                               81,7('67$7(6',675,&7&2857
                               )257+(',675,&72)&2/80%,$
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB
                                    
6(&85,7,(6$1'(;&+$1*(           
&200,66,21                        
                                    
                  3ODLQWLII       
                                                          
      Y                                                 &LYLO$FWLRQ1R$%-
                                    
530,17(51$7,21$/,1&et al.   
                                    
                  'HIHQGDQWV      
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

                                      0(025$1'8023,1,21

       7KH 6HFXULWLHV DQG ([FKDQJH &RPPLVVLRQ ³6(&´ KDV EURXJKW WKLV DFWLRQ DOOHJLQJ

VHFXULWLHVYLRODWLRQVXQGHUWKH6HFXULWLHV$FWRI³6HFXULWLHV$FW´WKH6HFXULWLHV([FKDQJH

$FW RI  ³([FKDQJH $FW´ DQG WKH ([FKDQJH $FW 5XOHV DJDLQVW GHIHQGDQWV 530

,QWHUQDWLRQDO,QF³530´DQG530¶V*HQHUDO&RXQVHODQG&KLHI&RPSOLDQFH2IILFHU(GZDUG

:0RRUH³0RRUH´&RPSO>'NW@±±7KH6(&DOOHJHVWKDWGHIHQGDQWV

IUDXGXOHQWO\IDLOHGWRGLVFORVHORVVFRQWLQJHQFLHVLQ530¶V6(&ILOLQJVDWDWLPHZKHQWKH\ZHUH

DZDUHWKDWDqui tam DFWLRQKDGEHHQILOHGDJDLQVW530XQGHUWKH)DOVH&ODLPV$FWDQGWKDWWKH

'HSDUWPHQWRI-XVWLFHZDVFRQGXFWLQJDQLQYHVWLJDWLRQWRGHWHUPLQHZKHWKHULWZRXOGLQWHUYHQH

DQGHYHQDIWHUVHWWOHPHQWQHJRWLDWLRQVEHWZHHQ530DQG'2-ZHUHXQGHUZD\Id.±

7KH 6(& VHHNV WR HQMRLQ 530 DQG 0RRUHIURPFRPPLWWLQJIXUWKHUYLRODWLRQVRIWKHVHFXULWLHV

ODZVWRGLVJRUJHWKHLULOOJRWWHQJDLQVDQGWRSD\FLYLOPRQH\SHQDOWLHVId. DW

       2Q )HEUXDU\  530 ILOHGDPRWLRQWRGLVPLVVWKHFODLPVDJDLQVWLWSXUVXDQW WR

)HGHUDO5XOHVRI&LYLO3URFHGXUHEDQGE1RWLFHRI'HI530,QWHUQDWLRQDO,QF¶V0RW

WR 'LVPLVV >'NW  @ ³530 0RW´  ,W DUJXHV WKDW WKH 6(& IDLOHG WR VWDWH D FODLP WKDW WKH
FRPSDQ\¶VILQDQFLDOVWDWHPHQWVZHUH³IDOVH´EHFDXVHDFFRXQWLQJUXOHVGRQRW³UHTXLUHDFRPSDQ\

WRGLVFORVHSUHOLPLQDU\VHWWOHPHQWRIIHUVDQGEHFDXVHWKH>F@RPSODLQWGRHVQRWDOOHJHWKDW530GLG

QRWVXEMHFWLYHO\EHOLHYHLQLWVDFFRXQWLQJWUHDWPHQW´0HPRI3	$LQ6XSSRI5300RW

>'NW@³5300HP´DW530DOVRFRQWHQGVWKDW&ODLPVDQGVKRXOGEHGLVPLVVHG

IRU WKH LQGHSHQGHQW UHDVRQ WKDW WKH FRPSODLQW IDLOV WR SODXVLEO\ DOOHJH WKDW WKH DOOHJHG

PLVVWDWHPHQWVZHUHPDWHULDODQGLWPDLQWDLQVWKDW&ODLPVDQGVKRXOGEHGLVPLVVHGZLWKUHVSHFW

WRVWDWHPHQWVPDGHDIWHU2FWREHUEHFDXVHWKH6(&KDVIDLOHGWRDOOHJHWKHIDFWVQHFHVVDU\WR

SURYHWKDW530YLRODWHG6HFWLRQDRIWKH6HFXULWLHV$FWId. DW

       'HIHQGDQW0RRUHKDVDOVRILOHGDPRWLRQWRGLVPLVVWKHFODLPVDJDLQVWKLPSXUVXDQW WR

)HGHUDO5XOHVRI&LYLO3URFHGXUHEDQGE'HI(GZDUG:0RRUH¶V0RWWR'LVPLVV

>'NW@ ³0RRUH0RW´0HPRI3	$LQ6XSSRI0RRUH0RW>'NW@³0RRUH

0HP´ DW   0RRUH DUJXHV WKDW WKH IDFWV LQ WKH FRPSODLQW ³IDLO WR HVWDEOLVK WKDW WKH UHOHYDQW

DFFRXQWLQJUXOHVUHTXLUHGDFFUXDOIRURUGLVFORVXUHRISRWHQWLDOORVVDVVRFLDWHGZLWKWKHJRYHUQPHQW

LQYHVWLJDWLRQSULRUWRWKHGDWHRQZKLFK530GLGDFFUXHDQGGLVFORVHLW´DQGWKDWZLWKUHJDUGWR

&ODLP  WKH 6(& KDV IDLOHGWR DGHTXDWHO\SOHDGWKDW0RRUH³REWDLQHGPRQH\RUSURSHUW\ DV D

UHVXOWRI530¶VDOOHJHGIDLOXUHWRDFFUXHRUGLVFORVHHDUOLHUWKDQLWGLG´0RRUH0HPDW±

       7KH6(&RSSRVHGERWKPRWLRQVLQDFRQVROLGDWHGEULHIRQ0DUFK6(&¶V2SSWR

'HIV¶0RWVWR'LVPLVV>'NW@³3O¶V2SS´DQG530DQG0RRUHHDFKILOHGDVHSDUDWHUHSO\

RQ$SULO5HSO\0HPRI3	$LQ6XSSRI5300RW>'NW@³5305HSO\´

5HSO\0HPRI3	$LQ6XSSRI0RRUH0RW>'NW@³0RRUH5HSO\´9LHZLQJWKHIDFWV

LQWKHOLJKWPRVWIDYRUDEOHWRWKH6(&DVLWLVUHTXLUHGWRGRDWWKLVVWDJHWKH&RXUWILQGVWKDWWKH

6(&KDVDOOHJHGVXIILFLHQWIDFWVZLWKWKHQHFHVVDU\SDUWLFXODULW\WRVWDWHSODXVLEOHIUDXGFODLPV

DJDLQVW530DQG0RRUHDQGWKHFDVHZLOOSURFHHG



                                                       

                                             %$&.*5281'

       530LVD'HODZDUHFRUSRUDWLRQKHDGTXDUWHUHGLQ0HGLQD2KLRWKDW³PDQXIDFWXUHVDQG

VHOOV YDULRXV FKHPLFDO SURGXFW OLQHV LQFOXGLQJ SDLQWV SURWHFWLYH FRDWLQJV URRILQJ V\VWHPV

VHDODQWVDQGDGKHVLYHV´&RPSO,Q0RRUHEHJDQVHUYLQJDV530¶V*HQHUDO&RXQVHO

DQG&RUSRUDWH6HFUHWDU\DQGLQKHDVVXPHGWKHDGGLWLRQDOSRVLWLRQRI&KLHI&RPSOLDQFH

2IILFHUId.

       7KHLQVWDQWDFWLRQVWHPVIURPDSUHYLRXVODZVXLWDJDLQVW530DQGRQHRILWVZKROO\RZQHG

VXEVLGLDULHV7UHPFR,QF³7UHPFR´DFRPSDQ\WKDW³SURYLGHVURRILQJPDWHULDOVDQGVHUYLFHV´

&RPSO±,Q-XO\DIRUPHU7UHPFRHPSOR\HHILOHGDqui tamFRPSODLQWXQGHUWKH

)DOVH&ODLPV$FW86&et seq. ³)&$´DOOHJLQJWKDW7UHPFRRYHUFKDUJHGWKH8QLWHG

6WDWHVXQGHUVHYHUDOJRYHUQPHQWFRQWUDFWVE\IDLOLQJWRSURYLGHUHTXLUHGSULFHGLVFRXQWVId. 

'2-LQLWLDWHGDQLQYHVWLJDWLRQLQWRWKHFRPSODLQW¶VDOOHJDWLRQVLQRUGHUWRGHFLGHZKHWKHUWR

LQWHUYHQHLQWKHODZVXLWId. 

       530OHDUQHGRIWKH'2-LQYHVWLJDWLRQLQ0DUFKZKHQLWUHFHLYHGDVXESRHQDVHHNLQJ

GRFXPHQWVUHJDUGLQJ530¶VDQG7UHPFR¶VJRYHUQPHQWFRQWUDFWV&RPSO0RRUHRYHUVDZ

WKHUHVSRQVHVRIERWK530DQG7UHPFRWRWKH'2-LQYHVWLJDWLRQDQGKHNHSW530VHQLRURIILFLDOV

DQG DXGLWRUV LQIRUPHG  Id.   ±  530 DOVR UHWDLQHG RXWVLGH FRXQVHO WR UHSUHVHQW LW LQ

FRQQHFWLRQZLWKWKH'2-LQYHVWLJDWLRQId. 

       0RRUHGLVFXVVHGWKH'2-LQYHVWLJDWLRQDW530¶VTXDUWHUO\$XGLW&RPPLWWHHPHHWLQJRQ

$SULODQGDFFRUGLQJWRWKHFRPSODLQW530¶VRXWVLGHDXGLWILUPDVNHG0RRUHHDFKTXDUWHU

WRNHHSLWDSSULVHGRIDQ\QHZGHYHORSPHQWVLQWKHLQYHVWLJDWLRQ&RPSO




                                                      

,           )LUVW4XDUWHU)LVFDO<HDU-XQH±$XJXVW

             2Q-XQHWKHDXGLWILUPVHQWDQHPDLOWR0RRUHUHJDUGLQJWKH)RUP.WKDWZDV

VFKHGXOHGWREHILOHGZLWKWKH6(&LQ-XO\VXJJHVWLQJGLVFORVXUHODQJXDJHUHODWHGWRJRYHUQPHQW

LQYHVWLJDWLRQV&RPSO +RZHYHU530DQG0RRUHGLGQRWGLVFORVHWKH'2-LQYHVWLJDWLRQ

LQLWV6(&ILOLQJLQ-XO\Id. 

             2Q$XJXVW'2-SURYLGHG530ZLWKDFRS\RIWKHqui tamFRPSODLQWZKLFKWKH

FRXUWKDGSDUWLDOO\XQVHDOHGVRWKDWWKHJRYHUQPHQWFRXOGGLVFORVHWKHH[LVWHQFHRIWKHODZVXLWWR

530 DQG 7UHPFR  &RPSO   see 'HFO RI :LOOLDP + :DJHQHU >'NW  @ ³:DJHQHU

'HFO´([$WR:DJHQHU'HFO>'NW@$IWHUOHDUQLQJRIWKHFRPSODLQW0RRUHGLGQRW

GLVFORVHLWWR530¶VDXGLWILUP&RPSO

,,          6HFRQG4XDUWHU)LVFDO<HDU6HSWHPEHU±1RYHPEHU

             2Q6HSWHPEHU530¶VRXWVLGHFRXQVHOPHWZLWK'2-DQGGLVFXVVHGDQDQDO\VLV

SUHSDUHGE\DFRQVXOWDQWWKDWFDOFXODWHGWKDW7UHPFRKDGRYHUFKDUJHGWKHJRYHUQPHQWE\DWOHDVW

PLOOLRQGXULQJSDUWRIWKHWLPHSHULRGXQGHULQYHVWLJDWLRQ&RPSO7KH6(&FODLPVWKDW

530¶VRXWVLGHFRXQVHOLQIRUPHG0RRUHRIZKDWWUDQVSLUHGGXULQJWKHPHHWLQJLQFOXGLQJWHOOLQJ

KLP DERXW WKHPLOOLRQRYHUFKDUJHGLVFXVVLRQId. 2QDSSUR[LPDWHO\6HSWHPEHU 

ZKLOH530¶VDXGLWILUPZDVFRQGXFWLQJWKHFRPSDQ\¶VILUVWTXDUWHUUHYLHZLWDVNHG0RRUHDERXW





     7KH&RXUWPD\FRQVLGHUDQ\GRFXPHQWVDWWDFKHG WRRULQFRUSRUDWHGE\UHIHUHQFHLQ WKH
FRPSODLQWEEOC v. St. Francis Xavier Parochial Sch.)G'&&LU7KLV
LQFOXGHV DQ\ GRFXPHQWV XSRQ ZKLFK WKH FRPSODLQW QHFHVVDULO\ UHOLHV HYHQ LI WKH GRFXPHQW LV
SURGXFHGE\WKHGHIHQGDQWLQDPRWLRQWRGLVPLVVHinton v. Corrs. Corp. of Am.)6XSSG
''&FLWLQJParrino v. FHP, Inc.)GWK&LUDQGCortec
Indus., Inc. v. Sum Holding L.P.)G±G&LU7KH6(&GRHVQRWVHHPWR
FKDOOHQJHWKDWGHIHQGDQWVKDYHSURYLGHGWKH&RXUWZLWKDGGLWLRQDOGRFXPHQWVVHHLQJDVWKHDJHQF\
DFWXDOO\FLWHVWRVRPHRIWKHVHGRFXPHQWVLQLWVRSSRVLWLRQSee 3O¶V2SSDWQFLWLQJWR([
+WR:DJHQHU'HFO
                                                               

WKHVWDWXVRIWKH'2-LQYHVWLJDWLRQId. 0RRUHWROGWKHILUPWKDW³µQRFODLPKDVEHHQDVVHUWHG¶

DQGWKDWWKHPDWWHUZDVµLQYHVWLJDWLYHLQQDWXUHDQGQRWLQOLWLJDWLRQ¶´Id.

             0RRUHVHQWDPDQDJHPHQWUHSUHVHQWDWLRQOHWWHUWRWKHDXGLWILUPRQ2FWREHULQ

FRQQHFWLRQZLWKWKHILUVWTXDUWHUUHYLHZVWDWLQJWKDW³µVLQFH-XQHQHLWKHU>KH@QRUDQ\RI

WKHODZ\HUVRYHUZKRP>KH@H[HUFLVH>V@JHQHUDOOHJDOVXSHUYLVLRQKDYHJLYHQVXEVWDQWLYHDWWHQWLRQ

WRRUUHSUHVHQWHGWKH>F@RPSDQ\LQFRQQHFWLRQZLWKPDWHULDOORVVFRQWLQJHQFLHV¶H[FHHGLQJ

PLOOLRQ´&RPSOsee ([+WR:DJHQHU'HFO>'NW@³([+´7KDWVDPHGD\

530 VHQW '2- D ZULWWHQ DQDO\VLV HVWLPDWLQJ WKDW 7UHPFR RYHUFKDUJHG WKH JRYHUQPHQW E\

DSSUR[LPDWHO\PLOOLRQGXULQJSDUWRIWKHWLPHSHULRGXQGHULQYHVWLJDWLRQ&RPSO7KH

IROORZLQJPRUQLQJ530¶V$XGLW&RPPLWWHHKHOGLWVTXDUWHUO\PHHWLQJEXW0RRUHGLGQRWGLVFORVH

WKHPLOOLRQRYHUFKDUJHHVWLPDWHWKDWKDGEHHQVHQWWR'2-Id. $WWKHVDPHPHHWLQJ

WKH &KDLUPDQ RI WKH $XGLW &RPPLWWHH DOOHJHGO\ VDLG WKDW WKH FRPSDQ\ ZDV ³QRW JRLQJ WR EH

DFFHSWLQJ RI RQJRLQJ H[WUDRUGLQDU\FKDUJHVRURQHWLPHFKDUJHV´DJDLQVWLQFRPHEHFDXVH³WKDW

ZRXOG>QRW@ERGHZHOOIRUWKHFRPSDQ\DQG>@WKHLPSUHVVLRQRIRXUVKDUHKROGHUVDQGRWKHUVRI

KRZ ZH UXQ WKH EXVLQHVV´  Id.    )XUWKHU DFFRUGLQJ WR WKH FRPSODLQW WKH  PLOOLRQ



           7KHOHWWHUUHDGV

                 ,DGYLVH\RXWKDWVLQFH-XQHQHLWKHU,QRUDQ\RIWKHODZ\HUVRYHU
                 ZKRP,H[HUFLVHJHQHUDOOHJDOVXSHUYLVLRQKDYHJLYHQVXEVWDQWLYHDWWHQWLRQ
                 WR RU UHSUHVHQWHG WKH &RPSDQ\ LQ FRQQHFWLRQ ZLWK PDWHULDO ORVV
                 FRQWLQJHQFLHV>RIPLOOLRQ@H[FHSWIRUWKHPDWWHUVGHVFULEHGLQWKH
                 DXGLWUHVSRQVHOHWWHUVRIWKHODZILUPVOLVWHGLQ([KLELW$´
                 
([+7KHUHOHYDQWODZILUPDXGLWUHVSRQVHOHWWHUSURYLGHVVLPLODULQIRUPDWLRQ([KLELW$WRWKH
OHWWHUOLVWV530¶VRXWVLGHFRXQVHODQGLWLGHQWLILHVWKH³7UHPFR5RRILQJ0DWWHUV´Id. 7KHODZ
ILUP¶VDXGLWUHVSRQVHOHWWHUWKHQVWDWHVWKDWLWKDV³QRWEHHQHQJDJHGWRJLYHVXEVWDQWLYHDWWHQWLRQ
WR RU UHSUHVHQW WKH >F@RPSDQ\ LQ FRQQHFWLRQ ZLWK ORVV FRQWLQJHQFLHV LQYROYLQJ LQ H[FHVV RI
LQGLYLGXDOO\RULQWKHDJJUHJDWH´([-WR:DJHQHU'HFO>'NW@7KHODZ
ILUP DOVR VWDWHV WKDW LW GRHV ³QRW FRQVLGHU LQYHVWLJDWLRQV E\ JRYHUQPHQW RU VHOIUHJXODWRU\
DXWKRULWLHVWRIDOOZLWKLQWKHGHILQLWLRQRIµORVVFRQWLQJHQF\¶´Id.
                                                               

RYHUFKDUJH HVWLPDWH HTXDOHG DSSUR[LPDWHO\  RI 530¶V QHW LQFRPH IRU WKH ILUVW TXDUWHU

Id. 

       530ILOHGD)RUP.VLJQHGE\0RRUHRQ2FWREHUDQGLWILOHGD)RUP4IRU

WKH ILUVW TXDUWHU WKH QH[W GD\  &RPSO    7KH )RUP . PDGH QR PHQWLRQ RI DQ\ ORVV

FRQWLQJHQF\EXWWKH)RUP4GLVFXVVHG³FRQWLQJHQFLHV´LQWKHEURDGVHQVHWKDW530LVD³SDUW\

WRYDULRXVFODLPVDQGODZVXLWV´Id. ±%XW530GLGQRWGLVFORVHDQ\LQIRUPDWLRQDERXW

WKH'2-LQYHVWLJDWLRQVSHFLILFDOO\LQHLWKHUILOLQJId. 7KH6(&DOVRDOOHJHVWKDWWKH)RUP

4 ³IDOVHO\ DQG PLVOHDGLQJO\ VWDWHG WKDW DV RI WKH HQG RI 530¶V ILUVW TXDUWHU µ>530¶V@

GLVFORVXUHFRQWUROVDQGSURFHGXUHVZHUHHIIHFWLYH¶´Id. 

       2Q2FWREHU530ILOHGD3URVSHFWXV6XSSOHPHQWZLWKWKH6(&IRUDPLOOLRQ

QRWHVRIIHULQJ&RPSO7KH3URVSHFWXV6XSSOHPHQWLQFRUSRUDWHGE\UHIHUHQFH530¶V6(&

ILOLQJVLQFOXGLQJWKH)RUP.DQG4WKDWZHUHILOHGDIHZGD\VHDUOLHUId. 0RRUHRYHUVDZ

WKHQRWHVRIIHULQJZKLFKFORVHGRQDSSUR[LPDWHO\2FWREHUId. 

,,,   7KLUG4XDUWHU)LVFDO<HDU'HFHPEHU±)HEUXDU\

        2Q1RYHPEHU'2-QRWLILHG530WKDWWKHVHDORQWKHqui tamFRPSODLQWZDVVHW

WRH[SLUHRQ-DQXDU\DQGWKDWWKH'2-ZDQWHGWRUHVROYHWKHPDWWHUE\WKDWGDWHRUEHLQ

DSRVLWLRQWRLQIRUPWKHFRXUWRILWVLQWHUYHQWLRQGHWHUPLQDWLRQ&RPSO2Q'HFHPEHU

530VHQW'2-DQRWKHUDQDO\VLVFDOFXODWLQJWKDW7UHPFRRYHUFKDUJHGWKHJRYHUQPHQWE\DW

OHDVWPLOOLRQId. $FFRUGLQJWRWKHFRPSODLQW0RRUHXQGHUVWRRGWKDW'2-W\SLFDOO\

VHHNV WR VHWWOH )&$ FDVHV IRU DW OHDVW WZR WLPHV WKH DPRXQW RI GDPDJHV LQ OLJKW RI WKH WULSOH

GDPDJHVPXOWLSOLHUDYDLODEOHXQGHUWKHVWDWXWHDQGWKDWKHZDVDOVRDZDUHWKDWWKHDPRXQWZDV

OLNHO\WRFRQWLQXHWRULVHId. ± $QGDIHZGD\VODWHU530LQIRUPHG'2-WKDWLWZRXOG

VXEPLWDVHWWOHPHQWRIIHUE\-DQXDU\Id. ¶ 



                                                       

             2Q'HFHPEHU530GLVFXVVHGLWVH[SRVXUHLQWKHPDWWHUZLWKLWVRXWVLGHFRXQVHO

DQGLWFRQFOXGHGWKDW±PLOOLRQZDVDIDLUHVWLPDWHQRWLQFOXGLQJDQ\GDPDJHVPXOWLSOLHU

&RPSO 2QHZHHNODWHU0RRUHVHQWDQRWKHUPDQDJHPHQWUHSUHVHQWDWLRQOHWWHUWRWKHDXGLW

ILUP LQ FRQQHFWLRQ ZLWK WKH VHFRQG TXDUWHU UHYLHZ VWDWLQJ DJDLQ WKDW KH KDG QRW JLYHQ DQ\

VXEVWDQWLYHDWWHQWLRQRUUHSUHVHQWHGWKHFRPSDQ\LQFRQQHFWLRQZLWKPDWHULDOORVVFRQWLQJHQFLHV

LQH[FHVVRIPLOOLRQId. 7KH6(&DOVRDOOHJHVWKDWLQUHVSRQVHWRWKHDXGLWILUP¶V

LQTXLU\DERXWWKH'2-LQYHVWLJDWLRQ0RRUHWROGWKHILUPWKDW³QRFODLPKDVEHHQILOHG´DQG³QR

ORVVFRQWLQJHQF\H[LVWV´Id. 

             $FFRUGLQJWRWKHFRPSODLQW530¶V$XGLW&RPPLWWHHKHOGLWVVHFRQGTXDUWHUO\PHHWLQJRQ

-DQXDU\GXULQJZKLFK0RRUHGLGQRWGLVFORVHDQ\RIWKHRYHUFKDUJHHVWLPDWHVWKDW

KDG EHHQ FRPPXQLFDWHG WR '2-  WKH IDFW WKDW 530 KDG WROG '2- WKDW LW ZRXOG VXEPLW D

VHWWOHPHQWRIIHUE\-DQXDU\RUWKHIDFWWKDWWKHHVWLPDWHGVHWWOHPHQWRIIHUKDGUHDFKHG

±PLOOLRQ&RPSO$QG0RRUHGLGQRWGLVFORVHDQ\RIWKLVLQIRUPDWLRQSULRUWR530

ILOLQJ LWV )RUP . RU )RUP 4 IRU WKH VHFRQG TXDUWHU RQ -DQXDU\    Id.  ±

)XUWKHUWKH6(&ILOLQJVGLGQRWGLVFORVHDQ\LQIRUPDWLRQUHODWLQJWRWKH'2-LQYHVWLJDWLRQDQGWKH

)RUP4MXVWFRQWDLQHGWKHVDPH³FRQWLQJHQFLHV´GLVFORVXUHWKDWZDVLQWKHILUVWTXDUWHUILOLQJ

Id. ¶±7KH6(&FODLPVWKDWDVRI-DQXDU\0RRUHKDGQRWGLVFORVHGWKHqui tam

FRPSODLQW WR WKH DXGLW ILUP DQG KDG RQO\ WROG WKH ILUP WKDW WKH UDQJH RI ORVV IRU WKH '2-

LQYHVWLJDWLRQZDVDSSUR[LPDWHO\PLOOLRQ&RPSO7KHDJHQF\DOVRDOOHJHVWKDWRQ





    7KHODQJXDJHLQWKLVOHWWHUPLUURUVWKHODQJXDJHLQWKHILUVWDQGDOVROLVWV530¶VRXWVLGH
FRXQVHODQGWKH³7UHPFR5RRILQJ0DWWHU´See ([,WR:DJHQHU'HFO>'NW@$QGWKH
ODZILUPVDLGWKHVDPHWKLQJLQLWVDXGLWUHVSRQVHOHWWHUDVLWGLGLQWKHILUVWOHWWHUSee ([.WR
:DJHQHU'HFO>'NW@
                                                               

-DQXDU\0RRUHWROG530¶V&(2IRUWKHILUVWWLPHWKDWWKHSRWHQWLDOORVVIRUWKH'2-

LQYHVWLJDWLRQFRXOGUHDFKPLOOLRQId. 

,9    7KH6HWWOHPHQWDQG530¶V7KLUG4XDUWHUDQG)LVFDO<HDU(QG)LOLQJV

       2Q-DQXDU\530VXEPLWWHGDVHWWOHPHQWSURSRVDOWR'2-RIIHULQJWRVHWWOHWKH

LQYHVWLJDWLRQDQGXQGHUO\LQJqui tamFDVHIRUPLOOLRQ&RPSO7ZR PRQWKV ODWHU RQ

0DUFK'2-SURYLGHGDFRXQWHURIIHURIPLOOLRQId. 2Q$SULO530

DFFUXHG D  PLOOLRQ OLDELOLW\ IRU WKH '2- LQYHVWLJDWLRQ DQG LW SXEOLFO\ GLVFORVHG WKLV

LQIRUPDWLRQLQLWVWKLUGTXDUWHU)RUP.DQG)RUP4RQ$SULOId. ± 530¶V

)RUP4UHSRUWHGDQHWORVVRIPLOOLRQIRUWKHWKLUGTXDUWHUFRPSDUHGWRDQHWLQFRPHRI

 PLOOLRQ IRU WKH VDPH TXDUWHU RQH \HDU HDUOLHU  Id.    7KH )RUP 4 VWDWHG WKDW WKH

³µSULPDU\GULYHURIWKHGHFOLQH¶ZDVWKHPLOOLRQDFFUXDOIRUWKH'2-LQYHVWLJDWLRQ´DQGWKH

6(&DOOHJHVWKDWERWKILOLQJV³PLVOHDGLQJO\LQGLFDWHGWKDW530KDGWLPHO\GLVFORVHGDQGDFFUXHG

IRU WKH '2- LQYHVWLJDWLRQ´ Id. $W WKH WLPH 530 PDGH WKH GLVFORVXUHWKHqui tam FRPSODLQW

UHPDLQHGXQGHUVHDOId. 

       7KH6(&DOOHJHVWKDWZKLOH530¶VDXGLWILUPZDVSUHSDULQJLWVDXGLWIRUWKHILVFDO\HDU

HQGHG0D\LWPHWZLWK0RRUHRQ-XQHWRLQTXLUHDERXWWKHWLPLQJRI530¶V

DFFUXDOIRUWKH'2-LQYHVWLJDWLRQ&RPSO$FFRUGLQJWRWKHFRPSODLQW0RRUHWROGWKHDXGLW

ILUPWKDWDIWHU530¶V)RUP4ZDVILOHGRQ-DQXDU\³530FRPSOHWHGDGGLWLRQDOSULFLQJ

FDOFXODWLRQVIRUFHUWDLQ\HDUVXQGHULQYHVWLJDWLRQ>@DQGWKHJRYHUQPHQWWKUHDWHGWRXQVHDOWKH)&$

FRPSODLQW´DQGWKHUHIRUHWKHFRPSDQ\GHFLGHGWRPDNHDVHWWOHPHQWRIIHUId. 7KH6(&FODLPV

WKDWWKHVHVWDWHPHQWVZHUHPDWHULDOO\IDOVHDQGPLVOHDGLQJEHFDXVH530WROG'2-WKDWLWZRXOG

PDNHDVHWWOHPHQWRIIHURQ'HFHPEHUDQGQRWDIWHUWKH)RUP4ZDVILOHGDQGEHFDXVH




                                                      

0RRUHGLGQRWGLVFORVHWKDWWKHRYHUFKDUJHHVWLPDWHVKDGUHDFKHG±PLOOLRQE\WKHWLPH530

ILOHGLWV)RUP4RQ-DQXDU\Id.

       2Q -XO\   530 ILOHG LWV )RUP . IRU WKH ILVFDO \HDU HQGHG 0D\  

&RPSO7KLVILOLQJGLVFORVHGWKH'2-LQYHVWLJDWLRQDQGUHODWHGDFFUXDOWKDW530UHFRUGHG

LQ LWV WKLUG TXDUWHU EXW WKH 6(& DOOHJHV WKDW WKH )RUP . ³PLVOHDGLQJO\ LQGLFDWHG WKDW 530

WLPHO\GLVFORVHGDQGDFFUXHGIRUWKH'2-LQYHVWLJDWLRQLQWKHWKLUGTXDUWHUZKHQLQIDFWGLVFORVXUH

DQGDFFUXDOZHUHUHTXLUHGLQWKHILUVWWZRTXDUWHUV´Id. 7KHDJHQF\DOVRFODLPVWKDWWKH)RUP

.³PLVOHDGLQJO\IDLOHGWRGLVFORVHDQ\PDWHULDOZHDNQHVVLQ530¶VLQWHUQDOFRQWURORYHUILQDQFLDO

UHSRUWLQJDWDQ\SRLQWGXULQJWKHILVFDO\HDUZKHQLQIDFWVXFKZHDNQHVVH[LVWHG´Id. 

       $WVRPHSRLQWLQ-XO\530SDLG0RRUHDFDVKERQXVRIIRUWKHILVFDO\HDU

HQGHG0D\ZKLFKZDVSDUWLDOO\EDVHGRQ530¶VILQDQFLDOSHUIRUPDQFH&RPSO

,Q$XJXVW530DQG'2-IRUPDOO\VHWWOHGWKH'2-LQYHVWLJDWLRQDQGXQGHUO\LQJqui tam

FRPSODLQWIRUDSSUR[LPDWHO\PLOOLRQId.

       2Q'HFHPEHU530ILOHGD3URVSHFWXV6XSSOHPHQWZLWKWKH6(&IRUDPLOOLRQ

QRWHVRIIHULQJZKLFKHQGHGRQDSSUR[LPDWHO\'HFHPEHU&RPSO0RRUHRYHUVDZ

WKHQRWHVRIIHULQJDQGUHYLHZHGWKH3URVSHFWXV6XSSOHPHQWZKLFKWKH6(&DOOHJHVLQFRUSRUDWHG

E\UHIHUHQFH530¶VIDOVHDQGPLVOHDGLQJ6(&ILOLQJVId.

       2Q$SULO530¶V&)2DQG0RRUHPHWZLWKWKHDXGLWILUPWRGLVFXVVD)RUP6

UHJLVWUDWLRQ VWDWHPHQW WKDW 530 LQWHQGHG WR ILOH DIWHU REWDLQLQJ WKH DXGLWRU¶V DSSURYDO

&RPSO  ,Q DQVZHULQJ WKH DXGLWRUV¶ TXHVWLRQV 0RRUH DOOHJHGO\ WROG WKHP WKDW  RQ

'HFHPEHUWKHUDQJHRIUHDVRQDEO\SRVVLEOHORVVIRUWKH'2-LQYHVWLJDWLRQZDVWR

PLOOLRQWKDWUDQJHVWD\HGWKHVDPHWKURXJK-DQXDU\DQGWKHUDQJHRIORVVZHQWXS

WRPLOOLRQDQGEHFDPHSUREDEOHEHWZHHQ-DQXDU\DQGId. 7KHDXGLWILUPSURYLGHG



                                                     

LWVFRQVHQWIRUWKH)RUP6WKDWGD\DQG530WKHQILOHGLWZLWKWKH6(&Id. %XWDFFRUGLQJ

WRWKH6(&¶VDFFRXQWRIHYHQWVWKLVGHVFULSWLRQLVLQDFFXUDWHEHFDXVH530VHQWWKH6(&DZULWWHQ

FKURQRORJ\RIHYHQWVUHODWHGWRWKH'2-LQYHVWLJDWLRQRQ0DUFKZKLFKVWDWHGWKDWRQ

³'HFHPEHU530DQG7UHPFRLQIRUPHGWKH'2-WKDWDVHWWOHPHQWSURSRVDOZRXOGEH

VXEPLWWHG E\ -DQXDU\  ´  Id.  ±  0RRUH DOOHJHGO\ UHYLHZHG DQG DXWKRUL]HG WKH

FKURQRORJ\EHIRUHLWZDVVHQWWRWKH6(&Id. 

       ,Q-XO\530SDLG0RRUHDFDVKERQXVRIIRUWKHILVFDO\HDUHQGHG0D\

  &RPSO    7KH 6(& DOOHJHVWKDW0RRUHUHFHLYHGWKHERQXVEDVHGLQSDUWRQ 530¶V

ILQDQFLDOSHUIRUPDQFHGXULQJWKHILVFDO\HDUZKLFKZDVEROVWHUHGE\WKH'HFHPEHUQRWHV

RIIHULQJId.

9     530¶V)LQDQFLDO5HVWDWHPHQWV

       ,Q -XO\  530¶V $XGLW &RPPLWWHH KLUHG LQGHSHQGHQW FRXQVHO WR FRQGXFW DQ

LQYHVWLJDWLRQRI530¶VGLVFORVXUHDQGDFFUXDOIRUWKH'2-LQYHVWLJDWLRQ&RPSO2Q$XJXVW

WKHLQGHSHQGHQWFRXQVHOUHSRUWHGWKDWE\WKHHQGRIWKHWKLUGZHHNRI'HFHPEHULW

³EHFDPHµNQRZQWR(G0RRUH¶WKDW530¶VILQDQFLDOH[SRVXUHLQWKH'2-LQYHVWLJDWLRQZDVµJRLQJ

WR MXPS¶ IURP DURXQG  PLOOLRQ WR DURXQG  PLOOLRQ WKDW 530¶V VHFXULWLHV µ>G@LVFORVXUH

FRXQVHO>ZDV@QRWDZDUH¶RIWKHRYHUFKDUJHHVWLPDWHVVHQWWR'2-DQGWKDW0RRUHPDGHµPLVWDNHV¶

LQFOXGLQJµQRGLVFORVXUHWR>WKH$XGLW)LUP@RUDXGLWFRPPLWWHH¶DWWKH$XGLW&RPPLWWHHPHHWLQJ

RQ-DQXDU\´Id. 7KHQH[WGD\WKH$XGLW&RPPLWWHHGLUHFWHG530WRUHVWDWHLWV

ILQDQFLDOVWDWHPHQWVIRUWKHILUVWWKUHHTXDUWHUVRIILVFDO\HDUE\DFFUXLQJDQPLOOLRQ

OLDELOLW\LQWKHILUVWTXDUWHUDFFUXLQJDPLOOLRQOLDELOLW\LQWKHVHFRQGTXDUWHUDQG

UHGXFLQJ530¶VPLOOLRQDFFUXDOLQWKHWKLUGTXDUWHUE\PLOOLRQIRUDWRWDORI

PLOOLRQId.



                                                   

             2Q$XJXVW530ILOHGD)RUP.ZKLFKDGPLWWHGWKDW530PDGH³HUURUV´LQ

GLVFORVLQJ DQG DFFUXLQJ IRU WKH '2- LQYHVWLJDWLRQ DQG LW ILOHG DPHQGHG )RUP 4¶V IRU HDFK

TXDUWHU LQ ILVFDO \HDU   &RPSO  ±  7KH 6(& DOOHJHV WKDW WKH ³UHVWDWHPHQW ZDV

QHFHVVDU\EHFDXVH530¶VGLVFORVXUHDQGDFFRXQWLQJHUURUVZHUHPDWHULDO´Id.¶ 

9,          7KH6(&¶V&RPSODLQW

             7KH6(&¶VFRPSODLQWFRQVLVWVRIVHYHQFODLPV

                             &ODLPDJDLQVW530DQG0RRUHDOOHJHVWKDWVWDWHPHQWVFRQWDLQHGLQWKH)RUP
                             .)RUP4DQG3URVSHFWXV6XSSOHPHQWILOHGLQ2FWREHU)RUP.DQG
                             )RUP4ILOHGLQ-DQXDU\)RUP.DQG)RUP4ILOHGLQ$SULO
                             )RUP.ILOHGLQ-XO\DQGWKH3URVSHFWXV6XSSOHPHQWILOHGLQ'HFHPEHU
                             ZHUHIDOVHDQGPLVOHDGLQJLQYLRODWLRQRI6HFWLRQDRIWKH6HFXULWLHV
                             $FW&RPSO±

                             &ODLPDJDLQVW530DQG0RRUHDOOHJHVWKDWWKH\HQJDJHGLQDFRXUVHRIFRQGXFW
                             WKDWRSHUDWHGRUZRXOGRSHUDWHDVDIUDXGRUGHFHLWXSRQWKHSXUFKDVHURIVHFXULWLHV
                             LQYLRODWLRQRI6HFWLRQDRIWKH6HFXULWLHV$FW&RPSO±

                             &ODLPDJDLQVW530DOOHJHVWKDWVWDWHPHQWVFRQWDLQHGLQWKH)RUP.)RUP
                             4DQG3URVSHFWXV6XSSOHPHQWILOHGLQ2FWREHU)RUP.DQG)RUP4
                             ILOHGLQ-DQXDU\)RUP.DQG)RUP4ILOHGLQ$SULO)RUP.
                             ILOHGLQ-XO\DQGWKH3URVSHFWXV6XSSOHPHQWILOHGLQ'HFHPEHUZHUH
                             LQDFFXUDWH LQ YLRODWLRQ RI 6HFWLRQ D RI WKH ([FKDQJH $FW DQG ([FKDQJH $FW
                             5XOHVEDDDQGD&RPSO±

                             &ODLPDJDLQVW530DOOHJHVWKDWWKHFRPSDQ\GLGQRWPDLQWDLQLWVERRNVDQG
                             UHFRUGVLQUHDVRQDEOHGHWDLODQGGLGQRWDFFXUDWHO\DQGIDLUO\UHIOHFWWKHWUDQVDFWLRQV
                             RI WKH FRPSDQ\ LQ YLRODWLRQ RI 6HFWLRQ E$ RI WKH ([FKDQJH $FW
                             &RPSO±



     7KH6(&¶VFRPSODLQWRQO\UHIHUVWRWKHDPHQGHGUHSRUWVIRUWKHILUVWDQGVHFRQGTXDUWHUV
EXWWKHDJHQF\¶VRSSRVLWLRQPHQWLRQVDPHQGHGUHSRUWVIRUDOOWKUHHTXDUWHUVDQGLWSURYLGHVWKH
UHSRUWV DV H[KLELWV  See 3O¶V 2SS DW  	 Q 'HFO RI 7LPRWK\ +DOORUDQ >'NW  @
³+DOORUDQ'HFO´([WR+DOORUDQ'HFO>'NW@([WR+DOORUDQ'HFO>'NW@
([WR+DOORUDQ'HFO>'NW@0RUHRYHUWKH&RXUWPD\WDNHMXGLFLDOQRWLFHRISXEOLF
UHFRUGVLQFOXGLQJ6(&ILOLQJVSee Marshall Cty. Health Care Auth. v. Shalala)G
Q'&&LUREVHUYLQJWKDW³PDWWHUVRISXEOLFUHFRUG´VXFKDVVWDWHPHQWVLQWKH
)HGHUDO5HJLVWHUFDQEHH[DPLQHGRQDPRWLRQWRGLVPLVVsee also DiLorenzo v. Norton1R
:/DWQ''&-XO\³%HFDXVH6(&ILOLQJVDUHPDWWHUVRI
SXEOLFUHFRUGWKH\DUHSURSHUO\WKHVXEMHFWRIMXGLFLDOQRWLFH´
                                                                

                &ODLP   DJDLQVW 530 DOOHJHV WKDW WKH FRPSDQ\ GLG QRW GHYLVH DQG PDLQWDLQ D
                V\VWHPRILQWHUQDODFFRXQWLQJFRQWUROVLQYLRODWLRQRI6HFWLRQE%RI WKH
                ([FKDQJH$FW&RPSO±

                &ODLPDJDLQVW0RRUHDOOHJHVWKDWKHIDOVLILHGRUFDXVHGWREHIDOVLILHG530¶V
                ERRNVDQGUHFRUGVLQYLRODWLRQRI([FKDQJH$FW5XOHE&RPSO±

                &ODLPDJDLQVW0RRUHDOOHJHVWKDWKHPDGHIDOVHDQGPLVOHDGLQJVWDWHPHQWVWR
                DFFRXQWDQWV LQ FRQQHFWLRQ ZLWK WKH UHYLHZ RU H[DPLQDWLRQ RI 530¶V ILQDQFLDO
                VWDWHPHQWVLQYLRODWLRQRI([FKDQJH$FW5XOHED&RPSO± 

                                      67$1'$5'2)5(9,(:

,     5XOHE6WDQGDUG

       ³7RVXUYLYHD>5XOHE@PRWLRQWRGLVPLVVDFRPSODLQWPXVWFRQWDLQVXIILFLHQWIDFWXDO

PDWWHUDFFHSWHGDVWUXHWRµVWDWHDFODLPWRUHOLHIWKDWLVSODXVLEOHRQLWVIDFH¶´Ashcroft v. Iqbal

86TXRWLQJBell Atl. Corp. v. Twombly86,QIqbal

WKH6XSUHPH&RXUWUHLWHUDWHGWKHWZRSULQFLSOHVXQGHUO\LQJLWVGHFLVLRQLQTwombly³)LUVWWKH

WHQHWWKDWDFRXUWPXVWDFFHSWDVWUXHDOORIWKHDOOHJDWLRQVFRQWDLQHGLQDFRPSODLQWLVLQDSSOLFDEOH

WR OHJDO FRQFOXVLRQV´ DQG ³>V@HFRQG RQO\ D FRPSODLQW WKDW VWDWHV D SODXVLEOH FODLP IRU UHOLHI

VXUYLYHVDPRWLRQWRGLVPLVV´Id.DW±

       $FODLPLVIDFLDOO\SODXVLEOHZKHQWKHSOHDGHGIDFWXDOFRQWHQW³DOORZVWKHFRXUWWRGUDZWKH

UHDVRQDEOHLQIHUHQFHWKDWWKHGHIHQGDQWLVOLDEOHIRUWKHPLVFRQGXFWDOOHJHG´Id.DWFLWLQJ

Twombly86DW³7KHSODXVLELOLW\VWDQGDUGLVQRWDNLQWRDµSUREDELOLW\UHTXLUHPHQW¶

EXWLWDVNVIRUPRUHWKDQDVKHHUSRVVLELOLW\WKDWDGHIHQGDQWKDVDFWHGXQODZIXOO\´Id.TXRWLQJ

Twombly  86 DW   $ SOHDGLQJ PXVW RIIHU PRUH WKDQ ³ODEHOV DQG FRQFOXVLRQV´ RU D

³IRUPXODLFUHFLWDWLRQRIWKHHOHPHQWVRIDFDXVHRIDFWLRQ´id.TXRWLQJTwombly86DW

DQG ³>W@KUHDGEDUH UHFLWDOV RI WKH HOHPHQWV RI D FDXVH RI DFWLRQ VXSSRUWHG E\ PHUH FRQFOXVRU\

VWDWHPHQWVGRQRWVXIILFH´Id.FLWLQJTwombly86DW




                                                     

       :KHQFRQVLGHULQJDPRWLRQWRGLVPLVVXQGHU5XOHEWKH&RXUWLVERXQGWRFRQVWUXH

DFRPSODLQWOLEHUDOO\LQWKHSODLQWLII¶VIDYRUDQGLWVKRXOGJUDQWWKHSODLQWLII³WKHEHQHILWRIDOO

LQIHUHQFHVWKDWFDQEHGHULYHGIURPWKHIDFWVDOOHJHG´Kowal v. MCI Commc’ns Corp.)G

'&&LU1HYHUWKHOHVVWKH&RXUWQHHGQRWDFFHSWLQIHUHQFHVGUDZQE\WKH

SODLQWLIILIWKRVHLQIHUHQFHVDUHXQVXSSRUWHGE\IDFWVDOOHJHGLQWKHFRPSODLQWQRUPXVWWKH&RXUW

DFFHSWSODLQWLII¶VOHJDOFRQFOXVLRQVSee id. see also Browning v. Clinton)G'&

&LU,QUXOLQJXSRQDPRWLRQWRGLVPLVVIRUIDLOXUHWRVWDWHDFODLPDFRXUWPD\RUGLQDULO\

FRQVLGHURQO\³WKHIDFWVDOOHJHGLQWKHFRPSODLQWGRFXPHQWVDWWDFKHGDVH[KLELWVRULQFRUSRUDWHG

E\ UHIHUHQFH LQ WKH FRPSODLQW DQG PDWWHUV DERXW ZKLFK WKH &RXUW PD\ WDNH MXGLFLDO QRWLFH´

Gustave-Schmidt v. Chao)6XSSG''&FLWLQJEEOC v. St. Francis

Xavier Parochial Sch.)G±'&&LU

,,    5XOHE6WDQGDUG

       )HGHUDO5XOHRI&LYLO3URFHGXUHELPSRVHVKHLJKWHQHGSOHDGLQJVWDQGDUGVLQIUDXGFDVHV

DVSODLQWLIIVPXVW³VWDWHZLWKSDUWLFXODULW\WKHFLUFXPVWDQFHVFRQVWLWXWLQJIUDXGRUPLVWDNH´)HG

5&LY3E+RZHYHU³WKHUXOHVSHFLILFDOO\DOORZVDOOHJDWLRQVRIµLQWHQWNQRZOHGJHDQGRWKHU

FRQGLWLRQRIPLQG¶WREHDYHUUHGJHQHUDOO\´U.S. ex rel. Totten v. Bombardier Corp.)G

'&&LUDSSO\LQJ5XOHEWRFODLPVXQGHUWKH)DOVH&ODLPV$FWTXRWLQJ)HG

5&LY3E7KLVPHDQVWKDWWKHGHJUHHRIVFLHQWHULQYROYHGRUUHTXLUHGIRUDSDUWLFXODUFDXVH

RIDFWLRQLVQRWGHWHUPLQDWLYHRIZKHWKHU5XOHEDSSOLHVSee id.5DWKHUWKHFLUFXPVWDQFHVWKDW

PXVW EH SOHG ³ZLWK VSHFLILFLW\ DUH PDWWHUV VXFK DV WKH µWLPH SODFH DQG FRQWHQWV RI WKH false

UHSUHVHQWDWLRQV¶VXFKUHSUHVHQWDWLRQVEHLQJWKHelement RIIUDXGDERXWZKLFKWKHUXOHLVFKLHIO\

FRQFHUQHG´Id. HPSKDVLVLQRULJLQDOsee also Kowal)GDW³>7@KHSOHDGHUPXVWVWDWH

WKHWLPHSODFHDQGFRQWHQWRIWKHIDOVHPLVUHSUHVHQWDWLRQVWKHIDFWPLVUHSUHVHQWHGDQGZKDWZDV



                                                     

UHWDLQHGRUJLYHQXSDVDFRQVHTXHQFHRIWKHIUDXG´TXRWLQJUnited States v. Cannon)G

'&&LU

       7KH '& &LUFXLW DSSOLHV 5XOH E¶V SOHDGLQJ VWDQGDUGV WR FODLPV RI PLVUHSUHVHQWDWLRQ

XQGHU6HFWLRQERIWKH([FKDQJH$FWSee Kowal)GDW7KHPDMRULW\RIFLUFXLWV

KDYHKHOGWKDW5XOHEDSSOLHVWRFODLPVXQGHUWKH6HFXULWLHV$FWDVZHOOLIWKH\³VRXQGLQIUDXG´

HYHQLIDSODLQWLIIQHHGRQO\DOOHJHQHJOLJHQFHWRVWDWHDFODLPSee, e.g.Rombach v. Chang

)G±G&LU³6RZKLOHDSODLQWLIIQHHGDOOHJHQRPRUHWKDQQHJOLJHQFHWR

SURFHHGXQGHU6HFWLRQDQG6HFWLRQDFODLPVWKDWGRUHO\XSRQDYHUPHQWVRIIUDXGDUH

VXEMHFWWRWKHWHVWRI5XOHE´In re Stac Elecs. Secs. Litig.)G±WK&LU

Melder v. Morris)GQWK&LUShapiro v. UJB Fin. Corp.

)GG&LU³>:@KHQDQGFODLPVDUHJURXQGHGLQIUDXGUDWKHUWKDQ

QHJOLJHQFH5XOHEDSSOLHV´But seeIn re NationsMart Corp. Secs. Litig.)G

WK&LUKROGLQJWKDW³WKHSDUWLFXODULW\UHTXLUHPHQWRI5XOHEGRHVQRWDSSO\WRFODLPV

XQGHU   RI WKH 6HFXULWLHV $FW EHFDXVH SURRI RI IUDXG RU PLVWDNH LV QRW D SUHUHTXLVLWH WR

HVWDEOLVKLQJOLDELOLW\XQGHU´

       7KH'&&LUFXLWKDV\HWWRUXOHRQWKLVLVVXHEXWFRXUWVLQWKLVGLVWULFWKDYHKHOGSODLQWLIIV

DOOHJLQJYLRODWLRQRIWKH6HFXULWLHV$FWWRWKHKHLJKWHQHGSOHDGLQJVWDQGDUGSee Hite v. Leeds

Weld Equity Partners, IV, LP)6XSSG''&QRWLQJWKDWDQDFWLRQXQGHU

6HFWLRQDRIWKH6HFXULWLHV$FWPXVWVDWLVI\5XOHE¶VUHTXLUHPHQWVIn re U.S. Office

Prods. Secs. Litig.)6XSSG''&REVHUYLQJWKDW³WKH'&&LUFXLWKDV

QHYHU VWDWHG ZKHWKHU 5XOH E¶V UHTXLUHPHQW RI SDUWLFXODULW\ DSSOLHV WR FODLPV RI YLRODWLRQ RI

6HFWLRQVDQGDRIWKH6HFXULWLHV$FW´EXWWKDWPDQ\RWKHUFLUFXLWVKDYHDSSOLHG5XOHE

WRWKRVHFODLPV



                                                     

             :LWKUHJDUGWRFODLPVXQGHU6HFWLRQDDQGDRIWKH6HFXULWLHV$FWVSHFLILFDOO\

ZKLFKRQO\UHTXLUHDOOHJDWLRQVRIQHJOLJHQFHFRXUWVKDYHUHTXLUHGWKHSODLQWLIIWRPHHW5XOHE¶V

KHLJKWHQHGSOHDGLQJVWDQGDUGSee, e.g.SEC v. Wey1RFY:/DW

6'1< 0DUFK   GLVPLVVLQJ WKH PLVUHSUHVHQWDWLRQ FODLP XQGHU 6HFWLRQ D

EHFDXVHLWGLGQRWPHHW5XOHE¶VUHTXLUHPHQWVSEC v. Thompson)6XSSG

6'1<FRQFOXGLQJWKDW6HFWLRQDFODLPV³DOOVRXQGLQIUDXG´VRWKH\PXVWEHSOHG

ZLWKSDUWLFXODULW\

             7KHJUDYDPHQRIWKH6(&¶VDFWLRQXQGHU6HFWLRQKHUHLVIUDXGDQGWKHDJHQF\GRHVQRW

DUJXH WKDW DSSO\LQJ 5XOH E WR &ODLPV  RU  ZRXOG EH LQDSSURSULDWH RWKHU WKDQ LQ D YDJXH

IRRWQRWH LQ LWV RSSRVLWLRQ  See 3O¶V 2SS DW  Q  7KHUHIRUH WKH &RXUW ZLOO XWLOL]H WKH

KHLJKWHQHGSOHDGLQJVWDQGDUGDVVHWRXWLQ5XOHEWRHYDOXDWHGHIHQGDQWV¶PRWLRQVWRGLVPLVV

WKRVHFODLPV+RZHYHUWKHUHPDLQLQJFODLPV±ZKLFKDUHEDVHGRQ6HFWLRQRIWKH([FKDQJH

$FW±ZLOOEHHYDOXDWHGXQGHUWKHWUDGLWLRQDO5XOHEVWDQGDUG





      2WKHU FRXUWV DQDO\]LQJ FODLPV XQGHU 6HFWLRQ  RI WKH ([FKDQJH $FW DV ZHOO DV WKH
([FKDQJH$FW5XOHVKDYHQRWXWLOL]HG5XOHE¶VKHLJKWHQHGSOHDGLQJVWDQGDUGEHFDXVHFODLPV
XQGHUWKDWVHFWLRQGRQRWQHFHVVDULO\VRXQGLQIUDXGSee, e.g.SEC v. e-Smart Techs., Inc.)
6XSSG±''&DQDO\]LQJFODLPVXQGHU6HFWLRQD6HFWLRQE$
6HFWLRQE%DQG5XOHVEDDDQGDSEC v. Familant)6XSS
G  ± ''&  DQDO\]LQJ FODLPV XQGHU 6HFWLRQ D 6HFWLRQ E$ DQG
5XOHVEDDDDQGEComput. Network Corp. v. Spohler1R
:/DW''&0DUFKUHFRJQL]LQJWKDW6HFWLRQRIWKH([FKDQJH
$FW ³UHIOHFWV FRQJUHVVLRQDO FRQFHUQ WKDW LQYHVWRUV EH SURPSWO\ DQG IXOO\ LQIRUPHG´ RI FHUWDLQ
LQIRUPDWLRQDQGWKDWVXFKFODLPVGRQRW³VRXQG>@RQO\LQIUDXG´ 
                                                               

                                            $1$/<6,6

,    7KH6(&KDVVWDWHGDFODLPDJDLQVW530DQG0RRUHXQGHU6HFWLRQDRIWKH
       6HFXULWLHV$FWLQ&ODLP

      ³7KH 6HFXULWLHV $FW LPSRVHV OLDELOLW\ IRU PDWHULDO PLVUHSUHVHQWDWLRQV RU GHFHLW LQ

FRQQHFWLRQZLWKDVHFXULWLHVRIIHULQJ´Weiss v. SEC)G'&&LU 6HFWLRQ

LVDNH\HQIRUFHPHQWSURYLVLRQRIWKH6HFXULWLHV$FWDQG6HFWLRQDSURYLGHV

               ,WVKDOOEHXQODZIXOIRUDQ\SHUVRQLQWKHRIIHURUVDOHRIDQ\VHFXULWLHV
               E\WKHXVHRIDQ\PHDQVRULQVWUXPHQWVRIWUDQVSRUWDWLRQRUFRPPXQLFDWLRQ
               LQLQWHUVWDWHFRPPHUFHRUE\XVHRIWKHPDLOVGLUHFWO\RULQGLUHFWO\WR
               REWDLQPRQH\RUSURSHUW\E\PHDQVRIDQ\XQWUXHVWDWHPHQWRIDPDWHULDO
               IDFWRUDQ\RPLVVLRQWRVWDWHDPDWHULDOIDFWQHFHVVDU\LQRUGHUWRPDNHWKH
               VWDWHPHQWVPDGHLQOLJKWRIWKHFLUFXPVWDQFHVXQGHUZKLFKWKH\ZHUHPDGH
               QRWPLVOHDGLQJ

86&TD

      7RVWDWHDFODLPXQGHU6HFWLRQDWKH6(&PXVWVKRZWKDWGHIHQGDQWVZHUHHQJDJHG

LQWKHRIIHURUVDOHRIVHFXULWLHVWKDWWKH\PDGHPDWHULDOPLVUHSUHVHQWDWLRQVRURPLWWHGPDWHULDO

IDFWVQHFHVVDU\WRPDNHRWKHUVWDWHPHQWVQRWPLVOHDGLQJDQGWKDWGHIHQGDQWVREWDLQHGPRQH\RU

SURSHUW\WKURXJKWKHXVHRIWKHPLVVWDWHPHQWVRURPLVVLRQVId.see also SEC v. Current Fin.

Servs., Inc.)6XSSG''&SEC v. Better Life Club of Am., Inc.)6XSS

  ''&   2QH QHHG QRW GHPRQVWUDWH NQRZOHGJH RI ZURQJGRLQJ RU VFLHQWHU WR

HVWDEOLVKDYLRODWLRQRI6HFWLRQDSURRIRIQHJOLJHQFHLVVXIILFLHQWAaron v. SEC86

FRQFOXGLQJWKDW6HFWLRQD³LVGHYRLGRIDQ\VXJJHVWLRQZKDWVRHYHURID

VFLHQWHUUHTXLUHPHQW´Weiss)GDWSEC v. Steadman)G'&&LU

REVHUYLQJWKDWXQGHUWKLVSURYLVLRQDFRPSDQ\LV³OLDEOHPHUHO\IRURPLWWLQJGLVFORVXUHRI

OLDELOLWLHVQHJOLJHQWO\±LQRWKHUZRUGVIRUIDLOLQJWRGLVFORVHOLDELOLWLHVDERXWZKLFK>LW@should

KDYHNQRZQ´HPSKDVLVLQRULJLQDO




                                                 

       7KH6(&DOOHJHVWKDW530DQG0RRUHPDGHPDWHULDOPLVVWDWHPHQWVRURPLVVLRQVLQQLQH

6(&ILOLQJVEHWZHHQ2FWREHUDQG'HFHPEHUSee &RPSO

                                         2FWREHU)LOLQJV

       7KH DJHQF\ DOOHJHV WKDW GHIHQGDQWV ZHUH UHTXLUHG WR GLVFORVH DQG DFFUXH IRU D ORVV

FRQWLQJHQF\LQWKUHH6(&ILOLQJVLQ2FWREHUEHFDXVHE\WKDWWLPHWKH\KDGUHFHLYHGDFRS\

RIWKHqui tamFRPSODLQWILOHGXQGHUWKH)&$DQGWKH\KDGDOUHDG\DFNQRZOHGJHGWR'2-WKDW

7UHPFRRYHUFKDUJHGWKHJRYHUQPHQWRQVHYHUDOFRQWUDFWVE\PRUHWKDQPLOOLRQ&RPSO

%HFDXVHQRQHRIWKHILOLQJVPHQWLRQHGWKH'2-LQYHVWLJDWLRQWKH6(&FODLPVWKDWWKH\

ZHUHIDOVHDQGPLVOHDGLQJ&RPSO±

       2Q2FWREHU530ILOHGLWV)RUP.&RPSO7KH6(&DOOHJHVWKDWWKLV

GRFXPHQW ³SXUSRUWHG WR SURYLGH WKH FRPSDQ\¶V ILQDQFLDO UHVXOWV IRU LWV ILVFDO ILUVW TXDUWHU EXW

PLVOHDGLQJO\ IDLOHG WR GLVFORVH WKH PDWHULDO LPSDFW RI WKH '2- LQYHVWLJDWLRQ RQ WKRVH UHVXOWV´

&RPSO  

       2Q2FWREHU530ILOHGLWV)RUP4&RPSO7KH)RUP4LQFOXGHGD

VHFWLRQWLWOHG³&RQWLQJHQFLHV´ZKLFKVWDWHGWKHIROORZLQJ

                 :HDUHSDUW\WRYDULRXVFODLPVDQGODZVXLWVDULVLQJLQWKHQRUPDOFRXUVHRI
                 EXVLQHVV$OWKRXJKZHFDQQRWSUHFLVHO\SUHGLFWWKHDPRXQWRIDQ\OLDELOLW\
                 WKDWPD\XOWLPDWHO\DULVHZLWKUHVSHFWWRDQ\RIWKHVHPDWWHUVZHUHFRUG
                 SURYLVLRQV ZKHQ ZH FRQVLGHU WKH OLDELOLW\ SUREDEOH DQG UHDVRQDEO\
                 HVWLPDEOH  2XU SURYLVLRQV DUH EDVHG RQ KLVWRULFDO H[SHULHQFH DQG OHJDO
                 DGYLFH UHYLHZHG TXDUWHUO\ DQG DGMXVWHG DFFRUGLQJ WR GHYHORSPHQWV ,Q
                 JHQHUDORXUDFFUXDOVLQFOXGLQJRXUDFFUXDOVIRUHQYLURQPHQWDOZDUUDQW\
                 DQGWD[OLDELOLWLHVGLVFXVVHGIXUWKHUEHORZUHSUHVHQWWKHEHVWHVWLPDWHRID
                 UDQJHRISRVVLEOHORVVHV(VWLPDWLQJSUREDEOHORVVHVUHTXLUHVWKHDQDO\VLV
                 RI PXOWLSOH IRUHFDVWHG IDFWRUV WKDW RIWHQ GHSHQG RQ MXGJPHQWV DERXW
                 SRWHQWLDODFWLRQVE\WKLUGSDUWLHVVXFKDVUHJXODWRUVFRXUWVDQGVWDWHDQG
                 IHGHUDOOHJLVODWXUHV&KDQJHVLQWKHDPRXQWVRIRXUORVVSURYLVLRQVZKLFK
                 FDQEHPDWHULDODIIHFWRXU&RQVROLGDWHG6WDWHPHQWVRI,QFRPH:KLOHLWLV
                 UHDVRQDEO\SRVVLEOHWKDWH[FHVVOLDELOLWLHVLIWKH\ZHUHWRRFFXUFRXOGEH
                 PDWHULDOWRRSHUDWLQJUHVXOWVLQDQ\JLYHQTXDUWHURU\HDURIWKHLUUHFRJQLWLRQ
                 ZHGRQRWEHOLHYHWKDWLWLVUHDVRQDEO\SRVVLEOHWKDWH[FHVVOLDELOLWLHVZRXOG


                                                     

               KDYH D PDWHULDO DGYHUVH HIIHFW RQ RXU ORQJWHUP UHVXOWV RI RSHUDWLRQV
               OLTXLGLW\RUFRQVROLGDWHGILQDQFLDOSRVLWLRQ

)RUP 4 KWWSVZZZVHFJRY$UFKLYHVHGJDUGDWDGG

TKWPsee also &RPSO±([3WR:DJHQHU'HFO>'NW@'HFORI'DUUHQ$

/DYHUQH>'NW@³/DYHUQH'HFO´([WR/DYHUQH'HFO>'NW@7KH6(&DOOHJHV

WKDW530RPLWWHGDQ\LQIRUPDWLRQDERXWWKH'2-LQYHVWLJDWLRQDQGWKDWWKHRPLVVLRQPDGHWKH

GLVFXVVLRQ UHJDUGLQJ FRQWLQJHQFLHV PLVOHDGLQJ EHFDXVH D PDWHULDO ORVV ZDV SUREDEOH DQG

UHDVRQDEO\HVWLPDEOHE\2FWREHU&RPSO

      7KH)RUP4DOVRLQFOXGHGDVHFWLRQWLWOHG³&RQWUROVDQG3URFHGXUHV´ZKLFKVDLG

               2XU&KLHI([HFXWLYH2IILFHUDQG&KLHI)LQDQFLDO2IILFHUDIWHUHYDOXDWLQJ
               WKH HIIHFWLYHQHVV RI RXU GLVFORVXUH FRQWUROV DQG SURFHGXUHV    KDYH
               FRQFOXGHG WKDW DV RI WKH (YDOXDWLRQ 'DWH RXU GLVFORVXUH FRQWUROV DQG
               SURFHGXUHV ZHUH HIIHFWLYH LQ HQVXULQJ WKDW LQIRUPDWLRQ UHTXLUHG WR EH
               GLVFORVHGE\XVLQWKHUHSRUWVZHILOHRUVXEPLWXQGHUWKH([FKDQJH$FW
               LVUHFRUGHGSURFHVVHGVXPPDUL]HGDQGUHSRUWHGZLWKLQWKHWLPHSHULRGV
               VSHFLILHGLQWKH&RPPLVVLRQ¶VUXOHVDQGIRUPVDQGLVDFFXPXODWHGDQG
               FRPPXQLFDWHGWRRXUPDQDJHPHQWLQFOXGLQJWKH&KLHI([HFXWLYH2IILFHU
               DQGWKH&KLHI)LQDQFLDO2IILFHUDVDSSURSULDWHWRDOORZIRUWLPHO\GHFLVLRQV
               UHJDUGLQJUHTXLUHGGLVFORVXUH

)RUP4KWWSVZZZVHFJRY$UFKLYHVHGJDUGDWDGG

TKWP&RPSO7KH6(&FODLPVWKDWWKLVVHFWLRQZDVDOVRIDOVHDQGPLVOHDGLQJSDUWLFXODUO\

EHFDXVH³530ODWHUDGPLWWHGLQFRQQHFWLRQZLWKLWVUHVWDWHPHQW>WKDW@LWVGLVFORVXUHFRQWUROVDQG

SURFHGXUHVZHUHQRWHIIHFWLYHDWWKHHQGRIWKHILUVWTXDUWHU´&RPSO

      2Q2FWREHU530ILOHGD3URVSHFWXV6XSSOHPHQWZLWKWKH6(&IRUDPLOOLRQ

QRWHVRIIHULQJ&RPSO7KH3URVSHFWXV6XSSOHPHQWVWDWHG

               ,W LV LPSRUWDQW IRU \RX WR UHDG DQG FRQVLGHU DOO LQIRUPDWLRQ FRQWDLQHG RU
               LQFRUSRUDWHGE\UHIHUHQFHLQWKLVSURVSHFWXVVXSSOHPHQWLQPDNLQJ\RXU
               LQYHVWPHQWGHFLVLRQ:H³LQFRUSRUDWHE\UHIHUHQFH´LQWRWKLVSURVSHFWXV
               VXSSOHPHQWDQGWKHDFFRPSDQ\LQJSURVSHFWXVWKHLQIRUPDWLRQZHILOHZLWK
               WKH6(&



                                                    

3URVSHFWXV 6XSSOHPHQW KWWSVZZZVHFJRY$UFKLYHVHGJDUGDWD

GGEKWP&RPSOsee also ([6WR:DJHQHU'HFO>'NW@([WR

/DYHUQH'HFO>'NW@*LYHQLWVH[SUHVVLQFRUSRUDWLRQRIRWKHUDOOHJHGO\LQFRPSOHWH6(&

ILOLQJVWKHDJHQF\FODLPVWKDWWKH3URVSHFWXV6XSSOHPHQWZDVDOVRPDWHULDOO\IDOVHDQGPLVOHDGLQJ

&RPSO

                                        -DQXDU\)LOLQJV

       7KHFRPSODLQWDOOHJHVWKDWWZR6(&ILOLQJVLQ-DQXDU\ZHUHDOVRIDOVHDQGPLVOHDGLQJ

EHFDXVHWKH\GLGQRWGLVFORVHRUDFFUXHIRUWKH'2-LQYHVWLJDWLRQ&RPSO±7KH6(&

FODLPVWKDWE\HDUO\-DQXDU\530DQG0RRUHNQHZWKDW530KDGDOUHDG\DJUHHGWRVXEPLW

DVHWWOHPHQWRIIHUWR'2-E\-DQXDU\DQGWKDWWKHVHWWOHPHQWRIIHUEHLQJSUHSDUHGZDV

IRUDSSUR[LPDWHO\±PLOOLRQ&RPSO±

       2Q-DQXDU\530ILOHGD)RUP.DVZHOODVD)RUP4IRUWKHILVFDOVHFRQG

TXDUWHU&RPSO(DFKILOLQJFRQWDLQHGVWDWHPHQWVLGHQWLFDOWRWKRVHLQ530¶V)RUPV.

DQG 4 LQ 2FWREHU  DQG WKH 6(& FKDOOHQJHV WKH VWDWHPHQWV DQG RPLVVLRQV RQ WKH VDPH

JURXQGV  &RPSO  ± ([ 4 WR :DJHQHU 'HFO >'NW  @ ([  WR /DYHUQH 'HFO

>'NW@

                                          $SULO)LOLQJV

       7KH6(&DOVRDOOHJHVLQWKHFRPSODLQWWKDWWKH)RUP.DQG)RUP4ILOHGRQ$SULO

ZHUHIDOVHDQGPLVOHDGLQJ&RPSO

       7KH)RUP.GHVFULEHGWKHDFFUXDOUHODWHGWRWKH'2-LQYHVWLJDWLRQ

                $V RI )HEUXDU\   EDVHG RQ GLVFXVVLRQV RFFXUULQJ RQ 0DUFK 
                 WKH &RPSDQ\ UHFRUGHG D  PLOOLRQ DFFUXDO DVVRFLDWHG ZLWK DQ
                LQYHVWLJDWLRQRIWKH&RPSDQ\¶V%XLOGLQJ6ROXWLRQV*URXSURRILQJFRQWUDFWV
                ZLWKWKH86*HQHUDO6HUYLFHV$GPLQLVWUDWLRQWKH³*6$´7KHVXEVWDQWLDO
                PDMRULW\RIWKHDFFUXDOUHODWHVWRWKHVDOHRISURGXFWVDQGVHUYLFHVIURP
                WR7KH&RPSDQ\¶V%XLOGLQJ6ROXWLRQV*URXSLVLQRQJRLQJVHWWOHPHQW


                                                   

                GLVFXVVLRQVZLWKWKH86'HSDUWPHQWRI-XVWLFHWKH³'2-´DQGWKH*6$
                DLPHGDWUHVROYLQJWKHLQYHVWLJDWLRQ7KH&RPSDQ\LVFRRSHUDWLQJZLWKWKH
                LQYHVWLJDWLRQ ZKLFK LQYROYHV FRPSOLDQFH ZLWK FHUWDLQ SULFLQJ WHUPV DQG
                FRQGLWLRQV RI *6$ FRQWUDFWV XQGHU ZKLFK WKH &RPSDQ\¶V %XLOGLQJ
                6ROXWLRQV*URXSURRILQJGLYLVLRQVROGSURGXFWVDQGVHUYLFHVWRWKHIHGHUDO
                JRYHUQPHQW 7KH DFWXDO DPRXQW RI WKH &RPSDQ\¶V ORVV ZKLFK UHPDLQV
                VXEMHFWWRDSSURYDOE\WKH'2-PD\YDU\IURPWKHDPRXQWRIWKHDFFUXDO

)RUP.KWWSVZZZVHFJRY$UFKLYHVHGJDUGDWDGGN

KWPsee ([WR/DYHUQH'HFO>'NW@

       7KH)RUP4FRQWDLQHGWKHIROORZLQJVWDWHPHQWUHJDUGLQJWKHLQYHVWLJDWLRQDQGDFFUXDO

                'XULQJWKHTXDUWHUHQGHG)HEUXDU\ZHUHFRUGHGDPLOOLRQ
                DFFUXDODVVRFLDWHGZLWKVHWWOHPHQWGLVFXVVLRQVWKDWZHDUHFXUUHQWO\KDYLQJ
                ZLWKWKH'2-DQGWKH*6$2IILFHRI,QVSHFWRU*HQHUDODLPHGDWUHVROYLQJ
                DQH[LVWLQJLQYHVWLJDWLRQ:HKDYHFRRSHUDWHGDQGFRQWLQXHWRFRRSHUDWH
                ZLWKWKHLQYHVWLJDWLRQZKLFKLQYROYHVRXUFRPSOLDQFHZLWKFHUWDLQSULFLQJ
                WHUPVDQGFRQGLWLRQVRIRXU*6$0XOWLSOH$ZDUG6FKHGXOHFRQWUDFWVXQGHU
                ZKLFKWKHURRILQJGLYLVLRQRIRXU%XLOGLQJ6ROXWLRQV*URXSVROGSURGXFWV
                DQG VHUYLFHV WR WKH IHGHUDO JRYHUQPHQW 7KH DFFUXDO IRU WKLV FRQWLQJHQF\
                UHSUHVHQWVRXUDVVHVVPHQWRIWKHDPRXQWRISUREDEOHORVVWKDWPD\UHVXOW
                IURPWKLVPDWWHU7KHVXEVWDQWLDOPDMRULW\RIWKHSUREDEOHORVVUHODWHVWRWKH
                VDOHRISURGXFWVDQGVHUYLFHVLQWKHSHULRGIURPWR,QDVVHVVLQJ
                RXU SUREDEOH ORVV ZH KDYH FRQVLGHUHG WKH SRWHQWLDOO\ GLVSXWHG DPRXQWV
                XQGHUWKHUHOHYDQWFRQWUDFWVWRJHWKHUZLWKRXUXQGHUVWDQGLQJRISROLFLHVIRU
                UHVROYLQJVXFKPDWWHUV7KHDFWXDODPRXQWRIRXUORVVXQGHUWKHWHUPVRI
                DQ\VHWWOHPHQWPD\YDU\IURPWKHDPRXQWRIWKHDFFUXDO

)RUP4KWWSVZZZVHFJRY$UFKLYHVHGJDUGDWDGG

TKWPsee ([WR/DYHUQH'HFO>'NW@

       $OWKRXJKWKHVHILOLQJVSXEOLFO\GLVFORVHGWKH'2-LQYHVWLJDWLRQDQGWKHUHODWHGDFFUXDOIRU

WKH ILUVW WLPH WKH 6(& FODLPV WKDW ERWK ILOLQJV ³PLVOHDGLQJO\ LQGLFDWHG WKDW 530 KDG WLPHO\

GLVFORVHGDQGDFFUXHGIRUWKH'2-LQYHVWLJDWLRQ´&RPSOZKHQLQIDFW³530LQFRUUHFWO\

UHFRUGHGWKHHQWLUHDFFUXDODVDFKDUJHDJDLQVWLQFRPHLQWKHWKLUGTXDUWHURIILVFDOUDWKHU

WKDQUHFRUGLQJDSSURSULDWHSRUWLRQVRIWKHDFFUXDOLQWKHILUVWDQGVHFRQGTXDUWHUVDVUHTXLUHGE\

>*HQHUDOO\$FFHSWHG$FFRXQWLQJ3ULQFLSOHV@´3O¶V2SSDW



                                                   

                                            -XO\)LOLQJ

       7KH6(&VWDWHVLQWKHFRPSODLQWWKDW530¶V)RUP.IRUWKHILVFDO\HDUVXIIHUHG

IURP WKH VDPH GHIHFWV DV WKH RWKHU ILOLQJV GXULQJ ILVFDO \HDU  WKDW LV WKDW WKH )RUP .

³PLVOHDGLQJO\LQGLFDWHGWKDW530WLPHO\GLVFORVHGDQGDFFUXHGIRUWKH'2-LQYHVWLJDWLRQLQWKH

WKLUGTXDUWHU´DQG³PLVOHDGLQJO\VWDWHGWKDW530¶VLQWHUQDOFRQWUROVZHUHHIIHFWLYH´&RPSO

see ([WR/DYHUQH'HFO>'NW@

                                         'HFHPEHU)LOLQJ

       )LQDOO\ WKH FRPSODLQW DOVR DOOHJHV WKDW 530 ILOHG D IDOVH DQG PLVOHDGLQJ 3URVSHFWXV

6XSSOHPHQWRQ'HFHPEHULQFRQQHFWLRQZLWKDPLOOLRQQRWHVRIIHULQJ&RPSO

%HFDXVHWKH3URVSHFWXV6XSSOHPHQWLQFRUSRUDWHGWKH)RUP.ILOHGRQ-XO\DVZHOODV

DOORI530¶VRWKHU6(&ILOLQJVWKH6(&FODLPVWKDWLWZDVDOVRIDOVHDQGPLVOHDGLQJ&RPSO

see([9WR:DJHQHU'HFO>'NW@

       530DQG0RRUHVHHNWRGLVPLVVWKHDJHQF\¶V6HFWLRQDFODLPIRUVHYHUDOUHDVRQV

7KH\MRLQWO\FRQWHQGWKDWWKHDJHQF\¶VFODLPIDLOVEHFDXVHGHIHQGDQWVODFNHGDGXW\WRGLVFORVHRU

DFFUXHIRUWKH'2-LQYHVWLJDWLRQ530DOVRDUJXHVWKDWWKHIDLOXUHWRGLVFORVHRUDFFUXHIRU

WKH '2- LQYHVWLJDWLRQ ZDV QRW PDWHULDO  WKDW DQ\ DOOHJHG PLVVWDWHPHQWV ZHUH RSLQLRQ

VWDWHPHQWVDQGWKH6(&GLGQRWDOOHJHWKDWGHIHQGDQWVNQHZWKDWWKH\ZHUHIDOVHDQGWKDWWKH

6(&KDVQRWDOOHJHGWKDWWKHPDWHULDOPLVVWDWHPHQWVRURPLVVLRQVRFFXUUHGLQWKHRIIHURUVDOHRI

VHFXULWLHV  $QG 0RRUH PDLQWDLQV WKDW WKH 6(& KDV IDLOHG WR DOOHJH WKDW KH REWDLQHG PRQH\ RU

SURSHUW\E\PHDQVRIDQXQWUXHVWDWHPHQWRUPDWHULDORPLVVLRQ




                                                      

              $            7KH6(&KDVVXIILFLHQWO\DOOHJHGWKDWGHIHQGDQWVKDGDGXW\WRGLVFORVHDQG
                             DFFUXHIRUWKH'2-LQYHVWLJDWLRQSULRUWRWKH$SULOILOLQJV

                                 /HJDO6WDQGDUGIRUD'XW\WR'LVFORVH

             6HFWLRQDSURYLGHVWKDW³>L@WVKDOOEHXQODZIXOIRUDQ\SHUVRQLQWKHRIIHURUVDOHRI

DQ\VHFXULWLHVWRREWDLQPRQH\RUSURSHUW\E\PHDQVRIDQ\XQWUXHVWDWHPHQWRIDPDWHULDOIDFW

RUDQ\RPLVVLRQWRVWDWHDPDWHULDOIDFWQHFHVVDU\LQRUGHUWRPDNHWKHVWDWHPHQWVPDGHLQOLJKWRI

WKHFLUFXPVWDQFHVXQGHUZKLFKWKH\DUHPDGHQRWPLVOHDGLQJ´86&TD'HIHQGDQWV

FRQWHQGWKDWWKH6HFWLRQDFODLPEDVHGRQRPLVVLRQVIDLOVEHFDXVHWKH\ODFNHGDGXW\WR

GLVFORVHWKHDOOHJHGO\RPLWWHGLQIRUPDWLRQ5300HPDW±0RRUH0HPDW±

             $OWKRXJK LW GRHV QRW DSSHDU WKDW WKH '& &LUFXLW KDV GLUHFWO\ DGGUHVVHG WKH LVVXH RI

RPLVVLRQV LQ WKH FRQWH[W RI 6HFWLRQ D FRXUWV LQ WKLV GLVWULFW KDYH LQWHUSUHWHG 6HFWLRQ D

EDVHGRQWKHSULQFLSOHVDSSOLHGLQ6HFWLRQEDQG5XOHEFDVHVEHFDXVHWKHODQJXDJHRI

5XOHESURPXOJDWHGSXUVXDQWWR6HFWLRQELVH[WUHPHO\VLPLODUWRWKHODQJXDJHLQ6HFWLRQ

DSee, e.g. United States v. Crop Growers Corp.)6XSS±''&

see also 86&ME &)5E




           5XOHEVWDWHV
                             ,WVKDOOEHXQODZIXOIRUDQ\SHUVRQGLUHFWO\RULQGLUHFWO\E\WKHXVHRIDQ\
                             PHDQVRULQVWUXPHQWDOLW\RILQWHUVWDWHFRPPHUFHRURIWKHPDLOVRURIDQ\
                             IDFLOLW\RIDQ\QDWLRQDOVHFXULWLHVH[FKDQJH
                                    D 7RHPSOR\DQ\GHYLFHVFKHPHRUDUWLILFHWRGHIUDXG
                                    E7RPDNHDQ\XQWUXHVWDWHPHQWRIDPDWHULDOIDFWRUWRRPLWWRVWDWHD
                                         PDWHULDOIDFWQHFHVVDU\LQRUGHUWRPDNHWKHVWDWHPHQWVPDGHLQWKH
                                         OLJKW RI WKH FLUFXPVWDQFHV XQGHU ZKLFK WKH\ ZHUH PDGH QRW
                                         PLVOHDGLQJRU
                                    F 7RHQJDJHLQDQ\DFWSUDFWLFHRUFRXUVHRIEXVLQHVVZKLFKRSHUDWHV
                                         RUZRXOGRSHUDWHDVDIUDXGRUGHFHLWXSRQDQ\SHUVRQ
                             LQFRQQHFWLRQZLWKWKHSXUFKDVHRUVDOHRIDQ\VHFXULW\
&)5E
                                                                 

      7KH6XSUHPH&RXUWKDVKHOGLQWKHFRQWH[WRI6HFWLRQERIWKH6HFXULWLHV([FKDQJH$FW

WKDW³>Z@KHQDQDOOHJDWLRQRIIUDXGLVEDVHGXSRQQRQGLVFORVXUHWKHUHFDQEHQRIUDXGDEVHQWD

GXW\WRVSHDN´Chiarella v. United States86³%XWRQHZKRIDLOVWR

GLVFORVHPDWHULDOLQIRUPDWLRQSULRUWRWKHFRQVXPPDWLRQRIDWUDQVDFWLRQFRPPLWVIUDXGRQO\ZKHQ

KHLVXQGHUDGXW\WRGRVR´7KH'&&LUFXLWKDVLQWHUSUHWHGChiarellaWRPHDQWKDWDGXW\WR

GLVFORVHXQGHU6HFWLRQEDWWDFKHV³RQO\ZKHQDSDUW\KDVOHJDOREOLJDWLRQVRWKHUWKDQDPHUH

GXW\WRFRPSO\ZLWKWKHJHQHUDODQWLIUDXGSURVFULSWLRQVLQWKHIHGHUDOVHFXULWLHVODZV´Dirks v.

SEC)G'&&LUrev’d on other grounds86

      )XUWKHUDSDUW\KDVDGXW\WRGLVFORVHPDWHULDOLQIRUPDWLRQQRWRQO\ZKHQUHTXLUHGE\D

VSHFLILFUXOHRUUHJXODWLRQEXW³ZKHQVLOHQFHZRXOGPDNHRWKHUVWDWHPHQWVPLVOHDGLQJRUIDOVH´

SEC v. Brown)6XSSG''&TXRWLQJIn re XM Satellite Radio Holdings

Sec. Litig.)6XSSG''&,QWKLVVHFRQGVFHQDULR³>W@KHWRXFKVWRQHRI

WKHLQTXLU\LVZKHWKHUGHIHQGDQWV¶UHSUHVHQWDWLRQVRURPLVVLRQVFRQVLGHUHGWRJHWKHUDQGLQ

FRQWH[WZRXOGDIIHFWWKHWRWDOPL[RILQIRUPDWLRQDQGWKHUHE\PLVOHDGDUHDVRQDEOHLQYHVWRU´Id.

TXRWLQJIn re XM Satellite Radio)6XSSGDW

      7KHUHIRUHZKHWKHUGHIHQGDQWVFDQEHKHOGOLDEOHIRUIDLOLQJWRGLVFORVHLQIRUPDWLRQLQWKHLU

VXEPLVVLRQVWRWKH6(&WXUQVRQZKHWKHUWKH\KDGDGXW\WRGRVR±HLWKHUEHFDXVHDGXW\ZDV

H[SUHVVO\LPSRVHGE\UXOHRUVWDWXWHRULQRUGHUWRPDNHRWKHUVWDWHPHQWVQRWPLVOHDGLQJ7KH

&RXUWILQGVWKDWWKH6(&KDVDOOHJHGVXIILFLHQWIDFWVWRVKRZWKDWGHIHQGDQWVKDGDGXW\WRGLVFORVH

WKH'2-LQYHVWLJDWLRQSXUVXDQWWRDFFRXQWLQJVWDQGDUGV

                2EOLJDWLRQWR'LVFORVHRU$FFUXHIRUWKH'2-,QYHVWLJDWLRQ8QGHU$6&

      7KH 6(& SRLQWV WR *HQHUDOO\ $FFHSWHG $FFRXQWLQJ 3ULQFLSOHV ³*$$3´ LQ SDUWLFXODU

$FFRXQWLQJ 6WDQGDUGV &RGLILFDWLRQ  ³$6& ´ DV D VRXUFH RI WKH GXW\ WR GLVFORVH



                                                 

&RPSOsee 3O¶V2SSDW±7KHDJHQF\DUJXHVWKDWIURPDWOHDVW0DUFKWKURXJK

$SULOWKH'2-LQYHVWLJDWLRQUHSUHVHQWHGDORVVFRQWLQJHQF\WKDWVKRXOGKDYHEHHQDFFUXHG

IRURUDWOHDVWGLVFORVHG3O¶V2SSDW±'HIHQGDQWVPDLQWDLQWKDWWKH\KDGQRREOLJDWLRQWR

GRHLWKHUXQGHU$6&5300HPDW±0RRUH0HPDW±

       )LQDQFLDOVWDWHPHQWVLQFOXGHGZLWKDQLVVXHU¶V6(&ILOLQJVPXVWFRPSO\ZLWK*$$3DQG

ILQDQFLDO VWDWHPHQWV ILOHG ZLWK WKH 6(& WKDW DUH QRW SUHSDUHG LQ DFFRUGDQFH ZLWK *$$3 DUH

SUHVXPHGWREHPLVOHDGLQJInd. Pub. Ret. Sys. v. SAIC, Inc.)GG&LU

&)5    7KH 6(& UHOLHV RQ $6&  ZKLFK SURYLGHV DFFRXQWLQJ JXLGDQFH IRU WKH

DFFUXDODQGGLVFORVXUHRIDORVVFRQWLQJHQF\ZKLFKLVGHILQHGDV³DQH[LVWLQJFRQGLWLRQVLWXDWLRQ

RUVHWRIFLUFXPVWDQFHVLQYROYLQJXQFHUWDLQW\DVWRDSRVVLEOHORVVWKDWZLOOEHUHVROYHGZKHQRQH

RUPRUHIXWXUHHYHQWVRFFXUVRUIDLOVWRRFFXU´&RPSOsee also ([&WR:DJHQHU'HFO

>'NW@³$6&´DW /RVVFRQWLQJHQFLHVFDQLQFOXGHDFWXDORUSRVVLEOHFODLPVDV

ZHOODVSHQGLQJRUWKUHDWHQHGOLWLJDWLRQ&RPSOsee also $6&DW7KH6(&

FRQWHQGVWKDWWKH'2-LQYHVWLJDWLRQZDVDORVVFRQWLQJHQF\WKDWQHHGHGWREHGLVFORVHGEHFDXVHLW

ZDVUHDVRQDEO\SRVVLEOHWKDW530ZRXOGVXIIHUDORVVDQGWKDWLWQHHGHGWREHDFFUXHGIRUEHFDXVH

WKHLQIRUPDWLRQDYDLODEOHWR530DQG0RRUHVXJJHVWHGWKDWDORVVZDVSUREDEOHDQGLWFRXOGEH

UHDVRQDEO\HVWLPDWHGSee 3O¶V2SSDW±

       7KH DSSOLFDEOH DFFRXQWLQJ VWDQGDUGV VHW RXW GLIIHUHQW UXOHV IRU FODLPV WKDW KDYH EHHQ

DVVHUWHGDQGWKRVHWKDWKDYH\HWWREHDVVHUWHG3XUVXDQWWR$6&IRUDFODLPWKDWKDV

EHHQ DVVHUWHG DQ LVVXHU PXVW GLVFORVH D ORVV FRQWLQJHQF\ LI WKHUH LV ³DW OHDVW D UHDVRQDEOH

SRVVLELOLW\´WKDWDORVVPD\EHLQFXUUHGHYHQLIWKHDPRXQWFDQQRWEHUHDVRQDEO\HVWLPDWHG$6&

DWid. DWidDWsee also &RPSO$ORVVFRQWLQJHQF\




                                                    

LVUHDVRQDEO\SRVVLEOHLIWKHOLNHOLKRRGWKDWLWZLOORFFXU³LVPRUHWKDQUHPRWHEXWOHVVWKDQOLNHO\´

$6&DW

       :LWKUHVSHFWWRFODLPVWKDWKDYHQRW\HWEHHQDVVHUWHGGLVFORVXUHLVQRWUHTXLUHG³LIWKHUH

KDV EHHQ QR PDQLIHVWDWLRQ E\ D SRWHQWLDO FODLPDQW RI DQ DZDUHQHVV RI D SRVVLEOH FODLP RU

DVVHVVPHQW´XQOHVV³>L@WLVFRQVLGHUHGSUREDEOHWKDWDFODLPZLOOEHDVVHUWHG´DQG³>W@KHUH

LVDUHDVRQDEOHSRVVLELOLW\WKDWWKHRXWFRPHZLOOEHXQIDYRUDEOH´$6&DW

       $OVR$6&SURYLGHVZLWKUHVSHFWWRDQ³XQDVVHUWHGFODLP´WKDWWKHHQWLW\PXVWFRQVLGHU

WKHSUREDELOLW\RIWKHDVVHUWLRQRIFODLPVDQGWKHSRVVLELOLW\RIORVVWRGHWHUPLQHLIWKHLQYHVWLJDWLRQ

PXVWEHGLVFORVHG$6&DW,IDVVHUWLRQRIDFODLP³LVQRWSUREDEOHQRDFFUXDORU

GLVFORVXUHZRXOGEHUHTXLUHG´Id.DW%XWLIDVVHUWLRQRIDFODLPLVSUREDEOHWKHQ

GLVFORVXUH ZRXOG EH ³UHTXLUHG LQ HLWKHU RI WKH IROORZLQJ FLUFXPVWDQFHV  D >D@Q XQIDYRUDEOH

RXWFRPH LV SUREDEOH EXW WKH DPRXQW RI ORVV FDQQRW EH UHDVRQDEO\ HVWLPDWHG >RU@ E >D@Q

XQIDYRUDEOH RXWFRPH LV UHDVRQDEO\ SRVVLEOH EXW QRW SUREDEOH´  Id. $QG ³>L@I DQ XQIDYRUDEOH

RXWFRPH LV SUREDEOH DQG WKH DPRXQW RI ORVV FDQ EH UHDVRQDEO\ HVWLPDWHG DFFUXDO RI D ORVV LV

UHTXLUHG´Id.DW

       7R GHWHUPLQH WKH SUREDELOLW\ RI DQ XQIDYRUDEOH RXWFRPH LQ DQ\ OLWLJDWLRQ FODLP RU

DVVHVVPHQW $6&  OLVWV D QXPEHU RI IDFWRUV WKH FRPSDQ\ PD\ FRQVLGHU LQFOXGLQJ   WKH

QDWXUHRIWKHOLWLJDWLRQFODLPRUDVVHVVPHQWWKHSURJUHVVRIWKHFDVHWKHRSLQLRQVRIOHJDO

FRXQVHORURWKHUDGYLVRUVWKHH[SHULHQFHRIWKHHQWLW\LQVLPLODUFDVHVWKHH[SHULHQFHRI

RWKHUHQWLWLHVDQG³DQ\GHFLVLRQRIWKHHQWLW\¶VPDQDJHPHQWDVWRKRZWKHHQWLW\LQWHQGVWR

UHVSRQGWRWKHODZVXLWFODLPRUDVVHVVPHQWIRUH[DPSOHDGHFLVLRQWRFRQWHVWWKHFDVHYLJRURXVO\

RUDGHFLVLRQWRVHHNDQRXWRIFRXUWVHWWOHPHQW´$6&DW




                                                    

             $6&UHTXLUHVWKDWDQLVVXHUUHFRUGDQDFFUXDOIRUDORVVFRQWLQJHQF\DVDFKDUJHDJDLQVW

LQFRPHLIDQXQIDYRUDEOHRXWFRPHLVGHWHUPLQHGWREHSUREDEOHDQGWKHDPRXQWRIORVVFDQEH

UHDVRQDEO\HVWLPDWHG$6&DWid. DWid. DW+RZHYHU

WKH³ILOLQJRIDVXLWRUIRUPDODVVHUWLRQRIDFODLPRUDVVHVVPHQWGRHVQRWDXWRPDWLFDOO\LQGLFDWH

WKDWDFFUXDORIDORVVPD\EHDSSURSULDWH´Id.DW

                             D            7KH6(&KDVDOOHJHGWKDWGHIHQGDQWVKDGDGXW\WRGLVFORVHDQGDFFUXH
                                            IRUWKH'2-LQYHVWLJDWLRQLQ530¶V2FWREHUILOLQJV

             *LYHQ WKH WZR VHWV RI VWDQGDUGV LW LV QHFHVVDU\ WR GHWHUPLQH DW WKH RXWVHW ZKHWKHU WKH

LQYHVWLJDWLRQLQTXHVWLRQZDVDQ³DVVHUWHG´RUDQ³XQDVVHUWHG´FODLPXQGHU$6&WRLGHQWLI\

WKHHOHPHQWVUHTXLUHGWRVWDWHDFODLPWKDWGHIHQGDQWVEUHDFKHGDGXW\WRGLVFORVH

             530DQG0RRUHNQHZRIWKHH[LVWHQFHRIWKHZKLVWOHEORZHUqui tam FRPSODLQWE\DWOHDVW

$XJXVW&RPSO0RRUHFRQWHQGVWKDWWKHFODLPZDV³XQDVVHUWHG´LQWKH2FWREHU

WLPHIUDPHEHFDXVHWKHJRYHUQPHQWKDGQRW\HWJLYHQDQ\LQGLFDWLRQZKHWKHULWLQWHQGHGWR

LQWHUYHQHLQWKHqui tam DFWLRQDQGDVVHUWDFODLPDJDLQVW5300RRUH0HPDW±6LQFHWKH

JRYHUQPHQWFODLPZDV³XQDVVHUWHG´0RRUHDUJXHVWKDW$6& UHTXLUHG WKH 6(&WR

DOOHJH WKDW LW ZDV SUREDEOH WKDW D FODLP ZRXOG EH DVVHUWHG DQG WKDW WKHUH ZDV D UHDVRQDEOH

SRVVLELOLW\WKDWDQRXWFRPHRIDQDVVHUWHGFODLPZRXOGEHXQIDYRUDEOHDQGWKDWLQWKHDEVHQFHRI

WKRVHDOOHJDWLRQVWKHFRPSODLQWGRHVQRWDOOHJHWKHH[LVWHQFHRIDGXW\WRGLVFORVHId.

             7KH6(&WDNHVWKHSRVLWLRQWKDW D FODLP KDG LQGHHG EHHQ DVVHUWHGDJDLQVW530VLQFH D

SULYDWHqui tamFRPSODLQWDOOHJLQJDYLRODWLRQRIWKH)&$KDGEHHQILOHGDJDLQVW530LQIHGHUDO

FRXUW3O¶V2SSDW0RUHRYHULWDUJXHVWKDWHYHQLIWKHRULJLQDOFRPSODLQWGLGQRWTXDOLI\DV

DQ ³DVVHUWHG´ FODLP EHFDXVH WKH 8QLWHG 6WDWHV KDG QRW \HW LQWHUYHQHG WKH KLJKHU SUREDELOLW\


     530GRHVQRWPDNHDQ\DUJXPHQWDVWRZKHWKHUWKHFODLPZDV³DVVHUWHG´RU³XQDVVHUWHG´
EXWUDWKHUIRFXVHVRQKRZ$6&GRHVQRWUHTXLUHFRPSDQLHVWRGLVFORVHVHWWOHPHQWRIIHUVLQ
JHQHUDO5300HPDW±
                                                                   

VWDQGDUGIRUDQ³XQDVVHUWHG´FODLPZRXOGQRWDSSO\EHFDXVH'2-KDGDWOHDVW³PDQLIHVWHGDQ

DZDUHQHVVRIDSRVVLEOHFODLP´ZKLFKZRXOGSUHFOXGHWKHDSSOLFDWLRQRI$6&Id.

TXRWLQJ$6&7KXVWRVWDWHDFODLPWKDWGLVFORVXUHZDVUHTXLUHGDOOWKH6(&KDGWR

DOOHJHZDVWKDWWKHUHZDVD³UHDVRQDEOHSRVVLELOLW\´WKDWDORVVFRXOGRFFXUSee 3O¶V2SSDW

$6&id. DWid DW7KH&RXUWDJUHHV

       )LUVWWKH6(&KDVSODXVLEO\DOOHJHGWKDWDFODLPKDGDOUHDG\EHHQDVVHUWHGDJDLQVW530

3DUDJUDSKRIWKHFRPSODLQWVWDWHVWKDWWKHqui tam DFWLRQZDVILOHGLQ-XO\DQGSDUDJUDSKV

DQGDOOHJHWKDW530DQG0RRUHZHUHDZDUHRIWKHFRPSODLQWDQGNQHZWKDW

'2-ZDVDFWLYHO\HQJDJHGLQDQLQYHVWLJDWLRQWRGHFLGHZKHWKHUWRLQWHUYHQHLQLW&RPSO±

$QGHYHQLIDFODLPRQWKHSDUWRIWKH8QLWHG6WDWHVZDVDV\HW³XQDVVHUWHG´WKH$6&

JXLGHOLQHV VXUURXQGLQJ GLVFORVXUH ZRXOG DSSO\ EHFDXVH '2- KDG FHUWDLQO\ ³PDQLIHVWHG´ DQ

³DZDUHQHVVRIDSRVVLEOHFODLP´E\LVVXLQJVXESRHQDVDQGHQJDJLQJLQFRPPXQLFDWLRQVZLWK530

DQG530¶VFRXQVHOUHODWHGWRWKHDPRXQWRIWKHRYHUSD\PHQWVSee, e.g. &RPSO



       $6&GRHVQRWSURYLGHDQ\JXLGDQFHDVWRZKDWLWPHDQVWR³PDQLIHVW´DQ³DZDUHQHVV

RIDSRVVLEOHFODLP´0RRUHKHDYLO\UHOLHVRQIn re Lions Gate Entertainment Corp. Securities

Litigation)6XSSG6'1<IRUWKHSURSRVLWLRQWKDWDJRYHUQPHQWDJHQF\FDQQRW

EHVDLGWRKDYH³PDQLIHVWHGDZDUHQHVV´RIDFODLPVLPSO\EHFDXVHLWLVLQYHVWLJDWLQJDSRWHQWLDO

YLRODWLRQRIODZ0RRUH0HPDW,QWKDWFDVHWKHFRPSODLQWDOOHJHGWKDWGHIHQGDQWVZHUH

DZDUH RI DQ DFWLYH 6(& LQYHVWLJDWLRQ LQWR DOOHJHGO\ IDOVH VWDWHPHQWV DQG RPLVVLRQV PDGH LQ

FRQQHFWLRQZLWKFHUWDLQFRUSRUDWHWUDQVDFWLRQVDQGWKDWWKHFRPSDQ\XOWLPDWHO\VHWWOHGZLWKWKH

6(&SULRUWRWKHILOLQJRIDQ\HQIRUFHPHQWDFWLRQIn re Lions Gate)6XSSGDW7KH

FRXUWJUDQWHGWKHFRPSDQ\¶VPRWLRQWRGLVPLVVKROGLQJWKDWD³JRYHUQPHQWLQYHVWLJDWLRQZLWKRXW



                                                  

PRUHGRHVQRWWULJJHUDJHQHUDOL]HGGXW\WRGLVFORVH´id. DWDQGWKDWWKHFRPSDQ\GLGQRWKDYH

D GXW\ WR GLVFORVH RU DFFUXH XQGHU $6&  EHFDXVH WKH LQYHVWLJDWLRQ LWVHOI GLG QRW TXDOLI\ DV

³SHQGLQJ RU WKUHDWHQHG OLWLJDWLRQ´ DQG WKHUH ZDV QR ZD\ WKH ORVV FRXOG KDYH EHHQ HVWLPDWHG

EHFDXVHWKHVHWWOHPHQWDPRXQWZDVQRW UHYHDOHG XQWLOWKH FRPSDQ\DFFUXHGDQH[SHQVHIRU WKH

SRVVLEOHVHWWOHPHQWId. DW±

       In re Lions GateLVQRWELQGLQJRQWKH&RXUWDQGLQDQ\HYHQWLWLVHDVLO\GLVWLQJXLVKDEOH

VLQFH 530 DQG 0RRUH KDG NQRZOHGJH RI PRUH WKDQ MXVW WKH PHUH H[LVWHQFH RI DQ RSHQ

LQYHVWLJDWLRQWKH\NQHZWKDWDIHGHUDOFLYLOFRPSODLQWDOOHJLQJYLRODWLRQVRIWKH)DOVH&ODLPV$FW

ZDV DFWXDOO\ SHQGLQJ DQG WKDW '2- ZDV LQ WKH PLGVW RI GHWHUPLQLQJ ZKHWKHU LW ZDV JRLQJ WR

LQWHUYHQHDQGWDNHRYHUWKHFDVH$QGWKH6(&¶VFRPSODLQWKHUHDOOHJHVWKDWE\6HSWHPEHURI

DW WKH ODWHVW 530 WKURXJK LWV RXWVLGH FRXQVHO ZDV HQJDJHG LQ TXDQWLI\LQJ WKH VFRSH RI WKH

RYHUFKDUJHWRWKHJRYHUQPHQWZKLFKXQGHUWKH)&$FRXOGEHWUHEOHG

       )RUWKRVHUHDVRQVWKLVFDVHLVPRUHVLPLODUWRIndiana Public Retirement System v. SAIC,

Inc.  )G  G &LU   ,Q WKDW FDVH WKH GHIHQGDQW SURYLGHG YDULRXV VHUYLFHV WR

JRYHUQPHQW DJHQFLHV DQG LW EHFDPH WKH SULPH FRQWUDFWRU RQ D SURMHFW ZLWK 1HZ <RUN &LW\ WR

GHYHORSDQDXWRPDWHGWLPHNHHSLQJSURJUDPNQRZQDV&LW\7LPHId. DW7KHGHIHQGDQWEHFDPH

LQYROYHGLQDQHODERUDWHNLFNEDFNVFKHPHZKLFKUHTXLUHGZRUNHUVWRLQIODWHELOODEOHKRXUVDQG

KRXUO\ UDWHV DQG XOWLPDWHO\ WKH FLW\ EHJDQ HYDOXDWLQJ ZKHWKHU LW ZRXOG VHHN UHFRYHU\ RI LWV

SD\PHQWVWRWKHGHIHQGDQWLQFRQQHFWLRQZLWKWKHSURMHFWId. %XWWKHGHIHQGDQWGLGQRWGLVFORVH

LWVSRWHQWLDOOLDELOLW\UHODWHGWRWKH&LW\7LPHSURMHFWLQLWV)RUP.Id. 7KHFRXUWKHOGWKDWWKH

SODLQWLIIKDGDGHTXDWHO\DOOHJHGWKDWWKHGHIHQGDQWYLRODWHG)LQDQFLDO$FFRXQWLQJ6WDQGDUG1R

³)$6´WKHSUHFXUVRUWR$6&E\IDLOLQJWRGLVFORVHDORVVFRQWLQJHQF\LQLWV)RUP.

ILOLQJDULVLQJIURPWKHFLW\¶V³PDQLIHVWDZDUHQHVV´RIDSRVVLEOHFODLPDJDLQVWWKHGHIHQGDQWId.



                                                     

DW±)XUWKHUWKHFRXUWFRQFOXGHGWKDWWKH³UHDVRQDEOHSRVVLELOLW\´VWDQGDUGRI)$6DSSOLHG

VLQFHWKH³>F@LW\KDGPDQLIHVWHGDQDZDUHQHVVRIDSRVVLEOHVL]HDEOHFODLPDJDLQVW´WKHGHIHQGDQW

ZKHUHDPRQJRWKHUWKLQJVWKHFLW\KDGDOUHDG\ILOHGDFULPLQDOIUDXGFRPSODLQWDJDLQVWFRPSDQ\

SULQFLSDOVWKDW³DOOXGHGWR´WKHFRPSDQ\¶VLPSURSHUFRQGXFWId.

       7KHUHIRUHDSSO\LQJ$6&WRVWDWHDFODLPWKDWGHIHQGDQWVKDGDQREOLJDWLRQWRGLVFORVH

WKH'2-LQYHVWLJDWLRQWKH6(&PXVWKDYHDOOHJHGWKDWWKHUHZDVD³UHDVRQDEOHSRVVLELOLW\´WKDWD

ORVVFRXOGRFFXU$QGLWKDVGRQHVR$FFRUGLQJWRWKHFRPSODLQWGHIHQGDQWV³NQHZRUVKRXOG

KDYH NQRZQ´ WKDW LW ZDV ³UHDVRQDEO\ SRVVLEOH     WKDW 530 ZRXOG LQFXU D PDWHULDO ORVV LQ

FRQQHFWLRQZLWKWKH'2-LQYHVWLJDWLRQ´EDVHGRQWKHIDFWWKDWWKH\NQHZDERXWWKHqui tam DFWLRQ

WKH FRPSDQ\ KDG DOUHDG\ HVWLPDWHGWKDW7UHPFRRYHUFKDUJHGWKHJRYHUQPHQWE\DWOHDVW 

PLOOLRQ DQG 530¶V FRXQVHO KDG EHHQ LQ FRPPXQLFDWLRQ ZLWK WKH '2- DERXW WKLV ILJXUH

&RPSO ±    7KHVH IDFWV JLYH ULVH WR WKH SODXVLEOH DOOHJDWLRQ WKDW LW ZDV

³UHDVRQDEO\SRVVLEOH´DWWKHWLPHRIWKH2FWREHUILOLQJVWKDW530FRXOGKDYHVXIIHUHGDORVV

       530 FRQWHQGV WKDW LW GLG QRW KDYH DQ REOLJDWLRQ WR GLVFORVH RU DFFUXH IRU WKH '2-

LQYHVWLJDWLRQXQGHU$6&EHFDXVHWKHJXLGHOLQHVGRQRWUHTXLUHWKHGLVFORVXUHRIFRQWHPSODWHG

RU H[FKDQJHG VHWWOHPHQW RIIHUV  530 0HP DW ±  %XW WKLV DUJXPHQW LV EHVLGH WKH SRLQW

1RZKHUHLQ6(&¶VFRPSODLQWGRHVLWDOOHJHWKDW530¶VILOLQJVZHUHIDOVHDQGPLVOHDGLQJEHFDXVH

WKH FRPSDQ\ GLG QRW GLVFORVH LWV DFWXDO VHWWOHPHQW RIIHU RU VHWWOHPHQW GLVFXVVLRQV ZLWK '2-

5DWKHU &ODLP  DOOHJHV WKDW 530 KDG D GXW\ WR GLVFORVH WKH '2- LQYHVWLJDWLRQ DV D ORVV

FRQWLQJHQF\EDVHGRQWKHLQIRUPDWLRQLWNQHZSULRUWR$SULO$QGRQHSLHFHRIWKDWSX]]OH

ZDVWKHFRQWHPSODWHGVHWWOHPHQWRIIHUZKLFK$6&UHFRJQL]HVDVRQHIDFWRUDFRPSDQ\PD\

FRQVLGHULQGHWHUPLQLQJLIGLVFORVXUHRUDFFUXDOLVQHFHVVDU\See $6&DWid. DW

id. DW3O¶V2SSDW



                                                     

       7XUQLQJWRZKHWKHUDFFUXDOZDVQHFHVVDU\0RRUHPDLQWDLQVWKDWWKHFRPSDQ\KDGQRGXW\

WRDFFUXHDORVVLQWKH2FWREHUILOLQJVEHFDXVHDORVVZDVQRW³SUREDEOH´DWWKLVWLPHVLQFH

WKHJRYHUQPHQWKDGQRWLQGLFDWHGLILWSODQQHGWRLQWHUYHQHLQWKHqui tam DFWLRQ0RRUH0HPDW

±)XUWKHUKHDUJXHVWKDWWKH6(&GRHVQRWDOOHJHDVKHLQVLVWVLWPXVWWKDW0RRUHNQHZWKHQ

WKDW 530 ZDV OLNHO\ HLWKHU WR VHWWOH RU ORVH DW WULDO  Id. DW   %XW WKH 6(&¶V DOOHJDWLRQV DUH

VXIILFLHQWDWWKLVVWDJHWRVXUYLYHDPRWLRQWRGLVPLVV7KH6(&FODLPVWKDWGHIHQGDQWV³NQHZRU

VKRXOGKDYHNQRZQ´WKDWLWZDV³SUREDEOHDQGUHDVRQDEO\HVWLPDEOH>@WKDW530ZRXOGLQFXUD

PDWHULDOORVVLQFRQQHFWLRQZLWKWKH'2-LQYHVWLJDWLRQ´EHFDXVHWKH\ZHUHDZDUHRIWKHqui tam

FRPSODLQW KDG DOUHDG\ FDOFXODWHG  PLOOLRQ ZRUWK RI OLDELOLW\ WR WKH JRYHUQPHQW DQG KDG

EHJXQGLVFXVVLQJVHWWOHPHQWRSWLRQVZLWK'2-&RPSO±7KLVLQIRUPDWLRQ

VXSSRUWVDSODXVLEOHLQIHUHQFHWKDWLWZDVSUREDEOHWKDWDORVVZRXOGRFFXUDQGWKDWWKHORVVFRXOG

EHUHDVRQDEO\HVWLPDWHGWREHDWOHDVWPLOOLRQ7KHUHIRUHWKH6(&KDVDGHTXDWHO\DOOHJHGWKDW

GHIHQGDQWVYLRODWHG$6&E\IDLOLQJWRGLVFORVHDQGDFFUXHIRUDORVVFRQWLQJHQF\LQ530¶V

WKUHH2FWREHUILOLQJV

                 E      7KH6(&KDVDOOHJHGWKDWGHIHQGDQWVKDGDGXW\WRGLVFORVHDQGDFFUXH
                          IRUWKH'2-LQYHVWLJDWLRQLQ530¶V-DQXDU\ILOLQJV

       *LYHQ WKH DGGLWLRQDO IDFWV WKDW KDG FRPH WR OLJKW E\ WKH WLPH 530 PDGH LWV ILOLQJV RQ

-DQXDU\WKH&RXUWDOVRILQGVWKDWWKH6(&KDVVXIILFLHQWO\DOOHJHGWKDWGHIHQGDQWVKDGD

GXW\WRGLVFORVHDQGDFFUXHIRUWKH'2-LQYHVWLJDWLRQLQWKH-DQXDU\ILOLQJVDQGWKHUHIRUH

DGHTXDWHO\DOOHJHGWKDWGHIHQGDQWVYLRODWHG$6&DWWKDWWLPHDVZHOO

       %XLOGLQJRQWKHIDFWVDOOHJHGLQFRQQHFWLRQZLWKWKH2FWREHUILOLQJVWKHFRPSODLQW

JRHVRQWRDOOHJHWKDW530OHDUQHGLQ1RYHPEHUWKDW'2-H[SHFWHGDQ\VHWWOHPHQWRIIHUWR

EHUHDFKHGE\PLG-DQXDU\DQGWKDWE\PLG'HFHPEHU530WROG'2-WKDWLWZRXOGVXEPLW

DVHWWOHPHQWRIIHUE\-DQXDU\&RPSO)XUWKHURQ'HFHPEHU530


                                                        

UHSUHVHQWDWLYHVLQFOXGLQJ0RRUHGLVFXVVHGWKHFRPSRQHQWVRIWKHSODQQHGVHWWOHPHQWRIIHUZKLFK

WKH\KDGFDOFXODWHGDW±PLOOLRQId. 530XOWLPDWHO\VXEPLWWHGDSDJHVHWWOHPHQW

SURSRVDOWRWKH'2-IRUPLOOLRQRQ-DQXDU\Id. 

             %DVHGRQWKHVHDGGLWLRQDOIDFWVDQGWKHDOOHJDWLRQVRIZKDWWUDQVSLUHGEHIRUH2FWREHU

WKH6(&KDVDOOHJHGWKDWDVRI-DQXDU\LWZDVUHDVRQDEO\SRVVLEOHWKDWDORVVZRXOGRFFXU

DQGWKDWWKHUHIRUH530ZDVREOLJDWHGWRGLVFORVHWKH'2-LQYHVWLJDWLRQ$QGLWKDVVXIILFLHQWO\

DOOHJHGWKDWDVRIWKDWGDWHWKHORVVZDVSUREDEOHVLQFH530ZDVLQWKHSURFHVVRISUHSDULQJD

VHWWOHPHQWDJUHHPHQWLQYROYLQJDPRUHWKDQPLOOLRQSD\PHQWDQGLWKDGDOUHDG\SURPLVHGWR

GHOLYHULWWR'2-E\-DQXDU\7KHVHIDFWVFRXSOHGZLWKWKHIDFWWKDW530GHOLYHUHGD

OHQJWK\VHWWOHPHQWSURSRVDOWR'2-WKUHHGD\VDIWHUWKHILOLQJVJLYHULVHWRDSODXVLEOHLQIHUHQFH

WKDWE\-DQXDU\530DQG0RRUHNQHZWKDWLWZDVSUREDEOHWKDWLWZRXOGVHWWOHZLWK'2-DQG

VXIIHUDORVV)XUWKHUWKHORVVFRXOGEHUHDVRQDEO\HVWLPDWHGVLQFH530KDGHVWLPDWHGLWVSRWHQWLDO

OLDELOLW\DWPLOOLRQDQGLQFOXGHGWKDWWHUPLQLWVVHWWOHPHQWRIIHU7KHUHIRUHWKHDJHQF\KDV

DGHTXDWHO\DOOHJHGWKDWGHIHQGDQWVYLRODWHG$6&E\IDLOLQJWRGLVFORVHDQGDFFUXHIRUWKHORVV

FRQWLQJHQF\LQLWV-DQXDU\ILOLQJV

              %            7KH 6(& KDV VXIILFLHQWO\ DOOHJHG WKDW WKH PLVVWDWHPHQWV RU RPLVVLRQV ZHUH
                             PDWHULDO

             'HIHQGDQWV FDQ RQO\ EH OLDEOH IRU D YLRODWLRQ RI 6HFWLRQ D LI WKH\ PDGH

PLVUHSUHVHQWDWLRQVRURPLVVLRQVWKDWZHUHPDWHULDO86&TD7KH&RXUWFRQFOXGHV

WKDWWKH6(&KDVVXIILFLHQWO\DOOHJHGWKDWWKHPLVVWDWHPHQWVRURPLVVLRQVZHUHPDWHULDO





    7KH6(&DOVRDOOHJHVWKDW,WHPRI5HJXODWLRQ6.³,WHP´DQG5XOHEVXSSO\
LQGHSHQGHQWEDVHVWRILQGWKDW530KDGDGXW\WRGLVFORVHWKH'2-LQYHVWLJDWLRQSee &RPSO
+RZHYHUWKH&RXUWGRHVQRWKDYHWRUHDFKWKLVLVVXHEHFDXVHLWKDVDOUHDG\FRQFOXGHGWKDWWKH6(&
DOOHJHGDYLRODWLRQRIWKHGXW\WRGLVFORVHFUHDWHGE\$6&
                                                               

       $ VWDWHPHQW RU RPLVVLRQ LV PDWHULDO XQGHU WKH IHGHUDO VHFXULWLHV ODZV LI WKHUH LV ³D

VXEVWDQWLDOOLNHOLKRRGWKDWDUHDVRQDEOHVKDUHKROGHU>RULQYHVWRU@ZRXOGFRQVLGHU>WKHLQIRUPDWLRQ@

LPSRUWDQW´TSC Indus. v. Northway, Inc.86Basic, Inc. v. Levinson

86±DGRSWLQJTSC Industries VWDQGDUGIRUPDWHULDOLW\WR6HFWLRQEDQG

5XOHEFODLPVSEC v. Steadman)G'&&LU³3XWDQRWKHUZD\

WKHUH PXVW EH D VXEVWDQWLDO OLNHOLKRRG WKDW WKH GLVFORVXUH RI WKH RPLWWHG IDFW ZRXOG KDYH EHHQ

YLHZHGE\WKHUHDVRQDEOHLQYHVWRUDVKDYLQJVLJQLILFDQWO\DOWHUHGWKHµWRWDOPL[¶RILQIRUPDWLRQ

PDGH DYDLODEOH´  TSC Indus.  86 DW   ³>7@KH PDWHULDOLW\ RI D PLVUHSUHVHQWDWLRQ RU

RPLVVLRQPXVWEHDVVHVVHGDVRIWKHWLPHRIWKHFRQWHVWHGWUDQVDFWLRQ´Media Gen., Inc. v. Tomlin

 )G   '& &LU   7KH TXHVWLRQ RI ZKHWKHU DOOHJHG PLVUHSUHVHQWDWLRQV RU

RPLVVLRQVDUHPDWHULDOLVDPL[HGTXHVWLRQRIODZDQGIDFWId.

       %HFDXVH PDWHULDOLW\ LV D PL[HG TXHVWLRQ RI ODZ DQG IDFW FRXUWV KDYH FDXWLRQHG DJDLQVW

JUDQWLQJDPRWLRQWRGLVPLVVEDVHGRQWKHIDLOXUHWRSOHDGPDWHULDOLW\³XQOHVV>WKHLQIRUPDWLRQLV@

VRREYLRXVO\XQLPSRUWDQWWRDUHDVRQDEOHLQYHVWRUWKDWUHDVRQDEOHPLQGVFRXOGQRWGLIIHURQWKH

TXHVWLRQRIWKHLULPSRUWDQFH´ Litwin v. Blackstone Grp., L.P.)GG&LU

GLVDJUHHLQJZLWKWKHGLVWULFWFRXUW³DWWKLVSUHOLPLQDU\VWDJHRIOLWLJDWLRQWKDWWKHDOOHJHGRPLVVLRQV

DQGPLVVWDWHPHQWV´ZHUH³REYLRXVO\XQLPSRUWDQW´TXRWLQJGoldman v. Belden)G

G&LUsee Brown)6XSSGDWILQGLQJWKDWWKHDJHQF\KDGDOOHJHGD

PDWHULDO RPLVVLRQ EHFDXVH ³UHDVRQDEOH PLQGV FRXOG GLIIHU DV WR ZKHWKHU´ WKH LQIRUPDWLRQ ZDV

³REYLRXVO\XQLPSRUWDQW´TXRWLQJGanino v. Citizens Utils. Co.)GG&LU

       &RXUWVKDYHKHOGWKDWWKHLVVXDQFHRIDUHVWDWHPHQWVXIILFLHQWO\SOHDGVPDWHULDOLW\EHFDXVH

XQGHU*$$3³DUHVWDWHPHQWLVVXHVRQO\ZKHQHUURUVDUHPDWHULDO´SEC v. Kelly)6XSSG

6'1<FRQFOXGLQJWKDWWKHIDFWWKDW$2/³UHVWDWHGLWVUHYHQXHV´ZDVVXIILFLHQW



                                                     

WRHVWDEOLVKWKDWLWVPLVVWDWHPHQWVRURPLVVLRQVZHUHPDWHULDOsee also SEC v. Montessoro

)6XSSG6')ODILQGLQJWKDWVXEVHTXHQWO\LVVXHGDPHQGHGDQQXDOUHSRUWV

GHPRQVWUDWHGWKDWWKHVWDWHPHQWVZHUHPDWHULDOIn re BISYS Sec. Litig.)6XSSG

6'1<³3XUVXDQWWR*HQHUDOO\$FFHSWHG$FFRXQWLQJ3ULQFLSOHVµ*$$3¶SUHYLRXVO\

LVVXHG ILQDQFLDO VWDWHPHQWV VKRXOG EH UHVWDWHG RQO\ WR FRUUHFW PDWHULDO DFFRXQWLQJ HUURUV WKDW

H[LVWHGDWWKHWLPHWKHVWDWHPHQWVZHUHLVVXHG´)XUWKHUDOOHJDWLRQVWKDWDGHFLVLRQDIIHFWVPRUH

WKDQILYHSHUFHQWRIWRWDODVVHWVKDVEHHQIRXQGWRVXJJHVWPDWHULDOLW\See ECA, Local 134 IBEW

Joint Pension Tr. of Chi. v. JP Morgan Chase Co.)GG&LUREVHUYLQJ

WKDW³WKHILYHSHUFHQWQXPHULFDOWKUHVKROGLVDJRRGVWDUWLQJSODFHIRUDVVHVVLQJPDWHULDOLW\RIWKH

DOOHJHG PLVVWDWHPHQW´ DQG FRQFOXGLQJ WKDW³>D@Q DFFRXQWLQJ FODVVLILFDWLRQ GHFLVLRQ WKDWDIIHFWV

OHVVWKDQRQHWKLUGRIDSHUFHQWRIWRWDODVVHWVGRHVQRWVXJJHVWPDWHULDOLW\´

       530XUJHVWKH&RXUWWRFRQFOXGHDVDPDWWHURIODZWKDWWKHDOOHJHGPLVVWDWHPHQWVDQG

RPLVVLRQVZHUHLPPDWHULDOEHFDXVHWKHUH³ZDVQRDSSUHFLDEOHLPSDFWRQ530¶VVWRFNSULFHHLWKHU

LDIWHU530GLVFORVHGDQGDFFUXHGPLOOLRQIRUWKH'2-LQYHVWLJDWLRQRULLDIWHU530

LVVXHGLWV$XJXVWUHVWDWHPHQWWRVSUHDGWKDWDFFUXDODFURVVWKUHHTXDUWHUV´5300HP

DW:KLOHVRPHFRXUWVKDYHKHOGWKDWLQIRUPDWLRQPD\EHGHHPHGLPPDWHULDODVDPDWWHURIODZ

LISXEOLFGLVFORVXUHRIWKHLQIRUPDWLRQKDVDQHJOLJLEOHHIIHFWRQVWRFNSULFHsee Oran v. Stafford

)GG&LURWKHUFRXUWVKDYHUHMHFWHGWKLVOLQHRIUHDVRQLQJSee No. 84

Emp’r-Teamster Joint Council Pension Tr. Fund v. Am. W. Holding Corp.)GWK

&LU  GHFOLQLQJ WR DGRSW WKH EULJKWOLQH UXOH IURPOran ³EHFDXVHDGRSWLRQRIVXFKD UXOH

ZRXOG FRQWUDYHQH WKH 6XSUHPH &RXUW¶V KROGLQJ LQ Basic, Inc. v. Levinson´ ZKLFK DGRSWHG WKH

³UHDVRQDEOHLQYHVWRU´VWDQGDUGIRUGHWHUPLQLQJPDWHULDOLW\United States v. Bilzerian)G

G&LU³>:@KHWKHUDSXEOLFFRPSDQ\¶VVWRFNSULFHPRYHVXSRUGRZQRUVWD\V



                                                   

WKHWLPHGRHVQRWHVWDEOLVKWKHPDWHULDOLW\RIWKHVWDWHPHQWVPDGH´see also SEC v. Stanard

1RFY:/DW6'1<-DQFRQFOXGLQJWKDW³WKHIDLOXUH

RI WKH PDUNHW WR UHDFW WR WKH UHWURVSHFWLYH FRUUHFWLRQ´ RI WKH ILQDQFLDO VWDWHPHQWV ³LV RI OLWWOH

VLJQLILFDQFHLQHYDOXDWLQJWKHPDWHULDOLW\RIWKHIDOVHVWDWHPHQWVZKHQPDGH´EHFDXVH³DGLVFORVXUH

WKDWJHQXLQHHDUQLQJVKDGEHHQVKLIWHGIURPRQHTXDUWHUWRDQRWKHUVHYHUDO\HDUVHDUOLHUZRXOGQRW

DIIHFWWKHSHUFHLYHGYDOXHRIWKHFRPSDQ\DVRIWKHWLPHRIWKHGLVFORVXUH´

       7KH'&&LUFXLWGRHVQRWDSSHDUWRKDYHDUWLFXODWHGDSRVLWLRQRQWKLVLVVXHKRZHYHULW

KDVKHOGWKDWPDWHULDOLW\³GRHVQRWUHTXLUHDVKRZLQJRIDFWXDOKDUPWRLQYHVWRUV´Rockies Fund,

Inc. v. SEC)G'&&LUYDFDWLQJWKH6(&¶VRUGHUVDQFWLRQLQJSHWLWLRQHU

IRUVHFXULWLHVYLRODWLRQVEXWUHFRJQL]LQJWKDWVXEVWDQWLDOHYLGHQFHVXSSRUWHGWKH6(&¶VILQGLQJRI

PDWHULDOLW\

       *LYHQWKDWSULQFLSOHDQGWKHJXLGDQFHWKDWFDQEHGHULYHGIURPWKHFDVHODZLQJHQHUDODQG

WDNLQJDOORIWKHIDFWXDODOOHJDWLRQVLQWKLVFDVHDVWUXHDVWKH&RXUWPXVWDWWKHPRWLRQWRGLVPLVV

VWDJHWKH&RXUWGRHVQRWEHOLHYHLWLVDSSURSULDWHWRGLVPLVVWKLVDFWLRQDWWKLVHDUO\MXQFWXUHIRU

IDLOXUHWRSOHDGPDWHULDOLW\1RWRQO\GLG530UHVWDWHLWVILQDQFLDOVWDWHPHQWVIRUWKHILUVWWKUHH

TXDUWHUV RI ILVFDO  LQ ZKLFK LW DGPLWWHG HUURUV LQ GLVFORVLQJ DQG DFFUXLQJ IRU WKH '2-

LQYHVWLJDWLRQDVZHOODVDPDWHULDOZHDNQHVVLQWKHFRPSDQ\¶VLQWHUQDOFRQWUROVsee &RPSO±

 EXW WKH6(& KDV DOOHJHG WKDW WKH PLVVWDWHPHQWV DQG RPLVVLRQV ZHUH PDWHULDO EHFDXVH DV RI

2FWREHUWKHPLOOLRQRYHUFKDUJHHVWLPDWH³HTXDOHGDSSUR[LPDWHO\RI530¶VQHW

LQFRPHIRUWKHILUVWTXDUWHU´Id. :KLOHWKHTXHVWLRQRIPDWHULDOLW\RIWKHVHPLVVWDWHPHQWVRU

RPLVVLRQVPD\DULVHDJDLQRQVXPPDU\MXGJPHQWDIWHUWKHUHFRUGKDVEHHQPRUHIXOO\GHYHORSHG

WKH&RXUWFDQQRWFRQFOXGHDWWKLVVWDJHWKDWGLVFORVXUHRIWKH'2-LQYHVWLJDWLRQRUDFFUXDORIWKH

SRWHQWLDOORVVDVDFKDUJHDJDLQVWLQFRPHDQGDFFXUDWHVWDWHPHQWVDERXW530¶VLQWHUQDOFRQWUROV



                                                      

ZHUH³VRREYLRXVO\XQLPSRUWDQWWRDUHDVRQDEOHLQYHVWRUWKDWUHDVRQDEOHPLQGVFRXOGQRWGLIIHURQ

WKHTXHVWLRQRIWKHLULPSRUWDQFH´See Litwin.)GDW

        &     (YHQLIWKHVWDWHPHQWVFRQWDLQHGZLWKLQWKH2FWREHUDQG-DQXDU\
                ILOLQJV FDQ EH FKDUDFWHUL]HG DV RSLQLRQ VWDWHPHQWV WKH 6(& KDV DGHTXDWHO\
                DOOHJHGWKDWWKH\ZHUHIDOVHRUPLVOHDGLQJ

       530 DUJXHV WKDW QRQH RI WKH VWDWHPHQWV ZLWKLQ LWV 6(& ILOLQJV IRU WKH ILUVW DQG VHFRQG

TXDUWHUVRIILVFDOFRXOGEHIDOVHRUPLVOHDGLQJEHFDXVHHDFK6(&ILOLQJUHIOHFWHG³DFRUSRUDWH

GHFLVLRQDSSO\LQJDVXEMHFWLYHDFFRXQWLQJVWDQGDUG>ZKLFK@LVDVWDWHPHQWRIopinionQRWD

VWDWHPHQWRIfact´5300HPDWHPSKDVLVLQRULJLQDO$OWKRXJKWKHFRPSDQ\GRHVQRWUHIHU

WRDQ\VWDWHPHQWLQSDUWLFXODU530¶VUHSO\VHHPVWREHFRQFHUQHGRQO\ZLWK³530¶VILQDQFLDO

VWDWHPHQWVFRQFHUQLQJORVVFRQWLQJHQFLHV´See 5305HSO\DW7KH6(&PDLQWDLQVWKDW³LWLV

IDUIURPFOHDUWKDW530¶VPLVVWDWHPHQWVVKRXOGEHFRQVLGHUHGH[SUHVVLRQVRIRSLQLRQ´EXWWKDWLQ

DQ\ HYHQW LW KDV SURYLGHG HQRXJK IDFWV WR DOOHJH WKDW WKRVH VWDWHPHQWV ZHUH PLVOHDGLQJ E\

RPLVVLRQ3O¶V2SSDW7KH&RXUWDJUHHV

       7KHPLVVWDWHPHQWVDWLVVXHZHUHFRQWDLQHGZLWKLQ530¶V)RUP4ILOHGRQ2FWREHU

DQGLQLWV)RUP4ILOHGRQ-DQXDU\

                :HDUHSDUW\WRYDULRXVFODLPVDQGODZVXLWVDULVLQJLQWKHQRUPDOFRXUVHRI
                EXVLQHVV$OWKRXJKZHFDQQRWSUHFLVHO\SUHGLFWWKHDPRXQWRIDQ\OLDELOLW\
                WKDWPD\XOWLPDWHO\DULVHZLWKUHVSHFWWRDQ\RIWKHVHPDWWHUVZHUHFRUG
                SURYLVLRQV ZKHQ ZH FRQVLGHU WKH OLDELOLW\ SUREDEOH DQG UHDVRQDEO\
                HVWLPDEOH  2XU SURYLVLRQV DUH EDVHG RQ KLVWRULFDO H[SHULHQFH DQG OHJDO
                DGYLFH UHYLHZHG TXDUWHUO\ DQG DGMXVWHG DFFRUGLQJ WR GHYHORSPHQWV ,Q
                JHQHUDORXUDFFUXDOVLQFOXGLQJRXUDFFUXDOVIRUHQYLURQPHQWDOZDUUDQW\
                DQGWD[OLDELOLWLHVGLVFXVVHGIXUWKHUEHORZUHSUHVHQWWKHEHVWHVWLPDWHRID
                UDQJHRISRVVLEOHORVVHV(VWLPDWLQJSUREDEOHORVVHVUHTXLUHVWKHDQDO\VLV
                RI PXOWLSOH IRUHFDVWHG IDFWRUV WKDW RIWHQ GHSHQG RQ MXGJPHQWV DERXW
                SRWHQWLDODFWLRQVE\WKLUGSDUWLHVVXFKDVUHJXODWRUVFRXUWVDQGVWDWHDQG
                IHGHUDOOHJLVODWXUHV&KDQJHVLQWKHDPRXQWVRIRXUORVVSURYLVLRQVZKLFK
                FDQEHPDWHULDODIIHFWRXU&RQVROLGDWHG6WDWHPHQWVRI,QFRPH:KLOHLWLV
                UHDVRQDEO\SRVVLEOHWKDWH[FHVVOLDELOLWLHVLIWKH\ZHUHWRRFFXUFRXOGEH
                PDWHULDOWRRSHUDWLQJUHVXOWVLQDQ\JLYHQTXDUWHURU\HDURIWKHLUUHFRJQLWLRQ
                ZHGRQRWEHOLHYHWKDWLWLVUHDVRQDEO\SRVVLEOHWKDWH[FHVVOLDELOLWLHVZRXOG


                                                     

                             KDYH D PDWHULDO DGYHUVH HIIHFW RQ RXU ORQJWHUP UHVXOWV RI RSHUDWLRQV
                             OLTXLGLW\RUFRQVROLGDWHGILQDQFLDOSRVLWLRQ

)RUP4KWWSVZZZVHFJRY$UFKLYHVHGJDUGDWDGG

TKWP )RUP 4 KWWSVZZZVHFJRY$UFKLYHVHGJDUGDWDG

GTKWPsee &RPSO±([3WR:DJHQHU'HFO>'NW@([WR/DYHUQH

'HFO>'NW@

             %RWK SDUWLHV UHO\ RQ WKH 6XSUHPH &RXUW¶V UHFHQW GHFLVLRQ LQ Omnicare Inc. v. Laborers

District Council Construction Industry Pension Fund6&W,QWKDWFDVHWKH

6XSUHPH &RXUW DQDO\]HG ZKHWKHU D FRPSDQ\¶V VWDWHPHQW DERXW LWV FRPSOLDQFH ZLWK OHJDO

UHTXLUHPHQWVLQDUHJLVWUDWLRQVWDWHPHQWFRXOGYLRODWH6HFWLRQRIWKH6HFXULWLHV$FWVLQFHWKH

VWDWXWHFUHDWHV³WZRZD\VWRKROGLVVXHUVOLDEOHIRUWKHFRQWHQWVRIDUHJLVWUDWLRQVWDWHPHQW±RQH

IRFXVLQJRQZKDWWKHVWDWHPHQWVD\VDQGWKHRWKHURQZKDWLWOHDYHVRXW´6&WDWsee

86&ND7KHWZRVWDWHPHQWVDWLVVXHZHUHFDVWLQWKHIRUPRIDQRSLQLRQ

                             x :HEHOLHYHRXUFRQWUDFWDUUDQJHPHQWVZLWKRWKHUKHDOWKFDUHSURYLGHUV
                                RXU SKDUPDFHXWLFDO VXSSOLHUV DQG RXU SKDUPDF\ SUDFWLFHV DUH LQ
                                FRPSOLDQFHZLWKDSSOLFDEOHIHGHUDODQGVWDWHODZV

                             x :H EHOLHYH WKDW RXU FRQWUDFWV ZLWK SKDUPDFHXWLFDO PDQXIDFWXUHUV DUH
                                OHJDOO\ DQG HFRQRPLFDOO\ YDOLG DUUDQJHPHQWV WKDW EULQJ YDOXH WR WKH
                                KHDOWKFDUHV\VWHPDQGWKHSDWLHQWVWKDWZHVHUYH

Omnicare6&W DWFLWDWLRQVRPLWWHG


           6HFWLRQSURYLGHV

                             ,Q FDVH DQ\ SDUW RI WKH UHJLVWUDWLRQ VWDWHPHQW ZKHQ VXFK SDUW EHFDPH
                             HIIHFWLYHFRQWDLQHGDQXQWUXHVWDWHPHQWRIDPDWHULDOIDFWRURPLWWHGWRVWDWH
                             D PDWHULDO IDFW UHTXLUHG WR EH VWDWHG WKHUHLQ RU QHFHVVDU\ WR PDNH WKH
                             VWDWHPHQWV WKHUHLQ QRW PLVOHDGLQJ DQ\ SHUVRQ DFTXLULQJ VXFK
                             VHFXULW\>PD\@VXH

 86&  ND  7KLV VWDWXWH OLNH 6HFWLRQ D GRHV QRW UHTXLUH SURRI RI VFLHQWHU
Omnicare6&WDWFLWLQJHerman & MacLean v. Huddleston86±

                                                                

       :KLOH³DVLQFHUHVWDWHPHQWRISXUHRSLQLRQLVQRWDQµXQWUXHVWDWHPHQWRIPDWHULDOIDFW¶

UHJDUGOHVV ZKHWKHU DQ LQYHVWRU FDQ XOWLPDWHO\ SURYH WKH EHOLHI ZURQJ´ id. DW  WKH &RXUW

H[SODLQHG WKDW 6HFWLRQ ¶V IDOVH VWDWHPHQW SURYLVLRQ FDQ EH DSSOLHG WR H[SUHVVLRQV RI RSLQLRQ

EHFDXVH³HYHU\VXFKVWDWHPHQWH[SOLFLWO\DIILUPVRQHIDFWWKDWWKHVSHDNHUDFWXDOO\KROGVWKHVWDWHG

EHOLHI´Id. DW7KHUHIRUH6HFWLRQZRXOGVXEMHFWWKHLVVXHUWROLDELOLW\LIWKHVSHDNHUPDGH

DVWDWHPHQWDQGNQHZWKDWLWZDVIDOVHId. 7KH&RXUWZHQWRQWRKROGWKDWERWKVWDWHPHQWVDWLVVXH

TXDOLILHGDVRSLQLRQVDQGWKDWVLQFHWKHSODLQWLIIKDG³QRWFRQWHVW>HG@WKDW2PQLFDUH¶VRSLQLRQZDV

KRQHVWO\KHOG´WKHFRPSODLQWGLGQRWVWDWHDFODLPEDVHGRQDIDOVHVWDWHPHQWId. DW

       %DVHGRQWKDWSUHFHGHQW530DUJXHVWKDWWKH6(&¶VFODLPVKRXOGEHGLVPLVVHGEHFDXVH

WKH 6(& ILOLQJV FRQWDLQHG RSLQLRQV DQG WKH FRPSODLQW GRHV QRW SODXVLEO\ DOOHJH WKDW 530

H[SUHVVHGWKHRSLQLRQVZLWKWKHNQRZOHGJHWKDWWKH\ZHUHIDOVHSee 5300HPDW%XW530

GLVUHJDUGVWKHUHPDLQGHURIWKH6XSUHPH&RXUW¶VGHFLVLRQLQZKLFKLWKHOGWKDW6HFWLRQSODLQWLIIV

FRXOGVWDWHDFODLPEDVHGRQRPLVVLRQVUHODWHGWRDQRSLQLRQDQGLWUHPDQGHGWKHFDVHIRUIXUWKHU

SURFHHGLQJVOmnicare6&WDW±

       7KH 6XSUHPH &RXUW H[SODLQHG WKDW DQ ³RPLVVLRQ RI D IDFW FDQ PDNH D VWDWHPHQW RI

RSLQLRQHYHQLIOLWHUDOO\DFFXUDWHPLVOHDGLQJWRDQRUGLQDU\LQYHVWRU´DQGWKDWWKLVLQTXLU\

LVREMHFWLYHDQG³GHSHQGVRQWKHSHUVSHFWLYHRIDUHDVRQDEOHLQYHVWRU´Omnicare6&WDW

±7KH&RXUWREVHUYHGWKDWWKHZRUGV³ZHEHOLHYH´RU³ZHWKLQN´³FDQSUHIDFHQHDUO\DQ\

FRQFOXVLRQDQGWKHUHVXOWLQJVWDWHPHQWVUHPDLQSHUIHFWO\FDSDEOHRIPLVOHDGLQJLQYHVWRUV´Id.

DW7KHSRLQWRIWKHRPLVVLRQVFODXVHLQ6HFWLRQLVWKDWDQLVVXHUPD\QRWVD\RQHWKLQJ

EXW KROG EDFN DQRWKHU DQG LW ³DVNV ZKDW >D UHDVRQDEOH SHUVRQ@ ZRXOG QDWXUDOO\ XQGHUVWDQG D

VWDWHPHQW WR FRQYH\ EH\RQG LWV OLWHUDO PHDQLQJ´  Id. DW ±  7KH FODXVH DOVR LQYROYHV




                                                    

³FRQVLGHULQJWKHIRXQGDWLRQ>DUHDVRQDEOHSHUVRQ@ZRXOGH[SHFWDQLVVXHUWRKDYHEHIRUHPDNLQJ

WKHVWDWHPHQW´Id. DW

             7KH &RXUW WKHQ GHWDLOHG ZKDW D SODLQWLII PXVW DOOHJH LQ RUGHU WR VWDWH D FODLP EDVHG RQ

6HFWLRQ¶VRPLVVLRQVFODXVH

                             6HFWLRQ ¶V RPLVVLRQV FODXVH DIWHU DOO LV QRW D JHQHUDO GLVFORVXUH
                             UHTXLUHPHQW LW DIIRUGV D FDXVH RI DFWLRQ RQO\ ZKHQ DQLVVXHU¶V IDLOXUH WR
                             LQFOXGHDPDWHULDOIDFWKDVUHQGHUHGDSXEOLVKHGVWDWHPHQWPLVOHDGLQJ7R
                             SUHVVVXFKDFODLPDQLQYHVWRUPXVWDOOHJHWKDWNLQGRIRPLVVLRQ±DQGQRW
                             PHUHO\E\PHDQVRIFRQFOXVRU\DVVHUWLRQV7REHVSHFLILF7KHLQYHVWRU
                             PXVW LGHQWLI\ SDUWLFXODU DQG PDWHULDO IDFWV JRLQJ WR WKH EDVLV IRU WKH
                             LVVXHU¶VRSLQLRQ±IDFWVDERXWWKHLQTXLU\WKHLVVXHUGLGRUGLGQRWFRQGXFW
                             RUWKHNQRZOHGJHLWGLGRUGLGQRWKDYH±ZKRVHRPLVVLRQPDNHVWKHRSLQLRQ
                             VWDWHPHQWDWLVVXHPLVOHDGLQJWRDUHDVRQDEOHSHUVRQUHDGLQJWKHVWDWHPHQW
                             IDLUO\DQGLQFRQWH[W

Omnicare6&WDWLQWHUQDOFLWDWLRQRPLWWHG

             ,IWKHOmnicare UXOLQJLVWREHDSSOLHGWRD6HFWLRQDFODLPWKH6(&¶VFRPSODLQW

SDVVHVWKHREMHFWLYHWHVW7KHIDFWVDOOHJHGLQWKHFRPSODLQWDERXWZKDWZDVNQRZQWR0RRUHDQG

530EXWRPLWWHGIURPWKHILOLQJVZRXOGUHQGHUWKHVWDWHPHQWVPLVOHDGLQJWRDUHDVRQDEOHUHDGHU

$OVRWKHFRPSODLQWVXSSRUWVDSODXVLEOHLQIHUHQFHWKDW530¶VVWDWHPHQWVDERXWFRQWLQJHQFLHVGLG

QRWUHVWRQPHDQLQJIXOLQTXLU\DQGGLGQRWIDLUO\DOLJQZLWKWKHIDFWVNQRZQDWWKHWLPH

             7KH6(&DOOHJHGWKHIROORZLQJIDFWVZLWKUHJDUGWRZKDWZDVNQRZQSULRUWR530¶V6(&

ILOLQJRQ2FWREHU




    7KH'&&LUFXLWKDVQRW\HWUXOHGRQWKHTXHVWLRQRIZKHWKHUOmnicare DSSOLHVWR6HFWLRQ
DFODLPVDVZHOOEXWRWKHUFRXUWVKDYHKHOGWKDWWKH6HFWLRQGHFLVLRQZRXOGDSSO\WRDOO
DQWLIUDXGSURYLVLRQVLQWKHVHFXULWLHVODZVSee, e.g.Tongue v. Sanofi)G±G
&LU DSSO\LQJOmnicare WRVHFXULWLHVIUDXGFODLPVDULVLQJXQGHU6HFWLRQEDQG 5XOH
ELQDGGLWLRQWR6HFWLRQZLWKRXWGLVWLQJXLVKLQJDPRQJWKHSURYLVLRQVCity of Dearborn
Heights Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc.)GWK&LU
KROGLQJWKDWWKHVWDQGDUGVIRUSOHDGLQJIDOVLW\RIRSLQLRQVWDWHPHQWVDUWLFXODWHGLQOmnicareDSSO\
WR6HFWLRQEDQG5XOHEFODLPV 

                                                                  

            x $XJXVW    530 SHUVRQQHO LQFOXGLQJ 0RRUH UHYLHZHG WKH qui tam
               FRPSODLQW EXW 0RRUH GLG QRW GLVFORVH WKH FRPSODLQW WR WKH DXGLW ILUP
               &RPSO±

            x 6HSWHPEHU    530¶V RXWVLGH FRXQVHO PHW ZLWK '2- ZLWK 0RRUH¶V
               NQRZOHGJH DQG DXWKRUL]DWLRQ DQG LQIRUPHG '2- WKDW 7UHPFR RYHUFKDUJHG WKH
               JRYHUQPHQWE\DWOHDVWPLOOLRQ&RPSO

            x 6HSWHPEHU530¶VDXGLWILUPDVNHG0RRUHDERXWWKHVWDWXVRIWKH'2-
               LQYHVWLJDWLRQDQG0RRUHWROGWKHILUPWKDW³QRFODLPKDGEHHQDVVHUWHG´DQGWKH
               PDWWHUZDV³LQYHVWLJDWLYHLQQDWXUHDQGQRWLQOLWLJDWLRQ´&RPSO

            x 2FWREHU0RRUHVHQWDPDQDJHPHQWUHSUHVHQWDWLRQOHWWHUWRWKHDXGLWILUP
               VWDWLQJ WKDW QHLWKHU KH QRU DQ\ ODZ\HUV KH VXSHUYLVHV KDG JLYHQ VXEVWDQWLYH
               DWWHQWLRQ WR RU UHSUHVHQWHG WKH FRPSDQ\ LQ FRQQHFWLRQ ZLWK PDWHULDO ORVV
               FRQWLQJHQFLHVH[FHHGLQJPLOOLRQ&RPSO

            x 2FWREHU    530 VHQW '2- D ZULWWHQ DQDO\VLV ZLWK 0RRUH¶V NQRZOHGJH
               HVWLPDWLQJWKDW7UHPFRKDGRYHUFKDUJHGWKHJRYHUQPHQWE\DSSUR[LPDWHO\
               PLOOLRQ&RPSO

            x 2FWREHU    $W 530¶V $XGLW &RPPLWWHH¶V PHHWLQJ DWWHQGHG E\ WKH &(2
               &)2 0RRUH DQG RWKHUV 0RRUH GLG QRW GLVFORVH WKH  PLOOLRQ RYHUFKDUJH
               HVWLPDWH&RPSO

            x 2FWREHU    7KH &KDLUPDQ RI 530¶V $XGLW &RPPLWWHH FRPPXQLFDWHG WR
               WKRVH LQ DWWHQGDQFH LQFOXGLQJ 0RRUH WKDW WKH FRPSDQ\ ZDV ³QRW JRLQJ WR EH
               DFFHSWLQJRIRQJRLQJH[WUDRUGLQDU\FKDUJHVRURQHWLPHFKDUJHV´DJDLQVWLQFRPH
               EHFDXVH³WKDWZRXOG>QRW@ERGHZHOOIRUWKHFRPSDQ\DQG>@WKHLPSUHVVLRQRIRXU
               VKDUHKROGHUVDQGRWKHUVRIKRZZHUXQWKHEXVLQHVV´&RPSO

       (YHQPRUHIDFWVZHUHDOOHJHGWRKDYHEHHQNQRZQE\0RRUHDQG530SULRUWRWKH-DQXDU\

ILOLQJ

            x 'HFHPEHU:LWK0RRUH¶VNQRZOHGJHDQGDXWKRUL]DWLRQ530VHQW'2-
               DQRWKHUDQDO\VLVFDOFXODWLQJWKDW7UHPFRRYHUFKDUJHGWKHJRYHUQPHQWE\DWRWDORI
               DWOHDVWPLOOLRQ&RPSO

            x 'HFHPEHU:LWK0RRUH¶VNQRZOHGJHDQGDXWKRUL]DWLRQ530LQIRUPHG
               '2-WKDWLWZRXOGVXEPLWDVHWWOHPHQWRIIHUWRUHVROYHWKHXQGHUO\LQJquit tam DFWLRQ
               E\-DQXDU\&RPSO

            x 'HFHPEHU530¶VFRXQVHOKHOGDFRQIHUHQFHFDOOZLWK530SHUVRQQHO
               LQFOXGLQJ0RRUHWRGLVFXVVWKH'2-LQYHVWLJDWLRQDQGWKHVHWWOHPHQWRIIHU7KH
               SDUWLHV FRQFOXGHG WKDW WKH VHWWOHPHQW RIIHU ZRXOG WRWDO DSSUR[LPDWHO\ ±
               PLOOLRQ&RPSO

                                                  

              x 'HFHPEHU0RRUHVHQWDQRWKHUPDQDJHPHQWUHSUHVHQWDWLRQOHWWHUWRWKH
                 DXGLW ILUP VWDWLQJ WKDW KH QRU DQ\ ODZ\HUV KH VXSHUYLVHV KDG JLYHQ VXEVWDQWLYH
                 DWWHQWLRQ WR RU UHSUHVHQWHG WKH FRPSDQ\ LQ FRQQHFWLRQ ZLWK PDWHULDO ORVV
                 FRQWLQJHQFLHVH[FHHGLQJPLOOLRQ&RPSO

              x 'HFHPEHU530¶VDXGLWILUPDVNHG0RRUHDERXWWKHVWDWXVRIWKH'2-
                 LQYHVWLJDWLRQDVSDUWRILWVVHFRQGTXDUWHUUHYLHZDQG0RRUHWROGWKHILUPWKDW³QR
                 FODLPKDVEHHQILOHG´DQG³QRORVVFRQWLQJHQF\H[LVWV´&RPSO

              x -DQXDU\    'XULQJ WKH VHFRQG TXDUWHUO\ PHHWLQJ ZLWK 530¶V $XGLW
                 &RPPLWWHH0RRUHXSGDWHGWKRVHLQDWWHQGDQFHDERXWWKH'2-LQYHVWLJDWLRQEXWKH
                 GLGQRWGLVFORVHDQ\RYHUFKDUJHHVWLPDWHVWKDWKDGEHHQFDOFXODWHGWKDW530KDG
                 WROG'2-WKDWLWZRXOGVXEPLWDVHWWOHPHQWRIIHUE\-DQXDU\RUWKDWWKH
                 VHWWOHPHQWFDOFXODWLRQVKDGUHDFKHG±PLOOLRQ&RPSO

       530DUJXHVWKDWLWVILOLQJVUHIOHFWDMXGJPHQWWKDW*$$3DQGWKHVHFXULWLHVODZVGLGQRW

UHTXLUHGLVFORVXUHRUDFFUXDOIRUWKH'2-LQYHVWLJDWLRQ7KH&RXUWKDVDOUHDG\GHWDLOHGZK\WKH

FRPSODLQWIDLUO\DOOHJHVWKDWWKHRPLVVLRQVGLGQRWFRPSRUWZLWK*$$3DQGWKHVDPHIDFWVPDNH

530¶VVWDWHPHQWVWKDWLWKDGDUULYHGDWWKLVEHOLHIRUMXGJPHQWPLVOHDGLQJ$QGHYHQLIVXFKD

MXGJPHQWZDVDFWXDOO\PDGHWKHFRPSDQ\DUULYHGDWLWVFRQFOXVLRQZKHQFULWLFDOLQIRUPDWLRQZDV

DOOHJHGO\EHLQJZLWKKHOGIURP530¶V&)2&(2$XGLW&RPPLWWHHDQGRXWVLGHDXGLWILUP$

UHDVRQDEOHSHUVRQUHDGLQJDFRPSDQ\¶VMXGJPHQWDERXWDFFRXQWLQJSULQFLSOHVZRXOGH[SHFWWKDW

WKHVHSHRSOHDQGHQWLWLHVZRXOGKDYHEHHQIXOO\LQIRUPHGSULRUWRPDNLQJDQ\VWDWHPHQWVUHJDUGLQJ

ORVVFRQWLQJHQFLHVLQWKH6(&ILOLQJV

       7KHUHIRUHHYHQLIWKHVWDWHPHQWVLQWKH6(&ILOLQJVFDQEHFODVVLILHGDV³RSLQLRQV´WKH

&RXUWILQGVWKDWWKH6(&KDVDOOHJHGVXIILFLHQWIDFWVWRVWDWHDFODLPXQGHU6HFWLRQD

        '       7KH6(&KDVDGHTXDWHO\DOOHJHGWKHRIIHURUVDOHRIVHFXULWLHV

       ,QGLVFXVVLQJ6HFWLRQDWKH6XSUHPH&RXUWKDVKHOGWKDWWKHODQJXDJH³LQWKHRIIHURU

VDOH RI DQ\ VHFXULWLHV´ LV ³H[SDQVLYH HQRXJK WR HQFRPSDVV WKH HQWLUH VHOOLQJ SURFHVV´  United

States v. Naftalin867KHVWDWXWHGRHVQRWUHTXLUHWKDWWKHIUDXGRFFXU

GXULQJ³DQ\SDUWLFXODUSKDVHRIWKHVHOOLQJWUDQVDFWLRQ´Id. 5DWKHU6HFWLRQD³ZDVLQWHQGHG


                                                      

WRFRYHUDQ\IUDXGXOHQWVFKHPHLQDQRIIHURUVDOHRIVHFXULWLHVZKHWKHULQWKHFRXUVHRIDQLQLWLDO

GLVWULEXWLRQRULQWKHFRXUVHRIRUGLQDU\PDUNHWWUDGLQJ´Id. DW530FRQWHQGVWKDWWKH6(&

KDVQRWDOOHJHGWKDWHDFKPLVVWDWHPHQWRURPLVVLRQWRRNSODFHLQWKHRIIHURUVDOHRIDVHFXULW\DQG

LWLQVLVWVWKDWDQDOOHJDWLRQWKDWDFRPSDQ\¶VVWRFNLVSXEOLFO\WUDGHGLVLQVXIILFLHQWWRPHHWWKH

³RIIHURUVDOH´UHTXLUHPHQW5300HPDW±5305HSO\DW±

       0DQ\ FRXUWV KDYH FRQFOXGHG WKDW DQ DOOHJDWLRQ WKDW WKH FRPSDQ\¶V VWRFN ZDV SXEOLFO\

WUDGHGLVVXIILFLHQWWRSOHDGWKLVHOHPHQWXQGHU6HFWLRQDSee, e.g.SEC v. Mudd)

6XSSG6'1<ILQGLQJWKDWDQDOOHJDWLRQWKDWDFRPSDQ\¶VVWRFNZDVSXEOLFO\

WUDGHG DORQH ZDV VXIILFLHQW WR VWDWH D FODLP SEC v. Farmer 1R FY  :/

DW6'7H[2FWKROGLQJWKDWWKH³RIIHURUVDOH´UHTXLUHPHQWLVPHWDV

ORQJDVWKHFRPSDQ\¶VVHFXULWLHVZHUHVROGDQGSXUFKDVHGGXULQJWKHWLPHSHULRG³LQZKLFKWKH

IUDXGXOHQWVWDWHPHQWVZHUHPDGH´SEC v. Goldsworthy1R:/DW

'0DVV-XQH³>:@KHUHDGHIHQGDQWKDVPDGHIDOVHRUPLVOHDGLQJVWDWHPHQWVLQ

PDWHULDOVW\SLFDOO\UHOLHGXSRQE\LQYHVWRUVHQJDJHGLQWKHRUGLQDU\PDUNHWWUDGLQJRIVHFXULWLHV

WKHUHTXLUHPHQWWKDWIUDXGRFFXUµLQWKHRIIHURUVDOH¶LVVDWLVILHG´

       530UHOLHVRQRQHFRXUW¶VGHFLVLRQLQWKLVGLVWULFWIRUWKHSURSRVLWLRQWKDWDQDOOHJDWLRQWKDW

D FRPSDQ\¶V VWRFN ZDV WUDGHG RQ D SXEOLF H[FKDQJH LV LQVXIILFLHQW WR PHHW WKH ³RIIHU RU VDOH´

HOHPHQW5300HPDW±FLWLQJBrown)6XSSGDW±+RZHYHUWKDWFDVHLV

QRWELQGLQJDXWKRULW\DQGLWLVGLVWLQJXLVKDEOHVLQFHWKHFRPSODLQWLQTXHVWLRQGLGQRWDOOHJHWKDW

any RIIHURUVDOHWRRNSODFHGXULQJWKHWLPHSHULRGLQZKLFKWKHFRPSDQ\ILOHGPXOWLSOHDQQXDO

UHSRUWVDQGSUR[\VWDWHPHQWVSee Brown )6XSSGDW±+HUHWKH6(&DOOHJHVPRUH

WKDQWKHIDFWWKDW530ZDVDSXEOLFO\WUDGHGFRPSDQ\,WDVVHUWVWKDW530ZDVLQYROYHGLQWZR

QRWHVRIIHULQJVRQHLQ2FWREHUDQGRQHLQ'HFHPEHU&RPSODVZHOODVWKDW



                                                     

³530¶VFRPPRQVWRFNZDVUHJLVWHUHGZLWKWKH6(&DQGWUDGHGFRQWLQXRXVO\RQWKH1HZ<RUN

6WRFN([FKDQJHXQGHUWKHWLFNHUV\PEROµ530¶´Id. 7KHUHIRUHWKH6(&KDVDGHTXDWHO\

DOOHJHGWKDWHDFKRIWKHILOLQJVFRQWDLQLQJDOOHJHGO\IDOVHRUPLVOHDGLQJVWDWHPHQWVZHUHLQWKHRIIHU

RUVDOHRI530VHFXULWLHV

        (     7KH6(&KDVDGHTXDWHO\DOOHJHGWKDW0RRUHREWDLQHGPRQH\RUSURSHUW\

        6HFWLRQDRIWKH6HFXULWLHV$FWSURYLGHVWKDWLWLVXQODZIXO³IRUDQ\SHUVRQLQWKH

RIIHURUVDOHRIVHFXULWLHVGLUHUFWO\RULQGLUHFWO\WRREWDLQPRQH\RUSURSHUW\E\PHDQVRI

DQ\ XQWUXH VWDWHPHQW RI PDWHULDO IDFW´   86&  TD  0RRUH DUJXHV WKDW WKH 6(&¶V

6HFWLRQDFODLPIDLOVWRVWDWHDFODLPDJDLQVWKLPIRUWKHLQGHSHQGHQWUHDVRQWKDWLWGRHVQRW

DOOHJHWKDWKHREWDLQHGPRQH\RUSURSHUW\E\PHDQVRIDQ\PDWHULDOPLVVWDWHPHQWRURPLVVLRQ

0RRUH0HPDW±7KH&RXUWGLVDJUHHV

        $QDOOHJDWLRQWKDWWLHVDFRPSDQ\RIILFHU¶VUHFHLYHGERQXVWRWKHFRPSDQ\¶VSHUIRUPDQFH

KDVEHHQIRXQGWREHVXIILFLHQWWRVWDWHDFODLPXQGHU6HFWLRQDSee Mudd)6XSSDW

 FRQFOXGLQJ WKDW WKH FRPSODLQW¶V DOOHJDWLRQV WKDWWZR FRPSDQ\ RIILFHUV REWDLQHG PRQH\ RU

SURSHUW\E\PHDQVRIWKHLUIDOVHVWDWHPHQWV³EHFDXVHHDFKUHFHLYHGDERQXVWKDWZDVWLHGWRERWK

>WKHFRPSDQ\¶V@SHUIRUPDQFHDQGWKHLURZQSHUVRQDOSHUIRUPDQFHLQDWWDLQLQJLQGLYLGXDO\HDUHQG

JRDOV´ZHUHVXIILFLHQWWRVWDWHDFODLPsee also SEC v. Spinosa)6XSSG6'

)ODKROGLQJWKDWDOOHJDWLRQVWKDWDSHUVRQUHFHLYHG³LQFUHDVHGFRPSHQVDWLRQEDVHGRQWKH

YROXPHRIEXVLQHVVHQODUJHGE\WKHDOOHJHGIUDXGXOHQWDFWLYLW\´ZDVVXIILFLHQWWRSOHDGDYLRODWLRQ

RI6HFWLRQDRIWKH6HFXULWLHV$FW%XWLIDFRXUWLVOHIWJXHVVLQJDVWRZKHWKHUDQGWRZKDW

H[WHQWWKHRIILFHUKDVDQHTXLW\VWDNHLQWKHFRPSDQ\DQGKRZWKHRIILFHU¶VRYHUDOOFRPSHQVDWLRQ

ZDVDIIHFWHGE\PDNLQJDIDOVHVWDWHPHQWFRXUWVKDYHEHHQLQFOLQHGWRJUDQWDGHIHQGDQW¶VPRWLRQ

WRGLVPLVVSee Wey:/DWFRQFOXGLQJWKDWWKHFRPSODLQWIDLOHGWRDOOHJHWKDW



                                                    

WKHFRPSDQ\¶VODZ\HUREWDLQHGPRQH\RUSURSHUW\EHFDXVH³>Y@HU\OLWWOH>FRXOG@EHOHDUQHGIURP

WKHFRPSODLQWDERXW>KLV@FRPSHQVDWLRQDQGKRZDQ\IDOVHVWDWHPHQWPD\KDYHEHQHILWHGKLP´

       +HUHWKH6(&DOOHJHGWKDW³0RRUHKDGDSHUVRQDOLQWHUHVWLQ530¶VVWRFNSULFHEHFDXVH

DVRI$XJXVWKHRZQHGVKDUHVRI530VWRFN±ZRUWKPRUHWKDQPLOOLRQ±

SOXV530VWRFNRSWLRQV´&RPSO%XWWKH6(&GRHVQRWDOOHJHWKDWWKHVWRFNSULFH

ZHQWXSRUWKDWDQ\PRYHPHQWLQWKHVKDUHSULFHDIIHFWHGWKHYDOXHRI0RRUH¶VLQYHVWPHQWRYHU

WKHFRXUVHRIWKHUHOHYDQWWLPHSHULRG6RWKHDVVHUWLRQWKDW0RRUHRZQHGVWRFNZLWKRXWPRUH

PD\UHIOHFWDUHDVRQWRHQVXUHWKDWWKHSULFHGRHVQRWIDOOEXWLWGRHVQRWVXIILFLHQWO\DOOHJHWKDW

0RRUHREWDLQHGPRQH\E\PHDQVRIDQ\PDWHULDOPLVVWDWHPHQWVRURPLVVLRQV

       %XW WKH 6(& VWLOO GLG SOHDG WKDW 0RRUH REWDLQHG PRQH\ E\ PHDQV RI WKH PDWHULDO

PLVVWDWHPHQWVRURPLVVLRQVE\DOOHJLQJWKDWDWWKHHQGRIWKHILVFDO\HDUHQGHG0D\DQG

0D\³530SDLG0RRUHDFDVKERQXV´RIDQGUHVSHFWLYHO\³EDVHG

LQ SDUW RQ 530¶V ILQDQFLDO SHUIRUPDQFH GXULQJ WKH \HDU LQFOXGLQJ WKH FRPSDQ\¶V QHW LQFRPH

ZKLFKZDVEROVWHUHGE\WKH2FWREHU>DQG'HFHPEHU@QRWHVRIIHULQJ>V@´&RPSO

7KH6(&¶VDOOHJDWLRQVDUHVXIILFLHQWDWWKLVVWDJHWRJLYHULVHWRDSODXVLEOHLQIHUHQFHWKDWVRPH

SRUWLRQRIWKHERQXVPRQH\0RRUHZDVSDLGDVDUHVXOWRIWKHFRPSDQ\¶VILQDQFLDOSHUIRUPDQFH

ZDV REWDLQHG E\ PHDQV RI IDOVH DQG PLVOHDGLQJ VWDWHPHQWV VLQFH WKH FRPSDQ\¶V ILQDQFLDO

VWDWHPHQWVZHUHLPSOLFDWHGLQERWKQRWHVRIIHULQJV+RZHYHUWKH6(&ZLOOEHUHTXLUHGWRSURYH

WKLVDOOHJDWLRQDVWKHPDWWHUPRYHVIRUZDUG

       6LQFHWKH6(&KDVVXFFHVVIXOO\VWDWHGDFODLPXQGHU6HFWLRQDGHIHQGDQWV¶PRWLRQV

WRGLVPLVV&ODLPZLOOEHGHQLHG




                                                  

,,          7KH6(&KDVVWDWHGDFODLPDJDLQVW530DQG0RRUHXQGHU6HFWLRQDRIWKH
              6HFXULWLHV$FWLQ&ODLP

             8QGHU6HFWLRQDLWLVXQODZIXOIRUDQ\SHUVRQLQWKHRIIHURUVDOHRIVHFXULWLHV³WR

HQJDJHLQDQ\WUDQVDFWLRQSUDFWLFHRUFRXUVHRIFRQGXFWZKLFKRSHUDWHVRUZRXOGRSHUDWHDVD

IUDXGRUGHFHLWXSRQWKHSXUFKDVHU´86&TD-XVWDVZLWK6HFWLRQDSURRI

RIQHJOLJHQFHLVVXIILFLHQWWRHVWDEOLVKDYLRODWLRQRIWKLVSURYLVLRQSee Aaron86DW

7KH 6XSUHPH &RXUW KDV REVHUYHG WKDW 6HFWLRQ D ³SODLQO\ IRFXVHV XSRQ WKH effect RI

SDUWLFXODU FRQGXFW RQ PHPEHUV RI WKH LQYHVWLQJ SXEOLF UDWKHU WKDQ XSRQ WKH FXOSDELOLW\ RI WKH

SHUVRQUHVSRQVLEOH´Id. HPSKDVLVLQRULJLQDO 

             7RHVWDEOLVK³VFKHPHOLDELOLW\´XQGHU6HFWLRQDWKHDOOHJHGFRQGXFWPXVWLQFOXGH

PRUHWKDQWKHVDPHPLVUHSUHVHQWDWLRQVRURPLVVLRQVXQGHUO\LQJWKHPLVVWDWHPHQWFODLPVSee Pub.

Pension Fund Grp. v. KV Pharm. Co. )GWK&LU³:HMRLQWKH6HFRQG

DQG 1LQWK &LUFXLWV LQ UHFRJQL]LQJ D VFKHPH OLDELOLW\ FODLP PXVW EH EDVHG RQ FRQGXFW EH\RQG

PLVUHSUHVHQWDWLRQVRURPLVVLRQVDFWLRQDEOHXQGHU5XOHEEWPP Lux. Gamma Three Sarl

v. Spot Runner, Inc.)GWK&LU³$GHIHQGDQWPD\RQO\EHOLDEOHDVSDUW

RIDIUDXGXOHQWVFKHPHEDVHGXSRQPLVUHSUHVHQWDWLRQVDQGRPLVVLRQVXQGHU5XOHVEDRUF

ZKHQ WKH VFKHPH DOVR HQFRPSDVVHV FRQGXFW EH\RQG WKRVH PLVUHSUHVHQWDWLRQV RU RPLVVLRQV´

Lentell v. Merrill Lynch & Co.)GG&LU³:HKROGWKDWZKHUHWKHVROH

EDVLVIRUVXFKFODLPVLVDOOHJHGPLVUHSUHVHQWDWLRQVRURPLVVLRQVSODLQWLIIVKDYHQRWPDGHRXWD


     $OWKRXJKWKHUHLVDGHDUWKRIFDVHODZRQWKHVXEMHFWFRXUWVDSSHDUWRW\SLFDOO\DQDO\]H
6HFWLRQDDQG5XOHEFFODLPVLQFRQMXQFWLRQRUDWOHDVWXQGHUWKHVDPHVWDQGDUGSee,
e.g. SEC v. Coffey  )G   WK &LU  FRQFOXGLQJ WKDW WKH XVH RI WKH WHUP
³SULPH´WHQGHGWRRSHUDWHDVDVFKHPHWRGHIUDXGZLWKLQWKHPHDQLQJRIERWK6HFWLRQDDQG
5XOHEFSEC v. Thompson)6XSSGQ6'1<UHFRJQL]LQJ
WKDWEHFDXVH6HFWLRQDDQG5XOHE³KDYHVLPLODUUHTXLUHPHQWV´LWLVQRWQHFHVVDU\WR
GLVWLQJXLVKEHWZHHQWKHPXQOHVVLWLVPDWHULDOWRWKHDQDO\VLVSEC v. Stoker)6XSSG
 6'1<  DSSO\LQJ WKH VDPH VWDQGDUG XQGHU 6HFWLRQ D DQG ILQGLQJ WKDW WKH
FRPSODLQWSODXVLEO\DOOHJHGDFRXUVHRIFRQGXFWEH\RQGPLVUHSUHVHQWDWLRQV
                                                               

PDUNHWPDQLSXODWLRQFODLPXQGHU5XOHEDDQGF´see also Brown)6XSSGDW

DQDO\]LQJDFODLPXQGHU5XOHEFDQGILQGLQJWKHDOOHJDWLRQWKDWWKHGHIHQGDQWIDLOHGWRILOH

VWDWHPHQWVSURSHUO\VXIILFLHQWWRZLWKVWDQGDPRWLRQWRGLVPLVV

       6FKHPHOLDELOLW\LVRQO\DSSURSULDWHLI6HFWLRQD³FDQQRWIXOO\FRYHUWKHGHFHSWLYH

DFWV´SeeFamilant)6XSSGDWILQGLQJWKHFRPSODLQWDOOHJHGFRQGXFWEH\RQGPHUH

PLVVWDWHPHQWV DQG RPLVVLRQV WR VDWLVI\ EF VFKHPH OLDELOLW\  /LDELOLW\ PD\ DULVH XQGHU

6HFWLRQDDQGDEDVHGRQWKHVDPHVHWRIIDFWVEXWRQO\LIWKHSODLQWLIIDOOHJHVERWK

WKDWWKHGHIHQGDQWVPDGHPLVUHSUHVHQWDWLRQVLQYLRODWLRQRIWKHVWDWXWHDQGWKDWWKHGHIHQGDQWV

XQGHUWRRNDGHFHSWLYHFRXUVHRIFRQGXFWWKDWZHQWEH\RQGWKHPLVUHSUHVHQWDWLRQVSee Brown

)6XSSGDWFLWLQJIn re Alstom SA)6XSSG6'1<Stoker

)6XSSGDW$GHIHQGDQWZLOOQRWEHOLDEOHXQGHUVXEVHFWLRQLIWKHRQO\DOOHJDWLRQLV

WKDWWKHGHIHQGDQWZDVDSDUWLFLSDQWLQDVFKHPHWKURXJKZKLFKWKHPLVOHDGLQJVWDWHPHQWVZHUH

PDGHSee Spot Runner)GDW±DIILUPLQJGLVPLVVDORIFODLPZKHUH³>W@KHIUDXGXOHQW

VFKHPH DOOHJHGO\ LQYROYHG WKH >G@HIHQGDQW>D@SHOOHHV SODQQLQJ WRJHWKHU WR QRW GLVFORVH WKH

>I@RXQGHU¶V VDOH RI VHFXULWLHV LQ WKH VHFRQGDU\ RIIHULQJ DQG WKHQ QRW GLVFORVLQJ WKRVH VDOHV

IXQGDPHQWDOO\WKLVLVDQRPLVVLRQFODLP´

       530DUJXHVWKDWWKH6(&KDVQRWDOOHJHGDFWVXQGHUWDNHQWRSHUSHWUDWHWKHVFKHPHVHSDUDWH

IURPWKHDOOHJHGPLVUHSUHVHQWDWLRQVRURPLVVLRQV5300HPDW±%XWWKH6(&VHWVIRUWK

DQDUUDWLYHLQZKLFK0RRUHHQJDJHGLQDFWVWRSUHYHQWWKHSXEOLFIURPNQRZLQJDQ\WKLQJDERXWWKH

qui tamFRPSODLQWRU'2-LQYHVWLJDWLRQWKDWZHQWEH\RQGKLVDOOHJHGLQYROYHPHQWLQWKHDFWXDO

ILOLQJ RI IDOVH RU PLVOHDGLQJ VWDWHPHQWV ZLWK WKH 6(&  $OWKRXJK WKH PLVUHSUHVHQWDWLRQV DQG

RPLVVLRQVZHUHSDUWRIWKDWFRQGXFWWKH\ZHUHQRWWKHHQWLUHW\RILW6SHFLILFDOO\WKHFRPSODLQW

DOOHJHVWKDW530DQG0RRUHZHUHLQSRVVHVVLRQRIDFRS\RIWKHqui tamFRPSODLQW\HWIDLOHGWR



                                                    

GLVFORVHLWWR530¶VDXGLWILUPRULWV$XGLW&RPPLWWHH&RPSO±)XUWKHU0RRUH

ZLWKKHOGLQIRUPDWLRQUHJDUGLQJWKHSRWHQWLDOOLDELOLW\WKDW530IDFHGLQWKH'2-LQYHVWLJDWLRQE\

QRW GLVFORVLQJ WR WKH $XGLW &RPPLWWHH RQ 2FWREHU   WKDW WKH FRPSDQ\ KDG GHWHUPLQHG

7UHPFRRYHUFKDUJHGWKHJRYHUQPHQWE\DWOHDVWPLOOLRQId. %\'HFHPEHU

0RRUHXQGHUVWRRGWKLVRYHUFKDUJHHVWLPDWHKDGLQFUHDVHGWRDSSUR[LPDWHO\±PLOOLRQ\HWKH

FRQWLQXHGWRZLWKKROGWKLVLQIRUPDWLRQIURP530¶VDXGLWRUVDQGLWV$XGLW&RPPLWWHHId. ±

7KH6(&IXUWKHUFODLPVWKDWGXULQJWKLVWLPH0RRUHNQHZWKDW³530ZDVZRUNLQJRQ

DGGLWLRQDO RYHUFKDUJH FDOFXODWLRQV´ VRKHNQHZWKDWWKH³WRWDO RYHUFKDUJHDPRXQWOLNHO\ZRXOG

FRQWLQXHWRULVH´Id. $VRI-DQXDU\ZKHQ530PDGHLWVVHFRQGTXDUWHUILOLQJVZLWK

WKH6(&0RRUHKDGVWLOORQO\WROG530¶VDXGLWILUPWKDWWKHUDQJHRIORVVIRUWKH'2-LQYHVWLJDWLRQ

ZDVPLOOLRQSee id.

       7KHUHIRUHWKHDJHQF\KDVVWDWHGDFODLPXQGHU6HFWLRQDDQGGHIHQGDQWV¶PRWLRQV

WRGLVPLVV&ODLPZLOOEHGHQLHG

,,,   7KH6(&KDVVWDWHGDFODLPDJDLQVW530XQGHU6HFWLRQDDQGWKH([FKDQJH$FW
        5XOHVLQ&ODLP

       &ODLPDOOHJHVWKDW530YLRODWHG6HFWLRQDRIWKH([FKDQJH$FWDQG5XOHVE

DDDQGD6HFWLRQDUHTXLUHVLVVXHUVRIUHJLVWHUHGVHFXULWLHVWRILOHZLWKWKH

6(&DQ\DQQXDOUHSRUWVTXDUWHUO\UHSRUWVRULQIRUPDWLRQDQGGRFXPHQWVWKDWWKH6(&PD\UHTXLUH

See 86&PD5XOHVDDDQGDLPSOHPHQWWKHUHTXLUHPHQWVLQ6HFWLRQ

DDQGFRPPDQGLVVXHUVRIUHJLVWHUHGVHFXULWLHVWRILOHDQQXDO)RUP.FXUUHQW)RUP

. DQG TXDUWHUO\ )RUP 4 UHSRUWV  See  &)5  D D D

7KHVHUHSRUWLQJUHTXLUHPHQWVDUHRQO\VDWLVILHGE\WKH³ILOLQJRIFRPSOHWHDFFXUDWHDQGWLPHO\

UHSRUWV´SEC v. Savoy Indus., Inc.)G'&&LUTXRWLQJSEC v. IMC

Int’l, Inc.)6XSS1'7H[5XOHEDGGVWKHUHODWHGREOLJDWLRQWKDW


                                                  

³>L@QDGGLWLRQWRWKHLQIRUPDWLRQH[SUHVVO\UHTXLUHGWREHLQFOXGHGLQDVWDWHPHQWRUUHSRUWWKHUH

VKDOO EH DGGHG VXFK IXUWKHU PDWHULDO LQIRUPDWLRQ LI DQ\ DV PD\ EH QHFHVVDU\ WR PDNH WKH

UHTXLUHPHQW VWDWHPHQWV LQ WKH OLJKW RI WKH FLUFXPVWDQFHV XQGHU ZKLFK WKH\ DUH PDGH>@ QRW

PLVOHDGLQJ´&)5Esee SEC v. Falstaff Brewing Corp.)G±

'&&LUFRQFOXGLQJWKDWVWDWHPHQWVLQ)RUPV.DQG.YLRODWHG5XOHEDQG

WKHUHIRUH6HFWLRQDEHFDXVHWKHILOLQJVPDGHVWDWHPHQWVDERXWDGHIDXOWEXWGLGQRWGLVFORVH

WKDWWKHGHIHQGDQW¶VSUHSD\PHQWRIEDQNORDQVKDGOHGWKHLQVXUDQFHOHQGHUVWRGHFODUHDGHIDXOW

       530¶VVROHDUJXPHQWWRGLVPLVVWKLVFODLPLVWKDWDQ\DOOHJHGPLVUHSUHVHQWDWLRQVZLWKLQLWV

6(&ILOLQJVZHUHLPPDWHULDODVDPDWWHURIODZ5300HPDW6LQFHWKH&RXUWKDVDOUHDG\

GHWHUPLQHG WKDW WKH 6(& KDV SODXVLEO\ DOOHJHG WKDW 530 ILOHG PDWHULDOO\ IDOVH DQG PLVOHDGLQJ

VWDWHPHQWVZLWKWKH6(&WKH6(&KDVVWDWHGDFODLPXQGHU6HFWLRQDWKDWWKHFRPSDQ\¶VUHSRUWV

ZHUHLQDFFXUDWHDQG530¶VPRWLRQWRGLVPLVV&ODLPZLOOEHGHQLHG

,9    7KH6(&KDVVWDWHGDFODLPDJDLQVW530XQGHU6HFWLRQE$RIWKH([FKDQJH
        $FWLQ&ODLP

       6HFWLRQ E JRYHUQV D FRPSDQ\¶V ERRNNHHSLQJ DQG 6HFWLRQ E$ VSHFLILFDOO\

UHTXLUHV HYHU\ LVVXHU RI UHJLVWHUHG VHFXULWLHV WR ³PDNH DQG NHHS ERRNV UHFRUGV DQG DFFRXQWV

ZKLFKLQUHDVRQDEOHGHWDLODFFXUDWHO\DQGIDLUO\UHIOHFWWKHWUDQVDFWLRQVDQGGLVSRVLWLRQVRIDVVHWV

RIWKHLVVXHU´86&PE$7KLVSURYLVLRQKDVWKUHHSULPDU\REMHFWLYHV

                 ERRNV DQG UHFRUGV VKRXOG UHIOHFW WUDQVDFWLRQV LQ FRQIRUPLW\ ZLWK
                DFFHSWHG PHWKRGV RI UHSRUWLQJ HFRQRPLF HYHQWV  PLVUHSUHVHQWDWLRQV
                FRQFHDOPHQW IDOVLILFDWLRQ FLUFXPYHQWLRQ DQG RWKHU GHOLEHUDWH DFWV
                UHVXOWLQJ LQ LQDFFXUDWH ILQDQFLDO ERRNV DQG UHFRUGV DUH XQODZIXO DQG 
                WUDQVDFWLRQV VKRXOG EHSURSHUO\ UHIOHFWHG RQ ERRNV DQG UHFRUGVLQ VXFK D
                PDQQHUDVWRSHUPLWWKHSUHSDUDWLRQRIILQDQFLDOVWDWHPHQWVLQFRQIRUPLW\
                ZLWK>JHQHUDOO\DFFHSWHGDFFRXQWLQJSULQFLSOHV@DQGRWKHUFULWHULDDSSOLFDEOH
                WRVXFKVWDWHPHQWV

SEC v. e-Smart Tech., Inc.)6XSSG''&TXRWLQJSEC v. World-Wide

Coin Invs., Ltd.)6XSS1'*D&RXUWVLQWKLVGLVWULFWKDYHKHOGWKDW

                                                    

³ILQDQFLDOVWDWHPHQWVDUHERRNVDQGUHFRUGVXQGHUWKHVHFXULWLHVODZV´See, e.g.Crop Growers

Corp.)6XSSDW³>&@RPPRQVHQVHUHDGLQJRIWKHVWDWXWHVXJJHVWVWKDWILQDQFLDO

VWDWHPHQWV DQG UHFRUGV DUH QRW VXIILFLHQWO\ GLVWLQFW WR ZDUUDQW GLIIHUHQWLDO WUHDWPHQW´ e-Smart

Tech.)6XSSGDW±UHIHUHQFLQJWKHFRPSDQ\¶V)RUP.DQGFRQFOXGLQJWKDWWKH

³VFKHPH QHFHVVDULO\ GLVWRUWHG H6PDUW¶V ERRNV´ EHFDXVH WKHUH ZDV QR ZD\ WKDW LWV ³ERRNV DQG

UHFRUGVµDFFXUDWHO\DQGIDLUO\¶UHIOHFWHGWKHQDWXUHRIH6PDUW¶VWUDQVDFWLRQVRUWKHGLVSRVLWLRQ

RILWVDVVHWV´see also 86&FDGHILQLQJ³UHFRUGV´DV³DFFRXQWVFRUUHVSRQGHQFH

PHPRUDQGXPVWDSHVGLVFVSDSHUVERRNVDQGRWKHUGRFXPHQWVRUWUDQVFULEHGLQIRUPDWLRQRIDQ\

W\SHZKHWKHUH[SUHVVHGLQRUGLQDU\RUPDFKLQHODQJXDJH´

       $FFRUGLQJWRWKHFRPSODLQW530¶VILQDQFLDOVWDWHPHQWVIRUWKHILUVWWKUHHTXDUWHUVRIILVFDO

\HDU  ZHUH QRW DFFXUDWH EHFDXVH WKH ILQDQFLDO VWDWHPHQWV IRU WKH ILUVW WZR TXDUWHUV GLG QRW

GLVFORVHWKH'2-LQYHVWLJDWLRQRUDFFUXHIRULWDQGWKHWKLUGTXDUWHUILQDQFLDOVWDWHPHQWXQGHUVWDWHG

WKHDPRXQWWREHDFFUXHG&RPSO)XUWKHUWKH6(&DOOHJHVWKDWWKHILQDQFLDO

VWDWHPHQWVILOHGLQ-XO\DQG'HFHPEHUZHUHDOVRLQDFFXUDWHVLQFHWKH\PLVOHDGLQJO\

LPSOLHGWKDW530KDGGLVFORVHGDQGDFFUXHGIRUWKH'2-LQYHVWLJDWLRQLQDWLPHO\DQGDFFXUDWH

PDQQHUDQGVWDWHGWKDWWKHFRPSDQ\¶VLQWHUQDOFRQWUROVZHUHHIIHFWLYHSee id.

       2WKHUWKDQLWVDVVHUWLRQWKDWLWVILQDQFLDOVWDWHPHQWVZHUHQRWIDOVH530GRHVQRWDSSHDU

WRPDNHDQ\RWKHUDUJXPHQWVUHODWLQJWR&ODLPSee 5300HPDW$VGLVFXVVHGLQGHWDLO

DERYHWKH&RXUWKDVFRQFOXGHGWKDWWKH6(&KDVVXIILFLHQWO\DOOHJHGWKDWWKHILQDQFLDOVWDWHPHQWV

FRQWDLQHGIDOVHDQGPLVOHDGLQJVWDWHPHQWVDQGWKDWGLVFORVXUHDQGDFFUXDOZHUHQRWPDGHDWWKH

DSSURSULDWHWLPH%HFDXVHWKHDOOHJHGLQDFFXUDFLHVLQWKH6(&ILOLQJVDUHVXIILFLHQWWRVWDWHDFODLP

XQGHU 6HFWLRQ E$ WKDW 530¶V UHFRUGV GLG QRW ³DFFXUDWHO\ DQG IDLUO\ UHIOHFW´ WKH




                                                     

FRPSDQ\¶V³WUDQVDFWLRQVDQGGLVSRVLWLRQVRIDVVHWV´WKH&RXUWZLOOGHQ\530¶VPRWLRQWRGLVPLVV

&ODLP

9    7KH6(&KDVVWDWHGDFODLPDJDLQVW530XQGHU6HFWLRQE%RIWKH([FKDQJH
       $FWLQ&ODLP

      7XUQLQJ WR 6HFWLRQ E% WKH VWDWXWH UHTXLUHV LVVXHUV WR ³GHYLVH DQG PDLQWDLQ D

V\VWHPRILQWHUQDODFFRXQWLQJFRQWUROV´86& PE%0RUHVSHFLILFDOO\LVVXHUV

PXVWKDYHLQWHUQDODFFRXQWLQJFRQWUROVWKDWSURYLGH³UHDVRQDEOHDVVXUDQFHV´WKDW

               WUDQVDFWLRQVDUHH[HFXWHGLQDFFRUGDQFHZLWKPDQDJHPHQW¶VJHQHUDORU
                   VSHFLILFDXWKRUL]DWLRQ
               WUDQVDFWLRQV DUH UHFRUGHG DV QHFHVVDU\ D WR SHUPLW SUHSDUDWLRQ RI
                   ILQDQFLDOVWDWHPHQWVLQFRQIRUPLW\ZLWKJHQHUDOO\DFFHSWHGDFFRXQWLQJ
                   SULQFLSOHVRUDQ\RWKHUFULWHULDDSSOLFDEOHWRVXFKVWDWHPHQWVDQGEWR
                   PDLQWDLQDFFRXQWDELOLW\IRUDVVHWV
               DFFHVV WR DVVHWV LV SHUPLWWHG RQO\ LQ DFFRUGDQFH ZLWK PDQDJHPHQW¶V
                   JHQHUDORUVSHFLILFDXWKRUL]DWLRQDQG
               WKH UHFRUGHG DFFRXQWDELOLW\ IRU DVVHWV LV FRPSDUHG ZLWK WKH H[LVWLQJ
                   DVVHWV DW UHDVRQDEOH LQWHUYDOV DQG DSSURSULDWH DFWLRQ LV WDNHQ ZLWK
                   UHVSHFWWRDQ\GLIIHUHQFHV

86&PE%L±LY$³UHDVRQDEOH´GHJUHHRIDVVXUDQFHLVRQHWKDW³ZRXOGVDWLVI\

SUXGHQWRIILFLDOVLQWKHFRQGXFWRIWKHLURZQDIIDLUV´86&PE6RPHH[DPSOHVRI

LQWHUQDO FRQWUROV LQFOXGH ³PDQXDO RU DXWRPDWHG UHYLHZ RI UHFRUGV WR FKHFN IRU FRPSOHWHQHVV

DFFXUDF\ DQG DXWKHQWLFLW\ D PHWKRG WR UHFRUG WUDQVDFWLRQV FRPSOHWHO\ DQG DFFXUDWHO\ DQG

UHFRQFLOLDWLRQRIDFFRXQWLQJHQWULHVWRGHWHFWHUURUV´McConville v. SEC)GWK

&LUsee e-Smart Tech.)6XSSGDW±ILQGLQJVXIILFLHQWHYLGHQFHRIDODFNRI

³YLUWXDOO\DQ\LQWHUQDODFFRXQWLQJFRQWUROV´WRJUDQWVXPPDU\MXGJPHQWLQIDYRURIWKH6(&ZKHUH

VRPHRIWKHDGPLWWHGLQWHUQDOZHDNQHVVHVLQFOXGHG³SRRUFRPPXQLFDWLRQDPRQJVWDIIDQGRXWVLGH

FRQVXOWDQWV´WKDWOHGWR³VLJQLILFDQWLQDFFXUDWHLQIRUPDWLRQ´DQGDODFNRIKLJKHUOHYHOVXSHUYLVRU\

UHYLHZRIWKHDFFRXQWLQJSURFHVV



                                                  

       ,QLWVFRPSODLQWWKH6(&DOOHJHVWKDW530¶VLQWHUQDOFRQWUROVUHJDUGLQJILQDQFLDOUHSRUWLQJ

KDGPDWHULDOZHDNQHVVHVDQGWKDW530DGPLWWHGDVPXFKLQLWV$XJXVWUHVWDWHPHQWSee

&RPSO6SHFLILFDOO\WKH6(&UHIHUVWRDQXPEHURIRFFDVLRQVZKHUHLQGLYLGXDOV³ZLWK

*$$3H[SHUWLVH´IDLOHGWRUHFHLYHWLPHO\DQGDFFXUDWHLQIRUPDWLRQDERXWWKH'2-LQYHVWLJDWLRQ

DQGWKDWFRQVHTXHQWO\WKHFRPSDQ\¶VILQDQFLDOVWDWHPHQWVZHUHQRWSUHSDUHGLQFRQIRUPLW\ZLWK

*$$3DVUHTXLUHGE\WKHVWDWXWHSee 3O¶V2SSDW&RPSO ,QHVVHQFHWKH

FRPSODLQW SDLQWV WKH SLFWXUH WKDW 0RRUH DQG D IHZ RWKHU 530 SHUVRQQHO SRVVHVVHG DOO RI WKH

PDWHULDOLQIRUPDWLRQUHJDUGLQJWKHLQYHVWLJDWLRQDQGWKDWWKHUHZHUHLQVXIILFLHQWLQWHUQDOFKHFNV

RQWKHLUDXWKRULW\DQGGLVFUHWLRQZKHQLWFDPHWRGLVFORVLQJRUPDNLQJMXGJPHQWVEDVHGRQWKDW

LQIRUPDWLRQ

       $JDLQWKHRQO\DUJXPHQW530DSSHDUVWRPDNHLQLWVPRWLRQWRGLVPLVVDVWR&ODLPLV

WKDWLWVILQDQFLDOVWDWHPHQWVZHUHQRWIDOVH530¶V0HPDW7KH&RXUWKDVDOUHDG\GHWHUPLQHG

WKDW WKH 6(& KDV SODXVLEO\ DOOHJHG WKDW 530¶V VWDWHPHQWV ZHUH IDOVH DQG PLVOHDGLQJ  $QG

VHSDUDWHO\WKH&RXUWFRQFOXGHVWKDWWKH6(&¶VDOOHJDWLRQVDERXW530¶VODFNRILQWHUQDOFRQWUROV

DUHVXIILFLHQWWRVWDWHDFODLPXQGHU6HFWLRQE%7KHUHIRUH530¶VPRWLRQWRGLVPLVV

&ODLPZLOOEHGHQLHG

9,    7KH6(&KDVVWDWHGDFODLPDJDLQVW0RRUHXQGHU([FKDQJH$FW5XOHELQ&ODLP
        

       ,Q&ODLPWKH6(&DOOHJHVWKDW0RRUHYLRODWHG5XOHEZKLFKSURYLGHVWKDW³>Q@R

SHUVRQ VKDOO GLUHFWO\ RU LQGLUHFWO\ IDOVLI\ RU FDXVH WR EH IDOVLILHG DQ\ ERRN UHFRUG RU DFFRXQW

VXEMHFWWRVHFWLRQE$´&)5E3URRIRIVFLHQWHULVQRWUHTXLUHGSee,

e.g.SEC v. Das)GWK&LU McConville)GDWSEC v. McNulty

)GG&LU7KHUHIHUHQFHG6HFWLRQE$GLVFXVVHGDERYHFRYHUVD

FRPSDQ\¶VILQDQFLDOVWDWHPHQWVSee Crop Growers Corp.)6XSSDW


                                                       

       0RRUH GHDOV ZLWK WKLV &ODLP RQO\ EULHIO\ DUJXLQJ WKDW KH GLG QRW YLRODWH 5XOH E

EHFDXVHWKH6(&KDVQRWGHPRQVWUDWHGWKDWKHDFWHGXQUHDVRQDEO\E\QRWGLVFORVLQJRUDFFUXLQJ

IRUDORVVFRQWLQJHQF\XQGHU$6&0RRUH0HPDW+RZHYHUJLYHQWKH&RXUW¶VFRQFOXVLRQ

WKDWWKH6(&KDVSODXVLEO\DOOHJHGWKDWGHIHQGDQWVKDGDGXW\WRGLVFORVHRUDFFUXHIRUWKH'2-

LQYHVWLJDWLRQSXUVXDQWWR$6&0RRUH¶VDUJXPHQWLVXQSHUVXDVLYH0RUHRYHUFRQVLGHULQJ

0RRUH¶VDOOHJHGUROHLQFRPPXQLFDWLQJZLWK530¶VRXWVLGHDXGLWILUPWKURXJKRXWWKHWLPHSHULRG

GXULQJZKLFKKHZDVUHVSRQVLEOHIRU530¶VUHVSRQVHVWRWKH'2-LQYHVWLJDWLRQsee &RPSO

 DV ZHOO DV KLV DOOHJHG LQYROYHPHQW LQ DQG DSSURYDO RI WKH UHSRUWV ILOHG ZLWK WKH 6(& see

id. WKHDJHQF\KDVVXIILFLHQWO\DOOHJHGWKDW0RRUHLQGLUHFWO\RUGLUHFWO\FDXVHG

530¶VUHFRUGVWREHIDOVLILHG 

       7KHUHIRUHGHIHQGDQW0RRUH¶VPRWLRQWRGLVPLVV&ODLPZLOOEHGHQLHG

9,, 7KH6(&KDVVWDWHGDFODLPDJDLQVW 0RRUHXQGHU ([FKDQJH $FW5XOH EDLQ
      &ODLP

       &ODLP  DOOHJHV WKDW 0RRUH YLRODWHG 5XOH ED ZKLFK SURYLGHV  ³1R GLUHFWRU RU

RIILFHURIDQLVVXHUVKDOOGLUHFWO\RULQGLUHFWO\PDNHRUFDXVHWREHPDGHDPDWHULDOO\IDOVHRU

PLVOHDGLQJVWDWHPHQWWRDQDFFRXQWDQWLQFRQQHFWLRQZLWK>D@Q\DXGLWUHYLHZRUH[DPLQDWLRQ

RIWKHILQDQFLDOVWDWHPHQWVRIWKHLVVXH´&)5ED3URRIRIVFLHQWHULVDOVRQRW

UHTXLUHGXQGHUWKLV5XOHSee, e.g. Das)GDW McConville)GDWMcNulty

)GDW

       0RRUHRQO\EULHIO\DGGUHVVHVWKLV&ODLPDUJXLQJWKDWWKH6(&KDVQRWHVWDEOLVKHGWKDWKH

³XQUHDVRQDEO\ZLWKKHOGLQIRUPDWLRQIURPRURWKHUZLVHPLVOHG´530¶VDXGLWILUPVLQFH530¶V

RXWVLGHFRXQVHOZDV³LQSRVVHVVLRQRIWKHVDPHLQIRUPDWLRQ´WKDW0RRUHKDGDQGWKDWWKHODZILUP

KDGDGYLVHGWKHDXGLWILUPWKDWLW³GLGQRWFRQVLGHUWKH'2-LQYHVWLJDWLRQWREHDGLVFORVDEOHORVV

FRQWLQJHQF\´0RRUH0HPDW%XWWKHODZILUP¶VDOOHJHGIDLOLQJVDUHQRWUHOHYDQWWRZKHWKHU


                                                      

WKH6(&KDVDOOHJHGWKDW0RRUHHQJDJHGLQPLVOHDGLQJFRQGXFWRIKLVRZQ7KH6(&DOOHJHVWKDW

0RRUHKLPVHOIPDGHVWDWHPHQWVLQPDQDJHPHQWUHSUHVHQWDWLRQOHWWHUVWR530¶VRXWVLGHDXGLWILUP

WKDWZHUHPDWHULDOO\IDOVHRUPLVOHDGLQJLQWKDWWKH\UHSUHVHQWHGWKDW0RRUHKDGQRWGHDOWZLWKDQ\

ORVVFRQWLQJHQFLHVRYHUPLOOLRQGHVSLWHKLVNQRZOHGJHRIWKH'2-LQYHVWLJDWLRQDQG530¶V

SRWHQWLDOOLDELOLW\IRUDWOHDVWPLOOLRQSee &RPSO)XUWKHUWKH6(&FODLPVWKDW

0RRUHPDGHRWKHUIDOVHRUPLVOHDGLQJVWDWHPHQWVLQSHUVRQWRWKHDXGLWRUVVXFKDVZKHQ0RRUH

WROGWKHDXGLWILUPWKDW³QRFODLPKD>G@EHHQDVVHUWHG´³QRFODLPKD>G@EHHQILOHG´DQGWKDWWKH

PDWWHUZDV³LQYHVWLJDWLYHLQQDWXUHDQGQRWLQOLWLJDWLRQ´GHVSLWHNQRZLQJWKDWDqui tam FRPSODLQW

KDGEHHQILOHGId. see also id.±±

       7DNLQJ WKH DOOHJHG IDFWV DV WUXH WKH 6(& KDV VXIILFLHQWO\ SOHG WKDW 0RRUH DFWHG

XQUHDVRQDEO\LQKLVFRPPXQLFDWLRQVZLWKWKHDXGLWRUVDQGWKHUHIRUHYLRODWHG5XOHEDVR

0RRUH¶VPRWLRQWRGLVPLVV&ODLPZLOOEHGHQLHG

                                          &21&/86,21

       )RUDOORIWKHIRUHJRLQJUHDVRQVWKH&RXUWZLOOGHQ\GHIHQGDQWV¶PRWLRQVWRGLVPLVVLQ

WKHLUHQWLUHW\

       $VHSDUDWHRUGHUZLOOLVVXH









                                               $0<%(50$1-$&.621
                                               8QLWHG6WDWHV'LVWULFW-XGJH

'$7(6HSWHPEHU




                                                  

