United States v. Stewart, Donna ( 2001 )

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$SSHOOHH  &URVV$SSHOODQW   1RV   Y !   s2( 6$%,12   '$1,(/ . 67(:$57   '211$ *  67(:$57   'HIHQGDQWV$SSHOODQWV  &URVV$SSHOOHHV 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&LQFLQQDWL 1Rn+HUPDQs:HEHU'LVWULFWsXGJH $UJXHG6HSWHPEHU 'HFLGHGDQG)LOHG'HFHPEHU %HIRUH'$8*+75( D@FDVH DV D ZKROH DQG DQ\ FRPELQDWLRQ WKHUHRI LQ GHWHUPLQLQJ 7KH JRYHUQPHQW FURVVDSSHDOV WKH GLVWULFW FRXUWjV ZKHWKHUWKHUHZHUHVXIILFLHQWH[WUDRUGLQDU\IDFWRUVWRWDNH>D VHQWHQFLQJ GHFLVLRQV LQFOXGLQJ IDLOLQJ WR HQKDQFH 0UV GHIHQGDQWjV@FDVHRXWRIWKHµKHDUWODQGjRIFDVHVl,GDW 6WHZDUWjV DQG 6DELQRjV RIIHQVH OHYHOV IRU REVWUXFWLRQ RI +RZHYHUDGHSDUWXUHPXVWEHmUHDVRQDEOHLQWHUPVRI MXVWLFHIDLOLQJWRHQKDQFHHDFKGHIHQGDQWjVRIIHQVHOHYHOIRU WKH DPRXQW DQG WKH H[WHQW RI WKH GHSDUWXUH LQ OLJKW RI WKH VRSKLVWLFDWHGFRQFHDOPHQWUHGXFLQJ6DELQRjVRIIHQVHOHYHO UHDVRQVIRUWKHGHSDUWXUH,QRWKHUZRUGVWKHUHDVRQV IRU D PLQRU UROH LQ WKH RIIHQVH DQG JUDQWLQJ 6DELQR D >PXVW@MXVWLI\WKHPDJQLWXGHRIWKHGHSDUWXUHl8QLWHG6WDWHV GRZQZDUGGHSDUWXUH Y7RFFR)GWK&LUFLWLQJ8QLWHG 6WDWHVY&URXVH)GWK&LU )RUWKHUHDVRQVWKDWIROORZWKHGHIHQGDQWVjFRQYLFWLRQV ZLOOEHDIILUPHG:HILQGKRZHYHUWKDWWKHGLVWULFWFRXUW 7KHGLVWULFWFRXUWGRZQZDUGGHSDUWHGRQ6DELQRjVRIIHQVH HUUHGLQJUDQWLQJ6DELQRDPLQRUUROHUHGXFWLRQDQGLQIDLOLQJ OHYHOE\WKUHHOHYHOVVRDVWRVHQWHQFHKLPWRSUREDWLRQ7KH WR HQKDQFH WKH 6WHZDUWVj DQG 6DELQRjV RIIHQVH OHYHOV IRU GLVWULFWFRXUWEXWWUHVVHGLWVGHSDUWXUHEDVHGRQWKHWRWDOLW\RI VRSKLVWLFDWHG FRQFHDOPHQW  7KHUHIRUH WKH VHQWHQFLQJ WKHIROORZLQJFLUFXPVWDQFHVWKHGHDWKRI6DELQRjVZLIHD GHWHUPLQDWLRQVZLOOEHDIILUPHGLQSDUWDQGUHYHUVHGLQSDUW IHZPRQWKVEHIRUHVHQWHQFLQJ6DELQRjVDJHDWWKHWLPH DQGWKHFDVHZLOOEHUHPDQGHGIRUUHVHQWHQFLQJFRQVLVWHQW RI VHQWHQFLQJ KLV SK\VLFDO GHILFLHQFLHV DQG FRQGLWLRQ ZLWKWKLVRSLQLRQ SDUWLFXODUO\DLOPHQWVZLWKKLVH\HVDQGHDUVWKHDEVHQFHRI ,%$&.*5281' $)DFWXDO%DFNJURXQG  7KH FRPPHQWDU\ WR 866* † . SURYLGHV ,QWKH&ULPLQDO,QYHVWLJDWLRQ'LYLVLRQRIWKH,QWHUQDO 7KH &RPPLVVLRQ GRHV QRW IRUHFORVH WKH SRVVLELOLW\ RI DQ 5HYHQXH6HUYLFHFRQGXFWHGDQLQYHVWLJDWLRQRI3KLOOLS0DUVK H[WUDRUGLQDU\ FDVH WKDW EHFDXVH RI D FRPELQDWLRQ RI VXFK WKH IRXQGHU RI DQ RUJDQL]DWLRQ FDOOHG WKH 3LORW &RQQHFWLRQ FKDUDFWHULVWLFV RU FLUFXPVWDQFHV >QRW RUGLQDULO\ UHOHYDQW WR D 6RFLHW\ 3&6 ZKLFK DPRQJ RWKHU DFWLYLWLHV LQVWUXFWHG GHSDUWXUH@ GLIIHUV VLJQLILFDQWO\ IURP WKH µKHDUWODQGj FDVHV FRYHUHG E\ WKH JXLGHOLQHV LQ D ZD\ WKDW LV LPSRUWDQW WR WKH LQGLYLGXDOV RQ PHWKRGV WR DYRLG SD\LQJ IHGHUDO DQG VWDWH VWDWXWRU\ SXUSRVHV RI VHQWHQFLQJ HYHQ WKRXJK QRQH RI WKH LQFRPHWD[HV7KURXJKWKHH[HFXWLRQRIDVHDUFKZDUUDQWRQ FKDUDFWHULVWLFV RU FLUFXPVWDQFHV LQGLYLGXDOO\ GLVWLQJXLVKHV WKH 0DUVKjV UHVLGHQFH DQG SURSHUW\ WKH ,56 REWDLQHG D OLVW RI FDVH +RZHYHU WKH &RPPLVVLRQ EHOLHYHV WKDW VXFK FDVHV ZLOO EH SHRSOHZKRZHUHDIILOLDWHGZLWKWKH3&67ZRRIWKHSHRSOH H[WUHPHO\ UDUH RQWKHOLVWZHUHGHIHQGDQWV'DQLHODQG'RQQD6WHZDUW7KH  6WHZDUWV RZQHG DQG RSHUDWHG 'DQFR 7UDQVPLVVLRQ ,QF $ VHQWHQFLQJ FRXUW PD\ JUDQW D GHIHQGDQW SUREDWLRQ XQGHU † % 'DQFRLQWKH&LQFLQQDWL2KLRDUHDVLQFH :LWKRXW WKLV GHSDUWXUH DW WKH WLPH RI KLV VHQWHQFH 6DELQR ZDV DW OHYHO  *LYHQ RXU ILQGLQJV WKDW 6DELQR ZDV QRW HQWLWOHG WR D UHGXFWLRQ LQ RIIHQVH OHYHO IRU PLQRU UROH DQG VKRXOG KDYH KDG KLV RIIHQVH OHYHO HQKDQFHG IRU %HFDXVHRIWKHLUFRQQHFWLRQZLWK3&6WKH&LYLO'LYLVLRQRI VRSKLVWLFDWHG PHDQV 6DELQRjV RIIHQVH OHYHO LV  ZLWKRXW WKH GHSDUWXUH DW WKH,56LQYHVWLJDWHGWKH6WHZDUWVjFRPSOLDQFHZLWKIHGHUDO LVVXH WD[ODZVDQGGLVFRYHUHGLQWKDWWKH\ZHUHRYHUGXHLQ  8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO VXEPLWWLQJ WKHLU  WD[ UHWXUQ  7KH ,56 TXHULHG WKH GRZQZDUGIURPDVHQWHQFLQJUDQJHZKHQWKHUHLVDPLWLJDWLQJ 6WHZDUWV DERXW WKHLU IDLOXUH WR ILOH WKH WD[ UHWXUQ  7KH IDFWRUWKDWKDVQRWEHHQDGHTXDWHO\FRQVLGHUHGLQIRUPXODWLQJ 6WHZDUWVUHVSRQGHGE\mUHYRNLQJlWKHLUWD[UHWXUQVIURP WKH6HQWHQFLQJ*XLGHOLQHV86&†E866* WRDGHFODUDWLYHDFWZKLFKKDGQRVXEVWDQWLYHHIIHFWRQ †.$VHQWHQFLQJFRXUWjVGHFLVLRQWRGHSDUWGRZQZDUG WKHLUWD[REOLJDWLRQV$VHULHVRIOHWWHUVHQVXHGEHWZHHQWKH LVUHYLHZHGIRUDQDEXVHRIGLVFUHWLRQ6HH.RRQY8QLWHG ,56DQGWKH6WHZDUWVGXULQJZKLFKWKH6WHZDUWVVHQWWKH,56 6WDWHV86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mXQWD[l LQVWUXFWLRQV WKH 6WHZDUWV FUHDWHG VHYHQ HQFRXUDJHGDVHQWHQFLQJFRXUWPD\GHSDUWLIWKH6HQWHQFLQJ SULPDU\ WUXVWV DQG WUDQVIHUUHG DOO RI WKHLU DVVHWV LQFOXGLQJ *XLGHOLQHVGRQRWDOUHDG\WDNHWKDWIDFWRULQWRDFFRXQW6HH 'DQFRWRWKHWUXVWV(YLGHQFHDWWULDOVKRZHGWKDWWKHWUXVWV LG  ,I D IDFWRU LV GLVFRXUDJHG RU LV DQ HQFRXUDJHG IDFWRU SDLGWKHSHUVRQDODQGEXVLQHVVH[SHQVHVRIWKH6WHZDUWVDQG DOUHDG\FRQVLGHUHGE\WKH6HQWHQFLQJ*XLGHOLQHVDVHQWHQFLQJ ZHUHXVHGWRSXUFKDVHYDULRXVSHUVRQDOLWHPVIRUXVHE\WKH FRXUW PD\ GHSDUW RQO\ mLI WKH IDFWRU LV SUHVHQW WR DQ 6WHZDUWVDQGWKHLUIDPLO\7KHUHZDVQRHYLGHQFHDWWULDOWKDW H[FHSWLRQDO GHJUHH RU LQ VRPH RWKHU ZD\ PDNHV WKH FDVH WKH,56UHFHLYHGDQ\RIWKHUHTXLVLWHSDSHUZRUNFRQFHUQLQJ GLVWLQJXLVKDEOH IURP DQ RUGLQDU\ FDVH ZKHUH WKH IDFWRU LV WKHWUXVWVQRILGXFLDU\LQFRPHWD[UHWXUQVZHUHILOHGRQEHKDOI SUHVHQWl,G)LQDOO\DGLVWULFWFRXUWPD\GHSDUWRQWKHEDVLV RIWKHWUXVWVIURPWR RIDIDFWRUQRWDGGUHVVHGE\WKH6HQWHQFLQJ&RPPLVVLRQLILW ILQGVmDIWHUFRQVLGHULQJWKHVWUXFWXUHDQGWKHRU\RIUHOHYDQW 'XULQJWKH\HDUVWKHWUXVWVmH[LVWHGlWKH6WHZDUWVDVNHG LQGLYLGXDOJXLGHOLQHVDQGWKH>6HQWHQFLQJ@*XLGHOLQHVWDNHQ UHODWLYHVIULHQGVDQGHPSOR\HHVRI'DQFRWRVHUYHDVWUXVWHHV DVDZKROHlWKDWWKHIDFWRUWDNHVWKHFDVHRXWRIWKHDSSOLFDEOH RIWKHWUXVWV7KHQRPLQDOWUXVWHHIRUHDFKRIWKHWUXVWVRIWHQ JXLGHOLQH VKHDUWODQG,GDW$GLVWULFWFRXUWGHSDUWLQJRQ FKDQJHG  (YLGHQFH DW WULDO HVWDEOLVKHG WKDW PDQ\ RI WKH WKHEDVLVRIDQXQHQXPHUDWHGIDFWRUKRZHYHUVKRXOGmEHDULQ WUXVWHHVGLGQRWNQRZWKHQDWXUHRIDWUXVWRUFRXOGQRWH[SODLQ PLQG WKH &RPPLVVLRQ V H[SHFWDWLRQ WKDW >VXFK@ WKHQDWXUHRIWKHLUUHVSRQVLELOLWLHVDVWUXVWHH6RPHWUXVWHHV GHSDUWXUHVZLOOEH KLJKO\LQIUHTXHQW ,GDWTXRWLQJ LQGLFDWHGWKDW0UV6WHZDUWJXLGHGWKHGDLO\RSHUDWLRQVRIWKH 866*FKSW$ WUXVWV7KHHYLGHQFHVKRZHGWKDW6DELQRVHUYHGDVWKHWUXVWHH IRUVHYHUDORIWKHWUXVWVDQGKLVVLJQDWXUHRUVLJQDWXUHVWDPS $VDSDQHORIWKLVFRXUWKDVVDLGWKH*XLGHOLQHVmH[SOLFLWO\ DFNQRZOHGJH WKDW D FRPELQDWLRQ RU DJJUHJDWLRQ RI IDFWRUV  8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO DSSO\LQJ † & HQKDQFHPHQW IRU DGGLWLRQDO REVWUXFWLYH DSSHDUHGRQPDQ\RIWKHGRFXPHQWVUHJDUGLQJWUDQVDFWLRQV FRQGXFWFRPPLWWHGDIWHUXQGHUO\LQJRIIHQVH8QLWHG6WDWHVY XQGHUWDNHQE\WKHWUXVWV $JRUR  )G   VW &LU  VDPH 8QLWHG6WDWHVY/XHGGHNH)GWK&LU %3URFHGXUDO%DFNJURXQG VDPH $ IHGHUDO JUDQG MXU\ UHWXUQHG DQ LQGLFWPHQW DJDLQVW WKH $QDO\VLVRIWKHWULDOFRXUWUHFRUGHVWDEOLVKHVWKDWLPSRVLQJ 6WHZDUWVRQ$SULODQGDVXSHUFHGLQJLQGLFWPHQWRQ D†&HQKDQFHPHQWLQWKLVFDVHZRXOGFRQVWLWXWHGRXEOH sXQH   DGGLQJ 6DELQR DV D GHIHQGDQW  7KH FRXQWLQJ,QDUJXLQJIRUDSSOLFDWLRQRIWKHHQKDQFHPHQWWR VXSHUFHGLQJLQGLFWPHQWFKDUJHG6DELQRDQGWKH6WHZDUWVZLWK 6DELQR DQG 0UV 6WHZDUW WKH JRYHUQPHQW UHOLHV XSRQ FRQVSLUDF\ WR GHIUDXG WKH 8QLWHG 6WDWHV E\ REVWUXFWLQJ WKH m6DELQRjVWHVWLPRQ\WKDWWKH6WHZDUWVKDGQRLQWHUHVWLQWKH IXQFWLRQVRIWKH,QWHUQDO5HYHQXH6HUYLFHLQYLRODWLRQRI 5HGQD7HUUDFH3URSHUW\DQGWKDWKHKDGQHYHUGLVFXVVHGWKH 86&†DQGWKH6WHZDUWVZLWKDQDGGLWLRQDOIRXUFRXQWV 6WHZDUWVj EXVLQHVV DIIDLUV ZLWK 6DP 6SLQHl DQG 0UV RIZLOOIXOO\DWWHPSWLQJWRHYDGHLQFRPHWD[HVLQYLRODWLRQRI 6WHZDUWjVIDOVHWHVWLPRQ\WRWKHJUDQGMXU\WKDWVKHGLGQRW 86&†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µSDUWDQGSDUFHOjRIWKHFRQVSLUDF\:H 6DELQR ZDV VXEMHFW WR D  WR  PRQWK VHQWHQFH RI ILQGWKHUHIRUHWKDWWKHGLVWULFWFRXUWGLGQRWHUULQIDLOLQJWR LQFDUFHUDWLRQXQGHUWKHJXLGHOLQHV7KHGLVWULFWFRXUWJUDQWHG HQKDQFH6DELQRDQG0UV6WHZDUWjVVHQWHQFHVIRUREVWUXFWLRQ DPRWLRQIRUGRZQZDUGGHSDUWXUHDQGVHQWHQFHGKLPWRILYH RIMXVWLFH \HDUVj SUREDWLRQ  6DELQR ZDV LQFOXGHG LQ WKH RUGHUHG UHVWLWXWLRQRIMRLQWO\DQGVHYHUDOO\ZLWKWKH6WHZDUWV 'RZQZDUG'HSDUWXUH6DELQR ,QLWVILQDODVVLJQPHQWRIHUURUWKHJRYHUQPHQWDUJXHVWKDW WKH GLVWULFW FRXUW HUUHG LQ JUDQWLQJ 6DELQR D GRZQZDUG GHSDUWXUH RQ KLV VHQWHQFH  $ VHQWHQFLQJ FRXUW PD\ GHSDUW  $00 )LQDO EULHI RI WKH $SSHOOHH&URVV$SSHOODQW ILOHG sXQH   DW    8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO ,,',6&866,21 WKDWWKHGLVWULFWFRXUWHUUHGLQILQGLQJWKDW6DELQRjVDQG0UV 6WHZDUWjV IDOVH VWDWHPHQWV EHIRUH WKH JUDQG MXU\ ZHUH QRW $6SHHG\7ULDO$FW PDWHULDOPLVUHSUHVHQWDWLRQV  7KH † & HQKDQFHPHQW LV DSSOLFDEOH WR †  FRQVSLUDFLHV  &RPPHQWDU\ WR † & SURYLGHV WKDW WKH 7KH6WHZDUWVDUJXHWKDWWKHGLVWULFWFRXUWHUUHGLQGHQ\LQJ HQKDQFHPHQW ZLOO QRW DSSO\ WR SHUVRQV FRQYLFWHG RI WKHLUPRWLRQWRGLVPLVVWKHVXSHUFHGLQJLQGLFWPHQWEHFDXVHRI m&RQWHPSWl m2EVWUXFWLRQ RI sXVWLFHl m3HUMXU\ RU DYLRODWLRQRIWKH6SHHG\7ULDO$FW86&†WKH 6XERUQDWLRQ RI 3HUMXU\ %ULEHU\ RI :LWQHVVl m)DLOXUH WR 67$ZKLFKUHTXLUHVWKDWDFULPLQDOGHIHQGDQWEHEURXJKWWR $SSHDUE\'HIHQGDQWlm3D\PHQWWR:LWQHVVlm$FFHVVRU\ WULDOZLWKLQGD\VIURPWKHODWHVWGDWHRIDUUHVWWKHILOLQJRI $IWHU WKH )DFWl RU m0LVSULVLRQ RI )HORQ\l XQOHVV mD DQ LQGLFWPHQW RU WKH ILUVW DSSHDUDQFH EHIRUH WKH FRXUW VLJQLILFDQW IXUWKHU REVWUXFWLRQ RFFXUUHG GXULQJ WKH +HQGHUVRQY8QLWHG6WDWHV867KH LQYHVWLJDWLRQSURVHFXWLRQRUVHQWHQFLQJRIWKHSURVHFXWLRQ 67$SURYLGHVWKDWLIWKLVWLPHOLPLWLVH[FHHGHGDQLQGLFWPHQW IRUWKHREVWUXFWLRQRIIHQVHl6HHLG†&FPWQ mVKDOO EH GLVPLVVHG RQ PRWLRQ RI WKH GHIHQGDQWl ZLWK RU %\ ORJLFDO H[WHQVLRQ RI &RPPHQW  WKH 6HQWHQFLQJ ZLWKRXW SUHMXGLFH   86& † D  +RZHYHU WKH *XLGHOLQHV GR QRW SURKLELW DSSOLFDWLRQ RI WKH † & 67$ DOVR SURYLGHV IRU SHULRGV RI H[FOXGDEOH GHOD\ GXULQJ REVWUXFWLRQHQKDQFHPHQWWRD†FRQVSLUDF\,ImIXUWKHUl ZKLFKWKHGD\mFORFNlGRHVQRWRSHUDWH6HHLG†K REVWUXFWLYH FRQGXFW PD\ OHDG WR DQ HQKDQFHPHQW RI WKH 7KHGLVWULFWFRXUWKDVGLVFUHWLRQWRH[FOXGHDGHOD\IURPWKH LQWULQVLFREVWUXFWLRQRIIHQVHVOLVWHGLQ&RPPHQWVXUHO\WKH GD\WLPHOLPLWDQGDGHFLVLRQWRH[FOXGHDGHOD\ZLOORQO\ HQKDQFHPHQWPD\EHDSSOLHGDVSXQLVKPHQWIRUREVWUXFWLYH EHUHYHUVHGXSRQDVKRZLQJRIDFWXDOSUHMXGLFH8QLWHG6WDWHV FRQGXFW FRPPLWWHG DIWHU WKH WHUPLQDWLRQ RI D †  Y &LDQFLROD  )G   WK &LU  FLWLQJ FRQVSLUDF\6HH8QLWHG6WDWHVY)XUNLQ)G 8QLWHG6WDWHVY0RQJHU)GWK&LU WK&LU 7KH LQGLFWPHQW ZDV UHWXUQHG RQ $SULO   WKH $SDQHORIWKLVFRXUWKDVVLJQDOHGWKDWDVHQWHQFLQJFRXUW VXSHUFHGLQJLQGLFWPHQWZDVUHWXUQHGRQsXQH7KH PD\ QRW DSSO\ WKH † & HQKDQFHPHQW LI WKH DSSOLFDWLRQ GLVWULFWFRXUWJUDQWHGLQGHILQLWHHQGVRIMXVWLFHFRQWLQXDQFHV HQWDLOVGRXEOHFRXQWLQJLHZKHUHWKHREVWUXFWLYHFRQGXFWLV RQ0D\6HSWHPEHUDQG2FWREHU mSDUWDQGSDUFHOlRIWKHXQGHUO\LQJRIIHQVHRIFRQYLFWLRQ6HH RQWKHEDVLVWKDWWKHFDVHZDVFRPSOH[7KH6WHZDUWVILOHGD 8QLWHG6WDWHVY%ODQGIRUG)GQWK&LU PRWLRQWRGLVPLVVWKHLQGLFWPHQWIRUYLRODWLQJWKH67$RQ  UHMHFWLQJ GRXEOHFRXQWLQJ DUJXPHQW E\ QRWLQJ WKDW sXQH    7KH 6WHZDUWV FRQFHGH WKDW VHYHUDO RI WKHLU GHIHQGDQWXWWHUHGDPDWHULDOIDOVHVWDWHPHQWGXULQJSUHWULDO PRWLRQV GHOD\HG FRPPHQFHPHQW RI WKH 67$ FORFN  7KH\ LQYHVWLJDWLRQ DQG GXULQJ WULDO WHVWLPRQ\ WKXV FRQVWLWXWLQJ DUJXH WKDW WKH 67$ FORFN EHJDQ WLFNLQJ RQ $SULO   mVHSDUDWH LQFLGHQWV RFFXUULQJ DW VHSDUDWH WLPHVl VHH DOVR ZKHQ WKH GLVWULFW FRXUW DFNQRZOHGJHG UHFHLSW RI ,56 MXU\ 8QLWHG 6WDWHV Y /OR\G  )G   WK &LU  LQIRUPDWLRQ WKH ILQDO LQIRUPDWLRQ UHTXHVWHG LQ WKHLU m6HFWLRQ&GRHVQRWDSSO\WRFRQGXFWWKDWLVSDUWRIWKH UHPDLQLQJPRWLRQPDGHDIWHUWKHLUDUUDLJQPHQWRQ0D\ FULPHLWVHOIlFLWLQJ8QLWHG6WDWHVY:HUOLQJHU)G 'LVFRXQWLQJH[FOXGDEOHGHOD\SHULRGVDIWHUWKHFORFN   WK &LU  8QLWHG 6WDWHV Y 5DQVRP FRPPHQFHGXQWLOWKHWULDORQsXO\WKH6WHZDUWVDUJXH  )G   WK &LU  SHU FXULDP VDPH FI WKDWQRQH[FOXGDEOHGD\VSDVVHGLQYLRODWLRQRIWKH67$ 8QLWHG6WDWHVY)UHGHWWH)GG&LU  8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO UHOHYDQW FRQGXFW UXOHV  6HH 866* 6XSSOHPHQW WR 7KHGLVWULFWFRXUWGHQLHGWKH6WHZDUWVjPRWLRQWRGLVPLVVRQ $SSHQGL[ & $PHQGPHQW  DW   866* sXQH   UHO\LQJ SDUWLDOO\ XSRQ D ILQGLQJ WKDW †%D% FRQWLQXDQFHVZHUHZDUUDQWHGWRVHUYHWKHHQGVRIMXVWLFHDVD UHVXOWRIWKHFDVHjVFRPSOH[LW\7KH6WHZDUWVDUJXHWKDWWKH 7KHFRPSOH[LW\RIWKHFDVHDQGWKHXVHRIWKHVHYHQWUXVWV GLVWULFWFRXUWGLGQRWPDNHVXIILFLHQWILQGLQJVWREXWWUHVVDQ LQ WKH WD[ HYDVLRQ FRQVSLUDF\ FRQVWLWXWHV VRSKLVWLFDWHG HQGVRIMXVWLFHFRQWLQXDQFHEDVHGRQWKHFRPSOH[LW\RIWKH FRQFHDOPHQW  7KHUHIRUH WKH GLVWULFW FRXUW DEXVHG LWV FDVH GLVFUHWLRQLQIDLOLQJWRDSSO\WKHVRSKLVWLFDWHGFRQFHDOPHQW HQKDQFHPHQWWR6DELQR $FFRUGLQJWR†K$GHOD\UHVXOWLQJIURPDFRXUW RUGHUHGFRQWLQXDQFHLVH[FOXGHGLILWLVEDVHGRQDILQGLQJWKDW 2EVWUXFWLRQRIsXVWLFH(QKDQFHPHQW WKHHQGVRIMXVWLFHVHUYHGE\WKHFRQWLQXDQFHmRXWZHLJKWKH EHVWLQWHUHVWRIWKHSXEOLFDQGWKHGHIHQGDQWLQDVSHHG\WULDOl 7KHJRYHUQPHQWDUJXHVWKDWWKHGLVWULFWFRXUWjVIDLOXUHWR :KHQ JUDQWLQJ DQ HQGVRIMXVWLFH FRQWLQXDQFH WKH GLVWULFW DSSO\DQREVWUXFWLRQRIMXVWLFHHQKDQFHPHQWWR6DELQRjVDQG FRXUWPXVWVHWIRUWKLWVDFWXDOUHDVRQLQJIRUWKHFRQWLQXDQFHLQ 0UV 6WHZDUWjV RIIHQVH OHYHOV FRQVWLWXWHG HUURU  7KH WKHUHFRUG6HH86&†K$8QLWHG6WDWHVY 6HQWHQFLQJ *XLGHOLQHV SURYLGH WKDW m>L@I >D@ GHIHQGDQW &UDZIRUG)GWK&LU ZLOOIXOO\REVWUXFWHGRULPSHGHGRUDWWHPSWHGWRREVWUXFWRU LPSHGHWKHDGPLQLVWUDWLRQRIMXVWLFHGXULQJWKHLQYHVWLJDWLRQ ,QLWVsXQHRUGHUWKHGLVWULFWFRXUWFOHDUO\VWDWHGWKDW SURVHFXWLRQRUVHQWHQFLQJRIWKHLQVWDQWRIIHQVHLQFUHDVH LWJUDQWHGDFRQWLQXDQFHGXHWRWKHFRPSOH[LW\RIWKHFDVHDQG WKHRIIHQVHOHYHOE\OHYHOVl866*†&2Q WKDWWKHFRQWLQXDQFHVHUYHGWKHHQGVRIMXVWLFH7KHGLVWULFW DSSHDODGLVWULFWFRXUWjVOHJDOLQWHUSUHWDWLRQRIWKH6HQWHQFLQJ FRXUWUHIHUUHGEDFNWRLWVSUHYLRXVRUDODQGZULWWHQRUGHUVWKDW *XLGHOLQHVSURYLVLRQVLVUHYLHZHGGHQRYR8QLWHG6WDWHVY JUDQWHG FRQWLQXDQFHV EDVHG XSRQ HQGVRIMXVWLFH ILQGLQJV sRQHV  )G   WK &LU   2Q DSSHDO VWHPPLQJ IURP WKH FRPSOH[LW\ RI WKH FDVH  7KH UHFRUG KRZHYHU ZH PD\ QRW UHMHFW WKH GLVWULFW FRXUWjV IDFWXDO HVWDEOLVKHV WKDW WKH GLVWULFW FRXUW GHFODUHG WKH FDVH DV ILQGLQJVXQOHVVWKH\DUHFOHDUO\HUURQHRXV8QLWHG6WDWHVY FRPSOH[RVWHQVLEO\ZLWKWKHDJUHHPHQWRIWKH GHIHQGDQWVj 3UXLWW)GWK&LU DWWRUQH\V  7KLV ZDV D WD[ HYDVLRQ FDVH RI FRPSOH[ SURSRUWLRQVLQYROYLQJWKHZURQJIXOXVHRIWKLUGSDUWLHVDQGWKH 7KHJRYHUQPHQWDUJXHVWKDW6DELQRjVDQG0UV6WHZDUWjV KLGLQJRIDVVHWVLQWUXVWV7KHGLVWULFWFRXUWFRQYHQHGSHULRGLF VHQWHQFHVVKRXOGKDYHEHHQHQKDQFHGGXHWRIDOVHWHVWLPRQ\ VWDWXV FRQIHUHQFHV WR HQVXUH WKDW WKH FDVH SURFHHGHG WKH\ JDYH LQ JUDQG MXU\ SURFHHGLQJV  $V REVHUYHG E\ WKH H[SHGLWLRXVO\WRWULDO)XUWKHUPRUHWKH6WHZDUWVZDLWHGWR JRYHUQPHQWDVHQWHQFLQJFRXUWPXVWDSSO\WKHHQKDQFHPHQW EULQJDPRWLRQWRGLVPLVVWKHLQGLFWPHQWRYHUD\HDUDIWHUWKH LIDGHIHQGDQWSURYLGHVDPDWHULDOO\IDOVHVWDWHPHQWWRDJUDQG GDWHRQZKLFKWKH\FRQWHQGWKH67$FORFNFRPPHQFHG7KH MXU\6HH8QLWHG6WDWHVY0DKDIIH\)GWK 6WHZDUWVjWDUGLQHVVUHIOHFWVWKHLUDJUHHPHQWZLWKWKHGLVWULFW &LU   7KH JRYHUQPHQW DUJXHV WKDW WKH GLVWULFW FRXUW FRXUWjVFDOHQGDUIRUEULQJLQJWKHFDVHWRWULDO$FFRUGLQJO\ GHFOLQHG WR DSSO\ † & LQ SDUW EHFDXVH LW HUURQHRXVO\ WKHGLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQLQJUDQWLQJHQGV GHWHUPLQHG WKDW REVWUXFWLRQ RI WKH ODZIXO RSHUDWLRQ RI WKH RIMXVWLFHFRQWLQXDQFHV 8QLWHG 6WDWHV LV WKH HVVHQFH RI D †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KROGLQJWKDWDQHQGVRIMXVWLFH DQG VWUDLJKWIRUZDUG PDQQHU DV IDU DV , FDQ WHOO DW DOO FRQWLQXDQFHPXVWEHVSHFLILFDOO\OLPLWHGLQWLPH:KLOHWKLV WLPHV7KHFKHFNV ZHUHGHSRVLWHGDVIDUDV,FDQWHOO &LUFXLWKDVQRWDGGUHVVHGWKLVSDUWLFXODULVVXHRWKHUFLUFXLWV $QG , ZRXOG FRQFOXGH WKDW WKH HQKDQFHPHQW IRU KDYHZLWKUHVXOWVFRQWUDU\WRWKH1LQWK&LUFXLWjVKROGLQJ,Q VRSKLVWLFDWHGPHDQVLQWKLVFDVHLVQRWDSSURSULDWHl 8QLWHG6WDWHVY5XVK)GVW&LUWKH)LUVW &LUFXLWUHPDUNHGWKDWm>W@KHSXUSRVHRIKFRQWLQXDQFHLV ,QDVXEVHTXHQWVWDWHPHQWWKHGLVWULFWFRXUWUHPDUNHGZLWK WR PDNH WKH >67$@ µIOH[LEOH HQRXJK WR DFFRPPRGDWH WKH UHVSHFW WR WKH FRQVSLUDF\ m>W@KHUH ZHUH QR RIIVKRUH EDQN SUDFWLFDOLWLHVRIRXUDGYHUVDU\V\VWHPj:HGRQRWWKLQNDUXOH DFFRXQWV>@ >W@KHUH ZHUH QR DOLDVHV XVHG>@ >W@KHUH ZHUH QR EDUULQJ RSHQHQGHG FRQWLQXDQFHV DOWRJHWKHU VHUYHV WKLV ILFWLWLRXVQDPHVXVHGl SXUSRVHl,GDWTXRWLQJ8QLWHG6WDWHVY0LWFKHOO )GVW&LU7KH)LUVW&LUFXLWRSLQHG %HFDXVHRIWKHFRPSOH[LW\RIWKHFLUFXPVWDQFHVRIWKLVFDVH WKDWRSHQHQGHGHQGVRIMXVWLFHFRQWLQXDQFHVPD\EHOLPLWHG LQZKLFKQXPHURXVEDQNVDQGOHQGHUVZHUHFDOOHGWRWHVWLI\ E\DUHDVRQDEOHQHVVUHTXLUHPHQWVRDVWRSUHYHQWXQIDLUGHOD\V DQGWKHIDFWWKDWWKHGHIHQGDQWVXVHGDWOHDVWVHYHQWUXVWVWR DQGFLUFXPYHQWLRQV,GVHHDOVR8QLWHG6WDWHVY3ULQJOH HYDGHWKHSD\PHQWRIWD[HVZHKROGWKDWWKH GLVWULFWFRXUW )GVW&LU7KH7KLUG&LUFXLWDOVR DEXVHG LWV GLVFUHWLRQ LQ IDLOLQJ WR DSSO\ WKH VRSKLVWLFDWHG UHMHFWHG D EDU DJDLQVW RSHQHQGHG FRQWLQXDQFHV EXW LW FRQFHDOPHQWHQKDQFHPHQWWRWKH6WHZDUWV H[SUHVVO\DGRSWHGDUHDVRQDEOHQHVVOLPLWDWLRQXSRQMXVWLILHG GHOD\V6HH8QLWHG6WDWHVY/DWWDQ\)GUG E$VDSSOLHGWR6DELQR &LU6HYHUDORWKHUFLUFXLWVKDYHIROORZHGWKH)LUVWDQG 7KLUG&LUFXLWV6HH8QLWHG6WDWHVYsRQHV)G 6DELQRDFWHGDVWUXVWHHIRUVHYHUDORIWKHWUXVWVXVHGE\WKH WK &LU  GLVWULFW FRXUW PD\ JUDQW RSHQHQGHG 6WHZDUWV  +H SHUPLWWHG WKH 6WHZDUWV WR XVH KLV VLJQDWXUH FRQWLQXDQFHVLQVLWXDWLRQVZKHUHmLWLVLPSRVVLEOHRUDWOHDVW VWDPSWRGHSRVLWPRQH\LQWREDQNLQJDFFRXQWVWRXVHDVIXQGV TXLWHGLIILFXOWIRUWKHSDUWLHVRUWKHFRXUWWRJDXJHWKHOHQJWK IRU WKHLU SHUVRQDO H[SHQVHV  6DELQR SDUWLFLSDWHG LQ WKH RI DQ RWKHUZLVH MXVWLILHG FRQWLQXDQFHl 8QLWHG 6WDWHV Y DFTXLVLWLRQRISURSHUW\IRUWKH6WHZDUWVVRDVWRFRQFHDOWKHLU 6SULQJ)GWK&LUDJUHHLQJZLWK RZQHUVKLS LQWHUHVWV  6DELQR DOVR SDUWLFLSDWHG LQ WKH WKH )LUVW 7KLUG DQG )LIWK &LUFXLWV WKDW RSHQHQGHG SODFHPHQWRIDERJXVPRUWJDJHRQWKH6WHZDUWVjUHVLGHQFH FRQWLQXDQFHVIRUDUHDVRQDEOHWLPHSHULRGDUHZDUUDQWHGLQ 7KHVHDFWLRQVHVWDEOLVKWKDW6DELQRZDVLQWLPDWHO\LQYROYHG VRPH FDVHVVHH DOVR 8QLWHG 6WDWHV Y %XUNH  )6XSS LQ WKH RSHUDWLRQ RI WKH WUXVWV DQG LQ WKH FRQVSLUDF\  +LV 1'*DLQVRPHFDVHVRSHQHQGHGHQGV DFWLRQV HQDEOHG WKH 6WHZDUWV WR PDLQWDLQ WKH WUXVWV DQG WR RIMXVWLFHFRQWLQXDQFHVDUHZDUUDQWHG7KH6HFRQG&LUFXLW HYDGHWKH,56$FFRUGLQJO\WKHVRSKLVWLFDWHGFRQFHDOPHQW KHOGWKDWWKHmOHQJWKRIDQH[FOXVLRQIRUFRPSOH[LW\PXVWEH HQKDQFHPHQW LV DSSOLFDEOH WR 6DELQR EDVHG RQ KLV QRWRQO\OLPLWHGLQWLPHEXWDOVRUHDVRQDEO\UHODWHGWRWKH SDUWLFLSDWLRQLQWKHFRQVSLUDF\)XUWKHUWKH6WHZDUWVjDFWLRQV DFWXDOQHHGVRIWKHFDVHl8QLWHG6WDWHVY*DPELQR)G LQFRQQHFWLRQZLWKWKHWUXVWVZHUHUHDVRQDEO\IRUHVHHDEOHDFWV G&LUFLWLQJ8QLWHG6WDWHVY%HHFK1XW LQ IXUWKHUDQFH RI WKH FRQVSLUDF\ LQ DFFRUGDQFH ZLWK WKH  8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO DFFRXQWV KH NQHZ WR EH D VKDP DQG UHFHLYHG  1XWULWLRQ&RUS)GG&LU8QLWHG6WDWHV IURPRQHRIWKHDFFRXQWV7KH,56KDGWRVXPPRQVEDQN Y/R)UDQFR)GG&LU UHFRUGVIURPDSSUR[LPDWHO\VL[EDQNVRYHUWKHFRXUVHRI VHYHUDO PRQWKV LQ RUGHU WR WUDFH WKH PRQH\ >WKH ,Q+HQGHUVRQY8QLWHG6WDWHV86WKH GHIHQGDQW@KHOSHGWRKLGH7KHLQYHVWLJDWLQJ,56DJHQW 6XSUHPH&RXUWGLVFXVVHGWKHSURSULHW\RIDUHDVRQDEOHQHVV WHVWLILHG WKDW VHWWLQJ XS WKH WD[ DYRLGDQFH VFKHPH UHTXLUHPHQW ZLWK UHJDUG WR DQRWKHU SURYLVLRQ HVWDEOLVKLQJ UHTXLUHG VRSKLVWLFDWLRQ DQG WKDW LW UHTXLUHG D PRUH GHOD\V H[FOXGDEOH IURP WKH 67$jV FORFN VSHFLILFDOO\  FRPSOH[ LQYHVWLJDWLRQ WKDQ WKDW QHFHVVDU\ IRU D IDOVH 86& † K) ZKLFK H[FOXGHV IURP VSHHG\ WULDO HQWU\RQDIRUP FDOFXODWLRQVDQ\SHULRGRIGHOD\FDXVHGE\DSUHWULDOPRWLRQ 7KH 6XSUHPH &RXUW UHDVRQHG WKDW WKH 67$ HPSOR\V D ,GDW FLWLQJ8QLWHG6WDWHVY3LHUFH)G UHDVRQDEOHQHVVVWDQGDUGIRUWKHH[FOXVLRQRIWLPHRQO\ZKHQ WK&LU &RQJUHVV H[SOLFLWO\ UHTXLUHV WKDW WKH SHULRG RI GHOD\ EH UHDVRQDEOH  :LWK UHVSHFW WR WKH SRVVLELOLW\ RI SRWHQWLDOO\ D$VDSSOLHGWRWKH6WHZDUWV H[FHVVLYH FRQWLQXDQFHV WKH 6XSUHPH &RXUW IRXQG WKDW &RQJUHVVOHIWVXFKFRQVLGHUDWLRQVZLWKLQWKHFRQWURORIGLVWULFW 7KHGLVWULFWFRXUWHUUHGLQIDLOLQJWRDSSO\WKHVRSKLVWLFDWHG FRXUWVUDWKHUWKDQWKHVWDWXWHLWVHOI6HH+HQGHUVRQ86 FRQFHDOPHQWHQKDQFHPHQWWRWKH6WHZDUWV7KHGLVWULFWFRXUW DW   %\ DQDORJ\ † K DOVR GRHV QRW FRQWDLQ D QRWHG WKH mPRQXPHQWDO ZRUNl WKDW WKH ,56 VSHFLDO DJHQW UHDVRQDEOHQHVV UHTXLUHPHQW VLQFH LWV ODQJXDJH PLUURUV HQJDJHGLQWRSUHVHQWWKHFDVHIRUWULDOEXWLWGHFOLQHGWRDSSO\ †K)LQDOOSHUWLQHQWUHVSHFWV6LQFH+HQGHUVRQ WKHHQKDQFHPHQWIRUWKHIROORZLQJUHDVRQV VLJQDOVWKDWGLVWULFWFRXUWVPD\GHYLVHWKHLURZQWLPHOLPLWV ZLWKUHVSHFWWRWKLVLVVXHZHZLOOIROORZWKHUXOHRIWKH)LUVW m>7@KLV &RXUW FDQQRW ILQG E\ D SUHSRQGHUDQFH RI WKH 7KLUG )LIWK DQG 7HQWK &LUFXLWV DQG KROG WKDW RSHQHQGHG HYLGHQFH WKDW WKLV LV D VRSKLVWLFDWHG VFKHPH  ,W LV VR HQGVRIMXVWLFHFRQWLQXDQFHVIRUUHDVRQDEOHWLPHSHULRGVDUH W\SLFDO RI D VFKHPH WKDW ZDV RULJLQDWHG E\ WKLV 3LORW &RQQHFWLRQ$V0U'LFNVWHLQ>0U6WHZDUWjVFRXQVHO@ KDVSRLQWHGRXWLWjVDWD[SURWHVWRUFDVHWKDWLWjVWKH UHODWLRQVKLSEHWZHHQWKHVHWD[SD\HUVDQGWKHJRYHUQPHQW  7KH 6XSUHPH &RXUW VWDWHG ZDVDOZD\VVWUDLJKWIRUZDUGDQGWKDWWKH\GLGPDNHVOLSV 2Q LWV IDFH VXEVHFWLRQ ) H[FOXGHV m>D@Q\ SHULRG RI GHOD\l LQWKDWUHODWLRQVKLS%XWEDVLFDOO\WKHVLWXDWLRQDV,IRXQG FDXVHG E\ mDQ\ SUHWULDO PRWLRQl mIURP WKH ILOLQJ RI WKH PRWLRQ LWDQGDV,OLVWHQHGWRWKHWULDOHYHQWKRXJKWKHFDVHZDV WKURXJK WKH FRQFOXVLRQ RI WKH KHDULQJl 7KH SODLQ WHUPV RI WKH FRPSOH[HYHQWKRXJKWKHFDVHZDVPDQ\PDQ\H[KLELWV VWDWXWH DSSHDU WR H[FOXGH DOO WLPH EHWZHHQ WKH ILOLQJ RI DQG WKH KHDULQJ RQ D PRWLRQ ZKHWKHU WKDW KHDULQJ ZDV SURPSW RU QRW WKDW IRU WKH SXUSRVH RI VHQWHQFLQJ , DJUHH ZLWK WKH 0RUHRYHU VXEVHFWLRQ ) GRHV QRW UHTXLUH WKDW D SHULRG RI GHOD\ DQDO\VLVWKDWWKLVTXRWHLVDUXQRIWKHPLOORIDWD[FDVH EH mUHDVRQDEOHl WR EH H[FOXGHG DOWKRXJK &RQJUHVV FOHDUO\ NQHZ HYHQWKRXJKLWLVH[WUHPHO\FRPSOH[WLPHFRQVXPLQJ KRZ WR OLPLW DQ H[FOXVLRQ LQ † K &RQJUHVV SURYLGHG DQG,WKLQNHYHQWKHWLPHZHjYHVSHQWRQWKHVHQWHQFLQJ IRU H[FOXVLRQ RI D mUHDVRQDEOH SHULRG RI GHOD\ ZKHQ WKH LVVXHVGHPRQVWUDWHVLWVFRPSOH[LW\DQGWKHQHHGZLWKWKH GHIHQGDQW LV MRLQHG IRU WULDO ZLWK D FRGHIHQGDQW DV WR ZKRP WKH FDVH o DQG WKH WLPH WKH FDVH QHHGHG WR SURSHUO\ EH WLPH IRU WULDO KDV QRW UXQ DQG QR PRWLRQ IRU VHYHUDQFH KDV EHHQ JUDQWHGl $SDUW IURP WKLV VLQJOH LQVWDQFH HYHU\ RWKHU SURYLVLRQ SUHVHQWHG LQ † K SURYLGHV IRU H[FOXVLRQ RI mDQ\ SHULRG RI GHOD\l ,G DW   8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO SHUPLVVLEOHLQFDVHVZKHUHLWLVQRWSRVVLEOHWRSUHIHUDEO\VHW 7KHVRSKLVWLFDWHGFRQFHDOPHQWHQKDQFHPHQWLVDSSOLHGWR VSHFLILFHQGLQJGDWHV DGHIHQGDQWmEDVHGRQWKHRYHUDOORIIHQVHFRQGXFWIRUZKLFK WKHGHIHQGDQWLVDFFRXQWDEOHlDFFRUGLQJWRWKHmXVXDOUHOHYDQW 7KH GLVWULFW FRXUWjV RUDO DQG ZULWWHQ UXOLQJV JUDQWLQJ WKH FRQGXFW UXOHVl 866* 6XSSOHPHQW WR $SSHQGL[ & HQGVRIMXVWLFH FRQWLQXDQFHV GHPRQVWUDWH WKDW WKLV FDVH $PHQGPHQWDW7KHUHOHYDQWFRQGXFWJXLGHOLQH GHVHUYHG RSHQHQGHG FRQWLQXDQFHV  7KH GHOD\ LQ SURYLGHVWKDWm>L@QWKHFDVHRIDMRLQWO\XQGHUWDNHQFULPLQDO FRPPHQFLQJ WULDO ZDV UHDVRQDEOH JLYHQ WKH YROXPH RI DFWLYLW\DOOUHDVRQDEO\IRUHVHHDEOHDFWVDQGRPLVVLRQVRI HYLGHQFHWKHJRYHUQPHQWPDUVKDOHGDQGWKHFRPSOH[LW\RIWKH RWKHUV LQ IXUWKHUDQFH RI WKH MRLQWO\ XQGHUWDNHQ FULPLQDO GHIHQGDQWVjWD[HYDVLRQVFKHPH)XUWKHUDODUJHSRUWLRQRI DFWLYLW\lDUHXVHGWRVHWDGHIHQGDQWjVRIIHQVHOHYHO866* WKH SUHWULDO SHULRG ZDV VSHQW DGGUHVVLQJ WKH GHIHQGDQWVj †%D% QXPHURXVPRWLRQV$FFRUGLQJO\WKHUHZDVQRXQUHDVRQDEOH GHOD\LQWKHPDQDJHPHQWRIWKLVFDVHDQGWKH67$ZDVQRW &RPSOH[VFKHPHVRIWD[HYDVLRQZDUUDQWLPSRVLWLRQRIWKH YLRODWHGE\WKHGLVWULFWFRXUWjVJUDQWLQJRIRSHQHQGHGHQGV VRSKLVWLFDWHGFRQFHDOPHQWHQKDQFHPHQW,Q8QLWHG6WDWHVY RIMXVWLFHFRQWLQXDQFHV 0RUULV 1R   :/  WK &LU sDQ  DSDQHORIWKLVFRXUWDIILUPHGWKHDSSOLFDWLRQRIWKH %)LIWK$PHQGPHQW&ODLP mVRSKLVWLFDWHG PHDQVl HQKDQFHPHQW WR WKH GHIHQGDQWjV RIIHQVHOHYHOQRWLQJWKHGHIHQGDQWjVDFNQRZOHGJPHQWWKDWKH 'XULQJWKHJRYHUQPHQWjVLQYHVWLJDWLRQRIWKHFRQVSLUDF\LQ XVHGWZRQRPLQHHWUXVWVWRFRQFHDOKLVLQFRPHDQGDVVHWV  DQ ,56 LQYHVWLJDWRU GXULQJ DQ LQWHUYLHZ UHDG WKH 7KHSDQHOVWDWHGWKDWmWKHXVHRIQRPLQHHWUXVWVFRQVWLWXWHVD 6WHZDUWV WKHLU 0LUDQGD ULJKWV  7KHUHDIWHU DQ DWWRUQH\ VRSKLVWLFDWHGPHDQVWRFRQFHDOWD[HYDVLRQRIIHQVHVl,GDW DOOHJHGO\DGYLVHGWKHPQRWWRILOHLQFRPHWD[UHWXUQVEHFDXVH HPSKDVLVDGGHGFLWLQJ8QLWHG6WDWHVY0LQQHPDQ GRLQJVRZRXOGFRQVWLWXWHWKHPDNLQJRIVHOILQFULPLQDWLQJ )GWK&LU VWDWHPHQWV7KH6WHZDUWVDUJXHWKDWWKHLU)LIWK$PHQGPHQW ULJKWWRUHPDLQVLOHQWZDVYLRODWHGEHFDXVHWKHLUIDLOXUHVWR 6LPLODUO\LQ8QLWHG6WDWHVY6SLQH1R:/ ILOHWD[UHWXUQVZHUHFKDUJHGDVRYHUWDFWVLQWKHLQGLFWPHQW WK&LU0D\DSDQHORIWKLVFRXUWDIILUPHG DQGDGGLWLRQDOO\WKHIDLOXUHWRILOHWKHUHWXUQVZDVLQWURGXFHG WKHDSSOLFDWLRQRIWKHmVRSKLVWLFDWHGPHDQVlHQKDQFHPHQWWR DWWULDODVHYLGHQFHRIWKHLUZLOOIXOQHVVLQHYDGLQJWD[HV WKHRIIHQVHOHYHORIGHIHQGDQWVWDWLQJ $WD[SD\HUFODLPLQJD)LIWK$PHQGPHQWSULYLOHJHDJDLQVW >7KHGHIHQGDQW@SUHSDUHGWKHIRUPVWRLQGLFDWHWKDW WKHILOLQJRIDWD[UHWXUQPXVWVSHFLILFDOO\FODLPWKHSULYLOHJH >DFRUSRUDWLRQjV@LQFRPHZDVGLVWULEXWHGRIIVKRUHWRDQ mLQUHVSRQVHWRSDUWLFXODUTXHVWLRQVQRWPHUHO\LQDEODQNHW HQWLW\WKDWGLGQRWH[LVW+HDWWDFKHG6FKHGXOH&IRUPV UHIXVDOWRIXUQLVKDQ\LQIRUPDWLRQl8QLWHG6WDWHVY6DXVV\ WKDWVKRXOGKDYHEHHQDWWDFKHGWRWKHIRUPVWRWKH )GWK&LUTXRWLQJ8QLWHG6WDWHVY  IRUPV  +H ZDV D VLJQDWRU\ RQ RQH RI WKH WUXVW sRKQVRQ  )G   WK &LU   )XUWKHU mWD[SD\HUV FDQQRW DVVHUW D YLRODWLRQ RI WKHLU ULJKWV DJDLQVW FRPSXOVRU\ VHOILQFULPLQDWLRQ ZKHQ WKH\ UHIXVH WR DQVZHU  TXHVWLRQV RQ D WD[ UHWXUQ IRU IHDU DXWKRULWLHV ZLOO GLVFRYHU ([SODQDWRU\ QRWHV WR WKH DPHQGPHQW H[SODLQ WKDW WKH ODQJXDJH RI WKH HQKDQFHPHQW IRU mVRSKLVWLFDWHG PHDQVl LQ WKH  HGLWLRQ RI WKH LOOHJDODFWLYLW\l8QLWHG6WDWHVY6WXUPDQ)G 6HQWHQFLQJ *XLGHOLQHV LV mHVVHQWLDOO\ HTXLYDOHQWl WR WKH ODQJXDJH RI WKH HQKDQFHPHQW IRU mVRSKLVWLFDWHG HQKDQFHPHQWl 866* 6XSSOHPHQW WR $SSHQGL[ & $PHQGPHQW  DW    8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO LQSHUPLWWLQJWKH6WHZDUWVWRXVHKLVVLJQDWXUHVWDPSVHFXULQJ WK&LU FLWLQJ8QLWHG6WDWHVY6XOOLYDQ SURSHUW\IRUWKH6WHZDUWVDQGFUHDWLQJDERJXVPRUWJDJHZHUH 86 HVVHQWLDOWRWKHRSHUDWLRQRIWKHFRQVSLUDF\7KHUHIRUHZH ILQGWKDW6DELQRjVDFWLRQVDVWUXVWHHZHUHLQGLVSHQVDEOHWRWKH 7KHUHTXLUHPHQWRIILOLQJWD[UHWXUQVZDVQRWGLUHFWHGDWWKH FRQVSLUDF\ DQG WKH GLVWULFW FRXUWj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j RIIHQVH OHYHOV IRU XWLOL]LQJ HYLGHQFH IRU D FULPLQDO SURVHFXWLRQ EHFDXVH WKH ,56 KDG VRSKLVWLFDWHGPHDQVWRFRQFHDOWKHFRQVSLUDF\XQGHU866* SODFHGDmIUHH]HFRGHlRQWKHLUDFFRXQWV$mIUHH]HFRGHl † 7  2Q DSSHDO WKH GLVWULFW FRXUWjV GHWHUPLQDWLRQ KRZHYHUFRQVWLWXWHVQRWKLQJPRUHWKDQDQLQWHUQDODFWRIWKH FRQFHUQLQJ WKH DSSOLFDELOLW\ RI WKLV JXLGHOLQH VHFWLRQ LV ,56  6HH ,Q UH %XUURZ  %5   %DQNU ' 8W UHYLHZHG IRU FOHDU HUURU  8QLWHG 6WDWHV Y .UDLJ  )G m:KHQWKH,56UHFHLYHGQRWLFHRIGHEWRUVjILOLQJLW WK&LU+RZHYHUWKHDSSOLFDWLRQRIWKH SODFHGZKDWLWFDOOVDµIUHH]HFRGHjRUµEDQNUXSWF\FRGHjRQ JXLGHOLQHWRDSDUWLFXODUVHWRIIDFWVLVUHYLHZHGGHQRYR6HH GHEWRUVjDFFRXQWLQWKH,56FRPSXWHUV\VWHP$IUHH]HFRGH 8QLWHG6WDWHVY3LHUFH)GWK&LU SUHYHQWVWKHILOLQJRIWD[OLHQVWKHDVVHVVPHQWRIWD[HVWKH VHWRII RI WD[ RYHUSD\PHQWV DJDLQVW WD[ OLDELOLWLHV DQG WKH 7KHHGLWLRQRIWKH6HQWHQFLQJ*XLGHOLQHVVWDWHVm>L@I LVVXDQFHRIWD[UHIXQGVl7KHUHIRUHWKHGLVWULFWFRXUWGLGQRW WKHRIIHQVHLQYROYHGVRSKLVWLFDWHGFRQFHDOPHQWLQFUHDVHE\ HUULQUHMHFWLQJWKH6WHZDUWVjFODLP OHYHOVl866*†7E$SSOLFDWLRQQRWHVWDWHV mµVRSKLVWLFDWHG FRQFHDOPHQWj PHDQV HVSHFLDOO\ FRPSOH[ RU HVSHFLDOO\LQWULFDWHRIIHQVHFRQGXFWLQZKLFKGHOLEHUDWHVWHSV  DUHWDNHQWRPDNHWKHRIIHQVHRULWVH[WHQWGLIILFXOWWRGHWHFW 7KH 6WHZDUWV UHO\ XSRQ WZR 1LQWK &LUFXLW FDVHV WR VXSSRUW WKHLU DUJXPHQW WKDW DFWXDOO\ FRQWUDGLFW WKHLU SRVLWLRQ ,Q 8QLWHG 6WDWHV Y &RQGXFW VXFK DV KLGLQJ DVVHWV RU WUDQVDFWLRQV RU ERWK 7URHVFKHU  )G  WK &LU  WKH FRXUW GHFOLQHG WR DGGUHVV WKH WKURXJK WKH XVH RI ILFWLWLRXV HQWLWLHV FRUSRUDWH VKHOOV RU FODLP ZH mQHHG QRW FRQVLGHU KRZ RU LQ ZKDW PDQQHU WKH )LIWK RIIVKRUH EDQN DFFRXQWV RUGLQDULO\ LQGLFDWHV VRSKLVWLFDWHG $PHQGPHQW PD\ EH LQYRNHG DV D GHIHQVH WR D SURVHFXWLRQ IRU IDLOXUH WR FRQFHDOPHQWl866*†7FPW ILOH WD[ UHWXUQVl ,G DW  Q  FLWLQJ 6XOOLYDQ  86 DW  8QLWHG 6WDWHV Y 5HQGDKO  )G   WK &LU  ,Q 5HQGDKO WKH FRXUW H[SOLFLWO\ FRXQWHUHG WKH 6WHZDUWVj DUJXPHQW LQ WKH IROORZLQJ GLVFXVVLRQ  ,Q 8QLWHG 6WDWHV Y &DUOVRQ  )G  WK &LU  WKH 7KH SUHVHQWHQFH UHSRUW DQG WKH JRYHUQPHQWjV EULHI KRZHYHU UHIHU GHIHQGDQW KDG ILOHG D IDOVH : IRUP FODLPLQJ QLQHW\QLQH WR VRSKLVWLFDWHG PHDQV DQG WKH JRYHUQPHQWjV EULHI FLWHV WR WKH  ZLWKKROGLQJ H[HPSWLRQV DQG WKHQ GLG QRW ILOH D UHWXUQ $V HGLWLRQ RI WKH *XLGHOLQHV PDQXDO LQ GLVFXVVLQJ WKLV LVVXH 7KH 6HQWHQFLQJ GHIHQVH WR D FKDUJH RI ZLOOIXO IDLOXUH WR ILOH D UHWXUQ &DUOVRQ *XLGHOLQHV mLQ HIIHFW RQ WKH GDWH WKDW WKH GHIHQGDQW LV VHQWHQFHGl DUH FODLPHG WKDW ILOLQJ D UHWXUQ ZRXOG KDYH LQFULPLQDWHG KLP IRU DSSOLHG 866* †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DQ ,56HPSOR\HHWRWHVWLI\DVDVXPPDU\ZLWQHVV7KH6WHZDUWV *6HQWHQFLQJ'HWHUPLQDWLRQV DUJXH WKDW )UDQ[PDQ RIIHUHG LPSHUPLVVLEOH FUHGLELOLW\ GHWHUPLQDWLRQV DQG OHJDO FRQFOXVLRQV DQG WKDW LW ZDV SODLQ 0LQRU5ROH5HGXFWLRQ6DELQR HUURUIRUWKHGLVWULFWFRXUWWRDGPLW)UDQ[PDQjVWHVWLPRQ\DV HYLGHQFH7KHUHIRUHWKH6WHZDUWVDUJXHWKDWWKLVFRXUWVKRXOG 7KH JRYHUQPHQW DUJXHV WKDW WKH GLVWULFW FRXUW HUUHG LQ UHPDQGWKHFDVHWRWKHGLVWULFWFRXUWZLWKLQVWUXFWLRQVWRVWULNH JUDQWLQJ6DELQRDUHGXFWLRQLQKLVRIIHQVHOHYHOIRUVHUYLQJDV )UDQ[PDQjVWHVWLPRQ\DQGGLVPLVVWKHFDVH$GLVWULFWFRXUWjV D PLQRU SDUWLFLSDQW LQ WKH FRQVSLUDF\  7KH 6HQWHQFLQJ HYLGHQWLDU\UXOLQJVDUHUHYLHZHGIRUDQDEXVHRIGLVFUHWLRQ *XLGHOLQHVSURYLGHWKDWDVHQWHQFLQJFRXUWVKRXOGGHFUHDVHDQ 6HH0RUDOHVY$PHULFDQ+RQGD0RWRU&RPSDQ\,QF RIIHQVHOHYHOE\OHYHOVLIDGHIHQGDQWLVDPLQRUSDUWLFLSDQW )GWK&LU LQDFULPLQDORIIHQVH866*†%7KHGLVWULFW FRXUWjVUHGXFWLRQRIDQRIIHQVHOHYHOXQGHUWKLVJXLGHOLQHLV 7HVWLPRQ\VXPPDUL]LQJHYLGHQFHLVDGPLVVLEOHLQLQFRPH UHYLHZHG IRU FOHDU HUURU 6HH 8QLWHG 6WDWHV Y /DWRXI  WD[SURVHFXWLRQV6WXUPDQ)GDWFLWLQJ8QLWHG )GWK&LUFLWLQJ8QLWHG6WDWHVY0LOOHU 6WDWHVY/DWWXV)GWK&LU6XFK )GWK&LU7KHGHIHQGDQWEHDUVWKH WHVWLPRQ\LVDGPLVVLEOHLQDFULPLQDOWULDOmZKHQWKHMXGJH EXUGHQ RI SURRI LQ HVWDEOLVKLQJ KLV HQWLWOHPHQW WR WKH FKDUJHV WKH MXU\ DV WR DOO WKH HOHPHQWV QHFHVVDU\ IRU UHGXFWLRQ6HHLGmµ$QDGMXVWPHQWLVQRWDSSURSULDWHLQWKH FRQYLFWLRQZKHUHWKHVXPPDU\LVLQWHQGHGWRDLGWKHMXU\LQ DEVHQFHRIDILQGLQJWKDWWKHGHIHQGDQWZDVµVXEVWDQWLDOO\OHVV FXOSDEOH WKDQ WKH DYHUDJH SDUWLFLSDQWj LQ WKH FULPLQDO HQWHUSULVHjl  ,G TXRWLQJ 0LOOHU  )G DW   m$ GHIHQGDQWZKRVHSDUWLFLSDWLRQLVLQGLVSHQVDEOHWRWKHFDUU\LQJ WKDW &DUOVRQ KDG QRW YDOLGO\ LQYRNHG WKH SULYLOHJH 7KH FRXUW QRWHG WKDW LQ FDVHV ZKHUH WKH SULYLOHJH LV LQYRNHG WR DYRLG RXWRIWKHSODQLVQRWHQWLWOHGWRDUROHUHGXFWLRQl,GFLWDWLRQ LQFULPLQDWLRQ IRU SDVW WD[ FULPHV WKH SULYLOHJH DJDLQVW RPLWWHG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jUHVLGHQFH UHTXLUHPHQW RI ILOLQJ DQ DQQXDO WD[ UHWXUQ LV GLUHFWHG DW UHYHQXH FROOHFWLRQ QRW FULPLQDO SURVHFXWLRQ WKH TXHVWLRQV LQ WKH UHWXUQ 6DELQRDUJXHVWKDWKHFRQWULEXWHGQRVSHFLDONQRZOHGJHRU DUH QHXWUDO DQG GLUHFWHG DW WKH SXEOLF DW ODUJH VNLOOVWKDWZHUHHVVHQWLDOWRWKHFRPSOHWLRQRIWKHFRQVSLUDF\ +RZHYHU6DELQRjVZLOOIXOFRQGXFWDVDWUXVWHHRIWKHWUXVWV 5HGDKO   )G DW  FLWLQJ 6XOOLYDQ   86 DW   8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO DOOHJHGDQGVXFKRYHUWDFWZDVNQRZLQJO\GRQH RUJDQL]LQJSURRIDQGZKHUHWKHVXPPDU\LVQRWLQIODPPDWRU\ LQ IXUWKHUDQFH RI VRPH REMHFW RU SXUSRVH RI WKH RUSUHMXGLFLDOO\ZRUGHGl,G FRQVSLUDF\DVFKDUJHGl :KLOHDVXPPDU\ZLWQHVVPD\JLYHDQRSLQLRQWKDWmHYHQWV .UDLJ)GDWFLWLQJ8QLWHG6WDWHVY6WXUPDQ DVVXPHG LQ >D@ TXHVWLRQ ZRXOG WULJJHU WD[ OLDELOLW\>@l RU )GWK&LU$OWKRXJK†LVEURDGO\ mZKHWKHUSDUWLFXODUSD\PHQWVXQGHUDVVXPHGFLUFXPVWDQFHV FRQVWUXHG m>L@W LV IXQGDPHQWDO WKDW D FRQYLFWLRQ IRU ZRXOGEHWD[DEOHlKHRUVKHPD\QRWJLYHDOHJDORSLQLRQWKDW FRQVSLUDF\XQGHU86&†FDQQRWEHVXVWDLQHGXQOHVV QHFHVVDULO\GHWHUPLQHVWKHJXLOWRIDGHIHQGDQWRULQVWUXFWVWKH WKHUHLV SURRIRIDQDJUHHPHQWWRFRPPLWDQRIIHQVHDJDLQVW MXU\RQFRQWUROOLQJOHJDOSULQFLSOHV8QLWHG6WDWHVY0RQXV WKH8QLWHG6WDWHVjl8QLWHG6WDWHVY&ROOLQV)G )GWK&LU7KHUHIRUHLQDWD[FDVH WK&LUTXRWLQJ,QJUDPY8QLWHG6WDWHV WKHVXPPDU\ZLWQHVVLVDOORZHGWRmVXPPDUL]HDQGDQDO\]H 86m>7@KHJRYHUQPHQWQHHGQRWSURYH WKHIDFWVLQGLFDWLQJZLOOIXOWD[HYDVLRQVRORQJDV>VKHGRHV@ DIRUPDODJUHHPHQWDWDFLWRUPXWXDOXQGHUVWDQGLQJWRHQJDJH QRWµGLUHFWO\HPEUDFHWKHXOWLPDWHTXHVWLRQRIZKHWKHU>WKH LQDFRPPRQSODQLVVXIILFLHQWl,GFLWLQJ8QLWHG6WDWHVY GHIHQGDQWV@ GLG LQ IDFW LQWHQG WR HYDGH LQFRPH WD[HVjl (OO]H\  )G   WK &LU  )XUWKHU m>W@KH 8QLWHG 6WDWHV Y 0RRUH  )G   WK &LU  DJUHHPHQWPD\EHLQIHUUHGIURPWKHDFWVGRQHLQIXUWKHUDQFH TXRWLQJ8QLWHG6WDWHVY'RWVRQ)GWK RIWKHFRQVSLUDF\l8QLWHG6WDWHVY+LWRZ)G &LU  WK &LU   2QFH WKH JRYHUQPHQW SURYHV WKDW D FRQVSLUDF\ H[LVWHG WKH GHIHQGDQW V mFRQQHFWLRQ WR WKH 7KH WHVWLPRQ\ RI D VXPPDU\ ZLWQHVV mVKRXOG EH FRQVSLUDF\PXVWEHVKRZQEH\RQGDUHDVRQDEOHGRXEWEXWWKH DFFRPSDQLHGE\DOLPLWLQJLQVWUXFWLRQZKLFKLQIRUPVWKHMXU\ LPSRUWDQFH RI WKH FRQQHFWLRQ QHHG QRW EH JUHDWl  8QLWHG RIWKHVXPPDU\jVSXUSRVHDQGWKDW>WKHVXPPDU\LWVHOI@GRHV 6WDWHVY%HWDQFRXUW)GWK&LU QRWFRQVWLWXWHHYLGHQFHl8QLWHG6WDWHVY3DXOLQR)G WK&LU,Q3DXOLQRDSDQHORIWKLVFRXUW 7KHJRYHUQPHQWPXVWVKRZWKDWWKHFRQVSLUDWRUVLQWHQGHG KHOG WKH WHVWLPRQ\ RI D QRQH[SHUW VXPPDU\ ZLWQHVV WRLPSDLUWKHIXQFWLRQVRIWKH,56:KLOHWKHJRYHUQPHQW DGPLVVLEOHXQGHU)(' 5 (9,'DEHFDXVHWKHGLVWULFW QHHG QRW mSURYH WKDW WKH FRQVSLUDWRUV ZHUH DZDUH RI WKH FRXUWJDYHDOLPLWLQJLQVWUXFWLRQDQGWKHGHIHQVHKDGDIXOO FULPLQDOLW\RIWKHLUREMHFWLYHlLWPXVWmVKRZWKDWWKH\NQHZ RSSRUWXQLW\WRFURVVH[DPLQHWKHZLWQHVV,G RIWKHOLDELOLW\IRUIHGHUDOWD[HVl&ROOLQV)GDW 7KH GLVWULFW FRXUW LQVWUXFWHG WR WKH MXU\ UHJDUGLQJ 7KHUHZDVDPSOHHYLGHQFHDWWULDOWRVXVWDLQWKHFRQYLFWLRQ )UDQ[PDQj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m(YLGHQFH LV VXIILFLHQW WR XSKROG D MXU\ FRQYLFWLRQ LI DIWHU YLHZLQJ WKH HYLGHQFH LQ WKH OLJKW PRVW IDYRUDEOH WR WKH 7KHVHLQVWUXFWLRQVLQFOXGHGWKHDSSURSULDWHOLPLWDWLRQVE\ JRYHUQPHQWDQGGUDZLQJDOOLQIHUHQFHVLQWKHJRYHUQPHQWjV WKHFRXUWDQGGLGQRWSUHVHQWDQ\LPSURSHUGLUHFWLRQ)XUWKHU IDYRUDUHDVRQDEOHMXURUFRXOGILQGWKDWHDFKHOHPHQWRIWKH XVHRI)UDQ[PDQDVDVXPPDU\ZLWQHVVZDVQRWHUURUEHFDXVH RIIHQVH KDV EHHQ HVWDEOLVKHG EH\RQG D UHDVRQDEOH GRXEWl WKH GHIHQGDQWVFURVVH[DPLQHGKHUH[WHQVLYHO\)UDQ[PDQ 8QLWHG6WDWHVY.UDLJ)GWK&LU DQDO\]HGWKHPXOWLWXGHRIGRFXPHQWVDQGWHVWLPRQ\DGPLWWHG FLWLQJ8QLWHG6WDWHV Y 7D\ORU)GWK&LU LQWRHYLGHQFHDQGSURSHUO\WHVWLILHGDVWRWKHJRYHUQPHQWjV  FDOFXODWLRQRIWD[GXHIURPWKH6WHZDUWV6HH8QLWHG6WDWHVY 0RKQH\)GWK&LU6KHGLGQRW 6DELQR ZDV FRQYLFWHG RI FRQVSLULQJ WR GHIUDXG WKH ,56 UHQGHUDQRSLQLRQFRQFHUQLQJWKHJXLOWRIWKHGHIHQGDQWVVKH XQGHU86&†$FFRUGLQJWR†m>L@IWZRRUPRUH VLPSO\FDOFXODWHGWKHWD[HVWKDWWKH6WHZDUWVRZHGEDVHGRQ SHUVRQV FRQVSLUH    WR GHIUDXG WKH 8QLWHG 6WDWHV RU DQ\ WKHHYLGHQFHDWWULDO DJHQF\WKHUHRILQDQ\PDQQHURUIRUDQ\SXUSRVHDQGRQHRU PRUHRIVXFKSHUVRQVGRDQ\DFWWRHIIHFWWKHREMHFWRIWKH  FRQVSLUDF\HDFKVKDOOEHILQHGl86&†7KH HOHPHQWVRID†FRQVSLUDF\DUH 7KH 6WHZDUWV DOVR REMHFWHG WR SDUWV RI )UDQ[PDQjV WHVWLPRQ\  )LUVW WKH 6WHZDUWV DUJXH WKDW VKH LPSURSHUO\ m WKH FRQVSLUDF\ GHVFULEHG LQ WKH LQGLFWPHQW ZDV WUHDWHG D SURPLVVRU\ QRWH IURP 'DQFR WR 0UV 6WHZDUWjV ZLOIXOO\IRUPHGDQGZDVH[LVWLQJDWRUDERXWWKHWLPH PRWKHUDVDSHUVRQDODVVHWRI0UV6WHZDUWDQGVHFRQGVKH DOOHJHGWKHDFFXVHGZLOOIXOO\EHFDPHDPHPEHU DVVLJQHGRZQHUVKLSWRWKH6WHZDUWVRISURSHUW\WLWOHGLQRWKHU RI WKH FRQVSLUDF\     RQH RI WKH FRQVSLUDWRUV SHUVRQVjQDPHV)UDQ[PDQKRZHYHUPHUHO\DFFRUGHGWKHVH WKHUHDIWHU NQRZLQJO\ FRPPLWWHG DW OHDVW RQH RYHUW DFW DVVHWV WKH WUHDWPHQW WKDW WKH HYLGHQFH GHPRQVWUDWHG WKH\ FKDUJHGLQWKHLQGLFWPHQWDWRUDERXWWKHWLPHDQGSODFH  8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO DFFRXQWLQJIRUFDVKLQWKHRSHQLQJQHWZRUWKFRPSXWDWLRQl GHVHUYHG:LWKUHVSHFWWRWKHSURPLVVRU\QRWHWULDOWHVWLPRQ\ *LDFDORQH)GDW7KHUHIRUHWKHHVWDEOLVKPHQWRI VKRZHGWKDW0UV6WHZDUWjVPRWKHUUHSDLGWKHORDQWR0UV UHTXLVLWHSURRISHUPLWVWKHmXVHRIGDVKHVlWRUHSUHVHQWmFDVKl 6WHZDUWUDWKHUWKDQ'DQFR/LNHZLVHWKHHYLGHQFHVXSSRUWHG IRUFRQWHVWHG\HDUVVXFKV\PEROLFGHQRPLQDWLRQVm>GR@QRW )UDQ[PDQjVVWDWHPHQWIRUWD[FDOFXODWLRQSXUSRVHVWKDWWKH LQYDOLGDWHWKHQHWZRUWKVWDWHPHQWl,GDW 6WHZDUWV WUXO\ RZQHG DVVHWV WLWOHG LQ WKH WUXVWV DQG RWKHU SHUVRQV )UDQ[PDQSUHVHQWHGWKH6WHZDUWVjFDVKDVVHWVDVDGDVKDQG WKXVFRQVWDQWIRUWKHFRQWHVWHG\HDUV6KHUHOLHGXSRQYDULRXV )LQDOO\ WKH 6WHZDUWV DOVR DUJXH WKDW )UDQ[PDQ LJQRUHG IDFWRUVWRFRQFOXGHWKDWWKH6WHZDUWVGLGQRWKDYHDFDVKKRDUG HYLGHQFHWKDWDVDPDWWHURI2KLRFRUSRUDWHODZ'DQFRKDG DW WKH FORVH RI  LQFOXGLQJ  HYLGHQFH RI ORDQV RI EHHQ GLVVROYHG LQ   )UDQ[PDQ SDUWLDOO\ UHOLHG XSRQ   DQG  LQ   DQG  'DQFRWUDQVDFWLRQVPDGHXQGHUWKHDXVSLFHVRIWKHWUXVWVWR UHVSHFWLYHO\WKDWVXJJHVWWKHODFNRIDFDVKKRDUGHYLGHQFH GHWHUPLQH 'DQFRjV WD[ OLDELOLW\  (VVHQWLDOO\ WKH 6WHZDUWV WKDWFKHFNVZULWWHQRQSHUVRQDODFFRXQWVGLGQRWUHYHDOWKH FRQWHQGWKDWWKLVWHVWLPRQ\ZDVLPSURSHUEHFDXVH'DQFRGLG SXUFKDVH RI DQ\ LQFRPHSURGXFLQJ DVVHWV RU LQYHVWPHQWV QRWH[LVWDVDPDWWHURI2KLRVWDWHODZ DQGWKHODFNRIHYLGHQFHWRVXSSRUWWKDWWKH6WHZDUWVKDGD KLVWRU\ RI HQJDJLQJ LQ ODUJH FDVK WUDQVDFWLRQV  2Q FURVV $WUXVWKDYLQJWKHDWWULEXWHVRIDFRUSRUDWLRQZLOOEHWUHDWHG H[DPLQDWLRQ0U6WHZDUWjVDWWRUQH\VXJJHVWHGWKHH[LVWHQFH IRUIHGHUDOLQFRPHWD[SXUSRVHVDVDQDVVRFLDWLRQDQGWKXV RI FDVK LWHPV WRWDOLQJ  EXW WKH 6WHZDUWV FRJQL]DEOHDVDWD[DEOHHQWLW\m7KHIDFWWKDWXQGHUVWDWHODZ DFNQRZOHGJHG LQ WKHLU EULHI RQ DSSHDO WKDW WKH\ FRXOG QRW RUJDQL]DWLRQVDUHQRWOHJDOHQWLWLHVlLVQRWFRQWUROOLQJLQ SURYLGH DQ\ OHDGV IRU WKH LWHPV  ,Q DQ\ HYHQW )UDQ[PDQ GHWHUPLQLQJZKHWKHUWKH\FRQVWLWXWHGDQDVVRFLDWLRQWD[DEOH SURSHUO\GLVSRVHGRIWKHVHVXJJHVWLRQV DV D FRUSRUDWLRQ  &RPPLVVLRQHU RI ,QWHUQDO 5HYHQXH Y )RUWQH\2LO&R)GWK&LUFLWLQJ 7KH 6WHZDUWV DOVR FODLPHG DGGLWLRQDO HUURUV LQ WKH %XUN:DJJRQHU 2LO $VVjQ Y +RSNLQV  86   JRYHUQPHQWjVQHWZRUWKFDOFXODWLRQVSHFLILFDOO\GLUHFWLQJWKLV m7KHFRUHWHVWRIFRUSRUDWHH[LVWHQFHIRUSXUSRVHVRI FRXUW WR VHYHUDO PLVVHG DVVHWV   LQ KRXVHKROG IHGHUDOLQFRPHWD[DWLRQLVDOZD\VDPDWWHURIIHGHUDOODZl IXUQLWXUH WKH  YDOXH RI D  OLIH LQVXUDQFH 8QLWHG6WDWHVY0F'RQDOG (LGH,QF)GUG SROLF\DQGLQORDQVWKH6WHZDUWVDOOHJHGO\PDGHWR &LU7KH6WHZDUWVjFRQWHQWLRQVUHJDUGLQJWKHWUHDWPHQW 'DQFR$VVHWIRUWKE\WKHJRYHUQPHQWWKRXJKWKHUHZDVQR RI 'DQFR DUH PHULWOHVV  7KH H[LVWHQFH RI 'DQFR DV DQ HYLGHQFHWKDWWKH6WHZDUWVGLVSRVHGRIWKHIXUQLWXUHGXULQJWKH DVVRFLDWLRQWD[DEOHDVDFRUSRUDWLRQIRUIHGHUDOWD[SXUSRVHV FRQWHVWHG \HDUV VR LWV YDOXH UHPDLQHG FRQVWDQW GXULQJ WKH GLGQRWGHSHQGXSRQLWVVWDWXVXQGHU2KLRODZ SHULRG7KH6WHZDUWVFODLPWKDWWKHIXUQLWXUHFRQVWLWXWHGDQ DVVHWEHFDXVHLQVXUDQFHSURFHHGVFRYHUHGGHVWUXFWLRQRIWKH 'sXU\,QVWUXFWLRQV IXUQLWXUHGXULQJDILUHEXWWKHHYLGHQFHVKRZHGWKDWSURFHHGV IURP WKH LQVXUDQFH VHWWOHPHQW FKHFN  SULPDULO\ ZHQW WR D ,QWKHLUIRXUWKDVVLJQPHQWRIHUURUWKH6WHZDUWVDUJXHWKDW FRQWUDFWRUWRFOHDQVPRNHGDPDJHQRWWREX\QHZIXUQLWXUH WKHGLVWULFWFRXUWLPSURSHUO\LQVWUXFWHGWKHMXU\E\IDLOLQJWR 7KH6WHZDUWVGLGQRWHOLFLWDQ\HYLGHQFHWKDWWKH\GLVSRVHGRI LQFOXGHWKH6WHZDUWjVSURIIHUHGLQVWUXFWLRQWKDW 'DQFRZDV WKHOLIHLQVXUDQFHSROLF\RUERUURZHGDJDLQVWLWDQGWKH\GLG GLVVROYHG DQG E\ DGPLQLVWHULQJ D FRQIXVLQJ LQVWUXFWLRQ QRW GHPRQVWUDWH WKDW WKHLU ORDQV WR 'DQFR ZHUH UHSDLG RU UHJDUGLQJ RSLQLRQ ZLWQHVVHV  7KH 6WHZDUWV DUJXH WKDW WKH EHFDPH ZRUWKOHVV  7KH 6WHZDUWV DOVR DUJXHG WKDW WKH GLVWULFWFRXUWjVUHIXVDOWRJLYHWKHLUSURIIHUHGLQVWUXFWLRQDQG  8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO WKH RYHUDOO FRQIXVLRQ RI WKH MXU\ LQVWUXFWLRQV FRQVWLWXWHG FRXUWVPXVWFORVHO\VFUXWLQL]HLWVXVHl+ROODQG86DW UHYHUVLEOHHUURU>7KHFRXUW@UHYLHZ>V@MXU\LQVWUXFWLRQVDVD   7KXV RSHQLQJ QHW ZRUWK PXVW EH HVWDEOLVKHG ZLWK ZKROH WR GHWHUPLQH ZKHWKHU WKH\ IDLUO\ DQG DGHTXDWHO\ mUHDVRQDEOHFHUWDLQW\l,GDWm$VDQDGGHGPHDVXUHRI VXEPLWWHGWKHLVVXHVDQGDSSOLFDEOHODZWRWKHMXU\8QLWHG SURWHFWLRQWKHJRYHUQPHQWLVUHTXLUHGWRGHPRQVWUDWHWKDWLW 6WDWHVY:LOOLDPV)GWK&LU$ KDVLQYHVWLJDWHGWKHH[LVWHQFHRIVRXUFHVRIQHWZRUWKRWKHU MXGJPHQW ZLOO EH UHYHUVHG mEDVHG XSRQ DQ LPSURSHU MXU\ WKDQ XQUHSRUWHG WD[DEOH LQFRPHl  *LDFDORQH  )G DW LQVWUXFWLRQµRQO\LIWKHLQVWUXFWLRQVYLHZHGDVDZKROHZHUH )DLOXUHWRLQYHVWLJDWHOHDGVIXUQLVKHGE\WKHWD[SD\HU FRQIXVLQJ PLVOHDGLQJ RU SUHMXGLFLDOjl  8QLWHG 6WDWHV Y PD\UHVXOWLQmVHULRXVLQMXVWLFHl+ROODQG86DW %HDW\)GWK&LU DQGWKXVWKHmFRJHQF\RI>WKHJRYHUQPHQWjV@SURRIGHSHQGV XSRQLWVHIIHFWLYHQHJDWLRQRIUHDVRQDEOHH[SODQDWLRQVE\WKH  WD[SD\HULQFRQVLVWHQWZLWKJXLOWl,Gm+RZHYHUZKHUHWKH JRYHUQPHQWSURYHVDVRXUFHRIWD[DEOHLQFRPHLWQHHGQRW 7KH 6WHZDUWV DUJXH WKDW WKH GLVWULFW FRXUW LPSURSHUO\ QHJDWHDOOWKHSRVVLEOHQRQWD[DEOHVRXUFHVRIWKHDOOHJHGQHW UHIXVHG WR LQVWUXFW WKH MXU\ WKDW 'DQFR ZDV GLVVROYHG DV D ZRUWKLQFUHDVHVVXFKDVJLIWVORDQVDQGLQKHULWDQFHV3URRI PDWWHU RI ODZ  7KH 6WHZDUWV SURIIHUHG WKH IROORZLQJ RIDVRXUFHRIWD[DEOHLQFRPHFDUULHVZLWKLWWKHQHJDWLRQRI LQVWUXFWLRQ DQG LWV UDWLRQDOH WR WKH GLVWULFW FRXUW m>$@V D XQWD[DEOHLQFRPHl8QLWHG6WDWHVY%HQFV)G PDWWHURIODZWKDWWKHFRUSRUDWLRQZDVGLVVROYHG%HFDXVH WK&LU FRUSRUDWLRQV DUH FUHDWHG E\  DV WKH\jUH ILFWLWLRXV HQWLWLHV FUHDWHGE\WKHVWDWHDQGXOWLPDWHO\GLVVROYHGE\WKHVWDWHDQG 7KH 6WHZDUWV DUJXH WKDW WKH JRYHUQPHQW LPSURSHUO\ ZHVXUHKDYHWKRVHGLVVROXWLRQSDSHUVLQWKHUHFRUGZLWKRXW FDOFXODWHGWKHLUQHWZRUWKEHFDXVHLWIDLOHGWRWUHDWWKHDVVHWV DQ\LQGLFDWLRQRIDQ\WKLQJWKDWZRXOGUHQGHUWKRVHGLVVROXWLRQ RI'DQFRDVWKRVHRIDVROHSURSULHWRUVKLS7KHGLVFXVVLRQ SDSHUVLQYDOLGl DERYHUHJDUGLQJ'DQFRjVVWDWXVDVDGLVVROYHGFRUSRUDWLRQ SDUWLFXODUO\ZLWKUHVSHFWWRIHGHUDOWD[ODZGLVSRVHVRIWKLV $VVWDWHGLQ:LOOLDPVm>D@UHIXVDOWRGHOLYHUDUHTXHVWHG DUJXPHQW LQVWUXFWLRQLVUHYHUVLEOHRQO\LIWKDWLQVWUXFWLRQLVDFRUUHFW VWDWHPHQW RI WKH ODZ  QRW VXEVWDQWLDOO\ FRYHUHG E\ WKH 1H[W WKH 6WHZDUWV DUJXH WKDW WKH JRYHUQPHQW IDLOHG WR FKDUJHDFWXDOO\GHOLYHUHGWRWKHMXU\DQGFRQFHUQVDSRLQW HVWDEOLVK RSHQLQJ FDVK RQ KDQG ZLWK UHDVRQDEOH FHUWDLQW\ VRLPSRUWDQWLQWKHWULDOWKDWWKHIDLOXUHWRJLYHLWVXEVWDQWLDOO\ EHFDXVHLWIDLOHGWRLQYHVWLJDWHOHDGVSURYLGHGE\WKHPm$ LPSDLUV WKH GHIHQGDQW V GHIHQVHl   )G DW   7KH GHIHQVH RIWHQ DVVHUWHG LQ QHW ZRUWK FDVHV LV WKDW WKH 6WHZDUWVjSURIIHUHGLQVWUXFWLRQZDVZURQJ:KHWKHUWKHWUXVWV JRYHUQPHQWjVRSHQLQJQHWZRUWKLVQRWDFFXUDWHEHFDXVHRI VKRXOG EH WD[HG DV D FRUSRUDWLRQ ZDV QRW FRQWLQJHQW RQ VXEVWDQWLDO FDVK RU DVVHWV RQ KDQG DW WKH VWDUWLQJ SRLQWl ZKHWKHU'DQFRZDVGLVVROYHGXQGHU2KLRODZ5DWKHULWZDV %HQFV)GDW7KHH[LVWHQFHRIDFDVKKRDUGPD\EH D TXHVWLRQ RI IDFW ZKHWKHU 'DQFR DQG WKH UHOHYDQW WUXVWV UHIXWHGKRZHYHUE\m>H@YLGHQFHZKLFKFDUHIXOO\WUDFHVWKH VKRXOG EH WUHDWHG DV D FRUSRUDWLRQ IRU WD[ SXUSRVHV  7KH ILQDQFLDOKLVWRU\RIDGHIHQGDQWDQGGLVFORVHVH[SHQGLWXUHVLQ SURIIHUHG LQVWUXFWLRQ HUURQHRXVO\ VWDWHG WKDW WKLV LVVXH ZDV H[FHVV RI UHSRUWHG UHVRXUFHV LQ WKH SHULRG LPPHGLDWHO\ UHVROYHGDVDPDWWHURI2KLRODZ SUHFHGLQJWKHLQGLFWPHQW\HDUVl*LDFDORQH)GDW )XUWKHUPRUHWKHmUHFRJQLWLRQRIDFDVKEDQNUROOWUHDWHGDVD FRQVWDQWWRJHWKHUZLWKSURRIZKLFKZRXOGVXSSRUWDILQGLQJ WKDW QR VLJQLILFDQW FDVK KRDUG H[LVWHG >LV@ D VXIILFLHQW  8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY  6DELQRHWDO 6DELQRHWDO 7KHUHIRUHEHFDXVHWKHVXPRIWKHGLVWULFWFRXUWjVLQVWUXFWLRQV  VHW IRUWK WKH UHTXLVLWH JXLGDQFH WR WKH MXU\ ZH GHFOLQH WR FRQFOXGHWKDWWKHLQVWUXFWLRQVDVDZKROHZHUHmFRQIXVLQJ 7KH 6WHZDUWVj VHFRQG FRQWHQWLRQ WKDW WKH GLVWULFW FRXUW PLVOHDGLQJRUSUHMXGLFLDOl%HDW\)GDW GHOLYHUHGFRQIXVLQJLQVWUXFWLRQVUHJDUGLQJRSLQLRQZLWQHVVHV LQYROYHVWKHGLVWULFWFRXUWjVLQVWUXFWLRQFRQFHUQLQJ)UDQ[PDQ (1HW:RUWK&DOFXODWLRQ 7KHGLVWULFWFRXUWLQVWUXFWHGWKHMXU\DVIROORZV ,QWKHLUVL[WKDVVLJQPHQWRIHUURUWKH6WHZDUWVFRQWHQGWKDW 23,1,21:,71(66$1'+ D@Q\ SHUVRQ ZKR H[SHULHQFHLQDQ\DUWVFLHQFHSURIHVVLRQRUFDOOLQJPD\ ZLOOIXOO\DWWHPSWVLQDQ\PDQQHUWRHYDGHRUGHIHDWDQ\WD[ VWDWHWKHLURSLQLRQVLQDPDWWHUZKLFKLVUHOHYDQWWRWKH LPSRVHGE\WKLVWLWOHRUWKHSD\PHQWWKHUHRIVKDOOEHJXLOW\ FDVH7KH\PD\DOVRVWDWHWKHUHDVRQVIRUWKHLURSLQLRQ RIDIHORQ\lm7KHUHDUHWZRPHWKRGVRISURRILQDWD[ FDVH,QWKHµGLUHFWjRUµVSHFLILFLWHPjPHWKRGVSHFLILFLWHPV