[Federal Register Volume 60, Number 140 (Friday, July 21, 1995)]
[Notices]
[Pages 37677-37689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17961]



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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-09611, et al.]


Proposed Exemptions: General Motors Retirement Program, et al.

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

    Unless otherwise stated in the Notice of Proposed Exemption, all 
interested persons are invited to submit written

[[Page 37678]]
comments, and with respect to exemptions involving the fiduciary 
prohibitions of section 406(b) of the Act, requests for hearing 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, NW., Washington, DC 
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 NW., 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.

    General Motors Retirement Program for Salaried Employes (the GM 
Salaried Plan); General Motors Hourly Rate Employes Pension Plan 
(the GM Hourly Plan); the Saturn Individual Retirement Plan for 
Represented Team Members (the Saturn Plan); Saturn Personal Choices 
Retirement Plan for Non-Represented Team Members (the Saturn Choices 
Plan); and Employees' Retirement Plan for GMAC Mortgage Corporation 
(the GMAC Plan; collectively, the Plans)

Located in New York, New York
Application Nos. D-09611, D-09612 and D-09809

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 section 406(a) 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 (D) of the Code shall not 
apply, effective May 21, 1993, to the purchase by a partnership (the 
Partnership) of a parcel of improved real property (the Property) 
located in Washington, DC, from Collin Equities, Inc. (the Seller), a 
party in interest with respect to the Plans, pursuant to an agreement 
which provided that the Plans would invest in the Partnership upon 
purchase of the Property, provided the following conditions are met:
    (a) the terms of the purchase of the Property were no less 
favorable to the Plans than those negotiated at arm's length in similar 
circumstances with unrelated third parties;
    (b) the fair market value of the Property was determined by an 
independent, qualified appraiser;
    (c) the Plans paid no commissions or fees in regard to the 
transaction; and
    (d) prior to investing in the Partnership an independent, qualified 
fiduciary acting on behalf of the Plans, reviewed and recommended 
approval of the transaction and determined that the transaction was in 
the best interest of the Plans and the participants and beneficiaries 
of such Plans.1

    \1\ For purposes of this exemption reference to specific 
provisions of title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
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EFFECTIVE DATE: If the proposed exemption is granted, the exemption 
will be effective retroactively, as of May 21, 1993.

Summary of Facts and Representations

    1. It is represented that the Plans are qualified under section 
401(a) of the Code and were established by GM to provide retirement 
benefits to its eligible salaried and hourly employees and to employees 
of approximately twenty (20) GM affiliates worldwide.2 The Plans 
which are the applicants for this proposed exemption are the GM 
Salaried Plan, the GM Hourly Plan, the Saturn Plan, the Saturn Choices 
Plan, and the GMAC Plan. As of October 1, 1993, the GM Salaried Plan, 
the GM Hourly Plan, the Saturn Plan, and the Saturn Choices Plan 
covered approximately 831,532 participants (both active employees and 
retirees) and beneficiaries. In addition, as of June 21, 1994, there 
were approximately 2,761 participants in the GMAC Plan.

    \2\ It is represented that employers whose employees are covered 
by the Plans are as follows: (1) GM; (2) Delco Electronics Service 
Corporation; (3) Fisher Lumber Corporation; (4) GMAC; (5) GMAC, 
Australia; (6) GMAC, Colombia, S.A. (7) GMAC, Continental; (8) GMAC, 
International; (9) GMAC, South America; (10) General Motors 
Investment Management Corporation; (11) General Motors Interamerica 
Corporation; (12) General Motors Overseas Corporation; (13) General 
Motors Overseas Distribution Corporation; (14) GMAC Capital 
Corporation; (15) GM Personnel Services, Inc.; (16) Holdens Motor 
Overseas Corporation; (17) Motors Insurance Corporation; (18) Motors 
Trading Corporation; (19) Saturn Corporation; (20) MIC Re 
Corporation; and (21) GMAC Mortgage Corporation.
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    2. The control and management of the assets of the Plans (including 
the investments described herein) are under the authority of the 
Finance Committee (the Committee) of the Board of Directors of GM, 
which is the ``named fiduciary'' (as such term is defined in the Act) 
of the Plans. In this regard, it is represented that the Committee acts 
on behalf of the Plans through duly authorized delegates. One such 
delegate of the Committee is the General Motors Investment Management 
Corporation (GMIMCO), a wholly-owned subsidiary of GM established in 
1990. In this regard, GMIMCO serves as the investment manager for the 
Plans. As of December 31, 1992, GMIMCO had approximately $7.7 billion 
in assets under its management, including a portion of the assets of 
the Plans.
    GMIMCO maintains a staff of investment experts who work for the 
Plans and for certain affiliates of GM.

[[Page 37679]]
GMIMCO is compensated by GM for the services it renders to the Plans, 
and to the extent permitted by the Act, the Plans reimburse GM for 
GMIMCO's expenses.3

    \3\ The applicants state that any fees or expenses received by 
GMIMCO for the provision of services to the Plans, the compensation 
received by GMIMCO from GM, or the reimbursement by the Plans to GM 
of expenses incurred by GMIMCO in the provision of such services 
will satisfy the requirements as set forth in section 408(b)(2) of 
the Act. However, the Department is providing no opinion as to 
whether the payment of any fees, expenses, compensation, or 
reimbursement under the circumstances described herein would satisfy 
the requirements of section 408(b)(2) of the Act and the regulations 
thereunder (see 29 CFR 2550.408b-2).
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    3. It is represented that GM has established various trusts, exempt 
from tax under section 501(a) of the Code, to hold and manage the 
invested funds used for providing benefits under the Plans. In this 
regard, certain assets of the GM Hourly Plan, the Saturn Plan, the 
Saturn Choices Plan, and the GMAC Plan are held in one master trust 
(the Hourly Trust), while certain assets of the GM Salaried Plan are 
held in another master trust (the Salaried Trust). As of September 30, 
1993, the aggregate fair market value of the assets of the Hourly Trust 
and the Salaried Trust was approximately $19.7 billion and $20.8 
billion, respectively.
    It is represented that the Hourly Trust and the Salaried Trust are 
the sole beneficial owners of the First Plaza Group Trust (the Group 
Trust), a New York trust, which is also exempt from taxation under 
section 501(a) of the Code. Mellon Bank, N.A. serves as trustee of the 
Group Trust. GMIMCO has authority, responsibility, and control with 
respect to the assets of the Plans invested in the Group Trust and also 
serves as the independent fiduciary for the transaction described below 
which is the subject of this proposed exemption. Further, in August 
1990, the Plans engaged Sarofim Realty Advisory (Sarofim) (formerly FS 
Realty Partners) of Dallas, Texas, an experienced real estate 
investment advisory firm, to serve as non-discretionary investment 
advisor to the Plans and to GMIMCO.
    4. On August 9, 1991, the Group Trust entered into a subscription 
agreement (the Subscription Agreement) with the Hines Acquisitions No. 
1 Limited Partnership, a Texas limited partnership. The Hines 
Acquisitions No. 1 Limited Partnership serves as the general partner 
(the GP) in the Partnership in which the Plans are invested. The GP is 
unrelated to GM, the Plans, or any other parties involved in the 
transactions. The Partnership is a Texas limited partnership known as 
the 1991 Acquisition Fund No. 1 Limited Partnership. It is represented 
that the GP organized the Partnership for the purpose of acquiring, 
improving, managing, operating, leasing, redeveloping, selling, and 
disposing of commercial office and retail real estate. Pursuant to the 
terms of the Subscription Agreement, the Group Trust agreed to become 
the sole limited partner of the Partnership.
    5. In connection with the formation of the Partnership, the GP and 
the Group Trust executed a partnership agreement (the Partnership 
Agreement) which was attached to and incorporated by reference into the 
Subscription Agreement. It is represented that contributions to capital 
of the Partnership under the Partnership Agreement were to be made 5 
percent (5%) by the GP and 95 percent (95%) by the Group Trust.4 
As of September 30, 1993, the percentages of the fair market value of 
the Hourly Trust and the Salaried Trust committed through the Group 
Trust to the Partnership were 0.48% and 0.46%, respectively.

    \4\ It is represented that based on contributions of capital, 
the Group Trust is a 95 percent (95%) limited partner in the 
Partnership that owns the Property. However, under the terms of the 
Partnership Agreement, in certain favorable scenarios with regard to 
the internal rate of return, the General Partner's right to receive 
distributions of profits can increase from 5 percent (5%) to 15 
percent (15%). The Department, herein, is offering no relief from 
any of the provisions of part 4, subpart B, of Title I of the Act 
with respect to the receipt by the GP of compensation based on this 
performance incentive feature in the Partnership Agreement.
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    Under the terms of the Partnership Agreement, the GP is, among 
other things, responsible for all decisions regarding acquisition, 
financing redevelopment, leasing, managing, and disposition of real 
estate owned by the Partnership. The GP also retains oversight over 
persons retained to provide assistance or services in connection with 
such matters. In this regard, it is represented that the Partnership 
has been and will be managed by the GP by affiliates of the GP, or 
through independent contractors retained by the Partnership, pursuant 
to the terms of third party management agreements, the form and content 
of which has been approved by the Group Trust. Additional 
responsibilities of the GP, include preparing budgets in connection 
with acquisitions, operations, renovations, and improvements for each 
property the Partnership owns and maintaining books, records, and bank 
accounts for the Partnership. Further, the GP has the exclusive 
responsibility to identify investment opportunities for the Partnership 
and to negotiate the acquisition of such investment opportunities. As a 
limited partner in the Partnership, the Group Trust does not have the 
right to propose or negotiate acquisitions on behalf of the 
Partnership. However, the Group Trust, acting through GMIMCO, does have 
the right to approve all acquisitions by the Partnership which have 
been negotiated by the GP.
    6. In July, 1992, the GP identified the Property as the first long-
term investment opportunity for the Partnership. The Property is 
described as a twelve story office building (the Building), built in 
1991, located at 700 Eleventh Street, N.W. on 37,370 square feet of 
land (the Land) at a subway station in the heart of downtown 
Washington, DC. The Building, commonly referred to as the Edward 
Bennett Williams Building, has 292,919 square feet of net rentable 
office space, 8,803 square feet of net rentable retail space on the 
first floor, and a five (5) level underground parking garage. It is 
represented that, as of March 1, 1993, 55.2% of the Property was 
leased. As of December 16, 1993, the tenants of the Property were: (1) 
Williams & Connolly, a law firm, with a lease dated September 24, 1991; 
(2) Kimberly-Clark Corporation, with a lease dated December 20, 1991; 
and (3) Massachusetts Mutual Life Insurance Company, with a lease dated 
April 30, 1993. It is represented that none of the lessees are parties 
in interest with respect to the Plans.
    At the time the Property was identified in July 1992, as a possible 
investment for the Partnership, the GP entered into discussions with 
the owner of the Property. The Seller is a Texas corporation which is 
wholly-owned by Wells Fargo Bank, N.A. (Wells Fargo). It is represented 
that unbeknownst to the GP in July 1992, Wells Fargo was then serving 
as a fiduciary with respect to other assets of the Plans not involved 
in the Partnership. Accordingly, the Seller, by virtue of being a 
wholly-owned subsidiary of Wells Fargo, was a party in interest with 
respect to the Plans when the GP negotiated the purchase of the 
Property.
    It is represented that after the principal business terms of the 
transaction were established through competitive bidding with other 
potential purchasers, the GP was selected by the Seller as the most 
attractive buyer. It is represented that in October 1992, officials at 
GMIMCO, following routine practices designed to avoid engaging in 
prohibited transactions, identified the Seller as a subsidiary of a 
service provider with

[[Page 37680]]
respect to the Plans, albeit one without any authority or 
responsibility with respect to the assets involved in the subject 
transaction.
    Subsequently, on February 17, 1993, the GP and the Seller executed 
a purchase and sale agreement (the Purchase Agreement) in which the 
Seller agreed to sell the Property to the GP for a purchase price of 
$60,000,000. For purposes of the Purchase Agreement, the Property 
included: (a) the Land; (b) the Building; (c) the related tangible 
personal property and fixtures (the Personalty); (d) all leases, 
licenses, and occupancy agreements demising the space in the Building 
(the Leases); (e) prepaid rents and deposits; (f) certain contracts 
(e.g., warranties, indemnities, licenses, permits) to the extent 
assignable without cost; (g) other miscellaneous property (e.g., 
telephone exchanges, trade names, trademarks, plans, drawings, surveys, 
and technical descriptions; and (h) except as specifically limited or 
excluded, all maintenance, service, and utility contracts that relate 
to the ownership, maintenance, construction, repair, and/or operation 
of the Land, the Building, the Personalty, and the Leases. In 
accordance with the terms of the Purchase Agreement, the GP 
subsequently, at closing on May 21, 1993, assigned its rights as 
purchaser of the Property to the Partnership.
    7. Pursuant to the terms of the Subscription Agreement, the GP and 
the Group Trust agreed to form the Partnership on the date that the 
Partnership first invested in real estate. Accordingly, prior to the 
date the Partnership acquired the Property, it is represented that the 
Partnership had no assets. In this regard, the capital contributions of 
the Hourly Trust and the Salaried Trust committed through the Group 
Trust to the Partnership were used to pay the Group Trust's pro rata 
share of the purchase price for the Property. It is represented that 
the Partnership acquired the Property at closing on May 21, 1993, for a 
purchase price of $60,000,000.
    8. An appraisal of the Property was performed independently by 
Delta Associates, Inc. (Delta), a qualified appraisal firm in 
Alexandria, Virginia. The appraisal report, dated April 5, 1993, was 
prepared in conjunction with a loan disbursed at closing on May 21, 
1993, by Credit Lyonnais Cayman Island Branch to the Partnership 
secured by the Property. However, Delta has consented to the use of 
such appraisal report in conjunction with this proposed exemption.
    In the appraisal report, Delta estimated that, as of March 1, 1993, 
the market value of the leased fee interest in the Property on an ``as 
is'' basis was $72 million and on an ``as if stabilized'' basis was $88 
million. In the opinion of Delta after the ``first stabilized year of 
operation,'' assumed to be March 1995, the fair market value of the 
leased fee interest in the Property will be $95 million. In addition, 
Delta estimated that the ``insurable value'' of the Property, as of 
March 1, 1993, was $47.4 million.
    9. Subsequently, on December 16, 1993, the subject application for 
retroactive exemption from the prohibited transaction restrictions of 
the Act was filed on behalf of the Plans with the Department.
    10. The applicants maintain that, while the issue is not free from 
doubt, the Partnership is a real estate operating company, as defined 
in 29 CFR Sec. 2510.3-101 and therefore the sale of the Property to the 
Partnership by the Seller was not a direct prohibited transaction 
between the Plans and a party in interest. In this regard, the 
applicants obtained an opinion of counsel with respect to the issues of 
whether the Partnership constituted a ``real estate operating company'' 
on the date of the purchase by the Partnership of the Property and 
whether the purchase of the Property by the Partnership from the 
Seller, a party in interest with respect to the Plans, constituted a 
prohibited transaction under section 406 of the Act.
    In the opinion of the applicants, no exemption from the 
restrictions of section 406 of the Act relating to direct prohibited 
transactions is necessary in connection with the sale of the Property 
by a party in interest to the Partnership nor for receipt of any 
compensation by the GP of the Partnership, because the purchase of the 
Property by the Partnership did not involve assets of the Plans by 
virtue of the operation of the Partnership as a ``real estate operating 
company.'' 5

    \5\ Under the ``plan asset'' regulations of the Department, as 
set forth in 29 CFR Sec. 2510.3-101(h)(3), when a plan or a related 
group of plans owns all of the outstanding equity interests (other 
than director's qualifying shares) in an entity, its assets include 
those equity interests and all of the underlying assets of the 
entity. The applicants maintain that, while for purposes of 
establishing a limited partnership under Texas law, a general 
partner must be named in the certificate of limited partnership, the 
GP, here, is obligated to contribute a significant amount of capital 
to the Partnership and, thus, is participating in the Partnership 
for reasons other than to satisfy the minimum state law requirements 
for treatment of the Partnership as a partnership. Accordingly, the 
applicants believe that the Partnership assets would not be treated 
as plan assets for the purpose of applying the fiduciary 
responsibility requirements of the Act.
    In addition, under the ``plan asset'' regulations of the 
Department, as set forth in 29 CFR Sec. 2510.3-101(e), an entity is 
treated as a real estate operating company if at least 50 percent of 
its assets are invested in real estate which is managed or developed 
and with respect to which the entity has the right to substantially 
participate directly in management or development activities. 
Further, in the ordinary course of its business, the entity must 
actually engage in real estate management or development activities. 
The applicants maintain that they are comfortable in relying on 
their own analysis that the Partnership operation meets these 
requirements.
    The Department, herein, is expressing no opinion whether the 
underlying assets of the Partnership are ``plan assets'' or whether 
the Partnership, as established or in the manner operated, satisfies 
the definition of a ``real estate operating company.'' Further, the 
Department is not proposing relief, herein, for any direct 
transaction between the Partnership or the Plans and a party in 
interest with respect to such Plans.
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    Notwithstanding their reliance on the plan assets analysis 
described above, the applicants continue to request retroactive relief 
under section 406(a) for any indirect prohibited transaction that may 
have occurred. The applicants point out that authority on the issue of 
what constitutes an ``indirect'' prohibited transaction is still quite 
sparse. In the opinion of the applicants, the following elements of the 
subject transaction, taken together, raise an indirect prohibited 
transaction issue: (1) the purchase of the Property by the Partnership 
and the Group Trust's investment in such Partnership occurred on the 
same day; (2) the Group Trust's investment provided the Partnership 
with 95 percent (95%) of the funds used to cover the purchase price of 
the Property; and (3) the Property and the Seller had been specifically 
identified prior to the time the funds were forwarded by the Group 
Trust to the Partnership. Further, of particular interest to this issue 
is the fact that the Partnership is not designed to be a ``blind pool'' 
investment vehicle where a general partner, so long as it follows the 
criteria set forth in a partnership agreement, has plenary discretion 
to invest committed partnership funds in any real property meeting 
those criteria and the unfettered ability to call funds from a limited 
partner to complete such investments without any approval rights in 
such limited partner. Rather, the Group Trust as subscriber had a right 
to examine and approve or disapprove the specific investment 
opportunity of the Partnership in the Property, although upon the 
signing of the Subscription Agreement in 1991, the Group Trust became 
committed to invest up to $95 million in the Partnership at such times 
as appropriate investments were identified and the Partnership was 
formed. Accordingly, at the time the Group Trust actually purchased its 
interest in the Partnership and

[[Page 37681]]
forwarded its 95 percent (95%) pro rata share of the initial capital 
call on the day of the closing, May 21, 1993, the Group Trust and the 
GP knew that the proceeds of the purchase of its interest in the 
Partnership would be forwarded almost immediately by the GP together 
with the GP's own capital contribution on behalf of the Partnership, to 
the Seller, a party in interest with respect to the Plans.
    Although applicants' counsel in analyzing these elements concluded 
that no indirect prohibited transaction occurred, counsel represents 
that this conclusion is ``not entirely free from doubt,'' in part 
because of the dearth of authority on what constitutes an indirect 
prohibited transaction. The applicants believe that the investment by 
the Group Trust in the Partnership could be viewed as an indirect sale 
or exchange of property between the Plans and a party in interest, the 
Seller, in violation of section 406(a)(1)(A) of the Act or a use of 
plan assets by or for the benefit of a party in interest in violation 
of section 406(a)(1)(D) of the Act. Accordingly, the applicants seek 
retroactive relief from such provisions of the Act at closing on May 
21, 1993, the date when the transaction was entered.
    11. The applicants maintain that the requested retroactive 
exemption is warranted, because the transaction was consummated under 
conditions that assured that the rights of participants and 
beneficiaries of the Plans were protected. In this regard, Sarofim 
served as an advisor to GMIMCO with respect to, among other things, 
whether to approve the acquisition of the Property by the Partnership 
as proposed by the GP. Specifically, it is represented that Sarofim 
reviewed and recommended the Partnership investment to GMIMCO and 
recommended approval of the Property acquisition. Further, GMIMCO, 
acting as investment manager on behalf of the Plans, after considering 
the terms of the acquisition of the Property, as negotiated by the GP, 
and the recommendations and analyses of Sarofim, made the ultimate 
decision on behalf of the Plans and the Group Trust to invest in the 
Partnership and to approve the acquisition of the Property by such 
Partnership. It is represented that Sarofim is unaffiliated with the 
Seller or Wells Fargo, and that there is no direct or indirect 
affiliation between GMIMCO (or GM) and Wells Fargo or the Seller.
    It is represented that the terms of the Partnership Agreement were 
negotiated by GMIMCO and Sarofim, on behalf of the Plans, at arm's 
length with the GP. Neither GMIMCO, GM, nor Sarofim have any direct or 
indirect affiliation with the GP. Additionally, the terms of the 
Partnership Agreement were negotiated at a time when the opportunity to 
acquire the Property had not arisen.
    The purchase price for the Property paid by the Partnership and the 
non-price terms of the acquisition were negotiated on an arm's length 
basis between unrelated parties, the GP and the Seller. Further, the 
purchase of the Property was also reviewed and recommended by Sarofim 
and approved by GMIMCO.
    Although the Seller of the Property is a party in interest with 
respect to the Plans, it is represented that this status resulted 
solely by reason of the Seller's relationship to Wells Fargo, a service 
provider with respect to other assets of Plans not involved in the 
Partnership. In this regard, it is represented that Wells Fargo was not 
a trustee of the Group Trust and had no authority, responsibility, or 
control with respect to the assets of the Group Trust that were 
invested in the Partnership. Further, it is represented that Wells 
Fargo does not have, and did not exercise, any of the authority, 
control or responsibility that makes it a fiduciary with respect to the 
Plans in connection with the decision by the Plans (acting through 
GMIMCO) to invest through the Group Trust in the Partnership or the 
decision by the Plans (acting through GMIMCO) to approve the 
Partnership's investment in the Property.
    On August 9, 1991, at the time the Group Trust entered into the 
Subscription Agreement, it is represented that there was no arrangement 
for the Partnership to specifically acquire the Property. Rather, the 
Partnership agreement called for the Group Trust to 95 percent (95%) 
fund the purchase of a property once identified by the GP and agreed to 
by GMIMCO. Neither the Plans, the Group Trust, GMIMCO, nor Sarofim 
participated in the search for the Property. It is represented that the 
GP had no knowledge of the relationship between Wells Fargo and the 
Plans in July 1992, at the time the Property was identified as an 
investment opportunity for the Partnership. It is further represented 
that officials at GMIMCO did not know that the Seller was a subsidiary 
of a service provider with respect to the Plans until October 1992. In 
addition, Sarofim, an experienced real estate investment advisory firm, 
has served since August 1990, as non-discretionary investment advisor 
to the Plans and to GMIMCO. Accordingly, it is represented that the 
Group Trust's commitment to become a limited partner in the Partnership 
was not in any way conditioned on the acquisition of the Property.
    11. It is represented that the transaction was in the interest of 
the Plans and their participants and beneficiaries. In this regard, the 
acquisition of the Property was consummated on terms customary in the 
commercial real estate market after extensive negotiations between the 
GP and the Seller who are unrelated. The purchase price was 
competitively bid by the GP and approved by both Sarofim and GMIMCO. It 
is represented that the GP negotiated a purchase price of $60 million 
that is approximately 14 percent (14%) lower than the $69.9 million 
dollar asking price for the Property. Further, Delta's appraisal of the 
Property indicated a value for the Property of $72 million on an ``as 
is'' basis in March, 1993, which was approximately 20 percent (20%) 
above the purchase price paid by the Partnership. Accordingly, prior to 
consummation of the acquisition of the Property at the $60 million 
dollar purchase price, both GMIMCO and Sarofim specifically concluded 
that the acquisition of the Property at the price negotiated by the GP 
was in the best interest of the Plans.
    It is represented that Sarofim analyzed at length the potential 
acquisition of the Property taking into account various scenarios 
regarding pricing, absorption/leasing, tenant finish costs, tenant 
expansions, renewal of leases, residual capitalization rates, and 
financing parameters. Based on this exhaustive analysis, Sarofim 
recommended to the Plans a pricing range for the Property that would 
warrant the Group Trust's approval of the acquisition by the 
Partnership. It is represented that as the ultimate acquisition price 
for the Property was within the recommended range, both Sarofim and 
GMIMCO determined that the favorable pricing of the Property would help 
produce an attractive return for the Plans and was thus in their best 
interest.
    It is further represented that the acquisition of the Property was 
recommended to the Plans for the following reasons: (a) the Property is 
a recently completed Class ``A'' building with high quality systems and 
construction quality; (b) the Property has advantageous sub-surface 
parking, which is a major leasing advantage in its market; (c) the 
Property was 53 percent (53%) leased at the time of the transaction, 
primarily to a prestigious national law firm with excellent credit; (d) 
tenants have demonstrated a strong demand to lease vacant space in

[[Page 37682]]
commercial buildings located in the East End submarket of Washington, 
DC over the past five (5) years; (e) the Property has direct access to 
a major transfer station in the subway system; (f) the Property has 
access to adjacent and nearby hotels and to retail amenities; (g) the 
shape of the Property facilitates either full-floor users or multi-
tenant layouts; and (h) the recommended pricing range was considered 
substantially below the replacement cost for the Property. Sarofim and 
GMIMCO concluded that for all of the above reasons the acquisition of 
the Property should help to form the core of real estate-related 
investments for the Plans.
    After reviewing the analysis of Sarofim, GMIMCO concluded that the 
ownership of a substantial limited partnership interest in the 
Partnership that acquired the Property for a price within the range 
recommended would give the Plans the dual benefits of (1) stable 
returns from participation in high quality office and retail buildings 
in attractive urban real estate markets at advantageous prices, and (2) 
joint investment with the GP and its affiliate, Hines LP, a national 
real estate development and management firm with expertise in the 
acquisition, management, and leasing of such properties. Accordingly, 
both GMIMCO and Sarofim concluded that the proposed acquisition of the 
Property was favorable to the Partnership and by extension to the 
Plans.
    12. The applicants maintain that the exemption is administratively 
feasible, because the transaction involves a one-time event that has 
been completed. In this regard, as the transaction has already been 
consummated, it is represented that no ``ongoing'' involvement of the 
Department will be required to implement the exemption.
    13. In summary, the applicants represent that the proposed 
transaction meets the statutory criteria of section 408(a) of the Act 
because:
    (a) the terms of the Partnership Agreement were negotiated at arm's 
length between the GP, acting on behalf of the Partnership, and GMIMCO 
and Sarofim, acting on behalf of the Plans;
    (b) the terms of the Partnership Agreement were negotiated at a 
time when the Property acquisition opportunity had not arisen;
    (c) the terms of the Purchase Agreement for the Property were 
negotiated at arm's-length between the GP and the Seller, who are 
unrelated parties;
    (d) the acquisition of the Property was consummated on terms 
customary in the commercial real estate market;
    (e) GMIMCO and Sarofim, respectively, an experienced real estate 
investment manager and an advisor acting on behalf of the Plans, 
reviewed, recommended, and approved the subject transaction;
    (f) GMIMCO and Sarofim determined that the subject transaction was 
feasible, in the interest of the Plans, and protective of the 
participants and beneficiaries of such Plans;
    (g) the fair market value of the Property was determined by Delta, 
an independent, qualified appraiser;
    (h) the Plans paid no commissions or fees in regard to the 
transaction;
    (i) the transaction involved a one-time event that has been 
completed and does not require monitoring.

Notice to Interested Persons

    It has been requested on behalf of the Plans that the Department 
waive the requirement to separately notify each participant, retiree, 
and beneficiary of the Plans of the proposed transaction. In this 
regard, it is represented that the time and expense of individually 
notifying such parties is substantial. Further, it is represented that 
the interests of the current employees are identical to those of the 
retirees, terminated participants, and beneficiaries with respect to 
the exemption application. In this regard, the current employees can 
effectively and adequately represent such interests. Moreover, several 
groups of employees are represented by unions, which will be notified 
as described in the paragraph below. Accordingly, the Department has 
determined that the only practical form of providing notice to 
interested persons is by posting on all bulletin boards normally used 
for employee notices of this nature by all GM-affiliated employers 
whose employees are covered by the Plans a copy of the notice of 
pendency of this proposed exemption (the Notice) as published in the 
Federal Register, a summary of the exemption request, as approved by 
the Department (the Summary), together with the supplemental statement, 
as required, pursuant to 29 CFR 2570.43(b)(2) (the Supplemental 
Statement), which shall inform all interested persons of their right to 
comment. Such posting shall occur within ten (10) days of the date of 
the publication in the Federal Register of the Notice. In addition, 
within ten (10) days of the publication of the Notice in the Federal 
Register, GM will mail first-class to each of the unions representing 
employees covered by the Plans a copy of the Notice, the Summary, and 
the Supplemental Statement. The names of the unions specifically to be 
notified are as follows: (1) International Union, United Automobile, 
Aerospace and Agricultural Implement Workers of America; (2) 
Brotherhood of Carpenters and Joiners of America; (3) International 
Die-Sinkers Conference; (4) International Union of Electronic, 
Electrical, Technical, Salaried Machine & Machine Workers, AFL-CIO; (5) 
Pattern Makers League of North America, AFL-CIO; (6) International 
Union of Operating Engineers; (7) Metal Polishers, Buffers, Platers and 
Allied Workers International Union; (8) International Brotherhood of 
Electrical Workers; (9) International Association of Machinists; (10) 
International Brotherhood of Teamsters, Chauffeurs, Warehousemen and 
Helpers of America; (11) United Rubber, Cork, Linoleum and Plastic 
Workers of America; (12) Sign, Pictorial and Display Union, Brotherhood 
of Painters, Decorators and Paperhangers; (13) United Plant Guard 
Workers of America; and (14) Automotive, Petroleum and Allied 
Industries Employe Union.
    For Further Information Contact: Angelena C. Le Blanc of the 
Department, telephone (202) 219-8883 (This is not a toll-free number.)

John B. Toomey Rollover IRA (the IRA)
Located in Lorton, Virginia
[Application No. D-09819]

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 the 
proposed installment sale of 36.2 shares of common stock (the Stock) in 
JBT Holding Corporation (JBT) by the IRA 6 to JBT, a disqualified 
person with respect to the IRA; provided that: (a) the purchase price 
JBT pays for the Stock is the greater of $410,146 or the fair market 
value of the Stock on the date of the sale; (b) the fair market value 
of the Stock is determined by a qualified independent appraiser, as of 
the date of the sale; (c) the terms of the transaction are no less 
favorable to the IRA than those negotiated at arm's length with 
unrelated third parties in similar circumstances; (d) the trustee of 
the IRA monitors compliance with the terms of

[[Page 37683]]
the transaction throughout the duration of the installment sale; (e) 
the IRA receives a cash downpayment of no less than $210,146 on the 
date of the sale and thereafter receives three (3) equal annual 
installment payments of $66,667, the first of which is due and payable 
December 31, 1995, plus interest at the fair market rate of interest, 
as determined by an independent, qualified third party, as of the date 
of the transaction, on the outstanding balance of the installment 
payments, payable annually until all the installment payments have been 
made by JBT on or before December 31, 1997; (f) the outstanding balance 
of the installment payments at no time exceeds 25 percent (25%) of the 
value of the assets of the IRA; (g) the outstanding balance on the 
installment payments is secured by a recorded first mortgage interest 
in real property pledged by JBT in favor of the IRA; (h) the collateral 
which secures the installment payments has a value, as determined by an 
independent, qualified appraiser, which at all times is no less than 
150 percent (150%) of the outstanding balance of the installment 
payments; and (i) the IRA pays no commissions, fees, or other expenses 
in connection with the transaction.

    \6\ Pursuant to 29 CFR 2510.3-2(d), the IRA is not within the 
jurisdiction of Title I of the Act. However, there is jurisdiction 
under Title II of the Act, pursuant to section 4975 of the Code.
---------------------------------------------------------------------------

Summary of Facts and Representations

    1. The IRA is a self-directed IRA described in section 408(a) of 
the Code. John B. Toomey (Mr. Toomey), the applicant for exemption, is 
the creator of the IRA, and the sole participant and beneficiary in the 
IRA. It is represented that Advest, Inc., located in Washington, DC, 
serves as the trustee of the IRA and has custody over the Stock held in 
the IRA. However, Mr. Toomey has investment discretion over the assets 
of the IRA, including the Stock, and therefore, is a fiduciary and a 
disqualified person with respect to the IRA, pursuant to section 
4975(e)(2)(A) of the Code. As of September 9, 1994, the IRA had 
approximately $810,775 in total assets. As of September 9, 1994, 
approximately 50.6 percent (50.6%) of the IRA's assets consisted of JBT 
Stock. The remaining portion of the IRA's assets are held in other 
securities and cash. It is represented that the IRA acquired the JBT 
Stock as a result of a rollover by Mr. Toomey of a distribution to him 
of his vested benefits from a PAYSOP/401(k) plan (the PAYSOP), a tax 
qualified pension plan sponsored by VSE Corporation (VSE).
    2. VSE, a Delaware corporation with offices in Alexandria, 
Virginia, is engaged in the business of providing engineering services. 
In 1992, due to differences between Mr. Toomey and other members of the 
VSE management group regarding future business activities, VSE was 
split into two separate groups, pursuant to a tax free reorganization 
under section 368(a)(1)(D) of the Code. To effectuate such 
reorganization, JBT, a Delaware corporation with offices located in 
Lorton, Virginia, was created in August 6, 1992. As part of the 
reorganization, VSE transferred all of the issued and outstanding 
shares of stock in three (3) VSE subsidiaries to JBT in exchange for 
all of the shares of JBT Stock. The exchange agreement was approved by 
VSE stockholders on October 17, 1992 and became effective October 31, 
1992. In a concurrent transfer, VSE distributed all of the JBT Stock to 
Mr. Toomey, the members of his immediate family, and the PAYSOP in 
exchange for an aggregate of 808,649 shares of VSE common stock which 
these parties owned on October 17, 1992. Concurrent with the exchange 
of stock pursuant to the reorganization, Mr. Toomey separated from 
service from VSE and received a lump sum distribution as a participant 
in the VSE PAYSOP and in another pension plan sponsored by a VSE 
affiliate. It is represented that this distribution was rolled over 
within the sixty (60) day rollover period into the IRA. It is 
represented that a part of this rollover distribution consisted of the 
JBT Stock which in the reorganization had been exchanged for shares of 
VSE common stock held in the PAYSOP.
    3. JBT is the parent holding company of three (3) wholly owned 
subsidiaries: (a) Metropolitan Capital Corporation (MetCap); (b) Design 
& Production, Inc. (D&P); and (c) Starr Management Corporation (Starr). 
It is represented that, as of December 31, 1993, on a consolidated 
financial statement the total assets of JBT and its subsidiaries was 
$20,318,107. Mr. Toomey is the president and the chief executive 
officer of JBT. Mr. Toomey also serves on the Board of Directors of 
JBT.
    MetCap, a Delaware Corporation incorporated in 1970, is an 
investment company that provides venture capital to companies which, in 
general, are closely-held, non-mature small business concerns. Mr. 
Toomey is the president and chief executive officer of MetCap. MetCap 
pays a management and administrative services fee to JBT.
    D&P, incorporated in Virginia in 1949 under the name Industrial 
Display, Inc., is an exhibit and graphics design firm which fabricates 
and installs custom exhibits and audio-visual systems for museums, 
trade shows, theme parks, and other exhibitions under fixed-price 
contracts with various governments and private industries. D&P owns the 
building which includes the offices and shop of JBT in Lorton, 
Virginia. Julian F. Barnwell, a minority shareholder and member of the 
Board of JBT is the President of D&P.
    Starr, a Delaware corporation established in 1972, primarily 
engages in property management and secondarily in property development. 
Starr owns the collateral which will secure the outstanding balance of 
the installment payments with respect to the proposed transaction. Mr. 
Toomey is the president and chief executive officer of Starr. Starr 
pays a management and administrative services fee to JBT.
    4. The stock of JBT is closely held by Mr. Toomey, his immediate 
family, and his IRA. Mr. Toomey and his family own a 96.38 percent 
(96.38%) interest or 963.8 shares out of the 1000 issued and 
outstanding shares of JBT Stock. The IRA owns a 3.62 percent (3.62%) 
interest in JBT or 36.2 shares of the 1,000 issued and outstanding 
shares of JBT Stock. As Mr. Toomey and his family are the only 
shareholders of the Stock, other than the IRA, there is concern that 
potential conflicts of interest may arise between the actions Mr. 
Toomey takes on behalf of his IRA and the business decisions he makes 
with respect to JBT. Mr. Toomey is also concerned that the 
diversification and liquidity of the IRA portfolio is limited by the 
IRA's continued holding of the Stock. Accordingly, Mr. Toomey requests 
an exemption to permit JBT to purchase the Stock from the IRA. In this 
regard, JBT is a disqualified person with respect to the IRA, pursuant 
to section 4975(e)(2)(G) of the Code, because fifty percent (50%) of 
the Stock of JBT is owned by Mr. Toomey, a fiduciary and disqualified 
person with respect to the IRA.
    5. JBT has offered to purchase the 36.2 shares of the JBT Stock 
currently held by the IRA at the greater of $410,146 or the fair market 
value of the Stock on the date of the sale. However, in this regard, it 
is represented that JBT would suffer a large cash drain in paying all 
of the purchase price to the IRA in a single lump sum. For this reason, 
JBT proposes to purchase the Stock in an installment sale. It is 
represented that immediately upon execution of the transaction JBT will 
receive all of the Stock from the IRA in exchange for a cash 
downpayment of $210,146 of the purchase price made to the IRA. 
Thereafter, it is represented that JBT will pay off the remaining 
portion of the purchase price of the Stock in three (3) equal annual 
installment payments of $66,667. The first of the installment payments 
is due and payable December 31, 1995. Further, JBT proposes to pay

[[Page 37684]]
annually interest at the rate of 10 percent (10%) per annum on the 
outstanding balance of the installment payments, until all installment 
payments have been made on or before December 31, 1997. In this regard, 
C.S. Burke III (Mr. Burke), Senior Vice President of Burke & Herbert 
Bank and Trust Company of Alexandria, Virginia, after reviewing the 
terms of the transaction, stated, in a letter dated December 29, 1994, 
that the terms of the proposed transaction are commercially reasonable 
with regard to common banking practices of which he is familiar, carry 
a reasonable rate of interest, and have terms which conform to standard 
lending practices. It is further represented that Mr. Burke will 
determine that the interest rate paid by JBT on the outstanding balance 
of the installment payments will not be less than the fair market 
interest rate, as of the date the transaction is entered. With regard 
to the payment of interest by JBT, Loretta S. Sebastian, vice president 
and secretary of JBT, has represented in a letter dated December 28, 
1994, that she is the corporate official responsible for ensuring that 
all installment payments, plus interest payable to the IRA, shall be 
paid timely and completely by JBT when due.
    It is anticipated that the outstanding balance of the installment 
payments at no time will exceed 25 percent (25%) of the value of the 
assets of the IRA and will be secured by the value of the Stock and by 
a recorded first mortgage interest in the value of two (2) parcels of 
real property (the Properties). It is represented that upon 
satisfactory payment of the third and final installment payment to the 
IRA, the mortgages encumbering the Properties shall be cancelled and 
the 36.2 shares of JBT Stock then held by JBT shall be retired.
    6. The two Properties which JBT will pledge to secure the 
outstanding balance of the installment payments are described as three 
bedroom residential townhouse condominiums in the Mill Creek 
Condominium development. The Properties, located at 758 and 762 Belle 
Field Road on Solomons Island in Dowell, Maryland, are rented for $950 
and $995 a month, respectively. Both of the Properties were five (5) 
years of age in 1993, and are listed in good condition.
    7. On September 1, 1993, the Properties were appraised by Ruth 
Hendricks and John W. Hersman, SRA, of Maryland Appraisal Services, 
Inc., located in Prince Frederick, Maryland. The appraisers are 
independent in that they have no present or prospective interest in the 
Properties and no personal interest or bias with respect to the parties 
involved. The appraisers are qualified to value the Properties in that 
each is certified by the State of Maryland and are members of 
professional organizations.
    As of June 1, 1993, the property located at 758 Belle Field Road 
was appraised at $200,000. As of June 2, 1993, the property located at 
762 Belle Field Road was appraised at $195,000. It is represented that 
the aggregate appraised fair market value of the two Properties is 
$395,000 which will constitute approximately 198% of the total 
installment payments due to the IRA after the downpayment has been made 
by JBT.
    8. It is represented that selling the Stock to JBT is in the 
interest of the IRA and that the proposed transaction will increase the 
liquidity of the IRA and facilitate distributions required by law. In 
this regard, as Mr. Toomey is presently seventy (70) years of age, and 
it is represented that in the near future the IRA will need more cash 
than it currently holds in order to make distributions in a timely 
manner and in the correct amount to Mr. Toomey.
    Further, as the JBT Stock constitutes more than 50% of the value of 
the total assets of the IRA, the IRA's portfolio lacks diversification. 
In this regard, it is represented that the proposed transaction is in 
the interest of the IRA in that a non-liquid, non-performing asset will 
be replaced at not less than its fair market value by an asset that is 
both liquid and performing.
    9. It is represented that the transaction is feasible in that the 
IRA will incur no commissions, fees, or other expenses in connection 
with the transaction. In this regard, Mr. Toomey has represented that 
he will be personally responsible for any and all costs incurred as a 
result of the proposed transaction. Further, Mr. Toomey represents that 
the cost of the exemption application and of notifying interested 
persons will be borne by JBT.
    10. It is represented that the purchase price for the Stock 
proposed by JBT is protective of the IRA in that the IRA will receive 
the greater of $410,146 or the fair market value of the Stock on the 
date of the sale, as determined by a qualified independent appraiser. 
In this regard, for the purpose of determining the fair market value of 
the Stock, a valuation of JBT and its subsidiaries was prepared in a 
Business Valuation Report dated July 20, 1994, by Councilor, Buchanan & 
Mitchell, P.C., a certified public accounting firm with offices in 
Bethesda, Maryland (the CPA). According to the CPA, the value of JBT 
and its subsidiaries, as of December 31, 1993, was $15,107,258, and the 
value of the 1,000 shares of Stock issued and outstanding equaled 
$15,107 per share. However, in the opinion of the CPA, a 25 percent 
(25%) discount on the adjusted net assets of JBT should be imposed for 
lack of marketability. In this regard, the CPA considered the 
illiquidity of JBT's corporate assets and the related costs to market 
and consummate sales transactions for the unrelated business operations 
of the JBT subsidiaries, as negative influences on the value of JBT. 
Accordingly, the CPA determined that the discounted value per share of 
the Stock equalled $11,330. Based on this evaluation, it is represented 
that the aggregate fair market value of the 36.2 shares of the JBT 
Stock held by the IRA was $410,146, as of December 31, 1993. It is 
represented that neither the professionals who worked on this valuation 
nor the officers or directors of the CPA have any financial interest in 
JBT, nor was the fee contingent on the value reported for the Stock.
    It is further represented that the terms of the proposed 
transaction are no less favorable to the IRA than those negotiated at 
arm's length with unrelated third parties in similar circumstances. In 
this regard, Mr. Burke, an independent qualified third party has 
determined that the terms of the proposed transaction are commercially 
reasonable and conform to standard lending practices and that the 
interest rate is reasonable. It is further represented that Mr. Burke 
will determine that the interest rate paid by JBT on the outstanding 
balance of the installment payments will not be less than the fair 
market interest rate, as of the date the transaction is entered.
    Further, the interests of the IRA will be protected throughout the 
duration of the transaction. In this regard, it is represented that a 
new legal document will be drawn that appoints Advest Bank as trustee 
for the limited and express purpose of holding and enforcing the 
provisions of the proposed transaction. It is anticipated that the 
assets which are the subject this proposed exemption will be held 
separately from other IRA assets which are under the custody of Advest, 
Inc. To accomplish this, a separate custody account will be established 
at Advest Bank. It is represented that Advest Bank will be responsible 
for collecting from JBT the installment payments and the interest when 
due. It is represented that the cash so received by Advest Bank will be 
transferred on a trustee-to-trustee basis into the IRA at Advest Inc. 
In the event JBT defaults, it is represented that Advest Bank will 
foreclose on the Properties which serve

[[Page 37685]]
as collateral and secure the outstanding balance of the installment 
payments in order to protect the IRA.
    11. In summary, Mr. Toomey, the applicant, represents that the 
proposed transaction meets the statutory criteria of section 4975(c)(2) 
of the Code because:
    (a) the purchase price JBT pays for the Stock will be the greater 
of $410,146 or the fair market value of the Stock on the date of the 
sale;
    (b) the fair market value of the Stock will be determined by a 
qualified independent appraiser, as of the date of the sale;
    (c) the terms of the transaction will be no less favorable to the 
IRA than those negotiated at arm's length with unrelated third parties 
in similar circumstances;
    (d) Advest Bank, acting as trustee on behalf of the IRA, will 
monitor compliance with the terms of the transaction throughout the 
duration of the installment sale;
    (e) the IRA will receive a cash downpayment of no less than 
$210,146 on the date of the sale and thereafter will receive three (3) 
equal annual installment payments of $66,667, the first of which is due 
and payable December 31, 1995, plus interest at the fair market rate of 
interest, as determined by an independent, qualified third party, as of 
the date of the transaction, on the outstanding balance of the 
installment payments, payable annually until all the installment 
payments have been made by JBT on or before December 31, 1997;
    (f) the outstanding balance of the installment payments will at no 
time exceed 25 percent (25%) of the value of the assets of the IRA;
    (g) the outstanding balance on the installment payments will be 
secured by a recorded first mortgage interest in real property pledged 
by JBT in favor of the IRA;
    (h) the collateral which will secure the installment payments has a 
value, as determined by an independent, qualified appraiser, which at 
all times will be no less than 150 percent (150%) of the outstanding 
balance of the installment payments; and
    (i) the IRA will pay no commissions, fees, or other expenses in 
connection with the transaction.
    Notice to Interested Persons: Because Mr. Toomey is the only 
participant in the IRA, 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: Angelena C. Le Blanc of the 
Department (202) 219-8883. (This is not a toll-free number.)

John L. Rust Co. Profit Sharing Plan (the Plan) Located in 
Albuquerque, New Mexico [Application No. D-09943]

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), 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 (1) the past and proposed purchases by the Plan 
of certain leases of equipment (the Leases) from John L. Rust Co. 
(Rust), the Plan sponsor and a party in interest with respect to the 
Plan, and (2) the agreement by Rust to indemnify the Plan against any 
loss relating to the Leases and also to repurchase any Leases that are 
in default in accordance with paragraph (E) below, provided that the 
following conditions are met:
    A. Any sale of Leases to the Plan will be on terms at least as 
favorable to the Plan as an arm's length transaction with an unrelated 
third party would be.
    B. Subsequent to the date of publication of this proposed 
exemption, the acquisition of a Lease from Rust shall not cause the 
Plan to hold immediately following the acquisition (i) more than 25% of 
the current value (as that term is defined in section 3(26) of the Act) 
of Plan assets in customer notes and Leases sold by Rust or (ii) more 
than 10% of Plan assets in the aggregate of Leases with and customer 
notes of any one entity.
    C. Prior to the purchase of each Lease, an independent, qualified 
fiduciary must determine that the purchase is appropriate and suitable 
for the Plan and that any Lease purchase is a fair market value 
transaction.
    D. The independent fiduciary, on behalf of the Plan, will monitor 
the terms of the Leases and the exemption and take whatever action is 
necessary to enforce the rights of the Plan.
    E. Upon default by the lessee on any payment due under a Lease, 
Rust has agreed to repurchase the Lease from the Plan at the payout 
value 7 as of the date of the default, without discount, and to 
indemnify the Plan for any loss suffered. The occurrence of any of the 
following events shall be considered events of default for purposes of 
this section: The lessee's failure to pay any amounts due hereunder 
within five days after receipt of written notice from the Plan's 
independent fiduciary, or the lessee's failure to pay any amounts due 
hereunder within 30 days after payment becomes past due, if earlier; 
the lessee's failure to perform any other obligation under this 
agreement within ten days of receipt of written notice from the Plan's 
independent fiduciary; abandonment of the equipment by the lessee; the 
lessee's cessation of business; the commencement of any proceeding in 
bankruptcy, receivership or insolvency or assignment for the benefit of 
creditors by the lessee; false representation by the lessee as to its 
credit or financial standing; attachment or execution levied on 
lessee's property; or use of the equipment by third parties without 
lessor's prior written consent.

    \7\ ``Payout value'' of a Lease is defined as the price that the 
lessee would pay at any point in time to obtain title to the leased 
property.
---------------------------------------------------------------------------

    F. The Plan receives adequate security for the Lease. For purposes 
of this exemption, the term adequate security means that the Lease is 
secured by a perfected security interest in the leased property which 
will name the Plan as the secured party.
    G. Insurance against loss or damage to the leased property from 
fire or other hazards will be procured and maintained by the lessee and 
the proceeds from such insurance will be assigned to the Plan.
    H. The Plan shall maintain for the duration of any Lease which is 
sold to the Plan pursuant to this exemption, records necessary to 
determine whether the conditions of this exemption have been met. The 
Plan will continue to maintain the records for a period of six years 
following the expiration of the Lease or the disposition by the Plan of 
the Lease. The records referred to above must be unconditionally 
available at their customary location for examination, for purposes 
reasonably related to protecting rights under the Plan, during normal 
business hours by the Internal Revenue Service, the Department of 
Labor, Plan participants, any employer organization any of whose 
members are covered by the Plan, or any duly authorized employee or 
representative of the above described persons.

Temporary Nature of Exemption

    Effective Date: The proposed exemption, if granted, will be 
effective December 30, 1985. However, the proposed exemption is 
temporary and, if granted, will expire five years from

[[Page 37686]]
the date the exemption is granted with respect to the Plan's future 
purchases of Leases. The Plan may hold the Leases pursuant to the terms 
of the exemption subsequent to the end of the five year period.

Summary of Facts and Representations

    1. The Plan is a profit sharing plan which currently has 302 
participants and assets with an approximate aggregate fair market value 
of $14,587,290. Rust, which does business as Rust Tractor Co. in 
Albuquerque, New Mexico, is in the business of selling heavy 
construction equipment. The Plan's trustee is Sunwest Bank of 
Albuquerque, N.A. (the Bank).
    2. On April 3, 1985, the Department published Prohibited 
Transaction Class Exemption 85-68 (PTE 85-68, 50 FR 13293) which 
permits, under certain conditions, a plan to purchase and hold customer 
notes (Notes) from an employer of employees covered by the plan. The 
applicant represents that the Plan has acquired and held many Notes 
from Rust since 1985 in compliance with the terms and conditions of PTE 
85-68.8

    \8\ In this proposed exemption, the Department expresses no 
opinion with respect to the applicability of PTE 85-68 to the Plan's 
acquisition and holding of such Notes.
---------------------------------------------------------------------------

    3. In addition, the Plan has also acquired from Rust, since 
December 30, 1985, approximately 76 Leases. These Leases are secured 
leases which were accepted by Rust in the normal course of its primary 
business activity as the seller of heavy construction equipment. The 
Leases involve equipment which is leased to third parties. The 
applicant represents that the Plan acquired the Leases from Rust in the 
belief that such transactions were also covered by PTE 85-68. The 
applicant has now requested retroactive relief with respect to the 
Plan's past acquisition of such Leases, and has also requested an 
exemption to permit the Plan to purchase additional Leases from Rust 
over a five year period.
    4. The applicant represents that each of the transactions involving 
the Plan's acquisition of the Leases would have satisfied the 
conditions of PTE 85-68, but for the fact that these were Leases and 
not Notes. The applicant further represents that these conditions will 
continue to be satisfied with respect to future purchases by the Plan 
of Leases. The applicant specifies that the conditions of PTE 85-68 
have been satisfied in the following manner:
    (a) Prior to the purchase of any Lease, the transaction has been 
reviewed by Mr. Charles R. Seward, C.P.A., an independent certified 
public accountant who is the Plan's independent fiduciary with respect 
to this series of transactions. Mr. Seward performs no other services 
for either Rust or the Plan. On-going review of the performance of the 
customer-obligors is performed by the Bank, the Plan's independent 
trustee. In the event that a default in payment occurs, Rust is 
notified by the Bank and an immediate repurchase is effected for cash;
    (b) The transactions have been on terms at least as favorable to 
the Plan as an arm's-length transaction with an unrelated party would 
be. The Plan's independent fiduciary, Mr. Seward, has represented that 
each transaction that he has approved for the Plan involving a Note or 
Lease has been in the best interests of the Plan and its participants. 
Mr. Seward further represents that each such transaction was for a 
price and on terms and conditions no less favorable to the Plan, and in 
many respects more favorable, than such transactions have in the past 
been engaged in between Rust and third party financial institutions;
    (c) At no time has the value of the Notes/Leases held by the Plan 
approached 50% of the Plan's assets. As of December 31, 1992, the 
Notes/Leases represented 17.9% of the Plan's assets, and they 
represented 12.2% as of December 31, 1993. At no time have the Notes/
Leases of any one customer exceeded 10% of the Plan's assets. With 
respect to Notes and Leases acquired by the Plan subsequent to the 
publication of this proposed exemption, the applicant represents that 
the value of such Notes and Leases in the aggregate will constitute no 
more than 25% of the total value of Plan assets.
    (d) Rust has guaranteed immediate repayment of any defaulted 
obligation. The applicant represents that there have been defaults in 
only two of the 76 Leases, and Rust has repurchased both of those 
Leases;
    (e) The Plan receives a perfected security interest in the tangible 
personal property purchased from Rust in return for the Note/Lease;
    (f) The obligor is required to insure the collateral against fire 
and other hazards; and
    (g) None of the terms of the Notes/Leases extends beyond the 60 
month period applicable to Notes secured by heavy equipment.
    5. The applicant represents that the Leases create essentially the 
same risk and obligations on the parties as a sale transaction, and 
thus pose no greater risk of loss to the Plan than in the case of the 
acquisition of a Note which is subject to PTE 85-68. To date the Plan 
has suffered no loss on any subject Lease transaction. Before entering 
into either a Note or Lease, Rust performs the same type of due 
diligence and requests the same type of financial information from the 
prospective purchaser/lessee. The agreements governing the transactions 
are very similar in that:
    (a) Both transactions provide for monthly installments to pay for 
the use and possession of the equipment;
    (b) Financing statements are filed by Rust in connection with both 
transactions;
    (c) Upon default, Rust may accelerate the lessee/purchaser's 
obligations and immediately regain possession of the subject equipment;
    (d) In the event of default under either transaction, Rust is 
entitled to its enforcement costs, including reasonable attorneys' 
fees;
    (e) Both types of transactions contain warranty disclaimers and 
sell/lease the subject equipment ``AS IS WHERE IS'' with no express or 
implied warranties except the pass-through of the manufacturer's 
warranties;
    (f) When either a Note or a Lease is sold to the Plan, an identical 
form of guarantee is executed by Rust in favor of the Plan as required 
by PTE 85-68. In the few transactions sold to the Plan which have gone 
into default, Rust has performed under its guarantees and the Plan has 
suffered no loss;
    (g) Under New Mexico law, there is no practical difference in the 
rights and obligations of Rust between the subject Lease transactions 
and sales transactions involving Notes. The essential terms and 
conditions of the two types of transactions are identical.
    6. In summary, the applicant represents that the proposed sales of 
the Leases by the Employer to the Plan meet the requirements of section 
408(a) of the Act, because: (a) the sales will be limited to a five 
year period and will be limited to 25% of Plan assets with the 
condition that no more than 10% of Plan assets be invested in the 
Leases or Notes of any one customer; (b) the decision to purchase a 
Lease will be made by Mr. Seward acting as independent fiduciary for 
the Plan, and the customer/obligor's performance under the Lease will 
be monitored by the Bank acting as independent fiduciary on behalf of 
the Plan; (c) perfected security interests will be filed on the 
equipment; and (d) Rust will agree to indemnify the Plan against any 
loss related to the Leases and to repurchase any Leases that are in 
default.

    For Further Information Contact: Mr. Gary Lefkowitz of the 
Department, telephone (202) 219-8881. (This is not a toll-free number.)


[[Page 37687]]

Leavitt Group Profit Sharing and Retirement
Savings Plan (the Plan)
Located in Cedar City, Utah
[Application No. D-09979]

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 the Cedar 
Development Corporation (CDC), a party in interest with respect to the 
Plan, provided that (1) the Sale is a one-time transaction for cash; 
(2) the Plan does not suffer any loss nor incur any expense from the 
proposed transaction; and (3) the Plan receives as consideration from 
the Sale the greater of either $310,000 or the fair market value of the 
Property as determined by a qualified, independent appraiser on the 
date of the Sale.

Summary of Facts and Representations

    1. The Plan is a defined contribution plan within the meaning of 
section 3(34) of the Act and a qualified profit sharing plan under 
section 401(a) of the Code and includes a cash or deferred arrangement 
under section 401(k) of the Code. Its related trust is exempt from 
taxation under section 501(a) of the Code. Effective October 1, 1994, 
the Plan adopted an investment policy allowing all participants of the 
Plan to direct investments of their Plan accounts into funds selected 
by the administrator of the Plan.
    As of October 1, 1994, the Plan had 163 participants and total 
assets of $5,317,000, of which approximately 5.8 percent is invested in 
the Property.
    The Plan was established effective January 1, 1975, by Security 
Enterprises Limited (SEL) and has since been adopted by some 40 
entities affiliated with SEL, including CDC.
    The fiduciary of the Plan is Dane O. Leavitt, who is the sole 
shareholder of Dane O. Leavitt, Inc. that owns one-seventh of SEL. Mr. 
Leavitt also holds a one-seventh interest, as a shareholder, in CDC, 
and is the Secretary of CDC. Mr. Leavitt is also the President of Dixie 
Insurance Agency which is the corporate general partner of SEL.
    2. SEL is a Nevada limited partnership established December 27, 
1972. It is owned equally by 7 corporations of which each corporation 
is wholly-owned by either one shareholder or by two, who are husband 
and wife. The individual shareholders are all related family members. 
SEL is engaged primarily in owning and providing services for 
affiliated insurance agencies.
    CDC, a Nevada corporation that is wholly-owned by the same family 
members who control SEL, was established on February 14, 1966, and is 
engaged primarily in the ownership and development of real estate. CDC 
is also one of the sponsoring employers of the Plan.
    3. The Property consists of 517.2 acres of mountain property, with 
attendant water rights, that is located on an area of Southwest Utah, 
known as Kamarra Mountain, in Iron County. The primary use of the area 
is for agricultural rangeland and recreation. Over the years the Plan 
leased the Property to unrelated persons for grazing purposes and has 
not undertaken any development of the Property. The Property has not 
produced any significant income for the Plan. Currently it is 
generating approximately $1,800 per year in grazing fees from local 
cattlemen and wool growers. Annual property taxes paid by the Plan have 
averaged under $100.
    The Plan acquired the Property on January 16, 1981, by warranty 
deed executed by Barbara S. Williams.\9\ Barbara Williams was not a 
party in interest with respect to the Plan nor related in anyway to any 
of the sponsors of the Plan or their shareholders. Barbara Williams 
conveyed the Property to the Plan as repayment of a $194,889.39 loan on 
January 16, 1981, made by the Plan, which enabled Barbara Williams to 
redeem the Property from a foreclosure sale instituted by the State 
Bank of Southern Utah. The Plan used this loan of $194,889.39 as the 
initial value for the Property. Since 1981 the Plan expended an 
additional $69,200 for physical improvements to the Property, legal 
fees, and payment of liens to obtain clear title to the Property. Based 
on appraisals, the Property increased in value during the period from 
1981 to 1984, and then, during the period from 1984 to 1991 decreased 
in value. The announcement of anticipated MX Missile sites in the area 
that the Property is located caused a wave of land speculation 
throughout southern Utah. When there was a later announcement that the 
MX Missile system would not be built, land values plummeted in the area 
of the Property. The Plan has attempted to sell the Property by 
contacting realtors in the area and entered into several single party 
listing agreements. None of the agreements resulted in any offers to 
purchase the Property. In the spring of 1986 and again in 1987, the 
Plan advertised the Property for sale in newspapers of major cities in 
Utah, Nevada, Arizona, and California. Several bids were received by 
the Plan and one was accepted; however, the proposed purchaser 
defaulted and the sale was not consummated. The applicant represents 
that it is doubtful that the Plan could sell the Property for its 
current appraised value of $310,000 because of the property values in 
the areas of the Property. Two realtors from Cedar City, Utah in 
letters concur with applicant's conclusion as to the improbability of 
selling the Property at its current appraised value.

    \9\ The Department notes that the decisions to acquire and hold 
the Property are governed by the fiduciary responsibility provisions 
of Part 4 of Title I of the Act. In this regard the Department is 
not proposing relief for any violations of Part 4 which may have 
arisen as a result of the acquisition and holding of the Property.
---------------------------------------------------------------------------

    Mr. Bradford C. Schmutz, a Certified General Appraiser, State of 
Utah, located in Cedar City, Utah, determined the fair market value of 
the Property was $310,000, as of November 30, 1994. Mr. Schmutz 
represented that the Property has been personally inspected by him on 
various dates, although not on the date of the appraisal determination, 
because of snow conditions. He describes the Property as having 517.2 
acres, agricultural mountain grazing land with a small, old cabin and 
some ponds on the Property. The Property is located at an elevation 
from approximately 7,000 feet to 8,600 feet. The winter months with the 
snow pack make the area impassible except by snowmobile.
    4. CDC proposes to purchase the Property from the Plan for cash for 
the greater of either $310,000 or the fair market value as determined 
by appraisal at the time of the Sale. The applicant represents that the 
Plan will not incur any costs associated with the proposed Sale and 
will suffer no loss.
    The applicant represents that the proposed transaction will be in 
the best interests of the Plan and its participants and beneficiaries 
because the Plan will recover all the funds spent in acquiring and 
holding the Property to the date of the Sale. In addition, the 
applicant represents that the Plan will not continue to hold an 
illiquid investment which has proven difficult to sell, and the funds 
received from the Sale can be

[[Page 37688]]
put to better use in income producing assets at the direction of 
participants. This will assist the Plan in achieving its goal of having 
all Plan assets invested at the direction of Plan participants pursuant 
to the Plan's current investment policy. Furthermore, it is represented 
by the applicant that all costs in connection with the exemption 
application will be paid by the sponsor of the Plan.
    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 involves a one-time transaction for cash; (b) the 
Plan will not incur any expenses or losses from the Sale, (c) the Plan 
will receive as consideration from the Sale the greater of either 
$310,000 or the fair market value of the Property as determined by a 
qualified, independent appraiser on the date of the Sale; (d) the Sale 
will permit the Plan to obtain liquid funds that can be reinvested at 
the direction of the participants in higher yielding and more liquid 
assets; and (e) the Plan will not have to risk its assets in the 
development of the Property.
    For Further Information Contact: Mr. C.E. Beaver of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)
Rollover Individual Retirement Accounts for Joseph Shepard, Located 
in Jacksonville, Florida; William Haspel, Located in Bethesda, 
Maryland; and Richard Geisendaffer, Paul Petryszak, William Kroh and 
Rolf Graage, Located in Baltimore, Maryland (collectively, the IRAs)
[Application Nos. D-10054-10059]

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 
the proposed sale by the IRAs of all the common stock (the Stock) of 
Purchase Port Services, Inc. (PPS) held by the IRAs to PPS, provided 
that the following conditions are satisfied: (1) the sale of Stock by 
each IRA is a one-time transaction for cash; (2) no commissions or 
other expenses are paid by the IRAs in connection with the sale; and 
(3) the IRAs receive the greater of: (a) the fair market value of the 
Stock as determined by a qualified independent appraiser as of May 31, 
1995, or (b) the fair market value of the Stock as of the time of the 
sale.10

    \10\ Pursuant to 29 CFR 2510.3-2(d), the IRAs are not within the 
jurisdiction of Title I of the Act. However, there is jurisdiction 
under Title II of the Act pursuant to section 4975 of the Code.
---------------------------------------------------------------------------

    Effective Date: If the proposed exemption is granted, the exemption 
will be effective July 31, 1995.

Summary of Facts and Representations

    1. The IRA participants are officers, shareholders, directors and/
or key employees of PPS. PPS has authorized one class of Stock, of 
which 30,000 shares are issued and outstanding. Approximately 72.09% of 
the Stock is individually owned by the shareholders whose IRAs are the 
subject of this proposed exemption. The remaining 27.91% of the Stock 
is held by the IRAs.
    2. The Stock held by the IRAs was acquired in 1984 by two profit 
sharing plans, the GK Management, Inc. Profit Sharing Plan and the Port 
Management Services, Inc. Profit Sharing Plan (the Plans). The Stock 
ownership by the Plans resulted from self- directed investments made by 
the Plans' participants.
    3. The Plans were terminated in 1988 because they could not satisfy 
the requirements of section 401(a)(26) of the Code, which became 
effective on January 1, 1989. Upon the termination of the Plans, the 
Stock of each participant under the Plans was rolled over to self-
directed IRAs established for the benefit of each participant. These 
rollovers were made in accordance with the provisions of section 402 of 
the Code as then in effect.
    4. Business and income tax considerations have compelled PPS to 
consider making an election to be taxed as a ``Subchapter S'' 
Corporation under section 1362(a) of the Code. However, IRAs cannot be 
shareholders of an ``S'' corporation. Accordingly, the applicants have 
requested an exemption to permit the IRAs to sell all of their shares 
of the Stock (8,374 in the aggregate) to PPS at their fair market 
value.
    5. There is no established market for PPS Stock. PPS obtained an 
appraisal of the Stock dated May 31, 1995 from Barry Goodman, CFA, CPA, 
CBA, ASA, an independent business consultant and financial analyst in 
Washington, D.C. The applicants represent that Mr. Goodman is 
independent of the IRAs, their participants and PPS. Mr. Goodman has 
appraised the Stock as having a fair market value of $825.30 a share as 
of May 31, 1995.
    6. The applicants have requested the exemption proposed herein to 
permit PPS to purchase all of the Stock held in their IRAs. PPS will 
pay the greater of (i) the fair market value of the PPS Stock as of May 
31, 1995 as established by Mr. Goodman's appraisal, or (ii) the fair 
market value of the Stock as of the date of the sale. The IRAs will pay 
no fees, commissions or other expenses in connection with the 
transactions.
    7. The applicants represent that presently the assets of each of 
the IRAs consist almost entirely of appreciated PPS Stock. Therefore, 
the IRAs have virtually no diversity and no liquidity. The applicants 
further represent that, as a practical matter, the only potential 
purchasers of the Stock at full fair market value are the IRA 
participants and PPS, with the effect that the IRAs would have great 
difficulty disposing of the Stock in a transaction at full value that 
did not involve a sale to disqualified persons. The IRA participants 
have attained, or will shortly attain, age 59\1/2\; therefore, it will 
be appropriate for the IRAs to commence distribution to their 
participants in the near term. Thus, the applicants represent that the 
proposed exemption will be in the interest of the IRA participants and 
their beneficiaries because it would make the IRAs liquid, provide 
diversity, maximize the value of the PPS Stock held by the IRAs, and 
permit cash distributions to the IRA participants (and/or to their 
beneficiaries) when such distributions are appropriate and/or required 
by the Code.
    8. In summary, the applicants represent that the proposed 
transactions satisfy the criteria contained in section 4975(c)(2) of 
the Code because: (a) the proposed sales will be one-time transactions 
for cash; (b) no commissions or other expenses will be paid by the IRAs 
in connection with the sales; (c) the IRAs will be receiving not less 
than the fair market value of the Stock as determined by a qualified, 
independent expert; and (d) each of the IRA participants is the only 
participant in his IRA, and each has determined that the proposed 
transaction is appropriate for and in the best interest of his IRA and 
desires that the transaction be consummated with respect to his IRA.
    Notice to Interested Persons: Because each of the IRA participants 
is the only participant in his own IRA, 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 30 days 
after publication of this notice in the Federal Register.
    For Further Information Contact: Gary H. Lefkowitz of the 
Department,

[[Page 37689]]
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 accurately describe all 
material terms of the transaction which is the subject of the 
exemption. In the case of continuing exemption transactions, if any of 
the material facts or representations described in the application 
change after the exemption is granted, the exemption will cease to 
apply as of the date of such change. In the event of any such change, 
application for a new exemption may be made to the Department.

    Signed at Washington, DC, this 18th day of July 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 95-17961 Filed 7-20-95; 8:45 am]
BILLING CODE 4510-29-P