Taxpayers pay $13M in buyouts

The Cincinnati Enquirer

Taxpayers are footing the bill for almost $13 million in severance packages to private employees at Fernald who agreed to buyouts last year, The Enquirer has learned.

Nationwide, the Energy Department has paid more than $350 million in buyouts to about 12,000 private employees at nuclear cleanup sites, with hundreds of workers walking away with an average of more than $70,000 at the Energy Department's Pinellas County, Fla., site. Included in the buyouts was as much as $15,000 guaranteed by the Energy Department to all salaried workers of Fernald Environmental Restoration Corp. (FERMCO). The guarantees are part of the department's contract with FERMCO's parent company, Fluor Daniel Corp., of Irvine, Calif. As of January 1, 1,423 salaried workers were at the site.

''The bonuses were paid on top of that ($15,000 buyouts) to the employees who volunteered to leave their jobs early,'' said Jack Craig, the Energy Department chief at Fernald.

''Also, that $15,000 severance agreement is standard in all (Energy Dept.) contracts,'' Mr. Craig said.

The government's generosity did not stop with FERMCO's salaried employees. Mr. Craig confirmed that the Energy Department also decided to award FERMCO hundreds of thousands of dollars in a ''performance fee'' for its successful handling of the buyout program.

Angry congressional leaders, including U.S. Sen. Mike DeWine, R-Ohio, and U.S. Reps. Rob Portman, R-Cincinnati, and Steve Chabot, R-Cincinnati, say they knew nothing about the Energy Department's costly buyouts until told by The Enquirer and are investigating.

The U.S. General Accounting Office, the investigative arm of congress, announced it would investigate the problems reported by The Enquirer. Mr. Portman said he also planned to initiate a congressional subcommittee hearing into the problems at Fernald. The Energy Department also has announced it would launch an investigation by its Inspector General's Office.

The federal government authorized payments to 476 salaried employees, about 20% of FERMCO's workforce, in January and February 1995. The payments averaged about $27,000 per employee, according to U.S. Department of Energy financial records.

The amount each person received was based on a formula that included their salaries and years of service.

The payments were in addition to any pension the workers may have earned up to that point with FERMCO or its parent company, Fluor Daniel of Irvine, Calif.

The buyouts were offered in an effort to reduce the workforce and save labor costs, according to the Energy Department. But The Enquirer found the payments were authorized for workers who already had received notices from FERMCO that they were about to lose their jobs because their work at the site was completed.

Furthermore, of those 476 salaried employees who accepted the buyouts, The Enquirer learned approximately 240 have remained employed and have not yet received their bonuses, but the Energy Department has guaranteed them the payment if they leave by May 5, said FERMCO president Don Ofte.

Also, an additional 60 hourly workers have been hired at the site since the buyouts were offered in February 1995, said Mr. Ofte and Mr. Craig. And about 30 salaried workers who took the government bonuses and left, have been hired back. They agreed to repay their bonuses as a requirement of being rehired.

The government also paid about $2.9 million in a similar FERMCO severance buyout in 1993, involving 255 employees, according to Fluor Daniel - FERMCO and Energy Department records. Mr. Craig said the payments were to persuade workers to voluntarily leave their jobs early - despite their pending dismissals - so the government ''could realize an overall, long-term cost savings.''

''When a (government) contract is awarded, labor costs are included in the budget that is set,'' Mr. Craig said. ''The reasoning behind the (buyouts) is that if you reduce the workforce, you reduce the overall cost of the contract.''

However, Mr. Craig conceded the government has not only failed to realize any savings from the buyouts so far, but in fact has lost money on the plan. He said with planned employee reductions in the future through attrition, however, the government may eventually realize the cost savings.

''All I can tell you is that we were following the policies and instructions that were given to us by (Energy Department) headquarters,'' Mr. Craig said. The plan was approved by Energy Secretary Hazel R. O'Leary, who declined repeated interview requests by The Enquirer.

Asked why the Energy Department agreed to pay the bonuses to FERMCO employees who had already been notified they were to lose their jobs within one to four months, Mr. Craig said, ''That was a decision by (Energy Department headquarters).''

''I guess an argument could be made that we wouldn't have had to pay the bonuses if we had waited, but that was a headquarter's decision,'' Mr. Craig said.

Several congressmen, including Mr. Portman, expressed astonishment at the Energy Department's use of public dollars to pay severance to the private employees, especially those who already were scheduled to lose their jobs. He also questioned whether the department had the authority to make the payments at Fernald or at 12 other nuclear sites nationwide.

''I believe this whole thing needs to be investigated,'' Mr. Portman said. ''I'm just learning about all of this now and need to learn more about how this happened. I can't tell you why the taxpayers are subsidizing the severance packages of private employees.''

Congressman Chabot said he also knew nothing about the Energy Department's multi-million dollar buyout package for private employees at Fernald.

''I've sent a letter to O'Leary demanding an explanation about all this,'' Mr. Chabot said. ''I intend to have this investigated to determine what is going on here. I knew nothing about this.''

U.S. Sen. Mike DeWine, R-Ohio, also said he was unaware that the Energy Department was paying hundreds of millions of dollars for private employee's severance packages. ''This sounds ludicrous and I will be checking into it.''

The Enquirer discovered the government's multi-million dollar payouts during a six-month investigation of Fluor Daniel - FERMCO's operations at Fernald.

Fluor Daniel - FERMCO was awarded a five-year, $2.2 billion contract from the Energy Department in 1992 to manage the cleanup at the former uranium-processing plant in Crosby Township. The company currently has approximately 2,200 employees at Fernald. It had 2,418 employees before the 1995 buyouts.

Mr. Craig said FERMCO has promised to try to reduce the Fernald workforce to about 2,000 employees through attrition by May.

All the FERMCO salaried workers who took the buyouts received lump-sum payments and some also had their last few remaining years until retirement ''purchased'' by the government so they could receive full pensions from FERMCO, according to the records.

Mr. Craig said the government buyouts restricted the recipients from returning to work at Fernald for five years. But the Energy Department relented, he added, when FERMCO said it needed to rehire about 30 of the employees as long as they repaid their bonuses.

Some of those employees also were rehired by Fluor Daniel for non-Fernald work, company records show.

Asked why FERMCO needed to hire an additional 60 hourly employees to finish the tasks left by the departing employees, Mr. Craig said, ''here obviously was some work that the departing people had not finished that we needed done.''

Mr. Craig said the Energy Department justified the severance payments under a clause of the 1993 Defense Authorization Act that covers the control of workers at defense nuclear facilities. The act - Section 3161 - says the secretary of energy should use ''retraining, early retirement, attrition and other options to minimize layoffs.''

The act, however, does not specifically mention using taxpayer money to pay severance packages to non-government employees.

Published Feb. 14, 1996.