- 23 -
hire anyone with plastics or recycling expertise to evaluate the
Clearwater transaction. The record does not indicate that
Paulson, Cassaday, or Diamond had any plastics or recycling
expertise.
The offering memorandum for EI and the revised offering
memorandum disclosed the fact that Efron was receiving
substantial compensation and fees as the general partner of EI
and as a 50-percent owner of MFA. In addition, both of the EI
offering memoranda specifically warned potential investors that
they were "not to consider the contents of [the offering
memoranda] or any communication from the partnership or its
general partners as legal or tax advice", and Efron testified
that he advised every limited partner in EI to talk to an
independent adviser. Petitioners had ample resources to employ
such advisers, but they chose not to do so. Instead, they chose
to rely on Efron and his close associates, Paulson, Cassaday, and
Diamond. Paulson had referred Wilson to Efron; Cassaday was the
banker who was heavily involved in financing EI; and Diamond was
the accountant who initially was referred to Sorey by Efron.
In these cases, Efron's conflicts of interest were
substantial and were ostentatiously displayed in the offering
memoranda. Efron himself testified that he urged investors to
consult independent advisers. Certainly, Efron was not an
independent adviser, and he surely is not a person upon whom
Wilson and Sorey could rely in negotiations with EI. His own
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011