Joseph R. Rollins - Page 13

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          entities in which petitioner had an interest were prohibited                
          transactions because (1) The loans were transfers of the Plan’s             
          assets that benefited petitioner (sec. 4975(c)(1)(D)), and (2)              
          the loans were dealings with the Plan’s assets in petitioner’s              
          own interest (sec. 4975(c)(1)(E)).  Respondent contends that                
          petitioner benefited from the loans in that the loans enabled the           
          Borrowers--all entities in which petitioner owned interests--to             
          operate without having to borrow funds at arm’s length from other           
          sources.  Respondent summarizes the contentions regarding                   
          petitioner’s role as fiduciary, as follows:                                 
               No documentation was provided of any security interest                 
               under the U.C.C. which would have protected the Plan                   
               against other creditors of these companies.  (Stip.,                   
               para. 23, 38, 41, 44, 47, 50, 61, 69)  Petitioner would                
               have had to authorize any actions the Plan took against                
               the companies and its officers to collect its loans.                   
               Petitioner’s ownership interest in these companies                     
               created a conflict of interest between the Plan and the                
               companies, resulting in dividing his loyalties to these                
               entities.  This conflicting interest as a disqualified                 
               person who is a fiduciary brought petitioner within the                
               prohibition against dealing “with the income or assets                 
               of a plan in his own interest or for his own account”.                 
               I.R.C. � 4975(c)(1)(E).                                                
               Petitioner maintains that, as to each of the loans: (1) The            
          interest rate was above market interest and was paid, (2) the               
          collateral was safe and secure and the principal was repaid, and            
          (3) the Plan’s assets were thereby diversified and thus the                 
          Plan’s portfolio’s risk level was “significantly lowered”.7                 


               7 The record does not indicate (1) either the magnitude or             
                                                             (continued...)           




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