‘Turnaround queen’s petition denied by Supreme Court
The U.S. Supreme Court on Tuesday denied turnaround queen Lynn Tilton’s constitutional challenge of a fraud proceeding that could bar the Wall Street financier from the securities industry.
The decision came in Tilton’s constitutional challenge of the Securities and Exchange Commission’s use of administrative judges. She contends the inhouse legal system gives the nation’s top financial regulator an unfair advantage over her and others targeted by the agency’s administrative proceedings. The cases should instead be tried in court, she argues.
The nation’s highest court rejected the application without comment. The decision means that the SEC case may continue. A hearing in the matter was held last year. Post-hearing filings were completed in January, and a decision in the case could be issued at any time. Tilton could re- file her petition if she lost the ruling.
Tilton’s company, Patriarch Partners, issued a statement that said the firm was disappointed by the decision. The SEC declined to comment.
Tilton has long taken pride in being a woman who has succeeded in the traditional man’s world of turning around distressed companies. “And as you may have noticed, I am all woman,” she said in a 2011 New York Magazine profile that featured a photo of Tilton wearing a fur coat, jewelry and apparently little else.
She also dubbed herself the “turnaround queen” and, unlike many other private equity executives, has frequently used media appearances to air her views.
The SEC proceeding, filed in March 2015, charged that Tilton and her New York-based companies allegedly misled investors about the values of risky pools of corporate loans while collecting nearly $200 million in fees.
The allegations focused on investments collectively known as the Zohar Funds, which hold portfolios of loans issued to distressed firms. The SEC charged that Tilton and her companies falsely led investors to believe that she and her companies made objective valuations of the loan assets. However, most of the valuations remained unchanged, even though many of the distressed firms made partial or no interest payments to the Zohar funds for several years, the SEC alleged.
Tilton has repeatedly denied the allegations.