Magazine article Risk Management

Due Diligence, Ethics and Chemical Contamination-Who's Liable?

Magazine article Risk Management

Due Diligence, Ethics and Chemical Contamination-Who's Liable?

Article excerpt

If the sale of a company results in unforeseen hazards, expense and harm to the buyer's reputation, who is responsible for the cost? How much due diligence is enough? These questions were debated during a mock jury trial held during Squeaky Clean? You Be the Judge.

The presidents of two fictitious firms, Mega Chemical Inc. and Northern Holdings Inc., took turns pointing accusatory fingers at each other during a heated and often humorous melodrama.

In the trial, Mega Chemical, a family-owned business that took pride in its "squeaky clean" reputation, purchased Northern's subsidiary plant, Blackfly Solutions, Inc. a small chemical plant, on an "as is" basis. Soon after taking over the facility, Blackfly was found to have a leaking underground tank that needed cleanup, and the company's good reputation was damaged.

Soon after discovering the problem, Mega found a memo from Northern's plant manager regarding suspicious inventory shrinkage and suggesting a leak could be a possible cause. This was a key exhibit that raised many issues: did Northern know about the leak and choose to ignore it? …

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