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

   (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
               )LOH 1DPH DS




81,7('67$7(6&28572)$33($/6
             )257+(6,;7+&,5&8,7
               BBBBBBBBBBBBBBBBB


(48$/ (03/2<0(17              ;
23325781,7< &200,66,21        
          3ODLQWLII$SSHOOHH 
                                     1RV
            &URVV$SSHOODQW 
                                !
                               
s26(3+ &$5/721                
                 ,QWHUYHQLQJ 
          3ODLQWLII$SSHOOHH 
                               
         Y                    
                               
                               
+$5%(57<($5*,1 ,1&         
        'HIHQGDQW$SSHOODQW 
             &URVV$SSHOOHH 
                              1
     $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
  IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHDWsDFNVRQ
 1RnsDPHV'7RGG&KLHI'LVWULFWsXGJH
                 $UJXHGsXQH
        'HFLGHGDQG)LOHG6HSWHPEHU
%HIRUH*8<1255,6DQG*,/0$1&LUFXLWsXGJHV




                           
     ((2&HWDOY                        1RV        1RV                             ((2&HWDOY          
      +DUEHUW<HDUJLQ,QF                                                                                    +DUEHUW<HDUJLQ,QF

                     BBBBBBBBBBBBBBBBB                                ,G7KLVFHUWDLQO\ZDVQRWWKHFDVHZLWK0U'DYLV+HOLNHG
                                                                      QRWKLQJEHWWHUWKDQWRKDYHPHQLQWKHZRUNSODFH,IQRWZKR
                          &2816(/                                     HOVHZRXOGKHURXJKKRXVHZLWK"
$5*8('  )UHGHULFN s /HZLV /(:,6 ),6+(5                       )LQDOO\ LQ 2QFDOH WKH FRXUW FRQFOXGHV ZLWK WKLV PRVW
+(1'(5621 	 &/$;721 0HPSKLV 7HQQHVVHH IRU                     LPSRUWDQWSURQRXQFHPHQW
$SSHOODQW  3DXOD %UXQHU (48$/ (03/2<0(17
23325781,7< &200,66,21 :DVKLQJWRQ '&                            :KDWHYHU HYLGHQWLDU\ URXWH WKH SODLQWLII FKRRVHV WR
0LFKDHO/:HLQPDQ7$780	:(,10$1+HQGHUVRQ                         IROORZKHRUVKHPXVWDOZD\VSURYHWKDWWKHFRQGXFWDW
7HQQHVVHHIRU$SSHOOHHV21%5,()sRKQ0RUULV5XVVHOO              LVVXH ZDV QRW PHUHO\ WLQJHG ZLWK RIIHQVLYH VH[XDO
7KRPDV/+HQGHUVRQ/(:,6),6+(5+(1'(5621	                         FRQQRWDWLRQVEXWDFWXDOO\FRQVWLWXWHGmGLVFULPLQD>WLRQ@
&/$;721 0HPSKLV 7HQQHVVHH IRU $SSHOODQW  3DXOD                EHFDXVHRIVH[l
%UXQHU &DURO\Q / :KHHOHU (48$/ (03/2<0(17
23325781,7< &200,66,21 :DVKLQJWRQ '&                          ,GDWHOOLSVHVRPLWWHG,GRQRWIHHOWKDWWKHSODLQWLIIKDV
0LFKDHO/:HLQPDQ7$780	:(,10$1+HQGHUVRQ                       VXVWDLQHGWKLVEXUGHQQRULQGHHGFRXOGKHXQGHUWKHVHIDFWV
7HQQHVVHHIRU$SSHOOHHV
                                                                         6DPHVH[VH[XDOKDUDVVPHQWFDVHVRIWKLVQDWXUHSUHVHQWD
   *,/0$1sDQQRXQFHGWKHRSLQLRQRIWKHFRXUW*8<s           VOLSSHU\ VORSH DQG WKLV FDVH HLWKHU JRHV RYHU WKH HGJH RU
SSGHOLYHUHGDVHSDUDWHRSLQLRQFRQFXUULQJLQSDUW          FRPHVVRFORVHWRLWWKDWDOLQHQHHGV WR EHGUDZQ,IQRW
DQG GLVVHQWLQJ LQ SDUW LQ ZKLFK 1255,6 s MRLQHG  7KH   ZKDWjVQH[WnWRZHOVQDSSLQJLQWKHORFNHUURRP"
RSLQLRQ RI sXGJH *LOPDQ DIILUPLQJ WKH GLVWULFW FRXUW ZLWK
UHVSHFW WR WKH ((2&jV FURVVDSSHDO UHJDUGLQJ WKH FODLP RI       ,ZRXOGUHYHUVHWKHGHQLDORIMXGJPHQWDVDPDWWHURIODZ
&HGULF:RRGVLVWKHRSLQLRQRIWKHFRXUW7KHRSLQLRQRI             ZLWKUHVSHFWWR&DUOWRQjVVH[XDOKDUDVVPHQWFODLP
sXGJH*X\UHYHUVLQJWKHGLVWULFWFRXUWZLWKUHVSHFWWR+DUEHUW
<HDUJLQ,QFjVDSSHDOUHJDUGLQJWKHFODLPRIsRVHSK&DUOWRQ
LVWKHRSLQLRQRIWKHFRXUW
                     BBBBBBBBBBBBBBBBB
                         23,1,21
                     BBBBBBBBBBBBBBBBB
  521$/' /(( *,/0$1 &LUFXLW sXGJH  7KLV FDVH
LQYROYHVDVDPHVH[VH[XDOKDUDVVPHQWVXLWEURXJKWE\WKH
(TXDO(PSOR\PHQW2SSRUWXQLW\&RPPLVVLRQ((2&DJDLQVW
+DUEHUW<HDUJLQ ,QF RQ EHKDOI RI 7HUU\ 'RWVRQ :LOOLDP
'R\OHDQG&HGULF:RRGVWKUHHRIWKHFRPSDQ\jVHPSOR\HHV                
$ IRXUWK HPSOR\HH sRVHSK &DUOWRQ LQWHUYHQHG  7KH                 7KH HIIHFW RI sXGJH 1RUULV FRQFXUULQJ LQ WKLV RSLQLRQ LV WKDW WKH


FRPSODLQW DOOHJHG WKDW +DUEHUW<HDUJLQ DOORZHG LWV PDOH         MXGJPHQW RI WKH GLVWULFW FRXUW DV WR :RRGV LV DIILUPHG DQG WKH MXGJPHQW
                                                                      DV WR &DUOWRQ LV UHYHUVHG   7KH FDVH LV UHPDQGHG WR WKH GLVWULFW FRXUW IRU
HPSOR\HHV WR EH VXEMHFWHG WR XQZHOFRPH DQG RIIHQVLYH           HQWU\ RI DSSURSULDWH MXGJPHQWV LQ FRQIRUPLW\ ZLWK WKLV RSLQLRQ
       ((2&HWDOY                          1RV          1RV                        ((2&HWDOY          
         +DUEHUW<HDUJLQ,QF                                                                                   +DUEHUW<HDUJLQ,QF

RI 0U &DUOWRQjV SOLJKW EXW KH KDG RWKHU UHPHGLHV                  WRXFKLQJ RQ WKH EDVLV RI VH[ DQG IDLOHG WR WDNH FRUUHFWLYH
(YHU\WKLQJIURPDXQLRQJULHYDQFHWRDFULPLQDOFRPSODLQW                    DFWLRQ WKHUHE\ FUHDWLQJ D KRVWLOH ZRUN HQYLURQPHQW LQ
DQGDFLYLODFWLRQIRUDVVDXOWDQGEDWWHU\:LWKDVWDWHFLYLO              YLRODWLRQRI7LWOH9,,RIWKH&LYLO5LJKWV$FWRI$MXU\
DFWLRQWKHHPSOR\HUFRXOGVWLOOEHDGHIHQGDQWDQGFRXOGKDYH               UHWXUQHG D YHUGLFW IRU ERWK &DUOWRQ DQG :RRGV RQ WKHLU
EHHQOLDEOHXQGHUWKHVHIDFWVIRUWKHDFWLRQVRILWVDJHQWVDQG              FODLPVDZDUGLQJ&DUOWRQLQFRPSHQVDWRU\GDPDJHVDQG
HPSOR\HHVSDUWLFXODUO\ZKHQWKRVHDFWLRQVKDGEHHQEURXJKW                   LQ SXQLWLYH GDPDJHV DQG :RRGV  LQ
WR WKH HPSOR\HUjV DWWHQWLRQ  0U &DUOWRQ VWLOO FRXOG KDYH          FRPSHQVDWRU\GDPDJHVDQGLQSXQLWLYHGDPDJHV1R
IRXQGWKHJRRVHWKDWODLGWKHJROGHQHJJZLWKRXWGLVWRUWLQJWKH              UHFRYHU\ ZDV KDG E\ HLWKHU 'RWVRQ RU 'R\OH  7KH GLVWULFW
RIIHQVLYH VH[XDO FRQGXFW LQWR D FLYLO ULJKWV YLRODWLRQ  7KH        FRXUW GHQLHG +DUEHUW<HDUJLQjV PRWLRQ IRU MXGJPHQW DV D
LVVXHLVQRWmQRZURQJZLWKRXWDUHPHG\l7KHLVVXHLVKRZ                  PDWWHURIODZZLWKUHVSHFWWR&DUOWRQjVFODLPEXWJUDQWHGWKH
IDU&RQJUHVVFDQJRRUPRUHDFFXUDWHO\KDVJRQHWRUHJXODWH                FRPSDQ\jVPRWLRQZLWKUHVSHFWWR:RRGVjVFODLP
FRQGXFWLQWKHZRUNSODFH7KLVEULQJVPHEDFNWR2QFDOH
0U 2QFDOH TXLW KLV MRE EHFDXVH KH WKRXJKW KH mZRXOG EH              +DUEHUW<HDUJLQ QRZ DSSHDOV FKDOOHQJLQJ WKH GLVWULFW
UDSHG RU IRUFHG   WR KDYH VH[l  7KH KDUDVVHU ZDV D                FRXUWjVUXOLQJVWKDWGHQLHGLWVPRWLRQIRUMXGJPHQWDVD
KRPRVH[XDO  %HFDXVH WKLV ZDV WKH IDFW LW ZDV HDV\ WR            PDWWHU RI ODZ ZLWK UHJDUG WR &DUOWRQjV FODLP  DGPLWWHG
FRQFOXGHWKHKDUDVVHUZRXOGQRWKDYHEHHQSUHGDWRU\WRZDUG                  HYLGHQFH WKDW +DUEHUW<HDUJLQ KDG HQJDJHG LQ VLPLODU
IHPDOHV7KH&RXUWJRHVRQWRVWDWHKRZHYHUWKDWmKDUDVVLQJ               PLVFRQGXFW LQ WKH SDVW DQG  XSKHOG WKH MXU\jV SXQLWLYH
FRQGXFWQHHGQRWEHPRWLYDWHGE\VH[XDOGHVLUHWRVXSSRUWDQ                 GDPDJHDZDUGZLWKUHJDUGWR&DUOWRQjVFODLP7KH((2&
LQIHUHQFHRIGLVFULPLQDWLRQRQWKHEDVLVRIVH[l2QFDOH               FURVVDSSHDOV FKDOOHQJLQJ WKH GLVWULFW FRXUWjV JUDQW RI
86DW7KH&RXUWWKHQRIIHUVDQH[DPSOHWKDWVKHGVVRPH                MXGJPHQW DV D PDWWHU RI ODZ LQ IDYRU RI +DUEHUW<HDUJLQ
OLJKW                                                                       UHJDUGLQJ:RRGVjVFODLP)RUWKHUHDVRQVVHWIRUWKEHORZ,
                                                                             ZRXOG $)),50 WKH MXGJPHQW RI WKH GLVWULFW FRXUW RQ ERWK
  $WULHURIIDFWPLJKWUHDVRQDEO\ILQGVXFKGLVFULPLQDWLRQ                 &DUOWRQjVDQG:RRGVjVFODLPV
  IRUH[DPSOHLIDIHPDOHYLFWLPLVKDUDVVHGLQVXFKVH[
  VSHFLILFDQGGHURJDWRU\WHUPVE\DQRWKHUZRPDQDVWR                                             ,%$&.*5281'
  PDNHLWFOHDUWKDWWKHKDUDVVHULVPRWLYDWHGE\JHQHUDO
  KRVWLOLW\WRWKHSUHVHQFHRIZRPHQLQWKHZRUNSODFH                       $ )DFWXDOEDFNJURXQG
                                                                               +DUEHUW<HDUJLQ D VXEVLGLDU\ RI 5D\WKHRQ &R LV D
                                                                             FRPSDQ\ WKDW SURYLGHG PDLQWHQDQFH VHUYLFHV DW D sDFNVRQ
                                                                            7HQQHVVHHFRQVWUXFWLRQVLWHXQGHUDFRQWUDFWZLWK3URFWHUDQG
     &RQWUDU\ WR WKH GLVVHQWjV VXJJHVWLRQ , DP QRW LPSO\LQJ WKH KDUDVVHU
KDV WR EH D KRPRVH[XDO   :KHQ WKH KDUDVVHU LV D KRPRVH[XDO KRZHYHU
                                                                             *DPEOH&R%RWK&DUOWRQDQG:RRGVFODLPWKDWWKH\ZHUH
WKH FRQFOXVLRQ WKDW WKH KDUDVVPHQW ZDV JHQGHU EDVHG LV GHIHQVLEOH     ,Q
                                                                             WKHYLFWLPVRIVDPHVH[VH[XDOKDUDVVPHQWDQGGLVFULPLQDWLRQ
%LEE\    Y 3KLODGHSKLD &RFD &ROD %RWWOLQJ &R     )G  G &LU     ZKLOH HPSOR\HG DW WKH +DUEHUW<HDUJLQ VLWH  ,Q SDUWLFXODU
 WKH FRXUW KHOG D SODLQWLII PLJKW GHPRQVWUDWH WKDW D VDPHVH[ VH[XDO   WKH\DOOHJHWKDWWKH\ZHUHVXEMHFWHGWRXQZDQWHGWRXFKLQJ
KDUDVVPHQW FODLP DPRXQWHG WR GLVFULPLQDWLRQ EHFDXVH RI VH[ LI WKH            SRNLQJDQGSURGGLQJLQWKHLUJHQLWDODUHDVDQGWRDKRVWLOH
KDUDVVHU ZDV PRWLYDWHG E\ VH[XDO GHVLUH WKH KDUDVVHU ZDV H[SUHVVLQJ D
JHQHUDO KRVWLOLW\ WR WKH SUHVHQFH RI RQH VH[ LQ WKH ZRUNSODFH RU WKH
                                                                             ZRUNHQYLURQPHQWWKDWDOORZHGVXFKEHKDYLRUWRIORXULVK
KDUDVVHU ZDV DFWLQJ WR SXQLVK WKH YLFWLPjV QRQFRPSOLDQFH ZLWK JHQGHU
VWHUHRW\SHV 1RQH RI WKHVH WKUHH VFHQDULRV FDQ EH JOHDQHG IURP WKH IDFWV
LQ WKLV FDVH
        ((2&HWDOY                     1RV        1RV                            ((2&HWDOY          
         +DUEHUW<HDUJLQ,QF                                                                                +DUEHUW<HDUJLQ,QF

        &DUOWRQjVFODLP                                             TXHVWLRQZKLFKLWGLGWKHIRUPGLUHFWHGWKHPWRWKHQSURFHHG
                                                                      GLUHFWO\WRDVVHVVGDPDJHV
  &DUOWRQZDVDSLSHZHOGHUZKREHJDQZRUNLQJIRU+DUEHUW
<HDUJLQRQsDQXDU\+HZDVDVVLJQHGWRWKHFUHZRI             6KHSKHUG Y 6ODWHU 6WHHOV &RUS  )G  WK &LU
/RXLV'DYLVZKRVHMREZDVWRDVVLJQWDVNVDQGVXSHUYLVHKLV           LV D JRRG H[DPSOH RI WKH DQDO\WLFDO J\PQDVWLFV LQ
PHQ&DUOWRQFODLPVWKDW'DYLVLPPHGLDWHO\EHJDQWRERWKHU           ZKLFK D FRXUW ZLOO HQJDJH LQ RUGHU WR FRQWRUW VH[XDOO\
KLPE\JHWWLQJWRRFORVHDQGIUHTXHQWO\WRXFKLQJ&DUOWRQjV            RIIHQVLYH FRQGXFW LQ WKH ZRUNSODFH LQWR JHQGHU
XSSHUWKLJK                                                         GLVFULPLQDWLRQ,Q6KHSKHUGWKHVH[XDOO\RIIHQVLYHFRQGXFW
                                                                      GLUHFWHGDWWKHPDOHSODLQWLIIE\RQHRIKLVPDOHFRZRUNHUV
   7KHILUVWWLPHWKDW'DYLVWRXFKHG&DUOWRQLQKLVJHQLWDODUHD      ZDVJURVVEH\RQGLPDJLQDWLRQ7KHFRZRUNHUKRZHYHUDV
ZDVRQ)HEUXDU\&DUOWRQDQGKLVSLSHILWWHUKDGEHHQ        SDUWRIKLVUHJXODURIIHQVLYHVH[XDOEHKDYLRUDOVRH[SRVHG
ZRUNLQJLQDQLVRODWHGSDUWRIWKHIDFLOLW\ZKHQ'DYLVVHQWWKH       KLPVHOIWRDWOHDVWRQHRIWKHIHPDOHZRUNHUV2QWKHEDVLVRI
ILWWHUDZD\WRJHWQHZVXSSOLHVOHDYLQJ&DUOWRQDORQHZLWK           WKLVIDFWWKHGLVWULFWFRXUWJUDQWHGVXPPDU\MXGJPHQWWRWKH
'DYLV$IWHUWKHILWWHUOHIW'DYLVJUDEEHG&DUOWRQjVmSULYDWH       GHIHQGDQW7KHFRXUWRIDSSHDOVUHYHUVHGLQDVSOLWGHFLVLRQ
DUHDMXVWRXWRIWKHEOXHl7KHQ'DYLVmMHUNHGKLVKDQG        LQHIIHFWKROGLQJWKDWEHFDXVHWKHUHZDVPRUHmIODVKLQJlRI
EDFNDQGWRRNRIIl&DUOWRQWROGWKHILWWHUDERXWWKHLQFLGHQW       PDOHV WKDQ IHPDOHV LW TXDOLILHG DV GLVFULPLQDWLRQ  ,I
ZKHQ KLV DVVLVWDQW UHWXUQHG EXW GLG QRW ILOH D FRPSODLQW    6KHSKHUGjV FRZRUNHU KDG EHHQ VH[XDOO\ RIIHQVLYH WR PRUH
EHFDXVHWKHUHZHUHQRH\HZLWQHVVHVDQGEHFDXVHKHKDGRQO\            IHPDOHVWKHUHZRXOGKDYHEHHQQRFDXVHRIDFWLRQnDKROGLQJ
EHHQRQWKHMREIRUDIHZZHHNV$IWHUWKLVLQFLGHQW'DYLV          WKDWFDQKDUGO\EHWKRXJKWWRPDNHIHPDOHVLQWKDWZRUNIRUFH
NHSWmWU\LQJWRJHWFORVHlWR&DUOWRQPDNLQJLWGLIILFXOWIRU        YHU\ KDSS\  $SSDUHQWO\ ZH QRZ KDYH D TXDQWLWDWLYH
&DUOWRQWRFRQFHQWUDWHRQKLVZHOGLQJ                               FRPSRQHQWWRWKHDQDO\VLV,QRUGHUWRHVFDSHOLDELOLW\WKH
                                                                      KDUDVVHUPXVWEHFDUHIXOWREHRIIHQVLYHLQHTXDOSDUWVWRDOO
   7KHQH[WWLPHWKDW'DYLVWRXFKHG&DUOWRQLQKLVJHQLWDODUHD       7KDW VKRXOG PDNH IRU VRPH LQWHUHVWLQJ ZRUNSODFH QRWLFHV
ZDVRQ7KXUVGD\)HEUXDU\&DUOWRQKDGEHQWRYHU            SRVWHGE\HPSOR\HUVm:HGRQRWWROHUDWHVH[XDOKDUDVVPHQW
D WDEOH ZKLOH ZHOGLQJ ZKHQ KH IHOW D KDQG WKDW mNLQG RI   EXWLI\RXPXVWPDNHVXUH\RXDUHHTXDOO\JURVVZLWKERWK
FRPHVLQIURPWKHEDFNVLGHWRP\WHVWLFOHVDQGNLQGRIFRPHV          VH[HVl
DOOWKHZD\DURXQGWRWKHERWWRPRIP\EDFN,MXVWWKUHZWKH
KRRGGRZQ,DOPRVWORVWLW,UHDOO\GLGl:KHQ&DUOWRQ             :KDWZHQWRQLQWKHFDVHDWEDUZDVJURVVYXOJDUPDOH
UHPRYHGKLVKHOPHWWRVHHZKRVHKDQGLWZDVKHVDZ'DYLV             KRUVHSOD\LQDPDOHZRUNSODFH,WZDVWKHFODVVLFH[DPSOHRI
mUXQQLQJRIIDJDLQMXVWOLNHKHGLGZKHQKHJUDEEHGPHWKH           PHQEHKDYLQJEDGO\,GRQRWPHDQLQDQ\ZD\WRPDNHOLJKW
ILUVW WLPHl  7KH WZR LQFLGHQWV FDXVHG &DUOWRQ WR IHHO
mRXWUDJHGlDQGERWKPHQWDOO\DQGSK\VLFDOO\H[KDXVWHG
                                                                          
  7KH)HEUXDU\LQFLGHQWZDVZLWQHVVHGE\FRZRUNHU                  $OWKRXJK WKH MXU\ LQVWUXFWLRQV GLG QRW SURSHUO\ FRQYH\ ZKDW WKH MXU\
/DUU\ /LQGOH\ ZKR WROG &DUOWRQ msRH \RX QHHG WR VHH       QHHGHG WR ILQG WKH MXU\ GLG D UDWKHU UHPDUNDEOH MRE RI DOPRVW JHWWLQJ LW
%RPDUl  2Q WKH IROORZLQJ GD\ &DUOWRQ UHSRUWHG 'DYLVjV       ULJKW 7KH\ IRXQG QR FDXVH RI DFWLRQ H[FHSW DV WR WZR SODLQWLIIV DQG RQO\
EHKDYLRUWR'RQ%RPDUWKHJHQHUDOVXSHULQWHQGHQW%RPDU             DZDUGHG WKHP  HDFK LQ FRPSHQVDWRU\ GDPDJHV 7KH SXQLWLYH
                                                                      GDPDJHV LI FRQVLGHUHG DSDUW IURP WKH TXHVWLRQ RI ZKHWKHU WKH SODLQWLII
ODXJKHGDWILUVWEXWWROG&DUOWRQWKDWKHZRXOGNHHS&DUOWRQjV       VKRXOG KDYH SUHYDLOHG DW DOO DUH XQGHUVWDQGDEOH VLQFH WKH HPSOR\HU GLG D
FRPSODLQWFRQILGHQWLDODQGZRXOGORRNLQWRWKHPDWWHU+H            YHU\ SRRU MRE RI WU\LQJ WR FRUUHFW D EDG ZRUNSODFH VLWXDWLRQ RI ZKLFK LW
                                                                      KDG NQRZOHGJH
    ((2&HWDOY                         1RV        1RV                       ((2&HWDOY         
      +DUEHUW<HDUJLQ,QF                                                                               +DUEHUW<HDUJLQ,QF

YLRODWLRQRI7LWOH9,,7KURXJKRXWWKHLQVWUXFWLRQVWKLVHUURU        ODWHUWHVWLILHGWKDWLWGLGQRWVXUSULVHKLPWRKHDUWKDW'DYLV
LV FRPSRXQGHG  )RU H[DPSOH WKH LQVWUXFWLRQV ODWHU VWDWH     KDG mJRRVHGl VRPHRQH  :KHQ %RPDU UHSRUWHG &DUOWRQjV
m$QHPSOR\HUKDVDGXW\WRWDNHSURPSWDQGHIIHFWLYHDFWLRQ            FRPSODLQWWR+DUROG6FRWWWKHVLWHVXSHULQWHQGHQW%RPDUZDV
WRUHPHG\FRPSODLQWVRIVH[XDOKDUDVVPHQWl$OWKRXJKDQ               GLUHFWHG WR QRWLI\ WKH +DUEHUW<HDUJLQ KRPH RIILFH LQ
HPSOR\HUPD\KDYHVRPHW\SHRIJHQHUDOGXW\DIDLOXUHWR              *UHHQYLOOH6RXWK&DUROLQD7KHKXPDQUHVRXUFHVRIILFLDODW
UHPHG\FRPSODLQWVRIVH[XDOKDUDVVPHQWWKDWGRHVQjWULVHWR            FRUSRUDWHKHDGTXDUWHUV5REHUW&RRSHULQVWUXFWHG%RPDUWR
WKHOHYHORIJHQGHUGLVFULPLQDWLRQLVQRWDFWLRQDEOHXQGHU7LWOH       WUDQVIHU &DUOWRQ RXW RI 'DYLVjV ZRUNJURXS  %\ WKH WLPH
9,,7KHHUURULVLQFRQFOXGLQJWKDWDOOKDUDVVPHQWRIDVH[XDO       &DUOWRQUHWXUQHGWRZRUNRQ0RQGD\)HEUXDU\KH
QDWXUHDPRXQWVLSVRIDFWRWRJHQGHUGLVFULPLQDWLRQ                  KDGEHHQPRYHGWRDQRWKHUFUHZZLWKDGLIIHUHQWVXSHUYLVRU
  /DWHUWKHLQVWUXFWLRQVWHOOWKHMXU\WKDW                            $FFRUGLQJ WR &DUOWRQ KRZHYHU WKH VH[XDO KDUDVVPHQW
                                                                       FRQWLQXHG&DUOWRQWHVWLILHGWKDW'DYLVEHJDQVWDONLQJKLPE\
  :KHUHWKHKDUDVVHUDQGWKHYLFWLPDUHERWKPDOHWKHUHLV             mVWDQG>LQJ@RIIIDUHQRXJKWROHWPHNQRZWKDWKHZDVWKHUHl
  DQLQIHUHQFHRIGLVFULPLQDWLRQEHFDXVHRIVH[ZKHQWKH               ,QDGGLWLRQZRUGOHDNHGRXWWKDW&DUOWRQKDGILOHGDVH[XDO
  KDUDVVHU VXEMHFWV RQO\ PDOH HPSOR\HHV WR RIIHQVLYH RU         KDUDVVPHQWFRPSODLQWGHVSLWH%RPDUjVSURPLVHWR&DUOWRQ
  REMHFWLRQDEOHFRQGXFWRIDVH[XDOQDWXUHRUWKHFRQGXFW              WKDWKLVFRPSODLQWZRXOGUHPDLQFRQILGHQWLDO$QXPEHURI
  LV VR VH[ VSHFLILF DQG GHURJDWRU\ WKDW WKH KDUDVVHU LV      &DUOWRQjVFRZRUNHUVWDXQWHG&DUOWRQUHSHDWHGO\E\JUDEELQJ
  FOHDUO\ PRWLYDWHG E\ D JHQHUDO KRVWLOLW\ WR PHQ LQ WKH      DQG mKXQFK>LQJ@l RQ HDFK RWKHU  7KH\ DOVR EHJDQ WR FDOO
  ZRUNSODFH                                                           &DUOWRQm/RXLHjVJLUOIULHQGlDQGWRWUHDWKLPDVLIKHKDGmWKH
                                                                       SODJXHl2QHFRZRUNHUWHVWLILHGWKDWYDULRXVVXSHUYLVRUVZHUH
   6LQFH WKHUH LV QR FODLP WKDW 'DYLV ZDV mPRWLYDWHG E\ D    SUHVHQWZKHQ &DUOWRQZDVEHLQJWDXQWHGDQGWKDWVRPHRI
JHQHUDOKRVWLOLW\WRPHQLQWKHZRUNSODFHl,WXUQP\DWWHQWLRQ        WKHPMRLQHGLQPRFNLQJ&DUOWRQE\VD\LQJWKDWLI&DUOWRQZHUH
WRRQO\WKHILUVWSDUWRIWKLVLQVWUXFWLRQ$JDLQLWLVFOHDUWKDW   DmUHDOPDQlKHZRXOGDGGUHVVWKHPDWWHULQDPDQQHURWKHU
mJHQGHUlDQGmVH[lDUHEHLQJFRQIODWHG)LUVWRIDOOLIWKH          WKDQ E\ ILOLQJ D VH[XDO KDUDVVPHQW FRPSODLQW  (YHQ DIWHU
KDUDVVPHQWLVVSHFLILFDOO\GLUHFWHGDWPHQDQGQRWZRPHQLW           &DUOWRQLQIRUPHG%RPDUDERXWWKHEHKDYLRURIKLVFRZRUNHUV
GRHVQjWKDYHWREHRIDVH[XDOQDWXUH7KHKDUDVVPHQWIRU            WKHULGLFXOHFRQWLQXHGILQDOO\FDXVLQJ&DUOWRQWRTXLWKLVMRE
H[DPSOH FRXOG EH YHUEDO DQG QRW LQYROYH VH[XDO WHUPV RU      LQ$SULORI
LQQXHQGRHVDWDOO6HFRQGWKHMXU\LVQRWEHLQJWROGDWWKLV
SRLQWWKDWWKHPDOHRQPDOHKDUDVVPHQWRIWKHW\SHLQYROYHG              0HDQZKLOH RQ )HEUXDU\   %RPDU ZURWH XS
LQWKLVFDVHLVRQO\DFWLRQDEOHXQGHU7LWOH9,,LQDPL[HGVH[         &DUOWRQjVFRPSODLQW+HDOVRWROG'DYLVDERXWWKHFRPSODLQW
ZRUNSODFH7KHHOHPHQWRIJHQGHUGLVFULPLQDWLRQLVPLVVLQJ            WRZKLFK'DYLVUHVSRQGHGE\JULQQLQJDQGGHQ\LQJWKDWKH
RUDWEHVWREVFXUHG7KHYHUGLFWIRUPJLYHQWRWKHMXU\RQO\          KDGHYHUGRQHDQ\WKLQJWR&DUOWRQ)LQDOO\%RPDUGLUHFWHG
FRPSRXQGHGWKHSUREOHP7KHRQO\VXEVWDQWLYHTXHVWLRQWKH             'DYLVWRGRFXPHQWDmZHOGLQJSUREOHPlDOOHJHGO\FDXVHGE\
MXU\ZDVDVNHGZDVm>K@DV3ODLQWLIIsRH&DUOWRQSURYHGE\D          &DUOWRQDQGWRSODFHLWLQ&DUOWRQjVILOH%RPDUODWHUDGPLWWHG
SUHSRQGHUDQFHRIWKHHYLGHQFHWKDW'HIHQGDQWVXEMHFWHGKLP             WKDWWKLVPDQQHURIGRFXPHQWDWLRQZDVFRQWUDU\WRFRPSDQ\
WR VH[XDO KDUDVVPHQW"l  ,I WKH MXU\ DQVZHUHG m\HVl WR WKDW   SROLF\ZKLFKLQVWHDGUHTXLUHGDVSHFLILFmYHUEDOUHSULPDQG
                                                                       IRUPlWREHFRPSOHWHG
        ((2&HWDOY                      1RV        1RV                          ((2&HWDOY     
         +DUEHUW<HDUJLQ,QF                                                                               +DUEHUW<HDUJLQ,QF

   2Q 0DUFK   &RRSHU WKH FRUSRUDWH KHDGTXDUWHUV         HIIHFW)RU0U'DYLVFKLYDOU\ZDVDOLYHDQGZHOO)RUKLV
KXPDQ UHVRXUFHV UHSUHVHQWDWLYH FDPH WR WKH sDFNVRQ             HPSOR\HUEHWWHUWKDWKHZHUHDFDG
7HQQHVVHH VLWH WR LQYHVWLJDWH &DUOWRQjV FRPSODLQW  +LV
LQYHVWLJDWLRQODVWHGDERXWIRXUKRXUVDQGFRQVLVWHGVROHO\RI           7KH ZKROH LVVXH RI D PL[HGVH[ ZRUNSODFH EHFDPH
WDONLQJWR%RPDU'DYLV6FRWWDQG&DUOWRQ%RPDU'DYLV            FRQIXVHG EHIRUH  WKH MXU\ HYHU UHFHLYHG WKLV FDVH IRU
DQG 6FRWW DOO DGPLWWHG WKDW mKRUVHSOD\l KDSSHQHG DW WKH        GHOLEHUDWLRQV:KHQGHIHQVHFRXQVHOREMHFWHGWRWKHFRXUWjV
IDFLOLW\DOWKRXJKWKHLUVWRULHVYDULHGDVWRWKHDFWXDODPRXQW        SURSRVHG LQVWUXFWLRQV RQ WKH GHILQLWLRQ RI mVH[XDO
RIKRUVHSOD\LQYROYHG&DUOWRQKRZHYHUGHFOLQHGWRGLVFXVV          KDUDVVPHQWlSDUWLFXODUO\DVLWUHODWHGWRZKHWKHUWKLVZDVD
KLVFRPSODLQWZLWK&RRSHUXQOHVVKLVDWWRUQH\ZDVSUHVHQW             PL[HGVH[ZRUNSODFHWKHWULDOMXGJHVWDWHG
&RRSHU LQ WXUQ GLG QRW FRQWDFW &DUOWRQjV DWWRUQH\ HYHQ
WKRXJK &DUOWRQ JDYH &RRSHU KLV DWWRUQH\jV QDPH DQG                   7+( &2857   1R  ,jP QRW JRLQJ WR JUDQW WKDW
WHOHSKRQHQXPEHU+HDOVRIDLOHGWRLQWHUYLHZ/LQGOH\ZKR              EHFDXVHZHjUHQRWJRLQJWRJHWLQWRZKHWKHUWKLVZDVRU
ZLWQHVVHG WKH VHFRQG LQFLGHQW RU DQ\RQH HOVH RQ 'DYLVjV         ZDVQRWDPL[HGZRUNSODFH,PHDQWKHUHZHUHZRPHQ
FUHZHYHQWKRXJK&RRSHUZDVSURYLGHGZLWKDOLVWRIWKHLU               DWWKHSODQW
QDPHV
                                                                          ,QDGGLWLRQLWLVFOHDUIURPWKHMXU\LQVWUXFWLRQFRQIHUHQFH
  $WWKHHQGRIKLVLQYHVWLJDWLRQ&RRSHUZDUQHG%RPDUDQG             DVZHOODVWKHLQVWUXFWLRQVDFWXDOO\JLYHQWKDWWKHWULDOMXGJH
6FRWWDERXWWKHmUDPSDQWlKRUVHSOD\RFFXUULQJDWWKHIDFLOLW\         IHOW LW PDGH QR GLIIHUHQFH ZKHWKHU WKLV ZDV D PL[HGVH[
SRLQWHGRXWWKDWLWYLRODWHGFRPSDQ\SROLF\DQGWROGWKHPWR          ZRUNSODFH RU QRW  $OWKRXJK WKDW PD\ EH WUXH LQ VRPH
SUHYHQWDQ\UHWDOLDWLRQDJDLQVW&DUOWRQ'DYLVKRZHYHUZDV          VLWXDWLRQV LW LV QRW WKH WKHRU\ XQGHU ZKLFK WKLV FDVH
QHLWKHUUHSULPDQGHGQRUGLVFLSOLQHGDVDUHVXOWRI&DUOWRQjV           SURFHHGHG7KHLQVWUXFWLRQVUHIOHFWWKHDQDO\WLFDOHUURUPDGH
LQYHVWLJDWLRQ EHFDXVH WKH UHSRUW WR FRUSRUDWH KHDGTXDUWHUV      E\ WKH WULDO MXGJHnWKH VDPH DQDO\WLFDO HUURU PDGH E\ WKH
FRQFOXGHGWKDWQRKDUDVVPHQWKDGRFFXUUHG                             GLVVHQW 7KH LQVWUXFWLRQV WKH MXU\ UHFHLYHG VWDUWHG RXW E\
                                                                       GHVFULELQJWKHSODLQWLIIVjFODLPDVIROORZV
        :RRGVjVFODLP
                                                                           7KH SODLQWLIIV FODLP WKDW sRVHSK &DUOWRQ &HGULF
  :RRGV ZRUNHG IRU +DUEHUW<HDUJLQ IURP 0D\                :RRGV7HUU\'RWVRQDQG:LOOLDP'R\OHZHUHVH[XDOO\
XQWLOsXO\EXWXQOLNH&DUOWRQZDVQRWRQWKHFUHZ            KDUDVVHG E\ WKH GHIHQGDQW    6H[XDO KDUDVVPHQW LV
VXSHUYLVHG E\ 'DYLV  +H ZDV ILUVW WRXFKHG E\ 'DYLV VL[        GLVFULPLQDWLRQRQWKHEDVLVRIVH[SURKLELWHGE\6HFWLRQ
PRQWKV DIWHU :RRGV EHJDQ ZRUNLQJ DW WKH IDFLOLW\  7KH          7LWOHRIWKH&LYLO5LJKWV$FWRI
LQFLGHQWRFFXUUHGZKHQ:RRGVZDVULGLQJLQDWD[LWUXFNIXOO
RI FRZRUNHUV  'DYLV JRW RQ WKH WUXFN SXW KLV DUP DURXQG     1RW RQO\ LV WKH FODLP QRW GHVFULEHG DV RQH IRU JHQGHU
:RRGVDQGSODFHGKLVKDQGVRQ:RRGVjVmSULYDWHVl:RRGV              GLVFULPLQDWLRQEXWWKHLQVWUXFWLRQVWHOOWKHMXURUVDWWKHRXWVHW
UHVSRQGHGE\UHPRYLQJ'DYLVjVKDQGDQGOHDYLQJWKHWUXFN              WKDWmVH[XDOKDUDVVPHQWLVGLVFULPLQDWLRQlWKDWDPRXQWVWRD
'DYLVODXJKHGDQGWKHRWKHUHPSOR\HHVDOOMRNHGDERXWWKH
LQFLGHQW
                                                                           
 $IWHUZDUGV DW OHDVW mWZR RU WKUHH WLPHV D GD\l 'DYLV            ,QVWUXFWLRQDO HUURU ZDV UDLVHG RQ DSSHDO
ZRXOGJHWXSFORVHWR:RRGVDQGWRXFKKLPmDORWlRQYDULRXV               
                                                                            6HH s$ DW 
       ((2&HWDOY                             1RV            1RV                         ((2&HWDOY          
         +DUEHUW<HDUJLQ,QF                                                                                         +DUEHUW<HDUJLQ,QF

FDUULHGRXWE\SHUVRQVZKRDUHRIWKHVDPHVH[DVWKHSHUVRQ                      SDUWVRIKLVERG\LQFOXGLQJKLVSULYDWHV:RRGVIHOWWKDWmLW
EHLQJ mGLVFULPLQDWHGl DJDLQVW  1RWH WKH XVH RI WKH ZRUG                 ZDVQjW ULJKWl ZKHQ 'DYLV WRXFKHG KLP DQG HYHQWXDOO\
mGLVFULPLQDWHGlDVRSSRVHGWRmKDUDVVHGl$OWKRXJKFHUWDLQ                       EHFDPHVRXQFRPIRUWDEOHDURXQG'DYLVWKDWZKHQKHVDZ
W\SHVRIKDUDVVPHQWPD\UHVXOWLQDFWLRQDEOHGLVFULPLQDWLRQ                      'DYLVFRPLQJWRZDUGVKLP:RRGVZRXOGJHWXSDQGUXQ
7LWOH 9,, LV QRW D JHQHULF DQWLKDUDVVPHQW VWDWXWH  7KLV
GLVWLQFWLRQEHFRPHVLPSRUWDQWLQKRVWLOHZRUNHQYLURQPHQW                              7KHHQYLURQPHQWDW+DUEHUW<HDUJLQ
FDVHV  ,W LV HDV\ WR VHH WKDW D UDFLDOO\ KRVWLOH ZRUN
HQYLURQPHQW LV JHQHUDOO\ DFWLRQDEOH  ,W GRHV QRW IROORZ                   +DUEHUW<HDUJLQKDGERWKDJHQHUDODQWLKDUDVVPHQWSROLF\
KRZHYHUWKDWHYHU\mVH[XDOO\lKRVWLOHZRUNHQYLURQPHQWZLOO                      DQGDVSHFLILFDQWLVH[XDOKDUDVVPHQWSROLF\7KHVHSROLFLHV
JURXQGD7LWOH9,,FODLP,QIDFWLIWKHHQYLURQPHQWLVMXVW                    ZHUHSRVWHGRQLWVEXOOHWLQERDUGDWWKHIDFLOLW\8QGHUWKH
VH[XDOO\KRVWLOHZLWKRXWDQHOHPHQWRIJHQGHUGLVFULPLQDWLRQ                     DQWLVH[XDO KDUDVVPHQW SROLF\ m>X@QZHOFRPH VH[XDO
LWLVQRWDFWLRQDEOH6WDWHGDQRWKHUZD\DQGZLWKDSRORJLHV                     DGYDQFHV UHTXHVWV IRU VH[XDO IDYRUV DQG RWKHU YHUEDO RU
WR0RWKHU*RRVH                                                                  SK\VLFDO FRQGXFW RI D VH[XDO QDWXUH FRQVWLWXWH VH[XDO
                                                                                  KDUDVVPHQWZKHQ>W@KHKDUDVVPHQWVXEVWDQWLDOO\LQWHUIHUHV
  *HRUJLH3RUJLHSXGGLQJDQGSLH                                                  ZLWK DQ HPSOR\HHjV ZRUN SHUIRUPDQFH RU FUHDWHV DQ
  *RRVHGWKHPHQDQGPDGHWKHPFU\                                                LQWLPLGDWLQJKRVWLOHRURIIHQVLYHZRUNHQYLURQPHQWl
  8SRQWKHZRPHQKHODLGQRKDQG
  6RLWFRVWKLVHPSOR\HUJUDQG                                                 'HVSLWH WKH H[LVWHQFH RI WKHVH ZULWWHQ SROLFLHV HYLGHQFH
                                                                                  SUHVHQWHGE\WKH((2&LQGLFDWHGWKDWPDQ\HPSOR\HHVDQG
   6XEVWLWXWH/RXLV'DYLVIRU*HRUJLH 3RUJLHDQG\RXKDYH                        VXSHUYLVRUV ZHUH XQDZDUH RI WKHLU FRQWHQW  9DULRXV
WKLV FDVH  $OWKRXJK WKH ODZ GRHV QRW DOZD\V IROORZ WKH                 HPSOR\HHV WHVWLILHG WKDW WKH\ KDG UHFHLYHG QR LQIRUPDWLRQ
GLFWDWHVRIFRPPRQVHQVHLWLVKDUGIRUPHWRFRPHWRJULSV                      FRQFHUQLQJVH[XDOKDUDVVPHQWHYHQWKRXJKXQGHU+DUEHUW
ZLWK WKH IDFW WKDW LI 'DYLV KDG EHHQ DQ HTXDO RSSRUWXQLW\              <HDUJLQjV FRUSRUDWH SURFHGXUHV WKH\ ZHUH UHTXLUHG WR EH
JRRVHUWKHUHZRXOGEHQRFDXVHRIDFWLRQKHUH <HWWKDWLV                    LQIRUPHGRILWVDQWLKDUDVVPHQWSROLFLHVGXULQJDQRULHQWDWLRQ
WKHIDFW,QRUGHUWRPDNHWKLVIDFWVLWXDWLRQILWZLWKLQ WKH                   IROORZLQJWKHLUKLUH(YHQ6FRWWDVWKHVLWHVXSHULQWHQGHQW
IUDPHZRUNIRUDFWLRQDEOHFDVHVWKH((2&DQGWKHGLVVHQW                          FRQFHGHG WKDW KH KDG UHFHLYHG QR DQWLVH[XDO KDUDVVPHQW
KDGWRGHFODUHWKDWWKLVZDVDPL[HGVH[ZRUNSODFH1HYHU                        WUDLQLQJ GHVSLWH WKH H[LVWHQFH RI FRUSRUDWH SROLF\ WR WKH
PLQGWKDWDOOPHPEHUVRIWKHODUJHPDOHZRUNIRUFHZRUNHG                        FRQWUDU\
RXWLQWKHILHOGZKLOHWKHWRWDORIWKUHHIHPDOHZRUNHUVZHUHLQ
DQRIILFHDQGKDGQRFRQWDFWZLWK0U'DYLV$SSDUHQWO\LW                          7KH ((2& DOVR SUHVHQWHG HYLGHQFH WKDW GHVSLWH D
ZRXOGKDYHPDGHQRGLIIHUHQFHLIWKHWKUHHZRPHQZRUNHGLQ                        SURKLELWLRQDJDLQVWXQZHOFRPHSK\VLFDOFRQWDFWRIDVH[XDO
DQRWKHU VWDWH LQ WKH IDFH RI 0U 'DYLVjV VHOIULJKWHRXV                   QDWXUH WKH SUDFWLFH RI mJRRVLQJl RFFXUUHG DPRQJ PDOH
SURFODPDWLRQ WKDW  m2I FRXUVH , GLGQjW GR WKDW WR ZRPHQ               HPSOR\HHVDW+DUEHUW<HDUJLQRQDGDLO\EDVLVm*RRVLQJl
:KDWNLQGRIDJX\GR\RXWKLQN,DP"lnRUZRUGVWRWKDW                           FRQVLVWHG RI JHWWLQJ JUDEEHG SDWWHG RU SURGGHG LQ WKH
                                                                                  EXWWRFNV RU JHQLWDOV  1R RQH ZDV HYHU GLVFLSOLQHG IRU WKLV
                                                                                  FRQGXFW:LOOLDP'R\OHIRUH[DPSOHWHVWLILHGWKDWKHZDV
     
      ,W LV QRW GLVSXWHG WKDW WKLV LV D FRUUHFW VWDWHPHQW RI WKH ODZ ,W LV QRW
                                                                                  VODSSHGSDWWHGDQGSRNHGRQWKHEXWWRFNVDQGWKDWKHVDZ
DV WKH GLVVHQW LPSOLHV D FRQFHVVLRQ RQ P\ SDUW 5DWKHU WKLV SULQFLSOH LV         WKLVKDSSHQWRRWKHUHPSOR\HHVDVZHOO7HUU\'RWVRQVDLG
FLWHG WR VKRZ ZK\ WKH ((2& KDG WR SURFHHG LQ WKLV FDVH XQGHU D PL[HG
VH[ ZRUNSODFH WKHRU\
     ((2&HWDOY                       1RV       1RV                         ((2&HWDOY         
      +DUEHUW<HDUJLQ,QF                                                                              +DUEHUW<HDUJLQ,QF

WKDWWZRSDUWLFXODUFRZRUNHUVZRXOGRIWHQFRPHXSWRKLP           UHYLHZHGWKHUHOHYDQWFDVHODZIURPRWKHUFLUFXLWV,WQRWHG
SLQFKKLPRQWKHWKLJKDQGJUDEKLPEHWZHHQWKHOHJV              WKDWWKHFLUFXLWVZHUHQRWLQDJUHHPHQWRQWKHLVVXHRIZKHWKHU
                                                                    VDPHVH[KDUDVVPHQWZDVDFWLRQDEOHDQGIXUWKHUWKHUHZDV
  $FFRUGLQJWRVHYHUDOZLWQHVVHVYDULRXVVXSHUYLVRUVHLWKHU        GLVDJUHHPHQWDVWRWKHW\SHRIVDPHVH[FRQGXFWWKDWZRXOG
SDUWLFLSDWHGLQRUZLWQHVVHGJRRVLQJ'DYLVDGPLWWHGWKDWKH       VXSSRUW DQ DFWLRQ  7KH FRXUW GHFLGHG WKDW WKH PDMRULW\ RI
JRRVHGPDOHHPSOR\HHVDQGWHVWLILHGWKDWKHVDZ6FRWWDQG          FLUFXLWVZRXOGDOORZSUHGDWRU\KRPRVH[XDOFRQGXFWWRJURXQG
$QWKRQ\6PLWKDFRZRUNHUJRRVHHPSOR\HHVLQWKHEXWWRFNV         D7LWOH9,,FODLP7KHFRXUWFRQFOXGHGLWVRSLQLRQKRZHYHU
/LQGOH\DQGFRZRUNHU7RQ\:DUUHQERWKWHVWLILHGWKDWWKH\           E\VWDWLQJ
KDG VHHQ 'DYLV JUDE YDULRXV HPSOR\HHVj EXWWRFNV DQG
FURWFKHV  :DUUHQ WHVWLILHG WKDW 'DYLV HYHQ WZLVWHG KLV          ,W LV QRW QHFHVVDU\ IRU WKLV FRXUW WR GHFLGH WRGD\
QLSSOHV,QDGGLWLRQ'RWVRQDQG:DUUHQWHVWLILHGWKDWWKH\          ZKHWKHUVDPHVH[VH[XDOKDUDVVPHQWFDQEHDFWLRQDEOH
VDZDQXPEHURIWKHLUFRZRUNHUVJRRVHRWKHUHPSOR\HHVLQ              RQO\ ZKHQ WKH KDUDVVHU LV D KRPRVH[XDO DOO WKDW LV
WKHSUHVHQFHRIYDULRXVVXSHUYLVRUVDQGWKDWWKHVXSHUYLVRUV         QHFHVVDU\IRUXVWRREVHUYHLVWKDWZKHQDPDOHVH[XDOO\
GLGQRWKLQJWRVWRSLW                                              SURSRVLWLRQVDQRWKHUPDOHEHFDXVHRIVH[XDODWWUDFWLRQ
                                                                      WKHUHFDQEHOLWWOHTXHVWLRQWKDWWKHEHKDYLRULVDIRUPRI
  2XWRIWKHSHRSOHHPSOR\HGDWWKHIDFLOLW\E\+DUEHUW          KDUDVVPHQWWKDWRFFXUVEHFDXVHWKHSURSRVLWLRQHGPDOH
<HDUJLQ LQ  RQO\  RI WKHP ZHUH ZRPHQ  $OO WKUHH     LVDPDOHnWKDWLVmEHFDXVHRIVH[l
ZRPHQ WHVWLILHG WKDW WKH\ KDG GDLO\ FRQWDFW ZLWK WKH
FRQVWUXFWLRQZRUNHUVDQGWKDWQRQHRIWKHPDOHHPSOR\HHV              :HWKLQNWKHGLVWULFWFRXUWFRUUHFWO\FRQFOXGHGWKDWWKH
LQFOXGLQJ'DYLVHYHUVDLGDQ\WKLQJRIDVH[XDOQDWXUHWRWKHP        SODLQWLIIKDV PDGHRXWDQDFWLRQDEOHFODLPXQGHU7LWOH
RUWRXFKHGWKHPLQDSSURSULDWHO\'DYLVKLPVHOIVWDWHGWKDWKH        9,,
ZRXOGQRWKDYHWRXFKHGDQ\IHPDOHEHORZWKHEHOWDQG6FRWW
WHVWLILHGWKDWDOWKRXJKKHKDGWKXPSHGWKHJHQLWDOVRIDQRWKHU      ,GDWHPSKDVLVLQRULJLQDO
PDOHHPSOR\HHKHZRXOGQHYHUGRWKDWWRDZRPDQ
                                                                       6LQFHWKHFRQGXFWFRPSODLQHGRILQPDQ\RIWKHVHVH[XDO
% 7ULDOEDFNJURXQG                                                 KDUDVVPHQWFDVHVLVVRRIIHQVLYHLWLVHDV\WRXQGHUVWDQGWKDW
                                                                    D VHQVH RI GHFHQF\ LQLWLDOO\ LQFOLQHV RQH WR ZDQW WR JUDQW
  7KH((2&ILOHGLWVDFWLRQRQ0D\DOOHJLQJWKDW           UHOLHI,WLVHDV\WRIRUJHWKRZHYHUWKDW7LWOH9,,GHDOVZLWK
'RWVRQ'R\OHDQG:RRGVH[SHULHQFHGVH[XDOKDUDVVPHQWLQ           GLVFULPLQDWLRQ LQ WKH ZRUNSODFH QRW PRUDOLW\ RU YXOJDULW\
YLRODWLRQRI7LWOH9,,&DUOWRQILOHGDFRPSODLQWWRLQWHUYHQH     :KHQ7LWOH9,,ZDVDPHQGHGWRHQFRPSDVVGLVFULPLQDWLRQ
RQ sXO\    7KH ILYHGD\ MXU\ WULDO FRPPHQFHG RQ   SUHGLFDWHG RQ VH[ WKH SULPDU\ IRFXV ZDV RQ SURWHFWLQJ
$SULO   WR DGMXGLFDWH ERWK WKH VH[XDO KDUDVVPHQW     ZRPHQ LQ WKH ZRUNSODFH IURP PDOH VXSHUYLVRUV DQG
FODLPVRI'RWVRQ'R\OHDQG:RRGVDQG&DUOWRQjVFODLPVRI         FRZRUNHUVWUHDWLQJWKHPGLIIHUHQWO\EHFDXVHRIWKHLUJHQGHU
VH[XDOKDUDVVPHQWUHWDOLDWLRQDQGFRQVWUXFWLYHGLVFKDUJH         ,IWKHZRUGmJHQGHUlKDGEHHQXVHGLQVWHDGRImVH[lVRPHRI
                                                                    WKHFRQIXVLRQWKDWH[LVWVWRGD\ SUREDEO\ZRXOGKDYHQHYHU
  $W WULDO WKH ((2& DQG &DUOWRQ SUHVHQWHG WHVWLPRQ\         GHYHORSHG  7KH FORFN FDQjW EH WXUQHG EDFN KRZHYHU DQG
UHJDUGLQJWKHZRUNSODFHHQYLURQPHQWDWWKH+DUEHUW<HDUJLQ          WKHUH LV QR GRXEW WKDW WKH VWDWXWH SURWHFWV PHQ DV ZHOO DV
IDFLOLW\7KHLUZLWQHVVHVH[SODLQHGWKHSUDFWLFHRIJRRVLQJ        ZRPHQIURPJHQGHUGLVFULPLQDWLRQ,WDOVRSURWHFWVXQGHU
DQGKRZERWKVXSHUYLVRUVDQGHPSOR\HHVHLWKHUSDUWLFLSDWHG          FHUWDLQ FLUFXPVWDQFHV ZRUNHUV IURP SUHGDWRU\ FRQGXFW
LQRUZLWQHVVHGWKHRIIHQGLQJFRQGXFW9DULRXVHPSOR\HHV
       ((2&HWDOY                      1RV         1RV                         ((2&HWDOY           
         +DUEHUW<HDUJLQ,QF                                                                               +DUEHUW<HDUJLQ,QF

 BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB                         DOVRWHVWLILHGWKDWWKH\KDGQRWEHHQPDGHDZDUHRIWKHDQWL
                                                                        KDUDVVPHQW SROLFLHV DW +DUEHUW<HDUJLQ  )XUWKHUPRUH WKH
  &21&855,1*,13$57',66(17,1*,13$57                                IHPDOHHPSOR\HHVDW+DUEHUW<HDUJLQFRQILUPHGWKDWWKH\KDG
 BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB                         QRWEHHQVXEMHFWHGWRDQ\XQZDQWHGSK\VLFDOFRQWDFWZKLOH
                                                                        ZRUNLQJDWWKHIDFLOLW\
  5$/3+%*8<s5&LUFXLWsXGJHFRQFXUULQJLQSDUWDQG
GLVVHQWLQJLQSDUW                                                      $GGLWLRQDOWHVWLPRQ\ZDVSUHVHQWHGWRVKRZWKDW+DUEHUW
                                                                        <HDUJLQ WULHG WR FRYHU XS GHWDLOV DERXW WKH ZRUNSODFH
  ,FRQFXULQWKDWSRUWLRQRIWKHOHDGRSLQLRQDIILUPLQJWKH            HQYLURQPHQWGXULQJWKH((2&jVLQYHVWLJDWLRQ,QSDUWLFXODU
MXGJPHQWDVDPDWWHURIODZRQWKH:RRGVFODLP,ZRXOG               :DUUHQVWDWHGWKDWVKRUWO\EHIRUHKHZDVVFKHGXOHGWRWDONWR
KRZHYHUUHYHUVHWKHMXGJPHQWLQIDYRURI&DUOWRQ                      WKH((2&LQYHVWLJDWRUFRQGXFWLQJWKHLQTXLU\LQWR&DUOWRQjV
                                                                        FRPSODLQWKHZDVDVNHGE\%RPDUDQG:DUUHQjVVXSHUYLVRU
  $OWKRXJK,GLVDJUHHZLWKWKHFRQFOXVLRQRIWKHGLVVHQW,             :LOOLDP ,UYLQ ZK\ KH ZDV EHLQJ FDOOHG LQ E\ WKH ((2&
FDQQRWVD\WKHUHVXOWUHDFKHGLVDZKROO\LOORJLFDOH[WHQVLRQ          :KHQ:DUUHQH[SODLQHGWKDWWKHLQYHVWLJDWRUZDVLQTXLULQJ
RIRXUSULRUFDVHODZ,WLVDQH[WHQVLRQKRZHYHUDQGRQH            DERXWWKHHQYLURQPHQWDWWKHIDFLOLW\%RPDUDQG,UYLQWROG
WKDW JRHV EH\RQG ZKHUH , EHOLHYH WKH 6XSUHPH &RXUW KDV         KLPWKDWmWKHOHVV\RXFDQVD\ZKHQ\RXJRLQWKHUHWKHEHWWHU
GUDZQWKHOLQH0\YLHZLVLQIRUPHGE\P\UHDGLQJRIWKH               RII ZH DUH  <RX GRQjW KDYH WR OLH EXW \RX GRQjW KDYH WR
6XSUHPH&RXUWjVGHFLVLRQLQ2QFDOHY6XQGRZQHU2IIVKRUH                H[DFWO\WHOOWKHPWKHWUXWKDERXWHYHU\WKLQJl
6HUYLFHV,QF86QRWZLWKVWDQGLQJWKDWWKLV
FDVHLVDOVRFLWHGE\WKHGLVVHQWLQVXSSRUWRIWKHGHFLVLRQLW            7KLVFRQYHUVDWLRQPDGH:DUUHQIHDUWKDWKHPLJKWORVHKLV
UHDFKHV                                                                MRE+HIHOWSUHVVXUHGWROLHEHFDXVHKHKDGmVHHQLQWKHSDVW
                                                                        ZKHQSHRSOHGLGQjWGRWKLQJVWKDWZHUHDVNHGRIWKHPWKH\
   $V WKH GLVVHQWLQJ RSLQLRQ LQGLFDWHV WKLV LV D VDPHVH[      GLGQjWVWD\DURXQGYHU\ORQJl$FFRUGLQJO\:DUUHQZDVQRW
VH[XDO KDUDVVPHQW FDVH  7KH ILUVW FDVH LQ RXU FLUFXLW WR     WUXWKIXOZLWKWKH((2&LQYHVWLJDWRUDQGVLJQHGDGRFXPHQW
GHILQLWLYHO\VWDWHWKDWDVDPHVH[VH[XDOKDUDVVPHQWFODLPLV           SUHSDUHGE\WKH((2&WKDWFRQWDLQHGLQDFFXUDWHLQIRUPDWLRQ
DFWLRQDEOHZDV<HDU\Y*RRGZLOO,QGXVWULHV.QR[YLOOH,QF            :DUUHQODWHUWHVWLILHGWKDWKHGHFLGHGWRWHOOWKHWUXWKZKHQKH
 )G  WK &LU   6LQFH <HDU\ ZDV GHFLGHG        UHDOL]HGWKDWWKHPDWWHUZDVDFWXDOO\JRLQJWRWULDO
EHIRUH 2QFDOH WKH FRXUW GLG QRW KDYH WKH EHQHILW RI WKDW
GHFLVLRQ%ULHIO\VWDWHG<HDU\LQYROYHGDZRUNSODFHVFHQDULR            7KHMXU\UHWXUQHGDYHUGLFWIRU&DUOWRQDQG:RRGVRQWKHLU
LQZKLFKWKHSODLQWLIIZDVVH[XDOO\KDUDVVHGE\DKRPRVH[XDO            VH[XDO KDUDVVPHQW FODLPV DZDUGLQJ &DUOWRQ  LQ
FRZRUNHU7KHKDUDVVPHQWFRQVLVWHGRIGLUHFWSURSRVLWLRQLQJ            FRPSHQVDWRU\GDPDJHVDQGLQSXQLWLYHGDPDJHV
RI WKH SODLQWLII IRU VH[ D KRVW RI REVFHQH DQG YXOJDU        DQG :RRGV  LQ FRPSHQVDWRU\ GDPDJHV DQG  LQ
FRPPHQWVDQGDFRQVLGHUDEOHDPRXQWRILQDSSURSULDWHDQG                SXQLWLYHGDPDJHV,WUHWXUQHGDYHUGLFWIRU+DUEHUW<HDUJLQ
RIIHQVLYHWRXFKLQJ,QUHDFKLQJWKHGHFLVLRQWKDWWKLVW\SHRI         RQWKHVH[XDOKDUDVVPHQWFODLPVRI'RWVRQDQG'R\OH$IWHU
FRQGXFW ZDV DFWLRQDEOH XQGHU 7LWOH 9,, WKH FRXUW ILUVW         WKHMXU\YHUGLFWZDVHQWHUHGWKHGLVWULFWFRXUWVHWDVLGHWKH
                                                                        YHUGLFWIRU:RRGVLQUHVSRQVHWR+DUEHUW<HDUJLQjVPRWLRQ
                                                                        IRUMXGJPHQWDVDPDWWHURIODZEXWOHWVWDQGWKHRWKHUSDUWV
                                                                        RIWKHMXU\YHUGLFW7KHGLVWULFWFRXUWDOVRGHQLHG+DUEHUW
     
     6LQFH sXGJH 1RUULV KDV FRQFXUUHG LQ WKLV RSLQLRQ LW EHFRPHV WKH   <HDUJLQjV PRWLRQ IRU D QHZ WULDO ZLWK UHVSHFW WR &DUOWRQjV
RSLQLRQ RI WKH FRXUW ZLWK UHVSHFW WR &DUOWRQjV FODLP
    ((2&HWDOY                         1RV        1RV                       ((2&HWDOY       
      +DUEHUW<HDUJLQ,QF                                                                               +DUEHUW<HDUJLQ,QF

FODLP  7KLV WLPHO\ DSSHDO DQG FURVVDSSHDO IROORZHG           REVHUYDWLRQVZHUHPDGHDWWKHWLPHRIKLVRZQKDUDVVPHQW
$OWKRXJKDQRWLFHRIEDQNUXSWF\ZDVILOHGE\+DUEHUW<HDUJLQ           %HFDXVHWKH((2&IDLOHGWRVKRZWKDW+DUEHUW<HDUJLQNQHZ
RQ0D\WKH%DQNUXSWF\&RXUWIRUWKH'LVWULFWRI              RUVKRXOGKDYHNQRZQRI'DYLVjVEHKDYLRUWRZDUGV:RRGV
1HYDGDDWWKHUHTXHVWRIDOOSDUWLHVHQWHUHGDQRUGHUOLILQJ         ZHILQGQRHUURULQWKHGLVWULFWFRXUWjVJUDQWRIMXGJPHQWDVD
WKHDXWRPDWLFVWD\VRWKDWWKLVFDVHFRXOGSURFHHGRQDSSHDO          PDWWHURIODZIRU+DUEHUW<HDUJLQZLWKUHVSHFWWR:RRGVjV
                                                                       FODLP
                        ,,$1$/<6,6
                                                                                           ,,,&21&/86,21
$ &DUOWRQjVVH[XDOKDUDVVPHQWFODLP
                                                                         )RUDOOWKHUHDVRQVVHWIRUWKDERYH,ZRXOG$)),50WKH
  :KHQUHYLHZLQJDMXU\YHUGLFWm>M@XGJPHQWDVDPDWWHURI            MXGJPHQWRIWKHGLVWULFWFRXUWRQERWK&DUOWRQjVDQG:RRGVjV
ODZLVDSSURSULDWHRQO\ZKHQWKHUHLVDFRPSOHWHDEVHQFHRI            FODLPV  , ZRXOG UHGXFH KRZHYHU WKH WRWDO DPRXQW RI
IDFWWRVXSSRUWWKHYHUGLFWVRWKDWQRUHDVRQDEOHMXURUFRXOG         GDPDJHVDZDUGHGWR&DUOWRQIURPWRVR
KDYH IRXQG IRU WKH QRQPRYLQJ SDUW\l  0RRUH Y .8.$           WKDW WKH DZDUG FRQIRUPV ZLWK WKH IHH FDS SURYLGHG LQ 
:HOGLQJ6\V	5RERW&RUS)GWK&LU              86&DE'
m>8@QOHVVWKLV&RXUWLVOHIWZLWKWKHGHILQLWHDQGILUP
FRQYLFWLRQWKDWDPLVWDNHUHVXOWLQJLQSODLQLQMXVWLFHKDVEHHQ
FRPPLWWHGRUXQOHVVWKHYHUGLFWLVFRQWUDU\WRDOOUHDVRQZH
PXVW DIILUP WKH MXU\jV YHUGLFWl  6FKRRQRYHU Y &RQVRO
)UHLJKWZD\V&RUSRI'HO/RFDO)GWK
&LULQWHUQDOTXRWDWLRQPDUNVDQGFLWDWLRQRPLWWHG
   :KHWKHUWKHDOOHJHGKDUDVVPHQWZDVmEHFDXVH RIl
  VH[DVUHTXLUHGXQGHU7LWOH9,,
  8QGHU7LWOH9,,RIWKH&LYLO5LJKWV$FWRIm>L@WVKDOO
EHDQXQODZIXOHPSOR\PHQWSUDFWLFHIRUDQHPSOR\HUWR
GLVFULPLQDWH DJDLQVW DQ\ LQGLYLGXDO    EHFDXVH RI VXFK
LQGLYLGXDOjVUDFHFRORUUHOLJLRQVH[RUQDWLRQDORULJLQl
86&  HD   +DUEHUW<HDUJLQ DUJXHV WKDW WKH
GLVWULFWFRXUWHUUHGLQGHQ\LQJLWVPRWLRQIRUMXGJPHQWDVD
PDWWHURIODZEHFDXVHQRHYLGHQFHZDVSUHVHQWHGDWWULDOWKDW
&DUOWRQZDVVXEMHFWHGWRDQ\KDUDVVPHQWEHFDXVHRIKLVVH[
'XH WR WKLV DOOHJHG IDLOXUH LW FRQWHQGV WKDW WKH ((2& DQG
&DUOWRQIDLOHGWRVKRZWKDW+DUEHUW<HDUJLQYLRODWHG7LWOH9,,
  7KH6XSUHPH&RXUWKRZHYHUKHOGLQ2QFDOHY6XQGRZQHU
2IIVKRUH 6HUYLFHV ,QF  86    WKDW
m>Q@RWKLQJ LQ 7LWOH 9,, QHFHVVDULO\ EDUV D FODLP RI
GLVFULPLQDWLRQ µEHFDXVH RI    VH[j PHUHO\ EHFDXVH WKH
    ((2&HWDOY                         1RV         1RV                       ((2&HWDOY        
      +DUEHUW<HDUJLQ,QF                                                                                +DUEHUW<HDUJLQ,QF

EHKDYLRUl  %XW DV WKH GLVWULFW FRXUW SRLQWHG RXW mLI WKLV   SODLQWLIIDQGWKHGHIHQGDQWRUWKHSHUVRQFKDUJHGZLWKDFWLQJ
DUJXPHQW ZHUH FRUUHFW WKHQ HPSOR\HUV ZRXOG KDYH                  RQEHKDOIRIWKHGHIHQGDQWDUHRIWKHVDPHVH[l,WSRLQWHG
FRQVWUXFWLYH QRWLFH LQ HYHU\ FDVH ZKHUH WKHUH LV VH[XDO         RXWWKDWm>W@KHFULWLFDOLVVXHLVZKHWKHUPHPEHUVRIRQH
KDUDVVPHQWEHFDXVHWREHDFWLRQDEOHWKHKDUDVVPHQWPXVWEH            VH[DUHH[SRVHGWRGLVDGYDQWDJHRXVWHUPVRUFRQGLWLRQVRI
VHYHUH RU SHUYDVLYHl  $OWKRXJK WKH ((2& DUJXHV WKDW            HPSOR\PHQW WR ZKLFK PHPEHUV RI WKH RWKHU VH[ DUH QRW
FRQVWUXFWLYH QRWLFH FDQ EH IRXQG ZLWK UHVSHFW WR :RRGV          H[SRVHGl  ,G DW   0RUHRYHU DV UHFRJQL]HG E\ WKH
EHFDXVH WKH mFKDOOHQJHG FRQGXFW ZDV ZLWQHVVHG E\ RWKHU           PDMRULW\6OLS2SDWWKHmKDUDVVLQJFRQGXFWQHHGQRWEH
HPSOR\HHVlWKHUHZDVQRSURRIWKDWDQ\RIWKHVHHPSOR\HHV              PRWLYDWHG E\ VH[XDO GHVLUH WR VXSSRUW DQ LQIHUHQFH RI
ZHUH+DUEHUW<HDUJLQVXSHUYLVRUV:RRGVIRUH[DPSOHZDV              GLVFULPLQDWLRQRQWKHEDVLVRIVH[l,G
XQDEOHWRQDPHDVLQJOHZLWQHVVZKRZDVSUHVHQWZKHQ'DYLV
DOOHJHGO\WRXFKHGKLPLQWKHWD[LWUXFN                                 7KH&RXUWWKHQJDYHWZRLOOXVWUDWLRQVRIVLWXDWLRQVLQZKLFK
                                                                        DWULHURIIDFWPLJKWUHDVRQDEO\ILQGVXFKGLVFULPLQDWLRQ2QH
   1RUGRHV:DQFKLNY*UHDW/DNHV+HDOWK3ODQ,QF1R               ZDVZKHUHDIHPDOHYLFWLPZDVKDUDVVHGE\DQRWKHUIHPDOHLQ
  :/  WK &LU 0DU                   VH[VSHFLILF WHUPV DQG WKH RWKHU ZDV ZKHUH WKH DOOHJHG
XQSXEOLVKHG WDEOH RSLQLRQ VXSSOLHG DV D VXSSOHPHQWDO           KDUDVVHUWUHDWHGPHQDQGZRPHQGLIIHUHQWO\LQDPL[HGVH[
FLWDWLRQ E\ WKH ((2& UHQGHU +DUEHU<HDUJLQ OLDEOH IRU           ZRUNSODFH6HHLGDWm:KDWHYHUHYLGHQWLDU\URXWHWKH
:RRGVjVFODLP7KH((2&DVVHUWVWKDW:DQFKLNVWDQGVIRU                SODLQWLIIFKRRVHVWRIROORZKHRUVKHPXVWDOZD\VSURYHWKDW
WKHSURSRVLWLRQWKDWWKHSHUYDVLYHQHVVRIVH[XDOKDUDVVPHQWWR          WKH FRQGXFW DW LVVXH ZDV QRW PHUHO\ WLQJHG ZLWK RIIHQVLYH
ZKLFKDSODLQWLIILVVXEMHFWHGFRXOGOHDGDUHDVRQDEOHMXU\WR          VH[XDOFRQQRWDWLRQVEXWDFWXDOO\FRQVWLWXWHGGLVFULPLQDWLRQ
FRQFOXGH WKDW DQ HPSOR\HU KDG FRQVWUXFWLYH NQRZOHGJH RI          EHFDXVHRIVH[l,GDWLQWHUQDOTXRWDWLRQPDUNVEUDFNHWV
KDUDVVPHQW GHVSLWH WKH SODLQWLIIjV IDLOXUH WR UHSRUW WKDW        HOOLSVHVDQGHPSKDVLVRPLWWHG
KDUDVVPHQW
                                                                          ,DJUHHZLWKWKHPDMRULW\jVVWDWHPHQWWKDWm>D@OWKRXJKDQ
   :DQFKLNKRZHYHULVQRWFRQWUROOLQJIRUWZRUHDVRQV)LUVW        HPSOR\HUPD\KDYHVRPHW\SHRIJHQHUDOGXW\DIDLOXUHWR
LWLVXQSXEOLVKHGDQGWKHUHIRUHRQO\RISHUVXDVLYHYDOXHDW            UHPHG\FRPSODLQWVRIVH[XDOKDUDVVPHQWWKDWGRHVQjWULVHWR
PRVW6HHWK&LU5XOHJ0RUHLPSRUWDQWO\HYHQWKH             WKHOHYHORIJHQGHUGLVFULPLQDWLRQLVQRWDFWLRQDEOHXQGHU7LWOH
SHUVXDVLYHYDOXHRI:DQFKLNLVOLPLWHGEHFDXVHWKHFHUWDLQW\           9,,l6OLS2SDW&RQWUDU\WRWKHPDMRULW\KRZHYHU,
RIFRUSRUDWHNQRZOHGJHLQ:DQFKLNZDVVLJQLILFDQWO\JUHDWHU             EHOLHYH WKDW WKH ((2& DQG &DUOWRQ SUHVHQWHG VXIILFLHQW
WKDQLQWKHSUHVHQWFDVH,Q:DQFKLNHYHQWKH&(2DQGWKH             HYLGHQFHIRUDUDWLRQDOWULHURIIDFWWRFRQFOXGHWKDWWKHVH[XDO
SUHVLGHQW RI WKH GHIHQGDQW FRPSDQ\ DGPLWWHG WR EHLQJ             KDUDVVPHQW GLG ULVH WR WKH OHYHO RI JHQGHU GLVFULPLQDWLRQ
SK\VLFDOO\ SUHVHQW GXULQJ WKH RFFXUUHQFH RI LI QRW              7KH\SUHVHQWHGHYLGHQFHWKDWWKHPDOHHPSOR\HHVDW+DUEHUW
SDUWLFLSDWLQJLQWKHDFWLYLWLHVWKDWYLRODWHGWKHFRPSDQ\jVRZQ        <HDUJLQ ZHUH H[SRVHG WR mGLVDGYDQWDJHRXV FRQGLWLRQV RI
KDUDVVPHQWSROLF\6HHLGDW:RRGVRQWKHRWKHUKDQG          HPSOR\PHQWlWRZKLFKWKHIHPDOHHPSOR\HHVZHUHQRWVXFK
IDLOHG WR SURYLGH DQ\ HYLGHQFH WKDW SDUWLFXODU VXSHUYLVRUV      WKDW WKH PDOH HPSOR\HHV ZHUH EHLQJ GLVFULPLQDWHG DJDLQVW
PXFK OHVV VXFK KLJKOHYHO RIILFHUV REVHUYHG DQ\ KRVWLOH         mEHFDXVH RIl VH[  ,Q SDUWLFXODU WZR RI WKH FRPSDQ\jV
EHKDYLRU GLUHFWHG DW :RRGV  $OWKRXJK WKHUH ZDV VRPH            VXSHUYLVRUV JDYH WHVWLPRQ\ WKDW FRXOG OHDG WKH MXU\ WR
JHQHUDOL]HG WHVWLPRQ\ WKDW +DUEHUW<HDUJLQ VXSHUYLVRUV              FRQFOXGH WKDW PDOHV ZHUH WUHDWHG GLIIHUHQWO\ IURP IHPDOHV
SHUVRQDOO\ REVHUYHG  D QXPEHU RI FRZRUNHUV JRRVH RWKHU          2QH ZDV 'DYLV ZKR WHVWLILHG WKDW KH KDG QHYHU WRXFKHG D
HPSOR\HHV :RRGV IDLOHG WR HVWDEOLVKHG WKDW WKHVH                 IHPDOHHPSOR\HHLQWKHEUHDVWEXWWRFNVRUSXELFDUHDQRU
    ((2&HWDOY                         1RV         1RV                         ((2&HWDOY          
      +DUEHUW<HDUJLQ,QF                                                                                  +DUEHUW<HDUJLQ,QF

ZRXOGKHKDYHGRQHVRHYHQWKRXJKKHDGPLWWHGWRWRXFKLQJ              RQHGROODUPRUHWKDQDOORZHGE\WKHDERYHIHHFDS$OWKRXJK
PDOH HPSOR\HHV LQ WKH QLSSOHV EXWWRFNV DQG SXELF DUHDV       WKH6XSUHPH&RXUWUHFHQWO\UXOHGLQ3ROODUGY(,GX3RQWGH
7KHRWKHUZDV6FRWWZKRVWDWHGWKDWKHZRXOGQHYHUWKXPS               1HPRXUV	&R6&WWKDWIURQWSD\LVQRW
WKHJHQLWDOVRIDZRPDQDOWKRXJKKHDFNQRZOHGJHGKDYLQJ                DQHOHPHQWRIFRPSHQVDWRU\GDPDJHVZLWKLQWKHPHDQLQJRI
GRQHVRWRDPDOHHPSOR\HH                                           WKH &LYLO 5LJKWV $FW RI  WKHUH LV QR LQGLFDWLRQ LQ WKH
                                                                        UHFRUG WKDW WKH RQH GROODU RI mFRPSHQVDWRU\ GDPDJHVl
   ,QDGGLWLRQWRWKHWHVWLPRQ\JLYHQE\WKHVHPDOHHPSOR\HHV          DZDUGHGWR&DUOWRQZDVFRPSHQVDWLRQIRUIURQWSD\7KHRQH
WKHWHVWLPRQ\RIWKHIHPDOHHPSOR\HHVHVWDEOLVKHGWKDWWKH\             GROODU FRPSHQVDWRU\ GDPDJH DZDUG LQVWHDG DSSHDUV WR
ZHUH QHYHU VXEMHFWHG WR WKH LQDSSURSULDWH WRXFKLQJ                FRPSHQVDWH&DUOWRQIRUKLVHPRWLRQDOSDLQDQGVXIIHULQJDQG
H[SHULHQFHG E\ WKH PDOH HPSOR\HHV  +DUEHUW<HDUJLQ LQ          WKXVIDOOVVTXDUHO\XQGHUWKHSURYLVLRQVRIDE'
UHVSRQVH SRLQWV RXW WKDW WKHUH ZHUH RQO\ WKUHH IHPDOH          $FFRUGLQJO\,ZRXOGUHGXFHWRWKHWRWDODPRXQWRI
HPSOR\HHVDWWKHIDFLOLW\DQGWKDWWKH\ZRUNHGLQWKHRIILFH          GDPDJHVDZDUGHGWR&DUOWRQVRWKDWWKHDZDUGFRQIRUPVZLWK
QRWLQWKHILHOG$OWKRXJKWKLVFRXOGEHYLHZHGDVZHLJKLQJ            WKHIHHFDSSURYLGHGLQ86&DE'
DJDLQVWWKH((2&jVFODLPRIGLVFULPLQDWLRQDJDLQVWPDOHVLW
LVQRWRXUUROHWRSHUIRUPVXFKDQHYDOXDWLRQ,QVWHDGWKLV           ' :RRGVjVVH[XDOKDUDVVPHQWFODLP
FRXUWLQUHYLHZLQJWKHMXU\jVGHWHUPLQDWLRQPD\RQO\LQTXLUH
ZKHWKHU D mPLVWDNH UHVXOWLQJ LQ SODLQ LQMXVWLFH KDV EHHQ          7XUQLQJQRZWRWKH((2&jVFURVVDSSHDOLWFKDOOHQJHVWKH
FRPPLWWHGRUXQOHVVWKHYHUGLFWLVFRQWUDU\WRDOOUHDVRQl       GLVWULFWFRXUWjVJUDQWRIMXGJPHQWDVDPDWWHURIODZLQIDYRU
6FKRRQRYHU)GDW                                            RI+DUEHUW<HDUJLQUHJDUGLQJ:RRGVjVFODLP7KHGLVWULFW
                                                                        FRXUWJUDQWHGVXFKMXGJPHQWRQWKHJURXQGVWKDW'DYLVZDV
   ,VHHQRVXFKPLVWDNHRUXQUHDVRQDEOHYHUGLFWLQWKHSUHVHQW         QRW :RRGVjV VXSHUYLVRU DQG WKDW :RRGV QHYHU YRLFHG D
FDVH7KH((2&DQG&DUOWRQSUHVHQWHGHYLGHQFHWKDWERWK                FRQWHPSRUDQHRXVFRPSODLQWUHJDUGLQJ'DYLVjVFRQGXFW
PHQDQGZRPHQZHUHZRUNLQJDWWKH+DUEHUW<HDUJLQIDFLOLW\
,QGHHGWKHGLVWULFWFRXUWH[SUHVVO\UHFRJQL]HGWKHPL[HGVH[             )RUDQHPSOR\HUWREHOLDEOHIRUWKHVH[XDOKDUDVVPHQWRIDQ
FKDUDFWHU RI WKH ZRUNSODFH ZKHQ LW VWDWHG WKDW mZHjUH QRW      HPSOR\HHE\DFRZRUNHUWKHKDUDVVHGHPSOR\HHPXVWVKRZ
JRLQJ WR JHW LQWR ZKHWKHU WKLV ZDV RU ZDV QRW D PL[HG        WKDWWKHHPSOR\HUERWKNQHZRUVKRXOGKDYHNQRZQRIWKH
ZRUNSODFH  , PHDQ WKHUH ZHUH ZRPHQ DW WKH SODQWl            KDUDVVPHQW DQG  IDLOHG WR WDNH SURPSW DQG DSSURSULDWH
(PSKDVLVDGGHG7KLVODQJXDJHFRQWUDU\WRWKHPDMRULW\jV            FRUUHFWLYHDFWLRQ6HH+DIIRUGY6HLGQHU)G
VWUDLQHGLQWHUSUHWDWLRQGRHVQRWLQGLFDWHWKDWWKHmWULDOMXGJH        WK &LU   7KH ((2& KRZHYHU IDLOHG WR VKRZ WKDW
IHOW LW PDGH QR GLIIHUHQFH ZKHWKHU WKLV ZDV D PL[HGVH[        +DUEHUW<HDUJLQNQHZRUVKRXOGKDYHNQRZQDERXW'DYLVjV
ZRUNSODFHRUQRWl6OLS2SDW,QVWHDG,EHOLHYHWKDWWKH       JURSLQJRI:RRGV8QOLNHWKHVLWXDWLRQZLWK&DUOWRQLWLV
MXGJH ZDV VLPSO\ VWDWLQJ WKDW WKH SUHVHQFH RI ZRPHQ LQ        XQGLVSXWHGWKDW:RRGVQHYHUUHSRUWHG'DYLVjVEHKDYLRUWRWKH
DGGLWLRQ WR DOO WKH PHQ VR FOHDUO\ UHQGHUHG WKH IDFLOLW\ D   +DUEHUW<HDUJLQ DGPLQLVWUDWLRQ  $QG &DUOWRQjV FRPSODLQW
PL[HGVH[ ZRUNSODFH WKDW QR VSHFLDO MXU\ LQVWUXFWLRQV             FRXOG QRW KDYH SURYLGHG QRWLFH WR +DUEHUW<HDUJLQ DERXW
UHJDUGLQJWKLVPDWWHUZHUHQHFHVVDU\                                   :RRGVjVVLWXDWLRQEHFDXVH&DUOWRQYRLFHGKLVFRPSODLQWDIWHU
                                                                        WKHWLPHWKDW:RRGVZDVDOOHJHGO\JURSHGE\'DYLV
  $OORIWKHIHPDOHHPSOR\HHVDW+DUEHUW<HDUJLQWHVWLILHG
WKDWWKH\KDGQHYHUEHHQWRXFKHGLQDSSURSULDWHO\DQGOLNHWKH            7KH((2&KRZHYHUDUJXHVWKDW+DUEHUW<HDUJLQVKRXOG
PDOH HPSOR\HHV DOO RI WKHVH IHPDOH HPSOR\HHV KDG GDLO\         EHOLDEOHWR:RRGVmEHFDXVH'DYLVKDGDKLVWRU\RIKDUDVVLQJ
     ((2&HWDOY                          1RV         1RV                       ((2&HWDOY        
       +DUEHUW<HDUJLQ,QF                                                                                 +DUEHUW<HDUJLQ,QF

IRUPXODHVKRXOGQRWEHXVHGLQHYDOXDWLQJDZDUGVRISXQLWLYH              FRQWDFWZLWK'DYLVDQGWKHRWKHUVXSHUYLVRUV7KHIDFWWKDW
GDPDJHV6HH%0:86DW                                       WKH\ZRUNHGLQWKHRIILFHUDWKHUWKDQRXWLQWKHILHOGGRHVQRW
                                                                          H[SODLQ WKH PDWHULDO GLIIHUHQFH LQ WUHDWPHQW  'UDZLQJ DOO
   )XUWKHUPRUH WKH VLQJOH LVRODWHG FDVH RI /DZ\HU Y          LQIHUHQFHV LQ IDYRU RI WKH ((2& DQG &DUOWRQ DV WKH
/XPEHU &R GRHV QRW SURYLGH +DUEHUW<HDUJLQ ZLWK D                 QRQPRYLQJ SDUWLHV DV WKLV FRXUW PXVW , EHOLHYH WKDW D
UHDVRQDEOH EDVLV WR FODLP WKDW LW ODFNHG IDLU QRWLFH WKDW WKH   UHDVRQDEOHMXU\FRXOGFRQFOXGHWKDWWKHGUDPDWLFDOO\GLIIHUHQW
SXQLWLYHGDPDJHDZDUGLQWKLVFDVHFRXOGEHXSWR               H[SHULHQFHV RI WKH PDOH DQG IHPDOH HPSOR\HHV DW +DUEHUW
$VLPLODUDZDUGIRUSXQLWLYHGDPDJHVKDVDOUHDG\EHHQXSKHOG              <HDUJLQ HVWDEOLVKHG WKDW WKH HPSOR\HHV ZKR ZHUH EHLQJ
E\WKLVFRXUWLQDQRWKHU7LWOH9,,DFWLRQ6HH((2&Y(0&               JUDEEHGRUSRNHGLQWKHJHQLWDOVUHFHLYHGWKLVWUHDWPHQWLQD
&RUS RI 0DVV 1R   :/  WK &LU             GLVFULPLQDWRU\ PDQQHU EHFDXVH RI WKHLU PDOH JHQGHU QRW
)HE   XQSXEOLVKHG WDEOH GHFLVLRQ VXVWDLQLQJ D           VLPSO\EHFDXVHWKHPHQZRUNHGRXWLQWKHILHOG
SXQLWLYH GDPDJH DZDUG RI  LQ D 7LWOH 9,, JHQGHU
GLVFULPLQDWLRQFDVHZKHUHWKHIHPDOHPDQDJHUZDVDOOHJHGO\                   %XWWKHPDMRULW\GHVSLWHLWVGHQLDOVHH6OLS2SDWQ
WHUPLQDWHGIRUSRRUSHUIRUPDQFHEXWZDVDOVRIRUFHGWRZRUN              LPSOLHVWKDW2QFDOHOLPLWVWKHDFWLRQDELOLW\RI7LWOH9,,VDPH
LQDQHQYLURQPHQWZKHUHVKHZDVUHTXLUHGWRDWWHQGGLVWULFW               VH[KDUDVVPHQWFODLPVWRVLWXDWLRQVZKHUHWKHmKDUDVVHUZDV
PHHWLQJVKHOGDWDWRSOHVVEDUDQGIRUFHGDWKHUZRUNSODFHWR           DKRPRVH[XDOlSRLQWLQJRXWWKDW2QFDOHLQYROYHGDFODLPDQW
OLVWHQ WR FUXGH MRNHV UHJDUGLQJ ZRPHQ  *LYHQ WKH QRWLFH        ZKRTXLWKLVMREEHFDXVHKHWKRXJKWKHmZRXOGEHUDSHGRU
SURYLGHGE\WKHVWDWXWRU\PD[LPXPDVZHOODVWKHH[LVWHQFH               IRUFHGWRKDYHVH[l6OLS2SDW,GLVDJUHHWKDW2QFDOH
RI VLPLODUOHYHOVDZDUGHGLQRWKHU7LWOH9,,FDVHV,ZRXOG              LPSRVHG VXFK D OLPLWDWLRQ  7KH &RXUW SUHVHQWHG WZR
KROGWKDWWKHDPRXQWRISXQLWLYHGDPDJHVDZDUGHGWR&DUOWRQ               LOOXVWUDWLRQVRIRWKHUVLWXDWLRQVLQZKLFKDWULHURIIDFWPLJKW
LVVXSSRUWHGE\WKHWKLUGSDUWRIWKH%0:DQDO\VLV                       UHDVRQDEO\ILQGGLVFULPLQDWLRQ6HH2QFDOH86DW
                                                                            0RUHRYHU WKH &RXUW SUHVHQWHG WKHVH LOOXVWUDWLRQV DV
      6WDWXWRU\FDSRQFRPSHQVDWRU\DQGSXQLWLYHGDPDJHV                H[DPSOHV DQG QRW DV DQ H[KDXVWLYH OLVW RI DOO SRVVLEOH
        DZDUGHGXQGHU86&D                                   VLWXDWLRQVLQZKLFKDSODLQWLIIZRXOGKDYHDQDFWLRQDEOH7LWOH
                                                                          9,,VDPHVH[KDUDVVPHQWFODLP
  2QHDGGLWLRQDOLVVXHUHJDUGLQJ&DUOWRQjVFODLPQRWUDLVHG
E\ HLWKHU SDUW\ GHVHUYHV WR EH EULHIO\ DGGUHVVHG  7KH             7KLV LV QRW WR VD\ WKDW mHYHU\ µVH[XDOO\j KRVWLOH ZRUN
ODQJXDJHRI86&DE'SURYLGHVWKDW                     HQYLURQPHQWZLOOJURXQGD7LWOH9,,FODLPlDVWKHPDMRULW\
                                                                          DVVHUWV6OLS2SDW,QGHHGWKH6XSUHPH&RXUWVHWIRUWK
  >W@KH VXP RI WKH DPRXQW RI FRPSHQVDWRU\ GDPDJHV                  mDQRWKHUUHTXLUHPHQWWKDWSUHYHQWV7LWOH9,,IURPH[SDQGLQJ
  DZDUGHGXQGHUWKLVVHFWLRQIRUIXWXUHSHFXQLDU\ORVVHV                 LQWRDJHQHUDOFLYLOLW\FRGHl2QFDOH86DWZKHQLW
  HPRWLRQDO SDLQ VXIIHULQJ LQFRQYHQLHQFH PHQWDO                    VWDWHGWKDW
  DQJXLVK ORVV RI HQMR\PHQW RI OLIH DQG RWKHU
  QRQSHFXQLDU\ORVVHVDQGWKHDPRXQWRISXQLWLYHGDPDJHV                   >W@KH SURKLELWLRQ RI KDUDVVPHQW RQ WKH EDVLV RI VH[
  DZDUGHGXQGHUWKLVVHFWLRQVKDOOQRWH[FHHG>LQWKHFDVH                 UHTXLUHV QHLWKHU DVH[XDOLW\ QRU DQGURJ\Q\ LQ WKH
  RIDFRPSDQ\RI+DUEHUW<HDUJLQjVVL]H@                         ZRUNSODFH LW IRUELGV RQO\ EHKDYLRU VR REMHFWLYHO\
                                                                            RIIHQVLYH DV WR DOWHU WKH FRQGLWLRQV RI WKH YLFWLPjV
,G,QWKHFDVHEHIRUHXVWKHVXPRIWKHFRPSHQVDWRU\DQG                 HPSOR\PHQW  &RQGXFW WKDW LV QRW VHYHUH RU SHUYDVLYH
SXQLWLYHGDPDJHVDZDUGHGE\WKHGLVWULFWFRXUWZDV                HQRXJKWRFUHDWHDQREMHFWLYHO\KRVWLOHRUDEXVLYHZRUN
    ((2&HWDOY                       1RV        1RV                         ((2&HWDOY          
      +DUEHUW<HDUJLQ,QF                                                                               +DUEHUW<HDUJLQ,QF

  HQYLURQPHQWnDQHQYLURQPHQWWKDWDUHDVRQDEOHSHUVRQ                IRUSXQLWLYHGDPDJHVXSWRWKHVWDWXWRU\FDSlZKLFKLQSDUW
  ZRXOG ILQG KRVWLOH RU DEXVLYHnLV EH\RQG 7LWOH 9,,jV         MXVWLILHG WKH GLVWULFW FRXUWjV UHIXVDO mWR UHGXFH WKH SXQLWLYH
  SXUYLHZ:HKDYHDOZD\VUHJDUGHGWKDWUHTXLUHPHQWDV              GDPDJHVEHORZWKHVWDWXWRU\PD[LPXPl
  FUXFLDODQGDVVXIILFLHQWWRHQVXUHWKDWFRXUWVDQGMXULHV
  GR QRW PLVWDNH RUGLQDU\ VRFLDOL]LQJ LQ WKH                     ,Q VXSSRUW RI LWV DUJXPHQW KRZHYHU +DUEHUW<HDUJLQ
  ZRUNSODFHnVXFK DV PDOHRQPDOH KRUVHSOD\ RU                    SRLQWV WR VHYHUDO FDVHV XSKROGLQJ VPDOOHU SXQLWLYH GDPDJH
  LQWHUVH[XDOIOLUWDWLRQnIRUGLVFULPLQDWRU\FRQGLWLRQVRI            DZDUGV%XWWKHVHFDVHVDUHHDVLO\GLVWLQJXLVKDEOH7ZRRI
  HPSOR\PHQW                                                        WKH FDVHV LQYROYLQJ ORZHU SXQLWLYH GDPDJH DZDUGV IRU
                                                                     LQVWDQFHGRQRWDGGUHVVWKHXSSHUOLPLWRIVXFKDZDUGVDWDOO
2QFDOH86DWLQWHUQDOTXRWDWLRQPDUNVDQGFLWDWLRQV       6HH6KHDY*DOD[LH/XPEHU	&RQVWU&R)G
RPLWWHG  7KH PDMRULW\jV IHDU WKDW m>V@DPHVH[ VH[XDO        WK&LUXSKROGLQJDSXQLWLYHGDPDJHDZDUGRI
KDUDVVPHQWFDVHVRIWKLVQDWXUHSUHVHQWDVOLSSHU\VORSHl6OLS      LQ D VH[XDO KDUDVVPHQW FDVH ZLWK RQO\  LQ
2S DW  VKRXOG DFFRUGLQJO\ EH DOOD\HG EHFDXVH WKH        FRPSHQVDWRU\GDPDJHVEHFDXVHWKHFRPSDQ\jVUHSUHKHQVLEOH
6XSUHPH &RXUW KDV GHVFULEHG KRZ WR GLVWLQJXLVK EHWZHHQ        FRQGXFWmPDNHVLWLPSRVVLEOHIRUXVWRILQGWKDWWKHGLVWULFW
DFWLRQDEOH DQG QRQDFWLRQDEOH 7LWOH 9,, FODLPV  7KLV LV D   FRXUW DEXVHG LWV GLVFUHWLRQ E\ UHIXVLQJ WR JUDQW >WKH
GLVWLQFWLRQWKDW,DPIROORZLQJKHUHDQGWKXV,UHVSHFWIXOO\        FRPSDQ\jV@UHTXHVWHGUHPLWWLWXUl7LPPY3URJUHVVLYH6WHHO
GLVDJUHHZLWKWKHPDMRULW\jVFKDUDFWHUL]DWLRQRIWKLVFDVHDVDQ     7UHDWLQJ ,QF  )G   WK &LU 
H[WHQVLRQRI2QFDOH6HH6OLS2SDW                            XSKROGLQJDSXQLWLYHGDPDJHDZDUGRILQDVH[XDO
                                                                     KDUDVVPHQW FDVH mEHFDXVH SXQLWLYH GDPDJHV DUH QRW
  , SHUFHLYH WKDW WKH PDMRULW\ LV DFWXDOO\ PRUH FRQFHUQHG    LQFRQVLVWHQW ZLWK WKH ODFN RI FRPSHQVDWRU\ GDPDJHVl
DERXWWKHLPSOLFDWLRQVRIWKLVFDVHWKDQZLWKWKHMXU\jVYHUGLFW     $QRWKHU RI WKH FDVHV FLWHG E\ +DUEHUW<HDUJLQ LQYROYHV
RQWKHIDFWVSUHVHQWHG7KHFRQGXFWLQTXHVWLRQLQYROYHVIDU        SXQLWLYH GDPDJHV DJDLQVW LQGLYLGXDO GHIHQGDQWV QRW D
PRUHWKDQPHUHmWRZHOVQDSSLQJLQWKHORFNHUURRPl6OLS            FRUSRUDWLRQZLWKDELOOLRQQHWZRUWKDWWKHWLPHRIWULDO
2SDW&DUOWRQZDVVXEMHFWHGRQPRUHWKDQRQHRFFDVLRQ        6HH)DOOY,QGLDQD8QLY%GRI7UXVWHHV)6XSSG
WRLQYDVLYHSK\VLFDOFRQWDFWWRKLVJHQLWDODUHDV'DYLVZDV        1',QGRUGHULQJDUHPLWWLWXURISXQLWLYHGDPDJHV
DEOHWRmVWDONl&DUOWRQHYHQDIWHU&DUOWRQZDVWUDQVIHUUHGDQG      IURPWRZKHUHWKHGLVWULFWFRXUWLPSRVHG
WKHRWKHUHPSOR\HHVZHUHDOORZHGWRWDXQW&DUOWRQE\FDOOLQJ         SXQLWLYHGDPDJHVDJDLQVWLQGLYLGXDOGHIHQGDQWV
KLPQDPHVDQGVXEMHFWLQJKLPWRREVFHQHSK\VLFDOJHVWXUHV
$QGWKHUHZDVDPSOHWHVWLPRQ\WKDWRWKHUPDOHHPSOR\HHVDW              +DUEHUW<HDUJLQDOVRFLWHV/DZ\HUY/XPEHU&R
+DUEHUW<HDUJLQ ZHUH VXEMHFW WR EHLQJ JUDEEHG SDWWHG RU     ) 6XSS  1' ,OO  LQ ZKLFK WKH GLVWULFW FRXUW
SURGGHGLQWKHEXWWRFNVRUJHQLWDOVDQGWKDWIHPDOHVZHUHQRW       UHGXFHGWKHSXQLWLYHGDPDJHDZDUGLQD7LWOH9,,FDVHIURP
VXEMHFWHGWRVXFKEHKDYLRU6HH3DUW,,$EHORZIRUDPRUH        WR  VLPSO\ EHFDXVH  ZDV ILYH
GHWDLOHGGLVFXVVLRQUHJDUGLQJWKHVHYHULW\DQGSHUYDVLYHQHVV         WLPHVWKHFRPSHQVDWRU\DZDUG7KHGLVWULFWFRXUWVSHFLILFDOO\
RIWKHZRUNHQYLURQPHQWDWWKH+DUEHUW<HDUJLQIDFLOLW\             EDVHGWKHUHGXFWLRQRQLWVLQWHUSUHWDWLRQRIWKHFDVHODZZLWKLQ
                                                                     LWV FLUFXLW VWDWLQJ WKDW m6HYHQWK &LUFXLW FDVHV VXJJHVW WKDW
  $OORIWKLVHYLGHQFHZDVVXFKWKDWDUHDVRQDEOHMXU\FRXOG         SXQLWLYHGDPDJHVRIWKUHHWLPHVWKHOHYHORIFRPSHQVDWRU\
FRQFOXGHWKDWWKHFRQGLWLRQVDW+DUEHUW<HDUJLQ FUHDWHGDQ          GDPDJHVZLOOEHDSSURSULDWHRUDWOHDVWSHUPLVVLEOHLQPDQ\
mREMHFWLYHO\KRVWLOHRUDEXVLYHZRUNHQYLURQPHQWl,QGHHG          FDVHVl,GDW7KLVUDWLRQDOHKRZHYHUFRQIOLFWVZLWKWKH
LQ DGGUHVVLQJ WKH HYDOXDWLRQ RI WKH VHYHULW\ RI D JLYHQ     6XSUHPH &RXUWjV DGPRQLWLRQ WKDW VWULFW PDWKHPDWLFDO
    ((2&HWDOY                       1RV        1RV                         ((2&HWDOY          
      +DUEHUW<HDUJLQ,QF                                                                               +DUEHUW<HDUJLQ,QF

)G   WK &LU  VWDWLQJ WKDW mZKHUH WKH   KDUDVVPHQWFODLPWKH6XSUHPH&RXUWLQ2QFDOHVSHFLILFDOO\
LQMXU\ LV SULPDULO\ SHUVRQDO D JUHDWHU UDWLR PD\ EH         VWDWHG
DSSURSULDWHl
                                                                       :H KDYH HPSKDVL]HG PRUHRYHU WKDW WKH REMHFWLYH
   )XUWKHUPRUH m>L@Q GHWHUPLQLQJ WKH DPRXQW DQG                  VHYHULW\ RI KDUDVVPHQW VKRXOG EH MXGJHG IURP WKH
HIIHFWLYHQHVVRIH[HPSODU\GDPDJHVWREHDZDUGHGDJDLQVWD             SHUVSHFWLYH RI D UHDVRQDEOH SHUVRQ LQ WKH SODLQWLIIjV
GHIHQGDQW WKH FRXUW PD\ WDNH LQWR FRQVLGHUDWLRQ WKH            SRVLWLRQFRQVLGHULQJmDOOWKHFLUFXPVWDQFHVl,QVDPH
GHIHQGDQWjVZHDOWKRUQHWZRUWKl:KLWQH\Y&LW\EDQN1$          VH[ DV LQ DOO KDUDVVPHQW FDVHV WKDW LQTXLU\ UHTXLUHV
)GG&LU7KHMXU\LQWKHSUHVHQW           FDUHIXO FRQVLGHUDWLRQ RI WKH VRFLDO FRQWH[W LQ ZKLFK
FDVHZDVPDGHDZDUHWKDW+DUEHUW<HDUJLQLVSDUWRIDJOREDO           SDUWLFXODU EHKDYLRU RFFXUV DQG LV H[SHULHQFHG E\ LWV
FRUSRUDWLRQ5D\WKHRQ&RZLWKDQHWZRUWKRIELOOLRQ           WDUJHW  $ SURIHVVLRQDO IRRWEDOO SOD\HUjV ZRUNLQJ
DWWKHWLPHRIWKHWULDO,QOLJKWRIWKHGHIHQGDQWjVQHWZRUWK      HQYLURQPHQWLVQRWVHYHUHO\RUSHUYDVLYHO\DEXVLYHIRU
D KLJKHU SXQLWLYHWRFRPSHQVDWRU\GDPDJHVDZDUG UDWLR LV           H[DPSOHLIWKHFRDFKVPDFNVKLPRQWKHEXWWRFNVDVKH
MXVWLILHGLQRUGHUWRVHUYH7LWOH9,,jVSXUSRVHRISXQLVKPHQW          KHDGVLQWRWKHILHOGnHYHQLIWKHVDPHEHKDYLRUZRXOG
DQG GHWHUUHQFH EHFDXVH D VPDOOHU DZDUG ZRXOG KDYH KDG         UHDVRQDEO\ EH H[SHULHQFHG DV DEXVLYH E\ WKH FRDFKjV
PXFKOHVVRIDQHIIHFWRQDFRUSRUDWLRQRI+DUEHUW<HDUJLQjV           VHFUHWDU\PDOHRUIHPDOHEDFNDWWKHRIILFH7KHUHDO
VL]H$VWKHWULDOFRXUWVWDWHGmHYHQFRQVLGHULQJWKHDPRXQW         VRFLDOLPSDFWRIZRUNSODFHEHKDYLRURIWHQGHSHQGVRQD
RIWKHILQHRQO\DSHQDOW\RIIRUDFRUSRUDWLRQ           FRQVWHOODWLRQRIVXUURXQGLQJFLUFXPVWDQFHVH[SHFWDWLRQV
ZRUWKQHDUO\ELOOLRQLVFRPSDUDEOHWRDILQHIRU          DQG UHODWLRQVKLSV ZKLFK DUH QRW IXOO\ FDSWXUHG E\ D
DQLQGLYLGXDOl$FFRUGLQJO\,ZRXOGKROGWKDWWKHDPRXQWRI          VLPSOHUHFLWDWLRQRIWKHZRUGVXVHGRUWKHSK\VLFDODFWV
SXQLWLYHGDPDJHVDZDUGHGWR&DUOWRQZDVVXSSRUWHGE\WKH               SHUIRUPHG
VHFRQGSDUWRIWKH%0:DQDO\VLV
                                                                      86 DW  LQWHUQDO TXRWDWLRQ PDUNV DQG FLWDWLRQV
  F &RPSDUDEOHFDVHV                                              RPLWWHG([DPLQLQJmDOOWKHFLUFXPVWDQFHVl,EHOLHYHWKDWD
                                                                     UHDVRQDEOH MXU\ FRXOG ILQG WKDW WKH VLWXDWLRQ DW +DUEHUW
   )LQDOO\+DUEHUW<HDUJLQDUJXHVWKDWWKHVL]HRI&DUOWRQjV        <HDUJLQ ZDV VXFK WKDW &DUOWRQ KDG DQ DFWLRQDEOH 7LWOH 9,,
SXQLWLYHGDPDJHDZDUGLVQRWVXSSRUWHGE\DZDUGVJLYHQLQ            FODLP7KHSHUYDVLYHFRQGXFWGHVFULEHGDERYHDQGLQ3DUW
FRPSDUDEOHFDVHVm&RPSDULQJWKHSXQLWLYHGDPDJHVDZDUG             ,,$EHORZZHQWIDUEH\RQGWKHVRUWRIDFWLRQVWKDWPLJKW
DQGWKHFLYLORUFULPLQDOSHQDOWLHVWKDWFRXOGEHLPSRVHGIRU        UHDVRQDEO\ EH H[SHFWHG LQ WKH VRFLDO FRQWH[W RI D IDFWRU\
FRPSDUDEOH PLVFRQGXFW SURYLGHV D WKLUG LQGLFLXP RI             ZRUNLQJHQYLURQPHQW
H[FHVVLYHQHVVl%0:86DW)RUDFRPSDQ\RI
+DUEHUW<HDUJLQjVVL]H7LWOH9,,jVVWDWXWRU\FDSSURYLVLRQV           7KH PDMRULW\ ILQDOO\ FRPSODLQV WKDW m>D@OWKRXJK WKH ODZ
DOORZIRUWKHVXPRIFRPSHQVDWRU\DQGSXQLWLYHGDPDJHVWR            GRHVQRWDOZD\VIROORZWKHGLFWDWHVRIFRPPRQVHQVHLWLV
UHDFK D PD[LPXP RI   6HH  86&                  KDUGIRUPHWRFRPHWRJULSVZLWKWKHIDFWWKDWLI'DYLVKDG
DE'7KHVHSURYLVLRQVSXW+DUEHUW<HDUJLQRQ           EHHQDQHTXDORSSRUWXQLW\JRRVHUWKHUHZRXOGEHQRFDXVHRI
QRWLFHRIWKHVFDOHRISXQLWLYHGDPDJHVWKDWFRXOGEHDZDUGHG        DFWLRQKHUHl<HWWKLVLVWKHHVVHQFHRIWKH6XSUHPH&RXUWjV
IRUYLRODWLRQVRI7LWOH9,,6HH:	2)GDWQRWLQJ       GHFLVLRQ LQ 2QFDOH ZKHUH LW KHOG WKDW m>W@KH FULWLFDO LVVXH
WKDW7LWOH9,,jVVWDWXWRU\FDSSURYLVLRQVIRUSXQLWLYHGDPDJHV       7LWOH9,,jVWH[WLQGLFDWHVLVZKHWKHUPHPEHUVRIRQHVH[DUH
mSXW>WKHGHIHQGDQWFRPSDQ\@RQQRWLFHWKDWLWFRXOGEHOLDEOH       H[SRVHG WR GLVDGYDQWDJHRXV WHUPV RU FRQGLWLRQV RI
     ((2&HWDOY                      1RV        1RV                         ((2&HWDOY         
       +DUEHUW<HDUJLQ,QF                                                                              +DUEHUW<HDUJLQ,QF

HPSOR\PHQW WR ZKLFK PHPEHUV RI WKH RWKHU VH[ DUH QRW          ,Q DGGLWLRQ WKH PDQDJHPHQW RI +DUEHUW<HDUJLQ WROG DQ
H[SRVHGl2QFDOH86DW                                   HPSOR\HHWREHHYDVLYHGXULQJWKH((2&jVLQYHVWLJDWLRQDQG
                                                                     IDLOHGWRGLVFLSOLQHDQ\HPSOR\HHVLQUHVSRQVHWR&DUOWRQjV
  ,DOVRQRWHWKDWWKHYHU\K\SRWKHWLFDOWURXEOLQJWKHPDMRULW\      FRPSODLQWV7KHVXSHUYLVRUVRIWKHIDFLOLW\ ERWKFRQGRQHG
ZDVUHFHQWO\DGGUHVVHGLQ+ROPDQY,QGLDQD)G            DQG SDUWLFLSDWHG LQ DFWV VLPLODU WR WKRVH FRPSODLQHG RI E\
WK &LU   +ROPDQ LQYROYHG D PDUULHG FRXSOH ZKR      &DUOWRQ*LYHQDOORIWKLV,EHOLHYHWKDW+DUEHUW<HDUJLQjV
ZRUNHG LQ WKH VDPH XQLW RI ,QGLDQDjV 'HSDUWPHQW RI           IDLOXUHWRUHVSRQGPRUHDSSURSULDWHO\WR&DUOWRQjVKDUDVVPHQW
7UDQVSRUWDWLRQ  7KH\ DOOHJHG WKDW WKHLU FRPPRQ PDOH          HYLQFHGDGHJUHHRIUHSUHKHQVLELOLW\VXIILFLHQWWRVXSSRUWDQ
VXSHUYLVRUVH[XDOO\KDUDVVHGWKHPERWKLQYLRODWLRQRI7LWOH         DZDUGRISXQLWLYHGDPDJHVWR&DUOWRQ
9,,,QGLVPLVVLQJWKHLUFODLPWKH6HYHQWK&LUFXLWVWDWHGWKDW
m7LWOH9,,GRHVQRWFRYHUWKHµHTXDORSSRUWXQLW\jRUµELVH[XDOj        E 5DWLRWRDFWXDOGDPDJHV
KDUDVVHUWKHQEHFDXVHVXFKDSHUVRQLVQRWGLVFULPLQDWLQJRQ
WKHEDVLVRIVH[l,GDWHPSKDVLVLQRULJLQDO7RKROG        +DUEHUW<HDUJLQ QH[W DUJXHV WKDW WKH  SXQLWLYH
RWKHUZLVHVWDWHGWKHFRXUWmZRXOGFKDQJH7LWOH9,,LQWRD          GDPDJHDZDUGZDVXQUHDVRQDEOHEHFDXVHWKHMXU\GHWHUPLQHG
FRGHRIZRUNSODFHFLYLOLW\l,GDW                            WKDW &DUOWRQjV FRPSHQVDWRU\ GDPDJHV PHULWHG RQO\   ,Q
                                                                     %0:KRZHYHUWKH6XSUHPH&RXUWH[SUHVVO\SRLQWHGRXWWKDW
  7KHFDVHEHIRUHXVKRZHYHUGRHVQRWLQYROYHDQmHTXDO            ORZFRPSHQVDWRU\GDPDJHVGRHVQRWSUHFOXGHDODUJHSXQLWLYH
RSSRUWXQLW\ JRRVHUl 7HVWLPRQ\ ZDV SUHVHQWHG WKDW PDOHV        GDPDJHDZDUGmLIIRUH[DPSOHDSDUWLFXODUO\HJUHJLRXVDFW
ZHUH EHLQJ WUHDWHG GLIIHUHQWO\ IURP IHPDOHV DQG WKDW WKLV   KDVUHVXOWHGLQRQO\DVPDOODPRXQWRIHFRQRPLFGDPDJHV$
QHJDWLYH WUHDWPHQW ZDV VHYHUH DQG SHUYDVLYH  , ZRXOG        KLJKHUUDWLRPD\DOVREHMXVWLILHGLQFDVHVLQZKLFKWKH
WKHUHIRUHILQGQRmPLVWDNHUHVXOWLQJLQSODLQLQMXVWLFHlQRUD       PRQHWDU\YDOXHRIWKHQRQHFRQRPLFKDUPPLJKWKDYHEHHQ
mYHUGLFW>WKDW@LVFRQWUDU\WRDOOUHDVRQlWKDWZRXOGUHTXLUH        GLIILFXOW WR GHWHUPLQHl  ,G DW   7KH HVVHQFH RI WKLV
UHYHUVDORIWKHMXU\jVYHUGLFW6FKRRQRYHU)GDW        JXLGHSRVWLVWRmUHTXLUH>@DFRXUWWRDVNZKHWKHUDUHODWLYHO\
                                                                     KLJKHU UDWLR RI SXQLWLYH WR FRPSHQVDWRU\ GDPDJHV LV
      :KHWKHU WKH DOOHJHG KDUDVVPHQW ZDV VXIILFLHQWO\         SHUPLVVLEOHLQRUGHUWRHIIHFWWKHGHWHUUHQWSXUSRVHVEHKLQG
        VHYHUH DQG SHUYDVLYH WR IRUP D YDOLG KDUDVVPHQW       SXQLWLYHGDPDJHVl:	2)GDW
        FODLP
                                                                       $ODUJHSXQLWLYHWRFRPSHQVDWRU\GDPDJHVDZDUGUDWLRLV
  +DUEHUW<HDUJLQQH[WDUJXHVWKDWWKHGLVWULFWFRXUWHUUHGLQ       MXVWLILHGLQWKHFDVHEHIRUHXVLQRUGHUWRVXSSRUWWKHGHWHUUHQW
GHQ\LQJLWVPRWLRQIRUMXGJPHQWDVDPDWWHURIODZEHFDXVH           SXUSRVHRI7LWOH9,,$VSRLQWHGRXWLQ&DUOWRQjVEULHIKH
WKH DOOHJHG KDUDVVPHQW ZDV QRW VXIILFLHQWO\ VHYHUH RU         VXIIHUHG D mSK\VLFDO DVVDXOW IRU ZKLFK QR SXQLVKPHQW ZDV
SHUYDVLYH WR IRUP D YDOLG KRVWLOH HQYLURQPHQW FODLP XQGHU    PHWHG RXW  ,Q DGGLWLRQ KH ZDV VXEMHFWHG WR FRQWLQXRXV
7LWOH9,,,WFODLPVWKDWWKHDFWLRQVDOOHJHGE\&DUOWRQWREH      KDUDVVPHQW WKDW VXSHUYLVRUV HQFRXUDJHG RU FRQGRQHGl
LQDSSURSULDWHZHUHRQO\mVSRUDGLFDQGLVRODWHGlDQGZHUHQRW        $OWKRXJKWKHHFRQRPLFDOO\FRPSHQVDEOHYDOXHRI&DUOWRQjV
VHYHUH HQRXJK IRU D UHDVRQDEOH SHUVRQ WR EH DGYHUVHO\        LQMXULHVPLJKWKDYHEHHQVPDOOWKHHJUHJLRXVQHVVRIWKHDFWV
DIIHFWHG                                                           VXIIHUHG E\ &DUOWRQ n XQZDQWHG SK\VLFDO LQWUXVLRQ LQ KLV
                                                                     JHQLWDODUHDnZDVJUHDWHQRXJKWRVXSSRUWDPXFKKLJKHU
  ,Q+DUULVY)RUNOLIW6\VWHPV,QF86WKH       UDWLRVRDVWRHQVXUHWKDWVXFKFRQGXFWGRHVQRWRFFXULQWKH
6XSUHPH&RXUWDGGUHVVHGWKHHOHPHQWVRIDYDOLGFODLPIRUD          IXWXUH6HH'HWHUVY(TXLID[&UHGLW,QIR6HUYV,QF
KRVWLOHZRUNSODFHHQYLURQPHQWXQGHU7LWOH9,,,WKHOGWKDWDOO
     ((2&HWDOY                          1RV         1RV                        ((2&HWDOY        
       +DUEHUW<HDUJLQ,QF                                                                                  +DUEHUW<HDUJLQ,QF

HFRQRPLFLQMXU\RIRQO\EXWVHH((2&Y:	2,QF               RI WKH FLUFXPVWDQFHV UHODWLQJ WR WKH SODLQWLIIjV ZRUNSODFH
)GWK&LUDSSO\LQJWKHIDFWRUV               HQYLURQPHQWPXVWEHWDNHQLQWRDFFRXQW6HHLGDW7KHVH
RXWOLQHGLQ%0:DQGXSKROGLQJDSXQLWLYHGDPDJHDZDUGLQ                  FLUFXPVWDQFHVmLQFOXGHWKHIUHTXHQF\RIWKHGLVFULPLQDWRU\
D 7LWOH 9,, DFWLRQ WKDW KDG DOUHDG\ EHHQ UHGXFHG WR WKH         FRQGXFWLWVVHYHULW\ZKHWKHULWLVSK\VLFDOO\WKUHDWHQLQJRU
VWDWXWRU\FDSDVQRWH[FHVVLYHm>&@RXUWVRIDSSHDOVVKRXOG             KXPLOLDWLQJ RU D PHUH RIIHQVLYH XWWHUDQFH DQG ZKHWKHU LW
DSSO\DGHQRYRVWDQGDUGRIUHYLHZZKHQSDVVLQJRQGLVWULFW               XQUHDVRQDEO\ LQWHUIHUHV ZLWK DQ HPSOR\HHjV ZRUN
FRXUWVj GHWHUPLQDWLRQV RI WKH FRQVWLWXWLRQDOLW\ RI SXQLWLYH         SHUIRUPDQFHl DV ZHOO DV LWV mHIIHFW RQ WKH HPSOR\HHjV
GDPDJHVDZDUGVl&RRSHU,QGXV,QFY/HDWKHUPDQ7RRO                  SV\FKRORJLFDO ZHOOEHLQJl  ,G  )XUWKHUPRUH WKH FRQGXFW
*URXS,QF6&W0D\                    PXVW ERWK FUHDWH DQ mREMHFWLYHO\ KRVWLOH RU DEXVLYH ZRUN
                                                                          HQYLURQPHQWlDQGFDXVHWKHYLFWLPWRmVXEMHFWLYHO\SHUFHLYH
  ,Q%0:WKH6XSUHPH&RXUWVHWIRUWKWKUHHJXLGHSRVWVWR                 WKHHQYLURQPHQWWREHDEXVLYHl,GDW
GHWHUPLQH ZKHWKHU DQ DZDUG RI SXQLWLYH GDPDJHV LV VR
H[FHVVLYH DV WR YLRODWH D GHIHQGDQWjV GXH SURFHVV ULJKWV            %DVHGRQP\UHYLHZRIWKHUHFRUG,EHOLHYHWKDWVXIILFLHQW
7KHVHJXLGHSRVWVDUHWKHmGHJUHHRIUHSUHKHQVLELOLW\lRI              HYLGHQFHZDVSUHVHQWHGIRUDMXU\WRUHDVRQDEO\GHWHUPLQHWKDW
WKH ZURQJGRLQJ  mWKH GLVSDULW\ EHWZHHQ WKH KDUP RU            &DUOWRQjV ZRUNSODFH HQYLURQPHQW ZDV KRVWLOH DQG DEXVLYH
SRWHQWLDOKDUPVXIIHUHGE\>WKHSODLQWLII@DQG>KLV@SXQLWLYH             XQGHUERWKWKHREMHFWLYHDQGVXEMHFWLYHVWDQGDUGVRI+DUULV
GDPDJHVDZDUGlDQGmWKHGLIIHUHQFHEHWZHHQWKLVUHPHG\               )LUVW WKH HYLGHQFH GHPRQVWUDWHG WKDW WKH GLVFULPLQDWRU\
DQGWKHFLYLOSHQDOWLHVDXWKRUL]HGRULPSRVHGLQFRPSDUDEOH               FRQGXFW RFFXUUHG TXLWH RIWHQ  &DUOWRQ WHVWLILHG WKDW 'DYLV
FDVHVl%0:86DW$QDQDO\VLVRIWKHVHWKUHH               DWWHPSWHG WR JHW FORVH WR KLP RQ D GDLO\ EDVLV DQG WKDW
JXLGHSRVWVDVDSSOLHGWRWKHDPRXQWRIWKHSXQLWLYHGDPDJHV               ZKHQHYHU'DYLVWDONHGWRKLPKHmKDGWREHWRXFKLQJ>KLP@l
DZDUGLQWKHSUHVHQWFDVHIROORZV                                        +HDOVRWHVWLILHGWKDW DIWHUKHUHSRUWHG'DYLVjVEHKDYLRUWR
                                                                          %RPDU'DYLVEHJDQWRVWDONKLPmWZRRUWKUHHWLPHVDGD\l
  D    'HJUHHRIUHSUHKHQVLELOLW\                                        DQGWKDWKLVFRZRUNHUVEHJDQPRFNLQJKLPZLWKRXWFRUUHFWLRQ
                                                                          E\+DUEHUW<HDUJLQVXSHUYLVRUV)LQDOO\RWKHUHPSOR\HHV
  ,QH[DPLQLQJWKHGHJUHHRIUHSUHKHQVLELOLW\RIDGHIHQGDQWjV            VXFK DV 'RWVRQ DQG 'R\OH WHVWLILHG WKDW WKH SUDFWLFH RI
FRQGXFW WKH 6XSUHPH &RXUW RXWOLQHG D QXPEHU RI                    JRRVLQJ RFFXUUHG HYHU\ GD\ DPRQJ PDOH HPSOR\HHV DW
mDJJUDYDWLQJIDFWRUVlLQFOXGLQJZKHWKHUWKHKDUPZDVPRUH                +DUEHUW<HDUJLQ DQG WKDW VXSHUYLVRUV ERWK FRQGRQHG DQG
WKDQ mSXUHO\ HFRQRPLF LQ QDWXUHl DQG ZKHWKHU WKH                  HQJDJHGLQWKHRIIHQVLYHFRQGXFW
GHIHQGDQWjVEHKDYLRUmHYLQFHGLQGLIIHUHQFHWRRUUHFNOHVV
GLVUHJDUG IRU WKH KHDOWK DQG VDIHW\ RI RWKHUVl  ,G DW      +DUEHUW<HDUJLQ KRZHYHU DUJXHV WKDW &DUOWRQjV
+HUHWKHKDUPWR&DUOWRQZDVPRUHWKDQSXUHO\HFRQRPLF                  KDUDVVPHQW ZDV LQIUHTXHQW SRLQWLQJ RXW WKDW &DUOWRQ
+H VXIIHUHG XQZDQWHG SK\VLFDO FRQWDFW WR KLV JHQLWDOV DQG         LGHQWLILHGRQO\WZRLQVWDQFHVZKHUHKLVJHQLWDOVZHUHJUDEEHG
EXWWRFNVFDXVLQJKLPWRIHHOmYLRODWHGlmRXWUDJHGlDQGERWK            %XW mWKH WRWDOLW\RIWKHFLUFXPVWDQFHV WHVW PDQGDWHV WKDW
PHQWDOO\ DQG SK\VLFDOO\ GUDLQHG  $IWHU KH UHSRUWHG EHLQJ         GLVWULFW FRXUWV FRQVLGHU KDUDVVPHQW E\ DOO SHUSHWUDWRUV
KDUDVVHG KH ZDV QRW RQO\ VWDONHG E\ 'DYLV EXW ZDV DOVR        FRPELQHGZKHQDQDO\]LQJZKHWKHUDSODLQWLIIKDVDOOHJHGWKH
PRFNHG DQG KXPLOLDWHG E\ KLV FRZRUNHUV  7KHVH                     H[LVWHQFH RI D KRVWLOH ZRUN HQYLURQPHQWl  :LOOLDPV Y
FLUFXPVWDQFHV DUH VXIILFLHQW WR GHPRQVWUDWH WKH                      *HQHUDO0RWRUV&RUS)GWK&LU
UHSUHKHQVLELOLW\RIWKHFRQGXFWIRUZKLFK+DUEHUW<HDUJLQLV              $FFRUGLQJO\ D MXU\ FRXOG FRQVLGHU WKH IUHTXHQF\ RI RWKHU
EHLQJKHOGUHVSRQVLEOH6HHLGDWQ                             LQVWDQFHVRIKRVWLOHFRQGXFWDQGUHDVRQDEO\ILQGmNHHSLQJLQ
    ((2&HWDOY                         1RV        1RV                          ((2&HWDOY         
      +DUEHUW<HDUJLQ,QF                                                                                  +DUEHUW<HDUJLQ,QF

PLQGWKDWHDFKVXFFHVVLYHHSLVRGHKDVLWVSUHGHFHVVRUVWKDW           +DUEHUW<HDUJLQGLGQRWVKLHOG WKHFRPSDQ\IURPSXQLWLYH
WKH LPSDFW RI WKH VHSDUDWH LQFLGHQWV PD\ >KDYH@                 GDPDJHVm:KLOHDQHPSOR\HUjVLQVWLWXWLRQRIDZULWWHQSROLF\
DFFXPXODWH>G@DQGWKDWWKHZRUNHQYLURQPHQWFUHDWHGWKHUHE\           DJDLQVW>@GLVFULPLQDWLRQPD\JRDORQJZD\WRZDUGGLVSHOOLQJ
PD\H[FHHGWKHVXPRIWKHLQGLYLGXDOHSLVRGHVl,GDW           DQ\FODLPDERXWWKHHPSOR\HUjVUHFNOHVVRUPDOLFLRXVVWDWHRI
VHHDOVRLGDWUHMHFWLQJWKHGLVWULFWFRXUWjVGHWHUPLQDWLRQ      PLQG    VXFK D SROLF\ LV QRW DXWRPDWLFDOO\ D EDU WR WKH
WKDWWKHFRPSODLQHGRIFRQGXFWZDVmLQIUHTXHQWQRWVHYHUH            LPSRVLWLRQ RI SXQLWLYH GDPDJHVl  /RZHU\ Y &LUFXLW &LW\
QRWWKUHDWHQLQJRUKXPLOLDWLQJEXWPHUHO\RIIHQVLYHlZKHUH           6WRUHV,QF)GWK&LUILQGLQJWKDW
WRVXSSRUWKHUFODLPRIDKRVWLOHZRUNHQYLURQPHQWDIHPDOH           WKH GHIHQGDQWjV mFRPPLWPHQW WR D FRPSDQ\ZLGH SROLF\
SODLQWLII SUHVHQWHG ILIWHHQ VHSDUDWH DOOHJDWLRQV RI SHUVLVWHQW   DJDLQVWUDFLDOGLVFULPLQDWLRQLQWKHZRUNSODFHLVFDOOHGLQWR
IRXOODQJXDJHDQGVH[XDOO\H[SOLFLWFRPPHQWVGLUHFWHGDWKHU          TXHVWLRQl ZKHUH WZR RI LWV WRS H[HFXWLYHV KHOG UDFLDOO\
RIIHQVLYHFRPPHQWVWRZDUGVZRPHQLQJHQHUDODQGGHQLDORI             GLVFULPLQDWRU\ DWWLWXGHV DQG ZKHUH RQH RI WKH H[HFXWLYHV
KHUUHTXHVWVIRURYHUWLPHZRUN                                       LPSOHPHQWHG D SURPRWLRQDO V\VWHP KDYLQJ WKH FDSDFLW\ WR
                                                                       PDVNUDFLDOGLVFULPLQDWLRQ
  7KHHYLGHQFHDOVRVKRZHGWKDWWKHRIIHQGLQJFRQGXFWZDV
ERWKSK\VLFDOO\WKUHDWHQLQJDQGKXPLOLDWLQJ&DUOWRQWHVWLILHG           7KHUH ZDV DOVR DPSOH HYLGHQFH IRU D UHDVRQDEOH MXU\ WR
WKDWWKHWKUHDWHQLQJQDWXUHRIWKHILUVWLQVWDQFHZKHQ'DYLV           LQIHU WKDW +DUEHUW<HDUJLQjV DQWLVH[XDO KDUDVVPHQW SROLF\
JUDEEHGKLVJHQLWDOVZDVHQKDQFHGE\WKHIDFWWKDW'DYLVVHQW          ZDVRQHLQQDPHRQO\9DULRXVHPSOR\HHVWHVWLILHGWKDWWKH\
DZD\ WKH RQO\ RWKHU SHUVRQ RQ WKH VFHQH WKXV LVRODWLQJ       UHFHLYHG QR DQWLKDUDVVPHQW WUDLQLQJ HYHQ WKRXJK WKH
&DUOWRQIURPDQ\KHOS'XULQJWKHVHFRQGHSLVRGH'DYLVjV             FRPSDQ\jVRIILFLDOSURFHGXUHVUHTXLUHGVXFKWUDLQLQJ'DYLV
FRQWDFW ZDV HYHQ PRUH H[WHQVLYH ZLWK KLV ILQJHU UXQQLQJ       ZDV QHYHU GLVFLSOLQHG IRU KLV LQDSSURSULDWH WRXFKLQJ RI
IURP&DUOWRQjVJHQLWDOVRYHUKLVDQXVDQGWRKLVEDFN7KH          &DUOWRQ7KHFRPSDQ\IDLOHGWRLQYHVWLJDWH&DUOWRQjVODWHU
MXU\FRXOGKDYHUHDVRQDEO\FRQVLGHUHGERWKRIWKHVHLQVWDQFHV          FRPSODLQWV WKDW 'DYLV ZDV VWDONLQJ KLP DQG WKDW KLV
DVHYLGHQFHWKDW&DUOWRQZDVVXEMHFWHGWRVHYHUHSK\VLFDOO\           FRZRUNHUVZHUHPRFNLQJKLPIRUILOLQJ D FRPSODLQWLQWKH
WKUHDWHQLQJDQGKXPLOLDWLQJGLVFULPLQDWRU\FRQGXFW                 ILUVW SODFH  $QG QXPHURXV ZLWQHVVHV WHVWLILHG WKDW
                                                                       LQDSSURSULDWHJHQLWDOJUDEELQJZDVRFFXUULQJWKURXJKRXWWKH
   0RUHRYHUWKHMXU\FRXOGKDYHUHDVRQDEO\IRXQGWKDWWKH             +DUEHUW<HDUJLQ IDFLOLW\ ERWK E\ DQG LQ WKH SUHVHQFH RI
RWKHU DGYHUVH EHKDYLRU WR ZKLFK &DUOWRQ WHVWLILHG ZDV           VXSHUYLVRU\SHUVRQQHODQGWKDWQRRQHZDVHYHUGLVFLSOLQHG
SK\VLFDOO\ WKUHDWHQLQJ RU KXPLOLDWLQJ  'DYLVjV VWDONLQJ RI     IRUWKLVEHKDYLRU*LYHQDOORIWKLVSURRI,EHOLHYHWKDWWKHUH
&DUOWRQDIWHU&DUOWRQUHSRUWHG'DYLVjVPLVFRQGXFWFRXOGKDYH           ZDV PRUH WKDQ VXIILFLHQW HYLGHQFH WR VXSSRUW D ILQGLQJ RI
EHHQFRQVWUXHGE\DUHDVRQDEO\MXU\DVSK\VLFDOO\WKUHDWHQLQJ          SXQLWLYHGDPDJHVDJDLQVW+DUEHUW<HDUJLQ
EHKDYLRU6HH+LUDVH'RLY86:HVW&RPPXQLFDWLRQV,QF
 )G   	 Q WK &LU  VWDWLQJ WKDW             &KDOOHQJHWRWKHDPRXQWRIWKHDZDUGDVH[FHVVLYH
mWKUHDWHQLQJ VWDUHVl FRXOG FRQVWLWXWH IXUWKHU HYLGHQFH WR
VXSSRUWDSODLQWLIIjVKRVWLOHZRUNHQYLURQPHQWFODLPZKHQWKH            +DUEHUW<HDUJLQQH[WDUJXHVWKDWWKHDZDUGRILQ
VWDUHVZHUHDSSDUHQWO\PDGHLQUHWDOLDWLRQIRUWKHSODLQWLIIjV         SXQLWLYH GDPDJHV ZDV VR H[FHVVLYH DV WR YLRODWH LWV
FRPSODLQWV DERXW VH[XDO KDUDVVPHQW  $QG WKH IDFW WKDW        FRQVWLWXWLRQDOULJKWWRWKHGXHSURFHVVRIODZ6HH%0:RI1
&DUOVRQjVFRZRUNHUVmKXQFK>HG@RQHDFKRWKHUlFDOOHGKLP              $P ,QF Y *RUH  86   KROGLQJ WKDW D
m/RXLHjVJLUOIULHQGlDQGWUHDWHGKLPOLNHmWKHSODJXHlHYHU\          SXQLWLYH DZDUG RI  YLRODWHG WKH )RXUWHHQWK
                                                                       $PHQGPHQW LQ D FDVH ZKHUH %0: ZDV IRXQG OLDEOH IRU
    ((2&HWDOY                         1RV        1RV                        ((2&HWDOY         
      +DUEHUW<HDUJLQ,QF                                                                                +DUEHUW<HDUJLQ,QF

LQIHU WKDW +DUEHUW<HDUJLQ ZDV DZDUH RI WKH ULVN WKDW VXFK    WLPHWKH\VDZKLPFRXOGKDYHEHHQUHDVRQDEO\LQWHUSUHWHGE\
H\HZLWQHVVHVZRXOGFRQILUPWKDWLWZDVYLRODWLQJ&DUOWRQjV             WKHMXU\DVHYLGHQFHWKDW&DUOWRQZDVVXEMHFWHGWRKXPLOLDWLRQ
7LWOH9,,ULJKWV
                                                                          )LQDOO\WKHUHZDVPRUHWKDQVXIILFLHQWWHVWLPRQ\SUHVHQWHG
  +DUEHUW<HDUJLQjV IDLOXUH WR H[DFW DQ\ GLVFLSOLQH IRU WKH     DWWULDOWRVKRZWKDWWKHZRUNSODFHHQYLURQPHQWDW+DUEHUW
RIIHQGLQJFRQGXFWSURYLGHVDGGLWLRQDOHYLGHQFHVXSSRUWLQJ              <HDUJLQ XQUHDVRQDEO\ LQWHUIHUHG ZLWK &DUOWRQjV ZRUN
&DUOWRQjV FODLP IRU SXQLWLYH GDPDJHV  6FRWW WKH VLWH         SHUIRUPDQFH DQG KDG D VLJQLILFDQWO\ QHJDWLYH HIIHFW RQ KLV
VXSHULQWHQGHQW ZKR ZDV UHVSRQVLEOH IRU HQIRUFLQJ WKH             SV\FKRORJLFDO ZHOOEHLQJ  &DUOWRQ ZDV mDVKDPHGl DQG
FRPSDQ\jVDQWLVH[XDOKDUDVVPHQWSROLF\IDLOHGWRGLVFLSOLQH          mDOPRVWVLFNlDERXWWKHLQFLGHQWV+HWHVWLILHGWKDW'DYLVjV
'DYLV IRU KLV DFWLRQV GHVSLWH WHVWLI\LQJ WKDW KH EHOLHYHG     EHKDYLRU PDGH LW GLIILFXOW IRU KLP WR FRQFHQWUDWH RQ KLV
&DUOWRQjV FRPSODLQWV DERXW EHLQJ KDUDVVHG E\ 'DYLV  1RU       ZHOGLQJWRWKHSRLQWZKHUHKHmFRXOGQjWGRQRWKLQJUHDOO\l
ZHUH DQ\ RI WKH FRZRUNHUV ZKR ODWHU WHDVHG &DUOWRQ IRU        $IWHUKHUHSRUWHG'DYLVjVPLVFRQGXFWKHIHOWERWKSK\VLFDOO\
UHSRUWLQJWKHLQFLGHQWHYHUGLVFLSOLQHGIRU WKHLUFRQGXFW,         DQG PHQWDOO\ GUDLQHG E\ WKH DFWLRQV RI 'DYLV DQG KLV
EHOLHYH WKDW D UHDVRQDEOH MXU\ FRXOG KDYH LQIHUUHG UHFNOHVV    FRZRUNHUV*LYHQDOORIWKLVWHVWLPRQ\,EHOLHYHWKDWWKHMXU\
LQGLIIHUHQFH IURP +DUEHUW<HDUJLQjV IDLOXUH WR UHVSRQG WR        KDG DPSOH IDFWV WR UHDVRQDEO\ FRQFOXGH WKDW &DUOWRQ ZDV
WKHVHVLWXDWLRQV6HH'HWHUVY(TXLID[&UHGLW,QIR6HUYV          VXEMHFWHGWRDKRVWLOHZRUNHQYLURQPHQWWKDWZDVVHYHUHDQG
,QF)GWK&LUm>5@HFNOHVVQHVV            SHUYDVLYH
DQGPDOLFHDUHWREHLQIHUUHGZKHQDPDQDJHUUHVSRQVLEOHIRU
VHWWLQJRUHQIRUFLQJSROLF\LQWKHDUHDRIGLVFULPLQDWLRQGRHV              :KHWKHU +DUEHUW<HDUJLQjV UHVSRQVH ZDV VR
QRW UHVSRQG WR FRPSODLQWV GHVSLWH NQRZOHGJH RI VHULRXV                LQDGHTXDWHDQGLQHIIHFWLYHDVWRUHQGHUWKHFRPSDQ\
KDUDVVPHQWl                                                                OLDEOH
   7KH MXU\ FRXOG DOVR KDYH LQIHUUHG PDOLFH LQ WKH IRUP RI      ,Q %XUOLQJWRQ ,QGXVWULHV ,QF Y (OOHUWK  86 
UHWDOLDWLRQ ZKHQ 'DYLV DW WKH GLUHFWLRQ RI %RPDU              DQGLQ)DUDJKHUY&LW\RI%RFD5DWRQ86
GRFXPHQWHGDQDOOHJHGmZHOGLQJSUREOHPlE\&DUOWRQJLYHQ               WKH 6XSUHPH &RXUW KHOG WKDW ZKHUH D VXSHUYLVRU
WKDWWKLVGRFXPHQWDWLRQZDVQRWGRQHDFFRUGLQJWRFRPSDQ\              KDUDVVHV DQ HPSOR\HH EXW WDNHV QR WDQJLEOH HPSOR\PHQW
SROLF\  $QG EHFDXVH WKLV GRFXPHQWDWLRQ RFFXUUHG DIWHU          DFWLRQ DJDLQVW KLP WKH HPSOR\HU LV VWLOO OLDEOH XQOHVV WKH
&DUOWRQILUVWFRPSODLQHGDERXW'DYLVmLWZDVQRWLUUDWLRQDORU        HPSOR\HUDIILUPDWLYHO\VKRZVWKDWLWmH[HUFLVHGUHDVRQDEOH
LPSHUPLVVLEOH IRU WKH MXU\ WR LQIHUl WKDW WKLV DFWLRQ ZDV     FDUHWRSUHYHQWDQGFRUUHFWSURPSWO\DQ\VH[XDOO\KDUDVVLQJ
LQWHQGHG mWR GLVJXLVH WKH UHWDOLDWRU\ QDWXUH RI WKHLU DFWLRQ   EHKDYLRUlDQGWKDWWKHSODLQWLIImXQUHDVRQDEO\IDLOHGWRWDNH
IURPRXWVLGHUVl9DVELQGHUY$PEDFK)G             DGYDQWDJH RI DQ\ SUHYHQWDWLYH RU FRUUHFWLYH RSSRUWXQLWLHV
G&LUKROGLQJLQDQXQODZIXOGLVFKDUJHDFWLRQWKDW         SURYLGHG E\ WKH HPSOR\HU RU WR DYRLG KDUP RWKHUZLVHl
D UHDVRQDEOH MXU\ FRXOG KDYH DZDUGHG SXQLWLYH GDPDJHV           %XUOLQJWRQ,QGXV,QF86DW)DUDJKHU86
ZKHUH WKH GHIHQGDQWV WRRN DIILUPDWLYH VWHSV DJDLQVW WKH         DW
SODLQWLII LQFOXGLQJ mILOO>LQJ WKH SODLQWLIIjV@ UHFRUG ZLWK
GDPDJLQJSHUVRQQHODFWLRQVl                                            +DUEHUW<HDUJLQDUJXHVWKDWLWIXOILOOHGERWKHOHPHQWVRILWV
                                                                       DIILUPDWLYHGHIHQVH7KHFRPSDQ\FODLPVWKDWLWH[HUFLVHG
  )LQDOO\WKHMXU\KDGVXIILFLHQWHYLGHQFHWRFRQFOXGHWKDWWKH       UHDVRQDEOHFDUHWRSURWHFW&DUOWRQIURPKDUDVVLQJEHKDYLRUE\
H[LVWHQFH RI D ZULWWHQ DQWLVH[XDO KDUDVVPHQW SROLF\ DW         LPPHGLDWHO\ WUDQVIHUULQJ KLP WR DQRWKHU FUHZ DIWHU KH
    ((2&HWDOY                       1RV        1RV                         ((2&HWDOY          
      +DUEHUW<HDUJLQ,QF                                                                               +DUEHUW<HDUJLQ,QF

UHSRUWHG 'DYLVjV PLVFRQGXFW KROGLQJ D PHHWLQJ WR WHOO KLV   DZDUHQHVV WKDW LW LV HQJDJLQJ LQ GLVFULPLQDWLRQ EXW WR LWV
FRZRUNHUV WKDW WKHUH ZDV WR EH QR PRUH mKRUVHSOD\l DQG     NQRZOHGJHWKDWLWPD\EHDFWLQJLQYLRODWLRQRIIHGHUDOODZl
FRQGXFWLQJDQLQYHVWLJDWLRQRI&DUOWRQjVFRPSODLQW+DUEHUW        .ROVWDGY$PHULFDQ'HQWDO$VVjQ86
<HDUJLQDOVRQRWHVWKDWWKHDQWLVH[XDOKDUDVVPHQWSROLF\LW         ,QWKHSUHVHQWFDVH+DUEHUW<HDUJLQDUJXHVWKDWLWFRXOGQRW
KDGLQSODFHH[SOLFLWO\PDGHDOWHUQDWHDYHQXHVRIFRPSODLQW          KDYH EHHQ DZDUH WKDW LW DFWHG LQ YLRODWLRQ RI IHGHUDO ODZ
DYDLODEOHE\VWDWLQJWKDWm>D@Q\HPSOR\HHWKDWIHHOVKHRUVKH       EHFDXVHDWWKHWLPHRIWKHDOOHJHG KDUDVVPHQWWKHFDVHRI
KDVVXIIHUHGVH[XDOKDUDVVPHQWVKRXOGUHSRUWVXFKLQFLGHQWV          2QFDOH Y 6XQGRZQHU 2IIVKRUH 6HUYLFHV ,QF  86 
WRKLVRUKHULPPHGLDWHVXSHUYLVRUWKH6LWH0DQDJHURUWKH          UHFRJQL]LQJ WKDW 7LWOH 9,, DSSOLHV WR VDPHVH[
+RPH 2IILFH +XPDQ 5HVRXUFHV 'HSDUWPHQW ZLWKRXW >VLF@          KDUDVVPHQWKDGQRW\HWEHHQGHFLGHG
IHDU RI UHSULVDOl  )LQDOO\ +DUEHUW<HDUJLQ FKDUJHV WKDW
&DUOWRQIDLOHGWRWDNHDGYDQWDJHRIWKHSROLF\E\QRWUHSRUWLQJ         6LQFHWKHVKRZHYHUWKHUHKDYHEHHQFDVHVKROGLQJ
WKH ILUVW LQFLGHQW DQG IDLOHG WR WDNH DGYDQWDJH RI WKH     WKDW7LWOH9,,FDQEHYLRODWHGE\PHPEHUVRIWKHVDPHUDFHRU
SUHYHQWDWLYHRSSRUWXQLWLHVDYDLODEOHWRKLPDIWHUWKHVHFRQG         VH[ DV WKH YLFWLP RI GLVFULPLQDWLRQ  6HH LG DW  FLWLQJ
LQFLGHQWE\UHIXVLQJWRWDONWR&RRSHUZLWKRXWKLVDWWRUQH\          6XSUHPH&RXUWGHFLVLRQVIURPDQGWRVXSSRUWLWV
SUHVHQW                                                             H[SUHVV UHFRJQLWLRQ RI VDPHVH[ KDUDVVPHQW  .ROVWDG
                                                                     PRUHRYHUGRHVQRWUHTXLUHWKDWDQHPSOR\HUNQRZIRUVXUH
  ,Q UHYLHZLQJ D PRWLRQ IRU MXGJPHQW DV D PDWWHU RI ODZ   WKDWLWDFWHGLQYLRODWLRQRIIHGHUDOODZLQRUGHUWREHOLDEOHIRU
KRZHYHU mZH GR QRW ZHLJK WKH HYLGHQFH HYDOXDWH WKH         SXQLWLYHGDPDJHVXQGHU7LWOH9,,,QVWHDG.ROVWDGKROGVWKDW
FUHGLELOLW\RIWKHZLWQHVVHVRUVXEVWLWXWHRXUMXGJPHQWIRUWKDW    SXQLWLYHGDPDJHVDUHZDUUDQWHGZKHQWKHHPSOR\HUHQJDJHV
RIWKHMXU\l%ODFNY=DULQJ+RPHV,QF)G        LQFRQGXFWWKDWFDUULHVZLWKLWDmSHUFHLYHGULVNWKDWLWVDFWLRQV
WK&LU:HLQVWHDGORRNDWWKHHYLGHQFHLQWKHOLJKW       ZLOOYLRODWHIHGHUDOODZl.ROVWDG86DWHPSKDVLV
PRVWIDYRUDEOHWRWKHQRQPRYLQJSDUW\DQGGHFLGHLILWZDV           DGGHG
VXIILFLHQWWRUDLVHDJHQXLQHLVVXHRIPDWHULDOIDFWIRUWKHMXU\
6HH5DWOLIIY:HOOLQJWRQ([HPSWHG9LOO6FK%GRI(G          +HUH WKH MXU\ FRXOG UHDVRQDEO\ LQIHU IURP +DUEHUW
)GWK&LU+HUHWKHMXU\KDGDEXQGDQW          <HDUJLQjV DFWLRQV WKDW LW SHUFHLYHG WKH ULVN WKDW LWV DFWLRQV
HYLGHQFHWRFRQFOXGHWKDW+DUEHUW<HDUJLQIDLOHGWRH[HUFLVH         YLRODWHGIHGHUDOODZ7KHUHZDVWHVWLPRQ\DWWULDOWKDW%RPDU
UHDVRQDEOHFDUHWRSURWHFW&DUOWRQIURPKDUDVVPHQW                DQG ,UYLQ DV VXSHUYLVRU\ SHUVRQQHO RI +DUEHUW<HDUJLQ
                                                                     VSHFLILFDOO\ GLUHFWHG :DUUHQ WR EH OHVV WKDQ WUXWKIXO LQ DQ
   $OWKRXJK+DUEHUW<HDUJLQSRLQWVRXWWKDWLWKDGDQDQWL          LQWHUYLHZ ZLWK DQ ((2& LQYHVWLJDWRU DERXW WKH IDFLOLW\jV
VH[XDOKDUDVVPHQW SROLF\ LQ SODFH WR DGGUHVV &DUOWRQjV         ZRUNSODFH HQYLURQPHQW  :DUUHQ DOVR WHVWLILHG WKDW KH IHOW
SUREOHPVDUHDVRQDEOHMXU\FRXOGKDYHFRQFOXGHGIURPWKH            SUHVVXUHGE\%RPDUDQG,UYLQWRVLJQDGRFXPHQWSUHSDUHGE\
HYLGHQFH WKDW WKLV SROLF\ ZDV QRW HQIRUFHG LQ SUDFWLFH      WKH((2&WKDWFRQWDLQHGLQDFFXUDWHLQIRUPDWLRQUDWKHUWKDQ
6HYHUDOHPSOR\HHVWHVWLILHGWKDWWKH\ZHUHXQDZDUHWKDWWKH          FRUUHFWWKDWLQIRUPDWLRQ6HH/HHY(GZDUGV)G
SROLF\ HYHQ H[LVWHG  6FRWW WKH VLWH VXSHULQWHQGHQW          G &LU  LQFOXGLQJ LQ D GHVFULSWLRQ RI FRQGXFW
DFNQRZOHGJHG WKDW KH KDG UHFHLYHG QR DQWLKDUDVVPHQW           VXIILFLHQW WR ZDUUDQW D ILQGLQJ RI D KLJK GHJUHH RI
WUDLQLQJGHVSLWHWKHIDFWWKDWVXFKWUDLQLQJZDVPDQGDWHGE\        UHSUHKHQVLELOLW\mZKHWKHUDGHIHQGDQWDFWHGZLWK GHFHLWRU
FRUSRUDWHSROLF\2WKHUZLWQHVVHVWHVWLILHGWKDWJRRVLQJZDV        PDOLFH DV RSSRVHG WR DFWLQJ ZLWK PHUH QHJOLJHQFHl
DIUHTXHQWRFFXUUHQFHDWWKHIDFLOLW\EXWWKDWQRRQHZDVHYHU      0RUHRYHU&RRSHUjVIDLOXUHWRVHHNSRWHQWLDOH\HZLWQHVVHVWR
GLVFLSOLQHGHYHQZKHQVXSHUYLVRUVZLWQHVVHGWKHSUDFWLFH           FRUURERUDWH&DUOWRQjVDOOHJDWLRQVFRXOGKDYHOHGWKHMXU\WR
     ((2&HWDOY                      1RV        1RV                         ((2&HWDOY         
       +DUEHUW<HDUJLQ,QF                                                                              +DUEHUW<HDUJLQ,QF

WKDWWKH((2&ZRXOGEHLQWURGXFLQJDGGLWLRQDOHYLGHQFHRI               $ UHDVRQDEOH MXU\ FRXOG DOVR KDYH FRQFOXGHG IURP WKH
LQDSSURSULDWHWRXFKLQJ                                              HYLGHQFHWKDW+DUEHUW<HDUJLQIDLOHGWRH[HUFLVHUHDVRQDEOH
                                                                     FDUHWRSURWHFW&DUOWRQIURPIXUWKHUKDUDVVPHQW6HHsDFNVRQ
  ,DJUHH$OORIWKHZLWQHVVHVZHUHNQRZQWRDQGGHSRVHGE\        Y 4XDQWH[ &RUS  )G   WK &LU 
+DUEHUW<HDUJLQEHIRUHWKHHQGRIWKHGLVFRYHU\SHULRGZKLFK        KROGLQJ WKDW WKH GHIHQGDQW IDLOHG WR VDWLVI\ LWV mEXUGHQ RI
ZDVPRUHWKDQGD\VEHIRUHWULDO+DUEHUW<HDUJLQLQWXUQ       SURYLQJWKDWLWVDFWLRQZDVDUHDVRQDEOHDWWHPSWWRSUHYHQW
ZDVDZDUHWKDWWKH((2&DQG&DUOWRQZHUHDOOHJLQJDKRVWLOH          DQGFRUUHFWWKHSUREOHPRIUDFLDOO\KDUDVVLQJEHKDYLRUl7KH
ZRUNSODFH HQYLURQPHQW ZKLFK QHFHVVDULO\ LQFOXGHG D             MXU\FRXOGKDYHFRQFOXGHGIURP+DUEHUW<HDUJLQjVUHIXVDOWR
FKDOOHQJHWRPRUHWKDQWKHDFWVRI'DYLVWRZDUGV&DUOWRQ$V        WDON WR &DUOWRQ LQ WKH SUHVHQFH RI KLV DWWRUQH\ WKDW WKH
VXFKWKHGLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQLQGHQ\LQJ     FRPSDQ\IDLOHGWRWDNHDFWLRQVUHDVRQDEO\FDOFXODWHGWRHQG
+DUEHUW<HDUJLQjV PRWLRQ IRU D QHZ WULDO ZLWK UHJDUG WR      'DYLVjVPLVFRQGXFWEHFDXVHZLWKRXWWDONLQJWR&DUOWRQRU
&DUOWRQjVFODLP6HH*UHHQZHOOY%RDWZULJKW)G         LQGHHGWRDQ\RQHHOVHZKRZLWQHVVHGWKHRIIHQGLQJDFWLRQV
WK&LUUHYLHZLQJWKHGLVWULFWFRXUWjVGHQLDORID      +DUEHUW<HDUJLQFRXOGQRWDGHTXDWHO\DVVHVVWKHH[WHQWRIWKH
PRWLRQIRUDQHZWULDOIRUDEXVHRIGLVFUHWLRQ                     PLVFRQGXFW
& 3XQLWLYHGDPDJHDZDUG                                                0RUHRYHU+DUEHUW<HDUJLQIDLOHGWRGLVFLSOLQH'DYLVIRU
                                                                     KLVEHKDYLRUGHVSLWHWKHIDFWWKDWLWLPPHGLDWHO\WUDQVIHUUHG
  +DUEHUW<HDUJLQDOVRFODLPVWKDWWKHMXU\jVSXQLWLYHGDPDJH        &DUOWRQ WR DQRWKHU FUHZ RQFH &DUOWRQ UHSRUWHG 'DYLVjV
DZDUG WR &DUOWRQ VKRXOG EH YDFDWHG EHFDXVH LW ZDV ERWK      PLVFRQGXFW$UHDVRQDEOHMXU\FRXOGKDYHFRQFOXGHGWKDWE\
DJDLQVWWKHZHLJKWRIWKHHYLGHQFHDQGH[FHVVLYHLQDPRXQW          IDLOLQJWRGLVFLSOLQH'DYLV+DUEHUW<HDUJLQjVDFWLRQVZHUHQRW
%RWKFODLPVDUHDGGUHVVHGEHORZ,DOVRDGGUHVVWKHIDFWWKDW       UHDVRQDEO\FDOFXODWHGWRHQG'DYLVjVKDUDVVLQJEHKDYLRU6HH
WKH VXP RI WKH SXQLWLYH DQG FRPSHQVDWRU\ GDPDJH DZDUG        %DW\Y:LOODPHWWH,QGXV,QF)GWK
H[FHHGHGWKHVWDWXWRU\FDSE\RQHGROODUDPLQRUSRLQWQRW          &LUSRLQWLQJRXWWKDWDQLQYHVWLJDWLRQFRQGXFWHGE\
UDLVHGE\HLWKHUSDUW\                                              WKH HPSOR\HU DIWHU WKH HPSOR\HH UHSRUWHG DQ LQVWDQFH RI
                                                                     KDUDVVPHQW mFRXOG UHDVRQDEO\ EH UHJDUGHG DV D VKDP
      &KDOOHQJHWRWKHHYLGHQFHLQVXSSRUWRIWKHSXQLWLYH         HVSHFLDOO\ZKHUHQR>@HPSOR\HHZDVHYHUGLVFLSOLQHGHYHQ
        GDPDJHDZDUG                                                 PLQLPDOO\l
  $MXU\PD\DZDUGSXQLWLYHGDPDJHVLQD7LWOH9,,FODLPmLI            ,Q DGGLWLRQ 'DYLV ZDV VWLOO DEOH WR mVWDONl &DUOWRQ HYHQ
WKH FRPSODLQLQJ SDUW\ GHPRQVWUDWHV WKDW WKH UHVSRQGHQW         DIWHU &DUOWRQ ZDV WUDQVIHUUHG DQG RWKHU HPSOR\HHV ZHUH
HQJDJHGLQDGLVFULPLQDWRU\SUDFWLFHZLWKPDOLFHRUZLWK       DOORZHG WR WDXQW &DUOWRQ E\ UHSHDWHGO\ JUDEELQJ DQG
UHFNOHVVLQGLIIHUHQFHWR>KLV@IHGHUDOO\SURWHFWHGULJKWVl      mKXQFK>LQJ@l RQ HDFK RWKHU E\ FDOOLQJ &DUOWRQ m/RXLHjV
86&DE8QGHUWKLVVWDQGDUG+DUEHUW<HDUJLQ          JLUOIULHQGlDQGE\WUHDWLQJKLPOLNHKHKDGmWKHSODJXHl$
PXVW VKRZ WKDW WKHUH ZDV LQVXIILFLHQW HYLGHQFH WR UDLVH D   UHDVRQDEOHMXU\FRXOGKDYHFRQFOXGHGWKDWWKHVHFRQWLQXLQJ
JHQXLQH LVVXH RI PDWHULDO IDFW UHJDUGLQJ WKH TXHVWLRQ RI     LQVWDQFHV RI KDUDVVPHQW VXSSRUWHG &DUOWRQjV FODLP WKDW
ZKHWKHU LW FUHDWHG D KRVWLOH ZRUNSODFH HQYLURQPHQW mZLWK      +DUEHUW<HDUJLQWRRNQRDFWLRQUHDVRQDEO\FDOFXODWHGWRHQG
PDOLFHRUUHFNOHVVLQGLIIHUHQFHl                                    KLVKDUDVVPHQW6HH(UHELDY&KU\VOHU3ODVWLF3URGV&RUS
                                                                     )GWK&LUKROGLQJWKDWWKHmMXU\jV
  7KH6XSUHPH&RXUWKDVGHWHUPLQHGm>W@KHWHUPVµPDOLFHj             ILQGLQJ RI LQWHQWLRQDO GLVFULPLQDWLRQ    LV VXSSRUWHG E\
DQG µUHFNOHVV LQGLIIHUHQFHj SHUWDLQ QRW WR WKH HPSOR\HUjV
    ((2&HWDOY                        1RV        1RV                        ((2&HWDOY         
      +DUEHUW<HDUJLQ,QF                                                                               +DUEHUW<HDUJLQ,QF

VXEVWDQWLDOHYLGHQFHlZKHUHWKHm>P@DQDJHPHQWZDVDZDUHRI            % $GPLVVLRQRIDGGLWLRQDOWHVWLPRQ\
SODLQWLIIjVPDQ\FRPSODLQWVRIKDUDVVPHQWDQGFRQGRQHGWKH
VLWXDWLRQ E\ WDNLQJ QR VWHSV WR LPSURYH FRQGLWLRQV DQG E\       +DUEHUW<HDUJLQ DOVR FKDOOHQJHV WKH GLVWULFW FRXUWjV
VHHNLQJWRLQWLPLGDWHSODLQWLIIl                                    DGPLVVLRQRIWHVWLPRQ\UHJDUGLQJSUHYLRXVLQFLGHQWVLQZKLFK
                                                                      'DYLVDQGRWKHUVLQDSSURSULDWHO\WRXFKHGHPSOR\HHVDWWKH
  7KHMXU\ZDVDOVRSUHVHQWHGHYLGHQFHIURPZKLFKLWFRXOG            sDFNVRQ7HQQHVVHHIDFLOLW\7KLVWHVWLPRQ\DUJXHV+DUEHUW
LQIHUWKDW&DUOWRQGLGQRWXQUHDVRQDEO\IDLOWRWDNHDGYDQWDJH        <HDUJLQ FRQVWLWXWHV JURXQGV IRU D QHZ WULDO  7KH FUX[ RI
RIDQ\SUHYHQWDWLYHRUFRUUHFWLYHRSSRUWXQLWLHVSURYLGHGE\           +DUEHUW<HDUJLQjVREMHFWLRQLVWKDW5XOHRIWKH)HGHUDO
+DUEHUW<HDUJLQ$OWKRXJK&DUOWRQGLGQRWFRPSODLQWKHILUVW         5XOHVRI(YLGHQFHUHTXLUHGWKH((2&WRGLVFORVHLWVLQWHQWWR
WLPHWKDW'DYLVJUDEEHGKLVJHQLWDOVDUHDVRQDEOHMXU\FRXOG         RIIHU VXFK WHVWLPRQ\ DW OHDVW  GD\V EHIRUH WKH VFKHGXOHG
KDYHFRQFOXGHGWKDW&DUOWRQKDGUDWLRQDOJURXQGVWRUHIUDLQ           GDWHRIWULDO,QFODLPVIRUGDPDJHVmSUHGLFDWHGRQDSDUW\jV
IURP UHSRUWLQJ WKLV LQFLGHQW EHFDXVH KH ZDV QHZ WR WKH       DOOHJHG FRPPLVVLRQ RI FRQGXFW FRQVWLWXWLQJ DQ RIIHQVH RI
FRPSDQ\ KDG QR ZLWQHVVHV DQG WKH KDUDVVHU ZDV KLV           VH[XDO DVVDXOWl 5XOH  JRYHUQV WKH DGPLVVLRQ RI mWKDW
VXSHUYLVRU6HH:LOOLDPVY*HQHUDO0RWRUV&RUS)G           SDUW\jVFRPPLVVLRQRIDQRWKHURIIHQVHRURIIHQVHVRIVH[XDO
WK&LUVWDWLQJWKDWmUHOXFWDQFHWRUHSRUWWKH      DVVDXOWl,G+DUEHUW<HDUJLQFODLPVWKDWLWLVHQWLWOHGWRD
>KDUDVVLQJ@LQFLGHQWVLVHQWLUHO\XQGHUVWDQGDEOHFRQVLGHULQJ          QHZWULDOEHFDXVHWKH((2&GLGQRWJLYHLWWKHSURSHUDGYDQFH
WKDWRQHRIWKHDOOHJHGDJJUHVVRUVZDVKHUVXSHUYLVRUDQGVKH         QRWLFHDVUHTXLUHGE\WKLV5XOH
ZDQWHG WR JHW DORQJ DW ZRUNl  )XUWKHUPRUH &DUOWRQ
FRPSODLQHG LPPHGLDWHO\ DIWHU WKH VHFRQG RFFDVLRQ ZKHQ             7KH((2&KRZHYHUDUJXHVWKDWLWGLGGLVFORVHLWVLQWHQWWR
'DYLV JUDEEHG KLV JHQLWDOV DFFHSWHG WKH WUDQVIHU WKDW ZDV    RIIHUWHVWLPRQ\DERXWLQDSSURSULDWHWRXFKLQJE\'DYLVDQG
RIIHUHGWRKLPDIWHUKHFRPSODLQHGDQGDWWHPSWHGWRDYRLG            RWKHUHPSOR\HHVPXFKHDUOLHUWKDQGD\VEHIRUHWKHWULDO
FRQWDFWZLWK'DYLVDIWHU'DYLVEHJDQVWDONLQJKLP                    $WOHDVWWZR\HDUVEHIRUHWKHWULDOWKH((2&JDYH+DUEHUW
                                                                      <HDUJLQQRWLFHWKDWLWZDVFKDOOHQJLQJPRUHWKDQWKHDFWVRI
  $UHDVRQDEOHMXU\FRXOGDOVRKDYHFRQFOXGHGWKDW&DUOWRQjV          'DYLV ZKHQ LW LQIRUPHG WKH FRPSDQ\ LQ WKH ((2&jV
IDLOXUH WR SDUWLFLSDWH LQ +DUEHUW<HDUJLQjV LQYHVWLJDWLRQ        6HSWHPEHU   OHWWHU RI GHWHUPLQDWLRQ WKDW LWV
ZLWKRXW KLV DWWRUQH\ SUHVHQW GLG QRW FRQVWLWXWH DQ             LQYHVWLJDWLRQmUHYHDOHGWKDWWKH&KDUJLQJ3DUW\ZDVVH[XDOO\
XQUHDVRQDEOH IDLOXUH WR WDNH DGYDQWDJH RI DQ\ FRUUHFWLYH       KDUDVVHGE\KLVPDOHVXSHUYLVRUDQGWKDW>WKHSUDFWLFH@ZDV
RSSRUWXQLWLHVRIIHUHGE\+DUEHUW<HDUJLQ,QOLJKWRI+DUEHUW       SHUYDVLYH IRU PDOHV WR WRXFK RWKHU PDOHV DW WKH ZRUNVLWHl
<HDUJLQjVIDLOXUHWRLQWHUYLHZ/LQGOH\ZKRKDGZLWQHVVHGWKH         (PSKDVLVDGGHG
VHFRQGLQFLGHQWWKHMXU\FRXOGKDYHFRQFOXGHGWKDW&DUOWRQjV
UHOXFWDQFHWREHLQWHUYLHZHGDORQHZDVXQGHUVWDQGDEOH                  ,QDGGLWLRQWKH((2&SRLQWVRXWWKDWLWVFRPSODLQWDOOHJHG
                                                                      WKDW+DUEHUW<HDUJLQZDVmVXEMHFWLQJ&DUOWRQDQGDFODVVRI
  *LYHQ DOO RI WKLV HYLGHQFH , EHOLHYH WKDW WKH MXU\ KDG   PDOHHPSOR\HH>VLF@WRVH[XDOKDUDVVPHQWLQFOXGLQJRIIHQVLYH
VXIILFLHQW JURXQGV WR LQIHU WKDW +DUEHUW<HDUJLQ IDLOHG WR     DQGXQZHOFRPHWRXFKLQJEHFDXVHRIVH[PDOHl)LQDOO\WKH
H[HUFLVHUHDVRQDEOHFDUHWRSUHYHQWDQGSURPSWO\FRUUHFWWKH          ((2&DUJXHVWKDWm+DUEHUW<HDUJLQNQHZWKHLGHQWLW\RIDOO
KDUDVVPHQWIDFHGE\&DUOWRQ,WDOVRKDGDEDVLVWRFRQFOXGH         WKHZLWQHVVHVZKRZRXOGWHVWLI\DWWULDOZHOOEHIRUHWKHWULDO
WKDW&DUOWRQGLGQRWXQUHDVRQDEO\IDLOWRWDNHDGYDQWDJHRIDQ\       GDWHDQGKDGGHSRVHGDOORIWKHPl7KH((2&DUJXHVWKDW
SUHYHQWDWLYHRUFRUUHFWLYHRSSRUWXQLWLHVSURYLGHGE\+DUEHUW         WKHVH IDFWRUV ZHUH VXIILFLHQW WR FRPSO\ ZLWK 5XOH jV
<HDUJLQ                                                              UHTXLUHPHQW WKDW +DUEHUW<HDUJLQ EH JLYHQ DGYDQFH QRWLFH
