5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 8QLWHG6WDWHVY.LQJ 1R 3XUVXDQW WR 6L[WK &LUFXLW 5XOH (/(&7521,& &,7$7,21 )(' $SS 3 WK &LU BBBBBBBBBBBBBBBB )LOH 1DPH DS ',66(17 BBBBBBBBBBBBBBBB 81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 '$9,'$1(/621&LUFXLWsXGJHGLVVHQWLQJ,DJUHH BBBBBBBBBBBBBBBBB ZLWK WKH FRXUWjV FRQFOXVLRQ WKDW WKHUH ZDV QR HUURU LQ WKH GHWHUPLQDWLRQ WKDW WKH DIILGDYLW ZDV VXIILFLHQW WR HVWDEOLVK SUREDEOHFDXVHIRUWKHVHDUFKRIWKHSUHPLVHVGHVFULEHGLQWKH ZDUUDQW $V WR WKLV FRXUWj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mFXUWLODJHl)RU)RXUWK $PHQGPHQWSXUSRVHVFRXUWVmKDYHGHILQHGWKHFXUWLODJHDV $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW GLG WKH FRPPRQ ODZ E\ UHIHUHQFH WR WKH IDFWRUV WKDW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW$NURQ GHWHUPLQHZKHWKHUDQLQGLYLGXDOUHDVRQDEO\PD\H[SHFWWKDW 1Rn'DYLG''RZGsU'LVWULFWsXGJH DQ DUHD LPPHGLDWHO\ DGMDFHQW WR WKH KRPH ZLOO UHPDLQ SULYDWHl2OLYHUY8QLWHG6WDWHV86 $UJXHG)HEUXDU\ ,IWKHGHIHQGDQWLQWKHFDVHDWEDUUHDVRQDEO\H[SHFWHGWKDWWKH EDVHPHQW RI KLV GZHOOLQJ XQLW ZRXOG UHPDLQ SULYDWH , DP 'HFLGHGDQG)LOHG$XJXVW DZDUHRIQRSULQFLSOHGEDVLVIRUH[FOXGLQJWKHEDVHPHQWIURP WKHFXUWLODJH %HIRUH1(/621&2/(DQG&/$<&LUFXLWsXGJHV $V SDUW RI WKH FXUWLODJH WKH EDVHPHQW ZDV WR ERUURZ D BBBBBBBBBBBBBBBBB SKUDVHIURP8QLWHG6WDWHVY'XQQ86 mDQ DGMXQFW RI WKH KRXVHl o DQG WKDW LV SUHFLVHO\ KRZ WKH &2816(/ SROLFHWUHDWHGLW,WKLQNWKH\ZHUHULJKWWRGRVRDQG,ZRXOG WKHUHIRUHDIILUPWKHMXGJPHQWHQWHUHGE\WKHGLVWULFWFRXUW $5*8(' sDPHV 5 :LOOLV :,//,6 %/$&.:(// 52*(56&OHYHODQG2KLRIRU$SSHOODQW'DYLG$6LHUOHMD $66,67$1781,7('67$7(6$77251(<&OHYHODQG 2KLRIRU$SSHOOHH21%5,()sDPHV5:LOOLV:,//,6 %/$&.:(// 52*(56&OHYHODQG2KLRIRU$SSHOODQW 'DYLG $ 6LHUOHMD $66,67$17 81,7(' 67$7(6 $77251(<&OHYHODQG2KLRIRU$SSHOOHH 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ &/$<sGHOLYHUHGWKHRSLQLRQRIWKHFRXUW&2/(s )RU WKH IRUHJRLQJ UHDVRQV , UHVSHFWIXOO\ FRQFXU LQ WKH SS GHOLYHUHG D VHSDUDWH FRQFXUULQJ RSLQLRQ MXGJPHQWUHDFKHGE\WKHFRXUW 1(/621sSGHOLYHUHGDVHSDUDWHGLVVHQWLQJRSLQLRQ BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB &/$<&LUFXLWsXGJH'HIHQGDQW.HQQHWK.LQJDSSHDOV IURPWKHMXGJPHQWRIFRQYLFWLRQDQGVHQWHQFHHQWHUHGE\WKH GLVWULFW FRXUW RQ sXQH SXUVXDQW WR 'HIHQGDQWjV FRQGLWLRQDOJXLOW\SOHDWRWZRFRXQWVRISRVVHVVLRQZLWKLQWHQW WRGLVWULEXWHFUDFNFRFDLQHZLWKLQIHHWRIDVFKRRO\DUG LQ YLRODWLRQ RI 86& D DQG ZKHUHLQ 'HIHQGDQWUHVHUYHGWKHULJKWWRFKDOOHQJHWKHGLVWULFWFRXUWjV GHQLDORIKLVPRWLRQWRVXSSUHVVWKHHYLGHQFH)RUWKHUHDVRQV VHW IRUWK EHORZ ZH 5(9(56( WKH GLVWULFW FRXUWjV RUGHU GHQ\LQJ 'HIHQGDQWjV PRWLRQ WR VXSSUHVV WKH HYLGHQFH DQG 9$&$7('HIHQGDQWjVFRQYLFWLRQDQGVHQWHQFH ,%$&.*5281' $ 3URFHGXUDO+LVWRU\ 2Q 1RYHPEHU D IHGHUDO JUDQG MXU\ UHWXUQHG D WKUHHFRXQWLQGLFWPHQWFKDUJLQJ'HIHQGDQWDQGKLVEURWKHU .HZLQ .LQJ LQ &RXQW ZLWK SRVVHVVLRQ ZLWK LQWHQW WR GLVWULEXWH JUDPV RI FRFDLQH EDVH LQ YLRODWLRQ RI 86&D.HZLQZDVQDPHGLQ&RXQWDVKDYLQJ SRVVHVVHGJUDPVRIFRFDLQHEDVHDQG'HIHQGDQWZDV FKDUJHG LQ &RXQW DV KDYLQJ SRVVHVVHG JUDPV RI FRFDLQH EDVH ERWK LQ YLRODWLRQ RI 86& D (DFK RI WKH FRXQWV FDUULHG D FRUUHVSRQGLQJ mVFKRRO\DUG SURYLVLRQlLQDFFRUGDQFHZLWK86& 3ULRU WR WULDO ERWK 'HIHQGDQW DQG .HZLQ ILOHG YDULRXV PRWLRQV WR VXSSUHVV 'HIHQGDQWj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jVWULDOWREHJLQRQsDQXDU\DQG.HZLQjV UHVLGHQWVLQYLWHGJXHVWVDQGSHUKDSVWKHLUODQGORUGDQGKHU WULDOWREHJLQRQ)HEUXDU\ DJHQWV,QGHHGZHKDYHKHOGWKLVWREHVRLQWKHFDVHRID PXOWLXQLW DSDUWPHQW EXLOGLQJ m$ WHQDQW H[SHFWV RWKHU 7KHUHDIWHUWKHGLVWULFWFRXUWVXDVSRQWHUDLVHGWKHLVVXHRI WHQDQWVDQGLQYLWHGJXHVWVWRHQWHULQWKHFRPPRQDUHDVRIWKH ZKHWKHU WKH VHDUFK RI WKH EDVHPHQW RI WKH WZRIDPLO\ EXLOGLQJEXWKHGRHVQRW>H[SHFW@WUHVSDVVHUVl8QLWHG6WDWHV GZHOOLQJZKHUH'HIHQGDQWDQG.HZLQUHVLGHGo(DVW Y&DUULJHU)GWK&LU7KXVXQOLNH WK6WUHHW&OHYHODQG&X\DKRJD&RXQW\2KLRoH[FHHGHG sXGJH&OD\,GRQRWILQGWKHLQVWDQWFDVHWREHVRIDUIURPWKH WKHVFRSHRIWKHVHDUFKZDUUDQW7KH GLVWULFWFRXUWLQYLWHG UXOHRI&DUULJHUWKDWLWUHTXLUHVDGLIIHUHQWDQDO\VLV VXSSOHPHQWDOEULHILQJRQWKHLVVXHDQG'HIHQGDQWDQG.HZLQ VXEVHTXHQWO\ PRYHG WR VXSSUHVV WKH JUDPV RI FRFDLQH )XUWKHU,DPFRQYLQFHGWKDWQRUHDVRQDEOHRIILFHURSHUDWLQJ EDVHVHL]HGIURPWKHEDVHPHQWRIWKHGZHOOLQJRQWKHEDVLV ZLWKLQWKHERXQGVRIWKLVFRXUWjVMXULVGLFWLRQZRXOGKDYHEHHQ WKDW WKH VHDUFK RI WKH EDVHPHQW H[FHHGHG WKH VFRSH RI WKH XQDZDUHWKDWKHQHHGHGDZDUUDQWGHVFULELQJZLWKSDUWLFXODULW\ ZDUUDQW 2Q sDQXDU\ ZLWKRXW FRQGXFWLQJ DQ WKHEDVHPHQWRIDPXOWLXQLWEXLOGLQJEHIRUHKHVHDUFKHGLW HYLGHQWLDU\KHDULQJWKHGLVWULFWFRXUWJUDQWHGWKHPRWLRQWR 6HHLGDW1RUDP,SHUVXDGHGE\WKHQRWLRQSURSRVHGE\ VXSSUHVVWKHFRFDLQHVHL]HGIURPWKHEDVHPHQW WKH GLVVHQW WKDW WKH EDVHPHQW LQ D GXSOH[ LV SDUW RI DQ LQGLYLGXDOXQLWjVmFXUWLODJHl7KHFDVHVUDLVHGE\WKHGLVVHQW 7KHJRYHUQPHQWILOHGDQLQWHUORFXWRU\DSSHDOWRWKLV&RXUW LQ VXSSRUW RI WKLV WKHRU\ FRQFHUQ WKH UHODWLRQVKLS RI IUHH RQ sDQXDU\ FKDOOHQJLQJ WKH GLVWULFW FRXUWjV RUGHU VWDQGLQJKRPHVWRVXUURXQGLQJODQGQRWWKDWRILQGLYLGXDO JUDQWLQJWKHPRWLRQWRVXSSUHVVWKHFRFDLQHVHL]HGIURPWKH DSDUWPHQWXQLWVWRDFRPPRQEDVHPHQWZKLFKPD\RUPD\ EDVHPHQW7KHJRYHUQPHQWDOVRPRYHGWRVWD\RUFRQWLQXH QRWEHmLPPHGLDWHO\DGMDFHQWlWRDSDUWLFXODUXQLW6HH2OLYHU 'HIHQGDQWjVWULDOSHQGLQJUHYLHZRIWKHVXSSUHVVLRQRUGHUE\ Y8QLWHG6WDWHV86VHHDOVR8QLWHG WKLV&RXUW7KHGLVWULFWFRXUWJUDQWHGWKHFRQWLQXDQFHDQG 6WDWHVY'XQQ86GHVFULELQJFXUWLODJHLQWKDW UHVFKHGXOHG.HZLQjVWULDOWREHJLQRQsDQXDU\WKH FDVHDVmDVSHFLILFDUHDRIODQGLPPHGLDWHO\DGMDFHQWWRWKH GDWHXSRQZKLFK'HIHQGDQWjVWULDOZDVRULJLQDOO\VHWWREHJLQ KRXVH WKDW LV UHDGLO\ LGHQWLILDEOH DV SDUW DQG SDUFHO RI WKH 7KHJRYHUQPHQWWKHUHIRUHILOHGDQHPHUJHQF\PRWLRQWRVWD\ KRXVHl .HZLQjVWULDOZLWKWKLV&RXUWZKLFKZDVGHQLHG2QsDQXDU\ .HZLQPRYHGIRUDFRQWLQXDQFHZKLFKWKHGLVWULFWFRXUW 7KHJRYHUQPHQWDJHQWVZKRVHDUFKHG.LQJjVDSDUWPHQWVHW GHQLHG RXWWRVHDUFKRQO\RQHXQLWRIDmWKUHHVWRU\GXSOH[RUGRXEOH IDPLO\ KRPHl ,I WKH\ ZDQWHG WR VHDUFK WKH VWUXFWXUHjV 7KH FDVH SURFHHGHG WR WULDO DV VFKHGXOHG DQG RQ VHSDUDWHFRPPRQEDVHPHQWWKH\VKRXOGKDYHGHPRQVWUDWHG sDQXDU\ WKH MXU\ IRXQG .HZLQ JXLOW\ 7KH SUREDEOHFDXVHDQGREWDLQHGDZDUUDQWVSHFLILFDOO\SHUPLWWLQJ JRYHUQPHQWVRXJKWWRKDYHWKHGLVWULFWFRXUWHQKDQFH.HZLQjV WKHPWRGRVR VHQWHQFHSXUVXDQWWR86&D$EDVHGRQKLV SULRU2KLRVWDWHFRXUWFRQYLFWLRQIRUIHORQ\GUXJWUDIILFNLQJ 7KH GLVWULFW FRXUW UHIXVHG WR HQKDQFH .HZLQjV VHQWHQFH KRZHYHUEHFDXVHWKHJRYHUQPHQWIDLOHGWRFRPSO\ZLWKWKH 2QH RI WKH )%, DJHQWV ZKR H[HFXWHG WKH VHDUFK RI WKH .LQJ QRWLFH SURYLVLRQV RI 86& D .HZLQ ZDV UHVLGHQFH GHVFULEHG WKH VWUXFWXUH LQ ZKLFK .LQJ GZHOOHG DV mD WKUHHVWRU\ GXSOH[ RU GRXEOHIDPLO\ KRPHl 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ VHQWHQFHGWRPRQWKVRILPSULVRQPHQWWREHIROORZHGE\ BBBBBBBBBBBBBBBBBBBB \HDUVRIVXSHUYLVHGUHOHDVH &21&855(1&( .HZLQDSSHDOHGWKHGHQLDORIKLVPRWLRQIRUDFRQWLQXDQFH BBBBBBBBBBBBBBBBBBBB DQG UDLVHG DQ LQHIIHFWLYH DVVLVWDQFH RI FRXQVHO FODLP .HZLQjV DSSHDO ZDV FRQVROLGDWHG ZLWK WKH JRYHUQPHQWjV 5 *8< &2/( s5 &LUFXLW sXGJH FRQFXUULQJ , DJUHH DSSHDORIWKHGLVWULFWFRXUWjVVXSSUHVVLRQRUGHUDQGWKHFRXUWjV ZLWKWKHFRXUWjVFRQFOXVLRQWKDWWKHGLVWULFWFRXUWGLGQRWHUU UHIXVDO WR HQKDQFH .HZLQjV VHQWHQFH 5HJDUGLQJ WKH LQGHWHUPLQLQJWKDWWKHDIILGDYLWLQWKLVFDVHZDVVXIILFLHQWWR JRYHUQPHQWjVDSSHDORIWKHVXSSUHVVLRQRUGHUWKLV&RXUWKHOG HVWDEOLVKSUREDEOHFDXVHIRUWKHZDUUDQWWRLVVXH6HHVXSUD WKDW WKH RUGHU EH YDFDWHG DQG UHPDQGHG WKH LVVXH WR WKH 3DUW,,$)XUWKHU,FRQFXUZLWKsXGJH&OD\jVFRQFOXVLRQWKDW GLVWULFWFRXUWIRUDQHYLGHQWLDU\KHDULQJEHFDXVHWKHUHFRUG WKHJRYHUQPHQWYLRODWHGWKH)RXUWK$PHQGPHQWZKHQRQHRI ZDVLQDGHTXDWHO\GHYHORSHGIRUDSURSHUUHYLHZ6HH8QLWHG LWV DJHQWV VHDUFKHG WKH EDVHPHQW RI WKH GXSOH[ LQ ZKLFK 6WDWHVY.LQJ)GWK&LU7KLV&RXUW .HQQHWK .LQJ UHVLGHG %HFDXVH , ZRXOG DUULYH DW WKLV DOVRKHOGWKDWWKHGLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQLQ FRQFOXVLRQ E\ VRPHZKDW GLIIHUHQW PHDQV WKDQ GRHV sXGJH GHQ\LQJ.HZLQjVPRWLRQIRUDFRQWLQXDQFHWKDWWKHFODLPIRU &OD\,ZULWHVHSDUDWHO\ LQHIIHFWLYH DVVLVWDQFH RI FRXQVHO FRXOG QRW EH FRQVLGHUHG EDVHGXSRQWKHLQDGHTXDWHUHFRUGDQGLQDPDWWHU RIILUVW 7KH 6XSUHPH &RXUW UHFHQWO\ UHLWHUDWHG WKH QDWXUH RI RXU LPSUHVVLRQKHOGWKDWDFOHULFDOHUURULQWKHLQIRUPDWLRQGLG LQTXLU\ZKHQDQDO\]LQJZKHWKHUDJRYHUQPHQWVHDUFKYLRODWHV QRW SUHFOXGH WKH DSSOLFDWLRQ RI WKH HQKDQFHPHQW WKH)RXUWK$PHQGPHQW EHFDXVH.HZLQKDGVXIILFLHQWQRWLFHGHVSLWHWKHHUURUWKHUHE\ UHYHUVLQJWKHGLVWULFWFRXUWjVUHIXVDOWRDSSO\WKHHQKDQFHPHQW 2XU )RXUWK $PHQGPHQW DQDO\VLV HPEUDFHV WZR WR.HZLQjVVHQWHQFH,G TXHVWLRQV)LUVWZHDVNZKHWKHUWKHLQGLYLGXDOE\KLV FRQGXFWKDVH[KLELWHGDQDFWXDOH[SHFWDWLRQRISULYDF\ 8SRQUHPDQGWKHGLVWULFWFRXUWFRQGXFWHGDVXSSUHVVLRQ WKDWLVZKHWKHUKHKDVVKRZQWKDWKH>VRXJKW@WRSUHVHUYH KHDULQJ UHJDUGLQJ WKH FRFDLQH IRXQG LQ WKH EDVHPHQW >VRPHWKLQJ@DVSULYDWH6HFRQGZHLQTXLUHZKHWKHU 7KHUHDIWHULQDQRUGHUGDWHG0D\WKHGLVWULFWFRXUW WKHLQGLYLGXDOjVH[SHFWDWLRQRISULYDF\LVRQHWKDWVRFLHW\ UHYHUVHGLWVSUHYLRXVGHFLVLRQDQGGHQLHG'HIHQGDQWjVPRWLRQ LVSUHSDUHGWRUHFRJQL]HDVUHDVRQDEOH WRVXSSUHVVWKHHYLGHQFH %RQGY8QLWHG6WDWHV6&WLQWHUQDO .HZLQ ZDV UHVHQWHQFHG WR D WHUP RI PRQWKV RI FLWDWLRQVDQGTXRWDWLRQVRPLWWHGEUDFNHWVLQRULJLQDO7KHUH LPSULVRQPHQW ZLWK FUHGLW JLYHQ IRU WLPH VHUYHG DQG WR FDQEHQRUHDOGHEDWHWKDW.LQJjVFRQGXFWH[KLELWHGDQDFWXDO \HDUVRIVXSHUYLVHGUHOHDVH.HZLQDSSHDOHGWKHMXGJPHQWWR H[SHFWDWLRQRISULYDF\KHSODFHGFRQWUDEDQGLQVLGHDVKRH WKLV &RXUW ZKLFK LV QRW DW LVVXH KHUH 2Q sXQH ER[DQGKLGLWLQWKHEDVHPHQWUDIWHUVRIWKHGXSOH[ZLWKLQ 'HIHQGDQWHQWHUHGFRQGLWLRQDOJXLOW\SOHDVRQ&RXQWDQG ZKLFKKHGZHOOHG6HHLG,IKLGLQJVRPHWKLQJZLWKLQDVKRH &RXQWRIWKHLQGLFWPHQWDQGZDVVHQWHQFHGWRDWHUPRI ER[ LQ WKH UDIWHUV RI WKH EDVHPHQW RI RQHjV GXSOH[ RU PRQWKV RI LPSULVRQPHQW WR EH IROORZHG E\ \HDUV RI DSDUWPHQWEXLOGLQJLVQRWLQGLFDWLYHRIDSHUVRQjVDWWHPSWWR VXSHUYLVHG UHOHDVH ,W LV IURP 'HIHQGDQWjV JXLOW\ SOHD NHHSVRPHWKLQJSULYDWH,DPDWDORVVIRUZKDWLV$VIRUWKH FRQYLFWLRQDQGVHQWHQFHWKDWKHQRZDSSHDOV TXHVWLRQRIZKHWKHUVRFLHW\LVSUHSDUHGWRUHFRJQL]H.LQJjV H[SHFWDWLRQRISULYDF\DVUHDVRQDEOH,KDYHQRGRXEWWKDWWKH FRXQWOHVVLQGLYLGXDOVZKROLYHLQGXSOH[HVRUGRXEOHIDPLO\ 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ $FFRUGLQJO\WKHGLVWULFWFRXUWHUUHGLQILQGLQJWKDWWKHJRRG % )DFWV IDLWKH[FHSWLRQWRWKH)RXUWK$PHQGPHQWH[FOXVLRQDU\UXOH DSSOLHGWRVDYHWKHLOOHJDOVHDUFK 7KHIROORZLQJUHFLWDWLRQRIIDFWVLVWDNHQIURPWKLV&RXUWjV SULRUGHFLVLRQLQWKLVFDVH ,,,&21&/86,21 2Q2FWREHUPHPEHUVRIWKH)HGHUDO%XUHDX )RUWKHDERYHVWDWHGUHDVRQVZHKROGWKDWWKHGLVWULFWFRXUW RI,QYHVWLJDWLRQjV&DULEEHDQ*DQJ7DVN)RUFHREWDLQHG HUUHG LQ GHQ\LQJ 'HIHQGDQWjV PRWLRQ WR VXSSUHVV WKH DZDUUDQWWRVHDUFK(DVWWK6WUHHW&OHYHODQG HYLGHQFH 7KHUHIRUH WKH GLVWULFW FRXUWjV RUGHU GHQ\LQJ 2KLRIRUGUXJSDUDSKHUQDOLDDQGZHDSRQV7KHZDUUDQW 'HIHQGDQWjV PRWLRQ WR VXSSUHVV LV 5(9(56(' DQG DXWKRUL]HG D VHDUFK RI WKH mSUHPLVHV FXUWLODJH 'HIHQGDQWjV MXGJPHQW RI FRQYLFWLRQ DQG VHQWHQFH LV FRQWDLQHUVDQGSHUVRQVWKHUHLQlDWDORFDWLRQGHVFULEHG 9$&$7(' DV m (DVW WK 6WUHHW &OHYHODQG &X\DKRJD &RXQW\ 2KLR DQG EHLQJ PRUH IXOO\ GHVFULEHG DV WKH GRZQVWDLUVXQLWLQDWZRIDPLO\WZRDQGRQHKDOIVWRU\ ZKLWHZRRG>@VLGHGGZHOOLQJZLWKJUHHQWULPl $OWKRXJK WKH UHFRUG LV VSDUVH LW DSSHDUV WKDW WKH mGRZQVWDLUVXQLWlLVDILYHURRPDSDUWPHQWFRQVLVWLQJRI DIURQWURRPWZREHGURRPVDNLWFKHQDQGDEDWKURRP 2QHEHGURRPDQGWKHNLWFKHQDUHORFDWHGLQWKHUHDURI WKHDSDUWPHQW7KHUHLVDGRRULQWKHNLWFKHQWKDWOHDGV WRDFRPPRQKDOOZD\7KHKDOOZD\FRQWDLQVDGRRUWKDW OHDGV LQWR WKH EXLOGLQJj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j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mFRPPRQlDUHDVVXEMHFWWR VHDUFKDVDXWKRUL]HGE\WKHZDUUDQWZKHQWKH\VHDUFKHGWKH VHDUFK%DVHGXSRQWKHDJHQWjVDVVHUWLRQVWKHGLVWULFWFRXUW EDVHPHQW&DURO\Q.LQJPRWKHURI'HIHQGDQWDQG.HZLQ FRQFOXGHGWKDWmWKHRIILFHUZKRVHDUFKHGWKHEDVHPHQWKDGDQ ZKR UHVLGHG LQ WKH XSSHU XQLW RI WKH WZRIDPLO\ IODW ZDV REMHFWLYHO\UHDVRQDEOHUHOLDQFHWKDWWKHVHDUFKZDUUDQWIRUWKH FDOOHG WR WHVWLI\ LQ RUGHU WR HVWDEOLVK VWDQGLQJ 0UV .LQJ µGRZQVWDLUVXQLWjLQFOXGHGWKHEDVHPHQWl WHVWLILHGWKDW'HIHQGDQWDQG.HZLQOLYHGRQWKHILUVWIORRURI WKH KRXVH WKDW VKH OLYHG RQ WKH VHFRQG IORRU ZLWK KHU WZR $OWKRXJK LW LV WUXH WKDW WKH ZDUUDQW ZDV QRW IDFLDOO\ GDXJKWHUVDQGDQRWKHUVRQDQGWKDWKHUWHHQDJHVRQOLYHGRQ GHILFLHQWDVDSSOLHGWR'HIHQGDQWjVGRZQVWDLUVXQLWLWLVDOVR WKHWKLUGIORRU$IWHUFRQVLGHUDEOHWHVWLPRQ\E\0UV.LQJ WUXHWKDWWKHZDUUDQWGLGQRWUHIHUHQFHWKHEDVHPHQWDUHDDQG UHJDUGLQJ WKH FRQILJXUDWLRQ RI WKH GZHOOLQJ DQG WKH OLYLQJ WKHDJHQWZDVDZDUHRIWKHZDUUDQWjVOLPLWDWLRQV7KHDJHQWjV DUUDQJHPHQWVRIWKHRFFXSDQWVWKHGLVWULFWFRXUWFRQFOXGHG DVVHUWLRQVWKDWWKHEDVHPHQWZDVLQFOXGHGLQWKHFRPPRQDUHD WKDW 'HIHQGDQW DQG .HZLQ KDG VWDQGLQJ WR FKDOOHQJH WKH RI'HIHQGDQWjVGRZQVWDLUVXQLWRIWKLVWZRIDPLO\GZHOOLQJLV VHDUFK QRWUHDVRQDEOHXQGHUWKHVHIDFWV6SHFLILFDOO\WKHEDVHPHQW RIWKHGXSOH[ZDVQRWDFFHVVLEOHWRWKHJHQHUDOSXEOLFLH 7KHGLVWULFWFRXUWWKHQFRQVLGHUHGDUJXPHQWVIURPGHIHQVH WKHEDVHPHQWFRXOGQRWEHUHDFKHGIURPWKHRXWVLGHEHFDXVH FRXQVHOVWKDWWKHDIILGDYLWLQVXSSRUWRIWKHVHDUFKZDUUDQW WKHGRRUZDVORFNHGDQGFRXOGRQO\EHHQWHUHGLIRQHRIWKH ZDV FRQVWLWXWLRQDOO\ GHIHFWLYH DQG WKDW WKH JRRG IDLWK WHQDQWV KDG DGPLWWHG WKH JXHVW LQWR WKH GXSOH[ DQG LW ZDV H[FHSWLRQXQGHU8QLWHG6WDWHVY/HRQ86 HVWDEOLVKHGODZLQWKLVFLUFXLWDWWKHWLPHRIWKHVHDUFKWKDWD GLGQRWDSSO\7HVWLPRQ\ZDVDOVRSUHVHQWHGE\WKHDJHQWV WHQDQWLQDQDSDUWPHQWEXLOGLQJKDVDUHDVRQDEOHH[SHFWDWLRQ ZKRFRQGXFWHGWKHVHDUFK RISULYDF\LQWKHFRPPRQDUHDRIDEXLOGLQJQRWRSHQWRWKH JHQHUDO SXEOLF 6HH &DUULJHU )G DW VHH DOVR 2Q 0D\ WKH GLVWULFW FRXUW HQWHUHG DQ RUGHU GLVFXVVLRQVXSUD3DUW,,%7KHIDFWWKDWWKHDJHQWPD\KDYH GHQ\LQJWKHPRWLRQWRVXSSUHVVWKHHYLGHQFH,QLWVRUGHUWKH OHJDOO\ VHDUFKHG WKH EDVHPHQW RI VLQJOH IDPLO\ UHVLGHQFHV FRXUWEHJDQE\QRWLQJWKDWDOWKRXJKLWZDVVWLOORIWKHEHOLHI ZKHQWKHZDUUDQWGLGQRWVSHFLILFDOO\LQFOXGHWKHEDVHPHQW mWKDWWKHEDVHPHQWZDVQRWZLWKLQWKHVFRSHRIWKHZDUUDQWl DUHDLVRIQRPRPHQWLQVRIDUDVWKHVLQJOHIDPLO\UHVLGHQFH WKHFRXUWILUVWKDGWRGHFLGHZKHWKHU'HIHQGDQWDQG.HZLQ FDQQRW EH FRPSDUHG WR WKH WZRIDPLO\ GZHOOLQJ DW KDQG KDG mVWDQGLQJl WR FKDOOHQJH WKH VHDUFK E\ GHWHUPLQLQJ :KLFKLVWRVD\WKHDJHQWjVVHDUFKRIWKHEDVHPHQWLQWKLV ZKHWKHU 'HIHQGDQW DQG .HZLQ HQMR\HG D OHJLWLPDWH W\SHRIVLWXDWLRQLVQRGLIIHUHQWWKDQLIWKHDJHQWKDGDWWHPSWHG H[SHFWDWLRQ RI SULYDF\ mYLVDYLV WKH EDVHPHQWl s$ DW WRVHDUFKWKHRWKHUXQLWZLWKRXWDZDUUDQW6HH8QLWHG6WDWHV 7KHGLVWULFWFRXUWFRQVLGHUHGWKHWHVWLPRQ\DGGXFHGDW Y&DWR1R:/DW WK&LU WKHVXSSUHVVLRQKHDULQJDQGIRXQGWKDWQHLWKHU'HIHQGDQWQRU $SUILQGLQJWKDWWKHJRRGIDLWKH[FHSWLRQGLGQRW .HZLQ KDG D OHJLWLPDWH H[SHFWDWLRQ RI SULYDF\ LQ WKH VDYH WKH LQYDOLG VHDUFK ZKHUH WKH RIILFHUV FRQGXFWLQJ WKH EDVHPHQW$FFRUGLQJO\WKHGLVWULFWFRXUWKHOGWKDWmWKH\KDYH VHDUFKZHUHSXWRQQRWLFHRQFHWKH\DUULYHGDWWKHVFHQHWKDW QRµVWDQGLQJjWRFKDOOHQJHWKHVHDUFKRIWKHEDVHPHQWDQGWKH WKH\PD\KDYHEHHQVHDUFKLQJWKHZURQJDSDUWPHQW 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ DUHVXOWRIWKHLOOHJDOVHDUFKVKRXOGKDYHEHHQVXSSUHVVHGDV VHL]XUH RI FUDFN FRFDLQH IURP WKH EDVHPHQWl GHVSLWH WKH SRLVRQRXVIUXLWV6HH:RQJ6XQ86DW FRXUWjVHDUOLHUUXOLQJDWWKHVXSSUHVVLRQKHDULQJLWVHOIs$ DW & *RRG)DLWK([FHSWLRQ 7KHGLVWULFWFRXUWWKHQZHQWRQWRVWDWHWKDWm>V@LQFHWKLV 7KHGLVWULFWFRXUWKHOGWKDWHYHQLIWKHRIILFHUjVVHDUFKRIWKH &RXUWKDVFRQFOXGHGWKDWWKHZDUUDQWGLGQRWLQFOXGHDVHDUFK EDVHPHQWZDVIRXQGWREHEH\RQGWKHVFRSHRIWKHZDUUDQW RIWKHEDVHPHQWDQGHVSHFLDOO\LQWKHHYHQWDUHYLHZLQJFRXUW WKHLOOHJDOVHDUFKZRXOGEHVDYHGQRQHWKHOHVVXQGHUWKHJRRG ZHUH WR ILQG WKDW WKH .LQJ EURWKHUV GLG KDYH D OHJLWLPDWH IDLWKH[FHSWLRQWRWKHH[FOXVLRQDU\UXOHDVHVSRXVHGE\WKH H[SHFWDWLRQ RI SULYDF\ ZLWK UHVSHFW WR WKH EDVHPHQW LW LV 6XSUHPH&RXUWLQ8QLWHG6WDWHVY/HRQ86 QHFHVVDU\WRGLVFXVVWKHVRFDOOHGµ/HRQH[FHSWLRQjls$DW $GLVWULFWFRXUWjVGHWHUPLQDWLRQDVWRZKHWKHUWKHJRRGIDLWK 7KH GLVWULFW FRXUW FRQFOXGHG WKDW mWKH RIILFHU ZKR H[FHSWLRQ RI /HRQ DSSOLHV WR D VHDUFK LV UHYLHZHG E\ WKLV VHDUFKHGWKHEDVHPHQWKDGDQREMHFWLYHO\UHDVRQDEOHUHOLDQFH &RXUWGHQRYR8QLWHG6WDWHVY'XUN)GWK WKDWWKHVHDUFKZDUUDQWIRUWKHµGRZQVWDLUVXQLWjLQFOXGHGWKH &LU 8QGHU WKH IDFWV RI WKLV FDVH WKH GLVWULFW FRXUW EDVHPHQW7KHUHIRUHRQWKDWEDVLVWKHFUDFNFRFDLQHVHL]HG HUUHGLQILQGLQJWKDWWKHJRRGIDLWKH[FHSWLRQDSSOLHG IURP WKH EDVHPHQW VKDOO QRW EH VXSSUHVVHGl s$ DW IRRWQRWH RPLWWHG )ROORZLQJ WKH GLVWULFW FRXUWj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jVIDFWXDOILQGLQJVRQD EDUH ERQHV DIILGDYLW DQG LI WKH ZDUUDQW ZDV IDFLDOO\ PRWLRQWRVXSSUHVVIRUFOHDUHUURUDQGLWVFRQFOXVLRQVRIODZ GHILFLHQW LQ WKDW LW IDLOHG WR SDUWLFXODUL]H WKH SODFH WR EH GHQRYR8QLWHG6WDWHVY/HDNH)GWK VHDUFKHGRUWKHWKLQJVWREHVHL]HG,GDW &LU :KHQ DV LQ WKLV FDVH WKH GLVWULFW FRXUW LV WKH UHYLHZLQJFRXUWZHRZHQRSDUWLFXODUGHIHUHQFHWRWKHGLVWULFW 7KHDJHQWZKRVHDUFKHGWKHEDVHPHQWDFNQRZOHGJHGWKDW FRXUWjVFRQFOXVLRQV,G WKHVHDUFKZDUUDQWGLGQRWVSHFLILFDOO\PHQWLRQWKHEDVHPHQW DQG FODLPHG WKDW KH GLG QRW NQRZ WKDW WKH GZHOOLQJ KDG D :KHQ UHYLHZLQJ D VWDWH PDJLVWUDWHjV GHWHUPLQDWLRQ RI EDVHPHQW XQWLO KH HQWHUHG WKH KDOOZD\ LQ WKH FRXUVH RI WKH SUREDEOH FDXVH LQ UHIHUHQFH WR WKH LVVXDQFH RI D VHDUFK VHDUFK7KHDJHQWDOVRDFNQRZOHGJHGWKDWWKHZDUUDQWGLGQRW ZDUUDQWWKLV&RXUWPXVWGHWHUPLQHZKHWKHUXQGHUDWRWDOLW\ 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ RIWKHFLUFXPVWDQFHVmWKHPDJLVWUDWHKDGDVXEVWDQWLDOEDVLV WKDWWKHVHDUFKZDUUDQWDXWKRUL]HGDVHDUFKRIWKHGRZQVWDLUV IRU FRQFOXGLQJ WKDW µD VHDUFK ZRXOG XQFRYHU HYLGHQFH RI DSDUWPHQWDVZHOODVWKHFXUWLODJH\HWWKHSDQHOUHYHUVHGWKH ZURQJGRLQJjl8QLWHG6WDWHVY6RQDJHUH)GWK GLVWULFWFRXUWjVRUGHUGHQ\LQJ'HIHQGDQWjVPRWLRQWRVXSSUHVV &LU TXRWLQJ ,OOLQRLV Y *DWHV 86 WKH FRFDLQH VHL]HG IURP WKH EDVHPHQW EHFDXVH WKH GLVWULFW 7KLVFRXUWSD\VmµJUHDWGHIHUHQFHjlWRDPDJLVWUDWHjV FRXUWKDGIDLOHGWRKROGDQHYLGHQWLDU\KHDULQJ6HH.LQJ ILQGLQJVZKLFKmµVKRXOGQRWEHVHWDVLGHXQOHVVDUELWUDULO\ )GDW7KLV&RXUWIRXQGWKDWUHPDQGZDVUHTXLUHGIRU H[HUFLVHGjl/HDNH)GDWTXRWLQJ8QLWHG6WDWHV D GHWHUPLQDWLRQ E\ WKH GLVWULFW FRXUW DV WR ZKHWKHU WKH Y3HOKDP)GWK&LUFLWLQJ*DWHV EDVHPHQWZDVSDUWRIWKHmGRZQVWDLUVXQLWlGHVFULEHGLQWKH 86DWPXVW@SHUIRUPKLV ZDUUDQWDQGZKHWKHUWKHJRRGIDLWKH[FHSWLRQDSSOLHG6HH µQHXWUDO DQG GHWDFKHGj IXQFWLRQ DQG QRW VHUYH PHUHO\ DV D LG,ILWZHUHDQHVWDEOLVKHGSULQFLSOHWKDWmFXUWLODJHlLQFOXGHV UXEEHUVWDPSIRUSROLFHl$JXLODUY7H[DV86 WKH EDVHPHQW RI D GZHOOLQJ VXFK DV WKLV WKHQ WKHUH ZRXOG 7RWKDWHQGm>G@HIHUHQFHWRWKH>LVVXLQJ@PDJLVWUDWH KDYHEHHQQRQHHGIRUWKHSUHYLRXVSDQHOWRKDYHUHPDQGHG LVQRWERXQGOHVVl8QLWHG6WDWHVY/HRQ86 WKHFDVH6HH8QLWHG6WDWHVY%ODFN1R:/ DW WK &LU 0D\ :HOOIRUG s FRQFXUULQJXQSXEOLVKHGUHO\LQJXSRQWKLV&RXUWjVGHFLVLRQ 7KH)RXUWK$PHQGPHQWJXDUDQWHHVWKDWmQR:DUUDQWVVKDOO LQ.LQJ)GDWIRUWKHFRQFOXVLRQWKDWUHPDQGZDV LVVXH EXW XSRQ SUREDEOH FDXVH VXSSRUWHG E\ 2DWK RU QHFHVVDU\ WR GHWHUPLQH ZKHWKHU WKH RIILFHUV VHDUFK RI WKH DIILUPDWLRQl 86 &2167 DPHQG ,9 7KH ZDUUDQW EDVHPHQWRIDWZRIDPLO\GZHOOLQJH[FHHGHGWKHVFRSHRIWKH UHTXLUHPHQW VHUYHV WR LQWHUSRVH EHWZHHQ WKH SROLFH DQG DQ ZDUUDQWZKLFKDXWKRUL]HGDVHDUFKRIWKHGRZQVWDLUVXQLWDQG LQGLYLGXDOjVSHUVRQDOSULYDF\DQRUGHUO\SURFHGXUHLQYROYLQJ WKHFXUWLODJH7KHSUHYLRXVSDQHODVZHOODVWKHGLVWULFWFRXUW mD QHXWUDO DQG GHWDFKHG PDJLVWUDWH>@l sRKQVRQ Y 8QLWHG FRXOG VLPSO\ KDYH FRQFOXGHG WKDW WKH ZDUUDQW H[SUHVVO\ 6WDWHV86ZKRLVUHVSRQVLEOHIRUPDNLQJ DXWKRUL]HG D VHDUFK RI WKH EDVHPHQW EHFDXVH WKH ZDUUDQW DQmLQIRUPHGDQGGHOLEHUDWHGHWHUPLQDWLRQlRQWKHLVVXHRI SURYLGHG IRU D VHDUFK RI WKH FXUWLODJH RI WKH GRZQVWDLUV SUREDEOH FDXVH $JXLODU 86 DW 7KH ZDUUDQW DSDUWPHQWKRZHYHUQHLWKHUFRXUWVRKHOG SURFHVVWKXVDYRLGVDOORZLQJWKHGHWHUPLQDWLRQRISUREDEOH FDXVHWRUHVWZLWKWKHm]HDORXVlDFWLRQVRIWKHSROLFHZKRDUH m&XUWLODJHlLVGHILQHGDVDVm>W@KHODQGRU\DUGDGMRLQLQJD mHQJDJHGLQWKHRIWHQFRPSHWLWLYHHQWHUSULVHRIIHUUHWLQJRXW KRXVH XVX>DOO\@ ZLWKLQ DQ HQFORVXUHl VHH %/$&.j6 /$: FULPHlsRKQVRQ86DW ',&7,21$5< WK HG RU mD \DUG FRXUW\DUG RU RWKHUSLHFHRIJURXQGLQFOXGHGZLWKLQDIHQFHVXUURXQGLQJD 3UREDEOHFDXVHLVGHILQHGDVmUHDVRQDEOHJURXQGVIRUEHOLHI GZHOOLQJ KRXVH>@l 6HH : (%67(5j6 7+,5' 1(: VXSSRUWHGE\OHVVWKDQSULPDIDFLHSURRIEXWPRUHWKDQPHUH ,17(51$7,21$/ ',&7,21$5< GHG7KHUHIRUH VXVSLFLRQl8QLWHG6WDWHVY%HQQHWW)GWK XQGHU WKH OHJDO DQG FRPPRQ GHILQLWLRQV RI FXUWLODJH WKH &LUWKDWmWKHUHLVDIDLUSUREDELOLW\WKDWFRQWUDEDQGRU GLVVHQWjVFRQFOXVLRQWKDWWKHEDVHPHQWDUHDRIWKLVWZRIDPLO\ HYLGHQFH RI D FULPH ZLOO EH IRXQG LQ D SDUWLFXODU SODFHl GZHOOLQJ LV LQFOXGHG LQ WKH FXUWLODJH LV ZLWKRXW EDVLV *DWHV 86 DW 7KLV GHWHUPLQDWLRQ GRHV QRW OHQG 0RUHRYHUXQGHUWKLV&LUFXLWjVSUHFHGHQWWKHEDVHPHQWDUHD LWVHOIWRWKHDSSOLFDWLRQRIm>U@LJLGOHJDOUXOHVlDQGQRRQH RIWKLVGZHOOLQJFDQQRWEHFRQVLGHUHGZLWKLQLWVFXUWLODJH GHFLVLRQPD\VHUYHWRSURYLGHDGHILQLWLYHEDVLVXSRQZKLFK WRUHO\LQDVPXFKDVmLQIRUPDQWjVWLSVOLNHDOORWKHUFOXHVDQG )RUDOORIWKHDERYHVWDWHGUHDVRQVZHKROGWKDWWKHRIILFHU HYLGHQFHPD\YDU\JUHDWO\LQWKHYDOXHDQGUHOLDELOLW\l H[FHHGHGWKHVFRSHRIWKHZDUUDQWE\VHDUFKLQJWKHEDVHPHQW *DWHV86DW5DWKHUWKHSUREDEOHFDXVHVWDQGDUG RIWKHGXSOH[DQGWKDWWKHJUDPVRIFRFDLQHUHFRYHUHGDV 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ IURPWKHFDVHDWKDQGEHFDXVH'HIHQGDQWjVGZHOOLQJZDVQRW LVDmµSUDFWLFDOQRQWHFKQLFDOFRQFHSWLRQ>ZKHUHLQ@ZH DPXOWLXQLWDSDUWPHQWEXLOGLQJEXWDWZRIDPLO\GZHOOLQJ GHDO ZLWK SUREDELOLWLHV >ZKLFK DUH@ WKH IDFWXDO DQG ZKHUHDVVWDWHGLQUHJDUGVWRWKHVWDQGLQJLVVXH'HIHQGDQWDV SUDFWLFDOFRQVLGHUDWLRQVRIHYHU\GD\OLIHRQZKLFKUHDVRQDEOH ZHOODVWKHRWKHUWHQDQWVHQMR\HGDUHDVRQDEOHH[SHFWDWLRQRI DQG SUXGHQW PHQ QRW OHJDO WHFKQLFLDQV DFWjl ,G DW SULYDF\$VVXFKWKHDUHDFRXOGQRWEHFRQVLGHUHGmFRPPRQl TXRWLQJ %ULQHJDU Y 8QLWHG 6WDWHV 86 DV LQ WKH FDVH RI D PXOWLXQLW DSDUWPHQW FRPSOH[ DQG WKH 6WDWHGRWKHUZLVHmSUREDEOHFDXVHLVDIOXLGFRQFHSW RIILFHUVKRXOGKDYHVRXJKWDVHDUFKZDUUDQWIRUWKHEDVHPHQW o WXUQLQJ RQ WKH DVVHVVPHQW RI SUREDELOLWLHV LQ SDUWLFXODU DUHDZKHQKHFDPHXSRQLWGXULQJWKHFRXUVHRIWKHVHDUFKRI IDFWXDOFRQWH[WVoQRWUHDGLO\RUHYHQXVHIXOO\UHGXFHGWRD 'HIHQGDQWjVXQLWKLVGHFLVLRQWRSURFHHGZLWKRXWDZDUUDQW QHDWVHWRI OHJDOUXOHV,QIRUPDQWVjWLSVGRXEWOHVVFRPHLQ ZDV IODJUDQW DQG XQUHDVRQDEOH XQGHU WKHVH IDFWV 6HH PDQ\ VKDSHV DQG VL]HV IURP PDQ\ GLIIHUHQW W\SHV RI *DUULVRQ86DWVHHDOVR%ULQGOH\)GDW SHUVRQV5LJLGOHJDOUXOHVDUHLOOVXLWHGWRDQDUHDRIVXFK /DPEHUW)GDW GLYHUVLW\2QHVLPSOHUXOHZLOOQRWFRYHUHYHU\VLWXDWLRQl,G DWFLWDWLRQDQGLQWHUQDOTXRWDWLRQPDUNVRPLWWHG$V 7KHJRYHUQPHQWDOVRFRQWHQGVWKDWEHFDXVH'HIHQGDQWDQG VXFK WKH LVVXLQJ PDJLVWUDWH PXVW DSSO\ D mWRWDOLW\ RI WKH WKHRWKHUWHQDQWVKLVPRWKHUDQGVLEOLQJVXVHGWKHGZHOOLQJ FLUFXPVWDQFHVlWHVWWRSUREDEOHFDXVHLVVXHV,GDW7KLV DV RQH XQLW WKH RIILFHU ODZIXOO\ VHDUFKHG WKH EDVHPHQW WHVWUHTXLUHVWKHPDJLVWUDWHWRmPDNHDSUDFWLFDOFRPPRQ LQDVPXFKDVDVHDUFKZDUUDQWH[HFXWHGIRUDUHVLGHQFHZRXOG VHQVHGHFLVLRQZKHWKHUJLYHQDOOWKHFLUFXPVWDQFHVVHWIRUWK KDYH LQFOXGHG WKH EDVHPHQW :H DUH QRW SHUVXDGHG E\ LQWKHDIILGDYLWEHIRUHKLPLQFOXGLQJWKHµYHUDFLW\jDQGµEDVLV 'HIHQGDQWjVDUJXPHQWEHFDXVHWKHRIILFHUZDVQRWDZDUHWKDW RINQRZOHGJHjRISHUVRQVVXSSO\LQJWKHKHDUVD\LQIRUPDWLRQl WKHGZHOOLQJZDVEHLQJXVHGLQFRPPRQE\DOORIWKHWHQDQWV SUREDEOHFDXVHH[LVWV,G DWWKHWLPHRIWKHVHDUFK7RWKHFRQWUDU\WKHVHDUFKZDUUDQW DQG DIILGDYLW LQ VXSSRUW WKHUHRI VSHFLILFDOO\ LGHQWLILHG 7KH6XSUHPH&RXUWLGHQWLILHGIDFWRUVZKLFKDOWKRXJKQRW 'HIHQGDQWjVXQLWDORQHDVWKHSODFHZKHUHFRFDLQHWUDIILFNLQJ WREHDQDO\]HGDVmVHSDUDWHDQGLQGHSHQGHQWUHTXLUHPHQWVWR ZDVRFFXUULQJs$DW6HH)ORULGDYs/BBB86 EH ULJLGO\ H[DFWHG LQ HYHU\ FDVHl VKRXOG EH ZHLJKHG E\ D BBB6&Wm7KHUHDVRQDEOHQHVVRI UHYLHZLQJFRXUWLQDVVHVVLQJWKHYDOXHWKDWVKRXOGEHDIIRUGHG RIILFLDO VXVSLFLRQ PXVW EH PHDVXUHG E\ ZKDW WKH RIILFHUV WRDQLQIRUPDQWjVWLSZKHQGHWHUPLQLQJZKHWKHUDVXEVWDQWLDO NQHZ EHIRUH WKH\ FRQGXFWHG WKHLU VHDUFKl 8QLWHG 6WDWHV EDVLVIRUSUREDEOHFDXVHH[LVWV6HH*DWHV86DW *DUULVRQ 86 DW VWDWLQJ WKDW WKH RIILFHUVj DFWLRQV 7KHVH IDFWRUV ZKLFK FRQVLVW RI WKH mYHUDFLW\l RU VKRXOGEHMXGJHGEDVHGXSRQWKHLQIRUPDWLRQWKH\KDGDWWKH mUHOLDELOLW\lDVZHOODVmEDVLVRINQRZOHGJHlRIWKHWLSDUH WLPHRIWKHVHDUFK,QGHHGLWZDVQRWXQWLOWKHVXSSUHVVLRQ UHODWLYHZKHUHWKHVWUHQJWKRIRQHIDFWRUPD\FRPSHQVDWHIRU KHDULQJ XSRQ UHPDQG IURP WKLV &RXUW WKDW WHVWLPRQ\ IURP WKH GHILFLHQF\ RI DQRWKHU ,G DW VHH 8QLWHG 'HIHQGDQWjVPRWKHUHVWDEOLVKHGWKDWWKHGZHOOLQJZDVXVHGE\ 6WDWHVY$OOHQ)GWK&LUHQEDQF DOOWHQDQWVDVRQHs$DW &OD\sGLVVHQWLQJ+RZHYHUmWKHLQIRUPDWLRQSUHVHQWHG PXVW EH VXIILFLHQW WR DOORZ WKH RIILFLDO WR LQGHSHQGHQWO\ 7KHGLVVHQWDUJXHVWKDWEHFDXVHWKHVHDUFKZDUUDQWLQFOXGHG GHWHUPLQH SUREDEOH FDXVH µKLV DFWLRQ FDQQRW EH D PHUH WKHmFXUWLODJHlRIWKHGRZQVWDLUVDSDUWPHQWLQWKHDUHDWREH UDWLILFDWLRQRIWKHEDUHFRQFOXVLRQVRIRWKHUVjl8QLWHG6WDWHV VHDUFKHG WKH ZDUUDQW WKHUHE\ DXWKRUL]HG D VHDUFK RI WKH Y :HDYHU )G WK &LU TXRWLQJ EDVHPHQW7KHGLVVHQWjVFKDUDFWHUL]DWLRQRIFXUWLODJHLQWKLV *DWHV 86 DW m,Q RUGHU WR HQVXUH WKDW VXFK DQ UHVSHFW LV ZLWKRXW SUHFHGHQW ,QGHHG WKH SDQHO ZKLFK DEGLFDWLRQ RI WKH PDJLVWUDWHjV GXW\ GRHV QRW RFFXU FRXUWV SUHYLRXVO\UHYLHZHGWKHVXSSUHVVLRQLVVXHLQWKLVFDVHNQHZ PXVW FRQWLQXH WR FRQVFLHQWLRXVO\ UHYLHZ WKH VXIILFLHQF\ RI 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ DIILGDYLWVRQZKLFKZDUUDQWVDUHLVVXHGl*DWHV86DW WKHOLPLWDWLRQVRIWKHZDUUDQWWKHLVVXHLQWKHFDVHDWKDQG :LWKWKHVHVWDQGDUGVDQGFDXWLRQDU\LQVWUXFWLRQVIURP EHFRPHVZKHWKHUWKHRIILFHUjVVHDUFKRIWKHEDVHPHQWZDVD WKH6XSUHPH&RXUWLQPLQGZHWXUQWRWKHDIILGDYLWSUHVHQWHG IODJUDQW GLVUHJDUG IRU WKH OLPLWDWLRQV RI WKH ZDUUDQW 6HH WRWKHPDJLVWUDWHLQWKLVFDVHWRGHWHUPLQHZKHWKHUXQGHUD %ULQGOH\Y%HVW)GWK&LUFLWLQJ WRWDOLW\RIWKHFLUFXPVWDQFHVWKHDIILGDYLWZDVVXIILFLHQWWR 8QLWHG6WDWHVY/DPEHUW)GWK&LU HVWDEOLVKSUREDEOHFDXVHIRUWKHZDUUDQWWRLVVXH 7KH WHVW IRU PDNLQJ VXFK D GHWHUPLQDWLRQ LV ZKHWKHU WKH RIILFHUjVDFWLRQVZHUHUHDVRQDEOH6HH%ULQGOH\)GDW 7KH DIILGDYLW VXEPLWWHG WR WKH FRXUW E\ 'HWHFWLYH sRKQ *DQQRQRIWKH&OHYHODQG3ROLFH'HSDUWPHQWLQVXSSRUWRIWKH VHDUFKZDUUDQWLQTXHVWLRQSURYLGHGDVIROORZV ,Q WKH FDVH DW KDQG WKH RIILFHUjV DFWLRQV ZHUH QRW UHDVRQDEOHLQDVPXFKDVWKHDUHDZDVQRWmFRPPRQlDUHDIRU %HIRUH PH DsXGJHRIWKH&RXUWRI&RPPRQ3OHDV SXUSRVHV RI EHLQJ LQFOXGHG ZLWKLQ WKH SDUDPHWHUV RI WKH &X\DKRJD &RXQW\ 2KLR SHUVRQDOO\ DSSHDUHG WKH VHDUFKRI'HIHQGDQWjVXQLWVHH&DUULJHU )GDW XQGHUVLJQHG'HWsRKQ*DQQRQZKREHLQJILUVW 0F&DVWHU)GDW+HDQH\s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mLVOLPLWHGWRWKH GLVWULEXWLRQRIFRQWUROOHGVXEVWDQFHVRYHURQHWKRXVDQG VSHFLILF SODFHV GHVFULEHG LQ LW DQG GRHV QRW H[WHQG WR DUUHVWVIRUGUXJUHODWHGRIIHQVHV DGGLWLRQDORUGLIIHUHQWSODFHVl,Q8QLWHG6WDWHVY(YDQV WKLV&RXUWIRXQGWKDWIHGHUDORIILFHUVODZIXOO\VHDUFKHGWKH $IILDQWKDVJRRGFDXVHWREHOLHYHWKDWRQWKHSUHPLVHV EDVHPHQWDUHDRIDWZRIDPLO\GXSOH[VLPLODUWRWKDWLQWKH NQRZQDV(DVWWK6WUHHW&OHYHODQG&X\DKRJD FDVHDWKDQGKRZHYHUXQOLNHWKLVFDVHWKHRIILFHUVGLGVR &RXQW\ 2KLR DQG EHLQJ PRUH IXOO\ GHVFULEHG DV WKH SXUVXDQW WR D VHDUFK ZDUUDQW ZKLFK H[SUHVVO\ LQFOXGHG WKH GRZQVWDLUVXQLWLQDWZRIDPLO\WZRDQGRQHKDOIVWRU\ EDVHPHQWDUHDLQWKHVFRSHRIWKHVHDUFK6HH)G ZKLWHZRRGVLGHGGZHOOLQJZLWKJUHHQWULPWKHQXPEHUV QWK&LUm7KHVSHFLILFSRUWLRQRIWKHEXLOGLQJ mlWKHDGGUHVVIRUWKHXSVWDLUVXQLWFOHDUO\YLVLEOH WREHVHDUFKHGLVWKHVRXWKHUQSRUWLRQRIWKHEXLOGLQJEHDULQJ RQWKHVRXWKVLGHRIWKHHQWUDQFHGRRUWRWKHXSVWDLUVXQLW WKH SRVWDO QXPEHU LQFOXGLQJ WKH EDVHPHQW DQG DWWLF WKHVWUXFWXUHEHLQJORFDWHGRQWKHHDVWVLGHRI(DVWWK SRUWLRQWKHUHRIl 6WUHHWIDFLQJZHVWDQGLQWKHYHKLFOHGHVFULEHGDV V PRGHOJUD\&KHYUROHW&DYDOLHU2KLR7HPSRUDU\/LFHQVH 7KHJRYHUQPHQWUHOLHVXSRQ8QLWHG6WDWHVY9DXJKDQ 1XPEHU.WKHUHLVQRZEHLQJNHSWFRQFHDOHG )6XSS'0DVVLQVXSSRUWRILWVFRQWHQWLRQWKDW DQG SRVVHVVHG WKH IROORZLQJ HYLGHQFH RI FULPLQDO WKHZDUUDQWDOORZLQJIRUDVHDUFKRI'HIHQGDQWjVORZHUXQLW RIIHQVH GZHOOLQJLQFOXGHGDVHDUFKRIWKHEDVHPHQW,Q9DXJKDQWKH GLVWULFW FRXUW RI 0DVVDFKXVHWWV KHOG WKDW D mVHDUFK RI D &RFDLQHDQGRWKHUQDUFRWLFGUXJVDQGRUFRQWUROOHG EDVHPHQWRUDWWLFFRQQHFWHGWRDQDSDUWPHQWLQDPXOWLXQLW VXEVWDQFHVLQVWUXPHQWVDQGSDUDSKHUQDOLDXVHGLQ EXLOGLQJ LV SHUPLVVLEOH XQGHU ZDUUDQWV OLPLWHG WR WKH WDNLQJRUSUHSDULQJGUXJVIRUVDOHXVHRUVKLSPHQW DSDUWPHQWl,GDW+RZHYHU9DXJKQLVGLVWLQJXLVKDEOH UHFRUGVRILOOHJDOWUDQVDFWLRQVLQFOXGLQJFRPSXWHUV 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ GLYLGHGLQWRPRUHWKDQRQHXQLWSUREDEOHFDXVHPXVWH[LVWIRU DQGFRPSXWHUILOHVDUWLFOHVRISHUVRQDOSURSHUW\DQG HDFKXQLWl8QLWHG6WDWHVY9RWWHOOHU)GWK&LU SDSHUV WHQGLQJ WR HVWDEOLVK WKH LGHQWLW\ RI WKH 8QLWHG6WDWHVY%DOGDFFKLQR)GVW SHUVRQVLQFRQWURORIWKHSUHPLVHVRWKHUFRQWUDEDQG &LU LQFOXGLQJ EXW QRW OLPLWHG WR PRQH\ FRPPXQLFDWLRQV HTXLSPHQW PRWRU YHKLFOHV DQG ,Q*DUULVRQWKHVHDUFKZDUUDQWDXWKRUL]HGWKHVHDUFKRI ZHDSRQV EHLQJ LOOHJDOO\ SRVVHVVHG WKHUHLQ DQGRU mSUHPLVHV NQRZQ DV 3DUN $YHQXH WKLUG IORRU DQ\DQGDOOHYLGHQFHSHUWDLQLQJWRWKHYLRODWLRQVRI DSDUWPHQWl86DW7KHRIILFHUVVHHNLQJWKHZDUUDQW WKHODZVRIWKH6WDWHRI2KLRWRZLW5& EHOLHYHGWKDWRQO\RQHDSDUWPHQWH[LVWHGRQWKHWKLUGIORRUDW DQGDQG WKHWLPHWKDWWKH\DSSOLHGIRUWKHZDUUDQWKRZHYHUWKHWKLUG IORRUZDVGLYLGHGLQWRWZRDSDUWPHQWV,G$IWHUGLVFRYHULQJ :LWKLQ WKH SDVW WZHQW\IRXU KRXUV DIILDQW ZDV FRQWUDEDQG LQ *DUULVRQjV DSDUWPHQW RQ WKH WKLUG IORRU WKH FRQWDFWHG E\ DQRWKHU D FRQILGHQWLDO UHOLDEOH LQIRUPDQW RIILFHUV EHFDPH DZDUH WKDW WKH IORRU ZDV GLYLGHG LQWR WZR FRQFHUQLQJ WKH GHOLYHU\ RI D ODUJH TXDQWLW\ RI FUDFN VHSDUDWHDSDUWPHQWV,G2QFHWKHRIILFHUVEHFDPHDZDUHRI FRFDLQHWRWKHDERYHGHVFULEHGSUHPLVHV WKHVHSDUDWHDSDUWPHQWVWKH\GLVFRQWLQXHGWKHVHDUFK,GDW *DUULVRQ FKDOOHQJHG WKH VHDUFK ZDUUDQW DQG WKH &RXUW 7KLV LQIRUPDWLRQ IURP FRQILGHQWLDO UHOLDEOH FRQFOXGHGWKDWWKHZDUUDQWjVYDOLGLW\VKRXOGEHGHWHUPLQHG LQIRUPDQW &5, LQGLFDWHG WKDW .HQQHWK .LQJ ZDV mQRWLQOLJKWRIIDFWVGLVFRYHUHGXSRQH[HFXWLRQRIWKHVHDUFK WUDIILFNLQJ LQ FRFDLQH DQG KDG FUDFN FRFDLQH DW WKH ZDUUDQWEXWUDWKHULQOLJKWRIWKHLQIRUPDWLRQDYDLODEOHWRWKH DERYHGHVFULEHGSUHPLVHVKDYLQJEHHQGHOLYHUHGWR.LQJ RIILFHUVDWWKHWLPHWKH\DFWHGl,GLQWHUQDOTXRWDWLRQPDUNV E\$QWRQLR&RRNZLWKLQWKHSDVWGD\ RPLWWHG 7KH &RXUW IXUWKHU FRQFOXGHG WKDW WKH RIILFHUV SURSHUO\UHFRJQL]HGWKDWmWKH\ZHUHUHTXLUHGWRGLVFRQWLQXH &5, LV PDGH UHOLDEOH LQ WKDW &5, KDV JLYHQ WKH VHDUFK RI >WKH GHIHQGDQWjV@ DSDUWPHQW DV VRRQ DV WKH\ LQIRUPDWLRQWRWKHODZHQIRUFHPHQWRIILFLDOZKLFKKDVOHG GLVFRYHUHG WKDW WKHUH ZHUH WZR VHSDUDWH XQLWV RQ WKH WKLUG WR WKH DUUHVW DQGRU FRQYLFWLRQ RI PRUH WKDQ VHYHQW\ IORRUDQGWKHUHIRUHZHUHSXWRQQRWLFHRIWKHULVNWKDWWKH\ LQGLYLGXDOV IRU YLRODWLRQV RI VWDWH DQGRU IHGHUDO GUXJ PLJKWEHLQDXQLWHUURQHRXVO\LQFOXGHGZLWKLQWKHWHUPVRI ODZV DV ZHOO DV WKH FRQILVFDWLRQ RI PRUH WKDQ WKHZDUUDQWl,G DQGNLORJUDPVRIFRQWUROOHGVXEVWDQFHV ,Q WKH SUHVHQW FDVH WKH LVVXH LV QRW WKH YDOLGLW\ RI WKH &5, VWDWHG WKDW .LQJ NHSW GUXJV DW WKH DERYH ZDUUDQW LWVHOI $JDLQ WKH VHDUFK ZDUUDQW LVVXHG IRU GHVFULEHGSUHPLVHVJLYLQJDGHVFULSWLRQRIWKHSUHPLVHV 'HIHQGDQWj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mlWKHDGGUHVVIRUWKH RI XVHDEOH TXDQWLWLHV RI GUXJV DUH VPDOO PDNLQJ WKHP XSVWDLUV XQLW FOHDUO\ YLVLEOH RQ WKH VRXWK VLGH RI WKH HDV\WRFRQFHDORQRQHjVSHUVRQ HQWUDQFH GRRU WR WKH XSVWDLUV XQLW WKH VWUXFWXUH EHLQJ ORFDWHGRQWKHHDVWVLGHRI(DVWWK6WUHHWIDFLQJZHVW )XUWKHULQWKHH[SHULHQFHRIDIILDQWSHUVRQVZKR DQG LQ WKH YHKLFOH GHVFULEHG DV D V PRGHO JUD\ WUDIILFLQLOOHJDOGUXJVIUHTXHQWO\NHHSUHFRUGVRILOOHJDO &KHYUROHW &DYDOLHU 2KLR 7HPSRUDU\ /LFHQVH 1XPEHU WUDQVDFWLRQVDWWLPHVXVLQJFRPSXWHUVIRUVXFKUHFRUGV . DQGHYLGHQFHRIFRPPXQLFDWLRQVXVHGLQWKHIXUWKHUDQFH RIGUXJWUDIILFNLQJDFWLYLW\LQFOXGLQJEXWQRWOLPLWHGWR s$DW SDJHUV FHOOXODU WHOHSKRQHV DQVZHULQJ PDFKLQHV DQG DQVZHULQJPDFKLQHWDSHV m7KHIRXUWKDPHQGPHQWUHTXLUHVZDUUDQWVWRSDUWLFXODUO\ GHVFULEHWKHSODFHWREHVHDUFKHGl8QLWHG6WDWHVY%ODNHQH\ )XUWKHULQWKHH[SHULHQFHRIWKHDIILDQWSHUVRQV )GWK&LULQWHUQDOTXRWDWLRQPDUNV ZKR WUDIILF LQ LOOHJDO GUXJV IUHTXHQWO\ NHHS ZHDSRQV DQGFLWDWLRQRPLWWHGVHH0DU\ODQGY*DUULVRQ86 VXFKDVILUHDUPVRQRUDERXWWKHLUSHUVRQRUZLWKLQWKHLU m7KH VWDQGDUG RI UHYLHZ IRU WKLV &RXUW LQ SRVVHVVLRQIRUXVHDJDLQVWODZHQIRUFHPHQWRIILFLDOVDV GHWHUPLQLQJZKHWKHUDVHDUFKZDUUDQWGHVFULEHVWKHSODFHWR ZHOODVRWKHUFLWL]HQV EHVHDUFKHGZLWKVXIILFLHQWSDUWLFXODULW\LVDGHQRYRUHYLHZl 8QLWHG 6WDWHV Y *DKDJDQ )G WK &LU 3HUPLWWLQJ D PRWRU YHKLFOH WR EH XVHG LQ WKH VHH8QLWHG6WDWHVY:DWNLQV)GWK FRPPLVVLRQRIDIHORQ\GUXJDEXVHRIIHQVHLVDYLRODWLRQ &LU RI5& ,Q *DKDJDQ WKLV &RXUW FUHDWHG D WZRSDUW WHVW IRU $IILDQWDYHUVWKDWLWLVXUJHQWO\QHFHVVDU\WKDWWKH GHWHUPLQLQJZKHWKHUDGHVFULSWLRQLQDZDUUDQWLVVXIILFLHQWWR DERYHPHQWLRQHG SUHPLVHV EH VHDUFKHG LQ WKH QLJKW VDWLVI\WKHSDUWLFXODULW\UHTXLUHPHQWZKHWKHUWKHSODFHWR VHDVRQIRUWKZLWKWRSUHYHQWWKHDERYHQDPHGSURSHUW\ EH VHDUFKHG LV GHVFULEHG ZLWK VXIILFLHQW SDUWLFXODULW\ DV WR IURPEHLQJFRQFHDOHGRUUHPRYHGVRDVQRWWREHIRXQG HQDEOH WKH H[HFXWLQJ RIILFHUV WR ORFDWH DQG LGHQWLI\ WKH DQGIRUWKHVDIHW\RIWKHH[HFXWLQJRIILFHUV SUHPLVHV ZLWK UHDVRQDEOH HIIRUW DQG ZKHWKHU WKHUH LV UHDVRQDEOH SUREDELOLW\ WKDW VRPH RWKHU SUHPLVHV PD\ EH s$DW PLVWDNHQO\VHDUFKHG)GDWm)RUSXUSRVHVRI VDWLVI\LQJ WKH )RXUWK $PHQGPHQW VHDUFKLQJ WZR RU PRUH 'HIHQGDQW DUJXHV WKDW WKH DIILGDYLW ZDV LQVXIILFLHQW WR DSDUWPHQWVLQWKHVDPHEXLOGLQJLVQRGLIIHUHQWWKDQVHDUFKLQJ HVWDEOLVKSUREDEOHFDXVHLQVRIDUDVLWIDLOVWRSURYLGHDQ\EDVLV WZRRUPRUHFRPSOHWHO\VHSDUDWHKRXVHVl6HH8QLWHG6WDWHV DVWRWKHUHOLDELOLW\RUYHUDFLW\RIWKHFRQILGHQWLDOLQIRUPDQW Y 6KDPDHL]DGHK )G WK &LU VHH DQG IDLOV WR LQGLFDWH WKDW 'HWHFWLYH *DQQRQ FRQGXFWHG DQ DOVR8QLWHG6WDWHVY*RQ]DOH])GWK&LU LQGHSHQGHQW LQYHVWLJDWLRQ WR FRUURERUDWH WKH LQIRUPDQWjV QRWLQJWKDWm>L@WLVVHWWOHGWKDWZKHUHDVWUXFWXUHLV DOOHJDWLRQV 'HIHQGDQW FRQWHQGV WKDW 'HWHFWLYH *DQQRQjV 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ DGXSOH[ZRXOGKDYHDUHDVRQDEOHH[SHFWDWLRQRISULYDF\LQDQ YHULILFDWLRQRI'HIHQGDQWjVDGGUHVVYLDWKH2KLR'HSDUWPHQW DUHD VKDUHG RQO\ E\ WKH GXSOH[jV WHQDQWV DQG WKH ODQGORUG RI0RWRU9HKLFOHVDVEHLQJWKDWDOOHJHGE\WKHLQIRUPDQWDV 6WDWHGGLIIHUHQWO\WKHQDWXUHRIWKHOLYLQJDUUDQJHPHQWVRID DSODFHZKHUHGUXJVZHUHEHLQJWUDIILFNHGZDVLQDGHTXDWHWR GXSOH[ DV RSSRVHG WR D PXOWLXQLW DSDUWPHQW EXLOGLQJ FRUURERUDWH WKH LQIRUPDQWjV FODLPV 'HIHQGDQW IXUWKHU DIIRUGV WKH WHQDQW RI WKH GXSOH[ D JUHDWHU H[SHFWDWLRQ RI FRQWHQGV WKDW EHFDXVH WKH DIILGDYLW GRHV QRW DYHU WKDW WKH SULYDF\ LQ DUHDV WKH WHQDQW RI WKH PXOWLXQLW DSDUWPHQW FRQILGHQWLDOLQIRUPDQWREVHUYHGGUXJVRUSDUDSKHUQDOLDRQWKH EXLOGLQJZRXOGQRWHQMR\EHFDXVHLQWKHFDVHRIDGXSOH[ SUHPLVHVRI'HIHQGDQWjVKRPHFRUURERUDWLRQE\'HWHFWLYH DFFHVV WR VXFK DUHDV LV OLPLWHG WR WKH GXSOH[jV WHQDQWV DQG *DQQRQ ZDV SDUWLFXODUO\ QHFHVVDU\ :H GLVDJUHH ZLWK ODQGORUG 'HIHQGDQWj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jV UHVLGHQFH ZLWK SDUWLFXODULW\DVEHLQJmWKHGRZQVWDLUVXQLWLQDWZRIDPLO\ :KHWKHU WKH $JHQWV ,PSURSHUO\ ([FHHGHG WKH WZRDQGRQHKDOIVWRU\ZKLWHZRRGVLGHGGZHOOLQJZLWKJUHHQ 6FRSH RI WKH :DUUDQW ZKHQ 6HDUFKLQJ WKH WULPWKHQXPEHUVµjWKHDGGUHVVIRUWKHXSVWDLUVXQLW %DVHPHQW FOHDUO\YLVLEOHRQWKHVRXWKVLGHRIWKHHQWUDQFHGRRUWRWKH XSVWDLUVXQLWWKHVWUXFWXUHEHLQJORFDWHGRQWKHHDVWVLGHRI ,QLWVRUGHUGHQ\LQJ'HIHQGDQWjVPRWLRQWRVXSSUHVVWKH (DVWWK6WUHHWIDFLQJZHVWls$DW7KHDIILGDYLW GLVWULFW FRXUW UHDIILUPHG LWV SUHYLRXV FRQFOXVLRQ mWKDW WKH IXUWKHUGHVFULEHG'HIHQGDQWjVYHKLFOHXVHGLQWKHGLVWULEXWLRQ EDVHPHQWZDVQRWZLWKLQWKHVFRSHRIWKHZDUUDQWlKRZHYHU RI FRFDLQH ZLWK SDUWLFXODULW\ DV D m V PRGHO JUD\ WKH FRXUW ZHQW RQ WR KROG WKDW GHVSLWH WKLV FRQFOXVLRQ &KHYUROHW &DYDOLHU 2KLR 7HPSRUDU\ /LFHQVH 1XPEHU 'HIHQGDQWGLGQRWKDYHVWDQGLQJWRFKDOOHQJHWKHVHDUFKRIWKH .ls$DW7KHDIILGDYLWDOVRLQGLFDWHGWKDWLQ EDVHPHQW7KHJRYHUQPHQWDUJXHVWKDWWKHZDUUDQWZKLFK DGGLWLRQWRGHVFULELQJWKHSUHPLVHVDQGWKHYHKLFOHLQVXFK DXWKRUL]HGDVHDUFKRIWKHILUVWIORRUXQLWDOVRDXWKRUL]HGD GHWDLOWKHFRQILGHQWLDOUHOLDEOHLQIRUPDQWm&5,lGHVFULEHG VHDUFKRIWKHEDVHPHQW:HGLVDJUHHZLWKWKHJRYHUQPHQWjV WKHQDWXUHRIDOOHJHGFULPLQDODFWLYLW\LQGHWDLOs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s$DW7KHUHOLDELOLW\RIWKH $IILDQW KDV H[KLELWHG SUREDEOH FDXVH QHFHVVDU\ WR LQIRUPDQW ZDV HVWDEOLVKHG LQ WKH DIILGDYLW E\ 'HWHFWLYH VHDUFKWKHEHORZOLVWHGSUHPLVHVFXUWLODJHFRQWDLQHUV *DQQRQjV DYHUPHQWV WKDW WKH &5, KDG SURYLGHG FUHGLEOH DQG SHUVRQV WKHUHLQ XSRQ WKH LQFRUSRUDWHG VZRUQ LQIRUPDWLRQ LQ WKH SDVW ZKLFK KDG OHG WR WKH DUUHVW DQGRU DIILGDYLWDWWDFKHGKHUHWRDV([KLELW$ZKHUHLQDIILDQW 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ FRQYLFWLRQRImPRUHWKDQVHYHQW\LQGLYLGXDOVIRUYLRODWLRQVRI LQFOXGLQJWKHZDVKHUDQGGU\HU)XUWKHUPRUHDFFRUGLQJWR VWDWHDQGRUIHGHUDOGUXJODZVDVZHOODVWKHFRQILVFDWLRQRI WKHWHVWLPRQ\WKHEDVHPHQWZDVQRWRSHQWRWKHSXEOLFDQG PRUH WKDQ DQG NLORJUDPV RI FRQWUROOHG 'HIHQGDQWKDGDULJKWWRH[FOXGHDQ\RQHZKRZDVQRWDWHQDQW VXEVWDQFHVls$DW IURPWKHEDVHPHQWDUHDXQOHVVWKDWSHUVRQKDGEHHQLQYLWHG E\RQHRIWKHRWKHUWHQDQWV'HIHQGDQWZDVOHJLWLPDWHO\RQ 0RUHRYHU WKH LQIRUPDQWjV WLS ZDV FRUURERUDWHG E\ WKHSUHPLVHV LQDVPXFKDVKHSDLGUHQWWROLYHLQWKHORZHU 'HWHFWLYH*DQQRQjVRZQLQYHVWLJDWLRQ6HH*DWHV86 XQLWDQGKHWRRNQRUPDOSUHFDXWLRQVWRPDLQWDLQKLVSULYDF\ DW)RUH[DPSOHWKHDIILGDYLWLQGLFDWHVWKDW'HWHFWLYH LQWKHEDVHPHQWDUHDLQVRIDUDVWKHEDVHPHQWZDVQRWRSHQWR *DQQRQYHULILHGZLWKWKH2KLR'HSDUWPHQWRI0RWRU9HKLFOHV WKHSXEOLFWKHRWKHUWHQDQWVZHUHIDPLO\PHPEHUVDQGWKHUH WKDWWKHYHKLFOHGHVFULEHGE\WKHLQIRUPDQWZDVUHJLVWHUHGWR ZDVDQRXWVLGHGRRUWRWKHEDVHPHQWZKLFKUHPDLQHGFORVHG 'HIHQGDQWDQGWKDWWKHDGGUHVVSURYLGHGE\WKHLQIRUPDQWZDV 'HIHQGDQWjVDGGUHVVs$DW'HWHFWLYH*DQQRQDOVR )XUWKHUPRUHWKHIDFWWKDWWKLVZDVDWZRIDPLO\GZHOOLQJDV YHULILHG WKDW 'HIHQGDQW KDG D SULRU KLVWRU\ RI FULPLQDO RSSRVHG WR D PXOWLXQLW DSDUWPHQW EXLOGLQJ LQXUHV WR RIIHQVHVIRUZKLFKKHKDGVSHQWWLPHLQSULVRQ,G)LQDOO\ 'HIHQGDQWjVEHQHILWLQWKDWLWLVPRUHOLNHO\WKDWKHHQMR\HGD 'HWHFWLYH *DQQRQ DV DQ H[SHULHQFHG PHPEHU RI WKH WDVN UHDVRQDEOHH[SHFWDWLRQRISULYDF\LQWKHEDVHPHQWDUHDoLH IRUFH HVWDEOLVKHG WR IHUUHW RXW GUXJUHODWHG FULPHV DYHUUHG LWLVPRUHOLNHO\WKDWWKHEDVHPHQWDUHDZDVQRWDmFRPPRQl WKDWKHZDVDZDUHWKDW$QWRQLR&RRNLVDSHUVRQNQRZQWR DUHD IRU SXUSRVHV RI )RXUWK $PHQGPHQW SURWHFWLRQ 6HH PHPEHUV RI WKH WDVN IRUFH DV D VXSSOLHU RI FRFDLQH ZKLFK 0F&DVWHU)GDW+HDQH\sFRQFXUULQJLQSDUWDQG IXUWKHUVXSSRUWHGWKH&5,jVDOOHJDWLRQV,G GLVVHQWLQJLQSDUWILQGLQJWKDWmDWHQDQWLQDGXSOH[KDVD UHDVRQDEOHH[SHFWDWLRQRI SULYDF\LQFRPPRQDUHDVVKDUHG :KHQFRQVLGHULQJWKHDERYHLQIRUPDWLRQXQGHUDWRWDOLW\RI RQO\E\WKHGXSOH[jVWHQDQWVDQGWKHODQGORUGl+ROODQG WKHFLUFXPVWDQFHVZHFRQFOXGHWKDWWKHDIILGDYLWSURYLGHGD )GDW1HZPDQsGLVVHQWLQJILQGLQJWKDWDWHQDQWLQ mVXEVWDQWLDOEDVLVlIRUWKHPDJLVWUDWHWREHOLHYHWKDWmWKHUH DVPDOOWZRIDPLO\KRXVHHQMR\VDUHDVRQDEOHH[SHFWDWLRQRI >ZDV@DIDLUSUREDELOLW\WKDWFRQWUDEDQGRUHYLGHQFHRIDFULPH SULYDF\LQWKHYHVWLEXOHRIWKHGZHOOLQJ)L[HO)GDW >ZRXOG@EHIRXQGLQDSDUWLFXODUSODFHlQDPHO\'HIHQGDQWjV KROGLQJWKDWWKHEDFN\DUGDUHDRIWKHGHIHQGDQWjVIRXU UHVLGHQFH6HH*DWHV86DW$OWKRXJKWKH XQLWDSDUWPHQWEXLOGLQJZDVVXIILFLHQWO\UHPRYHGDQGSULYDWH DIILGDYLWGRHVQRWLQGLFDWHWKDWWKH&5,REVHUYHGWKHGHOLYHU\ LQ FKDUDFWHU VXFK WKDW D UHDVRQDEOH H[SHFWDWLRQ RI SULYDF\ RI D mODUJH TXDQWLW\ RI FUDFN FRFDLQHl WR 'HIHQGDQWj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s$DWWUDQVFULSWFLWDWLRQVDQGIRRWQRWHRPLWWHG ZDV LQVXIILFLHQW WR HVWDEOLVK SUREDEOH FDXVH LQVRIDU DV LW :LWKRXWDQ\DQDO\VLVWKHGLVWULFWFRXUWVLPSO\FRQFOXGHGWKDW SUHVHQWHGQRXQGHUO\LQJIDFWXDOFLUFXPVWDQFHVWRVXSSRUWWKH m>R@QWKHVHIDFWVWKLV&RXUWILQGVWKDWQHLWKHU.HZLQ.LQJQRU LQIRUPDQWjVNQRZOHGJHIDLOHGWRLQGLFDWHWKDWWKHLQIRUPDQW >'HIHQGDQW@HQMR\HGDOHJLWLPDWHH[SHFWDWLRQRISULYDF\ZLWK KDGSURYLGHGLQIRUPDWLRQLQWKHSDVWDQGIDLOHGWRHVWDEOLVK UHVSHFWWRWKHEDVHPHQW$FFRUGLQJO\WKH\KDYHQRµVWDQGLQJj DQ\ LQGHSHQGHQW SROLFH FRUURERUDWLRQ WKH DIILGDYLW LQ WKH WR FKDOOHQJH WKH VHDUFK RI WKH EDVHPHQW DQG WKH VHL]XUH RI SUHVHQW FDVH SURYLGHV VXFK GHWDLO 6HH :HDYHU )G DW FUDFNFRFDLQHIURPWKHEDVHPHQWl,G:HGLVDJUHHZLWKWKH 6LPLODUO\LQ/HDNH)GDWWKHDIILGDYLWZDV GLVWULFWFRXUWjVXQVXSSRUWHGFRQFOXVLRQ LQVXIILFLHQWWRHVWDEOLVKSUREDEOHFDXVHLQWKDWWKHDQRQ\PRXV FDOOHUIDLOHGWRSURYLGHWKHQDPHVRIWKHLQGLYLGXDOVUHVLGLQJ $VVWDWHGWKHFRXUWVKDYHFRQVLGHUHGDQXPEHURIIDFWRUVLQ DWWKHKRPHZKHUHWKHPDULMXDQDZDVDOOHJHGO\EHLQJJURZQ LGHQWLI\LQJ WKRVH H[SHFWDWLRQV ZKLFK TXDOLI\ IRU )RXUWK DQGIDLOHGWRSURYLGHDGDWHXSRQZKLFKWKHPDULMXDQDZDV $PHQGPHQWSURWHFWLRQ$OWKRXJKWKHPRVWREYLRXVDPRQJ DOOHJHGO\VHHQDQGWKHSROLFHIDLOHGWRVXIILFLHQWO\FRUURERUDWH WKHIDFWRUVLVWKHSHUVRQjVSURSULHWDU\RUSRVVHVVRU\LQWHUHVWLQ WKHLQIRUPDWLRQ+RZHYHUQRQHRIWKHVHLQVXIILFLHQFLHVDUH WKHSODFHWREHVHDUFKHGRULWHPWREHVHL]HGDSURSHUW\ULJKW SUHVHQWKHUHHYHQWKRXJKWKH&5,GLGQRWREVHUYHWKHFRFDLQH DORQH LV QRW GHWHUPLQDWLYH RI ZKHWKHU WKH LQGLYLGXDO EHLQJ GHOLYHUHG WR 'HIHQGDQWjV UHVLGHQFH ILUVWKDQG 6HH UHDVRQDEO\H[SHFWHGmIUHHGRPIURPJRYHUQPHQWDOLQWUXVLRQl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jVPRWLRQWRVXSSUHVVWKHHYLGHQFHZKHUH EDVHPHQW LQVRIDU DV KH ZDV D WHQDQW RI WKH WZRIDPLO\ WKHDIILGDYLWVXEPLWWHGLQVXSSRUWRIWKHZDUUDQWZDVULFKLQ GZHOOLQJDQGDVDUHVXOWZDVSHUPLWWHGWRXVHWKHEDVHPHQW GHWDLO ZDV EDVHG XSRQ D WLS IURP D NQRZQ DQG UHOLDEOH LQIRUPDQW DQG ZDV FRUURERUDWHG E\ LQGHSHQGHQW SROLFH LQYHVWLJDWLRQ :H QRWH D FRQWUDGLFWLRQ LQ WKH GLVWULFW FRXUWjV GHFLVLRQ LQ WKLV UHJDUG % 6FRSHRIWKH:DUUDQW 6SHFLILFDOO\ DW WKH VXSSUHVVLRQ KHDULQJ KHOG RQ $SULO WKH GLVWULFW FRXUW KHDUG FRQVLGHUDEOH WHVWLPRQ\ IURP 'HIHQGDQWjV PRWKHU UHJDUGLQJ WKH FRQILJXUDWLRQ RI WKH GXSOH[ DQG WKH UHODWLRQVKLS RI WKH RFFXSDQWV 'HIHQGDQWQH[WDUJXHVWKDWHYHQLIWKHZDUUDQWZDVYDOLGO\ WKHUHRI DQG FRQFOXGHG WKDW 'HIHQGDQW DQG .HZLQ KDG VWDQGLQJ WR LVVXHGWKHJUDPVRIFRFDLQHVHL]HGIURPWKHEDVHPHQWRI FKDOOHQJH WKH VHDUFK RI WKH EDVHPHQW s$ DW +RZHYHU LQ WKH WKHGZHOOLQJVKRXOGKDYHEHHQVXSSUHVVHGEHFDXVHWKHRIILFHU GLVWULFW FRXUWjV FRUUHVSRQGLQJ RUGHU WR WKH VXSSUHVVLRQ KHDULQJ ILOHG RQ H[FHHGHGWKHVFRSHRIWKHZDUUDQWLQVHDUFKLQJWKHEDVHPHQW 0D\ WKH FRXUW PDGH D FRQWUDU\ UXOLQJ o EDVHG XSRQ WKH VDPH DUHD'HIHQGDQWFRQWHQGVWKDWWKHGLVWULFWFRXUWHUURQHRXVO\ WHVWLPRQ\ WKDW 'HIHQGDQWjV PRWKHU SURYLGHG DW WKH KHDULQJ o DQG KHOG WKDW mQHLWKHU .HZLQ .LQJ QRU .HQQHWK .LQJ HQMR\HG D OHJLWLPDWH H[SHFWDWLRQ IRXQGWKDW'HIHQGDQWGLGQRWKDYHVWDQGLQJWRFKDOOHQJHWKH RI SULYDF\ ZLWK UHVSHFW WR WKH EDVHPHQW $FFRUGLQJO\ WKH\ KDYH QR VFRSHRIWKHZDUUDQWRQWKHEDVLVWKDWQHLWKHUKHQRU.HZLQ µVWDQGLQJj WR FKDOOHQJH WKH VHDUFK RI WKH EDVHPHQW DQG WKH VHL]XUH RI FUDFN HQMR\HGDOHJLWLPDWHH[SHFWDWLRQRISULYDF\LQWKHEDVHPHQW FRFDLQH IURP WKH EDVHPHQWl s$ DW 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ DUHD :H DJUHH ZLWK 'HIHQGDQWjV FRQWHQWLRQ WKDW KH KDG FRXUWj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jVPRWKHU@RZQHGWKH %HFDXVH )RXUWK $PHQGPHQW ULJKWV DUH mSHUVRQDOl VHH ZDVKHU DQG GU\HU ZKLFK ZHUH LQ WKH EDVHPHQW EXW 5DNDV Y ,OOLQRLV 86 WKH FHQWUDO HYHU\RQHLQWKHKRXVHXVHGWKHPLQFOXGLQJ.HZLQDQG LQTXLU\LQDQ\VXSSUHVVLRQKHDULQJLVZKHWKHUWKHGHIHQGDQW >'HIHQGDQW@0UV.LQJGHQLHGWKDWWKHEDVHPHQWZDV FKDOOHQJLQJWKHDGPLVVLRQRIHYLGHQFHKDVVKRZQDOHJLWLPDWH mRSHQWRWKHSXEOLFl6KHGHVFULEHGLWDVmRSHQWRZKR H[SHFWDWLRQ RI SULYDF\ LQ WKH SODFH VHDUFKHG RU WKH WKLQJ OLYHGLQWKHKRXVHl$Q\RQHLQWKHEDVHPHQWZRXOGKDG VHL]HG.DW]Y8QLWHG6WDWHV86VHH WRKDYHEHHQLQYLWHGLQE\DWHQDQW 0LQQHVRWDY2OVRQ868QLWHG6WDWHV Y .LQFDLGH )G WK &LU $ 7KH EDVHPHQW FRXOG EH UHDFKHG LQ RQH RI WZR ZD\V GHWHUPLQDWLRQRIZKHWKHUDOHJLWLPDWHH[SHFWDWLRQRISULYDF\ HLWKHUWKURXJKWKHmEDFNlGRRURIIDVPDOOSRUFKRQWKH H[LVWVLQYROYHVDWZRSDUWLQTXLU\m)LUVWZHDVNZKHWKHUWKH VLGHRIWKHKRXVHRUYLDDFRPPRQKDOOZD\LQWKHLQWHULRU LQGLYLGXDOE\FRQGXFWKDVH[KLELWHGDQDFWXDOH[SHFWDWLRQRI RIWKHKRXVH$GRRUIURPWKHNLWFKHQRIWKHILUVWIORRU SULYDF\ WKDW LV ZKHWKHU KH KDV VKRZQ WKDW KH VRXJKW WR XQLWRSHQHGLQWRWKLVFRPPRQKDOOZD\DVGLGGRRUVIURP SUHVHUYH VRPHWKLQJ DV SULYDWH 6HFRQG ZH LQTXLUH WKH VHFRQG DQG WKLUG IORRU 7KH EDVHPHQW ZDV QRW ZKHWKHUWKH LQGLYLGXDOjVH[SHFWDWLRQRISULYDF\LVRQHWKDW ORFNHG VRFLHW\LVSUHSDUHGWRUHFRJQL]HDVUHDVRQDEOHl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mIUHH UHLQl WR WKH ZKROH KRXVH mIURP WKH EDVHPHQWWRWKHWKLUGIORRUl 2QWKHGD\WKDWWKHVHDUFKZDUUDQWZDVH[HFXWHGWKHGRRU IURPWKHFRPPRQKDOOZD\WRmEDFNlSRUFKZDVFORVHG 7KH TXHVWLRQ RI ZKHWKHU D GHIHQGDQW KDV mVWDQGLQJl WR FKDOOHQJH DQ EXWDOORIWKHGRRUVLQWRWKHOLYLQJXQLWVZHUHRSHQ$Q DOOHJHGO\ LOOHJDO VHDUFK FROODSVHV LQWR WKH VXEVWDQWLYH LVVXH RI ZKHWKHU WKH DJHQWZKRZDVSDUWRIWKHHQWU\WHDPGLGQRWUHFDOOWKHUH GHIHQGDQW KDG D OHJLWLPDWH H[SHFWDWLRQ RI SULYDF\ 6HH 8QLWHG 6WDWHV Y 0DGGR[ )G WK &LU ,I WKHUH LV QR OHJLWLPDWH EHLQJDGRRURQWKHHQWUDQFHWRWKHEDVHPHQWDQGKHZDV H[SHFWDWLRQ RI SULYDF\ mLW DGGV QRWKLQJ WR VD\ WKDW WKH GHIHQGDQW KDG µQR FHUWDLQWKDWQRRQHKDGWRDFWXDOO\RSHQDGRRUWRJHWLQWR VWDQGLQJjl ,G WKHEDVHPHQW 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ ,QDFDVHRQSRLQWWRWKDWRIWKHLQVWDQWFDVHWKH6XSUHPH m/HJLWLPDWLRQRIH[SHFWDWLRQVRISULYDF\E\ODZPXVWKDYH &RXUW RI &RQQHFWLFXW KHOG WKDW WKH GHIHQGDQWjV VXEMHFWLYH D VRXUFH RXWVLGH RI WKH )RXUWK $PHQGPHQW HLWKHU E\ H[SHFWDWLRQ RI SULYDF\ LQ WKH FRPPRQ EDVHPHQW RI D WZR UHIHUHQFHWRFRQFHSWVRIUHDORUSHUVRQDOSURSHUW\ODZRUWR IDPLO\ KRXVH ZDV UHDVRQDEOH DQG ZDV DQ H[SHFWDWLRQ WKDW XQGHUVWDQGLQJVWKDWDUHUHFRJQL]HGDQGSHUPLWWHGE\VRFLHW\l VRFLHW\ ZRXOG DOVR UHFRJQL]H DV VXFK 6HH &RQQHFWLFXW Y 5DNDV86DWQ7KHFRXUWVKDYHFRQVLGHUHGD 5HGGLFN $G &RQQ 7KH FRXUW QXPEHU RI IDFWRUV LQ LGHQWLI\LQJ WKRVH H[SHFWDWLRQV ZKLFK WKHUHIRUHFRQFOXGHGWKDWmEHFDXVHWKHVHDUFKWKDWGLVFORVHG TXDOLI\IRU)RXUWK$PHQGPHQWSURWHFWLRQ$OWKRXJKWKHPRVW WKHVKRWJXQ>ZKLFKZDVIRXQGKLGGHQLQDZDVKLQJPDFKLQH REYLRXV DPRQJ WKH IDFWRUV LV WKH SHUVRQjV SURSULHWDU\ RU LQWKHEDVHPHQW@ZDVQRWDXWKRUL]HGE\DZDUUDQWWKHIUXLWRI SRVVHVVRU\LQWHUHVWLQWKHSODFHWREHVHDUFKHGRULWHPWREH WKDWVHDUFKWKHVKRWJXQVKRXOGKDYHEHHQVXSSUHVVHGDWWKH VHL]HGDSURSHUW\ULJKWDORQHLVQRWGHWHUPLQDWLYHRIZKHWKHU GHIHQGDQWjVWULDOl,GFLWLQJ:RQJ6XQY8QLWHG6WDWHV WKH LQGLYLGXDO UHDVRQDEO\ H[SHFWHG mIUHHGRP IURP 86,QVRKROGLQJWKHFRXUWQRWHGWKH JRYHUQPHQWDOLQWUXVLRQl0DQFXVLY'H)RUWH86 GLVWLQFWLRQ EHWZHHQ WKH WZRIDPLO\ GZHOOLQJ LQYROYHG DQG 2WKHUIDFWRUVLQFOXGHZKHWKHUWKHGHIHQGDQWKDV PXOWLXQLWDSDUWPHQWEXLOGLQJVZKHQLWVWDWHGWKDWm>S@ROLFH WKHULJKWWRH[FOXGHRWKHUVIURPWKHSODFHLQTXHVWLRQZKHWKHU REVHUYDWLRQV LQ WKH FRPPRQ DUHDV RI PXOWLSOH IDPLO\ KH KDG WDNHQ QRUPDO SUHFDXWLRQV WR PDLQWDLQ KLV SULYDF\ GZHOOLQJV GR QRW FRQVWLWXWH D VHDUFK XQGHU WKH IRXUWK ZKHWKHUKHKDVH[KLELWHGDVXEMHFWLYHH[SHFWDWLRQWKDWWKHDUHD DPHQGPHQW LI WKH FLUFXPVWDQFHV LQGLFDWH WKDW WKH DUHD LV ZRXOGUHPDLQIUHHIURPJRYHUQPHQWDOLQWUXVLRQDQGZKHWKHU UHDGLO\DFFHVVLEOHWRRXWVLGHUV7KHFRQWUDU\LVWUXHKRZHYHU KH ZDV OHJLWLPDWHO\ RQ WKH SUHPLVHV 6HH 8QLWHG 6WDWHV Y LIWKHDUHDLVVXIILFLHQWO\VHFXUHGVRDVWRJLYHWKHWHQDQWVD &DVVLW\ )G WK &LU YDFDWHG DQG MXVWLILHGH[SHFWDWLRQRISULYDF\l,GFLWDWLRQVRPLWWHG UHPDQGHGRQRWKHUJURXQGV86UHYjGRQ RWKHUJURXQGV)6XSS('0LFKDIIjG $JDLQVW WKLV EDFNGURS ZH ZLOO QRZ GHWHUPLQH ZKHWKHU )GVHHDOVR5DZOLQJVY.HQWXFN\86 'HIHQGDQW KDG D UHDVRQDEOH H[SHFWDWLRQ RI SULYDF\ LQ WKH 8QLWHG6WDWHVY+D\GHO)GWK EDVHPHQW RI WKH WZRIDPLO\ GXSOH[ ZKHUH KH UHVLGHG &LU 3XUVXDQWWR.DW]EHIRUHDSODFHFDQEHODEHOHGmSULYDWHlRU mSXEOLFlIRUSXUSRVHVRIGHWHUPLQLQJWKHUHDVRQDEOHQHVVRID ,Q WKLV FDVH 'HIHQGDQW H[KLELWHG DQ DFWXDO VXEMHFWLYH SHUVRQjVH[SHFWDWLRQRISULYDF\LWLVQHFHVVDU\WRFRQVLGHU H[SHFWDWLRQRISULYDF\LQWKHEDVHPHQWE\KLGLQJWKHFRFDLQH ERWK WKH QDWXUH RI WKH SODFH DQG WKH PDQQHU LQ ZKLFK WKH WKHUH 6HH %RQG 6 &W DW ILQGLQJ WKDW WKH SHUVRQLVXVLQJLW.DW]86DW$VWKHRIWTXRWHG GHIHQGDQWVRXJKWWRSUHVHUYHKLVSULYDF\E\SODFLQJWKHEULFN SKUDVH JRHV mWKH )RXUWK $PHQGPHQW SURWHFWV SHRSOH QRW RIFRFDLQHLQDQRSDTXHEDJDQGSODFLQJLWGLUHFWO\DERYHKLV SODFHVl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j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l,GFLWDWLRQVRPLWWHG FDVHE\FDVHEDVLV +RZHYHU WKH GLVVHQW GLVDJUHHG ZLWK WKH PDMRULW\jV $OWKRXJK WKLV &RXUW KDV UHFRJQL]HG WKDW D WHQDQW LQ DQ FRQFOXVLRQEDVHGXSRQWKHXQLTXHQDWXUHRIWKHOLPLWHGVL]HRI DSDUWPHQWEXLOGLQJKDVDUHDVRQDEOHH[SHFWDWLRQRISULYDF\LQ WKH GZHOOLQJ 6HH +ROODQG )G DW 1HZPDQ s WKH FRPPRQ DUHD RI WKH EXLOGLQJ QRW RSHQ WR WKH JHQHUDO GLVVHQWLQJ6SHFLILFDOO\sXGJH1HZPDQRSLQHGWKDWm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jVl,G KDV\HWWRVSHFLILFDOO\FRQVLGHUZKHWKHUWKHEDVHPHQWRIVXFK DGZHOOLQJLVHQWLWOHGWR)RXUWK$PHQGPHQWSURWHFWLRQ7KH 6WDWHFRXUWVDVZHOOKDYHFRQVLGHUHGWKHXQLTXHQDWXUHRI FRXUWV ZKLFK KDYH FRQVLGHUHG WKH LVVXH DUH VSOLW DV WR WKH VPDOOOLPLWHGIDPLO\GZHOOLQJVDVRSSRVHGWRODUJHPXOWLXQLW RXWFRPHWKHUHE\UHQGHULQJPRUHXQFHUWDLQWKHGHWHUPLQDWLRQ DSDUWPHQW EXLOGLQJV IRU SXUSRVHV RI )RXUWK $PHQGPHQW RIZKHWKHUmVRFLHW\lZRXOGILQGDOHJLWLPDWHH[SHFWDWLRQRI MXULVSUXGHQFH)RUH[DPSOHLQ3HRSOHY.LOOHEUHZ1 SULYDF\LQWKHEDVHPHQWDUHDRIWKHGZHOOLQJLQWKLVFDVH :G0LFK&W$SSWKH0LFKLJDQ&RXUWRI $SSHDOV KHOG WKDW WKH GHIHQGDQWj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o ZKLFK LV XVHG E\ UHVLGHQWV DQG WKHLU LQWHQGHGIRUWKHXVHRIWKHRFFXSDQWVDQGWKHLUJXHVWV JXHVWV WKH ODQGORUG DQG KLV DJHQWV DQG RWKHUV KDYLQJ DQG DQ DUHD LQ ZKLFK WKH RFFXSDQWV KDYH D UHDVRQDEOH OHJLWLPDWH UHDVRQV WR EH RQ WKH SUHPLVHV o DQG WKHUHIRUH H[SHFWDWLRQ RI SULYDF\ ,Q WKH FDVH DW EDU WKHUH ZHUH FRQFOXGHGWKDWmWKHEDVHPHQWRI%ULJKWRQ:D\FRQVWLWXWHG RQO\WZRDSDUWPHQWVVKDULQJDFRPPRQKDOOZD\HQWU\WR DFRPPRQDUHDRIWKHEXLOGLQJDFFHVVLEOHWRDOOWHQDQWVDQG ZKLFK ZDV OLPLWHG E\ ULJKW WR WKH RFFXSDQWV 7KHVH WKH ODQGORUG $FFRUGLQJO\ 0F*UDQH GLG QRW KDYH DQ RFFXSDQWVFHUWDLQO\FRXOGH[SHFWWKDWDKLJKGHJUHHRI H[SHFWDWLRQRISULYDF\H[WHQGLQJLQWRWKHEDVHPHQWDQGWKH SULYDF\ZRXOGEHHQMR\HGLQWKDWDUHD YLVXDO LQVSHFWLRQ RI D VWRUDJH ORFNHU LQ WKLV DUHD GLG QRW YLRODWHWKHIRXUWKDPHQGPHQWl,GFLWLQJ8QLWHG6WDWHVY ,GDWHPSKDVLVDGGHG 8QLWHG6WDWHVY.LQJ 1R 1R 8QLWHG6WDWHVY.LQJ EDFN\DUG DQ DUHD RSHQ DV D FRUULGRU WR D VDOHVPDQ RU (LVOHU )G WK &LU 8QLWHG 6WDWHV Y RWKHUEXVLQHVVPHQZKRPLJKWDSSURDFKWKHWHQDQWVLQWKH /XVFKHQ)GWK&LU FRXUVH RI WKHLU WUDGH 7KLV DSDUWPHQW ZDV >WKH GHIHQGDQWj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jV@ULJKWWRSULYDF\DQ\PRUHWKDQ VKRZDQ\HIIRUWVWRH[FOXGHRWKHUVIURPWKHVSDFHEHFDXVHWKH LV DEVROXWHO\ UHTXLUHG :H EHOLHYH WKDW WKH EDFN\DUG ODQGORUGDQGWZRRWKHUWHQDQWVKDGDFFHVVWRWKHFORVHW,GDW DUHDRI>WKHGHIHQGDQWjV@KRPHLVVXIILFLHQWO\UHPRYHG +RZHYHULQDSDUWLDOFRQFXUUHQFHGLVVHQWRQHRIWKH DQGSULYDWHLQFKDUDFWHUWKDWKHFRXOGUHDVRQDEO\H[SHFW SDQHO PHPEHUV VSHFLILFDOO\ QRWHG WKDW WKH GZHOOLQJ LQ SULYDF\7KXVDFWXDOLQYDVLRQLQWRWKLVSURWHFWHGDUHD TXHVWLRQ ZDV D GXSOH[ DQG RSLQHG WKDW m>L@Q >KLV@ YLHZ D DQGVHDUFK>WKHUHRI@YLRODWHVWKH)RXUWK$PHQGPHQW WHQDQWLQDGXSOH[KDVDUHDVRQDEOHH[SHFWDWLRQRISULYDF\LQ FRPPRQDUHDVVKDUHGRQO\E\WKHGXSOH[jVWHQDQWVDQGWKH ,GFLWDWLRQVDQGIRRWQRWHRPLWWHGHPSKDVLVDGGHG ODQGORUGl ,G DW +HDQH\ s FRQFXUULQJ LQ SDUW DQG GLVVHQWLQJLQSDUWsXGJH+HDQH\ZHQWRQWRGLVWLQJXLVKWKH 7KHGLVWLQFWLRQEHWZHHQDGZHOOLQJRFFXSLHGE\DOLPLWHG WKUHHRWKHUFDVHVIURPWKH(LJKWK&LUFXLWZKLFKKHOGWKDWmD QXPEHURIWHQDQWVVXFKDVDVPDOOWZRIDPLO\KRXVHDQGD WHQDQWGRHVQRWKDYHDUHDVRQDEOHH[SHFWDWLRQRISULYDF\LQ ODUJH PXOWLXQLW DSDUWPHQW EXLOGLQJ IRU SXUSRVHV RI )RXUWK WKHFRPPRQDUHDVRIDQDSDUWPHQWEXLOGLQJlQDPHO\8QLWHG $PHQGPHQWJXDUDQWHHVZDVDOVRQRWHGE\WKH8QLWHG6WDWHV 6WDWHV Y 0F*UDQH )G WK &LU 8QLWHG &RXUWRI$SSHDOVIRUWKH6HFRQG&LUFXLW6HH8QLWHG6WDWHVY 6WDWHVY/XVFKHQ)GWK&LUDQG8QLWHG +ROODQG )G G &LU 1HZPDQ s 6WDWHV Y (LVOHU )G WK &LU ,G sXGJH GLVVHQWLQJ,Q+ROODQGWKHWZRMXGJHPDMRULW\UHYHUVHGWKH +HDQH\RSLQHGDVIROORZV GLVWULFW FRXUWjV RUGHU JUDQWLQJ WKH GHIHQGDQWjV PRWLRQ WR VXSSUHVV HYLGHQFH VHL]HG LQFLGHQW WR WKH GHIHQGDQWjV 7KHVHFDVHVDUHGLVWLQJXLVKDEOHIURPWKHIDFWVRIWKLV ZDUUDQWOHVVDUUHVW,GDW7KHFRXUWGLGVRRQWKHEDVLV FDVH)LUVW0F&DVWHUOLYHGLQDGXSOH[ZKHUHRQO\KH WKDWWKHGHIHQGDQWGLGQRWHQMR\DUHDVRQDEOHH[SHFWDWLRQRI DQGWKHXSVWDLUVWHQDQWVUHVLGHG(LVOHU0F*UDQHDQG SULYDF\LQWKHYHVWLEXOHRIWKHWZRVWRU\GZHOOLQJZKHUHWKH /XVFKHQLQYROYHGPXOWLSOHXQLWDSDUWPHQWEXLOGLQJVZLWK GHIHQGDQWUHVLGHGLQWKHVHFRQGIORRUDSDUWPHQW,GDW PRUH WKDQ WZR WHQDQWV +HQFH IHZHU LQGLYLGXDOV KDG 7KHFRXUWUHDVRQHGWKDWm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jV WHQDQWVDQGWKHODQGODG\$VDVWRUDJHDUHDWKHFORVHW WHQDQWVDQGWKHODQGODG\ OLNHO\ZRXOGQRWEHDFFHVVHGE\DQ\RQHRWKHUWKDQWKH WHQDQWVDQGODQGODG\DQGZRXOGFHUWDLQO\QRWEHDFFHVVHG 0F&DVWHU)GDW+HDQH\sFRQFXUULQJLQSDUW DV IUHTXHQWO\ DV D KDOOZD\ RU EDVHPHQW 7KXV DQGGLVVHQWLQJLQSDUWFLWDWLRQVRPLWWHGHPSKDVLVDGGHG DFFHVVLELOLW\ WR WKH FORVHW ZDV PRUH OLPLWHG WKDQ WKH KDOOZD\VRUEDVHPHQWDGGUHVVHGLQRXUSULRUFDVHV ,QDVLPLODUYHLQWKH8QLWHG6WDWHV&RXUWRI$SSHDOVIRUWKH )LIWK&LUFXLWFRQVLGHUHGWKHIDFWWKDWWKHGHIHQGDQWj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jV@ RWKHUWHQDQWVDQGWKDWDFFHVVWRWKHHQWU\ZD\ZDVOLPLWHG KRPH DQG WKDW )RXUWK $PHQGPHQW SURWHFWLRQV DUH DV D PDWWHU RI ULJKW WR WKH WZR EDVHPHQW WHQDQWV QRUPDOO\DIIRUGHGVXFKSODFHVWKHPXOWLXQLWFKDUDFWHURI )XUWKHUPRUHWKHRXWHUGRRUZDVDOZD\VORFNHGZLWKRQO\ WKLVUHVLGHQFHUHVXOWVLQDUHOLQTXLVKPHQWRIDQ\ULJKWRI WKHEXLOGLQJjVWKUHHWHQDQWVKDYLQJNH\V%DVHGRQWKHVH SULYDF\UHODWLQJWRWKHEDFN\DUG%HFDXVHLWLVORFDWHGLQ IDFWV WKH FRXUW IRXQG WKDW WKH WZR EDVHPHQW WHQDQWV DIRXUXQLWDSDUWPHQWEXLOGLQJWKHJRYHUQPHQWFRQWHQGV H[HUFLVHGmFRQVLGHUDEO\PRUHFRQWURORYHUDFFHVVWRWKDW WKDW>WKHGHIHQGDQWjV@KRPHVKRXOGQRWEHHQWLWOHGWRWKH SRUWLRQRIWKHEXLOGLQJWKDQZRXOGEHWUXHLQDPXOWLXQLW SURWHFWLRQ XVXDOO\ DIIRUGHG WKH FXUWLODJH RI D SXUHO\ FRPSOH[DQGKHQFHFRXOGUHDVRQDEO\EHVDLGWRKDYHD SULYDWH UHVLGHQFH /LNH D PRWHO RU ODUJH DSDUWPHQW JUHDWHUUHDVRQDEOHH[SHFWDWLRQRISULYDF\WKDQZRXOGEH FRPSOH[WKLVEDFN\DUGLVDQDUHDFRPPRQWRRUVKDUHG WUXHRIRFFXSDQWVRIODUJHEXLOGLQJVl ZLWK RWKHU WHQDQWV LV RSHQ WR WKH QHLJKERUV LQ WKH DGMDFHQWEXLOGLQJDQGWKXVQRWZLWKLQWKHJXDUDQWHHVRI 6LPLODU WR WKH GHIHQGDQW LQ )OXNHU 0F&DVWHUjV WKH)RXUWK$PHQGPHQW EXLOGLQJFRQVLVWHGRIRQO\WZRXQLWV%RWKWKHIURQWDQG EDFNGRRUVRIWKHGXSOH[KDGORFNVDQGRQO\WKHWHQDQWV ,G FLWDWLRQV RPLWWHG 7KH )LIWK &LUFXLW UHMHFWHG WKH DQGWKHODQGODG\KDGDFFHVVWRWKHGXSOH[)XUWKHUWKH JRYHUQPHQWjVDUJXPHQWDQGKHOGWKDW FORVHWZDVVKDUHGRQO\E\WKHWHQDQWVDQGWKHODQGODG\ 7KXVEHFDXVHWKHULJKWWRDFFHVVWRWKHGXSOH[DQGXVHRI >W@KH EDFN\DUG RI >WKH GHIHQGDQWjV@ KRPH ZDV QRW D WKH FORVHW ZDV OLPLWHG WR WKHVH LQGLYLGXDOV 0F&DVWHU FRPPRQ SDVVDJHZD\ QRUPDOO\ XVHG E\ WKH EXLOGLQJjV FRXOGUHDVRQDEO\KDYHH[SHFWHGJUHDWHUSULYDF\WKDQLIKH WHQDQWVIRUJDLQLQJDFFHVVWRWKHDSDUWPHQWV1RULVWKH UHVLGHGLQDPXOWLSOHXQLWEXLOGLQJ 7KHQDWXUHRIWKHOLYLQJDUUDQJHPHQWLQDGXSOH[DV RSSRVHGWRDPXOWLXQLWEXLOGLQJOHDGVPHWRFRQFOXGH 7KH &RXUW RI $SSHDOV IRU WKH 1LQWK &LUFXLW FLWHG WKLV &RXUWjV WKDWDWHQDQWLQDGXSOH[KDVDUHDVRQDEOHH[SHFWDWLRQRI GHFLVLRQ LQ &DUULJHU IRU WKH SURSRVLWLRQ WKDW mD WHQDQW LQ DQ DSDUWPHQW EXLOGLQJ KDV D UHDVRQDEOH H[SHFWDWLRQ RI SULYDF\ LQ WKH FRPPRQ DUHDV RI WKH EXLOGLQJ QRW RSHQ WR WKH JHQHUDO SXEOLFl 6HH )OXNHU )G Q WK &LU FLWLQJ &DUULJHU )G