INITIAL DECISION RELEASE NO. 122 ADMINISTRATIVE PROCEEDING FILE NO. 3-8573-EAJ UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION Washington, D.C. ______________________________ : In the Matter of : : INITIAL DECISION RUSSO SECURITIES, INC., and : March 9, 1998 FERDINAND RUSSO : : : ______________________________ APPEARANCES: Christian J. Mixter for the Division of Enforcement, Securities and Exchange Commission Simon S. Kogan for the Applicants BEFORE: Brenda P. Murray, Chief Administrative Law Judge I. Background This case resulted from a broad investigation by the Securities and Exchange Commission's ("Commission") Division of Enforcement ("Division") into various fraudulent activities by Cooper Companies, Inc. ("Cooper") and a member of its senior management which included manipulation of the price of certain bonds, specifically, $200 million aggregate principal amount of 10 5/8% Convertible Subordinate Reset Debentures issued March 1, 1985, and due 2005, which were publicly traded. The indentures on the bonds required Cooper to reset the interest rate ("reset obligation") to cause them to have a market value equal to 75% of their principal amount on June 15, 1991: The Company will reset the interest rate on the Securities on June 15, 1991 (the "Reset Date") to a rate per annum, as determined by two nationally recognized investment banking firms selected by the Company . . . that the Debentures should bear in order to have a market value equal to 75% of their principal amount on the Reset Date. In no event shall the rate be reset to an annual interest rate which is less than 10 5/8% nor greater than 13 1/8%. The Company will notify the Trustee and the Dow Jones News/Retrieval Service as soon as practicable, but in no event later than five business days after the Reset Date of the reset interest rate. Resp. Ex. 501.[1] On December 12, 1994, the Commission instituted an administrative proceeding against Russo Securities, Inc. ("Russo Securities"), Ferdinand Russo, Mascera & Company, Inc., ("Mascera & Co.") and Lawrence I. Mascera ("Respondents") pursuant to Sections 15(b), 19(h) and 21C of Securities Exchange Act of 1934 ("Exchange Act") to determine whether they violated the federal securities laws by providing Cooper with sham opinions in connection with Cooper's reset obligation. The Division alleged that Cooper and Gary Alan Singer, the Co-Chair of Cooper's Board of Directors, fraudulently avoided Cooper's alleged obligation under the indenture to reset the interest rate based on opinions from two recognized investment banking firms, and that Russo Securities and Mr. Russo assisted in Cooper's efforts to avoid this obligation. The Order Instituting Proceedings alleged that by fraudulently avoiding its obligations under the indenture, Cooper avoided paying investment banking fees of approximately $200,000 and that it avoided debenture interest payments. It is important to note that the Division did not allege in this proceeding that Respondents aided or abetted, or caused the price manipulation of Cooper's bonds. That fraud was the subject of separate prosecutions. Cooper settled an injunctive action brought by the Commission, and Cooper and Mr. Singer were the subject of federal criminal charges. (Oral Argument Tr. 10-11.) SEC v. The Cooper Companies, Inc., Civ. Action 92-8166 (S.D.N.Y. Nov. 10, 1992); U.S. v. Gary Singer and the Cooper Companies, Inc., 92 Cr. 964 (RJW) (S.D.N.Y.); see SEC v. The Cooper Companies, Inc., Litigation Release No. 14351, 58 SEC Docket 800 (Dec. 12, 1994); Report of Investigation in the Matter of The Cooper Companies, Inc. as it Relates to the Conduct of Cooper's Board of Directors, Exchange Act Release No. 34-35082, 58 SEC Docket 681 (Dec. 12, 1994). As to this fraudulent conduct, the specific allegations were that Russo Securities and Mr. Russo: (1) were a cause of Cooper's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, due to acts or omissions that they knew or should have known would contribute to such violations, (2) substantially assisted in the commission of these violations because they knew or were reckless in not knowing that the actions were unlawful, and (3) willfully aided and abetted the violations. Order Instituting Proceedings at 9 (Dec. 12, 1994). Judge Lawrence issued an Initial Decision on December 11, 1995, dismissing the proceeding.[2] Based on a record compiled at three days of hearing and following the submission of legal arguments by the parties, he concluded that the Division had not proven the allegations in that it "has conceded that there is nothing in the record that shows that Russo and Russo Securities knew of the underlying violation . . . Further, there is no evidence that [Russo and Russo Securities] rendered substantial assistance to the primary violator in the commission of the violation since there is no evidence that respondents' opinion letter was ever used, published, or referred to by Cooper." Russo Securities, Inc., 60 SEC Docket 2847, 2862 (Dec. 11, 1995). Judge Lawrence found no evidence that the opinion letter issued by Russo Securities "was ever used or even referred [to] in correspondence to bond holders, the trustee or the NYSE;" he noted that Cooper's position was that no interest reset was required based on the market value of the indenture, not on the opinion letter; he found no evidence in the record that the opinion letter was wrong, and that the Division's expert agreed that the terms "nationally recognized investment banking firm" had no specific meaning. 60 SEC Docket at 2861. The Division appealed to the Commission and, based on an independent review of the record, the Commission on October 1, 1997, dismissed the proceeding based on findings that the record did not establish that Russo and Russo Securities provided substantial assistance or contributed to Cooper's fraud, or that they acted with at least a general awareness of their role in the wrongdoing by Cooper, or that their reset opinion was a sham, or that it set forth a false valuation of the bonds. Russo Securities, Inc., 65 SEC Docket 1990, 2002 (Oct. 1, 1997). On October 31, 1997, Russo and Russo Securities ("Applicants") filed a request for reimbursement of attorneys fees and expenses under the Equal Access to Justice Act ("EAJA"). At the parties' request, I ordered a briefing schedule by which the Applicants supplemented their original filing on December 15, 1997; the Division filed in opposition on January 9, 1998; and Applicants filed their Reply on January 30, 1998. II. Issues The issues are whether the Applicants are entitled to recover their attorneys' fees and expenses under Section 504 of the EAJA, 5 U.S.C.  504, and, if so, what the amount of recovery should be.[3] III. Findings The EAJA provides for the recovery of reasonable attorney's fees and expenses against the Federal government unless the position of the United States was substantially justified or there are special circumstances that would make an award unjust. Congress's objective in enacting the EAJA was to encourage relatively impecunious private parties to challenge unreasonable or oppressive governmental behavior by relieving such parties of the fear of incurring large litigation expenses. In achieving this goal Congress hoped, among other things, to induce administrators to behave more responsibly in the future, to refine the administration of federal law - to foster greater precision, efficiency and fairness in the interpretation of statutes and in the formulation of governmental regulations. SEC v. Comserv Corp., 908 F.2d 1407, 1414 n.10 (8th Cir. 1990). There is no question that Applicants are prevailing parties as that term is used in Section 504(a)(1) of the EAJA: An agency that conducts an adversary adjudication shall award, to a prevailing party other than the United States, fees and other expenses incurred by that party in connection with that proceeding, unless the adjudicative officer of the agency finds that the position of the agency was substantially justified or that special circumstances make an award unjust. Whether or not the position of the agency was substantially justified shall be determined on the basis of the administrative record as a whole, which is made in the adversary adjudication for which fees and other expenses are sought. The United States Supreme Court has found that the modifying term "substantially justified" does not require that the government's position be "justified to a high degree," but rather "justified in substance or in the main"-- that is, justified to a degree that could satisfy a reasonable person. That is no different from the "reasonable basis both in law and fact" formulation adopted by the Ninth Circuit and the vast majority of other Courts of Appeals that have addressed this issue. (citations omitted.) . . . [A] position can be justified even though it is not correct, and we believe it can be substantially (i.e., for the most part) justified if a reasonable person could think it correct, that is, if it has a reasonable basis in law and fact. Pierce v. Underwood, 487 U.S. 552, 565 and 566 n.2 (1988). A. Reasonableness of the Division's Litigating Position The Court in Pierce began its analysis by using the following objective indicia as measures of determining whether the government's litigating position was substantially justified. Pierce, 487 U.S. at 568-69. 1. the terms of a settlement agreement In Pierce the Court held that the government's willingness to settle the litigation on terms that were unfavorable to its interests did not establish conclusively the weakness of the government's position. Pierce, 487 U.S. at 568. Here two parties named with Applicants as Respondents, who allegedly committed similar illegal actions, agreed to settle the matter on terms favorable to the government before trial.[4] Parties enter settlements for a myriad of reasons so that a reasonable person could not infer that the charges against the Applicants were substantially justified from the fact that the settlements described above occurred. 2. the stage in the proceedings at which the merits were decided The fact that six witnesses, including two experts,[5] testified at three days of hearing, indicate that a lot of time and effort were spent on the issues, but does not indicate that the allegations were substantially justified. 3. the views of different tribunals on the merits This third indicia is closely related to the merits of the Division's litigating position, which is what I will now consider. Judge Lawrence did not grant Applicants' motion to dismiss made at the conclusion of the Division's direct case, but after questioning Division counsel he put the Division on notice that: I have a real question about the Division's case here. I am going to look carefully into the proofs, and I haven't certainly read most of the Exhibits that have been sitting here in abundance, but I am just giving you fair notice that the Division is going to have to establish a number of these questions which are brought up at this point. (Hearing Tr. 213-21.) The fact that Judge Lawrence and the Commission both dismissed the charges is by itself inconclusive. SEC v. Fox, 855 F.2d 247, 252 (5th Cir. 1988) (holding that the legislative history of the EAJA indicates that loss at trial does not determine the availability of fees). What I find persuasive is that in reaching their findings both Judge Lawrence and the Commission independently determined that the Division's proof lacked elements essential to prove the allegations and that the Division should have been aware of these omissions prior to trial. Moreover, despite an Administrative Law Judge's decision that found its position unsupported by the record evidence, the Division caused the Applicants to incur further costs and almost two years in an undetermined status, by taking an appeal based on the same evidence to a higher authority which reached the same conclusion for the same reasons. To prove the aiding and abetting violation alleged here, it is basic, black letter law that the Division had to establish by a preponderance of the evidence: (1) a violation of the securities law by a primary violator; (2) that the aider and abettor knew or was aware that his role was part of an improper activity; and (3) that the aider and abettor rendered substantial assistance to the primary violator in the commission of the violation. 60 SEC Docket at 2862 (citing Investors Research Corp. v. SEC, 628 F.2d 168, 178 (D.C. Cir. 1980), cert. denied, 449 U.S. 919 (1980)). The Division satisfied the first basic requirement for an aiding and abetting violation with the pretrial stipulation that, for purposes of the proceeding, Cooper violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, by fraudulently avoiding an interest rate reset obligation on certain 10 5/8% Convertible Subordinate Reset Debentures due 2005 and by so informing the New York Stock Exchange and the trustee under the indenture. (60 SEC Docket at 2862; Oral Argument Tr. 8-9.) However, with respect to the second requirement, the Division conceded before Judge Lawrence that there was nothing in the record that showed that Mr. Russo and Russo Securities knew that Cooper was buying the bonds prior to the reset date to increase the price, and Judge Lawrence rejected the Division's clam that that Mr. Russo and Russo Securities were reckless for not knowing. 60 SEC Docket at 2859. Judge Lawrence also found that the Division had not: (1) produced any evidence that the market price of the bonds on the reset date was not an indication of their value,[6] and (2) shown that Applicants rendered substantial assistance to Cooper in commission of the primary violation due to the lack of evidence that Cooper ever used, published, or referred to Applicants' reset opinion. 60 SEC Docket at 2860, 2862. Judge Lawrence distinguished Woods v. Barnett Bank of Fort Lauderdale, 765 F.2d 1004 (11th Cir. 1985), the one case the Division relied on to support its assertion that Applicants aided and abetted Cooper's fraud, because in Woods the false information was provided to the trustee and the opinion letter was shown to be false. Here the opinion letter was not circulated to anyone, and Judge Lawrence found the opinion letter was not fraudulent. 60 SEC Docket at 2862-63. The Division chose to appeal Judge Lawrence's decision dismissing the proceeding based on the same evidentiary record that Judge Lawrence considered and found unpersuasive. The Commission restated the black letter law noted above to mean that to prosecute this aiding and abetting violation successfully, the Division had to show that: (1) Cooper committed fraud in violation of the federal securities laws, (2) Mr. Russo and Russo Securities knew, or were aware generally, of their role in Cooper's wrongdoing, and (3) Mr. Russo and Russo Securities knowingly or recklessly rendered substantial assistance to Cooper. 65 SEC Docket at 1998. To establish that Applicants were a cause of Cooper's fraud, Section 21C of the Exchange Act, the Commission required that the Division demonstrate that Mr. Russo and Russo Securities knew or should have known that their actions would contribute to Cooper's violation of the securities laws. Id. at 1999. The Commission held that the Division did not meet the required standard with respect to the aiding and abetting charges because of the "absence of proof that [Applicants'] conduct in preparing one reset opinion and arranging for Mascera to prepare a second one substantially assisted in Cooper's . . . fraud." Id. The Commission found the record did not support the Division's position that the mere existence of the opinions was an essential part of the fraud and thus supported its aiding and abetting charge. "In sum, the evidence of record suggests . . . that the decision by Cooper's senior management not to reset the bonds' interest rate was based upon factors independent of any knowledge of [Applicants'] activities." Id. at 2001. The Commission commented that: Our determination that this record does not establish that [Applicants] provided substantial assistance or contributed to Cooper's alleged fraud is sufficient to sustain the dismissal of this proceeding. Nevertheless, we further conclude that the Division has not met its burden with respect to the second element of aiding and abetting liability, which requires that [Applicants] acted with at least a general awareness of their role in the alleged wrongdoing by Cooper. Most importantly, the evidence does not establish that [Applicants'] reset opinion was a sham or that it set forth a false valuation of the bonds.[7] Id. at 2002. The Commission's decision highlighted other omissions in the Division's presentation. For example, it found "no basis in the record for concluding that Applicants knew, or were reckless in not knowing, that Mr. Singer was manipulating the bond's price prior to the reset date." Id. at 1996 n.10. Further, the Commission noted that the Division's expert had no idea of the market value of the bonds on the reset date.[8] Id. at 2002. A finding that the Division's litigating position was not substantially justified is supported by the oral argument before the Commission on July 29, 1997, as shown in the following excerpts: COMMISSIONER: I don't understand how that theory washes, in the sense of how was the fraud perpetrated on people, unless the person you're charging with aiding and abetting does something to aid and abet that fraud that goes to the belief or nonbelief of investors. I don't care what the fraud perpetrator asked for, I am concerned about what the supposed aider and abettor does that aids that fraud. (Oral Argument Tr. 12-13.) . . . COMMISSIONER: How were the Russo opinions used in connection with the purchase or sale of securities? DIVISION: . . . It is indirect . . . Cooper waited until the opinion was in hand, and we believe that is entirely sufficient use, given the public expectations that were created by the debenture and were also created by the letter of intent. COMMISSIONER: . . . I think that's a week [sic] reed upon which to rely . . . DIVISION: That's our reed. (Oral Argument Tr. 16-17.) . . . COMMISSIONER: . . . I don't see any knowledge here on the part of Russo, of a fraud that Cooper admittedly perpetrated. I see no use of the letter by Cooper in connection with the purchase and sale of securities, or indeed in connection with the perpetration of the fraud that Cooper admittedly perpetrated in terms of manipulating the price. I really don't know why we're here. (Oral Argument Tr. 32.) . . . COMMISSIONER: Counsel, the substantial assistance element is essential to making the case on aiding and abetting, is it not? DIVISION: It is. It is one of three essential elements. Yes. COMMISSIONER: One of three essential elements. Well in this particular case, isn't your proof on that element rather amorphous? (Oral Argument Tr. 40.) . . . COMMISSIONER: . . . assume for the moment that a Merrill Lynch or a Goldman or a Citicorp or et cetera similarly doesn't know about manipulation, provides the identical letter, does the appropriate amount of research underlying it. Everything else in the record is identical. Is it your view that there is no aiding and abetting then? DIVISION: I believe that we would not recommend that case to the Commission . . . because it would be almost impossible on the facts that you're hypothesizing . . . to show aiding and abetting. (Oral Argument Tr. 42- 43.) The Division alleged aiding and abetting here, as distinguished from the situation described in the colloquy quoted immediately above, because Russo Securities lacked the experience and the expertise to do this kind of evaluation; the Division did not consider Russo Securities a nationally recognized investment banking firm; the Division believed that Russo Securities knew that it could not act appropriately according to terms of the indenture; and the Division claimed that, as a practical matter, Russo Securities had to do Cooper's bidding. (Oral Argument Tr. 43.) It is undisputed that the record raises questions about the independence of Russo Securities and its role in giving the reset opinion. For example, Russo Securities received a substantial amount of business from Cooper; Cooper lent Russo Securities $400,000 in February 1991; the three brothers who owned Russo Securities were friends with the head of Cooper's equity trading; Cooper paid Russo Securities $1,650 monthly for unspecified investment services through January 1991; and Russo Securities specialized in equities, not in bonds. As the Commission noted in its decision, in a securities law context, the assistance provided by the aider and abettor must have been a proximate cause of the harm upon which the claim for relief is based -- that is, the harm must be a direct and foreseeable result of the alleged assistance. 65 SEC Docket at 1998-99. Despite the questionable circumstances, the Division knew when it made the allegations what evidentiary standard it had to meet to sustain its burden of proof, and it knew, or should have known, that it did not have sufficient persuasive evidence to meet that burden. Inasmuch as the record did not show that Mr. Russo knew of the underlying violation, the Division tried to show that Mr. Russo and Russo Securities were reckless in not knowing, to satisfy the second prong of the aiding and abetting test. (Oral Argument Tr. 30-31.) Considering the relationship between Russo Securities and Cooper, the Division contended that Applicants were reckless because they should have known that Cooper was fraudulently trying to avoid its reset obligation from the language of the indenture and from Cooper's request that they prepare a reset opinion using a form letter which Cooper provided them. (Id. at 31-33; Hearing Tr. 209-10.) The Division conceded that Cooper never used, published or referred to the reset opinion that Russo Securities issued, but it argued that the existence of the opinion substantially assisted Cooper's underlying violation. (Hearing Tr. 211-12; Oral Argument Tr. 12, 16-17, 35-38.) I reject the Division's argument that it "presented sufficient credible evidence from which the trier of fact could have reasonably concluded that Applicants violated the securities laws as alleged in the proceeding, and therefore possessed a reasonable basis in fact and law for proceeding with this matter." (Division's Opposition to the Application at 1.) The findings quoted above make clear that this was not a situation where the Division lost because reasonable people disagreed on the weight to be given the evidence; rather, the Division lost because its proof was woefully deficient in areas that were crucial to a successful prosecution. SEC v. Comserv Corp., 908 F.2d at 1410. The Division's expert did not support the Division's position on key issues. The indenture called for two opinions: whether the market value of the debentures was $750 per $1,000 principal amount on June 15, 1991, and if the market value of the bonds was not $750, then a determination of the appropriate interest rate to cause the market value of the debentures to be at that level. (Oral Argument Tr. 14-15.) The Division's expert did not testify that the result stated in Russo's opinion was wrong; he did not know the value of the debentures on the reset date; he testified that the term "nationally recognized banking firm" had no specific meaning; and he agreed with Applicants' expert that the identity of those buying debentures was proprietary information, thus undercutting the Division's position that Mr. Russo was reckless for not finding out if Cooper was buying its debentures which the Division (but not its expert) claimed he could have done by calling the New York Stock Exchange. 60 SEC Docket at 2856 n.18, 2861; 65 SEC Docket at 2002. The record does not show that the Division's presentation was affected by special circumstances, as for example that the Division was surprised by an unexpected occurrence like a hostile witness or a change in witness testimony, or that it was attempting to advance a novel and credible legal theory. SEC v. Kluesner, 834 F.2d 1438, 1444-45 (8th Cir. 1987). For all these reasons, and because the EAJA was intended to apply to this type of situation where prosecutorial zeal outweighed good judgment, I find that the Division has not carried its burden of proof and shown that its litigating position was substantially justified, or that there are special circumstances that would make an award unjust. 17 C.F.R.  201.31, .35 (1997). B. Amount of Recovery The next issue is to determine whether Applicants are eligible parties and, if so, the amount of legal fees and expenses that they are entitled to recover. I deny the application because Applicants have not established their entitlement to the lawyers' fees and costs they request by documenting the appropriate number of hours reasonably expended on the litigation and the reasonable hourly rate. Mays v. Bowen, 1988 U.S. Dist. Lexis 6619 at *12 (E.D. Pa. June 22, 1988) (citing Hensley v. Eckerhart, 461 U.S. 424, 433-37 (1983) (applicant must establish the fact that time was expended and that it was necessary to achieve the results obtained.); Tomallo v. Heckler, 623 F. Supp. 1046, 1049 (W.D. Pa. 1985)). See also NAACP v. Donovan, 554 F. Supp. 715, 718 (D.D.C. 1982) (burden of proof is always on the applicant to prove entitlement to fees). The original filing consists of a two page application; a copy of the Commission's opinion and order in Russo Securities, Inc.; a Declaration of Simon S. Kogan, legal counsel for Mr. Russo and Russo Securities, in Support of Respondents' Application For Fees and Expenses with 18 pages of xeroxed billing records marked Attachment A in support of his charges of: $65,825 for Mr. Kogan, $1,725 for his associate (23 hours at $75 per hour), $2,160.63 for an expert witness, $2,500 in fees and expenses for another attorney, Simone Palazallo; five pages of xeroxed billing records marked Attachment B in support of expenses of $8,320.13; and a Memorandum in Support of the Motion with attachments including copies of the bills already submitted.[9] (Applicants' Memorandum In Support.) Applicants' supplemental filing requests $100,470.76, which includes attorneys fees of $96,395.13 and $4,075.63 in "disbursements." The filing consists of a Supplemental Declaration of Simon S. Kogan with: Exhibit A, an audited statement of financial condition for Russo Securities as of June 30, 1995; Exhibit B, copies of bills for traveling to Washington, D.C. to defend Applicants; Exhibit C, copies of bills for travel expenses totaling $314; and Exhibit D, copies of bills supporting a charge of $18,025 (144.2 hours at $175) for Alan S. Berkun, an attorney "who also reviewed this case for respondents." (Supplemental Declaration of Simon S. Kogan in Support of Respondents' Application for Fees and Expenses at 2.) Eligible parties under the EAJA include individuals with a maximum net worth of "$2 million at the time the adversary adjudication was initiated," or corporations with maximum net worth of $7 million and no more than 500 employees "at the time the adversary adjudication was initiated." 5 U.S.C.  504(b)(1)(B) (emphasis added). In the application, Mr. Russo represented that on October 31, 1997, over two and a half years after the Commission initiated the adversary proceeding, that his net worth did not exceed $2 million, that Russo Securities employed 35 people, and that it had a net worth of not more than $7 million. The Applicants' supplemental filing contained an audited statement of financial condition showing that on June 30, 1995, six months after the Commission initiated the adversary proceeding, Russo Securities had assets of almost $2.2 million and a $650,278 deficit in owners equity. Applicants have not submitted any information as to their financial or employee status as of December 12, 1994, the date the Commission initiated this proceeding, and Mr. Russo did not submit any financial information of any kind as of any date. 17 C.F.R.  201.34, .42 (1997). In addition, Applicants have not shown themselves to be eligible parties under the Commission's EAJA regulations which specify that the application shall be accompanied by full documentation of the fees and expenses, including a separate itemized statement for each individual whose services are covered by the application, showing the hours spent, and a description of the specific services performed. 17 C.F.R.  201.36, .41, .43 (1997). I reject the application for $100,470.76, which includes attorneys fees of $96,395.13 and $4,075.63 in "disbursements," because Applicants have not shown themselves to be eligible parties under the EAJA and the Commission's regulations thereunder. (Supplemental Declaration of Simon S. Kogan in Support of Respondents' Application for Fees and Expenses at 2.) I will address the level of fees and expenses requested in case Applicants are successful in having my determination reversed.[10] The applicable rate for attorney's fees is $75 an hour. The $125 rate which Applicants used is inappropriate because it applies to attorneys' fees in situations where the underlying action was commenced on or after March 29, 1996, and the Commission began this proceeding on December 12, 1994. See Johnson v. Callahan, 1997 U.S. Dist. Lexis 17547 (D. Ala. Sept. 30, 1997) (finding that the higher rate, $125 as opposed to $75, applied to civil actions commenced on or after March 29, 1996, the date the amendment to the EAJA was enacted). Mr. Kogan's arguments are unpersuasive that he is entitled to more than the $150 an hour he charged because this amount is less than what he charged other clients and the prevailing rate for similar services in the New York City area. SEC v. Morelli, 1995 U.S. Lexis 141 at *35-36 (S.D.N.Y. Jan. 11, 1995) (denying a request for more than the $75 rate because representation was by experienced attorneys specializing in securities law who practiced in New York City). See also Pierce, 487 U.S. 552 at 572 (Congress thought that $75 an hour was generally quite enough public reimbursement for lawyers' fees whatever the local or national market might be). Finally, I will not consider a cost of living upward adjustment because this Commission's EAJA regulations do not provide for such an adjustment. 5 U.S.C.  504(b)(1)(A)(ii); 17 C.F.R.  201.36 (1997). It is impossible to determine whether the claim for attorney's fees is reasonable, or the basis for Mr. Kogan's claim that he spent 526.6 hours (65.8 days or three full months at 22 working days a month) working on this case because the copies of billing records he submitted do not show the time spent. Blum v. Stenson, 465 U.S. 886 (1984) (the product of hours reasonably expended and the reasonable hourly rate of compensation yields what is known as the "lodestar," the presumed reasonable fee which can be adjusted). The Division divided the amount Mr. Kogan claimed for his services through October 1, 1997, in the original application, $53,673.40, by the $150 billing amount, and calculated that Mr. Kogan was charging for 358 hours. (Division's Opposition to the Application at 31 n.46.) This straightforward approach does not yield an accurate number because several of the amounts shown on the summary sheet that total $53,673.40 included items other than Mr. Kogan's professional services. For example, the first item, $10,086.10, is from a bill that included at least $1,011.10 in airfare, parking, printing, etc. The fifth item, $5,342.13, includes $2,160.63 for an expert witness fee. There are similar discrepancies with the several other components of the total. (Mr. Kogan's declaration, Exhibit A at 1) I reject as unreasonable the fees of a second attorney, Alan M. Berkun, who allegedly spent 144.2 hours (18 days) on the case for Respondents because, among other things, he appears to have duplicated the work of Mr. Kogan, the attorney of record.[11] (Supplemental Declaration of Simon S. Kogan in Support of Respondents' Application for Fees and Expenses at 2 and Exhibit D.) The application is not "accompanied by full documentation of the fees and expenses . . . for which an award is sought," as called for by the Commission's regulations. 17 C.F.R.  201.43 (1997). Applicants did not comply with the requirement that they submit: A separate itemized statement . . . for each professional firm or individual whose services are covered by the application, showing the hours spent in connection with the proceeding by each individual, a description of the specific services performed, the rate at which each fee has been computed, any expenses for which reimbursement is sought, the total amount claimed, and the total amount paid or payable by the applicant . . . for the services provided. Id. The Commission's EAJA regulations provide that experts are awarded fees based on rates customarily charged in the locale of the hearing. 17 C.F.R.  201.36-.43 (1997). Applicants offered no support for their expert witness charge of $2,160.63. I reject the Division's claim that Section 27 of the Exchange Act prohibits the Commission from paying, as part of an EAJA application, the legal expenses at issue here. SEC v. Morelli, 1995 U.S. Lexis 141, at *39-40 (citing SEC v. Kaufman, 835 F. Supp. 157 (S.D.N.Y. 1993), aff'd sub nom SEC v. Price Waterhouse, 41 F.3d 805 (2d Cir. 1994)). In Morelli, the court concluded that the securities statute did not bar recovery of out-of-pocket litigation expenses. Examples of recoverable out- of-pocket litigation expenses include "expenses for travel, typing services, postage, telephone, transport and storage of records, and translation." Id. The court also held that Section 27 of the Exchange Act bars recovery of "fees of the court and marshall, fees of the court reporter for necessary stenographic transcripts, fees and disbursements for printing and witnesses, fees for necessary exemplification and copies of papers, docket fees, and compensation of court appointed experts, interpreters and special interpretation services under 28 U.S.C.  1828." Morelli at *39 (citing Kaufman, 835 F. Supp. at 159). Based on Morelli, I find that this application includes expenses that are, and items that are not, reimbursable. Moreover, it is impossible to determine from the application whether the "disbursements" claimed, which I take to mean litigation expenses, are reasonable or whether they total the $4,075.63 claimed. IV. Order Based on the findings and conclusions set forth above, I DENY the application. This order shall become effective in accordance with and subject to the provisions of Rules 410 and 411 of the Commission's Rules of Practice, 17 C.F.R.  201.410, .411 (1997). Pursuant to these rules, the Division or the Applicants may seek Commission review of this decision within twenty-one days after service of the decision. If no review is sought or if the Commission does not review the decision on its own initiative, the initial decision shall become a final decision of the Commission thirty days after it is issued. 17 C.F.R.  201.57 (1997). ______________________________ Brenda P. Murray Chief Administrative Law Judge **FOOTNOTES** [1]: I will cite the transcript of the hearing held August 10-11 and September, 27, 1995, and the exhibits admitted into evidence at that hearing as "(Hearing Tr. __)," "(Div. Ex. __)," and "(Resp. Ex. __)," respectively. I will cite the transcript for the Oral Argument Before the Commission on July 29, 1997, as "(Oral Argument Tr. __)." [2]: The Commission entered an Order Making Findings and Imposing Remedial Sanctions, and Cease and Desist Order ("Settlement"), 59 SEC Docket 2483, (July 17, 1995) as to Respondents Lawrence I. Mascera and Mascera & Co., Inc. [3]: Applicants and the Division cite 28 U.S.C.  2412 which applies to civil actions, but 5 U.S.C.  504 applicable to administrative proceedings is the appropriate authority. American Federation of Government Employees, Local 495, AFL-CIO, (Veterans Administration Medical Center, Tucson, Arizona), 22 FLRA 966, 22 FLRA No. 98 (1986) (citing appended decision of ALJ Francis E. Dowd of May 4, 1984); Hutto Stockyard, Inc., 50 Agric. Dec. 823 (1991). [4]: The Settlement found that Mascera & Co. and Mr. Mascera willfully aided and abetted violations of Section 10(b) and Rule 10b-5 thereunder, and that they were a cause of those violations. Mascera & Co. and Mr. Mascera were ordered to cease and desist from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and were prohibited from preparing or assisting in the preparation of any written report, recommendation, or opinion relating to the federal securities laws; Mr. Mascera agreed to a twelve-month suspension from association with any broker, dealer, investment adviser, investment company, or municipal securities dealer, and to pay a $7,500 fine; and Mascera & Co. accepted a censure. Settlement at 2490-91. [5]: Applicants presented testimony from two witnesses, one of whom was an expert. The Division presented evidence from four witnesses, one of whom was an expert. [6]: Russo's opinion letter stated that it was unnecessary for Cooper to reset the interest rate on the debentures because the market value of the debentures was $750 per $1000 principal amount on the reset date, June 15, 1991. Div. Ex. 9. [7]: The government can have a substantial basis for bringing an action where key factual issues hinge on the credibility of witnesses and other issues are not dispositive. See Todd S. Petersen, 1996 NTSB Lexis 79, at *7 (Oct. 7, 1996). That holding is inapplicable here because credibility determinations were not crucial to the findings and conclusions of either decision maker. 65 SEC Docket 1995 n.7, 1996 n.10. [8]: The Commission found that Applicants did not contribute to Cooper's fraud and thus issuance of a cease and desist order pursuant to Section 21C of the Exchange Act was unwarranted for the same reasons. 65 SEC Docket at 1999 n.20. [9]: Mr. Kogan's declaration puts the total request at $75,870.13, including fees and expenses. [10]: The Commission's regulations direct that this decision include findings and conclusions on the applicants' eligibility and status as a prevailing party, and an explanation of the reasons for any difference between the amount requested and the amount awarded. 17 C.F.R.  201.56 (1997). [11]: Mr. Berkun's relationship to Russo Securities is not clear. According to Mr. Russo, Mr. Berkun supervised the maintenance of part of Russo Securities's files during the period at issue. (Hearing Tr. 66-67.) 1