United States v. Faasse

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21  8QLWHG6WDWHVY)DDVVH 1R 3XUVXDQW WR 6L[WK &LUFXLW 5XOH  (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU ,9&RQFOXVLRQ )LOH 1DPH DS ,Q 8QLWHG 6WDWHV Y 0RUULVRQ GHFLGHG WKLV WHUP WKH 6XSUHPH&RXUWZDUQHGDJDLQVWRYHUO\HODVWLFFRQFHSWLRQVRI 81,7('67$7(6&28572)$33($/6 WKH &RPPHUFH &ODXVH WKDW ZRXOG JLYH &RQJUHVV DXWKRULW\ RYHUmIDPLO\ODZDQGRWKHUDUHDVRIWUDGLWLRQDOVWDWHUHJXODWLRQ )257+(6,;7+&,5&8,7 VLQFH WKH DJJUHJDWH HIIHFW RI PDUULDJH GLYRUFH DQG BBBBBBBBBBBBBBBBB FKLOGUHDULQJ RQ WKH QDWLRQDO HFRQRP\ LV XQGRXEWHGO\ VLJQLILFDQWl0RUULVRQ6&WDW0LQGIXORIWKLV DGPRQLWLRQZHKROGWRGD\WKDWWKHSURYLVLRQVRIWKH&KLOG 81,7(' 67$7(6 2) $0(5,&$ ; 6XSSRUW5HFRYHU\$FWRIFRQWDLQHGLQ86&† 3ODLQWLII$SSHOOHH   H[FHHG&RQJUHVVjVDXWKRULW\XQGHUWKH&RQVWLWXWLRQ  ,Q VR GRLQJ ZH REVHUYH WKDW WKLV UXOLQJ GRHV QRW SUHYHQW  1R &RQJUHVV IURP DVVLVWLQJ WKH 6WDWHV LQ REWDLQLQJ LQWHUVWDWH Y  HQIRUFHPHQWRIWKHLUFRXUWVjRUGHUV&RQJUHVVFDQGRVR DQG !  KDVGRQHVR SXUVXDQWWRWKH)XOO)DLWKDQG&UHGLW&ODXVH6HH 7,027+< *25'21 )$$66(  )XOO)DLWKDQG&UHGLWIRU&KLOG6XSSRUW2UGHUV$FW3XE/ 'HIHQGDQW$SSHOODQW  1R6WDW   FRGLILHGDVDPHQGHGDW 1 †86&%  %XW&RQJUHVVPD\QRWXQGHUWKH JXLVHRIWKH&RPPHUFH3RZHUFULPLQDOL]HWKHIDLOXUHWRREH\ $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW DVWDWHFRXUWRUGHUZKHQWKH6WDWHLWVHOIKDVGHFOLQHGWRGRVR IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDW*UDQG5DSLGV 6XFKOHJLVODWLRQGRHVFRQVLGHUDEOHYLROHQFHWRVWDWHUHJXODWLRQ 1Rn5REHUW+ROPHV%HOO'LVWULFWsXGJH E\ IUDJPHQWLQJ WKH VWDWH FRXUWVj DELOLW\ WR DQQRXQFH MXGJPHQWVDQGWKHLUDELOLW\WRGHWHUPLQHWKHVDQFWLRQWKDWZLOO 6XEPLWWHGsXQH DWWHQGGLVREHGLHQFHRIWKRVHMXGJPHQWV$EVHQWDVWURQJHU FRQQHFWLRQZLWKWKHFRPPHUFLDOFRQFHUQVWKDWDUHFHQWUDOWR 'HFLGHGDQG)LOHG6HSWHPEHU WKH &RPPHUFH &ODXVH WKLV LQWUXVLRQ GLVUXSWV WKH IHGHUDO EDODQFHWKDWWKH)UDPHUVHQYLVLRQHGDQGWKDWZHDUHREOLJHG %HIRUH%2**61255,6DQG%$7&+(/'(5&LUFXLW WRHQIRUFH/RSH]86DW .HQQHG\sFRQFXUULQJ  sXGJHV 7KHRUGHURIWKHGLVWULFWFRXUWLVWKHUHIRUH5(9(56(' BBBBBBBBBBBBBBBBB &2816(/ 21 %5,()  &KULVWRSKHU 3 VH@ 7KH IROORZLQJ \HDU )DDVVH ILOHG LQ 0LFKLJDQ FRXUW D FRQWHQWLRQV     ZH ZRXOG KDYH WR SLOH LQIHUHQFH XSRQ SHWLWLRQ WR HVWDEOLVK SDWHUQLW\ RI 1RHOOH  7KH VWDWH FRXUW LQIHUHQFH LQ D PDQQHU WKDW ZRXOG ELG IDLU WR FRQYHUW DJUHHGWKDW)DDVVHZDV1RHOOHjVIDWKHUDQGRUGHUHGKLPWR FRQJUHVVLRQDO DXWKRULW\ XQGHU WKH &RPPHUFH &ODXVH WR D PDNHZHHNO\FKLOGVXSSRUWSD\PHQWVRI7KHRUGHU JHQHUDOSROLFHSRZHURIWKHVRUWUHWDLQHGE\WKH6WDWHVl,GDW HQWHUHG RQ sDQXDU\   PDGH WKH VXSSRUW REOLJDWLRQ $FFRUGLQJO\ZHFRQFOXGHWKDWWKH&65$LVQRWDYDOLG UHWURDFWLYHWR'HFHPEHU$VDUHVXOW)DDVVHEHJDQKLV UHJXODWLRQ RI LQWHUVWDWH FRPPHUFH XQGHU /RSH]jV WKLUG DQG SD\PHQWVLQDUUHDUV7KH0LFKLJDQFRXUWZRXOG ILQDOFDWHJRU\ ODWHULQFUHDVHWKHVXSSRUWRUGHUWRSHUZHHN )DDVVHjVFKLOGVXSSRUWSD\PHQWVZHUHHUUDWLF,QKH PDGHIRXUSD\PHQWVWRWDOLQJ,QKHPDGHWHQ  8QLWHG6WDWHVY)DDVVH 1R 1R 8QLWHG6WDWHVY)DDVVH  WKHDEVHQFHRIDPHFKDQLVPWKDWZRXOGOLQNSDUWLFXODUVXSSRUW SD\PHQWV IRU D WRWDO RI   )DDVVH PDGH WHQ PRUH REOLJDWLRQVWRVRPHVRUWRIHFRQRPLFHQWHUSULVHVXVWDLQLQJ SD\PHQWVLQWKHVHFDPHWR7KHIROORZLQJ\HDU WKHFRQVWLWXWLRQDOLW\RIWKH&65$RQWKHEDVLVRILWVFXUUHQW EURXJKWSD\PHQWVRILQVHYHQLQVWDOPHQWV,Q MXULVGLFWLRQDO QH[XV ZRXOG UHTXLUH SDULQJ WKH m,QWHUVWDWH )DDVVHPDGHRQHSD\PHQWRI%\6HSWHPEHURIWKDW &RPPHUFH&ODXVHlWRWKHm,QWHUVWDWH&ODXVHl6HHLG7KLV \HDUKLVDUUHDUDJHKDGJURZQWR RIFRXUVHZHFDQQRWGR 8QLWHG 6WDWHV 0DUVKDOV DUUHVWHG )DDVVH LQ VRXWKHUQ 7KHPDQQHULQZKLFKWKHDFWLYLW\UHJXODWHGE\WKH&65$ &DOLIRUQLD RQ $XJXVW    +H ZDV FKDUJHG ZLWK RQH VXEVWDQWLDOO\DIIHFWVLQWHUVWDWHFRPPHUFHLVWKHUHIRUHRSDTXH FRXQW RI ZLOOIXO IDLOXUH WR SD\ SDVW GXH FKLOG VXSSRUW LQ m>7@RWKHH[WHQWWKDWFRQJUHVVLRQDOILQGLQJVZRXOGHQDEOHXV YLRODWLRQRIWKH&KLOG6XSSRUW5HFRYHU\$FW m&65$l  WRHYDOXDWHWKHOHJLVODWLYHMXGJPHQWWKDWWKHIDLOXUHWRVDWLVI\ 86&†  7KHPDWWHUZDVUHIHUUHGWRDPDJLVWUDWH FKLOG VXSSRUW REOLJDWLRQV VXEVWDQWLDOO\ DIIHFWV LQWHUVWDWH MXGJHEHIRUHZKRP)DDVVHSOHGJXLOW\7KHPDJLVWUDWHMXGJH FRPPHUFHWKH\DUHODFNLQJKHUHl/RSH]86DW DFFHSWHG )DDVVHjV SOHD DQG VHQWHQFHG KLP WR VL[ PRQWKVj ,W LV SRVVLEOH WR LQIHU IURP WKH OHJLVODWLYH KLVWRU\ WKDW LPSULVRQPHQWWKHVWDWXWRU\PD[LPXPDQGRUGHUHGKLPWR DSSUR[LPDWHO\  ELOOLRQ LQ LQWHUVWDWH FKLOG VXSSRUW PDNH UHVWLWXWLRQ RI   )DDVVH DSSHDOHG WR WKH REOLJDWLRQVJRXQSDLGDQQXDOO\DQGWKDW&RQJUHVVEHOLHYHG 8QLWHG 6WDWHV 'LVWULFW &RXUW IRU WKH :HVWHUQ 'LVWULFW RI WKDWVRPHIDPLOLHVZHUHGULYHQWRIHGHUDOSXEOLFDVVLVWDQFHDV 0LFKLJDQ DUJXLQJ WKDW HQDFWPHQW RI WKH &65$ H[FHHGHG DUHVXOWRIXQSDLGFKLOGVXSSRUW6HH+55HSDW &RQJUHVVjVDXWKRULW\XQGHUWKH&RPPHUFH&ODXVHDQGWKDW   REVHUYLQJWKDWELOOLRQLQVXSSRUWREOLJDWLRQVDUH WKH PDJLVWUDWH MXGJH KDG DEXVHG KLV GLVFUHWLRQ LQ RUGHULQJ QRWPHWHDFK\HDUDQGWKDWDSSUR[LPDWHO\RQHWKLUGRIFKLOG UHVWLWXWLRQLQWKHIXOODPRXQWRIWKHSDVWGXHFKLOG VXSSRUW VXSSRUW FDVHV FRQFHUQ FKLOGUHQ ZKRVH IDWKHUV OLYH LQ D REOLJDWLRQ7KHGLVWULFWFRXUWDIILUPHG GLIIHUHQW VWDWH   7KHVH REVHUYDWLRQV GR QRW DPRXQW WR D FRQJUHVVLRQDO FRQFOXVLRQ WKDW XQSDLG FKLOG VXSSRUW %HIRUH WKLV FRXUW )DDVVH UHQHZV KLV FKDOOHQJHV WR WKH VXEVWDQWLDOO\DIIHFWVLQWHUVWDWHFRPPHUFHKRZHYHUDQGZH FRQVWLWXWLRQDOLW\RIWKH&65$DQGWRWKHUHVWLWXWLRQRUGHU)RU ZRXOGQRWDFFHSWWKDWFRQFOXVLRQEDVHGRQVXFKILQGLQJVLQ WKHUHDVRQVVHWIRUWKEHORZZHFRQFOXGHWKDWWKH&65$LVQRW DQ\HYHQW6HH8QLWHG6WDWHVY0RUULVRQ6&W DSURSHUH[HUFLVHRI&RQJUHVVjVSRZHUWRUHJXODWHLQWHUVWDWH    QRWLQJWKDWmZKHWKHUSDUWLFXODURSHUDWLRQVDIIHFW FRPPHUFH LQWHUVWDWH FRPPHUFH VXIILFLHQWO\ WR FRPH XQGHU WKH FRQVWLWXWLRQDO SRZHU RI &RQJUHVV WR UHJXODWH WKHP LV ,,7KH&KLOG6XSSRUW5HFRYHU\$FWRI XOWLPDWHO\DMXGLFLDOUDWKHUWKDQDOHJLVODWLYHTXHVWLRQl  7KHOHJLVODWLYHKLVWRU\VXUURXQGLQJWKH&65$UHYHDOVWZR )LUVW WKH PHUH IDFW WKDW WKH DJJUHJDWH VRFLDO FRVWV RI DQ SULQFLSDO FRQFHUQV RQ WKH SDUW RI WKH ODZj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jVWH[WDQGLWVGUDIWHUVjGHVLJQXOWLPDWHO\UHQGHUVWKH  86     mSHUKDSV WKH PRVW IDU UHDFKLQJ ODZFRQVWLWXWLRQDOO\LQILUP  8QLWHG6WDWHVY)DDVVH 1R 1R 8QLWHG6WDWHVY)DDVVH  +RXVH RI 5HSUHVHQWDWLYHV ELOO nZKLFK HYHQWXDOO\ PDUNHWl RQO\ DW WKH PDUJLQV LI DW DOO  ,QGHHG WKH ULJKW WR ZRXOGEHFRPHWKH&65$nOHIWWKHsXGLFLDU\&RPPLWWHHZLWK VXSSRUW SD\PHQWV LV QRW IUHHO\ DOLHQDEOH DQG LQ VRPH DIDYRUDEOHUHFRPPHQGDWLRQ7KH&RPPLWWHH5HSRUWQRWHG LQVWDQFHVWKHSD\PHQWVPXVWEHPDGHWRWKH6WDWHUDWKHUWKDQ WKDWDERXWELOOLRQLQFKLOGVXSSRUWREOLJDWLRQVZHQWXQSDLG GLUHFWO\WRWKHXOWLPDWHEHQHILFLDU\IXUWKHUGHSULYLQJWKHPRI HDFK\HDU+55HSDW  ,QDSSUR[LPDWHO\ SRWHQWLDOWRDIIHFWWKHPDUNHW6HHHJ0LFK&RPS/DZV RQHWKLUG RI FKLOG VXSSRUW FDVHV WKH IDWKHU OLYHV LQ D VWDWH $QQ †  SURYLGLQJ IRU SD\PHQW RI VXSSRUW WR WKH RWKHU WKDQ WKH VWDWH ZKHUH WKH FKLOG RU FKLOGUHQ OLYH WKH RIILFHRIWKH0LFKLJDQIULHQGRIWKHFRXUW $VDUHVXOWFRXUW 5HSRUWFRQWLQXHGDQGILIW\VHYHQSHUFHQWRIFXVWRGLDOSDUHQWV RUGHUHGZHDOWKWUDQVIHUVWRRUIURP0LFKLJDQUHVLGHQWVDUHQRW LQ LQWHUVWDWH FDVHV UHFHLYH FKLOG VXSSRUW SD\PHQWV RQO\ SHUVHDILWREMHFWRIWKHIHGHUDO&RPPHUFH3RZHU RFFDVLRQDOO\ VHOGRP RU QHYHU  ,G  6XJJHVWLQJ WKDW VWDWH HQIRUFHPHQWZDVmWHGLRXVFXPEHUVRPHDQGVORZlWKH5HSRUW 'HVSLWH WKH GLVWLQFWO\ QRQFRPPHUFLDO QDWXUH RI FKLOG DGYRFDWHG D IHGHUDO UHPHG\ WR WDNH mWKH LQFHQWLYH RXW RI VXSSRUWRUGHUVJHQHUDOO\WKHUHPLJKWH[LVWDGLVFUHWHVHWRI PRYLQJ LQWHUVWDWH WR DYRLG SD\PHQWl  ,G  7KH 5HSRUW IDLOXUHVWRVDWLVI\VXSSRUWREOLJDWLRQVWKDWmKDYHDQH[SOLFLW FRQFOXGHG FRQQHFWLRQZLWKRUHIIHFWRQLQWHUVWDWHFRPPHUFHl/RSH]  86 DW   +DG WKH &65$ DQ H[SUHVV MXULVGLFWLRQDO 7KH &RPPLWWHH EHOLHYHV WKDW D FKLOG VKRXOG EH DEOH WR HOHPHQWZKLFKPLJKWOLPLWLWVUHDFKWRWKRVHIDLOXUHVWKH$FW H[SHFW WKH PRVW EDVLF VXSSRUW IURP WKRVH ZKR FKRVH WR PLJKWZLWKVWDQGFRQVWLWXWLRQDOVFUXWLQ\,G,WGRHVQRW7R EULQJWKHFKLOGLQWRWKHZRUOG7KDWH[SHFWDWLRQVKRXOGQRW EHVXUHWKH&65$KDVDMXULVGLFWLRQDOmKRRNlWKHREOLJRU HQGDWWKHVWDWHOLQH7KH&RPPLWWHHIXUWKHUEHOLHYHVWKDW SDUHQWDQGEHQHILFLDU\FKLOGPXVWUHVLGHLQGLIIHUHQW6WDWHV WKHWD[SD\HUVRI$PHULFDVKRXOGEHDEOHWRH[SHFWWKDWWKH  86& †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mKREEOHG E\ D ODE\ULQWK RI REOLJDWLRQKDGQRLQWHUVWDWHFKDUDFWHUDWDOODQGHYHQWKRXJK H[WUDGLWLRQODZVDQGVQDUOVRIUHGWDSHl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mUHJXODWHV HYHU\ &RQJUHVVPDQ(ZLQJWKDWWKHELOOZRXOGmPDNHLWDFULPHIRU LQWHUVWDWHREOLJDWLRQZLWKRXWH[FHSWLRQl%DLOH\)GDW DSDUHQWWRFURVV6WDWHOLQHVLQRUGHUWRDYRLGPDNLQJFRXUW  6PLWKsGLVVHQWLQJ %XWDVZHKDYHDOUHDG\VKRZQ RUGHUHGFKLOGVXSSRUWSD\PHQWVl,GDW+ FKLOGVXSSRUWREOLJDWLRQVDUHQRWFRPPHUFLDOLQFKDUDFWHU,Q  8QLWHG6WDWHVY)DDVVH 1R 1R 8QLWHG6WDWHVY)DDVVH  7KHDFWLYLW\FULPLQDOL]HGE\WKH&65$LVQRWFRPPHUFLDO 3@D\PHQWRIFKLOGVXSSRUWLVQRWFRQGLWLRQHGRQWKH SHUIRUPDQFHRIDUHFLSURFDOGXW\E\WKHREOLJHHQRUGRHVLW EHQHILW WKH REOLJRUl  %DLOH\  )G DW  6PLWK s  7KH $FW ZDV DPHQGHG LQ  DQG QRZ LQFOXGHV D SURYLVLRQ GLVVHQWLQJ   'XH WR WKLV XQLODWHUDO DOORFDWLYH FKDUDFWHU FULPLQDOL]LQJ WUDYHO LQ LQWHUVWDWH FRPPHUFH ZLWK WKH LQWHQW WR HYDGH D VXSSRUW REOLJDWLRQV FDQ LQIOXHQFH WKH mQDWLRQDO FRPPRQ VXSSRUW REOLJDWLRQ $00  86&$ †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mUHPRYH WKH WKH+REEV$FW DQGSURKLELWUHVWUDLQWVRIWUDGHWKDWREVWUXFW LQFHQWLYHl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jVOHJLVODWLYHDXWKRULW\ FRPPHUFH  %DLOH\  )G DW  Q 6PLWK s XQGHUWKH)XOO)DLWKDQG&UHGLW&ODXVH86&RQVWDUW,9 GLVVHQWLQJ   0RUH LPSRUWDQWO\ WKH REVWUXFWLRQ DUJXPHQW †FOVLQFHWKH)UDPHUVFRPPLWWHGLQWHUVWDWHHQIRUFHPHQW FRQIODWHVWKH/RSH]FDWHJRULHV$SURKLELWLRQRQREVWUXFWLRQ RIVWDWHFRXUWRUGHUVWRWKDWSURYLVLRQRIWKH&RQVWLWXWLRQ6HH RIFRPPHUFHGRHVQRWUHJXODWHmDWKLQJlLQFRPPHUFHQRU 0D[)DUUDQG7KH5HFRUGVRIWKH)HGHUDO&RQYHQWLRQRI GRHV REVWUXFWLRQ FRQVWLWXWH D mXVHl RI WKH FKDQQHOV RI DW   VWDWHPHQWRIsDPHV:LOVRQ  UHPDUNLQJ LQWHUVWDWHFRPPHUFHXQGHUWKHFRPPRQPHDQLQJRImXVHl,G WKDW LI WKH /HJLVODWXUH ZHUH QRW HPSRZHUHG WR GHFODUH WKH 5DWKHU &RQJUHVV KDV DXWKRULW\ WR SURKLELW DFWLYLWLHV WKDW HIIHFW RI VWDWH DFWV UHFRUGV DQG MXGLFLDO SURFHHGLQJV mWKH LQWHUIHUHZLWKFRPPHUFHEHFDXVHWKRVHDFWLYLWLHVWDNHQLQWKH SURYLVLRQZRXOGDPRXQWWRQRWKLQJPRUHWKDQZKDWQRZWDNHV DJJUHJDWHVXEVWDQWLDOO\DIIHFWFRPPHUFH7KH&65$PXVW SODFH DPRQJ DOO ,QGHSHQGHQW 1DWLRQVl  VHH DOVR 7KH WKHUHIRUHVWDQGRUIDOOOLNHWKH*XQ)UHH6FKRRO=RQHV$FWDV )HGHUDOLVW1RDW sDPHV0DGLVRQ  sDFRE(&RRNH DUHJXODWLRQXQGHU/RSH]jVILQDOFDWHJRU\ HG   m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l  *UHHQ Y 6DUPLHQWR  ) WKURXJK FDVH E\ FDVH LQTXLU\ WKDW WKH DFWLYLW\ LQ TXHVWLRQ &DV &&'3D  1R  :DVKLQJWRQ DIIHFWHG LQWHUVWDWH FRPPHUFH DQG LW ZDV SDVVHG ZLWKRXW s VLWWLQJ RQ FLUFXLW  m>7@KH SRZHU WR OLPLW WKH HIIHFW RI ILQGLQJVHODERUDWLQJWKHOLQNEHWZHHQWKHDFWLYLW\FULPLQDOL]HG >VWDWH@MXGLFLDOSURFHHGLQJVLVXQGRXEWHGDQGLWZDVZLVHO\ DQGLQWHUVWDWHFRPPHUFH/RSH]86DW 7KH OHIW WR WKH GLVFUHWLRQ RI FRQJUHVV WR UHJXODWH WKH GHJUHH RI &65$ IDLOV FRQVWLWXWLRQDO PXVWHU IRU SUHFLVHO\ WKHVH VDPH IRUFH WR EH JLYHQ WR VXFK SURFHHGLQJVl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mKRRNl7KLVUHDOL]DWLRQLVWURXEOLQJIRUWKH  ,QWKHVHFDVHVWKHSDUWLHVH[HFXWHGFRQWUDFWVIRUWKH 6WDWHVSRVVHVVSULPDU\DXWKRULW\IRUGHILQLQJDQGHQIRUFLQJ VDOHRIJRRGVWKDWZHUHWREHSHUIRUPHGZLWKLQWKHWHUULWRULDO ERWKWKHFULPLQDOODZDQGWKHODZRIGRPHVWLFUHODWLRQV$V OLPLWVRIDSDUWLFXODUVWDWHEXWZKLFKFRQWHPSODWHGWKDWWKH 7KRPDVs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mZH RIIHQVHVDJDLQVWWKHODZRIQDWLRQVDQGQRRWKHUFULPHV WKLQNWKHWUDQVDFWLRQZDVLQLQWHUVWDWHFRPPHUFHl'DKQNH ZKDWVRHYHUDQGLWEHLQJWUXHDVDJHQHUDOSULQFLSOHDQG :DONHU86DW7HPSWLQJWKRXJKLWPD\EHWRDSSO\ RQHRIWKHDPHQGPHQWVWRWKH&RQVWLWXWLRQKDYLQJDOVR WKLVVQLSSHWLQDQDQDO\VLVXQGHU/RSH]jVVHFRQGFDWHJRU\WKH GHFODUHGWKDWmWKHSRZHUVQRWGHOHJDWHGWRWKH8QLWHG 6XSUHPH&RXUWLWVHOIKDVDFNQRZOHGJHGWKDWWKHFOHDULPSRUW 6WDWHV E\ WKH &RQVWLWXWLRQ QRU SURKLELWHG E\ LW WR WKH RI'DKQNH:DONHUDQG$OOHQEHUJ&RWWRQLVWKDWD6WDWHKDVQR 6WDWHVDUHUHVHUYHGWRWKH6WDWHVUHVSHFWLYHO\RUWRWKH SRZHU mWR SUHYHQW DQ HQJDJHPHQW LQ LQWHUVWDWH FRPPHUFH SHRSOHlWKHUHIRUHDOOWKHLURWKHUDFWVZKLFKDVVXPH ZLWKLQKHUOLPLWVH[FHSWE\KHUOHDYHl6RQQHERUQ%URVY WRFUHDWHGHILQHDQGSXQLVKFULPHVRWKHUWKDQWKRVHVR &XUHWRQ86  7KHVHFDVHVLQQRZD\ HQXPHUDWHGLQWKH&RQVWLWXWLRQDUHDOWRJHWKHUYRLGDQG VXJJHVWWKDWWKHIHGHUDOOHJLVODWXUHKDVUHJXODWRU\MXULVGLFWLRQ RI QR IRUFH DQG WKDW WKH SRZHU WR FUHDWH GHILQH DQG ZLWKUHVSHFWWRWKHFRQGXFWRIFRQWUDFWLQJSDUWLHVRQWKHEDVLV SXQLVK VXFK RWKHU FULPHV LV UHVHUYHG DQG RI ULJKW RIPHUHGLYHUVLW\RIUHVLGHQF\6HH8QLWHG6WDWHVY6RXWK DSSHUWDLQVVROHO\DQGH[FOXVLYHO\WRWKHUHVSHFWLYH6WDWHV (DVWHUQ 8QGHUZULWHUV $VVjQ  86    HDFKZLWKLQLWVRZQWHUULWRU\ HPSKDVL]LQJ WKDW OHJDO IRUPXODH GHYLVHG WR DVVHVV VWDWH SRZHUFDQQRWmXQFULWLFDOO\EHDFFHSWHGDVWUXVWZRUWK\JXLGHV .HQWXFN\5HVROXWLRQVG5HVROYHGFO  UHSULQWHGLQ WR GHWHUPLQH &RQJUHVVLRQDO SRZHU XQGHU WKH &RPPHUFH 7KH3RUWDEOH7KRPDVsHIIHUVRQ 0HUULOO3HWHUVRQHG &ODXVHl   VHHDOVR3DWWHUVRQY1HZW@KHZKROHVXEMHFWRIWKHGRPHVWLFUHODWLRQV GRQRWSXWVRPHWKLQJLQWRWKHIORZRILQWHUVWDWHFRPPHUFH RIKXVEDQGDQGZLIHSDUHQWDQGFKLOGEHORQJVWRWKHODZVRI UDWKHU WKH\ UHIXVH WR GR VR  ,W KDV EHHQ DUJXHG WKDW WKLV WKHVWDWHVDQGQRWWKHODZVRIWKH8QLWHG6WDWHVl([SDUWH UHIXVDODPRXQWVWRDQmREVWUXFWLRQlRILQWHUVWDWHFRPPHUFH %XUUXV86  VHHDOVR6RVQDY,RZD  8QLWHG6WDWHVY)DDVVH 1R 1R 8QLWHG6WDWHVY)DDVVH   86     VWDWLQJ WKDW WKH mUHJXODWLRQ RI :HDGPLWWRVRPHFRQIXVLRQZLWKUHVSHFWWRWKHQRWLRQWKDW GRPHVWLFUHODWLRQVKDVORQJEHHQUHJDUGHGDVDYLUWXDOO\ WKH &65$ UHJXODWHV WKH XVH RI WKH FKDQQHOV RI LQWHUVWDWH H[FOXVLYH SURYLQFH RI WKH 6WDWHVl  FI $QNHQEUDQGW Y FRPPHUFH7KHWHUPmFKDQQHORILQWHUVWDWHFRPPHUFHlUHIHUV 5LFKDUGV  86    UHFRJQL]LQJ D GRPHVWLF WR LQWHU DOLD mQDYLJDEOH ULYHUV ODNHV DQG FDQDOV RI WKH UHODWLRQVH[FHSWLRQWRWKHGLYHUVLW\MXULVGLFWLRQRIWKHIHGHUDO 8QLWHG 6WDWHV WKH LQWHUVWDWH UDLOURDG WUDFN V\VWHP WKH FRXUWVLQYLHZRIORQJKHOGXQGHUVWDQGLQJVDQGVRXQGSROLF\ LQWHUVWDWH KLJKZD\ V\VWHP    LQWHUVWDWH WHOHSKRQH DQG FRQVLGHUDWLRQV  WHOHJUDSK OLQHV DLU WUDIILF URXWHV WHOHYLVLRQ DQG UDGLR EURDGFDVWIUHTXHQFLHVl*LEEVY%DEELWW)G ,QWKLVFDVHWKH&65$jVHQFURDFKPHQWRQWKHVHWUDGLWLRQDO  WK&LU  DOWHUDWLRQLQRULJLQDO  LQWHUQDOTXRWDWLRQ SUHVHUYHV RI VWDWH DXWKRULW\ GRHV FRQVLGHUDEOH GDPDJH WR PDUNVRPLWWHG &RQJUHVVKDVEURDGDXWKRULW\ZLWKUHVSHFWWR 0LFKLJDQjV ILQHO\ ZURXJKW VFKHPH IRU UHJXODWLQJ FKLOG WKHVHFKDQQHOVQRWRQO\PD\WKH/HJLVODWXUHUHJXODWHWKHP VXSSRUW,QOLJKWRIWKHWUDGLWLRQDOQRWLRQVRIIHGHUDOLVPDQG GLUHFWO\ LW PD\ DFW WR NHHS WKHP mIUHH IURP LPPRUDO DQG LQWKHZDNHRIWKHZDWHUVKHGFDVHRI8QLWHG6WDWHVY/RSH] LQMXULRXVXVHVl&DPLQHWWLY8QLWHG6WDWHV86 86  ZHFDQQRWFRQFOXGHWKDWWKH&RPPHUFH     %XW &RQJUHVV GRHV QRW DFW SXUVXDQW WR WKLV &ODXVHFRXQWHQDQFHVVXFKGDPDJH DXWKRULW\ ZKHQ LW UHJXODWHV DQ DFWLYLW\ WKDW PHUHO\ mLPSOLFDWHVlRUmLQYRNHVlWKHXVHRIWKHFKDQQHOVRILQWHUVWDWH ,,,7KH&RQVWLWXWLRQDO%DODQFHRI)HGHUDOLVP FRPPHUFH&I8QLWHG6WDWHVY%DLOH\)G WK&LU 7KXVZHKHOGLQ8QLWHG6WDWHVY$EGXOODK $6WDWH/DZDQGWKH&65$ WKDWWKHEDQRQWUDIILFNLQJLQFRQWUDEDQGFLJDUHWWHVIRXQGDW 86& ††  GRHV QRW IDOO ZLWKLQ WKH ILUVW /RSH] 7KH 6XSUHPH &RXUW KDV REVHUYHG WKDW ZKHQ m&RQJUHVV FDWHJRU\EHFDXVHWKHSXUSRVHRIWKHEDQLVQRWmWRNHHSRSHQ FULPLQDOL]HVFRQGXFWDOUHDG\GHQRXQFHGDVFULPLQDOE\WKH WKHYHU\DYHQXHVE\ZKLFKLQWHUVWDWHFRPPHUFHLVWUDQVDFWHGl 6WDWHVLWHIIHFWVDµFKDQJHLQWKHVHQVLWLYHUHODWLRQEHWZHHQ $EGXOODK)G WK&LU ,QGHHGWRKROG IHGHUDO DQG VWDWH FULPLQDO MXULVGLFWLRQjl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† :HVW  SURYLGLQJOLDELOLW\ LQWHUVWDWHGHEWVDQGRQWKHIXUWKHUVXSSRVLWLRQWKDW&RQJUHVV IRUUHIXVLQJmWRSURYLGHQHFHVVDU\DQGSURSHUVKHOWHUIRRG PD\FRPSHOSD\PHQWRIGHEWVWKURXJKLWVSRZHUWRSUHYHQW FDUHDQGFORWKLQJIRUKLVRUKHUFKLOGUHQXQGHU\HDUVRI REVWUXFWLRQRILQWHUVWDWHFRPPHUFH:HILQGQHLWKHUKDOIRI DJHl &LYLOFKLOGVXSSRUWHQIRUFHPHQWPHWKRGVmDFFRXQWIRU WKLVFRQWHQWLRQFRPSHOOLQJ$FFHSWLQJIRUWKHPRPHQWWKH YLUWXDOO\ DOO HQIRUFHPHQW DFWLYLW\ LQ 0LFKLJDQl  6FRWW *  8QLWHG6WDWHVY)DDVVH 1R 1R 8QLWHG6WDWHVY)DDVVH  RI ZKHWKHU WKH UHJXODWHG DFWLYLW\ VXEVWDQWLDOO\ DIIHFWV %DVVHWW)DPLO\/DZ$QQXDO6XUYH\RI0LFKLJDQ/DZsXQH LQWHUVWDWHFRPPHUFH,GDW+DYLQJFODULILHGWKDWSRLQW 0D\:D\QH/5HY   WKH &RXUW FRQFOXGHG WKDW VHYHUDO FULWLFDO IDFWRUV SUHYHQWHG 0LFKLJDQ/DZFRPPLWVWRWKHGLVFUHWLRQRIVWDWHMXGJHVWKH †  T  $  IURP TXDOLI\LQJ DV D YDOLG H[HUFLVH RI PHDQVE\ZKLFKWRHQIRUFHnRUWRGHWHUIDLOXUHWRREH\nD FRQJUHVVLRQDODXWKRULW\XQGHUWKHWKLUGFDWHJRU\)LUVWVLQFH VXSSRUWRUGHU$FLUFXLWFRXUWMXGJHPD\LQFDUFHUDWHDSHUVRQ †  T  $  GLG QRW UHJXODWH D FRPPHUFLDO DFWLYLW\ WKH IRUFKLOGQRQVXSSRUWEXWWKLVUHPHG\LVFLYLOLQQDWXUH6HH VWDWXWHFRXOGQRWEHXSKHOGDVUHJXODWLQJDFWLYLWLHVWKDWDULVH 0LFK&RPS/DZV$QQ†0HDGY%DWFKORU RXWRIRUDUHFRQQHFWHGZLWKDFRPPHUFLDOWUDQVDFWLRQZKLFK 1:GQ 0LFK  m&OHDUO\LWZDVLQWHQGHG YLHZHG LQ WKH DJJUHJDWH VXEVWDQWLDOO\ DIIHFWV LQWHUVWDWH WKDW WKH 0LFKLJDQ VWDWXWRU\ SURFHGXUH DXWKRUL]LQJ FRPPHUFH  ,G DW   )XUWKHU WKH VWDWXWH FRQWDLQHG QR LQFDUFHUDWLRQIRUFKLOGQRQVXSSRUWVKRXOGEHUHJDUGHGDVFLYLO MXULVGLFWLRQDO HOHPHQW ZKLFK ZRXOG HQVXUH WKURXJK LQQDWXUHl )XUWKHUPRUHWKHMXGJHjVGLVFUHWLRQLQWKLVUHJDUG FDVHE\FDVH LQTXLU\ WKDW WKH >DFWLYLW\@ LQ TXHVWLRQ DIIHFWV LVFDUHIXOO\FDELQHGDQRUGHURILQFDUFHUDWLRQPD\EHHQWHUHG LQWHUVWDWH FRPPHUFH  ,G  )LQDOO\ WKH VWDWXWH ZDV QRW RQO\ LI RWKHU UHPHGLHVnVXFK DV LQFRPH ZLWKKROGLQJ VXSSRUWHG E\ VSHFLILF FRQJUHVVLRQDO ILQGLQJV >WKDW@ ZRXOG LQWHUFHSWLRQ RI WD[ UHIXQGV DQG SURSHUW\ OLHQVnmDSSHDU HQDEOH>WKH&RXUW@WRHYDOXDWHWKHOHJLVODWLYHMXGJPHQWWKDW XQOLNHO\ WR FRUUHFW WKH SD\HUjV IDLOXUH RU UHIXVDO WR SD\ WKH DFWLYLW\ LQ TXHVWLRQ VXEVWDQWLDOO\ DIIHFWHG LQWHUVWDWH VXSSRUWl0LFK&RPS/DZV$QQ†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†  DQG WKH FRQWRXUV RI WKHLU GLVFUHWLRQ DUH &65$LVFRQVWLWXWLRQDOXQGHUWKHILUVW/RSH]FDWHJRU\6HH GHWHUPLQHGE\DQHOHFWHGOHJLVODWXUHWKH&65$WKXVSUHYHQWV HJ8QLWHG6WDWHVY&UDZIRUG)G WK&LU 0LFKLJDQ RIILFLDOV IURP UHJXODWLQJ LQ DFFRUGDQFH ZLWK WKH    $QRWKHU WKHVLV OLNHQV FKLOG VXSSRUW REOLJDWLRQV WR YLHZVRIWKHORFDOHOHFWRUDWH6HH1HZKH@ NQRZV  LV D VFKRRO ]RQH   DV DQ HIIRUWVHH86&$†FF :HVW WKHVHPRQLHV XQFRQVWLWXWLRQDO H[HUFLVH RI &RQJUHVV  SRZHU XQGHU WKH DUHQRWWHWKHUHGWRWKHFULPLQDOSURYLVLRQVRIWKHOHJLVODWLRQ &RPPHUFH&ODXVH8QLWHG6WDWHVY/RSH]86 7KH 6WDWHVj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†  T  $  GLG QRW GLVSODFHPHQW  %\ SLJJ\EDFNLQJ D FULPLQDO VDQFWLRQ RQ LQYROYHFKDQQHOVRULQVWUXPHQWDOLWLHVRILQWHUVWDWHFRPPHUFH 0LFKLJDQ FKLOG VXSSRUW RUGHUV WKH &65$ UHFRJQL]HV WKH WKH&RXUWUHDVRQHGWKDWWKHVWDWXWHZRXOG EHFRQVWLWXWLRQDO SULPDF\RIWKH6WDWHjVODZVDWWKHVDPHWLPHWKDWLWH[SUHVVO\ RQO\LILWTXDOLILHGXQGHUWKHWKLUGFDWHJRU\DVDVWDWXWHWKDW RYHUULGHVSRUWLRQVRIVXFKODZV UHJXODWHGDQDFWLYLW\ZKLFKVXEVWDQWLDOO\DIIHFWHGLQWHUVWDWH FRPPHUFH,GDW 7KH &RQVWLWXWLRQ GLIIXVHV SRZHU WR SURWHFW WKH FLWL]HQU\ DJDLQVW MXVW VXFK DWWHPSWV WR IUDJPHQW RIILFLDO DFWLRQ IURP ,QFRQVLGHULQJWKDWTXHVWLRQWKH&RXUWUHFRJQL]HGWKDWLWV SROLWLFDODFFRXQWDELOLW\6HH7KH)HGHUDOLVW1RDW FDVHODZKDGQRWDOZD\VEHHQFOHDUDVWRZKHWKHUDQDFWLYLW\ sDPHV 0DGLVRQ  &OLQWRQ 5RVVLWHU HG   m,Q WKH PXVWDIIHFWRUVXEVWDQWLDOO\DIIHFWLQWHUVWDWHFRPPHUFH FRPSRXQGUHSXEOLFRI$PHULFDWKHSRZHUVXUUHQGHUHGE\WKH 7KH &RXUW WKHQ H[SODLQHG WKDW FRQVLVWHQW ZLWK WKH JUHDW SHRSOHLVILUVWGLYLGHGEHWZHHQWZRGLVWLQFWJRYHUQPHQWVDQG ZHLJKWRIRXUFDVHODZWKHSURSHUWHVWUHTXLUHVDQDQDO\VLV