It's a startling sight: a vast palace in a former potato field by the Atlantic Ocean, as if Versailles had been moved from the outskirts of Paris and plunked down in the Hamptons. From a side road that affords the best view of it, the exterior of Ira Rennert's dream house— at 100,000 square feet the largest private residence in America, reportedly with 29 bedrooms, 40 bathrooms, a bowling alley, squash and basketball courts, a theater, and a vast parking garage—appears finished. Balustraded balconies and high Palladian windows punctuate the U-shaped building's awesome bulk. Vast chimneys rise above like so many penitentiary guard towers. In just a generation, mansions have risen from almost every field of this region's dark, rich farmland, marring the backdrop of one of the country's most beautiful public coastlines. But the Rennert house, five times larger than any of the others, violates the spirit of this already exploited place with a swagger both novel and obscene.

Inside, workers can be seen moving around beneath dangling bare bulbs. They may still be finishing the inlaid-marble floors, or putting in the ornate plaster molding that will make Fair Field look even more like the Sun King's palace. But how curious that five years after ground was broken the house remains at least two years from completion, according to an informed source. Indeed, the place has often seemed deserted. Why the seeming delays? Hamptonites have begun to wonder.

Five years ago, when Vanity Fair first profiled him, Rennert was a mysterious millionaire of whom hardly anyone had heard until his plans for Fair Field came to light. His private holding company, the Renco Group, was said to generate $2 billion a year in revenue, yet only about a dozen people occupied its offices on the 42nd floor of 30 Rockefeller Plaza in New Y>rk. Queries about what Renco's companies did, as well as requests for interviews with its owner, were met with stony silence. Most of Rennert's holdings, it turned out, were mills and mines which had compiled nasty records of noncompliance with environmental regulations. Together, they made Ira Rennert the country's biggest private polluter.

Rennert's notoriety has since made him a reluctant public figure, one whose business and personal dealings are noted by ever widening circles, from universities and charity groups grateful for his philanthropy to skeptical journalists, angry environmental activists, and the U.S. Department of Justice. Just this past May, the New York Post gleefully ran a picture of a bulldozer atop an obliterated sand dune in front of Fair Field; the dune had partly blocked Rennert's ocean view. Though still press-shy, Rennert responded to Vanity Fair's latest interview request with a modest concession: he would make available one of his top executives, as well as C.E.O.'s of his various companies, to argue that environmental improvements are under way at all of Renco's mills and mines.

Pollution at Rennert's companies has stirred headlines and public outcry but obscured another story. As Fair Field has risen, the market prices of lead, magnesium, coal, and steel have plummeted. The result is that today the Renco Group's companies are reeling, with all but one either bankrupt or nearly so. The unraveling of Rennert's financial empire is only partly due, however, to the recession. The other cause, it appears, is its founder's hubris.

To those who know him personally, Rennert seems genial and low-key. Business colleagues describe him as disciplined. Unquestionably, he is deeply religious and devoted to his family. Yet by the late 1990s a string of business triumphs seemed to have gone to his head.

In the Renco dining room that adjoins his corner office, Rennert would sit at the head of a long marble table, his six top executives in their assigned seats, and talk about the Gulfstream GV jet he was about to acquire. He was third in line to buy one of the brand-new, $33 million status symbols. "Ron Perelman wanted to pay me a million dollars to take my place," he would say of his friend the Revlon chairman. But Rennert refused. His wife, Ingeborg, would design the jet's interior for another $5 million. For a crowning touch, the seat-belt buckles would be etched with Renco's logo.

As secretaries served the men their lunch, then cleared the plates, Rennert would talk about Fair Field too. Originally, he had planned to build five homes on the 63-acre site, one for Ingeborg and himself, one for each of his three grown children (daughters Yonina and Tamara and son Ari) and their future families, one for the help. Only later did he put them all together, as seemingly oblivious to the impact of such a house on the community as he appeared to be to his own executives' mixed feelings about hearing the details.

In May 1998, as news of Fair Field was incensing his wealthy Hamptons neighbors, Rennert was in an especially good mood. His game plan had worked yet again. A canny bottom-fisher, he had made a lowball $60 million offer for Costain, a troubled Kentucky coal company (soon to be renamed Lodestar by Rennert), then dropped it to about $38 million when he realized how desperate the seller was. He'd paid only about $6 million in cash, says a source close to the deal. The rest had come from Congress Financial, the bank that has financed many of his big buys.

Congress Financial was essential to Rennert's game. It's known as an asset-based lender. It made the loan because it could see that Lodestar had assets that could be liquidated for at least as much money as the loan. Rennert's genius was in finding companies troubled enough to sell at the value of their assets, usually after a failed auction. Then the bank would pay nearly the whole cost, leaving Rennert to put in a pittance. "Bootstrapping," they called it on Wall Street. The more unglamorous the businesses were, the better a deal he could get on them.

After he bought the coal company, Rennert played part two of his game: issuing junk bonds against it. Everyone was doing it—a decade after Michael Milken's demise, the junk-bond market was bigger than ever. But Rennert played it with a twist that made even his own bankers call him rapacious. Instead of putting all the money raised into his new company, Rennert took a huge chunk for himself as a onetime "dividend." With Lodestar his take was, for him, modest—$28 million on the issue of $150 million—though still a princely premium on his investment.

Fair Field reportedly has 29 bedrooms, 40 bathrooms, a bowling alley, a theater, and a vast parking garage.

Other paydays had been far larger. On WCI Steel, his first big purchase, made in 1989, he had sucked up more than $350 million: a $108 million dividend from the initial $300 million junk bond; another $100 million dividend from the $120 million junk bond issued on the holding company created above it; and more profits from taking it public, then taking it private again. When the takings from WCI Steel were added to the dividends siphoned from his other holdings, the total was $525 million by one banker's estimate. Rennert had taken it all pretty much for Renco, tax-free until he spent it, the way a homeowner would pocket a chunk of his new mortgage.

The dividend gambit was entirely legal, because Rennert declared right on his bond offering how much he would shovel upstairs. Why anyone would buy such bonds was the question. "What on earth were all these institutional investors thinking in buying all this lousy-quality paper?" says a bond trader with a sigh. The simple answer was that the market was frothy, institutions had a lot of cash to invest, and they liked spreading it across many categories. The bond buyers at these institutions, as one banker notes dryly, were very young. They didn't realize that leveraging cyclical businesses with lots of debt was a prescription for disaster.

In snapping up Rennert's bonds, the buyers looked like geniuses at first, because so far every Rennert bond had made its semi-annual high interest payments without fail. No one seemed to worry how Renco, having taken so much of the principal upstairs, would pay back the loans when they matured. Maybe commodity prices would rise to generate enough profits at each company to pay off the bonds. Or the bonds would be refinanced. Or Rennert would sell the companies. Who cared?

Few public companies would have been t allowed by their shareholders to do this. Nor would most private companies with independent boards of directors. Rennert could do it because he was Renco: its sole owner and shareholder. Rennert had gone his own way, recounts a friend, ever since an early partner went broke on him, obligating " Rennert to pay the partner's debts. Possibly as a result, the small brokerage Rennert had opened on Beaver Street in Lower Manhattan became dangerously—and unacceptably-undercapitalized. In 1964, according to BusinessWeek, the young broker's license to trade stocks was revoked.

The censure set him on a new course: buying small, family-owned businesses. Their products ranged from butcher-block tables to sports boats to bra hooks, but they had one thing in common: they were all in dire straits and could be snapped up on the cheap. Above these "cats and dogs" Rennert created the Renco Group as a holding company, and began sucking up their cash flow to build a fund of $30 million. With that, in the late 1980s, he made his first big buys: $15 million down for WCI Steel, $7.5 million on AM General, which made the military Humvee, and about $75 million on the Magnesium Corporation of America. Though Congress Financial was his bank, and he had smart lawyers and advisers, Rennert did these deals on his own. Ironically enough, in his huge corner office, the king of junk-bond dividends sits at a massive partners desk.

Absolute ownership had been Rennert's strength. But, when prices fell, it became a liability. Over the next years, says a source close to Renco, he would watch his companies go bankrupt one after another— seemingly unwilling to cut his losses while he could, and too isolated to take advice from anyone other than the yes-men around him.

Lodestar, the last of his big buys, be1 came the first domino to fall. With the £ market for coal terrible after | a string of warm winters, it ° lost money from the day Rennert bought it. By No£ vember 2000, it had lost so -much money that it failed to make the semi-annual interest payment of $8.6 million on its bonds.

This was the first time any Renco company had defaulted on a bond payment. Rennert could have made up the shortfall from his dividend pot or bought the bonds back for 30 or 40 cents on the dollar and put a floor on the market, But he seemed incapable of parting with the cash. So he did nothing, and in March 2001 his biggest bondholder, Wexford Capital of Greenwich, Connecticut, put Lodestar into involuntary bankruptcy.

For the first time in recent memory, Ira Rennert appeared to be losing control.

Socially, Ira and Ingeborg, a German-born convert to Judaism, had established themselves in the congregation of the small but exclusive Fifth Avenue Synagogue. Rennert became chairman, pitching in, with fellow member Ron Perelman, to plug the synagogue's yearly deficit. In the flush of junk-bond wealth that begat Fair Field, the Rennerts' social ambitions expanded. They gave $5 million to New York University's law school, $2.5 million to Barnard College, and millions more to Columbia and Yeshiva Universities, as well as to many Jewish causes. Such generosity was usually acknowledged with gatherings of the grateful. Except when those gathering were journalists.

Former New York Times executive editor Abe Rosenthal was the recipient of one show of Rennert largesse: the 1999 Guardian of Zion Award from the Rennert Center for Jerusalem Studies. To celebrate, Rosenthal and his wife, novelist Shirley Lord, threw a party in New York for his benefactors. One journalist who attended remembers Ingeborg well. "She was wearing more diamonds than I'd ever seen. Absolutely bedecked. And very opinionated. She has the fanaticism you sometimes see in a convert."

Another journalist introduced himself to Rennert without quite realizing who he was. "I said, 'I remember that name, but I don't know where it's from.' "

"Good!" Rennert said, according to the journalist. When the journalist made the connection to Fair Field, Rennert started defending the house, describing the property's thousands of trees. It was going to be beautiful, he said.

Rennert seemed to have no one in his life who could give him a more objective view, either of Fair Field or of the environmental issues at his mills and mines that had begun to stir protests. As the owner at the top of the pyramid, says one close observer, Rennert felt "these issues aren't my issues." He had also been advised that saying anything publicly about his companies might "pierce the corporate veil." Disgruntled mine and mill workers and furious residents of the areas in which they were located were filing lawsuits, claiming Rennert's companies had ruined their health. State and federal agencies were circling. Rennert had to stay invisible as the chairman of the Renco Group, high above his holdings.

Yet the corporate veil was pierced in January 2001, with the filing of an extraordinary, $900 million lawsuit by the U.S. Department of Justice against his Magnesium Corporation of America in Rowley, Utah, and its holding company, and the readily visible owner at the top of the corporate pyramid back in New York.

The second domino was about to fall.

MagCorp "actually began making ... environmental investments when we bought it," declares Dennis Sadlowski, a Renco Group _vice president and lawyer. "The people who work for it ought to get credit for cleaning [it] up. They're heroes, not villains."

Sadlowski is a fit fellow in his early 60s, soft-spoken and shy for a lawyer, which may explain why he's always served as in-house counsel. He says that amid the stories about MagCorp's being among the largest polluters in the U.S. the real story has not been told.

He has a point. Since Rennert's purchase of MagCorp in 1989, the country's sole remaining producer of magnesium has spent, by its own reckoning, more than $50 million to streamline the process by which raw magnesium is drawn from the brine of the Great Salt Lake and turned into the lightweight metal that goes into nearly all automobiles and soft-drink cans. Years of searching for a better design finally produced a winner: almost overnight in January 2002, the company reduced its chlorine emissions from 118 million pounds a year to 10 million.

Unfortunately, the new technology addresses only air emissions from MagCorp's stacks. A stew of toxic chemicals, including chromium, dioxin, and hexachlorobenzene, is still dumped daily into a poisonous channel nicknamed "the Red River," and also into the nearby "White Ditch," from which they likely leach into the Great Salt Lake. Challenged at last by E.P.A. inspectors, the company declared that these wastes were sanctioned by an obscure congressional amendment passed in 1998 to help the coal industry. The U.S. Department of Justice, acting on behalf of the E.P.A., disagreed. Along with citing scores of violations, it declared that Rennert's strategy of "siphoning" MagCorp's funds by passing its junk-bond capital upstairs had left the company unable to pay for its environmental obligations and "perpetuates a fraud."

Seven months later, in August 2001, MagCorp filed for bankruptcy.

The stated cause was market conditions, and this was true as far as it went. Since Rennert's purchase of MagCorp, the Chinese and the Russians had come from nowhere to dominate the world market for magnesium. But the Justice suit was clearly another factor in the bankruptcy. By now, MagCorp had also been sued by the U.S. Bureau of Land Management for allegedly stealing raw magnesium brine from federal lands for years by pumping it out of the desert without paying proper royalties. The suit has been thrown out.

Filing for Chapter 11 bankruptcy was not good news for the bondholders who had bought $150 million in high-yield notes issued by a holding company above MagCorp. More than half of that had gone directly into Rennert's dividend pot. Why, some bondholders wondered, couldn't he use some of that $88.9 million to tide the company over, or buy them out at even 30 cents on the dollar? Instead, according to one bondholder, Rennert offered, in effect, an I.O.U. for half the bonds' value. It was, as Wall Streeters put it, "a cramdown." The bondholders found Rennert's manner as offensive as his deal. "He's very theatrical," says one participant. "He brings people into his script. Like a Kabuki performance. After a while you say, If I wanted to see a play, I would have gotten tickets."

Brutally tough as Rennert appeared to be, one close observer suggests a more complex person behind the mask. "He had this blind, optimistic hope that prices would go up," says the observer. "He truly believes the Lord provides." If magnesium prices rose enough with God's help, all would work out. Meanwhile, says the observer, "Ira's way of making a decision is not making a decision_He's always in denial."

With Rennert and the bondholders at an impasse, MagCorp was put up for auction in May 2002. One bidder was a New York hedge fund. The other was ... Dennis Sadlowski of the Renco Group, now head of a shell company called U.S. Magnesium. At the end of the day, the winning bid belonged to U.S. Magnesium, which solemnly agreed to buy MagCorp for $11.4 million, along with covering about $ 12 million of debts, and move it down the lushly carpeted hall of the 42nd floor at 30 Rockefeller Plaza to Dennis Sadlowski's office. "There was enough working capital in the company," says one bondholder, "that Rennert essentially got it for free."

"My brother died at 14 of cancer, and my sisters of leukemia at 46 and 49. We played on slag piles."

With that sleight of hand, the bondholders were wiped out. Left unclear was whether Rennert, in selling MagCorp to himself for a pittance and giving it a new name, had just managed to duck $900 million in E.P.A. fines.

Sleight of hand is certainly how one could characterize Rennert's purchase of a Park Avenue apartment in Manhattan to expand an already ample duplex.

Rennert had bought the duplex in the early 1990s, then decamped with his family to the Pierre Hotel while it was renovated at Ingeborg's direction. Still he wanted more. So in June 1998 he acquired an adjacent apartment in a secret deal.

The seller, Charles Unanue, was a son of the founder of Goya Foods Inc. After a bitter falling-out with his family, a failed attempt at declaring bankruptcy, and years of legal wrangling, Unanue had been ordered by a judge in Puerto Rico not to sell any of his assets until the issue of a debt to Goya was resolved. Rennert's lawyers were aware of the judge's order, but believed that it had lapsed. So he bought the apartment, secretly wiring $4.2 million for its purchase to a Swiss bank account. Unanue and his wife skipped the country and remain at large, presumably living off Rennert's money; the judge has issued a warrant for their arrest.

In October 2000, Goya learned of the deal and took Rennert to court. The judge found him in contempt—he "plainly knew" of the 1995 order forbidding Unanue and his wife to sell assets, yet bought the apartment "in defiance" of the decree—and ordered him to pay Goya $4.6 million: the purchase price plus a commission Rennert had paid to the building's management company. Within a week of the court order, Rennert did pay, though his lawyers are still filing appeals. "Ira acted entirely on advice of counsel when he bought that apartment," says Sadlowski. "That sounds like an excuse, but it's a fact."

While Rennert poured money into his homes, the bearers of Lodestar and MagCorp bonds had paper as worthless as sand dollars. Now the third of Rennert's four mill and mine businesses seemed likely to follow suit. Hit by some of the lowest relative prices for lead since the Great Depression, the Doe Run Company, of Missouri, announced in March 2002 that it would not be making the roughly $ 15 million semi-annual coupon on its $305 million of high-yield notes. The bondholders would have to take a "haircut," exchanging their notes for new ones at pennies on the dollar. Otherwise, like the MagCorp bondholders, they would get scalped as Doe Run went bankrupt.

More than Doe Run's survival and its bondholders' money was at stake. The health of children and their parents in the company town of Herculaneum had been threatened by fumes from the 550-foot stack that rises like an industrial steeple above the surrounding southem-Missouri hills and adjacent Mississippi River. Much of the damage, to be sure, pre-dated Renco's purchase of Doe Run in 1994. Decades of pollution had often made the town resemble a child's glass snow globe, only with swirling sulfur dioxide and lead dust instead of snow. Sometimes the stuff was so thick that a driver couldn't see his way down Broad Street. The sulfur smell was acrid and intense; it burned the eyes and the lungs; the taste of it remained in the mouth. Gently, the dust settled on the sidewalks and in the yards of the small houses that fanned out from the smelter. Residents picked up lead dust on the soles of their shoes and tracked it inside. Children put their lead-dusted hands into their mouths. In 2001, by Doe Run's own reckoning, the company released more than 2.6 million pounds of lead dust into Herculaneum.

Historically, the company had assured residents that the odds of ill effects were slim. t researchers were determining that even small amounts of lead absorbed by children—in their blood and in their bones—could cause learning disabilities, anemia, stunted growth, brain damage, and more. Pregnant women, as well as infants, were especially vulnerable. Even in healthy adults, high levels of lead, such as a worker might absorb on the job, could produce hypertension, jitteriness, a general stupor, and a proclivity to various chronic diseases.

By 2000 these dangers were well documented. Yet Doe Run, now six years into Rennert's ownership, still told residents not to worry. ("That's an interpretation," says Jeffrey Zelms, Doe Run's blunt-spoken president. "We've always said that one [child with an elevated blood-lead level] is too many.") Occasionally it tested their blood, but declined to publicize individual lead levels. Overall, it announced in early 2000, only 15 percent of children in Herculaneum had elevated levels. Parents were advised to check if their interior walls had lead paint. Venetian blinds were said to be a source of lead, too.

Jack and Leslie Warden, who live virtually in the shadow of the smelter with their teenage son, had long nursed suspicions that Doe Run was hedging on the truth. When they saw the results of the company's latest blood-lead survey, they began speaking out. They noticed that many of the unidentified children, six and younger, were said to have levels just below the Centers for Disease Control and Prevention's new threshold of danger for children in that age group: 10 micrograms per deciliter (mcg/dl) of blood. Coincidence? That notwithstanding, the Wardens obtained information from the state health department that broke out results for children living within a quarter-mile of the smelter and saw that 56 percent of them, not 15 percent, had levels above the threshold.

Late one night in August 2001, the Wardens persuaded Dave Mosby of the Missouri Department of Natural Resources (M.D.N.R.) to take a walk with them along the streets beside the smelter. At all hours, lead-loaded trucks careened through the town's residential streets, spilling concentrate. Mosby scooped up some curbside dust into a plastic bag. He knew from its metallic luster it was going to be "hot." Still, he couldn't believe what his handheld testing device indicated. This sample registered up to 300,000 parts per million, which is nearly one-third lead. It was more than dangerous. It was potentially lethal.

Zelms says that the street sample was "an extreme rarity" that unfairly put Doe Run in the hot seat. In fact, the company had already signed off on various improvements with state agencies. "We could have been calcitrant and said, 'We have a document you signed,"' he observes. "We weren't. We chose to meet with citizens of Herky and apologized. We said, 'We're going to make things right in Herculaneum.'" But the company's new stance was hard to believe.

At public meetings, parents began to comipare notes on children whose teeth were breaking, who had fits at night, stomachaches, joint pain, reading disabilities, hearing problems, nausea, constant lethargy. Charles and Robyn Warden had their two young children tested independently and learned their levels were 36 mcg/dl and 44 mcg/dl. Then they tested their green shag carpet: it measured up to 200,000 parts per million. The results were so high that Doe Run volunteered to relocate the family. The Wardens accepted the offer, but not the company's position that their children had been poisoned by lead paint.

Grown-ups had their own complaints. They recalled childhoods spent playing on the company slag pile—a black Sahara of lead waste beside the plant that no one warned them away from—and wondered, for the first time, if the high rates of cancer in their families might be related to that. "My brother died at 14 of cancer, and my two sisters died of leukemia at 46 and 49," declared one woman at a public meeting, shaking with rage. "I asked my doctor. He said it's not genetic. We played on slag piles; they never put a sign up."

Under growing pressure, Doe Run agreed to reduce smelter emissions, replace the sod of lead-poisoned yards, and clean lead-filled houses—an investment of several million dollars. But the old sod was merely dumped onto the slag pile, which still had no fence around it to keep children off. While their homes were being cleaned, residents were put in motels for weeks at a time. One, Brenda Browning, returned to find toys under sofas where her children had left them. Another, Carol Miller, noticed spiderwebs in the corners, and that her attic was untouched. (Zelms observes that the E.P.A. and the M.D.N.R. had to sign off on each clean house.) Even if the cleaning lowered lead levels, how long would those last while the stack kept fuming? No one seemed to know.

Hygiene, the company suggested, was key. If residents and their children just took proper precautions, their lead levels would go down. "If we went through all the hand-washing and shoe cleaning and housecleaning that they require us to do," declares Jack Warden, "we'd be diagnosed anywhere else as obsessive-compulsive. That's what they require us to do for living near the monster that we do. Wash your face, dust everything you have. But how do you dust your air?"

When Doe Run agreed further to a buyout of an estimated 160 homes around the smelter at a projected cost of $11 million, amid a still-depressed market for lead, failure to pay its bondholders in March 2002 became unavoidable. The only question was whether Rennert would agree to any deal with Doe Run's bondholders, even a cramdown.

By the fall of 2002, however, a deal was struck. Bondholders would get 58 to 68 cents on their dollar—not much. But they would also get 40 percent of Doe Run's equity in the form of warrants—chits to be tendered at a future time. Rennert had to give up a big chunk of Doe Run. But he still had a majority share. And if lead prices went up from 18 cents a pound to their historic average of 25 cents, his 60 percent would be worth a lot. Meanwhile, he had just cut his bondholder debt by roughly a third.

This had been bankruptcy of a sort: an out-of-court settlement with creditors. But not a formal Chapter 11 filing. That was important, because Doe Run's biggest asset was a huge, antediluvian lead-mine operation in the Andes Mountains of Peru. "Down there," says one observer to the negotiations, "bankruptcy is, like, illegal." If Doe Run had filed for Chapter 11 in the U.S., the observer explains, "they'd probably have lost Doe Run Peru. Creditors, including the government of Peru, could have foreclosed.... This was [what] tipped the outcome." Doe Run Peru had an amazing vein of mountain rock that yielded not just lead, but gold and silver.

Out in the Hamptons, construction on Fair Field twice stopped long enough for Rennert to have to file for new permits. Still, he remained optimistic. "What do I want when I retire?" he mused to a friend. "A billion dollars in cash—and the companies." With Ingeborg's approval, Rennert chose Yves Mikaeloff as one of the decorators for Fair Field and commissioned some of the most extravagant interiors seen since the 18th century.

Mikaeloff began as a Parisian dealer in carpets, antiques, and art. But he is also a sculptor who decorates for clients wealthy enough to ponder, as he did in a recent catalogue, "what an interior and what a home are actually about." In those pages, a rendering of Fair Field is shown, though not identified. A grand reception hall is visualized in watercolors. The floor is a long, complex mosaic of inlaid marble. The walls have hand-carved wood panels, painted in elaborate designs of royal blue with gold leaf. Each panel is draped with a garland of molded-plaster flowers and set off by columns. The panels are as high as the Palladian windows interspersed among them. The walls curve toward the ceiling, as in a European ballroom, and are adorned at the top with another row of blue-and-gold panels, designed to look like regal crests. The ceiling itself is to be a huge fresco of an ethereal scene, framed by more gold-painted molding.

One cold, wet day last September, a continent south of the ongoing work at Fair Field, more than 300 Peruvians walked the dusty streets of an Andean town called La Oroya in a "March for the Health of the Children." It was a protest against the metallurgical complex that had given rise to this company town more than 80 years ago. Given the power of Doe Run Peru to affect the livelihoods of almost every family in town, the march was an extraordinary show of alarm after studies concluded that 99 to 100 percent of the children in La Oroya had elevated blood-lead levels. Two months later, Vanity Fair was invited to witness the other side of the story: a panoply of social improvements the company had made since Rennert bought it in 1997.

By car, the first sign of La Oroya is the change in hillsides, from steep green to dirty white. The underlying limestone appears to be melting. In fact, it's been worn smooth by decades of toxic emissions— by the company's own estimate, 4.8 tons per day, "consisting of approximately 2.5 tons of lead, 2.0 tons of arsenic, 0.3 tons of zinc and smaller quantities of other metals." Around a final curve of the Mantaro River, the plant itself appears.

A sprawl of decrepit buildings overlooking the river, Doe Run Peru looks as grim and foreboding as England's "dark Satanic Mills" of the 19th century. Like its U.S. counterpart, Doe Run Peru is dominated by the smelter stack that towers above it. In La Oroya, though, contaminated effluents cascade unchecked from large pipes into the river below. The town lies on the opposite bank, a warren of twisting streets and jerrybuilt houses, with sidewalks so narrow that schoolchildren spill into the traffic.

Many company executives live upwind of the plant in a guarded compound of flowerbordered white cottages. Here, Juan Carlos Huyhua, vice president and manager of operations, explains that the refinery was built in 1922 by a U.S. consortium of magnates.

For decades their company, Cerro de Pasco, dominated the Peruvian market for lead, gold, silver, copper, and zinc. No one bothered them about environmental standards. In 1974, Peru nationalized its mines and created the government-run Centromin. Workers still labored without respirators and wore their lead-dust-covered work clothes home.

By the time Renco expanded Doe Run by purchasing La Oroya from Centromin in October 1997, however, the government had imposed new obligations on all its mine-owners. In addition to its $ 126 million purchase price, Doe Run Peru would have to spend $ 120 million over five years on capital improvements. To meet environmental standards, the company would have to spend, by its own estimate, $107 million over 10 years—a Figure later raised to $173 million. The company focused first on its employees' health, bringing in respirators and renovating washrooms. Five years later, Huyhua reports proudly, workers' blood-lead levels are down by 25 percent.

Huyhua and his staffers pile into a convoy of S.U.V.'s to show off the many civic projects also done in that time. On a high hillside, thousands of new cypress trees are growing. On a riverbank below, rabbits and peacocks gambol in a new public park. Schools have been repainted and renovated. Happy children chorus "Buenos dias" when Huyhua enters their classrooms. The schools have immaculate bathrooms with hot showers, a major improvement in a town with hardly any residential plumbing, where garbage and raw sewage simply go into the Mantaro River.

At dusk, the convoy finally makes its way into the sprawling refinery. Within vast, dark spaces, red-hot furnaces roar, burning impurities from concentrate. Over the din, Huyhua describes a new, $39 million effluent-treatment plant that will improve the quality of the contaminated water flowing through the plant's 12 discharge points into the river. Five years into Rennert's ownership, however, the plant is unfinished. As for the $ 100 million sulfuric-acid plant that will curb air emissions, it has not been designed yet.

Huyhua explains that for design reasons other improvements need to be made First. But Doe Run Peru has turned a profit only once, in 1998. Where will it get the money to make those improvements? In a small, double-locked room at the end of the tour, Huyhua shows one answer: stacks of gleaming silver ingots, among the purest in the world. "If you can lift one with one hand, you can have it," Huyhua says as a joke. Silver production in the Rennert years has gone up 60 percent. Gold has more than doubled. Both are good hedges against the low price of lead. When prices resurge, they may yet lead the plant to dizzying profits. But at a high cost in human health.

'They speak about planting flowers and A. trees," says a nurse the next morning at a local cafe. "We talk about reducing the level of lead in children's blood."

From the start, Doe Run Peru has been a story with two sides, like a book in English on its left-hand pages, Spanish on its right. The Spanish version is less flattering than the company's English translation. It begins, as does every story in Rennert's career, with the deal.

True, Renco paid $ 126 million for La Oroya. But even as the ink was drying, it obligated La Oroya to make a $ 126 million loan to Doe Run U.S.—interest-free. "We used the company's own cash to buy the company!" explains one observer. "So Ira didn't put up a penny." Later, in the Doe Run bond offering, the company would boast that its Peruvian operation had assets worth more than $950 million.

When it acquired the plant, Doe Run did do a lot to upgrade workers' conditions, and their blood-lead levels did drop. But the average remains 38 mcg/dl, far above the C.D.C.'s elevated level for adults. And many workers' levels are higher than that.

In a small apartment in one of the company-housing buildings—slum-like behind its exterior paint job—one worker describes a chilling response to his own blood-lead level of 43 mcg/dl. He worked for years in the silver plant and complained that increased production was causing new symptoms: heightened irritability, mental confusion, a tendency to fall asleep at all hours. He says he was given pills and told to get back to work. When he resisted, he says, he was transferred as punishment to the "toasting room": a toxic area of the plant where copper is extracted, releasing large amounts of arsenic, which is highly carcinogenic. "We'll make you shit out your lead," he says he was told. As he speaks, the worker's eyes grow lidded and his speech begins to slow. "I am constantly falling asleep," he says, apologizing. (Huyhua claims that such a worker would have been sent to a hospital.)

Another worker, in another small, slum-like company apartment, says he saw many colleagues "with nervous conditions, shaking on the job." But they tried to ignore their symptoms because they knew other workers had lost their jobs after registering health complaints with their supervisors. "The attitude is 'You want to keep on working here? Then get back to work,'" he says. (The company denies this would have happened. "That's not the attitude," protests Huyhua.)

The health of the broader community, especially its children, is the most troubling aspect of the La Oroya story—at least in the Spanish version. Doe Run says that, since it took over La Oroya, lead and other emissions from the main stack have gone down, despite a 20 percent increase in lead production. But a recent report sponsored by a group called the Interamerican Association for Environmental Defense finds disturbing trends based on the company's own air monitors. Lead, cadmium, arsenic—all are up.

To locals, the numbers conFirm an obvious reality. "We were born and raised here," says the nurse. "All of us know what comes out of the stacks. We know what we see. We've never seen higher volumes. And the impact of the gases in terms of discoloration and lesions of the skin, and respiratory infections and diseases, has never been greater."

In La Oroya, as in Missouri, children are most at risk. The nurse notes that other symptoms of lead poisoning, from decreased mental capacity to nervous-system disorders, are now endemic. Last summer, a hospital pharmacist from Ohio named Patty Nussle went down with fellow church members to La Oroya bearing handheld blood-lead testers. They tested 75 people, including many children. "We noted that almost all of these kids had very little response to getting their Fingers pricked," she reported. "Most two-year-olds will cry. Most of these were limp. A few never woke up. We started getting high readings, and I was a little worried our machine wasn't working, so we tested ourselves. Ours were under 10, some under 5 mcg/dl. So we kept going."

Every one of those 75 people had levels above 10 mcg/dl, the established threshold of danger. Nearly half had levels between 20 and 39 mcg/dl, and 28 percent had levels of 60 mcg/dl or higher. In the U.S., Nussle observed, a reading of 60 mcg/dl would be a hospital emergency. But not in La Oroya.

Over dinner, Doe Run Peru's president, Ken Buckley, says he has pledged that the company "would do everything in our power to lower the blood leads." At the same time, he says, "you have to understand that these problems are the responsibility of the Peruvian government, the result of years and years of emissions."

The company line is that the residents of La Oroya are affected by decades of lead deposits in the soil—a historical blight for which Doe Run Peru should not be held liable. Houses in La Oroya tend to have dirt floors; children play there, put dirty hands in their mouths, rarely bathe or shower. "We've found that once we get into the homes and teach hygiene," Buckley says, echoing the company line in Missouri, "the blood-lead levels go down."

"Those are necessary steps," counters a doctor in La Oroya, "but they don't have the same weight as pollution from the plant. The contamination from the stacks—the particulate matter, sediment falling to earth— that's the biggest factor."

Buckley is a big, genial Englishman in his 60s who has worked in a lot of rough places, including Uganda, where he had to stare down Idi Amin. His wife died last year after a long bout with cancer, and he seems a lonely man in his last career posting, a sort of Graham Greene character, struggling to make the best of an impossible situation. Could he do more for the children? Move the most poisoned ones out of La Oroya, perhaps? Or is that just opening a Pandora's box while the company is in, as he puts it, survival mode?

"Centromin had decided to move the whole town seven kilometers away," Buckley acknowledges. "This was just before we took over. Then we were asked, 'Will Doe Run move the town?' We said we're neutral. That's for the government to do."

If Rennert seems reluctant to do X more for the children poisoned by his Peruvian mine works, that may be because he's so focused already on philanthropy in Israel. Rennert has remained a generous friend of its right-wing political leaders and the settlements they have encouraged. He pays to have Torahs produced, each requiring a year or more's painstaking handwork, and gives them to newly established settlements on the West Bank. Often he pays for the building of synagogues and study halls. "One wonderful example involves a settlement in the Judaean hills called Bat Ayin," explains Shelley Gorin, an active member of the Fifth Avenue Synagogue, who regards Rennert as an extraordinary philanthropist. The rabbi of Bat Ayin is an American whom Gorin has known since the rabbi was a baby on his knee. So when the rabbi asked for help, Gorin wanted to oblige.

"They decided to build with no outside help," Gorin explains. "Because of the intifada, they couldn't get their children to school. So they had to build a nursery and school, but didn't have the funds." Gorin wrote a pitch letter to fellow synagogue members. Rennert gave the lion's share, enough that the synagogue was built in his father's name. When the school opened, Rennert was there.

It's a touching story, but, as with all stories in the Middle East, it has another side. Bat Ayin is a settlement of 100 families with an ideology "intense ... even in the context of the settler movement," according to The Jerusalem Post. Arabs are not allowed into the settlement, even as laborers. Bus service was suspended when one driver turned out to be an Arab and was allegedly stoned by Bat Ayin's children. Last spring, three men from Bat Ayin were questioned as suspicious characters at three A.M. in an Arab neighborhood of Jerusalem. The vehicle they had been in was found to contain a bomb linked to a gas canister and barrels of flammable material. The bomb had been set to go off a few hours later beside a nearby Arab girls' school.

First Lodestar, then MagCorp and Doe Run. Now the fourth domino has fallen: WCI Steel, the first of Rennert's mills and mines, announced that it would fail on June 3 to make the semi-annual interest payment due on its $300 million junk bond and began "discussions" with bondholders. Translation: another cramdown.

Meanwhile at Lodestar, the coal company that started Renco on its long slide, bankruptcy proceedings have gotten unusually ugly. The major bondholder that forced the company into involuntary Chapter 11—Wexford Capital—most likely assumed Rennert would hand over the keys and walk away, abandoning the company's assets and also its liabilities. But, according to one close observer, with his strange combination of passivity and stubbornness, Rennert simply refused to budge. So Wexford put more and more money into Lodestar to keep it going-only to see it stagger into a liquidation sale. Wexford is bidding on some of the assets, but will be lucky to get any of the proceeds: Rennert's old bank partner, Congress Financial, is the secured lender that gets first dibs. Rennert will lose, too, to a degree he didn't expect, says a source. But at least he's stymied Wexford. And, presumably, he still has the money he sucked out in the first place. "If I could lose out once like that," muses Lodestar's departing C.E.O., Mike Francisco, "I wouldn't be too upset."

Out in Rowley, Utah, the rechristened U.S. Magnesium is up and running. No one quite knows if the decision has, in fact, absolved Rennert from liability in the Justice Department's $900 million suit. The consensus is probably not. "It would be legally naive to think there's been any change in the suit," says U.S. Magnesium's new C.E.O., Michael Legge. "We knew from the beginning that such litigation by the E.P.A. is not in any way affected by the bankruptcy. In fact, U.S. Mag has been introduced to the suit." But the company continues to maintain it is exempt from certain E.P.A. rules on hazardous waste.

At the moment, the E.P.A. and Renco are trying to work out a settlement behind closed doors. One E.P.A. lawyer is cautiously optimistic, but says talks could easily collapse; if they do, the two sides have a September trial date. Separately, a group of still-simmering bondholders has obtained a court-appointed trustee to determine whether Renco misled them. "They borrowed money and immediately dividended half the proceeds up to the parent company," says the trustee, New York investment banker Lee Buchwald. "It may not be illegal in the sense you'd go to jail for it, but there are fraudulent-conveyance laws."

Of the various bond battles, Doe Run's is the one with the happiest ending so far—last year's bond exchange has given the company a few years' grace, at least. Whether the company can "do right by Herculaneum," as its president puts it, is rather less clear. The company proudly observes that it has met air-quality standards three calendar quarters in a row. The house-buyout plan is moving, albeit slowly: Doe Run has purchased 19 of the 160 houses it's committed to buy. Other houses, and yards, are being cleaned on schedule. And a recent health-department study of children's blood-lead levels showed a 62 percent drop in elevated levels within the zone nearest the smelter.

As he keeps negotiating with Doe Run, Dave Mosby tries to stay optimistic. Mostly, he feels weary. Yes, air quality is better, he agrees, but the company just barely met the standard of 1.5 micrograms per cubic meter, with emissions on some days that approached 14. Moreover, the smelter has been operating at only 60 to 70 percent of its capacity, thanks to the still-depressed market for lead. And even meeting the legal level may not keep the smelter from recontaminating yards and houses.

As for the reduced blood-lead levels in children, Mosby adds, it's encouraging. But far fewer families in the critical zone participated in the study: many had already moved, taking children whose health may be impaired for life. Meanwhile, readings of street lead remain unacceptably high, and the trucks that spill lead, though their loads are now covered with tarps, continue to roar through the town's streets. The Saharalike slag pile has a partial fence around it now, but the company has recently retreated from an interim plan to deal with the pile and its toxic runoff in flood season, making a less satisfactory proposal. "Is the company making a good effort?" Mosby echoes. "I'd say they're doing the minimum."

Amid all the bad news, Rennert can take consolation from his one slam-bang success: the Hummer and its hulking successor, the H2.

For a while, the Hummer's parent company, AM General, seemed a mediocre investment for Rennert. It made the military Humvee, successor to the jeep, but sales were threatened by Clinton-era cuts in the defense budget. Its commercial version, the Darth Vader-like Hummer, turned heads but not profits. "Everyone thought AM General would be Renco's first bankruptcy," says an observer. Then came a General Motors deal to co-produce the H2.

Last summer, the first H2s began rolling through streets in the Hamptons, Miami, Beverly Hills, and other fashionable enclaves. "You can't believe the attention it gets," enthused one buyer to The New York Times. With war coverage in Iraq of U.S. soldiers storming the desert in their Humvees, the H2 has become an icon of American military might and swagger, selling more than 3,000 units a month. In a year of declining sales despite 0 percent financing, the H2 is more than a niche success: it's a new GM brand.

And what could be a more perfect Rennertmobile? At more than three tons, the tanklike H2 is so heavy that it doesn't qualify as a car at all, and thus is exempt from federal fuel-economy regulations—a loophole right up there with the one that let Fair Field slip through the local zoning board, and the one that let Rennert take huge junk-bond dividends for himself. GM is not even required to say what the H2's mileage is. One new owner figures his gets about nine miles per gallon around town, making it among the most fuel-inefficient vehicles sold in the U.S. (The New York Times puts it closer to 10 to 13 miles per gallon.) Environmentalists are incensed. "We're going to try to do to the Hummer what we did to the [Ford Excursion]," declared Daniel Becker, the Sierra Gub's top energy expert, in the Times. "Kill it."

With its great, unexpected success, the H2 has become Rennert's ace in the hole. And so, as his mills and mines struggle in or near bankruptcy, he's reportedly put AM General up for sale, apparently for about $700 million. "Let's say he gets $450 million after taxes," suggests one observer. "Plus he's got at least $550 million in his dividend pot. So he's a billionaire after all. Plus of course he's got the apartment in New York, the house in Jerusalem—and Fair Field."

The other companies have little if any value above their raw assets. Certainly the bonds issued on three out of four of Rennert's mills and mines are nearly worthless; Doe Run's new bonds, trading downward for months, might fetch a few dimes on the dollar. By some cosmic irony of arithmetic, the amount of money lost by Rennert's bondholders approaches, in the aggregate, the billion dollars that Rennert may soon be worth.

For all his companies' tribulations, then, this is a fairy tale with a happy ending, at least for its protagonist. And yet before the denouement, a few dark threats still loom.

One is pension liability. According to one source, Rennert has taken so much money out of his four mills and mines that he may have underfunded their pension plans. Another trouble spot is that talks between the E.P.A. and MagCorp could break down, provoking a trial that ends with Rennert having to pay some portion of the $900 million penalty the government says he owes. In Peru, failure to make good on Doe Run's environmental obligations by 2007 might lead to stem government action. And in Missouri, a dozen or more health-related lawsuits lie on the horizon like so many cumulonimbus clouds, threatening rain.

None of this may keep Fair Field from being completed. But if the house is at last done, how long will its master live there? Rennert is nearly 70 now, a short, heavy figure who walks slowly. More than a few of the robber barons who ordered up ostentatious mansions in the industrial age were ruined or dead before they could occupy them. Fair Field may yet share their fate. It's too big for anyone to keep as a home— and not acceptable under local zoning as any sort of religious retreat or political center for the likes of ex-Israeli prime minister Benjamin Netanyahu, despite endless rumors to that effect. In a hundred years it will host daily lines of gawking tourists, who will marvel at the marble and paneled walls and hear stories of Ira Rennert, the great philanthropist.

Or it may just be torn down.