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Maxfield testified that he relied on the offering memoranda,
and in particular the reports by Ulanoff and Burstein appended
thereto, for the value of the recyclers. However, he never spoke
to Ulanoff or Burstein and never learned that they were investors
in the Plastics Recycling transactions. He did not ask Roberts
or Taggart whether Ulanoff and Burstein were investors in the
transaction. Although he knew that other plastics recycling
machines existed, Maxfield did not run any price comparisons or
independently investigate the capabilities of such competing
machines. In the end, Maxfield did not confirm the
representations in the offering memoranda upon which the
purported valuation of the recyclers was based. However, he did
caution the members of Sann & Howe on this point. Maxfield
testified:
[O]ne of the fundamental questions I had was is the
machine--are we paying a fair price, are we overpaying
for this machine?
Obviously, we could read the offering circular. I
was convinced, if the facts were as represented, we
weren't overpaying.
On the other hand, were the--was the offering
circular lying? I didn't have any judgment as to that,
and I said the only way to know, I suppose, would be to
hire another expert. [Emphasis added.]
Despite his express reservations, Maxfield and petitioners did
not hire an independent appraiser or expert, or otherwise
independently verify the "facts" as represented in the offering
memoranda. Reflecting on his own decision to invest, Maxfield
testified: "[I]f I would have asked the right questions, I
wouldn't have made the investment."
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