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firm as counsel. Taggert and other members of his firm prepared
private offering memoranda, tax opinions, and other legal
documents for Clearwater.
Robert Gottsegen (Gottsegen) was a businessman active in the
plastics industry and a longtime business associate of Bambara.
C. The Private Offering Memorandum
Clearwater distributed to potential limited partners a
private offering memorandum. The offering memorandum informed
investors that the business of Clearwater would be conducted in
accordance with the six simultaneous transactions described
above. The offering memorandum also listed significant business
and tax risk factors associated with an investment in Clearwater.
Specifically, the offering memorandum stated: (1) There was
a substantial likelihood of audit by the Internal Revenue
Service, and the purchase price paid by F&G Corp. to ECI Corp.
would probably be challenged as being in excess of fair market
value; (2) the partnership had no prior operating history; (3)
the general partner had no prior experience in marketing
recycling or similar equipment; (4) the limited partners would
have no control over the conduct of the partnership's business;
(5) there was no established market for the Sentinel EPE
recyclers; (6) there were no assurances that market prices for
virgin resin would remain at their current costs per pound or
that the recycled pellets would be as marketable as virgin
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