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Halaco Seeks Bankruptcy Protection

Courts: Oxnard recycling firm files for Chapter 11. But critics say it's trying to avoid an environmental lawsuit.


Halaco Engineering, an Oxnard metal recycling plant under fire by regulators, has filed for bankruptcy protection in a move that critics charge is designed to hold up an environmental lawsuit against the company.

The Chapter 11 petition, filed this week in U.S. Bankruptcy Court in Santa Barbara, would allow the company to continue operating while seeking protection from creditors--and plaintiffs in civil lawsuits--as it reorganizes its structure and finances.

A bankruptcy lawyer for Halaco said a lawsuit filed last year by the Santa Barbara-based environmental group Channelkeeper has strapped the company's resources to the point that bankruptcy protection was its only option. The federal lawsuit alleges that the company is releasing toxic materials into the air and water.

"When you're taking the managers away from the operation of the business and making them focus their time and energies on depositions and production of documents and hearings, it's very difficult," said attorney Lawrence Peitzman.

Drew Bohan, Channelkeeper's executive director, said Halaco's filing came as the group was preparing to ask a federal judge to rule in its favor. Channelkeeper must now convince a judge to let the case proceed.

"It throws a huge wrench into the works," Bohan said of Halaco's move. "It's consistent with the way the company operates."

Port Hueneme resident and City Council candidate Maricela Morales, who lives blocks from the smelting plant, urged the environmental group to challenge the bankruptcy protection filing.

"In light of what we are seeing on the national level with larger corporations," she said, "I think it's all the more important not to allow Halaco to get away with using another tactic to avoid taking responsibility."

Plant manager Dave Gable said Halaco is in financial straits and had no other option.

"There's not a lot of strategy to bankruptcy," Gable said. "We hope to be able to stay in business."

Court documents show that Halaco owes at least $239,000 in lawyers' fees and $168,000 to other companies with which it does business.

Gable declined to discuss company finances Thursday, but in an interview two years ago he told The Times that Halaco employed 50 people and had $10 million in annual sales.

Peitzman, the Los Angeles attorney representing Halaco in the bankruptcy proceedings, said that without bankruptcy protection, Halaco was concerned it could not continue complying with demands set forth earlier this year by the Regional Water Quality Control Board.

"The company believes it can work its way through this situation and emerge from Chapter 11 in compliance with governmental regulations and serving its customers," Peitzman said. "The company's in the recycling business. It's an environmentally friendly company."

Linda Krop, chief counsel for the Environmental Defense Center in Santa Barbara, co-plaintiffs in the Channelkeeper suit, put no stock in Halaco's contention that the lawsuit brought the company to its knees.

"We filed the lawsuit a year and a half ago, and they could have spent their money addressing the concerns and cleaning up their facility," Krop said.

"Instead, they decided to spend their money on lawyers and obstructing our case every step of the way."

Halaco set up shop in 1970 on 41 acres at Oxnard's southern tip. Nearby, Ormond Beach's wetlands are home to protected species including the tidewater goby and the California least tern.

Each year, millions of pounds of aluminum and magnesium scrap are melted at the plant. The recycled product is sold to soda bottlers and car companies. What is left is pumped into waste ponds and then accrues on slag heaps that have grown to 40 feet high.

Neighbors have long complained of foul smells and black soot. The company also has tangled for decades with regulators, consistently defending its right to operate.

The Environmental Protection Agency sued in 1980, alleging that waste was being discharged into the wetlands, but the state Supreme Court ultimately ruled in Halaco's favor.

The California Coastal Commission also lost a bid in the 1980s to impose stricter regulations on the company. In 1992, the EPA identified heavy metals from the site leaking onto Ormond Beach.

In recent years, the company has sued officials with the Ventura County Air Pollution Control District and threatened legal action against members of the Regional Water Quality Control Board if members acted in a way that the company believed to be overreaching.

Two years ago, the water board said it had evidence that ammonia and other toxic chemicals were seeping into the wetlands.

In 2001, Channelkeeper filed its lawsuit. Then in March of this year, the Regional Water Quality Control Board imposed tighter restrictions on the company, including an order that Halaco stop adding to its slag heap by the end of this year.

The company has said it will be able to do so with new filtration equipment it has purchased.

Dennis Dickerson, the water board's executive officer, said the bankruptcy filing should not affect that agreement.

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