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or she must act with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent investor,
acting in like capacity and familiar with such matters, would use
in the conduct of an enterprise of a like character and with like
aims--were deemed to be coextensive with the exclusive benefit
requirements. Relying on Rev. Rul. 69-494, supra, respondent
contends that to satisfy the exclusive benefit rule a plan must
invest its funds in a manner which assures a fair return on the
investments, provides the plan with sufficient liquidity to meet
the needs of the plan, and provides the plan with sufficient
diversification and security to guard against risk of loss.
Respondent contends that, in lending 90 percent of the plan's
assets to Estes Co., Mr. Shedd did not act prudently, because he
failed to diversify plan investments, to secure the loan, and to
consult with counsel about the propriety of making the loan.
Respondent also maintains that Mr. Shedd had sufficient
knowledge and skills to understand that the loan was imprudent
particularly in view of his substantial knowledge about lending
to real estate developers. Respondent contends that the loan did
not meet basic, commonsense standards for security and
diversification. Respondent contends further that the Shedds and
petitioner had significant financial dealings with Mr. Estes and
his related companies and that the relationship between them
motivated Mr. Shedd to make the loan.
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