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Employee Benefits Security Administration

EBSA Federal Register Notice

Prohibited Transaction Exemption 2003-32; [Exemption Application No. D-11067] et al.; Grant of Individual Exemptions; Sorensen Broadcasting Employee Stock Ownership Plan and Trust, et al [11/14/2003]

[PDF Version]

Volume 68, Number 220, Page 64657-64660

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

 
Prohibited Transaction Exemption 2003-32; [Exemption Application 
No. D-11067] et al.; Grant of Individual Exemptions; Sorensen 
Broadcasting Employee Stock Ownership Plan and Trust, et al

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    A notice was published in the Federal Register of the pendency 
before the Department of a proposal to grant such exemption. The notice 
set forth a summary of facts and representations contained in the 
application for exemption and referred interested persons to the 
application for a complete statement of the facts and representations. 
The application has been available for public inspection at the 
Department in Washington, DC. The notice also invited interested 
persons to submit comments on the requested exemption to the 
Department. In addition the notice stated that any interested person 
might submit a written request that a public hearing be held (where 
appropriate). The applicant has represented that it has complied with 
the requirements of the notification to interested persons. No requests 
for a hearing were received by the Department. Public comments were 
received by the Department as described in the granted exemption.
    The notice of proposed exemption was issued and the exemption is 
being granted solely by the Department because, effective December 31, 
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 
(1996), transferred the authority of the Secretary of the Treasury to 
issue exemptions of the type proposed to the Secretary of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

Sorenson Broadcasting Employee Stock Ownership Plan and Trust (the 
Plan); Located in Sioux Falls, SD

[Prohibited Transaction Exemption 2003-32; Exemption Application No. D-
11067]

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the 
Act and the sanctions resulting from the application of section 4975 of 
the Code, by reason of section 4975(c)(1)(A) through (E) of the 
Code,\1\ shall not apply to (1) the sale (the Sale) by the Plan to 
Sorenson Broadcasting Corporation (the Employer), a party in interest 
with respect to the Plan, of 930 shares of common stock (the Common 
Stock) of the Employer; and (2) the extension of credit by the Plan to 
the Employer under the terms of a subsequent adjustment to the Sale 
price (the True-up) in connection with the Sale.
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    \1\ For purposes of this exemption, references to provisions of 
Title I of the Act, unless otherwise specified, refer also to 
corresponding provisions of the Code.
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    This exemption is subject to the following conditions:
    (a) The Sale occurs in the following manner:
    (1) The Employer pays the Plan the fair market value of the Common 
Stock as of December 31, 2002, as determined by a qualified, 
independent appraiser, plus certain positive adjustments indicated in 
an addendum to a purchase agreement dated May 26, 2000;
    (2) The fair market value of the Common Stock as of the transaction 
date (the Closing Value) is determined no later than two months after 
the transaction date;
    (3) As additional consideration, the Plan receives the difference 
between the

[[Page 64658]]

Closing Value and the amount paid for the Common Stock on the 
transaction date (i.e., the True-up), plus interest based on the New 
York prime market rate, effective on the transaction date until the 
date of the True Up; and
    (4) As collateral for the True-up, Mr. Dean Sorenson, the principal 
shareholder of the Employer, deposits $100,000 in cash in an escrow 
account for the benefit of the Plan to ensure that the Employer honors 
its obligation under the True-up.
    (b) The Plan does not pay any commissions or other expenses with 
respect to the Sale.
    (c) The transactions are approved by an independent fiduciary, who 
will monitor such transactions on behalf of the Plan.
    (d) The Plan's trustees determine that the Sale and True-up are 
appropriate transactions for the Plan and in the best interests of the 
Plan and its participants and beneficiaries.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on September 5, 2003 at 68 
FR 52791.

FOR FURTHER INFORMATION CONTACT: Ms. Anna M.N. Mpras of the Department, 
telephone (202) 693-8565. (This is not a toll-free number.)

Liberty Media 401(k) Savings Plan (the Plan); Located in Englewood, 
Colorado

[Prohibited Transaction Exemption No. 2003-33; Application No. D-11170]

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (b)(2) and 
407(a) of the Act and the sanctions resulting from the application of 
section 4975 of the Code, by reason of section 4975(c)(1)(A) through 
(E) of the Code, shall not apply, effective November 25, 2002, to (1) 
the acquisition of certain stock rights (the Rights) by the Plan in 
connection with a Rights offering by Liberty Media Corporation (LMC), a 
party in interest with respect to the Plan; (2) the holding of the 
Rights by the Plan during the subscription period of the offering; and 
(3) the exercise of the Rights by the Plan. This exemption is 
conditioned upon the adherence to the material facts and 
representations described herein and upon the satisfaction of the 
following requirements:
    (a) The Rights were acquired pursuant to Plan provisions for 
individually-directed investment of such accounts;
    (b) The Plan's receipt of the Rights occurred in connection with 
the Rights offering made available to all shareholders of common stock 
of LMC;
    (c) All decisions regarding the holding and disposition of the 
Rights by the Plan were made, in accordance with the Plan provisions 
for individually-directed investment of participant accounts, by the 
individual Plan participants whose accounts in the Plan received the 
Rights in connection with the offering;
    (d) The Plan's acquisition of the Rights resulted from an 
independent act of LMC as a corporate entity, and all holders of the 
Rights, including the Plan, were treated in the same manner with 
respect to the acquisition; and
    (e) The Plan received the same proportionate number of the Rights 
as other owners of Liberty Media Series A and Series B common stock 
(the Stock).
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the Notice of Proposed Exemption published on August 15, 2003 at 68 FR 
49302.

FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department, 
telephone (202) 693-8540 (this is not a toll-free number).

Hayden O. Grona IRA (the IRA); Located in San Antonio, Texas

[Prohibited Transaction Exemption 2003-34; Application No. D-11192]

Exemption

    The sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall 
not apply to the proposed sale of certain unimproved land (the 
Property) by the IRA to Mr. Grona's children (the Children), 
disqualified persons with respect to the IRA;\2\ provided that the 
following conditions are met:
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    \2\ Pursuant to CFR 2510.3-2(d), there is no jurisdiction with 
respect to the IRA under Title I of the Act. However, there is 
jurisdiction under Title II of the Act, pursuant to section 4975 of 
the Code.
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    (a) the sale is a one-time cash transaction;
    (b) the IRA receives the current fair market value for the 
Property, as established at the time of the sale by an independent, 
qualified appraiser; and
    (c) the IRA pays no commissions or other expenses associated with 
the sale.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on September 5, 2003 at 68 
FR 52795.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department 
at (202) 693-8540. (This is not a toll-free number.)

Newspaper Agency Corporation; Pension Trust (the Plan); Located in Salt 
Lake City, Utah

[Prohibited Transaction Exemption 2003-35; Application No. D-11194]

Exemption

I. Transactions
    The restrictions of sections 406(a)(1)(A)-(D), 406(b)(1), and 
406(b)(2) of the Act and the sanctions resulting from the application 
of section 4975 of the Code, by reason of section 4975(c)(1)(A) through 
(E) of the Code \3\ shall not apply to: (1) The leasing of certain 
improved real property (the Property) by the Plan to the Newspaper 
Agency Corporation (the Employer), a party in interest with respect to 
the Plan, pursuant to the terms of a lease (the New Lease), effective 
August 1, 2003; and (2) the guarantee by MediaNews Group, Inc. and 
Deseret News Publishing Company (collectively, the Owners of the 
Employer) of the obligations of the Employer under the terms of the New 
Lease.
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    \3\ For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
to the corresponding provisions of the Code.
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II. Conditions
    This exemption is conditioned upon the adherence to the material 
facts and representations described herein and upon the satisfaction of 
the following requirements:
    (a) an independent, qualified fiduciary (the I/F), acting on behalf 
of the Plan, determines that each of the subject transactions is 
feasible, in the interest of, and protective of the Plan and the 
participants and beneficiaries of such Plan;
    (b) the I/F manages the Property on an on-going basis and is 
empowered to take whatever action it deems appropriate to serve the 
best interest of the Plan and its participants and beneficiaries, 
including but not limited to the retention, leasing, or sale of the 
Property;
    (c) the fair market value of the Property does not now and will at 
no time exceed twenty-five percent (25%) of the fair market value of 
the total assets of the Plan;
    (d) the I/F negotiates, reviews, and approves the terms of the 
subject transactions;
    (e) the terms and conditions of the subject transactions are, and 
will at all times be, no less favorable to the Plan than terms 
obtainable by the Plan under similar circumstances when negotiated at 
arm's length with an unrelated third party;

[[Page 64659]]

    (f) an independent, qualified appraiser determines the fair market 
value of the rental of the Property, as of August 1, 2003, and annually 
thereafter;
    (g) the I/F monitors compliance with the terms of the New Lease 
throughout the duration of such lease and is responsible for legally 
enforcing the payment of the rent and the proper performance by the 
Employer and/or the Owners of the Employer of all other obligations of 
the Employer under the terms of such lease;
    (h) the Plan incurs no fees, costs, commissions, or other charges 
or expenses as a result of its participation in the transactions which 
are the subject of this exemption, other than the fee payable to the I/
F for services rendered to the Plan and the fee payable to the 
independent, qualified appraiser for the annual appraisal of the fair 
market value of the Property;
    (i) the I/F ensures that the terms and conditions described herein 
are at all times satisfied;
    (j) the I/F will place the Property on the market for sale or lease 
to unrelated third parties, within fifteen (15) calendar days of the 
date of the publication of the grant of this exemption in the Federal 
Register, and subject to the termination of the New Lease, as provided 
in section II(k), below, of this exemption, will proceed to sell or 
lease such Property to any such unrelated third party who presents a 
bona fide sale or lease offer which the I/F determines to be prudent 
and in the best interest of the Plan and its participants and 
beneficiaries; and
    (k) notwithstanding anything to the contrary in the New Lease, the 
Plan may at any time upon six (6) month prior written notice to the 
Employer terminate the New Lease and the Employer's occupancy of the 
Property, effective as of the date specified in such notice, which date 
shall be at least six (6) months after the date such written notice is 
given to the Employer (but in no event extending the New Lease beyond 
the then current lease term.
    Effective Date: The exemption will be effective August 1, 2003.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department of 
Labor (the Department) invited all interested persons to submit written 
comments and requests for a hearing on the proposed exemption within 
forty-five (45) days of the date of the publication of the Notice in 
the Federal Register on September 5, 2003. All comments and requests 
for a hearing were due by October 20, 2003.
    The Department received, on October 20, 2003, a letter from the 
applicant, informing the Department of a correction to the language of 
the exemption, as proposed. In this regard, in the Notice on page 
52796, Part I, lines 16-17, the reference to ``Deseret News Publishing 
Corporation'' should be revised to read ``Deseret News Publishing 
Company.'' The Department acknowledges the correction and in the final 
exemption has amended the language of Part I, as requested in the 
October 20, 2003, letter from the applicant.
    In addition, on October 20, 2003, the Department received a comment 
letter, from the Executive Board and Chief Steward of the Graphic 
Communications International Union, Local 28N (the Local). Accompanying 
this comment letter was a petition signed by 153 individuals who are 
employees of the Employer and members of the Local. In this regard, the 
commentators requested denial of the exemption. In support of this 
request, the commentators state that: (a) The Employer has not 
maintained the premises of the Property, because upon completion of 
construction on a new building, the Employer wants to ``walk away'' 
leaving ``an almost worthless piece of property'' in the Plan; (b) all 
employees will be adversely affected by the grant of the exemption; (c) 
the exemption should not be allowed without proper and meaningful 
negotiations between the union(s) and the Employer; and (d) a hearing 
should be scheduled, in the event negotiations between the union(s) and 
the Employer break down.
    At the close of the comment period, the Department forwarded a copy 
of the comment letter to the applicant and requested that the applicant 
respond in writing to the issues raised by the commentators.
    With regard to the commentators' assertion that the Employer has 
not maintained the Property, the applicant points out that the Property 
is a warehouse constructed of cement block. As such, the greatest 
expense involved in maintaining the Property has been that of 
maintaining the roof. In this regard, it is represented that the 
Employer has expended substantial sums in maintaining the Property. For 
example, since June of 2001, the Employer has paid a total of 
$112,809.67 to replace over two-thirds (2/3) of the roof ($49,891 paid 
on June 30, 2001, and an additional $62,918.67 paid during 2002). It is 
represented that the Employer also pays for janitorial services for the 
Property two (2) times per week.
    In response to the comment that the Property is ``an almost 
worthless piece of property,'' the applicant points out that the fair 
market value of the Property is $1,700,000, as evidenced by the written 
appraisal of the independent appraiser selected by the I/F. In 
addition, the applicant points out that the Property has increased in 
value over the period from 1971 to 2003 from $259,000 to $1,700,000, 
being an increase in value of over 650% (or an average of slightly over 
20% per year over the term of 32 years). In addition to appreciation in 
the value of the Property, the Employer, as the tenant, has made fair 
market value rental payments to the Plan and also paid for the taxes, 
liability and casualty insurance premiums, maintenance, and repairs.
    In response to the comment that all employees will be adversely 
affected by the grant of the exemption, the applicant represents that 
the Plan is a defined benefit pension plan under which the participant 
benefits are calculated without regard to the value of the underlying 
plan assets as they exist from time to time. Accordingly, it is 
represented by the applicant that benefits of Plan participants are not 
adversely affected by approval of the exemption request. In this 
regard, the applicant points out that the exemption deals with the 
leasing of the Property under the terms of the New Lease between the 
Employer and the Plan which includes various provisions which are 
favorable to the Plan, including but not limited to the following:
    (a) the Employer, as the tenant, is required to pay fair market 
value lease payments to the Plan, redetermined annually by independent 
appraisal (in addition to taxes, insurance and other expenses); and
    (b) upon six months written notice to the Employer, the Plan may 
unilaterally terminate the New Lease for any reason. The applicant 
notes that the Employer does not have the right to terminate the New 
Lease prior to the end of the primary three (3) year term. Further, the 
applicant points out that the exemption includes a condition requiring 
the I/F, within fifteen (15) days following publication of the grant of 
the exemption in the Federal Register, to place the Property on the 
open market so that the Plan has adequate time (in essence, almost a 
three (3) year period) to find a buyer for the Property.
    In the opinion of the applicant, the comment that the exemption 
should not be allowed without proper and meaningful negotiations 
between the union(s) and the Employer appears to

[[Page 64660]]

reflect the desire of the Local to use the exemption application 
process as a means to open pension negotiations with the Employer. As 
the exemption application by the Employer does not request or result in 
any amendment to the Plan or any change in the benefits provided to 
participants under the Plan, it is the position of the applicant that 
the requested exemption should not constitute a trigger for union 
benefit negotiations.
    Further, the applicant suggests that the genesis of the request for 
denial of the exemption application included in the comment letter 
appears to arise from some disappointment or ill will from prior 
negotiations involving issues unrelated to the exemption application. 
In the opinion of the applicant, such feelings as to unrelated matters 
are irrelevant to and should not be the catalyst for denial of the 
requested exemption.
    In response to the comment requesting a hearing be scheduled if 
union negotiations break down, the applicant maintains that the 
exemption application does not affect the benefits of the participants 
under the Plan and should not involve union negotiations. Further, the 
applicant points out that the comment letter does not include any facts 
supporting a conclusion that any participant would be adversely 
affected by the grant of the exemption requested. In the opinion of the 
applicant, a hearing should not be required, as all factual data and 
documents have already been provided to the Department of Labor, and 
any issues discussed in the comment letter can be fully explored, if 
deemed necessary by the Department of Labor, through the submission of 
evidence in written form.
    The Department, after reviewing the concerns of the commentators, 
does not believe that there are material issues relating to the subject 
exemption that were raised by the commentators during the comment 
period which would require the convening of a hearing. Accordingly, the 
Department has determined not to delay consideration of the final 
exemption by holding a hearing on application D-11194.
    After giving full consideration to the entire record, including the 
written comment from the commentators, the applicant's response to such 
comments, and the applicant's own comment, the Department has decided 
to grant the exemption, as described and amended, above. In this 
regard, the comment letter from the commentators, the applicant's 
response thereto, and the comment letter from the applicant which were 
submitted to the Department have been included as part of the public 
record of the exemption application. The complete application file, 
including all supplemental submissions received by the Department, is 
made available for public inspection in the Public Documents Room of 
the Employee Benefits Security Administration, Room N-1513, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice published on September 5, 2003, at 68 FR 52796.

FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc, of the 
Department, telephone (202) 693-8540. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemption does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) This exemption is supplemental to and not in derogation of, any 
other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 7th day of November, 2003.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, Department of Labor.
[FR Doc. 03-28545 Filed 11-13-03; 8:45 am]

BILLING CODE 4510-29-P