BUSINESS

Tomato plant owner in $1.5-million battle with water regulators over waste and odors

Chris Rufer, 66, never has been keen on big government and always liked an underdog fight.

He was a long-shot candidate for the state Assembly and Congress in the early 1990s and has given more than $1 million to libertarian causes — including Ron and Rand Paul's presidential bids.

He has sued the state over hazardous waste fees and fought against its inspection system for tomatoes. He took on the Federal Elections Commission over "soft money" political donations and recently opposed a new basketball arena for the NBA Kings in his hometown of Sacramento.

Rufer has lost nearly all of those fights (though a couple might be classified as draws).

"If I'm wrong, I pay; If I'm right, I'll fight," said Rufer, president of Woodland, Calif.-based Morning Star Packing Co. "It's not a win-lose game; typically it's lose, lose, lose — and then at some point you win. So it's perseverance."

That perseverance has Rufer entangled in a $1.5-million battle with water regulators over waste and odors from his tomato processing plant in the Sacramento Valley town of Williams, the largest facility of its kind in the country.

It's Rufer's second major tangle with the Central Valley Regional Water Quality Control Board, which in 1995 cited him for dumping too many pollutants into surface and ground water. Last month, the board leveled similar charges of putting too much salts, nitrates and organic waste into groundwater.

"We don't see that magnitude of problems very often," said Wendy Wyels, environmental program manager of the control board.

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At issue are ponds and irrigation systems used to dispose of water used to convert tomatoes to paste. Rufer expanded the ponds and decreased the acreage on which he sprayed wastewater — which created an overload of pollutants allowed by permits, the board charged.

Rufer, who founded his operation on the libertarian principle of self-management, believes that he was allowed to alter those systems because they were part of an expansion included in a 2013 permit. "The cooling pond and assembly pond is part of our process, not part of the wastewater system. It's the recycling of water, to save water and decrease the energy we use."

Not so, say regulators.

"Our permits have to fully describe where the wastewater ponds are, their volume; they have to evaluate the impacts to groundwater," Wyels said. "So all of these things that need to be part of a permit were not there."

Rufer admits that there were "a few screw-ups" in his plans to get more paste from tomatoes using less water, including unusual odors. But he won't concede that he needed permission to change the waste stream, and has spent $250,000 in legal and engineering fees to stand on that principle.

A firm conviction that he knows better has paid off handsomely for Rufer. He spent 12 years trucking tomatoes to other people's processing facilities, carefully studying how the farms, packing sheds processors and inspectors worked. In 1982, he convinced investors that he could revolutionize the business.

His company would focus on producing tomato paste and diced tomatoes in 55-gallon drums and 300-gallon bins. And they would do it in a way that defied mainstream business thinking. Morning Star Packing would have no managers. The mission would be the boss, and employees would sign letters of understanding that bound everyone in a complex web of relationships with substantial autonomy. The company employs more than 2,000 people during its peak production season and sells to more than 200 corporate customers.

It was an early form of what has become known as Holacracy — a trademarked philosophy that takes its name from the "holarchy" built of interdependent but autonomous units, first described by Arthur Koestler in his 1967 psychological treatise "The Ghost in the Machine."

Zappo's, the Las Vegas-based shoe retailing arm of Amazon, is the best-known practitioner of the model.

Rufer parlayed less than a 2% stake in his first tomato plant into a network of three plants he wholly owns. Morning Star Packing now produces at least a third of the tomato-based ingredients that work their way into sauces, pizzas and other fast foods nationwide.

Revenue for the vertically integrated company, which includes trucking and growing, approaches $1 billion a year, Rufer said.

A Harvard Business Review profile in 2011 praised Rufer's company as a "positive deviant," and the Morning Star founding story has become a core parable for Holacracy advocates making the rounds at TED Talks and business conventions.

Rufer said his non-hierarchical approach to running the plant is not what got him in trouble.

"I made those decisions that those people are debating," Rufer said. "I can't blame it on anybody else."

Rufer said he's not sure what he could have done to draw such wrath from regulators, other than "sticking to what you believe and not cowing down to what they say."

Wyels, who has handled both cases against the company, said, "We try and treat everybody fairly and equally. He had an economic advantage here by making changes to his facility without getting a new permit. His other competitors, as far as I know, are following their permits."

Rufer now either must return his wastewater ponds back to the size listed on permits or agree to very stringent monitoring provisions, including new test wells, for a three-year period, after which he will have to get a new permit.

Rufer said he will fight the proposed $1.5-million fine and its entire premise, taking it to the state board and to civil court if he needs to.

"They're hurting what I do, and what I do is produce food, and I do it more cost-effectively year after year," he said. "That's what they're hurting."

geoff.mohan@latimes.com

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A version of this article appeared in print on March 15, 2016, in the Business section of the Los Angeles Times with the headline "Tomato fight getting dicey - A processing plant owner battles water regulators' fine over waste and odors." — Today's paperToday's paper | Subscribe
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