01a0369p.06

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
1R
0,&+$(/ ( 7,1'$//
3ODLQWLII$SSHOODQW
Y
:$<1( &2817< )5,(1' 2)
7+( &2857E\-26(3+ $
6&+(:('LUHFWRURI/HJDO
6HUYLFHV$/$1 ( 6.52.
6WDII$WWRUQH\$66,67$17
)5,(1' 2) &2857 :$<1(
&2817< 6+(5,))¶6
'(3$570(17E\52%(57
),&$126KHULII:$<1(
&2817< &,5&8,7 &2857
)$0,/< ',9,6,21E\
.,567(1 )5$1. .(//<
3UHVLGLQJ-XGJH0,&+$(/ )
6$3$/$&KLHI-XGJH
'HIHQGDQWV$SSHOOHHV
1R
0,&+$(/ ( 7,1'$//
3ODLQWLII$SSHOODQW
&URVV$SSHOOHH
Y
;!

1RV

-- 1 of 8 --

7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO
1RV
:$<1( &2817< )5,(1' 2)
7+( &2857E\-26(3+ $
6&+(:('LUHFWRURI/HJDO
6HUYLFHV:$<1( &2817<
6+(5,))¶6 '(3$570(17E\
52%(57 ),&$126KHULII
$/$1 ( 6.52.6WDII
$WWRUQH\$66,67$17 )5,(1'
2) &2857
'HIHQGDQWV
:$<1( &2817< &,5&8,7
&2857 )$0,/< ',9,6,21E\
.,567(1 )5$1. .(//<
3UHVLGLQJ-XGJH0,&+$(/ )
6$3$/$&KLHI-XGJH
'HIHQGDQWV$SSHOOHHV
&URVV$SSHOODQWV
1R
0,&+$(/ ( 7,1'$//
3ODLQWLII$SSHOODQW
&URVV$SSHOOHH
Y
:$<1( &2817< )5,(1' 2)
7+( &2857E\-26(3+ $
6&+(:('LUHFWRURI/HJDO
6HUYLFHV$/$1 ( 6.52.
6WDII$WWRUQH\
'HIHQGDQWV$SSHOOHHV
&URVV$SSHOODQWV

-- 2 of 8 --

1RV 7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO

7KH +RQRUDEOH $OJHQRQ / 0DUEOH\ 8QLWHG 6WDWHV 'LVWULFW -XGJH IRU
WKH 6RXWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ
:$<1( &2817< 6+(5,))¶6
'(3$570(17E\52%(57
),&$126KHULII$66,67$17
)5,(1' 2) &2857 52%(57
),&$126KHULII:$<1(
&2817< &,5&8,7 &2857E\
.,567(1 )5$1. .(//<
3UHVLGLQJ-XGJH0,&+$(/ )
6$3$/$&KLHI-XGJH
'HIHQGDQWV

1
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDW'HWURLW
1R²'HQLVH3DJH+RRG'LVWULFW-XGJH
$UJXHG-XQH
'HFLGHGDQG)LOHG2FWREHU
%HIRUH5<$1DQG&2/(&LUFXLW-XGJHV0$5%/(<
'LVWULFW-XGJH
BBBBBBBBBBBBBBBBB
&2816(/
$5*8('0LFKDHO(7LQGDOO7520%/<7,1'$//3RUW
+XURQ 0LFKLJDQ IRU 3ODLQWLII 0DUJHU\ 0RVHOOH 0DQQ
:$<1( &2817< )5,(1' 2) 7+( &2857
/,7,*$7,21 6(&7,21 'HWURLW 0LFKLJDQ -RVHSK &
0DUVKDOO ,,, ',&.,1621 :5,*+7 0221 9$1

-- 3 of 8 --

7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO
1RV
'86(1 )5((0$1'HWURLW0LFKLJDQIRU'HIHQGDQWV
21%5,() 0LFKDHO(7LQGDOO7520%/<7,1'$//
3RUW+XURQ0LFKLJDQIRU3ODLQWLII0DUJHU\0RVHOOH0DQQ
-DQHW(/H$QQDLV:$<1(&2817<)5,(1'2)7+(
&2857/,7,*$7,216(&7,21'HWURLW0LFKLJDQ-RVHSK
& 0DUVKDOO ,,, .DWKOHHQ $ /DQJ $QQ - )RHOOHU
',&.,1621 :5,*+7 0221 9$1 '86(1
)5((0$1'HWURLW0LFKLJDQIRU'HIHQGDQWV
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
5*8<&2/(-5&LUFXLW-XGJH$WWRUQH\DQGGLYRUFq
0LFKDHO ( 7LQGDOO LV D QRQFXVWRGLDO SDUHQW ZKR KDV
FRQWLQXDOO\ DQG LQH[SOLFDEO\ IDLOHG WR FRPSO\ ZLWK FRXUW
RUGHUVUHTXLULQJKLPWRPDNHVXSSRUWSD\PHQWVIRUKLVPLQRU
FKLOGUHQ +H KDV EHHQ WKH VXEMHFW RI DW OHDVW HLJKW
HQIRUFHPHQW SURFHHGLQJV WR FROOHFW GHOLQTXHQW VXSSRUW
SD\PHQWVLQVWLWXWHGXQGHU0LFKLJDQ¶V)ULHQGRI&RXUW$FW
0LFK&RPS/DZV$QQ†HWVHTDQGLWV6XSSRUW
DQG 9LVLWDWLRQ (QIRUFHPHQW $FW 0LFK &RPS /DZV $QQ
† 'LVVDWLVILHG ZLWK WKH PDQQHU LQ ZKLFK WKRVH
SURFHHGLQJVZHUHFRQGXFWHG7LQGDOOILOHGWKHLQVWDQWDFWLRQ
UDLVLQJYDULRXVIHGHUDOFODLPV1DPHGLQ7LQGDOO¶VODZVXLWDUH
'HIHQGDQWV$SSHOOHHVWKH:D\QH&RXQW\)ULHQGRIWKH&RXUW
³)2&´ WKH:D\QH&RXQW\&LUFXLW&RXUW)DPLO\'LYLVLRQ
³:&&&´ WKH :D\QH &RXQW\ 6KHULII¶V 'HSDUWPHQW
³6KHULII¶V'HSDUWPHQW´ DQGLQGLYLGXDOGHIHQGDQWV-RVHSK
$6FKHZH'LUHFWRURI)2&/HJDO6HUYLFHV$ODQ(6NURN
)2&6WDII$WWRUQH\5REHUW)LFDQR6KHULII:D\QH&RXQW\
6KHULII¶V'HSDUWPHQW.LUVWHQ)UDQN.HOO\3UHVLGLQJ-XGJH
:&&& DQG 0LFKDHO ) 6DSDOD &KLHI -XGJH :&&& >DOO
FROOHFWLYHO\UHIHUUHGWRKHUHLQDV³'HIHQGDQWV´@
7LQGDOODSSHDOVIURPWKHGLVWULFWFRXUW¶VJUDQWLQSDUWRIWKH
PRWLRQV WR GLVPLVV RI 'HIHQGDQWV$SSHOOHHV VSHFLILFDOO\
FKDOOHQJLQJWKHGLVWULFWFRXUW¶VDSSOLFDWLRQRIWKH<RXQJHUY
1RV 7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO

FRQVWLWXWHGDQ³DGPLVVLRQ´HQWLWOLQJKLPWRUHOLHI:HDUHQRW
SHUVXDGHG WKDW D GLVSXWHG DGPLVVLRQ LV VXIILFLHQW WR
GHPRQVWUDWH ³H[WUDRUGLQDU\ FLUFXPVWDQFHV´ ,QGHHG LI ZH
GHFOLQHGWRILQGWKHUHTXLVLWH³H[WUDRUGLQDU\FLUFXPVWDQFHV´
WRLQWHUYHQHLQ6HYLHUZKHUHWKHSODLQWLIIDOOHJHGLQMXULHVIDU
PRUH HJUHJLRXV WKDQ 7LQGDOO¶V WKHQ D IRUWLRUL ZH DUH
IRUHFORVHGDOVRIURPUHDFKLQJ7LQGDOO¶VFODLPV6HH)G
DW GLVFXVVLQJ KRZ WKH RIILFLDOV¶ DOOHJHG YLRODWLRQV
DUJXDEO\UHVXOWHGLQLQFDUFHUDWLRQRIILQDQFLDOKDUGVKLSWR
DQGMREORVVE\6HYLHU
,,,&21&/86,21
)RUWKHIRUHJRLQJUHDVRQVZH9$&$7(WKHMXGJPHQWRI
WKHGLVWULFWFRXUWDQG5(0$1'WKLVFDVHZLWKLQVWUXFWLRQVWR
GLVPLVV7LQGDOO¶VFRPSODLQWLQLWVHQWLUHW\

-- 4 of 8 --

7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO
1RV
LQGLYLGXDOPD\VHUYHDVDSURSHUH[FHSWLRQWRWKH<RXQJHU
DEVWHQWLRQ GRFWULQH VHH HJ 0LGGOHVH[ &RXQW\ (WKLFV
&RPP86DWZHKDYHIRXQGQR6XSUHPH&RXUW
FDVHWKDWKDVHYHUDXWKRUL]HGIHGHUDOLQWHUYHQWLRQXQGHUWKLV
H[FHSWLRQ6XFKFDVHVWKXVDUHH[FHHGLQJO\UDUHSDUWLFXODUO\
ZKHUHDSODLQWLIIVHHNLQJWRGHIHDWDQDEVWHQWLRQDUJXPHQWKDV
IDLOHGWRDYDLOKLPVHOIILUVWRIVWDWHDSSHOODWHSURFHVVHVEHIRUH
VHHNLQJUHOLHILQIHGHUDOFRXUW
7KHDFWLRQVDOOHJHGWRFRQVWLWXWHHYLGHQFHRIEDGIDLWKRQ
WKHSDUWRIWKHGHIHQGDQWVLQWKHLQVWDQWDSSHDOFDQDOO
SURSHUO\ EH FKDOOHQJHG HLWKHU E\ PRWLRQ WR WKH WULDO
FRXUWRUODWHURQDSSHDOWRWKHVWDWHDSSHOODWHFRXUWV$V
VXFK %DOODUG SODLQO\ KD>V@ DQ DGHTXDWH RSSRUWXQLW\ WR
KDYH>KHU@FRQVWLWXWLRQDOGHIHQVHVKHDUGDQGGHWHUPLQHG
GXULQJWKHFRXUVHRIWKHVWDWHFRXUWSURFHHGLQJV:KHUH
WKHUH H[LVWV WKH SRVVLELOLW\ RI UDLVLQJ DQG FRUUHFWLQJ
FRQVWLWXWLRQDO FODLPV LQ VWDWH FRXUWV WKH SULQFLSOHV RI
IHGHUDOLVPDQGFRPLW\H[SUHVVHGLQ<RXQJHUUHTXLUHWKDW
D FULPLQDO GHIHQGDQW PXVW ILUVW H[KDXVW KLV VWDWH
DSSHOODWHUHPHGLHVEHIRUHVHHNLQJUHOLHILQWKH'LVWULFW
&RXUW
%DOODUG Y 6WDQWRQ )G WK &LU
HPSKDVLV DGGHG LQWHUQDO FLWDWLRQV DQG TXRWDWLRQ PDUNV
RPLWWHG +HUHLWLVXQGLVSXWHGWKDW7LQGDOO¶VRQO\UHVRUWWR
0LFKLJDQFRXUWVIRUUHOLHIRFFXUUHGZKHQKHILOHGKLVPRWLRQV
IRU VXSHULQWHQGLQJ FRQWURO EHIRUH WKH 0LFKLJDQ &RXUW RI
$SSHDOVDQGWKH0LFKLJDQ6XSUHPH&RXUW7KRVHDSSHDOV
ZLWKRXW PRUH DUH LQVXIILFLHQW WR UHEXW WKH SUHVXPSWLRQ LQ
IDYRURIDEVWHQWLRQ6HH6HYLHU)GDW
7KHGLVWULFWFRXUWHUUHGE\IROGLQJLQWRLWVLQTXLU\RIWKH
DEVWHQWLRQTXHVWLRQFRQVLGHUDWLRQRIZKHWKHU'HIHQGDQWVKDG
UHVSRQGHGWRWKHDOOHJDWLRQVVHWIRUWKLQ7LQGDOO¶VFRPSODLQW
,Q UHVROYLQJ WKH WKUHVKROG TXHVWLRQ RI ZKHWKHU LW VKRXOG
SURSHUO\ DEVWDLQ IURP FRQVLGHUDWLRQ RI 7LQGDOO¶V FODLPV LW
HVVHQWLDOO\PDGHDPHULWVGHWHUPLQDWLRQWKDW'HIHQGDQWV¶
IDLOXUH WR UHEXW WKH FODLPV UDLVHG LQ 7LQGDOO¶V FRPSODLQW
1RV 7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO

'HIHQGDQW$SSHOOHH 6KHULII¶V 'HSDUWPHQW KDV QHLWKHU HQWHUHG DQ
DSSHDUDQFH LQ WKLV PDWWHU QRU ILOHG EULHIV IRU SXUSRVHV RI WKLV DSSHDO
7KXV ZH ZLOO DVVXPH WKDW LW KDV LPSOLHGO\ DGRSWHG WKH DUJXPHQWV UDLVHG
E\ LWV FRDSSHOOHHV WKH :&&& DQG WKH )2&
+DUULV DEVWHQWLRQ GRFWULQH WR &RXQWV ,,, DQG 9, RI KLV
FRPSODLQW LQ UHIXVLQJ WR GHWHUPLQH WKH FRQVWLWXWLRQDOLW\ RI
0LFK&RPS/DZV$QQ† ³/LFHQVH$FW´ ZKLFK
SURYLGHVIRUWKHVXVSHQVLRQRIWKHRFFXSDWLRQDORUGULYHU¶V
OLFHQVHRIDGHOLQTXHQWFKLOGVXSSRUWSD\HUDQGZKHWKHUWKH
)2&¶VIDLOXUHWRIROORZHVWDEOLVKHGSROLFLHVIRUFRQGXFWLQJ
UHIHUHHDQGMXGLFLDOKHDULQJVYLRODWHGKLVULJKWWRGXHSURFHVV
7LQGDOODOVRDVVLJQVHUURUWRWKHGLVWULFWFRXUW¶VGHQLDORIKLV
UHTXHVW IRU LQMXQFWLYH UHOLHI XQGHU WKH )HGHUDO &RXUWV
,PSURYHPHQW $FW RI DV WR &RXQWV ,9 DQG 9 RI KLV
FRPSODLQWDQGWRWKHGLVWULFWFRXUW¶VDOOHJHGPLVDSSOLFDWLRQ
RI WKH )HG 5 &LY 3 E VWDQGDUG LQ HYDOXDWLQJ KLV
FODLPV
&URVV$SSHOODQWVWKH)2&DQGWKH:&&&UDLVHFKDOOHQJHV
RIWKHGLVWULFWFRXUW¶VJUDQWLQSDUW RI 7LQGDOO¶VPRWLRQIRU
VXPPDU\ MXGJPHQW DQG DVVHUW WKDW WKH GLVWULFW FRXUW
YLRODWHGWKH(OHYHQWK$PHQGPHQWZKHQLWH[HUFLVHGVXEMHFW
PDWWHU MXULVGLFWLRQ RYHU 7LQGDOO¶V FODLPV WKH SRVW
FRPSODLQW WUDQVIHU RI 7LQGDOO¶V GLYRUFH DFWLRQ WR 0DFRPE
&RXQW\&LUFXLW&RXUWUHQGHUHGPRRWKLVFODLPVWKXVUHTXLULQJ
XVWRYDFDWHWKHGLVWULFWFRXUW¶VMXGJPHQWLQWKLVFDVH WKH
GLVWULFWFRXUWHUURQHRXVO\FRQFOXGHGWKDW7LQGDOOKDGVWDQGLQJ
WRDVVHUWWKHFODLPVUDLVHGLQKLVFRPSODLQW WKHGLVWULFW
FRXUW LPSURSHUO\ UHIXVHG WR DEVWDLQ IURP UXOLQJ RQ DOO RI
7LQGDOO¶V FODLPV WKH GLVWULFW FRXUW HUUHG E\ SHUPLWWLQJ
7LQGDOOWRSURFHHGXQGHUWKH'HFODUDWRU\-XGJPHQW$FWDQG
WKHGLVWULFWFRXUWLQJUDQWLQJ7LQGDOO¶VVXPPDU\MXGJPHQW
PRWLRQHUURQHRXVO\FRQFOXGHGWKDW'HIHQGDQWV¶SURFHGXUHV
IRU LVVXLQJ VKRZ FDXVH RUGHUV DQG EHQFK ZDUUDQWV ZHUH
XQFRQVWLWXWLRQDO
7KLV FDVH SUHVHQWV D KRVW RI OHJDO TXHVWLRQV IRU RXU
FRQVLGHUDWLRQ %HFDXVH KRZHYHU ZH FRQFOXGH WKDW WKH

-- 5 of 8 --

7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO
1RV
GLVWULFWFRXUWSURSHUO\VKRXOGKDYHDEVWDLQHGIURPUHDFKLQJ
DQ\RI7LQGDOO¶VFODLPVZHGHFOLQHWRUHDFKDQ\LVVXHH[FHSW
WKDW SHUWDLQLQJ WR DEVWHQWLRQ :H WKHUHIRUH 9$&$7( WKH
RUGHU RI WKH GLVWULFW FRXUW DQG 5(0$1' WKLV FDVH ZLWK
LQVWUXFWLRQVWRGLVPLVV7LQGDOO¶VFRPSODLQW
,%$&.*5281'
,Q'HFHPEHUDGLYRUFHMXGJPHQWLVVXHGLQWKH:D\QH
&RXQW\ &LUFXLW &RXUW HQGLQJ WKH PDUULDJH RI 0LFKDHO DQG
*UDFH 7LQGDOO SXUVXDQW WR ZKLFK 7LQGDOO ZDV RUGHUHG WR
PDNH VXSSRUW SD\PHQWV IRU KLV WZR PLQRU FKLOGUHQ +H
UHSHDWHGO\IDLOHGWRPDNHWKHUHTXLUHGSD\PHQWV%HWZHHQ
2FWREHUDQG$SULOQRIHZHUWKDQILYHVKRZFDXVH
RUGHUVLVVXHGRUGHULQJ7LQGDOOWRDQVZHUIRUKLVIDLOXUHWRSD\
FRXUWRUGHUHGFKLOGVXSSRUW:KHQ7LQGDOOIDLOHGWRDSSHDUDW
WKHVHKHDULQJVEHQFKZDUUDQWVLVVXHGLPPHGLDWHO\WKHUHDIWHU
7LQGDOODOOHJHVWKDWWKH:&&&DQGWKH)2&YLRODWHGWKHLU
HVWDEOLVKHGSURFHGXUHVE\SUHVLJQLQJWKHVHVKRZFDXVHRUGHUV
DQG EHQFK ZDUUDQWV DQG E\ DOORZLQJ WKHP WR EH LVVXHG E\
QRQMXGLFLDORIILFHUV
$:&&&UHSUHVHQWDWLYHLVVXHGDQRWKHUVKRZFDXVHRUGHU
RQ$SULORUGHULQJ7LQGDOOWRDSSHDUDWDKHDULQJWR
DQVZHU IRU KLV IDLOXUH WR FRPSO\ ZLWK WKH FRXUW¶V SUHYLRXV
FKLOG VXSSRUW RUGHU ZKLFK KDG UHVXOWHG LQ WKH $XJXVW
LVVXDQFHRIDEHQFKZDUUDQW7LQGDOOIDLOHGWRDSSHDUDW
WKLVKHDULQJDQGLQVWHDGVHQWKLVDWWRUQH\WRLQIRUPWKHFRXUW
WKDWKHKDGQHYHUUHFHLYHGQRWLFHRIWKHKHDULQJDQGWKDWKH
KDGQRWEHHQPDGHDZDUHWKDWDEHQFKZDUUDQWIRUKLVDUUHVW
KDGLVVXHGXQWLOWKHPRUQLQJRIWKHKHDULQJ)2&DWWRUQH\
6KHOO\ 3D\QH GLVSXWHV WKLV SRLQW :KHQ IXUWKHU FRQIXVLRQ
GHYHORSHGDWWKHKHDULQJFRQFHUQLQJZKRKDGDXWKRUL]HGWKH
LVVXDQFH RI WKH $XJXVW ZDUUDQW DQG ZKHUH WKDW
ZDUUDQWZDVFXUUHQWO\ORFDWHG3D\QHGUHZXSDQHZZDUUDQW
1RV 7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO

μH[WUDRUGLQDU\ FLUFXPVWDQFHV¶ PXVW DEVWDLQ IURP JUDQWLQJ
GHFODUDWRU\ RU LQMXQFWLYH UHOLHI >DIIHFWLQJ D FLYLO FRQWHPSW
KHDULQJ VWHPPLQJ IURP WKH QRQSD\PHQW RI FKLOG VXSSRUW@
EHFDXVHGRLQJVRZRXOGLQYROYHXQGXO\LQWUXVLYHLQWHUIHUHQFH
ZLWK DQG PRQLWRULQJ RI WKH GD\WRGD\ FRQGXFW RI VWDWH
KHDULQJVDQGWULDOV´6HYLHUY7XUQHU)G
WK&LU :HDJUHHWKDWWKHGLVWULFWFRXUW¶VIDLOXUHWR
DEVWDLQFRQWUDYHQHGRXUKROGLQJLQ6HYLHUY7XUQHUDFDVH
DOPRVWIDFWXDOO\LQGLVWLQJXLVKDEOHIURPWKHLQVWDQWRQH
,Q6HYLHUSODLQWLII)UHGGLH6HYLHUDQRQFXVWRGLDOSDUHQW
REOLJDWHGWRSD\FKLOGVXSSRUWIRUKLVPLQRUFKLOGUHQVRXJKW
LQMXQFWLYHDQGGHFODUDWRU\UHOLHIDJDLQVWYDULRXV7HQQHVVHH
MXYHQLOHMXGJHVDQGRWKHUIDPLO\FRXUWRIILFLDOV6HH6HYLHU
)GDW6HYLHUDOOHJHGLQWHUDOLDYDULRXVGXH
SURFHVVYLRODWLRQVVWHPPLQJIURPWKHRIILFLDOV¶DOOHJHGIDLOXUH
WRLQIRUPKLPRIFHUWDLQULJKWVWRZKLFKKHZDVHQWLWOHGDWD
FLYLOFRQWHPSWKHDULQJ HJWKHULJKWWRFRXQVHO 6HHLGDW
:KHQKHZDVXQVXFFHVVIXOLQREWDLQLQJUHOLHIIURP
WKH WULDO FRXUW 6HYLHU ILOHG EHIRUH WKH 7HQQHVVHH &RXUW RI
$SSHDOV DQG WKH 7HQQHVVHH 6XSUHPH &RXUW 7HQQHVVHH¶V
HTXLYDOHQWRIDPRWLRQIRUVXSHULQWHQGLQJFRQWUROVHHNLQJDQ
H[WUDRUGLQDU\DSSHDOIURPWKHWULDOFRXUW¶VDGYHUVHUXOLQJ6HH
LGDW%RWKDSSHDOVZHUHGHQLHGDQG6HYLHUWKHQVRXJKW
UHOLHILQIHGHUDOFRXUW6HHLG7KHGLVWULFWFRXUWGLVPLVVHGKLV
VXLW6HHLG2QDSSHDOUHO\LQJRQRXUGHFLVLRQLQ3DUNHUY
7XUQHU )G WK &LU ZH DEVWDLQHG IURP
DGMXGLFDWLQJ 6HYLHU¶V LQMXQFWLYH DQG GHFODUDWRU\UHOLHI
FODLPV ILQGLQJ WKDW 6HYLHU KDG IDLOHG WR GHPRQVWUDWH
³H[WUDRUGLQDU\FLUFXPVWDQFHV´IRUIHGHUDOFRXUWUHOLHI6HH
6HYLHU)GDW
7KHGLVWULFWFRXUWLQWKLVFDVHQHYHUFRQVLGHUHGWKHLPSDFW
RI6HYLHURQ7LQGDOO¶VFDVHFRQFOXGLQJWKDWZKLOHWKHDFWLRQ
PLJKWRWKHUZLVHEHEDUUHG'HIHQGDQWV¶EDGIDLWKSURYLGHGD
EDVLVIRUUHDFKLQJ&RXQWV,9DQG9RI7LQGDOO¶VFRPSODLQW
:HGLVDJUHHZLWKWKHGLVWULFWFRXUW¶VDQDO\VLVDQGFRQFOXGH
WKDW6HYLHUIRUHFORVHV7LQGDOO¶VDFWLRQ$OWKRXJKWKH6XSUHPH
&RXUW KDV UHFRJQL]HG WKDW EDGIDLWK SURVHFXWLRQ RI DQ

-- 6 of 8 --

7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO
1RV
:H KDYH UHOD[HG WKLV UHTXLUHPHQW QRWLQJ WKDW ³>H@YHQ LQ WKH DEVHQFH
RI D SHQGLQJ VWDWH SURFHHGLQJ D IHGHUDO FRXUW FDQQRW JUDQW UHOLHI
UHJDUGLQJ XQFRQVWLWXWLRQDO SUDFWLFHV ZKLFK RFFXU DW D VWDWH WULDO´ 3DUNHU
Y 7KRPDV )G WK &LU
HPHUJHGIRUGHWHUPLQLQJZKHQDEVWHQWLRQLVDSSURSULDWH
ZKHWKHU WKH XQGHUO\LQJ SURFHHGLQJV FRQVWLWXWH DQ RQJRLQJ
VWDWH MXGLFLDO SURFHHGLQJ ZKHWKHU WKH SURFHHGLQJV
LPSOLFDWHLPSRUWDQWVWDWHLQWHUHVWVDQG ZKHWKHUWKHUHLVDQ
DGHTXDWH RSSRUWXQLW\ LQ WKH VWDWH SURFHHGLQJV WR UDLVH D
FRQVWLWXWLRQDO FKDOOHQJH :KHUH D UHYLHZ RI WKHVH
FRQVLGHUDWLRQVVXJJHVWVWKDWWKHVWDWHFRXUWVKRXOGSURSHUO\
DGMXGLFDWHWKHPDWWHUDIHGHUDOFRXUWVKRXOGDEVWDLQDQGRUGHU
WKHIHGHUDOFRPSODLQWGLVPLVVHG,IKRZHYHUDSODLQWLIIFDQ
GHPRQVWUDWHH[WUDRUGLQDU\FLUFXPVWDQFHVVXFKDVEDGIDLWK
KDUDVVPHQWIODJUDQWXQFRQVWLWXWLRQDOLW\RUDQRWKHUXQXVXDO
FLUFXPVWDQFHZDUUDQWLQJHTXLWDEOHUHOLHIWKHQDIHGHUDOFRXUW
PD\GHFOLQHWRDEVWDLQ6HH)LHJHUY7KRPDV)G
WK&LU $GLVWULFWFRXUW¶VGHFLVLRQWRDEVWDLQ
IURPDGMXGLFDWLQJDFODLPSXUVXDQWWRWKH<RXQJHUGRFWULQHLV
DTXHVWLRQRIODZWKDWZHUHYLHZGHQRYR 6HH &RRSHUY
3DUULVK)G WK&LU
,QWKHLQVWDQWFDVHWKHGLVWULFWFRXUWUHYLHZHGHDFKRIWKHVH
IDFWRUVDQGGHWHUPLQHGWKDWLWVKRXOGSURSHUO\DEVWDLQIURP
FRQVLGHULQJ7LQGDOO¶VFODLPV,WWKHQSURFHHGHGWRFRQVLGHU
ZKHWKHU7LQGDOOKDGVDWLVILHGDQ\RIWKHUHFRJQL]HG<RXQJHU
H[FHSWLRQV DQG FRQFOXGHG WKDW KH KDG GHPRQVWUDWHG ZLWK
UHVSHFWWR&RXQWV,9DQG9EDGIDLWKRQWKHSDUWRI)2&
6SHFLILFDOO\ WKH GLVWULFW FRXUW IRXQG WKDW WKH 'HIHQGDQWV¶
IDLOXUHWRUHEXW7LQGDOO¶VDOOHJDWLRQVWKDWWKH\IDLOHGWRIROORZ
WKHLUHVWDEOLVKHGSURFHGXUHVIRULVVXLQJVKRZFDXVHRUGHUVDQG
EHQFKZDUUDQWVFRQVWLWXWHGDQDGPLVVLRQWRWKHWUXWKRIWKRVH
DOOHJDWLRQV6XFKDQDGPLVVLRQWKHGLVWULFWFRXUWFRQFOXGHG
ZDVHYLGHQFHRIEDGIDLWKWKXVUHPRYLQJDQ\<RXQJHUEDUWR
LWVFRQVLGHUDWLRQRIWKRVHFODLPV
'HIHQGDQWVVXEPLWWKDWWKHGLVWULFWFRXUWGLVUHJDUGHGWKLV
&LUFXLW¶V ZHOOVHWWOHG UXOH WKDW ³IHGHUDO FRXUWV DEVHQW
1RV 7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO

$W WKH KHDULQJ 3D\QH DGPLWWHG WKDW VKH KDG DXWKRUL]HG WKH ZDUUDQW
ZKLFK 7LQGDOO SRLQWV WR DV HYLGHQFH WKDW WKH )2& DQG LWV HPSOR\HHV
GLVUHJDUGHG HVWDEOLVKHG SURFHGXUHV IRU LVVXLQJ EHQFK ZDUUDQWV 6HH 0LFK
&RXUW 5XOHV >KHUHLQDIWHU 0&5@ % QRWLQJ WKDW ZKLOH D IULHQG RI
FRXUW PD\ SHWLWLRQ IRU D VKRZ FDXVH RUGHU RQO\ D FRXUW PD\ LVVXH D EHQFK
ZDUUDQW VHH DOVR 0LFK &RPS /DZV $QQ † VDPH
8QGHU 0LFKLJDQ ODZ VXSHULQWHQGLQJ FRQWURO RUGHUV DUH XVHG WR
GHWHUPLQH ³LI WKH LQIHULRU WULEXQDO XSRQ WKH UHFRUG PDGH KDG MXULVGLFWLRQ
ZKHWKHU RU QRW LW H[FHHGHG WKDW MXULVGLFWLRQ DQG SURFHHGHG DFFRUGLQJ WR
ODZ´ 3HRSOH Y %XUWRQ 1:G 0LFK
6XSHULQWHQGLQJ FRQWURO LV DQ H[WUDRUGLQDU\ SRZHU WKDW PD\ EH H[HUFLVHG
ZKHQ D SHWLWLRQHU GHPRQVWUDWHV ERWK WKH UHVSRQGHQW¶V IDLOXUH WR SHUIRUP
D FOHDU OHJDO GXW\ DQG WKH DEVHQFH RI DQ DGHTXDWH OHJDO UHPHG\ 6HH ,Q UH
5HFRUGHU¶V &RXUW %DU $VV¶Q Y :D\QH &LUFXLW &RXUW 1:G
0LFK ,I LW LV GHWHUPLQHG WKDW D SHWLWLRQHU VHHNLQJ VXFK DQ
RUGHU KDV DQ DGHTXDWH OHJDO UHPHG\ E\ UHVRUW WR WKH VWDWH DSSHOODWH SURFHVV
D FRPSODLQW IRU DQ RUGHU RI VXSHULQWHQGLQJ FRQWURO PXVW EH GLVPLVVHG 6HH
0&5 ' 5HYLHZ LQ VXFK FDVHV LV OLPLWHG WR TXHVWLRQV RI ODZ
6HH LG
VLJQHG E\ -XGJH *LRYDQ UHTXLULQJ 7LQGDOO DJDLQ WR VKRZ
FDXVHZK\KHVKRXOGQRWEHKHOGLQFRQWHPSW
,QUHVSRQVHWRWKH0D\ZDUUDQW7LQGDOOILOHGD
&RPSODLQWIRU6XSHULQWHQGLQJ&RQWUROLQWKH0LFKLJDQ&RXUW
RI$SSHDOVDFFRPSDQLHGE\DQ³(PHUJHQF\([3DUWH0RWLRQ
IRU 6XSHULQWHQGLQJ &RQWURO DQG WR 6WD\ (QIRUFHPHQW RI D
9RLG %HQFK :DUUDQW´ LQ ZKLFK 7LQGDOO REMHFWHG WR WKH
SURFHGXUHVWKDWKDGEHHQHPSOR\HGGXULQJWKHSHQGHQF\RI
KLVGLYRUFHDFWLRQ6SHFLILFDOO\KHFKDOOHQJHGWKHPDQQHULQ
ZKLFK VKRZ FDXVH RUGHUV KDG EHHQ LVVXHG DQG KRZ VKRZ
FDXVH KHDULQJV KDG EHHQ FRQGXFWHG DQG TXHVWLRQHG WKH
SURSULHW\ RI -XGJH *LRYDQ¶V DQG 3D\QH¶V FRQWLQXHG
SDUWLFLSDWLRQLQKLVGLYRUFHDFWLRQ7KH0LFKLJDQ&RXUWRI
$SSHDOVLVVXHGDVXPPDU\RUGHUGHQ\LQJ7LQGDOO¶V&RPSODLQW
IRU6XSHULQWHQGLQJ&RQWURORQ0D\7LQGDOOILOHGD
&RPSODLQW IRU 6XSHULQWHQGLQJ &RQWURO LQ WKH 0LFKLJDQ
6XSUHPH &RXUW RQ 0D\ ORGJLQJ WKH VDPH
JULHYDQFHVUDLVHGLQWKHSUHYLRXVFRPSODLQWILOHGLQWKH&RXUW

-- 7 of 8 --

7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO
1RV
RI$SSHDOV,QD-XQHRUGHUWKH0LFKLJDQ6XSUHPH
&RXUWGHFOLQHGUHYLHZRI7LQGDOO¶VSHWLWLRQRQ-XQH
7LQGDOO¶VFRQWLQXHGQRQSD\PHQWRIFKLOGVXSSRUWUHVXOWHG
LQWKHLVVXDQFHRIDGGLWLRQDOVKRZFDXVHRUGHUVDQGEHQFK
ZDUUDQWV6HYHUDOKHDULQJVZHUHKHOGDWZKLFK7LQGDOOZDV
UHTXLUHG WR GHPRQVWUDWH ZK\ KH VKRXOG QRW EH KHOG LQ
FRQWHPSWIRUKLVRSHQGHILDQFHRIWKHFRXUW¶VRUGHUV2QRQH
VXFKRFFDVLRQD:&&&MXGJHKHOG7LQGDOOLQFRQWHPSWRI
FRXUWDQGRUGHUHGKLPLQFDUFHUDWHGIRUIRUW\ILYHGD\VRUXQWLO
KH PDGH D SD\PHQW WRZDUGV KLV FKLOG VXSSRUW
REOLJDWLRQV 7LQGDOO FRPSOLHG ZLWK WKH FRXUW¶V RUGHU DQG
DYRLGHGLQFDUFHUDWLRQ7KHUHDIWHURQ$XJXVWWKH
)2& VHUYHG 7LQGDOO ZLWK D QRWLFH LQIRUPLQJ KLP WKDW RQ
6HSWHPEHULWZRXOGVHHNDQRUGHUVXVSHQGLQJKLV
OLFHQVH WR SUDFWLFH ODZ IRU KLV IDLOXUH WR SD\ FRXUWRUGHUHG
FKLOGVXSSRUW7LQGDOOILOHGQRPRWLRQWRTXDVKWKHQRWLFH
IDLOHGWRDSSHDUDWWKHKHDULQJDQGGLGQRWRWKHUZLVHUDLVHD
FKDOOHQJHWRLWLQVWDWHFRXUWEXWSURFHHGHGLQVWHDGWRIHGHUDO
FRXUWWRILOHWKHODZVXLWSUHVHQWO\EHIRUHXV
7LQGDOO LQLWLDWHG WKH LQVWDQW ODZVXLW LQ WKH 8QLWHG 6WDWHV
'LVWULFW &RXUW IRU WKH (DVWHUQ 'LVWULFW RI 0LFKLJDQ RQ
6HSWHPEHU7LQGDOO¶VFRPSODLQWVHWIRUWKIRXUFODLPV
SXUVXDQWWR86&†DQG86&†DOOHJLQJ
WKDWWKH/LFHQVH$FWZKLFKSURYLGHVIRUWKHVXVSHQVLRQRIWKH
GULYHU¶VRURFFXSDWLRQDOOLFHQVHRIDGHOLQTXHQWFKLOGVXSSRUW
SD\HULVXQFRQVWLWXWLRQDOERWKIDFLDOO\DQGDVDSSOLHGE\WKH
:&&& DQG WKH )2& &RXQW ,,, WKDW WKH SURFHGXUHV
HPSOR\HGE\WKH:&&&DQGWKH)2&WRLQLWLDWHFRQWHPSW
SURFHHGLQJV DUH XQFRQVWLWXWLRQDO &RXQW ,9 WKDW WKH
SURFHGXUHVXWLOL]HGE\WKH:&&&DQGWKH)2&WRLVVXHEHQFK
ZDUUDQWVDUHXQFRQVWLWXWLRQDO &RXQW9 DQGWKDW:&&&¶V
UHIHUHHKHDULQJVDQGMXGLFLDOKHDULQJV>FROOHFWLYHO\UHIHUUHGWR
KHUHLQDV³FRQWHPSWSURFHHGLQJV´@DUHXQFRQVWLWXWLRQDOIRU
WKHLU IDLOXUH WR FRPSO\ ZLWK 0LFKLJDQ &RXUW 5XOHV &RXQW
9, 7LQGDOOVRXJKWDQRUGHUIURPWKHGLVWULFWFRXUWGHFODULQJ
WKH FRQWHVWHG VWDWXWH DQG SURFHGXUHV XQFRQVWLWXWLRQDO
HQMRLQLQJWKHQDPHGGHIHQGDQWVIURPWDNLQJIXUWKHUDFWLRQ
1RV 7LQGDOOY:D\QH&RXQW\
)ULHQGRIWKH&RXUWHWDO

SXUVXDQW WR WKH FRQWHVWHG VWDWXWH DQG SURFHGXUHV DQG
DZDUGLQJKLPDWWRUQH\IHHVDQGFRVWV
2QRUDERXW6HSWHPEHU'HIHQGDQWVILOHGVHSDUDWH
PRWLRQV WR GLVPLVV DQG 7LQGDOO ILOHG D FURVVPRWLRQ IRU
VXPPDU\ MXGJPHQW $IWHU D KHDULQJ RQ WKH PRWLRQV WKH
GLVWULFWFRXUWLVVXHGDMXGJPHQWRQ6HSWHPEHUDQG
PDGHWKHIROORZLQJILQGLQJV EHFDXVH7LQGDOOFRXOGQRW
GHPRQVWUDWHWKDWWKHUHKDGEHHQDQ\DWWHPSWE\WKH:&&&RU
WKH )2& WR HQIRUFH WKH /LFHQVH $FW DQG VXVSHQG KLV ODZ
OLFHQVHLWDEVWDLQHGIURPUXOLQJRQWKHFRQVWLWXWLRQDOLW\RIWKH
VWDWXWH &RXQW ,,, EHFDXVH 7LQGDOO VXFFHVVIXOO\
GHPRQVWUDWHG ZLWKRXWUHEXWWDOE\'HIHQGDQWV WKDWWKH)2&
DFWHGLQEDGIDLWKE\YLRODWLQJLWVHVWDEOLVKHGSURFHGXUHVIRU
LVVXLQJVKRZFDXVHRUGHUVDQGEHQFKZDUUDQWVQR<RXQJHU
DEVWHQWLRQEDUH[LVWHGDQGLQWKHDEVHQFHRIVXFKDEDUERWK
VXPPDU\MXGJPHQWRQ&RXQWV ,9DQG9DQGDGHFODUDWRU\
MXGJPHQW ILQGLQJ WKHVH SUDFWLFHV XQFRQVWLWXWLRQDO ZHUH
DSSURSULDWH &RXQWV ,9 9 DQG ZLWK UHVSHFW WR WKH
FRQWHPSWSURFHHGLQJVEHFDXVH7LQGDOOIDLOHGWRGHPRQVWUDWH
WKDWWKH)2&DQGWKH:&&&GRQRWIROORZWKHLUHVWDEOLVKHG
SURFHGXUHVIRUFRQGXFWLQJFRQWHPSWSURFHHGLQJVDQGEHFDXVH
KHFRXOGQRWWKHUHIRUHGHPRQVWUDWHWKHUHTXLVLWHEDGIDLWKRU
IODJUDQWXQFRQVWLWXWLRQDOLW\WRRYHUFRPHD<RXQJHUDEVWHQWLRQ
EDU WKH GLVWULFW FRXUW DEVWDLQHG IURP UXOLQJ RQ WKLV LVVXH
&RXQW 9, ,Q VKRUW WKH GLVWULFW FRXUW JUDQWHG 7LQGDOO¶V
PRWLRQ IRU VXPPDU\ MXGJPHQW RQ &RXQWV ,9 DQG 9 DQG
GHFOLQHGWRUXOHRQ&RXQWV,,,DQG9,ILQGLQJQRH[FHSWLRQWR
WKH<RXQJHUDEVWHQWLRQGRFWULQH
,,',6&866,21
7KH<RXQJHUDEVWHQWLRQGRFWULQHFRXQVHOVDIHGHUDOFRXUWWR
DEVWDLQ IURP DGMXGLFDWLQJ D PDWWHU SURSHUO\ EHIRUH LW LQ
GHIHUHQFHWRRQJRLQJVWDWHFULPLQDOSURFHHGLQJV6HH<RXQJHU
Y +DUULV 86 VHH DOVR 0LGGOHVH[
&RXQW\(WKLFV&RPPY*DUGHQ6WDWH%DU$VV¶Q86
H[WHQGLQJWKHGRFWULQHWRHQFRPSDVVFLYLO
DQGDGPLQLVWUDWLYHSURFHHGLQJV 7KUHHFRQVLGHUDWLRQVKDYH

-- 8 of 8 --