Court Opinion

ID: 2969932
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:00:42.018205+00
Date Added: 2024-06-11T11:41:37.305293
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
   8QLWHG6WDWHVY+RUWRQHWDO      1RV                     3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

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

YLRODWLYHRI&DUULJHUDQGWKHVXEVHTXHQWFRQVHQWWRVHDUFKWKH                     )LOH 1DPH DS

DSDUWPHQWUHQGHUHGE\+RUWRQGLGQRWmSXUJHWKHWDLQWlRIWKH
LOOHJDOFRQGXFW$FFRUGLQJO\ZHUHYHUVHWKHGLVWULFWFRXUWjV
GHQLDORIGHIHQGDQWVjPRWLRQVWRVXSSUHVVWKHHYLGHQFHVHL]HG     81,7('67$7(6&28572)$33($/6
LQ +RUWRQjV DSDUWPHQW DQG UHPDQG IRU IXUWKHU SURFHHGLQJV                   )257+(6,;7+&,5&8,7
FRQVLVWHQWZLWKRXUGHWHUPLQDWLRQV                                                 BBBBBBBBBBBBBBBBB

                                                                   81,7(' 67$7(6 2) $0(5,&$        ;
                                                                             3ODLQWLII$SSHOOHH     
                                                                                                     
                                                                                                        1RV
                                                                              Y                     
                                                                                                      !
                                                                                                     
                                                                   6+< +($7+DQG           
                                                                   &$50(1 +25721          
                                                                          'HIHQGDQWV$SSHOODQWV 
                                                                                                     
                                                                                                    1
                                                                         $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
                                                                      IRUWKH:HVWHUQ'LVWULFWRI.HQWXFN\DW/RXLVYLOOH
                                                                            1Rn&KDUOHV56LPSVRQ,,,
                                                                                     &KLHI'LVWULFWsXGJH
                                                                                   6XEPLWWHG0DUFK
                                                                               'HFLGHGDQG)LOHG$XJXVW
                                                                     %HIRUH.(,7+6,/(5DQG&/$<&LUFXLWsXGJHV
                                                                                      BBBBBBBBBBBBBBBBB
                                                                                           &2816(/
                                                                  21%5,()6FRWW&&R[/RXLVYLOOH.HQWXFN\0DUN'
                                                                  &KDQGOHU /RXLVYLOOH .HQWXFN\ IRU $SSHOODQWV  7HUU\ 0
                                                                  &XVKLQJ0RQLFD:KHDWOH\$66,67$1781,7('67$7(6
                                                                  $77251(<6/RXLVYLOOH.HQWXFN\IRU$SSHOOHH

                                                                                                 
     8QLWHG6WDWHVY+RUWRQHWDO         1RV        1RV             8QLWHG6WDWHVY+RUWRQHWDO           

                     BBBBBBBBBBBBBBBBB                                 EXLOGLQJl $SSHOOHHjV %U DW    +RZHYHU WKH PHUH
                                                                       SRVVHVVLRQRIDNH\ZLOOQRWWUDQVIRUPDQLOOHJDOHQWU\LQWRD
                         23,1,21                                       YDOLGRQH,WLVWKHDXWKRULW\WRHQWHUQRWWKHPDQQHURIHQWU\
                     BBBBBBBBBBBBBBBBB                                 WKDWSURYLGHVWKHOHJDOLW\IRUWKHRIILFHUVjFRQGXFWWKHPRVW
                                                                       FDVXDOUHDGLQJRI&DUULJHUUHYHDOVWKDWDQ\HQWU\LQWRDORFNHG
  '$021s.(,7+&LUFXLWsXGJH'HIHQGDQWV$SSHOODQWV                DSDUWPHQWEXLOGLQJZLWKRXWSHUPLVVLRQH[LJHQF\RUDZDUUDQW
6K\+HDWKDQG&DUPHQ+RUWRQm'HIHQGDQWVlSOHGJXLOW\WR             LVSURKLELWHG
FRQVSLUDF\ WR SRVVHVV ZLWK LQWHQW WR GLVWULEXWH FRFDLQH LQ
YLRODWLRQRI86&DQGSRVVHVVLRQZLWKLQWHQWWR               $V QRWHG HDUOLHU WKH JRYHUQPHQW DUJXHV WKDW +RUWRQjV
GLVWULEXWHFRFDLQHLQYLRODWLRQRI86&D7KH        FRQVHQWWRWKHVHDUFKZDVDQmLQWHUYHQLQJDFWRIIUHHZLOOl
GHIHQGDQWV HQWHUHG WKHLU UHVSHFWLYH SOHD DJUHHPHQWV               ZKLFKmSXUJHG>WKHHQWU\@RILWVWDLQWl$SSHOOHHjV%UDW
FRQWLQJHQW XSRQ WKHLU DELOLW\ WR DSSHDO WKH GLVWULFW FRXUWjV   FLWLQJ:RQJ6XQY8QLWHG6WDWHV86
GHQLDO RI WKHLU PRWLRQV WR VXSSUHVV HYLGHQFH GLVFRYHUHG         +RZHYHULWZDVWKHRIILFHUVjLOOHJDOHQWU\LQWRWKHFRPPRQ
SXUVXDQWWRDZDUUDQWOHVVVWRSRI+HDWKDQGVXEVHTXHQWVHDUFK          DUHDV RI WKH EXLOGLQJ WKDW OHG WKHP WR 0V +RUWRQjV GRRU
RI +RUWRQjV DSDUWPHQW  )RU WKH UHDVRQV WKDW IROORZ  ZH     &RQVHTXHQWO\ WKH FRQVHQW IRU WKH HQVXLQJ VHDUFK DQG WKH
5(9(56(WKHGLVWULFWFRXUWjVRUGHUGHQ\LQJWKHGHIHQGDQWVj             LOOHJDOGUXJVPXVWEHVXSSUHVVHGEHFDXVHWKH\ZHUHmJDLQHG
PRWLRQVWRVXSSUHVV                                                   DVDUHVXOWRI>WKHRIILFHUVj@SUHVHQFHLQWKHFRPPRQDUHDVRI
                                                                       WKHEXLOGLQJl&DUULJHU)GDW$FFRUGLQJO\ZH
                      ,%$&.*5281'                                   KROG WKDW WKH WDLQW RI WKH LOOHJDO DUUHVW DQG HQWU\ LQWR WKH
                                                                       DSDUWPHQWEXLOGLQJZDVQRWSXUJHGE\+RUWRQjVLQWHUYHQLQJ
   2IILFHU 5RG 6HHO\H D QDUFRWLFV LQYHVWLJDWRU IRU WKH         FRQVHQW WR WKH VHDUFK DQG WKXV WKH IUXLWV RI WKH FRQVHQW
/RXLVYLOOH 3ROLFH 'HSDUWPHQW  LQLWLDOO\ REVHUYHG +HDWK LQ      VKRXOGKDYHEHHQVXSSUHVVHGDVWRERWKGHIHQGDQWV
HDUO\$SULORI2IILFHU6HHO\HWHVWLILHGWKDWKLVLQWHUHVW
LQ+HDWKZDVSLTXHGEHFDXVHKHmPLVLGHQWLILHG>+HDWK@DQG                                      ,,,&21&/86,21
WKRXJKWKHZDVDQRWKHUSHUVRQWKDW>KH@KDGEHHQORRNLQJDWl
s$DW2IILFHU6HHO\HIROORZHG+HDWKDQGREVHUYHG               %\FRQWLQXLQJWRGHWDLQ+HDWKDIWHUIDLOLQJWRFRQQHFWKLP
KLP VWRSSLQJ DW D ORFDWLRQ WKDW ZDV UHSRUWHGO\ XQGHU           ZLWKFULPLQDODFWLYLW\WKHRIILFHUVjDFWLRQVZHUHLQFRQVLVWHQW
LQYHVWLJDWLRQIRUGUXJ DFWLYLW\7KHRIILFHUVWKHQIROORZHG          ZLWK WKH OLPLWV RI D 7HUU\ VWRS DV VHW RXW LQ %HUNHPHU
+HDWK XQWLO KH FDPH WR D UHVLGHQWLDO DSDUWPHQW EXLOGLQJ DW    )XUWKHUWKHRIILFHUVjHQWU\LQWRWKHDSDUWPHQWEXLOGLQJZDV
ZKLFK WLPH 2IILFHU 6HHO\H FODLPHG +HDWK EHJDQ WR GULYH
VXVSLFLRXVO\LQWKDWKHmFLUFOHGWKHEORFNVHYHUDOWLPHV>DQG@
ORRN>HG@LQKLVUHDUYLHZPLUURUls$DW2IILFHU6HHO\H           
WHVWLILHG WKDW KLV mH[SHULHQFH DQG WUDLQLQJl LQGLFDWHG WKDW             :H QRWH WKDW WKLV DUJXPHQW DVVXPHV WKDW +HDWK FRXOG JLYH WKH

+HDWKZDVHQJDJHGLQEHKDYLRUmLQGLFDWLYHRIGUXJWUDIILFNLQJ          RIILFHUV SHUPLVVLRQ WR XVH WKH NH\ 7KH JRYHUQPHQW DVVHUWV WKDW +HDWKjV
                                                                       UHOLQTXLVKPHQW RI WKH NH\V HQWLWOHG WKH JRYHUQPHQW WR XVH WKHP WR JDLQ
DQGORRNLQJIRUDSROLFHWDLOls$DW7KHDSDUWPHQW         HQWU\ WR WKH DSDUWPHQW   +RZHYHU WKH JRYHUQPHQW FRQYHUVHO\ FRQWHQGV
EXLOGLQJ WKDW +HDWK HQWHUHG ZDV mD EULFN WKUHHVWRU\           WKDW +HDWK ODFNV WKH UHTXLVLWH VWDQGLQJ WR RSSRVH WKH VHDUFK RI +RUWRQjV

DSDUWPHQW EXLOGLQJ ZLWK D SDUNLQJ ORW  7KH RQH FRPPRQ        DSDUWPHQW DUJXLQJ WKDW    mKDYLQJ D NH\ WR D SODFH GRHV QRW HVWDEOLVK

HQWUDQFH LQWR WKH EXLOGLQJ >UHPDLQV@ ORFNHG DQG UHTXLUHV D     VWDQGLQJ WR FKDOOHQJH D VHDUFK RI WKH SODFHl $SSHOOHHjV %U DW    :KLOH

NH\ls$DW                                                    WKHVH VWDWHPHQWV DUH QRW HQWLUHO\ FRQWUDGLFWRU\ WKH\ FRQIOLFW LQDVPXFK DV
                                                                       WKH JRYHUQPHQW UHOLHV RQ +HDWKjV FRQVHQW ZKHQ MXVWLI\LQJ WKH RIILFHUjV
                                                                       UHWULHYDO DQG XVH RI WKH NH\V EXW WKHQ FRQWHVWV KLV VWDQGLQJ WR FKDOOHQJH
                                                                       WKH VHDUFK HIIHFWXDWHG WKURXJK WKH XVH RI WKHVH NH\V
    8QLWHG6WDWHVY+RUWRQHWDO         1RV        1RV             8QLWHG6WDWHVY+RUWRQHWDO          

VKRSSLQJEDJWKHRIILFHUVDWWHPSWHGWRIROORZKLPDQGIRXQG             6XEVHTXHQWO\ WKURXJK YHKLFOH UHJLVWUDWLRQ DQG FULPLQDO
WKDW WKH mHQWUDQFH GRRUV ZHUH ORFNHG DQG FRXOG RQO\ EH        SKRWRUHFRUGV2IILFHU6HHO\HZDVDEOHWRLGHQWLI\WKHLQVWDQW
RSHQHGE\DNH\RUE\VRPHRQHZLWKLQDFWLYDWLQJDEX]]HU               GHIHQGDQWDV6K\+HDWK2IILFHU6HHO\HDOVRGHWHUPLQHGWKDW
V\VWHPl  ,G  $IWHU DWWHPSWLQJ WR HQWHU WKH EXLOGLQJ ZKHQ   +HDWK KDG WKUHH PLVGHPHDQRU FRQYLFWLRQV DQG RQH IHORQ\
%HDVOH\ZDVDGPLWWHGWKHRIILFHUVXUUHSWLWLRXVO\HQWHUHGWKH          GUXJ FRQYLFWLRQ  $SSUR[LPDWHO\ RQH ZHHN ODWHU 2IILFHU
DSDUWPHQW EXLOGLQJ DQG EHJDQ WR VHDUFK IRU %HDVOH\             6HHO\HOHDUQHGIURPDIHOORZQDUFRWLFVRIILFHUWKDW+HDWKZDV
8OWLPDWHO\ WKH RIILFHU ZLWQHVVHG %HDVOH\ DQG &DUULJHU            UHSRUWHGO\ WUDIILFNLQJ ODUJH TXDQWLWLHV RI FRFDLQH  2IILFHU
HQJDJHGLQDFRQYHUVDWLRQDWWKHGRRURI&DUULJHUjVDSDUWPHQW         6HHO\HjVFRXQWHUSDUWREWDLQHGWKLVLQIRUPDWLRQIURPLQWKDW
8SRQ WKH GHIHQGDQWV GHSDUWXUH WKH RIILFHUV HQWHUHG WKH         RIILFHUjVRSLQLRQDmUHOLDEOHlFRQILGHQWLDOLQIRUPDQWs$DW
DSDUWPHQWDQGFRQGXFWHGDZDUUDQWOHVVVHDUFKWKDWOHDGWRWKH          %DVHGXSRQWKLVLQIRUPDWLRQ2IILFHU6HHO\HGHFLGHGWR
GLVFRYHU\RIKHURLQ&DUULJHUVXEVHTXHQWO\ILOHGKLVPRWLRQ           mFRQWLQXH>KLV@VXUYHLOODQFHls$DW
IRU VXSSUHVVLRQ RI WKH HYLGHQFH ZKLFK WKH GLVWULFW FRXUW
GHQLHG                                                                   2IILFHU6HHO\HVXUYHLOOHG+HDWKRQWKUHHRWKHURFFDVLRQVLQ
                                                                       $SULO+HQRWHGWKDWm+HDWKDQGRWKHULQGLYLGXDOV>ZRXOG@
   2Q DSSHDO ZH IRXQG WKDW D WHQDQW LQ D ORFNHG EXLOGLQJ    DUULYHDWWKH>DSDUWPHQW@DQGDFWVXVSLFLRXVO\ls$DW
HQMR\VDmVXEMHFWLYHH[SHFWDWLRQRISULYDF\WKDWWKH)RXUWK        6SHFLILFDOO\ 2IILFHU 6HHO\H GHVFULEHG DQ RFFDVLRQ ZKHQ D
$PHQGPHQWSURWHFWVl,GDW:HIXUWKHURSLQHGWKDWWKH          mVXEMHFWlDUULYHGDWWKHDSDUWPHQWFRPSOH[LQDEURZQ/H[XV
mSHDFHDEOHlQDWXUHRIDQRIILFHUjVHQWU\ZLOOQRWYLWLDWHWKH          6HHO\H IRXQG WKLV QRWDEOH EHFDXVH /H[XV LV DQ H[SHQVLYH
GHJUHH RI LQIULQJHPHQW ZKHWKHU LW LV HIIHFWXDWHG mIRUFLEO\     YHKLFOHEUDQG+HDWKDUULYHGVRRQDIWHU+HVWDWHGWKDW+HDWK
WKURXJKDZLQGRZRUE\JXLOHWKURXJKDQRUPDOO\ORFNHG             FLUFOHGWKHDUHDLQKLVYHKLFOHDQGWKHQmORRN>HG@DURXQGWKH
HQWUDQFHGRRUlDQ\HQWU\ZLWKRXWSHUPLVVLRQSUREDEOHFDXVH           SDUNLQJORWlSULRUWRHQWHULQJWKHDSDUWPHQWFRPSOH[2IILFHU
RUDZDUUDQWLVmDQLOOHJDOHQWU\l,GDWm>%@HFDXVH        6HHO\HWHVWLILHGWKDWDIWHUEHLQJLQVLGHIRUDmVKRUWWLPHlWKH
WKHRIILFHUGLGQRWKDYHSUREDEOHFDXVHWRDUUHVWDSSHOODQWRU         VXEMHFW H[LWHG WKH SUHPLVHV LQ ZKDW mVHHPHG OLNH D ELJJHU
KLVDFFRPSOLFHEHIRUHKHLQYDGHGDQDUHDZKHUHDSSHOODQWKDG           MDFNHW  ZDONLQJ DQG KH ZDVQjW PRYLQJ RQH RI KLV DUPVl
DOHJLWLPDWHH[SHFWDWLRQRISULYDF\WKHVXEVHTXHQWDUUHVWDQG         s$DW2IILFHU6HHO\HVSHFXODWHGWKDWWKHVXEMHFWjVODFN
VHL]XUHRIQDUFRWLFVZHUHLQYDOLGl,GDW:HDWWULEXWHG        RIH[WUHPLWDOPRYHPHQWZDVFRQVLVWHQWZLWKVRPHRQHZKR
SDUWLFXODU VLJQLILFDQFH WR WKH IDFW WKDW WKH RIILFHUV ODFNHG   ZDVmVRUWRIKROGLQJVRPHWKLQJls$DW+HIXUWKHU
SUREDEOHFDXVHWRDUUHVWWKHGHIHQGDQWVSULRUWRHQWHULQJWKH          WHVWLILHGWKDWWKHVXEMHFWGHSDUWHGLQ+HDWKjVYHKLFOHOHDYLQJ
DSDUWPHQWEXLOGLQJ6HHLG                                           WKHEURZQ/H[XVSDUNHGRXWVLGHWKHDSDUWPHQWFRPSOH[$V
                                                                       QRWHG DERYH 2IILFHU 6HHO\H FKDUDFWHUL]HG WKLV LQFLGHQW DV
  :HEHOLHYHWKDWWKHKROGLQJRI&DUULJHULVDSSOLFDEOHKHUH          mVXVSLFLRXV>@l+HGHVFULEHGDQRWKHULQFLGHQWZKHUH+HDWK
7KHRIILFHUVLQWKHLQVWDQWPDWWHUHQWHUHGDORFNHGEXLOGLQJ           HQJDJHG LQ FRXQWHUVXUYHLOODQFH LH ORRNLQJ DURXQG WKH
ZLWKRXW XWLOL]LQJ WKH SURSHU SURFHGXUH DQG WKHUHIRUH WKH      SDUNLQJ ORW DQG GULYLQJ DURXQG EHIRUH SDUNLQJ  2Q WKLV
HQVXLQJ VHDUFK ZDV YLRODWLYH RI GHIHQGDQWVj VXEMHFWLYH           RFFDVLRQ +HDWK SDUNHG KLV FDU DQG ORRNHG DURXQG EHIRUH
H[SHFWDWLRQ RI SULYDF\  7KH JRYHUQPHQW FRQWHQGV WKDW           UHPRYLQJDSLOORZFDVHZLWKVRPHWKLQJZHLJKLQJKHDYLO\LQ
&DUULJHULVGLVWLQJXLVKDEOHDUJXLQJWKDWWKHSROLFHLQWKLV
FDVH XVHG mD NH\ ODZIXOO\ VHL]HG IURP +HDWK WR HQWHU WKH
                                                                           
                                                                            7KH UHFRUG EHIRUH WKLV &RXUW LV VLOHQW DV WR KRZ PDQ\ WLPHV WKH
                                                                       RIILFHUV DFWXDOO\ REVHUYHG +HDWK +RZHYHU ZKHQ 2IILFHU 6HHO\H WHVWLILHG
                                                                       UHJDUGLQJ WKH EHKDYLRU RI +HDWK KH RQO\ PHQWLRQHG WKUHH RFFDVLRQV RI
                                                                       mVXVSLFLRXV DFWLYLW\l LQFOXGLQJ WKH GD\ RI WKH GHIHQGDQWVj DUUHVWV
     8QLWHG6WDWHVY+RUWRQHWDO         1RV         1RV         8QLWHG6WDWHVY+RUWRQHWDO      

WKHERWWRP+HDWKWKHQHQWHUHGWKHDSDUWPHQWFRPSOH[ZLWK              RIWHQ DV KH IHOWjl DQG D NH\ HVWDEOLVKHG D OHJLWLPDWH
WKHSLOORZFDVHDQGDIWHUVWD\LQJWKHUHIRUDSHULRGRIWLPHKH         H[SHFWDWLRQRISULYDF\LQWKHDSDUWPHQW
GHSDUWHGIRUKLVSHUPDQHQWIDPLOLDOUHVLGHQFH:KLOH+HDWK
ZDVLQVLGHKLVIDPLO\jVUHVLGHQFH2IILFHU6HHO\HWHVWLILHGWKDW           ,Q WKH LQVWDQW PDWWHU WKHUH DUH VHYHUDO LQGLFDWLRQV RI
KHREVHUYHGmQXPHURXVVXEMHFWVFRPLQJDQGJRLQJls$DW            mDFFHSWDQFHLQWRWKHKRXVHKROGl+HDWKmVOHSWRQWKHFRXFKl
  3ULRU WR WKH GD\ RI +HDWKjV DUUHVW WKHVH WZR HYHQWV   DVRIWHQDVRQFHDZHHNIRUDSSUR[LPDWHO\WZR\HDUVs$DW
FRPSULVHWKHFRPSOHWHUHFRUGRIVXVSLFLRXVDFWLYLW\UHSRUWHG            6HHDOVR$SSHOOHHjV%UDW+HDOVRSRVVHVVHGDNH\
E\2IILFHU6HHO\H                                                      ZKLFK E\ WKH RIILFHUVj RZQ WHVWLPRQ\ DOORZHG +HDWK
                                                                        XQIHWWHUHGDFFHVVWRWKHDSDUWPHQWDQGWKHDELOLW\WRDGPLWDQG
   2Q $SULO   WKH GDWH RI +HDWKjV DUUHVW 2IILFHU      H[FOXGH RWKHUV  0RUHRYHU +HDWK DQG +RUWRQ DUH FRXVLQV
6HHO\H WHVWLILHG WKDW KH EHJDQ VXUYHLOOLQJ WKH DSDUWPHQW         WKHLUIDPLOLDOWLHLVFOHDUO\DmUHODWLRQVKLSlZKLFKSUHGDWHVWKH
FRPSOH[ DW DSSUR[LPDWHO\  SP  s$ DW   $IWHU     DSDUWPHQWjV XVH IRU LOOHJDO FRQGXFW DV FRQWHPSODWHG E\
mVHYHUDOKRXUVl+HDWKDUULYHGLQDYHKLFOHWKDWZDVNQRZQWR          &DUWHU86DW)URPWKHVHIDFWVLWLVFOHDUWKDW
EHORQJWR0LFKDHO6SDXOGLQJs$DW6SDXOGLQJZDV              +HDWK PDLQWDLQHG D OHJLWLPDWH H[SHFWDWLRQ RI SULYDF\ LQ
DOOHJHGWRKDYHEHHQmDODUJHVFDOHGUXJWUDIILFNHU>ZLWK@          +RUWRQjV KRPH   :H WKHUHIRUH KROG WKDW WKH VHDUFK RI
SULRUGUXJDUUHVWVls$DW$IWHUSDUNLQJWKHYHKLFOH         +RUWRQjVDSDUWPHQWLPSOLFDWHG+HDWKjV)RXUWK$PHQGPHQW
+HDWKmORRN>HG@DURXQGWKHORWUHWULHYHGDEURZQEDJIURP           ULJKWV
WKHYHKLFOHlDQGHQWHUHGWKHDSDUWPHQWEXLOGLQJs$DW
+HDWKUHPDLQHGLQVLGHIRUDSSUR[LPDWHO\RQHKRXU:KHQKH              7KH(QWU\LQWRWKH&RPPRQ$UHDVRIWKH$SDUWPHQW%XLOGLQJ
GHSDUWHGWKHEXLOGLQJ+HDWKZDVUHSRUWHGO\FDUU\LQJDmGDUNHU
FRORUHGEDJls$DW%DVHGXSRQWKHDIRUHGHVFULEHG              $VVXPLQJ DUJXHQGR WKDW WKHVH RIILFHUV FRXOG VRPHKRZ
HYHQWV2IILFHU6HHO\HUHTXHVWHGDGGLWLRQDORIILFHUVWRUHSRUW          DUULYHDWWKHRXWHUJDWHWR+RUWRQjVDSDUWPHQWEXLOGLQJZLWKRXW
WRWKHDUHDDQGKHSURFHHGHGWRIROORZ+HDWK                         YLRODWLQJ+HDWKjV)RXUWK$PHQGPHQWULJKWVWKHLUHQWU\LQWR
                                                                        WKH EXLOGLQJ ZRXOG VWLOO EH EDUUHG  ,Q 8QLWHG 6WDWHV Y
   $FFRUGLQJ WR WKH WHVWLPRQ\ RI 2IILFHU 6HHO\H +HDWK           &DUULJHU)GZHKHOGWKDWZKHQmDQ
GHPRQVWUDWHGWKHEHKDYLRURIDSHUVRQmORRNLQJIRUDWDLOl             RIILFHU HQWHUV D ORFNHG EXLOGLQJ ZLWKRXW DXWKRULW\ RU
s$DW+HDWKEHJDQmPDNLQJDORWRIWXUQVGULY>LQJ@            LQYLWDWLRQWKHHYLGHQFHJDLQHGDVDUHVXOWRIKLVSUHVHQFHLQ
IDVWHUWKDQWKHVSHHGOLPLWDQGWKHQKHZRXOGVORZGRZQ             WKHFRPPRQDUHDVRIWKHEXLOGLQJPXVWEHVXSSUHVVHGl
DQG GULYH VORZO\l  2IILFHU 6HHO\H DOVR WHVWLILHG WKDW KH
WKRXJKW+HDWKmWXUQHGRQWRDGHDGHQGVWUHHWls$DW             ,Q &DUULJHU  SROLFH RIILFHUV ZHUH HQJDJHG LQ WKH
$IWHUIROORZLQJKLPIRUILIWHHQPLQXWHVWKHRIILFHUVGHFLGHG           VXUYHLOODQFHRIGHIHQGDQW%HDVOH\DNQRZQGUXJGHDOHU,Q
WRFRQGXFWDQmLQYHVWLJDWLYHVWRSlRI+HDWK+HDWKGURYHLQWR          WKH PRQWKV SUHFHGLQJ WKH DUUHVW RI GHIHQGDQW &DUULJHU
DIDVWIRRGUHVWDXUDQWSDUNLQJORWDWZKLFKSRLQWDVTXDGFDU          %HDVOH\KDGXQZLWWLQJO\VROGQDUFRWLFVWRXQGHUFRYHURIILFHUV
EORFNHGKLVSDVVDJHDQG2IILFHU6HHO\HVWRSSHGKLVFDUEHKLQG           RQVHYHUDORFFDVLRQV7KHRIILFHUVDGPLWWHGWKDWWKHSXUSRVH
+HDWKjVYHKLFOH7KHRIILFHUVDSSURDFKHG+HDWKjVFDUZLWK              RIWKHLUHIIRUWVRQWKHGD\RI&DUULJHUjVDUUHVWmZDVWRRUGHUD
WKHLUJXQVGUDZQ2IILFHU6HHO\HWHVWLILHGWKDWXSRQUHDFKLQJ          µVXIILFLHQWO\ODUJHTXDQWLW\RIKHURLQIURPGHIHQGDQW%HDVOH\
WKH GULYHUjV VLGH GRRU RI +HDWKjV YHKLFOH KH mSXOOHG 0U      WRIRUFHKLPWRJRXQGHUDJHQWVjVXUYHLOODQFHWRKLVVRXUFHRI
+HDWKIURPWKHYHKLFOHDQGSXWKLPXSRQWKHVLGHls$DW           VXSSO\jl,GDW7KHRIILFHUVIROORZHG%HDVOH\ WR DQ
+HIXUWKHUWHVWLILHGWKDWKHZHGJHG+HDWKEHWZHHQWKH            DSDUWPHQW EXLOGLQJ mZKLFK &DUULJHU RZQHG DQG ZKHUH KH
FDUGRRUDQGWKHERG\RIWKHFDUHQDEOLQJKLPWRmFORVHWKH             PDLQWDLQHG DQ DSDUWPHQWl  ,G DW   +DYLQJ REVHUYHG
                                                                        %HDVOH\ DV KH HQWHUHG WKH DSDUWPHQW EXLOGLQJ ZLWK D JUHHQ
       8QLWHG6WDWHVY+RUWRQHWDO           1RV        1RV             8QLWHG6WDWHVY+RUWRQHWDO           

RIODZZHUHYLHZWKLVGHWHUPLQDWLRQGHQRYR6HH+LOO                GRRU>@RQ>+HDWK@LI>KH@KDGWRls$DW'HVSLWHWKLV
)GDW                                                               WDFWLF 2IILFHU 6HHO\H WHVWLILHG WKDW KH IHDUHG WKDW +HDWK
                                                                            mPLJKWZDQWWRUXQlWKXVKHKDQGFXIIHGKLPs$DW
  *HQHUDOO\m>D@SHUVRQZKRLVDJJULHYHGE\DQLOOHJDOVHDUFK              +HIXUWKHUWHVWLILHGWKDWKHLQVWUXFWHG+HDWKWKDWKHZDVmQRW
DQG VHL]XUH RQO\ WKURXJK WKH LQWURGXFWLRQ RI GDPDJLQJ                XQGHUDUUHVWls$DW
HYLGHQFHVHFXUHGE\DVHDUFKRIDWKLUGSHUVRQjVSUHPLVHVRU
SURSHUW\ KDV QRW KDG DQ\ RI KLV )RXUWK $PHQGPHQW ULJKWV               2IILFHU6HHO\HLQIRUPHG+HDWKWKDWKHZDVFRQGXFWLQJD
LQIULQJHGl5DNDVY,OOLQRLV86FLWLQJ            QDUFRWLFV LQYHVWLJDWLRQ DQG  SURFHHGHG WR TXHVWLRQ +HDWK
$OGHUPDQY8QLWHG6WDWHV867KH                  DERXW KLV ZKHUHDERXWV LPPHGLDWHO\ SUHFHGLQJ WKH LQVWDQW
H[FOXVLRQDU\ UXOH DV LW LV FRPPRQO\ NQRZQ RQO\ DOORZV             HQFRXQWHU  +HDWK LQGLFDWHG WKDW KH ZDV YLVLWLQJ 0LFKDHO
mGHIHQGDQWV ZKRVH )RXUWK $PHQGPHQW ULJKWV KDYH EHHQ                   6SDXOGLQJ2IILFHU6HHO\HWKHQDVNHG+HDWKLIKHKDGEHHQWR
YLRODWHGWREHQHILWIURPWKHUXOHjVSURWHFWLRQVl,G+RZHYHU            WKHDIRUHPHQWLRQHGDSDUWPHQWEXLOGLQJKHUHVSRQGHGWKDWmKH
mDSHUVRQFDQKDYHDOHJDOO\VXIILFLHQWLQWHUHVWLQDSODFHRWKHU           KDGQjWls$DW7KHRIILFHUVVHDUFKHG+HDWKDQGWKH
WKDQKLVRZQKRPHVRWKDWWKH)RXUWK$PHQGPHQWSURWHFWV                     HQWLUHYHKLFOHQRWKLQJRIDQLOOHJDOQDWXUHZDVIRXQG2IILFHU
KLP IURP XQUHDVRQDEOH JRYHUQPHQWDO LQWUXVLRQ LQWR WKDW                6HHO\HWHVWLILHGWKDWGXULQJWKHSDWGRZQVHDUFKKHmQRWLFHG
SODFHl,GDW                                                        WKDW WKHUH ZHUH NH\V LQ >+HDWKjV@ SRFNHWl  s$ DW 
                                                                            2IILFHU 6HHO\H WKHQ DWWHPSWHG WR HOLFLW LQIRUPDWLRQ IURP
  ,QsRQHVY8QLWHG6WDWHV86WKH                  +HDWK UHJDUGLQJ    WKH DSDUWPHQW WKDW WKH NH\V ZHUH XVHG WR
&RXUW DOORZHG WKH GHIHQGDQW WR FKDOOHQJH WKH ILQGLQJ RI             XQORFN,QUHVSRQVHWR+HDWKjVDVVHUWLRQWKDWWKHNH\VDQG
SUREDEOH FDXVH IRU WKH VHDUFK RI mD IULHQG>µV@l DSDUWPHQW           SDQWVEHORQJHGWRKLVEURWKHU2IILFHU6HHO\HDVNHGLI+HDWK
ZKHQWKHGHIHQGDQWKDGDNH\DQGKDGVSHQWmPD\EHDQLJKWl                  ZRXOGmPLQGLI>KH@JRWWKHPVLQFHWKH\jUHQRW\RXUNH\Vl
EXWKDGPLQLPDOEHORQJLQJVLQWKHDSDUWPHQWDQGFRQWULEXWHG                 s$ DW   +HDWK UHVSRQGHG mQRl DQG 2IILFHU 6HHO\H
QRWKLQJWRZDUGVWKHOHDVH7KH6XSUHPH&RXUWUHDIILUPHG                   UHPRYHGWKHNH\VIURPKLVSRFNHW
sRQHVLQ0LQQHVRWDY2OVRQ86KROGLQJ
mWKDW DQ RYHUQLJKW JXHVW KDV D OHJLWLPDWH H[SHFWDWLRQ RI              $WWKLVSRLQWWKHRIILFHUVGHFLGHGWRWDNHWKHNH\VDQGJDLQ
SULYDF\LQKLVKRVWjVKRPHlWKDWLVQRWGLPLQLVKHGEHFDXVHKH               HQWU\WRWKHDSDUWPHQWEXLOGLQJ+DYLQJDQWLFLSDWHGWKLVLVVXH
GRHV QRW KDYH mFRPSOHWH GRPLQLRQ DQG FRQWURO RYHU WKH               DULVLQJ 2IILFHU 6HHO\H DQG KLV VXSHUYLVRU WKHQ SDJHG D
DSDUWPHQWl 7KH 6XSUHPH &RXUW KDV IXUWKHU FODULILHG WKDW            SURVHFXWRUZKRKDGUHVHDUFKHGWKHLVVXHRIZKHWKHULWZRXOG
ZKHQ GHWHUPLQLQJ ZKHWKHU D GHIHQGDQW LV HQWLWOHG WR WKH             mEHWKHHTXLYDOHQWRIDVHDUFKLI>WKHRIILFHUVWRRNWKH@NH\
SURWHFWLRQV DIIRUGHG E\ 2OVRQ UHYLHZLQJ FRXUWV VKRXOG                DQGWU>LHG@WRDVFHUWDLQZKLFKGRRUWKDWNH\JRHVWRls$
FRQVLGHUZKHWKHUWKHUHZDVDmSUHYLRXVUHODWLRQVKLSlZLWKWKH
DSDUWPHQWOHVVHHRULIWKHUHLVDQ\LQGLFLDmRIDFFHSWDQFHLQWR
WKHKRXVHKROGl0LQQHVRWDY&DUWHU86                   
6HHDOVR8QLWHG6WDWHVY6DQJLQHWR0LUDQGD)G                       'XULQJ WKH RIILFHUVj VXUYHLOODQFH RI +HDWK WKH\ ZHUH XQDEOH WR

 WK &LU  ILQGLQJ WKDW GHIHQGDQW ZKR KDG               IROORZ +HDWK LQWR WKH DSDUWPHQW EXLOGLQJ DQG FRQVHTXHQWO\ KDG IDLOHG
                                                                            DVFHUWDLQ KLV H[DFW ZKHUHDERXWV RQFH LQVLGH 2IILFHU 6HHO\H WHVWLILHG WKDW
mXQUHVWULFWHGDFFHVV>@>ZDV@DOORZHGWRVWD\RYHUQLJKWµDV            mLW >ZD@V LPSRVVLEOH WR DVFHUWDLQ ZKLFK DSDUWPHQW DQ\ERG\ JRHV LQWR RQFH
                                                                            WKH\ JR WKURXJK WKH FRPPRQ HQWUDQFHl s$ DW 

                                                                               
     %RWK WKH GLVWULFW FRXUW DQG WKH JRYHUQPHQW KDYH IDLOHG WR UHIHUHQFH          :H QRWH WKDW 2IILFHU 6HHO\H ODWHU UHFDQWHG WKLV WHVWLPRQ\ DQG VWDWHG
DQG FRQVHTXHQWO\ GLVWLQJXLVK WKH IDFWV RI WKH LQVWDQW PDWWHU IURP WKRVH   WKDW WKH SURVHFXWRU KDG UHVHDUFKHG DQ LVVXH mVLPLODUl WR WKLV LQ DQRWKHU
LQ sRQHV Y 8QLWHG 6WDWHV    86   DQG LWV SURJHQ\          FDVH s$ DW 
     8QLWHG6WDWHVY+RUWRQHWDO          1RV         1RV             8QLWHG6WDWHVY+RUWRQHWDO           

DW   2IILFHU 6HHO\H WHVWLILHG WKDW WKH\ ZDLWHG IRU WKH    RIFRXUVHQRUHDVRQWRVXSSRVHWKDWLWOHJLWLPDWHGWKHRIILFHUVj
SURVHFXWRUWRUHWXUQWKHLUSDJHDQGWKHQGLVFXVVHGWKHLUSODQ           XVHRIWKHNH\VWRJDLQHQWU\WRWKHDSDUWPHQWEXLOGLQJ
LHWRmWDNHWKHNH\DQGJREDFNWRWKHDSDUWPHQWDQGXVH
WKHNH\WRWHVWWKHGRRUVls$DW8SRQUHFHLYLQJWKH          F   7KH$SDUWPHQW%XLOGLQJ
SURVHFXWRUjV FRQVHQW WKH RIILFHUV SODFHG +HDWK LQ D SROLFH
YHKLFOH DQG SURFHHGHG WR WUDQVSRUW KLP WR WKH DSDUWPHQW            7KHJRYHUQPHQWDUJXHVWKDW+RUWRQjVFRQVHQWWRVHDUFKWKH
EXLOGLQJ$WWKLVSRLQW2IILFHU6HHO\HHVWLPDWHVWKDW+HDWK            DSDUWPHQW YLWLDWHG DQ\ LOOHJDO FRQGXFW WKDW PLJKW KDYH
KDGEHHQGHWDLQHGIRUmWKLUW\WRIRUW\ILYHPLQXWHVls$DW          SUHFHGHGWKHRIILFHUVjGLVFRYHU\RIWKHGUXJV$FFRUGLQJO\
                                                                    ZHQRZWXUQRXUFRQVLGHUDWLRQWRWKHRIILFHUVjHQWU\LQWRWKH
                                                                         FRPPRQDUHDVRIWKHDSDUWPHQWEXLOGLQJDQGWKHVXEVHTXHQW
   8SRQDUULYLQJDWWKHDSDUWPHQWEXLOGLQJWKHRIILFHUVXVHG            VHDUFKRIWKHDSDUWPHQW
RQHRIWKHWZRNH\VRQWKHNH\ULQJWRDFFHVVWKHHQWU\ZD\WR
WKH FRPPRQ DUHDV RI WKH DSDUWPHQW EXLOGLQJ  7KH\ WKHQ          +HDWKjV6WDQGLQJWR&RQWHVWWKH6HDUFKRIWKH$SDUWPHQW
DWWHPSWHG WR XQORFN HDFK GRRU RQ WKH ILUVW IORRU ZLWK WKH
UHPDLQLQJ NH\  $IWHU WKHLU HIIRUW RQ WKH ILUVW IORRU SURYHG     :HPXVWILUVWDGGUHVVWKHGLVWULFWFRXUWjVILQGLQJWKDW+HDWK
XQIUXLWIXOWKHRIILFHUVSURFHHGHGWRWKHVHFRQGIORRU$IWHU          ODFNHGmVWDQGLQJWRFRQWHVWWKHFRQVWLWXWLRQDOLW\RIWKHVHDUFK
DWWHPSWLQJ VHYHUDO GRRUV RQ WKH VHFRQG IORRU D IHPDOH           RI+RUWRQjVDSDUWPHQWls$DW$VWKLVLVDFRQFOXVLRQ
UHVLGHQWHQWHUHGWKHKDOOZD\DQGTXHULHGWKHRIILFHUVUHJDUGLQJ
WKHLUDFWLRQV8SRQLGHQWLI\LQJWKHPVHOYHVWKHRIILFHUVDVNHG
WKHUHVLGHQWmLIVKHNQHZ0U+HDWKlVKHUHVSRQGHGLQWKH                   
QHJDWLYHs$DW7KHRIILFHUVWKHQDVNHGWKHUHVLGHQW                7KH GLVWULFW FRXUW EDVHG LWV GHWHUPLQDWLRQ RQ RXU KROGLQJ LQ 8QLWHG
                                                                         6WDWHV Y 0F1HDO   )G   7KH GLVWULFW FRXUW VWDWHG
mLIVKHNQHZZKLFKIORRUWKHJX\VWKDWDOZD\VVKRZXSLQWKH
QHZUHQWDOFDUVDQG([SHGLWLRQVUHDOQLFHYHKLFOHVZKDWIORRU               7KH 6L[WK &LUFXLW KDV GHWHUPLQHG WKDW D GHIHQGDQW ZLWK D NH\ WR
GRWKH\JRWRls$DW7KHUHVLGHQWGLUHFWHGWKHPWR                DQ DSDUWPHQW DQG OLWWOH RWKHU FRQQHFWLRQ KDV QR VWDQGLQJ WR
WKHWKLUGIORRUZKHUHWKH\UHVXPHGWKHLUGRRUWRGRRUHIIRUW                 FKDOOHQJH D VHDUFK RI WKH DSDUWPHQW 8QLWHG 6WDWHV Y 0F1HDO

2IILFHU6HHO\HWHVWLILHGWKDWWKH\DWWHPSWHGPRUHWKDQKDOIRI                 )G   WK &LU  7KH GHIHQGDQW LQ 0F1HDO
                                                                              KDG QR FORWKHV DW WKH DSDUWPHQW DQG WKH IDFWV GLG QRW VKRZ KLP
WKHGRRUVRQWKHWKLUGIORRUEHIRUHILQGLQJWKHFRUUHVSRQGLQJ                 WR EH mPRUH WKDQ D FDVXDO WUDQVLHQW YLVLWRU RQ WKDW QLJKWl ,G
ORFN  7KLV DSDUWPHQW ZDV OHDVHG WR &DUPHQ +RUWRQ
7KURXJKRXW WKHVH HYHQWV +HDWK UHPDLQHG JXDUGHG                    s$ DW  +RZHYHU WKH GLVWULFW FRXUWjV UHOLDQFH RQ 0F1HDO LQ WKH
KDQGFXIIHGDQGGHWDLQHGLQDSROLFHYHKLFOH                             LQVWDQW PDWWHU LV PLVJXLGHG ,Q 0F1HDO WKH GHIHQGDQW DGPLWWHG WKDW KH
                                                                         ZDV D mFDVXDO WUDQVLHQW YLVLWRUl ,G DW  7KHUH WKH GLVWULFW FRXUW

  $IWHU D EULHI GLVFXVVLRQ WR GHWHUPLQH KRZ WKH\ ZRXOG           IXUWKHU UHFRJQL]HG WKDW mZKLOH WKH GHIHQGDQW GLG KDYH D NH\ WR WKH
                                                                         DSDUWPHQW KH DOVR KDG NH\V WR RWKHU DSDUWPHQWV LQ WKH FRPSOH[ LQ ZKLFK
SURFHHGWKHRIILFHUVGHFLGHGmWRREWDLQDFRQVHQW>WRVHDUFK            KH GLG QRW OLYHl ,G HPSKDVLV DGGHG 0RUHRYHU WKH OHVVHH RI WKH
WKHDSDUWPHQW@IURP>WKH@RFFXSDQW>V@ls$DW7R             DSDUWPHQW FRXOG QRW UHPHPEHU WKH GHIHQGDQWjV ODVW QDPH DW WKH WLPH WKH
PLQLPL]H WKH DSSHDUDQFH RI LQWLPLGDWLRQ RQH RI WKH WKUHH        RIILFHUV FRQGXFWHG WKH VHDUFK LQGLFDWLQJ WKDW WKHUH ZDV QR VLJQLILFDQW
RIILFHUVGHSDUWHGOHDYLQJ2IILFHUV6HHO\HDQG7D\ORUWRNQRFN           UHODWLRQVKLS EHWZHHQ WKHVH SDUWLHV ,G 7KXV WKHUH ZHUH QR UHOLDEOH
RQ+RUWRQjVGRRU+RUWRQDQVZHUHGDQGWKHRIILFHUVZLWK                LQGLFDWLRQV WKDW 0F1HDO KDG D UHDVRQDEOH H[SHFWDWLRQ RI SULYDF\ LQ WKH
                                                                         DSDUWPHQW $GGLWLRQDOO\ LQ ILQGLQJ WKDW WKH GLVWULFW FRXUWjV GHFLVLRQ ZDV
WKHLU JXQV YLVLEOH LGHQWLILHG WKHPVHOYHV DV SROLFH RIILFHUV      EH\RQG RXU UHYLHZ ZH QRWHG WKDW mWKH WULDO FRXUWjV GHFLVLRQ ZDV H[SUHVVO\
FRQGXFWLQJDQDUFRWLFVLQYHVWLJDWLRQDQGDVNHGLIWKH\FRXOG             DQFKRUHG LQ FUHGLELOLW\ HYDOXDWLRQV RI ZLWQHVVHVl QRW FRQFOXVLRQV RI ODZ
mFRPH LQVLGHl  s$ DW   8SRQ EHLQJ DGPLWWHG WKH       ,G    DW  &RQVHTXHQWO\ WKH IDFWV RI 0F1HDO DUH HQWLUHO\
                                                                         GLVWLQJXLVKDEOH IURP WKRVH LQ WKH LQVWDQW PDWWHU
    8QLWHG6WDWHVY+RUWRQHWDO        1RV        1RV            8QLWHG6WDWHVY+RUWRQHWDO          

FRQFOXVLRQ FRPSHOV XV WR ILQG WKDW WKLV GHWHUPLQDWLRQ ZDV     RIILFHUV DVNHG LI VKH KDG DQ\ PDULMXDQD LQ WKH DSDUWPHQW
UHDFKHG LQ HUURU  +HDWK PDGH WKH VWDWHPHQWV SULRU WR WKH   H[SODLQLQJWKDWDGPLWWLQJWRWKHSRVVHVVLRQRImMXVWDOLWWOH
RIILFHUVjVHDUFKRIWKHYHKLFOH$VQRWHGDERYHWKHVHDUFK          ELWRIPDULMXDQDlZRXOGQjWEHmWKDWELJRIDGHDOls$DW
SURGXFHG QRWKLQJ LOOHJDO DQG FRQVHTXHQWO\ +HDWKjV              +RUWRQSURIIHUHGDVPDOODPRXQWRIPDULMXDQDIURP
VWDWHPHQWV FDQQRW EH XVHG WR EUHDWKH OLIH LQWR D G\LQJ       WZR ORFDWLRQV ZLWKLQ WKH DSDUWPHQW  6RRQ DIWHU +RUWRQ
LQYHVWLJDWLRQ  0RUHRYHU WKH 6XSUHPH &RXUW KDV KHOG WKDW     H[HFXWHGDVHDUFKFRQVHQWIRUPDQGWKHRIILFHUVVHDUFKHGWKH
mXQOHVV WKH GHWDLQHHjV DQVZHUV SURYLGH WKH RIILFHU ZLWK        DSDUWPHQW7KLVIRUPLQGLFDWHGWKDWWKHFRQVHQWIRUWKHVHDUFK
SUREDEOHFDXVHWRDUUHVWKLPKHPXVWEHUHOHDVHGl%HUNHPHU        ZDV REWDLQHG DW  SP  7KH HQVXLQJ VHDUFK SURGXFHG
 86 DW    %HFDXVH +HDWKjV VWDWHPHQWV DQG WKH    GLJLWDOVFDOHVWKUHHHPSW\NLORJUDPZUDSSHUVLQVLGHDmEURZQ
VXEVHTXHQWVHDUFKRIWKHYHKLFOHGLGQRWSURYLGHWKHRIILFHUV         SODVWLF EDJl DQG DSSUR[LPDWHO\ WKUHH NLORJUDPV RI FRFDLQH
ZLWKVXIILFLHQWFDXVHWRDUUHVWKLPKLVGHWHQWLRQEH\RQGWKH         VHSDUDWHGLQWRVHYHUDOVPDOOHUSDFNDJHV7KHEURZQSODVWLF
FRPSOHWLRQRIWKHVHDUFKZDVLOOHJDO6HH%XWOHU)GDW        EDJDSSHDUHGWREHWKHVDPHSODVWLFEDJWKDWWKHRIILFHUVKDG
 KROGLQJ WKDW LI WKH VWRSV IDLOV WR mUHYHDO DQ\WKLQJ     VHHQ+HDWKFDUU\LQJZKHQKHHQWHUHGWKHDSDUWPHQWEXLOGLQJ
VXVSLFLRXVWKHRIILFHUVZHUHUHTXLUHGWRDOORZ'HIHQGDQW         HDUOLHU WKDW GD\  3XUVXDQW WR WKH GLVFRYHU\ RI WKHVH LWHPV
WRJRIUHHl                                                        +RUWRQDQG+HDWKZHUHWKHQUHDGWKHLU0LUDQGDZDUQLQJVDQG
                                                                      SODFHGXQGHUDUUHVW
  7KHGHIHQGDQWVDOVRFRQWHVWWKHmWUDQVSRUWlRI+HDWKDQG
WKHGXUDWLRQRIWKHVWRSDUJXLQJWKDWWKHVHPHDVXUHVZHUH              2Q0D\WKHJUDQGMXU\UHWXUQHGDQLQGLFWPHQW
mWRRLQWUXVLYHXQGHUWKHFLUFXPVWDQFHVl$SSHOODQWjV%UDW          DJDLQVW &DUPHQ +RUWRQ DQG 6K\ +HDWK  7KH GHIHQGDQWV
+DYLQJIRXQGWKDWWKHRIILFHUVZHUHREOLJDWHGWRUHOHDVH         VXEVHTXHQWO\ PRYHG WR VXSSUHVV WKH HYLGHQFH REWDLQHG
+HDWK XSRQ WKH FRPSOHWLRQ RI WKH XQIUXLWIXO VHDUFK LW LV    WKURXJK WKH VWRS DQG GHWHQWLRQ RI +HDWK DQG WKH VHDUFK RI
D[LRPDWLFWKDWWKHWUDQVSRUWRI+HDWKDQGWKHOHQJWKRIWKH           +RUWRQjVDSDUWPHQW7KHGLVWULFWFRXUWGHWHUPLQHGWKDWWKH
VWRSZHUHYLRODWLYHRIKLV)RXUWK$PHQGPHQWULJKWWREHIUHH          RIILFHUVKDGDUHDVRQDEOHVXVSLFLRQWKDW+HDWKZDVLQYROYHG
IURPXQUHDVRQDEOHVHL]XUHV:HLWHUDWHWKDWZKLOHWKHSXUSRVH        LQFULPLQDODFWLYLW\ZDUUDQWLQJWKHLQLWLDOVWRS7KHGLVWULFW
RIDQLQYHVWLJDWLYHVWRSLVWRFRQILUPRUGLVSHOWKHRIILFHUjV        FRXUWIXUWKHUFRQFOXGHGWKDWWKHVFRSHRI+HDWKjVGHWHQWLRQ
VXVSLFLRQV WKHVH W\SHV RI GHWHQWLRQV DUH OLPLWHG LQ VFRSH   ZDV MXVWLILHG UHDVRQLQJ WKDW WKH OHQJWK RI WLPH ZDV QRW
DEVHQWWKHUHTXLVLWHSUREDEOHFDXVHDQLQYHVWLJDWLYHVWRSPXVW       H[FHVVLYH DQG WKDW m+HDWKjV OLHV WR WKH SROLFHl UDLVHG WKH
EHFRQILQHGWRWKHVLWHRIWKHLQLWLDOLQTXLU\                       RIILFHUVj VXVSLFLRQV RI LOOHJDO DFWLYLW\  s$ DW   :LWK
                                                                      UHJDUG WR WKH VHL]XUH RI WKH NH\ DQG LWV VXEVHTXHQW XVH WR
  0DQLIHVW LQ RXU GHWHUPLQDWLRQ WKDW WKH RIILFHUV ODFNHG       DUULYHDWWKHGRRURI+RUWRQWKHGLVWULFWFRXUWFRQFOXGHGWKDW
SUREDEOHFDXVHWRIXUWKHUGHWDLQ+HDWKLVWKHFRQFOXVLRQWKDW         +HDWKVXUUHQGHUHGWKHNH\WRWKHSROLFHRIILFHUV+HIXUWKHU
WKHVHRIILFHUVZHUHQRWHQWLWOHGWRXVHWKHNH\V$FFRUGLQJO\       RSLQHGWKDWWKHGHIHQGDQWVHQMR\HGQRH[SHFWDWLRQRISULYDF\
ZKLOHWKHUHWHQWLRQRIWKHNH\VLVQRORQJHUJHUPDQHWRRXU           LQWKHFRPPRQDUHDVRIWKHDSDUWPHQWEXLOGLQJDQGWKDWXVLQJ
DQDO\VLVZLWKUHJDUGWRWKHWUDIILFVWRSZHILQGWKHRIILFHUVj       WKH VHFRQG NH\ WR ILQG WKH DSDUWPHQW RQFH LQVLGH ZDV
FRQGXFW LQ WKLV UHJDUG HVSHFLDOO\ QRWHZRUWK\  7KH GLVWULFW   DSSURSULDWH&RQVLVWHQWZLWKWKHVHILQGLQJVWKHGLVWULFWFRXUW
FRXUWFRQFOXGHGWKDW+HDWKFRQVHQWHGWRWKHRIILFHUjVUHPRYDO         GHQLHGWKHGHIHQGDQWVjPRWLRQVWRVXSSUHVVDQGFRQVHTXHQWO\
RIWKHNH\VIURPKLVSRFNHW+RZHYHUWKHUHLVDZLGHFKDVP        HDFKHQWHUHGDSOHDRIJXLOW\UHVHUYLQJWKHULJKWWRDSSHDOWKH
EHWZHHQUHPRYDODQGXVHZKLOH+HDWKjVFRQVHQWPD\KDYH
OHJLWLPDWHGWKHUHPRYDORIWKHNH\VIURPKLVSRFNHWWKHUHLV
        8QLWHG6WDWHVY+RUWRQHWDO        1RV         1RV           8QLWHG6WDWHVY+RUWRQHWDO       

GHQLDORIWKHPRWLRQVWRVXSSUHVV+HDWKDQG+RUWRQQRZ                XQLIRUPO\IRXQGWKDWWKHXVHRIIRUFHPXVWEHQHFHVVDU\WR
HDFKDSSHDOWKHLUFRQYLFWLRQV                                            SURWHFWRIILFHUVIURPSRWHQWLDOO\GDQJHURXVVLWXDWLRQV
                        ,,',6&866,21                                     sX[WDSRVHG DJDLQVW WKHVH FDVHV WKH IDFWV LQ WKH LQVWDQW
                                                                          PDWWHU VXJJHVW WKDW WKH RIILFHUV UHDVRQDEO\ EHOLHYHG WKDW
  'HIHQGDQWVjDSSHOODWHFODLPVUHODWHWRWKHGHQLDORIWKHLU              SURWHFWLYHPHDVXUHVZHUHQHFHVVDU\WRHIIHFWXDWHWKHVWRSRI
PRWLRQVWRVXSSUHVVHYLGHQFH:KHQFRQVLGHULQJDGLVWULFW                +HDWK  :H KDYH DOUHDG\ IRXQG WKDW +HDWK ZDV UHDVRQDEO\
FRXUWjVGHQLDORIDGHIHQGDQWjVPRWLRQWRVXSSUHVVHYLGHQFH              VXVSHFWHG RI FDUU\LQJ GUXJVWKH DJHQWV ZHUH WKHUHIRUH
ZH UHYLHZ LWV IDFWXDO ILQGLQJV IRU FOHDU HUURU DQG LWV OHJDO    HQWLWOHGWRUHO\RQWKHLUH[SHULHQFHDQGWUDLQLQJLQFRQFOXGLQJ
FRQFOXVLRQVGHQRYR6HH8QLWHG6WDWHVY+LOO)G            WKDW ZHDSRQV DUH IUHTXHQWO\ XVHG LQ GUXJ WUDQVDFWLRQV DQG
WK&LU8QLWHG6WDWHVY+DUULV)G              WKXVWKHGHJUHHRIIRUFHXWLOL]HGZDVUHDVRQDEOH6HHHJ
WK&LU:HUHYLHZWKHHYLGHQFHmLQWKHOLJKW                8QLWHG6WDWHVY%HOO)GWK&LU
PRVWOLNHO\WRVXSSRUWWKHGLVWULFWFRXUWjVGHFLVLRQl8QLWHG
6WDWHV Y 1DYDUUR&DPDFKR  )G   WK &LU               +RZHYHU RQFH WKHVH RIILFHUV XVHG DOO RI WKH DSSURSULDWH
                                                                    PHDQVDYDLODEOHWRWKHPWRDOOD\WKHLUFRQFHUQVRIFULPLQDO
                                                                          DFWLYLW\WKH\ZHUHUHTXLUHGWRUHOHDVH+HDWK6HH%HUNHPHU
   'HIHQGDQWV DUJXH WKDW WKH LQYHVWLJDWLYH VWRS RI +HDWK           86DWVHHDOVR8QLWHG6WDWHVY%XWOHU)G
FRQVWLWXWHG DQ LOOHJDO VHL]XUH WKXV KLV )RXUWK $PHQGPHQW            WK &LU  m>2@QFH 'HIHQGDQW LGHQWLILHG
ULJKWVZHUHYLRODWHG7KHGHIHQGDQWVDOVRFRQWHVWWKHHQWU\             KHUVHOIDQVZHUHGWKHRIILFHUjVTXHVWLRQVDQGFRQVHQWHGWRWKH
DQGVHDUFKRI+RUWRQjVDSDUWPHQW                                         SDWGRZQ ZKLFK GLG QRW UHYHDO DQ\WKLQJ VXVSLFLRXV WKH
                                                                          RIILFHUVZHUHUHTXLUHGXQGHUWKH)RXUWK$PHQGPHQWWRDOORZ
   ,QDQDO\]LQJWKHGHIHQGDQWVj)RXUWK$PHQGPHQWFODLPVZH               'HIHQGDQWWRJRIUHHl7KHRIILFHUVVWRSSHG+HDWKEDVHG
KDYHGLYLGHGWKHHYHQWVUHVXOWLQJLQWKHGHIHQGDQWVjDUUHVWV              XSRQWKHLUUHDVRQDEOHVXVSLFLRQWKDWKHZDVSUHVHQWO\HQJDJHG
LQWR WKUHH GLVWLQFW HSLVRGHV   WKH LQLWLDO VWRS RI +HDWK     LQFULPLQDODFWLYLW\6SHFLILFDOO\WKHRIILFHUVEHOLHYHGWKDWWKH
SXUVXDQW WR WKH RIILFHUV DOOHJHG UHDVRQDEOH VXVSLFLRQ RI           EDJWKDW+HDWKSODFHGLQWKHYHKLFOHFRQWDLQHGDODUJHTXDQWLW\
FULPLQDODFWLYLW\WKHGHWHQWLRQRI+HDWKZKLOHWKHRIILFHUV           RILOOHJDOGUXJV+RZHYHUKDYLQJ VHDUFKHG+HDWKDQGKLV
DWWHPSWHGWRDOOD\WKHLUVXVSLFLRQVRIFULPLQDODFWLYLW\DQG             YHKLFOHDQGILQGLQJQRWKLQJLQKHUHQWO\FULPLQDOWKHRIILFHUV
 WKH HQWU\ DQG VXEVHTXHQW VHDUFK RI +RUWRQjV DSDUWPHQW         ZHUHREOLJDWHGLQGHHGPDQGDWHGWRHQGWKHLULQYHVWLJDWLYH
:HUHYLHZHDFKRIWKHVHHSLVRGHVLQWXUQ                                 VWRS DEVHQW D QHZO\ GLVFRYHUHG DUWLFXODEOH EDVLV IRU KLV
                                                                          GHWHQWLRQ6HH8QLWHG6WDWHVY0HVD)GWK
D   7KH,QLWLDO6WRS                                                     &LUILQGLQJWKDWmWKHRIILFHUFRXOGQRWIXUWKHUGHWDLQ
                                                                          WKHYHKLFOHRULWVRFFXSDQWVXQOHVVVRPHWKLQJWKDWRFFXUUHG
  :KHQWKHSDWKVRISROLFHDQGFLWL]HQVFURVVWKHUHVXOWLQJ              GXULQJ WKH WUDIILF VWRS JHQHUDWHG WKH QHFHVVDU\ UHDVRQDEOH
HQFRXQWHUZLOOQRWDOZD\VFRQVWLWXWHDVHL]XUHDVFRQWHPSODWHG            VXVSLFLRQWRMXVWLI\DIXUWKHUGHWHQWLRQl
E\WKH)RXUWK$PHQGPHQW$VHL]XUHRQO\RFFXUVmZKHQWKH
RIILFHUE\PHDQVRISK\VLFDOIRUFHRUVKRZRIDXWKRULW\KDV               7KHJRYHUQPHQWFRQWHQGVWKDWUHDVRQDEOHVXVSLFLRQDURVH
LQ VRPH ZD\ UHVWUDLQHG WKH OLEHUW\ RI  D FLWL]HQl 7HUU\ Y   IURP +HDWKjV IDOVH VWDWHPHQWV UHJDUGLQJ KLV ZKHUHDERXWV
                                                                          LPPHGLDWHO\ SUHFHGLQJ WKH LQYHVWLJDWLYH VWRS DQG WKH
                                                                          RZQHUVKLSRIWKHNH\V7KHGLVWULFWFRXUWDJUHHG6HHs$DW
                                                                           +RZHYHU  RXU GH QRYR UHYLHZ RI WKH GLVWULFW FRXUWjV
     +HDWK UHFHLYHG D VHQWHQFH RI VHYHQW\WZR PRQWKV LPSULVRQPHQW DQG
+RUWRQ UHFHLYHG WKLUW\VHYHQ PRQWKV LPSULVRQPHQW
    8QLWHG6WDWHVY+RUWRQHWDO         1RV         1RV         8QLWHG6WDWHVY+RUWRQHWDO       

DQ\RXWVLGHWLPHOLPLWDWLRQIRUDSHUPLVVLEOH7HUU\VWRSlWKH         2KLR86Q6LQFH7HUU\FRXUWVKDYH
6XSUHPH&RXUWKDVKHOGWKDWWKHSDVVDJHRIWLPHFDQFDXVHDQ            UHFRJQL]HG WKDW ZKHQ mD ODZ HQIRUFHPHQW RIILFHU ODFNV
LQYHVWLJDWLYHGHWHQWLRQWRULSHQLQWRDGHIHFWLYHVHL]XUHWKDW          SUREDEOH FDXVH EXW SRVVHVVHV D UHDVRQDEOH DQG DUWLFXODEOH
PXVWEHEDVHGXSRQSUREDEOHFDXVH3ODFH86DW              VXVSLFLRQWKDWDSHUVRQKDVEHHQLQYROYHGLQFULPLQDODFWLYLW\
0RUHRYHUWKHGHJUHHRIIRUFHXWLOL]HGE\RIILFHUVGXULQJD             KHPD\GHWDLQWKHVXVSHFWEULHIO\WRLQYHVWLJDWHWKHVXVSLFLRXV
GHWHQWLRQPXVWEHmUHDVRQDEO\UHODWHGLQVFRSHWRWKHVLWXDWLRQ         FLUFXPVWDQFHVl8QLWHG6WDWHVY+XUVW)G
DW KDQGl DQG QRW mVR LQWUXVLYH DV WR FRQVWLWXWH DQ DUUHVWl   TXRWLQJ8QLWHG6WDWHVY%HQWOH\)G
8QLWHG 6WDWHV Y +DUGQHWW  )G   WK &LU      WK &LU   7KHVH VHL]XUHV KDYH EHFRPH FRPPRQO\
                                                                 NQRZQDV7HUU\VWRSV+RZHYHUZHUHLWHUDWHWKDW
  +DYLQJ SUHYLRXVO\ IRXQG WKDW WKH RIILFHUV SRVVHVVHG WKH          7HUU\Y2KLRGLGQRWDGGUHVVWKHUHDVRQDEOHQHVVRIDQ
UHTXLVLWHVXVSLFLRQWRZDUUDQWWKHVWRSRXULQTXLU\WXUQVWRWKH         LQYHVWLJDWLYHGHWHQWLRQUDWKHULWVKROGLQJDGGUHVVHGWKH
VHFRQGSURQJRIWKH:LQIUH\WHVW:KHWKHUWKHPHDQVDQG                  UHDVRQDEOHQHVVRIDSURWHFWLYHmIULVNlWKDWLVDVHDUFK
PHDVXUHVXWLOL]HGE\WKHRIILFHUVLQWKHLQVWDQWPDWWHUZHUH              WKDW LV QRW VXSSRUWHG E\ SUREDEOH FDXVH  ,Q FDVHV
mUHDVRQDEOHXQGHUWKHFLUFXPVWDQFHVl:LQIUH\)GDW               VXEVHTXHQWWR7HUU\WKH6XSUHPH&RXUWKDVKHOGWKDW
  'HIHQGDQWV DVVHUW WKDW WKH RIILFHUV FRQGXFW LH          XQGHUWKH)RXUWK$PHQGPHQWmDSROLFHPDQZKRODFNV
EORFNLQJ +HDWKjV YHKLFOH HPHUJLQJ ZLWK ZHDSRQV GUDZQ              SUREDEOH FDXVH EXW ZKRVH µREVHUYDWLRQV OHDG KLP
SXOOLQJ+HDWKIURPKLVYHKLFOHIULVNLQJDQGKDQGFXIILQJKLP             UHDVRQDEO\ WR VXVSHFWj WKDW D SDUWLFXODU SHUVRQ KDV
mUHVXOWHGLQDGHIDFWRDUUHVWl$SSHOODQWjV%UDW                FRPPLWWHGDFULPHPD\GHWDLQWKDWSHUVRQEULHIO\LQ
                                                                          RUGHU WR µLQYHVWLJDWH WKH FLUFXPVWDQFHV WKDW SURYRNH
   +DYLQJFRQVLGHUHGDOORIWKHPHDVXUHVXVHGE\WKHRIILFHUV            VXVSLFLRQ7\SLFDOO\WKLVPHDQVWKDWWKHRIILFHUPD\
ZHILQGWKDWWKHRIILFHUVjFRQGXFWLQHIIHFWXDWLQJWKHVWRSRI            DVN WKH GHWDLQHH D PRGHUDWH QXPEHU RI TXHVWLRQV WR
+HDWKGLGQRWULVHWRWKHOHYHORIDQDUUHVW:KLOHWKHDPRXQW           GHWHUPLQHKLVLGHQWLW\DQGWRWU\WRREWDLQLQIRUPDWLRQ
RIIRUFHXVHGE\WKHVHRIILFHUVZDVKLJKO\LQWUXVLYHDQGXQGHU           FRQILUPLQJRUGLVSHOOLQJWKHRIILFHUjVVXVSLFLRQVjl
VRPH FLUFXPVWDQFHV FRXOG EH HTXDWHG ZLWK DQ DUUHVW WKH
mPHUHXVHRIIRUFHLQPDNLQJDVWRSZLOOQRWQHFHVVDULO\            8QLWHG6WDWHVY)RXQWDLQHWDO)GWK&LU
FRQYHUW D VWRS LQWR DQ DUUHVW  >:KHQ WKH@ VXUURXQGLQJ       TXRWLQJ %HUNHPHU Y 0F&DUW\  86  
FLUFXPVWDQFHV JLYH ULVH WR D MXVWLILDEOH IHDU IRU SHUVRQDO      IRRWQRWHRPLWWHGTXRWLQJ8QLWHG6WDWHVY%ULJQRQL
VDIHW\ D VHL]XUH HIIHFWXDWHG ZLWK ZHDSRQV GUDZQ PD\             3RQFH  86    LQWHUQDO FLWDWLRQV
SURSHUO\EHFRQVLGHUHGDQLQYHVWLJDWLYHVWRSl+DUGQHWW           RPLWWHG6HHDOVR)ORULGDY5R\HU86
)GDWFLWLQJ8QLWHG6WDWHVY*UHHQH)G             DWHPSRUDU\7HUU\GHWHQWLRQLVZDUUDQWHGZKHQWKH
WK&LU7KLV&LUFXLWSHUPLWVWKHXVHRI            SXEOLF LQWHUHVW LQYROYHG LV WKH GHWHUUHQFH RI LOOHJDO GUXJ
IRUFHVXFKDVKDQGFXIIVDQGJXQVWRHIIHFWDVWRSZKHQVXFK           WUDIILFNLQJ
DVKRZRIIRUFHLVUHDVRQDEOHXQGHUWKHFLUFXPVWDQFHVRIWKH
VWRS6HHHJ+RXVWRQY&ODUN&RXQW\6KHULII'HSXW\sRKQ             ,QDQDO\]LQJWKHFLUFXPVWDQFHVUHOLHGXSRQE\WKHRIILFHUV
'RHV)GWK&LUILQGLQJWKDWWKH           LQUHDFKLQJWKHUHTXLVLWHOHYHORImUHDVRQDEOHVXVSLFLRQlD
XVHRIKDQGFXIIVGRHVQRWH[FHHGWKHERXQGVRID7HUU\VWRS           EULHIUHFLWDORIWKHIDFWRUVZDUUDQWLQJWKHVWRSDVIRXQGE\WKH
+DUGQHWW  )G DW   KROGLQJ WKDW DSSURDFKLQJ D         GLVWULFWFRXUWLVQHFHVVDU\
GHIHQGDQWZLWKDILUHDUPGUDZQZDVUHDVRQDEOHDVWKHRIILFHU
KDG UHDVRQ WR EHOLHYH WKH VXVSHFW ZDV DUPHG  :H KDYH          D   'HW6HHO\HKDGREVHUYHG+HDWKDWDVXVSHFWHGGUXJ
                                                                               ORFDWLRQDIHZZHHNVSULRUWRWKHVWRS
     8QLWHG6WDWHVY+RUWRQHWDO        1RV         1RV             8QLWHG6WDWHVY+RUWRQHWDO          

  E    'HW6HHO\HNQHZWKDW+HDWKKDGSULRUFRQYLFWLRQV               GHWHQWLRQ+DYLQJmYLHZ>HG@DOORIWKHFLUFXPVWDQFHVl
        LQFOXGLQJDSULRUGUXJWUDIILFNLQJFRQYLFWLRQ                  ZHGHHPWKHEHKDYLRUJOHDQHGIURPWKHVXUYHLOODQFHFRXSOHG
                                                                        ZLWKWKHLQIRUPDWLRQUHOD\HGE\WKHFRQILGHQWLDOLQIRUPDQW
  F    'HW6HHO\HNQHZIURPDUHOLDEOHVRXUFHWKDW+HDWK              VXIILFLHQW WR JLYH WKH RIILFHUV D UHDVRQDEOH VXVSLFLRQ RI
        ZDV FXUUHQWO\ LQYROYHG LQ WUDIILFNLQJ LQ ODUJH            RQJRLQJ FULPLQDO DFWLYLW\ .QR[  )G DW  TXRWLQJ
        TXDQWLWLHVRIFRFDLQH                                          0HQGHQKDOO  86 DW    $FFRUGLQJO\ WKH GLVWULFW
                                                                        FRXUWjV ILQGLQJ RI mUHDVRQDEOH VXVSLFLRQl ZDV QRW FOHDUO\
  G    'HW6HHO\HKDGVHHQ+HDWKXVHFRXQWHUVXUYHLOODQFH             HUURQHRXV
        WHFKQLTXHV ZKHQ DUULYLQJ DW WKH :HVW %URDGZD\
        DSDUWPHQW EXLOGLQJ HVSHFLDOO\ ZKHQ KH WRRN D             E 7KH'HWHQWLRQ
        SDFNDJHRUREMHFWLQWRWKHEXLOGLQJ
                                                                           7KHUHDOTXHVWLRQLVZKHWKHUWKLVVWRSYDOLGDWLWVLQFHSWLRQ
  H    'HW 6HHO\H VDZ DQRWKHU PDQ HQWHU WKH :HVW               ULSHQHG LQWR DQ DUUHVW EHIRUH WKH FRFDLQH ZDV IRXQG DQG
        %URDGZD\ DSDUWPHQW EXLOGLQJ +HDWK HQWHU WKH               WKHUHIRUHZDVDQDUUHVWZLWKRXWWKHEHQHILWRISUREDEOHFDXVH
        EXLOGLQJDVKRUWWLPHODWHUVDZWKHILUVWPDQOHDYH            :KHQHVWDEOLVKLQJWKDWDGHWHQWLRQZKLFKZDVQRWVXSSRUWHG
        WKHEXLOGLQJDSSHDULQJWRFDUU\DQREMHFWXQGHUKLV             E\ SUREDEOH FDXVH ZDV UHDVRQDEOH WKH JRYHUQPHQW PXVW
        MDFNHWDQGWKHQVDZWKHPDQGULYHDZD\LQWKHFDU              GHPRQVWUDWHWKDWm>@WKHRIILFHUjVFRQGXFWLVVXSSRUWHGE\
        +HDWKKDGXVHGWRGULYHWRWKHVFHQH                           DUWLFXODEOHVXVSLFLRQDQG>@WKHGHWHQWLRQDQGLQYHVWLJDWLYH
                                                                        PHWKRGV XVHG ZHUH UHDVRQDEOH XQGHU WKH FLUFXPVWDQFHVl
  I    'HW6HHO\HKDGIROORZHG+HDWKXSRQOHDYLQJWKH                8QLWHG6WDWHVY:LQIUH\)GWK&LU
        :HVW%URDGZD\DSDUWPHQWEXLOGLQJWRKLVKRPHRQ                m$OWKRXJKDQRIILFHUPD\KDYHUHDVRQDEOHVXVSLFLRQWRGHWDLQ
        'L[GDOH DQG KDG VHHQ SHRSOH EHJLQ FRPLQJ DQG             D SHUVRQ RU KLV SRVVHVVLRQV IRU LQYHVWLJDWLRQ WKH RIILFHUjV
        JRLQJIURPWKH'L[GDOHUHVLGHQFH7KLVLVFRQVLVWHQW            LQYHVWLJDWLYHGHWHQWLRQFDQPDWXUHLQWRDQDUUHVWRUVHL]XUHLI
        ZLWKGUXJWUDIILFNLQJ                                          LW RFFXUV RYHU DQ XQUHDVRQDEOH SHULRG RI WLPH RU XQGHU
                                                                        XQUHDVRQDEOH FLUFXPVWDQFHVl  8QLWHG 6WDWHV Y $YHU\ 
  J    2QWKHGD\RIWKHVWRS+HDWKZDVGULYLQJDYHKLFOH             )G   WK &LU    :KLOH FRXUWV KDYH EHHQ
        UHJLVWHUHG WR 0LFKDHO 6SDXOGLQJ D NQRZQ GUXJ             UHOXFWDQWWRVHWDWLPHOLPLWRQGHWHQWLRQVVHHHJ8QLWHG
        GHDOHU                                                         6WDWHVY3ODFH86GHFOLQLQJmWRDGRSW
  K    'HW6HHO\HKDGVHHQ+HDWKRQWKHGD\RIWKHVWRS
        XVHFRXQWHUVXUYHLOODQFHWHFKQLTXHVLQKLVGULYLQJLQ
                                                                            
        DQDWWHPSWWRORVHDQ\YHKLFOHIROORZLQJKLP                      :H DUH PLQGIXO WKDW WKH PDMRULW\ RI WKHVH IDFWRUV DUH DWWULEXWDEOH WR
                                                                        PDQ\ RUGLQDU\ ODZDELGLQJ FLWL]HQV    ,W KDV EHFRPH FRPPRQSODFH IRU

s$DW                                                           FLWL]HQV WR HPSOR\ mFRXQWHUVXUYHLOODQFHl WDFWLFV ZKHQ H[LWLQJ D YHKLFOH RU
                                                                        HQWHULQJ D EXLOGLQJ HVSHFLDOO\ ZKHQ FDUU\LQJ SDFNDJHV 7KHVH WDFWLFV DUH

   %DVHG XSRQ WKHVH IDFWV WKH GLVWULFW FRXUW IRXQG WKDW mWKH   RIWHQ PDQGDWHG E\ WKH UHDOLWLHV RI D GDQJHURXV VRFLHW\ :H IXUWKHU QRWH

LQLWLDOVWRSZDVSODLQO\UHDVRQDEOHls$DW$OWKRXJK          KRZHYHU WKDW RXU FRQVLGHUDWLRQV LQ WKLV FDVH HQFRPSDVV WKH mWRWDOLW\ RI
                                                                        WKH FLUFXPVWDQFHVl   $00 8QLWHG 6WDWHV Y .QR[  )G   WK
VXFKIDFWVZRXOGQRWVXSSRUWSUREDEOHFDXVHWRDUUHVW+HDWK            &LU  mLQ YLHZ RI DOO RI WKH FLUFXPVWDQFHV VXUURXQGLQJ WKH LQFLGHQWl
ZHILQGWKDWWKH\ZHUHVXIILFLHQWWRVDWLVI\WKHOHVVVWULQJHQW         TXRWLQJ 8QLWHG 6WDWHV Y 0HQGHQKDOO  86    7KXV
VWDQGDUGV RI 7HUU\ DQG %HUNHPHU IRU D EULHI LQYHVWLJDWLYH       LW LV WKH FRPELQDWLRQ DQG ZHLJKW RI WKHVH IDFWRUV ZKHQ FRQVLGHUHG HQ
                                                                        PDVVH WKDW JLYHV ULVH WR RXU FRQFXUUHQFH LQ WKH GLVWULFW FRXUWjV ILQGLQJ RI
                                                                        UHDVRQDEOH VXVSLFLRQ