Securities and Exchange Commis v. Eileen Jorgensen

Claimants Eileen Jorgensen and Paul Jorgensen appeal from the district court’s approval of the monitor’s recommendations regarding the treatment of their claim. We vacate the approval and remand for further proceedings consistent with this disposition.

As a general proposition, we agree with the monitor’s determination that the Jor-gensen claim is properly limited to the actual cost of the rugs, not to any purported retail value and not including any markup for overhead or profit. The out-of- pocket costs incurred by the Jorgensens were not limited to the acquisition cost of the rugs, however. Freight and duty charges paid to third parties, to the extent the Jorgensens present reliable evidence establishing the amount of these charges, should be recognized as part of their costs as well. Those charges were as necessary to obtain the rugs as were the acquisition costs. The failure to recognize those hard costs was an abuse of discretion. The value of the investment credited to them, for calculating their distribution from the fund, should be increased to include those out-of-pocket costs.

The district court approved the monitor’s determination that only 200 rugs were sold to the…