TVA RESTRICTED INFORMATION Office of the Inspector General Report of Administrative Inquiry March 23, 2010 William R. McCoIIum, Jr., LP 6A-C Ralph E. Rodgers, WT 555 LINCOLN DRIVE WEST MARLTON, NEW JERSEY 08053 OIG FILE NO. 12E-102 This report was prepared at the request of Ralph E. Rodgers, Deputy General Counsel, Office of the General Counsel, Tennessee Valley Authori TVA to summarize investigative and audit efforts concerning the actions of . ese swere Ia ed 0 owmg recelp a comp am a engaged in funneling money to a TVA employee, John L. (Jack) Symonds, secure TVA nuclear contracts for HI. This report provides information related to how those payments were made to the TVA employee, involvement with those payments and the pattern of behavior exhibited by when attempting to acquire nuclear contracts. The report also re?ects audi In Ings of overbilling by HI for equipment costs and the rationale provided by HI and TVA for the price difference at two of nuclear plants. The ?ndings in this report were based on the statements mm, several witnesses, the statements of Mr. Symonds, former Brown erry uc ear ant (BFN) Technical Contract Manager, and documents included as attachments. On August 3, 2007, Mr. Symonds pled guilty in US. federal court to making false ?nancial statements to TVA by not disclosing receiving more than $54,000 from Krohn Enterprises LLC, a company he co-owned with his spouse. Mr. Symonds was paid by HI through another company called U. 8. Tool Die Mr. Symonds knew HI had contracted with TVA in November 2001 to design and construct a dry cask storage system for spent nuclear fuel rods at BFN, and had contracted with to fabricate some of the construction materials for the TVA BFN dry cask storage system. The money received by Mr. Symonds was used to pay personal expenses of Mr. Symonds and his spouse. TVA RESTRICTED INFORMATION William R. McCoIIum, Jr. Ralph E. Rodgers Page 2 March 23, 2010 OVERVIEW During June 2000, TVA needed above-ground storage containers to store spent nuclear fuel at Sequoyah Nuclear Plant (SQN). TVA entered into a contract with Hl, for design and construction services, storage systems, and the necessary ancillary equipment for the storage containers. During November 2001, the contract was supplemented to authorize Hl to perform the same services at BFN. TVA employee Mr. Symonds was involved in the negotiations for the BFN contract as the BFN Technical Contract Manager, while being courted by Hl with promises of money and employment. Mr. Symonds was later paid over $50,000 for his assistance in obtaining the TVA contract for HI. FINDINGS While TVA was assessing re-racking spent nuclear fuel storage at BFN, the plant initiated a study to determine if BFN should convert to a dry cask storage system instead of re-racking its spent nuclear fuel. Mr. Symonds began advocating strongly for HI to perform the work at BFN that Hl had performed at SQN. During this time, agreed to pay Mr. Symonds $50,000. suggested that r. monds create a company and took Mr. Symon HEW F, who provided Mr. Symonds with a contact wou r. ymon establish an Limited Liability Company (LLC) in Delaware. From July 29 to August 2, 2001, Mr. Symonds and his wife went to Philadelphia, on a birthday trip. The itinerary for the trip was arranged by HI and the round-trip airline reservation for Mr. Symonds and his wife was made and paid for by Hl. From Philadelphia, Mr. Symonds and his wife traveled to Atlantic City, New Jersey, and stayed at the Taj Mahal, the Trump-owned hotel, paid for by Hl. Mr. Symonds and his wife had dinner WWIW that night. On July 31, 2001, they returned to a la ere a ma reservations for the Symonds at the Rittenhouse Hotel. arranged for a dinner party for the Symonds at a ?ne French restaurant, Le ec- In, and HI paid $2,137.20 for the meal. Attending were Mr. Symonds and his wife,? and his wife, and three Hl executives and their escorts. placed r. ymonds at the head of the table. Later in August, 2001 ?(and Mr. Symonds attended a meeting at Fitzpatrick Power Plant, Oswego, ew or consisting of about 30 people representing various utilities to discuss lessons learned. Mr. Symonds was reimbursed a portion of the cost for this trip by TVA, and travel expenses were also charged to of which was the majority owner. A Con?dential Source recalled that?J and created a company, FABSCO Inc., and that company con ro see ac ment 1). While Mr. Symonds was at the meeting, a TVA employee telephoned Mr. Symonds to tell him the TVA Board decided to proceed with the dry TVA RESTRICTED INFORMATION William R. McCoIIum, Jr. Ralph E. Rodgers Page 3 March 23, 2010 cask storage project for BFN. During a dinner that night? announced with fanfare to everyone present the decision to award the wor 0 HI, to the celebratory sound of clinking glasses. During the dinner, Mr. Symonds? wife told her vocation was credentialing doctors, which included conducting background checks. On September 13, 2001, Mr. Symonds had a breakfast meeting with! at the Marriott Hotel, Huntsville, Alabama. Previously, had discusse emp oyment for Mr. Symonds with HI. During this meeting, expressed concern, to avoid appearance problems, that Mr. Symonds not come 0 work at directly from TVA. Mr. Symonds would manage a construction company that appeared to be a separate entity from HI. offered Mr. Symonds a vice-president position at HI with a salary of $175, per year plus one percent of the business. suggested January 1, 2002, as the target date for Mr. Symonds to report to wor a HI. Mr. Symonds considered himself a part of HI from that point on, even though he continued to work for TVA. told Mr. Symonds they could set up a way to pay Mr. Symonds $50,000 by se Ing up a business through Mr. Symonds? wife for background investigation services. During November 2001, the HI dry cask contract for SQN was supplemented to authorize Hi to perform the same services at BFN. Mr. Symonds had been involved in the negotiations for the BFN contract as the BFN Technical Contract Manager. Also in November 2001, Mr. Symonds established Krohn Enterprises, an LLC in Delaware. On December 13, 2001, a post of?ce box was created for Krohn Enterprises, in Huntsville, Alabama, and the name ?Jack Symonds" was included as a person with access to the box. A bank account was also created in the name of Krohn Enterprises. Mr. Symonds came up with the name Krohn by using the ?rst two letters of_ ?rst name, and the last three letters of his own name, - Further, in November 2001, Mr. Symonds and his wife made a house-hunting trip to Philadelphia, The trip was later reimbursed by! through During this trip, - moved Mr. Symonds? emp oymen date from January to April 2002. Shortly after the meeting in November, Mr. Symonds and? met at a restaurant in Cherry Hill, New Jersey. said he did not know I ey were going to bring Mr. Symonds in to HI as a vrce presr ent, and said Mr. Symonds might be worth more to wou pay by remaining at BFN during the Unit 1 restart. then said he r. Symonds an additional $100,000. TVA RESTRICTED INFORMATION William R. McCoIIum, Jr. Ralph E. Rodgers Page 4 March 23, 2010 Subsequently, ?instructed to make a payment of $50,000 to an agency that wou I Ing for background checks. No investigative services were rendered to and none were provided by Krohn Enterprises. Krohn Enterprises submitted two invoices to (Attachment 2). The ?rst invoice, dated January 15, 2002, totaled $29,212.77 and included the ?rst ?retainer? payment of $25,000 and $4,212.77 in travel expenses. The travel expenses invoiced to were for the travel expenses of Mr. Symonds? meetings with? and HI of?cials. The second invoice, dated February 5, 2002, was for a ?retainer ee, payment of $25,000. paid Krohn Enterprises a total of $54,212.77. A review was conducted of documents obtained by the Of?ce of the Inspector General (OIG) regarding travel by Mr. Symonds and a copy of the review is attached (Attachment 3). In a roximatel January 2002, Mr. Symonds learned from TVA employee? who replaced Mr. Symonds as the Technical Contract Manager or con rac hatF had been offered a job by Mr. Symonds did not miss the fact a was now being ignored by Ie was pitching to work for him. Mr. Symonds prepare a etter( ac ment4) and sen I as a last chance for a position with HI, although it was clear to Mr. Symonds a IS Job with HI was dead. STATEMENTS BY KRISHNA SINGH On October 12, 2006, Mr. Symonds consented to telephonin for the purpose of recording the conversation. Mr. Symonds told OIG was aware of the money paid to Mr. Symonds by and was coming to interview Mr. Symonds. Mr. Simonds requested advice from- on how to handle the situation. response was as follows: Well, you know had hired your wife to do security checks. She got paid for that, right? That was the retainer paid to do the work. She did do retainer work. Why are they auditing your account? There?s no, there?s nothing that uh, mean it was a clean transaction, she was in the business of checking out, you know we had some, to my knowledge, had some problems with thefts and stuff, otherwise it was checks. She paid for, you know they paid for it. But you didn?t do any direct business with did you? They won?t call me because I have nothing to do with it, you know. But to the extent that I pointed to a potential source for to get the help, they ask me I?ll tell them. You know, I?ll tell them the straight scoop. Jack you ought to make sure that you tell them that you really have no, the funds you don?t know anything about the fact, other than the fact that your wife was in the business of doing consulting services and it was payment retainer for that work, and it?s a company that you don?t do any business with, and you have not. TVA RESTRICTED INFORMATION William R. McCoIIum, Jr. Ralph E. Rodgers Page 5 March 23, 2010 A copy of the entire transcription is attached (Attachment 5). A few minutes after the recording above was made, was interviewed in his of?ce by OIG Special Agents. During that interview 5 a essentially the following. Sometime between 1999 and 2001, was having problems with employee thefts. He wasn?t sure if it was parts being stolen or other materials, but there was a problem. ?advised that he mentioned to someone that Mr. Symonds did security 0 ec s. wasn?t sure if it was Mr. Symonds, his partner or someone associated with Mr. Symonds that helped companies catch employees stealing. ?lmay have mentioned the theft problems to Mr. Symonds and sugges r. Symonds call the plant manager or he may have mentioned it to plant personnel to contact Mr. Symonds, he just couldn?t remember. thought he may have put Mr. Symonds in touch with several other peop e. said he could not give the speci?cs about how he knew Mr. Symonds was Invo ved with catching employees stealing at factories. - did not know if used Mr. Symonds or not. recalled Mr. Symonds visited HI on a couple of occasions when . ymonds was on a project they were doing at BFN. If Mr. Symonds came to HI, he would have seen him. He never requested that HI employees en ertain Mr. Symonds. However, he did know that Mr. Symonds was friendly with one of Hl?s engineers who no longer worked for HI. was asked if he provided any entertainment to Mr. Symonds and said he remembered having dinner with Mr. Symonds on one occasmn. He does not remember who paid for the meal but he normally offered to pay for any meal he had with someone and they normally obliged. Sometimes clients would send checks back to him for the cost of their meals. He did not recall the speci?cs about the meal with Mr. Symonds. stated that he would not have offered any money to Mr. Symonds or nterprises for any reason. He did not direct anyone to pay any money to Mr. Symonds or Krohn Enterprises for any reason. He did not think that Mr. Symonds would solicit money from him. He said he has a particular air about him, and no one would ask a cent from him. said that he was a very ethical person in business dealings. a he could not say if someone at HI or paid Mr. Symon s, has never been told anything or that anyone paid Krohn Enterprises anything. opined that Mr. Symonds was not in a position to award contracts or . TVA RESTRICTED INFORMATION William R. McCoIIum, Jr. Ralph E. Rodgers Page 6 March 23, 2010 OTHER BAD ACTS BY- Exelon Corporation provided documentation relating to an In erna Inves Iga Ion concerning an engineer in a position to potentially in?uence a contract award to HI and whose wife had a business with which Hl began doing business under? direction. That investigation was instituted upon the receipt of information tha a contractor involved in a $20,000,000 project with ComEd, an Exelon company, for dry cask storage products, had switched travel agencies and began using an agency in Illinois, called Cove Travel. That travel agency was allegedly owned by?, a Senior Engineer at ComEd Corporate ServicesmInIs erIng the project with HI. According to a ComEd Supervising Engineer, in mid-July 1997, while on an audit trip to Japan, a HI Quality Assurance Manager, stated? had sent a letter to all HI employees instructing all travel arrangements be ma rough a travel agency in This letter was followed up six months later by diverting all travel arrangements to . mm the internal investigation was In erVIewe concernIng ma er and stated he had known sInce late 1989 or early 1990. was sure that ma the initial contact with him rela we 0 ove Travel. She then su a proposal which he turned over to one of the two HI personnel who handled travel arrangements for the firm. He advised that? had never put pressure on him to use Cove Travel and had never told him wou Increase/decrease ComEds business with HI dependent upon the use of Cove Travel. Were this to happen, would "kick him out," stating in his mind, for one thing, had "zero au on to place business and had no "Clout." WRITES T0 INSPECTOR GENERAL AND CHIEF NUCLEAR OFFICER sent a letter addressed to the TVA Inspector General, Richard W. Moore, a ovember 17, 2006 (Attachment 6), during the timeframe the criminal investigations were ongoing concerning and Mr. Symonds. In that letter a stated, ?Holtec International categorlca asserts that the company has not any funds to Mr. Saimonds [sic] in any shape or form, indirectly or directly.? also e?mailed a letter to Karl Singer, then Chief Nuclear Of?cer and xecu Ive Vice President, dated November 9, 2006 (Attachment 7). In that letter, stated, in part, we do not know anything about the gentleman?s ymon interactions with TVA RESTRICTED INFORMATION William R. McCollum, Jr. Ralph E. Rodgers Page 7 March 23, 2010 CONTRACT REVIEW The OIG conducted a review of the TVA contract with HI for the purchase of dry cask storage systems for spent nuclear fuel at SQN and BFN. The purpose of the review was to assess the reasonableness of the prices TVA paid HI for certain high-dollar equipment items at BFN in comparison with the prices paid for the equipment at SQN. Specifically, the OIG reviewed the prices TVA paid HI for the four largest dollar-value cask system components: the MPC (multipurpose canister for spent fuel), HI-STORM 100 (long-term storage overpack for the MPC), HI-TRAC 125D (in-plant transfer overpack for the MPC), and the vertical crawler. TVA had paid $7,198,763 for the equipment at SQN, versus $9,186,120 at BFN, a difference of $1,987,357. Information obtained in the review (Attachment 8) found HI may have made false statements regarding the equipment prices proposed to TVA, and it appeared TVA relied on that information to approve prices quoted for the BFN equipment. Additionally, the review found that HI had overbilled TVA at least $276,000 for the BFN vertical crawler because it did not comply with the contract's cost-plus pricing provision. The price HI quoted for the BFN crawler misrepresented its compliance with the contract. It appeared TVA relied on the information provided by HI to justify paying the higher BFN prices rather than attempting to negotiate lower pricing for BFN. Although it is unknown if TVA could have successfully negotiated lower prices for BFN, key economic indicators and reduction in material prices between the time period when HI proposed the SQN and BFN prices indicate TVA had an opportunity to negotiate better prices. For example, the price of steel had fallen about seven percent during the period between the SQN proposal and the BFN proposal. In summary, the OIG review found evidence that the higher prices TVA agreed to pay for the BFN MPC, the HI-STORM 100 and the HI-TRAC 125D were unreasonable. It appears HI may have misled TVA regarding its pricing and TVA did not attempt to negotiate better prices at BFN.  RECOMMENDATIONS We recommend TVA place HI on the Supply Chain Clearance List based on the actions of (b) (7)(C) . In addition, if you decide to take other documented action on the basis of this report, we would appreciate your sending a copy of the relevant information to this office for our file. We would appreciate being informed within 15 days of your determination of what action is appropriate on the basis of our report. Our investigative files will be made available for review upon request. TVA RESTRICTED INFORMATION William R. McCollum, Jr. Ralph E. Rodgers Page 8 March 23, 2010 This report has been designated “TVA Restricted” in accordance with TVA Business Practice 29, Information Security. Accordingly, it should not be disclosed further without the prior approval of the Inspector General or his designee. In addition, no redacted version of this report should be distributed without notification to the Inspector General of the redactions that have been made. Our investigation of this matter is closed. John E. Brennan Assistant Inspector General (Investigations) ET 4C-K (b) (6) cc: Terrell M. Burkhart, WT 3A-K Maureen H. Dunn, WT 6A-K Peyton T. Hairston, Jr., WT 7B-K Tom D. Kilgore, WT 7B-K Kenneth E. Tilley, WT 3A-K OIG File No. 12E-102 TVA RESTRICTED INFORMATION Attachment 1 Page 1 of 1 1 {.139 bum at mm: _r . Adidas Pm?t HERBS.) Magma) mam) m: (i um Ila?nu- 11.35311 KEIH 44hr- hm Phuadelp'ifa, 1 maumutmn?m mum}. Wan-pawn 'm "wwm ?3500,1115. 3- mt-lmdamumwmhu-w Ma?a-ban. do". in?! 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Pith of Merger Plan of Merger (?Finn?) between FABSCO. 1nt;.. a amputation and 5 Toni 45L Die. Int: . a corporation {"Suhsitlinty') shall he adopted by Parent it: the manner and become effective as at the time provided below 1. 5mm. Parent is record and bene?cial time of 32.419: of the irsued and outstanding antral tract of Saba-diary (?Subtldiary (lemon Stock"). The remaining shares of the Substd?ry Common Start: are owned and held of record by these shareholders listed in the eorporate returns as of the Plan Adoption Date [as such term is de?ned in Section 2 of this Punt The Heard of Directors of Parent true dctermittcd that is desirable and tn the beer interests at Parent rte: Subsidiary that Put-er be merged with and into the Subsidiary on the terms and conditions set forth in this Plan and in accordance with the applicable mutations of the Busmess Corporation Law of 1938. as amended {the ,1 2 Pier: that! became adopted ('F?Ian Adoption Date") 11an its agproul by the Board of Direuers of the Parent in insurance with Seettonr 19221:}. Egllibiflitnl. and 192mm}; of the PA 3- . 5-H The Merger shall become effective at the nitrate of business or. the date new. which appropriate Amelie. a! Merger (to whte?n this le win be searched and incorporated therein) are ?it-.1 with the Departmental Stare at the of (?Merger Effective Time'i At the Merger Effective Time. Parent than merge and into Subsidiary. the Separate watcher: at" Parent shah cease. and Subsidia?r 5113? be run-hing corporation (the ?Sumvmg Corporauon'], tail in accordance with this Pian and the raptubie pres-imam of the PA BEL (the ?Merger'J At the Merger Effective Tim: and as a Jesuit at :he Huger. tie Surviving Corporation that! continue to exist as a domestic husrness amputation under the :iM-?i a! the Commonwealth of with all oi the rt grits anti obligations. of SUCH sun-ivtng domestic business tnrporauurt a: are provided by 1929 anti the other eppircabie provisions of the PA BCL. Without the g: entity of the as hfthe Merger Effective Time. at: nftitt: property (real. persnnel and mire-Ii, rights. pot-1:15. muteges. men: nities, ltcenaen. permit: and franchises {bath of a TVA RESTRICTED INFORMATION I Attachment 1 Page 8 of 11 EEG. $13 I- 7'73'5- 2 Lo 32 i: 33-? '1 some 3? 6 Z?ll?lt Ell-5 prh'a't: are: pobiie nature}, and :esrricn?nns. duties, and obligations, of the Patent and Subsidiary shat! be taken and he deemed to he to and vested or continued to be treated, as the ease n'ta}r he. in the Surviving Corporation. without furtlter act. agreement. approval or deed W. The Articles of incorporation and Bylaws of the Subsidiary as to effect prior to the Merger Effective Time shall remain the same and continue th'tctaoged as. respectitely. the Articles of Incorporation and Bylaws of the Sun-wing Corporation on end after the Merger Effective Time until changed in accordance with their respective terms and the amicable provisions of the PA BCL. 5 mm. The Of?oers of Subsidiary prior to the Merger Effective Time shall. as of the Merger Effective Tithe. he and remain. reSpecttvely. the Of?cers of the Surviving Corporation until their respective successors are duly elected and quaii?ed under the Bylaws of the Surviving Corporation then in effect. or until their earlier death or until thetr resignation or remove! in accordance with such Bylaws. ?ts of the Effective Tithe. the Directors of the Surviving Corporation Sill." be David 5 Forum. Robert tied Cluistophei Street: who will serve as Directors of the Surviving Corpotzmn until their respective successors are duly elected quali?ed under the Bylaws of the Survivor; Corporation then in effect. or until their earlier death or resignation or removal :tt accordance with such Estate 6 Wm. Subtect to the provrsions of Sections 1 and of this Plan. except for Dissenting Shares (as such term is de?ned in Section ID of this Plant. which the Merger EffectWe Time the] he converted into the right to receive the consider itioo determined in accordance Seatittn ID of lists Fill: and the applicable prHilOIlS ol' the PA each share of Subsidiary Common Stock shall. at: the Merger Effective Time. without further action and by virtue of the Merger. be converted into the right to recent: cash consideration in the mount of 5 .TS for each share of Subsidiary Common Stock. trouble ir- accordance with Sections 1 and of this Plan. and that! no longer be ouourdmg and shail be deemed to he summatically canceled and cease to exist. (goo?ng! Subject to the provisions oi Section 8 of this Fla: each share of capital stock of Parent {'Pareot Shares"l shall, at the Merger Efrem-e Time without {in?ltration and uirtue oi the Merger. be converted into one shire of szock of the Corporation. and shall no longer he and shall he Courier: to he uneeiet! and cease to must 7 ?'httidln?t?is The Sort . ring Corporation shall he to deduct . . . . . . ted wi?lhold turn the consideration other-inst payable under E- or t0 of this Part. as case that be. such mic-unis 3.3, as it - 'equtred Lo deduct. withhold. and term: With -. TVA RESTRICTED INFORMATION in?ll? respect to the retaking of tor?h payment tinder any provision til :ral. etate or local our law {a ?Withholdiog?l. My such Withholding shall be treated for all purposes {including without limitation this Plan and the Merger] as having been paid to the Record Shareholder (as such term is defined in Section Bl in respect of which "it Entity-ting. Corporation made such Withholding acd. notwithstaedlng anything contained to the tit this Plan. such Record Shareholder shall only be entitled to receive from the Surviving Corporation the consideration payable pursuant to this Plan androi- the Disseoters' Rights Provisions tar such term is defined to Section ill of this Plant. less any Withholding. which shall be payable on such Record Shareholders accede: to the applicable federal. sure or local taxing authority in accordance With applicable federal. State or local :ait law if He! Merger Consideration") =ai .?t'gt'rg. As soon as practicable lollowmg the Merger Effective Titan. the Corporation shall mail or error: to be mailed to each record holder or record owner. as the ease trier be tiodividuilly, a 'ltecord Shareholder? and collectively to: "Record Shareholderi'l of the shores of Suhitdiary Common Stool: on the Plan Adoption Dare notices {'Mergcr Notice") ads-55mg them of and as applicable ii] the e?eetivcnm or? the Merger. till a copy ct this Plan: a lotto letter of and instructions regarding the sot-rerder of their certificaiet formerly representing shares of Common Siocit i'SthSidiary Certificates"). or to lieu thereof. such eirideoee of lost. Stolen or destroyed certification} and Such aiai'itltir bonds or Other security as the Surviving Corporation may. Ill its discretion. ."?Reqriired Documentation?). in exchange for the applicable Net Merger Corsideration. and the notices. information and other materials required to be provided to the Rezord Shareholdn'r under Section 1515 of the PA BCL. Mirage-r pf?u?n?m? Cindi-mt Fi?? the Merger Effective Torrie. opoii torreeder oi their Subsidiary Certi?cates. or in lieu. thereof. the Required Documentation. to the Smut-trig Corporation With a properly comptered and executed letter er'tratisuurtal [substantially the term included in the Merger Notice} with respect to tech certi?cates. a Record Shareholder will be entitled to receive the applicable Net Merger Consrderaiiori Such consideration shall be delivered by the Sui-vino; Corporation as after such surrender Except as odieru ire expressly protridcd in Seton: 1.11 of this Plan, without the written consent of a Record Shareholder and such other and other items as Slit?u'lli?l?g Corporation in its discretion may require it: "Perm-net! no person ether than a Record Shareholder shall be tar-titled to recon-e azi- toriSiderattoi-r 'ahatioc-rer from the Survivmg Corporation as a rerol'. of the Merger. in the nest of a ?rmned creep: ir: respeCt of the availability of Disseniers Rights lair socii ten-.1 it de?ned Section which Shall be determined in acml?amt we}: Se?tt?l? at this Plait. rcr'h pcrton shall he a Record Shareholder energetics of this Pia: azir: mi: Record areho'ider [or which a: Permitzed Substitution was TVA RESTRICTED INFORMATION Attachment 1 Page 9 of 11 JII .3111? Attachment 1 Page 10 of 11 - 9?9 av: .13; 3-- qh?ua- .v -- - to .7: I..- AK?5629J?q=1 3 made shall theteatter have no to receive any consideration from the Sun-wing Corporation as a result of the Merger. it,? Right: to ?rth-{imam mg: Equation: Hg! :53. ?ts Df the Merger Ttmc. the Record Shareholder; all other holders of SubStdiary Cercr'tcates. art-J al't bene?cial but not record owners of Subsidiary Common Stock prior to the Merger Time. :1 any. Shall cease to have rights with respect to such previously WEB-"din! 5403:. mic; howevs; that the Record Shareholders only shall have the :o tuber exchange his. her or :15 Subsidiary Certi?cate: or Requned Documentattno. as the case may 11:. the Net Merger Cons:derarton to which such Rocord Shareholder may be entitled pursuant to Sections 6 and PM or elect their Dtssertters? Rights in accordance With the Disseoters' agents Provtsons (as such tern-.5 are de?ned in Secuon l? nt this Plant. and (til the Subsidiary Certi?cnnu hold by Recent! Shuehotocrt be deemed to only ownership of other such Net Merger or Dissentert' ?lab? in respect or met: Subsidiary Common Stock. tl so clectcd tn with the Dissentert' Rights Provisions no event shall the. Survimeg Corporation he obligaled to deliver Net Merger Consideration set forth to Sutton: and or determined pursuant to Section 1' and the Dtssenters' Rights Provisions to 1 Record Shareholder unless and until such Record Shareholder surrenders his. he: or :u Certi?cates or formshes the Required Documentation. as the case may bt- If} urrend nrr'rrvr gummy: Upon receipt by the Surkutg Corporation of the certi?cates representing the Parent Shares or in lieu thereof Required Documcmnuon. to the cast: may he. 1 ly and executed letter of Ito the lotto acceptable to the sufwl'll'lg Corporationl with reopen to web certi?cates. the Surviving Corporation Will issue to Parent?s shareholders :ernt': ates representing the same number of shares of capital stock of the fornorttuon as nae been held by them in the Parent prior to the Merger Effective Tone 9 Lam; at Eton 1 his Pint nu}- be terminated and the Merger abandoned by Echo? of :he Board of Dureetars of Parent at any time helore the Merger Efl'ective Tune :0 Emmott Each {it Record Shareholder or (it; subject to compliance on: the protrstoos of Section 1573 ofthe PA BCL, bene?mt owner of Subsidiary Con-moo Stock that 1; not .1 Record Shareholder t'eiuter. a "Dinsentcr?}. .15 the case may he. shatl bu totaled to ext-rem dtstezoers Rights?: reapcct to his. her or its shares 5: Common Stock Slims"! as a result of the Merger. as pron-tiled Sections l930ta. mt: and 11:: other applicable actuoos of the PP- "Jtsseoters Rtghis the toregowg. shall forfeit are. her or :15 ?tsscotm? unless such Dissentcr makts i dcmantl pursuant 10 F11: cf Seen-co 1575 cf Lte Pit 3C1. .r the time and ptace spent?trd the Merger Hottct: two?. tester. to soot. than: a 'Prrfected If turner": A Perfected Dosenter will be connect. I I TVA RESTRICTED INFORMATION Attachment 1 Page 1 1 of 1 1 -1. 973? 13:21 5 :1 {5.57 :1 .1 9 211820? 1- "1 with 3 of that Plan. to the fat: valuc ticss any for his, her or :15 Di?scn?ng Shun-s. which. fair vain: will be in with [$73 incl-hr :57? of the FA BEL is applicable. and will have such Other rights and be subjw. to such obhga?oas as are accorded to or imposcd upon him. 11:: or it pursuant to the Dissemcrs' Rights Provuions. 3M, that if I shall subsequently drliver a wallet. withdrawal cl? his. her or its far appraisal of such shares [nub the ipprm?ai of th: Surviving Corpuratiou]. such person shall also forfeit has. her or its Right; In want that a forfeits his. but or its Rights. then such shins shat! mcrcupuu be deemed have been convened into and u: hav: hrtomt for. as ofthr Merger sze. subject 10 the premium: of Staten 01th:: Plan. [11! to receive his. her or it: Nat Merger prawdcd tr. Seamus Eli! 7 0f withom any ?we? or ?he? adamant sums piyuh'lc Ihcrmu 11 W. This Plan may 11:: mm in any manner army tune the Effcuwc Tim: ht: of that Board of Directors of Parent. subject to comphance with 19238:! the PA BCL Thu.- Farm has adupt?d nus Ptan as n! Augustlj. zoo: TVA RESTRICTED INFORMATION Bill To: US Tool 8. Die 200 Avenue Turtle Creek. PA 15145 ICROHN ENTERPRISES Po Box 5324 AL 35314?5334 (255 ,1 355-5399 For: Retainer Expenses to Date Attachment 2 Page 1 of 2 INVOICE DATE: January 15,2002 INVOICE 0001 RE: P.O. 01-12145 DESCRIPTION I mourn Hammer payment} 25.00000 I Airline Tickets 2.4.7350 1 '1 13.33 Car Rental 413.23 Fuel 39.00 Meals 104.16 I Tolls 21.00 I Parking 43.00 Make all cnecks payable to Krohn Enterprises Payable upon receipt. TOTAL 329.212]? TVA RESTRICTED INFORMATION Attachment 2 Page 2 of 2 . RISES PO BOX 5384 31mm, AL 35314-5324 (253) games/ma INVDIC DATE: February 15. 2002 . INVOICE 0002 . RE: PD. WM 2145 Bill To: For: us Team. Diem" Retainer 20G Braddock Avenue Turtle Creek. PA 15145 AMOUNT 25.00030 DESCRIPTTON Retainer 2nd payment} TOTAL $25,009.09! Make at! cHEcks payable to Kr'?hn Enterprisu Payable upon recaipt. TVA RESTRICTED INFORMATION Attachment 3 Page 1 of 4 Jack Symonds Travel Analysis Case 12E-100 The following investigation was conducted by Intelligence Analyst -on August 10. 2006. in Knoxville. TN. Jul 29-Aug 2, 2001 During the period of 7/29/01 13/2/01, Symonds mow flew to Philadelphia, PA not on duty status, The hot ve been paid for by Holtec. TVA was direct-billed for the rental car because Symonds used his government travel for the rental, TVA was not reimbursed by almonds. (Titie 18, Sec 287)? Company Paying Symonds' Travel July 29 - August 2, 2001 Expenses Fli ht Location: US Tool Ph?adelphla, PA Expense 03?9?? TVA Die Flight - Unknown Hotel Locations: Hotel - - $1 .176.70 Atlantic City, NY Rental Car $244.75 - Unknown Philadelphia. PA Meals - - Unknown Gas - - Unknown On Leave from TVA Miscellaneous - - Unknown Total $244.75 $0 $1,176.70 Aug 20 - 26, 2001 During the period of 8/20/01 Symonds and _flew to aracuse, NY Symonds' status was on-duty and TVA paid his travel expenses. Subsequently, US Tool 8. Die also paid for some of his travel expenses through Krohn (Title 18, Sec 209 and 1001)? August 20 - 26. 2001 ??mPanv Pagfgonds Travel Flight Location; US Tool SyracUse? NY Expense category WA 81 Die HOITOC I . Flight $349.00 $349.00 - Hotel $374.64 $374.54 - Syracuse. NY Rental Car . . - New York, NY Meals $34.from Miscellaneous $186.20 - - Total $944.16 $723.64 $0 TVA RESTRICTED INFORMATION Attachment 3 Page 2 of 4 Jack Symonds Travel Analysis Case 12E-100 Sep 6 - 7, 2001 During the period of 9/6/01 9/7/01, syrnonds flew to Philadelphia PA on duty status and TVA paid his travel expenses. Subsequently, US Tool Die also paid for some of his travel expenses through Krohn Enterprises (Title 18, Sec 209). Company Paying Symonds? Travel September 8 - 7, 2001 Exmm :"gahc: elig?: to; A Expense Category TVA U: [1310' Holtec Flight $232.50 - - Hotel Location: Hotel $138.71 $138.85 - Mount Laurel, NJ Rental Car $84.55 $84.55 - Meals $37.48 - - Not On Leave from Gas - - - TVA Miscellaneous $74.58 - - Total $567.82 $223.40 $0 Sep 23 - 30, 2001 During the period of 9/23/01 9/30/01, Wrnonds and-lew to Allentown, PA on leave status. TVA was direct-billed for SVmonds' rental car because Symonds used his government travel card for the rental (Title 18. Sec 287). September 23?30, 2001 Pails/:09 :1":st Travel Flight Location: JUS Tool Allentown. PA Exmna cat?9?ry TVA Die Flight - $266.00 - Hotel Location: $484 44 - Unknown Meals - - - - On Leave from TVA Miscollanoczz: 321:80 Total $484.44 $287.80 so TVA RESTRICTED INFORMATION Oct 7 - 8. 2001 Jack Symonds Travel Analysis Case During the period or 101'81'01. Symonds flew to Philadelphia. PA during a holiday period The cost of the ?ight was direct billed to TVA because Symonds used his government travel card to purchase the ticket, and US Tool a Die, through Krohn, also paid the cost {Title '18. Sec 28? and 1001}. Attachment 3 Page 3 of 4 Company Paying Symonds? Travel October 1" B. 2001 Ex ?585 Flight Location: US Tool Philadelphia. PA Expense Category TVA Die Hotter: Flight $254.50 $264.50 - Hotel Location' HOtei $14455 Mount Laurel, NJ Rental Car $5009 Meats - - . Gas - - Federal Holiday Miscellaneous Total $264.50 $459.15 $0 Nov 9-12, 2001 During the period or 11191131 111'12/01. Symonds and two friends flew to Baltimore. MD. Symoncls rented a car and drove to NJ over a weekendi'holiday. Symonds submitted a travel t0 TVA for reimbursement of expenses, and he also was reimbursed for his airline ticket, hotel, and the rental car by US Tool 8. Die through Krohn {Title 18. Sec: andfor Company Paying Symonds? Travel November 9 12, 2001 Expenses Expense Category TVA U: Sim Hotter: Flight 511'750 $177.50 Hotel Location; Hotel $314.32 $314.32 - Mount Laurel, NJ Rental Car $135.91 $135.91 - Meals $62.04 $14.78 - WeekendiFederal Gas - $11.20 - Holiday Miscellaneous $43.52 $27.00 - Total $688.21 $0 TVA RESTRICTED INFORMATION Dec 2001 Jack Symonds Travel Analysis Case 12E-100 Attachment 3 Page 4 of 4 During the period oi 12I6IU1 12!?!01. Symonde flew.r to Philadelphia. PA on duty status, rented a car and traveled to NJ. Symonde submitted a voucher to TVA for reimbursement of expenses and also was reimbursed by US Tool 8: Die through Krohn {Title 18, Sec 209 and 1001). Company Paying Symonds? Travel December 8 T, 2001 E): ?595 Expense Category TVA U: 320' Halter: Flight $546.50 $546.50 - Hotel Lo cation: Hotel $140.96 $140.95 - Mount Laurel, NJ RentalCar $102.13 $102.13 Meals $21 .80 $21 .74 Not On Leave from Gas - TVA Miscellaneous $26.52 Total 5337291 $311.33 $0 TVA RESTRICTED INFORMATION Attachment 4 Page 1 of 2 Imam ENTERPRISES PO Box 5324 mm, AL 35814-5324 (856) 655-5400 0 CC ma 0 Holtec Center 555 Lincoln Drive West Marlton, NJ 08053 It is becoming more and more difficult for you and I to engage in business conversations, although, through no fault of our own. I am also ?nding that I too am experiencing some of the paranoid feelings that you have previously expressed concern about. I have determined that the only way to truly communicate with you without fear of some kind of electronic eavesdropping or wiretapping or some other kind of industrial spying technique is to simply revert to a simpler time when writing a letter was the most e?'ective way of communicating. Ithink that by exercising this medium we can eliminate the anxiety of worrying about what some other peeple might say or do about the perceptions. Anyway, I wanted to let you know that the we discussed back in September that was to be paid for activities through the end of the year 2001 has been satisfied. Now let?s talk about the that you said that you would pay me in 2002 to stay with TV A. i had originally sent you a proposal that we break that up into quarters which would be in April. in August, in October and in December. You did not respond to that proposal except to say that you wanted me to perform the original deal with Bob. Now that the original deal is satis?ed and we are V4 of the way through 2002. I think we should address how we are going to bill for the remaining Krohn Inc. is alive and well and could very well prove to be the proper conduit for this transaction. _5 still the CEO and all business transactions are done through her. If you want, she can send you an RFQ on Krohn Inc. letterhead explaining the billing for services rendered. You think about it and let me know how you want to handle the evolution. 1 think that now that the ice has been roken with TVA on a couple of subjects. and Feedwater Heater issues with ineering analysis activities with ou should probably offer an unsolicited proposal to perform these kinds of activities. You should address the correspondence to -and copy . TVA RESTRICTED INFORMATION Attachment 4 Page 2 of 2 ??ihe only thing is, they might say ?come on down and give us a presentation of what you think you can offer?. We should be out of the outage by the 10'? of April. The bad thing is we are going to do a mid-cycle outage on U2 for 2 identi?ed fuel leakers the last week in April. It will only last a week (we hope). Then the board meets on May 16'" to determine the fate of U1. So, if you lay this all out, it looks to me like your best chance at an audience with the decision makers between now and then would be the week of April 15'h or the week or May Plan accordingly. How is the construction company business search going? Have you told Hot to talk to me? (I thought you may have told them to pretend I didn?t exrst or a 'Ie until some time had passed). I keep trying to get a hold of them and I am not getting any response. Let's stay in touch, so that we can eliminate any misunderstandings or any miscommunications that we promised each other we would avoid at all cost. Talk to you later my friend, TVA RESTRICTED INFORMATION Attachment 5 Page 1 of 12 TVA RESTRICTED INFORMATION Attachment 5 Page 2 of 12 TVA RESTRICTED INFORMATION Atachment 5 Page 3 of 12 TVA RESTRICTED INFORMATION Attachment 5 Page 4 of 12 TVA RESTRICTED INFORMATION Attachment 5 Page 5 of 12 TVA RESTRICTED INFORMATION Attachment 5 Page 6 of 12 TVA RESTRICTED INFORMATION Attachment 5 Page 7 of 12 TVA RESTRICTED INFORMATION Attachment 5 Page 8 of 12 TVA RESTRICTED INFORMATION Attachment 5 Page 9 of 12 TVA RESTRICTED INFORMATION Attachment 5 Page 10 of 12 TVA RESTRICTED INFORMATION Attachment 5 Page 11 of 12 TVA RESTRICTED INFORMATION 5 Page 12 of 12 TVA RESTRICTED INFORMATION Attachment 6 Page 1 of 2 TVA RESTRICTED INFORMATION Attachment 6 Pag 2 of 2 TVA RESTRICTED INFORMATION Attachment 7 Page 1 of 3 TVA RESTRICTED INFORMATION 7 Page 2 of 3 TVA RESTRICTED INFORMATION 7 Page 3 of 3 TVA RESTRICTED INFORMATION Attachment 8 Page 1 of 4 July 30. 2007 Charles A. Kandt. ET 4C-K SPECIAL PROJECT 2007-11160 HOLTEC INTERNATIONAL CONTRACT NO. 99999906 REASONABLENESS OF PRICES TVA PAID FOR CERTAIN DRY CASK STORAGE SYSTEMS COMPONENTS AT BROWNS FERRY NUCLEAR PLANT As requested by OIG Investigative Operations. we initiated an audit of Contract No. 99999906 that TVA has with Holtec International (Holtec) for the purchase of dry cask storage systems for spent nuclear fuel at Sequoyah Nuclear Plant (SQN) and Browns Ferry Nuclear Plant (BFN). The purpose of our review was to assess the reasonableness of the prices TVA paid Holtec for certain high dollar equipment items at BFN in comparison with the prices paid for the equipment at SQN. Speci?cally. as summarized in the following table. we reviewed the prices TVA paid Holtec forthe four largest dollar-value cask system components; (1) the MP0 (multipurpose canister for spent fuel); (2) 100 (long-term storage overpack for the MPC): (3) 125D (in-plant transfer overpack for the and (4) the vertical crawler. Summary of Price Differences for Major Conponents of Dry Cask Storage System: Description SQN Price BFN Price Difference MPC HI-STORM 100 Hl- RAG Vertical Crawler Total Table 1 As discussed in detail below. information obtained in our audit found Holtec may have made false statements regarding the equipment prices proposed to TVA. and it appeared TVA relied on that information to approve prices quoted for the BFN equipment. Additionally. we found that Holtec had overbiled TVA at least 5276000 for the BFN vertical crawler because it did not comply with the contract's cost-plus pricing provision. In our opinion, the price Holtec quoted for the BFN crawler misrepresented Its compliance with the contract. CONTRACT BACKGROUND On June 30. 2000. TVA entered into Contract No. 99999906 with Holtec to provide equipment and engineering services for a dry cask system to store SON spent nuclear fuel.? On November 8. 2001. the contract was supplemented to include a similar dry cask system for BFN. As of June 20, 2007. the contract had been supplemented 37times. and TVA had paid Holtec $31.2 million against the contract payment ceiling of $54 million. The contract term is currently set to expire on June 30. 2008. The original Contract No. PO0NNQ-258810 was changed to No. 99999906 in July 2001 for to the PassPort supply chain software. TVA RESTRICTED INFORMATION Attachment 8 Page 2 of 4 Charles A. Kandt Page 2 July 30. 200? The contract included ?xed prices for most of the components of the cask system and for defined scopes of engineering tasks to address safety aspects of the seal: system unique to the two plant sites. The contract also included cost-plus pricing for optional items including (1) construction of a storage pad for the casks atthe plant site and (2) a vertical crawler heavy lifting device to move the casks from the plant to the on-site storage pad. The DIG is investigating certain issues regarding the pricing TVA agreed to under the contract with Holtec. To support the investigation1 an audit (Audit 2007-0280) of the contract was initiated to assess the reasonableness of the prices TVA paid Holtec for the four highest dollar cask system components as summarized in Table 1. To perform our review. we: - Reviewed the contract and related supplements. correspondence. e-mails. and payment records obtained from TVA's ?les. Visited the SQN and BFN sites and interviewed the dry cask spent nuclear fuel project managers and other key personnel to obtain an understanding about the products purchased. - Obtained copies of TVA's documentation of products received. Holtec's documentation packages forthe MPG. 1'00. and 125D units as required bythe Nuclear Regulatory Commission for these safety-related items: and Holtec's specification document for each crawier. to more clearly define the products purchased. - Visited Holtec's offices and reviewed cost information to obtain an understanding about Holtec's costs for the products delivered. - Visited Lift System's {manufacturer of the vertical crawlers} offices and reviewed documentation of sales and related cost data for vertical crawlers soid to Holtec. AUDIT FINDINGS AND CONCLUSIONS Information obtained in our audit found Holtec may have made false statements regarding the equipment prices proposed to TVA. and it appeared TVA relied on that information to approve prices quoted for the BFN equipment. Additionally. we found that Holtec had overbilled TVA at least for the BFN vertical crawler because it did not comply with the contract's cost?plus pricing provision. In our opinion, the price Holtec quoted for the BFN crawler misrepresented its compliance with the contract. MPG. 1'00. and HI-TRAC 125E) Holtec's proposal {dated September 12. 2001} to add the BFN scope of work included signi?cant price increases for the MP0. 100. and 125D components in comparison to the prices TVA had agreed to pay for similar equipment at SON. Our review of TVA and Holtec files found Holtec may have made false statements to TVA when it explained why the prices it had quoted for certain components were higherthan the SON prices. Specifically. in a draft letter submitted to TVA. Holtec informed thatsignificantly improved model in comparison to the model proposed for use at SON in that it had a reduced height for transport through TVA RESTRICTED INFORMATION Attachment 8 Page 3 of 4 Charles A. Kandt Page 3 July 30. 2007 the plant?s external door. and (2) it reduced radiation exposure by about one rem per cask. The (lower) SQN price for the 1250 was the result of an arithmetic error during quoting. Each of these statements appears to be false or at least misleading because: (1) BFN's external door has an additional 4 feet of vertical clearance in comparison to SQN's. thus negating the need for a reduction in height for the BFN 100. (2) We found no evidence that the proposed BFN 100 model would have had a signi?cant reduction in radiation dose, and (3) Holtec initially proposed a price for the SQN 1250 that was the same price subsequently proposed for BFN. The final SQN price resulted from a discount offered by Holtec late in the bidding process. Holtec's claim that the lower SQN price was the result of an arithmetic error rather than a discount may have created the illusion that its prices were not negotiable. (Note - Holtec's ?nal letter transmitting a comparison of the prices did not include the statements from the draft about the HI-STORM 100. However. the letter continued to mislead the TVA negotiation team regarding SQN's low price for the 1250. referring to it as "an estimating department error.?) It appeared TVA relied on the information provided by Holtec to justify paying the higher BFN prices rather than attempting to negotiate lower pricing for BFN. Although it is unknown if TVA could have successfully negotiated lower prices for BFN. key economic indicators and reductions in material prices between the time period when Holtec proposed the SON and BFN prices indicate TVA had an opportunity to negotiate better prices. For example, the price of steel had fallen about 7 percent during the period between the SON proposal and the BFN proposal. In summaryI we found no evidence that the higher prices TVA agreed to pay for the BFN MPC. 100. and 1250 were reasonable. Instead. it appeared (1) Hotec may have misled TVA regarding its pricing, and/or (2) TVA did not attempt to negotiate better prices at BFN. Vertical Crawler Contract No. 99999906 rovided that the icin for Although the price WA paid for the craw er was In accor ance Wl cos -p us provision. the price for the BFN crawler was not. As discussed below, TVA's price for the BF vertical crawler should have been at _ess than the amount uotedb Holtec. Additionall since Holtec's rice quote tor BFN was in our opinion the quoted price was a misrepresentation by Holtec that it was complying with the contract's pricing provision. WNW - The vertical crawlers provided for SON and BFN were manufactured and sold to Holtec by Lift Systems. Although the SQN crawler TVA RESTRICTED INFORMATION Attachment 8 Page 4 of 4 Charles A. Kandt Page 4 July 30. 2007 had been ordered by Holtec speci?cally for the SQN project. the crawler that was sent to BFN had originally been ordered by Holtec for a project it had with Hope Creek Nuclear Plant (Hope Creek). When TVA requested Holtec to provide a crawler for BFN. to meet time requirements Holtec apparently requested Lift Systems to (1 send the crawler that had been manufactured for Hope Creek to BFN and (2) manufacture another crawler for Hope Creek. We reviewed documentation of the prices Holtec aid Lift 8 stems for each of the crawlers and found Holtec had aid Lift 8 stems Based on the prices Holtec paid for the two vertical crawlers, the most that should . have been billable to TVA would have been Potential Misreiresentation bi Holtec ?the quoted price misrepresented Holtec?s compliance with the contracts cost-plus provision. Additionally, Holtec may have made false statements by informing TVA the price for the BFN crawler was higher than the price of the SQN crawler because the BFN crawler (1) had enhancements that the SQN crawler did not have and (2) included expediting fees. We found the enhancements on the BFN crawler were minor and would not have materially affected Holtec's cost. Additionally. we found no evidence that Holtec incurred any expediting fees other than the higher price it paid Lift Systems for the replacement crawler for Hope Creek. Based on discussions we have had with?Ne understand OIG Investigations does not want Audit Operations to issue an audit report to TVA or Holtec at this time since the investigation is ongoing. Accordingly. we are providing the information in this memorandum for use in our on oin investi ation. If ou need additional information. Ben R. Wagner Deputy Inspector General ET 3C-K JHBIJP Richard W. Moore. 4C- OIG File No. 2007?11160 TVA could make an argumenl? However. a legal opinion would be needed as to whether TVA could prevail at paying this lower cost since Holtec apparentty had to pay a higher cost to replace the Hope Creek crawler. TVA RESTRICTED INFORMATION