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 2/(1 ( +87&+,621 ; 3HWLWLRQHU$SSHOODQW    1R Y  !  5,&. +XWFKLVRQ@DQGRI*D\ORUDQG+XGGOHVWRQl ,G0LOOHUjVWHVWLPRQ\ZDVXVHGWRZHDYHWRJHWKHUWKHVWDWHjV WKHRU\RIDFRQVSLUDF\WRNLOO+XGGOHVWRQ0LOOHUUHFRXQWHGD FRQYHUVDWLRQ EHWZHHQ KLPVHOI *D\ORU DQG +XWFKLVRQ LQ ZKLFK +XWFKLVRQ ZDV mWDONLQJ DERXW KRZ PXFK PRQH\ KH FRXOGPDNHLIKHWRRNLQVXUDQFHRXWRQVRPHERG\DQGWKHQ KDGWKHPNLOOHGls$DW0LOOHUVDLGWKDW*D\ORUWKHQ UHPDUNHGWKDWKHZRXOGSD\WRNLOOVRPHERG\EXW WKDWKLVmLQVXUDQFHSROLF\LVQjWJRRGXQWLO,jP\HDUVROGl s$DW+XWFKLVRQUHVSRQGHGDFFRUGLQJWR0LOOHUWKDW WKDWZDVmWRRORQJWRZDLWls$DW 0LOOHUWHVWLILHGWKDWDERXWRQHZHHNODWHU+XWFKLVRQDVNHG *D\ORUWRJHW+XGGOHVWRQWRVLJQVRPHLQVXUDQFHSDSHUVDQG D SURPLVVRU\ QRWH UHSUHVHQWLQJ D  ORDQ IURP +XWFKLVRQ WR +XGGOHVWRQ  +XWFKLVRQ  6:G DW  0LOOHU WHVWLILHG WKDW +XGGOHVWRQ ZRXOG GR DQ\WKLQJ WKDW *D\ORU DVNHG  $W *D\ORUjV XUJLQJ +XGGOHVWRQ VLJQHG D OLIHLQVXUDQFHSROLF\ODWHUFKDQJHGWRLQFOXGHDQ DGGLWLRQDODFFLGHQWDOGHDWKEHQHILWZKLFKQDPHG +XWFKLVRQDVWKHVROHEHQHILFLDU\,G7KHLQVXUDQFHSROLF\ ZDV VXSSRVHG WR SURYLGH VHFXULW\ IRU WKH  ORDQ  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  0LOOHU*D\ORUDQG&XUQXWWZLWQHVVHG+XGGOHVWRQVLJQWKH ,Q VXP +XWFKLVRQ KDV QRW GHPRQVWUDWHG WKDW WKH VWDWH SURPLVVRU\QRWH,G$FFRUGLQJWRWKHSURVHFXWLRQWKHGHEW FRXUWjVUHVROXWLRQRIKLVSURVHFXWRULDOPLVFRQGXFWFODLPVZDV ZDVHQWLUHO\ILFWLWLRXV,G DQXQUHDVRQDEOHDSSOLFDWLRQRIIHGHUDOODZ7KHSURVHFXWRUjV FRPPHQWV ZHUH SHUPLVVLEOH  0RUHRYHU WKLV &RXUW KDV +XWFKLVRQWKHQRIIHUHGPRQH\WRERWK*D\ORUDQG0LOOHUWR UHFRJQL]HG WKH HIIHFWLYHQHVV RI FXUDWLYH LQVWUXFWLRQV LQ NLOO+XGGOHVWRQ*D\ORUUHIXVHGEHFDXVHKLVILQDQFLDOLQWHUHVW PLWLJDWLQJSUHMXGLFHXQGHUVLPLODUFLUFXPVWDQFHV7KHUHIRUH LQ+XGGOHVWRQjVRWKHUEHQHILWVZRXOGPDNHKLPDQREYLRXV +XWFKLVRQLVQRWHQWLWOHGWRKDEHDVUHOLHIRQWKLVFODLP VXVSHFW  0LOOHU DOVR UHIXVHG  +XWFKLVRQ WKHQ DVNHG 9DUQDGRUHRQHRIKLVDOOHJHGGUXJULQJSDUWQHUVWRDUUDQJH ,,,&21&/86,21 WKHPXUGHU9DUQDGRUHVDLGKHZRXOGmJHWKLVER\VWRGRLWl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m0LOOHUOHIWWRJHWEDLWLQDQRWKHUERDW KHKDGEURXJKWRQWKHWULSl,G5ROO\VRQWHVWLILHGWKDWDIWHU 0LOOHUOHIW+DWPDNHUSXVKHG+XGGOHVWRQLQWRWKHZDWHU,G :KHQ0LOOHUUHWXUQHGWRWKHERDWDOORIWKHPHQZHUHJRQH 0LOOHU UHSRUWHG +XGGOHVWRQjV GLVDSSHDUDQFH DQG WKH ERG\ ZDV IRXQG LQ WKH ODNH ODWHU WKDW GD\  ,G  m7KHUH ZHUH QR REYLRXV VLJQV RI YLROHQFH RQ WKH ERG\ EXW WKH SDWKRORJLVW ODWHUQRWHGDGHHSEUXLVHLQWKHYLFWLPjVVFDOSSRVVLEO\ IURPVWULNLQJKLVKHDGRQWKHERDWRUEHLQJVWUXFNE\DERDW SDGGOH RU D ILVWl  ,G DW   )ROORZLQJ +XGGOHVWRQjV GHDWK ERWK *D\ORU DQG +XWFKLVRQ ILOHG FODLPV WR UHFRYHU EHQHILWV XQGHU +XGGOHVWRQjV OLIH LQVXUDQFH SROLFLHV  ,G DW  ,Q DGGLWLRQ WR WKH WHVWLPRQ\ RI 0LOOHU DQG 5ROO\VRQ WKH SURVHFXWLRQLQWURGXFHGVHYHUDOOHWWHUVZULWWHQE\+XWFKLVRQWR 0LOOHUDQG9DUQDGRUHmFRPPXQLFDWLQJZLWKWKHPDERXWWKH FDVHDQGWDFLWO\XUJLQJWKHPWRNHHSTXLHWl,G+XWFKLVRQjV FHOOPDWH WHVWLILHG WKDW +XWFKLVRQ WROG KLP WKDW KLV  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  :H DJUHH+XWFKLVRQFDQQRWVKRZWKDWWKHVWDWHFRXUWjV FRFRQVSLUDWRUVmNQHZEHWWHUWKDQWRVD\DQ\WKLQJlDQGWKDW UHVROXWLRQ RI WKH SURVHFXWRULDO PLVFRQGXFW FODLP ZDV m>L@IWKH\GLGWKH\ZRXOGHQGXSWKHVDPHZD\DVWKHRWKHU REMHFWLYHO\XQUHDVRQDEOH+XWFKLVRQGRHVQRWFKDOOHQJHWKH JX\l,G7KHFHOOPDWHDOVRVWDWHGWKDW+XWFKLVRQVDLGWKDW VWDWH FRXUWjV GHFLVLRQ DGPLWWLQJ GUXJ DFWLYLW\ HYLGHQFH IRU mDVORQJDVHYHU\ERG\NHSWWKHLUPRXWKVKXWWKHQWKH\ZRXOG QRQSURSHQVLW\ SXUSRVHV LQVWHDG KH FRQWHQGV WKDW WKH EHIRXQGQRWJXLOW\WKH\FRXOGQjWSURYHQRWKLQJl,G SURVHFXWLRQjV FORVLQJ DUJXPHQW DVNHG WKH MXU\ WR XVH WKH HYLGHQFH IRU LPSURSHU SXUSRVHV  +XWFKLVRQ LGHQWLILHV LQ *D\ORU DQG +XWFKLVRQ ERWK WHVWLILHG DW WULDO  'XULQJ LWV SDUWLFXODU WKH SURVHFXWLRQjV VXJJHVWLRQ WKDW DQ H[KLELW FURVVH[DPLQDWLRQ RI *D\ORU WKH SURVHFXWLRQ LQWURGXFHG D VKRZLQJ VRPH FDOFXODWLRQV E\ WKH GHIHQGDQW ZDV D mGHDWK FLYLO FRPSODLQW *D\ORU KDG ILOHG LQ IHGHUDO FRXUW  ,Q WKH ERRNl WKDW UHFRUGHG +XWFKLVRQjV LQWHQWLRQV RI XVLQJ WKH FRPSODLQW*D\ORUDUJXHGWKDWKHVKRXOGUHFRYHUWKHSURFHHGV LQVXUDQFH SURFHHGV DV D GUXJ LQYHVWPHQW  s$ DW  RI WKH  LQVXUDQFH SROLF\ QDPLQJ +XWFKLVRQ DV +RZHYHU WKHVH VWDWHPHQWV DUH GLUHFWHG DW PRWLYH QRW EHQHILFLDU\EHFDXVH+XWFKLVRQZDVIHORQLRXVO\UHVSRQVLEOH SURSHQVLW\DQGWKHUHIRUHZRXOGQRWKDYHPLVOHGWKHMXU\ IRU+XGGOHVWRQjVGHDWK*D\ORUPDLQWDLQHGWKDWKHILOHGWKH FODLPVROHO\XSRQKLVDWWRUQH\jVDGYLFHDQGWKDWKHGLGQRW 0RUHRYHU +XWFKLVRQ DUJXHV WKDW WKH SURVHFXWLRQ NQRZKRZ+XGGOHVWRQKDGGLHG LPSHUPLVVLEO\FDOOHGRQWKHMXU\WRDFWDVDULJKWHRXVDUP\WR FRPEDW GUXJ DFWLYLW\  +XWFKLVRQ FLWHV WKH SURVHFXWLRQjV +XWFKLVRQWHVWLILHGWKDWWKHORDQDQGWKHLQVXUDQFHSROLF\ VWDWHPHQWV DQDORJL]LQJ WKH EDWWOH DJDLQVW WKH mWUHPHQGRXV ZHUH SDUW RI D OHJLWLPDWH WUDQVDFWLRQ DQG GHQLHG DQ\ IRUFHVRIHYLOlPDUVKDOHGE\+XWFKLVRQDQG*D\ORUWRDEDWWOH LQYROYHPHQWLQ+XGGOHVWRQjVGHDWK+XWFKLVRQWHVWLILHGWKDW LQ+HQU\9s$DWDVZHOODVRWKHUUHIHUHQFHVWRWKH KHGLGQRWNQRZWKHYDOXHRIWKHLQVXUDQFHSROLF\RWKHUWKDQ mHYLOZD\VlRUmHYLOIRUFHlRI+XWFKLVRQs$DW WKDW LW ZDV HQRXJK WR VHFXUH WKH GHEW   +XWFKLVRQ IXUWKHU 7KHVH FRPPHQWV KRZHYHU GR QRW ULVH WR WKH OHYHO RI D VWDWHGWKDWXSRQ+XGGOHVWRQjVGHDWKKHKDGLQWHQGHGWRVHHN FRQVWLWXWLRQDOYLRODWLRQ$OWKRXJKWKLV&RXUWKDVKHOGWKDWLW UHFRYHU\ RI RQO\ WKH  YDOXH RI WKH QRWH LQFOXGLQJ LVDFRQVWLWXWLRQDOYLRODWLRQWRFDOOXSRQWKHMXU\WRVROYHD LQWHUHVWEXWWKDWXSRQWKHDGYLFHRIKLVDWWRUQH\KHILOHGD VRFLDO SUREOHP VXFK DV WKH GUXJ WUDGH E\ FRQYLFWLQJ WKH FODLPIRUWKHHQWLUHYDOXH GHIHQGDQW LW LV QRW LPSURSHU IRU WKH SURVHFXWRU WR PDNH D mPHUHDOOXVLRQWRWKHJHQHUDOQHHGWRFRQYLFWJXLOW\SHRSOHl 7KH MXU\ IRXQG +XWFKLVRQ JXLOW\ RI ILUVWGHJUHH PXUGHU 6ROLYDQ)GDWVHHDOVR%XHOOY0LWFKHOO)G FRQVSLUDF\ WR FRPPLW PXUGHU DQG VROLFLWDWLRQ WR FRPPLW WK&LU7KHSURVHFXWLRQGLGQRWFDOORQWKH PXUGHU,G$WVHQWHQFLQJWKHVWDWHSUHVHQWHGQRDGGLWLRQDO MXU\WRmVHQGDPHVVDJHlWRDQ\RQHLWPHUHO\DVNHGWKDWWKH HYLGHQFHEXWVRXJKWWKHGHDWKSHQDOW\RQWKHJURXQGVWKDW MXU\ PDNH +XWFKLVRQ DQVZHU IRU KLV RZQ SDUWLFXODU JXLOW\ +XWFKLVRQKDGmHPSOR\HGDQRWKHUWRFRPPLWWKHPXUGHUIRU DFWLYLWLHVs$DWm,XUJH\RXWRORRNDORQHWRWUXWKDQG UHPXQHUDWLRQRUWKHSURPLVHRIUHPXQHUDWLRQlDQDJJUDYDWLQJ MXVWLFH LQ WKLV FDVH DQG    SXW DQ HQG WR WKLV HYLO IDFWRUVHWIRUWKLQ7HQQHVVHH&RGH$QQRWDWHG7&$† SDUWQHUVKLSl7KHUHZDVQRDOOXVLRQWRWKHEURDGHUVRFLDO L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 +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  WHVWLILHGDERXWKLVVNLOOVLQUHSDLULQJVPDOOPDFKLQHVDQG +XWFKLVRQjV FODLP UHODWLQJ WR WKH SURVHFXWLRQj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jV VHFRQG PLVFRQGXFW FODLP UHODWHV WR WKH +XWFKLVRQ  6:G DW   $W WKH FRQFOXVLRQ RI WKH SURVHFXWRUjVUHIHUHQFHVWR+XWFKLVRQjVLQYROYHPHQWLQGUXJ VHQWHQFLQJSURFHHGLQJV+XWFKLVRQZDVVHQWHQFHGWRGHDWK DFWLYLW\GXULQJFORVLQJDUJXPHQW+XWFKLVRQDUJXHVWKDWWKH SURVHFXWLRQLPSURSHUO\FLWHGHYLGHQFHRI+XWFKLVRQjVGUXJ 7KH 7HQQHVVHH 6XSUHPH &RXUW DIILUPHG +XWFKLVRQjV DFWLYLW\ WR VKRZ FULPLQDO SURSHQVLW\ DQG WR DUJXH WKDW FRQYLFWLRQDQGVHQWHQFH,GDW2Q0D\WKUHH +XWFKLVRQVKRXOGEHFRQYLFWHGWRIXUWKHUWKHSXEOLFSROLF\ GD\VDIWHUWKHGHQLDORIUHKHDULQJE\WKH7HQQHVVHH6XSUHPH DJDLQVWGUXJV6HH8QLWHG6WDWHVY6ROLYDQ)G &RXUW +XWFKLVRQ ILOHG D SUR VH SHWLWLRQ IRU VWDWH WK&LUILQGLQJHUURUZKHUHDSURVHFXWRUFDOOHG SRVWFRQYLFWLRQ UHOLHI DOOHJLQJ QXPHURXV HUURUV LQFOXGLQJ RQMXURUVWRFRQYLFWGHIHQGDQWLQRUGHUWRGHWHUGUXJDFWLYLW\ LQVXIILFLHQF\ RI WKH HYLGHQFH SUHMXGLFH UHVXOWLQJ IURP WKH DQG PLWLJDWH WKH VRFLDO SUREOHPV VWHPPLQJ IURP WKH GUXJ WULDOFRXUWjVUHIXVDOWRVHYHUKLVWULDOIURP*D\ORUjVWULDOFRXUW WUDGH HUURUVLQWKHDGPLVVLRQRIHYLGHQFHDQGLQHIIHFWLYHDVVLVWDQFH RI FRXQVHO  7KH WULDO FRXUW UHMHFWHG +XWFKLVRQjV FODLPV 7KH VWDWH FULPLQDO DSSHDOV FRXUW XSRQ SRVWFRQYLFWLRQ IROORZLQJDQHYLGHQWLDU\KHDULQJ7KH7HQQHVVHH&RXUWRI UHYLHZUHMHFWHGWKLVFODLP+XWFKLVRQ:/DW &ULPLQDO$SSHDOVDIILUPHG+XWFKLVRQY6WDWH1R& 7KHFRXUWQRWHGWKDWmWHVWLPRQ\FRQFHUQLQJLOOHJDOGUXJ &&:/DW 7HQQ&ULP$SS DFWLYLW\>ZDV@DGPLVVLEOHEHFDXVHWKHFRQVSLUDF\WRFRPPLW 2FWFHUWGHQLHG86 PXUGHU ZDV OLQNHG WR WKH SULRU UHODWLRQVKLS DPRQJ WKH FR FRQVSLUDWRUV EDVHG XSRQ WKHLU LQYROYHPHQW LQ WKH GUXJ 2Q$XJXVW+XWFKLVRQILOHGDVHFRQGSHWLWLRQIRU EXVLQHVVl  7KH FRXUW QRWHG WKDW DOWKRXJK WKH SURVHFXWRUjV VWDWHSRVWFRQYLFWLRQUHOLHIDOOHJLQJWKDWWKHSURVHFXWLRQKDG UHPDUNV KDG D SRWHQWLDO WR PLVIRFXV WKH MXURUV mWKH PDMRU VXSSUHVVHGH[FXOSDWRU\DQGLPSHDFKPHQWHYLGHQFH7KHWULDO WKUXVWRIWKHVWDWHjVFRPPHQWVIRFXVHGFRQVLGHUDWLRQRQWKH FRXUWGLVPLVVHG+XWFKLVRQjVVHFRQGSHWLWLRQRQWKHJURXQGV SHWLWLRQHUjV ILQDQFLDO PRWLYHV IRU WKH PXUGHUl ZKLFK ZDV WKDWWKHSHWLWLRQZDVXQWLPHO\ILOHGWKHFODLPVKDG UHOHYDQW WR WKH DJJUDYDWLQJ IDFWRU UHJDUGLQJ PXUGHU IRU EHHQ ZDLYHG  WKH GHIHQGDQW ZDV HQWLWOHG WR RQO\ RQH UHPXQHUDWLRQ,GDW  SHWLWLRQIRUSRVWFRQYLFWLRQUHOLHIDQGWKHGHIHQGDQWKDG IDLOHG WR VWDWH D FODLP XSRQ ZKLFK UHOLHI FRXOG EH JUDQWHG 7KHGLVWULFWFRXUWDJUHHGZLWKWKHFULPLQDODSSHDOVFRXUWjV 7KH 7HQQHVVHH &RXUW RI &ULPLQDO $SSHDOV DIILUPHG WKH FRQFOXVLRQ WKDW WKH SURVHFXWRUjV FRPPHQWV IRFXVHG XSRQ GLVPLVVDO RQ WKH JURXQGV WKDW +XWFKLVRQjV SHWLWLRQ ZDV WKRVH LVVXHV IRU ZKLFK WKH GUXJ HYLGHQFH ZDV SURSHUO\ SURFHGXUDOO\EDUUHGE\WKHVWDWXWHRIOLPLWDWLRQVDQGZDLYHU DGPLWWHG'LVW&W2SDW7KHFRXUWDOVRQRWHGWKDWWKH UXOHV+XWFKLVRQY6WDWH1R&&5 SURVHFXWRUjVFRPPHQWVZHUHmIDLUO\LVRODWHGDQGREMHFWHGWR :/DW 7HQQ&ULP$SS'HF E\ SHWLWLRQHUjV FRXQVHOl DQG WKDW WKH SURVHFXWRU GLG QRW PLVVWDWHWKHHYLGHQFH'LVW&W2SDW  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  KLV FRFRQVSLUDWRUV  s$ DW  TXHVWLRQLQJ 0LOOHU DERXW +DYLQJ IDLOHG WR JDLQ UHOLHI LQ VWDWH FRXUW +XWFKLVRQ SULRUDFWRIDEXVH1HYHUWKHOHVVWKHUHLVQRLQGLFDWLRQWKDW SHWLWLRQHG WKH GLVWULFW FRXUW IRU KDEHDV FRUSXV UHOLHI +XWFKLVRQ SXUVXHG DQ\ SRVVLEOH RPLVVLRQV E\ KLV FRXQVHO 5HVSRQGHQWPRYHGIRUVXPPDU\MXGJPHQW)ROORZLQJRUDO UHODWLQJWRWKHVHPDWWHUVGXULQJSRVWFRQYLFWLRQSURFHHGLQJV DUJXPHQW WKH GLVWULFW FRXUW HQWHUHG D ILQDO RUGHU JUDQWLQJ 6HH0:LOOLDPV86DW+XWFKLVRQKDVPDGHQR VXPPDU\MXGJPHQWWRWKHUHVSRQGHQWRQDOORI+XWFKLVRQjV VKRZLQJ WKDW KH VDWLVILHV WKH VWULFW UHTXLUHPHQWV RI FODLPV7KLV&RXUWJUDQWHGDFHUWLILFDWHRIDSSHDODELOLW\RQ †H$ %7KHUHIRUH+XWFKLVRQLVSUHFOXGHGIURP WKHIROORZLQJLVVXHV GHYHORSLQJ WKH IDFWXDO EDVLV RI KLV LQHIIHFWLYH DVVLVWDQFH FODLPVDWWKLVVWDJHRIWKHSURFHHGLQJV ,VVXH,:KHWKHUWKHIDLOXUHWRJUDQWDVHYHUDQFHRIWKH WULDO EHWZHHQ +XWFKLVRQ DQG KLV FRGHIHQGDQW *D\ORU (3URVHFXWRULDO0LVFRQGXFW GHQLHG+XWFKLVRQDIDLUWULDO7KLVLVVXHDOVRLQFOXGHV ZKHWKHUWKHGLVWULFWFRXUWLQKDEHDVFRUSXVVKRXOGKDYH +XWFKLVRQjV ILQDO DUJXPHQW LV WKDW KH ZDV GHQLHG GXH JUDQWHGDKHDULQJRQWKLVTXHVWLRQ SURFHVVE\WKHSURVHFXWLRQjVLPSURSHUUHIHUHQFHVWRUHOLJLRQ DQG +XWFKLVRQjV DOOHJHG GUXJ LQYROYHPHQW GXULQJ FORVLQJ ,VVXH,,:KHWKHUWKHSHWLWLRQHUZDVGHQLHGWKHULJKWWR DUJXPHQWV LQ WKH JXLOW SKDVH RI WKH WULDO   6SHFLILFDOO\ HIIHFWLYHDVVLVWDQFHRIWULDOFRXQVHOLQERWKWKHJXLOWDQG +XWFKLVRQFODLPVWKDWWKHSURVHFXWRUjVUHIHUHQFHWRWKH7HQ VHQWHQFLQJSKDVHVRIWKHWULDO &RPPDQGPHQWVDOOXVLRQVWR*D\ORUDVDmsXGDVJRDWlDQG UHIHUHQFHV WR +XWFKLVRQ DV DQ mHYLO IRUFHl DQG OHDGHU RI D ,VVXH,,,:KHWKHU+XWFKLVRQjVFRQVWLWXWLRQDOULJKWVZHUH mGUXJHPSLUHlGHQLHGKLPGXHSURFHVV YLRODWHG E\ WKH ZLWKKROGLQJ RI H[FXOSDWRU\ HYLGHQFH XQGHU%UDG\Y0DU\ODQG86$SDUWRI  m:KHQ D SHWLWLRQHU PDNHV D FODLP RI SURVHFXWRULDO WKLVLVVXHLVZKHWKHUWKHGLVWULFWFRXUWHUUHGLQLWVUXOLQJ PLVFRQGXFWµWKHWRXFKVWRQHRIGXHSURFHVVDQDO\VLVLVWKH EHORZ IDLUQHVVRIWKHWULDOQRWWKHFXOSDELOLW\RIWKHSURVHFXWRUjl 6HUUDY0LFKLJDQ'HSjWRI&RUU)GWK&LU ,VVXH ,9  :KHWKHU SURVHFXWRULDO PLVFRQGXFW DW WULDO TXRWLQJ6PLWKY3KLOOLSV86 YLRODWHGSHWLWLRQHUjVFRQVWLWXWLRQDOULJKWV +DEHDVUHOLHILVZDUUDQWHGZKHQWKHSURVHFXWRUjVFRQGXFWZDV mVRHJUHJLRXVVRDVWRUHQGHUWKHHQWLUHWULDOIXQGDPHQWDOO\ ,VVXH9:KHWKHUWKHGLVWULFWFRXUWVKRXOGKDYHKHOGD XQIDLUl,GTXRWDWLRQRPLWWHG,QWKLV&LUFXLWZKHWKHUD KHDULQJLQRUGHUIRUSHWLWLRQHUWRGHYHORSWKHIDFWXDOEDVLV SURVHFXWRULDO UHPDUN ULVHV WR WKH OHYHO RI D GXH SURFHVV RIKLVFODLPV YLRODWLRQ GHSHQGV RQ  ZKHWKHU WKH UHPDUN WHQGHG WR PLVOHDGWKHMXU\RUWRSUHMXGLFHWKHDFFXVHGZKHWKHUWKH ,,',6&866,21 UHPDUNZDVLVRODWHGRUH[WHQVLYHZKHWKHUWKHUHPDUNZDV DFFLGHQWDOO\RUGHOLEHUDWHO\SODFHGEHIRUHWKHMXU\DQGWKH $6WDQGDUGRI5HYLHZ VWUHQJWKRIWKHHYLGHQFHDJDLQVWWKHDFFXVHG8QLWHG6WDWHVY :HUHYLHZDGLVWULFWFRXUWjVOHJDOFRQFOXVLRQVLQDKDEHDV &DUUROO)GWK&LU SURFHHGLQJGHQRYR%DUNHUY WKH6XSUHPH&RXUWjV@FDVHVlRUmFRQIURQWVDVHWRI )LQDOO\ +XWFKLVRQ KDV IDLOHG WR PDNH GLOLJHQW HIIRUWV WR IDFWVWKDWDUHPDWHULDOO\LQGLVWLQJXLVKDEOHIURPDGHFLVLRQRI GHYHORSWKHIDFWXDOEDVLVIRUKLVLQHIIHFWLYHDVVLVWDQFHFODLPV >WKH 6XSUHPH@ &RXUW DQG QHYHUWKHOHVV DUULYHV DW D UHVXOW LQWKHVWDWHFRXUWVKHWKHUHIRUHFDQQRWDYRLGWKHUHTXLUHPHQWV GLIIHUHQWIURP>6XSUHPH&RXUW@SUHFHGHQWl,GDW$ RI86&†H6HH0:LOOLDPV86DW VWDWHFRXUWXQUHDVRQDEO\DSSOLHVIHGHUDOODZZKHQLWDSSOLHV +XWFKLVRQ GLG UHFHLYH DQ HYLGHQWLDU\ KHDULQJ RQ KLV IHGHUDO ODZ WR IDFWV LQ D PDQQHU WKDW LV mREMHFWLYHO\ LQHIIHFWLYHDVVLVWDQFHRIFRXQVHOFODLPVLQVWDWHFRXUW,IDV XQUHDVRQDEOHl  ,G DW   $Q REMHFWLYHO\ XQUHDVRQDEOH +XWFKLVRQFRQWHQGVDUHDVRQDEOHLQYHVWLJDWLRQZRXOGKDYH DSSOLFDWLRQ mLV GLIIHUHQW IURP DQ LQFRUUHFW DSSOLFDWLRQ RI UHYHDOHGWKHHYLGHQFHGLVFXVVHGDERYHWKHQLWVKRXOGKDYH IHGHUDOODZDIHGHUDOKDEHDVFRXUWPD\QRWLVVXHWKHZULW EHHQGHYHORSHGLQUHODWLRQWRKLVLQHIIHFWLYHDVVLVWDQFHFODLPV VLPSO\ EHFDXVH WKDW FRXUW FRQFOXGHV LQ LWV LQGHSHQGHQW GXULQJ KLV ILUVW SRVWFRQYLFWLRQ SURFHHGLQJ  +XWFKLVRQ MXGJPHQWWKDWWKHUHOHYDQWVWDWHFRXUWGHFLVLRQDSSOLHGFOHDUO\ FHUWDLQO\ZDVRQQRWLFHRI'DYLGVRQjVSRWHQWLDOWHVWLPRQ\DV HVWDEOLVKHGIHGHUDOODZHUURQHRXVO\RULQFRUUHFWO\5DWKHU WKHWZRDUHORQJWLPHDFTXDLQWDQFHVVRWKLVHYLGHQFHFRXOG WKDWDSSOLFDWLRQPXVWDOVREHXQUHDVRQDEOHl,GDW KDYHEHHQSUHVHQWHGWRWKHVWDWHFRXUWKDG+XWFKLVRQEHHQ GLOLJHQW7KHUHFRUGDOVRVKRZVIDFWVWKDWVKRXOGKDYHSXW 8QGHU $('3$ D VWDWH FRXUW GHWHUPLQDWLRQ RI KLVWRULFDO +XWFKLVRQRQ QRWLFHRISRWHQWLDOHYLGHQFHRI+XGGOHVWRQjV IDFWV LV SUHVXPHG FRUUHFW XQOHVV WKH SHWLWLRQHU UHEXWV WKLV ILQDQFLDOSUREOHPVLQFOXGLQJWKHSURVHFXWRUjVVWDWHPHQWWKDW SUHVXPSWLRQ ZLWK mFOHDU DQG FRQYLQFLQJ HYLGHQFHl   +XGGOHVWRQZDVmYLUWXDOO\GURZQLQJLQGHEWls$DW 86& † H$('3$DOVROLPLWVDIHGHUDOFRXUWjV 0RUHRYHUWKHUHFRUGVXJJHVWVWKDW+XWFKLVRQZDVDZDUHRI DELOLW\WRJUDQWDQHYLGHQWLDU\KHDULQJ SULRU DFWV RI SK\VLFDO DEXVH E\ 0LOOHU DJDLQVW +XGGOHVWRQ ZKLFK ZRXOG KDYH SURYLGHG QRWLFH WKDW HYLGHQFH RI DQ H LQGHSHQGHQWPRWLYHIRUWKHPXUGHUH[LVWHGIRURQHRUPRUHRI ,IWKHDSSOLFDQWKDVIDLOHGWRGHYHORSWKHIDFWXDOEDVLV  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  $XVWLQY%HOO)GWK&LUVHHDOVR RIDFODLPLQ6WDWHFRXUWSURFHHGLQJVWKHFRXUWVKDOOQRW 0DUWLQ Y 0LWFKHOO  )G   WK &LU  KROG DQ HYLGHQWLDU\ KHDULQJ RQ WKH FODLP XQOHVV WKH KROGLQJ WKDW WKH SHWLWLRQHU IDLOHG WR VKRZ LQHIIHFWLYH DSSOLFDQWVKRZVWKDW DVVLVWDQFHZKHUHKHGLGQRWGHPRQVWUDWHmKRZWKHUHWHQWLRQRI $WKHFODLPUHOLHVRQ H[SHUWV DQ H[DPLQDWLRQ RI +HQGHUVRQjV VWDWHPHQW DQG LDQHZUXOHRIFRQVWLWXWLRQDOODZPDGHUHWURDFWLYHWR FRQWDFWLQJ DQGRU LQWHUYLHZLQJ KLV IDPLO\ PHPEHUV ZRXOG FDVHV RQ FROODWHUDO UHYLHZ E\ WKH 6XSUHPH &RXUW WKDW KDYHEHHQEHQHILFLDOWRKLVGHIHQVHl ZDVSUHYLRXVO\XQDYDLODEOHRU LL D IDFWXDO SUHGLFDWH WKDW FRXOG QRW KDYH EHHQ 2Q DSSHDO +XWFKLVRQ FRQWHQGV WKDW WULDO FRXQVHOjV SUHYLRXVO\ GLVFRYHUHG WKURXJK WKH H[HUFLVH RI GXH LQYHVWLJDWLRQZDVGHILFLHQWLQIDLOLQJWRXQFRYHUPDQ\RIWKH GLOLJHQFHDQG VDPHPDWHULDOVDOOHJHGWREHVXSSUHVVHGE\WKHSURVHFXWLRQLQ %WKHIDFWVXQGHUO\LQJWKHFODLPZRXOGEHVXIILFLHQWWR KLV%UDG\FODLP7KHVHPDWHULDOVLQFOXGHHYLGHQFHWKDW HVWDEOLVKE\FOHDUDQGFRQYLQFLQJHYLGHQFHWKDWEXWIRU +XGGOHVWRQKDGILQDQFLDOSUREOHPVHYLGHQFHWKDWZRXOG FRQVWLWXWLRQDOHUURUQRUHDVRQDEOHIDFWILQGHUZRXOGKDYH UHEXW WKH SURVHFXWLRQjV GUXJ ULQJ WKHRU\ SDUWLFXODUO\ WKH IRXQGWKHDSSOLFDQWJXLOW\RIWKHXQGHUO\LQJRIIHQVH VWDWHPHQWE\sRKQ'DYLGVRQWKDWKHNQHZ+XWFKLVRQIRUVHYHQ \HDUVDQGZDVQRWDZDUHRIDQ\GUXJDFWLYLW\DQGHYLGHQFH 86&† UHODWLQJ WR WKH SRVVLEOH KRPRVH[XDO UHODWLRQVKLS EHWZHHQ *D\ORUDQG+XGGOHVWRQ+XWFKLVRQDUJXHVWKDWDUHDVRQDEOH ,Q0:LOOLDPVY7D\ORUWKH6XSUHPH&RXUWLQWHUSUHWHGWKH LQYHVWLJDWLRQE\FRXQVHOZRXOGKDYHXQFRYHUHGWKLVHYLGHQFH RSHQLQJFODXVHRI†HWRFRQWDLQLWVRZQmGLOLJHQFHl DFODLPVXSSRUWHGE\WKHIDFWWKDWPXFKRIWKLVHYLGHQFH UHTXLUHPHQWVHSDUDWHIURPWKDWRI†H$LL6HH ZDV XQFRYHUHG E\ DQ LQVXUDQFH LQYHVWLJDWRU ZKR VSRNH 867KHmIDLOHGWRGHYHORSlFODXVH SULPDULO\ZLWK+XGGOHVWRQjVFRZRUNHUV LQ†HPHDQV 7KLVHYLGHQFHLVLQVXIILFLHQWWRVXSSO\DEDVLVIRUKDEHDV QRW ZKHWKHU WKH IDFWV FRXOG KDYH EHHQ GLVFRYHUHG EXW UHOLHI)LUVW+XWFKLVRQKDVSUHVHQWHGQRHYLGHQFHWRVKRZ LQVWHDGZKHWKHUWKHSULVRQHUZDVGLOLJHQWLQKLVHIIRUWV WKDW KLV FRXQVHO ZDV GHILFLHQW LQ IDLOLQJ WR SUHVHQW WKLV 7KH SXUSRVH RI WKH IDXOW FRPSRQHQW RI mIDLOHGl LV WR HYLGHQFH7KHUHLVQRWKLQJLQWKHUHFRUGLQGLFDWLQJGHIHQVH HQVXUHWKHSULVRQHUXQGHUWDNHVKLVRZQGLOLJHQWVHDUFKIRU FRXQVHOjV UHDVRQV IRU QRW SUHVHQWLQJ WKLV HYLGHQFH  ,Q WKH HYLGHQFH'LOLJHQFHIRUSXUSRVHVRIWKHRSHQLQJFODXVH DEVHQFHRIVXFKHYLGHQFHZHDUHWRSUHVXPHWKDWmFRXQVHOjV GHSHQGVXSRQZKHWKHUWKHSULVRQHUPDGHDUHDVRQDEOH FRQGXFWIDOOVZLWKLQWKHZLGHUDQJHRIUHDVRQDEOHSURIHVVLRQDO DWWHPSWLQOLJKWRIWKHLQIRUPDWLRQDYDLODEOHDWWKHWLPH DVVLVWDQFHlJXDUDQWHHGE\WKH&RQVWLWXWLRQ6HH&RQH6 WRLQYHVWLJDWHDQGSXUVXHFODLPVLQVWDWHFRXUW &W DW   +XWFKLVRQ DVVHUWV WKDW WKH HYLGHQFH ZDV QRW GLVFRYHUHGGXHWRGHIHQVHFRXQVHOjVLQDGHTXDWHLQYHVWLJDWLRQ ,GDWm'LOLJHQFHlIRUSXUSRVHVRI†HmZLOO 7KHUHLVQRUHFRUGHYLGHQFHWRVXSSRUWWKLVFODLP'HIHQVH UHTXLUHLQWKHXVXDOFDVHWKDWWKHSULVRQHUDWDPLQLPXPVHHN FRXQVHO ZDV QRW DVNHG DERXW DQ\ RI WKH DIRUHPHQWLRQHG DQHYLGHQWLDU\KHDULQJLQVWDWHFRXUWLQWKHPDQQHUSUHVFULEHG HYLGHQFH GXULQJ +XWFKLVRQjV SRVWFRQYLFWLRQ SURFHHGLQJV E\VWDWHODZl,GDW 'HIHQVHFRXQVHOKLUHGDQLQYHVWLJDWRUDQGPHWZLWK+XWFKLVRQ RQ PDQ\ RFFDVLRQV EHIRUH WULDO WR GLVFXVV ZLWQHVVHV ,I WKH SHWLWLRQHU IDLOV WKH GLOLJHQFH UHTXLUHPHQW RI +XWFKLVRQ  :/  DW   7KHUH LV QR UHFRUG †HKHLVFKDQQHOHGLQWRWKHVWULFWUHTXLUHPHQWVRI HYLGHQFHFRQFHUQLQJZKDWZDVRUZDVQRWXQFRYHUHGE\WKLV VXESDUWV$DQG%8QGHUWKRVHFLUFXPVWDQFHVDIHGHUDO FRXUWPD\JUDQWDQHYLGHQWLDU\KHDULQJRQO\LIWKHFODLPUHOLHV  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  RQmDQHZUXOHRIFRQVWLWXWLRQDOODZlRUIDFWVmWKDWFRXOGQRW 7RSUHYDLORQDFODLPRILQHIIHFWLYHDVVLVWDQFHRIFRXQVHO KDYHEHHQSUHYLRXVO\GLVFRYHUHGWKURXJKWKHH[HUFLVHRIGXH WKHSHWLWLRQHUPXVWVKRZWZRHOHPHQWVGHILFLHQWSHUIRUPDQFH GLOLJHQFHl DQG mWKH IDFWV XQGHUO\LQJ WKH FODLP ZRXOG EH DQGSUHMXGLFHWRWKHGHIHQGDQW6HH%HOOY&RQH6&W VXIILFLHQWWRHVWDEOLVKE\FOHDUDQGFRQYLQFLQJHYLGHQFHWKDW 7ULDOFRXQVHOjVSHUIRUPDQFHLVGHILFLHQW EXWIRUFRQVWLWXWLRQDOHUURUQRUHDVRQDEOHIDFWILQGHUZRXOG ZKHQLWIDOOVEHORZDQREMHFWLYHVWDQGDUGRIUHDVRQDEOHQHVV KDYHIRXQGWKHDSSOLFDQWJXLOW\RIWKHXQGHUO\LQJRIIHQVHl 6HH6WULFNODQGY:DVKLQJWRQ86 86&†H$ % &RPEVY&R\OH)GWK&LUFHUWGHQLHG 86,QDVVHVVLQJSHUIRUPDQFHmVWUDWHJLF %6HYHUDQFH,VVXHV FKRLFHVPDGHDIWHUWKRURXJKLQYHVWLJDWLRQRIODZDQGIDFWV UHOHYDQW WR SODXVLEOH RSWLRQV DUH YLUWXDOO\ XQFKDOOHQJHDEOH +XWFKLVRQDUJXHVWKDWWKHVWDWHFRXUWjVIDLOXUHWRVHYHUKLV DQG VWUDWHJLF FKRLFHV PDGH DIWHU OHVV WKDQ FRPSOHWH WULDOIURPKLVFRGHIHQGDQW&KLS*D\ORUSUHMXGLFHGKLPLQ LQYHVWLJDWLRQ DUH UHDVRQDEOH SUHFLVHO\ WR WKH H[WHQW WKDW WZRZD\V)LUVWLWSHUPLWWHG*D\ORUjVFLYLOFRPSODLQWZKLFK UHDVRQDEOHSURIHVVLRQDOMXGJPHQWVVXSSRUWWKHOLPLWDWLRQVRQ QDPHG+XWFKLVRQDV+XGGOHVWRQjVNLOOHUWREHLQWURGXFHGDV LQYHVWLJDWLRQl6WULFNODQG86DW7KHSUHMXGLFH HYLGHQFHDJDLQVW+XWFKLVRQLQYLRODWLRQRIWKH&RQIURQWDWLRQ HOHPHQW UHTXLUHV WKH GHIHQGDQW WR VKRZ mWKDW WKHUH LV D &ODXVH  6HFRQG LW GHSULYHG KLP RI D IDLU WULDO EHFDXVH LW UHDVRQDEOHSUREDELOLW\WKDWEXWIRUFRXQVHOjVXQSURIHVVLRQDO SUHYHQWHG+XWFKLVRQIURPLQWURGXFLQJHYLGHQFHWKDWZRXOG HUURUVWKHUHVXOWRIWKHSURFHHGLQJZRXOGKDYHEHHQGLIIHUHQW KDYHLQFXOSDWHG*D\ORURUH[FXOSDWHGKLPVHOI,QDGGLWLRQWR $ UHDVRQDEOH SUREDELOLW\ LV D SUREDELOLW\ VXIILFLHQW WR WKHVHVXEVWDQWLYHFODLPV+XWFKLVRQVXEPLWVWKDWWKHGLVWULFW XQGHUPLQHFRQILGHQFHLQWKHRXWFRPHl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m3ODLQWLII+87&+,621LVEDUUHGIURP mWKHWULDOFRXUWKDGLQVXIILFLHQWHYLGHQFHWRGHWHUPLQHHLWKHU UHFRYHULQJ DQ\ SURFHHGV RI WKH SROLF\ EHFDXVH KH ZDV LIWKHIDLOXUHWRFDOODZLWQHVVZDVGHILFLHQWSHUIRUPDQFHE\ IHORQLRXVO\UHVSRQVLEOHIRUWKHGHDWKRIWKHLQVXUHGls$DW WULDOFRXQVHORULIVXFKIDLOXUHFRQVWLWXWHGPDWHULDOSUHMXGLFH  WRWKHSHWLWLRQHUjVFDXVHl,G 2QGLUHFWDSSHDOWKH7HQQHVVHH6XSUHPH&RXUWIRXQGWKDW *LYHQWKHDEVHQFHRISURRIDW+XWFKLVRQjVSRVWFRQYLFWLRQ WKHFRPSODLQWZDVSURSHUO\LQWURGXFHGWRLPSHDFK*D\ORUEXW KHDULQJWKHVWDWHFRXUWjVDSSOLFDWLRQRIWKH6WULFNODQGWHVWZDV ZDVLQDGPLVVLEOHKHDUVD\DVWR+XWFKLVRQ+XWFKLVRQ QRW REMHFWLYHO\ XQUHDVRQDEOH  7KLV &RXUW KDV KHOG WKDW D 6:GDW1HYHUWKHOHVVWKH7HQQHVVHH6XSUHPH&RXUW SHWLWLRQHU FDQQRW VKRZ GHILFLHQW SHUIRUPDQFH RU SUHMXGLFH IRXQGWKHLQWURGXFWLRQRIWKHFRPSODLQWWREHKDUPOHVVHUURU UHVXOWLQJIURPDIDLOXUHWRLQYHVWLJDWHLIWKHSHWLWLRQHUGRHVQRW EHFDXVH PDNHVRPHVKRZLQJRIZKDWHYLGHQFHFRXQVHOVKRXOGKDYH SXUVXHGDQGKRZVXFKHYLGHQFHZRXOGKDYHEHHQPDWHULDO  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  7KHUHFRUGLQGLFDWHVWKDW+XWFKLVRQZDVRQQRWLFHRIWKH 7KHFRPSODLQWILOHGORQJDIWHU+XWFKLVRQjVLQGLFWPHQW LQVXUDQFH LQYHVWLJDWRUjV UHSRUW DV ZHOO DV SUHYLRXV DFWV RI FDVWEODPHIRUWKHPXUGHURQDNQRZQVXVSHFWDOLNHO\ SK\VLFDO DEXVH DJDLQVW +XGGOHVWRQ LQYROYLQJ 'DYLV DQG SHUVRQIRUDQ\RQHVHHNLQJLQVXUDQFHSURFHHGVWREODPH 0LOOHU  )RU H[DPSOH GXULQJ FORVLQJ DUJXPHQWV WKH 7KXVWKHFRPSODLQWKDGOLWWOHSUREDWLYHYDOXHUHJDUGLQJ SURVHFXWLRQUHIHUHQFHGFRPPHQWVPDGHE\+XWFKLVRQWRWKH +XWFKLVRQjVJXLOW,QDGGLWLRQWKHVXEVWDQWLYHHYLGHQFH LQVXUDQFH LQYHVWLJDWRU  s$ DW   +DYLQJ SHUVRQDOO\ DWWULDOVXSSRUWHGDILQGLQJRI+XWFKLVRQjVJXLOWEH\RQG VSRNHQ ZLWK WKH LQVXUDQFH LQYHVWLJDWRU +XWFKLVRQ VKRXOG DUHDVRQDEOHGRXEW KDYHEHHQDZDUHRIWKHUHSRUW,QDGGLWLRQWKHUHFRUGVKRZV WKDW WKH GHIHQVH ZDV DZDUH RI IDFWV FRQFHUQLQJ DFWV RI ,GDW SK\VLFDO DEXVH E\ 0LOOHU WRZDUGV +XGGOHVWRQ  2Q FURVV H[DPLQDWLRQRI0LOOHUWKHGHIHQVHDVNHGDERXWDQLQFLGHQWLQ +XWFKLVRQ DUJXHV WKDW WKH GHQLDO RI WKH VHYHUDQFH DQG ZKLFK 0LOOHU DQG 'DYLG 'DYLV WZLVWHG +XGGOHVWRQjV DUP DGPLVVLRQ RIWKHFRPSODLQWYLRODWHGKLV6L[WK$PHQGPHQW EHKLQGKLVEDFNDQGIRUFHGKLPWRWKHJURXQGs$DW ULJKW WR FRQIURQW KLV DFFXVHU  +H EDVHV KLV FRQVWLWXWLRQDO 7KLVTXHVWLRQUHYHDOVWKDWWKHGHIHQVHZDVDZDUHWKDW'DYLV FODLPRQ%UXWRQY8QLWHG6WDWHV86,Q WKH SXUSRUWHG VRXUFH RI 0LOOHUjV VWDWHPHQW WKDW 0LOOHU DQG %UXWRQ WKH 6XSUHPH &RXUW KHOG WKDW WKH DGPLVVLRQ RI D *D\ORU KDG SODQQHG WKH PXUGHU SRVVHVVHG UHOHYDQW QRQWHVWLI\LQJ FRGHIHQGDQWjV FRQIHVVLRQ ZKLFK FOHDUO\ LQIRUPDWLRQ+XWFKLVRQjVIDLOXUHWRLQYHVWLJDWHWKHVHFODLPV LPSOLFDWHGDQRWKHUGHIHQGDQWDWDMRLQWWULDOZDVDYLRODWLRQRI DQGGHYHORSWKHIDFWXDOEDVLVIRUWKHPLQVWDWHFRXUWWULJJHUV WKHRWKHUGHIHQGDQWjVULJKWVXQGHUWKH&RQIURQWDWLRQ&ODXVH WKH VWULFW UHTXLUHPHQWV RI  86& † H$ % ,G DW   7KH &RXUW QRWHG WKDW WKH QRQWHVWLI\LQJ ZKLFK+XWFKLVRQGRHVQRWFODLPWRKDYHVDWLVILHG7KHUHIRUH FRGHIHQGDQWjV FRQIHVVLRQ mDGGHG VXEVWDQWLDO SHUKDSV HYHQ  86& † H SUHFOXGHV JUDQWLQJ +XWFKLVRQ DQ FULWLFDOZHLJKWWRWKH*RYHUQPHQWjVFDVHLQDIRUPQRWVXEMHFW HYLGHQWLDU\KHDULQJWRGHYHORSWKHIDFWXDOEDVLVRIKLV%UDG\ WRFURVVH[DPLQDWLRQVLQFH>WKHFRGHIHQGDQW@GLGQRWWDNHWKH FODLPV VWDQGl  ,G DW   7KH &RXUW UHDVRQHG WKDW FRGHIHQGDQW FRQIHVVLRQV WKDW LPSOLFDWH DQRWKHU GHIHQGDQW DUH ERWK ',QHIIHFWLYH$VVLVWDQFHRI&RXQVHO mGHYDVWDWLQJWRWKHGHIHQGDQWlDQGLQKHUHQWO\XQWUXVWZRUWK\ mJLYHQWKHUHFRJQL]HGPRWLYDWLRQWRVKLIWEODPHRQWRRWKHUVl +XWFKLVRQDOVRDOOHJHVWKDWKLVWULDOFRXQVHOjVSHUIRUPDQFH ,GDW IHOOEHORZWKHVWDQGDUGJXDUDQWHHGE\WKH6L[WK$PHQGPHQW 6SHFLILFDOO\ KH DUJXHV WKDW KLV FRXQVHO LQDGHTXDWHO\ +RZHYHUWKHVFRSHRIWKH%UXWRQGHFLVLRQZDVOLPLWHGLQ LQYHVWLJDWHGH[FXOSDWRU\DQGPLWLJDWLQJHYLGHQFHWKDWFRXOG 1HOVRQ Y 2j1HLO  86    ,Q 2j1HLO WKH KDYHEHHQSUHVHQWHGDWWKHJXLOWSKDVHRIWULDO SURVHFXWLRQ HOLFLWHG WHVWLPRQ\ DERXW D FRGHIHQGDQWjV FRQIHVVLRQ ZKLFK LPSOLFDWHG DQRWKHU GHIHQGDQW  7KH FRGHIHQGDQWWHVWLILHGDWWKHMRLQWWULDODQGGHQLHGPDNLQJWKH FRQIHVVLRQ,GDW7KH&RXUWKHOGWKDWWKHGHIHQGDQWjV ULJKWVZHUHQRWYLRODWHGE\WKHDGPLVVLRQRIKLVFRGHIHQGDQWjV  FRQIHVVLRQ XQGHU WKRVH FLUFXPVWDQFHV  7KH 2j1HLO &RXUW +XWFKLVRQjV RWKHU FODLPV RI LQHIIHFWLYH DVVLVWDQFH RI FRXQVHO KDYH H[SODLQHGWKDWWKHKROGLQJRI%UXWRQZDVOLPLWHGWRVLWXDWLRQV QRW EHHQ DGHTXDWHO\ EULHIHG +HQFH ZH ILQG WKHP WR EH ZDLYHG 6HH  )G   WK &LU  m>,@VVXHV LQ ZKLFK WKH FRGHIHQGDQW GRHV QRW WHVWLI\ DW WULDO WKHUHE\ 8QLWHG 6WDWHV Y /D\QH DGYHUWHG WR LQ D SHUIXQFWRU\ PDQQHU XQDFFRPSDQLHG E\ VRPH HIIRUW DW GHSULYLQJWKHGHIHQGDQWWKHRSSRUWXQLW\WRFURVVH[DPLQHWKH GHYHORSHG DUJXPHQWDWLRQ DUH GHHPHG ZDLYHG    l FLWDWLRQ DQG GHFODUDQWRIWKHFRQIHVVLRQ,GDW7KH&RXUWUHDVRQHG TXRWDWLRQ PDUNV RPLWWHG  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  WKDWWKHUHZRXOGEHQR&RQIURQWDWLRQ&ODXVHSUREOHPmZKHUH PDWHULDOV KH FDQQRW GHPRQVWUDWH SUHMXGLFH VXIILFLHQW WR D FRGHIHQGDQW WDNHV WKH VWDQG LQ KLV RZQ GHIHQVH GHQLHV H[FXVHWKHGHIDXOW PDNLQJ DQ DOOHJHG RXWRIFRXUW VWDWHPHQW LPSOLFDWLQJ WKH GHIHQGDQWDQGSURFHHGVWRWHVWLI\IDYRUDEO\WRWKHGHIHQGDQW (YLGHQWLDU\+HDULQJ FRQFHUQLQJ WKH XQGHUO\LQJ IDFWVl  ,G DW   7KLV LV EHFDXVHWKHGHQLDORIWKHLQFXOSDWRU\FRQIHVVLRQJHQHUDOO\LV +XWFKLVRQKDVQRWGHPRQVWUDWHGWKHUHTXLVLWHGLOLJHQFHWR PRUHIDYRUDEOHWRWKHGHIHQGDQWWKDQDQ\WKLQJWKHGHIHQGDQW VXSSRUW KLV UHTXHVW IRU DQ HYLGHQWLDU\ KHDULQJ  8QGHU FRXOGHOLFLWRQFURVVH[DPLQDWLRQ,GDW † H D SHWLWLRQHU ZKR KDV IDLOHG WR GHYHORS WKH IDFWXDO UHFRUG LQ WKH VWDWH FRXUWV GXH WR KLV RZQ ODFN RI ,Q OLJKW RI 2j1HLO ZH FRQFOXGH WKDW WKH VWDWH FRXUWjV GLOLJHQFHZLOOQRWEHJLYHQDQHYLGHQWLDU\KHDULQJXQOHVVKH GHFLVLRQ WKDW WKH DGPLVVLRQ RI WKH FLYLO FRPSODLQW ZDV FDQPHHWWKHVWULQJHQWUHTXLUHPHQWVVHWIRUWKLQWKDWVHFWLRQ KDUPOHVV HUURU LV QRW FRQWUDU\ WR RU DQ REMHFWLYHO\ 6HH0:LOOLDPV86DW:KHUHDVKHUHWKHIDLOXUH XQUHDVRQDEOHDSSOLFDWLRQRIIHGHUDOODZ6HH7:LOOLDPV WR GHYHORS WKH IDFWXDO EDVLV RI D FRQVWLWXWLRQDO FODLP LV 86DW:HDVVXPHDUJXHQGRWKDW*D\ORUjV DWWULEXWDEOH WR SURFHGXUDO GHIDXOW WKH GHWHUPLQDWLRQ RI FLYLOFRPSODLQWLVWKHIXQFWLRQDOHTXLYDOHQWRIDQLQFXOSDWRU\ ZKHWKHU WKH SHWLWLRQHU KDV EHHQ GLOLJHQW LQ GHYHORSLQJ KLV FRQIHVVLRQ6HH9LQFHQWY3DUNH)GWK&LU FODLPSDUDOOHOVWKHLVVXHRIZKHWKHUKHFDQVKRZFDXVHIRUKLV VXJJHVWLQJLQGLFWDWKDWDQH[WUDMXGLFLDOVWDWHPHQWWKDW GHIDXOW,GDW LVQRWDFRQIHVVLRQEXWFOHDUO\LPSOLFDWHVWKHGHIHQGDQWPD\ UDLVH6L[WK$PHQGPHQWFRQFHUQV2j1HLOLQVWUXFWVXVWKDW $VH[SODLQHGDERYH+XWFKLVRQKDVQRW VKRZQFDXVHIRU WKHUHLVQRFRQVWLWXWLRQDOYLRODWLRQLIWKHFRGHIHQGDQWWHVWLILHV IDLOLQJWRDVVHUWKLV%UDG\FODLPVLQKLVILUVWSHWLWLRQ1HLWKHU RQ EHKDOI RI WKH GHIHQGDQW  ,Q WKLV FDVH *D\ORU WHVWLILHG KDV KH VKRZQ DQ\ IDFWV LQGLFDWLQJ WKDW KH ZDV GLOLJHQW LQ IDYRUDEO\WR+XWFKLVRQUHJDUGLQJWKHXQGHUO\LQJIDFWV*D\ORU VHHNLQJDQHYLGHQWLDU\KHDULQJSULRUWRWKHH[SLUDWLRQRIWKH VWDWHGWKDWLWZDVKLVODZ\HUj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jVUHIXVDOWRILQGSUHMXGLFHFRQWUDU\ QRWLFHRISRVVLEOH%UDG\PDWHULDOLQVXIILFLHQWWLPHWRUDLVH WR RU DQ XQUHDVRQDEOH DSSOLFDWLRQ RI IHGHUDO ODZ  6HH 7 WKHFODLPVLQVWDWHFRXUW7KHSHWLWLRQHUjVIDLOXUHWRSURPSWO\ :LOOLDPV  86 DW    +HQFH ZH ILQG QR LQYHVWLJDWH WKRVH FODLPV DQG GHYHORS WKH IDFWXDO UHFRUG UHYHUVLEOHHUURU SUHFOXGHV JUDQWLQJ DQ HYLGHQWLDU\ KHDULQJ XQOHVV WKH UHTXLUHPHQWV RI  86& † H$  % DUH 3UHMXGLFLDOsRLQGHU VDWLVILHG6HHLGDWKROGLQJWKDW D SHWLWLRQHUZDVQRW GLOLJHQWLQGHYHORSLQJUHFRUGRIDOOHJHGO\VXSSUHVVHGPHQWDO +XWFKLVRQjVSULPDU\FODLPLVWKDWWKHMRLQWWULDOIRUFHGKLP KHDOWKUHSRUWZKHUHWULDOWUDQVFULSWUHYHDOHGIDFWVWKDWVKRXOG WR SUHVHQW D XQLILHG GHIHQVH ZLWK *D\ORU  $V D FRUROODU\ KDYHSXWFRXQVHORQQRWLFHRIUHSRUWjVH[LVWHQFHEXWFRXQVHO +XWFKLVRQ DOOHJHV WKDW KH ZDV SUHYHQWHG IURP LQWURGXFLQJ PDGHQRIXUWKHUHIIRUWVWRGLVFRYHU  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  7KHUHSRUWRIWKHSRO\JUDSKH[DPLQDWLRQRI5ROO\VRQZRXOG HYLGHQFH WKDW ZRXOG KDYH LQFXOSDWHG *D\ORU RU H[FXOSDWHG KDYHKDGOLWWOHYDOXHIRUWKHGHIHQVH5ROO\VRQWHVWLILHGWKDW KLPVHOI KH ZDV RQ WKH ERDW ZKHQ +XGGOHVWRQ GURZQHG  7KH SRO\JUDSKUHSRUWVXJJHVWHGWKDWKHDQVZHUHGGHFHSWLYHO\WR +XWFKLVRQjVVHYHUDQFHFODLPGRHVQRWZDUUDQWKDEHDVUHOLHI TXHVWLRQVDERXWZKHWKHUKHWRXFKHG+XGGOHVWRQZKLOHKHZDV 6HYHUDQFH LV JRYHUQHG E\ 7HQQHVVHH VWDWH ODZ  6HH LQ WKH ZDWHU  $OWKRXJK WKH SRO\JUDSK UHSRUW FRQWUDGLFWV +XWFKLVRQ6:GDW6WDWHODZWULDOHUURUVZLOOQRW 5ROO\VRQjVWHVWLPRQ\DWWULDOWKDWKHGLGQRWWRXFK+XGGOHVWRQ ZDUUDQWKDEHDVUHOLHIXQOHVVWKHmHUURUULVHVWRWKHOHYHORI DQG GLG QRW VHH KLP IDOO LQWR WKH ZDWHU LW VKRZV RQO\ GHSULYLQJWKHGHIHQGDQWRIIXQGDPHQWDOIDLUQHVVLQWKHWULDO LQFRQVLVWHQF\ LQ 5ROO\VRQjV VWDWHPHQWV DERXW KLV RZQ SURFHVVl  6HUUD Y 0LFKLJDQ 'HSjW RI &RUU  )G  LQYROYHPHQWLQWKHFULPH,WGRHVQRWH[FXOSDWH+XWFKLVRQ WK&LU0RUHRYHUWKH6XSUHPH&RXUWKDVKHOG 0RUHRYHUWKHGHIHQVHZDVDEOHWRLPSHDFK5ROO\VRQZLWKD WKDWmPXWXDOO\DQWDJRQLVWLFGHIHQVHVDUHQRWSUHMXGLFLDOSHU SULRU VWDWHPHQW JLYHQ WR WKH SROLFH WKDW KH GLG WRXFK VHl  =DILUR Y 8QLWHG 6WDWHV  86    +XGGOHVWRQZKLOH+XGGOHVWRQZDVLQWKHZDWHU7KHUHSRUW LQWHUSUHWLQJ )(' 5 &5,0 3  VHH DOVR 6WDQIRUG Y WKHUHIRUHZRXOGKDYHDGGHGOLWWOHWRWKHGHIHQVH 3DUNHU)GWK&LUKDEHDVUHOLHILVQRW ZDUUDQWHG IRU IDLOXUH WR VHYHU mPHUHO\ EHFDXVH GHIHQGDQWV )LQDOO\ +XWFKLVRQ SRLQWV WR WKH VWDWHPHQW IURP sRKQ SUHVHQWDQWDJRQLVWLFGHIHQVHVl 'DYLGVRQZKRFODLPVWRKDYHNQRZQ+XWFKLVRQIRUVHYHQ \HDUV LQGLFDWLQJ WKDW 'DYLGVRQ ZDV XQDZDUH RI DQ\ GUXJ +XWFKLVRQDUJXHVWKDWKHPD\KDYHEHHQDEOHWRSUHVHQWD DFWLYLW\RQ+XWFKLVRQjVSDUW7KLVHYLGHQFHPD\KDYHVRPH PRUHHIIHFWLYHGHIHQVHKDGKHEHHQDEOHWRSUHVHQWHYLGHQFH H[FXOSDWRU\YDOXHLQVRIDUDVLWUHEXWVWKHSURVHFXWLRQjVWKHRU\ LPSOLFDWLQJ *D\ORU  %XW WKLV LV PHUHO\ D YHUVLRQ RI WKH WKDWWKHFULPHZDVPRWLYDWHGE\+XWFKLVRQjVGHVLUHWRH[SDQG DQWDJRQLVWLFGHIHQVHDUJXPHQW+XWFKLVRQZDVIUHHWRSXUVXH KLVGUXJEXVLQHVV+RZHYHUm>W@KH%UDG\UXOHGRHVQRWDVVLVW VXFKDVWUDWHJ\+HDSSDUHQWO\GHFOLQHGWRGRVRIRUIHDUWKDW D GHIHQGDQW ZKR LV DZDUH RI WKH HVVHQWLDO IDFWV WKDW ZRXOG *D\ORU ZRXOG WU\ WR VKLIW WKH EODPH WRZDUGV KLP  6XFK D DOORZKLPWRWDNHDGYDQWDJHRIWKHH[FXOSDWRU\HYLGHQFHDW VSHFXODWLYHULVNKRZHYHULVQRWVXIILFLHQWWRVKRZWKDWWKH LVVXHl&ROHPDQ)GDW3UHVXPDEO\LI'DYLGVRQ 7HQQHVVHH6XSUHPH&RXUWjVGHFLVLRQXSKROGLQJWKHMRLQWWULDO DQG+XWFKLVRQNQHZHDFKRWKHUDVZHOODV'DYLGVRQFODLPV ZDVREMHFWLYHO\XQUHDVRQDEOH6HH=DILUR86DW +XWFKLVRQZRXOGKDYHNQRZQDERXWDQ\SRWHQWLDOWHVWLPRQ\ IURP 'DYLGVRQ  7KHUHIRUH +XWFKLVRQ ZDV DZDUH RI WKH +XWFKLVRQDOVRFRPSODLQVWKDWWKHMRLQWWULDOSUHYHQWHGKLP HVVHQWLDO IDFWV QHFHVVDU\ IRU KLP WR WDNH DGYDQWDJH RI WKLV IURP SUHVHQWLQJ H[FXOSDWRU\ HYLGHQFH  6SHFLILFDOO\ KH WHVWLPRQ\  0RUHRYHU 'DYLGVRQjV VWDWHPHQW LV QRW DOOHJHV WKDW WKH MRLQW WULDO SUHYHQWHG KLP IURP SUHVHQWLQJ SDUWLFXODUO\ VWURQJ HYLGHQFH WKH PHUH IDFW WKDW RQH RI WHVWLPRQ\WRUHEXWWKHVWDWHjV FODLPWKDWKHZDVVHHNLQJWR +XWFKLVRQjVORQJWLPHIULHQGVZDVXQDZDUHRIGUXJDFWLYLW\ UHFRYHUXQGHU+XGGOHVWRQjVOLIHLQVXUDQFHSROLF\ GRHVQRWUXOHRXWWKHSRVVLELOLW\WKDWGUXJDFWLYLW\RFFXUUHG +XWFKLVRQFRQWHQGVWKDWWKHWULDOFRXUWXQIDLUO\H[FOXGHGKLV ZLWKRXWKLVNQRZOHGJH FLYLODWWRUQH\jVWHVWLPRQ\VXSSRUWLQJ+XWFKLVRQjVFODLPWKDW KH VRXJKW WR UHFRYHU RQO\  WKH YDOXH RI WKH QRWH 7DNHQWRJHWKHUWKHVHLWHPVGRQRWVRXQGHUPLQHFRQILGHQFH EHWZHHQ +XGGOHVWRQ DQG +XWFKLVRQ  +XWFKLVRQ DOVR LQWKHMXU\jVYHUGLFWWKDWWKH\FRXOGEHFRQVLGHUHGmPDWHULDOl PDLQWDLQVWKDWWKHWULDOFRXUWSUHMXGLFHGKLVFDVHE\H[FOXGLQJ IRU%UDG\SXUSRVHV7KHUHIRUHHYHQLI+XWFKLVRQFRXOGVKRZ D IHGHUDO FRXUWjV MXGJPHQW LQ KLV FLYLO VXLW WR UHFRYHU WKH FDXVHIRUKLVIDLOXUHWRUDLVHKLVFODLPVUHODWLQJWRWKH7%, SURFHHGVRIWKHOLIHLQVXUDQFHSROLF\7KHVWDWHWULDO  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  FRXUWH[FOXGHGERWKWKHDWWRUQH\jVWHVWLPRQ\DQGWKHIHGHUDO LWLVSRVVLEOHWKDW+XWFKLVRQZRXOGQRWKDYHUHFHLYHGWKHILOHV FRXUWMXGJPHQWDVKHDUVD\ LQWLPHWRILOHDFODLPSULRUWRWKHH[SLUDWLRQRIWKHOLPLWDWLRQV SHULRG  1RQHWKHOHVV KDG KH DWWHPSWHG WR SUHVHQW WKH 7%, 7KH6XSUHPH&RXUWKDVVXJJHVWHGWKDWIDLOXUHWRVHYHUFDQ PDWHULDOVWRWKHVWDWHFRXUWDQ\GLIILFXOW\KHH[SHULHQFHGLQ ULVHWRWKHOHYHORIDFRQVWLWXWLRQDOYLRODWLRQZKHQmHVVHQWLDO REWDLQLQJ WKH 7%, ILOHV FRXOG KDYH IRUPHG WKH EDVLV RI DQ H[FXOSDWRU\HYLGHQFHWKDWZRXOGEHDYDLODEOHWRDGHIHQGDQW DUJXPHQWIRU%XUIRUGWROOLQJZKLFKZRXOGKDYHDIIRUGHGWKH WULHGDORQH>LV@XQDYDLODEOHLQDMRLQWWULDOl,GDWFLWLQJ VWDWHFRXUWDQRSSRUWXQLW\WRFRQVLGHUWKHFODLPV7KHIDFW 7LIIRUG Y :DLQZULJKW  )G  WK &LU  WKDWWKH7%,PDWHULDOVDSSHDUWRKDYHJRQHXQUHTXHVWHGXQWLO +RZHYHU +XWFKLVRQ KDV QRW HVWDEOLVKHG KRZ WKH ODZVXLW DIWHU+XWFKLVRQKDGGHIDXOWHGKLVVWDWHUHPHGLHVPHDQVWKDWKH HYLGHQFHZRXOGKDYHEHHQHVVHQWLDOWRKLVGHIHQVH+XWFKLVRQ FDQQRWHVWDEOLVKFDXVHIRUKLVGHIDXOWRIWKHVHFODLPV ZDV DOORZHG WR WHVWLI\ WKDW KH LQWHQGHG WR UHFRYHU RQO\  XQGHU WKH LQVXUDQFH SROLF\ DQG WKDW LW ZDV KLV (YHQLI+XWFKLVRQFRXOGHVWDEOLVKFDXVHWKHLWHPVLQWKH DWWRUQH\jVLGHDWRILOHDVXLWIRUWKHIXOOSROLF\YDOXH VHFRQG JURXS RI %UDG\ FODLPV DUH QRW PDWHULDO IRU %UDG\ $OWKRXJKKLVDWWRUQH\jVWHVWLPRQ\ZRXOGKDYHFRUURERUDWHG SXUSRVHV DQG WKHUHIRUH DUH QRW VXIILFLHQW WR GHPRQVWUDWH KLVVWDWHPHQWV+XWFKLVRQZDVQRWGHQLHGWKHRSSRUWXQLW\WR SUHMXGLFHUHVXOWLQJIURP+XWFKLVRQjVGHIDXOW6HYHUDORIWKHVH H[SODLQ KLV PRWLYHV  $OVR WKH H[FOXGHG IHGHUDO FRXUW PDWHULDOV LQFOXGLQJ WKH 0F&DUW VWDWHPHQW DQG WKH MXGJPHQWHYHQLIDGPLVVLEOHKDGYLUWXDOO\QRUHOHYDQFHWR +XGGOHVWRQ OHWWHU FRXOG EH XVHG WR VKRZ WKDW WKHUH ZDV D +XWFKLVRQjVFODLPWKDWKHRQO\VRXJKWWRUHFRYHUWKHDPRXQW VH[XDOUHODWLRQVKLSEHWZHHQ+XGGOHVWRQDQG*D\ORUZKLFK RI WKH QRWH  7KH FLYLO MXGJPHQW ZDV D SDUWLDO JUDQW RI PLJKW VXSSO\ DGGLWLRQDO HYLGHQFH RI PRWLYH IRU *D\ORU VXPPDU\MXGJPHQWWRWKHLQVXUDQFHFRPSDQ\ZKLFKUXOHG +RZHYHULWLVQRWFOHDUKRZWKLVHYLGHQFHZRXOGH[FXOSDWH WKDW+XWFKLVRQZDVHQWLWOHGWRQRPRUHWKDQWKHYDOXH +XWFKLVRQ  7KH SURVHFXWLRQjV WKHRU\ DOUHDG\ SRVLWHG WKDW RI WKH QRWH  7KH FLYLO MXGJPHQW LV QRW SUREDWLYH RI *D\ORUZDVLQYROYHGLQWKHPXUGHUVRHYLGHQFHLQFXOSDWLQJ +XWFKLVRQjVLQWHQWLWPHUHO\UXOHGRQWKHRXWHUOLPLWVRIDQ\ *D\ORUZRXOGQRWWHQGWRVKRZ+XWFKLVRQjVLQQRFHQFH,Q OHJDOULJKWVKHSRVVHVVHGXQGHUWKHSROLF\$VDUHVXOWZH DGGLWLRQWKHUHZDVDOUHDG\DEXQGDQWHYLGHQFHLQGLFDWLQJWKDW ILQGQRUHYHUVLEOHHUURU *D\ORUKDGDILQDQFLDOPRWLYHWRPXUGHU+XGGOHVWRQLQVRIDU DV*D\ORUZDVWKHVROHEHQHILFLDU\XQGHUWKHZLOODQGDQRWKHU (YLGHQWLDU\+HDULQJ LQVXUDQFHSROLF\7KHUHIRUHLWLVXQFOHDUZK\HYLGHQFHRI DQRWKHUPRWLYHZRXOGKDYHFKDQJHGWKHMXU\jVLPSUHVVLRQRI )LQDOO\+XWFKLVRQKDVIDLOHGWRGHYHORSWKHIDFWXDOEDVLV +XWFKLVRQjVJXLOWRUPDGH+XWFKLVRQPRUHOLNHO\WRSXUVXHD IRUKLVFODLPV6HH86&†H+XWFKLVRQjVFRXQVHO WKHRU\ RI GHIHQVH DVVHUWLQJ WKDW *D\ORU DFWHG WR NLOO QHYHULQGLFDWHGZKDWHYLGHQFHKHZRXOGKDYHSUHVHQWHGKDG +XGGOHVWRQZLWKRXW+XWFKLVRQjVLQYROYHPHQW WKHWULDOMXGJHUXOHGIDYRUDEO\RQWKHVHYHUDQFHPRWLRQ1RU GLG WKH GHIHQVH LQGLFDWH WKDW LW ZLVKHG WR SUHVHQW DQ\ VXFK +XWFKLVRQDUJXHVWKDW0F&DUWj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jV%U ZDVQRWSUHVHQWEXWLWGRHVQRWH[FOXGH+XWFKLVRQIURPWKH DW    +RZHYHU WKH RQO\ HYLGHQFH LQ WKH UHFRUG WR FRQVSLUDF\ HVWDEOLVKWKHVHIDFWVDUHWKHPDWHULDOVWKDW+XWFKLVRQDOOHJHV 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 KROGLQJ WKDW HYLGHQFHWRVKRZWKDWWKHPDWHULDOVDYDLODEOHWRKLPGXULQJ GHIHQGDQWVPXVWVKRZZKDWH[FXOSDWRU\HYLGHQFHWKH\ZRXOG KLV KDEHDV SHWLWLRQ ZHUH QRW DYDLODEOH EHIRUH KLV ILUVW SUHVHQWDWDVHYHUHGWULDOWRVXSSRUWFODLP,I+XWFKLVRQGLG SRVWFRQYLFWLRQSURFHHGLQJ0RUHRYHUWKHLQVXUDQFHUHSRUW SRVVHVVHYLGHQFHWKDWZRXOGKDYHDOORZHGKLPWRSUHVHQWD PDWHULDOVOLVWHGLQ+XWFKLVRQjVVHFRQGJURXSRI%UDG\FODLPV GHIHQVHLPSOLFDWLQJ*D\ORUDVWKHUHDONLOOHUWKHQKLVIDLOXUH KDYHOLWWOHRUQRLPSHDFKPHQWRUH[FXOSDWRU\YDOXH7KHIDFW WR GHYHORS WKH UHFRUG DV WR WKHVH IDFWV LQ VWDWH FRXUW ZLOO WKDW &XUQXWW GHOLYHUHG SUHPLXP SD\PHQWV WR WKH LQVXUDQFH SUHYHQWKLPIURPREWDLQLQJDQHYLGHQWLDU\KHDULQJXQOHVVKH FRPSDQ\LVQRWH[FXOSDWRU\RURWKHUZLVHLQFRQVLVWHQWZLWK FDQ VDWLVI\ WKH VWULQJHQW UHTXLUHPHQWV RI  86& WKH SURVHFXWLRQjV FDVH VLQFH &XUQXWW ZDV DOOHJHG WR EH D † H$ %  6HH 0 :LOOLDPV  86 DW  PHPEHURIWKHFRQVSLUDF\KLPVHOIDQGZDVFRQYLFWHGIRUKLV +XWFKLVRQKDVQRWDWWHPSWHGWRPDNHVXFKDVKRZLQJ LQYROYHPHQW LQ D VHSDUDWH WULDO  s$ DW  GLVFXVVLQJ &XUQXWWjVLQYROYHPHQWLQWKHFRQVSLUDF\VHHDOVR6WULFNOHU %HFDXVH+XWFKLVRQKDVQRWGHPRQVWUDWHGWKDWWKHVWDWHWULDO 86DW7KHIDFWWKDW+XGGOHVWRQWDONHGZLWKWKH FRXUWjVDSSOLFDWLRQRIWKHODZZDVREMHFWLYHO\XQUHDVRQDEOH QXUVH DQG UHVFKHGXOHG KLV SK\VLFDO H[DPLQDWLRQ GRHV QRW DQGEHFDXVHKHKDVIDLOHGWRGHYHORSWKHIDFWXDOEDVLVIRUKLV UHIXWH +XWFKLVRQjV LQYROYHPHQW LQ DUUDQJLQJ WKH LQVXUDQFH FODLPVZHILQGQRHUURULQWKHGLVWULFWFRXUWjVRSLQLRQ SROLF\7KHVWDWHPHQWE\+DUPRQLQGLFDWLQJWKDW0LOOHUZDV QHUYRXV DW +XGGOHVWRQjV IXQHUDO ZRXOG DGG OLWWOH WR WKH &%UDG\&ODLP GHIHQVH VLQFH 0LOOHU DFNQRZOHGJHG DW WULDO WKDW KH ZDV DW OHDVWFRPSOLFLWLQWKHPXUGHU)LQDOO\WKHSHWLWLRQHUKDVQRW +XWFKLVRQ DOVR FODLPV WKDW WKH SURVHFXWLRQ ZLWKKHOG JLYHQDQ\UHDVRQZK\WKHIDFWWKDWWKHPDQDJHURIWKHPDULQD PDWHULDO H[FXOSDWRU\ HYLGHQFH LQ YLRODWLRQ RI %UDG\ Y UHPHPEHUHG +XGGOHVWRQ UHQWLQJ WKH ERDW ZRXOG EH 0DU\ODQG86,Q%UDG\WKH6XSUHPH&RXUW H[FXOSDWRU\RULPSHDFKDQRWKHUZLWQHVV KHOG WKDW mWKH VXSSUHVVLRQ E\ WKH SURVHFXWLRQ RI HYLGHQFH IDYRUDEOHWRWKHDFFXVHGXSRQUHTXHVWYLRODWHVGXHSURFHVV 7KHUHPDLQLQJPDWHULDOVLQWKHVHFRQGJURXSDSSHDUWREH ZKHUH WKH HYLGHQFH LV PDWHULDO HLWKHU WR JXLOW RU WR GRFXPHQWV IURP WKH 7%, ILOHV  3HWLWLRQHU FDQQRW HVWDEOLVK SXQLVKPHQWLUUHVSHFWLYHRIWKHJRRGIDLWKRUEDGIDLWKRIWKH FDXVH IRU KLV IDLOXUH WR SUHVHQW KLV FODLPV UHODWLQJ WR WKHVH SURVHFXWLRQl,GDWm7KHUHDUHWKUHHFRPSRQHQWVRID PDWHULDOVLQWKHVWDWHFRXUW+XWFKLVRQjVGLVFRYHU\PRWLRQWR WKH GLVWULFW FRXUW UHYHDOV WKDW KH GLG QRW UHTXHVW WKH 7%, UHFRUGVXQWLO'HFHPEHUs$DW7KLVZDVORQJ  +XWFKLVRQ LV LQ VRPHWKLQJ RI D GRXEOH ELQG ,I WKH GHIHQVH WHDP GLG DIWHUWKHH[SLUDWLRQRIWKH7HQQHVVHHVWDWXWHRIOLPLWDWLRQV SRVVHVV IDFWV DW WKH WLPH RI WULDO VKRZLQJ WKDW 0LOOHU DQG *D\ORU DWWHPSWHG +XWFKLVRQDGPLWVKRZHYHUWKDWWKHVHPDWHULDOVFRXOGKDYH WR NLOO +XGGOHVWRQ E\ WKHPVHOYHV WKHQ KLV %UDG\ FODLP DOOHJLQJ WKDW WKHVH EHHQUHTXHVWHGDWWKHWLPHWKDWSRVWFRQYLFWLRQFRXQVHOZDV IDFWV ZHUH ZLWKKHOG IURP WKH GHIHQVH ZRXOG QHFHVVDULO\ IDLO &ROHPDQ Y 0LWFKHOO  )G   WK &LU  m7KH %UDG\ UXOH GRHV QRW DSSRLQWHGSULRUWRKLVILUVWSRVWFRQYLFWLRQKHDULQJLQ DVVLVW D GHIHQGDQW ZKR LV DZDUH RI HVVHQWLDO IDFWV WKDW ZRXOG DOORZ KLP WR $SSHOODQWjV %U DW   *LYHQ WKH GLIILFXOW\ +XWFKLVRQ WDNH DGYDQWDJH RI WKH H[FXOSDWRU\ HYLGHQFH DW LVVXHl ,I WKH GHIHQGDQW H[SHULHQFHGLQREWDLQLQJWKH7%,ILOHRQFHLWZDVUHTXHVWHG GLG QRW SRVVHVV WKHVH IDFWV WKHQ WKH WULDO FRXUWjV UHIXVDO WR VHYHU FRXOG QRW KDYH DOWHUHG VLJQLILFDQWO\ +XWFKLVRQjV WULDO VWUDWHJ\  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  WUXH%UDG\YLRODWLRQ7KHHYLGHQFHDWLVVXHPXVWEHIDYRUDEOH ZLWQHVVZHLJKVKHDYLO\LQGXHSURFHVVDQDO\VLV6FKOHGZLW] WRWKHDFFXVHGHLWKHUEHFDXVHLWLVH[FXOSDWRU\RUEHFDXVHLW  )G DW  ZLWKKROGLQJ HYLGHQFH RI SXUSRUWHGO\ LVLPSHDFKLQJWKDWHYLGHQFHPXVWKDYHEHHQVXSSUHVVHGE\ mQHXWUDOlZLWQHVVLQLQYHVWLJDWLRQRIGHIHQGDQWZDVmDOOWKH WKH6WDWHHLWKHUZLOOIXOO\RULQDGYHUWHQWO\DQGSUHMXGLFHPXVW PRUHHJUHJLRXVEHFDXVH+RUQHDVIRXQGE\WKHGLVWULFWFRXUW KDYH HQVXHGl  6WULFNOHU Y *UHHQH  86   ZDVWKHµNH\jZLWQHVVl+RZHYHUDWWULDOGHIHQVHFRXQVHO  GLGDVN0LOOHUDERXWSUHYLRXVLQFLGHQWVRISK\VLFDODEXVHRI +XGGOHVWRQs$DWm$QGGR\RXDGPLWRUGHQ\WKDW\RX 8OWLPDWHO\ ZH ILQG +XWFKLVRQjV %UDG\ FODLP XQDYDLOLQJ DQG'DYLG'DYLVZHQWRXWVLGHDQGLQIDFWEHQW>+XGGOHVWRQjV@ EHFDXVH LW KDV EHHQ SURFHGXUDOO\ GHIDXOWHG DQG EHFDXVH KH DUPEHKLQGKLVEDFNDQGSXWKLPWRWKHJURXQG"l0LOOHU FDQQRWGHPRQVWUDWHFDXVHRUSUHMXGLFHIRUWKHGHIDXOW GHQLHG WKHVH LQFLGHQWV EXW WKH IDFW WKDW GHIHQVH FRXQVHO SXUVXHGWKLVOLQHRITXHVWLRQLQJVXJJHVWVWKDWKHZDVDZDUHRI %DFNJURXQG IDFWVUHJDUGLQJSK\VLFDODEXVHRI+XGGOHVWRQDQGZDVDEOHWR EULQJ DW OHDVW RQH RI WKHVH DOOHJHG LQFLGHQWV WR WKH MXU\jV D)LUVW*URXSRI%UDG\0DWHULDOV DWWHQWLRQIRUWKHSXUSRVHRILPSHDFKLQJ0LOOHU +XWFKLVRQjVFODLPVDUHEDVHGXSRQWZRJURXSVRIPDWHULDOV )LQDOO\ DQ\ LPSHDFKPHQW YDOXH RI WKH HYLGHQFH LV )LUVW+XWFKLVRQFODLPVWKDW%UDG\PDWHULDOVZHUHFRQWDLQHG XQGHUPLQHG E\ RWKHU HYLGHQFH LQ WKH UHFRUG LQFOXGLQJ LQWKHSDUWLDOO\GLVFORVHGSURVHFXWRUjVILOHZKLFKKHDOOHJHGO\ 5ROO\VRQjVFRUURERUDWLRQRI0LOOHUjVWHVWLPRQ\WKHH[LVWHQFH UHFHLYHG RQ 6HSWHPEHU   WKH GD\ RI KLV ILUVW RIWKHOLIHLQVXUDQFHSROLF\QDPLQJ+XWFKLVRQWKHWHVWLPRQ\ SRVWFRQYLFWLRQKHDULQJ7KHVHPDWHULDOVDOODSSHDUWREHSDUW RI+XWFKLVRQjVFHOOPDWHDQGWKHOHWWHUVZULWWHQE\+XWFKLVRQ RIWKHVDPHLQVXUDQFHFODLPLQYHVWLJDWLRQUHSRUWSUHSDUHGE\ KLPVHOIZKLOHLQSULVRQ+XWFKLVRQ6:GDW +XGGOHVWRQjVLQVXUDQFHFRPSDQ\7KHSDUWLFXODULWHPVFLWHG E\+XWFKLVRQLQFOXGH ,QVXPWKHHYLGHQFHFLWHGE\+XWFKLVRQLQKLVILUVWJURXS RI %UDG\ FODLPV GRHV QRW VDWLVI\ WKH PDWHULDOLW\ WHVW ‡ $VXPPDU\RIDVWDWHPHQWE\7RQ\*RLQJVDFR 7KHUHIRUH+XWFKLVRQFDQQRWVKRZSUHMXGLFHVWHPPLQJIURP ZRUNHU RI +XGGOHVWRQjV ZKR UHFRXQWHG D LWVVXSSUHVVLRQ FRQYHUVDWLRQZLWK'DYLG'DYLV$FFRUGLQJWRWKH VXPPDU\ 'DYLV VWDWHG WKDW 0LOOHU WROG KLP 6HFRQG*URXSRI%UDG\0DWHULDOV VRPHWLPH LQ $XJXVW  WKDW KH 0LOOHU DQG *D\ORU KDG mVHW XS WKH ZKROH WKLQJ LQYROYLQJ 7KHGLVWULFWFRXUWGHWHUPLQHGWKDW+XWFKLVRQKDGOLNHZLVH +XJKjVGHDWKlLQFOXGLQJWKHPXUGHUE\GURZQLQJ IDLOHGWRVKRZFDXVHIRUKLVIDLOXUHWRUDLVHFODLPVUHODWLQJWR s$DW WKHVHFRQGJURXSRI%UDG\PDWHULDOVWKHPDWHULDOVWKDWZHUH DOOHJHGO\GLVFORVHGRQO\DIWHUWKHILOLQJRI+XWFKLVRQjVIHGHUDO ‡ $VXPPDU\RIDVWDWHPHQWE\7RP%U\DQZKRWROG KDEHDVDSSHDOLQVWDWHFRXUWRUSUHMXGLFHUHVXOWLQJIURPKLV WKH LQVXUDQFH LQYHVWLJDWRU WKDW KH NQHZ RI RQH GHIDXOW7KHGLVWULFWFRXUWH[SODLQHGWKDWmLWLVQRWFOHDUWRWKH RFFDVLRQLQZKLFK0LOOHUDQG*D\ORUSXOOHGDJXQRQ &RXUW KRZ SHWLWLRQHU FRXOG GHWHUPLQH WKDW WKH PDWHULDO +XGGOHVWRQDQGEHDWKLPXS%U\DQVWDWHGWKDWKH FRQWDLQHGLQ>WKHVHFRQGJURXSRIFODLPV@ZDVQRWLQFOXGHGLQ REVHUYHGEXOOHWKROHVLQ+XGGOHVWRQjVFDUs$DW WKHSUHYLRXVUHFRUGVGLVFORVHGWRDQGUHYLHZHGE\SHWLWLRQHUjV  SRVWFRQYLFWLRQFRXQVHOl'LVW&W2SDW7KHGLVWULFW FRXUWDOVRQRWHGWKDWSHWLWLRQHUFRXOGQRWVKRZDUHDVRQDEOH  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  %UDG\SXUSRVHVSHUWDLQVRQO\WRWKHTXHVWLRQRIDGHIHQGDQWjV ‡ $VWDWHPHQWLQWKHLQVXUDQFHUHSRUWLQGLFDWLQJWKDW JXLOWRULQQRFHQFHQRWWRWKHLVVXHRIDGHIHQGDQWjVDELOLW\RU 'RQQLH7KRPDVZKRZRUNHGRQWKHFOHDQLQJFUHZ LQDELOLW\WRSUHSDUHIRUWULDOl,Q6FKOHGZLW]KRZHYHUWKH IRU +XGGOHVWRQjV HPSOR\HU REVHUYHG *D\ORU DQG SHWLWLRQHUSURYLGHGDIILGDYLWVIURPFRXQVHOVWDWLQJVSHFLILFDOO\ 0LOOHUWZLVWLQJ+XGGOHVWRQjVDUPEHKLQGKLVEDFN ZKDWZLWQHVVHVZRXOGKDYHEHHQFDOOHGKDGWKHHYLGHQFHEHHQ DQGZUHVWOLQJKLPWRWKHJURXQG7KRPDVDOVRVWDWHG GLVFORVHGWKXVJLYLQJWKHFRXUWDEDVLVWRHYDOXDWHKRZWKH WKDW+XGGOHVWRQIHDUHGIRUKLVOLIHs$DW GLVFORVXUHZRXOGKDYHDIIHFWHGWKHWULDO)GDW $V QRWHG DERYH WKH LQVXUDQFH UHSRUW FRXOG QRW EH XVHG WR $FFRUGLQJWR+XWFKLVRQWKHVHPDWHULDOVZHUHGLVFRYHUHGRQ SURYHWKHWUXWKRI0LOOHUjVVWDWHPHQWWKDWKHDQG*D\ORUDFWHG 2FWREHUVHYHUDOGD\VDIWHUKLVILUVWSRVWFRQYLFWLRQ DORQH7KHSULPDU\LWHPVRIHYLGHQFHFLWHGE\+XWFKLVRQDV KHDULQJ$SSHOODQWjV%UDW+HVXEVHTXHQWO\SUHSDUHGD VXSSRUWLQJWKLVGHIHQVHVWUDWHJ\DUHVWDWHPHQWVUHODWLQJWRWKH VHFRQG SUR VH SRVWFRQYLFWLRQ SHWLWLRQ LQ sDQXDU\ RI  SRVVLELOLW\RIDKRPRVH[XDOUHODWLRQVKLSEHWZHHQ*D\ORUDQG VHWWLQJ IRUWK %UDG\ FODLPV UHODWLQJ WR WKH DERYH PDWHULDOV +XGGOHVWRQDQGHYLGHQFHWKDW*D\ORUDQG0LOOHUKDGDEXVHG +RZHYHUKHZDLWHGXQWLO$XJXVWWRILOHWKHSHWLWLRQ +XGGOHVWRQRQSUHYLRXVRFFDVLRQV6XFKHYLGHQFHKRZHYHU 7KH WULDO FRXUW GHQLHG +XWFKLVRQjV VHFRQG SRVWFRQYLFWLRQ GRHV QRW H[FXOSDWH +XWFKLVRQ LW PHUHO\ LQFXOSDWHV D SHWLWLRQZLWKRXWDKHDULQJFRQFOXGLQJWKDWWKHSHWLWLRQZDV FRFRQVSLUDWRU ZKR KDV DOUHDG\ EHHQ IRXQG JXLOW\ RI SURFHGXUDOO\EDUUHGDQGIDLOHGWRVWDWHDFODLPXSRQZKLFK SDUWLFLSDWLQJLQWKHPXUGHU7KLVHYLGHQFHLVQRWLQFRQVLVWHQW UHOLHIFRXOGEHJUDQWHG  7KH7HQQHVVHH&RXUWRI&ULPLQDO ZLWKWKHVWDWHjVHYLGHQFHRUWKHRU\RIJXLOW,QIDFW0LOOHU $SSHDOVDIILUPHGILQGLQJWKHFODLPSURFHGXUDOO\GHIDXOWHG WHVWLILHG WKDW *D\ORU VXJJHVWHG WKDW KH NQHZ RI WKH ULJKW +XWFKLVRQ:/DW   YLFWLPIRUWKHOLIHLQVXUDQFHVFKHPHs$DW(YHQLIWKH HYLGHQFHHVWDEOLVKHGWKDW 0LOOHUKDGFRQFRFWHGWKHPXUGHU E6HFRQG*URXSRI%UDG\0DWHULDOV SODQ+XWFKLVRQZRXOGVWLOOEHGHDWKSHQDOW\HOLJLEOHIRUKLV SDUWLFLSDWLRQDVDFRQVSLUDWRULQDPXUGHUIRUKLUHVFKHPH +XWFKLVRQDVVHUWVWKDWKHUHFHLYHGDVHFRQGJURXSRI%UDG\ 6HH JHQHUDOO\ 6WDWH Y 3RUWHUILHOG  6:G  7HQQ PDWHULDOV DIWHU ILOLQJ WKLV IHGHUDO KDEHDV SHWLWLRQ DW ZKLFK  VHH DOVR 6WULFNOHU  86 DW  ILQGLQJ QR SRLQW KH FODLPV WR KDYH UHFHLYHG D FRPSOHWH FRS\ RI WKH SUHMXGLFHZKHUHmSHWLWLRQHUjVJXLOWRIFDSLWDOPXUGHUGLGQRW SURVHFXWRUjVILOHDVZHOODVDFRS\RIWKH7HQQHVVHH%XUHDX GHSHQGRQSURRIWKDWKHZDVWKHGRPLQDQWSDUWQHUl RI ,QYHVWLJDWLRQV m7%,l ILOH FRQFHUQLQJ KLV FDVH  7KH DGGLWLRQDOPDWHULDOVLQFOXGH 7KHUHPDLQLQJLWHPVLQFOXGHGLQ+XWFKLVRQjVILUVWJURXSRI %UDG\ FODLPV DUH WZR VWDWHPHQWV LQ WKH LQVXUDQFH FODLPV ‡ $ VWDWHPHQW E\ .DUHQ 0F&DUW ZKR OLYHG ZLWK LQYHVWLJDWLRQ LQGLFDWLQJ WKDW 0LOOHU DQG *D\ORU SK\VLFDOO\ *D\ORUDW+XGGOHVWRQjVWUDLOHUZKLFKLVDSSDUHQWO\ DEXVHG+XGGOHVWRQLQWKHSDVW$VQRWHGDERYHWKLVHYLGHQFH IURP WKH 7%, ILOH  0F&DUWjV VWDWHPHQW LQFOXGHV LVQRWVLJQLILFDQWO\H[FXOSDWRU\DVWR+XWFKLVRQ7KHHYLGHQFH UHIHUHQFHV WR D SRVVLEOH KRPRVH[XDO UHODWLRQVKLS PD\KDYHVRPHYDOXHLQLPSHDFKLQJ0LOOHUZKRWHVWLILHGWKDW EHWZHHQ *D\ORU DQG +XGGOHVWRQ  0F&DUW DOVR KHKDGQHYHUVHHQDQ\SK\VLFDOFRQIURQWDWLRQVEHWZHHQ*D\ORU UHFDOOHGDQHYHQLQJDWWKHWUDLOHUZKHQ*D\ORUWROGD DQG +XGGOHVWRQ  s$ DW   0LOOHU ZDV WKH mFKLHI QXPEHU RI SHRSOH LQ DWWHQGDQFH WKDW LI KH NLOOHG SURVHFXWLRQZLWQHVVl+XWFKLVRQ6:GDWVRDQ\ LPSHDFKLQJHYLGHQFHZRXOGKDYHEHHQYDOXDEOHWR+XWFKLVRQ DWWULDO6HH.\OHV86DWLQGLFDWLQJWKDWGHQLDO  +XWFKLVRQ FODLPV WR KDYH VHQW WKH SHWLWLRQ WR SRVWFRQYLFWLRQ FRXQVHO RIRSSRUWXQLW\WRXVHLPSHDFKLQJHYLGHQFHDJDLQVWmHVVHQWLDOl 9DQ 5LSHU LQ )HEUXDU\  EXW DVVHUWV WKDW 9DQ 5LSHU UHTXHVWHG WKDW +XWFKLVRQ ILOH WKH SHWLWLRQ SUR VH VRPHWLPH LQ sXO\ RI WKDW \HDU  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  +XGGOHVWRQKHZRXOGJHWHYHU\WKLQJXQGHUWKHZLOO KHDUVD\l  ,Q DGGLWLRQ +XWFKLVRQ KDV RIIHUHG QR EDVLV IRU 0F&DUWVWDWHGWKDWVKHPHW+XWFKLVRQRQO\RQHWLPH FRQFOXGLQJWKDWGLVFORVXUHRIWKLVLWHPZRXOGKDYHOHGWRWKH 0F&DUW DOVR VWDWHG WKDW *D\ORU SK\VLFDOO\ DEXVHG GLVFRYHU\RIRWKHUDGPLVVLEOHHYLGHQFHWKDWFRXOGKDYHEHHQ +XGGOHVWRQs$DW XVHGWRSURYHWKHVXEVWDQFHRIWKHVWDWHPHQWLHWKDW*D\ORU DQG 0LOOHU SODQQHG WKH PXUGHU DORQH  6HH :RRG Y ‡ $VWDWHPHQWIURPWKHQXUVHZKRSHUIRUPHGWKHSUH %DUWKRORPHZ  86    ILQGLQJ QR %UDG\ LQVXUDQFH SK\VLFDO H[DPLQDWLRQ RI +XGGOHVWRQ YLRODWLRQZKHUHVXSSUHVVHGHYLGHQFHZDVLQDGPLVVLEOHDQG ZKLFK DSSHDUV WR EH IURP WKH 7%, ILOHV  7KH SHWLWLRQHUFRXOGRIIHURQO\VSHFXODWLRQWKDWGLVFORVXUHZRXOG VWDWHPHQWH[SODLQVWKDW+XGGOHVWRQUHVFKHGXOHGWKH KDYHOHGWRDGPLVVLEOHHYLGHQFH H[DPLQDWLRQRQDQXPEHURIRFFDVLRQVs$DW  0RUHRYHUDOWKRXJK+XWFKLVRQjVFRXQVHOFRXOGKDYHDVNHG 0LOOHUDERXWWKHVWDWHPHQWGHVFULEHGLQWKHLQVXUDQFHUHSRUW ‡ $ VWDWHPHQW FRQWDLQHG LQ WKH LQVXUDQFH FODLPV RQFURVVH[DPLQDWLRQWKHLQVXUDQFHUHSRUWLWVHOIZRXOGQRW LQYHVWLJDWLRQ UHSRUW LQGLFDWLQJ WKDW DQ LQVXUDQFH KDYHEHHQDGPLVVLEOHDVH[WULQVLFHYLGHQFHRI0LOOHUjVSULRU DJHQW0&&XUQXWWDQDOOHJHGDFFRPSOLFHLQWKH LQFRQVLVWHQWVWDWHPHQW7KHDFFRXQWRI0LOOHUjVVWDWHPHQWLQ PXUGHU FRQVSLUDF\ SDLG WKH SUHPLXPV RQ WKHLQVXUDQFHUHSRUWFRQWDLQVPXOWLSOHOHYHOVRIKHDUVD\WKH +XGGOHVWRQjVLQVXUDQFHSROLF\DQGFODLPHGWKDWKH UHSRUWLWVHOILVDQRXWRIFRXUWVWDWHPHQWWKDWVXPPDUL]HVDQ UHFHLYHGWKHPRQH\IURP+XGGOHVWRQs$DW RXWRIFRXUW VWDWHPHQW E\ 7RQ\ *RLQJV ZKLFK LQ WXUQ UHFRXQWVDQRXWRIFRXUWVWDWHPHQWE\'DYLG'DYLVUHSRUWLQJ ‡ $ VXPPDU\ LQ WKH LQVXUDQFH FODLPV LQYHVWLJDWLRQ WKHRXWRIFRXUWVWDWHPHQWRI0LOOHU$OWKRXJKWKHRXWRI UHSRUWRIDVWDWHPHQWE\9DQFH+DUPRQ+DUPRQ FRXUW VWDWHPHQW RI 0LOOHU LV DGPLVVLEOH IRU LPSHDFKPHQW VWDWHGWKDWKHVSRNHZLWK0LOOHURQWKHGD\RIWKH SXUSRVHVWKH7HQQHVVHH5XOHVRI(YLGHQFHOLNHWKH)HGHUDO IXQHUDO DQG WKDW 0LOOHU VDLG WKDW m+XJK GLG QRW 5XOHVSHUPLWLQWURGXFWLRQRIPXOWLSOHKHDUVD\HYLGHQFHRQO\ GHVHUYHZKDWKHJRWRUZKDWKDGKDSSHQHGWRKLP LImHDFKSDUWRIWKHFRPELQHGVWDWHPHQWVFRQIRUPVZLWKDQ XSRQWKHODNHls$DW H[FHSWLRQWRWKHKHDUVD\UXOHl 7(11 5 (9,'%HFDXVH WKHUH LV QR H[FHSWLRQ FRYHULQJ WKH LQWHUPHGLDWH OHYHOV RI ‡ $7%,UHSRUWRIDSRO\JUDSKH[DPLQDWLRQ RI sRKQ KHDUVD\ LQ WKH LQVXUDQFH UHSRUW WKH UHSRUW ZRXOG QRW EH 5ROO\VRQ ZKR ZDV RQ WKH ERDW ZKHQ +XGGOHVWRQ DGPLVVLEOHWRLPSHDFK0LOOHU6HH3DUDGLVY$UDYH)G GURZQHGDQGZKRWHVWLILHGDW+XWFKLVRQjVWULDO7KH WK&LUm>,@I+DZVjQRWHVUHFRUG(OOLRWWjV UHSRUW LQGLFDWHG WKDW 5ROO\VRQ XQWUXWKIXOO\ VWDWHG KHDUVD\UHSRUWVRI'U%UDG\jVKHDUVD\VWDWHPHQWVWKHQWKH WKDWKHGLGQRWWRXFK+XGGOHVWRQZKHQKHZDVLQWKH QRWHVWKHPVHOYHVZRXOGQRWEHDGPLVVLEOHHYHQWRLPSHDFK ZDWHUDQGWKDWKHGLGQRWDJUHHZLWKDQ\RQHWRKHOS 'U%UDG\l GURZQ+XGGOHVWRQ7KHUHSRUWDOVRLQGLFDWHVWKDW 5ROO\VRQ JDYH LQFRQVLVWHQW H[SODQDWLRQV IRU KLV )LQDOO\+XWFKLVRQjVFODLPWKDWQRQGLVFORVXUHRI0LOOHUjV DQVZHUVs$DW VWDWHPHQW SUHMXGLFHG KLV WULDO VWUDWHJ\ LV LQVXIILFLHQW WR HVWDEOLVK PDWHULDOLW\  7KLV &LUFXLW KDV LPSOLHG WKDW LW PD\ ‡ $VWDWHPHQWE\WKHPDQDJHURIWKHPDULQDFRQWDLQHG FRQVLGHUZKHWKHUVXSSUHVVLRQRI%UDG\PDWHULDOVDIIHFWHGWULDO LQ WKH LQVXUDQFH FODLPV LQYHVWLJDWLRQ UHSRUW VWUDWHJ\LQGHWHUPLQLQJSUHMXGLFH6HH6FKOHGZLW]Y8QLWHG LQGLFDWLQJWKDW+XGGOHVWRQFDPHLQWRWKHPDULQDRQ 6WDWHV)GWK&LU%XWVHH3KLOOLS WKH GD\ RI WKH GURZQLQJ DQG UHQWHG D ERDW DIWHU )GDWm6LJQLILFDQWO\WKHLVVXHRIPDWHULDOLW\IRU  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  7KHTXHVWLRQLVQRWZKHWKHUWKHGHIHQGDQWZRXOGPRUH KDYLQJFDOOHGHDUOLHUWRPDNHVXUHWKHERDWZRXOGEH OLNHO\ WKDQ QRW KDYH UHFHLYHG D GLIIHUHQW YHUGLFW ZLWK WKH DYDLODEOHs$DW HYLGHQFHEXWZKHWKHULQLWVDEVHQFHKHUHFHLYHGDIDLUWULDO XQGHUVWRRG DV D WULDO UHVXOWLQJ LQ D YHUGLFW ZRUWK\ RI ‡ $ OHWWHU IURP +XGGOHVWRQ WR *D\ORU DOOHJHGO\ FRQILGHQFHl  .\OHV Y :KLWOH\  86    UHFHLYHG IURP WKH 7%,  ,Q WKH OHWWHU +XGGOHVWRQ 0RUHRYHUPDWHULDOLW\mLVQRWDVXIILFLHQF\RIHYLGHQFHWHVW PDNHV FRPPHQWV VWURQJO\ VXJJHVWLQJ WKDW KLV $GHIHQGDQWQHHGQRWGHPRQVWUDWHWKDWDIWHUGLVFRXQWLQJWKH UHODWLRQVKLSZLWK*D\ORUZDVDQLQWLPDWHRQHs$ LQFXOSDWRU\ HYLGHQFH LQ OLJKW RI WKH XQGLVFORVHG HYLGHQFH DW WKHUHZRXOGQRWKDYHEHHQHQRXJKOHIWWRFRQYLFWl,GDW 0DWHULDOLW\LVWREHHYDOXDWHGLQOLJKWRIWKHFXPXODWLYH +XWFKLVRQ FRQWHQGV WKDW WKHVH PDWHULDOV ZHUH DPRQJ ILYH HIIHFWRIWKHXQGLVFORVHGHYLGHQFH,GDWm>,@QIRUPDWLRQ EDQNHUER[HVRIUHFRUGVSURYLGHGE\WKHVWDWHLQUHVSRQVHWR ZLWKKHOG E\ WKH SURVHFXWLRQ LV QRW PDWHULDO XQOHVV WKH KLVUHTXHVWIRUGLVFORVXUHRIUHFRUGV5HVSRQGHQWFRQFHGHV LQIRUPDWLRQFRQVLVWVRIRUZRXOGOHDGGLUHFWO\WRHYLGHQFH WKDWILYHEDQNHUVER[HVZHUHSURYLGHGVXEVHTXHQWWRWKHILOLQJ DGPLVVLEOH DW WULDO IRU HLWKHU VXEVWDQWLYH RU LPSHDFKPHQW RI +XWFKLVRQjV IHGHUDO KDEHDV SHWLWLRQ EXW FRQWHQGV WKDW SXUSRVHVl8QLWHG6WDWHVY3KLOOLS)GWK PDQ\RIWKHVHGRFXPHQWVZHUHGXSOLFDWHVDQGWKDWLWFRXOGQRW &LUFHUWGHQLHG86 GHWHUPLQHZKHWKHUWKH\KDGEHHQSUHYLRXVO\GLVFORVHG 7KHFKLHISLHFHRIH[FXOSDWRU\DQGLPSHDFKLQJHYLGHQFH F3URFHGXUH DGYDQFHGE\+XWFKLVRQLVWKHVWDWHPHQWE\'DYLVUHSRUWLQJ 0LOOHUjVVWDWHPHQWWKDWKH0LOOHUDQG*D\ORUKDGmVHWXSWKH %RWKWKHVWDWHFRXUWVDQGWKHIHGHUDOGLVWULFWFRXUWFRQFOXGHG ZKROH WKLQJ LQYROYLQJ +XJKjV GHDWKl DQG KDG GHYLVHG WKH WKDW+XWFKLVRQjV%UDG\FODLPVZHUHSURFHGXUDOO\GHIDXOWHG SODQWRXVHWZRERDWVs$DW+XWFKLVRQFRQWHQGVWKDW 7KH VWDWH SRVWFRQYLFWLRQ FRXUW GHQLHG +XWFKLVRQjV VHFRQG WKLVHYLGHQFHZDVH[FXOSDWRU\LQVRIDUDVLWHVWDEOLVKHGWKDW SHWLWLRQ ZKLFK FRQWDLQHG WKH ILUVW JURXS RI %UDG\ FODLPV *D\ORU DQG 0LOOHU DFWHG DORQH LQ SODQQLQJ +XGGOHVWRQjV ZLWKRXW DQ HYLGHQWLDU\ KHDULQJ  7KH SRVWFRQYLFWLRQ FRXUW PXUGHU+XWFKLVRQDUJXHVWKDWWKHVWDWHPHQWFRXOGKDYHEHHQ FLWHGWKUHHUHDVRQVIRULWVGHFLVLRQWKHSHWLWLRQZDVEDUUHG XVHGWRLPSHDFK0LOOHUEHFDXVHLWZDVLQFRQVLVWHQWZLWKKLV XQGHU7&$†ZKLFKSURYLGHVDRQH\HDUVWDWXWH WHVWLPRQ\LPSOLFDWLQJ+XWFKLVRQ+XWFKLVRQDOVRFRQWHQGV RI OLPLWDWLRQV IRU SHWLWLRQV IRU SRVWFRQYLFWLRQ UHOLHI DQG WKDWGLVFORVXUHRIWKLVVWDWHPHQWZRXOGKDYHDOWHUHGKLVWULDO SURYLGHVWKDWDSULVRQHUPD\mLQQRHYHQWlILOHPRUHWKDQRQH VWUDWHJ\DQGVXSSRUWHGKLVPRWLRQIRUVHYHUDQFH SRVWFRQYLFWLRQSHWLWLRQWKHFODLPVDVVHUWHGLQWKHVHFRQG SHWLWLRQZHUHZDLYHGXQGHU7&$†JEHFDXVH 0LOOHUjV VWDWHPHQW WR 'DYLV LV KHDUVD\ DQG FRXOG QRW EH WKH\ ZHUH QRW LQFOXGHG LQ +XWFKLVRQjV ILUVW SHWLWLRQ IRU XVHGWRSURYHWKHWUXWKRIZKDWZDVVDLGLHWKDW0LOOHUDQG SRVWFRQYLFWLRQ UHOLHI DQG  WKH PDWHULDO LQFOXGHG LQ *D\ORU DFWHG DORQH  7KH IDFW WKDW DQ\ XVH RI WKH HYLGHQFH +XWFKLVRQjV SHWLWLRQ ZDV QRW %UDG\ PDWHULDO  +XWFKLVRQ ZRXOG EH OLPLWHG WR LPSHDFKPHQW PLWLJDWHV WKH SRWHQWLDO :/DW  7KH7HQQHVVHH&RXUWRI&ULPLQDO H[FXOSDWRU\ LPSDFW RI WKH HYLGHQFH  6HH 8QLWHG 6WDWHV Y $SSHDOV DIILUPHG WKH SRVWFRQYLFWLRQ FRXUWjV UXOLQJ WKDW 3HUH]  )G   G &LU  ILQGLQJ WKDW +XWFKLVRQSURFHGXUDOO\GHIDXOWHGKLV%UDG\FODLPV,GDW  H[FXOSDWRU\ RXWRIFRXUW VWDWHPHQW E\ ZLWQHVV mZRXOG QRW 7KHFULPLQDODSSHDOVFRXUWUHMHFWHG+XWFKLVRQjVDUJXPHQWWKDW KDYHPDGHDGLIIHUHQFHLQWKHWULDOEHFDXVHZKLOHLWPD\FRPH KHGLGQRWKDYHDQDGHTXDWHRSSRUWXQLW\WRSUHVHQWKLV%UDG\ LQ WR LPSHDFK     LW FRXOG QRW FRPH LQ IRU VXEVWDQWLYH FODLPVGXHWRWKHWLPLQJRIWKHSURVHFXWLRQjVGLVFORVXUHDQG FRQVLGHUDWLRQ E\ WKH MXU\ EHFDXVH LW ZDV LQDGPLVVLEOH FRQFOXGHGWKDW+XWFKLVRQKDGDGHTXDWHRSSRUWXQLW\WRSUHVHQW WKHFODLPVDWKLVILUVWSRVWFRQYLFWLRQKHDULQJ,G7KHFRXUW  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  GLGQRWHKRZHYHUWKDWLWZDVLPSURSHUIRUWKHSRVWFRQYLFWLRQ LQWHUSUHWHG WKLV VWDWHPHQW WR LPSO\ WKDW +XWFKLVRQ KDG FRXUWWRUHDFKDGHWHUPLQDWLRQRIWKHPHULWVRI+XWFKLVRQjV UHFHLYHG WKH GLVWULFW DWWRUQH\jV ILOH E\ 6HSWHPEHU   %UDG\FODLPVZLWKRXWKROGLQJDQHYLGHQWLDU\KHDULQJ,G VHYHQWHHQ GD\V EHIRUH +XWFKLVRQjV LQLWLDO SRVWFRQYLFWLRQ KHDULQJ  'LVW &W 2S DW   ,Q DGGLWLRQ GXULQJ RUDO 7KH GLVWULFW FRXUW IRXQG WKDW DOO RI +XWFKLVRQjV %UDG\ DUJXPHQWRQ+XWFKLVRQjVVHFRQGVWDWHSRVWFRQYLFWLRQSHWLWLRQ FODLPVZHUHSURFHGXUDOO\GHIDXOWHG)LUVWWKHFRXUWQRWHGWKDW +XWFKLVRQjVFRXQVHOVWDWHGWKDWmWKHPDWHULDOVWKDWPDNHXS 7HQQHVVHHjVZDLYHUUXOHVDQGRQH\HDUVWDWXWHRIOLPLWDWLRQV WKH EDVLV IRU WKH 3HWLWLRQ ZHUH QRW PDWHULDOV WKDW ZHUH IRU SRVWFRQYLFWLRQ SHWLWLRQV ZHUH ILUPO\ HVWDEOLVKHG DQG IXUQLVKHGE\WKH6WDWHLQGLVFRYHU\LQWKHRULJLQDOWULDO7KHVH UHJXODUO\ IROORZHG  'LVW &W 2S DW  FLWLQJ )OHWFKHU Y ZHUHPDWHULDOVWKDWZHUHREWDLQHGE\P\VHOILQWKHSURFHVVRI 6WDWH6:G7HQQ&DOGZHOOY6WDWH SUHSDULQJIRUWKHVHFRQGRUWKH3HWLWLRQIRU3RVW&RQYLFWLRQ 6:G7HQQ+RXVHY6WDWH6:G 5HOLHI IRU KHDULQJl  s$ DW   $OWKRXJK V\QWDFWLFDOO\ 7HQQ6HFRQGWKHFRXUWIRXQGWKDW+XWFKLVRQKDG FRQIXVLQJ WKLV VWDWHPHQW VXJJHVWV WKDW WKH PDWHULDOV ZHUH IDLOHGWRVKRZE\FOHDUDQGFRQYLQFLQJHYLGHQFHWKDWKHGLG GLVFORVHGGXULQJWKHSUHSDUDWLRQRIWKHILUVWSRVWFRQYLFWLRQ QRWKDYHDUHDVRQDEOHRSSRUWXQLW\WRSUHVHQWWKHILUVWJURXSRI SHWLWLRQ %UDG\FODLPVDWKLVILUVWSRVWFRQYLFWLRQKHDULQJ7KHGLVWULFW FRXUW WKHUHIRUH FRQFOXGHG WKDW +XWFKLVRQ FRXOG QRW VKRZ (YHQLI+XWFKLVRQGLGQRWUHFHLYHWKHGLVWULFWDWWRUQH\jVILOH FDXVH IRU KLV IDLOXUH WR FRPSO\ ZLWK WKH VWDWH SURFHGXUDO LQWLPHWRUDLVHWKH%UDG\FODLPVLQKLVILUVWSRVWFRQYLFWLRQ UHTXLUHPHQWWKDWWKHVHFODLPVEHUDLVHGDWKLVILUVWSHWLWLRQ SHWLWLRQKHFDQQRWVKRZFDXVHWRH[FXVHKLVIDLOXUHWRILOHKLV 'LVW&W2SDW VHFRQG SHWLWLRQ ZLWKLQ WKH RQH\HDU VWDWXWH RI OLPLWDWLRQV +XWFKLVRQ  :/  DW   8QGHU WKH 3RVW 7KH LWHPV LQ +XWFKLVRQj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3UHMXGLFH0DWHULDOLW\ UHVXOWRIKLVWULDOZRXOGKDYHEHHQGLIIHUHQWKDGWKHPDWHULDOV EHHQGLVFORVHGDQGWKHUHIRUH+XWFKLVRQFRXOGSURYHQHLWKHU (YHQLI+XWFKLVRQFRXOGVKRZFDXVHIRUKLVGHIDXOWDVWRWKH PDWHULDOLW\QRUSUHMXGLFHWRVXFFHHGRQWKHPHULWVRIKLV%UDG\ ILUVWJURXSRI%UDG\FODLPVWKHDOOHJHGO\VXSSUHVVHGHYLGHQFH FODLP'LVW&W2SDW LV QRW PDWHULDO IRU %UDG\ SXUSRVHV  7KHUHIRUH +XWFKLVRQ FDQQRWVKRZSUHMXGLFHUHVXOWLQJIURPDQ\GHIDXOW 7KH6XSUHPH&RXUWKDVH[SODLQHGWKDWWKHmWRXFKVWRQHRI PDWHULDOLW\LVDµUHDVRQDEOHSUREDELOLW\jRIDGLIIHUHQWUHVXOW  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  FRXOGQRWVKRZWKDWKLVIDLOXUHWRSUHVHQWWKHVHFODLPVZDV $QDO\VLV GXHWRVXSSUHVVLRQUDWKHUWKDQKLVRZQQHJOHFWWKHGLVWULFW FRXUWFRQFOXGHGWKDW+XWFKLVRQFRXOGQRWVKRZFDXVHIRUWKH 7KLV &LUFXLW H[DPLQHV IRXU IDFWRUV WR GHWHUPLQH ZKHQ GHIDXOW SURFHGXUDOGHIDXOWRIDVWDWHUXOHZLOOSUHYHQWDIHGHUDOFRXUWjV UHYLHZRQKDEHDVWKHUHPXVWEHDVWDWHSURFHGXUDOUXOH :H DJUHH ZLWK WKH GLVWULFW FRXUW  +XWFKLVRQ KDV QRW DSSOLFDEOH WR WKH SHWLWLRQHUjV FODLP WKDW KH GLG QRW FRPSO\ SUHVHQWHG FOHDU DQG FRQYLQFLQJ HYLGHQFH WKDW KH GLG QRW ZLWK   WKH VWDWH FRXUWV PXVW KDYH DFWXDOO\ HQIRUFHG WKH SRVVHVVWKHILUVWJURXSRI%UDG\PDWHULDOVSULRUWRKLVILUVW VWDWHSURFHGXUDOUXOHDJDLQVWSHWLWLRQHUjVFODLPWKHVWDWH KHDULQJ7KHUHLVQRDIILGDYLWRUWHVWLPRQ\IURP+XWFKLVRQjV SURFHGXUDOIRUIHLWXUHPXVWEHDQDGHTXDWHDQGLQGHSHQGHQW SRVWFRQYLFWLRQ FRXQVHO UHJDUGLQJ WKH WLPLQJ RI WKH VWDWHJURXQGXSRQZKLFKWKHVWDWHFDQUHO\WRIRUHFORVHUHYLHZ SURVHFXWLRQjV GLVFORVXUHV  1RU LV WKHUH DQ\ GRFXPHQWDU\ RIDIHGHUDOFRQVWLWXWLRQDOFODLPDQGLIWKHDERYHWKUHH HYLGHQFH DGGUHVVLQJ WKLV TXHVWLRQ  7KH RQO\ LWHP LQ WKH IDFWRUVDUHPHWWKHFRXUWPD\VWLOOH[FXVHWKHGHIDXOWLIWKH UHFRUGFLWHGE\+XWFKLVRQWRVXSSRUWKLVFODLPLVWKHVWDWHjV SHWLWLRQHUFDQGHPRQVWUDWHWKDWWKHUHZDVFDXVHIRUKLPWRQRW UHSO\WRKLVWUDYHUVHLQRSSRVLWLRQWRVXPPDU\MXGJPHQWILOHG IROORZWKHSURFHGXUDOUXOHDQGWKDWKHZDVDFWXDOO\SUHMXGLFHG EHIRUH WKH GLVWULFW FRXUW  ,Q UHSO\LQJ WR +XWFKLVRQjV E\WKHDOOHJHGFRQVWLWXWLRQDOHUURU0DXSLQY6PLWK)G FRQWHQWLRQWKDWDIDFWXDOGLVSXWHH[LVWHGRYHUZKHWKHUWKHILOHV WK&LUVHHDOVR0RQ]RY(GZDUGV ZHUH SURYLGHG mSULRU WRl RU mDWl WKH ILUVW SRVWFRQYLFWLRQ )GWK&LU KHDULQJ WKH VWDWH UHVSRQGHG WKDW WKH GLVSXWH FRXOG EH HOLPLQDWHG mE\ DPHQGLQJ WKH SKUDVH WR UHDG µLPPHGLDWHO\ 7HQQHVVHH VWDWH ODZ SURYLGHV WKDW SHWLWLRQHUV PXVW ILOH D SULRU WRj WKH KHDULQJ  5HVSRQGHQW LV QRW DVVHUWLQJ WKDW WKH SHWLWLRQ IRU SRVWFRQYLFWLRQ UHOLHI ZLWKLQ RQH \HDU IURP WKH UHFRUGV ZHUH SURYLGHG GD\V RU ZHHNV EHIRUH WKH KHDULQJl GDWHRIWKHILQDODFWLRQRIWKHVWDWHjVKLJKHVWFRXUWRQGLUHFW s$DW DSSHDO7&$†D3HWLWLRQHUVPD\ILOHRQO\RQH SHWLWLRQDWWDFNLQJDVLQJOHMXGJPHQWDQ\VXEVHTXHQWSHWLWLRQ 7KHUHFRUGDOVRVXSSRUWVWKHGLVWULFWFRXUWjVFRQFOXVLRQWKDW LVWREHVXPPDULO\GLVPLVVHG7&$+XWFKLVRQ WKH PDWHULDOV ZHUH QRW VXSSUHVVHG SULRU WR WKH ILUVW SRVWFRQYLFWLRQ KHDULQJ  +XWFKLVRQjV EULHI WR WKH VWDWH FULPLQDODSSHDOVFRXUWVDLGRIWKH%UDG\PDWHULDOVSUHVHQWHG  7&$ †  SURYLGHV LQ+XWFKLVRQjVVHFRQGSRVWFRQYLFWLRQSHWLWLRQWKDWm>W@KHVH D ([FHSW DV SURYLGHG LQ VXEVHFWLRQV E DQG F D SHUVRQ LQ LWHPV ZHUH SDUW RI D ODUJH YROXPH RI GRFXPHQWV WKDW WKH FXVWRG\ XQGHU D VHQWHQFH RI D FRXUW RI WKLV VWDWH PXVW SHWLWLRQ IRU DSSHOODQWZDVDOORZHGWRH[DPLQHEHIRUHWKHKHDULQJRQWKH SRVWFRQYLFWLRQ UHOLHI XQGHU WKLV SDUW ZLWKLQ RQH  \HDU RI WKH RULJLQDOSRVWFRQYLFWLRQSHWLWLRQKRZHYHUWKHDSSHOODQWDQG GDWH RI WKH ILQDO DFWLRQ RI WKH KLJKHVW VWDWH DSSHOODWH FRXUW WR KLV FRXQVHO ZHUH QRW JLYHQ DGHTXDWH WLPH WR H[DPLQH DQG ZKLFK DQ DSSHDO LV WDNHQ RU LI QR DSSHDO LV WDNHQ ZLWKLQ RQH  \HDU RI WKH GDWH RQ ZKLFK WKH MXGJPHQW EHFDPH ILQDO RU XWLOL]HWKHVDPHLQRUGHUWRPDNHWKHVDPHSDUWRIWKHRULJLQDO FRQVLGHUDWLRQ RI VXFK SHWLWLRQ VKDOO EH EDUUHG 7KH VWDWXWH RI KHDULQJl  s$ DW  HPSKDVLV DGGHG  0RUHRYHU LQ DQ OLPLWDWLRQV VKDOO QRW EH WROOHG IRU DQ\ UHDVRQ LQFOXGLQJ DQ\ DSSHDUDQFH EHIRUH WKH SRVWFRQYLFWLRQ FRXUW SULRU WR WROOLQJ RU VDYLQJ SURYLVLRQ RWKHUZLVH DYDLODEOH DW ODZ RU HTXLW\ +XWFKLVRQjV ILUVW SRVWFRQYLFWLRQ KHDULQJ FRXQVHO IRU 7LPH LV RI WKH HVVHQFH RI WKH ULJKW WR ILOH D SHWLWLRQ IRU +XWFKLVRQUHTXHVWHGDFRQWLQXDQFHH[SODLQLQJWKDWm>W@KHUH SRVWFRQYLFWLRQ UHOLHI RU PRWLRQ WR UHRSHQ HVWDEOLVKHG E\ WKLV FKDSWHU DQG WKH RQH\HDU OLPLWDWLRQV SHULRG LV DQ HOHPHQW RI WKH DUHUHFRUGVRIYDULRXVODZHQIRUFHPHQWDJHQFLHVLQFOXGLQJ ULJKW WR ILOH VXFK DQ DFWLRQ DQG LV D FRQGLWLRQ XSRQ LWV H[HUFLVH WKH 'LVWULFW $WWRUQH\jV RIILFH WKDW , KDYH QRW KDG DQ ([FHSW DV VSHFLILFDOO\ SURYLGHG LQ VXEVHFWLRQV E DQG F WKH RSSRUWXQLW\ WR UHYLHZl  s$ DW   7KH GLVWULFW FRXUW ULJKW WR ILOH D SHWLWLRQ IRU SRVWFRQYLFWLRQ UHOLHI RU D PRWLRQ WR UHRSHQ XQGHU WKLV FKDSWHU VKDOO EH H[WLQJXLVKHG XSRQ WKH  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  GRHVQRWGLVSXWHWKDWKLVVHFRQGSHWLWLRQZDVXQWLPHO\XQGHU E&DXVHDQG3UHMXGLFH WKH VWDWXWH RI OLPLWDWLRQV RU WKDW KLV VHFRQGSHWLWLRQ ZDV WHFKQLFDOO\EDUUHGXQGHUWKHRQHSHWLWLRQUXOH ,QVWHDGKH +XWFKLVRQjVGHIDXOWPD\QRQHWKHOHVVEHH[FXVHGLIKHFDQ VKRZFDXVHIRUKLVIDLOXUHWRWLPHO\UDLVHKLV%UDG\FODLPVDQG SUHMXGLFH UHVXOWLQJ IURP KLV GHIDXOW :DLQZULJKW Y 6\NHV 86,QWKHFRQWH[WRIWKLV%UDG\FODLP H[SLUDWLRQ RI WKH OLPLWDWLRQV SHULRG WKHUHTXLUHPHQWVIRUVKRZLQJFDXVHDQGSUHMXGLFHSDUDOOHOWKH E 1R FRXUW VKDOO KDYH MXULVGLFWLRQ WR FRQVLGHU D SHWLWLRQ ILOHG HOHPHQWVRIWKHXQGHUO\LQJ%UDG\YLRODWLRQ6WULFNOHU DIWHU VXFK WLPH XQOHVV  7KH FODLP LQ WKH SHWLWLRQ LV EDVHG XSRQ D ILQDO 86 DW   6XSSUHVVLRQ RI H[FXOSDWRU\ RU IDYRUDEOH UXOLQJ RI DQ DSSHOODWH FRXUW HVWDEOLVKLQJ D FRQVWLWXWLRQDO LPSHDFKLQJHYLGHQFHE\WKHVWDWHWKDWUHVXOWVLQDQLQDELOLW\WR ULJKW WKDW ZDV QRW UHFRJQL]HG DV H[LVWLQJ DW WKH WLPH RI UDLVHFODLPVUHODWLQJWRWKDWHYLGHQFHLQVWDWHFRXUWHVWDEOLVKHV WULDO LI UHWURVSHFWLYH DSSOLFDWLRQ RI WKDW ULJKW LV FDXVHIRUWKHHQVXLQJGHIDXOW,G7KHSHWLWLRQHUQHHGQRW UHTXLUHG 6XFK SHWLWLRQ PXVW EH ILOHG ZLWKLQ RQH  VKRZWKDW WKHSURVHFXWRUDFWHGLQEDGIDLWKRUWKDWGHIHQVH \HDU RI WKH UXOLQJ RI WKH KLJKHVW VWDWH DSSHOODWH FRXUW RU WKH 8QLWHG 6WDWHV VXSUHPH FRXUW HVWDEOLVKLQJ D FRXQVHOPDGHDVSHFLILFUHTXHVWIRUHYLGHQFH8QLWHG6WDWHV FRQVWLWXWLRQDO ULJKW WKDW ZDV QRW UHFRJQL]HG DV H[LVWLQJ Y%DJOH\86+RZHYHUXQOHVVWKH DW WKH WLPH RI WULDO DOOHJHG%UDG\HYLGHQFHLVmPDWHULDOlIRUWKHSXUSRVHVRIWKH  7KH FODLP LQ WKH SHWLWLRQ LV EDVHG XSRQ QHZ %UDG\UXOHLWVmVXSSUHVVLRQG>RHV@QRWJLYHULVHWRVXIILFLHQW VFLHQWLILF HYLGHQFH HVWDEOLVKLQJ WKDW VXFK SHWLWLRQHU LV SUHMXGLFHWRRYHUFRPHWKHSURFHGXUDOGHIDXOWl6WULFNOHU DFWXDOO\ LQQRFHQW RI WKH RIIHQVH RU RIIHQVHV IRU ZKLFK WKH SHWLWLRQHU ZDV FRQYLFWHG RU 86DW  7KH FODLP DVVHUWHG LQ WKH SHWLWLRQ VHHNV UHOLHI IURP D VHQWHQFH WKDW ZDV HQKDQFHG EHFDXVH RI D SUHYLRXV )LUVW*URXSRI%UDG\0DWHULDOV FRQYLFWLRQ DQG VXFK FRQYLFWLRQ LQ WKH FDVH LQ ZKLFK WKH FODLP LV DVVHUWHG ZDV QRW D JXLOW\ SOHD ZLWK DQ DJUHHG D&DXVH6XSSUHVVLRQ VHQWHQFH DQG WKH SUHYLRXV FRQYLFWLRQ KDV VXEVHTXHQWO\ EHHQ KHOG WR EH LQYDOLG LQ ZKLFK FDVH WKH SHWLWLRQ PXVW 7KH 7HQQHVVHH DSSHDOV FRXUW IRXQG WKDW +XWFKLVRQ KDG EH ILOHG ZLWKLQ RQH  \HDU RI WKH ILQDOLW\ RI WKH UXOLQJ KROGLQJ WKH SUHYLRXV FRQYLFWLRQ WR EH LQYDOLG UHFHLYHG WKH DOOHJHG %UDG\ PDWHULDOV SULRU WR KLV ILUVW F 7KLV SDUW FRQWHPSODWHV WKH ILOLQJ RI RQO\ RQH  SHWLWLRQ IRU SRVWFRQYLFWLRQKHDULQJ6HH+XWFKLVRQ:/DW SRVW FRQYLFWLRQ UHOLHI ,Q QR HYHQW PD\ PRUH WKDQ RQH  $VLWH[SODLQHG SHWLWLRQ IRU SRVW FRQYLFWLRQ UHOLHI EH ILOHG DWWDFNLQJ D VLQJOH MXGJPHQW ,I D SULRU SHWLWLRQ KDV EHHQ ILOHG ZKLFK ZDV UHVROYHG 3HWLWLRQHU FDQGLGO\ DGPLWV WKDW KH KDG DFFHVV WR WKH RQ WKH PHULWV E\ D FRXUW RI FRPSHWHQW MXULVGLFWLRQ DQ\ VHFRQG RU DOOHJHGm%UDG\lPDWHULDOSULRUWRWKHKHDULQJRQWKHILUVW VXEVHTXHQW SHWLWLRQ VKDOO EH VXPPDULO\ GLVPLVVHG $ SHWLWLRQHU PD\ PRYH WR UHRSHQ D SRVWFRQYLFWLRQ SURFHHGLQJ WKDW KDV EHHQ SHWLWLRQIRUSRVWFRQYLFWLRQUHOLHI7KHUHLVQRHYLGHQFH FRQFOXGHG XQGHU WKH OLPLWHG FLUFXPVWDQFHV VHW RXW LQ LQWKHUHFRUGWRVXJJHVWWKDW3HWLWLRQHUZDVQRWSURYLGHG †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† H  %HFDXVH +XWFKLVRQ  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO    7KXV DV ZLWK WKH 9LUJLQLD UXOH %XUIRUG SURYLGHV DQ DOOHJHV WKDW WKH RQH \HDU VWDWXWH RI OLPLWDWLRQV DQG WKH RQH H[FHSWLRQWRWKHVWDWXWHRIOLPLWDWLRQVZKHQWKHGHQLDORIWKH SHWLWLRQ UXOH GR QRW FRQVWLWXWH mDGHTXDWH DQG LQGHSHQGHQWl KHDULQJLWVHOIZRXOGYLRODWHWKHSHWLWLRQHUjVFRQVWLWXWLRQDOGXH VWDWH JURXQGV WR XSKROG WKH FRQYLFWLRQ  6SHFLILFDOO\ KH SURFHVVULJKWV8QOLNH$NHWKHGHFLVLRQWRDSSO\WKH%XUIRUG FKDUJHVWKDWWKH7HQQHVVHHFRXUWVPDNHDFDVHE\FDVHGXH H[FHSWLRQ GRHV QRW GHSHQG XSRQ WKH VWDWH FRXUWjV SURFHVVH[FHSWLRQWRWKHVHSURYLVLRQVIRUWKRVHSULVRQHUVZKR GHWHUPLQDWLRQRIWKHPHULWVRIWKHSHWLWLRQHUjVFRQVWLWXWLRQDO SUHVHQW D OHJDO RU IDFWXDO SUHGLFDWH WKDW DULVHV DIWHU WKH FKDOOHQJHV WR KLV FRQYLFWLRQ RU VHQWHQFH  ,QGHHG WKH H[SLUDWLRQRIWKHOLPLWDWLRQVSHULRG 7HQQHVVHH&RXUWRI&ULPLQDO$SSHDOVH[SUHVVO\VWDWHGWKDWLW ZDV QRW UHYLHZLQJ WKH PHULWV RI +XWFKLVRQjV %UDG\ FODLP D)LUPO\(VWDEOLVKHG5HJXODUO\(QIRUFHG +XWFKLVRQ:/DW m>:@HGHWHUPLQH>@WKDW WKHSHWLWLRQZDVSURSHUO\GLVPLVVHGEHFDXVHLWKDGEHHQILOHG 7KLV&RXUWUHYLHZVGHQRYRWKHTXHVWLRQRIZKHWKHUDVWDWH DIWHUH[SLUDWLRQRIWKHVWDWXWHRIOLPLWDWLRQVDQGDSULRUSRVW SURFHGXUDO UXOH LV DQ mDGHTXDWH DQG LQGHSHQGHQWl VWDWH FRQYLFWLRQ SHWLWLRQ KDG EHHQ ILOHG DQG KHDUG RQ WKH PHULWV JURXQG/XEHUGDY7ULSSHWW)GWK&LU l%HFDXVH+XWFKLVRQOLNHWKHSHWLWLRQHULQ&ROHPDQ  GRHV QRW DVVHUW WKDW WKH VWDWHjV GHQLDO RI D VHFRQG SRVWFRQYLFWLRQKHDULQJZDVLWVHOIDFRQVWLWXWLRQDOYLRODWLRQ 7REHDGHTXDWHDVWDWHSURFHGXUDOUXOHPXVWEHmµILUPO\ WKHVWDWHFRXUWjVGHFLVLRQQRWWRDSSO\WKH%XUIRUGH[FHSWLRQ HVWDEOLVKHGDQGUHJXODUO\IROORZHGjE\WKHWLPHDVRIZKLFKLW LVQRWUHYLHZDEOHE\WKLV&RXUW$FFRUG6FRWWY0LWFKHOO LVWREHDSSOLHGl)RUGY*HRUJLD86 )GWK&LUm7KH6XSUHPH&RXUWGRHV 7RGHWHUPLQHZKHWKHUWKHUXOHLVILUPO\HVWDEOLVKHGWKHFRXUW QRWILQGWKHPHUHUHVHUYDWLRQRIGLVFUHWLRQWRUHYLHZIRUSODLQ VKRXOGORRNWRZKHWKHUDWWKHWLPHRIWKHSHWLWLRQHUjVDFWLRQV HUURULQH[FHSWLRQDOFLUFXPVWDQFHVVXIILFLHQWWRFRQVWLWXWHDQ JLYLQJULVHWRWKHGHIDXOWWKHSHWLWLRQHUmFRXOGQRWEHGHHPHG DSSOLFDWLRQRIIHGHUDOODZl WRKDYHEHHQDSSULVHGRI>WKHUXOHjV@H[LVWHQFHl,GDW TXRWDWLRQ DQG FLWDWLRQ RPLWWHG  $ SHWLWLRQHU PXVW VKRZ PRUHWKDQm>D@QRFFDVLRQDODFWRIJUDFHE\DVWDWHFRXUW LQ H[FXVLQJRUGLVUHJDUGLQJDVWDWHSURFHGXUDOUXOHlLQRUGHUIRU DIHGHUDOFRXUWWRFRQFOXGHWKDWWKHVWDWHSURFHGXUDOUXOHLV LQDGHTXDWH EHFDXVH LQFRQVLVWHQWO\ DSSOLHG  &ROHPDQ  )GDWTXRWDWLRQDQGFLWDWLRQRPLWWHGVHHDOVR'XJJHU Y$GDPV86Q  +XWFKLVRQ DOVR DOOHJHV WKDW 7HQQHVVHH VWDWH FRXUWVj DSSOLFDWLRQ RI %XUIRUG WROOLQJ LV QRW DQ LQGHSHQGHQW VWDWH ODZ JURXQG EHFDXVH WKH OHQJWK RI WROOLQJ ZLOO YDU\ ZLWK WKH LPSRUWDQFH RI WKH FRQVWLWXWLRQDO ULJKW DOOHJHG 6HH 6WDWH Y &DOGZHOO  6:G   7HQQ  7KLV DUJXPHQW LV XQDYDLOLQJ $V WKH 8QLWHG 6WDWHV 6XSUHPH &RXUW KDV UHFHQWO\ KHOG WKH PHUH FDWHJRUL]DWLRQ RI D FRQVWLWXWLRQDO ULJKW E\ D VWDWH FRXUW IRU SXUSRVHV RI GHWHUPLQLQJ ZKHWKHU D SURFHGXUDO GHIDXOW PD\ EH H[FXVHG GRHV QRW UHQGHU WKH VWDWH FRXUWjV GHFLVLRQ GHSHQGDQW RQ IHGHUDO ODZ 6HH 6WHZDUW Y 6PLWK  6 &W    DQDO\]LQJ DQ $UL]RQD SURFHGXUDO EDU WKDW DSSOLHV GLIIHUHQW VWDQGDUGV IRU ZDLYHU EDVHG RQ ZKHWKHU WKH FODLP 7HQQ  7KH $FW ZDV LQ HIIHFW DW WKH WLPH +XWFKLVRQ ILOHG KLV LV RI mVXIILFLHQW FRQVWLWXWLRQDO PDJQLWXGHl 6LPLODUO\ 7HQQHVVHH FRXUWV VHFRQG SRVWFRQYLFWLRQ SHWLWLRQ $W WKH WLPH ILOHG KLV VHFRQG SHWLWLRQ QHHG RQO\ H[DPLQH WKH W\SH RI FRQVWLWXWLRQDO FODLP DOOHJHG WR GHWHUPLQH WKHUHIRUH 7HQQHVVHH ODZ SURYLGHG IRU RQO\ RQH SRVWFRQYLFWLRQ SHWLWLRQ D UHDVRQDEOH WROOLQJ WLPH XQGHU %XUIRUG  WKH\ QHHG QRW DGGUHVV WKH PHULWV 0RUHRYHU WKH ODWHVW GDWH RQ ZKLFK KH FRXOG KDYH ILOHG DQ\ SHWLWLRQ IRU RI WKH FODLP LWVHOI SRVWFRQYLFWLRQ UHOLHI XQGHU WKH $FW ZDV RQ 0D\    +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  'XH3URFHVV7ROOLQJ8QGHU%XUIRUG %XUIRUGLVEDVHGXSRQ866XSUHPH&RXUWSUHFHGHQWDQGWKH 'XH3URFHVV&ODXVHRIWKH86&RQVWLWXWLRQ6HH%XUIRUG +XWFKLVRQDUJXHVWKDWWKH7HQQHVVHHSURFHGXUDOUXOHVDUH  6:G DW  FLWLQJ /RJDQ Y =LPPHUPDQ %UXVK QRWDGHTXDWHRULQGHSHQGHQWEHFDXVH7HQQHVVHHFRXUWVDSSO\ &R86 6HDOVY6WDWH6:G DGXHSURFHVVH[FHSWLRQILUVWDUWLFXODWHGLQ%XUIRUGY6WDWH 7HQQ7KHUHIRUH+XWFKLVRQDVVHUWVWKDWWKH 6:G7HQQWRODWHUDULVLQJFRQVWLWXWLRQDO VWDWHFRXUWjVGHWHUPLQDWLRQRIWKHZDLYHULVVXHZDVQHFHVVDULO\ FODLPV  %XUIRUG KHOG WKDW WKH VWDWHjV SUHYLRXV WKUHH\HDU EDVHGXSRQWKHDSSOLFDWLRQRIIHGHUDOFRQVWLWXWLRQDOODZ VWDWXWHRIOLPLWDWLRQVIRUSRVWFRQYLFWLRQSHWLWLRQVZDVIDFLDOO\ FRQVWLWXWLRQDOEXWUHFRJQL]HGWKDWWKHUHPD\EHFDVHVZKHUH 7KH 6XSUHPH &RXUW UHMHFWHG D VLPLODU DUJXPHQW LQ WKHVWULFWDSSOLFDWLRQRIWKHOLPLWDWLRQVSHULRGZRXOGGHSULYH &ROHPDQ  86 DW   ,Q &ROHPDQ D KDEHDV SULVRQHUVRIDPHDQLQJIXORSSRUWXQLW\WRSUHVHQWWKHLUFODLPV SHWLWLRQHUDUJXHGUHO\LQJRQ$NHWKDWWKH9LUJLQLD6XSUHPH ,QWKRVHFDVHVWROOLQJRIWKHVWDWXWHRIOLPLWDWLRQVLVUHTXLUHG &RXUWjVGHFLVLRQWKDWKLVDSSHDOZDVEDUUHGE\WKHVWDWXWHRI WRHQVXUHWKDWWKHVWDWXWHLVDSSOLHGLQDPDQQHUFRQVLVWHQW OLPLWDWLRQVZDVQRWLQGHSHQGHQWRIIHGHUDOODZEHFDXVHVWDWH ZLWKVWDWHDQGIHGHUDOFRQVWLWXWLRQDOGXHSURFHVVJXDUDQWHHV ODZUHTXLUHGWROOLQJRIWKHOLPLWDWLRQVSHULRGLIGHQLDORIDQ 6HHLGDW H[WHQVLRQRIWLPHZRXOGDEULGJHDFRQVWLWXWLRQDOULJKW,GDW 7KH&RXUWDIWHUH[SUHVVLQJVRPHGRXEWDVWRZKHWKHU )ROORZLQJ%XUIRUG7HQQHVVHHFRXUWVKDYHHPSOR\HGDGXH $NHDSSOLHGLQWKHKDEHDVFRQWH[WFRQFOXGHGWKDWmHYHQLI$NH SURFHVVEDODQFLQJWHVWWRGHWHUPLQHZKHWKHUWRDSSO\DVWDWXWH DSSOLHVKHUHLWGRHV>SHWLWLRQHU@QRJRRGEHFDXVHWKH9LUJLQLD RIOLPLWDWLRQVEDUZKHUHmWKHJURXQGVIRUUHOLHIDFWXDOO\DURVH 6XSUHPH &RXUW UHOLHG RQ DQ LQGHSHQGHQW VWDWH SURFHGXUDO DIWHU WKH OLPLWDWLRQV SHULRG ZRXOG QRUPDOO\ KDYH UXOHl,G7KH&RXUWH[SODLQHGWKDWWKH9LUJLQLD6XSUHPH FRPPHQFHGl 6DQGVY6WDWH6:G7HQQ &RXUWjV WROOLQJ GRFWULQH GLG QRW UHTXLUH VWDWH FRXUWV WR 8QGHUWKLVUXOHm>W@RGHWHUPLQHZKHWKHUDSHWLWLRQHU H[DPLQHWKHPHULWVRIWKHSHWLWLRQHUjVIHGHUDOFRQVWLWXWLRQDO ZDV GHQLHG D UHDVRQDEOH RSSRUWXQLW\ WR SUHVHQW D FODLP D FODLPVEHIRUHDSSO\LQJWKHEDU,QVWHDGWKH&RXUWFRQFOXGHG FRXUWPXVWEDODQFHWKHOLEHUW\LQWHUHVWLQFROODWHUDOO\DWWDFNLQJ m>D@PRUHQDWXUDOUHDGLQJLVWKDWWKH9LUJLQLD6XSUHPH&RXUW WKHFRQVWLWXWLRQDOYLRODWLRQVDJDLQVWWKH6WDWHjVOHJLWLPDWH ZLOORQO\JUDQWDQH[WHQVLRQRIWLPHLIWKHGHQLDOLWVHOIZRXOG LQWHUHVW LQ SUHYHQWLQJ WKH OLWLJDWLRQ RI VWDOH DQG IUDXGXOHQW DEULGJHDFRQVWLWXWLRQDOULJKW7KDWLVWKH9LUJLQLD6XSUHPH FODLPVl:ULJKWY6WDWH6:G7HQQ &RXUWZLOOH[WHQGLWVWLPHUHTXLUHPHQWRQO\LQWKRVHFDVHVLQ 7KLV H[FHSWLRQ IRU ODWHUDULVLQJ FODLPV KDV EHHQ DSSOLHG WR ZKLFK WKH SHWLWLRQHU KDV D FRQVWLWXWLRQDO ULJKW WR KDYH WKH SHUPLWFRQVLGHUDWLRQRISURFHGXUDOO\EDUUHG%UDG\FODLPVLQ DSSHDOKHDUGl,GDW7KH&RXUWWKHQH[SODLQHGWKDW FLUFXPVWDQFHVLQYROYLQJERWKVXFFHVVLYHSHWLWLRQVDQGVWDWXWH WKH WROOLQJ UXOH ZDV mRI QR KHOSl WR WKH SHWLWLRQHUjV RIOLPLWDWLRQVSUREOHPV,GDWVHHDOVR6DPSOHY6WDWH MXULVGLFWLRQDODUJXPHQWEHFDXVHKHGLGmQRWFRQWHQGWKDWWKH 1RV&&5&&5 IDLOXUHRIWKH9LUJLQLD6XSUHPH&RXUWWRKHDUKLVXQWLPHO\ :/  DW  7HQQ &ULP $SS 6HSW   VWDWHKDEHDVDSSHDOYLRODWHGRQHRIKLVFRQVWLWXWLRQDOULJKWVl KROGLQJ WKDW WULDO FRXUW HUUHG LQ GLVPLVVLQJ VXFFHVVLYH ,G SRVWFRQYLFWLRQ SHWLWLRQ ZLWKRXW D KHDULQJ RQ ZDLYHU DQG VWDWXWHRIOLPLWDWLRQVJURXQGVZKHUHIDFWVDOOHJHGLQSHWLWLRQ &ROHPDQ FRQWUROV LQ WKH LQVWDQW FDVH  7KH %XUIRUG VKRZHGWKDWH[FXOSDWRU\HYLGHQFHZDVVXSSUHVVHGXQWLODIWHU H[FHSWLRQDSSOLHVZKHQWKHVWULFWDSSOLFDWLRQRIWKHVWDWXWHRI OLPLWDWLRQV SHULRG KDG H[SLUHG DQG DIWHU ILUVW SHWLWLRQ ZDV OLPLWDWLRQVZRXOGFRQVWLWXWHDGHQLDORIIHGHUDODQGVWDWHGXH GLVPLVVHG  ,Q DSSO\LQJ WKH %XUIRUG H[FHSWLRQ 7HQQHVVHH SURFHVV ULJKWV E\ GHSULYLQJ WKH SHWLWLRQHU RI D PHDQLQJIXO FRXUWVKDYHHVWDEOLVKHGQRIRUPDOFRQVWUDLQWVRQWKHDPRXQW RSSRUWXQLW\WRSUHVHQWKLVFODLPV%XUIRUG6:GDW  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  ,QGHSHQGHQW6WDWH*URXQGV RIWLPHWKDWWKHVWDWXWHPD\EHWROOHG:LOOLDPVY6WDWH 6:G7HQQ,QDGGLWLRQDV%XUIRUGPDGH +XWFKLVRQDOVRDUJXHVWKDWWKHVWDWHSRVWFRQYLFWLRQFRXUWjV FOHDU 7HQQHVVHH FRXUWV ZLOO VRPHWLPHV WROO WKH VWDWXWH RI GHWHUPLQDWLRQWKDWKLVFODLPVZHUHSURFHGXUDOO\EDUUHGZDV OLPLWDWLRQV LQ FDVHV ZKHUH DV KHUH WKH JURXQGV IRU UHOLHI LQWHUWZLQHG ZLWK IHGHUDO ODZ DQG WKHUHIRUH ZDV QRW DQ EHFDPHNQRZQDIWHUWKHVWDWXWHRIOLPLWDWLRQVEHJDQWRUXQEXW mLQGHSHQGHQWl VWDWHODZ JURXQG IRU GHQLDO RI KLV SHWLWLRQ EHIRUHWKHOLPLWDWLRQVSHULRGFRPSOHWHO\H[SLUHG6:G +XWFKLVRQEDVHVWKLVDUJXPHQWRQ$NHY2NODKRPD86 DWKROGLQJWKDWDQXQWLPHO\FODLPVKRXOGEHDOORZHGRQ    ,Q $NH WKH 6XSUHPH &RXUW KHOG WKDW LW KDG GXHSURFHVVJURXQGVQRWZLWKVWDQGLQJWKHIDFWWKDWJURXQGVIRU MXULVGLFWLRQ WR UHYLHZ WKH PHULWV RI WKH GHIHQGDQWjV UHOLHI EHFDPH NQRZQ WHQ PRQWKV EHIRUH H[SLUDWLRQ RI WKH FRQVWLWXWLRQDOGXHSURFHVVFODLPRQGLUHFWUHYLHZ IURPWKH VWDWXWH 2NODKRPD6XSUHPH&RXUWGHVSLWHWKH2NODKRPD6XSUHPH &RXUWjV FRQFOXVLRQ WKDW WKH DUJXPHQW ZDV ZDLYHG XQGHU D +XWFKLVRQ DUJXHV WKDW 7HQQHVVHH FRXUWVj ZLOOLQJQHVV WR VWDWHSURFHGXUDOUXOH,GDW7KH$NH&RXUWUHDVRQHGWKDW H[FXVHSURFHGXUDOGHIDXOWSXUVXDQWWR%XUIRUGGHPRQVWUDWHV EHFDXVH WKH VWDWHODZ ZDLYHU UXOH GLG QRW DSSO\ WR WKDWVWDWHSURFHGXUDOUXOHVDUHQRWUHJXODUO\IROORZHGLQWKH FRQVWLWXWLRQDOHUURUVm>E@HIRUHDSSO\LQJWKHZDLYHUGRFWULQH FRQWH[WRIODWHUDULVLQJFODLPV7KHGLVWULFWFRXUWUHMHFWHGWKLV WRDFRQVWLWXWLRQDOTXHVWLRQWKHVWDWHFRXUWPXVWUXOHHLWKHU DUJXPHQW  7KH FRXUW QRWHG WKDW%XUIRUG DSSOLHG RQO\ WR D H[SOLFLWO\ RU LPSOLFLWO\ RQ WKH PHULWV RI WKH FRQVWLWXWLRQDO QDUURZ FDWHJRU\ RI ODWHUDULVLQJ FODLPV ZKLFK ZHUH QRW TXHVWLRQl,GDW7KXVWKH&RXUWFRXOGUHYLHZWKHVWDWH SUHVHQWHGLQWKHLQVWDQWFDVH7KHFRXUWDOVRVXJJHVWHGWKDW VXSUHPH FRXUWjV GHFLVLRQ LQVRIDU DV WKDW GHFLVLRQ ZDV WKHDPHQGPHQWVWRWKHVWDWXWHRIOLPLWDWLRQVPD\KDYH SUHPLVHG XSRQ D GHWHUPLQDWLRQ RI WKH PHULWV RI WKH YLWLDWHG%XUIRUGDQGOLPLWHGWKHH[FHSWLRQVWRWKHVWDWXWHRI GHIHQGDQWjV IHGHUDOODZ FODLP  7KH &RXUW H[SODLQHG WKDW OLPLWDWLRQVWRWKHQDUURZJURXQGVODLGRXWLQWKHVWDWXWH'LVW mZKHQUHVROXWLRQRIWKHVWDWHSURFHGXUDOODZTXHVWLRQGHSHQGV &W2SDW7KLVUHDVRQLQJLVXQSHUVXDVLYH7KHGLVWULFW RQDIHGHUDOFRQVWLWXWLRQDOUXOLQJWKHVWDWHODZSURQJRIWKH FRXUWjVILUVWSRLQWEHJVWKHTXHVWLRQ+XWFKLVRQKDVDVVHUWHG FRXUWjV KROGLQJ LV QRW LQGHSHQGHQW RI IHGHUDO ODZ DQG RXU WKDWKLVFODLPLVmODWHUDULVLQJlEHFDXVHKHGLGQRWSRVVHVVWKH MXULVGLFWLRQLVQRWSUHFOXGHGl,G IDFWXDOSUHGLFDWHLHWKH%UDG\PDWHULDOVXQWLOLWZDVWRR ODWHWRLQFOXGHWKHPLQKLVILUVWSRVWFRQYLFWLRQSHWLWLRQ$V +XWFKLVRQ DUJXHV WKDW WKH 7HQQHVVHH FULPLQDO DSSHDOV QRWHGDERYH%XUIRUGWROOLQJPD\EHDSSOLHGLQFDVHVZKHUH FRXUWjV FRQFOXVLRQ WKDW KLV %UDG\ FODLPV ZHUH EDUUHG LV WKHUHDVRQIRUGHOD\LQEULQJLQJWKHFODLPZDVVXSSUHVVLRQRI VLPLODUO\LQWHUWZLQHGZLWKIHGHUDOODZ,QRUGHUWRUHDFKWKH HYLGHQFHE\WKHSURVHFXWLRQ6HH6DPSOH:/ FRQFOXVLRQ WKDW KLV FODLPV KDG EHHQ ZDLYHG +XWFKLVRQ DW 7KHGLVWULFWFRXUWjVVHFRQGSRLQWLVOHJDOO\LQFRUUHFW DUJXHV WKH FRXUW KDG WR FRQVLGHU ZKHWKHU XQGHU %XUIRUG LQVRIDUDVWKH7HQQHVVHH6XSUHPH&RXUWKDVH[SODLQHGWKDW +XWFKLVRQ ZDV DIIRUGHG D IDLU RSSRUWXQLW\ WR SUHVHQW KLV WKH %XUIRUG H[FHSWLRQ FRQWLQXHV WR DSSO\ DIWHU WKH  FODLPV+XWFKLVRQDUJXHVWKDWWKHH[FHSWLRQUHFRJQL]HGLQ DPHQGPHQWV  :LOOLDPV  6:G DW  UHPDQGLQJ IRU IXUWKHU SURFHHGLQJV WR GHWHUPLQH ZKHWKHU FRXQVHOjV PLVUHSUHVHQWDWLRQV WR SHWLWLRQHU MXVWLILHG DSSOLFDWLRQ RI %XUIRUG H[FHSWLRQ WR RQH\HDU VWDWXWH RI OLPLWDWLRQV XQGHU DSSOLHG WR FDVHV OLNH +XWFKLVRQjV 7KH HQDEOLQJ SURYLVLRQ RI WKH $FW H[SOLFLWO\ VWDWHG WKDW WKH $FW DSSOLHG WR mDOO SHWLWLRQV IRU SRVWFRQYLFWLRQ $FW UHOLHI ILOHG DIWHU >0D\   WKH HIIHFWLYH GDWH RI WKH $FW@l ,G DW  7KHUHIRUH +XWFKLVRQ FDQQRW PDLQWDLQ WKDW WKH $FW ZDV QRW UHJXODUO\ 1HYHUWKHOHVV ZH DJUHH WKDW 7HQQHVVHHjV GXH SURFHVV DSSOLHG WR SHWLWLRQHUV ZKRVH FRQYLFWLRQV EHFDPH ILQDO SULRU WR WKH $FWjV H[FHSWLRQ GRHV QRW UHQGHU WKLV SURYLVLRQ LQDGHTXDWH HIIHFWLYH GDWH  +XWFKLVRQY%HOO 1R 1R +XWFKLVRQY%HOO  7HQQHVVHHjVGXHSURFHVVH[FHSWLRQGRHVQRWJUDQWXQIHWWHUHG $OWKRXJKWKHSUHYLRXVFDVHVGLGQRWSUHVHQWD%XUIRUGW\SH GLVFUHWLRQWRVWDWHFRXUWVLQDSSO\LQJSURFHGXUDOGHIDXOWUXOHV ODWHU DULVLQJ FODLP ZH GR QRW ILQG WKDW WKH VWDWHjV %XUIRUG $OWKRXJK7HQQHVVHHFRXUWVZLOORIWHQSHUPLWWKHKHDULQJRIDQ WROOLQJUXOHVFRPPDQGDGLIIHUHQWUHVXOW,Q3DSURFNLY)ROW] XQWLPHO\FODLPWKHGHFLVLRQLVFRQILQHGE\WKHGXHSURFHVV  )G  WK &LU  ZH FRQVLGHUHG ZKHWKHU WKH VWDQGDUGV GHOLQHDWHG LQ %XUIRUG DQG LWV SURJHQ\  7KH 0LFKLJDQ VWDWH FRXUW KDG ZDLYHG LWV ULJKW WR HQIRUFH LWV 7HQQHVVHHFRXUWVFRQVLVWHQWO\HQIRUFHDSURFHGXUDOVFKHPH SURFHGXUDO UXOH E\ EULHIO\ FRQVLGHULQJ ZKHWKHU PDQLIHVW WKDWHQFRPSDVVHVERWKWKHRQH\HDUOLPLWDWLRQVSHULRGDQGD LQMXVWLFHZRXOGUHVXOWIURPDGHIDXOW,GDW7KLV&RXUW FRXUWUHFRJQL]HG SURFHGXUH IRU WROOLQJ WKDW VWDWXWH ZKHQ FRQFOXGHGWKDWm>Z@HZRXOGEHORDWKWRDGRSWDQH[FHSWLRQWR VSHFLILF GXH SURFHVV JURXQGV DUH SUHVHQWHG  ,QGHHG WKH WKH µFDXVH DQG SUHMXGLFHj UXOH WKDW ZRXOG GLVFRXUDJH VWDWH SRVWFRQYLFWLRQ FRXUW SXUSRUWHG WR IROORZ WKLV SURFHGXUH LQ DSSHOODWH FRXUWV IURP XQGHUWDNLQJ WKH VRUW RI LQTXLU\ +XWFKLVRQjVFDVHLQVRIDUDVLWFRQVLGHUHGKLVFODLPWKDWKHGLG FRQGXFWHG E\ WKH 0LFKLJDQ FRXUWl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jVUHOXFWDQFHWRGLVFRXUDJHVWDWHFRXUWVIURP GHWHUPLQHG WKDW 7HQQHVVHHjV ZDLYHU UXOH 7&$ †  H[KLELWLQJFDXWLRQEHIRUHDSSO\LQJSURFHGXUDOGHIDXOWUXOHVLQ J ZKLFK SURYLGHV WKDW FODLPV QRW UDLVHG LQ D SULRU FDSLWDOFDVHVZHFRQFOXGHWKDWWKH%XUIRUGH[FHSWLRQGRHVQRW SURFHHGLQJ DUH EDUUHG FRQVWLWXWHV DQ DGHTXDWH DQG UHQGHU7HQQHVVHHjVSURFHGXUDOUXOHVLQDGHTXDWH LQGHSHQGHQWVWDWHODZUXOHSUHFOXGLQJKDEHDVUHOLHI6HH&RQH Y %HOO  )G   WK &LU  ILQGLQJ %UDG\ FODLPSURFHGXUDOO\EDUUHGE\SUHGHFHVVRUWR7&$†  JUHYjGRQRWKHUJURXQGV6&W&RH +XWFKLVRQjV EULHI DOVR VXJJHVWV WKDW WKHUH ZDV XQFHUWDLQW\ SULRU WR &DUWHU Y 6WDWH  6:G  7HQQ  DV WR ZKHWKHU WKH 3RVW Y%HOO)GWK&LUFHUWGHQLHG &RQYLFWLRQ 3URFHGXUH $FW RI  DSSOLHG WR SHUVRQV OLNH +XWFKLVRQ 86,Q+DQQDKY&RQOH\)GWK&LU ZKRVH FRQYLFWLRQV EHFDPH ILQDO SULRU WR WKH SDVVDJH RI WKH $FW 7KH LVVXH SHUFXULDPWKLV&RXUWIRXQGWKDWWKHWKHQDSSOLFDEOH UHVROYHG LQ &DUWHU KRZHYHU ZDV QRW ZKHWKHU WKH $FWjV OLPLWDWLRQV SHULRG WKUHH\HDUVWDWXWHRIOLPLWDWLRQVIRUSRVWFRQYLFWLRQSHWLWLRQVLQ DSSOLHG WR SHUVRQV FRQYLFWHG EHIRUH SDVVDJH RI WKH $FW 5DWKHU WKH &DUWHU FRXUW DGGUHVVHG WKH QDUURZ TXHVWLRQ RI ZKHWKHU WKH $FWjV 7HQQHVVHHZDVUHJXODUO\DSSOLHGDQGZRXOGEDUSUHVHQWDWLRQ SURYLVLRQ WKDW mDQ\ SHUVRQ KDYLQJ D JURXQG IRU UHOLHI UHFRJQL]HG XQGHU RI DQ XQH[KDXVWHG FODLP ,G DW   7KH +DQQDK FRXUW WKLV DFW VKDOO KDYH DW OHDVW RQH  \HDU IURP WKH HIIHFWLYH GDWH RI WKLV DFW QRWHGWKDWWKHODQJXDJHRIWKHVWDWXWHZDVPDQGDWRU\LQWKDWLW WR ILOH D SHWLWLRQl SHUPLWWHG WKH ILOLQJ RI QHZ SHWLWLRQV E\ SHUVRQV IRU SURYLGHGWKDWDFODLPDQWmPXVWlSHWLWLRQZLWKLQWKUHH\HDUVRU ZKRP WKH SUHYLRXV WKUHH\HDU VWDWXWH RI OLPLWDWLRQV KDG DOUHDG\ H[SLUHG KLVFODLPmVKDOOlEHEDUUHG,GDW7KHFXUUHQWRQH\HDU ,G DW  7KH &DUWHU FRXUW FRQFOXGHG WKDW WKH RQH\HDU ZLQGRZ ZDV VWDWXWHRIOLPLWDWLRQVFRQWDLQVWKHVDPHPDQGDWRU\ODQJXDJH LQWHQGHG RQO\ WR SURWHFW WKH ULJKWV RI WKH mFODVV RI SHWLWLRQHUV IRU ZKRP WKH RQH \HDU OLPLWDWLRQV SHULRG XQGHU WKH QHZ ODZ KDG H[SLUHG EXW WKH 6HH7&$†D WKUHH \HDU OLPLWDWLRQV SHULRG XQGHU WKH ROG ODZ KDG QRWl ,G +XWFKLVRQ IDOOV LQWR WKH ODWWHU FODVV RI SHWLWLRQHUV DQG KH WKHUHIRUH UHFHLYHG RQH \HDU IURP WKH HIIHFWLYH GDWH RI WKH $FW WR ILOH KLV FODLP 7KH &DUWHU FDVH GRHV QRW VXJJHVW WKDW WKHUH ZDV DQ\ DPELJXLW\ DV WR ZKHWKHU WKH  $FW