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testified that he was allowed to see PI's internal accounting
controls regarding the allocation of royalty payments and PI's
recordkeeping system in general. In Provizer v. Commissioner,
supra, this Court found that "PI had no cost accounting system or
records."
Becker confirmed at trial that he relied on the offering
materials and discussions with PI personnel to establish the
value and purported uniqueness of the recyclers. Becker
testified that he relied upon the reports of Ulanoff and Burstein
contained in the offering materials, despite the fact:
(1) Ulanoff's report did not contain any hard data to support his
opinion; (2) Ulanoff was not an economics or plastics expert; (3)
Becker did not know whether Burstein was an engineer; and (4)
Burstein was a client of Miller's and was not an independent
expert. In addition, Ulanoff and Burstein each owned an interest
in more than one partnership that owned Sentinel recyclers as
part of the Plastics Recycling Program.
Becker explained at trial that in the course of his practice
when evaluating prospective investments for clients, he focuses
on the economics of the transaction and investigates whether
there is a need or market for the product or service. With
respect to the Partnership transactions, the record indicates
that Becker overlooked several red flags regarding the economic
viability and market for the Sentinel EPE recyclers. Becker
never saw any marketing plans for selling the pellets or leasing
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