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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
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