Proposed Exemptions; GE Capital Investment Advisors, Inc.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-10318, et al.]

Proposed Exemptions; GE Capital Investment Advisors, Inc.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the

Department of Labor (the Department) of proposed exemptions from

certain of the prohibited transaction restriction of the Employee

Retirement Income Security Act of 1974 (the Act) and/or the Internal

Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

All interested persons are invited to submit written comments or

request for a hearing on the pending exemptions, unless otherwise

stated in the Notice of Proposed Exemption, within 45 days from the

date of publication of this Federal Register Notice. Comments and

request for a hearing should state: (1) The name, address, and

telephone number of the person making the comment or request, and (2)

the nature of the person's interest in the exemption and the manner in

which the person would be adversely affected by the exemption. A

request for a hearing must also state the issues to be addressed and

include a general description of the evidence to be presented at the

hearing. A request for a hearing must also state the issues to be

addressed and include a general description of the evidence to be

presented at the hearing.

ADDRESSES: All written comments and request for a hearing (at least

three copies) should be sent to the Pension and Welfare Benefits

Administration, Office of Exemption Determinations, Room N-5649, U.S.

Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C.

20210. Attention: Application No. stated in each Notice of Proposed

Exemption. The applications for exemption and the comments received

will be available for public inspection in the Public Documents Room of

Pension and Welfare Benefits Administration, U.S. Department of Labor,

Room N-5507, 200 Constitution Avenue, N.W., Washington, D.C. 20210.

Notice to Interested Persons

Notice of the proposed exemptions will be provided to all

interested persons in the manner agreed upon by the applicant and the

Department within 15 days of the date of publication in the Federal

Register. Such notice shall include a copy of the notice of proposed

exemption as published in the Federal Register and shall inform

interested persons of their right to comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in

applications filed pursuant to section 408(a) of the Act and/or section

4975(c)(2) of the Code, and in accordance with procedures set forth in

29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990).

Effective December 31, 1978, section 102 of Reorganization Plan No. 4

of 1978 (43 FR 47713, October 17, 1978) transferred the authority of

the Secretary of the Treasury to issue exemptions of the type requested

to the Secretary of Labor. Therefore, these notices of proposed

exemption are issued solely by the Department.

The applications contain representations with regard to the

proposed exemptions which are summarized below. Interested persons are

referred to the applications on file with the Department for a complete

statement of the facts and representations.

GE Capital Investment Advisors, Inc., Located in New York, New York

[Application No. D-10318]

Proposed Exemption

The Department is considering granting an exemption under the

authority of section 408(a) of the Act and section 4975(c)(2) of the

Code and in accordance with the procedures set forth in 29 C.F.R. Part

2570, Subpart B (55 F.R. 32836, 32847, August 10, 1990). If the

exemption is granted, GE Capital Investment Advisors, Inc. (GECIA) and

GECIA Holdings, Inc. (Holdings) shall not be precluded from functioning

as a ``qualified professional asset manager'' pursuant to Prohibited

Transaction Class Exemption 84-14 (PTE 84-14, 49 FR 9494, March 13,

1984) solely because of a failure to satisfy section I(g) of PTE 84-14,

as a result of General Electric Company's ownership interest in them,

including any of their subsidiaries or successors which provides

investment advisory, management or related services and is registered

under the Securities and Exchange Act of 1934, as amended, or the

Investment Advisors Act of 1940, as amended; provided the following

conditions are satisfied:

(A) This exemption is not applicable to any affiliation by GECIA

or Holdings with any person or entity convicted of any of the

felonies described in part I(g) of PTE 84-14, other than General

Electric Company; and

(B) This exemption is not applicable with respect to any

convictions of General Electric Company for felonies described in

part I(g) of PTE 84-14 other than those involved in the G.E.

Felonies, described below.

Effective Date: This exemption, if granted, will be effective as of

January 29, 1996.

Summary of Facts and Representations

Introduction: General Electric Company (G.E.), an indirect 100

percent owner of GECIA Holdings, Inc. (Holdings), has been convicted

during the past ten years of certain felonies relating to G.E.'s

government contracts operations. In 1995-1996, Holdings created a

subsidiary, GE Capital Investment Advisors, Inc. (GECIA), solely to

purchase an unrelated investment advisory and management business.

G.E.'s felony convictions could bar GECIA from acting as a ``qualified

professional asset manager'' (QPAM) under Prohibited Transaction Class

Exemption 84-14 (PTE 84-14, 49 FR 9494, March 13, 1984). Part I(g) of

PTE 84-14 requires that no person owning, directly or indirectly, 5

percent or more of the QPAM has been

[[Page 59913]]

convicted of certain felonies within ten years preceding the

transaction for which the QPAM intends to utilize PTE 84-14. GECIA and

Holdings are requesting an exemption to enable GECIA to qualify as a

QPAM without regard to any failure to satisfy part I(g) of PTE 84-14 by

reason of G.E.'s ownership of GECIA, under the terms and conditions

described herein.

1. GECIA is a real estate investment advisory and management

business located in San Francisco, California. GECIA is a wholly-owned

subsidiary of Holdings, a wholly-owned subsidiary of GE Capital

Services, Inc. (GECS), which is entirely owned by G.E. GECIA and

Holdings (the Applicants) were organized and established by GECS solely

to acquire and continue the real estate investment advisory and

management business of MacFarlane Partners (MacFarlane), which was

unrelated to G.E. and its affiliates. MacFarlane obtained consent from

each of its existing clients to the transfer of MacFarlane client

accounts to GECIA, and GECIA commenced operations on January 29, 1996

immediately following completion of the acquisition of MacFarlane. As

part of the acquisition, GECIA has hired all of the investment

professionals and other employees of MacFarlane, including Victor

MacFarlane as the chief executive officer of GECIA.

The Applicants represent that the clientele served by GECIA's

operations include large employee benefit plans subject to the Act.

They maintain that, given the size and number of the plans which GECIA

represents, the large number of financial service providers engaged by

such plans, the breadth of the definition of ``party in interest''

under the Act, and the array of services offered by GECIA, it would not

be uncommon for GECIA to propose a transaction involving a party in

interest with respect to a plan for which GECIA is acting in a

fiduciary capacity. The Applicants represent that the proposing of such

transactions is occasionally necessary to offer plan clients adequate

investment diversification opportunities, and that such opportunities

will be missed if GECIA is not permitted to function as a QPAM pursuant

to PTE 84-14.

2. The Applicants represent that prior to January 29, 1996, G.E.

did not have any ownership interests in any of the operations of

MacFarlane, which are now the operations of GECIA. They represent that

Holdings and GECIA were established solely to acquire, operate and

expand the business of MacFarlane, and that GECIA and Holdings do not

engage in any of the business to which the G.E. Felonies, described

below, pertain. The Applicants further represents that GECIA and

Holdings are intended and structured to be operated and maintained

separately and independently from the G.E. business operations to which

the G.E. Felonies pertain, which did not involve any investment

advisory, management or related services.

3. On three occasions from 1986 through 1992, G.E. pled guilty or

was convicted of felonies relating to the government contract

activities of G.E. and its subsidiaries (the G.E. Felonies). The

Applicants represent that the G.E. Felonies did not in any way relate

to any employee benefit plan or any person's authority with respect to

an employee benefit plan. The Applicants describe the G.E. Felonies

more specifically as follows:

(a) On May 13, 1986, G.E. pled guilty to four counts of filing

false claims with the United States Air Force and 104 counts of filing

false statements with the United States Air Force in connection with

work performed in 1980 by G.E.'s Re-Entry Systems Operation. The

Applicants represent that these counts primarily related to individual

time cards that were improperly charged to certain government

contracts.

(b) On February 2, 1990, G.E. was convicted of mail fraud and

violations of the False Claims Act relating to the conduct in 1983 of

two contract employees of a G.E. subsidiary, Management and Technical

Services Co., involving failure to notify the United States Army that

subcontractors had agreed to prices lower than those contained in

projections for the project. The Applicants represent that neither G.E.

nor any officer or employee of G.E. was accused of having knowledge of

the discrepancy and withholding it from the United States Army.

(c) On July 22, 1992 G.E. pled guilty to violations of 18 U.S.C.

287 (submitting false claims against the United States), 18 U.S.C. 1957

(engaging in monetary transactions in criminally derived property), 15

U.S.C. 78m(b)(2)(A) and 78ff(a) (inaccurate books and records), and 18

U.S.C. 371 (conspiracy to defraud and commit offenses against the

United States). The Applicants represent that these violations related

to a series of events between 1984 and 1990, involving false statements

made by employees of G.E. Aircraft Engines Division to a foreign

government that led such foreign government to submit false claims to

the United States relating to the purchase of weapons.

4. The Applicants represent that the G.E. Felonies did not relate

in any way to the conduct or business of MacFarlane, or any investment

advisor or fiduciary of an employee benefit plan. The Applicants

maintain, however, that although none of the unlawful conduct involve

MacFarlane's or GECIA's investment management activities or any plans

covered by the Act, the criminal activities described above could

preclude GECIA, as an affiliate of G.E., from serving as a ``qualified

professional asset manager'' (QPAM), due to the provisions of sections

I(g) and V(d) of PTE 84-14. Section I(g) of PTE 84-14 precludes a

person who otherwise qualifies as a QPAM from serving as a QPAM if such

person or an affiliate thereof has within the 10 years immediately

preceding the transaction been either convicted or released from

imprisonment as a result of certain criminal activity, including any

crime described in section 411 of the Act. Because the G.E. Felonies

involved crimes described in section 411 of the Act and monies

transferred to or claimed by G.E., the Applicants represent that GECIA

may be barred from qualifying as a QPAM.

5. Accordingly, the Applicants request an exemption to enable GECIA

to function as a QPAM despite the failure to satisfy section I(g) of

PTE 84-14 solely because of the G.E. Felonies and GECIA's affiliation

with G.E. The Applicants request that the exemption apply not only to

GECIA but to Holdings as well, in order to enable flexibility in the

growth and development of GECIA's operations and to enable potential

corporate reorganizations. The Applicants state that they intend that

GECIA's relationships with employee benefit plans will be developed by

increasing the types and amounts of services provided, or by extending

the relationships into new areas. GECIA may prefer, for example, to

establish a related registered investment advisor to service a

particular niche of the market. However, the Applicants represent that

GECIA is structured such that subsidiaries will not be established

under GECIA, and any new coporate entities needed to accomodate

expanded operations of GECIA will be subsidiaries of Holdings. The

Applicants further maintain that inclusion of Holdings in the requested

exemption is also necessary to allow GECIA or Holdings to participate

in any reorganization which might eliminate one of them or change their

relative position with respect to GECS, or they may be repositioned for

reasons unrelated to their activities, such as a public offering of

their stock. For these reasons, the Applicants are requesting that the

exemption be

[[Page 59914]]

applicable to GECIA and Holdings and any subsidiary or successor which

provides investment advisory, management or related services and is

registered under the Investment Advisors Act of 1940, as amended.

The transactions covered by the proposed exemption would include

the full range of transactions that can be executed by investment

managers who qualify as QPAMs pursuant to PTE 84-14. If granted, the

exemption will enable GECIA to qualify as a QPAM by satisfying all

conditions of PTE 84-14, except that G.E.'s convictions and guilty

pleas in connection with the G.E. Felonies shall not prevent

satisfaction of the condition stated in section I(g) of PTE 84-14

because of affiliation with G.E. The exemption, if granted, will relate

only to the Applicants' affiliation with G.E. and not to any

affiliation with any other persons or entities.1

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1 For example, any affiliation of the Applicants with any

company or individual convicted of any of the felonies described in

section 411 of the Act, other than G.E. with respect to the G.E.

Felonies described herein, is not within the scope of the exemption

proposed herein. Furthermore, any future convictions of or guilty

pleas by G.E. for felonies described in part I(g) of PTCE 84-14 are

not within the scope of the exemption proposed herein.

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6. The Applicants represent that the G.E. Felonies do not create

any concern that they will endanger employee benefit plans for which

GECIA proposes to serve as a QPAM. The Applicants note that all of the

G.E. Felonies occurred before the creation of GECIA and its acquisition

of the MacFarlane business, and that all of the G.E. Felonies involved

areas of business unrelated to employee benefit plans and the

activities of GECIA. The Applicants represent that prior to its

incorporation, substantial efforts were devoted to identifying possible

relationships between its proposed provision of real estate management

services to plans and the existing business activities of G.E. and its

affiliates, and understanding the potential legal issues related

thereto. As a result, the Applicants represent that care has been taken

to situate GECIA and Holdings separate from other unrelated business

activities of G.E. and its affiliates, particularly those involved with

the G.E. Felonies, and that GECIA and Holdings are isolated

organizationally from the G.E. operations and entities formerly

involved in the G.E. Felonies.

Furthermore, the Applicants represent that they are committed to a

strong legal compliance program, developing their own policies and

procedures to promote compliance with applicable laws including the

Act. In this regard, the Applicants note that GECIA has established its

own general counsel, independent of G.E., with responsibility for

supervising legal compliance. Under the general counsel's direction,

GECIA has adopted written compliance policies designed to ensure

compliance with the Act, and written materials relating to such

policies have been provided to applicable employees. The Applicants

represent that GECIA conducts employee training programs, including on-

site seminars by outside counsel, on the requirements of the Act. The

Applicants conclude that the efforts in these compliance measures

constitute substantial amounts of time, effort and resources to avoid

any failure by GECIA to comply with the Act and other applicable laws.

7. In summary, the Applicants represent that the criteria of

section 408(a) of the Act are satisfied for the following reasons: (a)

The G.E. Felonies occurred prior to any affiliation between G.E. and

GECIA, and did not involve any conduct on the part of GECIA; (b) GECIA

constitutes a continuation of the operations of MacFarlane, which was

not involved in any of the G.E. Felonies and which was unrelated to

G.E. prior to acquisition by GECIA; (c) GECIA has committed to a legal

compliance program featuring written policies and procedures to prevent

illegal activity; and (d) The exemption will permit the Applicants to

engage in a broader variety of investments and services on behalf of

client employee benefit plans which demand diverse investment

opportunities.

For Further Information Contact: Ronald Willett of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

Summit Sheet Metal, Inc. Defined Benefit Pension Plan (the Plan)

Located in Anaheim, California

[Application No. D-10330]

Proposed Exemption

The Department is considering granting an exemption under the

authority of section 408(a) of the Act and section 4975(c)(2) of the

Code and in accordance with the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption

is granted, the restrictions of sections 406(a) and 406(b)(1) and

(b)(2) of the Act and the sanctions resulting from the application of

section 4975 of the Code, by reason of section 4975(c)(1) (A) through

(E) of the Code, shall not apply to the proposed cash sale (the Sale)

by the Plan of certain real property (the Property) to Messrs. Milton

J. Chasin, Donald E. Hanson, and Gale N. Searing, parties in interest

with respect to the Plan; provided that the following conditions are

satisfied: (a) the Sale is a one-time transaction for a lump sum cash

payment; (b) the purchase price is the fair market value of the

Property as determined on the date of the Sale by a qualified,

independent appraiser; and (c) the Plan will incur no commissions or

any other expenses from the proposed Sale.

Summary of Facts and Representations

1. The sponsoring employer of the Plan is the Summit Sheet Metal,

Inc. (the Employer), a California corporation, which has manufactured

sheet metal for over 20 years for the construction industry located

primarily in southern California. The Employer has formerly resolved to

terminate its business operations and is in the process of dissolution.

Messrs. Milton J. Chasin, Donald E. Hanson, and Gale N. Searing, who

each own a one-third interest in the Employer, are its only remaining

employees.

2. The Plan is a defined benefit plan with approximately $3.18

million in total assets, as of October 16, 1996, and three participants

who are equal owners of the Employer. The trustee and administrator of

the Plan are the three owners of the Employer. CalTrust, located in

Costa Mesa, California, is the third-party recordkeeper for the Plan.

The Employer has formally resolved to terminate the Plan, and has

received a determination from the Pension Benefit Guaranty Corporation

that the Plan is no longer insured. In addition, the Plan is currently

in termination process with the Internal Revenue Service.

The remaining three participants in the Plan have attained normal

retirement age and intend to retire within the next few months and

transfer their respective interests in the Plan to their respective

Individual Retirement Accounts (IRA).

3. The Property, acquired solely as an investment in 1988 by the

Plan from an unrelated person, is an unencumbered, fully developed

parcel of commercial real estate, which is located at 12707 and 12717

Los Neitos Road, Santa Fe Springs, California on approximately 1.17

acres. The applicants represent that the Property is serviced by all

the necessary public utilities and consists of a single story metal

building and a single story concrete block building with a mezzanine

for office space, and has been leased and used only by unrelated third-

parties with respect to the Plan. The Property was determined in 1993

by the Environmental Protection

[[Page 59915]]

Agency (EPA) to be located within a potential toxic waste clean-up

site.

The applicants represent that several attempts to sell the Property

by the Plan to unrelated persons have been unsuccessful, primarily,

because of the uncertainty of the costs in cleaning up the toxic waste

found by the EPA.

Mr. Claude J. Demers, Real Estate Broker with California Real

Estate Properties, Inc. of Huntington Beach, California, in a letter

dated September 3, 1996, represented that his listing agreement on the

Property had expired August 31, 1996, after every major industrial

broker in Orange County was contacted with little response and no

serious inquiries received. Mr. Demers further represented that the

lack of market demand for the Property and the potential liability

because of the hazardous materials on the Property effects the value of

the Property. In addition, Mr. Demers represented that several

financing institutions commented that even if a serious buyer were

found, financing the Property would still be a major obstacle to

overcome.

The Property was appraised as of June 20, 1996, and determined to

have a fair market value of $410,000. The appraisal was done by the

Grubb & Ellis Company Appraisal and Consulting Services, Orange,

California and signed by Paul M. Meade, Vice President, State

Certification #AG001947, and Donald L. Hoelzel, Independent Review

Appraiser, State Certification #AG00732. The appraiser represented that

it had no interest in the Property and was independent of the Employer

and the participants of the Plan. The appraiser also represented that

the only impact on the Property of the EPA determination is the stigma

associated with its proximity to the contained toxic waste and the

subsequent value reduction.

4. The applicants represent that the Plan has been unable to

interest anyone in purchasing the Property because of the EPA

determination, and the trustees of the Plan are unable to locate an IRA

custodian willing to accept the Property as an asset of an IRA.

Therefore, the three remaining participants of the Plan desire to

purchase the Property so that the Plan may be terminated and its assets

rolled-over into their respective IRAs.

The applicants represent that the Sale would be in the best

interests of the Plan and its participants and beneficiaries because

the Sale would avoid the risk of future costs of clean-up and the

anticipated depreciation in value of the Property. Also the parties

involved expect to terminate as soon as possible the Plan and the

Employer.

5. In summary, the applicant represents that the proposed

transaction will satisfy the criteria of section 408(a) of the Act

because (a) the Sale of the Property involves a one-time transaction

for cash; (b) the Plan will not incur any payment of commissions or any

other expenses from the Sale; (c) the Plan will be able to terminate

and roll-over its remaining assets into three separate IRAs for the

benefit of the three remaining participants; (d) the Property has been

appraised by a qualified, independent appraiser; and (e) the Plan will

receive as consideration for the Sale no less than the fair market

value of the Property as of the date of the Sale.

Notice to Interested Persons: Because Messrs. Chasin, Hanson, and

Searing, the applicants, are the sole participants of the Plan, it has

been determined that there is no need to distribute the notice of

proposed exemption to interested persons. Comments and requests for a

hearing are due thirty (30) days after publication of this notice in

the Federal Register.

For Further Information Contact: Mr. C.E. Beaver of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

Skana Enterprises, Inc. Defined Benefit Pension Plan (the Plan) Located

in Kodiak, Alaska

[Application No. D-10342]

Proposed Exemption

The Department is considering granting an exemption under the

authority of section 4975(c)(2) of the Code and in accordance with the

procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836,

32847, August 10, 1990). If the exemption is granted, the sanctions

resulting from the application of section 4975 of the Code, by reason

of section 4975(c)(1)(A) through (E) of the Code, shall not apply to:

(1) the proposed loan (the Loan) of $157,500 by the Plan to Skana

Enterprises, Inc. (Skana), the Plan's sponsor and a disqualified person

with respect to the Plan, and (2) the personal guarantee of the Loan by

Mr. Ralph Bolton (Mr. Bolton), a disqualified person with respect to

the Plan, provided the following conditions are satisfied: (a) The

terms of the Loan are at least as favorable to the Plan as those

obtainable in an arm's-length transaction with an unrelated party; (b)

the Loan does not exceed 25% of the assets of the Plan; (c) the Loan is

secured by a first deed of trust on real property (the Property) which

has been appraised by a qualified independent appraiser to have a fair

market value not less than 150% of the amount of the Loan; (d) the fair

market value of the Property remains at least equal to 150% of the

outstanding balance of the Loan throughout the duration of the Loan;

(e) the Plan's independent fiduciary has determined that the Loan is

appropriate for, in the best interest of, and protective of the Plan;

and (f) the Plan's independent fiduciary will monitor compliance with

the terms of the Loan and conditions of the exemption throughout the

duration of the transaction, taking any action necessary to safeguard

the Plan's interest, including foreclosure on the Property in the event

of default.2

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\2\ Since Mr. Bolton is the sole owner of Skana and the only

participant in the Plan, there is no jurisdiction under Title I of

the Act pursuant to 29 CFR 2510.3-3(b). However, there is

jurisdiction under Title II of the Act pursuant to section 4975 of

the Code.

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Summary of Facts and Representations

1. Skana is a corporation located in Kodiak, Alaska, which is

engaged in the business of commercial fishing for seafood. The Plan is

a defined benefit plan with one participant, Mr. Bolton. The

approximate aggregate fair market value of the Plan's assets is

$670,000.

2. Skana wishes to borrow $157,500 from the Plan to purchase a

parcel of real property in Kodiak, Alaska. The Loan will be amortized

over a 15 year period, with equal semi-annual payments of principal and

interest over the 15 year term. The interest rate for the Loan will be

9.25% per annum. The proposed terms of the Loan were submitted to Mr.

Duane E. Dudley, Vice President of the Bank of America Alaska, N.A. in

Anchorage, Alaska. Mr. Dudley approved the Loan, but recommended that

certain of the proposed terms should be amended, such as raising the

interest rate to 9.25% per annum. Mr. Dudley has represented that the

terms of the Loan, as amended, are commercially reasonable.

3. The Loan will be secured by the Property, which consists of land

and the timber located thereon, situated on East Devils Road in Lincoln

City, Oregon. Char Brown of The Prudential Taylor & Taylor Realty

Company in Lincoln City, Oregon, has appraised the land as having a

fair market value, excluding the timber value, of $200,000 as of

September 17, 1996. Ms. Brown represents that she is a qualified,

independent realtor who has worked in the small town of Lincoln City

for five years and is well acquainted with the values of all the

properties in the area. The timber on the Property has been valued by

D.J. Davis Cutting, Inc. of Otis, Oregon as having a fair market value

of $193,277.75 as of September

[[Page 59916]]

15, 1996. Thus, independent experts have determined that the fair

market value of the Property is $393,277.75, which is approximately 2.5

times the principal amount of the Loan. The applicant represents that

the Plan will have first priority interest in the collateral, and the

Plan's interest will be perfected under applicable state law. Mr.

Bolton will also personally guarantee the Loan to the Plan.

4. The Plan has appointed Drugge & Associates (Drugge), a CPA firm

in Seattle, Washington, as its independent fiduciary for purposes of

this transaction. Drugge represents that it performs accounting and tax

services for Skana, but fees generated from Skana represent less than

one percent of its annual service revenues. Mr. Jon Krueger of Drugge

has represented that all terms and conditions of the Loan are at least

as favorable to the Plan as the Plan could obtain in an arm's-length

transaction with an unrelated party, and represent fair market value

terms. Drugge has determined that the Loan is appropriate for the Plan,

in the Plan's best interests as an investment for its portfolio, and

protective of the Plan and its participant. Drugge represents that it

will monitor compliance by Skana with the terms and conditions of the

Loan and of the exemption proposed herein throughout the term of the

Loan, taking whatever action is necessary to safeguard the Plan's

interest, including foreclosure on the collateral in the event of

default.

5. In summary, the applicant represents that the proposed

transaction satisfies the criteria contained in section 4975(c)(2) of

the Code for the following reasons: (a) The Loan represents less than

25% of the assets of the Plan; (b) the terms of the Loan will be at

least as favorable to the Plan as those obtainable in an arm's-length

transaction with an unrelated party; (c) the Loan will be secured by a

first deed of trust on the Property, which has been appraised by

qualified, independent experts to have a fair market value

approximately 2.5 times the Loan amount; (d) Mr. Bolton will personally

guarantee the Loan; (e) Drugge, the Plan's independent fiduciary, has

determined that the transaction is appropriate for the Plan and in its

best interests; (f) Drugge will monitor the transaction and take

whatever action is necessary to enforce the Plan's rights under the

Loan; and (g) Mr. Bolton is the only participant in the Plan to be

affected by the transaction, and he desires that the transaction be

consummated.

Notice to Interested Persons: Since Mr. Bolton is the only Plan

participant to be affected by the proposed transaction, the Department

has determined that there is no need to distribute the notice of

proposed exemption to interested persons. Comments and requests for a

hearing are due within 30 days from the date of publication of this

notice of proposed exemption in the Federal Register.

For Further Information Contact: Gary H. Lefkowitz of the

Department, telephone (202) 219-8881. (This is not a toll-free number.)

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption

under section 408(a) of the Act and/or section 4975(c)(2) of the Code

does not relieve a fiduciary or other party in interest of disqualified

person from certain other provisions of the Act and/or the Code,

including any prohibited transaction provisions to which the exemption

does not apply and the general fiduciary responsibility provisions of

section 404 of the Act, which among other things require a fiduciary to

discharge his duties respecting the plan solely in the interest of the

participants and beneficiaries of the plan and in a prudent fashion in

accordance with section 404(a)(1)(b) of the act; nor does it affect the

requirement of section 401(a) of the Code that the plan must operate

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be granted under section 408(a) of the

Act and/or section 4975(c)(2) of the Code, the Department must find

that the exemption is administratively feasible, in the interests of

the plan and of its participants and beneficiaries and protective of

the rights of participants and beneficiaries of the plan;

(3) The proposed exemptions, if granted, will be supplemental to,

and not in derogation of, any other provisions of the Act and/or the

Code, including statutory or administrative exemptions and transitional

rules. Furthermore, the fact that a transaction is subject to an

administrative or statutory exemption is not dispositive of whether the

transaction is in fact a prohibited transaction; and

(4) The proposed exemptions, if granted, will be subject to the

express condition that the material facts and representations contained

in each application are true and complete, and that each application

accurately describes all material terms of the transaction which is the

subject of the exemption.

Signed at Washington, DC, this 19th day of November 1996.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration.

[FR Doc. 96-29900 Filed 11-22-96; 8:45 am]

BILLING CODE 4510-29-P