9366 Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 

stock; and (2) with an interest rate or 

dividend that is reset at specific 

intervals through a Dutch Auction 

process; 

(d) A person is ‘‘independent’’ of TD 

Ameritrade if the person is (1) not TD 

Ameritrade or an affiliate; and 

(2) not a relative (as defined in section 

3(15) of the Act) of the party engaging 

in the transaction; 

(e) The term ‘‘Plan’’ means an 

individual retirement account or similar 

account described in section 

4975(e)(1)(B) through (F) of the Code (an 

IRA); an employee benefit plan as 

defined in section 3(3) of the Act; or an 

entity holding plan assets within the 

meaning of 29 CFR 2510.3–101, as 

modified by section 3(42) of the Act; 

and 

(f) The term ‘‘Settlement Agreement’’ 

means a legal settlement involving TD 

Ameritrade and a U.S. state or federal 

authority that provides for the purchase 

of an Auction Rate Security by TD 

Ameritrade from a Plan. 

Effective Date: This exemption is 

effective as of July 20, 2009. 

For a more complete statement of the 

facts and representations supporting the 

Department’s decision to grant this 

exemption, refer to the notice of 

proposed exemption published on 

December 16, 2009 at 75 FR 78768. 

For Further Information Contact: Ms. 

Anna Mpras Vaughan of the 

Department, telephone (202) 693–8565. 

(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 or 

disqualified person from certain other 

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) This exemption is supplemental to 

and not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transactional 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 

(3) The availability of this exemption 

is subject to the express condition that 

the material facts and representations 

contained in the application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 14th day of 

February, 2011. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2011–3589 Filed 2–16–11; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

Proposed Exemptions From Certain 

Prohibited Transaction Restrictions 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Notice of proposed exemptions. 

SUMMARY: This document contains 

notices of pendency before the 

Department of Labor (the Department) of 

proposed exemptions from certain of the 

prohibited transaction restrictions of the 

Employee Retirement Income Security 

Act of 1974 (ERISA or the Act) and/or 

the Internal Revenue Code of 1986 (the 

Code). This notice includes the 

following proposed exemptions: D– 

11528, Wachovia Corporation and Its 

Current and Future Affiliates or 

Successors (collectively, Wachovia or 

the Applicant; and D–11635, The Parvin 

Nahvi, M.D., Inc. 401(k) Profit Sharing 

Trust (the Plan); et al.] 

DATES: All interested persons are invited 

to submit written comments or requests 

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. 

ADDRESSES: Comments and requests 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. 

All written comments and requests for 

a hearing (at least three copies) should 

be sent to the Employee Benefits 

Security Administration (EBSA), Office 

of Exemption Determinations, Room N– 

5700, U.S. Department of Labor, 200 

Constitution Avenue, NW., Washington, 

DC 20210. Attention: Application 

No.lll, stated in each Notice of 

Proposed Exemption. Interested persons 

are also invited to submit comments 

and/or hearing requests to EBSA via email or FAX. Any such comments or 

requests should be sent either by e-mail 

to: moffitt.betty@dol.gov, or by FAX to 

(202) 219–0204 by the end of the 

scheduled comment period. The 

applications for exemption and the 

comments received will be available for 

public inspection in the Public 

Documents Room of the Employee 

Benefits Security Administration, U.S. 

Department of Labor, Room N–1513, 

200 Constitution Avenue, NW., 

Washington, DC 20210. 

Warning: If you submit written 

comments or hearing requests, do not 

include any personally-identifiable or 

confidential business information that 

you do not want to be publiclydisclosed. All comments and hearing 

requests are posted on the Internet 

exactly as they are received, and they 

can be retrieved by most Internet search 

engines. The Department will make no 

deletions, modifications or redactions to 

the comments or hearing requests 

received, as they are public records. 

SUPPLEMENTARY INFORMATION: 

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). 

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, 5 U.S.C. App. 1 (1996), 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. 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 9367 

1For purposes of this proposed exemption, 

references to section 406 of the Act should be read 

to refer as well to the corresponding provisions of 

section 4975 of the Code. 

2The Department notes that the Act’s general 

standards of fiduciary conduct also would apply to 

the transactions described herein. In this regard, 

section 404 of the Act requires, among other things, 

that a fiduciary discharge his duties respecting a 

plan solely in the interest of the plan’s participants 

and beneficiaries and in a prudent manner. 

Accordingly, a plan fiduciary must act prudently 

with respect to, among other things, the decision to 

sell the Auction Rate Security to Wachovia for the 

par value of the Auction Rate Security, plus unpaid 

interest and dividends. The Department further 

emphasizes that it expects Plan fiduciaries, prior to 

entering into any of the proposed transactions, to 

fully understand the risks associated with this type 

of transaction following disclosure by Wachovia of 

all relevant information. 

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 

rrepresentations. 

Wachovia Corporation and Its Current 

and Future Affiliates or Successors 

(Collectively, Wachovia or the 

Applicant) 

Located in San Francisco, California 

[Application No. D–11528] 

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).1

Section I. Sales of Auction Rate 

Securities From Plans to Wachovia: 

Unrelated to a Settlement Agreement 

If the proposed exemption is granted, 

the restrictions of section 406(a)(1)(A) 

and (D) and section 406(b)(1) and (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), 

(D), and (E) of the Code, shall not apply, 

effective February 1, 2008, to the sale by 

a Plan (as defined in Section V(e)) of an 

Auction Rate Security (as defined in 

Section V(c)) to Wachovia, where such 

sale (an Unrelated Sale) is unrelated to, 

and not made in connection with, a 

Settlement Agreement (as defined in 

Section V(f)), provided that the 

conditions set forth in Section II have 

been met. 

Section II. Conditions Applicable to 

Transactions Described in Section I 

(a) The Plan acquired the Auction 

Rate Security in connection with 

brokerage or advisory services provided 

by Wachovia to the Plan; 

(b) The last auction for the Auction 

Rate Security was unsuccessful; 

(c) Except in the case of a Plan 

sponsored by Wachovia for its own 

employees (a Wachovia Plan), the 

Unrelated Sale is made pursuant to a 

written offer by Wachovia (the Offer) 

containing all of the material terms of 

the Unrelated Sale, including, but not 

limited to: (1) The identity and par 

value of the Auction Rate Security; (2) 

the interest or dividend amounts that 

are due and unpaid with respect to the 

Auction Rate Security; and (3) the most 

recent rate information for the Auction 

Rate Security (if reliable information is 

available). Notwithstanding the 

foregoing, in the case of a pooled fund 

maintained or advised by Wachovia, 

this condition shall be deemed met to 

the extent each Plan invested in the 

pooled fund (other than a Wachovia 

Plan) receives advance written notice 

regarding the Unrelated Sale, where 

such notice contains all of the material 

terms of the Unrelated Sale, including, 

but not limited to, the material terms 

described in the preceding sentence; 

(d) The Unrelated Sale is for no 

consideration other than cash payment 

against prompt delivery of the Auction 

Rate Security; 

(e) The sales price for the Auction 

Rate Security is equal to the par value 

of the Auction Rate Security, plus any 

accrued but unpaid interest or 

dividends; 

(f) The Plan does not waive any rights 

or claims in connection with the 

Unrelated Sale; 

(g) The decision to accept the Offer or 

retain the Auction Rate Security is made 

by a Plan fiduciary or Plan participant 

or an individual retirement account (an 

IRA (as defined in Section V(e)) owner 

who is independent (as defined in 

Section V(d)) of Wachovia. 

Notwithstanding the foregoing: (1) In 

the case of an IRA which is beneficially 

owned by an employee, officer, director 

or partner of Wachovia, the decision to 

accept the Offer or retain the Auction 

Rate Security may be made by such 

employee, officer, director or partner; or 

(2) in the case of a Wachovia Plan or a 

pooled fund maintained or advised by 

Wachovia, the decision to accept the 

Offer may be made by Wachovia after 

Wachovia has determined that such 

purchase is in the best interest of the 

Wachovia Plan or pooled fund; 2

(h) Except in the case of a Wachovia 

Plan or a pooled fund maintained or 

advised by Wachovia, neither Wachovia 

nor any affiliate exercises investment 

discretion or renders investment advice 

within the meaning of 29 CFR 2510.3– 

21(c) with respect to the decision to 

accept the Offer or retain the Auction 

Rate Security; 

(i) The Plan does not pay any 

commissions or transaction costs with 

respect to the Unrelated Sale; 

(j) The Unrelated Sale is not part of an 

arrangement, agreement or 

understanding designed to benefit a 

party in interest to the Plan; 

(k) Wachovia and its affiliates, as 

applicable, maintain, or cause to be 

maintained, for a period of six (6) years 

from the date of the Unrelated Sale, 

such records as are necessary to enable 

the persons described below in 

paragraph (l)(1), to determine whether 

the conditions of this exemption, if 

granted, have been met, except that: 

(1) No party in interest with respect 

to a Plan which engages in an Unrelated 

Sale, other than Wachovia and its 

affiliates, as applicable, shall be subject 

to a civil penalty under section 502(i) of 

the Act or the taxes imposed by section 

4975(a) and (b) of the Code, if such 

records are not maintained, or not 

available for examination, as required, 

below, by paragraph (l)(1); and 

(2) A separate prohibited transaction 

shall not be considered to have occurred 

solely because, due to circumstances 

beyond the control of Wachovia or its 

affiliates, as applicable, such records are 

lost or destroyed prior to the end of the 

six-year period; 

(l)(1) Except as provided below in 

paragraph (l)(2), and notwithstanding 

any provisions of subsections (a)(2) and 

(b) of section 504 of the Act, the records 

referred to above in paragraph (k) are 

unconditionally available at their 

customary location for examination 

during normal business hours by: 

(A) Any duly authorized employee or 

representative of the Department, the 

Internal Revenue Service, or the U.S. 

Securities and Exchange Commission; 

(B) Any fiduciary of any Plan, 

including any IRA owner, that engages 

in a Sale, or any duly authorized 

employee or representative of such 

fiduciary; or 

(C) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by a Plan that engages in the 

Unrelated Sale, or any authorized 

employee or representative of these 

entities; 

(2) None of the persons described 

above in paragraphs (l)(1)(B)–(C) shall 

be authorized to examine trade secrets 

of Wachovia, or commercial or financial 

information which is privileged or 

confidential; and 

(3) Should Wachovia refuse to 

disclose information on the basis that 


jlentini on DSKJ8SOYB1PROD with NOTICES
9368 Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 

such information is exempt from 

disclosure, Wachovia shall, by the close 

of the thirtieth (30th) day following the 

request, provide a written notice 

advising that person of the reasons for 

the refusal and that the Department may 

request such information. 

Section III. Sales of Auction Rate 

Securities From Plans to Wachovia: 

Related to a Settlement Agreement 

If the proposed exemption is granted, 

the restrictions of section 406(a)(1)(A) 

and (D) and section 406(b)(1) and (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), 

(D), and (E) of the Code, shall not apply, 

effective February 1, 2008, to the sale by 

a Plan of an Auction Rate Security to 

Wachovia, where such sale (a 

Settlement Sale) is related to, and made 

in connection with, a Settlement 

Agreement, provided that the conditions 

set forth in Section IV have been met. 

Section IV. Conditions Applicable to 

Transactions Described in Section III 

(a) The terms and delivery of the Offer 

are consistent with the requirements set 

forth in the Settlement Agreement and 

acceptance of the Offer does not 

constitute a waiver of any claim of the 

tendering Plan; 

(b) The Offer or other documents 

available to the Plan specifically 

describe, among other things: 

(1) The securities available for 

purchase under the Offer; 

(2) The background of the Offer; 

(3) The methods and timing by which 

Plans may accept the Offer; 

(4) The purchase dates, or the manner 

of determining the purchase dates, for 

Auction Rate Securities tendered 

pursuant to the Offer, if the Offer had 

any limitation on such dates; 

(5) The timing for acceptance by 

Wachovia of tendered Auction Rate 

Securities, if there were any limitations 

on such timing; 

(6) The timing of payment for Auction 

Rate Securities accepted by Wachovia 

for payment, if payment was materially 

delayed beyond the acceptance of the 

Offer; 

(7) The expiration date of the Offer; 

and 

(8) How to obtain additional 

information concerning the Offer; 

(c) The terms of the Settlement Sale 

are consistent with the requirements set 

forth in the Settlement Agreement; and 

(d) All of the conditions in Section II 

have been met. 

Section V. Definitions 

For purposes of this proposed 

exemption: 

(a) The term ‘‘affiliate’’ means any 

person directly or indirectly, through 

one or more intermediaries, controlling, 

controlled by, or under common control 

with such other person; 

(b) The term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual; 

(c) The term ‘‘Auction Rate Security’’ 

or ‘‘ARS’’ means a security: (1) That is 

either a debt instrument (generally with 

a long-term nominal maturity) or 

preferred stock; and (2) with an interest 

rate or dividend that is reset at specific 

intervals through a Dutch auction 

process; 

(d) A person is ‘‘independent’’ of 

Wachovia if the person is: (1) Not 

Wachovia or an affiliate; and (2) not a 

relative (as defined in section 3(15) of 

the Act) of the party engaging in the 

transaction; 

(e) The term ‘‘Plan’’ means an 

individual retirement account or similar 

account described in section 

4975(e)(1)(B) through (F) of the Code (an 

IRA); an employee benefit plan as 

defined in section 3(3) of the Act; or an 

entity holding plan assets within the 

meaning of 29 CFR 2510.3–101, as 

modified by section 3(42) of the Act; 

and 

(f) The term ‘‘Settlement Agreement’’ 

means a legal settlement involving 

Wachovia and a U.S. state or federal 

authority that provides for the purchase 

of an ARS by Wachovia from a Plan. 

DATES: Effective Date: If granted, this 

proposed exemption will be effective as 

of February 1, 2008. 

Summary of Facts and Representations 

1. The Applicant, Wachovia, is a 

global financial services firm 

headquartered in North Carolina. 

Among other things, Wachovia includes 

banks, registered investment advisers 

subject to the Investment Advisers Act 

of 1940 and broker-dealers registered 

with the U.S. Securities and Exchange 

Commission. In this last regard, 

Wachovia acts as a broker and dealer 

with respect to the purchase and sale of 

securities, including Auction Rate 

Securities. Wachovia is one of the 

largest diversified financial services 

companies in the United States. 

Wachovia provides a broad range of 

retail banking and brokerage, asset and 

wealth management, and corporate and 

investment banking products and 

services to customers through 3,330 

retail financial centers in 21 states from 

Connecticut to Florida and west to 

Texas and California, and nationwide 

retail brokerage, mortgage lending and 

auto finance businesses. On December 

31, 2008, Wachovia was acquired by 

Wells Fargo & Company (WF). WF is a 

nationwide, diversified communitybased financial services company with 

total assets of $1.2 trillion and market 

capitalization of $140 billion as of 

December 31, 2009. 

2. The Applicant describes Auction 

Rate Securities and the arrangement by 

which ARS are bought and sold as 

follows. Auction Rate Securities are 

securities (issued as debt or preferred 

stock) with an interest rate or dividend 

that is reset at periodic intervals 

pursuant to a process called a Dutch 

Auction. Investors submit orders to buy, 

hold, or sell a specific ARS to a brokerdealer selected by the entity that issued 

the ARS. The broker-dealers, in turn, 

submit all of these orders to an auction 

agent. The auction agent’s functions 

include collecting orders from all 

participating broker-dealers by the 

auction deadline, determining the 

amount of securities available for sale, 

and organizing the bids to determine the 

winning bid. If there are any buy orders 

placed into the auction at a specific rate, 

the auction agent accepts bids with the 

lowest rate above any applicable 

minimum rate and then successively 

higher rates up to the maximum 

applicable rate, until all sell orders and 

orders that are treated as sell orders are 

filled. Bids below any applicable 

minimum rate or above the applicable 

maximum rate are rejected. After 

determining the clearing rate for all of 

the securities at auction, the auction 

agent allocates the ARS available for 

sale to the participating broker-dealers 

based on the orders they submitted. If 

there are multiple bids at the clearing 

rate, the auction agent will allocate 

securities among the bidders at such 

rate on a pro-rata basis. 

3. The Applicant states that, under a 

typical Dutch Auction process, 

Wachovia is permitted, but not 

obligated, to submit orders in auctions 

for its own account either as a bidder or 

a seller and routinely does so in the 

auction rate securities market in its sole 

discretion. Wachovia may place one or 

more bids in an auction for its own 

account to acquire ARS for its 

inventory, to prevent: (a) A failed 

auction (i.e., an event where there are 

insufficient clearing bids which would 

result in the auction rate being set at a 

specified rate, resulting in no ARS being 

sold through the auction process); or (b) 

an auction from clearing at a rate that 

Wachovia believes does not reflect the 

market for the particular ARS being 

auctioned. 

4. The Applicant states that for many 

ARS, Wachovia has been appointed by 

the issuer of the securities to serve as a 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 9369 

3The Department notes that Prohibited 

Transaction Exemption 80–26 (45 FR 28545 (April 

29, 1980), as amended at 71 FR 17917 (April 7, 

2006)) permits interest-free loans or other 

extensions of credit from a party in interest to a 

plan if, among other things, the proceeds of the loan 

or extension of credit are used only: (1) For the 

payment of ordinary operating expenses of the plan, 

including the payment of benefits in accordance 

with the terms of the plan and periodic premiums 

under an insurance or annuity contract, or (2) for 

a purpose incidental to the ordinary operation of 

the plan. 

4The relief contained in this proposed exemption 

does not extend to the fiduciary provisions of 

section 404 of the Act. 

5However, in the case of an IRA beneficially 

owned by an employee, officer, director or partner 

of Wachovia, the decision to accept the Offer or 

retain the ARS may be made by such employee, 

officer, director or partner of Wachovia. 

6The Applicant states that while there may be 

communication between a Plan and Wachovia 

subsequent to an Offer, such communication will 

not involve advice regarding whether the Plan 

should accept the Offer. 

dealer in the auction and is paid by the 

issuer for its services. Wachovia is 

typically appointed to serve as a dealer 

in the auctions pursuant to an 

agreement between the issuer and 

Wachovia. That agreement provides that 

Wachovia will receive from the issuer 

auction dealer fees based on the 

principal amount of the securities 

placed through Wachovia. 

5. The Applicant states further that 

Wachovia may share a portion of the 

auction rate dealer fees it receives from 

the issuer with other broker-dealers that 

submit orders through Wachovia, for 

those orders that Wachovia successfully 

places in the auctions. Similarly, with 

respect to ARS for which broker-dealers 

other than Wachovia act as dealer, such 

other broker-dealers may share auction 

dealer fees with Wachovia for orders 

submitted by Wachovia. 

6. According to the Applicant, since 

February 2008, only a minority of 

auctions have cleared, particularly 

involving municipalities. As a result, 

Plans holding ARS may not have 

sufficient liquidity to make benefit 

payments, mandatory payments and 

withdrawals and expense payments 

when due.3

7. The Applicant represents that, in 

certain instances, Wachovia may have 

previously advised or otherwise caused 

a Plan to acquire and hold an Auction 

Rate Security.4 In connection with 

Wachovia’s role in the acquisition and 

holding of ARS by various Wachovia 

clients, including the Plans, Wachovia 

entered into Settlement Agreements 

with certain U.S. states and federal 

authorities. Pursuant to these Settlement 

Agreements, among other things, 

Wachovia was required to send a 

written offer to certain Plans that held 

ARS in connection with the advice and/ 

or brokerage services provided by 

Wachovia. As described in further detail 

below, eligible Plans that accepted the 

Offer were permitted to sell the ARS to 

Wachovia for cash equal to the par value 

of such securities, plus any accrued but 

unpaid interest and/or dividends. The 

Applicant states that, prospectively, 

additional shares of ARS may be 

tendered by Plans to Wachovia pursuant 

to a Settlement Agreement. Accordingly, 

the Applicant is requesting retroactive 

and prospective relief for the Settlement 

Sales. The Applicant is also requesting 

retroactive relief (and prospective relief) 

for Unrelated Sales in the event that a 

sale of Auction Rate Securities by a Plan 

to Wachovia has occurred outside the 

Settlement process. If granted, this 

proposed exemption will be effective as 

of February 1, 2008. 

8. Specifically, the Applicant is 

requesting exemptive relief for the sale 

of Auction Rate Securities under two 

different circumstances: (a) Where 

Wachovia initiates the sale by sending 

to a Plan a written Offer to acquire the 

ARS (i.e., an Unrelated Sale), 

notwithstanding that such Offer is not 

required under a Settlement Agreement; 

and (b) where Wachovia is required 

under a Settlement Agreement to send 

to Plans a written Offer to acquire the 

ARS (i.e., a Settlement Sale). The 

Applicant states that the Unrelated 

Sales and Settlement Sales (also referred 

to as a Covered Sale) are in the interests 

of Plans. In this regard, the Applicant 

states that the Covered Sales would 

permit Plans to normalize Plan 

investments. The Applicant represents 

that each Covered Sale will be for no 

consideration other than cash payment 

against prompt delivery of the ARS, and 

such cash will equal the par value of the 

ARS, plus any accrued but unpaid 

interest or dividends. The Applicant 

represents further that Plans will not 

pay any commissions or transaction 

costs with respect to any Covered Sale. 

9. The Applicant represents that the 

proposed exemption is protective of the 

Plans. The Applicant states that, with 

the exception of sales of ARS involving 

Wachovia Plans and pooled funds 

maintained or advised by Wachovia: (a) 

Each Covered Sale will be made 

pursuant to a written Offer; and (b) the 

decision to accept the Offer or retain the 

ARS will be made by a Plan fiduciary 

or Plan participant or IRA owner who is 

independent of Wachovia.5

Additionally, each Offer will be 

delivered in a manner designed to alert 

a Plan fiduciary that Wachovia intends 

to purchase ARS from the Plan. Offers 

made in connection with an Unrelated 

Sale will contain all of the material 

terms of the Unrelated Sale, including: 

(a) The identity and par value of the 

Auction Rate Security; (b) the interest or 

dividend amounts that are due with 

respect to the Auction Rate Security; 

and (c) the most recent rate information 

for the Auction Rate Security (if reliable 

information is available). Offers made in 

connection with a Settlement 

Agreement will specifically include, 

among other things: (a) The background 

of the Offer; (b) the method and timing 

by which a Plan may accept the Offer; 

(c) the expiration date of the Offer; (d) 

a description of certain risk factors 

relating to the Offer; (e) how to obtain 

additional information concerning the 

Offer; and (f) the manner in which 

information concerning material 

amendments or changes to the Offer will 

be communicated. The Applicant states 

that, with very narrowly tailored 

exceptions (involving Wachovia Plans 

and pooled funds maintained or advised 

by Wachovia), neither Wachovia nor 

any affiliate will exercise investment 

discretion or render investment advice 

with respect to a Plan’s decision to 

accept the Offer or retain the ARS.6 In 

the case of a Wachovia Plan or a pooled 

fund maintained or advised by 

Wachovia, the decision to engage in a 

Covered Sale may be made by Wachovia 

after Wachovia has determined that 

such purchase is in the best interest of 

the Wachovia Plan or pooled fund. The 

Applicant represents further that Plans 

will not waive any rights or claims in 

connection with any Covered Sale. 

10. The Applicant represents that the 

proposed exemption, if granted, would 

be administratively feasible. In this 

regard, the Applicant notes that each 

Covered Sale will occur at the par value 

of the affected ARS (plus accrued but 

unpaid interest and dividends, to the 

extent applicable), and such value is 

readily ascertainable. The Applicant 

represents further that Wachovia will 

maintain the records necessary to enable 

the Department and Plan fiduciaries, 

among others, to determine whether the 

conditions of this exemption, if granted, 

have been met. 

11. In summary, the Applicant 

represents that the transactions 

described herein satisfy the statutory 

criteria of section 408(a) of the Act 

because, among other things: 

(a) With only very narrow exceptions 

(involving Wachovia Plans and pooled 

funds maintained or advised by 

Wachovia), each Covered Sale shall be 

made pursuant to a written Offer; 

(b) Each Covered Sale shall be for no 

consideration other than cash payment 

against prompt delivery of the ARS; 

(c) The amount of each Covered Sale 

shall equal the par value of the ARS, 


jlentini on DSKJ8SOYB1PROD with NOTICES
9370 Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 

7This figure takes into account the Plan’s Loan 

liability of $500,946 as of December 31, 2009. 

plus any accrued but unpaid interest or 

dividends; 

(d) Plans will not waive any rights or 

claims in connection with any Covered 

Sale; 

(e) With only very narrow exceptions 

(involving Wachovia Plans and pooled 

funds maintained or advised by 

Wachovia): (1) The decision to accept an 

Offer or retain the ARS shall be made 

by a Plan fiduciary or Plan participant 

or IRA owner who is independent of 

Wachovia (unless the IRA owner is an 

employee, officer, director or partner of 

Wachovia); and (2) neither Wachovia 

nor any affiliate shall exercise 

investment discretion or render 

investment advice within the meaning 

of 29 CFR 2510.3–21(c) with respect to 

the decision to accept the Offer or retain 

the ARS; 

(f) Plans shall not pay any 

commissions or transaction costs with 

respect to any Covered Sale; 

(g) A Covered Sale shall not be part 

of an arrangement, agreement or 

understanding designed to benefit a 

party in interest to the affected Plan; 

(h) With respect to any Settlement 

Sale, the terms and delivery of the Offer, 

and the terms of Settlement Sale, shall 

be consistent with the requirements set 

forth in the Settlement Agreement; 

(i) Wachovia shall make available in 

connection with an Unrelated Sale the 

material terms of the Unrelated Sale, 

including: (1) The identity and par 

value of the Auction Rate Security; (2) 

the interest or dividend amounts that 

are due but unpaid with respect to the 

Auction Rate Security; and (3) the most 

recent rate information for the Auction 

Rate Security (if reliable information is 

available); and 

(j) Each Offer made in connection 

with a Settlement Agreement shall 

describe the material terms of the 

Settlement Sale, including the following 

(and shall not constitute a waiver of any 

claim of the tendering Plan): (1) The 

background of the Offer; (2) the methods 

and timing by which the Plan may 

accept the Offer; (3) the purchase dates, 

or the manner of determining the 

purchase dates, for ARS pursuant to the 

Offer and the timing for acceptance by 

Wachovia of tendered ARS for payment; 

(4) the expiration date of the Offer; and 

(5) how to obtain additional information 

concerning the Offer. 

Notice to Interested Persons 

The Applicant represents that the 

potentially interested participants and 

beneficiaries cannot all be identified, 

and, therefore, the only practical means 

of notifying such participants and 

beneficiaries of this proposed 

exemption is by the publication of this 

notice in the Federal Register. 

Comments and requests for a hearing 

must be received by the Department not 

later than 30 days from the date of 

publication of this notice of proposed 

exemption in the Federal Register. 

For Further Information Contact: Gary 

Lefkowitz of the Department, telephone 

(202) 693–8546. (This is not a toll-free 

number.) 

The Parvin Nahvi, M.D., Inc. 401(k) 

Profit Sharing Trust (the Plan), Located 

in Templeton, CA 

Application No. D–11635 

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, by reason of section 4975(c)(1)(A) 

through (E) of the Code, shall not apply, 

in connection with the cash sale by the 

Plan (the Sale) of a parcel of improved 

real property (the Property), to Dr. 

Parvin Nahvi and Dr. Javad Sani (the 

Applicants), the 100% owners of the 

Plan sponsor, Parvin Nahvi, M.D., Inc. 

(the Employer), and parties in interest 

with respect to the Plan; provided that: 

(a) All terms and conditions of the 

Sale are at least as favorable to the Plan 

as those that the Plan could obtain in an 

arm’s length transaction with an 

unrelated party; 

(b) The Plan’s obligations with respect 

to the remaining principal balance of a 

loan (the Loan) on the Property that is 

secured by a first deed of trust (the Deed 

of Trust) with Santa Lucia Bank, an 

unrelated lender, are: 

(1) Satisfied in full out of the proceeds 

of the Sale, or 

(2) assumed in full by the Applicants, 

who indemnify and hold the Plan 

harmless for any further payment on, or 

any claims arising in connection with, 

the Loan; 

(c) The Plan receives an amount in 

cash, equal to the greater of: 

(1) The original purchase price paid 

by the Plan for the Property, plus 

additional contributions or expenses 

paid by the Plan relating to the holding 

of the Property, less any income 

generated by the Property and paid to 

the Plan, less the Loan principal 

assumed by the Applicants pursuant to 

Section (b)(2), or 

(2) The Property’s appraised value of 

$1,825,000, which represents the fair 

market value of the Property, less the 

Loan principal assumed by the 

Applicants pursuant to Section (b)(2); 

(d) The fair market value of the 

Property has been determined by a 

qualified independent appraiser (the 

Appraiser) and is updated by such 

appraiser on the date the Sale is 

consummated; 

(e) The Sale is a one-time transaction 

for cash; 

(f) The Plan incurs no real estate fees, 

or commissions, in connection with the 

Sale; and 

(g) The Plan fiduciaries (1) determine 

whether it is in the interest of the Plan 

to proceed with the Sale, (2) review and 

approve the methodology used in the 

appraisal that is being relied upon, and 

(3) ensure that such methodology is 

applied by the Appraiser in determining 

the fair market value of the Property on 

the date of the Sale. 

Summary of Facts and Representations 

Background 

1. The Employer, a California 

professional medical corporation, is the 

sponsor of the Plan. The Applicants are 

participants in the Plan and the sole 

shareholders of the Employer. The 

Applicants are related through marriage 

and are both fiduciaries and trustees 

(the Trustees) of the Plan. The 

remaining employees covered under the 

Plan are the Applicants’ three children. 

The Employer is located in Templeton, 

California. 

2. The Plan is a profit sharing plan 

qualified under section 401(a) of the 

Code and an individual account plan as 

described in section 3(34) of the Act, 

having an original effective date of 

January 1, 2002. Under the Plan, each 

Plan participant may direct the Trustees 

to invest any portion of his or her 

individual account in any asset which is 

administratively feasible for the Plan to 

hold, provided the acquisition of which 

would not result in disqualification of 

the Plan under the Code. The Plan 

provides separate individual accounting 

so that each participant bears the sole 

risk of loss attributable to his or her 

investment decision. 

3. According to the Plan’s 2009 

Annual Return/Report of Employee 

Benefit Plan (the 2009 Annual Report), 

as of December 31, 2009, the Plan had 

five participants holding combined net 

assets of $1,459,184.7 According to the 

Applicants, as of December 31, 2009, 

the Plan’s five participants, together 

with their percentage holdings of total 

Plan’s assets, consist of Dr. Javad N. 

Sani, owning 57.69%, Dr. Parvin Nahvi, 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 9371 

8The Department expresses no opinion herein as 

to whether the acquisition and holding of the 

Property by the Plan violated any of the provisions 

of Part 4 of Title I of the Act. 

9The Applicants state that, as trustees of the Plan, 

they have applied the income derived from the 

Property’s operation since its purchase to paying 

down the principal balance of the Loan. 

10According to data provided by the Applicants, 

this loss was mainly attributable to a $76,829 drop 

in revenue received from room rents compared with 

the previous year and a corresponding drop in 

expenses of only $41,000. 

11Typically, the ‘‘rooms department’’ may include 

reservations, the front office, housekeeping, 

telephone, maintenance, and engineering. A 

‘‘department’’ is a management convention used in 

the hotel and lodging industry to ensure efficient 

coordination and control of activities undertaken to 

effectively manage a facility. In a very small lodging 

business, such as a bed-and-breakfast, the owner 

can supervise each department. 

12 Includes approximately $184,400 paid to 

Sterling Hotels Corporation and HMG, unrelated 

property management companies. 

owning 32.28%, and the Applicants’ 

children, Farhad Sani, Roya Sani, and 

Sara Sani, owning 4.13%, 3.28%, and 

2.62%, respectively. 

4. As Trustees, the Applicants caused 

the Plan, on August 5, 2004, to 

purchase, on behalf of the participants, 

the Garden Street Inn, a 13-room bed 

and breakfast located at 1212 Garden 

Street, San Luis Obispo, California, from 

Dan and Kathy Smith, unrelated third 

parties. The Property, originally 

constructed in 1898, is a rectangular 

shaped, two-story building containing 

approximately 5,998 square feet on the 

first and second level combined and an 

additional 754 square foot finished 

basement that is currently used as a 

manager’s unit. The Applicants 

represent that the purpose of the 

investment was to obtain an income 

producing piece of real estate. 

5. The total purchase price for the 

Property, inclusive of any closing costs 

and $85,890 allocated to furniture and 

fixtures, was $2,213,348.8 Of the total 

purchase price, the Plan paid 

$1,463,348 in cash and financed the 

remainder through a first deed of trust 

with Santa Lucia Bank, of Atascadero, 

California, an unrelated party, in the 

original principal amount of $750,000. 

According to the Applicants, there are 

no other deeds of trust or encumbrances 

on the Property. The Applicants state 

that the Loan underlying the Deed of 

Trust has a maturity date of August 4, 

2014 and it carries a 6.5% fixed interest 

rate for 5 years, after which it is subject 

to an adjustable rate of interest. Subject 

to any payment changes, the Loan is 

payable in 119 monthly installments. 

According to the Plan’s 2009 Annual 

Report, the outstanding balance of the 

Loan as of December 31, 2009 was 

$500,946. In addition, the Applicants 

state that, as of August 31, 2010, the 

outstanding principal balance of the 

Loan had been paid down to 

$479,876.43.9

6. The Applicants note that the Plan 

does not own any property aside from 

the subject Property. In addition, the 

Applicants represent that no parties in 

interest with respect to the Plan own or 

lease any property adjacent to the 

Property. The Applicants further 

represent that the Property has not been 

leased to, or used by, any party in 

interest with respect to the Plan since 

the date of acquisition. 

7. According to the Applicants, aside 

from the Property’s acquisition price 

(including real estate taxes), the 

aggregate cost of holding the Property by 

the Plan has been paid out of the 

income generated by the Property. 

According to the Applicants, in respect 

of the years 2004 through 2008, the 

Property yielded net income to the Plan 

in the amounts of: $9,175, $30,433, 

$30,492, $64,639, and $14,125, 

respectively. However, the Applicants 

state that, in 2009, the Property suffered 

a loss of $21,035.10

8. Furthermore, during the five month 

period ending on May 31, 2010, the 

Property suffered an additional loss of 

approximately $3,017, for a total loss of 

$24,052. The Applicants explain that, 

prior to June 1, 2010, the Property was 

managed by an unrelated third party, 

the Hotel Management Group (HMG), 

which had been charging the Plan 

$3,000 per month in maintenance fees. 

Due to the inability of the Plan to 

continue paying such fees, the 

management contract with HMG was 

terminated as of June 1, 2010, and since 

then, the Applicants have managed the 

Property themselves without receiving 

any compensation for their services. As 

a result, from June 1, 2010 through 

August 31, 2010, the Plan received 

approximately $16,836 in net income 

from the Property. 

Financial data provided by the 

Applicants, summarized below, reveals 

that for the period beginning in 2004 

and continuing through August 31, 

2010, the Plan received total income of 

$2,503,275 and incurred total expenses 

of $2,361,627, related to its holding of 

the Property, yielding aggregate net 

income of $141,648. As a result, through 

August 31, 2010, the Plan’s aggregate 

net acquisition and holding costs with 

respect to the Property were $2,071,700 

(the original purchase price of 

$2,213,348, less aggregate net income of 

$141,648). 

Item of Income/Expense 2004—8/31/2010 

($) 

Revenue: 

Rooms Department 11 2,490,046.00 

Other Income .............. 13,229.00 

Total Income ............ 2,503,275.00 

Departmental Expenses: 

Rooms Department ..... 955,938.00 

Cost of Other Income 4,312.00 

Fixed Expenses: 

Real Estate Taxes ...... 69,467.00 

Insurance .................... 40,084.00 

Item of Income/Expense 2004—8/31/2010 

($) 

Mortgage Interest Expense ....................... 256,813.00 

UBIT on Property ........ 0.00 

Other ........................... 10,327.00 

Undistributed Expenses: 

Operating Expenses ... 96,152.00 

Marketing Expenses ... 77,765.00 

Energy Costs .............. 97,138.00 

Administrative & General ........................... 12 753,631.00 

Total Expenses ........ 2,361,627.00 

Net Income ..................... 141,648.00 

The Appraisal Report 

9. ThePropertywas originally 

appraised on June 9, 2009, by Keith 

Spierling, of Spierling Appraisal and 

Consulting Services, Arroyo Grande, 

California. Based on the appraisal report 

dated June 9, 2009 (the Appraisal 

Report), the Appraiser is an Associate 

Member of the Appraisal Institute and 

has been actively engaged in the 

appraisal profession for over 25 years, 

20 of which with respect to the 

appraisal of commercial properties. The 

Appraiser is also certified by the State 

of California as a State Certified General 

Appraiser. The Appraiser affirms that he 

is independent of the Applicants, the 

Employer, and any other parties in 

interest. In addition, the Appraiser 

states that he derives less than 1% of his 

income from these parties. 

10. Pursuant to a letter addressed to 

the Applicants dated May 14, 2010, the 

Appraiser stated that the Appraisal 

Report was completed for Santa Lucia 

Bank, who was the primary client and 

the intended user of the Report. He 

further represented that he was engaged 

by Santa Lucia Bank so that the 

Applicants could obtain financing in 

order to purchase the Property from the 

Plan as well as seek exemptive relief 

from the Department for such purchase. 

Although the Appraisal Report was 

completed for Santa Lucia Bank as its 

intended user, the Applicants represent 

that the Appraisal Report was paid for 

by Dr. Sani. In this regard, the 

Applicants state that, in anticipation of 

applying for the exemption, they 

approached Santa Lucia Bank about 

assuming the Loan and also the 


jlentini on DSKJ8SOYB1PROD with NOTICES
9372 Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 

13 In the same manner that Santa Lucia Bank 

ordered the Appraisal Report, at the Applicants’ 

behest, Santa Lucia Bank also retained Mr. 

Spierling to complete the Appraisal Update and 

forwarded his bill for services to the Applicants, 

who paid the amount due in turn. 

14The Applicants represent that Santa Lucia Bank 

has authorized the assumption of the existing Loan 

by the Applicants in the event that the Sale takes 

place after approval by the Department of the 

exemption. 

15For this purpose, the updated appraisal must 

take into account any new data on recent sales of 

similar property in the local real estate market, 

which may affect the valuation conclusion. 

possibility of taking out a second loan. 

Accordingly, the Applicants explain, 

the bank required an appraisal of the 

Property in order to determine whether 

or not the Applicants could assume the 

Loan and qualify for the second loan. 

The Applicants explain further that the 

policy of the bank is to initiate an 

appraisal with the client paying the fee. 

Consequently, Santa Lucia Bank 

retained Mr. Spierling for an appraisal 

of the Property and forwarded his bill 

for services to the Applicants, who paid 

the amount due in turn. 

11. The Appraiser acknowledged, in 

his letter of May 14, 2010, that the 

Appraisal Report would be used for 

purposes of obtaining an administrative 

exemption from the Department for the 

Sale. Furthermore, the Appraiser stated 

that, barring any unforeseen 

circumstances, he would be able to 

update the Appraisal Report as of the 

date of purchase of the Property by the 

Applicants. According to the Appraiser, 

such an update would be necessary due 

to the length of time elapsed between 

the original Appraisal Report and the 

contemplated date of purchase of the 

Property. The Applicants have stated 

that they would pay the costs associated 

with updating the Appraisal Report. 

12. In the Appraisal Report, the 

Appraiser valued the Property in fee 

simple using the Sales Comparison 

Approach and Income Approach to 

valuation. The Appraiser indicated that 

he considered using the Cost Approach 

in addition to the Sales Comparison 

Approach and Income Approach, but 

ultimately decided that the Cost 

Approach was not appropriate, because 

the age of the building, the architectural 

details of the structure, and the lack of 

similar land sales prevent the Cost 

Approach from providing a meaningful 

indicator or adding any credibility to 

the overall analysis. 

The Appraisal Report indicates that 

the Sales Comparison Approach and 

Income Approach yielded $1,875,000 

and $1,850,000 for the Property, 

respectively. According to the 

Appraiser, the Sales Comparison 

Approach was considered the most 

pertinent to the analysis because of the 

recent sales of similar properties that 

were available for a comparative 

analysis, in spite of the fact that the 

available comparable sales of properties 

in the area were somewhat dated. 

Consequently, the Appraiser determined 

that the Sales Comparison Approach 

should be given consideration in the 

final analysis. Additionally, the 

Appraiser determined that the Income 

Approach was the most pertinent in the 

analysis of income producing 

properties. In valuing the Property using 

this approach, the Appraiser reviewed 

historical income and expense data and 

compared such data to similar 

competitive properties. In conclusion, 

the Appraiser accorded relatively equal 

consideration to both approaches to 

value and determined that the fair 

market value of the Property as of June 

9, 2009 was $1,860,000, using an 

exposure of three to sixteen months. 

The Appraisal Update 

13. Because the Appraisal Report was 

dated more than one year before this 

proposed exemption was published, the 

Department required an additional 

appraisal of the Property to take place, 

as an update to the original appraisal. In 

this regard, on November 3, 2010, the 

Appraiser provided an update to the 

Appraisal Report (the Appraisal 

Update), which incorporates the 

Appraisal Report of June 9, 2009.13

14. In the Appraisal Update, the 

Appraiser valued the Property in fee 

simple as of October 28, 2010 based 

upon the same methods of valuation 

used in the Appraisal Report, the 

Income Approach and Sales 

Comparison Approach. The Appraiser 

states that, upon his most recent 

inspection, the interior and exterior of 

the Property revealed no changes since 

the prior appraisal. However, the 

Appraisal Update notes that, while there 

continues to be overall softness in the 

real estate market in the past year since 

the date of the Appraisal Report, there 

is insufficient data to develop any 

definitive trends in current market 

price, as no additional sales of smaller, 

good quality hotels or bed and breakfast 

facilities since June of 2009 have 

occurred. 

15. The Appraisal Update indicates 

that the Sales Comparison Approach 

and the Income Approach yielded 

$1,850,000 and $1,800,000, respectively. 

Regarding the Sales Comparison 

Approach, while there were no recent 

comparable sales data since June of 

2009, as noted above, there were several 

open listings which supported and 

correlated well with the sales data in the 

Appraisal Report. In this regard, the 

Appraisal Update states that the slight 

decline in the value of the Property 

based on the Sales Comparison 

Approach was primarily due to the 

persistent soft market conditions. 

Regarding the Income Approach, an 

updated rental survey was completed 

which generally revealed that room 

rates have remained relatively stable 

since the date of the Appraisal Report. 

In addition, the Appraisal Update notes 

that no sales data was revealed which 

would contradict the overall 

capitalization rates used in the prior 

appraisal. 

The Appraisal Update notes that the 

two approaches are considered 

pertinent and should be considered in 

the final analysis. Thus, giving equal 

weight to each valuation approach, the 

Appraisal Update states that the fair 

market value of the Property as of 

October 28, 2010 was $1,825,000 

assuming an exposure period of 4 to 18 

months. Accordingly, the value of the 

Property constitutes approximately 

93.11% of the Plan’s total asset value of 

$1,960,130.43. 

Terms of the Sale 

16. The Applicants have requested an 

exemption from the Department to 

purchase the Property from the Plan. 

The Applicants represent that, although 

they do not currently possess enough 

cash to purchase the Property, they have 

the ability to sell for cash certain other 

properties that they currently own in 

their individual capacities. 

Furthermore, the Applicants represent 

that there is a chance that they may not 

be able to liquidate other real property 

holdings in order to pay cash for the full 

purchase price of the Property. In such 

event, they state that they will assume 

the remaining principal balance of the 

Loan from the Plan and pay cash to the 

Plan for the remainder.14 In either event, 

the Applicants state that the Plan’s 

obligations with respect to the Loan will 

be satisfied in full. Furthermore, the 

Applicants state that the Plan will not 

pay any commissions, costs, or other 

expenses in connection with the Sale, 

and the Appraisal Report will again be 

updated by the Appraiser on the date of 

the Sale.15

17. Therefore, in exchange for the 

Property the Applicants will make a 

one-time cash payment to the Plan equal 

to the greater of: (a) The original 

purchase price paid by the Plan for the 

Property, plus any expenses paid by the 

Plan relating to the holding of the 

Property, less any income generated by 

the Property and paid to the Plan, and 

less the Loan principal assumed by the 

Applicants, or (b) the appraised value of 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 9373 

$1,825,000, which represents the fair 

market value of the Property, less the 

Loan principal assumed by the 

Applicants. In the event that the 

Applicants assume the remainder of the 

Loan, they will indemnify and hold the 

Plan harmless for any further payment 

on such Loan. 

Rationale for the Sale 

18. The Applicants represent that the 

proposed transaction is in the interest of 

the Plan because it will divest the Plan 

of an asset that has been difficult to 

manage within the Plan as a result of 

adverse economic conditions. 

According to the Applicants, the 

hospitality industry has undergone a 

downturn as a result of the recent 

unfavorable economic conditions. As 

illustrated above, the net income 

generated by the Property since 2007 

has declined precipitously. The 

Applicants point out that this lack of 

strong cash flow makes it difficult for 

the Plan to pay expenses related to the 

management and maintenance of the 

Property. In this regard, the Applicants 

represent that the Property has had 

several maintenance and safety issues 

that have gone unaddressed because the 

Plan cannot afford to make them. 

19. Moreover, the Applicants suggest 

that the Sale is in the interest of the Plan 

because the Applicants would pay more 

to the Plan than unrelated third parties 

would pay to purchase the Property. 

According to the Applicants, in a sale 

on the open market the Plan would 

receive no more than its fair market 

value, whereas in the proposed 

transaction, the Applicants would make 

the Plan whole for any loss in the value 

of the Property since its acquisition, 

including any expenses paid by the Plan 

in holding the Property (net of any 

income paid to the Plan). As the 

Property’s current fair market value is 

well below its original acquisition cost, 

a sale on the open market would cause 

the Plan to sustain a significant 

monetary loss. Furthermore, the 

Applicants note that, in a sale on the 

open market, the Plan would be forced 

to pay a real estate commission of 

approximately 7% on the sale price of 

the Property. In the proposed 

transaction, the Plan will not incur any 

expenses in connection with the Sale, 

including real estate commissions. 

20. Finally, the Applicants, in their 

capacities as Plan fiduciaries, will (a) 

Determine whether it is in the interest 

of the Plan to proceed with the Sale of 

the Property, (b) review and approve the 

methodology used in the Appraisal 

Report that is being relied upon, and (c) 

ensure that such methodology is applied 

by the Appraiser in determining the fair 

market value of the Property on the date 

of the Sale. 

Summary 

21. In summary, the Applicants 

represent that the proposed transaction 

will satisfy the statutory criteria 

contained in section 408(a) of the Act 

and section 4975(c)(2) of the Code for 

the following reasons: 

(a) All terms and conditions of the 

Sale will be at least as favorable to the 

Plan as those that the Plan could obtain 

in an arm’s length transaction with an 

unrelated party; 

(b) The Plan’s obligations with respect 

to the Loan will be: 

(1) Satisfied in full out of the proceeds 

of the sale, or 

(2) Assumed in full by the Applicants, 

who shall indemnify and hold the Plan 

harmless for any further payment on, or 

any claims arising in connection with, 

the Loan; 

(c) The Plan will receive an amount 

in cash, equal to the greater of: 

(1) The original purchase price paid 

by the Plan for the Property, plus 

expenses paid by the Plan relating to the 

holding of the Property, less any income 

generated by the Property and paid to 

the Plan, less the Loan principal 

assumed by the Applicants pursuant to 

Section (b)(2), or 

(2) The appraised value of $1,825,000, 

which represents the fair market value 

of the Property, less the Loan principal 

assumed by the Applicants pursuant to 

Section (b)(2); 

(d) The fair market value of the 

Property has been determined by the 

Appraiser, who will update the 

Appraisal Report on the date the Sale is 

consummated; 

(e) The Sale will be a one-time 

transaction for cash; 

(f) The Plan will incur no real estate 

fees, or commissions, in connection 

with the Sale; and 

(g) The Plan fiduciaries will (1) 

determine whether it is in the interest 

of the Plan to proceed with the Sale, (2) 

review and approve the methodology 

used in the appraisal that is being relied 

upon, and (3) ensure that such 

methodology is applied by the 

Appraiser in determining the fair market 

value of the Property on the date of the 

Sale. 

For Further Information Contact: 

Warren Blinder of the Department, 

telephone (202) 693–8553. (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 or 

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, 14th day of 

February 2011. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2011–3590 Filed 2–16–11; 8:45 am] 

BILLING CODE 4510–29–P 


jlentini on DSKJ8SOYB1PROD with NOTICES