Reference no: EM132144669

Wings Air Corporation (WAC) flies routes in the U.S. WAC purchased several hotels and undeveloped parcels six years ago as part of a short-lived diversification strategy. WAC has recently suffered substantial losses and may be facing bankruptcy. Brenda Masters has been brought in as CEO to revitalize WAC. WAC owns a large, undeveloped gulf-front property on the west coast of Florida. Masters directs Greg Andrews, WAC’s vice president of real estate, to find a buyer for the property to generate badly needed cash. After some effort, Andrews identifies Restview Developers, a relatively new developer of retirement villas, as a good prospect. Restview is interested in a property where it can build a complex of high-rise retirement condos and villas featuring elaborate walking trails and outside recreational facilities. WAC had conducted a full environmental audit of the property six months earlier and had discovered no problems. A copy of this report was given to the Restview representative, who also walked over the property and discovered no problems. The representative asked, “Anything I should know about?” Andrews replied, “No problems.” As the negotiations progressed with Restview, Andrews was approached by a longtime friend at WAC, Mary Zimmerman, who told him that there was now some highly toxic waste on the property. She had heard rumors and was curious enough to check things out. Walking around the property one day, she had found several partially buried metal containers. Some containers were rusted, two were cracked and the liquid contents were seeping into the ground. Andrews contacted Masters, but before he could mention the containers to her, Masters interrupted and told him that it was vital that the sale close and that it be done as soon as possible. Andrews consulted with a WAC lawyer who told him that under state law it is not necessary to disclose the existence of hazardous waste on commercial property as long as there has not been a fraudulent misstatement about the condition of the property. Andrews was troubled. Should he mention the hazardous materials to Restview before he closed the sale? He knew that Restview was considering other similar properties. At the least, disclosure could delay the sale for months. Andrews did not anticipate any future real estate transactions with Restview because WAC did not own any other properties that fit Restview’s needs.