Weberg v. Franks

Opinion

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

0(55,$11( :(%(5*HWDO ; 3ODLQWLIIV$SSHOODQWV    1R Y  !  5$1'< )5$1.6HWDO  'HIHQGDQWV$SSHOOHHV  1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDW'HWURLW 1Rn'HQLVH3DJH+RRG'LVWULFWsXGJH $UJXHGsXQH 'HFLGHGDQG)LOHG2FWREHU %HIRUH.583$16.<5<$1DQG68+5+(,15,&+ &LUFXLWsXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8('  %ULDQ s 5LFKWDUFLN &+$30$1 $662&,$7(6%ORRPILHOG+LOOV0LFKLJDQIRU$SSHOODQWV .DWKHULQH & *DOYLQ 2)),&( 2) 7+( $77251(< *(1(5$/38%/,&(03/2<0(17$1'(/(&7,216 ',9,6,21/DQVLQJ0LFKLJDQIRU$SSHOOHHV21%5,() 5RQDOG : &KDSPDQ &+$30$1  $662&,$7(6 %ORRPILHOG+LOOV0LFKLJDQIRU$SSHOODQWVsRKQ)LW]JHUDOG

  :HEHUJHWDOY)UDQNVHWDO 1R

6]F]XEHOHN 2)),&( 2) 7+( $77251(< *(1(5$/ 38%/,&(03/2<0(17$1'(/(&7,216',9,6,21 /DQVLQJ0LFKLJDQIRU$SSHOOHHV BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB 68+5+(,15,&+ &LUFXLW sXGJH  3ODLQWLII 0HUULDQQH :HEHUJ DSSHDOV WKH GLVWULFW FRXUWjV HQWU\ RI VXPPDU\ MXGJPHQW LQ IDYRU RI GHIHQGDQW SULVRQ RIILFLDOV LQ WKLV mUHYHUVHlUDFLDOGLVFULPLQDWLRQDFWLRQSXUVXDQWWR86& †)RUWKHUHDVRQVVWDWHGEHORZZH5(9(56( ,%$&.*5281' 3ODLQWLIID&DXFDVLDQFRUUHFWLRQVVHUJHDQWZDVHPSOR\HG E\WKH0LFKLJDQ'HSDUWPHQWRI&RUUHFWLRQVm0'2&lDQG VWDWLRQHG DW WKH :HVWHUQ :D\QH &RUUHFWLRQDO )DFLOLW\ m::&)l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

 3ODLQWLII DOVR DVVHUWHG WKH IROORZLQJ FDXVHV RI DFWLRQ XQGHU 0LFKLJDQ ODZ  YLRODWLRQ RI $UWLFOH , 6HFWLRQ  RI WKH 0LFKLJDQ &RQVWLWXWLRQ  YLRODWLRQ RI 0LFKLJDQjV (OOLRWW/DUVRQ &LYLO 5LJKWV $FW  YLRODWLRQ RI WKH 0LFKLJDQ :KLVWOHEORZHUjV $FW  ORVV RI FRQVRUWLXP VRFLHW\ DQG FRPSDQLRQVKLS DQG  LQWHQWLRQDO LQWHUIHUHQFH ZLWK DQ DGYDQWDJHRXV EXVLQHVV UHODWLRQVKLS 3ODLQWLII KDV QRW SXUVXHG WKHVH LVVXHV RQ DSSHDO  :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

'HIHQGDQWV5RELQVRQ)UDQNV&KDSPDQDQG/DXGHUGDOHDQG JLYLQJDVSHHFKVHHNLQJGRQDWLRQVWREHQHILWIDPLOLHVRIFULPH 5(0$1'IRUIXUWKHUSURFHHGLQJV YLFWLPV/DXGHUGDOHRUGHUHGKHUVWDIIWROHDYHWKHPHHWLQJ WKXVFUHDWLQJDQLPSUHVVLRQWKDWWKHPHHWLQJKDGFRQFOXGHG 3ODLQWLIIILOHGDJULHYDQFHEXWQRKHDULQJZDVKHOG 2Q )HEUXDU\   3ODLQWLII DQG DQRWKHU &DXFDVLDQ FRZRUNHUXSRQHQFRXQWHULQJDEORRG\SULVRQHU LQKRXVLQJ XQLWUHTXHVWHGRIILFHUDVVLVWDQFHE\DFWLYDWLQJKHUmERG\ DODUPl  8SRQ UHVSRQGLQJ WR WKH HPHUJHQF\ /DXGHUGDOH FRQWUDU\ WR VWDQGDUG RSHUDWLQJ HPHUJHQF\ SUDFWLFHV DW WKH IDFLOLW\UXGHO\RUGHUHG3ODLQWLIIWROHDYHWKHDUHD3ODLQWLII ILOHGDQRWKHUJULHYDQFHDJDLQVW/DXGHUGDOHZKLFKZDVDOVR DOOHJHGO\LJQRUHG 2Q$SULOGXULQJDELUDFLDOERDUGPHHWLQJDUUDQJHG E\/DXGHUGDOHjVVXSHULRUWRmFOHDUWKHDLUlEHWZHHQWKHWZR ZRPHQ /DXGHUGDOH DIWHU H[KLELWLQJ RSHQ KRVWLOLW\ WRZDUG 3ODLQWLIIDQGFKDUDFWHUL]LQJWKHJDWKHULQJDVmVRPHNLQGRI .ODQPHHWLQJlDERUWHGWKHFRQIHUHQFHDQGDEUXSWO\OHIWWKH URRP3ODLQWLIIILOHGDQRWKHUJULHYDQFHDJDLQVW/DXGHUGDOH ZKLFKZDVGLVUHJDUGHG 7HQGD\VDIWHUWKHDERUWHGmFOHDUWKHDLUPHHWLQJl3ODLQWLII DQG WZR &DXFDVLDQ FRUUHFWLRQV RIILFHUV .HYLQ :D\QH +DPPHUPHLVWHUDQG%U\DQ7\LW\HZHUHFRQGXFWLQJDURXWLQH VHFXULW\ FKHFN ZLWKLQ KRXVLQJ XQLW   $V WKH\ H[LWHG WKH XQLWj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

KHDOWKVHUYLFHVIRUPHGLFDODWWHQWLRQIRUVPDOOVFUDWFKHVWRKLV DGPLQLVWUDWLYH FRPSODLQW DJDLQVW KHU  0RVW VLJQLILFDQWO\ IRUHKHDGDQGULJKWZULVW /DXGHUGDOH ID[HG KHU LQFLGHQW UHSRUW GLUHFWO\ WR &KDSPDQ DIWHUKRXUVRQWKHQLJKW/DXGHUGDOHILOHGKHUDGPLQLVWUDWLYH 2IWKHYDULRXVSULVRQHUVDQGVHFXULW\SHUVRQQHOZKRKDG FRPSODLQW/DXGHUGDOHjVXQXVXDOEHKDYLRUDQG&KDSPDQjV EHHQDWWUDFWHGWRWKHFRPPRWLRQLQFOXGLQJ/DXGHUGDOHQR HIIRUWVWRXSKROG/DXGHUGDOHjVYHUVLRQRIWKHHYHQWGHVSLWH RQHUHSRUWHGREVHUYLQJ3ODLQWLII+DPPHUPHLVWHURU7\LW\H VWURQJFRQIOLFWLQJHYLGHQFHVXJJHVWVDOLQNEHWZHHQWKHWZR NLFNLQJWKHSULVRQHULQWKHKHDGRUDQ\RWKHUERG\SDUW WRIXUWKHUWKHLUFRPPRQREMHFWLYHRIGLVFULPLQDWLQJDJDLQVW ZKLWHFRUUHFWLRQRIILFHUVm5DUHO\LQDFRQVSLUDF\FDVHZLOO :LWKLQDKDOIKRXURIWKHLQFLGHQWDURXWLQHLQYHVWLJDWLRQ WKHUHEHGLUHFWHYLGHQFHRIDQH[SUHVVDJUHHPHQWDPRQJDOO ZDVFRQGXFWHGE\6JW+DFNZRUWKZKRILOHGWKHIROORZLQJ WKHFRQVSLUDWRUVWRFRQVSLUHFLUFXPVWDQWLDOHYLGHQFHPD\ &ULWLFDO,QFLGHQW5HSRUW SURYLGHDGHTXDWHSURRIRIFRQVSLUDF\l6HH%HOOY&LW\RI 0LOZDXNHH  )G   WK &LU  LQWHUQDO $W DSSUR[LPDWHO\  KUV SULVRQHU 0DVVHQEXUJ TXRWDWLRQVDQGFLWDWLRQRPLWWHG$OWKRXJKRQO\WZRRIWKH $/ UHIXVHG WR SUHVHQW KLV ,' FDUG WR IRXU DOOHJHG FRQVSLUDWRUV LQ WKLV FDVH PDGH RSHQO\ UDFLVW RIILFHU+DPPHUPHLVWHUE\EHFRPLQJYHU\DJJUHVVLYHE\ FRPPHQWV LW LV FOHDU WKDW DOO IRXU VKDUHG LQ WKH JHQHUDO PDNLQJVWDWHPHQWVOLNHmIXFN\RXlm,DLQjWJLYLQJ\RX FRQVSLUDWRULDOREMHFWLYHRIXVLQJWKH0DVVHQEXUJLQFLGHQWWR VKLWlDQGRWKHUSURIDQLWLHV3ULVRQHUZDVRUGHUHGWRSXW VDERWDJH 3ODLQWLIIjV FDUHHU DW 0'2&  *LYHQ )UDQNVjV KLV KDQGV EHKLQG KLV EDFN VR KH FRXOG EH KDQGFXIIHG GHFHSWLYHDQG&KDSPDQjVREIXVFDWRU\HIIRUWVWRDFKLHYHWKLV SULVRQHUUHVLVWHGE\SXOOLQJKLVDUPDZD\DQGVZLQJLQJ JRDO ZH WKLQN WKH RSHQO\ UDFLDO PRWLYHV RI 5RELQVRQ DQG KLV ILVW DW 2IILFHU +DPPHUPHLVWHU  $W WKLV WLPH 6JW /DXGHUGDOHFDQEHLPSXWHGWR)UDQNVDQG&KDSPDQ:HKROG :HEHUJ FDOOHG m2IILFHU 1HHGV $VVLVWDQFHl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†6HH&RSHODQGY0DFKXOLV)G DIRUHPHQWLRQHG LQFLGHQW  2IILFHU +DPPHUPHLVWHU WK&LUVHHDOVR'DYLV86DW7KLV GHFOLQHGWRSUHVVDVVDXOWFKDUJHV8QLYHUVDOSUHFDXWLRQ FRQWHQWLRQLVZLWKRXWPHULW ZDVXVHGE\DOOVWDIILQYROYHG ,9&21&/86,21 7KUHH GD\V ODWHU RQ $SULO   0DVVHQEXUJ ILOHG D m&RPSODLQW$JDLQVW(PSOR\HHl7KHFRPSODLQWLVVLJQHGE\ :H $)),50 WKH GLVWULFW FRXUWjV JUDQW RI VXPPDU\ m$FWLQJ $': &KDSPDQl  ,Q WKDW GRFXPHQW 'HIHQGDQW MXGJPHQW RQ 3ODLQWLIIjV GLVSDUDWH LPSDFW FODLP  :H &KDSPDQ UHSRUWHG WKDW mSULVRQHU 0DVVHQEXUJ DOOHJHV WKDW 5(9(56(WKHGLVWULFWFRXUWjVJUDQWRIVXPPDU\MXGJPHQWWR 2IILFHUjV>VLF@+DPPHUPHLVWHUDQG7\LW\HDQG6JW:HEHUJ  :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

&KDSPDQUHIHUHQFHGDVWDWHPHQW2]RUJDYHKLPRQ$SULO ZHUHYHUEDOO\DQGSK\VLFDOO\DEXVLYHGXULQJWKH >$SULO WKDWKH2]RUKDGVHHQ3ODLQWLIINLFN0DVVHQEXUJRQFH @LQFLGHQWl6LJQLILFDQWO\&KDSPDQGLGQRWUHSRUWDQ\ LQ WKH KHDG  $JDLQ &KDSPDQ ZDV QRW GHWHUUHG E\ WKH DOOHJDWLRQ E\ 0DVVHQEXUJ WKDW 3ODLQWLII NLFNHG KLP LQ WKH RPLVVLRQRIVDLGIDFWLQ2]RUjV$SULOUHSRUWRUWKHODFNRI KHDG FRUURERUDWLRQE\DQ\RWKHURIILFHUVDWWKHVFHQH$OWKRXJK &KDSPDQFRXOGKDYHYHULILHGH[DFWO\ZKDWKDSSHQHGLQWKH $OVR RQ $SULO  2IILFHU ,JQDWLXV 2]RU DQ $IULFDQ GD\ URRP EHFDXVH KH ZDV FKDUJHG ZLWK WKH FXVWRG\ RI WKH $PHULFDQ UHSRUWHG KLV REVHUYDWLRQV RI WKH 0DVVHQEXUJ DXGLRUHFRUGLQJVDQGYLVXDOWDSHVKHFRXOGQRWDFFRXQWIRU LQFLGHQWRI$SULO WKHLUZKHUHDERXWV $W DSSUR[LPDWHO\  KUV WKH\ >VLF@ \DUG FUHZ &KDSPDQjV FRQGXFW DSSHDUV OLQNHG WR 5RELQVRQjV KHDGHGE\6JW:HEHUJFDPHWRWKH8QLWIRUWKHLU GLVFULPLQDWRU\GHFLVLRQ5RELQVRQKLPVHOISURYLGHGWKDWOLQN QRUPDOURXWLQHVKDNHGRZQ$ERXWKUVWKHVHUJHQW LQ KLV sXQH   PHPRUDQGXP  ,Q WKH PHPRUDQGXP >VLF@ UHTXHVWHG IRU RIILFHUjV DVVLVWDQFH YLD UDGLR 5RELQVRQ FKDVWLVHV %HQHGLFW IRU mXQGHUPLQ>LQJ@ WKH WUDQVPLVVLRQLQWKHXQLWGD\URRP,ORRNHGDURXQGDQG LQYHVWLJDWLRQRIWKH,QVSHFWRU>&KDSPDQ@lGHVSLWH%HQHGLFWjV VDZ SULVRQHUV ORRNLQJ DW WKH XQLW OLEUDU\ URRP  $V , ZHOOUHDVRQHG DQG ZHOOVXSSRUWHG FULWLFLVP RI &KDSPDQjV UXVKHG LQ , REVHUYHG 0DVWHQEXUJ >VLF@ RQ WKH IORRU ILQGLQJV  ,Q VKRUW ZH WKLQN D FRPPRQ REMHFWLYH o UHVLVWLQJWREHKDQGFXIIHGoE\2IILFHUV+DPPHUPHLVWHU GLVFULPLQDWLRQ DJDLQVW ZKLWH SHUVRQQHO o FDQ EH LQIHUUHG DQG7\LWH>VLF@+HZDVILQDOO\KDQGFXIIHGDQGGUDJJHG &KDSPDQjV PXWXDO LQWHQW WR VKDUH LQ /DXGHUGDOHjV XS IURP WKH JURXQG  , QRWLFHG VRPH EORRG RQ KLV GLVFULPLQDWRU\ PRWLYHV LV UHYHDOHG E\ KLV UHVSRQVH WR WKH IRUHKHDGEHIRUHKHZDVILQDOO\WDNHQWRVHJUHJDWLRQXQLW YDULRXV FRPSODLQWV DQG KLV HIIRUWV WR GLVWRUW WKH WUXWK UHJDUGLQJWKH0DVVHQEXUJLQFLGHQW 2Q$SULO3ODLQWLIIILOHGDIRUPDODGPLQLVWUDWLYH FRPSODLQWDJDLQVW/DXGHUGDOHFLWLQJWRWKHUDFLDOO\PRWLYDWHG /DXGHUGDOH FRQIURQWDWLRQVDQGKDUDVVPHQWWKDWRFFXUUHGRQ)HEUXDU\ DQG  DQG $SULO   DOO RI ZKLFK VKH DVVHUWHG ZDV /DXGHUGDOHjVFRQGXFWWRZDUGV3ODLQWLIIDOVRDSSHDUVWREH LQWHQGHG WR KXPLOLDWH GLVSDUDJH DQG GLVFUHGLW KHU LQ WKH EDVHG RQ DQ DQWLZKLWH DQLPXV QRW VLPSO\ D SHUVRQDOLW\ SUHVHQFHRISULVRQHUVDQGVHFXULW\HPSOR\HHV FRQIOLFWZLWK3ODLQWLII3ODLQWLIIDWWHVWHGWKDWDWWKH$SULO PHHWLQJ/DXGHUGDOHUHPDUNHGWKDWLWZDVmVRPHNLQGRI 7KDWQLJKW/DXGHUGDOHID[HGDIRXUSDJHOHWWHUGLUHFWO\WR .ODQPHHWLQJlDQGFRPPHQWHGWKDWm,DLQjWQRPXOHIRUWKH &KDSPDQ IURP D .LQNRjV 5HSURGXFWLRQ &HQWHU  ,Q KHU PDQl  5HJDUGLQJ WKH PXOH VWDWHPHQW /DXGHUGDOH GHQLHG GHSRVLWLRQ/DXGHUGDOHLGHQWLILHG'HSRVLWLRQ([KLELWDVWKH PDNLQJWKHFRPPHQWLQKHUDQVZHUVWRLQWHUURJDWRULHVEXWLQ GRFXPHQWVKHID[HG([KLELWLVDQ,QFLGHQW5HSRUWGDWHG KHU GHSRVLWLRQ DFNQRZOHGJHG D VWDWHPHQW UHJDUGLQJ PXOHV $SULOLQZKLFK/DXGHUGDOHUHFRXQWVKHUYHUVLRQRI ZKLFKVKHH[SODLQHGZDVPHUHO\DIDEOH WKH$SULOLQFLGHQW,QWKHUHSRUW/DXGHUGDOHVWDWHG WKDW VKH KHDUG D UDGLR WUDQVPLVVLRQ FDOOLQJ IRU RIILFHU /DXGHUGDOHj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

7\LW\H ZDV UHVWUDLQLQJ 0DVVHQEXUJ RQ WKH ULJKW VLGH )LQDOO\ )UDQNV DFNQRZOHGJHG WKDW 5RELQVRQ GLVFXVVHG WKH /DXGHUGDOH DOOHJHG WKDW 3ODLQWLII ZDV VWDQGLQJ DQG KDG KHU PDWWHUZLWKKLPDOWKRXJKQRWLQGHSWK ULJKW IRRW SUHVVHG GRZQ RQ 0DVVHQEXUJjV OHIW IRRW /DXGHUGDOH IXUWKHU VWDWHG WKDW RQFH 0DVVHQEXUJ ZDV )URP )UDQNVj DEQRUPDO DQG GHFHLWIXO LQWHUMHFWLRQ LQWR KDQGFXIIHGDQGEURXJKWWRKLVIHHWVKHREVHUYHGWKDWKHZDV %HQHGLFWjV LQYHVWLJDWLRQ ZH WKLQN LW FDQ EH LQIHUUHG WKDW EOHHGLQJIURPKLVIRUHKHDG$FFRUGLQJWR/DXGHUGDOHDVVRRQ )UDQNVVKDUHGWKHDQWLZKLWHDQLPXVRI5RELQVRQZLWKZKRP DV0DVVHQEXUJVWRRGRQKLVIHHWKHORRNHGDW3ODLQWLIIDQG KHDGPLWWHGO\GLVFXVVHGWKHPDWWHU$OWKRXJKFLUFXPVWDQWLDO VKRXWHGmVLF@ELWFKZK\GLG\RXZDLWXQWLO ZH WKLQN WKH IRUHJRLQJ HYLGHQFH VXSSRUWV 3ODLQWLIIjV FODLP WKH\ FXIIHG PH WR NLFN PHl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jVFRPSODLQWUHJDUGLQJWKH)HEUXDU\ FULPLQDOLQYHVWLJDWLRQRIWKH0DVVHQEXUJLQFLGHQWE\WKH6WDWH LQFLGHQW'HVSLWHKLVDZDUHQHVVRIDQLPRVLW\EHWZHHQ +LJKZD\3DWURO 3ODLQWLIIDQG/DXGHUGDOHDQGWKHVWDWHPHQWVRIWKUHHRIILFHUV &2 6WHZDUW &2 0FDOLVWHU DQG /W $OOHQ VXSSRUWLQJ 2Q0D\&KDSPDQVHQW'HSXW\:DUGHQ0HDGHU 3ODLQWLIIjV YLHZ WKDW /DXGHUGDOHjV FRQGXFW ZDV LQWHQWLRQDO DPHPRUDQGXPUHFRPPHQGLQJWKDWDGLVFLSOLQDU\FRQIHUHQFH &KDSPDQ WHVWLILHG WKDW KH IRXQG LQVXIILFLHQW HYLGHQFH WR EHVFKHGXOHGWRDGGUHVVWKHDOOHJDWLRQVDJDLQVW3ODLQWLII,Q VXSSRUWDFRQFOXVLRQWKDW/DXGHUGDOHLQWHQWLRQDOO\LQWHUUXSWHG KLV PHPRUDQGXP &KDSPDQ UHSRUWHG WKDW EDVHG RQ KLV 3ODLQWLIIGXULQJUROOFDOO LQYHVWLJDWLRQ 3ODLQWLII YLRODWHG IRXU 0'2& 'HSDUWPHQWDO :RUN 5XOHV GXULQJ WKH DOWHUFDWLRQ LQYROYLQJ 0DVVHQEXUJ %\FRQWUDVW&KDSPDQjVLQYHVWLJDWLRQRIWKH0DVVHQEXUJ )LUVW&KDSPDQIRXQGWKDW3ODLQWLIIXVHGH[FHVVLYHIRUFHLQ LQFLGHQWNLFNHGLQWRKLJKJHDUWKHPRUQLQJDIWHU/DXGHUGDOH UHVWUDLQLQJ0DVVHQEXUJLQYLRODWLRQRI0'2&'HSDUWPHQWDO ID[HGKHUFULWLFDOLQFLGHQWUHSRUW2QWKDWGD\$SULO :RUN5XOH,9+HFLWHGVWDWHPHQWVPDGHE\/DXGHUGDOH &KDSPDQFRQWDFWHGWKH0LFKLJDQ6WDWH3ROLFHWRFRQGXFWD DQG2IILFHU7LSSLQVWKDW3ODLQWLIIVWRRGRQ0DVVHQEXUJjVOHJ FULPLQDO LQYHVWLJDWLRQ  +H GLG VR KRZHYHU EHIRUH DQGIRRWDQGDVWDWHPHQWRI2IILFHU2]RUWKDW3ODLQWLIINLFNHG FRQGXFWLQJDQLQWHUQDOLQYHVWLJDWLRQRIKLVRZQDQGLQWKHIDFH 0DVVHQEXUJLQWKHKHDG&KDSPDQUHSRUWHGWKDWGXULQJDQ RI FRQIOLFWLQJ UHSRUWV  7ZR RI WKRVH UHSRUWV ZHUH GLUHFWO\ LQWHUYLHZ RI 2]RU 2]RU VWDWHG WKDW mZKLOH SULVRQHU DQWDJRQLVWLFo3ODLQWLIIjVDQG/DXGHUGDOHjV)XUWKHUWKHPRVW 0DVVHQEXUJZDVRQWKHIORRUVWLOOUHVLVWLQJWREHLQJFXIIHG FULWLFDO GRFXPHQW WKH SULVRQHUjV RZQ VWDWHPHQW ZKLFK KHZDVNLFNHGDURXQGUHSHDWHGO\E\6JW:HEHUJLQFOXGLQJ &KDSPDQKLPVHOIWUDQVFULEHGPDNHVQRPHQWLRQRIDQ\NLFN RQHRQKLVKHDGl(PSKDVLVLQRULJLQDO2]RUjV$SULO WRWKHKHDG2QO\/DXGHUGDOHjVUHSRUWLQGLFDWHGWKDW3ODLQWLII ZULWWHQVWDWHPHQWGLGQRWLQFOXGHDQ\DOOHJDWLRQRINLFNLQJ KDGNLFNHG0DVVHQEXUJ &KDSPDQ DOVR QRWHG WKDW 3ODLQWLII IDLOHG WR UHSRUW D IXOO GHVFULSWLRQRIDOOWKHPHWKRGVRIUHVWUDLQWVKHXVHGDQGDOOWKH ,Q KLV 0D\   UHSRUW WR 'HSXW\ :DUGHQ 0HDGHU VWDWHPHQWV VKH GLUHFWHG WRZDUG 0DVVHQEXUJ LQFOXGLQJ DQ\ &KDSPDQFRQFOXGHGWKDWm3ULVRQHU0DVVHQEXUJjVDOOHJDWLRQ SURIDQLWLHV RILQKXPDQHWUHDWPHQWDQGH[FHVVLYHIRUFHE\6JW:HEHUJLV VXSSRUWHG E\ EHOLHYDEOH ZLWQHVVHVj HYLGHQFHl  ,Q VXSSRUW  :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

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mFUHDWHG WKH DSSHDUDQFH RI UHSULVDOl +RRNV Y +RRNV  )G   WK &LU  FLWDWLRQV RPLWWHG VHH DOVR *XWLHUUH] Y /\QFK  )G )LQDOO\ &KDSPDQ IRXQG WKDW 3ODLQWLII IDLOHG WR PDNH   WK &LU  VWDWLQJ WKDW FRQVSLUDF\ FODLPV UHTXLUHGUHSRUWVLQYLRODWLRQRI0'2&'HSDUWPHQWDO:RUN XQGHU†PXVWEHSOHGZLWKVRPHGHJUHHRIVSHFLILFLW\ 5XOH,96SHFLILFDOO\&KDSPDQLQGLFDWHGWKDWLQKHU FULWLFDO LQFLGHQW UHSRUW IRU WKH $SULO   LQFLGHQW )UDQNV 3ODLQWLII IDLOHG WR UHSRUW WKDW 0DVVHQEXUJ VXUUHQGHUHG KLV SULVRQHU,'FDUGWR7\LW\H&KDSPDQDOVRVWDWHGWKDW3ODLQWLII )UDQNVDFNQRZOHGJHGLQKLVGHSRVLWLRQWHVWLPRQ\WKDWWKH DSSHDUHGWRDOWHUKHUVWRU\EHFDXVHLQDVWDWHPHQWJLYHQRQ 3HUVRQQHO'LUHFWRULVQRWLQYROYHGLQWKHGLVFLSOLQDU\SURFHVV $SULO   3ODLQWLII VWDWHG  IRU WKH ILUVW WLPH WKDW WKH )UDQNV DOVR YHULILHG WKDW DIWHU D GLVFLSOLQDU\ KHDULQJ D SULVRQHUmMXPSHGIURPKLVFKDLUlDQGDVVHUWHGDmGHIHQVLYH UHFRPPHQGDWLRQLVPDGHWRWKH:DUGHQ'HVSLWHKLVODFNRI SRVWXUHl&KDSPDQRSLQHGWKDWm>W@KHUHLVGHILQLWHUHDVRQWR D UROH LQ WKH SURFHVV )UDQNV DGPLWWHGO\ LQWHUFHGHG LQ EHOLHYHWKDW6JW:HEHUJjVLQLWLDOUHSRUWZDVLQFRPSOHWHRUWKH %HQHGLFWjV LQYHVWLJDWLRQ NQRZLQJ %HQHGLFW ZRXOG PDNH D FKDQJH LV DQ DWWHPSW WR SRUWUD\ 3ULVRQHU 0DVVHQEXUJ DV UHFRPPHQGDWLRQWR5RELQVRQ$OWKRXJK)UDQNVH[SODLQHG DJLWDWHGDQJU\DQGWKUHDWHQLQJWRZDUGVWDIIl3ODLQWLIIZDV WKDWKHGLGVREHFDXVHRWKHUHPSOR\HHVZHUHZRUULHGWKDWWKH JLYHQQRWLFHRIWKHFKDUJHVDJDLQVWKHURQ0D\DQG PDWWHUZRXOGEHVZHSWXQGHUWKHUXJKHFRXOGQRWLGHQWLI\WKH DGLVFLSOLQDU\FRQIHUHQFHZDVVFKHGXOHGIRUsXQH HPSOR\HHV ZKR H[SUHVVHG WKDW FRQFHUQ  0RVW WHOOLQJO\ )UDQNV DSSDUHQWO\ OLHG LQ D UHFRUGHG PHVVDJH WR %HQHGLFW $OWKRXJKWKH3HUVRQQHO'LUHFWRUZDVQRWQRUPDOO\LQYROYHG DERXWDFRQYHUVDWLRQZLWKsDQLFHsHQQLQJVLQ/DERU5HODWLRQV LQWKHJULHYDQFHSURFHVV'HIHQGDQW)UDQNVFDOOHG$VVLVWDQW LQKLVHIIRUWVWRLPSURSHUO\LQIOXHQFH%HQHGLFWjVGHFLVLRQ 'HSXW\ :DUGHQ %HQHGLFW WKH SHUVRQ DVVLJQHG WR FRQGXFW 3ODLQWLIIjV GLVFLSOLQDU\ KHDULQJ SULRU WR WKH SURFHHGLQJ )UDQNVUHFRPPHQGHGWR%HQHGLFWWKDW3ODLQWLIIEHWHUPLQDWHG SHUVRQDO NQRZOHGJH $00 )HG 5 &LY 3 H DIILGDYLWV RSSRVLQJ )UDQNVVWDWHGWKDWKHPDGHWKHUHFRPPHQGDWLRQEHFDXVHKH VXPPDU\ MXGJPHQW mVKDOO EH PDGH RQ SHUVRQDO NQRZOHGJH VKDOO VHW IRUWK NQHZWKDW%HQHGLFWDQG3ODLQWLIIZHUHJRRGIULHQGVmDQG, VXFK IDFWV DV ZRXOG EH DGPLVVLEOH LQ HYLGHQFH DQG VKDOO VKRZ DOVRNQHZFRQFHUQVH[SUHVVHGE\HPSOR\HHVWKDWDFWLRQPLJKW DIILUPDWLYHO\ WKDW WKH DIILDQW LV FRPSHWHQW WR WHVWLI\ WR WKH PDWWHUV VWDWHG WKHUHLQl :H KDYH KDG WR GLVUHJDUG PDQ\ RI 3ODLQWLIIjV DOOHJDWLRQV EHFDXVH WKH\ ZHUH QRW PDGH ZLWK 3ODLQWLIIjV SHUVRQDO NQRZOHGJH RU ZHUH RWKHUZLVH EDVHG RQ KHDUVD\ 6HH :LOH\ Y 8QLWHG 6WDWHV  )G    WK &LU  3ODLQWLII ZDV QRW FKDUJHG ZLWK IDLOLQJ WR PDNH UHTXLUHG UHSRUWV  :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

EH WDNHQ WKDW PLJKW QRW EH LQ OLQH ZLWK GHSDUWPHQWDO SUHVHQWHG$V)UDQNVRXWOLQHGLQKLVGHSRVLWLRQWHVWLPRQ\LW SURFHGXUHV LQ FRQGXFWLQJ RU PDNLQJ UHFRPPHQGDWLRQV IRU ZDV VWDQGDUG SURFHGXUH IRU D GLVFLSOLQDU\ KHDULQJ WR EH GLVFLSOLQDU\DFWLRQl)UDQNVFRXOGQRWLGHQWLI\DQ\RIWKHVH FRQGXFWHGDIWHUDQLQLWLDOLQYHVWLJDWLRQZDVFRPSOHWHGDQG HPSOR\HHVKRZHYHU SULRUWRDUHFRPPHQGDWLRQEHLQJPDGHWRWKH:DUGHQ:H DUH DOVR DW D ORVV WR XQGHUVWDQG ZK\ LW ZDV LPSURSHU IRU )UDQNV DOVR VWDWHG WKDW SULRU WR FDOOLQJ %HQHGLFW KH %HQHGLFWDVIDFWILQGHUWRFRQVLGHURWKHULQIRUPDWLRQUHOHYDQW GLVFXVVHGWKHPDWWHUZLWK/DERU5HODWLRQVLQ/DQVLQJ,QKLV WR WKH LQYHVWLJDWLRQ  5RELQVRQjV WRWDO GLVUHJDUG RI WKH GHSRVLWLRQWHVWLPRQ\)UDQNVWHVWLILHGWKDW FRQIOLFWLQJ HYLGHQFH DQG VSXULRXV DWWDFN RQ %HQHGLFW FDVW GRXEW RQ 5RELQVRQjV H[SODQDWLRQ  5RELQVRQjV ZULWWHQ $ > @ , LQLWLDOO\ GLVFXVVHG LW ZLWK /DERU 5HODWLRQV LQ VWDWHPHQWDQGGHSRVLWLRQWHVWLPRQ\VXJJHVWWKDWUDFHZDVWKH /DQVLQJ DQG WKH\ JDYH PH SDUDPHWHUV RQ ZKLFK WKH\ UHDOUHDVRQEHKLQGKLVDFWLRQVWRZDUG3ODLQWLII PDGHGHFLVLRQVLQRWKHUFDVHVLQYROYLQJWKHXVHRIIRUFH DQG,UHOD\HGWKDWWR0U%HQHGLFW ,QVXPZHKROGWKDW5RELQVRQjVVWDWHPHQWVSURYLGHGLUHFW HYLGHQFHRIUDFLDOGLVFULPLQDWLRQWKHUHE\FUHDWLQJDJHQXLQH 4:KDWGLG\RXUHOD\WR0U%HQHGLFW" LVVXH RI PDWHULDO IDFW  7KH GLVWULFW FRXUW HUUHG LQ JUDQWLQJ VXPPDU\MXGJPHQWWR5RELQVRQ+DYLQJPHWKHUVXPPDU\ $7KDWLQSULRURFFDVLRQVLQYROYLQJWKHXVHRIIRUFHWKH MXGJPHQWEXUGHQZLWKGLUHFWHYLGHQFHRIGLVFULPLQDWLRQE\ LQGLYLGXDOZDVGLVPLVVHG 5RELQVRQ ZH QHHG QRW FRQVLGHU ZKHWKHU WKHUH LV DOVR FLUFXPVWDQWLDOHYLGHQFHRI5RELQVRQjVGLVFULPLQDWRU\DQLPXV ,Q D WDSHUHFRUGHG  WHOHSKRQLF PHVVDJH WR %HQHGLFW EHIRUH 3ODLQWLIIjVKHDULQJ)UDQNVVWDWHG %&RQVSLUDF\ 7KLVLV5DQG\,VSRNHZLWK/DERU5HODWLRQVDQGWKH\ $OWKRXJK WKHUH LV QR GLUHFW HYLGHQFH WKDW WKH UHPDLQLQJ LQGLFDWHG WKDW ZH DUH WR UHFRPPHQG GLVPLVVDO RQ WKH WKUHH 'HIHQGDQWV o )UDQNV &KDSPDQ DQG /DXGHUGDOH o FKDUJHV DJDLQVW 0V :HEHUJ DV WKH UHDVRQLQJ IRU QRW GLVFULPLQDWHGDJDLQVW3ODLQWLIIEHFDXVHVKHLVZKLWH3ODLQWLII EULQJLQJKHUEDFNWRZRUN,I\RXKDYHDQ\TXHVWLRQV KDVDOOHJHGDQGRIIHUHGHYLGHQFHWRHVWDEOLVKWKDWWKHVHWKUHH JLYHPHDFDOO GHIHQGDQWVFRQVSLUHGZLWK5RELQVRQWRGHSULYH3ODLQWLIIRI HTXDOSURWHFWLRQRIWKHODZVEHFDXVHVKHLVZKLWHDQGWKH\DUH ,Q GLUHFW FRQWUDGLFWLRQ WR )UDQNVj WHVWLPRQ\ sDQLFH EODFN sHQQLQJV RI WKH /DERU 5HODWLRQV %RDUG WHVWLILHG LQ KHU GHSRVLWLRQWKDWVKHQHYHUWROG)UDQNVWKDW3ODLQWLIIVKRXOGEH WHUPLQDWHGsHQQLQJVDOVRVWDWHGWKDWLWZRXOGEHLUUHJXODUDQG  DJDLQVW GHSDUWPHQWDO SROLF\ WR GLVFXVV WKH 0DVVHQEXUJ ,Q KHU )LUVW $PHQGHG &RPSODLQW 3ODLQWLII DOOHJHG WKDW WKH DFWLRQV

LQFLGHQWZLWK)UDQNV GHVFULEHG LQ WKH FRPSODLQW mZHUH SDUW RI D FXVWRP>@ SROLF\>@ SURFHGXUH>@ RU SUDFWLFH RI WKH :HVWHUQ :D\QH &RUUHFWLRQDO )DFLOLW\ DQG ZHUH HLWKHU FRQGRQHG E\ DXWKRUL]HG E\ RU DFTXLHVFHG WR E\ 'HIHQGDQWV MRLQWO\ DQG 2Q 0D\   WKH 0LFKLJDQ 6WDWH 3ROLFH FORVHG LWV VHYHUDOO\l LQYHVWLJDWLRQ'HWHFWLYH*DU\*UD\ZKRZDVDVVLJQHGWKH FDVH FRQFOXGHG WKDW WKHUH ZDV LQVXIILFLHQW HYLGHQFH WR  ,Q VXSSRUW RI KHU EXUGHQ XQGHU )HG 5 &LY 3  3ODLQWLII UHOLHV VXSSRUWDSURVHFXWLRQEHFDXVHm>W@KHUHZDVQRLQGLFDWLRQIURP RQ QXPHURXV DOOHJDWLRQV LQ KHU YHULILHG FRPSODLQW $OWKRXJK VWDWHPHQWV

DQ\RIWKHZLWQHVVHVWKDWH[FHVVLYHIRUFHH[KLELWHGWRVXFKDQ LQ D YHULILHG FRPSODLQW PD\ IXQFWLRQ DV WKH HTXLYDOHQW RI DIILGDYLW

H[WHQWWRLQIOLFWSK\VLFDOLQMXU\WRWKHSULVRQHUZDVHYHUXVHGl VWDWHPHQWV IRU SXUSRVHV RI VXPPDU\ MXGJPHQW 800 :LOOLDP Y %URZPDQ  )G   WK &LU  DIILGDYLW VWDWHPHQWV PXVW EH EDVHG RQ  :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

+ROGLQJ D SULVRQHU> @V OHJV GRZQ WR SUHYHQW KLP IURP *UD\VWDWHGWKDW2]RULQIRUPHGKLPWKDW3ODLQWLIIVWRRGRQ VWULNLQJVWDIILVQRWDQH[DPSOHRIH[FHVVLYHXVHRIIRUFH 0DVVHQEXUJjVOHJVDQGmWKHQVWDUWHGWRNLFNKLPZKLOHKHZDV ,PRYHWRGLVPLVVWKHFKDUJHRIH[FHVVLYHXVHRIIRUFH UHVLVWLQJl+HQRWHGKRZHYHUWKDW2]RUZDVXQVXUHLIWKH NLFNWRWKHKHDGZDVLQIDFWLQWHQWLRQDORUDFFLGHQWDO2]RU 5RELQVRQ GLVUHJDUGHG %HQHGLFWjV GHWDLOHG ILQGLQJV DQG WROG*UD\WKDWKHGLGQRWWKLQNWKDW3ODLQWLIILQWHQGHGWRKDUP PDGHQRDWWHPSWWRUHVROYHWKHJODULQJFRQWUDGLFWLRQVLQWKH 0DVVHQEXUJDQGWKDW3ODLQWLIISUREDEO\NLFNHG0DVVHQEXUJ HYLGHQFH KLPVHOI  5DWKHU 5RELQVRQ VLPSO\ IDXOWHG EHFDXVHKHZDVVWUXJJOLQJVRYLROHQWO\ %HQHGLFW IRU mXQGHUPLQ>LQJ@ WKH LQYHVWLJDWLRQ RI WKH LQVSHFWRUTXHVWLRQ>LQJ@WKHFUHGLELOLW\RIVWDIIDQGWDN>LQJ@ 2Q sXQH   %HQHGLFW FRQGXFWHG D GLVFLSOLQDU\ WKHZRUGRIDQ>VLF@SULVRQHU%DLOH\ZKRLVQRWKRXVHGLQWKH KHDULQJ+HVHQW5RELQVRQDPHPRUDQGXPRQWKDWVDPHGD\ XQLW>ZKHUH@WKHLQFLGHQWWRRNSODFHl UHFRPPHQGLQJ WKDW 3ODLQWLII RQO\ EH UHSULPDQGHG IRU VZHDULQJ DW 0DVVHQEXUJ  +H IRXQG WKDW WKH DOOHJDWLRQV RI :H ILQG LW RGG WKDW D SHUVRQ FRQGXFWLQJ D GLVFLSOLQDU\ 3ODLQWLIINLFNLQJ0DVVHQEXUJZHUHXQVXEVWDQWLDWHG+HZDV KHDULQJ FKDUJHG ZLWK WKH GXW\ RI GHWHUPLQLQJ ZKHWKHU VXVSLFLRXV RI2]RUjVVWDWHPHQWWKDWKHREVHUYHGWKHZKROH VXIILFLHQWHYLGHQFHH[LVWVWRVXSSRUWWKHFKDUJHVHUUVZKHQKH LQFLGHQWEXWQHYHUDVVLVWHG%HQHGLFWQRWHGWKDWDWOHDVWVHYHQ HQJDJHV LQ DQ LQGHSHQGHQW HYDOXDWLRQ RI WKH HYLGHQFH RWKHUFRUUHFWLRQVRIILFHUVRQWKHVFHQHGLGQRWVHH2]RULQWKH DUHD ZKHQ WKH LQFLGHQW WRRN SODFH DQG WKDW QR RWKHU FRUUHFWLRQVRIILFHUVDZ3ODLQWLIINLFN0DVVHQEXUJRQWKHKHDG  +HIXUWKHUQRWHGWKDWDmNLWHlUHFHLYHGIURPDSULVRQHUQDPHG $SSDUHQWO\ WKH GLVWULFW FRXUW GLG WKH VDPH WKLQJ ,Q DFFHSWLQJ %DLOH\VWDWHGWKDWKHKDGKHDUGVHYHUDOLQPDWHVWDONLQJDERXW 'HIHQGDQWVj DUWLFXODWHG UHDVRQ DQG UHMHFWLQJ 3ODLQWLIIjV SURRI RI SUHWH[W XQGHU WKH EXUGHQVKLIWLQJ DQDO\VLV WKH FRXUW KHOG IDOVHVWDWHPHQWVWKH\KDGPDGHDERXW3ODLQWLIIUHJDUGLQJWKH :DUGHQ 5RELQVRQ GLG QRW DJUHH ZLWK $': 3 %HQHGLFWjV LQFLGHQW$GGLWLRQDOO\%HQHGLFWVWDWHGWKDWWKHVPDOODEUDVLRQ UHFRPPHQGDWLRQ GDWHG sXQH   ILQGLQJ WKDW WKH H[FHVVLYH RQ0DVVHQEXUJj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jV $SULO   3ODLQWLIIGLGQRWKDYHWLPHWRGHIXVHWKHVLWXDWLRQZDLWIRUWKH PHPRUDQGXP WR ,QVSHFWRU &KDSPDQ DQG KLV UHVSRQVHV WR SULVRQHUWRFRROGRZQRUXVHGHHVFDODWLRQWHFKQLTXHV ,QVSHFWRU &KDSPDQjV LQTXLULHV DERXW WKH LQFLGHQWV VKRZV WKDW 3ODLQWLII :HEHUJ NLFNHG 3ULVRQHU 0DVVHQEXUJ ZKLOH KH ZDV RQ 2Q sXQH   5RELQVRQ PRGLILHG WKH GLVFLSOLQH WKH JURXQG    $Q $SULO   PHPRUDQGXP IURP 6HUJHDQW UHFRPPHQGHGE\%HQHGLFW5HLQVWDWLQJWKHFKDUJHVDJDLQVW 3ODLQWLII5RELQVRQGHPRWHGDQGVXVSHQGHG3ODLQWLII,QWKH 6KDURQ /DXGHUGDOH WR ,QVSHFWRU &KDSPDQ DQG KLV UHVSRQVHV WR ,QVSHFWRU &KDSPDQ DOVR LQGLFDWHV WKDW 3ODLQWLII NLFNHG 3ULVRQHU 0DVVHQEXUJ RQ WKH KHDG ZKLOH KH ZDV O\LQJ RQ WKH JURXQG    GLVFLSOLQDU\UHSRUW5RELQVRQVWDWHG ,QVSHFWRU &KDSPDQjV UHSRUW RQ WKH LQFLGHQW VKRZV WKDW KH LQWHUYLHZHG QXPHURXV SULVRQHUV DQG VWDII UHJDUGLQJ WKH LQFLGHQW DQG FRQFOXGHG WKDW 3ODLQWLII :HEHUJ NLFNHG 3ULVRQHU 0DVVHQEXUJ ZKLOH KH ZDV RQ WKH JURXQG 7KH GLVWULFW FRXUWjV ILQGLQJ WKDW WKH $SULO   LQFLGHQW UHSRUW DQG  $SULO   2]RU VWDWHPHQW mLQGLFDWH KH >0DVVHQEXUJ@ ZDV NLFNHG E\ 7KH DFWXDO VXVSHQVLRQ LV LQFRQVLVWHQW ZLWK 5RELQVRQjV ZULWWHQ 3ODLQWLII :HEHUJl LV QRW VXSSRUWHG E\ WKH GRFXPHQWDU\ HYLGHQFH UHSRUW  :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

,W DSSHDUV WKDW DW WKH GLVFLSOLQDU\ >VLF@ WKH LQGLYLGXDO ,QVXPPDU\$':%HQHGLFWUHSRUWHGVDLGWKDWKHKDGD KROGLQJ WKH FRQIHUHQFH WRRN LW XSRQ KLPVHOI WR SUREOHPZLWK2]RUj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jV >VLF@ LQ WKHUH EXW WKHUH ZHUH WKUHH LQYHVWLJDWLRQRIWKH,QVSHFWRUTXHVWLRQWKHFUHGLELOLW\RI RIILFHUV DW WKH GHVN  &2 +DPPHUPHLVWHU GLG QRW VHH VWDIIDQGWDNHWKHZRUGRIDQ>VLF@SULVRQHU%DLOH\ZKR 2]RU  6JW /DXGHUGDOH FODLPHG WR EH RQH RI WKH ILUVW LVQRWKRXVHGLQWKHXQLW>ZKHUH@WKHLQFLGHQWWRRNSODFH SHRSOHWRDUULYH6KHVDLGVKHVDZ6JW:HEHUJjVIRRW 7KHLQFLGHQWZDVWRWDOO\PLVKDQGOHGE\WKHVXSHUYLVRUDW SUHVVHGDJDLQVWWKHSULVRQHU> @VIRRWDQGGLGQRWREVHUYH WKHVFHQH3URFHGXUHVZHUHQRWIROORZHG7KLVFRXOG 2]RU WR EH LQ WKH DUHD QRU 6JW :HEHUJ NLFNLQJ WKH KDYHOHGWRDVHULRXVRXWEXUVWE\WKHSULVRQHUVLQWKHXQLW SULVRQHU&27HUU\GLGQRWVHH2]RULQWKHDUHDV&2 $QGIRUXVWRWU\WRFRYHUXSWKHPLVWDNHVLVQRWSURSHU 0XUGRFK GLG QRW VHH 2]RU  &2 5LHPDQ GLG QRW VHH ,QUHYLHZLQJWKHLQYHVWLJDWLRQWKHUHLVQRHYLGHQFHWKH 2]RU&2j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m+H KHDUG VHYHUDO LQPDWHV WDNLQJ >VLF@ DERXW IDOVH VWDWHPHQWV WKH\ PDGH DERXW 6JW :HEHUJ LQ 8QLW  3ODLQWLIIZDVDOORZHGWRUHWXUQWRZRUNLQHDUO\$XJXVWRI 7KDW VKH UHDOO\ GLGQjW GR ZKDW WKH\ ZURWH LQ WKHLU EXWUHPDLQHGRQPHGLFDOOHDYH,QKHUEULHI3ODLQWLII VWDWHPHQWVDQGWKDWWKH\ZHUHRQO\WU\LQJWRKRRNKHU VWDWHV WKDW WKH 0'2& UHGXFHG WKH GLVFLSOLQH LPSRVHG E\ XSl  6WDWHPHQW DWWDFKHG  51 7DWH DOVR UHSRUWHG WKDW 5RELQVRQWRDILIWHHQGD\VXVSHQVLRQEXWZLWKRXWDGHPRWLRQ XSRQH[DPLQDWLRQRISULVRQHU0DVVHQEXUJGLUHFWO\DIWHU 3ODLQWLIIDOVRVWDWHVWKDWVKHDSSHDOHGWKHVXVSHQVLRQWRWKH WKH LQFLGHQW o VPDOO DEUDVLRQ RQ ULJKW ZULVW VPDOO 0LFKLJDQ'HSDUWPHQWRI&LYLO6HUYLFHZKLFKDIWHUDVL[WHHQ VXSHUILFLDO VFUDWFK RQ IRUHKHDG QHLWKHU RI ZKLFK LV PRQWK LQYHVWLJDWLRQ UHGXFHG WKH GLVFLSOLQH WR D ZULWWHQ FRQVLVWHQWZLWKH[FHVVLYHXVHRIIRUFH UHSULPDQG$FFRUGLQJWR3ODLQWLIIWKH0LFKLJDQ'HSDUWPHQW RI &LYLO 6HUYLFH FRQFOXGHG WKDW VKH ZDV QRW JXLOW\ RI DQ\ ZURQJGRLQJRWKHUWKDQGLUHFWLQJSURIDQLW\WRZDUGDSULVRQHU  :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

4 'R \RX UHFRPPHQG WHUPLQDWLRQ HYHU\ WLPH DQ 3ODLQWLIIDOVRVWDWHVWKDWDIWHUWKHLQYHVWLJDWLRQVKHZDVJLYHQ RIILFHUKLWVDQLQPDWH" DmZDLYHGOHDYHRIULJKWVlE\WKH0'2&ZKLFKVKHFODLPV FRQVWUXFWLYHO\GLVFKDUJHGKHUDQGSUHYHQWHGKHUIURPJRLQJ $ 1R EDFNWRZRUNDVD&RUUHFWLRQV6HUJHDQW 4 :HOOZK\QRW" 3ODLQWLIIVXHG0'2&5RELQVRQ)UDQNV&KDSPDQDQG /DXGHUGDOH DOOHJLQJ UHYHUVH UDFH GLVFULPLQDWLRQ XQGHU  $ &HUWDLQ FLUFXPVWDQFHV FDOO IRU FHUWDLQ DFWLRQV 86& †  DQG 0LFKLJDQjV (OOLRWW/DUVHQ &LYLO 5LJKWV (PSKDVLVDGGHG $FW3ODLQWLIIDOOHJHGWKDWWKHGHVFULEHGDFWLRQVZHUHSDUWRI D FXVWRP>@ SROLF\>@ RU SUDFWLFH RI WKH :HVWHUQ :D\QH ,QVKRUW5RELQVRQRSHQO\DGPLWWHGWKDWKHZRXOGWHUPLQDWH &RUUHFWLRQDO)DFLOLW\DQGZHUHHLWKHUFRQGRQHGE\DXWKRUL]HG DQHPSOR\HHVLPSO\EHFDXVHRIWKHmSHUFHSWLRQVRILQPDWHVl E\RUDFTXLHVFHGWRE\'HIHQGDQWVmMRLQWO\DQGVHYHUDOO\l DQGWKDWKHKDGLQIDFWGRQHMXVWWKDW+HIXUWKHULQGLFDWHG 'HIHQGDQWVPRYHGIRUVXPPDU\MXGJPHQWZKLFKWKHGLVWULFW WKDW KH IHOW mVWURQJO\l WKDW SODLQWLII VKRXOG EH WHUPLQDWHG FRXUW JUDQWHG RQ 0DUFK    7KH FRXUW QRWHG WKDW D m>V@LPSO\ EHFDXVH VKH ZDV ZKLWH DQG VKH ZDV LQ D EODFN VHFWLRQFODLPFRXOGQRWEHEDVHGRQDGLVSDUDWHLPSDFW KRXVLQJXQLWl DQDO\VLVDQGWKHUHIRUHUHIXVHGWRFRQVLGHU3ODLQWLIIjVFODLP XQGHUWKLVWKHRU\7KHGLVWULFWFRXUWWKHQDSSOLHGWKHIRXUSDUW m>'@LUHFWHYLGHQFHLVHYLGHQFHZKLFKLIEHOLHYHGUHTXLUHV 0F'RQQHOO 'RXJODV &RUS Y *UHHQ  86   WKH FRQFOXVLRQ WKDW XQODZIXO GLVFULPLQDWLRQ ZDV DW OHDVW D WHVW QRWLQJ WKDW WR SURYH DQ HTXDO SURWHFWLRQ FODLP XQGHU PRWLYDWLQJ IDFWRU  :LWK GLUHFW HYLGHQFH WKH H[LVWHQFH RI VHFWLRQ  D SODLQWLII PXVW HVWDEOLVK WKH VDPH HOHPHQWV XQODZIXOGLVFULPLQDWLRQLVµSDWHQWjl%DUWOLNY8QLWHG6WDWHV UHTXLUHGWRHVWDEOLVKDGLVSDUDWHWUHDWPHQWFODLPXQGHU7LWOH 'HSjWRI/DERU)GQWK&LULQWHUQDO 9,,7KHFRXUWGHWHUPLQHGWKDW3ODLQWLIIIDLOHGWRHVWDEOLVKD TXRWDWLRQPDUNVDQGFLWDWLRQVRPLWWHG,QRWKHUZRUGVLI SULPDIDFLHFDVHRIUDFLDOGLVFULPLQDWLRQEHFDXVHVKHIDLOHGWR EHOLHYHG5RELQVRQjVVWDWHPHQWVOHDGWRWKHFRQFOXVLRQWKDW GHPRQVWUDWHWKDWVKHZDVUHSODFHGZKLOHRQVXVSHQVLRQRUWKDW DQWLZKLWH DQLPXV PRWLYDWHG WKH HPSOR\PHQW GHFLVLRQ KH VKHZDVWUHDWHGOHVVIDYRUDEO\WKDQVLPLODUO\VLWXDWHG$IULFDQ PDGHUHJDUGLQJ3ODLQWLII6HHLGsDFNO\Q)GDW $PHULFDQRIILFHUV 7KHIRUHJRLQJVWDWHPHQWVHDVLO\VDWLVI\WKLVVWDQGDUG 5RELQVRQjVSURIIHUHGH[SODQDWLRQIRUVXVSHQGLQJ3ODLQWLII  ZKLFKWKHORZHUFRXUWFUHGLWHGZDVWKDWKHEHOLHYHGWKDWVKH 3ODLQWLII GRHV QRW H[SODLQ WKH PHDQLQJ RI D mZDLYHG OHDYH RI ULJKWVl

NLFNHG WKH LQPDWH RQ WKH KHDG DQG WKDW KH ZDV FRQFHUQHG  DERXW UDFH UHODWLRQV LQ WKH SULVRQ   7KDW H[SODQDWLRQ LV 3ODLQWLII DOVR QDPHG WKH 6WDWH RI 0LFKLJDQ DQG WKH 0LFKLJDQ

VXVSHFWKRZHYHU)LUVWLWDSSHDUVWRKDYHOLWWOHEDVLVLQIDFW 'HSDUWPHQW RI &RUUHFWLRQV DV GHIHQGDQWV LQ WKLV DFWLRQ 'HFHPEHU   WKH SDUWLHV VWLSXODWHG WR WKH +RZHYHU RQ ZLWKGUDZDO RI WKH %HQHGLFW GHWDLOHG LQ KLV UHSRUW ZK\ &KDSPDQjV FRPSODLQW DJDLQVW WKH 6WDWH RI 0LFKLJDQ DQG WKH 0LFKLJDQ 'HSDUWPHQW RI GRFXPHQWDWLRQGLGQRWVXSSRUWWKHFKDUJH &RUUHFWLRQV ZLWKRXW SUHMXGLFH 2Q 'HFHPEHU   WKH GLVWULFW FRXUW GLVPLVVHG 3ODLQWLIIjV FODLPV WR WKH H[WHQW WKH\ ZHUH DVVHUWHG DJDLQVW WKH LQGLYLGXDO GHIHQGDQWV LQ WKHLU RIILFLDO FDSDFLWLHV  %HFDXVH WKH GLVWULFW FRXUW HPSOR\HG WKH 0F'RQQHOO 'RXJODV  EXUGHQVKLIWLQJ DQDO\VLV LW WUHDWHG 'HIHQGDQWVj H[SODQDWLRQ DV PHUHO\ D 7KH GLVWULFW FRXUW GLG QRW VHSDUDWHO\ DQDO\]H 3ODLQWLIIjV VHFWLRQ  EXUGHQ RI SURGXFWLRQ +RZHYHU RQ UHPDQG 'HIHQGDQWV ZLOO EHDU WKH FODLP ZLWK UHVSHFW WR HDFK LQGLYLGXDO GHIHQGDQW 5DWKHU WKH FRXUW EXUGHQ RI SHUVXDVLRQ RQ WKLV SRLQW FRQGXFWHG LWV DQDO\VLV DV LI WKHUH ZHUH RQO\ RQH GHIHQGDQW  :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

7KHGLVWULFWFRXUWDOVRUXOHGWKDWHYHQDVVXPLQJDUJXHQGR $ &RQFHLYDEO\JLYHQWKHFLUFXPVWDQFHV WKDW3ODLQWLIIKDGHVWDEOLVKHGDSULPDIDFLHFDVH'HIHQGDQWV KDGSURIIHUHGDOHJLWLPDWHQRQGLVFULPLQDWRU\UHDVRQIRUKHU 4

,,67$1'$5'2)5(9,(: $

:HUHYLHZDGLVWULFWFRXUWjVJUDQWRIVXPPDU\MXGJPHQWGH 4 6R \RX ZRXOG UHFRPPHQG WHUPLQDWLQJ D ZKLWH QRYR6HH+DUWVHOY.H\V)GWK&LU HPSOR\HH IRUGRLQJQRWKLQJZURQJH[FHSWFRQFHLYDEO\ 6XPPDU\ MXGJPHQW LV DSSURSULDWH mLI WKH SOHDGLQJV JLYLQJWKHZURQJLPSUHVVLRQWREODFNLQPDWHV",VQjWWKDW GHSRVLWLRQV DQVZHUV WR LQWHUURJDWRULHV DQG DGPLVVLRQV RQ ZKDW\RXMXVWVDLG" ILOHWRJHWKHUZLWKWKHDIILGDYLWVLIDQ\VKRZWKDWWKHUHLVQR JHQXLQHLVVXHDVWRDQ\PDWHULDOIDFWDQGWKDWWKHPRYLQJSDUW\ $ 7KDWjVZKDW\RXURIIHULQJEXWLWjVQRWWKDWVLPSOH LVHQWLWOHGWRMXGJPHQWDVDPDWWHURIODZl)HG5&LY3 WRPH F:HDUHUHTXLUHGWRYLHZWKHIDFWVDQGDOOLQIHUHQFHV 4 ,VQjWWKDWZKDW\RXMXVWVDLG" GUDZQWKHUHIURPLQWKHOLJKWPRVWIDYRUDEOHWRWKHQRQPRYLQJ SDUW\6HH0DWVXVKLWD(OHF,QGXV&RY=HQLWK5DGLR&RUS $

:DUGHQ 5RELQVRQjV QRWDWLRQ RI 3ODLQWLIIjV UDFH LQ WKH  WK &LU  WKH SODLQWLII PXVW SURYH E\ D 'LVFLSOLQDU\ 5HSRUW GRHV QRW VKRZ WKDW KH VXVSHQGHG SUHSRQGHUDQFH RI WKH HYLGHQFH WKDW VKH ZDV WKH YLFWLP RI 3ODLQWLII EHFDXVH RI KHU UDFH  $V LQGLFDWHG DERYH mLQWHQWLRQDO DQG SXUSRVHIXO GLVFULPLQDWLRQl VHH DOVR :DUGHQ5RELQVRQjVUHDVRQIRUQRWLQJ3ODLQWLIIjVUDFHDQG :DVKLQJWRQY'DYLV86KROGLQJ WKH SULVRQHUjV UDFH LQ WKH UHSRUW ZDV EHFDXVH RI mWKH WKDW LQ RUGHU WR SURYH DQ HTXDO SURWHFWLRQ YLRODWLRQ WKH YRODWLYLW\RIWKHKRXVLQJXQLWDQGDEODFNPDOHSULVRQHUl SODLQWLII PXVW GHPRQVWUDWH WKDW WKH GHIHQGDQW DFWHG ZLWK DQGWRNHHSWKHVLWXDWLRQIURPEHFRPLQJmDVHULRXV GLVFULPLQDWRU\ LQWHQW VHH JHQHUDOO\ $QQLV Y &RXQW\ RI RXWEXUVW E\ WKH SULVRQHUV LQ WKH XQLWl     :DUGHQ :HVWFKHVWHU)GG&LUREVHUYLQJ 5RELQVRQjV PDLQ FRQFHUQ ZDV WR NHHS SHDFH DQG WKDWHYHU\FLUFXLWWRKDYHDGGUHVVHGWKHLVVXHLQFOXGLQJWKH GLVFLSOLQH LQ WKH KRXVLQJ XQLW DQG QRW WR DURXVH WKH 6L[WK &LUFXLW KDV KHOG WKDW 7LWOH 9,, LV QRW WKH H[FOXVLYH SULVRQHUVWRULRW UHPHG\IRUGLVFULPLQDWLRQDJDLQVWVWDWHHPSOR\HUVZKHQWKRVH FODLPVGHULYHIURPYLRODWLRQRIFRQVWLWXWLRQDOULJKWV7KH 8QOLNH WKH GLVWULFW FRXUW ZH WKLQN 5RELQVRQjV mPDLQ SODLQWLIIPD\QRWVLPSO\LQWURGXFHHYLGHQFHRIGLVFULPLQDWRU\ FRQFHUQl ZDV UDFH  ,Q KLV sXQH   PHPRUDQGXP LQWHQWDQGVXJJHVWWKDWmµVXFKLQWHQWFRXOGKDYHSOD\HGDUROH 5RELQVRQZURWHm+HUHZHKDYHWKUHHZKLWHHPSOR\HHVDQG LQ DQ DGYHUVH HPSOR\PHQW GHFLVLRQ  5DWKHU D SODLQWLII LV RQHEODFNLQPDWH7KHZURQJPHVVDJHLVWKXVVHQWWRRWKHU UHTXLUHGWRGHPRQVWUDWHWKDWWKHDGYHUVHHPSOR\PHQWGHFLVLRQ LQPDWHVLQWKHXQLWZKRDUHZDWFKLQJWKHLQFLGHQWl5RELQVRQ ZRXOGQRWKDYHEHHQPDGHmEXWIRUlKHU>UDFH@jl%RJHU UHLWHUDWHGWKHVHQWLPHQWLQKLVGHSRVLWLRQWHVWLPRQ\ )GDWTXRWLQJ*XW]ZLOOHU)GDW 4    7KH VWDWHPHQW KHUH ZH KDYH WKUHH ZKLWH 3ODLQWLIIFODLPVUDFHGLVFULPLQDWLRQLQYLRODWLRQRI† HPSOR\HHVDQGRQHEODFNLQPDWH:KDWGRHVWKDWKDYHWR XQGHUERWKGLVSDUDWHWUHDWPHQWDQGGLVSDUDWHLPSDFWWKHRULHV GRZLWKDQ\WKLQJUHJDUGLQJWKLVVLWXDWLRQ" 3ODLQWLIIDOVRDOOHJHVWKDW'HIHQGDQWVFRQVSLUHGWRYLRODWHKHU FRQVWLWXWLRQDOULJKWV $ &RQVLGHULQJWKHYRODWLYLW\>VLF@RIWKHKRXVLQJXQLW DQGDEODFNPDOHSULVRQHU $'LVSDUDWH7UHDWPHQW 4 :K\GRHVWKDWKDYHWREHSXWLQWRDGLVFLSOLQDU\ %HFDXVHERWK7LWOH9,,DQG†SURKLELWGLVFULPLQDWRU\ LVVXH"  ,V WKHUH VRPHWKLQJ ZURQJ ZLWK WKUHH ZKLWH HPSOR\PHQWSUDFWLFHVE\SXEOLFHPSOR\HUVWKLVFRXUWORRNV RIILFHUVGHDOLQJZLWKDEODFNLQPDWH" WR 7LWOH 9,, GLVSDUDWH WUHDWPHQW FDVHV IRU DVVLVWDQFH LQ DQDO\]LQJ UDFH GLVFULPLQDWLRQ LQ WKH SXEOLF HPSOR\PHQW $ 1R FRQWH[WXQGHU†6HHHJ*XW]ZLOOHU)GDW .LWFKHQY&KLSSHZD9DOOH\6FKV)GWK 4 :KDWGRHVWKDWKDYHWRGRZLWKDQ\WKLQJWKHQ" &LU'DQLHOVY%RDUGRI(GXF)G WK&LU*UDQRY'HSDUWPHQWRI'HY)G $ 7KH SHUFHSWLRQ RI WKH SULVRQHUV LQ WKH KRXVLQJ WK&LU XQLW 4 6RWKHSHUFHSWLRQRIWKHSULVRQHUVLQWKHKRXVLQJ  XQLW LQIOXHQFHV \RX LQ KRZ \RXjUH JRLQJ WR GLVFLSOLQH 7KLV FLUFXLW KROGV WKDW DQ LQGLYLGXDO HPSOR\HHVXSHUYLVRU ZKR GRHV

VRPHERG\IRUQRWHYHQGRLQJZKDW\RXWKLQNWKDWSHUVRQ QRW RWKHUZLVH TXDOLI\ DV DQ mHPSOR\HUl PD\ QRW EH VXHG XQGHU 7LWOH 9,,

GLG" 6HH :DWKHQ Y *HQHUDO (OHF &R  )G   WK &LU  ,QGLYLGXDO OLDELOLW\ LV DOORZHG XQGHU †  KRZHYHU  :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

7KH SODLQWLII FDQ PDNH WKH UHTXLUHG VKRZLQJ E\ FLUFXPVWDQWLDO HYLGHQFH SDWKV DUH PXWXDOO\ H[FOXVLYH WKH GHPRQVWUDWLQJWKDWUDFHZDVDGLUHFWIDFWRULQWKHHPSOR\PHQW SODLQWLIIFDQPHHWKHUEXUGHQ ZLWKHLWKHUPHWKRGRISURRI GHFLVLRQ  6HH $EHLWD Y 7UDQVDPHULFD 0DLOLQJV ,QF  6HHsRKQVRQY8QLYHUVLW\RI&LQFLQQDWL)G1R )GWK&LU.OLQHY7HQQHVVHH9DOOH\ :/DW WK&LUsXQH $XWK)GWK&LUVHHJHQHUDOO\3ULFH :DWHUKRXVH Y +RSNLQV  86   SOXUDOLW\ :HEHOLHYHWKLVWREHRQHRIWKRVHmUDUHlFDVHVZKHUHWKHUH 'LUHFWHYLGHQFHmLVWKDWHYLGHQFHZKLFKLIEHOLHYHGUHTXLUHV LVmGLUHFWHYLGHQFHIURPWKHOLSVRIWKHGHIHQGDQWSURFODLPLQJ WKH FRQFOXVLRQ WKDW XQODZIXO GLVFULPLQDWLRQ ZDV DW OHDVW D KLVUDFLDODQLPXVl5RELQVRQY5XQ\DQ)G PRWLYDWLQJ IDFWRU LQ WKH HPSOR\HUjV DFWLRQVl  sDFNO\Q Y WK&LU 6FKHULQJ3ORXJK +HDOWKFDUH 3URGV 6DOHV &RUS  )G   WK &LU   7KH EXUGHQ RI SHUVXDVLRQ WKHQ 5RELQVRQ VKLIWVWRWKHGHIHQGDQWWRVKRZWKDWLWZRXOGKDYHWHUPLQDWHG WKHSODLQWLIIjVHPSOR\PHQWDEVHQWWKHGLVFULPLQDWRU\PRWLYH ,QKROGLQJWKDW3ODLQWLIIIDLOHGWRVXEPLWGLUHFWHYLGHQFHRI 6HHLGFLWLQJ3ULFH:DWHUKRXVH86DW6HH GLVFULPLQDWLRQWKHGLVWULFWFRXUWUHDVRQHGWKDW DOVR7HUERYLW]Y)LVFDO&RXUWRI$GDLU&W\)G WK&LUQRWLQJWKDWRQFHWKHGLVWULFWFRXUWDFFHSWV WKH SODLQWLIIjV GLUHFW HYLGHQFH WKH HPSOR\HUjV DVVHUWHG QRQGLVFULPLQDWRU\ UHDVRQ ZKLFK LV PHUHO\ D EXUGHQ RI SURGXFWLRQ XQGHU WKH 0F'RQQHOO 'RXJODV IUDPHZRUN FLUFXPVWDQFHV ZKLFK QRUPDOO\ PDNH RXW D SULPD IDFLH FDVH DUH LQGLFDWLYH HVVHQWLDOO\EHFRPHVDQDIILUPDWLYHGHIHQVHXSRQZKLFKWKH RI GLVFULPLQDWLRQ LV QRW DYDLODEOH DEVHQW D VKRZLQJ WKDW EDFNJURXQG HPSOR\HUEHDUVWKHEXUGHQRISURRI FLUFXPVWDQFHV VXSSRUW WKH VXVSLFLRQ WKDW WKH GHIHQGDQW LV WKDW XQXVXDO HPSOR\HU ZKR GLVFULPLQDWHV DJDLQVW WKH PDMRULW\l %RJHU  )G DW $OWHUQDWLYHO\WKHSODLQWLIIFDQPHHWKHUHYLGHQWLDU\EXUGHQ  LQWHUQDO TXRWDWLRQV RPLWWHG 7KLV FRXUW KDV DOVR FLWHG D VHFRQG

WKURXJK LQGLUHFW HYLGHQFH XQGHU WKH 0F'RQQHOO 'RXJODV IDFWRU LQ WKH 7LWOH 9,, FRQWH[W 7KH SODLQWLII PXVW DOVR GHPRQVWUDWH WKDW WKH HPSOR\HU WUHDWHG GLIIHUHQWO\ VLPLODUO\ VLWXDWHG HPSOR\HHV RXWVLGH WKH IUDPHZRUN6HH%XQWLQY%UHDWKLWW&RXQW\%RDUGRI(GXF SURWHFWHG FODVV 6HH 3LHUFH Y &RPPRQZHDOWK /LIH ,QV &R  )G  )GWK&LUm(YDOXDWLRQRI%XQWLQjV  WK &LU  %XW VHH LG DW  Q FULWLFL]LQJ WKLV WHVW EHFDXVH GLVFULPLQDWLRQFODLPVXQGHU7LWOH9,,>DQG@86&† WKH ILUVW SURQJ LPSRVHV mD PRUH RQHURXV VWDQGDUG IRU SODLQWLIIV ZKR DUH IROORZWKH7LWOH9,,IUDPHZRUNVHWIRUWKE\WKH6XSUHPH ZKLWH RU PDOH WKDQ IRU WKHLU QRQZKLWH RU IHPDOH FRXQWHUSDUWVl VHH DOVR &RXUWLQ0F'RQQHOO'RXJODVlVHHJHQHUDOO\5HHYHVY 0LOOV Y +HDOWK &DUH 6HUY &RUS  )G   Q WK &LU  QRWLQJ WKDW 6L[WK &LUFXLW mUHYHUVH GLVFULPLQDWLRQl SULPD IDFLH WHVW LV mWKH 6DQGHUVRQ 3OXPELQJ 3URGV ,QF  6&W   VXEMHFW RI LQWUDFLUFXLW FRQWURYHUV\l VHH JHQHUDOO\ LG DW  VWDWLQJWKDW0F'RQQHOO'RXJODVDQGSURJHQ\KDYH 7KH GLVWULFW FRXUW LQ WKLV FDVH HUUHG LQ DSSO\LQJ WKH SULPD IDFLH WHVW IRU mµHVWDEOLVKHGDQDOORFDWLRQRIWKHEXUGHQRISURGXFWLRQDQGDQ WUDGLWLRQDO 7LWOH 9,, FODLPV LQVWHDG RI WKH PRGLILHG SULPD IDFLH WHVW VHW RUGHU IRU WKH SUHVHQWDWLRQ RI SURRI LQ    GLVFULPLQDWRU\ IRUWK LQ %RJHU DQG 3LHUFH WUHDWPHQWFDVHVjlTXRWLQJ6W0DU\jV+RQRU&HQWHUY+LFNV   86      7KH GLUHFW HYLGHQFH DQG 7KH OLWLJDQWV FRQFXUUHG DQG WKH GLVWULFW FRXUW DFFRUGLQJO\ IRXQG WKDW :HEHUJ DV D &DXFDVLDQ HPSOR\HH LQ D ZRUNSODFH SUHGRPLQDQWO\ VWDIIHG DQG PDQDJHG E\ $IULFDQ$PHULFDQV ZDV D PHPEHU RI D SURWHFWHG

 UDFLDO PLQRULW\ JURXS 7KXV WKH SDUWLHV KDYH DJUHHG WKDW WKH UHTXLUHPHQWV 8QGHU WKH 0F'RQQHOO 'RXJODV IUDPHZRUN WKH SODLQWLII EHDUV WKH RI %RJHU  )G DW  KDYH EHHQ VDWLVILHG DQG :HEHUJ ZDV D LQLWLDO EXUGHQ RI HVWDEOLVKLQJ D SULPD IDFLH FDVH RI UDFLDO GLVFULPLQDWLRQ PHPEHU RI D SURWHFWHG FODVV ZKR FODLPHG WR KDYH EHHQ WKH YLFWLP RI 6HH 0F'RQQHOO 'RXJODV Y *UHHQ  86    :KHQ D LQWHQWLRQDO UDFLDO GLVFULPLQDWLRQ WKDW XOWLPDWHO\ UHVXOWHG LQ DQ DGYHUVH SODLQWLII FODLPV mUHYHUVH GLVFULPLQDWLRQl mWKH SUHVXPSWLRQ WKDW WKH HPSOR\PHQW GHFLVLRQ