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collectively as the Myerses) became concerned about their
retirement planning and began to attend investment seminars given
by Ralph S. Matsuda, a certified financial planner. Mr. Matsuda
had been employed as director of financial planning by American
Savings & Loan from 1975 to 1980, worked for Progressive
Investment Corp. as a director of financial planning from 1980 to
1982, and was a self-employed financial planner from 1982 through
at least 1983. Petitioner knew he had a good reputation, and
some of the Myers’s friends had invested with him.
In 1981, the Myerses met with Mr. Matsuda to review their
finances; Mr. Matsuda confirmed that they had insufficient
retirement funds. Thereafter, Mr. Myers, and sometimes
petitioner, attended numerous seminars presented by Mr. Matsuda.
Petitioner trusted Mr. Myers to identify and implement
investments appropriate to their retirement goals. Between 1981
and 1984, the Myerses made eight investments in ventures proposed
by Mr. Matsuda. One of those investments was in Jojoba.
The Myerses’ Investment in Jojoba
Jojoba had entered into agreements with U.S. Agri-Research
and Development Corp. (Agri-Research) under which Agri-Research
would provide agricultural research and development services with
respect to the growing of jojoba plants. In connection with its
activities, Jojoba planned to deduct research and development
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