01a0324p.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
81,7(' 67$7(6 2) $0(5,&$
3ODLQWLII$SSHOOHH
Y
7,027+< *25'21 )$$66(
'HIHQGDQW$SSHOODQW
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDW*UDQG5DSLGV
1R²5REHUW+ROPHV%HOO&KLHI'LVWULFW-XGJH
$UJXHG0DUFK
'HFLGHGDQG)LOHG6HSWHPEHU
%HIRUH0$57,1&KLHI-XGJH0(55,77%2**6
1255,668+5+(,15,&+6,/(5%$7&+(/'(5
'$8*+75(<0225(&2/(&/$<DQG*,/0$1
&LUFXLW-XGJHV
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' &KULVWRSKHU 3 <DWHV )('(5$/ 38%/,&
'()(1'(56 2)),&( *UDQG 5DSLGV 0LFKLJDQ IRU
$SSHOODQW 0LFKDHO 5 'UHHEHQ 81,7(' 67$7(6
'(3$570(17 2) -867,&( :DVKLQJWRQ ' & IRU
$SSHOOHH21%5,()&KULVWRSKHU3<DWHV)('(5$/

-- 1 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
38%/,&'()(1'(562)),&(*UDQG5DSLGV0LFKLJDQ
IRU $SSHOODQW 0LFKDHO 5 'UHHEHQ 81,7(' 67$7(6
'(3$570(172)-867,&(:DVKLQJWRQ'&'HERUDK
:DWVRQ81,7('67$7(6'(3$570(172)-867,&(
$33(//$7( 6(&7,21 &5,0,1$/ ',9,6,21
:DVKLQJWRQ'&IRU$SSHOOHH
0225(-GHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK
0$57,1&-0(55,776,/(5'$8*+75(<&2/(
&/$<DQG*,/0$1--MRLQHG%$7&+(/'(5- SS
GHOLYHUHG D VHSDUDWH GLVVHQWLQJ RSLQLRQ LQ ZKLFK
%2**61255,6DQG68+5+(,15,&+--MRLQHG
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
.$5(11(/6210225(&LUFXLW-XGJH,QUHVSRQVHWR
³WKH JURZLQJ SUREOHP RI LQWHUVWDWH HQIRUFHPHQW RI FKLOG
VXSSRUW´&RQJUHVVSDVVHGWKH&KLOG6XSSRUW5HFRYHU\$FWRI
³&65$´ 3XE/1R† D 6WDW
FRGLILHG DW 86& † WR ³SXQLVK>@ FHUWDLQ
SHUVRQV ZKR LQWHQWLRQDOO\ IDLO WR SD\ WKHLU FKLOG VXSSRUW
REOLJDWLRQV´+5 5(3 12 DW 7KLVFDVH
SUHVHQWVWKHTXHVWLRQZKHWKHUWKH&65$LVDYDOLGH[HUFLVHRI
&RQJUHVV¶V&RPPHUFH&ODXVHSRZHUXQGHU$UWLFOH,†FO
RIWKH&RQVWLWXWLRQ7LPRWK\*RUGRQ)DDVVHSOHDGHGJXLOW\
WRYLRODWLQJWKH&65$ZKLFKFULPLQDOL]HVWKHZLOOIXOIDLOXUH
WRSD\FRXUWRUGHUHGFKLOGVXSSRUWIRUDFKLOGZKRUHVLGHVLQ
DQRWKHUVWDWH+HZDVVHQWHQFHGE\WKHGLVWULFWFRXUWWRVHUYH
DVL[PRQWKWHUPRILPSULVRQPHQWDQGRUGHUHGWR SD\ IXOO
UHVWLWXWLRQIRUSDVWGXHVXSSRUWSD\PHQWV+HQRZFKDOOHQJHV
WKHFRQVWLWXWLRQDOLW\RIWKHVWDWXWHDVZHOODVWKHOHJDOLW\RIWKH
GLVWULFWFRXUW¶VUHVWLWXWLRQRUGHU$OOWHQRIRXUVLVWHUFLUFXLWV
WKDW KDYH FRQVLGHUHG WKH FRQVWLWXWLRQDOLW\ RI WKH &65$ LQ
&RPPHUFH&ODXVHFKDOOHQJHVDIWHU8QLWHG6WDWHVY/RSH]
86 KDYHXSKHOGWKHVWDWXWH:HQRZMRLQ
WKHPLQFRQFOXGLQJWKDWWKH&65$LVDQDSSURSULDWHH[HUFLVH
RI&RQJUHVV¶VSRZHUXQGHUWKH&RPPHUFH&ODXVH7KHUHIRUH
ZH $)),50 WKH MXGJPHQW RI WKH GLVWULFW FRXUW DV WR WKH
1R 8QLWHG6WDWHVY)DDVVH
KDQGVRI8QLWHG6WDWHVRIILFLDOVLQWKDWPLQRULW\RIFDVHVLQ
ZKLFKWKHVWDWHRIUHVLGHQFHRIWKHSD\HULVGLIIHUHQWIURPWKDW
RIWKHFKLOG
,Q8QLWHG6WDWHVY0RUULVRQWKH6XSUHPH&RXUWZDUQHG
DJDLQVWRYHUO\HODVWLFFRQFHSWLRQVRIWKH&RPPHUFH&ODXVH
WKDW ZRXOG JLYH &RQJUHVV DXWKRULW\ RYHU ³IDPLO\ ODZ DQG
RWKHUDUHDVRIWUDGLWLRQDOVWDWHUHJXODWLRQVLQFHWKHDJJUHJDWH
HIIHFWRIPDUULDJHGLYRUFHDQGFKLOGUHDULQJRQWKHQDWLRQDO
HFRQRP\LVXQGRXEWHGO\VLJQLILFDQW´0RUULVRQ6&WDW
0LQGIXO RI WKLV DGPRQLWLRQ , ZRXOG KROG WKDW WKH
SURYLVLRQV RI WKH &KLOG 6XSSRUW 5HFRYHU\ $FW RI
FRQWDLQHG LQ 86& † H[FHHG &RQJUHVV¶V
DXWKRULW\XQGHUWKH&RQVWLWXWLRQ,WLVLPSRUWDQWWRQRWHWKDW
VXFKDUXOLQJZRXOGQRWSUHYHQW&RQJUHVVIURPDVVLVWLQJWKH
VWDWHV LQ REWDLQLQJ LQWHUVWDWH HQIRUFHPHQW RI WKHLU FRXUWV¶
RUGHUV&RQJUHVVFDQGRVR DQGKDVGRQHVR SXUVXDQWWRWKH
)XOO)DLWKDQG&UHGLW&ODXVH6HH)XOO)DLWKDQG&UHGLWIRU
&KLOG6XSSRUW2UGHUV$FW3XE/1R6WDW
FRGLILHG DV DPHQGHG DW † 86& %
%XW &RQJUHVV PD\ QRW XQGHU WKH JXLVH RI WKH
FRPPHUFHSRZHUFULPLQDOL]HWKHIDLOXUHWRREH\DVWDWHFRXUW
RUGHU ZKHQ WKH VWDWH LWVHOI KDV GHFOLQHG WR GR VR 6XFK
OHJLVODWLRQGRHVFRQVLGHUDEOHYLROHQFHWRVWDWHUHJXODWLRQE\
IUDJPHQWLQJWKHVWDWHFRXUWV¶DELOLW\WRDQQRXQFHMXGJPHQWV
DQG WKHLU DELOLW\ WR GHWHUPLQH WKH VDQFWLRQ WKDW ZLOO DWWHQG
GLVREHGLHQFH RI WKRVH MXGJPHQWV $EVHQW D VWURQJHU
FRQQHFWLRQZLWKWKHFRPPHUFLDOFRQFHUQVWKDWDUHFHQWUDOWR
WKH &RPPHUFH &ODXVH WKLV LQWUXVLRQ GLVUXSWV WKH IHGHUDO
EDODQFHWKDWWKH)UDPHUVHQYLVLRQHG6HH/RSH]86DW
.HQQHG\-FRQFXUULQJ

-- 2 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
IRUUHIXVLQJ³WRSURYLGHQHFHVVDU\DQGSURSHUVKHOWHUIRRG
FDUHDQGFORWKLQJIRUKLVRUKHUFKLOGUHQXQGHU\HDUVRI
DJH´ &LYLOFKLOGVXSSRUWHQIRUFHPHQWPHWKRGV³DFFRXQWIRU
YLUWXDOO\ DOO HQIRUFHPHQW DFWLYLW\ LQ 0LFKLJDQ´ 6FRWW *
%DVVHWW)DPLO\/DZ$QQXDO6XUYH\RI0LFKLJDQ/DZ-XQH
0D\:D\QH/5HY
0LFKLJDQODZFRPPLWVWRWKHGLVFUHWLRQRIVWDWHMXGJHVWKH
PHDQVE\ZKLFKWRHQIRUFH²RUWRGHWHUIDLOXUHWRREH\²D
VXSSRUWRUGHU$FLUFXLWFRXUWMXGJHPD\LQFDUFHUDWHDSHUVRQ
IRUFKLOGQRQVXSSRUWEXWWKLVUHPHG\LVFLYLOLQQDWXUH6HH
0LFK&RPS/DZV$QQ† :HVW 0HDGY
%DWFKORU1:GQ 0LFK ³&OHDUO\
LW ZDV LQWHQGHG WKDW WKH 0LFKLJDQ VWDWXWRU\ SURFHGXUH
DXWKRUL]LQJ LQFDUFHUDWLRQ IRU FKLOG QRQVXSSRUW VKRXOG EH
UHJDUGHG DV FLYLO LQ QDWXUH´ )XUWKHUPRUH WKH MXGJH¶V
GLVFUHWLRQ LQ WKLV UHJDUG LV FDUHIXOO\ FDELQHG DQ RUGHU RI
LQFDUFHUDWLRQPD\EHHQWHUHGRQO\LIRWKHUUHPHGLHV²VXFKDV
LQFRPHZLWKKROGLQJLQWHUFHSWLRQRIWD[UHIXQGVDQGSURSHUW\
OLHQV²³DSSHDU XQOLNHO\ WR FRUUHFW WKH SD\HU¶V IDLOXUH RU
UHIXVDO WR SD\ VXSSRUW´ 0LFK &RPS /DZV $QQ
† :HVW
7KH&65$GLVUXSWVWKHVWDWHVFKHPH%\FUHDWLQJDIHGHUDO
FULPLQDOSHQDOW\DVDGHWHUUHQWIRUGLVREHGLHQFHRIVXSSRUW
RUGHUVLQVRPHFLUFXPVWDQFHVWKH$FWUHQGHUVQXJDWRU\WKH
GLVFUHWLRQ LQYHVWHG LQ 0LFKLJDQ FLUFXLW FRXUW MXGJHV
0RUHRYHU WKHVH MXGJHV DUH VXEMHFW WR HOHFWLRQ VHH 0LFK
&RQVWDUW†DQGWKHFRQWRXUVRIWKHLUGLVFUHWLRQ DUH
GHWHUPLQHGE\DQHOHFWHGOHJLVODWXUHWKH&65$WKXVSUHYHQWV
0LFKLJDQ RIILFLDOV IURP UHJXODWLQJ LQ DFFRUGDQFH ZLWK WKH
YLHZVRIWKHORFDOHOHFWRUDWH6HH1HZ<RUNY8QLWHG6WDWHV
86 QRWLQJ WKDW ZKHUH &RQJUHVV
HQFRXUDJHVVWDWHUHJXODWLRQUDWKHUWKDQFRPSHOOLQJLWVWDWH
RIILFLDOV UHPDLQ DFFRXQWDEOH WR WKH SHRSOH EXW WKDW
DFFRXQWDELOLW\LVGLPLQLVKHGZKHQGXHWRIHGHUDOLQWHUIHUHQFH
³HOHFWHGVWDWHRIILFLDOVFDQQRWUHJXODWHLQDFFRUGDQFHZLWKWKH
YLHZ RI WKH ORFDO HOHFWRUDWH LQ PDWWHUV QRW SUHHPSWHG E\
IHGHUDOUHJXODWLRQ´ ,QHVVHQFHWKH$FWFDUYHVXS0LFKLJDQ
ODZE\SUHGLFDWLQJOLDELOLW\RQYLRODWLRQVRI0LFKLJDQFRXUW
RUGHUVEXWSXWWLQJGHWHUUHQFHDQGSHQDOW\GHFLVLRQVLQWRWKH
1R 8QLWHG6WDWHVY)DDVVH
,Q $XJXVW WKH FRXQW\ FLUFXLW FRXUW UDLVHG WKH DZDUG WR
SHU ZHHN
$V D UHVXOW RI )DDVVH¶V XQZLOOLQJQHVV WR SURYLGH WKH SUREDWLRQ
RIILFHU DVVLJQHG WR KLV FDVH ZLWK ILQDQFLDO UHFRUGV )DDVVH¶V HPSOR\PHQW
DQG HDUQLQJV KLVWRU\ DUH LQFRPSOHWHO\ UHSRUWHG LQ KLV SUHVHQWHQFH UHSRUW
FRQVWLWXWLRQDOLW\RIWKHVWDWXWHZHDOVR$)),50WKHGLVWULFW
FRXUW¶VRUGHURIUHVWLWXWLRQ
,)$&76
7LPRWK\*RUGRQ)DDVVHDQG6DQGUD%RZPDQKDGDFKLOG
1RHOOH $OH[DQGULD )DDVVH RQ 'HFHPEHU 7KH
FRXSOH UHVLGHG LQ /DQVLQJ 0LFKLJDQ IRU WKH ILUVW VHYHUDO
PRQWKV RI 1RHOOH¶V OLIH ,Q -XQH )DDVVH PRYHG WR
&DOLIRUQLD %RZPDQ FKRVH WR UHPDLQ LQ 0LFKLJDQ ZLWK
1RHOOH,Q-XQH)DDVVHILOHGDSHWLWLRQLQVWDWHFRXUWWR
HVWDEOLVKKLVSDWHUQLW\RI1RHOOHDVZHOODVYLVLWDWLRQULJKWV
7KHFLUFXLWFRXUWLQ.HQW&RXQW\0LFKLJDQDGMXGJHG)DDVVH
WR EH 1RHOOH¶V IDWKHU RQ -DQXDU\ LW DOVR RUGHUHG
)DDVVH WR SD\ FKLOG VXSSRUW LQ WKH DPRXQW RI SHU
ZHHN 7KH FKLOG VXSSRUW RUGHU ZDV PDGH UHWURDFWLYH WR
'HFHPEHU$VDUHVXOWRIWKHUHWURDFWLYHQDWXUHRIWKH
DZDUG )DDVVH IRXQG KLPVHOI LQ DUUHDUV RQ FKLOG
VXSSRUW
)DDVVHZDVLQWHUPLWWHQWO\HPSOR\HGLQ&DOLIRUQLDDQGKLV
FKLOGVXSSRUWSD\PHQWVZHUHVSRUDGLFLQ)DDVVHPDGH
IRXUSD\PHQWVWR%RZPDQWRWDOLQJLQKHVHQWWHQ
SD\PHQWVLQWKHDPRXQWRILQ)DDVVHSURYLGHG
SD\PHQWV RI LQ )DDVVH VHQW VHYHQ SD\PHQWV
WRWDOLQJDQGLQ)DDVVHPDGHRQHSD\PHQWRI

2Q -XO\ WKH JRYHUQPHQW ILOHG D FULPLQDO
FRPSODLQWDJDLQVW)DDVVHLQWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDOOHJLQJWKDW)DDVVHZDV
LQYLRODWLRQRIWKH&KLOG6XSSRUW5HFRYHU\$FWIRUIDLOXUHWR
SD\FRXUWRUGHUHGFKLOGVXSSRUWIURP-DQXDU\WR-XO\

-- 3 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
7KH &65$ ZDV VXEVHTXHQWO\ DPHQGHG LQ -XQH E\ WKH
'HDGEHDW 3DUHQWV 3XQLVKPHQW $FW RI 3XE / 1R †
6WDW 7KH &65$ FXUUHQWO\ SURYLGHV SXQLVKPHQW IRU ³>D@Q\ SHUVRQ
ZKR ²
ZLOOIXOO\ IDLOV WR SD\ D VXSSRUW REOLJDWLRQ ZLWK UHVSHFW WR D
FKLOG ZKR UHVLGHV LQ DQRWKHU 6WDWH LI VXFK REOLJDWLRQ KDV
UHPDLQHG XQSDLG IRU D SHULRG ORQJHU WKDQ \HDU RU LV JUHDWHU
WKDQ
WUDYHOV LQ LQWHUVWDWH RU IRUHLJQ FRPPHUFH ZLWK WKH LQWHQW WR
HYDGH D VXSSRUW REOLJDWLRQ LI VXFK REOLJDWLRQ KDV UHPDLQHG
XQSDLG IRU D SHULRG ORQJHU WKDQ \HDU RU LV JUHDWHU WKDQ
RU
ZLOOIXOO\ IDLOV WR SD\ D VXSSRUW REOLJDWLRQ ZLWK UHVSHFW WR D
FKLOG ZKR UHVLGHV LQ DQRWKHU 6WDWH LI VXFK REOLJDWLRQ KDV
UHPDLQHG XQSDLG IRU D SHULRG ORQJHU WKDQ \HDUV RU LV JUHDWHU
WKDQ ´
86& † D )DDVVH ZDV FRQYLFWHG DQG VHQWHQFHG XQGHU WKH SULRU
YHUVLRQ RI WKH $FW
2Q -XQH )DDVVH SOHDGHG JXLOW\ EHIRUH D
PDJLVWUDWHMXGJHWRRQHFRXQWRIYLRODWLQJWKH&65$7KH
&65$DWWKDWWLPHSURYLGHG³>Z@KRHYHUZLOOIXOO\IDLOVWRSD\
D SDVW GXH VXSSRUW REOLJDWLRQ ZLWK UHVSHFW WR D FKLOG ZKR
UHVLGHV LQ DQRWKHU 6WDWH VKDOO EH SXQLVKHG DV SURYLGHG LQ
VXEVHFWLRQ E ´86&† D 6XEVHFWLRQ E
VWDWHGWKDWSXQLVKPHQWIRUDILUVWRIIHQVHXQGHUVXEVHFWLRQ D
ZDVDILQHLPSULVRQPHQWIRUQRWPRUHWKDQPRQWKVRUERWK
DQGIRUDVXEVHTXHQWRIIHQVHDILQHLPSULVRQPHQWIRUQRW
PRUHWKDQWZR\HDUVRUERWK,G† E
7KHWHUP³SDVWGXHVXSSRUWREOLJDWLRQ´ZDVGHILQHGDV³DQ\
DPRXQW²
$ GHWHUPLQHG XQGHU D FRXUW RUGHU RU DQ RUGHU RI DQ
DGPLQLVWUDWLYHSURFHVVSXUVXDQWWRWKHODZRID6WDWH
WR EH GXH IURP D SHUVRQ IRU WKH VXSSRUW DQG
PDLQWHQDQFHRIDFKLOGRURIDFKLOGDQGWKHSDUHQW
ZLWKZKRPWKHFKLOGLVOLYLQJDQG
% WKDWKDVUHPDLQHGXQSDLGIRUDSHULRGORQJHUWKDQ
RQH\HDURULVJUHDWHUWKDQ
1R 8QLWHG6WDWHVY)DDVVH
WHWKHUHGWRWKHFULPLQDOSURYLVLRQVRIWKHOHJLVODWLRQ7KH$FW
HPDVFXODWHVWKHVWDWHV¶DELOLW\WRDVVLJQVRFLDODQGRWKHUFRVWV
WR WKH GLVREHGLHQFH RI FKLOG VXSSRUW RUGHUV UHJDUGOHVV RI
ZKHWKHU WKH VWDWHV DFFHSW IHGHUDO IXQGV $QG XQOLNH WKH
IHGHUDOJRYHUQPHQW¶VXVHRIKLJKZD\IXQGVWRIRUFHWKHVWDWHV
WRPDNHFKDQJHVLQWKHLUODZVJRYHUQLQJWKHFRQVXPSWLRQRI
DOFRKROLFEHYHUDJHVWKH&65$GRHVQRWRIIHUWKHVWDWHVWKH
FKRLFHEHWZHHQGHYLVLQJUHPHGLHVZLWKLQPLQLPXPIHGHUDO
VWDQGDUGV DQG KDYLQJ IHGHUDO IXQGV ZLWKKHOG ,QGHHG WKH
&65$FUHDWHVQRSUHHPSWLRQLVVXHWKH$FWLVIRXQGHGRQWKH
H[LVWHQFHRIVWDWHFRXUWRUGHUVQRWWKHLUGLVSODFHPHQW%\
SLJJ\EDFNLQJDFULPLQDOVDQFWLRQRQWKHVWDWHV¶FKLOGVXSSRUW
RUGHUVWKH&65$UHFRJQL]HVWKHSULPDF\RIWKHVWDWHV¶ODZV
DWWKHVDPHWLPHWKDWLWH[SUHVVO\RYHUULGHVSRUWLRQVRIWKRVH
ODZV
7KH &RQVWLWXWLRQ GLIIXVHV SRZHU WR SURWHFW WKH FLWL]HQU\
DJDLQVW MXVW VXFK DWWHPSWV WR IUDJPHQW RIILFLDO DFWLRQ IURP
SROLWLFDODFFRXQWDELOLW\6HH7KH)HGHUDOLVW1RDW
-DPHV 0DGLVRQ &OLQWRQ 5RVVLWHU HG ³,Q WKH
FRPSRXQGUHSXEOLFRI$PHULFDWKHSRZHUVXUUHQGHUHGE\WKH
SHRSOHLVILUVWGLYLGHGEHWZHHQWZRGLVWLQFWJRYHUQPHQWVDQG
WKHQWKHSRUWLRQDOORWWHGWRHDFKVXEGLYLGHGDPRQJGLVWLQFW
DQGVHSDUDWHGHSDUWPHQWV+HQFHDGRXEOHVHFXULW\DULVHVWR
WKHULJKWVRIWKHSHRSOH7KHGLIIHUHQWJRYHUQPHQWVFRQWURO
HDFKRWKHUDWWKHVDPHWLPHWKDWHDFKLVFRQWUROOHGE\LWVHOI´
$PRQJWKHVWUXFWXUDOSURWHFWLRQVRIWKH&RQVWLWXWLRQLVWKH
GRFWULQHRIHQXPHUDWHGSRZHUVDQGWKH&RPPHUFH&ODXVH
ILJXUHVSURPLQHQWO\DPRQJWKHVH$OWKRXJKMXGLFLDOHIIRUWVWR
PDLQWDLQ WKH IHGHUDO EDODQFH WKURXJK H[SRVLWLRQ RI WKH
&RPPHUFH&ODXVHKDYH³WDNHQVRPHWXUQV´2NODKRPD7D[
&RPP¶QY-HIIHUVRQ/LQHV,QF86
WKH6XSUHPH&RXUWUHDIILUPHGLQ8QLWHG6WDWHVY/RSH]WKDW
WKHUHDUHVRPHDFWLYLWLHVWKDWVWDWHVPD\UHJXODWHEXW&RQJUHVV
PD\QRW
$OWKRXJK 0LFKLJDQ KDV D IHORQ\ GHVHUWLRQ VWDWXWH RQ LWV
ERRNVLWLVUDUHO\HQIRUFHGDQGLQDQ\FDVHLWGRHVQRWOLQN
FULPLQDOOLDELOLW\WRMXGLFLDOFKLOGVXSSRUWRUGHUV6HH0LFK
&RPS/DZV$QQ† :HVW SURYLGLQJOLDELOLW\

-- 4 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
,QWKLVFDVHWKH&65$¶VHQFURDFKPHQWRQWKHVHWUDGLWLRQDO
SUHVHUYHV RI VWDWH DXWKRULW\ GRHV FRQVLGHUDEOH GDPDJH WR
0LFKLJDQ¶VV\VWHPIRUUHJXODWLQJFKLOGVXSSRUWZKLFKZDV
HQDFWHGE\LWVOHJLVODWXUHDQGDSSOLHGE\LWVHOHFWHGMXGJHV,Q
OLJKWRIWKHWUDGLWLRQDOQRWLRQVRIIHGHUDOLVPDQGLQWKHZDNH
RI /RSH] , FDQQRW FRQFOXGH WKDW WKH &RPPHUFH &ODXVH
FRXQWHQDQFHVVXFKGDPDJH7KH6XSUHPH&RXUWKDVREVHUYHG
WKDWZKHQ³&RQJUHVVFULPLQDOL]HVFRQGXFWDOUHDG\GHQRXQFHG
DVFULPLQDOE\WKH6WDWHVLWHIIHFWVDμFKDQJHLQWKHVHQVLWLYH
UHODWLRQ EHWZHHQ IHGHUDO DQG VWDWH FULPLQDO MXULVGLFWLRQ¶´
8QLWHG 6WDWHV Y /RSH] 86 Q TXRWLQJ
8QLWHG 6WDWHV Y (QPRQV 86
,URQLFDOO\LWPD\EHWKDWVWDWHSRZHUVXIIHUVJUHDWHUGLVUXSWLRQ
ZKHQ &RQJUHVV FULPLQDOL]HV FRQGXFW WKDW WKH VWDWHV KDYH
FKRVHQQRWWRFULPLQDOL]HEXWWRUHJXODWHLQDGLIIHUHQWIDVKLRQ
IRUWKHIHGHUDOODZDVVLJQVWRWKHFRQGXFWQHZFRVWVWKDWGLIIHU
QRWMXVWLQTXDQWXPEXWLQNLQGIURPWKHFRVWVGHILQHGE\WKH
VWDWH6XFKLVWKHFDVHKHUH
7KLV IHGHUDO OHJLVODWLYH FKRLFH LV SDUWLFXODUO\ XQVHWWOLQJ
JLYHQ WKDW FRQJUHVVLRQDO SRZHU WR GLVWXUE VWDWH UHJXODWRU\
SURJUDPV KDV FXVWRPDULO\ EHHQ WKRXJKW WR IDOO LQWR WKUHH
FDWHJRULHVLQWRQRQHRIZKLFKWKH&65$FRPIRUWDEO\ILWV
&RQJUHVVPD\SXUVXDQWWRLWVVSHQGLQJSRZHULQIOXHQFHD
VWDWH¶V UHJXODWRU\ GHFLVLRQV E\ DWWDFKLQJ FRQGLWLRQV WR WKH
UHFHLSWRIIHGHUDOIXQGV6HH6RXWK'DNRWDY'ROH86
&RQJUHVV PD\ DOVR FUDIW SURJUDPV RI
³FRRSHUDWLYH IHGHUDOLVP´ WKDW RIIHU D VWDWH WKH FKRLFH RI
UHJXODWLQJDFFRUGLQJWRQDWLRQDOVWDQGDUGVRUKDYLQJVWDWHODZ
SUHHPSWHG E\ IHGHUDO UHJXODWLRQ 6HH +RGHO Y 9LUJLQLD
6XUIDFH0LQLQJ 5HFODPDWLRQ$VV¶Q86
)LQDOO\&RQJUHVVPD\RIFRXUVHSUHHPSWRXWULJKW
VWDWH ODZV UHJXODWLQJ SULYDWH DFWLYLW\ WKDW LV ZLWKLQ WKH
HQXPHUDWHGSRZHUVRIWKH&RQVWLWXWLRQ6HH5LFHY6DQWD)H
(OHYDWRU&RUS86
,QHQDFWLQJWKH&65$&RQJUHVVKDVIROORZHGQRQHRIWKHVH
ZHOOWURGGHQSDWKV$OWKRXJKWKH$FWGRHVDXWKRUL]HJUDQWV
WRVWDWHVWRFRRUGLQDWHLQWHUVWDWHFKLOGVXSSRUWHQIRUFHPHQW
HIIRUWVVHH86&†FF WKHVHPRQLHVDUHQRW
1R 8QLWHG6WDWHVY)DDVVH
)DDVVH ILUVW DSSHDOHG KLV FRQYLFWLRQ DQG VHQWHQFH WR WKH GLVWULFW FRXUW
LQ WKH :HVWHUQ 'LVWULFW RI 0LFKLJDQ SXUVXDQW WR )HG 5 &ULP 3
J ' 7KH GLVWULFW FRXUW LVVXHG DQ RSLQLRQ DQG RUGHU XSKROGLQJ WKH
FRQVWLWXWLRQDOLW\ RI WKH &65$ DQG DIILUPLQJ )DDVVH¶V VHQWHQFH DQG
UHVWLWXWLRQ RUGHU
,G † G )DDVVH ZDV VXEVHTXHQWO\ VHQWHQFHG E\ D
PDJLVWUDWHMXGJHWRDWHUPRIPRQWKV¶LPSULVRQPHQWDQG
RUGHUHGWRSD\IXOOUHVWLWXWLRQLQWKHDPRXQWRI
IRUFKLOGVXSSRUWDUUHDUDJH
)DDVVHWLPHO\DSSHDOHGKLVFRQYLFWLRQDQGVHQWHQFHWRWKLV
FRXUW+HILUVWFKDOOHQJHVWKHFRQVWLWXWLRQDOLW\RIWKH&65$
DV DQ LPSURSHU H[HUFLVH RI &RQJUHVV¶V &RPPHUFH &ODXVH
DXWKRULW\ )DDVVH DWWDFNV WKH VWDWXWH¶V QH[XV WR LQWHUVWDWH
FRPPHUFH DVVHUWLQJ WKDW WKH &65$ FUHDWHV D ³IHGHUDO
FULPLQDO HQIRUFHPHQW PHFKDQLVP IRU SXUH VWDWH ODZ FKLOG
VXSSRUWREOLJDWLRQV´ZKRVHRQO\OLQNWRLQWHUVWDWHFRPPHUFH
LV WKH UHTXLUHPHQW WKDW SDUHQW DQG FKLOG UHVLGH LQ GLIIHUHQW
VWDWHV$SSHOODQW¶V%UDW$FFRUGLQJWR)DDVVHWKLVOLQNLV
LQVXIILFLHQW WR HVWDEOLVK D FRQVWLWXWLRQDO EDVLV IRU
&RQJUHVVLRQDOUHJXODWLRQ)DDVVHDOVRFKDOOHQJHVWKHGLVWULFW
FRXUW¶VRUGHUUHTXLULQJKLPWRSD\UHVWLWXWLRQDVDQDEXVHRI
WKHGLVWULFWFRXUW¶VGLVFUHWLRQ$SDQHORIWKLVFRXUWLQLWLDOO\
DFFHSWHG)DDVVH¶VDUJXPHQWVDQGUHYHUVHGWKHGLVWULFWFRXUW¶V
MXGJPHQW8QLWHG6WDWHVY)DDVVH)G WK
&LU :HJUDQWHGUHKHDULQJHQEDQFYDFDWHGWKHSDQHO
RSLQLRQ)G WK&LU DQGQRZDIILUPWKH
MXGJPHQWRIWKHGLVWULFWFRXUW
,,$1$/<6,6
7KH &RQVWLWXWLRQ JUDQWV &RQJUHVV WKH SRZHU WR UHJXODWH
FRPPHUFHDPRQJWKHVHYHUDOVWDWHV86 &2167 DUW,†
FO 5HO\LQJ RQ 8QLWHG 6WDWHV Y /RSH] 86
)DDVVH XUJHV XV WR IDVKLRQ D QDUURZ DQG WHFKQLFDO
GHILQLWLRQRIFRPPHUFHWKDWWXUQVRQZKHWKHUWKHWUDQVDFWLRQ
DWLVVXHLQYROYHVWUDGHDQGLVUHFLSURFDOLQQDWXUH:HILUPO\
GHFOLQH )DDVVH¶V LQYLWDWLRQ WR LPSRVH KHUHWRIRUH XQNQRZQ
FRQVWUDLQWV RQ &RQJUHVV¶V &RPPHUFH &ODXVH SRZHU DV

-- 5 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
XQVXSSRUWDEOHE\HLWKHU6XSUHPH&RXUWRURXURZQSUHFHGHQW
,QGHHGZHEHOLHYHWKDWSXUVXDQWWRRXUGHQRYRUHYLHZRIWKH
FRQVWLWXWLRQDOLW\ RI D VWDWXWH 8QLWHG 6WDWHV Y 1DSLHU
)G WK &LU WKH &65$ HDVLO\ SDVVHV
FRQVWLWXWLRQDOPXVWHU
$&RPPHUFH&ODXVH
,QRQHRIWKH6XSUHPH&RXUW¶VHDUOLHVWH[SRVLWLRQVRQWKH
&RPPHUFH&ODXVH&KLHI-XVWLFH0DUVKDOOUHMHFWHGWKHQRWLRQ
WKDW³FRPPHUFH´DVXWLOL]HGLQWKH&RQVWLWXWLRQLVOLPLWHG³WR
WUDIILF WR EX\LQJ DQG VHOOLQJ RU WKH LQWHUFKDQJH RI
FRPPRGLWLHV´*LEERQVY2JGHQ86 :KHDW
7KH &KLHI -XVWLFH QRWHG WKDW ³>F@RPPHUFH
XQGRXEWHGO\ LV WUDIILF EXW LW LV VRPHWKLQJ PRUH LW LV
LQWHUFRXUVH,WGHVFULEHVWKHFRPPHUFLDOLQWHUFRXUVHEHWZHHQ
QDWLRQV DQG SDUWV RI QDWLRQV LQ DOO LWV EUDQFKHV DQG LV
UHJXODWHG E\ SUHVFULELQJ UXOHV IRU FDUU\LQJ RQ WKDW
LQWHUFRXUVH´,GDW$OWKRXJKWKH6XSUHPH&RXUW¶V
UHOLDQFHRQWKLVHDUO\XQGHUVWDQGLQJRIFRPPHUFHKDVZD[HG
DQG ZDQHG LQ WKH FRXUVH RI WKLV QDWLRQ¶V GHYHORSPHQW LW
UHPDLQV WKH SULQFLSDO VWDQGDUG E\ ZKLFK ZH HYDOXDWH
&RPPHUFH&ODXVHFKDOOHQJHV:KLOHZHPXVWUHPDLQYLJLODQW
WRHQVXUHWKDWDIHGHUDOVWDWXWHGRHVQRWWUHQFKXSRQSXUHO\
ORFDO DFWLYLW\ ZH PD\ RQO\ LQYDOLGDWH D FRQJUHVVLRQDO
HQDFWPHQWSDVVHGSXUVXDQWWRWKH&RPPHUFH&ODXVHLILWEHDUV
QRUDWLRQDOUHODWLRQWRLQWHUVWDWHFRPPHUFH+RGHOY9LUJLQLD
6XUIDFH 0LQLQJ 5HFODPDWLRQ $VV¶Q 86

,Q8QLWHG6WDWHVY/RSH]WKH6XSUHPH&RXUWUHYHDOHGLWV
FRQFHUQ WKDW &RQJUHVV KDG VR H[SDQGHG LWV DXWKRULW\ WR
UHJXODWHLQWUDVWDWHDFWLYLW\XQGHUWKHJXLVHRILWV&RPPHUFH
&ODXVH SRZHU WKDW &RQJUHVV ZDV LQ GDQJHU RI ³HIIHFWXDOO\
REOLWHUDW>LQJ@ WKH GLVWLQFWLRQ EHWZHHQ ZKDW LV QDWLRQDO DQG
ZKDW LV ORFDO DQG FUHDW>LQJ@ D FRPSOHWHO\ FHQWUDOL]HG
JRYHUQPHQW´/RSH]86DW TXRWLQJ1/5%Y-RQHV
/DXJKOLQ 6WHHO &RUS 86
6XPPDUL]LQJLWVSULRU&RPPHUFH&ODXVHMXULVSUXGHQFHWKH
&RXUW DUWLFXODWHG ³WKUHH EURDG FDWHJRULHV RI DFWLYLW\ WKDW
1R 8QLWHG6WDWHVY)DDVVH
FRQVWLWXWLRQDO DXWKRULW\ WR UHJXODWH QRQFRPPHUFLDO
UHODWLRQVKLSV +HUH WKH PDMRULW\ ZURQJO\ IRFXVHV RQ WKH
SHUYDVLYHQHVVRISDUHQWV¶IDLOXUHWRREH\FKLOGVXSSRUWRUGHUV
WKHGLIILFXOW\VWDWHVKDYHLQHQIRUFLQJVXFKREOLJDWLRQVDQG
WKH XQKDSS\ FRQVHTXHQFHV WR D FKLOG ZKHQ KLV SDUHQW LV
GHUHOLFWLQKLVRUKHUSDUHQWDOGXWLHV7KHUHLVQRTXHVWLRQWKDW
WKH QRQSD\PHQW RI FKLOGVXSSRUW LV D SUREOHP RI QDWLRQDO
SURSRUWLRQV 7R WKH H[WHQW WKDW VWDWH ERXQGDULHV PDNH
VXSSRUWSD\PHQWUHFRYHU\PRUHGLIILFXOWLWLVDQLQWHUVWDWH
SUREOHP
+RZHYHUDV/RSH]DQG0RUULVRQPDNHFOHDU&RQJUHVV¶V
MXULVGLFWLRQLVQRWSUHPLVHGRQWKHVHYHULW\RIDSUREOHPLWV
VXVFHSWLELOLW\WRDIHGHUDOVROXWLRQRUWKHIDFWWKDWDIHGHUDO
VROXWLRQPLJKWEHPRUHFRQYHQLHQW7KHIDLOXUHRIDSDUHQWWR
FRPSO\ZLWKDFKLOGVXSSRUWRUGHUGRHVQRWEXUGHQFRPPHUFH
DPRQJWKHVWDWHVLQDQ\ZD\,WGRHVQRWHUHFWWKHEDUULHUVWR
WUDGH WKDW WKH )RXQGHUV VR IHDUHG 1RU GRHV WKH IDLOXUH WR
FRPSO\ ZLWK D VWDWH VXSSRUW RUGHU DOORZ WKH FKDQQHOV RI
LQWHUVWDWH FRPPHUFH WR EH XVHG IRU VRPH QHIDULRXV RU
GDQJHURXV SXUSRVH 0RUHRYHU WKH IDLOXUH WR SD\ FKLOG
VXSSRUW LQWHUVWDWH KDV QR HIIHFW RQ DQ\ QDWLRQDO VFKHPH RI
HFRQRPLF UHJXODWLRQ DQG GRHV QRW ³VXEVWDQWLDOO\ DIIHFW´
LQWHUVWDWHFRPPHUFH,QIDFWWKHHFRQRPLFLPSDFWRIIDLOXUH
WRSD\FKLOGVXSSRUWLQWUDVWDWHLVLQGLVWLQJXLVKDEOHIURPWKH
IDLOXUHWRSD\DIWHURQHKDVPRYHGRXWRIVWDWH
,W LV EH\RQG GLVSXWH WKDW ZLOOIXO QRQFRPSOLDQFH ZLWK
VXSSRUWRUGHUVKDVDGHWULPHQWDORIWHQGHYDVWDWLQJHIIHFWRQ
VLQJOH SDUHQWV ZKR GHSHQG RQ WKH SD\PHQWV WR PDNH HQGV
PHDW/LNHZLVHDYLFWLPRIFULPHVXFKDVWKHSODLQWLIILQ
0RUULVRQVXIIHUVSV\FKRORJLFDODQGHPRWLRQDOVFDUVEH\RQG
FDOFXODWLRQEXWZKLFKIRUSXUSRVHVRIWKHMXVWLFHZHDUHDEOH
WR SURYLGH PLJKW EH FRQYHUWHG LQWR GROODUV DQG FHQWV
+RZHYHUWKH6XSUHPH&RXUWKDVUHIXVHGWRFRQVWUXHWKHVH
LQGLYLGXDOORVVHVHYHQZKHQWKH\DUHDJJUHJDWHGLQWRWHUPV
VXFKDV³FRVWVRIFULPH´DQGORVWSURGXFWLYLW\DVRIIHQVHV
DJDLQVWWKH$PHULFDQFRPPHUFLDOV\VWHP6HH/RSH]
86DW

-- 6 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
UHJXODWLRQ RI LQWHUVWDWH FRPPHUFH XQGHU /RSH]¶V WKLUG DQG
ILQDOFDWHJRU\
7KHPDMRULW\GLVFXVVHVDWOHQJWKWKHSHUYDVLYHDQGLQWHUVWDWH
QDWXUH RI WKH FKLOG VXSSRUW GHOLQTXHQF\ SUREOHP DQG
UHFRJQL]HVWKDWWKURXJKRXWLWVKLVWRU\&RQJUHVVKDVH[HUFLVHG
LWV SRVLWLYH SRZHU XQGHU WKH &RPPHUFH &ODXVH WR HQDFW
³OHJLVODWLRQWRKHOSWKH6WDWHVVROYHSUREOHPVWKDWGHI\ORFDO
VROXWLRQ´ +RZHYHU WKH PDMRULW\ IDLOV WR QRWH WKDW WKH
DXWKRULW\ WR HQDFW WKHVH ODZV IORZHG IURP WKH UHODWLRQVKLS
EHWZHHQ WKH SURSRVHG UHJXODWLRQ DQG LQWHUVWDWH FRPPHUFH
FOHDUO\DVFHUWDLQDEOHXQGHURQHRIWKH/RSH]FDWHJRULHVDQG
QRW WKH GLIILFXOW\ RU LQWHUVWDWH QDWXUH RI WKH SUREOHP )RU
H[DPSOH IHGHUDO ODZV SURKLELWLQJ ORDQ VKDUNLQJ ZHUH KHOG
SHUPLVVLEOHEHFDXVHORDQVKDUNLQJDQGWKHDWWHQGDQWRUJDQL]HG
FULPH LQWHUIHUHV ZLWK LQWHUVWDWH FRPPHUFLDO DFWLYLW\ QRW
PHUHO\EHFDXVHWKHSUREOHPGHILHGVWDWHVROXWLRQV6HH3HUH]
Y 8QLWHG 6WDWHV 86 7KH RWKHU
LQVWDQFHVFLWHGE\WKHPDMRULW\ZKHUHWKHFRXUWVKDYHXSKHOG
FRQJUHVVLRQDODXWKRULW\WRUHJXODWHWKHFKDQQHOVRILQWHUVWDWH
FRPPHUFHIDOOLQWRWKHFDWHJRU\RIUHJXODWLRQVWRSUHYHQWWKH
IHGHUDOO\PDLQWDLQHGFKDQQHOVIURPEHLQJXVHGIRULPPRUDORU
LOOHJDOSXUSRVHV7KH1DWLRQDO6WROHQ3URSHUW\$FW86&
†† FLWHG E\ WKH PDMRULW\ SURYLGHV DQ H[DPSOH RI
UHJXODWLRQGHVLJQHGWRSUHYHQWFULPLQDOVIURPSURILWLQJIURP
WKHRSHQFKDQQHOVRILQWHUVWDWHFRPPHUFH )XUWKHUFRXUWV
KDYH XSKHOG UHJXODWLRQV VXFK DV WKH +REEV $FW DLPHG DW
SURWHFWLQJ FRPPHUFH LWVHOI 7KHVH UHJXODWLRQV GHIHQG WKH
LQWHJULW\ DQG UHOLDELOLW\ RI WKH FKDQQHOV RI LQWHUVWDWH
FRPPHUFHDQGFRQJUHVVLRQDODXWKRULW\WRHQDFWWKHPIORZV
IURPWKHFRQVWLWXWLRQDOFKDUJHWR³UHJXODWH&RPPHUFHDPRQJ
WKHVHYHUDO6WDWHV´
,WPLJKWLQIDFWEHPRUHFRQYHQLHQWLQWKHFRQWH[WRIWRGD\¶V
KLJKO\PRELOHVRFLHW\DQGVKLIWLQJPRUHVLI&RQJUHVVHQDFWHG
XQLIRUP ODZV IRU FKLOG VXSSRUW FKLOG FXVWRG\ DQG VSRXVDO
VXSSRUWWKDWFRXOGEHXQLYHUVDOO\DSSOLHGDQGHDVLO\HQIRUFHG
ZLWKRXWUHJDUGWRVWDWHERXQGDULHV7KDWIHGHUDOVROXWLRQVWR
YDULRXV VRFLDO SUREOHPV PLJKW SURYH HIILFDFLRXV DQG
FRQYHQLHQW KRZHYHU GRHV QRW FRQIHU XSRQ &RQJUHVV WKH
1R 8QLWHG6WDWHVY)DDVVH
2QO\ WKH 7KLUG &LUFXLW¶V GHFLVLRQ LQ 8QLWHG 6WDWHV Y 3DUNHU
)G G &LU FHUW GHQLHG 86 UHOLHV VROHO\ RQ
/RSH]¶V FDWHJRU\ WKUHH
&RQJUHVVPD\UHJXODWHXQGHULWV FRPPHUFHSRZHU>@)LUVW
&RQJUHVVPD\UHJXODWHWKHXVHRIWKHFKDQQHOVRILQWHUVWDWH
FRPPHUFH´ ,G DW LQWHUQDO FLWDWLRQV RPLWWHG 7KLV
FDWHJRU\ LQFOXGHV ³DQ DWWHPSW WR SURKLELW WKH LQWHUVWDWH
WUDQVSRUWDWLRQ RI D FRPPRGLW\ WKURXJK WKH FKDQQHOV RI
FRPPHUFH´,GDW³6HFRQG&RQJUHVVLVHPSRZHUHGWR
UHJXODWH DQG SURWHFW WKH LQVWUXPHQWDOLWLHV RI LQWHUVWDWH
FRPPHUFHRUSHUVRQVRUWKLQJVLQLQWHUVWDWHFRPPHUFHHYHQ
WKRXJKWKHWKUHDWPD\FRPHRQO\IURPLQWUDVWDWHDFWLYLWLHV´
,GDW7KLUG &RQJUHVVPD\³UHJXODWHWKRVHDFWLYLWLHV
KDYLQJDVXEVWDQWLDOUHODWLRQWRLQWHUVWDWHFRPPHUFH´,GDW
$OWKRXJKWKHVHEURDGFDWHJRULHVPD\³QRWVDWLVI\
WKRVH ZKR VHHN PDWKHPDWLFDO RU ULJLG IRUPXODV´ WKH\ DUH
FRQVLVWHQWZLWKWKHPRGHUQ&RXUW¶V³SUDFWLFDOFRQFHSWLRQRI
FRPPHUFLDO UHJXODWLRQ´ LG DW .HQQHG\ -
FRQFXUULQJ ZKLFKFRQWLQXHVWRJXLGHWKH&RXUW¶VUHVROXWLRQ
RI&RPPHUFH&ODXVHFKDOOHQJHVWRIHGHUDOVWDWXWHV
$FFRUGLQJWR)DDVVH&RQJUHVVODFNVWKHSRZHUXQGHUDOO
WKUHH/RSH]FDWHJRULHVWRHQDFWWKH&65$:HGLVDJUHH7KH
&65$ UHJXODWHV H[FOXVLYHO\ LQWHUVWDWH FDVHV LQYROYLQJ D
GHEWRU SDUHQW¶V REOLJDWLRQ WR VHQG FRXUWRUGHUHG SD\PHQWV
WKURXJKLQWHUVWDWHFKDQQHOVRIFRPPHUFHIRUDFKLOGUHVLGLQJ
LQDQRWKHUVWDWH:HEHOLHYHWKDWDWWKHYHU\OHDVWWKH&65$
IDOOV ZLWKLQ &RQJUHVV¶V SRZHU WR UHJXODWH D ³WKLQJ´ LQ
LQWHUVWDWHFRPPHUFH1LQHRIWKHWHQFLUFXLWVWRKDYHXSKHOG
WKH &65$ KDYH KHOG VLPLODUO\ 6HH 8QLWHG 6WDWHV Y
%RQJLRUQR)G VW&LU XSKROGLQJ
VWDWXWHXQGHU/RSH]¶VFDWHJRU\WZR 8QLWHG6WDWHVY6DJH
)G G&LU FHUWGHQLHG86
XSKROGLQJVWDWXWHXQGHUFDWHJRU\WZR 8QLWHG6WDWHV
Y-RKQVRQ)G WK&LU FHUWGHQLHG
86 XSKROGLQJ VWDWXWH XQGHU FDWHJRU\ WZR
8QLWHG6WDWHVY%DLOH\)G WK&LU
FHUWGHQLHG86 XSKROGLQJVWDWXWHXQGHU
FDWHJRULHVRQHDQGWZR 8QLWHG6WDWHVY%ODFN)G

-- 7 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
WK &LU FHUW GHQLHG 86
XSKROGLQJ VWDWXWH XQGHU FDWHJRU\ WZR 8QLWHG 6WDWHV Y
&UDZIRUG)G WK&LU FHUWGHQLHG
86 XSKROGLQJVWDWXWHXQGHUDOOWKUHHFDWHJRULHV
8QLWHG6WDWHVY0XVVDUL)G WK&LU
FHUWGHQLHG86 XSKROGLQJVWDWXWHXQGHU
FDWHJRU\WZR 8QLWHG6WDWHVY+DPSVKLUH)G
WK &LU FHUW GHQLHG 86
XSKROGLQJVWDWXWHXQGHUFDWHJRULHVWZRDQGWKUHH 8QLWHG
6WDWHVY:LOOLDPV)G WK&LU FHUW
GHQLHG 86 XSKROGLQJ VWDWXWH XQGHU
FDWHJRU\WZR /RSH]DQGLWVSURJHQ\VLPSO\GRQRWFDELQ
&RQJUHVV¶VDXWKRULW\WRSUHYHQWWKHREVWUXFWLRQRIWKLQJVLQ
LQWHUVWDWHFRPPHUFH
/RSH]LQYROYHGDFKDOOHQJHWRWKH*XQ)UHH6FKRRO=RQHV
$FWRI ³*)6=$´ 86&† T ZKLFK
SURKLELWHGWKHNQRZLQJSRVVHVVLRQRIDJXQZLWKLQIHHW
RI D VFKRRO 7KH &RXUW TXLFNO\ UHMHFWHG WKH ILUVW WZR
FDWHJRULHV RI DXWKRULW\ DV SRVVLEOH FRQVWLWXWLRQDO EDVHV IRU
&RQJUHVV¶V HQDFWPHQW RI WKH VWDWXWH 7XUQLQJ WR WKH WKLUG
FDWHJRU\WKH&RXUWFRQFOXGHGWKDWEHFDXVHWKH*)6=$ZDV
³DFULPLQDOVWDWXWHWKDWE\LWVWHUPVKD>G@QRWKLQJWRGRZLWK
μFRPPHUFH¶ RU DQ\ VRUW RI HFRQRPLF HQWHUSULVH KRZHYHU
EURDGO\RQHPLJKWGHILQHWKRVHWHUPV´WKHVWDWXWHFRXOGQRW
VWDQG DV D YDOLG UHJXODWLRQ XQGHU WKH &RPPHUFH &ODXVH
/RSH]86DW7KH&RXUWHYDOXDWHGVHYHUDOIDFWRUV
LQLWVDVVHVVPHQWZKHWKHUWKH*)6=$VXEVWDQWLDOO\DIIHFWHG
LQWHUVWDWHFRPPHUFHGHVSLWHWKHIDFWWKDW³QRVXFKVXEVWDQWLDO
HIIHFW ZDV YLVLEOH WR WKH QDNHG H\H>@´ ILUVW ZKHWKHU WKH
VWDWXWHZDVSDUWRIDODUJHUUHJXODWLRQRIHFRQRPLFDFWLYLW\LQ
ZKLFK WKH UHJXODWRU\ VFKHPH FRXOG EH XQGHUFXW XQOHVV WKH
LQWUDVWDWHDFWLYLW\ZHUHUHJXODWHGVHFRQGZKHWKHUWKHVWDWXWH
FRQWDLQHG D ³MXULVGLFWLRQ HOHPHQW ZKLFK ZRXOG HQVXUH
WKURXJKFDVHE\FDVHLQTXLU\´WKDWHDFKILUHDUPSRVVHVVLRQ
DIIHFWHGRUKDGDQH[SOLFLWFRQQHFWLRQWRLQWHUVWDWHFRPPHUFH
DQG WKLUG ZKHWKHU WKH VWDWXWH RU LWV OHJLVODWLYH KLVWRU\
FRQWDLQHG FRQJUHVVLRQDO ILQGLQJV UHJDUGLQJ ZKHWKHU JXQ
SRVVHVVLRQLQDVFKRRO]RQHDIIHFWHGLQWHUVWDWHFRPPHUFH,G
DW$QVZHULQJDOOWKUHHLQTXLULHVLQWKHQHJDWLYHWKH
1R 8QLWHG6WDWHVY)DDVVH
VDWLVI\WKHMXULVGLFWLRQDOUHTXLUHPHQWWKDWWKHDFWLYLW\KDYHD
VXEVWDQWLDO UHODWLRQVKLS WR LQWHUVWDWH FRPPHUFH 6HH LG DW
7KH QRWLRQ WKDW WKH FRPPHUFH SRZHU LQFOXGHV
UHJXODWLRQRIDFWLYLWLHVWKDWDUHFRQQHFWHGZLWKDFRPPHUFLDO
WUDQVDFWLRQ ZKLFK YLHZHG LQ WKH DJJUHJDWH VXEVWDQWLDOO\
DIIHFWVLQWHUVWDWHFRPPHUFHVWHPVIURP:LFNDUGY)LOEXUQ
86 ³SHUKDSV WKH PRVW IDU UHDFKLQJ
H[DPSOHRI&RPPHUFH&ODXVHDXWKRULW\´/RSH]86DW
%XWWKH6XSUHPH&RXUWKDVPDGHFOHDUWKDW:LFNDUG
DSSOLHVWRODZVWKDWDUH³DQHVVHQWLDOSDUWRIDODUJHUUHJXODWLRQ
RIHFRQRPLFDFWLYLW\LQZKLFKWKHUHJXODWRU\VFKHPHFRXOGEH
XQGHUFXWXQOHVVWKHLQWUDVWDWHDFWLYLW\ZHUHUHJXODWHG´,GDW
6XFKLVQRWWKHFDVHKHUH7KH&65$GRHVQRWDGGUHVV
D VLWXDWLRQ LQYROYLQJ WKH ³DJJUHJDWH HIIHFW´ RI SRWHQWLDO
PDUNHWSDUWLFLSDQWV¶UHIXVDOWRSDUWLFLSDWHLQFRPPHUFH²LQQR
VPDOOSDUWEHFDXVHFKLOGVXSSRUWRUGHUVDUHQRWFRPPHUFLDO
0RUHRYHU,KDYHFRQVLGHUDEOHGRXEWWKDWDVDIDFWXDOPDWWHU
FRXUWRUGHUHGWUDQVIHUVRIZHDOWKIURPRQHVWDWHWRDQRWKHU
DIIHFWLQWHUVWDWHFRPPHUFH,QWKHDJJUHJDWHDQ\JLYHQVWDWH
VKRXOGKDYHDERXWDVPXFKPRQH\IURPVXSSRUWSD\PHQWV
OHDYLQJLWVERUGHUVDVHQWHULQJ6HH5HFHQW&DVH+DUY
/5HY ³7KXVWKHDPRXQWRIJRRGVERXJKW
LQ HDFK VWDWH UHODWLYH WR RWKHU VWDWHV VKRXOG EH EDVLFDOO\
XQFKDQJHGDQGLQWHUVWDWHFRPPHUFHOHIWXQDIIHFWHG´,G
/LNHZLVHIHGHUDOUHJXODWRU\MXULVGLFWLRQFDQQRWEHIRXQGHG
RQWKHSRVVLELOLW\WKDWQRQSD\PHQWRIVXSSRUWRUGHUVPLJKW
FDXVHLQGLYLGXDOFLWL]HQVWREHFRPHGHSHQGHQWRQSURJUDPV
IXQGHGZLWKIHGHUDOPRQH\7DNHQWRLWVORJLFDOFRQFOXVLRQ
WKLVUHDVRQLQJZRXOGDOORZ&RQJUHVVWRUHJXODWHDFWLYLW\RI
DQ\ SHUVRQ WKDW GHSOHWHV DQRWKHU SHUVRQ¶V DVVHWV DQG DW
ERWWRPLVQRGLIIHUHQWIURPWKH³FRVWVRIFULPH´DQG³QDWLRQDO
SURGXFWLYLW\´ DUJXPHQWV DOUHDG\ UHMHFWHG E\ WKH 6XSUHPH
&RXUW6HH/RSH]86DW:KDWWKH&RXUWVDLG
LQ /RSH] KROGV WUXH KHUH DV ZHOO ³7R XSKROG WKH>VH@
FRQWHQWLRQV ZH ZRXOG KDYH WR SLOH LQIHUHQFH XSRQ
LQIHUHQFH LQ D PDQQHU WKDW ZRXOG ELG IDLU WR FRQYHUW
FRQJUHVVLRQDO DXWKRULW\ XQGHU WKH &RPPHUFH &ODXVH WR D
JHQHUDOSROLFHSRZHURIWKHVRUWUHWDLQHGE\WKH6WDWHV´,GDW
$FFRUGLQJO\,FRQFOXGHWKDWWKH&65$LVQRWDYDOLG

-- 8 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
$VGLVFXVVHGHDUOLHUWKH*XQ)UHH6FKRRO=RQHV$FWFRXOG
QRW EH VXVWDLQHG DV D UHJXODWLRQ RI DQ DFWLYLW\ WKDW
VXEVWDQWLDOO\DIIHFWVLQWHUVWDWHFRPPHUFHIRUWKUHHUHDVRQV
6HFWLRQ T ZDVDFULPLQDOVWDWXWHWKDWE\LWVWHUPVKDG
QRWKLQJ WR GR ZLWK DQ\ VRUW RI HFRQRPLF HQWHUSULVH LW
FRQWDLQHGQRMXULVGLFWLRQDOHOHPHQWWKDWZRXOGKDYHHQVXUHG
WKURXJK FDVH E\ FDVH LQTXLU\ WKDW WKH DFWLYLW\ LQ TXHVWLRQ
DIIHFWHG LQWHUVWDWH FRPPHUFH DQG LW ZDV SDVVHG ZLWKRXW
ILQGLQJVHODERUDWLQJWKHOLQNEHWZHHQWKHDFWLYLW\FULPLQDOL]HG
DQGLQWHUVWDWHFRPPHUFH/RSH]86DW7KH
&65$ IDLOV FRQVWLWXWLRQDO PXVWHU IRU SUHFLVHO\ WKHVH VDPH
UHDVRQV
7KHPDQQHULQZKLFKWKHDFWLYLW\UHJXODWHGE\WKH&65$
VXEVWDQWLDOO\DIIHFWVLQWHUVWDWHFRPPHUFHLVXQFOHDU³>7@RWKH
H[WHQWWKDWFRQJUHVVLRQDOILQGLQJVZRXOGHQDEOHXVWRHYDOXDWH
WKH OHJLVODWLYH MXGJPHQW WKDW WKH >IDLOXUH WR VDWLVI\ FKLOG
VXSSRUW REOLJDWLRQV@ VXEVWDQWLDOO\ DIIHFWHG LQWHUVWDWH
FRPPHUFHHYHQWKRXJKQRVXFKVXEVWDQWLDOHIIHFWZDVYLVLEOH
WRWKHQDNHGH\HWKH\DUHODFNLQJKHUH´/RSH]86DW
,WLVSRVVLEOHWRLQIHUIURPWKHOHJLVODWLYHKLVWRU\WKDW
DSSUR[LPDWHO\ ELOOLRQ LQ LQWHUVWDWH FKLOG VXSSRUW
REOLJDWLRQVJRXQSDLGDQQXDOO\DQGWKDW&RQJUHVVEHOLHYHG
WKDWVRPHIDPLOLHVZHUHGULYHQWRIHGHUDOSXEOLFDVVLVWDQFHDV
DUHVXOWRIXQSDLGFKLOGVXSSRUW6HH+55HSDW
REVHUYLQJWKDWELOOLRQLQVXSSRUWREOLJDWLRQVDUH
QRWPHWHDFK\HDUDQGWKDWDSSUR[LPDWHO\RQHWKLUGRIFKLOG
VXSSRUW FDVHV FRQFHUQ FKLOGUHQ ZKRVH IDWKHUV OLYH LQ D
GLIIHUHQW VWDWH 7KHVH REVHUYDWLRQV GR QRW DPRXQW WR D
FRQJUHVVLRQDO FRQFOXVLRQ WKDW XQSDLG FKLOG VXSSRUW
VXEVWDQWLDOO\DIIHFWVLQWHUVWDWHFRPPHUFHKRZHYHUDQGFRXUWV
ZRXOG QRW VLPSO\ DFFHSW WKDW FRQFOXVLRQ EDVHG RQ VXFK
ILQGLQJVLQDQ\HYHQW6HH8QLWHG6WDWHVY0RUULVRQ6
&WDW QRWLQJWKDW³ZKHWKHUSDUWLFXODURSHUDWLRQVDIIHFW
LQWHUVWDWH FRPPHUFH VXIILFLHQWO\ WR FRPH XQGHU WKH
FRQVWLWXWLRQDO SRZHU RI &RQJUHVV WR UHJXODWH WKHP LV
XOWLPDWHO\DMXGLFLDOUDWKHUWKDQDOHJLVODWLYHTXHVWLRQ´
)LUVW WKH PHUH IDFW WKDW WKH DJJUHJDWH VRFLDO FRVWV RI DQ
DFWLYLW\DPRXQWWRDODUJHGROODUILJXUHFDQQRWZLWKRXWPRUH
1R 8QLWHG6WDWHVY)DDVVH
:H GR QRW EHOLHYH QRU GRHV 0RUULVRQ KROG WKDW DOO DFWLYLW\
UHJXODWHG E\ WKH &RPPHUFH &ODXVH PXVW EH HFRQRPLF LQ QDWXUH 0RUULVRQ
VSRNH RQO\ WR &RQJUHVVLRQDO UHJXODWLRQ RI H[FOXVLYHO\ LQWUDVWDWH DFWLYLWLHV
3XUVXDQW WR LWV FDWHJRU\ RQH DQG WZR SRZHU &RQJUHVV PD\ IRU H[DPSOH
UHJXODWH WKH LQVWUXPHQWDOLWLHV RI FRPPHUFH VXFK DV DXWRPRELOHV RU SODQHV
&RQJUHVV PD\ UHJXODWH WKLQJV LQ FRPPHUFH WKDW DUH QRQFRPPHUFLDO VXFK
DV ORWWHU\ WLFNHWV DQG &RQJUHVV PD\ UHJXODWH WKH FKDQQHOV RI LQWHUVWDWH
FRPPHUFH E\ HJ SURKLELWLQJ UDFLDO GLVFULPLQDWLRQ DQG WKHUHE\
LQFUHDVLQJ WKH IORZ RI WUDIILF WKURXJK LQWHUVWDWH FKDQQHOV
&RXUWVWUXFNGRZQWKHVWDWXWHDVDQLPSHUPLVVLEOHH[HUFLVHRI
&RQJUHVV¶V&RPPHUFH&ODXVHDXWKRULW\
,Q8QLWHG6WDWHVY0RUULVRQ6&W WKH
6XSUHPH&RXUWHODERUDWHGXSRQWKH/RSH]&RXUW¶VFDWHJRU\
WKUHH DQDO\VLV LQ LWV UHYLHZ RI WKH FRQVWLWXWLRQDOLW\ RI
86&†WKH9LROHQFH$JDLQVW:RPHQ$FWRI¶V
FLYLO UHPHG\ SURYLVLRQ 6HFWLRQ SURYLGHG D IHGHUDO
FLYLO UHPHG\ IRU WKH YLFWLPV RI D ³FULPH>@ RI YLROHQFH
PRWLYDWHGE\JHQGHU´86&† E 7KH
0RUULVRQ&RXUWILUVWQRWHGWKDW³DIDLUUHDGLQJRI/RSH]VKRZV
WKDWWKHQRQHFRQRPLFFULPLQDOQDWXUHRIWKHFRQGXFWDWLVVXH
ZDVFHQWUDOWRRXUGHFLVLRQLQWKDWFDVH´0RUULVRQ6&W
DW 7KH &RXUW WKHQ VWDWHG WKDW ³/RSH]¶V UHYLHZ RI
&RPPHUFH&ODXVHFDVHODZGHPRQVWUDWHVWKDWLQWKRVHFDVHV
ZKHUH ZH KDYH VXVWDLQHG IHGHUDO UHJXODWLRQ RI LQWUDVWDWH
DFWLYLW\ EDVHG XSRQ WKH DFWLYLW\¶V VXEVWDQWLDO HIIHFWV RQ
LQWHUVWDWHFRPPHUFHWKHDFWLYLW\LQTXHVWLRQKDVEHHQVRPH
VRUWRIHFRQRPLFHQGHDYRU´,G,QVWULNLQJGRZQWKHVWDWXWH
WKH&RXUWQRWHGWKDWVLPLODUWRSRVVHVVLRQRIDJXQZLWKLQ
IHHWRIDVFKRRO]RQH³>J@HQGHUPRWLYDWHGFULPHVRI
YLROHQFH DUH QRW LQ DQ\ VHQVH RI WKH SKUDVH HFRQRPLF
DFWLYLW\´ ,G DW $OWKRXJK WKH &RXUW RVWHQVLEO\
HVFKHZHGWKHFUHDWLRQRIDEULJKWOLQHUXOHLGWKH&RXUW¶V
KROGLQJLPSOLHGWKDWIRUDVWDWXWHZKLFKUHJXODWHVLQWUDVWDWH
DFWLYLW\ WR EH XSKHOG XQGHU FDWHJRU\ WKUHH LW PXVW EH
³HFRQRPLF´LQQDWXUH
7RWKHH[WHQWWKDW)DDVVHUHOLHVRQ/RSH]DQG0RUULVRQDV
VXSSRUW IRU KLV DUJXPHQW KH UHYHDOV D VHULRXV
PLVXQGHUVWDQGLQJRIWKHVHSUHFHGHQWV8QGRXEWHGO\/RSH]

-- 9 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
2XW RI FRQFHUQ WKDW RWKHU OLWLJDQWV ZLOO UHO\ XSRQ LW ZH PXVW WR SXW
WR UHVW WKH GLVVHQW¶V UHOLDQFH RQ WKH QRWLRQ WKDW LQWHUVWDWH FRPPHUFH
UHTXLUHV ³UHFLSURFLW\´ GHILQHG DV ³WKH PXWXDO H[FKDQJH RI YDOXH
PRWLYDWHG E\ HFRQRPLF VHOILQWHUHVW´ SRVW S DQG WKDW EHFDXVH
SD\PHQW RI D GHEW LV QRW UHFLSURFDO LW LV QRW D SURSHU VXEMHFW IRU
&RQJUHVV¶V &RPPHUFH &ODXVH SRZHU :H NQRZ RI QR FRXUW WKDW KDV
LPSRVHG VXFK D UHVWULFWLYH QRWLRQ RI FRPPHUFH XSRQ WKH &RQVWLWXWLRQ &I
%DLOH\ )G DW Q UHMHFWLQJ GLVVHQW¶V DWWHPSW WR GHILQH
FRPPHUFH DV ³ELODWHUDO FRPPHUFLDO WUDQVDFWLRQ>@´ DQG QRWLQJ WKDW VXFK
GHILQLWLRQ ZRXOG UHTXLUH RYHUUXOLQJ QXPHURXV 6XSUHPH &RXUW SUHFHGHQWV
FLWLQJ +RNH Y 8QLWHG 6WDWHV 86 KROGLQJ WKDW
DQG0RUULVRQSURYLGHORZHUFRXUWVZLWKVLJQLILFDQWJXLGDQFH
LQ WKHLU UHYLHZ RI IHGHUDO VWDWXWHV UHJXODWLQJ H[FOXVLYHO\
LQWUDVWDWHDFWLYLW\&I8QLWHG6WDWHVY5REHUWVRQ86
H[SODLQLQJ WKDW WKH FDWHJRU\ WKUHH
³VXEVWDQWLDOO\DIIHFWV´WHVWQHHGRQO\EHDSSOLHGWRLQWUDVWDWH
FRPPHUFLDODFWLYLW\WKDWKDVLQWHUVWDWHHIIHFWV 1HLWKHU/RSH]
QRU0RUULVRQKRZHYHUVSHDNVLQPXFKGHWDLOWRWKHILUVWRU
VHFRQG FDWHJRULHV RI DFWLYLW\ WKDW &RQJUHVV PD\ YDOLGO\
UHJXODWH XQGHU LWV &RPPHUFH &ODXVH SRZHU $W RUDO
DUJXPHQW FRXQVHO IRU )DDVVH VWDWHG WKDW 0RUULVRQ ZDV
³DVSLUDWLRQDO´ LQ QDWXUH DQG WKDW LWV UHDVRQLQJ VKRXOG EH
H[WHQGHGWRWKHRWKHUFDWHJRULHVRIUHJXODWLRQ,WLVQRWRXU
SUDFWLFHWRGHFLGHFDVHVEDVHGRQDKXQFKWKDWDGHFLVLRQE\
WKH 6XSUHPH &RXUW LV DVSLUDWLRQDO :H GR NQRZ WKDW WKH
LQVWDQW FDVH LQGLVSXWDEO\ LQYROYHV WKH UHJXODWLRQ RI
H[FOXVLYHO\LQWHUVWDWHWUDQVDFWLRQVDQGWKDWDVVXFKLWGRHV
QRW LPSOLFDWH WKH 6XSUHPH &RXUW¶V SUHHPLQHQW FRQFHUQ LQ
/RSH] DQG 0RUULVRQ QDPHO\ WKDW &RQJUHVV¶V &RPPHUFH
&ODXVH SRZHU WDNHQ WRR IDU ZLOO HUDVH WKH GLVWLQFWLRQ
³EHWZHHQ ZKDW LV WUXO\ QDWLRQDO DQG ZKDW LV WUXO\ ORFDO´
0RUULVRQ 6 &W DW 7KH &65$ LV LQ ILQH QR
GLIIHUHQW IURP P\ULDG RWKHU $FWV RI &RQJUHVV WKDW WKH
6XSUHPH&RXUWKDVURXWLQHO\XSKHOG
%³7KLQJ´LQ&RPPHUFH
$V WKH 6XSUHPH &RXUW KDV UHSHDWHGO\ PDGH FOHDU
&RQJUHVV¶VSRZHUWRUHJXODWHWKLQJVLQLQWHUVWDWHFRPPHUFHLV
SOHQDU\ 6HH *LEERQV 86 :KHDW DW
1R 8QLWHG6WDWHVY)DDVVH
LQWHUVWDWHFRPPHUFHZKLFK&RQJUHVVKDVDXWKRULW\WRSUHYHQW
6HHHJ8QLWHG6WDWHVY0XVVDUL)G WK&LU
, DJUHH WKDW &RQJUHVV KDV SRZHU WR UHPRYH
LPSHGLPHQWVWRLQWHUVWDWHFRPPHUFH7KXV&RQJUHVVPD\
SURKLELW UDFLDO GLVFULPLQDWLRQ WKDW REVWUXFWV WKH IORZ RI
LQWHUVWDWHFRPPHUFHVHH+HDUWRI$WODQWD 0RWHOY8QLWHG
6WDWHV86 XSKROGLQJWKH&LYLO5LJKWV
$FW RI SURKLELW YLROHQW DFWLRQV WKDW LQWHUIHUH ZLWK
LQWHUVWDWHFRPPHUFHVHH8QLWHG6WDWHVY*UHHQ 86
XSKROGLQJ WKH +REEV $FW DQG SURKLELW
UHVWUDLQWV RI WUDGH WKDW REVWUXFW LQWHUVWDWH FRPPHUFH VHH
6WDQGDUG 2LO &R Y 8QLWHG 6WDWHV 86
XSKROGLQJWKH6KHUPDQ$FW %XWWKLVOLQHRIFDVHVGHDOV
ZLWKDFWLYHREVWUXFWLRQRIWKHIORZRILQWHUVWDWHFRPPHUFHLW
GRHVQRWVWDQGIRUWKHPRUHUDGLFDOSURSRVLWLRQWKDW&RQJUHVV
LVHPSRZHUHGWRUHJXODWHWKHSDVVLYHIDLOXUHRILQGLYLGXDOVWR
HQJDJHLQLQWHUVWDWHFRPPHUFH6HH%DLOH\)GDW
Q 6PLWK - GLVVHQWLQJ 0RUH LPSRUWDQWO\ WKH
REVWUXFWLRQ DUJXPHQW FRQIODWHV WKH /RSH] FDWHJRULHV $
SURKLELWLRQRQREVWUXFWLRQRIFRPPHUFHGRHVQRWUHJXODWH³D
WKLQJ´LQFRPPHUFHQRUGRHVREVWUXFWLRQFRQVWLWXWHD³XVH´
RIWKHFKDQQHOVRILQWHUVWDWHFRPPHUFHXQGHUWKHFRPPRQ
PHDQLQJ RI ³XVH´ ,G 5DWKHU &RQJUHVV KDV DXWKRULW\ WR
SURKLELWDFWLYLWLHVWKDWLQWHUIHUHZLWKFRPPHUFHEHFDXVHWKRVH
DFWLYLWLHV WDNHQ LQ WKH DJJUHJDWH VXEVWDQWLDOO\ DIIHFW
FRPPHUFH7KH&65$PXVWWKHUHIRUHVWDQGRUIDOOOLNHWKH
*XQ)UHH6FKRRO=RQHV$FWDVDUHJXODWLRQXQGHU/RSH]¶V
ILQDOFDWHJRU\
0RVWVLJQLILFDQWO\E\HIIHFWLYHO\SUHGLFDWLQJMXULVGLFWLRQRQ
PHUHGLYHUVLW\RIUHVLGHQF\WKH$FW³UHJXODWHVHYHU\LQWHUVWDWH
REOLJDWLRQ ZLWKRXW H[FHSWLRQ´ %DLOH\ )G DW
6PLWK-GLVVHQWLQJ %XWDV,KDYHDOUHDG\VKRZQFKLOG
VXSSRUWREOLJDWLRQVDUHQRWFRPPHUFLDOLQFKDUDFWHU,QWKH
DEVHQFHRIDPHFKDQLVPWKDWZRXOGOLQNSDUWLFXODUVXSSRUW
REOLJDWLRQVWRVRPHVRUWRIHFRQRPLFHQWHUSULVHVXVWDLQLQJ
WKH FRQVWLWXWLRQDOLW\ RI WKH &65$ RQ WKH EDVLV RI WKLV
SXUSRUWHG MXULVGLFWLRQDO QH[XV UHTXLUHV WKH H[FLVLQJ RI WKH
HOHPHQWRI³FRPPHUFH´IURPWKH³&RPPHUFH&ODXVH´6HH
LG

-- 10 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
NQRZ RI QR FDVH WKDW KROGV WKDW &RQJUHVV KDV SOHQDU\
DXWKRULW\WRUHJXODWHDGHEWPHUHO\EHFDXVHWKHREOLJRUDQG
REOLJHHUHVLGHLQGLIIHUHQWVWDWHV7KLVWKHRU\UHOLHVXSRQVXFK
SUH/RSH]FDVHVDV'DKQNH:DONHU0LOOLQJ&RY%RQGXUDQW
86 DQG$OOHQEHUJ&RWWRQ&RY3LWWPDQ
86 ,Q WKHVH FDVHV WKH SDUWLHV H[HFXWHG
FRQWUDFWV IRU WKH VDOH RI JRRGV WKDW ZHUH WR EH SHUIRUPHG
ZLWKLQ WKH WHUULWRULDO OLPLWV RI D SDUWLFXODU VWDWH EXW ZKLFK
FRQWHPSODWHGWKDWWKHJRRGVZRXOGHQWHUWKHIORZRILQWHUVWDWH
FRPPHUFH :KHQ WKHVH FRQWUDFWV ZHUH EUHDFKHG WKH
GHIHQGDQWV DVVHUWHG DV D GHIHQVH VWDWH ODZV SUHVFULELQJ
FRQGLWLRQVRQZKLFKIRUHLJQFRUSRUDWLRQVPLJKWGREXVLQHVV
LQWKHVWDWHLQZKLFKWKHFRQWUDFWZDVWREHSHUIRUPHG7KH
6XSUHPH&RXUWKHOGWKDWWKHVHEXVLQHVVTXDOLILFDWLRQODZVDV
DSSOLHGYLRODWHGWKH'RUPDQW&RPPHUFH&ODXVHVD\LQJ³ZH
WKLQNWKHWUDQVDFWLRQZDVLQLQWHUVWDWHFRPPHUFH´'DKQNH
:DONHU86DW7HPSWLQJWKRXJKLWPD\EHWRDSSO\
WKLVVQLSSHWLQDQDQDO\VLVXQGHU/RSH]¶VVHFRQGFDWHJRU\WKH
6XSUHPH&RXUWLWVHOIKDVDFNQRZOHGJHGWKDWWKHFOHDULPSRUW
RI'DKQNH:DONHUDQG$OOHQEHUJ&RWWRQLVWKDWDVWDWHKDVQR
SRZHU ³WR SUHYHQW DQ HQJDJHPHQW LQ LQWHUVWDWH FRPPHUFH
ZLWKLQKHUOLPLWVH[FHSWE\KHUOHDYH´6RQQHERUQ%URVY
&XUHWRQ86 7KHVHFDVHVVXSSRUWWKH
WUDGLWLRQDOYLHZWKDWWKHIHGHUDOSRZHUWRUHJXODWHFRPPHUFH
SUHYHQWVVWDWHVIURPLPSHGLQJWKHIORZRIJRRGVDQGVHUYLFHV
DFURVV VWDWH OLQHV DQG LQ QR ZD\ VXJJHVW WKDW WKH IHGHUDO
OHJLVODWXUH KDV UHJXODWRU\ MXULVGLFWLRQ ZLWK UHVSHFW WR WKH
FRQGXFWRIFRQWUDFWLQJSDUWLHVRQWKHEDVLVRIPHUHGLYHUVLW\
RI UHVLGHQF\ 6HH 8QLWHG 6WDWHV Y 6RXWK(DVWHUQ
8QGHUZULWHUV$VV¶Q86 HPSKDVL]LQJ
WKDW OHJDO IRUPXODH GHYLVHG WR DVVHVV VWDWH SRZHU FDQQRW
³XQFULWLFDOO\EHDFFHSWHGDVWUXVWZRUWK\JXLGHVWRGHWHUPLQH
&RQJUHVVLRQDOSRZHUXQGHUWKH&RPPHUFH&ODXVH´
(YHQLIWKH\GLGVRVXJJHVWVWLOODQRWKHUREVWDFOHVWDQGVLQ
WKHZD\RIWKHK\SRWKHVLVWKDWWKH&65$UHJXODWHVD³WKLQJLQ
LQWHUVWDWHFRPPHUFH´6LPSO\SXWGHIHQGDQWVLQ&65$FDVHV
GRQRWSXWVRPHWKLQJLQWRWKHIORZRILQWHUVWDWHFRPPHUFH
UDWKHUWKH\DUHEHLQJSURVHFXWHGIRUIDLOLQJWRGRVR,WKDV
EHHQDUJXHGWKDWWKLVIDLOXUHDPRXQWVWRDQ³REVWUXFWLRQ´RI
1R 8QLWHG6WDWHVY)DDVVH
LW LV LQWHUVWDWH FRPPHUFH WR WUDQVSRUW D ZRPDQ IURP RQH VWDWH WR DQRWKHU
LQ D FRPPRQ FDUULHU 8QLWHG 6WDWHV Y 6LPSVRQ 86
KROGLQJ WKDW LW LV LQWHUVWDWH FRPPHUFH WR FDUU\ DFURVV D VWDWH OLQH LQ D
SULYDWH DXWRPRELOH ILYH TXDUWV RI ZKLVNH\ LQWHQGHG IRU SHUVRQDO
FRQVXPSWLRQ DQG 3HQVDFROD 7HO &R Y :HVWHUQ 8QLRQ 7HO &R 86
2WWR KROGLQJ WKDW LW LV LQWHUVWDWH FRPPHUFH WR WUDQVPLW
LQIRUPDWLRQ RYHU LQWHUVWDWH WHOHJUDSK OLQHV ,QGHHG WKH GLVVHQW LQ RXU
FDVH FDQ RQO\ SRLQW WR D GLVVHQW LQ WKH )LIWK &LUFXLW¶V %DLOH\ GHFLVLRQ WR
VXSSRUW LWV QRYHO SURSRVLWLRQ DQG HYHQ WKDW GLVVHQW OLPLWHG LWV UHTXLUHPHQW
RI UHFLSURFLW\ WR ³WKLQJV´ LQ FRPPHUFH VHH %DLOH\ )G DW
Q 6PLWK - GLVVHQWLQJ ZKHUHDV WKH GLVVHQW LQ RXU FDVH ZRXOG DSSO\
LWV QDUURZ XQGHUVWDQGLQJ RI FRPPHUFH WR HYHU\ FRQFHLYDEOH FDWHJRU\ ,Q
DGGLWLRQ WR RYHUUXOLQJ YDULRXV 6XSUHPH &RXUW SUHFHGHQWV WKH GLVVHQW¶V
GHILQLWLRQ RI FRPPHUFH ZRXOG UHQGHU XQFRQVWLWXWLRQDO LQQXPHUDEOH
IHGHUDO VWDWXWHV )RU H[DPSOH DOO IHGHUDO VWDWXWHV WKDW FULPLQDOL]H WKH
SRVVHVVLRQ RI GUXJV RU ZHDSRQV ZKLFK KDYH WUDYHOHG LQWHUVWDWH ZRXOG RQ
WKH GLVVHQW¶V YLHZ RI FRPPHUFH KDYH WR EH VWUXFN GRZQ EHFDXVH WKHUH LV
QR UHFLSURFLW\ LQ SRVVHVVLRQ QRU GRHV SRVVHVVLRQ RI D FRQWUDEDQG
VXEVWDQFH LQYRNH ³WKH ZHDOWKFUHDWLQJ DVSHFW RI PDUNHWV´ 3RVW DW S
7KH VDPH FDQ EH VDLG RI IHGHUDO UHJXODWLRQV RI WKH DLU DQG ZDWHU RI WKH
KLJKZD\V DQG WKH QDWLRQ¶V DLUVSDFH DQG P\ULDG VDIHW\ UHJXODWLRQV QRQH
RI ZKLFK LQYROYH UHFLSURFLW\ 7KH PRVW OLNHO\ JHQHVLV IRU WKH GLVVHQW¶V
UHDVRQLQJ LV WKDW OLQH RI FDVHV VXFK DV +DPPHU Y 'DJHQKDUW 86
LQ ZKLFK WKH 6XSUHPH &RXUW UHOLHG RQ D QDUURZ
FRQVWUXFWLRQ RI WKH ZRUG ³FRPPHUFH´ DQG DWWHPSWHG WR FUDIW ULJLG
GLVWLQFWLRQV EHWZHHQ ³PDQXIDFWXUH´ ³SURGXFWLRQ´ DQG ³PLQLQJ´ WKRXJKW
WR EH WKH SURYLQFH RI WKH VWDWHV DQG DFWXDO LQWHUVWDWH ³FRPPHUFH´ 6HH
:LFNDUG Y )LOEXUQ 86 GLVFXVVLQJ
GHYHORSPHQW RI &RPPHUFH &ODXVH MXULVSUXGHQFH 7KH 'DJHQKDUW OLQH
RI FDVHV ZDV RI FRXUVH VXEVHTXHQWO\ RYHUUXOHG DQG FXUUHQWO\ UHSUHVHQWV
D FRPSOHWHO\ GLVFUHGLWHG XQGHUVWDQGLQJ RI WKH &RPPHUFH &ODXVH ,Q DQ\
HYHQW ZH KDYH QR GRXEW WKDW WKH 6XSUHPH &RXUW¶V FRQWHPSRUDU\
XQGHUVWDQGLQJ RI ³FRPPHUFH´ LQFOXGHV DQ LQWHUVWDWH PRQH\ SD\PHQW
H[SODLQLQJWKDWWKH&RPPHUFH&ODXVH³FRPSUHKHQG>V@HYHU\
VSHFLHVRIFRPPHUFLDOLQWHUFRXUVH´DPRQJWKHVHYHUDOVWDWHV
DQGWKDW&RQJUHVV¶V&RPPHUFH&ODXVHSRZHU³LVFRPSOHWHLQ
LWVHOI PD\ EH H[HUFLVHG WR LWV XWPRVW H[WHQW DQG
DFNQRZOHGJHVQROLPLWDWLRQVRWKHUWKDQDUHSUHVFULEHGLQWKH
FRQVWLWXWLRQ´ $PRQJ WKH UHDVRQV WKH QDWLRQ¶V )RXQGHUV
LPEXHGWKHQDWLRQDOOHJLVODWXUHZLWKDQH[SOLFLWJUDQWRISRZHU
LQ$UWLFOH,†FOZDVWRHQVXUHWKDWWKH&RQJUHVVFRXOG
UHJXODWHFRPPHUFHWKDWH[WHQGHGEH\RQGDQLQGLYLGXDOVWDWH¶V
ERUGHUV6HH&DPSV1HZIRXQG2ZDWRQQD,QFY7RZQRI

-- 11 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
+DUULVRQ86 H[SODLQLQJZLWKUHVSHFW
WRDGRUPDQW&RPPHUFH&ODXVHFKDOOHQJHWRDVWDWHVWDWXWH
WKDW³>L@IWKHUHZDVDQ\RQHREMHFWULGLQJRYHUHYHU\RWKHULQ
WKH DGRSWLRQ RI WKH FRQVWLWXWLRQ LW ZDV WR NHHS WKH
FRPPHUFLDO LQWHUFRXUVH DPRQJ WKH 6WDWHV IUHH IURP DOO
LQYLGLRXVDQGSDUWLDOUHVWUDLQWV´ TXRWLQJ*LEERQV86
:KHDW DW FI /RSH] 86 DW .HQQHG\ -
FRQFXUULQJ ³&RQJUHVVFDQUHJXODWHLQWKHFRPPHUFLDOVSKHUH
RQWKHDVVXPSWLRQWKDWZHKDYHDVLQJOHPDUNHWDQGDXQLILHG
SXUSRVHWREXLOGDVWDEOHQDWLRQDOHFRQRP\´ ,QGHHGWKH
)RXQGHUVUHFRJQL]HGWKDWFRPPHUFHWKDWFURVVHGVWDWHOLQHV
FRXOGH[FHHGWKHVWDWHV¶FDSDFLW\WRUHJXODWHVXFKFRPPHUFH
XQLIRUPO\RUWRHQIRUFHWKHVWDWHV¶RZQODZV,Q8QLWHG6WDWHV
Y 6RXWK(DVWHUQ 8QGHUZULWHUV $VV¶Q WKH 6XSUHPH &RXUW
REVHUYHG
7KH SRZHU FRQILQHG WR &RQJUHVV E\ WKH &RPPHUFH
&ODXVHLVGHFODUHGLQ7KH)HGHUDOLVWWREHIRUWKHSXUSRVH
RI VHFXULQJ WKH μPDLQWHQDQFH RI KDUPRQ\ DQG SURSHU
LQWHUFRXUVH DPRQJ WKH 6WDWHV¶ ,W LV WKH SRZHU WR
OHJLVODWHFRQFHUQLQJWUDQVDFWLRQVZKLFKUHDFKLQJDFURVV
VWDWHERXQGDULHVDIIHFWWKHSHRSOHRIPRUHVWDWHVWKDQ
RQH²WRJRYHUQDIIDLUVZKLFKWKHLQGLYLGXDOVWDWHVZLWK
WKHLUOLPLWHGWHUULWRULDOMXULVGLFWLRQVDUHQRWIXOO\FDSDEOH
RIJRYHUQLQJ
8QLWHG6WDWHVY6RXWK(DVWHUQ8QGHUZULWHUV$VV¶Q86
IRRWQRWHVRPLWWHG
,Q H[HUFLVLQJ LWV SRVLWLYH &RPPHUFH &ODXVH SRZHU
³&RQJUHVVKDVRIWHQSDVVHGOHJLVODWLRQWRKHOSWKH6WDWHVVROYH
SUREOHPV WKDW GHI\ ORFDO VROXWLRQ´ 6DJH )G DW
7KXVLQ3HUH]Y8QLWHG6WDWHV86 WKH
6XSUHPH&RXUWQRWHGWKDWOHJLVODWLYHKLVWRU\IRUWKH&RQVXPHU
&UHGLW3URWHFWLRQ$FW86&†HWVHTZKLFKPDNHV
LQWUDVWDWHORDQVKDUNLQJDFWLYLWLHVDIHGHUDOFULPHUHIOHFWHG
&RQJUHVV¶V FRQFHUQ WKDW ORDQ VKDUNLQJ D VLJQLILFDQW
FRPSRQHQWRIRUJDQL]HGFULPHZDVDQDWLRQDODIIOLFWLRQDQG
UHTXLUHG D IHGHUDO DQWLGRWH EHFDXVH ³>W@KH SUREOHP VLPSO\
>FRXOGQRW@EHVROYHGE\WKH6WDWHVDORQH´(DUOLHULQ8QLWHG
1R 8QLWHG6WDWHVY)DDVVH
LQWHUVWDWH KLJKZD\ V\VWHP LQWHUVWDWH WHOHSKRQH DQG
WHOHJUDSK OLQHV DLU WUDIILF URXWHV WHOHYLVLRQ DQG UDGLR
EURDGFDVWIUHTXHQFLHV´*LEEVY%DEELWW)G
WK&LU DOWHUDWLRQLQRULJLQDO LQWHUQDOTXRWDWLRQ
PDUNVRPLWWHG &RQJUHVVKDVEURDGDXWKRULW\ZLWKUHVSHFWWR
WKHVHFKDQQHOVQRWRQO\PD\WKH/HJLVODWXUHUHJXODWHWKHP
GLUHFWO\ LW PD\ DFW WR NHHS WKHP ³IUHH IURP LPPRUDO DQG
LQMXULRXVXVHV´&DPLQHWWLY8QLWHG6WDWHV86
%XW &RQJUHVV GRHV QRW DFW SXUVXDQW WR WKLV
DXWKRULW\ ZKHQ LW UHJXODWHV DQ DFWLYLW\ WKDW PHUHO\
³LPSOLFDWHV´RU³LQYRNHV´WKHXVHRIWKHFKDQQHOVRILQWHUVWDWH
FRPPHUFH&I%DLOH\)GDW7KXVWKLVFRXUW
KHOGLQ8QLWHG6WDWHVY$EGXOODKWKDWWKHEDQRQWUDIILFNLQJ
LQFRQWUDEDQGFLJDUHWWHVIRXQGDW86&††GRHV
QRWIDOOZLWKLQWKHILUVW/RSH]FDWHJRU\EHFDXVHWKHSXUSRVHRI
WKH EDQ LV QRW ³WR NHHS RSHQ WKH YHU\ DYHQXHV E\ ZKLFK
LQWHUVWDWHFRPPHUFHLVWUDQVDFWHG´8QLWHG6WDWHVY$EGXOODK
)G WK&LU ,QGHHGWRKROGRWKHUZLVH
ZRXOGEHWRFROODSVHWKHILUVWDQGVHFRQG/RSH]FDWHJRULHV
DQ\ UHJXODWLRQ RI D WKLQJ LQ LQWHUVWDWH FRPPHUFH ZRXOG
QHFHVVDULO\ EH D UHJXODWLRQ RI WKH XVH RI WKH FKDQQHOV RI
LQWHUVWDWHFRPPHUFH7KHIDLOXUHWRSODFHDSD\PHQWLQWKH
FKDQQHOV RI LQWHUVWDWH FRPPHUFH GRHV QRW FRUUXSW WKRVH
FKDQQHOVSXWWKHPWRLPPRUDOXVHVRULQDQ\ZD\WKUHDWHQWR
FORVHRULPSHGHWKHP$VVXPLQJWKDWWKH6XSUHPH&RXUWGLG
QRWLGO\GUDZWKHGLVWLQFWLRQVWKDWLWGLG,FDQQRWDJUHHWKDW
WKH &65$ UHJXODWHV WKH FKDQQHOV RI LQWHUVWDWH FRPPHUFH
PHUHO\E\FULPLQDOL]LQJWKHIDLOXUHWRPDNHVXSSRUWSD\PHQWV
ZKLFKLIPDGHZRXOGQRUPDOO\HQWHUWKHIORZRILQWHUVWDWH
FRPPHUFH
6LPLODUO\ XQSHUVXDVLYH LV WKH DUJXPHQW WKDW WKH &65$
UHJXODWHV D WKLQJ LQ LQWHUVWDWH FRPPHUFH 7KLV FRQWHQWLRQ
UHOLHVRQDQDQDORJ\EHWZHHQFKLOGVXSSRUWREOLJDWLRQVDQG
LQWHUVWDWHGHEWVDQGRQWKHIXUWKHUVXSSRVLWLRQWKDW&RQJUHVV
PD\FRPSHOSD\PHQWRIGHEWVWKURXJKLWVSRZHUWRSUHYHQW
REVWUXFWLRQ RI LQWHUVWDWH FRPPHUFH $FFHSWLQJ IRU WKH
PRPHQWWKHULFNHW\DQDORJ\EHWZHHQVXSSRUWREOLJDWLRQVDQG
GHEWV DOWKRXJK DV QRWHG DERYH , GR QRW EHOLHYH VXSSRUW
REOLJDWLRQV LQ IDFW KDYH DQ\ FRPPHUFLDO FKDUDFWHU DW DOO ,

-- 12 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
7KH PDMRULW\ IDLOV WR LGHQWLI\ FOHDUO\ ZKLFK FDWHJRU\ RI /RSH]
DXWKRUL]HV LWV KROGLQJ DQG LQVWHDG FREEOHV WRJHWKHU SLHFHV IURP HDFK WR
ILQG FRQJUHVVLRQDO UHJXODWRU\ DXWKRULW\ %XW WKH FDWHJRULHV RI SHUPLVVLEOH
UHJXODWLRQ RI FRPPHUFH VHW IRUWK LQ /RSH] DUH GLVFUHWH DQG OLPLWHG DQG GR
QRW SHUPLW FRXUWV WR ³PL[ DQG PDWFK´ DWWULEXWHV RI WKH YDULRXV FDWHJRULHV
WR H[WHQG FRQJUHVVLRQDO SRZHU
7KH PDMRULW\ EHJLQV ZLWK WKH GRXEWIXO SUHPLVH WKDW D GHEW RZHG WR
RQH LQ DQRWKHU VWDWH LV D ³WKLQJ´ LQ LQWHUVWDWH FRPPHUFH UHJDUGOHVV RI
ZKHWKHU SD\PHQW LV GHPDQGHG RU DWWHPSWHG )URP WKHUH WKH PDMRULW\
UHDVRQV WKDW LI WKH GHEW ZHUH WR EH SDLG WKH SD\PHQW ZRXOG WUDYHO LQ WKH
FKDQQHOV RI LQWHUVWDWH FRPPHUFH ZKRVH UHJXODWLRQ IDOOV ZLWKLQ WKH
FDWHJRU\ RI NHHSLQJ WKH FKDQQHOV RI FRPPHUFH RSHQ DQG IUHH IURP
LPSHGLPHQWV 7KH PDMRULW\ WKHQ FRQFOXGHV WKDW EHFDXVH WKH &RQVWLWXWLRQ
DXWKRUL]HV &RQJUHVV WR NHHS FRPPHUFLDO FKDQQHOV IUHH IURP LPSHGLPHQWV
DQG EHFDXVH WKH SD\PHQW RI DQ LQWHUVWDWH GHEW LV D ³WKLQJ´ LQ LQWHUVWDWH
FRPPHUFH &RQJUHVV PD\ LPSRVH FULPLQDO SHQDOWLHV IRU IDLOXUH WR SODFH
VXFK D SD\PHQW LQWR WKH FKDQQHOV RI LQWHUVWDWH FRPPHUFH 7KLV ³LI ZH KDG
VRPH KDP ZH FRXOG KDYH D KDP VDQGZLFK LI ZH KDG VRPH EUHDG´
UHDVRQLQJ LV XQIRUWXQDWH
7KH GLVWLQFW FDWHJRULHV RI /RSH] DQG WKH PDMRULW\¶V IDOODFLRXV
UHDVRQLQJ DUH SHUKDSV EHWWHU LOOXVWUDWHG E\ XVLQJ DV DQ H[DPSOH D
K\SRWKHWLFDO ULYHU EDUJH FDUU\LQJ JRRGV LQWHUVWDWH 8VLQJ LWV SRZHU WR
NHHS WKH FKDQQHOV RI LQWHUVWDWH FRPPHUFH IUHH IURP LPSHGLPHQWV
&RQJUHVV FRXOG OHJLWLPDWHO\ SUHYHQW WKH EXLOGLQJ RI GDPV RU WROO ORFNV RQ
WKH ULYHU /LNHZLVH &RQJUHVV FRXOG SURSHUO\ UHJXODWH WKH EDUJH DQG LWV
FDUJR DV WKLQJV LQ LQWHUVWDWH FRPPHUFH 2U &RQJUHVV PLJKW UHJXODWH
ZKROO\ LQWUDVWDWH DVSHFWV RI SURGXFWLRQ RI JRRGV FDUULHG RQ WKH EDUJH LI
WKDW SURGXFWLRQ VXEVWDQWLDOO\ DIIHFWHG WKH FRPPHUFH RI WKH QDWLRQ %XW
WRGD\¶V PDMRULW\ RSLQLRQ ZRXOG DOORZ &RQJUHVV WR FULPLQDOL]H WKH IDLOXUH
WR SODFH FDUJR RQ WKH EDUJH XQGHU WKH WKHRU\ WKDW VXFK IDLOXUH PLJKW
VRPHKRZ VWHP WKH IORZ RI WKH ULYHU EHFDXVH WKH ODFN RI WKH JRRGV ZRXOG
VXEVWDQWLDOO\ DIIHFW FHUWDLQ LQGLYLGXDOV UHVLGLQJ GRZQVWUHDP
)G G &LU $Q\ RI WKHVH WKHRULHV
KRZHYHU ZRXOG SHUPLW WKH FUHDWLRQ RI D IHGHUDO ODZ RI
RUGLQDU\SULYDWHGHEWZKHQHYHURQHSDUW\PRYHGRXWRIVWDWH
DIWHUWKHGHEWZDVFUHDWHG)RUWKHUHDVRQVVHWIRUWKEHORZ
WKHVHDUJXPHQWVDUHXQSHUVXDVLYH
,DGPLWWRVRPHFRQIXVLRQZLWKUHVSHFWWRWKHQRWLRQWKDW
WKH &65$ UHJXODWHV WKH XVH RI WKH FKDQQHOV RI LQWHUVWDWH
FRPPHUFH7KHWHUP³FKDQQHORILQWHUVWDWHFRPPHUFH´UHIHUV
WR LQWHU DOLD ³QDYLJDEOH ULYHUV ODNHV DQG FDQDOV RI WKH
8QLWHG 6WDWHV WKH LQWHUVWDWH UDLOURDG WUDFN V\VWHP WKH
1R 8QLWHG6WDWHVY)DDVVH
6WDWHVY6KHULGDQ86 WKH6XSUHPH
&RXUW H[SODLQHG WKDW &RQJUHVV SDVVHG WKH 1DWLRQDO 6WROHQ
3URSHUW\$FW86&††WRDVVLVW ³WKHVWDWHVLQ
GHWHFWLQJ DQG SXQLVKLQJ FULPLQDOV ZKRVH RIIHQVHV DUH
FRPSOHWH XQGHU VWDWH ODZ EXW ZKR XWLOL]H WKH FKDQQHOV RI
LQWHUVWDWHFRPPHUFHWRPDNHDVXFFHVVIXOJHWDZD\DQGWKXV
PDNHWKHVWDWH¶VGHWHFWLQJDQGSXQLWLYHSURFHVVHVLPSRWHQW´
:KHQ &RQJUHVV HQDFWHG WKH &65$ LQ OHJLVODWLYH
KLVWRU\ UHYHDOV WKDW LW GLG VR LQ UHVSRQVH WR D GLOHPPD LW
FRQVLGHUHGQDWLRQDOLQVFRSHDQGZKRVHUHVROXWLRQKDGGHILHG
WKHDXWKRULW\RIWKHLQGLYLGXDOVWDWHV7KH+RXVH-XGLFLDU\
&RPPLWWHHZKLFKDXWKRUHGDUHSRUWDFFRPSDQ\LQJWKHELOO
WKDWEHFDPH86&†VWDWHGWKDWWKH&RPPLWWHHKDG
IRXQGWKDWLQWHUVWDWHFROOHFWLRQRIFKLOGVXSSRUWZDV³WKHPRVW
GLIILFXOWWRHQIRUFH´DQGDFFRXQWHGIRUDQ³XQDFFHSWDEO\KLJK´
GHILFLWLQFKLOGVXSSRUWSD\PHQWV+5 5(3 12 DW
$FFRUGLQJWRWKHUHSRUWDSSUR[LPDWHO\RQHWKLUG
RIFKLOGVXSSRUWFDVHVLQYROYHFKLOGUHQZKRVHQRQFXVWRGLDO
SDUHQW OLYHV LQ D VWDWH GLIIHUHQW IURP WKH FKLOG DQG ZKRVH
FXVWRGLDOSDUHQWPXVWWKHUHIRUHUHO\RQLQWHUVWDWHSD\PHQWVRI
FKLOG VXSSRUW $PRQJ WKLV JURXS UHO\LQJ RQ LQWHUVWDWH
SD\PHQWILIW\VHYHQSHUFHQWRIWKHFXVWRGLDOSDUHQWVUHSRUWHG
UHFHLYLQJFKLOGVXSSRUWSD\PHQWV³RQO\RFFDVLRQDOO\VHOGRP
RUQHYHU´,GDW$IWHUQRWLQJWKDW³DWOHDVWVWDWHVKDYH
PDGHZLOOIXOIDLOXUHWRSD\FKLOGVXSSRUWDFULPH´WKHUHSRUW
FRQFOXGHGWKDW³WKHDELOLW\RIWKRVHVWDWHVWRHQIRUFHVXFKODZV
RXWVLGHWKHLURZQERXQGDULHVLVVHYHUHO\OLPLWHG´,GDW
,QGHHG WKH UHSRUW IRXQG WKDW HYHQ WKRXJK PRVW VWDWHV KDG
DGRSWHGWKH8QLIRUP5HFLSURFDO(QIRUFHPHQWRI6XSSRUW$FW
ZKLFKZDVGHVLJQHGWRGHDOZLWKWKHH[WUDGLWLRQRIGHIHQGDQWV
ZKR IDLOHG WR SD\ LQWHUVWDWH FKLOG VXSSRUW ³LQWHUVWDWH
H[WUDGLWLRQ DQG HQIRUFHPHQW LQ IDFW UHPDLQV D WHGLRXV
FXPEHUVRPHDQGVORZPHWKRGRIFROOHFWLRQ´,GDW
$VWKLVUHSRUWPDNHVSODLQ&RQJUHVV¶VHQDFWPHQWRIWKH
&65$ ZDV SUHPLVHG XSRQ D SDUDGLJPDWLF XVH RI LWV
&RPPHUFH &ODXVH SRZHU RYHU ³WKLQJV´ LQ FRPPHUFH WR
UHJXODWH QDWLRQDO SUREOHPV WKDW FRQIRXQG VWDWHE\VWDWH
VROXWLRQ$VWKH6HFRQG&LUFXLWQRWHG

-- 13 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
$OOWKH$FWGRHVLVHQDEOHWKH8QLWHG6WDWHVWRKHOS>WKH
VWDWH@GRZKDWLWFRXOGQRWGRRQLWVRZQQDPHO\HQIRUFH
>WKH GHIHQGDQW¶V@ REOLJDWLRQ WR VHQG PRQH\ IURP RQH
6WDWH WR DQRWKHU &RQJUHVV ZDV QRW LPSRWHQW WR
RYHUFRPHWKHREVWDFOHVLQKHUHQWLQRXU)HGHUDOV\VWHPWR
WKHHQIRUFHPHQWRIWKDWREOLJDWLRQ
6DJH)GDW
7KHUHIRUH SXUVXDQW WR LWV DXWKRULW\ WR UHJXODWH WKLQJV LQ
LQWHUVWDWHFRPPHUFHEHWKH\FRPPHUFLDORUQRWZHEHOLHYH
WKDW&RQJUHVVPD\SURSHUO\SURKLELWDQRQFXVWRGLDOVSRXVH
IURPUHIXVLQJWRSD\FRXUWRUGHUHGFKLOGVXSSRUWZKHQWKH
FKLOGOLYHVLQDQRWKHUVWDWH7KH&65$LVH[SOLFLWO\SUHPLVHG
XSRQ WKH QRQFXVWRGLDO SDUHQW¶V XQIXOILOOHG FRXUWRUGHUHG
REOLJDWLRQ WR PDNH DQ LQWHUVWDWH PRQH\ SD\PHQW WR WKH
FXVWRGLDOSDUHQW,PSRUWDQWO\³>S@D\PHQWVVWHPPLQJIURPD
VXSSRUWREOLJDWLRQZLOOXVXDOO\WUDYHOLQLQWHUVWDWHFRPPHUFH
E\PDLOZLUHRUHOHFWURQLFWUDQVIHU´%ODFN)GDW
FI8QLWHG6WDWHVY2ZHQV)G WK&LU
XSKROGLQJ PRQH\ ODXQGHULQJ FRQYLFWLRQ XQGHU 86&
† DQG ILQGLQJ VWDWXWH YDOLG H[HUFLVH RI &RQJUHVV¶V
&RPPHUFH&ODXVHDXWKRULW\XQGHUFDWHJRU\WZREHFDXVH³XVH
RI IHGHUDOO\ LQVXUHG EDQNV DQGRU WKH WUDQVSRUW RI PRQLHV
DFURVVVWDWHERUGHUVWRIDFLOLWDWHWKHPRQH\ODXQGHULQJFUHDWH
DVXIILFLHQWQH[XVWRLQWHUVWDWHFRPPHUFHWRDOORZDSSOLFDWLRQ
RI † ´ 7KH PRQH\ SD\PHQW RU LWV DEVHQFH ZKLFK
ZRXOG WUDYHO WKURXJK LQWHUVWDWH FRPPHUFH LV WKH ³WKLQJ´
ZKLFK&RQJUHVVPD\YDOLGO\UHJXODWH
,WPDWWHUVQRWIRUSXUSRVHVRIWKH&RQVWLWXWLRQZKHWKHUWKH
FKLOGVXSSRUWSD\PHQWLVDWDQJLEOHWKLQJ,Q6RXWK(DVWHUQ
8QGHUZULWHUV$VV¶Q86DWLQZKLFKWKH6XSUHPH
&RXUW XSKHOG &RQJUHVV¶V DXWKRULW\ WR UHJXODWH LQWHUVWDWH
LQVXUDQFHFRQWUDFWVWKH&RXUWPDGHFOHDUWKDW³&RQJUHVVFDQ
UHJXODWHWUDIILFWKRXJKLWFRQVLVWRILQWDQJLEOHV´7KH&RXUW
DOVRQRWHGWKDW³WUDQVDFWLRQV>PD\@EHFRPPHUFHWKRXJKQRQ
FRPPHUFLDO WKH\ PD\ EH FRPPHUFH WKRXJK LOOHJDO DQG
VSRUDGLFDQGWKRXJKWKH\GRQRWXWLOL]HFRPPRQFDUULHUVRU
FRQFHUQWKHIORZRIDQ\WKLQJPRUHWDQJLEOHWKDQHOHFWURQVDQG
1R 8QLWHG6WDWHVY)DDVVH
7KH &RXUW WKHQ H[SODLQHG WKDW FRQVLVWHQW ZLWK WKH JUHDW
ZHLJKWRIRXUFDVHODZWKHSURSHUWHVWUHTXLUHVDQDQDO\VLV
RI ZKHWKHU WKH UHJXODWHG DFWLYLW\ VXEVWDQWLDOO\ DIIHFWV
LQWHUVWDWHFRPPHUFH,G+DYLQJFODULILHGWKDWSRLQWWKH
&RXUW FRQFOXGHG WKDW VHYHUDO FULWLFDO IDFWRUV SUHYHQWHG
† T $ IURP TXDOLI\LQJ DV D YDOLG H[HUFLVH RI
FRQJUHVVLRQDODXWKRULW\XQGHUWKHWKLUGFDWHJRU\)LUVWVLQFH
† T $ GLG QRW UHJXODWH D FRPPHUFLDO DFWLYLW\ WKH
VWDWXWHFRXOGQRWEHXSKHOGDVUHJXODWLQJDFWLYLWLHVWKDWDULVH
RXWRIRUDUHFRQQHFWHGZLWKDFRPPHUFLDOWUDQVDFWLRQZKLFK
YLHZHG LQ WKH DJJUHJDWH VXEVWDQWLDOO\ DIIHFWV LQWHUVWDWH
FRPPHUFH ,G DW )XUWKHU WKH VWDWXWH FRQWDLQHG QR
MXULVGLFWLRQDO HOHPHQW ZKLFK ZRXOG HQVXUH WKURXJK
FDVHE\FDVH LQTXLU\ WKDW WKH >DFWLYLW\@ LQ TXHVWLRQ DIIHFWV
LQWHUVWDWH FRPPHUFH ,G )LQDOO\ WKH VWDWXWH ZDV QRW
VXSSRUWHG E\ VSHFLILF FRQJUHVVLRQDO ILQGLQJV >WKDW@ ZRXOG
HQDEOH>WKH&RXUW@WRHYDOXDWHWKHOHJLVODWLYHMXGJPHQWWKDW
WKH DFWLYLW\ LQ TXHVWLRQ VXEVWDQWLDOO\ DIIHFWHG LQWHUVWDWH
FRPPHUFHHYHQWKRXJKQRVXFKVXEVWDQWLDOHIIHFWZDVYLVLEOH
WRWKHQDNHGH\H,GDW
7KHPDMRULW\LQWKHFDVHEHIRUHXVWRGD\VD\VWKDWWKH&65$
IDOOV ZLWKLQ FDWHJRU\ , DQG SHUKDSV FDWHJRU\ ,, RI /RSH]
%HFDXVHSD\PHQWRIFKLOGVXSSRUWRQEHKDOIRIDQRXWRIVWDWH
FKLOGZLOOQRUPDOO\UHTXLUHWKHXVHRIFKDQQHOVRILQWHUVWDWH
FRPPHUFHWKHPDMRULW\DUJXHVWKH&65$LVFRQVWLWXWLRQDO
XQGHU WKH ILUVW /RSH] FDWHJRU\ 6HH DOVR 8QLWHG 6WDWHV Y
&UDZIRUG)G WK&LU 7KHPDMRULW\
DSSDUHQWO\DOVRHPEUDFHVWKHWKHVLVWKDWOLNHQVFKLOGVXSSRUW
REOLJDWLRQVWRLQWHUVWDWHGHEWVRUFRQWUDFWVDQGDVVHUWVWKDW
&RQJUHVV¶V DXWKRULW\ WR SUHYHQW REVWUXFWLRQ RI LQWHUVWDWH
FRPPHUFHHPSRZHUVLWWRFULPLQDOL]HQRQSD\PHQWRIVXFK
REOLJDWLRQV6HH8QLWHG6WDWHVY%RQJLRUQR)G
VW&LU 8QLWHG6WDWHVY6DJH)G
G&LU 7KHPDMRULW\DOVRVXJJHVWVWKDWEHFDXVH
WKHREOLJDWLRQVFRYHUHGE\WKH&65$LQWKHDJJUHJDWHWRWDO
ELOOLRQVRIGROODUVWKH$FWPLJKWSDVVPXVWHUXQGHU/RSH]DV
DUHJXODWLRQRIDQLQWUDVWDWHDFWLYLW\WKDWVXEVWDQWLDOO\DIIHFWV
LQWHUVWDWHFRPPHUFH6HHHJ8QLWHG6WDWHVY3DUNHU

-- 14 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
.HQWXFN\5HVROXWLRQVG5HVROYHGFO UHSULQWHGLQ
7KH3RUWDEOH7KRPDV-HIIHUVRQ 0HUULOO3HWHUVRQ
HG VHHDOVR3DWWHUVRQY1HZ<RUN86
VWDWLQJ WKDW ³SUHYHQWLQJ DQG GHDOLQJ ZLWK FULPH LV
PXFKPRUHWKHEXVLQHVVRIWKH6WDWHVWKDQLWLVRIWKH)HGHUDO
*RYHUQPHQW´ ,QDOLNHYHLQWKHFRXUWVKDYHFRQVLVWHQWO\
UHFRJQL]HGWKDW³>W@KHZKROHVXEMHFWRIWKHGRPHVWLFUHODWLRQV
RIKXVEDQGDQGZLIHSDUHQWDQGFKLOGEHORQJVWRWKHODZVRI
WKHVWDWHVDQGQRWWKHODZVRIWKH8QLWHG6WDWHV´([SDUWH
%XUUXV86 VHHDOVR6RVQDY,RZD
86 VWDWLQJ WKDW WKH ³UHJXODWLRQ RI
GRPHVWLFUHODWLRQVKDVORQJEHHQUHJDUGHGDVDYLUWXDOO\
H[FOXVLYH SURYLQFH RI WKH 6WDWHV´ FI $QNHQEUDQGW Y
5LFKDUGV 86 UHFRJQL]LQJ D GRPHVWLF
UHODWLRQV H[FHSWLRQ WR WKH GLYHUVLW\ MXULVGLFWLRQ RI IHGHUDO
FRXUWVLQYLHZRIORQJKHOGXQGHUVWDQGLQJVDQGVRXQGSROLF\
FRQVLGHUDWLRQV
,Q /RSH] WKH 6XSUHPH &RXUW DGGUHVVHG WKH UHDFK RI
&RQJUHVV¶V FRPPHUFH SRZHU 7KH &RXUW VWUXFN GRZQ WKH
*XQ )UHH 6FKRRO =RQHV $FW 86& † T $
ZKLFK SURKLELWHG DQ\ LQGLYLGXDO NQRZLQJO\ WR
SRVVHVVDILUHDUPDWDSODFH>KH@NQRZVLVDVFKRRO]RQH
DVDQXQFRQVWLWXWLRQDOH[HUFLVHRI&RQJUHVV VSRZHUXQGHU
WKH&RPPHUFH&ODXVH/RSH]86DW7KDWSRZHU
WKH&RXUWREVHUYHGH[WHQGVWRRQO\WKUHHW\SHVRIDFWLYLW\
WKHXVHRIWKHFKDQQHOVRILQWHUVWDWHFRPPHUFH WKH
LQVWUXPHQWDOLWLHVRILQWHUVWDWHFRPPHUFHRUSHUVRQVRUWKLQJV
LQ LQWHUVWDWH FRPPHUFH DQG WKRVH DFWLYLWLHV KDYLQJ D
VXEVWDQWLDO UHODWLRQ WR LQWHUVWDWH FRPPHUFH QDPHO\ WKRVH
DFWLYLWLHVWKDWVXEVWDQWLDOO\DIIHFWLQWHUVWDWHFRPPHUFH,GDW
6LQFH† T $ GLGQRWLQYROYHFKDQQHOVRU
LQVWUXPHQWDOLWLHVRILQWHUVWDWHFRPPHUFHWKH&RXUWUHDVRQHG
WKDW WKH VWDWXWH ZRXOG EH FRQVWLWXWLRQDO RQO\ LI LW TXDOLILHG
XQGHUWKHWKLUGFDWHJRU\DVDVWDWXWHWKDWUHJXODWHGDQDFWLYLW\
ZKLFKVXEVWDQWLDOO\DIIHFWHGLQWHUVWDWHFRPPHUFH,GDW
,QFRQVLGHULQJWKDWTXHVWLRQWKH&RXUWUHFRJQL]HGWKDWLWV
FDVHODZKDGQRWDOZD\VEHHQFOHDUDVWRZKHWKHUDQDFWLYLW\
PXVWDIIHFWRUVXEVWDQWLDOO\DIIHFWLQWHUVWDWHFRPPHUFH
1R 8QLWHG6WDWHVY)DDVVH
,QGHHG LQ /RSH] WKH 6XSUHPH &RXUW H[SOLFLWO\ QRWHG WKDW WKHIW IURP
LQWHUVWDWH VKLSPHQWV LQ YLRODWLRQ RI 86& † ZDV DQ H[DPSOH RI
D UHJXODWLRQ OHJLWLPDWHO\ SDVVHG E\ &RQJUHVV SXUVXDQW WR LWV SRZHU WR
SURWHFW WKLQJV LQ LQWHUVWDWH FRPPHUFH 6HH /RSH] 86 DW
LQIRUPDWLRQ´,GDWVHHDOVR5HQRY&RQGRQ
86 XSKROGLQJ'ULYHU¶V3ULYDF\3URWHFWLRQ
$FWZKLFKIRUELGVWKHVWDWHVIURPVHOOLQJRUUHOHDVLQJGULYHUV¶
SHUVRQDO LGHQWLI\LQJ LQIRUPDWLRQ DV YDOLG UHJXODWLRQ RI
³WKLQJ´LQLQWHUVWDWHFRPPHUFH
0RUHRYHU LW LV LPPDWHULDO WKDW WKH &65$ UHJXODWHV D
GHIHQGDQW¶VIDLOXUHWRSXWDWKLQJLQFRPPHUFH,WLVWUXHWKDW
PDQ\IHGHUDOVWDWXWHVSURKLELW UDWKHUWKDQVHHNWRFRPSHO
JRRGVRUVHUYLFHVIURPSDVVLQJWKURXJKLQWHUVWDWHFRPPHUFH
6HHHJ8QLWHG6WDWHVY'DUE\86
XSKROGLQJFULPLQDOSURYLVLRQRI)DLU/DERU6WDQGDUGV$FW
SURVFULELQJ LQWHUVWDWH VKLSPHQW RI JRRGV SURGXFHG E\
HPSOR\HHVZKRVHZDJHVDQGKRXUVRIHPSOR\PHQWGLGQRW
FRQIRUPWRWKH$FW $VWKH)LIWK&LUFXLWQRWHGKRZHYHU
³>W@KH6XSUHPH&RXUWKDVRIWHQKHOGLQVHYHUDOFRQWH[WVWKDW
WKHGHIHQGDQW¶VQRQXVHRILQWHUVWDWHFKDQQHOVDORQHGRHVQRW
VKLHOG KLP IURP IHGHUDO SXUYLHZ XQGHU WKH &RPPHUFH
&ODXVH´%DLOH\)GDWVHHDOVR6DJH)G
DW UHMHFWLQJDUJXPHQWWKDWIDLOXUHWRVHQGPRQH\GRHV
QRWLQYRNH&RPPHUFH&ODXVHSRZHUEHFDXVH³>L@I&RQJUHVV
FDQ WDNH PHDVXUHV XQGHU WKH &RPPHUFH &ODXVH WR IRVWHU
SRWHQWLDOLQWHUVWDWHFRPPHUFHLWVXUHO\KDVSRZHUWRSUHYHQW
WKH IUXVWUDWLRQ RI DQ REOLJDWLRQ WR HQJDJH LQ FRPPHUFH´
7KXVLQ+HDUWRI$WODQWD0RWHO,QFY8QLWHG6WDWHV
86 WKH6XSUHPH&RXUWXSKHOG7LWOH,,
RI WKH &LYLO 5LJKWV $FW RI ZKLFK SURYLGHV IRU HTXDO
DFFHVVWRSODFHVRISXEOLFDFFRPPRGDWLRQZLWKRXWUHJDUGWR
UDFHH[SODLQLQJWKDWWKH+HDUWRI$WODQWD0RWHO¶VUHIXVDOWR
DFFRPPRGDWHEODFNVZDVDQLPSHUPLVVLEOH³REVWUXFWLRQWR
LQWHUVWDWH FRPPHUFH´ EHFDXVH LW GHWHUUHG EODFNV IURP
HQJDJLQJLQLQWHUVWDWHWUDYHOLQ8QLWHG6WDWHVY*UHHQ
86 WKH6XSUHPH&RXUWXSKHOGWKH+REEV
$FW 86& † ZKLFK PDNHV LOOHJDO UREEHU\ RU
H[WRUWLRQ WKDW ³LQ DQ\ ZD\ RU GHJUHH REVWUXFWV GHOD\V RU

-- 15 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
:H FDQ FRQFHLYH RI QR SULQFLSOHG GLVWLQFWLRQ EHWZHHQ WKH SDUHQW
ZKR IDLOV WR VHQG DQ\ FKLOG VXSSRUW WKURXJK FRPPHUFH DQG WKH SDUHQW ZKR
VHQGV RQO\ D IUDFWLRQ RI WKH DPRXQW RZHG RQ )DDVVH¶V XQGHUVWDQGLQJ RI
WKH &RPPHUFH &ODXVH WKH IRUPHU ZRXOG QRW EH VXEMHFW WR IHGHUDO VDQFWLRQ
EXW WKH ODWWHU ZRXOG EH 7KLV UHVXOW LV FOHDUO\ XQWHQDEOH
DIIHFWVFRPPHUFH´DQGWKXVUHPRYHVREVWDFOHVWRLQWHUVWDWH
FRPPHUFHDQGLQ6WDQGDUG2LO&RY8QLWHG6WDWHV86
WKH 6XSUHPH &RXUW XSKHOG WKH 6KHUPDQ
$QWLWUXVW$FW86&††ZKLFKPDNHVLOOHJDO³HYHU\
FRQWUDFWFRPELQDWLRQRUFRQVSLUDF\LQUHVWUDLQWRIWUDGH
RUFRPPHUFHDPRQJWKHVHYHUDO6WDWHV´DQGWKHUHE\IXUWKHUV
LQWHUVWDWHFRPPHUFHWKDWRWKHUZLVHZRXOGKDYHEHHQVWLIOHG
,I&RQJUHVVPD\YDOLGO\UHVWULFWRQHLQGXVWU\¶VUHVWUDLQWRQ
WUDGHRUSUHYHQWLQWUDVWDWHH[WRUWLRQEHFDXVHLWREVWUXFWVWKH
IORZRILQWHUVWDWHFRPPHUFHFHUWDLQO\&RQJUHVVPD\UHJXODWH
)DDVVH¶V IDLOXUH WR VHQG SD\PHQWV IURP &DOLIRUQLD WR
0LFKLJDQDVDVLPLODUREVWUXFWLRQRILQWHUVWDWHFRPPHUFH
7KH GLVVHQW¶V FRQWHQWLRQ WKDW )DDVVH SDVVLYHO\ IDLOHG WR
HQJDJH LQ FRPPHUFH LQVWHDG RI DFWLYHO\ REVWUXFWHG
FRPPHUFHDQGWKDWWKHVHSUHFHGHQWVWKHUHIRUHGRQRWDSSO\WR
KLP LV QRW ZHOO WDNHQ )DDVVH¶V IDLOXUH WR DFW ZDV QRW
³SDVVLYH´LQWKLVFDVHLWZDVZLOOIXODVKHZDVXQGHUDVWDWH
FRXUW RUGHU WR SD\ FKLOG VXSSRUW ZKLFK KH GHOLEHUDWHO\
GLVREH\HG,QGHHGZHQRWHWKDWWKHVFLHQWHUHOHPHQWLQWKH
&65$UHTXLUHVZLOOIXOQHVVWKHVWDWXWHPD\RQO\EHLQYRNHG
LI D GHIHQGDQW ³ZLOOIXOO\ IDLOV WR SD\ D SDVW GXH VXSSRUW
REOLJDWLRQ ZLWK UHVSHFW WR D FKLOG ZKR UHVLGHV LQ DQRWKHU
6WDWH´86&† D :KHQ)DDVVHSOHDGHG
JXLOW\ KH DFNQRZOHGJHG KLV JXLOW DV WR HDFK DQG HYHU\
HOHPHQWRIWKHRIIHQVH7KXVE\YLUWXHRIKLVJXLOW\SOHD
)DDVVH FRQFHGHG WKDW KLV IDLOXUH WR SD\ FKLOG VXSSRUW ZDV
ZLOOIXO :H FRQFOXGH WKDW WKH GLVWLQFWLRQ EHWZHHQ ³DFWLYH
REVWUXFWLRQ´DQG³SDVVLYHIDLOXUH´LVLQWKLVFDVHLOOXVRU\DQG
ZHUHMHFWDQ\DWWHPSWWRKLGHEHKLQGLW
:H DUH DOVR QRQSOXVHG E\ WKH DVVHUWLRQ WKDW LQ VRPH
K\SRWKHWLFDO VLWXDWLRQV D GHEWRU SDUHQW DQG WKH FXVWRGLDO
SDUHQWPD\UHVLGHLQRQHVWDWHZKLOHWKHPLQRUFKLOGUHVLGHVLQ
1R 8QLWHG6WDWHVY)DDVVH
$ FRXUW RUGHU WR SD\ FKLOG VXSSRUW UHIOHFWV D SDUHQW¶V OHJDO DQG PRUDO
GHEW WR WKH FKLOG EXW WKH FKLOG KDV QR UHFLSURFDO REOLJDWLRQ WR WKH SDUHQW
7KHUH LV VLPSO\ QR FRPPHUFH LQYROYHG LQ WKLV NLQG RI REOLJDWLRQ
WKDWWKH\DUHSURSHUO\WKHVXEMHFWRIWKHFRPPHUFHSRZHU
$QG WKH FDVHV FLWHG E\ WKH PDMRULW\ GR QRW GHDO ZLWK
&RQJUHVV¶V DXWKRULW\ WR UHJXODWH ³WKLQJV´ LQ LQWHUVWDWH
FRPPHUFH1HLWKHUGRWKHVHFDVHVKROGWKDWFRPPHUFHQHHG
QRWLQYROYHDQHOHPHQWRIUHFLSURFLW\5DWKHUWKHVHFDVHVGHDO
ZLWK UHJXODWLQJ WKH FKDQQHOV RI LQWHUVWDWH FRPPHUFH E\
NHHSLQJWKHPRSHQDQGIUHHIURPLPPRUDOXVHV
7KH&65$GRHVQRWUHJXODWHZLWKLQDQ\RIWKHFDWHJRULHV
SHUPLWWHG E\ /RSH] QDPHO\ WKH FKDQQHOV RI LQWHUVWDWH
FRPPHUFHWKLQJVWKDWWUDYHOLQWKHVHFKDQQHOVRULQWUDVWDWH
DFWLYLW\WKDWVXEVWDQWLDOO\DIIHFWVFRPPHUFH5DWKHUWKH$FW
UHJXODWHV WKURXJK WKH LPSRVLWLRQ RI FULPLQDO VDQFWLRQV
REOLJDWLRQV RZHG E\ RQH IDPLO\ PHPEHU WR DQRWKHU XVLQJ
GLYHUVLW\ RI UHVLGHQFH DV D MXULVGLFWLRQDO ³KRRN´ 7KLV LV
SDUWLFXODUO\ WURXEOLQJ EHFDXVH WKH VWDWHV SRVVHVV SULPDU\
DXWKRULW\IRUGHILQLQJDQGHQIRUFLQJERWKWKHFULPLQDOODZDQG
WKHODZRIGRPHVWLFUHODWLRQV$V7KRPDV-HIIHUVRQZURWH
>7@KH&RQVWLWXWLRQRIWKH8QLWHG6WDWHVKDYLQJGHOHJDWHG
WR&RQJUHVVWKHSRZHUWRSXQLVKWUHDVRQFRXQWHUIHLWLQJ
WKH VHFXULWLHV DQG FXUUHQW FRLQ RI WKH 8QLWHG 6WDWHV
SLUDFLHVDQGIHORQLHVFRPPLWWHGRQWKHKLJKVHDVDQG
RIIHQVHVDJDLQVWWKHODZRIQDWLRQVDQGQRRWKHUFULPHV
ZKDWVRHYHUDQGLWEHLQJWUXHDVDJHQHUDOSULQFLSOHDQG
RQHRIWKHDPHQGPHQWVWRWKH&RQVWLWXWLRQKDYLQJDOVR
GHFODUHGWKDW³WKHSRZHUVQRWGHOHJDWHGWRWKH8QLWHG
6WDWHV E\ WKH &RQVWLWXWLRQ QRU SURKLELWHG E\ LW WR WKH
6WDWHVDUHUHVHUYHGWRWKH6WDWHVUHVSHFWLYHO\RUWRWKH
SHRSOH´WKHUHIRUHDOOWKHLURWKHUDFWVZKLFKDVVXPH
WRFUHDWHGHILQHRUSXQLVKFULPHVRWKHUWKDQWKRVHVR
HQXPHUDWHGLQWKH&RQVWLWXWLRQ>@DUHDOWRJHWKHUYRLG
DQGRIQRIRUFHDQGWKDWWKHSRZHUWRFUHDWHGHILQHDQG
SXQLVK VXFK RWKHU FULPHV LV UHVHUYHG DQG RI ULJKW
DSSHUWDLQVVROHO\DQGH[FOXVLYHO\WRWKHUHVSHFWLYH6WDWHV
HDFKZLWKLQLWVRZQWHUULWRU\

-- 16 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
QRWLQJ³WKHSUHPLVHZHOOHVWDEOLVKHGE\WKH
KLVWRU\RIWKH&RPPHUFH&ODXVHWKDWWKLVQDWLRQLVDFRPPRQ
PDUNHW´
7KHIDLOXUHWRREH\DVWDWHFRXUWRUGHURIFRXUVHODFNVWKLV
HVVHQWLDO IHDWXUHRIUHFLSURFLW\7KLVLVVRHYHQZKHUHWKH
RUGHU PDQGDWHV D WUDQVIHU RI ZHDOWK DV GR FKLOG VXSSRUW
RUGHUV³>3@D\PHQWRIFKLOGVXSSRUWLVQRWFRQGLWLRQHGRQWKH
SHUIRUPDQFHRIDUHFLSURFDOGXW\E\WKHREOLJHHQRUGRHVLW
EHQHILW WKH REOLJRU´ %DLOH\ )G DW 6PLWK -
GLVVHQWLQJ 'XHWRWKLVXQLODWHUDOUHGLVWULEXWLYHFKDUDFWHU
VXSSRUW REOLJDWLRQV FDQ LQIOXHQFH WKH ³QDWLRQDO FRPPRQ
PDUNHW´RQO\DWWKHPDUJLQVLIDWDOO,QGHHGWKH ULJKWWR
VXSSRUW SD\PHQWV LV QRW IUHHO\ DOLHQDEOH DQG LQ VRPH
LQVWDQFHVWKHSD\PHQWVPXVWEHPDGHWRWKHVWDWHUDWKHUWKDQ
GLUHFWO\WRWKHXOWLPDWHEHQHILFLDU\IXUWKHUGHSULYLQJWKHVH
SD\PHQWV RI WKH SRWHQWLDO WR DIIHFW WKH PDUNHW 6HH HJ
0LFK&RPS/DZV$QQ† :HVW SURYLGLQJ
IRUSD\PHQWRIVXSSRUWWRWKHRIILFHRIWKH0LFKLJDQIULHQGRI
WKH FRXUW %HFDXVH RI WKHLU QDWXUH FRXUWRUGHUHG ZHDOWK
WUDQVIHUVWRRUIURP0LFKLJDQUHVLGHQWVDUHQRWSHUVHDILW
REMHFWRIWKHIHGHUDOFRPPHUFHSRZHU
7KHPDMRULW\VHHNVWR³SXWWRUHVW´WKHQRWLRQWKDWLQWHUVWDWH
FRPPHUFHUHTXLUHVUHFLSURFLW\DWWULEXWLQJWRWKLVGLVVHQWWKH
SUHPLVHWKDWEHFDXVHSD\PHQWRIDGHEWLVQRWUHFLSURFDOLWLV
QRW VXEMHFW WR &RQJUHVV¶V FRPPHUFH SRZHU 7KH PDMRULW\
QH[W FLWHV 8QLWHG 6WDWHV Y 6LPSVRQ 86
+RNHY8QLWHG6WDWHV86 DQG3HQVDFROD
7HO&RY:HVWHUQ8QLRQ7HO&R86 2WWR
IRU WKH SURSRVLWLRQ WKDW WKH PHUH WUDQVSRUW RI SHRSOH RU
LQIRUPDWLRQ DFURVV VWDWH OLQHV JLYHV &RQJUHVV DXWKRULW\ WR
UHJXODWHWKHP7KHPDMRULW\WKHQUHDVRQVWKDWDGHEWRUWKH
VXSSRUWRUGHUHQIRUFLQJLWLVD³WKLQJ´LQLQWHUVWDWHFRPPHUFH
DQG WKHUHIRUH VXEMHFW WR FRQJUHVVLRQDO UHJXODWLRQ %XW
DOWKRXJK GHEWV DUH W\SLFDOO\ UHFLSURFDO LQ WKH VHQVH WKDW
SD\PHQWLVEHLQJVRXJKWIRUVRPHWKLQJRIYDOXHJLYHQHDUOLHU
LWGRHVQRWIROORZWKDWDOOGHEWVDUHFRPPHUFLDOLQQDWXUHVXFK
1R 8QLWHG6WDWHVY)DDVVH
:H QRWH WKDW )DDVVH EULQJV DQ DVDSSOLHG FRQVWLWXWLRQDO FKDOOHQJH
WR WKH &65$ 7KXV KH FODLPV WKDW DSSOLFDWLRQ RI WKH &65$ WR KLV
SDUWLFXODU FLUFXPVWDQFHV LV XQFRQVWLWXWLRQDO 7KH DSSURSULDWH UHPHG\ IRU
KLV DVDSSOLHG FKDOOHQJH ZRXOG EH WR LQYDOLGDWH WKH VWDWXWH DV WR )DDVVH
)DFLDO LQYDOLGDWLRQ RI D VWDWXWH LQ FRQWUDVW LV UHVHUYHG RQO\ IRU ZKHQ WKHUH
DUH QR VHW RI FLUFXPVWDQFHV LQ ZKLFK WKH VWDWXWH¶V DSSOLFDWLRQ ZRXOG EH
FRQVWLWXWLRQDO 6HH :DWFKWRZHU %LEOH 7UDFW 6RFLHW\ RI 1HZ <RUN ,QF
Y 9LOODJH RI 6WUDWWRQ 2KLR )G WK &LU &OHDUO\
)DDVVH¶V K\SRWKHWLFDO GRHV QRW FDOO IRU IDFLDO LQYDOLGDWLRQ RI WKH &65$
DQRWKHU WKHUHE\ XQGHUPLQLQJ WKH UDWLRQDOH IRU IHGHUDO
UHJXODWLRQ$OWKRXJKVXFKDVFHQDULRLVXQOLNHO\ZHQRWHWKDW
WKHGHEWRUSDUHQW¶VSD\PHQWPXVWVWLOOWUDYHOWKURXJKLQWHUVWDWH
FRPPHUFHWKHUHE\PDNLQJXVHRIWKHFKDQQHOVRIFRPPHUFH
WRUHDFKWKHFKLOG0RUHRYHUZHGRQRWVWULNHGRZQDVWDWXWH
IDFLDOO\EHFDXVHWKHUHDUHK\SRWKHWLFDOVLWXDWLRQVLQZKLFKWKH
$FW¶V LQWHUVWDWH FRPPHUFH FRQQHFWLRQ PD\ FRQFHLYDEO\ EH
WHQXRXV6HH8QLWHG6WDWHVY9DOHQ]HQR)G
WK&LU
)LQDOO\ZHZLVKWRPDNHFOHDUWKDWWKLVVWDWXWHGRHVQRWDV
)DDVVH DQG WKH GLVVHQW ZRXOG KDYH XV EHOLHYH UHJXODWH D
WUDGLWLRQDODUHDRIIDPLO\ODZEHVWOHIWWRWKHVWDWHV,QERWK
/RSH]DQG0RUULVRQWKH6XSUHPH&RXUWQRWHGWKDWVKRXOGWKH
³VXEVWDQWLDOHIIHFWV´DQGDJJUHJDWLRQSULQFLSOHVIRULQWUDVWDWH
DFWLYLW\EHH[WHQGHGWRRIDULWZRXOGSURYLGH&RQJUHVVZLWK
DXWKRULW\WRUHJXODWH³IDPLO\ODZDQGRWKHUDUHDVRIWUDGLWLRQDO
VWDWH UHJXODWLRQ VLQFH WKH DJJUHJDWH HIIHFW RI PDUULDJH
GLYRUFH DQG FKLOGUHDULQJ RQ WKH QDWLRQDO HFRQRP\ LV
XQGRXEWHGO\ VLJQLILFDQW´ 0RUULVRQ 6 &W DW
)LUVW WKH &65$ GRHV QRW UHO\ H[FOXVLYHO\ XSRQ HLWKHU WKH
³VXEVWDQWLDO HIIHFWV´ RU DJJUHJDWLRQ SULQFLSOH IRU LWV
FRQVWLWXWLRQDOLW\DVQRWHGDERYHLWUHJXODWHVLQWHUQRWLQWUD
VWDWH HFRQRPLF DFWLYLW\ 0RUHRYHU WKH VWDWXWH GRHV QRW
SXUSRUW WR UHJXODWH WKH QRQHFRQRPLF DFWLYLWLHV DVVRFLDWHG
ZLWKPDUULDJHGLYRUFHRUFKLOGUHDULQJXQGHUWKHJXLVHWKDW
LQWKHDJJUHJDWHVXFKDFWLYLWLHVVXEVWDQWLDOO\DIIHFWLQWHUVWDWH
FRPPHUFH$VDUHJXODWLRQRIRXWRIVWDWHGHEWRUVZKRRZH
FRXUWRUGHUHG SD\PHQWV WKH &65$ GHDOV H[FOXVLYHO\ ZLWK
LQWHUVWDWHHFRQRPLFWUDQVDFWLRQV&I8QLWHG6WDWHVY1DSLHU
)G WK &LU XSKROGLQJ 86&

-- 17 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
,QGHHG IHGHUDO FRXUWV UHYLHZLQJ SURVHFXWLRQV XQGHU WKH &65$
KDYH KHOG WKDW WKH\ FDQQRW GLVWXUE WKH XQGHUO\LQJ VWDWH FRXUW FKLOG VXSSRUW
RUGHU 6HH 8QLWHG 6WDWHV Y %UDQG )G WK &LU
KROGLQJ WKDW GHIHQGDQW¶V DWWHPSW FROODWHUDOO\ WR DWWDFN WKH ³VWDWH FRXUW
RUGHU LV QRW FRJQL]DEOH 7KH ODQJXDJH RI WKH &65$ PHUHO\ UHTXLUHV WKH
H[LVWHQFH RI D μSDVW GXH VXSSRUW REOLJDWLRQ¶ 7KH $FW¶V WHUPV GR QRW
UHTXLUH WKDW VXFK DQ REOLJDWLRQ EH μYDOLG¶´ IRRWQRWH RPLWWHG
0RUHRYHU ZH QRWH WKDW DFFRUGLQJ WR 'HSDUWPHQW RI -XVWLFH
JXLGHOLQHV D 8QLWHG 6WDWHV $WWRUQH\¶V 2IILFH PD\ QRW LQLWLDWH D IHGHUDO
SURVHFXWLRQ XQGHU WKH &65$ XQOHVV ³DOO UHDVRQDEO\ DYDLODEOH >VWDWH@
UHPHGLHV KDYH EHHQ H[KDXVWHG´ 5RQDOG 6 .RUQUHLFK 1RWH 7KH
&RQVWLWXWLRQDOLW\ RI 3XQLVKLQJ 'HDGEHDW 3DUHQWV 7KH &KLOG 6XSSRUW
5HFRYHU\ $FW RI $IWHU 8QLWHG 6WDWHV Y /RSH] )25'+$0 / 5(9
TXRWLQJ 'HSDUWPHQW RI -XVWLFH 3URVHFXWLYH *XLGHOLQHV
DQG 3URFHGXUHV IRU WKH &KLOG 6XSSRUW 5HFRYHU\ $FW RI DW
3ULRU WR IHGHUDO SURVHFXWLRQ RWKHU FLYLO UHPHGLHV PXVW DOVR EH DWWHPSWHG
WKH 86 $WWRUQH\ PXVW VHQG D OHWWHU WR WKH SRWHQWLDO GHIHQGDQW ³DGYLVLQJ
† J FULPLQDOL]LQJSRVVHVVLRQRIDZHDSRQWKDWKDV
WUDYHOHG LQWHUVWDWH ZKLOH GHIHQGDQW LV VXEMHFW WR GRPHVWLF
YLROHQFHRUGHUDJDLQVWFODLPWKDWVWDWXWHUHJXODWHVWUDGLWLRQDO
DUHDRIIDPLO\ODZEHFDXVHVWDWXWH¶VMXULVGLFWLRQDOHOHPHQW
HQVXUHV LW ZDV HQDFWHG SXUVXDQW WR &RQJUHVV¶V SRZHU WR
UHJXODWHLQWHUVWDWHFRPPHUFHLQILUHDUPV 7KHUHIRUHZHDUH
FRQILGHQW WKDW WKH VWDWXWH GRHV QRW LPSOLFDWH WKH &RXUW¶V
FRQFHUQWKDW&RQJUHVVPD\DWWHPSWWRFUHDWHIHGHUDOIDPLO\
ODZXQGHUWKHSUHWH[WRILWV&RPPHUFH&ODXVHSRZHU
6HFRQG WKH VWDWXWH GRHV QRW VXSSODQW WUDGLWLRQDO VWDWH
VWDWXWRU\HQIRUFHPHQWPHFKDQLVPV,QWKLVFDVH0LFKLJDQ
UHPDLQV WKH H[FOXVLYH UHJXODWRU DQG HQIRUFHU RI DOO XQSDLG
FKLOGVXSSRUWREOLJDWLRQVLQLWVVWDWHXQOHVVWKHQRQFXVWRGLDO
SDUHQW RUWKHFKLOG ERWKOLYHVRXWRIVWDWHDQGWKHSDUHQWIDLOV
WR PDNH SD\PHQWV ,Q VXFK D VLWXDWLRQ &RQJUHVV PDGH
H[SUHVVILQGLQJVWKDWFROOHFWLRQRISDVWGXHGHEWVKDGJURZQ
EH\RQGWKHHQIRUFHPHQWFDSDFLWLHVRIWKHVWDWHV7KH&65$
GRHVQRWVXSSODQWRUSUHHPSWVWDWHODZEHFDXVHLWGRHVQRW
LPSOLFDWHWKHVWDWHV¶DELOLW\RUDXWKRULW\WRRUGHUFKLOGVXSSRUW
SD\PHQWVQRUGRHVLWFRPSHOVWDWHVWRHQIRUFHVXFKRUGHUV
,QVWHDG WKH &65$ PHUHO\ UHLQIRUFHV VWDWH ODZV ZKLFK WKH
VWDWHVZHUHXQDEOHWRHQIRUFHWKHPVHOYHV7KLVLVDPRVW
1R 8QLWHG6WDWHVY)DDVVH
7KH)HGHUDOLVW1RDW $OH[DQGHU+DPLOWRQ &OLQWRQ
5RVVLWHQHG
+DPLOWRQDOVRKLJKOLJKWHGWKHQHHGIRUDIHGHUDOFRPPHUFH
SRZHU WR FKHFN WKH PHUFDQWLOLVW DQG LPSHULDOLVW DLPV RI
(XURSHDQPDULWLPHSRZHUVZULWLQJ³>W@KRVHRIWKHPZKLFK
KDYHFRORQLHVLQ$PHULFDORRNIRUZDUGWRZKDWWKLVFRXQWU\
LVFDSDEOHRIEHFRPLQJZLWKSDLQIXOVROLFLWXGH7KH\IRUHVHH
WKHGDQJHUVWKDWPD\WKUHDWHQWKHLU$PHULFDQGRPLQLRQVIURP
WKHQHLJKERUKRRGRI6WDWHV´7KH)HGHUDOLVW1RDW
$OH[DQGHU+DPLOWRQ &OLQWRQ5RVVLWHQHG
7KHPRVWZLGHO\DFFHSWHGJHQHUDOGHVFULSWLRQRIFRPPHUFH
DQG WKH RQH FLWHG E\ WKH PDMRULW\ LV JLYHQ LQ *LEERQV Y
2JGHQ ³&RPPHUFH XQGRXEWHGO\ LV WUDIILF EXW LW LV
VRPHWKLQJ PRUH²LW LV LQWHUFRXUVH ,W GHVFULEHV WKH
FRPPHUFLDOLQWHUFRXUVHEHWZHHQQDWLRQVDQGSDUWVRIQDWLRQV
LQDOOLWVEUDQFKHV´*LEERQV86 :KHDW
+RZHYHUDV-XGJH-HUU\6PLWKKDVSRLQWHGRXW
³LQWHUFRXUVH´ KDV DV LWV GLVWLQJXLVKLQJ IHDWXUH D QRWLRQ RI
UHFLSURFLW\8QLWHG6WDWHVY%DLOH\)G WK
&LU 6PLWK-GLVVHQWLQJ VHHDOVR:HEVWHU¶V1HZ
:RUOG'LFWLRQDU\RIWKH$PHULFDQ/DQJXDJH GHG
GHILQLQJLQWHUFRXUVHDV³FRPPXQLFDWLRQRUGHDOLQJV
EHWZHHQ RU DPRQJ SHRSOH FRXQWULHV HWF LQWHUFKDQJH RI
SURGXFWVVHUYLFHVLGHDVIHHOLQJVHWF´DQGLQWHUFKDQJHDV
³WRJLYHDQGWDNHPXWXDOO\H[FKDQJHWRSXW HDFKRIWZR
WKLQJV LQ WKH RWKHU¶V SODFH ´ 7KLV HOHPHQW RI
UHFLSURFLW\²WKH PXWXDO H[FKDQJH RI YDOXH PRWLYDWHG E\
HFRQRPLFVHOILQWHUHVW²GHILQHVWKHPDUNHWSODFHZKLFKIRVWHUV
VRFLDO ZHDOWK 6HH 0LFKDHO .ODXVQHU &RUSRUDWLRQV
&RUSRUDWH/DZDQG1HWZRUNVRI&RQWUDFWV9D/5HY
QRWLQJ WKH EDVLF SUHFHSW RI ZHOIDUH
HFRQRPLFV WKDW FRPSHWLWLYH PDUNHW IRUFHV RSWLPL]H VRFLDO
ZHDOWK $QGLWLVWKHZHDOWKFUHDWLQJDVSHFWRIPDUNHWVWKDW
MXVWLILHVDQDWLRQDOFRPPHUFHSRZHULQRXUIHGHUDOV\VWHPDV
WKH6XSUHPH&RXUWUHPLQGVXVWKH³RYHUULGLQJUHTXLUHPHQW´
RIWKH&RPPHUFH&ODXVHLVDQDWLRQDOFRPPRQPDUNHW+XQW
Y :DVKLQJWRQ 6WDWH $GYHU &RPP¶Q 86
VHHDOVR+XJKHVY$OH[DQGULD6FUDS&RUS86

-- 18 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
DERUWLYH EXW HQJHQGHUHG ULYDO FRQIOLFWLQJ DQG DQJU\
UHJXODWLRQV´7KH5HFRUGVRIWKH)HGHUDO&RQYHQWLRQ
0D[)DUUDQGHG
7KLVSRZHUWRSUHYHQWVWDWHVIURPHVWDEOLVKLQJSDURFKLDO
EDUULHUV WR QDWLRQDO WUDGH DQG WKH UHVXOWLQJ LQMXULHV WR WKH
QDWLRQDOHFRQRPLFKHDOWKZDV³VRXQLYHUVDOO\DVVXPHGWREH
QHFHVVDU\QRRWKHUVWDWHSRZHUZDVVRUHDGLO\UHOLQTXLVKHG´
+3+RRG 6RQV,QF86DW-XVWLFH-DFNVRQ
QRWHG WKLV QHHG IRU XQLIRUPLW\ DV WKH )UDPHU¶V SULPDU\
REMHFWLYHDQGUHFRJQL]HGWKHLULQWHQWWROLPLWWKHFRPPHUFH
SRZHU WR WKH SURWHFWLRQ RI WKH IUHH IORZ RI FRPPHUFH
FRPPHQWLQJ ³>W@KHUH ZDV QR GHVLUH WR DXWKRUL]H IHGHUDO
LQWHUIHUHQFHZLWKVRFLDOFRQGLWLRQVRUOHJDOLQVWLWXWLRQVRIWKH
VWDWHV´ ,G ,Q IDFW WKH DUJXPHQWV PDGH LQ IDYRU RI WKH
&RQVWLWXWLRQ¶V UDWLILFDWLRQ JHQHUDOO\ DQG WKH &RPPHUFH
&ODXVH VSHFLILFDOO\ KLJKOLJKWHG WKH QHHG IRU D IHGHUDO
FRPPHUFHSRZHULQRUGHUWRQDYLJDWHVXFFHVVIXOO\WKHURXJK
ZDWHUVRIWKHGHYHORSLQJ7UDQVDWODQWLFHFRQRP\6RYLWDOZDV
WKLV $PHULFDQ FRPPRQ PDUNHW WR WKH IRUPHU FRORQLHV¶
SDUWLFLSDWLRQ LQ LQWHUQDWLRQDO WUDGH WKDW FRQVWLWXWLRQDO
VXSSRUWHUVH[KRUWHG
>7@KHUHLVQRREMHFWHLWKHUDVLWUHVSHFWVWKHLQWHUHVWVRI
WUDGHRUILQDQFHWKDWPRUHVWURQJO\GHPDQGVDIHGHUDO
VXSHULQWHQGHQFH 7KH ZDQW RI >D IHGHUDO FRPPHUFH
SRZHU@KDVDOUHDG\RSHUDWHGDVDEDUWRWKHIRUPDWLRQRI
EHQHILFLDO WUHDWLHV ZLWK IRUHLJQ SRZHUV DQG KDV JLYHQ
RFFDVLRQV RI GLVVDWLVIDFWLRQ EHWZHHQ WKH 6WDWHV 1R
QDWLRQ DFTXDLQWHG ZLWK WKH QDWXUH RI RXU SROLWLFDO
DVVRFLDWLRQ ZRXOG EH XQZLVH HQRXJK WR HQWHU LQWR
VWLSXODWLRQV ZLWK WKH 8QLWHG 6WDWHV E\ ZKLFK WKH\
FRQFHGHG SULYLOHJHV RI DQ\ LPSRUWDQFH WR WKHP ZKLOH
WKH\ZHUHDSSULVHGWKDWWKHHQJDJHPHQWVRQWKHSDUWRI
WKH 8QLRQ PLJKW DW DQ\ PRPHQW EH YLRODWHG E\ LWV
PHPEHUVDQGZKLOHWKH\IRXQGIURPH[SHULHQFHWKDWWKH\
PLJKWHQMR\HYHU\DGYDQWDJHWKH\GHVLUHGLQRXUPDUNHWV
ZLWKRXW JUDQWLQJ XV DQ\ UHWXUQ EXW VXFK DV WKHLU
PRPHQWDU\FRQYHQLHQFHPLJKWVXJJHVW
1R 8QLWHG6WDWHVY)DDVVH
KLP RI WKH DSSDUHQW &65$ YLRODWLRQ DQG UHTXHVWLQJ SD\PHQW RI WKH
VXSSRUW REOLJDWLRQ ZLWKLQ D VSHFLILHG SHULRG ,I SD\PHQW LV QRW PDGH WKH
PDWWHU LV UHIHUUHG WR WKH )HGHUDO %XUHDX RI ,QYHVWLJDWLRQ 3ULRU WR ILOLQJ
FKDUJHV D VHFRQG OHWWHU LV VHQW WR WKH ZRXOGEH GHIHQGDQW DGYLVLQJ KLP
WKDW FKDUJHV ZLOO EH ILOHG DJDLQVW KLP XQOHVV KH PDNHV SD\PHQW ZLWKLQ D
VSHFLILHG SHULRG RI WLPH ,I SD\PHQW LV VWLOO QRW IRUWKFRPLQJ DQG WKHUH LV
QR DGHTXDWH H[SODQDWLRQ IRU QRQSD\PHQW WKH 86 $WWRUQH\ ZLOO FKDUJH
WKH SDUHQW ZLWK YLRODWLQJ WKH &65$´ ,G IRRWQRWHV RPLWWHG
7KH GLVVHQW DUJXHV WKDW EHFDXVH WKH 0LFKLJDQ OHJLVODWXUH KDV QRW
FKRVHQ WR FULPLQDOL]H WKH IDLOXUH WR SD\ FKLOG VXSSRUW WKH 8QLWHG 6WDWHV
&RQJUHVV LV IRUELGGHQ IURP FULPLQDOL]LQJ VXFK QRQSD\PHQW ZKHQ WKH
REOLJDWLRQ EHFRPHV GXH DQG RQH SDUHQW KDV OHIW WKH VWDWH $ VWDWH¶V IDLOXUH
WR FULPLQDOL]H DQ LQWUDVWDWH SUREOHP KDV QR EHDULQJ RQ &RQJUHVV¶V
DXWKRULW\ WR GHWHUPLQH WKDW RQFH D SUREOHP EHFRPHV LQWHUVWDWH LQ QDWXUH
DV LQ WKH FDVH DW KDQG LW GHVHUYHV FULPLQDO SXQLVKPHQW PRVW OLNHO\
EHFDXVH RI LWV SHUYDVLYHQHVV DQG VXVFHSWLELOLW\ WR HVFDSLQJ VWDWH ODZ
HQIRUFHPHQW 0RUH LPSRUWDQWO\ RQFH ZH KDYH GHFLGHG WKDW &RQJUHVV DFWV
OHJLWLPDWHO\ SXUVXDQW WR LWV &RPPHUFH &ODXVH SRZHU ZKHWKHU RU QRW
&RQJUHVV FULPLQDOL]HV DQ DFW ZKLFK WKH VWDWHV KDYH QRW VLPLODUO\ UHJXODWHG
LV LPPDWHULDO IRU FRQVWLWXWLRQDO SXUSRVHV &I %DLOH\ )G DW
QRWLQJ WKDW ³SULQFLSOHV RI IHGHUDOLVP DQG FRPLW\ DUH QRW FRPSURPLVHG
ZKHQ WKH >IHGHUDOO\@ UHJXODWHG DFWLYLW\ IDOOV LQVLGH FRQVWLWXWLRQDOO\GHILQHG
SHULPHWHUV RI FRQJUHVVLRQDO FRQWURO´ )LQDOO\ ZH GR QRW EHOLHYH WKDW
IHGHUDO HQIRUFHPHQW RI XQSDLG FKLOG VXSSRUW RUGHUV ZKLFK ZHUH HQWHUHG
E\ D VWDWH FRXUW SXUVXDQW WR VWDWH ODZ DQG WKHUHIRUH SUHVXPDEO\ LQ DFFRUG
ZLWK WKH VWDWH OHJLVODWXUH¶V GHWHUPLQDWLRQ WKDW FKLOG VXSSRUW VKRXOG EH
SDLG GRHV ³FRQVLGHUDEOH GDPDJH WR 0LFKLJDQ¶V V\VWHP IRU UHJXODWLQJ
FKLOG VXSSRUW´ SRVW DW S SDUWLFXODUO\ LQ YLHZ RI WKH IDFW WKDW D IHGHUDO
FRXUW FDQQRW UHYLVH WKH XQGHUO\LQJ VWDWH FRXUW RUGHU
DSSURSULDWH XVH RI IHGHUDO SRZHU 6HH 6RXWK(DVWHUQ
8QGHUZULWHUV$VV¶Q86DW QRWLQJWKDW&RPPHUFH
&ODXVHSRZHU³LVDSRVLWLYHSRZHUWRJRYHUQDIIDLUVZKLFK
WKHLQGLYLGXDOVWDWHVZLWKWKHLUOLPLWHGWHUULWRULDOMXULVGLFWLRQV
DUHQRWIXOO\FDSDEOHRIJRYHUQLQJ´
$QLQWHUVWDWHFRXUWRUGHUHGFKLOGVXSSRUWSD\PHQWFOHDUO\
LVD³WKLQJ´LQLQWHUVWDWHFRPPHUFH6HH%DLOH\)GDW
³7KH&65$VHHNVWRSUHYHQWWKHIUXVWUDWLRQRIDQ
LQWHUVWDWHFRPPHUFLDOWUDQVDFWLRQWKDWRWKHUZLVHZRXOGKDYH
RFFXUUHGDEVHQWWKHGHIHQGDQW¶VGHUHOLFWLRQ,WLVWKXVVXEMHFW
WR IHGHUDO FRQWURO >XQGHU FDWHJRU\ WZR@ IRU WKDW UHDVRQ´
&UDZIRUG)GDW ILQGLQJWKDWSD\PHQWVRIFKLOG

-- 19 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
:H VHH QR ORJLFDO IODZ LQ KROGLQJ WKDW WKH &65$ LV D YDOLG
UHJXODWLRQ XQGHU PXOWLSOH /RSH] FDWHJRULHV /RSH] GRHV QRW HYLQFH WKH
6XSUHPH &RXUW¶V LQWHQW WR KROG FRXUWV WR ULJLG FODVVLILFDWLRQV EHWZHHQ WKH
DFWLYLWLHV WKDW &RQJUHVV PD\ SURSHUO\ UHJXODWH LQGHHG WKH 6XSUHPH &RXUW
QRWHG WKDW LWV WKUHH FDWHJRULHV RI DFWLYLW\ ZHUH ³EURDG´ DQG GLG QRW VWDWH
WKDW WKH\ ZHUH H[FOXVLYH /RSH] 86 DW $Q HDUO\ 6XSUHPH
&RXUW FDVH &KDPSLRQ Y $PHV 86 XSKROGLQJ D
&RQJUHVVLRQDO $FW UHJXODWLQJ WKH WUDIILF RI ORWWHU\ WLFNHWV LQ LQWHUVWDWH
FRPPHUFH LV DFFRUGLQJ WR D OHDGLQJ FRQVWLWXWLRQDO VFKRODU D
SDUDGLJPDWLF H[DPSOH RI D UHJXODWLRQ RI ERWK D ³WKLQJ´ LQ LQWHUVWDWH
FRPPHUFH DQG WKH FKDQQHOV RI LQWHUVWDWH FRPPHUFH 6HH /$:5(1&( +
75,%( $0(5,&$1 &2167,787,21$/ /$: G HG 7KH ORWWHU\
WLFNHW ZDV WKH ³WKLQJ´ DQG WKH $FW LQ TXHVWLRQ UHJXODWHG WKH FKDQQHOV RI
FRPPHUFH E\ SURKLELWLQJ WKH PRYHPHQW RI D JRRG FRQVLGHUHG LQMXULRXV WR
WKH SXEOLF ZHOIDUH ,QGHHG LQ 8QLWHG 6WDWHV Y %HXFNHODHUH )G
VXSSRUW RQ EHKDOI RI DQ RXWRIVWDWH FKLOG RU WKH GHEWV
UHVXOWLQJ IURP QRQSD\PHQW DUH WKLQJV LQ LQWHUVWDWH
FRPPHUFH %RQJLRUQR )G DW KROGLQJ WKDW
³>E@HFDXVHFKLOGVXSSRUWRUGHUVWKDWUHTXLUHDSDUHQWLQRQH
VWDWH WR PDNH SD\PHQWV WR D SHUVRQ LQ DQRWKHU VWDWH DUH
IXQFWLRQDOO\ HTXLYDOHQW WR LQWHUVWDWH FRQWUDFWV VXFK
REOLJDWLRQV DUH μWKLQJV¶ LQ LQWHUVWDWH FRPPHUFH´ LQWHUQDO
FLWDWLRQRPLWWHG 0XVVDUL)GDW ³7KHREOLJDWLRQRI
D SDUHQW LQ RQH VWDWH WR SURYLGH VXSSRUW IRU D FKLOG LQ D
GLIIHUHQWVWDWHLVDQREOLJDWLRQWREHPHWE\DSD\PHQWWKDW
ZLOOQRUPDOO\PRYHLQLQWHUVWDWHFRPPHUFH²E\PDLOE\
ZLUHRUE\WKHHOHFWURQLFWUDQVIHURIIXQGV7KDWREOLJDWLRQLV
WKHUHIRUHDWKLQJLQLQWHUVWDWHFRPPHUFHDQGIDOOVZLWKLQWKH
SRZHURI&RQJUHVVWRUHJXODWH´ 7KHUHIRUHWKH&RQJUHVV
PD\IUHHO\UHJXODWHWKHLQWHUVWDWHFRXUWRUGHUHGFKLOGVXSSRUW
SD\PHQW SURYLGHG ZH ILQG WKDW WKH VWDWXWH¶V PHDQV DUH
UDWLRQDOO\UHODWHGWRLWVHQGVZKLFKZHGR7KXVZHFRQFOXGH
WKDW WKH &65$ UHSUHVHQWV DQ DSSURSULDWH H[HUFLVH RI
&RQJUHVV¶V&RPPHUFH&ODXVHSRZHU
&2WKHU&DWHJRULHVRI5HJXODWLRQ
$OWKRXJK ZH KDYH GHWHUPLQHG WKDW WKH &65$ YDOLGO\
UHJXODWHVDWKLQJLQFRPPHUFHZLWKLQ/RSH]¶VFDWHJRU\WZR
ZHDOVREHOLHYHWKDWWKHVWDWXWHLVDFRQVWLWXWLRQDOUHJXODWLRQ
RIWKHFKDQQHOVRILQWHUVWDWHFRPPHUFH$FFRUG&UDZIRUG
1R 8QLWHG6WDWHVY)DDVVH
BBBBBBBBBBBBBBBB
',66(17
BBBBBBBBBBBBBBBB
$/,&(0%$7&+(/'(5GLVVHQWLQJ%HFDXVHP\YLHZ
RIWKH&RPPHUFH&ODXVHIXQGDPHQWDOO\GLIIHUVIURPWKDWRI
WKHPDMRULW\,UHVSHFWIXOO\GLVVHQW,Q8QLWHG6WDWHVY/RSH]
86 DQG8QLWHG6WDWHVY0RUULVRQ6
&W WKH6XSUHPH&RXUWPDGHFOHDUWKDWVRPH
PDWWHUV DUH VLPSO\ RXWVLGH RI WKH VFRSH RI FRQJUHVVLRQDO
UHJXODWLRQ XQGHU WKH &RPPHUFH &ODXVH , WKLQN WKDW
FULPLQDOL]LQJWKHIDLOXUHWRSD\FKLOGVXSSRUWSXUVXDQWWRD
VWDWHFRXUWRUGHULVRQHRIWKRVHPDWWHUV,QWKHRULJLQDOSDQHO
GHFLVLRQ ZH QRWHG WKDW WKH )UDPHUV RI RXU &RQVWLWXWLRQ
GUDIWHG WKH ,QWHUVWDWH &RPPHUFH &ODXVH QRW WKH ,QWHUVWDWH
&ODXVH7KHPDMRULW\¶VFRQVWUXFWLRQUHQGHUVWKHFRPPHUFH
FRPSRQHQWPHDQLQJOHVV6XFKDUHDGLQJYLRODWHVWKHLQWHQWRI
WKH )UDPHUV DQG WUDQVIRUPV WKH &RPPHUFH &ODXVH ± D
PHDVXUHGUDIWHGWRSUHYHQWVWDWHLQWHUIHUHQFHLQWKHHFRQRPLF
DIIDLUVRIWKHQDWLRQ±LQWRDYLUWXDOO\OLPLWOHVVIHGHUDOSROLFH
SRZHUFRQWUDU\WRWKH6XSUHPH&RXUW¶VUHFHQWKROGLQJVLQ
/RSH]DQG0RUULVRQ
,QGHWHUPLQLQJWKHVFRSHRIFRQJUHVVLRQDOSRZHUXQGHUWKH
&RPPHUFH&ODXVHDEULHIUHYLHZRIWKHKLVWRULFDOURRWVRIWKLV
SRZHULVLQVWUXFWLYH$VWKH6XSUHPH&RXUWKDVQRWHG³7KH
VROHSXUSRVHIRUZKLFK9LUJLQLDLQLWLDWHGWKHPRYHPHQWZKLFK
XOWLPDWHO\ SURGXFHG WKH &RQVWLWXWLRQ ZDV μWR WDNH LQWR
FRQVLGHUDWLRQWKHWUDGHRIWKH8QLWHG6WDWHVWRH[DPLQHWKH
UHODWLYHVLWXDWLRQVDQGWUDGHRIWKHVDLGVWDWHVWRFRQVLGHUKRZ
IDUDXQLIRUPV\VWHPLQWKHLUFRPPHUFLDOUHJXODWLRQPD\EH
QHFHVVDU\ WR WKHLU FRPPRQ LQWHUHVW DQG WKHLU SHUPDQHQW
KDUPRQ\¶'RFXPHQWV)RUPDWLRQRIWKH8QLRQ+'RFV
WK&RQJVW6HVVS´+3+RRG 6RQV,QFY'X
0RQG 86 -DPHV 0DGLVRQ FKLHI
DUFKLWHFWRIRXUIHGHUDOV\VWHPVWDWHGWKDWWKH8QLRQUHTXLUHG
DSRZHUWRUHJXODWHFRPPHUFLDODFWLYLW\EHFDXVH³ZDQWRID
JHQHUDO SRZHU RYHU &RPPHUFH OHG WR DQ H[HUFLVH RI WKLV
SRZHU VHSDUDWHO\ E\ WKH 6WDWHV ZKLFK QRW RQO\ SURYHG

-- 20 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
%HFDXVHWKHGLVWULFWFRXUWGLGQRWIDLOWRFRQVLGHUDQ\RIWKH
VWDWXWRU\IDFWRUVDQGGLGQRWRUGHUDQDPRXQWRIUHVWLWXWLRQLQ
H[FHVVRIZKDWLVUHTXLUHGE\VWDWXWHZHPXVWFRQFOXGHWKDW
WKH GLVWULFW FRXUW GLG QRW DEXVH LWV GLVFUHWLRQ E\ KROGLQJ
)DDVVHUHVSRQVLEOHIRUUHVWLWXWLRQRIWKHIXOODPRXQWRIXQSDLG
FKLOGVXSSRUW:HDOVREHOLHYHWKDWWKHGLVWULFWFRXUW¶VRUGHU
WR SD\ WKH UHVWLWXWLRQ LQ D OXPS VXP LV QRW DQ DEXVH RI
GLVFUHWLRQ 6HH 86& † I $ QRWLQJ WKDW D
UHVWLWXWLRQ RUGHU PD\ GLUHFW WKH GHIHQGDQW WR PDNH VLQJOH
OXPSVXPSD\PHQWRUSDUWLDOSD\PHQWVDWVSHFLILHGLQWHUYDOV
$OWKRXJKWKHSUREDWLRQRIILFHUDGYLVHGWKDW)DDVVHFRXOGSD\
UHVWLWXWLRQ³DWDUDWHGHHPHGUHDVRQDEOHE\WKH&RXUW´-$DW
WKH PDJLVWUDWH MXGJH H[SOLFLWO\ GHFOLQHG WR GHYLVH D
SD\PHQWSODQIRUWKHUHVWLWXWLRQRUGHU-$DW+HEDVHG
KLV GHFLVLRQ RQ KLV EHOLHI WKDW )DDVVH ³KDV KDG PHDQV DQG
PHWKRGVWRSD\WKLVPRQH\DOODORQJKHMXVWZLOOQRW´,G
%HFDXVH )DDVVH ZDV HYDVLYH DQG UHFDOFLWUDQW LQ SURYLGLQJ
ILQDQFLDOLQIRUPDWLRQWRWKHFRXUWDQGWKHEXUGHQZDVKLVWR
GHPRQVWUDWHKLVLQDELOLW\WRSD\ZHFDQQRWFRQFOXGHWKDWWKH
PDJLVWUDWHMXGJH¶VILQGLQJLVDQDEXVHRIGLVFUHWLRQ
,9&21&/86,21
)RUWKHIRUHJRLQJUHDVRQVWKHMXGJPHQWRIWKHGLVWULFWFRXUW
LV$)),50('LQDOOUHVSHFWV
1R 8QLWHG6WDWHVY)DDVVH
WK &LU ZH IRXQG 86& † R ZKLFK FULPLQDOL]HG
WKH SRVVHVVLRQ RU WUDQVIHU RI D PDFKLQHJXQ FRQVWLWXWLRQDO EHFDXVH LW
UHJXODWHG ERWK D ³WKLQJ´ LQ LQWHUVWDWH FRPPHUFH DQG WKH FKDQQHOV RI
LQWHUVWDWH FRPPHUFH 7KLV LV QRW WR VD\ WKDW D UHJXODWLRQ RI D ³WKLQJ´ LQ
FRPPHUFH QHFHVVDULO\ LPSOLHV D YDOLG UHJXODWLRQ RI WKH FKDQQHOV RI
FRPPHUFH $ UHJXODWLRQ RI D ³WKLQJ´ LQ FRPPHUFH PD\ EH GLUHFWHG VROHO\
DW WKDW WKLQJ VXFK DV D ODZ SURVFULELQJ WKHIW IURP LQWHUVWDWH VKLSPHQWV VHH
3HUH] Y 8QLWHG 6WDWHV 86 FLWLQJ 86& † EXW
KDYH QRWKLQJ WR GR ZLWK NHHSLQJ RSHQ WKH FKDQQHOV RI FRPPHUFH RU
SURKLELWLQJ LQMXULRXV JRRGV IURP IORZLQJ DFURVV VWDWH OLQHV 7KXV ZH GR
QRW ILQG DQ\WKLQJ LPSURSHU ZLWK RXU FRQFOXVLRQ WKDW WKH &65$ YDOLGO\
UHJXODWHV ERWK WKH XVH RI WKH FKDQQHOV RI LQWHUVWDWH FRPPHUFH DQG D
³WKLQJ´ LQ LQWHUVWDWH FRPPHUFH EHFDXVH WKH VXSSRUW REOLJDWLRQ LV E\
GHILQLWLRQ D ³WKLQJ´ DQG WKH &65$ SURPRWHV WKH IORZ RI PRQH\ WKURXJK
LQWHUVWDWH FKDQQHOV
)G DW ILQGLQJ &65$ YDOLG UHJXODWLRQ XQGHU
FDWHJRU\RQHEHFDXVH³SD\PHQWRIFKLOGVXSSRUWRQEHKDOIRI
DQRXWRIVWDWHFKLOGUHTXLUHVWKHXVHRIFKDQQHOVRILQWHUVWDWH
FRPPHUFH´ %DLOH\)GDW FRQFOXGLQJWKDW&65$
LV YDOLG UHJXODWLRQ XQGHU FDWHJRU\ RQH EHFDXVH ³WKH FKLOG
VXSSRUW REOLJDWLRQ ² PDGH LQWHUVWDWH LQ QDWXUH DV D GLUHFW
FRQVHTXHQFHRIWKHGLYHUVLW\UHTXLUHPHQWLPSRVHGXSRQWKH
REOLJRU DQG WKH REOLJHH ² FDQ EH VDWLVILHG QRUPDOO\ E\ D
SD\PHQWWKDWQHFHVVDULO\PXVWPRYHLQLQWHUVWDWHFRPPHUFH´
,Q /RSH] WKH &RXUW VWDWHG WKDW WKHUH DUH WZR NLQGV RI
SHUPLVVLEOH UHJXODWLRQ XQGHU WKH ILUVW FDWHJRU\ RI DFWLYLW\
³UHJXODWLRQ RI WKH XVH RI WKH FKDQQHOV RI LQWHUVWDWH
FRPPHUFH´ DQG ³DQ DWWHPSW WR SURKLELW WKH LQWHUVWDWH
WUDQVSRUWDWLRQ RI D FRPPRGLW\ WKURXJK WKH FKDQQHOV RI
FRPPHUFH´ /RSH] 86 DW $V WKH &RXUW¶V
UHIHUHQFHV WR 8QLWHG 6WDWHV Y 'DUE\ 86 DW
XSKROGLQJ FULPLQDO SURVHFXWLRQ XQGHU WKH )DLU /DERU
6WDQGDUGV$FWIRULQWHUVWDWHVKLSPHQWRIOXPEHUZKLFKZDV
PDQXIDFWXUHGLQWUDVWDWHE\HPSOR\HHVZKRVHZDJHVDQGKRXUV
GLGQRWFRQIRUPZLWK$FW DQG+HDUWRI$WODQWD0RWHO,QFY
8QLWHG6WDWHV86DW XSKROGLQJ7LWOH,,RIWKH&LYLO
5LJKWV$FWRIIRUELGGLQJSXEOLFDFFRPPRGDWLRQVIURP
UHIXVLQJWRVHUYHFXVWRPHUVEDVHGRQUDFHDQGQRWLQJWKDW³WKH
DXWKRULW\ RI &RQJUHVV WR NHHS WKH FKDQQHOV RI LQWHUVWDWH

-- 21 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
FRPPHUFH IUHH IURP LPPRUDO DQG LQMXULRXV XVHV KDV EHHQ
IUHTXHQWO\ VXVWDLQHG DQG LV QR ORQJHU RSHQ WR TXHVWLRQ´
LOOXVWUDWHSHUPLVVLEOHFDWHJRU\RQHUHJXODWLRQHQFRPSDVVHV
PRUH WKDQ VLPSOH UHJXODWLRQ RI WKH QDWLRQ¶V KLJKZD\V
UDLOURDGVRURWKHUOLWHUDO³FKDQQHOV´RIFRPPHUFH/RSH]
86DW7KHVHFDVHVWHDFKWKDW&RQJUHVV KDVWKH
SRZHU XQGHU FDWHJRU\ RQH WR UHJXODWH RU H[FOXGH FHUWDLQ
FDWHJRULHVRIJRRGVIURPIORZLQJDFURVVVWDWHOLQHVWKURXJK
WKHFKDQQHOVRIFRPPHUFH2XUFDVHODZLVLQKDUPRQ\ZLWK
WKH6XSUHPH&RXUWLQ8QLWHG6WDWHVY%HXFNHODHUH)G
DWZHXSKHOGDVDFDWHJRU\RQHUHJXODWLRQ86&
† R DVWDWXWHFULPLQDOL]LQJWKHSRVVHVVLRQRUWUDQVIHURI
D PDFKLQHJXQ EHFDXVH WKH ³LOOHJDO SRVVHVVLRQ RI D
PDFKLQHJXQFDQQRWRFFXUZLWKRXWDQLOOHJDOWUDQVIHUZKLFK
JLYHQWKHQDWLRQDOPDUNHWSODFHIRUPDFKLQHJXQVLQYROYHVWKH
FKDQQHOV RI LQWHUVWDWH FRPPHUFH´ :H WKHUHIRUH FRQFOXGH
WKDWEDVHGXSRQLWVSRZHUWRUHJXODWHWKHXVHRIWKHFKDQQHOV
RILQWHUVWDWHFRPPHUFHWKH&65$ZDVYDOLGO\HQDFWHGXQGHU
/RSH]¶VFDWHJRU\RQH
)LQDOO\ZHDOVREHOLHYHWKDWDOWKRXJKQRWQHFHVVDU\WRRXU
KROGLQJWRGD\ZHFRXOGILQGWKH&65$DYDOLGUHJXODWLRQ
XQGHU/RSH]¶VFDWHJRU\WKUHH7KHVWDWXWHUHJXODWHVILQDQFLDO
REOLJDWLRQV ZKLFK PXVW PRYH LQ LQWHUVWDWH FRPPHUFH YLD
PDLO ZLUH RU HOHFWURQLF WUDQVIHU LW KDV DQ H[SOLFLW
MXULVGLFWLRQDOQH[XVWRLQWHUVWDWHFRPPHUFH²WKHFKLOGDQG
QRQFXVWRGLDOSDUHQWPXVWUHVLGHLQGLIIHUHQWVWDWHVDQGLWLV
VXSSRUWHGE\&RQJUHVVLRQDOILQGLQJVH[SODLQLQJWKHHIIHFWRQ
LQWHUVWDWHFRPPHUFHRIWKHIDLOXUHWRPDNHFRXUWRUGHUHGFKLOG
VXSSRUWSD\PHQWV$FFRUG3DUNHU)GDW&UDZIRUG
)GDW+DPSVKLUH)GDW DOOXSKROGLQJ
&65$XQGHU/RSH]¶VFDWHJRU\WKUHH &RQJUHVVFOHDUO\KDG
D UDWLRQDO EDVLV IRU HQDFWLQJ WKH &65$ XQGHU LWV FDWHJRU\
WKUHH&RPPHUFH&ODXVHSRZHU,QVXPZHEHOLHYHWKDWWKH
&65$LVYDOLGXQGHUHDFKRIWKHWKUHH/RSH]FDWHJRULHV
,,,25'(52)5(67,787,21
+DYLQJ UHMHFWHG )DDVVH¶V FRQVWLWXWLRQDO FKDOOHQJH WR WKH
&65$ZHQRZWXUQWRKLVFKDOOHQJHWRWKHGLVWULFWFRXUW¶V
1R 8QLWHG6WDWHVY)DDVVH
WKH DELOLW\ WR SD\ UHVWLWXWLRQ DW D UDWH GHHPHG
UHDVRQDEOHE\WKH&RXUW$IWHUQROHVVWKDQILYHUHTXHVWV
WKHGHIHQGDQWKDVIDLOHGWRUHWXUQKLV3HUVRQDO)LQDQFLDO
6WDWHPHQWWRWKLVRIILFH
-$ DW HPSKDVLV DGGHG %HFDXVH )DDVVH UHIXVHG WR
FRRSHUDWHZLWKWKHSUREDWLRQRIILFHUE\SURYLGLQJD3HUVRQDO
)LQDQFLDO 6WDWHPHQW VHH 86& † G ³(DFK
GHIHQGDQWVKDOOSUHSDUHDQGILOHZLWKWKHSUREDWLRQRIILFHUDQ
DIILGDYLW IXOO\ GHVFULELQJ WKH ILQDQFLDO UHVRXUFHV RI WKH
GHIHQGDQWLQFOXGLQJDFRPSOHWHOLVWLQJRIDOODVVHWVRZQHGRU
FRQWUROOHG E\ WKH GHIHQGDQW DV RI WKH GDWH RQ ZKLFK WKH
GHIHQGDQWZDVDUUHVWHGWKHILQDQFLDOQHHGVDQGHDUQLQJDELOLW\
RIWKHGHIHQGDQWDQGWKHGHIHQGDQW¶VGHSHQGHQWVDQGVXFK
RWKHULQIRUPDWLRQWKDWWKHFRXUWUHTXLUHV´ ZHGRQRW
NQRZZKHWKHUWKHSUHVHQWHQFHUHSRUWDFFXUDWHO\UHIOHFWVKLV
HDUQLQJV IRU WKH \HDUV :H DOVR FDQQRW NQRZ
ZKHWKHU)DDVVHKDVXQGLVFORVHGDVVHWVRUOLDELOLWLHV
7RWKHH[WHQWWKDWWKHSUHVHQWHQFHUHSRUWLVLQFRPSOHWHZH
QRWHWKDW³WKHEXUGHQLVRQWKHGHIHQGDQWWRGHPRQVWUDWHWKDW
D UHVWLWXWLRQ RUGHU IDU H[FHHGV KLV UHVRXUFHV DQG HDUQLQJ
SRWHQWLDO´ $GDPV )G DW VHH DOVR 86&
† H ³7KH EXUGHQ RI GHPRQVWUDWLQJ WKH ILQDQFLDO
UHVRXUFHVRIWKHGHIHQGDQWVKDOOEHRQWKHGHIHQGDQW´
:H EHOLHYH WKDW )DDVVH¶V XQZLOOLQJQHVV WR SURYLGH WKH
SUREDWLRQ RIILFHU ZLWK FRPSOHWH ILQDQFLDO DQG HPSOR\PHQW
LQIRUPDWLRQKDVHIIHFWLYHO\FRQVWUDLQHGRXUGHFLVLRQPDNLQJ
ZLWKUHJDUGWRWKHDPRXQWRIUHVWLWXWLRQ:HDUHWKHUHIRUH
FRPSHOOHG WR FRQFOXGH WKDW KH KDV QRW PHW KLV EXUGHQ RI
SHUVXDVLRQ WR SURYH WKDW WKH UHVWLWXWLRQ RUGHU H[FHHGV KLV
HDUQLQJ SRWHQWLDO RU KLV ILQDQFLDO UHVRXUFHV :H QRWH
PRUHRYHUWKDWHYHQLI)DDVVHGRHVODFNWKHSUHVHQWDELOLW\WR
SD\ WKLV FRXUW KDV SUHYLRXVO\ KHOG WKDW D GHIHQGDQW¶V
LQGLJHQF\LVQRWDEDUWRDQRUGHURIUHVWLWXWLRQEHFDXVHDELOLW\
WRSD\LV³EXWRQHIDFWRUIRUWKHFRXUWWRFRQVLGHU´8QLWHG
6WDWHVY%RQGXUDQW)G WK&LU QRWLQJ
UHOHYDQFHRIRWKHUIDFWRUVLQFOXGLQJGHIHQGDQW¶VLQWHOOLJHQFH
DFDGHPLFEDFNJURXQGDQGOLNHO\DELOLW\WRREWDLQDMRE

-- 22 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
UHFRUGV WKDW )DDVVH HDUQHG LQ EXW KDG QR
UHSRUWHGLQFRPHLQ-$DW7KHSUREDWLRQ
RIILFHUQRWHGWKDWVKH³HQFRXQWHUHGGLIILFXOW\HVWDEOLVKLQJWKH
GHIHQGDQW¶VVRXUFH V RIVXEVLVWHQFHLQ´-$DW
6RFLDO6HFXULW\$GPLQLVWUDWLRQUHFRUGVUHIOHFWHGWKDW)DDVVH
HDUQHGLQDOWKRXJKKHPDLQWDLQHGDQDSDUWPHQW
ZLWK D PRQWKO\ UHQW RI DSSDUHQWO\ ZLWK ILQDQFLDO
DVVLVWDQFHIURPKLVIDPLO\)URP-XO\WR$XJXVW
)DDVVHHDUQHGDSSUR[LPDWHO\HYHU\WZRZHHNV,G
$FFRUGLQJWR6RFLDO6HFXULW\$GPLQLVWUDWLRQUHFRUGV)DDVVH
HDUQHGDSSUR[LPDWHO\LQ-$DW)URP
$XJXVWWR)HEUXDU\)DDVVHZRUNHGIRUDGLIIHUHQW
HPSOR\HU DQG HDUQHG FRPPLVVLRQV RI XQNQRZQ VXPV
7KHUHDIWHU)DDVVHZDVEDVLFDOO\XQHPSOR\HGIURP)HEUXDU\
WR 6HSWHPEHU ZKHQ KH ZDV FRQYLFWHG RI WKH SUHVHQW
RIIHQVHDQGKLVLQFRPHIRUWKDWSHULRGLVDOVRXQNQRZQ,G
%DVHG RQ )DDVVH¶V HDUQLQJV GHWDLOHG LQ WKH SUHVHQWHQFH
UHSRUW LW ILUVW DSSHDUV WKDW WKH PDJLVWUDWH MXGJH KDG QR
³LQGLFDWLRQWKDW>WKH@GHIHQGDQWZ>RXOG@EHDEOHWRSD\WKH
DPRXQWRIUHVWLWXWLRQRUGHUHG´'XQLJDQ)GDW
SDUWLFXODUO\LQRQHOXPSVXPSD\DEOHLPPHGLDWHO\DVZDV
RUGHUHGE\WKHGLVWULFWFRXUW-$DW$VLVFOHDUIURPWKH
DERYHUHFLWDWLRQRI)DDVVH¶VHPSOR\PHQWUHFRUGKRZHYHUWKH
SUHVHQWHQFH UHSRUW LV VXEVWDQWLDOO\ LQFRPSOHWH )DDVVH¶V
SUREDWLRQRIILFHUUHSRUWHGWKDW)DDVVH¶V³YLHZVDQGEHOLHIV
UHJDUGLQJ WKH IHGHUDO FULPLQDO MXVWLFH V\VWHP >@ PDGH KLP
XQFRRSHUDWLYHLQWKHJDWKHULQJRIIDFWVDQGPDWHULDOUHOHYDQW
WRWKHSUHSDUDWLRQRIWKHSUHVHQWHQFHUHSRUW´-$DW
7KH SUREDWLRQ RIILFHU DOVR IRXQG WKDW )DDVVH ³ZDV HYDVLYH
UHJDUGLQJKLVSHUVRQDOEDFNJURXQGHPSOR\PHQWDQGFULPLQDO
KLVWRULHV´,G,QWKHVHFWLRQRQWKHGHIHQGDQW¶VHPSOR\PHQW
UHFRUGWKHSUHVHQWHQFHUHSRUWVWDWHVWKDWWKHSUREDWLRQRIILFHU
³HQFRXQWHUHG GLIILFXOW\ LGHQWLI\LQJ DQG YHULI\LQJ WKH
GHIHQGDQW¶VHPSOR\PHQWKLVWRU\7KHGHIHQGDQWSUHVHQWHG
IDOVH DQG PLVOHDGLQJ LQIRUPDWLRQ WR WKLV RIILFHU RQ PDQ\
RFFDVLRQV´-$DW7KHSUREDWLRQRIILFHUFRQFOXGHG
>,@WLVGLIILFXOWWRJDXJHWKHGHIHQGDQW¶VDELOLW\WRSD\,I
KLVPRVWUHFHQWHPSOR\PHQWZRUNVRXWKHVKRXOGKDYH
1R 8QLWHG6WDWHVY)DDVVH
:H QRWH WKDW WKH SDUWLHV GR QRW GLVSXWH WKDW WKLV LV WKH WRWDO DPRXQW
GXH DQG RZLQJ LQ XQSDLG FRXUWRUGHUHG FKLOG VXSSRUW
RUGHUUHTXLULQJKLPWRSD\LQUHVWLWXWLRQ:H
UHYLHZWKHGLVWULFWFRXUW¶VGHFLVLRQWRRUGHUDVSHFLILFDPRXQW
RI UHVWLWXWLRQ IRU DQ DEXVH RI GLVFUHWLRQ 8QLWHG 6WDWHV Y
$GDPV)G WK&LU QRWLQJDOVRWKDW
WKHOHJDOLVVXHRIZKHWKHUUHVWLWXWLRQLVSHUPLWWHGXQGHUODZLV
UHYLHZHGGHQRYR
7KH&65$UHTXLUHVDFRXUWXSRQDFRQYLFWLRQXQGHUWKH
$FW WR RUGHU UHVWLWXWLRQ XQGHU 86& † ³LQ DQ
DPRXQWHTXDOWRWKHSDVWGXHVXSSRUWREOLJDWLRQDVLWH[LVWVDW
WKHWLPHRIVHQWHQFLQJ´86&† F 6HFWLRQ
D % L UHTXLUHV FRXUWV WR FRQVLGHU ZKHQ
GHWHUPLQLQJWKHDPRXQWRIUHVWLWXWLRQWREHRUGHUHG³ , WKH
DPRXQWRIWKHORVVVXVWDLQHGE\HDFKYLFWLPDVDUHVXOWRIWKH
RIIHQVHDQG ,, WKHILQDQFLDOUHVRXUFHVRIWKHGHIHQGDQWWKH
ILQDQFLDOQHHGVDQGHDUQLQJDELOLW\RIWKHGHIHQGDQWDQGWKH
GHIHQGDQW¶VGHSHQGHQWVDQGVXFKRWKHUIDFWRUVDVWKHFRXUW
GHHPVDSSURSULDWH´86&† D % L
)DDVVH¶VVROHDUJXPHQWLVWKDWWKHPDJLVWUDWHMXGJHDEXVHG
KLVGLVFUHWLRQE\IDLOLQJWRFRQVLGHU³WKHILQDQFLDOQHHGVDQG
HDUQLQJ DELOLW\ RI WKH GHIHQGDQW´ ZKHQ IDVKLRQLQJ WKH
UHVWLWXWLRQ RUGHU 6SHFLILFDOO\ )DDVVH DUJXHV WKDW WKH
PDJLVWUDWH MXGJH GLG QRW DGHTXDWHO\ FRQVLGHU WKH HIIHFW RI
)DDVVH¶VVL[PRQWKWHUPRILPSULVRQPHQWDQGWKHFRQVHTXHQW
ORVVRIKLVMRERQKLVHDUQLQJDELOLW\$FFRUGLQJWR)DDVVH
³>I@DLOXUH WR UHGXFH WKH UHVWLWXWLRQ DZDUG LQ OLJKW RI 0U
)DDVVH¶VFLUFXPVWDQFHVFRQVWLWXWHVDQDEXVHRIGLVFUHWLRQWKDW
ZDUUDQWV UHPDQG IRU UHFRQVLGHUDWLRQ RI DQ DSSURSULDWH
UHVWLWXWLRQDZDUG´$SSHOODQW¶V%UDW
,Q VXSSRUW RI KLV SRVLWLRQ )DDVVH FLWHV WR WKLV FRXUW¶V
GHFLVLRQLQ8QLWHG6WDWHVY'XQLJDQ)G WK
&LU LQZKLFKDSDQHORIWKLVFRXUWUHYHUVHGWKHGLVWULFW
FRXUW¶V LPSRVLWLRQ RI D UHVWLWXWLRQ RUGHU RQ D
GHIHQGDQW VHQWHQFHG WR WKLUW\RQH PRQWKV LQ SULVRQ 7KH
'XQLJDQFRXUWGHWHUPLQHGWKDWWKHGLVWULFWFRXUWKDGIDLOHGWR

-- 23 of 24 --

8QLWHG6WDWHVY)DDVVH 1R
FRQVLGHUSXUVXDQWWRWKHVWDWXWH'XQLJDQ¶VDELOLW\WRSD\LQ
OLJKWRIWKHGHIHQGDQW¶VH[WUHPHO\PHDJHUILQDQFLDODVVHWVDQG
WKHODFNRIDQ\HYLGHQFHLQWKHUHFRUGWKDWWKHGHIHQGDQWFRXOG
SD\ ZKDW DPRXQWHG WR DIWHUWD[ GROODUV SHU PRQWK
HYHU\PRQWKIRUWKUHH\HDUVGXULQJKLVVXSHUYLVHGUHOHDVH
:HKDYHKHOGWKDWWKHGLVWULFWFRXUWPXVWFRQVLGHUHDFKRI
WKHVWDWXWRU\IDFWRUVLQ†ZKHQGHWHUPLQLQJWKHVSHFLILF
DPRXQWRUGHUHGDVUHVWLWXWLRQ8QLWHG6WDWHVY6DQGHUV
)G WK &LU 7KH GLVWULFW FRXUW LV QRW
KRZHYHU UHTXLUHG WR PDNH H[SOLFLW ILQGLQJV DERXW HDFK
VWDWXWRU\ IDFWRU LG DOWKRXJK ZH KHOG LQ 'XQLJDQ WKDW ³D
GLVWULFWFRXUWPXVWKDYHDWDPLQLPXPVRPHLQGLFDWLRQWKDW
D GHIHQGDQW ZLOO EH DEOH WR SD\ WKH DPRXQW RI UHVWLWXWLRQ
RUGHUHG´'XQLJDQ)GDW7KXVZHQRWHGWKDW
³>D@ GLVWULFW FRXUW DEXVHV LWV GLVFUHWLRQ ZKHQ LW RUGHUV
UHVWLWXWLRQ LQ DQ DPRXQW WKDW LW ILQGV WKH GHIHQGDQW LV QRW
OLNHO\ WR EH DEOH WR SD\´ ,G TXRWLQJ 8QLWHG 6WDWHV Y
)XHQWHV)G WK&LU
,Q )DDVVH¶V FDVH ZH EHOLHYH WKDW WKH GLVWULFW FRXUW
DGHTXDWHO\ FRQVLGHUHG WKH DSSURSULDWH VWDWXWRU\ IDFWRUV
LQFOXGLQJ WKH GHIHQGDQW¶V ILQDQFLDO VWDWXV 7KH PDJLVWUDWH
MXGJHVWDWHGDWWKHVHQWHQFLQJKHDULQJ
,GRQ¶WVHHDQ\UHVROXWLRQRIWKLVFDVHRWKHUWKDQWKHRQH
,¶PJRLQJWRLPSRVHDQGWKDWLVWKHVWDWXWRU\PD[LPXP
KHUH LV VL[ PRQWKV DQG ,¶P JRLQJ WR LPSRVH WKH VL[
PRQWK VHQWHQFH ,I , WKRXJKW WKDW ² DQG REYLRXVO\ ,
NQRZWKDWWKLVPHDQVWKHGHIHQGDQW¶VJRLQJWRORVHKLV
MRE ,I , WKRXJKW WKDW OHWWLQJ KLP NHHS KLV MRE ZRXOG
PHDQWKDWKHZRXOGVWDUWVXSSRUWLQJKLVFKLOGLW¶VWKHODVW
WKLQJLQWKHZRUOG,¶GGRLVWDNHKLVMREDZD\IURPKLP
EXW , GRQ¶W EHOLHYH IRU D PRPHQW WKDW JHWWLQJ WKLV
SDUWLFXODU MRE DW D \HDU SOXV FRPPLVVLRQV LV
JRLQJWRGRDQ\WKLQJIRUWKLVFKLOG
7KH GHIHQGDQW KDV D ORQJ WUDFN UHFRUG KHUH RI QRW
VXSSRUWLQJ WKH FKLOG VR ZKDW ,¶P JRLQJ WR GR LV
LQFDUFHUDWH WKH GHIHQGDQW PDNH D OHVVRQ RI KLP IRU
KLPVHOIDQGIRURWKHUVDQGDWWKHHQGRIVL[PRQWKVWKHQ
1R 8QLWHG6WDWHVY)DDVVH
KH FDQ GHFLGH ZKHWKHU KH ZDQWV WR FRQWLQXH LQ KLV
REVWUXFWLRQLVWIDVKLRQ
,WKLQNWKHGHIHQGDQWKDVKDGPHDQVDQGPHWKRGVWRSD\
WKLVPRQH\DOODORQJKHMXVWZLOOQRWDQGLQDFDVHZKHUH
WKH&RXUWGHFLGHVWKDWLW¶VWKHGHIHQGDQW¶VZLOODQGQRW
KLVLQDELOLW\WKDW¶VWKHSUREOHP,WKLQNWKLVLVZKDWWKH
&RXUWRXJKWWRGR
-$DW7KHWUDQVFULSWPDNHVFOHDUWKDWWKHPDJLVWUDWH
MXGJHGLGQRWLJQRUH³WKHILQDQFLDOQHHGVDQGHDUQLQJDELOLW\
RIWKHGHIHQGDQW´ZKHQRUGHULQJUHVWLWXWLRQ7KHPDJLVWUDWH
MXGJHH[SOLFLWO\FRQWHPSODWHGWKDW)DDVVHZRXOGORVHKLVMRE
ZKHQ VHQWHQFLQJ KLP EXW EHOLHYHG WKDW HPSOR\HG RU QRW
)DDVVHZDVQRWOLNHO\ZLOOLQJO\WRVXSSRUWKLVGDXJKWHU7KH
PDJLVWUDWH MXGJH DWWULEXWHG )DDVVH¶V IDLOXUH WR PDNH FKLOG
VXSSRUW SD\PHQWV WR KLV ODFN RI ³ZLOO´ WR SD\ QRW WR KLV
ILQDQFLDOLQDELOLW\7KXVXQOLNHWKHVLWXDWLRQLQ'XQLJDQLQ
ZKLFKWKHGLVWULFWFRXUW³H[SUHVVHGFRQVLGHUDEOHGRXEWWKDW
'XQLJDQHYHUZRXOGEHDEOHWRSD\´'XQLJDQ)GDW
WKHPDJLVWUDWH MXGJHLQWKLVFDVHEHOLHYHGWKDW)DDVVH
FRXOGSD\WKHFKLOGVXSSRUWVKRXOGKHVRFKRRVH
+DYLQJGHWHUPLQHGWKDWWKHPDJLVWUDWHMXGJHGLGQRWLJQRUH
WKHDSSURSULDWHVWDWXWRU\IDFWRUVZHPXVWFRQVLGHUZKHWKHU
WKHUH LV VXIILFLHQW HYLGHQFH LQ WKH UHFRUG WR VXSSRUW WKH
DPRXQWRIUHVWLWXWLRQRUGHUHGRUZKHWKHUWKHUHVWLWXWLRQRUGHU
FRQVWLWXWHG DQ DEXVH RI WKH PDJLVWUDWH MXGJH¶V GLVFUHWLRQ
$FFRUGLQJ WR 86& † D WKH SUREDWLRQ RIILFHU
VKRXOG LQFOXGH LQ WKH SUHVHQWHQFH UHSRUW ³LQIRUPDWLRQ
VXIILFLHQWIRUWKHFRXUWWRH[HUFLVHLWVGLVFUHWLRQLQIDVKLRQLQJ
D UHVWLWXWLRQ RUGHU´ LQFOXGLQJ ³LQIRUPDWLRQ UHODWLQJ WR WKH
HFRQRPLFFLUFXPVWDQFHVRIHDFKGHIHQGDQW´7KHSUHVHQWHQFH
UHSRUW LQ WKLV FDVH UHIOHFWV WKDW )DDVVH KDV QHYHU HDUQHG D
FRQVLVWHQWOLYHOLKRRG$FFRUGLQJWRWKHSUREDWLRQRIILFHU¶V
UHSRUW )DDVVH ZDV LQ DQ DXWRPRELOH DFFLGHQW LQ )HEUXDU\
)DDVVHDVVHUWHGWKDWWKLVDFFLGHQWSURKLELWHGKLPIURP
ZRUNLQJIURPWRWKHPLGGOHRI-$DW7KH
SUREDWLRQRIILFHUOHDUQHGIURP6RFLDO6HFXULW\$GPLQLVWUDWLRQ

-- 24 of 24 --