(Bloomberg News) Reverend Steven Jamison recalls the February day 13 years ago when he was digging ditches to replace culverts at his Maranatha Faith Center in Columbus, Mississippi. As he switched from a shovel to an excavator, an oily black substance began to fill the trench. It smelled like turpentine, and the deeper he dug, the more he saw, Bloomberg Markets magazine reports in its June issue.

"We called the city right away to come and look," says Jamison, 58, a Pentecostal minister whose speech quickens as he relives the incident. "They told us they thought we'd hit creosote."

Jamison phoned the Kerr-McGee Corp. plant down the road. The company produced creosote, a toxic wood preservative, and coated railroad ties and telephone poles with it. A manager told him the stuff probably wasn't creosote and that even if it were, it wouldn't hurt anyone, Jamison says. So he kept working, immersing himself in sludge and bringing in dirt to absorb it.

After digging for six weeks, Jamison, who says he hadn't had health problems beforehand, was sick and losing weight. He says his kidneys were functioning at less than a third of their normal level. That April, when Kerr-McGee offered to help remove the old culverts, the crew arrived in hazmat suits, Jamison says.

U.S. Lawsuit

The U.S. Department of Justice, in a lawsuit on behalf of the Environmental Protection Agency and other environmental and state agencies, says Kerr-McGee fouled 2,772 sites, including Columbus, during seven decades of producing chemicals, fertilizer and plutonium pellets. The lawsuit, scheduled for trial beginning May 15, seeks $25 billion to clean up the toxins and compensate tort claimants -- or the people who say they've been personally harmed.

"That is by far the biggest polluter on record," says David Guest, an attorney with nonprofit law firm Earthjustice. "This is an almost unprecedented case in terms of how much money is in play."

Trouble is, Kerr-McGee no longer exists. It disappeared in a spinoff, a merger -- into Anadarko Petroleum Corp. -- and a bankruptcy, corporate maneuvers that have frustrated small-town residents across the country who say the pollution has ruined their health.

For decades, companies have used such tactics to make it harder to pursue legal action so they won't have to pay for tainting the land and making people sick, says Robert Gordon, a partner in New York law firm Weitz & Luxenberg, which specializes in mass-tort and wrongful injury suits. Gordon compares such tactics to a card game that dealers use to cheat victims.

'Three-Card Monte'

"Establishing liability can be like three-card monte," he says. "'Oh, sorry. You got the wrong corporation. Oh, sorry. You got the wrong corporation again.'" Weitz & Luxenberg represents business owners and residents in suits against BP Plc and other companies, including Anadarko, related to the 2010 Gulf of Mexico oil spill.

The case, scheduled for U.S. Bankruptcy Court in Manhattan, will test whether the government can recover money years later from a successor to a polluting company, even when a bankruptcy has ostensibly cleaned the slate.

The lawsuit says The Woodlands, Texas-based Anadarko, the company that bought a piece of Kerr-McGee in 2006, is responsible because it was part of a "two-step fraudulent scheme" that transferred $15 billion in assets out of Kerr- McGee.

The U.S. is seeking that amount from Anadarko, plus another $10 billion to cover interest and appreciation since 2005, according to a lawyer involved in the case.

Not Responsible

Anadarko, among the biggest U.S. independent oil and gas companies by market value, says it's not responsible for Kerr-McGee's old liabilities. In July 31, 2009, court papers that sought, and failed, to have the suit dismissed, Anadarko said the lawsuit is trying to rewrite history. The company estimated in a March slide show for investors that the suit will cost about $250 million -- 1 percent of what the EPA is seeking.