Environmental Issues in Business Transactions - Essay Example

In January 2000 after finalizing the purchased amount of seven million dollars and obtaining the assurance of Tyco that the Plant is compliant to existing environmental laws Shan finalized the acquisition of the Plant from Tyco. To reiterate this assurance the purchase contract stipulated that Tyco “will be responsible for any losses arising out of environmental clean-ups, fines or penalties”. After the purchase of the Plant, Shan discovered that it would cost more than two million dollars to make the Plant compliant to federal and state environmental laws.

Shan also discovered that the potential fines and penalties for the non-compliance to environmental state and federal laws could amount to more than one billion dollars. Shan thru its owners tried in several instances to persuade Tyco to buy back the Plant at the same cost or pay for the necessary remediation cost to make the Plant comply with state and federal environmental laws. . the final report was sent to the Chief Executive Officer of Tyco, the report was accompanied by a request from Shan for assistance in making the Plant compliant.

However, Tyco ignored the report including the request. Thereafter, Shan reiterated its offer for Tyco to just buy back the Plant for the same amount it was bought to which, Tyco declined. In December 2003, Shan voluntarily reported to the Environmental Protection Agency that the Plant is not compliant to state and federal regulations. At around the same time Shan also met with the Tyco officials who promised to send documents that would prove that the Plant was in compliance with the regulations set by state and federal laws.

Perusing over the documents sent over by Tyco it was determined that Tyco was not doing its responsibility to make sure that the Plant are compliant to regulations under state and federal environmental laws. On the last day of 2003, they filed a case against Tyco for breach of contract. In April 2004, the Plant was visited by state and federal environmental authorities and naturally found it non-compliant to environmental laws. It was determined that it was Tyco who suggested that environmental auditors examine the Plant.

Based on their findings the state and federal environmental authorities issued a cease-and-desist order that affected forty percent of the Plant’s operating capacity. That could have greatly diminished its earning capacity thus its initiative to make the Plant compliant to environmental state and federal laws. In June 2004, Shan appealed the cease-and-desist order by asserting that the environmental problem was an issue inherited from Tyco, the previous owner. The appeal contained the findings of the independent consultants showing the extent of the violation in the