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justified in relying on an individual whom he knew had a conflict
of interest.
As applied to the present cases, petitioners’ argument is
also flawed in that it ignores the various red flags that should
have alerted petitioner, a relatively sophisticated investor with
a technical background, that the Sentinel EPS recyclers were
overvalued and independent expert advice was therefore required.
Obvious red flags included the exorbitant cost of the recyclers
(i.e., $7 million) and the fact that the Whitman transactions, as
described in the offering memorandum, were to be executed
simultaneously in what was nothing other than a circular flow of
apparent payments made only through bookkeeping entries.
Finally, mention should be made of two Plastics Recycling
cases that were decided after petitioners’ briefs were filed,
namely, Thompson v. United States, 223 F.3d 1206 (10th Cir.
2000), and Klein v. United States, 94 F. Supp.2d 838 (E.D. Mich.
2000).
In Thompson v. United States, supra, the Court of Appeals
for the Tenth Circuit held that the District Court did not abuse
its discretion in instructing the jury that reasonable, good-
faith reliance on the advice of a professional adviser
constitutes a defense to negligence within the meaning of section
6653. This holding served to uphold the jury’s verdict in favor
of the taxpayers on the issue of negligence.
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