Westchester Plastic Surgical Associates, P.C. - Page 20




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          Depart. Store, Inc. v. Commissioner, 82 T.C. 869 (1984); Feroleto           
          Steel Co. v. Commissioner, supra; see also Ada Orthopedic, Inc.             
          v. Commissioner, supra.                                                     
               Additionally, in applying the prudent investor rule, it has            
          been stated:                                                                
               Under ERISA, as well as at common law, courts have focused             
               the inquiry under the "prudent man" rule on a review of the            
               fiduciary's independent investigation of the merits of a               
               particular investment, rather than on an evaluation of the             
               merits alone.  As a leading commentator puts it, "the test             
               of prudence--the Prudent Man Rule--is one of conduct, and              
               not a test of the result of performance of the investment.             
               The focus of the inquiry is how the fiduciary acted in his             
               selection of the investment, and not whether his investments           
               succeeded or failed."  In addition, the prudent man rule as            
               codified in ERISA is a flexible standard:  the adequacy of a           
               fiduciary's investigation is to be evaluated in light of the           
               "character and aims" of the particular type of plan he                 
               serves.  [Donovan v. Cunningham, 716 F.2d 1455, 1467 (5th              
               Cir. 1983); fn. ref. omitted; citations omitted.]                      
          Thus, the ultimate outcome of an investment is not proof that the           
          investment failed to meet the prudent investor rule.  See                   
          DeBruyne v. Equitable Life Assur. Socy. of U.S., 920 F.2d 457,              
          465 (7th Cir. 1990); see also Norton Bankruptcy Law and Practice            
          2d, sec. 156:9 (1997-98).                                                   
               By examining the totality of transgressions that Morrissey             
          committed, we can assess whether it was an abuse of discretion              
          for respondent to disqualify the Defined Benefit Plan.                      
          Morrissey, as sole shareholder of petitioner--the plan sponsor--            
          failed to make required contributions to the Defined Benefit                
          Plan.  For the plan year ended October 31, 1989, the Schedule B             





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