Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices 3159 

Application at the address set forth 

above. 

Proposed Exemption 

Based on the facts and representations 

set forth in the application, 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, August 10, 1990), the 

Department proposes to modify the 

following individual Prohibited 

Transaction Exemptions (PTEs), as set 

forth below: PTE 89–88, 54 FR 42582 

(October 17, 1989); PTE 89–89, 54 FR 

42569 (October 17, 1989); PTE 89–90, 54 

FR 42597 (October 17, 1989); PTE 90–

22, 55 FR 20542 (May 17, 1990); PTE 

90–24, 55 FR 20548 (May 17, 1990); PTE 

90–28, 55 FR 21456 (May 24, 1990); PTE 

90–29, 55 FR 21459 (May 24, 1990); PTE 

90–30, 55 FR 21461 (May 24, 1990); PTE 

90–32, 55 FR 23147 (June 6, 1990); PTE 

90–36, 55 FR 25903 (June 25, 1990); PTE 

90–39, 55 FR 27713 (July 5, 1990); PTE 

90–59, 55 FR 36724 (September 6, 

1990); PTE 90–83, 55 FR 50250 

(December 5, 1990); PTE 90–84, 55 FR 

50252 (December 5, 1990); PTE 90–88, 

55 FR 52899 (December 24, 1990); PTE 

91–14, 55 FR 48178 (February 22, 1991); 

PTE 91–22, 56 FR 03277 (April 18, 

1991); PTE 91–23, 56 FR 15936 (April 

18, 1991); PTE 91–30, 56 FR 22452 (May 

15, 1991); PTE 91–62, 56 FR 51406 

(October 11, 1991); PTE 93–31, 58 FR 

28620 (May 5, 1993); PTE 93–32, 58 FR 

28623 (May 14, 1993); PTE 94–29, 59 FR 

14675 (March 29, 1994); PTE 94–64, 59 

FR 42312 (August 17, 1994); PTE 94–70, 

59 FR 50014 (September 30, 1994); PTE 

94–73, 59 FR 51213 (October 7, 1994); 

PTE 94–84, 59 FR 65400 (December 19, 

1994); PTE 95–26, 60 FR 17586 (April 

6, 1995); PTE 95–59, 60 FR 35938 (July 

12, 1995); PTE 95–89, 60 FR 49011 

(September 21, 1995); PTE 96–22, 61 FR 

14828 (April 3, 1996); PTE 96–84, 61 FR 

58234 (November 13, 1996); PTE 96–92, 

61 FR 66334 (December 17, 1996); PTE 

96–94, 61 FR 68787 (December 30, 

1996); PTE 97–05, 62 FR 1926 (January 

14, 1997); PTE 97–28, 62 FR 28515 (May 

23, 1997); PTE 98–08, 63 FR 8498 

(February 19, 1998); PTE 99–11, 64 FR 

11046 (March 8, 1999); PTE 2000–19, 65 

FR 25950 (May 4, 2000); PTE 2000–33, 

65 FR 37171 (June 13, 2000); PTE 2000–

41, 65 FR 51039 (August 22, 2000); PTE 

2000–55, 65 FR 37171 (November 13, 

2000); PTE 2002–19, 67 FR 14979 

(March 28, 2002); PTE 2003–31, 68 FR 

59202 (October 14, 2003); and PTE 

2006–07, 71 FR 32134 (June 2, 2006), 

each as subsequently amended by PTE 

97–34, 62 FR 39021 (July 21, 1997) and 

PTE 2000–58, 65 FR 67765 (November 

13, 2000) and for certain of the 

exemptions, amended by PTE 2002–41, 

67 FR 54487 (August 22, 2002). 

In addition, the Department notes that 

it is also proposing individual 

exemptive relief for: Deutsche Bank 

A.G., New York Branch and Deutsche 

Morgan Grenfell/C.J. Lawrence Inc., 

Final Authorization Number (FAN) 97–

03E (December 9, 1996); Credit 

Lyonnais Securities (USA) Inc., FAN 

97–21E (September 10, 1997); ABN 

AMRO Inc., FAN 98–08E (April 27, 

1998); Ironwood Capital Partners Ltd., 

FAN 99–31E (December 20, 1999) 

(supersedes FAN 97–02E (November 25, 

1996)); William J. Mayer Securities LLC, 

FAN 01–25E (October 15, 2001); 

Raymond James & Associates Inc. & 

Raymond James Financial Inc., FAN 03–

07E ( June 14, 2003); WAMU Capital 

Corporation, FAN 03–14E (August 24, 

2003); and Terwin Capital LLC, FAN 

04–16E (August 18, 2004); which 

received the approval of the Department 

to engage in transactions substantially 

similar to the transactions described in 

the Underwriter Exemptions pursuant to 

PTE 96–62, 61 FR 39988 (July 31, 1996). 

The definition of ‘‘Rating Agency’’

under section III.X. of the Underwriter 

Exemptions is amended to read: 

‘‘Rating Agency’’ means Standard & 

Poor’s Ratings Services, a division of 

The McGraw-Hill Companies, Inc.; 

Moody’s Investors Service, Inc.; 

FitchRatings, Inc.; Dominion Bond 

Rating Service Limited, or Dominion 

Bond Rating Service, Inc.; or any 

successors thereto. 

If granted, the amendment would be 

effective for transactions occurring on or 

after April 5, 2006. 

The availability of this amendment, if 

granted, is subject to the express 

condition that the material facts and 

representations contained in the 

Application are true and complete and 

accurately describe all material terms of 

the transactions. In the case of 

continuing transactions, if any of the 

material facts or representations 

described in the Application change, the 

amendment will cease to apply as of the 

date of such change. In the event of any 

such change, an application for a new 

amendment must be made to the 

Department. 

Signed at Washington, DC, this 17th day of 

January, 2007. 

Ivan L. Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. E7–969 Filed 1–23–07; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Exemption Application No. D–11183] 

Prohibited Transaction Exemption 

2007–01; Grant of Individual 

Exemptions Involving; The Plumbers 

and Pipefitters National Pension Fund 

(the Fund) 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Grant of Individual Exemptions. 

SUMMARY: This document contains 

exemptions issued by the Department of 

Labor (the Department) 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). 

A notice was published in the Federal 

Register of the pendency before the 

Department of a proposal to grant such 

exemption. The notice set forth a 

summary of facts and representations 

contained in the application for 

exemption and referred interested 

persons to the application for a 

complete statement of the facts and 

representations. The application has 

been available for public inspection at 

the Department in Washington, DC. The 

notice also invited interested persons to 

submit comments on the requested 

exemption to the Department. In 

addition the notice stated that any 

interested person might submit a 

written request that a public hearing be 

held (where appropriate). The applicant 

has represented that it has complied 

with the requirements of the notification 

to interested persons. No requests for a 

hearing were received by the 

Department. Public comments were 

received by the Department as described 

in the granted exemption. 

The notice of proposed exemption 

was issued and the exemption is being 

granted solely by the Department 

because, 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 proposed to the Secretary of 

Labor. 

Statutory Findings 

In accordance with section 408(a) of 

the Act and/or section 4975(c)(2) of the 

Code and the procedures set forth in 29 

CFR part 2570, subpart B (55 FR 32836, 

32847, August 10, 1990) and based upon 

the entire record, the Department makes 

the following findings: 


pwalker on PROD1PC71 with NOTICES
3160 Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices 

(a) The exemption is administratively 

feasible; 

(b) The exemption is in the interests 

of the plan and its participants and 

beneficiaries; and 

(c) The exemption is protective of the 

rights of the participants and 

beneficiaries of the plan. 

The Plumbers & Pipefitters National 

Pension Fund (the Fund) Located in 

Alexandria, VA 

[Prohibited Transaction Exemption (PTE) 

2007–01; Exemption Application No. D–

11183] 

Exemption 

The restrictions of sections 

406(a)(1)(A) through (D) 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, effective June 5, 2001, 

to the transactions described below 

involving the receipt by Diplomat 

Properties, Limited Partnership (DPLP 

or the Partnership) of certain services 

and products from the hotel 

management company, Westin 

Management Company East (after 

January 12, 2006, Westin Hotel 

Management, L.P.) (referred to 

collectively with its parent company, 

Starwood Hotels & Resorts Worldwide, 

Inc., as Starwood) and certain related 

entities (Related Companies), retained to 

operate the Partnership’s principal 

asset, the Westin Diplomat Resort & Spa 

and the Diplomat Country Club and Spa 

(collectively, the Resort), provided that 

there is adherence to the material facts 

and representations contained in the 

Application and satisfaction of the 

applicable requirements described in 

Parts II and III below. 

I. Exemption Transactions 

(a) The provision of Centralized 

Services or Additional Services 

(collectively, the Proposed Services) to 

the Resort by Starwood or a Related 

Company; 

(b) The purchase of goods from 

Starwood or a Related Company in 

connection with the provision of 

Centralized Services or Additional 

Services (Purchase of Goods); and 

(c) The participation of the Resort in 

the Associate Room Discount Program 

(ARD Program), 

II. General Conditions 

(a) LaSalle Investment Management, 

Inc., Capital Hotel Management, LLC or 

a successor independent qualified 

professional asset manager (QPAM) for 

the Partnership, will represent the 

interests of the Partnership for all 

purposes with respect to the Proposed 

Services and the Purchase of Goods for 

the duration of the arrangement. The 

QPAM, on behalf of the Partnership, 

through negotiation and execution of 

the Operating Agreements and periodic 

monitoring of the Proposed Services and 

the Purchase of Goods, determines that: 

(1) Starwood’s provision of 

Centralized Services and Additional 

Services to the Resort is in the best 

interests and protective of the 

participants and beneficiaries of the 

Plumbers & Pipefitters National Pension 

Fund (the Fund). 

(2) The terms under which the 

provision of Centralized Services and 

Additional Services are provided by 

Starwood to the Resort are at least as 

favorable to the Resort as those which 

the Partnership could obtain in arm’s 

length transactions with unrelated 

parties in the relevant market; 

(3) The overall cost of services and 

products charged by Starwood to the 

Resort on a centralized basis is 

consistent with the amounts charged by 

other potential branded operators; and 

(4) The Centralized Services and 

Additional Services made available by 

Starwood and its affiliates are provided 

at prices and on terms at least as 

favorable to the Partnership as are 

available in the relevant market from 

unrelated parties and reflect the same 

prices and terms as are offered by 

Starwood and its affiliates to other 

properties managed by Starwood and its 

affiliates in the ordinary course of 

business. 

(b) Under the Operating Agreements, 

at all times that the Partnership is using 

Centralized Services and Additional 

Services, Starwood has acknowledged 

in writing: 

(1) Starwood’s fiduciary status under 

section 3(21) (A) of the Act, with respect 

to the Resort; and 

(2) Starwood’s indemnification of the 

Partnership with respect to any claims, 

demands, actions, penalties, suits and 

liabilities arising from Starwood’s 

breach of fiduciary duty or violation of 

the Act. 

(c) On an annual basis, the QPAM, on 

behalf of the Partnership, approves the 

participation of the Resort in 

Centralized Services and Additional 

Services as part of its approval of the 

Resort’s Annual Operating Plan. 

(d) During any year, subject to 

exceptions for certain Variable Expenses 

or Uncontrollable Expenses, Starwood 

does not, without the approval of the 

QPAM, incur any cost or expense or 

make any expenditure with respect to 

Centralized Services or Additional 

Services that would: (i) Cause the total 

expenditures for any line item in the 

Annual Operating Plan that includes 

payment of fees for Centralized Service 

or Additional Services to exceed the 

budgeted expense for that line item by 

more than 10%; (ii) cause total 

expenditures for any department of the 

Resort that pays fees for Centralized 

Service or Additional Services to exceed 

the budgeted expenses for that 

department by more than 5%; or (iii) 

cause the actual aggregate expenditures 

for operating expenses or capital 

expenditures to exceed the budget by 

more than 2%. 

(e) All purchases of products and 

services by Starwood from (i) itself, (ii) 

any person or entity directly or 

indirectly controlling, or controlled by, 

or under common control with 

Starwood, or (iii) any entity in which 

Starwood or its affiliates have any 

ownership, investment or management 

interest or responsibility are first 

approved by the QPAM (as part of the 

approval of the Annual Operating Plan 

or otherwise), except in cases of 

purchases of not more than $50,000 per 

annum where the price paid or charged 

for each such purchase and the terms 

thereof are lower than those that could 

be obtained from unrelated third parties 

in the applicable location. 

(f) The QPAM approves (as part of the 

approval of the Annual Operating Plan 

or otherwise) all contracts for 

Additional Services (and, to the extent 

applicable, Centralized Services) that 

provide for aggregate annual 

expenditure or revenue of more than 

$50,000 or have a term of more than one 

year. 

(g) The fees charged to the Resort for 

Centralized Services can be increased 

only on a system-wide basis (i.e., not 

just for the Resort). 

(h) The fees for Centralized Services 

are not greater than the lowest of: (i) The 

fees initially agreed upon by the parties 

in the Operating Agreement; (ii) 

Starwood’s prevailing fee for the 

services or products as generally 

charged by Starwood or its affiliates to 

other properties managed by it; (iii) 

Starwood’s cost, with no profit or markup (although it may include overhead); 

or (iv) 5% of gross revenues (exclusive 

of certain occupancy-related charges, 

such as third-party reservations fees and 

frequent guest program charges) of the 

hotel or country club, as applicable. 

(i) Starwood does not, with respect to 

any Centralized Service or Additional 

Service, solicit bids for the product or 

service in a manner that could result in 

a ‘‘right of first refusal’’ or other bidding 

advantage for the benefit of Starwood or 

its affiliates. 

(j) The QPAM, on behalf of the 

Partnership, has the right to opt out of 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices 3161 

any Centralized Services and to elect 

not to receive any Additional Services. 

(k) The QPAM, on behalf of the 

Partnership, retains the right to conduct 

audits of transactions entered into by 

Starwood with respect to Centralized 

Services and Additional Services, and, 

in the event that an audit uncovers a 

discrepancy related to any payment to 

Starwood or its affiliates, it must be 

corrected within ten days of notice 

being provided. 

(l) As part of its monitoring 

responsibilities, the QPAM, on behalf of 

the Partnership, has the right to meet 

with representatives of Starwood no less 

frequently than monthly (and otherwise 

at the request of the Partnership) for the 

purposes of reviewing each Annual 

Operating Plan, preparing, reviewing 

and updating rolling three-month 

forecasts for the Resort, and analyzing 

Starwood’s actual performance against 

the Annual Operating Plan and the 

performance of the Resort relative to an 

applicable competitive set of resorts. 

(m) The QPAM, on behalf of the 

Partnership, retains the right to receive 

monthly interim and annual accounting 

reports that include a comparison of 

actual to budgeted expenses, and to 

have such reports audited by an 

independent accounting firm not more 

than once in any fiscal year. 

III. ARD Program Conditions 

(a)(1) Rooms are not made available to 

employees or associates of Starwood or 

a Related Company pursuant to the 

Associate Room Discount Program if the 

rooms could otherwise be sold to the 

public at a higher rate; and 

(2) In each case, the discounted rates 

fully cover the variable cost to the 

Resort for the use of the room and the 

cost to the Resort of the food, beverage 

and amenities. 

(b) Participation in the Associate 

Room Discount Program is offered by 

Starwood at all of its owned properties 

and properties that it manages. 

(c) The QPAM, acting on behalf of the 

Partnership, monitors the Resort’s 

participation in the Associate Room 

Discount Program and retains the right 

to opt out of the Associate Room 

Discount Program. 

IV. Definitions 

(a) The term ‘‘Partnership’’ means 

Diplomat Properties, Limited 

Partnership whose principle asset is the 

Resort. The Plumbers & Pipefitters 

National Pension Fund (the Fund) is the 

sole member of Diplomat Properties, 

LLC, the General Partner of the 

Partnership. The QPAM is a nonmember manager of the General Partner. 

(b) The term ‘‘QPAM’’ means LaSalle 

Investment Management, Inc. (LaSalle), 

Capital Hotel Management, LLC (CHM) 

or a successor qualified professional 

asset manager (as defined in section V(a) 

of Prohibited Transaction Class 

Exemption 84–14 at 49 FR 9494, March 

13, 1984), as amended at 71 FR 5887 

(February 3, 2006) or such other entity 

that is permitted by a U.S. Department 

of Labor individual exemption to 

function with powers similar to that of 

a qualified professional asset manager, 

that is exercising discretionary authority 

on behalf of the Fund with respect the 

activities of the Partnership and the 

Resort. 

(c) The term ‘‘affiliate’’ means: 

(1) Any person directly or indirectly 

through one or more intermediaries, 

controlling, controlled by, or under 

common control with the person; 

(2) Any officer, director, employee, 

relative, or partner of any such person; 

and 

(3) Any corporation or partnership of 

which such person is an officer, 

director, partner, or employee. 

(d) The term ‘‘control’’ means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(e) The term ‘‘Related Company’’

means wholly or partially owned 

affiliates of Starwood (including, 

without limitation, affiliates of 

Starwood that are parties in interest by 

virtue of section 3(14)(G), (H) or (I) of 

the Act or disqualified persons by virtue 

of sections 4975(e)(2)(G), (H), or (I) of 

the Code) or affiliates or other entities 

in which Starwood has an ownership or 

other contractual interest. 

(f) The term ‘‘Additional Services’’

means any service or product other than 

Centralized Services: (1) Which is 

provided to the Resort by Starwood or 

a Related Company and is typically 

provided by Starwood or a Related 

Company on a property by property 

basis to properties operated by 

Starwood or an affiliate; and (2) for 

which Starwood or a Related Company 

receives a fee for providing such service 

or product that is based on the level of 

usage by the Resort. 

(g) The term ‘‘Annual Operating Plan’’

means the annual written operating plan 

submitted by Starwood to the 

Partnership no later than 90 days before 

the commencement of each fiscal year, 

which plan shall include monthly 

estimates and cover the operating 

budget (including departmental revenue 

and expenses, taxes, insurance and 

reserves), the capital budget, the 

marketing plan, the advertising 

program, working capital requirements, 

litigation and any other matter 

reasonably deemed appropriate by the 

QPAM, on behalf of the Partnership. 

(h) The term ‘‘Associate Room 

Discount Program’’ means the program 

maintained by Starwood with the 

approval of the QPAM pursuant to 

which discounted room rates and 

discounted food, beverage and other 

amenities at participating hotels are 

provided for Starwood associates or 

associates of participating Starwood 

franchise hotels worldwide and their 

immediate family. 

(i) The term ‘‘Centralized Services’’

means any service or product, including 

(without limitation) certain advertising, 

marketing and promotional activities 

(including frequent guest programs), 

reservations and distribution systems 

and networks, training and similar 

items, provided that: (i) The service or 

product is provided to the Resort by 

Starwood or a Related Company and is 

typically provided by Starwood or a 

Related Company on a central, regional, 

chain or brand basis, rather than 

specifically at an individual property; 

and (ii) Starwood or a Related Company 

receives a fee for providing the service 

or product that is based on the level of 

usage by the Resort. 

(j) The term ‘‘Operating Agreements’’

means, collectively, the parallel 

operating agreements, executed on June 

5, 2001, between LaSalle and Starwood, 

as amended, and executed on May 1, 

2006, between CHM and Starwood, as 

amended, to brand and operate the 

Resort’s convention hotel as the ‘‘Westin 

Diplomat Resort and Spa,’’ and to brand 

and operate the country club as ‘‘The 

Diplomat Country Club and Spa,’’ as 

part of Starwood’s Luxury Collection, 

and any successor operating agreements 

that may be in effect between the parties 

or successor parties from time to time. 

(k) The term ‘‘Variable Expense,’’ as 

set forth in the Operating Agreements, 

means operating expenses covered by 

the then-current Annual Operating Plan 

that reasonably fluctuate as a direct 

result of business volumes, including 

food and beverage expenses, other 

merchandise expenses, operating supply 

expenses, and energy costs. 

(l) The term ‘‘Uncontrollable 

Expenses,’’ as set forth in the Operating 

Agreements, means certain expenses the 

amount of which cannot be controlled 

by Starwood, which expenses include, 

without limitation, real estate taxes, 

utilities, insurance premiums, license 

and permit fees and charges provided in 

contracts entered into pursuant to the 

Operating Agreement, provided, that 

Starwood agrees to use commercially 

reasonable efforts to mitigate the 

expenses under such contracts; and the 


pwalker on PROD1PC71 with NOTICES
3162 Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices 

QPAM, on behalf of the Partnership, 

agrees that Starwood shall have the right 

to pay all Uncontrollable Expenses 

without reference to the amounts 

provided for in respect thereof in the 

approved Annual Operating Plan. 

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. 

SUPPLEMENTARY INFORMATION: On August 

21, 2006, the Department published a 

notice in the Federal Register (71 FR 

48768) of a proposed individual 

exemption (the Proposed Exemption). 

The application for this Proposed 

Exemption (Application) was submitted 

by LaSalle Investment Management, Inc. 

(LaSalle), as qualified professional asset 

manager (QPAM) for, and on behalf of, 

the Fund (Applicant). By letter dated 

April 25, 2006, LaSalle informed the 

Department that as of April 30, 2006, 

LaSalle was replaced by Capital Hotel 

Management, LLC (CHM) as the QPAM 

for the Fund. Independent Fiduciary 

Services, Inc. (IFS) is the independent 

named fiduciary of the Fund’s account 

that holds the interests in the 

Partnership, the General Partner and 

other assets of the Fund invested in, or 

awaiting investment in, the Resort (the 

Diplomat Account). The Fund is funded 

solely by employer contributions 

negotiated under collective bargaining 

agreements with the United Association 

of Journeymen and Apprentices of the 

Plumbing and Pipe Fitting Industry of 

the United States and Canada, AFL–CIO 

(the Union). The Fund is administered 

by the Board of Trustees of the Fund, 

which has six individual members, 

three of whom are appointed by the 

Union and three of whom are appointed 

by contributing employers. The 

Applicant requested that the restrictions 

of sections 406(a)(1)(A) through (D) 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, not apply, effective June 5, 

2001, to certain transactions involving 

the receipt by Diplomat Properties, 

Limited Partnership (DPLP or the 

Partnership) of certain services and 

products from the hotel management 

company, Westin Management 

Company East (after January 12, 2006, 

Westin Hotel Management, L.P.) 

(referred to collectively with its parent 

company, Starwood Hotels & Resorts 

Worldwide, Inc., as Starwood) and 

certain related entities (Related 

Companies), retained to operate the 

Partnership’s principal asset, the Westin 

Diplomat Resort & Spa and the Diplomat 

Country Club and Spa (collectively, the 

Resort). 

Discussion and Comments Received 

Four comment letters from interested 

persons and one comment from Capital 

Hotel Management, LLC (CHM) as the 

QPAM for the Fund were received by 

the Department. The CHM comment 

provided further information on the 

proposed exemption and is discussed 

below. By letter dated November 20, 

2006, CHM responded to the questions 

raised in the four comments received 

from interested persons. CHM noted 

that several commenters raised issues or 

asked questions regarding the propriety 

of the initial purchase of the Resort and 

the Applicant’s development of it. The 

comments included statements alleging 

that members of the Board of Trustees 

of the Fund and contractors engaged in 

the Resort’s development and operation 

received improper benefits. CHM stated 

that the Proposed Exemption in no way 

relates to the initial purchase of the 

Resort or the subsequent investment of 

the Fund’s assets to develop and 

stabilize it. CHM explained that the 

exemption was requested because the 

QPAM concluded that Starwood’s 

provision of Centralized Services, 

Additional Services and the Associate 

Room Discount Program will result in 

improved operating performance 

beyond that which can be provided by 

an operator of a single hotel or smaller 

group of hotels that does not provide 

those services and products. In addition, 

the QPAM concluded that (a) by 

centralizing the sourcing function, 

Starwood is also able to capture 

economies of scale designed to reduce 

the cost of the procurement function in 

the Resort and (b) the Resort’s 

participation in these programs should 

result in increased efficiencies and 

lower operating costs. CHM asserts that 

none of the commenters has disputed 

any of these conclusions. 

CHM noted that one commenter 

stated that ‘‘not one of the UA Members 

of the UA PPNPF receive a discount on 

anything pertaining to the Diplomat 

Propertys [sic], why should someone 

else who are not owners of the 

Deplomat [sic] receive a discount’’. 

CHM responded that, while the precise 

meaning of this comment is unclear, to 

the extent that the commenter is 

questioning the purpose of the Associate 

Room Discount Program, the QPAM 

concluded that it constitutes a relatively 

cheap employee benefit for employees 

of the Resort. CHM stated that, because 

this arrangement is typically offered by 

Starwood and all other international 

branded hotel and resort operators, 

denying this benefit to Resort employees 

would place the Resort at a distinct 

disadvantage vis-a`-vis other competing 

hotels in its area with respect to hiring 

and retaining employees. 

Another comment questioned 

whether the Resort can make a profit 

and stated that the Partnership should 

sell the Resort immediately to the 

highest bidder. CHM responded that the 

purpose of this Application is not to 

determine whether a sale of the Resort 

is in the best interest of the Partnership 

or the Applicant, but to allow the 

Partnership to enter into arrangements 

with Starwood, the Resort’s operator 

(through Westin Hotel Management, 

L.P.), to enhance the operation of the 

Resort while the Applicant (through the 

Partnership) owns it. 

Another comment stated that the 

Partnership does not need ‘‘additional 

managers to manage the ‘Westin 

Group’ ’’ and that the ‘‘Westin Group’’

should be replaced by managers that can 

manage the Resort properly and with a 

profit, such as the ‘‘Sheraton Group’’ or 

the ‘‘Hilton Group.’’ CHM responds that, 

as an initial matter, Sheraton hotels and 

Westin hotels are sister brands within 

the Starwood group of brand hotels. The 

Applicant submits that this comment is 

not relevant to the Proposed Exemption 

because the Application does not seek 

an exemption to permit the retention of 

CHM, the current investment manager 

and qualified professional asset manager 

for the Applicant’s investment in the 

Resort. The retention of CHM as an 

investment manager is specifically 

contemplated by ERISA and does not 

constitute a prohibited transaction. 

Rather, it is CHM’s involvement in the 

budget process and general oversight of 

Starwood as the Resort operator, which 

limits Starwood’s discretion and will 

prevent abuse of the arrangement for 

Centralized Services, Additional 

Services and the Associate Room 

Discount Program. CHM notes that, in 

correspondence supplementing the 

Application, CHM confirmed to the 

Department that it is responsible for 

performing the actions ascribed to the 

QPAM as they relate to both the specific 

and general limitations on Starwood’s 

activities described in Section II.F of the 

Application. In addition, CHM 

confirmed that, as described in Section 

III.A of the Application, changes to 

services and products or fees (as limited 

by the Operating Agreements) must be 

presented to and approved, if 

applicable, by CHM in connection with 

the annual budget process. 

CHM states that another commenter 

asked various questions regarding the 

retention of Starwood. The commenter 

asked the additional costs of another 

management company being involved, 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices 3163 

who owns Starwood, whether any 

pension officials or board members are 

associated in any way with Starwood or 

its affiliates, how the Proposed 

Exemption is going to help pension plan 

and union members and retirees, and 

who is the Starwood affiliate presently 

managing the Resort. CHM responded 

that, as described in the Application 

and subsequent correspondence from 

the QPAM, the hotel is currently 

managed by Westin Hotel Management, 

L.P.; a Delaware limited partnership and 

a wholly-owned subsidiary of Starwood 

Hotels & Resorts Worldwide, Inc., which 

is a public company. CHM asserts that 

no member of the Board of Trustees of 

the Fund is a director, officer or 

employee of Starwood or any Starwood 

ERISA Affiliate. CHM also states that 

the determination to retain Starwood 

was made not by the Board of Trustees 

but by LaSalle, CHM’s predecessor as 

qualified professional asset manager. In 

addition, La Salle was, and CHM is, 

overseen by IFS, the Applicant’s 

independent named fiduciary for the 

Diplomat Account. Starwood was 

selected after LaSalle, monitored by IFS, 

engaged in a comprehensive review of 

all relevant issues that included 

extensive due diligence, a competitive 

bidding process (which attracted many 

of the larger international hotel 

operating companies, including several 

well-known brands) and several 

interviews and on-site visits. The 

Applicant notes that the purpose of this 

Application is not to determine whether 

the retention of Starwood was 

appropriate or whether the overall fee 

arrangement with Starwood is 

reasonable, but rather whether 

Starwood, as operator of the Resort, will 

be permitted to engage in certain 

transactions that the QPAM has 

determined will inure to the financial 

benefit of the Partnership (and, 

therefore, the Fund). Accordingly, the 

Applicant believes that the overall cost 

of a management company being 

involved is immaterial to this Proposed 

Exemption. CHM states that of more 

significance is that the QPAM has, after 

careful consideration, concluded that 

Centralized Services and Additional 

Services are likely to result in benefits 

to the Resort that are both financial (i.e., 

utilizing these services and products 

will result in cost savings through 

aggregation of Starwood’s purchasing 

and organizational power, and there are 

specific provisions in the Operator 

Agreements to assure that the Resort 

will benefit financially from such 

arrangements) and operational (i.e., 

value will be achieved through 

enhancements in quality and service 

resulting from the economies of scale 

and joint participation in these 

arrangements). Thus, the QPAM expects 

that Starwood’s services and purchasing 

program, as well as its Associate Room 

Discount Program, will enhance the 

value of the Resort, resulting in a benefit 

to participants and beneficiaries of the 

Fund. 

Another comment inquired as to why 

certain individuals did not receive 

notice of the Proposed Exemption. CHM 

explains that the notice to interested 

persons, along with the supplemental 

statement required by Department 

Regulation 2570.43(b)(2) was sent to 

each member of the Board of Trustees of 

the Applicant and to anyone who 

commented with respect to PTE 99–46, 

PTE Application D–10960 or D–10971. 

CHM notes that, with respect to 

Applications D–10960 and 10971, the 

Department concluded that, in part due 

to the burden and expense of a wider 

distribution, it was reasonable and 

adequate under the circumstances to 

provide the notice to interested persons 

and supplemental statement only to 

persons who commented on PTE 99–46, 

the first exemption issued with respect 

to the Fund and the Diplomat Account. 

CHM believes that the Proposed 

Exemption is more technical and less 

sweeping than either of the prior 

exemptions the Department has granted 

regarding the Diplomat Account. It is 

unlikely that individuals, other than the 

Board of Trustees and those who 

commented on PTE 99–46, D–10960 or 

D–10971 would be concerned with the 

technical issues regarding the provision 

of the Centralized Services, Additional 

Services and Associate Room Discount 

Program to the Partnership by Starwood 

(or a Related Company). CHM concludes 

that the reasonableness of this 

assumption is reflected in the absence of 

comments from those who did receive 

notice that go to the substance of any of 

those issues. 

One commenter requested 

information concerning any ‘‘current or 

future hearings’’ before the Department 

on the Proposed Exemption. Regarding 

a public hearing, the Department does 

not believe that there are material 

factual issues relating to this exemption 

that were raised by the commenters 

which would require the convening of 

a hearing on the Proposed Exemption. 

Thus, the Department has determined 

not to hold a hearing. 

As previously noted in the Proposed 

Exemption, in considering exemptive 

relief for the transactions described 

herein, the Department placed a great 

deal of emphasis on the significant 

involvement of IFS, as named fiduciary, 

and LaSalle and CHM, as investment 

managers (the Independent Fiduciaries) 

and their considered and objective 

evaluation of the subject transactions. 

These Independent Fiduciaries have 

represented for the record that the 

retention of Starwood was in the 

interests of the Partnership and that the 

written agreement and the limitations 

contained therein permit the 

Independent Fiduciaries to effectively 

monitor and scrutinize the actions 

undertaken by Starwood. The initial and 

continued involvement of the 

Independent Fiduciaries on behalf of 

the Fund with respect to the 

transactions that are the subject of this 

exemption is a critical factor in the 

Department’s determination to grant 

exemptive relief. In addition, as the 

Department has previously stated in 

PTE 2001–39, the fact that a transaction 

is the subject of an exemption under 

section 408(a) of the Act does not 

relieve a fiduciary from the general 

fiduciary responsibility provisions of 

section 404 of the Act. IFS’ appointment 

of an investment manager and QPAM to 

manage the Diplomat Account and its 

ongoing determination to continue to 

retain LaSalle and CHM with respect to 

the management of the Diplomat 

Account are subject to section 404 of the 

Act. Both LaSalle and CHM, as 

investment managers for the Diplomat 

Account, retain fiduciary responsibility 

for the activities undertaken by 

Starwood on behalf of the Resort. In this 

regard, section 404(a)(1)(A) and (B) of 

ERISA requires that a fiduciary 

discharge his duties to a plan solely in 

the interests of the participants and 

beneficiaries, for the exclusive purpose 

of providing benefits to participants and 

beneficiaries and defraying reasonable 

administrative expenses, and in a 

prudent manner. Accordingly, it is the 

responsibility of the Fund’s fiduciaries 

to operate the Resort in a manner 

designed to maximize the Fund’s rate of 

return, consistent with their fiduciary 

duties under section 404 of the Act. The 

fiduciary obligation to act prudently 

requires, at a minimum, that the 

Independent fiduciaries conduct an 

ongoing objective, thorough and 

analytical critique of the management of 

the Diplomat Account. If the 

transactions that are the subject of this 

exemption result in activity that is not 

‘‘prudent,’’ and not ‘‘solely in the 

interest’’ of the participants and 

beneficiaries of the Fund, the 

responsible fiduciaries of the Fund 

would be liable for any losses resulting 

from such a breach of fiduciary 

responsibility, even if the transactions 

involved do not constitute prohibited 


pwalker on PROD1PC71 with NOTICES
3164 Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices 

transactions under section 406 of 

ERISA. 

FOR FURTHER INFORMATION CONTACT: 

Wendy McColough of the Department, 

telephone (202) 693–8540. (This is not 

a toll-free number.) 

American Maritime Officers Safety & 

Education Plan (S&E Plan); American 

Maritime Officers Pension Plan; 

American Maritime Officers Vacation 

Plan; American Maritime Officers 

Medical Plan; and American Maritime 

Officers 401(k) Plan; (Collectively the 

AMO Plan(s)) Located in Dania Beach, 

Florida and Toledo, Ohio 

[Prohibited Transaction Exemption No. 

2007–02; Application Nos. L–11148; D11149; 

L–11150; L–11151; D–11152; and D–11153] 

Exemption 

Section I 

The restrictions of sections 406(a) and 

406(b)(1) and (b)(2) of the Act shall not 

apply to: (1) The S&E Plan entering into 

an arrangement with the American 

Maritime Officers (the Union), which is 

a party in interest with respect to the 

AMO Plans, for the Union to pay the 

S&E Plan, where appropriate and at the 

rate established by the independent 

fiduciary (the I/F), for the portion of the 

Union trustees’ food and lodging 

provided by the S&E Plan that is 

attributable to attendance at certain 

Union meetings at the Dania Beach, 

Florida and Toledo, Ohio facilities 

(collectively, the Facilities); (2) the S&E 

Plan entering into an arrangement with 

the Union and certain contributing 

employers, who are parties in interest 

with respect to the AMO Plans, to pay 

the S&E Plan at a rate established by the 

I/F, for food and lodging provided by 

the S&E Plan at the Facilities for the 

representatives of the Union and the 

respective contributing employers that 

is attributable to attendance at various 

conferences; and (3) the S&E Plan 

entering into an arrangement with the 

governing bodies of the American 

Maritime Officers Joint Employment 

Committee, and the American Maritime 

Officers Service, who are parties in 

interest with respect to the AMO Plans, 

to pay the S&E Plan at a rate established 

by the I/F, for food and lodging 

provided by the S&E Plan at the 

Facilities. 

Section II 

The restrictions of sections 406(a) and 

406(b)(1) and 406(b)(2) of the Act and 

the sanctions resulting from the 

application of section 4975 of the Code, 

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

through (E) of the Code, shall not apply 

to: (1) The AMO Plans sharing expenses 

based on an internal expense allocation 

model (the Allocation Model) for the 

provision of food and lodging by the 

S&E Plan at the Facilities to the AMO 

Plans’ trustees (the Trustees); and (2) 

The AMO Plans, the JEC and AMOS 

sharing expenses based on the 

Allocation Model for the provision of 

food and lodging by the S&E Plan at the 

Facilities. 

Section III 

The restrictions of sections 406(a) and 

406(b)(1) and (b)(2) of the Act shall not 

apply to: (1) Contributing employers 

contracting with the S&E Plan to 

provide one of its regular courses at a 

special time; and (2) The S&E Plan 

designing training programs or 

undertaking special research or 

modeling that is tailored to the needs of 

a particular contributing employer or its 

vessels. 

Conditions 

This exemption is subject to the 

following conditions: 

(a) Each AMO Plan will pay its 

appropriate share of expenses based on 

the Allocation Model; 

(b) The I/F retained by the AMO Plans 

will: 

(1) Make a determination of whether 

the proposed transactions (the 

Transaction(s)) are prudent and in the 

best interest of the relevant AMO 

Plan(s); 

(2) Establish the terms for each of the 

Transactions, including: 

(i) The price to be charged for the 

services provided pursuant to the 

Transactions; and 

(ii) The terms and conditions ensuring 

that the Transactions are fair to the 

involved AMO Plans; 

(3) Develop policies and guidelines 

for the implementation of the 

Transactions; 

(4) Monitor the Transactions on an 

on-going basis, including periodic 

reviews of the Transactions, to ensure 

compliance with the I/F policies and 

guidelines; 

(5) On a periodic basis, review the 

terms of each of the Transactions, 

including the fair market value of the 

services provided; and 

(6) Prepare an annual report, 

summarizing the Transactions for that 

year; 

(c) The costs associated with 

recordkeeping and all forms of 

independent oversight will be included 

in the daily rate established by the I/F 

for food and lodging provided by the 

S&E Plan at the Facilities; 

(d) An independent auditor will 

perform annual audits of all the AMO 

Plans to identify and reconcile any 

discrepancies regarding the 

recordkeeping involving the 

Transactions and provide an annual 

evaluation of all allocation models and 

produce approval letters explicitly 

affirming that the models are 

satisfactory; 

(e) The Room Master Software System 

will create an invoice for lodging and 

food service accounting functions and 

related services at the Facilities; 

(f) The AMO Plans’ fiduciaries 

maintain or cause to be maintained, for 

a period of six years from the date of the 

covered transactions, such records as 

are necessary to enable the persons 

described in paragraph (g) to determine 

whether the conditions of this 

exemption were met, except that: 

(1) If the records necessary to enable 

the persons described in paragraph (g) 

to determine whether the conditions of 

the exemption have been met are lost or 

destroyed, due to circumstances beyond 

the control of the AMO Plans’

fiduciaries, then no prohibited 

transaction will be considered to have 

occurred solely on the basis of the 

unavailability of those records; and 

(2) No party in interest, other than the 

AMO Plans’ fiduciaries responsible for 

recordkeeping, shall be subject to the 

civil penalty that may be assessed under 

section 502(i) of the Act or to the taxes 

imposed by section 4975(a) and (b) of 

the Code if the records are not 

maintained or are not available for 

examination as required by paragraph 

(g) below; 

(g)(1) Except as provided below in 

paragraph (g)(2) and notwithstanding 

the provisions of section (a)(2) and (b) 

of section 504 of the Act, the records 

referred to above in paragraph (f) are 

unconditionally available for 

examination during normal business 

hours at their customary location by the 

following persons or an authorized 

representative thereof: 

(i) any duly authorized employee or 

representative of the Department or the 

Internal Revenue Service; 

(ii) any fiduciary of the AMO Plans or 

any duly authorized employee or 

representative of such fiduciary; or 

(iii) any contributing employer and 

any employee organization whose 

members are covered by the AMO Plans, 

or any authorized employee or 

representative of these entities; or 

(iv) any participant or beneficiary of 

the AMO Plans or the duly authorized 

employee or representative of such 

participant or beneficiary. 

(2) None of the persons described in 

paragraphs (ii), (iii) and (iv) of 

paragraph (g)(1) shall be authorized to 

examine trade secrets or commercial or 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 15 / Wednesday, January 24, 2007 / Notices 3165 

financial information which is 

privileged or confidential. 

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 (the Notice) 

published on July 21, 2006 at 71 FR 

41478. 

Written Comments 

The Department received three 

written comments from interested 

persons in response to the Notice. The 

Department forwarded copies of the 

comments to the applicant and 

requested that the applicant and the 

I/F address, in writing the various 

concerns raised by the commentators. 

The principal concern expressed by all 

three commentators is that the 

exemption would allow pension assets 

to be used for purposes other than 

retirement benefits for plan participants. 

Two of the commentators link this 

concern to the investigation of the AMO 

Plans by the U.S. Department of Justice. 

The applicant represents that one of 

the commentators’ concerns that the 

exemption would allow pension plan 

assets to be used for a variety of 

inappropriate uses reflects a 

misunderstanding of the purpose of the 

exemption and the conditions under 

which it has been proposed. The 

applicant represents that the proposed 

exemption would allow the Plans’

trustee meetings, union meetings, and 

other meetings or conferences involving 

the Union, employers who contribute to 

the Plans, the Joint Employment 

Committee, the American Maritime 

Officers Service, and professionals 

servicing the Plans to be held at the 

training and meeting facilities in Dania 

Beach, Florida, which is leased by the 

S&E Plan, and another facility owned by 

the S&E Plan in Toledo, Ohio. Under the 

proposed exemption, meeting 

participants or the groups they represent 

are required to pay their proportional 

share of lodging, catering and meeting 

costs—the costs would not fall on the 

facilities or the S&E Plan. Notably, the 

costs associated with these meetings are 

substantially less when lodging, food 

and meeting space are provided at the 

facilities than if provided by hotels or 

other conference facilities. Without the 

requested exemption, there would be 

legal constraints on the ability of the 

S&E Plan to contract with the other 

Plans to provide the necessary services 

and functions that would have to be 

scheduled at independent meeting 

facilities at a higher cost. 

In addition, the applicant represents 

that, as a condition contained in the 

Notice, the Plans have retained an 

independent fiduciary to ensure that the 

interests of the Plans and their 

participants are protected. Among other 

things, the independent fiduciary will 

monitor all transactions and activities 

permitted under the proposed 

exemption to ensure compliance with 

the conditions set out by the 

Department. The duties of the I/F will 

also include ensuring that the parties 

using the facilities pursuant to the 

proposed exemption pay a fair price for 

the services they receive. 

Two of the commentators suggest that 

the exemption should not be granted 

because of a Department of Justice 

investigation of the Plans. One of the 

two requested a hearing on this basis. 

The applicant represents that contrary 

to the concern expressed, the 

application is part of an effort to ensure 

ERISA compliance and the protection of 

plan assets. In response to the 

investigation, the AMO Plans formed a 

Special Committee, which retained 

Special Counsel to undertake an 

independent investigation and to make 

reports and recommendations for 

remedial action to the Special 

Committee. The Special Committee 

authorized Special Counsel to apply for 

the exemption on behalf of the AMO 

Plans as part of an ERISA compliance 

process. 

The I/F has reviewed the comments 

and represents that proper 

implementation and compliance with 

the conditions of the proposed 

exemption will be protective of the 

beneficiaries of the AMO Plans because 

(i) the use of the facilities by parties in 

interest will be monitored and linked to 

specific meeting schedules; (ii) costs 

associated with the use of the facilities 

by the parties in interest will be 

properly charged, with the AMO Plans 

being appropriately compensated for 

services provided; (iii) costs savings can 

inure to the beneficiaries as a result of 

the efficiency of having the multiple 

meetings associated with the Plans in a 

single lower cost environment; and (iv) 

the parties in interest will only be 

allowed to use the facilities if there is 

excess capacity so that beneficiaries 

who require training cannot be 

displaced. Furthermore, the I/F 

represents that the I/F’s research and 

analysis results in the belief that usage 

of the facilities by parties in interest can 

be effectively monitored, costs can be 

properly allocated and efficiencies in 

the scheduling of the meetings can be 

attained which will result in cost 

savings to the beneficiaries. 

The Department has considered the 

entire record and has determined to 

grant the exemption as proposed. 

Further, the Department does not 

believe that there are material factual 

issues relating to the exemption that 

were raised by commentators which 

would require the convening of a 

hearing. Thus, the Department has 

determined not to hold a hearing on 

these matters. 

FOR FURTHER INFORMATION CONTACT: 

Khalif I. Ford of the Department, 

telephone (202) 693–8540. (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 17th day of 

January, 2007. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. E7–970 Filed 1–23–07; 8:45 am] 

BILLING CODE 4510–29–P 


pwalker on PROD1PC71 with NOTICES