Jeffrey I. and Roberta H. Stone - Page 22

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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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