- 36 -
States, 929 F.2d at 1021; see also Higgins v. Commissioner, 312
U.S. 212, 218 (1941). Kellen testified that he did not even read
the private placement memorandum for Utah I until preparing for
the trial of this case. Utah I's role was only to serve as a
vehicle for the injection of risk capital into U.S. Agri's jojoba
farming operation. Utah I was a passive investor in a farming
venture.
Utah I's actions following the execution of the R&D
agreement were ministerial only. As general partner, Kellen was
not active in pursuing the affairs of Utah I. CFS and Pace
identified the investors for Utah I. Kellen testified that CFS
prepared the private placement memorandum and all related
documents for Utah I. Kellen simply signed all of the documents
placed before him without any analysis or independent evaluation.
Kellen did not regularly relay U.S. Agri's quarterly progress
reports, in the form of correspondence from Pace, to Utah I's
limited partners. Kellen never met with the limited partners and
made no effort to enforce the obligations of the limited partners
who defaulted on their promissory notes. Although Kellen claims
to have "frequently" visited Utah I's plantation, the actual
number of times he visited the plantation was never established.
Additionally, under both the original R&D agreement and the
amended research plan, as well as the licensing agreement, U.S.
Agri enjoyed complete discretion and control over any research
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