Weberg v. Franks

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

(/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
)LOH 1DPH DS

81,7('67$7(6&28572)$33($/6
)257+(6,;7+&,5&8,7
BBBBBBBBBBBBBBBBB

0(55,$11( :(%(5*HWDO ;
3ODLQWLIIV$SSHOODQWV 

 1R
Y 
!

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


 :HEHUJHWDOY)UDQNVHWDO 1R

6]F]XEHOHN 2)),&( 2) 7+( $77251(< *(1(5$/
38%/,&(03/2<0(17$1'(/(&7,216',9,6,21
/DQVLQJ0LFKLJDQIRU$SSHOOHHV
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
68+5+(,15,&+ &LUFXLW sXGJH  3ODLQWLII 0HUULDQQH
:HEHUJ DSSHDOV WKH GLVWULFW FRXUWjV HQWU\ RI VXPPDU\
MXGJPHQW LQ IDYRU RI GHIHQGDQW SULVRQ RIILFLDOV LQ WKLV
mUHYHUVHlUDFLDOGLVFULPLQDWLRQDFWLRQSXUVXDQWWR86&
†)RUWKHUHDVRQVVWDWHGEHORZZH5(9(56(
,%$&.*5281'
3ODLQWLIID&DXFDVLDQFRUUHFWLRQVVHUJHDQWZDVHPSOR\HG
E\WKH0LFKLJDQ'HSDUWPHQWRI&RUUHFWLRQVm0'2&lDQG
VWDWLRQHG DW WKH :HVWHUQ :D\QH &RUUHFWLRQDO )DFLOLW\
m::&)l  ::&) KRXVHV SULPDULO\ $IULFDQ$PHULFDQ
LQPDWHV7KHVWDIILVDOVRSUHGRPLQDWHO\$IULFDQ$PHULFDQ
'HIHQGDQW.HQQ\5RELQVRQWKH:DUGHQ'HIHQGDQW5DQG\
)UDQNVWKH3HUVRQQHO'LUHFWRU'HIHQGDQW:LOOLV&KDSPDQ
DQ LQVSHFWRU DQG 'HIHQGDQW 6KDURQ /DXGHUGDOH DOVR D
FRUUHFWLRQVVHUJHDQWDUHDOO$IULFDQ$PHULFDQV
7KHLQVWDQWFRQWURYHUV\HYROYHGIURPDVHULHVRIJULHYDQFHV
3ODLQWLII ILOHG DVVHUWLQJ WKDW 'HIHQGDQW /DXGHUGDOH ZDV
LQWHQWLRQDOO\ SXUVXLQJ D UDFLDOO\PRWLYDWHG FRQIURQWDWLRQDO
FRXUVHRIFRQGXFWFDOFXODWHGWRGHPHDQDQGKXPLOLDWHKHULQ
WKHSUHVHQFHRIERWKEODFNDQGZKLWHFRUUHFWLRQVSHUVRQQHO
DQGSULVRQHUV7KHILUVWDVVHUWHGLQFLGHQWRFFXUUHGGXULQJUROO
FDOORQ)HEUXDU\3ODLQWLIIDOOHJHGWKDWZKLOHVKHZDV


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

'HIHQGDQWV5RELQVRQ)UDQNV&KDSPDQDQG/DXGHUGDOHDQG JLYLQJDVSHHFKVHHNLQJGRQDWLRQVWREHQHILWIDPLOLHVRIFULPH
5(0$1'IRUIXUWKHUSURFHHGLQJV YLFWLPV/DXGHUGDOHRUGHUHGKHUVWDIIWROHDYHWKHPHHWLQJ
WKXVFUHDWLQJDQLPSUHVVLRQWKDWWKHPHHWLQJKDGFRQFOXGHG
3ODLQWLIIILOHGDJULHYDQFHEXWQRKHDULQJZDVKHOG
2Q )HEUXDU\   3ODLQWLII DQG DQRWKHU &DXFDVLDQ
FRZRUNHUXSRQHQFRXQWHULQJDEORRG\SULVRQHU LQKRXVLQJ
XQLWUHTXHVWHGRIILFHUDVVLVWDQFHE\DFWLYDWLQJKHUmERG\
DODUPl  8SRQ UHVSRQGLQJ WR WKH HPHUJHQF\ /DXGHUGDOH
FRQWUDU\ WR VWDQGDUG RSHUDWLQJ HPHUJHQF\ SUDFWLFHV DW WKH
IDFLOLW\UXGHO\RUGHUHG3ODLQWLIIWROHDYHWKHDUHD3ODLQWLII
ILOHGDQRWKHUJULHYDQFHDJDLQVW/DXGHUGDOHZKLFKZDVDOVR
DOOHJHGO\LJQRUHG
2Q$SULOGXULQJDELUDFLDOERDUGPHHWLQJDUUDQJHG
E\/DXGHUGDOHjVVXSHULRUWRmFOHDUWKHDLUlEHWZHHQWKHWZR
ZRPHQ /DXGHUGDOH DIWHU H[KLELWLQJ RSHQ KRVWLOLW\ WRZDUG
3ODLQWLIIDQGFKDUDFWHUL]LQJWKHJDWKHULQJDVmVRPHNLQGRI
.ODQPHHWLQJlDERUWHGWKHFRQIHUHQFHDQGDEUXSWO\OHIWWKH
URRP3ODLQWLIIILOHGDQRWKHUJULHYDQFHDJDLQVW/DXGHUGDOH
ZKLFKZDVGLVUHJDUGHG
7HQGD\VDIWHUWKHDERUWHGmFOHDUWKHDLUPHHWLQJl3ODLQWLII
DQG WZR &DXFDVLDQ FRUUHFWLRQV RIILFHUV .HYLQ :D\QH
+DPPHUPHLVWHUDQG%U\DQ7\LW\HZHUHFRQGXFWLQJDURXWLQH
VHFXULW\ FKHFN ZLWKLQ KRXVLQJ XQLW   $V WKH\ H[LWHG WKH
XQLWjV GD\ URRP VRPHRQH IURP LQVLGH VKRXWHG D IHPDOH
VSHFLILFREVFHQHLQVXOW8SRQWXUQLQJWKHRIILFHUVREVHUYHG
5LFDUGR'DUQHOO0DVVHQEXUJSHHULQJDWWKHPWKURXJKDJODVV
ZLQGRZ 7KH RIILFHUV UHHQWHUHG WKH GD\ URRP
+DPPHUPHLVWHU DVNHG 0DVVHQEXUJ IRU KLV SULVRQ
LGHQWLILFDWLRQFDUG0DVVHQEXUJUHIXVHGDQGEHJDQVZHDULQJ
DW+DPPHUPHLVWHU3ODLQWLIILQVWUXFWHG+DPPHUPHLVWHUDQG
7\LW\H WR KDQGFXII WKH SULVRQHU  0DVVHQEXUJ VZXQJ DW
+DPPHUPHLVWHUDQGJUDEEHGKLPDURXQGWKHZDLVW$WWKLV
WLPH 3ODLQWLII FDOOHG IRU DVVLVWDQFH  0DVVHQEXUJ ZDV
XOWLPDWHO\UHVWUDLQHGE\+DPPHUPHLVWHUDQG7\LW\H$IWHU
+DPPHUPHLVWHU DQG 7\LW\H VXEGXHG 0DVVHQEXUJ 2IILFHU
:HQVNR ZKR KDG FRPH WR DVVLVW HVFRUWHG 0DVVHQEXUJ WR
WHPSRUDU\ VHJUHJDWLRQ  0DVVHQEXUJ ZDV ODWHU HVFRUWHG WR
 :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

KHDOWKVHUYLFHVIRUPHGLFDODWWHQWLRQIRUVPDOOVFUDWFKHVWRKLV DGPLQLVWUDWLYH FRPSODLQW DJDLQVW KHU  0RVW VLJQLILFDQWO\
IRUHKHDGDQGULJKWZULVW /DXGHUGDOH ID[HG KHU LQFLGHQW UHSRUW GLUHFWO\ WR &KDSPDQ
DIWHUKRXUVRQWKHQLJKW/DXGHUGDOHILOHGKHUDGPLQLVWUDWLYH
2IWKHYDULRXVSULVRQHUVDQGVHFXULW\SHUVRQQHOZKRKDG FRPSODLQW/DXGHUGDOHjVXQXVXDOEHKDYLRUDQG&KDSPDQjV
EHHQDWWUDFWHGWRWKHFRPPRWLRQLQFOXGLQJ/DXGHUGDOHQR HIIRUWVWRXSKROG/DXGHUGDOHjVYHUVLRQRIWKHHYHQWGHVSLWH
RQHUHSRUWHGREVHUYLQJ3ODLQWLII+DPPHUPHLVWHURU7\LW\H VWURQJFRQIOLFWLQJHYLGHQFHVXJJHVWVDOLQNEHWZHHQWKHWZR
NLFNLQJWKHSULVRQHULQWKHKHDGRUDQ\RWKHUERG\SDUW WRIXUWKHUWKHLUFRPPRQREMHFWLYHRIGLVFULPLQDWLQJDJDLQVW
ZKLWHFRUUHFWLRQRIILFHUVm5DUHO\LQDFRQVSLUDF\FDVHZLOO
:LWKLQDKDOIKRXURIWKHLQFLGHQWDURXWLQHLQYHVWLJDWLRQ WKHUHEHGLUHFWHYLGHQFHRIDQH[SUHVVDJUHHPHQWDPRQJDOO
ZDVFRQGXFWHGE\6JW+DFNZRUWKZKRILOHGWKHIROORZLQJ WKHFRQVSLUDWRUVWRFRQVSLUHFLUFXPVWDQWLDOHYLGHQFHPD\
&ULWLFDO,QFLGHQW5HSRUW SURYLGHDGHTXDWHSURRIRIFRQVSLUDF\l6HH%HOOY&LW\RI
0LOZDXNHH  )G   WK &LU  LQWHUQDO
$W DSSUR[LPDWHO\  KUV SULVRQHU 0DVVHQEXUJ TXRWDWLRQVDQGFLWDWLRQRPLWWHG$OWKRXJKRQO\WZRRIWKH
$/ UHIXVHG WR SUHVHQW KLV ,' FDUG WR IRXU DOOHJHG FRQVSLUDWRUV LQ WKLV FDVH PDGH RSHQO\ UDFLVW
RIILFHU+DPPHUPHLVWHUE\EHFRPLQJYHU\DJJUHVVLYHE\ FRPPHQWV LW LV FOHDU WKDW DOO IRXU VKDUHG LQ WKH JHQHUDO
PDNLQJVWDWHPHQWVOLNHmIXFN\RXlm,DLQjWJLYLQJ\RX FRQVSLUDWRULDOREMHFWLYHRIXVLQJWKH0DVVHQEXUJLQFLGHQWWR
VKLWlDQGRWKHUSURIDQLWLHV3ULVRQHUZDVRUGHUHGWRSXW VDERWDJH 3ODLQWLIIjV FDUHHU DW 0'2&  *LYHQ )UDQNVjV
KLV KDQGV EHKLQG KLV EDFN VR KH FRXOG EH KDQGFXIIHG GHFHSWLYHDQG&KDSPDQjVREIXVFDWRU\HIIRUWVWRDFKLHYHWKLV
SULVRQHUUHVLVWHGE\SXOOLQJKLVDUPDZD\DQGVZLQJLQJ JRDO ZH WKLQN WKH RSHQO\ UDFLDO PRWLYHV RI 5RELQVRQ DQG
KLV ILVW DW 2IILFHU +DPPHUPHLVWHU  $W WKLV WLPH 6JW /DXGHUGDOHFDQEHLPSXWHGWR)UDQNVDQG&KDSPDQ:HKROG
:HEHUJ FDOOHG m2IILFHU 1HHGV $VVLVWDQFHl LQ KRXVLQJ WKDWZLWKWKHIRUHJRLQJHYLGHQFH3ODLQWLIIUDLVHGDQLVVXHRI
8QLW2IILFHU+DPPHUPHLVWHUZDVDVVDXOWHGZKHQ IDFWWRVXSSRUWKHUFODLPWKDW'HIHQGDQWVFRQVSLUHGDJDLQVW
SULVRQHU 0DVVHQEXUJ JUDEEHG KLP DURXQG WKH ZDLVW KHUEHFDXVHVKHLVZKLWH7KHGLVWULFWFRXUWHUUHGLQKROGLQJ
GXULQJKLVUHVLVWDQFHWREHLQJFXIIHG3ULVRQHUZDVWKHQ RWKHUZLVH
UHVWUDLQHGE\2IILFHUV7\LW\HDQG+DPPHUPHLVWHUZLWK
DSSURSULDWH IRUFH  3ULVRQHU ZDV HVFRUWHG WR 76(* &'LVSDUDWH,PSDFW
>WHPSRUDU\VHJUHJDWLRQ@DWDSSUR[LPDWHO\KUVE\
582:HQVNRZKHUHKHZDVSODFHGLQ76(*ZLWKRXW 3ODLQWLIIDOVRFODLPVWKDWWKHGLVWULFWFRXUWHUUHGLQUHIXVLQJ
IXUWKHULQFLGHQW3ULVRQHU0DVVHQEXUJZDVHVFRUWHGWR WR DGGUHVV KHU UDFH GLVFULPLQDWLRQ FODLP EDVHG XSRQ D
+HDOWK 6HUYLFHV E\ &6 *HKRVNL DQG 5HLPDQQ IRU GLVSDUDWH LPSDFW WKHRU\  $V WKH GLVWULFW FRXUW KHOG PHUH
PHGLFDODWWHQWLRQIRUVPDOOVFUDWFKHVWRIRUHKHDGDQGUW GLVSDUDWHLPSDFWLVQRWVXIILFLHQWWRVWDWHDQHTXDOSURWHFWLRQ
ZULVW$WKUV6JW+XJJLQVRI063ZDVQRWLILHGRI FODLPXQGHU†6HH&RSHODQGY0DFKXOLV)G
DIRUHPHQWLRQHG LQFLGHQW  2IILFHU +DPPHUPHLVWHU WK&LUVHHDOVR'DYLV86DW7KLV
GHFOLQHGWRSUHVVDVVDXOWFKDUJHV8QLYHUVDOSUHFDXWLRQ FRQWHQWLRQLVZLWKRXWPHULW
ZDVXVHGE\DOOVWDIILQYROYHG
,9&21&/86,21
7KUHH GD\V ODWHU RQ $SULO   0DVVHQEXUJ ILOHG D
m&RPSODLQW$JDLQVW(PSOR\HHl7KHFRPSODLQWLVVLJQHGE\ :H $)),50 WKH GLVWULFW FRXUWjV JUDQW RI VXPPDU\
m$FWLQJ $': &KDSPDQl  ,Q WKDW GRFXPHQW 'HIHQGDQW MXGJPHQW RQ 3ODLQWLIIjV GLVSDUDWH LPSDFW FODLP  :H
&KDSPDQ UHSRUWHG WKDW mSULVRQHU 0DVVHQEXUJ DOOHJHV WKDW 5(9(56(WKHGLVWULFWFRXUWjVJUDQWRIVXPPDU\MXGJPHQWWR
2IILFHUjV>VLF@+DPPHUPHLVWHUDQG7\LW\HDQG6JW:HEHUJ
 :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

&KDSPDQUHIHUHQFHGDVWDWHPHQW2]RUJDYHKLPRQ$SULO ZHUHYHUEDOO\DQGSK\VLFDOO\DEXVLYHGXULQJWKH >$SULO
WKDWKH2]RUKDGVHHQ3ODLQWLIINLFN0DVVHQEXUJRQFH @LQFLGHQWl6LJQLILFDQWO\&KDSPDQGLGQRWUHSRUWDQ\
LQ WKH KHDG  $JDLQ &KDSPDQ ZDV QRW GHWHUUHG E\ WKH DOOHJDWLRQ E\ 0DVVHQEXUJ WKDW 3ODLQWLII NLFNHG KLP LQ WKH
RPLVVLRQRIVDLGIDFWLQ2]RUjV$SULOUHSRUWRUWKHODFNRI KHDG
FRUURERUDWLRQE\DQ\RWKHURIILFHUVDWWKHVFHQH$OWKRXJK
&KDSPDQFRXOGKDYHYHULILHGH[DFWO\ZKDWKDSSHQHGLQWKH $OVR RQ $SULO  2IILFHU ,JQDWLXV 2]RU DQ $IULFDQ
GD\ URRP EHFDXVH KH ZDV FKDUJHG ZLWK WKH FXVWRG\ RI WKH $PHULFDQ UHSRUWHG KLV REVHUYDWLRQV RI WKH 0DVVHQEXUJ
DXGLRUHFRUGLQJVDQGYLVXDOWDSHVKHFRXOGQRWDFFRXQWIRU LQFLGHQWRI$SULO
WKHLUZKHUHDERXWV
$W DSSUR[LPDWHO\  KUV WKH\ >VLF@ \DUG FUHZ
&KDSPDQjV FRQGXFW DSSHDUV OLQNHG WR 5RELQVRQjV KHDGHGE\6JW:HEHUJFDPHWRWKH8QLWIRUWKHLU
GLVFULPLQDWRU\GHFLVLRQ5RELQVRQKLPVHOISURYLGHGWKDWOLQN QRUPDOURXWLQHVKDNHGRZQ$ERXWKUVWKHVHUJHQW
LQ KLV sXQH   PHPRUDQGXP  ,Q WKH PHPRUDQGXP >VLF@ UHTXHVWHG IRU RIILFHUjV DVVLVWDQFH YLD UDGLR
5RELQVRQ FKDVWLVHV %HQHGLFW IRU mXQGHUPLQ>LQJ@ WKH WUDQVPLVVLRQLQWKHXQLWGD\URRP,ORRNHGDURXQGDQG
LQYHVWLJDWLRQRIWKH,QVSHFWRU>&KDSPDQ@lGHVSLWH%HQHGLFWjV VDZ SULVRQHUV ORRNLQJ DW WKH XQLW OLEUDU\ URRP  $V ,
ZHOOUHDVRQHG DQG ZHOOVXSSRUWHG FULWLFLVP RI &KDSPDQjV UXVKHG LQ , REVHUYHG 0DVWHQEXUJ >VLF@ RQ WKH IORRU
ILQGLQJV  ,Q VKRUW ZH WKLQN D FRPPRQ REMHFWLYH o UHVLVWLQJWREHKDQGFXIIHGoE\2IILFHUV+DPPHUPHLVWHU
GLVFULPLQDWLRQ DJDLQVW ZKLWH SHUVRQQHO o FDQ EH LQIHUUHG DQG7\LWH>VLF@+HZDVILQDOO\KDQGFXIIHGDQGGUDJJHG
&KDSPDQjV PXWXDO LQWHQW WR VKDUH LQ /DXGHUGDOHjV XS IURP WKH JURXQG  , QRWLFHG VRPH EORRG RQ KLV
GLVFULPLQDWRU\ PRWLYHV LV UHYHDOHG E\ KLV UHVSRQVH WR WKH IRUHKHDGEHIRUHKHZDVILQDOO\WDNHQWRVHJUHJDWLRQXQLW
YDULRXV FRPSODLQWV DQG KLV HIIRUWV WR GLVWRUW WKH WUXWK
UHJDUGLQJWKH0DVVHQEXUJLQFLGHQW 2Q$SULO3ODLQWLIIILOHGDIRUPDODGPLQLVWUDWLYH
FRPSODLQWDJDLQVW/DXGHUGDOHFLWLQJWRWKHUDFLDOO\PRWLYDWHG
/DXGHUGDOH FRQIURQWDWLRQVDQGKDUDVVPHQWWKDWRFFXUUHGRQ)HEUXDU\
DQG  DQG $SULO   DOO RI ZKLFK VKH DVVHUWHG ZDV
/DXGHUGDOHjVFRQGXFWWRZDUGV3ODLQWLIIDOVRDSSHDUVWREH LQWHQGHG WR KXPLOLDWH GLVSDUDJH DQG GLVFUHGLW KHU LQ WKH
EDVHG RQ DQ DQWLZKLWH DQLPXV QRW VLPSO\ D SHUVRQDOLW\ SUHVHQFHRISULVRQHUVDQGVHFXULW\HPSOR\HHV
FRQIOLFWZLWK3ODLQWLII3ODLQWLIIDWWHVWHGWKDWDWWKH$SULO
PHHWLQJ/DXGHUGDOHUHPDUNHGWKDWLWZDVmVRPHNLQGRI 7KDWQLJKW/DXGHUGDOHID[HGDIRXUSDJHOHWWHUGLUHFWO\WR
.ODQPHHWLQJlDQGFRPPHQWHGWKDWm,DLQjWQRPXOHIRUWKH &KDSPDQ IURP D .LQNRjV 5HSURGXFWLRQ &HQWHU  ,Q KHU
PDQl  5HJDUGLQJ WKH PXOH VWDWHPHQW /DXGHUGDOH GHQLHG GHSRVLWLRQ/DXGHUGDOHLGHQWLILHG'HSRVLWLRQ([KLELWDVWKH
PDNLQJWKHFRPPHQWLQKHUDQVZHUVWRLQWHUURJDWRULHVEXWLQ GRFXPHQWVKHID[HG([KLELWLVDQ,QFLGHQW5HSRUWGDWHG
KHU GHSRVLWLRQ DFNQRZOHGJHG D VWDWHPHQW UHJDUGLQJ PXOHV $SULOLQZKLFK/DXGHUGDOHUHFRXQWVKHUYHUVLRQRI
ZKLFKVKHH[SODLQHGZDVPHUHO\DIDEOH WKH$SULOLQFLGHQW,QWKHUHSRUW/DXGHUGDOHVWDWHG
WKDW VKH KHDUG D UDGLR WUDQVPLVVLRQ FDOOLQJ IRU RIILFHU
/DXGHUGDOHjVOLQNWRWKHLQVWDQWFRQVSLUDF\LVPRVWFOHDUO\ DVVLVWDQFHLQ8QLW$VVKHHQWHUHGWKHDUHDZKHUHWKH
UHYHDOHG E\ WKH WLPLQJ DQG FRQWHQW RI KHU ,QFLGHQW 5HSRUW DOWHUFDWLRQ ZDV WDNLQJ SODFH /DXGHUGDOH FODLPHG WKDW VKH
UHJDUGLQJWKH0DVVHQEXUJLQFLGHQW$OWKRXJKWKHDOWHUFDWLRQ REVHUYHG0DVVHQEXUJRQWKHIORRU$FFRUGLQJWR/DXGHUGDOH
ZLWKWKHSULVRQHURFFXUUHGRQ$SULO/DXGHUGDOHGLGQRW 0DVVHQEXUJ ZDV OD\LQJ IODW RQ KLV VWRPDFK ZLWK KLV DUPV
ILOHKHUUHSRUWXQWLO$SULO0RUHVLJQLILFDQWO\/DXGHUGDOH SLQQHGXQGHUQHDWKKLP6KHVWDWHGWKDW+DPPHUPHLVWHUZDV
GLG QRW ILOH KHU UHSRUW XQWLO 3ODLQWLII ILOHG D IRUPDO UHVWUDLQLQJ 0DVVHQEXUJ RQ WKH OHIW VLGH RI KLV ERG\ ZKLOH
 :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

7\LW\H ZDV UHVWUDLQLQJ 0DVVHQEXUJ RQ WKH ULJKW VLGH )LQDOO\ )UDQNV DFNQRZOHGJHG WKDW 5RELQVRQ GLVFXVVHG WKH
/DXGHUGDOH DOOHJHG WKDW 3ODLQWLII ZDV VWDQGLQJ DQG KDG KHU PDWWHUZLWKKLPDOWKRXJKQRWLQGHSWK
ULJKW IRRW SUHVVHG GRZQ RQ 0DVVHQEXUJjV OHIW IRRW
/DXGHUGDOH IXUWKHU VWDWHG WKDW RQFH 0DVVHQEXUJ ZDV )URP )UDQNVj DEQRUPDO DQG GHFHLWIXO LQWHUMHFWLRQ LQWR
KDQGFXIIHGDQGEURXJKWWRKLVIHHWVKHREVHUYHGWKDWKHZDV %HQHGLFWjV LQYHVWLJDWLRQ ZH WKLQN LW FDQ EH LQIHUUHG WKDW
EOHHGLQJIURPKLVIRUHKHDG$FFRUGLQJWR/DXGHUGDOHDVVRRQ )UDQNVVKDUHGWKHDQWLZKLWHDQLPXVRI5RELQVRQZLWKZKRP
DV0DVVHQEXUJVWRRGRQKLVIHHWKHORRNHGDW3ODLQWLIIDQG KHDGPLWWHGO\GLVFXVVHGWKHPDWWHU$OWKRXJKFLUFXPVWDQWLDO
VKRXWHGmVLF@ELWFKZK\GLG\RXZDLWXQWLO ZH WKLQN WKH IRUHJRLQJ HYLGHQFH VXSSRUWV 3ODLQWLIIjV FODLP
WKH\ FXIIHG PH WR NLFN PHl  /DXGHUGDOH DOOHJHG WKDW WKDW)UDQNVFRQVSLUHGZLWK5RELQVRQWRWDNHDGYHUVHDFWLRQ
0DVVHQEXUJ DQG 3ODLQWLII EHJDQ WR H[FKDQJH SURIDQLWLHV DW DJDLQVW3ODLQWLIIEHFDXVHVKHLV:KLWH
WKDW SRLQW  /DXGHUGDOH DOVR VWDWHG WKDW :HQVNR
+DPPHUPHLVWHU DQG 7\LW\H HVFRUWHG 0DVVHQEXUJ WR &KDSPDQ
WHPSRUDU\VHJUHJDWLRQ
3ODLQWLII DOVR LQWURGXFHG FLUFXPVWDQWLDO HYLGHQFH WKDW
2Q $SULO   ZLWK OLWWOH WR QR SUHOLPLQDU\ &KDSPDQDFWHGEDVHGRQGLVFULPLQDWRU\PRWLYHV&KDSPDQ
LQYHVWLJDWLRQRIKLVRZQ&KDSPDQUHTXHVWHGDQLPPHGLDWH LQYHVWLJDWHG3ODLQWLIIjVFRPSODLQWUHJDUGLQJWKH)HEUXDU\
FULPLQDOLQYHVWLJDWLRQRIWKH0DVVHQEXUJLQFLGHQWE\WKH6WDWH LQFLGHQW'HVSLWHKLVDZDUHQHVVRIDQLPRVLW\EHWZHHQ
+LJKZD\3DWURO 3ODLQWLIIDQG/DXGHUGDOHDQGWKHVWDWHPHQWVRIWKUHHRIILFHUV
&2 6WHZDUW &2 0FDOLVWHU DQG /W $OOHQ VXSSRUWLQJ
2Q0D\&KDSPDQVHQW'HSXW\:DUGHQ0HDGHU 3ODLQWLIIjV YLHZ WKDW /DXGHUGDOHjV FRQGXFW ZDV LQWHQWLRQDO
DPHPRUDQGXPUHFRPPHQGLQJWKDWDGLVFLSOLQDU\FRQIHUHQFH &KDSPDQ WHVWLILHG WKDW KH IRXQG LQVXIILFLHQW HYLGHQFH WR
EHVFKHGXOHGWRDGGUHVVWKHDOOHJDWLRQVDJDLQVW3ODLQWLII,Q VXSSRUWDFRQFOXVLRQWKDW/DXGHUGDOHLQWHQWLRQDOO\LQWHUUXSWHG
KLV PHPRUDQGXP &KDSPDQ UHSRUWHG WKDW EDVHG RQ KLV 3ODLQWLIIGXULQJUROOFDOO
LQYHVWLJDWLRQ 3ODLQWLII YLRODWHG IRXU 0'2& 'HSDUWPHQWDO
:RUN 5XOHV GXULQJ WKH DOWHUFDWLRQ LQYROYLQJ 0DVVHQEXUJ %\FRQWUDVW&KDSPDQjVLQYHVWLJDWLRQRIWKH0DVVHQEXUJ
)LUVW&KDSPDQIRXQGWKDW3ODLQWLIIXVHGH[FHVVLYHIRUFHLQ LQFLGHQWNLFNHGLQWRKLJKJHDUWKHPRUQLQJDIWHU/DXGHUGDOH
UHVWUDLQLQJ0DVVHQEXUJLQYLRODWLRQRI0'2&'HSDUWPHQWDO ID[HGKHUFULWLFDOLQFLGHQWUHSRUW2QWKDWGD\$SULO
:RUN5XOH,9+HFLWHGVWDWHPHQWVPDGHE\/DXGHUGDOH &KDSPDQFRQWDFWHGWKH0LFKLJDQ6WDWH3ROLFHWRFRQGXFWD
DQG2IILFHU7LSSLQVWKDW3ODLQWLIIVWRRGRQ0DVVHQEXUJjVOHJ FULPLQDO LQYHVWLJDWLRQ  +H GLG VR KRZHYHU EHIRUH
DQGIRRWDQGDVWDWHPHQWRI2IILFHU2]RUWKDW3ODLQWLIINLFNHG FRQGXFWLQJDQLQWHUQDOLQYHVWLJDWLRQRIKLVRZQDQGLQWKHIDFH
0DVVHQEXUJLQWKHKHDG&KDSPDQUHSRUWHGWKDWGXULQJDQ RI FRQIOLFWLQJ UHSRUWV  7ZR RI WKRVH UHSRUWV ZHUH GLUHFWO\
LQWHUYLHZ RI 2]RU 2]RU VWDWHG WKDW mZKLOH SULVRQHU DQWDJRQLVWLFo3ODLQWLIIjVDQG/DXGHUGDOHjV)XUWKHUWKHPRVW
0DVVHQEXUJZDVRQWKHIORRUVWLOOUHVLVWLQJWREHLQJFXIIHG FULWLFDO GRFXPHQW WKH SULVRQHUjV RZQ VWDWHPHQW ZKLFK
KHZDVNLFNHGDURXQGUHSHDWHGO\E\6JW:HEHUJLQFOXGLQJ &KDSPDQKLPVHOIWUDQVFULEHGPDNHVQRPHQWLRQRIDQ\NLFN
RQHRQKLVKHDGl(PSKDVLVLQRULJLQDO2]RUjV$SULO WRWKHKHDG2QO\/DXGHUGDOHjVUHSRUWLQGLFDWHGWKDW3ODLQWLII
ZULWWHQVWDWHPHQWGLGQRWLQFOXGHDQ\DOOHJDWLRQRINLFNLQJ KDGNLFNHG0DVVHQEXUJ
&KDSPDQ DOVR QRWHG WKDW 3ODLQWLII IDLOHG WR UHSRUW D IXOO
GHVFULSWLRQRIDOOWKHPHWKRGVRIUHVWUDLQWVKHXVHGDQGDOOWKH ,Q KLV 0D\   UHSRUW WR 'HSXW\ :DUGHQ 0HDGHU
VWDWHPHQWV VKH GLUHFWHG WRZDUG 0DVVHQEXUJ LQFOXGLQJ DQ\ &KDSPDQFRQFOXGHGWKDWm3ULVRQHU0DVVHQEXUJjVDOOHJDWLRQ
SURIDQLWLHV RILQKXPDQHWUHDWPHQWDQGH[FHVVLYHIRUFHE\6JW:HEHUJLV
VXSSRUWHG E\ EHOLHYDEOH ZLWQHVVHVj HYLGHQFHl  ,Q VXSSRUW
 :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

$ FLYLO FRQVSLUDF\ LV DQ DJUHHPHQW EHWZHHQ WZR RU 6HFRQG&KDSPDQIRXQGWKDW3ODLQWLIIGLUHFWHGRIIHQVLYH
PRUH SHUVRQV WR LQMXUH DQRWKHU E\ XQODZIXO DFWLRQ DEXVLYHDQGSURIDQHODQJXDJHWRZDUG0DVVHQEXUJGXULQJWKH
([SUHVV DJUHHPHQW DPRQJ DOO WKH FRQVSLUDWRUV LV QRW DOWHUFDWLRQLQYLRODWLRQRI0'2&'HSDUWPHQWDO:RUN5XOH
QHFHVVDU\ WR ILQG WKH H[LVWHQFH RI D FLYLO FRQVSLUDF\ ,9%7KLUG&KDSPDQIRXQGWKDW3ODLQWLIIIDLOHGWRWDNH
(DFKFRQVSLUDWRUQHHGQRWKDYHNQRZQDOORIWKHGHWDLOV SURSHUVHFXULW\SUHFDXWLRQVGXULQJWKHLQFLGHQWLQYLRODWLRQRI
RIWKHLOOHJDOSODQRUDOORIWKHSDUWLFLSDQWVLQYROYHG$OO 0'2& 'HSDUWPHQWDO :RUN 5XOH ,9   +H QRWHG WKDW
WKDWPXVWEHVKRZQLVWKDWWKHUHZDVDVLQJOHSODQWKDW 3ODLQWLIILJQRUHGGHSDUWPHQWDOSROLF\RISURKLELWLQJDQRIILFHU
WKH DOOHJHG FRFRQVSLUDWRU VKDUHG LQ WKH JHQHUDO WREHSUHVHQWRUSDUWLFLSDWHLQUHVWUDLQLQJDSULVRQHULIKHKDG
FRQVSLUDWRULDO REMHFWLYH DQG WKDW DQ RYHUW DFW ZDV MXVWEHHQDVVDXOWHGE\WKHSULVRQHU+HVWDWHGWKDW3ODLQWLII
FRPPLWWHGLQIXUWKHUDQFHRIWKHFRQVSLUDF\WKDWFDXVHG E\ SHUPLWWLQJ +DPPHUPHLVWHU WR EULQJ 0DVVHQEXUJ WR
LQMXU\WRWKHFRPSODLQDQW DGPLQLVWUDWLYH VHJUHJDWLRQ mFUHDWHG WKH DSSHDUDQFH RI
UHSULVDOl
+RRNV Y +RRNV  )G   WK &LU 
FLWDWLRQV RPLWWHG VHH DOVR *XWLHUUH] Y /\QFK  )G )LQDOO\ &KDSPDQ IRXQG WKDW 3ODLQWLII IDLOHG WR PDNH
  WK &LU  VWDWLQJ WKDW FRQVSLUDF\ FODLPV UHTXLUHGUHSRUWVLQYLRODWLRQRI0'2&'HSDUWPHQWDO:RUN
XQGHU†PXVWEHSOHGZLWKVRPHGHJUHHRIVSHFLILFLW\ 5XOH,96SHFLILFDOO\&KDSPDQLQGLFDWHGWKDWLQKHU
FULWLFDO LQFLGHQW UHSRUW IRU WKH $SULO   LQFLGHQW
)UDQNV 3ODLQWLII IDLOHG WR UHSRUW WKDW 0DVVHQEXUJ VXUUHQGHUHG KLV
SULVRQHU,'FDUGWR7\LW\H&KDSPDQDOVRVWDWHGWKDW3ODLQWLII
)UDQNVDFNQRZOHGJHGLQKLVGHSRVLWLRQWHVWLPRQ\WKDWWKH DSSHDUHGWRDOWHUKHUVWRU\EHFDXVHLQDVWDWHPHQWJLYHQRQ
3HUVRQQHO'LUHFWRULVQRWLQYROYHGLQWKHGLVFLSOLQDU\SURFHVV $SULO   3ODLQWLII VWDWHG  IRU WKH ILUVW WLPH WKDW WKH
)UDQNV DOVR YHULILHG WKDW DIWHU D GLVFLSOLQDU\ KHDULQJ D SULVRQHUmMXPSHGIURPKLVFKDLUlDQGDVVHUWHGDmGHIHQVLYH
UHFRPPHQGDWLRQLVPDGHWRWKH:DUGHQ'HVSLWHKLVODFNRI SRVWXUHl&KDSPDQRSLQHGWKDWm>W@KHUHLVGHILQLWHUHDVRQWR
D UROH LQ WKH SURFHVV )UDQNV DGPLWWHGO\ LQWHUFHGHG LQ EHOLHYHWKDW6JW:HEHUJjVLQLWLDOUHSRUWZDVLQFRPSOHWHRUWKH
%HQHGLFWjV LQYHVWLJDWLRQ NQRZLQJ %HQHGLFW ZRXOG PDNH D FKDQJH LV DQ DWWHPSW WR SRUWUD\ 3ULVRQHU 0DVVHQEXUJ DV
UHFRPPHQGDWLRQWR5RELQVRQ$OWKRXJK)UDQNVH[SODLQHG DJLWDWHGDQJU\DQGWKUHDWHQLQJWRZDUGVWDIIl3ODLQWLIIZDV
WKDWKHGLGVREHFDXVHRWKHUHPSOR\HHVZHUHZRUULHGWKDWWKH JLYHQQRWLFHRIWKHFKDUJHVDJDLQVWKHURQ0D\DQG
PDWWHUZRXOGEHVZHSWXQGHUWKHUXJKHFRXOGQRWLGHQWLI\WKH DGLVFLSOLQDU\FRQIHUHQFHZDVVFKHGXOHGIRUsXQH
HPSOR\HHV ZKR H[SUHVVHG WKDW FRQFHUQ  0RVW WHOOLQJO\
)UDQNV DSSDUHQWO\ OLHG LQ D UHFRUGHG PHVVDJH WR %HQHGLFW $OWKRXJKWKH3HUVRQQHO'LUHFWRUZDVQRWQRUPDOO\LQYROYHG
DERXWDFRQYHUVDWLRQZLWKsDQLFHsHQQLQJVLQ/DERU5HODWLRQV LQWKHJULHYDQFHSURFHVV'HIHQGDQW)UDQNVFDOOHG$VVLVWDQW
LQKLVHIIRUWVWRLPSURSHUO\LQIOXHQFH%HQHGLFWjVGHFLVLRQ 'HSXW\ :DUGHQ %HQHGLFW WKH SHUVRQ DVVLJQHG WR FRQGXFW
3ODLQWLIIjV GLVFLSOLQDU\ KHDULQJ SULRU WR WKH SURFHHGLQJ
)UDQNVUHFRPPHQGHGWR%HQHGLFWWKDW3ODLQWLIIEHWHUPLQDWHG
SHUVRQDO NQRZOHGJH $00 )HG 5 &LY 3 H DIILGDYLWV RSSRVLQJ )UDQNVVWDWHGWKDWKHPDGHWKHUHFRPPHQGDWLRQEHFDXVHKH
VXPPDU\ MXGJPHQW mVKDOO EH PDGH RQ SHUVRQDO NQRZOHGJH VKDOO VHW IRUWK NQHZWKDW%HQHGLFWDQG3ODLQWLIIZHUHJRRGIULHQGVmDQG,
VXFK IDFWV DV ZRXOG EH DGPLVVLEOH LQ HYLGHQFH DQG VKDOO VKRZ DOVRNQHZFRQFHUQVH[SUHVVHGE\HPSOR\HHVWKDWDFWLRQPLJKW
DIILUPDWLYHO\ WKDW WKH DIILDQW LV FRPSHWHQW WR WHVWLI\ WR WKH PDWWHUV VWDWHG
WKHUHLQl :H KDYH KDG WR GLVUHJDUG PDQ\ RI 3ODLQWLIIjV DOOHJDWLRQV
EHFDXVH WKH\ ZHUH QRW PDGH ZLWK 3ODLQWLIIjV SHUVRQDO NQRZOHGJH RU ZHUH
RWKHUZLVH EDVHG RQ KHDUVD\ 6HH :LOH\ Y 8QLWHG 6WDWHV  )G  

WK &LU  3ODLQWLII ZDV QRW FKDUJHG ZLWK IDLOLQJ WR PDNH UHTXLUHG UHSRUWV
 :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

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

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

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

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

+ROGLQJ D SULVRQHU>
@V OHJV GRZQ WR SUHYHQW KLP IURP *UD\VWDWHGWKDW2]RULQIRUPHGKLPWKDW3ODLQWLIIVWRRGRQ
VWULNLQJVWDIILVQRWDQH[DPSOHRIH[FHVVLYHXVHRIIRUFH 0DVVHQEXUJjVOHJVDQGmWKHQVWDUWHGWRNLFNKLPZKLOHKHZDV
,PRYHWRGLVPLVVWKHFKDUJHRIH[FHVVLYHXVHRIIRUFH UHVLVWLQJl+HQRWHGKRZHYHUWKDW2]RUZDVXQVXUHLIWKH
NLFNWRWKHKHDGZDVLQIDFWLQWHQWLRQDORUDFFLGHQWDO2]RU
5RELQVRQ GLVUHJDUGHG %HQHGLFWjV GHWDLOHG ILQGLQJV DQG WROG*UD\WKDWKHGLGQRWWKLQNWKDW3ODLQWLIILQWHQGHGWRKDUP
PDGHQRDWWHPSWWRUHVROYHWKHJODULQJFRQWUDGLFWLRQVLQWKH 0DVVHQEXUJDQGWKDW3ODLQWLIISUREDEO\NLFNHG0DVVHQEXUJ
HYLGHQFH KLPVHOI  5DWKHU 5RELQVRQ VLPSO\ IDXOWHG EHFDXVHKHZDVVWUXJJOLQJVRYLROHQWO\
%HQHGLFW IRU mXQGHUPLQ>LQJ@ WKH LQYHVWLJDWLRQ RI WKH
LQVSHFWRUTXHVWLRQ>LQJ@WKHFUHGLELOLW\RIVWDIIDQGWDN>LQJ@ 2Q sXQH   %HQHGLFW FRQGXFWHG D GLVFLSOLQDU\
WKHZRUGRIDQ>VLF@SULVRQHU%DLOH\ZKRLVQRWKRXVHGLQWKH KHDULQJ+HVHQW5RELQVRQDPHPRUDQGXPRQWKDWVDPHGD\
XQLW>ZKHUH@WKHLQFLGHQWWRRNSODFHl UHFRPPHQGLQJ WKDW 3ODLQWLII RQO\ EH UHSULPDQGHG IRU
VZHDULQJ DW 0DVVHQEXUJ  +H IRXQG WKDW WKH DOOHJDWLRQV RI
:H ILQG LW RGG WKDW D SHUVRQ FRQGXFWLQJ D GLVFLSOLQDU\ 3ODLQWLIINLFNLQJ0DVVHQEXUJZHUHXQVXEVWDQWLDWHG+HZDV
KHDULQJ FKDUJHG ZLWK WKH GXW\ RI GHWHUPLQLQJ ZKHWKHU VXVSLFLRXV RI2]RUjVVWDWHPHQWWKDWKHREVHUYHGWKHZKROH
VXIILFLHQWHYLGHQFHH[LVWVWRVXSSRUWWKHFKDUJHVHUUVZKHQKH LQFLGHQWEXWQHYHUDVVLVWHG%HQHGLFWQRWHGWKDWDWOHDVWVHYHQ
HQJDJHV LQ DQ LQGHSHQGHQW HYDOXDWLRQ RI WKH HYLGHQFH RWKHUFRUUHFWLRQVRIILFHUVRQWKHVFHQHGLGQRWVHH2]RULQWKH
DUHD ZKHQ WKH LQFLGHQW WRRN SODFH DQG WKDW QR RWKHU
FRUUHFWLRQVRIILFHUVDZ3ODLQWLIINLFN0DVVHQEXUJRQWKHKHDG
 +HIXUWKHUQRWHGWKDWDmNLWHlUHFHLYHGIURPDSULVRQHUQDPHG
$SSDUHQWO\ WKH GLVWULFW FRXUW GLG WKH VDPH WKLQJ ,Q DFFHSWLQJ %DLOH\VWDWHGWKDWKHKDGKHDUGVHYHUDOLQPDWHVWDONLQJDERXW
'HIHQGDQWVj DUWLFXODWHG UHDVRQ DQG UHMHFWLQJ 3ODLQWLIIjV SURRI RI SUHWH[W
XQGHU WKH EXUGHQVKLIWLQJ DQDO\VLV WKH FRXUW KHOG
IDOVHVWDWHPHQWVWKH\KDGPDGHDERXW3ODLQWLIIUHJDUGLQJWKH
:DUGHQ 5RELQVRQ GLG QRW DJUHH ZLWK $': 3 %HQHGLFWjV
LQFLGHQW$GGLWLRQDOO\%HQHGLFWVWDWHGWKDWWKHVPDOODEUDVLRQ
UHFRPPHQGDWLRQ GDWHG sXQH   ILQGLQJ WKDW WKH H[FHVVLYH RQ0DVVHQEXUJjVULJKWZULVWDQGWKHVPDOOVXSHUILFLDOVFUDWFK
IRUFH DQG IDLOXUH WR WDNH SURSHU SUHFDXWLRQ FKDUJHV ZHUH QRW RQKLVIRUHKHDGZHUHLQFRQVLVWHQWZLWKWKHXVHRIH[FHVVLYH
VXEVWDQWLDWHG    7KH H[KLELWV VXEPLWWHG E\ 3ODLQWLII VKRZ WKDW IRUFH
3ODLQWLII :HEHUJ PD\ KDYH NLFNHG 3ULVRQHU 5LFDUGR 0DVVHQEXUJ
DQ $IULFDQ $PHULFDQ ZKLOH KH ZDV KDQGFXIIHG DQG RQ WKH
JURXQG 7KH $SULO   LQFLGHQW UHSRUW DQG $SULO  
%HQHGLFWDOVRIRXQGWKDWWKHFKDUJHRIIDLOLQJWRWDNHSURSHU
VWDWHPHQW VXEPLWWHG E\ 3ULVRQHU 0DVVHQEXUJ LQGLFDWH KH ZDV
VHFXULW\ SUHFDXWLRQV ZDV XQVXEVWDQWLDWHG  +H VWDWHG WKDW
NLFNHG E\ 3ODLQWLII :HEHUJ    582 ' 2]RUjV $SULO   3ODLQWLIIGLGQRWKDYHWLPHWRGHIXVHWKHVLWXDWLRQZDLWIRUWKH
PHPRUDQGXP WR ,QVSHFWRU &KDSPDQ DQG KLV UHVSRQVHV WR SULVRQHUWRFRROGRZQRUXVHGHHVFDODWLRQWHFKQLTXHV
,QVSHFWRU &KDSPDQjV LQTXLULHV DERXW WKH LQFLGHQWV VKRZV WKDW
3ODLQWLII :HEHUJ NLFNHG 3ULVRQHU 0DVVHQEXUJ ZKLOH KH ZDV RQ 2Q sXQH   5RELQVRQ PRGLILHG WKH GLVFLSOLQH
WKH JURXQG    $Q $SULO   PHPRUDQGXP IURP 6HUJHDQW
UHFRPPHQGHGE\%HQHGLFW5HLQVWDWLQJWKHFKDUJHVDJDLQVW
3ODLQWLII5RELQVRQGHPRWHGDQGVXVSHQGHG3ODLQWLII,QWKH
6KDURQ /DXGHUGDOH WR ,QVSHFWRU &KDSPDQ DQG KLV UHVSRQVHV WR
,QVSHFWRU &KDSPDQ DOVR LQGLFDWHV WKDW 3ODLQWLII NLFNHG 3ULVRQHU
0DVVHQEXUJ RQ WKH KHDG ZKLOH KH ZDV O\LQJ RQ WKH JURXQG    GLVFLSOLQDU\UHSRUW5RELQVRQVWDWHG
,QVSHFWRU &KDSPDQjV UHSRUW RQ WKH LQFLGHQW VKRZV WKDW KH
LQWHUYLHZHG QXPHURXV SULVRQHUV DQG VWDII UHJDUGLQJ WKH LQFLGHQW
DQG FRQFOXGHG WKDW 3ODLQWLII :HEHUJ NLFNHG 3ULVRQHU
0DVVHQEXUJ ZKLOH KH ZDV RQ WKH JURXQG
7KH GLVWULFW FRXUWjV ILQGLQJ WKDW WKH $SULO   LQFLGHQW UHSRUW DQG

$SULO   2]RU VWDWHPHQW mLQGLFDWH KH >0DVVHQEXUJ@ ZDV NLFNHG E\ 7KH DFWXDO VXVSHQVLRQ LV LQFRQVLVWHQW ZLWK 5RELQVRQjV ZULWWHQ
3ODLQWLII :HEHUJl LV QRW VXSSRUWHG E\ WKH GRFXPHQWDU\ HYLGHQFH UHSRUW
 :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

,W DSSHDUV WKDW DW WKH GLVFLSOLQDU\ >VLF@ WKH LQGLYLGXDO ,QVXPPDU\$':%HQHGLFWUHSRUWHGVDLGWKDWKHKDGD
KROGLQJ WKH FRQIHUHQFH WRRN LW XSRQ KLPVHOI WR SUREOHPZLWK2]RUjVVWDWHPHQWLQZKLFKKHVWDWHGWKDW
LQYHVWLJDWHWKHLQYHVWLJDWLRQRIWKH,QVSHFWRU,ILQGWKLV KH REVHUYHG WKH ZKROH LQFLGHQW EXW KH QHYHU DVVLVWHG
WRWDOO\ XQDFFHSWDEOH  :KHQ FRQGXFWLQJ D GLVFLSOLQDU\ &2>&RUUHFWLRQV2IILFHU@7LSSHQVFODLPVLQKLVUHSRUW
FRQIHUHQFHWKHFKDUJHLVWRUHYLHZWKHHYLGHQFHSUHVHQWHG WKDWKHKHDUGWKHFDOORQWKHUDGLRIRUDVVLVWDQFHDQGZDV
DQGGHWHUPLQHLIWKH\>VLF@VXSSRUWWKHFKDUJHVEURXJKW WKHILUVWWRDUULYH+HGLGQRWREVHUYHWKHSULVRQHUEHLQJ
,IWKHLQYHVWLJDWLRQZDVQRWFRPSOHWHLWVKRXOGKDYHEHHQ VWUXFNQRU&22]RULQWKHDUHD
UHWXUQHG SULRU WR KROGLQJ WKH GLVFLSOLQDU\ FRQIHUHQFH
+HUHZDVDVLWXDWLRQWKDWVKRXOGKDYHDQGFRXOGKDYH &27HUU\GLGQRWREVHUYH2]RULQWKHDUHD&2+ROG
EHHQDYRLGHGE\WKHVXSHUYLVRUSUHVHQWDWWKHVFHQH, ZDVWROGWRFOHDUWKHGD\URRPDQGUHSRUWHGWKHUHZHUH
ILQG LW XQDFFHSWDEOH IRU WKH $': WR XQGHUPLQH WKH QR RWKHU RIILFHUjV >VLF@ LQ WKHUH EXW WKHUH ZHUH WKUHH
LQYHVWLJDWLRQRIWKH,QVSHFWRUTXHVWLRQWKHFUHGLELOLW\RI RIILFHUV DW WKH GHVN  &2 +DPPHUPHLVWHU GLG QRW VHH
VWDIIDQGWDNHWKHZRUGRIDQ>VLF@SULVRQHU%DLOH\ZKR 2]RU  6JW /DXGHUGDOH FODLPHG WR EH RQH RI WKH ILUVW
LVQRWKRXVHGLQWKHXQLW>ZKHUH@WKHLQFLGHQWWRRNSODFH SHRSOHWRDUULYH6KHVDLGVKHVDZ6JW:HEHUJjVIRRW
7KHLQFLGHQWZDVWRWDOO\PLVKDQGOHGE\WKHVXSHUYLVRUDW SUHVVHGDJDLQVWWKHSULVRQHU>
@VIRRWDQGGLGQRWREVHUYH
WKHVFHQH3URFHGXUHVZHUHQRWIROORZHG7KLVFRXOG 2]RU WR EH LQ WKH DUHD QRU 6JW :HEHUJ NLFNLQJ WKH
KDYHOHGWRDVHULRXVRXWEXUVWE\WKHSULVRQHUVLQWKHXQLW SULVRQHU&27HUU\GLGQRWVHH2]RULQWKHDUHDV&2
$QGIRUXVWRWU\WRFRYHUXSWKHPLVWDNHVLVQRWSURSHU 0XUGRFK GLG QRW VHH 2]RU  &2 5LHPDQ GLG QRW VHH
,QUHYLHZLQJWKHLQYHVWLJDWLRQWKHUHLVQRHYLGHQFHWKH 2]RU&2jV>VLF@6WHZDUWDQG:HQVNRKHOSHGFXIIWKH
RIILFHUVVSHFLILFDOO\VDZSULVRQHU0DVVHQEXUJPDNHWKH SULVRQHU DQG GLG QRW REVHUYH DQ\ LQDSSURSULDWH
DOOHGJHG>VLF@FRPPHQW$OOWKUHHKDGWKHLUEDFNWRWKH EHKDYLRUDFWLRQVRQWKHSDUWRI6JW:HEHUJ$OVRLQDOO
'D\URRPDQGZHUHRQWKHLUZD\RXWRIWKHXQLW+HUHZH WKHVHVWDWHPHQWVWKHVHVWDIIGLGQRWZLWQHVVDQ\KLWWLQJRU
KDYHWKUHHZKLWHHPSOR\HHVDQGRQHEODFNLQPDWH7KH NLFNLQJRIWKLVSULVRQHUE\6JW:HEHUJ,ILQGHHG2]RU
ZURQJPHVVDJHLVWKXVVHQWWRRWKHULQPDWHVLQWKHXQLW ZLWQHVVHG WKH LQFLGHQW IURP WKH RIILFHU>
@V GHVN WKH
ZKRDUHZDWFKLQJWKHLQFLGHQW,WKLQNRWKHUVWHSVVKRXOG YLVLELOLW\ IURP WKH GHVN WR WKH FDUG URRP ZRXOG KDYH
KDYH EHHQ WDNHQ WR DYRLG WKLV LQFLGHQW  $V VXFK , DP EHHQSUDFWLFDOO\]HURHVSHFLDOO\ZLWKWKHWDEOHEORFNLQJ
UHLQVWDWLQJWKHRULJLQDOFKDUJHVDQGUHFRPPHQGLQJ0V WKHYLHZ$':%HQHGLFWDOVRDGGHGWRWKHHYLGHQFHD
:HEHUJ EH GHPRWHG DQG VXVSHQGHG IRU WKUHH GD\V NLWHUHFHLYHGE\SULVRQHU%DLOH\VWDWLQJWKDW
(PSKDVLVDGGHG m+H KHDUG VHYHUDO LQPDWHV WDNLQJ >VLF@ DERXW IDOVH
VWDWHPHQWV WKH\ PDGH DERXW 6JW :HEHUJ LQ 8QLW 
3ODLQWLIIZDVDOORZHGWRUHWXUQWRZRUNLQHDUO\$XJXVWRI 7KDW VKH UHDOO\ GLGQjW GR ZKDW WKH\ ZURWH LQ WKHLU
EXWUHPDLQHGRQPHGLFDOOHDYH,QKHUEULHI3ODLQWLII VWDWHPHQWVDQGWKDWWKH\ZHUHRQO\WU\LQJWRKRRNKHU
VWDWHV WKDW WKH 0'2& UHGXFHG WKH GLVFLSOLQH LPSRVHG E\ XSl  6WDWHPHQW DWWDFKHG  51 7DWH DOVR UHSRUWHG WKDW
5RELQVRQWRDILIWHHQGD\VXVSHQVLRQEXWZLWKRXWDGHPRWLRQ XSRQH[DPLQDWLRQRISULVRQHU0DVVHQEXUJGLUHFWO\DIWHU
3ODLQWLIIDOVRVWDWHVWKDWVKHDSSHDOHGWKHVXVSHQVLRQWRWKH WKH LQFLGHQW o VPDOO DEUDVLRQ RQ ULJKW ZULVW VPDOO
0LFKLJDQ'HSDUWPHQWRI&LYLO6HUYLFHZKLFKDIWHUDVL[WHHQ VXSHUILFLDO VFUDWFK RQ IRUHKHDG QHLWKHU RI ZKLFK LV
PRQWK LQYHVWLJDWLRQ UHGXFHG WKH GLVFLSOLQH WR D ZULWWHQ FRQVLVWHQWZLWKH[FHVVLYHXVHRIIRUFH
UHSULPDQG$FFRUGLQJWR3ODLQWLIIWKH0LFKLJDQ'HSDUWPHQW
RI &LYLO 6HUYLFH FRQFOXGHG WKDW VKH ZDV QRW JXLOW\ RI DQ\
ZURQJGRLQJRWKHUWKDQGLUHFWLQJSURIDQLW\WRZDUGDSULVRQHU
 :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

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

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

VXVSHFWKRZHYHU)LUVWLWDSSHDUVWRKDYHOLWWOHEDVLVLQIDFW 'HSDUWPHQW RI &RUUHFWLRQV DV GHIHQGDQWV LQ WKLV DFWLRQ
'HFHPEHU   WKH SDUWLHV VWLSXODWHG WR WKH
+RZHYHU RQ
ZLWKGUDZDO RI WKH
%HQHGLFW GHWDLOHG LQ KLV UHSRUW ZK\ &KDSPDQjV FRPSODLQW DJDLQVW WKH 6WDWH RI 0LFKLJDQ DQG WKH 0LFKLJDQ 'HSDUWPHQW RI
GRFXPHQWDWLRQGLGQRWVXSSRUWWKHFKDUJH &RUUHFWLRQV ZLWKRXW SUHMXGLFH
2Q 'HFHPEHU   WKH GLVWULFW FRXUW GLVPLVVHG 3ODLQWLIIjV FODLPV
WR WKH H[WHQW WKH\ ZHUH DVVHUWHG DJDLQVW WKH LQGLYLGXDO GHIHQGDQWV LQ WKHLU
RIILFLDO FDSDFLWLHV

%HFDXVH WKH GLVWULFW FRXUW HPSOR\HG WKH 0F'RQQHOO 'RXJODV 
EXUGHQVKLIWLQJ DQDO\VLV LW WUHDWHG 'HIHQGDQWVj H[SODQDWLRQ DV PHUHO\ D 7KH GLVWULFW FRXUW GLG QRW VHSDUDWHO\ DQDO\]H 3ODLQWLIIjV VHFWLRQ 
EXUGHQ RI SURGXFWLRQ +RZHYHU RQ UHPDQG 'HIHQGDQWV ZLOO EHDU WKH FODLP ZLWK UHVSHFW WR HDFK LQGLYLGXDO GHIHQGDQW 5DWKHU WKH FRXUW
EXUGHQ RI SHUVXDVLRQ RQ WKLV SRLQW FRQGXFWHG LWV DQDO\VLV DV LI WKHUH ZHUH RQO\ RQH GHIHQGDQW
 :HEHUJHWDOY)UDQNVHWDO 1R 1R :HEHUJHWDOY)UDQNVHWDO 

7KHGLVWULFWFRXUWDOVRUXOHGWKDWHYHQDVVXPLQJDUJXHQGR $ &RQFHLYDEO\JLYHQWKHFLUFXPVWDQFHV
WKDW3ODLQWLIIKDGHVWDEOLVKHGDSULPDIDFLHFDVH'HIHQGDQWV
KDGSURIIHUHGDOHJLWLPDWHQRQGLVFULPLQDWRU\UHDVRQIRUKHU 4 UDFH@jl%RJHU
UHLWHUDWHGWKHVHQWLPHQWLQKLVGHSRVLWLRQWHVWLPRQ\ )GDWTXRWLQJ*XW]ZLOOHU)GDW
4    7KH VWDWHPHQW KHUH ZH KDYH WKUHH ZKLWH 3ODLQWLIIFODLPVUDFHGLVFULPLQDWLRQLQYLRODWLRQRI†
HPSOR\HHVDQGRQHEODFNLQPDWH:KDWGRHVWKDWKDYHWR XQGHUERWKGLVSDUDWHWUHDWPHQWDQGGLVSDUDWHLPSDFWWKHRULHV
GRZLWKDQ\WKLQJUHJDUGLQJWKLVVLWXDWLRQ" 3ODLQWLIIDOVRDOOHJHVWKDW'HIHQGDQWVFRQVSLUHGWRYLRODWHKHU
FRQVWLWXWLRQDOULJKWV
$ &RQVLGHULQJWKHYRODWLYLW\>VLF@RIWKHKRXVLQJXQLW
DQGDEODFNPDOHSULVRQHU $'LVSDUDWH7UHDWPHQW
4 :K\GRHVWKDWKDYHWREHSXWLQWRDGLVFLSOLQDU\ %HFDXVHERWK7LWOH9,,DQG†SURKLELWGLVFULPLQDWRU\
LVVXH"  ,V WKHUH VRPHWKLQJ ZURQJ ZLWK WKUHH ZKLWH HPSOR\PHQWSUDFWLFHVE\SXEOLFHPSOR\HUVWKLVFRXUWORRNV
RIILFHUVGHDOLQJZLWKDEODFNLQPDWH" WR 7LWOH 9,, GLVSDUDWH WUHDWPHQW FDVHV IRU DVVLVWDQFH LQ
DQDO\]LQJ UDFH GLVFULPLQDWLRQ LQ WKH SXEOLF HPSOR\PHQW
$ 1R FRQWH[WXQGHU†6HHHJ*XW]ZLOOHU)GDW
.LWFKHQY&KLSSHZD9DOOH\6FKV)GWK
4 :KDWGRHVWKDWKDYHWRGRZLWKDQ\WKLQJWKHQ" &LU'DQLHOVY%RDUGRI(GXF)G
WK&LU*UDQRY'HSDUWPHQWRI'HY)G
$ 7KH SHUFHSWLRQ RI WKH SULVRQHUV LQ WKH KRXVLQJ WK&LU
XQLW
4 6RWKHSHUFHSWLRQRIWKHSULVRQHUVLQWKHKRXVLQJ

XQLW LQIOXHQFHV \RX LQ KRZ \RXjUH JRLQJ WR GLVFLSOLQH 7KLV FLUFXLW KROGV WKDW DQ LQGLYLGXDO HPSOR\HHVXSHUYLVRU ZKR GRHV

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

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

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

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

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