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Due diligence may shield you from environmental liability

As part of the due diligence regarding the purchase of new property, a corporation should also include screening for any potential environmental liability issues.

In a recent example, the Trump Organization was denied eligibility for a state program that would have shielded it from responsibility for past pollution on a six-acre industrial property, including chemical contamination of groundwater.

To qualify, the program requires a new owner to have no affiliation or involvement with either the site location or former owner. The rationale for that requirement is to prevent owners from evading their cleanup liability by simply repurchasing a site through a new shell entity or corporation.

In this case, the former owner was a company, called Titan Atlas Manufacturing, run by President Trump’s eldest son. The Trump Organization purchased the industrial site from the son through an entity called D B Pace. That familial relationship, by itself, may not have resulted in ineligibility. However, the Trump Organization also refused to provide regulators with information they requested about the business relationship between D B Pace and Titan Atlas Manufacturing. Without more information, state regulators denied the Trump Organization’s request.

If the Trump Organization had qualified under the program, it would only have been responsible for preventing any existing pollution on the property from spreading. Now, however, it may be legally responsible for all pollution at the site.

As a law firm that provides environmental counsel and risk assessment, we cannot overemphasize the importance of due diligence and proactive planning. Before making a new purchase, a company should consult with an environmental law firm. Otherwise, a nasty surprise could be in store.

Source: The New York Times, “Trump Firm Loses Bid to Limit Cleanup Liability for Property,” Barry Meier, Feb. 7, 2017

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