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expertise to have made his actions reasonable, he must have
conducted a meaningful investigation into the investment. For
the reasons below, we do not think petitioner conducted such an
investigation.
There were several factors that should have alerted
petitioner to the fact that the Sentinel recyclers were
overvalued. The exorbitant cost of the recyclers (i.e.,
$1,162,667 and $1,750,000 for the Sentinel EPE and EPS recyclers,
respectively) should have made petitioner question the purchases.
Here we are reminded that prior to purchasing the recyclers,
petitioner had never paid more than several hundred thousand
dollars for plastic processing equipment. The price of the
Sentinel recyclers should have appeared particularly excessive to
petitioner because there was no established market for such
recyclers at the time that petitioner purchased them.
Additionally, respondent's experts identified other machines
that were not only functionally equivalent to the Sentinel
recyclers but also significantly less expensive. Here we recall
petitioner's testimony that in determining the value of the
Sentinel EPE recycler he "looked around the industry" and did not
discover any machines successfully recycling expanded
polyethylene. Manufacturers questioned by petitioner allegedly
told him that they had "reservations" and "no firm assertions"
about recycling polyethylene. Aside from this testimony,
petitioner offered few details in respect of his investigation
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