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friend" (Lauren) had read the offering memorandum, but Feinstein
was explicit that Lauren had not seen an offering memorandum.
Feinstein's investigation of Poly Reclamation and the
Plastics Recycling transactions was very limited. He spoke with
Lauren, who may have had some insight into plastics materials,
but Feinstein only asked Lauren about PI's reputation. Feinstein
did not provide Lauren with a copy of the offering memorandum, or
ask him about the prospects for a Sentinel EPE recycler, or
inquire as to whether there were any competing machines already
on the market. He accepted the purported value of the Sentinel
EPE recycler after speaking with a friend and associate "about
pricing and how things are priced in * * * [the plastics]
industry." The friend and associate--unidentified by Feinstein--
only allegedly confirmed that the stream-of-income method of
valuation was used in the industry. Feinstein did not verify any
of the underlying assumptions upon which the income projections
in the offering memorandum were based. Neither Feinstein nor
Lauren visited PI to see a Sentinel EPE recycler, or investigated
whether competitive machines existed. Feinstein testified that
he had telephone conversations with Winer, but he did not explain
whether they discussed Poly Reclamation or the Plastics Recycling
transactions, or the nature of Winer's advice, if any. See
Howard v. Commissioner, 931 F.2d at 582; Patin v. Commissioner,
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