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and Sentinel expanded polystyrene recyclers. We refer to these
collectively as the Plastics Recycling transactions.
With respect to each of the Partnerships, a private
placement memorandum was distributed to potential limited
partners. Appended to the offering memoranda were reports by F &
G's evaluators, Dr. Stanley M. Ulanoff (Ulanoff), a marketing
consultant, and Dr. Samuel Z. Burstein (Burstein), a mathematics
professor. The offering memoranda list significant business and
tax risk factors associated with investments in the Partnerships.
Specifically, the offering memoranda state: (1) That there is a
substantial likelihood of audit by the Internal Revenue Service
(IRS) and that the purchase price paid to ECI Corp. probably
would be challenged as being in excess of fair market value; (2)
that the Partnerships have no prior operating history; (3) that
the general partners have no prior experience in marketing
recycling or similar equipment; (4) that the limited partners
have no control over the conduct of the Partnerships' business;
(5) that there is no established market for the Sentinel EPE
recyclers; (6) that there are no assurances that market prices
for virgin resin will remain at their current costs per pound or
that the recycled pellets will be as marketable as virgin
pellets; and (7) that certain potential conflicts of interest
exist.
During 1981, Stone acquired a 2.60525-percent interest in
Northeast for his investment of $25,000. As a result of the
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