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know how many recyclers SAB Reclamation leased or who
manufactured the recyclers. Blount had no idea who the general
partner of Phoenix was, how a Sentinel EPE recycler worked, the
value placed on the recyclers, how many recyclers Phoenix leased,
or how he was going to make a profit from his investment. David
did not know how many recyclers SAB Recycling purchased or the
price of each machine. Selvin knew nothing about resin prices,
was not aware of any companies that would be suitable end-users,
and did not know whether Scarborough had any assets, or how the
venture was to work.
Petitioners failed to explain how the so-called oil crisis,
or the media coverage of it, provided a reasonable basis for them
to invest in the Partnerships and claim the associated tax
deductions and credits. The offering materials warned that there
could be no assurances that prices for new resin pellets would
remain at their then current level. One of respondent's experts,
Steven Grossman, explained that the price of plastics materials
is not directly proportional to the price of oil. In his report,
he stated that less than 10 percent of crude oil is utilized for
making plastics materials, and that studies have shown that "a
300% increase in crude oil prices results in only a 30 to 40%
increase in the cost of plastics products." Moreover, during
1980 and 1981, in addition to the media coverage of the so-called
oil crisis, there was "extensive continuing press coverage of
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