01a0158p.06

7KH +RQRUDEOH 'RQDOG & 1XJHQW 8QLWHG 6WDWHV 'LVWULFW -XGJH IRU
WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
3XUVXDQW WR 6L[WK &LUFXLW 5XOH
(/(&7521,& &,7$7,21 )(' $SS 3 WK &LU
)LOH 1DPH DS
81,7('67$7(6&28572)$33($/6
)257+(6,;7+&,5&8,7
BBBBBBBBBBBBBBBBB
81,7(' 67$7(6 2) $0(5,&$
3ODLQWLII$SSHOOHH
Y
-2+1 0 /2*$1
$/$1 0,&+$(/ /$:6

'HIHQGDQWV$SSHOODQWV
;!

1
1RV
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHDW*UHHQHYLOOH
1R²-DPHV+-DUYLV'LVWULFW-XGJH
$UJXHG-DQXDU\
'HFLGHGDQG)LOHG0D\
%HIRUH0$57,1&KLHI-XGJH&2/(&LUFXLW-XGJH
18*(17'LVWULFW-XGJH

-- 1 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' -HUU\ : /DXJKOLQ 52*(56 /$8*+/,1
1811$//< *UHHQHYLOOH 7HQQHVVHH 5REHUW : 5LWFKLH
5,7&+,( )(/6 ',//$5' .QR[YLOOH 7HQQHVVHH IRU
$SSHOODQWV01HLO6PLWK$66,67$1781,7('67$7(6
$77251(< *UHHQHYLOOH 7HQQHVVHH IRU $SSHOOHH
21 %5,() -HUU\ : /DXJKOLQ 52*(56 /$8*+/,1
1811$//< *UHHQHYLOOH 7HQQHVVHH 5REHUW : 5LWFKLH
: 7KRPDV 'LOODUG 5,7&+,( )(/6 ',//$5'
.QR[YLOOH 7HQQHVVHH IRU $SSHOODQWV 0 1HLO 6PLWK
$66,67$1781,7('67$7(6$77251(<*UHHQHYLOOH
7HQQHVVHHIRU$SSHOOHH
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
18*(17'LVWULFW-XGJH$SSHOODQWV-RKQ0/RJDQDQG
$ODQ0LFKDHO/DZVZHUHIRXQGJXLOW\E\DMXU\VLWWLQJLQWKH
8QLWHG 6WDWHV 'LVWULFW &RXUW IRU WKH (DVWHUQ 'LVWULFW RI
7HQQHVVHHRQQLQHW\IRXUFRXQWVRIFULPLQDOFKDUJHVZKLFK
LQFOXGHGPDNLQJIDOVHVWDWHPHQWVIDOVHHQWULHVIDOVHFODLPV
DQGRQHFRXQWRIFRQVSLUDF\$SSHOODQWVILOHGDWLPHO\QRWLFH
RIDSSHDOWRWKLV&RXUWFKDOOHQJLQJWKHLUFRQYLFWLRQVDQGWKH
FRUUHVSRQGLQJVHQWHQFHV:HH[HUFLVHMXULVGLFWLRQSXUVXDQW
WR 86& † WR UHYLHZ WKH ILQDO MXGJPHQW RI WKH
GLVWULFWFRXUWDQGSXUVXDQWWR86&† D WRUHYLHZ
WKHVHQWHQFHLPSRVHG)RUWKHUHDVRQVVHWIRUWKEHORZZH
KHUHE\$)),50WKHMXGJPHQWUHDFKHGDQGVHQWHQFHVLPSRVHG
E\WKHGLVWULFWFRXUW
,%$&.*5281'
$SSHOODQWV LQ WKLV FDVH DUH WKH VROH VKDUHKROGHUV DQG
FRQWUROOLQJ RIILFHUV RI /RJDQ/DZV )LQDQFLDO &RUSRUDWLRQ
³//)&´ DQHQWLW\ZKLFKPDGHPRUWJDJHORDQVFRLQVXUHG
E\WKH)HGHUDO+RXVLQJ$GPLQLVWUDWLRQRIWKH'HSDUWPHQWRI

-- 2 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
GLVWULFWFRXUWGLGQRWHUULQGHQ\LQJ$SSHOODQWV¶PRWLRQIRU
SHUPLVVLRQWRLQWHUYLHZWKHMXURUV$FFRUGLQJO\ZHVKDOOQRW
UHYHUVHWKHORZHUFRXUWRQWKLVEDVLV
,,,&21&/86,21
)RUWKHUHDVRQVVWDWHGKHUHLQZH$)),50WKHMXGJPHQW
UHDFKHGDQGWKHVHQWHQFHVLPSRVHGLQWKHFRXUWEHORZ0RUH
VSHFLILFDOO\ ZH KROG WKDW WKH GLVWULFW FRXUW GLG QRW HUU LQ
ILQGLQJWKDWWKHVHDUFKZDUUDQWH[HFXWHGE\WKHJRYHUQPHQWRI
//)&¶VSUHPLVHVZDVQRWDJHQHUDOZDUUDQWLQYLRODWLRQRIWKH
)RXUWK$PHQGPHQW,QDGGLWLRQWKHGLVWULFWFRXUWSURSHUO\
KHOG WKDW WKHUH ZDV VXIILFLHQW HYLGHQFH WR ILQG $SSHOODQWV
JXLOW\RIPDNLQJIDOVHFODLPVIDOVHHQWULHVRUIDOVHVWDWHPHQWV
DQGFRQVSLUDF\)XUWKHUPRUHWKHGLVWULFWFRXUWGLGQRWHUULQ
DGPLWWLQJ HYLGHQFH RI D VHWWOHPHQW DJUHHPHQW EHWZHHQ
+8')+$DQG//)&DQGHYLGHQFHRI$SSHOODQWV¶UHSRUWHG
WD[DEOHLQFRPH$VWRVHQWHQFLQJZHILQGWKDWWKHGLVWULFW
FRXUW GLG QRW HUU LQ FDOFXODWLQJ ORVV LQ UHIXVLQJ WR GHSDUW
GRZQZDUGIURP$SSHOODQW/DZV¶VVHQWHQFLQJFRPSXWDWLRQLQ
HQKDQFLQJ$SSHOODQWV¶VHQWHQFHVIRUREVWUXFWLRQRIMXVWLFH
DQGLQFDOFXODWLQJ$SSHOODQW/DZV¶VFULPLQDOKLVWRU\FDWHJRU\
)LQDOO\ZHKROGWKDWWKHGLVWULFWFRXUWGLGQRWHUULQUHIXVLQJ
WR DOORZ FRXQVHO IRU $SSHOODQWV WR FRQGXFW D SRVWYHUGLFW
LQWHUURJDWLRQ RI MXURUV FRQFHUQLQJ DOOHJHG MXU\ PLVFRQGXFW
WKDWWRRNSODFHGXULQJWKHWULDO
1RV 8QLWHG6WDWHVY/RJDQHWDO
+RXVLQJDQG8UEDQ'HYHORSPHQW ³+8')+$´ 7KURXJK
//)& $SSHOODQWV LVVXHG VHFXULWLHV EDFNHG E\ SRROV RI
IHGHUDOO\LQVXUHGPRUWJDJHVWRVHFRQGDU\PDUNHWSXUFKDVHUV
XQGHU WKH *RYHUQPHQW 1DWLRQDO 0RUWJDJH $VVRFLDWLRQ¶V
³*10$¶V´ PRUWJDJHEDFNHG VHFXULWLHV SURJUDP ³0%6
SURJUDP´ $V DQ LVVXHU RI VHFXULWLHV XQGHU WKH 0%6
SURJUDP//)&ZDVUHTXLUHGWRFROOHFWPRQWKO\SULQFLSDODQG
LQWHUHVW SD\PHQWV IURP SURSHUW\ RZQHUV ZKLFK LW SDVVHG
WKURXJKWRWKHVHFXULW\KROGHUVOHVVVHUYLFLQJ IHHV,QWKH
HYHQW WKDW D SURSHUW\ RZQHU IDLOHG WR PDNH D PRQWKO\
SD\PHQW //)&¶V UROH DV D +8')+$ FRLQVXUHG OHQGHU
UHTXLUHG LW WR SD\ VHFXULW\ KROGHUV IURP LWV RZQ IXQGV ,I
//)& IDLOHG WR PDNH VXFK SD\PHQWV *10$ JXDUDQWHHG
SD\PHQW WR WKH VHFXULW\ KROGHUV 7KXV WKH 8QLWHG 6WDWHV
WKURXJK *10$ ZDV XOWLPDWHO\ UHVSRQVLEOH IRU WKH WLPHO\
SD\PHQWRISULQFLSDODQGLQWHUHVWGXHRQ//)&¶VPRUWJDJH
EDFNHGVHFXULWLHV
,Q FRQQHFWLRQ ZLWK WKLV SUDFWLFH D JUDQG MXU\ UHWXUQHG D
QLQHW\VL[FRXQW,QGLFWPHQWDJDLQVW$SSHOODQWVFKDUJLQJWKHP
ZLWKFRQVSLULQJWRGHIUDXGDQGFRPPLWRIIHQVHVDJDLQVWWKH
8QLWHG 6WDWHV PDNLQJ IDOVH FODLPV WR +8')+$ PDNLQJ
IDOVHHQWULHVLQUHSRUWVWR*10$PDNLQJIDOVHVWDWHPHQWVWR
*10$DQGZLUHIUDXG3ULRUWRWULDORQHFRXQWRIPDNLQJ
IDOVH FODLPV WR +8')+$ DQG WKH ZLUH IUDXG FRXQW ZHUH
GLVPLVVHG $ MXU\ FRQYLFWHG $SSHOODQWV RQ HDFK RI WKH
UHPDLQLQJ&RXQWVLQWKH,QGLFWPHQW3XUVXDQWWRWKH8QLWHG
6WDWHV6HQWHQFLQJ*XLGHOLQHV WKH³*XLGHOLQHV´ WKHGLVWULFW
FRXUWVHQWHQFHG$SSHOODQWVWRVHUYHHLJKW\VHYHQPRQWKVRI
LPSULVRQPHQWWREHIROORZHGE\WKUHH\HDUVRIVXSHUYLVHG
UHOHDVH,QDGGLWLRQWKHGLVWULFWFRXUWRUGHUHG$SSHOODQWVWR
PDNHUHVWLWXWLRQWR+8')+$DQG*10$LQWKHDPRXQWRI
RQHPLOOLRQGROODUV
,QWKLV&RXUW$SSHOODQWVFKDOOHQJHERWKWKHLUFRQYLFWLRQV
DQG VHQWHQFHV 0RUH VSHFLILFDOO\ $SSHOODQWV UDLVH WKH
IROORZLQJLVVXHV ZKHWKHUWKHVHDUFKZDUUDQWH[HFXWHGE\
WKHJRYHUQPHQWRI//)&¶VSUHPLVHVZDVDJHQHUDOZDUUDQWLQ
YLRODWLRQ RI WKH )RXUWK $PHQGPHQW RI WKH 8QLWHG 6WDWHV
&RQVWLWXWLRQ ZKHWKHUWKHUHZDVVXIILFLHQWHYLGHQFHWRILQG

-- 3 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
$SSHOODQWV JXLOW\ RI IDOVH FODLPV ZKHWKHU WKHUH ZDV
VXIILFLHQWHYLGHQFHWRILQG$SSHOODQWVJXLOW\RIIDOVHHQWULHVRU
IDOVHVWDWHPHQWV ZKHWKHUWKHUHZDVVXIILFLHQWHYLGHQFHWR
GHPRQVWUDWHWKDWWKHUHZDVDNQRZLQJDQGZLOOLQJDJUHHPHQW
EHWZHHQ $SSHOODQWV WR FRPPLW D FULPH ZKHWKHU WKH
GLVWULFW FRXUW HUUHG LQ DGPLWWLQJ HYLGHQFH RI D VHWWOHPHQW
DJUHHPHQWEHWZHHQ+8')+$DQG//)& ZKHWKHUWKH
GLVWULFWFRXUWHUUHGLQSHUPLWWLQJWKHJRYHUQPHQWWRLQTXLUHDV
WR $SSHOODQWV¶ UHSRUWHG WD[DEOH LQFRPH ZKHWKHU WKH
GLVWULFWFRXUWLQFRUUHFWO\FDOFXODWHGORVVXQGHUWKH*XLGHOLQHV
ZKHWKHU WKH GLVWULFW FRXUW LPSURSHUO\ UHIXVHG WR GHSDUW
GRZQZDUGIURP$SSHOODQW/DZV¶VVHQWHQFLQJFRPSXWDWLRQ
XQGHUWKH*XLGHOLQHV ZKHWKHUWKHGLVWULFWFRXUWHUUHGE\
HQKDQFLQJ$SSHOODQWV¶VHQWHQFHVIRUREVWUXFWLRQRIMXVWLFH
ZKHWKHU WKH GLVWULFW FRXUW LQFRUUHFWO\ FDOFXODWHG
$SSHOODQW /DZV¶V FULPLQDO KLVWRU\ FDWHJRU\ XQGHU WKH
*XLGHOLQHV DQG ZKHWKHU WKH GLVWULFW FRXUW LPSURSHUO\
UHIXVHG WR DOORZ LQYHVWLJDWLRQ RI DOOHJHG MXU\ PLVFRQGXFW
7KH&RXUWFRQVLGHUVHDFKRIWKHVHLVVXHVEHORZ
,,',6&866,21
7KHLVVXHVUDLVHGRQDSSHDOLQWKLVFDVHJHQHUDOO\IDOOLQWR
WKUHHFDWHJRULHV)LUVW$SSHOODQWVFKDOOHQJHWKHVXIILFLHQF\
RIWKHHYLGHQFHOHDGLQJWRWKHLUFRQYLFWLRQV1H[W$SSHOODQWV
DVVHUWWKDWWKHGLVWULFWFRXUWHUUHGLQPDNLQJVHYHUDOPDWHULDO
HYLGHQWLDU\ UXOLQJV )LQDOO\ $SSHOODQWV UDLVH YDULRXV
FKDOOHQJHVWRWKHSRVWWULDOUXOLQJVPDGHLQWKHFRXUWEHORZ
:HFRQVLGHUWKHVHFDWHJRULHVLQWXUQ
$6XIILFLHQF\RIWKH(YLGHQFH
,Q FRQVLGHULQJ FODLPV IRU VXIILFLHQF\ RI WKH HYLGHQFH WR
VXSSRUWDFRQYLFWLRQWKLV&RXUWZKLOHUHYLHZLQJWKHUHFRUG
LQWKHOLJKWPRVWIDYRUDEOHWRWKHSURVHFXWLRQVKRXOGJUDQW
UHOLHIRQO\LILWLVIRXQGWKDWXSRQWKHUHFRUGHYLGHQFHDGGXFHG
DWWULDOQRUDWLRQDOWULHURIIDFWFRXOGKDYHIRXQGSURRIRIJXLOW
EH\RQGDUHDVRQDEOHGRXEW6HH-DFNVRQY9LUJLQLD86

1RV 8QLWHG6WDWHVY/RJDQHWDO
%XW VHH 'RDQ Y %ULJDQR )G WK &LU ,Q WKDW
FDVH D SDQHO RI WKLV &RXUW IUDPHG WKH LVVXH LQ WHUPV RI ZKHWKHU DQ
DSSOLFDWLRQ RI 5XOH E YLRODWHG WKH GHIHQGDQW¶V FRQVWLWXWLRQDO ULJKWV
DV RSSRVHG WR UHO\LQJ RQ WKH LQWHUQDO YHUVXV H[WHUQDO LQIOXHQFH GLVWLQFWLRQ
EXLOW LQWR WKH 5XOH WR SUHVHUYH WKH LQWHJULW\ RI WKH MXU\ DV ZHOO DV WKH ULJKWV
RI WKH GHIHQGDQW
FRXUWEHIRUHWKH\UHQGHUDYHUGLFW)LQDOO\DIWHUWKHWULDO
D SDUW\ PD\ VHHN WR LPSHDFK WKH YHUGLFW E\ QRQMXURU
HYLGHQFHRIPLVFRQGXFW
,G HPSKDVLVLQRULJLQDO LQWHUQDOFLWDWLRQVRPLWWHG 7KXV
WKHUHH[LVWYDULRXVVRXUFHVRISURWHFWLRQEXLOWLQWRWKHOHJDO
V\VWHP ZKLFK SURWHFW WKH GHIHQGDQW¶V FRQVWLWXWLRQDO ULJKWV
WKURXJKRXW WKH WULDO SURFHVV 6HH LG +HQFH WKH HQWLUH
SURFHVV LQFOXGLQJ 5XOH E LV GHVLJQHG WR EDODQFH WKH
LQWHJULW\RIWKHMXU\V\VWHPDJDLQVWWKHULJKWVRIWKHGHIHQGDQW
6HHLG
$JDLQVW WKLV EDFNGURS D FRXUW IDFLQJ SRVWYHUGLFW
DOOHJDWLRQVRIMXU\PLVFRQGXFWVKDOOUHO\RQWKHHVVHQFHRI
5XOH E ZKLFK SURYLGHV WKDW LI WKH FDVH LQYROYHV DQ
H[WUDQHRXV RU H[WHUQDO LQIOXHQFH RQ WKH MXU\ WKHQ D SRVW
YHUGLFW LQWHUURJDWLRQ RI MXURUV LV SHUPLWWHG LQ RUGHU WR
DGHTXDWHO\SURWHFWWKHGHIHQGDQW¶VFRQVWLWXWLRQDOULJKWV6HH
LG&RQYHUVHO\LIWKHFDVHLQYROYHVDQLQWHUQDOLQIOXHQFHWKH
5XOHGRHVQRWSHUPLWWKHSRVWYHUGLFWLQWHUURJDWLRQRIMXURUV
,QWKHODWWHULQVWDQFHWKHSUHVHUYDWLRQRIWKHLQWHJULW\RIWKH
MXU\ V\VWHP RXWZHLJKV DQ\ SRWHQWLDO YLRODWLRQ RI WKH
GHIHQGDQW¶V FRQVWLWXWLRQDO ULJKWV 6HH LG ,Q WKLV ZD\ WKH
LQWHUQDOLQIOXHQFHYHUVXVH[WHUQDOLQIOXHQFHGLVWLQFWLRQLQWKH
5XOHLVGHVLJQHGWREDODQFHWKHSUHVHUYDWLRQRIWKHLQWHJULW\RI
WKHMXU\V\VWHPDQGWKHULJKWVRIWKHGHIHQGDQW6HHLG
,QWKHLQVWDQWFDVHWKHDOOHJHGMXU\PLVFRQGXFWFRQVLVWHGRI
SRWHQWLDOO\SUHPDWXUHGHOLEHUDWLRQVWKDWRFFXUUHGGXULQJWKH
FRXUVHRIWKHWULDO7KHGLVWULFWFRXUWFRUUHFWO\GHWHUPLQHGWKDW
WKLV DOOHJHG PLVFRQGXFW FRQVWLWXWHG D SRWHQWLDO LQWHUQDO
LQIOXHQFHRQWKHMXU\%HFDXVH5XOH E SURKLELWVSRVW
YHUGLFWLQWHUURJDWLRQRIMXURUVDVWRLQWHUQDOLQIOXHQFHVWKH

-- 4 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
%DVHGXSRQWKHIRUHJRLQJLWLVFOHDUWKDWWKHYHU\SXUSRVH
EHKLQG5XOH E LVWRSUHVHUYHRQHRIWKHPRVWEDVLFDQG
FULWLFDOSUHFHSWVRIWKH$PHULFDQMXVWLFHV\VWHPWKHLQWHJULW\
RIWKHMXU\6HHLG5XOH E DOORZVIRUDV\VWHPLQZKLFK
MXURUVPD\HQJDJHLQGHOLEHUDWLRQVZLWKWKHXWPRVWFDQGRU
SHUIRUPLQJLQDQXQLQKLELWHGZD\WKHIDFWILQGLQJGXWLHVZLWK
ZKLFKWKH\DUHFKDUJHG6HHLG ,QWKLVPDQQHUWKH5XOH
SURYLGHV MXURUV ZLWK DQ LQKHUHQW ULJKW WR EH IUHH IURP
LQWHUURJDWLRQFRQFHUQLQJLQWHUQDOLQIOXHQFHVRQWKHGHFLVLRQ
PDNLQJSURFHVV6HHLG6XFKLQWHUQDOLQIOXHQFHVKDYHEHHQ
KHOGWRLQFOXGHSUHVVXUHRIRQHMXURURQDQRWKHUVHH6PLWKY
%UHZHU ) 6XSS 6' ,RZD MXURU
PLVXQGHUVWDQGLQJRIFRXUWLQVWUXFWLRQVVHH8QLWHG6WDWHVY
'¶$QJHOR)G WK&LU DYHUGLFWDFKLHYHG
WKURXJKFRPSURPLVHVHH8QLWHG6WDWHVY&DPSEHOO)G
'&&LU MXURUPLVJLYLQJVDERXWWKHYHUGLFWVHH
8QLWHG6WDWHVY%DUEHU)G WK&LU DQG
MXURUDJUHHPHQWRQDWLPHOLPLWIRUDGHFLVLRQ8QLWHG6WDWHV
Y%DGRODWR)G WK&LU $FFRUGLQJO\
5XOH E SUHYHQWVWKHXQZDUUDQWHGEDGJHULQJRIMXURUVWKDW
ZRXOGLQYDULDEO\DULVHLQLWVDEVHQFHLQDQDOOHJHGDWWHPSWWR
VHDUFK IRU WKH ³WUXWK´ DV WR WKH PDQQHU LQ ZKLFK HDFK DQG
HYHU\MXU\UHDFKHVDYHUGLFW6HH7DQQHU86DW
0RUHRYHU5XOH E GRHVQRWH[LVWLQDYDFXXP6HHLG
DW7RWKHFRQWUDU\WKH5XOHH[LVWVDVMXVWRQHSRUWLRQRI
WKH RYHUDOO MXVWLFH V\VWHP ZKLFK LV OLNHZLVH GHVLJQHG WR
SURWHFWWKHFRQVWLWXWLRQDOULJKWVRIWKHGHIHQGDQWLQFOXGLQJWKH
GHIHQGDQW¶V6L[WKDQG)LIWK$PHQGPHQWULJKWVWRDIDLUWULDO
DQGDQLPSDUWLDOMXU\XQGHUWKH&RQVWLWXWLRQ6HHLG,QWKLV
UHJDUGWKH6XSUHPH&RXUWKDVVWDWHGIRUH[DPSOH
3HWLWLRQHUV¶6L[WK$PHQGPHQWLQWHUHVWVLQDQXQLPSDLUHG
MXU\ DUH SURWHFWHG E\ VHYHUDO DVSHFWV RI WKH WULDO
SURFHVV 7KH VXLWDELOLW\ RI DQ LQGLYLGXDO IRU WKH
UHVSRQVLELOLW\ RI MXU\ VHUYLFH RI FRXUVH LV H[DPLQHG
GXULQJYRLUGLUH0RUHRYHUGXULQJWKHWULDOWKHMXU\LV
REVHUYDEOH E\ WKH FRXUW E\ FRXQVHO DQG E\ FRXUW
SHUVRQQHO 0RUHRYHU MXURUV DUH REVHUYDEOH E\ HDFK
RWKHUDQGPD\UHSRUWLQDSSURSULDWHMXURUEHKDYLRUWRWKH
1RV 8QLWHG6WDWHVY/RJDQHWDO
)DOVH&ODLPV&RQYLFWLRQV
2QDSSHDO$SSHOODQWVDUJXHWKDWWKHHYLGHQFHSUHVHQWHGDW
WULDOZDVLQVXIILFLHQWWRVXSSRUWWKHLUFRQYLFWLRQVIRUPDNLQJ
RUFDXVLQJWREHPDGHIDOVH+8')+$ORDQLQVXUDQFHFODLPV
XQGHU 86& † $SSHOODQWV FRQWHQG WKDW WKH IDOVH
FODLPV FRXQWV ZHUH EDVHG XSRQ VXEPLVVLRQ RI HLWKHU D
9HULILFDWLRQRI(PSOR\PHQWIRUP ³92(´ RUD9HULILFDWLRQ
RI 'HSRVLW IRUP ³92'´ QHLWKHU RI ZKLFK VDWLVILHV WKH
PDWHULDOLW\ UHTXLUHPHQW SUHVHQW LQ WKH IDOVH FODLPV VWDWXWH
7KXV$SSHOODQWVDUJXHWKDWWKHVHIRUPVHYHQLIIDOVHGLGQRW
UHQGHUWKHFODLPV³IDOVH´ZLWKLQWKHPHDQLQJRIWKHVWDWXWH
EHFDXVH WKH UHTXLUHG HOHPHQW RI PDWHULDOLW\ UHPDLQV
XQVDWLVILHG
7KLV&LUFXLWILUVWDGGUHVVHGWKHSDUWLFXODULVVXHRIZKHWKHU
PDWHULDOLW\LVDQHOHPHQWRIDIDOVHFODLPVRIIHQVHLQ8QLWHG
6WDWHVY1DVK)G WK&LU $VLQ
WKLVFDVHWKHDSSHOODQWLQ1DVKDUJXHGWKDWPDWHULDOLW\LVDQ
HOHPHQW RI WKLV RIIHQVH DQG WKDW EHFDXVH WKH JRYHUQPHQW
IDLOHGWRSURYHWKDWKLVVWDWHPHQWVZHUHPDWHULDOQRUDWLRQDO
WULHURIIDFWFRXOGILQGKLPJXLOW\EH\RQGDUHDVRQDEOHGRXEW
RIPDNLQJIDOVHVWDWHPHQWV,GDW
,QGHWHUPLQLQJZKHWKHUPDWHULDOLW\ZDVDQHOHPHQWRIWKH
IDOVH FODLPV VWDWXWH LQ 1DVK WKLV &RXUW ILUVW ORRNHG WR WKH
SODLQODQJXDJHRI86&†7KDWODQJXDJHSURYLGHV
:KRHYHUPDNHVRUSUHVHQWVWRDQ\SHUVRQRURIILFHULQ
WKHFLYLOPLOLWDU\RUQDYDOVHUYLFHRIWKH8QLWHG6WDWHV
RUWRDQ\GHSDUWPHQWRUDJHQF\WKHUHRIDQ\FODLPXSRQ
RUDJDLQVWWKH8QLWHG6WDWHVRUDQ\GHSDUWPHQWRUDJHQF\
WKHUHRI NQRZLQJ VXFK FODLP WR EH IDOVH ILFWLWLRXV RU
IUDXGXOHQWVKDOOEHLPSULVRQHGQRWPRUHWKDQILYH\HDUV
DQGVKDOOEHVXEMHFWWRDILQHLQWKHDPRXQWSURYLGHGLQ
WKLVWLWOH
,G%DVHGXSRQWKDWVHFWLRQWKLV&RXUWQRWHGWKDWWKHSODLQ
ODQJXDJHQHLWKHUPHQWLRQVPDWHULDOLW\QRULQDQ\ZD\LPSOLHV
WKDW WKH FODLP PXVW EH PDWHULDO 1DVK )G DW
)XUWKHUPRUHZHUHFRJQL]HGWKDW UHDGLQJPDWHULDOLW\LQWR

-- 5 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
6SHFLILFDOO\ WKH GLVWULFW FRXUW FKDUJHG WKDW WKH HOHPHQWV RI 86&
† DUH DV IROORZV
WKDW WKH GHIHQGDQW PDGH RU SUHVHQWHG RU FDXVHG WR EH PDGH RU
SUHVHQWHG WR +8' D FODLP DJDLQVW WKH 8QLWHG 6WDWHV WKDW DW
WKH WLPH RI WKLV FODLP +8' ZDV D GHSDUWPHQW RU DJHQF\ RI WKH
8QLWHG 6WDWHV WKDW WKH FODLP SUHVHQWHG ZDV ILFWLWLRXV RU
IUDXGXOHQW LQ WKDW WKH ORDQ LQVXUDQFH FODLP FRQWDLQHG IDOVH
GRFXPHQWV WKDW ZHUH PDWHULDO WR WKH FODLP DQG WKDW WKH
GHIHQGDQWV NQHZ WKDW WKH FODLP ZDV IDOVH ILFWLWLRXV RU
IUDXGXOHQW -$ DW
WKHVWDWXWHZRXOGPDNHVXUSOXVDJHRI&RQJUHVV¶VH[SOLFLWXVH
RI WKH WHUP LQ RWKHU VWDWXWHV WKH OHJLVODWLYH KLVWRU\ RI
† GRHV QRW LQGLFDWH WKDW &RQJUHVV LQWHQGHG WR PDNH
PDWHULDOLW\ D QHFHVVDU\ HOHPHQW RI WKH VWDWXWH DQG WKH
UHTXLUHPHQW RI PDWHULDOLW\ ³ZRXOG VHW XS DQ LQFRQJUXRXV
μKHDGV,ZLQWDLOV\RXORVH¶GLFKRWRP\´,G7KLVEHLQJWKH
FDVHZHPDGHFOHDULQ1DVKWKDWWKH6L[WK&LUFXLWMRLQHGWKH
6HFRQG )LIWK 1LQWK DQG 7HQWK &LUFXLWV LQ ILQGLQJ WKDW
PDWHULDOLW\LVQRWDQHOHPHQWRI86&†,G2QWKLV
EDVLV DORQH ZH ILQG $SSHOODQWV¶ DUJXPHQW FRQFHUQLQJ
LQVXIILFLHQF\ RI WKH HYLGHQFH DV WR WKH IDOVH FODLPV
FRQYLFWLRQVWREHHQWLUHO\ZLWKRXWPHULW8QGHUWKHODZRI
WKLV&LUFXLWPDWHULDOLW\LVQRWDQHOHPHQWRIDQRIIHQVHDULVLQJ
XQGHU86&†
0RUHRYHU HYHQ LI PDWHULDOLW\ ZHUH WR EH FRQVLGHUHG DQ
HOHPHQWRIWKLVRIIHQVHWKHHYLGHQFHZDVVWLOOVXIILFLHQWWR
VXSSRUW$SSHOODQWV¶FRQYLFWLRQVXQGHU86&†7KDW
LVLQOLJKWRIWKHIDFWWKDWWKHWULDOLQWKHLQVWDQWFDVHWRRN
SODFH SUH1DVK WKH MXU\ ZDV FKDUJHG WKDW PDWHULDOLW\ ZDV
UHTXLUHG7KH MXU\IRXQGWKDWWKHIDOVH92(VDQG92'V
ZHUHLQIDFWPDWHULDOWR+8')+$¶VGHFLVLRQFRQFHUQLQJ
ZKHWKHUWRSD\SDUWLFXODUFODLPVXSRQGHIDXOW7KHUHFRUG
UHYHDOVWKDWFODLPVPDQDJHU-DPHV*LEVRQWHVWLILHGDWWULDO
WKDW WKH 92(V DQG 92'V IRU WKH UHOHYDQW FODLPV ZHUH
IUDXGXOHQW0RUHVSHFLILFDOO\0U*LEVRQH[SODLQHGWKDWKH
$SSHOODQWVRURWKHU//)&HPSOR\HHVIRUJHGWKHGRFXPHQWV
WRPDNHWKHORDQILOHVDFFHSWDEOHWR+8')+$IRUSD\PHQW
RQWKHORDQLQVXUDQFHFODLPV-$DW)XUWKHUPRUH
$OOHQ6WDLOH\DPDUNHWLQJDQGRXWUHDFKVSHFLDOLVWIRU+8'
1RV 8QLWHG6WDWHVY/RJDQHWDO
LQWKHODQJXDJHRIWKH5XOHH[FHSWLRQVDUHPDGHRQO\ZLWK
UHVSHFW WR H[WUDQHRXV SUHMXGLFLDO LQIRUPDWLRQ LPSURSHUO\
EURXJKWWRWKHMXU\¶VDWWHQWLRQDQGHYLGHQFHFRQFHUQLQJDQ
RXWVLGHLQIOXHQFHEURXJKWWREHDUXSRQDQ\MXURU
,Q7DQQHUY8QLWHG6WDWHV86
WKH6XSUHPH&RXUWSURYLGHGDGHWDLOHGH[DPLQDWLRQRI5XOH
E LQXSKROGLQJWKHORZHUFRXUW¶VH[FOXVLRQRIHYLGHQFH
RIIHUHGE\WZRMXURUVUHJDUGLQJWKHRWKHUMXURUV¶DOOHJHGXVH
RI GUXJV DQG DOFRKRO GXULQJ WKH FRXUVH RI WKH WULDO ,Q
UHDFKLQJ WKH FRQFOXVLRQ WKDW WKH LQIOXHQFH DW LVVXH ZDV
LQWHUQDO LQ QDWXUH UDWKHU WKDQ H[WHUQDO LQ QDWXUH DQG
FRQVHTXHQWO\ QRW SURSHUO\ D VXEMHFW IRU TXHVWLRQLQJ RI WKH
MXURUVSXUVXDQWWR5XOH E WKH6XSUHPH&RXUWH[SODLQHG
WKDWSXEOLFSROLF\FRQVLGHUDWLRQVKDYHORQJHPSKDVL]HGWKH
QHFHVVLW\RIVKLHOGLQJMXU\GHOLEHUDWLRQVIURPSXEOLFVFUXWLQ\
,GDW,QWKLVUHJDUGWKH6XSUHPH&RXUWUHIHUUHGWRWKH
GHFLVLRQRI0F'RQDOGY3OHVV86
ZKLFKVWDWHG
>/@HWLWRQFHEHHVWDEOLVKHGWKDWYHUGLFWVVROHPQO\PDGH
DQGSXEOLFO\UHWXUQHGLQWRFRXUWFDQEHDWWDFNHGDQGVHW
DVLGHRQWKHWHVWLPRQ\RIWKRVHZKRWRRNSDUWLQWKHLU
SXEOLFDWLRQDQGDOOYHUGLFWVFRXOGEHDQGPDQ\ZRXOG
EH IROORZHG E\ DQ LQTXLU\ LQ WKH KRSH RI GLVFRYHULQJ
VRPHWKLQJ ZKLFK PLJKW LQYDOLGDWH WKH ILQGLQJ -XURUV
ZRXOGEHKDUDVVHGDQGEHVHWE\WKHGHIHDWHGSDUW\LQDQ
HIIRUWWRVHFXUHIURPWKHPHYLGHQFHRIIDFWVZKLFKPLJKW
HVWDEOLVKPLVFRQGXFWVXIILFLHQWWRVHWDVLGHDYHUGLFW,I
HYLGHQFH WKXV VHFXUHG FRXOG EH WKXV XVHG WKH UHVXOW
ZRXOG EH WR PDNH ZKDW ZDV LQWHQGHG WR EH D SULYDWH
GHOLEHUDWLRQWKHFRQVWDQWVXEMHFWRISXEOLFLQYHVWLJDWLRQ
± WR WKH GHVWUXFWLRQ RI DOO IUDQNQHVV DQG IUHHGRP RI
GLVFXVVLRQDQGFRQIHUHQFH
,GDW FLWLQJ0DWWR[Y8QLWHG6WDWHV86
7KXV WKH 6XSUHPH &RXUW UHFRJQL]HG WKH YDULRXV
SXEOLFSROLF\FRQVLGHUDWLRQVWKDWZHLJKLQIDYRURISURWHFWLQJ
D MXU\¶V GHOLEHUDWLRQV IURP LQWUXVLYH LQTXLU\ DV WR LQWHUQDO
LQIOXHQFHV,GDW

-- 6 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
RUGHU$SSHOODQWVQRZUDLVHWKLVLVVXHFRQFHUQLQJWKHDOOHJHG
MXU\PLVFRQGXFWEHIRUHWKLV&RXUW
,WLVDZHOOHVWDEOLVKHGSULQFLSOHRIODZWKDWWULDOMXGJHVDUH
DIIRUGHGFRQVLGHUDEOHGLVFUHWLRQLQGHWHUPLQLQJWKHDPRXQWRI
LQTXLU\QHFHVVDU\LIDQ\LQUHVSRQVHWRDOOHJDWLRQVRIMXU\
PLVFRQGXFW6HH8QLWHG6WDWHVY*ULIILWK)G
WK&LU 8QLWHG6WDWHVY)UDQNV)G WK&LU
:HKDYHWKXVUHFRJQL]HGWKDWEHFDXVH³WKHWULDOMXGJH
LVLQWKHEHVWSRVLWLRQWRGHWHUPLQHWKHQDWXUHDQGH[WHQWRIWKH
DOOHJHG MXU\ PLVFRQGXFW KLV GHFLVLRQ RQ WKH VFRSH RI WKH
SURFHHGLQJV QHFHVVDU\ WR GLVFRYHU PLVFRQGXFW LV UHYLHZHG
RQO\IRUDQDEXVHRIGLVFUHWLRQ´6HH*ULIILWK)GDW
TXRWLQJ8QLWHG6WDWHVY6KDFNHOIRUG)G
WK ,QFDVHVLQYROYLQJDSRVWYHUGLFWLQYHVWLJDWLRQ
LQWR DOOHJHG MXU\ PLVFRQGXFW WKH UHOHYDQW IHGHUDO ODZ
FRQFHUQLQJWKHLPSHDFKPHQWRIMXU\YHUGLFWVLVFRGLILHGLQ
5XOH E
5XOH E SURYLGHV
8SRQ DQ LQTXLU\ LQWR WKH YDOLGLW\ RI D YHUGLFW RU
LQGLFWPHQWDMXURUPD\QRWWHVWLI\DVWRDQ\PDWWHURU
VWDWHPHQW RFFXUULQJ GXULQJ WKH FRXUVH RI WKH MXU\¶V
GHOLEHUDWLRQVRUWRWKHHIIHFWRIDQ\WKLQJXSRQWKDWRUDQ\
RWKHUMXURU¶VPLQGRUHPRWLRQVDVLQIOXHQFLQJWKHMXURUWR
DVVHQW WR RU GLVVHQW IURP WKH YHUGLFW RU LQGLFWPHQW RU
FRQFHUQLQJ WKH MXURU¶V PHQWDO SURFHVVHV LQ FRQQHFWLRQ
WKHUHZLWKH[FHSWWKDWDMXURUPD\WHVWLI\RQWKHTXHVWLRQ
ZKHWKHU H[WUDQHRXV SUHMXGLFLDO LQIRUPDWLRQ ZDV
LPSURSHUO\EURXJKWWRWKHMXU\¶VDWWHQWLRQRUZKHWKHUDQ\
RXWVLGHLQIOXHQFHZDVLPSURSHUO\EURXJKWWREHDUXSRQ
DQ\MXURU1RUPD\DMXURU¶VDIILGDYLWRUHYLGHQFHRIDQ\
VWDWHPHQWE\WKHMXURUFRQFHUQLQJDPDWWHUDERXWZKLFK
WKHMXURUZRXOGEHSUHFOXGHGIURPWHVWLI\LQJEHUHFHLYHG
IRUWKHVHSXUSRVHV
)HG5(YLG E $FFRUGLQJO\WKH5XOHLVGHVLJQHGWR
SURKLELW WHVWLPRQ\ RQ PDWWHUV WKDW WDNH SODFH GXULQJ
GHOLEHUDWLRQVWKHHIIHFWRIDQ\WKLQJRQWKHMXURU¶VPLQGVRU
HPRWLRQVDQGWKHPHQWDOSURFHVVRIDQ\MXURU$VSURYLGHG
1RV 8QLWHG6WDWHVY/RJDQHWDO
WHVWLILHGWKDWEHFDXVHWKHSURJUDPLVSULPDULO\EDVHGRQWKH
FUHGLWZRUWKLQHVVRIWKHERUURZHULWLVFULWLFDOWKDWWKHOHQGHUV
IROORZSURFHGXUHVDQGWKDWWKH\DUHWUXWKIXOLQWKHYHULILFDWLRQ
RIHPSOR\PHQWDQGGHSRVLWLQIRUPDWLRQVRWKDW+8')+$
FDQGHWHUPLQHZKHWKHUWRSD\RQDSDUWLFXODUFODLP-$DW
%DVHGXSRQWKLVWHVWLPRQ\LWZDVUHDVRQDEOHIRUWKH
MXU\WRFRQFOXGHDVLWGLGWKDWWKHFRQWHQWVRIWKH92(VDQG
92'V ZHUH PDWHULDO WR WKH +8')+$¶V GHFLVLRQ DV WR
ZKHWKHUWRSD\SDUWLFXODUFODLPV
$SSHOODQWV PDNH PXFK RI WKH IDFW WKDW QHLWKHU WKH
DSSOLFDEOHUHJXODWLRQVJRYHUQLQJDSSURYDOE\DOHQGHURID
ORDQQRUWKHUHJXODWLRQVJRYHUQLQJWKHVXEPLVVLRQRIDFODLP
VSHFLILFDOO\ UHTXLUH WKDW D 92( RU 92' IRUP EH XVHG RU
VXEPLWWHG7KLVWHFKQLFDODUJXPHQWDPRXQWVWRQRWKLQJPRUH
WKDQ DQ XQVXFFHVVIXO DWWHPSW WR FLUFXPYHQW WKH LQHYLWDEOH
FRQFOXVLRQ WKDW $SSHOODQWV VXEPLWWHG IDOVH GRFXPHQWV LQ
RUGHUWRLQGXFH+8')+$WRSD\RQFHUWDLQORDQLQVXUDQFH
FODLPVUHJDUGOHVVRIWKHPDQQHULQZKLFKVXFKLQIRUPDWLRQ
ZDV VXEPLWWHG ,Q YLHZLQJ WKH UHFRUG LQ WKH OLJKW PRVW
IDYRUDEOHWRWKHSURVHFXWLRQWKH&RXUWILQGVWKDWWKHHYLGHQFH
DGGXFHGDWWULDOZDVVXFKWKDWDUDWLRQDOWULHURIIDFWFRXOG
KDYHIRXQGSURRIRIJXLOWEH\RQGDUHDVRQDEOHGRXEW)RUWKH
DERYHVWDWHGUHDVRQVWKH&RXUWILQGV$SSHOODQWV¶DUJXPHQW
FRQFHUQLQJLQVXIILFLHQF\RIWKHHYLGHQFHZLWKUHVSHFWWRWKH
IDOVHFODLPVFRQYLFWLRQVWREHZLWKRXWPHULW
)DOVH(QWULHVDQG)DOVH6WDWHPHQWV&RQYLFWLRQV
$SSHOODQWVQH[WDVVHUWWKDWWKHUHZDVLQVXIILFLHQWHYLGHQFH
DGGXFHGDWWULDOXSRQZKLFKDUDWLRQDOMXU\FRXOGILQGWKHP
JXLOW\RIWKHRIIHQVHRIPDNLQJIDOVHHQWULHVLQUHSRUWVXQGHU
86&†6LPLODUO\$SSHOODQWVDUJXHWKDWWKHUHLV
LQVXIILFLHQWHYLGHQFHWRVXSSRUWDFRQYLFWLRQIRUPDNLQJIDOVH
ILFWLWLRXVRUIUDXGXOHQWVWDWHPHQWVFRQFHUQLQJPDWHULDOIDFWV
ZLWKLQWKHMXULVGLFWLRQRI*10$LQYLRODWLRQRI86&
†7KH&RXUWFRQVLGHUVWKHVHDUJXPHQWVLQWXUQ
6HFWLRQHQWLWOHG³)HGHUDO&UHGLW,QVWLWXWLRQ(QWULHV
5HSRUWV DQG 7UDQVDFWLRQV´ SURYLGHV LQ SHUWLQHQW SDUW WKH
IROORZLQJ

-- 7 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
:KRHYHUEHLQJFRQQHFWHGLQDQ\FDSDFLW\ZLWKWKH
'HSDUWPHQWRI+RXVLQJDQG8UEDQ'HYHORSPHQW
ZLWKLQWHQWWRGHIUDXG>WKH@LQVWLWXWLRQRUWRGHFHLYH
DQ\ RIILFHU DXGLWRU H[DPLQHU RU DJHQW RI >WKH@
LQVWLWXWLRQPDNHVDQ\IDOVHHQWU\LQDQ\ERRNUHSRUW
RU VWDWHPHQW RI RU WR DQ\ VXFK LQVWLWXWLRQ RU ZLWKRXW
EHLQJ GXO\ DXWKRUL]HG GUDZV DQ\ RUGHU RU ELOO RI
H[FKDQJHPDNHVDQ\DFFHSWDQFHRULVVXHVSXWVIRUWKRU
DVVLJQVDQ\QRWHGHEHQWXUHERQGRURWKHUREOLJDWLRQ
RUZLWKLQWHQWWRGHIUDXGWKH8QLWHG6WDWHVRUDQ\DJHQF\
WKHUHRISDUWLFLSDWHVRUVKDUHVLQRUUHFHLYHVGLUHFWO\RU
LQGLUHFWO\DQ\PRQH\SURILWSURSHUW\RUEHQHILWVWKURXJK
DQ\WUDQVDFWLRQORDQFRPPLVVLRQFRQWUDFWRUDQ\RWKHU
DFWRIDQ\VXFKFRUSRUDWLRQLQVWLWXWLRQRUDVVRFLDWLRQ
VKDOOEHILQHGQRWPRUHWKDQRULPSULVRQHG
QRWPRUHWKDQ\HDUVRUERWK
86&†7KXVWKHRIIHQVHRIPDNLQJIDOVHHQWULHV
XQGHU†UHTXLUHVWKDW$SSHOODQWVZKLOHRIILFHUVDJHQWV
RU HPSOR\HHV RI D OHQGLQJ FRUSRUDWLRQ DFWLQJ SXUVXDQW WR
IHGHUDOODZDQGLQDFDSDFLW\FRQQHFWHGZLWKWKH*10$RI
WKH+8'ZLWKWKHLQWHQWWRGHIUDXGVXFKDJHQFLHVNQRZLQJO\
DQG ZLOOIXOO\ PDGH RU FDXVHG WR EH PDGH IDOVH HQWULHV LQ
UHSRUWVWRWKHP
,Q WKH LQVWDQW FDVH WKH JRYHUQPHQW DOOHJHG DW WULDO WKDW
$SSHOODQWVPDGHIDOVHHQWULHVLQ)RUP$UHSRUWVZKLFK
SURYLGHG LQIRUPDWLRQ RQ SRROV RI ORDQV LQ )RUP '
UHSRUWVZKLFKVXPPDUL]HGDOORIWKHSRROVWKDW//)&LVVXHG
GXULQJLWVH[LVWHQFHDQGLQOHWWHUVIURP$SSHOODQW/RJDQWR
*X\:LOVRQD9LFH3UHVLGHQWRI*10$ZKLFKUHSHDWHGWKH
LQIRUPDWLRQUHSUHVHQWHGLQWKH$DQG'IRUPV
-$DW$SSHOODQWVGRQRWGLVSXWHWKHIDFWWKDWDVDQ
DXWKRUL]HG 7LWOH , OHQGHU //)& ZDV UHTXLUHG WR VXEPLW
PRQWKO\ UHSRUWV WR *10$ UHIOHFWLQJ WKH VWDWXV RI HDFK
ERUURZHU¶VDFFRXQWRQD)RUP$DQGD)RUP'
$VLQWKHFRXUWEHORZKRZHYHU $SSHOODQWVDUJXHWKDWWKH
IRUPV DQG OHWWHUV ZHUH QRW IDOVH EHFDXVH WKH SD\PHQWV
UHIOHFWHG WKHUHLQ ZHUH DFWXDOO\ PDGH WR WKH ERUURZHUV¶
DFFRXQWV UHJDUGOHVV RI WKH IDFW WKDW WKH\ ZHUH SDLG RXW RI
1RV 8QLWHG6WDWHVY/RJDQHWDO
,QWKHLQVWDQWFDVH>$SSHOODQW@/DZVGLGQRWDOOHJHDQ\
MXURUPLVFRQGXFWGXULQJWKHWULDODQGGRHVQRWDOOHJHDQ\
QRZ 7KH GHIHQGDQW¶V PRWLRQ DQG VXSSRUWLQJ EULHI
SURYLGH QR JURXQGV XSRQ ZKLFK SRVWYHUGLFW
LQWHUURJDWLRQVKRXOGEHJUDQWHGH[FHSWWRQRWHWKDWRQO\
E\ FRPPXQLFDWLQJ ZLWK WKH MXURUV FRXOG GHIHQGDQW¶V
FRXQVHO GLVFRYHU LI WKHUH KDG EHHQ DQ\ H[WHUQDO
LQIOXHQFHV RQ MXURUV 7KH VDPH LV WUXH RI HYHU\ FDVH
KRZHYHU DQG JUDQWLQJ GHIHQGDQW¶V PRWLRQ RQ WKHVH
JURXQGVDORQHZRXOGSRWHQWLDOO\RSHQXSDQ\MXU\YHUGLFW
WRLPSHDFKPHQW
-$DW)LQGLQJWKDWDJUDQWRIWKHPRWLRQZRXOGJLYH
ULVH WR DQ LPSURSHU ILVKLQJ H[SHGLWLRQ WKURXJK ZKLFK
$SSHOODQW VRXJKW WR XQGHUPLQH WKH LQWHJULW\ RI WKH MXU\
YHUGLFWWKHGLVWULFWFRXUWGHQLHGWKHUHTXHVWIRUSHUPLVVLRQWR
LQWHUURJDWHWKHMXURUV-$DW
,QUHVSRQVHWRWKHGLVWULFWFRXUW¶VUXOLQJ$SSHOODQW/DZV
ILOHGDPRWLRQWRDOWHU RU DPHQGWKHFRXUW¶VRUGHUGHQ\LQJ
SHUPLVVLRQWRLQWHUYLHZWKHMXURUV-$DW,QWKLVVHFRQG
PRWLRQFRXQVHOIRU$SSHOODQW/DZVH[SODLQHGWKDWGXULQJKLV
FRPPXQLFDWLRQZLWKDMXURUKHOHDUQHGWKDWWKHMXU\URXWLQHO\
GLVFXVVHGHYLGHQFHDPRQJWKHPVHOYHVGXULQJWKHFRXUVHRI
WKHHQWLUHWULDOWKHUHE\HIIHFWLYHO\GHOLEHUDWLQJSULRUWRWKH
FORVH RI WKH HYLGHQFH DQG SULRU WR EHLQJ DGYLVHG RI WKH
DSSURSULDWHMXU\LQVWUXFWLRQV-$DW%DVHGXSRQWKLV
DOOHJDWLRQRIMXU\PLVFRQGXFW$SSHOODQW/DZVDUJXHGWKDWKH
VKRXOGEHSHUPLWWHGWRLQYHVWLJDWHWKHVLWXDWLRQZKLFKPD\
KDYH JLYHQ ULVH WR D YLRODWLRQ RI KLV 6L[WK DQG )LIWK
$PHQGPHQWULJKWVWRDIDLUWULDODQGDQLPSDUWLDOMXU\XQGHU
WKH &RQVWLWXWLRQ -$ DW )XUWKHUPRUH FRXQVHO IRU
$SSHOODQW /DZV 5REHUW : 5LWFKLH DWWDFKHG KLV VZRUQ
DIILGDYLWLQVXSSRUWRIWKHPRWLRQ
7KHUHDIWHU $SSHOODQW /RJDQ ILOHG D ³PRWLRQ WR DGRSW
GHIHQGDQW/DZ¶V>VLF@SHQGLQJPRWLRQWRDOWHURUDPHQG>WKH@
-XO\RUGHUGHQ\LQJSHUPLVVLRQWRLQWHUYLHZMXURUV´
2Q -XO\ WKH GLVWULFW MXGJH GHQLHG $SSHOODQWV¶
PRWLRQWRDOWHURUDPHQGLWVSULRUUXOLQJLQDPDUJLQDOHQWU\

-- 8 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
$PHQGPHQWSULYLOHJHUHIOHFWVWKDWWKHGLVWULFWFRXUWSURSHUO\
DVVHVVHG RQH FULPLQDO KLVWRU\ SRLQW IRU WKH '8,
FRQYLFWLRQSXUVXDQW WR†$ F RIWKH*XLGHOLQHV)RU
WKHVHUHDVRQVZHILQGWKDWWKHGLVWULFW FRXUW GLGQRWHUULQ
FRPSXWLQJ$SSHOODQW/DZV¶VFULPLQDOKLVWRU\FDWHJRU\
,QYHVWLJDWLRQRI$OOHJHG-XU\0LVFRQGXFW
)LQDOO\$SSHOODQWVFRQWHQGWKDWWKHGLVWULFWFRXUWHUUHGLQ
GHQ\LQJDPRWLRQILOHGE\$SSHOODQW/DZVIRUSHUPLVVLRQWR
FRPPXQLFDWH ZLWK MXURUV ,Q WKH PRWLRQ $SSHOODQW /DZV
VWDWHGWKDW³DIWHUWKHMXURUVLQWKLVFDVHZHUHUHOHDVHGIURP
IXUWKHU MXU\ VHUYLFH FRXQVHO IRU 0U /DZV KDG D
FRPPXQLFDWLRQZLWKDMXURULQWKLVFDVHEXWGLGQRWIHHOWKDW
IXUWKHUFRPPXQLFDWLRQVKRXOGEHKDGZLWKRXWSHUPLVVLRQRI
WKH&RXUW´-$DW2XWRIDSXUSRUWHGDEXQGDQFHRI
FDXWLRQWKHUHIRUH$SSHOODQW/DZVUHTXHVWHGSHUPLVVLRQWR
LQWHUURJDWHWKHMXURUV-$DW
,Q FRQVLGHULQJ WKH PRWLRQ ILOHG E\ $SSHOODQW /DZV WKH
GLVWULFWFRXUWILUVWUHFRJQL]HGWKHH[LVWHQFHRI/RFDO5XOH
IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHZKLFKJRYHUQVSRVW
YHUGLFWFRPPXQLFDWLRQVZLWKMXURUV-$DW,WSURYLGHV
WKDW
1R DWWRUQH\ SDUW\ RU UHSUHVHQWDWLYH RI HLWKHU PD\
LQWHUURJDWHDMXURUDIWHUDYHUGLFWKDVEHHQUHWXUQHGRUWKH
WULDO KDV EHHQ RWKHUZLVH FRQFOXGHG ZLWKRXW SULRU
SHUPLVVLRQRIWKHFRXUW
-$ DW TXRWLQJ /5 ('7HQQ 7KH GLVWULFW
FRXUW DOVR DFNQRZOHGJHG WKDW 5XOH E IXUWKHU
FLUFXPVFULEHVWKHSUDFWLFHRISRVWYHUGLFWLQTXLULHVE\VWDWLQJ
WKDW MXURUV PD\ WHVWLI\ RQO\ DV WR ZKHWKHU H[WUDQHRXV
SUHMXGLFLDO LQIRUPDWLRQ ZDV LPSURSHUO\ EURXJKW WR WKHLU
DWWHQWLRQRU ZKHWKHUDQ\RXWVLGHLQIOXHQFHZDVLPSURSHUO\
EURXJKWWREHDUXSRQDQ\MXURU-$DW,QOLJKWRIWKHVH
VWDQGDUGVDQGLQDGGLWLRQWRWKHUHOHYDQWFDVHODZWKHGLVWULFW
FRXUWPDGHWKHIROORZLQJGHWHUPLQDWLRQ
1RV 8QLWHG6WDWHVY/RJDQHWDO
//)&¶VRZQIXQGV2QWKLVEDVLV$SSHOODQWVFRQWHQGWKDW
WKHUHSRUWVDFFXUDWHO\UHIOHFWWKDWDSD\PHQWKDGEHHQPDGH
DQGWKHUHIRUHZHUHQRWIDOVH
,Q8QLWHG6WDWHVY:DONHU)G WK&LU
WKLV&LUFXLWPDGHFOHDUWKDW³>D@VWDWHPHQWPD\EHIDOVH
ZKHQLWFRQWDLQVDKDOIWUXWKRUZKHQLWFRQFHDOVDPDWHULDO
IDFW´,QWKDWFDVHZHZHUHIDFHGZLWKDVLPLODUVLWXDWLRQLQ
ZKLFK WKH DSSHOODQW DUJXHG WKDW WKH HQWULHV ZHUH QRW IDOVH
EHFDXVHWKH\UHFRUGHGDFWXDOWUDQVDFWLRQVDVWKH\RFFXUUHG
,G1HYHUWKHOHVVWKHJRYHUQPHQW³DOOHJHGDQGSURYHGWKDW
WKHHQWULHVDWLVVXHZHUHIDOVHEHFDXVHWKH\IDLOHGWRGLVFORVH
WKDWWKHORDQVZHUHQRWPDGH IRU WKHEHQHILWRIWKHQDPHG
ERUURZHU DQG WKDW WKH QDPHG ERUURZHU KDG QRW PDGH WKH
LQWHUHVWSD\PHQWVZLWKKLVRZQIXQGV´,G2QWKLVEDVLVZH
XSKHOGWKHIDOVHHQWULHVFRQYLFWLRQV,G
+HUHWKH*10$JXLGHOLQHVHVWDEOLVKWKDWWKHUHSRUWVLQ
TXHVWLRQ DUH UHTXLUHG WR UHIOHFW WKH SD\PHQWV WKDW ZHUH
DFWXDOO\ UHFHLYHG IURP WKH ERUURZHUV $FFRUGLQJ WR WKH
WHVWLPRQ\SUHVHQWHGDWWULDO*10$UHTXLUHVOHQGHUUHSRUWVWR
UHIOHFW DFWXDO SD\PHQWV IURP ERUURZHUV DQG WKH ORDQ
GHOLQTXHQF\LQIRUPDWLRQEHFDXVHLWQHHGVWRREWDLQDFRPSOHWH
SLFWXUH RI KRZ PDQ\ ORDQV ZHUH GHOLQTXHQW DQG KRZ VXFK
GHOLQTXHQF\DIIHFWHGWKHOHQGHU¶VFDVKIORZ-$DW$
%,QWKLVZD\*10$LVDEOHWRJDXJHWKHULVNWKDWLWLV
XQGHUWDNLQJ ZLWK UHVSHFW WR HDFK OHQGHU DQG LW LV DEOH WR
GHWHUPLQH ZKHWKHU WR DOORZ WKH OHQGHU WR FRQWLQXH
SDUWLFLSDWLQJ LQ WKH SURJUDP ,G DW % ,I WKH OHQGHU
PDVNVWKHQXPEHURIGHOLQTXHQWORDQSD\PHQWVE\PDNLQJWKH
SD\PHQWV IURP LWV RZQ IXQGV DQG WKHUHE\ FODVVLILHV VXFK
SD\PHQWVDVDFWXDOO\UHFHLYHGWKHHIIHFWZRXOGEHWRGHSULYH
*10$ RI WKH PDQGDWRU\ LQIRUPDWLRQ LW UHTXLUHV WR DVVHVV
FRQWLQXHGUHODWLRQVZLWKWKHOHQGHU7KHUHFRUGUHIOHFWVWKDW
HDFK ZLWQHVV ZKR WHVWLILHG DERXW WKH SURSULHW\ RI D OHQGHU
PDNLQJSD\PHQWVWRWKHDFFRXQWVRIGHOLQTXHQWERUURZHUV
ZLWK WKH H[FHSWLRQ RI $SSHOODQWV H[SODLQHG WKDW VXFK D
SUDFWLFHZDVQRWSHUPLWWHGSXUVXDQWWRWKH*10$JXLGHOLQHV
DQGZRXOGKDYHEHHQGRQHRQO\WRGHFHLYH*10$DERXWWKH
OHQGHU¶VWUXHORDQGHOLQTXHQF\UDWHV-$DW9LHZLQJ

-- 9 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
WKHUHFRUGLQWKHOLJKWPRVWIDYRUDEOHWRWKHSURVHFXWLRQZH
ILQGWKDWWKHUHFRUGHYLGHQFHDGGXFHGDWWULDOFRXOGKDYHOHG
DUDWLRQDOMXU\WRILQGJXLOWEH\RQGDUHDVRQDEOHGRXEWDVWR
WKHIDOVHHQWULHVFRQYLFWLRQV
6LPLODUO\ $SSHOODQWV FKDOOHQJH WKHLU FRQYLFWLRQV IRU
PDNLQJIDOVHVWDWHPHQWVSXUVXDQWWR86&†7KDW
VWDWXWHSURYLGHVLQSDUW
ZKRHYHU LQ DQ\ PDWWHU ZLWKLQ WKH MXULVGLFWLRQ RI WKH
H[HFXWLYH OHJLVODWLYH RU MXGLFLDO EUDQFK RI WKH
*RYHUQPHQW RI WKH 8QLWHG 6WDWHV NQRZLQJO\ DQG
ZLOOIXOO\±
IDOVLILHVFRQFHDOVRUFRYHUVXSE\DQ\WULFNVFKHPH
RUGHYLFHDPDWHULDOIDFW
PDNHVDQ\PDWHULDOO\IDOVHILFWLWLRXVRUIUDXGXOHQW
VWDWHPHQWRUUHSUHVHQWDWLRQRU
PDNHVRUXVHVDQ\IDOVHZULWLQJRUGRFXPHQWNQRZLQJ
WKH VDPH WR FRQWDLQ DQ\ PDWHULDOO\ IDOVH ILFWLWLRXV RU
IUDXGXOHQWVWDWHPHQWRUHQWU\
VKDOOEHILQHGXQGHUWKLVWLWOHRULPSULVRQHGQRWPRUHWKDQ
\HDUVRUERWK
86& † ,Q RUGHU WR HVWDEOLVK D YLRODWLRQ RI
86&†WKHJRYHUQPHQWPXVWGHPRQVWUDWHWKDW WKH
GHIHQGDQW PDGH D VWDWHPHQW WKH VWDWHPHQW LV IDOVH RU
IUDXGXOHQW WKH VWDWHPHQW LV PDWHULDO WKH GHIHQGDQW
PDGH WKH VWDWHPHQW NQRZLQJO\ DQG ZLOIXOO\ DQG WKH
VWDWHPHQWSHUWDLQHGWRDQDFWLYLW\ZLWKLQWKHMXULVGLFWLRQRID
IHGHUDODJHQF\6HH8QLWHG6WDWHVY5RJHUV)G
WK&LU $VWDWHPHQWLVPDWHULDOXQGHU†LI
LW KDV WKH QDWXUDO WHQGHQF\ WR LQIOXHQFH RU LV FDSDEOH RI
LQIOXHQFLQJWKHIHGHUDODJHQF\6HH8QLWHG6WDWHVY/XW]
)G WK&LU
,QWKLVFDVHWKHVWDWHPHQWVDWLVVXHUHODWHWROHWWHUVIURP
$SSHOODQWVWR*X\:LOVRQUHODWLQJWR//)&¶V³'4UDWLRV´
7KH'4UDWLRVDUH³DQLQGLFDWRURIWKHORDQGHOLQTXHQFLHVIRU
D*10$LVVXHU¶VORDQSRUWIROLRDQGZHUHXVHGE\*10$WR
GHWHUPLQH ZKHWKHU DXWKRULW\ WR LVVXH DGGLWLRQDO *10$
JXDUDQWHHGVHFXULWLHVZRXOGEHJUDQWHG´-$DW7KHVH
1RV 8QLWHG6WDWHVY/RJDQHWDO
&ULPLQDO+LVWRU\&RPSXWDWLRQ
:H QRZ FRQVLGHU WKH DUJXPHQW WKDW WKH GLVWULFW FRXUW
LQFRUUHFWO\ FDOFXODWHG $SSHOODQW /DZV¶V FULPLQDO KLVWRU\
FDWHJRU\XQGHUWKH*XLGHOLQHV0RUHVSHFLILFDOO\$SSHOODQW
/DZV VWDWHV WKDW WKH GLVWULFW FRXUW LQFRUUHFWO\ DVVHVVHG RQH
FULPLQDO KLVWRU\ SRLQW IRU D GULYLQJXQGHUWKHLQIOXHQFH
³'8,´ FRQYLFWLRQ WKDW WRRN SODFH RQ $SULO
$SSHOODQW/DZVDUJXHVWKDWEHFDXVHKHZDVQRWUHSUHVHQWHGE\
FRXQVHO RQ WKLV PLVGHPHDQRU FKDUJH DQG WKH FRQYLFWLRQ
UHVXOWHGLQDVHQWHQFHRILPSULVRQPHQWLWVKRXOGQRWKDYH
EHHQLQFOXGHGLQKLVFULPLQDOKLVWRU\FRPSXWDWLRQ
,Q VXSSRUW RI WKLV SRVLWLRQ $SSHOODQW /DZV UHOLHV
SULQFLSDOO\ XSRQ 1LFKROV Y 8QLWHG 6WDWHV 86
+HDUJXHVWKDW1LFKROVLQGLFDWHVWKDWDVHQWHQFLQJ
FRXUW PD\ FRQVLGHU D GHIHQGDQW¶V SUHYLRXV XQFRXQVHOHG
PLVGHPHDQRU FRQYLFWLRQ IRU '8, RQO\ LI WKH SUHYLRXV
XQFRXQVHOHG PLVGHPHDQRU GLG QRW UHVXOW LQ D VHQWHQFH RI
LPSULVRQPHQW %HFDXVH D VHQWHQFH RI LPSULVRQPHQW ZDV
LPSRVHGZLWKUHVSHFWWRKLVFRQYLFWLRQ$SSHOODQW/DZV
DVVHUWVWKDWWKLVRIIHQVHVKRXOGQRWEHLQFOXGHGLQFDOFXODWLQJ
KLVFULPLQDOKLVWRU\FDWHJRU\:HILQG/DZV¶VXVHRI1LFKROV
KHUHWREHPLVSODFHG
7KH 1LFKROV FDVH HVWDEOLVKHG WKH UXOH WKDW XQFRXQVHOHG
PLVGHPHDQRU FRQYLFWLRQV DUH SURSHUO\ LQFOXGHG ZKHQ
GHWHUPLQLQJDGHIHQGDQW¶VFULPLQDOKLVWRU\FDWHJRU\RQO\LI
WKHFRQYLFWLRQVGLGQRWUHVXOWLQVHQWHQFHVRILPSULVRQPHQW
,GDW'HVSLWH$SSHOODQW/DZV¶VDUJXPHQWVWRWKH
FRQWUDU\KRZHYHUWKHUXOHLQ1LFKROVLVLQDSSOLFDEOHWRWKH
LQVWDQW FDVH 7KH UHFRUG UHIOHFWV WKDW $SSHOODQW /DZV
NQRZLQJO\ DQG LQWHOOLJHQWO\ ZDLYHG KLV ULJKW WR FRXQVHO LQ
FRQQHFWLRQZLWKWKH'8,FRQYLFWLRQDQGWKXVLWGLGQRW
FRQVWLWXWH DQ ³XQFRXQVHOHG´ PLVGHPHDQRU FRQYLFWLRQ DV
DGGUHVVHGLQ1LFKROV)XUWKHUPRUHWKHIDFWWKDW$SSHOODQW
/DZVZDVVHQWHQFHGWRDWHUPRILPSULVRQPHQWLQFRQQHFWLRQ
ZLWKWKLVFRQYLFWLRQDORQHGRHVQRWSUHFOXGHWKHGLVWULFWFRXUW
IURP LQFOXGLQJ WKH RIIHQVH LQ WKH FULPLQDO KLVWRU\
FRPSXWDWLRQ7KHNQRZLQJDQGLQWHOOLJHQWZDLYHURIWKH6L[WK

-- 10 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
HQKDQFHPHQW:HILQGWKLVDUJXPHQWWREHZLWKRXWPHULWIRU
VHYHUDOUHDVRQV
$WVHQWHQFLQJWKHGLVWULFWFRXUWDGRSWHGWKHIDFWXDOILQGLQJV
DVVXJJHVWHGE\WKHSUREDWLRQRIILFHULQWKH365VDQGWKHUHE\
PDGH$SSHOODQWVDZDUHRIWKHEDVLVIRULWVDSSOLFDWLRQRIWKH
WZROHYHOHQKDQFHPHQWRYHUUXOLQJ$SSHOODQWV¶REMHFWLRQVRQ
WKHUHFRUGWRWKHVDPH)XUWKHUPRUHWKHUHFRUGDWWKHWLPHRI
VHQWHQFLQJ ZDV UHSOHWH ZLWK H[DPSOHV RI WKH REVWUXFWLYH
FRQGXFWLQFOXGLQJDGHWDLOHGH[SODQDWLRQRIWKHSHUMXU\DQG
WKH WUDQVIHU RI DVVHWV RXWOLQHG LQ D EULHI VXEPLWWHG E\ WKH
JRYHUQPHQW-$DW$WWKHWLPHRIVHQWHQFLQJWKH
GLVWULFWFRXUWKDGEHIRUHLWWKHLQIRUPDWLRQLQWKH365VWKH
JRYHUQPHQW¶VEULHIDQGLWVRZQREVHUYDWLRQVRIWKHWULDOPDGH
LQGHSHQGHQWRIWKHMXU\¶VYHUGLFWRIJXLOW\%DVHGXSRQWKLV
UHFRUG WKH GLVWULFW FRXUW IRXQG WKDW WKH HQKDQFHPHQW ZDV
SURSHU0RUHRYHUWKHGLVWULFWFRXUWLVVXHGWKHDERYHRXWOLQHG
PHPRUDQGXPDQGRUGHUVSHFLILFDOO\DGGUHVVLQJWKHILQGLQJV
WKDWJDYHULVHWRLWVDSSOLFDWLRQRIWKHHQKDQFHPHQW$OWKRXJK
WKHPHPRUDQGXPDQGRUGHUZRXOGKDYHEHHQPRUHSURSHUO\
LVVXHG SULRU WR $SSHOODQWV¶ ILOLQJ WKH QRWLFH RI DSSHDO
$SSHOODQWVZHUHDGHTXDWHO\DZDUHRIWKHSDUWLFXODUEDVLVXSRQ
ZKLFKWKHWULDOMXGJHPDGHKLVGHFLVLRQ
+HUHWKH&RXUWLVQRWIDFHGZLWKDVLWXDWLRQLQZKLFKWKH
WULDO FRXUW DOWHUHG WKH VHQWHQFH RU RWKHUZLVH PDWHULDOO\
FKDQJHGWKHUHFRUGDIWHUWKHQRWLFHRIDSSHDOKDGEHHQILOHG
5DWKHULQWKLVFDVHWKHGLVWULFWMXGJHPHUHO\VXSSOHPHQWHG
WKHH[LVWLQJUHFRUGZLWKILQGLQJVWKDWZHUHFRQVLVWHQWZLWKKLV
SUHYLRXV UXOLQJV 7KH GLVWULFW FRXUW GLG QRW DOWHU WKH
SXQLVKPHQWWRWKHEHQHILWRUGHWULPHQWRI$SSHOODQWVQRUGLG
LWDOWHUDQ\DVSHFWRIWKHFDVHLQYROYHGLQWKHDSSHDO7KH
PHPRUDQGXP DQG RUGHU VHUYHG RQO\ WR H[SDQG PRUH IXOO\
XSRQWKHILQGLQJVWKDWKDGDOUHDG\EHHQPDGHLQRSHQFRXUW
(YHQLIZHZHUHWRILQGWKDWWKHILOLQJRIWKHQRWLFHRIDSSHDO
GLYHVWHG WKH GLVWULFW FRXUW RI MXULVGLFWLRQ WR LVVXH WKH
VXSSOHPHQWDOVWDWHPHQWRIUHDVRQVEHLQJIXOO\LQIRUPHGRI
WKHDOOHJDWLRQVOHDGLQJWRWKHFRXUW¶VGHWHUPLQDWLRQWKDWWKH\
REVWUXFWHGMXVWLFHDQ\HUURURQWKHSDUWRIWKHGLVWULFWFRXUWLQ
WKLVUHJDUGZDVKDUPOHVVDQGWKXVGRHVQRWZDUUDQWUHYHUVDO
1RV 8QLWHG6WDWHVY/RJDQHWDO
'4 UDWLRV ZHUH GHWHUPLQHG IURP WKH ORDQ GHOLQTXHQF\
LQIRUPDWLRQ FRQWDLQHG LQ WKH )RUP $ DQG WKH )RUP
'UHSRUWV7KHJRYHUQPHQWFRQWHQGVWKDWEHFDXVHWKHVH
UHSRUWV FRQWDLQHG IDOVH ORDQ GHOLQTXHQF\ LQIRUPDWLRQ ²
EURXJKW DERXW E\ //)& PDNLQJ GHOLQTXHQW ORDQ SD\PHQWV
IURPLWVRZQIXQGV²WKH'4UDWLRVVXEPLWWHGWR0U:LOVRQ
EDVHGXSRQWKLVLQIRUPDWLRQZHUHDOVRIDOVH
$WWULDO0U:LOVRQWHVWLILHGWKDWLI//)&¶V'4UDWLRVZHUH
QRWLQSURSHUFRPSOLDQFHZLWK*10$VWDQGDUGVWKHQ*10$
ZDVJRLQJWRHQGWKHFRPPLWPHQWDXWKRULW\DQGQRWLVVXHDQ\
PRUHSRROV-$DW&+HIXUWKHUH[SODLQHGWKDWWKH
UHVXOW RI PDVNLQJ WKH '4 UDWLRV E\ PDNLQJ GHOLQTXHQW
SD\PHQWV IURP LWV RZQ IXQGV DOORZHG //)& WR IDOVHO\
UHSUHVHQW WR *10$ WKDW LWV GHOLQTXHQF\ UDWHV ZHUH LQ
FRPSOLDQFH-$DW&,QWKLVZD\//)&DOORZHGLWV
FRPPLWPHQW DXWKRULW\ DQG WKH LVVXDQFH RI QHZ SRROV WR
UHPDLQXQFKDQJHG:HILQGWKDWWKLVWHVWLPRQ\SURYLGHVDQ
DGHTXDWHEDVLVXSRQZKLFKWKHMXU\FRXOGILQGWKDWWKHIDOVH
UHSUHVHQWDWLRQVZHUHPDWHULDODQGWKDW*10$UHOLHGRQWKH
VWDWHPHQWV LQ H[WHQGLQJ DGGLWLRQDO ORDQ FRPPLWPHQWV WR
//)& $FFRUGLQJO\ YLHZLQJ WKH UHFRUG LQ WKH OLJKW PRVW
IDYRUDEOHWRWKHSURVHFXWLRQWKHHYLGHQFHSUHVHQWHGDWWULDO
FRXOGKDYHOHGDUDWLRQDOMXU\WRILQG$SSHOODQWVJXLOW\EH\RQG
DUHDVRQDEOHGRXEWDVWRWKHIDOVHHQWULHVFRQYLFWLRQV
&RQVSLUDF\&RQYLFWLRQV
$SSHOODQWV IXUWKHU DUJXH WKDW WKHUH ZDV LQVXIILFLHQW
HYLGHQFH WR HVWDEOLVK WKH FRQVSLUDF\ FRQYLFWLRQV 0RUH
VSHFLILFDOO\$SSHOODQWVDVVHUWWKDWWKHJRYHUQPHQWIDLOHGWR
GHPRQVWUDWHWKDWWKHUHZDVDNQRZLQJDQGZLOOLQJDJUHHPHQW
EHWZHHQ WKHP WR FRPPLW D FULPH EHFDXVH WKHUH ZDV
LQVXIILFLHQWHYLGHQFHWRVXSSRUWWKHXQGHUO\LQJVXEVWDQWLYH
FODLPV$VGLVFXVVHGSUHYLRXVO\WKHJRYHUQPHQWSURGXFHG
VXIILFLHQW HYLGHQFH XSRQ ZKLFK D UDWLRQDO MXU\ FRXOG ILQG
$SSHOODQWVJXLOW\EH\RQGDUHDVRQDEOHGRXEWRIPDNLQJIDOVH
HQWULHV IDOVH FODLPV DQG IDOVH VWDWHPHQWV 7KH HYLGHQFH
SURGXFHG E\ WKH JRYHUQPHQW HVWDEOLVKHG WKDW $SSHOODQWV
NQRZLQJO\ DQG YROXQWDULO\ HQWHUHG LQWR DQ DJUHHPHQW WR

-- 11 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
FRPPLW WKH XQGHUO\LQJ VXEVWDQWLYH RIIHQVHV DQG WKDW WKH\
FRPPLWWHG DQ RYHUW DFW IRU WKH SXUSRVH RI DGYDQFLQJ RU
KHOSLQJWKHFRQVSLUDF\2QWKLVEDVLVWKHMXU\SRVVHVVHGD
UDWLRQDOEDVLVXSRQZKLFKLWFRQFOXGHGWKDW$SSHOODQWVZHUH
JXLOW\EH\RQGDUHDVRQDEOHGRXEWRIWKHFULPHRIFRQVSLUDF\
%3URSULHW\RIWKH(YLGHQWLDU\5XOLQJV
$SSHOODQWV DOVR UDLVH VHYHUDO FKDOOHQJHV WR VSHFLILF
HYLGHQWLDU\UXOLQJVPDGHE\WKHGLVWULFWFRXUW$VDQLQLWLDO
PDWWHU $SSHOODQWV DUJXH WKDW WKH GLVWULFW FRXUW HUUHG LQ
GHQ\LQJWKHLUPRWLRQVWRVXSSUHVVHYLGHQFHGXHWRWKHDOOHJHG
LQVXIILFLHQF\RIWKHVHDUFKZDUUDQWWKDWOHGWRWKHGLVFRYHU\RI
VXFKHYLGHQFH)XUWKHUPRUH$SSHOODQWVFRQWHQGWKDWWKHWULDO
FRXUWLPSURSHUO\DGPLWWHGLQWRHYLGHQFHDUHYLHZE\
+8'¶VPRQLWRULQJGLYLVLRQWKHUHVXOWLQJDFWLRQE\+8'¶V
PRUWJDJHHUHYLHZERDUG//)&¶V-XO\UHVSRQVHWRWKH
PRUWJDJHHUHYLHZERDUGDQGWKHVHWWOHPHQWDJUHHPHQWDQG
OHWWHURIUHSULPDQGGLVSRVLQJRIWKHDGPLQLVWUDWLYHDFWLRQ,Q
DGGLWLRQ $SSHOODQWV VWDWH WKDW WKH GLVWULFW FRXUW HUUHG LQ
SHUPLWWLQJWKHJRYHUQPHQWWRLQTXLUHDVWRWKHLUDPRXQWRI
LQFRPHJDLQHGIURP//)&DQGUHODWHGFRUSRUDWLRQV:HQRZ
FRQVLGHUHDFKRIWKHVHDUJXPHQWVLQWXUQ
6XIILFLHQF\RIWKH:DUUDQW
2Q-XO\6SHFLDO$JHQW'HUHN%-RKQVRQRIWKH
)HGHUDO%XUHDXRI,QYHVWLJDWLRQSUHSDUHGDQDSSOLFDWLRQDQG
DIILGDYLWIRUDVHDUFKZDUUDQWRI//)&¶VSUHPLVHV6SHFLDO
$JHQW-RKQVRQVRXJKWWKHZDUUDQWDIWHUREWDLQLQJLQIRUPDWLRQ
LQGLFDWLQJWKDW//)&UHJXODUO\IDOVLILHGORDQGRFXPHQWVILOHG
ZLWK+8')+$DQGIUDXGXOHQWO\PDQLSXODWHGLWVUHFRUGVWR
JLYHWKHDSSHDUDQFHWKDWLWZDVLQFRPSOLDQFHZLWK*10$
UHTXLUHPHQWV8SRQUHYLHZRIWKHDIILGDYLWDQGDSSOLFDWLRQ
8QLWHG6WDWHV'LVWULFW-XGJH7KRPDV*+XOOLVVXHGDVHDUFK
ZDUUDQW7KHZDUUDQWDXWKRUL]HGWKHIROORZLQJLWHPVWREH
VHL]HG
,QIRUPDWLRQDQGRUGDWDVWRUHGLQWKHIRUPRIPDJQHWLF
RU HOHFWURQLF FRGLQJ RQ FRPSXWHU PHGLD RU LQ PHGLD
FDSDEOHRIEHLQJUHDGE\DFRPSXWHURUZLWKWKHDLGRI
1RV 8QLWHG6WDWHVY/RJDQHWDO
7KH>GHIHQGDQWVUHO\@RQ86Y6SHDUV)G
WK &LU LQ VWDWLQJ WKDW WKH DGMXVWPHQW IRU
REVWUXFWLRQRIMXVWLFHLVLQDSSURSULDWHZKHQWKHGHIHQGDQW
WHVWLILHVDQGWKHFRXUWUHOLHVRQWKHMXU\¶VYHUGLFWRIJXLOW
LQDSSO\LQJWKHHQKDQFHPHQW7KLVLVWUXHWRWKHH[WHQW
WKDWWKHFRXUWFDQQRWUHO\VLPSO\RQWKHYHUGLFWRIJXLOWWR
VXSSRUWWKHHQKDQFHPHQW7KHFRXUWPXVWPDNHILQGLQJV
RIVSHFLILFLQVWDQFHVRIWKHGHIHQGDQW¶VWHVWLPRQ\ZKLFK
ZDV GLUHFWO\ FRQWUDGLFWHG E\ WKH WHVWLPRQ\ RI RWKHU
ZLWQHVVHV7KH8QLWHG6WDWHVKDVDWUDQVFULSWRIYDULRXV
ZLWQHVVHVDWWKHWULDOOLVWLQJVSHFLILFH[DPSOHVIRUWKH
FRXUW RI GLUHFW FRQWUDGLFWLRQV WR WKH >GHIHQGDQWV¶@
SHUMXUHGWHVWLPRQ\7KLVWUDQVFULSWZLOOEHSURYLGHGDW
WKHVHQWHQFLQJKHDULQJIRUWKHFRXUW¶VXVHLQGHWHUPLQLQJ
VSHFLILF H[DPSOHV RI SHUMXUHG WHVWLPRQ\ 2QFH WKLV
WHVWLPRQ\ LV LGHQWLILHG WKH HQKDQFHPHQW PHHWV WKH
VWDQGDUGVHWIRUWKLQ6SHDUV
,Q WKH SUHVHQWHQFH UHSRUW WKH >GHIHQGDQWV¶@ SHUMXUHG
WHVWLPRQ\KDVEHHQXVHGDVWKHEDVLVRIWKHREVWUXFWLRQRI
MXVWLFHHQKDQFHPHQW:KLOHWKHSUREDWLRQRIILFHUIHHOV
WKDW WKLV DORQH LV VXIILFLHQW WR ZDUUDQW WKH WZROHYHO
LQFUHDVHLWVKRXOGDOVREHQRWHGWKDWWKH>GHIHQGDQWV@
WUDQVIHUUHG RYHU PLOOLRQ GROODUV LQ DVVHWV IURP
>//)&@WR-RKQ+/DZVGHIHQGDQW$ODQ0LFKDHO/DZV¶
IDWKHUDQG(OL]DEHWK/RJDQZLIHRIFRGHIHQGDQW-RKQ
/RJDQ7KHVHWUDQVDFWLRQVRFFXUUHGDIWHUWKH)%,VHDUFK
DQGVHL]XUHRIUHFRUGVIURP>//)&@DQGWKHGHIHQGDQWV
ZHUHDZDUHWKH\ZHUHXQGHULQYHVWLJDWLRQIRUWKHLQVWDQW
RIIHQVH'HWDLOVRIWKHVHWUDQVDFWLRQVDUHRXWOLQHGLQWKH
ILQDQFLDOVHFWLRQRIWKHSUHVHQWHQFHUHSRUW7KHWUDQVIHU
RIWKHVHDVVHWVUHSUHVHQW>V@DQREVWUXFWLRQRIMXVWLFHLQ
WKDW LW LPSHGHV WKH DGPLQLVWUDWLRQ LQ WKH FROOHFWLRQ RI
UHVWLWXWLRQ7KHHQKDQFHPHQWIRUWKHWUDQVIHURIDVVHWVLV
VXSSRUWHGE\86Y%ODFN)G VW&LU
-$ DW $SSHOODQWV¶ DUJXPHQW RQ DSSHDO LV
WDQWDPRXQWWRDQDVVHUWLRQRIODFNRIQRWLFHZLWKUHVSHFWWRWKH
GLVWULFWFRXUW¶VILQGLQJVLQVXSSRUWRIWKHREVWUXFWLRQRIMXVWLFH

-- 12 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
0V /HZLV SRLQWHG WR VSHFLILF HQWULHV LQ KHU
FRQWHPSRUDQHRXVQRWHVLQZKLFKVKHGHWDLOHG0U/DZV¶
GLUHFWLRQVWR>IDOVLI\GRFXPHQWV@/LNHZLVH-DFTXHO\Q
0DWKHVRQWHVWLILHGWKDWVKHZDVGLUHFWHGE\0U/DZVWR
FRPSOHWH PLVVLQJ IRUPV IRU XVH LQ )+$ FODLPV
6LPLODUO\/HLVD7DGORFN&DPSEHOOWHVWLILHGWKDWVKHDQG
RWKHU HPSOR\HHV ZHUH SHUVRQDOO\ GLUHFWHG E\
GHIHQGDQWV>/RJDQDQG/DZV@WRIDOVLI\GRFXPHQWVIRU
XVHLQ)+$ORDQLQVXUDQFHFODLPV)LQDOO\6DUDK0D\V
DFRGHIHQGDQWWHVWLILHGWKDWLWZDVFRPPRQNQRZOHGJH
WKURXJKRXW >//)&@ WKDW 0U *LEVRQ ZDV XVLQJ IDOVH
GRFXPHQWV LQ )+$ FODLPV DQG WKDW VKH WRR KDG EHHQ
DVNHGWRFUHDWHIDOVHGRFXPHQWV
-$DW&RQVLGHULQJWKHUHFRUGDVDZKROHWKHGLVWULFW
FRXUW IRXQG WKDW EDVHG XSRQ LWV RZQ DVVHVVPHQW RI WKH
HYLGHQFHSUHVHQWHGDWWULDO$SSHOODQWVFRPPLWWHGSHUMXU\E\
JLYLQJXQWUXWKIXOWHVWLPRQ\RQPDWHULDOPDWWHUVGHVLJQHGWR
VXEVWDQWLDOO\ DIIHFW WKH RXWFRPH RI WKH FDVH -$ DW
7KXVWKHGLVWULFWFRXUWDSSOLHGWKHWZROHYHOHQKDQFHPHQWWR
$SSHOODQWV¶*XLGHOLQHFDOFXODWLRQ-$DW,QGRLQJVR
WKHGLVWULFWFRXUWZDVFDUHIXOWRQRWHWKDWLWPDGHWKHILQGLQJ
RIREVWUXFWLRQRIMXVWLFHLQGHSHQGHQWRIWKHMXU\¶VYHUGLFWRI
JXLOW\ ,G 7KHUHIRUH WKH GLVWULFW FRXUW PDGH LWV RZQ
LQGHSHQGHQW GHWHUPLQDWLRQ WKDW $SSHOODQWV HQJDJHG LQ
REVWUXFWLYH FRQGXFW ZKLFK ZDUUDQWHG DQ DSSOLFDWLRQ RI WKH
HQKDQFHPHQW
$SSHOODQWV¶ PDLQ DUJXPHQW RQ DSSHDO LV WKDW WKH GLVWULFW
FRXUW¶VPHPRUDQGXPDQGRUGHUPDNLQJWKHILQGLQJVUHTXLUHG
E\ † & LV ZLWKRXW HIIHFW EHFDXVH LW ZDV LVVXHG DIWHU
$SSHOODQWVILOHGDWLPHO\QRWLFHRIDSSHDODQGZDVQRWWLPHO\
VHUYHG RQ $SSHOODQWV¶ FRXQVHO (YHQ DVVXPLQJ WKDW
$SSHOODQWV¶SRVLWLRQSURSHUO\UHIOHFWVWKHUHOHYDQWSURFHGXUDO
KLVWRU\ZHILQGDQ\HUURUE\WKHGLVWULFWFRXUWFRPPLWWHGLQ
WKLVUHJDUGWREHKDUPOHVVLQQDWXUH7KHLQIRUPDWLRQXSRQ
ZKLFKWKHGLVWULFWFRXUWXOWLPDWHO\EDVHGLWVGHFLVLRQWRDSSO\
WKHWZROHYHOHQKDQFHPHQWLVFOHDUO\VHWIRUWKLQWKH365V
ZKLFKVWDWH
1RV 8QLWHG6WDWHVY/RJDQHWDO
FRPSXWHUUHODWHGHTXLSPHQW7KLVPHGLDLQFOXGHVEXWLV
QRW OLPLWHG WR IORSS\ GLVNHWWHV IL[HG KDUG GLVNV
UHPRYDEOHKDUGGLVNFDUWULGJHVWDSHVODVHUGLVNVYLGHR
FDVVHWWHV DQG DQ\ RWKHU PHGLD ZKLFK LV FDSDEOH RI
VWRULQJPDJQHWLFFRGLQJ
(OHFWURQLF GHYLFHV ZKLFK DUH FDSDEOH RI DQDO\]LQJ
FUHDWLQJ GLVSOD\LQJ FRQYHUWLQJ RU WUDQVPLWWLQJ
HOHFWURQLFRUPDJQHWLFFRPSXWHULPSXOVHVRUGDWD7KHVH
GHYLFHV LQFOXGH EXW DUH QRW OLPLWHG WR FRPSXWHUV
FRPSXWHU FRPSRQHQWV FRPSXWHU SHULSKHUDOV ZRUG
SURFHVVLQJ HTXLSPHQW PRGHPV PRQLWRUV SULQWHUV
SORWWHUV HQFU\SWLRQ FLUFXLW ERDUGV RSWLFDO VFDQQHUV
H[WHUQDO KDUG GULYHV DQG RWKHU FRPSXWHU UHODWHG
HOHFWURQLFGHYLFHV
,QVWUXFWLRQVRUSURJUDPVLQWKHIRUPRIHOHFWURQLFRU
PDJQHWLFPHGLDZKLFKDUHFDSDEOHRIEHLQJLQWHUSUHWHG
E\DFRPSXWHURUUHODWHGFRPSRQHQWV7KHLWHPVWREH
VHL]HG FRXOG LQFOXGH EXW ZRXOG QRW EH OLPLWHG WR
RSHUDWLQJV\VWHPVDSSOLFDWLRQVRIWZDUHXWLOLW\SURJUDPV
FRPSLOHUV LQWHUSUHWHUV DQG DQ\ RWKHU SURJUDPV
SHULSKHUDOV HLWKHU GLUHFWO\ RU LQGLUHFWO\ YLD WHOHSKRQH
OLQHVUDGLRRURWKHUPHDQVRIWUDQVPLVVLRQ
3ULQWHGPDWHULDOZKLFKSURYLGH>VLF@LQVWUXFWLRQVRU
H[DPSOHVFRQFHUQLQJWKHRSHUDWLRQRIDFRPSXWHUV\VWHP
FRPSXWHUVRIWZDUHDQGRUDQ\UHODWHGGHYLFH
7HOHSKRQHORQJGLVWDQFHFDOOUHFRUGVDQGUHFRUGVRI
ZLUHDQGHOHFWURQLFLQWHUVWDWHFRPPXQLFDWLRQV
5HFRUGV ILOHV GRFXPHQWV QRWHV FRUUHVSRQGHQFH
PLFURILFKH RU FRPSXWHUL]HG HQWULHV FRQFHUQLQJ WKH
'HSDUWPHQWRI+RXVLQJDQG8UEDQ'HYHORSPHQW +8'
*RYHUQPHQW1DWLRQDO0RUWJDJH$VVRFLDWLRQ *10$
)HGHUDO+RXVLQJ$GPLQLVWUDWLRQ )+$ PDQXIDFWXUHG
KRPHGHDOHUVERUURZHUVERWKSDVWDQGSUHVHQWSD\PHQW
KLVWRU\DQGFXUUHQWORDQVWDWXVRIERUURZHUVORDQILOHV
DQGDFFRXQWVRIERUURZHUVORDQDSSOLFDWLRQVDQGFRSLHV

-- 13 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
RIVXEPLVVLRQVWR)+$*10$+8')+$LQVXUDQFH
FODLPVDQGFODLPVUHFRUGV
$FFRXQWVUHFHLYDEOHDQGUHFRUGVWKHUHRI
5HWDLQHG FRSLHV RI GRFXPHQWV UHODWLQJ WR EDQNLQJ
WUDQVDFWLRQVLQFOXGLQJEXWQRWOLPLWHGWR
UHWDLQHGFRSLHVRIVLJQDWXUHFDUGV
EDQNVWDWHPHQWV
FDQFHOHGFKHFNV
GHSRVLWWLFNHWV
UHWDLQHGFRSLHVRILWHPVGHSRVLWHG
UHWDLQHGFRSLHVRIFUHGLWDQGGHELWPHPRV
%DQNFRUUHVSRQGHQFHILOHV
'RFXPHQWV LQ ERRNV RI RULJLQDO HQWU\ FRQWDLQLQJ
HQWULHVUHIOHFWLQJDQ\DQGDOOWUDQVDFWLRQVLQFOXGLQJEXW
QRW OLPLWHG WR *HQHUDO OHGJHUV *HQHUDO MRXUQDOV
6XEVLGLDU\OHGJHUVLQFOXGLQJEXWQRWOLPLWHGWRORDQORVV
DFFRXQW OHGJHUV WULDO EDODQFHV 6XPPDU\ MRXUQDOV
LQFOXGLQJ EXW QRW OLPLWHG WR FDVK UHFHLSWV DQG FDVK
GLVEXUVHPHQWV 'DLO\ SRVWLQJ UHFRUGV DQG VOLSV FKHFN
UHTXHVWIRUPV³VSHFLDOKDQGOLQJDFFRXQWV´DQG³VSHFLDO
KDQGOLQJDFFRXQW´UHSRUWV
,QWHUQDO GRFXPHQWV RU LQVWUXFWLRQV WR HPSOR\HHV
UHSUHVHQWDWLYHV RU DJHQWV FRQFHUQLQJ *10$ )+$
ERUURZHUVRUPDQXIDFWXUHGKRPHVGHDOHUVSHUVRQDODQG
LQIRUPDO ILOHV QRWHV GLDULHV WHOHSKRQH FDOO ORJV DQG
WHOHSKRQH UHFRUGV FDOHQGDUV DQG ZRUNLQJ SDSHUV RI
HPSOR\HHV DQG RIILFHUV RI /RJDQ/DZV $UWLFOHV RI
LQFRUSRUDWLRQRU3DUWQHUVKLSV
$OORIWKHDERYHOLVWHGGRFXPHQWVPD\EHIRXQGLQ
ZULWWHQRUHOHFWURQLFIRUP
-$DW7KXVWKHZDUUDQWDXWKRUL]HGDJHQWVRIWKH
JRYHUQPHQW WR VHDUFK IRU DQG VHL]H DQ\ UHFRUGV ILOHV DQG
GRFXPHQWVUHODWLQJWRWKHPRELOHKRPHORDQVPDGHE\//)&
FRLQVXUHG E\ +8')+$ DQG XSRQ ZKLFK //)& LVVXHG
1RV 8QLWHG6WDWHVY/RJDQHWDO
$ ,KDGQRNQRZOHGJHRIKLPGRLQJWKDW
-$DW FLWLQJ'RFDWWDFKPHQWSS 7KH
GLVWULFW WKHQ WXUQHG WR WKH IROORZLQJ WHVWLPRQ\ PDGH E\
$SSHOODQW/DZV
4 'LG\RXRUQRWHYHU>VLF@NQRZLQJO\RUZLOOIXOO\
PDNHRUFDXVHDQ\RQHHOVHWRPDNHDQ\IDOVHFODLPV
WR+8'"
$ 1R,GLGQ¶W

4 'LGVKH>,YD-HDQ/HZLV@HYHULQGLFDWHWR\RXWKDW
VKHZDVIRUJLQJDQ\GRFXPHQWV"
$ 1RVKHGLGQ¶WQRW±
4 'LGVKHHYHULQGLFDWHWR\RXVKHQHHGHGWRIRUJHDQ\
GRFXPHQWVWRJHWWKHFODLPVILOHG"
$ 1RVKHGLGQRW

4 'LG\RXHYHUWHOODQ\ERG\WRIDOVLI\DQ\GRFXPHQWV"
$ ,QHYHUWROG-LP*LEVRQRU,YD/HZLVRUDQ\ERG\HOVH
LQRXURIILFHWRIDOVLI\DQ\GRFXPHQWVZKDWVRHYHU
-$ DW &RQWUDU\ WR WKLV WHVWLPRQ\ PDGH E\
$SSHOODQWV KRZHYHU WKH GLVWULFW FRXUW QRWHG WKDW DW WULDO
ZLWQHVVHV*LEVRQDQG/HZLVVZRUHXQGHURDWKWKDW$SSHOODQWV
/RJDQDQG/DZVGLUHFWHGWKHPWRIDOVLI\GRFXPHQWVIRUWKH
VXEPLVVLRQRIORDQLQVXUDQFHFODLPV-$DW
,Q DGGLWLRQ WKH GLVWULFW FRXUW VWDWHG WKH IROORZLQJ ZLWK
UHVSHFW WR WKH HYLGHQFH LQ WKH IRUP RI WHVWLPRQ\ PDGH E\
YDULRXV//)&HPSOR\HHV

-- 14 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
2EVWUXFWLRQRI-XVWLFH(QKDQFHPHQW
:HQRZWXUQWR$SSHOODQWV¶DUJXPHQWWKDWWKHGLVWULFWFRXUW
HUUHG ZKHQ LW HQKDQFHG WKHLU VHQWHQFHV IRU REVWUXFWLRQ RI
MXVWLFH6HFWLRQ&RIWKH*XLGHOLQHVVWDWHVWKDW
,IWKHGHIHQGDQWZLOOIXOO\REVWUXFWHGRULPSHGHGRU
DWWHPSWHGWRREVWUXFWRULPSHGHWKHDGPLQLVWUDWLRQRI
MXVWLFH GXULQJ WKH FRXUVH RI WKH LQYHVWLJDWLRQ
SURVHFXWLRQ RU VHQWHQFLQJ RI WKH LQVWDQW RIIHQVH
LQFUHDVHWKHRIIHQVHOHYHOE\OHYHOV
866* † & 2QH W\SH RI REVWUXFWLYH FRQGXFW
VSHFLILFDOO\PHQWLRQHGLQWKH*XLGHOLQHVLVSHUMXU\6HHLGDW
FPW Q E :H HPSOR\ D FOHDUO\ HUURQHRXV VWDQGDUG LQ
UHYLHZLQJ D GLVWULFW FRXUW¶V IDFWXDO GHWHUPLQDWLRQ WKDW D
GHIHQGDQW¶V FRQGXFW ZDUUDQWV DQ REVWUXFWLRQ RI MXVWLFH
HQKDQFHPHQW6HH8QLWHG6WDWHVY:DONHU)G
WK&LU
,Q WKH LQVWDQW FDVH WKH FRXUW EHORZ GHWHUPLQHG WKDW
$SSHOODQWVIDOVHO\WHVWLILHGXQGHURDWKDERXWDPDWHULDOPDWWHU
ZKHQWKH\GHQLHGDQ\NQRZOHGJHFRQFHUQLQJWKHDGPLVVLRQRI
IDOVHDQGIUDXGXOHQWFODLPV-$DW,QSDUWLFXODULQD
PHPRUDQGXPDQGRUGHULVVXHGRQ2FWREHUQXQFSUR
WXQF $XJXVW WKH GLVWULFW FRXUW SRLQWHG WR WKH
IROORZLQJWHVWLPRQ\PDGHE\$SSHOODQW/RJDQ
4 0U/RJDQDWDQ\WLPHDWDQ\WLPHGLG\RXHYHU
GLUHFWDQ\HPSOR\HHRI>//)&@WRPDNHDQ\IDOVH
HQWULHVLQDQ\FODLPV"
$ 1RVLUQHYHU

4 :KDWDERXW0U-LP*LEVRQ":KDWNQRZOHGJHGLG
\RXKDYHEHIRUH\RXUEXVLQHVVZDVFORVHGWKDWKH
ZDVVXEPLWWLQJDQ\IDOVHLQVXUDQFHFODLPVWR+8'
RU)+$"
1RV 8QLWHG6WDWHVY/RJDQHWDO
PRUWJDJHEDFNHG VHFXULWLHV SXUVXDQW WR *10$ 7KH
JRYHUQPHQWDJHQWVH[HFXWHGWKHVHDUFKZDUUDQWRQ-XO\

3ULRU WR WULDO $SSHOODQWV ILOHG PRWLRQV WR VXSSUHVV WKH
GRFXPHQWVDQGLWHPVVHL]HGGXULQJWKHVHDUFKRI//)&,Q
WKHPRWLRQV$SSHOODQWVDUJXHGWKDWWKHVHDUFKZDUUDQWZDV
³JHQHUDO´ DQG WKDW LW ³HIIHFWLYHO\ DXWKRUL]HG WKH VHL]XUH RI
DOPRVWHYHU\VLQJOHSLHFHRISDSHURUSLHFHRILQIRUPDWLRQLQ
WKH/RJDQ/DZVFRUSRUDWHEXLOGLQJ´-$DW7KHGLVWULFW
FRXUWUHIHUUHGWKHPDWWHUWR0DJLVWUDWH-XGJH'HQQLV+,QPDQ
IRU UHSRUW DQG UHFRPPHQGDWLRQ 2Q )HEUXDU\
0DJLVWUDWH-XGJH,QPDQKHOGDQHYLGHQWLDU\KHDULQJRQLQWHU
DOLD WKH PRWLRQV WR VXSSUHVV 7KHUHDIWHU WKH 0DJLVWUDWH
-XGJHLVVXHGDUHSRUWDQGUHFRPPHQGDWLRQFRQFOXGLQJWKDW
WKH³ZDUUDQWZDVLQOLJKWRIWKHQDWXUHRIWKHDFWLYLW\XQGHU
LQYHVWLJDWLRQDQGWKHPDQQHURIVWRULQJWKHLQIRUPDWLRQDV
SDUWLFXODU DV LW FRXOG EH´ -$ DW )XUWKHUPRUH WKH
0DJLVWUDWH-XGJHVWDWHG
7KLV ZDUUDQW ZDV EURDG WR EH VXUH EXW LW ZDV QRW
μJHQHUDO¶7KHZDUUDQWZDVUDWKHUVSHFLILFDERXWZKDW
FRXOGEHVHDUFKHGDQGVHL]HG$OWKRXJKWKHGHVFULSWLRQ
HQFRPSDVVHGYLUWXDOO\DOORIWKHEXVLQHVVUHFRUGVRIWKH
FRUSRUDWLRQWKDWGRHVQRWPHDQWKDWWKHZDUUDQWODFNHG
SDUWLFXODULW\LWVLPSO\PHDQVWKDWLWZDVH[WUHPHO\EURDG
7KH LVVXH WKHUHIRUH LV μZKHWKHU WKHUH ZDV SUREDEOH
FDXVHWRVXSSRUWDVHDUFKRIWKLVEUHDGWKQRWZKHWKHUWKH
ZDUUDQWZDVJHQHUDO¶
-$DW LQWHUQDOFLWDWLRQDQGTXRWDWLRQVRPLWWHG )LQGLQJ
WKDWDOOUHFRUGVRIWKHFRUSRUDWLRQUHODWLQJWRLWV+8')+$
DQG*10$DFWLYLWLHVZHUHSRWHQWLDOO\SUREDWLYHRIFULPLQDO
FRQGXFW 0DJLVWUDWH -XGJH ,QPDQ UHFRPPHQGHG WKDW WKH
GLVWULFWFRXUWGHQ\WKHPRWLRQVWRVXSSUHVVRQWKHJURXQGWKDW
WKHUHZDVSUREDEOHFDXVHWRVXSSRUWDVHDUFKRIWKLVEUHDGWK
$SSHOODQWV ILOHG WLPHO\ REMHFWLRQV WR WKH UHSRUW DQG
UHFRPPHQGDWLRQ7KHGLVWULFWFRXUWGHQLHGWKHVHREMHFWLRQV
DQGFRQVHTXHQWO\DGRSWHGWKHUHSRUWDQGUHFRPPHQGDWLRQLQ
LWV HQWLUHW\ ,Q D PHPRUDQGXP RSLQLRQ WKH GLVWULFW FRXUW

-- 15 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
IRXQG WKDW WKH VHDUFK ZDUUDQW WKRXJK EURDG DWWHPSWHG WR
XQFRYHUVSHFLILFHYLGHQFHRIFRQYROXWHGIUDXGXOHQWDFWLYLW\
EXULHG DPLGVW PRXQGV RI SDSHUZRUN DQG FRPSXWHU
GRFXPHQWDWLRQ-$DW,QDGGLWLRQWKHGLVWULFWFRXUW
VWDWHGWKHIROORZLQJ
%HFDXVHRIWKHFRPSOH[QDWXUHRIWKHFULPLQDOVFKHPHLQ
WKHSUHVHQWFDVHWKHZDUUDQWFRXOGQRWKDYHEHHQPRUH
VSHFLILFDVWRWKHLGHQWLW\RIWKHGRFXPHQWVWREHVHL]HG
(YHQ ZLWK WKH DLG RI WKH FRQILGHQWLDO LQIRUPDQWV ZKR
SURYLGHG WKH LQIRUPDWLRQ XSRQ ZKLFK WKH DIILGDYLW LQ
VXSSRUWRIWKHZDUUDQWZDVEDVHGWKHRIILFHUVFRXOGQRW
KDYH NQRZQ SUHFLVHO\ ZKHUH DQG LQ ZKDW IRUP
GRFXPHQWDWLRQ RI WKLV VFKHPH H[LVWHG )RU H[DPSOH
DFFRUGLQJWRWKHVWDWHPHQWVRIRQHLQIRUPDQWWKHFKHFNV
XVHG WR PDNH SD\PHQWV WR GHOLQTXHQW ERUURZHUV¶
DFFRXQWVZHUHUHWXUQHGWR/RJDQ/DZVDQGVWRUHGμZLWK
RWKHUUHFRUGVLQWKHVHFRQGIORRUVWRUDJHDUHD¶ZKLFK
DOVRKRXVHGDOORIWKHμUHFRUGVGDWLQJWRWKHEHJLQQLQJRI
WKH /RJDQ/DZV &RUSRUDWLRQ¶ 7KHVH UHFRUGV DOVR
LQFOXGHGDPLGVWPRXQWDLQVRISDSHUZRUNHYLGHQFHLQ
XQNQRZQIRUPVRIIUDXGXOHQWORDQSD\PHQWVDQGILOLQJV
ZLWK)+$DQG*10$+HQFHQDPLQJWKHJHQHUDOFODVV
RI LWHPV VXFK DV DOO GRFXPHQWV UHODWLQJ WR WKH +8'
)+$DQG*10$WUDQVDFWLRQVDQGORDQSD\PHQWVZDV
DV VSHFLILF DV SRVVLEOH DQG WKXV UHDVRQDEOH XQGHU WKH
FLUFXPVWDQFHV
-$DW LQWHUQDOFLWDWLRQRPLWWHG 7KXVWKHGLVWULFWFRXUW
KHOGWKDWWKHZDUUDQWVXIILFLHQWO\VWDWHGWKHLWHPVWREHVHL]HG
HYHQ WKRXJK LW HIIHFWLYHO\ HQFRPSDVVHG WKH EXON RI WKH
FRPSDQ\¶VUHFRUGV-$DW
$SSHOODQWV FRQWHQG WKDW WKH GLVWULFW FRXUW VKRXOG KDYH
GHFODUHGWKHVHDUFKZDUUDQWLQYDOLGEHFDXVHWKHGHVFULSWLRQRI
WKH SURSHUW\ GLG QRW PHHW WKH FRQVWLWXWLRQDO VWDQGDUGV RI
SDUWLFXODULW\ 7KH\ DUJXH WKDW WKH ZDUUDQW ZDV JHQHUDO LQ
QDWXUH DQG WKHUHIRUH DOORZHG IRU D JHQHUDO UXPPDJLQJ
VHDUFK )XUWKHUPRUH $SSHOODQWV FRQWHQG WKDW WKH ODZ
HQIRUFHPHQW RIILFLDOV VHHNLQJ WKH ZDUUDQW KDG VSHFLILF
1RV 8QLWHG6WDWHVY/RJDQHWDO
WKLVSURYLVLRQEHFDXVHWKHUHDUHDWOHDVWWZRIHDWXUHVRIKLV
FRQGXFW WKDW WDNH WKLV FDVH RXWVLGH RI WKH KHDUWODQG RI
FRPSDUDEOHIUDXGFDVHV)LUVW$SSHOODQW/DZVDUJXHVWKDWKH
ODFNHG WKH LQWHQW WR VWHDO PRQH\ IURP WKH 8QLWHG 6WDWHV
6HFRQGKHDUJXHVWKDWWKH92(DQG92'IRUPVZHUHQRW
HYHQQHFHVVDU\DVWKHORDQILOHVDOUHDG\FRQWDLQHGDGHTXDWH
YHULILFDWLRQ RI HPSOR\PHQW DQG DGHTXDWH YHULILFDWLRQ RI
GHSRVLWXSRQZKLFK+8')+$FRXOGDQGZRXOGKDYHUHOLHG
WRSD\WKHPDMRULW\RIWKHFODLPV$VWRWKHODWWHUDUJXPHQW
$SSHOODQW/DZVVWDWHVWKDWZKLOHKHZDVIRXQGE\DMXU\WR
KDYH WHFKQLFDOO\ YLRODWHG WKH ODZ KLV LQWHQWLRQ ZDV QRW WR
GHIUDXGWKHJRYHUQPHQWEXWUDWKHUWRHQVXUHSURPSWSD\PHQW
RQWKHFODLPVWRZKLFKLWZDVULJKWIXOO\HQWLWOHGSD\PHQW
7KH UHIXVDO RI D GLVWULFW MXGJH WR PDNH D GRZQZDUG
GHSDUWXUHLVQRWRUGLQDULO\DSSHDODEOH6HH8QLWHG6WDWHVY
%\UG)G WK&LU ,Q8QLWHG6WDWHVY
'DYLV)G WK&LU ZHKHOG
:KHUH DV KHUH WKH JXLGHOLQH UDQJH ZDV SURSHUO\
FRPSXWHG WKH GLVWULFW FRXUW ZDV QRW XQDZDUH RI LWV
GLVFUHWLRQ WR GHSDUW IURP WKH JXLGHOLQH UDQJH DQG WKH
VHQWHQFH ZDV QRW LPSRVHG LQ YLRODWLRQ RI ODZ RU DV D
UHVXOWRIDQLQFRUUHFWDSSOLFDWLRQRIWKHJXLGHOLQHVWKH
IDLOXUHWR GHSDUWLVQRWFRJQL]DEOHRQDSSHDOXQGHU
86&† D
,QWKHLQVWDQWFDVH$SSHOODQW/DZVGRHVQRWPDNHDQ\HIIRUW
WR DYRLG WKLV UXOH ZKLFK SUHYHQWV KLP IURP PDNLQJ WKH
DUJXPHQWFRQFHUQLQJWKHGRZQZDUGGHSDUWXUHLQWKLV&RXUW
)XUWKHUPRUH WKH GLVWULFW MXGJH ZHQW EH\RQG WKLV &LUFXLW¶V
UHTXLUHPHQWVLQUXOLQJRQWKHPRWLRQE\VWDWLQJDIILUPDWLYHO\
WKDW KH ZDV DZDUH WKDW KH SRVVHVVHG WKH SRZHU WR PDNH D
GRZQZDUGGHSDUWXUHEXWGHFOLQHGWRGRVR&I%\UG)G
DW H[SODLQLQJWKDWWKHWULDOMXGJHGRHVQRWKDYHDGXW\WR
VWDWHDIILUPDWLYHO\WKDWKHNQRZVWKDWKHSRVVHVVHVWKHSRZHU
WRPDNHDGRZQZDUGGHSDUWXUHEXWGHFOLQHVWRGRVR )RU
WKHVHUHDVRQVZHDIILUPWKHGLVWULFWFRXUW¶VUXOLQJ

-- 16 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
+8')+$LQFXUUHGGXHWRWKHIDOVHFODLPVFRQYLFWLRQV
WKH DPRXQW RI ORVV XQGHU WKH UHOHYDQW FRQGXFW ILJXUH
FDOFXODWHGLQOLJKWRIWKHFRQVSLUDF\FRQYLFWLRQVDQG WKH
DPRXQW RI ORVV LQFXUUHG E\ *10$ ZH FRQFOXGH WKDW WKH
GLVWULFWFRXUWSURSHUO\DSSOLHG†) E ZKLFKUHTXLUHGLWWR
LQFUHDVH $SSHOODQWV¶ EDVH RIIHQVH OHYHO RI VL[ E\ IRXUWHHQ
OHYHOVUHVXOWLQJLQDOHYHOWZHQW\866*†) D DQG
E 2 $VVXFKZHILQG$SSHOODQWV¶DUJXPHQWFRQFHUQLQJ
WKH GLVWULFW FRXUW¶V FRPSXWDWLRQ RI ORVV DQG FRUUHVSRQGLQJ
LQFUHDVHLQWKHRIIHQVHOHYHOWREHZLWKRXWPHULW7KHGLVWULFW
FRXUW¶VFRPSXWDWLRQRIORVVLQWKLVFDVHLVWKHUHIRUHDIILUPHG
'RZQZDUG'HSDUWXUH
1H[W ZH FRQVLGHU $SSHOODQW /DZV¶ DUJXPHQW WKDW WKH
GLVWULFWFRXUWLPSURSHUO\UHIXVHGWRGHSDUWGRZQZDUGIURPLWV
VHQWHQFLQJ FRPSXWDWLRQ XQGHU WKH *XLGHOLQHV 7KH UHFRUG
UHIOHFWVWKDWFRXQVHOIRU$SSHOODQW/DZVILOHGDZULWWHQPRWLRQ
LQ WKH GLVWULFW FRXUW MXVW RQH GD\ SULRU WR WKH VHQWHQFLQJ
KHDULQJLQZKLFKKHUHTXHVWHGDGRZQZDUGGHSDUWXUHIURP
WKH*XLGHOLQHVSXUVXDQWWR†.-$DW:KLOH
UHFRJQL]LQJLWVDXWKRULW\WRPDNHVXFKDGHSDUWXUHWKHGLVWULFW
FRXUWQHYHUWKHOHVVIRXQGWKDWWKH JURXQGVVHWIRUWKLQWKH
PRWLRQ DQG VXSSRUWLQJ PHPRUDQGXP GLG QRW ZDUUDQW WKH
UHTXHVWHGGHSDUWXUH-$DW2QWKLVEDVLVWKHGLVWULFW
FRXUWGHQLHGWKHPRWLRQ-$DW$SSHOODQW/DZVQRZ
REMHFWVWRWKHGLVWULFWFRXUW¶VIDLOXUHWRJUDQWKLPDGRZQZDUG
GHSDUWXUHSXUVXDQWWR†.RIWKH*XLGHOLQHV
6HFWLRQ.VWDWHVLQSHUWLQHQWSDUW
WKHVHQWHQFLQJFRXUWPD\LPSRVHDVHQWHQFHRXWVLGHWKH
UDQJH HVWDEOLVKHG E\ WKH DSSOLFDEOH JXLGHOLQHV LI WKH
FRXUWILQGVWKDWWKHUHH[LVWVDQDJJUDYDWLQJRUPLWLJDWLQJ
FLUFXPVWDQFHRIDNLQGRUWRDGHJUHHQRWDGHTXDWHO\
WDNHQLQWRFRQVLGHUDWLRQE\WKH6HQWHQFLQJ&RPPLVVLRQ
LQ IRUPXODWLQJ WKH JXLGHOLQHV WKDW VKRXOG UHVXOW LQ D
VHQWHQFHGLIIHUHQWIURPWKDWGHVFULEHG
866*†. LQWHUQDOTXRWDWLRQVRPLWWHG $SSHOODQW
/DZVDUJXHVWKDWKHZDVHQWLWOHGWRDGHSDUWXUHSXUVXDQWWR
1RV 8QLWHG6WDWHVY/RJDQHWDO
LQIRUPDWLRQZLWKZKLFKWKH\FRXOGKDYHOLPLWHGWKHVHDUFKWR
DVLJQLILFDQWGHJUHHEXWZKLFKWKH\FKRVHQRWWRLQFOXGHLQWKH
ZDUUDQW%DVHGXSRQWKHVHDOOHJHGGHILFLHQFLHV$SSHOODQWV
VWDWHWKDWWKHGLVWULFWFRXUWHUUHGLQGHQ\LQJWKHLUPRWLRQVWR
VXSSUHVV
:H UHYLHZ D GLVWULFW FRXUW¶V IDFWXDO ILQGLQJV UHJDUGLQJ
PRWLRQVWRVXSSUHVVIRUFOHDUHUURUDQGLWVOHJDOFRQFOXVLRQV
GHQRYR6HH8QLWHG6WDWHVY%ODLU)G WK
&LU ,Q GRLQJ VR ZH H[WHQG JUHDW GHIHUHQFH WR D
SUHYLRXV ILQGLQJ RI SUREDEOH FDXVH IRU WKH LVVXDQFH RI WKH
VHDUFK ZDUUDQW 6HH LG 7KXV LW LV WKLV &RXUW¶V WDVN WR
GHWHUPLQH ZKHWKHU LQ OLJKW RI WKH WRWDOLW\ RI WKH
FLUFXPVWDQFHVWKHMXGJHLVVXLQJWKHZDUUDQWKDGDVXEVWDQWLDO
EDVLVIRUFRQFOXGLQJWKDWDVHDUFKRIWKHVSHFLILHGSUHPLVHV
ZRXOGXQFRYHUHYLGHQFHRIZURQJGRLQJ6HHLG
7KH)RXUWK$PHQGPHQWWRWKH8QLWHG6WDWHV&RQVWLWXWLRQ
UHTXLUHVDZDUUDQWWR³SDUWLFXODUO\GHVFULE>H@WKHSODFHWREH
VHDUFKHGDQGWKHSHUVRQVRUWKLQJVWREHVHL]HG´86&RQVW
DPHQG,97KHSXUSRVHRIWKLVSDUWLFXODULW\UHTXLUHPHQWLV
WR SUHYHQW WKH XVH RI JHQHUDO ZDUUDQWV DXWKRUL]LQJ ZLGH
UDQJLQJUXPPDJLQJVHDUFKHVLQYLRODWLRQRIWKH&RQVWLWXWLRQ¶V
SURVFULSWLRQDJDLQVWXQUHDVRQDEOHVHDUFKHVDQGVHL]XUHV6HH
$QGUHVHQ Y 0DU\ODQG 86 8QLWHG
6WDWHVY6FKXOW])G WK&LU VHHDOVR
8QLWHG 6WDWHV Y %ODNHQH\ )G WK &LU
UHFRJQL]LQJWKDWWKHZDUUDQWPXVWHQDEOHDVHDUFKHUWR
UHDVRQDEO\ DVFHUWDLQ DQG LGHQWLI\ WKH WKLQJV ZKLFK DUH
DXWKRUL]HGWREHVHL]HG 7KLV&RXUWKDVUHFRJQL]HGWKDWWKH
LVVXHRIZKHWKHUDZDUUDQWLVJHQHUDORUODFNVWKHUHTXLVLWH
SDUWLFXODULW\ LV EHVW UHVROYHG XSRQ H[DPLQDWLRQ RI WKH
FLUFXPVWDQFHVRIWKHSDUWLFXODUFDVH6HH:KLWH)DEULFDWLQJ
&RY8QLWHG6WDWHV)G WK&LU VHH
DOVR %ODLU )G DW VWDWLQJ WKDW ³WKH GHJUHH RI
VSHFLILFLW\LQDZDUUDQWPXVWEHIOH[LEOHGHSHQGLQJXSRQWKH
W\SHRILWHPVWREHVHL]HGDQGWKHFULPHLQYROYHG´ 8QLWHG
6WDWHV Y +HQVRQ )G WK &LU
ILQGLQJWKDWWKHSDUWLFXODULW\UHTXLUHGGHSHQGVRQWKHLWHPV
VRXJKW DQG WKH VSHFLILF FLUFXPVWDQFHV LQ WKH FDVH $

-- 17 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
GHVFULSWLRQFRQWDLQHGLQDZDUUDQWLVVXIILFLHQWO\SDUWLFXODULI
LWLVDVVSHFLILFDVWKHFLUFXPVWDQFHVDQGWKHQDWXUH RIWKH
DOOHJHGFULPHSHUPLW%ODLU)GDW,QDGGLWLRQ
RQFHDFDWHJRU\RIGRFXPHQWVKDVEHHQDGHTXDWHO\GHVFULEHG
LQWKHZDUUDQWLQSDUWE\DQLOOXVWUDWLYHOLVWRI LWHPVWREH
VHL]HGWKH)RXUWK$PHQGPHQWLVQRWYLRODWHGZKHQRIILFHUV
H[HFXWLQJ WKH ZDUUDQW H[HUFLVH PLQLPDO MXGJPHQW DV WR
ZKHWKHU D SDUWLFXODU GRFXPHQW IDOOV ZLWKLQ WKH GHVFULEHG
FDWHJRU\6HHLG
,Q WKLV FDVH ZH ILQG WKDW WKH ORZHU FRXUW FRUUHFWO\
GHWHUPLQHGWKDWWKHVHDUFKZDUUDQWVDWLVILHVWKHSDUWLFXODULW\
UHTXLUHPHQW 7KH VHDUFK ZDUUDQW DW LVVXH DXWKRUL]HV WKH
VHL]XUH RI LWHPV VSHFLILFDOO\ UHODWHG WR IDOVH RU IUDXGXOHQW
DFWLYLW\WDNLQJSODFHZLWKLQWKHFRQWH[WRIWKH+8')+$FR
LQVXUHGORDQVDQGWKH*10$PRUWJDJHEDFNHGVHFXULWLHV,Q
SDUWLFXODU LWHPV VXFK DV UHFRUGV ILOHV GRFXPHQWV QRWHV
FRUUHVSRQGHQFH PLFURILFKH RU FRPSXWHUL]HG HQWULHV
FRQFHUQLQJ+8')+$*10$PDQXIDFWXUHGKRPHGHDOHUV
ERUURZHUVERWKSDVWDQGSUHVHQWSD\PHQWKLVWRU\DQGFXUUHQW
ORDQ VWDWXV RI ERUURZHUV ORDQ DSSOLFDWLRQV DQG FRSLHV RI
VXEPLVVLRQV WR )+$ *10$ DQG +8' )+$ LQVXUDQFH
FODLPV DQG RWKHU FODLPV UHFRUGV FRXOG ORJLFDOO\ OHDG WR
HYLGHQFH WKDW $SSHOODQWV ZHUH LQYROYHG LQ WKH VXVSHFWHG
LOOHJDO DFWLYLW\ $SSHOODQWV¶ DUJXPHQW FRQFHUQLQJ WKH
SDUWLFXODULW\ UHTXLUHPHQW LV EDVHG XSRQ WKHLU SRVLWLRQ WKDW
LQYHVWLJDWLQJRIILFHUVGXJWRRGHHSO\LQWRWKHRYHUDOOEXVLQHVV
RI//)&LQVWHDGRIIRFXVLQJRQRQHSRUWLRQRIWKHRSHUDWLRQ
WKDW ZDV DOOHJHG WR KDYH LQYROYHG LOOHJDO SUDFWLFHV
$SSHOODQWVPLVVWKHSRLQW
)URP WKH IDFH RI WKH VHDUFK ZDUUDQW DQG DFFRPSDQ\LQJ
DIILGDYLWLWLVFOHDUWKDWWKHZDUUDQW¶VJHQHUDOQDWXUHZDVGXH
WRWKHLQYHVWLJDWRUV¶EHOLHIWKDWJUDQWLQJ+8')+$FRLQVXUHG
ORDQV DQG *10$ PRUWJDJHEDFNHG VHFXULWLHV FRQVWLWXWHG
//)&¶V HQWLUH RSHUDWLRQ 7KDW EHLQJ WKH FDVH ODZ
HQIRUFHPHQW RIILFLDOV ZHUH QHFHVVDULO\ LQYROYHG LQ DQ
H[DPLQDWLRQRIDQH[WHQVLYHSDSHUWUDLOLQRUGHUWRGLVFRYHU
ZKLFKWUDQVDFWLRQVPD\KDYHEHHQLOOHJDOLQQDWXUH.HHSLQJ
LQ PLQG WKDW WKH SDUWLFXODULW\ UHTXLUHPHQW LV GHWHUPLQHG
1RV 8QLWHG6WDWHVY/RJDQHWDO
7KHJHQHUDOUXOHLQGHWHUPLQLQJORVVUHTXLUHVWKHFRXUWWR
H[DPLQHWKHFDXVDOFRQQHFWLRQEHWZHHQWKHFULPLQDOFRQGXFW
DQG WKH DOOHJHG ORVV DQG ZKHWKHU LW ZDV UHDVRQDEO\
IRUHVHHDEOHWRWKHGHIHQGDQWVWKDWWKHORVVZRXOGRFFXU&I
8QLWHG6WDWHVY.UHQQLQJ)G WK&LU
VWDWLQJ WKDW WKH DPRXQW RI ORVV PXVW EHDU D UHDVRQDEOH
UHODWLRQWRWKHDFWXDORULQWHQGHGKDUPRIWKHRIIHQVH ,QWKLV
UHJDUGWKHGLVWULFWFRXUWREVHUYHGWKDW
>//)&@KDGDKLJKGHOLQTXHQF\UDWHLQLWVORDQSRUWIROLR
GXH WR WKH KLJK QXPEHU RI IDOVLILFDWLRQV LQ WKH
GRFXPHQWVZKLFKIDOVLILFDWLRQVZHUHWKHGLUHFWUHVXOWRI
GHIHQGDQWV¶ NQRZLQJ DQG ZLOOIXO DFWLRQV /RDQV ZHUH
WKHUHIRUHPDGHWRLQGLYLGXDOVZKRZHUHSRRUFUHGLWULVNV
7KHJRYHUQPHQWKDVHVWDEOLVKHGE\DSUHSRQGHUDQFHRI
WKHHYLGHQFHWKDW>//)&@PDQLSXODWHGWKHGHOLQTXHQF\
UDWHLQIRUPDWLRQLQRUGHUWRFRQFHDOLWVWUXHGHOLQTXHQF\
UDWHIURP*10$DXWKRULWLHV,QRWKHUZRUGV³EXWIRU´
WKHFULPLQDODFWLRQE\WKHVHGHIHQGDQWVWKHDGGLWLRQDO
ORDQV ZRXOG QRW KDYH EHHQ LVVXHG E\ >//)&@ DQG
XQGHUZULWWHQ E\ *10$ ,W ZDV IRUHVHHDEOH WR WKHVH
GHIHQGDQWV WKDW D KLJK QXPEHU RI ORDQV ZRXOG GHIDXOW
EHFDXVH>//)&@KDGEHHQSUHYLRXVO\ZDUQHGE\*10$
WKDWWKHGHIDXOWGHOLQTXHQF\UDWHZDVQRWFXUUHQWO\DWDQ
DFFHSWDEOHOHYHO
-$DW IRRWQRWHRPLWWHG 8SRQDWKRURXJKUHYLHZRI
WKH HYLGHQFH SUHVHQWHG DW WULDO LQ DGGLWLRQ WR WKH ODZ DQG
DUJXPHQWVHWIRUWKE\WKHSDUWLHVRQWKLVLVVXHZHILQGWKDWWKH
GLVWULFW FRXUW SURSHUO\ FRQFOXGHG WKDW LW ZDV UHDVRQDEO\
IRUHVHHDEOH WKDW WKH ORVV LQ TXHVWLRQ ZRXOG EH LQFXUUHG E\
*10$DVDGLUHFWUHVXOWRI$SSHOODQWV¶FRQGXFW)RUWKLV
UHDVRQ ZH DIILUP WKH GLVWULFW FRXUW¶V UXOLQJ WKDW WKH ORVV
LQFXUUHG E\ *10$ ZDV LQ WKH DPRXQW RI
)XUWKHUPRUHWKHGLVWULFWFRXUWFRUUHFWO\DGGHGWKLVORVVWRWKDW
LQFXUUHGE\+8')+$ILQGLQJWKDWWKHWRWDOORVVZDVDWOHDVW

%DVHGXSRQRXUGHWHUPLQDWLRQWKDWWKHGLVWULFWFRXUWPDGH
SURSHU ILQGLQJV FRQFHUQLQJ WKH DPRXQW RI ORVV WR

-- 18 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
FRXUW¶VILQGLQJFRQFHUQLQJWKHUHOHYDQWFRQGXFWIRUSXUSRVHV
RIVHQWHQFLQJ
6HFWLRQ % D $ RI WKH *XLGHOLQHV H[SODLQV WKDW
IUDXGXOHQWFODLPVWKDWDUHVXEPLWWHGDQGSDLGEXWQRWSDUWRI
WKHFRXQWVRIFRQYLFWLRQVKDOOEHLQFOXGHGLQWKHVHQWHQFLQJ
FDOFXODWLRQDVUHOHYDQWFRQGXFW7KLVSURYLVLRQLQVWUXFWVWKDW
WKH RIIHQVH OHYHO EH GHWHUPLQHG EDVHG XSRQ ³DOO DFWV DQG
RPLVVLRQVFRPPLWWHGDLGHGDEHWWHGFRXQVHOHGFRPPDQGHG
LQGXFHGSURFXUHGRUZLOOIXOO\FDXVHGE\WKHGHIHQGDQW
WKDW RFFXUUHG GXULQJ WKH FRPPLVVLRQ RI WKH RIIHQVH RI
FRQYLFWLRQLQSUHSDUDWLRQIRUWKDWRIIHQVHRULQWKHFRXUVHRI
DWWHPSWLQJ WR DYRLG GHWHFWLRQ RU UHVSRQVLELOLW\ IRU WKDW
RIIHQVH´866*†% D $ +HUH$SSHOODQWVZHUH
IRXQGJXLOW\RQWKHFKDUJHRIFRQVSLUDF\WRGHIUDXGWKH8QLWHG
6WDWHV7KHDGGLWLRQDOIDOVHFODLPVZHUHLGHQWLILHGDWWULDOE\
0U *LEVRQ 7KH UHFRUG IXUWKHU UHIOHFWV WKDW XSRQ
H[DPLQDWLRQE\+8'LQYHVWLJDWRUVWKHILOHVLQTXHVWLRQGLG
FRQWDLQ IDOVH FODLPV $V VXFK WKHVH FODLPV FRQVWLWXWH
DGGLWLRQDOFULPLQDOZURQJGRLQJQRWVSHFLILFDOO\FKDUJHGLQ
WKH,QGLFWPHQWWKDWLVSURSHUO\WDNHQLQWRFRQVLGHUDWLRQZKHQ
IRUPXODWLQJWKHUHOHYDQWFRQGXFWIRUVHQWHQFLQJ%DVHGXSRQ
WKHLQIRUPDWLRQLQWKHUHFRUGZHILQG$SSHOODQWV¶DUJXPHQW
FRQFHUQLQJWKHUHOHYDQWFRQGXFWWREHZLWKRXWPHULW
F$PRXQWRI/RVVWR*10$
)LQDOO\ WKH WULDO FRXUW FRQVLGHUHG WKH DPRXQW RI ORVV WR
*10$ ZKLFK ZLWKRXW NQRZOHGJH RI //)&¶V DFWXDO ORDQ
GHOLQTXHQF\UDWHVH[WHQGHGDGGLWLRQDOORDQSRROFRPPLWPHQW
DXWKRULW\ WR //)& 7KH GLVWULFW FRXUW H[SODLQHG WKDW
$SSHOODQWV¶ PLVUHSUHVHQWDWLRQV UHVXOWHG LQ DQ LQFUHDVHG
DPRXQWRIORDQVDQGVHFXULWLHVRIZKLFKORDQVGHIDXOWHG
-$DW7KH UHFRUGUHIOHFWVWKDWWKHVHGHIDXOWHGORDQV
UHVXOWHG LQ D ORVV RI WR *10$ -$ DW
$GGLQJWKHORVVLQFXUUHGE\*10$WRWKHORVVLQFXUUHGE\
+8')+$WKHGLVWULFWFRXUWIRXQGWKDWWKH365VFRUUHFWO\
GHWHUPLQHGWKHDPRXQWRIORVVWREHDWOHDVW-$
DW
1RV 8QLWHG6WDWHVY/RJDQHWDO
UHODWLYHWRWKHVSHFLILFFLUFXPVWDQFHVLQHDFKFDVHZHILQG
WKDWWKHLWHPVVRXJKWLQOLJKWRIWKHLOOHJDODFWLYLW\DOOHJHG
ZHUHDSSURSULDWH7KHZDUUDQWVSHFLILHGWKDWWKHLWHPVVRXJKW
ZHUH WKRVH UHODWHG WR +8')+$ OHQGLQJ DQG *10$
VHFXULWLHV DQG DV VXFK GLG QRW YLRODWH WKH SDUWLFXODULW\
UHTXLUHPHQWRIWKH)RXUWK$PHQGPHQW
)XUWKHUPRUH HYHQ LI ZH ZHUH WR ILQG WKDW WKH ZDUUDQW
ODFNHGVXIILFLHQWSDUWLFXODULW\XQGHUWKH)RXUWK$PHQGPHQW
WKHGLVWULFWFRXUWZRXOGVWLOOKDYHEHHQFRUUHFWLQGHQ\LQJWKH
PRWLRQV WR VXSSUHVV XQGHU WKH JRRG IDLWK H[FHSWLRQ WR WKH
H[FOXVLRQDU\UXOHRXWOLQHGLQ8QLWHG6WDWHVY/HRQ86
6HH6FKXOW])GDW7KHJRRG
IDLWKH[FHSWLRQWRWKHH[FOXVLRQDU\UXOHVWDWHVWKDWWKHIUXLWVRI
D FRQVWLWXWLRQDOO\ LQILUP VHDUFK QHHG QRW QHFHVVDULO\ EH
VXSSUHVVHGXQOHVV WKHZDUUDQWFRQWDLQHGDNQRZLQJRU
UHFNOHVV IDOVHKRRG WKH LVVXLQJ MXGJH DFWHG DV D PHUH
³UXEEHU VWDPS´ IRU WKH SROLFH RU WKH ZDUUDQW DQG WKH
DIILGDYLWHYHQDIWHUH[WHQGLQJDSSURSULDWHGHIHUHQFHWRWKH
LVVXLQJ MXGJH¶V GHWHUPLQDWLRQ GLG QRW HVWDEOLVK SUREDEOH
FDXVH RU SRVVHVVHG D WHFKQLFDO GHILFLHQF\ VXFK WKDW WKH
H[HFXWLQJRIILFHUVFDQQRWUHDVRQDEO\DVVXPHWKHZDUUDQWWREH
YDOLG/HRQ86DW
,QWKHLQVWDQWPDWWHUWKHUHH[LVWVQRHYLGHQFHWKDW6SHFLDO
$JHQW-RKQVRQJDYHDNQRZLQJO\IDOVHDIILGDYLWRURWKHUZLVH
DFWHG LQ EDG IDLWK XSRQ VHHNLQJ WKH VHDUFK ZDUUDQW 7KH
ZDUUDQW ZDV LVVXHG E\ D SURSHU DXWKRULW\ QDPHO\ 8QLWHG
6WDWHV 'LVWULFW -XGJH 7KRPDV * +XOO )XUWKHUPRUH WKH
UHFRUGLVGHYRLGRIDQ\HYLGHQFHWKDW-XGJH+XOODEDQGRQHG
KLV QHXWUDO UROH ZKHQ KH LVVXHG WKH ZDUUDQW )LQDOO\ ZH
FDQQRW VD\ WKDW WKLV ZDUUDQW ZDV ³VR ODFNLQJ LQ LQGLFLD RI
SUREDEOH FDXVH DV WR UHQGHU RIILFLDO EHOLHI LQ LWV H[LVWHQFH
HQWLUHO\XQUHDVRQDEOH´6FKXOW])GDW7KLVEHLQJ
WKHFDVHWKHRIILFHUV¶JRRGIDLWKUHOLDQFHRQWKHZDUUDQWLQ
H[HFXWLQJ WKH VHDUFK ZDV LQGHHG UHDVRQDEOH 7KHUHIRUH
XQGHUHLWKHUVFHQDULRWKHHYLGHQFHREWDLQHGIURPWKHVHDUFK
ZDUUDQW DW LVVXH SURSHUO\ VXUYLYHG $SSHOODQWV¶ PRWLRQV WR
VXSSUHVV

-- 19 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
$GPLVVLRQRIWKH6HWWOHPHQW$JUHHPHQW
2YHU $SSHOODQWV¶ REMHFWLRQV DW WULDO WKH GLVWULFW FRXUW
DGPLWWHG LQWR HYLGHQFH D UHYLHZ E\ +8'¶V
PRQLWRULQJ GLYLVLRQ WKH UHVXOWLQJ DFWLRQ E\ +8'¶V
PRUWJDJHHUHYLHZERDUG //)&¶V-XO\UHVSRQVHWR
WKHPRUWJDJHHUHYLHZERDUGDQG WKHVHWWOHPHQWDJUHHPHQW
DQGOHWWHURIUHSULPDQGGLVSRVLQJRIWKHDGPLQLVWUDWLYHDFWLRQ
$SSHOODQWVFRQWHQGWKDWWKHGLVWULFWFRXUWHUUHGLQDGPLWWLQJ
WKLV HYLGHQFH ,Q SDUWLFXODU $SSHOODQWV DUJXH WKDW WKH
DGPLVVLRQ RI WKH VHWWOHPHQW DJUHHPHQW ZDV LQ YLRODWLRQ RI
)HGHUDO5XOHVRI(YLGHQFH ³5XOHV´ E DQG
7KH JRYHUQPHQW DVVHUWV WKDW WKH HYLGHQFH ZDV UHOHYDQW
PDWHULDODQGDGPLVVLEOHWRGHPRQVWUDWHWKDW$SSHOODQWVZHUH
RQQRWLFHRILPSURSULHWLHVLQWKHLUORDQRULJLQDWLRQSURFHVV
DQGWRH[SODLQRQHUHDVRQZK\$SSHOODQWVZHUHIDOVLI\LQJORDQ
LQVXUDQFHFODLPV
:HUHYLHZWKHGLVWULFWFRXUW¶VDGPLVVLRQRIWHVWLPRQ\RU
RWKHUHYLGHQFHDWWULDOIRUDQDEXVHRIGLVFUHWLRQ6HH8QLWHG
6WDWHVY7DOOH\)G WK&LU $QDEXVH
RIGLVFUHWLRQH[LVWVRQO\LIWKLV&RXUWLVILUPO\FRQYLQFHGWKDW
WKHGLVWULFWFRXUWKDVPDGHDPLVWDNH6HH8QLWHG6WDWHVY
:LHG\N)G WK&LU 7KLV&RXUWILUVW
FRQVLGHUV$SSHOODQWV¶DUJXPHQWWKDWWKHHYLGHQFHLQTXHVWLRQ
ZDVDGPLWWHGLQYLRODWLRQRI5XOH
5XOHSURYLGHV
5XOH&RPSURPLVHDQG2IIHUVWR&RPSURPLVH
(YLGHQFHRI IXUQLVKLQJRURIIHULQJRUSURPLVLQJWR
IXUQLVK RU DFFHSWLQJ RU RIIHULQJ RU SURPLVLQJ WR
DFFHSW D YDOXDEOH FRQVLGHUDWLRQ LQ FRPSURPLVLQJ RU
DWWHPSWLQJWRFRPSURPLVHDFODLPZKLFKZDVGLVSXWHGDV
WRHLWKHUYDOLGLW\RUDPRXQWLVQRWDGPLVVLEOHWRSURYH
OLDELOLW\ IRU RU LQYDOLGLW\ RI WKH FODLP RU LWV DPRXQW
(YLGHQFHRIFRQGXFWRUVWDWHPHQWVPDGHLQFRPSURPLVH
QHJRWLDWLRQVLVOLNHZLVHQRWDGPLVVLEOH7KLVUXOHGRHV
QRW UHTXLUH WKH H[FOXVLRQ RI DQ\ HYLGHQFH RWKHUZLVH
GLVFRYHUDEOHPHUHO\EHFDXVHLWLVSUHVHQWHGLQWKHFRXUVH
1RV 8QLWHG6WDWHVY/RJDQHWDO
7KHUHOHYDQWFDVHODZDOVRVXSSRUWVWKHXVHRILQWHQGHGORVV
XQGHU†)H[SODLQLQJWKDWWKHILJXUHLVGHVLJQHGWRDVVLJQ
UHVSRQVLELOLW\ IRU WKH KDUP WKDW ZDV PHDQW WR WDNH SODFH
UHJDUGOHVV RI ZKHWKHU WKH KDUP GLG LQ IDFW RFFXU 6HH
0RRUHG)GDW7KDWLVVRORQJDVWKHLQWHQGHGORVV
LVVXSSRUWHGE\DSUHSRQGHUDQFHRIWKHHYLGHQFHWKHGLVWULFW
FRXUWPD\XVHLWLQUHDFKLQJWKHDSSURSULDWHRIIHQVHOHYHO6HH
LGDW,QWKLVLQVWDQFHWKHGLVWULFWFRXUWIRXQGWKDW
WKHUH ZDV HYLGHQFH LQ WKH UHFRUG VXIILFLHQW WR VXSSRUW D
ILQGLQJ WKDW $SSHOODQWV FDXVHG D ORVV RI WR
+8')+$ -$ DW 8SRQ D UHYLHZ RI † ) LWV
DFFRPSDQ\LQJ FRPPHQWDU\ DQG WKH UHOHYDQW FDVH ODZ DV
DSSOLHGWRWKHIDFWVLQWKHUHFRUGLQWKLVFDVHZHILQGWKDWWKH
FRXUWEHORZSURSHUO\FDOFXODWHGWKHDPRXQWRIORVVIRUIDOVH
FODLPVVXEPLWWHGWR+8')+$
E$PRXQWRI/RVVIRU&RQVSLUDF\&RQYLFWLRQV
0RUHRYHU EHFDXVH $SSHOODQWV ZHUH IRXQG JXLOW\ RI
FRQVSLUDF\WRVXEPLWIDOVHFODLPVWKHGLVWULFWFRXUWIRXQGWKDW
† % RI WKH *XLGHOLQHV UHTXLUHG WKDW DOO IDOVH FODLPV
VXEPLWWHGE\FRFRQVSLUDWRUVHYHQWKRVHFODLPVQRWFKDUJHG
LQWKH,QGLFWPHQWEHLQFOXGHGZLWKLQWKHUHOHYDQWFRQGXFWIRU
SXUSRVHVRIIDVKLRQLQJWKHDSSURSULDWHVHQWHQFH$WWULDO0U
*LEVRQ WHVWLILHG WKDW WKHUH ZHUH DGGLWLRQDO FODLPV
VXEPLWWHG WR +8')+$ WKDW FRQWDLQHG PDWHULDOO\ IDOVH
GRFXPHQWVLQDGGLWLRQWRWKRVHZLWKZKLFK$SSHOODQWVZHUH
FKDUJHG-$DW7KHDPRXQW+8')+$SDLG
RQWKHVHDGGLWLRQDOIDOVHFODLPVZDV-$DW
%DVHGXSRQWKLVWHVWLPRQ\WKHGLVWULFWFRXUWGHWHUPLQHG
WKDWWKHWRWDOORVVIRUDOOIDOVHFODLPVZDV
$SSHOODQWVFRQWHVWWKHGLVWULFWFRXUW¶VILQGLQJVZLWKUHVSHFW
WR WKH ORVV DULVLQJ RXW RI WKH FRQVSLUDF\ FRQYLFWLRQV
*HQHUDOO\$SSHOODQWVDUJXHWKDWWKHUHOHYDQWFRQGXFWVKRXOG
QRWKDYHLQFOXGHGWKHVHDGGLWLRQDOIDOVHFODLPVEHFDXVHWKH
JRYHUQPHQW IDLOHG WR HVWDEOLVK WKDW WKHVH ORDQ ILOHV
DFWXDOO\ FRQWDLQHG DQ\ PDWHULDOO\ IDOVH GRFXPHQWV
$FFRUGLQJO\$SSHOODQWVDVNWKLV&RXUWWRUHYHUVHWKHGLVWULFW

-- 20 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
LQFOXVLRQRIPRQLHVSDLGE\//)&LQDQQXDOL]HGDPRXQWVIRU
HDFKORDQWRFRYHUORVVHVRUWKHYDOXHRIWKHQRWHIRUHDFK
ORDQDVVLJQHGWRWKHJRYHUQPHQWLQH[FKDQJHIRUSD\PHQWRI
WKH FODLP 6XFK DQ DUJXPHQW KRZHYHU LV LQVXIILFLHQW WR
GHPRQVWUDWHWKDWWKHHYDOXDWLRQRIWKHORVV IHOORXWVLGHWKH
UHDOPRISHUPLVVLEOHFRPSXWDWLRQVXQGHUWKH*XLGHOLQHV7KH
FRPPHQWDU\WR†)SURYLGHV
)RUWKHSXUSRVHVRIVXEVHFWLRQ E WKHORVVQHHGQRW
EHGHWHUPLQHGZLWKSUHFLVLRQ7KHFRXUWQHHGRQO\PDNH
D UHDVRQDEOH HVWLPDWH RI WKH ORVV JLYHQ WKH DYDLODEOH
LQIRUPDWLRQ7KLVHVWLPDWHIRUH[DPSOHPD\EHEDVHG
RQWKHDSSUR[LPDWHQXPEHURIYLFWLPVDQGDQHVWLPDWHRI
WKH DYHUDJH ORVV WR HDFK YLFWLP RU RQ PRUH JHQHUDO
IDFWRUVVXFKDVWKHQDWXUHDQGGXUDWLRQRIWKHIUDXGDQG
WKHUHYHQXHVJHQHUDWHGE\VLPLODURSHUDWLRQV
,GDWFPWQ)XUWKHUPRUHWKHFRPPHQWDU\DGGUHVVHVWKH
FLUFXPVWDQFHVSUHVHQWHGLQIUDXGXOHQWORDQDSSOLFDWLRQFDVHV
DQGFRQWUDFWSURFXUHPHQWFDVHVLQQRWH E ZKLFKVWDWHV
,Q IUDXGXOHQW ORDQ DSSOLFDWLRQ FDVHV DQG FRQWUDFW
SURFXUHPHQWFDVHVWKHORVVLVWKHDFWXDOORVVWRWKHYLFWLP
RULIWKHORVVKDVQRW\HWFRPHDERXWWKHH[SHFWHGORVV
)RUH[DPSOHLIDGHIHQGDQWIUDXGXOHQWO\REWDLQVDORDQ
E\PLVUHSUHVHQWLQJWKHYDOXHRIKLVDVVHWVWKHORVVLVWKH
DPRXQWRIWKHORDQQRWUHSDLGDWWKHWLPHWKHRIIHQVHLV
GLVFRYHUHGUHGXFHGE\WKHDPRXQWWKHOHQGLQJLQVWLWXWLRQ
KDVUHFRYHUHG RUFDQH[SHFWWRUHFRYHU IURPDQ\DVVHWV
SOHGJHGWRVHFXUHWKHORDQ+RZHYHUZKHUHWKHLQWHQGHG
ORVVLVJUHDWHUWKDQWKHDFWXDOORVVWKHLQWHQGHGORVVLVWR
EHXVHG
,GDWFPWQ$FFRUGLQJWRWKHVHSDVVDJHVWKHGLVWULFWFRXUW
ZDVQRWUHTXLUHGWRPDNHWKHSUHFLVHGHWHUPLQDWLRQRIORVV
FDXVHGE\$SSHOODQWVVHWRIIE\DPRXQWVUHFRYHUHGRQWKH
GHIDXOWHG ORDQV 7R WKH FRQWUDU\ WKH DSSOLFDWLRQ QRWHV
VSHFLILFDOO\ GHOLQHDWH WKDW LQ FLUFXPVWDQFHV ZKHUH WKH
LQWHQGHG ORVV LV JUHDWHU WKDQ WKH DFWXDO ORVV LQFXUUHG WKH
GLVWULFW FRXUW VKDOO XVH WKH LQWHQGHG ORVV LQ FDOFXODWLQJ WKH
SURSHURIIHQVHOHYHOXQGHUWKH*XLGHOLQHV
1RV 8QLWHG6WDWHVY/RJDQHWDO
RI FRPSURPLVH QHJRWLDWLRQV 7KLV UXOH DOVR GRHV QRW
UHTXLUH H[FOXVLRQ ZKHQ WKH HYLGHQFH LV RIIHUHG IRU
DQRWKHUSXUSRVHVXFKDVSURYLQJELDVRUSUHMXGLFHRID
ZLWQHVV QHJDWLYLQJ D FRQWHQWLRQ RI XQGXH GHOD\ RU
SURYLQJDQHIIRUWWRREVWUXFWDFULPLQDOLQYHVWLJDWLRQRU
SURVHFXWLRQ
)HG5(YLG7KHLVVXHRIZKHWKHU5XOHVHUYHVWR
SURKLELW DGPLVVLRQ RI DGPLQLVWUDWLYH RU FLYLO VHWWOHPHQW
QHJRWLDWLRQVLQDFULPLQDOFRQWH[WLVRQHRIILUVWLPSUHVVLRQLQ
WKLV&LUFXLW
,QUXOLQJRQPRWLRQVIRUMXGJPHQWRIDFTXLWWDORULQWKH
DOWHUQDWLYH IRU D QHZ WULDO WKH GLVWULFW FRXUW KHOG ZLWKRXW
FLWDWLRQ WKDW ³5XOH ZKLFK H[FOXGHV HYLGHQFH RI
FRPSURPLVH DQG VHWWOHPHQWV LQ D FLYLO FRQWH[W GRHV QRW
IRUHFORVHWKHXVHRIWKLVW\SHRIHYLGHQFHLQDFULPLQDOFDVH´
-$ DW 6HYHUDO FLUFXLWV LQFOXGLQJ WKH 6HFRQG DQG
6HYHQWK&LUFXLWVKDYHFRQIURQWHG WKH TXHVWLRQRIZKHWKHU
5XOH DSSOLHV WR HYLGHQFH RI D VHWWOHPHQW DJUHHPHQW
VRXJKWWREHDGPLWWHGLQDFULPLQDOPDWWHU,QHDFKLQVWDQFH
WKHFRXUWKHOGWKDW5XOHLVLQDSSOLFDEOHWRFULPLQDOFDVHV
7KH6HFRQG&LUFXLWUHDFKHGWKHFRQFOXVLRQWKDW5XOH
GRHV QRW DSSO\ WR FULPLQDO FDVHV E\ ORRNLQJ WR WKH SODLQ
ODQJXDJHRIWKH5XOH6HH8QLWHG6WDWHVY%DNHU)G
G&LU ILQGLQJLW³IDLUO\HYLGHQWWKDW WKH
5XOHDSSOLHVRQO\WRFLYLOOLWLJDWLRQ´ ,QUHYLHZLQJWKHSODLQ
ODQJXDJHWKHFRXUW KHOG WKDWZRUGVVXFKDV³YDOLGLW\´DQG
³FODLP´HVWDEOLVKWKDWWKHGUDIWHUVRIWKH5XOHLQWHQGHGIRULW
WRDSSO\VROHO\LQDFLYLOFRQWH[W6HHLG)XUWKHUPRUHWKH
6HFRQG&LUFXLWKDVKHOGWKDWWKHSULPDU\SROLF\FRQVLGHUDWLRQ
WKDWXQGHUOLHVWKHSXUSRVHRI5XOHZKLFKLVWRHQFRXUDJH
WKH VHWWOHPHQW RI FLYLO FDVHV GRHV QRW DSSO\ WR FULPLQDO
SURVHFXWLRQV6HH0DQNRY8QLWHG6WDWHV)G G
&LU 8QLWHG6WDWHVY*RQ]DOH])G G
&LU VHHDOVR8QLWHG6WDWHVY3HHG)G WK
&LU KROGLQJ WKDW 5XOH ZDV LQDSSOLFDEOH LQ WKH
FRQWH[WRIDFULPLQDOFDVHEHFDXVHWKHQHJRWLDWLRQVDWLVVXH
³ZHUH QRW QHJRWLDWLRQV DLPHG DW VHWWOLQJ D FLYLO FODLP

-- 21 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
QHJRWLDWLRQV WKDW WKH SROLF\ EHKLQG 5XOH VHHNV WR
HQFRXUDJH´
6LPLODUO\WKH6HYHQWK&LUFXLWKHOGWKDWWKHSODLQODQJXDJH
RI 5XOH UHIOHFWV WKDW LW DSSOLHV RQO\ WR FLYLO FDVHV
³VSHFLILFDOO\WKHODQJXDJHFRQFHUQLQJYDOLGLW\DQGDPRXQWRI
DFODLP´8QLWHG6WDWHVY3UHZLWW)G WK&LU
,QDGGLWLRQWKHFRXUWUHFRJQL]HGWKDWQRWKLQJLQ5XOH
SDUWLFXODUO\ FLUFXPVFULEHV WKH XVH RI HYLGHQFH RI
VHWWOHPHQWQHJRWLDWLRQVZLWKDSULYDWHSDUW\LQWKHFRQWH[WRI
DFULPLQDOFDVH6HHLG)LQGLQJWKDWWKHSXEOLFLQWHUHVWLQWKH
SURVHFXWLRQRIFULPHLVJUHDWHUWKDQWKHSXEOLFLQWHUHVWLQWKH
VHWWOHPHQWRIFLYLOGLVSXWHVWKHFRXUWPDGHFOHDUWKDWWKHODZ
LQWKH6HYHQWK&LUFXLWSURYLGHVWKDW5XOHVKRXOGQRWEH
DSSOLHGWRFULPLQDOFDVHV6HHLG
:HILQGWKDWWKHFDVHVWKDWH[LVWLQWKH6HFRQGDQG6HYHQWK
&LUFXLWVDUHFRUUHFWLQFRQFOXGLQJWKDWWKHSODLQODQJXDJHRI
5XOH PDNHV LW LQDSSOLFDEOH LQ WKH FULPLQDO FRQWH[W
$OWKRXJKWKLVFRQFOXVLRQDUJXDEO\PD\KDYHDFKLOOLQJHIIHFW
RQ DGPLQLVWUDWLYH RU FLYLO VHWWOHPHQW QHJRWLDWLRQV LQ FDVHV
ZKHUHSDUDOOHOFLYLODQGFULPLQDOSURFHHGLQJVDUHSRVVLEOHZH
ILQGWKDWWKLVULVNLVKHDYLO\RXWZHLJKHGE\WKHSXEOLFLQWHUHVW
LQSURVHFXWLQJFULPLQDOPDWWHUV%DVHGXSRQWKHIRUHJRLQJ
ZHFRQFOXGHDVKDYHWKH6HFRQGDQG6HYHQWK&LUFXLWVWKDW
5XOHGRHVQRWVHUYHWRSURKLELWWKHXVHRIHYLGHQFHIURP
VHWWOHPHQWQHJRWLDWLRQVLQDFULPLQDOFDVH
1H[WZHWXUQWR$SSHOODQWV¶DUJXPHQWWKDWWKHUHYLHZ
E\+8'¶VPRQLWRULQJGLYLVLRQWKHUHVXOWLQJDFWLRQE\+8'¶V
PRUWJDJHHUHYLHZERDUG//)&¶V-XO\UHVSRQVHWRWKH
PRUWJDJHHUHYLHZERDUGDQGWKHVHWWOHPHQWDJUHHPHQWDQG
OHWWHU RI UHSULPDQG GLVSRVLQJ RI WKH DGPLQLVWUDWLYH DFWLRQ
ZHUH LQDGPLVVLEOH SXUVXDQW WR 5XOH E 7KDW 5XOH
SURYLGHVLQSHUWLQHQWSDUW
5XOH&KDUDFWHU(YLGHQFH1RW$GPLVVLEOHWR3URYH
&RQGXFW([FHSWLRQV2WKHU&ULPHV
E 2WKHU FULPHV ZURQJV RU DFWV (YLGHQFH RI RWKHU
FULPHVZURQJVRUDFWV LV QRWDGPLVVLEOHWRSURYHWKH
1RV 8QLWHG6WDWHVY/RJDQHWDO
LQFXUUHGGXHWRWKHIDOVHFODLPVFRQYLFWLRQV1H[WWKHGLVWULFW
FRXUWLQTXLUHGDVWRWKHDPRXQWRIORVVFDOFXODWHGLQOLJKWRI
WKHFRQVSLUDF\FRQYLFWLRQ/DVWWKHGLVWULFWFRXUWLQFOXGHGWKH
DPRXQWRIORVVLQFXUUHGE\*10$7KHGLVWULFWFRXUWDGGHG
WKHVH WKUHH ILJXUHV WR DUULYH DW D WRWDO ORVV RI DW OHDVW
IRU SXUSRVHV RI VHQWHQFLQJ 6HFWLRQ ) E
SURYLGHVWKDWLIWKHORVVZDVPRUHWKDQEXWOHVV
WKDQ WKHQ WKH GLVWULFW FRXUW VKDOO LQFUHDVH WKH
EDVHRIIHQVHOHYHORIVL[E\IRXUWHHQOHYHOVUHVXOWLQJLQDQ
RIIHQVHOHYHORIWZHQW\866*†) D DQG E 2
$FFRUGLQJO\WKHGLVWULFWFRXUWLQFUHDVHG$SSHOODQWV¶RIIHQVH
OHYHOVWRWZHQW\:HQRZFRQVLGHU$SSHOODQWV¶DUJXPHQWWKDW
WKH GLVWULFW FRXUW¶V FRPSXWDWLRQ RI ORVV DQG FRUUHVSRQGLQJ
LQFUHDVHLQWKHRIIHQVHOHYHOVZDVLQHUURU
D$PRXQWRI/RVVIRU)DOVH&ODLPV&RQYLFWLRQV
,QH[DPLQLQJWKHDPRXQWRIDFWXDORULQWHQGHGORVVFDXVHG
E\$SSHOODQWV¶IDOVHFODLPVWKHGLVWULFWFRXUWILUVWQRWHGWKH
SUHVHQWHQFHLQYHVWLJDWLRQUHSRUWV¶ ³365V¶´ FDOFXODWLRQRI
LQDFWXDORULQWHQGHGORVVHVWR+8')+$-$DW
7KH FRXUW DGRSWHG WKH 365V¶ FDOFXODWLRQ LQ WKLV
UHJDUGEDVHGLQSDUWRQWKHXQGLVSXWHGIDFWWKDW+8')+$
SDLGDWRWDORILQDFWXDOORVVRQRIWKHIDOVH
FODLPV-$DW:LWKUHVSHFWWRWKUHHRIWKHIDOVHFODLPV
XSRQ ZKLFK +8')+$ GHQLHG SD\PHQW WKH GLVWULFW FRXUW
IRXQG WKDW EHFDXVH WKH DYHUDJH FODLP SD\PHQW ZDV
DSSUR[LPDWHO\ WKRVH FODLPV UHSUHVHQWHG DQ
DGGLWLRQDOLQLQWHQGHGORVVHVWR+8')+$-$DW
FLWLQJ8QLWHG6WDWHVY0RRUHG)G WK
&LU ³μ>/@RVV¶XQGHU†)LVQRWWKHSRWHQWLDOORVV
EXWLVWKHDFWXDOORVVWRWKHYLFWLPRUWKHLQWHQGHGORVVWRWKH
YLFWLPZKLFKHYHULVJUHDWHU´ $GGLQJWKHLQ
DFWXDO ORVV WR LQ LQWHQGHG ORVV WKH GLVWULFW FRXUW
DUULYHG DW DV WKH WRWDO DPRXQW RI ORVV WR
+8')+$-$DW
$SSHOODQWV FRQWHVW WKH FRPSXWDWLRQ RI WKH IDOVH FODLPV
ILJXUHE\DUJXLQJLQWHUDOLDWKDWLWIDLOVWRLQFOXGHDQ\VHW
RIIV IRU DPRXQWV FROOHFWHG RQ WKH GHIDXOWHG ORDQV WKH

-- 22 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
FKDOOHQJHLQYROYHVWKHGLVWULFWFRXUW¶VUXOLQJFRQFHUQLQJDQ
LQYHVWLJDWLRQLQWRDOOHJHGMXU\PLVFRQGXFWDWWULDO3ULRUWR
DGGUHVVLQJ WKHVH SDUWLFXODU LVVXHV ZH EULHIO\ UHLWHUDWH WKH
GLVWULFWFRXUW¶VJHQHUDOGHWHUPLQDWLRQVDWVHQWHQFLQJ
$W WKH VHQWHQFLQJ KHDULQJ WKH GLVWULFW FRXUW DOORZHG
WHVWLPRQ\ DQG RWKHU HYLGHQFH FRQFHUQLQJ $SSHOODQWV¶
REMHFWLRQV WR WKH SUHVHQWHQFH LQYHVWLJDWLRQ UHSRUWV 8SRQ
FRQFOXVLRQ RI VXFK HYLGHQFH DQG DUJXPHQW UHODWHG WR WKH
VDPHWKHGLVWULFWFRXUWVHQWHQFHGHDFK$SSHOODQWWRDWHUPRI
HLJKW\VHYHQPRQWKVRILPSULVRQPHQWWREHIROORZHGE\D
WKUHH\HDU WHUP RI VXSHUYLVHG UHOHDVH 7KH FRXUW IXUWKHU
RUGHUHGWKDW$SSHOODQWVPDNHUHVWLWXWLRQWRWKHYLFWLPVLQWKLV
FDVHQDPHO\+8')+$DQG*10$LQWKHDPRXQWRIRQH
PLOOLRQGROODUV$SSHOODQWVQRZDSSHDOWKHLUVHQWHQFHVWRWKLV
&RXUW
$PRXQWRI/RVV
$SSHOODQWV ILUVW FRQWHQG WKDW WKH GLVWULFW FRXUW HUUHG LQ
FDOFXODWLQJ WKH DPRXQW RI ORVV DWWULEXWDEOH WR WKHP DW
VHQWHQFLQJ7KHGLVWULFWFRXUW¶VGHILQLWLRQRIORVVLVDTXHVWLRQ
RI ODZ WR EH UHYLHZHG GH QRYR 6HH 8QLWHG 6WDWHV Y
.RKOEDFK)G WK&LU :HUHYLHZWKH
GLVWULFWFRXUW¶VIDFWXDOILQGLQJVZLWKUHVSHFWWRORVVXQGHUWKH
FOHDUO\HUURQHRXVVWDQGDUG6HHLG7RWKHH[WHQWWKDWRQH
FKDOOHQJHVWKHGLVWULFWFRXUW¶VFDOFXODWLRQRIORVVWKHUHIRUH
WKH DSSHOODQW EHDUV WKH KHDY\ EXUGHQ RI SHUVXDGLQJ WKH
UHYLHZLQJFRXUWWKDW³WKHHYDOXDWLRQRIWKHORVVZDVQRWRQO\
LQDFFXUDWH EXW ZDV RXWVLGH WKH UHDOP RI SHUPLVVLEOH
FRPSXWDWLRQV´8QLWHG6WDWHVY-DFNVRQ)G
WK&LU
,QWKLVFDVHWKHGLVWULFWFRXUWFRPSXWHGWKHDPRXQWRIORVV
XQGHU†)RIWKH6HQWHQFLQJ*XLGHOLQHV6HFWLRQ)RI
WKH*XLGHOLQHVJRYHUQVWKHFDOFXODWLRQRI ORVVIRURIIHQVHV
LQYROYLQJIUDXGRUGHFHLW7KDWVHFWLRQEHJLQVE\DVVLJQLQJD
EDVHRIIHQVHOHYHORIVL[DQGWKHQLQFUHDVLQJWKHEDVHRIIHQVH
OHYHOE\WKHDPRXQWRIORVV,QWKHLQVWDQWFDVHWKHGLVWULFW
FRXUWFRPSXWHGWKHDPRXQWRIORVVXVLQJWKUHHILJXUHV)LUVW
WKHGLVWULFWFRXUWGHWHUPLQHGWKHDPRXQWRIORVVWR+8')+$
1RV 8QLWHG6WDWHVY/RJDQHWDO
FKDUDFWHU RI D SHUVRQ LQ RUGHU WR VKRZ DFWLRQ LQ
FRQIRUPLW\WKHUHZLWK,WPD\KRZHYHUEHDGPLVVLEOHIRU
RWKHU SXUSRVHV VXFK DV SURRI RI PRWLYH RSSRUWXQLW\
LQWHQWSUHSDUDWLRQSODQNQRZOHGJHLGHQWLW\RUDEVHQFH
RIPLVWDNHRUDFFLGHQWSURYLGHGWKDWXSRQUHTXHVWE\WKH
DFFXVHGWKHSURVHFXWLRQLQDFULPLQDOFDVHVKDOOSURYLGH
UHDVRQDEOHQRWLFHLQDGYDQFHRIWULDORUGXULQJWULDOLIWKH
FRXUWH[FXVHVSUHWULDOQRWLFHRQJRRGFDXVHVKRZQRIWKH
JHQHUDO QDWXUH RI DQ\ VXFK HYLGHQFH LW LQWHQGV WR
LQWURGXFHDWWULDO
)HG 5 (YLG E 2Q DSSHDO $SSHOOHH FRQWHQGV WKDW
WKHVHGRFXPHQWVZHUHSURSHUO\DGPLWWHGWRSURYHNQRZOHGJH
DQGLQWHQWWRGHIUDXG
,Q8QLWHG6WDWHVY*ROG8QOLPLWHG,QF)G
WK &LU WKLV &RXUW VHW RXW D WKUHHSDUW WHVW IRU WKH
DGPLVVLRQRIHYLGHQFHXQGHU5XOH E ,QWKDWFDVHZH
VWDWHG
7KLVFRXUWUHTXLUHVDGLVWULFWFRXUWWRPDNHWKUHHILQGLQJV
EHIRUHWKHGLVWULFWFRXUWDGPLWVHYLGHQFHXQGHU)HGHUDO
5XOHRI(YLGHQFH E 7KHGLVWULFWFRXUWPXVWILQG
WKDWWKHSULRUEDGDFWVRFFXUUHG DILQGLQJUHYLHZHGIRU
FOHDU HUURU WKDW WKH HYLGHQFH KHOSV SURYH D PDWHULDO
LVVXH DILQGLQJUHYLHZHGGHQRYR DQGWKDWWKHHYLGHQFH
SDVVHVWKHEDODQFLQJWHVWRI5XOH DILQGLQJUHYLHZHG
IRUDEXVHRIGLVFUHWLRQ
,G FLWLQJ8QLWHG6WDWHVY-REVRQ)G WK
&LU $SSHOODQWV GR QRW FRQWHVW WKH ILUVW RU VHFRQG
HOHPHQWVLPSOLFLWO\DGPLWWLQJWKDWWKHEDGDFWVWUDQVSLUHGDQG
WKDWWKHHYLGHQFHKHOSVWRSURYHDPDWHULDOLVVXH,QVWHDG
$SSHOODQWV GLUHFW WKHLU DUJXPHQW WR WKH WKLUG HOHPHQW
FODLPLQJ WKDW WKH SUREDWLYH YDOXH RI WKH HYLGHQFH ZDV
VXEVWDQWLDOO\RXWZHLJKHGE\WKHGDQJHURIXQIDLUSUHMXGLFH
FRQIXVLRQRIWKHLVVXHVDQGPLVOHDGLQJWKHMXU\XQGHU5XOH

5XOHVWDWHVWKHIROORZLQJ

-- 23 of 24 --

8QLWHG6WDWHVY/RJDQHWDO 1RV
5XOH([FOXVLRQRI5HOHYDQW(YLGHQFHRQ*URXQGV
RI3UHMXGLFH&RQIXVLRQRU:DVWHRI7LPH
$OWKRXJK UHOHYDQW HYLGHQFH PD\ EH H[FOXGHG LI LWV
SUREDWLYHYDOXHLVVXEVWDQWLDOO\RXWZHLJKHGE\WKHGDQJHU
RIXQIDLUSUHMXGLFHFRQIXVLRQRIWKHLVVXHVRUPLVOHDGLQJ
WKHMXU\RUE\FRQVLGHUDWLRQVRIXQGXHGHOD\ZDVWHRI
WLPHRUQHHGOHVVSUHVHQWDWLRQRIFXPXODWLYHHYLGHQFH
)HG5(YLG,QUHYLHZLQJ5XOHFKDOOHQJHVWRWKH
GLVWULFWFRXUW¶VGHFLVLRQWRDGPLWFHUWDLQHYLGHQFHZHYLHZ
WKHHYLGHQFHLQWKHOLJKWPRVWIDYRUDEOHWRWKHSURVHFXWLRQ
6HH8QLWHG6WDWHVY6DQGHUV)G WK&LU $V
VXFKZHPD[LPL]HWKHSUREDWLYHYDOXHRIWKHHYLGHQFHDQG
PLQLPL]HLWVSRWHQWLDOSUHMXGLFHWRWKHGHIHQGDQW6HHLG7KH
SUHMXGLFH QRWHG E\ WKH FRXUW LV RQO\ WKH XQIDLU SUHMXGLFH
DJDLQVW WKH GHIHQGDQW FDXVHG E\ WKH DGPLVVLRQ RI WKH
HYLGHQFH6HHLG$FFRUGLQJO\³>H@YLGHQFHWKDWLVSUHMXGLFLDO
RQO\LQWKHVHQVHWKDWLWSDLQWVWKHGHIHQGDQWLQDEDGOLJKWLV
QRW XQIDLUO\ SUHMXGLFLDO SXUVXDQW WR 5XOH ´ ,G DW
FLWLQJ8QLWHG6WDWHVY0XOOLQV)G WK&LU
%DVHGXSRQWKHVHVWDQGDUGVWKHWULDOFRXUWKDVEURDG
GLVFUHWLRQLQGHFLGLQJZKHWKHUWRDGPLWHYLGHQFHSXUVXDQWWR
5XOH E 6HH7DOOH\)GDW
,QWKLVFDVHWKH&RXUWILQGVWKDWWKHGLVWULFWFRXUWGLGQRW
DEXVHLWVGLVFUHWLRQ LQ DGPLWWLQJDUHYLHZE\+8'¶V
PRQLWRULQJGLYLVLRQWKHUHVXOWLQJDFWLRQE\+8'¶VPRUWJDJHH
UHYLHZERDUG//)&¶V-XO\UHVSRQVHWRWKHPRUWJDJHH
UHYLHZ ERDUG DQG WKH VHWWOHPHQW DJUHHPHQW DQG OHWWHU RI
UHSULPDQGGLVSRVLQJRIWKHDGPLQLVWUDWLYHDFWLRQ9LHZLQJ
WKHHYLGHQFHLQWKHOLJKWPRVWIDYRUDEOHWRWKHSURVHFXWLRQWKH
HYLGHQFH DW LVVXH ZDV SURSHUO\ DGPLWWHG WR GHPRQVWUDWH
$SSHOODQWV¶NQRZOHGJHPRWLYHDQGLQWHQW$OWKRXJKVRPH
SUHMXGLFH PD\ KDYH DULVHQ GXH WR WKH DGPLVVLRQ RI WKLV
HYLGHQFHWKHSUHMXGLFHGRHVQRWDPRXQWWRWKHW\SHRIXQIDLU
SUHMXGLFH FRQWHPSODWHG E\ 5XOH %DVHG XSRQ WKH
IRUHJRLQJZHILQGWKDWWKHWULDOFRXUWDFWHGZLWKLQLWVEURDG
GLVFUHWLRQLQDGPLWWLQJWKHHYLGHQFHSXUVXDQWWR5XOH E
DQGWKDW$SSHOODQWV¶DUJXPHQWLQWKLVUHJDUGLVZLWKRXWPHULW
1RV 8QLWHG6WDWHVY/RJDQHWDO
$GPLVVLRQRI,QFRPH(YLGHQFH
6LPLODUO\$SSHOODQWVFRQWHQGWKDWWKHGLVWULFWFRXUWHUUHGLQ
SHUPLWWLQJ $SSHOOHH WR LQTXLUH DERXW WKH DPRXQW RI WKHLU
LQFRPHIURP//)&DQGUHODWHGFRUSRUDWLRQV7KHHYLGHQFH
LQ TXHVWLRQ UHIOHFWHG D JURVV LQFRPH RI RYHU IRU
HDFK$SSHOODQW$SSHOODQWVDUJXHWKDWWKHDGPLVVLRQRIWKLV
LQFRPH HYLGHQFH ZDV XQIDLUO\ SUHMXGLFLDO ODFNHG DQ\
SUREDWLYHYDOXHRIDQ\HOHPHQWRIWKHFULPHFKDUJHGE\WKH
JRYHUQPHQWDQGZDVLQYLRODWLRQRI5XOH
,Q PD[LPL]LQJ WKH SUREDWLYH YDOXH RI WKLV HYLGHQFH DQG
PLQLPL]LQJ LWV SUHMXGLFLDO HIIHFW ZH ILQG WKDW WKH LQFRPH
HYLGHQFHZDVUHOHYDQWWRGHPRQVWUDWHWKDWILQDQFLDOJDLQZDV
WKHPRWLYHIRUWKHFULPHVFKDUJHG6HHHJ3RLQWHUY8QLWHG
6WDWHV 86 SURRI RI PRWLYH DOZD\V
ZHOFRPH 6WDWHG DQRWKHU ZD\ $SSHOODQWV¶ VXEVWDQWLDO
LQFRPH ZDV QHFHVVDULO\ GHSHQGHQW XSRQ *10$¶V
FRQWLQXDWLRQRI//)&¶VORDQFRPPLWPHQWDXWKRULW\,QWKH
HYHQW WKDW *10$ EHFDPH DZDUH RI WKH DFWXDO QXPEHU RI
//)&¶V ORDQ GHOLQTXHQFLHV WKH UHVXOW ZRXOG KDYH KDG D
SURIRXQG ILQDQFLDO HIIHFW RQ $SSHOODQWV //)&¶V VROH
VKDUHKROGHUVLQWKDWWKH\ZRXOGFHDVHWRJDLQSURILWVIURPWKH
LVVXDQFHRIWKHPRUWJDJHEDFNHGVHFXULWLHV,QWKLVZD\WKH
LQFRPHHYLGHQFHKDGDVLJQLILFDQWSUREDWLYHYDOXHEHFDXVHLW
GHPRQVWUDWHGZKDW$SSHOODQWVVWRRGWRORVHLIWKH\SURSHUO\
UHSRUWHGWKHDFWXDOORDQGHOLQTXHQFLHV)RUWKLVUHDVRQWKH
WULDOFRXUWSURSHUO\H[HUFLVHGLWVEURDGGLVFUHWLRQLQDGPLWWLQJ
WKLVHYLGHQFH
&3RVW7ULDO5XOLQJV
1H[W$SSHOODQWVFKDOOHQJHYDULRXVSRVWWULDOUXOLQJVPDGH
LQWKHFRXUWEHORZ7KHILUVWIRXURIWKHVHFKDOOHQJHVUHODWHWR
WKH GLVWULFW FRXUW¶V GHFLVLRQV LQ IDVKLRQLQJ DSSURSULDWH
VHQWHQFHV XQGHU WKH *XLGHOLQHV 0RUH VSHFLILFDOO\
$SSHOODQWVFKDOOHQJHWKHGLVWULFWFRXUW¶VGHWHUPLQDWLRQRIWKH
DPRXQWRIORVVDWWULEXWDEOHWRWKHPLWVGHQLDORIDPRWLRQIRU
GRZQZDUGGHSDUWXUHPDGHE\$SSHOODQW/DZVLWVDSSOLFDWLRQ
RIDQREVWUXFWLRQRIMXVWLFHHQKDQFHPHQWDQGLWVFRPSXWDWLRQ
RI $SSHOODQW /DZV¶V FULPLQDO KLVWRU\ FDWHJRU\ 7KH ILQDO

-- 24 of 24 --