Carter v. Bell

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 s$0(6 '$9,' &$57(5 ; 3HWLWLRQHU$SSHOODQW    1R Y  !  5,&.< %(//:DUGHQ3$8/  6800(56$WWRUQH\*HQHUDO  5HVSRQGHQWV$SSHOOHHV   1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHDW*UHHQHYLOOH 1Rn7KRPDV*+XOO'LVWULFWsXGJH $UJXHG0DUFK 'HFLGHGDQG)LOHGsXO\ %HIRUH1(/621&/$<DQG*,/0$1&LUFXLWsXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8('  *DU\ & 6KRFNOH\ %$.(5 '21(/621 %($50$1  &$/':(// 1DVKYLOOH 7HQQHVVHH IRU $SSHOODQW'DU\Os%UDQG2)),&(2)7+($77251(< *(1(5$/ 1DVKYLOOH 7HQQHVVHH IRU $SSHOOHHV 21 %5,()  *DU\ & 6KRFNOH\ %$.(5 '21(/621 %($50$1  &$/':(// 1DVKYLOOH 7HQQHVVHH IRU   &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  $SSHOODQW'DU\Os%UDQG *OHQQ53UXGHQ2)),&(2) HYDOXDWLYHMXGJPHQWRQWKHUHODWLYHKRUURURIRQHPXUGHURYHU 7+( $77251(< *(1(5$/ 1DVKYLOOH 7HQQHVVHH IRU DQRWKHU$UDYHY&UHHFK86  6HFWLRQ $SSHOOHHV  L   GRHV QRW IDFLDOO\ YLRODWH WKH (LJKWK $PHQGPHQW BBBBBBBBBBBBBBBBB )RUWKHVHUHDVRQVZH$)),50LQSDUWDQG5(9(56(LQ 23,1,21 SDUW WKH MXGJPHQW RI WKH GLVWULFW FRXUW ZH DIILUP LQ DOO BBBBBBBBBBBBBBBBB UHVSHFWV WKH MXGJPHQW RI JXLOW HQWHUHG RQ WKH MXU\jV JXLOW\ YHUGLFW EXW UHYHUVH WKH MXGJPHQW RI WKH VHQWHQFH RI GHDWK &/$< &LUFXLW sXGJH  3HWLWLRQHU sDPHV 'DYLG &DUWHU EHFDXVH RI WKH LQHIIHFWLYH DVVLVWDQFH RI FRXQVHO DW WKH DSSHDOV IURP WKH RUGHU RI WKH GLVWULFW FRXUW DGRSWLQJ DQG VHQWHQFLQJSKDVHRIWKHWULDO:H5(0$1'WKHFDVHWRWKH DSSURYLQJWKHPDJLVWUDWHMXGJHjVUHSRUWDQGUHFRPPHQGDWLRQ GLVWULFW FRXUW ZLWK LQVWUXFWLRQV WR LVVXH D ZULW RI KDEHDV VWDWLQJ DGGLWLRQDO ILQGLQJV DQG GHQ\LQJ &DUWHUjV FODLPV FRUSXVYDFDWLQJ&DUWHUjVGHDWKVHQWHQFHGXHWRWKHLQHIIHFWLYH UHJDUGLQJLQHIIHFWLYHDVVLVWDQFHRIFRXQVHO)RUWKHUHDVRQV DVVLVWDQFHRIFRXQVHOKHUHFHLYHGDWWKHVHQWHQFLQJSKDVHRI VHWIRUWKEHORZZH5(9(56(LQSDUWDQG$)),50LQSDUW WKHWULDOXQOHVVWKHVWDWHFRQGXFWVDQHZSHQDOW\SURFHHGLQJ ZLWKLQGD\VDIWHUUHPDQG , :H VXPPDUL]H WKH IROORZLQJ IDFWV IURP WKH 7HQQHVVHH 6XSUHPH &RXUWjV RSLQLRQ RQ GLUHFW DSSHDO  6HH 6WDWH Y &DUWHU6:G 7HQQ  2Q)HEUXDU\&DUWHUGURYHZLWK'DQQ\3ULFHWRWKH ,QWHUVWDWH  UHVW DUHD QHDU %DLOH\WRQ 7HQQHVVHH  7KH\ SODQQHGWRVWHDODFDUWKDWWKH\FRXOGXVHLQDUREEHU\WKHQH[W GD\,GDW &ODUHQFH$/LOHD\HDUROG2NODKRPDUHVLGHQWVWRSSHG DWWKHUHVWDUHDMXVWDIWHUPLGQLJKW$V3ULFHZDWFKHG&DUWHU HQWHUHGWKHUHVWURRPDQGHPHUJHGVKRUWO\ZLWK/LOH7KHWZR JRWLQWR/LOHjVSLFNXSWUXFNDQGOHIWWKHDUHD3ULFHIROORZHG LQ&DUWHUjVFDU&DUWHUIRUFHG/LOHWRGULYHWRDVHFOXGHGDUHD NQRZQDVWKH%OXIIVZKLFKRYHUORRNHG&KHURNHH/DNH3ULFH ZDWFKHG&DUWHUVKRRW/LOHIRXUWLPHVDWFORVHUDQJHDQGUROO /LOHjVERG\RIIWKHFOLII7KHERG\ZDVIRXQGDIRRWVKRUWRI WKHODNHWKHQH[WGD\,G 7KH+DPEOHQ&RXQW\JUDQGMXU\LQGLFWHG&DUWHUDQG3ULFH LQ0DUFKRIFKDUJLQJ&DUWHULQ&RXQWV,DQG,,,ZLWK ILUVWGHJUHHPXUGHURI/LOHDQGDVDKDELWXDOFULPLQDOXQGHU 7HQQHVVHH &RGH $QQRWDWHG †    UHSHDOHG  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  DJJUDYDWLQJFLUFXPVWDQFHVmLVQRWVXVFHSWLEOHRIPDWKHPDWLFDO  &RXQW,,FKDUJHG3ULFHZLWKDLGLQJDQGDEHWWLQJ/LOHjV SUHFLVLRQl IHGHUDO FRXUW YDJXHQHVV UHYLHZ LV mTXLWH PXUGHU GHIHUHQWLDOl  ,G DW   $Q DJJUDYDWLQJ IDFWRU mLV QRW XQFRQVWLWXWLRQDO LI LW KDV VRPH µFRPPRQVHQVH FRUH RI ,Q sXO\ RI  SROLFH LQYHVWLJDWRUV FRQWDFWHG 0LFKDHO PHDQLQJ    WKDW FULPLQDO MXULHV VKRXOG EH FDSDEOH RI *DUEHU WKH PDLQWHQDQFH PDQ RQ WKH ODWHQLJKW VKLIW DW WKH XQGHUVWDQGLQJjl,G7KHVWDWHVPD\DGRSWFDSLWDOVHQWHQFLQJ ,QWHUVWDWHUHVWDUHD7KH\LQIRUPHG*DUEHUWKDWWKH\ZHUH SURFHVVHVWKDWUHO\RQWKHMXU\jVMXGJPHQWWRH[HUFLVHZLGH LQYHVWLJDWLQJ D KRPLFLGH DQG VKRZHG KLP SKRWRJUDSKV RI GLVFUHWLRQLQLQGLYLGXDOL]HGVHQWHQFLQJ,GDW7KHIHZ &DUWHU 3ULFH /LOH &DUWHUjV FDU DQG /LOHj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mHVSHFLDOO\KHLQRXVDWURFLRXVRUFUXHOl0D\QDUG &DUWHUZDVGHFODUHGLQGLJHQWDQGWKHFRXUWDSSRLQWHG0LQG\  86 DW  RU DV mRXWUDJHRXVO\ RU ZDQWRQO\ YLOH 1RUWRQ6HDOVDQG'RXJODV5%HLHUWRGHIHQGKLP$WWULDORQ KRUULEOH DQG LQKXPDQl *RGIUH\  86 DW  WKHFKDUJHRIPXUGHULQWKHILUVWGHJUHH3ULFHWHVWLILHGDJDLQVW 7XLODHSD86DW &DUWHU  3ULFH KDG SUHYLRXVO\ SOHG JXLOW\ WR VHFRQGGHJUHH PXUGHULQUHWXUQIRUDVHQWHQFHRIWKLUW\ILYH\HDUV 7KH 7XLODHSD FRXUW DSSURYHG RI DJJUDYDWLQJ IDFWRUV IRFXVLQJRQWKHmFLUFXPVWDQFHVRIWKHFULPHlDQGRQm>W@KH &DUWHUUHOLHGRQDQDOLELGHIHQVHZKLFKZDVVXSSRUWHGE\ SUHVHQFH RU DEVHQFH RI FULPLQDO DFWLYLW\ E\ WKH GHIHQGDQW WKHWHVWLPRQ\RIRQHZLWQHVV7KHMXU\FRQYLFWHG&DUWHURI >ZKLFKLQYROYHG@WKHXVHRUDWWHPSWHGXVHRIIRUFHRUYLROHQFH ILUVWGHJUHHPXUGHUE\DJHQHUDOYHUGLFW RUWKHH[SUHVVRULPSOLHGWKUHDWWRXVHIRUFHRUYLROHQFHl,G DW   )ROORZLQJ WKH VDPH DQDO\VLV WKH GLVWULFW FRXUW 8QGHU WKH ELIXUFDWHG 7HQQHVVHH V\VWHP WKH VDPH MXU\ SURSHUO\UHMHFWHG&DUWHUjVYDJXHQHVVFKDOOHQJHE\ILQGLQJWKDW ZKLFKFRQYLFWHG&DUWHUGHWHUPLQHGKLVVHQWHQFH'XULQJWKH WKH DYRLGDQFH RI DUUHVW RU SURVHFXWLRQ IDFWRU FRQWDLQV QR VHQWHQFLQJSKDVHRIWKHWULDOERWKWKH6WDWHDQGWKHGHIHQVH SHMRUDWLYHODQJXDJHGHVFULELQJWKHFULPHDVDZKROHLVQRW ZHUHRIIHUHGWKHRSSRUWXQLW\WRSUHVHQWSURRIRIDJJUDYDWLQJ SKUDVHGLQWHUPVUHTXLULQJD\HVRUQRDQVZHUIRFXVHVWKH DQG PLWLJDWLQJ FLUFXPVWDQFHV XQGHU WKHQ 7HQQHVVHH &RGH MXU\jV DWWHQWLRQ RQ VSHFLILF FLUFXPVWDQFHV UDWKHU WKDQ WKH $QQRWDWHG †   UHSHDOHG    7KH 6WDWH FULPH DV D ZKROH DQG LPSDUWV D FRPPRQVHQVH PHDQLQJ UHVWHGRQWKHHYLGHQFHLWKDGSUHVHQWHGGXULQJWKHJXLOWSKDVH FDSDEOHRIXQGHUVWDQGLQJE\DMXU\ UHOHYDQW WR WKH DJJUDYDWLQJ FLUFXPVWDQFHV  7KH GHIHQVH QHLWKHULQYHVWLJDWHGQRULQWURGXFHGDQ\HYLGHQFHRIPLWLJDWLQJ :H DJUHH ZLWK WKH GLVWULFW FRXUW DQG ILQG WKDW †  IDFWRUVEDVLQJLWVDUJXPHQWRQDWKHRU\RIUHVLGXDOGRXEWE\  L   FRQWDLQV D mFRPPRQVHQVH FRUH RI PHDQLQJ    DSSHDOLQJ WR DQ\ OLQJHULQJ GRXEW WKH MXU\ PLJKW KDYH KDG FULPLQDO MXULHV VKRXOG EH FDSDEOH RI XQGHUVWDQGLQJl UHJDUGLQJWKHFRQYLFWLRQLQDQDWWHPSWWRGLVVXDGHWKHMXU\ 7XLODHSD86DW7KHVWDWXWHGHILQLWLRQGRHVQRW IURPLPSRVLQJWKHGHDWKSHQDOW\7KHMXU\VHQWHQFHG&DUWHU FRQWDLQmSHMRUDWLYHDGMHFWLYHVWKDWGHVFULEHDFULPHDVD WRGHDWKSXUVXDQWWR7HQQHVVHH&RGH†ILQGLQJQR ZKROHl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†  RUGLQDU\VHQVLELOLW\FRXOGIDLUO\FKDUDFWHUL]HDOPRVWHYHU\  L        7KH MXGJPHQW ZDV DIILUPHG E\ WKH PXUGHUDVmRXWUDJHRXVO\RUZDQWRQO\YLOHKRUULEOHDQG 7HQQHVVHH 6XSUHPH &RXUW DQG WKH 8QLWHG 6WDWHV 6XSUHPH LQKXPDQl6XFKDYLHZPD\LQIDFWKDYHEHHQRQHWR &RXUWGHQLHGFHUWLRUDUL6HH6WDWHY&DUWHU6:G ZKLFKPHPEHUVRIWKHMXU\LQWKLVFDVHVXEVFULEHG 7HQQ FHUWGHQLHG86   86DW &DUWHUILOHGDSURVHSHWLWLRQIRUVWDWHSRVWFRQYLFWLRQUHOLHI UDLVLQJDFODLPRILQHIIHFWLYHDVVLVWDQFHRIFRXQVHODQGRWKHU 7KH 7HQQHVVHH 6XSUHPH &RXUW KDV FRQVWUXHG †  LVVXHV  7KH WULDO FRXUW GHQLHG UHOLHI DIWHU DQ HYLGHQWLDU\  L   DV UHTXLULQJ RQO\ WKDW DYRLGDQFH RI DUUHVW RU KHDULQJ DQG WKH 7HQQHVVHH &RXUW RI &ULPLQDO $SSHDOV SURVHFXWLRQEHRQHRIWKHSXUSRVHVPRWLYDWLQJWKHPXUGHUQRW DIILUPHG WKH GHQLDO RI UHOLHI LQ 6HSWHPEHU RI   7KH WKH VROH RU SUHGRPLQDQW PRWLYH  6HH 6WDWH Y %XVK  7HQQHVVHH6XSUHPH&RXUWGHQLHGSHUPLVVLRQWRDSSHDO 6:G 7HQQ 6WDWHY6PLWK6:G   7HQQ   &DUWHU  6:G DW  :KLOHWKHDSSHDOIURPGHQLDORIKLVILUVWSRVWFRQYLFWLRQ 7HQQHVVHH &RXUWV GR QRW DSSO\ †  L   ZKHQ WKH SHWLWLRQZDVSHQGLQJ&DUWHUILOHGDVHFRQGSRVWFRQYLFWLRQ 6WDWHjV WKHRU\ LV WKDW WKH YLFWLP ZDV NLOOHG WR SUHYHQW WKH SHWLWLRQ7KHWULDOFRXUWGLVPLVVHGWKHSHWLWLRQDQGWKH&RXUW GHIHQGDQWjV DUUHVW RU SURVHFXWLRQ IRU WKH NLOOLQJ LH WR RI&ULPLQDO$SSHDOVDIILUPHGWKHGLVPLVVDORQWKHJURXQGV SUHYHQWWKHYLFWLPIURPEHLQJDZLWQHVVWRKLVRZQPXUGHU WKDWWKHWULDOFRXUWODFNHGMXULVGLFWLRQWRFRQVLGHUWKHVHFRQG 6HH %XVK  6:G DW   +RZHYHU WKH DJJUDYDWLQJ SHWLWLRQ ZKLOH WKH ILUVW SHWLWLRQ UHPDLQHG RQ DSSHDO  6HH FLUFXPVWDQFHDSSOLHVZKHQWKHHYLGHQFHVXSSRUWVDILQGLQJ &DUWHUY6WDWH6:G 7HQQ&ULP$SS  WKDW WKH YLFWLP ZDV NLOOHG WR SUHYHQW WKH GHIHQGDQWjV 2Q sDQXDU\   WKH 7HQQHVVHH 6XSUHPH &RXUW GHQLHG DSSUHKHQVLRQ DQG SURVHFXWLRQ IRU D VHSDUDWH RIIHQVH  ,G SHUPLVVLRQWRDSSHDO 7KHUHIRUH &DUWHUjV LQWHUSUHWDWLRQ RI WKH VWDWXWH LV QRW VXSSRUWHGE\ODZ ,Q0DUFKRI&DUWHUILOHGDSHWLWLRQIRUZULWRIKDEHDV FRUSXV LQ WKH 8QLWHG 6WDWHV 'LVWULFW &RXUW IRU WKH 0LGGOH &DUWHUHPSKDVL]HVWKDWWKH7HQQHVVHH6XSUHPH&RXUWDWRQH 'LVWULFW RI 7HQQHVVHH  7KH GLVWULFW FRXUW LVVXHG D VWD\ RI SRLQWUHIHUUHGWR&DUWHUjVRYHUDOOFRQGXFWLQFOXGLQJGLVSRVLQJ H[HFXWLRQDSSRLQWHGFRXQVHODQGVXDVSRQWHWUDQVIHUUHGWKH RI/LOHjVERG\DVPRWLYDWHGE\DGHVLUHWRDYRLGGHWHFWLRQDQG FDVH WR WKH 8QLWHG 6WDWHV 'LVWULFW &RXUW IRU WKH (DVWHUQ DSSUHKHQVLRQIRUWKH/LOHPXUGHU+RZHYHU&DUWHULJQRUHV 'LVWULFW RI 7HQQHVVHH  2Q 1RYHPEHU   WKH GLVWULFW WKHFRXUWjVILQGLQJWKDW&DUWHUZDVPRWLYDWHGWRNLOO/LOHLQ FRXUWJUDQWHGVXPPDU\MXGJPHQWIRU5HVSRQGHQWVRQVHYHUDO RUGHUWRDYRLGGHWHFWLRQDQGDUUHVWIRUVWHDOLQJ/LOHjVWUXFN RI &DUWHUjV FODLPV LQFOXGLQJ KLV DOOHJDWLRQ WKDW D SUHWULDO DQG IRU WKH SODQQHG UREEHU\ WR EH DFFRPSOLVKHG LQ /LOHjV SKRWR LGHQWLILFDWLRQ SURFHGXUH ZDV XQFRQVWLWXWLRQDOO\ WUXFN6HH&DUWHU6:GDW VXJJHVWLYH KLV FODLP UHJDUGLQJ IDLOXUH RI WKH WULDO FRXUW WR UHLQVWUXFWWKHMXU\DWWKHVHQWHQFLQJKHDULQJDVWRWKHHOHPHQWV &DUWHUjV DUJXPHQW WKRXJK FRXFKHG LQ WKH WHUPV RI RIWKHXQGHUO\LQJIHORQLHVIRUIHORQ\PXUGHUDQGKLVFODLP YDJXHQHVV GRHV QRW LPSOLFDWH WKH VHFRQG UHTXLUHPHQW ,Q WKDWWKHmDYRLGDQFHRIDUUHVWlDJJUDYDWLQJFLUFXPVWDQFHZDV UHMHFWLQJ &DUWHUjV YDJXHQHVV FKDOOHQJH WKH GLVWULFW FRXUW XQFRQVWLWXWLRQDOO\YDJXH2Q'HFHPEHUWKHGLVWULFW DSSOLHG WKH SULQFLSOHV HQXQFLDWHG LQ 7XLODHSD  86 DW   %HFDXVH mWKH SURSHU GHJUHH RI GHILQLWLRQl RI  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  † L    UHSHDOHG 7KHMXU\IRXQGWKLV FRXUWJUDQWHGVXPPDU\MXGJPHQWLQIDYRURI5HVSRQGHQWVRQ DJJUDYDWRUDSSOLFDEOHWRWKHIDFWVLQ&DUWHUjVVHQWHQFLQJ &DUWHUjVFODLPVWKDWWKHSURVHFXWLRQIDLOHGWRGLVFORVHUHOHYDQW HYLGHQFH7KHGLVWULFWFRXUWUHIHUUHGWKHFDVHWRDPDJLVWUDWH 2QGLUHFWDSSHDOWKH7HQQHVVHH6XSUHPH&RXUWIRXQGWKDW MXGJHIRUDQHYLGHQWLDU\KHDULQJRQ&DUWHUjVUHPDLQLQJFODLPV WKH HYLGHQFH VXSSRUWHG D ILQGLQJ WKDW &DUWHUjV PRWLYH LQ RILQHIIHFWLYHDVVLVWDQFHRIFRXQVHO NLOOLQJ/LOHDQGGLVSRVLQJRIKLVERG\ZDVWRmDYRLGGHWHFWLRQ DQGDSSUHKHQVLRQIRUWKHPXUGHUDQGWKHSODQQHGUREEHU\WR 7KH SURRI SUHVHQWHG DW WKH HYLGHQWLDU\ KHDULQJ RQ EHDFFRPSOLVKHGLQ/LOHjVWUXFNl&DUWHU6:GDW LQHIIHFWLYHDVVLVWDQFHRIFRXQVHODWVHQWHQFLQJVKRZHGWKDWDW )XUWKHUWKHVWDWHFRXUWIRXQGWKDWRQO\3ULFHjVWHVWLPRQ\WKDW WKH WLPH RI DSSRLQWPHQW %HLHU KDG EHHQ OLFHQVHG DV DQ KHDQG&DUWHUQHHGHGDFOHDQFDUWRXVHLQDSODQQHGUREEHU\ DWWRUQH\ IRU VHYHQ \HDUV DQG 6HDOV IRU WKUHH  %HLHU KDG H[SODLQHG WKH FULPH  m1R RWKHU PRWLYH ZDV H[SUHVVHG RU KDQGOHGEHWZHHQWKUHHDQGILYHSULRUFDSLWDOFDVHV6HDOVKDG FRXOG EH LPSOLHG IURP WKH HYLGHQFH LQ WKLV FDVH IRU WKH EHHQFRXQVHORIUHFRUGLQRQHVXFKFDVHDQGKDGDVVLVWHGKHU DFWLYLWLHVRI3ULFHDQGGHIHQGDQWDWWKH,QWHUVWDWHUHVWVWRS HPSOR\HU LQ DQRWKHU  1HLWKHU KDG SUHYLRXVO\ SUHSDUHG RU RUIRUWKHPXUGHUDQGDWWHPSWWRGLVSRVHRIWKHERG\LQWKH SUHVHQWHG D VHQWHQFLQJ SKDVH GHIHQVH XQGHU 7HQQHVVHHjV ODNHl,GDW ELIXUFDWHGFDSLWDOWULDOVFKHPH 8QGHUFRQWUROOLQJODZmWKHFKDQQHOLQJDQGOLPLWLQJRIWKH $W WKH WLPH RI WKHLU DSSRLQWPHQW %HLHU ZDV D sXYHQLOH VHQWHQFHUjV GLVFUHWLRQ LQ LPSRVLQJ WKH GHDWK SHQDOW\ LV D &RXUW sXGJH IRU +DPEOHQ &RXQW\ DQG 6HDOV ZDV sXYHQLOH IXQGDPHQWDO FRQVWLWXWLRQDO UHTXLUHPHQW IRU VXIILFLHQWO\ &RXUW 2IILFHU ZKHUH KHU GXWLHV LQFOXGHG SURVHFXWLRQ RI PLQLPL]LQJ WKH ULVN RI ZKROO\ DUELWUDU\ DQG FDSULFLRXV MXYHQLOHVFKDUJHGZLWKGHOLQTXHQF\IRUWKH6WDWH%HFDXVHRI DFWLRQl0D\QDUGY&DUWZULJKW86   %HLHUjVVHQWHQFLQJRI&DUWHUjVFRXVLQDQGIRURWKHUUHDVRQV 6WDWXWRU\DJJUDYDWLQJFLUFXPVWDQFHVDUHFRQVWLWXWLRQDOVRORQJ &DUWHUDQG%HLHUGLGQRWJHWDORQJ&RQVHTXHQWO\6HDOVZDV DVWKH\PHHWWZRUHTXLUHPHQWVm)LUVWWKHFLUFXPVWDQFHPD\ WKHSULPDU\FRQWDFWZLWK&DUWHUZKLOH%HLHUSXUVXHGIDFWXDO QRWDSSO\WRHYHU\GHIHQGDQWFRQYLFWHGRIDPXUGHULWPXVW LQYHVWLJDWLRQ RI WKH RIIHQVH DQG &DUWHUjV DOLEL GHIHQVH  ,Q DSSO\RQO\WRDVXEFODVVRIGHIHQGDQWVFRQYLFWHGRIPXUGHU GLYLGLQJXSWULDOSUHSDUDWLRQWDVNV%HLHUSUHSDUHGDOLVWRI 6HFRQG WKH DJJUDYDWLQJ FLUFXPVWDQFH PD\ QRW EH WZHQW\VHYHQGLIIHUHQWWDVNV WR EHSXUVXHG%HLHUWHVWLILHG XQFRQVWLWXWLRQDOO\YDJXHl7XLODHSDY&DOLIRUQLD86 WKDW KH DQG 6HDOV PHW DQG ZHQW RYHU WKH OLVW SODFLQJ WKH    LQLWLDOVRIWKHUHVSRQVLEOHDWWRUQH\QH[WWRHDFKWDVN2IWKH WZHQW\VHYHQLWHPVRQWKHOLVWRQO\RQHOLVWHGDVmDJJUDYDWHG 7KHVXEVWDQFHRI&DUWHUjVDUJXPHQWLVWKDWWKH7HQQHVVHH FLUFXPVWDQFHVl ZDV UHODWHG WR WKH VHQWHQFLQJ SKDVH RI WKH VWDWXWHFDQEHLQWHUSUHWHGDVDFDWFKDOOLQYLRODWLRQRIWKHILUVW WULDO%HLHUWHVWLILHGWKDWWKLVWDVNZDVDVVLJQHGWRKLPDQG UHTXLUHPHQW$QDJJUDYDWLQJFLUFXPVWDQFHLVFRQVWLWXWLRQDOO\ ZRXOGKDYHLQFOXGHGDQ\LQYHVWLJDWLRQRIERWKDJJUDYDWLQJ LQYDOLG m>L@I WKH VHQWHQFHU IDLUO\ FRXOG FRQFOXGH WKDW DQ FLUFXPVWDQFHVDQGPLWLJDWLQJFLUFXPVWDQFHV DJJUDYDWLQJFLUFXPVWDQFHDSSOLHVWRHYHU\GHIHQGDQWHOLJLEOH IRUWKHGHDWKSHQDOW\l$UDYH86DW %HLHU DOVR WHVWLILHG WKDW 6HDOV PLJKW KDYH GRQH VRPH VHQWHQFLQJ SKDVH LQYHVWLJDWLRQ RU UHVHDUFK  %HLHU WHVWLILHG ,Q *RGIUH\ WKH 6XSUHPH &RXUW KHOG WKDW *HRUJLDjV WKDW KH UHYLHZHG WKH OLVW RI DJJUDYDWLQJ FLUFXPVWDQFHV DQG mRXWUDJHRXVO\ RU ZDQWRQO\ YLOH KRUULEOH RU LQKXPDQl VWDWXWRU\PLWLJDWLQJFLUFXPVWDQFHVVHWRXWLQWKHVWDWXWH6HH DJJUDYDWLQJFLUFXPVWDQFHZDVXQFRQVWLWXWLRQDOEHFDXVH 7HQQ &RGH $QQ †   %HLHU GLG QRW UHFDOO LQYHVWLJDWLQJDQ\QRQVWDWXWRU\PLWLJDWLQJFLUFXPVWDQFHVEXW  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  VXJJHVWHGWKDW6HDOVPLJKWKDYHGRQHVR6HDOVWHVWLILHGWKDW ZLWQHVV  &DUWHU FODLPV WKDW LW VXIIHUV IURP WKH VDPH VKHGLGQRW%HLHUDOVRWHVWLILHGWKDWKHGLVFXVVHGZLWK&DUWHU XQFRQVWLWXWLRQDO YDJXHQHVV FRQGHPQHG LQ *RGIUH\ Y ZKHWKHU KH ZDQWHG WR WHVWLI\ DW WKH VHQWHQFLQJ SKDVH *HRUJLD  86    DQG WKHUHIRUH YLRODWHV WKH $OWKRXJK%HLHUWHVWLILHGWKDWKHGLGPHHWZLWK&DUWHUjVPRWKHU (LJKWK$PHQGPHQW7KHGLVWULFWFRXUWKHOGWKDW&DUWHUKDG DQG RWKHU PHPEHUV RI &DUWHUjV IDPLO\ KH FRXOG QRW UHFDOO IDLOHGWRSUHVHQWWKLVFODLPWRWKHVWDWHFRXUWVRQGLUHFWDSSHDO ZKHWKHU SRWHQWLDO PLWLJDWLQJ HYLGHQFH ZDV GLVFXVVHG QRU DQGWKHUHIRUHKHKDGGHIDXOWHGIHGHUDOUHYLHZRQLWVPHULWV ZKLFKIDPLO\PHPEHUVZHUHSUHVHQW%HLHUjVWLPHUHFRUGVGLG 'HVSLWHWKHSURFHGXUDOEDUWKHGLVWULFWFRXUWGHWHUPLQHGWKDW QRWVKHGDQ\OLJKWRQHLWKHUSRLQW%HLHUWHVWLILHGWKDWKHVSHQW WKH FODLP ZDV PHULWOHVV ILQGLQJ WKDW WKH VWDWXWH LPSDUWV D RIKLVSUHWULDOWLPHRQJXLOWSKDVHLVVXHV FRPPRQVHQVHPHDQLQJZKLFKDMXURUZRXOGXQGHUVWDQG 6HDOV FRQILUPHG WKDW VKH ZDV WKH SULQFLSDO FRQWDFW ZLWK :HGRQRWDJUHHZLWKWKHGLVWULFWFRXUWjVKROGLQJWKDW&DUWHU &DUWHU DQG WKDW &DUWHU DQG %HLHU GLG QRW JHW DORQJ  6HDOV KDVGHIDXOWHGIHGHUDOUHYLHZRIWKLVFODLP&DUWHUjVILUVWSRVW WHVWLILHG WKDW VKH ZDV QRW DZDUH RI DQ\ LQYHVWLJDWLRQ RI FRQYLFWLRQ SHWLWLRQ FRQWDLQHG D FKDOOHQJH WR WKH VWDWXWH DV SRWHQWLDOVWDWXWRU\RUQRQVWDWXWRU\PLWLJDWLQJFLUFXPVWDQFHV XQFRQVWLWXWLRQDO  +LV VHFRQG SRVWFRQYLFWLRQ SHWLWLRQ E\FRXQVHO6HDOVUHFDOOHGPHHWLQJZLWK&DUWHUjVPRWKHUEXW LQFOXGHG D FODLP WKDW WKH HQWLUH VWDWXWH IDLOHG WR JHQXLQHO\ FRXOGQRWUHFDOOWKHVXEVWDQFHRIKHUGLVFXVVLRQV6HDOVDOVR QDUURZWKHFODVVRIGHDWKHOLJLEOHPXUGHUV(YHQLIZHDJUHHG SRLQWHG RXW WKDW KHU WLPH UHFRUGV VKRZHG D VLQJOH PHHWLQJ ZLWK WKH GLVWULFW FRXUW WKDW VXFK DOOHJDWLRQV ZHUH mEDOGl RU ZLWKRQHRI&DUWHUjVVLVWHUVEXWFRXOGQRWUHFDOOZKRWKLVZDV mJHQHUDOl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j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m>W@KHPXUGHUZDVFRPPLWWHGIRUWKHSXUSRVHRI ZDV WR FUHDWH D UHDVRQDEOH GRXEW WKURXJK LPSHDFKPHQW RI DYRLGLQJ LQWHUIHULQJ ZLWK RU SUHYHQWLQJ D ODZIXO DUUHVW RU &DUWHUjV FRGHIHQGDQW 3ULFH  %HLHU DOVR WHVWLILHG WKDW WKH SURVHFXWLRQRIWKHGHIHQGDQWRUDQRWKHUl7HQQ&RGH$QQ  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  QRUGLG0RUUHOORU6KHOODVNIRUKLVLQGHSHQGHQWUHFROOHFWLRQ GHIHQVH VWUDWHJ\ ZDV WKH VDPH DW WKH VHQWHQFLQJ SKDVH WR RIHYHQWV VKRZWKDW3ULFHjVWHVWLPRQ\ZDVQRWVXIILFLHQWO\UHOLDEOHWR HVWDEOLVKDQDJJUDYDWLQJFLUFXPVWDQFH%RWK%HLHUDQG6HDOV :HUHFRJQL]HWKDWmSKRWRLGHQWLILFDWLRQSURFHGXUHVUHTXLUH WHVWLILHGWKDWWKHDOWHUQDWLYHSUHPHGLWDWHGDQGIHORQ\PXUGHU FORVHVFUXWLQ\DQGPXVWEHFRQGXFWHGFDUHIXOO\WRHQVXUH WKHRULHV VHW RXW LQ &RXQW , RI WKH LQGLFWPHQW SUHVHQWHG D WKHUHOLDELOLW\RIH\HZLWQHVVLQFRXUWLGHQWLILFDWLRQl8QLWHG SUREOHP WR WKH GHIHQVH LQ LQWHUSUHWLQJ WKH MXU\j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jV FDU  6PLWK Y 3HULQL  )G  WK &LU IHGHUDO HYLGHQWLDU\ KHDULQJ ZDV WKDW RI &DUWHUjV H[SHUW   SKRWRDUUD\LQSHUVRQVKRZXSSOXVSULRULQGHSHQGHQW &KDUOHV :% )HOV D IRUPHU 7HQQHVVHH $VVLVWDQW 'LVWULFW GHVFULSWLRQ 8QLWHG6WDWHVY7\OHU)G WK&LU $WWRUQH\*HQHUDODIRUPHU$VVLVWDQW86$WWRUQH\DQGDQ   WZRVHSDUDWHSKRWRDUUD\VSOXVGHWDLOHGGHVFULSWLRQ  H[SHULHQFHGGHIHQVHFRXQVHO+HKDGOHFWXUHGRQFULPLQDO GHIHQVH LQ RYHU D GR]HQ VWDWHV DW WKH )%, $FDGHP\ LQ :H ILQG WKDW VXIILFLHQW LQGLFLD RI UHOLDELOLW\ RI *DUEHUj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jVDQG3ULFHj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jVLQFRXUWLGHQWLILFDWLRQ WKDWLWZDVFXVWRPDU\IRUGHIHQVHFRFRXQVHOWRGLYLGHSUHWULDO ZDV UHOLDEOH  :H WKHUHIRUH DIILUP WKH GLVWULFW FRXUWjV LQYHVWLJDWLRQLQWRJXLOWDQGVHQWHQFLQJSKDVHLVVXHVDQGIRU GHWHUPLQDWLRQWKDWWKHXVHRIWKLVLGHQWLILFDWLRQGLGQRWYLRODWH RQHDWWRUQH\WREHUHVSRQVLEOHIRUHDFK$FFRUGLQJWR)HOVLW &DUWHUjVGXHSURFHVVULJKWV ZDV DOVR FXVWRPDU\ WR REWDLQ WKH GHIHQGDQWjV HGXFDWLRQDO IDPLO\VRFLDOFRXUWPHGLFDOSULVRQDQGVLPLODUUHFRUGVDQG 9,, WR LQWHUYLHZ WKH GHIHQGDQWj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µLPSHUPLVVLEO\VXJJHVWLYHDVWRJLYHULVHWR SKDVHLQYHVWLJDWLRQDQGSUHSDUDWLRQ D YHU\ VXEVWDQWLDO OLNHOLKRRG RI LUUHSDUDEOH PLVLGHQWLILFDWLRQjl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j GHJUHH RI DWWHQWLRQ   WKH SUHVHQWDWLRQRIDYDLODEOHPLWLJDWLQJFLUFXPVWDQFHVHYLGHQFH DFFXUDF\RIWKHZLWQHVVj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jVKDEHDVFRUSXVFDVHVKHZDVDEOHWR WRWDOLW\ RI WKH FLUFXPVWDQFHV LQ GHWHUPLQLQJ ZKHWKHU GXH FRPSLOH D GHWDLOHG IDPLO\ KLVWRU\ WKURXJK LQWHUYLHZV ZLWK SURFHVV UHTXLUHV VXSSUHVVLRQ RI WKH LGHQWLILFDWLRQ  6HH &DUWHUjV IDPLO\ PHPEHUV LQ WKH 0RUULVWRZQ DUHD  7RWK 0DQVRQ86DW WHVWLILHGWKDWVKHKDGEHHQDEOHWRDPDVVDVLJQLILFDQWYROXPH RIIDPLO\VRFLDOPHGLFDOSV\FKRORJLFDOPLOLWDU\DQGOHJDO :H ILQG WKDW WKH *DUEHU SKRWR LGHQWLILFDWLRQ ZDV UHFRUGVUHJDUGLQJ&DUWHUWKURXJKWKHXVHRIDZULWWHQUHFRUGV VXJJHVWLYH,QsXO\RI*DUEHUNQHZWKDWWKHRIILFHUV UHOHDVH7KUHHPHPEHUVRI&DUWHUjVIDPLO\WHVWLILHG&DUWHUjV ZHUHLQYHVWLJDWLQJDKRPLFLGHUHODWHGWRWKH,QWHUVWDWHUHVW DXQW +D]HOsLQNV&DUWHUjVVHFRQGFRXVLQ7HUULsLQNVDQG VWRS*DUEHUZDVVKRZQRQO\WKHSLFWXUHVRIWKHWZRVXVSHFWV &DUWHUjV VLVWHU %HWW\ sHDQ +ROW  $OO WKUHH OLYHG LQ WKH DQGWKHYLFWLPLQWKHSKRWRJUDSKLFHTXLYDOHQWRIWKHZLGHO\ 0RUULVWRZQDUHDLQ1RYHPEHUEXWQRQHZHUHFRQWDFWHG FRQGHPQHGVKRZXSLGHQWLILFDWLRQ6HH6LPPRQV86 E\WULDOFRXQVHO$OOWKUHHVWDWHGWKDWWKH\ZRXOGKDYHEHHQ DW m7KLVGDQJHUZLOOEHLQFUHDVHGLIWKHSROLFHGLVSOD\WR ZLOOLQJDQGDEOHWRWHVWLI\RQ&DUWHUjVEHKDOILIDVNHGWRGRVR WKH ZLWQHVV RQO\ WKH SLFWXUH RI D VLQJOH LQGLYLGXDO ZKR JHQHUDOO\UHVHPEOHVWKHSHUVRQKHVDZRULIWKH\VKRZKLP $IWHU DOORZLQJ WKH SDUWLHV DQ RSSRUWXQLW\ WR VXEPLW WKHSLFWXUHVRIVHYHUDOSHUVRQVDPRQJZKLFKWKHSKRWRJUDSK SURSRVHG )LQGLQJV RI )DFW DQG &RQFOXVLRQV RI /DZ WKH RI D VLQJOH VXFK LQGLYLGXDO UHFXUV RU LV LQ VRPH ZD\ PDJLVWUDWHMXGJHLVVXHGDUHSRUWDQGUHFRPPHQGDWLRQILQGLQJ HPSKDVL]HGl  6WRYDOO Y 'HQQR  86    WKDWWULDOFRXQVHOKDGQRWEHHQGHILFLHQWLQIDLOLQJWRFRQGXFW *DUEHUZDVQRWDVNHGWRGHVFULEHDQ\VXVSLFLRXVSHUVRQVDW DQ LQYHVWLJDWLRQ LQWR SRWHQWLDO PLWLJDWLQJ FLUFXPVWDQFHV WKHUHVWVWRSLQ)HEUXDU\EHIRUHEHLQJVKRZQWKHSKRWRV  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  WKDW WKH RIILFHUV ZHUH LQYHVWLJDWLQJ D KRPLFLGH  *DUEHU HYLGHQFH7KHPDJLVWUDWHMXGJHIRXQGWKDWVLQFHWKH6WDWH LQGLFDWHGWKDWKHKDGVHHQWKHWKUHHLQGLYLGXDOVWRJHWKHUDWWKH FRXOGUHEXWDQ\PLWLJDWLQJFLUFXPVWDQFHVHYLGHQFHZLWKSURRI UHVWVWRSEXWFRXOGQRWVD\ZKLFKQLJKWQRUFRXOGKHLGHQWLI\ RI&DUWHUjVDOOHJHGEDGFKDUDFWHUSULRUEDGDFWVDQGFULPLQDO WKH YHKLFOHV VKRZQ LQ WKH SKRWRV  2Q FURVVH[DPLQDWLRQ FRQYLFWLRQV WKHUH ZDV QR SUHMXGLFH IURP DQ\ LQHIIHFWLYH 0RUUHOODGPLWWHGWKDWKHGLGQRWDVN*DUEHUWRLQGHSHQGHQWO\ DVVLVWDQFHRIFRXQVHODWVHQWHQFLQJ&DUWHUILOHGREMHFWLRQVWR GHVFULEHWKHLQGLYLGXDOVSULRUWRVKRZLQJKLPWKHVXVSHFWVj WKH PDJLVWUDWH MXGJHjV UHSRUW DQG UHFRPPHQGDWLRQ DQG SKRWRVDQGWKDW*DUEHUFRXOGQRWGHVFULEHWKHFORWKLQJZRUQ VXEPLWWHGDEULHILQVXSSRUWRIWKRVHREMHFWLRQV E\WKHWKUHHSHUVRQVVKRZQLQWKHP ,Q sDQXDU\  &DUWHU ILOHG D WKLUG SRVWFRQYLFWLRQ *DUEHUWHVWLILHGDWWKHVXSSUHVVLRQKHDULQJWKDWKHZRUNHG SHWLWLRQIRUUHOLHIIURPMXGJPHQWLQWKHVWDWHFRXUWV2Q$SULO DW WKH UHVW VWRS LQ )HEUXDU\ RI  DV D FDUHWDNHU DQG   WKH IHGHUDO PDJLVWUDWH MXGJH ILOHG D UHSRUW DQG PDLQWHQDQFHPDQ*DUEHUZDVXQDEOHWRUHFDOOKRZORQJKH UHFRPPHQGDWLRQFRQFOXGLQJWKDWWKHFODLPVRILQHIIHFWLYHQHVV KDGREVHUYHGWKHWZRPHQKHLGHQWLILHGDV3ULFHDQG&DUWHU RIFRXQVHOVKRXOGEHGLVPLVVHG%HFDXVH&DUWHUjVWKLUGSRVW DQGZKHQSUHVVHGE\WKHFRXUWJXHVVHGWKDWWKH\ZHUHDWWKH FRQYLFWLRQSHWLWLRQLQVWDWHFRXUWZDVVWLOOSHQGLQJWKHGLVWULFW UHVWVWRSIRUDWOHDVWDQKRXU*DUEHUFRXOGQRWUHFDOOZKDWWKH FRXUWGLVPLVVHGWKHIHGHUDOKDEHDVFDVHIRUIDLOXUHWRH[KDXVW PHQZHUHZHDULQJQRUFRXOGKHVSHFLI\ZKLFKRIWKHWZRJRW VWDWH UHPHGLHV  7KH 7HQQHVVHH 6XSUHPH &RXUW XOWLPDWHO\ LQWR WKH WUXFN ZLWK /LOH  2Q FURVVH[DPLQDWLRQ *DUEHU DIILUPHGWKHGHQLDORIUHOLHIRQ&DUWHUjVWKLUGVWDWHSHWLWLRQ UHLWHUDWHGWKDWKHFRXOGQRWEHPRUHVSHFLILFDERXWWKHGDWH 6HH&DUWHUY6WDWH6:G 7HQQ 2Q0D\ ZKHQKHVDZWKHWKUHHPHQDWWKHUHVWVWRSRWKHUWKDQWKDWmLW WKLV&RXUWILOHGDSHUFXULDPRSLQLRQYDFDWLQJWKH ZDV\HWFRROZHDWKHUl$WWKHWLPH*DUEHUZDVLQVLGHWKHUHVW GLVWULFWFRXUWjVRUGHUDQGUHPDQGHGWKHFDVHIRUGHWHUPLQDWLRQ VWRS OREE\ DQG YLHZHG WKH PHQ WKURXJK LWV JODVV ZLQGRZV RI&DUWHUjVFODLPVRQWKHPHULWV6HH&DUWHUY%HOO1R ZKLOHFOHDQLQJWKHOREE\6KHOOFRQILUPHGWKDW*DUEHUZDV :/ WK&LU0D\  QRWVKRZQDPXJERRNRUSKRWRVRIDQ\RQHRWKHUWKDQ3ULFH &DUWHUDQG/LOH 2Q sDQXDU\   WKH GLVWULFW FRXUW HQWHUHG DQ RUGHU DGRSWLQJ DQG DSSURYLQJ WKH PDJLVWUDWH MXGJHjV UHSRUW DQG 7KH'XH3URFHVV&ODXVHSURKLELWVWKHXVHRILGHQWLILFDWLRQV UHFRPPHQGDWLRQ VWDWLQJ DGGLWLRQDO ILQGLQJV DQG GHQ\LQJ ZKLFK XQGHU WKH WRWDOLW\ RI WKH FLUFXPVWDQFHV DUH &DUWHUjVFODLPVUHJDUGLQJLQHIIHFWLYHQHVVRIFRXQVHO,QLWV LPSHUPLVVLEO\VXJJHVWLYHDQGSUHVHQWDQXQDFFHSWDEOHULVNRI 0HPRUDQGXP DFFRPSDQ\LQJ WKH RUGHU WKH GLVWULFW FRXUW LUUHSDUDEOHPLVLGHQWLILFDWLRQ6HH0DQVRQY%UDWKZDLWH IRXQGWKDWWULDOFRXQVHOjVSHUIRUPDQFHZDVGHILFLHQWLQWKHLU 86  1HLOY%LJJHUV86  m$ IDLOXUH WR LQYHVWLJDWH GLVFRYHU DQG SUHVHQW PLWLJDWLQJ FRQYLFWLRQ EDVHG RQ LGHQWLILFDWLRQ WHVWLPRQ\ IROORZLQJ HYLGHQFH DW WKH VHQWHQFLQJ KHDULQJ  +RZHYHU WKH GLVWULFW SUHWULDOLGHQWLILFDWLRQYLRODWHVWKHGHIHQGDQWjVFRQVWLWXWLRQDO FRXUWZHQWRQWRILQGWKDWKDGVXFKHYLGHQFHEHHQDGPLWWHG ULJKW WR GXH SURFHVV ZKHQHYHU WKH SUHWULDO LGHQWLILFDWLRQ LW ZRXOG KDYH RSHQHG WKH GRRU WR XQOLPLWHG EDG FKDUDFWHU HYLGHQFHDQGWKHUHIRUHZRXOGQRWKDYHPDGHDGLIIHUHQFHLQ WKHRXWFRPHRIWKHVHQWHQFLQJKHDULQJ7KHGLVWULFWFRXUWDOVR  JUDQWHG D FHUWLILFDWH RI SUREDEOH FDXVH  2Q )HEUXDU\  5HVSRQGHQWV DVVHUW WKDW *DUEHU WHVWLILHG WKDW ZKHQ KH ILUVW VSRNH &DUWHUILOHGWKLVWLPHO\DSSHDO ZLWK WKH LQYHVWLJDWRUV DQG ORRNHG DW WKH SKRWRJUDSKV KH GLG QRW NQRZ WKDW WKH\ ZHUH LQYHVWLJDWLQJ D PXUGHU EXW RQO\ WKDW WKH\ ZHUH FKHFNLQJ mDERXW VRPHWKLQJ WKDW KDSSHQHG DW WKH UHVW DUHDl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jV LQFRXUW IDFWXDOILQGLQJVDFFRUGLQJWKHPDSUHVXPSWLRQRIFRUUHFWQHVV LGHQWLILFDWLRQ VKRXOG KDYH EHHQ VXSSUHVVHG  7KH 6WDWH WKDWWKHSHWLWLRQHUPD\UHEXWRQO\ZLWKFOHDUDQGFRQYLQFLQJ FRQWHQGV WKDW LQ OLJKW RI WKH WRWDOLW\ RI WKH FLUFXPVWDQFHV HYLGHQFH6HHLG+RZHYHUWKDWSUHVXPSWLRQRQO\DSSOLHV VXSSRUWLQJWKHUHOLDELOLW\RI*DUEHUjVLGHQWLILFDWLRQ&DUWHUjV WREDVLFSULPDU\IDFWVDQGQRWWRPL[HGTXHVWLRQVRIODZDQG FRQVWLWXWLRQDOULJKWVZHUHQRWLPSLQJHG2QGLUHFWDSSHDOWKH IDFW,G  :H UHYLHZ D PL[HG TXHVWLRQ RI ODZ DQG IDFWGH 7HQQHVVHH 6XSUHPH &RXUW FRQFOXGHG WKDW WKH SURFHGXUH QRYR6HH5LFNPDQY%HOO)G WK&LU VDWLVILHGWKHGXHSURFHVVDQDO\VLVRI1HLOY%LJJHUV86     6HH&DUWHU6:GDW7KHFRXUW IRXQG WKDW HYHQ DVVXPLQJ WKDW WKH LGHQWLILFDWLRQ SURFHGXUH $VDIHGHUDOFRXUWUHYLHZLQJDVWDWHFULPLQDOMXGJPHQWZH XVHG E\ 7HQQHVVHH SROLFH RIILFHUV ZDV VXJJHVWLYH mWKH GRQRWFRQVLGHUDVWDWHFRXUWFRQFOXVLRQWKDWFRXQVHOUHQGHUHG SURFHGXUH GLG QRW JLYH ULVH WR D VXEVWDQWLDO OLNHOLKRRG RI HIIHFWLYHDVVLVWDQFHWREHDILQGLQJRIIDFWELQGLQJRQXV6HH LUUHSDUDEOHPLVLGHQWLILFDWLRQDQGWKDWXQGHUWKHWRWDOLW\RIWKH 6WULFNODQG Y :DVKLQJWRQ  86     FLUFXPVWDQFHV WKH LQFRXUW LGHQWLILFDWLRQ ZDV UHOLDEOH DQG m,QHIIHFWLYHQHVV LV QRW D TXHVWLRQ RI µEDVLF SULPDU\ RU LQGHSHQGHQW RI DQ\ SUHYLRXV VXVSHFW LGHQWLILFDWLRQl   KLVWRULFDOIDF>W@jl,G FLWDWLRQVRPLWWHG :HUHFRJQL]HWKDW 6:GDW7KHGLVWULFWFRXUWDOVRUHMHFWHG&DUWHUjVFODLP WKH6XSUHPH&RXUWKDVIRXQGWKDWmERWKWKHSHUIRUPDQFHDQG $FFHSWLQJWKH6XSUHPH&RXUWRI7HQQHVVHHjVIDFWXDOILQGLQJV SUHMXGLFHFRPSRQHQWVRIWKHLQHIIHFWLYHQHVVLQTXLU\DUHPL[HG WKHGLVWULFWFRXUWKHOGWKDWWKHSKRWRLGHQWLILFDWLRQSURFHGXUH TXHVWLRQV RI ODZ DQG IDFWl  ,G  $ FODLP RI LQHIIHFWLYH XVHGZLWK*DUEHUGLGQRWXQGHUPLQHWKHLQGHSHQGHQFHDQG DVVLVWDQFHRIFRXQVHOSUHVHQWVDPL[HGTXHVWLRQRIODZDQG UHOLDELOLW\RIKLVVXEVHTXHQWLQFRXUWLGHQWLILFDWLRQRI&DUWHU IDFW WKHUHIRUH ERWK WKH VWDWH FRXUW DQG GLVWULFW FRXUW DQGWKHUHIRUHGLGQRWHQFURDFKRQ&DUWHUjVGXHSURFHVVULJKWV GHWHUPLQDWLRQVDUHVXEMHFWWRGHQRYRUHYLHZE\WKLVFRXUW 6HH5LFNPDQ)GDW6LPVY/LYHVD\)G ,QWKLVFDVHDKHDULQJRQ&DUWHUjVPRWLRQWRVXSSUHVVWKH  WK&LU $OOHJDWLRQVRIYLRODWLRQVRI%UDG\ *DUEHULGHQWLILFDWLRQZDVKHOGRQ1RYHPEHU$WWKH Y0DU\ODQG86  SUHVHQWPL[HGTXHVWLRQVRI KHDULQJ 7HQQHVVHH %XUHDX RI ,QYHVWLJDWLRQ $JHQW 5LFN ODZDQGIDFWZKLFKWKLV&RXUWUHYLHZVGHQRYR6HH1RUULVY 0RUUHOO7RP6KHOORIWKH'LVWULFW$WWRUQH\*HQHUDOjV2IILFH 6FKRWWHQ)G WK&LU 8QLWHG6WDWHVY DQG*DUEHUWHVWLILHG0RUUHOOVWDWHGWKDWKHDQG6KHOOILUVW 3KLOOLS)G WK&LU  LQWHUYLHZHG*DUEHUVRPHILYHPRQWKVDIWHU/LOHjVDEGXFWLRQ DQG PXUGHU  $W WKDW LQLWLDO LQWHUYLHZ 0RUUHOO DQG 6KHOO :H DSSO\ WKHVH VWDQGDUGV LQ OLJKW RI WKH IDFW WKDW &DUWHU VKRZHG*DUEHUWHQSKRWRJUDSKVRI3ULFH&DUWHU/LOH&DUWHUjV ILOHGKLVSHWLWLRQIRUKDEHDVUHYLHZSULRUWRWKHHQDFWPHQWRI &KHYUROHW&KHYHWWHDQG/LOHjV*0&SLFNXS*DUEHUZDVWROG WKH$QWLWHUURULVPDQG(IIHFWLYH'HDWK3HQDOW\$FW3XE/1R 6WDW   m$('3$l 6HH/LQGKY 0XUSK\86  :KLOHZHVWLOOGHIHUWRWKH VWDWHFRXUWVj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jVYHUGLFW 7RHVWDEOLVKDYLRODWLRQRIWKH6L[WK$PHQGPHQWULJKWWR 7KH 6XSUHPH &RXUW KDV LQGLFDWHG WKDW m>W@R UHQGHU D HIIHFWLYHDVVLVWDQFHRIFRXQVHODGHIHQGDQWPXVWGHPRQVWUDWH GHIHQGDQWHOLJLEOHIRUWKHGHDWKSHQDOW\WKHWULHURIIDFW WKDWFRXQVHOjVUHSUHVHQWDWLRQIHOOEHORZDQREMHFWLYHVWDQGDUG PXVW FRQYLFW WKH GHIHQGDQW RI PXUGHU DQG ILQG RQH RIUHDVRQDEOHQHVVDQGWKDWWKHGHIHQGDQWZDVSUHMXGLFHGE\ µDJJUDYDWLQJ FLUFXPVWDQFHj RU LWV HTXLYDOHQW  DW HLWKHU WKH WKH LQHIIHFWLYH DVVLVWDQFH RI FRXQVHO  6HH 6WULFNODQG Y JXLOWRUSHQDOW\SKDVHl7XLODHSDY&DOLIRUQLD86 :DVKLQJWRQ  86      5HSUHVHQWDWLRQ LV   VHH/RZHQILHOGY3KHOSV86 GHILFLHQWZKHQmFRXQVHOPDGHHUURUVVRVHULRXVWKDWFRXQVHO     0RUHRYHU WKH HOHPHQWV RI WKH DJJUDYDWLQJ ZDVQRWIXQFWLRQLQJDVWKHµFRXQVHOjJXDUDQWHHGWKHGHIHQGDQW FLUFXPVWDQFHmPD\EHFRQWDLQHGLQWKHGHILQLWLRQRIWKHFULPH E\WKH6L[WK$PHQGPHQWl86DW,QFRQVLGHULQJ RULQDVHSDUDWHVHQWHQFLQJIDFWRU RUERWK l7XLODHSD WKHVHFRQGmSUHMXGLFHlIDFWRUWKH6WULFNODQG&RXUWQRWHGWKDW 86DWVHH/RZHQILHOG86DW7KXVLIWKH HYHQSURIHVVLRQDOO\XQUHDVRQDEOHHUURUVmGRQRWZDUUDQW MXU\ LV LQVWUXFWHG RQ WKH VWDWXWRU\ HOHPHQWV RI XQGHUO\LQJ VHWWLQJ DVLGH WKH MXGJPHQW RI D FULPLQDO SURFHHGLQJ LI WKH FULPHVSHUWDLQLQJWRDJJUDYDWLQJFLUFXPVWDQFHVWKHUHLVQR HUURU>V@ KDG QR HIIHFW RQ WKH MXGJPHQWl  ,G DW  FRQVWLWXWLRQDOGLIIHUHQFHZKHWKHUWKHLQVWUXFWLRQVDUHJLYHQDW 0RUHRYHU m>W@KH GHIHQGDQW PXVW VKRZ WKDW WKHUH LV D WKHJXLOWSKDVHRUWKHVHQWHQFLQJSKDVH:HDUHDZDUHRIQR UHDVRQDEOHSUREDELOLW\WKDWEXWIRUFRXQVHOjVXQSURIHVVLRQDO DXWKRULW\VWDWLQJWKDWWKH(LJKWK$PHQGPHQWUHTXLUHVWKHWULDO HUURUVWKHUHVXOWRIWKHSURFHHGLQJZRXOGKDYHEHHQGLIIHUHQW FRXUWWRUHVWDWHWKHHOHPHQWVRIXQGHUO\LQJIHORQLHVDGYDQFHG $ UHDVRQDEOH SUREDELOLW\ LV D SUREDELOLW\ VXIILFLHQW WR DVDJJUDYDWLQJFLUFXPVWDQFHVDWWKHVHQWHQFLQJSKDVHZKHUH XQGHUPLQHFRQILGHQFHLQWKHRXWFRPHl,GDW:H WKHVDPHMXU\UHPDLQVLPSDQHOHGDQGWKHVHQWHQFLQJSKDVHVR QRWH WKDW WKH 6XSUHPH &RXUW KDV GHWHUPLQHG WKDW LWV ODWHU FORVHO\IROORZVWKHJXLOWSKDVHRIWKHWULDO GHFLVLRQ LQ /RFNKDUW Y )UHWZHOO  86    mGR>HV@ QRW MXVWLI\ D GHSDUWXUH IURP D VWUDLJKWIRUZDUG 8SRQFORVHUHYLHZ&DUWHUjVDUJXPHQWZRXOGFRQVWLWXWHD DSSOLFDWLRQ RI 6WULFNODQG ZKHQ FRXQVHOjV LQHIIHFWLYHQHVV QHZ UXOH RI (LJKWK $PHQGPHQW ODZ  $ QHZ UXOH RI GHSULYHVWKHGHIHQGDQWRIDVXEVWDQWLYHRUSURFHGXUDOULJKWWR FRQVWLWXWLRQDOODZVKRXOGQRWEHDSSOLHGRQFROODWHUDOUHYLHZ ZKLFKWKHODZHQWLWOHVKLPl:LOOLDPV6&WDW LQDIHGHUDOKDEHDVFRUSXVFDVHXQOHVVWRGRVRZRXOGVDWLVI\ 7KLV&RXUWKDVUHJXODUO\DSSOLHGWKH6WULFNODQGVWDQGDUGVLQ WKHQDUURZH[FHSWLRQVRIGHFULPLQDOL]LQJDFODVVRIFRQGXFW KDEHDVFRUSXVFDVHV6HHHJ5LFNPDQ)GDW RU SURKLELW LQIOLFWLRQ RI FDSLWDO SXQLVKPHQW RQ D SDUWLFXODU *URVHFORVHY%HOO)G WK&LU  FODVV RI SHUVRQV RU GHYLVLQJ D QHZ UXOH ZKLFK  LV D mZDWHUVKHG UXOH RI FULPLQDO SURFHGXUH LPSOLFDWLQJ WKH &DUWHUDUJXHVWKDWKLVWULDOFRXQVHOZHUHLQHIIHFWLYHLQWZR IXQGDPHQWDO IDLUQHVV DQG DFFXUDF\ RI WKH FULPLQDO ZD\VE\IDLOLQJWRLQYHVWLJDWHKLVEDFNJURXQGIRUPLWLJDWLQJ SURFHHGLQJl  6DIIOH Y 3DUNV  86    HYLGHQFH DQG E\ FRQVHTXHQWO\ IDLOLQJ WR LQWURGXFH DW WKH  1RQHRIWKHVHH[FHSWLRQVDSSO\KHUH$FFRUGLQJO\ VHQWHQFLQJ KHDULQJ WKH PLWLJDWLQJ HYLGHQFH ZKLFK SURSHU LQYHVWLJDWLRQZRXOGKDYHGLVFRYHUHG&DUWHUPDLQWDLQVWKDW  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  KLVFRXQVHOjVIDLOXUHWRGLVFRYHUDQGSUHVHQWVXFKPLWLJDWLQJ 9 HYLGHQFH DW VHQWHQFLQJ ZDV XQUHDVRQDEOH JLYHQ WKDW WKH SUHVHQWDWLRQRIPLWLJDWLQJIDFWRUVZRXOGKDYHKXPDQL]HGKLP &DUWHUDUJXHVWKDWWKHWULDOFRXUWIDLOHGWRUHLQVWUXFWWKHMXU\ EHIRUHWKHMXU\VXFKWKDWDWOHDVWRQHMXURUFRXOGKDYHIRXQG DW WKH VHQWHQFLQJ SKDVH DV WR WKH VWDWXWRU\ HOHPHQWV RI WKH KHGLGQRWGHVHUYHWKHGHDWKSHQDOW\ IHORQ\ RIIHQVHV UHOLHG XSRQ WR HVWDEOLVK WKH IHORQ\ PXUGHU DJJUDYDWLQJ FLUFXPVWDQFHV DVVHUWLQJ WKDW WKH WULDO FRXUWjV 8QGHU7HQQHVVHHODZDWWKHWLPHRI&DUWHUjVWULDOQRGHDWK IDLOXUHWRUHSHDWDWWKHVHQWHQFLQJSKDVHLQVWUXFWLRQVJLYHQOHVV SHQDOW\FRXOGEHLPSRVHGDEVHQWDQXQDQLPRXVILQGLQJWKDW WKDQWZHQW\IRXUKRXUVHDUOLHUDWWKHJXLOWSKDVHZDVVXFKD RQH RI WKH IROORZLQJ VWDWXWRU\ DJJUDYDWLQJ FLUFXPVWDQFHV IXQGDPHQWDOHUURUWKDWLWFDQQRWEHKDUPOHVV7KH6WDWHQRWHV H[LVWHGWKHPXUGHUZDVFRPPLWWHGDJDLQVWDSHUVRQOHVVWKDQ WKDW &DUWHU GRHV QRW SRLQW WR DQ\ DXWKRULW\ VXSSRUWLQJ DQ WZHOYH\HDUVRIDJHWKHGHIHQGDQWZDVSUHYLRXVO\FRQYLFWHG (LJKWK $PHQGPHQW UHTXLUHPHQW WKDW WKH WULDO FRXUW DW WKH RIRQHRUPRUHIHORQLHVZKLFKLQYROYHGWKHXVHRUWKUHDWRI VHQWHQFLQJSKDVHUHLWHUDWHLQVWUXFWLRQVDOUHDG\JLYHQ WR WKH YLROHQFH WKH GHIHQGDQW NQRZLQJO\ FUHDWHG D JUHDW ULVN RI MXU\ GHDWKWRWZRRUPRUHSHUVRQVRWKHUWKDQWKHYLFWLPGXULQJKLV DFW RI PXUGHU WKH GHIHQGDQW FRPPLWWHG WKH PXUGHU IRU 7KH WULDO FRXUW FKDUJHG WKH MXU\ DV WR WKH HOHPHQWV RI UHPXQHUDWLRQWKHPXUGHUZDVHVSHFLDOO\KHLQRXVDWURFLRXV NLGQDSSLQJUREEHU\DQGODUFHQ\DVXQGHUO\LQJIHORQLHVDQG RUFUXHOLQWKDWLWLQYROYHGWRUWXUHRUGHSUDYLW\RIPLQGWKH GLGVRODWHRQWKHDIWHUQRRQRI1RYHPEHUMXVWEHIRUH PXUGHU ZDV FRPPLWWHG IRU WKH SXUSRVH RI DYRLGLQJ WKHMXU\EHJDQGHOLEHUDWLRQVRQWKHJXLOWSKDVH7KHQH[WGD\ LQWHUIHULQJZLWKRUSUHYHQWLQJDODZIXODUUHVWRUSURVHFXWLRQ WKH FRXUW FRQGXFWHG WKH VHQWHQFLQJ SKDVH DQG WKH MXU\ RIWKHGHIHQGDQWRUDQRWKHUWKHPXUGHUZDVFRPPLWWHGZKLOH UHWXUQHG LWV YHUGLFW DW  DP ILQGLQJ DV RQH RI WKH WKHGHIHQGDQWZDVHQJDJHGLQFRPPLWWLQJDQRWKHUIHORQ\WKH DJJUDYDWLQJFLUFXPVWDQFHVWKDWmWKHPXUGHUZDVFRPPLWWHG PXUGHU ZDV FRPPLWWHG E\ WKH GHIHQGDQW ZKLOH KH ZDV LQ ZKLOHWKHGHIHQGDQWZDVHQJDJHGLQFRPPLWWLQJODUFHQ\DQG ODZIXOFXVWRG\RUGXULQJKLVHVFDSHIURPODZIXOFXVWRG\WKH NLGQDSSLQJl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j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jV VHQWHQFLQJm7KLVGHPRQVWUDWHVWKDWWKHMXU\KDGFOHDUO\LQ FRQGXFW RU FRQVHQWHG WR WKH DFW WKH GHIHQGDQW UHDVRQDEO\ PLQGWKHHOHPHQWVQHFHVVDU\WRFRQYLFWRIWKHFULPHRIWKH EHOLHYHGWRKDYHPRUDOMXVWLILFDWLRQIRUKLVFRQGXFWGHIHQGDQW IHORQ\RIUREEHU\DQGTXLWHSURSHUO\GHFOLQHGWRLQFOXGHLWl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jV IDLOXUH WR WKHSK\VLFLDQGLGQRWHYHQH[DPLQH&DUWHUDQGWKDWKHPDGH LQYHVWLJDWHGLVFRYHUDQGSUHVHQWPLWLJDWLQJHYLGHQFHLQWKH QR FRPPHQW DERXW &DUWHUj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jVIDLOXUHWRGLVFORVHVXFK LQIRUPDWLRQGRHVQRWYLRODWH%UDG\6HH0XOOLQV)GDW ,Q&DUWHUjVHYLGHQWLDU\KHDULQJEHIRUHWKH0DJLVWUDWHsXGJH  &ODUN  )G DW   (YHQ DVVXPLQJ WKDW WKH KH SUHVHQWHG HYLGHQFH RI PLWLJDWLQJ FLUFXPVWDQFHV WKDW KH PHGLFDOHQWU\WRZKLFK&DUWHUUHIHUVLVSRWHQWLDOO\PLWLJDWLQJ DOOHJHGKLVWULDOFRXQVHOVKRXOGKDYHSUHVHQWHGDWVHQWHQFLQJ LQIRUPDWLRQKHLVQRWHQWLWOHGWRUHOLHI$VFDQEHVHHQIURP LQFOXGLQJ DVVHUWLRQV RI LOOHJLWLPDF\ H[WUHPH FKLOGKRRG WKHQXUVHjVQRWHVFRUUHVSRQGLQJWRWKHSK\VLFLDQjVRUGHULQ SRYHUW\DQGQHJOHFWIDPLO\YLROHQFHDQGLQVWDELOLW\ GXULQJ TXHVWLRQ &DUWHU ZDV HVVHQWLDOO\ VHOIUHIHUUHG WR WKH SULVRQ FKLOGKRRG SRRU HGXFDWLRQ PHQWDO GLVDELOLW\ DQG GLVRUGHU PHGLFDOSHUVRQQHO,WFDQQRWEHHUURUIRUWKHSURVHFXWLRQWR PLOLWDU\KLVWRU\DQGSRVLWLYHUHODWLRQVKLSVZLWKVWHSFKLOGUHQ IDLOWRGLVFORVH&DUWHUjVRZQNQRZLQJDFWLRQV DGXOWIDPLO\DQGIULHQGV:HVXPPDUL]HWKLVHYLGHQFHKHUH 7KHUHFRUGVKRZVWKDW&DUWHUKDGUHTXHVWHGVRPHWKLQJWR KHOSKLPVOHHS+HDSSHDUHGYHU\QHUYRXVZKLFKWKHQXUVH RQGXW\DWWULEXWHGWRWKHIDFWWKDW&DUWHUm>K@DVUHWXUQHGIURP FRXUW UHFHLYHGPRUHWLPHl7KHQXUVHFRQWDFWHG'U&DVWHU  ZKRSUHVFULEHGWKDW&DUWHUEHJLYHQDVHGDWLYHEHIRUHEHGDQG 3HWLWLRQHUjV H[WHQVLYH FULPLQDO UHFRUG ZKLFK LQFOXGHV ERWK VWDWH DQG DVUHTXLUHGHYHU\IRXUWRVL[KRXUVDQGUHFRPPHQGHGWUDQVIHU IHGHUDO FRQYLFWLRQV FRQWDLQV WKH IROORZLQJ EXUJODU\ DQG ODUFHQ\   WRDPHQWDOKHDOWKIDFLOLW\([DPLQDWLRQRIWKHSK\VLFLDQjV ILUVW DQG WKLUG GHJUHH EXUJODU\   PDLO WKHIW   WKLUG GHJUHH EXUJODU\ DWWHPSW WR SDVV D IRUJHG LQVWUXPHQW HVFDSH DQG ODUFHQ\ IURP RUGHUUHYHDOVWKDW'U&DVWHUQHYHUVDZ&DUWHUKHVSRNHWRWKH WKH SHUVRQ   WKUHH FRXQWV RI DUPHG UREEHU\ DQG RQH FRXQW RI DVVDXOW QXUVHRYHUWKHWHOHSKRQH&DUWHUQHYHUVXEPLWWHGHYLGHQFH ZLWK LQWHQW WR FRPPLW DUPHG UREEHU\   WKDWDUHFRPPHQGHGWUDQVIHUHYHUDFWXDOO\WRRNSODFHDQGLI 7ULDO FRXQVHO ZHUH DOVR IDPLOLDU ZLWK 3HWLWLRQHUjV RWKHU DFWV RI LWRFFXUUHGZKDWILQGLQJVZHUHUHQGHUHGIURPDQ\UHVXOWLQJ PLVFRQGXFW ZKLFK KDG QRW UHVXOWHG LQ FULPLQDO FKDUJHV 5HVSRQGHQWV HYDOXDWLRQV  :H ILQG QR HUURU WKHUHIRUH  LQ WKH GLVWULFW SRLQW WR FODLPV WKDW KH SK\VLFDOO\ DVVDXOWHG KLV IRUPHU ZLYHV VWUXFN KLV VWHSGDXJKWHU VWDEEHG D IHOORZ LQPDWH LQ D GLVSXWH RYHU D WULYLDO PDWWHU FRXUWjVDQDO\VLVRIWKLVFODLP ZKLOH LQFDUFHUDWHG DZDLWLQJ WULDO RQ WKH FXUUHQW PXUGHU FKDUJH DQG DWWDFNHG 3ULFH GXULQJ D EUHDN LQ DQRWKHU WULDO LQ ZKLFK 3ULFH ZDV DOVR WHVWLI\LQJ DJDLQVW KLP  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  7KH HYLGHQFH VKRZV WKDW &DUWHU JUHZ XS LQ D SRRU DQG GLVDJUHHGFRQFOXGLQJWKDWHYHQWVWKDWRFFXUUHGGXULQJ3ULFHjV WURXEOHGKRXVHKROG&DUWHUZDVWKHVHFRQGRI0DGJH&DUWHUjV PLOLWDU\WHQXUHLQWKH VZHUHWRRUHPRWHLQWLPHWREHRI QLQHFKLOGUHQ7KHVHFKLOGUHQKDGILYHGLIIHUHQWIDWKHUVRQO\ DQ\SUREDWLYHYDOXHUHJDUGLQJ3ULFHjVFUHGLELOLW\LQ6HH RQHRIZKRP0DGJH&DUWHUPDUULHG2QHVLEOLQJGLHGLQD 7HQQ5(YLG E DQG E )HG5(YLG E DQG KRXVH ILUH VHW E\ RQH RI 0DGJHjV OLYHLQ ER\IULHQGV  7ZR  E 6WDWHY0RUJDQ6:G 7HQQ  RWKHUVGLHGIURPELUWKGHIHFWVDVLQIDQWV$OORIWKHUHPDLQLQJ VL[KDYHFULPLQDOUHFRUGV&DUWHUjVPRWKHUDQGVLVWHUZHUH 3ULFHZDVRQDFWLYHPLOLWDU\GXW\IURPWR,Q ERWK KRVSLWDOL]HG LQ PHQWDO KHDOWK LQVWLWXWLRQV  +LV 3ULFHjV GHSRVLWLRQ KH DGPLWWHG WR UHFHLYLQJ GLVFLSOLQDU\ JUDQGIDWKHU IDWKHU PRWKHU VWHSIDWKHU DQG EURWKHU DOO DFWLRQIRUVWDWHVLGHDEVHQFHVZLWKRXWOHDYHDQGIRUGULQNLQJ VXIIHUHG IURP DOFRKROLVP WKRXJK &DUWHU KDV QHYHU DEXVHG HSLVRGHV  1RQH RI WKH RIIHQVHV IRU ZKLFK 3ULFH PD\ KDYH DOFRKRORUXVHGLOOHJDOGUXJV&DUWHUjVIDPLO\ZDVH[WUHPHO\ EHHQGLVFLSOLQHGLQWKH$UP\PHHWWKHFULWHULDRI7HQQHVVHHjV SRRUGXULQJKLVFKLOGKRRGZLWKQRHOHFWULFLW\UXQQLQJZDWHU HYLGHQFHUXOHVUHJDUGLQJLPSHDFKPHQWRIZLWQHVVHVE\SULRU RULQGRRUSOXPELQJ7KHIDPLO\GLHWFRQVLVWHGSULPDULO\RI EDGDFWVRUFRQYLFWLRQVWKH\DUHQRWSUREDWLYHRIWUXWKIXOQHVV ZKLWH EHDQV DQG FRUQEUHDG DQG WKH FKLOGUHQ ZRUH XVHG RUXQWUXWKIXOQHVVQRUGLGWKH\RFFXUZLWKLQWKHSUHFHGLQJWHQ FORWKLQJGRQDWHGE\WKHZHOIDUHGHSDUWPHQW7KHIDPLO\QHYHU \HDUV6HH0RUJDQ6:GDW DGRSWLQJ)HG5 FHOHEUDWHG WKH FKLOGUHQjV ELUWKGD\V &KULVWPDV RU RWKHU (YLG E DQG E  KROLGD\V 'XULQJ WULDO &DUWHUjV FRXQVHO XVHG 3ULFHjV VL[ IHORQ\ $OOWKHHYLGHQFHGHPRQVWUDWHVWKDW&DUWHUjVFKLOGKRRGKRPH FRQYLFWLRQV IRU IRUJHU\ ODUFHQ\ DQG DVVDXOW ZLWK LQWHQW WR ZDV YLROHQW DQG XQVWDEOH  7KHUH ZHUH IUHTXHQW ILVWILJKWV FRPPLWPXUGHUWRLPSHDFK3ULFHjVFUHGLELOLW\6HH&DUWHU EHWZHHQ IDPLO\ PHPEHUV DQG YLVLWRUV H[FHVVLYH GULQNLQJ 6:GDW,QOLJKWRIWKDWLPSHDFKPHQWHYLGHQFH JDPEOLQJ DQG FRQVLVWHQW PDQXIDFWXUH DQG VDOH RI ZH GR QRW VHH KRZ HYLGHQFH RI XQVSHFLILHG \HDUROG mKRPHEUHZl  &DUWHUjV PRWKHU ZDV EHDWHQ E\ KHU IDWKHU PLOLWDU\GLVFLSOLQHZRXOGKDYHEHHQPDWHULDOWR&DUWHUjVFDVH &DUWHUjV JUDQGIDWKHU IRU EHFRPLQJ SUHJQDQW ZLWK RQH RI :HILQGWKDWWKHGLVWULFWFRXUWFRUUHFWO\FRQFOXGHGWKDW3ULFHjV &DUWHUjVKDOIVLEOLQJV&DUWHUjVIDWKHUZKRPKLVPRWKHUQHYHU PLOLWDU\GLVFLSOLQDU\UHFRUGZRXOGQRWKDYHSURYLGHGPDWHULDO PDUULHGSK\VLFDOO\DVVDXOWHGKHU&DUWHUjVVLVWHUVWDWHVWKDW LPSHDFKPHQWHYLGHQFHIRU&DUWHUEHFDXVHRILWVVWDOHQHVVDQG WKH IDPLO\ QHYHU OLYHG LQ RQH SODFH PRUH WKDQ WZR \HDUV LWVODFNRISUREDWLYHYDOXH PRYLQJRQWRDYRLGWKHZHOIDUHGHSDUWPHQWDQGVD\VLWZDV QRWXQFRPPRQIRUWKHLUPRWKHUWRGULQNXSKHUZHOIDUHFKHFN &DUWHU DOVR FODLPV WKDW WKH SURVHFXWLRQ VKRXOG KDYH DQGWKHFKLOGUHQWRJRKXQJU\ GLVFORVHG WKDW 3ULFH ZDV LQVWLWXWLRQDOL]HG DW (DVWHUQ 6WDWH 3V\FKLDWULF +RVSLWDO LQ   7KH GLVWULFW FRXUW UHMHFWHG &DUWHUjV PRWKHU ZDV DUUHVWHG RQ VHYHUDO RFFDVLRQV IRU &DUWHUjVFODLPILQGLQJLWWRRUHPRWHLQWLPHIURPWKH SXEOLF LQWR[LFDWLRQ PDQXIDFWXUH RI PRRQVKLQH DQG FKLOG PXUGHUDQGWULDOWREHPDWHULDORQDQ\LVVXH&DUWHUGRHVQRW QHJOHFW$WWKHDJHRIWKUHH&DUWHUDQGKLVWKHQILYH\HDUROG GHPRQVWUDWH WKDW WKH LQIRUPDWLRQ FRQFHUQLQJ 3ULFHjV VLVWHUZHUHDEDQGRQHGE\WKHLUPRWKHUIRUPRUHWKDQDZHHN KRVSLWDOL]DWLRQ DW (DVWHUQ 6WDWH ZDV LQ HLWKHU DFWXDO RU VXEVLVWLQJRQPLONVWROHQIURPWKHQHLJKERUVjSRUFKHV7KH FRQVWUXFWLYHSRVVHVVLRQRIWKHSURVHFXWLRQSULRUWRRUGXULQJ ZHOIDUHGHSDUWPHQWSODFHGWKHWZRLQDFKLOGUHQjVKRPHIRU WKHWULDO&DUWHUKDVQRWDOOHJHGRUVKRZQDQ\IDFWVLQGLFDWLQJ VHYHUDOZHHNV7KH\VXEVHTXHQWO\OLYHGZLWKWKHLUDXQWXQWLO WKDWWKHSURVHFXWLQJDWWRUQH\NQHZRUVKRXOGKDYHNQRZQWKDW WKHLUPRWKHUUHJDLQHGFXVWRG\D\HDUODWHU VXFKLQIRUPDWLRQH[LVWHG%HFDXVH&DUWHUIDLOHGWRVKRZWKDW  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  ZDVDYDLODEOHWRKLPIURPDQRWKHUVRXUFH6HH&RHY%HOO &DUWHUVXIIHUHGVHULRXVO\IURPFKLOGKRRGUKHXPDWLFIHYHU )G WK&LU 8QLWHG6WDWHVY&ODUN +HZDVZKLSSHGDQGEHDWHQDVDQLQIDQWIRUFU\LQJIURPWKH )G WK&LU  LOOQHVV  &DUWHU DOVR VXIIHUHG IUHTXHQW VHULRXV EUHDWKLQJ SUREOHPV DV D FKLOG WKDW OHG WR QXPHURXV WULSV WR WKH :HQRWHWKDWLWLVFOHDUWKDW&DUWHUjVFRXQVHOZDVDZDUHWKDW HPHUJHQF\URRP7KHUHFRUGVVKRZERWKFKLOGKRRGDQGDGXOW 3ULFHZDVWHVWLI\LQJLQH[FKDQJHIRUDSOHDDJUHHPHQWZKLFK KHDGLQMXULHVIURPDFFLGHQWVDQGILJKWV&DUWHUZDVGLDJQRVHG ZRXOG DOORZ 3ULFH WR SOHDG JXLOW\ WR WKH OHVVHU LQFOXGHG ZLWKGLDEHWHVLQZKHQKHDSSDUHQWO\ZDVEURXJKWWRWKH RIIHQVHRIVHFRQGGHJUHHPXUGHULQH[FKDQJHIRUDVHQWHQFH KRVSLWDOLQDFRPD RI WKLUW\ ILYH \HDUV ZLWK HOLJLELOLW\ IRU SDUROH LQ IRXUWHHQ \HDUV  7KH UHFRUG DOVR VKRZV WKDW 3ULFH KDG UHDFKHG DQ &DUWHUUHFHLYHGOLPLWHGVFKRROLQJDWEHVW7KHUHFRUGVRI DJUHHPHQW ZLWK *UDLQJHU &RXQW\ DXWKRULWLHV E\ ZKLFK KH WKH+DPEOHQ&RXQW\VFKRROV\VWHPVKRZRQO\YHU\VSRUDGLF ZRXOGUHFHLYHDWKLUW\ILYH\HDUVHQWHQFHIRUDUPHGUREEHU\ DWWHQGDQFHIRUDIHZPRQWKVLQWKHVHFRQGDQGVL[WKJUDGHV DQGWKHUHZDVDGLVWLQFWSRVVLELOLW\WKLVVHQWHQFHZRXOGUXQ DQGQRRWKHUHGXFDWLRQDOUHFRUGVZHUHORFDWHG7KHUHLVVRPH FRQFXUUHQWO\ ZLWK KLV VHQWHQFH LQ WKH /LOH PXUGHU  7KLV HYLGHQFHWRVKRZWKDW&DUWHUDWWHQGHGDSRUWLRQRIWKHQLQWK LQIRUPDWLRQ ZDV EURXJKW EHIRUH WKH MXU\ GXULQJ FURVV JUDGHZKHQWKHIDPLO\OLYHGLQ,QGLDQD&DUWHUj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j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j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jV SULRUWR1RYHPEHUZKHQ&DUWHUZDVUHFRPPHQGHGIRU PLOLWDU\GLVFLSOLQDU\UHFRUGIURPWKHV7KHGLVWULFWFRXUW  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  SV\FKLDWULFRUSV\FKRORJLFDOFRXQVHOLQJUHFHLYHGPHGLFDWLRQ LQIRUPDWLRQ ZDV RI QR XVH WR KLP UHODWHG WR LQFLGHQWV WRR IRU KLV mQHUYHVl H[KLELWHG SDUDQRLG LGHDV RU EHKDYLRU RU UHPRWHWREHPDWHULDORUZDVRITXHVWLRQDEOHUHOLDELOLW\7KH VXIIHUHGKDOOXFLQDWLRQVRUGHOXVLRQV GLVWULFWFRXUWDOVRIRXQGWKDW3ULFHKDGWHVWLILHGWKDWQRVXFK DJUHHPHQW KDG EHHQ PDGH DQG WKDW WKH RWKHU DVSHFWV RI &DUWHUZDVPDUULHGWZLFHSULRUWRDQGKDGVWHSFKLOGUHQ 3ULFHjVSOHDEDUJDLQZHUHSUHVHQWHGWRWKHMXU\ IURP HDFK PDUULDJH  +LV VWHSFKLOGUHQ VWDWH WKDW WKHLU UHODWLRQVKLSV ZLWK KLP ZHUH SRVLWLYH  ,Q DGGLWLRQ WR KLV m>6@XSSUHVVLRQE\WKHSURVHFXWLRQRIHYLGHQFHIDYRUDEOHWR VWHSFKLOGUHQ&DUWHUKDGJRRGUHODWLRQVKLSVZLWKVHYHUDORIWKH DQ DFFXVHG XSRQ UHTXHVW YLRODWHV GXH SURFHVV ZKHUH WKH RWKHUFKLOGUHQLQKLVOLIH7KHVHLQFOXGHKLVQLHFH7HUULsLQNV HYLGHQFH LV PDWHULDO HLWKHU WR JXLOW RU WR SXQLVKPHQW ZKRZDV\HDUVROGLQ0VsLQNVWHVWLILHGWKDW&DUWHU LUUHVSHFWLYHRIWKHJRRGIDLWKRUEDGIDLWKRIWKHSURVHFXWLRQl UHSODFHGWKHORFNVRQWKHLUGRRUDQGERXJKWJURFHULHVIRUKHU %UDG\86DWm>(@YLGHQFHLVPDWHULDORQO\LIWKHUH DIWHUQHLJKERUVEURNHLQWRKHUPRWKHUjVDSDUWPHQWDQGVWROH LV D UHDVRQDEOH SUREDELOLW\ WKDW KDG WKH HYLGHQFH EHHQ WKHLUIRRG+HDOVRERXJKWFORWKHVDQGVKRHVIRU0VsLQNV GLVFORVHGWRWKHGHIHQVHWKHUHVXOWRIWKHSURFHHGLQJZRXOG DQGVHQWKHUFDUGVDQGSKRWRV KDYH EHHQ GLIIHUHQW  $ µUHDVRQDEOH SUREDELOLW\j LV D SUREDELOLW\ VXIILFLHQW WR XQGHUPLQH FRQILGHQFH LQ WKH &DUWHUVHUYHGIRUDSHULRGRIDSSUR[LPDWHO\VL[PRQWKVLQ RXWFRPHl8QLWHG6WDWHVY%DJOH\86   WKH ,QGLDQD 1DWLRQDO *XDUG LQ   +H ZDV JLYHQ DQ 8QLWHG6WDWHVY0XOOLQV)G WK&LU  KRQRUDEOH GLVFKDUJH GXH DW OHDVW LQ SDUW WR KLV ORZ (YHQDEVHQWDVSHFLILF%UDG\UHTXHVWWKHSURVHFXWLRQPXVW LQWHOOLJHQFHDQGLQDSWLWXGHIRUWKHVHUYLFH GLVFORVH H[FXOSDWRU\ HYLGHQFH WKDW ZKHQ YLHZHG LQ WKH FRQWH[WRIWKHHQWLUHUHFRUGmFUHDWHVDUHDVRQDEOHGRXEWWKDW $WWKHHYLGHQWLDU\KHDULQJ&DUWHUSUHVHQWHGWKLVHYLGHQFH GLGQRWRWKHUZLVHH[LVWl8QLWHG6WDWHVY$JXUV86 WR VKRZ PLWLJDWLQJ FLUFXPVWDQFHV ZKLFK KH DOOHJHG ZRXOG   m>,@WLVZHOOVHWWOHGWKDWWKLVGLVFORVXUHREOLJDWLRQ KDYHLQIOXHQFHGWKHMXU\WRJUDQWDOHVVHUSHQDOW\,QOLJKWRI LQFOXGHV HYLGHQFH WKDW FRXOG EH XVHG WR LPSHDFK WKH WKLV HYLGHQFH ZH ORRN WR WKH ODZ RQ WKH LQWURGXFWLRQ RI FUHGLELOLW\RIDZLWQHVVl 6FKOHGZLW]Y8QLWHG6WDWHV PLWLJDWLQJIDFWRUVDWVHQWHQFLQJLQFDSLWDOFDVHV7KH(LJKWK )G WK&LU  DQG)RXUWHHQWK$PHQGPHQWVWRWKH8QLWHG6WDWHV&RQVWLWXWLRQ GLFWDWH WKDW WKH VHQWHQFHU LQ D FDSLWDO FDVH PD\ QRW EH 7R HVWDEOLVK D YLRODWLRQ RI %UDG\ WKH SHWLWLRQHU KDV WKH SUHFOXGHGIURPFRQVLGHULQJDQ\UHOHYDQWFLUFXPVWDQFHDVD EXUGHQ RI HVWDEOLVKLQJ WKDW WKH SURVHFXWRU VXSSUHVVHG PLWLJDWLQJIDFWRU6HH0LOOVY0DU\ODQG86 HYLGHQFHWKDWVXFKHYLGHQFHZDVIDYRUDEOHWRWKHGHIHQVH    m7KH &RQVWLWXWLRQ UHTXLUHV 6WDWHV WR DOORZ DQGWKDWWKHVXSSUHVVHGHYLGHQFHZDVPDWHULDO6HH0RRUHY FRQVLGHUDWLRQRIPLWLJDWLQJHYLGHQFHLQFDSLWDOFDVHV$Q\ ,OOLQRLV  86      7KH LQTXLU\ LV EDUULHUWRVXFKFRQVLGHUDWLRQPXVWWKHUHIRUHIDOOl0F.R\Y REMHFWLYHLQGHSHQGHQWRIWKHLQWHQWRIWKHSURVHFXWRUV6HH 1RUWK&DUROLQD86  m:KDWHYHUWKH %UDG\86DW FDXVH    WKH >VHQWHQFHU V@ IDLOXUH WR FRQVLGHU DOO RI WKH PLWLJDWLQJHYLGHQFHULVNVHUURQHRXVLPSRVLWLRQRIWKHGHDWK 7KLV&RXUWKDVUHFRJQL]HGWKDWm%UDG\LVFRQFHUQHGRQO\ VHQWHQFHl,G0LWLJDWLQJHYLGHQFHLQFOXGHVmDQ\DVSHFWRID ZLWKFDVHVLQZKLFKWKHJRYHUQPHQWSRVVHVVHVLQIRUPDWLRQ GHIHQGDQWjVFKDUDFWHURUUHFRUGDQGDQ\RIWKHFLUFXPVWDQFHV ZKLFKWKHGHIHQGDQWGRHVQRWl6HH0XOOLQV)GDW RI WKH RIIHQVH WKDW WKH GHIHQGDQW SURIIHUV DV D EDVLV IRU D )XUWKHUWKHUHLVQR%UDG\YLRODWLRQLIWKHGHIHQGDQWNQHZRU VHQWHQFHOHVVWKDQGHDWKl/RFNHWWY2KLR86 VKRXOGKDYHNQRZQWKHHVVHQWLDOIDFWVSHUPLWWLQJKLPWRWDNH    )XUWKHU VWDWHV FDQQRW LQIULQJH XSRQ WKH FRXUWjV DGYDQWDJHRIWKHLQIRUPDWLRQLQTXHVWLRQRULIWKHLQIRUPDWLRQ  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  UHDVRQDEOH SUREDELOLW\ WKDW D MXU\ ZRXOG KDYH UHWXUQHG WKH FRQVLGHUDWLRQRIDQ\UHOHYDQWFLUFXPVWDQFHWKDWPD\GHWHUWKH VDPHVHQWHQFHKDGWKHHYLGHQFHEHHQLQWURGXFHG LPSRVLWLRQRIWKHGHDWKSHQDOW\6HH0F&OHVN\Y.HPS 86  7KH6XSUHPH&RXUWUHFHQWO\QRWHGWKDW 7KHVHQWHQFLQJSKDVHRIWKHWULDOXQGHU7HQQHVVHHODZLV mLWLVXQGLVSXWHGWKDW>WKHSHWLWLRQHU@KDGDULJKWoLQGHHGD REYLRXVO\DFULWLFDOVWDJHRIWKHFULPLQDOSURFHHGLQJZKLFK FRQVWLWXWLRQDOO\SURWHFWHGULJKWoWRSURYLGHWKHMXU\ZLWKWKH FDQUHVXOWLQWKHVHQWHQFHRIGHDWKDQGGLGVRLQWKLVFDVHSHWLWLRQHUjV@IDYRUl OHJDOUHVHDUFKRUREWDLQDQGUHYLHZDQ\UHFRUGVLQFOXGLQJ  6&W DW   7KH &RXUW IRXQG WKDW mWKH JUDSKLF WKRVHUHJDUGLQJ>SHWLWLRQHUjV@HPSOR\PHQWHGXFDWLRQPHQWDO GHVFULSWLRQRI>SHWLWLRQHUjV@FKLOGKRRGILOOHGZLWKDEXVHDQG KHDOWK VRFLDO VHUYLFHV FRQWDFWV PLOLWDU\ VHUYLFH RU SULVRQ SULYDWLRQ RU WKH UHDOLW\ WKDW KH ZDV µERUGHUOLQH PHQWDOO\ H[SHULHQFHl  ,G  )XUWKHU WULDO FRXQVHOjV WULDO SUHSDUDWLRQ UHWDUGHGjPLJKWZHOOKDYHLQIOXHQFHGWKHMXU\jVDSSUDLVDORI mFRQVLVWHG VROHO\ RI LQWHUYLHZV KH FRQGXFWHG ZLWK >WKH KLV PRUDO FXOSDELOLW\l  ,G DW  FLWLQJ %R\GH Y SHWLWLRQHU@l  ,G  $OWKRXJK ZH QRWH WKDW XQOLNH 5LFNPDQ &DOLIRUQLD86  7KH6XSUHPH&RXUW WKHUHZDVQRKRVWLOLW\RQWKHSDUWRIWULDOFRXQVHOLQWKLVFDVH FRQFOXGHG WKDW m>P@LWLJDWLQJ HYLGHQFH XQUHODWHG WR ZHILQGWKDW5LFNPDQVWDQGVIRUWKHUHOHYDQWSURSRVLWLRQWKDW GDQJHURXVQHVVPD\DOWHUWKHMXU\jVVHOHFWLRQRISHQDOW\HYHQ WKHFRPSOHWHIDLOXUHWRLQYHVWLJDWHOHWDORQHSUHVHQWH[LVWLQJ LI LW GRHV QRW XQGHUPLQH RU UHEXW WKH SURVHFXWLRQjV GHDWK PLWLJDWLQJ HYLGHQFH LV EHORZ DQ REMHFWLYH VWDQGDUG RI HOLJLELOLW\FDVHl,GDW UHDVRQDEOHUHSUHVHQWDWLRQDQGPD\LQIDFWEHVRVHYHUHDVWR SHUPLWXVWRLQIHUSUHMXGLFH /LNH:LOOLDPV&DUWHUKDVSUHVHQWHGVXEVWDQWLDOHYLGHQFHRI DFKLOGKRRGLQZKLFKDEXVHQHJOHFWDQGKXQJHUZHUHQRUPDO ,Q*URVHFORVHY%HOOWKLV&RXUWFRQVLGHUHGD7HQQHVVHH ,QOLJKWRIWKHTXDQWLW\RIPLWLJDWLRQHYLGHQFHDYDLODEOHDQG FDVH LQ ZKLFK WULDO FRXQVHO mDOPRVW HQWLUHO\ IDLOHG WR WKHOLPLWVGLVFXVVHGDERYHRQZKDWWKH6WDWHFRXOGLQWURGXFH LQYHVWLJDWHWKHFDVHKHQHYHUIRUH[DPSOHLQWHUYLHZHGWKH LQ UHEXWWDO ZH ILQG RXUVHOYHV XQSHUVXDGHG WKDW WKHUH LV D FULPHLQFLGHQWZLWQHVVHVRUDQ\IDPLO\PHPEHUVl)G   WK &LU    ,Q *URVHFORVH WULDO FRXQVHO IDLOHGWRSUHVHQWPLWLJDWLQJHYLGHQFHGXULQJWKHVHQWHQFLQJ VWDJHRIWKHSURFHHGLQJV$PRQJRWKHUWKLQJVWULDOFRXQVHO  :H QRWH WKDW 6FRWW SUHGDWHG WKH 6XSUHPH &RXUWjV GHFLVLRQ LQ IDLOHGWRSUHVHQWWKHGHIHQGDQWjVPLOLWDU\UHFRUGUHOLJLRXVDQG :LOOLDPV E\ DSSUR[LPDWHO\ WZR ZHHNV $V :LOOLDPV FRQWDLQV VXEVWDQWLDO YROXQWHHU DFWLYLWLHV RU H[SHUWV ZKR FRXOG WHVWLI\ DERXW ODQJXDJH FRQFHUQLQJ WKH JHQHUDOO\ SUHMXGLFLDO QDWXUH RI WULDO FRXQVHOjV VRFLRORJLFDORUSV\FKRORJLFDOIDFWRUV6HHLG8QGHUWKHVH IDLOXUH WR UHVHDUFK DQG SUHVHQW PLWLJDWLQJ HYLGHQFH LQ GHDWK SHQDOW\ VHQWHQFLQJ ZH ILQG WKDW :LOOLDPV PD\ OLPLW 6FRWW WR WKH QDUURZ IDFWV RI FLUFXPVWDQFHV WKH &RXUW IRXQG WKH UHSUHVHQWDWLRQ ZDV D IHGHUDO FRXUW FRQWHPSODWLQJ D KDEHDV SHWLWLRQ DIWHU D VWDWH FRXUW KDV REMHFWLYHO\XQUHDVRQDEOH6HHLGDW FRQGXFWHG DQ HYLGHQWLDU\ KHDULQJ DQG PDGH D ILQGLQJ RI IDFW WKDW KDG PLWLJDWLQJ HYLGHQFH EHHQ LQWURGXFHG WKH GHIHQGDQWjV UHFHQW FULPLQDO KLVWRU\ ZRXOG KDYH EHHQ SUHVHQWHG WR WKH MXU\ LQ UHEXWWDO  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  SRVLWLYHUHODWLRQVKLSVZLWKFKLOGUHQ0HUHO\EHFDXVH&DUWHU ,Q$XVWLQY%HOO)G WK&LU WKLV KDV D OHQJWK\ FULPLQDO UHFRUG KDUGO\ VHUYHV WR mH[SODLQ RU &RXUWKHOGWKDWWKHIDLOXUHRIWULDOFRXQVHOmWRLQYHVWLJDWHDQG FRQWURYHUWlWKHVHIDFWRUV&R]]ROLQR6:GDW1R SUHVHQWDQ\PLWLJDWLQJHYLGHQFHGXULQJWKHVHQWHQFLQJSKDVH UHDVRQ KDV EHHQ VKRZQ WKDW D 7HQQHVVHH WULDO FRXUW ZRXOG VR XQGHUPLQHG WKH DGYHUVDULDO SURFHVV WKDW >GHIHQGDQWjV@ DOORZVXFKHYLGHQFHLQDFDSLWDOVHQWHQFLQJKHDULQJ+HQFH GHDWK VHQWHQFH ZDV QRW UHOLDEOHl  5HO\LQJ RQ WKLV &RXUWjV WKH GLVWULFW FRXUWjV FRQFOXVLRQ LJQRUHG WKH SURSHU VFRSH RI KROGLQJLQ*OHQQY7DWH)G  WK&LU UHEXWWDO HYLGHQFH XQGHU 7HQQHVVHH ODZ  ,Q GRLQJ VR WKH   WKDW FRXQVHO SURYLGHG LQHIIHFWLYH DVVLVWDQFH ZKHUH GLVWULFWFRXUWHUURQHRXVO\FRQFOXGHGWKDW&DUWHUKDGQRWVKRZQ LQIRUPDWLRQ ZDV QRW SUHVHQWHG WR WKH MXU\ DW VHQWHQFLQJ KH KDG VXIIHUHG DQ\ SUHMXGLFH IURP WKH PLVVLQJ PLWLJDWLRQ EHFDXVH FRXQVHO PDGH OLWWOH DWWHPSW WR SUHSDUH IRU WKH HYLGHQFH VHQWHQFLQJ SKDVH WKH $XVWLQ FRXUW IRXQG WKDW mJLYHQ WKDW VHYHUDO RI >GHIHQGDQWjV@ UHODWLYHV IULHQGV GHDWK SHQDOW\ :H GLVWLQJXLVK WKLV &RXUWjV UHFHQW GHFLVLRQ LQ 6FRWW Y H[SHUWVDQGDPLQLVWHUZHUHDYDLODEOHDQGZLOOLQJWRWHVWLI\RQ 0LWFKHOO)G WK&LU RQWKLVSRLQW,Q6FRWW KLVEHKDOIlIDLOXUHWRSUHVHQWDQ\PLWLJDWLQJHYLGHQFHmGRHV WKLV &RXUW GHWHUPLQHG WKDW WKH GHIHQGDQW FRXOG QRW VKRZ QRW UHIOHFW D VWUDWHJLF GHFLVLRQ EXW UDWKHU DQ DEGLFDWLRQ RI SUHMXGLFH XQGHU 6WULFNODQG ZKHQ mWKH PLWLJDWLQJ DGYRFDF\l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l)G EDFNJURXQGRUFKLOGKRRGWKDWWKHUHZHUHQRLQGLFDWLRQVEDVHG DW,Q6FRWWKRZHYHUXQOLNHWKLVFDVHWKH2KLR&RXUWRI RQ&DUWHUjVGHPHDQRUWRVXSSRUWDQDUJXPHQWEDVHGRQPHQWDO &RPPRQ3OHDVKDGFRQGXFWHGDQHYLGHQWLDU\KHDULQJRQWKH GHIHFW DQG WKDW  PHPEHUV RI &DUWHUjV IDPLO\ ZHUH LVVXHRIWKHLQHIIHFWLYHQHVVRIFRXQVHOLQIDLOLQJWRSUHVHQW XQFRRSHUDWLYH&RXQVHOFODLPHGWKDWWKH\ZHUHDZDUHWKDW PLWLJDWLQJHYLGHQFHDQGKDGFRQFOXGHGWKDWmKDG>GHIHQGDQW@ &DUWHU VXIIHUHG IURP GLDEHWHV EXW EDVHG RQ SHUVRQDO FKRVHQWRKDYHDSUHVHQWHQFHLQYHVWLJDWLRQUHSRUWSUHSDUHGRU H[SHULHQFHZLWKRWKHUGLDEHWLFVWKH\VDZQRWKLQJDERXWWKDW KDGWKHIDPLO\PHPEHUVWHVWLILHGWKHMXU\ZRXOGKDYHOHDUQHG FRQGLWLRQ WKDW ZRXOG EH D FUHGLEOH PLWLJDWLQJ IDFWRU IRU RI >GHIHQGDQWjV@ H[WHQVLYH FULPLQDO KLVWRU\l  ,G DW  &DUWHU7KH\DOVRVWDWHGWKDW&DUWHUGLGQRWZDQWWRWHVWLI\DW 8SRQ KDEHDV UHYLHZ WKLV &RXUW JDYH GHIHUHQFH WR WKLV WKHVHQWHQFLQJKHDULQJ$VDUHVXOWFRXQVHOGLGQRWIXUWKHU FRQFOXVLRQDQGWKHUHIRUHKHOGWKDWWKHGHIHQGDQWFRXOGQRW LQYHVWLJDWHDQ\QRQVWDWXWRU\PLWLJDWLQJIDFWRUV HVWDEOLVKSUHMXGLFHQRWLQJWKDWmXQOLNHLQ$XVWLQWKHVH ODZ\HUVKDGDFUHGLEOHUHDVRQIRUQRWSUHVHQWLQJWHVWLPRQ\D 7ULDOFRXQVHOWHVWLILHGWKDWWKH\ZHUHQRWDZDUHRIDOOWKH GHVLUHWRNHHS>GHIHQGDQWjV@H[WHQVLYHFULPLQDOKLVWRU\IURP SRWHQWLDOQRQVWDWXWRU\PLWLJDWLQJHYLGHQFHRXWOLQHGDERYH WKHMXU\l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jVVXEVWDQWLDOFULPLQDOUHFRUG SURVHFXWLRQ WR QHJDWLYH HYLGHQFH ZKLFK LV UHOHYDQW WR D DQGRWKHUEDGDFWVDWWKHVHQWHQFLQJSKDVH  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  ,Q KLV VHQWHQFLQJ SKDVH DUJXPHQW %HLHU VWUHVVHG WKDW 7KH FRXUW DOVR KHOG WKDW HYLGHQFH RI SULRU HVFDSH DQG FRXQVHOjV HUURUV VKRXOG QRW EH KHOG DJDLQVW &DUWHU DQG DVVDXOWDQGEDWWHU\FRQYLFWLRQVZHUHUHOHYDQWWRRQHRIWKH SUHVHQWHGDJHQHUDOSOHDIRUPHUF\$OWKRXJKKHDOOXGHGWR DJJUDYDWLQJFLUFXPVWDQFHVRUZDVRWKHUZLVHKDUPOHVV6HHLG 3ULFHjV FUHGLELOLW\ DQG 3ULFHjV SOHD WR D WKLUW\ILYH \HDU 7KHGHIHQGDQWDUJXHGWKDWWKHSURVHFXWLRQLPSURSHUO\DVVHUWHG VHQWHQFHIRUVHFRQGGHJUHHPXUGHUKHGLGQRWVXJJHVWWKDW WKDWWKHMXU\VKRXOGLPSRVHWKHGHDWKSHQDOW\GXHWRWKHULVN WKHVHZHUHQRQVWDWXWRU\PLWLJDWLQJFLUFXPVWDQFHVWKDWVKRXOG WKDWWKHGHIHQGDQWZRXOGNLOOLQSULVRQRUHVFDSHLIJLYHQDOLIH EHZHLJKHGDJDLQVWDQ\DJJUDYDWLQJFLUFXPVWDQFHVIRXQGE\ VHQWHQFH7KH7HQQHVVHH6XSUHPH&RXUWGHWHUPLQHGWKDWDV WKHMXU\QRUGLGKHFRQWHQGWKDWWKH6WDWHKDGIDLOHGWRPHHW mWKH GHIHQVH ZDV PROGHG DURXQG WKH WKHRU\ WKDW D OLIH LWVEXUGHQRISURRIWRHVWDEOLVKDQDJJUDYDWLQJFLUFXPVWDQFH VHQWHQFHZDVDSSURSULDWHEHFDXVHWKHGHIHQGDQWZDVPHQWDOO\ &RXQVHOjVWKHRU\ZDVWKDWHYHQWKRXJKWKHMXU\KDGFRQYLFWHG GLVWXUEHGWRDGHJUHHWKDWLWOHVVHQHGKLVFXOSDELOLW\7KH &DUWHUDWOHDVWLQSDUWRQWKHEDVLVRI3ULFHjVWHVWLPRQ\WKHUH 6WDWHjV DUJXPHQW ZDV LQ GLUHFW UHVSRQVH WR GHIHQGDQWjV UHPDLQHGVXIILFLHQWGRXEWDERXW3ULFHjVFUHGLELOLW\WRSUHYHQW PLWLJDWLQJ WKHRU\ DQG ZDV QRW LPSURSHU XQGHU WKH LPSRVLWLRQRIWKHGHDWKSHQDOW\$WWHPSWLQJWRNHHS&DUWHUjV FLUFXPVWDQFHVRIWKLVFDVHl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jVFORVLQJDUJXPHQWILOOHG DVIRUHFDVWE\WKHGLVWULFWFRXUW7KH6WDWHGLVDJUHHVDVVHUWLQJ RQO\ VL[ SDJHV RI ZULWWHQ WUDQVFULSW ZKLFK UHTXLUHG WKDW%DWHVSHUPLWVWKHSUHVHQWDWLRQE\WKH6WDWHRIHYLGHQFH DSSUR[LPDWHO\VL[DQGRQHKDOIPLQXWHVWRUHDGDORXGPXFK UHOHYDQWWRVSHFLILFGHWHUUHQFHDQGWKHIXWXUHGDQJHURXVQHVV RI LW EDVHG RQ D SOHD WR WKH MXU\ WR QRW KROG WKH HUURUV RI RIWKHGHIHQGDQWLQRUGHUWRUHEXWGHIHQVHWKHRULHVRIOHVVHQHG &DUWHUjV FRXQVHO DJDLQVW &DUWHU DQG D GLVFRXUVH RQ WKH FXOSDELOLW\ GXH WR PHQWDO FRQGLWLRQ DQG XQIRUWXQDWH VRFLDO VDFUHGQHVV RI DOO OLIH LOOXVWUDWHG E\ D VWRU\ RI FRXQVHOjV KLVWRU\ DWWHPSWVWRVDYHEDE\ELUGVZKRIHOORXWRIWKHLUQHVWV :HILQGWKDW%DWHVLVGLVWLQJXLVKDEOH:HUHDG%DWHVDV :KLOHZHXQGHUVWDQGWKHJUHDWEXUGHQVRQDSSRLQWHGWULDO FRQFHUQLQJ D GHIHQVH WKHRU\ RI UHGXFHG FXOSDELOLW\ GXH WR FRXQVHOLQFDSLWDOFDVHVDQGWKHRIWHQOLPLWHGILQDQFLDOVXSSRUW PHQWDOGHIHFWDWWKHWLPHRIWKHRIIHQVH&DUWHUj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jV HYLGHQFH GHPRQVWUDWLQJ IDFWRUVFDQQRWSURSHUO\EHWKDWLQIRUPDWLRQZKLFKGHIHQGDQW &DUWHUjVFULPLQDOKLVWRU\GRHVQRWFRQWURYHUWWKHPLWLJDWLQJ PD\YROXQWHHUFRXQVHOPXVWPDNHVRPHHIIRUWDWLQGHSHQGHQW IDFWRUVSUHVHQWHGDQGLVWKHUHIRUHQRWUHOHYDQW LQYHVWLJDWLRQLQRUGHUWRPDNHDUHDVRQHGLQIRUPHGGHFLVLRQ DVWRWKHLUXWLOLW\:HILQGWKDWUHOXFWDQFHRQ&DUWHUjVSDUWWR &DUWHURIIHUHGHYLGHQFHRIVSHFLILFQRQVWDWXWRU\PLWLJDWLQJ SUHVHQW D PHQWDO KHDOWK GHIHQVH RU WR WHVWLI\ VKRXOG QRW IDFWRUV VXFK DV KLV LOOHJLWLPDF\ IDPLO\ KLVWRU\ OLPLWHG SUHFOXGH FRXQVHOjV LQYHVWLJDWLRQ RI WKHVH SRWHQWLDO IDFWRUV HGXFDWLRQ ORZ DQG GHFOLQLQJ ,4 PHQWDO FRQGLWLRQ DQG  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  ,Q 6WDWH Y %DWHV  6:G  7HQQ   WKH 8QGHUWKH$PHULFDQ%DU$VVRFLDWLRQJXLGHOLQHVIRUDSSRLQWHG 6XSUHPH &RXUW RI 7HQQHVVHH UHYLVLWHG WKH &R]]ROLQR UXOH GHDWK SHQDOW\ GHIHQVH FRXQVHO m>W@KH LQYHVWLJDWLRQ IRU $IWHUEHLQJVHQWHQFHGWRGHDWKIRUPXUGHULQFRQQHFWLRQZLWK SUHSDUDWLRQ RI WKH VHQWHQFLQJ SKDVH VKRXOG EH FRQGXFWHG DFDUWKHIWWKHGHIHQGDQWLQ%DWHVREMHFWHGWRWKHDGPLVVLELOLW\ UHJDUGOHVVRIDQ\LQLWLDODVVHUWLRQE\WKHFOLHQWWKDWPLWLJDWLRQ RIFHUWDLQHYLGHQFHDWVHQWHQFLQJ7KHGHIHQGHQWREMHFWHGWR LVQRWWREHRIIHUHGl$PHULFDQ%DU$VVRFLDWLRQ*XLGHOLQHV WHVWLPRQ\WKDWWKHGHIHQGDQWKDGFDVKHGVRPHRIWKHYLFWLPjV IRUWKH$SSRLQWPHQWDQG3HUIRUPDQFHRI&RXQVHOLQ'HDWK WUDYHOHUVjFKHFNV7KHFRXUWUXOHGWKDWDOWKRXJKWKHHYLGHQFH 3HQDOW\&DVHV†F  :HDJUHHWKHUHIRUHZLWK ZDV LQWURGXFHG GXULQJ WKH JXLOW SKDVH WKH HYLGHQFH ZDV WKHGLVWULFWFRXUWjVFRQFOXVLRQVWKDWGHIHQVHFRXQVHOPDGHQR UHOHYDQWWRVHQWHQFLQJEHFDXVHLWERWKSURYLGHGSURRIRIDQ LQYHVWLJDWLRQ LQWR &DUWHUjV IDPLO\ VRFLDO RU SV\FKRORJLFDO DJJUDYDWLQJFLUFXPVWDQFH UREEHU\RUODUFHQ\LQFRQQHFWLRQ EDFNJURXQG DQG WKDW WKH IDLOXUH WR GR VR FRQVWLWXWHG ZLWKWKHPXUGHU DQGEHFDXVHmHYLGHQFHRI>WKHGHIHQGDQWjV@ UHSUHVHQWDWLRQ DW D OHYHO EHORZ DQ REMHFWLYH VWDQGDUG RI EHKDYLRU VKRUWO\ DIWHU WKH KRPLFLGH ZRXOG KDYH EHHQ UHDVRQDEOHQHVV DGPLVVLEOH LQ UHEXWWDO WR WKH PLWLJDWLQJ HYLGHQFH WKDW GHIHQGDQWZDVVXIIHULQJIURPDPHQWDOGLVHDVHRUGHIHFWRU 7KHVHFRQG6WULFNODQGIDFWRULQVWUXFWVWKLV&RXUWWRFRQVLGHU H[WUHPHRUHPRWLRQDOGLVWUHVVDWWKHWLPHRIWKHRIIHQVHl ZKHWKHU &DUWHU VXIIHUHG DQ\ SUHMXGLFH DV D UHVXOW RI WKH 6:GDW DEVHQFHRIVXFKPLWLJDWLQJIDFWRUVEHLQJH[SODLQHGWRWKHMXU\ 6HH6WULFNODQG86DW&DUWHUPXVWGHPRQVWUDWHWKDW 7KHGHIHQGDQWQH[WREMHFWHGWRWKHWHVWLPRQ\RIDSROLFH mFRXQVHOjVHUURUVZHUHVHULRXVHQRXJKWRGHSULYH>KLP@RID RIILFHU ZKR GHVFULEHG WKH KLJKVSHHG FKDVH SULRU WR WKH SURFHHGLQJWKHUHVXOWRIZKLFKZDVUHOLDEOHl*OHQQY7DWH GHIHQGDQWjVDUUHVW7KHFRXUWIRXQGWKDWVXFKHYLGHQFHZDV )G WK&LU  ILQGLQJSUHMXGLFHWREH DGPLVVLEOHDVmSURRIHVWDEOLVKLQJODUFHQ\RIWKHDXWRPRELOHDV mTXLWH FOHDUl ZKHQ FRXQVHO IDLOHG WR SUHVHQW SHUWLQHQW DQ DJJUDYDWLQJ FLUFXPVWDQFHl  ,G  7KLUG WKH GHIHQGDQW HYLGHQFHRIPHQWDOKLVWRU\DQGPHQWDOFDSDFLW\ 7KHGLVWULFW FKDOOHQJHGWHVWLPRQ\ZKLFKDOOHJHGWKDWZKLOHKHZDVEHLQJ FRXUWFRQFOXGHGWKDW&DUWHUIDLOHGWRVDWLVI\WKLVVHFRQGSURQJ KHOGIROORZLQJDUUHVWKHKDGUHPRYHGSDUWVRIDJDUEDJHFDQ UHDVRQLQJWKDWWKHLQWURGXFWLRQRIPLWLJDWLRQHYLGHQFHE\D DQG KLG WKHP QHDU KLV FHOO DQG KDG WROG D MDLORU WKDW KH FDSLWDOGHIHQGDQWZRXOGRSHQWKHGRRUWRUHEXWWDOHYLGHQFHRI LQWHQGHGWRXVHWKHSDUWVWRNLOODJXDUG7KHFRXUWUXOHGWKDW &DUWHUjVH[WHQVLYHFULPLQDOEDFNJURXQGDQGYLROHQWKLVWRU\ VXFKWHVWLPRQ\ZDVDGPLVVLEOHDWVHQWHQFLQJEHFDXVHLWZDV ZKLFKZRXOGQHJDWHDQ\PLWLJDWLQJIDFWRUVRIIHUHG UHODWHGWRPLWLJDWLQJFLUFXPVWDQFHVUDLVHGE\WKHGHIHQGDQW 7KHFRXUWUHDVRQHGWKDWEHFDXVHWKHmGHIHQGDQWLQWURGXFHG &DUWHU DVVHUWV WKDW QRQH RI WKH SURSRVHG EDG FKDUDFWHU H[SHUWHYLGHQFHDQGLQVWLWXWLRQDOUHFRUGVWRFRQYH\WRWKHMXU\ HYLGHQFH H[SODLQV RU FRQWURYHUWV WKH VSHFLILF QRQVWDWXWRU\ WKDWKHZDVODERULQJXQGHUDSV\FKRORJLFDOFRQGLWLRQZKLFK PLWLJDWLQJFLUFXPVWDQFHVDQGWKHUHIRUHZRXOGQRWKDYHEHHQ FUHDWHG DQ H[WUHPH PHQWDO RU HPRWLRQDO GLVWXUEDQFH DW WKH DGPLVVLEOH WR UHEXW WKH PLVVLQJ PLWLJDWLQJ HYLGHQFH WLPHKHFRPPLWWHGWKHPXUGHUlWKH6WDWHZDVSHUPLWWHGWR 5HVSRQGHQWVFRQWHQGWKDW&DUWHUGLGQRWVXIIHUSUHMXGLFHIURP LQWURGXFH UHEXWWLQJ HYLGHQFH mLQFOXGLQJ SURRI RI EDG WKHGHILFLHQFLHVLQKLVWULDOFRXQVHOjVSHUIRUPDQFHEHFDXVHWKH LQVWLWXWLRQDOEHKDYLRUWRGHPRQVWUDWHWKDWKHZDVDSHUVRQ HYLGHQFHDGGXFHGDWWKHHYLGHQWLDU\KHDULQJLQFOXGHGQHJDWLYH ZKRZRXOGWXUQWRYLROHQFHLQDQHIIRUWWRREWDLQKLVZD\ PDWHULDOWKDWZRXOGKDYHEHHQKDUPIXOUDWKHUWKDQKHOSIXOWR UDWKHUWKDQDSHUVRQZKRFRPPLWWHGYLROHQWDFWVEHFDXVHKH &DUWHUDQGEHFDXVHFURVVH[DPLQDWLRQRQWKHHYLGHQFHZRXOG ZDV XQGHU WKH LQIOXHQFH RI H[WUHPH PHQWDO RU HPRWLRQDO KDYHH[SRVHG&DUWHUjVSDVWFULPHVDQGYLROHQFH GLVWXUEDQFHl,GDW  &DUWHUY%HOOHWDO 1R 1R &DUWHUY%HOOHWDO  )RUPHUVHFWLRQ F RIWKH7HQQHVVHH&RGHSURYLGHV ,GDW7KHUHIRUHXQGHU7HQQHVVHHODZm>H@YLGHQFHLV WKHDSSOLFDEOHVWDQGDUGVIRUWKHDGPLVVLELOLW\RIHYLGHQFHLQ UHOHYDQW WR SXQLVKPHQW RQO\ LI LW LV UHOHYDQW WR D VWDWXWRU\ &DUWHUjVVHQWHQFLQJKHDULQJ,WVWDWHVWKDWmHYLGHQFHPD\EH DJJUDYDWLQJFLUFXPVWDQFHRUWRDPLWLJDWLQJIDFWRUUDLVHGE\ SUHVHQWHGDVWRDQ\PDWWHUWKDWWKHFRXUWGHHPVUHOHYDQWWRWKH WKHGHIHQGDQWl6WDWHY7HDJXH6:G 7HQQ SXQLVKPHQWlDQGPD\LQFOXGHWKDWmHYLGHQFHWHQGLQJWR   UHEXW PLWLJDWLQJ IDFWRUVl  7HQQ &RGH $QQ †  F   QRZ7HQQ&RGH$QQ† F  6XSS  ,Q&R]]ROLQRWKHGHIHQGDQWZDVVHQWHQFHGWRGHDWKIRUWKH 7KH&RGHSHUPLWVWKDWmHYLGHQFHZKLFKWKHFRXUWGHHPVWR PXUGHURIDSROLFHRIILFHULQDVHQWHQFLQJKHDULQJZKHUHWKH KDYH SUREDWLYH YDOXH RQ WKH LVVXH RI SXQLVKPHQW PD\ EH 6WDWHZDVSHUPLWWHGWRLQWURGXFHHYLGHQFHHVWDEOLVKLQJWKDW UHFHLYHG UHJDUGOHVV RI LWV DGPLVVLELOLW\ XQGHU WKH UXOHV RI WKHGHIHQGDQWKDGFRPPLWWHGVHYHUDODUPHGUREEHULHVDIWHUWKH HYLGHQFHlDQGQRWHVWKDWmWKHGHIHQGDQW>PXVWEH@DFFRUGHG PXUGHUEXWEHIRUHKLVFDSWXUHE\SROLFH6:GDW D IDLU RSSRUWXQLW\ WR UHEXW DQ\ KHDUVD\ VWDWHPHQWVl  ,G 5HPDQGLQJ WKH FDVH IRU D QHZ VHQWHQFLQJ KHDULQJ WKH )XUWKHUHYLGHQFHPD\QRWEHLQWURGXFHGDWVHQWHQFLQJmLQ 7HQQHVVHH6XSUHPH&RXUWIRXQGWKDW YLRODWLRQ RI WKH FRQVWLWXWLRQ RI WKH 8QLWHG 6WDWHV RU WKH FRQVWLWXWLRQRI7HQQHVVHHl,G HYLGHQFH RI VXEVHTXHQW FULPHV ZDV QRW DGPLVVLEOH WR HVWDEOLVKDQ\RIWKHDJJUDYDWLQJFLUFXPVWDQFHVIRULW 7KH 7HQQHVVHH 6XSUHPH &RXUW KDV UHMHFWHG DQ LV UHOHYDQW WR QRQH RI WKHP    )URP WKH OLPLWDWLRQV LQWHUSUHWDWLRQ RI †  F  ZKLFK ZRXOG SHUPLW WKH SODFHG RQ WKH XVH RI WKLV HYLGHQFH LQ WKH FRXUWjV LQWURGXFWLRQ RI DQ\ HYLGHQFH UHOHYDQW WR SXQLVKPHQW LQVWUXFWLRQVLWDSSHDUVWKDWWKHWULDOMXGJHSHUPLWWHGLWV UHJDUGOHVV RI WKH HYLGHQFHjV UHOHYDQF\ WR WKH H[LVWHQFH RI LQWURGXFWLRQRQWKHWKHRU\WKDWLWZDVUHOHYDQWWRUHEXW DJJUDYDWLQJ FLUFXPVWDQFHV RU PLWLJDWLQJ IDFWRUV  6HH HYLGHQFH RI PLWLJDWLQJ FLUFXPVWDQFHV WKDW PLJKW EH &R]]ROLQRY6WDWH6:G 7HQQ ,Q DGYDQFHG E\ WKH GHIHQGDQW  ,Q WKLV KH ZDV LQ HUURU &R]]ROLQR WKH FRXUW REVHUYHG WKDW DOWKRXJK m>R@Q LWV IDFH m5HEXWWLQJHYLGHQFHlLVWKDWZKLFKWHQGVWRH[SODLQRU VHFWLRQ F ZRXOGVHHPWRSHUPLWWKHLQWURGXFWLRQRIHYLGHQFH FRQWURYHUWHYLGHQFHSURGXFHGE\DQDGYHUVHSDUW\2QH µUHOHYDQWWRWKHSXQLVKPHQWjLQDGGLWLRQWRWKDWµWHQGLQJWR FDQQRWUHEXWDSURSRVLWLRQWKDWKDVQRWEHHQDGYDQFHG HVWDEOLVKRUUHEXWWKHDJJUDYDWLQJFLUFXPVWDQFHVjRUµWHQGLQJ :KLOH WKLV HUURU DGPLWWHGO\ PLJKW KDYH EHHQ PDGH WR HVWDEOLVK RU UHEXW DQ\ PLWLJDWLQJ IDFWRUV    WKLV KDUPOHVV E\ WKH ODWHU LQWURGXFWLRQ E\ WKH GHIHQGDQW RI LQWHUSUHWDWLRQLVRQHWKDWZHFDQQRWDFFHSWl,GDW HYLGHQFHWRZKLFKWKH6WDWHjVSURRIRIVXEVHTXHQWFULPHV 7KHFRXUWFRQWLQXHGWRVWDWHWKDWXSRQFRQVLGHUDWLRQRIWKH ZDVUHOHYDQWLQUHEXWWDOWKDWGLGQRWRFFXULQWKHLQVWDQW HQWLUHVWDWXWH FDVH7KHGHIHQGDQWjVSURRIZDVOLPLWHGWRDQDWWHPSWWR VKRZ WKH RULJLQ LQ D WURXEOHG FKLOGKRRG RI WKH LWLVFOHDUWKDWWKHRQO\LVVXHVWKDWWKHMXU\PD\SURSHUO\ GHIHQGDQWjV FULPLQDO DFWV  7KLV SURRI ZDV QRW FRQVLGHU LQ UHDFKLQJ D GHFLVLRQ RQ WKH VHQWHQFH WR EH FRQWURYHUWHGE\WKH6WDWHj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jVGHOLEHUDWLRQ SXQLVKPHQW