Lynn Tilton and her Patriarch Partners investment group today filed a lawsuit against the U.S. Securities and Exchange Commission in response to charges of alleged fraud filed on March 31 by the SEC. The suit filed in the U.S. District Court for the Southern District of New York by Tilton, Patriarch and “certain of its affiliated entities” alleges that the SEC’s program for administrative proceedings “violates Article II of the U.S. Constitution.”
The counter-suit complained that the SEC, after more than five years of investigation, opted to pursue its claims before an administrative law judge rather than in the U.S. District Court, “where there are greater discovery rights and the right to a jury trial.” Essentially, Tilton’s legal team is arguing that the defendants in the SEC case are being denied important due process rights while being subjected to a process that could defame and damage their reputation, regardless of the outcome.
“Tilton and Patriarch strongly believe that the most fair and appropriate forum for this complex, five-year-old matter is the U.S. District Court, and they urged the SEC staff to bring their case in that forum,” said an April 1 statement. “We felt compelled to bring this suit, which we strongly believe is in the best interests of not only ourselves, but the Zohar Funds, the portfolio companies and their employees, and the Zohar Fund note holders.”
In a March 30 statement, Tilton and Patriarch strongly denied that they had defrauded investors by failing to properly value loan assets within funds they managed. It said that the SEC’s proposed enforcement action is “ill-founded and at odds with Patriarch’s investment strategy, which was consistently disclosed since the inception of the [collaterized loan obligation] funds.”
Patriarch Partners owns MD Helicopters.