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offering memoranda and that they ultimately did not place a great
deal of reliance, if any, on the representations therein.
On their face, the Partnership transactions should have
raised serious questions in the minds of ordinarily prudent
investors. The offering memoranda included numerous caveats and
warnings with respect to the Partnerships, including: (1) The
substantial likelihood of audit by the IRS and a likely challenge
of the purported value of the recyclers; (2) the general
partner's lack of experience in marketing recycling or similar
equipment; (3) the lack of an established market for the
recyclers; and (4) uncertainties regarding the market prices for
virgin resin and the possibility that recycled pellets would not
be as marketable as virgin pellets. In addition, the offering
memoranda noted a number of conflicts of interest, including
Miller's interest in F & G and his legal representation of
Burstein, PI, and Raymond Grant, who was the sole shareholder of
ECI.
A careful consideration of the materials in the respective
offering memoranda, especially the discussions of high writeoffs
and risk of audit, should have alerted a prudent and reasonable
investor to the questionable nature of the promised deductions
and credits. See Collins v. Commissioner, 857 F.2d 1383, 1386
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