01a0058p.06

6LQJOHWRQY6PLWKHWDO 1R
2QUHPDQGWKHPDJLVWUDWHMXGJHPXVWILUVWGHWHUPLQHLQ
ZKLFK FDWHJRU\ HDFK RI WKH DVVHVVHG FRVWV IDOOV $IWHU
LPSRVLQJOLDELOLW\RQ6LQJOHWRQIRUDQ\FRVWVIRXQGWREHLQ
WKHWKLUGFDWHJRU\WKHPDJLVWUDWHPXVWWKHQDOORZ6LQJOHWRQ
DQRSSRUWXQLW\WRSURYHWKDWKHZLOOEHXQDEOHWRSD\WKHFRVWV
IRXQGWREHLQWKHILUVWDQGVHFRQGFDWHJRU\,IWKLVVKRZLQJ
ZDUUDQWVUHOLHIIURPWKRVHFRVWVVXEMHFWWRFKDOOHQJHWKHFRVWV
VKRXOG EH UHGXFHG RU HOLPLQDWHG IURP WKH WRWDO DVVHVVHG
DJDLQVWWKHDSSHOODQW
,,,
7KH DZDUG RI FRVWV DJDLQVW 6LQJOHWRQ LV $)),50('
+RZHYHUEHFDXVH6LQJOHWRQPD\FKDOOHQJHDWOHDVWSDUWRI
WKLVDZDUGRQWKHJURXQGVRILQDELOLW\WRSD\ZH5(0$1'
IRUIXUWKHUSURFHHGLQJVQRWLQFRQVLVWHQWZLWKWKLVRSLQLRQ

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
$/3+2162 6,1*/(721
3ODLQWLII$SSHOODQW
Y
/(( (':$5' 60,7+DQG(5,&
5266
'HIHQGDQWV$SSHOOHHV
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&ROXPEXV
1R²(GPXQG$6DUJXV-U'LVWULFW-XGJH
$UJXHG1RYHPEHU
'HFLGHGDQG)LOHG0DUFK
%HIRUH.(,7+%2**6DQG&2/(&LUFXLW-XGJHV
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' 'DYLG $ *ROGEHUJHU $&/8 2) 2+,2
)281'$7,21,1&&ROXPEXV2KLRIRU$SSHOODQW-
(ULF+ROORZD\2)),&(2)7+($77251(<*(1(5$/
&255(&7,216/,7,*$7,216(&7,21&ROXPEXV2KLR
IRU$SSHOOHHV21%5,()'DYLG$*ROGEHUJHU$&/8
2)2+,2)281'$7,21,1&&ROXPEXV2KLR$QQH0

-- 1 of 8 --

6LQJOHWRQY6PLWKHWDO 1R
'R\OH2+,267$7(81,9(56,7<&2//(*(2)/$:
&/,1,&$/352*5$06&ROXPEXV2KLRIRU$SSHOODQW
-RVKXD7&R[2)),&(2)7+($77251(<*(1(5$/
&255(&7,216/,7,*$7,216(&7,21&ROXPEXV2KLR
IRU$SSHOOHHV
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
%2**6&LUFXLW-XGJH)ROORZLQJDQHJDWLYHMXU\YHUGLFW
LQ KLV FLYLO WULDO FRVWV ZHUH LPSRVHG DJDLQVW DSSHOODQW
6LQJOHWRQ SXUVXDQW WR WKH 3ULVRQHU /LWLJDWLRQ 5HIRUP $FW
³3/5$´ 86&† I 6LQJOHWRQDSSHDOVDQRUGHU
WKDWGHQLHGKLPUHOLHIIURPFRVWVRIDUJXLQJWKDW
LPSRVLWLRQRIWKHFRVWVZDVDPLVDSSOLFDWLRQRIWKH3/5$DQG
LQWHUSUHWLYHFDVHODZ,QWKHDOWHUQDWLYHKHDUJXHVWKDWVXFK
DQDSSOLFDWLRQZRXOGEHDQ XQFRQVWLWXWLRQDOEXUGHQRQKLV
DFFHVVWRWKHFRXUWV,QWKHVHFRQGDOWHUQDWLYHKHFODLPVWKDW
XVHRIWKLVSURYLVLRQRIWKH3/5$ZRXOGEHLPSHUPLVVLEO\
UHWURDFWLYHDVKLVFDVHZDVILOHGSULRUWRWKHHIIHFWLYHGDWHRI
WKHVWDWXWH6LQJOHWRQVHHNVWRKDYHWKHMXGJPHQWRIFRVWV
UHYHUVHGRQJURXQGVRIOHJDOHUURURUWKHXQFRQVWLWXWLRQDOLW\
RIWKHUHOHYDQWSURYLVLRQVRIWKH3/5$$OWHUQDWLYHO\LIKLV
UHWURDFWLYLW\ FODLP VXFFHHGV KH VHHNV D UHPDQG IRU
DVVHVVPHQW RI SRVVLEOH UHOLHI EDVHG RQ LQGLJHQF\ LQ
DFFRUGDQFH ZLWK QRZVXSHUVHGHG SURFHGXUHV RXWOLQHG LQ
:HDYHUY7RRPEV)G WK&LU :H
ILQG6LQJOHWRQ¶VUHWURDFWLYLW\FODLPWRKDYHPHULWDQGUHPDQG
IRUIXUWKHUSURFHHGLQJV
,
7KHPHULWVRI6LQJOHWRQ¶VFRPSODLQWDUHQRWDWLVVXHKHUH
EXWPD\EHXVHIXOIRUFRQWH[W6LQJOHWRQDQ2KLRSULVRQHULV
D GLDJQRVHG DVWKPDWLF ZKR ZDV LQFDUFHUDWHG LQ WKH
&RUUHFWLRQDO5HFHSWLRQ&HQWHULQ2ULHQW2KLRLQ+H
FODLPHGWRKDYHUHTXHVWHGDQRQVPRNLQJHQYLURQPHQWDQG
EHHQ GHQLHG LW ,QGHHG KH VDLG WKH GHIHQGDQWV ZKR DUH
FRUUHFWLRQVVHUJHDQWVWROGRWKHULQPDWHVWR³VPRNHKLPRXW´
1R 6LQJOHWRQY6PLWKHWDO
7KH 3/5$ ZDV PHDQW WR UHJXODWH 6LQJOHWRQ¶V OLWLJDWLRQ
EHKDYLRU,QSDUWLFXODUWKHSURYLVLRQVRQFRVWVDQGIHHVZHUH
PHDQWWRDOWHUKLVHFRQRPLFLQFHQWLYHVWRWDNHOHJDODFWLRQV
:KHQKHWRRNVXFKDFWLRQV6LQJOHWRQKDGVHWWOHGH[SHFWDWLRQV
DERXW KLV XOWLPDWH OLDELOLW\ IRU WKH HQWDLOHG FRVWV 7KHVH
H[SHFWDWLRQVZRXOGEHXSVHWE\WKHUHWURDFWLYHHOLPLQDWLRQRI
D:HDYHUFKDOOHQJHDQGIROORZLQJWKHJXLGHRI/DQGJUDIDQG
0DUWLQ6LQJOHWRQVKRXOGEHSURWHFWHGDVWRWKHOHJDOHIIHFWRI
WKHDFWLRQVKHWRRN7KHUHIRUHLWZRXOGEHLPSHUPLVVLEO\
UHWURDFWLYHWRHOLPLQDWHD:HDYHUFKDOOHQJHWRFRVWVWKDWUHODWH
WR³HYHQWVFRPSOHWHG´SULRUWR0DUFK
7KHUHPDLQLQJDPELJXLW\KDVWRGRZLWKZKHQ³HYHQWVZHUH
FRPSOHWHG´RU³H[SHFWDWLRQVEHFDPHVHWWOHG´ZLWKUHJDUGWR
RQH RU DOO RI WKH FRVWV LQ WKLV FDVH 8QOLNH ZLWK WKH IHH
VHHNLQJDWWRUQH\VLQ0DUWLQWKHFUHDWLRQRIWKHFRVWVKHUHZDV
QRWXQGHUFRPSOHWHFRQWURORIWKHLQGLYLGXDOEHLQJUHJXODWHG
E\WKHQHZUXOH/RJLFDOO\IRUWKHSXUSRVHVRIUHWURDFWLYH
DSSOLFDWLRQDQHYHQWZRXOGEH³FRPSOHWHG´ZKHQ6LQJOHWRQ
WRRNDQDFWLRQWKDWPDGHWKHRWKHUSDUW\¶VFRVWLQHYLWDEOH7KH
FRVWVLQWKLVFDVHPD\EHGLYLGHGLQWRWKUHHFDWHJRULHV,QWKH
ILUVWFDWHJRU\ZRXOGEHWKRVHFRVWVLQFXUUHGE\GHIHQGDQWV
SULRUWRWKH3/5$ZKLFKIRUSXUSRVHVRIWKLVTXHVWLRQKDVWKH
HIIHFWLYH GDWH RI 0DUFK 7KH FRVWV RI GHSRVLQJ
6LQJOHWRQ IDOO LQWR WKLV FDWHJRU\ ,Q WKH VHFRQG FDWHJRU\
ZRXOGEHFRVWVLQFXUUHGE\WKHGHIHQGDQWVDIWHUWKH3/5$EXW
PDGH QHFHVVDU\ E\ DFWLRQV WDNHQ E\ 6LQJOHWRQ VXFK DV
QRWLFLQJZLWQHVVHV SULRUWRWKH3/5$7KHWKLUGFDWHJRU\
ZRXOGFRQVLVWRIFRVWVPDGHQHFHVVDU\DQGLQFXUUHGRQO\DIWHU
WKH3/5$7KHSURYLVLRQVRIWKH3/5$FRPSHOOLQJSD\PHQW
LQIXOOPD\RQO\EHSHUPLVVLEO\DSSOLHGWRWKHFRVWVLQWKH
WKLUG FDWHJRU\ $SSHOODQW LV IXOO\ UHVSRQVLEOH IRU FRVWV
GHWHUPLQHG WR EH LQ WKH WKLUG FDWHJRU\ 6LQJOHWRQ PD\
FKDOOHQJHXQGHU:HDYHUWKRVHFRVWVGHWHUPLQHGWREHLQWKH
ILUVWRUVHFRQGFDWHJRU\:HDYHUGLUHFWHGWKDWSRVWWD[DWLRQ
FKDOOHQJHVEHKHDUGEHIRUHWKHMXGLFLDORIILFHUZKRRULJLQDOO\
DOORZHGWKHSODLQWLIIWRSURFHHGLQIRUPDSDXSHULV)G
DW6LQJOHWRQZDVJUDQWHG,)3VWDWXVRQ6HSWHPEHU
E\RUGHURI0DJLVWUDWH-XGJH0DUN$EHOZKRLVQRZWKH
SURSHURIILFHUWRDGMXGLFDWH6LQJOHWRQ¶VFKDOOHQJH

-- 2 of 8 --

6LQJOHWRQY6PLWKHWDO 1R
FRQWLQXLQJDELOLW\WRZLWKGUDZLIWKH\WKRXJKWWKH\ZRXOGQRW
EHSDLGHQRXJKXQGHUWKHQHZUXOHV6HH86DW
0DUWLQ SURWHFWHG WKH VHWWOHG H[SHFWDWLRQV RI DWWRUQH\V
UHJDUGLQJ WKH EHQHILWV RI ILOLQJ D SULVRQHU VXLW DQG WKHUH
DSSHDUVWREHQRUHDVRQQRWWRSURWHFWWKHH[SHFWDWLRQVRIWKH
OLWLJDQWKLPVHOI$OWKRXJK6LQJOHWRQZDVDOZD\VOLDEOHIRUKLV
FRVWV XQWLO 0DUFK :HDYHU SURYLGHG D EDFNVWRS WKDW
ZRXOGSUREDEO\KDYHSUHYHQWHGKLPIURPEHLQJVXEMHFWWRD
SRVWLQFDUFHUDWLRQGHEWLPPHGLDWHO\SD\DEOH7KHILUVWFRVW
FXUUHQWO\ DVVHVVHG DJDLQVW 6LQJOHWRQ LV IRU GHIHQGDQWV¶
GHSRVLWLRQRIKLPPRQWKVEHIRUHWKH3/5$EHFDPHHIIHFWLYH
3HUVXDVLYHDXWKRULW\YDULHVRQUHWURDFWLYHDSSOLFDWLRQVRI
WKH 3/5$¶V SUHYDLOLQJSDUW\ FRVW SURYLVLRQV ,Q DQ
XQSXEOLVKHGGHFLVLRQDSDQHORIWKLVFRXUWKHOGWKDWWKHQHZ
PHWKRG IRU SD\LQJ FRVWV LPSRVHG E\ WKH FRXUW ³PHUHO\
HVWDEOLVKHVDSURFHGXUH´DQGLWWKHUHE\XSKHOGLQFRVWV
GHVSLWHWKHIDFWWKDWWKHFRPSODLQWKDGEHHQILOHGIRXU\HDUV
SULRUWRWKH3/5$ 6HH6DQGHUVY6HDEROG1R
:/ WK &LU $XJ XQSXEOLVKHG
+RZHYHURQHRIRXUGLVWULFWFRXUWGHFLVLRQVSULRUWR6DQGHUV
KHOG WR WKH RSSRVLWH HIIHFW ± ³WKH 6L[WK &LUFXLW¶V UHFHQW
DGPLQLVWUDWLYHRUGHUGRHVFRQWDLQLQGLFDWLRQVWKDWWKH6L[WK
&LUFXLWZRXOGKROGWKDWLQFDVHVILOHGSULRUWRWKHHQDFWPHQW
RI WKH 3/5$ SUH3/5$ VWDQGDUGV VKRXOG EH DSSOLHG LQ
GHWHUPLQLQJZKHWKHUWRUHOLHYHDSULVRQHUOLWLJDQWRIRWKHUZLVH
WD[DEOHFRVWVRQWKHEDVLVRILQGLJHQF\´:LOFR[Y6WUDXE
1R86'LVW/H[LV :'0LFK
-XQ UHIHUULQJ WR ,Q UH 3/5$ 7KH 6DQGHUV
RSLQLRQ ZDV KDQGHG GRZQ RQO\ VKRUWO\ DIWHU WKH 6XSUHPH
&RXUW¶VRSLQLRQLQ0DUWLQDQGPDNHVQRUHIHUHQFHWRLWRUWR
LWVUHQHZHGHPSKDVLVWKDWSURFHGXUDOODEHOLVQRWHQRXJKWR
LQVXODWH QHZ UXOHV VSHFLILFDOO\ 3/5$ UXOHV IURP D
UHWURDFWLYLW\LQTXLU\6HH86DW1RUGLG6DQGHUV
XQOLNH:LOFR[DQDO\]HRXULQVWUXFWLRQVLQ,QUH3/5$ZKLFK
PDUNHG WKH DFWXDO GHPLVH RI WKH :HDYHU SURFHGXUH
0RUHRYHU EHFDXVH WKH FRPSODLQW LQ 6DQGHUV ZDV GHHPHG
IULYRORXVWKHUHZHUHPXOWLSOHJURXQGVRQZKLFKWRLPSRVH
FRVWVRQWKHSODLQWLII
1R 6LQJOHWRQY6PLWKHWDO
EHFDXVH KH ZDV ³DQ DVVKROH´ 6LQJOHWRQ FODLPHG WKDW KLV
DVWKPDZDVZRUVHQHGDVDUHVXOWRIWKHFLJDUHWWHVPRNHWR
ZKLFK KH ZDV H[SRVHG E\ GHIHQGDQWV¶ DOOHJHG DFWV RI
FRPPLVVLRQDQGRPLVVLRQ,Q6LQJOHWRQILOHGDFLYLO
ULJKWV FODLP XQGHU 86& † FODLPLQJ GHOLEHUDWH
LQGLIIHUHQFHVXIILFLHQWWRFRQVWLWXWHDYLRODWLRQRIWKH(LJKWK
$PHQGPHQW6XPPDU\MXGJPHQWIRUGHIHQGDQWVZDVGHQLHG
DQGIROORZLQJPXFKZUDQJOLQJWKHFDVHSURFHHGHGWRWULDOLQ
0DUFK'LUHFWHGYHUGLFWPRWLRQVZHUHDOVRGHQLHGDQG
WKHFDVHSURFHHGHGWRDMXU\ZKLFKIROORZLQJGHOLEHUDWLRQ
UXOHG DJDLQVW 6LQJOHWRQ 6PLWK DQG 5RVV WKHQ PRYHG WR
UHFRYHUIURPWKHDSSHOODQWWKHFRVWVWKH\KDGLQFXUUHGIRUWKH
GHSRVLWLRQVWDNHQIURP6LQJOHWRQDQGKLVZLWQHVVHVDQGIRU
WKHGHSRVLWLRQVWDNHQIURPWKHGHIHQGDQWVDQGWKHLUPHGLFDO
H[SHUW7KH3/5$ZDVKHOGWRJRYHUQWKHLPSRVLWLRQRIWKH
FRVWVZKLFKZHUHWD[HGDJDLQVW6LQJOHWRQ7KH6WDWHRI2KLR
ZKLFKGHIHQGHGWKHDFWLRQDJDLQVWWKHFRUUHFWLRQVVHUJHDQWV
VWDQGVWRUHFHLYHWKHDZDUG
6SHFLILFDOO\FRVWVZHUHDVVHVVHGIRU WKHGHIHQGDQWV¶
GHSRVLWLRQ RI WKH SODLQWLIIDSSHOODQW RQ -DQXDU\
WKHGHIHQGDQWV¶GHSRVLWLRQVRIWKHGHIHQGDQWVDSSHOOHHVRQ
1RYHPEHU WKHGHIHQGDQWV¶GHSRVLWLRQVRIIRXU
LQPDWHVRQ-DQXDU\ WKHGHIHQGDQWV¶GHSRVLWLRQV
RI WZR RWKHU LQPDWHV RQ )HEUXDU\ WKH
GHIHQGDQWV¶ GHSRVLWLRQ RI 6LQJOHWRQ¶V PHGLFDO H[SHUW RQ
)HEUXDU\DQG GHIHQGDQWV¶WZRGHSRVLWLRQV RQH
DYLGHRGHSRVLWLRQ RIWKHLURZQPHGLFDOH[SHUWRQ0DUFK
6LQJOHWRQ GRHV QRW FKDOOHQJH WKH QHFHVVLW\ RI WKHVH
FRVWVRUSUHVHQWOHJDOFKDOOHQJHVWRDQ\RIWKHPLQGLYLGXDOO\
7KHVH GHSRVLWLRQV EHJDQ DIWHU -XGJH %HFNZLWK WKHQ
KDQGOLQJWKHFDVH GHQLHGDGHIHQVHPRWLRQWRUHFRQVLGHUWKH
PDJLVWUDWH MXGJH¶V UHSRUW DQG UHFRPPHQGDWLRQ GHQ\LQJ
VXPPDU\MXGJPHQW7KLVRFFXUUHGRQ-DQXDU\DQG
ZDV IROORZHG E\ DQ RUGHU WR ILOH D ZULWWHQ VWDWHPHQW RQ
UHDGLQHVVWRSURFHHGWRWULDO -DQXDU\ 6LQJOHWRQ¶V
GHSRVLWLRQZDVQRWLFHGWRWKHFRXUWWKHQH[WGD\DQGWDNHQWZR
ZHHNVODWHU7KHGHSRVLWLRQVRIWKHFRUUHFWLRQVRIILFHUVZHUH
QRWQRWLFHG

-- 3 of 8 --

6LQJOHWRQY6PLWKHWDO 1R
:KHQ6LQJOHWRQLGHQWLILHGKLVZLWQHVVHVLVQRWDSSDUHQWLQ
DOO FDVHV IURP WKH UHFRUG EHIRUH XV ,Q D QRWLFH ILOHG
-DQXDU\KHLGHQWLILHG7LPRWK\6ORQH GHSRVHGRQ
DQG DOVR PHQWLRQHG KLV ZULW ZULWHU 'DUU\O
%ODQNHQVKLS GHSRVHG ,QDQRWLFHILOHGRQ-XQH
6LQJOHWRQLGHQWLILHG7UR\+DUVKH\ GHSRVHG
6ORQH DJDLQ DQG KLV ROG FHOO PDWH +RZDUG %RGGLH -U
GHSRVHG
$WWKHFRQFOXVLRQRIWKHWULDOWKHGHIHQGDQWSUHVHQWHGD%LOO
RI &RVWV IRU 7KH FOHUN RI WKH FRXUW GLVDOORZHG
VRPHFRVWVDQGDVVHVVHG6LQJOHWRQ2QSODLQWLII¶V
PRWLRQWRUHWD[FRVWVWKHWULDOMXGJHDSSDUHQWO\ZDVZLOOLQJ
WRFRQVLGHULQGLJHQF\DVDIDFWRUIDYRULQJGHQLDORIFRVWV7KH
MXGJHQRWHGKRZHYHUWKDWSXUVXDQWWRKLVLQWHUSUHWDWLRQRI
RXUUXOHLQ7DOOH\%H\Y.QHEO)G WK&LU
DQ\DZDUGZRXOGQRWEHVXEVHTXHQWO\FKDOOHQJHDEOHRQ
WKHEDVLVRILQDELOLW\WRSD\$IWHUFRQVLGHULQJVHYHUDOIDFWRUV
DQG GLVDOORZLQJ RQH RI WKH FOHUN¶V DVVHVVPHQWV DV
XQDXWKRUL]HG KH DZDUGHG WR WKH GHIHQGDQWV
6LQJOHWRQ¶V FRPSODLQWV DUH QRW GLUHFWHG DW WKH SDUWLFXODU
FDOFXODWLRQVWKDWOHGWRWKLVILJXUHEXWDWWDFNWKHHTXLWDEOH
VWDWXWRU\DQGFRQVWLWXWLRQDOJURXQGVIRUWD[LQJKLPZLWKVR
ODUJHDVXP
6LQJOHWRQLVDQLQGLJHQW DIDFWQRWGLVSXWHGE\GHIHQGDQWV
ZKRZDVJUDQWHGLQIRUPDSDXSHULVVWDWXVWRILOHKLVVXLW+LV
DYHUDJHPRQWKO\EDODQFHLQKLVSULVRQDFFRXQWLQWKHPRQWKV
XSWRKLVILOLQJZDV6LQJOHWRQLVVHUYLQJDWR
\HDUVHQWHQFH
,,
6WDQGDUGRI5HYLHZ
:HUHYLHZDGLVWULFWFRXUW VDZDUGRIFRVWVIRUDQDEXVHRI
GLVFUHWLRQ-RQHVY&RQWLQHQWDO&RUS)G
WK&LU $EXVHRIGLVFUHWLRQLVGHILQHGDVDGHILQLWH
DQGILUPFRQYLFWLRQWKDWWKHWULDOFRXUWFRPPLWWHGDFOHDUHUURU
RIMXGJPHQW%RZOLQJY3IL]HU,QF)G WK
&LU XSKROGLQJ WKH DZDUG RI DWWRUQH\¶V IHHV
1R 6LQJOHWRQY6PLWKHWDO
$UJXDEO\ OLWLJDQWV VKRXOG KDYH EHHQ RQ QRWLFH IURP WKH GDWH RI WKLV
RUGHU )HEUXDU\ +RZHYHU VLQFH WKH RUGHU KDV DQRWKHU GDWH 0DUFK
RQ ZKLFK LW ZDV LQWHQGHG WR EH HIIHFWLYH WKLV JRYHUQV
RIWKHSULVRQHU¶VFDSDFLW\WRSD\WKHFRVWVDVVHVVHG+RZHYHU
WKHVWDWXWHKDVVXSHUVHGHG:HDYHU´,QUH3/5$)GDW
FLWDWLRQRPLWWHG ,QWKLVRUGHUZHFOHDUO\VDZWKH
:HDYHUSURFHGXUHDVFRQVLVWLQJRIWZRSKDVHVDVVHVVPHQW
DQGWKHQIXUWKHU³GHWHUPLQDWLRQ´,QUH3/5$GLGQRWKLQJWR
FKDOOHQJH RU WR FKDQJH GLVFUHWLRQDU\ DVVHVVPHQW EXW LW
HOLPLQDWHGWKH:HDYHUSURFHGXUHIRU³GHWHUPLQDWLRQ´+HQFH
RXUODWHUVWDWHPHQWLQ7DOOH\%H\Y.QHEO)G
WK&LU WKDWWKH³SULVRQHU¶VDELOLW\WRSD\WKHFRVWVLV
QRORQJHUDQLVVXH´SURSHUO\UHIHUVWRHOLPLQDWLRQRIWKLVSRVW
DVVHVVPHQWFKDOOHQJH±LQGLJHQF\VWLOOFRXOGEH DQGZDVIRU
6LQJOHWRQ ³DQLVVXH´IRUWKHH[HUFLVHRIWULDOFRXUWGLVFUHWLRQ
$OVRLQRXUDGPLQLVWUDWLYHRUGHUZHUHTXLUHGSODLQWLIIVDV
RI0DUFKWRILOHDIRUPWKDWZRXOGZDLYHREMHFWLRQWR
³IHHDVVHVVPHQW´E\WKHWULDOFRXUWDQGZDLYHREMHFWLRQWR
³WKH ZLWKGUDZDO RI IXQGV IURP WKH WUXVW DFFRXQW E\ SULVRQ
RIILFLDOVWRSD\WKHSULVRQHU¶VFRXUWIHHVDQGFRVWV´,Q UH
3/5$)GDW7DNHQZLWKWKHIRUHJRLQJWKHQLW
ZRXOGVHHPWKDWLWLVWKLVRUGHUWKDWUHSUHVHQWVWKH³QHZUXOH´
WKDWVKRXOGEHDVVHVVHGIRUUHWURDFWLYHHIIHFWQDPHO\ZKHWKHU
WKHHOLPLQDWLRQRIWKHSRVWDVVHVVPHQWFKDOOHQJHWRWD[DWLRQ
RI FRVWV EDVHG RQ DELOLW\ WR SD\ DWWDFKHG QHZ OHJDO
FRQVHTXHQFHVWRHYHQWVWKDWKDGDOUHDG\RFFXUUHGE\0DUFK
LQ6LQJOHWRQ¶VFDVH
7KH6XSUHPH&RXUW¶VDQDO\VLVLQ0DUWLQLVLQVWUXFWLYHLQ
UHVROYLQJ WKLV FDVH 7KHUH VXFFHVVIXO SODLQWLIIV VRXJKW WR
DYRLG WKH 3/5$¶V OLPLWV RQ DWWRUQH\ IHHV LQ D VLWXDWLRQ LQ
ZKLFKVRPHRIWKHZRUNKDGRFFXUUHGSULRUWRWKH3/5$DQG
VRPHDIWHU WKHFDVHKDGEHHQILOHGPDQ\\HDUVSULRUWRWKH
3/5$ EXW WKH ELOO RI FRVWV KDG EHHQ VXEPLWWHG DIWHU WKH
3/5$ 7KH&RXUWUXOHGWKDWWKH3/5$OLPLWVGLGQRWDSSO\
WRZRUNGRQH ³HYHQWVFRPSOHWHG´ SULRUWRWKH3/5$EXWGLG
DSSO\WRZRUNGRQHDIWHUWKH3/5$VLQFHWKHDWWRUQH\VKDGD

-- 4 of 8 --

6LQJOHWRQY6PLWKHWDO 1R
RIIDLUQRWLFHUHDVRQDEOHUHOLDQFHDQGVHWWOHGH[SHFWDWLRQV¶´
,GDW TXRWLQJ/DQGJUDI86DW
,I WKHUH KDG EHHQ QR 3/5$ RU LI 6LQJOHWRQ¶V FDVH KDG
SURFHHGHGDVRULJLQDOO\VFKHGXOHGLQ2FWREHUKLVDFWLRQ
ZRXOGKDYHEHHQFRYHUHGE\WKHSURFHGXUHVLQ:HDYHU
)GDWZKLFKZDVDOVRWKHVWDWHRIWKHODZZKHQKH
ILOHGKLVDFWLRQ3UHVXPLQJWKDW6LQJOHWRQZRXOGKDYHORVWDW
WKHMXU\OHYHOWKHWULDOFRXUWZRXOGKDYHEHHQLQDQHTXLYDOHQW
SRVLWLRQDIWHUZDUGVWRDVVHVVFRVWVDJDLQVWKLPGHVSLWHKLV
LQGLJHQF\ DQG LQ IRUPD SDXSHULV VWDWXV ,ELG +RZHYHU
:HDYHUWKHQVWDWHGWKDWVXFKDVVHVVPHQWVZRXOGEH³VXEMHFW
WRDSURPSWFKDOOHQJHDQGVKRZLQJE\VXFKSULVRQHUSODLQWLIIV
WKDWWKH\DUHLQFDSDEOHDVDSUDFWLFDOPDWWHUDQGDVDPDWWHURI
HTXLW\RISD\LQJVXFKFRVWV´,ELG,IVXFKDVKRZLQJZDV
PDGHWKHSODLQWLIIVFRXOG³JDLQUHOLHIRUSDUWLDOUHOLHIIURP
VXFKDVVHVVPHQWDQGVXEVHTXHQWHIIRUWVWRFROOHFWVXFKFRVWV
DZDUGHGWRVXFFHVVIXOGHIHQGDQWV´,ELG:HDYHUUHPDQGHG
WKHUHVROXWLRQRIVXFKDFKDOOHQJHWRWKHPDJLVWUDWHMXGJHZKR
KDGDSSURYHGLQIRUPDSDXSHULVVWDWXVIRUWKHSODLQWLIIV,ELG
$OWKRXJK QRW SHUIHFWO\ FOHDU IURP WKH FDVH DV D ZKROH LW
DSSHDUVWKLVVHFRQGDU\SURFHGXUHZDVLQWHQGHGWRDSSO\WRDOO
LQ IRUPD SDXSHULV SODLQWLIIV &I LG DW -RQHV -
GLVVHQWLQJ ³>W@KHPDMRULW\VHHNVWRPDNHLWVKROGLQJPRUH
SDODWDEOHE\REVFXULQJWKHOLQHEHWZHHQLQIRUPDSDXSHULV
SODLQWLIIV ZKR DUH SULVRQHUV DQG RWKHU LQ IRUPD SDXSHULV
SODLQWLIIV´
7KH :HDYHU FKDOOHQJH DYDLODEOH WR LQ IRUPD SDXSHULV
SODLQWLIIVLQZKLFKWKH\KDGDPHWKRGWRDYRLGVRPHRUDOORI
D GLVWULFW FRXUW¶V RUGHUHG FRVWV ZDV FRQVLGHUHG WR EH
LQFRPSDWLEOH DVWRSULVRQHUV ZLWKWKH3/5$¶VFRPPDQGWKDW
³>L@IWKHMXGJPHQWDJDLQVWDSULVRQHULQFOXGHVWKHSD\PHQWRI
FRVWVWKHSULVRQHUVKDOOEHUHTXLUHGWRSD\WKHIXOODPRXQW
RIWKHFRVWVRUGHUHG´86&† I $ :HVR
KHOGGLUHFWO\LQRXUDGPLQLVWUDWLYHRUGHURQ)HEUXDU\
VD\LQJ³ZHKHOG>LQ:HDYHU@WKDWFRXUWVKDYHGLVFUHWLRQLQ
DVVHVVLQJ FRVWV DJDLQVW DQ XQVXFFHVVIXO SULVRQHU ZKR
SURVHFXWHGKLVRUKHUFDVH LQ IRUPDSDXSHULV)XUWKHUZH
QRWHGWKDWWKHFRXUWVZHUHUHTXLUHGWRPDNHDGHWHUPLQDWLRQ
1R 6LQJOHWRQY6PLWKHWDO
6LQJOHWRQ¶VVHFRQGDUJXPHQWDGGUHVVHVWKHFRQVWLWXWLRQDOLW\
RI WKH 3/5$ :H UHYLHZ GH QRYR D FKDOOHQJH WR WKH
FRQVWLWXWLRQDOLW\ RI D IHGHUDO VWDWXWH 6HH 8QLWHG 6WDWHV Y
%URZQ)G WK&LU :KHWKHUWKH
3/5$E\LWVWHUPVPD\EHUHWURDFWLYHO\DSSOLHGLQWKLVFDVH
WR JRYHUQ WKH WD[DWLRQ RI FRVWV LV D TXHVWLRQ RI VWDWXWRU\
FRQVWUXFWLRQ VXEMHFW WR GH QRYR UHYLHZ 6HH *ORYHU Y
-RKQVRQ)G WK&LU
7KH HIIHFWLYH GDWH RI WKH 3/5$ LV $SULO 2XU
RUGHUVSXUVXDQWWRWKH3/5$EHFDPHHIIHFWLYHRQ0DUFK
6HH,QUH3ULVRQ/LWLJDWLRQ5HIRUP$FW)G
WK&LU
7KH)DFLDO&RQVWLWXWLRQDOLW\RI86&
†† I I $
6LQJOHWRQ FODLPV WKDW WKH LPSRVLWLRQ RI ODUJH ILQDQFLDO
EXUGHQV UHVXOWLQJ IURP KLV XQVXFFHVVIXO OLWLJDWLRQ
XQFRQVWLWXWLRQDOO\GHQLHVKLPDFFHVVWRWKHFRXUWVLQYLRODWLRQ
RIWKH)LUVW$PHQGPHQW7KLVDUJXPHQWLVIRUHFORVHGE\RXU
SUHYLRXVUXOLQJLQ+DPSWRQY+REEV)G
WK&LU 7KHUHLQHYDOXDWLQJWKHIHHSURYLVLRQVRI
WKH3/5$ZHIRXQGWKDW³SULVRQHUVDVVHUWLQJFLYLOFODLPVLQ
IHGHUDOFRXUWKDYHQHYHUEHHQJXDUDQWHHGDμIUHHULGH¶´,GDW
$VGLVFXVVHGDERYHWKH3/5$LWVHOIKDVSURYLVLRQV
WKDWSUHYHQWDVVHVVPHQWVIURPEHLQJVREXUGHQVRPHWKDWWKH\
ZRXOGVWRSDSULVRQHUIURPEHLQJDEOHWREULQJVXLW86&
† E SULVRQHUFDQILOHVXLWHYHQLIKHKDVQRDVVHWVDW
DOO $OWKRXJKWKHLVVXHKHUHLQYROYHVFRVWVUDWKHUWKDQIHHV
DQG WKH FRVWV DUH VXEVWDQWLDO DQ\ OLWLJDQW ZRXOG EH
SUHVXPSWLYHO\OLDEOHIRUWKHVHFRVWV7KHSDUWLDOOLIWLQJRIWKH
VXEVLG\SUHYLRXVO\HQMR\HGE\SULVRQHUOLWLJDQWVGRHVQRWGHQ\
WKHPDFFHVVWRWKHFRXUWVH[FHSWWKDWOLNHDOOSRRUSHUVRQV
WKHLUDFFHVVLVUHVWULFWHGEHFDXVHWKH\PXVWZHLJKWKHULVNV
DQGUHZDUGVRIWU\LQJWKHLUFODLPVLQFRXUW6HH:HDYHU
)GDW+DPSWRQ)GDW QRWLQJWKDW3/5$
IRUFHVSULVRQHUWRFRQIURQWWKHVDPHFRQVLGHUDWLRQVDVRWKHU
FLYLOOLWLJDQWV VHHDOVR5ROOHUY*XQQ)G
WK &LU XSKROGLQJ FRVW SURYLVLRQV RI WKH 3/5$

-- 5 of 8 --

6LQJOHWRQY6PLWKHWDO 1R
2I FRXUVH WKLV UHODWLRQVKLS KROGV RQO\ DORQJ WKDW SDUW RI WKH
FRQWLQXXP ZKLFK FRYHUV XQVXFFHVVIXO FODLPV UDQJLQJ IURP WKH PRVW WR
OHDVW LQYDOLG RQHV ± D YDOLG FODLP ZRXOG FROOHFW FRVWV DQG EHFDXVH WKH
PRVW YDOLG FODLP ZLOO EH UHVROYHG VRRQHVW LW ZRXOG XVXDOO\ FROOHFW WKH
IHZHVW FRVWV 6LQJOHWRQ¶V FODLPHG ³LQMXVWLFH´ LV VLPSO\ D FRQVHTXHQFH RI
DQ LQKHUHQW IHDWXUH RI WKH DGYHUVDU\ V\VWHP WKDW PRUH GLIILFXOW FDVHV DUH
FHWHULV SDULEXV PRUH FRVWO\ IRU HYHU\RQH LQYROYHG SODLQWLII GHIHQGDQW
DQG WKH FRXUWV
0F*LOOY)DXONQHU)G WK&LU VWDWLQJ
WKDW LPSRVLQJ FRVWV DJDLQVW LQGLJHQW SULVRQHU PDNHV WKHP
³OLNHDQ\ERG\HOVH´
6LQJOHWRQ¶V GLVFXVVLRQ RI WKH FDVHODZ RQ WKHVH SRLQWV LV
LQDSSRVLWH GHDOLQJ ZLWK FDVHV VXFK DV 0XUGRFN Y
3HQQV\OYDQLD86 ZKLFKLQYDOLGDWHGRQ
)LUVW $PHQGPHQW JURXQGV VSHFLDO EXUGHQV RQ -HKRYDK¶V
:LWQHVVHV¶GLVWULEXWLRQRIUHOLJLRXVOLWHUDWXUH7KHIXQFWLRQ
RI WKH FKDOOHQJHG SURYLVLRQV RI WKH 3/5$ LV QRW WR SODFH
VSHFLDOEXUGHQVRQWKHSULVRQHUVEXWWRSXWWKHPLQWKHVDPH
SRVLWLRQDVRWKHUOLWLJDQWVQRUGRHVLWLQIDFWSUHYHQWWKHP
IURP SHUIRUPLQJ WKH SURWHFWHG DFWLYLW\ KHUH OLWLJDWLQJ
FODLPV DV WKH LQYDOLGDWHG IHHV HIIHFWLYHO\ GLG WR WKH
-HKRYDK¶V:LWQHVVHV
6LQJOHWRQ DOVR SRLQWV RXW WKDW D VLGH HIIHFW RI WKH FRVW
SURYLVLRQV LV WKDW WKH\ ZLOO DIIHFW PRUH KHDYLO\ WKRVH ZLWK
VWURQJEXWXOWLPDWHO\XQVXFFHVVIXOFODLPV)ULYRORXVOLWLJDQWV
ZKRVH FODLPV DUH GLVPLVVHG HDUO\ RQ ZLOO LPSRVH IHZHU
GLVFRYHU\FRVWVVXFKDVGHSRVLWLRQVRQWKHRWKHUVLGHDQGZLOO
WKHUHIRUH EH OLDEOH IRU IHZHU FRVWV ZKHQ WKH RWKHU VLGH
SUHYDLOV 6LQJOHWRQ DUJXHV WKDW WKLV RSHUDWHV DV D JUHDWHU
GHWHUUHQWWRWKHEHWWHUFODLPVDQGWKDWFRVWSURYLVLRQVWKDWGR
WKLVHIIHFWLYHO\GHQ\DFFHVVWRWKHFRXUWV+RZHYHUWKLVFRVW
VWUHQJWKUHODWLRQVKLSLVDJDLQWUXHRIDOOOLWLJDQWVDQGSRLQWV
RXWWKHIXQGDPHQWDOZHDNQHVVRI6LQJOHWRQ¶VEURDGHUDWWDFNV
RQFRVWWD[DWLRQ&RVWVRIWKHVRUWFRQVLGHUHGKHUHDUHQRW
LQWHQGHG DV SXQLWLYH WKHUHIRUH DSSURSULDWHO\ VFDOLQJ DV
6LQJOHWRQVXJJHVWVZLWKWKHIULYROLW\RIDQDFWLRQ VXFKFRVWV
DUHSULPDULO\FRPSHQVDWRU\&RVWWD[DWLRQLVDFRPPRQODZ
1R 6LQJOHWRQY6PLWKHWDO
5HWURDFWLYH([FOXVLRQE\WKH3/5$RI3RVW$ZDUG
&KDOOHQJHV
3ULRUWRWKHHQDFWPHQWRIWKH3/5$LWZDVSRVVLEOHIRUDQ
XQVXFFHVVIXOLQGLJHQWSODLQWLIIWRKDYHDVXEVHTXHQWFKDOOHQJH
WRDQDZDUGRIFRVWVWKURXJKSURRIRILQDELOLW\WRSD\6HH
:HDYHU)GDW$VWKHGLVWULFWFRXUWLQWKLVFDVH
QRWHG WKH 3/5$ HOLPLQDWHG VXFK FKDOOHQJHV WKURXJK LWV
SURYLVLRQV UHTXLULQJ SD\PHQW LQ IXOO +DYLQJ XSKHOG WKH
DZDUG RI FRVWV DQG WKH FRQVWLWXWLRQDOLW\ RI WKH UHOHYDQW
SURYLVLRQVRI3/5$RXULQTXLU\LVQRWDWDQHQGKRZHYHU
EHFDXVHZHPXVWGHWHUPLQHWRZKDWH[WHQWWKH3/5$DIIHFWV
6LQJOHWRQ¶VOLWLJDWLRQZKLFKLQSDUWSUHGDWHVLW
7KHUHLVD³WUDGLWLRQDOSUHVXPSWLRQ´DJDLQVWUHWURDFWLYLW\
/DQGJUDIY86,)LOP3URGXFWV86 ,Q
RUGHUWRDVVHVVZKHWKHUWRDSSO\DFKDQJHLQODZWRSHQGLQJ
FDVHV/DQGJUDIHVWDEOLVKHVDWZRSDUWWHVW)LUVWZHDUHWR
ORRNDWZKHWKHUWKHQHZVWDWXWHVKRZV³FOHDUFRQJUHVVLRQDO
LQWHQW´GHILQLQJLWVWHPSRUDOUHDFKDQGIDYRULQJUHWURDFWLYH
DSSOLFDWLRQ,ELG6HFRQGLIFRQJUHVVLRQDOLQWHQWLVDEVHQW
WKHLQTXLU\EHFRPHVZKHWKHU³WKHQHZSURYLVLRQDWWDFKHVQHZ
OHJDOFRQVHTXHQFHVWRHYHQWVFRPSOHWHGEHIRUHLWVHQDFWPHQW´
,G DW 1HZ SURFHGXUDO UXOHV DUH OHVV OLNHO\ WR FUHDWH
UHWURDFWLYLW\ SUREOHPV ,G DW +RZHYHU UHWURDFWLYLW\
FRQFHUQV DQG DQDO\VLV DUH DOVR OHJLWLPDWHO\ DSSOLHG WR
SURFHGXUDOUXOHV±³WKHPHUHIDFWWKDWDQHZUXOHLVSURFHGXUDO
GRHVQRWPHDQWKDWLWDSSOLHVWRHYHU\FDVH´,GDWQ
7KH6XSUHPH&RXUW¶VVXEVHTXHQWDQDO\VLVRIWKH3/5$LQ
0DUWLQ Y +DGL[ FRQFOXGHG WKDW WKH ³3/5$ FRQWDLQV QR
H[SUHVVFRPPDQGDERXWLWVWHPSRUDOVFRSH´86
7KH&RXUWWKHUHIRUHDQDO\]HGWKHSURYLVLRQVLQ
TXHVWLRQWKHUH RQDWWRUQH\¶VIHHV XQGHUWKHVHFRQG/DQGJUDI
WHVWDVDOVRVHHPVDSSURSULDWHKHUH7KHUHOHYDQWTXHVWLRQ
EHFRPHV ZKHWKHU WKH FKDQJH LQ ODZ LQ WKH 6L[WK &LUFXLW
XOWLPDWHO\WUDFHDEOHWRWKHSDVVDJHRIWKH3/5$DWWDFKHGQHZ
OHJDOFRQVHTXHQFHVWRHYHQWVFRPSOHWHGE\6LQJOHWRQLQKLV
FDVHSULRUWRWKHFKDQJHLQODZ,QDQVZHULQJWKLVTXHVWLRQ
ZHDUHWREH³LQIRUPHGDQGJXLGHGE\μIDPLOLDUFRQVLGHUDWLRQV

-- 6 of 8 --

6LQJOHWRQY6PLWKHWDO 1R
6LQJOHWRQ DOVR FODLPV WKDW HYHQ LI VRPH FRVWV ZHUH
DSSURSULDWH WKH WRWDO DZDUG RI FRVWV ZDV QRW +H DOVR
FRQWHQGVWKDWWKHGLVWULFWFRXUWIHOWLWFRXOGQRWJHQHUDWHDQ
HTXLWDEOHLQWHUPHGLDWHILJXUHEHFDXVHLWVRPHKRZWRRNWKH
3/5$DVFUHDWLQJDQ³DOORUQRQH´UXOH 6LQJOHWRQ%UDW
$OWKRXJK QRW FLWHG E\ 6LQJOHWRQ GLVWULFW FRXUWV GR
RFFDVLRQDOO\ UHPLW SDUW RI RWKHUZLVH DOORZDEOH FRVWV RQ
HTXLWDEOH JURXQGV LQFOXGLQJ WKH ORVLQJ SDUW\¶V ILQDQFLDO
FLUFXPVWDQFHV6HH-DQVHQY3DFNDJLQJ&RUSRI$PHULFD
)6XSS 1',OO &RXOWHUY1HZPRQW
*ROG&R)6XSS '1HY (]ROGY
:ROI%ORFN6FKRUU 6ROLV&RKHQ)5' ('
3D ,QHYDOXDWLQJDVLPLODUPRWLRQIRUFRVWVDJDLQVWD
SULVRQHUXQGHU86&† I $ WKH6HFRQG&LUFXLW
KDVSRLQWHGRXWWKHGLVFUHWLRQRIDFRXUWWRUHTXLUHLQGLJHQW
SULVRQHUVWRSD\FRVWV³RUVRPHSDUWRIWKHP´LQLWVLQLWLDO
FKRLFHRIDQDZDUG)HOLFLDQRY6HOVN\)G
G&LU :HGRQRWDSSHDUWRKDYHIRUELGGHQSDUWLDO
UHPLWWDQFH RI FRVWV DV SDUW RI D GLVWULFW FRXUW¶V GLVFUHWLRQ
GHVSLWHDSUHVXPSWLRQIRUWD[DWLRQRIIXOOFRVWV
6LQJOHWRQDVVHUWVWKDWWKHGLVWULFWFRXUWPLVXQGHUVWRRGWKH
3/5$¶VUHTXLUHPHQWWKDWDIWHUDFRXUWFKRRVHVWRWD[FRVWV
WKHSULVRQHUPXVWSD\LQIXOO6LQJOHWRQFODLPVWKHGLVWULFW
MXGJHIHOWKLVGLVFUHWLRQZDVFRQILQHGIURPHYHQFRQVLGHULQJ
DSDUWLDODZDUG$VVXPLQJWKLVZRXOGKDYHEHHQDPLVWDNH
WKHUHLVQRHYLGHQFHWKHGLVWULFWFRXUWPDGHLW7KHGLVWULFW
FRXUWVLPSO\SRLQWHGRXWWKDWLWVDVVHVVPHQWVZRXOGQRWEH
VXEMHFWWRFKDOOHQJHRUUHGXFWLRQRQWKHEDVLVRILQDELOLW\WR
SD\,WGLGQRWDV6LQJOHWRQFODLPVDGRSWDQ³DOORUQRQH´
UXOH DQ\ZKHUH LQ WKH RSLQLRQ 7KHUH LV QR HYLGHQFH WKH
GLVWULFW FRXUW FRQVLGHUHG D SDUWLDO DZDUG DQG LW ZDV QRW
UHTXLUHG WR GR VR %HFDXVH WKHUH ZDV QR OHJDO HUURU DQG
EHFDXVH ZH DUH QRW FRQYLQFHG D FOHDU HUURU RI MXGJPHQW
RFFXUUHGZHKROGWKDWWKHLQLWLDODZDUGRIFRVWVZDVQRWDQ
DEXVHRIGLVFUHWLRQ
1R 6LQJOHWRQY6PLWKHWDO
WUDGLWLRQEDVHGRQPDNLQJDSUHYDLOLQJSDUW\JHQXLQHO\ZKROH
RU DW OHDVW FORVHU WR WKDW LGHDO LQ WKH $PHULFDQ UXOH
0RUHRYHU DV PHQWLRQHG DERYH WKH GLVWULFW FRXUW KDV
GLVFUHWLRQWRGHQ\ RUSHUKDSVUHGXFH FRVWVLIWKHORVLQJSDUW\
KDGDSDUWLFXODUO\VWURQJFDVH7KXVWKHOHJDOV\VWHPDOUHDG\
KDVDPHWKRGWRGHDOZLWKWKLVDOOHJHGLQHTXLW\:HWKHUHIRUH
KROG 6LQJOHWRQ¶V FKDOOHQJH WR WKH FRVW SURYLVLRQV RI WKH
3/5$86&†† I I $ WREHZLWKRXW
PHULW
$EXVHRI'LVFUHWLRQLQ7D[DWLRQRI&RVWV
)HG 5 &LY 3 G SURYLGHV WKDW ³FRVWV RWKHU WKDQ
DWWRUQH\¶VIHHVVKDOOEHDOORZHGDVRIFRXUVHWRWKHSUHYDLOLQJ
SDUW\XQOHVVWKHFRXUWRWKHUZLVHGLUHFWV´:HKDYHKHOGWKDW
³WKLV ODQJXDJH FUHDWHV D SUHVXPSWLRQ LQ IDYRU RI DZDUGLQJ
FRVWVEXWDOORZVGHQLDORIFRVWVDWWKHGLVFUHWLRQRIWKHWULDO
FRXUW´:KLWH :KLWH,QFY$PHULFDQ+RVS6XSSO\&RUS
)G WK &LU :H KDYH LGHQWLILHG
VHYHUDOIDFWRUVDORVLQJSDUW\PD\SXWIRUZDUGWKDWPD\EH
VXIILFLHQW WR MXVWLI\ D GLVWULFW FRXUW LQ RYHUFRPLQJ WKH
SUHVXPSWLRQLQIDYRURIDFRVWDZDUGLQFOXGLQJWKHORVLQJ
SDUW\¶V JRRG IDLWK WKH GLIILFXOW\ RI WKH FDVH WKH ZLQQLQJ
SDUW\¶VEHKDYLRUDQGWKHQHFHVVLW\RIWKHFRVWV6HHHJLG
DW$OWKRXJKWKHDELOLW\RIWKHZLQQLQJSDUW\WRSD\
KLVRZQFRVWVLVLUUHOHYDQWLGDWDQRWKHUIDFWRUZHLJKLQJ
LQIDYRURIGHQ\LQJFRVWVLVWKHLQGLJHQF\RIWKHORVLQJSDUW\
-RQHV)GDW$OWKRXJKFHUWDLQDVSHFWVRI:HDYHU
Y7RRPEV)G WK&LU KDYHEHHQ
VXSHUVHGHGSXUVXDQWWRWKH3/5$ GLVFXVVHGLQIUDSS
ZHKDYHVXSSRUWHGLWVUXOHWKDWLQIRUPDSDXSHULVVWDWXVZLOO
QRWE\LWVHOISURYLGHDQDXWRPDWLFEDVLVIRUGHQ\LQJWD[DWLRQ
RI FRVWV DJDLQVW DQ XQVXFFHVVIXO OLWLJDQW 6HH +DPSWRQ Y
+REEV)G WK&LU
7KHGLVWULFWFRXUWLQWKLVFDVHDIWHUFRUUHFWO\VWDWLQJWKHODZ
RQWKHPDWWHUDSSHDUVWRKDYHSULPDULO\FRQVLGHUHGWKHLVVXHV
RILQGLJHQF\DQGZKHWKHUWKHFDVHZDVD³FORVHDQGGLIILFXOW
RQH´7KHMXGJHIRXQG6LQJOHWRQ¶VFODLPDOWKRXJKUHDFKLQJ
WKH MXU\ VWDJH ZDV QRW D GLIILFXOW RU FORVH FDVH 2Q WKH

-- 7 of 8 --

6LQJOHWRQY6PLWKHWDO 1R
TXHVWLRQRILQGLJHQF\KHVHHPVWRKDYHZHLJKHGWKHSRLQW
WKDW6LQJOHWRQ¶VQHHGVZLOOEHSURYLGHGIRUWKHVWDWHLQDQ\
HYHQWDQGIRXQGWKHLPSRVLWLRQRIFRVWVZRXOGQRWEHRYHUO\
EXUGHQVRPHRQ6LQJOHWRQ¶VOLIH6HH+DPSWRQ)GDW
7KHFRXUWIXUWKHUFRQVLGHUHGZKHWKHUWKHLPSRVLWLRQRI
FRVWVZRXOGFKLOO6LQJOHWRQ¶VH[HUFLVHRIFRQVWLWXWLRQDOULJKWV
UHO\LQJRQRXU&LUFXLWSUHFHGHQWVLQ+DPSWRQDQG:HDYHUWR
ILQGWKDWWKHHIIHFWGLGQRWULVHWRWKHOHYHORIDFRQVWLWXWLRQDO
YLRODWLRQ
6LQFHFRVWVDUHSUHVXPSWLYHO\DZDUGHGDQGWKHLVVXHLVLQ
WKH GLVFUHWLRQ RI WKH WULDO FRXUW LW UHTXLUHV D VXEVWDQWLDO
VKRZLQJ IRU XV WR UXOH WKDW WKLV GLVFUHWLRQ ZDV DEXVHG
*HQHUDOO\ WKLV ZRXOG UHTXLUH WKH ORZHU FRXUW LJQRULQJ WKH
FULWHULDVHWE\6L[WK&LUFXLWVHH:KLWH :KLWH)GDW
RURWKHUZLVHDFHUWDLQW\RQRXUSDUWWKDWDFOHDUHUURULQ
MXGJPHQWZDVFRPPLWWHG6LQJOHWRQDVVHUWVWKDWWKHFRXUWGLG
QRWFRQVLGHUWKHVL]HRIWKHDZDUGLQFRPSDULVRQZLWKRWKHU
FDVHV ZKHUH FRVWV KDYH EHHQ DZDUGHG RU LQ SURSRUWLRQ WR
6LQJOHWRQ¶V PLQLPDO LQFRPH6LQJOHWRQDOVRDVVHUWVWKDWWKH
GLVWULFWFRXUWLQFRUUHFWO\EHOLHYHGWKDWLWFRXOGQRWOHJDOO\JLYH
DSDUWLDODZDUGRIFRVWV
%HFDXVHWKHSD\PHQWSURYLVLRQVRIWKH3/5$86&
† E OHY\DWZHQW\SHUFHQW³WD[´RQKLVPRQWKO\
DVVHWV DERYH 6LQJOHWRQ ZLOO EH QRW EH WKDW KHDYLO\
DIIHFWHGRQDGD\WRGD\EDVLVE\WKHDZDUG7KLVHIIHFWRQ
KLP LV ORQJHU LQ WLPH EXW WKH VDPH LQ VHYHULW\ DV WKH
LPSRVLWLRQXSKHOGLQ+DPSWRQ ZKLFKLQYROYHGRQO\D
DZDUG ,QSULVRQRQWKH3/5$¶V³H[WHQGHGSD\PHQWSODQ´
DQGZLWKKLVQHFHVVLWLHVSURYLGHGIRU6LQJOHWRQ¶VLQGLJHQF\
LVHIIHFWLYHO\ PLWLJDWHG6LQJOHWRQDUJXHVWKDWEHFDXVHKLV
LQFRPH LV XQOLNHO\ WR HYHU DOORZ KLP WR UHSD\ WKH FRVWV
LPSRVHGRQKLPZKLOHLQSULVRQKHZLOOEHVDGGOHGZLWKD
VLJQLILFDQW GHEW XSRQ OHDYLQJ LQFDUFHUDWLRQ 7KHUHIRUH
PHDVXULQJ WKH HTXLWLHV RI KLV SULVRQHU VWDWXV DJDLQVW KLV
LQGLJHQF\PD\QRWIXOO\DFFRXQWIRUWKHHIIHFWRIWKHFRVWVDW
VRPHSRLQWDVDPLGGOHDJHGH[FRQYLFWSDXSHUKHFRXOGZHOO
1R 6LQJOHWRQY6PLWKHWDO
$OWKRXJK 6LQJOHWRQ PD\ FRPH LQWR PRQH\ E\ WKH WLPH KLV VHQWHQFH
LV VHUYHG WKH PRVW OLNHO\ VFHQDULR LQYROYHV D SD\PHQW SHU PRQWK EDVHG
RQ KLV PRQWKO\ DFFRXQW EDODQFH RI RI (YHQ
DIWHU \HDUV DQG SD\PHQWV WKLV ZRXOG OHDYH DQ XQUHFRYHUHG GHEW LQ
WKH QHLJKERUKRRG RI ,Q RWKHU FDVHV WKH LPSRVLWLRQ RI DQ DZDUG
ZLWK D YHU\ ODUJH ³EDOORRQ SD\PHQW´ RQ UHOHDVH IURP SULVRQ KDV WKH
SRWHQWLDO WR FUHDWH SHUYHUVH LQFHQWLYHV GLVFRXUDJLQJ LQPDWHV IURP GRLQJ
DOO WKH\ FDQ WR HDUQ DQ HDUO\ UHOHDVH GDWH
EH IDFHG ZLWK VRPH VLJQLILFDQW SRUWLRQ RI WKH GHEW RQ WKH
RXWVLGHXQSURWHFWHGE\VWDWXVDVDQLQPDWH
7KHVL]HRIWKHDZDUGDQGWKHFLUFXPVWDQFHVLQZKLFKLWZLOO
XOWLPDWHO\EHDSSOLHGVKRXOGEHHTXLWDEOHIDFWRUVLQHYDOXDWLQJ
WKH HIIHFW RI LQGLJHQF\ &I :HDYHU )G DW
DJUHHLQJ³DGLVWULFWFRXUWPD\ORRNWRVXFKIDFWRUVDVWKH
μSXUSRVH RI WKH UXOH¶ μWKH OLWLJDWLRQ KLVWRU\¶ RI WKH SDUW\
μJRRGIDLWK¶DQGμWKHDFWXDOGROODUVLQYROYHG¶´ HPSKDVLV
VXSSOLHG FLWDWLRQRPLWWHG $&+$5/(6 $/$1 :5,*+7 (7
$/ )('(5$/ 35$&7,&( $1' 352&('85(†DWQ
GHG FLWLQJ:HDYHU 7KHORZHUFRXUWGLGQRWFOHDUO\
UHIXVHWRWDNHWKHDZDUG¶VVL]HLQWRFRQVLGHUDWLRQ±LWZDV
DZDUHRI6LQJOHWRQ¶VILQDQFLDOFRQGLWLRQDOWKRXJKLWGLGQRW
FRQFHUQLWVHOIZLWKDQ\SRVWUHOHDVHHIIHFWVRIWKHDZDUG,Q
DQ\HYHQWZHFDQQRWEHFHUWDLQRIDQHUURURQWKHSDUWRIWKH
GLVWULFWFRXUWDV6LQJOHWRQKDVDSSDUHQWO\ORQJ\HDUVZLWK
ZKLFKWRSUHSDUHKLPVHOIWREHDEOHWRSD\DGHEWZKLFKLVQRW
LQVXUPRXQWDEOHLIKHLVHPSOR\DEOH6HH0F*LOOY)DXONQHU
)G WK &LU RQ DEXVH RI GLVFUHWLRQ
VWDQGDUG XSKROGLQJDFRVWDZDUGDJDLQVWDSULVRQHU
LUUHVSHFWLYHRILQGLJHQF\DQGQRWLQJ³ZHDUHQRWFRQYLQFHG
RQWKHUHFRUGWKDW0F*LOOZLOOQRW HYHU EHDEOHWRSD\WKH
RUGHULPSRVLQJFRVWV´ ,WLVLQ 2KLR¶VLQWHUHVWWRVHHWKDW
6LQJOHWRQDFTXLUHVVXIILFLHQWVNLOOVLIWKHVWDWHHYHUZDQWVWR
EH SDLG 6LQJOHWRQ¶V VLWXDWLRQ PD\ QRW EH JRRG EXW WKH
LPPHGLDWHHIIHFWRIWKHDZDUGLVPXWHG+HUHPDLQVEHWWHURII
WKDQDQLPSRYHULVKHGIUHHOLWLJDQWZKRPD\EHPDGHXWWHUO\
GHVWLWXWHE\WD[DWLRQRIFRVWV±6LQJOHWRQZLOOQRWEHGHSULYHG
RIKLVKRPHRUKLVPHDQVRIOLYHOLKRRG

-- 8 of 8 --