Court Opinion

ID: 2970557
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:16:13.71886+00
Date Added: 2024-06-11T15:00:32.255540
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
    &RPEVHWDOY:LONLQVRQHWDO            1R                      3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

                                                                             (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU

 BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB                                          )LOH 1DPH DS

  &21&855,1*,13$57',66(17,1*,13$57
 BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB                      81,7('67$7(6&28572)$33($/6
                                                                                       )257+(6,;7+&,5&8,7
  521$/'/((*,/0$1&LUFXLWsXGJHFRQFXUULQJLQSDUW                                   BBBBBBBBBBBBBBBBB
DQGGLVVHQWLQJLQSDUW,DPLQIXOODJUHHPHQWZLWKWKHEXONRI
WKH PDMRULW\ RSLQLRQjV DQDO\VLV EXW , GLVDJUHH ZLWK LWV
GLVSRVLWLRQUHJDUGLQJWKHFODLPVDJDLQVW6HUJHDQW%HUU\7KH
PDMRULW\GLVPLVVHVWKHH[FHVVLYHIRUFHFODLPVDJDLQVW%HUU\           521$/' &20%6 s$621               ;
RQWKHJURXQGWKDWm3ODLQWLIIVKDYHQRWVXEPLWWHGSURRIWKDW          52%%DQG*(25*( 6.$7=(6 
>%HUU\ KDG@ D FXOSDEOH VWDWH RI PLQGnWKDW WKH DFWLRQ RU               3ODLQWLIIV$SSHOODQWV 
IDLOXUH WR DFW ZDV WR VRPH GHJUHH GHOLEHUDWH UDWKHU WKDQ                                          1R
LQDGYHUWHQWl0DM2SDWFLWDWLRQEUDFNHWVDQGLQWHUQDO                                        
TXRWDWLRQPDUNVRPLWWHG7RWKHFRQWUDU\,EHOLHYHWKDWD                     Y                       !
                                                                                                         
UHDVRQDEOHMXU\FRXOGILQGWKDW%HUU\OLNHKLVGLUHFWVXSHULRU                                         
/LHXWHQDQW 0RURQH\ mNQRZLQJO\ DFTXLHVFHG LQ WKH XVH RI        5(*,1$/' :,/.,1621                
H[FHVVLYHIRUFHLQWKHH[WUDFWLRQl+D\VYsHIIHUVRQ&RXQW\         'LUHFWRURIWKH2KLR               
)GWK&LU                                   'HSDUWPHQWRI5HKDELOLWDWLRQ       
                                                                      DQG&RUUHFWLRQHWDO            
   $V WKH WDFWLFDO FRPPDQGHU RI WKH 657 %HUU\ REVHUYHG                                          
PDQ\ RI WKH H[WUDFWLRQV ILUVWKDQG  $OWKRXJK QRQH RI WKH            'HIHQGDQWV$SSHOOHHV 
H[WUDFWLRQVWKDWKHSHUVRQDOO\ZLWQHVVHGLQYROYHGWKHXVHRI                                            1
H[FHVVLYH IRUFH %HUU\ ZRXOG KDYH VHHQ WKDW WKH RIILFHUV
FRQGXFWLQJ WKH H[WUDFWLRQV ZHUH QRW ZHDULQJ LGHQWLILFDWLRQ            $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
EDGJHV6XFKEDGJHVDUHUHTXLUHGE\2KLRODZLQSDUWIRUWKH              IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW&OHYHODQG
SXUSRVH RI GHWHUULQJ RIILFHUV IURP XVLQJ H[FHVVLYH IRUFH         1Rn'RQDOG&1XJHQW'LVWULFWsXGJH
%HUU\ DOVR IDLOHG WR HQVXUH WKDW WKH H[WUDFWLRQV ZHUH
YLGHRWDSHGZKLFKLVDQRWKHU2KLRUHTXLUHPHQWLQWHQGHGWR                                $UJXHG0DUFK
SUHYHQWWKHXVHRIH[FHVVLYHIRUFH<HW%HUU\SHUPLWWHGWKH
H[WUDFWLRQVWRRFFXUZLWKRXWWKHVHVDIHJXDUGVGHVSLWHKDYLQJ                    'HFLGHGDQG)LOHG1RYHPEHU
ZLWQHVVHGWKUHH657PHPEHUVPDNHFRPPHQWVVXFKDVµWKLV
LVWKHJX\,ZDQWlDQGm,ZDQWWREHDWKLVDVVlQHDUWKHFHOORI     %HIRUH6,/(5DQG*,/0$1&LUFXLWsXGJHV+(<%851
DSULVRQHU*LYHQWKHVHIDFWV,EHOLHYHWKDWDUHDVRQDEOHMXU\                       &KLHI'LVWULFWsXGJH
FRXOGFRQFOXGHWKDWKHNQRZLQJO\DFTXLHVFHGLQWKHXVHRI
H[FHVVLYHIRUFH)RUWKLVUHDVRQ,UHVSHFWIXOO\GLVVHQWIURP
3DUW,,,%HRIWKHPDMRULW\RSLQLRQ

                                                                         
                                                                          7KH +RQRUDEOH sRKQ * +H\EXUQ ,, &KLHI 8QLWHG 6WDWHV 'LVWULFW
                                                                     sXGJH IRU WKH :HVWHUQ 'LVWULFW RI .HQWXFN\ VLWWLQJ E\ GHVLJQDWLRQ

                                                                                                        
       &RPEVHWDOY:LONLQVRQHWDO                 1R        1R         &RPEVHWDOY:LONLQVRQHWDO   

                       BBBBBBBBBBBBBBBBB                                      %XFNDQG2IILFHU6KDVN\DQG$)),50DVWRDOOUHPDLQLQJ
                                                                              GHIHQGDQWV7KHFDVHLV5(0$1'('IRUIXUWKHUSURFHHGLQJV
                             &2816(/                                          FRQVLVWHQWZLWKWKLVRSLQLRQ
$5*8('6WDXJKWRQ/\QG1257+($672+,2/(*$/
6(59,&(6 <RXQJVWRZQ 2KLR IRU $SSHOODQWV  7RGG 5
0DUWL 2)),&( 2) 7+( $77251(< *(1(5$/
&255(&7,216/,7,*$7,216(&7,21&ROXPEXV2KLR
IRU$SSHOOHH21%5,()6WDXJKWRQ/\QG1257+($67
2+,2 /(*$/ 6(59,&(6 <RXQJVWRZQ 2KLR sRKQ %
sXKDV] <RXQJVWRZQ 2KLR 'RXJODV % 7D\ORU 1HZ
0LGGOHWRZQ2KLRIRU$SSHOODQWV7RGG50DUWL2)),&(
2) 7+( $77251(< *(1(5$/ &255(&7,216
/,7,*$7,216(&7,21&ROXPEXV2KLRIRU$SSHOOHH
  6,/(5 s GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ ZKLFK
+(<%851'sMRLQHG*,/0$1sSGHOLYHUHGD
VHSDUDWHRSLQLRQFRQFXUULQJLQSDUWDQGGLVVHQWLQJLQSDUW
                       BBBBBBBBBBBBBBBBB
                           23,1,21
                       BBBBBBBBBBBBBBBBB
  6,/(5 &LUFXLW sXGJH  3ODLQWLIIV 5RQDOG &RPEV sDVRQ
5REEDQG*HRUJH6NDW]HV2KLRGHDWKURZLQPDWHVEURXJKW
WKLVFLYLOULJKWVDFWLRQXQGHU86&DJDLQVWVHYHUDO
2KLR'HSDUWPHQWRI5HKDELOLWDWLRQDQG&RUUHFWLRQm2'5&l
VXSHUYLVRUV DQG RIILFHUV DOOHJLQJ WKDW FRUUHFWLRQV RIILFHUV
XVHGH[FHVVLYHIRUFHLQTXHOOLQJDGLVWXUEDQFHDW0DQVILHOG
&RUUHFWLRQDO ,QVWLWXWLRQ m0DQ&,l  ,Q DSSHDOLQJ WKH
GLVPLVVDORIWKHLUH[FHVVLYHIRUFHFODLPV SODLQWLIIVDVVHUWWKDW
WKH GLVWULFW FRXUW HUUHG LQ  VWULNLQJ WKH 2'5&jV 8VH RI
)RUFH&RPPLWWHH5HSRUWGLVPLVVLQJWKHH[FHVVLYHIRUFH
FODLPV RI 5REE DQG 6NDW]HV IRU IDLOXUH WR H[KDXVW WKHLU
DGPLQLVWUDWLYHUHPHGLHVDVUHTXLUHGE\86&HD

    
     3ODLQWLIIV GR QRW DSSHDO WKH GLVPLVVDO RI WKHLU FODLPV WKDW GHIHQGDQWV
WUDQVIHUUHG SODLQWLIIV 5REE DQG 6NDW]HV WR WKH 2KLR 6WDWH 3HQLWHQWLDU\ LQ
YLRODWLRQ RI VWDWH ODZ DQG WKH )LIWK DQG )RXUWHHQWK $PHQGPHQWV
    &RPEVHWDOY:LONLQVRQHWDO                1R        1R             &RPEVHWDOY:LONLQVRQHWDO       

     H   6HUJHDQW'RQDOG%HUU\                                            DQGJUDQWLQJVXPPDU\MXGJPHQWLQIDYRURIGHIHQGDQWVRQ
                                                                           &RPEVjV H[FHVVLYH IRUFH FODLPV  ,Q UHVSRQVH GHIHQGDQWV
  /LHXWHQDQW 0RURQH\ GHVLJQDWHG 6HUJHDQW %HUU\ DV WKH                FRQFHGH WKDW WKH GLVWULFW FRXUWjV GLVPLVVDO RI 5REEjV DQG
657jVWDFWLFDOFRPPDQGHU3ODLQWLIIVDOOHJHWKDW%HUU\OHGWKH            6NDW]HVjVH[FHVVLYHIRUFHFODLPVIRUIDLOXUHWRH[KDXVWWKHLU
657LQWR'5DQGZDVSUHVHQWGXULQJWKHFHOOH[WUDFWLRQV                 DGPLQLVWUDWLYHUHPHGLHVZDVHUURQHRXVEXWPDLQWDLQWKDWWKH
$OWKRXJKKHGLGQRWREVHUYHDQ\RIILFHUXVLQJH[FHVVLYHIRUFH              GLVPLVVDO RI WKRVH FODLPV VKRXOG EH VXVWDLQHG EHFDXVH WKH
RQDQLQPDWH%HUU\GLGZLWQHVVWKUHH657PHPEHUVPDNLQJ                   UHFRUG UHTXLUHG VXPPDU\ MXGJPHQW RQ WKH PHULWV  $V VHW
FRPPHQWVVXFKDVmWKLVLVWKHJX\,ZDQWlDQGm,ZDQWWREHDW              IRUWKEHORZZH5(9(56(WKHH[FOXVLRQRIWKH8VHRI)RUFH
KLV DVVl QHDU WKH FHOO RI D SULVRQHU ZKR LV QRW D SODLQWLII   &RPPLWWHH5HSRUW$)),50,13$57DQG5(9(56(,1
%HUU\ GLG QRW DGPRQLVK WKH RIILFHUV  3ODLQWLIIV KDYH QRW         3$57WKHGLVPLVVDORISODLQWLIIVjH[FHVVLYHIRUFHFODLPVDQG
VXEPLWWHGmSURRIWKDW>%HUU\KDG@DFXOSDEOHVWDWHRIPLQG               5(0$1' IRU IXUWKHU SURFHHGLQJV FRQVLVWHQW ZLWK WKLV
WKDWWKHDFWLRQRUIDLOXUHWRDFWZDVWRVRPHGHJUHHGHOLEHUDWH            RSLQLRQ
UDWKHUWKDQLQDGYHUWHQWl+D\V)GDW2QWKHEDVLV
RI WKH HYLGHQFH WKDW KH ZLWQHVVHG 657 PHPEHUV PDNLQJ                                               ,
FRPPHQWVDERXWDQRWKHULQPDWHDUHDVRQDEOHMXU\FRXOGDW
PRVWFRQFOXGHWKDW%HUU\ZDVQHJOLJHQW$EVHQWDVKRZLQJ                    ,Q  D GLVWXUEDQFH EHJDQ LQ GHDWK URZ XQLW '5 DW
WKDW KH HQFRXUDJHG RU GLUHFWO\ SDUWLFLSDWHG LQ WKH XVH RI         0DQ&,  $W WKH WLPH WKLUW\VHYHQ LQPDWHV VHQWHQFHG WR
H[FHVVLYH IRUFH DJDLQVW SODLQWLIIV %HUU\ ZDV HQWLWOHG WR           H[HFXWLRQ ZHUH DVVLJQHG WR '5 DQG WKUHH FRUUHFWLRQV
VXPPDU\MXGJPHQW                                                         RIILFHUVZRUNHGWKHXQLW$IWHURQHRIWKHRIILFHUVIDLOHGWR
                                                                           VHFXUH DQ LQPDWH SULRU WR XQORFNLQJ DQ RXWVLGH UHFUHDWLRQ
& ,QMXQFWLYH5HOLHI                                                       FDJHWKHLQPDWHVRYHUSRZHUHGWKHWKUHHRIILFHUVDQGJDLQHG
                                                                           FRQWURORIWKHLUNH\V7KHLQPDWHVWKHQWRRNRYHUWKHXQLWDQG
  ,Q WKHLU UHSO\ EULHI DQG DW RUDO DUJXPHQW SODLQWLIIV            DOORZHGWKHWKUHHRIILFHUVWROHDYH
HPSKDVL]HG WKDW WKH\ VHHN LQMXQFWLYH UHOLHI DV ZHOO DV
PRQHWDU\GDPDJHV6SHFLILFDOO\SODLQWLIIVUHTXHVWDQRUGHU                 /LHXWHQDQW 7KRPDV 0RURQH\ 1RUWKHDVW 5HJLRQDO
UHTXLULQJ FRUUHFWLRQV RIILFHUV WR ZHDU QDPH WDJV RU RWKHU          &RPPDQGHURIWKH6SHFLDO7DFWLFVDQG5HVSRQVH7HDPIRU
LGHQWLILFDWLRQ DQG WR YLGHRWDSH FHOO H[WUDFWLRQV LQ RUGHU WR       WKH 2'5& ZDV FDOOHG WR 0DQ&,  7KH 6SHFLDO 5HVSRQVH
DYRLGUHFXUUHQFHRIWKHHYHQWVRIWKH'5GLVWXUEDQFH7KH               7HDPVm657lIURPVHYHUDOLQVWLWXWLRQVLQWKHUHJLRQZHUH
IDLOXUHWRZHDULGHQWLILFDWLRQRUXVHDYLGHRFDPHUDLVQRWD              DOVRVXPPRQHGWR0DQ&,WRDVVLVWLQTXHOOLQJWKHGLVWXUEDQFH
FRQVWLWXWLRQDO YLRODWLRQ LWVHOI EXW LV D YLRODWLRQ RI 2'5&         DQGUHJDLQLQJFRQWURORI'5
SROLFLHVDQGUHJXODWLRQV:HDUHZLWKRXWDXWKRULW\WRRUGHU
GHIHQGDQWVWRFRQIRUPWKHLUFRQGXFWWRVWDWHODZ3HQQKXUVW                 7KHLQPDWHVEDUULFDGHGWKHGRRUVWR'5DQGSDLQWHGWKH
6WDWH6FK	+RVSY+DOGHUPDQ86                  ZLQGRZVWRREVFXUHWKHYLHZIURPWKHKDOOZD\7KHLQPDWHV
                                                                           ZHUHLQSRVVHVVLRQRIDOOWKHVHFXULW\NH\VWRWKHHQWLUHXQLW
                                 ,9                                       7KH657UHFHLYHGLQIRUPDWLRQWKDWWKHLQPDWHVKDGZHDSRQV
                                                                           VXFK DV EURRP DQG PRS KDQGOHV  $FFRUGLQJ WR SODLQWLIIV
  )RUWKHIRUHJRLQJUHDVRQVZH5(9(56(WKHH[FOXVLRQRI                   WKHUH ZDV SULVRQHURQSULVRQHU YLROHQFH DV ZHOO DV
WKH 8VH RI )RUFH &RPPLWWHH 5HSRUW  ,Q DGGLWLRQ ZH               FRQVLGHUDEOHGHVWUXFWLRQRISURSHUW\
5(9(56( WKH GLVWULFW FRXUWjV VXPPDU\ MXGJPHQW DV WR
SODLQWLIIVjH[FHVVLYHIRUFHFODLPVDJDLQVW/LHXWHQDQW0RURQH\                /LHXWHQDQW0RURQH\GHYHORSHGWKHWDFWLFDOSODQWRUHJDLQ
DQGSODLQWLII5REEjVH[FHVVLYHIRUFHFODLPVDJDLQVW&DSWDLQ                FRQWURORI'5ZKLFKZDVUHYLHZHGDQGDSSURYHGE\WKH
    &RPEVHWDOY:LONLQVRQHWDO          1R      1R             &RPEVHWDOY:LONLQVRQHWDO      

LQFLGHQWFRPPDQGHU:DUGHQ5DOSK&R\OH0RURQH\GHFLGHG          JLYHQFRQFHUQLQJWKHH[WUDFWLRQRILQPDWHVIURPWKHLUFHOOV
WRXVHFKHPLFDODJHQWVSULRUWRWKH657jVHQWU\WRTXHOOWKH     7KHFRPPLWWHHGHWHUPLQHGWKDWm>W@KLVOHGWR657PHPEHUV
GLVWXUEDQFHDQGWRHQVXUHWKHVDIHW\DQGVHFXULW\RIWKHVWDII    µIUHHODQFLQJjDVWKH\HQFRXQWHUHGDVLWXDWLRQDQGWKHRQVLWH
DQGLQPDWHVDVWKHLQPDWHVZHUHHVFRUWHGRXWRIWKHXQLW+H     VXSHUYLVRUVORVLQJFRQWURORIWKH657PHPEHUV>j@DFWLRQVl
DVVLJQHGWZRWHDPVWREUHDNZLQGRZVDQGGHSOR\FKHPLFDO
DJHQWV2QHSHUVRQRQHDFKWHDPXVHGDVOHGJHKDPPHUWR             7KH FRPPLWWHHIXUWKHUIRXQGWKDWDWOHDVWIRXUH[SORVLYH
EUHDNWKHFHOOZLQGRZVDURXQGWKHXQLWjVSHULPHWHUZKLOHWKH     GLVWUDFWLRQ GHYLFHV  H[SORVLYH JDV GHYLFHV DQG VL[
RWKHUSHUVRQRQWKHWHDPGLVSHUVHGWKHFKHPLFDODJHQWV          FDQLVWHUVRISHSSHUPDFHZHUHXVHGWRTXHOOWKHGLVWXUEDQFH
                                                                  7KHFRPPLWWHHVWDWHGWKDWm>E@DVHGRQWKHGRFXPHQWHGXVHRI
  2QFHWKHFKHPLFDODJHQWVKDGEHHQGHSOR\HGDERXWILYH          JDVDQGWKHSK\VLFDOLQYHVWLJDWLYHLQWHUYLHZVLWLVEHOLHYHG
KRXUV DIWHU WKH GLVWXUEDQFH EHJDQ WKH 657 HQWHUHG '5   WKDWWKHDLUFRQFHQWUDWLRQOHYHOFRXOGKDYHUHDFKHGDOHWKDO
WKURXJKWKHIURQWGRRU7KHLQPDWHVKDGFKDLQHGWKHGRRUDQG     OHYHOl7KHFRPPLWWHHIRXQGWKDW/LHXWHQDQW0RURQH\WKH
EDUULFDGHGWKHHQWUDQFH$IWHUWKH657PHPEHUVEUHDFKHGWKH      RQVLWH 657 FRPPDQGHU mIDLOHG WR PDLQWDLQ IXQGDPHQWDO
HQWU\WKH\PRYHGWRWKHKRXVLQJDUHDZKHUHWKH\IRXQGWKH       FRQWURO RI WKH RSHUDWLRQl DQG WKDW WKH 657jV mXVH RI JDV
LQPDWHVLQWKHLUFHOOV7KHLQPDWHVZHUHQRWLQWKHLUDVVLJQHG    PDFH DQG GLVWUDFWLRQ FRQWURO GHYLFHV ZDV H[FHVVLYH
FHOOVDQGDWOHDVWRQHFHOOFRQWDLQHGWKUHHLQPDWHV2QFHDOO   XQFRQWUROOHGDQGFOHDUO\FRPSURPLVHGWKHVDIHW\RIVWDIIDQG
FHOOGRRUVDQGIRRGVORWVZHUHVHFXUHG657PHPEHUVZHQWWR       LQPDWHVl
HDFK FHOO DQG KDQGFXIIHG WKH LQPDWHV  7KH 657 PHPEHUV
HVFRUWHGLQPDWHVIURPWKHLUFHOOVRXWRI'5DQGLQWRWKH           )LQDOO\ WKH XVH RI IRUFH FRPPLWWHH IRXQG WKDW 657
2KLR 3HQDO ,QGXVWULHV m23,l ZDUHKRXVH DUHD ZKHUH WKH    PHPEHUVXVHGmTXHVWLRQDEOHIRUFHlLQUHVWUDLQLQJWKHLQPDWHV
LQPDWHVUHFHLYHGPHGLFDOWUHDWPHQW                               H[WUDFWLQJWKHPIURPWKHLUFHOOVDQGHVFRUWLQJWKHPIURP'5
                                                                  7KHFRPPLWWHHFRQFOXGHGWKDWm>D@JHQHUDOORVVRIFRQWURO
$ 5RQDOG&RPEV                                                   H[LVWHG LQ WKH PDQQHU LQ ZKLFK LQPDWHV ZHUH FRQWUROOHG
                                                                  UHVWUDLQHGDQGHVFRUWHGIURPWKHFHOOEORFNlDQGWKDWm>W@KH
   3ODLQWLII&RPEVLVDGHDWKURZLQPDWHVHUYLQJWZRGHDWK        RQVLWH&RPPDQGHURIDOORIWKH7HDPV>0RURQH\@DQGRUWKH
VHQWHQFHVIRUDJJUDYDWHGPXUGHUFRQYLFWLRQVDQGVL[\HDUVIRU     VSHFLILF &RPPDQGHU RI HDFK 7HDP IDLOHG WR FRQWURO WKH
ILUHDUPVVSHFLILFDWLRQV6HH6WDWHY&RPEV1(G     FRQGXFWRIWKHDVVDXOWIRUFHl
2KLR$WWKHWLPHWKHGLVWXUEDQFHEHJDQ&RPEVD
SRUWHUZDVVHUYLQJWKHHYHQLQJPHDOWRRWKHULQPDWHV:KHQ        7KH8VHRI)RUFH&RPPLWWHH5HSRUWLIDGPLVVLEOHFUHDWHV
KHEHFDPHDZDUHRIWKHGLVWXUEDQFHKHUHWXUQHGWRKLVFHOO       JHQXLQH LVVXHV RI PDWHULDO IDFW DV WR 0RURQH\jV OLDELOLW\
DQGEURNHDSHQFLOLQWKHORFNWRSUHYHQWRWKHUSULVRQHUVIURP    %DVHG RQ WKH FRPPLWWHHjV ILQGLQJV WKDW KH LQDGHTXDWHO\
HQWHULQJ:KLOH&RPEVZDLWHGLQKLVFHOOWREHUHVFXHGWKH      EULHIHG WKH 657 PHPEHUV IDLOHG WR FRQWURO WKH XVH RI
ZLQGRZZDVEURNHQZLWKDVOHGJHKDPPHUDQGWZRFDQVRI             FKHPLFDODJHQWVDQGIDLOHGWRFRQWUROWKH657PHPEHUVLQWKH
WHDUJDVZHUHGLVSHQVHGLQWRKLVFHOO&RPEVZKRKDGWURXEOH    H[WUDFWLRQ RI LQPDWHV D UHDVRQDEOH MXU\ FRXOG ILQG WKDW
EUHDWKLQJZHQWWRWKHEURNHQZLQGRZIRUDLU&RUUHFWLRQV        0RURQH\ mLPSOLFLWO\ DXWKRUL]HG DSSURYHG RU NQRZLQJO\
2IILFHU&KULV.UXSDZKRZDVDWWKHZLQGRZVSUD\HG&RPEV         DFTXLHVFHGlLQWKHXVHRIH[FHVVLYHIRUFHDJDLQVWSODLQWLIIV
LQWKHH\HVDQGIDFHZLWKOLTXLGPDFHDQGWROG&RPEVmWRJHW      DQG RWKHU LQPDWHV  $V VXFK WKH GLVWULFW FRXUW HUUHG LQ
WKHIXFNDZD\IURP WKH ZLQGRZl&RPEVDOVRKHDUGPHQ           JUDQWLQJVXPPDU\MXGJPHQWLQKLVIDYRU
VD\LQJm*HWDZD\IURPWKHZLQGRZ%DFNXS%DFNXSl$
    &RPEVHWDOY:LONLQVRQHWDO            1R       1R            &RPEVHWDOY:LONLQVRQHWDO      

'53ODLQWLIIVDOOHJHWKDW+LOOVYLHZHGWKHH[WUDFWLRQRIDW       IHZPRPHQWVODWHUPRUHWHDUJDVZDVVKRWWKURXJKWKHEURNHQ
OHDVW WZHOYH SULVRQHUV IURP WKHLU FHOOV LQFOXGLQJ SODLQWLII   ZLQGRZHQJXOILQJ&RPEVjVFHOO+LVVNLQEHJDQWREXUQ
5REE  ,Q KLV DQVZHU +LOOV DGPLWV EHLQJ LQ WKH FRPSOH[
GXULQJWKHH[WUDFWLRQVEXWFODLPVWRKDYHZLWQHVVHGQRSROLFH           657PHPEHUVDUULYHGDW&RPEVjVFHOOPRUHWKDQDQKRXU
EUXWDOLW\DFODLPSODLQWLIIVGRQRWUHEXW6LPSO\YLHZLQJWKH       ODWHU7KHRIILFHUVRUGHUHGKLPWRWXUQDURXQGIDFHWKHZDOO
H[WUDFWLRQV ZLWKRXW HYLGHQFH RI PRUH LQYROYHPHQW LV             DQGJHWGRZQRQKLVNQHHV&RPEVORRNHGDWWKHZLQGRZDQG
LQVXIILFLHQWWRGHPRQVWUDWHWKDW+LOOVmLPSOLFLWO\DXWKRUL]HG        DVNHGm,QDOOWKDWJODVV"l7KHRIILFHUVUHVSRQGHGm*HWWKH
DSSURYHGRUNQRZLQJO\DFTXLHVFHGlLQWKHXVHRIH[FHVVLYH            IXFNRQ\RXUNQHHVQRZl+LVFHOOGRRUZDVWKHQXQORFNHG
IRUFHDJDLQVWSODLQWLIIV$FFRUGLQJO\ZHDIILUPWKHVXPPDU\         DQGVL[WRHLJKWRIILFHUVUXVKHGLQWRKLVFHOODQGGURYHKLP
MXGJPHQWIRU+LOOV                                                   KHDGILUVWWRWKHIORRU$FFRUGLQJWR&RPEVWKHRIILFHUVVWRRG
                                                                      RQKLVQHFNDQGVKRXOGHUVDQGKLWKLPLQWKHIDFHDQGRQWKH
     F   :DUGHQ5DOSK&R\OH                                          EDFNRIKLVKHDG+HEODFNHGRXWDIWHURIILFHUVNLFNHGKLPLQ
                                                                      WKHJHQLWDOVDQGKHDZRNHZKHQRIILFHUVZHUHGUDJJLQJKLP
   &R\OHZDV WKH ZDUGHQRI0DQ&,RQ6HSWHPEHU              RXWWKHVDOO\SRUWGRRUV&RPEVDVVHUWVWKDWRIILFHUVNLFNHG
&R\OHWKHLQFLGHQWFRPPDQGHUDVNHG/LHXWHQDQW0RURQH\WR            KLP DV KH ZDV HVFRUWHG WR WKH PHGLFDO WUHDWPHQW DUHD
SUHSDUH D WDFWLFDO SODQ DQG DSSURYHG WKDW SODQ ZKLFK         2IILFHUVWKHQKDQGFXIIHGKLPWRDEHQFKLQVLGHDKROGLQJFHOO
SODLQWLIIV FRQFHGH ZDV FRQVLVWHQW ZLWK FRQVWLWXWLRQDO            DQGWZRRWKHURIILFHUVVSUD\HGKLPZLWKPDFH2WKHUWKDQ
VWDQGDUGV7KH8VHRI)RUFH&RPPLWWHH5HSRUWRIIHUHGE\              VWDWLQJ WKDW WKH RIILFHUV ZRUH EODFN IDWLJXHV PDVNV DQG
SODLQWLIIV GRHV QRW LQGLFDWH WKDW &R\OH HQFRXUDJHG DQ\         KHOPHWV&RPEVGRHVQRWLGHQWLI\DQ\RIWKHVHRIILFHUV
PLVFRQGXFWRUGLUHFWO\SDUWLFLSDWHGLQLW5DWKHUWKHUHSRUW
GHPRQVWUDWHVWKDW:DUGHQ&R\OHJDYHLQVWUXFWLRQVQRWWRXVH           % sDVRQ5REE
H[FHVVLYH IRUFH RUGHULQJ WKDW WKHUH ZRXOG EH QR mIUHH
ODQFLQJlDQGmQR5DPERVlDQGVWUHVVLQJWKDWWKHUHZRXOGEH               3ODLQWLII 5REE LV D GHDWK URZ LQPDWH VHUYLQJ GHDWK
mQRGHDGO\IRUFHXQOHVVDEVROXWHO\QHFHVVDU\l7KHGLVWULFW          VHQWHQFHV IRU WZR FRXQWV RI DJJUDYDWHG PXUGHU DQG
FRXUWSURSHUO\JUDQWHGVXPPDU\MXGJPHQWLQIDYRURI:DUGHQ            FRQVHFXWLYHSULVRQWHUPVIRUWZRFRXQWVRINLGQDSLQJDULVLQJ
&R\OH                                                                RXWRIWKHGHDGO\SULVRQULRWDWWKH6RXWKHUQ2KLR&RUUHFWLRQDO
                                                                      )DFLOLW\LQ/XFDVYLOOH2KLRLQ6HH6WDWHY5REE
     G /LHXWHQDQW7KRPDV0RURQH\                                     1(G2KLR:KHQWKHGLVWXUEDQFHEHJDQKH
                                                                      OHIWKLVFHOOWRFKHFNRQWKHVDIHW\RIRWKHUSULVRQHUVLQWKH
   /LHXWHQDQW0RURQH\FRPPDQGHGWKH657WKDWHQWHUHG'5              XQLW  +H WKHQ UHWXUQHG WR KLV FHOO ZLWK LQPDWHV 5REHUW
DQGGHYHORSHGWKHWDFWLFDOSODQWRUHWDNHWKHXQLW3ODLQWLIIV     9DQ+RRNDQG.HQQHWK5LFKH\
DOOHJH WKDW 0RURQH\ ZDV SUHVHQW GXULQJ WKH H[WUDFWLRQ RI
LQPDWHVDQGGLGQRWLQWHUYHQHWRSUHYHQWWKHXVHRIH[FHVVLYH           5REEjV FHOO ZLQGRZ ZDV EURNHQ DQG JDV ZDV GLVSHUVHG
IRUFH+RZHYHUSODLQWLIIVRIIHUQRHYLGHQFHWKDW0RURQH\            WKURXJKWKHZLQGRZDQGWKHDLUYHQW$FFRUGLQJWR5REEWKH
SHUVRQDOO\ ZLWQHVVHG WKH XVH RI H[FHVVLYH IRUFH DJDLQVW        JDV FDXVHG WKHLU PXVFOHV WR WLJKWHQ DQG PDGH WKHP ORVH
SODLQWLIIVRUDQ\RWKHULQPDWH                                       FRQWURORIWKHLUXULQHDQGIHFHV5REEEURNHWKHJODVVRXWRI
                                                                      DZLQGRZDQGWKHWKUHHLQPDWHVZHQWWRWKHZLQGRZIRUDLU
  7KH XVH RI IRUFH FRPPLWWHH IRXQG WKDW 0RURQH\                2IILFHUVVSUD\HGWKHLQPDWHVZLWKPDFHWRPDNHWKHPPRYH
LQDGHTXDWHO\EULHIHGWKH657PHPEHUVSULRUWRWKHLUHQWU\            DZD\ IURP WKH ZLQGRZ  :KHQ 5REE VDLG WKDW WKH\ ZHUH
LQWR'52QO\DSRUWLRQRIWKH657PHPEHUVLQYROYHGLQ             ORFNHGLQWKHLUFHOOWKHRIILFHUVWROG5REEWRVKXWXSDQGWR
WKH LQFLGHQW UHFHLYHG D EULHILQJ DQG QR LQVWUXFWLRQV ZHUH    JHW DZD\ IURP WKH ZLQGRZ  2IILFHU *LOEHUW WKHQ VZXQJ D
     &RPEVHWDOY:LONLQVRQHWDO               1R       1R             &RPEVHWDOY:LONLQVRQHWDO     

VOHGJHKDPPHUDW5REE7KHVOHGJHKDPPHUJODQFHG5REEjV                   &RPEV2QDSSHDOGHIHQGDQWVFRQWHQGWKDW6NDW]HVjVDQG
IDFH DQG KLW KLV OHIW VKRXOGHU  5REE FODLPV WKDW KH FRXOG    5REEjVVXSHUYLVRU\OLDELOLW\FODLPVIDLOIRUWKHVDPHUHDVRQ
EDUHO\VWDQGRUEUHDWKHDIWHUDQKRXURIH[SRVXUHWRWKHJDV            3ODLQWLIIVUHVSRQGWKDWWKH8VHRI)RUFH&RPPLWWHH5HSRUW
                                                                         LQGLFDWHVPLVFRQGXFWE\VXSHUYLVRU\GHIHQGDQWVLQILYHDUHDV
   $V WKH 657 PHPEHUV HQWHUHG '5 5REE KHDUG WKHP              LQDGHTXDWHEULHILQJIDLOXUHWRZHDULGHQWLI\LQJQDPH
FDOOLQJRXWm:KHUHjV5REE"l7KHRIILFHUVDUULYHGDWKLVFHOO           WDJVH[FHVVLYHXVHRIJDVTXHVWLRQDEOHXVHRIIRUFHLQ
DQGGLUHFWHGWKHWKUHHLQPDWHVWRUHPRYHHYHU\WKLQJIURPWKH             FHOOH[WUDFWLRQVDQGIDLOXUHWRYLGHRWDSH
IORRUDUHDDQGWRSODFHLWRQWKHWRSEXQN:KHQWKHRIILFHUV
HQWHUHGWKHFHOO5REEKHDUGVRPHRQHVD\m<RXWDNHWKHOLWWOH              m>6@LPSOHQHJOLJHQFHLVLQVXIILFLHQWWRVXSSRUWOLDELOLW\RI
PRWKHUIXFNHULQWKHPLGGOHlUHIHUULQJWR5REE$QRIILFHU             >VXSHUYLVRU\RIILFLDOV@IRULQDGHTXDWHWUDLQLQJVXSHUYLVLRQ
KLW5REELQWKHEDFNRIKLVKHDGDQGWKHQVRPHRQHSODFHGKLP             DQGFRQWURORILQGLYLGXDORIILFHUVl+D\V)GDW$
LQ D FKRNH KROG DQG SXOOHG KLP WR WKH IORRU  7KH RIILFHUV   VXSHUYLVRU\RIILFLDOPD\QRWEHKHOGOLDEOHXQGHUIRU
VWRPSHGRQKLVEDFNDQGNLFNHGKLPLQWKHJHQLWDOVIDFHDQG            WKH PLVFRQGXFW RI WKRVH WKH RIILFLDO VXSHUYLVHV XQOHVV WKH
VLGH5REEKHDUGWKHRIILFHUVVD\m7KLVLVZKDWWKLVPRWKHU            SODLQWLII GHPRQVWUDWHV WKDW mWKH VXSHUYLVRU HQFRXUDJHG WKH
IXFNHU GHVHUYHVl  5REE ZDV NQRFNHG XQFRQVFLRXV ZKLOH             VSHFLILFLQFLGHQWRIPLVFRQGXFWRULQVRPHRWKHUZD\GLUHFWO\
O\LQJRQWKHIORRU                                                      SDUWLFLSDWHGLQLWl%HOODP\Y%UDGOH\)G
                                                                         WK&LUm$WDPLQLPXPDSODLQWLIIPXVWVKRZWKDW
  &DSWDLQ%XFNVWRRGRXWVLGH5REEjVFHOOZKLOHRWKHU657                 WKH RIILFLDO DW OHDVW LPSOLFLWO\ DXWKRUL]HG DSSURYHG RU
PHPEHUVHQWHUHGWKHFHOO5REEZDVKDQGFXIIHGLQVLGHWKH                NQRZLQJO\DFTXLHVFHGLQWKHXQFRQVWLWXWLRQDOFRQGXFWRIWKH
FHOODQGKDQGHGRIIWR%XFN$V%XFNHVFRUWHG5REEWKH\                RIIHQGLQJ RIILFHUVl  +D\V  )G DW   6XSHUYLVRU\
ERWKIHOOLQWKHKDOOZD\5REEjVZHLJKWSXOOHG%XFNGRZQ                OLDELOLW\XQGHUFDQQRWEHEDVHGXSRQDPHUHIDLOXUHWR
ZLWK KLP  $QRWKHU RIILFHU RU RIILFHUV KHOSHG %XFN SLFN       DFWEXWPXVWEHEDVHGXSRQDFWLYHXQFRQVWLWXWLRQDOEHKDYLRU
5REEXSDQGDVVLVWHG%XFNLQHVFRUWLQJ5REERXWRI'5                 %DVV)GDW
  5REEZRNHXSZKHQKHZDVRQWKHIORRURXWVLGHKLVFHOO                    D   'LUHFWRU5HJLQDOG:LONLQVRQ
6RPHRQH MHUNHG RQ KLV KDQGV WU\LQJ WR SXOO KLP RII WKH
JURXQG$IWHUWKH\SXOOHGKLPXSWKHRIILFHUVWULHGWRUXQ                3ODLQWLIIV DOOHJH WKDW DV GLUHFWRU RI WKH 2'5& RQ
5REE LQWR WKH VWDLUZD\ RQ WKH VLGH RI WKH UHFUHDWLRQ DUHD     6HSWHPEHU:LONLQVRQZDVXOWLPDWHO\UHVSRQVLEOHIRU
5REEWXUQHGKLVKHDGWRDYRLGWKHVWDLUZD\EXWLWFDXJKWKLV            WKH2'5&6573ODLQWLIIVFRQWHQGWKDWLWLVUHDVRQDEOHWR
VKRXOGHU7KHRIILFHUVSLFNHGKLPXSDQGUDQKLPLQWRDZDOO           LQIHUWKDW:LONLQVRQVDZDQGDSSURYHGWKHWDFWLFDOSODQZKHQ
5REEEODFNHGRXWDJDLQDQGKLWWKHIORRU                                LWZDVID[HGWRWKH&HQWUDO2IILFHKRZHYHUWKH\FRQFHGHWKDW
                                                                         WKH SODQ ZDV FRQVLVWHQW ZLWK FRQVWLWXWLRQDO VWDQGDUGV
   %XFNZDVDW5REEjVOHIWVLGHWKHHQWLUHGLVWDQFHIURP'5            %HFDXVHSODLQWLIIVIDLOWRSUHVHQWDQ\HYLGHQFHWKDW:LONLQVRQ
WR23,$WRQHSRLQWWKHRIILFHUDW5REEjVULJKWVLGHKDQGHG           ZKRZDVQRWHYHQSUHVHQWDW0DQ&,RQWKHHYHQLQJRIWKH
KLPRIIWR2IILFHU6KDVN\6KDVN\HVFRUWHG5REEIURPWKH                GLVWXUEDQFHHQJDJHGLQDFWLYHXQFRQVWLWXWLRQDOEHKDYLRUZH
RIILFHUVjGHVNDUHDWR23,:KHQ5REEZRNHDJDLQ6KDVN\                DIILUPWKHVXPPDU\MXGJPHQWLQKLVIDYRU
UDPPHGKLVNQHHDQGOHJLQWR5REEjVIDFHZKLOH5REEZDV
NQHHOLQJ$IWHUDIHZPRUHSXQFKHVDQGNLFNV5REEEODFNHG                  E 1RUWK5HJLRQ'LUHFWRU1RUPDQ+LOOV
RXWDJDLQ
                                                                           +LOOV ZDV WKH 1RUWK 5HJLRQ 'LUHFWRU RI WKH 2'5& RQ
                                                                         6HSWHPEHUDQGZDVSUHVHQWZKHQWKH657ZHQWLQWR
       &RPEVHWDOY:LONLQVRQHWDO                1R        1R              &RPEVHWDOY:LONLQVRQHWDO        

DQ\ HYLGHQFH FRQFHUQLQJ WKH LGHQWLW\ RI WKH RIILFHUV WKH                $V%XFNDQG6KDVN\HVFRUWHGKLP5REEDSSHDUHGGD]HG
GLVWULFWFRXUWVWDWHGm(YHQDVVXPLQJWKDWWKHIDFWVDVVHWIRUWK            DQGZDVEOHHGLQJIURPKLVKHDGIDFHDQGKDQG$FFRUGLQJ
E\ 3ODLQWLII &RPEV DUH WUXH WKHUH LV QR ZD\ IRU D MXU\ WR        WR 6KDVN\ 5REE ZDV QRW FRRSHUDWLQJ LQ WKH HVFRUW  5REE
GHWHUPLQH ZKHWKHU WKH FRQGXFW ZDV D JRRGIDLWK HIIRUW WR              UHFHLYHGPHGLFDOWUHDWPHQWDW23,DQGWKHQZDVWUDQVSRUWHG
PDLQWDLQRUUHVWRUHGLVFLSOLQHRUPDOLFLRXVO\DQGVDGLVWLFDOO\               WRWKHKRVSLWDO+HVXIIHUHGDVNXOOIUDFWXUHDQGUHFHLYHGPRUH
WRFDXVHKDUPDEVHQWDQDOOHJDWLRQWKDWFHUWDLQLQGLYLGXDOVDUH              WKDQWKLUW\VWLWFKHV
UHVSRQVLEOHIRUWKHFRQGXFWl&ODLPLQJWKDWWKH\ZHUHXQDEOH
WRLGHQWLI\WKHRIILFHUVEHFDXVHWKH\ZRUHEODFNXQLIRUPVJDV                & *HRUJH6NDW]HV
PDVNV DQG QR QDPH EDGJHV SODLQWLIIV DUJXH WKDW m>W@KH
'LVWULFW&RXUWjVKROGLQJLISHUPLWWHGWRVWDQG GLVFRXUDJHV                   3ODLQWLII6NDW]HVLVDGHDWKURZLQPDWHVHUYLQJWZRGHDWK
FLYLO ULJKWV OLWLJDQWV IURP UHGUHVVLQJ WKHLU FODLPV DQG                VHQWHQFHVIRUWZRDJJUDYDWHGPXUGHUFRQYLFWLRQVDQGILIWHHQ
HQFRXUDJHVXQVFUXSXORXVVWDWHRIILFHUVWRVKLHOGWKHLULGHQWLW\               WRWZHQW\ILYH\HDUVRQHDFKRIWKUHHNLGQDSLQJFRQYLFWLRQV
DQGWKHLUOLDELOLW\ZLWKEODFNVXLWVJDVPDVNVDQGDODFNRI                +HZDVLQYROYHGLQWKH/XFDVYLOOHSULVRQULRW6NDW]HV
RIILFHUQDPHEDGJHVl                                                         ZDVLQKLVFHOOZKHQWKHGLVWXUEDQFHEHJDQDQGGLGQRWOHDYH
                                                                              KLVFHOO+HZDVKLWE\DWHDUJDVFDQLVWHUVKRWWKURXJKWKH
  7KHGLVWULFWFRXUWSURSHUO\GLVPLVVHG&RPEVjVH[FHVVLYH                     ZLQGRZLQKLVFHOO+HFODLPVWKDWZKHQKHZHQWWRWKHFHOO
IRUFHFODLPVDJDLQVWDQ\XQLGHQWLILHGRIILFHUVDQGGHIHQGDQWV                ZLQGRZIRUVRPHDLUVRPHRQHRXWVLGHVKRWKLPZLWKOLTXLG
DUHHQWLWOHGWRVXPPDU\MXGJPHQWRQ6NDW]HVjVDQG5REEjV                      JDVZKLFKODQGHGRQKLVOHJ
FODLPV DJDLQVW XQLGHQWLILHG RIILFHUV DV ZHOO  8QGHU WKHLU
WKHRU\RIWKHFDVHSODLQWLIIVDUHHQWLWOHGWRUHFRYHUGDPDJHV                   $IWHUDERXWDQKRXU657PHPEHUVFDPHWR6NDW]HVjVFHOO
IURPVRPHVRXUFHHYHQLIWKH\FDQQRWSURYHWKDWDQ\QDPHG                    DQG WROG KLP WR SXW KLV KHDG RQ WKH ZDOO  6NDW]HV ZDLWHG
GHIHQGDQW DFWXDOO\ XVHG IRUFH DJDLQVW WKHP  3ODLQWLIIV                DERXWKDOIDQKRXU:KHQWKHRIILFHUVUHWXUQHGWR6NDW]HVjV
HVVHQWLDOO\VHHNWRLPSRVHUHVSRQGHDWVXSHULRUOLDELOLW\DJDLQVW              FHOOWKH\WROGKLPWRSXWKLVKDQGVEHKLQGKLVKHDGDQGWRJHW
WKHVXSHUYLVRU\RIILFHUV0DQ&,2'5&DQGRUWKH6WDWHRI                    RQKLVNQHHV6NDW]HVFRPSOLHG7KHRIILFHUVWKHQUDQLQWR
2KLRIRUWKHDFWLRQVRIWKHVHXQLGHQWLILHGRIILFHUV,WLVZHOO              WKHFHOODQGVWDUWHGWREHDW6NDW]HV$WWHPSWLQJWRUHPRYH
VHWWOHGWKDWOLDELOLW\ZLOOQRWEHLPSRVHGVROHO\RQWKH               6NDW]HVjVULJKWDUPIURPXQGHUQHDWKKLPWKHRIILFHUVEHQWKLV
EDVLVRIUHVSRQGHDWVXSHULRU+D\VYsHIIHUVRQ&RXQW\                  ILQJHUVZULVWDQGOHJVDQGEHDWKLPRQWKHVLGHRIKLVKHDG
)GWK&LU                                         6NDW]HVILQDOO\DOORZHGWKHRIILFHUVWRWDNHKLVDUPDQGKH
                                                                              ZDVKDQGFXIIHG7KHRIILFHUVSLFNHGKLPXSE\WKHKDQGFXIIV
        ([FHVVLYH )RUFH &ODLPV $JDLQVW 6XSHUYLVRU\                      DQGHVFRUWHGKLPRXWRIWKHFHOO$IHZVWHSVRXWVLGHWKHFHOO
          2IILFLDOV                                                           VRPHRQHFDPHDORQJJUDEEHG6NDW]HVjVKDLUDQGVODPPHG
                                                                              KLVKHDGLQWRWKHZDOO7KHRIILFHUVWKHQHVFRUWHG6NDW]HVRXW
  7KH GLVWULFW FRXUW KHOG WKDW WKH VXSHUYLVRU\ RIILFLDOV DUH          RI'5$QRWKHURIILFHUDSSURDFKHG6NDW]HVDQGKLWKLPRQ
HQWLWOHGWRVXPPDU\MXGJPHQWEHFDXVHWKH\KDGQRSHUVRQDO                     WKH KHDG  6NDW]HV FODLPV WKDW KH WRRN KHDG VKRWV IURP
LQYROYHPHQW LQ WKH DOOHJHG XVH RI H[FHVVLYH IRUFH DJDLQVW             XQNQRZQRIILFHUV
                                                                                                               ,,
     
       $V GHIHQGDQWV SRLQW RXW SODLQWLIIV FRXOG KDYH SXUVXHG UHFRYHU\
                                                                                3ODLQWLIIV ILOHG D IRXUFRXQW FRPSODLQW SXUVXDQW WR 
DJDLQVW WKH 6WDWH RI 2KLR DV DQ HQWLW\ LQ WKH 2KLR &RXUW RI &ODLPV ZLWKRXW
KDYLQJ WR SURYH ZKLFK LQGLYLGXDO VWDWH RIILFHUV YLRODWHG WKHLU ULJKWV RU
                                                                              86&DJDLQVW5HJLQDOG:LONLQVRQ'LUHFWRURIWKH
KDYLQJ WR VDWLVI\ D VWDQGDUG KLJKHU WKDQ VLPSOH QHJOLJHQFH RU DVVDXOW
                                                                              2'5&1RUPDQ+LOOV1RUWK5HJLRQ'LUHFWRURIWKH2'5&
       &RPEVHWDOY:LONLQVRQHWDO                 1R         1R             &RPEVHWDOY:LONLQVRQHWDO       

%HUQDUG5\]QDU&KLHIRIWKH%XUHDXRI&ODVVLILFDWLRQ5DOSK                   HIIRUWVPDGHWRWHPSHUWKHVHYHULW\RIDIRUFHIXOUHVSRQVHjl
&R\OH :DUGHQ RI 0DQ&, /LHXWHQDQW 7KRPDV 0RURQH\                       +XGVRQ86DW
1RUWKHDVW5HJLRQDO&RPPDQGHURIWKH6SHFLDO7DFWLFVDQG
5HVSRQVH7HDP6HUJHDQW'RQ%HUU\7DFWLFDO&RPPDQGHURI                          m>2@IILFLDOV FRQIURQWHG ZLWK D SULVRQ GLVWXUEDQFH PXVW
WKH657DQGVHYHUDOFRUUHFWLRQVRIILFHUVERWKLGHQWLILHGDQG                 EDODQFHWKHWKUHDWXQUHVWSRVHVWRLQPDWHVSULVRQZRUNHUV
XQLGHQWLILHG7KHILUVWWKUHHFRXQWVRIWKHFRPSODLQWDOOHJH                  DGPLQLVWUDWRUV DQG YLVLWRUV DJDLQVW WKH KDUP LQPDWHV PD\
WKDW GHIHQGDQWV XVHG H[FHVVLYH IRUFH DJDLQVW SODLQWLIIV LQ              VXIIHULIJXDUGVXVHIRUFHl,GDW%HFDXVHSULVRQRIILFLDOV
TXHOOLQJWKH'5GLVWXUEDQFHLQYLRODWLRQRIWKH(LJKWKDQG                   mPXVW PDNH WKHLU GHFLVLRQV LQ KDVWH XQGHU SUHVVXUH DQG
)RXUWHHQWK $PHQGPHQWV WR WKH &RQVWLWXWLRQ  7KH IRXUWK                  IUHTXHQWO\ZLWKRXWWKHOX[XU\RIDVHFRQGFKDQFHlZHPXVW
FRXQWDVVHUWVWKDWGHIHQGDQWVWUDQVIHUUHG5REEDQG6NDW]HVWR                  JUDQW WKHP mZLGHUDQJLQJ GHIHUHQFH LQ WKH DGRSWLRQ DQG
WKH2KLR6WDWH3HQLWHQWLDU\LQYLRODWLRQRIVWDWHODZDQGWKH                  H[HFXWLRQRISROLFLHVDQGSUDFWLFHVWKDWLQWKHLUMXGJPHQWDUH
)LIWKDQG)RXUWHHQWK$PHQGPHQWV                                               QHHGHG WR SUHVHUYH LQWHUQDO RUGHU DQG GLVFLSOLQH DQG WR
                                                                               PDLQWDLQLQVWLWXWLRQDOVHFXULW\l,GLQWHUQDOTXRWDWLRQPDUNV
   2QGHIHQGDQWVjPRWLRQWKHGLVWULFWFRXUWGLVPLVVHG5REEjV                  RPLWWHG
DQG6NDW]HVjVH[FHVVLYHIRUFHFODLPVIRUIDLOXUHWRH[KDXVW
WKHLU DGPLQLVWUDWLYH UHPHGLHV DV UHTXLUHG E\  86&                       D   2IILFHU&KULV.UXSD
 HD  7KH GLVWULFW FRXUW DOVR JUDQWHG GHIHQGDQWVj
PRWLRQIRUMXGJPHQWRQWKHSOHDGLQJVZLWKUHVSHFWWR5REEjV                       &RPEVDVVHUWVWKDWZKHQKHSODFHGKLVIDFHQHDUWKHEURNHQ
DQG6NDW]HVjVWUDQVIHUFODLPVRQWKHJURXQGVWKDW5REEIDLOHG                  ZLQGRZLQKLVFHOO2IILFHU.UXSDVSUD\HGKLPLQWKHH\HVDQG
WRH[KDXVWKLVDGPLQLVWUDWLYHUHPHGLHVDQGWKDWWKHUHZDVQR                  IDFHZLWKOLTXLGPDFHDQGRUGHUHGKLPWRPRYHDZD\IURPWKH
JHQXLQHLVVXHRIPDWHULDOIDFWZLWKUHVSHFWWRWKRVHFODLPV                   ZLQGRZ7KHGLVWULFWFRXUWGHWHUPLQHGWKDW&RPEVIDLOHGWR
)LQDOO\WKHGLVWULFWFRXUWJUDQWHGVXPPDU\MXGJPHQWLQIDYRU                  HVWDEOLVK WKDW .UXSDjV FRQGXFW ZDV PDOLFLRXV RU VDGLVWLF
RIGHIHQGDQWVRQ&RPEVjVH[FHVVLYHIRUFHFODLPV                               FLWLQJFDVHVLQZKLFKFRXUWVKDYHUHFRJQL]HGWKDWWKHXVHGRI
                                                                               PDFHWRFRQWURODSULVRQLQPDWHLVQRWPDOLFLRXVRUVDGLVWLF
                                   ,,,                                        6HHHJ7KRPDVY*UHHQH1R:/
                                                                               WK &LU 'HF   DIILUPLQJ WKH GLVPLVVDO RI DQ
$ 8VHRI)RUFH&RPPLWWHH5HSRUW                                               H[FHVVLYHIRUFHFODLPE\DQLQPDWHZKRZDVPDFHGZKHQKH
                                                                               UHIXVHGWRFRQVHQWWRDVWULSVHDUFK7KHGLVWULFWFRXUWVWDWHG
   $IWHUWKH'5GLVWXUEDQFHWKH2'5&DSSRLQWHGDXVHRI                     m.HHSLQJLQPLQGWKDW'HIHQGDQW.UXSDDFWHGLQWKHFRQWH[W
IRUFH FRPPLWWHH WR LQYHVWLJDWH WKH LQFLGHQW  )RXU PRQWKV              RI>D@SULVRQGLVWXUEDQFHLQZKLFKSULVRQRIILFLDOVKDGORVW
ODWHU DIWHU FRQGXFWLQJ  LQWHUYLHZV DQG UHYLHZLQJ                     FRQWURORIWKHXQLWWKLV&RXUWPXVWOHQGVXEVWDQWLDOGHIHUHQFH
QXPHURXVGRFXPHQWVWKHFRPPLWWHHLVVXHGWKH8VHRI)RUFH                      WRKLVGHFLVLRQWRXVHPDFHZKLFKKHPDGHLQKDVWHDQGXQGHU
&RPPLWWHH 5HSRUW ZKLFK GHWDLOHG WKH FRPPLWWHHjV IDFWXDO                 VLJQLILFDQW SUHVVXUHl  :H DJUHH DQG DIILUP WKH VXPPDU\
ILQGLQJVFRQFOXVLRQVDQGUHFRPPHQGDWLRQVUHJDUGLQJWKHXVH                   MXGJPHQWLQIDYRURI.UXSD
RIIRUFHRQ6HSWHPEHU3ODLQWLIIVDWWDFKHGDFRS\RI
WKH8VHRI)RUFH&RPPLWWHH5HSRUWWRWKHLUPHPRUDQGXPLQ                            E 8QLGHQWLILHG2IILFHUV
RSSRVLWLRQWRGHIHQGDQWVjPRWLRQIRUVXPPDU\MXGJPHQW
                                                                                 $OO WKUHH SODLQWLIIV DVVHUW WKDW XQLGHQWLILHG RIILFHUV XVHG
                                                                               H[FHVVLYH IRUFH LQ UHPRYLQJ WKHP IURP WKHLU FHOOV DQG
    
     3ODLQWLIIV GR QRW DSSHDO WKH GLVWULFW FRXUWjV GLVPLVVDO RI WKH WUDQVIHU
                                                                               HVFRUWLQJWKHPWR23,IRUPHGLFDOWUHDWPHQW,QGLVPLVVLQJ
FODLPV
                                                                               &RPEVjVH[FHVVLYHIRUFHFODLPVGXHWRKLVIDLOXUHWRSUHVHQW
       &RPEVHWDOY:LONLQVRQHWDO             1R       1R              &RPEVHWDOY:LONLQVRQHWDO        

LVHQWLWOHGWRDMXGJPHQWDVDPDWWHURIODZl)HG5&LY3             %\ PDUJLQDO HQWU\ WKH GLVWULFW FRXUW JUDQWHG GHIHQGDQWVj
F  ,Q UHYLHZLQJ WKH GLVWULFW FRXUWjV GHFLVLRQ WR JUDQW      PRWLRQ WR VWULNH WKH 8VH RI )RUFH &RPPLWWHH 5HSRUW  2Q
VXPPDU\MXGJPHQWDOOHYLGHQFHPXVWEHYLHZHGLQWKHOLJKW                DSSHDO SODLQWLIIV FRQWHQG WKDW WKH GLVWULFW FRXUW DEXVHG LWV
PRVW IDYRUDEOH WR WKH QRQPRYLQJ SDUW\  0DWVXVKLWD (OHF          GLVFUHWLRQ LQ VWULNLQJ ZLWKRXW H[SODQDWLRQ WKH UHSRUW
,QGXV&RY=HQLWK5DGLR&RUS86               DVVHUWLQJWKDWWKHUHSRUWVDWLVILHVWKHGHILQLWLRQRImUHOHYDQW
:H PD\ QRW PDNH FUHGLELOLW\ GHWHUPLQDWLRQV RU ZHLJK WKH           HYLGHQFHlXQGHU)HG5(YLGDQGLVDGPLVVLEOHXQGHUWKH
HYLGHQFH$QGHUVRQY/LEHUW\/REE\,QF86             SXEOLFUHFRUGVDQGUHSRUWVKHDUVD\H[FHSWLRQ)HG5(YLG
                                                                   :HUHYLHZWKHGLVWULFWFRXUWjVHYLGHQWLDU\UXOLQJIRU
                                                                          DEXVHRIGLVFUHWLRQ6Q\GHUY$J7UXFNLQJ,QF)G
        ([FHVVLYH )RUFH &ODLPV $JDLQVW ,QGLYLGXDO                   WK&LUm$ILQGLQJRIDEXVHRIGLVFUHWLRQZLOOEH
          2IILFHUV                                                       PDGHRQO\ZKHUHWKHUHYLHZLQJFRXUWLVILUPO\FRQYLQFHGWKDW
                                                                          DPLVWDNHKDVEHHQPDGHl,G
  $QLQPDWHjVSRVWFRQYLFWLRQH[FHVVLYHIRUFHFODLPPXVWEH
UDLVHGmH[FOXVLYHO\XQGHUWKH(LJKWK$PHQGPHQWjVFUXHODQG                   )HG5(YLGGHILQHVmUHOHYDQWHYLGHQFHlDVmHYLGHQFH
XQXVXDOSXQLVKPHQWFODXVHl3HOIUH\Y&KDPEHUV)G                 KDYLQJDQ\WHQGHQF\WRPDNHWKHH[LVWHQFHRIDQ\IDFWWKDWLV
WK&LU,Q+XGVRQY0F0LOOLDQ               RI FRQVHTXHQFH WR WKH GHWHUPLQDWLRQ RI WKH DFWLRQ PRUH
86WKH6XSUHPH&RXUWVHWIRUWKWKHVWDQGDUGIRU               SUREDEOH RU OHVV SUREDEOH WKDQ LW ZRXOG EH ZLWKRXW WKH
DQDO\]LQJ H[FHVVLYH IRUFH FODLPV XQGHU WKH (LJKWK                   HYLGHQFHl7KHUHSRUWVHWVIRUWKWKHXVHRIIRUFHFRPPLWWHHjV
$PHQGPHQW  mZKHWKHU IRUFH ZDV DSSOLHG LQ D JRRGIDLWK            ILQGLQJV DQG UHFRPPHQGDWLRQV IROORZLQJ WKH FRPPLWWHHjV
HIIRUW WR PDLQWDLQ RU UHVWRUH GLVFLSOLQH RU PDOLFLRXVO\ DQG      LQYHVWLJDWLRQRIWKHXVHRIIRUFHGXULQJWKH'5GLVWXUEDQFH
VDGLVWLFDOO\WRFDXVHKDUPl,GDW                                 DQG LV WKHUHIRUH UHOHYDQW WR SODLQWLIIVj FODLPV RI H[FHVVLYH
                                                                          IRUFH
   7KH PDLQWHQDQFH RI SULVRQ VHFXULW\ DQG GLVFLSOLQH PD\
UHTXLUH WKDW LQPDWHV EH VXEMHFWHG WR SK\VLFDO FRQWDFW                 8QGHU)HG5(YLGWKHIROORZLQJDUHQRWH[FOXGHG
DFWLRQDEOH DV DVVDXOW XQGHU FRPPRQ ODZ KRZHYHU mD                E\WKHKHDUVD\UXOHm>U@HFRUGVUHSRUWVVWDWHPHQWVRUGDWD
YLRODWLRQRIWKH(LJKWK$PHQGPHQWZLOOQHYHUWKHOHVVRFFXULI              FRPSLODWLRQV LQ DQ\ IRUP RI SXEOLF RIILFHV RU DJHQFLHV
WKH RIIHQGLQJ FRQGXFW UHIOHFWV DQ XQQHFHVVDU\ DQG ZDQWRQ           VHWWLQJIRUWKLQFLYLODFWLRQVDQGSURFHHGLQJVIDFWXDO
LQIOLFWLRQ RI SDLQl  3HOIUH\  )G DW  LQWHUQDO         ILQGLQJV UHVXOWLQJ IURP DQ LQYHVWLJDWLRQ PDGH SXUVXDQW WR
TXRWDWLRQPDUNVDQGDOWHUDWLRQVRPLWWHG)DFWRUVWRFRQVLGHU            DXWKRULW\JUDQWHGE\ODZXQOHVVWKHVRXUFHVRILQIRUPDWLRQRU
LQ GHWHUPLQLQJ ZKHWKHU WKH XVH RI IRUFH ZDV ZDQWRQ DQG           RWKHUFLUFXPVWDQFHVLQGLFDWHODFNRIWUXVWZRUWKLQHVVl2KLR
XQQHFHVVDU\ LQFOXGH WKH H[WHQW RI LQMXU\ VXIIHUHG E\ DQ           $GPLQ&RGH'VHWVIRUWKWKHSURFHGXUHVWREH
LQPDWH mWKH QHHG IRU DSSOLFDWLRQ RI IRUFH WKH UHODWLRQVKLS      XVHG LQ FRUUHFWLRQDO LQVWLWXWLRQV WR LQYHVWLJDWH XVH RI IRUFH
EHWZHHQWKDWQHHGDQGWKHDPRXQWRIIRUFHXVHGWKHWKUHDW                LQFLGHQWV$XVHRIIRUFHFRPPLWWHHLVDSSRLQWHGmZKHQHYHU
µUHDVRQDEO\SHUFHLYHGE\WKHUHVSRQVLEOHRIILFLDOVjDQGµDQ\             XVHRIIRUFHE\RQHRUPRUHHPSOR\HHVUHVXOWVLQGHDWKRIRU
                                                                          VHULRXVSK\VLFDOKDUPWRDQLQPDWHRULQDQ\FDVHZKHUHWKH
                                                                          GLUHFWRU GHHPV QHFHVVDU\l  2KLR $GPLQ &RGH  
                                                                          '7KHFRPPLWWHHmVKDOOLQWHUYLHZDOODYDLODEOHVWDII
     
       'HIHQGDQWV FRQFHGH WKDW SODLQWLII 5REE SUHVHQWV HYLGHQFH JLYLQJ
                                                                          PHPEHUVDQGLQPDWHVGLUHFWO\LQYROYHGLQWKHLQFLGHQWSOXV
ULVH WR IDFW TXHVWLRQV DV WR KLV H[FHVVLYH IRUFH FODLPV DJDLQVW &DSWDLQ
                                                                          DVPDQ\ZLWQHVVHVDVDUHQHFHVVDU\RUH[SHGLHQWl,G
%XFN DQG 2IILFHU 6KDVN\ DQG WKDW WKRVH FODLPV VKRXOG EH UHPDQGHG IRU      '7KHQ
IXUWKHU SURFHHGLQJV
    &RPEVHWDOY:LONLQVRQHWDO            1R     1R             &RPEVHWDOY:LONLQVRQHWDO      

  >D@IWHUDOOWHVWLPRQLHVKDYHEHHQWDNHQWKHWKUHHSHUVRQ         WKDWmLQQRFDVHPD\DQRIILFHULQYROYHGLQWKHLQFLGHQWRUKLV
  LQYHVWLJDWLQJ FRPPLWWHH VKDOO GHWHUPLQH ZKDW DFWXDOO\        GLUHFW VXSHUYLVRU EH RQ WKH FRPPLWWHHl  $OWKRXJK WKH
  KDSSHQHGDQGVKDOOPDNHDFRQFOXVLRQDVWRZKHWKHURU             FRPPLWWHH ODFNHG SHUVRQDO NQRZOHGJH RI WKH '5
  QRW WKH VWDII PHPEHU ZDV MXVWLILHG LQ XVLQJ IRUFH DQG    GLVWXUEDQFHWKHFRPPLWWHHEDVHGLWVUHSRUWRQLQWHUYLHZV
  ZKHWKHU RU QRW H[FHVVLYH IRUFH ZDV DSSOLHG XQGHU WKH      DQG QXPHURXV GRFXPHQWV LQFOXGLQJ DOO VWDII DQG LQPDWH
  FLUFXPVWDQFHV$EULHIVWDWHPHQWRIWKHIDFWVDVIRXQG      LQFLGHQWUHSRUWVDVZHOODVWKHLQYHVWLJDWLYHUHSRUWFRPSOHWHG
  E\WKHFRPPLWWHHDQGLWVFRQFOXVLRQDVWRWKHQHFHVVLW\          E\WKH2KLR+LJKZD\6WDWH3DWURO
  IRU XVLQJ IRUFH LWV FRQFOXVLRQ DV WR ZKHWKHU RU QRW
  H[FHVVLYHIRUFHZDVHPSOR\HGDORQJZLWKWKHUHDVRQV                $FFRUGLQJO\ZHILQGWKDWDVWKHUHFRUGQRZVWDQGVWKH
  VXSSRUWLQJ WKHVH FRQFOXVLRQV VKDOO EH ZULWWHQ RQ WKH      8VHRI)RUFH&RPPLWWHH5HSRUWLVDGPLVVLEOHXQGHU)HG5
  ERWWRPKDOIRIWKHIRUFHUHSRUW                           (YLG8SRQUHPDQGLIWKHGLVWULFWFRXUWILQGVWKDW
                                                                    mWKHVRXUFHVRILQIRUPDWLRQRURWKHUFLUFXPVWDQFHVLQGLFDWH
,G  '  7KHUHIRUH WKH 8VH RI )RUFH         ODFNRIWUXVWZRUWKLQHVVlWKHQLWPD\VWLOOH[FOXGHWKHUHSRUW
&RPPLWWHH5HSRUWFRQWDLQVWKHILQGLQJVUHVXOWLQJIURPWKH
FRPPLWWHHjV LQYHVWLJDWLRQ PDGH SXUVXDQW WR 2KLR ODZ DQG      % ([FHVVLYH)RUFH&ODLPV
IDOOVZLWKLQ)HG5(YLG
                                                                       3ODLQWLII &RPEV DVVHUWV WKDW WKH GLVWULFW FRXUW HUUHG LQ
  'HIHQGDQWVDUJXHWKDWSODLQWLIIVIDLOHGWRSURYHIRXQGDWLRQDO     JUDQWLQJ VXPPDU\ MXGJPHQW LQ IDYRU RI GHIHQGDQWV RQ KLV
IDFWVVKRZLQJWKDWWKHSXEOLFUHFRUGVDQGUHSRUWVH[FHSWLRQ         H[FHVVLYHIRUFHFODLPV'HIHQGDQWVUHVSRQGWKDWWKHGLVWULFW
DSSOLHV WR WKH 8VH RI )RUFH &RPPLWWHH 5HSRUW  ,Q KHU     FRXUWjV VXPPDU\ MXGJPHQW RQ &RPEVjV H[FHVVLYH IRUFH
GHSRVLWLRQKRZHYHU1DQF\7HZHOOWHVWLILHGWKDWVKHZDVWKH        FODLPVVKRXOGEHDIILUPHG,QDGGLWLRQGHIHQGDQWVDUJXHWKDW
FKDLUSHUVRQRIWKHXVHRIIRUFHFRPPLWWHHDSSRLQWHGE\WKH          DOWKRXJKWKHGLVWULFWFRXUWHUUHGLQGLVPLVVLQJWKHH[FHVVLYH
2'5&WRLQYHVWLJDWHWKH'5GLVWXUEDQFHDQGLGHQWLILHGWKH         IRUFH FODLPV RI SODLQWLIIV 6NDW]HV DQG 5REE IRU IDLOXUH WR
GRFXPHQW DV WKH FRPPLWWHHjV UHSRUW WKHUHE\ SURYLGLQJ D      H[KDXVW WKHLU DGPLQLVWUDWLYH UHPHGLHV WKH GLVWULFW FRXUWjV
VXIILFLHQWIRXQGDWLRQIRUWKHDSSOLFDWLRQRIWKHSXEOLFUHFRUGV     GLVPLVVDO RI WKRVH FODLPV VKRXOG EH DIILUPHG EHFDXVH WKH
DQGUHSRUWVH[FHSWLRQ                                              UHFRUGUHTXLUHGVXPPDU\MXGJPHQWRQWKHPHULWVH[FHSWIRU
                                                                    5REEjVFODLPVDJDLQVWGHIHQGDQWV%XFNDQG6KDVN\6HH
   'HIHQGDQWV IXUWKHU DUJXH WKDW WKH UHSRUW ZDV SURSHUO\     86&m2QWKHKHDULQJRIDQ\DSSHDOWKHFRXUW
H[FOXGHG EHFDXVH WKH FRPPLWWHH PHPEHUV ODFNHG SHUVRQDO        VKDOO JLYH MXGJPHQW DIWHU DQ H[DPLQDWLRQ RI WKH UHFRUG
NQRZOHGJHRI'5GLVWXUEDQFH3XUVXDQWWR)HG5(YLG           ZLWKRXWUHJDUGWRHUURUVRUGHIHFWVZKLFKGRQRWDIIHFW WKH
m>D@ZLWQHVVPD\QRWWHVWLI\WRDPDWWHUXQOHVVHYLGHQFH       VXEVWDQWLDOULJKWVRIWKHSDUWLHVl)HG5&LY3m7KH
LVLQWURGXFHGVXIILFLHQWWRVXSSRUWDILQGLQJWKDWWKHZLWQHVV      FRXUW DW HYHU\ VWDJH RI WKH SURFHHGLQJ PXVW GLVUHJDUG DQ\
KDVSHUVRQDONQRZOHGJHRIWKHPDWWHUl8QGHUGHIHQGDQWVj           HUURURUGHIHFWLQWKHSURFHHGLQJZKLFKGRHVQRWDIIHFWWKH
DUJXPHQWDQLQYHVWLJDWLYHUHSRUWZRXOGQHYHUEHDGPLVVLEOH         VXEVWDQWLDOULJKWVRIWKHSDUWLHVl
DVVXFKUHSRUWVW\SLFDOO\DUHQRWSUHSDUHGE\SHUVRQVGLUHFWO\
LQYROYHG LQ WKH PDWWHU XQGHU LQYHVWLJDWLRQ  ,QYHVWLJDWLYH      :HUHYLHZGHQRYRWKHGLVWULFWFRXUWjVJUDQWRIVXPPDU\
UHSRUWVmHPERG\WKHUHVXOWVRILQYHVWLJDWLRQDQGDFFRUGLQJO\        MXGJPHQW%DVVY5RELQVRQ)GWK&LU
DUH RIWHQ QRW WKH SURGXFW RI WKH GHFODUDQWjV ILUVWKDQG        6XPPDU\ MXGJPHQW LV SURSHU mLI WKH SOHDGLQJV
NQRZOHGJHl0F&RUPLFNRQ(YLGHQFHWKHG          GHSRVLWLRQV DQVZHUV WR LQWHUURJDWRULHV DQG DGPLVVLRQV RQ
2KLR$GPLQ&RGH'VSHFLILFDOO\SURYLGHV            ILOHWRJHWKHUZLWKWKHDIILGDYLWVLIDQ\VKRZWKDWWKHUHLVQR
                                                                    JHQXLQHLVVXHDVWRDQ\PDWHULDOIDFWDQGWKDWWKHPRYLQJSDUW\