01a0040p.06

99-6370; 99-6387Court of Appeals for the Sixth CircuitFeb 13, 2001

Full text


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

+ &$5/ 0&&$//DV
&RPSWUROOHURIWKH6WDWHRI
1HZ<RUNDQG7UXVWHHRIWKH
1HZ<RUN6WDWH&RPPRQ
5HWLUHPHQW)XQGGHULYDWLYHO\
RQEHKDOIRI&ROXPELD+&$
+HDOWKFDUH&RUSRUDWLRQ
&$/,)251,$ 38%/,&
(03/2<((6¶ 5(7,5(0(17
6<67(0 1(: <25. 67$7(
7($&+(56¶ 5(7,5(0(17
6<67(0 1(: <25. &,7<
),5( '(3$570(17 3(16,21
)81' 1(: <25. &,7<
32/,&( '(3$570(17
3(16,21 )81' 1(: <25.
&,7< 7($&+(56¶ 5(7,5(0(17
6<67(0 1(: <25. &,7<
%2$5' 2) ('8&$7,21
5(7,5(0(17 6<67(0 1(:
<25. &,7< (03/2<((6¶
5(7,5(0(17 6<67(0 /26
$1*(/(6 &2817<
(03/2<((6¶ 5(7,5(0(17
$662&,$7,21 7($&+(56¶
;!

1RV

-- 1 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
5(7,5(0(17 6<67(0 2)
/28,6,$1$ &,7< 2)
3+,/$'(/3+,$DFWLQJWKURXJK
LWV%RDUGRI3HQVLRQVDQG
5HWLUHPHQW&21&25'
,19(670(17 &203$1<
(03/2<((6¶ . 352),7
$1' 6+$5,1* 3/$1 $1'
75867 ,55(92&$%/( 75867
)25 7+( %(1(),7 2) 52%(57
02250$1E\LWV7UXVWHH
6LGQH\-6LOYHU1250$1
&+2&. 0' 1250$1
&+2&. 0' ,1& 3(16,21
$1' 352),7 6+$5,1* 3/$1
1250$1 &+2&. 0' ,1&
,17(*5$7(' 352),7 6+$5,1*
3/$1E\1RUPDQ&KRFN
WKHLU7UXVWHH2ZQHU
%$5%$5$ ( 6+867(5 7+(
0$< )$0,/< 3$571(56+,3
6$08(/ :(,66 02,6( .$7=
*5$&( 0 *,66(/48,67
3ODLQWLIIV$SSHOODQWV
1$7,21$/ ,1'8675<
3(16,21 )81'
3ODLQWLII
Y
5,&+$5' / 6&277 7+20$6
) )5,67 -5 0' 5

1RV 0F&DOOHWDOY6FRWWHWDO
:H$)),50WKHGLVPLVVDORIWKHGXW\RIOR\DOW\FODLPIRU
IDLOXUHWRPDNHDSUHVXLWGHPDQG5(9(56(WKHGLVPLVVDO
RIWKHFODLPIRULQWHQWLRQDORUUHFNOHVVEUHDFKRIWKHGXW\RI
FDUH DQG 5(0$1' WKH FDVH IRU IXUWKHU SURFHHGLQJV
FRQVLVWHQWZLWKWKLVRSLQLRQ

-- 2 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
DOOHJDWLRQVFRQFHUQLQJWKHLUUHODWLYHKROGLQJVRUWKHWLPLQJRI
WKHWUDQVIHUV
/RQJ LV DOOHJHG WR KDYH VROG VKDUHV IRU DERXW
VLQFHZKLOHKHZDVDPHPEHURIWKH$XGLW
&RPPLWWHH+HZDVDOVRDFRPDQDJHURI7KH)XQG
/3ZKLFKSXUFKDVHGDPLOOLRQ&ROXPELDQRWHLQ
KHOGDZDUUDQWIRU&ROXPELDVKDUHVDQGVLQFH
VROG&ROXPELDVKDUHVIRUSURFHHGVRIPLOOLRQ
2WKHUPHPEHUVRIWKH$XGLW&RPPLWWHH5HLFKDUGW$YHUKRII
DQG 0DF1DXJKWRQ ZHUH QRW DOOHJHG WR KDYH HQJDJHG LQ
LQVLGHU WUDGLQJ ,Q IDFW SODLQWLIIV DYHU WKDW 0DF1DXJKWRQ
ZKRRZQHGRYHUVKDUHVSXUFKDVHGVKDUHVLQ
-DQXDU\
)LQDOO\0F:KRUWHUZKREHFDPHDGLUHFWRULQZKHQ
&ROXPELDDFTXLUHG+HDOWKWUXVWVROGRYHUPLOOLRQVKDUHVRI
&ROXPELDVWRFNIRUPRUHWKDQPLOOLRQDQGFRQWULEXWHG
VKDUHVYDOXHGDWPLOOLRQWRFKDULWDEOHWUXVWVVLQFH
(YHQLIWKHVKHHUPDJQLWXGHRIWKHQXPEHURIVKDUHV
VROG E\ 0F:KRUWHU FRXOG DORQH EH HQRXJK WR FUHDWH D
UHDVRQDEOHGRXEWDVWRKLVGLVLQWHUHVWHGQHVVLWZRXOGQRWEH
VXIILFLHQWWRH[FXVHWKHIDLOXUHWRPDNHDSUHVXLWGHPDQGRQ
WKH%RDUG
$OWKRXJK UHO\LQJ XSRQ WKH ³UHG IODJV´ WR DOOHJH WKDW WKH
GLUHFWRUVNQHZRUUHFNOHVVO\GLVUHJDUGHG&ROXPELD¶VLPSURSHU
SROLFLHVDQGSUDFWLFHVSODLQWLIIVIDLOHGWRFRQQHFWWKHWLPLQJ
RIDQ\RIWKHVWRFNWUDQVDFWLRQVWRWKRVHZDUQLQJV0RUHYHU
QRW DOO RI WKH ³UHG IODJV´ UHSUHVHQW QRQSXEOLF PDWHULDOO\
DGYHUVHLQIRUPDWLRQ7KHIHGHUDOVHDUFKZDUUDQWVH[HFXWHGLQ
0DUFKWKH1HZ<RUN7LPHVDUWLFOHVDQGWKHTXLWDP
ODZVXLWZHUHQRWFRQILGHQWLDOPDWWHUV,QIDFWDVSUHYLRXVO\
PHQWLRQHGWKH7KRPSVRQODZVXLWZDVGLVFORVHGE\&ROXPELD
LQLWV.ILOLQJIRUWKH\HDUHQGLQJ'HFHPEHU:H
ILQGWKDWSODLQWLIIV¶DOOHJDWLRQVDUHVLPSO\LQVXIILFLHQWWRVWDWH
ZLWKSDUWLFXODULW\IDFWVZKLFKFUHDWHDVXEVWDQWLDOOLNHOLKRRG
RIOLDELOLW\RQWKHSDUWRIDWOHDVWDPDMRULW\RIWKH%RDUGIRU
EUHDFKRIWKHGXW\RIOR\DOW\E\LQVLGHUWUDGLQJ
1RV 0F&DOOHWDOY6FRWWHWDO
&/$<721 0&:+257(5 7
0,&+$(/ /21* :,//,$0 7
<281* )5$1. 6 52<$/
0' '21$/' 6
0$&1$8*+721
0$*'$/(1$ $9(5+2))
0' '$9,' 7
9$1'(:$7(5
&2/80%,$+&$
+($/7+&$5( &25325$7,21
DQRPLQDOGHIW
'HIHQGDQWV$SSHOOHHV

/28,6,$1$ 67$7(
(03/2<((6 5(7,5(0(17
6<67(0
3ODLQWLII$SSHOODQW
Y
0$*'$/(1$ $9(5+2)) -$<
$ -$55(// 0,&+$(/ 7
1((% 52%(57 :+,7(6,'(
7+20$6 ) )5,67 7
0,&+$(/ /21* -5 '21$/'
6 0$&1$8*+721 5
&/$<721 0&:+257(5
&$5/ ( 5(,&+$5'7 )5$1.
52<$/ 5,&+$5' / 6&277
'$9,' 9$1'(:$7(5
:,//,$0 7 <281* -2+1
'2(DQG5LFKDUG'RHEHLQJ

-- 3 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
ILFWLWLRXVWKHSDUWLHVLQWHQGHG
EHLQJWKRVHRIILFHUVGLUHFWRUV
DJHQWVDQGRUHPSOR\HHVRI
WKHQRPLQDOGHIHQGDQWZKR
SDUWLFLSDWHGLQWKHZURQJIXO
DFWVLQYROYHGKHUHLQ
&2/80%,$+&$
+($/7+&$5( &25325$7,21
LQZKRVHEHKDOIWKLVDFWLRQLV
EHLQJEURXJKW
'HIHQGDQWV$SSHOOHHV

1
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH0LGGOH'LVWULFWRI7HQQHVVHHDW1DVKYLOOH
1RV²7KRPDV$+LJJLQV
'LVWULFW-XGJH
$UJXHG'HFHPEHU
'HFLGHGDQG)LOHG)HEUXDU\
%HIRUH0$57,1&KLHI-XGJH*8<DQG&2/(&LUFXLW
-XGJHV
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' 'DQLHO / %HUJHU %(5167(,1 /,72:,7=
%(5*(5 *52660$11 1HZ <RUN 1HZ <RUN ,
:DOWRQ%DGHU%$'(5 %$'(5:KLWH3ODLQV1HZ<RUN
IRU$SSHOODQWV3DXO+'DZHV/$7+$0 :$7.,16
0HQOR3DUN&DOLIRUQLDIRU$SSHOOHHV21%5,()'DQLHO
/%HUJHU0D[:%HUJHU-HIIUH\1/HLEHOO%(5167(,1
/,72:,7=%(5*(5 *52660$111HZ<RUN1HZ
<RUN,:DOWRQ%DGHU%$'(5 %$'(5:KLWH3ODLQV
1RV 0F&DOOHWDOY6FRWWHWDO
H[SHFWHG WR WUDGH WKRVH VHFXULWLHV LQ WKH QRUPDO FRXUVH RI
HYHQWV6HH,QUH%XUOLQJWRQ&RDW)DFWRU\6HF/LWLJ
)G G &LU $V D UHVXOW WR UHFRYHU
LQVLGHUSURILWVIRUDEUHDFKRIWKHGXW\RIOR\DOW\³LWPXVWEH
VKRZQ WKDW HDFK VDOH E\ HDFK LQGLYLGXDO GHIHQGDQW ZDV
HQWHUHGLQWRDQGFRPSOHWHGRQWKHEDVLVRIDQGEHFDXVHRI
DGYHUVHPDWHULDOQRQSXEOLFLQIRUPDWLRQ´6WHSDN:/
DW FLWLQJ 3ROLQ )G DW )XUWKHU
IUDXGXOHQW LQWHQW PD\ EH LQIHUUHG IURP WKH WLPLQJ DQG
TXDQWLWLHVRIWKHWUDGHV6HH%XUOLQJWRQ)GDW
,QWKLVFDVHSODLQWLIIVDOOHJHGLQRQO\DJHQHUDOZD\WKDW
EHWZHHQ -DQXDU\ DQG $SULO 6FRWW /RQJ
0F:KRUWHU <RXQJ DQG 5HLFKDUGW EUHDFKHG WKHLU GXW\ RI
OR\DOW\E\VHOOLQJPLOOLRQVRIGROODUVRI&ROXPELDVWRFNWRWKH
SXEOLF ³DW SULFHV DUWLILFLDOO\ LQIODWHG E\ WKH XQGLVFORVHG
IUDXGXOHQWSUDFWLFHVDXWKRUL]HGRUSHUPLWWHGE\WKH%RDUG´
<RXQJ DQG 0F:KRUWHU DUH DOVR DOOHJHG WR KDYH REWDLQHG
VXEVWDQWLDOILQDQFLDOEHQHILWVLQFOXGLQJLQFRPHWD[EHQHILWV
IURPPDNLQJFKDULWDEOHFRQWULEXWLRQVRIVWRFNYDOXHGDWRYHU
PLOOLRQDQGPLOOLRQUHVSHFWLYHO\
3ODLQWLIIV DYHU WKDW 6FRWW RZQHG PRUH WKDQ PLOOLRQ
VKDUHVRUSHUFHQWRIRXWVWDQGLQJ&ROXPELDVWRFN6LQFH
6FRWW KDG VROG RQO\ VKDUHV YDOXHG DW
DSSUR[LPDWHO\PLOOLRQ)ULVWRZQHGRYHUPLOOLRQ
VKDUHVRI&ROXPELDVWRFNRUSHUFHQWRIWKHRXWVWDQGLQJ
VWRFNZKLFKGHIHQGDQWVFODLPLVYLUWXDOO\DVPXFKDVDOORI
WKHSODLQWLIIVFRPELQHG6LQFH)ULVWLVDOOHJHGWRKDYH
GLVSRVHGRIRQO\VKDUHVRIVWRFNWKURXJKJLIWVDQGWR
KDYH WUDQVIHUUHG DERXW PLOOLRQ VKDUHV DPRQJ WUXVWV KH
FRQWUROV7KHVXEVWDQWLDOKROGLQJVWKDWERWK6FRWWDQG)ULVW
FRQWLQXHG WR PDLQWDLQ QHJDWH DQ\ LQIHUHQFH WKDW WKH\ ZHUH
WUDGLQJRQPDWHULDOO\DGYHUVHQRQSXEOLFLQIRUPDWLRQ
,WLVDOOHJHGWKDWGXULQJWKHWZR\HDUSHULRG5R\DOVROG
VKDUHVIRUDERXWZKLOH<RXQJFRQWULEXWHG
VKDUHVRI&ROXPELDVWRFNYDOXHGDWWKHWLPHDWRYHU
PLOOLRQ WR FKDULWDEOH WUXVWV 7KHUH ZHUH KRZHYHU QR

-- 4 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
,W LV XQGLVSXWHG WKDW GLUHFWRU OLDELOLW\ ZRXOG QRW EH ZDLYHG XQGHU
WKH 5HVWDWHG &HUWLILFDWH RI ,QFRUSRUDWLRQ DV LW H[SUHVVO\ SURYLGHV QR
SURWHFWLRQ IURP OLDELOLW\ IRU EUHDFK RI WKH GXW\ RI OR\DOW\
3ODLQWLIIVDUJXHWKDWWKHGLVWULFWFRXUWHUURQHRXVO\YLHZHG
WKLVDVDVHFXULWLHVIUDXGFODLPDQGFRQVHTXHQWO\LPSURSHUO\
UHOLHGXSRQ,QUH6RIDPRU'DQHN*URXS,QF)G
WK&LU ,WLVQRWFOHDUWKDWWKHGLVWULFWFRXUWFLWHG
6RIDPRUIRUDQ\WKLQJPRUHWKDQWKHJHQHUDOSURSRVLWLRQWKDW
WKHVDOHRIVWRFNE\DQLQVLGHULVQRWLQKHUHQWO\IUDXGXOHQW7R
WKH H[WHQW WKDW WKH GLVWULFW FRXUW PLVUHDG WKLV FODLP ZH
QRQHWKHOHVVILQGWKDWSODLQWLIIVIDLOHGWRDOOHJHSDUWLFXODUL]HG
IDFWVVXIILFLHQWWRFUHDWHGRXEWDVWRWKHGLVLQWHUHVWHGQHVVRI
DPDMRULW\RIWKH%RDUGWRFRQVLGHUDGHPDQGZLWKUHVSHFWWR
WKLVFODLP
7KHGXW\RIOR\DOW\UHTXLUHVWKDWWKHEHVWLQWHUHVWVRIWKH
FRUSRUDWLRQ DQG LWV VKDUHKROGHUV WDNH SUHFHGHQFH RYHU DQ\
VHOILQWHUHVWRIDGLUHFWRURIILFHURUFRQWUROOLQJVKDUHKROGHU
WKDWLVQRWVKDUHGE\WKHVWRFNKROGHUVJHQHUDOO\6HH3RJRVWLQ
Y5LFH$G 'HO *XWKY/RIW,QF
$G 'HO 8QGHU'HODZDUHFRPPRQODZ
³μDILGXFLDU\RIDFRUSRUDWLRQZKRWUDGHVIRUKLVRZQEHQHILW
RQWKHEDVLVRIFRQILGHQWLDOLQIRUPDWLRQDFTXLUHGWKURXJKKLV
ILGXFLDU\SRVLWLRQEUHDFKHVKLVGXW\WRWKHFRUSRUDWLRQDQG
PD\ EH KHOG DFFRXQWDEOH WR WKDW FRUSRUDWLRQ IRU DQ\ JDLQV
ZLWKRXW UHJDUG WR ZKHWKHU WKH FRUSRUDWLRQ VXIIHUHG
GDPDJHV>@¶´3ROLQY&RQGXFWURQ&RUS)G
WK&LU FLWDWLRQRPLWWHG GLVFXVVLQJ%URSK\Y&LWLHV
6HUY&R$G 'HO&K
$VWKHGLVWULFWFRXUWREVHUYHGKRZHYHUWKHPHUHIDFWWKDW
VWRFNVZHUHWUDGHGE\DQRIILFHURUGLUHFWRUGRHVQRWHVWDEOLVK
DEUHDFKRIWKHGXW\RIOR\DOW\6HH%URSK\$GDW$
GLUHFWRU LV IUHH WR WUDGH LQ WKH FRUSRUDWLRQ¶V VWRFN ZLWKRXW
OLDELOLW\WRWKHFRUSRUDWLRQ6HH7XFNPDQY$HURVRQLF&RUS
&$1R:/ 'HO&K0D\
FLWLQJ0DQDFKHUY5H\QROGV$G 'HO&K
%URSK\$GDW,QIDFWZKHQGLUHFWRUVDQGRIILFHUV
RZQVWRFNRUUHFHLYHFRPSHQVDWLRQLQVWRFNWKH\VKRXOGEH
1RV 0F&DOOHWDOY6FRWWHWDO
7KH GHULYDWLYH VKDUHKROGHU FODLPV ZHUH ILUVW EURXJKW DORQJ ZLWK
LQGLYLGXDO VKDUHKROGHU FODVV FODLPV LQ 0RUVH Y 0F:KRUWHU HW DO &$
1R ZKLFK ZDV ILOHG LQ WKH 8QLWHG 6WDWHV 'LVWULFW &RXUW IRU WKH
0LGGOH 'LVWULFW RI 7HQQHVVHH RQ $SULO $ QXPEHU RI RWKHU
GHULYDWLYH VKDUHKROGHU DFWLRQV ZHUH WKHQ ILOHG 2Q $XJXVW WKH
GLVWULFW FRXUW RUGHUHG WKDW WKH GHULYDWLYH VKDUHKROGHU FODLPV EH
FRQVROLGDWHG DQG D VLQJOH DPHQGHG FRPSODLQW EH ILOHG LQ WKH 0F&DOO FDVH
7KH GHULYDWLYH DFWLRQ ILOHG E\ SODLQWLII /RXLVLDQD 6WDWH (PSOR\HHV
5HWLUHPHQW 6\VWHP /6(56 LQ D )ORULGD VWDWH FRXUW ZDV UHPRYHG WR
IHGHUDO FRXUW WUDQVIHUUHG WR WKH 0LGGOH 'LVWULFW RI 7HQQHVVHH DQG
DGPLQLVWUDWLYHO\ GLVPLVVHG E\ VWLSXODWLRQ DV FRQWHPSODWHG E\ WKH RUGHU
1HZ<RUNIRU$SSHOODQWV:LOOLDP-0HHVNH/$7+$0
:$7.,16 /RV $QJHOHV &DOLIRUQLD 6WHYHQ $ 5LOH\
%2:(15,/(<:$512&. -$&2%6211DVKYLOOH
7HQQHVVHH'DYLG'$XIKDXVHU(QX$0DLQLJL'HQQLV0
%ODFN :,//,$06 &2112//< :DVKLQJWRQ '&
-DPHV * 7KRPDV 1($/ +$5:(// 1DVKYLOOH
7HQQHVVHH-RKQ'.LWFK.,7&+ *$50$11DVKYLOOH
7HQQHVVHH :LOOLDP 5 :LOOLV -U :,//,6 .1,*+7
1DVKYLOOH7HQQHVVHHIRU$SSHOOHHV
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
5$/3+ % *8< -5 &LUFXLW -XGJH 7KHVH DSSHDOV
LQYROYHDFRQVROLGDWHGVWRFNKROGHUGHULYDWLYHDFWLRQEURXJKW
RQ EHKDOI RI WKH QRPLQDO GHIHQGDQW &ROXPELD+&$
+HDOWKFDUH &RUSRUDWLRQ &ROXPELD DJDLQVW FHUWDLQ RI LWV
FXUUHQWDQGIRUPHUGLUHFWRUVDQGRURIILFHUV7KHFODLPVDULVH
RXW RI LQYHVWLJDWLRQV LQWR DOOHJHGO\ ZLGHVSUHDG DQG
V\VWHPDWLFKHDOWKFDUHIUDXGE\&ROXPELD¶VKRVSLWDOVKRPH
KHDOWKDJHQFLHVDQGRWKHUIDFLOLWLHV3ODLQWLIIVDUHLQYHVWRUV
LQVWLWXWLRQDO DQG RWKHUZLVH WKDW RZQ VKDUHV RI
&ROXPELD+&$DQGRZQHGVXFKVKDUHVGXULQJWKHWLPHRIWKH
DOOHJHG ZURQJGRLQJ 3ODLQWLIIV¶ WKUHHFRXQW DPHQGHG DQG
FRQVROLGDWHG FRPSODLQW DOOHJHG LQWHQWLRQDO DQG QHJOLJHQW
EUHDFKRIWKHILGXFLDU\GXW\RIFDUHDQGLQWHQWLRQDOEUHDFKRI
WKHILGXFLDU\GXW\RIOR\DOW\E\LOOHJDOLQVLGHUWUDGLQJ7KH

-- 5 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
FRQVROLGDWLQJ VXFK FODLPV LQ WKH 0F&DOO FDVH ,Q WKDW VWLSXODWLRQ /6(56
DJUHHG WR EH ERXQG E\ WKH GLVWULFW FRXUW¶V GHFLVLRQ RQ WKH PRWLRQV WR
GLVPLVV WKDW ZHUH SHQGLQJ LQ 0F&DOO DQG UHVHUYHG WKH ULJKW WR DSSHDO IURP
WKDW GHFLVLRQ
7KHVH DUJXPHQWV PDGH LQ WKH 0F&DOO DSSHDO DUH DGRSWHG E\
/6(56 RQO\ LI LW LV GRHV QRW SUHYDLO RQ LWV GLVFUHWH FODLP WKDW LWV FRPSODLQW
ZDV LPSURSHUO\ UHPRYHG IURP VWDWH FRXUW 7KH RQO\ IDLU UHDGLQJ RI WKH
VWLSXODWLRQ UHTXLUHV XV WR ILQG WKDW /6(56 ZDLYHG WKLV FODLP E\ VWLSXODWLQJ
WR EH ERXQG E\ WKH GHFLVLRQ LQ 0F&DOO 0RUHRYHU /6(56¶V FKDOOHQJH WR
WKH UHPRYDO LV ZLWKRXW PHULW :KHUH WKHUH LV FRPSOHWH GLYHUVLW\ RI
FLWL]HQVKLS DV /6(56 FRQFHGHV WKHUH ZDV WKH LQFOXVLRQ RI DQ XQVHUYHG
UHVLGHQW GHIHQGDQW LQ WKH DFWLRQ GRHV QRW GHIHDW UHPRYDO XQGHU 86&
† E :HQVLO Y (, 'X3RQW 'H 1HPRXUV DQG &R ) 6XSS
' 6& 5HSXEOLF :HVWHUQ ,QV &R Y ,QW¶O ,QV &R
) 6XSS 1 ' &DO 6HH DOVR ,Q UH 1RUSODQW
&RQWUDFHSWLYH 3URGV /LDE /LWLJ ) 6XSS (' 7H[

GLVWULFWFRXUWDGRSWLQJWKHILQGLQJVDQGFRQFOXVLRQVRIWKH
PDJLVWUDWH MXGJH GLVPLVVHG WKH FRQVROLGDWHG DFWLRQ XQGHU
)HG5&LY3 E ILQGLQJWKDWSODLQWLIIVKDGIDLOHGWR
VXIILFLHQWO\ DOOHJH GHPDQG IXWLOLW\ XQGHU 'HODZDUH ODZ WR
H[FXVHWKHIDLOXUHWRPDNHDSUHVXLWGHPDQGRQWKH%RDUGRI
'LUHFWRUV 3ODLQWLIIV DUJXH WKDW WKH GLVWULFW FRXUW IDLOHG WR
SURSHUO\YLHZWKHDOOHJDWLRQVLQWKHOLJKWPRVWIDYRUDEOHWR
WKHPDQGPDGHHUURUVLQWKHLQWHUSUHWDWLRQDQGDSSOLFDWLRQRI
WKHODZ
7KH GLUHFWRU GHIHQGDQWV 7KRPDV ) )ULVW -U 0' 5
&OD\WRQ0F:KRUWHU'RQDOG6 0DF1DXJKWRQ0DJGDOHQD
$YHUKRII0')UDQN5R\DO0'70LFKDHO/RQJ-U
DQG:LOOLDP7<RXQJILOHGDMRLQWEULHIRQDSSHDODUJXLQJ
WKDW WKH GLVPLVVDO ZDV SURSHU ERWK IRU IDLOXUH WR DOOHJH
GHPDQGIXWLOLW\DQGIRUIDLOXUHWRVWDWHDFODLPDJDLQVWWKHPDV
GLUHFWRUV'HIHQGDQWV5LFKDUG6FRWWZKRZDV&KDLUPDQRI
WKH %RDUG DQG &(2 RI &ROXPELD DQG 'DYLG 9DQGHZDWHU
ZKRZDVWKH&KLHI2SHUDWLQJ2IILFHU EXWQRWDGLUHFWRU HDFK
DGRSWHG WKH MRLQW EULHI RI WKH RWKHU LQGLYLGXDO GHIHQGDQWV
&ROXPELDOLNHZLVHDGRSWHGWKHGHIHQGDQWV¶EULHIEXWRQO\DV
WRWKHLVVXHRIGHPDQGIXWLOLW\$IWHUFDUHIXOUHYLHZRIWKH
UHFRUGDQGWKHDSSOLFDEOHODZZHUHYHUVHLQSDUWDQGILQGWKDW
1RV 0F&DOOHWDOY6FRWWHWDO
3ODLQWLIIV DOVR DOOHJHG WKDW WKHUH ZDV D UHDVRQDEOH GRXEW DV WR WKH
LQGHSHQGHQFH RI 5HLFKDUGW DQG 5R\DO EHFDXVH WKH\ ZHUH EHKROGHQ WR
)ULVW ZKR ZDV UHVSRQVLEOH IRU WKHLU EHFRPLQJ &ROXPELD GLUHFWRUV ,Q
DGGLWLRQ WR WKH EXVLQHVV WLHV WR &ROXPELD WKDW ZHUH PHQWLRQHG HDUOLHU
5HLFKDUGW DQG 5R\DO DOOHJHGO\ EHQHILWWHG SHUVRQDOO\ IURP WKHLU
LQYHVWPHQWV LQ WKH /%2 RI +&$ LQ DQG WKH ,32 RI +&$ LQ
:KLOH ZH GR QRW GHFLGH WKLV TXHVWLRQ ZH QRWH WKDW LW LV QRW HQRXJK WR
DOOHJH WKDW D GLUHFWRU ZDV QRPLQDWHG RU HOHFWHG DW WKH EHKHVW RI DQRWKHU
$URQVRQ $G DW
,QDFWLRQE\WKH%RDUGZLOOQRWH[FXVHWKHIDLOXUHWRPDNHD
GHPDQG EHFDXVH LW ZRXOG GHSULYH WKH %RDUG RI WKH
RSSRUWXQLW\ WR EH ³SURGGHG´ LQWR DFWLRQ ZKLFK LV D
IXQGDPHQWDOJRDORIWKHGHPDQGUHTXLUHPHQW6HH6WHSDNY
5RVV &$ 1R :/ 'HO &K 6HSW
5LFKDUGVRQ Y *UDYHV &$ 1R :/
'HO&K0DU
7DNLQJ WKH DOOHJDWLRQV DV D ZKROH DQG GUDZLQJ WKH
UHDVRQDEOH LQIHUHQFHV LQ SODLQWLIIV¶ IDYRU ZH ILQG WKDW WKH
SDUWLFXODUL]HGIDFWVDUHVXIILFLHQWWRFUHDWHDUHDVRQDEOHGRXEW
DV WR WKH GLVLQWHUHVWHGQHVV RI DW OHDVW ILYH RI &ROXPELD¶V
GLUHFWRUVLQFOXGLQJ6FRWW)ULVW0F:KRUWHU0DF1DXJKWRQ
DQG$YHUKRIIE\DOOHJLQJIDFWVWKDWSUHVHQWHGDVXEVWDQWLDO
OLNHOLKRRG RI GLUHFWRU OLDELOLW\ IRU LQWHQWLRQDO RU UHFNOHVV
EUHDFKRIWKHGXW\RIFDUH
( 'XW\RI/R\DOW\
)LQDOO\ SODLQWLIIV DOOHJHG WKDW FHUWDLQ RI WKH GLUHFWRUV
EUHDFKHGWKHILGXFLDU\GXW\RIOR\DOW\E\HQJDJLQJLQLQVLGHU
WUDGLQJZKLOHLQSRVVHVVLRQRINQRZOHGJHWKDW&ROXPELDZDV
V\VWHPDWLFDOO\YLRODWLQJIHGHUDODQGVWDWHODZV,WLVDOOHJHG
WKDWGHIHQGDQWVVROGDQGFRQWULEXWHGVWRFNEHWZHHQ-DQXDU\
DQG $SULO ZLWK IXOO NQRZOHGJH WKDW SXEOLF
GLVFORVXUHRIWKLVPDWHULDOO\DGYHUVHLQIRUPDWLRQZRXOGKDYH
DGYHUVH FRQVHTXHQFHV IRU &ROXPELD¶V VWRFN SULFH 7KH
GLVWULFW FRXUW FRQFOXGHG WKDW WKH SDUWLFXODUL]HG IDFWXDO
DOOHJDWLRQVRILQVLGHUWUDGLQJZHUHQRWVXIILFLHQWWRVXSSRUWDQ
LQIHUHQFHRIIUDXGDQGWKHUHIRUHGLGQRWSRVHDVXEVWDQWLDO
ULVNRIOLDELOLW\IRUDQ\RIWKHGLUHFWRUV

-- 6 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
$OWKRXJK SODLQWLIIV DOOHJH WKDW &ROXPELD SURYLGHG 6FRWW DQG
9DQGHZDWHU ZLWK VXEVWDQWLDO VHYHUDQFH SDFNDJHV WKH GLVWULFW FRXUW
FRUUHFWO\ REVHUYHG WKDW WKH %RDUG¶V GHFLVLRQ LQ WKDW UHJDUG LV QRW UHOHYDQW
WR WKH TXHVWLRQ RI ZKHWKHU D GHPDQG ZRXOG KDYH EHHQ IXWLOH RQ $SULO

WDUJHWHG RQ 0HGLFDUH FODLP IRUPV DQG WKDW &ROXPELD¶V
KRVSLWDOVFKDUJHG0HGLFDUHIRUWKHPRVWH[SHQVLYHLOOQHVVHV
IDUPRUHRIWHQWKDQLWVQHDUE\FRPSHWLWRUV7KH1HZ<RUN
7LPHV DQQRXQFHG WKDW LWV ³UHSRUWHUV KDG GLVFXVVHG WKHLU
ILQGLQJVZLWK&ROXPELDRIILFLDOVIRUVHYHUDOPRQWKVSULRUWR
WKH0DUFKUDLGV´:LWKRXWDOOHJLQJZKRWKRVHRIILFLDOVPLJKW
KDYHEHHQSODLQWLIIV¶FRPSODLQWVWDWHGWKDW³WKH%RDUGZDV
DZDUHLQRIWKH1HZ<RUN7LPHV¶LQYHVWLJDWLRQ´
5HMHFWLQJ WKH FODLP WKDW WKH %RDUG ZDV DZDUH RI WKH
LQYHVWLJDWLRQ WKH GLVWULFW FRXUW IRXQG LW PD\ KDYH EHHQ
UHDVRQDEOH IRU WKH %RDUG WR WDNH PRUH WKDQ WZR ZHHNV WR
HYDOXDWH WKH 1HZ <RUN 7LPHV¶ DUWLFOHV ZLWKRXW WDNLQJ DQ\
DFWLRQ3ODLQWLIIVDVNWKDWZHDVVXPHWKDWWKHUHSRUWHUZRXOG
KDYH GLVFXVVHG WKH ILQGLQJV ZLWK HLWKHU WKH GLUHFWRUV
WKHPVHOYHV RU KLJKOHYHO H[HFXWLYHV ZKR ZRXOG KDYH
SURPSWO\DOHUWHGWKH%RDUG7RGRVRZRXOGEHVSHFXODWLRQ
DQGQRWLQIHUHQFH$WWKHVDPHWLPHWKHKLJKHUWKDQDYHUDJH
&0,V DQG '5*V DW &ROXPELD¶V KRVSLWDOV ZHUH QRW QHZO\
GLVFRYHUHGDVDUHVXOWRIWKHDUWLFOHV(YHQLIWKH%RDUGZDV
XQDZDUH RI WKH 1HZ <RUN 7LPHV¶ LQYHVWLJDWLRQ EHIRUH WKH
DUWLFOHVZHUHSXEOLVKHGSODLQWLIIVKDYHDOOHJHGWKDWWKH%RDUG
KDGDOUHDG\GLVUHJDUGHGLQIRUPDWLRQVXJJHVWLQJZLGHVSUHDG
DQGV\VWHPDWLFIUDXGPD\KDYHEHHQRFFXUULQJLQ&ROXPELD¶V
IDFLOLWLHVQDWLRQZLGH
%RDUG,QDFWLRQ
2Q -XO\ WKH %RDUG RI 'LUHFWRUV DFFHSWHG WKH
UHVLJQDWLRQV RI ERWK 6FRWW DQG 9DQGHZDWHU 7KRVH
UHVLJQDWLRQVZHUHIROORZHGE\WKHUHVLJQDWLRQVRIDWOHDVWQLQH
RWKHUVHQLRUH[HFXWLYHV3ODLQWLIIVDUJXHWKDWWKHIDLOXUHRI
WKH%RDUGWRUHPRYH6FRWWEHIRUH-XO\GHPRQVWUDWHV
WKDWDSUHVXLWGHPDQGLQ$SULOZRXOGKDYHEHHQIXWLOH
1RV 0F&DOOHWDOY6FRWWHWDO
*LYHQ WKH SRVWXUH RI WKLV DSSHDO RXU VXPPDU\ RI WKH IDFWV LV GUDZQ
IURP WKH SODLQWLIIV¶ DPHQGHG DQG FRQVROLGDWHG FRPSODLQW 'HIHQGDQWV
DOVR SURYLGHG WKH GLVWULFW FRXUW ZLWK FRSLHV RI WKH . IRUP ILOHG ZLWK WKH
6(& IRU WKH \HDU HQGLQJ 'HFHPEHU &ROXPELD¶V 3UR[\ 6WDWHPHQW
GDWHG $SULO IRU WKH $QQXDO 0HHWLQJ ZKLFK ZDV ILOHG ZLWK
WKH 6(& DQG VHQW WR VKDUHKROGHUV DQG &ROXPELD¶V 5HVWDWHG &HUWLILFDWH RI
,QFRUSRUDWLRQ 'HVSLWH KDYLQJ JUDQWHG WKH PRWLRQ WR WDNH MXGLFLDO QRWLFH
RI WKHVH PDWWHUV WKH PDJLVWUDWH MXGJH GLG QRW FRQVLGHU WKHP 6HH
%HUJVWHLQ Y 7H[DV ,QW¶O &R $G 'HO &K
$OWKRXJK GHIHQGDQWV GR QRW FKDOOHQJH WKDW GHWHUPLQDWLRQ ZH WDNH MXGLFLDO
QRWLFH RI WKH 5HVWDWHG &HUWLILFDWH RI ,QFRUSRUDWLRQ 6HH ,Q UH %D[WHU ,QW¶O
6¶KROGHUV /LWLJ $G 'HO &K
&+$0386 LV D IHGHUDOO\ IXQGHG SURJUDP DGPLQLVWHUHG E\ WKH
'HSDUWPHQW RI 'HIHQVH IRU GHSHQGHQWV RI PLOLWDU\ SHUVRQQHO
WKHSODLQWLIIVVXIILFLHQWO\DOOHJHGGHPDQGIXWLOLW\ZLWKUHVSHFW
WRWKHLUFODLPIRULQWHQWLRQDORUUHFNOHVVEUHDFKRIWKHGXW\RI
FDUH'HVSLWHWKHXUJLQJRIWKHLQGLYLGXDOGHIHQGDQWVZHGR
QRWDGGUHVVWKHPRWLRQVWRGLVPLVVWKHFODLPVRQWKHPHULWV
EHFDXVHWKH\ZHUHQRWFRQVLGHUHGE\WKHGLVWULFWFRXUW
,
&ROXPELD+&$ LV D 'HODZDUH FRUSRUDWLRQ ZLWK LWV
KHDGTXDUWHUV DQG SULQFLSDO SODFH RI EXVLQHVV LQ 1DVKYLOOH
7HQQHVVHH)RXQGHGLQE\5LFKDUG/6FRWW&ROXPELD
JUHZVRDJJUHVVLYHO\WKDWE\LWRZQHGDQGRSHUDWHG
RIDOOIRUSURILWKRVSLWDOVLQWKH8QLWHG6WDWHV,WZDV
WKUHHWLPHVDVODUJHDVWKHQH[WODUJHVWIRUSURILWKHDOWKFDUH
PDQDJHPHQW FRPSDQ\ DQG ZDV WKH QDWLRQ¶V QLQWK ODUJHVW
HPSOR\HU ,WV VWUDWHJ\ IRU JURZWK ZDV WR DFTXLUH PLG WR
ODUJHVL]HJHQHUDODFXWHFDUHKRVSLWDOV3ODLQWLIIVDOOHJHGWKDW
&ROXPELD RSHUDWHG KRVSLWDOV RXWSDWLHQW VXUJHU\
FHQWHUVDQGRYHUKRPHKHDOWKFDUHFHQWHUVORFDWHGLQ
VWDWHV DQG IRUHLJQ FRXQWULHV &ROXPELD ZDV 0HGLFDUH¶V
VLQJOHODUJHVWSURYLGHUDQGEHWZHHQDQGUHFHLYHG
RYHU RI LWV UHYHQXHV IURP 0HGLFDUH DQG 0HGLFDLG
&ROXPELD SDUWLFLSDWHG LQ WKH 0HGLFDUH 0HGLFDLG DQG
&+$0386SURJUDPVZLWKQHDUO\DOORILWVKRVSLWDOVFHUWLILHG
DVSURYLGHUVRIEHQHILWVXQGHUWKHVHSURJUDPV

-- 7 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
3ODLQWLIIVDOOHJHGWKDW&ROXPELD¶VVHQLRUPDQDJHPHQWZLWK
%RDUGNQRZOHGJHGHYLVHGVFKHPHVWRLPSURSHUO\LQFUHDVH
UHYHQXH DQG SURILWV DQG SHUSHWXDWHG D PDQDJHPHQW
SKLORVRSK\WKDWSURYLGHGVWURQJLQFHQWLYHVIRUHPSOR\HHVWR
FRPPLWIUDXG3ODLQWLIIVDYHUUHGWKDWPDQDJHPHQWVHWJURZWK
WDUJHWV DW WR RU WKUHH WR IRXU WLPHV WKH LQGXVWU\
DYHUDJH ZKLFK FRXOG QRW UHDVRQDEO\ EH DWWDLQHG ZLWKRXW
YLRODWLQJ 0HGLFDUH DQG 0HGLFDLG ODZV DQG UHJXODWLRQV
5HVXOWVZHUHPRQLWRUHGXVLQJD³VFRUHFDUG´DQGJRRGUHVXOWV
ZHUH UHZDUGHG ZLWK FDVK ERQXVHV )UDXGXOHQW SUDFWLFHV
DOOHJHGO\LQFOXGHG ³XSFRGLQJ´E\SURYLGHUVZKLFKUHIHUV
WRELOOLQJIRUVHUYLFHVXQGHU'5* GLDJQRVLVUHODWHGJURXS
FRGHVIRULOOQHVVHVZLWKDKLJKHUGHJUHHRIFRPSOH[LW\DQG
VHYHULW\ WKDQ D SDWLHQW¶V FRQGLWLRQ DFWXDOO\ ZDUUDQWHG
LPSURSHUFRVWUHSRUWLQJVXFKDVVHHNLQJUHLPEXUVHPHQW
IRUDGYHUWLVLQJDQGPDUNHWLQJFRVWV³JURVVLQJXS´RXWSDWLHQW
UHYHQXHVDOORFDWLQJFRVWVIURPRQHGLYLVLRQWRDQRWKHUDQG
VWUXFWXULQJ WUDQVDFWLRQV WR GLVJXLVH DFTXLVLWLRQ FRVWV DV
UHLPEXUVDEOH PDQDJHPHQW IHHV RIIHULQJ ILQDQFLDO
LQFHQWLYHV WR SK\VLFLDQV WR LQFUHDVH UHIHUUDOV RI 0HGLFDUH
SDWLHQWVWR&ROXPELD¶VIDFLOLWLHV LHHTXLW\LQWHUHVWVIHHV
UHQWVRURWKHUSHUTXLVLWHV DQG DFTXLVLWLRQSUDFWLFHVWKDW
RIIHUHGLQGXFHPHQWVWRH[HFXWLYHVRIWDUJHWFRPSDQLHVDQG
LQWHUIHUHG ZLWK H[LVWLQJ SK\VLFLDQ UHODWLRQVKLSV 3ODLQWLIIV
DOVRDVVHUWHGWKDWVRPHRIWKHGHIHQGDQWVHQJDJHGLQLOOHJDO
LQVLGHU WUDGLQJ VLQFH WKH\ WUDGHG ZKLOH NQRZLQJ RI
&ROXPELD¶VIUDXGXOHQWDFWLYLWLHV'DPDJHVZHUHDOOHJHGWR
LQFOXGHDPRQJRWKHUWKLQJVWKHFRQVHTXHQFHVRIIHGHUDODQG
VWDWHLQYHVWLJDWLRQVVWRFNKROGHUDQGZKLVWOHEORZHUODZVXLWV
ORVV RI JRRG ZLOO DQG GHFOLQHV LQ WKH YDOXH RI &ROXPELD
VWRFN
1HHGLQJWRRYHUFRPHWKHIDLOXUHWRPDNHDSUHVXLWGHPDQG
SODLQWLIIVDOOHJHGWKDWDPDMRULW\RIWKH%RDUGRI'LUHFWRUVKDG
DQ LQWHUHVW LQ WKH ZURQJGRLQJ RU FRXOG QRW H[HUFLVH
LQGHSHQGHQW MXGJPHQW ZLWK UHVSHFW WR WKH DVVHUWHG FODLPV
3ODLQWLIIVFKDOOHQJHWKHGLVLQWHUHVWDQGLQGHSHQGHQFHRIDOOEXW
RQH RI WKH %RDUG¶V WHQ PHPEHUV WKH RQH H[FHSWLRQ EHLQJ
1RV 0F&DOOHWDOY6FRWWHWDO
$OWKRXJK SODLQWLIIV DUJXH WKDW WKH GLVWULFW FRXUW HUUHG E\
GLVUHJDUGLQJ WKH MXGLFLDO GHWHUPLQDWLRQV RI SUREDEOH FDXVH ZKLFK ZHUH
PDGH LQ FRQQHFWLRQ ZLWK WKH WKLUW\ILYH VHDUFK ZDUUDQWV WKRVH
GHWHUPLQDWLRQV KDG QRW EHHQ PDGH DV RI $SULO
7KHGLVWULFWFRXUWILUVWIRXQGWKDW)RUG¶VDIILGDYLWFRXOGQRW
EHFRQVLGHUHGEHFDXVHLWZDVDWWHVWHGWRDIWHU$SULO
+RZHYHUIDFWVLQH[LVWHQFHEHIRUHWKHGHULYDWLYHFODLPVZHUH
ILOHG EXW QRW GLVFRYHUHG XQWLO ODWHU PD\ EH FRQVLGHUHG LQ
GHWHUPLQLQJGHPDQGIXWLOLW\6HHHJ/HYLQHY6PLWK
$G 'HO +DUULVY&DUWHU$G
'HO&K $OWHUQDWLYHO\WKHGLVWULFWFRXUW
FRQFOXGHG
7REHVXUHDQ\FULPLQDOLQYHVWLJDWLRQRIDFRUSRUDWLRQ
VKRXOGDOHUWLWVGLUHFWRUVEXWJLYHQ&ROXPELD¶VFRUSRUDWH
VL]HWKHIDFWWKDWDVRI$SULOXQODZIXODFWLYLWLHV
RFFXUUHG LQ RQH RIILFH RXW RI IDFLOLWLHV DFURVV WKH
QDWLRQDQGWKHZRUOGZRXOGQRWVXSSRUWDQLQIHUHQFHRI
FRUSRUDWHZLGHFULPLQDOFRQGXFW
7KLVFRQFOXVLRQHUURQHRXVO\YLHZVWKHVHDUFKRIWKH(O3DVR
RIILFHVLQLVRODWLRQ:KHQWKHSDUWLFXODUL]HGDOOHJDWLRQVDUH
WDNHQWRJHWKHUWKHUHDUHVXIILFLHQWIDFWVIURPZKLFKRQHFRXOG
LQIHU WKDW WKH %RDUG NQHZ RI RU UHFNOHVVO\ GLVUHJDUGHG WKH
DOOHJHGO\LPSURSHUSROLFLHVDQGSUDFWLFHVEHLQJV\VWHPDWLFDOO\
IROORZHG LQ &ROXPELD¶V IDFLOLWLHV QDWLRQZLGH ,Q IDFW WKH
PDJQLWXGHDQGGXUDWLRQRIWKHDOOHJHGZURQJGRLQJLVUHOHYDQW
LQ GHWHUPLQLQJ ZKHWKHU WKH IDLOXUH RI WKH GLUHFWRUV WR DFW
FRQVWLWXWHV D ODFN RI JRRG IDLWK 6HH ,Q UH 2[IRUG +HDOWK
3ODQV,QF)5' 6'1< 'HOODZ
1HZ<RUN7LPHV¶,QYHVWLJDWLRQ
2Q0DUFKDQGVHYHUDODUWLFOHVDSSHDUHGLQ
WKH1HZ<RUN7LPHVZKLFKDOOHJHGO\³FRQILUPHGWKHPDVVLYH
VFRSH DQG ORQJVWDQGLQJ QDWXUH RI WKH JRYHUQPHQW¶V
LQYHVWLJDWLRQ´$VWXG\RIWKHELOOLQJUHFRUGVIRUPLOOLRQ
0HGLFDUH SDWLHQWV LQ 7H[DV DQG )ORULGD UHYHDOHG WKDW
&ROXPELD HPSOR\HHV ZHUH SURYLGHG OLVWV RI FRGHV WR EH

-- 8 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
,Q GHIHQGLQJ DJDLQVW WKH 7KRPSVRQ ODZVXLW WKH &ROXPELD
GHIHQGDQWV DUJXHG WKDW HYHQ LI WKHUH ZHUH YLRODWLRQV RI IHGHUDO ODZV WKH\
GLG QRW FRQVWLWXWH YLRODWLRQV RI WKH )DOVH &ODLPV $FW 7KH )LIWK &LUFXLW
UHYHUVHG LQ SDUW DQG UHPDQGHG IRU IXUWKHU IDFWXDO GHYHORSPHQW RQ WKH
TXHVWLRQ RI ZKHWKHU SD\PHQWV IRU VHUYLFHV LGHQWLILHG LQ DQQXDO FRVW
UHSRUWV ZHUH FRQGLWLRQHG XSRQ WKH GHIHQGDQWV¶ FHUWLILFDWLRQV RI
FRPSOLDQFH ZLWK WKH ODZV 7KH FRXUW DIILUPHG WKH ILQGLQJ WKDW WKH
VWDWLVWLFDO VWXGLHV IDLOHG WR DOOHJH IUDXGXOHQW ELOOLQJ SUDFWLFHV ZLWK
VXIILFLHQW SDUWLFXODULW\ 2Q UHPDQG WKH GHIHQGDQWV¶ QHZ PRWLRQ WR
GLVPLVV ZDV GHQLHG 6HH 7KRPSVRQ ) 6XSSG 6' 7H[

WKH %RDUG¶V IDLOXUH WR WDNH DFWLRQ RU LQYHVWLJDWH XQGHU WKH
FLUFXPVWDQFHVZDVQRWLQJRRGIDLWK
)HGHUDO,QYHVWLJDWLRQV
2Q 0DUFK IHGHUDO DJHQWV IURP IRXU IHGHUDO
DJHQFLHVWKH)%,,56'HSDUWPHQWRI++6DQG'HSDUWPHQW
RI'HIHQVH&ULPLQDO,QYHVWLJDWLRQ6HUYLFHH[HFXWHGVHDUFK
ZDUUDQWVRQ&ROXPELD¶VRIILFHVLQ(O3DVR7H[DV3ODLQWLIIV
DOOHJHGWKDWWKHZDUUDQWVZHUHH[HFXWHGLQFRQQHFWLRQZLWKD
QDWLRQZLGHIHGHUDOLQYHVWLJDWLRQRI&ROXPELDWKDWKDGEHHQ
RQJRLQJVLQFHDWOHDVWPLG,Q-XO\IHGHUDODJHQWV
UDLGHGWKLUW\ILYH&ROXPELDIDFLOLWLHVLQVL[PRUHVWDWHVIRU
HYLGHQFHUHODWLQJWRODERUDWRU\ELOOLQJDQGKRPHKHDOWKFDUH
RSHUDWLRQV7KH-XO\ZDUUDQWVZHUHVXSSRUWHGE\WKHDIILGDYLW
RI)%,$JHQW-RVHSK)RUGWRZKLFKKHDWWHVWHGRQ-XO\

$JHQW )RUG VWDWHG WKDW DIWHU LQWHUYLHZV ZLWK ZLWQHVVHV
DFURVVWKHFRXQWU\LQFOXGLQJFXUUHQWDQGIRUPHU&ROXPELD
HPSOR\HHVWKH)%,³KDVXQFRYHUHGDV\VWHPLF>VLF@FRUSRUDWH
VFKHPH SHUSHWUDWHG E\ FRUSRUDWH RIILFHUV DQG PDQDJHUV RI
&ROXPELD¶VKRVSLWDOV KRPHKHDOWKDJHQFLHVDQGRWKHU
IDFLOLWLHVLQWKH6WDWHVRI7HQQHVVHH)ORULGD*HRUJLD7H[DV
DQG HOVHZKHUH WR GHIUDXG 0HGLFDUH 0HGLFDLG DQG
&+$0386´ )RUG DOVR VWDWHG WKDW &ROXPELD ZDV EHLQJ
LQYHVWLJDWHGE\WKH-XVWLFH'HSDUWPHQWWKH3RVWDO,QVSHFWRU
DQGDWOHDVWHOHYHQRWKHUVWDWHV
1RV 0F&DOOHWDOY6FRWWHWDO
7KH 6(& ILOLQJV LQGLFDWH WKDW .DUDP ZKR MRLQHG WKH %RDUG LQ 0D\
LV D 0DMRU 6XSHULRU RI WKH 6LVWHUV RI &KDULW\ RI 6W $XJXVWLQH KDV
H[WHQVLYH H[SHULHQFH DV D KRVSLWDO DGPLQLVWUDWRU DQG LV D )HOORZ LQ WKH
$PHULFDQ &ROOHJH RI +HDOWKFDUH ([HFXWLYHV
7KH PDJLVWUDWH MXGJH DPHQGHG KLV UHSRUW DIWHU OHDUQLQJ WKDW IRXU
LQGLYLGXDOV ZKR ZHUH QDPHG LQ WKH 0RUVH DFWLRQ DQG GLVFXVVHG LQ KLV
UHSRUW ZHUH QRW DFWXDOO\ GLUHFWRUV DW WKH UHOHYDQW SRLQW LQ WLPH 7KH
PDJLVWUDWH FODULILHG WKDW WKLV FRUUHFWLRQ GLG QRW DIIHFW KLV UHFRPPHQGDWLRQ
EHFDXVH RQO\ RQH GLUHFWRU ZDV IRXQG WR KDYH EHHQ LQWHUHVWHG 7KH GLVWULFW
FRXUW¶V RUGHU PLVWDNHQO\ VWDWHV WKDW WKH PDJLVWUDWH IRXQG WZR GLUHFWRUV
ZHUH LQWHUHVWHG
6LVWHU-XGLWK$QQ.DUDP(LJKWRIWKHGLUHFWRUVZHUHQDPHG
DVGHIHQGDQWVLQ0F&DOODQGWKHQLQWKFKDOOHQJHGGLUHFWRU
&DUO5HLFKDUGWZDVQDPHGDVDGHIHQGDQWLQ/6(567KHUH
LV QR GLVSXWH WKDW WKH FODLP RI GHPDQG IXWLOLW\ PXVW EH
HYDOXDWHGDVRI$SULOWKHGDWHWKDWWKHILUVWGHULYDWLYH
FODLPVZHUHPDGHLQWKH0RUVHDFWLRQ
'HIHQGDQWV¶VHYHUDOPRWLRQVWRGLVPLVVZHUHUHIHUUHGWRD
PDJLVWUDWH MXGJH IRU UHSRUW DQG UHFRPPHQGDWLRQ 7KH
PDJLVWUDWH MXGJH RXWOLQHG WKH DOOHJDWLRQV LQ FRQVLGHUDEOH
GHWDLODQDO\]HGWKHJURXQGVXSRQZKLFKSODLQWLIIVFODLPHGD
GHPDQG ZRXOG KDYH EHHQ IXWLOH DQG FRQFOXGHG WKDW WKH
SODLQWLIIVKDGQRWVKRZQWKDWDPDMRULW\RIWKHGLUHFWRUVZHUH
LQWHUHVWHG RU ODFNHG LQGHSHQGHQFH DW WKH WLPH WKH
0RUVHFRPSODLQWZDVILOHG2YHUSODLQWLIIV¶REMHFWLRQVWKH
GLVWULFWFRXUWDGRSWHGWKHILQGLQJVRIWKHPDJLVWUDWHMXGJHDQG
GLVPLVVHGWKHFRPSODLQWLQDEULHIPHPRUDQGXPRSLQLRQ
7LPHO\DSSHDOVZHUHILOHGE\SODLQWLIIVLQ0F&DOODQG/6(56
,,
$ $SSOLFDEOH6WDQGDUGRI5HYLHZ
$GLVWULFWFRXUW¶VGHFLVLRQWRGLVPLVVXQGHU)HG5&LY3
E LVUHYLHZHGGHQRYR2UGLQDULO\DPRWLRQWRGLVPLVV
XQGHU5XOH E VKRXOGQRWEHJUDQWHG³XQOHVVLWDSSHDUV
EH\RQGGRXEWWKDWWKHSODLQWLIIFDQSURYHQRVHWRIIDFWVLQ
VXSSRUW RI KLV FODLP ZKLFK ZRXOG HQWLWOH KLP WR UHOLHI´

-- 9 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
&RQOH\ Y *LEVRQ 86 ,Q D
VKDUHKROGHUGHULYDWLYHDFWLRQ)HG5&LY3UHTXLUHV
WKDWWKHSODLQWLII³DOOHJHZLWKSDUWLFXODULW\´WKHUHDVRQVIRU
IDLOLQJ WR PDNH D SUHVXLW GHPDQG 7KH VDPH SOHDGLQJ
UHTXLUHPHQWDGRSWHGLQ'HODZDUH&KDQFHU\5XOHZDV
VXFFLQFWO\GHVFULEHGDVIROORZV
3OHDGLQJVLQGHULYDWLYHVXLWVDUHJRYHUQHGE\&KDQFHU\
5XOH >ZKLFK@ PXVW FRPSO\ ZLWK VWULQJHQW
UHTXLUHPHQWV RI IDFWXDO SDUWLFXODULW\ WKDW GLIIHU
VXEVWDQWLDOO\ IURP WKH SHUPLVVLYH QRWLFH SOHDGLQJV
JRYHUQHGVROHO\E\&KDQFHU\5XOH D 5XOHLVQRW
VDWLVILHG E\ FRQFOXVRU\ VWDWHPHQWV RU PHUH QRWLFH
SOHDGLQJ2QWKHRWKHUKDQGWKHSOHDGHULVQRWUHTXLUHG
WRSOHDGHYLGHQFH:KDWWKHSOHDGHUPXVWVHWIRUWKDUH
SDUWLFXODUL]HGIDFWXDOVWDWHPHQWVWKDWDUHHVVHQWLDOWRWKH
FODLP
%UHKPY(LVQHU$G 'HO IRRWQRWH
RPLWWHG
/6(56 VHSDUDWHO\ DUJXHV WKDW GHPDQG IXWLOLW\ LV D
SURFHGXUDOTXHVWLRQJRYHUQHGE\7HQQHVVHHVWDWHODZ7RWKH
FRQWUDU\WKH6XSUHPH&RXUWPDGHFOHDULQ.DPHQY.HPSHU
)LQDQFLDO 6HUYLFHV ,QF 86 WKDW
ZK HWKHUWKHIDLOXUHWRPDNHDGHPDQGLVH[FXVHGPXVWEH
GHWHUPLQHG XQGHU WKH VXEVWDQWLYH ODZ RI WKH VWDWH RI
LQFRUSRUDWLRQ 7KH&RXUWKHOGWKDWWKHODZRIWKHVWDWHRI
LQFRUSRUDWLRQ FRQWUROV HYHQ ZKHQ GHULYDWLYH FODLPV DUH
EURXJKW XQGHU IHGHUDO ODZ ,G DW 7KH SOHDGLQJ
UHTXLUHPHQW RI )HG 5 &LY 3 LV WKH SURFHGXUDO
HPERGLPHQWRIWKHVXEVWDQWLYHSULQFLSOHWKDWDVWRFNKROGHU¶V
ULJKWWRSURVHFXWHDGHULYDWLYHVXLWLVOLPLWHGWRVLWXDWLRQVLQ
ZKLFKGHPDQGLVH[FXVHGEHFDXVHHLWKHUWKHGLUHFWRUVZHUH
LQFDSDEOHRIPDNLQJDQLPSDUWLDOGHFLVLRQRUWKHGLUHFWRUV
1RV 0F&DOOHWDOY6FRWWHWDO
4XL7DP$FWLRQ
-DPHV 7KRPSVRQ 0' D GRFWRU SUDFWLFLQJ LQ &RUSXV
&KULVWL7H[DVILOHGDTXLWDPDFWLRQXQGHUWKHIHGHUDO)DOVH
&ODLPV$FWVHH86&†7KRPSVRQDOOHJHGWKDW
&ROXPELDDQGHQWLWLHVFRQWUROOHGE\LWXVHGLQYHVWPHQWDQG
RWKHUILQDQFLDODUUDQJHPHQWVWRLQGXFHSK\VLFLDQVWRUHIHU
0HGLFDUH SDWLHQWV ZKLFK DOOHJHGO\ YLRODWHG IHGHUDO ODZV
7KRPSVRQ DOVR FODLPHG &ROXPELD HQJDJHG LQ IUDXGXOHQW
ELOOLQJIRUXQQHFHVVDU\VHUYLFHV
7KH7KRPSVRQFRPSODLQWZDVXQVHDOHGLQ6HSWHPEHU
ZKHQWKHJRYHUQPHQWGHFOLQHGWRLQWHUYHQHLQWKHDFWLRQ,Q
IDFW &ROXPELD¶V . IRUP ILOHG ZLWK WKH 6(&
GHVFULEHGWKHDFWLRQDVKDYLQJDOOHJHG³WKDWWKHGHIHQGDQWV
WKH &RPSDQ\ DQG FHUWDLQ VXEVLGLDULHV DQG DIILOLDWHG
SDUWQHUVKLSV HQJDJHG LQ D ZLGHVSUHDG VWUDWHJ\ WR SD\
SK\VLFLDQVPRQH\IRUUHIHUUDOVDQGHQJDJHGLQRWKHUFRQGXFW
WRLQGXFHUHIHUUDOV´LQYLRODWLRQRIIHGHUDOODZ:HPD\LQIHU
IURPWKLVGLVFORVXUHWKDWWKH%RDUGZDVDZDUHRIWKHODZVXLW
,QGLVFRXQWLQJWKHLPSRUWDQFHRIWKH7KRPSVRQDFWLRQWKH
GLVWULFW FRXUW UHOLHG XSRQ WKH IDFW WKDW WKH FRPSODLQW ZDV
GLVPLVVHGLQ-XO\DQGUHPDLQHGVRXQWLOWKHGLVPLVVDO
ZDVUHYHUVHGLQSDUWE\WKH)LIWK&LUFXLWLQ2FWREHU6HH
86H[UHO7KRPSVRQY&ROXPELD+&$+HDOWKFDUH&RUS
)6XSS 6'7H[ UHY¶GLQSDUW)G
WK&LU $VDUHVXOWWKHGLVWULFWFRXUWFRQFOXGHG
WKDWWKHGLVPLVVHGFRPSODLQW ZRXOGQRWKDYHFRQVWLWXWHGD
³UHGIODJ´DVRI$SULO,QGRLQJVRWKHGLVWULFWFRXUW
PLVDSSUHKHQGHGWKHVLJQLILFDQFHRIWKHODZVXLW:HDUHQRW
DVNHGWRGHWHUPLQHZKHWKHUUHGIODJVZHUHSUHVHQWRQ$SULO
EXWZKHWKHURQWKDWGDWHWKH%RDUGFRXOGKDYHGLVLQWHUHVWHGO\
DQGLQGHSHQGHQWO\FRQVLGHUHGDVWRFNKROGHUGHPDQGWRVXHIRU
EUHDFKRIWKHGXW\RIFDUH(YHQWKRXJKWKHDFWLRQKDGEHHQ
GLVPLVVHGLWFOHDUO\SUHVHQWHGFODLPVRILPSURSHUSK\VLFLDQ
LQGXFHPHQWVDQGLOOHJDOELOOLQJSUDFWLFHV)XUWKHUDVDTXL
WDPDFWLRQWKH7KRPSVRQODZVXLWLPSOLFDWHGIHGHUDOUHYLHZ
RIWKHFODLPVDQGSRVVLEOHIHGHUDOLQWHUYHQWLRQ:HILQGWKDW
WKH7KRPSVRQFODLPVZHUHUHOHYDQWWRWKHTXHVWLRQRIZKHWKHU

-- 10 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
3ODLQWLIIV VWDWH RQ DSSHDO WKDW WKH YHUGLFW ZDV UHQGHUHG RQ
)HEUXDU\
SUDFWLFHVEHFDXVHWKH\ZHUHIRUPHUGLUHFWRUVRURIILFHUVRI
FRPSDQLHVDFTXLUHGE\&ROXPELD+RZHYHUWKHFRPSODLQW
GLGQRWDOOHJHZLWKSDUWLFXODULW\DQ\LPSURSHUDFWLYLW\LQWKRVH
WUDQVDFWLRQV7RFRQFOXGHIURPWKHLUSULRUDIILOLDWLRQDORQH
WKDWWKH\ZHUHDZDUHRIDOOHJHGO\LOOHJDODFTXLVLWLRQSUDFWLFHV
ZRXOGEHVSHFXODWLRQ2IWKHVHILYHGLUHFWRUVRQO\)ULVWZDV
DOOHJHG WR KDYH EHHQ SHUVRQDOO\ LQYROYHG LQ &ROXPELD¶V
DFTXLVLWLRQDFWLYLWLHV:KLOHZHDJUHHZLWKWKHGLVWULFWFRXUW
WKDWWKHUHLVQRWKLQJLPSURSHURULOOHJDOSHUVHDERXWHLWKHU
³H[SDQVLRQ E\ DFTXLVLWLRQ´ RU OREE\LQJ RQ EHKDOI RI D
SDUWLFXODU WUDQVDFWLRQ WKH SDUWLFLSDWLRQ RI 6FRWW DQG )ULVW
LPSOLHVNQRZOHGJHRIWKHDUUDQJHPHQWVWKDWDOOHJHGO\YLRODWHG
KHDOWKFDUHODZVDQGUHJXODWLRQV
&ODLPLQJ WKDW &ROXPELD LQWHUIHUHG ZLWK SK\VLFLDQ
UHODWLRQVKLSV LQ SXUVXLW RI LWV DFTXLVLWLRQ JRDOV SODLQWLIIV
VSHFLILFDOO\ DOOHJHG WKDW 6FRWW ZDV SHUVRQDOO\ LQYROYHG LQ
FDXVLQJDGRFWRUWRGHIUDXGKLVSDUWQHURXWRIKLVLQWHUHVWLQ
WKHLURQFRORJ\SDUWQHUVKLS$OHWWHUIURP6FRWWZKLFKZDV
DGPLWWHG DW WULDO RIIHUHG LQGXFHPHQWV WR 'U $ERXG WR
GLVDVVRFLDWH KLPVHOI IURP 'U 6FKOLFKWHPHLHU 7KH MXU\
DZDUGHG6FKOLFKWHPHLHUPLOOLRQLQFOXGLQJPLOOLRQLQ
SXQLWLYH GDPDJHV DJDLQVW &ROXPELD 3ODLQWLIIV¶ FRPSODLQW
VWDWHGRQO\WKDW³7KH%RDUGZDVXQTXHVWLRQDEO\DZDUHRI
WKLVFDVH´
2EVHUYLQJ WKDW WKH FRPSODLQW GLG QRW LQGLFDWH ZKHQ WKH
YHUGLFWZDVUHQGHUHGWKHGLVWULFWFRXUWIRXQGWKDWHYHQLILW
ZDVUHQGHUHGEHIRUH$SULOWKHYHUGLFWDORQHZDVQRW
VXJJHVWLYHRIFRUSRUDWHZLGHZURQJGRLQJ:KLOHZHDJUHH
WKDW WKH ODZVXLW GLG QRW QHFHVVDULO\ ZDUQ WKDW LPSURSHU
SUDFWLFHVZHUHEHLQJHPSOR\HGV\VWHPDWLFDOO\WKHODZVXLWDV
ZHOO DV WKH YHUGLFW VKRXOG EH FRQVLGHUHG ZLWK DOO RI WKH
IDFWV
1RV 0F&DOOHWDOY6FRWWHWDO
:KHQ D GHPDQG LV PDGH DQG UHIXVHG VWRFNKROGHUV PD\ RQO\ SXUVXH
WKH GHULYDWLYH DFWLRQ LI WKH ERDUG¶V UHIXVDO LV QRW SURWHFWHG E\ WKH EXVLQHVV
MXGJPHQW UXOH 6HH 6FDWWHUHG &RUS Y &KL 6WRFN ([FK ,QF $G
'HO RYHUUXOHG RQ RWKHU JURXQGV E\ %UHKP $G
DW 5DOHV $G DW Q
ZURQJIXOO\UHIXVHGDGHPDQGWRVXH5DOHVY%ODVEDQG
$G 'HO
% 'HPDQG)XWLOLW\7HVW
$EDVLFSUHPLVHRIFRUSRUDWHJRYHUQDQFHXQGHU'HODZDUH
ODZLVWKDWWKHGLUHFWRUVUDWKHUWKDQWKHVKDUHKROGHUVPDQDJH
WKHEXVLQHVVDQGDIIDLUVRIWKHFRUSRUDWLRQ$URQVRQY/HZLV
$G 'HO <HWVKDUHKROGHUVDUHQRW
SRZHUOHVV WR FKDOOHQJH GLUHFWRU DFWLRQ WKDW KDUPV WKH
FRUSRUDWLRQ³7KHPDFKLQHU\RIFRUSRUDWHGHPRFUDF\DQGWKH
GHULYDWLYH VXLW DUH SRWHQW WRROV WR UHGUHVV WKH FRQGXFW RI D
WRUSLG RU XQIDLWKIXO PDQDJHPHQW´ ,G %HFDXVH GHULYDWLYH
VXLWVFKDOOHQJHWKHSURSULHW\RIGHFLVLRQVPDGHE\GLUHFWRUV
XQGHUWKHLUDXWKRULW\³VWRFNKROGHUSODLQWLIIVPXVWRYHUFRPH
WKH SRZHUIXO SUHVXPSWLRQV RI WKH EXVLQHVV MXGJPHQW UXOH
EHIRUHWKH\ZLOOEHSHUPLWWHGWRSXUVXHWKHGHULYDWLYHFODLP´
5DOHV$GDW
7KHGLVWULFWFRXUWFRQFOXGHGWKDWEHFDXVHWKLVFDVHLQYROYHG
WKH³DEVHQFHRIDFRQVFLRXVERDUGGHFLVLRQ´GHPDQGIXWLOLW\
VKRXOG EH HYDOXDWHG XQGHU WKH 5DOHV WHVW UDWKHU WKDQ WKH
$URQVRQ WHVW :H DJUHH 7KH WHVW DUWLFXODWHG LQ $URQVRQ
SURYLGHV WKDW GHPDQG LV H[FXVHG ZKHQ ³XQGHU WKH
SDUWLFXODUL]HGIDFWVDOOHJHGDUHDVRQDEOHGRXEWLVFUHDWHGWKDW
>D PDMRULW\ RI@ WKH GLUHFWRUV DUH GLVLQWHUHVWHG DQG
LQGHSHQGHQW>RU@ WKHFKDOOHQJHGWUDQVDFWLRQZDVRWKHUZLVH
WKHSURGXFWRIDYDOLGH[HUFLVHRIEXVLQHVVMXGJPHQW´
$G DW ,Q 5DOHV WKH FRXUW UHFRJQL]HG WKDW QRW DOO
GHULYDWLYH VXLWV IDOO XQGHU WKH SDUDGLJP DGGUHVVHG E\ WKH
$URQVRQWHVW
:KHUHWKHUHLVQRFRQVFLRXVGHFLVLRQE\GLUHFWRUVWRDFW
RUUHIUDLQIURPDFWLQJWKHEXVLQHVVMXGJPHQWUXOHKDVQR

-- 11 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
6LQFH WKH FODLPV EDVHG XSRQ LQVLGHU WUDGLQJ DOVR GLG QRW LQYROYH DQ\
%RDUG GHFLVLRQ ZH DOVR DSSO\ WKH 5DOHV WHVW WR GHWHUPLQH ZKHWKHU GHPDQG
FDQ EH H[FXVHG IRU WKRVH FODLPV
DSSOLFDWLRQ 7KH DEVHQFH RI ERDUG DFWLRQ WKHUHIRUH
PDNHV LW LPSRVVLEOH WR SHUIRUP WKH HVVHQWLDO LQTXLU\
FRQWHPSODWHGE\$URQVRQ±ZKHWKHUWKHGLUHFWRUVKDYH
DFWHGLQFRQIRUPLW\ZLWKWKHEXVLQHVVMXGJPHQWUXOHLQ
DSSURYLQJWKHFKDOOHQJHGWUDQVDFWLRQ
5DOHV$GDW FLWDWLRQRPLWWHG
3ODLQWLIIVDVNXVWRFRQFOXGHWKDWWKH%RDUG¶VIDLOXUHWRWDNH
DFWLRQ ZLWK UHVSHFW WR WKH V\VWHPDWLF IUDXG RFFXUULQJ DW
&ROXPELDZDVWDQWDPRXQWWRDFRQVFLRXVGHFLVLRQWRUHIUDLQ
IURPDFWLQJ3ODLQWLIIV¶GXW\RIFDUHFODLPVKRZHYHUDULVH
RXW RI DOOHJDWLRQV RI QRQIHDVDQFH E\ WKH %RDUG LH
³LQWHQWLRQDOLJQRUDQFHRI´RU³ZLOOIXOEOLQGQHVVWR´WKH³UHG
IODJV´WKDWZHUHVLJQVRISRWHQWLDOO\IUDXGXOHQWSUDFWLFHV DQG
FKDOOHQJH WKH %RDUG¶V IDLOXUH WR WDNH DFWLRQ RU LQYHVWLJDWH
XQGHU WKH FLUFXPVWDQFHV 7KH FODLPV GR QRW DOOHJH D
FRQVFLRXV%RDUGGHFLVLRQWRUHIUDLQIURPDFWLQJ
8QGHU5DOHVWKHQWKHFRXUWPXVWGHWHUPLQH³ZKHWKHURUQRW
WKHSDUWLFXODUL]HGIDFWXDODOOHJDWLRQVFUHDWHDUHDVRQDEOH
GRXEWWKDWDVRIWKHWLPHWKHFRPSODLQWLVILOHG>DPDMRULW\
RI@WKHERDUGRIGLUHFWRUVFRXOGKDYHSURSHUO\H[HUFLVHGLWV
LQGHSHQGHQW DQG GLVLQWHUHVWHG EXVLQHVV MXGJPHQW LQ
UHVSRQGLQJ WR D GHPDQG´ 5DOHV $G DW 7R
HVWDEOLVK D UHDVRQDEOH GRXEW SODLQWLIIV DUH QRW UHTXLUHG WR
SOHDG IDFWV WKDW ZRXOG EH VXIILFLHQW WR VXSSRUW D MXGLFLDO
ILQGLQJRIGHPDQGIXWLOLW\*URERZY3HURW$G
'HO 1RU PXVW SODLQWLIIV GHPRQVWUDWH D
UHDVRQDEOHSUREDELOLW\RIVXFFHVVRQWKHPHULWV5DOHV
$GDW)XUWKHUZKHWKHUSODLQWLIIVKDYHDOOHJHGIDFWV
VXIILFLHQW WR FUHDWH D UHDVRQDEOH GRXEW FRQFHUQLQJ WKH
GLVLQWHUHVWHGQHVVDQGLQGHSHQGHQFHRIDPDMRULW\RIWKH%RDUG
PXVWEHGHWHUPLQHGIURPWKHDFFXPXODWLRQRIDOOWKHIDFWV
WDNHQWRJHWKHU6HH+DUULVY&DUWHU$G 'HO
&K
1RV 0F&DOOHWDOY6FRWWHWDO
DYHUDJH&0,VLQDOOVWDWHVZKHUHLWRSHUDWHGKRVSLWDOV7KH
GLVWULFW FRXUW IRXQG WKDW VLQFH +&$ UHFHLYHG KXQGUHGV RI
PLOOLRQV RI GROODUV LQ UHLPEXUVHPHQWV +&$¶V SD\PHQW RI
SOXV PLOOLRQ LQ UHLPEXUVHPHQW IRU
XQVXSSRUWDEOHRUTXHVWLRQDEOHH[SHQGLWXUHVGLGQRWVXJJHVW
FRUSRUDWHZLGHIUDXGDW+&$:KLOHWKDWPD\RUPD\QRWEH
WUXHRQHQRQHWKHOHVVPD\UHDVRQDEO\LQIHUWKDWWKHGLUHFWRUV
ZKRKDGSULRUH[SHULHQFHPDQDJLQJ+&$ZRXOGEHVHQVLWLYH
WR WKH FLUFXPVWDQFHV WKDW SURPSWHG WKH LQYHVWLJDWLRQ RI
+&$¶VSUDFWLFHV
$VIRUWKHDERYHDYHUDJHSHUFHQWDJHRIFDVHVELOOHGXQGHU
WKHKLJKHVW'5*VWKHGLVWULFWFRXUWFRQFOXGHGWKDW³JLYHQWKDW
&ROXPELDLVWKHODUJHVWILUPLQWKHVHIHGHUDOKHDOWKSURJUDPV
WKDW&ROXPELDRZQHGRYHUHLJKW\SHUFHQW RIWKHWRS
KRVSLWDOV LQ WKH FRXQWU\ DQG WKDW &ROXPELD DGRSWHG D
FRUSRUDWHVWUDWHJ\WRSXUVXHDFXWHFDUHSDWLHQWVLQKRVSLWDOVRI
SDWLHQWV RU PRUH RQH FRXOG UHDVRQDEO\ H[SHFW WKDW
&ROXPELD¶V'5*VDQG0&,VZRXOGEHKLJKHUWKDQWKHQRUP
RIPRVWKRVSLWDOVLQ&ROXPELD¶VPDUNHWV´:HILQGWKDWLW
ZRXOGEHMXVWDVUHDVRQDEOHWRLQIHUWKDWWKHFRQVLVWHQWO\KLJK
&0,V DQG '5*V ZDV D VLJQ RI SRVVLEOH LPSURSHU ELOOLQJ
DFWLYLWLHV
$FTXLVLWLRQ3UDFWLFHV
7KHHQWLUH%RDUGDOOHJHGO\UHFHLYHGUHJXODUUHSRUWVDERXW
WKHFRPSDQ\¶VDFTXLVLWLRQSURJUDPLQFOXGLQJWKHVWUXFWXUHRI
WKHYDULRXVWUDQVDFWLRQVDQGWKHDQWLFLSDWHGSHUIRUPDQFHRI
WDUJHWFRPSDQLHV6FRWWDQG)ULVWUHJXODUO\DWWHQGHGPHHWLQJV
RI &ROXPELD¶V $FTXLVLWLRQ 'HYHORSPHQW *URXS DQG ZHUH
SULY\WRWKHGHWDLOVRIWKHWUDQVDFWLRQV)ULVWHQJDJHGLQDFWLYH
OREE\LQJRIJRYHUQPHQWRIILFLDOVRQQXPHURXVRFFDVLRQVWR
VHFXUHDSSURYDOVIRUDFTXLVLWLRQV,WLVDOVRDOOHJHGWKDWVRPH
H[HFXWLYHVUHSRUWHGWRWKH)%,WKDWWKH\ZHUHRIIHUHGSHUVRQDO
EHQHILWVDQGSHUTXLVLWHVZKLOH&ROXPELDZDVQHJRWLDWLQJIRU
WKHSXUFKDVHRIWKHLUKRVSLWDOV
3ODLQWLIIV DVVHUW WKDW ILYH RI WKH GLUHFWRUV²)ULVW
0F:KRUWHU 0DF1DXJKWRQ <RXQJ DQG 5HLFKDUGW²PXVW
KDYH EHHQ IDPLOLDU ZLWK &ROXPELD¶V LPSURSHU DFTXLVLWLRQ

-- 12 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
LQFUHDVHLQWKHSURSRUWLRQRIFRPSOH['5*VEHLQJELOOHGDQG
SUHVVXUHG&ROXPELD¶VIDFLOLWLHVWRDFKLHYHWRJURZWK
3ODLQWLIIVDOOHJHGWKDWWKHGLUHFWRUVNQHZWKDWVXFKDUDWHRI
JURZWKZDVQRWUHDOLVWLFDOO\DWWDLQDEOHDEVHQWIUDXG6HYHUDO
H[HFXWLYHVDOOHJHGO\WROGWKH)%,WKDWWKHFKDOOHQJHGSUDFWLFHV
UHVXOWHG IURP FRUSRUDWH SROLFLHV WKDW HPDQDWHG IURP
&ROXPELD¶VKHDGTXDUWHUV
,Q)ULVWDOOHJHGO\JDYH³IHOORZH[HFXWLYHV´DQDUWLFOH
IURP%XVLQHVV:HHNWKDWZDVFULWLFDORIDQRWKHUFRPSDQ\¶V
SUHVVXUH WR PHHW DJJUHVVLYH JURZWK WDUJHWV WKDW OHG WR
³LQIODWHG VDOHV ILJXUHV´ DQG ³TXHVWLRQDEOH DFFRXQWLQJ
PHWKRGV´)LQGLQJQRDOOHJDWLRQVWKDWRWKHU%RDUGPHPEHUV
ZHUH DZDUH RI WKH DUWLFOH WKH GLVWULFW FRXUW FRQFOXGHG WKDW
JLYLQJWKHDUWLFOHWRRWKHUVZDVXQGHUVWDQGDEOHDQGGLGQRW
JLYH ULVH WR DQ LQIHUHQFH RI ³VLQLVWHU PRWLYHV´ ,W LV QRW
QHFHVVDU\ WKDW SODLQWLIIV DOOHJH IDFWV VKRZLQJ D VLQLVWHU
PRWLYH 5DWKHU WKH LQFLGHQW VXJJHVWV WKDW )ULVW PD\ KDYH
EHHQVHQVLWLYHWRWKHGDQJHUWKDWDJJUHVVLYHJURZWKWDUJHWV
FRXOGUHVXOWLQTXHVWLRQDEOHELOOLQJSUDFWLFHV
,Q SDUWLFXODU SODLQWLIIV FRQWHQG WKDW WKH GLUHFWRUV VKRXOG
KDYHEHHQDOHUWHGE\WKHUDWHRILQFUHDVHLQFRPSOH['5*V
DQG&0,VH[SHULHQFHGDWKRVSLWDOVDIWHUWKH\ZHUHDFTXLUHGE\
&ROXPELD$VDQH[DPSOHSODLQWLIIVDOOHJHGWKDWRQH\HDU
DIWHU&HGDUV0HGLFDO&HQWHUZDVDFTXLUHGE\&ROXPELDLWV
SHUFHQWDJHRIUHVSLUDWRU\FDVHVELOOHGXQGHU'5*FRGHVZLWK
WKHODUJHVWUHLPEXUVHPHQWZHQWIURPWR,WWKHQ
URVHWRZKLOHDKRVSLWDOORFDWHGDFURVVWKHVWUHHW²EXW
QRWRZQHGE\&ROXPELD²ELOOHGRQO\RILWVUHVSLUDWRU\
FDVHVXQGHUWKHKLJKHVW'5*FRGHV
3ODLQWLIIV DOVR UHO\ RQ DOOHJDWLRQV WKDW +&$ ZKLFK KDG
KLJKHUWKDQDYHUDJH&0,VZDVLQYHVWLJDWHGIRUDQGVHWWOHG
DOOHJDWLRQV RI TXHVWLRQDEOH ELOOLQJ FRVW UHSRUWLQJ DQG
PDUNHWLQJSUDFWLFHV)ULVWZDVSUHVLGHQWDQG&(2RI+&$
5HLFKDUGW 0DF1DXJKWRQ DQG 5R\DO ZHUH GLUHFWRUV DQG
5R\DO ZDV D PHPEHU RI +&$¶V $XGLW &RPPLWWHH
+HDOWKWUXVWRIZKLFK0F:KRUWHUZDVFKDLUPDQDQG&(2DQG
0DF1DXJKWRQZDVDGLUHFWRUDOVRKDGURXWLQHO\KLJKHUWKDQ
1RV 0F&DOOHWDOY6FRWWHWDO
3ODLQWLIIV KDYH DEDQGRQHG WKHLU FODLP IRU QHJOLJHQW EUHDFK RI WKH
ILGXFLDU\ GXW\ RI FDUH 7KLV LV XQGHUVWDQGDEOH VLQFH GLUHFWRU OLDELOLW\
XQGHU 'HODZDUH ODZ LV SUHGLFDWHG XSRQ FRQFHSWV RI JURVV QHJOLJHQFH 6HH
$URQVRQ $G DW
:HDJUHHZLWKSODLQWLIIVWKDWWKHGLVWULFWFRXUWLQDGRSWLQJ
WKHPDJLVWUDWHMXGJH¶VUHSRUWDQGUHFRPPHQGDWLRQHUUHGE\
YLHZLQJWKHIDFWXDODOOHJDWLRQVVHSDUDWHO\DQGE\UHIXVLQJWR
GUDZUHDVRQDEOHLQIHUHQFHVLQSODLQWLIIV¶IDYRU5DWKHUWKDQ
IRFXVLQJXSRQWKHSODLQWLIIV¶FODLPVRIHUURUZHUHYLHZGH
QRYRWKHTXHVWLRQRIZKHWKHUSODLQWLIIVDOOHJHGZLWKVXIILFLHQW
SDUWLFXODULW\ IDFWV WKDW FUHDWH D UHDVRQDEOH GRXEW DV WR WKH
GLVLQWHUHVWHGQHVV DQG LQGHSHQGHQFH RI D PDMRULW\ RI WKH
GLUHFWRUV
$GLUHFWRULVFRQVLGHUHGLQWHUHVWHGZKHQIRUH[DPSOHKH
ZLOOUHFHLYHDSHUVRQDOILQDQFLDOEHQHILWIURPDWUDQVDFWLRQ
WKDW LV QRW HTXDOO\ VKDUHG E\ WKH VWRFNKROGHUV RU ZKHQ D
FRUSRUDWHGHFLVLRQZLOOKDYHD³PDWHULDOO\GHWULPHQWDOLPSDFW´
RQ D GLUHFWRU EXW QRW WKH FRUSRUDWLRQ RU LWV VWRFNKROGHUV
5DOHV$GDW:KLOHWKHPHUHWKUHDWRISHUVRQDO
OLDELOLW\ LV QRW VXIILFLHQW UHDVRQDEOH GRXEW DV WR WKH
GLVLQWHUHVWHGQHVV RI D GLUHFWRU LV FUHDWHG ZKHQ WKH
SDUWLFXODUL]HG DOOHJDWLRQV LQ WKH FRPSODLQW SUHVHQW ³D
VXEVWDQWLDOOLNHOLKRRG´RIOLDELOLW\RQWKHSDUWRIDGLUHFWRU
6HH5DOHV$GDW TXRWLQJ$URQVRQ$GDW
,QUH%D[WHU,QW¶O,QF6¶KROGHUV/LWLJ$G
'HO&K
,QWKLVFDVHSODLQWLIIVPDLQWDLQWKDWUHDVRQDEOHGRXEWDULVHV
IURP WKH OLNHOLKRRG RI OLDELOLW\ RQ WKH SDUW RI DW OHDVW ILYH
GLUHFWRUVIRULQWHQWLRQDORUUHFNOHVVEUHDFKRIWKHILGXFLDU\
GXW\RIFDUH3ODLQWLIIVDOVRFRQWHQGWKDWDWOHDVWILYHRIWKH
GLUHFWRUV ZHUH LQWHUHVWHG E\ YLUWXH RI KDYLQJ REWDLQHG
ILQDQFLDOEHQHILWVIURPLQVLGHUWUDGLQJRI&ROXPELDVWRFNLQ
YLRODWLRQRIWKHLUGXW\RIOR\DOW\

-- 13 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
& ,QWHQWLRQDORU5HFNOHVV%UHDFKRIWKH'XW\RI&DUH
7KHFRQWRXUVRIGLUHFWRUOLDELOLW\IRUEUHDFKRIWKHGXW\WR
H[HUFLVHDSSURSULDWHDWWHQWLRQWRSRWHQWLDOO\LOOHJDOFRUSRUDWH
DFWLYLWLHVZHUHGLVFXVVHGLQ,QUH&DUHPDUN,QWHUQDWLRQDO,QF
'HULYDWLYH/LWLJDWLRQ$G 'HO&K 7KHUH
WKHFRXUWH[SODLQHGWKDWWKLVZDV³SRVVLEO\WKHPRVWGLIILFXOW
WKHRU\LQFRUSRUDWLRQODZXSRQZKLFKDSODLQWLIIPLJKWKRSH
WRZLQDMXGJPHQW´,GDW'LUHFWRUOLDELOLW\IRUVXFKD
EUHDFKPD\DULVH IURPDERDUGGHFLVLRQWKDWUHVXOWHGLQD
ORVV EHFDXVH WKH GHFLVLRQ ZDV LOODGYLVHG RU IURP ³DQ
XQFRQVLGHUHGIDLOXUHRIWKHERDUGWRDFWLQFLUFXPVWDQFHVLQ
ZKLFK GXH DWWHQWLRQ ZRXOG DUJXDEO\ KDYH SUHYHQWHG WKH
ORVV´,G$VGLVFXVVHGHDUOLHUWKHGXW\RIFDUHFODLPVLQWKLV
FDVH IDOO LQWR WKH VHFRQG FDWHJRU\ DV WKH\ DULVH IURP WKH
%RDUG¶VIDLOXUHWRDFWXQGHUWKHFLUFXPVWDQFHV7KHFRXUWLQ
&DUHPDUNKHOGWKDWZKHQGLUHFWRUOLDELOLW\LVSUHGLFDWHGXSRQ
LJQRUDQFHRIOLDELOLW\FUHDWLQJDFWLYLWLHV³RQO\DVXVWDLQHGRU
V\VWHPDWLFIDLOXUHRIWKHERDUGWRH[HUFLVHRYHUVLJKW²VXFKDV
DQXWWHUIDLOXUHWRDWWHPSWWRDVVXUHDUHDVRQDEOHLQIRUPDWLRQ
DQGUHSRUWLQJV\VWHPH[LVWV²ZLOOHVWDEOLVKWKHODFNRIJRRG
IDLWKWKDWLVDQHFHVVDU\FRQGLWLRQWROLDELOLW\´,GDW
8QFRQVLGHUHGLQDFWLRQFDQEHWKHEDVLVIRUGLUHFWRUOLDELOLW\
EHFDXVHHYHQWKRXJKPRVWFRUSRUDWHGHFLVLRQVDUHQRWVXEMHFW
WRGLUHFWRUDWWHQWLRQRUGLQDU\EXVLQHVVGHFLVLRQVRIRIILFHUV
DQG HPSOR\HHV GHHSHU LQ WKH FRUSRUDWLRQ FDQ VLJQLILFDQWO\
LQMXUH WKH FRUSRUDWLRQ DQG PDNH LW VXEMHFW WR FULPLQDO
VDQFWLRQV,G7KLVWKHRU\JUHZRXWRIDQHDUOLHUGHFLVLRQLQ
ZKLFKWKH'HODZDUH6XSUHPH&RXUWH[SODLQHGWKDW
WKHTXHVWLRQRIZKHWKHUDFRUSRUDWHGLUHFWRUKDVEHFRPH
OLDEOH IRU ORVVHV WR WKH FRUSRUDWLRQ WKURXJK QHJOHFW RI
GXW\ LV GHWHUPLQHG E\ WKH FLUFXPVWDQFHV ,I KH KDV
UHFNOHVVO\ UHSRVHG FRQILGHQFH LQ DQ REYLRXVO\
XQWUXVWZRUWK\ HPSOR\HH KDV UHIXVHG RU QHJOHFWHG
FDYDOLHUO\ WR SHUIRUP KLV GXW\ DV D GLUHFWRU RU KDV
LJQRUHGHLWKHUZLOOIXOO\RUWKURXJKLQDWWHQWLRQREYLRXV
GDQJHUVLJQVRIHPSOR\HHZURQJGRLQJWKHODZZLOOFDVW
WKHEXUGHQRIOLDELOLW\XSRQKLP
1RV 0F&DOOHWDOY6FRWWHWDO
:KLOH WKH DXGLW SURFHGXUHV IDLOHG WR SUHYHQW WKH DOOHJHG IUDXG WKH
%RDUG DVVXUHG WKDW QDWLRQZLGH DXGLWV LQWHUQDO DQG H[WHUQDO ZHUH
XQGHUWDNHQ ZLWK DWWHQWLRQ WR DUHDV WKDW FRXOG KDYH OHJDO UDPLILFDWLRQV IRU
&ROXPELD $V D UHVXOW ZH DJUHH ZLWK WKH GLVWULFW FRXUW WKDW WKHUH LV QRW D
VXEVWDQWLDO OLNHOLKRRG RI OLDELOLW\ EDVHG XSRQ D IDLOXUH WR DVVXUH WKDW
UHDVRQDEOH UHSRUWLQJ V\VWHPV H[LVWHG
$W RQH KRVSLWDO RI D ORQJWHUP ORDQ ZDV HUURQHRXVO\
DWWULEXWHG WR FDSLWDO DQG WKH DXGLWRUV FRQFHDOHG WKH HUURU IURP WKH
JRYHUQPHQW $ PLOOLRQ UHVHUYH ZDV VHW DVLGH LQ FDVH WKH HUURU ZDV
GLVFRYHUHG
$XGLW&RPPLWWHH
7KH%RDUG¶V$XGLW&RPPLWWHHZDVFKDUJHGZLWKUHYLHZLQJ
WKHSURJUDPVRI&ROXPELD¶VLQWHUQDODXGLWRUVWKHUHVXOWVRI
WKHLU DXGLWV DQG WKH DGHTXDF\ RI &ROXPELD¶V V\VWHP RI
LQWHUQDO FRQWUROV DQG DFFRXQWLQJ SUDFWLFHV 7KH $XGLW
&RPPLWWHHDOVRUHSRUWHGWRWKHUHVWRIWKH%RDUG,WLVDOOHJHG
WKDW &ROXPELD¶V LQWHUQDO DXGLW VWDII DXGLWHG LWV KRVSLWDOV
QDWLRQZLGHIRFXVLQJ³SULPDULO\RQWKRVHDUHDVWKDWDIIHFWWKH
&RPSDQ\¶VSURILWPDUJLQ´DQGDGGUHVVLQJ³LVVXHVZLWKOHJDO
UDPLILFDWLRQVWKDWPD\LQFOXGHSRVVLEOHYLRODWLRQVRIODZ´
3ODLQWLIIVFRQWHQGWKDWLQIRUPDWLRQSURYLGHGE\WKHDXGLWV
DERXW&ROXPELD¶VUHLPEXUVHPHQWSUDFWLFHVZRXOGKDYHVKRZQ
XQPLVWDNDEOH VLJQV WKDW LPSURSHU SUDFWLFHV ZHUH EHLQJ
HPSOR\HG WKURXJKRXW WKH FRUSRUDWLRQ 6SHFLILFDOO\ WKH
UHSRUWVDOOHJHGO\LQGLFDWHGGLVFUHSDQFLHVEHWZHHQFRVWUHSRUWV
VXEPLWWHG WR WKH JRYHUQPHQW DQG VHFUHW UHVHUYH UHSRUWV
LPSURSHULQFOXVLRQRIPRQH\VSHQWRQSK\VLFLDQUHFUXLWPHQW
PDUNHWLQJ DQG DGYHUWLVHPHQW ZLWK FODLPV IRU SDWLHQW FDUH
UHLPEXUVHPHQWLPSURSHUVKLIWLQJRIFRVWVIURPLQSDWLHQWWR
RXWSDWLHQW VHUYLFHV WR JHW KLJKHU UHLPEXUVHPHQW UDWHV DQG
H[WUDIHHVSDLGWRUHIHUULQJSK\VLFLDQV
3ODLQWLIIVDOVRDOOHJHGWKDWWKHDXGLWVSURYLGHGVWDWLVWLFDO
HYLGHQFH RI ZLGHVSUHDG LOOHJDO ³XSFRGLQJ´ LQ WKH IRUP RI
FRQVLVWHQWO\DERYHDYHUDJHUHLPEXUVHPHQWVIRULOOQHVVELOOHG
XQGHUWKHKLJKHVW'5*FRGHVZKLFKZHUHUHIOHFWHGLQWKH
FDVHPL[LQGH[ &0, 6FRWWDOOHJHGO\UHYLHZHGWKHUDWHRI

-- 14 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
,Q WKH $XGLW &RPPLWWHH RI &ROXPELD¶V %RDUG
FRQVLVWHG RI $YHUKRII 5HLFKDUGW DQG /RQJ ,Q
0DF1DXJKWRQ UHSODFHG /RQJ $YHUKRII D SK\VLFLDQ
SUDFWLFLQJLQ0LDPL)ORULGDEHFDPHD&ROXPELDGLUHFWRULQ
6KHKDGDQHTXLW\LQWHUHVWLQDSDUWQHUVKLSWKDWKHOGD
PLQRULW\LQYHVWPHQWLQ&HGDUV0HGLFDO&HQWHUD&ROXPELD
DFTXLVLWLRQORFDWHGLQ0LDPL)ORULGD0DF1DXJKWRQZDVD
IRUPHU &KDLUPDQ DQG &(2 RI ERWK +&$ DQG 3UXGHQWLDO
,QVXUDQFH&RPSDQ\+HDOVRKDGUHWLUHGIURP+HDOWKWUXVW
ZKHUH KH KDG VHUYHG DV &KDLUPDQ RI WKH ([HFXWLYH
&RPPLWWHH
5HLFKDUGW EHFDPH D &ROXPELD GLUHFWRU LQ DQG ZDV
&KDLUPDQRILWV$XGLW&RPPLWWHH5HLFKDUGWZDV&KDLUPDQ
DQG&(2RI:HOOV)DUJR &RPSDQ\DQGLWVVXEVLGLDU\:HOOV
)DUJR%DQNIURPXQWLO'XULQJWKDWWLPH:HOOV
)DUJRSURYLGHGVXEVWDQWLDOILQDQFLDOEDFNLQJWR+&$6LQFH
WKHQ:HOOV)DUJRKDVSURYLGHGPLOOLRQRIDELOOLRQ
FUHGLWIDFLOLW\WR&ROXPELD
/RQJEHFDPHD&ROXPELDGLUHFWRULQDQGVHUYHGRQ
WKH%RDUG¶V$XGLWDQG&RPSHQVDWLRQ&RPPLWWHHV/RQJLVD
SDUWQHULQDSULYDWHEDQNLQJILUPDQGFRPDQDJHURI7KH
)XQG/3ZKLFKSXUFKDVHGDPLOOLRQ&ROXPELDQRWHLQ

*LYHQ WKHLUSULRUH[SHULHQFHSODLQWLIIVPDLQWDLQWKDWWKH
IDLOXUHRIWKHVHGLUHFWRUVWRDFWZDVWKHUHVXOWRIDQLQWHQWLRQDO
RU UHFNOHVV GLVUHJDUG RI WKH ³UHG IODJV´ WKDW ZDUQHG RI WKH
V\VWHPDWLFIUDXGXOHQWSUDFWLFHVHPSOR\HGDQGHQFRXUDJHGE\
&ROXPELDPDQDJHPHQW,QSDUWLFXODUSODLQWLIIVDOOHJHGWKDW
LQWHQWLRQDO RU UHFNOHVV GLVUHJDUG FDQ EH LQIHUUHG IURP WKH
IDLOXUH WR DFW LQ WKH IDFH RI DXGLW LQIRUPDWLRQ RQJRLQJ
DFTXLVLWLRQSUDFWLFHVDOOHJDWLRQVEURXJKWDJDLQVW&ROXPELDLQ
DTXLWDPDFWLRQWKHH[WHQVLYHIHGHUDOLQYHVWLJDWLRQWKH1HZ
<RUN7LPHV¶LQYHVWLJDWLRQLQWR&ROXPELD¶VELOOLQJSUDFWLFHV
DQGLQDFWLRQE\WKH%RDUGSULRUWR-XO\
1RV 0F&DOOHWDOY6FRWWHWDO
*UDKDPY$OOLV&KDOPHUV0IJ&R$G 'HO
6LQFHWKHQWKH'HODZDUH6XSUHPH&RXUWVSHFLILFDOO\
DGRSWHG JURVV QHJOLJHQFH DV WKH VWDQGDUG IRU PHDVXULQJ D
GLUHFWRU¶V OLDELOLW\ IRU D EUHDFK RI WKH GXW\ RI FDUH 6HH
$URQVRQ$GDW6PLWKY9DQ*RUNRP$G
'HO
$IWHUUHYLHZLQJWKHFDVHVZHFDQQRWDJUHHZLWKWKHGLVWULFW
FRXUW¶VFRQFOXVLRQWKDW&DUHPDUNUHTXLUHVDGLUHFWRUWRKDYH
LQWHQWLRQDOO\DFWHGWRKDUPWKHFRUSRUDWLRQ:KLOHGHIHQGDQWV
GRQRWGHQ\WKDWVRPHWKLQJOHVVWKDQLQWHQWLRQDOFRQGXFWPD\
VWDWH D FODLP XQGHU &DUHPDUN WKH\ DUJXH LQVWHDG WKDW
LQWHQWLRQDO FRQGXFW LV UHTXLUHG WR RYHUFRPH WKH ZDLYHU RI
OLDELOLW\DGRSWHGE\&ROXPELDSXUVXDQWWR'HODZDUHVWDWXWH
6HH &DUHPDUN $G DW Q '(/ &2'( $11
† E &ROXPELD¶V5HVWDWHG&HUWLILFDWHRI,QFRUSRUDWLRQ
SURYLGHVDVIROORZV
7:(/)7+$GLUHFWRURIWKH&RUSRUDWLRQVKDOOQRWEH
SHUVRQDOO\OLDEOHWRWKH&RUSRUDWLRQRULWVVWRFNKROGHUV
IRUPRQHWDU\GDPDJHVIRUEUHDFKRIILGXFLDU\GXW\DVD
GLUHFWRUSURYLGHGKRZHYHUWKDWWKHIRUHJRLQJVKDOOQRW
HOLPLQDWHRUOLPLWWKHOLDELOLW\RIDGLUHFWRU L IRUDQ\
EUHDFKRIWKHGLUHFWRU¶VGXW\RIOR\DOW\WRWKH&RUSRUDWLRQ
RULWVVWRFNKROGHUV LL IRUDFWVRURPLVVLRQVQRWLQJRRG
IDLWK RU ZKLFK LQYROYH LQWHQWLRQDO PLVFRQGXFW RU D
NQRZLQJYLRODWLRQRIODZ LLL XQGHU6HFWLRQRIWKH
*HQHUDO&RUSRUDWLRQ/DZRI'HODZDUHRU LY IRUDQ\
WUDQVDFWLRQIURPZKLFKWKHGLUHFWRUGHULYHGDQLPSURSHU
SHUVRQDOEHQHILW
:KHQWKHYDOLGLW\RIVXFKDSURYLVLRQLVQRWFRQWHVWHGDQGWKH
IDFWXDOEDVLVIRUWKHFODLPVLPSOLFDWHVRQO\DEUHDFKRIWKH
GXW\ RI FDUH WKH ZDLYHU PD\ SURSHUO\ EH FRQVLGHUHG DQG
DSSOLHGLQGHFLGLQJDPRWLRQWRGLVPLVVIRUIDLOXUHWRPDNHD
SUHVXLWGHPDQG%D[WHU,QW¶O$GDW5RWKHQEHUJ

-- 15 of 16 --

0F&DOOHWDOY6FRWWHWDO 1RV
6LQFH WKH SURWHFWLRQ RI VXFK D SURYLVLRQ LV LQ WKH QDWXUH RI DQ
DIILUPDWLYH GHIHQVH D GHIHQGDQW VHHNLQJ H[FXOSDWLRQ EHDUV WKH EXUGHQ RI
HVWDEOLVKLQJ LWV HOHPHQWV (PHUDOG 3DUWQHUV Y %HUOLQ $G
'HO $V D UHVXOW LW LV QRW WKH SODLQWLII ZKR PXVW HVWDEOLVK
EDG IDLWK DW WULDO EXW WKH GHIHQGDQW ZKR EHDUV WKH EXUGHQ KRZHYHU VOLJKW
WR VKRZ JRRG IDLWK ,G ,Q WKH FRQWH[W RI GHWHUPLQLQJ GHPDQG IXWLOLW\ RI
FRXUVH QR HYLGHQFH LV UHTXLUHG VLQFH WKH LVVXH LV ZKHWKHU WKH
SDUWLFXODUL]HG IDFWXDO DOOHJDWLRQV DUH VXIILFLHQW WR FUHDWH GRXEW DERXW WKH
GLVLQWHUHVWHGQHVV DQG LQGHSHQGHQFH RI D PDMRULW\ RI WKH GLUHFWRUV
Y6DQWD)H3DF&RUS&$:/ 'HO
&K0D\
3ODLQWLIIV PDLQWDLQ WKDW WKHLU GXW\ RI FDUH FODLPV DUH QRW
EDUUHG DV WKH VHFRQG H[FHSWLRQ H[FOXGHV SURWHFWLRQ IURP
GLUHFWRUOLDELOLW\IRU³DFWVRURPLVVLRQVQRWLQJRRGIDLWKRU
ZKLFKLQYROYHLQWHQWLRQDOPLVFRQGXFWRUDNQRZLQJYLRODWLRQ
RIODZ´$OWKRXJKSODLQWLIIVXUJHXVWRLQWHUSUHW³LQWHQWLRQDO
PLVFRQGXFW´WRLQFOXGH³UHFNOHVVQHVV´ZHGRQRWEHOLHYHWKH
'HODZDUH6XSUHPH&RXUWZRXOGLQWHUSUHWWKHSURYLVLRQLQWKLV
ZD\ 6WLOO LW LV XQFOHDU ZKHWKHU VRPH UHFNOHVV DFWV RU
RPLVVLRQVPD\EHH[FOXGHGIURPWKHSURWHFWLRQRISURYLVLRQV
DGRSWHGSXUVXDQWWR† E $VRQHWUHDWLVHH[SODLQHG
:KHWKHU WKH VWDWXWH ZRXOG SURWHFW D GLUHFWRU DJDLQVW
UHFNOHVVDFWVLVQRWDOWRJHWKHUFOHDU7RWKHH[WHQWWKDW
UHFNOHVVQHVVLQYROYHVDFRQVFLRXVGLVUHJDUGRIDNQRZQ
ULVNLWFRXOGEHDUJXHGWKDWVXFKDQDSSURDFKLVQRWRQH
WDNHQ LQ JRRG IDLWK DQG WKXV FRXOG QRW EH OLDELOLW\
H[HPSWHGXQGHUWKHQHZVWDWXWH2QWKHRWKHUKDQGWR
WKH H[WHQW WKDW WKH FRQGXFW DOOHJHG WR EH UHFNOHVV LV
SUHGLFDWHGVROHO\RQDOOHJDWLRQVRIVXVWDLQHGLQDWWHQWLRQ
WRWKHGXW\LWLVDUJXDEOHZKHWKHUVXFKFRQGXFWLV³JURVVO\
QHJOLJHQW´EXWQRWFRQGXFWDPRXQWLQJWREDGIDLWK
%$/277, ),1.(/67(,1'(/$:$5( /$: 2) &25325$7,216
$1' %86,1(66 25*$1,=$7,216†DWWR
GHG6XSS 7KXVZHILQGWKHGLVWULFWFRXUWHUUHGLQ
FRQFOXGLQJWKDWRQO\LQWHQWLRQDOFRQGXFWZRXOGHVFDSHWKH
SURWHFWLRQRIWKHSURYLVLRQDGRSWHGLQ&ROXPELD¶V5HVWDWHG
&HUWLILFDWHRI,QFRUSRUDWLRQ
1RV 0F&DOOHWDOY6FRWWHWDO
' 3ODLQWLIIV¶3DUWLFXODUL]HG$OOHJDWLRQV
:HILQGWKDWWKHSDUWLFXODUL]HGIDFWVZKHQWDNHQWRJHWKHU
DUHVXIILFLHQWWRSUHVHQWDVXEVWDQWLDOOLNHOLKRRGRIOLDELOLW\RQ
WKHSDUWRIDWOHDVWILYHRI&ROXPELD¶VGLUHFWRUVZKLFKFUHDWHV
DUHDVRQDEOHGRXEWDVWRWKHGLVLQWHUHVWHGQHVVRIDPDMRULW\RI
WKH%RDUGDVRI$SULO$WWKHVDPHWLPHZHFDXWLRQ
WKDW WKLV FRQFOXVLRQ LQYROYHV RQO\ WKH VXIILFLHQF\ RI WKH
SOHDGLQJV ZLWK UHVSHFW WR GHPDQG IXWLOLW\ DQG UHIOHFWV QR
RSLQLRQDVWRWKHWUXWKRIWKHDOOHJDWLRQVRUWKHRXWFRPHRIWKH
FODLPVRQWKHPHULWV
$ VLJQLILFDQW IDFWRU LQ RXU DVVHVVPHQW RI WKH IDFWXDO
DOOHJDWLRQV ZDV WKH SULRU H[SHULHQFH RI D QXPEHU RI WKH
GHIHQGDQWV DV GLUHFWRUV RU PDQDJHUV RI KHDOWK FDUH
RUJDQL]DWLRQVWKDWZHUHDFTXLUHGE\&ROXPELD)ULVWZDV9LFH
&KDLUPDQ RI &ROXPELD¶V %RDUG IURP XQWLO -XO\
ZKHQKHZDVDSSRLQWHGWRVXFFHHG6FRWWDV&KDLUPDQ
DQG &(2 )ULVW KDG EHHQ 3UHVLGHQW DQG &(2 RI +RVSLWDO
&RUSRUDWLRQ RI $PHULFD +&$ IURP XQWLO LW ZDV
DFTXLUHGE\&ROXPELDLQ
0F:KRUWHUVHUYHGDV&ROXPELD¶V&KDLUPDQIRURQH\HDUDW
DQ DQQXDO VDODU\ RI DIWHU &ROXPELD DFTXLUHG
+HDOWKWUXVW ,QF7KH +RVSLWDO &RPSDQ\ +HDOWKWUXVW LQ
+HWHUPLQDWHGKLVHPSOR\PHQWLQEXWFRQWLQXHG
WRVHUYHDVDGLUHFWRU0F:KRUWHUZDV&KDLUPDQDQG&(2RI
+HDOWKWUXVW IURP WR +H ZDV DOVR &22 DQG D
GLUHFWRURI+&$IURPWR
5R\DO D SK\VLFLDQ SUDFWLFLQJ LQ 5LFKPRQG 9LUJLQLD
EHFDPH D PHPEHU RI &ROXPELD¶V %RDUG LQ DQG KDV
VHUYHG RQ &ROXPELD¶V &RPSHQVDWLRQ &RPPLWWHH ZKLFK
DSSURYHVFRPSHQVDWLRQDUUDQJHPHQWVIRUPDQDJHPHQWJUDQWV
VWRFNRSWLRQVDQGUHYLHZVHPSOR\HHFRPSHQVDWLRQSROLFLHV
%HIRUHMRLQLQJ&ROXPELD¶V%RDUG5R\DOKDGEHHQDGLUHFWRU
RI+&$DQGDPHPEHURILWVDXGLWFRPPLWWHH<RXQJZKR
MRLQHG &ROXPELD¶V %RDUG LQ ZDV &KDLUPDQ RI
&ROXPELD¶V &RPSHQVDWLRQ &RPPLWWHH <RXQJ KDG
SUHYLRXVO\ EHHQ D ERDUG PHPEHU DQG &KDLUPDQ RI WKH
([HFXWLYH&RPPLWWHHRI+XPDQD,QF

-- 16 of 16 --

Continue your research in ChatGPT or Claude

Connect Omnilex to search the legal corpus from your AI assistant.