The Enquirer's Fernald Investigation



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Taxpayers bilked
in Fernald cleanup

| Initial findings | The list | More disturbing facts |
| Major fallout | Another contract anyway | About the staff | Story list |

A report by the General Accounting Office, released March 19, confirmed Enquirer reports that the cleanup of Fernald has wasted millions of dollars through mismanagement by the contractor and a lack of oversight by the U.S. Department of Energy. Story

STORY ON GAO REPORT
SUMMARY OF GAO REPORT
COMPLETE GAO REPORT

PDF FILE OF GAO REPORT

The report prompted members of Congress to say the contract of Fluor Daniel Fernald should not be renewed or extended unless major problems at the nuclear cleanup site can be fixed.

Two days later, the U.S. Energy Department, reacting to the report, said it would strip Fluor Daniel of the most critical cleanup project at the site and replace the company with a new contractor. Story

The Enquirer broke the story of mismanagement in the Fernald cleanup with a four day series entitled Danger & Deceit on Feb. 11-14, 1996. The initial series and more than 60 subsequent stories, detailed financial irregularities, safety problems and a lack of government oversight in the massive cleanup project.

Mike Gallagher's continuing reports prompted area Congressmen to ask for the GAO investigation, brought fines and penalties against the contractor, Fluor Daniel Fernald, and was cited as one of the top public service reporting efforts of 1996 by the Associated Press Managing Editors Association.

The Energy Department gave Fluor Daniel Fernald a $2.2 billion contract to clean up the former uranium processing plant 18 miles northwest of Cincinnati. There are 20 million pounds of radioactive waste in two underground silos at Fernald.

Fluor Daniel Fernald was known as Fernald Environmental Restoration Management Co. (FERMCO) until the company name was changed last September.

The Enquirer's investigation continues.

Initial findings

Among the findings in Gallagher's initial reports Feb. 11-14:

Fluor Daniel Fernald collected millions of dollars in performance fees for incomplete work and billed the government for unauthorized work.It was company policy to not correct mistakes when it found it overstated work progress to the government. Feb. 11, 1996

The government reimbursed the companies cleaning up Fernald $15 million in unsubstantiated travel costs, with no receipts or other documentation. And the practice goes on even though the government determined the companies improperly charged it $1.6 million between September 1992 and September 1994. Feb. 11, 1996

Government records blamed poor management for hundreds of safety violations, including many radiation exposures, and other problems at the site. The Enquirer investigation revealed more than 1,000 serious safety-related problems since Jan. 1, 1993, when Fluor Daniel Fernald began work at the site 18 miles northwest of Cincinnati. Feb. 12, 1996

The problems went unnoticed and/or unchallenged because of lax oversight by the Energy Department and an independent contractor that makes financial, safety and performance audits and reviews. The Energy Department said it has a staff of 56 to oversee the cleanup of Fernald, and the contractor has 12. Feb. 12, 1996

The company continued to spend taxpayer dollars on a trouble filled vitrification pilot plant that would encapsulate the radioactive waste, even while knowing it wouldn't work as designed. Meanwhile, the company worked in secret to develop a second, far more expensive, process that it hoped to convince the government to implement. The vitrification project has so far cost $72 million -- $42 on pilot plant construction and $30 million on research and study of the vitrification process. Feb. 13, 1996

The Energy Department paid private Fluor Daniel Fernald employees more than $13 million in severance incentives. The government authorized payments to 476 salaried employees, about 20% of Fluor Daniel Fernald's workforce, in January and February 1995. The payments averaged about $27,000 per employee. Feb. 14, 1996

More disturbing facts

Since the initial reports, The Enquirer has uncovered more disturbing facts at Fernald:

Life-threatening structural defects have been ignored and covered up in the construction of the vitrification pilot plant. A senior company official said the pilot plant is ''a deathtrap awaiting its first victim.''

Fluor Daniel Fernald violated environmental regulations by failing to keep inspection records. The company also admitted it may have failed to conduct some required inspections. Company reports showed it sometimes used employees as hazardous and radioactive waste inspectors who have little or no training for the jobs.

Barrels filled with radioactive and other toxic liquids were allowed to leak onto other containers and the floor of a storage area this year. After first denying it, company officials confirmed the Enquirer report.

Union leaders representing workers at Fernald said the company pressured them to lie about safety conditions.

Workers at Fernald said the company ordered them to throw away millions of dollars in new and unused equipment and material to save on expenses and paperwork.

Major fallout

The Enquirer reports have created major fallout:

After the initial stories Feb. 11-14, area congressmen asked the General Accounting Office to investigate Fluor Daniel Fernald and the Energy Department. The GAO said it also would investigate the Energy Department policy that allows private employees at nuclear cleanup sites to receive taxpayer-financed severance buyouts. More than $500 million has been paid out nationally since 1993.

Last March, a special Energy Department investigative team found the pilot project was riddled with problems, confirming The Enquirer report. The team also suggested that Energy Department should consider scrapping vitrification and research other cleanup methods.

After first blaming a subcontractor for shoddy work in the construction of the pilot plant, Fluor Daniel Fernald admitted it issued false statements about the contractor.

Last May, the Energy Department's Inspector General reported that almost $16 million was wasted in employee buyouts at Fernald. Fluor Daniel Fernald refilled most of the terminated positions.

Last May, the Energy Department penalized Fluor Daniel Fernald $135,000 for failing to correct estimates of subcontracting costs that were millions of dollars higher than the actual costs.

Last May, Fluor Daniel Fernald raised the price tag for the vitrification plant by $14 million, citing design, schedule and construction problems.

Last July, the Energy Department penalized Fluor Daniel Fernald $810,000 for unsolved pilot plant problems.

Last August, Fluor Daniel Fernald president John Bradburne acknowledged that the company was considering changing or scrapping its vitrification project because of ''equipment reliability uncertainty'' in the pilot plant operation.

After saying in 1995 it could reduce the cleanup from 25 years to 10, Fluor Daniel Fernald backtracked in September and said it would take 12-15 years. Its reason: the Energy Department cut the budget by $10 million per year.

Last October, the Energy Department ordered Fluor Daniel Fernald to refund $768,000 because it violated government accounting rules, improperly reimbursed employees and performed shoddy bookkeeping.

Last October, the EPA blamed the Energy Department for continuing delays in the project, citing ''poor planning and management.''

After that announcement, the GAO said it would expand its investigation to determine what internal financial controls are in place and why the 10-year timetable may be extended. That delayed the GAO report, originally scheduled for December, until March.

Another contract anyway

Despite the findings, last August the Energy Department awarded a $5 billion cleanup contract to a six-member team headed by Fluor Daniel Corp., of Irvine, Calif., the parent company of Fluor Daniel Fernald. They will clean up the former Hanford plutonium production facility in Richland, Wash.

About the staff

Mike Gallagher Mike Gallagher, 38, has been an investigative reporter with The Enquirer since June 1995. Before that, he was an investigative reporter for Gannett Suburban Newspapers in White Plains, N.Y.
David Wells, 45, is local news editor for The Enquirer. He has been with the paper since 1974.
The Enquirer's series was one of 16 finalists in the 1996 annual Public Service Awards competition sponsored by the Associated Press Managing Editors (APME) Association.

David Wells