Wppss Could Lose $11.7 Million From Uranium Sale Audit Says Several Wppss Managers Should Be Disciplined For Unsecured Sale To Company That Went Bankrupt

Several managers at the Washington Public Power Supply System should be disciplined for approving an unsecured sale of uranium to a Denver trader, according to an internal audit.

The uranium sale could leave WPPSS and Northwest electrical ratepayers on the hook for $11.7 million.

The audit, which was obtained Wednesday by the Tri-City Herald, contends that managers violated both agency policies and basic business principles in the deal with uranium trader Oren L. Benton.

One of Benton’s companies, Nuexco Trading Corp., has not paid for the 440 tons of uranium hexafluoride it bought from WPPSS last fall.

The sale was made behind the back of WPPSS managing director William Counsil, and only a minimal effort was made to check the financial condition of Benton and his companies, the audit said.

Managers also failed to communicate with each other and with Counsil, according to the audit.

Benton filed for Chapter 11 bankruptcy protection in February, and WPPSS officials have said it is too early to tell how much, if anything, the utility might recover from Benton’s reorganized companies. Because WPPSS is a public agency, losses would be absorbed by ratepayers who get electricity from the Bonneville Power Administration.

WPPSS had dealt successfully since 1987 with Benton, who built a fortune in the international uranium market. The utility sold uranium from a stockpile it had built since the 1970s for planned nuclear reactors that were never finished.

In accordance with WPPSS policy, the utility demanded security for each deal with Benton, generally in the form of a letter of credit from a bank. Letters of credit assure payment even in case of bankruptcy.

But in late 1993, Benton asked to be relieved of that requirement. He instead offered promises from Energy Fuels Ltd., another company he owned.

The change in terms should have alerted WPPSS managers to potential problems in Benton’s finances, according to the report by David Galloway, the utility’s internal auditor.

By agreeing to the new terms, senior WPPSS managers violated policy that had been set by the utility’s executive board, the report said.

In addition, managers failed to sufficiently check on the financial health of Benton and his companies, even though concerns about his possible money troubles were widespread at the time, the report said.

“The evaluation of Nuexco’s financial stability was limited primarily to a phone call to Nuexco’s international bank,” the report said.

WPPSS managers had further cause for suspicion because Nuexco had been late early last year in making payments for two other uranium sales totaling $13.1 million, the report said.

The report said Counsil should take “appropriate disciplinary action” against several senior WPPSS managers.

James Perko, WPPSS’ chief financial officer, resigned in the wake of disclosures about the unsecured sale, WPPSS officials have said. Members of WPPSS’ board of directors have said other managers also have resigned. But WPPSS has declined to officially comment on other resignations, saying the matter is a personnel issue.