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was a disqualified person because Mr. Estes had an indirect
ownership interest in Estes Co. through his interest in WE 7 and
its interest in Guardian Construction Co., and he also served as
a trustee of the plan. Estes Co. agreed to file Forms 5330,
Return of Excise Taxes Related to Employee Benefit Plans, pay the
excise taxes under section 4975 applicable to the prohibited
transactions, and repay the loans.
The Loan to Estes Co. From the Plan During 1986
Sometime during 1986, Mr. Shedd approached Mr. Grove, who at
the time was executive vice president of Estes Co., and suggested
that Estes Co. borrow money from the plan. Subsequently, on
December 25, 1986, the plan lent $2,250,000 to Estes Co. (the
loan).
On behalf of Estes Co., Mr. Grove signed a promissory note
relating to the loan dated December 25, 1986 (the note), and
payable to Mr. Shedd as trustee of the plan. The note was
payable on demand and bore interest on the unpaid balance,
payable monthly commencing January 25, 1987, at the rate of
seven-eights of 1 percent above the prime rate charged by the
Wells Fargo Bank of California (Wells Fargo). The interest rate
on the loan on its face was somewhat higher than Estes Co. was
paying commercial banks, but the rate nonetheless was slightly
advantageous to Estes Co. on an overall basis because the banks
charged Estes Co. additional fees which the plan did not charge.
The combined effect of the loan's rate of interest and lack of
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