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should go into this deal at all based on the valuations
established." He did not market the Partnerships; in his view
the deal "was very aggressive" and "sure to be challenged" by the
IRS. He knew that the recyclers were insured for only a "nominal
amount" in relation to their purported value. (The parties have
stipulated that the recyclers had a manufacturing cost of only
$18,000 each.) Consequently, Tomasetti believed their purported
value could only be supported by the success of the Partnerships,
i.e., as a function of market demand, and that an investor should
therefore have "a strong inclination that this was a viable
economic deal." Both Tomasetti and Frabotta testified that they
believed the purported value of the Sentinel EPE recycler was
supported by the economic projections in the offering materials.
Neither Tomasetti nor Frabotta, nor anyone associated with
them investigated the merits of those projections. Frabotta did
not investigate the market for the Sentinel EPE recycler or
inquire as to whether the recycler had any competition.
Tomasetti made no independent inquiries or investigation of the
recycler or any of the individuals involved. He thought that
there was a ready market for the recyclers. As he put it, "I did
some due diligence to the extent that I was asked to accompany
these individuals to Hyannis, but it wasn't my objective to go
down and to try and shake this out, and spend six months of my
life trying to learn about the industry".
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