Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 4, 1992 TAG: 9201040238
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: MARY BISHOP STAFF WRITER
DATELINE: CHARLOTTESVILLE LENGTH: Medium
COURT SHIELDS LEADER FROM KIM-STAN COSTS
A federal judge dealt a crippling blow Friday to state attempts to force the president of the Kim-Stan landfill to control its continuing pollution.In two rulings, U.S. District Court Judge James H. Michael Jr. agreed with Kim-Stan president Jerry Wharton that the state should back off.
The rulings say the state has no special claim on the bankrupt landfill company's assets, that it must get in line with all the other creditors. This, in turn, would halt the state's effort to force Kim-Stan's owners to pay for cleaning up pollution at the dump. The state then could have to spend tax money or find some other way to pay for the cleanup.
The state Department of Waste Management says it needs about $5.5 million to install a permanent cap and control systems for leachate and methane gas. The private landfill in Alleghany County took thousands of truckloads of garbage from the North before the state, accusing owners of flagrant pollution of streams, closed it in 1990.
With the company bankrupt and a federal bankruptcy trustee agreeing to leave Wharton alone if he pays creditors $100,000, Wharton appears to have found safe haven in federal bankruptcy law. The landfill owes millions of dollars to dozens of creditors.
Federal bankruptcy law provides "a huge shield" for polluting companies, said Rick Parrish, attorney with the Southern Environmental Law Center in Charlottesville.
"It's one of the biggest controversies in the field of federal environmental law right now," he said.
State agencies say that despite their warnings to maintain proper pollution-control equipment, Kim-Stan's leachate has flowed for years into tributaries of the Jackson River. The 48-acre dump near Clifton Forge took out-of-state garbage from 1988 to 1990. County officials suspect the landfill earned millions of dollars.
Wayne Heslep, attorney for Alleghany County, said he feared the consequences of the bankruptcy trustee's deal with Wharton last fall.
"It worried me at the time that he'd be able to seek refuge under that, and that seems to be just what he [Wharton] has done."
Heslep, like the Kim-Stan neighbors who pleaded with the state for years before it closed the dump, wants the state to clean it up first, then seek justice in the courts.
So far, according to a state official, the state has spent "hundreds of thousands of dollars" putting in soil and grass seed and hauling away some of its leachate. The official said the state government, with an ever-tightening budget, can't afford a multimillion-dollar cleanup.
Marshall Ross, one of Wharton's lawyers, said in a court document last month that Wharton "owes no legal responsibility to the commonwealth or its various agencies relating to Kim-Stan Inc.'s landfill."
Virginia Assistant Attorney General John Butcher argued Friday that Wharton was just using federal law to get "off the hook."
The state contends that Wharton, landfill partner Bill Stover and three Kim-Stan-related companies were so financially intertwined they were "alter egos" of Kim-Stan Inc. and are personally responsible for its environmental damage.
In a letter last September, Butcher said Wharton was trying to "mousetrap our $5 million claim as part of a $100,000 settlement" with the bankruptcy trustee.
Michael seemed annoyed Friday when Butcher pressed for Wharton to be held accountable. "You are saying you want him to close the landfill? . . . That is a ridiculous statement, Mr. Butcher," the judge said. "We know that he cannot personally do it."
It was not clear Friday what rights, if any, the state might have to appeal Michael's rulings. Butcher would not comment on what the state's next move might be.
Under bankruptcy law, the state's environmental claims are considered along with dozens of others - from the $13 owed to a Covington hardware store to the nearly $500,000 due the Richmond law firm of Hunton & Williams.
The judge said that if the state pursues its "alter ego" claims against Wharton, other creditors could do the same. "The whole theory of bankruptcy," the judge said, "is for assets to be marshaled and parceled out to all the creditors."
Lawyers said Friday that Wharton had offered federal bankruptcy trustee John G. Leake an additional $15,000 to buy "peace" from further financial demands.
A bankruptcy official said Friday the money cannot be accepted because the trustee already agreed he will not pursue Wharton.
State officials say they have not found Stover, a Kim-Stan partner who was a Michigan businessman. Wharton has said Stover and Kim-Stan records disappeared in 1990.