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Petitioner also claims that he reasonably relied upon the
conclusions of the draft opinion letter. Petitioner contends
that the nonrecourse nature of F & G's note was not readily
apparent in the draft opinion letter and that he would not have
made the investment had he been aware that the note was
nonrecourse. However, the nonrecourse nature of the note was
clearly stated in two different sections of the main body of the
offering memorandum.3 One section was headlined "Price of the
Sentinel Recyclers To F & G and Payment Terms" and the other was
headlined "F & G's Purchase of the Sentinel Recyclers".
Petitioner's reliance on Grant and Roberts, two promoters of
Northeast, was not reasonable, in good faith, nor based upon full
disclosure. The record does not show that either Grant or
Roberts possessed any special qualifications or professional
skills in the recycling or plastics industries. Petitioner's
stated reliance on Grant in making a substantial investment in a
complex transaction stemmed from nothing more than a 2-year
shared work environment in the late 1940's and membership in the
same country club and social group for a few years during the
late 1970's. Petitioner's reliance on Roberts derived almost
3
According to the purchase agreement as described in the
Northeast offering memorandum, of the $8,138,667 purchase price,
F & G would pay $615,000 in cash at closing, with the balance to
be paid with a "partial recourse note." Ten percent of the note
would be full recourse, but such recourse portion would only be
due and payable after the nonrecourse portion of the note had
been satisfied.
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