I think they knew Rossi's nature, and thought putting up $11 million was worth the risk.
Which was complete idiocy, and gross negligence and incompetence. It would have taken a few weeks and certainly under $100K to get a proper test of ONE MODULE of the moronic collection of junk Rossi called a "megawatt plant." Of course, Rossi would never have agreed to a good test performed by competent people so that would have ended it without any money being spent by IH at all beyond the small amount required to write a few letters and specs for Rossi. This dumb error was compounded when Woodford gave IH money, in part because of the Rossi connection, ALSO without a single proper test of the claimed "technology." And folks, Darden and Woodford are captains of industry, right? Geniuses, no? Uh.... no.