Malcolm I. Lewin and Trina Lewin - Page 7

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               The memorandum informed investors that the business of SAB             
          Foam would be conducted in accordance with the transaction                  
          described above.  The memorandum warned potential investors of              
          significant business and tax risk factors associated with                   
          investments in SAB Foam.  The memorandum was replete with                   
          warnings.  In bold capital letters, the memorandum unequivocally            
          stated:  “THIS OFFERING INVOLVES A HIGH DEGREE OF RISK”.                    
               Specifically, the memorandum warned potential investors                
          that:  (1) There was a substantial likelihood of audit by the               
          Internal Revenue Service (IRS); (2) “On audit, the purchase price           
          of the Sentinel EPS recyclers to be paid by F&G to ECI may be               
          challenged by the * * * [IRS] as being in excess of the fair                
          market value thereof, a practice followed by * * * [the IRS] in             
          transactions it deems to be ‘tax shelters’.  Such purchase price            
          is the basis for computing the regular investment and energy tax            
          credits to be claimed by * * * [SAB Foam and ultimately by its              
          partners]”; (3) the partnership had no prior operating history;             
          (4) the general partner had limited experience in marketing                 
          recycling or similar equipment; (5) the limited partners would              
          have no control over the conduct of the partnership’s business;             
          (6) there was no established market for the sale, leasing, or               
          licensing of Sentinel EPS Recyclers; and (7) certain potential              
          conflicts of interest existed.                                              

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Last modified: May 25, 2011