Court Opinion

ID: 2970432
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:12:44.686531+00
Date Added: 2024-06-11T15:01:55.349524
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
           3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

   (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
               )LOH 1DPH DS

81,7('67$7(6&28572)$33($/6
             )257+(6,;7+&,5&8,7
               BBBBBBBBBBBBBBBBB

       1R                ;
81,7(' 67$7(6 2) $0(5,&$          
          3ODLQWLII$SSHOOHH      
                                     1RV
                                     
           Y                       !
                                   
                                   
3$8/ &255$'2                      
         'HIHQGDQW$SSHOODQW 
                                   
     1RV             
                                   
81,7(' 67$7(6 2) $0(5,&$ 
           3ODLQWLII$SSHOODQW 
               &URVV$SSHOOHH 
                                   
           Y                      
                                   
                                   
$17+21< &255$'2                   
          'HIHQGDQW$SSHOOHH 
              &URVV$SSHOODQW 
                                   
                                  1
      $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
     IRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDW'HWURLW
 1RnsRKQ&RUEHWW2j0HDUD'LVWULFWsXGJH
                $UJXHG$SULO

                           
       8QLWHG6WDWHVY                  1RV
        &RUUDGRHWDO

            'HFLGHGDQG)LOHG6HSWHPEHU
    %HIRUH'$8*+75(<DQG0225(&LUFXLWsXGJHV
               (&212086'LVWULFWsXGJH
                       BBBBBBBBBBBBBBBBB
                             &2816(/
$5*8('5REHUW00RUJDQ'HWURLW0LFKLJDQ&DUROH0
6WDQ\DU'HWURLW0LFKLJDQIRU'HIHQGDQWV.DWKOHHQ0RUR
1HVL$66,67$1781,7('67$7(6$77251(<'HWURLW
0LFKLJDQIRU3ODLQWLII21%5,() 5REHUW00RUJDQ
'HWURLW0LFKLJDQ&DUROH06WDQ\DU'HWURLW0LFKLJDQIRU
'HIHQGDQWV  .DWKOHHQ 0RUR 1HVL $66,67$17 81,7('
67$7(6$77251(<'HWURLW0LFKLJDQIRU3ODLQWLII
                       BBBBBBBBBBBBBBBBB
                           23,1,21
                       BBBBBBBBBBBBBBBBB
  .$5(11(/6210225(&LUFXLWsXGJH'HIHQGDQWV
3DXO &RUUDGR m3DXOl DQG $QWKRQ\ &RUUDGR m$QWKRQ\l
DSSHDOWKHGLVWULFWFRXUWjVUHLQVWDWHPHQWRIWKHLUFRQYLFWLRQV
IROORZLQJUHPDQGDQGWKHLUVHQWHQFHVIROORZLQJUHVHQWHQFLQJ
7KH8QLWHG6WDWHVFURVVDSSHDOV$QWKRQ\jVVHQWHQFH)RUWKH
IROORZLQJ UHDVRQV ZH $)),50 WKH UHLQVWDWHPHQW RI WKH
&RUUDGRVjFRQYLFWLRQVDQG3DXOjVVHQWHQFHEXWZH9$&$7(
$QWKRQ\jVVHQWHQFHDQG5(0$1'WRWKHGLVWULFWFRXUWIRU
UHVHQWHQFLQJ
                       ,%$&.*5281'
  3DXODQG$QWKRQ\DORQJZLWKILIWHHQRWKHUVZHUHFKDUJHG
LQDWZHQW\ILYHFRXQWLQGLFWPHQWWKDWLQFOXGHGWZRFRXQWV

    
     7KH +RQRUDEOH 3HWHU & (FRQRPXV 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU
WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ
1RV                   8QLWHG6WDWHVY      
                                         &RUUDGRHWDO

XQGHU WKH 5DFNHWHHU ,QIOXHQFHG DQG &RUUXSW 2UJDQL]DWLRQV
$FW m5,&2l  86&   HW VHT DQG VHYHUDO
H[WRUWLRQFRQVSLUDF\DQGILUHDUPFRXQWV6HH8QLWHG6WDWHV
Y >3DXO@ &RUUDGR  )G   WK &LU 
>m&RUUDGR,l@8QLWHG6WDWHVY>$QWKRQ\sRVHSK@&RUUDGR
1RV	:/DW
WK&LU
6HSW   >m&RUUDGR ,,l@  3DXO DQG $QWKRQ\ ZHUH
DOOHJHGO\ PHPEHUV RI WKH 'HWURLW &RVD 1RVWUD 3DXO WKH
QHSKHZRI$QWKRQ\HQJDJHGLQDVFKHPHZLWK1RYH7RFFR
WRmVKDNHGRZQlERRNPDNHUVLQWKH'HWURLWPHWURSROLWDQDUHD
DOOHJHGO\XQGHUWKHVXSHUYLVLRQRI$QWKRQ\D0DILDmFDSRl
DQGRWKHUV7KHH[WHQVLYHXQGHUO\LQJIDFWVRIWKHFDVHFDQEH
IRXQGLQWKHRSLQLRQVFLWHGVXSUD6HHDOVR8QLWHG6WDWHVY
&RUUDGR  )G  WK &LU  IRUIHLWXUHUHODWHG
LVVXHV>m&RUUDGR,9l@8QLWHG6WDWHVY&RUUDGR)G
WK&LUVDPH>m&RUUDGR,,,l@8QLWHG6WDWHVY
7RFFR)GWK&LUDSSHDORIFRFRQVSLUDWRU
sDFN7RFFR
   $IWHUDMXU\WULDO3DXOZDVFRQYLFWHGRQ&RXQWV5,&2
FRQVSLUDF\86&G+REEV$FWFRQVSLUDF\
YLRODWLRQ86&DFRQVSLUDF\WRLQWHUIHUHZLWK
FRPPHUFH E\ H[WRUWLRQ      +REEV $FW
VXEVWDQWLYH YLRODWLRQV LQWHUIHUHQFH ZLWK FRPPHUFH E\
H[WRUWLRQ    +REEV $FW DWWHPSW YLRODWLRQV
DWWHPSWHGLQWHUIHUHQFHZLWKFRPPHUFHE\H[WRUWLRQDQG
XVLQJRUFDUU\LQJDILUHDUPGXULQJRULQUHODWLRQWRDFULPH
RI YLROHQFH  86&  F VHH sRLQW $SSHQGL[
ms$lDW$QWKRQ\ZDVFRQYLFWHGRI&RXQWVDQG
5,&2FRQVSLUDF\WRFROOHFWDQLOOHJDOGHEWFRQVSLUDF\
WR LQWHUIHUH ZLWK FRPPHUFH E\ H[WRUWLRQ    
DLGLQJ DQG DEHWWLQJ LQWHUIHUHQFH ZLWK FRPPHUFH E\
H[WRUWLRQDLGLQJDQGDEHWWLQJDWWHPSWHGLQWHUIHUHQFHZLWK
FRPPHUFHE\H[WRUWLRQDQGREVWUXFWLRQRIMXVWLFHVHH
s$DW3DXOZDVVHQWHQFHGWRQLQHW\VHYHQPRQWKVj
LPSULVRQPHQWSOXVVL[W\PRQWKVWRUXQFRQVHFXWLYHO\EDVHG
        8QLWHG6WDWHVY                    1RV                1RV               8QLWHG6WDWHVY   
         &RUUDGRHWDO                                                                                                &RUUDGRHWDO

RQWKHILUHDUP FRXQWV$QWKRQ\ZDVVHQWHQFHGWRILIW\RQH                         &RUUDGRjV VHQWHQFH DQG 5(0$1' WKDW FDVH IRU IXUWKHU
PRQWKVjLPSULVRQPHQW                                                             SURFHHGLQJVFRQVLVWHQWZLWKWKLVRSLQLRQ
   3DXO DQG $QWKRQ\ WKHQ DSSHDOHG WKHLU FRQYLFWLRQV DQG
VHQWHQFHV WR WKLV FRXUW  :H YDFDWHG ERWK GHIHQGDQWVj
FRQYLFWLRQVKROGLQJWKDWWKHGLVWULFWFRXUWHUUHGLQQRWKROGLQJ
D5HPPHUKHDULQJWRGHWHUPLQHZKHWKHUWKHMXU\YHUGLFWKDG
EHHQ WDLQWHG E\ DQ DWWHPSWHG DFW RI MXU\ WDPSHULQJ  6HH
&RUUDGR,)GDW&RUUDGR,,:/
DW
:HDOVRLQVWUXFWHGWKDWLIWKHGLVWULFWFRXUWUHLQVWDWHG
WKH &RUUDGRVj FRQYLFWLRQV WKH GLVWULFW FRXUW VKRXOG WKHQ
UHVHQWHQFHWKH&RUUDGRV:LWKUHVSHFWWR3DXOjVVHQWHQFHZH
KHOG WKDW WKH GLVWULFW FRXUW IDLOHG WR FRPSO\ ZLWK WKH
UHTXLUHPHQWVRI)HGHUDO5XOHRI&ULPLQDO3URFHGXUHF
ZKLFKUHTXLUHVDVHQWHQFLQJFRXUWWRPDNHDGHTXDWHILQGLQJV
RI IDFW LQ VHQWHQFLQJ  6HH &RUUDGR ,  )G DW 
,QVWHDG ZH FRQFOXGHG WKDW WKH GLVWULFW FRXUW KDG mHLWKHU
VXPPDULO\DGRSWHGWKHILQGLQJVRIWKHSUHVHQWHQFHUHSRUWRU
VLPSO\ GHFODUHG WKDW WKH HQKDQFHPHQW LQ TXHVWLRQ ZDV
VXSSRUWHGE\DSUHSRQGHUDQFHRIWKHHYLGHQFHl,G
  ,QDGGLWLRQWKHJRYHUQPHQWDSSHDOHG$QWKRQ\jVVHQWHQFH
:HKHOGWKDWWKHGLVWULFWFRXUWHUUHGEHFDXVHJLYHQ$QWKRQ\jV
FRQYLFWLRQ EDVHG RQ WKH +REEV $FW FRQVSLUDF\ DQG
VXEVWDQWLYHH[WRUWLRQFKDUJHVWKHGLVWULFWFRXUWKDGIDLOHGWR
HQKDQFHKLVVHQWHQFHEDVHGRQKLVVXSHUYLVRU\UROH7KXVZH
KHOGWKDWRQUHPDQG$QWKRQ\&RUUDGRjVVHQWHQFHVKRXOGEH
HQKDQFHG E\ WKUHH OHYHOV SXUVXDQW WR WKH 8QLWHG 6WDWHV
6HQWHQFLQJ*XLGHOLQHVm866*l%E6HH
&RUUDGR,,:/DW
,QDGGLWLRQWKHGLVWULFW
FRXUWZDVLQVWUXFWHGWRPDNHIDFWXDOILQGLQJVZLWKUHVSHFWWR
ZKHWKHUWKHDFWLRQVRI3DXO&RUUDGRDQG1RYH7RFFRZKLFK

    
     %HFDXVH WKH GLVWULFW FRXUW UHOLHG RQ WKH  YHUVLRQ RI WKH 8QLWHG
6WDWHV   6HQWHQFLQJ   *XLGHOLQHV   LQ   VHQWHQFLQJ   $QWKRQ\   DQG   3DXO   DOO
UHIHUHQFHV WR WKH *XLGHOLQHV DQG WKH &RPPHQWDU\ WR WKH *XLGHOLQHV LQ WKLV
RSLQLRQ DUH WR WKH  YHUVLRQ

    
     6HH 5HPPHU Y 8QLWHG 6WDWHV        86  
    8QLWHG6WDWHVY                  1RV          1RV                   8QLWHG6WDWHVY      
      &RUUDGRHWDO                                                                                            &RUUDGRHWDO

IRU WKH FULPLQDOLW\ RI WKH ERRNPDNHUV WKHUH ZRXOG EH QR        WULJJHUHG WKH VSHFLILF RIIHQVH FKDUDFWHULVWLF HQKDQFHPHQWV
RIIHQVHRIFRQYLFWLRQLQYROYLQJ3DXO&RUUDGRl                        IRXQG LQ 866*  %E %E$L DQG
                                                                        %E ZHUH UHDVRQDEO\ IRUHVHHDEOH WR $QWKRQ\
   7KHSUHVHQWFDVHLVGLVWLQJXLVKDEOHIURP8QLWHG6WDWHVY            &RUUDGR6HH&RUUDGR,,:/DW

'DLOH\)GWK&LUZKLFK3DXO&RUUDGR
FLWHVLQKLVEULHI,Q'DLOH\WKHH[WRUWLRQDWLVVXHKDGEHHQ           2QUHPDQGWKHGLVWULFWFRXUWILUVWKHOGD5HPPHUKHDULQJ
SURYRNHGEHFDXVHm'DLOH\jVYLFWLPKDGGHIUDXGHGKLPRXWRI              ZKLFKLVGLVFXVVHGDWOHQJWKLQIUD7KHFRXUWFRQFOXGHGWKDW
WHQV RI WKRXVDQGV RI GROODUVl  ,G DW   7KHUH LV QR   WKH YHUGLFW KDG QRW EHHQ WDLQWHG E\ WKH DWWHPSWHG MXU\
LQGLFDWLRQLQWKLVUHFRUGWKDWDQ\RI3DXO&RUUDGRjVH[WRUWLRQ          WDPSHULQJDQGWKXVUHLQVWDWHGWKH&RUUDGRVjFRQYLFWLRQV7KH
YLFWLPVKDGGHIUDXGHGKLPRUSURYRNHGWKHH[WRUWLRQLQDQ\              FRXUWWKHQUHVHQWHQFHGWKH&RUUDGRV
ZD\  7KXV KH VKRXOG QRW UHFHLYH WKH EHQHILW RI WKLV
GRZQZDUGGHSDUWXUH&I8QLWHG6WDWHVY%LJHORZ)G             $3DXO&RUUDGRjV5HVHQWHQFLQJ
  WK &LU  m6HFWLRQ . FRQWHPSODWHV
VLWXDWLRQVZKHUHWKHDFWLRQVRIWKHYLFWLPSURYRNHWKHFRQGXFW            3ULRUWRUHVHQWHQFLQJDQHYLGHQWLDU\KHDULQJZDVKHOGDW
RIWKHRIIHQVH+HUHWKHYLFWLPGLGQRWHQJDJHLQWKH          ZKLFK 1RYH 7RFFR DQRWKHU GHIHQGDQW LQ WKH 5,&2 FDVH
EHKDYLRUFRQWHPSODWHGE\>WKDWSURYLVLRQ@>7KHYLFWLP@           WHVWLILHGZLWKUHVSHFWWRVRPHRIWKHIDFWXDOILQGLQJVUHPDQGHG
ZDVDWZRUVWDQXQSOHDVDQWDQGXQWUXVWZRUWK\SHUVRQ7KLV              WRWKHGLVWULFWFRXUW1RYH7RFFRZDVFDOOHGDVDZLWQHVVE\
GRHVQRWH[FXVHEHDWLQJKLPQRUWKHH[WRUWLRQRIKLVIXQGVl          WKH GHIHQVH DOWKRXJK KH LV QRZ FRRSHUDWLQJ ZLWK WKH
FLWDWLRQVRPLWWHGFHUWGHQLHG86                JRYHUQPHQW2QGLUHFWH[DPLQDWLRQ1RYH7RFFRWHVWLILHG
                                                                        DPRQJRWKHUWKLQJVWKDWKHUDWKHUWKDQ3DXOKDGUHFUXLWHG
  7KHVDPHFRQFOXVLRQKROGVIRUWKHFRQVSLUDFLHVWRPXUGHU              YDULRXV LQGLYLGXDOV LQWR WKHLU H[WRUWLRQ VFKHPH DQG WKDW
+DUU\m7DFRl%RZPDQDQGsHVXV0RUDOHV0RUDOHVZDVD                   3DXOjVUROHLQWKHVFKHPHGHFOLQHGRYHUWLPHWKDWKHGLG
ERRNPDNHUZKRUHIXVHGWRSD\DQ\mVWUHHWWD[lWR3DXODQG               QRWVHH3DXOZLWKDKDQGJXQGXULQJWKHH[WRUWLRQRI*HRUJH
1RYH2QDSSHDO3DXODUJXHVWKDWWKHFRQVSLUDF\WRNLOOKLP           6RSKLHDDQGWKDWWKHUHKDGQHYHUEHHQDSODQWRNLGQDSRU
ZDVmPHUHWDONlDQGWKDWWKHLUGULYLQJE\KLVEXVLQHVVZDV             PXUGHU5DP]L<DOGRRRUsHVXV0RUDOHV7KHVHIDFWXDOLVVXHV
PHUHO\ WR mVFRSH LW RXWl  $SSHOODQWjV %U DW   7KH    ZHUHUHOHYDQWWRWKHVSHFLILFRIIHQVHFKDUDFWHULVWLFVDWLVVXHLQ
UHFRUGLV FOHDUKRZHYHUWKDW0RUDOHVGLGQRWSURYRNHWKH             3DXOjVUHVHQWHQFLQJ
FRQVSLUDF\WRPXUGHUKLP3DXOKDVDPXFKEHWWHUDUJXPHQW
ZLWKUHVSHFWWR%RZPDQZKRZDVDUDWKHUGDQJHURXVILJXUH                7KH GLVWULFW FRXUW WKHQ UHVHQWHQFHG 3DXO WR QLQHW\VHYHQ
7KH UHFRUG LQGLFDWHV KRZHYHU WKDW WKH EDVLV IRU WKH           PRQWKVj LPSULVRQPHQW SOXV VL[W\ PRQWKV WR UXQ
FRQVSLUDF\WRNLOO%RZPDQZDVEDVHGRQWKHODWWHUjVWKHIWRI            FRQVHFXWLYHO\6HHs$DW5HVHQWHQFLQJ0HP,QLWV
DGLFHJDPHIURPWKH7RFFRRUJDQL]DWLRQ6HHs$DW              ZULWWHQPHPRUDQGXPWKHGLVWULFWFRXUWVWDWHG
6HQWjJ0HPR7KLVLVQRWDSURSHUJURXQGIRUDGRZQZDUG
GHSDUWXUHLQWKHSUHVHQWFDVH                                               7KH&RXUWRI$SSHDOV'HFLVLRQUHPDQGLQJWKLVFDVH
                                                                          GLUHFWHGWKLVFRXUWWRPDNHILQGLQJVRIIDFWVVXSSRUWLQJ
                     ,,,&21&/86,21                                     LWVFRQFOXVLRQVZLWKUHJDUGWRWKHOHDGHUVKLSUROHVRIWKH
                                                                          GHIHQGDQW WKH LQYROYHPHQW RI WKH GHIHQGDQW WR
  )RU WKH IRUHJRLQJ UHDVRQV ZH $)),50 WKH &RUUDGRVj               FRQVSLUDF\ WR PXUGHU %RZPDQ DQG WKH GHWHUPLQDWLRQ
FRQYLFWLRQV DQG 3DXOjV VHQWHQFH 9$&$7( $QWKRQ\                      WKDWWKHGHIHQGDQWZDVDUPHGZKHQKHH[WRUWHGPRQH\
                                                                          IURP*HRUJH6RSKLHD
      8QLWHG6WDWHVY               1RV       1RV                     8QLWHG6WDWHVY      
       &RUUDGRHWDO                                                                                        &RUUDGRHWDO

      3ULRUWRVHQWHQFLQJWKHGHIHQGDQWjVDWWRUQH\UHTXHVWHG      GHPDQG ZDV WR EH PDGH  %DVHG RQ 3DQDURjV DQG &LQRjV
    WKDWWKHFRXUWDOVRFRQVLGHUWKHIDFWWKDWWKHGHIHQGDQWjV     UHSXWDWLRQV DV PHPEHUV RI DQ RUJDQL]HG FULPH IDPLO\ WKH
    RQO\YLFWLPVZHUHVRWKHGHIHQGDQWDUJXHGWKHPVHOYHV         GLVWULFWFRXUWGLGQRWFOHDUO\HUUE\FRQFOXGLQJWKDWWKHLUSODQ
    HQJDJHGLQFULPLQDODFWLYLW\                                  WR EH SUHVHQW ZKHQ WKH GHPDQG ZDV PDGH RQ %OLW]VWHLQ
                                                                   FRQVWLWXWHGDQDJUHHPHQWWRPDNHDQLPSOLFLWWKUHDWRIERGLO\
s$DW7KHGLVWULFWFRXUWILUVWIRXQGWKDWWKHWZROHYHO   LQMXU\LIKHUHIXVHGWRDFFHGHWRWKHGHPDQGl6HHDOVR
DGMXVWPHQWVEDVHGRQ3DXO&RUUDGRjVOHDGHUVKLSUROHSXUVXDQW      8QLWHG6WDWHVY'L6DOYR)GG&LU
WR866*%FZHUHVXSSRUWHGE\WULDOWHVWLPRQ\DQG      KROGLQJWKDWLPSOLHGWKUHDWFRXOGEHIRXQGZKHUHPDILRVRjV
WKHWHVWLPRQ\RI1RYH7RFFRDWWKHUHVHQWHQFLQJKHDULQJ,Q       UHSXWDWLRQDVHVWDEOLVKHGIURPKLVRZQVWDWHPHQWVmUHOLHYHG
VXPWKHGLVWULFWFRXUWIRXQGWKDW                                KLPIURPDQ\QHFHVVLW\RIXWLOL]LQJH[SUHVVWKUHDWVl8QLWHG
                                                                   6WDWHV Y =DQQLQR  )G   VW &LU KROGLQJ RQ
    'HIHQGDQW &RUUDGR UHFUXLWHG sRKQ sDUMRVD DQG 7RP         VXIILFLHQF\RIWKHHYLGHQFHLQFRQYLFWLRQIRUORDQVKDUNLQJ
    /HQKDUG WR DVVLVW LQ WKH H[WRUWLRQ RI 5DP]L <DOGRR    WKDWm>H@YLGHQFHRIDGHIHQGDQWjVQH[XVWRRUJDQL]HGFULPH
    'HIHQGDQW&RUUDGRDOVRUHFUXLWHGsRKQsDUMRVDWRDVVLVWLQ     FDQEHWDNHQLQWRDFFRXQWLQHYDOXDWLQJ>WKH@UHDVRQDEOHQHVV
    WKHH[WRUWLRQRIPRQH\IURP*HRUJH<DWRRPDDQG6DP             RI D GHEWRUjV IHDUVl DQG WKDW GHIHQGDQWjV RZQ VWDWHPHQWV
    0DUWLQ3DXO&RUUDGRDORQJZLWK1RYH7RFFRXWLOL]HG         mHVWDEOLVKHG WKDW KH ZDV D &DSR 5HJLPH LQ WKH 3DWULDUFD
    3HWHUsDFN&RUUDGRDQG3HWHU7RFFRWRDVVLVWWKHPLQWKH       )DPLO\lFHUWGHQLHG86)RUWKLVUHDVRQ
    H[WRUWLRQ RI PRQH\ IURP *HRUJH 6RSKLHD  7KH FRXUW     WKHVHILQGLQJVDUHQRWFOHDUO\HUURQHRXV
    ILQGVDOORIWKHVH%FLQFUHDVHVLQRIIHQVHOHYHODUH
    VXSSRUWHGE\DSUHSRQGHUDQFHRIWKHHYLGHQFH                    )LQDOO\WKHGLVWULFWFRXUWGLGQRWHUULQGHFOLQLQJWRGHSDUW
                                                                   GRZQZDUG EDVHG RQ WKH FULPLQDOLW\ RI 3DXO &RUUDGRjV
s$ DW   7KLV FRQFOXVLRQ ZDV IROORZHG E\ D       H[WRUWLRQ YLFWLPV  %HFDXVH WKH GLVWULFW FRXUW UHMHFWHG WKLV
GLVFXVVLRQ RI VSHFLILF ILQGLQJV ZLWK UHVSHFW WR HDFK        DUJXPHQWmRQWKHODZlZLWKRXWIXUWKHUHODERUDWLRQVHHs$DW
HQKDQFHPHQW                                                       UDWKHUWKDQRQWKHIDFWVLWVGHFLVLRQLVUHYLHZDEOHRQ
                                                                   DSSHDO
  7KHGLVWULFWFRXUWWKHQ IRXQGE\DSUHSRQGHUDQFHRIWKH
HYLGHQFHWKDW3DXO&RUUDGRSDUWLFLSDWHGLQDFRQVSLUDF\WR           6HFWLRQ.SURYLGHVIRUDGRZQZDUGGHSDUWXUHEDVHG
PXUGHU+DUU\m7DFRl%RZPDQWKHSUHVLGHQWRIWKH2XWODZV           RQWKHYLFWLPjVZURQJIXOFRQGXFW,WLVOLPLWHGKRZHYHUWR
0RWRUF\FOH&OXEWKDW3DXO&RUUDGRZDVDUPHGGXULQJWKH            VLWXDWLRQVZKHUHmWKHYLFWLPjVZURQJIXOFRQGXFWFRQWULEXWHG
H[WRUWLRQRI*HRUJH6RSKLHDDQGWKDWmWKHIDFWWKDWWKHRQO\      VLJQLILFDQWO\ WR SURYRNLQJ WKH RIIHQVH EHKDYLRUl 866*
YLFWLPVRIWKHGHIHQGDQWjVFULPLQDODFWLYLWLHVZHUHWKHPVHOYHV     .DQGWKHFRQVLGHUDWLRQVOLVWHGLQWKHSURYLVLRQRQO\
HQJDJHG LQ FULPLQDO DFWLYLW\ DV ERRNPDNHUVl ZDV QRW DQ     UHLQIRUFHWKLVOLPLWDWLRQ6HHHJLGEmDQ\HIIRUWVE\WKH
DSSURSULDWHEDVLVIRUDGRZQZDUGGHSDUWXUHSXUVXDQWWRWKH         GHIHQGDQW WR SUHYHQW FRQIURQWDWLRQl LG F mWKH GDQJHU
6HQWHQFLQJ*XLGHOLQHVs$DW                               UHDVRQDEO\SHUFHLYHGE\WKHGHIHQGDQWl2QWKHIDFWVRIWKH
                                                                   SUHVHQWFDVHZHWKLQNWKDWLWLVULGLFXORXVIRU3DXO&RUUDGRWR
%$QWKRQ\&RUUDGRjV5HVHQWHQFLQJ                                 DUJXHWKDWWKHXQODZIXOERRNPDNLQJRIKLVYLFWLPVSURYRNHG
                                                                   KLPWRHQJDJHLQH[WRUWLRQ,QGHHGRQDSSHDOKHGRHVQRW
  $W UHVHQWHQFLQJ WKH GLVWULFW FRXUW VHQWHQFHG $QWKRQ\      DUJXHSURYRFDWLRQEXWLQVWHDGWKDWWKHLOOHJDODFWLYLWLHVZHUH
&RUUDGRWRVHYHQW\PRQWKVjLPSULVRQPHQW:LWKUHVSHFWWR          DEXWIRUFDXVHRIKLVDFWLYLW\6HH$SSHOODQWjV%UDWm%XW
WKH&RXQW5,&2FRQVSLUDF\WKHGLVWULFWFRXUWFRQFOXGHG
    8QLWHG6WDWHVY                  1RV          1RV                            8QLWHG6WDWHVY           
      &RUUDGRHWDO                                                                                                     &RUUDGRHWDO

DQLPSOLHGWKUHDWRIERGLO\LQMXU\LQYROYHGLQWKHHQFRXQWHU           WKDW$QWKRQ\VKRXOGEHKHOGUHVSRQVLEOHIRURQO\RQHRIWKH
0RQURWHVWLILHGIRUH[DPSOHWKDWm>3DXO&RUUDGR@VDLGUHOD[         VL[ XQGHUO\LQJ UDFNHWHHULQJ DFWLYLWLHV DOOHJHG LQ WKH
LIZHZHUHJRLQJWRNLOO\RX\RXjGEHGHDGDOUHDG\l6HHs$         LQGLFWPHQWREVWUXFWLRQRIMXVWLFHFKDUJHGLQ2YHUW$FWRI
DW7KHGLVWULFWFRXUWGLGQRWHUULQFRQFOXGLQJWKDWWKLV        &RXQWDQG&RXQW6HHs$DW7KHGLVWULFWFRXUW
VWDWHPHQWFRQVWLWXWHGDQLPSOLHGWKUHDW&I866*%         GHFOLQHGWRKROG$QWKRQ\UHVSRQVLEOHXQGHUWKH5,&2FRXQW
DSSOLFQRWHm$QDPELJXRXVWKUHDWVXFKDVµSD\XSRUHOVHj         IRULQWHUDOLDWKHH[WRUWLRQFRQVSLUDF\DQGWKH VXEVWDQWLYH
RUGLQDULO\VKRXOGEHWUHDWHGXQGHUWKLVVHFWLRQl               DFWV RI H[WRUWLRQ ILQGLQJ WKHVH H[WRUWLRQ DFWLYLWLHV
                                                                        LQGHSHQGHQWRIWKHODUJHU5,&2FRQVSLUDF\
   7KHUHFRUGDOVRLQGLFDWHVWKDW3DXO1RYHDQG6FLDUURWWD
WRRN0RQURmIRUDULGHls$DWDQGWKDW0RQURZDV                  1H[WLQFDOFXODWLQJ$QWKRQ\jVVHQWHQFHRQ&RXQWWKH
IRUFHGLQWRWKHFDUIRUSXUSRVHVRIWKLVmULGHlDJDLQVWKLVZLOO       H[WRUWLRQ FRQVSLUDF\ FKDUJH WKH GLVWULFW FRXUW LQFOXGHG DV
7KH 6HQWHQFLQJ *XLGHOLQHV GHILQH mDEGXFWHGl DV PHDQLQJ            XQGHUO\LQJ DFWV WKH ILYH VXEVWDQWLYH H[WRUWLRQ FRXQWV IRU
mWKDW D YLFWLP ZDV IRUFHG WR DFFRPSDQ\ DQ RIIHQGHU WR D       ZKLFK$QWKRQ\ZDVFRQYLFWHG6HHs$DW6RSKLHD
GLIIHUHQWORFDWLRQ)RUH[DPSOHDEDQNUREEHUjVIRUFLQJD              <DOGRR      <DWRRPD  0DUWLQ DQG
EDQNWHOOHUIURPWKHEDQNLQWRDJHWDZD\FDUZRXOGFRQVWLWXWH           $EUDKDP:LWKUHVSHFWWRWKHIRXUVXEVWDQWLYHH[WRUWLRQ
DQDEGXFWLRQl866*%DSSOLFQRWHD7KXVWKH         FRXQWV IRU ZKLFK $QWKRQ\ ZDV QRW FRQYLFWHG WKH GLVWULFW
ILQGLQJWKDW0RQURZDVmDEGXFWHGlZDVQRWFOHDUO\HUURQHRXV            FRXUWFRQFOXGHGWKDWm>Q@RHYLGHQFH>@WLH>G@$QWKRQ\&RUUDGR
7KDW0RQURZDVQRWWDNHQDJUHDWGLVWDQFHLQWKHFDUDIWHU             WRWKH>@DFWVlLQYROYHGLQWKH0RQUR:LHU]ED0RUDOHVDQG
EHLQJIRUFHGLQWRLWDJDLQVWKLVZLOOGRHVQRWXQGHUPLQHWKLV          sRKQVH[WRUWLRQVs$DW0RQUR:LHU]ED
FRQFOXVLRQ                                                             0RUDOHVsRKQVDQGWKXVWKDWWKHVHH[WRUWLRQVGLGQRW
                                                                        FRQVWLWXWH XQGHUO\LQJ DFWV IRU VHQWHQFLQJ RQ WKH H[WRUWLRQ
   6LPLODUHYLGHQFHVXSSRUWVWKHGLVWULFWFRXUWjVILQGLQJVZLWK         FRQVSLUDF\FRXQW,QDGGLWLRQWKHGLVWULFWFRXUWFRQFOXGHG
UHVSHFW WR WKH WKUHDW HQKDQFHPHQWV IRU WKH <DOGRR DQG           WKDWm>Z@LWKUHVSHFWWRWKHVSHFLILFRIIHQVHFKDUDFWHULVWLFVIRU
:LHU]ED FRXQWV  $V WKH JRYHUQPHQW DUJXHV WKH UHOHYDQW         XVHRIWKUHDWVSRVVHVVLRQRIDILUHDUPGLVFKDUJHRIDILUHDUP
JXLGHOLQHSURYLVLRQVWDWHVWKDWm>H@YHQLIWKHWKUHDWGRHVQRWLQ       WKUHDWRIGHDWKDEGXFWLRQDQGDPRXQWRIORVV$QWKRQ\
LWVHOI LPSO\ YLROHQFH WKH SRVVLELOLW\ RI YLROHQFH RU VHULRXV
DGYHUVHFRQVHTXHQFHVPD\EHLQIHUUHGIURPWKHFLUFXPVWDQFHV
RI WKH WKUHDW RU WKH UHSXWDWLRQ RI WKH SHUVRQ PDNLQJ LWl         
                                                                              $V
866*%EDSSOLFQRWHHPSKDVLVDGGHG7KH                      ZH QRWHG DERYH $QWKRQ\ ZDV DFWXDOO\ FRQYLFWHG RI &RXQW 
                                                                        REVWUXFWLRQ RI MXVWLFH LQ YLRODWLRQ RI  86&   DQG  86&  
UHFRUGLQGLFDWHVWKDW3DXO&RUUDGRDQG1RYH7RFFRWUDGHGRQ             +RZHYHU WKH GLVWULFW FRXUW GLG QRW LQGHSHQGHQWO\ VHQWHQFH $QWKRQ\ RQ
WKHUHSXWDWLRQRIWKH0DILDLQH[WRUWLQJWKHLUYLFWLPV2WKHU          WKLV &RXQW WKH FRXUW MXVW LQFOXGHG &RXQW  DV UHOHYDQW FRQGXFW LQ LWV

FRXUWVKDYHKHOGWKDWDQH[WRUWLRQLVWjVFRQQHFWLRQWRRUJDQL]HG         FDOFXODWLRQ   RI   $QWKRQ\jV   &RXQW      5,&2   FRQVSLUDF\   RIIHQVH   OHYHO

FULPHFDQHVWDEOLVKWKHH[LVWHQFHRIDQLPSOLHGWKUHDW6HH            %HFDXVH QHLWKHU WKH JRYHUQPHQW QRU WKH GHIHQGDQW DSSHDOV WKLV WUHDWPHQW

8QLWHG6WDWHVY3DQDUR)GWK&LU           RI &RXQW  ZH GR QRW DGGUHVV LW

m7KH UHFRUG UHIOHFWV WKDW 3DQDUR &LQR DQG WKH RWKHU               
FRQVSLUDWRUV UHSHDWHGO\ UHDVVXUHG 'H/XFD WKDW %OLW]VWHLQ                 7KH GLVWULFW FRXUW VWDWHG LQ UHJDUG WR WKH VXEVWDQWLYH FRXQWV RI
                                                                        H[WRUWLRQ WKDW m>I@RU SXUSRVHV RI FDOFXODWLQJ WKH JXLGHOLQHV WKHVH ILYH
ZRXOGFDSLWXODWHWRWKHGHPDQGWKDW%OLW]VWHLQUHOLQTXLVKKLV           VXEVWDQWLYH FRXQWV ZLOO EH PHUJHG LQWR &RXQW  WR DYRLG GRXEOH FRXQWLQJl
LQWHUHVWVLQWKHDXWRVKRSDQGORDQVKDUNLQJEXVLQHVVHVDQGKH          s$ DW  %HFDXVH QHLWKHU WKH JRYHUQPHQW QRU WKH GHIHQGDQW DSSHDOV

ZRXOGGRWKDWEHFDXVHRIWKHFRQVSLUDWRUVjSUHVHQFHZKHQWKH            WKLV mPHUJHUl RI &RXQWV     DQG  LQWR &RXQW  ZH GR QRW
                                                                        DGGUHVV LW
     8QLWHG6WDWHVY                 1RV          1RV                    8QLWHG6WDWHVY     
      &RUUDGRHWDO                                                                                            &RUUDGRHWDO

&RUUDGR FRXOG QRW KDYH IRUHVHHQ DQ\ RI WKH VSHFLILF            1RYH7RFFRDQG3DXOGLIIHUHQWO\RQWKLVGLPHQVLRQ%XWLWLV
FKDUDFWHULVWLFVRIWKHH[WRUWLRQRI0RQUR:LHU]ED0RUDOHV           WKHGLVWULFWFRXUWUDWKHUWKDQWKHSUREDWLRQGHSDUWPHQWWKDWLV
sRKQV<DOGRR6RSKLHD<DWRRPD0DUWLQDQG$EUDKDPDQG               FKDUJHG ZLWK PDNLQJ WKH UHOHYDQW ILQGLQJV RI IDFW  7KH
LVQRWWREHKHOGDFFRXQWDEOHIRUWKRVHFKDUDFWHULVWLFVls$        GLVWULFWFRXUWIRXQGWKLVIDFWDQGWKDWILQGLQJLVQRWFOHDUO\
DW                                                            HUURQHRXV
  7KH GLVWULFW FRXUW FDOFXODWHG DQ RIIHQVH OHYHO RI  IRU       3DXOQH[WDUJXHVWKDWWKHGLVWULFWFRXUWVKRXOGKDYHUHYLVHG
&RXQW,WUHDFKHGWKLVOHYHOE\ILUVWFDOFXODWLQJWKHRIIHQVH       LWVILQGLQJZLWKUHVSHFWWRWKH0RQURLQFLGHQWEDVHGRQ1RYH
OHYHO IRU HDFK VXEVWDQWLYH H[WRUWLRQ FRXQW  3XUVXDQW WR       7RFFRjV WHVWLPRQ\ DW UHVHQWHQFLQJ  $W LVVXH LV WKH
866*%DWKHEDVHRIIHQVHOHYHOIRUYLRODWLRQVRI          DSSOLFDELOLW\ RI WKH HQKDQFHPHQWV SXUVXDQW WR 866*
WKH+REEV$FWLVZLWKWKHWKUHHOHYHOHQKDQFHPHQWXQGHU             %E EDVHG RQ mDQ H[SUHVV RU LPSOLHG WKUHDW RI
866*  %E WKDW WKLV FRXUW PDQGDWHG RQ WKH ILUVW     GHDWK ERGLO\ LQMXU\ RU NLGQDSSLQJl DQG 866*
DSSHDOWRUHIOHFW$QWKRQ\jVVXSHUYLVRU\UROHWKHGLVWULFWFRXUW       %E$EHFDXVH0RQURZDVDEGXFWHGLHIRUFHG
GHWHUPLQHG WKDW WKH RIIHQVH OHYHO IRU HDFK VXEVWDQWLYH          LQWRWKHH[WRUWLRQLVWVjDXWRPRELOHDQGWDNHQIURPWKHVFHQHRI
H[WRUWLRQFRXQWZDV*URXSLQJWKHVXEVWDQWLYHH[WRUWLRQ            WKHHQFRXQWHUDJDLQVWKLVZLOO,QPDNLQJWKLVDUJXPHQW3DXO
FRXQWV DV UHTXLUHG E\ 866*  'E WKH FRXUW WKHQ     DJDLQ UHOLHV KHDYLO\ RQ 1RYH 7RFFRjV WHVWLPRQ\ DW
GHWHUPLQHG WKDW $QWKRQ\jV FRPELQHG RIIHQVH OHYHO IRU WKH        UHVHQWHQFLQJ  7KH GLVWULFW FRXUW FOHDUO\ GLVFRXQWHG 1RYHjV
H[WRUWLRQFRQVSLUDF\ZDVXQGHU866*'                    GHVFULSWLRQ RI WKH UHOHYDQW HQFRXQWHU  )RU H[DPSOH 1RYH
                                                                       WHVWLILHGWKDWKHGLGQRWVWULNH0RQUR
  7KHJRYHUQPHQWDQG$QWKRQ\DJUHHGWKDWWKHRIIHQVHOHYHO
IRUWKH&RXQW5,&2FRQVSLUDF\VKRXOGEH%DVHGRQLWV              4 'LG\RXUHVWUDLQ>0RQUR@RUJRDIWHUKLPRUFKDVH
FRQFOXVLRQV DQG ILQGLQJV UHJDUGLQJ $QWKRQ\jV DSSURSULDWH               KLP"
RIIHQVH OHYHO IRU &RXQWV   DQG  WKH GLVWULFW FRXUW        $ 'LGQjWKDYHWR+H,GRQjWNQRZZKDWKDSSHQHG,
FDOFXODWHGDWRWDORIIHQVHOHYHORIXQGHUWKHPXOWLSOHFRXQW             GRQjWNQRZKRZKHIHOO+HIHOO+HHLWKHUUDQLQWR
SURYLVLRQVRI866*'&RPELQHGZLWK$QWKRQ\jV                    WKHEDFNRIKLVRZQFDURUKHVOLSSHG,GRQjWNQRZ
&ULPLQDO +LVWRU\ &DWHJRU\ RI , WKH JXLGHOLQHV UDQJH ZDV            ZKDWRFFXUUHGWKDWQLJKW,NQRZ,GLGQRWKLWKLP
VHYHQW\ WR HLJKW\VHYHQ PRQWKVj LPSULVRQPHQW  $IWHU                  DQGKHZDVGRZQRQWKHJURXQG,SLFNHGKLPXS
GHFOLQLQJ WR GHSDUW GRZQZDUG RQ WKUHH VHSDUDWH JURXQGV            4 $QGGLGKHWU\WRJHWDZD\"
$QWKRQ\jVKHDOWKKLVZLIHjVKHDOWKDQGWKHJRYHUQPHQWjV               $ 1RQRWZKHQ,SLFNHGKLPXS
FXOSDELOLW\LQGDPDJLQJKLVKHDOWKZKLFKLVGLVFXVVHGLQIUD
WKH GLVWULFW FRXUW VHQWHQFHG $QWKRQ\ WR WKH ORZ HQG RI WKH   s$DW7KXVDWUHVHQWHQFLQJ1RYH7RFFRWHVWLILHGWKDW
DSSOLFDEOHUDQJHVHYHQW\PRQWKVjLPSULVRQPHQW                        0RQURmIHOOlWKDW0RQURHQGHGXSRQWKHJURXQGE\HLWKHU
                                                                       UXQQLQJLQWRKLVRZQFDURUVOLSSLQJ+HWKHQVWDWHGWKDWm,
                                                                       GRQjWNQRZZKDWRFFXUUHGWKDWQLJKWl7KLVWHVWLPRQ\VHHPV
                                                                       OHVVWKDQFUHGLEOHHYHQRQWKHmFROGlUHFRUG
                                                                          $WWULDO0RQURWHVWLILHGWRDSK\VLFDODOWHUFDWLRQZLWK3DXO
                                                                       1RYH DQG sRKQ 6FLDUURWWD  6HH s$ DW   7KH
                                                                       WUDQVFULSWVXSSRUWVWKHFRQFOXVLRQWKDWWKHUHZDVDWPLQLPXP
    8QLWHG6WDWHVY                  1RV          1RV                        8QLWHG6WDWHVY         
      &RUUDGRHWDO                                                                                                 &RUUDGRHWDO

WKHH[WRUWLRQDWLVVXH6HHs$DW:HDUHXQDEOHWR                                     ,,$1$/<6,6
FRQFOXGHWKDWWKLVILQGLQJLVFOHDUO\HUURQHRXV
                                                                        $#02207+HDULQJ
   0RUHRYHUWKHHYLGHQFHDGGXFHGE\3DXODWUHVHQWHQFLQJ
GRHVQRWFRPSHOWKHFRQFOXVLRQWKDWWKHGLVWULFWFRXUWjVIDFWXDO          ,QWKHILUVWDSSHDOZHUHPDQGHGIRUD5HPPHUKHDULQJ
ILQGLQJRQWKLVSRLQWZDVFOHDUO\HUURQHRXV)LUVW3DXODUJXHV        SURYLGLQJ VSHFLILF LQVWUXFWLRQV WR WKH GLVWULFW FRXUW ZLWK
WKDW 6RSKLHD GLG QRW REVHUYH WKH ILUHDUP DQG WKDW WKLV IDFW   UHVSHFWWRWKHQDWXUHRIWKDWKHDULQJRQUHPDQG
LQGLFDWHV WKDW 3DXO GLG QRW SRVVHVV D ILUHDUP GXULQJ WKH
6RSKLHDH[WRUWLRQ1RRQHKDVHYHUDOOHJHGKRZHYHUWKDWWKH            $WWKLVKHDULQJWKHGHIHQGDQWVVKRXOGEHDFFRUGHGWKH
ILUHDUP ZDV EUDQGLVKHG RU GLVSOD\HG GXULQJ WKH HYHQWV LQ          RSSRUWXQLW\WRTXHVWLRQWKHMXURUVLQGLYLGXDOO\DQGXQGHU
TXHVWLRQRQO\WKDWLWZDVSRVVHVVHG7KXVWKHPHUHIDFWWKDW           RDWK DERXW WKH H[WHQW RI WKHLU LQWHUDFWLRQ LI DQ\ ZLWK
6RSKLHDGLGQRWVHHWKHILUHDUPGRHVQRWFRPSHOWKHFRQWUDU\              .HQQHG\7KHGHIHQGDQWVVKRXOGDOVREHSHUPLWWHGWR
FRQFOXVLRQ6HFRQG3DXOFDOOHG1RYH7RFFRDVDZLWQHVVDW               LQYHVWLJDWH WKH LPSDFW LI DQ\ RI WKH QHZV UHSRUWV
UHVHQWHQFLQJZKRWHVWLILHGWKDW3DXOGLGQRWSRVVHVVDILUHDUP           GHVFULELQJ 6KDED]]jV DUUHVW WKDW ZHUH LVVXHG RQ WKH
GXULQJWKHHYHQWVLQTXHVWLRQ$VDORQJWLPHIULHQGRI3DXO             ZHHNHQGEHIRUHWKHMXU\EHJDQLWVGHOLEHUDWLRQV
KLV WHVWLPRQ\ PD\ QRW KDYH EHHQ WHUULEO\ FUHGLEOH RQ WKLV
SRLQW7KHGLVWULFWFRXUWPD\KDYHFKRVHQWRGLVFRXQWWKLV             &RUUDGR,)GDWFLWDWLRQRPLWWHG
WHVWLPRQ\ IRU WKLV UHDVRQ  1RYH 7RFFRjV FUHGLELOLW\ DV D
ZLWQHVVDWUHVHQWHQFLQJLVIXUWKHUGLVFXVVHGLQIUD                       2QUHPDQGGHIHQVHFRXQVHOVXEPLWWHGDOLVWRIHOHYHQDUHDV
                                                                        WKDWWKH\EHOLHYHGVKRXOGEHH[SORUHGDWWKH5HPPHUKHDULQJ
  3DXO QH[W DUJXHV WKDW WKH HYLGHQFH GRHV QRW VXSSRUW WKH
FRXUWjV ILQGLQJ WKDW KH ZDV D OHDGHU LQ WKH +REEV $FW              $ERXWDQ\GLVFXVVLRQSULRUWRGHOLEHUDWLRQDERXWWKH
FRQVSLUDF\ D ILQGLQJ WKDW UHVXOWHG LQ D WZROHYHO LQFUHDVH       QDWXUHDQGTXDOLW\RIWKHHYLGHQFHLQFOXGLQJLGHQWLI\LQJ
SXUVXDQW WR 866*  %F  *LYHQ WKH SURRI DW WULDO     DOORIWKRVHSHUVRQVWKH\VSRNHZLWKLQFOXGLQJEXWQRW
KRZHYHUWKLVILQGLQJZDVQRWFOHDUO\HUURQHRXV2QDSSHDO              OLPLWHGWRDOOWKHMXURUV
3DXODUJXHVWKDWm>W@KHJRYHUQPHQWjVWULDOSURRIVQHYHU                  7KH VXEVWDQFH RI DOO VXFK GLVFXVVLRQV DQG WKHLU
UHDOO\GHPRQVWUDWHGWKHSUHFLVHUHODWLRQVKLSEHWZHHQ>3DXO@               IHHOLQJVFRQFHUQLQJWKRVHFRQYHUVDWLRQV
&RUUDGRDQG>1RYH@7RFFRRUWKHRWKHUVl$SSHOODQWjV%U                    :KHWKHUWKH\UHDGDQ\QHZVSDSHUDUWLFOHVZDWFKHG
3DXODW7KDWHYLGHQFHKRZHYHUVXSSRUWVWKHFRQFOXVLRQ            DQ\PHGLDVKRZVRUOLVWHQHGWRDQ\QHZVUHSRUWVZKLFK
WKDW3DXODQG1RYH7RFFRVWDUWHGWKHH[WRUWLRQVFKHPHDV                 LQYROYHGWKHWULDO
mSDUWQHUVl DQG WKDW WKH\ FDUULHG RXW QXPHURXV DFWV RI               D:KHWKHUWKH\UHJXODUO\UHDGWKHm2DNODQG3UHVVlRU
H[WRUWLRQWRJHWKHU DQGLQFRQMXQFWLRQZLWKRWKHUVUHFUXLWHG              m0DFRPE'DLO\l
LQWR WKH FRQVSLUDF\  3DXOjV DUJXPHQW WKDW 1RYH ZDVPRUH
LQYROYHGWKDWLWZDV1RYHZKRUHFUXLWHGYDULRXVLQGLYLGXDOV                
LQWR WKHFRQVSLUDF\GRHVQRWDOWHUWKHIDFWWKDW3DXOZDV D               )RU D GHVFULSWLRQ RI WKH DWWHPSWHG MXU\ WDPSHULQJ E\ D WKLUGSDUW\

OHDGHU RI WKH VFKHPH  ,Q VXSSRUW RI WKLV DUJXPHQW 3DXO      .KDOLG 6KDED]]   VHH &RUUDGR ,     )G DW    $IWHU 6KDED]]
                                                                        DSSURDFKHG 3DXO WKH ODWWHU ZHQW WR WKH DXWKRULWLHV DQG DVVLVWHG LQ WKH
DUJXHVWKDWWKHGLVWULFWFRXUWLQVWUXFWHGWKHSUREDWLRQRIILFHU         DUUHVW DQG FRQYLFWLRQ RI 6KDED]]   6KDED]] ZDV DFTXDLQWHG ZLWK D MXURU
SUHSDULQJ WKH SUHVHQWHQFLQJ UHSRUW WR DGG WKH WZROHYHO          LQ WKH FDVH MXURU (GZDUG .HQQHG\ DQG DSSDUHQWO\ WKRXJKW WKDW KH FRXOG

LQFUHDVH DQG WKDW WKH SUREDWLRQ RIILFHU KDG LQLWLDOO\ WUHDWHG   DFW DV DQ LQWHUPHGLDU\ EHWZHHQ WKH GHIHQGDQWV LQ WKH FDVH DQG .HQQHG\
                                                                        1RQH RI WKH GHIHQGDQWV ZHUH LQYROYHG LQ DQ\ ZD\ ZLWK 6KDED]]jV HIIRUWV
   8QLWHG6WDWHVY                  1RV       1RV                            8QLWHG6WDWHVY       
     &RUUDGRHWDO                                                                                                  &RUUDGRHWDO

      :KHWKHU WKH\ UHDG KHDUG RU ZHUH WROG DQ\WKLQJ    KH DUJXHV WKDW WKH GLVWULFW FRXUW HUUHG LQ FRQFOXGLQJ DV D
  DERXWWKHDUUHVWRI.KDOLG6KDED]]RUDQ\WKLQJDERXWDQ\          PDWWHURIODZWKDWWKHIDFWRIWKHFULPLQDOLQYROYHPHQWRIKLV
  LPSURSULHW\ FRQFHUQLQJ WKH MXU\  7KH QDWXUH DQG           YLFWLPVZDVQRWDJURXQGIRUDGRZQZDUGGHSDUWXUH
  VXEVWDQFH RI ZKDW WKH\ KHDUG LGHQWLW\ RI DQ\RQH WKH\
  GLVFXVVHG LW ZLWK DV ZHOO DV WKH VXEVWDQFH RI WKRVH        3DXOILUVWDUJXHVWKDWWKHGLVWULFWFRXUWHUUHGLQILQGLQJWKDW
  FRQYHUVDWLRQV                                                    KHSRVVHVVHGDILUHDUPGXULQJWKHH[WRUWLRQRI6RSKLHDWKLV
      :KHWKHU WKH\ UHDG REVHUYHG RU KHDUG DQ\WKLQJ      ILQGLQJUHVXOWHGLQDILYHOHYHOLQFUHDVHSXUVXDQWWR866*
  DERXWWKHWZRSDUWLFXODUDUWLFOHVLQWKH2DNODQG3UHVVDQG        %E$LLL+HDUJXHVWKDW6RSKLHDjVJUDQGMXU\
  0DFRPE'DLO\                                                     WHVWLPRQ\GRHVQRWVXSSRUWWKLVILQGLQJWKDW1RYH7RFFRjV
      :KDW GLVFXVVLRQV HDFK MXURU KDG ZLWK RU LQ WKH   WHVWLPRQ\DWWKHUHVHQWHQFLQJKHDULQJXQGHUPLQHVWKLVILQGLQJ
  SUHVHQFHRI(GZDUG.HQQHG\LQDYDQULGHRUHOVHZKHUH           DQGWKDWm>R@WKHUWKDQWKHULIOHVKRRWLQJRI5DP]L<DOGRRjV
  UHJDUGLQJWKHmSUREOHPZLWKDMXU\>LQYROYLQJ@VRPH         ZLQGRZQRILUHDUPVZHUHSRVVHVVHGGXULQJDQ\FRQWDFWZLWK
  >0XVOLP@JX\l                                                    DQ\ERRNPDNHUl$SSHOODQWjV%U3DXODWIRRWQRWH
      :KDW WKH\ KHDUG SULRU WR RU GXULQJ GHOLEHUDWLRQ    RPLWWHG  +RZHYHU 3DXOjV DWWRUQH\ VWLSXODWHG DW WULDO WR D
  FRQFHUQLQJ WKH DUUHVW RI 6KDED]] WKH DUUHVW RI 3DXO      JRYHUQPHQWVXUYHLOODQFHUHSRUWWKDWLQFOXGHGWKHIROORZLQJ
  &RUUDGR WKH VXEMHFW RI MXU\ WDPSHULQJ WKH VXEMHFW RI    VWDWHPHQWm'HIHQGDQW3DXO&RUUDGRZDVREVHUYHGRQFHDJDLQ
  MXURUPLVFRQGXFWZKDWGLVFXVVLRQVWKH\KDGLIDQ\DQG          RSHQLQJWKHWUXQNRIWKHFDUDQGKHDSSHDUHGWRUHPRYHDJXQ
  WKHLGHQWLW\RIDQ\RWKHUSHUVRQRUMXURUZKRPHQWLRQHG           IURPWKHZDLVWEDQGRIKLVSDQWVDQGSODFHLWLQWKHWUXQNl
  WKLVVXEMHFW                                                     s$DW&7KHGLVWULFWFRXUWKHOGWKDWWKLVVWLSXODWLRQ
    :KDWGLVFXVVLRQDQ\MXURUKDGDERXW3DXO&RUUDGR            ERXQG3DXOIRUVHQWHQFLQJSXUSRVHVDQGWKDWEDVHGRQWKH
  RU DQ\ RWKHU GHIHQGDQW ZKLFK GLG QRW UHODWH WR DQ\       VWLSXODWLRQLWIRXQGWKDW3DXOKDGSRVVHVVHGDILUHDUPGXULQJ
  WHVWLPRQ\RUH[KLELW
    :K\MXURU6HOWHQULJKWIHOWFRQVWUDLQHGWRVWD\XS
  ZLWKDJXQLQIHDUDIWHU >DQ LQYHVWLJDWRU@DWWHPSWHGDQ
  LQWHUYLHZ                                                        GLVWULFW FRXUW IDLOHG WR SURYLGH VXIILFLHQW ILQGLQJV RI IDFW ZLWK UHVSHFW WR
                                                            WKH FRQWHVWHG VHQWHQFLQJ IDFWRUV VSHFLILFDOO\ mWKH OHDGHUVKLS UROH RI WKH

                                                             GHIHQGDQWV WKH ILQGLQJ RI D FRQVSLUDF\ WR PXUGHU %RZPDQ DQG WKH

    :KDWGLVFXVVLRQLIDQ\WKHUHZDVDPRQJVWWKH             GHWHUPLQDWLRQ WKDW &RUUDGR ZDV DUPHG DW WKH WLPH WKDW WKH GHIHQGDQWV

  MXURUV RU ZLWK DQ\ WKLUG SDUW\ IROORZLQJ WKH WKUHH        H[WRUWHG PRQH\ IURP 6RSKLHDl      6HH &RUUDGR ,  )G DW     7KHVH

  TXHVWLRQV SXW WR WKHP E\ WKH &RXUW FRQFHUQLQJ WKDW
                                                                    IDFWRUV ZHUH FRQWHVWHG EHFDXVH WKH\ ZHUH WKH LVVXHV UDLVHG E\ 3DXO DQG
                                                                    1RYH 7RFFR RQ WKHLU ILUVW DSSHDO   6HH LG   2Q WKH ILUVW DSSHDO WKLV FRXUW
  LQTXLU\RUWKHSHUFHSWLRQRIZKDWPD\KDYHEHHQWDNLQJ            UHPDQGHG EHFDXVH LQ VWDWLQJ LWV ILQGLQJV RQ WKHVH LVVXHV WKH GLVWULFW FRXUW
  SODFH                                                            mHLWKHU VXPPDULO\ DGRSWHG WKH ILQGLQJV RI WKH SUHVHQWHQFH UHSRUW RU

    :KHWKHUWKHUHZDVDQ\PHQWLRQRIWKHPRYLHm7KH            VLPSO\ GHFODUHG WKDW WKH HQKDQFHPHQW LQ TXHVWLRQ ZDV VXSSRUWHG E\ D

  sXURUlRUDQ\VLPLODUW\SHRIPRYLHERRN79VKRZ         SUHSRQGHUDQFH RI WKH HYLGHQFHl       ,G   2Q UHPDQG WKH GLVWULFW FRXUW

  HWF                                                              SURYLGHG DGGLWLRQDO IDFWXDO ILQGLQJV
                                                                        :H PXVW ILUVW GHFLGH WKHQ ZKHWKHU WKH GLVWULFW FRXUWjV ILQGLQJV RI
                                                                    IDFW ZLWK UHVSHFW WR WKHVH LVVXHV ZHUH DGHTXDWH WR VXSSRUW LWV FRQFOXVLRQV
s$DW7KHJRYHUQPHQWREMHFWHGWRLWHPVDQG          LQ UHVHQWHQFLQJ 3DXO     :H FRQFOXGH WKDW WKH GLVWULFW FRXUWjV IDFWXDO

DUJXLQJWKDWWKHVHTXHVWLRQVZHQWmIDUEH\RQGZKDWZDV        ILQGLQJV DUH DGHTXDWH WR HQDEOH DSSHOODWH UHYLHZ RI WKH GLVWULFW FRXUWjV

RUGHUHGE\WKH&RXUWRI$SSHDOVDQGDUHLQYLRODWLRQRIWKH         ILQGLQJV ZLWK UHVSHFW WR 3DXOjV VHQWHQFH 7KXV ZH ZLOO FRQVLGHU ZKHWKHU
                                                                    WKH FKDOOHQJHG ILQGLQJV DUH FOHDUO\ HUURQHRXV
     8QLWHG6WDWHVY                    1RV             1RV                             8QLWHG6WDWHVY          
       &RUUDGRHWDO                                                                                                           &RUUDGRHWDO

FKDUDFWHULVWLFV DVVRFLDWHG ZLWK SDUWLFXODU DFWV RI H[WRUWLRQ            )HGHUDO5XOHVRI(YLGHQFHls$DW7KHJRYHUQPHQW
FRPPLWWHG E\ KLV FRFRQVSLUDWRUV SXUVXDQW WR 866*                   FLWHG)HGHUDO5XOHRI(YLGHQFHE
 %D% UHOHYDQW FRQGXFW %E
%E$L DQG %E VSHFLILF RIIHQVH                         7KH5HPPHUKHDULQJZDVKHOGRQ2FWREHU7KH
FKDUDFWHULVWLFV6HH&RUUDGR,,:/DW
                  GLVWULFWFRXUWILUVWUXOHGRQWZRLPSRUWDQWWKUHVKROGPDWWHUV
$WUHVHQWHQFLQJWKHGLVWULFWFRXUWIRXQGWKDWQRQHRIWKHVH                   WKDW WKH 5HPPHU KHDULQJ ZRXOG EH KHOG LQ RSHQ FRXUW
VSHFLILFRIIHQVHFKDUDFWHULVWLFVZHUHUHDVRQDEO\IRUHVHHDEOHWR               UDWKHUWKDQLQFDPHUDDQGWKDWWKHTXHVWLRQVWREHDVNHG
$QWKRQ\ DQG WKXV GLG QRW HQKDQFH KLV VHQWHQFH RQ WKH                 E\FRXQVHOZRXOGmEHVWULFWO\OLPLWHGWRZKHWKHUWKHUHZDV
H[WRUWLRQ FRQVSLUDF\ RQ WKH EDVLV RI DQ\ RI WKHVH                     DQ\LQWHUDFWLRQZLWKDOWHUQDWHMXURU.HQQHG\FRQFHUQLQJ
FKDUDFWHULVWLFV7KHGLVWULFWFRXUWPDGHWKLVILQGLQJLQRQH                 WKHDSSURDFKPDGHWRKLPE\0U6KDED]]DQGWKHTXHVWLRQV
VHQWHQFH6HHs$DW2QWKLVQHZUHPDQGZHDJDLQ                 FRQFHUQLQJ ZKHWKHU QHZV UHSRUWV RU RWKHU LQIRUPDWLRQ
LQVWUXFWWKHGLVWULFWFRXUWWRPDNHDGHTXDWHIDFWXDOILQGLQJV                 FRQFHUQLQJ 0U 6KDED]]jV DUUHVW DQG 'HIHQGDQW &RUUDGRjV
UHJDUGLQJ WKH VSHFLILF RIIHQVH FKDUDFWHULVWLFV WKDW WKH                 LQYROYHPHQWLQWKDWDUUHVWFDPHWRWKHDWWHQWLRQRIDQ\RIWKH
JRYHUQPHQWDOOHJHVDSSO\WRWKHVXEVWDQWLYHDFWVRIH[WRUWLRQ                 MXURUVls$DW7KHFRXUWFRQWLQXHGm,IDQGRQO\LI
IRUZKLFK$QWKRQ\ZDVFRQYLFWHG)RUSXUSRVHVRIDSSHOODWH                   WKH IRUPHU MXURU WHVWLILHV WKDW WKHUH ZDV VRPH LQWHUDFWLRQ
UHYLHZWKHGLVWULFWFRXUWPXVWSURYLGHVRPHH[SODQDWLRQIRU                  UHODWHGWRWKH6KDED]]FRQWDFWRUWKDWWKHDUUHVWDQGWKH
ZK\ WKHVH DFWV ZHUH RU ZHUH QRW UHDVRQDEO\ IRUHVHHDEOH WR            HYHQWV VXUURXQGLQJ WKH DUUHVW RI 0U 6KDED]] FDPH WR WKH
$QWKRQ\6HH)HG5&ULP3F&RUUDGR,)G                  DWWHQWLRQRIDQ\MXURUVWKHQWKH&RXUWZLOODOORZIROORZXS
DW                                                                    TXHVWLRQV FRQFHUQLQJ WKH LPSDFW LI DQ\ RI VXFK FRQGXFW
                                                                              LQWHUDFWLRQRULQIRUPDWLRQls$DW
&3DXO&RUUDGR
                                                                                7KHGLVWULFWFRXUWSURSRVHGWRDVNHDFKMXURUWKHIROORZLQJ
  3DXO &RUUDGR DOVR UDLVHV D QXPEHU RI DUJXPHQWV ZLWK                 TXHVWLRQV SULRU WR DOORZLQJ WKH JRYHUQPHQW DQG GHIHQVH
UHVSHFWWRKLVVHQWHQFH)LUVWKHDUJXHVWKDWWKHGLVWULFWFRXUW            FRXQVHOWRDVNWKHLUTXHVWLRQV
HUUHG LQ ILQGLQJ WKDW KH SRVVHVVHG D KDQGJXQ GXULQJ WKH
H[WRUWLRQRI*HRUJH6RSKLHD6HFRQGKHDUJXHVWKDWGLVWULFW                     $WDQ\WLPHSULRUWRRUGXULQJ\RXUGHOLEHUDWLRQV
FRXUWHUUHGLQILQGLQJWKDWKHKDGDFWHGLQDOHDGHUVKLSUROHLQ                GLG \RX KHDU DQ\WKLQJ IURP DOWHUQDWH MXURU (GZDUG
WKHH[WRUWLRQVFKHPH7KLUGKHDUJXHVWKDWWKHGLVWULFWFRXUW
HUUHG LQ QRW UHFRQVLGHULQJ ZKHWKHU 5REHUW 0RQUR DQ
H[WRUWLRQYLFWLPKDGEHHQWKUHDWHQHGSK\VLFDOO\DVVDXOWHG                      
DQG DEGXFWHG EDVHG RQ WKH WHVWLPRQ\ RI 1RYH 7RFFR DW                     7KDW UXOH SURYLGHV LQ UHOHYDQW SDUW
                                                                                  8SRQ DQ LQTXLU\ LQWR WKH YDOLGLW\ RI D YHUGLFW RU LQGLFWPHQW D
UHVHQWHQFLQJ)RXUWKKHDUJXHVWKDW1RYH7RFFRjVWHVWLPRQ\                      MXURU PD\ QRW WHVWLI\ DV WR DQ\ PDWWHU RU VWDWHPHQW RFFXUULQJ
DOVRFDOOHGLQWRTXHVWLRQDGMXVWPHQWVLPSRVHGZLWKUHVSHFWWR                     GXULQJ WKH FRXUVH RI WKH MXU\jV GHOLEHUDWLRQV RU WR WKH HIIHFW RI

WKHH[WRUWLRQRI*HRUJH:LHU]EDDQG5DP]L<DOGRR)LIWK                       DQ\WKLQJ XSRQ WKDW RU DQ\ RWKHU MXURUjV PLQG RU HPRWLRQV DV
                                                                                  LQIOXHQFLQJ WKH MXURU WR DVVHQW RU GLVVHQW IURP WKH YHUGLFW RU
                                                                                  LQGLFWPHQW   RU   FRQFHUQLQJ   WKH   MXURUjV   PHQWDO   SURFHVVHV   LQ

                                                                                FRQQHFWLRQ WKHUHZLWK H[FHSW WKDW D MXURU PD\ WHVWLI\ RQ WKH
       *HQHUDOO\ VSHDNLQJ 3DXOjV ILUVW IRXU DUJXPHQWV IROORZ IURP D PRUH         TXHVWLRQ   ZKHWKHU   H[WUDQHRXV      SUHMXGLFLDO   LQIRUPDWLRQ   ZDV
JHQHUDO FRPSODLQW n QDPHO\ WKDW RQ UHPDQG WKH GLVWULFW FRXUW IDLOHG WR         LPSURSHUO\ EURXJKW WR WKH MXU\jV DWWHQWLRQ RU ZKHWKHU DQ\ RXWVLGH
REH\ WKLV FRXUWjV PDQGDWH WR PDNH IDFWXDO ILQGLQJV VXIILFLHQW IRU DSSHOODWH       LQIOXHQFH ZDV LPSURSHUO\ EURXJKW WR EHDU XSRQ DQ\ MXURU
UHYLHZ ,Q UHPDQGLQJ WKLV FDVH WR WKH GLVWULFW FRXUW ZH FRQFOXGHG WKDW WKH   )HG 5 (YLG E
    8QLWHG6WDWHVY                 1RV         1RV                        8QLWHG6WDWHVY       
      &RUUDGRHWDO                                                                                               &RUUDGRHWDO

  .HQQHG\ RU DQ\ RWKHU SHUVRQ DERXW VRPHRQH GHVLULQJ          GLVWULFW FRXUW KHOG $QWKRQ\ UHVSRQVLEOH RQO\ IRU WKRVH ILYH
  WKURXJK 0U .HQQHG\ RU RWKHUZLVH WR DIIHFW WKH              VXEVWDQWLYHFRXQWVRIH[WRUWLRQIRUZKLFKKHZDVFRQYLFWHGn
  GHOLEHUDWLRQVRIWKHMXU\LQDQ\ZD\"                               &RXQWV  <DOGRR  <DWRRPD  $EUDKDP 
    ,I WKHUH LV DQ\ NLQG RI DQ DIILUPDWLYH DQVZHU RU DQ     6RSKLHD DQG  0DUWLQ n UDWKHU WKDQ IRU DOO RI WKH
  XQFHUWDLQDQVZHUWRWKDWLI\RXGLGZKDWGLG\RXKHDU             H[WRUWLRQYLFWLPVQLQHDOOHJHGLQ&RXQWDQGWKHVSHFLILF
  DQGIURPZKRP"                                                      FRXQWVRIZKLFKKHZDVQRWFRQYLFWHG7KHGLVWULFWFRXUWKHOG
    $QGDWDQ\WLPHSULRUWRGHOLEHUDWLRQVRUGXULQJ\RXU             WKDW DV D WULHU RI IDFW KH ZRXOG QRW FRQYLFW $QWKRQ\ RI
  GHOLEHUDWLRQVGLG\RXWKURXJKQHZVSDSHUVWHOHYLVLRQRU            FRQVSLULQJWRFRPPLWWKRVHIRXURIIHQVHVIRUZKLFKKHZDV
  DQ\RWKHUPHGLDKHDUDERXWWKHDUUHVWRIDSHUVRQ.KDOLG           QRWFRQYLFWHG6HHs$DW&RXQWn0RQUR
  6KDED]] RU DQ\ERG\ IRU DWWHPSWLQJ MXU\ WDPSHULQJ             &RXQWn:LHU]ED&RXQWn0RUDOHV
  VSHFLILFDOO\ GLG \RX KHDU WKDW WKH 'HIHQGDQW 3DXO           &RXQWnsRKQV
  &RUUDGR ZDV LQYROYHG LQ WKH HYHQWV VXUURXQGLQJ WKH
  DUUHVWRI0U6KDED]]"                                                ,QSUHYLRXVO\UHPDQGLQJWKLVFDVHZHDOVRLQVWUXFWHGWKH
    ,IWKHDQVZHUWRWKHILUVWTXHVWLRQLV\HVGLG\RX          GLVWULFWFRXUWWRPDNHIDFWXDOILQGLQJVZLWKUHVSHFWWRZKHWKHU
  UHDGRUKHDUDWDQ\WLPHSULRUWRRUGXULQJGHOLEHUDWLRQV           $QWKRQ\&RUUDGRVKRXOGEHDFFRXQWDEOHIRUVSHFLILFRIIHQVH
  DQ\WKLQJ SULQWHG LQ HLWKHU RI WKH 2DNODQG 3UHVV RU WKH
  0DFRPE 'DLO\ FRQFHUQLQJ WKH HYHQWV VXUURXQGLQJ WKH
  DUUHVWRI0U6KDED]]"                                                   RIIHQVHV >ZHUH@ WKH REMHFW RI WKH FRQVSLUDF\ ,Q VXFK FDVHV
                                                                           VXEVHFWLRQ G VKRXOG RQO\ EH DSSOLHG ZLWK UHVSHFW WR DQ REMHFW
s$ DW   'HIHQVH FRXQVHO REMHFWHG VSHFLILFDOO\            RIIHQVH DOOHJHG LQ WKH FRQVSLUDF\ FRXQW LI WKH FRXUW ZHUH LW
QRWLQJ WKDW PDQ\ RI WKHLU HOHYHQ VXEMHFW DUHDV KDG EHHQ           VLWWLQJ DV D WULHU RI IDFW ZRXOG FRQYLFW WKH GHIHQGDQW RI
                                                                           FRQVSLULQJ WR FRPPLW WKDW REMHFW RIIHQVH
HOLPLQDWHG7KHGLVWULFWFRXUWH[SODLQHGWKDWZKLOHLWKDGQRW      866*  % FRPPHQWDU\ DSSOLF QRWH  7KLV QRWH RQO\ DSSOLHV
UXOHGVSHFLILFDOO\RQWKHHOHYHQDUHDVLWZRXOGSXUVXHWKHVH         XQGHU 866*  %G ZKLFK VWDWHV WKDW m>D@ FRQYLFWLRQ RQ D FRXQW
OLQHV RI TXHVWLRQV DV WKRVH SHUPLWWHG E\ ODZ DQG UHTXLUHG    FKDUJLQJ D FRQVSLUDF\ WR FRPPLW PRUH WKDQ RQH RIIHQVH VKDOO EH WUHDWHG
XQGHURXUPDQGDWH7KHGLVWULFWFRXUWDOVRQRWHGWKDWm,GRQjW      DV LI WKH GHIHQGDQW KDG EHHQ FRQYLFWHG RQ D VHSDUDWH FRXQW RI FRQVSLUDF\
WKLQNDQ\WKLQJHOVHLVUHOHYDQWls$DW                      IRU HDFK RIIHQVH WKDW WKH GHIHQGDQW FRQVSLUHG WR FRPPLWl 866*
                                                                       %G

   $IWHUDGGLWLRQDOREMHFWLRQVZHUHUDLVHGE\GHIHQVHFRXQVHO             
DQG GLVFXVVHG WKH GLVWULFW FRXUW SURFHHGHG WR FDOO DQG               7KH JRYHUQPHQW GRHV QRW DUJXH LQ LWV EULHI RQ DSSHDO WKDW WKH

TXHVWLRQXQGHURDWKDOOWZHOYHGHOLEHUDWLQJMXURUVDQGWKHVL[      GLVWULFW FRXUW VKRXOG KDYH KHOG $QWKRQ\ UHVSRQVLEOH IRU WKH IRXU
                                                                      VXEVWDQWLYH DFWV RI H[WRUWLRQ RI ZKLFK KH ZDV QRW FRQYLFWHG IRU WKH
DOWHUQDWHMXURUVLQFOXGLQJDOWHUQDWHMXURU(GZDUG.HQQHG\           SXUSRVHV RI FDOFXODWLQJ KLV &RXQW  +REEV $FW FRQVSLUDF\ EDVH RIIHQVH
7KH JRYHUQPHQW DQG GHIHQVH FRXQVHO ZHUH DOVR JLYHQ DQ         OHYHO KRZHYHU WKH JRYHUQPHQWjV FKDUW 800 $SSHOOHHjV %U DW 
RSSRUWXQLW\WRDVNTXHVWLRQVZLWKLQWKHVFRSHDOORZHGE\WKH          VXJJHVWV WKDW $QWKRQ\ VKRXOG EH KHOG UHVSRQVLEOH IRU WKRVH DFWV
FRXUW  sXURUV         DQG    $UJXPHQWV QRW GHYHORSHG LQ EULHIV RQ DSSHDO DUH GHHPHG ZDLYHG E\ WKLV

DQVZHUHGWKHFRXUWjVTXHVWLRQVLQWKHQHJDWLYHWKHVHMXURUV          FRXUW KRZHYHU DQG ZH WKXV GR QRW DGGUHVV ZKHWKHU WKH GLVWULFW FRXUW
                                                                      SURSHUO\ KHOG $QWKRQ\ UHVSRQVLEOH IRU RQO\ ILYH VXEVWDQWLYH DFWV RI
DOVRWHVWLILHGLQUHVSRQVHWRGHIHQVHFRXQVHOjVTXHVWLRQVWKDW      H[WRUWLRQ LQ LWV FDOFXODWLRQ RI $QWKRQ\jV EDVH RIIHQVH OHYHO IRU WKH
WKH\GLGQRWUHFDOOGLVFXVVLQJWKHMXU\WDPSHULQJLQFLGHQWRU         H[WRUWLRQ FRQVSLUDF\ 6HH 8QLWHG 6WDWHV Y /D\QH  )G  
QHZVDFFRXQWVRILWZLWK.HQQHG\RUDQ\RQHHOVH                      WK &LU  FHUW GHQLHG  86   mLVVXHV DGYHUWHG WR
                                                                      LQ D SHUIXQFWRU\ PDQQHU XQDFFRPSDQLHG E\ VRPH HIIRUW DW GHYHORSHG
                                                                      DUJXPHQWDWLRQ DUH GHHPHG ZDLYHGl TXRWDWLRQ RPLWWHG
     8QLWHG6WDWHVY                     1RV           1RV                      8QLWHG6WDWHVY      
       &RUUDGRHWDO                                                                                                   &RUUDGRHWDO

   2QUHPDQGKRZHYHUWKHGLVWULFWFRXUWQHHGQRWUHYLVLWLWV                 sXURU  KDG VXIIHUHG D JUDQG PDO VHL]XUH WKDW FDXVHG
ILQGLQJVUHJDUGLQJZKHWKHUWKH)URQWLHU+RWHODQG(GJHZDWHU                  PHPRU\ORVVVKHWHVWLILHGWKDWVKHGLGQRWUHFDOODQ\LQFLGHQWV
+RWHO FRXQWV DQG WKH FRQVSLUDF\ WR PXUGHU +DUU\ m7DFRl               RUGLVFXVVLRQVUHJDUGLQJWKH6KDED]]LQFLGHQW
%RZPDQ FRQVWLWXWH UHOHYDQW FRQGXFW IRU SXUSRVHV RI
VHQWHQFLQJ$QWKRQ\XQGHU&RXQW:HFRQFOXGHWKDWWKH                         sXURU  WHVWLILHG WKDW KHVKH KHDUG DERXW WKH 6KDED]]
GLVWULFW FRXUWjV ILQGLQJV ZLWK UHVSHFW WR WKHVH LVVXHV DUH           LQFLGHQW EXW KHVKH ZDV QRW FHUWDLQ ZKHWKHU KHVKH KHDUG
DGHTXDWH IRU DSSHOODWH UHYLHZ DQG WKDW WKH\ DUH QRW FOHDUO\         DERXWLWEHIRUHRUDIWHUWKHWULDOFRQFOXGHGsXURUKDGD
HUURQHRXV  7KH HYLGHQFH SURGXFHG E\ WKH JRYHUQPHQW WR               JUHDWGHDORIGLIILFXOW\UHPHPEHULQJVSHFLILFV+HVKHGLG
FRQQHFW$QWKRQ\ZLWKWKHVHLQFLGHQWVZDVQRWVXIILFLHQWWR                   WHVWLI\KRZHYHUWKDWKLVKHUYHUGLFWZDVQRWDIIHFWHGE\DQ\
VXSSRUWDILQGLQJHLWKHUWKDWKHZDVLQYROYHGLQDQ\LOOHJDOLW\              VXFK LQIRUPDWLRQ EXW ZDV LQVWHDG mGHILQLWHO\ EDVHG RQ   
LQ DVVRFLDWLRQ ZLWK WKHP RU WKDW DQ\ VXFK LOOHJDOLW\ ZDV            ZKDWZHKHDUGGXULQJWULDODVIDUDVDOOWKHHYLGHQFHls$
UHDVRQDEO\IRUHVHHDEOHWRKLP$FRQWUDU\FRQFOXVLRQLVQRW                 DWsXURUUHFDOOHGmVRPHWKLQJDERXWVRPHERG\LQD
GLFWDWHGE\WKHMXU\jVJXLOW\YHUGLFWRQ&RXQWLQFRQWUDVWWR             UHVWDXUDQWDWRQHWLPHlLQUHVSRQVHWRWKHFRXUWjVTXHVWLRQ
WKH+REEV$FWFRQVSLUDF\DQGVXEVWDQWLYHFRXQWV                           UHJDUGLQJ ZKHWKHU WKH MXURU KDG KHDUG DQ\WKLQJ DERXW
                                                                             6KDED]]jVDUUHVWs$DW$VZLWKsXURUKRZHYHU
     E&RXQW+REEV$FW&RQVSLUDF\                                        sXURUWHVWLILHGWKDWWKLVLQIRUPDWLRQGLGQRWLPSDFWKLVKHU
                                                                             LPSDUWLDOLW\
  $WUHVHQWHQFLQJWKHGLVWULFWFRXUWFRQVLGHUHGZKHWKHUWKH
VXEVWDQWLYH DFWV RI H[WRUWLRQ VKRXOG EH XVHG WR FDOFXODWH              sXURUVDQGDOOWHVWLILHGWKDWDWDERXWWKHVDPH
$QWKRQ\jVEDVHRIIHQVHOHYHOIRUWKH+REEV$FWFRQVSLUDF\                   WLPH WKH DEVHQFH RI DQRWKHU MXURU DOWHUQDWH MXURU 
DSSO\LQJWKHKLJKHUVWDQGDUGIRUPXOWLSOHREMHFWFRQVSLUDFLHV                m0\URQlnZKRZDVDVLWWXUQVRXWXQDEOHWRDWWHQGWKHWULDO
IRXQG LQ DSSOLFDWLRQ QRWH  WR 866*  %  7KH            EHFDXVH RI LOOQHVV n FDXVHG WKHP WR ZRQGHU DERXW HYHQWV
                                                                             VXUURXQGLQJWKHWULDO7KHGLVWULFWFRXUWKRZHYHUUXOHGWKDW
                                                                             WKLVOLQHRITXHVWLRQLQJE\GHIHQVHFRXQVHOLHWKHMXURUjV
     
                                                                      DEVHQFH DQG VSHFXODWLRQ UHODWHG WR LW ZDV LUUHOHYDQW WR WKH
       ,Q VXP IRU WKH &RXQW  5,&2 FRQVSLUDF\ FRQYLFWLRQ $QWKRQ\
&RUUDGR PXVW EH KHOG UHVSRQVLEOH IRU  WKH H[WRUWLRQ FRQVSLUDF\ DQG      SXUSRVHVRIWKH5HPPHUKHDULQJ
 WKH VXEVWDQWLYH DFWV RI H[WRUWLRQ IRU ZKLFK KH ZDV FRQYLFWHG LQ
DGGLWLRQ WR WKH REVWUXFWLRQ RI MXVWLFH $W PLQLPXP WKLV UHVXOWV LQ D EDVH     7KHDOWHUQDWHMXURUVZHUHTXHVWLRQHGE\FRXQVHOEXWZHUH
RIIHQVH OHYHO RI  ZKHQ WKH RIIHQVH OHYHOV DUH FRPELQHG SXUVXDQW WR
866*  ' 7KH REVWUXFWLRQ RI MXVWLFH FRXQW ZDUUDQWV DQ RIIHQVH
                                                                             QRWDVNHGWKHSUHOLPLQDU\TXHVWLRQVE\WKHFRXUW$OWHUQDWH
OHYHO RI DW OHDVW  VHH s$ DW  QRWLQJ WKDW RIIHQVH OHYHO IRU
                                                                             MXURUVDQGWHVWLILHGWKDWWKH\KDGKHDUGQRWKLQJDERXW
REVWUXFWLRQ RI MXVWLFH FRXQW FRXOG HLWKHU EH  RU  WKH H[WRUWLRQ        WKHVHPDWWHUV$OWHUQDWHMXURUWHVWLILHGWKDWKHVKHKDG
FRQVSLUDF\ ZDUUDQWV DQ RIIHQVH OHYHO RI  D EDVH RIIHQVH OHYHO RI        KHDUGRIWKH6KDED]]DUUHVWEXWWKDWKHVKHKDGQRWDVVRFLDWHG
SXUVXDQW WR 866*  %D DQG D WKUHHOHYHO DJJUDYDWLQJ UROH           WKDW LQIRUPDWLRQ ZLWK WKH WULDO  $OWHUQDWH MXURU  DOVR
HQKDQFHPHQW SXUVXDQW WR 866*  %E DQG HDFK VXEVWDQWLYH
FRXQW RI H[WRUWLRQ DOVR ZDUUDQWV DQ RIIHQVH OHYHO RI DW OHDVW  D EDVH
                                                                             WHVWLILHGWRKDYLQJKHDUGDERXWWKHQHZVDUWLFOHRQSRVVLEOH
RIIHQVH OHYHO RI  SXUVXDQW WR 866*  %D DQG D WKUHHOHYHO
                                                                             MXU\WDPSHULQJEXWKHVKHDOVRWHVWLILHGWKDWWKHGLVFXVVLRQ
DJJUDYDWLQJ UROH HQKDQFHPHQW SXUVXDQW WR 866*  %E               ZDVOLPLWHGWRWKHDUWLFOHDQGQRWWRZKHWKHULQGLYLGXDOMXURUV
                                                                             KDGWKHPVHOYHVEHHQFRQWDFWHG6LPLODUO\DOWHUQDWHMXURU
                                                                           WHVWLILHG WKDW KH VXIIHUHG IURP DQ[LHW\ EHFDXVH WKH WULDO
       7KDW SURYLVLRQ VWDWHV LQ UHOHYDQW SDUW
     3DUWLFXODU FDUH PXVW EH WDNHQ LQ DSSO\LQJ VXEVHFWLRQ G EHFDXVH        LQYROYHGDOOHJHGSDUWLFLSDQWVLQRUJDQL]HGFULPH
     WKHUH DUH FDVHV LQ ZKLFK WKH YHUGLFW    GRHV QRW HVWDEOLVK ZKLFK
    8QLWHG6WDWHVY                  1RV           1RV                     8QLWHG6WDWHVY      
      &RUUDGRHWDO                                                                                               &RUUDGRHWDO

  $OWHUQDWHMXURU.HQQHG\DOWHUQDWHMXURUZDVTXHVWLRQHG            5,&2 FRQVSLUDF\ LQ WKH SUHVHQW FDVH  )RUIHLWXUH LV D
ODVW  +H WHVWLILHG WKDW KH KDG QHYHU DSSURDFKHG DQ\ RWKHU     PDQGDWRU\DVSHFWRI5,&2VHQWHQFLQJZLWKWKHPHPEHUVRI
MXURUV ZLWK UHVSHFW WR 6KDED]]jV RIIHU DQG WKDW KH GLG QRW     WKH FULPLQDO HQWHUSULVH MRLQWO\ DQG VHYHUDOO\ OLDEOH IRU WKH
FRPHIRUZDUGZLWKKLVLQIRUPDWLRQZKHQWKHGLVWULFWMXGJH                SURFHHGVRIWKHHQWLUHHQWHUSULVH6HH&RUUDGR,,,)G
DVNHGWKHMXU\WKHWKUHHTXHVWLRQVDWWULDOEHFDXVHKHNQHZ              DW,QWKH&RUUDGR,,,IRUIHLWXUHFDVHZHKHOGWKDWWKH
6KDED]] RQO\ E\ WKH QLFNQDPH m'l  .HQQHG\ WHVWLILHG WR        GLVWULFWFRXUWHUUHGLQILQGLQJWKDWWKHSURFHHGVRIWKHmVWUHHW
RYHUKHDULQJ MXURUV GLVFXVV WKH 6KDED]] LQFLGHQW LQ WKH YDQ       WD[l VFKHPH LQYROYHG LQ WKH +REEV $FW FRXQWV ZHUH QRW
EULQJLQJWKHMXURUVWRWKHFRXUWKRXVHEXWRQHRIWKHMXURUVKH          DWWULEXWDEOHWRmWKHHQWLUHFULPLQDOHQWHUSULVHlDQGWKXVmWKDW
LGHQWLILHGDVKDYLQJGLVFXVVHGWKHLQFLGHQWZDV0\URQWKH               WKHGLVWULFWFRXUWFRPPLWWHGFOHDUHUURULQIDLOLQJWRKROGsDFN
MXURU ZKR ZDV DEVHQW DW WKDW WLPH EHFDXVH RI LOOQHVV  7KH    7RFFRDQG*LDFDORQHMRLQWO\DQGVHYHUDOO\OLDEOHIRUIRUIHLWXUH
RWKHU MXURU LGHQWLILHG E\ .HQQHG\ DV SDUWLFLSDWLQJ LQ WKLV       RIWKHVWUHHWWD[SURFHHGVl,GDW0RUHUHFHQWO\LQWKH
GLVFXVVLRQZDVsXURUm6X]DQQHl                                       &RUUDGR ,9 IRUIHLWXUH FDVH ZH KHOG WKDW mWKH HYLGHQFH
                                                                         VKRZHG WKDW $QWKRQ\ &RUUDGR ZDV D PHPEHU RI WKH
    $WWKHFRQFOXVLRQRIWKHKHDULQJWKHGLVWULFWFRXUWUHLQVWDWHG      FRQVSLUDWRULDOHQWHUSULVHWKDWHPSRZHUHGWKHFROOHFWLRQRIWKH
WKH &RUUDGRVj FRQYLFWLRQV KROGLQJ mWKDW WKHUH LV D WRWDO        VWUHHWWD[HVlDQGWKXVWKDW$QWKRQ\ZDVMRLQWO\DQGVHYHUDOO\
DEVHQFHRIDQ\FUHGLEOHHYLGHQFHWKDWWKHZRUNRIWKHMXU\LQ            OLDEOH SXUVXDQW WR PDQGDWRU\ 5,&2 IRUIHLWXUH IRU WKH
WKLVFDVHZDVLQDQ\ZD\WDLQWHGE\WKHHYHQWVRUFRQWDFWVWKDW          SURFHHGVRIWKHVWUHHWWD[VFKHPH&RUUDGR,9)GDW
ZHZHUHWROGWRORRNLQWRE\WKH6L[WK&LUFXLWls$       
DW
                                                                            %HFDXVHZHFRQFOXGHWKDWWKHH[WRUWLRQFRQVSLUDF\DQGWKH
  6WDQGDUGRI5HYLHZ                                                 &RXQW5,&2FRQVSLUDF\ZHUHQRWLQGHSHQGHQWZHKROGWKDW
                                                                         LW ZDV FOHDU HUURU IRU WKH GLVWULFW FRXUW LQ UHVHQWHQFLQJ
   :HUHYLHZWKHGLVWULFWFRXUWjVGHFLVLRQRQMXURUPLVFRQGXFW           $QWKRQ\ WR ILQG WKDW WKH VWUHHW WD[ FRQVSLUDF\ DQG WKH
RULWVGHWHUPLQDWLRQRISUHMXGLFHIRUDEXVHRIGLVFUHWLRQ6HH          VXEVWDQWLYH DFWV RI H[WRUWLRQ LQYROYHG LQ LW ZHUH QRW
8QLWHG 6WDWHV Y 'DYLV  )G   WK &LU       mXQGHUO\LQJ UDFNHWHHULQJ DFWLYLW\l SXUVXDQW WR 866*
PLVFRQGXFWFDOOLQJLQWRTXHVWLRQMXU\LPSDUWLDOLW\8QLWHG             (DIRUWKHSXUSRVHRIFDOFXODWLQJ$QWKRQ\jVEDVH
6WDWHV Y %UDQKDP  )G   WK &LU               RIIHQVHOHYHOIRU&RXQW5HPDQGLVWKXVQHFHVVDU\VRWKDW
GHWHUPLQDWLRQRISUHMXGLFH7KHGHIHQGDQWVEHDUWKHEXUGHQ            WKH GLVWULFW FRXUW FDQ UHFDOFXODWH $QWKRQ\jV VHQWHQFH WR
RIVKRZLQJSUHMXGLFH%UDQKDP)GDWm>8@QGHUQR             LQFOXGH DW PLQLPXP WKH +REEV $FW FRQVSLUDF\ DQG WKH
FLUFXPVWDQFH ZLOO SUHMXGLFH EH SUHVXPHGl  ,G  6HH DOVR        VSHFLILFDFWVRIH[WRUWLRQIRUZKLFK$QWKRQ\ZDVFRQYLFWHGDV
8QLWHG6WDWHVY3HQQHOO)GWK&LU              UHOHYDQW FRQGXFW XQGHU WKH &RXQW  5,&2 FRQVSLUDF\
m>7@KHEXUGHQRISURRIUHVWVXSRQDGHIHQGDQWWRGHPRQVWUDWH            FRQYLFWLRQ,QDGGLWLRQWKHGLVWULFWFRXUWPXVWUHFRQVLGHUWKH
WKDW XQDXWKRUL]HG FRPPXQLFDWLRQV ZLWK MXURUV UHVXOWHG LQ           VXEVWDQWLYHDFWVRIH[WRUWLRQFKDUJHGLQWKHLQGLFWPHQWEXWIRU
DFWXDO SDUWLDOLW\  3UHMXGLFH LV QRW WR EH SUHVXPHGl FHUW   ZKLFK$QWKRQ\ZDVQRWFRQYLFWHGWRGHWHUPLQHZKHWKHUWKRVH
GHQLHG86                                            DFWVRIH[WRUWLRQZHUHUHOHYDQWFRQGXFWIRUSXUSRVHVRIWKH
                                                                         5,&2FRQVSLUDF\FKDUJHGLQ&RXQWLHZKHWKHUWKHVHDFWV
  $SSOLFDWLRQ                                                        RI3DXODQG1RYH7RFFRZHUHmUHDVRQDEO\IRUHVHHDEOHlDQG
                                                                         mLQIXUWKHUDQFHRIWKHMRLQWO\XQGHUWDNHQFULPLQDODFWLYLW\l
  2QDSSHDO3DXO&RUUDGRDUJXHVWKDWWKHGLVWULFWFRXUWHUUHG           866*%D%LHWKH5,&2FRQVSLUDF\
EHFDXVHWKHIDXOW\PHPRULHVRIMXURUVGXHLQODUJHSDUWWR
       8QLWHG6WDWHVY                  1RV            1RV                     8QLWHG6WDWHVY      
         &RUUDGRHWDO                                                                                                &RUUDGRHWDO

   ,WLVDWOHDVWSRVVLEOHKRZHYHUWKDW$QWKRQ\jVSDUWLFLSDWLRQ            WKHSDVVDJHRIWLPHUHQGHUHGWKH5HPPHUKHDULQJRQUHPDQG
LQWKHH[WRUWLRQFRQVSLUDF\DQGKLVFRPPLVVLRQRIVXEVWDQWLYH                LQDGHTXDWH  WKH GLVWULFW FRXUW XQGXO\ OLPLWHG GHIHQVH
DFWVRIH[WRUWLRQZHUHLQGHSHQGHQWRIKLVSDUWLFLSDWLRQLQWKH               FRXQVHOjV TXHVWLRQLQJ RI MXURUV DQG  WKH GLVWULFW FRXUW
&RXQW5,&2FRQVSLUDF\7KHIDFWVRIWKLVFDVHDQGRXU                    VKRXOGKDYHSUHVXPHGELDVEHFDXVHWKHMXURUVZHUHREYLRXVO\
SULRURSLQLRQVLQWKLVFDVHWKRXJKUHTXLUHDFRQFOXVLRQWKDW               OHVVWKDQFDQGLGDWWKHKHDULQJ$QWKRQ\&RUUDGRDUJXHVWKDW
WKH H[WRUWLRQ FRQVSLUDF\ ZDV QRW LQGHSHQGHQW RI WKH                   WKH GLVWULFW FRXUW HUUHG EHFDXVH  WKHUH LV DW OHDVW D
RYHUDUFKLQJ5,&2FRQVSLUDF\FKDUJHGLQ&RXQW)LUVWWKH                  UHDVRQDEOH SRVVLELOLW\ WKDW H[WULQVLF HYLGHQFH DIIHFWHG WKH
VDPH SDUWLHV ZHUH LQYROYHG LQ ERWK FRQVSLUDFLHV n LQ WKH            MXU\jVYHUGLFWLQWKLVFDVHWKHGLVWULFWFRXUWXQGXO\OLPLWHG
VDPH UROHV  (YLGHQFH HVWDEOLVKHG WKDW SULRU WR VWDUWLQJ XS        GHIHQVH FRXQVHOjV DELOLW\ WR TXHVWLRQ MXURUV  DQG WKH
WKHLUmEXVLQHVVl3DXODQG1RYH7RFFRUHFHLYHGSHUPLVVLRQ                    SURFHHGLQJVZHUHKHOGLQRSHQFRXUWUDWKHUWKDQLQFDPHUD
IURP WKH mERVVl RI WKH 'HWURLW IDPLO\ sDFN 7RFFR WKDW             ZKLFK FDXVHG MXURUV WR EH OHVV WKDQ FDQGLG UHJDUGLQJ ELDV
$QWKRQ\ DV D mFDSRl LQ WKDW IDPLO\ VXSHUYLVHG 3DXO DQG            DQGRUWKHHIIHFWRIH[WULQVLFHYLGHQFHRQWKHLUYHUGLFW
1RYH7RFFRLQWKHmVWUHHWWD[lVFKHPHDQGWKDW$QWKRQ\WRRN
VWHSVWKURXJKRXWWKHSHULRGLQZKLFK3DXODQG1RYH7RFFR                       7KH GHIHQGDQWV KDG WKH EXUGHQ RI GHPRQVWUDWLQJ DW WKH
ZHUHH[WRUWLQJERRNPDNHUVLQWKH'HWURLWPHWURSROLWDQDUHD                  5HPPHU KHDULQJ WKDW WKH\ ZHUH SUHMXGLFHG E\ WKH MXU\
WRUHLQLQKLVVXERUGLQDWHVWRNHHSWKHPIURPDWWUDFWLQJWKH                 WDPSHULQJLQFLGHQWDQGRUQHZVDFFRXQWVRIWKDWLQFLGHQW:H
XQZDQWHGDWWHQWLRQRIODZHQIRUFHPHQWRQWKHRYHUDUFKLQJ                     DJUHH ZLWK WKH GLVWULFW FRXUW WKDW WKH GHIHQGDQWV IDLOHG WR
5,&2 FRQVSLUDF\  ,Q DGGLWLRQ ZH PDQGDWHG D WKUHHOHYHO             SURGXFHHYLGHQFHVXIILFLHQWWRHVWDEOLVKWKDWWKHMXU\jVYHUGLFW
LQFUHDVHLQWKHRIIHQVHOHYHOVIRUWKH+REEV$FWFRQVSLUDF\                  KDG EHHQ WDLQWHG E\ WKLV H[WULQVLF LQIRUPDWLRQ  7KH
DQGVXEVWDQWLYHFRXQWVEDVHGRQ$QWKRQ\jVVXSHUYLVRU\UROH                   GHIHQGDQWVjDUJXPHQWVWKDWWKLVFRXUWVKRXOGSUHVXPHWKDWWKH
LQ WKH +REEV $FW FRQVSLUDF\  6HH &RUUDGR ,,  :/              MXU\jVYHUGLFWLQWKHSUHVHQWFDVHZDVWDLQWHGDUHFRQWUDU\WR
DW
                                                              ELQGLQJ SUHFHGHQW DQG WKXV PXVW EH UHMHFWHG  6HH 8QLWHG
                                                                             6WDWHV Y 2UODQGR  )G   WK &LU 
  6HFRQGZHKDYHSUHYLRXVO\KHOGLQWKHIRUIHLWXUHFDVHV                  UHDIILUPLQJWKDWWKHEXUGHQLVRQWKHSDUW\FODLPLQJMXURUELDV
&RUUDGR,,,)GDWDQG&RUUDGR,9)GDW                 DQGWKDWDUHDVRQDEOHSRVVLELOLW\RIWDLQWLVLQVXIILFLHQWWRFDUU\
WKDWLWZDVFOHDUHUURUIRUWKHGLVWULFWFRXUWWRFRQFOXGH           WKDWEXUGHQ
WKDWWKH+REEV$FWFRQVSLUDF\ZDVQRWSDUWRIWKHRYHUDUFKLQJ
                                                                               6LPLODUO\ERWK&RUUDGRVDUJXHWKDWWKHMXURUVjWHVWLPRQ\DW
                                                                             WKH5HPPHUKHDULQJZDVOHVVWKDQFDQGLGDQGWKDWWKHUHIRUH
                                                                            WKHGLVWULFWFRXUWHUUHGLQUHLQVWDWLQJWKHLUFRQYLFWLRQV:H
      $ FULPLQDO FRQYLFWLRQ RQ D FRXQW UHJDUGLQJ DQRWKHU FRQVSLUDF\ LQ
DGGLWLRQ WR D FULPLQDO FRQYLFWLRQ RQ D 5,&2FRQVSLUDF\ FRXQW GRHV QRW
                                                                             KDYH SUHYLRXVO\ KHOG KRZHYHU WKDW D MXURUjV WHVWLPRQ\
QHFHVVDULO\ UHTXLUH WKDW WKH GLVWULFW FRXUW ILQG WKH GHIHQGDQW DFFRXQWDEOH   UHJDUGLQJKLVRUKHURZQLPSDUWLDOLW\VKRXOGQRWEHWUHDWHGDV
IRU WKH QRQ5,&2 FRQVSLUDF\ DV UHOHYDQW FRQGXFW IRU WKH SXUSRVH RI           mµLQKHUHQWO\ VXVSHFWjl  3HQQHOO  )G DW  TXRWLQJ
GHWHUPLQLQJ WKH EDVH RIIHQVH OHYHO IRU WKH 5,&2 FRQVSLUDF\ 6HH 866*     6PLWKY3KLOOLSV86Q6HHDOVR
 % FRPPHQWDU\ DSSOLF QRWH  m7KH SULQFLSOHV DQG OLPLWV RI           8QLWHG 6WDWHV Y =HOLQND  )G   WK &LU 
VHQWHQFLQJ DFFRXQWDELOLW\ XQGHU WKLV JXLGHOLQH DUH QRW DOZD\V WKH VDPH DV
WKH SULQFLSOHV DQG OLPLWV RI FULPLQDO OLDELOLW\ 8QGHU VXEVHFWLRQV D
                                                                             m>s@XURUWHVWLPRQ\DWWKHµ5HPPHUKHDULQJjLVQRWLQKHUHQWO\
DQG D WKH IRFXV LV RQ WKH VSHFLILF DFWV DQG RPLVVLRQV IRU ZKLFK WKH    VXVSHFWl,Q3HQQHOOZHH[SOLFLWO\KHOGmWKDWLIDGLVWULFW
GHIHQGDQW LV WR EH KHOG DFFRXQWDEOH LQ GHWHUPLQLQJ WKH DSSOLFDEOH            FRXUWYLHZVMXURUDVVXUDQFHVRIFRQWLQXHGLPSDUWLDOLW\WREH
JXLGHOLQH UDQJH UDWKHU WKDQ RQ ZKHWKHU WKH GHIHQGDQW LV FULPLQDOO\ OLDEOH   FUHGLEOHWKHFRXUWPD\UHO\XSRQVXFKDVVXUDQFHVLQGHFLGLQJ
IRU DQ RIIHQVH DV D SULQFLSDO DFFRPSOLFH RU FRQVSLUDWRUl
    8QLWHG6WDWHVY                  1RV          1RV                           8QLWHG6WDWHVY        
      &RUUDGRHWDO                                                                                                    &RUUDGRHWDO

ZKHWKHUDGHIHQGDQWKDVVDWLVILHGWKHEXUGHQRISURYLQJDFWXDO              ,QGHHGWKHFRXUWFDQRQO\FRQFOXGHIURPWKHOHQJWK\
SUHMXGLFHl)GDW                                             FRQVLGHUDWLRQWKDWLWKDVJLYHQDOOWKHHYLGHQFHUHODWHGWR
                                                                          WKHUHODWLRQVKLSVDQGLQWHUDFWLRQVEHWZHHQ1RYH7RFFR
   ,Q3HQQHOOILYHMXURUVKDGUHFHLYHGWKUHDWHQLQJODWHQLJKW           3DXO &RUUDGR RQ WKH RQH KDQG DQG sDFN 7RFFR DQG
DQRQ\PRXVWHOHSKRQHFDOOVUHJDUGLQJWKHLUYHUGLFWLQWKHFDVH            $QWKRQ\ &RUUDGR RQ WKH RWKHU WKDW 1RYH 7RFFR DQG
WKHVH MXURUV FRPPXQLFDWHG WKH FRQWHQW RI WKHVH WHOHSKRQH           3DXO&RUUDGRFDUULHGRXWWKHLUmVWUHHWWD[lH[WRUWLRQVLQ
FDOOVILUVWWRWKHLUIHOORZMXURUVWKHQWRWKHFRXUW6HHLGDW        VSLWH RI WKH UHVLVWDQFH DQG GLVSOHDVXUH H[SUHVVHG
8SRQOHDUQLQJWKLVLQIRUPDWLRQWKHFRXUWTXHVWLRQHGWKH            FRQVLVWHQWO\DQGLQYDULRXVZD\VE\WKHROGHUPHPEHUVRI
ILYHMXURUVLQGLYLGXDOO\DQGRXWRIWKHSUHVHQFHRIWKHRWKHU             WKH&RXQW5,&2FRQVSLUDF\
MXURUV  (DFK RI WKH ILYH MXURUV VWDWHG WKDW KLV RU KHU
LPSDUWLDOLW\ KDG QRW EHHQ FRPSURPLVHG DQG WKDW KH RU VKH       s$DW7KLVVWDWHPHQWVHHPVHQWLUHO\WRLJQRUHWKH
FRXOG FRQWLQXH WR IXQFWLRQ DV D MXURU  2WKHU MXURUV QRWHG   IDFWWKDW$QWKRQ\ZDVFRQYLFWHGRIWKHH[WRUWLRQFRQVSLUDF\
KRZHYHUWKDWsXURU6DYHVNLVHHPHGSDUWLFXODUO\VKDNHQE\WKH           6HH &RUUDGR ,,  :/  DW 
 QRWLQJ WKDW D
LQFLGHQW  :KHQ WKH FRXUW TXHVWLRQHG sXURU 6DYHVNL VKH         VHQWHQFLQJ FRXUW FDQQRW mLJQRU>H@ FRQGXFW RI ZKLFK D
mVWDWHGIRXUWLPHVLQUHVSRQVHWRGLIIHUHQWTXHVWLRQVWKDWWKH          GHIHQGDQWKDVEHHQIRXQGJXLOW\EH\RQGDUHDVRQDEOHGRXEWl
WHOHSKRQHFDOOKDGQRWDIIHFWHGKHULPSDUWLDOLW\RUKHUDELOLW\         ,QDVPXFKDVFRQVSLUDF\WRH[WRUWLQYLRODWLRQRIWKH+REEV
WRGHFLGHWKHFDVHRQWKHEDVLVRIWKHWHVWLPRQ\DQGH[KLELWVl         $FWZDVOLVWHGDVDSUHGLFDWHDFWLQWKHLQGLFWPHQWVHHs$DW
,G7KHFRXUWWKHQDVNHGTXHVWLRQVUHJDUGLQJLPSDUWLDOLW\DQG          ,QGLFWPHQWZHEHOLHYHWKDW$QWKRQ\jVFRQYLFWLRQRQWKH
DELOLW\WRUHQGHUDYHUGLFWWRWKHHQWLUHMXU\:KHQQRMXURU          H[WRUWLRQFRQVSLUDF\FRXQWVHUYHVWKHIXQFWLRQRIDVSHFLDO
H[SUHVVHGGRXEWZLWKUHVSHFWWRWKHVHLVVXHVWKHFRXUWRUGHUHG         YHUGLFWRQWKDWSUHGLFDWHDFW
WKHMXU\WRFRQWLQXHLWVGHOLEHUDWLRQV6HHLGDW
  6KRUWO\WKHUHDIWHUKRZHYHUWKHFRXUWUHFHLYHGDQRWHIURP               
WKHMXU\QRWLI\LQJLWWKDWDQRWKHUMXURUsXURU/RUHQ]EHOLHYHG              7KH GLVWULFW FRXUW GLVFXVVHG ZKHWKHU WR LQFOXGH WKH +REEV $FW

WKDWWKHWHOHSKRQHFDOOVZRXOGLQIOXHQFHKHUGHFLVLRQLQWKH            FRQVSLUDF\ DV UHOHYDQW FRQGXFW IRU WKH SXUSRVHV RI FDOFXODWLQJ $QWKRQ\jV
                                                                        &RXQW  5,&2 FRQVSLUDF\ RIIHQVH OHYHO LQ WHUPV RI mPHUJ>LQJ@l &RXQW 
FDVH                                                                   LQWR &RXQW  s$ DW  :H DUH WURXEOHG E\ WKLV WHUPLQRORJ\ 'LVWULFW
                                                                        FRXUWV PD\ mPHUJHl FRQYLFWLRQV E\ YDFDWLQJ GXSOLFLWRXV RU PXOWLSOLFLWRXV
  7KHFRXUWLPPHGLDWHO\VXPPRQHGsXURU/RUHQ]ZKRKDG                  FRQYLFWLRQV DIWHU D MXU\ YHUGLFW LI WKH FRXUW ILQGV WKDW WKH FRQYLFWLRQV DUH
  QRWUHFHLYHGDWHOHSKRQHFDOOEDFNWRWKHFRXUWURRP,Q             GXSOLFLWRXV RU PXOWLSOLFLWRXV DQG WKHUHIRUH LQ YLRODWLRQ RI WKH 'RXEOH
  UHVSRQVHWRTXHVWLRQV/RUHQ]VWDWHGWKDWOLVWHQLQJWRWKH            sHRSDUG\ &ODXVH RI WKH )LIWK $PHQGPHQW RI WKH 8QLWHG 6WDWHV

  RWKHUMXURUVKDGPDGHKHUQHUYRXVDQGWKDWVKHGLGQRW                &RQVWLWXWLRQ 8QLWHG 6WDWHV Y 7KURQHEXUJ  )G   WK &LU
                                                                         VHH DOVR %DOO Y 8QLWHG 6WDWHV  86   +RZHYHU
  ZLVKWRUHFHLYHDWHOHSKRQHFDOO1HYHUWKHOHVVVKHWZLFH            $QWKRQ\jV FRQYLFWLRQ XQGHU 5,&2 DQG KLV FRQYLFWLRQ XQGHU WKH +REEV
  LQGLFDWHGWKDWWKHFDOOVUHFHLYHGE\WKHRWKHUVZRXOGQRW             $FW DUH QRW GXSOLFLWRXV ZH KDYH ORQJ PDLQWDLQHG WKDW WKH LPSRVLWLRQ RI
  DIIHFWKHUYHUGLFW,QUHVSRQVHWRDGGLWLRQDOTXHVWLRQLQJ           FRQVHFXWLYH VHQWHQFHV IRU YLRODWLRQV RI 5,&2 DQG LWV DFFRPSDQ\LQJ
  /RUHQ]VWDWHGWKUHHWLPHVWKDWWKHFDOOVZRXOGQRWDIIHFW             SUHGLFDWH RIIHQVHV GRHV QRW YLRODWH WKH 'RXEOH sHRSDUG\ &ODXVH 6HH

  KHUGHOLEHUDWLRQVDQGIXUWKHUVWDWHGWKDWVKHFRXOGVWLOO             8QLWHG 6WDWHV Y 6XWWRQ  )G   WK &LU  +DG WKH
                                                                        GLVWULFW FRXUW FRQFOXGHG WKDW WKH +REEV $FW FRQVSLUDF\ ZDV UHOHYDQW
  DELGHE\KHUMXURUjVRDWK7KHFRXUWWKHQDVNHG/RUHQ]LI            FRQGXFW IRU WKH SXUSRVHV RI FDOFXODWLQJ $QWKRQ\jV RIIHQVH OHYHO IRU WKH
  VKH ZHUH FRQFHUQHG DERXW SRVVLEOH VDIHW\ WR ZKLFK             &RXQW  5,&2 FRQVSLUDF\ FRQYLFWLRQ WKH FRXUW VWLOO VKRXOG KDYH
  /RUHQ] UHVSRQGHG E\ QRGGLQJ KHU KHDG  :KHQ DVNHG             LQGHSHQGHQWO\ FDOFXODWHG KLV RIIHQVH OHYHO IRU WKH &RXQW  +REEV $FW
                                                                        FRQVSLUDF\ FRQYLFWLRQ
    8QLWHG6WDWHVY               1RV         1RV                     8QLWHG6WDWHVY     
      &RUUDGRHWDO                                                                                          &RUUDGRHWDO

   :HUHFRJQL]HWKDWWKHMXU\LQWKHSUHVHQWFDVHUHQGHUHGD          ZKHWKHU KHU QHUYRXVQHVV ZRXOG SUHYHQW KHU IURP
JHQHUDOYHUGLFWDQGWKXVGLGQRWVSHFLI\ZKLFKRIWKHSUHGLFDWH       FRQWLQXLQJ GHOLEHUDWLRQV /RUHQ] UHVSRQGHG m, GRQjW
DFWVLWIRXQGKDGEHHQDJUHHGWRE\$QWKRQ\DQGWKHRWKHU             NQRZl
GHIHQGDQWV$VZHKDYHSUHYLRXVO\KHOGKRZHYHUWKHmRWKHU
YHUGLFWVRIWKHVDPHMXU\PD\VHUYHWKHIXQFWLRQRIDVSHFLDO       ,GDW$IWHUDQRWKHUH[FKDQJHLQZKLFKWKHFRXUWDVVXUHG
YHUGLFW RQ WKH SUHGLFDWH DFWV ZKHUH WKRVH RWKHU YHUGLFWV   /RUHQ]WKDWQRWKLQJZRXOGFRPHRIWKHWHOHSKRQHFDOOVWKH
QHFHVVDULO\UHTXLUHGDILQGLQJWKDWWKH5,&2GHIHQGDQWKDG          FRXUW FRQFOXGHG WKDW /RUHQ] ZRXOG EH DEOH WR UHQGHU DQ
FRPPLWWHGWKHSUHGLFDWHDFWVl&DOODQDQY8QLWHG6WDWHV      LPSDUWLDOYHUGLFWEDVHGRQWKHHYLGHQFH7KHFRXUWIXUWKHU
)GWK&LUFHUWGHQLHG86          FRQFOXGHG WKDW WKH HQWLUH MXU\ ZRXOG EH DEOH WR UHQGHU DQ
  %HFDXVH ERWK WKH H[WRUWLRQ FRQVSLUDF\ DQG WKH      LPSDUWLDOYHUGLFW6HHLG
VXEVWDQWLYHDFWVRIH[WRUWLRQZHUHSUHGLFDWHDFWVRIWKH&RXQW
5,&2FRQVSLUDF\ZHFRQFOXGHWKDWWKHGLVWULFWFRXUWHUUHG           :HKHOGWKDWWKHGLVWULFWFRXUWKDGQRWDEXVHGLWVGLVFUHWLRQ
LQWKLVFDVHE\QRWLQFOXGLQJWKHH[WRUWLRQFRQVSLUDF\DQGWKH      LQGHQ\LQJWKHGHIHQGDQWjVPRWLRQIRUDPLVWULDO6HHLGDW
VXEVWDQWLYH DFWV RI H[WRUWLRQ IRU ZKLFK $QWKRQ\ ZDV          7KHGLVWULFWFRXUWKDGKHOGWKHUHTXLUHG5HPPHUKHDULQJ
FRQYLFWHG DV mXQGHUO\LQJ UDFNHWHHULQJ DFWLYLW\l IRU WKH       DW ZKLFK m>W@KH FRXUW WKRURXJKO\ TXHVWLRQHG WKH FRQWDFWHG
SXUSRVHRIFDOFXODWLQJ$QWKRQ\jV&RXQW5,&2FRQVSLUDF\            MXURUV RQ DQ LQGLYLGXDO EDVLV DQG FRQFOXGHG WKDW WKHLU
RIIHQVHOHYHO                                                      DVVHUWLRQVRIXQLPSDLUHGLPSDUWLDOLW\ZHUHZRUWK\RIEHOLHIl
                                                                    ,G3HQQHOOLQGLFDWHVWKDWWKHGLVWULFWFRXUWjVGHWHUPLQDWLRQ
  :LWKUHJDUGWRZKHWKHUWKHH[WRUWLRQFRQVSLUDF\ DQGWKH          UHJDUGLQJWKHFUHGLELOLW\RIMXURUVjDVVXUDQFHVVKRXOGUHFHLYH
VXEVWDQWLYHDFWVRIH[WRUWLRQFRQVWLWXWHGUHOHYDQWFRQGXFWIRU      VXEVWDQWLDOGHIHUHQFHRQDSSHDO,QWKDWFDVHGHVSLWHHYLGHQFH
$QWKRQ\jV&RXQW5,&2FRQVSLUDF\EDVHRIIHQVHOHYHOWKH           LQWKHUHFRUGWKDWDWOHDVWWZRMXURUVH[SHULHQFHGDJUHDWGHDO
GLVWULFWFRXUWVWDWHGDWUHVHQWHQFLQJ                              RIDQ[LHW\DVDUHVXOWRIWKHWKUHDWHQLQJWHOHSKRQHFDOOVZH
                                                                    FRQFOXGHGWKDWWKHGHIHQGDQWKDGQRWVXVWDLQHGKLVEXUGHQ
     7KHFRXUWKDYLQJFRQVLGHUHGDOOWKHHYLGHQFHOLVWHQHG        7KHGLVWULFWFRXUWKDGTXHVWLRQHGWKHMXURUVLQGLYLGXDOO\DQG
  WRDQGREVHUYHGDOOZLWQHVVHVDWWULDOOLVWHQHGWRKRXUVRI      WKHMXURUVKDGJLYHQDVVXUDQFHVWRWKHFRXUWDOEHLWDIWHUVRPH
  WDSHUHFRUGLQJVDOPRVWHQWLUHO\RIFRQYHUVDWLRQVEHWZHHQ          KHVLWDWLRQWKDWWKH\FRXOGVWLOOEHLPSDUWLDO:HKHOGWKDWWKH
  1RYH 7RFFR DQG 3DXO &RUUDGR EHHQ SUHVHQW DW WKH          GLVWULFWFRXUWZDVZLWKLQLWVGLVFUHWLRQLQFRQFOXGLQJWKDWWKHVH
  WHVWLPRQ\ODVW\HDURI1RYH7RFFRDOORIZKLFKLWYLHZV          DVVXUDQFHVZHUHFUHGLEOH
  LQFRQWH[WDJDLQVWWKHLPSHUDWLYHIXQGDPHQWRI$QWKRQ\
  &RUUDGRjVFRQYLFWLRQRQ&RXQWV               *LYHQ3HQQHOOZHKROGWKDWWKHGLVWULFWFRXUWGLGQRWDEXVH
  DQG  FRQFOXGHV DQG ILQGV WKDW WKH mVWUHHW WD[l          LWV GLVFUHWLRQ LQ WKH SUHVHQW FDVH  7KH GLVWULFW FRXUW
  H[WRUWLRQVRI1RYH7RFFRDQG3DXO&RUUDGRZHUHLQGHHG             TXHVWLRQHGWKHMXURUVLQGLYLGXDOO\DERXWWKHMXU\WDPSHULQJ
  LQGHSHQGHQWRIWKHRYHUDOO&RXQW5,&2FRQVSLUDF\RI             LQFLGHQWDQGQHZVFRYHUDJHRILWDQGGHWHUPLQHGWKDWWKHLU
  ZKLFK$QWKRQ\&RUUDGRZDVFRQYLFWHGDQGWKDWWKHUHIRUH            QHJDWLYHUHVSRQVHVWRLWVTXHVWLRQVZHUHUHOLDEOH1RQHRIWKH
  WKRVHH[WRUWLRQDWHDFWVRI1RYH7RFFRDQG3DXO&RUUDGR            GHOLEHUDWLQJMXURUVWHVWLILHGWKDWWKHLUYHUGLFWZDVWDLQWHGE\
  DUHQRWUHOHYDQWFRQGXFWIRUWKHSXUSRVHRIRIIHQVHOHYHO         WKH MXU\ WDPSHULQJ LQFLGHQW  $OWKRXJK WKH WHVWLPRQ\ RI
  FDOFXODWLRQVDVWR$QWKRQ\&RUUDGRXQGHU&RXQW                 DOWHUQDWH MXURU .HQQHG\ VXJJHVWV WKDW DW OHDVW RQH MXURU
                                                                    6X]DQQHZDVOHVVWKDQFRPSOHWHO\KRQHVWLQKHUWHVWLPRQ\
                                                                    .HQQHG\jVRZQWHVWLPRQ\LVLWVHOISUREOHPDWLF)RUH[DPSOH
    8QLWHG6WDWHVY                1RV         1RV                     8QLWHG6WDWHVY     
      &RUUDGRHWDO                                                                                           &RUUDGRHWDO

.HQQHG\ UHFDOOHG WKDW 6X]DQQH KDG GLVFXVVHG WKH MXU\          LVUHOHYDQWWRSDUWLFLSDWLQJLQDFULPLQDOHQWHUSULVHl7KH
WDPSHULQJLQFLGHQWZLWK0\URQEXWWKHUHFRUGVKRZHGWKDW            LVVXHLQWKHSUHVHQWFDVHWKHQLVZKHWKHUWKHGLVWULFWFRXUW
0\URQ ZDV QRW SUHVHQW RQ WKH GD\ WKDW .HQQHG\ WHVWLILHG     HUUHG E\ QRW LQFOXGLQJ WKH IROORZLQJ DV mXQGHUO\LQJ
6X]DQQHGLVFXVVHGWKHLVVXHZLWKKLP,QDGGLWLRQWKHUHLV         UDFNHWHHULQJDFWLYLW\lIRUWKHSXUSRVHRIFDOFXODWLQJ$QWKRQ\
UHDVRQ WR GLVFRXQW .HQQHG\jV FUHGLELOLW\ JLYHQ KLV SDVW       &RUUDGRjV RIIHQVH OHYHO IRU &RXQW    WKH H[WRUWLRQ
DFWLRQVLQWKHSUHVHQWFDVHLHKLVVLOHQFHZKHQWKHGLVWULFW     FRQVSLUDF\  WKH VXEVWDQWLYH DFWV RI H[WRUWLRQ  WKH
MXGJH DVNHG WKH MXU\ DERXW WKH 6KDED]] LQFLGHQW SULRU WR    FRQVSLUDF\ WR PXUGHU +DUU\ %RZPDQ DQG  DFWLYLWLHV
GHOLEHUDWLRQV                                                       UHODWHGWRWKH)URQWLHUDQG(GJHZDWHU+RWHOV
   7KDWWKHSURFHHGLQJZDVKHOGLQRSHQFRXUWDVRSSRVHGWR            :HQRWHDWWKHRXWVHWWKDWLQRUGHUWRFRQYLFW$QWKRQ\RI
LQ FDPHUD GRHV QRW FKDQJH RXU DQDO\VLV  7KH GHIHQGDQWV    WKH5,&2FRQVSLUDF\FKDUJHGLQ&RXQWWKHMXU\QHFHVVDULO\
DUJXHGmWKDWMXURUVZRXOGEHPRUHFDQGLGLIQRWIRUFHGWR      KDGWRILQGEH\RQGDUHDVRQDEOHGRXEWWKDW$QWKRQ\DJUHHG
VKHG WKHLU DQRQ\PLW\ E\ WHVWLI\LQJ LQ RSHQ FRXUWl            WRWKHFRPPLVVLRQRIDWOHDVWWZR5,&2SUHGLFDWHDFWV6HH
$SSHOODQWjV%U$QWKRQ\DW7KHGLVWULFWFRXUWUHDVRQHG        86&mµSDWWHUQRIUDFNHWHHULQJDFWLYLW\jUHTXLUHV
KRZHYHUWKDWWKHMXURUVZHUHIDPLOLDUZLWKWKHFRXUWURRPDQG        DWOHDVWWZRDFWVRIUDFNHWHHULQJDFWLYLW\lVHHDOVR6DOLQDVY
WKDW KROGLQJ WKH SURFHHGLQJ LQ FDPHUD ZRXOG PDNH WKHP        8QLWHG 6WDWHV  86    8QLWHG 6WDWHV Y
XQFRPIRUWDEOHLQFUHDVHWKHLUDQ[LHW\OHYHODQGOHDGWROHVV        sRVHSK)GWK&LU+RZHYHUWKH
FDQGRU LQ WKHLU DQVZHUV  0RUHRYHU GXULQJ WKH 5HPPHU        GLVWULFWFRXUWIRXQGE\DSUHSRQGHUDQFHRIWKHHYLGHQFHWKDW
KHDULQJWKHMXURUVZHUHQRWLGHQWLILHGE\QDPHEXWRQO\E\           $QWKRQ\ ZDV UHVSRQVLEOH IRU RQO\ RQH mXQGHUO\LQJ
MXURU QXPEHU DQG WKXV VWHSV ZHUH WDNHQ WR SURWHFW WKHLU    UDFNHWHHULQJRIIHQVHlREVWUXFWLRQRIMXVWLFHIRUWKHSXUSRVH
DQRQ\PLW\LQRSHQFRXUW7KHGLVWULFWFRXUWWKXVKHOGWKDWmWKH     RIFDOFXODWLQJ$QWKRQ\jVEDVHRIIHQVHOHYHOIRUWKH&RXQW
SUHVXPSWLRQ WKDW DOO FRXUW EXVLQHVV ZLOO EH FRQGXFWHG LQ     5,&2FRQVSLUDF\SXUVXDQWWRWKHUHOHYDQWFRQGXFWSURYLVLRQV
SXEOLFlZDVQRWRXWZHLJKHGE\DQ\FRPSHOOLQJLQWHUHVWs$         RI866*%5HOHYDQWFRQGXFWLQFOXGHVmDOODFWV
DW%DVHGRQWKHIDFWVRIWKHSUHVHQWFDVHZHFDQQRW          RURPLVVLRQVlWKDWWKHGHIHQGDQWmFRPPLWWHGDLGHGDEHWWHG
FRQFOXGHWKDWWKHGLVWULFWFRXUWHUUHGLQKROGLQJWKH5HPPHU         FRXQVHOHG FRPPDQGHG LQGXFHG SURFXUHG RU ZLOOIXOO\
KHDULQJ LQ RSHQ FRXUW  m&ORVHG SURFHHGLQJV DOWKRXJK QRW    FDXVHGl DQG  mDOO UHDVRQDEO\ IRUHVHHDEOH DFWV DQG
DEVROXWHO\SUHFOXGHGPXVWEHUDUHDQGRQO\IRUFDXVHVKRZQ          RPLVVLRQVRIRWKHUVLQIXUWKHUDQFHRIWKHMRLQWO\XQGHUWDNHQ
WKDWRXWZHLJKVWKHYDOXHRIRSHQQHVVl3UHVV(QWHUSULVH&R         FULPLQDODFWLYLW\lWKDWRFFXUUHGGXULQJLQSUHSDUDWLRQIRURU
Y6XSHULRU&RXUW867KHRSHQQHVV           LQWKHFRXUVHRIDWWHPSWLQJWRDYRLGGHWHFWLRQRUUHVSRQVLELOLW\
RIWKH5HPPHUKHDULQJFOHDUO\DGYDQFHGmWKHDSSHDUDQFHRI            IRUWKH5,&2FRQVSLUDF\866*%D$	%
IDLUQHVVVRHVVHQWLDOWRSXEOLFFRQILGHQFHLQWKHV\VWHPlLG       5,&2SUHGLFDWHDFWVWKHQIRUZKLFKDGHIHQGDQWLVFRQYLFWHG
DWLQWKLVKLJKSURILOHFDVH                                   QHFHVVDULO\ FRQVWLWXWH UHOHYDQW FRQGXFW IRU WKH SXUSRVH RI
                                                                     FDOFXODWLQJ WKH GHIHQGDQWjV EDVH RIIHQVH OHYHO IRU D 5,&2
  :LWKUHVSHFWWRWKHHIIHFWRIWKHSDVVDJHRIWLPHZHWKLQN        FRQVSLUDF\ FRQYLFWLRQ  7KH GLVWULFW FRXUW WKXV HUUHG LQ
WKDWMXURUVDUHOLNHO\WRUHFDOOZKHWKHUWKHLUYHUGLFWZDVWDLQWHG   VHQWHQFLQJ $QWKRQ\ E\ ILQGLQJ E\ D SUHSRQGHUDQFH RI WKH
E\H[WULQVLFIDFWRUVHYHQLIWKH\KDYHWURXEOHUHPHPEHULQJ          HYLGHQFHWKDWKHZDVUHVSRQVLEOHIRURQO\RQHmXQGHUO\LQJ
WKH QDPHV RI WKHLU IHOORZ MXURUV GD\WRGD\ KDSSHQLQJV       UDFNHWHHULQJ RIIHQVHl ZKHUH WKH MXU\ IRXQG EH\RQG D
GXULQJWKHFRXUVHRIDOHQJWK\WULDODQGWKHOLNH7KXVWKH       UHDVRQDEOHGRXEWWKDW$QWKRQ\DJUHHGWRWKHFRPPLVVLRQRI
PHUHSDVVDJHRIWLPHLVQRWVXIILFLHQWWRFDOOLQWRTXHVWLRQWKH     DWOHDVWWZR5,&2SUHGLFDWHDFWV
       8QLWHG6WDWHVY                  1RV            1RV                      8QLWHG6WDWHVY      
         &RUUDGRHWDO                                                                                                 &RUUDGRHWDO

DQGLQGHFOLQLQJWRHQKDQFH$QWKRQ\&RUUDGRjV&RXQW                    IDLUQHVVRIWKHKHDULQJ:LWKUHVSHFWWRERWKWKHSDVVDJHRI
H[WRUWLRQFRQVSLUDF\RIIHQVHOHYHOEHFDXVHWKHDFWVRI1RYH                  WLPHDVZHOODVWKHMXURUZLWKDPQHVLDZHQRWHWKDWWKHSDUW\
7RFFRDQG3DXO&RUUDGRWULJJHULQJWKRVHHQKDQFHPHQWVZHUH                    VHHNLQJ WR SURYH WDLQW EHDUV WKH EXUGHQ LQ WKH 5HPPHU
QRWUHDVRQDEO\IRUHVHHDEOHWR$QWKRQ\&RUUDGR                               KHDULQJ WR DOORZ WKH SDVVDJH RI WLPH DQG WKH IDGLQJ RI
                                                                             PHPRU\WRHQWHUWKHFDOFXOXVZRXOGVKLIWWKDWEXUGHQWRD
  :HUHYLHZGHQRYRWKHVHQWHQFLQJFRXUWjVLQWHUSUHWDWLRQRI                 FRQVLGHUDEOH H[WHQW  7KH SDUW\ ZLWK WKH EXUGHQ LQ HIIHFW
WKH 6HQWHQFLQJ *XLGHOLQHV DQG VWDWXWHV DQG ZH UHYLHZ IRU            EHDUVWKHULVNVRIMXURUDPQHVLDDQGIDGHGPHPRU\EHFDXVHRI
FOHDU HUURU LWV IDFWXDO ILQGLQJV  6HH HJ 8QLWHG 6WDWHV Y     WKHSDVVDJHRIWLPH
6ZLQH\)GWK&LUFHUWGHQLHG86
,IWKHGLVWULFWFRXUWjVIDFWXDOILQGLQJVDUH               %RWK $QWKRQ\DQG3DXODOVRDUJXHWKDWWKHGLVWULFWFRXUW
QRW FOHDUO\ HUURQHRXV WKLV FRXUW UHYLHZV GH QRYR mWKH               LQDSSURSULDWHO\OLPLWHGWKHLUDELOLW\ WR DVNTXHVWLRQVRIWKH
GHWHUPLQDWLRQ WKDW WKH FRQGXFW LQ TXHVWLRQ FRQVWLWXWHG                 MXURUVDWWKHKHDULQJ7RWKHH[WHQWWKHGLVWULFWFRXUWOLPLWHG
UHOHYDQWFRQGXFWl8QLWHG6WDWHVY0\HUV)G                WKH DVNLQJ RI TXHVWLRQV EDVHG RQ LWV GHWHUPLQDWLRQV RI
WK&LUFHUWGHQLHG86m:KHWKHUWKH                UHOHYDQFH ZH UHYLHZ IRU DEXVH RI GLVFUHWLRQ  6HH 8QLWHG
FULPLQDO DFWV RI RWKHUV LQ D MRLQWO\ XQGHUWDNHQ FULPLQDO             6WDWHVY1DVK)GWK&LUFHUWGHQLHG
DFWLYLW\ DUH UHDVRQDEO\ IRUHVHHDEOH LV D TXHVWLRQ RI IDFW           867KHGLVWULFWFRXUWFOHDUO\GLGQRWDEXVHLWV
UHYLHZDEOHRQO\IRUFOHDUHUURUl8QLWHG6WDWHVY&DQHVWUDUR              GLVFUHWLRQ LQ OLPLWLQJ GHIHQVH FRXQVHOjV DELOLW\ WR DVN
)GWK&LU                                           TXHVWLRQVDERXWWKHPRYLHm7KHsXURUlRUDERXWWKHMXURU
                                                                             ZKR VOHSW ZLWK D KDQGJXQ XQGHU KLV SLOORZ DIWHU WKH
     D&RXQW5,&2&RQVSLUDF\                                             FRQFOXVLRQRIWKHWULDO6LPLODUO\ZHFDQQRWFRQFOXGHWKDWWKH
                                                                             GLVWULFWFRXUWDEXVHGLWVGLVFUHWLRQLQOLPLWLQJTXHVWLRQVZLWK
  6HFWLRQ ( JRYHUQV VHQWHQFLQJ IRU 5,&2 FRQVSLUDF\                 UHVSHFW WR WKH FRQFOXVLRQV WKH MXURUV GUHZ IURP 0\URQjV
FRQYLFWLRQV  ,W SURYLGHV WKDW WKH EDVH RIIHQVH OHYHO IRU D        DEVHQFHEHFDXVHRIKHDOWKSUREOHPV7KDW0\URQjVDEVHQFH
5,&2 FRXQW LV WKH JUHDWHU RI  RU mWKH RIIHQVH      OHYHO         FRLQFLGHGZLWKWKHMXU\WDPSHULQJLQFLGHQWGRHVQRWPDNHWKH
DSSOLFDEOHWRWKHXQGHUO\LQJUDFNHWHHULQJDFWLYLW\l,Q7RFFR             MXURUjVDEVHQFHLWVHOIDVRXUFHRIMXURUELDVRUSUHMXGLFHDQG
ZH KHOG WKDW WKH WHVW IRU GHWHUPLQLQJ ZKHWKHU FRQGXFW                WKXVLWZDVSHULSKHUDOWRWKH5HPPHUKHDULQJDWEHVW7KH
TXDOLILHV DV DQ mXQGHUO\LQJ UDFNHWHHULQJ DFWLYLW\l IRU                 GHIHQVH VRXJKW WR PDNH WKH 5HPPHU KHDULQJ D IXOOVFDOH
VHQWHQFLQJ SXUSRVHV LV WKH UHOHYDQW FRQGXFW WHVW LH WKDW         LQTXLU\ LQWR WKH MXU\jV GRXEWV DQG IHDUV JRLQJ LQWR
IRXQGLQ866*%6HH)GDW6HHDOVR                   GHOLEHUDWLRQ WKH GLVWULFW FRXUW ZDV ZLWKLQ LWV GLVFUHWLRQ LQ
&RUUDGR ,  )G DW  m>7@KH XQGHUO\LQJ DFWV RI               SUHYHQWLQJWKLV
UDFNHWHHULQJLQD5,&2FRQVSLUDF\DUHVLPSO\FRQGXFWWKDW
                                                                               )LQDOO\ )HGHUDO 5XOH RI (YLGHQFH E OLPLWV WKH
                                                                             DGPLVVLELOLW\RIMXURUWHVWLPRQ\LQDKHDULQJVXFKDVWKLVDQG
                                                                            WKHGLVWULFWFRXUWFRUUHFWO\FRQFOXGHGWKDWVRPHRIWKHDUHDV
      7KH ,QWURGXFWRU\ &RPPHQWDU\ VWDWHV m7KH RIIHQVH OHYHO XVXDOO\         WKDWWKHGHIHQVHSURSRVHGWRH[SORUHDUHmRIIOLPLWVlXQGHU
ZLOO EH GHWHUPLQHG E\ WKH RIIHQVH OHYHO RI WKH XQGHUO\LQJ FRQGXFWl
$SSOLFDWLRQ 1RWH  VWDWHV m:KHUH WKHUH LV PRUH WKDQ RQH XQGHUO\LQJ
                                                                             WKDWUXOH$VZHQRWHGLQ8QLWHG6WDWHVY*RQ]DOHV)G
RIIHQVH WUHDW HDFK XQGHUO\LQJ RIIHQVH DV LI FRQWDLQHG LQ D VHSDUDWH FRXQW   WK&LUm5XOHEH[SOLFLWO\GLVTXDOLILHV
RI FRQYLFWLRQ    l 7KXV WKH SURYLVLRQ DQG FRPPHQWDU\ XVH WKUHH          MXURU WHVWLPRQ\ UHJDUGLQJ MXURUVj PHQWDO SURFHVVHV LQ
GLIIHUHQW FRQVWUXFWLRQV mXQGHUO\LQJ UDFNHWHHULQJ DFWLYLW\l mXQGHUO\LQJ     FRQQHFWLRQZLWKGHOLEHUDWLRQVl7KXVDUHDVDQGTXRWHG
FRQGXFWl DQG mXQGHUO\LQJ RIIHQVHl WR UHIHU WR WKH VDPH WKLQJ
    8QLWHG6WDWHVY                1RV         1RV                      8QLWHG6WDWHVY      
      &RUUDGRHWDO                                                                                            &RUUDGRHWDO

VXSUD ZHUH QRW DSSURSULDWH JURXQGV IRU TXHVWLRQV DW WKH       >$QWKRQ\jV@FRXQVHODUJXHVZLWKJUHDWSHUVXDVLYHIRUFH
KHDULQJDVWKH\ZHQWWRMXURUWKRXJKWSURFHVVHVUDWKHUWKDQ           WKDWVXFKPLVWUHDWPHQWDQGLWVHIIHFWVZHUHFOHDUO\QRW
WKHLQIOXHQFHRIWKHMXU\WDPSHULQJLQFLGHQW:HKROGWKDWWKH        FRQWHPSODWHGE\WKHGUDIWHUVRIWKHVHQWHQFLQJJXLGHOLQHV
GLVWULFWFRXUWDSSURSULDWHO\OLPLWHGGLVFXVVLRQWRFRQIRUPZLWK        EXWDUHDVSHFLDOFLUFXPVWDQFHZKLFKDVHQWHQFLQJFRXUW
WKLVUXOH                                                             VKRXOGEHDEOHWRWDNHLQWRFRQVLGHUDWLRQ3HUKDSVXQGHU
                                                                       WKH ULJKW FLUFXPVWDQFHV ZKDW FRXQVHO XUJHV XSRQ WKH
%$QWKRQ\&RUUDGR                                                    &RXUWVKRXOGEHFRPHSDUWRIRXUMXULVSUXGHQFHEXWQRW
                                                                       XQGHUWKHVHFLUFXPVWDQFHV)LUVWRIDOOWKH&RXUWFDQQRW
  $QWKRQ\UDLVHVRQHDGGLWLRQDOLVVXHDQGWKHJRYHUQPHQW              FRQFOXGH EDVHG RQ 'U <HHjV WHVWLPRQ\ WKDW DQ\
FURVVDSSHDOVKLVVHQWHQFH                                            PDOWUHDWPHQWWKDW0U&RUUDGRPD\KDYHVXIIHUHGFDXVHG
                                                                       PDMRUDQGSHUVLVWHQWGDPDJHWRKLVKHDOWK7KHHYLGHQFH
  'RZQZDUG'HSDUWXUH                                               LVVLPSO\QRWFRQFOXVLYHRQWKLVSRLQW(YHQLILWZHUH
                                                                       WKHUHjVQRMXULVSUXGHQWLDOO\VDWLVI\LQJUHFRUGRWKHUWKDQ
  $QWKRQ\DSSHDOVWKHGLVWULFWFRXUWjVGHFLVLRQQRWWRGHSDUW          WKH DVVHUWLRQV RI 0U &RUUDGR KLPVHOI WKDW WKLV
GRZQZDUG LQ VHQWHQFLQJ KLP EDVHG RQ WKH JRYHUQPHQWjV           PDOWUHDWPHQW RFFXUUHG DQG WKH &RXUW FDQQRW WKHUHIRUH
FXOSDELOLW\ IRU GDPDJLQJ KLV KHDOWK LQ QHHGOHVVO\ DQG           ILQG WKDW LW GLG  ,I VXFK HYLGHQFH ZHUH DYDLODEOH WKH
DOOHJHGO\ YLQGLFWLYHO\ WUDQVSRUWLQJ KLP IURP 5RFKHVWHU         &RXUWZRXOGEHFRQIURQWHGZLWKDQRWKHUYHU\GLIILFXOW
0LQQHVRWDWR'HWURLWWRWHVWLI\LQDQRWKHUFDVH                      LVVXH    ZKHQ LI DW DOO VKRXOG PDOWUHDWPHQW RI D
   $GLVWULFWMXGJHjVUHIXVDOWRGHSDUWGRZQZDUGLVRUGLQDULO\         SULVRQHUEHDEDVLVIRUGRZQZDUGGHSDUWXUH
XQUHYLHZDEOHEXWZHPD\UHYLHZWKHGLVWULFWFRXUWjVGHFLVLRQ        s$ DW   7KH GLVWULFW FRXUW QRWHG WKDW LQ FHUWDLQ
LIWKHGLVWULFWFRXUWZDV XQDZDUHRILWVGLVFUHWLRQWRGHSDUW       FLUFXPVWDQFHV LW ZRXOG KDYH WR GHWHUPLQH ZKHWKHU
GRZQZDUG6HHHJ8QLWHG6WDWHVY%\UG)G        JRYHUQPHQWPDOWUHDWPHQWRIDSULVRQHUFRXOGVHUYHDVDEDVLV
WK&LU7KHGLVWULFWFRXUWLPSOLFLWO\DFNQRZOHGJHVLWV     IRU D GRZQZDUG GHSDUWXUH EXW WKDW HYHQ LI WKLV ZHUH DQ
GLVFUHWLRQWRGHSDUWGRZQZDUGZKHUHLWFOHDUO\ILQGVRQWKH          DSSURSULDWHEDVLVIRUDGRZQZDUGGHSDUWXUHWKHIDFWVRIWKH
IDFWVLQWKHUHFRUGWKDWWKHUHTXHVWHGGRZQZDUGGHSDUWXUHLV         SUHVHQWFDVHZRXOGQRWVXSSRUWLW,QRWKHUZRUGVWKHFRXUW
XQZDUUDQWHG6XFKDILQGLQJSUHFOXGHVDSSHOODWHUHYLHZRI           FRQFOXGHGWKDWHYHQLILWKDGGLVFUHWLRQWRGHSDUWGRZQZDUG
WKHGLVWULFWFRXUWjVGHFLVLRQ6HH8QLWHG6WDWHVYsRQHV      RQWKLVEDVLVLWZRXOGQRW)RUWKLVUHDVRQWKLVLVVXHLVQRW
)G   WK &LU  VHH DOVR 8QLWHG 6WDWHV Y   UHYLHZDEOHRQDSSHDO
$EGXOODK  )G   WK &LU  KROGLQJ WKDW
GLVWULFWFRXUWjVGHFLVLRQZDVXQUHYLHZDEOHZKHUHGLVWULFWFRXUW        *RYHUQPHQWjV&URVV$SSHDO
mHQWHUWDLQHGDUJXPHQWlDQGmFOHDUO\H[SUHVVHGUHFRJQLWLRQRI
KLVGLVFUHWLRQWRGHSDUWl                                            ,QLWVFURVVDSSHDOWKHJRYHUQPHQWDUJXHVWKDWWKHGLVWULFW
                                                                     FRXUWHUUHGLQDVVLJQLQJ$QWKRQ\&RUUDGRDWRWDORIIHQVHOHYHO
   ,QWKHSUHVHQWFDVHWKHGLVWULFWFRXUWLPSOLFLWO\UHFRJQL]HG     RI7KHJRYHUQPHQWDUJXHVWKDW$QWKRQ\&RUUDGRVKRXOG
LWVGLVFUHWLRQWRGHSDUWIURPWKH*XLGHOLQHVE\FDOOLQJ LQWR        KDYHEHHQDVVLJQHGDWRWDORIIHQVHOHYHORI$FFRUGLQJWR
TXHVWLRQWKHIDFWXDOEDVLVRIWKHGHIHQGDQWjVPRWLRQ$WWKH        WKH JRYHUQPHQW WKH GLVWULFW FRXUW HUUHG  LQ VHQWHQFLQJ
UHVHQWHQFLQJKHDULQJIRUH[DPSOHWKHGLVWULFWFRXUWVWDWHG        $QWKRQ\&RUUDGRZLWKUHVSHFWWRRQO\RQHXQGHUO\LQJRIIHQVH
                                                                     IRUWKH&RXQW5,&2FRQVSLUDF\LHREVWUXFWLRQRIMXVWLFH