NEWS RELEASE PRESS RELEASE
OIL, CHEMICAL & ATOMIC WORKERS INT'L UNION, AFL-CIO
For Immediate Release: July 7, 1998
Contact: Robert E. Wages, OCAW President, (303) 987-2229.
Lynne Baker, OCAW Communications Director,
(303) 987-5334.
Dan Minter, Piketon, Ohio, Local 3-689
President, (740) 289-2405.
Dave Fuller, Paducah, Ky., Local 3-550
President, (502) 442-3668.
LAKEWOOD, Colo.-The Oil, Chemical & Atomic Workers
Union (OCAW) released the following:
The Clinton-Gore Administration's decision to
privatize the United States Enrichment Corporation
("USEC"), a government-owned corporation, will lead to
the collapse of one of the nation's most important
nuclear arms reductions initiatives, while enriching a
group of Wall Street investors at the expense of
taxpayers and impoverishing communities.
Few have scrutinized this nearly $2 billion deal,
which is the largest government privatization since
Conrail. Even though it has made disclosures for an
initial public offering, USEC is still refusing to
release documents about its public obligations. Unlike
other federal agencies, it has closed its board meetings
to the public so it could operate in secrecy.
The private corporation will be entrusted with the
implementation of a government- negotiated agreement -
the U.S./Russia Highly Enriched Uranium (HEU) Agreement
-- under which the U.S. will pay $8 billion to purchase
Russia's nuclear weapons materials for reuse as civilian
nuclear power plant fuel. Both governments reached this
agreement to ensure that Russia's nuclear material will
not get into the "wrong" hands.
The threat to national security occurs with privatization
because of the conflict between private gain and public
obligation. The Russian uranium is high-priced, and USEC
will incur a loss in writing new contracts to sell it. In
1999, USEC will import 41 percent of its supply under the
Russian HEU Agreement. USEC could produce the same amount
of product at its gaseous diffusion plants in Portsmouth,
Ohio, and Paducah, Ky., for $125 million per year less
than the Russian price for the equivalent amount of
material.
"You don't have to use a lot of imagination to see
that the economic incentives are not there for USEC to
import the Russian uranium," said Joseph Stiglitz, the
former chair of the president's Council of Economic
Advisors and now chief economist at the World Bank. "So
you're putting something that's in our national security
interests in direct conflict with USEC's private property
interests."
As a government-owned corporation, USEC could be
instructed to accept lower profits for the foreign policy
gains associated with the purchase of Russian HEU -- a
trade it would resist if it were owned by
profit-maximizing investors.
"Given the difficulty of ensuring that a government
agency is acting for the good of the country," Stiglitz
adds, "the task becomes next to impossible when it is a
private entity."
Similarly, Richard Falkenrath, executive director of
the Center for Science and International Affairs at
Harvard, questions why the "government would ever want to
vest executive authority for implementing a foreign
policy initiative as important as the HEU deal in a
privately-owned company whose commercial interests run
directly against the success of that initiative?"
"Privatization is a foreign policy disaster waiting
to happen," Falkenrath added.
If the privatized USEC threatens to jettison the
U.S.-Russia HEU Agreement, the taxpayer may be called
upon to subsidize USEC's profits so that it would have an
incentive to realign its interests with U.S. national
security.
"Vice President Gore and his staff are well aware of
these contradictions, but have chosen to blunder ahead
with privatization," said OCAW President Robert E. Wages.
"Mr. Gore's infatuation with his `reinventing government'
initiative has apparently defeated the common-sense
proposition that national security should not be
entrusted to an entity whose interests are adverse to
national, if not global, security."
Beyond the threat to national security, there is no
independent and public evidence that privatization will
save taxpayer dollars. A United States General Accounting
Office (GAO) report--required by the 1992 Energy Policy
Act--estimates that privatization will leave taxpayers
hundreds of millions to $1.5 billion worse off when
compared with USEC remaining as a government-owned
corporation.
The 1996 USEC Privatization Act requires the
Secretary of Treasury to ensure that USEC will continue
operations of the two gaseous diffusion plants. The
Administration announced in a June 29 letter to Ohio (D)
Senator John Glenn that, "As a result of our process,
USEC is contractually obligated to keep both enrichment
plants open until at least 2005."
However, the fine print in USEC's filing with the
Securities and Exchange Commission shows this commitment
is illusory because it is subject to conditions --
including declining market prices for USEC's product --
that have been triggered by the flood of Russian HEU.
Just a 9 percent decrease in market price or an operating
margin that drops below 10 percent would annul the
agreement to keep the plants open.
"The vice president booby-trapped the safety net
that Congress provided for workers to keep their jobs,"
Wages said. "The enrichment plants are the largest and
second-largest employers in the congressional districts
in Ohio and Kentucky."
Privatization will also result in at least 500-600
pink slips for workers in the immediate future,
consistent with USEC's still-secret "strategic plan,"
which reportedly calls for $50 million per year in
payroll cuts. Up to 2,200 workers will lose their jobs,
if and when, USEC closes one of the two gaseous diffusion
plants.
The Administration has touted its plan to mitigate
the impacts of this downsizing with severance plans and
an environmental cleanup program. However, the DOE
projects this program to generate no more than 50 jobs
per site for displaced workers.
"The Administration's `bridge to the 21st century'
is paved with pink slips and leaves a 50-year legacy of
untreated waste behind," Wages said.
The primary beneficiaries of privatization will be
current USEC officials and investment bankers. Senior
managers of the government-owned USEC - they are
beneficiaries of a special exemption from Federal ethics
laws --- will reportedly triple their pay within 180 days
after they go to work for the privatized company. USEC
itself has refused to disclose the fees paid to its
outside lawyers and investment bankers, but the
Government Accounting Office estimates that they will
reap $100 million in fees.
"Six hundred families will have to go without
paychecks for two years simply to pay off the investment
bankers and enrich senior management," observed Wages.
"Vice President Gore has orchestrated a transaction
whereby the obscenely rich will get even richer at the
expense of working families.
"Unfortunately, it looks like Al Gore has borrowed
a page from the book of discredited management wisdom by
`Chainsaw' Al Dunlop. I can't imagine how VP Gore can
campaign for president with a straight face in the
congressional districts where he is now impoverishing
communities with his slash and burn privatization
agenda."
Although Congress authorized privatization of USEC
in 1992 and again in 1996, important details, including
non-proliferation concerns and massive jobs cuts, were
kept secret. For example, on April 30, 1998, USEC broadly
denied OCAW's Freedom of Information Act request,
essentially claiming that all information related to its
implementation of statutory requirements is a business
secret. USEC has ignored requests for data from members
of Congress, including Representative Ted Strickland
(D-OH) and Ed Whitfield (R-KY).
As the facts of this privatization deal become
known, members of Congress have stated their concern
about the lawfulness and wisdom of the rush to
privatization. On June 22, forty-seven members of the
House of Representatives wrote the Administration, asking
it to hold off on privatization. On June 26, Senator Pete
Dominici (R-NM), who has supported privatization of USEC
for the past 10 years, asked Sandy Berger, the
president's National Security Advisor, to refrain from
moving forward with privatization until concerns raised
by independent experts about the U.S.-Russia HEU
Agreement can be resolved.
On June 30, OCAW filed suit in Federal District
Court under the Freedom of Information Act to compel USEC
to disclose critical documents, including USEC's
strategic plan, minutes of USEC Board meetings, and the
agreement between the US Department of Energy and USEC
which governs the U.S.-Russia HEU Agreement.
"The train is rolling down the track with all of the
red flags up," concluded Wages. "The Administration needs
to suspend privatization until the many unresolved
questions raised by the public can be fairly addressed."