
DATE: Thursday, July 10, 1997               TAG: 9707100518

SECTION: FRONT                   PAGE: A1   EDITION: FINAL 

SOURCE: BY SCOTT HARPER, STAFF WRITER 

DATELINE: ISLE OF WIGHT                     LENGTH:  113 lines

VA. HALTS SUIT VS. SMITHFIELD FOODS KEY REPORT BARRED; STATE VOWS TO REFILE CASE

In a stunning turnabout, state lawyers in mid-trial Wednesday abruptly halted their environmental lawsuit against meatpacking giant Smithfield Foods Inc.

The surprise move came after Judge Kenneth E. Trabue barred a key report from being introduced as evidence, ruling that attorneys for Smithfield Foods had not had enough time to review it.

The report, compiled by a Virginia Tech engineering professor, was turned over July 3 - one working day before the high-profile trial began in Isle of Wight County Circuit Court.

Under legal rules, the state can still bring another civil suit against Smithfield Foods. And Wednesday, the attorney general's office released a statement saying it intends to do that - this time, with all its evidence in hand.

``We are not dropping our case against Smithfield,'' said chief deputy David Anderson. ``We intend to refile this suit and vigorously pursue our allegations that Smithfield violated state water permits more than 22,000 times during the past decade.''

Assistant Attorney General John Butcher argued that he needed the disputed report to help prove the state's central premise in the case - that company sewage plants in the town of Smithfield were too old and too small to keep hog wastes and other contaminants from polluting the Pagan River, a Chesapeake Bay tributary.

The report in question was originally turned in June 13. But it was ``seriously flawed, not even based on data,'' said James Ryan, a Smithfield Foods attorney who saw the first draft.

Realizing they were in trouble on a key point, state officials scrambled to amend the report, and only completed it July 3, lawyers said.

Carl Wood, vice president in charge of engineering for Smithfield Foods, who has been observing court proceedings all week, said Wednesday's developments exposed the flaws in the state's claims.

``It's obvious the state has failed to make its case,'' Wood said. ``If they come back, I'd think they'd want to take a different approach.''

Trabue, a visiting judge from Roanoke, ruled in favor of the company on another key issue Wednesday - one that should give the East Coast's biggest pork processor momentum going into a second big government lawsuit it faces this summer.

Brought by the U.S. Environmental Protection Agency, this larger suit, scheduled for trial later this month in Norfolk, seeks as much as $125 million in fines for 5,330 alleged violations of the national Clean Water Act.

The EPA suit challenges a 1991 cleanup deal between Smithfield Foods and Virginia as too lax - especially concerning phosphorus, a nutrient that flowed for years from company slaughterhouses into the Pagan River and is known to harm the Chesapeake Bay.

The deal excused Smithfield Foods from complying with state limits on phosphorus emissions; in exchange, the company agreed to pipe its wastes to a public sewage treatment plant in Suffolk once space was available.

Trabue ruled that the deal still should be respected, noting that Smithfield Foods has kept its part of the bargain and is about to complete a connection to the Hampton Roads Sanitation District plant in Suffolk.

After Wednesday's events, state officials quickly packed their files and boxes full of documents and checked out of their hotel. One official made his fingers into the shape of a gun, inserted his hand into his mouth and pulled, shaking his head over what had just occurred.

On the Smithfield Foods side, lawyers hired from the Richmond-based firm Mays & Valentine joked and smiled and talked tough. Anthony Troy, lead attorney for Smithfield Foods, said he was ``disappointed'' the state had dropped its case, even temporarily, saying he wanted to move ahead.

``I thought . . . they were ready to litigate,'' Troy said.

The state case against Smithfield Foods has been plagued with controversy since it was filed last fall.

It was brought just days after state officials learned that the EPA was preparing its own legal case against the company. And it came as state politicians, a state watchdog agency and environmentalists were publicly criticizing Virginia as being soft on polluters.

In addition, the state suit was filed months after disclosures that Smithfield Foods CEO Joseph Luter III had given $125,000 to Gov. George F. Allen's political action committee. The gift came at a time when the company was in settlement negotiations with the state over past environmental violations.

Luter and his lawyers have complained that they are the victims of a political squabble between Richmond and Washington, with the state and federal governments both trying to appear tough on environmental issues by taking on a big target like Smithfield Foods.

The $4 billion company, one of largest employers in Hampton Roads, has been the subject of environmental lawsuits for more than a decade, with one case ending up in the Supreme Court in 1985.

In the aftermath Wednesday, critics and political rivals were quick to fault state lawyers, saying they failed to do their homework in the case.

Don Beyer, Democratic candidate for governor, said the events Wednesday showed that the attorney general's office, formerly headed by GOP gubernatorial candidate James S. Gilmore III, ``mishandled'' the case.

Gilmore resigned his post as attorney general last month to run full-time for governor. His replacement, Richard Cullen, did not work on the Smithfield Foods case because his former law firm also represents the company. ILLUSTRATION: Graphic

ABOUT THE CASE

WHAT HAPPENED?

Virginia dropped its environmental lawsuit against Smithfield

Foods Inc. after a key piece of evidence was disallowed.

WHY WAS IT DISALLOWED?

The evidence - a report on conditions of company waste plants in

Isle of Wight County - was given to Smithfield Foods on July 3. The

judge ruled there was not enough time for company attorneys to

review and critique its findings.

WHAT'S NEXT FOR VIRGINIA? The Attorney General's Office indicated

it will refile its lawsuit at a later date. The state has six months

to do so.