Donald N. and Rosemarie F. Merino - Page 23

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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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