI except in extraordinary circumstances, such as those involving the failure of equipment that performs a significant safety function.”

At the same time, the OIG published the Special Inquiry’s companion document, “Audit of the Nuclear Regulatory Commission’s Oversight of Counterfeit, Fraudulent, and Suspect Items at Nuclear Power Reactors” on the same day. According to the OIG, the NRC supposedly “requires nuclear power plants to use products and services exhibiting the highest quality in agency-regulated activities.” [Emphasis added]

However, the audit identifies corrupt and unlawful activity:

  • “Counterfeit items are intentionally manufactured or altered to imitate a legitimate product without the legal right to do so. A counterfeit item is one that has been fabricated in imitation of something else with the purpose to defraud by passing the false copy for genuine or original, or is an item copied without the legal right or authority to do so;
  • Fraudulent items are intentionally misrepresented with intent to deceive; Fraudulent items include items provided with incorrect identification or falsified or inaccurate certification; and,
  • Suspect items are suspected of being counterfeit or fraudulent, but have not been verified as counterfeit or fraudulent.”

The audit’s finds that the NRC needs to improve its oversight and enforcement action to counter the trafficking of fraudulent parts being installed into the US nuclear industry. After nearly a half century of apparently lackadaisical regulatory oversight, the OIG finds that “[t]he NRC also does not have specific guidance in inspection procedures on how to identify potential CFSI and does not require CFSI-related qualification or training, which has contributed to the staff’s varying awareness of CFSI.”

The fabrication of imitation circuit breakers, fuses, valves, structural steel and other critical components is a deliberate money-making operation to deceive and market potentially dangerous substandard parts to the US nuclear industry. This fraudulent activity ultimately comes at the risk and expense to public health, safety and security. The risk and potential impacts are only compounded by the US nuclear industry’s failure to report the trafficking of substandard parts which is magnified by the NRC ignoring enforcement action against both the industry’s failure to report and the vendors’ fraudulent manufacturing and marketing.

Even more troubling, this is an unresolved and  recurring problem  now several decades old and still unchecked by the NRC. An investigation by the Government Accountability Office (GAO) in a 1990 report to Congress, exposed the same nuclear safety and security scandal 38 years ago. The GAO concluded:

“Nonconforming products are a governmentwide problem, but consolidated data do not exist to help prevent the purchase of these products by government and utility officials. Further, the magnitude of the problem, cost to the taxpayers, and potential dangers resulting from using such products are not known. Incidents have occurred that illustrate the need for an information clearinghouse for these products. For instance, 5 years after DOD (Department of Defense) had identified certain vendors as suspect, utilities installed steel from these companies in safety systems designed to prevent or mitigate an accident at a nuclear plant. NRC warned utilities about these vendors only after they were indicted for selling nonconforming products. In 1988 the Office of Management and Budget (OMH), which provides management leadership to the executive branch, agreed to act as a clearinghouse for information on nonconforming products. OMB has not fulfilled its commitment.”

Time magazine popularized this nationwide nuclear scandal in a March 12, 1996 cover story “Special investigation: Blowing the whistle on nuclear safety: How a showdown at a power plant exposed the federal government failure to enforce its own rules.”  As much as the Time cover story exposes the increased risk caused corruption and malfeasance potentially impacting public safety, it also paid a debt of gratitude to those nuclear industry whistleblowers and their supportive civil society organizations like Stephen Comley’s “We the People” who have courageously instigated these GAO and OIG investigations to come into the light of day.

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