FRONT ROYAL, VA. -- David A. Tousignant, the final president of Avtex Fibers, still keeps the American flag flying at the bankrupt rayon factory that closed abruptly last fall and is now the site of the state's largest toxic waste cleanup.

Tousignant oversees a staff of 16 that also mows the grass, answers the telephone and guards the brick and steel buildings, although now they are paid by the federal bankruptcy court.

A career Avtex employee, Tousignant says he is not ready to give up on the plant where he spent 28 years. He wants to reopen part of it to manufacture polypropylene, which is used to line disposable diapers.

The prospect that Avtex could operate again is stirring up uneasiness and anger in this Blue Ridge town, where the jobs-versus-environment issue bitterly divided the community in the months before the plant closed.

Many vividly recall the midnight arrival of environmental officials, who rushed to the 440-acre plant after the shutdown and warned that Avtex managers had left behind only a skeleton crew to supervise hundreds of tons of chemicals that could blow up at any time.

"I don't know why we would want to help these people again," declared Patricia Cassidy Lewis, a local environmentalist.

"I think we should prosecute them."

The 50-year-old plant closed on Nov. 10, the day the Virginia State Water Control Board revoked its waste discharge permit over allegations the factory was dumping toxic polychlorinated biphenyls into the Shenandoah River, and two months after Attorney General Mary Sue Terry went to court trying to shut its doors.

PCBs once were used as insulating oils in electrical equipment, but were banned a decade ago because they cause cancer. The state has warned fishermen not to eat catches from the river's south fork because of PCB contamination.

Environmentalists have criticized the state and federal governments for being too slow in going after Avtex, which violated its water discharge permit 2,000 times between 1980 and 1989 but was also the nation's only supplier of a rayon thread used in some Pentagon and space program rocket nozzles.

The Environmental Protection Agency has spent $5 million so far to clean up the site, with millions more and years to go. Immediate hazards include pipes leaking acid and a tank filled with 15,000 gallons of a poisonous chemical, carbon disulfide. Longterm problems include contaminated groundwater, 85 acres of toxic lagoons and PCBs that polluted 32 miles of the Shenandoah River.

The factory's bankruptcy filing says it is $64.8 million in debt, with only $2.5 million in known assets; the claims of creditors may take years to sort out. The town, which has a $16 million annual budget, lost $80,000 a year in tax revenue when Avtex closed, but local merchants report suffering no major losses, possibly because newly arrived residents are replacing old business, according to town manager Breckenridge Bentley. Most of the 400 Avtex workers have found new jobs.

Tousignant says his company, Shenandoah Fibers, could hire 25 people. He has asked town officials to allow him to hook up to the municipal sewer line -- the Avtex waste treatment plant is too contaminated -- and he is trying to line up potential customers.

If he succeeds, he will ask the bankruptcy court to lease him the polypropylene building, which is newer and in better condition than the rest of the plant.

"It's environmentally benign," Tousignant says of his proposal. "Nothing goes into the water and as far as the emissions, it's mostly heat."

EPA officials say the polypropylene plant would not violate federal regulations as long as it stays away from the cleanup area. The state Air Pollution Control Department does not believe Tousignant would need a permit to operate, according to Bill Millward, the assistant regional director.

But because of Avtex's volatile history, the state agency handed the issue over to local officials, saying it would hold a public hearing if they wanted and would let local sentiment decide whether that part of the plant should be allowed to reopen.

Lewis said her group, the Commonwealth Coalition, would demand a hearing, and residents who are not hard-line environmentalists are skeptical about assurances of safety.

"I think people are at a point now where . . . they are not willing to accept something at face value without more research going into it," said the town's new mayor, Robert J. Traister. "We may be dealing with a psychological factor here. If it's safe and a lot of people are uncomfortable, we've got to deal with this."

Beyond safety, Lewis said the issue is one of personal accountability for Tousignant and other former Avtex executives who may be involved.

"They have taken profits out of the plant, taken away the fishing rights of everyone in the Shenandoah Valley, and have damaged the river, perhaps forever," Lewis said. " . . . I don't see how we can justify letting those people take more profit from this facility which has already cost us millions of dollars."

Replied Tousignant: "I've never knowingly done anything wrong. I've always run a very honest upfront business. I have a right to earn a living."

Virginia state police officials seized Avtex files last November and announced a criminal investigation into the plant's environmental record. They later gave the records to federal officials. Lewis said she was told the state statute of limitations had expired on a 1985 PCB spill under investigation.

She said EPA officials told her they are aggressively pursuing possible criminal charges of their own. EPA spokesman John Kasper said the agency could not confirm or deny that an investigation was in progress.

The question of who will pay for the cleanup could be tangled in litigation for years. The EPA is seeking money from the companies that operated the plant before Avtex, but one of them has gone to court to declare the U.S. government is partly liable because it ran the factory as a military supplier during World War II.

Terry's deputy, R. Claire Guthrie, told a Senate hearing last month that "when there is evidence that corporate officers knowingly endangered public health, it should be made easier for those charged with the environmental cleanup to reach those officers' personal assets." Her office would not comment on whether she thought Avtex officials fit that definition.

The federal government may get some cleanup money out of Avtex's assets if the firm's mortgage-holders, who have top priority, choose not to press their claims because it could open them to liability for cleanup costs, said Albert Ciardi, a lawyer for the trustee overseeing the Avtex case for the bankruptcy court.