A federal judge in Norfolk today fined Smithfield Foods Inc. $12.6 million for dumping excessive levels of hog waste into a Chesapeake Bay tributary in violation of the Clean Water Act -- the largest such penalty ever assessed in the United States.

The decision by U.S. District Judge Rebecca Beach Smith was a victory for federal officials and environmental activists who have complained that Virginia long has been lax in its oversight of Smithfield, the East Coast's largest meatpacker. Smithfield attorneys said they will appeal.

The ruling followed a week-long trial in Norfolk that put a spotlight on the environmental policies of Republican Gov. George Allen's administration, which the U.S. Environmental Protection Agency has accused of coddling corporate polluters such as Smithfield.

Federal regulators rarely step into such state cases so aggressively, but in December they sued Smithfield for $20 million, alleging nearly 7,000 violations of the Clean Water Act since 1991. The U.S. government accused the company of dumping illegal levels of waste into the Pagan River and falsifying and destroying records to hide it.

"This decision sends a strong message that there can be no profit in pollution," said W. Michael McCabe, the EPA's regional administrator.

Roy Hoagland, staff attorney for the Chesapeake Bay Foundation, said of the penalty: "It's great for the bay. I'm pleased to know the federal government held Smithfield accountable."

Throughout their dispute with the EPA, Smithfield officials have maintained that a dumping agreement they signed with Gov. L. Douglas Wilder's administration in 1991 allowed the company to discharge pollutants at levels above the legal limits as long as it hooked up its slaughterhouses to a public wastewater system extension as soon as possible.

Today, they said the fine was outlandish because the company was merely abiding by the agreement.

"Twelve point six million for doing what we were told to do?" Smithfield attorney Anthony F. Troy said. "Thank God we weren't doing things that we weren't supposed to do."

Smithfield's attorneys said the ruling sends a chilling message to companies that pollution agreements negotiated with the state are worthless. "Smithfield Foods . . . earnestly hopes that the many other Virginia industries . . . which now operate under {agreements with the state} . . . will not have to suffer through the same ordeal that the company has experienced."

Environmentalists and Democratic critics said the fine is significant not only in itself but also because it underscores what they call Allen's laissez-faire approach to environmental regulation that places business interests above all others. They note that Smithfield's chairman, Joseph W. Luter III, gave $125,000 to Allen's political action committee while the firm was negotiating a pollution settlement with the state.

The EPA has threatened to take over the state's water pollution program, saying it has failed to enforce anti-pollution rules. A federal review of the state's program is underway.

Allen spokesman Julie Overy defended the administration's actions regarding Smithfield, noting that the company was discharging pollutants under the agreement worked out during Wilder's Democratic administration.

"The responsibility of this administration has been to make sure that {Smithfield's promise to hook up to a Hampton Roads treatment plant} comes to fruition," Overy said. "It happened this week."

She also dismissed criticism that the administration has been soft on polluters. Virginia, she said, will "vigorously pursue" its own lawsuit against Smithfield in which it accuses the meatpacker of breaking pollution laws.

Before today, the largest court-imposed fine for violating water pollution laws was $4 million, imposed this year against a Pennsylvania dairy firm. The largest settlement in such a case was for $6 million, which an Ohio steel company agreed to pay in 1991. Federal officials have seen Smithfield, a $4 billion conglomerate that sells products under the Smithfield, Gwaltney and Cudahay labels, as a particularly flagrant violator of pollution laws. The company discharged waste -- especially phosphorus, which causes algae blooms that rob fish and aquatic plants of oxygen -- for decades into the Pagan River. The 1991 discharge agreement did not include limits on phosphorus.

But the agreement was made with the understanding that Smithfield would comply with phosphorus limits by January 1993, said Elizabeth Haskell, Virginia's natural resources secretary under Wilder.

"I assumed that they were going to do that," Haskell said. "Evidently, after we left office, those consent agreements were extended and continued. {Smithfield has} just been given too many extensions. It was cheaper for them to dump the pollution . . . than to do the {treatment plant} connections." Smithfield officials said that hooking up their plants to a public wastewater system took longer than expected because a pipeline to Smithfield was delayed.

In any case, Judge Smith ruled in May that the federal government was not bound by the 1991 agreement. She added that the agreement was so lax that it was virtually "toothless."

The agreement's lack of limits on phosphorus highlighted just how weak Virginia's enforcement program has been, the Chesapeake Bay Foundation's Hoagland said.

"There's no question that enforcement is a program that had problems before Governor Allen took office," he said. "But it's a program that got dramatically worse when Governor Allen arrived. There's no question, enforcement in Virginia under this administration has gone from bad to worse."