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reasonable and ordinarily prudent investor. At the onset, we
note that petitioner readily admitted that he has no experience
in the music recording industry. Indeed, petitioner was unsure
of the identity of the recording artists who perform on the
master recordings leased by the Alamo partnerships.
Further, petitioners failed to introduce any evidence that
they conducted any research regarding the validity or viability
of the leasing of master recordings. Petitioners failed to
investigate the marketability or the quality of the master
recordings. They failed to seek independent appraisals regarding
the economic merit of leasing the master recordings. There is no
evidence that petitioners even listened to the master recordings
prior to entering into the lease or that they discussed the
marketability of the master recordings with any record
distributor. Petitioners did not inquire about the past
successes or failures of the leasing of master recordings.
Moreover, they did not inquire about Orsi or the other investors
with regard to their expertise in the record industry. There is
also no evidence in the record that petitioners undertook any
measure, whether precautionary or investigatory, to ensure the
economic success of the leasing of master recordings. We believe
that such activities require a greater degree of participation
and investigation on the part of petitioners.
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