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Accordingly, in determining whether a plan has satisfied the
exclusive benefit rule, we must consider the risk of the loan to
the plan when the loan was made, taking into account its relative
safety, its effect on the diversity and liquidity of the plan's
assets, its profit potential, and the trustee's rationale for
making the loan. We also must consider whether the loan complies
with the terms of the plan.
In our view, the loan was not a prudent investment for the
plan. When made, the loan constituted approximately 90 percent
of the plan's assets. The promissory note evidencing the loan
was not secured. Estes Co. used the loan for working capital
needs, not to acquire assets. When the loan was made,
essentially all of Estes Co.'s and Estes Homes' property already
was pledged as collateral for loans those entities had received
from Wells Fargo or other creditors. Although Estes Co. had
available on its line of credit with Wells Fargo a balance equal
to or greater than the amount of the loan when the loan was made,
the plan extracted no commitment from Estes Co. and Estes Homes
that they would keep that balance available for the benefit of
the plan. Moreover, petitioner had no guaranty that Wells Fargo,
or any other creditor of Estes Co., would continue to extend
credit to Estes Co. in the future, especially should Estes Co. or
Estes Homes experience financial difficulties. Consequently, the
line of credit provided no security for the loan and the note was
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