- 27 -
inability to repay the loan resulted from a downturn in the real
estate market and not from impropriety on its part. We found
that although the loan failed to meet the prudent investor test,
it was an isolated violation of that test, did not exhibit
indifference to the continued well-being of the plan, and was not
an attempt to manipulate the plan's assets for the benefit of
persons other than the plan's beneficiaries. We therefore found
that the loan did not violate the exclusive benefit rule.
Accordingly, we concluded that the extension of the loan did not
cause the plan to fail to satisfy the requirements of sections
401(a) and 501(a).
Our examination of the facts in this case leaves no doubt
that the Defined Benefit Plan was not managed for the exclusive
benefit of the employees. While the detailed facts of this case
are not identical with those in Winger's Depart. Store, Inc. v.
Commissioner, supra, or in Ada Orthopedic, Inc. v. Commissioner,
supra, the ultimate thrust of those cases is equally applicable
here. The facts in Winger's and Ada Orthopedic reveal investment
philosophies that were not aimed primarily at providing benefits
for the employees and their beneficiaries in general but instead
were aimed at benefiting the plan sponsors or certain
individuals. Indeed, the investment practices in those cases
involved flagrant violations of the exclusive benefit rule.
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