- 7 - 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.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011