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investment to clients, he had a conflict of interest in advising
petitioner to purchase the limited partnership interests.9 The
advice petitioner allegedly received from Dr. Stephan fails as a
defense to negligence due to his lack of competence to give such
advice and the clear presence of a conflict of interest. See
Rybak v. Commissioner, 91 T.C. 524, 565 (1988). Petitioner's
reliance on the advice of Dr. Stephan was unreasonable under the
circumstances.
Outside of Mr. Salgo and Dr. Stephan, petitioner made no
other inquiry into the viability of this partnership's proposed
research and operations. The Court finds it notable that the
offering listed at least 15 "potential uses of jojoba nuts", yet
petitioner failed to explore the plausibility of any of those
potential uses. Some of the potential uses listed in the
offering were various lubricants for high-speed or high-
temperature machinery, cosmetics, shampoos and soaps, sunscreens,
pharmaceuticals, cooking oils, disinfectants, polishing waxes,
corrosion inhibitors, candles, animal feed supplements, and
fertilizer. Being a physician, it seems logical that petitioner
would have had some access to information about the use of jojoba
in the pharmaceutical arena; however, petitioner failed to pursue
9 Petitioner acknowledged in his testimony that he
believed Dr. Stephan was receiving commissions for finding
investors to purchase the limited partnership interests.
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