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opinion 72 F.3d 123 (3d Cir. 1995); Sacks v. Commissioner, supra;
Steerman v. Commissioner, T.C. Memo. 1993-447; Rogers v.
Commissioner, T.C. Memo. 1990-619; see also the Plastics
Recycling cases cited supra note 8.
In addition to his professional experience as a corporate
and Federal securities lawyer, by 1981 Friedman had made a "great
number" of personal investments. His approach to these
investments was rigorous and methodical: he read the prospectus
or private offering memorandum, spoke to an expert in the
pertinent industry, investigated the risk factors described in
the offering materials, consulted industry reports, and spoke to
other active investors or lawyers. With respect to Clearwater,
however, Friedman's investigation was wanting. Friedman did not
speak to a plastics materials or plastics recycling expert, or
investigate the risk factors described in the offering
memorandum, or consult plastics industry trade journals or
reports. His investigation of Clearwater entailed nothing more
than reading the offering memorandum and discussing the
investment with other attorneys at Shea & Gould. Friedman
testified that he also provided a copy of the offering memorandum
to his accountant and that his accountant did not advise against
the investment. The accountant, however, had no experience in
plastics or plastics recycling, and did not independently
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