[Federal Register Volume 88, Number 189 (Monday, October 2, 2023)]
[Notices]
[Pages 67815-67817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21732]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2023-20; Exemption Application Nos. 
D-12032 and D-12033]


Exemption From Certain Prohibited Transaction Restrictions 
Involving the Occidental Petroleum Corporation Savings Plan and the 
Anadarko Employee Savings Plan Located in Houston, TX

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of exemption.

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SUMMARY: This document contains a notice of exemption issued by the 
Department of Labor (the Department) from certain prohibited 
transaction restrictions of the Employee Retirement Income Security Act 
of 1974. The exemption permits: (1) the acquisition, on August 3, 2020, 
by the Occidental Petroleum Corporation Savings Plan (the Oxy Plan) and 
the Anadarko Employee Savings Plan (the Anadarko Plan; together, the 
Plans), of stock warrants (the Warrants) issued by Occidental Petroleum 
Company, a party in interest with respect to the Plans; and (2) the 
holding of the Warrants.

DATES: This exemption will be in effect for the period beginning August 
3, 2020, through August 12, 2027.

FOR FURTHER INFORMATION CONTACT: Mrs. Blessed Chuksorji-Keefe of the 
Department at (202) 693-8567. (This is not a toll-free number).

SUPPLEMENTARY INFORMATION: The Plans requested an exemption pursuant to 
ERISA Section 408(a) and supplemented the request with certain 
additional information that has been made a part of the public 
record.\1\ On February 9, 2023, the Department published a notice of 
proposed exemption in the Federal Register at 88 FR 8472.
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    \1\ The procedures for requesting an exemption are set forth in 
29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).
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    Based on the record, the Department has determined to grant the 
proposed exemption. This exemption provides only the relief specified 
herein. It provides no relief from violations of any law other than the 
prohibited transaction provisions of ERISA, as expressly stated herein.
    The Department makes the requisite findings under ERISA Section 
408(a) based on the Applicants' adherence to all the conditions of the 
exemption. Accordingly, affected parties should be aware that the 
conditions incorporated in this exemption are, taken individually and 
as a whole, necessary for the Department to grant the relief requested 
by the Applicants. Absent these conditions, the Department would not 
have granted this exemption.

Background

    As discussed in greater detail in the proposed exemption, the 
Applicants are: (a) the Occidental Petroleum Corporation (Occidental or 
Oxy); (b) the Anadarko Petroleum Corporation (Anadarko), a wholly owned 
subsidiary of Oxy; and (c) the Plans, which are sponsored by Oxy and 
Anadarko, respectively.
    On June 26, 2020, Oxy announced that its Board of Directors had 
declared a distribution of Warrants to holders of Oxy common stock on 
the record date (Record Date) of July 6, 2020. The Warrants have a 
seven-year term and expire on August 3, 2027. Recipients may exercise 
the Warrants to purchase additional shares of Oxy common stock at the 
exercise price of $22 per share or sell the Warrants at the prevailing 
market price on the NYSE.\2\
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    \2\ As of the Record Date, July 6, 2020, the closing price for 
Oxy common stock on the NYSE was $18.18 per share.
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    On August 3, 2020, Oxy distributed the Warrants. Stockholders of 
record, including the Plans, received 1/8th (12.5%) of a Warrant for 
each share of Oxy common stock they held as of July 6, 2020. Each Oxy 
common stockholder, including the Plans, received the same 
proportionate number of Warrants based on the number of shares of Oxy 
common stock held as of July 6, 2020. The Plans and the other 
stockholders received the Warrants automatically, without any action on 
their part, because of Oxy's unilateral and independent corporate act.
    The Oxy Plan received 1,476,172 Warrants based on its holding of 
11,809,376 shares of Oxy common stock. The Anadarko Plan received 
26,601 Warrants based on its holding of 212,813 shares of Oxy common 
stock. Each Plan established a Warrant account to reflect their 
respective participants' proportionate interest in the Warrants. All 
stockholders, including each Plan participant, received 1/8th of a 
Warrant for every share of common stock of

[[Page 67816]]

which they were the record holder as of July 6, 2020.
    The Applicants represent that all decisions regarding whether to 
hold, sell, or exercise the Warrants by the Plans were made by 
Fiduciary Counselors Inc. (FCI), a qualified independent fiduciary 
within the meaning of 29 CFR 2570.31(j), while acting solely in the 
interests of the Plans and their participants and beneficiaries and in 
accordance with the Plans' provisions.
    As described in the proposed exemption, FCI sold the Oxy Plan's 
1,476,172 Warrants in ``blind transactions'' on the NYSE over the 
course of five trading dates (August 6, 7, 10, 11, and 12, 2020) for 
gross proceeds of $6,332,184.28 which were proportionately allocated to 
the Plan accounts of the affected participants in the Oxy Stock Fund 
(and reinvested in such participants' accounts in the Oxy Stock Fund). 
FCI sold the Anadarko Plan's 26,601 Warrants in ``blind transactions'' 
on the NYSE on August 10, 2020, for proceeds of $115,538.88. Because 
the Anadarko Plan was frozen to new investments, the proceeds from the 
sale were proportionately credited to the affected participants through 
the Anadarko Plan's qualified designated investment alternative. At the 
time of the sales of the Warrants by FCI, a share of Oxy Stock ranged 
from $15.23 on August 6, 2020 to $14.71 on August 12, 2020. The 
Warrants had an exercise price of $22.00 per share.
    The Applicants requested an exemption to permit the acquisition and 
holding by the Plans of the Warrants that were issued by Oxy, a party 
in interest with respect to the Plans. An exemption is necessary 
because the acquisition and holding of the Warrants by the Plans is 
prohibited under ERISA and the Code.
    On February 9, 2023, the Department published a notice of proposed 
exemption in the Federal Register that would permit the Plans' 
acquisition and holding of the Warrants. The exemption's protective 
conditions include a requirement that FCI represent the Plans' 
interests for all purposes with respect to the acquisition and holding 
of the Warrants, and that no brokerage fees, commissions, subscription 
fees, or other charges were paid by the Plans with respect to the 
acquisition and holding of the Warrants. In addition, FCI's 
responsibilities included determining whether and when to exercise or 
sell each Warrant held by the Plans.
    As discussed below, the Department finds that the favorable terms 
of the acquisition and holding of the Warrants by the Plans, combined 
with the protective conditions included in this exemption, are 
appropriately protective and in the interest of the Plans and their 
participants to support the granting of this exemption.

Comments Received Regarding the Proposed Exemption

    In the proposed exemption, the Department invited all interested 
persons to submit written comments and/or requests for a public hearing 
with respect to the proposed exemption by March 27, 2023. During the 
comment period, the Department received nine written comments from 
seven Plan participants (and a comment from FCI that is part of an 
email exchange between FCI and one of the aforementioned commenters, a 
retired Plan participant). The Department did not receive a request for 
a public hearing from any Plan participant.

Comments

1. Commenter Requests That the Oxy Warrants Be Returned to His Account
    One Plan participant submitted three of the nine comments, in which 
they expressed their opposition to the sale of the Warrants from the 
participant's 401(k) account. The Plan participant insisted that they 
``had no intention of selling these [W]arrants as they had a 7-year 
time value,'' and demanded that the Warrants be returned to his 
account. After it received this comment, the Department requested that 
the Plans' representative submit a response to these three comments to 
the Department. The Department also requested that FCI contact the Plan 
participant directly to address his concerns.
    Applicant's Response: The Plans' representative, an attorney for 
the Plan, reported to the Department that the participant's concerns 
were related to FCI's decision to sell the Warrants. The representative 
stated that she believes the commenter's concerns were appropriately 
addressed in the exemption application and FCI's report. Specifically, 
as explained in the application, the Oxy Stock Fund in each of the 
Plans is a unitized fund in which contributions allocated to 
participants' Oxy Stock Fund accounts reflect their unit interest in 
the Oxy common stock held by the Oxy Plan; i.e., the Plans own the 
stock and the participants receive an allocated interest in the value 
of the Fund. According to the representative the Plans were amended to 
provide that participants invested in the Stock Fund were to receive an 
allocated proportionate interest in the warrants received by the Plans 
based on the participant's Oxy Stock Fund units on July 6, 2020, the 
record date. The Plans were also amended to provide that an independent 
fiduciary would make decisions with respect to whether to sell or 
exercise the warrants and if the decision were to sell, the proceeds 
would be allocated to the participant's account and invested in the 
Stock Fund (for the Oxy Plan) or invested in the then-designated 
qualified default investment alternative applicable for such 
Participants (for the Anadarko Plan in light of its termination).'' The 
representative also stated that FCI's report, which was summarized in 
the proposed exemption and discussed with the Department before the 
proposal was published, explains FCI's decision-making process with 
respect to its decision to sell the warrants.
    FCI's Response: FCI contacted the Plan participant directly by 
sending a letter explaining that the Plans' decision to require FCI to 
make decisions concerning the Warrants rather than passing-through that 
decision to each of the participants is supported by administrative and 
cost reasons. The letter also explained FCI's decision-making process 
with respect to the decision to sell the Warrants and acknowledged that 
while the participant may have made a different decision regarding the 
Warrants received as a result of its holdings in the Oxy Stock Fund in 
the Oxy Plan, FCI's fiduciary responsibility was to make a prudent 
decision in the interest of all participants with respect to the 
Warrants received as a result of their holdings in the Oxy Stock Fund 
through the Plan. FCI said that it made a prudent decision that 
considered all of the factors involved, including the terms of the 
Plans, the fact that the Warrants were more volatile than Oxy stock and 
thus less appropriate as a plan investment, and the fact that the 
proceeds of the sale of the Warrants held by the Oxy Plan were to be 
reinvested in the Oxy Stock Fund.
    Department's Response: After reviewing the Commenter's request and 
the Applicant's response, the Department concurs that the application 
and FCI's Report addresses the issues raised by the commenter. The 
Department also notes that it considered the information contained in 
the application and FCI's Report, in their totality, in order to make 
the Department's requisite findings under ERISA Section 408(a). This 
includes a finding that the acquisition and holding by the Plans of the 
Warrants was in the interest of, and protective of, the Plans. However, 
the relief in this exemption

[[Page 67817]]

does not extend to ERISA Section 404, and no inference should be drawn 
from the fact that the Department is not opining on FCI's statement 
that it acted prudently on behalf of the Plans.
2. Plan Participants Seek Clarification or Express Their Opinions 
Regarding the Proposed Exemption
    Four comments were submitted anonymously. Six commenters, including 
the four anonymous commenters, either expressed their opinions about 
whether the proposed exemption should be granted, or they sought 
clarification regarding how the exemption would affect their benefits.
    Department's Response: The Department explained the proposed 
exemption to each of the non-anonymous commenters, via phone or email. 
However, the Department was unable to directly respond to the four Plan 
participants who submitted their comments anonymously.
    The complete application files (D-12032 and D-12033) are available 
for public inspection in the Public Disclosure Room of the Employee 
Benefits Security Administration, Room N-1515, U.S. Department of 
Labor, 200 Constitution Avenue NW, Washington, DC 20210. For a more 
complete statement of the facts and representations supporting the 
Department's decision to grant this exemption, refer to the proposed 
exemption.\3\
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    \3\ 88 FR 8472 (2/9/2023).
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    Accordingly, after considering the entire record developed in 
connection with the Applicants' exemption application, the Department 
has determined to grant the exemption described below.

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 ERISA Section 408(a) does not relieve a fiduciary or other party 
in interest from certain requirements of other ERISA provisions, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
ERISA Section 404, which, among other things, require a fiduciary to 
discharge his or her duties respecting the plan solely in the interest 
of the plan's participants and beneficiaries and in a prudent fashion 
in accordance with ERISA Section 404(a)(1)(B).
    (2) As required by ERISA Section 408(a), the Department hereby 
finds that the exemption is: (a) administratively feasible; (b) in the 
interests of affected plans and of their participants and 
beneficiaries; and (c) protective of the rights of participants and 
beneficiaries of the plans.
    (3) This exemption is supplemental to and not in derogation of any 
other ERISA provisions, 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 to determining whether the transaction is in fact a 
prohibited transaction.
    (4) The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describe all material terms of the transactions 
that are the subject of the exemption.
    Accordingly, the Department grants the following exemption under 
the authority of ERISA Section 408(a)in accordance with the procedures 
set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 
27, 2011):

Exemption

Section I. Covered Transactions

    The restrictions of ERISA Sections 406(a)(1)(E), 406(a)(2) and 
407(a)(1)(A), does not apply to the acquisition and holding by the 
Plans of Warrants, issued by Oxy, provided the conditions set forth in 
Section II below have been met.

Section II. Conditions

    (a) The Warrants were issued by Oxy to all Oxy common stockholders, 
including the Plans;
    (b) All Oxy common stockholders, including the Plans, were treated 
in the same manner with respect to the acquisition and holding of the 
Warrants;
    (c) All Oxy common stockholders, including the Plans, were issued 
the same proportionate number of Warrants based on the number of shares 
of Oxy common stock held by such stockholder;
    (d) The Plans' acquisition of the Warrants was a result of a 
unilateral and independent corporate act of Oxy without any 
participation by the Plans;
    (e) All decisions regarding whether to hold, sell, or exercise the 
Warrants by the Plans were made by FCI while acting solely in the 
interests of the Plans and their participants and beneficiaries and in 
accordance with the Plan's provisions;
    (f) FCI determined that it was protective and in the interests of 
the Plans and their participants and beneficiaries to sell all of the 
Warrants received by the Plans in blind transactions on the NYSE;
    (g) FCI will provide a written statement to the Department 
demonstrating that the covered transactions have met all of the 
exemption conditions within 90 days after the exemption is granted;
    (h) No brokerage fees, commissions, subscription fees, or other 
charges were paid by the Plans to Oxy with respect to the acquisition 
and holding of the Warrants, nor were they paid to any affiliate of Oxy 
or FCI with respect to the sale of the Warrants;
    (i) No party related to this exemption application has or will 
indemnify FCI, in whole or in part, for negligence and/or any violation 
of state or federal law that may be attributable to FCI in performing 
its duties overseeing the transaction. In addition, no contract or 
instrument may purport to waive FCI's liability under state or federal 
law for any such violations; and
    (j) Each Plan participant received the entire amount they were due 
with respect to the acquisition of the Warrants and the sale of the 
Warrants.
    Effective Date: This exemption will be in effect for the period 
beginning August 3, 2020, through August 12, 2027.

George Christopher Cosby,
Director Office of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2023-21732 Filed 9-29-23; 8:45 am]
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