00a0398p.06

7KH +RQRUDEOH 5LFKDUG ' &XGDK\ &LUFXLW -XGJH RI WKH 8QLWHG
6WDWHV &RXUW RI $SSHDOV IRU WKH 6HYHQWK &LUFXLW VLWWLQJ E\ GHVLJQDWLRQ

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 DS
81,7('67$7(6&28572)$33($/6
)257+(6,;7+&,5&8,7
BBBBBBBBBBBBBBBBB
'(%25$+ -$+1
3ODLQWLII$SSHOODQW
Y
(48,1( 6(59,&(6 36&
6&277 ' %(11(77 '90
0$5< %(7+ :$//,1*)25'
'90 DQG5,&+$5'
*5,)),1 '90
'HIHQGDQWV$SSHOOHHV
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH(DVWHUQ'LVWULFWRI.HQWXFN\DW)UDQNIRUW
1R²-RVHSK0+RRG'LVWULFW-XGJH
$UJXHG0D\
'HFLGHGDQG)LOHG1RYHPEHU
%HIRUH0(55,77&/$<DQG&8'$+<&LUFXLW
-XGJHV

-- 1 of 10 --

-DKQY(TXLQH6HUYVHWDO 1R
(TXLQH 6HUYLFHV D .HQWXFN\ FRUSRUDWLRQ LV RZQHG E\ 'U 6FRWW
%HQQHWW -DKQ KDG WDNHQ 1LJKW 3DVVDJH WR 'U %HQQHWW EHIRUH WR UHFHLYH
FDUH IRU DQ H\H LQMXU\ $OWKRXJK VKH ZDV GLVSOHDVHG ZLWK WKH KLJK ELOO
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' 'DQLHO ( 'DQIRUG 67,7(6 +$5%,621
/H[LQJWRQ .HQWXFN\ IRU $SSHOODQW 0DWWKHZ - 6PLWK
60,7+52/)(6 6.$9'$+/&203$1<&LQFLQQDWL
2KLR 0LFKDHO - &R[ 0,//(5 *5,)),1 0$5.6
/H[LQJWRQ.HQWXFN\IRU$SSHOOHHV21%5,()'DQLHO(
'DQIRUG%HQMDPLQ/.HVVLQJHU-U67,7(6 +$5%,621
/H[LQJWRQ .HQWXFN\ IRU $SSHOODQW 0DWWKHZ - 6PLWK
7KRPDV ) *ODVVPDQ 60,7+ 52/)(6 6.$9'$+/
&203$1< &LQFLQQDWL 2KLR 0LFKDHO - &R[ 0,//(5
*5,)),1 0$5.6/H[LQJWRQ.HQWXFN\IRU$SSHOOHHV
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
&8'$+< &LUFXLW -XGJH 'HERUDK -DKQ RZQHG D
FKDPSLRQ+DFNQH\SRQ\QDPHG1LJKW3DVVDJH,Q$SULORI
WKHSRQ\ZDVWDNHQWR(TXLQH6HUYLFHV36&WRKDYH
FRUUHFWLYHVXUJHU\IRUDEUHDWKLQJSUREOHP7KHVXUJHU\ZDV
SHUIRUPHG RQ $SULO DQG D IHZ KRXUV DIWHU WKH
RSHUDWLRQ1LJKW3DVVDJHZDVIRXQGGHDGLQKLVVWDOO-DKQ
VXHG(TXLQH6HUYLFHVDQGWKUHHYHWHULQDULDQVLQIHGHUDOFRXUW
DVVHUWLQJYDULRXVVWDWHODZFDXVHVRIDFWLRQ7KHGLVWULFWFRXUW
JUDQWHGVXPPDU\MXGJPHQWLQIDYRURIWKHGHIHQGDQWVRQDOO
FRXQWVLQWKHFRPSODLQWDQG-DKQQRZDSSHDOV
-DKQ DQ ,OOLQRLV UHVLGHQW VRXJKW WUHDWPHQW IRU 1LJKW
3DVVDJH¶VSDODWHGLVSODFHPHQWDFRQGLWLRQFRPPRQDPRQJ
+DFNQH\ SRQLHV WKDW LQWHUIHUHV ZLWK WKH KRUVH¶V EUHDWKLQJ
7KLVFRQGLWLRQFDQEHFRUUHFWHGXVLQJRQHRIVHYHUDOVXUJLFDO
WHFKQLTXHVDQG'U%HQQHWWDW(TXLQH6HUYLFHVFKRVHWRXVH

-- 2 of 10 --

-DKQY(TXLQH6HUYVHWDO 1R
:H QRWH KRZHYHU WKDW D ODFN RI VXSSRUWLQJ VWXGLHV LV QRW LQ LWVHOI
IDWDO WR WKH DGPLVVLELOLW\ RI H[SHUW WHVWLPRQ\ 6HH 0F&XOORFN Y +%
)XOOHU &R )G G &LU ³'LVSXWHV DV WR WKH
VWUHQJWK RI >DQ H[SHUW¶V@ FUHGHQWLDOV RU ODFN RI WH[WXDO DXWKRULW\ IRU KLV
RSLQLRQ JR WR WKH ZHLJKW QRW WKH DGPLVVLELOLW\ RI KLV WHVWLPRQ\´
PHWKRGRORJ\ WR GHWHUPLQH ZKHWKHU 1LJKW 3DVVDJH KDG DQ
LQIHFWLRQWKHUHLVQRHYLGHQFH²OLNHYHWHULQDU\VWXGLHV²LQ
WKH UHFRUG YHULI\LQJ RU FRQWUDGLFWLQJ WKH YHWHULQDULDQV¶
RSLQLRQVWKDWDILEULQRJHQOHYHORILQGLFDWHVWKHSUHVHQFH
RIDQLQIHFWLRQ7KHGLVWULFWFRXUWPHQWLRQHGWKHIDFWWKDW
-DKQSURYLGHGQRVWXGLHVWRVXSSRUWWKLVRSLQLRQEXWLWLVQRW
YHU\VXUSULVLQJWKDWWKHUHFRUGZDVLQFRPSOHWHEHFDXVHWKH
FRXUW JDYH -DKQ QR QRWLFH WKDW LW ZRXOG EH UXOLQJ RQ WKH
DGPLVVLELOLW\RIKHUH[SHUWV$GLVWULFWFRXUWVKRXOGQRWPDNH
D'DXEHUWUXOLQJSUHPDWXUHO\EXWVKRXOGRQO\GRVRZKHQWKH
UHFRUGLVFRPSOHWHHQRXJKWRPHDVXUHWKHSURIIHUHGWHVWLPRQ\
DJDLQVWWKHSURSHUVWDQGDUGVRIUHOLDELOLW\DQGUHOHYDQFH:H
EHOLHYHWKDWWKHUHFRUGQHHGVWREHIXUWKHUGHYHORSHGWRPDNH
DQDGHTXDWH'DXEHUWGHWHUPLQDWLRQLQWKLVFDVH:LWKDPRUH
FRPSOHWHUHFRUGEHIRUHWKHGLVWULFWFRXUW-DKQZLOOKDYHDQ
DGHTXDWH RSSRUWXQLW\ WR GHIHQG WKH DGPLVVLELOLW\ RI KHU
H[SHUWV¶ WHVWLPRQ\ DQG (TXLQH 6HUYLFHV ZLOO KDYH DQ
DGHTXDWHRSSRUWXQLW\WRDUJXHDJDLQVWLW
%HFDXVH WKH GLVWULFW FRXUW¶V GHFLVLRQ WR JUDQW VXPPDU\
MXGJPHQW ZDV EDVHG RQ LWV LPSURSHU H[FOXVLRQ RI -DKQ¶V
SURIIHUHGH[SHUWWHVWLPRQ\ZH9$&$7(WKHGLVWULFWFRXUW¶V
GHFLVLRQWRJUDQWVXPPDU\MXGJPHQW)XUWKHUZH5(0$1'
IRUSURFHHGLQJVQRWLQFRQVLVWHQWZLWKWKLVRSLQLRQ
1R -DKQY(TXLQH6HUYVHWDO
VKH UHWXUQHG WR GLVFXVV WUHDWPHQW RI 1LJKW 3DVVDJH¶V EUHDWKLQJ FRQGLWLRQ
'XULQJ D WRXU RI (TXLQH 6HUYLFHV¶V IDFLOLW\ VKH ZDV WROG WKDW (TXLQH
6HUYLFHV PRQLWRUHG ³FRQWLQXRXVO\ FRPSOHWHO\ DQG DURXQGWKHFORFN´
7KHUH LV KRZHYHU QR HYLGHQFH LQ WKH UHFRUG VXJJHVWLQJ ZK\ 'U
%HQQHWW FKRVH WKLV SDUWLFXODU SURFHGXUH RU ZKHWKHU KH GLVFXVVHG LW ZLWK
-DKQ
-DKQ HPSOR\HG /DUU\ %DFRQ DV 1LJKW 3DVVDJH¶V WUDLQHU DQG %DFRQ
EURXJKW 1LJKW 3DVVDJH WR (TXLQH 6HUYLFHV IRU DGPLVVLRQ DQG SHUIRUPDQFH
RI WKH PRGLILHG )RUVHOO¶V SURFHGXUH $OWKRXJK -DKQ GLG QRW SHUVRQDOO\
DXWKRUL]H WKH VXUJHU\ RQ WKH GD\ RI WKH RSHUDWLRQ %DFRQ GLG +RZHYHU
WKHUH LV QR GRFXPHQWDU\ HYLGHQFH GHPRQVWUDWLQJ WKDW 'U %HQQHWW
H[SODLQHG WKH ULVN RI WKLV SURFHGXUH WR HLWKHU -DKQ RU %DFRQ
D WHFKQLTXH NQRZQ DV D ³PRGLILHG )RUVHOO¶V SURFHGXUH´
7KLV SURFHGXUH LQYROYHV WKH UHPRYDO RI PXVFOH DQG WLVVXH
IURPWKHSRQ\¶VQHFNWKHUHE\DOORZLQJLWWREHWWHUUHOD[LWV
QHFNWRRSHQWKHDLUZD\DQGSHUPLWIXOOHUEUHDWKLQJ'XULQJ
DSUHVXUJHU\HYDOXDWLRQLWZDVGLVFRYHUHGWKDW1LJKW3DVVDJH
KDG D ILEULQRJHQ OHYHO RI DQG D QDVDO GLVFKDUJH 'U
%HQQHWWDSSDUHQWO\FRQFOXGHGWKDWWKLVZDVQRWDVRXUFHRI
FRQFHUQDQGKDGWKHSRQ\SUHSDUHG
7KHVXUJHU\EHJDQDWDSSUR[LPDWHO\SPRQ$SULO
7KUHHYHWHULQDULDQVDQGWZRDVVLVWDQWVWRRNSDUWLQWKH
SURFHGXUH'U%HQQHWWVXSHUYLVHGWKHHQWLUHRSHUDWLRQDQG
SHUIRUPHG WKH PRGLILHG )RUVHOO¶V SURFHGXUH KLPVHOI 'U
5LFKDUG*ULIILQ²DYHWHULQDU\LQWHUQ²UHFRPPHQGHGDSUH
VXUJLFDODQHVWKHVLDGRVDJHDQGDGPLQLVWHUHGWKHDQHVWKHVLD
RQFH'U%HQQHWWYHUEDOO\DSSURYHGWKHGRVH1LJKW3DVVDJH
ZDVJLYHQPLOOLJUDPVRI[\ODQLQHDQGPLOOLJUDPVRI
NHWDPLQH EHIRUH WKH VXUJHU\ 'U 0DULEHWK
:DOOLQJIRUG²DQRWKHU YHWHULQDU\ LQWHUQ²KDG OLPLWHG
LQYROYHPHQWZLWKWKHRSHUDWLRQEHFDXVHDQHPHUJHQF\ZLWK
DQRWKHUDQLPDOUHTXLUHGKHUDWWHQWLRQ7KHPRGLILHG)RUVHOO¶V
SURFHGXUHZDVFRQGXFWHGZLWK1LJKW3DVVDJHXQGHUJHQHUDO
DQHVWKHWLFDQG'U*ULIILQDJDLQXQGHUWKHVXSHUYLVLRQRI'U
%HQQHWWDGPLQLVWHUHGDQHVWKHWLFJDVWRWKHSRQ\WKURXJKRXW
WKH VXUJHU\1RUHFRUGRIWKHW\SHRUDPRXQWRIJDVXVHG

-- 3 of 10 --

-DKQY(TXLQH6HUYVHWDO 1R
,Q KLV GHSRVLWLRQ 'U *ULIILQ WHVWLILHG WKDW WKH JDV XVHG ZDV
KDORWKDQH²D FRPPRQ JHQHUDO DQHVWKHWLF²EXW KH GLG QRW UHFDOO WKH
DPRXQW KH DGPLQLVWHUHG
$OO FLWDWLRQV WR WKH UHFRUG ZLOO EH WR WKH SDUWLHV¶ -RLQW $SSHQGL[
H[LVWV$FFRUGLQJWRWKHYHWHULQDULDQVSUHVHQW1LJKW3DVVDJH
UHPDLQHGVWDEOHGXULQJWKHHQWLUHVXUJHU\ZKLFKODVWHGDERXW
PLQXWHV
$IWHUWKHVXUJHU\HQGHGDW1LJKW3DVVDJHZDVWDNHQWR
DSDGGHGUHFRYHU\URRPZKHUHKHEHJDQWRZDNHXSDERXW
ILYHPLQXWHVODWHU)URPWKLVSRLQWIRUZDUG(TXLQH6HUYLFHV
PDGHQRDGGLWLRQDOPHGLFDOUHFRUGVUHODWLQJWR1LJKW3DVVDJH
$FFRUGLQJWR'U%HQQHWW1LJKW3DVVDJHZDVEDFNRQKLVIHHW
DIWHUPLQXWHVDQGKHGHFLGHGWRUHWXUQ1LJKW3DVVDJHWR
KLVVWDOO'U*ULIILQVXSHUYLVHGWKHSRQ\¶VUHWXUQWRDUHJXODU
VWDOO DQG REVHUYHG 1LJKW 3DVVDJH IRU DSSUR[LPDWHO\
PLQXWHVWKHUHDIWHU$OODSSHDUHGILQH'U%HQQHWWFODLPVWKDW
KH³SUREDEO\VDZ>1LJKW3DVVDJH@JRLQJEDFNDQGIRUWKWRWKH
VWDOOVDQGFKHFNLQJRWKHUKRUVHVRUWLPHV´EHIRUH
SPDQGHDFKWLPHKHGHWHFWHGQRSUREOHPVZLWKWKHSRQ\¶V
FRQGLWLRQ6HH-$DW %HQQHWW'HSR $VLQGLFDWHG
DERYHKRZHYHUQRPHGLFDOUHFRUGVRIDQ\NLQGGRFXPHQW
WKHVHYLVLWVRU1LJKW3DVVDJH¶VFRQGLWLRQGXULQJWKHFRXUVHRI
WKHHYHQLQJ$KRUVHFDUHWDNHUDW(TXLQH6HUYLFHVFODLPVWKDW
KHFKHFNHGRQ1LJKW3DVVDJHSHULRGLFDOO\XQWLO ZKHQKH
ZHQWKRPHIRUWKHQLJKW EXWDJDLQWKHUHDUHQRUHFRUGVRI
WKH YLVLWV RU 1LJKW 3DVVDJH¶V FRQGLWLRQ $W DSSUR[LPDWHO\
RQH RI WKH WHFKQLFLDQV ZKR DVVLVWHG ZLWK 1LJKW
3DVVDJH¶V VXUJHU\ FKHFNHG WKH SRQ\ 6KH FODLPHG WKDW QR
SUREOHPVZHUHGHWHFWHGEXW\HWDJDLQWKHUHDUHQRPHGLFDO
UHFRUGV WR VXSSRUW WKLV 1LJKW 3DVVDJH ZDV IRXQG GHDG DW
DSSUR[LPDWHO\SP
1LJKW3DVVDJH¶VFRUSVHZDVVHQWWR'U5REHUW7UDPRQWLQ
DW WKH /LYHVWRFN 'LVHDVH 'LDJQRVWLF &HQWHU /''& LQ
/H[LQJWRQ.HQWXFN\ZKHUHKHSUHIRUPHGDQDXWRSV\RQWKH
XQIRUWXQDWH DQLPDO +LV DXWRSV\ UHSRUW GRHV QRW LQGLFDWH
ZKHWKHUKHFRQGXFWHGDQH[WHUQDOH[DPLQDWLRQRIWKHERG\
1R -DKQY(TXLQH6HUYVHWDO
EHOLHYHWKDWWKHGLVWULFWFRXUWDEXVHGLWVGLVFUHWLRQLQILQGLQJ
WKHP LQDGPLVVLEOH²RQ WKH DSSDUHQW JURXQGV WKDW WKH\
HPSOR\HG LPSURSHU PHWKRGRORJ\ DQG WKDW WKH SDWKRORJLVWV
ZHUHPRUHSHUVXDVLYHRQWKHLVVXHRIWKHLQIHFWLRQ²XQGHU
5XOH0HGLFDORSLQLRQVQHHGQRWEHXQFKDOOHQJHDEOHLQ
RUGHUWREHDGPLVVLEOH0HGLFDOH[SHUWVDUHMXVWZLWQHVVHV
DQGWKH\QHHGQRWEHSXUYH\RUVRIXOWLPDWHWUXWKLQRUGHUWREH
DOORZHG RQ WKH VWDQG $V WKH 6XSUHPH &RXUW QRWHG LQ
'DXEHUWWKDW³>Y@LJRURXVFURVVH[DPLQDWLRQSUHVHQWDWLRQRI
FRQWUDU\HYLGHQFHDQGFDUHIXOLQVWUXFWLRQRQWKHEXUGHQRI
SURRIDUHWKHWUDGLWLRQDODQGDSSURSULDWHPHDQVRIDWWDFNLQJ
VKDN\ EXW DGPLVVLEOH HYLGHQFH´ 86 DW 7KH
RSLQLRQVRI'U0XQG\DQG'U5REELQVPD\YHU\ZHOOEH
³VKDN\´ EXW WKH\ DUH FOHDUO\ QRW DV WKH GLVWULFW FRXUW
DSSDUHQWO\EHOLHYHG³JXHVVHV´RU³DVVXPSWLRQV´
1RW RQO\ GR ZH EHOLHYH WKDW WKH GLVWULFW FRXUW HUUHG E\
PLVFKDUDFWHUL]LQJ WKH PHWKRGRORJ\ HPSOR\HG E\ -DKQ¶V
H[SHUWVDQGE\ZHLJKLQJWKHLUWHVWLPRQ\DJDLQVWWKDWRIWKH
SDWKRORJLVWV EXW ZH DOVR EHOLHYH WKDW WKH UHFRUG ZDV
LQVXIILFLHQWLQRUGHUWRPDNHDSURSHU'DXEHUWGHWHUPLQDWLRQ
$OWKRXJKZHKDYHH[SODLQHGWKDW³>W@KHGLVWULFWFRXUWLVQRW
REOLJDWHGWRKROGD'DXEHUWKHDULQJ´ &OD\ Y)RUG0RWRU
&R)G WK&LU DGLVWULFWFRXUWVKRXOG
QRW PDNH D 'DXEHUW GHWHUPLQDWLRQ ZKHQ WKH UHFRUG LV QRW
DGHTXDWHWRWKHWDVN³>,@QWKHDEVHQFHRIDKHDULQJZHPXVW
UHYLHZWKHUHFRUGWRGHWHUPLQHZKHWKHUWKHGLVWULFWFRXUWHUUHG
LQLWVDVVHVVPHQWRIWKHUHOHYDQFHDQGUHOLDELOLW\RIWKHH[SHUW
WHVWLPRQ\´LG TXRWDWLRQRPLWWHG DQGWKHUHFRUGEHIRUHXV
FRQWDLQV HQRXJK PDWHULDO²WKH H[SHUWV¶ UHSRUWV WKH
SDWKRORJLVWV¶UHSRUWVDQGGHSRVLWLRQVIURPPRVWRIWKHSHRSOH
LQYROYHG²IRUXVWRKDYHGHWHUPLQHGWKDWWKHGLVWULFWFRXUW
PLVFKDUDFWHUL]HGWKHWHVWLPRQ\RI'UV0XQG\DQG5REELQV
E\ ZHLJKLQJ WKHLU RSLQLRQV DJDLQVW WKH SDWKRORJLVWV¶
+RZHYHU ZH GR QRW EHOLHYH WKDW WKH UHFRUG LV FRPSOHWH
HQRXJKIRUWKLVFRXUWWRUHYHUVHWKHGLVWULFWFRXUWDQGGLUHFWO\
UXOHWKDW-DKQ¶VH[SHUWWHVWLPRQ\LVDGPLVVLEOH
)RU H[DPSOH DOWKRXJK ZH ILUPO\ EHOLHYH UHO\LQJ RQ ODE
UHVXOWV DQG UHFRUGV RI SK\VLFDO V\PSWRPV LV DSSURSULDWH

-- 4 of 10 --

-DKQY(TXLQH6HUYVHWDO 1R
XQGRXEWHGO\ ZLWK VWUXJJOH´ -$ DW 0XQG\ 5HSRUW
7KHK\SRWKHVLVZDVWKDWWKHKRUVHZDVLQVKRFNGXHWRWKH
DGPLQLVWUDWLRQ RI DQHVWKHVLD LQ WKH SUHVHQFH RI DQ
XQGLDJQRVHG LQIHFWLRQ VHH -$ DW 0XQG\
'HSR EDVKHGKLVKHDGRQWKHZDOORIWKHVWDOODQGGLHG'U
0XQG\ FRQFOXGHG WKDW EHFDXVH WKHUH ZHUH QR PHGLFDO
UHFRUGV(TXLQH6HUYLFHVGLGQRWDGHTXDWHO\PRQLWRU1LJKW
3DVVDJH DQG VWDWHG WKDW ³>U@HDVRQDEOH YHWHULQDU\ SUDFWLFH
LQFOXGHV FORVH UHJXODU PRQLWRULQJ E\ WUDLQHG PHGLFDO
SHUVRQQHO ZLWK DSSURSULDWH PHGLFDO UHFRUGV LQ WKH SRVW
VXUJLFDO SHULRG´ DQG ³>W@KH DEVHQFH RI WKLV UHDVRQDEOH
YHWHULQDU\SUDFWLFHLQP\RSLQLRQFRPSURPLVHGWKHSDWLHQW¶V
OLIH´-$DW 0XQG\5HSRUW 'U5REELQVOLQNHGWKH
XQGLDJQRVHGLQIHFWLRQWR1LJKW3DVVDJH¶VGHDWK³WKHVWUHVVRI
VXUJHU\ FRXOG KDYH DOORZHG HQGRWR[LQ WR EH DEVRUEHG DQG
WKHQZH¶YHJRWWRIROORZXSZLWKDQHQGRWR[LFUHDFWLRQODWHU´
-$DW 5REELQV'HSR 'U5REELQVDOVREHOLHYHGWKDW
³KDGVRPHRQHEHHQLQDWWHQGDQFHDQGPRQLWRUHGWKHSRQ\DV
SURPLVHG OLIH VDYLQJ SURFHGXUHV FRXOG KDYH EHHQ
LPSOHPHQWHGDQGPD\KDYHSUHYHQWHGWKHGHDWKRIWKHSRQ\´
-$ DW 5REELQV 5HSRUW -DKQ¶V H[SHUWV XVHG WKH
H[LVWLQJ IDFWV WR SUHVHQW WKHLU RSLQLRQV RQ FDXVDWLRQ WKH
DQHVWKHVLD DQG LQIHFWLRQ ZKLFK VKRXOG KDYH GHOD\HG WKH
VXUJHU\ LQ WKH ILUVW SODFH FDXVHG 1LJKW 3DVVDJH WR JR LQWR
VKRFN DQG EHFDXVH (TXLQH 6HUYLFHV GLG QRW DGHTXDWHO\
PRQLWRU1LJKW3DVVDJHWKHVKRFNOHGWRWKHKRUVH¶VGHDWK
(YHQ'U%HQQHWWEHOLHYHVWKDWWKHVKRFNFRQWULEXWHGWR1LJKW
3DVVDJH¶VGHDWK6HH-$DW %HQQHWW'HSR 2IFRXUVH
'U%HQQHWWDQGWKH(TXLQH6HUYLFHVVWDIISURIHVVHGWKDWWKH\
PRQLWRUHG1LJKW3DVVDJHDQG'U%HQQHWWSRLQWHGRXWWKDWQRW
DOOIRUPVRIVKRFNDUHWUHDWDEOH+RZHYHUWKHDGHTXDF\RI
SRVWRSHUDWLYH PRQLWRULQJ DQG ZKHWKHU EHWWHU PRQLWRULQJ
FRXOGKDYHVDYHGWKHKRUVHLVVXUHO\DTXHVWLRQIRUWKHWULHURI
IDFW QRW RQH WR EH UXOHG RQ ZKHQ GHWHUPLQLQJ WKH
DGPLVVLELOLW\RIH[SHUWWHVWLPRQ\
%HFDXVHWKHRSLQLRQVRI'U0XQG\DQG'U5REELQVZHUH
EDVHGRQXQGLVSXWHGREMHFWLYHPHGLFDOIDFWVDQGEHFDXVHWKH
H[SHUWVDSSDUHQWO\DSSOLHGDVFLHQWLILFDOO\EDVHGPHWKRGRORJ\
WR WKH OLPLWHG IDFWV ZLWK ZKLFK WKH\ ZHUH SUHVHQWHG ZH
1R -DKQY(TXLQH6HUYVHWDO
7KH VOLGHV FRQWDLQHG VHFWLRQV RI 1LJKW 3DVVDJH¶V OXQJV OLYHU
LQWHVWLQHV VSOHHQ NLGQH\ WK\URLG P\RFDUGLXP DQG SRUWLRQV RI WKH EUDLQ
EXW LW FRQWDLQV VHYHUDO VSHFLILF ILQGLQJV IURP DQ LQWHUQDO
H[DPLQDWLRQ'XULQJWKLVDXWRSV\'U7UDPRQWLQH[DPLQHG
WKHDUHDRIWKHVXUJHU\DQGGHWHUPLQHGWKDWWKHVXUJHU\KDG
EHHQGRQHSURSHUO\+HDOVRSHUIRUPHGFXOWXUHVWRFKHFNIRU
EDFWHULDOLQIHFWLRQLQWKHOXQJVEXWIRXQGQRHYLGHQFHRIDQ
LQIHFWLRQ DOWKRXJK KH QRWHG WKDW WKH OXQJV ZHUH YHU\
FRQJHVWHG DQG WKH WUDFKHD DQG EURQFKL FRQWDLQHG D ³SDOH
IURWK\PDWHULDO´-$DW 7UDPRQWLQ¶V&DVH6XPPDU\
7KHUHSRUWVWDWHVWKDWWKH³>F@RQJHVWLYH FKDQJHLQYDULRXV
RUJDQVDORQJZLWKYHU\SDOHPXFRXVPHPEUDQHVLQGLFDWHWKDW
WKLV DQLPDO ZDV LQ VKRFN´ ,G ,Q KLV GHSRVLWLRQ 'U
7UDPRQWLQVWDWHGWKDWKHGLGQRWNQRZWKHVSHFLILFFDXVHRI
GHDWKDQG WKHDXWRSV\UHSRUWQRWHGVLPSO\³',$*126,6
+HPRUUKDJHEUDLQDQGVSLQDOFRUGHWLRORJ\XQFHUWDLQ´,G
7KH/''&VHQWQXPHURXVVOLGHVWR'U%ROLQWKHYHWHULQDU\
SDWKRORJLVW DW WKH ,OOLQRLV %XUHDX RI $QLPDO 'LVHDVH
/DERUDWRU\/RRNLQJDWWKHVHVOLGHV'U%ROLQDOVRLGHQWLILHG
VLJQVRIVKRFNEXWKHFRXOGQRWGHWHUPLQHWKHFDXVHRIGHDWK
1RU GLG 'U %ROLQ VHH DQ\ VLJQV RI LQIHFWLRQ EDVHG RQ WKH
VOLGHVLQKLVSRVVHVVLRQ
,Q1RYHPEHURI-DKQILOHGVXLWDJDLQVW'U%HQQHWW
DQG(TXLQH6HUYLFHVLQWKH(DVWHUQ'LVWULFWRI.HQWXFN\ODWHU
DGGLQJ'UV*ULIILQDQG:DOOLQJIRUGDVGHIHQGDQWVLQKHUILUVW
DPHQGHG FRPSODLQW :H VKDOO UHIHU WR WKH GHIHQGDQWV
FROOHFWLYHO\DV(TXLQH6HUYLFHV -DKQ¶VFRPSODLQWVWDWHGILYH
FRXQWVDJDLQVWWKHGHIHQGDQWV)LUVWVKHDOOHJHGWKDWDOOWKH
GHIHQGDQWV KDG EHHQ QHJOLJHQW LQ WKHLU WUHDWPHQW RI 1LJKW
3DVVDJH EHIRUH GXULQJ DQG DIWHU WKH VXUJHU\ 6HFRQG VKH
FODLPHGWKDW(TXLQH6HUYLFHVKDGEUHDFKHGDQRUDOFRQWUDFWWR
PRQLWRU1LJKW3DVVDJH³FRQWLQXRXVO\FRPSOHWHO\DQGDURXQG
WKHFORFN´-$DW )LUVW$PHQGHG&RPSODLQW 7KLUG
-DKQ DOOHJHG WKDW 'U %HQQHWW DQG (TXLQH 6HUYLFHV ZHUH
QHJOLJHQW E\ IDLOLQJ WR LQIRUP KHU RI WKH ULVNV LQYROYHG LQ
1LJKW3DVVDJH¶VVXUJHU\)RXUWK-DKQSOHDGHGFRQYHUVLRQ
DJDLQVW'U%HQQHWWDQG(TXLQH6HUYLFHVDOOHJLQJWKDWWKH\GLG

-- 5 of 10 --

-DKQY(TXLQH6HUYVHWDO 1R
QRWKDYHFRQVHQWWRSHUIRUPWKHVXUJHU\)LIWKDQGILQDOO\
-DKQDOOHJHGWKDW(TXLQH6HUYLFHVKDGFRPPLWWHGIUDXGE\
UHSUHVHQWLQJWRKHUWKDW1LJKW3DVVDJHZRXOGEHPRQLWRUHG
³FRQWLQXRXVO\FRPSOHWHO\DQGDURXQGWKHFORFN´,GDW
*LYHQ WKH FRPSOLFDWHG QDWXUH RI FDVHV GHDOLQJ ZLWK
DOOHJDWLRQV RI YHWHULQDU\ PDOSUDFWLFH -DKQ HPSOR\HG WZR
H[SHUWZLWQHVVHV
-DKQ¶VILUVWH[SHUWZLWQHVV'U*HRUJH0XQG\KDVEHHQD
SUDFWLFLQJ YHWHULQDULDQ LQ .HQWXFN\ VLQFH DQG KDV
H[WHQVLYHH[SHULHQFHGLDJQRVLQJDQGWUHDWLQJKRUVHV+HKDV
SUHVHQWHG VHYHUDO SDSHUV RQ WKH YHWHULQDU\ DVSHFWV RI UDFH
KRUVHVEXWDVRIWKHWLPHKHZDVGHSRVHG'U0XQG\KDGQRW
SHUIRUPHGDVXUJHU\LQWKHSUHFHGLQJWHQ\HDUVDQGKDGQHYHU
SHUIRUPHG D PRGLILHG )RUVHOO¶V SURFHGXUH -DKQ¶V RWKHU
H[SHUW'U5KRQGD5REELQVKDVEHHQDYHWHULQDULDQVLQFH
VSHFLDOL]LQJLQKRUVHPHGLFLQHDQGKDVWDXJKWLQWKH
'HSDUWPHQWRI/DUJH$QLPDO6XUJHU\DW$XEXUQ8QLYHUVLW\
,QWKHLUGHSRVLWLRQVERWK'UV0XQG\DQG5REELQVVWDWHG
WKDWDILEULQRJHQOHYHORIDQGDQDVDOGLVFKDUJHDUHVLJQV
RILQIHFWLRQRULQIODPPDWLRQDQGSURYLGHGFDXVHIRUGHOD\LQJ
WKH VXUJHU\ LQ RUGHU WR FRQGXFW IXUWKHU WHVWV 'U 5REELQV
H[SODLQHG WKDW 1LJKW 3DVVDJH¶V ILEULQRJHQ OHYHO ZDV KLJK
HQRXJKWREHDVLJQLILFDQWIDFWRULQWKHSRQ\¶VGHDWKDQG'U
0XQG\QRWHGWKDWHYHQDPLOGLQIHFWLRQFDQWKUHDWHQDKRUVH¶V
OLIH %RWK DOVR DJUHHG WKDW LQIHFWLRQ PDWFKHG ZLWK
DQHVWKHVLD²HYHQQRUPDOGRVDJHVZKHQJLYHQWRDKRUVHZLWK
DQ LQIHFWLRQ²FRXOG OHDG WR VKRFN DQG WKHQ GHDWK 'U
5REELQV VWDWHG WKDW LW DSSHDUHG IURP WKH UHFRUGV VKH KDG
EHIRUHKHUWKDW1LJKW3DVVDJHKDGEHHQJLYHQDQRYHUGRVHRI
DSSUR[LPDWHO\WRWLPHVWKHQRUPDOSUHRSHUDWLYHGRVDJH
RI;\ODQLQHDQG.HWDPLQH'U0XQG\EHOLHYHGWKDWWKHSRQ\
ZHQWLQWRVKRFNDWVRPHSRLQWDIWHUWKHVXUJHU\IHOODQGKLW
KLVKHDGFDXVLQJWKHKHPRUUKDJHLQWKHEUDLQDQGVSLQDOFRUG
DQGGHDWK'UV0XQG\DQG5REELQVZHUHERWKFULWLFDORIWKH
ODFNRIPHGLFDOUHFRUGVNHSWE\(TXLQH6HUYLFHVDQGZHUH
HVSHFLDOO\ FULWLFDO RI WKH ODFN RI SRVWRSHUDWLYH FDUH %XW
PXFKOLNHWKHSDWKRORJLVWV7UDPRQWLQDQG%ROLQQHLWKHU'U
0XQG\QRU'U5REELQVFRXOGLGHQWLI\ZLWKDQ\GHJUHHRI
1R -DKQY(TXLQH6HUYVHWDO
SK\VLFDOV\PSWRPVWRLQIHUWKHSUHVHQFHRIDQLQIHFWLRQLVQRW
DPHWKRGRORJLFDOO\XQVRXQG³DVVXPSWLRQ´RU³JXHVV´²LWLV
DGLDJQRVLV6HH:DONHUY6RR/LQH55&R)G
WK &LU QRWLQJ WKDW SDWLHQW KLVWRULHV ³SURYLGH
LQIRUPDWLRQXSRQZKLFKSK\VLFLDQVPD\DQGDWWLPHVPXVW
UHO\LQWKHLUGLDJQRVWLFZRUN´ ,QUH3DROL55<DUG3&%
/LWLJ)G G&LU ³>(@YDOXDWLRQRIWKH
SDWLHQW¶V PHGLFDO UHFRUGV LV D UHOLDEOH PHWKRG RI
FRQFOXGLQJ WKDW D SDWLHQW LV LOO HYHQ LQ WKH DEVHQFH RI D
SK\VLFDO H[DPLQDWLRQ´ 7KH IDFW WKDW QHLWKHU SDWKRORJLVW
FRQILUPHGWKHH[LVWHQFHRIDQLQIHFWLRQFHUWDLQO\SODFHVWKH
PDWWHULQGHEDWHEXWLWGRHVQRWUHQGHUWKHPHWKRGRORJ\RI
'UV0XQG\RU5REELQVXQUHOLDEOH DOWKRXJKWKHLUFRQFOXVLRQV
PD\ EH OHVV WKDQ FHUWDLQ :KHWKHU 1LJKW 3DVVDJH ZDV
VXIIHULQJIURPDQXQGLDJQRVHGLQIHFWLRQDQGZKHWKHU(TXLQH
6HUYLFHV QHJOLJHQWO\ IDLOHG WR FRQGXFW IXUWKHU WHVWV RQ WKH
KRUVHDUHTXHVWLRQVIRUWKHWULHURIIDFWQRWIRUWKHGLVWULFW
FRXUW WR DQVZHU ZKHQ UXOLQJ RQ DGPLVVLELOLW\ RI H[SHUW
WHVWLPRQ\
7KHRWKHUFRPSRQHQWVRI'U0XQG\¶VDQG'U5REELQV¶
RSLQLRQVDUHVLPLODUO\EDVHGRQWKHREMHFWLYHPHGLFDOIDFWVRI
WKLVFDVH:LWKUHVSHFWWRWKHLUEHOLHIWKDW(TXLQH6HUYLFHV¶
LQDGHTXDWH SRVWVXUJLFDO PRQLWRULQJ FRQWULEXWHG WR 1LJKW
3DVVDJH¶VGHDWKUHFDOOWKDWERWK'U7UDPRQWLQDQG'U%ROLQ
QRWHGWKDWWKHUHZHUHVLJQVWKDW1LJKW3DVVDJHKDGEHHQLQ
VKRFNDQGWKDWWKHUHKDGEHHQDKHPRUUKDJHLQKLVEUDLQDQG
VSLQDO FRUG 7KHVH GRFXPHQWHG REVHUYDWLRQV E\ WKH
SDWKRORJLVWV PDWFKHG ZLWK WKH WRWDO DEVHQFH RI PHGLFDO
UHFRUGVIRUWKHSRVWVXUJLFDOSHULRGVXSSRUWWKHLQIHUHQFHWKDW
1LJKW3DVVDJHZDVLQVRPHNLQGRIGLVWUHVVRIZKLFK(TXLQH
6HUYLFHVZDVQRWDZDUH8VLQJRWKHUFOXHVIURPWKHH[LVWLQJ
PHGLFDOUHFRUGV'U0XQG\SLHFHGWRJHWKHUZKDWKHEHOLHYHG
WREHWKHSUREDEOHVHULHVRIHYHQWVOHDGLQJXSWRWKHSRQ\¶V
GHPLVH %DVHG RQ 'U 7UDPRQWLQ¶V QRWH WKDW WKH EUDLQ
KHPRUUKDJH³PD\KDYHEHHQVHOILQGXFHGWKURXJKVRPHIRUP
RIWUDXPD´DQGDSKRWRJUDSKRI1LJKW3DVVDJH¶VFRUSVHLQWKH
VWDOODW(TXLQH6HUYLFHVZLWKEORRGSRROLQJDURXQGLWVKHDG
DQGVRPHEORRGRQWKHZDOORIWKHVWDOO'U0XQG\EHOLHYHG
WKDW WKH KRUVH VXIIHUHG D ³SURJUHVVLYH DJRQDO GHDWK

-- 6 of 10 --

-DKQY(TXLQH6HUYVHWDO 1R
7KH ILUVW LV WKH HOHYDWHG ILEULQRJHQ YDOXH WKDW LV
GRFXPHQWHG DQG VHFRQG²DQG LI \RX ORRN LQ P\
FRQFOXVLRQV , DOVR²,², GLFWDWH WZR VSHFLILF IDFWV
GRFXPHQWHGLQWKHUHFRUGWKHHOHYDWHGILEULQRJHQYDOXH
FRQFXUUHQWZLWKWKHPLOGVHURXVPXFRLGELODWHUDOQDVDO
GLVFKDUJH
-$ DW 0XQG\ 'HSR 7KLV VKRZV WKDW 'U 0XQG\
EDVHG KLV RSLQLRQ RQ FOLQLFDO LQGLFLD RI DQ LQIHFWLRQ 'U
5REELQVVLPLODUO\H[SODLQHGWKDW1LJKW3DVVDJH¶VILEULQRJHQ
OHYHODQGQDVDOGLVFKDUJHVXJJHVWHGDQLQIHFWLRQ6HH-$DW
5REELQV'HSR 7KHGLVWULFWFRXUWGLVFRXQWHGWKHVH
IDFWVE\H[SODLQLQJWKDW³LWLVYHU\VXVSHFWWRDVVXPHWKDWWKH
DQLPDO KDG DQ LQIHFWLRQ ZLWKLQ D UHDVRQDEOH PHGLFDO
SUREDELOLW\HVSHFLDOO\FRQVLGHULQJWKDWWKHSDWKRORJLVWGLGQRW
ILQGDQLQIHFWLRQ´-$DW*Q 0HP2SDQG2UGHU
$SU 6HH DOVR LG DW ( Q ³%HFDXVH WKH
SDWKRORJLVWGLGQRWILQGDQLQIHFWLRQWKLVFDOOVLQWRTXHVWLRQ
WKH UHOLDELOLW\ RI 'U 0XQG\¶V UHSRUW´ LG DW * ³7KH
SUREOHP ZLWK WKLV DVVXPSWLRQ LV WKDW LW JRHV DJDLQVW WKH
SDWKRORJLVW¶VUHSRUW´ ,QVRVWDWLQJWKHGLVWULFWFRXUW
HUUHGLQWZRZD\V)LUVWWKHGLVWULFWFRXUWDSSDUHQWO\ZHLJKHG
WKHSDWKRORJLVW¶VWHVWLPRQ\DJDLQVW-DKQ¶VH[SHUWWHVWLPRQ\
DQG DSSDUHQWO\ IRXQG WKH RSLQLRQV RI 'U 0XQG\ DQG 'U
5REELQV VXVSHFW EHFDXVH WKH\ FRQWUDGLFWHG WKDW RI WKH
SDWKRORJLVW %XW FRPSDULQJ WZR SLHFHV RI HYLGHQFH DQG
GHWHUPLQLQJ ZKLFK LV PRUH FUHGLEOH VKRXOG EH OHIW IRU WKH
ILQGHURIIDFWDQGVKRXOGQRWEHFRQVLGHUHGZKHQUXOLQJRQ
5XOHDGPLVVLELOLW\6HH.HQQHG\Y&ROODJHQ&RUS
)G WK &LU UHYHUVLQJ GLVWULFW FRXUW¶V
H[FOXVLRQRIH[SHUWWHVWLPRQ\EHFDXVH³>X@OWLPDWHO\WKHWULDO
FRXUWIDLOHGWRGLVWLQJXLVKEHWZHHQWKHWKUHVKROGTXHVWLRQRI
DGPLVVLELOLW\RIH[SHUWWHVWLPRQ\DQGWKHSHUVXDVLYHZHLJKWWR
EHDFFRUGHGVXFKWHVWLPRQ\E\DMXU\´
7KH VHFRQG HUURU FRPPLWWHG E\ WKH GLVWULFW FRXUW LQ
GLVPLVVLQJ 'U 0XQG\¶V DQG 'U 5REELQV¶V RSLQLRQV WKDW
1LJKW3DVVDJHKDGDQLQIHFWLRQSULRUWRWKHVXUJHU\LVWKDWLW
PLVFKDUDFWHUL]HGWKHPHWKRGRORJ\WKH\HPSOR\HGWRFRPHWR
WKDW RSLQLRQ /RRNLQJ DW WKH UHFRUGV RI WHVW UHVXOWV DQG
1R -DKQY(TXLQH6HUYVHWDO
FHUWDLQW\WKHVSHFLILFSK\VLRORJLFDOFDXVHRI1LJKW3DVVDJH¶V
GHDWK
$IWHU WKH FDVH SURFHHGHG WKURXJK GLVFRYHU\ DOO WKH
GHIHQGDQWV PRYHG IRU VXPPDU\ MXGJPHQW $OWKRXJK 'U
:DOOLQJIRUGKDGUHWDLQHGVHSDUDWHFRXQVHOWKHGHIHQGDQWVDOO
PDGH WKH VDPH DUJXPHQW IRU VXPPDU\ MXGJPHQW 7KH\
DUJXHG WKDW -DKQ¶V FODLPV IDLOHG EHFDXVH VKH FRXOG QRW
HVWDEOLVKWKHFDXVHRIWKHSRQ\¶VGHDWK%HFDXVH-DKQFRXOG
QRWHVWDEOLVKFDXVDWLRQWKH\DUJXHGKHUHQWLUHFDVHFROODSVHG
,QUHVSRQVHWRWKHVHPRWLRQVWKHGLVWULFWFRXUWGHWHUPLQHG
VXDVSRQWHDQGZLWKRXWDOORZLQJDGGLWLRQDOEULHILQJWKDWWKH
SURSRVHG WHVWLPRQ\ RI 'UV 0XQG\ DQG 5REELQV ZDV
LQDGPLVVLEOHXQGHU'DXEHUWY0HUUHOO'RZ3KDUP,QF
86 DQGUHMHFWHGWKHLUH[SHUWWHVWLPRQ\7KH
GLVWULFWFRXUWWKHQGHFLGHGVXPPDU\MXGJPHQWDJDLQVW-DKQRQ
DOOKHUFODLPVEHFDXVHZLWKRXWWKHWHVWLPRQ\IURPKHUH[SHUW
ZLWQHVVHV VKH FRXOG QRW SURYH FDXVDWLRQ 6KH DSSHDOV
DUJXLQJWKDWWKHGLVWULFWFRXUWLPSURSHUO\H[FOXGHGKHUH[SHUW
ZLWQHVV WHVWLPRQ\ 6KH DOVR FRQWHQGV XQGHU QXPHURXV
WKHRULHV WKDW WKH GLVWULFW FRXUW HUUHG E\ JUDQWLQJ VXPPDU\
MXGJPHQW IRU WKH GHIHQGDQWV :H VKDOO DGGUHVV RQO\ KHU
H[SHUW ZLWQHVV DUJXPHQW KHUH 6XPPDU\ MXGJPHQW LV RI
FRXUVHFORVHO\OLQNHGZLWKWKH'DXEHUWDQDO\VLVDOWKRXJKLW
PLJKWFRQFHLYDEO\EHDYDLODEOHHYHQZLWKDGLIIHUHQW'DXEHUW
RXWFRPH:HZLOOQRWGLVFXVV-DKQ¶VUHVLSVDORTXLWXUDQG
EDLOPHQW DUJXPHQWV VLQFH WKH\ ZHUH DSSDUHQWO\ QRW UDLVHG
EHORZ
:HUHYLHZWKHGLVWULFWFRXUW¶VGHFLVLRQWRJUDQWVXPPDU\
MXGJPHQWGHQRYR6HH+DUULVY*HQHUDO0RWRUV&RUS
)G WK&LU 6XPPDU\MXGJPHQWLVSURSHU
RQO\LIWKHUHLVQRJHQXLQHLVVXHRIPDWHULDOIDFW6HH&HORWH[
&RUS Y &DWUHWW 86 $QGHUVRQ Y
/LEHUW\/REE\,QF86 7KHEXUGHQRI
SURYLQJSUR[LPDWHFDXVDWLRQIDOOVRQWKHSODLQWLIIDQGLQD
SURIHVVLRQDO QHJOLJHQFH FDVH LQ .HQWXFN\ SUR[LPDWH
FDXVDWLRQ PXVW EH HVWDEOLVKHG E\ H[SHUW WHVWLPRQ\ 6HH
0RUULVVY+RIIPDQ6:G .HQ&W$SS
VHHDOVR:HOVKY8QLWHG6WDWHV)G WK&LU

-- 7 of 10 --

-DKQY(TXLQH6HUYVHWDO 1R
+HUHWKHVROHEDVLVIRUWKHGLVWULFWFRXUW¶VGHFLVLRQWR
JUDQWVXPPDU\MXGJPHQWZDVLWVH[FOXVLRQRI-DKQ¶VH[SHUW
WHVWLPRQ\ 7KXV ZH PXVW UHYLHZ LWV UXOLQJ WKDW -DKQ¶V
SURIIHUHGH[SHUWWHVWLPRQ\ZDVLQDGPLVVLEOHDQGHYHQLQWKH
FRQWH[WRIVXPPDU\MXGJPHQWZHUHYLHZWKDWGHFLVLRQIRU
DEXVHRIGLVFUHWLRQ6HH*HQHUDO(OHF&RY-RLQHU86

7KHDGPLVVLELOLW\RIH[SHUWWHVWLPRQ\LQDIHGHUDOFRXUWLV
SULPDULO\JRYHUQHGE\)HGHUDO5XOHRI(YLGHQFHZKLFK
VWDWHV
,IVFLHQWLILFWHFKQLFDORURWKHUVSHFLDOL]HGNQRZOHGJH
ZLOODVVLVWWKHWULHURIIDFWWRXQGHUVWDQGWKHHYLGHQFHRU
WR GHWHUPLQH D IDFW LQ LVVXH D ZLWQHVV TXDOLILHG DV DQ
H[SHUW E\ NQRZOHGJH VNLOO H[SHUWLVH WUDLQLQJ RU
HGXFDWLRQPD\WHVWLI\WKHUHWRLQWKHIRUPRIDQRSLQLRQ
RURWKHUZLVH
)HG5(YLG,Q'DXEHUWWKH6XSUHPH&RXUWSURYLGHG
H[WHQVLYHJXLGDQFHIRUWKHDSSOLFDWLRQRIWKHGLFWDWHVRI5XOH
7KH&RXUWH[SODLQHGWKDW5XOHGLVSOD\VD³OLEHUDO
WKUXVW´ZLWKWKH³JHQHUDODSSURDFKRIUHOD[LQJWKHWUDGLWLRQDO
EDUULHUV WR μRSLQLRQ¶ WHVWLPRQ\´ ,G DW TXRWDWLRQ
RPLWWHG %XWWKH&RXUWFRQWLQXHG5XOHSODFHVVRPH
UHVWULFWLRQVRQWKHDGPLVVLELOLW\RIH[SHUWWHVWLPRQ\DQGWKH
GLVWULFW FRXUW UHWDLQV WKH UHVSRQVLELOLW\ RI ³VFUHHQLQJ VXFK
HYLGHQFH´ ,G DW :KHQ D SDUW\ SURIIHUV H[SHUW
WHVWLPRQ\ WKH GLVWULFW FRXUW PXVW GHWHUPLQH ZKHWKHU WKH
WHVWLPRQ\ LV ERWK UHOHYDQW DQG UHOLDEOH ZKHQ UXOLQJ RQ LWV
DGPLVVLRQ6HHLGDW
,QDVVHVVLQJWKHUHOHYDQFHDQGUHOLDELOLW\RISURIIHUHGH[SHUW
WHVWLPRQ\WKHGLVWULFWFRXUWPXVWGHWHUPLQH
ZKHWKHUWKHH[SHUWLVSURSRVLQJWRWHVWLI\WR VFLHQWLILF
NQRZOHGJH WKDW ZLOO DVVLVW WKH WULHU RI IDFW WR
XQGHUVWDQGRUGHWHUPLQHDIDFWLQLVVXH7KLVHQWDLOVD
SUHOLPLQDU\ DVVHVVPHQW RI ZKHWKHU WKH UHDVRQLQJ RU
PHWKRGRORJ\XQGHUO\LQJWKHWHVWLPRQ\LVVFLHQWLILFDOO\
1R -DKQY(TXLQH6HUYVHWDO
VHH-$DW 0XQG\'HSR LGDW 5REELQV'HSR
DQG LW VHHPV SDWHQWO\ XQIDLU WR DOORZ (TXLQH 6HUYLFHV WR
EHQHILWIURPZKDWVHHPVWREHDGHSORUDEOHDQGSHUKDSVHYHQ
QHJOLJHQWDEVHQFHRIUHFRUGNHHSLQJ&I:HOVK)GDW
H[SODLQLQJ LQ D GLYHUVLW\ DFWLRQ JRYHUQHG E\
.HQWXFN\ODZWKDWWKHSDUW\WKDWQHJOLJHQWO\IDLOHGWRSUHVHUYH
PHGLFDOUHFRUGVPXVW³EHDUWKHRQXVRISURYLQJDIDFWZKRVH
H[LVWHQFH RU QRQH[LVWHQFH ZDV SODFHG LQ JUHDWHU GRXEW E\
>WKDW@QHJOLJHQWSDUW\´
'U 0XQG\ DQG 'U 5REELQV DIWHU UHYLHZLQJ DOO RI WKH
HYLGHQFH SUHVHQWHG WR WKHP SUHVHQW D FKDLQ RI HYHQWV WKDW
WKH\EHOLHYHLQWRWRSUREDEO\FDXVHG1LJKW3DVVDJHWRGLH
)LUVW1LJKW3DVVDJHSUREDEO\KDGDPLOGLQIHFWLRQRQWKHGD\
RI WKH VXUJHU\ 7KLV LQGLFDWLRQ RI LQIHFWLRQ VKRXOG KDYH
GHOD\HGWKHVXUJHU\DQGSURPSWHGIXUWKHUWHVWLQJWRGHWHUPLQH
LIWKHLQIHFWLRQPDGHDQRSHUDWLRQKD]DUGRXV6HFRQGEHLQJ
SXWXQGHUDQHVWKHWLFVWUHVVHGWKHKRUVH¶VV\VWHPWRWKHSRLQW
WKDWDOWKRXJKLWDZRNHIURPWKHVXUJHU\1LJKW3DVVDJHZHQW
LQWR VKRFN VRPHWLPH WKHUHDIWHU 7KLV VKRFN SURJUHVVHG
XQQRWLFHGDQGXQWUHDWHGDQGHYHQWXDOO\NLOOHGWKHDQLPDO7KH
GLVWULFWFRXUWKRZHYHUYLHZHGWKLVDV³VWDFNLQJRQHJXHVVRQ
WRSRIDQRWKHU´-$DW' 0HP2SDQG2UGHU$SU
DQGUHMHFWHGKLVWHVWLPRQ\RQWKDWEDVLV
:HUH 'U 0XQG\ DQG 'U 5REELQV SXOOLQJ WKHLU QRWLRQV
IURP WKLQ DLU WKH GLVWULFW FRXUW¶V XVH RI ³JXHVV´ ZRXOG EH
DSSURSULDWHDQGWKHLUWHVWLPRQ\VKRXOGKDYHEHHQH[FOXGHG
DVODFNLQJDIDFWXDOIRXQGDWLRQ%XWWKH\GLGQRVXFKWKLQJ
ERWKEDVHGWKHLURSLQLRQVRQWKHIDFWVZLWKZKLFKWKH\ZHUH
SUHVHQWHG %\ RIIKDQGHGO\ ODEHOLQJ WKLV D ³JXHVV´ WKH
GLVWULFWFRXUWIDLOHGWRH[SORUHZKHWKHUWKHSURSRVHGWHVWLPRQ\
ZDV EDVHG RQ ³WKH VDPH OHYHO RI LQWHOOHFWXDO ULJRU WKDW
FKDUDFWHUL]HVWKHSUDFWLFH´RIYHWHULQDU\PHGLFLQH.XPKR
7LUH 86 DW :H EHOLHYH WKDW 'UV 0XQG\ DQG
5REELQVFOHDUO\XVHGDPHWKRGRORJ\GHULYHGIURPVFLHQWLILF
PHGLFDO NQRZOHGJH DOWKRXJK OLPLWHG E\ WKH LQIRUPDWLRQ
SURYLGHGWRWKHPE\WKHGHIHQGDQWV)RUH[DPSOH'U0XQG\
H[SODLQHGWKDWKHEHOLHYHGDQLQIHFWLRQZDVSUREDEOHIRUWZR
UHDVRQV

-- 8 of 10 --

-DKQY(TXLQH6HUYVHWDO 1R
7KH GHIHQGDQWV¶ QHJOLJHQFH LV RI FRXUVH DOVR FHQWUDO WR WKLV FDVH
EXW EHFDXVH WKH GLVWULFW FRXUW¶V GHFLVLRQ WR JUDQW VXPPDU\ MXGJPHQW GLG
QRW DGGUHVV QHJOLJHQFH ZH ZLOO QRW GR VR HLWKHU 1RU GR ZH DGGUHVV WKH
PHULWV RI -DKQ¶V FRQWUDFW FODLPV
D VWDQGDUG ZKHQ FRQVLGHULQJ WKH DGPLVVLELOLW\ RI WKHLU
WHVWLPRQ\
7KHFHQWUDOLVVXHLQWKLVFDVHLVZKHWKHU(TXLQH6HUYLFHV
FDXVHGRUIDLOHGWRSUHYHQW1LJKW3DVVDJH¶VXQWLPHO\GHPLVH
,QRUGHUWREHDGPLVVLEOHRQWKHLVVXHRIFDXVDWLRQDQH[SHUW¶V
WHVWLPRQ\QHHGQRWHOLPLQDWHDOORWKHUSRVVLEOHFDXVHVRIWKH
LQMXU\ 6HH $PEURVLQL Y /DEDUUDTXH )G
'&&LU ³7KHIDFWWKDWVHYHUDOSRVVLEOHFDXVHVPLJKW
UHPDLQμXQHOLPLQDWHG¶RQO\JRHVWRWKHDFFXUDF\RIWKH
FRQFOXVLRQQRWWRWKHVRXQGQHVVRIWKHPHWKRGRORJ\´,G
+HUHDOWKRXJKWKH\DGPLWWHGWKDWWKH\GLGQRWNQRZWKHFDXVH
RIGHDWKERWK'U0XQG\DQG'U5REELQVLGHQWLILHGZKDW
WKH\ EHOLHYHG WR EH WKH SUREDEOH FDXVH RI 1LJKW 3DVVDJH¶V
GHPLVH6HH-$DW 0XQG\'HSR LGDW
5REELQV'HSR ,WLVXQGHQLDEOHWKDW1LJKW3DVVDJH
LVGHDGDQG-DKQKDVSURIIHUHGH[SHUWWHVWLPRQ\WR³DVVLVWWKH
WULHURIIDFWWRXQGHUVWDQGWKHHYLGHQFHRUWRGHWHUPLQH´ZK\
WKLVDQLPDOLVGHDG)HG5(YLG'DXEHUWDQG5XOH
UHTXLUH RQO\ WKDW WKH H[SHUW WHVWLPRQ\ EH GHULYHG IURP
LQIHUHQFHV EDVHG RQ D VFLHQWLILF PHWKRG DQG WKDW WKRVH
LQIHUHQFHVEHGHULYHGIURPWKHIDFWVRIWKHFDVHDWKDQGVHH
'DXEHUW86DWQRWWKDWWKH\NQRZDQVZHUVWR
DOO WKH TXHVWLRQV D FDVH SUHVHQWV²HYHQ WR WKH PRVW
IXQGDPHQWDOTXHVWLRQV&HUWDLQW\LVQRWWREHIRXQGLQWKLV
FDVHGXHLQFRQVLGHUDEOHSDUWWRWKHODFNRIPHGLFDOUHFRUGV
NHSWE\WKHGHIHQGDQWV+DPSHUHGE\DODFNRISRVWRSHUDWLYH
PHGLFDOUHFRUGV-DKQKDVFDOOHGRQKHUH[SHUWZLWQHVVHVWR
XVHWKHLUH[SHUWLVHWRSLHFHWRJHWKHUZKDWSUREDEO\KDSSHQHG
WRKHUQRZGHDGKRUVH,I(TXLQH6HUYLFHVKDGNHSWUHFRUGV
'UV 0XQG\ DQG 5REELQV FRXOG SUREDEO\ KDYH VWDWHG WKHLU
RSLQLRQVLQDPRUHLOOXPLQDWLQJIDVKLRQDQGLWPLJKWKDYH
EHHQ SRVVLEOH IRU WKH ZLWQHVVHV WR SUHFLVHO\ GHWHUPLQH WKH
SK\VLRORJLFDOFDXVHRI1LJKW3DVVDJH¶VGHDWK%RWKH[SHUWV
QRWHGWKDWWKHLUDQDO\VLVZDVKDPSHUHGE\WKHODFNRIUHFRUGV
1R -DKQY(TXLQH6HUYVHWDO
YDOLG DQG RI ZKHWKHU WKH UHDVRQLQJ RU PHWKRGRORJ\
SURSHUO\FDQEHDSSOLHGWRWKHIDFWVLQLVVXH
'DXEHUW 86 DW ³μ>6@FLHQWLILF NQRZOHGJH¶
HVWDEOLVKHVWKHVWDQGDUGRIHYLGHQWLDU\UHOLDELOLW\´LGDW
DQGWREHFRQVLGHUHGDSSURSULDWHO\VFLHQWLILFWKHH[SHUWQHHG
QRWWHVWLI\WRZKDWLV³μNQRZQ¶WRDFHUWDLQW\´EXWPXVWRQO\
VWDWH³DQLQIHUHQFHRUDVVHUWLRQGHULYHGE\WKHVFLHQWLILF
PHWKRG´ ,G 7HVWLPRQ\ PHHWV WKLV WKUHVKROG ZKHQ ³DQ
H[SHUWZKHWKHUEDVLQJWHVWLPRQ\RQSURIHVVLRQDOVWXGLHVRU
SHUVRQDOH[SHULHQFHHPSOR\VLQWKHFRXUWURRPWKHVDPHOHYHO
RI LQWHOOHFWXDO ULJRU WKDW FKDUDFWHUL]HV WKH SUDFWLFH LQ WKH
UHOHYDQW ILHOG´ .XPKR 7LUH &R /WG Y &DUPLFKDHO
86 ([SHUWVDUHSHUPLWWHGDZLGHODWLWXGH
LQ WKHLU RSLQLRQV LQFOXGLQJ WKRVH QRW EDVHG RQ ILUVWKDQG
NQRZOHGJHVRORQJDV³WKHH[SHUW¶VRSLQLRQ>KDV@DUHOLDEOH
EDVLV LQ WKH NQRZOHGJH DQG H[SHULHQFH RI WKH GLVFLSOLQH´
'DXEHUW86DW7KHFRXUWH[SODLQHGWKDWUHOHYDQFH
RISURSRVHGVFLHQWLILFWHVWLPRQ\LVHVWDEOLVKHGWKURXJK5XOH
¶V ³μKHOSIXOQHVV¶ VWDQGDUG´ ZKLFK ³UHTXLUHV D YDOLG
VFLHQWLILF FRQQHFWLRQ WR WKH SHUWLQHQW LQTXLU\ DV D
SUHFRQGLWLRQIRUDGPLVVLELOLW\´,GDW,QWKHHQG
5XOHHPERGLHVDIOH[LEOHDSSURDFKDQGLWV³RYHUDUFKLQJ
VXEMHFW LV WKH VFLHQWLILF YDOLGLW\ RI WKH SULQFLSOHV WKDW
XQGHUOLHWKHSURSRVHGVXEPLVVLRQ7KHIRFXVRIFRXUVHPXVW
EH VROHO\ RQ SULQFLSOHV DQG PHWKRGRORJ\ QRW RQ WKH
FRQFOXVLRQVWKDWWKH\JHQHUDWH´'DXEHUW86DW
$V D JHQHUDO PDWWHU ³>S@K\VLFLDQV DQG RWKHU PHGLFDO
SURIHVVLRQDOV URXWLQHO\ WHVWLI\ DV H[SHUWV VLQFH WKHLU
VSHFLDOL]HG NQRZOHGJH JHQHUDOO\ KHOSV WKH MXU\ UHVROYH
PHGLFDOLVVXHV´-DFN%:HLQVWHLQ 0DUJDUHW$%HUJHU
:HLQVWHLQ¶V )HGHUDO (YLGHQFH † >@ -RVHSK 0
0F/DXJKOLQHGGHG 6RKHUHJLYHQWKHLQKHUHQWO\
PHGLFDOQDWXUHRI-DKQ¶VODZVXLW-DKQSURIIHUHGWKHWHVWLPRQ\
RIYHWHULQDULDQV'U0XQG\DQG'U5REELQVWRDVVLVWWKHWULHU
RI IDFW LQ GHWHUPLQLQJ ZKHWKHU (TXLQH 6HUYLFHV ZDV
UHVSRQVLEOHIRU1LJKW3DVVDJH¶VGHDWK7KHGLVWULFWFRXUW¶V
'DXEHUW DQDO\VLV FRQVLVWHG RI ILYH SDJHV LQ LWV ILUVW RUGHU
JUDQWLQJVXPPDU\MXGJPHQW7KHFRXUWILUVWQRWHVWKDW'U

-- 9 of 10 --

-DKQY(TXLQH6HUYVHWDO 1R
0XQG\KDGQHYHUSHUIRUPHGDPRGLILHG)RUVHOO¶VSURFHGXUH
DQG KDG QHYHU ZRUNHG RXWVLGH RI D XQLYHUVLW\ VHWWLQJ
FRQFOXGLQJIURPWKHVHIDFWVWKDW'U0XQG\¶V³RSLQLRQVDVWR
ZKDWPD\KDYHNLOOHG1LJKW3DVVDJHDUHYHU\VXVSHFW´-$
DW& 0HP2SDQG2UGHU$SULO 7KHGLVWULFW
FRXUW DOVR QRWHG WKDW 'U 0XQG\ UHO\LQJ VROHO\ RQ WKH
SDWKRORJLVWV¶UHSRUW³PDNHVDQDVVXPSWLRQDVWRZKDWNLOOHG
1LJKW 3DVVDJH DQG WKHQ JLYHV ZKDW KH FRQVLGHUV WR EH WKH
PRVWOLNHO\VFHQDULRWKDWZRXOGKDYHSURGXFHGVXFKDUHVXOW´
UHIHUULQJWRWKLVPHWKRGRORJ\DV³VWDFN>LQJ@RQHJXHVVRQWRS
RIDQRWKHU´,GDW'7KHGLVWULFWFRXUWDOVRQRWHGWKDW
-DKQ¶VRWKHUH[SHUWZLWQHVV'U5REELQVIUHHO\DGPLWWHGWKDW
VKHGLGQRWKDYHDQRSLQLRQDVWRZKDWVSHFLILFDOO\FDXVHGWKH
KRUVH¶V GHDWK 7KH GLVWULFW FRXUW ILQDOO\ QRWHG WKDW ERWK
H[SHUWV¶VXJJHVWLRQWKDWDQLQIHFWLRQPD\KDYHNLOOHGWKHSRQ\
ZDV FRQWUDGLFWHG E\ WKH SDWKRORJLVW¶V UHSRUW ZKLFK GLGQ¶W
ILQGDQ\HYLGHQFHRILQIHFWLRQ ²UHGXFLQJWKHLUH[SODQDWLRQV
WR ³VSHFXODWLYH DQG XQUHOLDEOH RSLQLRQV´ ,G DW *
+RZHYHUZHEHOLHYHWKDWWKHGLVWULFWFRXUW¶V'DXEHUWDQDO\VLV
ERWK PLVFKDUDFWHUL]HG WKH PHWKRGRORJ\ HPSOR\HG E\ 'UV
0XQG\DQG5REELQVDQGXOWLPDWHO\HPSOR\HGDVWDQGDUGRI
DGPLVVLELOLW\PRUHVWULQJHQWWKDQWKDWH[SUHVVHGLQ5XOH
:HILUVWQRWHWKDWWKHGLVWULFWFRXUWHUUHGLQILQGLQJWKDW'U
0XQG\¶VRSLQLRQVDVWRKRZ1LJKW3DVVDJHGLHGZHUH³YHU\
VXVSHFW´RQWKHJURXQGWKDW'U0XQG\³QHYHUSHUIRUPHGWKH
VXUJHU\WKDWZDVSHUIRUPHGLQWKLVFDVHDQGKDVQHYHUZRUNHG
LQ D QRQXQLYHUVLW\ VHWWLQJ´ -$ DW & 0HP 2S DQG
2UGHU$SU 7KHIDFWWKDW'U0XQG\KDGQHYHU
SHUIRUPHGDPRGLILHG)RUVHOO¶VSURFHGXUHZRXOGFDVWGRXEW
RQDQ\FULWLFLVPVKHKDG UHJDUGLQJWKHSHUIRUPDQFHRIWKH
VXUJHU\EXWKHGLGQRWFULWLFL]HWKHVXUJLFDOSURFHGXUH$VKLV
UHSRUW DQG GHSRVLWLRQ PDNH FOHDU 'U 0XQG\ FULWLFL]HG
(TXLQH 6HUYLFHV¶ IDLOXUH WR FRQGXFW D PRUH WKRURXJK SUH
RSHUDWLYHH[DPLQDWLRQDQGIDLOXUHWRPRQLWRU1LJKW3DVVDJH
DIWHU WKH VXUJHU\ 'U 0XQG\ GLG QRW EDVH KLV RSLQLRQV
UHJDUGLQJ(TXLQH6HUYLFHV¶FDUHRI1LJKW3DVVDJHRUWKHFDXVH
RIKLVGHDWKRQDQ\NQRZOHGJHRIWKHSURFHGXUHSHUIRUPHG
,QVWHDGKHTXLWHFOHDUO\H[SODLQHGWKDWKHZDVUHO\LQJRQWKH
PHGLFDOUHFRUGVSUHVHQWHGWRKLPE\WKHGHIHQGDQWVDQGKLV
1R -DKQY(TXLQH6HUYVHWDO
RZQFOLQLFDOSURIHVVLRQDOH[SHULHQFH7KHUHIRUHKLVODFNRI
KDQGVRQ IDPLOLDULW\ ZLWK WKH VXUJHU\ SHUIRUPHG ZDV QRW
UHOHYDQW WR D UXOLQJ RQ WKH DGPLVVLELOLW\ RI 'U 0XQG\¶V
WHVWLPRQ\UHJDUGLQJSUHRSHUDWLYHWHVWLQJDQGSRVWRSHUDWLYH
PRQLWRULQJ
7KHSULPDU\UHDVRQWKHGLVWULFWFRXUWJDYHIRUH[FOXGLQJ'U
0XQG\¶V DQG 'U 5REELQV¶ RSLQLRQ WHVWLPRQ\ ZDV WKHLU
LQDELOLW\WRVSHFLI\ZKDWLQSDUWLFXODUNLOOHG1LJKW3DVVDJH
7KH GLVWULFW FRXUW WXUQHG WR WKLV VHFWLRQ RI 'U 0XQG\¶V
GHSRVLWLRQWHVWLPRQ\
4 2QH 'R \RX KDYH DQ RSLQLRQ DV WR ZKDW >1LJKW
3DVVDJH@GLHGRI"
$ 1REXW,²LW¶VDSSDUHQWWRPHWKDWVRPHWKLQJZHQW
ZURQJ
4 6R\RXDUHQRWSUHSDUHGWRJLYHWHVWLPRQ\DVWRWKH
FDXVHRIGHDWKLVWKDWFRUUHFW"
$ ,¶PQRWSUHSDUHGEHFDXVH,GRQ¶WVHHDQ\WKLQJLQWKH
PHGLFDOUHFRUGVVSHFLILFDOO\JLYLQJDGLDJQRVLV
-$DW 0XQG\'HSR )URPWKLVH[FHUSWWKHGLVWULFW
FRXUWFRQFOXGHGWKDW³>Z@LWKRXWNQRZLQJWKHFDXVHRIGHDWK
'U0XQG\¶VRSLQLRQVDUHQRWUHOLDEOH´-$DW' 0HP
2SDQG2UGHU$SU 7KHGLVWULFWFRXUWDOVRSRLQWHG
WRDQH[FHUSWIURP'U5REELQV¶VGHSRVLWLRQ
4 6RDV,XQGHUVWDQG\RXVLWWLQJKHUHWRGD\\RXGRQRW
KDYHDQRSLQLRQDVWRZKDWFDXVHWKLVKRUVH¶VGHDWK"
$ 1RWUHDOO\
-$DW 5REELQV'HSR %DVHGRQWKHVHH[FHUSWVWKH
GLVWULFWFRXUWVWDWHGWKDW³>E@HFDXVHSODLQWLII¶VH[SHUWVGRQRW
NQRZZKDWFDXVHGWKHSRQ\¶VGHDWKWKH\FDQRQO\VSHFXODWH´
-$DW* 0HP2SDQG2UGHU$SU 3ODLQWLII
FRQFHGHVWKDWQRRQHNQRZVWKHSUHFLVHSK\VLRORJLFDOFDXVH
RI 1LJKW 3DVVDJH¶V GHDWK DQG E\ LPSO\LQJ WKDW VSHFLILF
NQRZOHGJH RI WKH SUHFLVH SK\VLRORJLFDO FDXVH RI 1LJKW
3DVVDJH¶VGHDWKLVDSUHUHTXLVLWHWRDGPLVVLELOLW\ZHEHOLHYH
WKDWWKHGLVWULFWFRXUWKHOGWKHH[SHUWVXSWRHQWLUHO\WRRVWULFW

-- 10 of 10 --