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"Diva Of Distress" Dissed: Court Tosses Lynn Tilton's Lawsuit Against SEC, Which Is Suing Her For Fraud

Tyler Durden's picture




 

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 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... 

... 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).

 

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Tue, 06/30/2015 - 14:27 | 6254997 Soul Glow
Soul Glow's picture

OMG she is ugly.

Tue, 06/30/2015 - 14:31 | 6255002 nope-1004
nope-1004's picture

It's Steven Tyler in drag!

Eat your heart out Mr. Bruce Jenner, olympic MENS decathlon champion.

 

fugly x 2

Tue, 06/30/2015 - 14:41 | 6255046 NoDebt
NoDebt's picture

"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

Tue, 06/30/2015 - 14:43 | 6255070 Herd Redirectio...
Herd Redirection Committee's picture

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!
Tue, 06/30/2015 - 15:28 | 6255236 Pool Shark
Pool Shark's picture

 

 

No, she's not ugly...

https://www.youtube.com/watch?v=PNzrem4U298

 

Tue, 06/30/2015 - 15:58 | 6255330 NidStyles
NidStyles's picture

Bitchz be trippin.

 

 

No one has said a word about Zerohedge warning us in September of 2003 yet either....

Tue, 06/30/2015 - 18:14 | 6255833 Cornfedbloodstool
Cornfedbloodstool's picture

Thats a man, baby!

Wed, 07/01/2015 - 11:33 | 6258293 eforce
eforce's picture

If you thought the bankers were bad...lets see what The Protocols says about the money lenders and their (and our) fate...

 

6. The people, under our guidance, have annihilated the aristocracy, who were their one 

And only defense and foster-mother for the sake of their own advantage which is 

Inseparably bound up with the well-being of the people. Nowadays, with the destruction 

Of the aristocracy, the people have fallen into the grips of merciless money-grinding 

Scoundrels who have laid a pitiless and cruel yoke upon the necks of the workers. 

 

7. We appear on the scene as alleged saviours of the worker from this oppression when 

We propose to him to enter the ranks of our fighting forces - socialists, anarchists, 

Communists - to whom we always give support in accordance with an alleged brotherly 

Rule (of the solidarity of all humanity) of our social masonry. The aristocracy, 

Which enjoyed by law the labor of the workers, was interested in seeing that the workers 

Were well fed, healthy, and strong. We are interested in just the opposite - in the 

Diminution, the killing out of the goyim. Our power is in the chronic shortness 

Of food and physical weakness of the worker because by all that this implies he is made 

The slave of our will, and he will not find in his own authorities either strength or energy 

To set against our will. Hunger creates the right of capital to rule the worker more surely 

Than it was given to the aristocracy by the legal authority of kings.

 

8. By want and the envy and hatred which it engenders we shall move the mobs and with 

their hands we shall wipe out all those who hinder us on our way. 

 

(Note: The Protocols is a blatant plagiarism, so "goyim" could easily be replaced by "common man".)

Tue, 06/30/2015 - 14:46 | 6255076 Freddie
Freddie's picture

Maybe Caroline Kennedy is moonlighting like yah know.

https://www.youtube.com/watch?v=ZT8G6Qf7Ngo

yah know

Tue, 06/30/2015 - 14:57 | 6255117 Osmium
Osmium's picture

If the reporter was from Iowa or Missouri, he would have written it this way.

"alleging the SEC violated her constitutional rights and shit."

Tue, 06/30/2015 - 15:30 | 6255242 Greenie
Greenie's picture

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

Tue, 06/30/2015 - 15:11 | 6255180 Larry Dallas
Larry Dallas's picture

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.

Tue, 06/30/2015 - 15:25 | 6255225 Calculus99
Calculus99's picture

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.

 

Tue, 06/30/2015 - 15:59 | 6255343 swmnguy
swmnguy's picture

“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.

Wed, 07/01/2015 - 02:02 | 6257117 Titus
Titus's picture

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...

Tue, 06/30/2015 - 15:15 | 6255199 Anusocracy
Anusocracy's picture

She looks like a love child of Alfred E, Neuman and Farrah Fawcett.

Tue, 06/30/2015 - 14:30 | 6255016 pods
pods's picture

She's a man baby.

Betcha she could palm a basketball.

pods

Tue, 06/30/2015 - 14:32 | 6255024 El Vaquero
El Vaquero's picture

Beat me to it.  I was even going to include 'baby' in it.

Tue, 06/30/2015 - 15:02 | 6255145 Implied Violins
Implied Violins's picture

Hmm. I was going to include 'palm' with the word 'shave.'

Tue, 06/30/2015 - 16:56 | 6255568 Kirk2NCC1701
Kirk2NCC1701's picture

Tilton is the family name of the guy she married and divorced.  Her birth-name is Garfinkel.

Tue, 06/30/2015 - 14:33 | 6255031 Bill of Rights
Bill of Rights's picture

" Peg Im blind "

Tue, 06/30/2015 - 14:35 | 6255036 WTFUD
WTFUD's picture

Botox Babes

Tue, 06/30/2015 - 14:36 | 6255042 BeaverCream
BeaverCream's picture

I hate to say it but I would rather Jenner, post op of course.

Tue, 06/30/2015 - 15:06 | 6255159 Mike Honcho
Mike Honcho's picture

Up your dosage and start seeing Dr. Feingold more frequently.

Tue, 06/30/2015 - 15:48 | 6255304 BeaverCream
BeaverCream's picture

Any relation to goldstein?

Tue, 06/30/2015 - 16:00 | 6255345 NidStyles
NidStyles's picture

Worse, Feinstein.

Tue, 06/30/2015 - 17:40 | 6255732 mastersnark
mastersnark's picture

Fag.

Tue, 06/30/2015 - 14:40 | 6255057 WillyGroper
WillyGroper's picture

I'd venture to guess...

She's no more a member than anyone here.

That, or her check bounced.

Tue, 06/30/2015 - 16:00 | 6255348 NidStyles
NidStyles's picture

Not Jewish enough.

Tue, 06/30/2015 - 14:50 | 6255087 ghostzapper
ghostzapper's picture

if you default you're forced to nail her/he/it with your eyelids kept open stitched to your brow.  

Tue, 06/30/2015 - 14:59 | 6255132 Freddie
Freddie's picture

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.

Tue, 06/30/2015 - 14:58 | 6255127 TrustbutVerify
TrustbutVerify's picture

What's up with the necklace so small its around her forehead? 

Tue, 06/30/2015 - 15:04 | 6255151 Implied Violins
Implied Violins's picture

She couldn't pull it past her ego.

Tue, 06/30/2015 - 15:00 | 6255138 RichardENixon
RichardENixon's picture

Every clock in my house stopped when I pulled up this article. Thanks Tyler!

Tue, 06/30/2015 - 16:18 | 6255417 Dave Thomas
Dave Thomas's picture

Hey-OOOOOO!

Tue, 06/30/2015 - 15:09 | 6255169 _SILENCER
_SILENCER's picture

That IS a man, right?

Tue, 06/30/2015 - 15:23 | 6255219 Colonel Klink
Colonel Klink's picture

Suck an SEC dick Lynn.

Tue, 06/30/2015 - 15:41 | 6255287 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

nearly two years after Zero Hedge first warned in September 2003

Damn, I have completely lost track of the time here on ZH.

Tue, 06/30/2015 - 15:41 | 6255290 Yen Cross
Yen Cross's picture

  Someone~anyone!...Pass the eye bleach.

Tue, 06/30/2015 - 16:09 | 6255371 davidalan1
davidalan1's picture

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..

Tue, 06/30/2015 - 16:33 | 6255475 insanelysane
insanelysane's picture

She kinda looks like the slump buster Arnold was tagging instead of the Kennedy chick.

Tue, 06/30/2015 - 17:39 | 6255729 mastersnark
mastersnark's picture

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.

Wed, 07/01/2015 - 00:52 | 6257040 bluskyes
bluskyes's picture

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.

Do NOT follow this link or you will be banned from the site!