This page has been archived and commenting is disabled.
"Diva Of Distress" Dissed: Court Tosses Lynn Tilton's Lawsuit Against SEC, Which Is Suing Her For Fraud
It took the SEC nearly two years after Zero Hedge first warned in September 2003 that something is very wrong with the CLO's issued by Lynn Tilton and her Patriarch Partners, to admit just that.

Recall:
Zombie CLO’s are not Paying-Down – Underlying “Loans” are not True Loans
With absolute power over the whole closed system, as the Zombie collateral manager also controls the equity in the Zombie CLO’s (so much for the purported benefit of the new risk retention rules) and is also the controlling shareholder (in some cases CEO) of nearly all borrowers of Zombie loans and is also the “Agent” on nearly all the Zombie “loans” >>> the “loans” are not really loans. As both borrower and lender, any element of any “loan” can be amended at any time, as needed (maturity, covenants, interest rate, frequency of payment, etc.). Taken to the extreme, we have heard stories of (a) Patriarch Partners companies being liquidated/having substantial assets sold and leaving in-place Zombie collateral loans to a then shell entity devoid of meaningful assets and (b) companies with existing Zombie collateral loans filing for bankruptcy, then selling-to and being repurchased-via additional new Zombie loans, with both the old and new Zombie loans continuing to be held on the books of the Zombie funds. How can this be - who would let this type of circular arrangement without any checks-and-balances persist?
And:
39 Small/Middle-Market Private Portfolio Companies Listed on the Patriarch Partners Website May be Difficult to Sell/Liquidate
- The www.patriarchpartners.com website lists 39 companies (some of which are essentially the same company by a few different names), which we believe contain nearly all of the Zombie funds’ collateral loans.
- Nearly all of these small/middle-market companies seem to be controlled by affiliates of the collateral manager – furthermore, many have limited franchises and continue to operate in distress; these companies may not weather the tumult of protracted uncertainty well (along with no ongoing funding), further limiting potential recoveries.
- The following (also from the Patriarch Partners website) is not what one would expect to read about the portfolio of loans in a CLO: "Although comprised of individual private equity investments, our portfolio of assets is managed as a global conglomerate, with a continued focus on synergies and ventures between companies that will enhance value. The investment funds managed by Patriarch currently hold equity positions in more than 70 companies, approximately two-thirds of which are control positions, spanning almost a dozen industries."
- We understand that nearly 100% of the capital for these 39 portfolio companies came from the Zombie funds, aside from a handful of true first-priority, third-party working capital facilities (asset-based loans/factoring lines, which will also tend to limit Zombie recoveries – a key question is therefore, how much of the meaningful (larger) companies’ equity is owned by each of the Zombie funds (vs. other/personal funds controlled by the collateral manager)?
Then, on March 30, the SEC finally putt the hammer down on the Diva of Distress when the SEC "Announces Fraud Charges Against Investment Adviser Accused of Concealing Poor Performance of Fund Assets From Investors."
The SEC alleged "that instead of informing their clients about the declining value of assets in the CLO funds, Tilton and her firms have consistently misled investors and collected almost $200 million in fees and other payments to which they were not entitled,” said Andrew J. Ceresney, Director of the SEC’s Enforcement Division. “Tilton violated her fiduciary duty to her clients when she exercised subjective discretion over valuation levels, creating a major conflict of interest that was never disclosed to them.”
Just hours later, knowing well in advance the lawsuit would hit, Tilton countersued the SEC to stop it from pursuing its civil charge, alleging the SEC violated her constitutional rights or something. As Reuters reported, "In a complaint filed in Manhattan federal court, Tilton and her firm Patriarch Partners LLC said the SEC violated the U.S. Constitution by bringing its case in an in-house administrative proceeding rather than in federal court.
Critics of administrative proceedings, which are handled by judges on the SEC payroll, say they can be unfair to defendants because discovery is limited, defense lawyers generally cannot take depositions, and there are no juries.
"I hold hope that our nation will allow a fair fight for truth, to defend integrity and intent against allegations and provides fair forums," Tilton posted on Twitter on Wednesday.
Our nation did not.
As District Judge Ronnie Abrams of the Southern District of New York just opined, the court has no jurisdiction to hear this case, saying that "Congress has created a remedial scheme applicable to claims such as Plaintiffs', pursuant to which the exclusive avenue of review of an ALJ's decisions is through the administrative process, with subsequent judicial review by a federal court of appeals. Plaintiffs are therefore obliged to further litigate their claims in the Commission's administrative forum and seek review, if they so choose, in a circuit court of appeals. Because this Court lacks subject matter jurisdiction to decide the merits of Plaintiffs' constitutional claims, their motion is denied and the Complaint must be dismissed."
And:
Congress has carefully delineated the distinct roles of the Commission and the courts in cases such as this. It rests first with the Commission to determine whether to commence an action at all, and if so, whether to do so in federal district court or in its own administrative tribunal. Having chosen the latter, it rests with an ALJ and then the Commission to rule on Plaintiffs' claims. That decision in tum is subject to appeal to a federal court of appeals. In this Court's view, there is no basis to allow Plaintiffs to bypass this congressionally created remedial scheme. Accordingly, this Court lacks subject matter jurisdiction over this action.
True: after all we are talking about a commission that has decided to never commence an action against a TBTF banker (because that's where the SEC's employees go to work after their drudgery at the dungeon is over) or a HFT firm (because their lobby pays the bills). But when it comes to people like the Diva of Distress, well...
Of course, further litigating her claims in the SEC's forum is precisely what Tilton wants to avoid in her ploy to delay and pull a Greece (i.e., kick the can indefinitely). End result, the court just tossed Tilton's lawsuit.
There is just something about the summer of 2015: it has turned out to be a very bad period for indefinite can kicking. Although she is clearly not giving up:
We're disappointed with Judge Abrams decision that she lacks jurisdiction. We will seek expedited appellate review.
https://t.co/2dSlJx9MR4
— Lynn Tilton (@LynnTilton) June 30, 2015
We are hardly the only ones who can't wait for this to escalate all the way up to the Supreme Court.
The full court decision, courtesy of Reuters, can be found on the following link.
So in conclusion we leave readers with a clip showing Tilton, who recently retweeted a proposal to become Donald Trump's running mate which would be just delightful...
@LynnTilton you should be @realDonaldTrump running mate. Run the country like a business
— rodney raanan (@rodneyraanan) June 30, 2015
... during better days. One wonders how much of these much prized material possessions Lynn will have to liquidate (in a stalking horse sale or otherwise) to satisfy the SEC's monetary damages which, once all settled, will be sure to dethrone the Diva from the three commas club (and maybe even two).
- 19073 reads
- Printer-friendly version
- Send to friend
- advertisements -


OMG she is ugly.
It's Steven Tyler in drag!
Eat your heart out Mr. Bruce Jenner, olympic MENS decathlon champion.
fugly x 2
"alleging the SEC violated her constitutional rights or something."
It's not often you seen an article written by a professional journalist include the phrase "or something."
Like, the market crashed today. Some dude in Europe said it was because of Greece or something. Anyway, there was like stuff and things happening all over the place. I'm sure you could read about it somewhere else if the details matter to you.
And for the record, Steven Tyler was hotter than that. Go back and watch him in the "Dude Looks Like a Lady" video.
https://www.youtube.com/watch?v=nf0oXY4nDxE
Guess what I just read on Business Insider - UK, about the Greek crisis:
"He said that the City of London was the base of the Rothschilds and Zionists, and that they ran the Federal Reserve too."
Read more: http://uk.businessinsider.com/greek-atm-bank-run-and-queues-person-blamed-a-rothschild-led-zionist-conspiracy-for-greeces-crisis-2015-6#ixzz3eZXp96Pa LOL, Wow! Of course the article dismisses this as fantasy, but its good to know the avg. man on the street in Greece gets it!No, she's not ugly...
https://www.youtube.com/watch?v=PNzrem4U298
Bitchz be trippin.
No one has said a word about Zerohedge warning us in September of 2003 yet either....
Thats a man, baby!
If you thought the bankers were bad...lets see what The Protocols says about the money lenders and their (and our) fate...
(Note: The Protocols is a blatant plagiarism, so "goyim" could easily be replaced by "common man".)
Maybe Caroline Kennedy is moonlighting like yah know.
https://www.youtube.com/watch?v=ZT8G6Qf7Ngo
yah know
If the reporter was from Iowa or Missouri, he would have written it this way.
"alleging the SEC violated her constitutional rights and shit."
And if the reporter was from Chicago, he would have written it this way.
"alleging the SEC violated her constitutional rights and dat kinda fuckin shiiiit
Never invest in someone who wants to flaunt how rich they are. They will fuck you every single time. Their ego is more important than your savings.
I'm with ya Larry. See it all the time.
A similar rule is don't do business with a businessman who's in some sort of opaque business (he's in 'investments' or 'property') who drives a Bentley. At least 80%+ are scammers, legal or illegal, doesn't matter, you'll lose.
“Never play cards with a man called Doc. Never eat at a place called Mom's. Never sleep with a woman whose troubles are worse than your own.” A (dare I use the term) liberal application of these 3 rules for life from Nelson Algren will help one avoid this, and many, many, many other yet fundamentally similar perils.
Ignore however if you're on the southern tip of portugal and you see a restaurant called Mum's. The food there is true art, better than my mom could cook anyway...
She looks like a love child of Alfred E, Neuman and Farrah Fawcett.
She's a man baby.
Betcha she could palm a basketball.
pods
Beat me to it. I was even going to include 'baby' in it.
Hmm. I was going to include 'palm' with the word 'shave.'
Tilton is the family name of the guy she married and divorced. Her birth-name is Garfinkel.
" Peg Im blind "
Botox Babes
I hate to say it but I would rather Jenner, post op of course.
Up your dosage and start seeing Dr. Feingold more frequently.
Any relation to goldstein?
Worse, Feinstein.
Fag.
I'd venture to guess...
She's no more a member than anyone here.
That, or her check bounced.
Not Jewish enough.
if you default you're forced to nail her/he/it with your eyelids kept open stitched to your brow.
I watched the video and might but it would take a boatload of alcohol....and it would be a pretty big boat.
It looks like she saved Hughes helicopter. I know nothing about her case but at least she kept one manufacturer open for business.
What's up with the necklace so small its around her forehead?
She couldn't pull it past her ego.
Every clock in my house stopped when I pulled up this article. Thanks Tyler!
Hey-OOOOOO!
That IS a man, right?
Suck an SEC dick Lynn.
Damn, I have completely lost track of the time here on ZH.
Someone~anyone!...Pass the eye bleach.
Poor thing, cant think of anything worse than a woman with gawd awful taste. Bet she has a couple of those elvis paintings on her walls..
She kinda looks like the slump buster Arnold was tagging instead of the Kennedy chick.
Putting aside the allegations and any personal shortcomings, it should be disconcerting to free men someone can be adjudicated of a violation by the same people who did the investigation and who are doing the prosecution. In-house adminstrative courts are inherently repugnant to due process.
I have considered asking the judge to recuse himself, due to conflict of interest.
But it was a failure on my part to invoke my person.