The impact of computer privacy concerns on access to government information

impactofcomputer00spli ( .pdf )

THE IMPACT OF COMPUTER PRIVACY CONCERNS ON ACCESS
TO GOVERNMENT INFORMATION













By

SIGMAN L. SPLICHAL


A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL
OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY

UNIVERSITY OF FLORIDA

1993


UNIVERSITY OF FLORIDA LIBRARIES















ACKNOWLEDGMENTS

I thank the professors who served on my supervisory

committee: Drs. Leonard Tipton and William McKeen from the

University of Florida College of Journalism and

Communications; Fletcher Baldwin of the UF College of Law;

and Dr. Kermit Hall, dean of the College of Arts and

Sciences at the University of Tulsa.

I owe a special debt of gratitude to Dr. Bill F.

Chamberlin, Joseph L. Brechner Eminent Scholar in Mass

Communication and chairman of my committee, for offering

guidance, inspiration, and unstinting faith in me and my

project throughout difficult times.

I also wish to thank Dean Ralph Lowenstein and Dr. Kurt

Kent of the College of Journalism and Communications, Rick

Donnelly and Rosalie Sanderson of the Legal Research Center,

and reference librarian Dolores Jenkins.

I will never forget the help and good humor of Matt

Bunker, my fellow graduate student, to whom I wish a

successful career at the University of Alabama. My student

days also were enriched considerably by the friendship of

Dr. Judy McFetridge. My thanks to them both.









And finally, my love and heartfelt thanks go to my

wife, Colee, and our son, Clark, for their support beyond

measure.


iii
















TABLE OF CONTENTS


ACKNOWLEDGMENTS........................... .............. ii

ABSTRACT ................................................ vii

CHAPTERS

ONE PRIVACY VS. ACCESS: THE ROLE OF THE COMPUTER.. 1

The Importance of Access....................... 1
The Issue of Privacy........................... 6
The Scope of the Privacy/Access Issue......... 12
The Effects of Privacy Concerns on Access..... 16
A Framework for the Access/Privacy Conflict... 17
Contribution to the Literature................. 19
Definition of Terms ........................... 23
Notes ........................................ 27

TWO THE DEVELOPMENT OF SOCIAL AND LEGAL THEORIES
SUPPORTING PRIVACY AND PUBLIC ACCESS TO
GOVERNMENT INFORMATION......................... 32

A Right of Privacy ............................ 33
Privacy as a Social Value ..................... 35
Privacy as a Legal Concept ..... ............... 39
Constitutional Privacy ........................ 47
Legislative Recognition of a Right to Privacy. 58
A Right of Access to Government Information... 61
Toward a Theory of Self-Governance ............ 62
Libertarian Underpinnings ..................... 63
Building on the Revolutionary Experience...... 65
Twentieth Century Legal Theory................. 68
A Common Law Right of Access .................. 73
Access and the Constitution ...... ............. 74
The Right to Receive Information.............. 77
A Right of Access to Government Information... 79
Statutory Access to Government Information.... 86
State Access to Government Records............ 89
Privacy and Access in Conflict................. 90
Notes ........................................... 92









THREE THE EVOLUTION OF COMPUTER/PRIVACY CONCERNS:
ACCESS TO GOVERNMENT INFORMATION HELD IN THE
BALANCE ......................................... 104

The Core of the Debate ........................ 104
Backdrop for the Computer/Privacy Debate...... 107
The Computer Issue Unfolds in the Media........ 112
Hearings on Creation of a National Data
Center ................. .................. .. 120
The Computer and the Bill of Rights Hearings.. 132
The Health, Education, and Welfare Report..... 138
The Privacy Act of 1974 ....................... 141
The Computer Matching and Privacy Act......... 145
Other Legislation Concerned About Computers
and Privacy ................................. 151
Fair Credit Reporting Act................... ... 151
Fair Credit Billing Act ....................... 152
Family Education Rights and Privacy Act....... 152
Right to Financial Privacy Act................. 153
The Computer Crime Act ........................ 154
Electronic Communication Privacy Act of 1986.. 155
Computer Security Act of 1987................. 155
Video Privacy Protection Act.................. 157
Scales Tipped Toward Caution.................. 157
Notes ................ ......................... 159

FOUR COURT CASES ADDRESSING PRIVACY CONCERNS
ABOUT COMPUTERS ............................... 170

A Question of Balance ......................... 170
A Right of Informational Privacy? ............. 173
The Seeds of Informational Privacy............. 174
The Supreme Court and Informational Privacy... 175
A Seminal Case for Informational Privacy...... 183
The Long Road to the Supreme Court............ 186
A Definition of Informational Privacy.......... 192
A Public Record in the Computer Age............ 194
Purpose of Disclosure ......................... 198
Categorical Exemption of Information .......... 203
Cases Decided Since Reporters Committee....... 206
Privacy-Access Cases Addressing Technical and
Definitional Concerns........................ 208
Federal Courts and Technical and Definitional
Privacy Concerns ............................ 209
State Courts and Computer Access Issues....... 216
Privacy/Access Out of Balance................. 227
Notes .......................................... 228









FIVE TOWARD RESOLVING THE COMPUTER PRIVACY/ACCESS
ISSUE ................. .......................... 239

Summarizing the Problem ....................... 239
Access and Privacy: American Ideals........... 242
When Values Collide ........................... 246
A Model of Relative Values .................... 248
Relative Privacy Values....................... 252
Relative Access Values......................... 256
Application of the Model....................... 264
The Need for a Response ....................... 268
Notes ................ ......................... 272

BIBLIOGRAPHY ............................................ 276

BIOGRAPHICAL SKETCH ................ .................... 291















Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment
of the Requirements for the Degree of
Doctor of Philosophy

THE IMPACT OF COMPUTER PRIVACY CONCERNS ON ACCESS
TO GOVERNMENT INFORMATION

By

Sigman L. Splichal

August 1993

Chairman: Dr. Bill F. Chamberlin
Major Department: Mass Communication

This project explores how the growing computerization of

government information is affecting the balance between

personal privacy and public and media access to that

information. The following questions are addressed, using

legal and historical research to analyze court cases,

legislation and legislative histories, and other sources:

Have computer privacy concerns affected public policy and

legislative activity related to government information

practices? Have computer privacy concerns affected court

opinions dealing with privacy-access issues? Have

legislation and court opinions reduced, or threatened to

reduce, access to computerized government information?

Analysis suggests concerns about computers and privacy

run wide and deep, dating to a proposal in the early 1960s


vii









for a National Data Center to pool information from various

federal agencies. Computer privacy concerns raised during

congressional hearings over the data center proposal

eventually led to passage of the Privacy Act of 1974.

A review of court cases shows computers are raising

novel issues, some of which are skewing the traditional

balance between privacy and access to government information.

Issues fall into three categories: technical and mechanical,

interpretational and definitional, and public policy.

Technical and mechanical issues arise when access is

reduced simply because a machine stands between the record

keeper and the information requester and the record keeper is

unable or unwilling to use the computer to effect access.

Interpretational and definitional problems related to

access terminology and agency duties arise because most

record laws and customs developed when government information

existed primarily on paper. When the same information is in

a computer, record keepers are not sure what responses are

required to satisfy legitimate access requests.

Public policy questions have been centered on the nature

of computerized information and whether it poses a greater

threat to privacy than the same information in paper form.

The access/privacy issues raised when government

information is in computers, and their potential threat to

legitimate public and media access, indicate a need for

legislatures to revisit access legislation to ensure it


viii









remains viable. To this end, a descriptive model is proposed

to show the relationship between access and privacy in the

computer age.
















CHAPTER ONE
PRIVACY VS. ACCESS: THE ROLE OF THE COMPUTER

The Importance of Access

The transistor was invented in 1947, the integrated

circuit came along about 11 years later, and the modern

computer epoch was born. That "mindless simpleton, but very

fast mindless simpleton,"1 forever altered how individuals

and institutions, including governments, gather, store,

sort, and analyze information.

Computers numbered fewer than three score among the

federal agencies when California Congressman John Moss began

hearings in 1955 that set the stage for passage of the

Freedom of Information Act, a congressional recognition that

the government's business was the people's business.2 The

Census Bureau had introduced the first government computer,

a UNIVAC I, just four years earlier.3 Crude by the

standards of the 1990s, these behemoth assemblages of

hundreds of vacuum tubes and miles of electrical circuitry

were novel, and their vast potential as information

processors remained to be fully understood and exploited.

When President Lyndon Johnson signed the Freedom of

Information Act on Independence Day, 1966, with the

proclamation that "democracy works best when the people have








2

all the information that the security of the nation

permits,"4 the federal government operated about 3,000

computers.5 Twenty years later, it maintained 22,000 large,

mainframe computers; by 1990, that number had more than

doubled to 48,000.6 Government use of smaller

microcomputers increased from 490,000 in 1987 to more than a

million two years later.7 In a scant three decades,

computers and computer programming capabilities were refined

and streamlined to the point that computer screens replaced

the ubiquitous file cabinet as the dominant office fixture

in an increasingly information-hungry society.

Along the way, the onslaught of computer technology has

confounded many of the laws and customs affecting public

and media access to government information that were

established when most records had four corners and could be

tucked into a filing cabinet. At the same time, the very

existence of information in computers--its compactness and

accessibility--has opened up a range of possibilities for

involving the public in the democratic process, enhancing

the ability of citizens to make informed decisions and to

acquire more knowledge about the governments they elect to

represent them.

The importance of an informed citizenry in a democratic

society, discussed at length in Chapter Two, is deeply

rooted in the American experience and has been a guiding

force in twentieth century legislation and jurisprudence.9







3

The role of the citizen-elector was galvanized by the late

Alexander Meiklejohn, the noted educator and former

president of Amherst College. In elucidating the theory of

freedom of expression, Meiklejohn strongly tied the

importance of the free flow of information to self-

governance. In his work Free Speech and Its Relation to

Self-Government, published in 1948, Meiklejohn said the

First Amendment's main purpose was to allow citizens to

understand "the issues which bear upon our common life." He

maintained that "no idea, no opinion, no doubt, no belief,

no counterbelief, no relevant information" should be kept

from the people. "Under the compact upon which the

Constitution rests," he said, "it is agreed that men shall

not be governed by others, that they shall govern

themselves."9

Government information is a vital raw material for the

press and an essential ingredient in a self-governed,

democratic society. Much of the daily content of news

broadcasts and publications is about government. But the

task of keeping track of government goings-on is daunting.

Newspapers, magazines, and broadcast stations in this

country employ roughly 260,000 reporters and editors, many

of whom in some way cover the activities of 17 million

government workers. Although reporters attend press

conferences, scour government documents, and have legions of

sources within the bureaucracy, they still fall short of










covering the countless official decisions that are made and

actions taken. Without a doubt, reporters--and the public--

go unaware of many of them.10

With the unprecedented increase in government use of

computers--and the media's comparatively recent abilities to

gain access to millions of records on the large computers

often used in government--a new kind of reporting has

evolved that heretofore was not deemed possible. For

example, St. Louis Post-Dispatch reporters George Landau and

Tim Novak uncovered the fact dead people were voting in

elections, by matching a computerized list of registered

voters to a computerized list of death certificates. The

computer was the all-important alternative to plowing

through thousands of records--requiring an investment of

time and manpower beyond the resources of many newspapers."

That improved access to computerized government

information can lead to news stories that are more useful to

the public is being demonstrated increasingly at computer-

savvy newspapers around the country. Examples abound, among

them the analysis of Internal Revenue Service files by the

Transactional Records Access Clearinghouse in Syracuse,

N.Y., which proved incorrect an IRS claim that underpayment

of taxes had risen sharply during the previous 20 years.

Computer analysis showed tax compliance rates had remained

about the same since 1969.12










Similarly, when the National Transportation Safety

Board said the maintenance record of a 25-year-old DC-9 that

crashed in Cleveland was typical of any aircraft that age, a

Cleveland Plain Dealer computer analysis of Federal Aviation

Administration records showed a history of equipment

malfunctions not found in similar planes.13

Such computer-assisted reporting, though around for

more than a decade, came to the fore in 1989, when an

Atlanta Journal and Constitution data base project showed

widespread discrimination against blacks by home-mortgage

lenders and won a Pulitzer Prize for investigative

reporting. Since 1989, investigative projects involving

computers have become the norm, resulting in additional

Pulitzers for computer-assisted reporting. As Bill Dedman,

the reporter who won the Pulitzer for the Atlanta stories,

told News Inc., "Ten years from now there won't be a

term 'computer-assisted reporting.' It would be like saying

pen-and-paper assisted reporting."14

Andy Schneider, whose efforts helped the Pittsburgh

Press win back-to-back Pulitzer Prizes for stories based on

computer analysis of government information, summed up the

potential of the new technology another way: "It's not

magic, but if you're willing to master the new technology,

it's close."15

The initial successes of computer-assisted reporting

are not without potential drawbacks. As record custodians










become more aware of the ability of reporters to probe

government data bases, reporters could become victims of

their own successes. Hard-hitting stories have shown record

custodians that sophisticated analysis of computerized

agency information can result in criticism of agency

performance and practices. In some cases, this independent

analysis of agency data has revealed problems not apparent

to agencies themselves. For example, Newsday's Penny Loeb

reported that New York City owed property owners $275

million in tax overpayments and had failed to inform them.

The city's finance department had provided her with

computerized records, but the agency no longer was so

forthcoming after the story appeared. "I've been in an

eight-month battle for more tapes," Loeb told a news

magazine.16

Common sense suggests that awareness of computer

reporting capabilities by record custodians could result in

some self-serving attempts to limit access. And socially

and politically attractive arguments based on the costs of

computer access, computer security, and privacy could foster

attempts to foreclose access to information that previously

has been publicly available, simply because it is contained

in a computer.

The Issue of Privacy

Access to government information has never been an

absolute; it always has involved balancing the social










benefits of public disclosure with competing social

interests.17 While access undoubtedly yields substantial

social benefits by informing the public about government and

other important matters, values supporting access sometimes

conflict with other equally important values, such as the

privacy rights of individuals who interact with government

and relinquish personal information in the process. The

"rules" of this balancing process once yielded relatively

predictable results when records were in paper format, and

record custodians in comparison knew what was expected of

them to fulfill requests for information lawfully. But most

existing laws--including the federal Freedom of Information

Act and similar state access statutes--are not adequate to

acknowledge the presence of information in computers or deal

with the increased demand by the public and press for such

information.

Another, potentially more threatening challenge posed

by computers is that their mere proliferation has stirred

alarm at all levels of American life. This concern, first

raised by the rampant growth of computers in the federal

government during the 1960s, continues to be reflected in

news stories of the 1990s, with disclosures and commentaries

about the excesses of private data vendors who buy and sell

personal information.18

When the computer was introduced to business and

government, its star climbed steadily in the constellation










of historic innovations; a 1965 Time magazine cover story

titled "The Cybernation Generation" quoted a General

Electric vice president who proclaimed that "the electronic

computer may have a more beneficial potential for the human

race than any other invention in history."19 But as the

computer's star rose, so also rose the specter of "Big

Brother," the faceless, omnipresent technocrat in a society

devoid of individualism and personal privacy, thrust into

the lexicon in 1949 by George Orwell's unsettling novel

1984.20 Orwell's villain was invoked during hearings in the

1960s over a proposal for a National Data Center to pool

government data on individuals in a central computer.

References such as "chains of plastic" and an "unforgiving

god" abounded as discussion focused on the potential dangers

posed by the vast accumulation of personal information by

government bureaucrats.21

Computer privacy concerns continued into the 1970s,

punctuated by passage of the Privacy Act of 1974. Pollster

Louis Harris reported in a 1983 study, aptly titled The Road

After 1984: A Nationwide Survey of the Public and Its

Leaders on the New Technology and Its Consequences for

American Life, that nearly half of those surveyed said they

were "very concerned" about the threat computers posed to

personal privacy. Sixty percent of the respondents favored

drastic measures to ensure that computers did not erode

privacy.22 The depth of support for strong constraints on










the new information technology impressed Harris, who

observed,

Americans are not willing to endure abuse or
misuse of information, and they overwhelmingly
support action to do something about it. This
support permeates all subgroups in society and
represents a mandate for initiatives in public
policy.23

Indeed, the pervasiveness of computers in society has

raised numerous legal and public policy issues related to

privacy, both inside and outside of government. Many of

these issues and problems--both practical and philosophical

in nature--may threaten public and press access to government-

held information. They have brought about--and could

continue to result in--well-intentioned legislative and

legal actions that endanger public access to government

information.

Irony is inherent to this problem: While the public

desires to be better informed about its government, and

while the media now have more capability than ever to

assemble and analyze that information (and more time and

resources than any single citizen normally would have),

fears for privacy may supersede all other concerns. Part of

this fear is certainly based on a stereotype derived from

popular culture, that of the anthropomorphic machine that

takes over from the humans who have programmed it--and in

some way goes awry. The idea is that if humans create

machines in their own image, "play God," if you will, the

consequences are disastrous. The scenario has been played










out from the dawn of the Industrial Age in Mary Shelley's

novel Frankenstein through Stanley Kubrick's film "2001: A

Space Odyssey" and beyond.24

Fears were fanned in the early 1990s by the credit-

reporting excesses, in which commercial vendors of

computerized personal information were criticized for their

mishandling of that information. Sometimes the abuse was in

the form of incorrect computer entries that were allowed to

self-perpetuate, adversely affecting the lives of

individuals without their knowledge. Again, hovering around

the discussion was the image of an implacable computer

holding information that takes on a malevolent life of its

own. Stories in publications ranging from The New York

Times and Newsweek to American Demographics and the columns

of James J. Kilpatrick and Jane Bryant Quinn noted this

concern, offering proclamations from the experts that

privacy was a hot issue.25 Although the controversy in the

early 1990s centered on the private sector, not government,

worries about computer-held personal information were

generalized. Newsweek reported Congress was scrambling to

"bring some order to the hodgepodge of privacy and

technology laws" and that the U.S. Office of Consumer

Affairs was targeting privacy as one of its prime concerns,

as were such advocacy groups as the Consumer Federation of

America and the American Civil Liberties Union. Said










Janlori Goldman, head of the ACLU's Privacy Project,

"There's a tremendous groundswell of support out there."26

In seeking protection from the watchful eyes of others

or from any computerized compilation of personal

information, however, lies the danger of muzzling the

traditional watchdog of government, the press. Legislation

and court interpretations could have the corollary effect of

permitting government--in the name of protecting personal

privacy--to hide information, cover up mistakes and

excesses, obscure the governing process from the people.

The U.S. Supreme Court's 1989 opinion in Justice

Department v. Reporters Committee for Freedom of the Press

more than anything else has underscored the need for renewed

legislative consideration of the privacy-access conflict.27

The case ultimately involved attempts by a CBS correspondent

and the Reporters Committee for Freedom of the Press to

obtain prior arrest information, or "a rap sheet," on a

principal in a business identified by the Pennsylvania Crime

Commission as having ties with organized crime. The

business also had been linked to a corrupt congressman. The

information in question was compiled from public record

sources in a Justice Department computer data base.28

In allowing withholding of such information in a

computer compilation, the Court articulated the "practical

obscurity" doctrine, an acknowledgment of the social value

of allowing individuals to put time and distance between










themselves and past mistakes. The Court concluded, among

other things, that personal information--even information

taken from public sources--enjoyed a reinvigorated privacy

interest when drawn together in a government data base. The

Court also held that such information could be categorically

exempted from public disclosure, forgoing what had been the

usual process of balancing particular privacy interests with

the public interest in disclosure on a case-by-case basis.29

In effect, the Court shifted the analysis away from the

content of the information and its public-record status and

focused instead on the computerized form of the information.

The holding and legal reasoning of the Reporters Committee

opinion are discussed at length in Chapters Four and Five.

For those in government who might wish to shield

information from public scrutiny, the Court provided a

potentially powerful weapon--based on the politically

attractive rationale of personal privacy.

The Scope of the Privacy/Access Issue

Most privacy-access conflicts related to computers fall

into three general categories: technical and mechanical

issues, definitional or interpretational issues, and public

policy issues. The general outlines of these issues,

discussed at length in subsequent chapters, are presented

below.










Technical and Mechanical Problems

Technical and mechanical problems related to computer

privacy occur simply because the computer machinery--or

hardware--stands between the record requester and the record

custodian. Requesters who do not know how the machinery

works frequently do not know the proper questions to ask to

facilitate the release of disclosable information that is

mixed with private, undisclosable information. On the other

hand, record custodians often are not properly trained to

respond to computer requests or are indifferent to the new

technology (or perhaps use it as an excuse to withhold

embarrassing information in the name of privacy) and,

therefore, are unresponsive to legitimate information

requests. For example, the Freedom of Information Act

requires agencies to provide "reasonably segregable"

portions of records that contain exempt private information

mixed with disclosable information.30 With paper records,

exempt private information is simply blacked out before

documents are provided. When records are in computers,

custodians have used the computer as an excuse to deny

access requests simply because they do not know how to

segregate information stored in computer format, or they are

unwilling to take the time or incur the cost. How courts

have addressed these problems is examined in Chapter Four,

which looks at legal opinions dealing with access-privacy

issues.










Definitional or Interpretational Issues

Problems of definition and interpretation have occurred

because most record-access laws and practices predate the

widespread use of computers by government agencies. When

the Freedom of Information Act was passed in 1966, most

records existed in paper form. Paper also was the dominant

record medium when most public access problems were sorted

out, either by new legislation or by the courts. But laws

and duties that were understood when most records were paper

became muddled when the same kinds of records were held in

government computers. And when laws and duties become

muddled, they provide opportunities for government agencies

to offer their own interpretations, sometimes motivated by

administrative convenience or the desire to hide information

rather than by legitimate privacy concerns.

The previous example of providing reasonably segregable

portions of records is illustrative. In the paper era,

agencies had learned through experience what constituted a

reasonable response to requests for records that required

the editing out of private information. But when records

were computerized, it no longer was clear to agencies what

constituted a reasonable response when exempt and nonexempt

material were mixed in a computer data base. Are agencies

in effect denying legitimate public access because they are

reluctant to take time to operate or reprogram their

computers to separate disclosable nonprivate information










from exempt private information? These questions are

addressed in Chapter Four.

The Freedom of Information Act does not require

agencies to create a "new record" to satisfy public record

requests. But does the use of agency computers to separate

disclosable and nondisclosable information constitute

creation of a "new record"? Court cases discussing such

problems of definition and interpretation also are studied

in Chapter Four.

Public Policy Issues

Important public policy issues related to the

widespread gathering and storage of personal information in

government computers have arisen on a number of fronts. A

fundamental concern involves the very nature of the computer

and its role in a democratic society. The value of

computers in improving government efficiency and cost

effectiveness is beyond question. This societal benefit, in

both the public and private sectors, is the driving force

behind their widespread use. But, as witnesses during the

National Data Center hearings asked, is the ability of

computers to sort, compare, and analyze information with

exacting efficiency itself an unwarranted threat to personal

privacy that calls for further legal and public-policy

analysis?31 Fear about the threat computers posed to

personal privacy was expressed during the debate over

whether to create a National Data Center and ultimately led










to passage of the Privacy Act of 1974 and other computer-

related legislation. These hearings and legislation are

discussed at length in Chapter Three. A generalized concern

about computers and the danger they pose to personal privacy

was the central issue in the Supreme Court's Reporters

Committee opinion, mentioned previously.

A second public policy question involves the cost of

computer technology and the extent to which agencies must

invest in computer technology to ensure reasonable public

and press access. Cost is a legitimate public policy

consideration, but it also provides agencies with an

attractive rationale for limiting access to computers. This

question is discussed briefly in several court opinions in

Chapter Four.

The Effects of Privacy Concerns on Access

The goal of this dissertation is to explore how the

tension between the rampant growth of computer record

systems in government and resultant privacy concerns is

threatening public and press access to government-held

information, an essential component of democracy. To this

end, the dissertation employs legal research techniques,

analyzing primary sources such as legal cases and

legislation that reflect patterns and changes in the

privacy/access equation. Historical research, tapping

primary sources such as hearing transcripts as well as some

secondary materials, also is used. Its role is to establish










the historical, social, and political contexts of some

issues, and to delve into the legislative history of the

privacy issue.

In addressing the proper balance between privacy and

access, several questions are posed:

--How have computer concerns affected legislative

activity related to personal privacy?

--To what extent have computer privacy concerns

affected public policy regarding information in government

computers?

--To what extent have computer privacy concerns

affected court opinions dealing with privacy-access issues?

--To what extent have legislation and court opinions

regarding access to computerized information reduced, or

threatened to reduce, public and press access to government

information?

It is hoped that attempting to answer these questions

will help to determine what the proper course of action

should be to protect privacy when appropriate without

unnecessarily reducing public and media access to government

information.

A Framework for the Access/Privacy Conflict

To establish a theoretical foundation from which to

assess the impact of computer privacy concerns on access to

government-held information, Chapter Two explores the

philosophical, political, and legal roots of two important--










and sometimes competing--social values. The first is the

right to personal privacy, which Supreme Court Justice Louis

Brandeis has called simply "the right to be let alone."32

The second social value is the right of public and press in

a democratic, self-governing society to have access to the

information government uses to go about the people's

business.

An overview of the tension between the sometimes-

conflicting values supporting privacy and access to

government information will provide the theoretical

framework for discussing how legislators, government

agencies, and the courts attempt to balance these values and

to what effect.

Chapter Three attempts to trace the evolution of the

federal government's concern about the threat of computers

to personal privacy and to define the extent to which the

federal government has responded to these concerns. The

chapter looks at how various responses to computer privacy

concerns have affected access to computerized information on

individuals that the government gathers and disseminates.

Chapter Four looks at how the courts have dealt with computer-

privacy issues and at what these cases portend for public

and press access when government information is held in

computers.

Chapter Five attempts to construct a hierarchy of

privacy and access values that could be used to help resolve










access/privacy questions. A model is proposed to help

define a reasonable balance between privacy and public

access. So that former levels of access--when laws

pertained to records on paper--are maintained in the high-

tech age, the model focuses on the content, not the form, of

the information held by government. In doing so, the model

looks at the kind of personal information involved, the

likelihood that harm would result from disclosure, and the

relative strength of the public good derived from

disclosure.

This project also will propose the urgent need for a

legislative response to prevent the reasoning of Reporters

Committee and other computer-privacy cases from reducing

public and media access to government information simply

because information is held in a computer.

Contribution to the Literature

Much has been written about computers and the dangers

they hold for personal privacy. Some works, such as Vance

Packard's The Naked Society,33 deal with general concerns

about the effects of technogical change on society and, when

in the wrong hands, on civil liberties. Alan Westin's

Privacy and Freedom34 and Arthur Miller's The Assault on

Privacy35 are seminal books that greatly influenced early

public debate when government agencies were just beginning

to realize the capabilities of computers. Both authors

played prominent roles in hearings that led up to the










Privacy Act of 1974. Westin and Miller and others, such as

Richard I. Miller, wrote related articles for scholarly and

legal journals and in the popular press dealing with the

effects of technology on personal privacy.36

Many substantial works have been written supporting

public access to government-held records. Foremost among

them is Harold Cross' The Right to Know.37 Cross' work,

sanctioned by the Society of Professional Journalists,

influenced the debate that led to congressional recognition

of the public's right to government information.

Several articles have been written about the overall

effect computers are having on access to public information.

Elliot Jaspin and Mark Sableman, for example, explore the

significant changes wrought by the "new electronic

government" in the traditional relationships between

government and press. The authors conclude,

[T]he control and release of government computer-
stored information is too important an issue to be
left to the haphazard pattern of statutory and
case law that has governed it to date. Many
of the existing decisions overemphasize general
fears of the new electronic information-storage
technology, and understate or ignore the great
potential benefits of access to such information
to the public.38

Other articles state the urgent need for redefining the

federal Freedom of Information Act in the face of burgeoning

computer technology. Leo Sorokin, for example, calls on

Congress to "broaden the definition of a record in the

context of electronic information, enable FOIA requesters to










choose between paper and electronic formats, establish

substantive criteria to determine when depository libraries

should be provided access to on-line government databases,

and direct that agencies provide the public with the

benefits of computerization when agencies develop electronic

dissemination programs."39

Another author, Jerry Berman, envisions an "Electronic

Freedom of Information Act," through which citizens can dial

up the federal FOIA data base that has an index of agencies

and subjects.40 In the Jurimetrics Journal of Law. Science

and Technology, Jamie Grodsky maintains "a broad,

legislative message is needed to establish at least minimum

requirements for agencies and give clearer guidance to the

courts. "41

Joining the chorus of advocates for better access to

government information is Patti Goldman in Government

Information Ouarterly, but her perspective is that the

Freedom of Information Act need not be tinkered with;

instead, it is how the agencies interpret it that must be

altered in the context of computer records. Instead of

passing legislation tailored to electronic information, she

suggests, Congress should "maintain vigilant oversight of

agency practices to ensure that access to electronic

information is provided to the public in accordance with the

Act. "42










Matthew Bunker, Sigman Splichal, Bill Chamberlin, and

Linda Perry, who devote some attention to the privacy/access

nexus, propose computer-access criteria based on the

assumption that access should not be restricted simply

because records are in a computer. Among their 13

recommendations: Federal, state and local governments must

promote public access needs when agencies install or upgrade

computer systems, at which stage public access can be built

in at little additional cost; all information in government-

owned and operated computers must be a public record, absent

specific statutory exemptions; and any agency using

computerized records should make nonexempt information

available through user-friendly computer terminals.43

A host of other articles has examined how advancing

technology has encroached on privacy, without focusing on

how privacy concerns affect access. Among other things, the

articles recommend individuals be informed in writing of the

existence of identifiable information stored about them, the

reasons it has been recorded, and the extent of its use by

and dissemination to others. One author advocates amending

the Privacy Act of 1974 to include predisclosure

notification. Central to many of these articles seems to be

the recognition that while computerized information is

necessary for government efficiency, the individual must

somehow retain some type of control over potentially

harmful, identifiable information. In Computer/Law Journal,










C. Dennis Southard IV says courts must maintain a "minimum

standard" of privacy based on the Fourth Amendment's

guarantee of protection against unreasonable searches and

seizures. "It should allow government to continue its police

and national security protection at its current level, while

guaranteeing that if an individual takes certain steps to

assure his privacy, it will be respected,"44 he reasoned.

None of the articles, however, looks specifically and

in depth at how computer privacy concerns--both practical

and philosophical--relate to public and media access to

information held in government computers. It is this

author's belief that by focusing on the question of how

computer privacy concerns affect overall legitimate access

to government-held information, the undertaking contributes

to the scholarly discourse on one of the important social

dilemmas in the information age.

Definition of Terms

Privacy has many dimensions, as the subsequent

discussion of the evolution of the value will show. For the

purposes of this dissertation, with its focus on access to

government-held information, the type of privacy discussed

will be informational privacy. The following definition of

informational privacy, adopted by a congressional committee

and later endorsed by the U.S. Supreme Court, will be used:

"Privacy is the claim of individuals to determine for










themselves when, how, and to what extent information about

them is communicated to others."45

The definition of government "information" also is

central to this dissertation. For the purposes of this

project, a definition provided by the U.S. Supreme Court in

the 1980 case of Forsham v. Harris will be adopted.

Borrowing terminology from the Federal Records Disposal Act,

the court defined government information as

all books, papers, maps, photographs, machine-
readable materials or other documentary materials,
regardless of physical form or characteristic,
made or received by an agency of the United States
government under federal law or in connection with
the transaction of public business.46

No attempt is made to distinguish between government

"information" and government "records," for to do so in the

age of computerized information begs for circular reasoning.

In this undertaking, they are assumed to be one and the

same. The Colorado Supreme Court, in a 1986 computer access

case discussed in Chapter Four, rejected an attempt to

distinguish between "information" and "records." Said the

court, "This is a distinction without a difference.

Information does not exist in a vacuum. Rather a 'record'

by its very nature exists to impart the information

contained in it."47

Various words and terms are used throughout this

dissertation. To facilitate understanding, some key

definitions follow.










Computer: A mechanical device that stores and

processes information electronically. Computer systems are

traditionally divided into three subclassifications:

mainframe, mini, and micro. These divisions are related to

the size of the computer and its speed of processing

information.

Mainframe computer: A large, multitask computer

designed to be operated simultaneously by multiple users.

Personal computer: A small, self-contained computer

designed to be operated by one individual.

Computer hardware: The physical machinery used in the

electronic computing process.

Computer software: The electronic instructions that

tell a computer how to store information and manipulate it.

Computer data: Individual pieces of electronically

stored information, such as names, addresses, Social

Security numbers, etc., suitable for processing and

interpretation.

Computer data base: An electronic collection of pieces

of related data.

Computer input: Data entered into a computer system

for storage or processing purposes.

Computer output: The conversion of electronic computer

impulses into some usable format, such as computer tapes,

disks, screen images, or printouts.










Computer system: The computer hardware, software,

input devices, output devices, and auxiliary storage

devices.

Computer program: Coded instructions that instruct a

computer to complete a sequence of tasks to achieve a

specific result.

Computer programming: The process for coding

instructions so a computer can complete a specific task.

Computerized government information: The sum of all

data in a government computer.

Computerized government records: Data in a government

computer that have been organized in some fashion pursuant

to a government or other function.

Public access to government information: Access

predicated on any of several legal theories, primarily

common law access and statutory access. A majority of the

U.S. Supreme Court have never agreed that access to

government information is a constitutional right.

Publicly accessible government information: All

government-held information not specifically shielded from

disclosure by statute.

Privacy: In most general terms, the right of

individuals to be secure in their private lives and personal

affairs. (Webster's New World Dictionary of the American

Language, Second College Edition.) This general definition










encompasses informational privacy. (See Informational

Privacy.)

Constitutional privacy: The right of individuals to be

secure from intrusion by government into their private

affairs. The U.S. Supreme Court has recognized this right

in several areas: the right to be secure in one's home, the

right of association, the right of intimate decision making,

and the right to control information about oneself. (See

Informational Privacy.)

Informational privacy: The right of individuals to

control access to, and the dissemination of, personal

information about themselves.

Notes

1. T.R. Reid, "Computerthink," 5 APF Reporter 7
(Winter 1983).

2. David Morrissey, "The Age of Electronic
Government," presented at the 1990 Conference on Advanced
Investigative Methods for Journalists 2 (1990).

3. John W. Macy Jr., "The New Computerized Age--4:
Automated Government: How Computers Are Being Used in
Washington To Streamline Personnel Administration--To the
Individual's Benefit," Saturday Review, July 23, 1966, at
24. Macy points out that one of the first completely
electronic computers ever built was called ENIAC, for
electronic numerical integrator and calculator. It was
built by the War Department and the University of
Pennsylvania in 1946 to solve problems with ballistics
research. The UNIVAC I was put into service by the Census
Bureau in 1951 and was retired to the Smithsonian
Institution in October 1963.

4. Thomas M. Susman, "Introduction to the Issues,
Problems and Relevant Law" in "Your Business, Your Trade
Secrets, and Your Government," 34 Admin. L.R. 117 (1982).


5. Morrissey at 2.










6. General Services Administration, Federal Equipment
Data Center, Automated Data Processing Equipment in the U.S.
Government (April 1990).

7. General Services Administration, Office of Federal
Information Resources Management, Microcomputer Survey
Report (September 1988).

8. See the Freedom of Information Act, 5 U.S.C. sec.
552; New York Times v. Sullivan, 376 U.S. 254 (1964).

9. Alexander Meiklejohn, Free Speech and Its Relation
to Self-Government 88-89 (1948).

10. Elliot Jaspin and Mark Sableman, "News Media
Access to Computer Records: Updating Information Laws in the
Electronic Age" 36 St. Louis U.L.J. 351 (February 1992).

11. George Landau and Tim Novak, "Dead or Alive," St
Louis Post Dispatch, September 9, 1990, at 1A.

12. Katherine Corcoran, "Power Journalists," News
Inc., November 1991, at 30. See also Mitchell Hartman,
"Investigative reporters use databases to break stories,"
The Quill, November/December 1990, at 21-26.

13. Corcoran at 30.

14. Corcoran at 32. See also Howard Kurtz, "Reporters
Let Their Terminals Do the Walking," The Washington Post,
July 7, 1991, at F4.

15. Kurtz, supra note 14.

16. Katherine Corcoran, "Beating the Tape Resistance,"
News Inc., November 1991, at 30.

17. For example, Exemption 6 of the Freedom of
Information Act allows withholding of information "that
could reasonably be expected to cause an unwarranted
invasion of privacy." This language contemplates a
balancing of privacy interests with the public interest in
disclosure.

18. See e.g., John Schwartz, "Consumer Enemy No. 1,"
Newsweek, October 28, 1991, at 42-47.

19. John W. Macy Jr., "The Cybernation Generation,"
Time, April 2, 1965, at 84.


20. George Orwell, 1984 3 (1949).










21. The Computer and Invasion of Privacy: Hearings
Before the Special Subcommittee on Invasion of Privacy of
the House Committee on Government Operations, 89th Cong., 2d
Sess. 12 (1966). See also Computer Privacy: Hearings Before
the Subcommittee on Administrative Practices and Procedures
of the Senate Committee on the Judiciary. 90th Cong., 1st
Sess. 2 (1967).

22. See J. Kirchner, "Latest Harris Poll Uncovers
Mixed Attitudes About High Tech," Computerworld, December
12, 1983, at 1, on the 1983 Louis Harris survey, The Road
After 1984: A Nationwide Survey of the Public and Its
Leaders on the New Technology and Its Consequences for
American Life. See also "Sharp Increase in Concern" 16
Privacy Journal 7 (May 1990), citing other Harris surveys
noting privacy concerns among the population. See also John
Schwartz, "How Did They Get My Name?" Newsweek, June 3,
1991, at 40-42. A 1990 Harris poll taken for consumer-data
conglomerate Equifax showed that 79 percent of the
respondents were worried about threats to their privacy, up
from 47 percent in 1977.

23. Id.

24. 2001: A Space Odyssey (Metro-Goldwyn-Mayer 1968).
In the movie, a computer named HAL takes over a space
station from two astronauts.

25. See e.g., Jane Bryant Quinn, "Guarding Your Good
Name," Newsweek, August 12, 1991, at 64.

26. Schwartz, supra note 22 at 40.

27. Justice Department v. Reporters Committee for
Freedom of the Press, 489 U.S. 749 (1989).

28. Id.

29. Id.

30. Freedom of Information Act, 5 U.S.C. sec. 552(b).

31. See generally The Computer and Invasion of
Privacy, supra note 21.

32. Olmstead v. United States, 227 U.S. 438, 478
(1928).

33. Vance Packard, The Naked Society 3-43 (1964).


34. Alan F. Westin, Privacy and Freedom (1967).










35. Arthur Miller, The Assault on Privacy (1971).

36. See Richard I. Miller, "Data Banks and Privacy,"
in Computers and the Law: An Introductory Handbook 156-161
(R.P. Bigelow 2d ed. 1969).

37. Harold Cross, The People's Right to Know (1953).

38. Jaspin and Sableman, supra note 10 at 405, 404.

39. Leo T. Sorokin, "The Computerization of Government
Information: Does It Circumvent Public Access Under the
Freedom of Information Act and the Depository Library
Program?" 24 Colum. J.L. & Soc. Probs. 297 (1990). See
generally Sandra Davidson Scott, "Computer Technology v.
Laws on Access," unpublished paper presented to the
Association for Education in Journalism and Mass
Communication annual convention, Boston, Mass. (August
1991).

40. Jerry J. Berman, "The Right To Know: Public Access
to Electronic Public Information," 3 Software L.J. 523
(Summer 1989).

41. Jamie A. Grodsky, "The Freedom of Information Act
in the Electronic Age: The Statute Is Not User Friendly," 17
Jurimetrics J. 51 (Fall 1990).

42. Patti A. Goldman, "The Freedom of Information Act
Needs No Amendment to Ensure Access to Electronic Records,"
7 Gov't Info. 0. 400 (1990).

43. Matthew D. Bunker, Sigman L. Splichal, Bill F.
Chamberlin, and Linda M. Perry, "Access to Government-Held
Information in the Computer Age: Applying Legal Doctrine to
Emerging Technology," 20 Fla. St. U.L. Rev. 594-598 (Winter
1993).
44. See generally Louise M. Benjamin, "Privacy,
Computers, and Personal Information: Toward Equality and
Equity in an Information Age," 13 Comm. & the L. 3-16 (June
1991); C. Dennis Southard IV, "Individual Privacy and
Governmental Efficiency: Technology's Effect on the
Government's Ability to Gather, Store, and Distribute
Information," 9 Computer/L. J. 359 (Summer 1989); Fred W.
Weingarten, "Communications Technology: New Challenges to
Privacy," 21 J. Marshall L. Rev. 735 (1988); Donsia Renee
Strong, "The Computer Matching and Privacy Protection Act of
1988: Necessary Relief from the Erosion of the Privacy Act
of 1974," 2 Software L. J. 391 (Summer 1988).


45. Reporters Committee at 763.








31

46. Forsham v. Harris, 445 U.S. 169, 183 (1980).

47. Western Services, Inc. v. Sergeant School District
No. RE-33J, 719 P.2D 355, 358 (Colo. App. Jan. 2, 1986).
















CHAPTER TWO
THE DEVELOPMENT OF SOCIAL AND
LEGAL THEORIES SUPPORTING PRIVACY
AND PUBLIC ACCESS TO GOVERNMENT INFORMATION

The public's "right to know"l about the business of

government and individuals' "right to be let alone"2 are

fundamental to American society, each firmly anchored in the

mores and values that have guided the development of the

nation. But these rights are not mutually exclusive. The

rights of the public and media to know about government

through access to the information it gathers--derived from

historical and twentieth century philosophical principles of

a free press and a self-governing democracy--are not

absolute. Neither are the rights of individuals to be

shielded from unwanted intrusions into their personal

affairs. Each of these rights, which the Supreme Court has

recognized are "plainly rooted in the traditions and

significant concerns of our society,"3 on occasion imposes

limits on the other, and at times they come into conflict as

the news media go about the task of informing the public

about matters of concern.

This chapter charts the development of a free press in

self-governing American society with its need for access to

government information, and the development of the concept










of personal privacy. It highlights the legal,

philosophical, and historical roots of each. The chapter

shows how rights of access and privacy have clashed from

time to time because of social, economic, and technical

change, causing friction between legitimate free-press and

personal-privacy interests. The chapter concludes by

introducing the most recent social and technological

developments that have brought privacy and access into

conflict--the government's use of computers and its

burgeoning need for personal information to make policy and

provide benefits to citizens. Subsequent chapters will

explore legislative and judicial concerns about the effects

of computers on privacy and how such concerns threaten

public and media access to the information government uses

to make decisions.

A Right of Privacy

U.S. Supreme Court Justice Arthur Goldburg, in an

attempt to explain the origin and dimensions of a right of

privacy, has suggested a fruitful approach for assessing

society's values. In his concurring opinion in Griswold v.

Connecticut in 1965, a case that fashioned a constitutional

right of privacy, Justice Goldburg concluded that privacy

was among those unenumerated rights retained by the people

under the Ninth Amendment to the Constitution.4 The Ninth

Amendment states that the failure of the Constitution to

recognize a particular right does not mean that no such










right exists; rather, the amendment concludes that

important rights not mentioned in the document are assumed

to be retained by the people. To determine whether a

particular right was among those retained by the people

under the Ninth Amendment, Justice Goldburg reasoned that it

was necessary to look at it in the social and political

context of the American experience. He said that one "must

look to the tradition and [collective] conscience of our

people [and at] .the totality of the constitutional

scheme under which we live."5

Without passing judgment on Justice Goldburg's Ninth

Amendment rationale for a constitutional right of privacy,

the following discussion of access and personal privacy

attempts to use his basic approach to explore the traditions

and conscience of the nation within "the constitutional

scheme under which we live." In doing so, the discussion

traces the development of a right of privacy under common

law, the unwritten law based on custom or court decision;

constitutional law; and statutory law. It is hoped that

this discussion, along with subsequent study of cases, laws

and political theories supporting a right of access to

government information, will provide a framework within

which to explore the ongoing tension between computers and

personal privacy and how this conflict affects public and

media access to government information.










Privacy as a Social Value

The seeds of privacy can be traced to the beginning of

the Judeo-Christian era in the biblical book of Genesis.

Ever since the story of Adam and Eve, who were shamed in the

eyes of God and took refuge behind fig leaves, modesty has

been a basic social and religious value integral to the

modern concept of privacy. After Adam and Eve defied God

and ate from the tree of knowledge, "the eyes of both were

opened, and they knew they were naked." Genesis further

noted that "God made for Adam and his wife coats of skins,

and clothed them."6 Modesty has played a central role in

the development of various cultures in the millennia since

Adam and Eve stepped from the Garden of Eden into a world

governed by human nature.7

A concept of privacy, though never expressed as it is

understood today, was not unknown in English common law, the

legal system dominant in colonial America and later adopted

by the fledgling nation. English common law cases dating

back to the Norman conquest recognized a value resembling

privacy in property rights of individuals.8 The case of

Pope v. Curl in 1741 illustrates the approach the English

common law followed. To resolve the case, the House of

Lords, England's highest court, applied a property-rights

doctrine to protect the contents of individuals' personal

letters from unauthorized publication by others.9 This case

was important to development of privacy in American










jurisprudence because it acknowledged a property right in

individuals' retention and control of personal ideas

contained in letters sent to others, not only in the letters

themselves.

In the development of American social and legal values,

the basic characteristics that embody the modern legal

concept of privacy predate the American Revolution.

Philosopher John Locke, whose writings influenced the

libertarian sentiments of the Founding Fathers' generation,

argued that government had a duty to protect certain

fundamental rights, such as life, liberty, and property.10

These "inalienable rights" would find expression in the

Declaration of Independence, the Constitution, and the Bill

of Rights, and the Supreme Court almost 200 years later

would glean from the fundamental concept of liberty a

constitutional right of privacy.11

John Adams, writing in his diary during the nation's

formative years, extolled the virtues of privacy when he

reasoned there was some personal information about which

"others have not a Right to Know." Adams, who would become

the nation's second president, maintained individuals should

dissimulate--or protect their feelings or motives--because

such information in the wrong hands could result in personal

harm. Said Adams,

The first Maxim of worldly Wisdom, constant
Dissimulation, may be good or evil, as it is
interpreted. If it means only a constant
concealment from others of such of our Sentiments,










Actions, Desires, and Resolutions, as others have
not the Right to Know, it is not only lawful but
commendable because when these are divulged, our
Enemies may avail themselves of the Knowledge of
them. Things that ought to be communicated
to some of our Friends, that they may improve them
to our Profit or Honour or Pleasure, should be
concealed from our Enemies, and from indiscreet
friends. This kind of Dissimulation, which
is no more than Concealment, Secrecy, and Reserve,
or in other words, Prudence and Discretion, is a
necessary Branch of Wisdom.12

In his book Privacy in Colonial New England, historian

David H. Flaherty explored the precursors of modern privacy,

which he found evident during the American colonial

experience. These precursors include such concepts as

solitude, intimacy, anonymity, and reserve.13 Flaherty

observed that although a right of privacy as a legal

doctrine evolved slowly in Western culture, its underlying

values were expressed in colonial customs and in the courts.

Colonial courts, he suggested, protected privacy values

indirectly by enforcing laws against trespass or physical

intrusions, by limiting government searches and seizures, by

hearing defamation cases, and by recognizing privileged

communications between wives and husbands.14 Ironically, as

Flaherty pointed out, there was little physical privacy--in

the modern sense--within most homes and public inns. Homes

often lacked individual sleeping quarters, and families

congregated in common beds. Communal sleeping arrangements

also were a common feature in public accommodations.

Flaherty noted that the concept of informational privacy was

officially recognized during Benjamin Franklin's tenure as










postmaster general before the American Revolution. During

this time, postmasters were required to swear an oath that

they would not "wittingly, willingly, or knowingly open or

cause, procure, permit, or suffer to be opened any

letter or letters which shall come into their hands."15

Flaherty also maintained that values supporting privacy

during the colonial period were instrumental in the

formulation of the First, Fourth, Fifth and Ninth amendments

to the U.S. Constitution.16

Values underlying privacy were apparent as the

Revolutionary War drew near, and played a central role in

the colonists' growing hostility toward British rule. In

1761, Boston lawyer James Otis, speaking out against the

practice of general searches by the colonial rulers, noted,

"Now one of the most essential branches of English liberty,

is the freedom of one's own house. A man's house is his

castle; and while he is quiet he is as well guarded as a

prince in his castle."17

On the eve of the Revolutionary War, each colony drew

up a list of grievances against the British authorities.

Atop each list was concern about general warrants, which

authorized government officials to search premises at will,

without first presenting evidence of a specific violation of

the law. After the colonies won independence, James

Madison, the major proponent of a Bill of Rights spelling

out individual liberties, introduced a proposal during the










Constitutional Convention in 1789 to limit the scope of

government searches. He argued that a Bill of Rights to the

Constitution was necessary to ensure, among other things,

that the new government could never attempt to enforce

general search warrants, so loathed by the colonies before

independence.18 Madison's proposal, which established "the

right of the people to be secure against unreasonable

search and seizures," was later adopted as the Fourth

Amendment.19

Values supporting privacy also found expression in the

writings of nineteenth-century philosopher John Stuart Mill,

whose works were widely read in the United States. In

Mill's influential work On Liberty, he argued the government

should have no say in certain kinds of personal conduct,

absent a compelling social interest, such as preventing harm

to others. Expounding on this concept of personal

"liberty," Mill wrote,

The sole end for which mankind are warranted,
individually or collectively, in interfering with
the liberty of action of any of their number is
self-protection. That is the only purpose for
which power can be rightfully exercised over any
member of a civilized community, against his will,
is to prevent harm to others. The only part
of conduct of anyone for which he is amenable to
society is that which concerns others. In the
part which merely concerns himself, his
independence is, of right, absolute.20

Privacy as a Legal Concept

While Flaherty documented the existence of the

components of privacy during the nation's formative years,










privacy as an identifiable legal concept remained only an

undercurrent in the common law during the nation's first

century. Legal concerns related to privacy developed

slowly, in large part because of the agrarian nature of

society. People were relatively few and far between, and

this measure of physical distance reduced the potential for

unwanted contacts and physical intrusions and the need for

legal solutions. Yet, court cases reflecting privacy

concerns did surface in the common law. One nineteenth-

century case worth mentioning because of its unusual facts

is Demay v. Roberts.21 The case, decided by the Michigan

Supreme Court, arose when a doctor took an untrained

assistant with him to help deliver a baby. The parents sued

when they learned the assistant was not medically trained;

they claimed their privacy had been compromised. The court

agreed, holding that the mother had a "legal right to the

privacy of her apartment at such a time."22

The demographics of agrarian American shifted

dramatically as the American industrial revolution hit full

stride. Technological developments such as the steam engine

led to the growth of manufacturing-based cities populated by

factory workers. Physical distance separating individuals

and families shrank as people moved to the cities to work in

the factories or immigrated to the growing nation in search

of opportunity. In the crowded cities, the natural barriers

of time and space common to agrarian settings no longer










insulated individuals from unwanted contacts and

intrusions.23 Between 1870 and 1900, the population of the

United States doubled and the number of urban residents

tripled.24

Dramatic technological developments during the

nineteenth century that threatened personal privacy are

traced by Alan F. Westin in Privacy and Freedom, a

comprehensive study of privacy-related issues.25 As Westin

noted, "Three technological developments in the late

nineteenth century altered the balance between personal

expression and third-party surveillance that had prevailed

since antiquity."26 These innovations included the

microphone and the telephone in the 1870s, the Kodak camera

with its potential for "instantaneous photographs" in the

1880s, and the dictograph recorder in the 1890s.

In 1877, The New York Times expressed concern about the

effect of new technology on privacy. In one of several

editorials about privacy the newspaper would write in the

coming years, the Times took issue with the telephone--a

"nefarious instrument" with its "vast capabilities for

mischief" that promised to rob individuals of their personal

privacy.27 Responding to a decision by the city to allow

telephone wires to be attached to city lampposts, the Times

cautioned,

Every confidential remark made to a lamp-post by a
belated Democratic statesman could be reproduced
by a telephone connected with any other lamp-post.
Men who had trusted to friendly lamp-posts,










and embraced them with the utmost confidence in
their silence and discretion, would find
themselves shamelessly betrayed, and their
unsuspecting philosophies literally reported to
their indignant families.28

While technological innovations led to growth of

populous industrial cities and such privacy-altering

inventions as the telephone, other innovations--in the form

of high-speed newspaper presses and advanced photography--

spawned an aggressive new kind of journalism, a distant

cousin of the Colonial and Revolutionary printers who

catered to the well-read and politically astute of society.

New printing processes could produce newspapers quickly and

cheaply, and a new kind of journalism developed that often

directed its content at the baser instincts of the swelling

numbers of city dwellers. A new breed of mass newspaper

reader, not so interested in the complexities of politics

and other public issues, sought more information about the

misdeeds and travails of others. This new kind of

readership, coupled with the ability of journalists armed

with cameras to intrude into areas previously shielded by

lack of technology, sometimes brought newspaper practices

and privacy concerns into conflict. This conflict created

new social and legal issues to be sorted out, such as the

rights of individuals to choose not to appear on the pages

of local newspapers.29

In 1890, a pair of former law partners and Harvard Law

School classmates took issue with the newspaper practices










and new technologies of the day. Louis Brandeis and Samuel

D. Warren, uppercrust Boston lawyers, penned "The Right to

Privacy" for the Harvard Law Review.30 The seminal article

would steer the concept of a legal right of privacy toward

the mainstream of American jurisprudence. Attempting to

document a climate of journalistic excesses and abuses of

privacy, the article stated somewhat hyperbolically that

"Instantaneous photographs and newspaper enterprise have

invaded the sacred precincts of private and domestic life;

and numerous mechanical devices threaten to make good the

prediction that 'what is whispered in the closet shall be

proclaimed from the house-tops.'"31

Brandeis and Warren argued that individuals possessed

certain intangible attributes, such as sentiments and

intellect, over which they exercised rights akin to those

governing personal property. The authors identified these

rights in what they viewed as analogous laws on breach of

trust, assault, copyright, and defamation, among others.

The article arguably achieved its aim of bringing privacy

into the legal arena.32 In 1891, soon after "The Right to

Privacy" was published, the New York Supreme Court addressed

the "novel" issue of personal privacy. Said the court, "It

is true that there is no reported decision which goes to

this extent in maintaining the right of privacy, and in that

respect this is a novel case."33










The case, Schuyler v. Curtis, arose when the family of

a prominent woman filed a suit against a private

organization, challenging its plans to erect a life-size

statue in her memory. The family argued that the woman had

never been a public personality and that the statue

constituted an invasion of privacy. The court, noting the

case before it was a test case for the right of privacy,

rejected the family's claim. But the court stopped short of

fully exploring the privacy issue. Important to the court's

analysis was the fact the subject of the statue was dead.

The court noted that, whatever right of privacy the woman

had, it followed her to the grave. The extent to which a

living person might have asserted a legally enforceable

privacy right was not explored.

In some early privacy cases, courts showed a

willingness to consider the interests of the press. For

example, in 1902 the New York Court of Appeals, the state's

highest court, refused to recognize a distinct right of

privacy in Roberson v. Rochester Folding Box Co.34 The case

began when the family of a young girl sued the Franklin

Mills Company for using a photograph of the girl without

permission in an advertisement for the company's flour. The

advertisement referred to the girl as "The Flour of the

Family" and was posted in various public places. The family

claimed invasion of privacy and argued that the

advertisement caused the girl to be "greatly humiliated by










the scoffs and jeers of persons who recognized her face and

picture."35

The court, while sympathetic to the girl's predicament,

nonetheless refused to recognize a legal remedy for an

injury that was not physical. The court expressed concern

that recognizing the claim might trigger similar lawsuits

that would clutter the courts and place unreasonable burdens

on the press. The girl's plight and controversy surrounding

the court's action was not lost on the New York Legislature.

In response, the legislature adopted a law creating a civil

remedy for the use of a person's name or likeness for

commercial purposes without consent.36

While the New York court was unwilling to recognize a

legal right of privacy, the Georgia Supreme Court not long

afterward reached the opposite result in a similar case. In

Pavesich v. New England Life Insurance Co., Georgia's high

court became the first to recognize unauthorized commercial

use of one's identity as a violation of the person's right

of privacy.37 The Georgia opinion prompted Louis Brandeis to

write that he was encouraged to see that privacy as a

distinguishable legal right was being recognized by the

courts.38

In addition to promoting privacy as a legal doctrine,

the article by Brandeis and Warren in the Harvard Law Review

also may have helped elevate the right of privacy to the

level of public discourse. In 1902, The New York Times took










issue with the new photographic technology, which no longer

required a willing subject to sit motionless to be

photographed. The newspaper complained in an editorial,

echoing the concerns of Brandeis and Warren, that "'kodakers

lying in wait' to photograph public figures had become a

'wanton' invasion of privacy that demands legal control."39

While the Brandeis and Warren article arguably nudged

the issue of a right of privacy onto the social and legal

stage, the development of a unified legal theory supporting

a right of privacy remained elusive. In the following

decades, the legal contours of privacy developed piecemeal

and with many variations.

Seventy years after "The Right to Privacy" proposed a

separate legal remedy for invasion of privacy, William

Prosser summarized the extent of common law development of

the privacy tort in the California Law Review. The 1960

article, titled simply "Privacy,"40 dealt only with tort law

and not with the constitutional question of government

interference in private matters. After reviewing some 200

privacy-related cases, Prosser identified four separate

torts--or breaches of duties imposed by society that

resulted in harm to another individual. They were

disclosure of embarrassing private facts about individuals;

appropriation, or the use of a person's name or likeness

without permission; false light, the intentional

dissemination of highly offensive false publicity about










another; and intrusion, the physical or technological

violation of an individual's privacy.

Prosser, an authority on tort law and author of a

seminal treatise on the subject, further defined the private

facts tort as publicity of a private matter that would be

highly offensive to a reasonable person and not of

legitimate public concern.41 Prosser's definition,

especially its reference to matters of "legitimate public

concern," highlights the factors courts traditionally have

weighed in balancing personal privacy with the media's right

to publish some kinds of personal information. Implicit in

the definition is that a legitimate public interest in

personal information could overcome privacy rights, even

when disclosure would offend most people. The privacy-public

interest balancing suggested by Prosser's definition is

addressed more thoroughly in subsequent discussions of

statutory privacy and court cases attempting to strike such

a balance.

Constitutional Privacy

While common law privacy developed gradually in America

over more than two centuries, explicit Supreme Court

recognition of a constitutional basis for personal privacy

occurred only in recent decades, beginning with the landmark

case Griswold v. Connecticut in 1965.42 Unlike the common

law tort, which gives individuals the right to sue other

individuals or entities for violations of their privacy, a










constitutional right of privacy protects individuals from

actions by the federal government and the states.

The Supreme Court's recognition of constitutional

privacy can be broken down into four general categories:

privacy from unwarranted intrusions, privacy of association,

privacy in making intimate decisions, and privacy in

controlling personal information. The first category

involving Fourth Amendment cases of physical and electronic

intrusion is well developed. The second and third

categories also are reasonably well developed. They are

associational privacy, or the freedom from interference or

constraints on relationships with groups or individuals, and

decisional privacy, or freedom from government interference

in intimate personal decisions. The fourth area in which

the Supreme Court has recognized a constitutional privacy

interest is less developed. It concerns informational

privacy, or rights of individuals to control information

about themselves. It imposes a duty on government to

protect the privacy rights of individuals on whom it

gathers, keeps, or disseminates information.

Freedom from Unwarranted Intrusion

The first and oldest judicial recognition of privacy

involves search and seizure cases implicating the Fourth

Amendment, usually resulting from physical intrusion. The

1886 case Boyd v. United States is illustrative.43 In Qoyd,

the Court said the Fourth Amendment search and seizure










provision voided a federal statute that required importers

to relinquish business records for seized goods or forfeit

the goods. The opinion, which expressed privacy values the

Court would expound on over the next 100 years, said, "It is

not the breaking of [an individual's] doors and the

rummaging of his drawers that constitutes the essence of the

offense; but it is the invasion of the indefeasible right of

personal security, personal liberty and private property."44

The Court has recognized privacy as freedom from

unwarranted intrusion in a number of other Fourth Amendment

cases. During the twentieth century, several Supreme Court

cases involving Fourth Amendment claims addressed threats to

personal privacy made possible by new technologies--a theme

introduced in the latter decades of the nineteenth century.45

Thirty-eight years after publication of "The Right to

Privacy" in the Harvard Law Review, Louis Brandeis, by then

a U.S. Supreme Court justice, took issue with the majority

of the court's upholding of the government in a telephone

wiretapping case. In his oft-quoted dissenting opinion in

Olmstead v. United States, Justice Brandeis said,

The makers of our Constitution undertook to
secure conditions favorable to the pursuit of
happiness. They conferred, as against the
government, the right to be let alone--the most
comprehensive of rights valued by civilized men.
To protect that right, every unjustifiable
intrusion by the government on the privacy of the
individual .must be deemed a violation of the
Fourth Amendment.46










In another Fourth Amendment case a dozen years later,

Justice Murphy took up Brandeis' argument that Olmstead had

been wrongly decided. In Goldman v. United States, a case

involving the surreptitious use of an electronic listening

device by government agents, Justice Murphy launched the

concept of privacy into the technological age. He conceded

that no physical intrusion or search had taken place. But

he warned, "Science has brought forth far more effective

devices for the invasion of a person's privacy than the

direct and obvious methods of oppression which were detested

by our forebears and which inspired the Fourth Amendment."47

The court underscored the privacy value embodied in the

Fourth Amendment in the landmark case of Mapp v. Ohio. The

case established the exclusionary rule, which made evidence

obtained during an unlawful search inadmissible in courts.48

The court held that

Having once recognized the right of privacy
embodied in the Fourth Amendment is enforceable
against the states and that the right to be secure
against rude invasions of privacy by state
officers is, therefore, constitutional in origin,
we can no longer permit that right to remain an
empty promise.49

Associational Privacy

The Supreme Court has invoked the First Amendment's

free speech and free association clauses to carve out a

right of associational privacy. The Court first applied a

First Amendment rationale to protect a privacy relationship

in the 1958 case NAACP v. Alabama ex rel. Patterson.50 The










National Association for the Advancement of Colored People

challenged a court order that the civil rights organization

turn over to the state of Alabama its membership rolls. The

NAACP argued that such information might be used to

intimidate members and, consequently, discourage membership.

Writing for the unanimous court, Justice Harlan said the

Court "has recognized the vital relationship between

freedom to associate and privacy in one's association .

particularly where a group espouses dissident beliefs."51

Two years later, the Court again addressed the issue of

associational privacy. In Shelton v. Tucker, the court

narrowly struck down an Arkansas statute requiring

schoolteachers to disclose all organizations to which they

belonged, or contributed, during the previous five years.

The Court was concerned that public access to records of

teacher affiliations might lead to the harm of teachers who

listed controversial or unpopular organizations.52 As the

Tucker opinion shows, the Court at least to some degree

agreed with John Adams' assertion that there are some

matters about which "the public has not the Right to Know."53

These associational privacy cases are also important to the

access-privacy discussion because the Court recognized the

potential for serious harm to individuals who lose control

of personal information about themselves. This recognition

will become more apparent in subsequent discussion of

informational privacy cases.










Decisional Privacy

Many of the Supreme Court's first forays into the

uncharted waters of constitutional privacy occurred before

the turn of the century in cases that focused on the

"liberty" rights of individuals in making certain kinds of

economic decisions.

The 1897 case Allgeyer v. Louisiana54 presaged reasoning

the court would apply in decisional privacy cases more than

a half century later. In Allgever, the Court struck down a

statute that limited the authority of insurance companies to

enter into certain contracts.55 The court held that the

"liberty" interest protected by the Fourteenth Amendment due

process clause "means not only the right of the citizen to

be free from physical restraint" but also from government

interference in individual decisions.56

The Supreme Court reached a similar result in the 1923

case Meyer v. Nebraska when it overturned the conviction of

a teacher who taught a foreign language to schoolchildren in

violation of a state statute.57 The case was decided in the

lower courts on the premise that the courts should protect

the economic freedom of private schools. However, the issue

as the Supreme Court posed it was one of freedom of inquiry

and thought. Again, the Court noted that "liberty" meant

more than "merely freedom from bodily restraint but also the

right of individuals generally to enjoy those










privileges long recognized at common law as essential to the

orderly pursuit of happiness by free men."58

In the 1925 case Pierce v. Society of Sisters, the

Supreme Court applied the reasoning of Meyer to void a

statute requiring children to attend public schools. The

Court said the statute interfered with the "liberty of

parents and guardians to direct the upbringing and education

of children under their control."59 Under this reasoning, a

government cannot interfere with parents' decisions about

whether their children will attend public or private

schools. However, once the parents opt for the privilege of

sending their children to public schools, the freedom of

choice diminishes dramatically.

The Supreme Court has articulated its strongest

recognition of a constitutional right of privacy in more

recent decisional privacy cases, those involving freedom of

choice in intimate personal decisions. The Court's clearest

articulation of a right of decisional privacy came in

Griswold v. Connecticut, a 1965 case that struck down a

statute that made it a crime for anyone, including married

people, to use contraceptives.60 In Griswold, the court held

that the statute intruded on the intimate relationship of

married couples and violated a "zone of privacy created by

several fundamental constitutional guarantees."61

The rationales for voiding the statute varied, but six

justices agreed it violated the due process clause of the










Fourteenth Amendment by interfering in couples' intimate

decisions on whether or not to use contraceptives. Specific

mention of a right of privacy appears nowhere in the

Constitution or the Bill of Rights. However, Justice

Douglas, writing the primary opinion for the Court, found

justification for a constitutional right of privacy in the

"penumbra" of rights associated with the First, Third,

Fourth, Fifth, and Ninth amendments. Justice Douglas said

that "specific guarantees in the Bill of Rights have

penumbras, formed by emanations that give them life

and substance."62

In a concurring opinion, Justice Harlan provided

another rationale for a right of privacy that recognized

that privacy concerns at times must be balanced with broader

societal demands. Relying on his dissent in an earlier

case, Poe v. Ullman, he concluded that the Connecticut

statute violated privacy values "implicit in the concept of

ordered liberties."63 Harlan, looking back at how the Court

historically had attempted to balance personal liberties

with other societal values, reasoned,

Due process has not been reduced to any
formula. The best that can be said is that
through the course of the Court's decisions it has
represented the balance which our Nation, built
upon the postulates of respect for liberty of the
individual, has struck between that liberty and
the demands of organized society.64

In 1973, the court underscored the right of individuals

to make intimate decisions in Roe v. Wade, a controversial










case involving a woman's right to decide whether to have an

abortion.6s In Roe, as in Griswold before it, the Court held

the government to a standard of strict scrutiny when

government attempted to interfere in intimate decisions.

Under the strict scrutiny standard, the government must show

a compelling interest in regulating a particular activity

and that the means of regulating the activity are narrowly

tailored to achieve the interest.

Informational Privacy

The most recent privacy concept recognized by the

Supreme Court is informational privacy. Concerns about

privacy have been raised in several cases addressing

government use of computers to gather, store, and

disseminate information about private individuals. The

Supreme Court's approach to informational privacy is

discussed briefly below and will be explored in more depth

in Chapter Four, which focuses on how courts have dealt with

both practical questions and public policy issues related to

privacy and access to information held in government

computers.

Concern about the impact of new information processing

technologies on privacy was first expressed on the Supreme

Court in 1976 by Justice William Brennan in a dissenting

opinion in United States v. Miller.66 The Miller majority

held that an individual did not have a constitutional

privacy interest in personal information voluntarily given










to a bank, because the information had become a part of the

bank's business records. Justice Brennan, signaling a

growing concern on the Court about the threat of information

technology to personal privacy, cautioned, "Development of

photocopying machines, electronic computers and other

sophisticated instruments have accelerated the abilities of

government to intrude into areas which a person normally

chooses to exclude from prying eyes and inquisitive minds."67

A year later, in Whalen v. Roe, the court acknowledged

a right of information privacy in an opinion that said a New

York state practice of compiling and storing in a computer

certain prescription drug records on individuals did not

violate their constitutional right of privacy.68 Central to

Justice Stevens' majority opinion were the "strong security

provisions" imposed by the state to ensure privacy.69 Said

Justice Stevens, "We are not unaware of the threat to

privacy implicit in the accumulation of vast amounts of

personal information in computerized data banks or other

massive government files."70

Justice Brennan, in a concurring opinion echoing

concerns about the threat of computers to privacy, noted

prophetically, "The central storage and easy accessibility

of computerized data vastly increases the potential for

abuse of that information, and I am not prepared to say that

future developments will not demonstrate the necessity for

some curb on such technology."71










After Whalen v. Roe, several informational privacy

cases reached the U.S. Courts of Appeals, but none reached

the Supreme Court until United States Department of Justice

v. Reporters Committee for Freedom of the Press in 1989.72

In Reporters Committee, decided almost a century after

Brandeis and Warren first took issue with the encroachment

of technology on personal privacy, the Supreme Court

apparently deemed that "the necessity of some curb" on

modern computer technology was in order.

The case stemmed from a Freedom of Information Act

request to the Federal Bureau of Investigation for

computerized criminal history records that had been compiled

from public records. In upholding the FBI's denial of the

request, Justice Stevens reasoned,

the issue here is whether the compilation of
otherwise hard-to-obtain information alters the
privacy interests implicated by disclosure of
that information. Plainly, there is a vast
difference between the public records that might
be found after a diligent search of the courthouse
files, county archives, and local police stations
throughout the country and a computerized summary
located in a single clearing house of
information.73

In his discussion of the case, Justice Stevens also

adopted a definition of privacy that included the control by

individuals of personal information about themselves.74 The

implications for public and media access as a result of the

Reporters Committee reasoning, and subsequent cases based on

that reasoning, will be explored in Chapter Four, along with










state cases that reflect concerns about the privacy threat

of computerized information.

Legislative Recognition of a Right to Privacy

While the concept of informational privacy has been

embraced by the Supreme Court, the clearest statements of

privacy rights in information collected by the government

have come through the legislative process. Most of the

legislative concern has been in response to the growing use

of computers by government. The evolution and dimensions of

that legislative interest will be discussed in detail in

Chapter Three. At this juncture, legislative privacy

concerns are outlined briefly.

When Congress passed the Freedom of Information Act in

1966, it recognized that the accumulation of personal

information by government threatened personal privacy. Two

exemptions to the FOIA specifically shield personal privacy

interests in government information. Exemption 6, which

covers medical, personnel and "related" records,75 and

Exemption 7, which covers criminal history records,76

acknowledge expectations of privacy in varying degrees.

When information requesters have challenged agencies that

have denied access under these exemptions, courts have

attempted to balance privacy interests with the public's

interest in disclosure of such information. However, the

Supreme Court in Department of Justice v. Reporters

Committee for Freedom of the Press has greatly narrowed what










constitutes a public interest in disclosure.77 The

ramifications of the 1989 opinion in Reporters Committee are

discussed in Chapter Four.

Other exemptions also recognize privacy-like interests

in business-related information held by government.

Exemption 4 shields from disclosure confidential business

information that agencies collect pursuant to their

statutory duties.78 Similarly, Exemption 8 protects certain

banking records79 and Exemption 9 protects valuable

geological and geophysical information about oil and gas

wells.80

Lastly, Exemption 3 covers information declared

confidential by other statutes.81 Several agencies have

attempted to apply this exemption to the Privacy Act of 1974

as grounds for withholding information.a2 These attempts

prompted Congress to pass legislation specifically excluding

the Privacy Act from Exemption 3 status.83

The threat of computers to personal privacy first

caught the attention of Congress in the 1960s, when

congressional subcommittees held hearings on the possible

development of a National Data Center, or centralized

computerized data bank to pool information from various

federal agencies. Several hearings were held on the

National Data Center proposal and related technology issues

throughout the 1960s, as the federal bureaucracy ballooned

with President Lyndon Johnson's Great Society social










programs and the Vietnam war effort.84 Proponents of a

National Data Center pointed out the need for efficiency and

enhanced decision making in the burgeoning bureaucracy.

Opponents saw a centralized computer system as a serious

threat to personal privacy and alluded to George Orwell's

"Big Brother."85

At a hearing in 1966, Representative Frank Horton of

New York suggested that the very size and inefficiency of

the federal bureaucracy held certain advantages for

citizens.

One of the most practical safeguards .of
privacy is the fragmented nature of present
information. It is scattered in little bits and
pieces across the geography of years of life.
Retrieval is impractical and often impossible. A
central data bank completely removes this
safeguard.86

Concern about the threat of government computers

expressed at various congressional hearings,87 underscored by

the abuses of the Nixon administration during the Watergate

era, ultimately led to passage of the Privacy Act of 1974.88

The act recognized privacy as a fundamental right protected

by the Constitution and threatened by widespread collection

and dissemination of personal information by federal

agencies. The act also recognized the positive role of

computer technology in efficient government but sought to

balance those positive aspects with the potential for abuse.

Since passage of the Privacy Act, Congress has

responded to the new information technologies by passing










numerous measures to regulate the collection, distribution,

and access to personal information held by the government.89

Most recently, Congress passed the Computer Matching and

Privacy Act of 1988 to put limitations on federal agencies'

ability to share personal information via computers.90

A Right of Access to Government Information

When the Founding Fathers gathered in Philadelphia more

than 200 years ago to sort out differences endangering the

tenuous union, they met in private. With an agenda that

included potentially divisive issues, the Founders

apparently believed secrecy more accommodating to the needs

of the infant nation than the rigors of public debate. Self-

preservation seemed paramount.91

Yet, this seemingly inauspicious beginning for a theory

of access to the public's business belies the sentiments

expressed in numerous writings by those instrumental in the

American Revolution and by those who steadied the nation as

it took its first unsure steps. A recurring theme was that

the government served the people, that it existed only with

the knowledge and consent of those governed. As James

Madison, a dominant force behind the Bill of Rights, noted,

"If we avert to the nature of Republic Government, we shall

find that the censorial power is in the people over

government, and not in the Government over people."92 From

writings such as Madison's evolved a theory of democratic

self-governance by an informed electorate, with a free and










vigorous press as a fundamental instrument in that process.

This section looks at the development of the principle that

the government's business is the people's business and that,

as a result, the people have a fundamental right of access

to that process and to information and records related to

it. It explores the philosophical principles that gave rise

to the values of free expression and a free press that

influenced the Founding Fathers and how those values helped

mold the new nation. It also traces the growth of values

supporting access to government information that is integral

to the contemporary concept of a self-governing society. In

addition, the section looks at how the courts have viewed a

right of access from a constitutional perspective and at how

access has been incorporated into positive law through the

legislative process.

Toward a Theory of Self-Governance

The free speech and free press clauses of the First

Amendment to the U.S. Constitution and the concept of a

well-informed, self-governing society grew from seeds

planted more than a century before by English social and

political philosophers. These philosophers wrote of the

need to write and speak without government interference, of

the importance of such freedoms within a society. These

seeds would put down roots before and during the American

Revolution and would flourish in the words of the Founding










Fathers, even if their actions sometimes seemed inconsistent

with their words.93

Libertarian Underpinnings

By most accounts, the genesis of libertarian thought

was in the English poet John Milton's essay Aeropagitica in

1644, with its ritualistically quoted passage: "Give me

liberty to know, to utter, and to argue freely according to

conscience, above all liberties."94 In Aeropagitica, Milton

railed against government attempts to suppress his earlier

writings that called for changes in the divorce laws that

locked him in an unwanted marriage. Milton argued that

government licensing of printers impeded the free flow of

information and ideas, a process essential to the betterment

of life and society. Milton said that people were capable

of judging ideas and information for what they were worth,

that in the process of sorting the good from the bad, truth

would prevail. Said Milton, "And though all the winds of

doctrine were let loose to play upon the earth, so Truth be

in the field .Let her and Falsehood grapple; who ever

knew Truth put to the worse, in a free and open encounter."95

Rivaling Milton as a philosophical influence on the

libertarian sentiments of the Founding Fathers' generation

was John Locke, who maintained that governments have a duty

to protect certain fundamental rights of citizens, such as

life, liberty, and property. Compared to Milton, Locke held

a radically different concept of the role of truth in public










discourse. While Milton focused on the tyranny and futility

of suppression and in the belief that truth ultimately would

triumph, Locke viewed truth as essentially unknowable.96 He

said people should be skeptical of their own opinions since

they could never know for certain whether they were correct.

Since knowledge was so frail and truth unknowable, Locke

argued, it would be best to put all ideas before the public.

Said Locke,

We should do well to commiserate our mutual
ignorance, and endeavor to remove it in all the
gentle and fair ways of information, and not
instantly treat others ill or obstinate and
perverse because they will not renounce their own
and receive our opinions, or at least those we
would force upon them, when it is more probable
that we are no less obstinate in not embracing
some of theirs. For where is the man that has
uncontested evidence of the truth of all that he
holds, or of the falsehood of all he condemns; or
can say, that he examined to the bottom all of his
own and other men's opinions?97

Locke also argued that individuals enter society freely and

as a matter of choice. Consequently, the government may

exercise control over individuals only with their consent.

All power to make laws resides with the citizenry, and only

through the delegation of that power to the state may the

state act.98

Later essays of Englishmen John Trenchard and Thomas

Gordon, writing under the pseudonym "Cato," also were a

significant force behind the propagation of libertarian

thought in colonial America. The essays were reprinted










widely in the colonial press and were popular reading. Said

Cato,

That men ought to speak well of their Governors,
is true, while their Governors deserve to be well
spoken of; but to do public Mischief, without
hearing of it, is only the Prerogative of Felicity
and Tyranny; A free People will be shewing that
they are so, by the freedom of speech."

Building on the Revolutionary Experience

The words of Milton, Locke, and Cato resonated through

the colonists' revolutionary rhetoric as they became

increasing alienated under British rule. Locke's notion of

the fundamental rights of individuals rings out in the

Declaration of Independence, and the values of life, liberty

and property pervade the Bill of Rights. The belief that

free speech and a free press served as an essential check on

the powers of government also found eloquent expression in

the writings of those who shaped the new democracy.

Thomas Paine, whose Common Sense on the eve of the

American Revolution helped draw waffling patriots into the

revolutionary fold, expounded on the benefits of a

representative democracy and the need for a full public

accounting of government actions. Paine later wrote,

In the representative system, the reason for
everything must publicly appear. Every man is a
proprietor in government, and considers it a
necessary part of his business to understand. It
concerns his interest because it affects his
property. He examines the costs, and compares it
with the advantages; and above all, he does not
adopt the slavish custom of following what in
other governments are called leaders.i00










James Madison, the major proponent of the Bill of

Rights, amplified the virtue of an informed society.

Although writing about the role of information in the

context of education, his premise suggests a parallel lesson

for democratic society in general. He cautioned, "A popular

government without popular information or the means of

acquiring it, is but a prologue to a farce or a tragedy, or

perhaps both."101

Thomas Jefferson, writing in 1823, years after the

tumult of the Revolution and the stressful period

immediately following, cast himself "into the ranks of the

most advanced libertarians [with] his final testament

on freedom of the press--a reflex of the best Enlightenment

theory."102 Drawing on his own experience and observations,

and on the collective wisdom of the libertarian

philosophers, Jefferson described the press as a conveyer of

information about the workings of government and as a

stabilizing force in the rough-and-tumble of democratic

society:

This formidable censor of the public
functionaries, by arraigning them at the tribunal
of public opinion, produces reform peaceably,
which must otherwise be done by revolution. It is
also the best instrument for enlightening the mind
of man, and improving him as a rational, moral
being.103

Interestingly, even as Jefferson saw a free and

vigorous press as a cornerstone of democracy, he did not

view the press as free from "liability for personal










injuries." And at one point, not long after the expiration

of the controversial Sedition Act in 1801, he suggested that

the states should keep an unruly "Tory" press in check.

Writing to Governor Thomas McKean of Pennsylvania, Jefferson

opined that state restraints on the press might have a

"wholesome effect in restoring the integrity of the presses

. [and would] place the whole band more on their

guard. "104

During the century that followed the American

Revolution, when free speech and free press rhetoric

flourished and strengthened the values underlying the First

Amendment, another influential political philosopher would

add to the theory that truth must have its day. John Stuart

Mill acknowledged the value of free expression advanced by

the earlier libertarian philosophers but discounted the

argument that truth, given an opportunity, would always

prevail. Mill, an ardent critic of American slavery, noted

that truth frequently was suppressed and that its only

chance to succeed lay in the right of free expression.105

Mill also wrote about the concepts underlying a democratic

society. Of the role of the individual in representative

government, he suggested that government derives its

authority from the governed; no democratic government would

succeed without citizens willing to abide by certain rules

and to do what was necessary to preserve it.106 The

foundation for such a society, Mill argued, was the










existence of powerful ideas and the ability of the majority

to persuade others of their correctness.107

Twentieth Century Legal Theory

The principles of the early libertarians and the words

of the Founding Fathers and others regarding free expression

and a free press lay the foundation for twentieth century

legal theory and social philosophy supporting the role of a

free and vigorous press in American society and its need for

public information. Woodrow Wilson, in the first year of

his presidency in 1913, eloquently expressed the sentiments

of the nation's founders that government prospered only with

the knowledge and consent of the people:

Whenever any public business is transacted,
wherever plans affecting the public are laid, or
enterprises touching the public welfare, comfort
or convenience go forward, wherever political
programs are formulated, or candidates agreed on,
over that place a voice must speak, with the
divine prerogative of a people's will, the words:
"Let there be light."108

The twentieth century concept of free expression was

brought into focus in the second decade of the new century

as it faced a severe test at a time when fears of social

revolution dominated the legal and political establishments.

In 1919, amid the post-World War I social and

political tumult in the United States over the Bolshevik

revolution in Russia, U.S. Supreme Court Justice Oliver

Wendell Holmes carried Milton's notion of free speech into

the twentieth century discourse through the American free

enterprise metaphor of the marketplace. The occasion was










the Supreme Court's opinion in Abrams v. United States,

which upheld criminal convictions under the newly enacted

Espionage Act.109 The defendants were convicted of

distributing materials critical of the United States' war

effort that encouraged "disaffection, sedition, riots, and

even revolution."l10 The offending pamphlets, tossed from

windows to passers-by, criticized the United States'

decision to send troops to aid the czar during the

revolution. In a dissenting opinion, Holmes took up the

libertarian standard of free expression to reject the

majority reasoning upholding the convictions based on words,

not deeds. He argued for "free trade in ideas," even those

we "loathe and believe to be fraught with death." Holmes

said the "best test of truth is the power of the thought to

get itself accepted in the competition of the market.""'

Holmes' notion of "the free trade of ideas" was often quoted

by legal and political scholars when free speech was in

question, and the importance of a free press in the

marketplace of ideas became a rallying cry in the First

Amendment lexicon.

In 1927, Justice Louis Brandeis, a dominant judicial

force behind the notion of a fundamental right of privacy,

argued with equal force for unfettered free expression

limited only by the need "to protect the state" from "clear

and imminent danger."112










In a concurring opinion in Whitney v. California,

Justice Brandeis denounced a California syndicalism law as a

threat to the fundamental principles of an informed, self-

governing democracy, on which the nation was founded. He

noted,

Those who won our independence believed that
the final end of the state was to make men free to
develop their faculties, and that in its
government the deliberative forces should prevail
over the arbitrary. They value liberty as both an
end and as a means. They believed that
freedom to think as you will and to speak as you
think are indispensable to the discovery and
spread of political truth that public
discussion is a political duty; and that this
should be a fundamental principle of the American
government. Believing in the power of reason
as applied through public discussion, they
eschewed silence coerced by law--the argument of
force in its worst form. Recognizing the
occasional tyrannies of governing majorities, they
amended the Constitution so that free speech and
assembly would be guaranteed.113

The majority of the Court soon amplified this theme.

In the 1931 case Stromberg v. California, the Court said

that the First Amendment ensured "the opportunity for free

political discussion to the end that government may be

responsive to the will of the people and that changes may be

obtained by lawful means."114 The role of a free press in

the process of democratic self-governance was best

articulated by Alexander Meiklejohn. Writing some 300 years

after John Locke, Meiklejohn rejected the idea that freedom

of speech derived solely from the natural law or rules of

reason espoused by the Enlightenment philosophers. Rather,

the venerable scholar anchored his theory of free expression










in the very nature of a self-governing democracy.

Meiklejohn reasoned that the "principle of free speech

springs from the necessity of the program of self-

government. It is a deduction from the basic American

agreement that public issues shall be decided by universal

suffrage."ii5 He said the First Amendment's protections for

the practice of self-government are to ensure that the

public retains control over government in the process of

self-governance. He would have afforded absolute protection

for expression about issues of self-governance because, he

said, citizens need to gather and share information and

opinions about their government to participate intelligently

in the democratic process.1i6

Legal scholar Thomas Emerson couched Locke's principles

of natural rights in the modern theory of self-

actualization. The theory of self-actualization established

an ascending hierarchy of essential needs to individuals in

society. At the bottom were basic physical needs, such as

food and shelter; at the top were the psychological needs of

individuals to realize their full potential--or to be self-

actualized.117 Emerson saw free speech and expression as

essential to attainment of these higher needs. To Emerson,

free expression was the embodiment of "the widely accepted

premise of Western thought that the proper end of man is the

realization of his own character and potentialities as a

human being."1is










Legal scholar Vincent Blasi offers another rationale

for a strong, free press in American society. Echoing the

sentiments of Paine and Jefferson that a free press as a

"formidable censor of public functionaries" was essential to

a democracy, he contends that a strong, free press is the

most effective--if not the only effective--check on the

potential abuse of power by government. Blasi accepts both

Locke's argument for free expression based on fundamental

rights and Meiklejohn's theory of self-governance. But he

also casts the press--particularly the large, influential

press--in another essential role as the only viable check on

the equally powerful government.119

Blasi's arguments reflect those espoused by former

Supreme Court Justice Potter Stewart, who saw in the First

Amendment a "structural provision" giving the press rights

separate and distinct from those of free speech. In a 1970

address at Yale Law School titled "Or of the Press," Stewart

rejected the view that the press should be only a neutral

forum in the "marketplace of ideas." The press was not

merely a vehicle for the balanced discussion of diverse

ideas, he said. "Instead, the free press meant organized,

expert scrutiny of government," Stewart said.o20 Implicit in

both Meiklejohn's First Amendment theory of self-governance

and Blasi's theory of the press as a fundamental check on

government excess is the need for public and media access to

the information government uses in decision making.










While freedom of the press and the implied importance

of access to information have found solid support in the

American experience, the legal parameters of press freedoms

and a right of access have been shaped by legislatures and

the courts. This development occurred at three levels. The

first is the common law, where the notion of access to

public information evolved through the daily application of

laws and customs to resolve disputes and issues. The second

is constitutional law. Constitutional analysis was

triggered when the press asserted First Amendment rights to

keep the public informed about the business of government.

The third is statutory law, or positive laws enacted by

legislatures recognizing varying degrees of a right of

access.

A Common Law Right of Access

A legal concept of public access to government

information developed within the common law. This concept

initially was based on the personal interests of individuals

in specific information, not on the premise that the public

had a general right to inspect public records. Usually,

access under the common law involved records sought during

litigation. A Kentucky court summed up the early status of

common law access:

[T]here is no common law right in all persons
to inspect public documents or records; and that
right, if it exists, depends entirely on the
statutory grant. But every person is
entitled [to inspect public records] .
provided he has an interest therein which is such










as would enable him to maintain or defend any
action for which the document or record sought can
furnish evidence of necessary information.121

Eventually, however, some courts began to expand the

kinds of interest that would warrant access to public

information. In 1903, for example, the state of Tennessee

recognized a general taxpayers' interest in records

concerning the financial condition of city government.122 In

some jurisdictions, courts have abandoned entirely interest

tests for access to public records.123 Despite the

willingness of some jurisdictions to recognize a broad-based

public right under the common law, the most effective tools

for access continue to be statutory. The statutory

dimensions of public access will be discussed in a later

section of this chapter.

Access and the Constitution

Acknowledging the important role of the press as

primary sources of information in a self-governing society,

the Supreme Court has recognized the constitutional right of

the press to publish information it gathers about public

issues.124 But the Court has not articulated a First

Amendment right of the press to obtain information that the

government gathers, creates, or possesses outside the

limited area of court proceedings. One jurist has likened

the press without a right to gather and publish news to a

"river without water."l25










This section looks at how the Supreme Court has viewed

the right of the media to gather and publish news from a

First Amendment perspective and at the implications various

cases have for the flow of information in a self-governing

society.

Before 1925, the First Amendment had functioned only as

a limitation on actions of the federal government. But in

that year, the Supreme Court first applied the First

Amendment to actions of a state in a case that upheld a

conviction based on the distribution of revolutionary

literature. In Gitlow v. New York, the Court said that

First Amendment rights protected from abridgment by Congress

were "among the fundamental personal rights and 'liberties'

protected by the due process clause of the Fourteenth

Amendment from impairment by the states."126 This selective

application of certain parts of the Bill of Rights to the

states through the Fourteenth Amendment is known as

incorporation.127

Since Gitlow, numerous cases have applied the First

Amendment to affirm the roles of free speech and a free

press in American society. For example, in 1931, the

Supreme Court issued a landmark opinion in Near v. Minnesota

that held prior restraints against the press were

impermissible in all but the most extreme of

circumstances.128 More important to the development of a

theory of access, however, are cases in which the Supreme










Court has addressed the rights of individuals to receive

information and the rights of the public and the press to

have access to government proceedings and information held

by the government.

A right of the public to know about the workings of

government, as such, is not stated in the U.S. Constitution.

But the framers of the Constitution did include provisions

for making government accountable to the people. The

Constitution, in general terms, requires the legislative and

executive branches of government to report regularly about

their activities. Both Houses of Congress must keep and

publish a "journal of its proceedings"129 but may decide

for themselves what might "require secrecy" and be

withheld.130 Congress also is required to "publish from time

to time a regular Statement and Account of the

Receipts and Expenditures of all public Money."131

Similarly, the president is required to report to Congress

"Information of the State of the Union."132 While these

requirements for government accountability seem limited by

modern access standards, they, nonetheless, reflected the

fundamental principle that government should not function in

secret or withhold information without good cause. Indeed,

the fact the Constitution gives Congress the authority to

determine what might "require secrecy" presupposes secrecy

is the exception rather than the rule. Too, the limited

expression of openness in the Constitution perhaps reflected










the realities of communications during the nation's

formative years. The movement of information, even urgent

information, was measured in terms of weeks and sometimes

months; in times of war, battles were sometimes fought

before word of an armistice could reach the battlefield.

The Right to Receive Information

The Supreme Court has never recognized a constitutional

right of access to government information, or a right to

gather information, on a par with the right to publish

without prior government interference. The press may

publish what it gathers, but government has no affirmative

duty to facilitate the newsgathering process. The Court,

however, has been more receptive to the rights of the public

to receive information.

The Supreme Court has specifically recognized the

rights of individuals to receive information in several

cases. Perhaps, the first is Grosjean v. American Press

Co., a 1936 case involving a challenge to a state tax that

affected only large-circulation publications. A unanimous

court struck down the tax as a violation of the First

Amendment. The Court said a free press is a vital source of

information and that "informed public opinion is the most

potent of all restraints upon misgovernment."133 The Court

said First Amendment freedoms went "to the heart of the

natural right of the members of an organized society, united

in their common good, to impart and acquire information










about their common interests."134 The Court concluded that

the Louisiana tax would "limit the circulation of

information to which the public is entitled by virtue of

constitutional guarantees."'135

In 1969, the Supreme Court again recognized the

public's right to receive information. In a broadcast

regulation case involving the Federal Communications

Commission's Fairness Doctrine, Red Lion Broadcasting Co. v.

FCC, the Court held that broadcasters, who operated under a

government license, may be compelled to grant individuals

the right to reply on the air to political editorials and

personal attacks. The Court recognized that government-

regulated broadcasters had First Amendment rights but

concluded that, on balance, the First Amendment rights of

broadcast audiences to receive information were paramount.

Interestingly, the court reasoned that broadcasters, by

virtue of their license relationship with the government,

had an affirmative duty to facilitate public access to

information and ideas--a concept the Court has never imposed

on government itself.136 Neither has the Court imposed on

the print media an affirmative duty to provide access to

different points of view.137

The Court also recognized the public's First Amendment

right to receive information--even commercial information--

in Virginia State Board of Pharmacy v. Virginia Citizens

Consumer Council. Inc.138 The Court struck down a state










statute barring pharmacists from advertising prescription

drug prices. The Court's opinion focused on the public's

strong interest in access to commercial information.139 Such

information, the Court reasoned, was essential if citizens

were to make thoughtful consumer choices that, in the

aggregate, could affect political issues such as the

allocation of resources. "To this end, the free flow of

commercial information is indispensable," the opinion

stated. 140

The Court applied the First Amendment to the receipt of

political information in First National Bank v. Bellotti,

when it struck down a state law forbidding political

advocacy by corporations. The Court reasoned that the

public's right to receive political information is not

diminished by the corporate identity of the speaker. The

Court said the First Amendment's role was not only to foster

individual expression but also to afford "the public access

to discussion, debate, and the dissemination of information

and ideas."141 The Court rejected the argument that "the

relative voice of corporations" might drown out other less

powerful speakers on controversial public issues. Instead,

the Court said that in a democracy the public must choose

among messages, whether the speaker be weak or strong.142

A Right of Access to Government Information

While the Court has recognized the right of individuals

to receive information from willing speakers, the question










of the public's and the media's constitutional right of

access to government-held information is more problematic.

Some cases, however, have implied at least a limited right

of access to government functions and records. In Branzburg

v. Hayes, the Court acknowledged that "without some

protection for seeking out the news, freedom of the press

could be eviscerated."143 But on a 5-4 vote, the Court

rejected a special privilege for news reporters not to have

to testify before grand juries. In Branzburg, three

journalists argued that if they were forced to reveal names

of confidential sources, to whom they had pledged

confidentiality, news organizations would lose their

credibility. Too, sources would cease to come forward, and

society might be deprived of important information, they

said. Justice Powell, who joined the majority opinion as

the key fifth vote, stated in a concurring opinion that any

claim of press privilege should be weighed on a case-by-case

basis, thus recognizing at least the possibility that in

some circumstances the press might warrant special

consideration.144 Powell's reasoning, when combined with the

rationale of the dissenting justices, led many appellate

courts during the 1980s to recognize a limited First

Amendment newsgathering right for journalists with respect

to protecting confidential sources, at least in cases not

involving grand juries.145










In a pair of cases dealing with access to prisoners and

prisons, the Court has said the press had no greater right

of access to government information than any other members

of the public. In Pell v. Procunier146 and Saxbe v.

Washington Post Co.,147 cases heard jointly, the Court upheld

federal regulations restricting press interviews with

prisoners. Important to the Court's analysis, however, was

that access to prisons was traditionally restricted and

therefore the media were not being singled out. Writing for

the majority, Justice Stewart said the press was free to

gather what it can and to publish what it knows. But,

Stewart said,

This autonomy cuts both ways. The press is
free to do battle against secrecy and deception in
government. But the press cannot expect from the
Constitution any guarantee that it will succeed.
There is no constitutional right to have access to
particular government information, or to require
openness from the bureaucracy.148

In Pell and Saxbe, Justice Douglas, writing for the

three dissenters, argued that the press should have a right

of access greater than the public generally. He said the

press, as a vehicle for the transmission of ideas and

information, held a "preferred position in our

constitutional scheme" and that the public's "right to know

is crucial to the governing powers of the people."149

While the Supreme Court has said the public and media

have no right of access to prisons, it has held that the

First Amendment requires criminal trials to be open. In










Richmond Newspapers v. Virginia, the Court said criminal

trials "must be open to the public" absent an overriding

competing interest, even when a defendant wanted the trial

closed.150 In a plurality opinion, Chief Justice Burger

engaged in a historical as well as a First Amendment

analysis. He noted that trials in England and in this

country had historically been public affairs. The chief

justice cited English customs dating to before the Norman

Conquest that gave rise to the jury system. When cases were

brought before courts, freemen of the community were

required to attend and render a judgment. In reasoning that

could apply equally to access to all forms of government

proceedings, he noted,

This is no quirk of history; rather, it has
long been recognized as an indispensable
attribute of the Anglo-American trial. It
gave assurances that the proceedings were
conducted fairly to all concerned, and it
discouraged perjury, the misconduct of
participants, and decisions based on secret bias
or partiality.151

He also noted the therapeutic value of open proceedings

and the importance of such openness in ensuring confidence

in the process of government. "People sensed from

experience and observation that, especially in the

administration of criminal justice, the means used to

achieve justice must have the support derived from public

acceptance of both the process and the results."152 The

chief justice echoed Thomas Jefferson's notion that exposing

government actions in the "tribunal of public opinion"










diffused emotions and led to peaceable reforms. He observed

that openness provided an "outlet for community concern,

hostility, and emotion," and that without knowledge the

system was working, "natural human reactions of outrage and

protest are frustrated and may manifest themselves in some

form of vengeful 'self-help,' as indeed they did regularly

in the activities of vigilante 'committees' on the

frontiers."'53 He pointed out that people do not demand

infallibility from their institutions, but that "it is

difficult for them to accept what they are prohibited from

observing. "154

After outlining the need for openness in government--at

least in court proceedings--the chief justice turned his

attention directly to the special role of the press as a

surrogate for the people. He noted that while the First

Amendment right to assemble in public places and to attend

trials covers the public generally, the press acts as a

stand-in for the public; therefore, without press access,

public access is diminished.

It is not crucial whether we describe this
right to attend criminal trials to hear, see, and
communicate observations concerning them as a
"right of access," or a "right to gather
information," for we have recognized that "without
some protection for seeking out the news, freedom
of the press could be eviscerated." The explicit,
guaranteed rights to speak and publish concerning
what takes place at a trial would lose much
meaning if access to observe the trial could, as
it was here, be foreclosed arbitrarily.155










Chief Justice Burger also made quick work of the

argument that there was no right of public access to court

proceedings because no such right was spelled out in the

Constitution. He pointed out that during the debate over

whether the Constitution should have a Bill of Rights, it

was made clear that just because the Constitution did not

grant a particular right, this did not mean no such right

existed. In words that could bolster an argument for an

implicit First Amendment right of access to government

information modeled along the lines of reasoning supporting

a constitutional right of privacy, he noted,

Notwithstanding the appropriate caution
against reading into the Constitution rights not
explicitly defined, the Court has acknowledged
that certain unarticulated rights are implicit in
enumerated guarantees. For example, rights of
association and of privacy, the right to be
presumed innocent and the right to be judged by a
standard of proof beyond a reasonable doubt in a
criminal trial, as well as the right to travel,
appear nowhere in the Constitution or Bill of
Rights. Yet these important but unarticulated
rights have nonetheless been found to share
constitutional protection in common with explicit
guarantees .fundamental rights, even though
not expressly guaranteed, have been recognized by
the Court as indispensable to the enjoyment of
rights specifically defined.156

Justice William Brennan, author of the Court's landmark

1964 libel opinion in New York Times v. Sullivan, concurred

with the result in Richmond but focused on the "structural

role" the media play in the American system of self-

government. Alluding to Alexander Meiklejohn's theory of

democratic self-governance, Justice Brennan reasoned that










the First Amendment was meant to do more than protect free

communication for its own sake. Rather, he said,

Implicit in this structural role is not only
"the principle that debate on public issues
should be unhibited, robust and wide-open," but
the antecedent assumption that valuable public
debate--as well as other civic behavior--must be
informed. The structural model links the First
Amendment to that process of communication
necessary for a democracy to survive, and thus
entails solicitude not only for communication
itself, but for the indispensable conditions of
meaningful communication.157

For communication to be meaningful in a self-governing

society, Justice Brennan concluded, public and press access

to government information are essential. In words that

anticipated his approach to the access/privacy conflict that

would arise over the government's growing use of computers,

he said, "Our decisions must therefore be understood as

holding only that any privilege of access to governmental

information is subject to a degree of restraint dictated by

the nature of the information and countervailing interests

in security and confidentiality."158 (Emphasis added.)

In a separate concurring opinion, Justice Stevens

termed Richmond "a watershed case" and suggested that "for

the first time the court unequivocally holds that an

arbitrary interference with access to important information

is an abridgment of the freedom of speech and of the

press."159 In the wake of Richmond, some legal scholars

shared Justice Stevens' position, suggesting that the

opinion cast the First Amendment as a sword with which to










"secure information from a reluctant government."160 While

increased access has occurred in other trial-related

areas,161 pronouncements that Richmond was "a watershed

case," signaling a significant shift in access doctrine

proved exaggerated.162

Statutory Access to Government Information

If the Supreme Court has been reluctant to recognize a

First Amendment right of access to government information

beyond the courts, Congress has been willing to enact

legislation opening federal regulatory agencies to public

scrutiny. But statutory recognition of a public right of

access to government information is a relatively new

phenomenon that developed in the two decades following World

War II.

In 1946, Congress enacted the Administrative Procedures

Act,163 which recognized the public character of government

records gathered and kept by federal executive agencies.

But the act's inexact language, which allowed agencies to

determine what information "requiring secrecy in the public

interest" should be exempt from disclosure, provided a

loophole that led to widespread, arbitrary withholding. The

act, in effect, became more of a withholding statute. During

this post-World War II period, proponents of access to

government information were given a boost when the

government issued the Hoover Study Report, which led to

passage of the Federal Records Act of 1950.164










As the 1950s unfolded, press organizations and other

advocates of open government began a push to open up federal

executive agencies, which had increased the level of secrecy

as the Cold War and the threat of communism took hold. In

one effort to promote access, the American Society of

Newspaper Editors commissioned a report on the customs, law,

and legislation dealing with access to government

information. The result was The People's Right to Know, a

book promoting access by media lawyer Harold Cross.165 Cross

began the seminal study about access to government

information with this statement:

Public business is the public's business.
The people have a right to know. Freedom of
information is their just heritage. Without that
citizens of a democracy have but changed their
kings. Citizens of a self-governing society
must have the legal right to examine and
investigate the conduct of affairs, subject only
to those limitations imposed by the most urgent
public necessity.166

Cross concluded that the solution to the problem of

access to government information lay with the legislative

process:

Congress is the primary source of relief.
The time is ripe for an end to ineffectual
sputtering about executive refusals of access to
official records and for Congress to begin
exercising its function to regulate freedom of
information for itself, the public and the
press.167

Despite Cross' call on Congress for relief, the

"ineffectual sputtering" would continue for a while.

Shifting of political fortunes, however, would soon provide










an important nudge. In 1955, President Dwight Eisenhower

was elected to a second term. But while the Republican won

the White House, the majority in the House of

Representatives swung to the Democrats, and along with

majority-party status came committee chairmanships.

Congress had become increasingly concerned about its

inability to pry information from Republican-controlled

executive agencies. Various committees, now under

Democratic leadership, provided forums for a public access

debate. 168

In 1955, California Congressman John Moss began

hearings on the access issue that would continue for some 10

years. The work of the Moss Committee, along with that of

other access advocates such as Cross and Ralph Nader,169

culminated in 1966 with passage of the federal Freedom of

Information Act. When President Lyndon Johnson signed the

legislation, he observed that "a democracy works best when

the people have all the information that the security of the

nation permits."170 The purpose of the act, according to the

Senate report on the legislation, was to close loopholes in

the Administrative Procedures Act and to foster "a general

philosophy of full agency disclosure."171 The Supreme Court

later put its imprimatur on this goal in an FOIA-related

opinion. "The basic purpose of the FOIA is to ensure an

informed citizenry, vital to the functioning of a democratic










society, needed to check against corruption and to hold the

governors accountable to the governed," the Court stated.172

Under the FOIA, all agency records must be disclosed

unless specifically exempted. The act places the burden on

the agency to justify withholding. While the FOIA's purpose

is "full agency disclosure," it also contained nine

exemptions that recognized competing social values.173

Several of these exemptions, discussed in a previous

section, specifically attempt to balance the public's right

to know with the privacy interests of individuals on whom

the government keeps information.

In addition to access to records, Congress also has

passed "Government in the Sunshine" legislation requiring

some 50 federal agencies, boards, and commissions to open

most of their meetings to the public.174

State Access to Government Records

Legislative recognition of a public right of access to

information is not limited to the federal government.

Before 1940, only 12 states had substantial public access

statutes.175 By 1992, all 50 states and the District of

Columbia recognized the public's right of access to

government records.176 The state statutes vary in the degree

of openness allowed and the definition of public records.

Some provide access to a narrow range of records, such as

records required to be kept by state law; others take a

sweeping view of access, opening all records pertaining to










any aspect of state business. Perhaps, the preamble to the

Indiana Open Records Law best sums up the thrust of most

state access legislation:

A fundamental philosophy of the American
constitutional form of representative government
is that government is the servant of the people
and not their master. Accordingly, it is the
public policy of that state that all persons are
entitled to full and complete information
regarding the affairs of government and the
official acts of those who represent them as
public officials and employees.177

Privacy and Access in Conflict

The foregoing discussion of the values supporting a

right of privacy and values supporting public access to

government information suggest both are well-grounded in the

American experience.

Where core privacy values have been involved, such as

those involving unlawful searches, intimate personal

decisions, or freedom of association, the Supreme Court has

demanded government show a compelling interest before

infringing on those values. In informational privacy cases,

the Court also has imposed constitutional limitations on

government. At the very least, the Court has recognized

that when government gathers and stores personal information

about individuals, it has a concomitant duty to ensure the

privacy of that information. When private information is

held in government computers, the Court requires government

place a high priority on the security of such information

systems. Exactly how privacy is defined remains a problem.










In legislation, Congress also has clearly recognized the

privacy rights of individuals who relinquish personal

information to the government, most prominently the Privacy

Act of 1974. A major factor in the Privacy Act and much

subsequent legislation resulted from concerns about the

threat of computers to personal privacy.

While privacy is a core societal value, the right of

the public and the press to government information,

likewise, is at the core of the process of democratic self-

governance. Although the Supreme Court has held that a

general right of access lacks the constitutional dimension

of the right of privacy, the values underlying the public's

right to know about government are no less fundamental and

are deeply embedded in the American experience. The value

of an informed electorate is rooted in the nation's drive to

independence and has been articulated in many ways during

more than two centuries. The legitimate role of access to

information has been recognized as a core social value by

Congress, which in a democratic society reflects the will of

the people.

These important values at times conflict, as the public

and press seek information, sometimes containing private

data, about how government goes about the people's business.

At times, one right or the other must yield in the interest

of society. Chapter Three will look at how Congress and the

courts have attempted to balance these interests, at a time

PAGE 1

7+( ,03$&7 2) &20387(5 35,9$&< &21&(516 21 $&&(66 72 *29(510(17 ,1)250$7,21 %\ 6,*0$1 / 63/,&+$/ $ ',66(57$7,21 35(6(17(' 72 7+( *5$'8$7( 6&+22/ 2) 7+( 81,9(56,7< 2) )/25,'$ ,1 3$57,$/ )8/),//0(17 2) 7+( 5(48,5(0(176 )25 7+( '(*5(( 2) '2&725 2) 3+,/2623+< 81,9(56,7< 2) )/25,'$ 81,9(56,7< &) )/25,'$ /,%5$5,(6

PAGE 2

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

PAGE 3

$QG ILQDOO\ P\ ORYH DQG KHDUWIHOW WKDQNV JR WR P\ ZLIH &ROHH DQG RXU VRQ &ODUN IRU WKHLU VXSSRUW EH\RQG PHDVXUH LQ

PAGE 4

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

PAGE 5

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

PAGE 6

),9( 72:$5' 5(62/9,1* 7+( &20387(5 35,9$&<$&&(66 ,668( 6XPPDUL]LQJ WKH 3UREOHP $FFHVV DQG 3ULYDF\ $PHULFDQ ,GHDOV :KHQ 9DOXHV &ROOLGH $ 0RGHO RI 5HODWLYH 9DOXHV 5HODWLYH 3ULYDF\ 9DOXHV 5HODWLYH $FFHVV 9DOXHV $SSOLFDWLRQ RI WKH 0RGHO 7KH 1HHG IRU D 5HVSRQVH 1RWHV %,%/,2*5$3+< %,2*5$3+,&$/ 6.(7&+ YL

PAGE 7

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

PAGE 8

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

PAGE 9

UHPDLQV YLDEOH 7R WKLV HQG D GHVFULSWLYH PRGHO LV SURSRVHG WR VKRZ WKH UHODWLRQVKLS EHWZHHQ DFFHVV DQG SULYDF\ LQ WKH FRPSXWHU DJH ,;

PAGE 10

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nV EXVLQHVV ZDV WKH SHRSOHnV EXVLQHVV 7KH &HQVXV %XUHDX KDG LQWURGXFHG WKH ILUVW JRYHUQPHQW FRPSXWHU D 81,9$& MXVW IRXU \HDUV HDUOLHU &UXGH E\ WKH VWDQGDUGV RI WKH V WKHVH EHKHPRWK DVVHPEODJHV RI KXQGUHGV RI YDFXXP WXEHV DQG PLOHV RI HOHFWULFDO FLUFXLWU\ ZHUH QRYHO DQG WKHLU YDVW SRWHQWLDO DV LQIRUPDWLRQ SURFHVVRUV UHPDLQHG WR EH IXOO\ XQGHUVWRRG DQG H[SORLWHG :KHQ 3UHVLGHQW /\QGRQ -RKQVRQ VLJQHG WKH )UHHGRP RI ,QIRUPDWLRQ $FW RQ ,QGHSHQGHQFH 'D\ ZLWK WKH SURFODPDWLRQ WKDW GHPRFUDF\ ZRUNV EHVW ZKHQ WKH SHRSOH KDYH

PAGE 11

DOO WKH LQIRUPDWLRQ WKDW WKH VHFXULW\ RI WKH QDWLRQ SHUPLWVn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

PAGE 12

7KH UROH RI WKH FLWL]HQHOHFWRU ZDV JDOYDQL]HG E\ WKH ODWH $OH[DQGHU 0HLNOHMRKQ WKH QRWHG HGXFDWRU DQG IRUPHU SUHVLGHQW RI $PKHUVW &ROOHJH ,Q HOXFLGDWLQJ WKH WKHRU\ RI IUHHGRP RI H[SUHVVLRQ 0HLNOHMRKQ VWURQJO\ WLHG WKH LPSRUWDQFH RI WKH IUHH IORZ RI LQIRUPDWLRQ WR VHOI JRYHUQDQFH ,Q KLV ZRUN )UHH 6SHHFK DQG ,WV 5HODWLRQ WR 6HOI*RYHUQPHQW SXEOLVKHG LQ 0HLNOHMRKQ VDLG WKH )LUVW $PHQGPHQWn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

PAGE 13

FRYHULQJ WKH FRXQWOHVV RIILFLDO GHFLVLRQV WKDW DUH PDGH DQG DFWLRQV WDNHQ :LWKRXW D GRXEW UHSRUWHUVf§DQG WKH SXEOLF JR XQDZDUH RI PDQ\ RI WKHP :LWK WKH XQSUHFHGHQWHG LQFUHDVH LQ JRYHUQPHQW XVH RI FRPSXWHUVf§DQG WKH PHGLDn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

PAGE 14

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nW EH D WHUP nFRPSXWHUDVVLVWHG UHSRUWLQJn ,W ZRXOG EH OLNH VD\LQJ SHQDQGSDSHU DVVLVWHG UHSRUWLQJ $QG\ 6FKQHLGHU ZKRVH HIIRUWV KHOSHG WKH 3LWWVEXUJK 3UHVV ZLQ EDFNWREDFN 3XOLW]HU 3UL]HV IRU VWRULHV EDVHG RQ FRPSXWHU DQDO\VLV RI JRYHUQPHQW LQIRUPDWLRQ VXPPHG XS WKH SRWHQWLDO RI WKH QHZ WHFKQRORJ\ DQRWKHU ZD\ ,WnV QRW PDJLF EXW LI \RXnUH ZLOOLQJ WR PDVWHU WKH QHZ WHFKQRORJ\ LWn V FORVH 7KH LQLWLDO VXFFHVVHV RI FRPSXWHUDVVLVWHG UHSRUWLQJ DUH QRW ZLWKRXW SRWHQWLDO GUDZEDFNV $V UHFRUG FXVWRGLDQV

PAGE 15

EHFRPH PRUH DZDUH RI WKH DELOLW\ RI UHSRUWHUV WR SUREH JRYHUQPHQW GDWD EDVHV UHSRUWHUV FRXOG EHFRPH YLFWLPV RI WKHLU RZQ VXFFHVVHV +DUGKLWWLQJ VWRULHV KDYH VKRZQ UHFRUG FXVWRGLDQV WKDW VRSKLVWLFDWHG DQDO\VLV RI FRPSXWHUL]HG DJHQF\ LQIRUPDWLRQ FDQ UHVXOW LQ FULWLFLVP RI DJHQF\ SHUIRUPDQFH DQG SUDFWLFHV ,Q VRPH FDVHV WKLV LQGHSHQGHQW DQDO\VLV RI DJHQF\ GDWD KDV UHYHDOHG SUREOHPV QRW DSSDUHQW WR DJHQFLHV WKHPVHOYHV )RU H[DPSOH 1HZVGD\V 3HQQ\ /RHE UHSRUWHG WKDW 1HZ
PAGE 16

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

PAGE 17

RI KLVWRULF LQQRYDWLRQV D 7LPH PDJD]LQH FRYHU VWRU\ WLWOHG 7KH &\EHUQDWLRQ *HQHUDWLRQ TXRWHG D *HQHUDO (OHFWULF YLFH SUHVLGHQW ZKR SURFODLPHG WKDW WKH HOHFWURQLF FRPSXWHU PD\ KDYH D PRUH EHQHILFLDO SRWHQWLDO IRU WKH KXPDQ UDFH WKDQ DQ\ RWKHU LQYHQWLRQ LQ KLVWRU\ %XW DV WKH FRPSXWHUnV VWDU URVH VR DOVR URVH WKH VSHFWHU RI %LJ %URWKHU WKH IDFHOHVV RPQLSUHVHQW WHFKQRFUDW LQ D VRFLHW\ GHYRLG RI LQGLYLGXDOLVP DQG SHUVRQDO SULYDF\ WKUXVW LQWR WKH OH[LFRQ LQ E\ *HRUJH 2UZHOOnV XQVHWWOLQJ QRYHO 2UZHOOf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

PAGE 18

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f IHDUV IRU SULYDF\ PD\ VXSHUVHGH DOO RWKHU FRQFHUQV 3DUW RI WKLV IHDU LV FHUWDLQO\ EDVHG RQ D VWHUHRW\SH GHULYHG IURP SRSXODU FXOWXUH WKDW RI WKH DQWKURSRPRUSKLF PDFKLQH WKDW WDNHV RYHU IURP WKH KXPDQV ZKR KDYH SURJUDPPHG LWDQG LQ VRPH ZD\ JRHV DZU\ 7KH LGHD LV WKDW LI KXPDQV FUHDWH PDFKLQHV LQ WKHLU RZQ LPDJH SOD\ *RG LI \RX ZLOO WKH FRQVHTXHQFHV DUH GLVDVWURXV 7KH VFHQDULR KDV EHHQ SOD\HG

PAGE 19

RXW IURP WKH GDZQ RI WKH ,QGXVWULDO $JH LQ 0DU\ 6KHOOH\nV QRYHO )UDQNHQVWHLQ WKURXJK 6WDQOH\ .XEULFNnV ILOP $ 6SDFH 2G\VVH\ DQG EH\RQG )HDUV ZHUH IDQQHG LQ WKH HDUO\ V E\ WKH FUHGLWn UHSRUWLQJ H[FHVVHV LQ ZKLFK FRPPHUFLDO YHQGRUV RI FRPSXWHUL]HG SHUVRQDO LQIRUPDWLRQ ZHUH FULWLFL]HG IRU WKHLU PLVKDQGOLQJ RI WKDW LQIRUPDWLRQ 6RPHWLPHV WKH DEXVH ZDV LQ WKH IRUP RI LQFRUUHFW FRPSXWHU HQWULHV WKDW ZHUH DOORZHG WR VHOISHUSHWXDWH DGYHUVHO\ DIIHFWLQJ WKH OLYHV RI LQGLYLGXDOV ZLWKRXW WKHLU NQRZOHGJH $JDLQ KRYHULQJ DURXQG WKH GLVFXVVLRQ ZDV WKH LPDJH RI DQ LPSODFDEOH FRPSXWHU KROGLQJ LQIRUPDWLRQ WKDW WDNHV RQ D PDOHYROHQW OLIH RI LWV RZQ 6WRULHV LQ SXEOLFDWLRQV UDQJLQJ IURP 7KH 1HZ
PAGE 20

-DQORUL *ROGPDQ KHDG RI WKH $&/8nV 3ULYDF\ 3URMHFW 7KHUHnV D WUHPHQGRXV JURXQGVZHOO RI VXSSRUW RXW WKHUH ,Q VHHNLQJ SURWHFWLRQ IURP WKH ZDWFKIXO H\HV RI RWKHUV RU IURP DQ\ FRPSXWHUL]HG FRPSLODWLRQ RI SHUVRQDO LQIRUPDWLRQ KRZHYHU OLHV WKH GDQJHU RI PX]]OLQJ WKH WUDGLWLRQDO ZDWFKGRJ RI JRYHUQPHQW WKH SUHVV /HJLVODWLRQ DQG FRXUW LQWHUSUHWDWLRQV FRXOG KDYH WKH FRUROODU\ HIIHFW RI SHUPLWWLQJ JRYHUQPHQWLQ WKH QDPH RI SURWHFWLQJ SHUVRQDO SULYDF\f§WR KLGH LQIRUPDWLRQ FRYHU XS PLVWDNHV DQG H[FHVVHV REVFXUH WKH JRYHUQLQJ SURFHVV IURP WKH SHRSOH 7KH 86 6XSUHPH &RXUWn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

PAGE 21

WKHPVHOYHV DQG SDVW PLVWDNHV 7KH &RXUW FRQFOXGHG DPRQJ RWKHU WKLQJV WKDW SHUVRQDO LQIRUPDWLRQHYHQ LQIRUPDWLRQ WDNHQ IURP SXEOLF VRXUFHVf§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

PAGE 22

7HFKQLFDO DQG 0HFKDQLFDO 3UREOHPV 7HFKQLFDO DQG PHFKDQLFDO SUREOHPV UHODWHG WR FRPSXWHU SULYDF\ RFFXU VLPSO\ EHFDXVH WKH FRPSXWHU PDFKLQHU\f§RU KDUGZDUHf§VWDQGV EHWZHHQ WKH UHFRUG UHTXHVWHU DQG WKH UHFRUG FXVWRGLDQ 5HTXHVWHUV ZKR GR QRW NQRZ KRZ WKH PDFKLQHU\ ZRUNV IUHTXHQWO\ GR QRW NQRZ WKH SURSHU TXHVWLRQV WR DVN WR IDFLOLWDWH WKH UHOHDVH RI GLVFORVDEOH LQIRUPDWLRQ WKDW LV PL[HG ZLWK SULYDWH XQGLVFORVDEOH LQIRUPDWLRQ 2Q WKH RWKHU KDQG UHFRUG FXVWRGLDQV RIWHQ DUH QRW SURSHUO\ WUDLQHG WR UHVSRQG WR FRPSXWHU UHTXHVWV RU DUH LQGLIIHUHQW WR WKH QHZ WHFKQRORJ\ RU SHUKDSV XVH LW DV DQ H[FXVH WR ZLWKKROG HPEDUUDVVLQJ LQIRUPDWLRQ LQ WKH QDPH RI SULYDF\f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

PAGE 23

'HILQLWLRQDO RU ,QWHUSUHWDWLRQDO ,VVXHV 3UREOHPV RI GHILQLWLRQ DQG LQWHUSUHWDWLRQ KDYH RFFXUUHG EHFDXVH PRVW UHFRUGDFFHVV ODZV DQG SUDFWLFHV SUHGDWH WKH ZLGHVSUHDG XVH RI FRPSXWHUV E\ JRYHUQPHQW DJHQFLHV :KHQ WKH )UHHGRP RI ,QIRUPDWLRQ $FW ZDV SDVVHG LQ PRVW UHFRUGV H[LVWHG LQ SDSHU IRUP 3DSHU DOVR ZDV WKH GRPLQDQW UHFRUG PHGLXP ZKHQ PRVW SXEOLF DFFHVV SUREOHPV ZHUH VRUWHG RXW HLWKHU E\ QHZ OHJLVODWLRQ RU E\ WKH FRXUWV %XW ODZV DQG GXWLHV WKDW ZHUH XQGHUVWRRG ZKHQ PRVW UHFRUGV ZHUH SDSHU EHFDPH PXGGOHG ZKHQ WKH VDPH NLQGV RI UHFRUGV ZHUH KHOG LQ JRYHUQPHQW FRPSXWHUV $QG ZKHQ ODZV DQG GXWLHV EHFRPH PXGGOHG WKH\ SURYLGH RSSRUWXQLWLHV IRU JRYHUQPHQW DJHQFLHV WR RIIHU WKHLU RZQ LQWHUSUHWDWLRQV VRPHWLPHV PRWLYDWHG E\ DGPLQLVWUDWLYH FRQYHQLHQFH RU WKH GHVLUH WR KLGH LQIRUPDWLRQ UDWKHU WKDQ E\ OHJLWLPDWH SULYDF\ FRQFHUQV 7KH SUHYLRXV H[DPSOH RI SURYLGLQJ UHDVRQDEO\ VHJUHJDEOH SRUWLRQV RI UHFRUGV LV LOOXVWUDWLYH ,Q WKH SDSHU HUD DJHQFLHV KDG OHDUQHG WKURXJK H[SHULHQFH ZKDW FRQVWLWXWHG D UHDVRQDEOH UHVSRQVH WR UHTXHVWV IRU UHFRUGV WKDW UHTXLUHG WKH HGLWLQJ RXW RI SULYDWH LQIRUPDWLRQ %XW ZKHQ UHFRUGV ZHUH FRPSXWHUL]HG LW QR ORQJHU ZDV FOHDU WR DJHQFLHV ZKDW FRQVWLWXWHG D UHDVRQDEOH UHVSRQVH ZKHQ H[HPSW DQG QRQH[HPSW PDWHULDO ZHUH PL[HG LQ D FRPSXWHU GDWD EDVH $UH DJHQFLHV LQ HIIHFW GHQ\LQJ OHJLWLPDWH SXEOLF DFFHVV EHFDXVH WKH\ DUH UHOXFWDQW WR WDNH WLPH WR RSHUDWH RU UHSURJUDP WKHLU FRPSXWHUV WR VHSDUDWH GLVFORVDEOH QRQSULYDWH LQIRUPDWLRQ

PAGE 24

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

PAGE 25

WR SDVVDJH RI WKH 3ULYDF\ $FW RI DQG RWKHU FRPSXWHU UHODWHG OHJLVODWLRQ 7KHVH KHDULQJV DQG OHJLVODWLRQ DUH GLVFXVVHG DW OHQJWK LQ &KDSWHU 7KUHH $ JHQHUDOL]HG FRQFHUQ DERXW FRPSXWHUV DQG WKH GDQJHU WKH\ SRVH WR SHUVRQDO SULYDF\ ZDV WKH FHQWUDO LVVXH LQ WKH 6XSUHPH &RXUWn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

PAGE 26

WKH KLVWRULFDO VRFLDO DQG SROLWLFDO FRQWH[WV RI VRPH LVVXHV DQG WR GHOYH LQWR WKH OHJLVODWLYH KLVWRU\ RI WKH SULYDF\ LVVXH ,Q DGGUHVVLQJ WKH SURSHU EDODQFH EHWZHHQ SULYDF\ DQG DFFHVV VHYHUDO TXHVWLRQV DUH SRVHG f§+RZ KDYH FRPSXWHU FRQFHUQV DIIHFWHG OHJLVODWLYH DFWLYLW\ UHODWHG WR SHUVRQDO SULYDF\" 7R ZKDW H[WHQW KDYH FRPSXWHU SULYDF\ FRQFHUQV DIIHFWHG SXEOLF SROLF\ UHJDUGLQJ LQIRUPDWLRQ LQ JRYHUQPHQW FRPSXWHUV f§7R ZKDW H[WHQW KDYH FRPSXWHU SULYDF\ FRQFHUQV DIIHFWHG FRXUW RSLQLRQV GHDOLQJ ZLWK SULYDF\DFFHVV LVVXHV" f§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

PAGE 27

DQG VRPHWLPHV FRPSHWLQJf§VRFLDO YDOXHV 7KH ILUVW LV WKH ULJKW WR SHUVRQDO SULYDF\ ZKLFK 6XSUHPH &RXUW -XVWLFH /RXLV %UDQGLV KDV FDOOHG VLPSO\ WKH ULJKW WR EH OHW DORQH 7KH VHFRQG VRFLDO YDOXH LV WKH ULJKW RI SXEOLF DQG SUHVV LQ D GHPRFUDWLF VHOIJRYHUQLQJ VRFLHW\ WR KDYH DFFHVV WR WKH LQIRUPDWLRQ JRYHUQPHQW XVHV WR JR DERXW WKH SHRSOHnV EXVLQHVV $Q RYHUYLHZ RI WKH WHQVLRQ EHWZHHQ WKH VRPHWLPHV FRQIOLFWLQJ YDOXHV VXSSRUWLQJ SULYDF\ DQG DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ ZLOO SURYLGH WKH WKHRUHWLFDO IUDPHZRUN IRU GLVFXVVLQJ KRZ OHJLVODWRUV JRYHUQPHQW DJHQFLHV DQG WKH FRXUWV DWWHPSW WR EDODQFH WKHVH YDOXHV DQG WR ZKDW HIIHFW &KDSWHU 7KUHH DWWHPSWV WR WUDFH WKH HYROXWLRQ RI WKH IHGHUDO JRYHUQPHQWn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

PAGE 28

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nV 7KH 1DNHG 6RFLHW\ GHDO ZLWK JHQHUDO FRQFHUQV DERXW WKH HIIHFWV RI WHFKQRJLFDO FKDQJH RQ VRFLHW\ DQG ZKHQ LQ WKH ZURQJ KDQGV RQ FLYLO OLEHUWLHV $ODQ :HVWLQnV 3ULYDF\ DQG )UHHGRP DQG $UWKXU 0LOOHUnV 7KH $VVDXOW RQ 3ULYDF\ DUH VHPLQDO ERRNV WKDW JUHDWO\ LQIOXHQFHG HDUO\ SXEOLF GHEDWH ZKHQ JRYHUQPHQW DJHQFLHV ZHUH MXVW EHJLQQLQJ WR UHDOL]H WKH FDSDELOLWLHV RI FRPSXWHUV %RWK DXWKRUV SOD\HG SURPLQHQW UROHV LQ KHDULQJV WKDW OHG XS WR WKH

PAGE 29

3ULYDF\ $FW RI :HVWLQ DQG 0LOOHU DQG RWKHUV VXFK DV 5LFKDUG 0LOOHU ZURWH UHODWHG DUWLFOHV IRU VFKRODUO\ DQG OHJDO MRXUQDOV DQG LQ WKH SRSXODU SUHVV GHDOLQJ ZLWK WKH HIIHFWV RI WHFKQRORJ\ RQ SHUVRQDO SULYDF\ 0DQ\ VXEVWDQWLDO ZRUNV KDYH EHHQ ZULWWHQ VXSSRUWLQJ SXEOLF DFFHVV WR JRYHUQPHQWKHOG UHFRUGV )RUHPRVW DPRQJ WKHP LV +DUROG &URVVn 7KH 5LJKW WR .QRZ &URVVn ZRUN VDQFWLRQHG E\ WKH 6RFLHW\ RI 3URIHVVLRQDO -RXUQDOLVWV LQIOXHQFHG WKH GHEDWH WKDW OHG WR FRQJUHVVLRQDO UHFRJQLWLRQ RI WKH SXEOLFn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

PAGE 30

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

PAGE 31

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n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

PAGE 32

& 'HQQLV 6RXWKDUG ,9 VD\V FRXUWV PXVW PDLQWDLQ D PLQLPXP VWDQGDUG RI SULYDF\ EDVHG RQ WKH )RXUWK $PHQGPHQWnV JXDUDQWHH RI SURWHFWLRQ DJDLQVW XQUHDVRQDEOH VHDUFKHV DQG VHL]XUHV ,W VKRXOG DOORZ JRYHUQPHQW WR FRQWLQXH LWV SROLFH DQG QDWLRQDO VHFXULW\ SURWHFWLRQ DW LWV FXUUHQW OHYHO ZKLOH JXDUDQWHHLQJ WKDW LI DQ LQGLYLGXDO WDNHV FHUWDLQ VWHSV WR DVVXUH KLV SULYDF\ LW ZLOO EH UHVSHFWHGn KH UHDVRQHG 1RQH RI WKH DUWLFOHV KRZHYHU ORRNV VSHFLILFDOO\ DQG LQ GHSWK DW KRZ FRPSXWHU SULYDF\ FRQFHUQVf§ERWK SUDFWLFDO DQG SKLORVRSKLFDOUHODWH WR SXEOLF DQG PHGLD DFFHVV WR LQIRUPDWLRQ KHOG LQ JRYHUQPHQW FRPSXWHUV ,W LV WKLV DXWKRUn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

PAGE 33

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nUHFRUGn E\ LWV YHU\ QDWXUH H[LVWV WR LPSDUW WKH LQIRUPDWLRQ FRQWDLQHG LQ LW 9DULRXV ZRUGV DQG WHUPV DUH XVHG WKURXJKRXW WKLV GLVVHUWDWLRQ 7R IDFLOLWDWH XQGHUVWDQGLQJ VRPH NH\ GHILQLWLRQV IROORZ

PAGE 34

&RPSXWHU $ PHFKDQLFDO GHYLFH WKDW VWRUHV DQG SURFHVVHV LQIRUPDWLRQ HOHFWURQLFDOO\ &RPSXWHU V\VWHPV DUH WUDGLWLRQDOO\ GLYLGHG LQWR WKUHH VXEFODVVLILFDWLRQV PDLQIUDPH PLQL DQG PLFUR 7KHVH GLYLVLRQV DUH UHODWHG WR WKH VL]H RI WKH FRPSXWHU DQG LWV VSHHG RI SURFHVVLQJ LQIRUPDWLRQ 0DLQIUDPH FRPSXWHU $ ODUJH PXOWLWDVN FRPSXWHU GHVLJQHG WR EH RSHUDWHG VLPXOWDQHRXVO\ E\ PXOWLSOH XVHUV 3HUVRQDO FRPSXWHU $ VPDOO VHOIFRQWDLQHG FRPSXWHU GHVLJQHG WR EH RSHUDWHG E\ RQH LQGLYLGXDO &RPSXWHU KDUGZDUH 7KH SK\VLFDO PDFKLQHU\ XVHG LQ WKH HOHFWURQLF FRPSXWLQJ SURFHVV &RPSXWHU VRIWZDUH 7KH HOHFWURQLF LQVWUXFWLRQV WKDW WHOO D FRPSXWHU KRZ WR VWRUH LQIRUPDWLRQ DQG PDQLSXODWH LW &RPSXWHU GDWD ,QGLYLGXDO SLHFHV RI HOHFWURQLFDOO\ VWRUHG LQIRUPDWLRQ VXFK DV QDPHV DGGUHVVHV 6RFLDO 6HFXULW\ QXPEHUV HWF VXLWDEOH IRU SURFHVVLQJ DQG LQWHUSUHWDWLRQ &RPSXWHU GDWD EDVH $Q HOHFWURQLF FROOHFWLRQ RI SLHFHV RI UHODWHG GDWD &RPSXWHU LQSXW 'DWD HQWHUHG LQWR D FRPSXWHU V\VWHP IRU VWRUDJH RU SURFHVVLQJ SXUSRVHV &RPSXWHU RXWSXW 7KH FRQYHUVLRQ RI HOHFWURQLF FRPSXWHU LPSXOVHV LQWR VRPH XVDEOH IRUPDW VXFK DV FRPSXWHU WDSHV GLVNV VFUHHQ LPDJHV RU SULQWRXWV

PAGE 35

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nV 1HZ :RUOG 'LFWLRQDU\ RI WKH $PHULFDQ /DQJXDJH 6HFRQG &ROOHJH (GLWLRQf 7KLV JHQHUDO GHILQLWLRQ

PAGE 36

HQFRPSDVVHV LQIRUPDWLRQDO SULYDF\ 6HH ,QIRUPDWLRQDO 3ULYDF\f &RQVWLWXWLRQDO SULYDF\ 7KH ULJKW RI LQGLYLGXDOV WR EH VHFXUH IURP LQWUXVLRQ E\ JRYHUQPHQW LQWR WKHLU SULYDWH DIIDLUV 7KH 86 6XSUHPH &RXUW KDV UHFRJQL]HG WKLV ULJKW LQ VHYHUDO DUHDV WKH ULJKW WR EH VHFXUH LQ RQHnV KRPH WKH ULJKW RI DVVRFLDWLRQ WKH ULJKW RI LQWLPDWH GHFLVLRQ PDNLQJ DQG WKH ULJKW WR FRQWURO LQIRUPDWLRQ DERXW RQHVHOI 6HH ,QIRUPDWLRQDO 3ULYDF\f ,QIRUPDWLRQDO SULYDF\ 7KH ULJKW RI LQGLYLGXDOV WR FRQWURO DFFHVV WR DQG WKH GLVVHPLQDWLRQ RI SHUVRQDO LQIRUPDWLRQ DERXW WKHPVHOYHV 1RWHV 75 5HLG &RPSXWHUWKLQN $3) 5HSRUWHU :LQWHU f 'DYLG 0RUULVVH\ 7KH $JH RI (OHFWURQLF *RYHUQPHQW SUHVHQWHG DW WKH &RQIHUHQFH RQ $GYDQFHG ,QYHVWLJDWLYH 0HWKRGV IRU -RXUQDOLVWV f -RKQ : 0DF\ -U 7KH 1HZ &RPSXWHUL]HG $JHf§ $XWRPDWHG *RYHUQPHQW +RZ &RPSXWHUV $UH %HLQJ 8VHG LQ :DVKLQJWRQ 7R 6WUHDPOLQH 3HUVRQQHO $GPLQLVWUDWLRQf§7R WKH ,QGLYLGXDOnV %HQHILW 6DWXUGD\ 5HYLHZ -XO\ DW 0DF\ SRLQWV RXW WKDW RQH RI WKH ILUVW FRPSOHWHO\ HOHFWURQLF FRPSXWHUV HYHU EXLOW ZDV FDOOHG (1,$& IRU HOHFWURQLF QXPHULFDO LQWHJUDWRU DQG FDOFXODWRU ,W ZDV EXLOW E\ WKH :DU 'HSDUWPHQW DQG WKH 8QLYHUVLW\ RI 3HQQV\OYDQLD LQ WR VROYH SUREOHPV ZLWK EDOOLVWLFV UHVHDUFK 7KH 81,9$& ZDV SXW LQWR VHUYLFH E\ WKH &HQVXV %XUHDX LQ DQG ZDV UHWLUHG WR WKH 6PLWKVRQLDQ ,QVWLWXWLRQ LQ 2FWREHU 7KRPDV 0 6XVPDQ ,QWURGXFWLRQ WR WKH ,VVXHV 3UREOHPV DQG 5HOHYDQW /DZ LQ
PAGE 37

*HQHUDO 6HUYLFHV $GPLQLVWUDWLRQ )HGHUDO (TXLSPHQW 'DWD &HQWHU $XWRPDWHG 'DWD 3URFHVVLQJ (TXLSPHQW LQ WKH 86 *RYHUQPHQW $SULO f *HQHUDO 6HUYLFHV $GPLQLVWUDWLRQ 2IILFH RI )HGHUDO ,QIRUPDWLRQ 5HVRXUFHV 0DQDJHPHQW 0LFURFRPSXWHU 6XUYH\ 5HSRUW 6HSWHPEHU f 6HH WKH )UHHGRP RI ,QIRUPDWLRQ $FW 86& VHF 1HZ
PAGE 38

7KH &RPSXWHU DQG ,QYDVLRQ RI 3ULYDF\ +HDULQJV %HIRUH WKH 6SHFLDO 6XEFRPPLWWHH RQ ,QYDVLRQ RI 3ULYDF\ RI WKH +RXVH &RPPLWWHH RQ *RYHUQPHQW 2SHUDWLRQV WK &RQJ G 6HVV f 6HH DOVR &RPSXWHU 3ULYDF\ +HDULQJV%HIRUH WKH 6XEFRPPLWWHH RQ $GPLQLVWUDWLYH 3UDFWLFHV DQG 3URFHGXUHV RI WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ WK &RQJ VW 6HVV f 6HH .LUFKQHU /DWHVW +DUULV 3ROO 8QFRYHUV 0L[HG $WWLWXGHV $ERXW +LJK 7HFK &RPSXWHUZRU,G 'HFHPEHU DW RQ WKH /RXLV +DUULV VXUYH\ 7KH 5RDG $IWHU $ 1DWLRQZLGH 6XUYH\ RI WKH 3XEOLF DQG ,WV /HDGHUV RQ WKH 1HZ 7HFKQRORJ\ DQG ,WV &RQVHTXHQFHV IRU $PHULFDQ /LIH 6HH DOVR 6KDUS ,QFUHDVH LQ &RQFHUQ 3ULYDF\ -RXUQDO 0D\ f FLWLQJ RWKHU +DUULV VXUYH\V QRWLQJ SULYDF\ FRQFHUQV DPRQJ WKH SRSXODWLRQ 6HH DOVR -RKQ 6FKZDUW] +RZ 'LG 7KH\ *HW 0\ 1DPH" 1HZVZHHN -XQH DW $ +DUULV SROO WDNHQ IRU FRQVXPHUGDWD FRQJORPHUDWH (TXLID[ VKRZHG WKDW SHUFHQW RI WKH UHVSRQGHQWV ZHUH ZRUULHG DERXW WKUHDWV WR WKHLU SULYDF\ XS IURP SHUFHQW LQ ,G $ 6SDFH 2G\VVH\ 0HWUR*ROGZ\Q0D\HU f ,Q WKH PRYLH D FRPSXWHU QDPHG +$/ WDNHV RYHU D VSDFH VWDWLRQ IURP WZR DVWURQDXWV 6HH HJ -DQH %U\DQW 4XLQQ *XDUGLQJ
PAGE 39

$UWKXU 0LOOHU 7KH $VVDXOW RQ 3ULYDF\ f 6HH 5LFKDUG 0LOOHU 'DWD %DQNV DQG 3ULYDF\ LQ &RPSXWHUV DQG WKH /DZ $Q ,QWURGXFWRU\ +DQGERRN 53 %LJHORZ G HG f +DUROG &URVV 7KH 3HRSOHnV 5LJKW WR .QRZ f -DVSLQ DQG 6DEOHPDQ VXSUD QRWH DW /HR 7 6RURNLQ 7KH &RPSXWHUL]DWLRQ RI *RYHUQPHQW ,QIRUPDWLRQ 'RHV ,W &LUFXPYHQW 3XEOLF $FFHVV 8QGHU WKH )UHHGRP RI ,QIRUPDWLRQ $FW DQG WKH 'HSRVLWRU\ /LEUDU\ 3URJUDP" &ROXP -/ t 6RF 3UREV f 6HH JHQHUDOO\ 6DQGUD 'DYLGVRQ 6FRWW &RPSXWHU 7HFKQRORJ\ Y /DZV RQ $FFHVV XQSXEOLVKHG SDSHU SUHVHQWHG WR WKH $VVRFLDWLRQ IRU (GXFDWLRQ LQ -RXUQDOLVP DQG 0DVV &RPPXQLFDWLRQ DQQXDO FRQYHQWLRQ %RVWRQ 0DVV $XJXVW f -HUU\ %HUPDQ 7KH 5LJKW 7R .QRZ 3XEOLF $FFHVV WR (OHFWURQLF 3XEOLF ,QIRUPDWLRQ 6RIWZDUH /6XPPHU f -DPLH $ *URGVN\ 7KH )UHHGRP RI ,QIRUPDWLRQ $FW LQ WKH (OHFWURQLF $JH 7KH 6WDWXWH ,V 1RW 8VHU )ULHQGO\ -XULPHWULFV )DOO f 3DWWL $ *ROGPDQ 7KH )UHHGRP RI ,QIRUPDWLRQ $FW 1HHGV 1R $PHQGPHQW WR (QVXUH $FFHVV WR (OHFWURQLF 5HFRUGV *RYfW ,QIR 2 f 0DWWKHZ %XQNHU 6LJPDQ / 6SOLFKDO %LOO ) &KDPEHUOLQ DQG /LQGD 0 3HUU\ $FFHVV WR *RYHUQPHQW+HOG ,QIRUPDWLRQ LQ WKH &RPSXWHU $JH $SSO\LQJ /HJDO 'RFWULQH WR (PHUJLQJ 7HFKQRORJ\ )OD 6W 8/ 5HY :LQWHU f 6HH JHQHUDOO\ /RXLVH 0 %HQMDPLQ 3ULYDF\ &RPSXWHUV DQG 3HUVRQDO ,QIRUPDWLRQ 7RZDUG (TXDOLW\ DQG (TXLW\ LQ DQ ,QIRUPDWLRQ $JH &RPP t WKH / -XQH f & 'HQQLV 6RXWKDUG ,9 ,QGLYLGXDO 3ULYDF\ DQG *RYHUQPHQWDO (IILFLHQF\ 7HFKQRORJ\nV (IIHFW RQ WKH *RYHUQPHQWnV $ELOLW\ WR *DWKHU 6WRUH DQG 'LVWULEXWH ,QIRUPDWLRQ &RPSXWHU/ 6XPPHU f )UHG : :HLQJDUWHQ &RPPXQLFDWLRQV 7HFKQRORJ\ 1HZ &KDOOHQJHV WR 3ULYDF\ 0DUVKDOO / 5HY n f 'RQVLD 5HQHH 6WURQJ 7KH &RPSXWHU 0DWFKLQJ DQG 3ULYDF\ 3URWHFWLRQ $FW RI 1HFHVVDU\ 5HOLHI IURP WKH (URVLRQ RI WKH 3ULYDF\ $FW RI 6RIWZDUH / 6XPPHU f 5HSRUWHUV &RPPLWWHH DW

PAGE 40

)RUVKDP Y +DUULV 86 f :HVWHUQ 6HUYLFHV ,QF Y 6HUJHDQW 6FKRRO 'LVWULFW 1R 5(3' &ROR $SS -DQ f

PAGE 41

&+$37(5 7:2 7+( '(9(/230(17 2) 62&,$/ $1' /(*$/ 7+(25,(6 6833257,1* 35,9$&< $1' 38%/,& $&&(66 72 *29(510(17 ,1)250$7,21 7KH SXEOLFnV ULJKW WR NQRZ DERXW WKH EXVLQHVV RI JRYHUQPHQW DQG LQGLYLGXDOVn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

PAGE 42

RI SHUVRQDO SULYDF\ ,W KLJKOLJKWV WKH OHJDO SKLORVRSKLFDO DQG KLVWRULFDO URRWV RI HDFK 7KH FKDSWHU VKRZV KRZ ULJKWV RI DFFHVV DQG SULYDF\ KDYH FODVKHG IURP WLPH WR WLPH EHFDXVH RI VRFLDO HFRQRPLF DQG WHFKQLFDO FKDQJH FDXVLQJ IULFWLRQ EHWZHHQ OHJLWLPDWH IUHHSUHVV DQG SHUVRQDOSULYDF\ LQWHUHVWV 7KH FKDSWHU FRQFOXGHV E\ LQWURGXFLQJ WKH PRVW UHFHQW VRFLDO DQG WHFKQRORJLFDO GHYHORSPHQWV WKDW KDYH EURXJKW SULYDF\ DQG DFFHVV LQWR FRQIOLFWWKH JRYHUQPHQWn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nV YDOXHV ,Q KLV FRQFXUULQJ RSLQLRQ LQ *ULVZROG Y &RQQHFWLFXW LQ D FDVH WKDW IDVKLRQHG D FRQVWLWXWLRQDO ULJKW RI SULYDF\ -XVWLFH *ROGEXUJ FRQFOXGHG WKDW SULYDF\ ZDV DPRQJ WKRVH XQHQXPHUDWHG ULJKWV UHWDLQHG E\ WKH SHRSOH XQGHU WKH 1LQWK $PHQGPHQW WR WKH &RQVWLWXWLRQ 7KH 1LQWK $PHQGPHQW VWDWHV WKDW WKH IDLOXUH RI WKH &RQVWLWXWLRQ WR UHFRJQL]H D SDUWLFXODU ULJKW GRHV QRW PHDQ WKDW QR VXFK

PAGE 43

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n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

PAGE 44

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nV KLJKHVW FRXUW DSSOLHG D SURSHUW\ULJKWV GRFWULQH WR SURWHFW WKH FRQWHQWV RI LQGLYLGXDOV n SHUVRQDO OHWWHUV IURP XQDXWKRUL]HG SXEOLFDWLRQ E\ RWKHUV 7KLV FDVH ZDV LPSRUWDQW WR GHYHORSPHQW RI SULYDF\ LQ $PHULFDQ

PAGE 45

MXULVSUXGHQFH EHFDXVH LW DFNQRZOHGJHG D SURSHUW\ ULJKW LQ LQGLYLGXDOVn UHWHQWLRQ DQG FRQWURO RI SHUVRQDO LGHDV FRQWDLQHG LQ OHWWHUV VHQW WR RWKHUV QRW RQO\ LQ WKH OHWWHUV WKHPVHOYHV ,Q WKH GHYHORSPHQW RI $PHULFDQ VRFLDO DQG OHJDO YDOXHV WKH EDVLF FKDUDFWHULVWLFV WKDW HPERG\ WKH PRGHUQ OHJDO FRQFHSW RI SULYDF\ SUHGDWH WKH $PHULFDQ 5HYROXWLRQ 3KLORVRSKHU -RKQ /RFNH ZKRVH ZULWLQJV LQIOXHQFHG WKH OLEHUWDULDQ VHQWLPHQWV RI WKH )RXQGLQJ )DWKHUVn JHQHUDWLRQ DUJXHG WKDW JRYHUQPHQW KDG D GXW\ WR SURWHFW FHUWDLQ IXQGDPHQWDO ULJKWV VXFK DV OLIH OLEHUW\ DQG SURSHUW\ 7KHVH LQDOLHQDEOH ULJKWV ZRXOG ILQG H[SUHVVLRQ LQ WKH 'HFODUDWLRQ RI ,QGHSHQGHQFH WKH &RQVWLWXWLRQ DQG WKH %LOO RI 5LJKWV DQG WKH 6XSUHPH &RXUW DOPRVW \HDUV ODWHU ZRXOG JOHDQ IURP WKH IXQGDPHQWDO FRQFHSW RI OLEHUW\ D FRQVWLWXWLRQDO ULJKW RI SULYDF\ -RKQ $GDPV ZULWLQJ LQ KLV GLDU\ GXULQJ WKH QDWLRQnV IRUPDWLYH \HDUV H[WROOHG WKH YLUWXHV RI SULYDF\ ZKHQ KH UHDVRQHG WKHUH ZDV VRPH SHUVRQDO LQIRUPDWLRQ DERXW ZKLFK RWKHUV KDYH QRW D 5LJKW WR .QRZ $GDPV ZKR ZRXOG EHFRPH WKH QDWLRQnV VHFRQG SUHVLGHQW PDLQWDLQHG LQGLYLGXDOV VKRXOG GLVVLPXODWHf§RU SURWHFW WKHLU IHHOLQJV RU PRWLYHVf§EHFDXVH VXFK LQIRUPDWLRQ LQ WKH ZURQJ KDQGV FRXOG UHVXOW LQ SHUVRQDO KDUP 6DLG $GDPV 7KH ILUVW 0D[LP RI ZRUOGO\ :LVGRP FRQVWDQW 'LVVLPXODWLRQ PD\ EH JRRG RU HYLO DV LW LV LQWHUSUHWHG ,I LW PHDQV RQO\ D FRQVWDQW FRQFHDOPHQW IURP RWKHUV RI VXFK RI RXU 6HQWLPHQWV

PAGE 46

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nV WHQXUH DV

PAGE 47

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n JURZLQJ KRVWLOLW\ WRZDUG %ULWLVK UXOH ,Q %RVWRQ ODZ\HU -DPHV 2WLV VSHDNLQJ RXW DJDLQVW WKH SUDFWLFH RI JHQHUDO VHDUFKHV E\ WKH FRORQLDO UXOHUV QRWHG 1RZ RQH RI WKH PRVW HVVHQWLDO EUDQFKHV RI (QJOLVK OLEHUW\ LV WKH IUHHGRP RI RQHnV RZQ KRXVH $ PDQn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

PAGE 48

&RQVWLWXWLRQDO &RQYHQWLRQ LQ WR OLPLW WKH VFRSH RI JRYHUQPHQW VHDUFKHV +H DUJXHG WKDW D %LOO RI 5LJKWV WR WKH &RQVWLWXWLRQ ZDV QHFHVVDU\ WR HQVXUH DPRQJ RWKHU WKLQJV WKDW WKH QHZ JRYHUQPHQW FRXOG QHYHU DWWHPSW WR HQIRUFH JHQHUDO VHDUFK ZDUUDQWV VR ORDWKHG E\ WKH FRORQLHV EHIRUH LQGHSHQGHQFH 0DGLVRQnV SURSRVDO ZKLFK HVWDEOLVKHG WKH ULJKW RI WKH SHRSOH WR EH VHFXUH DJDLQVW XQUHDVRQDEOH VHDUFK DQG VHL]XUHV ZDV ODWHU DGRSWHG DV WKH )RXUWK $PHQGPHQW 9DOXHV VXSSRUWLQJ SULYDF\ DOVR IRXQG H[SUHVVLRQ LQ WKH ZULWLQJV RI QLQHWHHQWKFHQWXU\ SKLORVRSKHU -RKQ 6WXDUW 0LOO ZKRVH ZRUNV ZHUH ZLGHO\ UHDG LQ WKH 8QLWHG 6WDWHV ,Q 0LOOnV LQIOXHQWLDO ZRUN 2Q /LEHUW\ KH DUJXHG WKH JRYHUQPHQW VKRXOG KDYH QR VD\ LQ FHUWDLQ NLQGV RI SHUVRQDO FRQGXFW DEVHQW D FRPSHOOLQJ VRFLDO LQWHUHVW VXFK DV SUHYHQWLQJ KDUP WR RWKHUV ([SRXQGLQJ RQ WKLV FRQFHSW RI SHUVRQDO OLEHUW\ 0LOO ZURWH 7KH VROH HQG IRU ZKLFK PDQNLQG DUH ZDUUDQWHG LQGLYLGXDOO\ RU FROOHFWLYHO\ LQ LQWHUIHULQJ ZLWK WKH OLEHUW\ RI DFWLRQ RI DQ\ RI WKHLU QXPEHU LV VHOISURWHFWLRQ 7KDW LV WKH RQO\ SXUSRVH IRU ZKLFK SRZHU FDQ EH ULJKWIXOO\ H[HUFLVHG RYHU DQ\ PHPEHU RI D FLYLOL]HG FRPPXQLW\ DJDLQVW KLV ZLOO LV WR SUHYHQW KDUP WR RWKHUV 7KH RQO\ SDUW RI FRQGXFW RI DQ\RQH IRU ZKLFK KH LV DPHQDEOH WR VRFLHW\ LV WKDW ZKLFK FRQFHUQV RWKHUV ,Q WKH SDUW ZKLFK PHUHO\ FRQFHUQV KLPVHOI KLV LQGHSHQGHQFH LV RI ULJKW DEVROXWH 3ULYDF\ DV D /HJDO &RQFHSW :KLOH )ODKHUW\ GRFXPHQWHG WKH H[LVWHQFH RI WKH FRPSRQHQWV RI SULYDF\ GXULQJ WKH QDWLRQnV IRUPDWLYH \HDUV

PAGE 49

SULYDF\ DV DQ LGHQWLILDEOH OHJDO FRQFHSW UHPDLQHG RQO\ DQ XQGHUFXUUHQW LQ WKH FRPPRQ ODZ GXULQJ WKH QDWLRQnV ILUVW FHQWXU\ /HJDO FRQFHUQV UHODWHG WR SULYDF\ GHYHORSHG VORZO\ LQ ODUJH SDUW EHFDXVH RI WKH DJUDULDQ QDWXUH RI VRFLHW\ 3HRSOH ZHUH UHODWLYHO\ IHZ DQG IDU EHWZHHQ DQG WKLV PHDVXUH RI SK\VLFDO GLVWDQFH UHGXFHG WKH SRWHQWLDO IRU XQZDQWHG FRQWDFWV DQG SK\VLFDO LQWUXVLRQV DQG WKH QHHG IRU OHJDO VROXWLRQV
PAGE 50

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
PAGE 51

DQG HPEUDFHG WKHP ZLWK WKH XWPRVW FRQILGHQFH LQ WKHLU VLOHQFH DQG GLVFUHWLRQ ZRXOG ILQG WKHPVHOYHV VKDPHOHVVO\ EHWUD\HG DQG WKHLU XQVXVSHFWLQJ SKLORVRSKLHV OLWHUDOO\ UHSRUWHG WR WKHLU LQGLJQDQW IDPLOLHV :KLOH WHFKQRORJLFDO LQQRYDWLRQV OHG WR JURZWK RI SRSXORXV LQGXVWULDO FLWLHV DQG VXFK SULYDF\DOWHULQJ LQYHQWLRQV DV WKH WHOHSKRQH RWKHU LQQRYDWLRQVLQ WKH IRUP RI KLJKVSHHG QHZVSDSHU SUHVVHV DQG DGYDQFHG SKRWRJUDSK\f§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

PAGE 52

DQG QHZ WHFKQRORJLHV RI WKH GD\ /RXLV %UDQGLV DQG 6DPXHO :DUUHQ XSSHUFUXVW %RVWRQ ODZ\HUV SHQQHG 7KH 5LJKW WR 3ULYDF\ IRU WKH +DUYDUG /DZ 5HYLHZ 7KH VHPLQDO DUWLFOH ZRXOG VWHHU WKH FRQFHSW RI D OHJDO ULJKW RI SULYDF\ WRZDUG WKH PDLQVWUHDP RI $PHULFDQ MXULVSUXGHQFH $WWHPSWLQJ WR GRFXPHQW D FOLPDWH RI MRXUQDOLVWLF H[FHVVHV DQG DEXVHV RI SULYDF\ WKH DUWLFOH VWDWHG VRPHZKDW K\SHUEROLFDOO\ WKDW ,QVWDQWDQHRXV SKRWRJUDSKV DQG QHZVSDSHU HQWHUSULVH KDYH LQYDGHG WKH VDFUHG SUHFLQFWV RI SULYDWH DQG GRPHVWLF OLIH DQG QXPHURXV PHFKDQLFDO GHYLFHV WKUHDWHQ WR PDNH JRRG WKH SUHGLFWLRQ WKDW nZKDW LV ZKLVSHUHG LQ WKH FORVHW VKDOO EH SURFODLPHG IURP WKH KRXVHWRSVn %UDQGLV DQG :DUUHQ DUJXHG WKDW LQGLYLGXDOV SRVVHVVHG FHUWDLQ LQWDQJLEOH DWWULEXWHV VXFK DV VHQWLPHQWV DQG LQWHOOHFW RYHU ZKLFK WKH\ H[HUFLVHG ULJKWV DNLQ WR WKRVH JRYHUQLQJ SHUVRQDO SURSHUW\ 7KH DXWKRUV LGHQWLILHG WKHVH ULJKWV LQ ZKDW WKH\ YLHZHG DV DQDORJRXV ODZV RQ EUHDFK RI WUXVW DVVDXOW FRS\ULJKW DQG GHIDPDWLRQ DPRQJ RWKHUV 7KH DUWLFOH DUJXDEO\ DFKLHYHG LWV DLP RI EULQJLQJ SULYDF\ LQWR WKH OHJDO DUHQD ,Q VRRQ DIWHU 7KH 5LJKW WR 3ULYDF\ ZDV SXEOLVKHG WKH 1HZ
PAGE 53

7KH FDVH 6FKX\OHU Y &XUWLV DURVH ZKHQ WKH IDPLO\ RI D SURPLQHQW ZRPDQ ILOHG D VXLW DJDLQVW D SULYDWH RUJDQL]DWLRQ FKDOOHQJLQJ LWV SODQV WR HUHFW D OLIHVL]H VWDWXH LQ KHU PHPRU\ 7KH IDPLO\ DUJXHG WKDW WKH ZRPDQ KDG QHYHU EHHQ D SXEOLF SHUVRQDOLW\ DQG WKDW WKH VWDWXH FRQVWLWXWHG DQ LQYDVLRQ RI SULYDF\ 7KH FRXUW QRWLQJ WKH FDVH EHIRUH LW ZDV D WHVW FDVH IRU WKH ULJKW RI SULYDF\ UHMHFWHG WKH IDPLO\nV FODLP %XW WKH FRXUW VWRSSHG VKRUW RI IXOO\ H[SORULQJ WKH SULYDF\ LVVXH ,PSRUWDQW WR WKH FRXUWnV DQDO\VLV ZDV WKH IDFW WKH VXEMHFW RI WKH VWDWXH ZDV GHDG 7KH FRXUW QRWHG WKDW ZKDWHYHU ULJKW RI SULYDF\ WKH ZRPDQ KDG LW IROORZHG KHU WR WKH JUDYH 7KH H[WHQW WR ZKLFK D OLYLQJ SHUVRQ PLJKW KDYH DVVHUWHG D OHJDOO\ HQIRUFHDEOH SULYDF\ ULJKW ZDV QRW H[SORUHG ,Q VRPH HDUO\ SULYDF\ FDVHV FRXUWV VKRZHG D ZLOOLQJQHVV WR FRQVLGHU WKH LQWHUHVWV RI WKH SUHVV )RU H[DPSOH LQ WKH 1HZ
PAGE 54

WKH VFRIIV DQG MHHUV RI SHUVRQV ZKR UHFRJQL]HG KHU IDFH DQG SLFWXUH f 7KH FRXUW ZKLOH V\PSDWKHWLF WR WKH JLUOnV SUHGLFDPHQW QRQHWKHOHVV UHIXVHG WR UHFRJQL]H D OHJDO UHPHG\ IRU DQ LQMXU\ WKDW ZDV QRW SK\VLFDO 7KH FRXUW H[SUHVVHG FRQFHUQ WKDW UHFRJQL]LQJ WKH FODLP PLJKW WULJJHU VLPLODU ODZVXLWV WKDW ZRXOG FOXWWHU WKH FRXUWV DQG SODFH XQUHDVRQDEOH EXUGHQV RQ WKH SUHVV 7KH JLUOnV SOLJKW DQG FRQWURYHUV\ VXUURXQGLQJ WKH FRXUWnV DFWLRQ ZDV QRW ORVW RQ WKH 1HZ
PAGE 55

LVVXH ZLWK WKH QHZ SKRWRJUDSKLF WHFKQRORJ\ ZKLFK QR ORQJHU UHTXLUHG D ZLOOLQJ VXEMHFW WR VLW PRWLRQOHVV WR EH SKRWRJUDSKHG 7KH QHZVSDSHU FRPSODLQHG LQ DQ HGLWRULDO HFKRLQJ WKH FRQFHUQV RI %UDQGLV DQG :DUUHQ WKDW nNRGDNHUV O\LQJ LQ ZDLWn WR SKRWRJUDSK SXEOLF ILJXUHV KDG EHFRPH D nZDQWRQn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f GHDOW RQO\ ZLWK WRUW ODZ DQG QRW ZLWK WKH FRQVWLWXWLRQDO TXHVWLRQ RI JRYHUQPHQW LQWHUIHUHQFH LQ SULYDWH PDWWHUV $IWHU UHYLHZLQJ VRPH SULYDF\UHODWHG FDVHV 3URVVHU LGHQWLILHG IRXU VHSDUDWH WRUWVf§RU EUHDFKHV RI GXWLHV LPSRVHG E\ VRFLHW\ WKDW UHVXOWHG LQ KDUP WR DQRWKHU LQGLYLGXDO 7KH\ ZHUH GLVFORVXUH RI HPEDUUDVVLQJ SULYDWH IDFWV DERXW LQGLYLGXDOV DSSURSULDWLRQ RU WKH XVH RI D SHUVRQnV QDPH RU OLNHQHVV ZLWKRXW SHUPLVVLRQ IDOVH OLJKW WKH LQWHQWLRQDO GLVVHPLQDWLRQ RI KLJKO\ RIIHQVLYH IDOVH SXEOLFLW\ DERXW

PAGE 56

DQRWKHU DQG LQWUXVLRQ WKH SK\VLFDO RU WHFKQRORJLFDO YLRODWLRQ RI DQ LQGLYLGXDOnV SULYDF\ 3URVVHU DQ DXWKRULW\ RQ WRUW ODZ DQG DXWKRU RI D VHPLQDO WUHDWLVH RQ WKH VXEMHFW IXUWKHU GHILQHG WKH SULYDWH IDFWV WRUW DV SXEOLFLW\ RI D SULYDWH PDWWHU WKDW ZRXOG EH KLJKO\ RIIHQVLYH WR D UHDVRQDEOH SHUVRQ DQG QRW RI OHJLWLPDWH SXEOLF FRQFHUQn 3URVVHUnV GHILQLWLRQ HVSHFLDOO\ LWV UHIHUHQFH WR PDWWHUV RI OHJLWLPDWH SXEOLF FRQFHUQ KLJKOLJKWV WKH IDFWRUV FRXUWV WUDGLWLRQDOO\ KDYH ZHLJKHG LQ EDODQFLQJ SHUVRQDO SULYDF\ ZLWK WKH PHGLDnV ULJKW WR SXEOLVK VRPH NLQGV RI SHUVRQDO LQIRUPDWLRQ ,PSOLFLW LQ WKH GHILQLWLRQ LV WKDW D OHJLWLPDWH SXEOLF LQWHUHVW LQ SHUVRQDO LQIRUPDWLRQ FRXOG RYHUFRPH SULYDF\ ULJKWV HYHQ ZKHQ GLVFORVXUH ZRXOG RIIHQG PRVW SHRSOH 7KH SULYDF\SXEOLF LQWHUHVW EDODQFLQJ VXJJHVWHG E\ 3URVVHUn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

PAGE 57

FRQVWLWXWLRQDO ULJKW RI SULYDF\ SURWHFWV LQGLYLGXDOV IURP DFWLRQV E\ WKH IHGHUDO JRYHUQPHQW DQG WKH VWDWHV 7KH 6XSUHPH &RXUWnV UHFRJQLWLRQ RI FRQVWLWXWLRQDO SULYDF\ FDQ EH EURNHQ GRZQ LQWR IRXU JHQHUDO FDWHJRULHV SULYDF\ IURP XQZDUUDQWHG LQWUXVLRQV SULYDF\ RI DVVRFLDWLRQ SULYDF\ LQ PDNLQJ LQWLPDWH GHFLVLRQV DQG SULYDF\ LQ FRQWUROOLQJ SHUVRQDO LQIRUPDWLRQ 7KH ILUVW FDWHJRU\ LQYROYLQJ )RXUWK $PHQGPHQW FDVHV RI SK\VLFDO DQG HOHFWURQLF LQWUXVLRQ LV ZHOO GHYHORSHG 7KH VHFRQG DQG WKLUG FDWHJRULHV DOVR DUH UHDVRQDEO\ ZHOO GHYHORSHG 7KH\ DUH DVVRFLDWLRQDO SULYDF\ RU WKH IUHHGRP IURP LQWHUIHUHQFH RU FRQVWUDLQWV RQ UHODWLRQVKLSV ZLWK JURXSV RU LQGLYLGXDOV DQG GHFLVLRQDO SULYDF\ RU IUHHGRP IURP JRYHUQPHQW LQWHUIHUHQFH LQ LQWLPDWH SHUVRQDO GHFLVLRQV 7KH IRXUWK DUHD LQ ZKLFK WKH 6XSUHPH &RXUW KDV UHFRJQL]HG D FRQVWLWXWLRQDO SULYDF\ LQWHUHVW LV OHVV GHYHORSHG ,W FRQFHUQV LQIRUPDWLRQDO SULYDF\ RU ULJKWV RI LQGLYLGXDOV WR FRQWURO LQIRUPDWLRQ DERXW WKHPVHOYHV ,W LPSRVHV D GXW\ RQ JRYHUQPHQW WR SURWHFW WKH SULYDF\ ULJKWV RI LQGLYLGXDOV RQ ZKRP LW JDWKHUV NHHSV RU GLVVHPLQDWHV LQIRUPDWLRQ )UHHGRP IURP 8QZDUUDQWHG ,QWUXVLRQ 7KH ILUVW DQG ROGHVW MXGLFLDO UHFRJQLWLRQ RI SULYDF\ LQYROYHV VHDUFK DQG VHL]XUH FDVHV LPSOLFDWLQJ WKH )RXUWK $PHQGPHQW XVXDOO\ UHVXOWLQJ IURP SK\VLFDO LQWUXVLRQ 7KH FDVH %R\G Y 8QLWHG 6WDWHV LV LOOXVWUDWLYH ,Q %R\G WKH &RXUW VDLG WKH )RXUWK $PHQGPHQW VHDUFK DQG VHL]XUH

PAGE 58

SURYLVLRQ YRLGHG D IHGHUDO VWDWXWH WKDW UHTXLUHG LPSRUWHUV WR UHOLQTXLVK EXVLQHVV UHFRUGV IRU VHL]HG JRRGV RU IRUIHLW WKH JRRGV 7KH RSLQLRQ ZKLFK H[SUHVVHG SULYDF\ YDOXHV WKH &RXUW ZRXOG H[SRXQG RQ RYHU WKH QH[W \HDUV VDLG ,W LV QRW WKH EUHDNLQJ RI >DQ LQGLYLGXDOnV@ GRRUV DQG WKH UXPPDJLQJ RI KLV GUDZHUV WKDW FRQVWLWXWHV WKH HVVHQFH RI WKH RIIHQVH EXW LW LV WKH LQYDVLRQ RI WKH LQGHIHDVLEOH ULJKW RI SHUVRQDO VHFXULW\ SHUVRQDO OLEHUW\ DQG SULYDWH SURSHUW\n 7KH &RXUW KDV UHFRJQL]HG SULYDF\ DV IUHHGRP IURP XQZDUUDQWHG LQWUXVLRQ LQ D QXPEHU RI RWKHU )RXUWK $PHQGPHQW FDVHV 'XULQJ WKH WZHQWLHWK FHQWXU\ VHYHUDO 6XSUHPH &RXUW FDVHV LQYROYLQJ )RXUWK $PHQGPHQW FODLPV DGGUHVVHG WKUHDWV WR SHUVRQDO SULYDF\ PDGH SRVVLEOH E\ QHZ WHFKQRORJLHVf§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f§WKH PRVW FRPSUHKHQVLYH RI ULJKWV YDOXHG E\ FLYLOL]HG PHQ 7R SURWHFW WKDW ULJKW HYHU\ XQMXVWLILDEOH LQWUXVLRQ E\ WKH JRYHUQPHQW RQ WKH SULYDF\ RI WKH LQGLYLGXDO PXVW EH GHHPHG D YLRODWLRQ RI WKH )RXUWK $PHQGPHQW

PAGE 59

,Q DQRWKHU )RXUWK $PHQGPHQW FDVH D GR]HQ \HDUV ODWHU -XVWLFH 0XUSK\ WRRN XS %UDQGLVn DUJXPHQW WKDW 2OPVWHDG KDG EHHQ ZURQJO\ GHFLGHG ,Q *ROGPDQ Y 8QLWHG 6WDWHV D FDVH LQYROYLQJ WKH VXUUHSWLWLRXV XVH RI DQ HOHFWURQLF OLVWHQLQJ GHYLFH E\ JRYHUQPHQW DJHQWV -XVWLFH 0XUSK\ ODXQFKHG WKH FRQFHSW RI SULYDF\ LQWR WKH WHFKQRORJLFDO DJH +H FRQFHGHG WKDW QR SK\VLFDO LQWUXVLRQ RU VHDUFK KDG WDNHQ SODFH %XW KH ZDUQHG 6FLHQFH KDV EURXJKW IRUWK IDU PRUH HIIHFWLYH GHYLFHV IRU WKH LQYDVLRQ RI D SHUVRQn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nV IUHH VSHHFK DQG IUHH DVVRFLDWLRQ FODXVHV WR FDUYH RXW D ULJKW RI DVVRFLDWLRQDO SULYDF\ 7KH &RXUW ILUVW DSSOLHG D )LUVW $PHQGPHQW UDWLRQDOH WR SURWHFW D SULYDF\ UHODWLRQVKLS LQ WKH FDVH 1$$&3 Y $ODEDPD H[ UHO 3DWWHUVRQ 7KH

PAGE 60

1DWLRQDO $VVRFLDWLRQ IRU WKH $GYDQFHPHQW RI &RORUHG 3HRSOH FKDOOHQJHG D FRXUW RUGHU WKDW WKH FLYLO ULJKWV RUJDQL]DWLRQ WXUQ RYHU WR WKH VWDWH RI $ODEDPD LWV PHPEHUVKLS UROOV 7KH 1$$&3 DUJXHG WKDW VXFK LQIRUPDWLRQ PLJKW EH XVHG WR LQWLPLGDWH PHPEHUV DQG FRQVHTXHQWO\ GLVFRXUDJH PHPEHUVKLS :ULWLQJ IRU WKH XQDQLPRXV FRXUW -XVWLFH +DUODQ VDLG WKH &RXUW KDV UHFRJQL]HG WKH YLWDO UHODWLRQVKLS EHWZHHQ IUHHGRP WR DVVRFLDWH DQG SULYDF\ LQ RQHn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n DVVHUWLRQ WKDW WKHUH DUH VRPH PDWWHUV DERXW ZKLFK WKH SXEOLF KDV QRW WKH 5LJKW WR .QRZ 7KHVH DVVRFLDWLRQDO SULYDF\ FDVHV DUH DOVR LPSRUWDQW WR WKH DFFHVVSULYDF\ GLVFXVVLRQ EHFDXVH WKH &RXUW UHFRJQL]HG WKH SRWHQWLDO IRU VHULRXV KDUP WR LQGLYLGXDOV ZKR ORVH FRQWURO RI SHUVRQDO LQIRUPDWLRQ DERXW WKHPVHOYHV 7KLV UHFRJQLWLRQ ZLOO EHFRPH PRUH DSSDUHQW LQ VXEVHTXHQW GLVFXVVLRQ RI LQIRUPDWLRQDO SULYDF\ FDVHV

PAGE 61

'HFLVLRQDO 3ULYDF\ 0DQ\ RI WKH 6XSUHPH &RXUWn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

PAGE 62

SULYLOHJHV ORQJ UHFRJQL]HG DW FRPPRQ ODZ DV HVVHQWLDO WR WKH RUGHUO\ SXUVXLW RI KDSSLQHVV E\ IUHH PHQ ,Q WKH FDVH 3LHUFH Y 6RFLHW\ RI 6LVWHUV WKH 6XSUHPH &RXUW DSSOLHG WKH UHDVRQLQJ RI 0H\HU WR YRLG D VWDWXWH UHTXLULQJ FKLOGUHQ WR DWWHQG SXEOLF VFKRROV 7KH &RXUW VDLG WKH VWDWXWH LQWHUIHUHG ZLWK WKH OLEHUW\ RI SDUHQWV DQG JXDUGLDQV WR GLUHFW WKH XSEULQJLQJ DQG HGXFDWLRQ RI FKLOGUHQ XQGHU WKHLU FRQWURO 8QGHU WKLV UHDVRQLQJ D JRYHUQPHQW FDQQRW LQWHUIHUH ZLWK SDUHQWV n GHFLVLRQV DERXW ZKHWKHU WKHLU FKLOGUHQ ZLOO DWWHQG SXEOLF RU SULYDWH VFKRROV +RZHYHU RQFH WKH SDUHQWV RSW IRU WKH SULYLOHJH RI VHQGLQJ WKHLU FKLOGUHQ WR SXEOLF VFKRROV WKH IUHHGRP RI FKRLFH GLPLQLVKHV GUDPDWLFDOO\ 7KH 6XSUHPH &RXUW KDV DUWLFXODWHG LWV VWURQJHVW UHFRJQLWLRQ RI D FRQVWLWXWLRQDO ULJKW RI SULYDF\ LQ PRUH UHFHQW GHFLVLRQDO SULYDF\ FDVHV WKRVH LQYROYLQJ IUHHGRP RI FKRLFH LQ LQWLPDWH SHUVRQDO GHFLVLRQV 7KH &RXUWnV FOHDUHVW DUWLFXODWLRQ RI D ULJKW RI GHFLVLRQDO SULYDF\ FDPH LQ *ULVZROG Y &RQQHFWLFXW D FDVH WKDW VWUXFN GRZQ D VWDWXWH WKDW PDGH LW D FULPH IRU DQ\RQH LQFOXGLQJ PDUULHG SHRSOH WR XVH FRQWUDFHSWLYHV ,Q *ULVZROG WKH FRXUW KHOG WKDW WKH VWDWXWH LQWUXGHG RQ WKH LQWLPDWH UHODWLRQVKLS RI PDUULHG FRXSOHV DQG YLRODWHG D ]RQH RI SULYDF\ FUHDWHG E\ VHYHUDO IXQGDPHQWDO FRQVWLWXWLRQDO JXDUDQWHHV 7KH UDWLRQDOHV IRU YRLGLQJ WKH VWDWXWH YDULHG EXW VL[ MXVWLFHV DJUHHG LW YLRODWHG WKH GXH SURFHVV FODXVH RI WKH

PAGE 63

)RXUWHHQWK $PHQGPHQW E\ LQWHUIHULQJ LQ FRXSOHVn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nV GHFLVLRQV LW KDV UHSUHVHQWHG WKH EDODQFH ZKLFK RXU 1DWLRQ EXLOW XSRQ WKH SRVWXODWHV RI UHVSHFW IRU OLEHUW\ RI WKH LQGLYLGXDO KDV VWUXFN EHWZHHQ WKDW OLEHUW\ DQG WKH GHPDQGV RI RUJDQL]HG VRFLHW\ ,Q WKH FRXUW XQGHUVFRUHG WKH ULJKW RI LQGLYLGXDOV WR PDNH LQWLPDWH GHFLVLRQV LQ 5RH Y :DGH D FRQWURYHUVLDO

PAGE 64

FDVH LQYROYLQJ D ZRPDQn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f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

PAGE 65

WR D EDQN EHFDXVH WKH LQIRUPDWLRQ KDG EHFRPH D SDUW RI WKH EDQNnV EXVLQHVV UHFRUGV -XVWLFH %UHQQDQ VLJQDOLQJ D JURZLQJ FRQFHUQ RQ WKH &RXUW DERXW WKH WKUHDW RI LQIRUPDWLRQ WHFKQRORJ\ WR SHUVRQDO SULYDF\ FDXWLRQHG 'HYHORSPHQW RI SKRWRFRS\LQJ PDFKLQHV HOHFWURQLF FRPSXWHUV DQG RWKHU VRSKLVWLFDWHG LQVWUXPHQWV KDYH DFFHOHUDWHG WKH DELOLWLHV RI JRYHUQPHQW WR LQWUXGH LQWR DUHDV ZKLFK D SHUVRQ QRUPDOO\ FKRRVHV WR H[FOXGH IURP SU\LQJ H\HV DQG LQTXLVLWLYH PLQGV $ \HDU ODWHU LQ :KDOHQ Y 5RH WKH FRXUW DFNQRZOHGJHG D ULJKW RI LQIRUPDWLRQ SULYDF\ LQ DQ RSLQLRQ WKDW VDLG D 1HZ
PAGE 66

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n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n 7KH LPSOLFDWLRQV IRU SXEOLF DQG PHGLD DFFHVV DV D UHVXOW RI WKH 5HSRUWHUV &RPPLWWHH UHDVRQLQJ DQG VXEVHTXHQW FDVHV EDVHG RQ WKDW UHDVRQLQJ ZLOO EH H[SORUHG LQ &KDSWHU )RXU DORQJ ZLWK

PAGE 67

VWDWH FDVHV WKDW UHIOHFW FRQFHUQV DERXW WKH SULYDF\ WKUHDW RI FRPSXWHUL]HG LQIRUPDWLRQ /HJLVODWLYH 5HFRJQLWLRQ RI D 5LJKW WR 3ULYDF\ :KLOH WKH FRQFHSW RI LQIRUPDWLRQDO SULYDF\ KDV EHHQ HPEUDFHG E\ WKH 6XSUHPH &RXUW WKH FOHDUHVW VWDWHPHQWV RI SULYDF\ ULJKWV LQ LQIRUPDWLRQ FROOHFWHG E\ WKH JRYHUQPHQW KDYH FRPH WKURXJK WKH OHJLVODWLYH SURFHVV 0RVW RI WKH OHJLVODWLYH FRQFHUQ KDV EHHQ LQ UHVSRQVH WR WKH JURZLQJ XVH RI FRPSXWHUV E\ JRYHUQPHQW 7KH HYROXWLRQ DQG GLPHQVLRQV RI WKDW OHJLVODWLYH LQWHUHVW ZLOO EH GLVFXVVHG LQ GHWDLO LQ &KDSWHU 7KUHH $W WKLV MXQFWXUH OHJLVODWLYH SULYDF\ FRQFHUQV DUH RXWOLQHG EULHIO\ :KHQ &RQJUHVV SDVVHG WKH )UHHGRP RI ,QIRUPDWLRQ $FW LQ LW UHFRJQL]HG WKDW WKH DFFXPXODWLRQ RI SHUVRQDO LQIRUPDWLRQ E\ JRYHUQPHQW WKUHDWHQHG SHUVRQDO SULYDF\ 7ZR H[HPSWLRQV WR WKH )2,$ VSHFLILFDOO\ VKLHOG SHUVRQDO SULYDF\ LQWHUHVWV LQ JRYHUQPHQW LQIRUPDWLRQ ([HPSWLRQ ZKLFK FRYHUV PHGLFDO SHUVRQQHO DQG UHODWHG UHFRUGV DQG ([HPSWLRQ ZKLFK FRYHUV FULPLQDO KLVWRU\ UHFRUGV DFNQRZOHGJH H[SHFWDWLRQV RI SULYDF\ LQ YDU\LQJ GHJUHHV :KHQ LQIRUPDWLRQ UHTXHVWHUV KDYH FKDOOHQJHG DJHQFLHV WKDW KDYH GHQLHG DFFHVV XQGHU WKHVH H[HPSWLRQV FRXUWV KDYH DWWHPSWHG WR EDODQFH SULYDF\ LQWHUHVWV ZLWK WKH SXEOLFnV LQWHUHVW LQ GLVFORVXUH RI VXFK LQIRUPDWLRQ +RZHYHU WKH 6XSUHPH &RXUW LQ 'HSDUWPHQW RI -XVWLFH Y 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV KDV JUHDWO\ QDUURZHG ZKDW

PAGE 68

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nV *UHDW 6RFLHW\ VRFLDO

PAGE 69

SURJUDPV DQG WKH 9LHWQDP ZDU HIIRUW 3URSRQHQWV RI D 1DWLRQDO 'DWD &HQWHU SRLQWHG RXW WKH QHHG IRU HIILFLHQF\ DQG HQKDQFHG GHFLVLRQ PDNLQJ LQ WKH EXUJHRQLQJ EXUHDXFUDF\ 2SSRQHQWV VDZ D FHQWUDOL]HG FRPSXWHU V\VWHP DV D VHULRXV WKUHDW WR SHUVRQDO SULYDF\ DQG DOOXGHG WR *HRUJH 2UZHOOnV %LJ %URWKHU $W D KHDULQJ LQ 5HSUHVHQWDWLYH )UDQN +RUWRQ RI 1HZ
PAGE 70

QXPHURXV PHDVXUHV WR UHJXODWH WKH FROOHFWLRQ GLVWULEXWLRQ DQG DFFHVV WR SHUVRQDO LQIRUPDWLRQ KHOG E\ WKH JRYHUQPHQW 0RVW UHFHQWO\ &RQJUHVV SDVVHG WKH &RPSXWHU 0DWFKLQJ DQG 3ULYDF\ $FW RI WR SXW OLPLWDWLRQV RQ IHGHUDO DJHQFLHVn DELOLW\ WR VKDUH SHUVRQDO LQIRUPDWLRQ YLD FRPSXWHUV $ 5LJKW RI $FFHVV WR *RYHUQPHQW ,QIRUPDWLRQ :KHQ WKH )RXQGLQJ )DWKHUV JDWKHUHG LQ 3KLODGHOSKLD PRUH WKDQ \HDUV DJR WR VRUW RXW GLIIHUHQFHV HQGDQJHULQJ WKH WHQXRXV XQLRQ WKH\ PHW LQ SULYDWH :LWK DQ DJHQGD WKDW LQFOXGHG SRWHQWLDOO\ GLYLVLYH LVVXHV WKH )RXQGHUV DSSDUHQWO\ EHOLHYHG VHFUHF\ PRUH DFFRPPRGDWLQJ WR WKH QHHGV RI WKH LQIDQW QDWLRQ WKDQ WKH ULJRUV RI SXEOLF GHEDWH 6HOI SUHVHUYDWLRQ VHHPHG SDUDPRXQW
PAGE 71

YLJRURXV SUHVV DV D IXQGDPHQWDO LQVWUXPHQW LQ WKDW SURFHVV 7KLV VHFWLRQ ORRNV DW WKH GHYHORSPHQW RI WKH SULQFLSOH WKDW WKH JRYHUQPHQWnV EXVLQHVV LV WKH SHRSOHn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

PAGE 72

)DWKHUV HYHQ LI WKHLU DFWLRQV VRPHWLPHV VHHPHG LQFRQVLVWHQW ZLWK WKHLU ZRUGV /LEHUWDULDQ 8QGHUSLQQLQJV %\ PRVW DFFRXQWV WKH JHQHVLV RI OLEHUWDULDQ WKRXJKW ZDV LQ WKH (QJOLVK SRHW -RKQ 0LOWRQn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n JHQHUDWLRQ ZDV -RKQ /RFNH ZKR PDLQWDLQHG WKDW JRYHUQPHQWV KDYH D GXW\ WR SURWHFW FHUWDLQ IXQGDPHQWDO ULJKWV RI FLWL]HQV VXFK DV OLIH OLEHUW\ DQG SURSHUW\ &RPSDUHG WR 0LOWRQ /RFNH KHOG D UDGLFDOO\ GLIIHUHQW FRQFHSW RI WKH UROH RI WUXWK LQ SXEOLF

PAGE 73

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n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

PAGE 74

ZLGHO\ LQ WKH FRORQLDO SUHVV DQG ZHUH SRSXODU UHDGLQJ 6DLG &DWR 7KDW PHQ RXJKW WR VSHDN ZHOO RI WKHLU *RYHUQRUV LV WUXH ZKLOH WKHLU *RYHUQRUV GHVHUYH WR EH ZHOO VSRNHQ RI EXW WR GR SXEOLF 0LVFKLHI ZLWKRXW KHDULQJ RI LW LV RQO\ WKH 3UHURJDWLYH RI )HOLFLW\ DQG 7\UDQQ\ $ IUHH 3HRSOH ZLOO EH VKHZLQJ WKDW WKH\ DUH VR E\ WKH IUHHGRP RI VSHHFK %XLOGLQJ RQ WKH 5HYROXWLRQDU\ ([SHULHQFH 7KH ZRUGV RI 0LOWRQ /RFNH DQG &DWR UHVRQDWHG WKURXJK WKH FRORQLVWVn UHYROXWLRQDU\ UKHWRULF DV WKH\ EHFDPH LQFUHDVLQJ DOLHQDWHG XQGHU %ULWLVK UXOH /RFNHn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

PAGE 75

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f§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

PAGE 76

LQMXULHV $QG DW RQH SRLQW QRW ORQJ DIWHU WKH H[SLUDWLRQ RI WKH FRQWURYHUVLDO 6HGLWLRQ $FW LQ KH VXJJHVWHG WKDW WKH VWDWHV VKRXOG NHHS DQ XQUXO\ 7RU\ SUHVV LQ FKHFN :ULWLQJ WR *RYHUQRU 7KRPDV 0F.HDQ RI 3HQQV\OYDQLD -HIIHUVRQ RSLQHG WKDW VWDWH UHVWUDLQWV RQ WKH SUHVV PLJKW KDYH D ZKROHVRPH HIIHFW LQ UHVWRULQJ WKH LQWHJULW\ RI WKH SUHVVHV >DQG ZRXOG@ SODFH WKH ZKROH EDQG PRUH RQ WKHLU JXDUG 'XULQJ WKH FHQWXU\ WKDW IROORZHG WKH $PHULFDQ 5HYROXWLRQ ZKHQ IUHH VSHHFK DQG IUHH SUHVV UKHWRULF IORXULVKHG DQG VWUHQJWKHQHG WKH YDOXHV XQGHUO\LQJ WKH )LUVW $PHQGPHQW DQRWKHU LQIOXHQWLDO SROLWLFDO SKLORVRSKHU ZRXOG DGG WR WKH WKHRU\ WKDW WUXWK PXVW KDYH LWV GD\ -RKQ 6WXDUW 0LOO DFNQRZOHGJHG WKH YDOXH RI IUHH H[SUHVVLRQ DGYDQFHG E\ WKH HDUOLHU OLEHUWDULDQ SKLORVRSKHUV EXW GLVFRXQWHG WKH DUJXPHQW WKDW WUXWK JLYHQ DQ RSSRUWXQLW\ ZRXOG DOZD\V SUHYDLO 0LOO DQ DUGHQW FULWLF RI $PHULFDQ VODYHU\ QRWHG WKDW WUXWK IUHTXHQWO\ ZDV VXSSUHVVHG DQG WKDW LWV RQO\ FKDQFH WR VXFFHHG OD\ LQ WKH ULJKW RI IUHH H[SUHVVLRQ 0LOO DOVR ZURWH DERXW WKH FRQFHSWV XQGHUO\LQJ D GHPRFUDWLF VRFLHW\ 2I WKH UROH RI WKH LQGLYLGXDO LQ UHSUHVHQWDWLYH JRYHUQPHQW KH VXJJHVWHG WKDW JRYHUQPHQW GHULYHV LWV DXWKRULW\ IURP WKH JRYHUQHG QR GHPRFUDWLF JRYHUQPHQW ZRXOG VXFFHHG ZLWKRXW FLWL]HQV ZLOOLQJ WR DELGH E\ FHUWDLQ UXOHV DQG WR GR ZKDW ZDV QHFHVVDU\ WR SUHVHUYH LW 7KH IRXQGDWLRQ IRU VXFK D VRFLHW\ 0LOO DUJXHG ZDV WKH

PAGE 77

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nV IRXQGHUV WKDW JRYHUQPHQW SURVSHUHG RQO\ ZLWK WKH NQRZOHGJH DQG FRQVHQW RI WKH SHRSOH :KHQHYHU DQ\ SXEOLF EXVLQHVV LV WUDQVDFWHG ZKHUHYHU SODQV DIIHFWLQJ WKH SXEOLF DUH ODLG RU HQWHUSULVHV WRXFKLQJ WKH SXEOLF ZHOIDUH FRPIRUW RU FRQYHQLHQFH JR IRUZDUG ZKHUHYHU SROLWLFDO SURJUDPV DUH IRUPXODWHG RU FDQGLGDWHV DJUHHG RQ RYHU WKDW SODFH D YRLFH PXVW VSHDN ZLWK WKH GLYLQH SUHURJDWLYH RI D SHRSOHnV ZLOO WKH ZRUGV /HW WKHUH EH OLJKW 7KH WZHQWLHWK FHQWXU\ FRQFHSW RI IUHH H[SUHVVLRQ ZDV EURXJKW LQWR IRFXV LQ WKH VHFRQG GHFDGH RI WKH QHZ FHQWXU\ DV LW IDFHG D VHYHUH WHVW DW D WLPH ZKHQ IHDUV RI VRFLDO UHYROXWLRQ GRPLQDWHG WKH OHJDO DQG SROLWLFDO HVWDEOLVKPHQWV ,Q DPLG WKH SRVW:RUOG :DU VRFLDO DQG SROLWLFDO WXPXOW LQ WKH 8QLWHG 6WDWHV RYHU WKH %ROVKHYLN UHYROXWLRQ LQ 5XVVLD 86 6XSUHPH &RXUW -XVWLFH 2OLYHU :HQGHOO +ROPHV FDUULHG 0LOWRQnV QRWLRQ RI IUHH VSHHFK LQWR WKH WZHQWLHWK FHQWXU\ GLVFRXUVH WKURXJK WKH $PHULFDQ IUHH HQWHUSULVH PHWDSKRU RI WKH PDUNHWSODFH 7KH RFFDVLRQ ZDV

PAGE 78

WKH 6XSUHPH &RXUWnV RSLQLRQ LQ $EUDPV Y 8QLWHG 6WDWHV ZKLFK XSKHOG FULPLQDO FRQYLFWLRQV XQGHU WKH QHZO\ HQDFWHG (VSLRQDJH $FW 7KH GHIHQGDQWV ZHUH FRQYLFWHG RI GLVWULEXWLQJ PDWHULDOV FULWLFDO RI WKH 8QLWHG 6WDWHVn ZDU HIIRUW WKDW HQFRXUDJHG GLVDIIHFWLRQ VHGLWLRQ ULRWV DQG HYHQ UHYROXWLRQ 7KH RIIHQGLQJ SDPSKOHWV WRVVHG IURP ZLQGRZV WR SDVVHUVE\ FULWLFL]HG WKH 8QLWHG 6WDWHVn GHFLVLRQ WR VHQG WURRSV WR DLG WKH F]DU GXULQJ WKH UHYROXWLRQ ,Q D GLVVHQWLQJ RSLQLRQ +ROPHV WRRN XS WKH OLEHUWDULDQ VWDQGDUG RI IUHH H[SUHVVLRQ WR UHMHFW WKH PDMRULW\ UHDVRQLQJ XSKROGLQJ WKH FRQYLFWLRQV EDVHG RQ ZRUGV QRW GHHGV +H DUJXHG IRU IUHH WUDGH LQ LGHDV HYHQ WKRVH ZH ORDWKH DQG EHOLHYH WR EH IUDXJKW ZLWK GHDWK +ROPHV VDLG WKH EHVW WHVW RI WUXWK LV WKH SRZHU RI WKH WKRXJKW WR JHW LWVHOI DFFHSWHG LQ WKH FRPSHWLWLRQ RI WKH PDUNHW +ROPHVn QRWLRQ RI WKH IUHH WUDGH RI LGHDV ZDV RIWHQ TXRWHG E\ OHJDO DQG SROLWLFDO VFKRODUV ZKHQ IUHH VSHHFK ZDV LQ TXHVWLRQ DQG WKH LPSRUWDQFH RI D IUHH SUHVV LQ WKH PDUNHWSODFH RI LGHDV EHFDPH D UDOO\LQJ FU\ LQ WKH )LUVW $PHQGPHQW OH[LFRQ ,Q -XVWLFH /RXLV %UDQGLV D GRPLQDQW MXGLFLDO IRUFH EHKLQG WKH QRWLRQ RI D IXQGDPHQWDO ULJKW RI SULYDF\ DUJXHG ZLWK HTXDO IRUFH IRU XQIHWWHUHG IUHH H[SUHVVLRQ OLPLWHG RQO\ E\ WKH QHHG WR SURWHFW WKH VWDWH IURP FOHDU DQG LPPLQHQW GDQJHU

PAGE 79

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f§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

PAGE 80

LQ WKH YHU\ QDWXUH RI D VHOIJRYHUQLQJ GHPRFUDF\ 0HLNOHMRKQ UHDVRQHG WKDW WKH SULQFLSOH RI IUHH VSHHFK VSULQJV IURP WKH QHFHVVLW\ RI WKH SURJUDP RI VHOI JRYHUQPHQW ,W LV D GHGXFWLRQ IURP WKH EDVLF $PHULFDQ DJUHHPHQW WKDW SXEOLF LVVXHV VKDOO EH GHFLGHG E\ XQLYHUVDO VXIIUDJH +H VDLG WKH )LUVW $PHQGPHQWnV SURWHFWLRQV IRU WKH SUDFWLFH RI VHOIJRYHUQPHQW DUH WR HQVXUH WKDW WKH SXEOLF UHWDLQV FRQWURO RYHU JRYHUQPHQW LQ WKH SURFHVV RI VHOIJRYHUQDQFH +H ZRXOG KDYH DIIRUGHG DEVROXWH SURWHFWLRQ IRU H[SUHVVLRQ DERXW LVVXHV RI VHOIJRYHUQDQFH EHFDXVH KH VDLG FLWL]HQV QHHG WR JDWKHU DQG VKDUH LQIRUPDWLRQ DQG RSLQLRQV DERXW WKHLU JRYHUQPHQW WR SDUWLFLSDWH LQWHOOLJHQWO\ LQ WKH GHPRFUDWLF SURFHVV /HJDO VFKRODU 7KRPDV (PHUVRQ FRXFKHG /RFNHnV SULQFLSOHV RI QDWXUDO ULJKWV LQ WKH PRGHUQ WKHRU\ RI VHOI DFWXDOL]DWLRQ 7KH WKHRU\ RI VHOIDFWXDOL]DWLRQ HVWDEOLVKHG DQ DVFHQGLQJ KLHUDUFK\ RI HVVHQWLDO QHHGV WR LQGLYLGXDOV LQ VRFLHW\ $W WKH ERWWRP ZHUH EDVLF SK\VLFDO QHHGV VXFK DV IRRG DQG VKHOWHU DW WKH WRS ZHUH WKH SV\FKRORJLFDO QHHGV RI LQGLYLGXDOV WR UHDOL]H WKHLU IXOO SRWHQWLDORU WR EH VHOI DFWXDOL]HG (PHUVRQ VDZ IUHH VSHHFK DQG H[SUHVVLRQ DV HVVHQWLDO WR DWWDLQPHQW RI WKHVH KLJKHU QHHGV 7R (PHUVRQ IUHH H[SUHVVLRQ ZDV WKH HPERGLPHQW RI WKH ZLGHO\ DFFHSWHG SUHPLVH RI :HVWHUQ WKRXJKW WKDW WKH SURSHU HQG RI PDQ LV WKH UHDOL]DWLRQ RI KLV RZQ FKDUDFWHU DQG SRWHQWLDOLWLHV DV D KXPDQ EHLQJ

PAGE 81

/HJDO VFKRODU 9LQFHQW %ODVL RIIHUV DQRWKHU UDWLRQDOH IRU D VWURQJ IUHH SUHVV LQ $PHULFDQ VRFLHW\ (FKRLQJ WKH VHQWLPHQWV RI 3DLQH DQG -HIIHUVRQ WKDW D IUHH SUHVV DV D IRUPLGDEOH FHQVRU RI SXEOLF IXQFWLRQDULHV ZDV HVVHQWLDO WR D GHPRFUDF\ KH FRQWHQGV WKDW D VWURQJ IUHH SUHVV LV WKH PRVW HIIHFWLYHf§LI QRW WKH RQO\ HIIHFWLYHf§FKHFN RQ WKH SRWHQWLDO DEXVH RI SRZHU E\ JRYHUQPHQW %ODVL DFFHSWV ERWK /RFNHnV DUJXPHQW IRU IUHH H[SUHVVLRQ EDVHG RQ IXQGDPHQWDO ULJKWV DQG 0HLNOHMRKQnV WKHRU\ RI VHOIJRYHUQDQFH %XW KH DOVR FDVWV WKH SUHVVSDUWLFXODUO\ WKH ODUJH LQIOXHQWLDO SUHVVf§LQ DQRWKHU HVVHQWLDO UROH DV WKH RQO\ YLDEOH FKHFN RQ WKH HTXDOO\ SRZHUIXO JRYHUQPHQW %ODVLnV DUJXPHQWV UHIOHFW WKRVH HVSRXVHG E\ IRUPHU 6XSUHPH &RXUW -XVWLFH 3RWWHU 6WHZDUW ZKR VDZ LQ WKH )LUVW $PHQGPHQW D VWUXFWXUDO SURYLVLRQ JLYLQJ WKH SUHVV ULJKWV VHSDUDWH DQG GLVWLQFW IURP WKRVH RI IUHH VSHHFK ,Q D DGGUHVV DW
PAGE 82

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

PAGE 83

DV ZRXOG HQDEOH KLP WR PDLQWDLQ RU GHIHQG DQ\ DFWLRQ IRU ZKLFK WKH GRFXPHQW RU UHFRUG VRXJKW FDQ IXUQLVK HYLGHQFH RI QHFHVVDU\ LQIRUPDWLRQ (YHQWXDOO\ KRZHYHU VRPH FRXUWV EHJDQ WR H[SDQG WKH NLQGV RI LQWHUHVW WKDW ZRXOG ZDUUDQW DFFHVV WR SXEOLF LQIRUPDWLRQ ,Q IRU H[DPSOH WKH VWDWH RI 7HQQHVVHH UHFRJQL]HG D JHQHUDO WD[SD\HUVn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

PAGE 84

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
PAGE 85

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

PAGE 86

WKH UHDOLWLHV RI FRPPXQLFDWLRQV GXULQJ WKH QDWLRQn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

PAGE 87

DERXW WKHLU FRPPRQ LQWHUHVWV 7KH &RXUW FRQFOXGHG WKDW WKH /RXLVLDQD WD[ ZRXOG OLPLW WKH FLUFXODWLRQ RI LQIRUPDWLRQ WR ZKLFK WKH SXEOLF LV HQWLWOHG E\ YLUWXH RI FRQVWLWXWLRQDO JXDUDQWHHV ,Q WKH 6XSUHPH &RXUW DJDLQ UHFRJQL]HG WKH SXEOLFnV ULJKW WR UHFHLYH LQIRUPDWLRQ ,Q D EURDGFDVW UHJXODWLRQ FDVH LQYROYLQJ WKH )HGHUDO &RPPXQLFDWLRQV &RPPLVVLRQn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nV )LUVW $PHQGPHQW ULJKW WR UHFHLYH LQIRUPDWLRQHYHQ FRPPHUFLDO LQIRUPDWLRQf§ LQ 9LUJLQLD 6WDWH %RDUG RI 3KDUPDF\ Y 9LUJLQLD &LWL]HQV &RQVXPHU &RXQFLO ,QF 7KH &RXUW VWUXFN GRZQ D VWDWH

PAGE 88

VWDWXWH EDUULQJ SKDUPDFLVWV IURP DGYHUWLVLQJ SUHVFULSWLRQ GUXJ SULFHV 7KH &RXUWnV RSLQLRQ IRFXVHG RQ WKH SXEOLFn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nV ULJKW WR UHFHLYH SROLWLFDO LQIRUPDWLRQ LV QRW GLPLQLVKHG E\ WKH FRUSRUDWH LGHQWLW\ RI WKH VSHDNHU 7KH &RXUW VDLG WKH )LUVW $PHQGPHQWn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

PAGE 89

RI WKH SXEOLFnV DQG WKH PHGLDn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nV UHDVRQLQJ ZKHQ FRPELQHG ZLWK WKH UDWLRQDOH RI WKH GLVVHQWLQJ MXVWLFHV OHG PDQ\ DSSHOODWH FRXUWV GXULQJ WKH V WR UHFRJQL]H D OLPLWHG )LUVW $PHQGPHQW QHZVJDWKHULQJ ULJKW IRU MRXUQDOLVWV ZLWK UHVSHFW WR SURWHFWLQJ FRQILGHQWLDO VRXUFHV DW OHDVW LQ FDVHV QRW LQYROYLQJ JUDQG MXULHV

PAGE 90

,Q D SDLU RI FDVHV GHDOLQJ ZLWK DFFHVV WR SULVRQHUV DQG SULVRQV WKH &RXUW KDV VDLG WKH SUHVV KDG QR JUHDWHU ULJKW RI DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ WKDQ DQ\ RWKHU PHPEHUV RI WKH SXEOLF ,Q 3HOO Y 3URFXQLHU DQG 6D[EH Y :DVKLQJWRQ 3RVW &R FDVHV KHDUG MRLQWO\ WKH &RXUW XSKHOG IHGHUDO UHJXODWLRQV UHVWULFWLQJ SUHVV LQWHUYLHZV ZLWK SULVRQHUV ,PSRUWDQW WR WKH &RXUWn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nV ULJKW WR NQRZ LV FUXFLDO WR WKH JRYHUQLQJ SRZHUV RI WKH SHRSOH :KLOH WKH 6XSUHPH &RXUW KDV VDLG WKH SXEOLF DQG PHGLD KDYH QR ULJKW RI DFFHVV WR SULVRQV LW KDV KHOG WKDW WKH )LUVW $PHQGPHQW UHTXLUHV FULPLQDO WULDOV WR EH RSHQ ,Q

PAGE 91

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nV QRWLRQ WKDW H[SRVLQJ JRYHUQPHQW DFWLRQV LQ WKH WULEXQDO RI SXEOLF RSLQLRQ

PAGE 92

GLIIXVHG HPRWLRQV DQG OHG WR SHDFHDEOH UHIRUPV +H REVHUYHG WKDW RSHQQHVV SURYLGHG DQ RXWOHW IRU FRPPXQLW\ FRQFHUQ KRVWLOLW\ DQG HPRWLRQ DQG WKDW ZLWKRXW NQRZOHGJH WKH V\VWHP ZDV ZRUNLQJ QDWXUDO KXPDQ UHDFWLRQV RI RXWUDJH DQG SURWHVW DUH IUXVWUDWHG DQG PD\ PDQLIHVW WKHPVHOYHV LQ VRPH IRUP RI YHQJHIXO nVHOIKHOSn DV LQGHHG WKH\ GLG UHJXODUO\ LQ WKH DFWLYLWLHV RI YLJLODQWH nFRPPLWWHHVn RQ WKH IURQWLHUV +H SRLQWHG RXW WKDW SHRSOH GR QRW GHPDQG LQIDOOLELOLW\ IURP WKHLU LQVWLWXWLRQV EXW WKDW LW LV GLIILFXOW IRU WKHP WR DFFHSW ZKDW WKH\ DUH SURKLELWHG IURP REVHUYLQJ f $IWHU RXWOLQLQJ WKH QHHG IRU RSHQQHVV LQ JRYHUQPHQWf§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

PAGE 93

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
PAGE 94

WKH )LUVW $PHQGPHQW ZDV PHDQW WR GR PRUH WKDQ SURWHFW IUHH FRPPXQLFDWLRQ IRU LWV RZQ VDNH 5DWKHU KH VDLG ,PSOLFLW LQ WKLV VWUXFWXUDO UROH LV QRW RQO\ WKH SULQFLSOH WKDW GHEDWH RQ SXEOLF LVVXHV VKRXOG EH XQKLELWHG UREXVW DQG ZLGHRSHQ EXW WKH DQWHFHGHQW DVVXPSWLRQ WKDW YDOXDEOH SXEOLF GHEDWHf§DV ZHOO DV RWKHU FLYLF EHKDYLRUf§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nV JURZLQJ XVH RI FRPSXWHUV KH VDLG 2XU GHFLVLRQV PXVW WKHUHIRUH EH XQGHUVWRRG DV KROGLQJ RQO\ WKDW DQ\ SULYLOHJH RI DFFHVV WR JRYHUQPHQWDO LQIRUPDWLRQ LV VXEMHFW WR D GHJUHH RI UHVWUDLQW GLFWDWHG E\ WKH QDWXUH RI WKH LQIRUPDWLRQ DQG FRXQWHUYDLOLQJ LQWHUHVWV LQ VHFXULW\ DQG FRQILGHQWLDOLW\ (PSKDVLV DGGHGf ,Q D VHSDUDWH FRQFXUULQJ RSLQLRQ -XVWLFH 6WHYHQV WHUPHG 5LFKPRQG D ZDWHUVKHG FDVH DQG VXJJHVWHG WKDW IRU WKH ILUVW WLPH WKH FRXUW XQHTXLYRFDOO\ KROGV WKDW DQ DUELWUDU\ LQWHUIHUHQFH ZLWK DFFHVV WR LPSRUWDQW LQIRUPDWLRQ LV DQ DEULGJPHQW RI WKH IUHHGRP RI VSHHFK DQG RI WKH SUHVV ,Q WKH ZDNH RI 5LFKPRQG VRPH OHJDO VFKRODUV VKDUHG -XVWLFH 6WHYHQVn SRVLWLRQ VXJJHVWLQJ WKDW WKH RSLQLRQ FDVW WKH )LUVW $PHQGPHQW DV D VZRUG ZLWK ZKLFK WR

PAGE 95

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nV LQH[DFW ODQJXDJH ZKLFK DOORZHG DJHQFLHV WR GHWHUPLQH ZKDW LQIRUPDWLRQ UHTXLULQJ VHFUHF\ LQ WKH SXEOLF LQWHUHVW VKRXOG EH H[HPSW IURP GLVFORVXUH SURYLGHG D ORRSKROH WKDW OHG WR ZLGHVSUHDG DUELWUDU\ ZLWKKROGLQJ 7KH DFW LQ HIIHFW EHFDPH PRUH RI D ZLWKKROGLQJ VWDWXWH 'XULQJ WKLV SRVW:RUOG :DU ,, SHULRG SURSRQHQWV RI DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ ZHUH JLYHQ D ERRVW ZKHQ WKH JRYHUQPHQW LVVXHG WKH +RRYHU 6WXG\ 5HSRUW ZKLFK OHG WR SDVVDJH RI WKH )HGHUDO 5HFRUGV $FW RI

PAGE 96

$V WKH V XQIROGHG SUHVV RUJDQL]DWLRQV DQG RWKHU DGYRFDWHV RI RSHQ JRYHUQPHQW EHJDQ D SXVK WR RSHQ XS IHGHUDO H[HFXWLYH DJHQFLHV ZKLFK KDG LQFUHDVHG WKH OHYHO RI VHFUHF\ DV WKH &ROG :DU DQG WKH WKUHDW RI FRPPXQLVP WRRN KROG ,Q RQH HIIRUW WR SURPRWH DFFHVV WKH $PHULFDQ 6RFLHW\ RI 1HZVSDSHU (GLWRUV FRPPLVVLRQHG D UHSRUW RQ WKH FXVWRPV ODZ DQG OHJLVODWLRQ GHDOLQJ ZLWK DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ 7KH UHVXOW ZDV 7KH 3HRSOHnV 5LJKW WR .QRZ D ERRN SURPRWLQJ DFFHVV E\ PHGLD ODZ\HU +DUROG &URVV &URVV EHJDQ WKH VHPLQDO VWXG\ DERXW DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ ZLWK WKLV VWDWHPHQW 3XEOLF EXVLQHVV LV WKH SXEOLFn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n FDOO RQ &RQJUHVV IRU UHOLHI WKH LQHIIHFWXDO VSXWWHULQJ ZRXOG FRQWLQXH IRU D ZKLOH 6KLIWLQJ RI SROLWLFDO IRUWXQHV KRZHYHU ZRXOG VRRQ SURYLGH

PAGE 97

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

PAGE 98

VRFLHW\ QHHGHG WR FKHFN DJDLQVW FRUUXSWLRQ DQG WR KROG WKH JRYHUQRUV DFFRXQWDEOH WR WKH JRYHUQHG WKH &RXUW VWDWHG 8QGHU WKH )2,$ DOO DJHQF\ UHFRUGV PXVW EH GLVFORVHG XQOHVV VSHFLILFDOO\ H[HPSWHG 7KH DFW SODFHV WKH EXUGHQ RQ WKH DJHQF\ WR MXVWLI\ ZLWKKROGLQJ :KLOH WKH )2,$nV SXUSRVH LV IXOO DJHQF\ GLVFORVXUH LW DOVR FRQWDLQHG QLQH H[HPSWLRQV WKDW UHFRJQL]HG FRPSHWLQJ VRFLDO YDOXHV 6HYHUDO RI WKHVH H[HPSWLRQV GLVFXVVHG LQ D SUHYLRXV VHFWLRQ VSHFLILFDOO\ DWWHPSW WR EDODQFH WKH SXEOLFn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nV ULJKW RI DFFHVV WR JRYHUQPHQW UHFRUGV 7KH VWDWH VWDWXWHV YDU\ LQ WKH GHJUHH RI RSHQQHVV DOORZHG DQG WKH GHILQLWLRQ RI SXEOLF UHFRUGV 6RPH SURYLGH DFFHVV WR D QDUURZ UDQJH RI UHFRUGV VXFK DV UHFRUGV UHTXLUHG WR EH NHSW E\ VWDWH ODZ RWKHUV WDNH D VZHHSLQJ YLHZ RI DFFHVV RSHQLQJ DOO UHFRUGV SHUWDLQLQJ WR

PAGE 99

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

PAGE 100

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nV ULJKW WR NQRZ DERXW JRYHUQPHQW DUH QR OHVV IXQGDPHQWDO DQG DUH GHHSO\ HPEHGGHG LQ WKH $PHULFDQ H[SHULHQFH 7KH YDOXH RI DQ LQIRUPHG HOHFWRUDWH LV URRWHG LQ WKH QDWLRQnV GULYH WR LQGHSHQGHQFH DQG KDV EHHQ DUWLFXODWHG LQ PDQ\ ZD\V GXULQJ PRUH WKDQ WZR FHQWXULHV 7KH OHJLWLPDWH UROH RI DFFHVV WR LQIRUPDWLRQ KDV EHHQ UHFRJQL]HG DV D FRUH VRFLDO YDOXH E\ &RQJUHVV ZKLFK LQ D GHPRFUDWLF VRFLHW\ UHIOHFWV WKH ZLOO RI WKH SHRSOH 7KHVH LPSRUWDQW YDOXHV DW WLPHV FRQIOLFW DV WKH SXEOLF DQG SUHVV VHHN LQIRUPDWLRQ VRPHWLPHV FRQWDLQLQJ SULYDWH GDWD DERXW KRZ JRYHUQPHQW JRHV DERXW WKH SHRSOHnV EXVLQHVV $W WLPHV RQH ULJKW RU WKH RWKHU PXVW \LHOG LQ WKH LQWHUHVW RI VRFLHW\ &KDSWHU 7KUHH ZLOO ORRN DW KRZ &RQJUHVV DQG WKH FRXUWV KDYH DWWHPSWHG WR EDODQFH WKHVH LQWHUHVWV DW D WLPH

PAGE 101

ZKHQ WKH FHQWHU RI EDODQFH KDV EHHQ VNHZHG E\ FRQFHUQV DERXW WKH ZLGHVSUHDG XVH RI JRYHUQPHQW FRPSXWHUV WR JDWKHU DQG VWRUH LQIRUPDWLRQ DERXW LQGLYLGXDOV 7KH FKDSWHU ZLOO WUDFN WKH GHYHORSPHQW RI FRQJUHVVLRQDO FRQFHUQV DERXW WKH WKUHDW RI FRPSXWHUV WR SHUVRQDO SULYDF\ IRFXVLQJ RQ KHDULQJV OHDGLQJ XS WR SDVVDJH RI WKH 3ULYDF\ $FW RI 1RWHV 6HH +DUROG &URVV 7KH 3HRSOHnV 5LJKW WR .QRZ [LY f 3XEOLF EXVLQHVV LV WKH SXEOLFnV EXVLQHVV 7KH SHRSOH KDYH D ULJKW WR NQRZ )UHHGRP RI LQIRUPDWLRQ LV WKHLU MXVW KHULWDJH :LWKRXW WKDW FLWL]HQV RI D GHPRFUDF\ KDYH EXW FKDQJHG WKHLU NLQJV &LWL]HQV RI D VHOI JRYHUQLQJ VRFLHW\ PXVW KDYH WKH OHJDO ULJKW WR H[DPLQH DQG LQYHVWLJDWH WKH FRQGXFW RI DIIDLUV VXEMHFW RQO\ WR WKRVH OLPLWDWLRQV LPSRVHG E\ WKH PRVW XUJHQW SXEOLF QHFHVVLW\ 4OPVWHDG Y 8QLWHG 6WDWHV 8 6 f 86 6XSUHPH &RXUW -XVWLFH /RXLV %UDQGLV ZURWH 7KH PDNHUV RI RXU &RQVWLWXWLRQ XQGHUWRRN WR VHFXUH FRQGLWLRQV IDYRUDEOH WR WKH SXUVXLW RI KDSSLQHVV 7KH\ FRQIHUUHG DV DJDLQVW WKH *RYHUQPHQW WKH ULJKW WR EH OHW DORQHf§WKH PRVW FRPSUHKHQVLYH RI ULJKWV DQG WKH ULJKW PRVW YDOXHG E\ FLYLOL]HG PDQ )ORULGD 6WDU Y %-* 6&W f *ULVZROG Y &RQQHFWLFXW 86 f -XVWLFH *ROGEXUJ MRLQHG E\ &KLHI -XVWLFH :DUUHQ DQG -XVWLFH %UHQQDQ FRQFXUULQJ DW *HQHVLV 5LFKDUG ) +L[VRQ 3ULYDF\ LQ D 3XEOLF 6RFLHW\ +XPDQ 5LJKWV LQ &RQIOLFW f 0RUULV / (UQVW DQG $ODQ 8 6FKZDUW] 7KH 5LJKW 7R %H /HW $ORQH f ,œ -RKQ /RFNH 7KH 6HFRQG 7UHDWLVH RQ *RYHUQPHQW 7 3HDUGRQ HG f

PAGE 102

*ULVZROG Y &RQQHFWLFXW VXSUD QRWH 'DYLG + )ODKHUW\ 3ULYDF\ LQ &RORQLDO 1HZ (QJODQG f ,G DW ,G DW ,G DW ,G DW 7KH 6XSUHPH &RXUW ODWHU IRXQG D ULJKW RI SULYDF\ LQ WKH SHQXPEUD RI WKHVH DPHQGPHQWV *ULVZROG Y &RQQHFWLFXW VXSUD QRWH DW +L[VRQ 3ULYDF\ LQ D 3XEOLF 6RFLHW\ DW -RKQ +) 6KDWWXFN 5LJKWV RI 3ULYDF\ f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f 'HPD\ Y 5REHUWV 0LFK 1: f ,G DW 0LFKDHO (PHU\ DQG (GZLQ (PHU\ 7KH 3UHVV LQ $PHULFD $Q ,QWHUSUHWLYH +LVWRU\ RI WKH 0DVV 0HGLD WK HG f 6HH DOVR 'RQ 5 3HPEHU 3ULYDF\ DQG WKH 3UHVV f ,G DW $ODQ ) :HVWLQ 3ULYDF\ DQG )UHHGRP f ,Gf DW 7KH 7HOHSKRQH 8QPDVNHG 7KH 1HZ
PAGE 103

:LOOLDP 3URVVHU 3ULYDF\ &DOLI / 5HY f 6HH DOVR 3HPEHU 3ULYDF\ DQG WKH 3UHVV DW 6DPXHO :DUUHQ DQG /RXLV %UDQGLV 7KH 5LJKW WR 3ULYDF\ +DUY / 5HY 'HFHPEHU f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f§:HUH :DUUHQ DQG %UDQGLV :URQJ" /DZ t &RQWHPS 3UREV f 6FKX\OHU Y &XUWLV 1< 6XSS f 5REHUVRQ Y 5RFKHVWHU )ROGLQJ %R[ &R 1( 1< f ,G DW ;G &LWLQJ 1HZ
PAGE 104

%R\G Y 8QLWHG 6WDWHV 86 f ,G DW :HVWLQ 3ULYDF\ DQG )UHHGRP DW 6HH DOVR +DUU\ .DOYHQ -U 7KH 3UREOHPV RI 3ULYDF\ LQ WKH
PAGE 105

$OOJH\HU Y /RXLVLDQD DW 0HYHU Y 1HEUDVND 86 f ,G DW 3LHUFH Y 6RFLHW\ RI 6LVWHUV 86 f *ULVZROG Y &RQQHFWLFXW VXSUD QRWH 6HH DOVR 'DYLG 'L[RQ 7KH *ULVZROG 3HQXPEUD &RQVWLWXWLRQDO &KDUWHU IRU WKH ([SDQGHG /DZ RI 3ULYDF\" 0LFK / 5HY f ,G DW ,G ,G DW ,G FLWLQD 3RH Y 8OOPDQ 86 f 5RH Y :DGH 86 f 8QLWHG 6WDWHV Y 0LOOHU 86 f ,G DW :KDOHQ Y 5RH 86 f ,G DW ,G ,G DW 8QLWHG 6WDWHV 'HSDUWPHQW RI -XVWLFH Y 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV 86 f ,G DW ,G DW &LWLQJ :HVWLQ 3ULYDF\ DQG )UHHGRP f DW 3ULYDF\ LV WKH FODLP RI LQGLYLGXDOV WR GHWHUPLQH IRU WKHPVHOYHV ZKHQ KRZ DQG WR ZKDW H[WHQW LQIRUPDWLRQ DERXW WKHP LV FRPPXQLFDWHG WR RWKHUV )UHHGRP RI ,QIRUPDWLRQ $FW 86& VHF Ef f ,G DW 86& VHF Eff

PAGE 106

-XVWLFH 'HSDUWPHQW Y 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV DW )UHHGRP RI ,QIRUPDWLRQ $FW 86& VHF Ef f ,G DW 86& VHF Ef f R ,G DW 86& VHF Ef f ,G DW 86& VHF Ef f 6HH 7KRPDV 6XVPDQ 7KH 3ULYDF\ $FW DQG )UHHGRP RI ,QIRUPDWLRQ $FW &RQIOLFW DQG 5HVROXWLRQ 0DUVKDOO / 5HY 6XPPHU f &RQJUHVV FOHDUHG XS WKH PLVXQGHUVWDQGLQJ LQ ZLWK DQ DPHQGPHQW WR WKH 1DWLRQDO 6HFXULW\ $FW RI WKDW VSHFLILFDOO\ VWDWHG WKDW WKH 3ULYDF\ $FW GLG QRW TXDOLI\ DV DQ ([HPSWLRQ VWDWXWH XQGHU WKH )UHHGRP RI ,QIRUPDWLRQ $FW 3XE / 1R DPHQGLQJ 86&$ VHF 6HH JHQHUDOO\ 7KH &RPSXWHU DQG OQYDVLRQB4I 3ULYDF\ +HDULQJV %HIRUH WKH 6SHFLDO 6XEFRPPLWWHH RQ ,QYDVLRQ RI 3ULYDF\ RI WKH +RXVH &RPPLWWHH RQ *RYHUQPHQW 2SHUDWLRQV WK &RQJ G 6HVV f )HGHUDO 'DWD %DQNV &RPSXWHUV DQG WKH %LOO RI 5LJKWV +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ &RQVWLWXWLRQDO 5LJKWV RI WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ QG &RQJ VW 6HVV f 3ULYDF\ 7KH &ROOHFWLRQ 8VH DQG &RPSXWHUL]DWLRQ RI 3HUVRQDO 'DWD -RLQW +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ 3ULYDF\ DQG ,QIRUPDWLRQ 6\VWHPV RI WKH 6HQDWH &RPPLWWHH RQ *RYHUQPHQW 2SHUDWLRQV DQG WKH 6XEFRPPLWWHH RQ &RQVWLWXWLRQDO 5LJKWV RI WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ UG &RQJ G 6HVV f 7KH &RPSXWHU DQG ,QYDVLRQ RI 3ULYDF\ VXSUD QRWH DW LG DW 6HH VXSUD QRWH 3ULYDF\ $FW RI 65HS 1R UHSULQWHG LQ f 6& VHF 6 &RQJ D t $GPLQ 6HH DOVR 1HZV &RPSXWHU 0DWFKLQJ DQG 3ULYDF\ 3URWHFWLRQ $FW RI 86& VHF D 5LJKW WR )LQDQFLDO 3ULYDF\ $FW RI 86& VHF (OHFWURQLF &RPPXQLFDWLRQV 3ULYDF\ $FW RI 86& VHF &RPSXWHU 6HFXULW\ $FW RI 3XE / 1R )HGHUDO 0DQDJHUVn )LQDQFLDO

PAGE 107

,QWHJULW\ $FW RI 86& VHF &RPSXWHU )UDXG DQG $EXVH $FW RI 3XE / 1R &DEOH &RPPXQLFDWLRQ 3ROLF\ $FW RI 86& VHF )DPLO\ (GXFDWLRQDO 5LJKWV DQG 3ULYDF\ $FW RI 86& VHF &RPSXWHU 0DWFKLQJ DQG 3ULYDF\ 3URWHFWLRQ $FW RI 86& VHF D :HVWLQ 3ULYDF\ DQG )UHHGRP DW $QQDOV RI &RQJ f )RU H[DPSOH WKH FRQVWLWXWLRQDO FRQYHQWLRQ H[FOXGHG WKH SXEOLF VHH VXSUD QRWH f DQG 7KRPDV -HIIHUVRQ VRRQ DIWHU H[SLUDWLRQ RI WKH 6HGLWLRQ $FW VXJJHVWHG LQ D OHWWHU WR WKH JRYHUQRU RI 3HQQV\OYDQLD WKDW WKH VWDWHV VKRXOG DFW WR FRQWURO WKH 7RU\ SUHVV VHH /HRQDUG /HY\ (PHUJHQFH RI D )UHH 3UHVV f 6HH 1DW +HQWRII 7KH )LUVW )UHHGRP f 6HH JHQHUDOO\ /HRQDUG /HY\ -HIIHUVRQ DQG &LYLO /LEHUWLHV 7KH 'DUNHU 6LGH f /HY\ (PHUJHQFH RI D )UHH 3UHVV DW 7KH 3URVH :RUNV RI -RKQ 0LOWRQ 5XIXV : *ULVZROG HG f -RKQ /RFNH ,9 $Q (VVD\ &RQFHUQLQJ +XPDQ 8QGHUVWDQGLQJ f DV QRWHG LQ /HY\ (PHUJHQFH RI D )UHH 3UHVV DW ,G /RFNH 7KH 6HFRQG 7UHDWLVH RQ *RYHUQPHQW DW /HY\ (PHUJHQFH RI D )UHH 3UHVV DW 6HH DOVR (PHU\ DQG (PHU\ 7KH 3UHVV LQ $PHULFD $Q ,QWHUSUHWLYH +LVWRU\ RI WKH 0DVV 0HGLD DW 7KRPDV 3DLQH 7KH 5LJKWV RI 0DQ f /HWWHU IURP -DPHV 0DGLVRQ WR :7 %DUU\ $XJ f SHUWLQHQW SRUWLRQ UHSULQWHG LQ 7KH &RPSOHWH 0DGLVRQ 6DXO 3DGRYHU HG f &LWHG LQ (QYLURQPHQWDO 3URWHFWLRQ $JHQF\ Y 0LQN 86 f /HY\ -HIIHUVRQ DQG &LYLO /LEHUWLHV 7KH 'DUNHU 6LGH DW ,G

PAGE 108

/HWWHU IURP 7KRPDV -HIIHUVRQ WR *RY 7KRPDV 0F.HDQ RI 3HQQV\OYDQLD )HE f UHSULQWHG LQ 7KH :ULWLQJV RI 7KRPDV -HIIHUVRQ 3DXO /HLFHVWHU )RUG HG f &LWHG LQ /HY\ (PHUJHQFH RI D )UHH 3UHVV DW 6HH DOVR (PHUJHQFH RI D )UHH 3UHVV DW IRU D GLVFXVVLRQ RI -HIIHUVRQnV EHOLHI LQ VWDWH SURKLELWLRQV DJDLQVW WKH SUHVV 6HH JHQHUDOO\ -RKQ 6WXDUW 0LOO 2Q /LEHUW\ f -RKQ 6WXDUW 0LOO &RQVLGHUDWLRQV RQ 5HSUHVHQWDWLYH *RYHUQPHQW & 6KLHOGV HG f ,G DW :RRGURZ :LOVRQ 7KH 1HZ )UHHGRP f $EUDPV Y 8QLWHG 6WDWHV 86 f ,G DW ,G -XVWLFH +ROPHV GLVVHQWLQJf :KLWQH\ Y &DOLIRUQLD 86 f ,G DW 6WURPEHUJ Y &DOLIRUQLD 86 f $OH[DQGHU 0HLNOHMRKQ )UHH 6SHHFK DQG ,WV 5HODWLRQ WR 6HOI*RYHUQPHQW f ,G 6HH JHQHUDOO\ $EUDKDP 0DVORZ 0RWLYDWLRQ DQG 3HUVRQDOLW\ f DQG 0DVORZ 5HOLJLRQ 9DOXHV DQG 3HDN ([SHULHQFH f 7KRPDV (PHUVRQ 7RZDUG D *HQHUDO 7KHRU\ RI WKH )LUVW $PHQGPHQW f 6HH DOVR (PHUVRQ 7KH %LOO RI 5LJKWV 7RGD\ f 9LQFHQW %ODVL 7KH &KHFNLQJ 9DOXH LQ )LUVW $PHQGPHQW 7KHRU\ $P % )RXQG 5HV 3RWWHU 6WHZDUW 2U RI WKH 3UHVV +DVWLQJV / f 6HH DOVR )OR\G $EUDPV 7KH 3UHVV LV 'LIIHUHQW 5HIOHFWLRQV RQ -XVWLFH 6WHZDUW DQG WKH $XWRQRPRXV 3UHVV +RIVWUD / 5HY f )D\HWWH &R Y 0DUWLQ .\ f 6: G

PAGE 109

6WDWH H[ UH :HOOIRUG Y :LOOLDPV 7HQQ 6: f 6HV DOVR &OHPHQW Y *UDKDP 9W f %XUWRQ Y 7XLWH 0LFK f 0DF(ZDQ Y +ROP 2U f 6HH JHQHUDOO\ 1HEUDVND 3UHVV $VVnQ Y 6WXDUW 86 f 8QLWHG 6WDWHV Y 1L[RQ 86 f ,Q UH 0DFN 3D $G f FHUW GHQLHG 86 f *LWORZ Y 1HZ
PAGE 110

LG -XVWLFH 5HKQTXLVW GLVVHQWHG VKDUSO\ IURP WKH PDMRULW\ DUJXLQJ WKDW WKH RSLQLRQ GHYDOXHG WKH )LUVW $PHQGPHQW +H VDLG WKH )LUVW $PHQGPHQW VKRXOG SURWHFW WKH PDUNHWSODFH RI LGHDV QRW WKH FRPPHUFLDO PDUNHWSODFH ,G DW )LUVW 1DWLRQDO %DQN Y %HOORWWL 86 f ,G DW %UDQ]EXUFU Y +D\HV 86 f ,G DW -XVWLFH 3RZHOO FRQFXUULQJf .HQW 0LGGOHWRQ DQG %LOO ) &KDPEHUOLQ 7KH /DZ RI 3XEOLF &RPPXQLFDWLRQ G HG f f 3HOO Y 3URFXQLHU 86 f 6D[EH Y :DVKLQFUWRQ 3RVW &R 86 3HOO Y 3URFXQLHU DW ,G DW -XVWLFH 'RXJODV GLVVHQWLQJf 5LFKPRQG 1HZVSDSHUV Y 9LUDLQLD 86 f ,G DW ,G DW ,G ,G DW ,G DW ,G DW ,G DW ,G DW ,G DW :LOOLDP 9DQ $OVW\QH ,QWHUSUHWDWLRQV RI WKH )LUVW $PHQGPHQW f

PAGE 111

6HH H J 6PLWK Y 'DLO\ 0DLO 3XEOLVKLQJ &R 86 f *OREH 1HZVSDSHU &R Y 6XSHULRU &RXUW 86 f 3UHVV(QWHUSULVH &R Y 5LYHUVLGH &RXQW\ 6XSHULRU &RXUW 86 f 3HOO Y 3URFXQLHU DW $GPLQLVWUDWLYH 3URFHGXUHV $FW 86& VHF f )HGHUDO 5HFRUGV $FW 6WDW f 6HH JHQHUDOO\ &URVV 7KH 3HRSOHnV 5LJKW WR .QRZ LG DW [[[ LG DW [LY 6HH 3DXO ( .RVW\X 3ROLWLFDO 3UHVVXUH 7KH )UHHGRP RI ,QIRUPDWLRQ $FW DQG -RKQ ( 0RVV -U FRQIHUHQFH SDSHU SUHVHQWHG DW WKH $(-0& 6RXWKHDVW &ROORTXLXP LQ 2UODQGR )OD )HE 0DUFK f 6HH JHQHUDOO\ -DPHV 5 :LJJLQV )UHHGRP RU 6HFUHF\" f 5DOSK 1DGHU 8QVDIH DW $Q\ 6SHHG 7KH 'HVLJQHGLQ 'DQJHU RI WKH $PHULFDQ $XWRPRELOH f 4XRWHG LQ 7KRPDV 6XVPDQ ,QWURGXFWLRQ WR WKH ,VVXHV 3UREOHPV DQG 5HOHYDQW /DZ LQ
PAGE 112

(YHU\WKLQJ $Q\WLPH ([FHSW )RUGKDP /5 f ,QG &RGH VHF f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

PAGE 113

&+$37(5 7+5(( 7+( (92/87,21 2) &20387(535,9$&< &21&(516 $&&(66 72 *29(510(17 ,1)250$7,21 +(/' ,1 7+( %$/$1&( 7KH &RUH RI WKH 'HEDWH &RQFHUQV DERXW WKUHDWV WR SHUVRQDO SULYDF\ KDYH SOD\HG D FHQWUDO UROH LQ ODZV DQG OHJLVODWLRQ SODFLQJ OLPLWDWLRQV RQ SXEOLF DQG PHGLD DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ *RYHUQPHQWV DW DOO OHYHOVf§IHGHUDO VWDWH DQG ORFDOf§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

PAGE 114

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f§HYHQ ZKHQ WKH LQIRUPDWLRQ ZDV WDNHQ IURP SXEOLF UHFRUGV HOVHZKHUHf§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f§ HVSHFLDOO\ DIWHU IHDUV DERXW FRPSXWHUV KDYH EHHQ YRLFHGUXQ

PAGE 115

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

PAGE 116

%DFNGURS IRU WKH &RPSXWHU3ULYDFY 'HEDWH ,Q WKH GHFDGH IROORZLQJ :RUOG :DU ,, WKH &ROG :DU IRFXVHG WKH DWWHQWLRQ RI $PHULFDQV RQ WKH WKUHDW RI 6RYLHW FRPPXQLVP DQG PRUH JHQHUDOO\ WRWDOLWDULDQ JRYHUQPHQW *HRUJH 2UZHOOn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nV PHWDSKRU RI WKH ,URQ &XUWDLQ 7KH &ROG :DU RI WKH HDUO\ V XQGHUVFRUHG E\ DQ XQGHFODUHG ZDU ZLWK FRPPXQLVW 1RUWK .RUHD XQGHU WKH DXVSLFHV RI WKH 8QLWHG 1DWLRQV ZDV IHUWLOH JURXQG IRU WKH OLNHV RI -RVHSK 0F&DUWK\ 7KH VHQDWRU IURP :LVFRQVLQ JDLQHG SROLWLFDO FDSLWDO E\ FKDOOHQJLQJ WKH SDWULRWLVP RI PDQ\ HPSOR\HHV RI WKH IHGHUDO EXUHDXFUDF\ TXLWH D IHZ 1HZ 'HDO

PAGE 117

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nV SXEOLVKHG LQ DV WKH &ROG :DU XQIROGHG VWUXFN D QHUYH DV UHDGHUV PHDVXUHG WKHLU FXUUHQW LQVHFXULWLHV DJDLQVW D GDWH WKDW VHHPHG VR IDU DZD\ 2UZHOOnV YLOODLQ ZDV WKH IDFHOHVV EXUHDXFUDW LQ WKH WRWDOLWDULDQ VWDWH ZKHUH JRYHUQPHQW NHSW HYHU\ DVSHFW RI FLWL]HQVn OLYHV XQGHU FRQVWDQW VXUYHLOODQFH 7KH YLOODLQnV DFFRPSOLFH ZDV WHFKQRORJ\ SHUVRQLILHG E\ %LJ %URWKHU 7KH SRVWHU ZLWK WKH HQRUPRXV IDFH JD]HG IURP WKH ZDOO ,W ZDV RQH RI WKRVH SLFWXUHV ZKLFK DUH VR FRQWULYHG WKDW WKH H\HV IROORZ \RX DERXW ZKHQ \RX PRYH %LJ %URWKHU ,V :DWFKLQJ ,Q WKH DSDUWPHQW@ WKH WHOHVFUHHQ UHFHLYHG DQG WUDQVPLWWHG VLPXOWDQHRXVO\ $Q\ VRXQG ZRXOG EH SLFNHG XS E\ LW 7KHUH ZDV RI FRXUVH QR ZD\ RI

PAGE 118

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f§D WLQ\ SLHFH RI VLOLFRQH WKDW FRXOG PLPLF WKH YDFXXP WXEHUHSODFHG LWV EXON\ JODVV FRXQWHUSDUW

PAGE 119

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

PAGE 120

,OO FKDQJH LQ WKH ZD\ OHJLVODWXUHV DQG FRXUWV GLVWULEXWHG HFRQRPLF ULVNV DQG EHQHILWV WKURXJKRXW VRFLHW\ *RYHUQPHQW QR ORQJHU VLPSO\ HQKDQFHG HFRQRPLF RSSRUWXQLW\ E\ VWDQGLQJ DVLGH LQVWHDG LW DVVXPHG WKH DIILUPDWLYH UROH RI HQVXULQJ FHUWDLQ ULJKWV DQG OLEHUWLHV $V WKH V PDWXUHG JRYHUQPHQW LQ WKH UROH RI EHQHILW SURYLGHU JUHZ UDSLGO\ XQGHU 3UHVLGHQW /\QGRQ -RKQVRQn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

PAGE 121

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n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

PAGE 122

VFKRODUO\ OLWHUDWXUH DERXW WKH QHZ WHFKQRORJ\ WKURXJKRXW WKH V DQG HDUO\ V (DUOLHU ERRNV VXFK DV DQG $OGRXV +X[OH\nV %UDYH 1HZ :RUOG RQFH WUHDWHG DV VFLHQFH ILFWLRQ DFKLHYHG QHZ UHOHYDQFH 6HYHUDO ERRNV LQ WKH HDUO\ V VXFK DV 9DQFH 3DFNDUGn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

PAGE 123

0DQ\ ERRNV WKDW DGGUHVVHG FRPSXWHU FRQFHUQV GXULQJ WKH V DQG V KRZHYHU IRFXVHG RQ IHDUV UHODWHG WR FRPSXWHU SULYDF\ DQG RWKHU GDQJHUV WHFKQRORJ\ SRVHG IRU FLYLO OLEHUWLHV 7KH IRFXV RI PXFK FRQFHUQ ZDV D SURSRVDO E\ WKH IHGHUDO %XUHDX RI WKH %XGJHW IRU FUHDWLRQ RI D 1DWLRQDO 'DWD &HQWHU 6XFK D FHQWHU ZRXOG EULQJ WRJHWKHU LQIRUPDWLRQ JDWKHUHG E\ YDULRXV IHGHUDO DJHQFLHVPXFK RI LW SHUVRQDO LQ QDWXUHf§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n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

PAGE 124

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nWR EH OHW DORQHn PD\ EH VOLSSLQJ DZD\ ZLWKRXW SXEOLF SURWHVW ,VVXHV UDLVHG E\ WKH 1DWLRQDO 'DWD &HQWHU SURSRVDO ZHUH DGGUHVVHG LQ VHYHUDO VFKRODUO\ DUWLFOHV $UWKXU 0LOOHUnV 3HUVRQDO 3ULYDF\ LQ WKH &RPSXWHU $JH 7KH &KDOOHQJH RI 1HZ

PAGE 125

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nV ULJKW WR NQRZ DERXW WKH DFWLYLWLHV RI JRYHUQPHQW &RQVWLWXWLRQDO VFKRODU +DUU\ .DOYHQ -U ZKRVH ZRUN LQIOXHQFHG JHQHUDWLRQV RI OHJDO WKLQNHUV ORRNHG DKHDG PRUH WKDQ D TXDUWHU RI D FHQWXU\ LQ D DUWLFOH WLWOHG 7KH 3UREOHPV RI 3ULYDF\ LQ WKH
PAGE 126

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nV SRWHQWLDO DUWLFOHV IRFXVHG RQ WKH SRWHQWLDO VRFLDO FRQVHTXHQFHV RI DQ XQEULGOHG WHFKQRORJ\ LQ WKH KDQGV RI WKH XQZLWWLQJ RU XQVFUXSXORXV 7KH FKDQJH FRLQFLGHG ZLWK D JURZLQJ FRQFHUQ DERXW WKH SURSRVDO IRU FUHDWLRQ RI D 1DWLRQDO 'DWD &HQWHU WR SRRO LQIRUPDWLRQ IURP YDULRXV JRYHUQPHQW DJHQFLHV $V WKH GHEDWH RYHU WKH SURSRVHG 1DWLRQDO 'DWD &HQWHU TXLFNHQHG WKH 2UZHOOLDQ VSHFWHU RI %LJ %URWKHU JUHZ $

PAGE 127

\HDU DIWHU WKH 7LPH DUWLFOH KHUDOGHG 7KH &\EHUQDWLRQ *HQHUDWLRQ 86 1HZV t :RUOG 5HSRUW FDXWLRQHG LQ D FHQWHUSLHFH VWRU\ WKDW \RXU OLIH VWRU\ PD\ EH RQ ILOH ZLWK WKH *RYHUQPHQW EHIRUH ORQJ VXEMHFW WR RIILFLDO VFUXWLQ\ DW WKH SXVK RI D EXWWRQ ,Q WKH DUWLFOH 'U 2UYLOOH %ULP -U FKDLUPDQ RI WKH 5XVVHOO 6DJH )RXQGDWLRQ RI 1HZ
PAGE 128

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

PAGE 129

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f ZKLFK DGGUHVVHG WKH QHHG WR SUHVHUYH GDWD IRU HFRQRPLF UHVHDUFK 7KH JRYHUQPHQW FROOHFWHG HFRQRPLF DQG

PAGE 130

UHODWHG GDWD DV SDUW RI LWV UHJXODWRU\ IXQFWLRQ DQG $($ ZDV FRQFHUQHG WKDW ZLWKRXW D SURJUDP WR PDLQWDLQ VXFK GDWD LW ZRXOG EH ORVW IRU IXWXUH UHVHDUFK 7R WKLV HQG WKH $($ UHFRPPHQGHG WKDW WKH QRQSURILW 6RFLDO 6FLHQFH 5HVHDUFK &RXQFLO ZKLFK UHSUHVHQWHG WKH LQWHUHVWV RI VRFLDO VFLHQWLVWV FRQGXFW D IHDVLELOLW\ VWXG\ 7KH VWXG\ ZDV EHJXQ LQ 'HFHPEHU &KDLUHG E\ 5LFKDUG 5XJJOHV RI
PAGE 131

WKH FRPPLWWHH XUJHG WKDW D IHGHUDO GDWD FHQWHU EH HVWDEOLVKHG E\ WKH IHGHUDO JRYHUQPHQW ,WV SXUSRVH ZRXOG EH WR SUHVHUYH DQG PDNH DYDLODEOH WR ERWK JRYHUQPHQW DQG QRQJRYHUQPHQW XVHUV EDVLF VWDWLVWLFDO GDWD WKDW RULJLQDWHG DW DOO IHGHUDO DJHQFLHV 7KH 5XJJOHV FRPPLWWHH WXUQHG RYHU LWV UHSRUW WR WKH 6RFLDO 6FLHQFH 5HVHDUFK &RXQFLO LQ HDUO\ %DVHG RQ LWV FRQFOXVLRQV WKH %XUHDX RI WKH %XGJHW ZKLFK KDG MRLQHG WKH SURMHFW DW WKH UHVHDUFK FRXQFLOn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n SDVVLQJ DQG SHUIRUPDQFH RI VWDQGDUG VWDWLVWLFDO URXWLQHV 'HYHORSPHQW RI FRPSXWHU KDUGZDUH DQG VRIWZDUH V\VWHPV 3URYLVLRQ RI VWDII VXSSRUW WR ZRUN LQ FRQMXQFWLRQ ZLWK WKH %XUHDX RI WKH %XGJHW WR GHYHORS DQG HVWDEOLVK VWDQGDUGV HVVHQWLDO WR V\VWHP FDSDELOLW\ 5HVSRQGLQJ WR FRQFHUQV WKDW D 1DWLRQDO 'DWD &HQWHU FRXOG EH XVHG WR PRQLWRU WKH SHUVRQDO OLYHV RI LQGLYLGXDOV 'XQQ VDLG WKDW GDQJHU FRXOG EH DYHUWHG LQ WZR ZD\V )LUVW

PAGE 132

&RQJUHVV FRXOG OHJLVODWH VWDWXWRU\ UHVWULFWLRQV RQ XVH RI WKH LQIRUPDWLRQ 6HFRQG KH VDLG FRPSXWHU V\VWHPV FRXOG EH GHVLJQHG WR UHTXLUH FRGH ERRNV WR HQVXUH WKDW RQO\ GHVLJQDWHG SHUVRQV ZRXOG KDYH DFFHVV WR WKH V\VWHP $ VSHFLDO FRPPLWWHH ZDV HVWDEOLVKHG E\ WKH :KLWH +RXVH WR UHYLHZ WKH SURSRVDO ,W ZDV KHDGHG E\ &DUO .D\VHQ D IRUPHU .HQQHG\ DGPLQLVWUDWLRQ HFRQRPLVW DQG FKDLUPDQ RI 3ULQFHWRQ 8QLYHUVLW\nV ,QVWLWXWH IRU $GYDQFHG 6WXG\ .D\VHQnV UHSRUW HQGRUVHG WKH 1DWLRQDO 'DWD &HQWHU SURSRVDO DQG VXJJHVWHG WKDW LW DOVR LQFOXGH VWDWH DQG ORFDO JRYHUQPHQW GDWD )RU WKH 1DWLRQDO 'DWD &HQWHU WR ZRUN WKH %XUHDX RI WKH %XGJHW FRQFHGHG SHRSOH RQ ZKRP GDWD ZHUH FROOHFWHG PXVW EH LQGLYLGXDOO\ LGHQWLILHG LQ VRPH ZD\ SUHFDXWLRQV ZRXOG EH WDNHQ KRZHYHU WR SUHYHQW WKH GLVFORVXUH RI DQ\ FRQILGHQWLDO LQIRUPDWLRQ &RQJUHVV UHVSRQGHG TXLFNO\ WR WKH 1DWLRQDO 'DWD &HQWHU FRQFHSW ,Q WKH +RXVH &RPPLWWHH RQ *RYHUQPHQW 2SHUDWLRQVn 6SHFLDO 6XEFRPPLWWHH RQ ,QYDVLRQ RI 3ULYDF\ KHOG KHDULQJV RQ WKH GDWD FHQWHU SURSRVDO 7KH\ ZHUH D FRQWLQXDWLRQ RI D VSHFLDO LQTXLU\ LQLWLDWHG WKH \HDU EHIRUH E\ 5HS :LOOLDP / 'DZVRQ FKDLUPDQ RI WKH +RXVH &RPPLWWHH RQ *RYHUQPHQW 2SHUDWLRQV 'DZVRQnV FRPPLWWHH GHDOW ZLWK VHYHUDO EURDGHU LVVXHV UHODWHG WR WHFKQRORJ\ DQG SHUVRQDO SULYDF\

PAGE 133

'XULQJ WKH 1DWLRQDO 'DWD &HQWHU KHDULQJV WKH FRQIOLFW EHWZHHQ WZR LPSRUWDQW SXEOLF SROLF\ FRQVLGHUDWLRQV EHFDPH DSSDUHQW 3URSRQHQWV RI WKH GDWD FHQWHU HFKRHG FRQFOXVLRQV RI WKH HDUOLHU 5XJJOHV FRPPLWWHH DQG %XUHDX RI WKH %XGJHW FRQVXOWDQWnV UHSRUWV 7KH\ HPSKDVL]HG WKDW WKH FXUUHQW GHFHQWUDOL]HG V\VWHP ZDV FXPEHUVRPH DQG LQHIILFLHQW DQG LPSDLUHG IHGHUDO DJHQFLHVn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

PAGE 134

ZKLOH ZHLJKLQJ FRPSXWHU SULYDF\ FRQFHUQV DJDLQVW WKH QHHG WR IRVWHU JRYHUQPHQW HIILFLHQF\ +H FDOOHG IRU D VHQVH RI EDODQFH QRWLQJ WKDW D GDWD EDQNnV EHQHILWV WR UHVHDUFKHUV IRU H[DPSOH FRXOG EH UHDOL]HG ZKLOH KXPDQ GLJQLW\ DQG FLYLO OLEHUWLHV ZHUH SUHVHUYHG
PAGE 135

,Q WHVWLPRQ\ EHIRUH WKH FRPPLWWHH VHYHUDO WKHPHV DQG DUJXPHQWV HPHUJHG 6XEFRPPLWWHH PHPEHU )UDQN +RUWRQ RI 1HZ
PAGE 136

LQDGYHUWHQW GDWDSURFHVVLQJ PLVWDNHV SHUSHWXDWHG LQ JRYHUQPHQW GDWD EDQNV FRXOG UXLQ FDUHHUV DQG OLYHV 7KLV SRWHQWLDO ZDV JUHDWHVW KH VDLG ZKHQ DOO NLQGV RI UDZ LQIRUPDWLRQ ZDV IHG LQWR FRPSXWHUV ZLWKRXW H[SODQDWLRQV FRUUHFWLRQV XSGDWHV RU UHIHUHQFH WR H[WHQXDWLQJ FLUFXPVWDQFHV 6LPLODUO\ &KDUOHV $ 5HLFK RI WKH
PAGE 137

GLUHFWRU IRU VWDWLVWLFDO VWDQGDUGV IRU WKH %XUHDX RI WKH %XGJHW %RZPDQ LQ FKDUJH RI PDNLQJ UHFRPPHQGDWLRQV RQ ZKHWKHU WKH FHQWHU VKRXOG EH HVWDEOLVKHG VDLG HOHFWURQLF GDWD SURFHVVLQJ KDG UHYROXWLRQL]HG JRYHUQPHQW UHFRUGn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

PAGE 138

LGHQWLILHG WKH SURYLGHU 7KHUH LV JHQHUDO UHFRJQLWLRQ WKDW WKLV SUDFWLFH RI FRQILGHQWLDOLW\ LV VRXQG SXEOLF SROLF\ 0DLQWHQDQFH RI WKLV SULQFLSOH ZRXOG EH D PDMRU WHQHW RI DQ\ VWDWLVWLFDO GDWD FHQWHU DQG LV FOHDUO\ UHTXLUHG E\ ODZ (GJDU 6 'XQQ -U WKH UHVHDUFK DQDO\VW IRU WKH ILUP WKDW SUHSDUHG WKH UHSRUW IRU WKH %XUHDX RI WKH %XGJHW FRQIURQWHG WKH SXEOLFnV IHDUV RI %LJ %URWKHU KHDG RQ 7KH OD\ RU SXEOLF LPDJH RI VXFK D V\VWHP LV RQH RI DQ DXWRPDWHG PRQVWHU ZLWK HYHU\ERG\nV UHFRUG WKDW FDQ EH LQVWDQWDQHRXVO\ UHWULHYHG E\ SUHVVLQJ EXWWRQV 7KHUH VHHPV WR EH QR DZDUHQHVV WKDW WKH VDPH WHFKQRORJ\ WKDW SURMHFWV WKLV IULJKWHQLQJ LPDJH KDV FKDUDFWHULVWLFV WKDW FDQ EH XWLOL]HG HIIHFWLYHO\ WR SURWHFW WKH VDQFWLW\ RI WKH LQGLYLGXDO UHFRUG 'XQQ VDLG PXFK RI WKH SXEOLFn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

PAGE 139

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nV 6XEFRPPLWWHH RQ $GPLQLVWUDWLYH 3UDFWLFHV DQG 3URFHGXUHV ZHUH EULHI FRPSDUHG WR WKRVH LQ WKH +RXVH 7KH KHDULQJV FRQVLVWHG SULPDULO\ RI WHVWLPRQ\ IURP (GJDU 'XQQ -U DQG DV LQ WKH +RXVH VXEFRPPLWWHH PHPEHUV H[SUHVVHG ZRUULHV WKDW WHFKQRORJ\ PLJKW UXQ URXJKVKRG RYHU LQGLYLGXDO

PAGE 140

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

PAGE 141

&RQJUHVV DQG WKH DGPLQLVWUDWLRQ VKRXOG WDNH D FDUHIXO ORRN DW LW &RPPLWWHHV IURP ERWK +RXVH DQG 6HQDWH KHOG D VHFRQG URXQG RI WDONV WKH IROORZLQJ \HDU UHYLVLWLQJ VRPH RI WKH FHQWUDO LVVXHV %XW WKH SURSRVDO GLHG 8QFHUWDLQW\ DERXW QHZ FRPSXWHU WHFKQRORJ\ ZRQ WKH GD\ DQG ZRXOG FRQWLQXH WR XQGHUVFRUH FRQJUHVVLRQDO WKLQNLQJ IRU GHFDGHV WR FRPH
PAGE 142

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

PAGE 143

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
PAGE 144

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

PAGE 145

WKDW PDQ\ $PHULFDQV KDYH RI D ZRPEWRWRPE GRVVLHU RQ HDFK RI XV KH VDLG 0LOOHU VXUPLVHG WKDW WKH JHQHUDO ODFN RI FRQFHUQ DERXW JRYHUQPHQW LQIRUPDWLRQJDWKHULQJ UHIOHFWHG WKH IDFW WKDW IRU WKH PRVW SDUW VXFK DFWLYLWLHV ZHUH ZHOOLQWHQWLRQHG %XW LQYRNLQJ WKH FRQFHUQV RI 2UZHOO DQG +X[OH\ 0LOOHU QRQHWKHOHVV H[SUHVVHG IHDU DERXW WKH FXPXODWLYH QHJDWLYH LPSDFW RQ WKH SXEOLFn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
PAGE 146

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nV FRQFHUQV DERXW WKH FXPXODWLYH HIIHFW RI WHFKQRORJ\ RQ WKH SXEOLF SV\FKH 5RVHQEHUJ ZDUQHG WKH FRPPLWWHH DERXW WKH SV\FKRORJLFDO LPSDFW RI UDSLG WHFKQRORJLFDO FKDQJH +H VDLG KLV VWXGLHV KDG IRXQG $PHULFDQV FRQFHUQHG DERXW WKH XQGHPRFUDWLF SURFHVV ZKLFK VWDUWV DW ELUWK WR PDNH SHRSOH EHOLHYH WKDW WKH\ DUH XQDEOH WR VD\ n1Rn WR GLYXOJLQJ SHUVRQDO LQIRUPDWLRQ 7KLV

PAGE 147

LQDELOLW\ WR VD\ n1Rn SHUSHWXDWHV WKH FROOHFWLRQ RI GDWD WKDW ZLOO IROORZ WKHP IRU WKH UHPDLQGHU RI WKHLU OLYHVf§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f LQLWLDWHG D VWXG\ RI DJHQF\ SUDFWLFHV &DVSDU :HLQEHUJHU HVWDEOLVKHG DQ $GYLVRU\ &RPPLWWHH RQ $XWRPDWHG 3HUVRQDO 'DWD 6\VWHPV WR H[SORUH WKH UHODWLRQVKLS EHWZHHQ LQGLYLGXDOV DQG UHFRUGNHHSLQJ RUJDQL]DWLRQV DQG WR DQDO\]H VHYHUDO LVVXHV 7KH FRPPLWWHH FRQVLVWLQJ RI PHPEHUV IURP WKH VRFLDO VHUYLFH SURIHVVLRQV WKH UHVHDUFK FRPPXQLW\

PAGE 148

DFDGHPLFV SULYDWH LQGXVWU\ DQG JRYHUQPHQW ZDV DVNHG WR PDNH UHFRPPHQGDWLRQV DERXW f§+DUPIXO FRQVHTXHQFHV WKDW PD\ UHVXOW IURP XVLQJ DXWRPDWHG SHUVRQDO GDWD V\VWHPV f§6DIHJXDUGV WKDW PLJKW SURWHFW DJDLQVW SRWHQWLDOO\ KDUPIXO FRQVHTXHQFHV f§ 0HDVXUHV WKDW PLJKW DIIRUG UHGUHVV IRU DQ\ KDUPIXO FRQVHTXHQFHV f§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

PAGE 149

FRGH ZKLFK EHFDPH D PRGHO IRU WKH 3ULYDF\ $FW RI KDG ILYH PDMRU SULQFLSOHV f§7KHUH PXVW EH QR SHUVRQDO GDWD UHFRUGn NHHSLQJ V\VWHPV ZKRVH YHU\ H[LVWHQFH LV VHFUHW f§7KHUH PXVW EH D ZD\ IRU DQ LQGLYLGXDO WR ILQG RXW ZKDW LQIRUPDWLRQ DERXW KLP LV LQ D UHFRUG DQG KRZ LW LV XVHG f§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

PAGE 150

8QWLO OHJLVODWLYH HQDFWPHQW RI WKH UHFRPPHQGHG &RGH RI )DLU ,QIRUPDWLRQ 3UDFWLFHV WKH FRPPLWWHH VDLG DJHQF\ GHSDUWPHQWV LQ WKH LQWHULP VKRXOG XVH WKHLU DGPLQLVWUDWLYH DQG UXOHPDNLQJ SRZHUV WR VDIHJXDUG DOO LQIRUPDWLRQ ZLWKLQ WKH IHGHUDO V\VWHP DQG LQ RWKHU V\VWHPV ZLWKLQ WKH UHDFK RI WKH IHGHUDO JRYHUQPHQWn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n DG KRF 6XEFRPPLWWHH RQ 3ULYDF\ DQG ,QIRUPDWLRQ 6\VWHPV EHJDQ MRLQW KHDULQJV ZLWK WKH -XGLFLDU\ &RPPLWWHHnV 6XEFRPPLWWHH RQ &RQVWLWXWLRQDO 5LJKWV ZKLFK ZDV FRQVLGHULQJ UHODWHG OHJLVODWLRQ 6HQDWRU (UYLQ FKDLUPDQ RI ERWK VXEFRPPLWWHHV DQQRXQFHG WKH MRLQW KHDULQJV LQ D VSHHFK EHIRUH WKH 6HQDWH RQ -XQH +H QRWHG WKDW KLV VXEFRPPLWWHHV KDG KHDUG FRPSODLQWV DERXW JRYHUQPHQW LQIRUPDWLRQ SUDFWLFHV IURP ZLWQHVVHV IURP YDULRXV ZDONV RI OLIH DQG VSDQQLQJ VHYHUDO DGPLQLVWUDWLRQV +H VDLG WKH FRPSODLQWV VKRZHG $PHULFDQV

PAGE 151

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

PAGE 152

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nV XVH RI FRPSXWHUV 7KH 3ULYDF\ $FW ZDV GHVLJQHG WR SURWHFW LQGLYLGXDOV E\ SURYLGLQJ WKHP ZLWK PRUH FRQWURO RYHU WKH JDWKHULQJ GLVVHPLQDWLRQ DQG DFFXUDF\ RI LQIRUPDWLRQ WKH JRYHUQPHQW PDLQWDLQHG DERXW WKHP ,W HVWDEOLVKHG VDIHJXDUGV DJDLQVW XQZDUUDQWHG LQWUXVLRQV LQWR SULYDF\ WKDW SDUDOOHOHG WKRVH LQ +(:n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

PAGE 153

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

PAGE 154

WR H[SHFW 7KH FRPPLVVLRQ VDLG WKH DFW ZDV EHLQJ DSSOLHG ORRVHO\ DQG IURP WKH DJHQFLHVn SRLQW RI YLHZ DQG WKDW FKDQJHV ZHUH QHHGHG WR VWUHQJWKHQ LWV SURYLVLRQV $ NH\ FRQFHUQ RI WKH FRPPLVVLRQ ZDV WKH 3ULYDF\ $FWn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

PAGE 155

SULYDF\ 7LPH DQG WHFKQRORJLFDO DGYDQFHV SURYHG WKLV FRQFHUQ ZHOO IRXQGHG ,Q WKH 'HSDUWPHQW RI +HDOWK DQG +XPDQ 6HUYLFHV VXFFHVVRU WR +(:f LQVWLWXWHG 3URMHFW 0DWFK 7KH OHJDO EDVLV IRU WKH SURJUDP XQGHU ZKLFK DJHQFLHV XVHG WKHLU FRPSXWHUV WR FURVVUHIHUHQFH GDWD IURP RWKHU DJHQFLHV ZDV WKH URXWLQH XVH H[HPSWLRQ WR WKH 3ULYDF\ $FW ZKLFK DJHQFLHV EHJDQ WR LQWHUSUHW ORRVHO\ WR DOORZ VXFK GDWD VKDULQJ 3URMHFW 0DWFK ZDV DLPHG DW XVLQJ DJHQF\ FRPSXWHUV WR FRPSDUH ZHOIDUH UROOV ZLWK IHGHUDO SD\UROO UHFRUGV IURP WKH 'HIHQVH 'HSDUWPHQW DQG &LYLO 6HUYLFH &RPPLVVLRQ WR IHUUHW RXW SHRSOH RQ ZHOIDUH ZKR KDG LQFRPHV LQ H[FHVV RI ZHOIDUH JXLGHOLQHV 7KH JRDO ZDV WR VDYH WD[ GROODUV E\ UHGXFLQJ ZHOIDUH IUDXG ZDVWH DQG DEXVH 7KH *HQHUDO $FFRXQWLQJ 2IILFH DQG WKH 2IILFH RI 7HFKQRORJ\ $VVHVVPHQW GHILQHG WKH FRPSXWHU PDWFKLQJ SURFHVV DV IROORZV 7\SLFDOO\ )HGHUDO DJHQFLHV XVH FRPSXWHU PDWFKLQJ WR ORFDWH DQ LQGLYLGXDO YHULI\ HOLJLELOLW\ IRU EHQHILWV RU WR GHYHORS LQYHVWLJDWRU\ OHDGV 7KHUH DUH VHYHUDO GLIIHUHQW FRPSXWHUDVVLVWHG WHFKQLTXHV IRU LGHQWLI\LQJ VLPLODULWLHV DQG GLIIHUHQFHV EHWZHHQ UHFRUGV :LWK FODVVLF FRPSXWHU PDWFKLQJ D FRPSXWHU FRPSDUHV WKH UHFRUGV RI WZR VHSDUDWH GDWD EDVHV ORRNLQJ IRU LQGLYLGXDOV RU RUJDQL]DWLRQVf WKDW DSSHDU LQ ERWK ILOHV 7\SLFDOO\ WKH GDWD EDVHV FRQWDLQ LQIRUPDWLRQ RQ EHQHILFLDULHV XQGHU WZR GLIIHUHQW JRYHUQPHQW SURJUDPV :KLOH FRPSXWHU PDWFKLQJ KDG DW WLPHV EHHQ SUDLVHG E\ &RQJUHVV E\ LQVSHFWRUV JHQHUDO DQG E\ WKH 3UHVLGHQWnV &RXQFLO RQ ,QWHJULW\ DQG (IILFLHQF\ VXFK PDWFKLQJ DOVR ZDV

PAGE 156

FULWLFL]HG DV LQHIIHFWLYH DQG D YLRODWLRQ RI SULYDF\ 2QH DVVHVVPHQW RI 3URMHFW 0DWFK FRQFOXGHG WKH SURJUDP FRVW PRUH WKDQ LW VDYHG ,W DOVR IRXQG WKDW FRPSXWHU PDWFKLQJ HUURUV RIWHQ VXEMHFWHG LQQRFHQW ZHOIDUH UHFLSLHQWV WR XQGXH JRYHUQPHQW VFUXWLQ\ DQG KDUDVVPHQW ,Q WKH HDUO\ V &RQJUHVVn 2IILFH RI 7HFKQRORJ\ $VVHVVPHQW 27$f DOVR H[SUHVVHG FRQFHUQ DERXW WKH HDVH ZLWK ZKLFK SHUVRQDO LQIRUPDWLRQ FRXOG EH GLVVHPLQDWHG ZLWK WKH DLG RI FRPSXWHUV 7KH 27$ FDXWLRQHG WKDW FRPSXWHU WHFKQRORJ\ ZDV RXWSDFLQJ JRYHUQPHQWn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

PAGE 157

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

PAGE 158

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nV 3URJUDP (YDOXDWLRQ DQG 0HWKRGRORJ\ 'LYLVLRQ H[SUHVVHG FRQFHUQ DERXW WKH ODFN RI SURFHGXUHV UHJXODWLQJ FRPSXWHU PDWFKLQJ GHFLVLRQV >,@Q H[DPLQLQJ KRZ GHFLVLRQV DERXW FRPSXWHU PDWFKHV KDYH EHHQ PDGH ZH QRWHG D JHQHUDOO\

PAGE 159

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f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n ODFN RI SURFHGXUHV JRYHUQLQJ FRPSXWHU PDWFKHV ,W DPHQGHG WKH 3ULYDF\ $FW WR UHJXODWH WKH XVH RI FRPSXWHU PDWFKLQJ FRQGXFWHG E\ )HGHUDO DJHQFLHV RU XVLQJ )HGHUDO UHFRUGV VXEMHFW WR WKH 3ULYDF\ $FW RI 7KH FRPSXWHUPDWFKLQJ OHJLVODWLRQ GHDOW ZLWK SUREOHPV DVVRFLDWHG ZLWK DEXVH RI WKH 3ULYDF\ $FWnV URXWLQH XVH H[HPSWLRQ E\ UHTXLULQJ WKDW DJHQFLHV HVWDEOLVK ZULWWHQ DJUHHPHQWV VSHFLI\LQJ WKH WHUPV XQGHU ZKLFK FRPSXWHU PDWFKHV ZRXOG EH GRQH ,W DOVR SUHVFULEHG GXH SURFHVV ULJKWV IRU LQGLYLGXDOV E\ SUHYHQWLQJ DJHQFLHV IURP WDNLQJ DGYHUVH DFWLRQ DJDLQVW WKHP XQWLO LQIRUPDWLRQ ZDV LQGHSHQGHQWO\

PAGE 160

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

PAGE 161

DFFHVV WR FUHGLW UHSRUWV DQG WKH DELOLW\ WR FKDOOHQJH GDWD LQ FUHGLW ILOHV 7KH DFW UHTXLUHG DJHQFLHV WR IROORZ UHDVRQDEOH SURFHGXUHV WR PDNH VXUH GDWD ZHUH DFFXUDWH DQG WKDW WKH GDWD ZHUH XVHG SURSHUO\ 3HQDOWLHV LQFOXGHG FRVWV DFWXDO GDPDJHV DQG OHJDO IHHV %XW WKHUH KDYH EHHQ ORRSKROHV LQ WKH ODZ DQG WKH FRQWLQXHG DEXVH RI FRQVXPHU FUHGLW LQIRUPDWLRQf§LQFOXGLQJ PLVWDNHV SHUSHWXDWHG LQ UHFRUGVDQG RI RWKHU SHUVRQDO LQIRUPDWLRQ JDWKHUHG DQG GLVVHPLQDWHG E\ SULYDWH GDWD YHQGRUV KDV EHHQ GHFULHG UHFHQWO\ LQ &RQJUHVV DQG LQ WKH PHGLD 7KH FRQWURYHUV\ KDV VHUYHG QRW RQO\ WR LQFUHDVH HIIRUWV WR IXUWKHU HDVH FRQVXPHUVn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

PAGE 162

IXQGV IURP HGXFDWLRQDO LQVWLWXWLRQV YLRODWLQJ LWV GLVFORVXUH OLPLWLQJ SURYLVLRQV 5LJKW WR )LQDQFLDO 3ULYDF\ $FW ,Q &RQJUHVV SDVVHG WKH 5LJKW WR )LQDQFLDO 3ULYDF\ $FW WR OLPLW DFFHVV WR SHUVRQDO UHFRUGV KHOG E\ ILQDQFLDO LQVWLWXWLRQV &RQJUHVV DFWHG LQ DSSDUHQW UHVSRQVH WR WKH 86 6XSUHPH &RXUWnV GHFLVLRQ LQ 8QLWHG 6WDWHV Y 0LOOHU LQ ZKLFK WKH FRXUW KHOG WKDW LQGLYLGXDOV UHWDLQHG QR H[SHFWDWLRQV RI SULYDF\ IRU LQIRUPDWLRQ YROXQWDULO\ VXEPLWWHG WR EDQNV 6XFK UHFRUGV WKH FRXUW UHDVRQHG ZHUH RXWVLGH DQ LQGLYLGXDOn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

PAGE 163

ZLWK WKH SHULOV FUHDWHG E\ WKHVH QHZ GHYLFHV HPSKDVLV DGGHGf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

PAGE 164

QRQGLVFORVXUH ZKHQ QRUPDOO\ DFFHVVLEOH UHFRUGV DUH KHOG LQ FRPSXWHUV (OHFWURQLF &RPPXQLFDWLRQ 3ULYDF\ $FW RI 7KH (OHFWURQLF &RPPXQLFDWLRQV 3ULYDF\ $FW ZDV SDVVHG WR SURWHFW WKH FRQWHQW RI SULYDWH FRPPXQLFDWLRQV UHJDUGOHVV RI KRZ WKH LQIRUPDWLRQ ZDV WUDQVPLWWHG 7KH DFWnV VWDWHG SXUSRVH ZDV WR XSGDWH DQG FODULI\ IHGHUDO SULYDF\ SURWHFWLRQV DQG VWDQGDUGV LQ OLJKW RI GUDPDWLF FKDQJHV LQ QHZ FRPSXWHU DQG WHOHFRPPXQLFDWLRQV WHFKQRORJ\ ,W SURWHFWV DOO HOHFWURQLF FRPPXQLFDWLRQV LQFOXGLQJ ILEHUn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

PAGE 165

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nV VHQVLWLYH GHVLJQDWLRQ WKH +RXVH UHSRUW RQ WKH OHJLVODWLRQ PDGH FOHDU WKH DFWnV UHODWLRQVKLS WR WKH )UHHGRP RI ,QIRUPDWLRQ $FW ,Q RUGHU WR HQVXUH WKDW WKH &RPSXWHU 6HFXULW\ $FW LV GHVLJQHG WR SURWHFW DQG QRW UHVWULFW DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ VSHFLILF SURYLVLRQV ZHUH DGGHG ZKLFK PDNH LW H[SOLFLWO\ FOHDU

PAGE 166

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nV YLGHR YLHZLQJ KDELWV 7KH VWRULHV ZHUH EDVHG RQ FRPSXWHU SULQWRXWV RI %RUNV YLGHR UHQWDOV REWDLQHG E\ WKH QHZV PHGLD 8QGHU WKH ELOO GLVFORVXUH RI VXFK FRPSXWHUL]HG OLVWV RI YLHZHU KDELWV ZHUH SURKLELWHG 6FDOHV 7LSSHG 7RZDUG &DXWLRQ &RQFHUQ DERXW JRYHUQPHQW XVH RI FRPSXWHUV WR VWRUH DQG DQDO\]H SHUVRQDO LQIRUPDWLRQ DUJXDEO\ ZDV DQ RXWJURZWK RI WKH QDWLRQnV LQVHFXULWLHV FUHDWHG E\ WKH FOLPDWH RI WKH GHFDGH IROORZLQJ :RUOG :DU ,, 7KH SURSRVDO IRU D 1DWLRQDO 'DWD &HQWHU JDOYDQL]HG WKH FRPSXWHUSULYDF\ GHEDWH GXULQJ WKH V VSXUUHG E\ VFKRODUO\ ZULWLQJV DQG WKH SRSXODU SUHVV &RQJUHVVLRQDO KHDULQJV RQ FRPSXWHUV DQG SULYDF\

PAGE 167

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

PAGE 168

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f *HQHUDO 6HUYLFHV $GPLQLVWUDWLRQ 2IILFH RI )HGHUDO ,QIRUPDWLRQ 5HVRXUFHV 0DQDJHPHQW 0LFURFRPSXWHU 6XUYH\ 5HSRUW 6HSWHPEHU f %UXQG\ &RPSXWHUV DQG 6PDOOHU /RFDO *RYHUQPHQWV 3XEOLF 3URGXFWLYLW\ 5HYLHZ f 'UDHPHU .LQJ 'XQNOH t /DQH 7UHQGV LQ 0XQLFLSDO ,QIRUPDWLRQ 6\VWHPV %DVHOLQH 'DWD 5HSRUW 6SULQJ f -XVWLFH 'HSDUWPHQW Y 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV 86 f *HRUJH 2UZHOO f %DUEDUD : 7XFKPDQ 7KH 0DUFK RI )ROO\ )URP 7UR\ WR 9LHWQDP f ,Q D VSHHFK LQ 0DUFK LQ )XOWRQ 0R &KXUFKLOO UHIHUUHG WR WKH LURQ FXUWDLQ H[WHQGHG DFURVV (XURSH DQG VXJJHVWHG WKDW QR RQH NQHZ WKH OLPLWV LI DQ\ WR >WKH@ H[SDQVLYH DQG SURVHO\WLVLQJ WHQGHQFLHV RI WKH 6RYLHW 8QLRQ )RU DQ RYHUYLHZ RI WKH 0F&DUWK\ SKHQRPHQRQ VHH 0DUN /DQGLV -RVHSK 0F&DUWK\ 7KH 3ROLWLFV RI &KDRV f (GZLQ 5 %D\OH\ -RH 0F&DUWK\ DQG WKH 3UHVV f 6HH DOVR $ODQ ) :HVWLQ 3ULYDF\ DQG )UHHGRP f :HVWLQ GLVFXVVHV FRQFHUQV DERXW DXWKRULWDULDQLVP DQG WHFKQRORJ\ LQ VFKRODUO\ OLWHUDWXUH VFLHQFH ILFWLRQ RQ WHOHYLVLRQ DQG LQ VXFK GLYHUVH VRXUFHV DV WKH :DOO 6WUHHW -RXUQDO 3OD\ER\ PDJD]LQH DQG &RQVXPHU 5HSRUWV 6HH HJ 'HQQLV Y 8QLWHG 6WDWHV 86 f 6HH DOVR -RKQ $ *RUILQNHO DQG -XOLDQ : 0DFN ,, 'HQQLV Y 8QLWHG 6WDWHV DQG WKH &OHDU DQG 3UHVHQW 'DQJHU 5XOH &DOLI / 5HY f

PAGE 169

7XFKPDQ 7KH 0DUFK RI )ROO\ DW 2UZHOO DW -RKQ : 0DF\ -U 7KH &\EHUQDWLRQ 7LPH $SULO DW 75 5HLG &RPSXWHUWKLQN $3) 5HSRUWHU :LQWHU f 6HH DOVR -HUHP\ %HUQVWHLQ 7KH $QDO\WLFDO (QJLQH &RPSXWHUV 3DVW 3UHVHQW DQG )XWXUH f O .HUPLW / +DOO 7KH 0DJLF 0LUURU /DZ LQ $PHULFDQ +LVWRU\ f ,G 6HH JHQHUDOO\ (OL *LQVEHUJ 7KH *UHDW 6RFLHW\ /HVVRQV IRU WKH )XWXUH f 0DUYLQ ( *HWWOHPDQ 7KIL *UHDW 6RFLHW\ 5HDGHU 7KH )DLOXUH RI $PHULFDQ /LEHUDOLVP f 7XFKPDQ 7KH 0DUFK RI )ROO\ DW -RKQ 7 6RPD DQG 5LFKDUG $ :HKPKRHIHU $ /HJDO DQG 7HFKQLFDO $VVHVVPHQW RI WKH (IIHFWV RI &RPSXWHUV RQ 3ULYDF\ 'HQYHU /f $UWKXU 0LOOHU 7KH $VVDXOW RQ 3ULYDF\ &RPSXWHUV 'DWD %DQNV DQG 'RVVLHUV f ,Q DGGLWLRQ :KHQ WKH )UHHGRP RI ,QIRUPDWLRQ $FW ZDV SDVVHG LQ WKH IHGHUDO JRYHUQPHQW RSHUDWHG DERXW PDLQIUDPH FRPSXWHUV 6HH 'DYLG 0RUULVVH\ 7KH $JH RI (OHFWURQLF *RYHUQPHQW SUHVHQWHG DW WKH &RQIHUHQFH RQ $GYDQFHG ,QYHVWLJDWLYH 0HWKRGV IRU -RXUQDOLVWV DW 7ZHQW\ \HDUV ODWHU LQ WKH IHGHUDO JRYHUQPHQW RSHUDWHG PDLQIUDPH FRPSXWHUV %\ WKDW QXPEHU KDG PRUH WKDQ GRXEOHG WR 6HH *HQHUDO 6HUYLFHV $GPLQLVWUDWLRQ )HGHUDO (TXLSPHQW 'DWD &HQWHU $XWRPDWHG 'DWD 3URFHVVLQJ (TXLSPHQW LQ WKH 86 *RYHUQPHQW $SULO f *RYHUQPHQW XVH RI VPDOOHU PLFURFRPSXWHUV KDV DOVR LQFUHDVHG UDSLGO\ IURP WR PRUH WKDQ RQH PLOOLRQ MXVW WZR \HDUV ODWHU LQ 6HH *HQHUDO 6HUYLFHV $GPLQLVWUDWLRQ 2IILFH RI )HGHUDO ,QIRUPDWLRQ 5HVRXUFHV 0DQDJHPHQW 0LFURFRPSXWHU 6XUYH\ 5HSRUW 6HSWHPEHU f $OGRXV +X[OH\ %UDYH 1HZ :RUOG f 9DQFH 3DFNDUG 7KH 1DNHG 6RFLHW\ f 6HH DOVR 9LFWRU & )HUNLVV 7HFKQRORJLFDO 0DQ 7KH 0\WK DQG WKH 5HDOLW\ f

PAGE 170

'RQDOG 1 0LFKDHO &\EHUQDWLRQ 7KH 6LOHQW &RQTXHVW f $ 6SDFH 2G\VVH\ 0HWUR*ROGZ\Q0D\HU f 0LOOHU 7KH $VVDXOW RQ 3ULYDF\ DW &RQFHUQV DERXW WKH TXDOLW\ RI GDWD ZHUH H[SUHVVHG GXULQJ KHDULQJV RYHU D SURSRVDO IRU D 1DWLRQDO 'DWD &HQWHU 6XFK FRQFHUQV DOVR DUH UHIOHFWHG LQ PRGHUQ FRPSXWHU SDUODQFH ZLWK WKH WHUP *,*2f§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f DW $ODQ :HVWLQ DQG 0 %DNHU 'DWDEDQNV LQ D )UHH 6RFLHW\ &RPSXWHUV 5HFRUG.HHSLQJ DQG 3ULYDF\ f :HVWLQ DQG %DNHU 'DWDEDQNV LQ D )UHH 6RFLHW\ DW 6HH JHQHUDOO\ 'DYLG /LQRZHV 0XVW 3ULYDF\ 'LH LQ WKH &RPSXWHU $JH" $%$$XJXVW f -HUU\ 0 5RVHQEHUJ 7KH 'HDWK RI 3ULYDF\ f 6HH JHQHUDOO\ $UWKXU 0LOOHU 3HUVRQDO 3ULYDF\ LQ WKH &RPSXWHU $JH 7KH &KDOOHQJH RI D 1HZ 7HFKQRORJ\ LQ DQ ,QIRUPDWLRQ 2ULHQWHG 6RFLHW\ 0LFK / 5HY f 5LFKDUG 5XJJOHV 2Q WKH 1HHGV DQG 9DOXHV RI 'DWD %DQNV LQ 6\PSRVLXP&RPSXWHUV 'DWD %DQNV DQG ,QGLYLGXDO 3ULYDF\ 0LQQ / 5HY f 'DYLG / %D]HORQ 3URELQJ 3ULYDF\ *RQ] / 5HY f %D]HORQ ZDV WKH FKLHI MXGJH RQ WKH '& &LUFXLW RI WKH 86 &RXUW RI $SSHDOV +DUU\ .DOYHQ -U 7KH 3UREOHPV RI 3ULYDF\ LQ WKH
PAGE 171

:LOOLDP &RKHQ DQG -RKQ .DSODQ &RQVWLWXWLRQDO /DZ &LYLO /LEHUWLHV DQG ,QGLYLGXDO 5LJKWV G HG f -RKQ : 0DF\ -U &\EHUQDWLRQ *HQHUDWLRQ 7LPH $SULO DW 6HH DOVR 3IHLIIHU +RZ &RPSXWHUV :LOO &KDQJH
PAGE 172

5HSRUW RQ WKH 7DVN )RUFH RQ WKH 6WRUDJH DQG $FFHVV WR *RYHUQPHQW 6WDWLVWLFV WKH .D\VHQ 5HSRUWf FLWHG LQ 5RVHQEHUJ 7KH 'HDWK RI 3ULYDF\ DW 7KH &RPSXWHU ,G ,G DW ,G DW ,G ,G DW ,G ,G DW ,G ,G DW ,G DW ,G ,G DW ,G DW ,G DW ,G DW ,G DW ,G ,G DW ,G DW ,G DW ,G DW ,G DW &RPSXWHUL ]HG $JH e: -XO\

PAGE 173

,G DW 6HH JHQHUDOO\ ,QYDVLRQ RI 3ULYDF\ +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ $GPLQLVWUDWLYH 3UDFWLFHV DQG 3URFHGXUHV RI WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ WK &RQJ G 6HVV f ,G DW ,G ,G DW ,G DW 6HH H J &RPSXWHU 3ULYDF\ +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ $GPLQLVWUDWLYH 3UDFWLFHV DQG 3URFHGXUHV RI WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ WK &RQJ VW 6HVV f 6HH JHQHUDOO\ )HGHUDO 'DWD %DQNV &RPSXWHUV DQG WKH %LOO RI 5LJKWV +HDULQJV %HIRUH WKH 6XEFRPPPLWWHH RQ &RQVWLWXWLRQDO 5LJKWV RI WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ QG &RQJ VW 6HVV f ,G DW ,G DW ,G DW ,G DW ,G DW ,G DW ,G DW ,G DW ,G DW ,V/X ,G DW ,G DW ,G DW ,G DW TXRWLQJ :HVWLQ 3ULYDF\ DQG )UHHGRP

PAGE 174

,G DW O2 &7! ,G DW ,G DW 6HH &RQD 5HF GDLO\ HG f IRU 6HQDWRU (UYLQnV FRPPHQWV ZKHQ KH LQWURGXFHG WKH 6HQDWH YHUVLRQ RI WKH SULYDF\ ELOO 6 UG &RQJ G 6HVVf 7KH 6HQDWH *RYHUQPHQW 2SHUDWLRQV &RPPLWWHHnV DG KRF 6XEFRPPLWWHH RQ 3ULYDF\ DQG ,QIRUPDWLRQ 6\VWHPV KHOG MRLQW KHDULQJV ZLWK WKH 6HQDWH -XGLFLDU\ &RPPLWWHHnV 6XEFRPPLWWHH RQ &RQVWLWXWLRQDO 5LJKWV ZKLFK ZDV FRQVLGHULQJ VLPLODU OHJLVODWLRQ &LWHG LQ 65HS 1R UG &RQJ G 6HVV f UHSULQWHG LQ 86 &RQJ t $GPLQ 1HZV f 5HFRUGV 86 'HSDUWPHQW &RPSXWHUV DQG WKH RI +HDOWK (GXFDWLRQ DQG :HOIDUH 5LFUKWV RI &LWL]HQV YLLL f ,G DW YLL L[ ,G ,G DW YL ,G DW Y YL ,G DW ;; [[L $GPLQLVWUDWLYH GDWD V\VWHPV FRQWDLQ SHUVRQDO LQIRUPDWLRQ QHFHVVDU\ IRU WKH GD\WRGD\ RSHUDWLRQV RI DJHQFLHV 6WDWLVWLFDO GDWD V\VWHPV FRPSLOH SHUVRQDO LQIRUPDWLRQ IRU UHVHDUFK SXUSRVHV DQG WR LQIRUP SXEOLF SROLF\ 5HFRUGV &RPSXWHUV DQG WKH 5LJKWV RI &LWL]HQV DW [LL ,G ,G DW [[LLL 65HS 1R DW VXSUD QRWH ,G DW ,G DW ,G

PAGE 175

7KH 3ULYDF\ $FW RI 86& D HW VHT 65HS 1R DW ,G DW 6HH JHQHUDOO\ 7KRPDV 0 6XVPDQ 7KH 3ULYDF\ $FW DQG WKH )UHHGRP RI ,QIRUPDWLRQ $FW &RQIOLFW DQG 5HVROXWLRQ 0DUVKDOO / 5HY f 65HS 1R DW 7KH 3ULYDF\ 3URWHFWLRQ &RPPLVVLRQ ZDV WR FRQVLVW RI ILYH H[SHUWV IURP VSHFLDOL]HG ILHOGV FRYHULQJ ODZ VRFLDO VFLHQFH FRPSXWHU WHFKQRORJ\ FLYLO OLEHUWLHV EXVLQHVV DQG VWDWH DQG ORFDO JRYHUQPHQW 3ULYDF\ 3URWHFWLRQ 6WXG\ &RPPLVVLRQ 7KH 3ULYDF\ $FW RI $Q $VVHVVPHQW DSS f ,G DW 7KH &RPSXWHU DQG ,QYDVLRQ RI 3ULYDF\ DW &RPSXWHU 0DWFKLQJ DQG 3ULYDF\ 3URWHFWLRQ $FW RI +5HS WK &RQJ VW 6HVV UHSRUWHG LQ 8‘6‘ &RQJ t $GPLQ 1HZV f 7KH 3ULYDF\ $FW DOORZV DJHQFLHV WR FROOHFW DQG GLVVHPLQDWH SHUVRQDO LQIRUPDWLRQ SXUVXDQW WR WKH DJHQFLHVn VWDWXWRU\ GXWLHV DQG RWKHU URXWLQH XVHV 6HH 86& VHF DHff $JHQFLHV GHILQHG WKLV WHUP ORRVHO\ FRQFOXGLQJ WKDW VKDULQJ SHUVRQDO GDWD ZLWK RWKHU DJHQFLHV IRU UHDVRQV UHODWHG WR WKH DJHQFLHVn VWDWXWRU\ UROHV ZDV URXWLQH XVH +5HS 1R DW ,G DW 6HH (YDQ +HQGULFNV +RZ 1RW WR &DWFK :HOIDUH &KHDWHUV 7KH :DVKLQJWRQ 3RVW -XO\ DW & 86 &RQJUHVV 2IILFH RI 7HFKQRORJ\ $VVHVVPHQW &RPSXWHU%DVHG 1DWLRQDO ,QIRUPDWLRQ 6\VWHPV f 6HH JHQHUDOO\ 2YHUVLJKW RI &RPSXWHU 0DWFKLQJ WR 'HWHFW )UDXG DQG 0LVPDQDJHPHQW LQ *RYHUQPHQW 3URJUDPV +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ 2YHUVLJKW RI *RYHUQPHQW 0DQDJHPHQW RI WKH 6HQDWH &RPPLWWHH RQ *RYHUQPHQWDO $IIDLUV WK &RQJ G 6HVV f ,G DW ,G DW

PAGE 176

,G ,G DW 6HH JHQHUDOO\ &RPSXWHU 0DWFKLQJ DQG 3ULYDF\ 3URWHFWLRQ $FW RI +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ 2YHUVLJKW RI *RYHUQPHQW 0DQDJHPHQW RI WKH 6HQDWH &RPPLWWHH RQ *RYHUQPHQWDO $IIDLUV WK &RQJ G 6HVV f ,G DW 86 &RQJUHVV 2IILFH RI 7HFKQRORJ\ $VVHVVPHQW (OHFWURQLF 5HFRUG 6\VWHPV DQG ,QGLYLGXDO 3ULYDF\ f 6HH JHQHUDOO\ &RPSXWHU 0DWFKLQJ DQG 3ULYDF\ 3URWHFWLRQ $FW RI +HDULQJV %HIRUH WKH +RXVH &RPPLWWHH RQ *RYHUQPHQW 2SHUDWLRQV WK &RQJ VW 6HVV f ,G DW &RPSXWHU 0DWFKLQJ DQG 3ULYDF\ 3URWHFWLRQ $FW 3XE/ 1R 6WDW f +5HS 1R DW )DLU &UHGLW 5HSRUWLQJ $FW 86& VHF f ,G /HRQDUG 6ORDQH 2QH6WRS &UHGLW 5HSRUW &RYHUV 7KUHH %XUHDXVn 'DWD 7KH 1HZ
PAGE 177

6HQDWRU 0DWKLDV H[SUHVVHG DODUP WKDW WKH &RPSXWHU &ULPH $FW PLJKW EH FRQVWUXHG WR DSSO\ HYHQ ZKHQ WKH )UHHGRP RI ,QIRUPDWLRQ $FW UHTXLUHG GLVFORVXUH RI LQIRUPDWLRQ 6HH &RQJ 5HF GDLO\ HG 0DUFK f 6HH JHQHUDOO\ 6XVPDQ 7KH 3ULYDF\ $FW DQG WKH )UHHGRP RI ,QIRUPDWLRQ $FW &RQIOLFW DQG 5HVROXWLRQ VXSUD QRWH )RUW\QLQH VWDWHV DOVR KDYH FRPSXWHU FULPH OHJLVODWLRQ FRYHULQJ D UDQJH RI DFWLYLWLHV 6HH 5REHUW (OOLV 6PLWK &RPSLODWLRQ RI 6WDWH DQG )HGHUDO 3ULYDF\ /DZV f )RU H[DPSOH &DOLIRUQLDnV ODZ PDNHV LW D FULPH WR LQWHQWLRQDOO\ DFFHVV DQ\ FRPSXWHU V\VWHP RU FRPSXWHU QHWZRUN IRU WKH SXUSRVH RI GHYLVLQJ RU H[HFXWLQJ DQ\ VFKHPH RU DUWLILFH WR GHIUDXG RU H[WRUW RU REWDLQ PRQH\ SURSHUW\ RU VHUYLFHV ZLWK IDOVH RU IUDXGXOHQW LQWHQW UHSUHVHQWDWLRQV RU SURPLVHV RU WR PDOLFLRXVO\ DFFHVV DOWHU GHOHWH GDPDJH RU GHVWUR\ DQ\ FRPSXWHU V\VWHP FRPSXWHU QHWZRUN FRPSXWHU SURJUDP RU GDWD &DO 3HQDO &RGH VHF f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f 0LFKLJDQ 0LFK &RPS /DZV $QQ VHF 0LQQHVRWD 0LQQ 6WDW $QQ 0LVVLVVLSSL 0LVV &RGH $QQ VHF 0LVVRXUL 0R $QQ 6WDW VHF 0RQWDQD 0RQW &RGH $QQ 1HEUDVND 1HE 5HY 6WDW VHF 1HYDGD 1HY 5HY 6WDW VHF 1HZ +DPSVKLUH 1+ 5HY 6WDW $QQ VHF -HZ -HUVH\ 15HY 6WDW VHFV $$ & 1HZ 0H[LFR 10 6WDW $QQ VHF $ 1HZ
PAGE 178

9LUJLQLD :9D &RGH VHF F WKURXJK :LVFRQVLQ :LV 6WDW $QQ VHF :\RPLQJ :\R 6WDW VHF WKURXJK (OHFWURQLF &RPPXQLFDWLRQV 3ULYDF\ $FW RI 86& VHF f 65HS 1R WK &RQJ G 6HVV f UHSULQWHG LQ 86 &RGH &RQJ t $GPLQ 1HZV f ,G &RPSXWHU 6HFXULW\ $FW RI 3XE/ 1R +5HS 1R WK &RQJ VW 6HVV f UHSULQWHG LQ 86 &RGH &RQJ t $GPLQ 1HZV f ,G DW ,G DW ,G ,G ,G DW 7KH 9LGHR 3ULYDF\ 3URWHFWLRQ $FW JUHZ RXW RI WKH RXWUDJH RI PDQ\ 86 6HQDWRUV RYHU WKH LQWUXVLRQ LQWR WKH %RUN IDPLO\nV SULYDF\ 6HH 1RPLQDWLRQ RI 5REHUW + %RUN WR EH $VVRFLDWH -XVWLFH RI WKH 6XSUHPH &RXUW RI WKH 8QLWHG 6WDWHV +HDULQJV %HIRUH WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ WK &RQJ VW 6HVV f UHPDUNV RI 6HQ 3DWULFN /HDK\ '97f ,Q WZHQW\ \HDUV DIWHU WKH )UHHGRP RI ,QIRUPDWLRQ $FW ZDV SDVVHG WKH IHGHUDO JRYHUQPHQW RSHUDWHG DERXW PDLQIUDPH FRPSXWHUV E\ WKDW QXPEHU PRUH WKDQ GRXEOHG WR 6HH *HQHUDO 6HUYLFH $GPLQLVWUDWLRQ )HGHUDO (TXLSPHQW 'DWD &HQWHU $XWRPDWHG 'DWD 3URFHVVLQJ (TXLSPHQW LQ WKH 86 *RYHUQPHQW $SULO f

PAGE 179

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

PAGE 180

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

PAGE 181

$QRWKHUf§PRUH SUREOHPDWLFf§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

PAGE 182

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nV KRPH DQG ZLWKLQ RWKHU ]RQHV RI SULYDF\ QRW GHSHQGHQW RQ D VSHFLILF ORFDWLRQ DV ZHOO DV DVVRFLDWLRQDO SULYDF\ SUHYHQWLQJ JRYHUQPHQW LQWHUIHUHQFH LQ SULYDWH DVVRFLDWLRQV DQG SROLWLFDO DIILOLDWLRQV 7KH &RXUW DOVR KDV UHFRJQL]HG D ULJKW RI GHFLVLRQDO SULYDF\ SUHYHQWLQJ LQWHUIHUHQFH LQ LQWLPDWH SHUVRQDO GHFLVLRQV VXFK DV WKH XVH RI ELUWK FRQWURO DQG DERUWLRQV

PAGE 183

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

PAGE 184

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

PAGE 185

5HKQTXLVW ZKR ZRXOG ODWHU VLW DV FKLHI MXVWLFH EDONHG DW WKH QRWLRQ RI D FRQVWLWXWLRQDO EDVLV IRU LQIRUPDWLRQDO SULYDF\ +H GLVWLQJXLVKHG SULYDF\ LQWHUHVWV LQ WKH FRQWURO RI SHUVRQDO LQIRUPDWLRQ IURP SULYDF\ FDVHV WKDW GHDOW ZLWK VXEVWDQWLYH UHVWULFWLRQV RQ DFWLYLWLHV VXFK DV FRQWUDFHSWLRQ DQG SURFUHDWLRQ 1RQH RI RXU VXEVWDQWLYH SULYDF\ GHFLVLRQV KROG WKLV RU DQ\WKLQJ OLNH WKLV DQG ZH GHFOLQH WR HQODUJH WKHP LQ WKLV PDQQHU -XVWLFH 5HKQTXLVW ZURWH ,Q 8QLWHG 6WDWHV Y 0LOOHU GHFLGHG VRRQ DIWHU 3DXO WKH &RXUW DJDLQ GHFOLQHG WR UHFRJQL]H D ULJKW RI LQIRUPDWLRQDO SULYDF\ LQ D FDVH WKDW GHDOW ZLWK D PDQn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

PAGE 186

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

PAGE 187

LQIRUPDWLRQ DERXW LQGLYLGXDOV WKDW RWKHUV KDYH QRW D 5LJKW WR .QRZR -XVWLFH %UHQQDQ VDLG $ EDQN FXVWRPHUn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f 7KH WKUHDW RI XQFKHFNHG GLVFORVXUH RI EDQNLQJ UHFRUGV WR WKH SULYDF\ RI LQGLYLGXDOV ZDV QRW ORVW RQ &RQJUHVV ZKLFK QRW ORQJ EHIRUH WKH 0LOOHU RSLQLRQ KDG KHOG H[WHQVLYH KHDULQJV LQWR WKH FRPSXWHUSULYDF\ LVVXH WKDW XOWLPDWHO\ OHG WR SDVVDJH RI WKH 3ULYDF\ $FW RI 5HVSRQGLQJ WR WKH &RXUWnV UXOLQJ LQ 0LOOHU &RQJUHVV SDVVHG WKH 5LJKW WR )LQDQFLDO 3ULYDF\ $FW 7KH 5LJKW WR )LQDQFLDO 3ULYDF\ $FW GLVFXVVHG LQ &KDSWHU 7KUHH LQFOXGHV GXH SURFHVV VWDQGDUGV DQG UHTXLUHV ODZ HQIRUFHPHQW DJHQFLHV WR PHHW FHUWDLQ FULWHULD EHIRUH EDQNLQJ UHFRUGV PD\ EH UHOHDVHG $ \HDU DIWHU 0LOOHU WKH &RXUW IRU WKH ILUVW WLPH FRQVLGHUHG D FDVH WKDW GHDOW VTXDUHO\ ZLWK FRPSXWHUL]HG UHFRUGV PDLQWDLQHG E\ JRYHUQPHQW ,Q :KDOHQ Y 5RH WKH FRQFHUQV DERXW WHFKQRORJ\ DQG SHUVRQDO SULYDF\ H[SUHVVHG LQ -XVWLFH %UHQQDQnV GLVVHQW LQ 0LOOHU ZHUH HPEUDFHG E\ D PDMRULW\ RQ WKH &RXUW 7KH RSLQLRQ LQ :KDOHQ QXGJHG WKH

PAGE 188

FRQFHSW RI LQIRUPDWLRQDO SULYDF\ QHDU LI QRW LQWR WKH FRQVWLWXWLRQDO UHDOP ,Q :KDOHQ VHYHUDO SK\VLFLDQV DQG SDWLHQWV FKDOOHQJHG WKH FRQVWLWXWLRQDOLW\ RI D 1HZ
PAGE 189

VHFXULW\ RI WKH VWDWHnV FRPSXWHU V\VWHP ZHUH VSHFXODWLYH DQG QRW VXSSRUWHG E\ IDFWV SUHVHQWHG LQ WKH FDVH -XVWLFH 6WHYHQV ZULWLQJ IRU WKH VHYHQPHPEHU PDMRULW\ SRVHG WKH OHJDO LVVXH EHIRUH WKH &RXUW LQ FRQVWLWXWLRQDO WHUPV +H VDLG WKH FRQVWLWXWLRQDO TXHVWLRQ SUHVHQWHG LV ZKHWKHU WKH 6WDWH RI 1HZ
PAGE 190

RU SDWLHQW PLJKW YROXQWDULO\ PDNH WKH LQIRUPDWLRQ SXEOLF +H FRQFOXGHG WKDW WKH WKLUG SRVVLELOLW\ H[LVWHG XQGHU SULRU ODZ DQG ZDV WRWDOO\ XQUHODWHG WR WKH FRPSXWHUILOLQJ SURJUDP DQG WKDW QHLWKHU RI WKH ILUVW WZR FRQFHUQV ZDV VXIILFLHQW WR UHQGHU WKH VWDWXWH LQYDOLG :LWK UHVSHFW WR WKH FRPSXWHU VHFXULW\ LVVXH -XVWLFH 6WHYHQV QRWHG WKHUH ZDV QR VXSSRUW LQ WKH UHFRUG RU LQ WKH H[SHULHQFH RI WZR VWDWHV ZLWK VLPLODU VWDWXWHV WR VXJJHVW 1HZ
PAGE 191

XVH VXFK GDWD IRU SXEOLF SXUSRVHV LV W\SLFDOO\ DFFRPSDQLHG E\ D FRQFRPLWDQW VWDWXWRU\ RU UHJXODWRU\ GXW\ WR DYRLG XQZDUUDQWHG GLVFORVXUH 5HFRJQL]LQJ WKDW LQ VRPH FLUFXPVWDQFHV WKDW GXW\ DUJXDEO\ KDV LWV URRWV LQ WKH &RQVWLWXWLRQ QHYHUWKHOHVV 1HZ
PAGE 192

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

PAGE 193

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n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f§HYHQ LQIRUPDWLRQ FRPSLOHG IURP VFDWWHUHG SXEOLF UHFRUGVJDLQV D UHYLWDOL]HG SULYDF\ LQWHUHVW ZKHQ SRROHG LQ D FHQWUDOL]HG FRPSXWHU V\VWHP WKH &RXUW UHDVRQHG

PAGE 194

7KLUG WKH &RXUW VDLG DJHQFLHV FRXOG GHWHUPLQH WKDW FODVVHV RI LQIRUPDWLRQf§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n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

PAGE 195

LQGLYLGXDOV E\ SUHYHQWLQJ LQGHSHQGHQW GLVFXVVLRQ DQG DQDO\VLV RI LQIRUPDWLRQ WKDW YHU\ ZHOO FRXOG UHIOHFW RQ DQ DJHQF\n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

PAGE 196

LPSURSHUO\ UHFHLYHG YDULRXV GHIHQVH FRQWUDFWV ZLWK WKH DLG RI D FRUUXSW FRQJUHVVPDQ 7KH )%, LQLWLDOO\ GHQLHG DOO RI WKH UHTXHVWV EXW SURYLGHG WKH LQIRUPDWLRQ RQ WKUHH RI WKH 0HGLFR EURWKHUV DIWHU WKHLU GHDWKV LQ DFFRUGDQFH ZLWK WKH DJHQF\n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

PAGE 197

WR WKH JHQHUDO SXEOLF 7KH FRXUW WKHUHIRUH FRQFOXGHG WKLV LQIRUPDWLRQ ZDV FRYHUHG E\ ([HPSWLRQ RI WKH )UHHGRP RI ,QIRUPDWLRQ $FW ZKLFK VKLHOGHG IURP GLVFORVXUH LQIRUPDWLRQ FRYHUHG E\ VSHFLILF VWDWXWHV 7ZR UHTXLUHPHQWV PXVW EH PHW IRU D VWDWXWH WR TXDOLI\ XQGHU ([HPSWLRQ 7KH VWDWXWH PXVW DOORZ DQ DJHQF\ QR GLVFUHWLRQ DERXW ZKDW LQIRUPDWLRQ PD\ EH ZLWKKHOG DQG WKH FULWHULD IRU ZLWKKROGLQJ VSHFLILF LQIRUPDWLRQ PXVW EH FOHDUO\ VSHOOHG RXW 7KLV SRVLWLRQWKDW WKH LQIRUPDWLRQ ZDV FRYHUHG E\ ([HPSWLRQ ZDV FHQWUDO WR WKH -XVWLFH 'HSDUWPHQW DUJXPHQWV LQ WKH FDVH 6HFRQG WKH FRXUW VDLG WKH UHTXHVWHG LQIRUPDWLRQ ZDV DOVR VKLHOGHG E\ ([HPSWLRQ RI WKH )2,$ ZKLFK FRYHUHG SHUVRQQHO DQG PHGLFDO ILOHV DQG VLPLODU ILOHV WKH GLVFORVXUH RI ZKLFK ZRXOG FRQVWLWXWH DQ XQZDUUDQWHG LQYDVLRQ RI SULYDF\ 7KH FRXUW VDLG FULPLQDO ILOHV IHOO ZLWKLQ WKH VLPLODU ILOHV GHILQLWLRQ EHFDXVH WKH\ ZHUH SHUVRQDO WR WKH LQGLYLGXDO QDPHG WKHUHLQ $FNQRZOHGJLQJ WKH SHUVRQDO QDWXUH RI WKH FULPLQDO UHFRUGV WKH FRXUW SURFHHGHG WR EDODQFH WKH SULYDF\ LQWHUHVW DQG SXEOLF LQWHUHVW FRQFOXGLQJ GLVFORVXUH ZRXOG UHVXOW LQ D FOHDUO\ XQZDUUDQWHG LQYDVLRQ RI SULYDF\ 6DLG WKH FRXUW ,W VHHPV KLJKO\ XQOLNHO\ WKDW LQIRUPDWLRQ DERXW RIIHQVHV ZKLFK PD\ KDYH RFFXUUHG RU \HDUV DJR DV LQ WKH FDVH RI :LOOLDP 0HGLFR ZRXOG KDYH DQ\ UHOHYDQFH RU SXEOLF LQWHUHVW 7KH VDPH FDQ EH VDLG IRU LQIRUPDWLRQ UHODWLQJ WR WKH DUUHVW RU FRQYLFWLRQ RI SHUVRQV IRU PLQRU FULPLQDO RIIHQVHV RU RIIHQVHV ZKLFK DUH FRPSOHWHO\ XQUHODWHG WR DQ\WKLQJ QRZ XQGHU FRQVLGHUDWLRQ E\

PAGE 198

WKH SODLQWLIIV 7KDW LQIRUPDWLRQ LV SHUVRQDO WR WKH WKLUG SDUW\ &KDUOHV 0HGLFRf DQG LW LI >VLF@ H[LVWV LWV UHOHDVH ZRXOG FRQVWLWXWH D FOHDUO\ XQZDUUDQWHG LQYDVLRQ RI SHUVRQDO SULYDF\ 7KH WKLUG UHDVRQ WKH FRXUW JDYH ZDV WKDW WKH FULPLQDO UHFRUGV ZHUH DOVR FRYHUHG E\ ([HPSWLRQ &f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f 7KH FRXUW FRQFOXGHG WKDW LQGLYLGXDO SULYDF\ LQWHUHVWV ZHUH DW EHVW PLQLPDO LQ FULPLQDO KLVWRU\ LQIRUPDWLRQ WKDW ZDV D PDWWHU RI SXEOLF UHFRUGf§HYHQ LI WKRVH UHFRUGV ZHUH FRPSLOHG LQ D ODUJH QDWLRQDO GDWD EDQN 7KH '& &LUFXLW FRQFHGHG WKDW PDLQWDLQLQJ WKH REVFXULW\ RI FRPSXWHUL]HG FULPLQDO UHFRUGV ZDV DWWUDFWLYH DV D OHJLVODWLYH SROLF\ PDWWHU EXW ZDV QRW UHODWHG WR WKH VWDWXWRU\ PHDQLQJ RI SULYDF\ LQ WKLV FRQWH[W $EVHQW D VWDWXWRU\ GHILQLWLRQ RI SXEOLF LQWHUHVW LQ GLVFORVXUH WKH FRXUW UHDVRQHG LW VKRXOG IROORZ WKH SUDFWLFHV RI VWDWH DQG ORFDO JRYHUQPHQWV 7KH FRXUW KDG EHHQ DGYLVHG WKDW PRVW VWDWH DQG ORFDO JRYHUQPHQWV PDGH

PAGE 199

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

PAGE 200

JRYHUQPHQW UHFRUG LQVWHDG WKH FRXUW UHDVRQHG WKDW WKH RQO\ SXEOLF LQWHUHVW WR EH FRQVLGHUHG LQ ([HPSWLRQ DQG &f FDVHV ZDV WKH JHQHUDO GLVFORVXUH SROLF\ RI WKH )2,$ :H GR QRW EHOLHYH WKDW WKH SKUDVH nSXEOLF LQWHUHVWn DV XVHG LQ WKH EDODQFLQJ LQ ([HPSWLRQV DQG &f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f FDVHV WR GHWHUPLQH ZKHWKHU GLVFORVXUH PLJKW EH ZDUUDQWHG %XW WKH FRXUW FRQFOXGHG WKDW ZH PXVW EDODQFH WKH SURVSHFWLYH GDPDJH WR WKH SULYDF\ LQWHUHVW DJDLQVW WKH SXEOLFnV LQWHUHVW GRHV QRW QHFHVVDULO\ PHDQ ZH FRQFOXGHG FRXOG QRW PHDQ WKDW WKH SXEOLF LQWHUHVW GHSHQGV RQ RXU DSSUDLVDO RI WKH SXEOLFnV QHHG WR NQRZ SDUWLFXODU LQIRUPDWLRQ 7KH -XVWLFH 'HSDUWPHQW SHWLWLRQHG WKH 86 6XSUHPH &RXUW IRU D ZULW RI FHUWLRUDUL DEDQGRQLQJ HQWLUHO\ LWV FODLP WKDW WKH FULPLQDOUHFRUG QRQGLVFORVXUH VWDWXWH TXDOLILHG XQGHU WKH )2,$nV ([HPSWLRQ ,QVWHDG WKH -XVWLFH 'HSDUWPHQW DUJXHG WKDW ([HPSWLRQV DQG &f FDVHV

PAGE 201

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f FDVHV 7KH 6XSUHPH &RXUW JUDQWHG FHUWLRUDUL DQG LVVXHG LWV RSLQLRQ RQ 0DUFK -XVWLFH 6WHYHQV ZURWH WKH PDMRULW\ RSLQLRQ MRLQHG E\ -XVWLFHV :KLWH 0DUVKDOO 2n&RQQRU 6FDOLD .HQQHG\ DQG &KLHI -XVWLFH 5HKQTXLVW -XVWLFH %ODFNPXQ MRLQHG E\ -XVWLFH %UHQQDQ ILOHG DQ RSLQLRQ FRQFXUULQJ ZLWK WKH UHVXOW $ 'HILQLWLRQ RI ,QIRUPDWLRQDO 3ULYDF\ -XVWLFH 6WHYHQV LQ EHJLQQLQJ KLV DQDO\VLV QRWHG WKDW WKH &RXUW DJUHHG WR KHDU WKH FDVH EHFDXVH RI LWV SRWHQWLDO LPSDFW RQ YDOXHV RI SHUVRQDO SULYDF\ :KLOH WKH FDVH LQYROYHG WKH VWDWXWRU\ LQWHUSUHWDWLRQ RI D )2,$ H[HPSWLRQ KH SRVHG WKH OHJDO TXHVWLRQ EHIRUH WKH &RXUW LQ EURDGHU FRQVWLWXWLRQDO WHUPV &LWLQJ KLV HDUOLHU RSLQLRQ LQ :KDOHQ Y 5RH -XVWLFH 6WHYHQV QRWHG WKDW SULYDF\ FDVHV KDYH DVVHUWHG WZR FRQVWLWXWLRQDO YDOXHV WKH LQWHUHVW LQ DYRLGLQJ GLVFORVXUH RI SHUVRQDO LQIRUPDWLRQ DQG LQGHSHQGHQFH LQ PDNLQJ FHUWDLQ NLQGV RI LQWLPDWH GHFLVLRQV +HUH WKH

PAGE 202

IRUPHU LQWHUHVW nLQ DYRLGLQJ GLVFORVXUH RI SHUVRQDO PDWWHUVn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n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

PAGE 203

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f -XVWLFH 6WHYHQV FLWHG VHYHUDO VWDWXWHV DQG UHJXODWLRQV WR VXSSRUW WKH &RXUWnV FRQFOXVLRQ WKDW UHFRUGV WKDW ZHUH SXEOLF VRPHZKHUH RU DW VRPH WLPH LQ JRYHUQPHQW UHFRUG

PAGE 204

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nV SRVLWLRQ -XVWLFH 6WHYHQV FLWHG WKH 3ULYDF\ $FW RI ZKLFK UHFRJQL]HG WKH LPSDFW RI FRPSXWHU GDWD EDQNV RQ LQGLYLGXDO SULYDF\ -XVWLFH 6WHYHQV VDLG WKH 3ULYDF\ $FW FRXOG QRW EH XVHG WR ZLWKKROG LQIRUPDWLRQ UHTXLUHG WR EH GLVFORVHG XQGHU WKH )2,$ D FRQFOXVLRQ &RQJUHVV LWVHOI KDG UHDFKHG LQ %XW KH LJQRUHG &RQJUHVVn VSHFLILF SURKLELWLRQ DJDLQVW XVLQJ WKH 3ULYDF\ $FW WR ZLWKKROG SXEOLFUHFRUG LQIRUPDWLRQ DQG VXUPLVHG WKDW &RQJUHVVn EDVLF SROLF\ FRQFHUQ UHJDUGLQJ WKH LPSOLFDWLRQV RI FRPSXWHUL]HG GDWD EDQNV IRU SHUVRQDO SULYDF\ LV FHUWDLQO\ UHOHYDQW LQ RXU FRQVLGHUDWLRQ RI SULYDF\ LQWHUHVWV DIIHFWHG E\ GLVVHPLQDWLRQ RI UDS VKHHWV IURP WKH )%, FRPSXWHU -XVWLFH 6WHYHQV FLWHG WZR H[DPSOHV LQ WKH )2,$ LWVHOI WR EROVWHU KLV FRQFOXVLRQ WKDW &RQJUHVV KDG QRW LQWHQGHG WKH GLVFORVXUH VWDWXWH WR FRYHU UHFRUGV RI SULYDWH FLWL]HQV LGHQWLILDEOH E\ QDPH +H SRLQWHG RXW WKDW WKH )2,$

PAGE 205

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nV RSLQLRQ LQ 'HSDUWPHQW RI $LU )RUFH Y 5RVH D FDVH WKDW UHFRJQL]HG SULYDF\ LQWHUHVWV LQ FDGHW GLVFLSOLQDU\ UHSRUWV WKDW DW RQH WLPH KDG EHHQ SRVWHG RQ EXOOHWLQ ERDUGV DW WKH 8QLWHG 6WDWHV $LU )RUFH $FDGHP\ D PLOLWDU\ HGXFDWLRQDO LQVWLWXWLRQ QRW URXWLQHO\ RSHQ WR WKH SXEOLF 5RVH EHJDQ ZKHQ 1HZ
PAGE 206

SXEOLF EXW DOVR IURP WKH SHUVSHFWLYH RI RWKHU FDGHWV DQG DFDGHP\ SHUVRQQHO ZKR PLJKW UHFRJQL]H WKH VXEMHFWV RI WKH GLVFLSOLQDU\ DFWLRQV -XVWLFH 6WHYHQV HTXDWLQJ SXEOLF FULPLQDO UHFRUGV WR LQVWLWXWLRQDO GLVFLSOLQDU\ UHFRUGV VHHPHG WR VXJJHVW WKDW UHFRUGV FRXOG HQGDQJHU SULYDF\ DQG EH ZLWKKHOG EDVHG RQ D YHU\ OLPLWHG VSHFXODWLYH WKUHDW +H QRWHG ,I D FDGHW KDV D SULYDF\ LQWHUHVW LQ SDVW GLVFLSOLQH WKDW ZDV RQFH SXEOLF EXW PD\ KDYH EHHQ nZKROO\ IRUJRWWHQn WKH RUGLQDU\ FLWL]HQ VXUHO\ KDV D VLPLODU LQWHUHVW LQ WKH DVSHFWV RI KLV RU KHU FULPLQDO KLVWRU\ WKDW PD\ KDYH EHHQ ZKROO\ IRUJRWWHQ &LWLQJ KLV HDUOLHU RSLQLRQ LQ :KDOHQ -XVWLFH 6WHYHQV PDGH FOHDU LQ 5HSRUWHUV &RPPLWWHH WKDW ZKROO\ IRUJRWWHQ FULPLQDO UHFRUGV UHJDLQHG SULYDF\ LQWHUHVWV ZKHQ FRPSLOHG E\ JRYHUQPHQW FRPSXWHUV :H DUH QRW XQDZDUH RI WKH WKUHDW WR SULYDF\ LPSOLFLW LQ WKH DFFXPXODWLRQ RI YDVW DPRXQWV RI SHUVRQDO LQIRUPDWLRQ LQ FRPSXWHUL]HG GDWD EDQNV f 7R XQGHUVFRUH WKH &RXUWnV FRQFHUQ DERXW FRPSXWHUV DQG WKH GLPHQVLRQV RI LQIRUPDWLRQDO SULYDF\ -XVWLFH 6WHYHQV FLWHG D OHFWXUH E\ &KLHI -XVWLFH 5HKQTXLVW ZKR KDG ZULWWHQ WKH PDMRULW\ RSLQLRQ LQ 3DXO Y 'DYLV WKDW UHMHFWHG D FRQVWLWXWLRQDO ULJKW RI LQIRUPDWLRQDO SULYDF\ 7KH FKLHI MXVWLFH QRWHG WKDW WKH IDFW DQ HYHQW LV QRW ZKROO\ nSULYDWHn GRHV QRW PHDQ WKDW DQ LQGLYLGXDO KDV QR LQWHUHVW LQ OLPLWLQJ GLVFORVXUH RU GLVVHPLQDWLRQ RI WKH LQIRUPDWLRQ

PAGE 207

3XUSRVH RI 'LVFORVXUH 1H[W -XVWLFH 6WHYHQV WXUQHG WR WKH TXHVWLRQ RI WKH SXUSRVH RI GLVFORVXUH &%6 DQG WKH 5HSRUWHUV &RPPLWWHH KDG DUJXHG WKHUH ZHUH WZR LVVXHV UHODWHG WR &KDUOHV 0HGLFRn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nV EHKDYLRU /LNHZLVH -XVWLFH 6WHYHQV VDLG WKDW VXFK LQIRUPDWLRQ ZRXOG QRW WHOO XV DQ\WKLQJ DERXW WKH FRQGXFW RI WKH 'HSDUWPHQW RI 'HIHQVH '2'f LQ DZDUGLQJ RQH RU PRUH FRQWUDFWV WR WKH 0HGLFR &RPSDQ\ ,QVWHDG RI ORRNLQJ DW WKH SXEOLF LQWHUHVW VLGH RI WKH EDODQFLQJ HTXDWLRQ LQ WHUPV RI WKH VRFLHWDO EHQHILWV WKDW PLJKW DFFUXH IURP GLVFORVXUH -XVWLFH 6WHYHQV VDLG GLVFORVXUH PXVW WXUQ RQ WKH QDWXUH RI WKH UHTXHVWHG GRFXPHQW DQG LWV UHODWLRQVKLS WR WKH EDVLF SXUSRVH RI WKH

PAGE 208

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nV SHUIRUPDQFH RI LWV VWDWXWRU\ GXWLHV IDOOV VTXDUHO\ ZLWKLQ WKH VWDWXWRU\ SXUSRVH 7KDW SXUSRVH KRZHYHU LV QRW IRVWHUHG E\ GLVFORVXUH RI LQIRUPDWLRQ DERXW SULYDWH FLWL]HQV WKDW LV DFFXPXODWHG LQ YDULRXV JRYHUQPHQWDO ILOHV EXW WKDW UHYHDOV OLWWOH RU QRWKLQJ DERXW DQ DJHQF\fV RZQ FRQGXFW ,Q WKLV FDVH WKH UHTXHVWHU GRHV QRW LQWHQG WR GLVFRYHU DQ\WKLQJ DERXW WKH FRQGXFW RI WKH DJHQF\ WKDW KDV SRVVHVVLRQ RI WKH UHTXHVWHG UHFRUGV ,QGHHG UHVSRQVH WR WKLV UHTXHVW ZRXOG QRW VKLHOG DQ\ OLJKW RQ WKH FRQGXFW RI DQ\ *RYHUQPHQW DJHQF\ RU RIILFLDO 7KH GHILQLWLRQ RI SXEOLF LQWHUHVW WKDW -XVWLFH 6WHYHQV DUWLFXODWHG GHSDUWV IURP WKH UHDVRQLQJ LQ VHYHUDO HDUOLHU )2,$ FDVHV GHFLGHG E\ ORZHU IHGHUDO FRXUWV WKDW ZHLJKHG

PAGE 209

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t +HQQLDHU Y 0DUVKDOO ZKLFK VDLG SHUVRQV ZKR VHHN UHFRUGV IRU SHUVRQDO ODZVXLWV GR QRW IXUWKHU D SXEOLF LQWHUHVW &RXUWV DOVR KDYH KHOG WKDW LQIRUPDWLRQ VRXJKW IRU VWULFWO\ FRPPHUFLDO SXUSRVHV VHUYHV OLWWOH RU QR SXEOLF LQWHUHVW ,Q 0XOWQRPDK &RXQW\ 0HGLFDO 6RFLHW\ Y 6FRWW WKH 1LQWK &LUFXLW RI WKH 86 &RXUW RI $SSHDOV KHOG WKDW D UHTXHVWHUnV FRPPHUFLDO LQWHUHVW LQ WKH QDPHV DQG DGGUHVVHV RI 0HGLFDUH UHFLSLHQWV IDLOHG WR ZDUUDQW GLVFORVXUH RI RWKHUZLVH SULYDWH LQIRUPDWLRQ ,Q DQRWKHU 1LQWK &LUFXLW FDVH 0LQQLV Y 'HSDUWPHQW RI $JULFXOWXUH WKH FRXUW

PAGE 210

UHFRJQL]HG D OHJLWLPDWH SXEOLF LQWHUHVW LQ DQ DJHQF\ ORWWHU\ SUDFWLFH IRU DOORFDWLQJ SHUPLWV WR UDIW GRZQ D IHGHUDOO\ FRQWUROOHG ULYHU 7KH FRXUW KRZHYHU UHMHFWHG WKH UHTXHVW ,W QRWHG WKDW WKH UHTXHVWHUn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nV UHDVRQLQJ LQ 5HSRUWHUV &RPPLWWHH DOWKRXJK VHYHUDO ORZHU FRXUWV KDYH EHHQ ZLOOLQJ WR ORRN EH\RQG RQO\ WKDW ZKLFK UHIOHFWV RQ DQ DJHQF\nV VWDWXWRU\ GXWLHV $Q H[DPSOH RI D FRXUWnV ZLOOLQJQHVV WR JR EH\RQG VFUXWLQ\ RI DQ DJHQF\nV DFWLRQV LV &ROXPELD 3DFNLQJ &R Y 8QLWHG 6WDWHV 'HSDUWPHQW RI $JULFXOWXUH ,Q WKLV FDVH LQYROYLQJ WKH LGHQWLW\ RI LQVSHFWRUV FRQYLFWHG RI DFFHSWLQJ EULEHV LQ D ZLGHVSUHDG VFDQGDO LQ WKH PHDW SURFHVVLQJ LQGXVWU\ WKH )LUVW &LUFXLW RI WKH 86 &RXUW RI $SSHDOV DOORZHG UHOHDVH RI WKH QDPHV UHFRJQL]LQJ WKDW WR GR VR PLJKW IRUHVWDOO VLPLODU RFFXUUHQFHV 7KH IRFXV RI WKH DQDO\VLV ZDV QRW RQ DJHQF\ EHKDYLRU SHU VH EXW UDWKHU RQ D SRVLWLYH IXWXUH EHQHILW IURP GLVFORVXUH 7KH FRXUW QRWHG

PAGE 211

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nV SULYDF\ LQWHUHVWV ZLWK WKH SXEOLF LQWHUHVW LQ GLVFORVXUH FRQFOXGHG WKDW WKH $UP\ SUHVV UHOHDVH FRQWDLQHG H[DFWO\ WKH NLQG RI LQIRUPDWLRQ WKH )2,$ GLUHFWHG DJHQFLHV WR GLVFORVH >7@R IRUHVWDOO IXWXUH DEXVHV WKH SXEOLF KDV DQ LQWHUHVW LQ DQ\ GHWHUUHQW HIIHFW GLVFORVXUH PLJKW KDYH 7KH FRXUW DGGHG 7KH OHJLVODWLYH KLVWRU\ RI WKH >3ULYDF\@ $FW GRHV QRW HYLGHQFH DQ\ LQWHQW WR SUHYHQW WKH GLVFORVXUH E\ WKH JRYHUQPHQW WR WKH SUHVV RI FXUUHQW

PAGE 212

QHZVZRUWK\ LQIRUPDWLRQ RI LPSRUWDQFH DQG LQWHUHVW WR D ODUJH QXPEHU RI SHRSOHLr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t &R WKH 6XSUHPH &RXUW UHMHFWHG DQ DUJXPHQW E\ WKH JHQHUDO FRXQVHO RI WKH 1DWLRQDO /DERU 5HODWLRQV %RDUG IRU FDWHJRULFDO EDODQFLQJ LQ DQ ([HPSWLRQ FDVH LQYROYLQJ LQYHVWLJDWRU\ UHFRUGV ,Q UHMHFWLQJ FDWHJRULFDO H[HPSWLRQV WKH &RXUW FLWHG FRQJUHVVLRQDO FRQFHUQ DERXW VHYHUDO IHGHUDO FDVHV WKDW KDG DOORZHG FDWHJRULFDO H[HPSWLRQ RI LQYHVWLJDWRU\ ILOHV XQGHU ([HPSWLRQ 7KLV FRQFHUQ ZDV UHIOHFWHG LQ WKH DPHQGPHQWV WR WKH )2,$ WKDW FODULILHG WKH QHHG IRU EDODQFLQJ ,Q 1/5% WKH &RXUW QRWHG 7KH OHJLVODWLYH KLVWRU\ FOHDUO\ LQGLFDWHV WKDW &RQJUHVV GLVDSSURYHV RI WKRVH FDVHV UHOLHG RQ E\ WKH >1/5%nV@ *HQHUDO &RXQVHO ZKLFK UHOLHYH WKH *RYHUQPHQW RI WKH REOLJDWLRQ WR VKRZ WKDW GLVFORVXUH RI D SDUWLFXODU LQYHVWLJDWRU\ ILOH ZRXOG

PAGE 213

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f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

PAGE 214

ZKLFK WKH EDODQFH FKDUDFWHULVWLFDOO\ WLSV LQ RQH GLUHFWLRQ &RPSXWHU FRPSLODWLRQV RI FULPLQDO UHFRUGVf§ HYHQ LQIRUPDWLRQ WDNHQ RQO\ IURP SXEOLF UHFRUGVFRXOG EH FDWHJRULFDOO\ H[FOXGHG IURP GLVFORVXUH EHFDXVH WKH\ FKDUDFWHULVWLFDOO\ WLS WRZDUG DQ XQZDUUDQWHG LQYDVLRQ RI SULYDF\ KH VDLG -XVWLFH 6WHYHQV FRQFOXGHG 7KH SULYDF\ LQWHUHVW LQ PDLQWDLQLQJ WKH SUDFWLFDO REVFXULW\ RI UDSVKHHW LQIRUPDWLRQ ZLOO DOZD\V EH KLJK :KHQ WKH VXEMHFW RI VXFK D UDS VKHHW LV D SULYDWH FLWL]HQ DQG ZKHQ WKH LQIRUPDWLRQ LV LQ WKH *RYHUQPHQWnV FRQWURO DV D FRPSLODWLRQ UDWKHU WKDQ DV D UHFRUG RI ZKDW WKH *RYHUQPHQW LV XS WR WKH SULYDF\ SURWHFWHG E\ ([HPSWLRQ &f LV LQ IDFW DW LWV DSH[ ZKLOH WKH )2,$EDVHG SXEOLF LQWHUHVW LQ GLVFORVXUH LV DW LWV QDGLU 6XFK D GLVSDULW\ RQ WKH VFDOHV RI MXVWLFH KROGV IRU D FODVV RI FDVHV ZLWKRXW UHJDUG WR LQGLYLGXDO FLUFXPVWDQFHV WKH VWDQGDUG YLUWXHV RI EULJKWOLQH UXOHV DUH WKXV SUHVHQW DQG WKH GLIILFXOWLHV DWWHQGDQW WR DG KRF DGMXGLFDWLRQ PD\ EH DYRLGHG $FFRUGLQJO\ ZH KROG DV D FDWHJRULFDO PDWWHU WKDW D WKLUG SDUW\nV UHTXHVW IRU ODZ HQIRUFHPHQW UHFRUGV RU LQIRUPDWLRQ DERXW D SULYDWH FLWL]HQ FDQ UHDVRQDEO\ EH H[SHFWHG WR LQYDGH WKDW FLWL]HQn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

PAGE 215

RI )2,$ GLVSXWHV PXVW GHIHU WR WKH DJHQF\nV MXGJPHQW XQOHVV WKH UHTXHVWHU FDQ VKRZ WKH LQIRUPDWLRQ UHODWHV VSHFLILFDOO\ WR WKH DJHQF\n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nV SXEOLF LQWHUHVW LQTXLU\ WR WKH QDWXUH RI UHTXHVWHG LQIRUPDWLRQ DQG LWV UHODWLRQVKLS WR WKH )2,$ ZLWKRXW ORRNLQJ DW RWKHU SRWHQWLDO VRFLHWDO EHQHILWV 7KH FDVH LQYROYHG D UHTXHVW E\ WKH 1$5)( IRU WKH FRPSXWHUL]HG QDPHV DQG DGGUHVVHV RI SHUVRQV DGGHG WR IHGHUDO DQQXLW\ UROOV KHOG LQ D JRYHUQPHQW GDWD EDVH 7KH ORZHU FRXUW KDG DOORZHG GLVFORVXUH UHDVRQLQJ WKDW WKH UHODWLYHO\ PLQRU SULYDF\ LQIULQJHPHQW E\ GLVFORVXUH RI RQO\ QDPHV DQG DGGUHVVHV ZDV RXWZHLJKHG E\ WKH SXEOLF LQWHUHVW LQ GLVFORVXUH WKDW IORZV IURP WKH 1$5)(nV VHUYLFH DQG WKH IDFW WKDW PDQ\ DQQXLWDQWV PLJKW EH SOHDVHG WR OHDUQ RI WKHP 7KH '& &LUFXLW UHMHFWHG WKLV EDODQFLQJ DSSURDFK WKDW ORRNHG DW WKH UHVXOW RI GLVFORVXUH

PAGE 216

QRWLQJ LQVWHDG WKDW WKH >)2,$nV@ VROH FRQFHUQ LV ZLWK ZKDW PXVW EH PDGH SXEOLF DQG QRW PDGH SXEOLF )LQGLQJ QR SXEOLF LQWHUHVW LQ VXFK GLVFORVXUH XQGHU WKH 5HSRUWHUV &RPPLWWHH UHDVRQLQJ WKH FRXUW KHOG WKDW HYHQ WKH PLQRU SULYDF\ LQIULQJHPHQW RI GLVFORVLQJ QDPHV DQG DGGUHVVHV WLSSHG WKH EDODQFLQJ VFDOHV LQ IDYRU RI ZLWKKROGLQJ WKH LQIRUPDWLRQ 7KH UHDVRQLQJ RI 5HSRUWHUV &RPPLWWHH ZDV FHQWUDO WR WKH '& &LUFXLWnV UHDVRQLQJ LQ $PHULFDQ )HGHUDWLRQ RI *RYHUQPHQW (PSOR\HHV Y 'HSDUWPHQW RI +HDOWK DQG +XPDQ 6HUYLFHV D FDVH LQYROYLQJ WKH SULYDF\ LQWHUHVWV RI SHRSOH ZKRVH QDPHV DQG DGGUHVVHV ZHUH FRQWDLQHG LQ DQ DJHQF\nV GDWD EDVH 7KH '& &LUFXLW KHOG WKDW WKH SXEOLF LQWHUHVW HPERGLHG LQ D FROOHFWLYH EDUJDLQLQJ VWDWXWH ZKLFK KDG QR GLUHFW EHDULQJ RQ DQ DJHQF\nV SHUIRUPDQFH ZDV LQVXIILFLHQW WR RYHUFRPH WKH PLQRU SULYDF\ LQWHUHVWV RI WKH LQIRUPDWLRQ + 5HSRUWHUV &RPPLWWHH DOVR ZDV UHOLHG RQ E\ D IHGHUDO GLVWULFW FRXUW LQ 1HZ
PAGE 217

UHFRUGV 7KH FRXUW DOVR IROORZHG WKH 5HSRUWHUV &RPPLWWHH GHILQLWLRQ RI LQIRUPDWLRQDO SULYDF\ DV DPRQJ RWKHU WKLQJV WKH ULJKW RI LQGLYLGXDOV WR FRQWURO LQIRUPDWLRQ DERXW WKHPVHOYHV $ 1HZ -HUVH\ VXSHULRU FRXUW FLWHG 5HSRUWHUV &RPPLWWHHnV UHDVRQLQJ WKDW LQIRUPDWLRQ LQ JRYHUQPHQW FRPSLODWLRQV SRVHG D JUHDWHU SULYDF\ WKUHDW WKDQ WKH LQIRUPDWLRQ DW LWV RULJLQDO VRXUFH ,Q $VEXU\ 3DUN 3UHVV ,QF Y 'HSDUWPHQW RI +HDOWK WKH FRXUW DIILUPHG D ORZHU FRXUWn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nV LQWHUSUHWDWLRQ RI SULYDF\ LQ WKH SXEOLF SROLF\ DUHQD SULYDF\ FRQFHUQV KDYH DIIHFWHG DFFHVV WR FRPSXWHUL]HG JRYHUQPHQW LQIRUPDWLRQ DW D PRUH SUDFWLFDO OHYHO $V RXWOLQHG SUHYLRXVO\ WHFKQLFDO DQG GHILQLWLRQDO SUREOHPV UHODWHG WR SULYDF\ FRQFHUQV DOVR WKUHDWHQ WR OLPLW DFFHVV WR FRPSXWHUL]HG UHFRUGV 7HFKQLFDO SUREOHPV DULVH ZKHQ DJHQF\ SHUVRQQHO VLPSO\ DUH XQZLOOLQJ RU XQDEOH WR XVH

PAGE 218

FRPSXWHUV WR SURYLGH PHDQLQJIXO DFFHVV 'HILQLWLRQDO SUREOHPV RFFXU EHFDXVH UHFRUGV ODZV ZULWWHQ ZKHQ PRVW UHFRUGV ZHUH LQ SDSHU IRUP GR QRW UHVROYH QRYHO LVVXHV SRVHG E\ FRPSXWHUL]HG UHFRUGV 7KLV VHFWLRQ ORRNV DW KRZ IHGHUDO DQG VWDWH FRXUWV KDYH DWWHPSWHG WR GHDO ZLWK VXFK WHFKQLFDO DQG GHILQLWLRQDO SUREOHPV RI FRPSXWHU DFFHVV 6RPH RI WKH FRXUW FDVHV WKDW IROORZ GR QRW GLVSXWH WKH SULYDWH QDWXUH RI SHUVRQDO LQIRUPDWLRQ UDWKHU WKH\ GHDO ZLWK LVVXHV VXFK DV DJHQFLHVn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

PAGE 219

WKH FDVH RI SDSHU UHFRUGV WKH GXW\ ZDV FOHDUO\ GHILQHG $JHQFLHV DUH QRW UHTXLUHG WR JDWKHU LQIRUPDWLRQ IURP YDULRXV VRXUFHV WR FUHDWH QHZ GRFXPHQWV RU WR DQDO\]H RU VXPPDUL]H LQIRUPDWLRQ LQ WKHLU ILOHV VXFK D GXW\ ZRXOG LPSRVH WRR JUHDW D EXUGHQ RQ DJHQF\ SHUVRQQHO +RZHYHU ZKDW FRQVWLWXWHV FUHDWLRQ RI D UHFRUG ZKHQ WKH WLPHVDYLQJ FDSDELOLWLHV RI FRPSXWHUV DUH IDFWRUHG LQ LV PXFK OHVV FOHDU )RU H[DPSOH LQ WKH FDVH
PAGE 220

,Q /RQJ Y ,56 WKH 86 &RXUW RI $SSHDOV IRU WKH 1LQWK &LUFXLW UHDFKHG D GLIIHUHQW FRQFOXVLRQ LQ D VLPLODU VLWXDWLRQ 7KH ,QWHUQDO 5HYHQXH 6HUYLFH DUJXHG WKDW SURYLGLQJ D FRPSXWHU WDSH ZLWK VRPH SULYDWH LQIRUPDWLRQ GHOHWHG FRQVWLWXWHG FUHDWLRQ RI D QHZ UHFRUG ZKLFK WKH )2,$ GLG QRW UHTXLUH 7KH FRXUW UHMHFWHG WKH ,56n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n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

PAGE 221

UHTXHVWHG LQIRUPDWLRQ +RZHYHU WKH FRXUW VDLG WKDW ZKLOH DQ DJHQF\ PD\ EH UHTXLUHG WR SURGXFH UHFRUGV WKDW GR H[LVW LW LV QRW UHTXLUHG WR PDNH WKHP 7KH FRXUW DOVR QRWHG WKDW WKH 7UHDVXU\ 'HSDUWPHQWnV RZQ UHJXODWLRQV SURYLGH WKDW >W@KHUH LV QR UHTXLUHPHQW WKDW UHFRUGV EH FUHDWHG RU GDWD SURFHVVHG LQ D IRUPDW RWKHU WKDQ UHTXLUHG IRU JRYHUQPHQW SXUSRVHV WR FRPSO\ ZLWK D UHTXHVW 6HJUHJDWLRQ RI &RPSXWHUL]HG 'DWD $QRWKHU VLWXDWLRQ WKDW KDV SRVHG GLIILFXOWLHV IRU FRPSXWHUL]HG DFFHVVf§DQG WKH RQH PRVW GLUHFWO\ UHODWHG WR SULYDF\ FRQFHUQVf§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f§ DQG PD\ GHQ\ DFFHVVf§ZKHQ WKH UHVXOW RI WKH HGLWLQJ ZRXOG EH DQ XQLQWHOOLJLEOH GRFXPHQW 6HFRQG DJHQFLHV FDQ UHIXVH WR VHJUHJDWH ZKHQ GLVFORVDEOH PDWHULDO LV VR LQH[WULFDEO\ LQWHUWZLQHG ZLWK QRQGLVFORVDEOH LQIRUPDWLRQ WKDW VHJUHJDWLRQ

PAGE 222

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nV GXW\ WR VHJUHJDWH H[HPSW DQG QRQH[HPSW LQIRUPDWLRQ ,Q /RQJ Y ,56 WKH FRXUW VDLG LW GLG QRW EHOLHYH WKH PHUH GHOHWLRQ

PAGE 223

RI QDPHV DGGUHVVHV DQG VRFLDO VHFXULW\ QXPEHUV WR SURWHFW SULYDF\ UHVXOWHG LQ WKH DJHQF\nV FUHDWLQJ D ZKROH QHZ UHFRUG +RZHYHU WKH FRXUW ZDV QRW FOHDU DERXW WKH DJHQF\nV GXW\ WR FUHDWH D FRPSXWHU SURJUDP WR HGLW RXW VXFK LQIRUPDWLRQ 7ZR \HDUV ODWHU LQ
PAGE 224

nFROODSVHn LQIRUPDWLRQ DV SDUW RI LWV GXW\ WR GLVFORVH UHDVRQDEO\ VHJUHJDEOH LQIRUPDWLRQ +RZHYHU WKH FRXUW GLG VXJJHVW WKDW FRPSXWHUV SURYLGH DJHQFLHV ZLWK PRUH IOH[LELOLW\ WR PHHW )2,$ UHTXHVWV DQG VDLG WKDW DJHQFLHV VKRXOG EH HQFRXUDJHG WR SHUIRUP VHUYLFHV DJHQFLHV DUH QRW UHTXLUHG WR SURYLGH 'XW\ WR ,QYHVW LQ 1HZ &RPSXWHU 7HFKQRORJ\ $ TXHVWLRQ VRPHZKDW UHODWHG WR WKH GXW\ RI DJHQFLHV WR VHJUHJDWH H[HPSW DQG QRQH[HPSW LQIRUPDWLRQ LV ZKHWKHU DJHQFLHV PXVW LQYHVW LQ QHZ FRPSXWHU WHFKQRORJ\ WR DLG SXEOLF DFFHVV :KLOH WKH )2,$@ LQ QR ZD\ FRQWHPSODWHV WKDW DJHQFLHV VKRXOG LQYHVW LQ WKH PRVW VRSKLVWLFDWHG DQG H[SHQVLYH IRUP RI WHFKQRORJ\

PAGE 225

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

PAGE 226

WKH WKUHDW WR KHU SHUVRQDO SULYDF\ ZDV H[DFHUEDWHG E\ PRGHUQ WHFKQRORJ\ 7KH FRXUW FLWLQJ $UWKXU 0LOOHUnV LQIOXHQWLDO ERRN 7KH $VVDXOW RQ 3ULYDF\ VDLG 5HFHQW \HDUV KDYH ZLWQHVVHG D VXEVWDQWLDO XSVXUJH LQ WKH QXPEHU RI FDVHV DQG FRPPHQWDULHV GHDOLQJ ZLWK WKH SUREOHP EHIRUH WKLV &RXUW ,Q QR VPDOO SDUW WKLV SKHQRPHQD LV GXH WR WKH DGYHQW RI WKH FRPSXWHU DJHf§DQ HYHQW ZKLFK KDV GUDVWLFDOO\ LQFUHDVHG WKH SRZHU RI LQGXVWU\ DQG JRYHUQPHQW WR FROOHFW GDWDDQG WKH JURZLQJ FRQFHUQ IRU WKH LQGLYLGXDOnV ORVV RI SULYDF\ DV D QDWXUDO E\n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n SULYDF\ 7KH FDVH .HVWHQEDXP Y 0LFKLJDQ 6WDWH 8QLYHUVLW\ EHJDQ ZKHQ D VWXGHQW ILOHG D ODZVXLW VHHNLQJ D FRPSXWHU WDSH FRQWDLQLQJ

PAGE 227

WKH QDPHV DQG DGGUHVVHV RI VWXGHQWV DWWHQGLQJ 0LFKLJDQ 6WDWH 8QLYHUVLW\ 7KH XQLYHUVLW\ XVHG WKH WDSH WR SURGXFH WKH XQLYHUVLW\nV GLUHFWRU\ RI QDPHV DQG DGGUHVVHV ZKLFK ZDV SXEOLFO\ GLVWULEXWHG 7KH FRXUW UHMHFWHG WKH UHTXHVW RQ WKH EDVLV RI WKH VWXGHQWVn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

PAGE 228

LQKHUHQW LQ FRPSXWHUL]HG LQIRUPDWLRQ ,Q IDFW WKH FRXUW UHDVRQHG WKDW JUHDWHU SULYDF\ LQWHUHVWV ZHUH DW VWDNH LQ WKH 0XLQ FDVH EHFDXVH WKH DFFLGHQW UHSRUWV FRQWDLQHG QRW RQO\ QDPHV DQG DGGUHVVHV EXW DOVR HPEDUUDVVLQJ IDFWV VXFK DV WKH QDPHV RI SHRSOH ZKR KDG EHHQ DUUHVWHG 2Q WKLV EDVLV WKH FRXUW KHOG WKDW GLVFORVXUH RI WKH FRPSXWHU WDSH EDVHG RQ SXEOLF UHFRUGV ZRXOG FRQVWLWXWH D FOHDUO\ XQZDUUDQWHG LQYDVLRQ RI SULYDF\ ,Q D 0DVVDFKXVHWWV DSSHDOV FRXUW EORFNHG UHOHDVH RI GULYHUnV OLFHQVH UHFRUGV RXW RI FRQFHUQ IRU WKH DJJUHJDWH HIIHFW RI VXFK GLVFORVXUH RQ SULYDF\ ,Q 'RH Y 5HJLVWUDU RI 0RWRU 9HKLFOHV WKH FRXUW YDFDWHG D ORZHU FRXUW GHFLVLRQ DOORZLQJ GLVFORVXUH RI GULYHUnV UHFRUGV 7KH FRXUW SODFHG WKH EXUGHQ RQ WKH UHFRUG FXVWRGLDQ WR VKRZ WKDW LQIRUPDWLRQ ZDV QRW SHUVRQDO GDWD XQGHU WKH VWDWHnV )DLU ,QIRUPDWLRQ 3UDFWLFHV $FW EHIRUH GLVFORVLQJ LW 7KHQ LQ UHDVRQLQJ WKDW IRFXVHG RQ WKH TXDQWLW\ RI LQIRUPDWLRQ VWRUHG LQ DQ DJHQF\n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

PAGE 229

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nV OLFHQVH DSSOLFDWLRQV LQ WKH VDPH FRPSXWHU GDWD EDVH 7KH %HDFRQ -RXUQDO KDG VRXJKW D SULQWRXW RI PRWRULVWV ZKR KDG H[FHHGHG EDGGULYLQJ SRLQW OLPLWV DORQJ ZLWK DQ\ UHFRUGV RI VWHSV WDNHQ E\ WKH VWDWH WR VXVSHQG WKH OLFHQVHV RI WKRVH PRWRULVWV 7KH UHJLVWUDU EDONHG FRQWHQGLQJ WKDW VXFK SULQWRXWV ZRXOG FRQWDLQ SULYDWH GULYHUfV OLFHQVH LQIRUPDWLRQ WKDW WKH FRVWV DQG WLPH QHFHVVDU\ WR VHW XS WKH FRPSXWHU WR DQDO\]H WKH SULQWRXWV IRU DFFXUDF\ ZRXOG EH SURKLELWLYH WKDW ILOOLQJ VXFK D ODUJH UHTXHVW ZRXOG WDNH H[FHVVLYH WLPH DQG WDNH HPSOR\HHV DZD\ IURP WKHLU QRUPDO GXWLHV DQG WKDW VXFK GLVFORVXUH ZRXOG YLRODWH WKH ULJKW RI SULYDF\ RI FLWL]HQV 7KH FRXUW ZDV XQV\PSDWKHWLF UHDVRQLQJ WKDW WKH UHJLVWUDU ZDV XQGHU D VWDWXWRU\ GXW\ WR RUJDQL]H KLV RIILFH DQG HPSOR\ KLV VWDII LQ VXFK D ZD\ WKDW UHFRUG DFFHVV UHTXHVWV FRXOG EH PHW LQ D WLPHO\ DQG FRVW HIIHFWLYH PDQQHU

PAGE 230

$ /RXLVLDQD DSSHDOV FRXUW UHDFKHG D VLPLODU UHVXOW LQ :HEE Y 6KUHYHSRUW LQ ZKLFK WKH FRXUW XSKHOG D UHTXHVW IRU D FRPSXWHU WDSH FRQWDLQLQJ WKH QDPHV DQG DGGUHVVHV RI SXEOLF HPSOR\HHV LQ 6KUHYHSRUW 7KH FRXUW VDLG WKDW EHFDXVH WKH QDPHV DQG DGGUHVVHV ZHUH LQ SXEOLF UHFRUGV LQ RWKHU IRUPV QR UHDVRQDEOH H[SHFWDWLRQ RI SULYDF\ H[LVWHG IRU WKH VDPH UHFRUGV LQ FRPSXWHU IRUPDW XQGHU SULYDF\ SURYLVLRQV RI WKH VWDWHnV FRQVWLWXWLRQ :KLOH WKH FRXUW KHOG WKHUH ZDV QR SULYDF\ H[SHFWDWLRQ LQ WKH SXEOLFUHFRUG LQIRUPDWLRQ LQ TXHVWLRQ LW GLG QRW VSHFLILFDOO\ GLVFXVV ZKHWKHU FRPSXWHUL]HG UHFRUGV SRVH D SULYDF\ WKUHDW JUHDWHU WKDQ SDSHU UHFRUGV &RPSXWHU UHFRUGV UHFHLYHG D VLPLODU DVVHVVPHQW E\ D 1HZ
PAGE 231

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n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

PAGE 232

LQGLYLGXDO 0HGLFDLG UHFLSLHQWV IURP WKH UHFRUGV ZKRVH UHOHDVH KDV EHHQ RUGHUHG ,Q )DPLO\ /LIH /HDJXH Y 'HSDUWPHQW RI 3XEOLF $LG WKH ,OOLQRLV 6XSUHPH &RXUW VDLG WKH IDFW UHFRUGV NHSW E\ ZHOIDUH DERUWLRQ SURYLGHUV SXUVXDQW WR VWDWH UHFRUG ODZV FRQWDLQHG QDPHV RI DERUWLRQ UHFLSLHQWV GLG QRW SUHYHQW GLVFORVXUH RI QRQSULYDWH LQIRUPDWLRQ 7KH FDVH DURVH ZKHQ DQ DQWLn DERUWLRQ RUJDQL]DWLRQ VXHG WKH VWDWH 'HSDUWPHQW RI 3XEOLF $LG VHHNLQJ UHFRUGV DERXW SXEOLF IXQGV SDLG WR GRFWRUV DQG PHGLFDO SURYLGHUV IRU ZHOIDUH DERUWLRQV DQG DERUWLRQUHODWHG VHUYLFHV $ ORZHU FRXUW RUGHUHG WKH VWDWH WR SURYLGH WKH DGGUHVVHV RI GRFWRUV DQG SURYLGHUV RI DERUWLRQ VHUYLFHV DQG WKH VWDWH DSSHDOHG 2Q DSSHDO WKH VWDWH SUHVHQWHG IRXU DUJXPHQWV DJDLQVW GLVFORVXUH ,W ZRXOG YLRODWH WKH SDWLHQWVn ULJKW RI SULYDF\ LW ZRXOG KDYH DQ LQKLELWLQJ HIIHFW RQ DERUWLRQ SURYLGHUV WKXV LQGLUHFWO\ DIIHFWLQJ DERUWLRQ SDWLHQWVn ULJKW RI SULYDF\ LW ZRXOG LQYDGH WKH SULYDF\ RI DERUWLRQ SURYLGHUV DQG FRPSOLDQFH ZRXOG UHTXLUH FUHDWLRQ RI D QHZ UHFRUG ZKLFK ZDV QRW UHTXLUHG RI DJHQFLHV 7KH KLJK FRXUW UHMHFWHG WKH DUJXPHQWV KROGLQJ WKH VWDWHnV SXEOLF UHFRUGV ODZ UHTXLUHG GLVFORVXUH RI WKH LQIRUPDWLRQ ZLWK WKH QDPHV RI DERUWLRQ UHFLSLHQWV GHOHWHG LQ D UHDVRQDEOH DPRXQW RI WLPH +RZHYHU WKH FRXUW VDLG WKH UHTXHVWHU RI WKH UHFRUGV PXVW SD\ WKH FRVW RI D FRPSXWHU SURJUDP QHFHVVDU\ WR VHJUHJDWH WKH LQIRUPDWLRQ WR PHHW WKH UHTXHVW

PAGE 233

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
PAGE 234

GLVWULFW KDG QR GXW\ WR SUHSDUH D QHZ UHFRUG WR PDNH LQIRUPDWLRQ GLVFORVDEOH 7KH DSSHOODWH FRXUW FRQVWUXLQJ WKH VWDWHnV SXEOLF UHFRUGV ODZ WR EH DSSOLHG OLEHUDOO\ WR SHUPLW PD[LPXP DFFHVV WR GRFXPHQWV KHOG WKDW WKH VFKRRO GLVWULFW PXVW VFUDPEOH WKH UHFRUGV DQG PDNH WKHP DYDLODEOH 'LVFORVXUH RI WKH WHVW VFRUHV KHUH LQ D nVFUDPEOHGn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nV DUJXPHQW WKDW EHFDXVH H[HPSW DQG QRQH[HPSW LQIRUPDWLRQ ZHUH PL[HG WKH GLVWULFW ZRXOG KDYH WR FUHDWH D QHZ UHFRUG WR FRPSO\ ZLWK WKH GDWD UHTXHVW 7KH DSSHOODWH FRXUW FRQFOXGHG :H KROG WKDW XQGHU RXU SXEOLF UHFRUGV DFW WKHUH H[LVWV DQ LPSOLHG GXW\ WR GHOHWH H[HPSW

PAGE 235

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nUHFRUGn E\ LWV YHU\ QDWXUH H[LVWV WR LPSDUW WKH LQIRUPDWLRQ FRQWDLQHG LQ LW f ,Q DQRWKHU FDVH WKH ,OOLQRLV 6XSUHPH &RXUW KHOG WKDW D VFKRRO GLVWULFW PXVW GLVFORVH PDVNHG DQG VFUDPEOHG UHFRUGV RI DFKLHYHPHQW WHVW VFRUHV ,Q %RZLH Y (YDQVWRQ &RPPXQLW\ &RQVROLGDWHG 6FKRRO 'LVWULFW 1R SDUHQWV VRXJKW GLVFORVXUH RI VWDQGDUGL]HG WHVW VFRUHV IRU VWXGHQWV IRU FHUWDLQ \HDUV JUDGHV DQG VFKRROV LQ WKH GLVWULFW DORQJ ZLWK D OLVW RI HGXFDWLRQDO SURJUDPV DYDLODEOH LQ WKRVH VFKRROV 7KH SDUHQWV ILOHG VXLW DIWHU WKH GLVWULFW GHQLHG WKHLU UHTXHVW DQG D FLUFXLW FRXUW GLVPLVVHG WKH SDUHQWVn FRPSODLQW RQ WZR JURXQGV )LUVW WKH FRXUW FLWHG WKH SULYDF\ ULJKWV RI WKH VWXGHQWV VHFRQG WKH FRXUW FRQFOXGHG D VFKRRO VWDWXV UHSRUW LVVXHG E\ WKH GLVWULFW SURYLGHG VXIILFLHQW LQIRUPDWLRQ WR VDWLVI\ WKH SDUHQWVn UHTXHVW 7KH SDUHQWV DSSHDOHG 2Q DSSHDO WKH GLVWULFW DUJXHG WKDW WKH LQIRUPDWLRQ ZDV SULYDWH DQG WKHUHIRUH H[HPSW DQG WKDW WR

PAGE 236

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
PAGE 237

UHVROYHG LQ VRPH PDQQHU 3XEOLF SROLF\ EDVHG LQ JHQHUDO RQ D QDWLRQnV DWWLWXGH SUHVHQWV DQ HQWLUHO\ GLIIHUHQW NLQG RI SUREOHP 1RZKHUH LQ WKH SULYDF\DFFHVV GHEDWH KDV WKLV EHHQ PRUH DSSDUHQW WKDQ LQ WKH GHFLVLRQ RI WKH 6XSUHPH &RXUW LQ 5HSRUWHUV &RPPLWWHH 7KH QDWLRQnV KLJKHVW FRXUW H[SOLFLWO\ UHFRJQL]HG D ULJKW RI LQIRUPDWLRQDO SULYDF\ VHHPLQJO\ RQ D SDU ZLWK RWKHU FRQVWLWXWLRQDO SULYDF\ LQWHUHVWV DFNQRZOHGJHG E\ WKH &RXUW $W WKH FRUH RI WKH PDMRULW\ RSLQLRQ LQ 5HSRUWHUV LV D SXEOLF SROLF\ TXHVWLRQ DERXW WKH YHU\ QDWXUH RI FRPSXWHUV DQG WKHLU SRWHQWLDO LPSDFW RQ $PHULFDf§D TXHVWLRQ WKDW VKLIWV WKH IRFXV DZD\ IURP WKH FRQWHQW RI LQIRUPDWLRQ WR LWV IRUP $ QDWLYH IHDU RI WHFKQRORJ\ DQG WKH GDQJHU LW SRVHV IRU LQGLYLGXDO IUHHGRPV UHVRQDWHV LQ WKH RSLQLRQ ZULWWHQ E\ -XVWLFH -RKQ 3DXO 6WHYHQV ZKR IUDPHG WKH LVVXH DV ZKHWKHU WKH FRPSLODWLRQ RI RWKHUZLVH KDUGWR REWDLQ LQIRUPDWLRQ DOWHUV WKH SULYDF\ LQWHUHVW LPSOLFDWHG E\ WKH GLVFORVXUH RI WKDW LQIRUPDWLRQ 1RWHV ‘ 8QLWHG 6WDWHV 'HSDUWPHQW RI -XVWLFH Y 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV 86 f KHUHDIWHU UHIHUUHG WR DV 5HSRUWHUV &RPPLWWHHf 6HH DOVR 86 'HSDUWPHQW RI -XVWLFH 2IILFH RI 3ROLF\ 'HYHORSPHQW )2,$ 8SGDWH 6SULQJ f IRU WKH -XVWLFH 'HSDUWPHQWnV LQWHUSUHWDWLRQ RI 5HSRUWHUV &RPPLWWHH %DVHG RQ WKLV LQWHUSUHWDWLRQ WKH -XVWLFH 'HSDUWPHQW SURYLGHV OHJDO DGYLFH WR IHGHUDO H[HFXWLYH DJHQFLHV 6HH :LOOLDP 3URVVHU 3ULYDF\ &DOLI / 5HY f 6HH JHQHUDOO\ WKH 3ULYDF\ $FW 86& VHF D f DQG UHODWHG OHJLVODWLRQ GLVFXVVHG LQ &KDSWHU 7KUHH 6WDQOH\ Y *HRUJLD 86 f

PAGE 238

.DW] Y 8QLWHG 6WDWHV 86 f 1$$&3 Y $ODEDPD 86 f *ULVZROG Y &RQQHFWLFXW 86 f 5RH Y :DGH 86 f 6HH DOVR 3ODQQHG 3DUHQWKRRG RI 6RXWKHDVWHUQ 3HQQV\OYDQLD Y &DVH\ 86 f 86/: :/ XSKROGLQJ D FRQVWLWXWLRQDO ULJKW WR DQ DERUWLRQ :KDOHQ Y 5RH 86 f 5HSRUWHUV &RPPLWWHH VXSUD QRWH 3RSH Y &XUO $WN (QJ5HS f 'DYLG + )ODKHUW\ 3ULYDF\ LQ &RORQLDO 1HZ (QJODQG f 5HVWDWHPHQW 6HFRQGf RI 7RUWV VHF f 6HH JHQHUDOO\ (WKDQ 0 .DWVK 7KH (OHFWURQLF 0HGLD DQG WKH 7UDQVIRUPDWLRQ RI /DZ f DQG ,WKLHO 'H 6ROD 3RRO 7HFKQRORJLHV RI )UHHGRP f 3DXO Y 'DYLV 86 f ,G DW 8QLWHG 6WDWHV Y 0LOOHU 86 f .DW] Y 8QLWHG 6WDWHV 86 f 8QLWHG 6WDWHV Y 0LOOHU DW 5HSRUWHG LQ )ODKHUW\ 3ULYDF\ LQ &RORQLDO 1HZ (QJODQG DW 6HH DOVR &KDUOHV )ULHG $Q $QDWRP\ RI 9DOXHV f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

PAGE 239

LW ZRXOG YLRODWH P\ SULYDF\ LI KH ZHUH DFWXDOO\ WR ZLWQHVV P\ VXIIHULQJ IURP VRPH V\PSWRPV ZKLFK KH PXVW NQRZ LV DVVRFLDWHG ZLWK WKH GLVHDVH 3ULYDF\ LQ LWV GLPHQVLRQ RI FRQWURO RYHU LQIRUPDWLRQ LV DQ DVSHFW RI SHUVRQDO OLEHUW\ $FWV GHULYH WKHLU PHDQLQJ SDUWO\ IURP WKHLU VRFLDO FRQWH[Wf§IURP KRZ PDQ\ SHRSOH NQRZ DERXW WKHP DQG ZKDW WKH NQRZOHGJH FRQVLVWV RI 8QLWHG 6WDWHV Y 0LOOHU DW TXRWLQJ %XUURZV Y 6XSHULRU &RXUW 3G f 3ULYDF\ $FW RI 86& VHF D HW VHT 86& VHF :KDOHQ Y 5RH VXSUD QRWH 3XE +HDOWK /DZ 1< VHF HW VHT 0F.LQQH\ 6XSS :KDOHQ Y 5RH )6XSS 6'1< f :KDOHQ Y 5RH DW ,G DW ,G DW ,G ,G -XVWLFH 6WHYHQV FLWHG DQ LQGHSHQGHQW LQYHVWLJDWLRQ LQWR FRPSXWHUL]HG FHQWUDO ILOLQJ V\VWHPV LQ &DOLIRUQLD DQG ,OOLQRLV 7KH LQYHVWLJDWLRQ IDLOHG WR XQFRYHU D VLQJOH FDVH LQ ZKLFK D SDWLHQWnV SULYDF\ ZDV YLRODWHG ,G DW ,G DW 0LOOHU ,G DW &RPSXWHUV 'DWD -XVWLFHV 6WHYHQV FLWHG $UWKXU %DQNV DQG ,QGLYLGXDO 3ULYDF\ $Q 2YHUYLHZ &ROXP +XP 5WV / 5HY f DQG $UWKXU 0LOOHU 7KH $VVDXOW RQ 3ULYDF\ &RPSXWHUV 'DWD %DQNV DQG 'RVVLHUV f %RWK WKH ODZ UHYLHZ DUWLFOH DQG ERRN E\ OHJDO VFKRODU 0LOOHU DV ZHOO DV KLV WHVWLPRQ\ EHIRUH VHYHUDO FRQJUHVVLRQDO FRPPLWWHHV ZHUH LQVWUXPHQWDO LQ SDVVDJH RI WKH 3ULYDF\ $FW RI ,G DW

PAGE 240

,G DW 5HSRUWHUV &RPPLWWHH VXSUD QRWH ,G &RPSXWHU 6HFXULW\ $FW RI 3XE / 1R ,QWHUHVWLQJO\ WKH 3ULYDF\ $FW DOORZV DJHQFLHV WR FROOHFW RQO\ LQIRUPDWLRQ QHFHVVDU\ WR SHUIRUP WKHLU VWDWXWRU\ GXWLHV 8QGHU WKLV UHDVRQLQJ DOO DJHQF\ LQIRUPDWLRQ LV DW OHDVW LQGLUHFWO\ UHOHYDQW WR DJHQF\ SHUIRUPDQFH 5HSRUWHUV &RPPLWWHH DW ,G ,G ,G ,G ,G FLWLQJ 86& VHF Ef$f )UHHGRP RI ,QIRUPDWLRQ $FW 86& DQG Ef%f VHFV 5HSRUWHUV &RPPLWWHH DW 6HH 86& Ef ([HPSWLRQ VKLHOGV LQIRUPDWLRQ LQ SHUVRQQHO PHGLFDO DQG VLPLODUf ILOHV WKH GLVFORVXUH RI ZKLFK ZRXOG FRQVWLWXWH D FOHDUO\ XQZDUUDQWHG LQYDVLRQ RI SHUVRQDO SULYDF\ ,G ,G ,G TXRWLQJ WKH GLVWULFW FRXUWnV VXPPDU\ MXGJPHQW RSLQLRQ ,G DW ,G FLWLQJ 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV Y 8QLWHG 6WDWHV 'HSDUWPHQW RI -XVWLFH )G '& &LU f ,G DW ,G

PAGE 241

LG ,G FLWLQJ 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV Y -XVWLFH 'HSDUWPHQW )G '& &LU f LG LG DW LG LG 3HWLWLRQHUVn EULHI IRU FHUWLRUDUL DW 8QLWHG 6WDWHV 'HSDUWPHQW RI -XVWLFH Y 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV 86 f FHUW JUDQWHG 'HSDUWPHQW RI -XVWLFH Y 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV 86 f 5HSRUWHUV &RPPLWWHH VXSUD QRWH LG DW -XVWLFH %ODFNPXQ LQ KLV FRQFXUULQJ RSLQLRQ MRLQHG E\ -XVWLFH %UHQQDQ JHQHUDOO\ VXSSRUWHG WKH PDMRULW\ UHVXOW +RZHYHU KH WRRN LVVXH ZLWK WKH PDMRULW\nV SRVLWLRQ RQ FDWHJRULFDO EDODQFLQJ +H VDLG 6XFK D EULJKWOLQH UXOH REYLRXVO\ KDV LWV DSSHDO EXW ZRQGHU ZKHWKHU LW ZRXOG QRW UXQ DJURXQG RQ RFFDVLRQ VXFK DV LQ D VLWXDWLRQ ZKHUH D UDS VKHHW GLVFORVHV D FRQJUHVVLRQDO FDQGLGDWHnV FRQYLFWLRQ RI WD[ IUDXG ILYH \HDUV EHIRUH 6XUHO\ WKH )%,nV GLVFORVXUH RI WKDW LQIRUPDWLRQ FRXOG QRW UHDVRQDEO\ EH H[SHFWHG WR FRQVWLWXWH DQ LQYDVLRQ RI SHUVRQDO SULYDF\ PXFK OHVV DQ XQZDUUDQWHG LQYDVLRQ ,G DW ,G FLWLQJ :KDOHQ Y 5RH DW ,G ,QGLYLGXDOV GR KDYH VRPH FRQWURO RYHU LQIRUPDWLRQ DERXW WKHPVHOYHV LQ WKH FULPLQDO MXVWLFH FRQWH[W EXW LW UHTXLUHV DVVLVWDQFH IURP D FRXUW )RU H[DPSOH DQ LQGLYLGXDO FDQ SHWLWLRQ D FRXUW WR KDYH D FULPLQDO UHFRUG VHDOHG RU H[SXQJHG 5HSRUWHUV &RPPLWWHH DW TXRWLQJ :HEVWHUnV 7KLUG 1HZ ,QWHUQDWLRQDO 'LFWLRQDU\ RI WKH (QJOLVK /DQJXDJH

PAGE 242

8QDEULGJHG f 7KH GLFWLRQDU\ GHILQHV LQIRUPDWLRQ DV SULYDWH LI LW LV LQWHQGHG IRU RU UHVWULFWHG WR WKH XVH RI D SDUWLFXODU SHUVRQ RU JURXS RU FODVV RI SHUVRQV QRW IUHHO\ DYDLODEOH WR WKH SXEOLF ,G 5LJKW WR ,G FLWLQJ 6DPXHO :DUUHQ DQG 3ULYDFY +DUY / 5HY /RXLV %UDQGLV f ,G DW ,G DW ,G DW FLWLQJ 86& VHF Ef ,QWHUHVWLQJO\ WKH FRQFHUQ DERXW ZLGHVSUHDG GLVVHPLQDWLRQ H[SUHVVHG LQ 86& VHF Ef ZDV QRW DERXW SXEOLF UHFRUG LQIRUPDWLRQ FRQWDLQHG LQ FULPLQDO KLVWRU\ ILOHV EXW UDWKHU IRU XQFRUURERUDWHG RU KHDUVD\ LQIRUPDWLRQ DQG RXWGDWHG LQIRUPDWLRQ VXFK DV FKDUJHV WKDW ZHUH ILOHG EXW ODWHU GURSSHG $OVR WKH OHJLVODWLYH KLVWRU\ RI WKH RULJLQDO )2,$ ([HPSWLRQ &f IRFXVHG RQ WKH SRWHQWLDO KDUP GLVFORVXUH ZRXOG SRVH WR LQYHVWLJDWLRQV QRW WR LQGLYLGXDOV LG DW FLWLQJ WKH 3ULYDF\ $FW RI 86& VHF D DQG TXRWLQJ +5HS 1R f &RQJUHVV UHDFWLQJ WR VHYHUDO FRQIOLFWLQJ FRXUW RSLQLRQV WKDW DWWHPSWHG WR XVH WKH 3ULYDF\ $FW DV MXVWLILFDWLRQ IRU ZLWKKROGLQJ LQIRUPDWLRQ DPHQGHG WKH 3ULYDF\ $FW LQ WR VSHFLILFDOO\ VWDWH WKDW WKH DFW ZDV QRW DQ ([HPSWLRQ VWDWXWH XQGHU WKH )UHHGRP RI ,QIRUPDWLRQ $FW 7KH QHZ ODQJXDJH ZDV DFKLHYHG DV DQ DPHQGPHQW WR WKH 1DWLRQDO 6HFXULW\ $FW RI 86& VHF f 6HH 7KRPDV 0 6XVPDQ 7KH 3ULYDF\ $FW DQG WKH )UHHGRP RI ,QIRUPDWLRQ $FW &RQIOLFW DQG 5HVROXWLRQ 0DUVKDOO / 5HY f &2 5HRUWHUV &RPPLWWHH DW ,G DW R ,G U+ ,G 7KH )2,$ ODQJXDJH KRZHYHU DOVR ZDV DQ DFNQRZOHGJHPHQW E\ &RQJUHVV WKDW DOO LQIRUPDWLRQ KHOG E\ DJHQFLHV ZDV GLVFORVDEOH XQOHVV FRYHUHG E\ D VSHFLILF )2,$ H[HPSWLRQ RI ZKLFK WKH 3ULYDF\ $FW ZDV QRW 6HH VXSUD QRWH ,Gf DW

PAGE 243

f 'HSDUWPHQW RI $LU )RUFH Y 5RVH 86 &2 5HSRUWHUV &RPPLWWHH DW ,G DW &2 ,G DW FLWLQFU :KDOHQ Y 5RH DW ,G DW FLWLQJ :LOOLDP 5HKQTXLVW ,V $Q ([SDQGLQJ 5LJKW RI 3ULYDF\ &RQVLVWHQW ZLWK )DLU DQG (IIHFWLYH /DZ (QIRUFHPHQW 1HOVRQ 7LPRWK\ 6WHSKHQV /HFWXUHV 8QLYHUVLW\ RI .DQVDV /DZ 6FKRRO 6HSWHPEHU f f 5HSRUWHUV &RPPLWWHH DW ,G ,G DW ,G FLWLQJ 'HSDUWPHQW RI $LU )RUFH Y 5RVH DW ,G DW 5HSRUWHUV &RPPLWWHH DW ,G DW %URZQ Y )%, )G G &LU f 0' /OR\G t +HQQLQJHU Y 0DUVKDOO )6XSS )OD f 0XOWQRPDK &RXQW\ 0HGLFDO 6RFLHW\ Y 6FRWW )G WK &LU f WK &LU 0LQQLV Y 'HSDUWPHQW RI $DULFXOWXUH )G f FHUW GRQLSG 86 f f :LQH +REE\ 86$ 7QF Y ,56 )G G &LU &ROXPELD 3DFNLQJ &R Y 'HSDUWPHQW RI $JULFXOWXUH )G VW &LU f ,G DW f &RFKUDQ Y 8QLWHG 6WDWHV )G WK &LU

PAGE 244

,G DW ,G DW ,QWHUQDWLRQDO %RDUG RI (OHFWULFDO :RUNHUV Y 'HSDUWPHQW RI +RXVLQJ DQG 8UEDQ 'HYHORSPHQW )G G &LU f 1/5% Y 6HDUV 5RHEXFN t &R 86 f LG DW FLWLQJ 6 &RQI 5HS 1R f LQ 86 &RGH &RQJ t $GPLQ 1HZV f 6HH VXSUD QRWH 5HSRUWHUV &RPPLWWHH DW ,G ,G DW &KDSWHU 2QH FLWHV H[DPSOHV RI KRZ LQGHSHQGHQW DQDO\VLV RI DJHQF\ LQIRUPDWLRQ FDQ OHDG WR FRQFOXVLRQV QRW UHDGLO\ DSSDUHQW RU QRW FRQWDLQHG LQ DQ\ WUDGLWLRQDO GRFXPHQW )RU H[DPSOH D QHZVSDSHUnV DQDO\VLV RI DQ ,QWHUQDO 5HYHQXH 6HUYLFH FRPSXWHU GDWD EDVH GLVSURYHG DQ ,56 FODLP WKDW XQGHUSD\PHQW RI WD[HV KDG ULVHQ VKDUSO\ GXULQJ WKH SUHYLRXV \HDUV 6HH .DWKHULQH &RUFRUDQ 3RZHU -RXUQDOLVP 1HZV ,QF 1RYHPEHU DW 6HH DOVR 0LWFKHOO +DUWPDQ ,QYHVWLJDWLYH UHSRUWHUV XVH GDWDEDVHV WR EUHDN VWRULHV 7KH 4XLOO 1RYHPEHU'HFHPEHU DW 1DWLRQDO $VVnQ RI 5HWLUHG )HGHUDO (PSOR\HHV Y +RUQHU )G '& &LU f ,G DW ,G FLWLQJ 5HSRUWHUV &RPPLWWHH DW $PHULFDQ )HGHUDWLRQ RI *RYHUQPHQW (PSOR\HHV Y 'HSDUWPHQW RI +HDOWK DQG +XPDQ 6HUYLFHV 1R f 6HH $FFHVV 5HSRUWV 1RY DW ,JQHUL Y 0RRUH )6XSS 1'1< f ,G DW $VEXU\ 3DUN 3UHVV ,QF Y 'HSDUWPHQW RI +HDOWK $G 1f ,G DW

PAGE 245

6HH HR
PAGE 246

,G DW ,G DW 0DUWLQ t 0HUUHOO ,QF Y 8QLWHG 6WDWHV &XVWRPV 6HUYLFH )6XSS 6' )LD 1RY f ,G DW 'DYLGVRQ Y 'LOO 3G f ,G DW 0LOOHU 7KH $VVDXOW RQ 3ULYDF\ VXSUD QRWH 'DYLGVRQ Y 'LOO DW ,G DW ,G DW .HVWHQEDXP Y 0LFKLJDQ 6WDWH 8QLYHUVLW\ 1 : G f f ,G DW ,G DW 0XOOLQ Y 'HWURLW 3ROLFH 1:G f ,G DW 'RH Y 5HDLVWUDU RI 0RWRU 9HKLFOHV 1(HG f ,G DW %HDFRQ -RXUQDO 3XEOLVKLQD &R Y $QGUHZV 1( G 'HF f ,G DW ,G DW :HEE Y 6KUHYHSRUW 6G f ,G DW 6]LNV]D\ Y %XHORZ 1<6G 1< -DQ f f ,G DW

PAGE 247

,G 6WHSKDQ Y +DUGHU 3G .DQ )HE f ,G DW 0DKHU Y )UHHGRP RI ,QIRUPDWLRQ &RPPLVVLRQ $G &RQQ )HE f ,G DW )DPLO\ /LIH /HDJXH Y 'HSDUWPHQW RI 3XEOLF $LG 1(G 0D\ f ,G DW ,G DW .U\VWRQ Y %RDUG RI (GXFDWLRQ (DVW 5DPDSR &HQWUDO 6FKRRO 'LVWULFW 1<6G $XJ f ,G DW FLWLQJ 86& VHF Jf ,G ,G DW :HVWHUQ 6HUYLFHV ,QF Y 6DUJHQW 6FKRRO 'LVWULFW 1R 5(3G -DQ f ,G DW ,G DW ,G DW %RZLH Y (YDQVWRQ &RPPXQLW\ &RQVROLGDWHG 6FKRRO 'LVWULFW 1R 1(G $SULO f ,G DW ,G DW 5HSRUWHUV &RPPLWWHH DW

PAGE 248

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f§DQG VRPHWLPHV IDLOV WR ZRUN -RXUQDOLVWV DUH MXVW EHJLQQLQJ WR OHDUQ KRZ WR WDS WKLV QHZ SXEOLF UHVRXUFH DV WKH\ JR DERXW IXOILOOLQJ WKHLU KLVWRULF UROHV DV PHPEHUV RI WKH )RXUWK (VWDWH WKH SHUHQQLDO ZDWFKGRJ RI JRYHUQPHQW ([DPSOHV RI FRPSXWHU UHSRUWLQJ VXFFHVVHV DERXQG SXQFWXDWHG E\ WKH IDFW WKUHH UHFHQW 3XOLW]HU 3UL]HV IRU H[FHOOHQFH LQ MRXUQDOLVP ZHUH DZDUGHG IRU UHSRUWV EDVHG RQ QHZVSDSHU DQDO\VLV RI JRYHUQPHQW GDWD EDVHV

PAGE 249

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f§LV RYHUSURWHFWHG EHFDXVH RI H[DJJHUDWHG RU VSHFXODWLYH IHDUV WKDW LW PLJKW EH ORVW DW WKH H[SHQVH RI DQRWKHU SUL]HG YDOXH VXFK DV DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ $Q LPEDODQFH EHWZHHQ DFFHVV DQG SULYDF\ FDXVHG E\ WKH FRPSXWHUL]DWLRQ RI JRYHUQPHQW LQIRUPDWLRQ KDV RFFXUUHG IRU VHYHUDO UHDVRQV 7KH\ LQFOXGH WHFKQLFDO DQG GHILQLWLRQDO

PAGE 250

LVVXHV DV ZHOO DV PRUH IXQGDPHQWDO TXHVWLRQV DERXW WKH QDWXUH RI FRPSXWHUL]HG LQIRUPDWLRQ DQG LWV SRWHQWLDO WR KDUP LQGLYLGXDOV 7HFKQLFDO DQG GHILQLWLRQDO LVVXHV KDYH WKUHDWHQHG DFFHVV HYHQ ZKHQ WKH VWUHQJWK RI WKH SULYDF\ LQWHUHVW IDYRULQJ ZLWKKROGLQJ RI LQIRUPDWLRQ ZDV QRW LQ TXHVWLRQ 5DWKHU FRPSXWHUL]DWLRQ KDV DIIHFWHG DFFHVV EHFDXVH UHFRUG NHHSHUV FDQQRWf§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

PAGE 251

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nV WHFKQRORJ\ 7KHUHIRUH LW ZLOO DGYRFDWH UHYLVLRQ RI WKH )UHHGRP RI ,QIRUPDWLRQ $FW GHVSLWH VRPH LQKHUHQW GDQJHUV LQ GRLQJ VR DQG ZLOO RXWOLQH D GHVFULSWLYH PRGHO WR LOOXVWUDWH KRZ SULYDF\ DQG DFFHVV FDQ FRQWLQXH WR EH EDODQFHG LQ WKH FRPSXWHU DJH $FFHVV DQG 3ULYDF\ $PHULFDQ ,GHDOV $V SUHFHGLQJ FKDSWHUV KDYH LOOXVWUDWHG SULYDF\ DQG DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ ERWK DUH YDOXHV URRWHG GHHSO\ LQ WKH $PHULFDQ H[SHULHQFH 'XULQJ WKH &RORQLDO SHULRG DQG WKH QDWLRQnV IRUPDWLYH \HDUV SULYDF\ ZDV HYLGHQW DV D VRFLDO YDOXH DV D OHJDO FRQFHSW LW JDLQHG PRUH UHFRJQLWLRQ LQ WKH WZHQWLHWK FHQWXU\ DV VRFLHW\ JUHZ FRPSOH[ DQG LWV WHFKQRORJLHV SRWHQWLDOO\ PRUH LQYDVLYH 7KH PRGHUQ FRPSXWHU LQ SDUWLFXODU IRFXVHG DWWHQWLRQ RQ SULYDF\ ZLWK LWV DELOLW\ WR VWRUH DQG SURFHVV YDVW DPRXQWV RI LQIRUPDWLRQ 7KH GHEDWH LQ WKH V RYHU D SURSRVDO IRU D 1DWLRQDO 'DWD &HQWHUf§D FHQWUDO VWRULQJKRXVH

PAGE 252

IRU LQIRUPDWLRQ FRPSLOHG E\ JRYHUQPHQW WR PDNH VKDULQJ GDWD HDVLHUSURYLGHG D IRUXP IRU IHDUV DERXW DGYDQFLQJ WHFKQRORJ\ 7HVWLPRQ\ ZDV SHSSHUHG ZLWK UHIHUHQFHV WR %LJ %URWKHU RI *HRUJHnV 2UZHOOn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nV GHYHORSPHQW WKH QRWLRQ RI D IUHH DQG YLJRURXV SUHVV DV D ZDWFKGRJ RQ JRYHUQPHQW DOVR JDLQHG VXSSRUW IURP WKH &RORQLDO SHULRG RQZDUG 7R IXOILOO WKLV UROH WKH SUHVV PXVW KDYH DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ D IDFW UHFRJQL]HG DV D FUXFLDO WRRO LQ LQIRUPLQJ FLWL]HQV DERXW WKHLU JRYHUQPHQW LQ D VHOIJRYHUQLQJ GHPRFUDWLF QDWLRQ $V QRWHG LQ 5LFKPRQG 1HZVSDSHUV WKH KLVWRULDO SUHGLFDWH RI WKH SXEOLF WULDO D FRUQHUVWRQH RI GHPRFUDF\

PAGE 253

ZDV WKH (QJOLVK WRZQ PHHWLQJ DW ZKLFK MXVWLFH ZDV PHWHG RXW LQ SXEOLF 7KH &RQVWLWXWLRQ LWVHOI DOVR VXSSRUWV WKH WKHRU\ WKDW WKH SXEOLFn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n GLVGDLQ IRU D JRYHUQPHQW XQEULGOHG E\ D ODFN RI SXEOLF DFFRXQWDELOLW\ :ULWLQJ VRRQ DIWHU WKH PXFK SXEOLFL]HG DEXVHV E\ H[HFXWLYH DJHQFLHV GXULQJ WKH :DWHUJDWH VFDQGDO %ODVL HQYLVLRQHG WKH UHODWLRQ EHWZHHQ WKH SUHVV DQG JRYHUQPHQW DV DGYHUVDULDO %XW LPSOLFLW LQ KLV FKHFNLQJ YDOXH RI WKH )LUVW $PHQGPHQW ZDV WKH QHHG IRU DFFHVV WR WKH SURFHVV DQG SURGXFWV RI JRYHUQPHQW 7KH SUHVV SOD\HG VXFK D FUXFLDO UROH KH UHDVRQHG EHFDXVH JRYHUQPHQW RIWHQ

PAGE 254

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f ,QVWHDG KH FRQFOXGHG DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ ZDV D PDWWHU IRU WKH SROLWLFDO SURFHVV (YHQ WKRXJK WKH 6XSUHPH &RXUW KDV WKXV IDU UHIXVHG WR UHFRJQL]H D FRQVWLWXWLRQDO EDVLV IRU D JHQHUDO ULJKW RI DFFHVV WR JRYHUQPHQW LQIRUPDWLRQ WKH SROLWLFDO SURFHVV KDV PDGH FOHDU VXFK DFFHVV LV IXQGDPHQWDO WR GHPRFUDF\ &RQJUHVV ZKRVH PHPEHUV DUH WKH GLUHFW UHSUHVHQWDWLYHV RI WKH SHRSOH KDV SDVVHG YDULRXV PHDVXUHV DFNQRZOHGJLQJ WKH SXEOLFnV ULJKW WR NQRZ DERXW WKH ZRUNLQJV RI JRYHUQPHQW )RUHPRVW DPRQJ WKH OHJLVODWLRQ LV WKH )UHHGRP RI ,QIRUPDWLRQ $FW SDVVHG LQ DIWHU PRUH WKDQ D GHFDGH RI OHJLVODWLYH KHDULQJV RQ LVVXHV UHODWHG WR SXEOLF DFFHVV :KLOH WKH DFW LWVHOI FRQWDLQV QR VWDWHPHQW RI SXUSRVH LWV OHJLVODWLYH KLVWRU\ VWDWHG WKH DFWnV DLP ZDV WR IRVWHU D JHQHUDO SKLORVRSK\ RI IXOO DJHQF\ GLVFORVXUH VXEMHFW RQO\ WR VSHFLILF OHJLVODWHG H[HPSWLRQV

PAGE 255

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
PAGE 256

GHILQLWLRQV WR UHIOHFW WKH UHDOLWLHV RI FRPSXWHUL]HG LQIRUPDWLRQ V\VWHPV 5HODWHG UHFRPPHQGDWLRQV ZLOO EH RIIHUHG DW WKH HQG RI WKLV FKDSWHU 7KH IDU PRUH SUREOHPDWLF DFFHVV LVVXH UDLVHG E\ WKH FRPSXWHUL]DWLRQ RI JRYHUQPHQW LQIRUPDWLRQ LQYROYHV WKH QDWXUH RI VXFK LQIRUPDWLRQ DQG ZKHWKHU LWV IRUP QRW LWV FRQWHQW FRQVWLWXWHV D JUHDWHU WKUHDW WR LQGLYLGXDO SULYDF\ ,Q 5HSRUWHUV &RPPLWWHH LQ WKH 6XSUHPH &RXUW UHDVRQHG WKDW JRYHUQPHQW LQIRUPDWLRQ VWRUHG LQ FRPSXWHUV SRVHG D JUHDWHU SULYDF\ WKUHDW WKDQ WKH LGHQWLFDO LQIRUPDWLRQ VFDWWHUHG DPRQJ SXEOLF VRXUFHV 2WKHU FRXUW RSLQLRQV DW YDULRXV OHYHOV LQ WKH MXGLFLDO V\VWHP KDYH UDLVHG FRQFHUQ DERXW LQIRUPDWLRQ FRPSLOHG LQ JRYHUQPHQW GDWD EDVHV %XW WKH 5HSRUWHUV &RPPLWWHH RSLQLRQ SURYLGHG DQ LPSRUWDQW GLIIHUHQFH 7KH &RXUW RSWHG IRU D EULJKW OLQH UXOH UHDVRQLQJ WKDW GLVFORVXUH RI FHUWDLQ FDWHJRULHV RI SXEOLF LQIRUPDWLRQ KHOG LQ FRPSXWHUV DOZD\V FRQVWLWXWHG DQ XQGXH SULYDF\ WKUHDW DQG FRXOG URXWLQHO\ EH GHHPHG DQ XQZDUUDQWHG SULYDF\ WKUHDW DQG EH ZLWKKHOG ZLWKRXW D FDVHE\FDVH DQDO\VLV 7KH ODQJXDJH RI ([HPSWLRQV DQG RI WKH )UHHGRP RI ,QIRUPDWLRQ $FW WKDW UHTXLUHV D GHWHUPLQDWLRQ RI ZKHWKHU D SDUWLFXODU LQYDVLRQ RI SULYDF\ ZDV XQZDUUDQWHG KDG EHHQ LQWHUSUHWHG DV UHTXLULQJ D FDVHE\FDVH GHWHUPLQDWLRQ 7KDW LQWHUSUHWDWLRQ DOORZHG IRU D EDODQFLQJ RI FRPSHWLQJ LQWHUHVWV ZKHUHE\ FRXUWV FRQVLGHUHG WKH SULYDF\ LQWHUHVWV DW VWDNH YHUVXV WKH SXEOLF EHQHILW IURP GLVFORVXUH

PAGE 257

7KH &RXUW LQ 5HSRUWHUV &RPPLWWHH DOVR KHOG D VHHPLQJO\ QDUURZ YLHZ RI WKH SXEOLF LQWHUHVW VHUYHG E\ GLVFORVXUH RI JRYHUQPHQW LQIRUPDWLRQ IRFXVLQJ RQO\ RQ LQIRUPDWLRQ WKDW KDG DQ REYLRXV EHDULQJ RQ DQ DJHQF\nV SHUIRUPDQFH RI LWV VWDWXWRU\ GXWLHV 7KH &RXUW VDLG WKDW VLQFH &RQJUHVV KDG QRW SURYLGHG WKH VSHFLILF FULWHULD LQ WKH )2,$ IRU EDODQFLQJ D SDUWLFXODU SULYDF\ LQWHUHVW ZLWK WKH SXEOLF LQWHUHVW LQ GLVFORVXUH WKHQ FRXUWV VKRXOG QRW WU\ WR GR VR *HQHUDOL]HG IHDUV DERXW WKH GDQJHUV FRPSXWHUV SRVH WR SULYDF\ DSSHDU WR KDYH LQIOXHQFHG WKH &RXUWn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

PAGE 258

LQIRUPDWLRQDO SULYDF\ KDV SRLQWHG RXW WKDW SULYDF\ KLVWRULFDOO\ KDV EHHQ D UHODWLYH FRQFHSW JRYHUQHG E\ WKH UHODWLYH LPSRUWDQFH RI HYHUVKLIWLQJ VRFLDO YDOXHV $V KH QRWHV LQ KLV LQIOXHQWLDO ERRN 3ULYDF\ DQG )UHHGRP :KHQ WKH $PHULFDQ 5HSXEOLF ZDV IRXQGHG WKH IUDPHUV HVWDEOLVKHG D OLEHUWDULDQ HTXLOLEULXP DPRQJ FRPSHWLQJ YDOXHV RI SULYDF\ GLVFORVXUH DQG VXUYHLOODQFH 7KLV EDODQFH ZDV EDVHG RQ WKH WHFKQRORJLFDO UHDOLWLHV RI HLJKWHHQWKFHQWXU\ OLIH 7KH WKHPH WKDW SULYDF\ ZDV D UHODWLYH YDOXH OD\ WKH IRXQGDWLRQ IRU KLVWRULDQ 'DYLG + )ODKHUW\n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

PAGE 259

GLVVHPLQDWHG LQIRUPDWLRQ DIIHFWHG VXFK YDOXHV DV DFFHVV 8QGHU WKH KHDGLQJ &RPSHWLQJ 3XEOLF3ROLF\ ,QWHUHVWV WKH FRPPLVVLRQ QRWHG $ PDMRU WKHPH RI WKLV UHSRUW LV WKDW SULYDF\ ERWK DV D VRFLHWDO YDOXH DQG DV DQ LQGLYLGXDO LQWHUHVW GRHV QRW DQG FDQQRW H[LVW LQ D YDFXXP ,QGHHG SULYDF\ LV D SRRU ODEHO IRU PDQ\ RI WKH LVVXHV WKH &RPPLVVLRQ DGGUHVVHV EHFDXVH WR PDQ\ SHRSOH WKH FRQFHSW FRQQRWHV LVRODWLRQ DQG VHFUHF\ ZKHUHDV WKH UHODWLRQVKLSV WKH &RPPLVVLRQ LV FRQFHUQHG ZLWK DUH LQKHUHQWO\ VRFLDO %HFDXVH WKH\ DUH PRUHRYHU WKH SULYDF\ SURWHFWLRQV DIIRUGHG WKHP PXVW EH EDODQFHG DJDLQVW RWKHU VLJQLILFDQW VRFLHWDO YDOXHV DQG LQWHUHVWV 7KH &RPPLVVLRQ KDV LGHQWLILHG ILYH VXFK FRPSHWLQJ VRFLHWDO YDOXHV WKDW PXVW EH WDNHQ LQWR DFFRXQW LQ IRUPXODWLQJ SXEOLF SROLF\ WR SURWHFW SHUVRQDO SULYDF\ f )LUVW $PHQGPHQW LQWHUHVWV f IUHHGRP RI LQIRUPDWLRQ LQWHUHVWV f WKH VRFLHWDO LQWHUHVWV LQ ODZ HQIRUFHPHQW f FRVW DQG f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

PAGE 260

HVWDEOLVKHG IRU SULYDF\ YDOXHV ZLWK FRUH YDOXHV DW WKH FHQWHU IROORZHG E\ GHFUHDVLQJ YDOXHV WKDW DUH PRUH OLNHO\ WR \LHOG WR FRPSHWLQJ VRFLHWDO LQWHUHVWV 9DOXHV DW HDFK FLUFOHn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

PAGE 261

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n LQQHUPRVW WKRXJKWV IHHOLQJV DQG VHQWLPHQWV /HZLQ 3DUN DQG

PAGE 262

*RIIPDQ GHVFULEH WKHVH DV LQGLYLGXDOVn XOWLPDWH VHFUHWVf§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f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

PAGE 263

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nV IULHQGVKLS JURXS 7KH ULQJ DOVR FRQWDLQV LQIRUPDWLRQ RQ JURXS DIILOLDWLRQ ZKLFK WKH 6XSUHPH &RXUW UHFRJQL]HG LQ 6KHOWRQ Y 7XFNHU DQG 1$$&3 Y $ODEDPD ,Q 6KHOWRQ Y 7XFNHU WKH &RXUW VWUXFN GRZQ DQ $UNDQVDV VWDWXWH UHTXLULQJ WHDFKHUV WR GLVFORVH RUJDQL]DWLRQV WR ZKLFK WKH\ EHORQJHG 7KH &RXUW UHDVRQHG WKDW PDQGDWRU\ GLVFORVXUH RI PHPEHUVKLS LQ XQSRSXODU RU FRQWURYHUVLDO

PAGE 264

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nV OLFHQVH VHOO RU SXUFKDVH KRXVHV JHW PDUULHG RU GLYRUFHG VXEVFULEH WR PXQLFLSDO XWLOLWLHV VHHN JRYHUQPHQW EHQHILWV VHHN D SHUPLW IRU D JRYHUQPHQWUHJXODWHG DFWLYLW\ DQG LQWHUDFW ZLWK WKH MXGLFLDO V\VWHP 7KLV NLQG RI LQIRUPDWLRQ WUDGLWLRQDOO\ KDV

PAGE 265

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n

PAGE 266

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n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nV ODQGPDUN RSLQLRQ LQ 1HZ
PAGE 267

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

PAGE 268

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nV 9LQFHQW %ODVL LW KDV EHHQ XQGHUVFRUHG WKDW WKH PRVW LPSRUWDQW LQIRUPDWLRQ IRU $PHULFDQ FLWL]HQV WR KDYH LV ZKDW WKHLU JRYHUQPHQW LV GRLQJ 7KH SURSRVHG FLUFOH WDNHV LQWR FRQVLGHUDWLRQ WKH UHDVRQV LQIRUPDWLRQ LV VRXJKW LQDVPXFK DV WKRVH UHDVRQV PLJKW KDYH D EHDULQJ RQ KRZ WKDW LQIRUPDWLRQ DIIHFWV VRFLHW\ 9DULRXV OHJLVODWLRQ DV ZHOO DV VHYHUDO FRXUW FDVHV WKDW KDYH DWWHPSWHG WR EDODQFH SULYDF\ DQG DFFHVV KHOS GHILQH WKH ULQJV VXUURXQGLQJ WKLV FRUH YDOXH

PAGE 269

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nV VWDWXWRU\ GXWLHV %XW ZKHQ DQDO\]HG WRJHWKHU WKH UHVXOW PLJKW KDYH PXFK WR VD\ DERXW VRPH LPSRUWDQW DVSHFW RI JRYHUQPHQW 6HFRQG 5LQD $FFHVV 9DOXHV 7KH 6HFRQG 5LQJ YDOXH DFFHVV FLUFOH FRPSULVHV LQIRUPDWLRQ QRW GLUHFWO\ DERXW JRYHUQPHQW EXW WKDW

PAGE 270

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n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

PAGE 271

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

PAGE 272

ZRXOG EH GLVFORVDEOH EHFDXVH GLVFORVXUH FRXOG OHDG WR WKHLU UHFHLYLQJ LQIRUPDWLRQ WKDW PLJKW EHQHILW WKHP DW PLQLPDO ULVN RI SULYDF\ ORVV $ IHGHUDO GLVWULFW FRXUW DSSOLHG VXFK UHDVRQLQJ LQ 1DWLRQDO $VVRFLDWLRQ RI 5HWLUHG )HGHUDO (PSOR\HHV Y +RUQHU ZKHQ LW DOORZHG GLVFORVXUH RI QDPHV DQG DGGUHVVHV RI SHUVRQV DGGHG WR IHGHUDO DQQXLW\ UROOV 7KH GLVWULFW FRXUW VDLG DQ\ SULYDF\ LQIULQJHPHQW ZRXOG EH PLQRU DQG WKDW WKH SXEOLF LQWHUHVW LQ GLVFORVXUH IORZV IURP WKH 1$5)(nV VHUYLFH DQG WKH IDFW WKDW PDQ\ DQQXLWDQWV PLJKW EH SOHDVHG WR OHDUQ RI WKHP ,Q WKH ZDNH RI WKH 6XSUHPH &RXUWnV RSLQLRQ LQ 5HSRUWHUV &RPPLWWHH KRZHYHU WKH '& &LUFXLW RI WKH 86 &RXUW RI $SSHDOV UHYHUVHG WKH ORZHU FRXUW RQ WKH EDVLV RI QDUURZHG GHILQLWLRQ RI SXEOLF LQWHUHVW LQ GLVFORVXUH 6LQFH D SULYDF\ LQWHUHVW HYHQ D PLQLPDO RQH ZDV DW VWDNH DQG GLVFORVXUH ZRXOG UHYHDO QRWKLQJ DERXW WKH FRQGXFW RI DJHQF\ GXWLHV SULYDF\ VKRXOG SUHYDLO WKH &RXUW UHDVRQHGf 7KH NLQG RI DFFHVV GHVFULEHG LQ WKH )RXUWK 5LQJ LQFUHDVHV WKH IORZ RI LQIRUPDWLRQ WR VRFLHW\ RU KHOSV WDUJHW WKH LQIRUPDWLRQ WR WKRVH ZKR PLJKW ILQG LW PRVW XVHIXO :KHQ YLHZHG FROOHFWLYHO\ RYHU WLPH WKLV LQFUHDVHG IORZ FRQWULEXWHV WR DQ LQIRUPHG FLWL]HQU\ 7KH 6XSUHPH &RXUW LQ 9LUJLQLD 3KDUPDF\ UHFRJQL]HG D VLPLODU YDOXH ZKHQ WKH &RXUW UHDVRQHG WKDW SXEOLF NQRZOHGJH RI GUXJ SULFLQJ XOWLPDWHO\ FRXOG DIIHFW SXEOLF SROLF\ UHJDUGLQJ UHJXODWLRQ RI WKH SUHVFULSWLRQ GUXJ LQGXVWU\

PAGE 273

)LIWK 5LQD $FFHVV 9DOXH 7KH )LIWK 5LQJ YDOXH LQ WKH DFFHVV FLUFOH FRPSULVHV LQIRUPDWLRQ VRXJKW IRU SHUVRQDO UHDVRQV 6LQJOH LQVWDQFHV RI WKLV NLQG RI DFFHVV FRQWULEXWH OLWWOH WKDW LV REYLRXV WR SXEOLF XQGHUVWDQGLQJ RI JRYHUQPHQW DQG VRFLHW\
PAGE 274

UHIXVHG WR GLVFORVH WKH LQIRUPDWLRQ FLWLQJ ([HPSWLRQ WR WKH )2,$ ZKLFK VKLHOGHG SHUVRQQHO PHGLFDO DQG VLPLODU ILOHV IURP XQZDUUDQWHG LQYDVLRQV RI SULYDF\ $IWHU KHDULQJ WKH DUJXPHQWV WKDW GLVFORVXUH PLJKW SXW WKH QHZ FLWL]HQVn OLYHV DW ULVN WKH 6XSUHPH &RXUW UHMHFWHG WKH '& &LUFXLWnV DVVHUWLRQ WKDW SULYDF\ VKRXOG EH FRQVWUXHG QDUURZO\ UHDVRQLQJ LQVWHDG WKDW D EURDGHU GHILQLWLRQ RI SULYDF\ ZDV LQ RUGHU WKDW LQFOXGHG QRQLQWLPDWH LQIRUPDWLRQn 8QGHU XVXDO FLUFXPVWDQFHV LQIRUPDWLRQ DERXW FLWL]HQVKLS D VWDWXV QRUPDOO\ FRQIHUUHG RQ QRQ$PHULFDQERUQ LQGLYLGXDOV GXULQJ D SXEOLF FHUHPRQ\ ZRXOG KDYH OLWWOH SULYDF\ YDOXH DQG PLJKW IDOO LQWR 5LQJ )RXU RI WKH SULYDF\ FLUFOH ZLWK RWKHU LQIRUPDWLRQ IURP SXEOLF SURFHHGLQJV +RZHYHU EHFDXVH RI WKH 8QLWHG 6WDWHVn VWUDLQHG UHODWLRQV DW WKDW WLPH ZLWK ,UDQ RYHU WKH KROGLQJ RI $PHULFDQ KRVWDJHV DQG VXEVHTXHQW 86 UHWDOLDWLRQ WKH QHZ FLWL]HQV PLJKW UHDVRQDEO\ EH H[SHFWHG WR IDFH VRPH NLQG RI SK\VLFDO GDQJHU QRW QRUPDOO\ DVVRFLDWHG ZLWK GLVFORVXUH RI FLWL]HQVKLS 7KDW EHLQJ WKH FDVH WKH SULYDF\ YDOXH RI WKH LQIRUPDWLRQQHFHVVDU\ WR WKH SK\VLFDO ZHOOEHLQJ RI WKH LQGLYLGXDOVf§ZRXOG PRYH WR WKH 7KLUG 5LQJ RU HYHQ 6HFRQG WKHUHE\ VKLIWLQJ WKH EDODQFH DZD\ IURP GLVFORVXUH ,Q HIIHFW WKLV LV ZKDW WKH 6XSUHPH &RXUW GLG LQ WKH FDVH 7R UHVROYH WKH SHUVRQDO GDQJHU LVVXH WKH &RXUW IRFXVHG QRW RQ WKH QDWXUH RI WKH LQIRUPDWLRQ ZKLFK KDG DW OHDVW DQ LQGLUHFW EHDULQJ RQ SXEOLF SROLF\ EXW RQ LWV SRWHQWLDO WR FDXVH KDUP DVVLJQLQJ WR LW Df KLJKHU

PAGE 275

SULYDF\ YDOXH DV D UHVXOW 8QIRUWXQDWHO\ IURP D SURn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f§ZRXOG OLNHO\ IDOO LQWR SULYDF\ 5LQJ )LYH KDYLQJ OLPLWHG SULYDF\ YDOXH 2Q WKH DFFHVV VLGH WKH VWDWXWRU\ UHFRJQLWLRQ RI VXFK DFFHVV DQG LW UROH LQ FROOHFWLYH EDUJDLQLQJ PLJKW SODFH WKH DFFHVV YDOXH LQ WKH 7KLUG 5LQJ 8QGHU WKLV DQDO\VLV WKH SULYDF\ YDOXH RI WKH LQIRUPDWLRQ LV ORZ GLVWDQW IURP WKH FRUHf DQG WKH SXEOLF LQWHUHVW VXIILFLHQWO\ KLJK FORVHU WR WKH FRUHf WR ZDUUDQW GLVFORVXUH

PAGE 276

7KH PRGHO SURGXFHV LQWHUHVWLQJ UHVXOWV ZKHQ DSSOLHG WR WKH 5HSRUWHUV &RPPLWWHH FDVH LWVHOI 5HFDOO WKDW WKH FDVH XOWLPDWHO\ IRFXVHG RQ D UHTXHVW E\ D &%6 FRUUHVSRQGHQW DQG WKH 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV IRU SXEOLF UHFRUG FULPLQDO KLVWRU\ LQIRUPDWLRQ 7KH LQIRUPDWLRQ ZDV DERXW D SULQFLSDO LQ D FRPSDQ\ LGHQWLILHG E\ WKH 3HQQV\OYDQLD &ULPH &RPPLVVLRQ DV D OHJLWLPDWH EXVLQHVV GRPLQDWHG E\ RUJDQL]HG FULPH WKDW KDG GHDOLQJV ZLWK D FRUUXSW 8QLWHG 6WDWHV FRQJUHVVPDQ $VVXPLQJ WKDW WKH LQIRUPDWLRQ ZHUH DUUHVW UHFRUGVD SDUW RI WKH SXEOLF UHFRUGV LQ VRPH MXULVGLFWLRQVWKH LQIRUPDWLRQ PLJKW IDOO LQ 5LQJ )RXU RI WKH SULYDF\ PRGHO 7KLV NLQG RI LQIRUPDWLRQ QRUPDOO\ UHWDLQV OLPLWHG SULYDF\ YDOXH DQG WKH SXEOLF LQWHUHVW LQ FULPLQDO DFWLYLWLHV ZRXOG EH KLJK $FFRUGLQJO\ WKH YDOXH IRU DFFHVV ZRXOG IDOO LQWR WKH 6HFRQG 5LQJ :KHQ WKH IDFW WKH VXEMHFW RI WKH LQIRUPDWLRQ KDG EHHQ OLQNHG WR DQ DOOHJHG FRUUXSW FRQJUHVVPDQ LV WDNHQ LQWR DFFRXQW WKH YDOXHV VXSSRUWLQJ DFFHVV ZRXOG EH PDJQLILHG VKLIWLQJ LW WR WKH FRUH YDOXH IRU DFFHVV VLQFH WKH ODZPDNLQJ SURFHVV LWVHOI ZDV LPSOLFDWHG 8QGHU WKLV DQDO\VLV WKH LQIRUPDWLRQ VKRXOG KDYH EHHQ GLVFORVHG QRWZLWKVWDQGLQJ LWV SHUVRQDO QDWXUH DQG SUHVHQFH LQ D FRPSXWHU GDWD EDVH 2EYLRXVO\ LQ VRPH LQVWDQFHV WKH YDOXHV RI DFFHVV DQG SULYDF\ ZRXOG DSSHDU HTXDO :KLOH WKH PRGHO VWLOO ZRXOG EH XVHIXO LQ FODULI\LQJ WKH LVVXHV DQG H[SRVLQJ XQUHDVRQDEOH RU HPRWLRQDO FRQFHUQV XOWLPDWHO\ FRXUWV ZRXOG KDYH WR GR ZKDW

PAGE 277

WKH\ KDYH DOZD\V GRQHUHDFK WKH EHVW VROXWLRQ JLYHQ WKH LQGLYLGXDO FLUFXPVWDQFHV RI WKH FDVH 7KH 1HHG IRU D 5HVSRQVH 7KH SUHFHGLQJ PRGHO DWWHPSWV WR GHVFULEH KRZ WKH EDODQFHf§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nV 5HSRUWHUV &RPPLWWHH RSLQLRQ LQ ZD\V WKDW FRXOG FXUWDLO DFFHVV DV WKH &RXUW VKLIWHG LWV IRFXV WR WKH FRPSXWHUL]HG IRUP RI WKH LQIRUPDWLRQ QRW WKH FRQWHQW RI WKH LQIRUPDWLRQ DQG WKH HIIHFW LWV GLVFORVXUH PLJKW KDYH RQ VRFLHW\ 7KH 6XSUHPH &RXUWnV UHFRJQLWLRQ RI HQKDQFHG GDQJHUV IURP FRPSXWHUL]HG LQIRUPDWLRQf§HYHQ ZKHQ LW KDG PLQLPDO SULYDF\ YDOXHVHFKRHG WKH OHJDO UHDVRQLQJ RI VRPH ORZHU FRXUWV $V FRPSXWHUV FRQIRXQG H[LVWLQJ DFFHVV ODZV DQG DV FRXUW RSLQLRQV VHQG RXW PL[HG VLJQDOV WR FXVWRGLDQV DQG DFFHVV VHHNHUV DOLNH LW DJDLQ EHFRPHV FOHDU WKDW D FDUHIXOO\ UHDVRQHG OHJLVODWLYH UHPHG\ LV QHHGHG LI SXEOLF DQG SUHVV

PAGE 278

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
PAGE 279

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

PAGE 280

RI ,QIRUPDWLRQ $FW %XW WKH 6XSUHPH &RXUWn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n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f§E\ VWDWH OHJLVODWXUHV

PAGE 281

DV ZHOO DV E\ &RQJUHVVZLOO SURYLGH WKH FKDQFH WR DFNQRZOHGJH WKH FDSDELOLWLHV RI FRPSXWHUV ZKLOH HQVXULQJ WKHVH FDSDELOLWLHV DUH XVHG WR ERWK HQVXUH SULYDF\ DQG WR HQKDQFH QRW IUXVWUDWH SXEOLF DFFHVV 1RWHV +RZDUG .XUW] 5HSRUWHUV /HW 7KHLU 7HUPLQDOV 'R WKH :DONLQJ 7KH :DVKLQJWRQ 3RVW -XO\ DW ) 6HH 9LQFHQW %ODVL 7KH 3DWKRORJLFDO 3HUVSHFWLYH DQG WKH )LUVW $PHQGPHQW &ROXP / 5HY f 6HH $UWKXU 0LOOHU 7KH $VVDXOW RQ 3ULYDF\ f :LOOLDP 3URVVHU 3ULYDF\ &DOLI / 5HY f 86 'HSDUWPHQW RI -XVWLFH Y 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV 86 f 6HH 1DWLRQDO /DERU 5HODWLRQV %RDUG Y 5REELQV 7LUH t 5XEEHU &R 86 f 5LFKPRQG 1HZVSDSHUV ,QF Y 9LUJLQLD 86 f 86 &RQVW DUW VHF 6HH $OH[DQGHU 0HLNOHMRKQ )UHH 6SHHFK DQG ,WV 5HODWLRQ WR 6HOI*RYHUQPHQW f 1HZ
PAGE 282

$ODQ :HVWLQ 3ULYDF\ DQG )UHHGRP f 'DYLG + )ODKHUW\ 3ULYDF\ LQ &RORQLDO 1HZ (QJODQG f 3ULYDF\ 3URWHFWLRQ 6WXG\ &RPPLVVLRQ 3HUVRQDO 3ULYDF\ LQ DQ ,QIRUPDWLRQ 6RFLHW\ f :HVWLQ 3ULYDF\ DQG )UHHGRP DW &KDUOHV )ULHG 3ULYDF\
PAGE 283

)LUVW 1DWLRQDO %DQN RI %RVWRQ Y %HOORWWL 86 f 5LFKPRQG 1HZVSDSHUV ,QF Y 9LUJLQLD 86 f )UHHGRP RI ,QIRUPDWLRQ $FW 86& f 5HSRUWHUV &RPPLWWHH DW &ROXPELD 0HDW 3DFNLQJ &R Y 'HSDUWPHQW RI $JULFXOWXUH )G VW &LU f ,QWHUQDWLRQDO %URWKHUKRRG RI (OHFWULFDO :RUNHUV 1T Y 'HSDUWPHQW RI +RXVLQJ DQG 8UEDQ 'HYHORSPHQW )G UG &LU f 1DWLRQDO $VVRFLDWLRQ RI 5HWLUHG )HGHUDO (PSOR\HHV Y +RUQHU )6XSS ''& f 1DWLRQDO $VVRFLDWLRQ RI 5HWLUHG )HGHUDO (PSOR\HHV Y +RUQHU )G '& &LU f 9LUJLQLD 6WDWH %RDUG RI 3KDUPDF\ DW 6HH JHQHUDOO\ 0LQQLV Y 'HSDUWPHQW RI $JULFXOWXUH )G WK &LU f :LQH +REE\ 86$ ,QF Y ,56 )G UG &LU f 'HSDUWPHQW RI 6WDWH Y :DVKLQJWRQ 3RVW &R 86 f )HGHUDO /DERU 5HODWLRQV $XWKRULW\ Y 86 'HSDUWPHQW RI 'HIHQVH )G f ,G DW 0DWWKHZ %XQNHU 6LJPDQ / 6SOLFKDO %LOO ) &KDPEHUOLQ DQG /LQGD 3HUU\ $FFHVV WR *RYHUQPHQW+HOG ,QIRUPDWLRQ LQ WKH &RPSXWHU $JH )OD 6W 8/ 5HY :LQWHU f &RPSXWHU 6HFXULW\ $FW RI 3XE / 1R 6HH +RZ 'LG 7KH\ *HW 0\ 1DPH" &RQVXPHUV DUH JURZLQJ PRUH XQHDV\ DERXW WKUHDWV WR SULYDF\DQG DUH ILJKWLQJ EDFN 1HZVZHHN -XQH DW 3HWHU .HUU %LJ &UHGLW %XUHDX WR /HW &RQVXPHUV 6HH 5HSRUWV )UHH $ 5HVSRQVH WR &ULWLFLVP 75: $FWV DV ,QGXVWU\ )DFHV 0RXQWLQJ 3UHVVXUH 2YHU (UURUV LQ ,WV 5HFRUGV 7KH 1HZ
PAGE 284

WKH 6KDGHV DQG 3HHN LQWR ZD\V WR NHHS P\ EXVLQHVV 7LPHV -DQXDU\ 3ULYDWH 0DWWHUV $ JURXS VHHNV QHZ IURP EHFRPLQJ \RXUV 7KH 1HZ
PAGE 285

%,%/,2*5$3+< /HJDO &LWDWLRQV $EUDPV Y 8QLWHG 6WDWHV 86 f $OOJH\HU Y /RXLVLDQD 86 f $PHULFDQ )HGHUDWLRQ RI *RYHUQPHQW (PSOR\HHV YV 'HSDUWPHQW RI +HDOWK DQG +XPDQ 6HUYLFHV 1R f $VEXU\ %DUN %UDVV ,QF Y 'HSDUWPHQW RI +HDOWK $G 1f %HDFRQ -RXUQDO 3XEOLVKLQJ &R Y $QGUHZV 1(G 'HFHPEHU f %RZLH Y (YDQVWRQ &RPPXQLW\ &RQVROLGDWHG 6FKRRO 'LVWULFW 1R ee 1(G $SULO f %R\G Y 8QLWHG 6WDWHV 86 f %UDQ]EXUJ Y +D\HV 86 f %URZQ Y )%, )G G &LU f %XUURZV Y 6XSHULRU &RXUW 3G f %XUWRQ Y 7XLWH 0LFK f &ODUNH Y 86 'HSDUWPHQW RI 7UHDVXU\ &LY $ 1R (' 3D f &OHPHQW Y *UDKDP 9W f &RFKUDQ Y 8QLWHG 6WDWHV )G WK &LU f &ROXPELD 3DFNLQJ &R Y 'HSDUWPHQW RI $JULFXOWXUH )G VW &LU f 'DYLGVRQ Y 'LOO 3G f 'HPD\ Y 5REHUWV 0LFK 1: f

PAGE 286

'HQQLV Y 8QLWHG 6WDWHV 86 f 'HSDUWPHQW RI $LU )RUFH Y 5RVH 86 f 'RH Y 5HJLVWUDU RI 0RWRU 9HKLFOHV 1(G f (QYLURQPHQWDO 3URWHFWLRQ $JHQF\ Y 0LQN 86 f )DPLO\ /LIH /HDJXH Y 'HSDUWPHQW RI 3XEOLF $LG 1(G 0D\ f )D\HWWH &R Y 0DUWLQ .\ 6:G f )LUVW 1DWLRQDO %DQN Y %HOORWWL 86 f )ORULGD 6WDU Y %-* 6 &W f )RUVKDP Y +DUULV 86 f *LWORZ Y 1HZ
PAGE 287

/RQD Y ,56 )G WK &LU f 0DF(ZDQ Y +ROP 2U f 0DKHU Y )UHHGRP RI ,QIRUPDWLRQ &RPPLVVLRQ $G &RQQ )HE f 0DSS Y 2KLR 86 f 0DUWLQ t 0HUUHOO ,QF Y 8QLWHG 6WDWHV &XVWRP 6HUYLFH )6XSS 6' )OD 1RY f 0HDG 'DWD &HQW ,QF Y 'HSDUWPHQW RI $LU )RUFH )G '& &LU f 0H\HU Y 1HEUDVND 86 f 0LDPL +HUDOG Y 7RUQLOOR 86 f 0LQQLV Y 'HSDUWPHQW RI $JULFXOWXUH )G WK &LU f 0XOOLQ Y 'HWURLW 3ROLFH 1:G f 0XOWQRPDK &RXQW\ 0HGLFDO 6RFLHW\ Y 6FRWW )G WK &LU f 1$$&3 Y $ODEDPD H[ UHO 3DWWHUVRQ 86 f 1DWLRQDO $VVnQ RI 5HWLUHG )HGHUDO (PSOR\HHV Y +RUQHU )G '& &LU f 1HDU Y 0LQQHVRWD 86 f 1HEUDVND 3UHVV $VVnQ Y 6WXDUW 86 f 1HZ
PAGE 288

3ODQQHG 3DUHQWKRRG RI 6RXWKHDVWHUQ 3HQQV\OYDQLD Y &DVH\ 86/: f 3RH Y 8OOPDQ 86 f 3RSH Y &XUO $WN (QJ 5HS f 3UHVV (QWHUSULVH &R Y 5LYHUVLGH &RXQW\ 6XSHULRU &RXUW 86 f 5HG /LRQ %URDGFDVWLQJ Y )&& 86 f 5LFKPRQG 1HZVSDSHUV Y 9LUJLQLD 86 f 5REHUVRQ Y 5RFKHVWHU )ROGLQJ %R[ &R 1( 1< f 5RH Y :DGH 86 f 6D[EH Y :DVKLQJWRQ 3RVW &R 86 f 6FKX\OHU Y &XUWLV 1< 6XSS f 6KHOWRQ Y 7XFNHU 86 f 6PLWK Y 'DLO\ 0DLO 3XEOLVKLQJ &R 86 f 6WDQOH\ Y *HRUJLD 86 f 6WDWH HO UHO :HOOIRUG Y :LOOLDPV 7HQQ f 6WHSKDQ Y +DUGHU 3G .DQ )HE f 6WHUOLQH 'UXJ ,QF Y +DUULV ) 6XSS 6'1< f 6WURPEHUJ Y &DOLIRUQLD 86 f 6]LNV]D\ Y %XHORZ 1<6G 1< -DQ f 8QLWHG 6WDWHV Y 0LOOHU 86 f 8QLWHG 6WDWHV Y 1L[RQ 86 f 8QLWHG 6WDWHV 'HSDUWPHQW RI -XVWLFH Y 5HSRUWHUV &RPPLWWHH IRU )UHHGRP RI WKH 3UHVV 86 f 9LUJLQLD 6WDWH %RDUG RI 3KDUPDF\ Y 9LUJLQLD &LWL]HQV &RQVXPHU &RXQFLO 86 f :HEE Y 6KUHYHSRUW 6G f

PAGE 289

:HVWHUQ 6HUYLFHV ,QF Y 6HUJHDQW 6FKRRO 'LVWULFW 1R 5( 3G &ROR $SS -DQ f :KDOHQ Y 5RH 86 f :KLWQH\ Y &DOLIRUQLD 86 f :LQH +REE\ 86$ ,QF Y ,56 )G G &LU f
PAGE 290

)ULHG &KDUOHV $Q $QDWRP\ RI 9DOXHV &DPEULGJH 0DVV +DUYDUG 8QLYHUVLW\ 3UHVV *HWWOHPDQ 0DUYLQ ( 7KH *UHDW 6RFLHW\ 5HDGHU 7KH )DLOXUH RI $PHULFDQ /LEHUDOLVP 1HZ
PAGE 291

0LGGOHWRQ .HQW DQG %LOO ) &KDPEHUOLQ 7KH /DZ RI 3XEOLF &RPPXQLFDWLRQ QG HG 1HZ
PAGE 292

9DQ $OVW\QH :LOOLDP ,QWHUSUHWDWLRQV RI WKH )LUVW $PHQGPHQW 'XUKDP 1& 'XNH 8QLYHUVLW\ 3UHVV :HVWLQ $ODQ ) 3ULYDF\ DQG )UHHGRP 1HZ
PAGE 293

%XQNHU 0DWWKHZ 6LJPDQ / 6SOLFKDO %LOO ) &KDPEHUOLQ DQG /LQGD 0 3HUU\ $FFHVV WR *RYHUQPHQW+HOG ,QIRUPDWLRQ LQ WKH &RPSXWHU $JH $SSO\LQJ /HJDO 'RFWULQH WR (PHUJLQJ 7HFKQRORJ\ )ORULGD 6WDWH 8QLYHUVLW\ /DZ 5HYLHZ :LQWHU f %XUHDXFUDF\ &KDLQV RI 3ODVWLF 1HZVZHHN $XJXVW &RUFRUDQ .DWKHULQH %HDWLQJ 7KH 7DSH 5HVLVWDQFH 1HZV ,QF 1RYHPEHU 3RZHU -RXUQDOLVWV 1HZV ,QF 1RYHPEHU &/ 'L[RQ 'DYLG 7KH *ULVZROG 3HQXPEUD &RQVWLWXWLRQDO &KDUWHU IRU WKH ([SDQGHG /DZ RI 3ULYDF\" 0LFKLJDQ /DZ 5HYLHZ f )ULHG &KDUOHV 3ULYDF\
PAGE 294

.DOYHQ +DUU\ 3ULYDF\ DQG 7RUW /DZf§:HUH :DUUHQ DQG %UDQGLV :URQJ" /DZ DQG &RQWHPSRUDU\ 3UREOHPV f 7KH 3UREOHPV RI 3ULYDF\ LQ WKH
PAGE 295

5HKQTXLVW :LOOLDP ,V $Q ([SDQGLQJ 5LJKW RI 3ULYDF\ &RQVLVWHQW ZLWK )DLU DQG (IIHFWLYH /DZ (QIRUFHPHQW" 1HOVRQ 7LPRWK\ 6WHSKHQV /HFWXUHV 8QLYHUVLW\ RI .DQVDV /DZ 6FKRRO 6HSWHPEHU 3DUW 2QHf 5HLG 75 &RPSXWHUWKLQN $3) 5HSRUWHU :LQWHU f 5XJJOHV 5LFKDUG 2Q WKH 1HHGV DQG 9DOXHV RI 'DWD %DQNV ,Q 6\PSRVLXPf§&RPSXWHUV 'DWD %DQNV DQG ,QGLYLGXDO 3ULYDF\ 0LQQHVRWD /DZ 5HYLHZ f 6FKZDUW] -RKQ &RQVXPHU (QHP\ 1R 1HZVZHHN 2FWREHU +RZ 'LG 7KH\ *HW 0\ 1DPH" 1HZVZHHN -XQH 6KDUS ,QFUHDVH LQ &RQFHUQ 3ULYDF\ -RXUQDO 0D\ f 6RPD -RKQ 7 DQG 5LFKDUG $ :HKPKRHIHU $ /HJDO DQG 7HFKQLFDO $VVHVVPHQW RI WKH (IIHFWV RI &RPSXWHUV RQ 3ULYDF\ 'HQYHU /DZ -RXUQDO f 6RURNLQ /HR 7 7KH &RPSXWHUL]DWLRQ RI *RYHUQPHQW ,QIRUPDWLRQ 'RHV ,W &LUFXPYHQW 3XEOLF $FFHVV 8QGHU WKH )UHHGRP RI ,QIRUPDWLRQ $FW DQG WKH 'HSRVLWRU\ /LEUDU\ 3URJUDP" &ROXPELD -RXUQDO RI /DZ t 6RFLDO 3UREOHPV f 6RXWKDUG & 'HQQLV ,9 ,QGLYLGXDO 3ULYDF\ DQG *RYHUQPHQWDO (IILFLHQF\ 7HFKQRORJ\nV (IIHFW RQ WKH *RYHUQPHQWnV $ELOLW\ WR *DWKHU 6WRUH DQG 'LVWULEXWH ,QIRUPDWLRQ &RPSXWHU/DZ -RXUQDO 6XPPHU f 6WHZDUW 3RWWHU 2U RI WKH 3UHVV +DVWLQJV /DZ -RXUQDO f 6WURQJ 'RQVLD 5HQHH 7KH &RPSXWHU 0DWFKLQJ DQG 3ULYDF\ 3URWHFWLRQ $FW RI 1HFHVVDU\ 5HOLHI IURP WKH (URVLRQ RI WKH 3ULYDF\ $FW RI 6RIWZDUH /DZ -RXUQDO 6XPPHU f 6XVPDQ 7KRPDV 0 ,QWURGXFWLRQ WR WKH ,VVXHV 3UREOHPV DQG 5HOHYDQW /DZ LQ
PAGE 296

7KH 3ULYDF\ $FW DQG )UHHGRP RI ,QIRUPDWLRQ $FW &RQIOLFW DQG 5HVROXWLRQ -RKQ 0DUVKDOO /DZ 5HYLHZ 6XPPHU f :DUUHQ 6DPXHO DQG /RXLV %UDQGLV 7KH 5LJKW RI 3ULYDF\ +DUYDUG /DZ 5HYLHZ 'HFHPEHU f :HLQJDUWHQ )UHG : &RPPXQLFDWLRQV 7HFKQRORJ\ 1HZ &KDOOHQJHV WR 3ULYDF\ -RKQ 0DUVKDOO /DZ 5HYLHZ f $UWLFOHV LQ 1HZVSDSHUV +HQGULFNV (YDQ +RZ 1RW WR &DWFK :HOIDUH &KHDWHUV 7KH :DVKLQJWRQ 3RVW -XO\ & .HUU 3HWHU %LJ &UHGLW %XUHDX WR /HW &RQVXPHUV 6HH 5HSRUWV )UHH 7KH 1HZ
PAGE 297

&RPSXWHU 6HFXULW\ $FW 3XE / f (OHFWURQLF &RPPXQLFDWLRQV 3ULYDF\ $FW 86& VHF f UHSULQWHG LQ 86 &RGH &RQJUHVVLRQDO $GPLQLVWUDWLYH 1HZV )DLU &UHGLW %LOOLQJ $FW 86& VHF f )DLU &UHGLW 5HSRUWLQJ $FW 86& VHF f )DPLO\ (GXFDWLRQDO 5LJKWV DQG 3ULYDF\ $FW 86& VHF f )HGHUDO 0DQDJHUVn )LQDQFLDO ,QWHJULW\ $FW 86& VHF f )HGHUDO 5HFRUGV $FW 6WDW f )UHHGRP RI ,QIRUPDWLRQ $FW 86& VHF f ,QGLDQD 2SHQ 5HFRUGV /DZ ,QG &RGH VHF f 7H[DV 6WDW VHF D 3ULYDF\ $FW 86& VHF D f UHSULQWHG LQ 86 &RGH &RQJUHVVLRQDO t $GPLQLVWUDWLYH 1HZV 5LJKW WR )LQDQFLDO 3ULYDF\ $FW 86& VHF f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

PAGE 298

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f &RPSXWHU 0DWFKLQJ DQG 3ULYDF\ 3URWHFWLRQ $FW RI +HDULQJV %HIRUH WKH +RXVH &RPPLWWHH RQ *RYHUQPHQW 2SHUDWLRQV WK &RQJ VW 6HVV f &RPSXWHU 3ULYDF\ +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ $GPLQLVWUDWLYH 3UDFWLFHV DQG 3URFHGXUHV RI WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ WK &RQJ VW 6HVV f )HGHUDO 'DWD %DQNV &RPSXWHUV DQG WKH %LOO RI 5LJKWV +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ &RQVWLWXWLRQDO 5LJKWV RI WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ QG &RQJ VW 6HVV f

PAGE 299

,QYDVLRQ RI 3ULYDF\ +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ $GPLQLVWUDWLYH 3UDFWLFHV DQG 3URFHGXUHV RI WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ WK &RQJ G 6HVV f 2YHUVLJKW RI &RPSXWHU 0DWFKLQJ WR 'HWHFW )UDXG DQG 0LVPDQDJHPHQW LQ *RYHUQPHQW 3URJUDPV +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ 2YHUVLJKW RI *RYHUQPHQW 0DQDJHPHQW RI WKH 6HQDWH &RPPLWWHH RQ *RYHUQPHQWDO $IIDLUV WK &RQJ G 6HVV f 3ULYDF\ 7KH &ROOHFWLRQ 8VH DQG &RPSXWHUL]DWLRQ RI 3HUVRQDO 'DWD -RLQW +HDULQJV %HIRUH WKH 6XEFRPPLWWHH RQ 3ULYDF\ DQG ,QIRUPDWLRQ 6\VWHPV RI WKH 6HQDWH &RPPLWWHH RQ *RYHUQPHQW 2SHUDWLRQV DQG WKH 6XEFRPPLWWHH RQ &RQVWLWXWLRQDO 5LJKWV RI WKH 6HQDWH &RPPLWWHH RQ WKH -XGLFLDU\ 6 5HS 1R UG &RQJ G 6HVVf UHSULQWHG LQ 86 &RGH &RQJUHVVLRQDO t $GPLQLVWUDWLYH 1HZV 7KH &RPSXWHU DQG ,QYDVLRQ RI 3ULYDF\ +HDULQJV %HIRUH WKH 6SHFLDO 6XEFRPPLWWHH RQ ,QYDVLRQ RI 3ULYDF\ RI WKH +RXVH &RPPLWWHH RQ *RYHUQPHQW 2SHUDWLRQV WK &RQJ G 6HVV f 8QSXEOLVKHG 6RXUFHV .RVW\X 3DXO ( 3ROLWLFDO 3UHVVXUH 7KH )UHHGRP RI ,QIRUPDWLRQ $FW DQG -RKQ ( 0RVV -U $VVRFLDWLRQ IRU (GXFDWLRQ LQ -RXUQDOLVP DQG 0DVV &RPPXQLFDWLRQ 6RXWKHDVW &ROORTXLXP 2UODQGR )OD )HEUXDU\0DUFK .XEULFN 6WDQOH\ GLUHFWRU $ 6SDFH 2G\VVH\ 0HWUR *ROGZ\Q0D\HU f 0RUULVVH\ 'DYLG 7KH $JH RI (OHFWURQLF *RYHUQPHQW &RQIHUHQFH RQ $GYDQFHG ,QYHVWLJDWLYH 0HWKRGV IRU -RXUQDOLVWV 6FRWW 6DQGUD 'DYLGVRQ &RPSXWHU 7HFKQRORJ\ Y /DZV RQ $FFHVV $VVRFLDWLRQ IRU (GXFDWLRQ LQ -RXUQDOLVP DQG 0DVV &RPPXQLFDWLRQ %RVWRQ 0DVV $XJXVW

PAGE 300

%,2*5$3+,&$/ 6.(7&+ 6LJPDQ / 6SOLFKDO UHFHLYHG %6 DQG 0$ GHJUHHV IURP WKH 8QLYHUVLW\ RI )ORULGD DQG ZRUNHG DV D QHZVSDSHU UHSRUWHU DQG HGLWRU LQ *HRUJLD )ORULGD DQG 9LUJLQLD EHIRUH UHWXUQLQJ WR SXUVXH D GRFWRUDO GHJUHH 6SOLFKDOnV UHVHDUFK LQWHUHVWV IRFXV RQ PDVV FRPPXQLFDWLRQ ODZ DQG LQFOXGH LVVXHV UHODWHG WR QHZVSDSHU PDQDJHPHQW DQG HWKLFV +H LV DQ DVVLVWDQW SURIHVVRU DW WKH 8QLYHUVLW\ RI 0LDPL

PAGE 301

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

PAGE 302

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

PAGE 303

81,9(56,7< 2) )/25,'$

PAGE 304

81,9(56,7< 2) )/25,'$


xml version 1.0 encoding UTF-8
REPORT xmlns http:www.fcla.edudlsmddaitss xmlns:xsi http:www.w3.org2001XMLSchema-instance xsi:schemaLocation http:www.fcla.edudlsmddaitssdaitssReport.xsd
INGEST IEID ECI3JNQC4_9O36B6 INGEST_TIME 2017-07-12T20:59:54Z PACKAGE AA00003261_00001
AGREEMENT_INFO ACCOUNT UF PROJECT UFDC
FILES