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him that the Southampton investment had been investigated by
MSC, and in fact no such investigation had been done.
At the time he learned of the Southampton investment,
petitioner was not familiar with the music industry or master
recordings. Petitioner claims that he familiarized himself with
the music industry by spending numerous hours at the library
doing research, talking to some musicians from his church,
attending several seminars about investing in the music
industry, and on one or two occasions, speaking on the phone
with someone from Motown Records. There is no indication,
however, that these efforts included an investigation of the
Southampton master recording investment presented to petitioner
by Cunningham.1 When asked at trial what he had learned from
his research, petitioner stated: "I learned that it was an
industry where you could make a lot of money if you got a good
album--a good person that became popular." Petitioner provided
no evidence, however, that he had researched the profitability
1 Petitioner introduced into evidence two brochures he allegedly
received at a seminar on investing in the music industry. One of
the brochures is a quarterly report prepared by another master
recording leasing company, Audio Leasing Corp., and includes
information about the activities of that company as well as news
about the music industry generally. The brochure also emphasizes
the alleged tax incentives in investing in master recording
leases. The second brochure is a glossary of terms used in the
music industry. Neither brochure contains a discussion of the
nontax economic benefits to be expected from a master recording
lease, nor do they discuss the Southampton investment program at
issue in this case.
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Last modified: May 25, 2011