1            IN THE UNITED STATES DISTRICT COURT

       2            FOR THE EASTERN DISTRICT OF VIRGINIA

       3                      NORFOLK DIVISION

       4
           ________________________________
       5                                   :
           UNITED STATES OF AMERICA        :
       6                                   :
                                           :
       7   vs.                             :
                                           :
       8   SMITHFIELD FOODS, INC., et al   :
           ________________________________:
       9

      10

      11             The deposition of JOSEPH W. LUTER, III, a

      12   witness called on behalf of the plaintiff, before

      13   Connie Alys Crane Pryor, a Registered Court Reporter

      14   and a Notary Public in and for the State of Virginia

      15   at Large, pursuant to Notice, beginning at 1:00 p.m.

      16   on May 19, 1997, at the offices of Smithfield Foods,

      17   Incorporated, 999 Waterside Drive, Norfolk, Virginia;

      18   said depositions taken pursuant to Rules of Civil

      19   Procedure for the United States District Court.

      20

      21

      22

      23               CRANE-SNEAD & ASSOCIATES, INC.
                      4914 Fitzhugh Avenue - Suite 203
      24                  Richmond, Virginia 23230
                          Tel. No.  (804) 355-4335
      25








                                                               2



       1   APPEARANCES:

       2   U.S. DEPARTMENT OF JUSTICE
             Environmental Enforcement Section
       3     1425 New York Avenue, Suite 12002
             Washington, D.C.   20005
       4     By:  Ms. Sarah Himmelhoch
             Counsel for the plaintiff
       5
           MAYS & VALENTINE
       6     1111 E. Main Street
             Richmond, Virginia  23219
       7     By:  Mr. Anthony F. Troy
             Counsel for the defendant
       8

       9

      10

      11

      12

      13

      14

      15

      16

      17

      18

      19

      20

      21

      22

      23

      24

      25




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                                                               3



       1                         I N D E X

       2                                                         
                                                     DIRECT  CROSS
       3
           Joseph W. Luter, III                         4      --
       4

       5

       6

       7

       8

       9
                              E X H I B I T S
      10
                                                           PAGE
      11
           Luter Deposition Exhibit No. 1                   89
      12     Letter dated December 5, 1996

      13   Luter Deposition Exhibit No. 2                   124
             Letter dated December 7, 1989
      14
           Luter Deposition Exhibit No. 3                   130
      15     Copy of a Richmond Times-Dispatch article

      16   Luter Depsoition Exhibit No. 4                   142
             Copy of a paid advertisement
      17

      18

      19

      20

      21

      22

      23

      24

      25




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       1

       2

       3             JOSEPH W. LUTER, III, a witness called on

       4   behalf of the plaintiff, first being duly sworn,

       5   testifies as follows:

       6             DIRECT EXAMINATION

       7   BY MS. HIMMELHOCH:

       8             Q         Could you please state your full

       9   name and address for the record, please?

      10             A         Joseph W. Luter, III.  Route 10,

      11   Smithfield, Virginia.

      12             Q         Have you ever testified before,

      13   Mr. Luter?

      14             A         Yes.

      15             Q         How often?

      16             A         I guess it's probably my fourth

      17   deposition, probably.

      18             Q         Have you ever testified at trial?

      19             A         At trial?  Yes.  Uh huh.

      20   (Indicating in the affirmative)

      21             Q         How many times at trial?

      22             A         Two, I believe.

      23             Q         Why don't we start with the

      24   trials, since those are smaller in number.  What were

      25   the cases in which you testified at trial?




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           Luter - Direct                                      5



       1             A         One was a lawsuit that I brought

       2   against an individual for fraud in the U.S. District

       3   Court, which I won.

       4                       And the second, I believe, was a

       5   State environmental lawsuit back in 1980,

       6   approximately.  Somewhere along in there.

       7             Q         Was that brought against

       8   Smithfield Foods?

       9             A         That was brought against

      10   Smithfield Packing Company, I believe.  I'm not sure.

      11             Q         One of the two Smithfield

      12   facilities in Smithfield, Virginia?

      13             A         That's correct.

      14             Q         What were the allegations in that

      15   suit?

      16             A         Violations of the permit.

      17             Q         The Clean Water Act permit?

      18             A         I'm not sure.  Probably so.  I'm

      19   not sure.

      20             Q         Do you remember the ultimate

      21   resolution of that case?

      22             A         That was a fine, waters

      23   violations.

      24             Q         Do you remember the amount of the

      25   fine?




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           Luter - Direct                                      6



       1             A         Not exactly.  I think it was

       2   around $40,000.00, I believe.

       3             Q         Do you recall the nature of the

       4   violations that were --

       5             A         I do not.

       6             Q         What were the four occasions in

       7   which you testified in deposition?

       8                       THE WITNESS:  Is this relevant,

       9             Tony?  I mean, I have nothing to hide.

      10                       MR. TROY:  No.  She has a right to

      11             see what you've testified to before.

      12             A         One, let's see.  Well, one was the

      13   fraud case that I brought.  Second was this case, I

      14   think once.  And a divorce proceeding.  And one was an

      15   SCC inquiry.

      16             Q         Was that into Smithfield Foods?

      17             A         No.  That had nothing to do with

      18   Smithfield Foods.

      19             Q         And the fraud case, did that have

      20   anything to do with Smithfield Foods?

      21             A         What?

      22             Q         The fraud case?

      23             A         No, it did not.

      24             Q         I'd like to just get a little

      25   professional understanding of your professional and




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           Luter - Direct                                      7



       1   educational background and your work at Smithfield

       2   Foods.  What degrees do you hold?

       3             A         I have a BBA from Wake Forest

       4   University.

       5                       Pardon me.  I've got hay fever.

       6   I'm having trouble getting words out today.

       7                       I have a BBA from Wake Forest

       8   University, 1962.

       9             Q         In what area of study?

      10             A         BBA.  Bachelor of Business

      11   Administration.

      12             Q         I'm sorry.  I didn't understand

      13   the initials.

      14                       Do you hold any other degrees?

      15             A         No, I do not.

      16             Q         Where have you worked, other than

      17   Smithfield Foods?

      18             A         Do you mean menial jobs?  I worked

      19   for Colonial Stores as a bag boy, stock boy back in

      20   when I was in high school.

      21             Q         Since receiving your degree.

      22             A         Smithfield Foods.  And I was

      23   president of Bryce Mountain Resort for approximately a

      24   five year period.

      25             Q         Approximately when was that?




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           Luter - Direct                                      8



       1             A         1970 to 1975.

       2             Q         During that time period, were you

       3   also working at Smithfield Foods?

       4             A         No, I was not.

       5             Q         What are the various positions

       6   that you've held at Smithfield Foods?

       7             A         I was hired as a salesman, I held

       8   the title of secretary/treasurer, president of

       9   Smithfield Packing Company, which later became part of

      10   Smithfield Foods.  And I came back in 1975 as

      11   president of Smithfield Foods in 19, in April of 1975.

      12             Q         When did Smithfield Packing become

      13   a part of Smithfield Foods?

      14             A         I was president of Smithfield

      15   Packing in 1969 and sold Smithfield Packing to a

      16   company called Liberty Equities Corporation in 1969.

      17   And I left the company shortly thereafter.  And

      18   Liberties Equities changed their name to Smithfield

      19   Foods.  And Smithfield Packing Company became a

      20   subsidiary of Smithfield Foods.

      21             Q         And then you came back to

      22   Smithfield Foods in 1975?

      23             A         In April of '75, that's correct.

      24             Q         At that time, were you

      25   secretary/treasurer?




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           Luter - Direct                                      9



       1             A         No.  No.  I was

       2   secretary/treasurer of Smithfield Packing Company in

       3   the 1960's.

       4             Q         What was the position you took

       5   with Smithfield Foods in 1975?

       6             A         As president and chief operating

       7   officer.

       8             Q         When did Gwaltney of Smithfield

       9   become part of Smithfield Foods?

      10             A         Smithfield bought Gwaltney in

      11   November of 1981, I believe.

      12             Q         At that time, had Gwaltney been

      13   sued by the Chesapeake Bay Foundation?

      14             A         I think it was shortly thereafter

      15   that.  It was, I think, sometime after that.

      16             Q         So you were president and chief

      17   operating officer during the time that Gwaltney was

      18   sued by the Chesapeake Bay Foundation?

      19             A         That's correct.

      20             Q         What was the nature of the

      21   allegations made by the Chesapeake Bay Foundation?

      22             A         The nature of the allegations were

      23   that they were, when we bought Gwaltney from ITT,

      24   there were violations that were taking place.  We

      25   split the money to correct the violations.  Because we




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           Luter - Direct                                      10



       1   spent the money to correct the violations, the State

       2   elected not to bring suit.  The Chesapeake Bay

       3   Foundation stepped in as a result and filed suit

       4   alleging there were ongoing violations when, in fact,

       5   the violations had been corrected.

       6                       And this case went all the way up

       7   to the United States Supreme Court.  And I'm sure

       8   you've got the records.

       9             Q         What was your understanding of the

      10   Chesapeake Bay Foundation's authority to bring suit

      11   against Smithfield Foods or Gwaltney of Smithfield?

      12             A         My understanding is they could

      13   bring suit if the State elected not to bring suit if

      14   there were ongoing violations.  And, and we believe

      15   that there were not ongoing violations, because we had

      16   spent the money to upgrade the systems.  And the

      17   violations had ceased prior to the filing of the suit

      18   by the Chesapeake Bay Foundation.

      19                       But there was some testimony

      20   during that trial that, that intimated that maybe

      21   violations could continue in the future.  And that was

      22   the basis upon which they filed suit.

      23                       As I say, this went up to the

      24   United States Supreme Court, and the Supreme Court

      25   ruled.  I'm not a lawyer.  I'm sure you probably know




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           Luter - Direct                                      11



       1   the facts better than I do.  But the Supreme Court

       2   ruled that the Chesapeake Bay Foundation, or no

       3   environmental group can bring suit on violations that

       4   have been corrected.  But they can bring suit to stop

       5   ongoing violations.  That was the basis of the suit.

       6   That was the basis of the decision.

       7             Q         At any time, did you formulate an

       8   understanding of EPA's role with respect to

       9   enforcement of the permit?

      10             A         EPA's role, what?  Come again now?

      11             Q         Well, you just described your

      12   understanding of what citizen groups could do to

      13   enforce the permit.  And I'm asking whether you ever

      14   came to an understanding of what EPA could do to

      15   enforce the law?

      16                       MR. TROY:  Sarah, I'm going to

      17             object to the mischaracterization.  You

      18             asked him his understanding of the nature of

      19             the lawsuit, the Gwaltney suit, which is

      20             what you indicated.  You never asked him

      21             about permits or anything like that.

      22                       (To the witness)  Go ahead.

      23             A         Phrase your question once again.

      24             Q         What was your understanding of

      25   EPA's authority to enforce the permit?




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           Luter - Direct                                      12



       1             A         I'm not going to say --  It's my

       2   understanding that the State has primary enforcement

       3   rights.  And, and also the EPA has enforcement rights.

       4   And what the balance of those rights are --  I'm not

       5   an attorney.  I have no authority to speak on that.

       6             Q         Do you belong to any environmental

       7   groups?

       8             A         Do I belong --  No, we have

       9   supported some environmental groups.

      10             Q         Which are those?

      11             A         Let's see.  Give me a chance to

      12   recollect the name of it.  I've --

      13                       THE WITNESS:  Carl, can you help

      14             me?  That Virginia --  We made a

      15             contribution to --

      16                       MR. WOOD:  Are you talking about

      17             Ducks Unlimited?

      18                       THE WITNESS:  Well, we've

      19             contributed to Ducks Unlimited.  I'm talking

      20             about the VIMS.

      21                       MR. WOOD:  Oh, yes.  VIMS, right.

      22             A         We've made a contribution to that.

      23                       MR. WOOD:  Yes, we have.

      24             Q         Was that contribution separate

      25   from the funding for the study on the recalibration of




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           Luter - Direct                                      13



       1   the Pagan River model?

       2             A         I'm not sure.  I just know that --

       3   I think they're one of the few or rational

       4   environmental groups out there.  I think they do good

       5   work.  I just know we have made a contribution.  How

       6   long ago and what amount, I don't remember.

       7             Q         When you say rational

       8   environmental groups, what do you mean?

       9             A         There are an awful lot of radical

      10   environmental groups out there.

      11             Q         What constitutes a radical

      12   environmental group?

      13             A         That's a matter of interpretation.

      14             Q         I need to understand what you mean

      15   by that phrase.

      16             A         I just said there are lot of

      17   environmental groups out there.  PETA is one.

      18   P E T A.  That's an animal rights group; it's also an

      19   environmental group.  That, in my opinion, is a

      20   radical group.

      21             Q         What about VIMS strikes you as a

      22   rational approach to the environmental issue?

      23             A         I think they --  I think they --

      24   I don't know a lot about VIMS.  But I've just been

      25   told by numerous people that, that they approach




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           Luter - Direct                                      14



       1   environmental issues through science and reason, and

       2   not through hysteria.  And, and VIMS depends upon

       3   science.  I think they've got groups out there that

       4   really don't depend upon science; they depend upon

       5   fear.

       6             Q          Would you put the Chesapeake Bay

       7   Foundation in that category?

       8                       MR. TROY:  What category are you

       9             talking about?

      10             Q         A group that does not depend upon

      11   science.

      12             A         I don't know that --  My only

      13   experience with the Chesapeake Bay Foundation is the

      14   lawsuit they brought against Gwaltney.  And as I said

      15   earlier, they brought the lawsuit after the problem

      16   had been corrected.  And, you know, I found some fault

      17   with that, obviously.  Because, because the problem

      18   had been corrected at the time that they brought suit.

      19             Q         What was the ultimate resolution

      20   of the action brought by the Chesapeake Bay

      21   Foundation?

      22             A         You know that, so why do you ask

      23   me?

      24             Q         I need to know what your

      25   understanding of --




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           Luter - Direct                                      15



       1             A         My understanding is that the

       2   Supreme Court ruled that environmental groups could

       3   only bring suit to address ongoing problems and not

       4   problems that have been corrected.

       5             Q         Did Smithfield Foods or Gwaltney

       6   of Smithfield pay a penalty in the action brought by

       7   the Chesapeake Bay Foundation?

       8             A         Yes, they did.

       9             Q         How much was that penalty?

      10             A         I don't remember.  I think it was

      11   around $300,000.00.

      12             Q         That was part of a settlement, is

      13   that correct?

      14             A         That was part of a settlement,

      15   yes.

      16             Q         Why did you settle with that

      17   action if it was your understanding that --

      18             A         Because it was less than to pay

      19   lawyers to carry the fight fairly.

      20                       I think we would could have won it

      21   if we'd take it back up to the Supreme Court.  But we

      22   had a U.S. District Judge that made the statement in

      23   front of our attorneys that he didn't give a damn what

      24   the Supreme Court said, that he was going to make

      25   Smithfield Foods pay.  And he made that statement in




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           Luter - Direct                                      16



       1   front of attorneys representing us at that time, and

       2   in front of the Chesapeake Bay Foundation attorneys.

       3   Which I thought was outrageous that a U.S. District

       4   Judge would make such a statement.  But he did make a

       5   statement.  And I have affidavits to that effect.

       6             Q         From whom?

       7             A         From Pat Raer, with Hogan &

       8   Hartson, who represented us in that matter.

       9             Q         Anyone else?

      10             A         I'm not sure.

      11                       THE WITNESS:  Tony --

      12                       MR. TROY:  I can't recall.

      13             Q         Have you received any formal or

      14   informal education in environmental science?

      15             A         No.

      16             Q         Have you ever managed or

      17   supervised, other than in your role as Chief Operating

      18   Officer of Smithfield Foods --

      19             A         I'm Chief Executive Officer now of

      20   Smithfield Foods today.

      21             Q         When did you become Chief

      22   Executive Officer?

      23             A         I'm not sure, but I think it was

      24   some time between 1975 and 1979.

      25             Q         So in the late '70's?




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           Luter - Direct                                      17



       1             A         That's correct.

       2             Q         Other than in your capacity as

       3   Chief Operating or Chief Executive Officer of

       4   Smithfield Foods, have you ever supervised or managed

       5   environmental compliance issues?

       6             A         No.

       7             Q         Are you aware that the Pagan River

       8   has been classified by Virginia as a nutrient enriched

       9   water?

      10             A         I think I've read that, yes.

      11   Probably in the newspaper.

      12             Q         What is your understanding of what

      13   that means?

      14             A         It means that it has, it has

      15   nutrients in it.

      16             Q         Do you understand the implications

      17   of being a nutrient enriched water?

      18             A         No.  I only do know if too many

      19   nutrients go into any river, I've been told that algae

      20   blooms can take place, and fish kills can take place.

      21                       It's my understanding that there's

      22   never been an algae bloom or a fish kill in the Pagan

      23   River.

      24             Q         Is that your understanding of the

      25   only impacts of being a nutrient enriched water?




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           Luter - Direct                                      18



       1             A         That's the only impact I've got.

       2             Q         Is the Pagan River open to shell

       3   fish harvesting at this time?

       4             A         I don't --  I think it's been

       5   closed for a number of years.

       6             Q         Approximately how long?

       7             A         I don't know.

       8             Q         Do you know why it's been closed?

       9             A         No, I do not.

      10             Q         Have you reviewed any water

      11   quality data with respect to the Pagan River?

      12             A         Have I reviewed any water quality?

      13   No.

      14             Q         Do you use the Pagan River for any

      15   recreational activities?

      16             A         Quite often.  I have --  I have a

      17   home that's right on the Pagan River.  And I water

      18   ski, jet ski, fish, hunt in the Pagan River my entire

      19   life.

      20                       MR. TROY:  When you're using the

      21             word you, you mean him, personally?

      22                       MS. HIMMELHOCH:  Yes.

      23                       MR. TROY:  That's the context in

      24             which you've used the word previously?

      25                       MS. HIMMELHOCH:  Yes.




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           Luter - Direct                                      19



       1                       MR. TROY:  Okay.

       2

       3   BY MS HIMMELHOCH:  (Continuing)

       4             Q         Are you aware of other individuals

       5   who engage in recreational activities on the Pagan

       6   River?

       7             A         Yes.

       8             Q         Who else?

       9             A         Oh, any number.  Smithfield is a

      10   small town.  And quite a few people fish and hunt.  I

      11   don't have time enough to --  I mean, there are

      12   numerous people I know that use the Pagan River.

      13             Q         Do you know of people who swim in

      14   the Pagan River or wade in the Pagan River?

      15             A         Yes, myself.  My children, as

      16   recent as yesterday.  Not with myself, yesterday, but

      17   some friends of mine that were visiting me.

      18             Q         What type of fish do you catch out

      19   of the Pagan?

      20             A         What kind of fish?  Trout, striped

      21   bass, croaker, spot --  Let's see.  Toad fish, if you

      22   will, eels, perch--brown and white--all of those fish.

      23             Q         At any time over the past five

      24   years, have you noticed a decline in the frequency of

      25   your catching any one of those fish?




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           Luter - Direct                                      20



       1             A         No.  Quite to the contrary, it's

       2   increased substantially.  I think anybody you talk to

       3   that fishes the Pagan River will tell you that it's,

       4   from a fish standpoint, it's as healthy as it's ever

       5   been.

       6             Q         In terms of the number of fish --

       7             A         Yes.  One of my very good friends,

       8   is a guy by the name of Rollis Bailey.  He probably

       9   fishes the Pagan River more than any one single

      10   individual.  And I have fished and hunted with him for

      11   at least the last ten years.  And I would say he

      12   probably fishes an average of four to five times a

      13   week.  He's what I would call a professional

      14   fisherman.  And I think he would testify to the fact

      15   that the fishing is better in the Pagan River than

      16   it's ever been.

      17             Q         When did that increase begin?

      18             A         I don't know.  I mean, as I've

      19   said, I've known him way over ten years.

      20                       All I can tell you, when I was a

      21   child growing up, we never caught rock fish in the

      22   Pagan River.  We would catch croakers, a few spot, and

      23   a few perch.  But it's only been in the last ten

      24   years, I would say, that we're catching rock fish and

      25   trout in the Pagan River.




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           Luter - Direct                                      21



       1             Q         Do you know what has caused the

       2   change in the fishing?

       3             A         No.  I just know that --  I just

       4   know that, that for some reason, there's more fish in

       5   the Pagan River today than it was when I was a child.

       6             Q         When was the Smithfield Packing

       7   plant built?

       8             A         Which plant?

       9             Q         Smithfield Packing, in Smithfield.

      10             A         I mean, which plant?  I mean, one

      11   was built in 1936, and another was built in 1946.

      12             Q         For Smithfield Packing?

      13             A         Correct.

      14             Q         When was the plant that is

      15   currently in use in Smithfield?

      16             A         1946.  The one that was built in

      17   1936 burned down about five years ago, I guess.  Maybe

      18   a little bit longer.

      19             Q         And up until that time, had it

      20   also been operating?

      21             A         Yes.

      22             Q         Where did the plant that was built

      23   in 1936 discharge its waste?

      24             A         Into --  I'm not sure, but I think

      25   it discharged its waste into the town system.




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           Luter - Direct                                      22



       1             Q         Where did the plant that is

       2   currently in use in Smithfield for Smithfield Packing

       3   discharge its waste prior to 1986?

       4             A         Into the Pagan River.

       5             Q         And it continues to do so today?

       6             A         One plant is not hooked on.  The

       7   Gwaltney plant is hooked on to HRSD, and the

       8   Smithfield Packing Company is waiting to be hooked on,

       9   as soon as HRSD notifies us they are ready to accept

      10   the effluent.

      11             Q         So when you were a child, the

      12   Smithfield Packing Company was discharging its waste

      13   into the Pagan River?

      14             A         When I was a child, yes.  Uh huh.

      15   (Indicating in the affirmative).

      16                       When I was a child --  All of the

      17   homes on Church Street were discharging raw sewage

      18   directly into the Pagan River when I was a child.

      19             Q         When you were a child, what

      20   treatment was the Smithfield Packing Company --

      21             A         I'm not sure if there was

      22   treatment.  But what the degree of treatment was, I

      23   don't know.  But the homes in Smithfield were

      24   discharging with no treatment, whatsoever.  It was

      25   just a pipe to the Pagan River from the, from all of




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           Luter - Direct                                      23



       1   the homes on Church Street in Smithfield.  It was

       2   common at that time.

       3             Q         Have you, as Chief Executive

       4   Officer and former Chief Operating Officer of

       5   Smithfield Foods, familiarized yourself with the

       6   histories of the operations of the Smithfield Packing

       7   plant and Gwaltney plants in Smithfield?

       8             A         What do you mean operations?

       9             Q         How the plants ran.

      10             A         I don't understand.  I mean, that

      11   covers sunrise to sunset.  I don't really know what

      12   you mean by that question.

      13             Q         Are you familiar with how the

      14   Smithfield Packing Company processed hogs in the

      15   1940's?

      16             A         Shortly speaking.  We processed

      17   them the same way we process them today.  I mean,

      18   there's been some refinements.  But generally

      19   speaking, the systems are the same.

      20             Q         Is that also true for Gwaltney?

      21             A         I assume so.  Though, I'm not too

      22   familiar with what happened with Gwaltney until we

      23   purchased Gwaltney in 1980.

      24             Q         When was the Gwaltney plant built?

      25             A         Well, here again, the second




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       1   Gwaltney plant was built --  I believe it was four

       2   stages.  I think it started in the late '50's and was

       3   built from the late '50's to the early '60's.  It was

       4   in stages over a four, five year period.

       5             Q         From that time until the time it

       6   connected to the HRSD plant in 1996, did the Gwaltney

       7   Plant also discharge into the Pagan River?

       8             A         That's correct.  Uh huh.

       9   (Indicating in the affirmative)

      10             Q         Do you eat the fish you catch in

      11   the Pagan River?

      12             A         Yes, I do.

      13             Q         Do you cook them before you eat

      14   them?

      15             A         Huh?

      16             Q         Do you cook them before you eat

      17   them?

      18             A         Yes.

      19             Q         Do you eat raw shell fish out of

      20   the Pagan River?

      21             A         I eat raw shell fish, but I don't

      22   shell fish, myself.  I don't know how much, where the

      23   shell fish come from.

      24             Q         Would you eat a raw shell fish

      25   from the Pagan River?




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       1             A         Would I today?  Yes.

       2             Q         Would you five years ago?

       3             A         Five years ago?  I think so.

       4   Yeah.

       5             Q         Would you have in 1994?

       6             A         In '94?

       7             Q         Yes.

       8             A         That's three years ago.  So I

       9   mean, I --  Yes, I would.

      10             Q         Are you familiar with the phrase,

      11   fecal coliform?

      12             A         Vaguely.

      13             Q         What is your understanding of what

      14   fecal coliform is?

      15             A         All I know is it's a --  Well, I

      16   say vaguely.  I just know that we have --  We have to

      17   meet limitations.  Fecal coliform is one, nitrogen is

      18   one, phosphorous is one.  But exactly what it is, I'm

      19   not sure.

      20             Q         Do you know the source of fecal

      21   coliform?

      22             A         No, I do not.

      23             Q         How --  Who runs Smithfield Foods?

      24             A         I do.

      25             Q         Is there also a Board of




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       1   Directors?

       2             A         Yes.

       3             Q         How many members are on that Board

       4   of Directors?

       5             A         I'm not sure.  But it's 15, 16, I

       6   guess.  I can give you that number, but I'm not

       7   sitting and counting.  But I'm not sure of the exact

       8   number.

       9             Q         Is there also a Board of Directors

      10   for Smithfield Packing?

      11             A         Um, yes.  Each of our subsidiaries

      12   has a Board of Directors.

      13             Q         Are there common members between

      14   the Board of Directors for Smithfield Foods and the

      15   Board of Directors for Smithfield Packing?

      16             A         That's correct, yes.

      17             Q         How many common members?

      18             A         I don't know.  I can --  The Board

      19   of Directors of subsidiary companies are there for

      20   housekeeping matters rather than to make policy.  All

      21   the policy is made by the management of Smithfield

      22   Foods with the supervision of the Board of Directors.

      23             Q         So you make the policy decisions

      24   that affect Smithfield Packing's plant and Gwaltney?

      25             A         That's correct.  The policy




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       1   decisions, yes, I do.

       2             Q         And you make the policy decisions

       3   affecting the Gwaltney plant at Smithfield?

       4             A         That's correct.

       5             Q         And that includes environmental

       6   compliance issues?

       7             A         That includes--  Yes, as far as

       8   policy is concerned.

       9             Q         What is Smithfield Foods' policy

      10   with respect to environmental compliance?

      11             A         To totally comply with the law one

      12   hundred percent.

      13             Q         How have you taken steps to

      14   effectuate that policy?

      15             A         I have given instructions, um,

      16   that every company is to totally comply with the law.

      17   And I have given authority to subordinates to try to

      18   ensure that policy takes place.

      19             Q         How have you communicated your

      20   policy of totally complying with the law?

      21             A         Orally.

      22             Q         To whom?

      23             A         To the people that were in charge,

      24   which would, which was Bill Hellmann--who was

      25   responsible for all environmental matters up until he




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       1   retired.  And then since that time, it's been Carl

       2   Wood.

       3             Q         Do you remember the precise

       4   statement that you made to these individuals?

       5             A         When you say precise, I could tell

       6   you in no uncertain terms, I told them that we are,

       7   that private industry is subject to one set of rules,

       8   and municipalities and government concern, government

       9   agencies are subject to another set of rules.  And

      10   that a private industry, particularly a meat packing

      11   company, is going to receive a high degree of scrutiny

      12   from the State, from the federal government, and from

      13   environmental groups.  And that we are to stay in

      14   total compliance and to do our best to stay in total

      15   compliance at all times.

      16                       We went through a very lengthy,

      17   expensive lawsuit we went over a few minutes ago that

      18   the Chesapeake Bay Foundation brought.  It was quite

      19   clear to me that we had to stay in compliance, or that

      20   we would bankrupt the company in paying lawyers and

      21   paying fines.

      22             Q         Was Bill Hellmann responsible for

      23   environmental compliance just at the Smithfield plants

      24   or at other plants owned by Smithfield Foods?

      25             A         He was in charge of Smithfield




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       1   Packing Company, and I believe Gwaltney.  I think all

       2   the other companies that we have today were bought

       3   after Bill Hellmann retired.  Well, let me --  Let's

       4   see.  Hold on.

       5                       Let me back up.  Maybe we had a

       6   plant in Baltimore that was closed down.  But that

       7   went into a municipal system.

       8                       The only two plants that I know of

       9   that had discharge permits with Bill Hellmann were the

      10   Smithfield Packing Company and Gwaltney.

      11             Q         Is it fair to say that Smithfield

      12   Foods has grown quite substantially over the past five

      13   years?

      14             A         I would say so.  I would say over

      15   the last 22 years.  No more in the last five than

      16   previously.  We've --  I guess if you don't grow, you

      17   die, one of the two.

      18             Q         What companies were acquired by

      19   Smithfield Foods between 1991 and 1997?

      20             A         We bought John Morrell, and we

      21   bought LIKES, in Florida.  I think they're the only

      22   two.

      23                       MR. WOOD:  Mash.

      24                       THE WITNESS:  Was that after '91?

      25                       MR. WOOD:  No.  That was prior to




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       1             '91.

       2             A         There's a small ham company up in

       3   Maryland named Mash.  I don't remember the exact year

       4   but I think it was before '91.  I can give you that

       5   information, if you'd like.

       6             Q         What states does Smithfield Foods

       7   operate in?

       8             A         I might forget one, but we operate

       9   in Kansas, and Iowa, South Dakota, Wisconsin,

      10   Virginia, North Carolina, Georgia, Florida, Maryland.

      11   I believe that covers them all.  Ohio.  I missed Ohio.

      12             Q         Other than communicating orally

      13   your policy of total compliance with the law to

      14   Mr. Hellman and Mr. Wood, did you engage in any direct

      15   communication with employees at the Smithfield Packing

      16   or Gwaltney plant regarding compliance with

      17   environmental statutes?

      18             A         None, other than the way we're set

      19   up, we have a president of each subsidiary.  And I

      20   conveyed to the president of Smithfield Packing

      21   Company, and the president of Gwaltney that

      22   Mr. Hellman and Mr. Wood were in charge of

      23   environmental compliance.  And that they, although

      24   they had almost complete autonomy to run the different

      25   businesses, they are to take directions from Mr. Wood




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       1   to curtail production or shut down the plant, if

       2   necessary, if it meant to try to come into, to stay in

       3   compliance.

       4                       And it's my understanding that,

       5   that Mr. Wood and Mr. Hellmann, on numerous occasions,

       6   have curtailed production to, in an effort to stay in

       7   compliance.  That's the policy of the company.  And

       8   everyone from the top down knew it.

       9             Q         How did you insure that everyone,

      10   other than who you spoke to, was aware of that policy?

      11             A         Well, I mean, I conveyed it

      12   verbally to Mr. Hamilton, who's the president of

      13   Smithfield Packing Company, and at various, and

      14   Gwaltney.  I mean, everyone knows that, you know, that

      15   Mr. Wood has authority in that area.  And it's never

      16   been --  It's never been a topic of debate.  It's

      17   clear cut, and everyone understands it.

      18             Q         How do you know that everyone

      19   understands that?

      20             A         Because when I give

      21   instructions --  It's not like the government.  When I

      22   give instructions, those orders are followed.

      23             Q         What do you mean it's not like the

      24   government?

      25             A         Well, I'm in control of Smithfield




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       1   Foods.  I mean, you don't have --  I mean, in the

       2   government, you've got an Executive Branch, you've got

       3   the Legislative Branch, you've got the Judicial

       4   Branch.  And there's no, there's a sharing pile.

       5                       But a private corporation, people

       6   do what I say, or they are disciplined or discharged.

       7   It's that simple.

       8             Q         At any time, did you have

       9   conversations with anyone other than Mr. Wood,

      10   Mr. Hellman and the presidents of Smithfield Packing

      11   and Gwaltney regarding the policy of the company

      12   towards environmental compliance?

      13             A         Not that I remember, no.

      14                       That's not to say that I might not

      15   have made a comment in passing someone.  But I

      16   don't --  I mean, presidents report to me, and the

      17   Smithfield Foods staff reports to me.  But other than

      18   them, no one reports to me.

      19             Q         And the chain of command is an

      20   important concept at Smithfield Foods?

      21             A         Absolutely.

      22             Q         And at Smithfield Packing?

      23             A         Absolutely.

      24             Q         And at Gwaltney?

      25             A         Absolutely.




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       1             Q         And people are discouraged from

       2   circumventing one supervisor to report to another?

       3             A         Everyone has a boss, and they

       4   report to their boss.  That doesn't mean that, that

       5   from time to time people don't go around their boss to

       6   talk to someone else.  You know, that happens in all

       7   organizations, I guess.

       8             Q         But that's not a favored practice

       9   at Smithfield Foods?

      10             A         I --  No.  I think a favored

      11   practice of Smithfield Foods is we have open debate.

      12   And I have, I have an open-door policy, myself.  And

      13   there are many people that work at Smithfield Foods

      14   will come in, will come to me and talk to me about

      15   something that, that's that's not in the chain of

      16   command.  That's just because I have an open-door

      17   policy.  Sort of helps me to to keep abreast of what's

      18   going on.

      19             Q         When did you initiate that

      20   open-door policy?

      21             A         It's just been my management style

      22   my entire life.

      23             Q         How do you communicate that

      24   open-door policy to the staff?

      25             A         I don't.  I don't invite it.  I'm




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       1   just saying that, you know --  I've --  People in the

       2   organization --  I mean, I'll give you an example.

       3                       Tom Ross, who's the Vice-president

       4   of Personnel at Smithfield Packing Company, he reports

       5   directly, today, to the president of Smithfield

       6   Packing Company.  But if something comes up that he

       7   thinks I would be interested in, he feels free to walk

       8   in the door and discuss it with me.

       9             Q         What kind of topics has he come

      10   into your office to discuss?

      11             A         Oh, might be labor union matters;

      12   it may be some new law that's come out in regard to

      13   personnel matters.  You've got all kinds of new laws

      14   today to deal with that you didn't have to deal with

      15   years ago in regard to racial or sexual

      16   discrimination, that sort of thing.

      17                       But my policy has always been, you

      18   stay out of --  Courtrooms are expensive, lawyers are

      19   expensive.

      20                       And anybody that works for

      21   Smithfield Foods that knows me knows that our policy

      22   is to comply with any and all laws, irregardless of

      23   whether you think those laws are appropriate or not.

      24   But we have a policy that we just, we don't break the

      25   law.  Whether it's labor law, or whether it's




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       1   environmental law, or whether it's wage and hour law.

       2   I mean, whether it's the subject --

       3                       The meat packing business is a

       4   highly regulated industry, and we learned a long time

       5   ago that, you know, the best policy is to comply with

       6   all laws.

       7             Q         What topics, other than advising

       8   you of new developments in either union rules or laws

       9   have employees at Smithfield Foods, Smithfield Packing

      10   or Gwaltney brought to your office?

      11             A         I can't tell you.  I mean, you

      12   know, I've been there for 22 years.  People walk in my

      13   office every day on a wide variety of subjects.

      14                       I do not --  I do not micro-manage

      15   the business.  I mean, I leave it up to people.  I

      16   give them responsibilities.  I try to make them feel

      17   that they are part owner of the business.  And they

      18   have authority to run their ends of the business.  And

      19   I hold those people responsible.

      20                       That's not to say that if, I mean,

      21   if someone thought that we were breaking a law, not

      22   doing something that's right --  I mean, Tom Ross

      23   thought that a president of a company was encouraging

      24   him to violate the law, he'd go right around that

      25   person and come to me, yes.




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       1             Q         Would staff go around the chain of

       2   command to report to you?

       3             A         If they thought a law was being

       4   broken, I think they would, yes.

       5             Q         Has anyone ever done that?

       6             A         The only time I can recall is I

       7   think we had a supervisor one time that was letting

       8   truck driver's work longer than prescribed hours.  And

       9   the personnel man came to me and said, hey, some of

      10   these truck drivers are working longer than prescribed

      11   hours.  You know, we can get in trouble.  And I

      12   immediately corrected the problem.

      13             Q         How did you correct the problem?

      14             A         I decided we will monitor the

      15   truck drivers' hours to make sure that they don't

      16   fudge when they turn in their time sheets.

      17             Q         How did you monitor their hours?

      18             A         I don't know.  I just said, look,

      19   bring it to a halt.

      20             Q         And you did not get into the

      21   details of how they fixed it?

      22             A         I don't get into the details.

      23   This is a four billion dollar a year business.  I

      24   can't get into details.  There's not enough hours in

      25   the day for me to do that.




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       1             Q         Are you aware of any instances

       2   where someone has reported environmental compliance

       3   issues to you outside the chain of command?

       4             A         No.

       5             Q         What training do new employees at

       6   Smithfield Packing or Gwaltney of Smithfield receive

       7   before they begin working?

       8                       MR. TROY:  What do you mean, what

       9             employees?

      10             A         What employees?  I've got 18,000

      11   employees.  Obviously, there are different degrees of

      12   training required for 18,000 different employees.  And

      13   probably, probably five thousand different job

      14   functions.

      15             Q         Is there a general environmental

      16   compliance course taught on behalf of Smithfield

      17   Foods, Smithfield Packing or Gwaltney to new

      18   employees?

      19             A         No.  We don't get into anything

      20   like that.  Environmental course?  No.  I know we --

      21   No.  I mean, the people that are in charge of the, of

      22   running our Waste Water Treatment Plants, I assume,

      23   have got the qualifications and the background and the

      24   education and the mentality to perform their jobs.

      25             Q         Is there any written or oral




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       1   training given to employees, other than waste water

       2   treatment plant employees, regarding environmental

       3   compliance?

       4             A         Here again, I don't know--  I mean

       5   it's --  We've got a lot of employees that can't read

       6   or write.

       7             Q         But they can listen.

       8             A         They can listen.  But are you

       9   asking me, do we run our business like the federal

      10   government runs its business?  The answer is, no.

      11             Q         What do you mean?

      12             A         Exactly what I said.

      13             Q         What do you mean by how the

      14   federal government runs its business?

      15             A         I just said.  We don't --  We

      16   don't --  We don't run our business with mounds of

      17   paperwork that go in the files that no one looks at.

      18   We just don't run our business that way.  We're not a

      19   paper-driven kind of a company.

      20             Q         My question was, is there any

      21   written or oral training given to employees, other

      22   than Waste Water Treatment Plant employees regarding

      23   environmental compliance?

      24             A         It may be.  I'm not aware of it.

      25   But it may be.  It may be.




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       1             Q         What training is given to

       2   employees who begin operating on the kill floor?

       3             A         You'll have to ask the

       4   Vice-president of Operations what training is given.

       5   It depends upon --  Here again, we've got many

       6   different jobs on the kill floor.  Some jobs don't

       7   require any training; some jobs require an awful lot

       8   of training.

       9             Q         Is there any job --

      10             A         I mean, you're a lawyer with the

      11   EPA.  You know, you've got janitors working for the

      12   EPA.  So it's, you've got different levels required

      13   for different positions.

      14             Q         Is there any training given to

      15   employees working in the kill room regarding job

      16   safety?

      17             A         Oh, job safety is always a top

      18   priority with us.

      19             Q         What kind of training is given in

      20   job safety on the kill floor?

      21             A         We have a safety --  We have a

      22   safety director.  We have safety meetings all the

      23   time.  I mean, every accident is very, very expensive.

      24   I think every company in the country tries to operate

      25   a safe environment.  It's --  Accidents are costly,




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       1   plus they're damaging to the employee.

       2                       And we have safety programs we

       3   have for truck drivers; we have safety programs for

       4   most of our employees, some more than less, I guess.

       5   I'm not familiar with the details of those programs.

       6             Q         Do you receive regular reports on

       7   the operations at Smithfield Packing and Gwaltney?

       8             A         No.  Well, I wouldn't say regular

       9   reports.  I mean, bottom line reports.  But I'm not --

      10   Not detailed reports.

      11             Q         What do you mean by bottom line

      12   reports?

      13             A         I mean sales per week, that sort

      14   of thing, perhaps.  But, but not day-to-day operation

      15   reports.  The answer is no.

      16             Q         Do you receive reports on

      17   accidents?

      18             A         I receive a report once a quarter

      19   on Workmen Comp claims, yeah.

      20             Q         Do you receive a productivity

      21   report?

      22             A         Not in any great detail.

      23             Q         Do you receive reports on

      24   environmental compliance?

      25             A         I receive reports when we're not




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       1   in compliance, yes.  Here again, it's orally.

       2                       We have a problem with compliance,

       3   Carl Wood will come into my office and tell me we've

       4   had a problem.

       5             Q         Do you receive regular reports on

       6   the operation of the Waste Water Treatment Plant?

       7             A         No.

       8             Q         Is it fair to say you receive

       9   regular reports on the key indicators of profit and

      10   loss at Smithfield Packing and Gwaltney?

      11             A         No.  It would not be fair to say

      12   that.

      13             Q         Who would receive those reports?

      14             A         The presidents of each of those

      15   companies.

      16             Q         Are those ever reported to you?

      17             A         Well, obviously.

      18             Q         How often?

      19             A         I mean, we run monthly financial

      20   statements.

      21             Q         Do you review those monthly

      22   financial statements?

      23             A         I look at them, yes.

      24             Q         For both Smithfield Packing and

      25   Gwaltney?




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       1             A         For every company we have, I've

       2   seen them.  But I don't --  I don't --  Here again, I

       3   look at them more if there are problems.  I don't look

       4   at them if things are going well.

       5             Q         So do you look at the monthly

       6   report for each company or --

       7             A         I look at the financial statements

       8   every month.  I look at the consolidated financial

       9   statements of Smithfield Foods.  Smithfield Foods is

      10   made up of, you know, of various operating entities.

      11             Q         Have there been instances in which

      12   either the Smithfield Packing plant or the Gwaltney

      13   plant have not complied with environmental laws?

      14             A         Have there been instances?

      15             Q         Yes.

      16             A         We've had violations, yes.  I

      17   think everyone has violations from time to time.  I

      18   mean, you know, you've got --  You're going to

      19   disagree, but I think our environmental record hasn't

      20   been perfect, but --  I don't think it's been bad

      21   compared to most other ones we've had.

      22                       MR. TROY:  Sarah, I want to put an

      23             objection on the record for the form of that

      24             last question to the compliance.

      25                       MS. HIMMELHOCH:  To the extent




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       1             that it calls for legal conclusion?  Is that

       2             the objection?

       3                       MR. TROY:  To the extent that it's

       4             vague.

       5

       6   BY MS. HIMMELHOCH:  (Continuing)

       7             Q         You say your record compared to

       8   most --

       9             A         No.  I'm just saying that --  I'm

      10   saying that we make every effort to be in total

      11   compliance.  Because we're well aware that if we're

      12   not in total compliance, that the State of Virginia or

      13   various environmental groups would be very, very quick

      14   to file suit.  And I'm very much aware that every

      15   violation is subject to a $25,000.00 fine.  And that,

      16   and that it is company policy to try to make sure that

      17   does not happen.

      18                       I have been told that, that we do

      19   operate a biological system.  And from time to time,

      20   there are upsets.  I have talked to outside

      21   consultants--not recently, but going back to the, to

      22   the Gwaltney lawsuits of 15 years ago, I guess it's

      23   been now--that from time to time, the biological

      24   systems, there are upsets.  We don't live in a perfect

      25   world.




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       1             Q         Who are the consultants you spoke

       2   with during that time period?

       3             A         Wells Engineering was, is our

       4   primary.  And then I believe we've consulted with

       5   other people, also, from time to time.  Names, I don't

       6   remember.

       7             Q         Between the conclusion of the

       8   Gwaltney lawsuit and the present, have you personally

       9   spoken with Wells Engineering regarding environmental

      10   compliance at either the Smithfield Packing or

      11   Gwaltney plants in Smithfield?

      12             A         No.

      13             Q         Have you personally spoken with

      14   anyone at CH2M-Hill regarding --

      15             A         No.

      16             Q         I appreciate your desire to get

      17   through this quickly, but you do have to let me finish

      18   the question so that the record is clear.

      19                       Have you personally, since 1991,

      20   spoken with anyone at CH2M-Hill regarding Waste Water

      21   Treatment Plant issues at Smithfield Packing plant or

      22   Gwaltney of Smithfield?

      23             A         No.

      24             Q         Are you aware of any instances in

      25   which Smithfield Packing or Gwaltney have violated the




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           Luter - Direct                                      45



       1   fecal coliform levels set forth in the permit?

       2             A         I'm aware there have been some

       3   occasional variances.  There have been some occasional

       4   violations, yes.  I'm aware of those, yes.  But I --

       5   We did some calculations some time ago.  And we run

       6   hundreds, literally hundreds of thousands of tests.

       7   The vast, vast, vast majority of the tests, we're in

       8   compliance.  But there have been, there have been

       9   occasional upsets, and there have been occasional

      10   violations.

      11             Q         When you say you run hundreds of

      12   thousands of tests, are those all tests run on the

      13   final effluent discharge to the Pagan River?

      14             A         I'm not sure.  I just know that

      15   we, I asked Mr. Wood to tell me the number of possible

      16   violations that we could have in a year's time.  He

      17   did that some months ago.  It was in the hundreds of

      18   thousands.

      19             Q         Why did you ask him to do that?

      20             A         I wanted to see --  What I wanted

      21   to see was the number of violations we had, was this

      22   something that was out of the norm?  Was it more than

      23   what other companies in the meat packing industry have

      24   experienced?  I wanted to try to find out whether we

      25   were doing a good job or a bad job in comparison to




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       1   other industries, to other companies in our industry

       2   and other industries.

       3                       And the reports get back to me, as

       4   you know, we're not perfect.  We've occasional

       5   problems.  But in the overall scheme of things, we

       6   have not had that many violations.  And those

       7   violations were not violations that were life

       8   threatening or posed any significant risk to the well

       9   being of the Pagan River.

      10             Q         What is the basis of your

      11   understanding that the violations did not pose a

      12   significant risk to the well being of the Pagan River?

      13             A         Conversations with Mr. Wood.

      14             Q         Any other basis?

      15             A         No other bases, other than, I

      16   believe that the majority of the phosphorus and the

      17   nitrogen that is in the Pagan River is coming from

      18   agriculture runoff and from the natural decaying

      19   process that takes place in the vast amount of marsh

      20   land that's around the Pagan River.

      21             Q         What is the basis of that belief?

      22             A         Conversations with Wells

      23   Engineering, with Carl Wood.  This was back --  This

      24   goes back to the Gwaltney lawsuit when I was talking

      25   with lawyers and with Wells Engineering, and, and our




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       1   people to try to get hold of what was really taking

       2   place.

       3                       And then, then when I found out in

       4   19, in the late 1980's that the State was going to put

       5   in a two parts per million phosphorus limitation,

       6   Mr. Hellmann came to me at that time and said, Joe,

       7   that the State is going to, was going to, is talking

       8   about imposing a two parts per million phosphorus

       9   limitation.  He says there's no way that we can meet

      10   it on a consistent basis.  And I said, I asked him at

      11   that time, had he discussed it with the outside

      12   engineers?  And he told me that he had, and they had

      13   come to the same conclusion.

      14                       And, and I'd just gone through the

      15   Chesapeake Bay Foundation experience.  And I was very

      16   concerned that, that you know, that the State may be

      17   asking us to do something that would be impossible to

      18   comply with on a consistent basis.

      19             Q         Did you personally talk to Wells

      20   Engineers about the phosphorus compliance issue?

      21             A         Let me think back.  I believe I

      22   did.  I believe a guy named --

      23                       THE WITNESS:  Carl, refresh my

      24             memory.  What's that young guy's name that

      25             testified?




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       1                       MR. WOOD:  Willis Sneed?

       2             A         Willis Sneed.  Yes, I do believe I

       3   did talk to Willis Sneed.  This is back in the late

       4   '80's.  Willis Sneed, at that time, told me he did not

       5   know of another meat packing company in the country

       6   that was subject to that strict of a limitation.  And

       7   he had very serious reservations about whether we

       8   could meet it on a consistent basis despite spending

       9   millions of dollars.  And anyway, as a result of

      10   listening to my people, plus outside consultant

      11   engineers--this is what they do for a living--I came

      12   to the conclusion that, you know, that we could not

      13   meet it on a hundred percent basis.

      14                       Here again, I keep going back,

      15   today, you have to meet it on a hundred percent, or

      16   you're subject to be drug in court and charged

      17   $25,000.00 for every single violation.  So --

      18             Q         When you spoke to Mr. Sneed at

      19   Wells Engineers about the ability of the plants to

      20   meet the phosphorus limit, had he conducted a study of

      21   the plant or written a report regarding the ability of

      22   the report to meet the limit?

      23             A         He had been doing that work for

      24   years.  And as I say, the issue was so serious that we

      25   brought in other people other than Mr. Sneed, other




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           Luter - Direct                                      49



       1   than Wells Engineering.  And it's my understanding

       2   that it was unanimous from our side that if we agreed

       3   to a two parts per million phosphorus limitation that

       4   we would be in non-compliance quite often.  And with,

       5   and with, and subject to, subject to fines and

       6   publicity that would be detrimental, if not ruin us,

       7   to the company.

       8             Q         What was your understanding of how

       9   often the phosphorus limit would have been violated?

      10             A         Well, I say, we couldn't meet it

      11   on a consistent basis.  It was too tight to meet it on

      12   a consistent basis.  The regulatory agencies, today,

      13   insist it's one hundred percent, or they come down

      14   hard on you.

      15             Q         What was your understanding of how

      16   often the phosphorus limit --

      17                       MR. TROY:  Asked and answered.

      18             A         I've answered that twice.

      19             Q         Did they give you an estimate of

      20   the number of times per month the phosphorus limit

      21   would be --

      22             A         No.  No.  They said, Joe, have you

      23   a biological system?  You are, the nature of the

      24   effluent in a meat packing plant is naturally high in

      25   phosphorus.  They explained it to me, they said, hey,




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       1   that--I'm trying to remember the--dioxin.  Said, look

       2   you can put one part per trillion dioxin in your

       3   treatment plant, and you can meet it.  But a paper

       4   company can't meet a 1 part per billion.

       5                       See, different companies have

       6   different limitations in their permit.  And the

       7   limitations are based on what's the best available

       8   technology.

       9                       And, and that because the nature

      10   of your effluent in a meat packing business is high in

      11   nutrients, which means high in nitrogen and

      12   phosphorus--I believe they are nutrients--that the

      13   three parts was extremely tight, unrealistic, and that

      14   I would be putting the company's future in severe

      15   jeopardy if I ever agreed to a three parts per

      16   million.

      17                       So we --  I --  We brought our

      18   lawyers in.  We discussed it.  The general sentiment

      19   was the three parts per million was an unrealistic

      20   demand on the part of the State.  And we --  I gave

      21   instructions to contest, to contest it in court.  And

      22   it's my understanding that the law firm of Mays &

      23   Valentine instituted a lawsuit, or maybe it wasn't a

      24   lawsuit--I'm not sure of the terminology--but they

      25   took the necessary action to challenge, to challenge




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       1   that limitation, because we thought that the, that

       2   that request by the State was unrealistic.

       3             Q         Who, other than Willis Sneed,

       4   advised you that the limit could not be met?

       5             A         As I say, it was another company.

       6   You just mentioned it, I believe.  I believe that was

       7   the company.

       8             Q         Do you recognize the name

       9   CH2M-Hill?

      10             A         I believe that's the one.  I'm not

      11   sure, but I think that was the one.

      12             Q         When did CH2M-Hill --

      13             A         I don't know.  I don't know.  I've

      14   never talked to anyone.  I just--  I know that the, it

      15   was serious enough that I told, I can't remember

      16   whether it was Bill Hellmann or whether it was Carl

      17   Wood, but it was serious enough, I said, let's go get

      18   another outside opinion to make sure that we know what

      19   we're talking about here.

      20             Q         Did you review the reports of that

      21   second study?

      22             A         No.

      23             Q         Did you ask your staff what the

      24   result of that study were?

      25             A         No.  My staff has always been




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       1   consistent.  My staff is basically Carl Wood, and Bill

       2   Hellmann before him.  That they reconfirmed that the

       3   two parts per million, we would run a severe risk of

       4   being in violation if we, if we --  And that was it.

       5                       And I mean, it was serious enough

       6   that we started considering shutting the plants down

       7   in Virginia and moving to North Carolina.  That's how

       8   seriously we took it.

       9                       MR. TROY:  Sarah, I think the

      10             witness previously indicated three parts.  I

      11             think we all know that the record should

      12             reflect he meant two parts.  He just said

      13             two parts a second ago.

      14             A         Okay.  I'm sorry.  Yes.

      15                       My head is clogged up with hey

      16   fever.  I rode three wheelers over the weekend and got

      17   pollen in my head.  I'm not thinking very clearly

      18   today, I'm afraid.

      19             Q         Would you like to reschedule the

      20   deposition for another time?

      21             A         No.  Listen, I want to get it over

      22   with.

      23             Q         And you feel comfortable that you

      24   can fairly answer the questions?

      25             A         Oh, yes.  Oh, yes.




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       1             Q         Why didn't you move the Smithfield

       2   Packing and Gwaltney plants to North Carolina?

       3             A         Well, in reality, I did.  I built

       4   a --  Because of the State action, I, which I thought

       5   was severe, over severe, that I did not feel like if

       6   the State recognized that, that a two parts per

       7   million phosphorus limitation was something that was

       8   not attainable by Smithfield Foods, I made every

       9   argument.  And the State refused to give in.  And I

      10   basically made the decision to build a plant in North

      11   Carolina which did not have a strict phosphorus

      12   limitation requirement.

      13             Q         I'm going to ask you to take a

      14   look at a couple of documents.  This has previously

      15   been marked as Exhibit 51 to Mr. Wood's deposition.

      16   And he has identified it as the study that was

      17   performed on behalf of Smithfield Foods by CH2M-Hill

      18   regarding phosphorus compliance.  I'd ask you to

      19   turn --

      20             A         I have seen it.  So I mean, I'll

      21   turn to whatever page you want to.

      22             Q         I'd ask you to turn to --  Give me

      23   a moment to find the page.  If you would turn to Page

      24   61 of this exhibit, which is Bates No. SF403218.

      25                       These are the conclusions that




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       1   CH2M-Hill presented to Smithfield Foods.  And if you

       2   look at the third bullet on this page, could you read

       3   that to yourself?

       4             A         I've read it.

       5             Q         So CH2M-Hill prepared a report and

       6   submitted it to Smithfield Foods that indicated that

       7   Smithfield can meet a two milligram per liter

       8   phosphorus limit, is that correct?

       9                       MR. TROY:  I'm objecting to the

      10             form of the question.  I think the report

      11             speaks for itself and has to be read en

      12             toto.

      13             A         I was told on certain days, you

      14   can meet it.  I'm saying that I was told that I could

      15   not meet a two parts per million phosphorus limitation

      16   on a consistent basis, which means a hundred percent

      17   of the time.  Because if I'm 95 --  If I run

      18   phosphorus tests for 365 days, and 364 days I meet two

      19   parts per million, and then the 365th day I do not,

      20   I'm subject to being drug into federal court and

      21   subject to a fine.

      22             Q         So if you can't meet it a hundred

      23   percent of the time, you're not going to try to meet

      24   it at all?

      25             A         No.  That's not what I said.  I'm




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       1   saying that --  I'm saying that I, I have to meet it a

       2   hundred percent of the time, or I'm opening myself up

       3   to constant litigation.

       4             Q         Did you ask to see the report that

       5   CH2M-Hill --

       6             A         No.  No.  I don't read reports

       7   like that.  I don't have enough time to do that.

       8             Q         Did you speak with CH2M-Hill

       9   directly?

      10             A         I just told you, I did not.

      11             Q         Did you review the Wells

      12   Engineering reports?

      13             A         I have not reviewed any reports,

      14   period.

      15             Q         Other than instructions given to

      16   the individuals we've already identified, have you

      17   taken any other steps to insure environmental

      18   compliance at Smithfield Packing or Gwaltney at

      19   Smithfield?

      20             A         It is well known with the top

      21   management, of all the top managers of Smithfield

      22   Packing Company and Gwaltney, that we are to comply

      23   with all environmental laws.  And that we are to do

      24   whatever is necessary to be in compliance.

      25             Q         If an employee is unable to insure




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       1   compliance, does he have reason to fear losing his

       2   job?

       3             A         Absolutely not.  Now, if he, if

       4   he --  If he makes mistakes that should not happen,

       5   and it's human error that is not excusable, or is what

       6   I would call dereliction of duty, yes, he's got --

       7   Yes, he knows he would be fired.  But that's true --

       8   That's true throughout the organization in all areas

       9   where people are held responsible.

      10             Q         Is it fair to say that it was a

      11   pervasive notion within Smithfield Packing and

      12   Gwaltney that the companies did not wish to report any

      13   violations of the Clean Water Act?

      14             A         It's fair to say that, that

      15   everyone is to do their utmost to make sure that

      16   violations do not occur.

      17             Q         And that is the pervasive attitude

      18   within the companies?

      19             A         No, it's not pervasive.  I'm

      20   saying --  Pervasive is your word.  I'm saying that we

      21   spent the money to put in the treatment plants that

      22   were recommended to us by Wells Engineering and other

      23   people.  We were told that these treatment plants were

      24   designed, and if they were operated properly, that we

      25   could be in compliance.




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       1                       And I gave Carl Wood and his, and

       2   he has subordinates under him.  I told Carl Wood it's

       3   his responsibility to see that, to staff these

       4   facilities as they should be staffed, and that we try

       5   to achieve as close to one hundred percent compliance

       6   as we possibly can.

       7             Q         Did you give --

       8             A         But I mean, that's something--  I

       9   think that's --  But that's --  I think every company

      10   in the country operates with that understanding today.

      11   Might be a few companies that don't, but I mean,

      12   it's --  You can't --  You can't conduct business in

      13   this country with an attitude of breaking the law.

      14             Q         In the late 1980's, do you recall

      15   any upgrades to the Waste Water Treatment Plants?

      16             A         Do I what?

      17             Q         Upgrades, improvements.

      18             A         There have been several upgrades.

      19   I will say this.  That every time a request came to my

      20   desk, I approve all capital expenditures above

      21   $10,000.00.  It has been increased about a year ago,

      22   that limit was increased to $25,000.00.  But up until

      23   about a year ago, I approved every capital expenditure

      24   project in excess of $10,000.00.  And that I have

      25   never turned down one request.  I have never delayed




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       1   approval of any request of any additions to the waste

       2   water treatment system to upgrade to keep us in

       3   compliance.  I've always immediately said, spend the

       4   money, do what is necessary to stay in compliance.

       5             Q         You indicated earlier today that

       6   Mr. Wood and Mr. Hellmann had the authority to cut

       7   back production, if necessary, to achieve compliance?

       8             A         That's correct.

       9             Q         And that they did so on several

      10   instances?

      11             A         Quite a few instances over the

      12   years, yes.

      13             Q         After Mr. Hellmann left Smithfield

      14   Foods, are you aware of any instances in which

      15   production was cut back to achieve compliance with the

      16   Clean Water Act?

      17             A         Mr. Wood has told me he's cut

      18   back.  Many times, we've cut back operations within

      19   the plant that use a lot of waste water.  I mean, use

      20   a lot of water.  And he has told me that he has done

      21   it on numerous occasions.  And specifically, what he

      22   did on what day, I don't know.  But in following

      23   through on my instructions, he has, he has issued

      24   instructions to cut back.

      25                       I separated --  I mean, when




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       1   you've got operating presidents, when you've got

       2   operating heads of companies that I hold responsible

       3   for bottom line profits, quite, you know, they're

       4   quite reluctant to scale back production.  Because

       5   profits are down, they come under very severe

       6   pressure.  So I had to take that responsibility away

       7   from the operating presidents and I gave it, I gave it

       8   to Mr. Wood.

       9             Q         Since 1991, are you aware of

      10   specific occasions in which production has been cut

      11   back in order to maintain or achieve compliance of the

      12   Waste Water Treatment Plant?

      13             A         I just said, I've been told --

      14   I've been told by Mr. Wood that he has done it on

      15   numerous occasions.  You need to ask him the specific

      16   times.  I don't know the specific times, but I do know

      17   that --  I do know there were times we had them save

      18   casings and chitterlings, because we were pushing the

      19   limits, and we were, we would be running the risk of

      20   having violations.  I do know that we have curtailed

      21   production.  I believe we have actually cut the kills

      22   from time to time.  We've cut back on casings and

      23   chitterlings.

      24                       We have --  It's a, something

      25   that's monitored.  My understanding, you know, you




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       1   know, on an hourly or daily basis.  And we, we

       2   monitor, we try to monitor it very, very closely.

       3   Here again, as I say, it is a biological system.  And

       4   it's --  It's my understanding that you constantly

       5   have to adjust or tweek the system to stay in

       6   compliance.  I mean tweek, I mean add chlorine or

       7   subtract chlorine --  I'm not an expert, I don't know

       8   what goes on.  But I do know that, that it's something

       9   that requires, you know, constant attention.

      10             Q         How long has Mr. Wood been in

      11   charge of environmental compliance at Smithfield

      12   Packing and Gwaltney of Smithfield?

      13             A         I think since Mr. Hellmann's

      14   retirement, I believe.

      15             Q         When did Mr. Hellmann retire?

      16             A         I'm not sure.  It was in the late

      17   '80's, I believe.

      18             Q         Has Mr. Wood told you specific

      19   occasions after 1991 in which he cut back production

      20   in order to achieve or maintain compliance?

      21             A         He's told me he has done it, yes.

      22   You know, when and where it was, I don't know.  I

      23   mean, he has told me that he has done it on numerous

      24   occasions.

      25             Q         Did you ever --




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       1             A         I mean --  But he wouldn't have to

       2   tell me every time he did it, because he had the

       3   authority to do it.  Because --  And he, quite

       4   frankly, was in a difficult position, because I had

       5   some presidents of companies that got very mad with

       6   him from time to time, because he was hurting the

       7   profitability of the company, which was, which made

       8   them look bad.  But --  But I backed up Mr. Wood on

       9   every occasion and said, I can't help it.  Mr. Wood's

      10   got complete authority in this area, and, and we're

      11   not going to have violations.

      12             Q         Did you ever conduct or instruct

      13   anyone else to conduct investigations of ways to

      14   reduce the need to cut back production in order to

      15   stay in compliance?

      16             A         No.

      17             Q         Do you know whether the frequency

      18   with which production was cut back increased or

      19   decreased between 1991 and 1994?

      20             A         I don't know.  I think

      21   Mr. Hellmann and Mr. Wood both exercised that

      22   authority from time to time.  But whether it's

      23   increased or decreased, I don't know.

      24             Q         Did you create any positive

      25   incentives to achieve environmental compliance at the




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       1   Smithfield Packing or Gwaltney plants?

       2             A         What do you mean by positive

       3   incentives?

       4             Q         Did you offer bonuses, or raises,

       5   or promotions, or awards of any kind?

       6             A         Sure.  I mean, if we --  I mean,

       7   I --  What?  From 1982-'83, you know, we went for ten,

       8   eleven years without violations.  I think for the most

       9   part, we had an occasional upset, but I was told by

      10   Mr. Wood that, you know, that, you know, occasional

      11   upset was recognized as something that happens with

      12   these biological systems, in that, in that Mr. Wood

      13   told me that he thought that, that our systems were

      14   certainly within the norm of what to expect from these

      15   kind of systems.

      16             Q         What is the basis of your

      17   understanding that there were no violations between

      18   1983 and 1994?

      19             A         I just didn't think --  I could be

      20   wrong.  I just didn't think we had any.  We might have

      21   an occasional upset, one or two.  But here again, as I

      22   say, when you run hundreds of thousands of tests a

      23   year, sometimes you will have --  You know, you'll

      24   have a bad test, for instance.  You know, I don't

      25   know.  But I just --  I just know that I was told




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       1   that, that, you know, that the systems were operating

       2   satisfactorily.

       3                       And, and I know from time to time,

       4   that--  Correct me if I'm wrong.  I could be wrong on

       5   this, because my memory is a little bit vague.  But I

       6   think from time to time, Mr. Wood came to me and said

       7   we needed to add a couple of aerators or spend some

       8   money to, to upgrade the system, and I did it.  In

       9   fact, I think he came to me after we reached an

      10   agreement to tap onto HRSD, he came to me and

      11   requested I spend some monies to upgrade the system.

      12   And I said, well, why in the world do we have to

      13   upgrade it?  We're going to tear it down in a couple

      14   of years.  But he said, well, he said, I need to do it

      15   to stay in compliance during this interim period.  I

      16   said, if we've got to do it, we've got to do it.  I

      17   authorized it.  But I thought it was a little bit

      18   foolish, perhaps, because we were getting ready to tap

      19   onto HRSD.  I didn't delay the decision.  I think I

      20   approved every request to spend monies on the waste

      21   water treatment system the day the request hit my

      22   desk.  I did not --  I never --  I never delayed it.

      23   I'd ask a few questions, as I do.  But, you know, I

      24   was told that we need to do it to stay in compliance.

      25   And I said, well, if we need to do it, we need to do




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       1   it.

       2             Q         What is your --  When you had

       3   these conversations with Mr. Wood about the lack of

       4   violations between 1983 and 1994, did you include

       5   phosphorus in those discussions?

       6             A         No.  I --  You know, it's my

       7   opinion that we don't have, I mean, it's my opinion

       8   today that we don't have any phosphorous violations.

       9   I think the only reason we have phosphorus violations

      10   is because EPA is challenging the agreement that we

      11   reached with the State back in I guess 1990, '91's.

      12             Q         Did you review the agreement

      13   signed in 1991?

      14             A         No.

      15             Q         Did you discuss with anyone the

      16   terms of that agreement?

      17             A         Well, no.  The, the only time I

      18   got involved was a meeting was set up at my office in,

      19   at Smithfield Packing Company.  This was when --  This

      20   meeting was when we were challenging the State's right

      21   to put a two parts per million phosphorus limitation

      22   in our permit.  And the State was being very insistent

      23   upon this.  We made all the arguments about most of

      24   the phosphorus we believed in the Pagan River was

      25   coming from agricultural run off and from natural




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           Luter - Direct                                      65



       1   decaying of the marsh land.  These are my personal

       2   opinions.

       3                       But in any event, the meeting was

       4   set up.  I don't remember who requested the meeting,

       5   but a meeting was set up, which I met with the State

       6   Water Control Board--Richard Burton was there at that

       7   time.  He was head of the State Water Control Board.

       8   Mr. Borberg who was there with HRSD.  Jim Ryan, an

       9   attorney with Mays & Valentine.  He was handling the

      10   challenges to the State's action was there.  I was

      11   there.  I don't remember whether Mr. Wood or

      12   Mr. Hellmann were there.  I just don't remember.  Had

      13   one member from the State Water Control Board, Pat

      14   Stanley was there.

      15                       The thrust of the meeting was, my

      16   position was you're asking me to do something that I

      17   can't accomplish.  And I've got really three

      18   decisions.  I've got --  And that is, to shut the

      19   plants down to come into compliance; to make the

      20   improvements, but run the risk, severe risk of being

      21   in non-compliance on an ongoing basis; or to fight the

      22   new tougher limitations through the court.  And my

      23   intention was to fight it all the way.

      24                       And they brought up to me at that

      25   meeting that I didn't know I had a fourth alternative.




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       1   That was to tap on to HRSD.  And, and seeing that the

       2   lines were in Suffolk, and that HRSD would be willing,

       3   Mr. Borberg said that he would be willing to run the

       4   lines to Smithfield, but they would only make economic

       5   sense if the two packing plants agreed to tap onto

       6   those lines, because the town of Smithfield was not

       7   large enough to support the cost of running the lines

       8   from Suffolk to Smithfield.  I think it was like 15,

       9   16, 17 miles.  I don't remember what it was.  But that

      10   it made economic sense if the two plants agreed to do

      11   it.  And this would be good for the community.  It

      12   would get the town off the Pagan River--and they were

      13   quite clear to me really what they wanted to do was to

      14   eliminate all point discharges on the Pagan River.

      15   And they thought that this was my best, this was my

      16   best alternative to do this.  I asked what it would

      17   cost just on an annualized basis.  I was told about a

      18   million-and-a-half dollars a year.  I said, this is up

      19   and above what my current treatment costs are?  They

      20   said, yes.  And I said, well, that will probably go

      21   up?  I said, oh, yes, million-and-a-half today, but

      22   it's going to be two million dollars two years from

      23   now.  No telling what it's going to be four, five

      24   years from today.  They said, well, all we can promise

      25   you is we won't be discriminatory; we'll charge you




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           Luter - Direct                                      67



       1   the same as we charge everybody else on a per gallon

       2   basis.  And it's clear to me that this was an

       3   orchestrated effort to, to convince me to eliminate

       4   the two point discharges into the Pagan River--one in

       5   Packing and one in Gwaltney.

       6                       And shortly thereafter, I

       7   evaluated my position.  And I, quite frankly, didn't

       8   have any choice.  And my choice was either to shut the

       9   plants down or to, or to tap on.  And, so I made a

      10   decision that I thought it was in the best interest of

      11   my shareholders.  That's what my responsibility is.  I

      12   mean, I've got to comply with all the laws, that goes

      13   without saying.

      14                       But it's clear to me that, that,

      15   that the million-and-a-half dollars a year, plus it

      16   was going to be about a three million dollar cost to

      17   modify our system.  And I was told what we would have

      18   to do is down grade our system, because our effluent

      19   was too good to put into HRSD.  I said, my gosh.  I've

      20   just spent all this money in the last ten years to

      21   upgrade my system.  Now, you tell me you've got to

      22   downgrade this system.  This is what was told me, that

      23   I had to downgrade the system, because we had to give

      24   HRSD effluent that they could blend in with the

      25   effluent from the town and everybody else that was




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           Luter - Direct                                      68



       1   discharging into the HRSD lines.  I said, well, okay,

       2   fine.

       3                       So anyway, I made the decision to

       4   spend the three million dollars to convert over to tap

       5   on to HRSD, and to incur ongoing expenses about a

       6   million-and-a-half dollars a year, initially, fully

       7   expecting those numbers to increase substantially as

       8   time goes on.

       9             Q         You said that you were convinced

      10   that this was an orchestrated effort to get the two

      11   point sources.

      12             A         Why Mr. Borberg was there.  Why

      13   would he be there, otherwise?

      14             Q         So what did you mean this was an

      15   orchestrated effort?  That meeting?

      16             A         Yeah.  The meeting, yes.  Uh huh.

      17   (Indicating in the affirmative.)  Yeah.  Because

      18   Mr. Borberg was there.  He was head of HRSD.  So I

      19   mean, it was clear to me --  I had the State Water

      20   Control Board there, I had HRSD there.  So I mean, it

      21   was clear to me that this is what they wanted to

      22   accomplish.  That was to get the town of Smithfield

      23   and the two plants off of the Pagan River.

      24             Q         And did you disagree with that

      25   goal?




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           Luter - Direct                                      69



       1             A         I told them that I thought that,

       2   that a phosphorus limitation of something in excess of

       3   three, in excess of two, excuse me, is something that

       4   we could live with, if you'd give us an eight, or

       5   nine, or ten--I can't remember the number.  But I said

       6   I think we can live with that.  But I said, to me, to

       7   require us to go to two, and then to do nothing in

       8   regard to agricultural run off, was basically spending

       9   an awful lot of money to correct a small part of the

      10   problem when you're not addressing the true culprit.

      11                       I mean, I still feel that way

      12   today.  I mean, I think it's absolutely absurd to hold

      13   Smithfield Foods to a two parts per million phosphorus

      14   limitation, and then to allow the City of Richmond to

      15   dump hundreds of millions of gallons of raw sewage

      16   into the James River year in and year out and do

      17   absolutely nothing.

      18             Q         What is --  Aside from the casual

      19   conversations that you had with individuals regarding

      20   their understanding of the sources of --

      21             A         Would you start again?  Start with

      22   your question, again?  I'm not sure --

      23

      24                       NOTE:  At this time, the previous

      25             question was read by the court reporter.




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           Luter - Direct                                      70



       1

       2

       3   BY MS. HIMMELHOCH:  (Continuing)

       4             Q         -- phosphorus and nitrogen in the

       5   Pagan River, what is the basis of your belief that the

       6   majority of phosphorus and nitrogen in the Pagan River

       7   comes from agricultural sources?

       8             A         Talking to Mr. Wood, talking to

       9   Willis Sneed years and years back, conversations that

      10   Mr. Wood had related to me in regard to conversations

      11   he'd had with VIMS, I believe.  You'll have to ask

      12   Mr. Wood this.  But --  And plus, what I read in the

      13   newspapers.  Not that I can put a lot of faith in that

      14   a lot of the time.  But there's no question that, that

      15   agricultural run off is a very, very big problem.  And

      16   virtually nothing has been done to address that.  I

      17   mean, the Pagan River is surrounded by crop land and

      18   phosphorus and nitrogen are applied to crop lands

      19   every year.  And every time it rains, a lot of that

      20   fertilizer flows right into the Pagan River.

      21             Q         How much is the flow of run-off

      22   into the Pagan River?

      23             A         Huh?

      24             Q         How many cubic feet per second --

      25             A         Oh, I have no idea.




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       1             Q         How much is the Smithfield Foods

       2   companies contributing to the Pagan River?

       3             A         I have no idea.  All I know is I

       4   was told that whether we're at two parts per million

       5   or whether we're at ten parts per million, as far as

       6   the quality --

       7                       Really this all came with the

       8   impact by the Chesapeake Bay.  This was a Bay

       9   initiative.  I was told that, you know, that whether

      10   we were two parts per million or whether we were ten

      11   parts per million, you wouldn't be able to measure the

      12   impact in the Chesapeake Bay.  And, and rightly or

      13   wrongly, I still, I believe today that, that you would

      14   be able to measure it in the Pagan River with the flow

      15   of water there.

      16                       Prior to all of this litigation

      17   coming up two years ago --  I believe this.  And the

      18   reason --  And the reason that I know I believe this

      19   two years ago, before I knew there was any litigation,

      20   whatsoever, was I instructed Carl Wood to run samples

      21   of the Pagan River, take water samples to have VIMS do

      22   it--not Smithfield--because I know anything Smithfield

      23   would come up with would be questioned by

      24   environmental groups.  But I said then wait, wait.

      25   And then two or three years later, do another water




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           Luter - Direct                                      72



       1   sample, and let's see how much the Pagan, the water

       2   quality in the Pagan River has improved, because we

       3   stopped discharging into the Pagan River three years

       4   ago.

       5                       And I authorized him to contact

       6   VIMS to spend our money to do that test, because I

       7   wanted to see whether all of these monies that

       8   Smithfield Foods had spent, whether it's going to have

       9   any major impact on the water quality of the Pagan

      10   River.

      11             Q         Have you received the results of

      12   the second set of samples?

      13             A         I said three years after we

      14   stopped discharging.  What I'm saying is, I told

      15   Mr. Wood over two years ago to spend the money to do

      16   those tests.  And I believe that Mr. Wood will testify

      17   that he contacted VIMS, and they agreed to run those

      18   tests.  And those conversations took place over two

      19   years ago.

      20                       So that should give you some

      21   indication that I seriously question whether the two

      22   parts per million is going to have any real positive

      23   impact upon the water quality of the Pagan River.

      24             Q         I don't doubt the sincerity of

      25   your belief.  I'm trying to fully understand the basis




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           Luter - Direct                                      73



       1   for that belief.  And as I understand it --

       2             A         I'm not a scientist, and I have to

       3   believe --  I run a very large corporation.  I've got

       4   production people telling me something; I've got sales

       5   people telling me something; I've got engineering

       6   people telling me; I've got environmental people

       7   telling me something, and I got lawyers telling me

       8   something.  And I have to depend upon what people tell

       9   me.  I'm not that smart.  I can't be an expert in all

      10   of these areas at the same time.

      11             Q         Other than what Carl Wood and

      12   Willis Sneed have told you, you have no other basis

      13   for your belief that --

      14             A         Bill Hellmann told me that years

      15   ago.  When the State first approached Smithfield Foods

      16   about the two parts per million, Bill Hellman came

      17   into my office and said, you can't believe --  And he

      18   was very concerned.  He says, Mr. Luter, he says, I

      19   just, we can't do it.  We can't do it.  They're asking

      20   us to do something that I'm going to be in trouble all

      21   the time.

      22             Q         Well, there's a difference between

      23   whether or not you can meet the limit and whether or

      24   not agricultural sources contribute more phosphorus to

      25   the river --




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           Luter - Direct                                      74



       1             A         I think it's immaterial.  You put

       2   a limit in.  I've got to comply with it.  I made the

       3   argument to the State Water Control Board about the

       4   agricultural run off.  Okay?  But, but the bottom line

       5   is, the EPA --  You don't go after people where

       6   there's a lot of political clout.  You don't go after

       7   the farmers.  You don't go after the municipalities,

       8   because there are millions of voters.  You don't go

       9   after the City of Richmond.  Because if you require

      10   the City of Richmond to clean up their act, they're

      11   going to have to put a substantial tax increase in to

      12   pay for it, and that's politically unacceptable.

      13                       And you all have a dual

      14   enforcement policy.  You require companies like

      15   Smithfield to be in total complete compliance one

      16   hundred percent of the time, or you're going to come

      17   down on us.  And yet, you turn a blind eye to what

      18   other government agencies do.

      19             Q         What do you base that on?

      20             A         Based on facts.  I'll give you one

      21   example.  You talk about why I'm hostile to

      22   environmental groups?  They say the Pagan River is one

      23   of the most endangered rivers.  That's the Elizabeth

      24   River.  (Pointing out of the window.)

      25             Q         Yes.




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       1             A         Okay?  These are government

       2   installations all around here.  This river is so

       3   toxic, that I doubt there's been a live fish in there

       4   in years.  What are you doing?  Nothing.  And you

       5   compare the Elizabeth, the Pagan River with the

       6   Elizabeth River?

       7                       The reason is, is that the federal

       8   government is polluting the Elizabeth River.  The City

       9   of Norfolk is polluting the Elizabeth River.  The City

      10   of Portsmouth is polluting the Elizabeth River.  So

      11   you have a dual enforcement.  The State Water Control

      12   Board privately admitted this to me.

      13             Q         Who on the State Water Control

      14   Board admitted that to you?

      15             A         They've admitted it to me by

      16   not --  I've made the same argument to the State

      17   Water, to Richard Burton.  And I said, why are you

      18   trying to put a two parts per million phosphorus

      19   limitation on Smithfield Foods when the City of

      20   Richmond discharges hundreds of millions of gallons of

      21   raw sewage into the James River?  The Pagan River

      22   flows into the James River.  And, um, and --  And I

      23   said, you all have a dual enforcement policy.

      24                       Look.  Every lawyer in this

      25   country knows that the federal government and the




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           Luter - Direct                                      76



       1   state governments have those dual enforcement

       2   policies.  So I'm not telling you something you don't

       3   already know.

       4             Q         What is the basis for your belief

       5   that there is no effort by the State or federal

       6   government to stop the discharges of sewage by

       7   Richmond into the James?

       8             A         It's been going on for decades,

       9   and it's still happening.

      10             Q         Have you investigated whether or

      11   not EPA or any state agency has worked with the City

      12   of Richmond?

      13             A         I'm not saying you've not worked

      14   with.  It's my understanding --  It's my understanding

      15   that the State was complaining about what the --

      16                       THE WITNESS:  Correct me, Tony, if

      17             I'm wrong.

      18             Q         You're refering to Blue Plains?

      19             A         Blue Plains, okay.  And the

      20   argument that the federal government used is the same

      21   argument that I'm using in your case against

      22   Smithfield Foods today.

      23             Q         Which argument is that?

      24             A         That is, give us time, give us a

      25   consent order, and we're going to come into




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           Luter - Direct                                      77



       1   compliance.

       2             Q         What is your understanding of the

       3   nature of the dispute between the federal government

       4   and Blue Plains?

       5             A         My understanding is that the, that

       6   there is severe pollution taking place on the Potomac

       7   River that's affecting the water quality in the State

       8   of Virginia, and that the federal government has been

       9   very lax in requiring those people to clean up their

      10   act.  And the State of Virginia is very unhappy about

      11   it.

      12             Q         What is the basis of your belief

      13   that the federal government has been lax?

      14             A         It's what I read in the newspapers

      15   and just conversations.

      16             Q         Have you familiarized --

      17             A         I'm not a lawyer.  I'm not an

      18   expert.  All I'm saying is that --  But I do know --

      19   I do know that --  I do know this Elizabeth River is

      20   very, very polluted.

      21             Q         How do you know that?

      22             A         And how do I know it?  Just read

      23   the newspapers.  It's the most polluted river probably

      24   in the State of Virginia.  And the federal government

      25   is the main polluter.




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       1             Q         How do you know that the federal

       2   government is the main polluter?

       3             A         Because I know what's here on the

       4   Pagan River.  It's all these ship yards.

       5                       MR. TROY:  Elizabeth River.

       6             A         Excuse me.  The Elizabeth River.

       7   Because of the government shipping, I'm not--  You

       8   don't need to question me on this.  These are well

       9   known facts.

      10             Q         I need to understand the basis of

      11   what you're saying.  That's why I'm asking.

      12             A         I'm saying--  I'm saying that the

      13   EPA has a dual enforcement policy.  One for private

      14   industry and a completely different one for other

      15   government agencies.

      16             Q         And that's based on the Richmond

      17   case, the Blue Plains case and Smithfield?

      18             A         And thousands of cases all over

      19   this country.

      20             Q         Have you conducted a survey --

      21             A         No, I haven't.

      22             Q         -- of the cases brought by EPA

      23   against municipalities?

      24             A         All I know that if I ran

      25   Smithfield Foods the way the City of Richmond




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       1   operates, I'd probably be in jail.  But that's --  I

       2   mean, that's --  If I ran my pitching plants the way

       3   the government runs Social Security, I'd be in jail.

       4             Q         You indicated that you had this

       5   meeting with HRSD and the State in which they proposed

       6   connection to HRSD as another option in your challenge

       7   to the phosphorus limit, is that correct?

       8             A         Yes, uh huh.  (Indicating in the

       9   affirmative).

      10             Q         Approximately when did that

      11   meeting occur?

      12             A         I believe it was in January.  I

      13   had to refresh my memory on it, but I think it was the

      14   first part of 1990.

      15             Q         And do you know whether the

      16   Hampton Roads Sanitation District had begun to plan a

      17   sewer expansion before that meeting?

      18             A         It's my understanding that they,

      19   they had contemplated possible expansion, but

      20   Mr. Borberg told me that the only way they would agree

      21   to run the line to Smithfield is if we tied, if we

      22   agreed to tie on the two plants.

      23             Q         Do you know whether planning for

      24   the sewer line continued after that meeting but before

      25   you committed to hook up to HRSD?




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       1             A         I don't know.  All I know is that

       2   shortly thereafter--and whether it was one day, or one

       3   week, or one month, but it was a very short period of

       4   time--I said, okay, I'll agree to do it.  I really

       5   don't have any choice.  This is the only alternative

       6   that makes any sense.  I certainly don't want to close

       7   down the plants and put thousands of people out of

       8   work.  I certainly don't want to spend the rest of my

       9   life in federal court being sued by the EPA, or the

      10   State of Virginia, or some environmental group.  So I

      11   really don't have --  I really don't have any choice.

      12                       And so my --  Unless the State

      13   agreed to relent on this strict limitation--  And the

      14   State let me know in no uncertain terms that they were

      15   not going to relent, and they were going to hold me,

      16   and that we were going to be in litigation for the

      17   foreseeable future.

      18                       And, and then they told me that,

      19   at that meeting that they would agree not to put in

      20   those new tougher limits until --  They would give me

      21   relaxation from those new tougher limits if I would

      22   agree to tap on when the lines were made available to

      23   Smithfield.

      24             Q         Who told you that?

      25             A         Richard Burton told me that.  That




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           Luter - Direct                                      81



       1   was the entire, the entire consensus in that room.  I

       2   think if you depose everybody that was at that

       3   meeting, I think that they will tell you that.

       4             Q         They told you that they wouldn't

       5   put the limit in the permit?

       6             A         They told me they would not hold

       7   Smithfield to the, the new tougher limitations that we

       8   were challenging.

       9             Q         Did they tell you that they would

      10   not put that requirement in the permit?

      11                       MR. TROY:  Asked and answered.

      12             A         I just answered the question.

      13             Q         Did they tell you that they would

      14   not put the limit in the order?

      15             A         I told you, they told me that they

      16   would not require Smithfield to meet that new tougher

      17   limitation, that I, in my mind, knew was impossible to

      18   meet on a consistent basis.

      19             Q         Well, it's one thing to say they

      20   wouldn't hold to you the limit, and it's another thing

      21   to say they wouldn't put the limit in the permit.  And

      22   my question is, did they say they wouldn't put the

      23   limit in the permit?

      24                       MR. TROY:  It was asked and

      25             answered.  Now, that's the third time you've




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           Luter - Direct                                      82



       1             asked the question.  I would ask that you

       2             ask another question.

       3                       MS. HIMMELHOCH:  The witness has

       4             not answered the question.

       5             A         I will answer it the same way.

       6   I'll answer it the same way.  Ask me one more time.

       7             Q         Did anyone say to you that they

       8   would not put that limit in the permit?

       9             A         They told me, in no uncertain

      10   terms that, I believe --  First of all, I believe that

      11   they had a lot of sympathy for my position that I

      12   could not meet these new tougher limitations.  They

      13   kept going back to one point.  Well, Joe, you have an

      14   alternative, and that is to tap onto HRSD.  And they

      15   told me they would give me whatever --  They told me

      16   they would give me relief during the interim period of

      17   time until HRSD lines would be available in

      18   Smithfield.  I asked them, how long would it take to

      19   bring those lines to Smithfield?  They told me two to

      20   three years.  And it would depend upon EPA grants, the

      21   permit process that they go through, I guess.  I don't

      22   know what they had to go through.  But they told me

      23   two or three years, depending upon monies available.

      24   And some of those monies were coming from EPA.

      25             Q         They told you that in 1990?




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       1             A         They told --  Yes.  Uh huh.

       2   (Indicating in the affirmative).  Yes.  They told me

       3   that in 1990.

       4             Q         Who said that?

       5             A         I don't remember.  I just remember

       6   that it was some uncertainty about the exact time it

       7   would take.  But I asked them, because quite

       8   obviously, I wanted to know when I was going to have

       9   to start spending the million-and-a-half dollars a

      10   year.  And I was told two or three years.  Okay?  The

      11   point is, that I have done everything that was asked

      12   of me as a result of that agreement that I reached

      13   with the State.

      14             Q         The State told you that they would

      15   give you relief from the phosphorus limit.  Did they

      16   describe the nature of the relief that they would give

      17   you?

      18             A         They told me that they would give

      19   me relief from the new tougher standards that they

      20   were taking.  I believe they were taking tougher

      21   standards in other things other than phosphorous.

      22   They told me they would give me, they would not

      23   tighten the standards on me if I agreed to tap on.

      24   And they said, look, it will be good for the State; it

      25   will be good for the town of Smithfield; it will be




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       1   good for everybody.  And I said, yes, but it's going

       2   to cost me a million-and-a-half dollars.  But I said--

       3   At that meeting, I didn't agree to it.

       4                       But within a very, very short

       5   period of time, I had a meeting with my people.  We

       6   discussed all of our alternatives.  And we all

       7   basically came to a conclusion.  I made the final

       8   decision that, that this was the best alternative.  It

       9   was a very difficult situation, a very expensive

      10   situation.  But this was really the only viable

      11   alternative I had other than a long, protracted

      12   lawsuit with the State.  And, and knowing that the

      13   subject is the environment, usually, the State will

      14   win, and industry will lose.

      15                       And because of all of these facts,

      16   I agreed to tap onto HRSD when they brought the lines

      17   to Smithfield.

      18             Q         Did the State tell you the form

      19   that they would use to give you relief from the

      20   phosphorus limit?

      21             A         No.  I didn't get into details.

      22   I'm just --  I was involved in the general

      23   understanding.  The general understanding was that

      24   they would not --  They would delay getting tougher on

      25   me if I would agree to tap onto HRSD.  Now, what form




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       1   that took, I don't know.

       2             Q         Did they make any representations

       3   to you about EPA's position with respect to this

       4   issue?

       5             A         This was a conversation seven

       6   years ago.  I don't know whether they made any

       7   representation, but I had full knowledge that the

       8   State works closely with EPA on all, that EPA serves

       9   as oversight of everything that the State does.  And I

      10   assume that EPA was kept informed and was made privy

      11   to the agreement.

      12                       But I had, I have never had any

      13   dealings with the EPA; I had dealings with the State

      14   Water Control Board, and I assumed that they had

      15   authority to enter into an agreement.  And that if the

      16   EPA had an objection to the agreement, that it would

      17   come back to me at that time, and say, hey, we've got

      18   to change something.  But that never took place.

      19             Q         Did you ever confirm your

      20   assumption that EPA was aware of these agreements?

      21             A         I was not aware --  To me, it was

      22   a relationship between the State of Virginia and EPA,

      23   and it was not a place for me to be.

      24             Q         Did you, at any time, receive any

      25   repsentations from the Department of Environmental




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       1   Quality or the State Water Control Board regarding

       2   EPA's position with respect to the phosphorus

       3   agreement?

       4             A         I assumed that the EPA did not

       5   have any problem with the agreement that I reached

       6   with the State of Virginia, because there were no

       7   objections made at that time.  There were no

       8   objections made in 1991, 1992, 1993, 1994, 1995, 1996.

       9                       The first time that I was aware

      10   that EPA had any objection or any concerns was three

      11   days later, after the EPA had notified the Washington

      12   Post that they were filing suit against Smithfield

      13   Foods.  And several weeks after --  And weeks prior to

      14   even notifying me, you're having correspondence going

      15   from Mr. McCabe to environmental groups in the State

      16   of Virginia discussing how the fines against

      17   Smithfield Foods are going to be distributed before

      18   I'm even notified that EPA has a problem, whatsoever.

      19             Q         What question --

      20             A         And I'm also aware that this

      21   decision came from the top down at EPA and not from

      22   the staff up.

      23                       It's strictly a political vendetta

      24   that's taking place, because there's a problem between

      25   Governor Allen and the Clinton administration.




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       1             Q         On what do you base that?

       2             A         That you would go to the

       3   newspapers before you even notify me that you've got

       4   any problems, whatsoever.  That you would --  That you

       5   would have correspondence with environmental groups

       6   regarding fines against Smithfield before you notified

       7   Smithfield.  That you have any problems before you

       8   notified Smithfield that you were filing suit.

       9             Q         Which environmental group are you

      10   referring to?

      11                       MR. TROY:  I believe it's already

      12             in discovery produced by your own records,

      13             if I'm mistaken.

      14                       MS. HIMMELHOCH:  I'm still

      15             entitled to ask the witness which --

      16             A         I saw it today.  There are so many

      17   environmental groups out there, I'm not sure.  It's

      18   the James River something or another.

      19             Q         Is this a document you reviewed in

      20   preparation for your deposition today?

      21             A         This was a document that I was

      22   told about by Hogan & Hartson four weeks ago.  And I

      23   asked them to fax a copy of it down to me today, so I

      24   would be more familiar with that document.  They faxed

      25   it down to me today.




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       1             Q         And this is a letter from the

       2   James River Association to whom?

       3             A         Mr. McCabe.  And a response of

       4   Mr. McCabe back to the James River Association.  I

       5   believe it's the James River Association.

       6             Q         What was the date of the letter

       7   written by the James River Association?

       8             A         I'm not sure.  You've got the

       9   letter, so, you know, you got the date.

      10                       MS. HIMMELHOCH:  Counsel, do you

      11             have that letter here?

      12                       MR. TROY:  I believe it's been

      13             produced out of your own documents.

      14                       MS. HIMMELHOCH:  Counsel, my

      15             question is, do you have that letter here?

      16                       MR. TROY:  Not to my knowledge,

      17             but --

      18

      19   BY MS. HIMMELHOCH:

      20             Q         Mr. Luter, is that letter in your

      21   office?

      22             A         I think I can get it for you.

      23             Q         If you could, please.

      24

      25




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       1

       2                       NOTE:  At this time, recess is

       3             had; whereupon the deposition continues,

       4             viz:

       5

       6                       NOTE:  The above-referred to

       7             letter dated December 5, 1996 was marked and

       8             filed as Luter Deposition Exhibit No. 1.

       9

      10             Q         I'm handing you what's been marked

      11   Luter Deposition Exhibit 1.

      12                       Is that the letter to which you

      13   were referring?

      14             A         Uh huh.  (Indicating in the

      15   affirmative)  I just got it today, I told you.

      16             Q         This letter is dated December 5,

      17   1996, is that correct?

      18             A         That's correct.

      19             Q         When was the first time you became

      20   aware of the United States' claims against Smithfield

      21   Foods?

      22             A         I'd say three or four days

      23   after --  I didn't become aware of it until on a

      24   Monday.  My understanding that, that our attorneys

      25   became aware of it approximately 5:00 o'clock the




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       1   previous Friday.  We started receiving telephone calls

       2   from the news media I believe Tuesday or Wednesday,

       3   prior to the Friday in question.

       4             Q         Do you have any personal knowledge

       5   as to how the news media became aware of the United

       6   States' claims?

       7             A         Oh, sure.

       8             Q         How?

       9             A         I think it was a controlled leak

      10   by the EPA.

      11             Q         On what do you base that?

      12             A         Well, I mean, why would EPA go to

      13   the news media --  Why --  If EPA had a problem --

      14   EPA hasn't alleged that --  I've complied one hundred

      15   percent with the agreement that I reached with the

      16   State of Virginia in very adversarial negotiations

      17   with a democratic administration--not with Governor

      18   Allen's administration.  And I would think, this is

      19   America.

      20                       And if EPA had a problem with that

      21   agreement, and they were really truly concerned about

      22   the environment, they would have approached me or the

      23   State of Virginia, or both of us and said, hey, we've

      24   got a problem.  This is not good for the environment,

      25   and we don't, we don't think that Smithfield Foods is




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       1   doing enough to comply with the law.  And then I said,

       2   okay, you tell me what I need to do.

       3                       But you don't --  You don't

       4   contact me.  You don't tell me that you even have any

       5   concerns, much less a problem.

       6                       Let me finish.  And all you do is

       7   file suit rather than trying to work it out.

       8             Q         My question is --

       9             A         Now --  And it's clear --  And

      10   it's clear that the EPA was very much aware of the

      11   agreement between the State of Virginia and Smithfield

      12   Foods.  You even approved --  I understand it's, EPA

      13   monies went to pay for the line, or a portion of the

      14   line that was run to Smithfield.  And it's, it's

      15   beyond any doubt that EPA was fully aware of

      16   everything that was taking place.  You had quarterly

      17   meetings with the State of Virginia, is my

      18   understanding.  And you never raised an objection.

      19                       Now, if this is America, and the

      20   EPA is charged with treating people fairly, why

      21   wouldn't you come to me and say, hey, look.  We don't

      22   like this agreement.  What can we do to strengthen the

      23   agreement to further protect the environment?  No.

      24   You all don't say a word to me.  You go and talk to

      25   the press.  You talk to the environmental groups that




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       1   are out there, and you don't even talk to you us.  And

       2   all you do is file suit.

       3             Q         Sir, my question was, what is the

       4   basis of your statement that EPA spoke to the press

       5   prior to sending the letter to Smithfield Foods?

       6             A         When the press calls me days

       7   before being, before I was notified that a lawsuit was

       8   being filed, it tells me that EPA operates the way a

       9   lot of government agencies operate in Washington, is

      10   through leaks to accomplish whatever agenda they have

      11   through the press.

      12             Q         Do you have any specific evidence

      13   that EPA --

      14             A         I'm not stupid.  When reporters

      15   call me three days, call my people--they didn't call

      16   me--but when they talked to my people, what's this

      17   about EPA filing a lawsuit?  We said, we know nothing

      18   about it.

      19             Q         What is your evidence that it is

      20   EPA who informed the press about this lawsuit?

      21                       MR. TROY:  That's asked and

      22             answered.

      23             A         I've answered it three times.

      24             Q         Other than your assumption that

      25   because you heard from the press.  Do you have any




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           Luter - Direct                                      93



       1   other evidence that EPA notified the press of the

       2   impending lawsuit?

       3                       MR. TROY:  Sarah, he's already

       4             asked and answered that.

       5             A         I think EPA has notified the

       6   press.  I think they notified the James River

       7   Association.  And no telling who before they notified

       8   me.  I think I was the last to find out.

       9             Q         You were aware of the United

      10   States' potential claims when you met with me at the

      11   Department of Justice, is that correct?

      12             A         That's exactly right, yes.  I made

      13   these same complaints to you, at that time, if you

      14   recall.

      15             Q         Do you recall the date of that

      16   meeting?

      17             A         No, I don't, but I'm sure you have

      18   the date.  But I made these same complaints.  I

      19   remember vividly making the same accusations at that

      20   time.

      21                       MS. HIMMELHOCH:  Counsel, will you

      22             stipulate that that meeting occurred on

      23             October 31, 1996?

      24                       MR. TROY:  If you say so, Sarah.

      25             I'm not going to stipulate to it.  I'll let




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           Luter - Direct                                      94



       1             you proffer it to the --

       2             A         It happened after I was notified

       3   of the lawsuit.

       4             Q         But my question is, do you know

       5   the date of that meeting?

       6             A         No, I don't know the date of it.

       7   I attend hundreds --  I've probably attended five

       8   hundred meeting since I had that meeting.

       9                       MR. TROY:  We'll let you proffer

      10             the date for the record.  I presume you're

      11             right, but I'm not stipulating to it,

      12             because I don't know.

      13             Q         What is your basis for the

      14   statement that that letter from the James River

      15   Association was sent to Mr. McCabe prior to your

      16   meeting with the Department of Justice?

      17             A         Reach --  We'll see you in July.

      18   I see July.

      19             Q         Is there any evidence that that

      20   meeting in July related to the Smithfield Foods case?

      21                       MR. TROY:  That's another reason

      22             Mr. McCabe will have to be a witness in this

      23             case.  Find out those inquiries.  You can

      24             add this, as the other predicate, to the

      25             discussions we had.




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       1             A         It's not important what I believe.

       2   It's important what, what will be brought out when you

       3   put Mr. McCabe under oath.

       4             Q         Mr. Luter, what evidence do you

       5   have that the meeting that is referenced in the first

       6   page of Luter Exhibit 1 discussed Smithfield Foods?

       7             A         Well, you mention the Pagan River.

       8   We are the only point discharger on the Pagan River.

       9             Q         My question doesn't go to the body

      10   of the letter.  My question goes to --

      11             A         I believe they mention Smithfield

      12   Foods.  Yeah.

      13                       I'm writing to you to address the

      14             present situation with Smithfield Foods,

      15             which I have recently discussed with

      16             Stephanie.

      17                       You know, I haven't, I haven't

      18   looked at this as --  All I'm telling you is that I've

      19   met with Pat Raher several weeks ago in Washington

      20   that you're probably familiar with.  I met with

      21   Senator Chaffee from Rhode Island in regard to this

      22   matter.

      23                       And at that time, Mr. Raher told

      24   me he was incensed.  He says, can you believe --  It's

      25   your money.  I'm going to tell you this; this will




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           Luter - Direct                                      96



       1   upset you.  That there was correspondence between the

       2   EPA and environmental groups in regard to the

       3   Smithfield case?  And it was his impression that this

       4   correspondence was taking place.  Communications were

       5   taking place prior to the filing of the lawsuit.

       6             Q         Other than the correspondence that

       7   has been marked as Luter Exhibit 1, is there any other

       8   correspondence that you're aware of?

       9             A         Not that I'm aware of.  The

      10   lawyers may --  Pat Raher, with Hogan & Hartson

      11   mentioned to me this one letter.  And today, I just

      12   asked him to fax me a copy down so I could read it.

      13             Q         And is it your understanding that

      14   EPA --

      15             A         There may be a lot more

      16   correspondence.  There may be, may be a lot of things

      17   my attorneys may know that I don't know in regard to

      18   this entire matter.  I'm not sure.  I don't know.  I

      19   suspect they know more than what they've told me.

      20             Q         You're not aware of any other

      21   correspondence yourself, then?

      22             A         No.

      23             Q         Do you know if the letter that is

      24   written by Mr. McCabe and Bates No. US6850, which is

      25   the last page of Luter Exhibit 1 --  Do you know if




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           Luter - Direct                                      97



       1   that letter predates or postdates the letter from the

       2   James River Association?

       3             A         I guess it says:

       4                       Thank you for your letter of

       5             December 5th.

       6                       So I assume that that letter, this

       7   Mr. McCabe's letter was after the 5th.

       8             Q         Are you aware of any

       9   correspondence from Mr. McCabe to the James River

      10   Association before December 5, 1996?

      11             A         Am I personally aware?  No.

      12             Q         You indicated that this was a

      13   decision, in your words, that was top down, is that

      14   correct?

      15             A         Uh huh.  (Indicating in the

      16   affirmative)

      17             Q         What was the basis of that

      18   contention?

      19             A         This is what my attorneys told me.

      20             Q         Do you have any personal knowledge

      21   in support of that contention?

      22             A         No.  My attorneys tell me this is

      23   clearly a political decision.  You're caught between

      24   two governments fighting, and you're caught in the

      25   middle, Joe.  I'm sorry, but you're caught in the




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           Luter - Direct                                      98



       1   middle.  This is what my attorneys are telling me.

       2             Q         Do you have any person knowledge

       3   as to the nature of the funding for the Hampton Roads

       4   Sanitation District sewer that was brought out for the

       5   Smithfield plants?

       6             A         No.  Except what I was told.  I

       7   was told there was an EPA grant on that line.  But I

       8   was just told that.  Here again, I think I was told by

       9   my attorneys or Mr. Wood.  But I'm not --  I was just

      10   told that.  Whether that's true or not, I don't know.

      11   That's what I was told.

      12             Q         Do you have any personal knowledge

      13   that EPA was aware of the consent orders at the time

      14   that they were entered into between Smithfield and the

      15   State of Virginia?

      16             A         I understand that the consent

      17   orders were part of the EPA files, yes.

      18             Q         Do you know when they got to the

      19   EPA files?

      20             A         Here again, I don't know --  I

      21   don't have anything --  The only thing I know is what

      22   my attorneys are telling me.  And I'm not so sure I

      23   need to go into what my attorneys tell me.  Do I have

      24   any specific --   No.  This is not --

      25                       MR. TROY:  Don't tell them.




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       1             A         This is not a burning issue with

       2   me.  I mean, I've got many other things to contend

       3   with than this.  I leave it to the attorneys.

       4             Q         So you don't have any personal

       5   knowledge of when the consent orders got into the EPA

       6   files?

       7             A         I wouldn't have any knowledge, no.

       8   How would I know?

       9             Q         You testified earlier that HRSD is

      10   requiring you to downgrade your systems.  Do you

      11   recall making that statement?

      12             A         Uh huh.  (Indicating in the

      13   affirmative)

      14             Q         What do you mean by that?

      15             A         I was told --  And here again, I

      16   was told by Mr. Wood that we had, I thought that we

      17   were, the effluent --  Probably shows how little I

      18   know about these systems.

      19                       But we were putting effluent --

      20   Last year, we were putting effluent into the Pagan

      21   River.  Okay.  I thought that all we were going to

      22   have to do is put that same effluent into the HRSD

      23   system.  Okay?  I said, why have we got to spend three

      24   million dollars to change my system if all we're going

      25   to do is to pipe it into HRSD?  I was told that, no.




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       1   That our effluent was too good for HRSD, because they

       2   had different parameters about the effluent they could

       3   accept.  Because they had to look at what the total

       4   effluent coming into the system is, and they were

       5   going to blend it.

       6                       So they'll take effluent that's

       7   very low in phosphorus, blend it with us that are high

       8   in phosphorus.  But then when it's blended, then it

       9   will come within the limitations, I guess, of the HRSD

      10   permit.

      11                       But I was told that we would have

      12   to, in effect, dirty up our effluent to give HRSD what

      13   they want.  Now, don't ask me to elaborate, because

      14   that's all that I know.  And it was second hand

      15   information that was passed on to me when I questioned

      16   why we had to spend three million dollars more to, to

      17   discharge at HRSD.

      18             Q         The source of that information was

      19   Mr. Wood?

      20             A         I believe it was Mr. Wood, yes.

      21             Q         Are you familiar with the

      22   phosphorus standards in North Carolina?

      23             A         No.  I mean, I know that it's my

      24   understanding that, that either we do not have, or we

      25   have a much higher phosphorus standard in our permit




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           Luter - Direct                                      101



       1   in North Carolina.

       2             Q         Why is there a higher standard in

       3   North Carolina?

       4             A         I have no idea.

       5             Q         Have you ever inquired?

       6             A         I was told that, that --  I mean

       7   it wasn't required, because evidently, there were more

       8   rivers that was not nutrient enriched.

       9             Q         During the course of your

      10   discussions as to what steps to take in response to

      11   the phosphorus limitation, did you have any

      12   conversations with employees of Smithfield Foods,

      13   Smithfield Packing or Gwaltney regarding reduction of

      14   phosphorus loading through alterations in the process

      15   used at the Smithfield Packing or Gwaltney plants?

      16             A         Discussions?  No.  I, I know that

      17   there was an ongoing effort to keep the phosphorus as

      18   low as possible.  But I mean, as a company policy, we

      19   try to keep our effluent as clean as possible, even

      20   though it may be well within the parameters of what

      21   we're allowed to discharge.

      22             Q         Let me ask you this.  When you

      23   decided to hook up to HRSD, that was approximately

      24   late 1990, is that correct?

      25             A         No.  I think it was early '90.




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           Luter - Direct                                      102



       1   We --  It was shortly after the --  It was shortly

       2   after when the final I's and T's were dotted and

       3   crossed.  It might have been later, but there was a,

       4   there was a verbal commitment on our part.

       5                       Keep in mind that in our business,

       6   I mean, everything that we sell, virtually 99 percent

       7   of what we sell, is verbal.  It's a verbal company.  I

       8   mean, we sell verbally.  We sell on the telephone.

       9   You have mutual trust, or you don't do business.

      10                       As a result, we have a culture.

      11   We do things by word of mouth, because if your word is

      12   no good, you don't survive in this business.  I mean,

      13   it's the kind of business that things are

      14   communicated.  Everything is bought and sold on the

      15   telephone.

      16                       If you have disagreements with

      17   people of any consistency at all, you're out of

      18   business, because business is conducted on trust.

      19                       And that's the way --  That's the

      20   way that --  That's the culture of this company.  Once

      21   I committed --  Once I committed to tap onto HRSD, it

      22   was a commitment.

      23                       I mean, for instance, right after

      24   Doug Wilder became governor, he requested a meeting

      25   with me, because he had heard that we were going to




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           Luter - Direct                                      103



       1   possibly move our operations out, build a plant in

       2   North Carolina.  And, and he was concerned about the

       3   job loss in Virginia.  And I told him at that meeting

       4   that it was too late.  This took place in Gerald

       5   Balisles' administration.  And that I had already

       6   committed to tap onto HRSD, and I'd also already

       7   committed to build a plant in North Carolina, because

       8   I was very concerned about, quite frankly, what the

       9   State was going to do to me next.

      10                       MS. HIMMELHOCH:  (To the court

      11             reporter)  Can you read back the first part

      12             of that answer, please?

      13

      14                       NOTE:  At this time, a portion of

      15             the previous answer was read by the court

      16             reporter.

      17

      18             A         Shortly after the meeting in

      19   January, I said, tell Richard Burton, tell Richard

      20   Borberg that I'm going to tap onto HRSD.  Then, as far

      21   as I was concerned, I went on to other matters.

      22             Q         At that time, did you direct

      23   anyone to begin to study what steps Smithfield would

      24   have to take in order to connect to HRSD?

      25             A         No.  I mean, I assumed that the,




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           Luter - Direct                                      104



       1   you know, that they would be back in touch with us and

       2   tell us what we had to do.  You know, things had to be

       3   worked out exactly where would the HRSD line be, and

       4   where would we tap on, that sort of thing.  But here

       5   again, these were technicalities I would not involve

       6   myself with.

       7                       I made the policy decision to tap

       8   onto HRSD, and told Mr. Wood to make sure it happened.

       9             Q         Did you direct them to take steps

      10   between the time that you decided to hook up to HRSD

      11   and the time the connection was available to control

      12   phosphorus discharges from the Smithfield Packing or

      13   Gwaltney plant?

      14             A         I told them to comply with the

      15   law.

      16             Q         Did you specifically direct them

      17   to take any steps with respect to phosphorus prior to

      18   the hook up with HRSD?

      19             A         No.  I didn't tell them to take

      20   any specific steps towards phosphorus, or nitrogen, or

      21   ammonia, or any of the parameters in the permit.  It

      22   was understood that, you know, we would have to comply

      23   with all the limitations that we had previously been

      24   working under.

      25             Q         Did you ever read the permit




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       1   issued to Smithfield Foods --

       2             A         No.

       3             Q         -- to the Waste Water Treatment

       4   Plant?

       5             A         No.

       6             Q         Did you ever ask for a summary of

       7   that permit?

       8             A         No.

       9             Q         Did you ever ask anyone to explain

      10   to you what the permit required?

      11             A         No.  I knew the permit had

      12   limitations in various categories, and, and that, you

      13   know, we had, we had to meet, we had to stay within

      14   those limitations.  But what those limitations were, I

      15   don't know.  I mean, I know it's two parts on the

      16   phosphorus, because that was a, that was a burning

      17   issue, the two parts.  What our --  What parts

      18   nitrogen, ammonia, I couldn't tell you what the limit

      19   is today.  I have no idea.  I even made a mistake.  I

      20   thought it was three points for a while.  I was unsure

      21   about the two or three.

      22             Q         After you had made the decision to

      23   connect to HRSD, Smithfield Foods' permit went through

      24   modification and renewal process, is that correct?

      25             A         I don't know.




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       1             Q         You didn't participate in that at

       2   all?

       3             A         Huh huh.  (Indicating in the

       4   negative.)  No.

       5             Q         You didn't ask whether the

       6   modified permit contained the new phosphorus limits?

       7             A         I was promised relief from the

       8   tougher standards.  As far as I was concerned, the

       9   subject was closed.

      10                       And quite frankly, during that

      11   period of time, I didn't discuss anything.  I was --

      12   I asked when would we be required to tap on?  And

      13   other than that, I didn't involve myself with

      14   anything.

      15                       MR. TROY:  Sarah, I'm going to

      16             object to the form of the question as a

      17             foundation basis, because I believe the

      18             record, thus far, has indicated the modified

      19             permit was issued in January of 1990.  So

      20             the question has some, a confusion built

      21             into it.

      22                       MS. HIMMELHOCH:  The permit was

      23             renewed in 1992.

      24                       MR. TROY:  That's correct.

      25                       MS. HIMMELHOCH:  And it was not




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       1             modified in 1992.  Is that what you're

       2             saying?

       3                       MR. TROY:  There's a modified

       4             permit, as you perhaps know, that was issued

       5             in 1990.  So I just want to avoid confusion

       6             on those terms.

       7

       8   BY MS. HIMMELHOCH:  (Continuing)

       9             Q         Did you make any inquiry as to

      10   whether the permit that became effective in January,

      11   1992 contained the phosphorus limit?

      12                       MR. TROY:  That's been asked and

      13             answered.

      14                       MS. HIMMELHOCH:  I'm responding to

      15             your objection.

      16             A         To me, this wasn't an issue of --

      17   I wasn't --  It's just something I wasn't thinking

      18   about at that time.

      19                       I mean, I --  I was told by my

      20   people that, that, that we were granted interim relief

      21   from, from these very severe limitations because we

      22   had agreed to tap on.  As far as I was concerned, that

      23   was the end of the problem, and I had many other

      24   problems in many other areas to address, quite

      25   frankly, in my job, that it should have, it was over




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       1   with.  And once, once something is over with, I go

       2   onto something else.  I don't go back and rehash.

       3             Q         At any time, did any member of

       4   your staff inform you that EPA had made any statements

       5   regarding the consent order?

       6             A         No.  I don't think EPA --  As I

       7   said earlier, I don't think people talked about the

       8   EPA.  I think it was understood by everybody in my

       9   organization that, that we would be, we were dealing

      10   with the State Water Control Board, and that the EPA

      11   had oversight over the State Water Control Board.  And

      12   if the EPA had any reason to think that the State was

      13   not doing its job, it had remedies that didn't pertain

      14   to Smithfield.

      15             Q         Were you aware of any enforcement

      16   rights EPA had against Smithfield Foods?

      17                       MR. TROY:  Object to the form of

      18             the question.

      19                       (To the witness)  Go ahead and

      20             answer if you can.

      21                       MS. HIMMELHOCH:  I'll rephrase.

      22             Q         Were you aware that EPA could sue

      23   you for what they alleged were violations in the

      24   permit?

      25             A         No.  I was not --  I was shocked




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       1   when I got the EPA suit, because I had assumed that,

       2   that I was dealing with someone who had the right on,

       3   or the power to enter into a binding agreement with

       4   Smithfield Foods.  And I was shocked that EPA could

       5   come in and object to that, to that agreement.

       6                       And it went beyond shock when I

       7   became aware that EPA had full knowledge of that

       8   agreement and only decided to object when it served

       9   its political purposes.

      10             Q         Setting aside the phosphorous

      11   limits --

      12             A         I'm sorry.  That any government

      13   agencies can sue me for most anything but Jesus.

      14             Q         Were you aware that EPA could sue

      15   you for violations of the permit, other than

      16   phosphorus?

      17                       MR. TROY:  Other than phosphorus?

      18             Q         Other than phosphorus.

      19                       MR. TROY:  That's been asked and

      20             answered, too.  You're including TKN?

      21             A         I'm aware that the EPA can sue who

      22   it damn well pleases.  Okay?

      23             Q         At any time, did you --

      24             A         At any time they want to sue.

      25   Anybody --  In this country, all you need is $10.00 in




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       1   your pocket, you can sue anybody for anything.

       2             Q         Did you ask anyone at the State if

       3   they were speaking, or if they had the authority to

       4   bind EPA?

       5                       MR. TROY:  It's been asked and

       6             answered.  He's already indicated the

       7             understanding that he had, also the prima

       8             seat enforcement authority.

       9             Q         Please answer the question.

      10             A         My lawyer just did.

      11             Q         Please answer the question.

      12             A         My lawyer just did.  I have

      13   nothing further to say.  If you want to get a Judge to

      14   force me to answer it further, I'll do that.

      15                       MS. HIMMELHOCH:  I will have to

      16             keep this deposition open if he refuses to

      17             answer this question, and we will address

      18             this issue at another time.

      19                       MR. TROY:  Well, you're not

      20             keeping the deposition open.  He already

      21             indicated what his response was.  It's been

      22             asked and answered.

      23                       MS. HIMMELHOCH:  He's refused to

      24             answer the question.

      25                       MR. TROY:  No, he hasn't, Sarah.




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       1             He indicated what the answer was.  Please,

       2             ask another question now.

       3

       4   BY MS. HIMMELHOCH:  (Continuing)

       5             Q         Has your lawyer informed you of

       6   the testimony of the Department of Environmental

       7   Quality with respect to the consent orders?

       8                       MR. TROY:  I'm going to object.

       9             You have no right to inquire as to what we

      10             have or have not communicated to this

      11             client.

      12                       MS. HIMMELHOCH:  This witness

      13             has --

      14                       MR. TROY:  Please ask another

      15             question.

      16                       MS. HIMMELHOCH:  I will place my

      17             response to your objection on the record.

      18             And then if you choose to direct the witness

      19             not to answer, we can proceed.

      20                       This witness has testified at

      21             length today regarding the information

      22             provided to him by his attorneys with

      23             respect to the factual issues in this case.

      24             I'm entitled now to inquire as to the scope

      25             of information provided to the client by his




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       1             attorneys.

       2                       MR. TROY:  No, you're not.  And

       3             you can ask another question.  There's been

       4             no waiver of attorney/client privilege.

       5                       MS. HIMMELHOCH:  Please instruct

       6             the witness not to answer if you're going to

       7             do so, then we can proceed.

       8                       MR. TROY:  Ask your question.

       9                       MS. HIMMELHOCH:  (To the court

      10             reporter)  Please, read the question back.

      11

      12                       NOTE:  At this time, the previous

      13             question is read by the court reporter.

      14

      15                       MS. HIMMELHOCH:  Are you going to

      16             instruct the witness not to answer, or do

      17             you want him to answer the question?

      18                       MR. TROY:  Yeah.  I'm going to

      19             instruct him not to answer that question.

      20             You can ask him what he knows, but you

      21             cannot ask him about communications between

      22             the attorney and his client.

      23                       Now, ask another question.

      24                       MS. HIMMELHOCH:  I simply needed

      25             the instruction on the record.  Thank you.




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       1

       2   BY MS. HIMMELHOCH:  (Continuing)

       3             Q         Are you aware of the testimony of

       4   the Department of Environmental Quality regarding the

       5   effect of the consent order on the 1992 permit?

       6             A         No.

       7             Q         What was your understanding of why

       8   Virginia imposed a phosphorus limit or sought to

       9   impose a phosphorus limit of two milligrams per liter?

      10             A         Well, my understanding was that

      11   the State of Virginia, and the State of Maryland and

      12   the State of Delaware entered into some sort of

      13   agreement to try to improve the water quality of the

      14   Chesapeake Bay.  And that the Upper Chesapeake Bay was

      15   very rich in nutrients, and the Upper Chesapeake Bay

      16   was polluted because of extreme pollution taking place

      17   in the upper regions of the Bay, particularly around

      18   the City of Baltimore.  And so they entered into an

      19   agreement to begin to severely reduce the nutrient

      20   level of the Chesapeake Bay.

      21                       During my efforts to not to be

      22   subject to the two parts per million limitation on

      23   phosphorus, I pointed out the following facts.  I

      24   didn't get anywhere, but I pointed it out that the

      25   Pagan River discharges into the lower Bay very close




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       1   to the ocean, and the lower Bay is flushed out by the

       2   ocean every day, and that there is not a nutrient

       3   problem in the lower Bay; so the Pagan River will not

       4   negatively impact the Chesapeake Bay.

       5                       Now, if the Pagan River was

       6   discharging up in the very upper reaches of the

       7   Chesapeake Bay, around Baltimore, or Annapolis, or in

       8   that area, I could accept the argument that what we

       9   were doing, or what we were discharging into the Pagan

      10   River could adversely affect the Chesapeake Bay.

      11                       But since we're down here in this

      12   area, and since there are many rivers that are a

      13   million times more polluted than the Pagan River--the

      14   Elizabeth River, right here in Norfolk, for

      15   instance--that it didn't make a lot of sense to me to

      16   impose back in 1990 a two parts per million phosphorus

      17   limitation when there were much more severer

      18   violations taking place.

      19                       And, you know, and I approached it

      20   as a business man.  Okay.  If you've got a problem on

      21   one to one hundred.  First of all, you solve the, you

      22   solve the 95's to a hundred.  Once they're solved, you

      23   solve the 90 to 95, and then you work your way down.

      24   But it didn't make any sense to me to spend millions

      25   of dollars a year to reduce phosphorus to a two parts




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       1   per million until you, until you solve the real major

       2   pollution that was taking place, which was

       3   agricultural runoff and major pollutions from

       4   municipalities, and the federal government and so on.

       5                       And it's like why, you know, why

       6   worry about a small leak in a roof if half your house

       7   doesn't have a roof on it?  That was the argument that

       8   I used to the State in my efforts to get some

       9   relaxation on the two parts per million.  But I got

      10   absolutely nowhere.

      11             Q         What is the basis for your belief

      12   that the Pagan has no impact on the nutrient loading

      13   problem in the Chesapeake Bay?

      14             A         I just explained that to you,

      15   Sarah.  We're --  Common sense.  I'm in the --  We are

      16   in the lower Bay.  We're --  Where the Pagan River

      17   discharges right into the James --  The Pagan River to

      18   the Atlantic Ocean is a very short distance.  And

      19   we're in the very, the lowest part of the Bay that you

      20   can discharge into, which is where the Atlantic Ocean

      21   comes in.  And, and this is flushed by the ocean every

      22   day.  The high nutrient levels are not in the lower

      23   Bay where the ocean flushes it every day; it's in the

      24   upper Bay.

      25             Q         And how do you know that?




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       1             A         Common sense.  I'm not a

       2   scientist, but I've got common sense.

       3             Q         Did you ever tell any of your

       4   employees not to report exceedences of the permit

       5   limits?

       6             A         Absolutely not.

       7             Q         Did you ever suggest to anyone

       8   that they not report any exceedence?

       9             A         Absolutely not.

      10             Q         Did you have any conversations

      11   with anyone who was employed at Smithfield Foods,

      12   Smithfield Packing or Gwaltney regarding the

      13   submission of false data to DEQ prior to 1994?

      14             A         Never.

      15             Q         When did you first become aware

      16   that Terry Rettig had submitted false data to the

      17   Department of Environmental Quality?

      18             A         When Carl Wood came in to me --  I

      19   don't remember the exact date.  He came into my office

      20   and said that he had been contacted by the State of

      21   Virginia, and that the State was doing, in the course

      22   of investigation of Mr. Rettig's work for other

      23   entities--not Smithfield Foods--but the town of

      24   Smithfield, the town of Surry, and I believe a trailer

      25   park, that they had found some irregularities, and




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       1   that they had reason to believe that he had used

       2   Smithfield's work sheets and substituted them for work

       3   he was doing for them when, in fact, maybe that he

       4   hadn't done the necessary tests and had just

       5   substituted Smithfield's work sheets for work that he

       6   should have done for these other people.

       7                       And, and I was surprised, because

       8   I didn't even know Terry Rettig was working for anyone

       9   else.  I assumed he was just working for Smithfield.

      10   I didn't know that he was moonlighting on the side.

      11   And I said, fine.  I said, you know, give the State

      12   whatever they want, and, and see where it goes.

      13             Q         Did you ask Mr. Wood if he was

      14   aware that Mr. Rettig had been working for other

      15   clients?

      16             A         I don't remember.  I was

      17   surprised.  I didn't know it.  But whether Mr. Wood

      18   knew it or not, I don't know.  We have employees that

      19   work for other people, you know.  We have a lot of

      20   employees that moonlight other jobs.  So it didn't --

      21   It was news to me, but I wasn't shocked about it.

      22             Q         Did you direct Mr. Wood to take

      23   any steps other than to cooperate with the State?

      24             A         I told him to cooperate fully with

      25   the State, completely.




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       1             Q         Did you direct him to do anything

       2   else?

       3             A         No. I said, give the State

       4   whatever they want and don't --  I don't even think I

       5   told him this.  He would know not to hide anything.  I

       6   said, you know, cooperate with the State, and keep me

       7   informed of what takes place.

       8             Q         After that time, did you direct

       9   Mr. Wood to conduct an environmental audit of your

      10   Smithfield Packing or Gwaltney plants?

      11             A         After that, yes.  Well, let me go

      12   to the next sequence, if you will.

      13                       The next conversation that I had

      14   with Mr. Wood was he came into my office again, and

      15   said that the State had been down looking at our

      16   records to see if he had used our records to

      17   supplement for these other outside concerns, and that

      18   some of our records were missing.  I said --  My

      19   first, are they missing?  Are we required to keep

      20   them?  He said, yes, we're required to keep them.  I

      21   said, what happened?  He says, I think Terry Rettig

      22   destroyed them.  And I said, oh, my God.  That was my

      23   response.  And, you know, I said, do you think he was

      24   falsifying data for us?  He said he didn't know, but

      25   the records were missing.




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       1                       I instructed him --  I asked him

       2   this exact question.  I said, Carl, is there a

       3   smoking --  If I need to know, is there a smoking gun

       4   here anywhere?  Is there something missing?  Do you

       5   know anything of this at all?  Do any of your people

       6   know anything?  My exact words was the smoking gun.  I

       7   took it from the Watergate episode, painfully aware

       8   that a cover up is worse than the crime in many cases.

       9   He assured me at that time, that absolutely not.  I

      10   said, well, don't hold anything back.  Be completely

      11   open in all of your communications with the State.

      12                       He came back to me after that for

      13   a third time and told me that he or some of his

      14   people--I don't remember--had found some records which

      15   indicated that he had falsified some data for us.

      16                       MR. TROY:  He, being --

      17             A         He, being Terry Rettig.

      18                       And I said, of course, we've got

      19   to release that information.  Give that information to

      20   the State immediately.  He says, yes, I agree totally.

      21   I said, do it today.  Don't wait a day.  Call them,

      22   tell them that we found some records that were missing

      23   that we have found.  Because what we --  We promised

      24   the State that we would look for those records that

      25   were missing, and someone found them.  I don't know




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       1   who found them.  But I don't know whether Carl found

       2   them or somebody working for Carl.  But the minute

       3   that we found them, my instructions were to

       4   immediately give everything to the State, let the

       5   chips fall where they may.

       6             Q         How long was it between the second

       7   time Carl Wood came into your office and the third

       8   time?

       9             A         I don't remember.  I really don't.

      10   I mean, it wasn't a long period of time.  But it could

      11   have been a month, two months.  I don't remember.

      12             Q         Did you ask Mr. Wood if he had

      13   conducted an investigation to locate those records?

      14             A         I knew --  I instructed him to, to

      15   search for those records, to cooperate fully with

      16   everyone concerned, and not to hold anything back.

      17   But when you start talking about missing records, that

      18   got my attention.  And, and I told him at that time

      19   to --  And then when he found them, there wasn't any

      20   debate about whether, are we going to give this

      21   evidence away?  Because it made us look bad.  There

      22   was never any debate with Mr. Wood or myself, was, of

      23   course, we've got to release it.  And we did it

      24   immediately.

      25             Q         And the State was already aware of




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       1   the concern that Mr. Rettig had falsified data, is

       2   that correct, at that time?

       3             A         Yeah.  The State was concerned

       4   initially, as I said earlier, about the falsified data

       5   for other people.  Then when they got into our records

       6   to see if our records were being used to justify his

       7   other tests, then we found our records were missing.

       8                       Then when we found some of those

       9   missing records --  But anyway, we totally cooperated

      10   at every instance.  And, and in fact, I asked Carl

      11   Wood, I said, Carl, are we sure?  I mean, is this

      12   something --  Is anyone above Terry Rettig?  It

      13   appears that Terry Rettig wasn't doing his job that

      14   he's committed a criminal offense.  I said, is there

      15   anybody above him, do you think, that's involved with

      16   this?  He says, absolutely not.  He didn't believe

      17   that.

      18                       Then I made sure that

      19   Mays-Valentine got into it, which is our attorney.

      20   And I've asked Mays-Valentine to do an independent,

      21   not an audit, but to, independently to look into it to

      22   see if the same went beyond Terry Rettig.

      23             Q         Did you ever talk to Mr. Lively

      24   about these incidents?

      25             A         No.  Huh huh.  (Indicating in the




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       1   negative.)

       2             Q         Did you talk with anyone other

       3   than Mr. Wood and the attorneys at Mays & Valentine

       4   regarding these incidents?

       5             A         I probably --  I can't say I did,

       6   but I probably discussed it with Aaron Troub, who is

       7   an inhouse counsel.  He doesn't know anything about

       8   environmental law, but I --  But since he's the

       9   inhouse attorney, I'm sure I discussed it with him.  I

      10   made --  I made our Board of Directors aware of what

      11   had taken place.  And I think all of it --

      12                       This is the type of company we

      13   have, but all of our top management, I would say, was

      14   aware that, you know, that this was a problem.

      15             Q         When you say this is the type of

      16   company we have, what do you mean?

      17             A         I'm just saying that we're an open

      18   company.  We don't --  If something goes wrong, we

      19   don't try to hide it.  I mean, we just have an open --

      20   It's an open philosophy, if you will.  I mean, it's

      21   not --  I mean, it's something that, if I had a

      22   conversation with the Vice-president of Sales, I'd

      23   say, by the way, I'm in a bad mood today.  I just

      24   heard that we've got some missing documents.  I mean,

      25   we're an open company.  We don't --  At least I am.




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       1   We don't try to --  It's not a secretive kind of a

       2   company.  It's pretty open.

       3             Q         During the time period in which

       4   Mr. Hellmann was retiring from Smithfield Foods, did

       5   you have any conversations with Mr. Rettig regarding

       6   his desire to resign from the company?

       7             A         Resign from the company?  No.

       8   I've never had any conversations with Mr. Rettig at

       9   all.  I believe that either Bill Hellmann or Carl Wood

      10   brought Mr. Rettig in one day and introduced me to

      11   him.  And I was introduced to him.  I said, well,

      12   welcome aboard, something like that.  I've never had a

      13   substantive conversation with Mr. Rettig.  But I think

      14   Mr. Rettig is very much aware of the openness of the

      15   company.

      16                       As I say, I have an open door

      17   policy.  Mr. Rettig could come into my office at any

      18   time and speak to me about any issue that was of

      19   concern to him if he wanted to.

      20             Q         Did you have any conversations --

      21             A         But he never did.

      22             Q         Did you have any conversations

      23   with Mr. Morris regarding Mr. Rettig offering to

      24   resign?

      25                       MR. TROY:  Objection.  Lack of




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       1             foundation, if there's any such offer.

       2             A         I don't remember Mr. --  I mean,

       3   Mr. Rettig resigning or not resigning would not be

       4   something that would concern me one way or the other.

       5   I mean, he --  I mean, I --  If he was, if he was a

       6   vice-president, I would be involved.  But Terry

       7   Rettig's come and go.  I mean, we've got 18,000

       8   employees.  You know, people at that level come and

       9   go, or offer to, or threaten to resign, or whatever.

      10   But I would never know about it.

      11                       MR. TROY:  Let the record show

      12             when he said that Terry Rettig's, he was

      13             just referencing simply employees, not

      14             officers.  He wasn't referencing the

      15             character of Terry Rettig.

      16             A         No.  No.

      17

      18                       NOTE:  The above-referred to

      19             letter dated December 7, 1989 was marked and

      20             filed as Luter Deposition Exhibit No. 2.

      21

      22             A         Giving the same speech eight years

      23   later, am I not?

      24             Q         This is a letter you wrote to

      25   Governor-elect Douglas Wilder, is that correct?




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       1             A         Okay.  Let's see.  Uh huh.

       2   (Indicating in the affirmative)

       3             Q         This is a letter you wrote to

       4   Governor-elect Douglas Wilder, is that correct?

       5             A         Yes.

       6             Q         You reference a meeting that --

       7             A         I say, you know --  Yeah.

       8   Evidently, the meeting I had with --  Yeah.  So

       9   evidently, I must have met with him on the, probably

      10   the 6th of December.  I thought it was after he took

      11   office.  But was this '91 or '90?

      12                       Yeah.  This is right after he was

      13   elected, before he was inaugurated, I guess.  Yeah.

      14   He was elected in '89; he took office in '90.

      15                       MR. TROY:  Correct.  We can

      16             stipulate that the electoral elections were,

      17             '89 was the year for the election.

      18             Mid-January 1990 is when Governor Wilder

      19             took office.

      20             A         Yeah.  Had this meeting taken

      21   place.  It's no secret.  Richard Holland, is who is on

      22   our Board of Directors was State senator.  He was very

      23   much aware of the fight between the State of Virginia

      24   and Smithfield Foods in regards to this two parts per

      25   million phosphorus limitation.  He arranged a meeting




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       1   with the Governor-elect at that time, Governor Wilder.

       2   I basically made my case.  And that was it.

       3             Q         Is it fair to say that you were

       4   advising the Governor-elect that if you did not

       5   receive relief from the two milligram per liter

       6   phosphorus limit, you would move your operations to

       7   North Carolina?

       8             A         I told --  At that time, I don't

       9   believe I had the --  I don't believe I had the HRSD

      10   option.  I think the HRSD option was --  I was made

      11   aware of the HRSD option, I believe, after this.  I

      12   think the meeting with Mr. Borberg and Richard

      13   Burton --  Wait a minute.  Wait a minute.  I believe

      14   it was after, was after this meeting, I believe.

      15             Q         So it is fair to say that at this

      16   time, you told Douglas Wilder that you would be moving

      17   the company out of Virginia if you do not receive --

      18             A         No.  I told him that this was a

      19   limitation that I believed at that time, and that I

      20   believe, in fact, today, that we could not meet on a

      21   consistent basis.  And that if some relief wasn't

      22   forthcoming, that I would have to move out of state,

      23   severely curtail production in the State of Virginia.

      24                       I said in a way that, as tough as

      25   the State has been on me, I have no interest at all in




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       1   expanding in a state that every time --  See, what --

       2                       Let me back up.  The State would

       3   put in a limitation.  We would spend millions of

       4   dollars to do what was necessary to come into

       5   compliance of that limitation.  Then two, three years

       6   later, they would up the ante.  And I --  It was --  I

       7   had a moving target all during the 1980's.  It was a

       8   moving target.  And I never knew where I stood.  I

       9   couldn't make plans to do anything, because I never

      10   knew what the State was going to do, as far as

      11   tightening up the limitations.  And, and then I

      12   finally just, I just made the mental decision that I'm

      13   not going to expand in the State of Virginia any

      14   further, because they're just too unreasonable and too

      15   tough.  And as a result, I built, I built this very

      16   large plant in North Carolina.

      17             Q         So because of the strictness of

      18   environmental regulations in Virginia --

      19             A         No, I wouldn't say the strictness.

      20   I would say because of the unreasonableness of putting

      21   in a limitation that I could not meet.

      22             Q         Was there any limitation other

      23   than the phosphorus limit that you viewed as

      24   unreasonable?

      25             A         I don't remember.  I just remember




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       1   at the time that every time that I would build waste

       2   water treatment facilities, the rules would change.

       3   And I've got --  Then I've got a crisis on my hands,

       4   again.  And, and I was just getting very, very tired

       5   of it.  And I said, you know, I said --  And we had,

       6   got businesses in many other states.  I said, my God,

       7   Virginia is --  Evidently, they just don't want a meat

       8   packing plant in the State of Virginia.

       9                       So quite frankly, since that time,

      10   for the last 15 years, virtually every capital, I

      11   mean, most of our monies have been spent outside of

      12   the State of Virginia.

      13             Q         Was it your understanding that

      14   only the meat packing industry was subjected to the

      15   two milligram per liter standard?

      16             A         No.  As I said earlier, the meat

      17   packing industry --  If you want to put me to a very,

      18   very strict limit, make it ten times tougher on dioxin

      19   than the paper industry, then I can deal with that.

      20   Because the nature of my effluent allows me to deal

      21   with a much stricter standard.

      22                       Phosphorus may not be a problem

      23   for many industries, but it's a problem for people

      24   that are in the meat packing industry.

      25             Q         Do you know whether phosphorous is




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       1   a problem for other industries?

       2             A         I assume it is for some

       3   industries, but in some industries, it's not.

       4                       MR. TROY:  Objection.

       5             A         It depends upon the nature of the

       6   effluent that comes out of various industries.

       7             Q         Did you do anything to familiarize

       8   yourself with the nature of the effluent coming from

       9   other industrial discharges in the State of Virginia?

      10             A         I'm not concerned about other

      11   industries.  I'm concerned about what's available

      12   under best available technology minus what was, what

      13   was explained to me at that time is that if the limits

      14   are not set at some magical point, that pollution

      15   occurs.  The limits are set on what is obtainable

      16   within various industries with best available

      17   technology and that you can stay in compliance.  And

      18   that some industries will have a much higher standard

      19   or much lower standard, not because it's some magical

      20   point of pollution, but because that's what's

      21   attainable with best available technology.

      22             Q         So you did not familiarize

      23   yourself with --

      24                       MR. TROY:  Objection.

      25             A         I am not an expert; I'm not a




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       1   scientist; I do not have a degree in environmental

       2   matters.  I, I depended upon people like Mr. Wood and

       3   outside consultants to tell me what I could accomplish

       4   and what I could not accomplish.

       5

       6                       NOTE:  The above-referred to copy

       7             of a Richmond Times-Dispatch article dated

       8             2/25/87 was marked and filed as Luter

       9             Deposition Exhibit No. 3.

      10

      11             A         All I can say is I have never read

      12   a newspaper article in my life the way I knew the

      13   facts cold, where there weren't numerous mistakes in

      14   the article.  I will say this before I even read this

      15   particular article.

      16             Q         I understand that.

      17             A         Do you want me to read this

      18   article?

      19                       MR. TROY:  What's the date of this

      20             article?

      21                       MS. HIMMELHOCH:  February 25,

      22             1997.

      23                       MR. TROY:  199- what?

      24                       MS. HIMMELHOCH:  7.

      25             A         I mean, there are so many




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       1   inaccuracies.  I want to work outside the system.

       2   I've tried to work within the system.  But these

       3   environmental groups, you know, wouldn't --

       4             Q         They wouldn't what?

       5             A         Huh?  Oh, they don't mean --  Most

       6   of them, it's hard to reason with them.  They're so

       7   radical, you can't reason with them.

       8             Q         Have you had a chance to review

       9   the article?

      10             A         Yes.

      11             Q         In the second paragraph of this

      12   article, the Richmond Times-Dispatch attributes a

      13   statement to you that EPA is targeting him--I think

      14   referring to you--in an effort to embarrass the DEQ

      15   under Republican Governor, George Allen.

      16             A         Uh huh.  (Indicating in the

      17   affirmative)

      18             Q         Is that a correct reporting of the

      19   statement that you made?

      20             A         Yes.  Uh huh.  (Indicating in the

      21   affirmative)

      22             Q         What was the basis of that

      23   statement?

      24             A         What my attorneys told me.

      25             Q         What, specifically?




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       1             A         I just said it.  What my attorneys

       2   told me.

       3             Q         What did they say to you?

       4             A         They made me aware of the ongoing

       5   battle between the EPA and the Allen administration,

       6   much of it that I did not know of.

       7                       But when I got the EPA suit, my

       8   reaction was, my God, what's this all about?  I said,

       9   we entered into an agreement with the State.  Why --

      10   We're just --  We're right on the verge of doing,

      11   accomplishing everything that's been asked of us in

      12   regard to improve the water quality of the Pagan

      13   River.  There will be no point discharges.  The two

      14   plants of Smithfield, plus we, what we did, paid for

      15   allowed the State, the town of Smithfield not to incur

      16   any heavy costs and to eliminate the only other point

      17   discharge on the Pagan River.

      18                       I said, my God, we should be

      19   celebrating.  Why is the EPA coming in at this point

      20   in time, if it was --  If they were trying to abate an

      21   ongoing problem that was going to threaten the water

      22   quality of the Pagan River, I could understand it.

      23   But I said, we're not going to be discharging anything

      24   into the Pagan River --  At that time, I thought it

      25   was just a matter of weeks until we tap on the second




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       1   plant.  It's been some delays that was out of my

       2   control.

       3                       But I couldn't --  I didn't

       4   understand --  My question to my attorneys--and Tony

       5   Troy is sitting right here--why in the world would EPA

       6   sue Smithfield when the problem is going to be

       7   completely solved in a positive fashion in a matter of

       8   weeks?

       9             Q         Is it your understanding that you

      10   have been sued by the United States only for

      11   phosphorous violations?

      12             A         It's my understanding that that's

      13   the vast majority of it, yes.

      14             Q         In terms of --

      15             A         I haven't even read it, quite

      16   frankly, the complaint or the lawsuit.

      17             Q         Is it your belief that the United

      18   States is seeking penalties for fecal coliform

      19   violations for political reasons?

      20             A         I think that the EPA has filed

      21   suit against Smithfield for political reasons,

      22   whatever violations that Smithfield Foods has been

      23   responsible for.  I'm sure the State of Virginia is

      24   going to do its best to levy fines for those

      25   violations.




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       1                       What I object about is, you know,

       2   let EPA and the State of Virginia decide who's going

       3   to do what, but don't put us in the middle.

       4             Q         You also are attributed as saying

       5   that:

       6                       I'll spend five million in

       7             attorney's fees before I pay three million

       8             in fines.

       9                       Is that correct?

      10             A         That's right.

      11             Q         Why is that?

      12             A         Because I think that what the EPA

      13   has done is so outrageous.  I've got numerous letters

      14   from small business people that have been put out of

      15   business that have gone bankrupt personally.  And

      16   there are businesses that don't have the resources to

      17   stand up to the unlimited power and money that the

      18   federal government has.  And I think it's so totally

      19   wrong.

      20                       I have done everything that's been

      21   asked of me.  And, and everything that we've done is

      22   going to make the Pagan River as pristine as it can

      23   be.  And I think the EPA's action is outrageous.  I

      24   think it's unAmerican.  Just my personal opinion.

      25   When decisions are made, these kind of decisions are




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       1   made for political reasons.  Whether I'm right or

       2   wrong, I think it's criminal.  Whether it is or not, I

       3   don't know.  I'm not a lawyer.  But I'm totally

       4   outraged that this has taken place.

       5                       I'm not outraged about the State

       6   lawsuit.  I mean, I've had violations; I admit to

       7   those violations.  I know I'm subject to a fine every

       8   time I have a violation.  And I will, you know --

       9   That will be what will be.

      10                       But for the EPA to come in at this

      11   point in time, after it has fully been aware of what

      12   has transpired in the last six years, I think is

      13   totally outrageous.  And I think it's probably the

      14   biggest power grab that the federal government has

      15   tried to embark on in my lifetime.

      16                       I mean, if, if this decision is

      17   allowed to stand, you just as well disband 50 DEQ's

      18   from all 50 states, because no corporation or no

      19   individual is going to enter into any agreement with

      20   any state enforcement agencies if six years or seven

      21   years later, the federal government can come in, oh

      22   yes, we knew about this, but we didn't sign onto this

      23   and can overthrow it.  I mean, what's the practical

      24   result?  I guess we'll just abolish 50 DEQ's in the

      25   country.




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       1                       I've got attorneys at Hogan &

       2   Hartson that have said that they're advising their

       3   clients, don't agree to any consent order or any

       4   agreement with any state unless you make sure that EPA

       5   has signed on, because you're opening yourselves up to

       6   a nightmare.

       7             Q         Has the Board of Directors

       8   approved your decision to spend five million dollars

       9   in attorney's fees --

      10             A         No.  I make those decisions.

      11             Q         Is this a sound fiscal decision?

      12             A         That's for me to judge.

      13             Q         Do you --

      14                       MR. TROY:  I'm going to object to

      15             the form fiscal.  There's no discussion.

      16             A         I know.  How I spend Smithfield

      17   Foods' money should not be of any concern to you or

      18   the government.

      19                       The bottom line is, you succumb to

      20   a tyrant once, you will succumb to him a second,

      21   third, fourth, fifth time.  And I think in this

      22   instance, the government is the tyrant.  I --  I think

      23   this is so outrageous that if I'm not going to take a

      24   position on this, I'd just as soon not take a position

      25   on any lawsuit.




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       1                       I mean, we have people suing us

       2   all the time demanding millions of dollars for broken

       3   teeth, from a piece of bone on a piece of sausage, for

       4   instance.  But I'm not about to --  I'm not about to

       5   settle this lawsuit, because I think I'm right.

       6             Q         Who are the small businesses that

       7   you have heard from regarding their closure?

       8             A         I'm not going to get into that.

       9   I've got two, three personal letters.  And quite

      10   frankly, I thought they may be discovery.  Some of

      11   them were, actually make you cry.  And I personally

      12   tore them up, because I thought they may --  I just

      13   didn't want to make them a part of the fight.  But I

      14   received numerous letters from, from people.

      15                       I mean, one --  Give you one

      16   example.  Said, you know, my business went bankrupt, I

      17   went personally bankrupt.  I didn't have the resources

      18   to stand up to the EPA.  Please, don't give into them.

      19   Someone needs to stand up.  Unfortunately, I didn't

      20   have the resources to.  And he sent me a check for

      21   $15.00.  And I sent the $15.00 back to him, by the

      22   way.

      23             Q         Did you investigate the accuracy

      24   of the claim in the letter --

      25             A         No.  But I realize that --  I see




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       1   what the EPA has done in my instance, so it's not hard

       2   for me to extrapolate from that that they have been

       3   heavy handed in other instances.

       4             Q         Do you have specific evidence of

       5   those other instances?

       6             A         As I told you, do I take my time

       7   to investigate it?  No.  That's their problem.  I've

       8   got my own problems.

       9                       I can tell you this.  That you all

      10   are hurting your efforts in trying to improve the

      11   environment in this country in taking on the kinds of

      12   cases that you've taken on in regard to Smithfield.

      13             Q         How so?

      14             A         Because I think that it's one

      15   thing about the truth.  When it comes to the surface I

      16   think they will see it for what it is, that there is a

      17   political vendetta.  And knowing I'm making every

      18   effort to testify before Congress to make members of

      19   Congress aware of what is taking place in this

      20   instance with Smithfield so they can, so there can be

      21   some Congressal oversight upon government agencies

      22   that are out of control.

      23             Q         If this is a fight between the

      24   United States and Virginia, why did they pick you?

      25             A         I haven't --  You'll have to ask




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       1   the EPA.

       2             Q         Why do you believe --

       3             A         I think because --  I think I

       4   made --   I made a political contribution to Governor

       5   Allen.  And I think EPA has accused the Allen

       6   administration of being soft on the environment.  And,

       7   you know, as I say, all the reason I think it's

       8   political.  I think, as I told you, the decision came

       9   from the top down, not from the bottom up, the way

      10   these normally, the staff takes problems and takes it

      11   up the ladder for prosecution.  And rather than being

      12   pushed down from the top --  And I think it's my

      13   understanding that, that the staff at EPA will testify

      14   this is something they did not recommend, but it was

      15   pushed down from the top.

      16             Q         If, in fact, that's not the case,

      17   would that alter your opinion of this action?

      18             A         Probably not.  Because I --  If I

      19   believe that EPA was not aware of the agreement that

      20   Smithfield Foods and the State of Virginia entered

      21   into some seven years ago, I think it may change my

      22   mind.  But it's clear to me in discussions I've had

      23   with my attorneys that the EPA was fully aware and was

      24   kept fully informed of this entire matter.  And, and

      25   why, why --  What other reason would there be --  If I




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       1   was going to continue to discharge into the Pagan

       2   River for the next two, three, four or five years, and

       3   you want to abate that pollution, I can understand

       4   you're unhappy with the amount of phosphorus we're

       5   putting into the River.  I can understand you saying,

       6   hey, look, bring it to a stop tomorrow.  Then I've got

       7   to make a decision.

       8             Q         So is it your opinion that any

       9   action --

      10             A         I think any time the federal

      11   government files suit against someone before they even

      12   have the courtesy to talk to the people that they are

      13   suing, it's outrageous.

      14             Q         I need to be --

      15             A         It's outrageous.

      16             Q         Sir, I need to finish my question.

      17                       Is it your opinion that any action

      18   for wholly passed violations is inappropriate?

      19             A         It's inappropriate when the

      20   federal government --  I'm not sure of the question.

      21   I don't know whether you're talking about the

      22   phosphorus or whether you're talking about the

      23   violations that the State is suing me on.  I'm not

      24   sure what you're referring to.

      25             Q         Is it your belief that it would be




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       1   improper for EPA to sue a company who had been in

       2   violation of the act but had since come into

       3   compliance?

       4                       MR. TROY:  I'm going to object to

       5             this line of questioning as to, you know,

       6             I'd like to know where we're going, how this

       7             could lead to the discovery of relevant

       8             evidence.  He's already testified at length

       9             about his beliefs regarding this litigation,

      10             why he feels it was improperly motivated.

      11             What are these hypotheticals going to lead

      12             to, Sarah?

      13                       MS. HIMMELHOCH:  Counsel, he has

      14             testified that he would understand if this

      15             action were brought to abate future

      16             violations.  And I'm entitled to probe what

      17             that understanding is.

      18             A         No.  No.  My understanding is the

      19   State of Virginia, any violations that we have that

      20   the State of Virginia can and will bring appropriate

      21   action.  If the EPA doesn't think that the State of

      22   Virginia is fulfilling its obligations under

      23   environmental law, then they can take, they've got

      24   certain remedies.  They can take over the enforcement

      25   and sue us directly, I guess.




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       1                       What I have a problem with--and

       2   I've repeated it over and over and over again--is if

       3   you've got a problem with anything that we've done,

       4   discuss it, first.  Bring it to my attention.  Tell me

       5   what I'm doing wrong.  Let me see if I can do better.

       6   This --  Bill Clinton did something every week, and

       7   says we've got a new era of government, that we're

       8   going to work together for the common good.  And

       9   rather than taking a meat axe approach --  And

      10   evidently, the regulatory agencies are not paying any

      11   attention to the president of the United States.

      12                       But --  But as I said earlier, the

      13   EPA can sue anybody for whatever they want to at any

      14   time.  I mean, the lawsuits are very easy to bring in

      15   this country.  So I mean --

      16

      17                       NOTE:  The above-referred to copy

      18             of a paid advertisement was marked and filed

      19             as Luter Deposition Exhibit No. 4.

      20

      21             Q         Would you please examine what's

      22   been marked as Exhibit 4?

      23             A         I know what it is.

      24             Q         What is it?

      25             A         It's an ad that I ran in various




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       1   newspapers about six, seven weeks ago, I guess, now.

       2             Q         Which newspapers did it run in?

       3             A         I believe it was the Washington

       4   Post, the Norfolk Virginia Pilot, the Roanoke paper

       5   and a Richmond paper, I believe.

       6             Q         How much did the ad cost?

       7             A         Different amounts for different

       8   newspapers.

       9             Q         How much did it cost in the

      10   Washington Post?

      11             A         I don't know.

      12             Q         You state in this advertisement

      13   under the heading:

      14                       What are the facts behind EPA's

      15             lawsuit?  That more than five thousand

      16             alleged violations which are expressly

      17             excused by two states issued administrative

      18             consent orders.

      19             A         Uh huh.  (Indicating in the

      20   affirmative)

      21             Q         What is the basis of that

      22   statement?

      23             A         To the phosphorus violations that,

      24   that we've been talking about.

      25             Q         Is there a document that expressly




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       1   excuses you from compliance with the phosphorus

       2   limitations?  And when I say you, I mean Smithfield

       3   Foods?

       4             A         There's an agreement that we

       5   entered into with the State that excuses us from the

       6   phosphorus limitations that EPA is very much aware of.

       7             Q         Did EPA sign that agreement?

       8             A         I don't know whether they signed

       9   it or not.

      10             Q         Did you sign the agreement?

      11                       MR. TROY:  Do you mean him,

      12             personally, or Smithfield?

      13                       MS. HIMMELHOCH:  Yes, he.

      14             A         I don't remember.

      15             Q         Did you review the agreement?

      16             A         No.  I mean, my attorneys would.

      17   But I sign my signature probably --  I don't know.  I

      18   probably average 20 times a day with various

      19   documents.  I have people review them, tell me it's

      20   okay to sign them.  If they tell me it's okay to sign

      21   them, I sign them.

      22             Q         Who wrote the advertisement that's

      23   been marked as Luter Exhibit 4?

      24             A         Primarily myself and, and we use a

      25   PR firm.  And help from the law firms.




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       1             Q         What is your evidence that Terry

       2   Rettig acted alone?

       3             A         That's what I believe.

       4             Q         Do you have any specific evidence

       5   to that effect?

       6             A         I have --  I don't have any

       7   specific evidence to the contrary.

       8             Q         Do you have any specific evidence

       9   that Terry Rettig acted alone?

      10             A         I believe he acted alone.  I don't

      11   have any evidence that anyone else was involved other

      12   than Terry Rettig.

      13             Q         What controls does the company

      14   have in place now to prevent violations like those

      15   that occurred during Terry Rettig's work at Smithfield

      16   Foods?

      17             A         My response is that if someone

      18   wants to steal from you, they can steal from you.  All

      19   the controls in the world are not going to stop that.

      20                       If someone wants to falsify a

      21   document or to lie, he can do that.  You have to --

      22   It's impossible --  When you've got 18,000 employees,

      23   it's impossible to, to put tight controls on

      24   everybody.

      25                       MR. TROY:  Sarah, I'm going to




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       1             also apologize for the late objection, but

       2             the question as to, that you posed regarding

       3             Terry Rettig working alone, I'm going to

       4             object to the form of that question, because

       5             it mischaracterizes the exhibit, itself,

       6             which indicates that Terry Rettig gave an

       7             affidavit that he had acted on his own.

       8                       MS. HIMMELHOCH:  Thank you for

       9             supplementing your witness' testimony.

      10             A         No.  No.

      11                       MR. TROY:  It's

      12             mischaracterization of your question, Sarah.

      13             I think I have the right to object as to the

      14             form of your question.

      15             A         No.  When I asked Carl Wood --  I

      16   said, Carl, is there a smoking gun here any place?

      17   And, you know, at that time, he told me that Terry

      18   Rettig had signed an affidavit saying that no one else

      19   was involved.  And my response was, thank God.

      20             Q         Let me ask you this.  What

      21   procedures were put in place to supervise the

      22   activities of the person who replaced Terry Rettig?

      23             A         Well, I have Carl Wood.  Then

      24   below Carl Wood is Larry Lively.  Below Larry Lively

      25   is, what's her name, Carl?




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       1             Q         Mr. Gill?

       2             A         I have --  Well, Mr. Gill replaced

       3   Larry Lively recently.  But then you have Diane --

       4             Q         Carson?

       5             A         Diane Carson is below Mr. Gill

       6   today.  And then I think she's got any number of

       7   people reporting to her.  And it's like a chain of

       8   command.  If there's a broken link anywhere, then

       9   problems occur.  But I mean, you know --

      10             Q         Was there any change in the

      11   management structure relating to the Waste Water

      12   Treatment Plant as a result of the violations that

      13   were discovered while Mr. Rettig was employed by

      14   Smithfield?

      15             A         Repeat that one more time.

      16             Q         Did you make any changes to the

      17   management chain supervising the waste water treatment

      18   plant in response to Mr. Rettig's violations?

      19             A         No.  When I found --

      20                       MR. TROY:  Wait a minute.  Terry

      21             Rettig was terminated.  I mean, what are you

      22             talking about?

      23                       MS. HIMMELHOCH:  I'm talking

      24             about --

      25             A         When we found out that Terry




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       1   Rettig had --   When we first became aware that the

       2   State suspected that Terry Rettig may be involved in

       3   improper conduct, we took a wait-and-see attitude.

       4   Obviously, we couldn't fire him at that point, because

       5   we didn't have any basis to fire him.  And you get in

       6   trouble by firing someone today unless you've got

       7   cause to do the same.

       8                       When we found out that Mr. Rettig

       9   was involved in improper conduct, it's my

      10   understanding that we acted promptly and discharged

      11   Mr. Rettig at that time.

      12             Q         Did you make any changes as to how

      13   the Waste Water Treatment Plant was supervised, other

      14   than discharging Mr. Rettig?

      15             A         No.  It's my understanding --  And

      16   here again, you'll have to ask other

      17   people--Mr. Lively and Mr. Wood.  It's my

      18   understanding that when he was let go, that we

      19   immediately hired a replacement.  And that entire

      20   episode was a major topic of discussion.  And every

      21   effort was being made to make sure that such an event

      22   never could happen again.

      23                       But here again, I mean --  I mean,

      24   you can always have employees that, that cannot do

      25   their job, and that you're not aware of it until a




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       1   later date.

       2             Q         Did you ask Mr. Wood what checks

       3   had been placed on Mr. Rettig when you first found out

       4   about the allegations that Mr. Rettig falsified data?

       5             A         I told him --  Obviously, he said

       6   he was going to watch him very closely.  We just --

       7   We didn't --  You know, we were not aware of there

       8   being anything initially, other than unsubstantiated

       9   allegations.

      10             Q         My question went to the

      11   supervision of Mr. Rettig before the allegations

      12   arose.  When Mr. Wood reported to you that there had

      13   been allegations that Mr. Rettig had falsified data.

      14   So this is either the second or the third meeting that

      15   you had with Mr. Wood regarding Mr. Rettig.

      16                       MR. TROY:  Wait a minute.  I'm

      17             going to object to the form of the question,

      18             too.  It mischaracterizes, I believe, the

      19             prior testimony.

      20             Q         Did Mr. Wood, at any time, report

      21   to you allegations that Mr. Rettig had falsified data?

      22             A         Did he report to me?

      23             Q         Yes.

      24             A         Yes.  He reported to me when he

      25   found, when he or his people found some documents that




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       1   implicated Mr. Rettig --  You know, I testified he

       2   came to me and reported that incident to me.  And I

       3   assumed Mr. Rettig was discharged, you know, within

       4   short order.

       5             Q         Did you ask Mr. Wood when he

       6   reported this to you --

       7             A         I talked to him --  No.

       8             Q         Sir, I have to be able to finish

       9   my question.

      10                       Did you ask Mr. Wood when he

      11   reported these falsifications to you, what auditing or

      12   checks had been put in place to check what Mr. Rettig

      13   was reporting to DEQ?

      14                       MR. TROY:  Objection to the form

      15             of the question.  It's an invalid

      16             foundation.  There's no foundation that at

      17             that time he was reporting anything to DEQ,

      18             Sarah.  You're mischaracterizing the entire

      19             course of the discovery of this case.

      20             Q         At any time, did you ask Mr. Wood

      21   what checks had been put in place to check on the

      22   information reported by Mr. Rettig to DEQ?

      23                       MR. TROY:  Same objection.  And

      24             I'm not going to allow you to

      25             mischaracterize the evidence.




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       1                       Let me just --  For clarification

       2             purpose, you can object that it's an

       3             improper objection, if you want.  But

       4             testimony has already been made that when

       5             the first report regarding Terry Rettig came

       6             to light, there was no question at that time

       7             about falsification of documents.

       8                       MS. HIMMELHOCH:  And I'm not

       9             implying that there was.

      10                       MR. TROY:  And you know from the

      11             record that at that time, Terry Rettig was

      12             removed from his position as waste water

      13             manager.  So he was no longer reporting

      14             anything to DEQ from that date forward.

      15                       MS. HIMMELHOCH:  I'm not implying

      16             that he is.  I'm asking--

      17                       MR. TROY:  Your question implies

      18             that he was.

      19                       MS. HIMMELHOCH:  No, it doesn't.

      20             I asked Mr. Luter whether he ever inquired

      21             of Mr. Wood what system was in place to

      22             check what Mr. Rettig was reporting to DEQ

      23             prior to --

      24                       THE WITNESS:  No.  No.  No.

      25                       MS. HIMMELHOCH:  -- prior to the




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       1             allegation surfacing.

       2

       3   BY MS. HIMMELHOCH:

       4             Q         Let me step back and lay a couple

       5   of questions down.

       6                       Mr. Rettig was submitting

       7   information to DEQ on behalf of Smithfield Foods until

       8   he was relieved of his responsibilities, is that

       9   correct?

      10             A         I assume so, yes.

      11             Q         Did you, at any time, ask Mr. Wood

      12   what checks were in place on the information that

      13   Mr. Rettig submitted to DEQ on behalf of Smithfield

      14   Foods?

      15             A         Once we became that Mr. Rettig was

      16   suspect, I'm not sure, but I'm sure I would have said

      17   something like, Carl, watch him closely, or make sure

      18   that Larry Lively watches him closely until we know,

      19   until we find out what the facts are.

      20             Q         Right.  But I'm asking whether you

      21   tried to find out what the historical practice of

      22   supervision had been?

      23             A         No, I don't get involved --  I

      24   can't --  I can't micromanage Carl.  I've got --  I've

      25   got ten people, probably, that have got Carl Wood's




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       1   responsibility.  I've got the President of Packing,

       2   the President of Gwaltney, Carl Wood, the head hog

       3   buyer, the buyer that heads the, that does the

       4   commodity trading, and three or four other jobs.  I do

       5   not try to micromanage their job.

       6                       Carl Wood had the responsibility

       7   to keep us in compliance.  And that was his

       8   responsibility.  And I did not get involved in how he

       9   fulfilled his responsibilities.  That's not my job.

      10             Q         Even after these allegations

      11   arose?

      12             A         After these allegations, I said

      13   monitor closely, cooperate fully.  He told me that

      14   he'd hired a replacement for Terry Rettig.  He spoke

      15   highly.  He thought that he's got all the confidence

      16   in the world in Larry Lively at that time.

      17                       I don't know Larry well, but he,

      18   he impresses me as a fine gentleman who would not ever

      19   do anything improper.  I used to see Larry Lively

      20   almost every day in the hallway.  And, and I --  To

      21   this day, I believe that Larry Lively has got one

      22   hundred percent integrity.  Do I think he made a

      23   couple of mistakes?  Absolutely.

      24             Q         What mistakes did me make?

      25             A         He made the mistakes --  The only




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       1   one that I know that he made was a test he should be

       2   running every hour; I think he ran it every two hours.

       3   That's the only one that I know of.

       4             Q         Are you aware that Mr. Wood signed

       5   the DMR's on occasion?

       6             A         No.

       7             Q         Were you aware --

       8             A         I don't know who --  I'm not aware

       9   who signs the DMR's, quite frankly.  I mean, I assume

      10   that --  I mean, what I know today, I assumed it was

      11   Terry Rettig.  But, I mean, I couldn't say for a fact

      12   today whether Terry Rettig signs DMR's, or Larry

      13   Lively, or Carl Wood.  I don't know.

      14             Q         Let me ask you this.  You've

      15   testified that the atmosphere at Smithfield Foods is

      16   an open atmosphere.

      17             A         That's correct.

      18             Q         How did Mr. Rettig get away with

      19   what he did in such an open company?

      20             A         I think that --  As I said

      21   earlier, I think any time an employee wants to do

      22   something dishonest, he can get away with it for a

      23   period of time.  I think, eventually, the truth always

      24   comes to the surface, quite frankly.

      25                       But, you know, I think a teller in




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       1   a bank can steal for a while, can steal for years.

       2   But eventually, that teller is going to get caught.

       3   And I think the same thing applies to Mr. Rettig.  I

       4   mean, I have to depend upon the integrity of many

       5   people that work for Smithfield Foods.

       6                       Once in a while, we, we have

       7   employees that let us down.  But that's, you know --

       8   You don't blame the president of the United States for

       9   everything that goes wrong in his administration,

      10   because the job --  He can't involve himself with

      11   everything that Webster Hubbel does, or what his wife

      12   does, or whatever.  I mean, it's --  The job is too

      13   big.  If I get bogged down in the, too much detail, I

      14   can't do my job.

      15             Q         Do you have an internal accounting

      16   department at Smithfield Foods?

      17             A         We have an accounting department

      18   at Smithfield Foods, yes.

      19             Q         Who prepares the tax returns for

      20   Smithfield Foods?

      21             A         We do, with the help of Arthur

      22   Anderson.

      23             Q         Who signs --  Who has the

      24   authority to sign checks of $10,000.00 or more at

      25   Smithfield Foods?




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       1             A         I have no idea.  Lots of people.

       2             Q         Is there a counter-signature in

       3   place for Smithfield Foods?

       4             A         I think some instances, yes.  But

       5   I don't think so in all instances, no.

       6                       I mean, if my hog buyers want to

       7   steal from me, they can steal from me for years and

       8   probably never get caught.

       9                       If someone in the Purchasing

      10   Department wants to steal from me for years, they can

      11   probably get away with it for an extended period of

      12   time.

      13             Q         Are your accounting records

      14   audited on a regular basis?

      15             A         We're a publicly held company, and

      16   we're audited, as all publicly held companies are

      17   audited.  I mean, I --  And we get a report from

      18   Arthur Anderson every year telling us where they

      19   believe that the internal controls of the company are

      20   adequate.  And, and they have been.  I mean, they come

      21   up with suggestions from time to time on how we can

      22   tighten the internal controls, and we usually follow

      23   their advice when they make such a recommendation.

      24             Q         Did you consider having an

      25   investigation done of the Waste Water Treatment Plant




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       1   to determine whether additional internal controls can

       2   be placed on the reporting by the Waste Water

       3   Treatment Plant employees to DEQ after you discovered

       4   what had happened with Mr. Rettig?

       5             A         No.  I asked the law firm --  I

       6   wanted to make sure that I got an unbiased opinion, or

       7   unbiased investigation, because I, you know --  I

       8   didn't know what the facts were.  And, you know, I

       9   asked Mays & Valentine to, to look into it for me.

      10             Q         Did they do so?

      11             A         It's my understanding they did,

      12   yes.

      13             Q         Did they give you a written

      14   report.

      15             A         No.  But I got a report back.  I

      16   mean, I talked to Tony Troy and Jim Ryan.  And, you

      17   know, asked do they have any reason to believe that

      18   anybody other than Terry Rettig was involved?  They

      19   told me no.

      20                       I did the same thing on Shannon

      21   Williams, I believe is his name, when I heard about

      22   Shannon Williams.  I asked the law firm to immediately

      23   investigate that.

      24             Q         That addresses the question of

      25   whether Mr. Rettig acted alone.  My question was, did




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       1   you ask anyone to investigate the internal controls to

       2   see if they should be improved so that future

       3   incidents like that which happened with Mr. Rettig

       4   could not occur again?

       5             A         If one wants to falsify a

       6   document, they will.  All the internal controls in the

       7   world are not going to prohibit that from taking

       8   place.

       9             Q         In this instance, Mr. Rettig's

      10   falsification was traceable to written records

      11   maintained by Smithfield Foods, is that correct?

      12             A         I don't know.

      13             Q         Did you ask anyone to see whether

      14   there should be closer scrutiny of the DMR's before

      15   they are submitted to DEQ in order to prevent someone

      16   else from doing what Terry Rettig did?

      17             A         It's my understanding that

      18   meetings were held after the Terry Rettig matter

      19   became public, and everyone was told that this was not

      20   only unacceptable behavior, it was criminal behavior.

      21   In all likelihood, people go to jail for such

      22   behavior.  And, and exactly what, what that meeting or

      23   meetings encompassed, I don't know.  But I know that,

      24   that I considered it very serious.  I know Mr. Wood

      25   considered it very serious.  I don't tell Mr. Wood




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       1   what to say to his people.

       2                       But it's my understanding that,

       3   that this whole episode was, was addressed properly

       4   with the person that took Mr. Rettig's job.  And she

       5   was very aware of the disastrous consequences that

       6   would take place if she conducted herself as

       7   Mr. Rettig had conducted himself.

       8                       But you know, I mean, it's --

       9   What seems to be forgotten here was that Mr. Rettig

      10   was convicted.  But most of the charges he was

      11   convicted for were something that were --  Most of the

      12   charges he was convicted for were charges that did not

      13   pertain to Smithfield Foods.

      14                       Now, if you --  Have you

      15   questioned the integrity of the town of Smithfield?

      16   Have you questioned the integrity of the town of

      17   Surry?  No.  You're focusing on Smithfield Foods,

      18   alone.  Which, here, again, once again, makes my case,

      19   that you treat, that you treat private industry

      20   totally different than you treat, than you treat other

      21   governments.

      22                       Mr. Rettig --  The majority of

      23   Mr. Rettig's violations were violations with

      24   municipalities.  Why aren't you going after them?

      25             Q         Mr. Luter, do you have any




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       1   evidence that Mr. Rettig destroyed an entire year's

       2   worth of records for any other facility?

       3             A         I don't --  No.  All I know is as

       4   I've told you that Mr. Wood told me that there were

       5   improper records --  That Mr. Rettig --  I'm tired

       6   right now.  Let me catch my breath.

       7                       MR. TROY:  Why don't we take a

       8             short break.

       9             A         No.  Let's get it over with.  I

      10   mean, gosh, I thought I'd be out of here two hours

      11   ago.

      12                       MR. TROY:  How much longer do you

      13             have?

      14                       MS. HIMMELHOCH:  Not very much.

      15             A         Rephrase your question; I'll try

      16   to answer it.

      17                       MS. HIMMELHOCH:  (To the court

      18             reporter)  Would you read it again, please?

      19

      20                       NOTE:  At this time, the previous

      21             question was read by the court reporter.

      22

      23             A         I don't have any evidence that he

      24   destroyed Smithfield's records.  I don't have any

      25   evidence --  I don't know anything that Mr. Rettig,




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       1   for a fact, has done.  All I know is what's been told,

       2   what's been related to me.  I don't know for a fact

       3   that he's destroyed anybody's records.

       4                       All I know is, you know, that he's

       5   been convicted, and, for X number of violations.  And

       6   some of those violations pertain to Smithfield Foods.

       7   But the majority of those violations pertain to other

       8   people he was working for.

       9             Q         When you say the majority, what do

      10   you mean?

      11             A         The majority means the majority,

      12   Sarah.

      13             Q         How are you counting the

      14   violations?

      15             A         What's reported in the newspaper.

      16   He was --  He was convicted of X number of counts.

      17   And the majority of those counts, was my

      18   understanding, were --

      19             Q         So based purely on the number of

      20   counts in the indictment?

      21             A         That's my understanding, yeah.

      22             Q         Not the number of events giving

      23   rise to any particular count?

      24             A         I don't know the number of events

      25   at Smithfield or the number of events --  I'm not




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       1   familiar with the details of this lawsuit.

       2             Q         You indicate in Luter Exhibit 4

       3   that, in fact, there have been at least 74 reported

       4   exceedences at the Smithfield plant, is that correct?

       5             A         Uh huh.  (Indicating in the

       6   affirmative)

       7             Q         What were those parameters that

       8   were exceeded?

       9                       MR. TROY:  Where are you

      10             referencing?

      11                       MS. HIMMELHOCH:  The second

      12             paragraph in:  An Open Letter From Joe

      13             Luter.

      14             A         I asked Mays & Valentine to give

      15   me the number of violations that, that had taken place

      16   at Gwaltney and Smithfield Packing Company since 19,

      17   going back 15 years.  And, and that --  I got the

      18   number from, from Mays & Valentine.

      19             Q         Is it fair to say that you

      20   delegated responsibility for the waste water treatment

      21   plant to Mr. Wood and his staff, and that you did not

      22   consider it your job or necessary for you to supervise

      23   what Mr. Wood was doing with respect to the Waste

      24   Water Treatment Plant?

      25                       MR. TROY:  Object to the form of




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       1             the question.

       2                       (To the witness)  Go ahead and

       3             answer it.

       4             A         Well, he is --  I expected him --

       5   I --  He's responsible; I'm ultimately responsible.

       6   If, if he had marching orders from me, then I expected

       7   him to follow those marching orders.  And it's my

       8   understanding then, it's my understanding now, that he

       9   conveyed those marching orders to Mr. Lively.

      10   Mr. Lively conveyed them down to Mr. Rettig.

      11   Mr. Rettig conveyed them down to people that worked

      12   under him.

      13             Q         It was absolutely clear in your

      14   mind that the employees of Smithfield Packing and

      15   Gwaltney, that you would accept no violations at the

      16   waste water treatment treatment?

      17             A         No.  I said earlier that I realize

      18   that biological systems do have upsets.  And there are

      19   violations from time to time that occur.  It's my

      20   opinion that Jesus Christ cannot operate a biological

      21   system and keep it in one hundred percent compliance

      22   one hundred percent of the time.

      23                       MR. TROY:  His Father could,

      24             but --

      25                       THE WITNESS:  Yeah.  His Father




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       1             could, yeah.

       2                       MS. HIMMELHOCH:  Why don't we take

       3             five minutes.  I think I'm done.

       4

       5                       NOTE:  At this time, recess is had

       6             from 4:45 to 4:50 p.m.; whereupon the

       7             deposition continues, out of the presence of

       8             Mr. Troy, viz:

       9

      10                       THE WITNESS:  I'd just like to

      11             make one statement to make sure there's no

      12             misunderstanding.

      13                       MS. HIMMELHOCH:  We have to wait

      14             until Tony comes back in the room.  I'd be

      15             happy to accommodate you --

      16                       THE WITNESS:  I understand.

      17             That's fine.

      18

      19                       NOTE:  Mr. Troy returns to the

      20             deposition at 4:54 p.m.

      21

      22   BY MS. HIMMELHOCH:  (Continuing)

      23             Q         Mr. Luter, you indicated you

      24   wanted to make a statement on the record before we

      25   adjourn for the day.




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       1             A         Yes.  I just wanted to make sure

       2   that we are clear on one point.

       3                       I had testified earlier that with

       4   a biological system, that I know from time to time

       5   that there are violations that occur.  And these

       6   violations, it's my belief that are unavoidable

       7   treatment in a biological system.  There are upsets;

       8   there are human errors; there are dramatic changes in

       9   the environmental conditions--temperature, rainfall,

      10   and so on--that can throw a biological system out of

      11   balance.

      12                       And so that I do --  Because this

      13   was a point that was covered in the lawsuit in great

      14   depth in regard to the Chesapeake Bay Foundation

      15   lawsuit.  But under no circumstances was there

      16   pressure from me to anyone in the organization to

      17   intentionally violate, don't have any violations, to

      18   intentionally have any violations.  There are

      19   unavoidable violations that take place, because this

      20   is not a perfect world.

      21                       So I just wanted to make that

      22   clear that --  I suspect maybe the thrust of your

      23   question was to, was to catch me, if you will, to

      24   insinuate that I put pressure, we're not going to have

      25   violations.  That was not the case.  We're not going




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       1   to have intentional violations, and we're not going to

       2   be involved in anything that is illegal.  So I just

       3   want to make that point perfectly clear.

       4             Q         If I understand you, what you're

       5   saying is you never said to anyone, I want you to

       6   falsify data?

       7             A         I've never said that.  I've never

       8   insinuated that, and I've never put pressure upon

       9   people of a nature that would encourage them to, to

      10   falsify data.

      11             Q         To your knowledge.

      12             A         That's my opinion, that I have not

      13   put --  I have put pressure upon people to do their

      14   job.

      15                       But when Mr. Wood comes in and

      16   tells me that --  I think we had some heavy rainfall

      17   here a couple years ago, and the system went out of

      18   what can for a few days.  It's nothing --  It's an Act

      19   of God, can't do anything about it.

      20                       And, you know, but when I find out

      21   mistakes are made that should not be made, I get

      22   pretty upset.  But things that we can't do anything

      23   about, I try to be reasonable about it.

      24             Q         In the context of the clear policy

      25   of maintaining compliance?




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       1             A         Clear policy of maintaining

       2   compliance.  I've got --  It's just too much history

       3   out there, you know, to, to have any other policy.  I

       4   mean, you've got to be out of your mind to have any

       5   other policy today.

       6             Q         Are you aware of any violations

       7   for which Smithfield Foods has been fined at any of

       8   the plants, other than the two at Smithfield?

       9             A         No.  I mean, there were some

      10   problems at the Morrell plant before we bought

      11   Morrell, which we had absolutely nothing to do with.

      12   That was all years before we bought Morrell.

      13                       I think there had been surcharges

      14   where we have discharged into municipal systems that

      15   we have had to pay for, because someone didn't do

      16   their job, or something that was unavoidable, and the

      17   counts go up.  So we get a bill from the City of

      18   Kenston, for instance, North Carolina that, you know,

      19   your effluent did not meet certain criteria, so there

      20   was a surcharge.  I don't know whether you call that a

      21   violation or not.  I'm aware of that.

      22             Q         Are there any other instances --

      23             A         But I think the whole

      24   environmental movement is to set these parameters

      25   extremely high to try to improve the environment.  But




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       1   if you exceed those parameters by the slightest

       2   amount, then there are severe consequences that

       3   result.

       4                       And that's why we fought so

       5   vigorously parameters that were, which the State was

       6   trying to impose upon us that we felt would keep us in

       7   constant trouble.

       8             Q         And you're referring to the

       9   phosphorus?

      10             A         I --  Phosphorus --  I think there

      11   was some concern about nitrogen, too.  Or it would be

      12   any parameter that we would be worried about our

      13   inability to meet it a hundred percent of the time.

      14             Q         Why didn't Smithfield Foods

      15   install any of the chemical pretreatment that it is

      16   using now at Smithfield Packing before 1995?

      17             A         I'm not aware of that.

      18             Q         Well, Smithfield Food--Mr. Wood,

      19   among others--has testified that chemical pretreatment

      20   was one of the things that was put into the Smithfield

      21   Packing plant in order to hook up to HRSD.  I'm

      22   wondering why that wasn't installed before 1995.

      23             A         I don't know.  You'll have to ask

      24   him.  I don't know.

      25             Q         Did you have any studies done on




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           Luter - Direct                                      169



       1   whether or not the Smithfield plants could meet the

       2   nitrogen level?

       3             A         As I testified earlier, we had

       4   Wells Engineering and another company in to look at --

       5   It's my understanding--it may not be the case.  It's

       6   my understanding that, you know, they looked at

       7   everything that was asked of us by the State and gave

       8   a report back, and --

       9             Q         Including nitrogen?

      10             A         As I say, I'm not sure.  I'm not

      11   sure.  As I testified, I didn't read the report.  I

      12   mean, you know, you know, I depended upon other people

      13   to read the report and report back to me what we

      14   needed to do to satisfy the State.  And that's when I

      15   got involved.

      16             Q         Have you ever met Mr. McCabe?

      17             A         No.

      18             Q         Have you ever had any

      19   conversations with Mr. McCabe?

      20             A         No.

      21             Q         Have you ever exchanged letters

      22   with Mr. McCabe?

      23             A         I don't think so, no.

      24             Q         Are you aware of anyone on your

      25   staff who has had conversations, met with, or




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       1   exchanged letters with Mr. McCabe?

       2             A         No.  I mean, I --  I saw an

       3   interview that he had with Becky Dunlap.

       4             Q         But you never met him?

       5             A         No.  I've never met him, no.

       6                       MS. HIMMELHOCH:  I have no further

       7             questions at this time.

       8

       9

      10

      11   And further this deponent saith not.

      12

      13

      14             DEPOSITION CONCLUDED AT 5:03 P.M.

      15

      16

      17

      18

      19

      20

      21

      22

      23

      24

      25




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                                                               171



       1   COMMONWEALTH OF VIRGINIA,

       2   City/County of  _________________________, to wit:

       3

       4

       5

       6             I, Joseph W. Luter, III, do hereby certify

       7   that I have read the foregoing pages of typewritten

       8   matter numbered 1 through 171, and that the same

       9   contains a true and correct transcription of the

      10   deposition given by me on the 19th day of May, 1997,

      11   Norfolk, Virginia, to the best of my knowledge and

      12   belief.

      13

      14

      15                                                     
           Date                     Jospeh W. Luter, III
      16

      17             Subscribed and sworn to before me this

      18                day of, 1997.

      19

      20             My commission expires                      .

      21

      22                                                         

      23

      24

      25




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                                                               172



       1   COMMONWEALTH OF VIRGINIA, to-wit:

       2

       3             I, Connie Alys Crane Pryor, a Registered

       4   Court Reporter and a Notary Public in and for the

       5   Commonwealth of Virginia at Large, of qualification in

       6   the Circuit Court of the City of Richmond, Virginia,

       7   and whose commission expires on the 31st day of

       8   August, 1998, do certify that pursuant to Notice, the

       9   within deponent, Joseph W. Luter, III, appeared before

      10   me at Norfolk, Virignia, as hereinbefore set forth,

      11   and after being duly sworn by me to "testify to the

      12   truth, the whole truth, and nothing but the truth, so

      13   help you God," of his knowledge touching and

      14   concerning the matter in controversy in this action at

      15   law, was thereupon examined upon his oath by counsel,

      16   and his examination reported in shorthand and reduced

      17   to typescript by me; and that the foregoing is a true

      18   and correct transcript of the testimony adduced, and

      19   other matters set forth therein and relating thereto.

      20   I further certify that I am not related to, nor

      21   associated with any counsel or party to this

      22   proceeding, nor otherwise interested in the event

      23   thereof; and that there were 4 exhibits introduced

      24   during the deposition.

      25




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                                                               173



       1             Given under my hand and Notarial Seal at

       2   Richmond, Virginia, this 21st day of June, 1997.

       3

       4
                         _________________________________________
       5                 Connie Alys Crane Pryor
                         Notary Public, State of Virginia at Large
       6

       7

       8

       9

      10

      11

      12

      13

      14

      15

      16

      17

      18

      19

      20

      21

      22

      23

      24

      25




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                          CRANE-SNEAD & ASSOCIATES
                              Court Reporters
                      4914 Fitzhugh Avenue - Suite 203
                         Richmond, Virginia  23230


                               June 21, 1997



           MAYS & VALENTINE
           1111 E. Main Street
           Richmond, Virginia  23219

                        RE:  United State of America
                             vs
                             Smithfield Foods, Inc., et al

           Dear Mr. Troy:

                     Please find attached hereto the original
           signature page of Joseph W. Luter, III.

                     Please have Mr. Luter read his deposition;
           if there are corrections to be made, you will find an
           errata sheet attached to his signature page.  Have him
           sign the original signature page before a Notary
           Public and then return to me so that I may forward the
           original in a sealed envelope to Ms. Himmelhoch for
           filing if deemed necessary.

                     Thank you for your prompt cooperation.
           Mr. Luter has twenty-one days within which to read and
           sign his deposition; otherwise it will be filed
           unsigned.


                                        Very truly yours,




                                        Connie A. Crane Pryor



           cc:  Ms. Sarah Himmelhoch