BALTIMORE -- It's a small business, an 11-employe rustproofing firm that pours less than 10,000 gallons of waste water into the city's sewage treatment system each day -- a drop in the municipal bucket.

But in court last week, state prosecutors accused the company, Baltimore Rustproof Inc., of doing an end run around the city's water pollution monitoring system and dumping untreated chromium, cadmium and other hazardous wastes into Baltimore's Inner Harbor and ultimately the Chesapeake Bay.

Baltimore Rustproof President Robert Marc Berman pleaded guilty to rendering a monitoring device inaccurate, and in an unusual move backed by Maryland Attorney General J. Joseph Curran Jr., prosecutors asked that Berman serve jail time. Baltimore Circuit Judge Edgar P. Silver refused, however, sentencing Berman to two years of probation and fining the company $25,000.

Small though the company is, Curran and prosecutors in the environmental crimes unit of the attorney general's office said they saw the pollution as an assault on the bay and the state's recent initiatives to clean up its waters.

"I viewed this thing as very serious from day one," Curran said in an interview after the sentencing. ". . . Where we're dealing with environmental crimes, {polluters} deserve severe sanctions."

Imprisonment of corporate executives for violating environmental laws is rare in Maryland. In 1985, in what is believed to be the first such case, the general manager of American Recovery Co., an oil recycling firm, was sentenced to a six-month work release jail term for lying to a grand jury and trying to cover up illegal disposal of chemical wastes in Baltimore harbor.

Both the American Recovery and the Baltimore Rustproof cases were initiated by Curran's predecessor, Stephen H. Sachs, who had a reputation as an activist prosecutor and who organized a special unit to closely monitor environmental crimes. Sachs' style and vigor became a campaign issue last year, not only for Sachs in his unsuccessful campaign for governor, but also among the candidates seeking to replace him.

Curran was the candidate most closely associated with Gov. William Donald Schaefer and Schaefer's strong interests in attracting business to Maryland, a position that raised some questions from environmental groups about his willingness to enforce pollution laws vigorously.

But Curran, who as lieutenant governor in the early 1980s lobbied legislators for bay restoration laws, has gained a reputation for evenhandedness in balancing business and environmental interests.

"He's gone out of his way to meet with environmental people since becoming the attorney general," said Scott Burns, a lawyer for the Chesapeake Bay Foundation. "He wanted to get our input as well as the business community's."

As for the Baltimore Rustproof case, Curran is a "strongly principled person," Burns said. "In that case, he recognized there was clearly criminal conduct. We congratulate him."

In the case, the company and Berman were originally indicted on charges of violating various pollution control laws. In an agreement with prosecutors, Berman and the company pleaded guilty to one count each.

At the sentencing last week, Assistant Attorney General Elizabeth Volz said investigators at the rustproofing plant in downtown Baltimore discovered that most of the heavy metals, such as chromium and cadmium used in the rustproofing process, were being diverted illegally from a pipe leading to the city's sewage treatment plant and dumped instead into a storm drain that fed into Baltimore's Inner Harbor.

To "mask" the diversion and give the appearance of compliance with the company's waste water discharge permit, Volz said, the rest of the hazardous wastes were allowed to flow into the sanitary sewer but were diluted first by tap water run through a garden hose from an adjacent building.

Volz noted that Berman had been cited for 14 prior violations and is spending $163,000 in cleanup costs and installation of special treatment equipment for rustproofing metals and chemicals before they are discharged into the city sewer system.