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partner of the partnership, and Eugene Pace, who was the
president of what was to become the purported research and
development contractor to the partnership, U.S. Agri Research &
Development Corp. Mr. Trimboli had no experience in farming or
in research and development ventures, and he was aware that Mr.
Cole, the general partner, also had no experience with respect to
jojoba.
A private placement memorandum for investments in the
partnership, dated December 1, 1983, was distributed to
petitioners. Prefatory material in the memorandum contained the
following caveats:
PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO CONSTRUE
THIS MEMORANDUM OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS AS
CONSTITUTING LEGAL OR TAX ADVICE. * * * INVESTORS ARE URGED
TO CONSULT THEIR OWN COUNSEL AS TO ALL MATTERS CONCERNING
THIS INVESTMENT.
* * * * * * *
NO REPRESENTATIONS OR WARRANTIES OF ANY KIND ARE
INTENDED OR SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC
RETURN OR TAX ADVANTAGES WHICH MAY ACCRUE TO THE INVESTORS
IN THE UNITS.
EACH PURCHASER OF UNITS HEREIN SHOULD AND IS EXPECTED
TO CONSULT WITH HIS OWN TAX ADVISOR AS TO THE TAX ASPECTS.
In a section entitled “Use of Proceeds”, an estimation of various
expenditures, the memorandum stated that 90.7 to 93.0 percent of
the capital contributions from the partners would be allocated to
the research and development contract (regardless of the total
amount of the contributions). The only other expenses were to be
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