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not establish that the Zenkels' purported reliance on Steele was
reasonable, in good faith, or based upon full disclosure.
3. The Private Offering Memoranda
In addition to purportedly relying on Becker, Steele, and/or
Sprague, petitioners maintain that they reasonably relied upon
the offering memoranda and the tax opinion letter appended
thereto. However, petitioners' testimony and actions indicate
that they did not thoroughly review or study all of the
information set out in the offering memoranda and that they
ultimately did not place a great deal of reliance, if any, on the
representations therein.
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
partners' 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 Corp. and his representation of
Burstein, PI, and Grant, who was the sole shareholder of ECI
Corp. A careful consideration of the materials in the respective
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