13908 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices

licensee’s presentation. If the licensee

chooses to forego an enforcement

conference and, instead, responds to the

NRC’s findings in writing, the

complainant will be provided the

opportunity to submit a written rebuttal

to the licensee’s response. For cases

involving potential discrimination by a

contractor or vendor to the licensee, any

associated predecisional enforcement

conference with the contractor or

vendor would be handled similarly.

These arrangements for complainant

participation in the predecisional

enforcement conference are not to be

conducted or viewed in any respect as

an adjudicatory hearing.

A predecisional enforcement

conference may not need to be held in

cases where there is a full adjudicatory

record before the Department of Labor.

If a conference is held in such cases,

generally the conference will focus on

the licensee’s corrective action. As with

discrimination cases based on OI

investigations, the complainant may be

allowed to participate.

Members of the public attending open

conferences will be reminded that (1)

the apparent violations discussed at

predecisional enforcement conferences

are subject to further review and may be

subject to change prior to any resulting

enforcement action and (2) the

statements of views or expressions of

opinion made by NRC employees at

predecisional enforcement conferences,

or the lack thereof, are not intended to

represent final determinations or beliefs.

When needed to protect the public

health and safety or common defense

and security, escalated enforcement

action, such as the issuance of an

immediately effective order, will be

taken before the conference. In these

cases, a conference may be held after the

escalated enforcement action is taken.

* * * * *

Dated at Rockville, Maryland, this 17th day

of March, 1997.

For the Nuclear Regulatory Commission.

John C. Hoyle,

Secretary of the Commission.

[FR Doc. 97–7315 Filed 3–21–97; 8:45 am]

BILLING CODE 7590–01–P

[Docket Nos. 50–424 and 50–425]

Georgia Power Company, et al. Vogtle

Electric Generating Plant, Units 1 and

2; Issuance of Director’s Decision

Under 10 CFR 2.206

Notice is hereby given that the Acting

Director, Office of Nuclear Reactor

Regulation, has taken action with regard

to a Petition dated September 11, 1990,

by Michael D. Kohn, Esquire, on behalf

of Messrs. Marvin Hobby and Allen

Mosbaugh (Petitioners), pursuant to

Section 2.206 of Title 10 of the Code of

Federal Regulations (10 CFR 2.206). The

Petition was supplemented by

submittals made on September 21 and

October 1, 1990, and July 8, 1991. The

Petition pertains the Vogtle Electric

Generating Plant, Units 1 and 2.

The Petition contained allegations

regarding: the management of the

Georgia Power Company (GPC) nuclear

facilities; illegal transfer of GPC

operating licenses to Southern Nuclear

Operating Company (SONOPCO);

intentional false statements to the NRC

regarding GPC’s organizational chain of

command and the reliability of a diesel

generator; perjured testimony submitted

by a GPC executive during a DOL

proceeding under Section 210 of the

Energy Reorganization Act; repeated

abuse at the Vogtle facility of Technical

Specification 3.0.3; repeated willful

technical specification violations at the

Vogtle facility; repeated concealment of

safeguards problems from the NRC;

operation of radioactive waste systems

and facilities at Vogtle in gross violation

of NRC requirements; routine

nonconservative and questionable

management practices; and retaliation

by GPC against managers who make

their regulatory concerns known to GPC

or SONOPCO management. The

supplements to the Petition of

September 21 and October 1, 1990,

forwarded exhibits and provided

additional information regarding the

alleged illegal transfer of operating

licenses. Based on these allegations,

Petitioners requested that the NRC

institute proceedings and take swift and

immediate action.

The July 8, 1991, supplement to the

Petition repeated several of the earlier

allegations, and also alleged that GPC’s

Executive Vice President made material

false statements in GPC’s April 1, 1991,

submittal to the NRC that responded to

allegations in the original Petition. The

supplement also alleged that false

statements had been made to the NRC

by the same individual during a

transcribed meeting on January 11,

1991, to discuss the formation and

operation of SONOPCO. Based on these

allegations, Petitioners requested the

NRC to take immediate steps to

determine if GPC’s current management

has the requisite character, competence,

fundamental trustworthiness, and

commitment to safety to continue

operating a nuclear facility.

Several issues in the Petition were

further defined and reviewed in

connection with the licensing

proceeding before the Atomic Safety

and Licensing Board (Docket Nos. 50–

424–OLA–3; 50–425–OLA–3) regarding

GPC’s application for license

amendments to transfer operating

authority of the Vogtle facility to

Southern Nuclear Operating Company

(SONOPCO), and proceedings before the

U.S. Department of Labor (DOL) as a

result of separate discrimination suites

filed by Messrs. Hobby (DOL Case No.

90–ERA–30) and Mosbaugh (DOL Case

Nos. 91–ERA–001 and 91–ER–A–011).

Although the licensing proceeding

concluded without a final Board

decision when the parties settled and

Mr. Mosbaugh withdrew as sole

intervenor, the NRC staff has considered

the evidence for the common issues in

reaching decisions on the 10 CFR 2.206

Petition. The NRC staff recognizes that

Mr. Mosbaugh has withdrawn his

interest in the Petition. Nevertheless,

the interest of Mr. Hobby in the joint

Petition remains and is the purpose for

the Acting Director’s action to address

the Petition. The decisions of the

Secretary of Labor regarding the

discrimination suites of Messrs. Hobby

and Mosbaugh have been addressed by

the NRC by means of enforcement

action.

As discussed in the Director’s

Decision, certain concerns raised by the

Petitioners are partially substantiated.

Violations of regulatory requirements

have occurred in the operation of the

Vogtle facility. A number of violations

were identified and three civil penalties

have been issued to GPC for certain of

these violations. The three civil

penalties resulted from (1) opening a

valve when it was required to be closed

by the Vogtle Technical Specifications

to protect against a potential ‘‘boron

dilution’’ event (2) providing inaccurate

and incomplete information to the NRC

regarding diesel generator testing, and

(3) violating 10 CFR 50.7, ‘‘Employee

Protection,’’ by discriminating against

Messrs. Hobby and Mosbaugh for

engaging in protected activities. The

NRC has issued letters to GPC and to

several GPC and SONOPCO individuals

reminding them of their obligations to

provide information to the NRC that is

complete and accurate in all material

respects, and of the need to ensure a

proper environment in which

employees can express regulatory

concerns without fear of retaliation,

harassment, intimidation, or

discrimination. The licensee has

committed to provide special training

and notify the NRC before the

individual who in 1990 was the Vogtle

General Manager will be permitted to

participate in licensed activities. As

previously mentioned, Petitioner’s

request for proceedings has been
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices 13909

accomplished in large measure through

the licensing transfer proceeding and

through separate actions before DOL,

the results of which are recognized by

the NRC. To this extent, the Petitioners’

request for action pursuant to 10 CFR

2.206 is granted.

However, it has been determined that

no unauthorized transfer of the Vogtle

operating licenses has occurred, and

that the GPC nuclear facilities are being

operated in accordance with NRC

regulations and do not endanger the

health and safety of the public.

Additionally, based on the staff’s review

of extensive information available to

date, including the results of relevant

enforcement actions, it is concluded

that none of the issues call into question

the licensee’s character, competence,

fundamental trustworthiness, or

commitment to safety in the operation

of its nuclear facilities. Therefore, the

Acting Director for the Office of Nuclear

Reactor Regulation declines to take any

further action with respect to the issues

raised in the Petition. To this extent, the

Petitioners’ request for action pursuant

to 10 CFR 2.206 is denied.

The reasons for this denial are

explained in the ‘‘Director’s Decision

Under 10 CFR 2.206’’ (DD–97–06), a

summary of which follows this notice.

The complete text of DD–97–06 is

available for public inspection at the

Commission’s Public Document Room,

the Gelman Building, 2120 L Street,

NW., Washington, DC, and at the local

public document room at the Burke

County Library, 412 Fourth Street,

Waynesboro, Georgia.

Dated at Rockville, Maryland, this 18th day

of March 1997.

For The Nuclear Regulatory Commission.

Frank J. Miraglia, Jr.,

Acting Director, Office of Nuclear Reactor

Regulation.

Summary of Director’s Decision Under

10 CFR 2.206

I. Introduction

This is a summary of the final

Director’s Decision on the petition of

Messrs. Marvin B. Hobby and Allen L.

Mosbaugh (Petitioners) dated September

11, 1990, as supplemented October 1,

1990, and July 8, 1991, pursuant to 10

CFR 2.206 (Petition). In CLI–93–15, 38

NRC 1 (1993), the Commission vacated

and remanded a partial decision on the

Petition, DD–93–8, 37 NRC 314 (1993),

dated April 23, 1993, and directed that

the NRC staff consider the outcome of

a pending licensing transfer proceeding

on the Vogtle facility before acting on

the Petition, due to the overlap in

issues. After closure of the evidentiary

record and before issuance of a decision,

the Licensing Board terminated the

Vogtle licensing transfer proceeding

based upon a settlement agreement

between Georgia Power Company (GPC

or the licensee) and the sole intervenor,

Mr. Mosbaugh. The final Director’s

Decision addresses the matters

considered in the partial Director’s

Decision and the balance of the Petition

in light of the information disclosed in

the licensing transfer amendment

proceeding, in NRC inspections,

investigations, and enforcement actions,

and decisions by the Department of

Labor.

Although Mr. Mosbaugh has

withdrawn his interest in the 10 CFR

2.206 Petition, Mr. Hobby’s request is

still pending before the NRC. Inasmuch

as the Petition was jointly filed by

Messrs. Mosbaugh and Hobby and it is

difficult to segregate their concerns, the

final Director’s Decision addresses all

matters raised in the Petition, as

supplemented by the hearing record.

II. Discussion

The Petitioners made a number of

allegations about the management of the

GPC nuclear facilities (Hatch and

Vogtle). Specifically, they alleged that:

1. GPC illegally transferred its

operating licenses to Southern Nuclear;

2. GPC knowingly included

misrepresentations in its response to

concerns of a Commissioner about the

chain of command for the Vogtle

facility;

3. GPC made intentional false

statements to the NRC about the

reliability of a diesel generator (DG)

whose failure had resulted in a Site

Area Emergency (SAE) at Vogtle;

4. A GPC executive submitted

perjured testimony during a DOL

proceeding under Section 210 of the

Energy Reorganization Act;

5. GPC repeatedly abused Technical

Specification (TS) 3.0.3 at the Vogtle

facility;

6. GPC repeatedly and willfully

violated Technical Specifications (TSs)

at the Vogtle facility;

7. GPC repeatedly concealed

safeguards problems from the NRC;

8. GPC operated radioactive waste

systems and facilities at Vogtle in gross

violation of NRC requirements;

9. GPC routinely used

nonconservative and questionable

management practices at its nuclear

facilities; and,

10. GPC retaliated against managers

who made their regulatory concerns

known to GPC or Southern Nuclear

management.

Mr. Mosbaugh had previously

informed NRC’s Office of Investigations

(OI) of some of these allegations. The

Petitioners requested the NRC to

institute proceedings and take swift and

immediate action based on these

allegations. On October 23, 1990, Dr.

Thomas E. Murley, who was then the

Director, NRR, acknowledged receiving

the Petition and concluded that no

immediate action was necessary

regarding these matters. He made this

determination based on completed and

continuing NRC inspections and

investigations of the licensee and

particularly of the operation of the

Vogtle facility.

On July 8, 1991, the Petitioners

submitted ‘‘Amendments to Petitioners

Marvin Hobby’s and Allen Mosbaugh’s

September 11, 1990, Petition; and

Response to Georgia Power Company’s

April 1, 1991, Submission by its

Executive Vice President, Mr. R. P.

McDonald’’ (Supplement). In the

Supplement the Petitioners alleged that:

1. GPC’s Executive Vice President

made material false statements in GPC’s

April 1, 1991, submittal to the NRC

regarding the participants in an April

19, 1990, telephone conference call;

and,

2. This same Executive Vice President

made false statements to the NRC at a

transcribed meeting on January 11,

1991, which discussed the formation

and operation of Southern Nuclear.

The Petitioners requested that the

NRC take immediate steps to determine

if GPC’s current management has the

requisite character and competence to

operate a nuclear facility. On August 26,

1991, Dr. Murley acknowledged

receiving the Supplement and informed

the Petitioners that no immediate action

was required and that the specific issues

raised in the Supplement would be

addressed in a Director’s Decision (DD).

On October 22, 1992, in response to

a Federal Register notice of the

proposed issuance of these license

amendments (57 FR 47135, October 14,

1992), Messrs. Mosbaugh and Hobby

filed a petition for leave to intervene

and request for hearing. Mr. Hobby was

denied intervenor status for lack of

standing. In LBP–93–5, 37 NRC 96

(February 18, 1993), Mr. Mosbaugh was

admitted as an intervenor along with a

single contention:

The license to operate the Vogtle Electric

Generating Plant, Units 1 and 2, should not

be transferred to Southern Nuclear Operating

Company, Inc., because it lacks the requisite

character, competence and integrity, as well

as the necessary candor, truthfulness and

willingness to abide by regulatory

requirements.

The bases for the admitted contention

alleged that (1) the license transfers had

already taken place because Southern

Nuclear had assumed control of the
13910 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices

operation of the Vogtle facility without

prior approval from the NRC, and (2)

officials of the SONOPCO Project (the

predecessor organization to Southern

Nuclear) conspired to submit false

information to the NRC concerning

safety-related information regarding DG

testing following the March 1990 SAE.

On April 23, 1993, the Director, NRR,

issued DD–93–8, NRC 314, in which he

resolved several matters. In summary,

the Director determined that:

1. No unauthorized transfer of the

Vogtle licenses had occurred;

2. There is no information beyond the

Petitioners’ opinions to support the

position that GPC’s omission from a

description of their chain of command

at a Commission meeting on March 30,

1989, was intentional;

3. GPC does not routinely threaten the

safe operation of the Vogtle facility by

allowing entry into TS 3.0.3;

4. Although TS violations had

occurred, Petitioners’ claim that they

were willful was not substantiated;

5. Failures to make timely reports to

the NRC of safeguards problems were

due to GPC’s cumbersome system for

evaluating security findings, rather than

being due to any willful attempt to

impede the reporting process;

6. The relevant facts do not support a

conclusion that GPC wilfully violated

NRC requirements or wilfully operated

the radioactive waste system in a

manner to endanger public health and

safety; and,

7. The GPC nuclear facilities were

being operated in accordance with NRC

regulations and do not endanger public

health and safety.

Decisions on the Petitioners’ issues of

intentional false statements to the NRC

regarding DG reliability, perjured

testimony by a GPC executive in a DOL

proceeding, and discrimination against

managers who raised regulatory

concerns were deferred pending the

completion of OI investigations and the

issuance of a DOL decision.

In CLI–93–15, 38 NRC 1 (July 14,

1993), the Commission vacated and

remanded DD–93–8, and directed that

the staff consider the outcome of the

Vogtle license amendment proceeding

before acting on the Petition due to the

overlap in issues.

Several extensive reviews of the above

concerns have been conducted by the

NRC. The NRC performed special

inspections, OI performed

investigations, an Atomic Safety and

Licensing Board (ASLB) held hearings

on the contention challenging Southern

Nuclear’s character, and the Department

of Labor (DOL) held hearings

concerning alleged discrimination

against Messrs. Hobby and Mosbaugh by

licensee management.

Litigation concerning the contention

in the license amendment proceeding

was extensive and included over 35

prehearing depositions, over 12,500

pages of hearing transcripts, and nearly

600 documentary exhibits. After the

hearings were completed and prior to

issuance of an ASLB decision on the

contention, Mr. Mosbaugh and licensee

arrived at a settlement agreement that

resulted in, among other things, Mr.

Mosbaugh withdrawing his contention

and filing a joint motion (with the

licensee) requesting that the Board

terminate the proceeding without

issuance of a Board order setting forth

its findings and conclusions. The Board

granted the request and dismissed the

contention (LBP–96–16, 44 NRC 59

(August 19, 1996)).

The dismissal of the contention did

not address the potential safety

implications of the 2.206 Petition as

supplemented by the hearing record.

The staff has considered the testimony

of staff witnesses, including staff

engineers, supervisors, and senior

managers, the technical issues raised,

and the staff’s observations and

assessments of licensee performance to

resolve the issues raised by the Petition.

The following is a summary of the

conclusions in the Director’s Decision.

A. Illegal License Transfers, and

Misrepresentations of Management

Control

1. Illegal License Transfers

The Petition alleged that GPC

improperly transferred control of its

nuclear licenses to Southern Nuclear in

that Mr. Joseph M. Farley (who was an

officer of GPC’s parent company,

Southern Company, and its subsidiary,

Southern Company Services) acted as

Chief Executive Officer (CEO) of

SONOPCO and was responsible for

operating the GPC nuclear facilities and

made or influenced budget and hiring

decisions, beginning with the first of

three phases in the planned transition to

Southern Nuclear. The Petitioners state

that the nuclear officers in SONOPCO

Project reported to Mr. Farley, rather

than to Mr. Dahlberg, GPC’s CEO, and

that Mr. Farley controlled the Vogtle

facility based upon his involvement in

(1) controlling daily operations, (2)

establishing and implementing nuclear

policy decisions, (3) employing,

supervising, and dismissing nuclear

personnel, and (4) controlling costs.

Intervenor also asserts that numerous

documents and statements provided to

the NRC regarding the organizational

structure and responsibilities for

managerial control of the Vogtle facility

were inaccurate or incomplete because

they do not show Mr. McDonald

reporting to Mr. Farley or Mr. Farley

functioning as the de facto Chief

Executive Officer of the SONOPCO

Project.

The staff’s review concluded that

Intervenor’s assertion that Mr. Farley

functioned as the de facto Chief

Executive Officer of the SONOPCO

Project is not supported by the record.

Mr. McDonald did not report to Mr.

Farley regarding GPC licensed activities.

The items cited do not demonstrate that

Mr. Farley exercised control over

licensed activities at GPC’s nuclear

facilities during his involvement in the

SONOPCO Project. Rather, the record

shows that GPC controlled the daily

operations of the Vogtle facility in

accordance with a chain of command

extending from the Vogtle General

Manager, through the Vice President of

the Vogtle facility, through the Senior

Vice President—Nuclear Operations,

through the Executive Vice President—

Nuclear Operations, to the President

and CEO of GPC. A Nuclear Operations

Overview Committee of the GPC Board

of Directors conducted periodic reviews

of the regulatory and operational

performance of GPC’s nuclear plants.

The hearing record shows that nuclear

policy decisions for the Vogtle facility

were established and implemented by

GPC, and there was no evidence that

Mr. Farley established the outage

philosophy or any other operational

policies for the Vogtle facility. Mr.

Farley’s limited involvement in a 1989

rate case matter before the Georgia

Public Service Commission (i.e., his

review of draft testimony regarding

alternative performance standards) did

not indicate any control of GPC’s

nuclear operations or licensed activities.

Intervenor also provided no information

that The Southern Company

Management Council acted as the

SONOPCO Project board of directors

until the Project was incorporated.

Regarding the assertions that Mr.

Farley controlled the Vogtle facility

through personnel decisions, the record

does not show that Mr. Farley

controlled GPC nuclear facilities by

employing, supervising, and dismissing

nuclear personnel, or that GPC provided

inaccurate information to the NRC

regarding Mr. Farley’s involvement with

personnel matters.

The hearing record does not support

a conclusion that GPC misrepresented

its budgets affecting the operation of

GPC licensed facilities. There is no basis

to conclude that the particular process

GPC used to develop its budget showed

that Mr. Farley, The Southern Company,
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices 13911

or SONOPCO Project controlled the

operation of the Vogtle facility. Rather,

the record shows that GPC was

responsible for the costs of the Vogtle

facility. After review by GPC’s

Management Council, the operating and

capital budgets were approved by GPC’s

President and CEO, and the capital

budget was also approved by the GPC

Board of Directors. The record does not

support that Messrs. Farley and Edward

L. Addison, the President and CEO of

The Southern Company, approved

GPC’s nuclear budgets. As an Executive

Vice President of The Southern

Company, Mr. Farley was involved in

reviewing the nuclear budgets as part of

the normal process for preparing annual

budgets in the Southern system. Given

The Southern Company’s holding

company status, Mr. Addison’s

involvement in reviewing and providing

guidelines and requirements for

adequate earnings and reasonable

capital needs was appropriate.

The record shows that GPC provided

some inaccurate or incomplete

information to the NRC when describing

its organization and plans to form

Southern Nuclear, and when responding

to the Petition. This information

involved (1) the omission of Mr.

Hairston when Mr. McDonald described

the Vogtle chain of command during a

March 30, 1989, meeting, (2) a 1989

FSAR organizational chart showing the

position of Mr. Dahlberg as ‘‘Chairman

and CEO’’ rather than ‘‘President and

CEO’’, and (3) GPC’s April 1991 written

response to the Petition indicating that

the GPC Management Council included

all Senior Vice Presidents (which was

inaccurate because Mr. Hairston was not

a member), and indicating Mr. Farley’s

title in 1988 to be Executive Vice

President—Nuclear of The Southern

Company (a position he did not assume

until March 1, 1989). This inaccurate or

incomplete information was of minor

safety significance in terms of NRC

understanding of the proposed transfers,

did not mislead the NRC, and was not

sufficient to warrant NRC enforcement

action nor conclusions that (1) GPC

concealed an unauthorized role of Mr.

Farley or a de facto, unauthorized

organization for control of GPC nuclear

facilities, or (2) GPC lacks the requisite

character and integrity to be a licensee.

The staff has reviewed the Vogtle

Final Safety Analysis Report (FSAR),

the Vogtle licenses, records of an NRC

Special Inspection conducted to review

the SONOPCO management

organization, and testimony of key

officials taken under oath in the license

amendment proceeding, as well as the

evidence proffered by the Intervenor in

the license amendment proceeding. This

information established that the

responsibility for decisions affecting the

operation of the GPC plants rested with

GPC’s Senior Vice President—Nuclear

Operations, who at the time was Mr.

Hairston. The Petitioners’ concerns do

not warrant the conclusion that

SONOPCO was in control. Rather, the

staff finds that during the period of time

in question, the chain of command was

from the respective vice presidents for

the Vogtle and Hatch facilities to Mr.

Hairston. Mr. Hairston reported to Mr.

McDonald, who reported to Mr.

Dahlberg, President of GPC. Each of

these individuals was an elected officer

of GPC, and the reporting chain at that

time progressed up to the President of

GPC.

Therefore, the staff concludes that

GPC did not transfer control of the

operating licenses for the Vogtle facility

without the prior consent of the NRC

and that GPC did not mislead the NRC

in any material respect regarding control

of the operation of the Vogtle facility.

2. Chain of Command

Misrepresentations at a Commission

Meeting

The Petitioners stated that during a

Commission meeting to vote on the full

power operating license for Vogtle Unit

2 on March 30, 1989, GPC misled the

Commission about the chain of

command from the Vogtle Plant

Manager to the CEO during their

response to a question from one of the

Commissioners.

Shortly after reading the transcript of

the meeting, Mr. W.G. Hairston, on May

1, 1989, sent the NRC a letter that

corrected the meeting transcript, and

noted that GPC had inadvertently

omitted him in the management chain

in their reply to the Commissioner. The

letter further stated that the organization

was as described on figures 13.1.1–1

and 13.1.1–2 of the FSAR. The NRC

previously had been apprised of the

GPC organization, including Mr.

Hairston’s position, by an FSAR

amendment dated November 23, 1988,

and NRC staff members present at the

Commission meeting were aware of the

correct information. The staff has no

basis to conclude that GPC’s omission of

the Senior VP position in their oral

remarks was intentional. The staff

concluded, after consultation with the

Commission, that GPC’s omission was

not significant because the information

would not likely have caused the

Commission to reach a different

decision regarding the Unit 2 license

application. In addition, the staff had

previously been provided and was

aware of the correct information. Thus,

enforcement action was not appropriate.

3. Misrepresentations Concerning the

SONOPCO Project

The Petition asserted that GPC (Mr.

McDonald) falsely stated during a

transcribed meeting with the staff on

January 11, 1991, that Mr. Farley had no

responsibilities for administrative

matters related to the SONOPCO

Project. Mr. Farley claims he had been

involved in SONOPCO administrative

matters since the SONOPCO Project was

formed in November 1988.

Based on the meeting transcript and

his testimony during the ASLB hearing,

Mr. McDonald’s January 11, 1991,

statement was not inaccurate in terms of

the functions depicted on the charts

discussed during the meeting. Mr.

McDonald testified during the hearing

that his statement was that prior to the

incorporation of Southern Nuclear, Mr.

Farley had been performing as a Vice

President of The Southern Company,

had been providing certain services to

him under a contract with SCS, and had

no responsibility for certain other

administrative support that was

depicted on organization charts

discussed during the meeting.

Administrative support was being

performed by the Southern Company

Services Vice President for

Administrative Services (Mr. McCrary)

for Mr. McDonald pursuant to the April

24, 1989, agreement. While Mr. McCrary

provided administrative services to

support Mr. Farley’s role in guiding the

formation of Southern Nuclear and Mr.

Farley’s general industry activities, Mr.

McCrary did not report to Mr. Farley

with respect to the administrative

support function for the Vogtle facility.

B. Reporting of DG Reliability

The Petitioners alleged that GPC made

intentional false statements to the NRC

about the reliability of a DG whose

failure had resulted in an SAE at Vogtle.

OI conducted an investigation and

issued a report on December 17, 1993.

Based on its evaluation of the evidence

gathered by OI, and other information,

the NRC staff determined that, contrary

to the requirements of 10 CFR 50.9, the

licensee had failed on four occasions to

provide information concerning DG start

counts (and the reasons for errors in

those counts) to the NRC that was

complete and accurate in all material

respects. An examination of how the

performance failures of licensee staff,

supervisors and managers contributed to

these errors resulted in the violations

being judged by the NRC to collectively

represent a very significant regulatory

concern. Enforcement action was taken

by the issuance of a Modified Notice of

Violation and Imposition of Civil
13912 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices

Penalties (Notice) (EA 93–304, February

13, 1995) which characterized the

violations as a Severity Level II

problem. The licensee paid a $200,000

civil penalty on March 1, 1995.

Corrective actions taken by licensee

management have included:

1. Making the initial notice of

violation available to all employees and

committing to posting an NRC Order if

one is issued;

2. A letter from the Senior Vice

President to the Vice Presidents for

Hatch and Vogtle regarding the

importance of thorough record keeping

during off-normal hours;

3. Counseling of specific individuals

by the Senior Vice President, and the

issuance of an ‘‘Oral Reminder’’

pursuant to the licensee’s Positive

Discipline System;

4. A letter from the Executive Vice

President—Nuclear Operations to

nuclear operations employees that

stressed the importance of effective

communications and the effective

resolution of concerns;

5. Posting copies of 10 CFR 50.9 and

encouraging employees to read it;

6. Meetings held by the Senior Vice

President—Nuclear Operations with

employees at the Hatch and Vogtle sites

to discuss GPC’s policy of open,

complete and accurate communications

with the NRC, and a letter to all

employees on the same subject;

7. Management observation of

communications with the NRC to ensure

that the enforcement action does not

adversely affect the completeness of

statements; and,

8. Posting a notice to all employees of

the availability of GPC’s reply to the

initial notice of violation.

The staff reviewed the licensee’s

corrective actions and concluded that

the actions were sufficient.

The staff’s evaluation also resulted in

Demands for Information (DFIs) being

issued to the licensee and six

individuals who acknowledged their

roles and responsibilities in the

activities that were the bases for the

enforcement action. The performance of

the Vogtle General Manager (GM)

through August 1990 contributed

directly to each of the failures to meet

10 CFR 50.9. GPC and that individual

acknowledged his role and

responsibility in the events underlying

the enforcement action and informed

the staff in separate letters dated

February 1, 1995, that the individual

had requested, and his current employer

(Southern Nuclear) had agreed to

implement a personal training program

to strengthen his ability to perform any

future line management role in support

of licensed activities. Southern Nuclear

and GPC committed that the former GM

would not assume a line management

position for a GPC or Southern Nuclear

plant unless he had satisfactorily

completed training in management

communications and responsibilities,

and the NRC received 60 days prior

written notice of the assignment. As

documented in the February 13, 1995,

Modified Notice of Violation and

Imposition of Civil Penalties, the staff

concluded that, in light of these

commitments, the staff had no present

concerns with the character and

integrity of the individuals or the

licensee arising out of these events, and

no further enforcement action was

necessary.

C. DOL Testimony

The Petitioners asserted that (1) GPC’s

Executive Vice President knowingly

submitted false testimony in a DOL

proceeding involving the discrimination

complaints of two GPC employees and

(2) that Mr. Hobby advised GPC’s

counsel before the DOL hearing that the

proposed testimony was false and that

GPC’s counsel responded by advising

him that the testimony would have to be

changed.

The DOL case resulted in a Decision

and Remand Order (Decision) by the

Secretary of Labor (Secretary) on August

4, 1995. The Secretary found that GPC

had discriminated against Mr. Hobby for

engaging in protected activities, and

stated, in relevant part: ‘‘Because I

found other evidence sufficient to

establish that Complainant [Mr. Hobby]

engaged in protected activity on January

2, [1989 (the pre-hearing meeting),] it

was unnecessary to consider at that

juncture whether counsel attempted to

suborn Complainant to perjury. Even if

counsel did, that evidence would not

alter this decision.’’

As discussed more fully below, based

on the Secretary’s Decision, and a

similar Decision in a proceeding

regarding an alleged unlawful

termination of Mr. Mosbaugh’s

employment, the staff issued two

Severity Level I Notices of Violation to

GPC. The staff also issued individual

letters to certain senior corporate

managers admonishing them to ensure

that a proper environment is maintained

in which employees can express

regulatory concerns without fear of

retaliation, harassment, intimidation, or

discrimination.

D. Use of TS 3.0.3

The Petitioners asserted that GPC

engaged in unsafe practices in that (1)

GPC repeatedly allowed the Vogtle

facility to enter TS 3.0.3 by rendering

both trains of safety-related load

sequencers for the DGs inoperable, (2)

GPC did not make the required

notifications to the NRC when TS 3.0.3

was entered, and (3) GPC failed to

recognize that the loss of a load

sequencer resulted in entry into TS

3.0.3.

The staff reviewed entries into TS

3.0.3 through inspections conducted by

region-based inspectors and the

observations of the resident inspectors.

The staff also reviewed the completed

maintenance work orders performed on

the load sequencers and the related

surveillance tests. The staff found

several instances in which the work

performed would have required the load

sequencers to be de-energized. However,

the associated unit was found not to

have been in Modes 1, 2, 3, or 4 at the

time this work was performed and thus,

no TS LCO applied. The surveillance

test review did not reveal any examples

of the load sequencers having been deenergized while in Modes 1 through 4

at the time the test was performed and

thus, no TS LCOs applied. Based on its

review, the staff concluded that GPC did

not routinely allow the Vogtle facility to

enter TS 3.0.3 by rendering both trains

of safety-related load sequencers for the

DGs inoperable.

In accordance with 10 CFR 50.72,

Immediate Notification Requirements

for Operating Nuclear Power Reactors,

licensees are required to make

immediate (i.e., within 1 or 4 hours,

depending on the circumstances)

reports to the NRC of any declaration of

an emergency class specified in the

Emergency Plan, and certain nonemergency events. Non-emergency

events include such items as the

initiation of any nuclear plant shutdown

required by the TS, any deviation from

the TS authorized by 10 CFR 50.54(x),

any condition where the nuclear power

plant (including its principle safety

barriers) becomes seriously degraded,

and any natural phenomenon or other

external condition that poses an actual

threat to the safety of the nuclear plant

or significantly hampers site personnel

in the performance of duties necessary

for the safe operation of the plant. In 10

CFR 50.73, Licensee Event Report

System, events are identified for which

written reports will be made to the NRC

within 30 days. These events include

several of the events requiring

immediate reports pursuant to 10 CFR

50.72, plus additional events such as

any event or condition that alone could

have prevented the fulfillment of the

safety function of certain structures or

systems. The Commission’s regulations

do not contain an explicit requirement

that an entry into TS 3.0.3, in and of

itself, be reported. Licensees are
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices 13913

required by 10 CFR 50.72 to notify the

NRC within 1 hour of the initiation of

any plant shutdown required by the

plant’s TS. Thus, the NRC is promptly

notified of entries into TS 3.0.3 if the

plant initiates a shutdown as a result of

the problem that caused entry into the

TS. There is no requirement to notify

the NRC of entries into TS 3.0.3 if a

shutdown is not initiated. The staff has

no basis to conclude that the licensee’s

activities constituted unsafe practices or

that these activities indicated that the

character of the licensee, including

those GPC individuals who will be

employed by Southern Nuclear after the

licenses are transferred, was unsuitable

for operating a nuclear power plant.

E. Willful TS Violations

The Petitioners stated that GPC

willfully and knowingly violated Vogtle

Unit 1 TSs during the October 1988

refueling outage by opening boron

dilution valves required to be locked

closed by TSs. The Petitioners claimed

that (1) the valves were opened while

the coolant level in the reactor vessel

was lowered to the mid-loop level, and

that this placed the plant in an

unanalyzed condition creating the risk

of an uncontrolled boron dilution

accident and an inadvertent criticality,

(2) the valves were opened to expedite

the outage so the plant could be placed

back on line according to the schedule,

and (3) the violation of TSs to stay on

schedule was due, in part, to a senior

management philosophy that outages

must be scheduled assuming that

everything goes right and that

contingency or extra time is not to be

included in the schedule.

After reviewing OI Report 2–90–001

and responses to four DFIs, and after an

enforcement conference, the staff sent

letters to the Operations Manager, the

Operations Superintendent, and the

Shift Supervisor stating that no actions

would be taken regarding their

individual NRC licenses. The staff also

stated that, although their actions did

not meet NRC expectations, the

evidence was insufficient to support a

conclusion that their actions constituted

an attempt to intentionally circumvent

the TSs. On December 31, 1991, after

consultation with the Commission, the

staff issued a Severity Level III Notice of

Violation and Proposed Imposition of

Civil Penalty (EA 91–141). GPC paid a

$100,000 civil penalty on July 9, 1992.

With respect to the placement of the

plant in a condition that could have

resulted in an uncontrolled dilution

event and inadvertent reactor criticality,

the staff reviewed an analysis of this

event that Westinghouse later performed

for GPC. The staff concluded that,

although the TSs in effect at the time

were violated, the actual opening of the

valves was of insufficient duration to

create a criticality event and did not

endanger public health and safety.

With respect to the Petitioners’ claim

that the valves were opened to expedite

the outage, the staff, based on its review,

did not find sufficient basis to conclude

that this evolution had been performed

to meet the outage schedule. The NRC

did not require chemical cleaning before

the utility restarted the reactor, and

cleaning expended time during the

outage.

On February 26, 1990, the staff found

that the dilution valves identified above

were required to be locked closed, but

were not locked while at mid-loop as

required by the TSs. The Petitioners

assert that this is another example of a

willful violation of TSs by Vogtle senior

management. Instead of installing a

mechanism to mechanically secure this

valve, the licensee had placed a hold tag

on the valve, which provided only

administrative control to preclude valve

operation. GPC subsequently agreed that

this method was unacceptable and took

action to install a mechanical locking

device. On April 26, 1990, the staff

issued Notice of Violation, 50–424,425/

90–05–01, ‘‘Failure to Mechanically

Secure Valve 1–1208–U4–176 During

Mode 5 As Required By TS 3.4.1.4.2.C’’

(Severity Level IV). The staff concluded

that, although a violation occurred, the

error in TS interpretation was not an

example of a willful violation of TSs by

Vogtle senior management. Thus, there

is no basis to conclude that GPC

willfully and knowingly violated the

TSs.

F. Safeguards Problems

The Petitioners alleged that (1) GPC

personnel, including a Vice President

and General Manager, and a Southern

Company Services Manager, knowingly

and repeatedly hid safeguards problems

from the NRC and willfully refused to

comply with reporting requirements, (2)

the GPC Vice President made false

statements to the NRC during an

Enforcement Conference about the

status of safeguards materials, and that

the false statements probably influenced

a subsequent civil penalty action taken

by the NRC, (3) on July 23, 1990, plant

and SONOPCO senior management

prevented the Site Security Manager

from making a notification within 1

hour as required by 10 CFR 73.71, and

(4) the manager was prevented from

making the call in order to delay or

defuse the NRC’s knowledge of

programmatic problems on the part of

the licensee regarding the handling of

safeguards documents.

OI investigated the allegation that

GPC knowingly and repeatedly hid

safeguards problems from the NRC and

willfully refused to comply with

mandatory reporting requirements. OI

also investigated the allegation that the

GPC Vice President made false

statements to the NRC in an

Enforcement Conference concerning the

status of safeguards material. The

investigations did not substantiate that

GPC withheld pertinent information

from the NRC at the time of the

Enforcement Conference or that GPC

management impeded the reporting of

safeguards events. On the basis of the OI

investigations, the staff concluded that

the Severity Level II violation and

$50,000 civil penalty issued by the staff

on June 27, 1990, for failing to properly

secure safeguards information was

appropriate for the volume and content

of the safeguards information involved.

GPC paid the civil penalty on July 27,

1990.

OI also investigated the allegation that

plant and SONOPCO senior

management prevented the Site Security

Manager from making notifications

within 1 hour as required by 10 CFR

73.71 in two instances. After reviewing

OI’s investigation results, the staff

concluded that both of the failures to

make timely reports were due to the

GPC’s cumbersome system for

evaluating corporate security findings

through the site security organization,

rather than due to any willful attempt to

impede the reporting process.

G. Operation of Radioactive Waste

Systems

The Petitioners asserted that GPC

endangered public health and safety by

operating a temporary radioactive waste

system known to be in gross violation of

NRC requirements. The Petitioners also

state that Vogtle’s General Manager

(GM) had intimidated the members of

the Plant Review Board (PRB) when

they attempted to consider if the use of

the waste system should be resumed.

An NRC Special Inspection Team

reviewed these items and discussed its

findings in Supplement 1 to Inspection

Report 50–424,425/90–19, dated

November 1, 1991. The licensee’s

operation of the radwaste systems was

found to be acceptable. The inspection

team concluded that although the

system was originally installed without

an adequate safety evaluation and did

not meet regulatory guidance, the

subsequent safety evaluations were

acceptable for the system’s use. One

issue was identified in the inspection

report as warranting further review by

the licensee under the provisions of 10

CFR 50.59.
13914 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices

Regarding the assertion that the GM

had intimidated PRB members, the

inspection team found one case where

a voting PRB member felt intimidated

and feared retribution because the GM

was present at the meeting. The staff

concluded that the allegation was

substantiated. However, the PRB

member stated that he did not change

his vote in response to GM pressure,

and the GM subsequently met with the

PRB members to allay their fears. Since

the level of intimidation perceived by

the PRB member was insufficient to

have any affect on the PRB member’s

safety decision, and the GM

subsequently addressed the

intimidation concern with the PRB,

further regulatory action based on this

event was not warranted.

H. GPC Statement On Management

Participation in a Telephone Call

The Intervenor contended that GPC,

in their April 1, 1991, response to the

Petition, intentionally tried to conceal

the participation of the Senior VP—

Nuclear Operations in an April 19,

1990, conference call regarding a

Licensee Event Report (LER).

The Senior VP participated in one of

at least two conference calls known to

have taken place on April 19, 1990,

before the LER was issued that same

day. However, there is no evidence that

the GPC corporate official who signed

the April 1, 1991, Petition response (the

GPC Executive Vice President) was

aware of the fact that the Senior VP had

participated in one of the April 19

conference calls. The staff review of a

transcript of Mr. Mosbaugh’s

surreptitiously recorded audio tape of

the calls, that was admitted as evidence

in the licensing proceeding, shows that

the Senior VP joined one call after

decisions were made on how to convey

the DG start count information in the

LER, and the Senior VP did not

participate in a second conference call

that finalized the LER language. The

staff has determined that there is

insufficient basis to conclude that GPC,

in their April 1, 1991, response to the

Petition, intentionally tried to conceal

the participation of the Senior VP—

Nuclear Operations in an April 19,

1990, conference call regarding the

preparation of the LER.

I. Management Retaliation

The Petition alleged that GPC

retaliated against managers who made

their regulatory concerns known to GPC

or SONOPCO management.

As noted previously, in 1990, Messrs.

Hobby and Mosbaugh each filed a

complaint with DOL alleging, in part,

that their employment terminations

constituted unlawful discrimination

against them for engaging in protected

activities (i.e., expressing safety

concerns). The Secretary found that the

terminations of employment resulted

from unlawful discrimination by senior

licensee management personnel. The

NRC reviewed the Secretary’s decisions

and determined that violations of 10

CFR 50.7, (Employee Protection) had

occurred. Two Severity Level I Notices

of Violation were issued to the licensee

as provided for by the NRC’s

Enforcement Policy. Although the NRC

took no enforcement actions directly

against the individuals involved, the

NRC did issue letters to several senior

management personnel to emphasize

that harassment, intimidation and

discrimination against licensee

employees for engaging in protected

activities is unacceptable.

GPC corrective actions included

emphasizing to employees that they are

encouraged to raise safety concerns and

that harassment, intimidation and

discrimination against employees for

raising those concerns is contrary to a

strongly supported management policy

prohibiting such retaliatory measures.

Licensee corporate management

communicated this message in writing,

and at special meetings with site

employees to focus on this concern.

The staff concludes that the

significant enforcement action by the

NRC, in addition to ASLB hearing

activities and the DOL Orders, is likely

to sensitize licensee management to the

seriousness of problems of this nature

and ensure a proper environment in

which employees can express regulatory

concerns without fear of retaliation,

harassment, intimidation, or

discrimination.

J. Management Practices

The Petitioners stated that GPC

routinely used nonconservative and

questionable management practices at

its nuclear facilities. Examples provided

by the Petitioner include the improper

use of TS 3.0.3 (see D. above), willful TS

violations (see E. above), safeguards

problems (see F. above), and operation

of a radioactive waste system known to

be in violation of NRC requirements (see

G. above). To address the Petitioners’

general characterization of licensee

management practices as being

nonconservative and questionable, NRC

witnesses, including staff engineers,

supervisors, and senior managers

provided testimony during the ASLB

proceeding on several technical issues

in addition to observations and

assessments of GPC’s performance from

several perspectives.

The staff concluded that GPC’s

performance problems were not

sufficient to establish that Southern

Nuclear (and the GPC employees who

will work for that company if the

transfers were granted) lack the requisite

character to be a licensee. The staff cited

GPC’s overall performance in keeping

the NRC informed of DG post-repair and

trouble shooting activities, GPC’s

technical competence in addressing

those matters and the efforts of the GPC

Senior Vice President—Nuclear

Operations to keep the NRC informed of

errors as GPC became aware of them.

In a letter, dated December 23, 1996,

Southern Nuclear and GPC iterated their

1995 commitment that the former GM

would not assume a line management

position for a GPC or Southern Nuclear

plant unless he had satisfactorily

completed training in management

communications and responsibilities,

and the NRC received 60 days prior

written notice of the assignment. The

staff has relied on this commitment in

evaluating the proposed transfers. A

condition has been included in the

Order authorizing these license transfers

that the staff will receive 60 days prior

written notice of the licensee’s intent to

assign the individual to a line

management position at Vogtle.

The staff has concluded that, although

significant violations were identified

against GPC in the past, corrective

actions have been implemented. There

has been no showing that Southern

Nuclear or GPC (including the GPC

employees who will work for Southern

Nuclear if the transfers were granted)

lacks the requisite character to be a

licensee. In light of the various

regulatory actions that have already

been taken by the NRC on issues raised

in the Petition, including the Order

provision regarding the former Vogtle

General Manager, and corrective actions

taken by the licensee, no further action

is necessary.

III. Conclusion

As summarized above, NRC has

conducted several inspections,

investigations, and technical reviews

regarding the concerns in the Petition,

and proceedings before NRC and DOL

have been conducted regarding most of

the concerns. Some of the concerns

raised by the Petitioners were

substantiated. Violations of regulatory

requirements have occurred. Notices of

Violation and civil penalties have been

issued to the licensee, letters have been

issued to several individuals, and

certain conditions regarding one

individual are being imposed by NRC in

conjunction with the license transfers.

To this extent, the Petitioners’ request
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Notices 13915

for action pursuant to 10 CFR 2.206 has

been granted.

On the basis of the NRC staff’s review

and the record of the Vogtle license

transfer amendment proceeding, I

conclude that no unauthorized transfer

of the Vogtle or Hatch operating licenses

occurred, and that the GPC nuclear

facilities are being operated in

accordance with NRC regulations and

do not endanger the health and safety of

the public. On balance, the evidence

does not support the conclusion that

GPC, SONOPCO Project, or Southern

Nuclear deliberately provided false or

misleading information to the NRC or

that Southern Nuclear or GPC

(including the GPC employees that

would be employed by Southern

Nuclear if the proposed license transfer

is authorized) lack the requisite

character and integrity to be an NRC

licensee as required by section 182 of

the Atomic Energy Act, 42 U.S.C 2232,

and 10 CFR 50.80. Thus, there is no

basis upon which to grant Petitioners’

request that the operation of the facility

be modified, suspended or revoked.

With respect to Petitioners’ request

that the NRC institute proceedings and

impose civil penalties based on the

matters addressed in the Petition, the

issues in the Petition that give rise to

substantial health and safety issues

have, in fact, been the subject of a

lengthy proceeding and escalated

enforcement actions by the NRC. Also,

based upon the findings of the DOL, the

NRC has addressed both Petitioners’

specific concerns that they were

discriminated against for engaging in

protected activities (and the associated

allegation that GPC retaliates against

managers who make their regulatory

concerns known) by taking escalated

enforcement actions against GPC. Based

on actions already taken by the NRC

staff and the licensee, there is

reasonable assurance that the GPC

facilities operate with adequate

protection of the public health and

safety. Therefore, I decline to take any

further action with respect to matters

raised in the Petition. To this extent, the

Petitioners’ request for action pursuant

to 10 CFR 2.206 is denied.

A complete copy of the Director’s

Decision will be filed with the Secretary

of the Commission for the Commission’s

review in accordance with 10 CFR

2.206(c) of the Commission’s

regulations. As provided by this

regulation, the Director’s Decision will

constitute the final action of the

Commission 25 days after the date of

issuance unless the Commission, on its

own motion, institutes a review of the

Director’s Decision in that time.

Dated at Rockville, Maryland, this 18th day

of March 1997.

[FR Doc. 97–7317 Filed 3–21–97; 8:45 am]

BILLING CODE 7590–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22569; 812–10524]

Nations Fund Trust et al.; Notice of

Application

March 17, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: Nations Funds Trust

(‘‘NFT’’), Nations Fund, Inc. (‘‘NFI’’),

NationsBanc Advisors, Inc. (‘‘NBAI’’),

The Pilot Funds (‘‘Pilot’’), and

Boatmen’s Trust Company

(‘‘Boatmen’s’’).

RELEVANT ACT SECTIONS: Order requested

under section 17(b) for an exemption

from section 17(a).

SUMMARY OF APPLICATION: Applicants

request an order under section 17(b) for

an exemption from section 17(a) to

permit certain series of NFT and NFI to

acquire all of the assets and assume all

of the stated liabilities of certain series

of Pilot. Because of certain affiliations,

applicants may not rely on rule 17a–8

under the Act.

FILING DATE: The application was filed

on February 13, 1997. Applicants have

agreed to file an amendment during the

notice period, the substance of which is

included in this notice.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicants with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

April 11, 1997, and should be

accompanied by proof of service on the

applicants, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicants: NFT, NFI, NBAI, and

Boatmen’s One NationsBank Plaza,

Charlotte, North Carolina 28255; Pilot,

3435 Stelzer Road, Columbus, Ohio,

43219.

FOR FURTHER INFORMATION CONTACT:

John K. Forst, Staff Attorney, at (202)

942–0569, or Mary Kay Frech, Branch

Chief, at (202) 942–0564, (Division of

Investment Management, Office of

Investment Company Regulation.)

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch.

Applicants’ Representations

1. NFT, a Massachusetts business

trust, is registered under the Act as an

open-end management investment

company. NFT currently consists of

thirty-two series, seven of which are the

subject of this application: Nations

Strategic Fixed Income Fund, Nations

Disciplined Equity Fund, Nations Value

Fund, Nations Intermediate Municipal

Bond Fund, Nation Short-Intermediate

Government Fund, Nations Tax Exempt

Fund, and Nations Municipal Income

Fund. NFI, A Maryland corporation, is

registered under the Act as an open-end

management investment company.

Three of NFI’s existing five series and

three shell funds are the subject of this

application: Nations Equity Income

Fund, Nations Prime Fund, Nations

Treasury Fund, Nations Small Company

Growth Fund (shell), Nations U.S.

Government Bond Fund (shell), and

Nations International Growth Fund

(shell) (collectively, these thirteen funds

are referred to as the ‘‘Acquiring

Funds’’).

2. Pilot, a Massachusetts business

trust, is registered under the Act as an

open-end management investment

company. Pilot currently offers fourteen

series: Pilot Diversified Bond Income

Fund, Pilot Equity Income Fund, Pilot

Growth Fund, Pilot Growth and Income

Fund, Pilot Intermediate Municipal

Bond Fund, Pilot Intermediate U.S.

Government Securities Fund, Pilot

International Equity Fund, Pilot

Missouri Short-Term Tax-Exempt Fund,

Pilot Municipal Bond Fund, Pilot

Municipal Bond Fund, Pilot Short-Term

U.S. Treasury Fund, Pilot Small

Capitalization Equity Fund, Pilot U.S.

Government Securities Fund, Pilot

Short-Term Diversified Assets Fund,

and Pilot Short-Term Tax-Exempt

Diversified Fund (collectively, the

‘‘Acquired Funds’’).

3. The investment objectives of each

Acquired Fund are substantially similar

to those of the corresponding Acquiring

Fund.

4. NBAI is the investment adviser to

the operating Acquiring Funds. NBAI is