First Environment was retained as an expert witness on a litigation case involving the failure of an acquiring company to adequately fund an environmental indemnity agreement related to the purchase of a basic/specialty chemical manufacturing company located in Newark, New Jersey. This agreement called for the reimbursement of liabilities and defense costs relating to dioxin contamination from a chemical production facility as well as a large tract of the Passaic River. The overall site consists of a 17-mile study area within the river and eight miles of bank to bank sediment remediation involving multiple potentially responsible parties (PRPs).
First Environment developed expert opinions regarding the obligations of the parties under the stock purchase agreement, indemnity agreement, contribution agreement and subsequent buy-out agreement to properly and accurately value the scope and cost of the cleanup work at the Site and the river including the valuation of Natural Resource Damages related to primary restoration and compensation for loss of use.
To form the opinions, First Environment reviewed the due diligence and valuation techniques employed by the purchaser and compared them to standards that should have been employed at the time of the transactions. Technical analysis included a survey of similar sediment remediation costs conducted prior to the acquisition. Based on this analysis of comparable Superfund site, First Environment estimated a range of credible cleanup costs at the time of the transaction. These costs were then compared to the due diligence results developed by the acquiring company and those results presented to their property insurance company.
First Environment also opined on a series of asset transfers that were designed to side step current environmental laws and divert funds away from the environmental liabilities. In total, First Environment traced the viability of over 20 companies that were involved in the fraudulent transfer and receipt of assets in at least 7 different countries including Argentina, Spain, Bolivia, Ecuador, Argentina, Indonesia and Sumatra. First Environment also determined the financial viability of newly created and reorganized companies that were created and dissolved quickly to avoid detection.