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was reasonable, petitioners emphasized that Clothier had invested
with them in the investments that Clothier had proposed prior to
Whitman. However, petitioners did not claim, nor is there
evidence, that Clothier invested in Whitman. Apparently,
Clothier’s decision not to invest in Whitman did not dissuade
petitioners.
Like petitioners, Clothier had no knowledge of the plastics
recycling industry. Moreover, Clothier did not consult with any
persons who had expertise in plastics recycling. Instead,
Clothier’s sources of information about Whitman were limited to
the offering memorandum and the representations of insiders. The
only persons with whom Clothier remembers discussing Whitman
were: (1) Margolin, a Whitman sales representative; (2) Connel,
a client of Clothier; and (3) either Winer’s attorney or one of
the attorneys who wrote the tax opinion of Whitman. Each of
these contacts either had a self-interest in the promotion of
Whitman or had no knowledge about the plastics recycling
industry.
Clothier’s reliance on Margolin was unreasonable. Clothier
remembers Margolin telling him that Whitman was a reasonable
investment and that it had tax shelter advantages. These
conclusory remarks, without further investigation, were not a
proper basis for reliance, especially since there is no evidence
that Margolin had any expertise with plastics recycling although
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