[Federal Register Volume 60, Number 213 (Friday, November 3, 1995)]
[Notices]
[Pages 55857-55863]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27295]



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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-10027, et al.]


Proposed Exemptions; Concord Hospital Capital Region

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 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, 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.

Retirement Plan for Employees of Concord Hospital Capital Region 
Healthcare Corp. (the Plan) Located in Concord, New Hampshire

[Application No. D-10027]

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), 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 July 7, July 13, July 18, August 19, 
and August 22, 1994, transfers (the Transfers) to the Plan of 
$7,376,039 of publicly-traded securities from non-ERISA accounts (the 
Accounts) of Concord Hospital, Inc. (the Employer) and its parent 
corporation, Capital Region Health Care Corporation (Capital; 
collectively, the Applicant); (2) the transfer of $3,761,319 of 
publicly-traded securities from the Plan to the Accounts in August of 
1994 (the August, 1994 Distributions); and (3) the proposed transfer of 
approximately $3.6 million from the Plan to the Accounts (the Proposed 
Corrective Distribution), provided the following conditions are 
satisfied: (a) the decision for the Plan to enter the subject 
transactions was made at the recommendation of the Plan's independent 
investment advisor; (b) the Plan has not paid and will not pay 
commissions or other fees in connection with the subject transactions; 
(c) the transactions involve publicly-traded securities, the fair 
market values of which were based upon published prices on established 
markets; and (d) the Plan's independent fiduciary has reviewed the 
transactions and has determined that the transactions were in the best 
interest of the Plan and protective of the rights of the participants 
and beneficiaries of the Plan.

Effective Date: If the proposed exemption is granted, the exemption 
will be effective July 7, 1994.

Summary of Facts and Representations

    1. The Plan is a defined benefit pension plan which has 
approximately 

[[Page 55858]]
1,400 participants and beneficiaries and assets with an approximate 
fair market value of $20 million. The Applicant is a community-service 
hospital which is exempt from federal income tax under section 
501(c)(3) of the Code. The Accounts from which the Transfers were made 
are commingled accounts consisting of assets belonging to the Employer 
and Capital. The Accounts of Capital are endowment accounts, and the 
Accounts of the Employer are funded depreciation reserves and operating 
reserves.
    2. Effective June 1, 1993, the Applicant hired an investment 
consulting firm, Prime Buchholz & Associates, Inc. (PB) to provide 
advice concerning the investment of the assets of the Plan and of the 
Accounts. The equity categories that were reviewed included large 
capitalization U.S. equities, medium capitalization U.S. equities, 
small capitalization U.S. equities, international equities, and fixed-
income U.S. and international securities.
    3. After a year of study, PB recommended that the Plan investments 
be diversified from the then principally large capitalization U.S. 
equities and intermediate term U.S. fixed- income securities to a 
broader spectrum of investments in large, medium and small 
capitalization U.S. equities, international equities and intermediate 
term U.S. fixed-income and global fixed-income securities. A 
corresponding decision was made to diversify the investments of the 
Accounts from principally medium capitalization U.S. equities and 
intermediate fixed-income securities to include holdings in large, 
medium and small capitalization U.S. equities and international 
equities, and intermediate term U.S. fixed-income and global fixed-
income securities.
    4. In order to eliminate significant transaction costs which would 
arise from sales of existing securities and the purchase of other 
securities for the Plan, the decision was made, at PB's recommendation, 
to enter into an equivalent like-kind exchange of assets between the 
Plan and the Accounts. The intent of PB and of the Applicant was to 
produce this exchange at an exactly equivalent value, determined by 
third party valuation sources. The practical impact was a substantial 
cost saving to the Plan in sales brokerage commissions, as well as the 
purchase of certain medium capitalization and small capitalization U.S. 
equities recommended for the Plan's portfolio.
    5. The first set of transactions consisted of the Transfers, an in-
kind transfer of $7,376,039 of publicly-traded securities from the 
Accounts into the Plan, completed on July 7, July 13, July 18, August 
19, and August 22, 1994. The second set of transactions was to be a 
reciprocal in-kind transfer of $7,376,039 of Plan assets into the 
Accounts, scheduled for completion in early August, 1994. A portion 
($3,761,319) of this second transaction was completed on August 18-19, 
and August 29-31, 1994 prior to the realization by the Applicant that a 
prohibited transaction may have taken place.1 The Applicant 
immediately suspended further transfers between the Plan and the 
Accounts, and commenced discussions with PB and its counsel as to 
whether a prohibited transaction may have occurred and whether any 
corrective action could be taken. The Applicant then engaged outside 
counsel to review the situation, to make recommendations concerning 
corrective action and, subsequently, to request a prohibited 
transaction exemption from the Department.

    \1\The Applicant represents that The Boston Company (Boston), 
one of the independent investment money managers hired to manage the 
assets of the Plan, had an internal transaction review process which 
identified the subject transactions as being prohibited transactions 
under the Act.
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    6. The Plan's independent asset managers, Keystone Institutional 
Company, Inc. (Keystone) and Boston represent that they were 
fiduciaries to the Plan at the time of the subject transactions, and 
that they were responsible for the selection of the securities.2 
Boston represents that because the transfer value was slightly more 
than one-half of the value of the account it managed for the Plan, it 
first selected for transfer one-half of the shares of each equity 
security held by the account. Then, Boston identified certain 
securities in the account which had been classified as near-term sell 
candidates through the firm's investment research process. Boston 
selected the balance of the securities to be transferred from those 
designated near-term sell candidates. With regard to its security 
selection for assets to be transferred to the Plan, Keystone represents 
that it agreed to transfer securities where possible to fund the 
pension accounts while avoiding unnecessary transaction costs. Keystone 
also represents that it undertook all security transfers to have the 
Plan's portfolio be in line with other similar portfolios that it 
managed.

    \2\Keystone represents that none of the assets that were 
transferred from the Plan to the Accounts were subject to its 
management.
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    7. With respect to the Transfers and the August, 1994 
Distributions, the Plan's independent custodian, U.S. Trust Company 
(UST) represents that all the securities transferred were publicly-
traded securities. Each security was valued as of the date of its 
Transfer to or Distribution from the Plan. UST represents that it 
relied on Interactive Data Corporation and Merrill Lynch Securities to 
provide independent valuations of the investment assets transferred. 
The values of the common stocks were established by Interactive Data 
Corporation, based upon closing prices, if available. If they were not 
available, then the bid quotation was used. The values of the bonds 
were established by Merrill Lynch, a market maker, based on closing 
prices. The money market assets were valued at the $1.00 per share 
stated value.
    8. Keystone and Boston represent that the transactions were not all 
accomplished on the same date for several reasons. First, the 
instructions from PB were sent to the two asset managers in two 
separate fax transmissions, separated by approximately a month. In 
addition, Boston states that the distributions out of the Plan were 
delayed because there were multiple accounts, there were questions 
about the mechanics of the transactions, and because UST had recently 
become the custodian of the Plan's accounts and it was necessary that 
UST's records be reconciled.
    9. The Applicant has retained an independent investment management 
firm, R.M. Davis & Company (Davis) of Portland, Maine, as an 
independent fiduciary to evaluate the initial transactions and to 
recommend the procedure to be followed in making the Proposed 
Corrective Distribution from the Plan to protect the interests of the 
Plan and of its participants and beneficiaries. The Applicant 
instructed Davis that the Proposed Corrective Distribution must be 
accomplished in such a manner that the Plan will not suffer any loss 
due to the transaction, and that an appropriate dollar amount will be 
retained by the Plan to reflect interest, dividends and capital 
appreciation, if necessary, to put the Plan in at least as good a 
position as it would have been in had none of the transfers taken 
place. In this regard, it should be noted that the Plan held assets 
with a value of approximately $7,361,664 for slightly less than one 
month (between the Transfers made in July, 1994 and the August, 1994 
Distributions), and that it will also have held $3,614,720 in assets 
from August 22, 1994 until the completion of the Proposed Corrective 
Distribution.3 

[[Page 55859]]
Keystone represents that the assets transferred into the Plan have 
appreciated in value to $10,997,547 as of September 13, 1995, an 
increase of $2,942,305 from August 22, 1994. That appreciation, plus 
any interest and dividends, will be retained by the Plan so that the 
maximum Proposed Corrective Distribution will be no greater than 
$3,614,720, which was the difference in value between the assets 
transferred into the Plan in July and August, 1994, and distributed out 
of the Plan in August, 1994. It is intended that the Proposed 
Corrective Distribution will consist of short-term fixed income 
securities managed by Boston. The Applicant represents that Boston will 
select the securities to be transferred out of the Plan, and these 
securities will be valued by UST as of the date of transfer, with the 
values being verified by Davis.

    \3\Boston represents that the Plan has earned $314,736.50 in 
interest on this money as of August 31, 1995.
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    10. Davis has reviewed the past and proposed transactions and has 
determined that PB's general recommendation was prudently arrived at 
and was in accordance with a policy of diversifying Plan assets. PB's 
specific recommendation to adjust portfolio balances through a direct 
exchange between the Plan and the Accounts was also prudently arrived 
at and was consistent with the best interest of Plan participants and 
beneficiaries. The methods employed for determining fair market values 
of the securities were consistent with industry practices, and the 
transactions have been carried out in a manner protective of the 
participants and beneficiaries of the Plan.
    11. In summary, the Applicant represents that the subject 
transactions satisfy the criteria contained in section 408(a) of the 
Act because: (a) The decision to enter into the transactions was made 
at the recommendation of PB, the Plan's independent investment advisor; 
(b) the Plan paid no commissions or other fees in connection with the 
transactions; (c) the transactions, which have all involved publicly-
traded securities, have been at fair market value as evidenced by 
published quotations; (d) Boston and Keystone, independent asset 
managers of the Plan, selected the securities that were involved in the 
transactions; (e) the Applicant, upon discovery of the prohibited 
nature of the transactions, suspended the transactions and promptly 
applied for an exemption; and (f) Davis, the Plan's independent 
fiduciary, has reviewed all aspects of the transactions and determined 
that they were in the best interest of the Plan and of its participants 
and beneficiaries, and protective of their rights.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

The Industrial Bank of Japan, Limited, New York Branch (IBJ) Located in 
New York, New York

[Application Nos. D-10065 and D-10066]

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 to (1) The proposed granting to IBJ, as the representative of 
lenders (the Lenders) participating in a credit facility (the 
Facility), of security interests in limited partnership interests in 
the Tiger Real Estate Fund, L.P. (the Partnership) owned by certain 
employee benefit plans (the Plans) with respect to which some of the 
Lenders are parties in interest; and (2) the proposed agreements by the 
Plans to honor capital calls made by IBJ in lieu of the Partnership's 
general partner; provided that (a) the proposed grants and agreements 
are on terms no less favorable to the Plans than those which the Plans 
could obtain in arm's length transactions with unrelated parties; and 
(b) the decisions on behalf of each Plan to invest in the Partnership 
and to execute such grants and agreements in favor of IBJ are made by a 
fiduciary which is not included among, and is independent of, the 
Lenders and IBJ.

Summary of Facts and Representations

    1. The Partnership is a Delaware limited partnership which is 
organized under an agreement (the Agreement) dated January 31, 1995 for 
a term expiring on February 1, 2005. The general partner of the 
Partnership is Tiger Real Estate Partners Management, L.L.C., (the 
General Partner), a Delaware limited liability company, the managing 
member of which is Tiger Real Estate Partners, L.L.C., also a Delaware 
limited liability company. The Partnership has been organized to make 
investments in a broad range of real estate related assets, portfolios, 
and companies. Proceeds from the sale or refinancing of properties 
generally will not be reinvested, but will be distributed to the 
limited partners, so that the Partnership will be self-liquidating.
    2. After execution of the Agreement, the General Partner sought 
capital commitments through private placement and has obtained, as a 
result, irrevocable, unconditional capital commitments of at least 
$500,000,000 from 48 purchasers of limited partnership units (the 
Limited Partners). The Agreement requires Limited Partners to make 
capital contributions upon receipt of notice from the General Partner. 
Under the Agreement, the General Partner may make a call for cash 
contributions, also known as a ``drawdown,'' up to the total amount of 
the Limited Partner's capital commitment upon 15 days' notice, subject 
to certain limitations. The Partners' capital commitments are 
structured as irrevocable, unconditional, and binding commitments to 
contribute equity when capital calls are made by the General Partner. 
The obligation of each Limited Partner to contribute the full amount of 
its capital commitment is secured by a grant to the Partnership of a 
security interest in the Limited Partner's partnership interest.
    3. In the ordinary course of its business operations, it is 
contemplated that the Partnership will incur indebtedness in connection 
with many of its investments. This on-going need for credit is to be 
provided by the Facility, a 45-month arrangement for $200 million in 
revolving credit. The Facility will enable the Partnership to 
consummate investments quickly without the delay of having to finalize 
the debt/equity structure for an investment or of having to arrange for 
interim or permanent financing prior to making an investment. IBJ is 
the administrative agent for a group of Lenders funding the Facility, 
as well as a participating Lender. The Facility is, for the 
Partnership, a non-recourse obligation which matures December 30, 1998. 
The repayment of this obligation is secured by the Partnership's 
assignment to the Facility of a security interest in each Limited 
Partner's partnership interest, capital commitment, and the General 
Partner's right to make drawdowns. As additional security, the Facility 
will require each Limited Partner to execute a separate agreement (the 
Security Agreement) granting to IBJ, for the benefit of the Lenders, a 
security interest and lien in the Limited Partner's partnership 
interest, and covenanting with IBJ for the benefit of the Lenders, that 
such Limited Partner will unconditionally honor any drawdown made by 
IBJ in lieu of the General Partner in accordance with the Agreement to 
the 

[[Page 55860]]
full extent of the Limited Partner's unfunded capital commitment.
    4. The trusts which hold assets of the Plans (the Trusts) are 
Limited Partners in the Partnership and therefore own limited 
partnership interests. Some of the Lenders are parties in interest with 
respect to some of the Plans in the Trusts by virtue of such Lenders' 
(or their affiliates') provision of fiduciary services to such Plans. 
These fiduciary services are provided with respect to Trust assets 
other than the Partnership interests.
    IBJ is requesting an exemption to permit the Trusts to enter into 
the Security Agreements under the terms and conditions described 
herein. The Trusts with the largest interests in the Partnership and 
the extent of their respective capital commitments to the Partnership 
are described as follows:
    (a) The AT&T Master Pension Trust (the AT&T Trust), Located in New 
York, New York; State Street Bank and Trust Company, Trustee. This 
Trust holds the assets of two defined benefit pension plans sponsored 
by AT&T--the AT&T Pension Plan and the AT&T Management Pension Plan. 
The AT&T Trust also holds the assets of some smaller plans sponsored by 
AT&T affiliates. As of December 31, 1995, the AT&T Trust had a total of 
442,240 participants and aggregate assets of $38.25 billion. The AT&T 
Trust has undertaken a total capital commitment of $100,000,000 to the 
Partnership. The fiduciary responsible for reviewing and authorizing 
the investment in the Partnership by the AT&T Trust is David Feldman, 
Corporate Vice President, of AT&T's Investment Management Organization.
    (b) The Honeywell Master Pension Trust (the Honeywell Trust), 
Located in Medford, Massachusetts; Boston Safe Deposit and Trust 
Company, Trustee. This Trust holds the assets of four defined benefit 
pension plans. These Plans are the Durham Pension Plan, the Honeywell 
Retirement Benefit Plan, the Honeywell Protection Services Pension 
Plan, and the Honeywell Pension Plan for Certain Hourly Employees. As 
of February 28, 1995, the Honeywell Trust had a total of 82,850 
participants and aggregate assets of $2.33 billion. The Honeywell Trust 
has undertaken a total capital commitment of $20,000,000 to the 
Partnership. The fiduciary responsible for reviewing and authorizing 
the investment in the Partnership by the Honeywell Trust is the 
Honeywell Pension and Retirement Committee.
    (c) The BP America Inc. Retirement Trust (the BP Trust), Located in 
Cleveland, Ohio; Bankers Trust Company, Trustee. This Trust holds the 
assets of two defined benefit pension plans sponsored by BP. These 
Plans are the BP America Master Hourly Plan for Represented Employees 
and the BP America Retirement Accumulation Plan. As of December 31, 
1993, these Plans had a total of 39,619 participants. The BP Trust also 
holds the assets of some smaller plans sponsored by BP affiliates. As 
of December 31, 1993, the BP Trust had aggregate assets of $1.4 
billion. The BP Trust has undertaken a total capital commitment of 
$10,000,000 to the Partnership. The fiduciary responsible for reviewing 
and authorizing the investment in the Partnership by the BP Trust is 
Howard H. Harpster, Director, of Pension Investments.
    (d) The IBM Retirement Plan (the IBM Plan), Located in New York, 
New York. This Plan is a defined benefit pension plan having 285,951 
participants and total assets of $26.7 billion as of February 28, 1995. 
Assets of the IBM Plan are held in the IBM Retirement Plan Trust (the 
IBM Trust), of which the Chase Manhattan Bank is the directed trustee. 
The IBM Trust has undertaken a total capital commitment of $50,000,000 
to the Partnership. The fiduciary responsible for reviewing and 
authorizing the investment in the Partnership by the IBM Trust is the 
IBM Investment Committee.
    (e) The United States Steel Corporation Plan for Employee Pension 
Benefits (the USS Plan), Located in New York, New York. This Plan is a 
defined benefit pension plan having 148,985 participants and total 
assets of $8.3 billion as of December 31, 1993. Assets of the USS Plan 
are held in the USS Special Investments Group Trust (the USS Trust), of 
which the United States Steel and Carnegie Pension Fund is trustee. The 
USS Trust has undertaken a total capital commitment of $20,000,000 to 
the Partnership. The fiduciary responsible for reviewing and 
authorizing the investment in the Partnership by the USS Trust is the 
United States Steel and Carnegie Pension Fund.
    (f) The Retirement Plan of Marathon Oil Company (the Marathon 
Plan), Located in New York. This is a defined benefit pension plan 
having 11,969 participants and total assets of $863,677,625 as of 
December 31, 1993. Assets of the Marathon Plan are held in the MRO USS 
Special Investments Group Trust (the MRO Trust), of which the United 
States Steel and Carnegie Pension Fund is trustee. The MRO Trust has 
undertaken a total capital commitment of $5,000,000 to the Partnership. 
The fiduciary responsible for reviewing and authorizing the investment 
in the Partnership by the MRO Trust is the United States Steel and 
Carnegie Pension Fund.
    (g) The Walt Disney Company Retirement Plan Master Trust (the 
Disney Trust), Located in Burbank, California; Bankers Trust Company, 
Trustee. This trust holds the assets of five defined benefit pension 
plans. These Plans are the Walt Disney Productions and Associated 
Companies' Retirement Plan, the Disneyland and Associated Companies' 
Retirement Plan, the Disney Associated Companies' Retirement Plan, the 
Walt Disney World Co. and Associated Companies' Retirement Plan, and 
the Disney Salaried Retirement Plan. As of February 28, 1995, the 
Disney Trust had a total of 40,000 participants and aggregate assets of 
$637,000,000. The Disney Trust has undertaken a total capital 
commitment of $10,000,000 to the Partnership. The fiduciary responsible 
for reviewing and authorizing the investment in the Partnership by the 
Disney Trust is the Investment and Administrative Committee of the Walt 
Disney Company Sponsored Qualified Benefit Plans and Key Employees 
Deferred Compensation and Retirement Plan.
    (h) The General Mills, Inc. Master Trust (the General Mills Trust), 
Located in Minneapolis, Minnesota; State Street Bank and Trust Company, 
Trustee. This Trust holds assets of eleven defined benefit and deferred 
compensation pension plans. The Plans in the General Mills Trust are 
the Retirement Income Plan, the Grain Millers Plan, the Multiple Group 
Plan, The Restaurant Hourly Plan, the Restaurant Salaried Plan, the 
Vroman's Bargaining Plan, the Yoplait Hourly Plan, the Yoplait #386 
Plan, the Voluntary Investment Plan, the Profit Sharing and Savings 
Plan, and the Retirement Savings Plan. As of December 31, 1994, the 
General Mills Trust had a total of 130,000 participants and aggregate 
assets of $1.42 billion. The General Mills Trust has undertaken a total 
capital commitment of $5,000,000 to the Partnership. The fiduciary 
responsible for reviewing and authorizing the investment in the 
Partnership by the General Mills Trust is the Benefit Finance Committee 
of General Mills, Inc.
    (i) The Central States, Southeast and Southwest Areas Pension Fund 
(the Fund), Located in Rosemont, Illinois. This Plan is a defined 
benefit plan having 483,794 participants and total assets of $12.16 
billion as of December 31, 1994. The Fund has undertaken a total 
capital commitment of $75,000,000. The fiduciary responsible for 
reviewing and authorizing the 

[[Page 55861]]
investment in the Partnership by the Fund is LaSalle Advisors.
    (j) In addition, it is possible that one or more other Plans may 
become Limited Partners at some future time. Therefore, this proposed 
exemption is intended to cover any such Plan so long as the Plan meets 
the terms and conditions described herein.
    (k) Limited Partners which are not Plans include:
    (1) Allstate Insurance Company, which has undertaken a total 
capital commitment of $25,000,000.
    (2) Allstate Life Insurance Company, which has undertaken a total 
capital commitment of $10,000,000.
    (3) Columbia University, which has undertaken a total capital 
commitment of $10,000,000.
    (4) Cornell University, which has undertaken a total capital 
commitment of $10,000,000.
    (5) The Ministers and Missionaries Benefit Board of the American 
Baptist Churches, which has undertaken a total capital commitment of 
$20,000,000.
    (6) The New York State Common Retirement Fund, which has undertaken 
a total capital commitment of $75,000,000.
    (7) The Commonwealth of Pennsylvania Public School Employes' 
Retirement System, which has undertaken a total capital commitment of 
$50,000,000.
    (8) Puma, which has undertaken a total capital commitment of 
$13,500,000.
    (9) NC/TREIT, which has undertaken a total capital commitment of 
$20,000,000.
    (10) Endowment Realty Investors II, Inc., which has undertaken a 
total capital commitment of $25,000,000.
    (11) The Oregon Public Employees' Retirement Fund, which has 
undertaken a total capital commitment of $75,000,000.
    (12) Tiger, which has undertaken a total capital commitment of 
$38,250,000.
    5. IBJ represents that the Partnership has obtained an opinion of 
counsel that the Partnership will constitute an ``operating company'' 
under the Department's plan asset regulations [29 CFR 2510.3-101(c)] if 
the Partnership is operated in accordance with the Agreement and the 
offering memorandum (the Offering) distributed in connection with the 
private placement of the limited partnership interests.4

    \4\The Department expresses no opinion herein as to whether the 
Partnership will constitute an operating company under the 
regulations at 29 CFR 2510.3-101.
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    6. IBJ represents that the Security Agreement constitutes a form of 
credit security which is customary among financing arrangements for 
real estate limited partnerships, wherein the financing institutions do 
not obtain security interests in the real property assets of the 
partnership. IBJ also represents that the obligatory execution of the 
Security Agreement by the Limited Partners for the benefit of the 
Lenders was fully disclosed in the Offering as a requisite condition of 
investment in the Partnership during the private placement of the 
limited partnership interests. IBJ represents that the only direct 
relationship between any of the Limited Partners and any of the Lenders 
will be in the execution of the Security Agreements. All other aspects 
of the transaction, including the negotiation of all terms of the 
Facility, are exclusively between the Lenders and the Partnership. IBJ 
represents that the proposed executions of the Security Agreements will 
not affect the abilities of the Trusts to withdraw from investment and 
participation in the Partnership. The only Plan assets to be affected 
by the proposed transaction are each Plan's limited partnership 
interests in the Partnership and the related Plan obligations as 
Limited Partners to respond to drawdowns up to the total amount of each 
Plan's capital commitment to the Partnership.
    7. IBJ represents that neither it nor any Lender will act in any 
fiduciary capacity with respect to any Trust's investment in the 
Partnership and that IBJ is independent of and unrelated to those 
fiduciaries (the Trust Fiduciaries) responsible for authorizing and 
overseeing the Trusts' investments in the Partnership. Each Trust 
Fiduciary represents independently that its authorization of Trust 
investment in the Partnership was free of any influence, authority or 
control by the Lenders. The Trust Fiduciaries represent that the 
Trust's investments in and capital commitments to the Partnership were 
made with the knowledge that each Limited Partner would be required 
subsequently to grant a security interest in the Partnership to the 
Lenders and to honor drawdowns made on behalf of the Lenders without 
recourse to any defenses against the General Partner. Each Trust 
Fiduciary individually represents that it is independent of and 
unrelated to IBJ and the Lenders and that the investment by the Trust 
for which that Trust Fiduciary is responsible continues to constitute a 
favorable investment for the Plans participating in that Trust and that 
the execution of the Security Agreement is in the best interests and 
protective of the participants and beneficiaries of such Plans.
    8. In summary, the applicants represent that the proposed 
transactions satisfy the criteria of section 408(a) of the Act for the 
following reasons: (a) The Plans' investments in the Partnership were 
authorized and are overseen by the Trust Fiduciaries, which are 
independent of the Lenders; (b) none of the Lenders have any influence, 
authority or control with respect to the Plans' investments in the 
Partnership or the Plans' executions of the Security Agreements; and 
(c) the Trust Fiduciaries invested in the Partnership on behalf of the 
Plans with the knowledge that the Security Agreements are required of 
all Limited Partners investing in the Partnership.

FOR FURTHER INFORMATION CONTACT: Karin Weng of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

Larson Distributing Co. Profit Sharing Plan (the Plan) Located in 
Denver, Colorado

[Application No. D-10083]

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 F.R. 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 proposed extension 
of credit to the Plan (the Loan) by Larson Distributing Co., Inc. (the 
Employer), the sponsor of the Plan, with respect to the Plan's 
investments in annuity accounts maintained with USG Annuity and Life 
Co. and All American Life Insurance Company (the Annuities), and (2) 
the Plan's potential repayment of the Loan (the Repayments); provided 
the following conditions are satisfied:
    (A) The Plan does not pay any interest or incur any expenses with 
respect to the Loan;
    (B) The Repayments are restricted solely to the amounts recovered 
by the Employer on behalf of the Plan (the Recovery Amounts) in 
litigation concerning the Annuities; and
    (C) To the extent the Loan exceeds the total Recovery Amounts, the 
Repayments shall be waived. 

[[Page 55862]]


Summary of Facts and Representations

    1. The Plan is a defined contribution plan with 47 participants and 
total assets of $446,784 as of October 31, 1994. The Employer is a 
Colorado closely-held corporation engaged in the wholesale distribution 
of floor coverings and building materials, with its principal place of 
business in Denver, Colorado. The trustees of the Plan are John L. 
Larson, Sr. and Allen W. Kliewer (the Trustees), each of whom is an 
officer and director of the Employer.
    2. The Plan provides for individual participant accounts and 
participant-directed investment of the accounts among investment 
options (the Funds) selected by the Trustees. Commencing October 1987, 
the Trustees engaged the services of Moore Resources Group, Inc. (MRGI) 
as a third party administrator of the Plan. MRGI's duties included 
responsibility for receiving all Plan contributions for distribution 
and deposit among the Funds in accordance with participant directions. 
Among the Funds under MRGI's responsibility was the Money Market 
Annuity Fund, the assets of which included annuity accounts with USG 
Annuity and Life Co. (USG) and All American Life Insurance Company (All 
American; together, the Insurers).
    3. The Employer represents that from October 1991 through December 
1993, MRGI fraudulently deposited into its own account at Norwest Bank 
in Denver, Colorado, a total of $150,595.24 generated by forging checks 
and fraudulently surrendering annuities with respect to the Plan's 
accounts with the Insurers. The Employer details the allegations of 
fraud and forgery as follows: Twenty one checks, totalling $78,472.71, 
in Plan contributions payable to USG were deposited into MRGI's account 
at Norwest Bank and were never paid to USG. Nineteen checks totalling 
$51,203.52 issued by USG as surrendered annuities, pursuant to forged 
surrender applications submitted by MRGI, were endorsed by forgery and 
deposited by MRGI into its account at Norwest Bank. Twelve checks 
totalling $20,919.01 issued by All American as surrendered annuities, 
pursuant to forged surrender applications submitted by MRGI, were 
endorsed by forgery and deposited by MRGI into its account at Norwest 
Bank. Previously, on May 14, 1991, according to the Employer, MRGI's 
chief executive officer had forged the signature of one of the Trustees 
on a letter to USG requesting that all correspondence regarding the 
Plan be forwarded to MRGI. Furthermore, the Employer states that the 
Form 5500's for the Plan which were prepared by MRGI and sent to the 
Employer for review and signature contained false entries with respect 
to the amount of contributions to the Insurers and the balances of the 
participant accounts invested with the Insurers. In addition, the 
Employer represents that the year-end statements sent to Plan 
participants by MRGI reflected not the actual balances of the 
individual accounts but an approximation of the amounts which would 
have been in the participant accounts without the forgeries.
    4. The Employer is initiating litigation on behalf of the Plan 
against MRGI, USG, All American, and Norwest Bank to recover the 
amounts fraudulently diverted from the Plan as described above (the 
Litigation). The Employer is paying all court costs and attorneys fees 
in initiating and pursuing the Litigation. Meanwhile, the Employer 
wishes to restore to the Plan the amounts of the forged checks and 
fraudulently surrendered annuities, plus interest, in the form of a 
loan to the Plan (the Loan). The Employer represents that by making a 
special contribution to the Plan in the form of the Loan the Plan will 
be able to recover immediately the amounts sought in the Litigation, 
and to prevent further lost earnings on the amounts which have been 
diverted by MRGI. Accordingly, the Employer is requesting an exemption 
for the Loan, including its potential repayment by the Plan (the 
Repayments), as described herein.
    5. The Employer proposes to execute a written agreement (the 
Agreement) under which the Employer undertakes the obligation to make a 
special cash contribution to the Plan (the Special Contribution), which 
will constitute the Loan principal. The Agreement provides that the 
Special Contribution is to be made to the Plan only after the grant of 
the exemption proposed herein, if granted. The amount of the Special 
Contribution is defined in the Agreement as the amount of the forged 
checks for contributions and fraudulently surrendered annuity contracts 
plus an amount to reflect earnings that would have accumulated under 
the contracts with the Insurers absent the fraud, as determined on the 
basis of rate information provided by the Insurers. The Agreement 
requires that the Special Contribution be allocated to the Plan 
participants in the proportion that their accounts were affected by the 
fraud and forgery.
    With respect to repayment of the Loan (the Repayment), the 
Agreement provides that the Special Contribution is to be repaid to the 
Employer only if the Litigation is successful in recovering monetary 
amounts on behalf of the Plan either through a final judgment or 
settlement of the Litigation. If the Litigation does not result in any 
monetary recovery, the Plan shall not reimburse the Employer for any of 
the Special Contribution. Upon the entry of a final judgment or upon 
settlement of the Litigation, the Plan shall repay the Special 
Contribution to the Company in the amount of the lesser of (a) the 
amount of the Special Contribution plus Litigation costs and attorneys' 
fees, or (b) the amount actually recovered in the Litigation. If the 
amount of such recovery is greater than the amount of the Special 
Contribution plus costs of the Litigation and attorneys fees, the 
excess recovery shall enure to the benefit of the Plan. If the amount 
of such recovery is less than the amount of the Special Contribution 
plus costs of the Litigation and attorneys fees, repayment of the 
difference will be waived and the Employer will have no further right 
of reimbursement with respect to the Special Contribution.
    6. In summary, the applicant represents that the proposed 
transaction satisfies the criteria of section 408(a) of the Act for the 
following reasons: (a) The Loan will enable the Plan to recover 
immediately the amounts allegedly diverted, including interest on such 
amounts as determined by the Insurers, and to prevent further loss of 
earnings on such amounts; (b) The Plan will not pay any interest or 
incur any expenses with respect to the Loan; (c) Repayment of the Loan 
will be restricted to the proceeds, if any, recovered in the 
Litigation; and (d) To the extent the Loan exceeds the amount recovered 
in the Litigation, the Repayments will be waived.

FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

Retirement Savings Plan and Trust for Employees of the J.H. Heafner 
Company, Inc. (the Plan), Located in Lincolnton, North Carolina

[Application No. D-10125]

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, 

[[Page 55863]]
shall not apply to the proposed sale by to the Plan of certain limited 
partnership units (the Units) in two limited partnerships to the J.H. 
Heafner Company, Inc. (Heafner), provided the following conditions are 
satisfied: a) the sale is a one-time transaction for cash; b) the Plan 
pays no commissions or other expenses in connection with the 
transaction; and c) the Plan receives no less than the greater of: (1) 
its cost for the Units; or (2) the fair market value of the Units on 
the date of the sale.

Summary of Facts and Representations

    1. The Plan is a defined contribution profit sharing plan 
established by Heafner under the provisions of section 401(k) of the 
Code. The Plan currently has 392 participants, and had assets of 
$5,728,370 as of June 30, 1995. Heafner is a North Carolina corporation 
which has 30 distribution centers throughout the Southeast involved in 
the wholesale distribution of tires and automotive equipment and 
wheels.
    2. Among the assets in the Plan are the Units, which are interests 
in two limited partnerships, which are unrelated to Heafner. Heafner 
has no interests in either of the partnerships. One partnership is 
Realty Parking Properties L.P. (RPP), and the second is Atlantic Income 
Properties (Atlantic). The Plan purchased 1,600 Units in RPP on June 2, 
1989 for a purchase price of $40,000. The Plan purchased 5,000 Units in 
Atlantic on April 5, 1989 for a purchase price of $100,000. The Plan's 
investment broker, Interstate Johnson Lane, purchased the Units in both 
partnerships on behalf of the Plan on the open market. There are a 
total of 1,909,087 units of RPP as of June 30, 1995, so the Plan's 
Units represent approximately .08% of the total units. There are a 
total of 508,844 units of Atlantic outstanding, so the Plan's Units 
represent approximately .98% of the total units. The applicant 
represents that the Units are non-liquid in nature with no ready market 
for their sale.
    3. The Plan now proposes to sell the Units to Heafner. The 
applicant represents that the Units are the only non-liquid assets 
contained in the Plan, except for those invested in the NCNB Real 
Estate Fund, which the North Carolina National Bank is moving to 
liquidate itself. Currently, the Plan's trustees have frozen these 
fixed asset accounts to preserve the principal base for all 
participants who have money invested in these assets. Due to the non-
liquid nature of the assets, there are no allowable distributions 
currently until the liquidity improves. The applicant represents that 
the presence of these assets has made Plan administration difficult and 
that the current freeze is unfair to participants. The applicant 
represents that before considering a sale to Heafner, the Plan's 
trustees investigated the possibility of selling the Units on the open 
market and found that there was no market.
    4. The sale price will be the higher of the Plan's cost for the 
Units or their fair market value as of the date of the sale. Any costs 
that will be incurred in the proposed transaction will be borne by 
Heafner. Ms. Denise Liekfet of RPP has represented that as of December 
31, 1994, the Units of RPP had an appraised fair market value of $22.50 
per Unit, or a total value of $36,000. Since the Plan's cost for these 
Units was $40,000, Heafner proposes to pay $40,000 to the Plan. Ms. 
Tammy L. Stempler of ISC Realty Corporation, General Partner of 
Atlantic has represented that as of March 30, 1995 the Units in 
Atlantic had an appraised fair market value of $13 per Unit, or a total 
value of $65,000. Since the Plan's cost for these units was $100,000, 
Heafner proposes to pay $100,000 to the Plan.5

    \5\Heafner represents that should the Plan receive greater than 
the fair market value of the Units, the excess, if treated as a 
contribution to the Plan, would not cause the Plan to violate 
sections 401(a)(4), 404 or 415 of the Code.
---------------------------------------------------------------------------

    5. In summary, the applicant represents that the proposed 
transaction satisfies the criteria of section 408(a) of the Act 
because: a) the sale is a one-time transaction for cash; b) the Plan 
will pay no commissions or other expenses in connection with the 
transaction; and c) the sale price will be the higher of the Plan's 
cost of the Units or the current fair market value of the Units as 
determined by independent appraisal.

Tax Consequences of the Transaction

    The Department of the Treasury has determined that if a transaction 
between a qualified employee benefit plan and its sponsoring employer 
(or affiliate thereof) results in the plan either paying less than or 
receiving more than fair market value, such excess may be considered to 
be a contribution by the sponsoring employer to the plan, and therefore 
must be examined under the applicable provisions of the Internal 
Revenue Code, including sections 401(a)(4), 404 and 415.

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 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 31st day of October, 1995.

U.S. Department of Labor.
Ivan Strasfeld,
Director of Exemption Determinations Pension and Welfare Benefits 
Administration.
[FR Doc. 95-27295 Filed 11-2-95; 8:45 am]
BILLING CODE 4510-29-P