Notice of Proposed Exemptions, 70372-70378 [E8-27616]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 73, Number 225 (Thursday, November 20, 2008)]
[Notices]
[Pages 70372-70378]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-27616]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application Nos. and Proposed Exemptions; Heico Holding Inc. Pension 
Plan, D-11428; D-11450, Brewster Dairy, Inc. 401(k) Profit Sharing Plan 
(the Plan); and Starrett Corporation Pension Plan (the Plan), D-11473, 
et al.]


Notice of Proposed Exemptions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of Proposed Exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
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. 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.

ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Employee

[[Page 70373]]

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. --, 
stated in each Notice of Proposed Exemption. Interested persons are 
also invited to submit comments and/or hearing requests to EBSA via e-
mail 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.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978, 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.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.
    Heico Holding Inc. Pension Plan (the Plan), Located in Downers 
Grove, Illinois [Exemption Application Number: D-11428]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570 Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of section 406(a)(1)(A) and (D), and 
section 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), (D), and (E) of the Code, shall not apply to the 
proposed sale by the Plan of a non-marketable limited partnership 
interest (the Interest) in Trident Equity Fund, II, L.P. (the 
Partnership) to Heico Holding Inc. (the Applicant), a party in interest 
with respect to the Plan, provided that the following conditions are 
satisfied:
    (a) The sale is a one-time transaction for cash;
    (b) The Plan pays no commissions, fees or other expenses in 
connection with the sale;
    (c) The terms and conditions of the sale are at least as favorable 
as those obtainable in an arm's length transaction with an unrelated 
third party;
    (d) As a result of the sale, the Plan receives the greater of: (i) 
$1,050,000; (ii) The value of the Interest as determined by the General 
Partner of the Partnership and reported on the most recent quarterly 
account statements of the Partnership available at the time of the 
sale; (iii) The fair market value of the Interest as determined on the 
date of the sale by a qualified, independent appraiser; or (iv) The 
total amount of the Plan's contributions to the Partnership made on or 
after January 21, 2005 (i.e., the Plan's investment cost basis in the 
Interest); and
    (e) Upon Plan termination, it is determined that the Plan is 
overfunded.

Summary of Facts and Representations

    1. The Plan is a defined benefit pension plan sponsored by Heico 
Holding Inc. (the Applicant), which is headquartered at 2626 
Warrenville Road, Downers Grove, Illinois. The Applicant is a company 
that specializes in purchasing interests in distressed and under-
performing businesses from a variety of industries (including heavy 
equipment, telecommunications, plastics, food production, and 
commercial construction) with the purpose of improving their financial 
condition. As of December 31, 2006, the Plan had a combined total of 
approximately 2,848 participants and beneficiaries, and total net 
assets of approximately $84,664,677. The Applicant represents that the 
Plan was overfunded by approximately $2,000,000 as of June 1, 2007. The 
administrator of the Plan is Daniel M. Schramm (Schramm), and an 
Investment Committee (the Committee) comprised of five members (Mr. 
Schramm, Michael E. Heisley, E.A. Roskovensky, Stanley H. Meadows, and 
Larry G. Wolski) possesses discretionary authority under the Plan to 
select and manage the Plan's investments.
    2. The Applicant represents that one of the current assets of the 
Plan is a partnership interest (the Interest), which was acquired on 
January 21, 2005 in accordance with the terms of both a subscription 
agreement (Deed of Adherence) and a partnership agreement (Partnership 
Agreement) between the Plan and Trident Equity Fund, II, L.P. (the 
Partnership). The Applicant states that the Partnership is domiciled in 
the Cayman Islands. The Applicant further represents that the limited 
partnership interests offered to investors by the Partnership are not 
publicly traded. According to the Applicant, the investment objective 
of the Partnership is to generate high absolute returns by investing 
the limited partners' capital in a portfolio consisting primarily of 
private and listed investments in small and medium sized companies in 
the United Kingdom and to distribute realized gains to the limited 
partners. Specifically, the intended underlying investments of the 
Partnership are concentrated on leveraged buyouts, expansion capital, 
consolidation, public-to-private and pre-IPO investments in a range of 
non-technology sectors in the United Kingdom. The Applicant further 
represents that the General Partner of the Partnership, North Atlantic 
Value, Ltd., of Hamilton, Bermuda, does not provide investment advice 
to the Plan or otherwise act as a fiduciary with respect to the Plan, 
and that the General Partner and the Partnership itself are independent 
of both the Plan and the Applicant.
    3. The Applicant represents that pension plan assets from the 
United States do not comprise 20% or more of the assets of the 
Partnership, and that the underlying assets of the Partnership do not 
constitute plan assets within the meaning of 29 CFR 2510.3-101. The 
Applicant states that, pursuant to Section 1.5 of the Partnership 
Agreement, the ordinary term of the Plan's investment as a limited 
partner in the Partnership is ten (10) years from January 21, 2005. The 
Applicant also

[[Page 70374]]

represents that the Plan's investment in the Partnership as of December 
31, 2007 amounted to approximately 1.2% of the Plan's total assets.
    4. The Applicant represents that the Plan became a limited partner 
of the Partnership as of January 21, 2005, the effective date of the 
Partnership Agreement. The Applicant states that the terms and 
conditions of the Plan's entry into the Partnership were the same as 
those required of other limited partners.\1\
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    \1\ The Applicant further represents that Heico Holding Inc., 
the Plan sponsor, also holds an interest in Trident Equity Fund, II, 
L.P. In this connection, section 404 of the Act requires, among 
other things, that a plan fiduciary act prudently, solely in the 
interest of the plan's participants and beneficiaries, and for the 
exclusive purpose of providing benefits to participants and 
beneficiaries when making decisions on behalf of a plan. 
Accordingly, the Department is not expressing an opinion herein as 
to whether any investment decisions or other actions taken by the 
Committee regarding the acquisition and subsequent holding of the 
Interest in the Partnership by the Plan would be consistent with, or 
in violation of, its fiduciary obligations under Part 4 of Title I 
of the Act.
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    The Applicant represents that, pursuant to the terms of the 
Partnership Agreement, the Plan made three separate installments of 
capital contributions totaling $447,427.51 to the Partnership after 
January 21, 2005: (1) On May 16, 2005, the Plan contributed $185,530 to 
the Partnership; (2) On November 5, 2005, the Plan contributed 
$173,915.01 to the Partnership; and (3) On December 21, 2005, the Plan 
contributed $87,982.50 to the Partnership. The Applicant states that no 
further capital contributions were made by the Plan to the Partnership 
after December 21, 2005, and that no distributions were made by the 
Partnership to the Plan.
    5. The Applicant represents that, prior to June 1, 2007, the 
benefits under the plan were ``frozen'', with different freeze dates 
applying to different groups of employees. According to the Applicant, 
the effective date of the termination of the Plan is June 1, 2007. In 
connection with the termination, the Applicant represents that the 
Company has submitted information relating to the termination to the 
Pension Benefit Guaranty Corporation (PBGC), and has also sought a 
favorable determination letter from the Internal Revenue Service (IRS). 
After the IRS and PBGC approvals are received and all assets of the 
Plan have been liquidated, the Applicant states, final distribution of 
pension benefits to participants and beneficiaries will ensue.
    The Applicant has contracted to purchase a group annuity contract 
with Transamerica Life Insurance Company (Transamerica) of Los Angeles, 
California to assume the liability for benefit payments to 
participants; The effective date of this contract was May 2, 2007. To 
fund the purchase of the group annuity contract, to pay associated 
administrative expenses, and to allow the winding up of the Plan and 
trust, the Applicant represents that all of the remaining assets of the 
Plan (including the Interest) must be converted to cash; such a 
liquidation would necessarily entail a transfer of the Interest from 
the Plan.
    6. The Applicant represents that, pursuant to Section 14.2.1 of the 
Partnership Agreement, a limited partner cannot assign or transfer its 
Interest in the Partnership without the prior written consent of the 
General Partner of the Partnership.
    The Applicant states that, pursuant to section 14.2.1 of the 
Partnership Agreement, the General Partner possesses sole and absolute 
discretion regarding transfers of Interests by limited partners. The 
Applicant represents that this same provision of the Partnership 
Agreement allows a transfer of a limited partner's interest in the 
Partnership only to the General Partner or to an associate of the 
transferring limited partner. The Applicant represents that the General 
Partner considers Heico Holding Inc., the sponsor of the Plan, as an 
associate to whom a transfer of the Plan's Interest in the Partnership 
may be made under the foregoing provision of the Partnership Agreement. 
The Applicant also maintains that a sale of the Interest to the General 
Partner, rather than to Heico Holding Inc., could only occur at a price 
that would represent a significant discount. The Applicant represents 
that Mr. Schramm has been informed by the General Partner that it will 
only permit the Plan to sell its Interest in the Partnership to Heico 
Holding Inc.
    7. The Applicant represents that the General Partner has stated 
that there is no requirement that the transfer from one limited partner 
to another be at fair market value.\2\ The Applicant also represents 
that the General Partner has confirmed that the proportionate share of 
an investor's interests in the Partnership as shown in the unaudited 
financial statements furnished quarterly to limited partners is, in the 
opinion of the General Partner, an accurate representation of the value 
of the Interest as of the dates of the financial statements. The 
Applicant further states that this value is used by the General Partner 
for all transactions relating to the value and the Interest for 
purchases, sales and calculation of the investment management fee, and 
was applied consistently to all limited partners. The Applicant also 
represents that, according to the Plan's most recent statement of 
account prepared by Northern Trust Company (Northern Trust) of Chicago, 
Illinois, the Plan's custodial trustee, the value of the Plan's 
Interest in the Partnership as of December 31, 2007 was $715,146.93. 
The same statement from Northern Trust also indicated that, as of 
December 31, 2007, the Plan's cumulative return on the Interest since 
the inception of its investment in the Partnership was $267,719.42.
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    \2\ Under section 5.3(c) of the Partnership Agreement, the 
General Partner is authorized generally to take any action the 
General Partner considers appropriate for the protection of the 
assets of the Partnership. Section 8.5.6 of the Partnership 
Agreement also provides that, in the event the Partnership purchases 
the Interest of any limited partner, the valuation of such Interest 
shall be made by the General Partner in good faith in consultation 
with the auditors of the Partnership, Ernst & Young.
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    8. In July of 2008, the Committee retained Comstock Valuation 
Advisors, Inc. (Comstock Advisors) of Wheaton, Illinois, to determine 
the fair market value of the Interest. On August 15, 2008, Comstock 
Advisors, on behalf of the Plan, prepared an appraisal report 
concerning the value of the Interest for the Committee. Comstock 
Advisors represents that it is a national valuation firm that 
specializes in customized business appraisals, including the valuation 
of limited partnership interests for which no readily-ascertainable 
price is available. In the July 26, 2008 engagement letter accompanying 
its appraisal report, Comstock Advisors represents that it is 
independent of, and unrelated to, the Applicant, and acknowledges that 
the appraisal report was prepared as part of the Applicant's exemption 
application. Comstock Advisors also represents in the engagement letter 
that it derives less than 1% of its annual income from the Applicant. 
The administrator of the Plan, Mr. Dan Schramm, represents that all of 
the fees and costs associated with appraising the value of the Interest 
shall be borne by the Applicant rather than the Plan.
    A supplement to the appraisal report further states that the 
Comstock Advisors managing director who personally conducted the 
appraisal of the Interest, Mr. James E. Ahern, has been employed full-
time as a valuation professional since 1986. The supplement states that 
Mr. Ahern has prior experience in valuing the securities of investment 
vehicles such as limited liability companies and limited partnerships, 
as well as experience in valuing certain investment interests

[[Page 70375]]

lacking readily ascertainable market values that are held by employee 
benefit plans. The supplement also represents that Mr. Ahern is an 
accredited senior appraiser with the American Society of Appraisers.
    9. In its engagement letter, Comstock Advisors advised that the 
fair market measurement utilized in the appraisal would assume an exit 
price in an orderly, hypothetical transaction by market participants in 
the Interest's principal or most advantageous market. In this 
connection, Comstock Advisors stated that, because the Partnership's 
equity interests are not publicly traded, it would utilize the 
applicable fair value measurement described in Statement No. 157 issued 
by the Financial Accounting Standards Board (FASB) concerning the 
valuation of an asset for which (i) there is little, if any, market 
activity as of the valuation date, (ii) there are no independent, 
observable pricing data inputs available, and (iii) there are 
restrictions placed by management on its sale or use.
    In an appraisal report issued on August 15, 2008, Comstock Advisors 
determined that the Interest had a fair market value of $1,050,000 as 
of December 31, 2007, representing approximately 1.42% of the 
outstanding partnership interests of the Partnership. In arriving at 
this valuation, Comstock Advisors did not use the income valuation 
approach because the future income of the Partnership could not be 
reasonably estimated. The market approach to valuation (which examines 
actual sales of similar assets to estimate value) also was not used 
because, according to the appraiser, there are no publicly traded 
companies comparable to the Partnership. Comstock Advisors determined 
that the net asset valuation of the Interest (which was discounted for 
the lack of marketability and lack of investor control associated with 
the Interest) was the appropriate valuation methodology, given the 
Partnership's character as an investment holding company. A net asset 
valuation reflects the amount that can be realized if the company's 
assets are sold at their individual fair market values. Because 
Comstock Advisors noted that the Partnership has generated very high 
returns, it applied a 10% discount factor to the adjusted net asset 
value of the Interest, which produced a higher value for the Interest 
than the value reported as of December 31, 2007 by Northern Trust.
    10. The Applicant requests an administrative exemption from the 
Department to purchase the Interest from the Plan. The Applicant states 
that the proposed sale of the Interest by the Plan to the Applicant 
would be a one-time transaction for cash, and that no commissions or 
other expenses would be charged to the Plan in connection with the 
sale. The Applicant represents that the proposed transaction is 
administratively feasible because, under the Partnership Agreement, the 
sale of the Interest from the Plan to the Applicant is the only 
permissible transfer that can be accomplished without a significant 
discounting of the value of the Interest. The Applicant also represents 
that the proposed transaction is in the interests of the Plan and its 
participants and beneficiaries because, in the absence of the proposed 
sale, the necessary liquidation of the Plan's remaining assets incident 
to the termination of the Plan will be delayed. The Applicant further 
represents that the proposed transaction is protective of the interests 
of the Plan's participants and beneficiaries because the Plan will 
receive an amount greater than the Plan's cumulative capital 
contributions to the Partnership. If the Department grants the proposed 
exemption, an updated appraisal of the Interest will be performed as of 
the date of the sale by a qualified, independent appraiser.
    11. In summary, it is represented that the proposed transaction 
will satisfy the statutory requirements for an exemption under section 
408(a) of the Act because: (a) The sale is a one-time transaction for 
cash; (b) The Plan pays no commissions, fees or other expenses in 
connection with the sale; (c) The terms and conditions of the sale are 
at least as favorable as those obtainable in an arm's length 
transaction with an unrelated third party; (d) As a result of the sale, 
the Plan receives the greater of: (i) $1,050,000; (ii) The value of the 
Interest as determined by the General Partner of the Partnership and 
reported on the most recent quarterly account statements of the 
Partnership available at the time of the sale; (iii) The fair market 
value of the Interest as determined on the date of the sale by a 
qualified, independent appraiser; or (iv) The total amount of the 
Plan's contributions to the Partnership made on or after January 21, 
2005 (i.e., the Plan's investment cost basis in the Interest); and (e) 
Upon Plan termination, it is determined that the Plan is overfunded.
    Notice to Interested Persons: A copy of this notice of the proposed 
exemption (the Notice) shall be given to all interested persons in the 
manner agreed upon by the Applicant and the Department within fifteen 
(15) days of the date of its publication in the Federal Register. The 
Department must receive all written comments and requests for a hearing 
no later than forty-five (45) days after publication of the Notice in 
the Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr. Mark Judge of the Department, 
telephone (202) 693-8339. (This is not a toll-free number).
    Brewster Dairy, Inc. 401(k) Profit Sharing Plan (the Plan)
    Located in Brewster, Ohio
    [Application No. D-11450]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act 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)(1)(A) and (D), 406(b)(1) and (b)(2) of the Act, and 
the sanctions resulting from the application of section 4975(a) and (b) 
of the Code, by reason of section 4975(c)(1)(A), (D) and (E) of the 
Code, shall not apply to the sale (the Sale) by the Plan of 2.5 limited 
partnership units (the Units) in the Heartland California Clayton 
Limited Partnership (the Partnership) to Brewster Dairy, Inc. 
(Brewster), the Plan's sponsor and a party in interest with respect to 
the Plan, for the greater of: (1) $57,000; (2) the net proceeds for the 
Units in the event the Partnership sells its real estate (the Property) 
to a third party; or (3) the net proceeds from foreclosure for the 
Units in the event the Property is foreclosed to pay back real estate 
taxes, provided the following conditions are satisfied:
    (a) The Sale of the Units is a one-time transaction for cash;
    (b) The Plan pays no commissions, fees or other expenses in 
connection with the Sale;
    (c) The terms of the transaction are at least as favorable to the 
Plan as those the Plan could obtain in a similar transaction with an 
unrelated party;
    (d) The fair market value of the Units on the date of the Sale is 
determined by a qualified independent appraiser;
    (e) The Plan fiduciaries will determine whether it is in the best 
interest of the Plan to go forward with the Sale, will review and 
approve the methodology used in the appraisal that is being relied 
upon, and will ensure that the methodology is applied by a qualified, 
independent appraiser in determining the fair market value of the Units 
as of the date of the Sale; and
    (f) The proceeds from the Sale of the Units to Brewster will be 
allocated only to the participants who are defined in the Consent Order 
and Judgment (the COJ, File No. 5:98CV744, July 1, 1999)

[[Page 70376]]

entered by the United States District Court for the Northern District 
of Ohio Eastern Division (the Court).

Summary of Facts and Representations

    1. The Brewster Dairy, Inc. 401(k) Profit Sharing Plan (the Plan) 
is an individual account plan established by Brewster Dairy, Inc. 
(Brewster) on April 1, 1965. As of June 30, 2007, the Plan had 259 
participants, and had total assets of $15,013,748. Brewster, 
headquartered in Brewster, Ohio, is the largest manufacturer of all 
natural Swiss cheese in the United States.
    2. In December 1990, the Plan purchased 2.5 limited partnership 
units (the Units) in the Heartland California Clayton Limited 
Partnership (the Partnership), a predevelopment real estate limited 
partnership originally consisting of 139 acres of land (the Property). 
The Plan made an initial capital contribution of $243,952 to the 
Partnership in 1990, and made additional contributions during the years 
through 1996. In all, the Plan made payments to the Partnership 
totaling approximately $749,000, which would represent less than 5% of 
the Plan's current assets. The applicant represents that the Plan has 
not paid any of the costs related to the Units since they were 
acquired. The costs of appraisals, reports, etc. have all been paid by 
Brewster.
    3. In 1997, the Department, in a routine audit of the Plan, 
determined that the purchase of the 2.5 Units of the Partnership was a 
violation of the fiduciary responsibility provisions of the Act. The 
Department filed suit in this matter on May 29, 1998. The parties 
agreed to settle the case, and a Consent Order and Judgment (the COJ) 
was entered by the Court on July 1, 1999. On December 4, 1999, Brewster 
complied with the COJ and allocated the agreed amount, $333,333, to the 
individual accounts of such persons (other than defendants Fritz 
Leeman, Walter Leeman and Tom Riegler) \3\ who were Plan participants 
on March 31, 1999 and held a portion of the Plan's investment in the 
Units as an asset in their individual accounts.
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    \3\ These three individuals were the Plan fiduciaries 
responsible for the acquisition of the Units by the Plan.
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    4. The applicant represents that due to zoning restrictions and the 
discovery of landslides on the Property, the value of the Units has 
dropped significantly since the Plan purchase date.\4\ Timothy 
McDaniel, CPA and ASA, an accountant experienced in business valuations 
and a co-director of Rea Strategic Solutions, stated on June 23, 2008 
that the Units had a fair market value of $57,000. Mr. McDaniel based 
his valuation of the Units on an appraisal of the fair market value of 
the Property performed by Ms. Marian Huntoon, SRA, a California 
Certified General Appraiser in Berkeley, California. Ms. Huntoon 
determined that the Property had a fair market value of $780,000 as of 
May 10, 2008. The applicant represents that the Plan fiduciaries will 
determine whether it is in the best interest of the Plan to go forward 
with the Sale, will review and approve the methodology used in the 
appraisal that is being relied upon, and will ensure that the 
methodology is applied by a qualified, independent appraiser in 
determining the fair market value of the Units as of the date of the 
Sale.
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    \4\ The Department in this proposed exemption is not opining on 
the prudence of the Plan's continued holding of the Units after the 
date of the COJ.
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    5. By letter dated August 25, 2008, the Partnership notified the 
fiduciaries of the Plan that due to delinquent real estate taxes, the 
Partnership anticipated receiving a foreclosure notice in December 
2008. The Partnership further notified the Plan that an unrelated 
adjacent property owner, Clayton Estates, LLC has contacted the 
Partnership and offered to purchase the Property for $65,000. In its 
August 25, 2008 letter, the Partnership sought approval from the Plan 
to negotiate and close on a sale of the Property at a price not less 
than $65,000.
    6. The applicant has requested a prohibited transaction exemption 
for the Sale of the Units by the Plan to Brewster, in a cash Sale, for 
a price not less than $57,000, the appraised value of the Units as 
determined by Mr. McDaniel. The applicant represents that in the event 
the Partnership sells its real estate to a third party, if the net 
proceeds for the Units exceeds $57,000, that will be the Sale price for 
the subject transaction. Similarly, the applicant represents that in 
the event the Property is foreclosed to pay back real estate taxes, if 
the net proceeds from that foreclosure for the Units exceeds $57,000, 
that will be the Sale price for the subject transaction. In the 
calculation of net proceeds, the Plan will be treated the same as all 
other limited partners in the Partnership.
    7. The applicant represents that when Brewster complied with the 
COJ in 1999 and allocated the agreed amount, $333,333, to the 
individual accounts of such persons (other than defendants Fritz 
Leeman, Walter Leeman and Tom Riegler) who were Plan participants on 
March 31, 1999 and held a portion of the Plan's investment in the Units 
as an asset in their individual accounts, Brewster also filed with the 
Court a schedule showing how the allocation was calculated. A separate 
trust was established to hold the Units and the trustees have kept 
track of those participants who received an allocation. In fact, a 
majority of those participants are still employed by Brewster. The 
applicant represents that if the exemption proposed herein is granted, 
the proceeds of the Sale will be allocated on a pro rata basis in 
accordance with the terms of the COJ, to the same participants and in 
the same manner as was the 1999 payment. The three Plan fiduciaries 
will not receive any allocation. If for some reason Brewster is unable 
to locate a participant or a deceased participant's beneficiary, 
Brewster would use one of the Federal Government Locator services. If, 
after a reasonable amount of time, Brewster is still unable to locate a 
participant or beneficiaries, Brewster would then reallocate the 
missing participant's allocation to the other participants set forth 
above, using each participant's percentage ownership calculated 
excluding the missing participant's percentage.
    8. The applicant represents that the transaction would be in the 
best interests of the Plan because the Plan would be relieved of an 
illiquid asset that is difficult and expensive to value. After the 
Sale, the annual valuation would no longer be required, and the cash 
proceeds resulting from the Sale will be added to the appropriate 
participant accounts per the COJ. After the Sale, the Plan would be 
relieved of keeping track of such participants, which is both time-
consuming and expensive. The fiduciary responsibility of monitoring the 
Units and the Partnership would also be removed.
    9. In summary, the applicant represents that the subject 
transaction satisfies the criteria contained in section 408(a) of the 
Act because: (a) The Sale of the Units is a one-time transaction for 
cash; (b) The Plan will pay no commissions, fees or other expenses in 
connection with the Sale; (c) The terms of the transaction will be at 
least as favorable to the Plan as those the Plan could obtain in a 
similar transaction with an unrelated party; (d) The fair market value 
of the Units on the date of the Sale will be determined by a qualified 
independent appraiser who is unrelated to Brewster and the Plan's 
current fiduciaries; (e) The Plan fiduciaries will determine whether it 
is in the best interest of the Plan to go forward with the Sale, will 
review and approve the methodology used in the appraisal that is being 
relied upon, and will ensure that the methodology is applied by a 
qualified, independent

[[Page 70377]]

appraiser in determining the fair market value of the Units as of the 
date of the Sale; (f) The Sale price for the Units will be the greater 
of: (1) $57,000; (2) the net proceeds for the Units in the event the 
Partnership sells its real estate to a third party; or (3) the net 
proceeds from foreclosure for the Units in the event the Property is 
foreclosed to pay back real estate taxes; and (g) The proceeds from the 
Sale will be allocated only to the Plan participants who are defined in 
the COJ.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 693-8546. (This is not a toll-free number.)
    Starrett Corporation Pension Plan (the Plan), Located in New York, 
NY [Exemption Application Number: D-11473]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570 Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2) 
of the Act, and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1)(A), through (E) of 
the Code, shall not apply to the proposed cash sale (the Sale) by the 
Plan to the Starrett Corporation (the Applicant), a party in interest 
with respect to the Plan, of a $25,000 face amount 7.797% secured 
senior note (the Security) issued by the Osprey Trust (the Trust), an 
Enron related entity, provided that the following conditions are 
satisfied:
    (a) The Sale is a one-time transaction for cash;
    (b) The Plan pays no commissions, fees or other expenses in 
connection with the Sale;
    (c) The terms and conditions of the Sale are at least as favorable 
as those obtainable in an arm's length transaction with an unrelated 
third party;
    (d) The value of the Security is determined by Interactive Data 
Systems, a qualified, unrelated entity; and
    (e) The Plan is a defined benefit plan which has been terminated 
and all benefits have been paid out to Plan participants and 
beneficiaries.

 Summary of Facts and Representations

    1. The Plan is a defined benefit pension plan sponsored by the 
Applicant, which is headquartered at 70 East 55th Street New York, NY 
10022-3222. The Applicant represents that the Plan was terminated in 
2006, and that all benefits have been paid to participants and 
beneficiaries; therefore the Plan currently has no remaining 
participants or beneficiaries. The Plan holds residual assets totaling 
$17,348.25. These residual assets are comprised of two components: (1) 
Cash equivalents totaling $12,098.25; and (2) the Security, whose value 
as of April 11, 2008, was stated as $5,250.00 by the Plan's broker-
dealer, UBS Financial Services, Inc., (UBS).
    2. The Applicant is a construction manager or general contractor of 
buildings, mainly in the metropolitan New York City area. Its services 
also include initial planning and development; property acquisition, 
financing, and management; consulting; and related services. Through 
its subsidiary, Levitt Corporation, the company constructs single-
family homes and garden apartments in the United States and Puerto 
Rico. Through its HRH subsidiary, the company supplies construction 
services and acts as a manager for major construction projects.
    3. The Plan acquired the Security on September 28, 2000, for 
$25,000 pursuant to an Eligible Rule 144A Offering.\5\ The Applicant 
proposes that the Plan sell the Security, which matured on January 15, 
2003, to the Applicant for a one time payment of $5,250 in cash. The 
Plan will pay no commissions, fees or other expenses in connection with 
the Sale. The Security has been in default for a number of years in 
connection with the Enron bankruptcy. The cash price to be paid will be 
the value of the Security as set forth on a monthly statement issued to 
the Plan by UBS. UBS determined the value of the Security based on 
information from an independent pricing service, Interactive Data 
Systems Inc.
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    \5\ SEC Rule 10f-3(a)(4), 17 CFR 270.10f-3(a)(4), states that 
the term ``Eligible Rule 144A Offering'' means an offering of 
securities that meets the following conditions:
    (i) The securities are offered or sold in transactions exempt 
from registration under section 4(2) of the Securities Act of 1933 
[15 U.S.C. 77d(d)], rule 144A thereunder [Sec.  230.144A of this 
chapter], or rules 501-508 thereunder [Sec. Sec.  230.501-230-508 of 
this chapter];
    (ii) The securities are sold to persons that the seller and any 
person acting on behalf of the seller reasonably believe to include 
qualified institutional buyers, as defined in Sec.  230.144A(a)(1) 
of this chapter; and
    (iii) The seller and any person acting on behalf of the seller 
reasonably believe that the securities are eligible for resale to 
other qualified institutional buyers pursuant to Sec.  230.144A of 
this chapter.
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    4. The Applicant represents that UBS has stated that the Security 
is not traded, and the Applicant further represents that efforts to 
sell the Security to an unrelated third party have been unsuccessful. 
The Applicant represents that none of the Plan's residual assets will 
revert to the Applicant, and that subsequent to the Sale these assets 
will be used to pay the Plan's unrelated service providers amounts due 
in connection with the winding down and termination of the Plan.
    In summary, it is represented that the proposed transaction will 
satisfy the statutory requirements for an exemption under section 
408(a) of the Act because: (a) The Sale is a one-time transaction for 
cash; (b) The Plan pays no commissions, fees or other expenses in 
connection with the Sale; (c) The terms and conditions of the Sale are 
at least as favorable as those obtainable in an arm's length 
transaction with an unrelated third party; (d) The value of the 
Security was determined by Interactive Data Systems, a qualified and 
unrelated party; and (e) The Plan is a defined benefit plan which has 
been terminated and all benefits have been paid out to Plan 
participants and beneficiaries.
    Notice to Interested Persons: The Applicant represents that the 
Plan has been terminated and that all participants and beneficiaries 
have been paid their benefits in full. Thus, the only practical means 
of notifying terminated plan participants is by publication of the 
proposed exemption in the Federal Register. Therefore, the Department 
must receive all written comments and requests for a hearing no later 
than forty-five (45) days after publication of the Notice in the 
Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr. Brian Buyniski of the Department, 
telephone (202) 693-8545. (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

[[Page 70378]]

it affect the requirement of section 401(a) of the Code that the plan 
must operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 12th day of November 2008.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E8-27616 Filed 11-19-08; 8:45 am]
BILLING CODE 4510-29-P