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Becker was also told that PI had put an enormous amount of
research and development (i.e., 10 to 12 years’ worth) into the
creation and production of the recyclers. When he asked to see
the cost records for some kind of independent verification,
however, his request was denied. Becker was informed that such
information was proprietary and secret, and that he would just
have to take PI’s representations as true. Becker decided to
accept PI’s representations after speaking with Miller (corporate
counsel to PI), Canno (who had never been to PI’s plant or seen a
recycler), and a surrogate judge from Rhode Island who did
business in the Boston-Cape Cod area (and who had no experience
in engineering or plastics materials). Becker testified that he
was allowed to see PI’s internal accounting controls regarding
the allocation of royalty payments and PI’s record-keeping system
in general. In Provizer v. Commissioner, supra, though, this
Court found that “PI had no cost accounting system or records.”
Becker confirmed in his testimony that he relied on the
memorandum and discussions with PI personnel to establish the
value and purported uniqueness of the recyclers. Becker
testified that he relied upon the reports of Ulanoff and Burstein
contained in the offering materials, despite the fact that: (1)
Ulanoff’s report did not contain any hard data to support his
opinion; (2) Ulanoff was not an economics or plastics expert; (3)
Becker did not know whether Burstein was an engineer; and (4)
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