[Federal Register Volume 73, Number 179 (Monday, September 15, 2008)]
[Notices]
[Pages 53291-53294]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-21432]


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NUCLEAR REGULATORY COMMISSION

[IA-08-014]


In the Matter of Joseph S. Shepherd; Order Prohibiting 
Involvement in 10 CFR Part 71 Activities and Conditioning Other NRC 
Licensed Activities (Effective Immediately)

I

    Joseph S. Shepherd was a contractor to Source Production and 
Equipment Company, Inc. (SPEC), of St. Rose, Louisiana. SPEC was a 
registered user of a U.S. Nuclear Regulatory Commission (NRC or 
Commission) Model No. 5979 Shipping Package (Certificate of Compliance 
(CoC) No. 5979, Revision 10), and an NRC-approved Quality Assurance 
(QA) Program Approval holder (NRC Docket Number 71-0102) pursuant to 
Part 71 of Title 10 of the Code of Federal Regulations (10 CFR). The 
CoC authorized use of the Model No. 5979 package under the general 
license provisions of 10 CFR 71.12 [currently 10 CFR 71.17]. The QA 
Program Approval satisfied the requirements of 10 CFR 71.12(b) 
[currently 10 CFR 71.17(b)], and 10 CFR 71.101(c) [currently 10 CFR 
71.101(c)(1)] by authorizing activities to be conducted under criteria 
of Subpart H of 10 CFR Part 71, ``Quality Assurance.'' SPEC also was an 
NRC export licensee pursuant to 10 CFR Part 110. SPEC hired Mr. 
Shepherd to perform certain maintenance inspections required by the NRC 
CoC for the Model No. 5979 shipping cask prior to making shipments of 
NRC licensed radioactive material to Mexico.

II

    During an NRC inspection conducted on November 18, 2004, at Alpha-
Omega Services, Inc. (AOS), an NRC certificate holder and Quality 
Assurance (QA) program holder, certain nonconformances regarding a 
shipping package, serial number 1B, CoC No. 5979, Model No. 5979, were 
brought to the NRC's attention. The end-caps of the shipping package 
did not conform to the physical (weight and materials) and dimensional 
(end cap thickness and length of the bolts) configuration specified by 
the CoC. In addition, holes had been drilled in the turret of the 
shipping package. Foss Therapy Services (FTS) had purchased the 
shipping package from AOS in 2001. FTS holds a State of California 
radioactive materials license and coordinates source exchanges and 
recycling for radiation therapy systems at various hospitals. FTS, 
however, is not an NRC licensee, authorized user, or certificate or QA 
program holder. AOS happened to be performing its annual inspection of 
the Model No. 5979 package when NRC conducted its November 18, 2004, 
inspection at AOS.
    The NRC also became aware during its November 18, 2004, inspection 
at AOS that FTS had been using SPEC, to ship byproduct material for FTS 
to Mexico. The NRC obtained shipping documents which confirmed that 
SPEC had used the nonconforming container between June 25, 2001, and 
May 20, 2004, to make export shipments to Mexico. SPEC hired Mr. 
Shepherd, an officer and co-owner of FTS, to perform inspections of the 
Model No. 5979 shipping package prior to three export shipments by SPEC 
on July 15, 2003, December 4, 2003, and May 20, 2004.
    As a result of the NRC's November 18, 2004, inspection, the NRC's 
Office of Investigations (OI) initiated an investigation to determine 
whether SPEC had willfully violated NRC regulations relating to its 
export shipments to Mexico.
    Based on the OI investigation, the NRC has concluded that Mr. 
Shepherd engaged in three examples of deliberate misconduct in 
violation of 10 CFR 110.7b, ``Deliberate Misconduct.''
    First, on or about July 15, 2003, and December 4, 2003, and in 
violation of 10 CFR 110.7b(a)(2), Mr. Shepherd deliberately provided 
materially inaccurate information to SPEC in two checklists and in 
shipping papers concerning inspections of the Model No.

[[Page 53292]]

5979 shipping package. Specifically, Mr. Shepherd signed ``OK'' on all 
applicable steps of the FTS inspection checklists, and certified on the 
bills of lading that the package conformed to all national governmental 
regulations, signifying that Mr. Shepherd had performed all steps of 
the inspection and that the package conformed to the NRC CoC 
requirements. In fact, Mr. Shepherd did not perform step 2.4.A, which 
required that he remove and visually check six cask screws. The 
inaccurate information was material because it concealed that SPEC 
failed to conform to the CoC requirement that before shipment of the 
package, an inspection must be performed, including step 2.4.A.
    By deliberately providing materially inaccurate checklists and 
bills of lading to SPEC on or about July 15, 2003 and December 4, 2003, 
Mr. Shepherd violated 10 CFR 110.7b(a)(1) because he deliberately 
caused SPEC to violate 10 CFR 71.3, ``Requirement for License.''10 CFR 
71.3 requires that all persons who deliver for transport, or who 
transport, NRC licensed material must have an NRC license to do so. 10 
CFR 71.17, ``General license; NRC-approved package'', provides that a 
general license to deliver or transport licensed material in a package 
with an NRC CoC is granted only to licensees who comply with the terms 
and conditions of the CoC. SPEC relied upon Mr. Shepherd's 
representations that he had completed all steps of the package 
inspection required by the CoC. As a result of Mr. Shepherd's 
deliberate provision of materially inaccurate information, SPEC did not 
comply with the COC, and thus SPEC delivered for transport and 
transported licensed material without the license required by 10 CFR 
71.3.
    Second, on or about May 20, 2004, and in violation of 10 CFR 
110.7b(a)(2), Mr. Shepherd deliberately provided materially inaccurate 
information to SPEC in a checklist and in a bill of lading concerning 
an inspection of the Model No. 5979 package. Specifically, Mr. Shepherd 
signed ``OK'' on all applicable steps of the FTS inspection checklist 
and certified on the bill of lading that the package met all national 
governmental regulations, signifying that Mr. Shepherd had performed 
all steps of the inspection and that the package met all CoC 
requirements. In fact, Mr. Shepherd was not present and did not conduct 
any inspection of the CoC No. 5979 package. The inaccuracies were 
material because they concealed that Mr. Shepherd's associate who did 
the inspection was not authorized or qualified to perform the 
inspection on SPEC's behalf, and concealed that steps 2.4 through 2.8, 
required by the maintenance inspection procedures, were not performed.
    By deliberately providing a materially inaccurate checklist and 
bill of lading to SPEC on or about May 20, 2004, Mr. Shepherd violated 
10 CFR 110.7b(a)(1) because he deliberately caused SPEC to violate 10 
CFR 71.3, ``Requirement for License.'' 10 CFR 71.3 requires that all 
persons who deliver for transport, or who transport, NRC licensed 
material must have an NRC license to do so. 10 CFR 71.17, ``General 
license; NRC-approved package'', provides that a general license to 
deliver or transport licensed material in a package with an NRC CoC is 
granted only to licensees who comply with the terms and conditions of 
the CoC. SPEC relied upon Mr. Shepherd's representations that he had 
completed all steps of the package inspection required by the CoC. As a 
result of Mr. Shepherd's deliberate provision of materially inaccurate 
information, SPEC did not comply with the CoC, and thus SPEC delivered 
for transport and transported licensed material without the license 
required by 10 CFR 71.3.
    Third, Mr. Shepherd violated 10 CFR 110.7b(a)(2) by deliberately 
providing materially inaccurate information to SPEC in a conversation 
around May 2004, in a fax dated January 12, 2005, and again in an e-
mail of April 12, 2005, when Mr. Shepherd told SPEC that he had not 
authorized any modifications to the Model No. 5979 package. Mr. 
Shepherd told SPEC personnel that the only modifications to the package 
were holes drilled in the turret by someone else in Mexico. In June 
2005, shortly after an OI interview in which Mr. Shepherd admitted to 
having authorized modifications to the package, Mr. Shepherd told SPEC 
that he did in fact authorize modifying the end caps by drilling larger 
holes. The inaccurate information was material because it concealed 
that the shipping package was rendered nonconforming by the 
modification Mr. Shepherd had authorized, and concealed that SPEC had 
delivered for transport or transported licensed material in a certified 
container without the license required by10 CFR 71.3.

III

    Joseph S. Shepherd entered into a plea agreement with the United 
States Department of Justice on August 22, 2008. Under the terms of 
that plea agreement, Mr. Shepherd agreed not to contest an NRC order 
that requires him to comply with the following, or substantially 
similar, provisions related to his involvement in NRC activities:
    1. Not package any Type B shipments, nor prepare any paperwork, for 
a Type B shipment in any NRC jurisdiction.
    2. Prepare and submit the following information to the NRC by the 
end of September 2008: A list of lessons learned and measures taken to 
avoid recurrence and a statement describing the reasons that the NRC 
should have confidence that Mr. Shepherd will perform licensed 
activities in compliance with NRC regulations.
    3. Prior to his conducting licensed activities in NRC jurisdiction, 
Mr. Shepherd will notify the NRC in writing no later than 5 business 
days of the planned work in order to facilitate inspections of his 
activities.
    4. For a period of five years from the date of an Order, prior to 
his conducting licensed activities in NRC jurisdictions, Mr. Shepherd 
will notify customers that the NRC has issued an Order to him and will 
also make that Order available to customers.
    5. Prepare a presentation and offer to give that presentation at an 
industry conference to include, at a minimum, a description of the 
violations, as well as the circumstances that led to the violations, 
lessons learned, and the corrective actions taken and planned to 
prevent recurrence. The presentation will also address the following: 
(1) Acknowledgment that a condition occurred that resulted in 
violations of NRC requirements; (2) the need to establish an 
environment and culture that promotes regulatory compliance through the 
implementation of controls and processes; (3) the need to ensure that 
all employees are trained and oriented in NRC requirements; and (4) the 
importance of continued self-assessment of programs and processes to 
ensure that these programs and processes are delivering the desired 
outcomes. Mr. Shepherd agrees to advise the NRC of his compliance with 
this provision no later than one year from the date of an Order.
    6. Take a Radiation Safety Officer course with emphasis on the 
regulatory interface within one year of the date of an Order in order 
to enhance his understanding of the importance of completeness and 
accuracy of information regarding activities subject to NRC and DOT 
regulation. Mr. Shepherd agrees to advise the NRC of his compliance 
with this provision no later than one year from the date of an Order.
    7. If Mr. Shepherd should seek other employment involving NRC-
regulated activities within five years from the date of an Order, Mr. 
Shepherd will provide that employer with a copy of any Order addressing 
the violations.

[[Page 53293]]

IV

    Based on the above, it appears that Joseph S. Shepherd has engaged 
in deliberate misconduct in violation of 10 CFR 110.7b, ``Deliberate 
misconduct.'' The NRC must be able to rely on its licensees and their 
employees and contractors to comply with NRC requirements, including 
the requirement to provide information that is complete and accurate in 
all material respects. Mr. Shepherd's actions in causing SPEC, an NRC 
Licensee, to violate 10 CFR 71.3, and his misrepresentations to SPEC, 
have raised serious doubt as to whether he can be relied upon to comply 
with NRC requirements and whether the public health and safety can be 
assured if he is involved in NRC-licensed activities.
    While the NRC is not aware of actual safety consequences associated 
with the shipments, the potential safety consequences were significant, 
considering the potential adverse impact of shipping radioactive 
materials in an unapproved package design that had not been 
demonstrated to meet the transportation package approval standards for 
both normal and hypothetical accident conditions as required by 10 CFR 
part 71. Of the many controls that are in place to assure public health 
and safety during the transport of radioactive materials, one of the 
most important is that the configuration of the package conforms to 
that analyzed and approved by the NRC staff, through the package CoC 
process, so as to assure integrity of the package during transportation 
for both normal and hypothetical accident conditions. In this case, the 
package integrity is of particular safety concern given the quantities 
of licensed radioactive material that were transported on July 15, 
2003, December 4, 2003, and May 20, 2004.
    Consequently, I lack the requisite reasonable assurance that Mr. 
Shepherd can be relied upon to comply with NRC requirements with 
honesty and integrity. Therefore, the public health, safety, and 
interest require that Mr. Shepherd be prohibited from any involvement 
in 10 CFR part 71 activities, including the package certificate and 
quality assurance program requirements of 10 CFR part 71, and that Mr. 
Shepherd's involvement in other NRC licensed activities be conditioned. 
Furthermore, pursuant to 10 CFR 2.202, ``Orders,'' I find that the 
significance of Mr. Shepherd's conduct described above is such that the 
public health, safety, and interest require that this Order be 
immediately effective.

V

    Accordingly, pursuant to Sections 81, 161b, 161i, 161o, 182, and 
186 of the Atomic Energy Act of 1954, as amended, and the Commission's 
regulations in 10 CFR 2.202, 10 CFR Part 71, 10 CFR 110.7b, and 10 CFR 
150.20, it is hereby ordered, effective immediately, that:
    1. Mr. Shepherd is prohibited from packaging any Type B shipments 
and from preparing any paperwork for a Type B shipment in any NRC 
jurisdiction.
    2. Mr. Shepherd shall prepare a list of lessons learned and 
identify measures taken to avoid recurrence of his violations. Mr. 
Shepherd shall also include a statement describing the reasons that the 
NRC should have confidence that Mr. Shepherd will perform licensed 
activities in compliance with NRC regulations. This information shall 
be submitted to the NRC by the end of September 2008.
    3. Prior to his conducting licensed activities in any NRC 
jurisdiction, Mr. Shepherd shall notify the NRC in writing no less than 
5 business days in advance of the planned work in order to facilitate 
inspections of his activities. The notifications shall be made for a 
period of five years from the date of this Order.
    4. Prior to his conducting licensed activities in any NRC 
jurisdiction, Mr. Shepherd shall notify customers that the NRC has 
issued this Order to him and shall also make this Order available to 
customers. The notifications shall be made for a period of five years 
from the date of this Order.
    5. Mr. Shepherd shall prepare a presentation and offer to give that 
presentation at an industry conference. The presentation must include, 
at a minimum, a description of the violations, as well as the 
circumstances that led to the violations, lessons learned, and the 
corrective actions taken and planned to prevent recurrence. The 
presentation must also address the following: (1) Acknowledgment that a 
condition occurred that resulted in violations of NRC requirements; (2) 
the need to establish an environment and culture that promotes 
regulatory compliance through the implementation of controls and 
processes; (3) the need to ensure that all employees are trained and 
oriented in NRC requirements; and (4) the importance of continued self-
assessment of programs and processes to ensure that these programs and 
processes are delivering the desired outcomes. Mr. Shepherd must advise 
the NRC upon completion of these items, which shall be no later than 
one year from the date of this Order.
    6. Mr. Shepherd shall take a Radiation Safety Officer course with 
emphasis on the regulatory interface within one year of the date of the 
Order in order to enhance his understanding of the importance of 
completeness and accuracy of information regarding activities subject 
to NRC and DOT regulation. Mr. Shepherd must advise the NRC upon 
completion of this item, which shall be no later than one year from the 
date of the Order.
    7. Should Mr. Shepherd leave Foss Therapy Services and seek other 
employment involving NRC-regulated activities within five years from 
the date of this Order, Mr. Shepherd shall provide that employer a copy 
of this Order.
    The Director, Office of Enforcement, may, in writing, relax or 
rescind any of the above conditions upon demonstration by Joseph S. 
Shepherd of good cause.

VI

    In accordance with 10 CFR 2.202, Joseph S. Shepherd must, and any 
other person adversely affected by this Order may, submit an answer to 
this Order within 20 days of its issuance. In addition, Joseph S. 
Shepherd, and any other persons adversely affected by this Order may 
request a hearing on this Order within 20 days of its issuance. Where 
good cause is shown, consideration will be given to extending the time 
to request a hearing. A request for extension of time must be made in 
writing to the Director, Office of Enforcement, U.S. Nuclear Regulatory 
Commission, and include a statement of good cause for the extension.
    The answer shall be in writing and under oath or affirmation, and 
shall specifically admit or deny each allegation or charge made in this 
Order. The answer shall set forth the matters of fact and law on which 
Joseph S. Shepherd or other persons adversely affected relies and the 
reasons as to why this Order should not have been issued. The answer 
may consent to the Order. Any answer shall be submitted to the 
Secretary, U.S. Nuclear Regulatory Commission, ATTN: Chief, Rulemakings 
and Adjudications Staff, Washington, DC 20555-0001. Copies shall also 
be sent to: the Director, Office of Enforcement, U.S. Nuclear 
Regulatory Commission, Washington, DC 20555-0001; the Assistant General 
Counsel for Materials Litigation and Enforcement at the same address; 
and to Joseph S. Shepherd if the answer is by a person other than 
Joseph S. Shepherd.
    If a person other than Joseph S. Shepherd requests a hearing, that 
person shall set forth with particularity

[[Page 53294]]

the manner in which his or her interest is adversely affected by this 
Order and shall address the criteria set forth in 10 CFR 2.309(d) and 
(f).
    If Joseph S. Shepherd or a person whose interest is adversely 
affected requests a hearing, the Commission will issue an Order 
designating the time and place of any hearing. If a hearing is held, 
the issue to be considered at such hearing shall be whether this Order 
should be sustained.
    Pursuant to 10 CFR 2.202(c)(2)(i), Joseph S. Shepherd, or any other 
person adversely affected by this Order may, in addition to demanding a 
hearing, at the time the answer is filed or sooner, move the presiding 
officer to set aside the immediate effectiveness of the Order on the 
ground that the Order, including the need for immediate effectiveness, 
is not based on adequate evidence but on mere suspicion, unfounded 
allegations, or error. The motion must state with particularity the 
reasons why the Order is not based on adequate evidence and must be 
accompanied by affidavits or other evidence relied on.
    A request for a hearing or to set aside the immediate effectiveness 
of this order must be filed in accordance with the NRC E-Filing rule, 
which became effective on October 15, 2007. The NRC E-filing Final Rule 
was issued on August, 28 2007, (72 FR 49,139) and codified in pertinent 
part at 10 CFR Part 2, Subpart B. The E-Filing process requires 
participants to submit and serve documents over the internet or, in 
some cases, to mail copies on electronic optical storage media. 
Participants may not submit paper copies of their filings unless they 
seek a waiver in accordance with the procedures described below.
    To comply with the procedural requirements associated with E-
Filing, at least five (5) days prior to the filing deadline the 
requestor must contact the Office of the Secretary by e-mail at 
<a href="/cdn-cgi/l/email-protection#733b3632213a3d34373c30383627333d21305d343c25"><span class="__cf_email__" data-cfemail="a6eee3e7f4efe8e1e2e9e5ede3f2e6e8f4e588e1e9f0">[email protected]</span></a>, or by calling (301) 415-1677, to request (1) a 
digital ID certificate, which allows the participant (or its counsel or 
representative) to digitally sign documents and access the E-Submittal 
server for any NRC proceeding in which it is participating; and/or (2) 
creation of an electronic docket for the proceeding (even in instances 
when the requestor (or its counsel or representative) already holds an 
NRC-issued digital ID certificate). Each requestor will need to 
download the Workplace Forms Viewer\TM\ to access the Electronic 
Information Exchange (EIE), a component of the E-Filing system. The 
Workplace Forms Viewer\TM\ is free and is available at http://www.nrc.gov/site-help/e-submittals/install-viewer.html. Information 
about applying for a digital ID certificate also is available on NRC's 
public Web site at http://www.nrc.gov/site-help/e-submittals/apply-certificates.html.
    Once a requestor has obtained a digital ID certificate, had a 
docket created, and downloaded the EIE viewer, it can then submit a 
request for a hearing through EIE. Submissions should be in Portable 
Document Format (PDF) in accordance with NRC guidance available on the 
NRC public Web site at http://www.nrc.gov/site-help/e-submittals.html. 
A filing is considered complete at the time the filer submits its 
document through EIE. To be timely, electronic filings must be 
submitted to the EIE system no later than 11:59 p.m. Eastern Time on 
the due date. Upon receipt of a transmission, the E-Filing system time-
stamps the document and sends the submitter an e-mail notice confirming 
receipt of the document. The EIE system also distributes an e-mail 
notice that provides access to the document to the NRC Office of the 
General Counsel and any others who have advised the Office of the 
Secretary that they wish to participate in the proceeding, so that the 
filer need not serve the document on those participants separately. 
Therefore, any others who wish to participate in the proceeding (or 
their counsel or representative) must apply for and receive a digital 
ID certificate before a hearing request is filed so that they may 
obtain access to the document via the E-Filing system.
    A person filing electronically may seek assistance through the 
``Contact Us'' link located on the NRC Web site at http://www.nrc.gov/site-help/e-submittals.html or by calling the NRC technical help line, 
which is available between 8:30 a.m. and 4:15 p.m., Eastern Time, 
Monday through Friday. The help line number is (800) 397-4209 or 
locally, (301) 415-4737.
    Participants who believe that they have good cause for not 
submitting documents electronically must file a motion, in accordance 
with 10 CFR 2.302(g), with their initial paper filing requesting 
authorization to continue to submit documents in paper format. Such 
filings must be submitted by (1) first class mail addressed to the 
Office of the Secretary of the Commission, U.S. Nuclear Regulatory 
Commission, Washington, DC 20555-0001, Attention: Rulemaking and 
Adjudications Staff; or (2) courier, express mail, or expedited 
delivery service to the Office of the Secretary, Sixteenth Floor, One 
White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852, 
Attention: Rulemaking and Adjudications Staff. Participants filing a 
document in this manner are responsible for serving the document on all 
other participants. Filing is considered complete by first-class mail 
as of the time of deposit in the mail, or by courier, express mail, or 
expedited delivery service upon depositing the document with the 
provider of the service.
    Documents submitted in adjudicatory proceedings will appear in 
NRC's electronic hearing docket which is available to the public at 
http://ehd.nrc.gov/EHD_Proceeding/home.asp, unless excluded pursuant 
to an order of the Commission, an Atomic Safety and Licensing Board, or 
a Presiding Officer. Participants are requested not to include personal 
privacy information, such as social security numbers, home addresses, 
or home phone numbers in their filings. With respect to copyrighted 
works, except for limited excerpts that serve the purpose of the 
adjudicatory filings and would constitute a Fair Use application, 
Participants are requested not to include copyrighted materials in 
their works.
    In the absence of any request for hearing, or written approval of 
an extension of time in which to request a hearing, this Order shall be 
final 20 days from the date of this Order without further order or 
proceedings. If an extension of time for requesting a hearing has been 
approved, the provisions specified in Section IV shall be final when 
the extension expires if a hearing request has not been received. An 
answer or request for hearing shall not stay the immediate 
effectiveness of this order.

    Dated this 8th day of September 2008.

    For the Nuclear Regulatory Commission.
Cynthia A. Carpenter,
Director, Office of Enforcement.
[FR Doc. E8-21432 Filed 9-12-08; 8:45 am]
BILLING CODE 7590-01-P


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