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particularly the basic sham nature of the transaction, undermines
critical aspects of petitioner's testimony and analysis and does
not support the conclusions he purportedly reached with respect
to the Sentinel EPE recycler and the Northeast transaction.
1. Petitioner's Investigation of the Transaction Was
Inadequate
The Northeast offering memorandum warned: (1) Northeast had
no prior operating history; (2) management of Northeast's
business was dependent upon the general partner, who had no prior
experience in marketing recycling or similar equipment; (3) the
general partner had other business commitments that required a
substantial portion of his time; (4) the general partner was
required to devote only such time to Northeast as he, in his
absolute discretion, deemed necessary; (5) the limited partners
had no control over the conduct of Northeast's business; and (6)
there was no established market for the Sentinel EPE recyclers.
In addition, PI faced added costs because it shipped resin by
truck instead of rail, and because PI was in an inconvenient
location with high costs for supplies.
To some extent these added costs were offset by a volume
discount PI purportedly received on its resin purchases.
However, Bambara did not tell petitioner the amount of the
discount, nor, for that matter, did he tell petitioner how much
PI paid in added costs as a "location differential". The PI
representatives refused to provide petitioner with any of the
records or information that he requested, ostensibly because he
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