[Federal Register Volume 61, Number 228 (Monday, November 25, 1996)]
[Notices]
[Pages 59912-59916]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29900]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-10318, et al.]
Proposed Exemptions; GE Capital Investment Advisors, Inc.
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Notice of proposed exemptions.
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SUMMARY: This document contains notices of pendency before the
Department of Labor (the Department) of proposed exemptions from
certain of the prohibited transaction restriction of the Employee
Retirement Income Security Act of 1974 (the Act) and/or the Internal
Revenue Code of 1986 (the Code).
Written Comments and Hearing Requests
All interested persons are invited to submit written comments or
request for a hearing on the pending exemptions, unless otherwise
stated in the Notice of Proposed Exemption, within 45 days from the
date of publication of this Federal Register Notice. Comments and
request for a hearing should state: (1) The name, address, and
telephone number of the person making the comment or request, and (2)
the nature of the person's interest in the exemption and the manner in
which the person would be adversely affected by the exemption. A
request for a hearing must also state the issues to be addressed and
include a general description of the evidence to be presented at the
hearing. A request for a hearing must also state the issues to be
addressed and include a general description of the evidence to be
presented at the hearing.
ADDRESSES: All written comments and request for a hearing (at least
three copies) should be sent to the Pension and Welfare Benefits
Administration, Office of Exemption Determinations, Room N-5649, U.S.
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C.
20210. Attention: Application No. stated in each Notice of Proposed
Exemption. The applications for exemption and the comments received
will be available for public inspection in the Public Documents Room of
Pension and Welfare Benefits Administration, U.S. Department of Labor,
Room N-5507, 200 Constitution Avenue, N.W., Washington, D.C. 20210.
Notice to Interested Persons
Notice of the proposed exemptions will be provided to all
interested persons in the manner agreed upon by the applicant and the
Department within 15 days of the date of publication in the Federal
Register. Such notice shall include a copy of the notice of proposed
exemption as published in the Federal Register and shall inform
interested persons of their right to comment and to request a hearing
(where appropriate).
SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in
applications filed pursuant to section 408(a) of the Act and/or section
4975(c)(2) of the Code, and in accordance with procedures set forth in
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990).
Effective December 31, 1978, section 102 of Reorganization Plan No. 4
of 1978 (43 FR 47713, October 17, 1978) transferred the authority of
the Secretary of the Treasury to issue exemptions of the type requested
to the Secretary of Labor. Therefore, these notices of proposed
exemption are issued solely by the Department.
The applications contain representations with regard to the
proposed exemptions which are summarized below. Interested persons are
referred to the applications on file with the Department for a complete
statement of the facts and representations.
GE Capital Investment Advisors, Inc., Located in New York, New York
[Application No. D-10318]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the procedures set forth in 29 C.F.R. Part
2570, Subpart B (55 F.R. 32836, 32847, August 10, 1990). If the
exemption is granted, GE Capital Investment Advisors, Inc. (GECIA) and
GECIA Holdings, Inc. (Holdings) shall not be precluded from functioning
as a ``qualified professional asset manager'' pursuant to Prohibited
Transaction Class Exemption 84-14 (PTE 84-14, 49 FR 9494, March 13,
1984) solely because of a failure to satisfy section I(g) of PTE 84-14,
as a result of General Electric Company's ownership interest in them,
including any of their subsidiaries or successors which provides
investment advisory, management or related services and is registered
under the Securities and Exchange Act of 1934, as amended, or the
Investment Advisors Act of 1940, as amended; provided the following
conditions are satisfied:
(A) This exemption is not applicable to any affiliation by GECIA
or Holdings with any person or entity convicted of any of the
felonies described in part I(g) of PTE 84-14, other than General
Electric Company; and
(B) This exemption is not applicable with respect to any
convictions of General Electric Company for felonies described in
part I(g) of PTE 84-14 other than those involved in the G.E.
Felonies, described below.
Effective Date: This exemption, if granted, will be effective as of
January 29, 1996.
Summary of Facts and Representations
Introduction: General Electric Company (G.E.), an indirect 100
percent owner of GECIA Holdings, Inc. (Holdings), has been convicted
during the past ten years of certain felonies relating to G.E.'s
government contracts operations. In 1995-1996, Holdings created a
subsidiary, GE Capital Investment Advisors, Inc. (GECIA), solely to
purchase an unrelated investment advisory and management business.
G.E.'s felony convictions could bar GECIA from acting as a ``qualified
professional asset manager'' (QPAM) under Prohibited Transaction Class
Exemption 84-14 (PTE 84-14, 49 FR 9494, March 13, 1984). Part I(g) of
PTE 84-14 requires that no person owning, directly or indirectly, 5
percent or more of the QPAM has been
[[Page 59913]]
convicted of certain felonies within ten years preceding the
transaction for which the QPAM intends to utilize PTE 84-14. GECIA and
Holdings are requesting an exemption to enable GECIA to qualify as a
QPAM without regard to any failure to satisfy part I(g) of PTE 84-14 by
reason of G.E.'s ownership of GECIA, under the terms and conditions
described herein.
1. GECIA is a real estate investment advisory and management
business located in San Francisco, California. GECIA is a wholly-owned
subsidiary of Holdings, a wholly-owned subsidiary of GE Capital
Services, Inc. (GECS), which is entirely owned by G.E. GECIA and
Holdings (the Applicants) were organized and established by GECS solely
to acquire and continue the real estate investment advisory and
management business of MacFarlane Partners (MacFarlane), which was
unrelated to G.E. and its affiliates. MacFarlane obtained consent from
each of its existing clients to the transfer of MacFarlane client
accounts to GECIA, and GECIA commenced operations on January 29, 1996
immediately following completion of the acquisition of MacFarlane. As
part of the acquisition, GECIA has hired all of the investment
professionals and other employees of MacFarlane, including Victor
MacFarlane as the chief executive officer of GECIA.
The Applicants represent that the clientele served by GECIA's
operations include large employee benefit plans subject to the Act.
They maintain that, given the size and number of the plans which GECIA
represents, the large number of financial service providers engaged by
such plans, the breadth of the definition of ``party in interest''
under the Act, and the array of services offered by GECIA, it would not
be uncommon for GECIA to propose a transaction involving a party in
interest with respect to a plan for which GECIA is acting in a
fiduciary capacity. The Applicants represent that the proposing of such
transactions is occasionally necessary to offer plan clients adequate
investment diversification opportunities, and that such opportunities
will be missed if GECIA is not permitted to function as a QPAM pursuant
to PTE 84-14.
2. The Applicants represent that prior to January 29, 1996, G.E.
did not have any ownership interests in any of the operations of
MacFarlane, which are now the operations of GECIA. They represent that
Holdings and GECIA were established solely to acquire, operate and
expand the business of MacFarlane, and that GECIA and Holdings do not
engage in any of the business to which the G.E. Felonies, described
below, pertain. The Applicants further represents that GECIA and
Holdings are intended and structured to be operated and maintained
separately and independently from the G.E. business operations to which
the G.E. Felonies pertain, which did not involve any investment
advisory, management or related services.
3. On three occasions from 1986 through 1992, G.E. pled guilty or
was convicted of felonies relating to the government contract
activities of G.E. and its subsidiaries (the G.E. Felonies). The
Applicants represent that the G.E. Felonies did not in any way relate
to any employee benefit plan or any person's authority with respect to
an employee benefit plan. The Applicants describe the G.E. Felonies
more specifically as follows:
(a) On May 13, 1986, G.E. pled guilty to four counts of filing
false claims with the United States Air Force and 104 counts of filing
false statements with the United States Air Force in connection with
work performed in 1980 by G.E.'s Re-Entry Systems Operation. The
Applicants represent that these counts primarily related to individual
time cards that were improperly charged to certain government
contracts.
(b) On February 2, 1990, G.E. was convicted of mail fraud and
violations of the False Claims Act relating to the conduct in 1983 of
two contract employees of a G.E. subsidiary, Management and Technical
Services Co., involving failure to notify the United States Army that
subcontractors had agreed to prices lower than those contained in
projections for the project. The Applicants represent that neither G.E.
nor any officer or employee of G.E. was accused of having knowledge of
the discrepancy and withholding it from the United States Army.
(c) On July 22, 1992 G.E. pled guilty to violations of 18 U.S.C.
287 (submitting false claims against the United States), 18 U.S.C. 1957
(engaging in monetary transactions in criminally derived property), 15
U.S.C. 78m(b)(2)(A) and 78ff(a) (inaccurate books and records), and 18
U.S.C. 371 (conspiracy to defraud and commit offenses against the
United States). The Applicants represent that these violations related
to a series of events between 1984 and 1990, involving false statements
made by employees of G.E. Aircraft Engines Division to a foreign
government that led such foreign government to submit false claims to
the United States relating to the purchase of weapons.
4. The Applicants represent that the G.E. Felonies did not relate
in any way to the conduct or business of MacFarlane, or any investment
advisor or fiduciary of an employee benefit plan. The Applicants
maintain, however, that although none of the unlawful conduct involve
MacFarlane's or GECIA's investment management activities or any plans
covered by the Act, the criminal activities described above could
preclude GECIA, as an affiliate of G.E., from serving as a ``qualified
professional asset manager'' (QPAM), due to the provisions of sections
I(g) and V(d) of PTE 84-14. Section I(g) of PTE 84-14 precludes a
person who otherwise qualifies as a QPAM from serving as a QPAM if such
person or an affiliate thereof has within the 10 years immediately
preceding the transaction been either convicted or released from
imprisonment as a result of certain criminal activity, including any
crime described in section 411 of the Act. Because the G.E. Felonies
involved crimes described in section 411 of the Act and monies
transferred to or claimed by G.E., the Applicants represent that GECIA
may be barred from qualifying as a QPAM.
5. Accordingly, the Applicants request an exemption to enable GECIA
to function as a QPAM despite the failure to satisfy section I(g) of
PTE 84-14 solely because of the G.E. Felonies and GECIA's affiliation
with G.E. The Applicants request that the exemption apply not only to
GECIA but to Holdings as well, in order to enable flexibility in the
growth and development of GECIA's operations and to enable potential
corporate reorganizations. The Applicants state that they intend that
GECIA's relationships with employee benefit plans will be developed by
increasing the types and amounts of services provided, or by extending
the relationships into new areas. GECIA may prefer, for example, to
establish a related registered investment advisor to service a
particular niche of the market. However, the Applicants represent that
GECIA is structured such that subsidiaries will not be established
under GECIA, and any new coporate entities needed to accomodate
expanded operations of GECIA will be subsidiaries of Holdings. The
Applicants further maintain that inclusion of Holdings in the requested
exemption is also necessary to allow GECIA or Holdings to participate
in any reorganization which might eliminate one of them or change their
relative position with respect to GECS, or they may be repositioned for
reasons unrelated to their activities, such as a public offering of
their stock. For these reasons, the Applicants are requesting that the
exemption be
[[Page 59914]]
applicable to GECIA and Holdings and any subsidiary or successor which
provides investment advisory, management or related services and is
registered under the Investment Advisors Act of 1940, as amended.
The transactions covered by the proposed exemption would include
the full range of transactions that can be executed by investment
managers who qualify as QPAMs pursuant to PTE 84-14. If granted, the
exemption will enable GECIA to qualify as a QPAM by satisfying all
conditions of PTE 84-14, except that G.E.'s convictions and guilty
pleas in connection with the G.E. Felonies shall not prevent
satisfaction of the condition stated in section I(g) of PTE 84-14
because of affiliation with G.E. The exemption, if granted, will relate
only to the Applicants' affiliation with G.E. and not to any
affiliation with any other persons or entities.1
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1 For example, any affiliation of the Applicants with any
company or individual convicted of any of the felonies described in
section 411 of the Act, other than G.E. with respect to the G.E.
Felonies described herein, is not within the scope of the exemption
proposed herein. Furthermore, any future convictions of or guilty
pleas by G.E. for felonies described in part I(g) of PTCE 84-14 are
not within the scope of the exemption proposed herein.
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6. The Applicants represent that the G.E. Felonies do not create
any concern that they will endanger employee benefit plans for which
GECIA proposes to serve as a QPAM. The Applicants note that all of the
G.E. Felonies occurred before the creation of GECIA and its acquisition
of the MacFarlane business, and that all of the G.E. Felonies involved
areas of business unrelated to employee benefit plans and the
activities of GECIA. The Applicants represent that prior to its
incorporation, substantial efforts were devoted to identifying possible
relationships between its proposed provision of real estate management
services to plans and the existing business activities of G.E. and its
affiliates, and understanding the potential legal issues related
thereto. As a result, the Applicants represent that care has been taken
to situate GECIA and Holdings separate from other unrelated business
activities of G.E. and its affiliates, particularly those involved with
the G.E. Felonies, and that GECIA and Holdings are isolated
organizationally from the G.E. operations and entities formerly
involved in the G.E. Felonies.
Furthermore, the Applicants represent that they are committed to a
strong legal compliance program, developing their own policies and
procedures to promote compliance with applicable laws including the
Act. In this regard, the Applicants note that GECIA has established its
own general counsel, independent of G.E., with responsibility for
supervising legal compliance. Under the general counsel's direction,
GECIA has adopted written compliance policies designed to ensure
compliance with the Act, and written materials relating to such
policies have been provided to applicable employees. The Applicants
represent that GECIA conducts employee training programs, including on-
site seminars by outside counsel, on the requirements of the Act. The
Applicants conclude that the efforts in these compliance measures
constitute substantial amounts of time, effort and resources to avoid
any failure by GECIA to comply with the Act and other applicable laws.
7. In summary, the Applicants represent that the criteria of
section 408(a) of the Act are satisfied for the following reasons: (a)
The G.E. Felonies occurred prior to any affiliation between G.E. and
GECIA, and did not involve any conduct on the part of GECIA; (b) GECIA
constitutes a continuation of the operations of MacFarlane, which was
not involved in any of the G.E. Felonies and which was unrelated to
G.E. prior to acquisition by GECIA; (c) GECIA has committed to a legal
compliance program featuring written policies and procedures to prevent
illegal activity; and (d) The exemption will permit the Applicants to
engage in a broader variety of investments and services on behalf of
client employee benefit plans which demand diverse investment
opportunities.
For Further Information Contact: Ronald Willett of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Summit Sheet Metal, Inc. Defined Benefit Pension Plan (the Plan)
Located in Anaheim, California
[Application No. D-10330]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the procedures set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption
is granted, the restrictions of sections 406(a) and 406(b)(1) and
(b)(2) of the Act and the sanctions resulting from the application of
section 4975 of the Code, by reason of section 4975(c)(1) (A) through
(E) of the Code, shall not apply to the proposed cash sale (the Sale)
by the Plan of certain real property (the Property) to Messrs. Milton
J. Chasin, Donald E. Hanson, and Gale N. Searing, parties in interest
with respect to the Plan; provided that the following conditions are
satisfied: (a) the Sale is a one-time transaction for a lump sum cash
payment; (b) the purchase price is the fair market value of the
Property as determined on the date of the Sale by a qualified,
independent appraiser; and (c) the Plan will incur no commissions or
any other expenses from the proposed Sale.
Summary of Facts and Representations
1. The sponsoring employer of the Plan is the Summit Sheet Metal,
Inc. (the Employer), a California corporation, which has manufactured
sheet metal for over 20 years for the construction industry located
primarily in southern California. The Employer has formerly resolved to
terminate its business operations and is in the process of dissolution.
Messrs. Milton J. Chasin, Donald E. Hanson, and Gale N. Searing, who
each own a one-third interest in the Employer, are its only remaining
employees.
2. The Plan is a defined benefit plan with approximately $3.18
million in total assets, as of October 16, 1996, and three participants
who are equal owners of the Employer. The trustee and administrator of
the Plan are the three owners of the Employer. CalTrust, located in
Costa Mesa, California, is the third-party recordkeeper for the Plan.
The Employer has formally resolved to terminate the Plan, and has
received a determination from the Pension Benefit Guaranty Corporation
that the Plan is no longer insured. In addition, the Plan is currently
in termination process with the Internal Revenue Service.
The remaining three participants in the Plan have attained normal
retirement age and intend to retire within the next few months and
transfer their respective interests in the Plan to their respective
Individual Retirement Accounts (IRA).
3. The Property, acquired solely as an investment in 1988 by the
Plan from an unrelated person, is an unencumbered, fully developed
parcel of commercial real estate, which is located at 12707 and 12717
Los Neitos Road, Santa Fe Springs, California on approximately 1.17
acres. The applicants represent that the Property is serviced by all
the necessary public utilities and consists of a single story metal
building and a single story concrete block building with a mezzanine
for office space, and has been leased and used only by unrelated third-
parties with respect to the Plan. The Property was determined in 1993
by the Environmental Protection
[[Page 59915]]
Agency (EPA) to be located within a potential toxic waste clean-up
site.
The applicants represent that several attempts to sell the Property
by the Plan to unrelated persons have been unsuccessful, primarily,
because of the uncertainty of the costs in cleaning up the toxic waste
found by the EPA.
Mr. Claude J. Demers, Real Estate Broker with California Real
Estate Properties, Inc. of Huntington Beach, California, in a letter
dated September 3, 1996, represented that his listing agreement on the
Property had expired August 31, 1996, after every major industrial
broker in Orange County was contacted with little response and no
serious inquiries received. Mr. Demers further represented that the
lack of market demand for the Property and the potential liability
because of the hazardous materials on the Property effects the value of
the Property. In addition, Mr. Demers represented that several
financing institutions commented that even if a serious buyer were
found, financing the Property would still be a major obstacle to
overcome.
The Property was appraised as of June 20, 1996, and determined to
have a fair market value of $410,000. The appraisal was done by the
Grubb & Ellis Company Appraisal and Consulting Services, Orange,
California and signed by Paul M. Meade, Vice President, State
Certification #AG001947, and Donald L. Hoelzel, Independent Review
Appraiser, State Certification #AG00732. The appraiser represented that
it had no interest in the Property and was independent of the Employer
and the participants of the Plan. The appraiser also represented that
the only impact on the Property of the EPA determination is the stigma
associated with its proximity to the contained toxic waste and the
subsequent value reduction.
4. The applicants represent that the Plan has been unable to
interest anyone in purchasing the Property because of the EPA
determination, and the trustees of the Plan are unable to locate an IRA
custodian willing to accept the Property as an asset of an IRA.
Therefore, the three remaining participants of the Plan desire to
purchase the Property so that the Plan may be terminated and its assets
rolled-over into their respective IRAs.
The applicants represent that the Sale would be in the best
interests of the Plan and its participants and beneficiaries because
the Sale would avoid the risk of future costs of clean-up and the
anticipated depreciation in value of the Property. Also the parties
involved expect to terminate as soon as possible the Plan and the
Employer.
5. In summary, the applicant represents that the proposed
transaction will satisfy the criteria of section 408(a) of the Act
because (a) the Sale of the Property involves a one-time transaction
for cash; (b) the Plan will not incur any payment of commissions or any
other expenses from the Sale; (c) the Plan will be able to terminate
and roll-over its remaining assets into three separate IRAs for the
benefit of the three remaining participants; (d) the Property has been
appraised by a qualified, independent appraiser; and (e) the Plan will
receive as consideration for the Sale no less than the fair market
value of the Property as of the date of the Sale.
Notice to Interested Persons: Because Messrs. Chasin, Hanson, and
Searing, the applicants, are the sole participants of the Plan, it has
been determined that there is no need to distribute the notice of
proposed exemption to interested persons. Comments and requests for a
hearing are due thirty (30) days after publication of this notice in
the Federal Register.
For Further Information Contact: Mr. C.E. Beaver of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Skana Enterprises, Inc. Defined Benefit Pension Plan (the Plan) Located
in Kodiak, Alaska
[Application No. D-10342]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 4975(c)(2) of the Code and in accordance with the
procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836,
32847, August 10, 1990). If the exemption is granted, the sanctions
resulting from the application of section 4975 of the Code, by reason
of section 4975(c)(1)(A) through (E) of the Code, shall not apply to:
(1) the proposed loan (the Loan) of $157,500 by the Plan to Skana
Enterprises, Inc. (Skana), the Plan's sponsor and a disqualified person
with respect to the Plan, and (2) the personal guarantee of the Loan by
Mr. Ralph Bolton (Mr. Bolton), a disqualified person with respect to
the Plan, provided the following conditions are satisfied: (a) The
terms of the Loan are at least as favorable to the Plan as those
obtainable in an arm's-length transaction with an unrelated party; (b)
the Loan does not exceed 25% of the assets of the Plan; (c) the Loan is
secured by a first deed of trust on real property (the Property) which
has been appraised by a qualified independent appraiser to have a fair
market value not less than 150% of the amount of the Loan; (d) the fair
market value of the Property remains at least equal to 150% of the
outstanding balance of the Loan throughout the duration of the Loan;
(e) the Plan's independent fiduciary has determined that the Loan is
appropriate for, in the best interest of, and protective of the Plan;
and (f) the Plan's independent fiduciary will monitor compliance with
the terms of the Loan and conditions of the exemption throughout the
duration of the transaction, taking any action necessary to safeguard
the Plan's interest, including foreclosure on the Property in the event
of default.2
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\2\ Since Mr. Bolton is the sole owner of Skana and the only
participant in the Plan, there is no jurisdiction under Title I of
the Act pursuant to 29 CFR 2510.3-3(b). However, there is
jurisdiction under Title II of the Act pursuant to section 4975 of
the Code.
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Summary of Facts and Representations
1. Skana is a corporation located in Kodiak, Alaska, which is
engaged in the business of commercial fishing for seafood. The Plan is
a defined benefit plan with one participant, Mr. Bolton. The
approximate aggregate fair market value of the Plan's assets is
$670,000.
2. Skana wishes to borrow $157,500 from the Plan to purchase a
parcel of real property in Kodiak, Alaska. The Loan will be amortized
over a 15 year period, with equal semi-annual payments of principal and
interest over the 15 year term. The interest rate for the Loan will be
9.25% per annum. The proposed terms of the Loan were submitted to Mr.
Duane E. Dudley, Vice President of the Bank of America Alaska, N.A. in
Anchorage, Alaska. Mr. Dudley approved the Loan, but recommended that
certain of the proposed terms should be amended, such as raising the
interest rate to 9.25% per annum. Mr. Dudley has represented that the
terms of the Loan, as amended, are commercially reasonable.
3. The Loan will be secured by the Property, which consists of land
and the timber located thereon, situated on East Devils Road in Lincoln
City, Oregon. Char Brown of The Prudential Taylor & Taylor Realty
Company in Lincoln City, Oregon, has appraised the land as having a
fair market value, excluding the timber value, of $200,000 as of
September 17, 1996. Ms. Brown represents that she is a qualified,
independent realtor who has worked in the small town of Lincoln City
for five years and is well acquainted with the values of all the
properties in the area. The timber on the Property has been valued by
D.J. Davis Cutting, Inc. of Otis, Oregon as having a fair market value
of $193,277.75 as of September
[[Page 59916]]
15, 1996. Thus, independent experts have determined that the fair
market value of the Property is $393,277.75, which is approximately 2.5
times the principal amount of the Loan. The applicant represents that
the Plan will have first priority interest in the collateral, and the
Plan's interest will be perfected under applicable state law. Mr.
Bolton will also personally guarantee the Loan to the Plan.
4. The Plan has appointed Drugge & Associates (Drugge), a CPA firm
in Seattle, Washington, as its independent fiduciary for purposes of
this transaction. Drugge represents that it performs accounting and tax
services for Skana, but fees generated from Skana represent less than
one percent of its annual service revenues. Mr. Jon Krueger of Drugge
has represented that all terms and conditions of the Loan are at least
as favorable to the Plan as the Plan could obtain in an arm's-length
transaction with an unrelated party, and represent fair market value
terms. Drugge has determined that the Loan is appropriate for the Plan,
in the Plan's best interests as an investment for its portfolio, and
protective of the Plan and its participant. Drugge represents that it
will monitor compliance by Skana with the terms and conditions of the
Loan and of the exemption proposed herein throughout the term of the
Loan, taking whatever action is necessary to safeguard the Plan's
interest, including foreclosure on the collateral in the event of
default.
5. In summary, the applicant represents that the proposed
transaction satisfies the criteria contained in section 4975(c)(2) of
the Code for the following reasons: (a) The Loan represents less than
25% of the assets of the Plan; (b) the terms of the Loan will be at
least as favorable to the Plan as those obtainable in an arm's-length
transaction with an unrelated party; (c) the Loan will be secured by a
first deed of trust on the Property, which has been appraised by
qualified, independent experts to have a fair market value
approximately 2.5 times the Loan amount; (d) Mr. Bolton will personally
guarantee the Loan; (e) Drugge, the Plan's independent fiduciary, has
determined that the transaction is appropriate for the Plan and in its
best interests; (f) Drugge will monitor the transaction and take
whatever action is necessary to enforce the Plan's rights under the
Loan; and (g) Mr. Bolton is the only participant in the Plan to be
affected by the transaction, and he desires that the transaction be
consummated.
Notice to Interested Persons: Since Mr. Bolton is the only Plan
participant to be affected by the proposed transaction, the Department
has determined that there is no need to distribute the notice of
proposed exemption to interested persons. Comments and requests for a
hearing are due within 30 days from the date of publication of this
notice of proposed exemption in the Federal Register.
For Further Information Contact: Gary H. Lefkowitz of the
Department, telephone (202) 219-8881. (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest of disqualified
person from certain other provisions of the Act and/or the Code,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
section 404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(b) of the act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) Before an exemption may be granted under section 408(a) of the
Act and/or section 4975(c)(2) of the Code, the Department must find
that the exemption is administratively feasible, in the interests of
the plan and of its participants and beneficiaries and protective of
the rights of participants and beneficiaries of the plan;
(3) The proposed exemptions, if granted, will be supplemental to,
and not in derogation of, any other provisions of the Act and/or the
Code, including statutory or administrative exemptions and transitional
rules. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction; and
(4) The proposed exemptions, if granted, will be subject to the
express condition that the material facts and representations contained
in each application are true and complete, and that each application
accurately describes all material terms of the transaction which is the
subject of the exemption.
Signed at Washington, DC, this 19th day of November 1996.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration.
[FR Doc. 96-29900 Filed 11-22-96; 8:45 am]
BILLING CODE 4510-29-P
