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in San Nicholas. The cover page cautioned that “THIS OFFERING
INVOLVES A HIGH DEGREE OF RISK” and warned prospective investors
“NOT TO CONSTRUE THIS MEMORANDUM OR ANY PRIOR OR SUBSEQUENT
COMMUNICATIONS AS CONSTITUTING LEGAL OR TAX ADVICE.” Potential
inventors were urged “TO CONSULT THEIR OWN COUNSEL AS TO ALL
MATTERS CONCERNING THIS INVESTMENT” and were advised “TO CONSULT
WITH [THEIR] OWN TAX ADVISOR AS TO THE TAX ASPECTS.” The single
longest section of the offering memorandum was devoted to “risk
factors” and warned of numerous risks, specifically including tax
risks, the lack of a structured market and distribution system for
jojoba, and the highly speculative nature of the investment.
Petitioner ignored these warnings, reasoning that “for the amount
of investment that I made here, I didn’t think it was necessary to
go hire an attorney to find out if this was * * * legitimate”.16
16 In the alternative, petitioners assert that petitioner
did in fact consult an attorney; i.e., Mr. Kellen. However,
there is simply nothing in the record to suggest that petitioner
ever questioned Mr. Kellen concerning the details of San Nicholas
or that petitioner ever compensated Mr. Kellen for whatever
advice may have been rendered. More to the point, the record is
clear that petitioner consulted Mr. Kellen not as an attorney but
rather as a close personal friend and business associate.
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